Madam Speaker, it gives me pleasure to enter into the debate on the report of the Standing Committee on Finance. My purpose will be twofold. I would like to make some comments on the report of the committee and then I would like to serve the broader purpose of offering some advice from the official opposition to the finance minister and the government prior to the finalization of the federal budget.
The official opposition has also consulted with Canadians with respect to their expectations in terms of federal finances. While we appreciate the consultations that have been conducted by the committee, we think that from our own consultations Canadians are much more specific on the expectations they have in mind.
In particular, Canadians are telling us and anyone who will listen that it is what the federal government is doing to our taxes and our health care that concerns us most. They expect the budgetary policy of the government in the next number of months to focus specifically on addressing their concerns in that area.
It is our view that the report of the committee and the statements to date by the government are not sufficiently focused on these priorities. Therefore, my colleague, the member of parliament for Medicine Hat, the official opposition finance critic, and a number of his colleagues have produced their own prebudget submission entitled “Taxes and Health Care: It's Critical”. That is being released today. I thank all those responsible for its development and commend it to the committee, to the House, to the finance minister and to the government.
The report has three emphases. First, it proposes a real, substantial tax relief package. For example, under that package a single income family of four earning $30,000 would receive an annual pay hike of over $4,000, not the pathetic $143 offered by the government.
Second, on the health side it not only proposes an additional $2 billion per year of reinvestment in health care but complementary measures to start putting the patient first in the rebuilding of the crumbling health care system.
Third, on the debt side it proposes a comprehensive debt repayment schedule designed to reduce the national debt by $19 billion over the next three years.
I turn to the report of the Standing Committee on Finance entitled Challenges and Choices . I do not want to begin by slamming the report or by dismissing its recommendations or analyses out of hand. Like many of us I think there is too much of that in the House.
It is not our intention to slam every effort or proposal that comes from the government simply because it comes from the government. I think the government tends to do that a bit: if it comes from the official opposition, particularly if it comes from Reform, it is automatically banned. Those attitudes on either side of the House cannot encourage debate. They do not earn the respect of the public and they are not very productive. We do not want to fall into the same trap.
With respect to the report we commend the committee for its extensive consultations. I commend the committee on the first chapter of the report which provides a summary of where we are financially and in relation to the economy and the performance of the government financially.
I commend the committee for devoting at least two of its eight chapters to the priority areas of health care and taxes. I also commend the committee for adopting some of the proposals of the official opposition, in particular the proposals for eliminating the 3% surtax, eventually the 5% surtax, and reductions in personal income tax.
When we think that three years ago the subject of tax relief was not in the government's vocabulary, we have to take some satisfaction in the House that the government is at least talking about it. We are encouraged by these signs of progress.
Having said that, I would like to point out two major deficiencies in the report. The first is that the report devotes an entire chapter to a prudent budget making process, chapter 3, and then omits the most important step in prudent budgeting.
Prudent budgeting begins with accurate, transparent, principled accounting and reporting of the government's financial position. Concrete measures are required to prevent the finance minister from playing a shell game with public finances and giving the appearance, rightly or wrongly, of cooking the books.
The shell game on taxes, for example, is that the government is taking $40 billion more per year in taxes than it was in 1995. It gives $2 billion to $3 billion per year back to the taxpayers and calls this token tax reduction tax relief and hopes the public does not notice the difference between what was given and what was taken. This type of rhetoric, this type of approach to presenting tax reduction fools no one. It increases public skepticism about anything said regarding tax reduction at the federal level.
The government also plays a shell game on spending, something that even the auditor general has commented on and gone further than commenting on: he will not sign off on the financial statements because of this shell game.
In the old days when the federal government was running a deficit it practised what is called back end loading. It tried to push costs, if there was any accounting way of justifying it, on to the next year to make the deficit look smaller.
Now that we are into the era of surpluses the government is practising front end loading. It is trying to pull as many costs as it can into the current fiscal year to make the surplus look smaller so that it is under less pressure to reduce taxes.
I pointed out on numerous occasions that if this was done in the private sector and the finance minister was the vice-president of finance of an oil company, he would end up making licence plates in some provincial penitentiary for practising that game.
The shell game is also played particularly with respect to the surplus. Everything is done now to try to make the surplus look smaller so as to reduce the pressure for tax relief. This includes spin doctoring of the projected surplus.
We find the initial projection of the surplus by the government was $10 billion to $13 billion. A series of press releases came out, particularly over the last couple of weeks, indicating why those initial projections were out of line and that probably it would be less and less and less. The purpose is to make this surplus appear smaller and, I am certain, to minimize public pressure for tax relief.
The official opposition therefore recommends that if the government wants to practise prudent budgeting Canada should follow the example of New Zealand and pass a financial responsibility act that creates a legal requirement for the government to produce financial statements in accordance with generally accepted accounting principles, specifies what those principles are in the legislation, and holds officials legally liable for violating those rules.
There is a second deficiency in the report which should be emphasized. It centres around the report's recommendation that the federal government enter into a productivity covenant with Canadians.
The word covenant is a religious term. I do not know whether the intention was to deify the government or to imply that the Minister of Finance would go up the mountain and return with two tablets of stone prior to the budget. If he does that, I hope the tablets will have something in bold print about thou shalt not steal and thou shalt not bear false witness. However that is not my main point.
The definition and elaboration of productivity in the report strikes me as curious. I spent 20 years in the private sector as a management consultant working with companies for whom productivity was a real term which was measured. They even developed computer models in the company to try to measure the development of productivity.
In this report the vague definition is used that productivity simply means getting better results with the same effort. It looks like it was written by a Liberal spin doctor, not by somebody responsible for productivity.
The definition of productivity that is used in the real world, in business, in unions and in the marketplace where people have to produce, where this means something and where they will be measured against it, is a ratio. Productivity is a ratio of the value of production over the cost of doing business. The cost of doing business is the denominator in that fraction. It includes taxes imposed by the government. Anything that increases the cost of doing business without increasing the value of production decreases productivity. It hurts productivity.
If the government wants to talk seriously about productivity and the productivity covenant with Canadians who are not stupid—there are thousands of people in my constituency who can define productivity better than in this report—it needs a clear definition of productivity that makes crystal clear the negative impacts of Liberal overtaxation on the competitiveness and the profitability of Canadian business and employment. I urge the committee to address that point. It fits in with public understanding of what the government is doing to our taxes.
I now turn to a bigger and broader framework than is contained in this report for analysing the government's financial position of what should be in the budget. When Reformers came to Ottawa in 1993 we had a four point list for fixing federal finances that is as relevant today as it was when we first came here: control and prioritise the spending, balance the budget, reduce the taxes and reduce the debt. It is pretty simple.
Five and a half years later under this administration only one of those matters has been dealt with. The budget is now balanced, but that was done not by controlled spending but mainly through revenue increases and offloading to the provinces. There still remains much to be done on the simplest fiscal agenda that is possible to get Canada's fiscal house in order. That is the thrust of our prebudget submission and our advice.
Let me take these categories one by one. With respect to controlling the spending, the federal government is still not doing it. In the 1997 budget plan the finance minister projected that government program spending last year would come in at $105.8 billion. He called his assumptions prudent, taking into account normal demographic and inflation changes. The problem is that when the final numbers came in, program spending for 1997-98 was $108.8 billion or a $3 billion spending hike. All the talk about spending control, all the talk about balancing the budget through cost reduction, and the first year into a surplus position spending escalated $3 billion over the estimate.
This year it is déjà vu all over again. In the same 1997 budget plan the finance minister projected program spending for this year at $103.5 billion. By the time his 1998 budget came out he had upped those spending predictions to $104.5 billion. Now, according to the most recent financial information, program spending is slated to rise even further, by 3.1% so far this year.
This means that if the finance minister follows last year's pattern and continues this year's already documented schedule of overspending, his spending is going to come in around $107.5 billion or another $3 billion over what he told this House it was going to be. That is spending control. What it reflects is a Liberal predisposition to spend and the need for even stronger spending controls.
What the official opposition recommends is really three things. First, to freeze program spending for three years at $104.5 billion to generate the surpluses necessary for real tax relief and debt reduction. That is not an unreasonable figure. It is the figure that the finance minister himself said was adequate for last year.
This does not mean that we cannot increase spending in priority areas. But during the three year freeze it means that can only be done by reducing spending in other areas. In other words, it forces the government to do what every household in the country has to do when there is not quite enough money and that is to prioritize. Why should we not do what millions and millions of Canadians in households and businesses are forced to do every year and every month?
The official opposition therefore recommends increases in both health and defence spending, but primarily from reductions in handouts to business, interest groups and government to government foreign aid. We propose increases in spending, but we would get the money by reducing spending somewhere else rather than adding to the deficit or adding to taxes.
Other members and the government may disagree with our spending controls and our spending priorities. That is fine. That is what we are here to debate. But if they disagree, then it is incumbent upon the government to set out its own spending controls and priorities which will still have the effect of generating the surpluses we need for tax reduction, debt reduction and health care reinvestment.
Let me turn to debt reduction. Again the federal government just is not doing it. We have a $580 billion federal debt. All we see is token debt reduction. Under this government Canada continues to spend almost 30 cents out of every revenue dollar on interest on the debt. That is a burden on the capacity to finance social services. We bleed ourselves white paying out over $40 billion a year and then we wonder why there is not enough money for transfers to the provinces.
It is a drag on productivity. The government says it is concerned about productivity. The greatest thing it could do about productivity is to get the debt burden down. If we work out its own calculation on its productivity, that $43 billion a year on debt service knocks the ratio out the window.
Lincoln once said that excessive debts were like rats gnawing at the vital organs and sinews of the state. I cannot for the life of me understand how the finance minister can sleep at night with $580 billion rats gnawing at the vitals of the Government of Canada. I use rats of course in a general sense, you understand, Mr. Speaker; not attributing it to any personality.
What the official opposition recommends is not rocket science. The problem here is not figuring out what to do; the problem here is to get doing it. We recommend, first, that a debt retirement sinking fund be established; second, that a law be passed to direct a portion of the debt to be retired each year; and third, that a schedule be established to reduce the debt. We recommend that the debt be reduced by $19 billion over the next three years and by $240 billion over the next 20 years. Let us get serious about debt reduction and the mortgaging of the future of the next generation.
I want to talk about real tax relief, and I will draw a distinction between token tax relief and real tax relief. I will draw a distinction between the shell game, where the finance minister pushes a shell that says a $2 billion reduction, a $3 billion reduction and tries to pull to the back of the table the fact that the government is taking $38 billion to $40 billion a year more than when it came here in 1993. I am not talking about the shell game. I am talking about real, genuine tax reduction that can be felt in the pockets of consumers and can be seen on the financial statements of businesses.
Let us consider the taxation record under the government.
Personal income taxes are up almost 38% and now account for 8.2% of GDP, up from 7% in 1993, for a 17% increase. Is it any wonder Canadians are struggling to get by? I have asked public audiences all over this country “Government income has gone up 35% to 40% since 1993. How many of you can say that your personal income or your family income has gone up 38% during that same period?” Not very many hands go up. There is a rumble through that audience that the government ought to take into account.
According to Statistics Canada taxes paid by the average Canadian household were 15% higher in 1996 than in 1992. Canadians pay 46 cents on every dollar earned toward taxes, while Americans, our greatest single competitor and the American labour market being the great drawing card to many of our young people right now, pay only 33 cents. In other words, as a percentage Canadian taxation represents 140% of the U.S. tax rate.
Government members cannot get out of this argument by saying “Oh, but we spend so much on health care”. The Americans spend much more than we do on defence. They wash each other out. It is not that simple. Our rates are simply higher, consistently higher, than those of our principal trading partner.
To put it another way, our personal income tax burden has gone up 136% in the past three decades compared with only 31% in the United States.
The federal government collects $11.2 billion from 7.7 million Canadians who earn $30,000 a year or less. We hear these great protestations of social concern from the government and the finance minister. He wrings his hands in public about child poverty and he wrings $11 billion a year out of families, with children, which make $30,000 a year or less. He sits in the House devising all kinds of programs to try to deliver some help to those families when the best help he could give them from a poverty standpoint would be to simply leave more dollars in their pockets.
Bracket creep is another area where the shell game is played. The minister stood in the House and told us how many people he would take off the tax rolls. That is the shell that is pushed to the front. What government members do not show us is the other shell which they pull to the back, the people who are being pulled onto the tax rolls through bracket creep. They outnumber by far the ones who have been taken off. More than a million low wage workers have been pulled onto the income tax net since the government took office. More than 1.9 million taxpayers were pushed from the bottom to the middle tax bracket and 600,000 taxpayers were pushed from the middle to the top bracket. That is the government's record on taxation. There is no tax relief. There is a consistent record of increased government revenues connected to increasing taxation.
In place of this token tax relief proposed by the government the official opposition proposes real, substantial, broad based tax relief. The proposals contained in the paper “Taxes and Health Care” include a reduction of $26 billion in federal taxes over the next three years, starting with a $7 billion reduction in employment insurance taxes, payroll taxes that kill jobs, and a $19 billion reduction in personal income taxes and capital gains taxes. If members work out the impact of these numbers on the take-home pay of a single income family of four making $30,000 a year, the family gets an annual pay hike of $4,628 under these tax relief reforms.
In case this is too complex for some of our colleagues, it is the intention of the official opposition to go across this country showing people what their take-home pay is under the Liberal tax regime, including the token tax relief measures contained in the budget, and what their take-home pay would be under these tax reforms. I do not think there is going to be much doubt as to which paycheque the public would prefer.
The finance minister plays the shell game and tells the government caucus that if it gives substantial, broad based tax relief the country will be back in a deficit position. Some hon. members actually believe that argument. That is simply not the case if one puts in place the other measures required to maintain the balance, such as the spending controls and the spending priorities referred to, the debt reduction measure that would reduce the interest on the debt, and tax relief that is substantial enough to stimulate economic growth.
If the government truly wants to enter into a productivity covenant with the Canadian people, let it be based on this proposition: that at Canada's levels of debt and Canada's levels of taxation, a dollar left in the pocket of a Canadian taxpayer, consumer or employer is more productive than that dollar in the hands of a federal politician or bureaucrat. That is a statement on productivity. It lies within the power of this parliament to increase the take-home pay of millions of individuals and families this year simply by substantially reducing the demands of the federal taxman. It lies within the power of this parliament to free up billions of dollars for future investment in health care and essential services by paying down federal debt now.
I therefore conclude by asking, by imploring, the Prime Minister, the finance minister and the 156 members opposite not to stand in the way of such noble objectives.