Debates of Feb. 29th, 2000

Points Of Order

[The Speaker]

Ordinarily what happens is that when a specific member asks for the blues we usually interpret that to be what he or she said in the House. If a member wants extra information then I am sure it can be provided.

As to it being provided automatically, I do not know if we should give what is on that page, what is on the previous page, or what is on another page. For greater certainty, I would advise that when members ask for their blues, that is what they said, they can change or at least clarify what they said. Then if they want the response it should be added to it. In that way there would be no question about it. Most times they just want to know that they were correctly quoted in the blues and then subsequently in Hansard .

[John Cummins, Reform, Delta—South Richmond, BC]

Mr. Speaker, I did not want to turn this into a debate. It was not my intention, but I think what my colleague was saying was that vacuum does exist when we only receive one-half of a discussion. It just happened, I guess because of the positioning on the paper, that I received the transcript of what the Prime Minister said, so that check was not there. It might be helpful, when there is an exchange in question period, if both sides were distributed. If you could take that under consideration, Mr. Speaker, I think it might be helpful.

[The Speaker]

I am sure the hon. member for Delta—South Richmond will revisit what I have just said today. He asked me to take it under consideration. I am always open to advice from any member of the House.

The House resumed consideration of the motion that this House approves in general the budgetary policy of the government, of the amendment, and of the amendment to the amendment.

The Budget

[Sarmite Bulte, Liberal, Parkdale—High Park, ON]

Mr. Speaker, I will be splitting my time with the member for Stoney Creek. I rise today to congratulate the Minister of Finance on budget 2000, the first budget of the 21st century and the next step in the government's balanced and comprehensive plan to make Canada the place to be in the 21st century.

I would like to use my time to highlight parts of the budget by comparing it to the main priorities of my constituents, which were elicited during prebudget consultations last year. Prebudget consultations have become an annual event in my riding. Every year I meet with local business representatives, community activists and members of various community organizations.

Last year I also distributed a prebudget questionnaire in my riding and solicited responses through a local newspaper. Following the consultations I prepared a report which was then forwarded to the Minister of Finance, the Parliamentary Secretary to Minister of Finance and to the chair of the Standing Committee on Finance.

Yesterday the Minister of Finance thanked Canadians who shared their ideas and insights with the Standing Committee on Finance. Today I would like to take this opportunity to thank everyone who participated in my consultations.

When asked what should be the government's main priority in terms of investing the projected budget surplus, the great consensus among my constituents was a balanced approach. However, three major priorities dominated these consultations. First, 40% felt that the government should continue to repay the debt. Second, 35% felt that the government should renew spending and investment in key sectors. Finally, 25% advocated tax cuts.

Virtually everyone during my consultations felt that some action was necessary to pay down the debt. Every year I am finding increased understanding of the debt issue: how large it is in terms of the government's overall finances and how much of our revenues are eaten up in interest payments. I am increasingly hearing that if we are unable to retire a substantial part of the debt during the current relative boom, how will we be able to do so when some day we face a recession?

Others have pointed out the riskiness in very deep tax cuts while the debt and interest payments are still so high. Once again the concern is centred on the prospects of an eventual recession. If taxes are substantially reduced now, it will be politically difficult to raise them again in recessionary times. However, no one has suggested that debt reduction should be the government's singular priority. Most people felt that we were now in a position to reduce debt, address a host of social needs and cut taxes.

What did yesterday's budget say about the debt? The Minister of Finance confirmed that we would not abandon the balanced approach which the government adopted from the beginning, an approach which recognizes that debt reduction, tax relief and spending on health, post-secondary education and other priorities are not competing claims but complementary components of a fair and effective plan.

Let us not forget that the government inherited a record $42 million deficit in 1993. Yet Canada has not just eliminated this deficit. We are one of the few countries that is now reducing the absolute amount of its debt and will indeed continue to do so.

Over the past two years we have paid down the debt by $6 million, resulting in interest savings alone of more than $300 million a year each and every year. The budget also confirmed that we would continue to set aside a $3 billion contingency reserve to protect against unforeseen events. In accordance with our debt repayment plan we will continue to use the contingency reserve fund to reduce the debt when it is not needed.

Canada's debt to gross domestic product ratio, which measures the amount of debt against the size of our economy, has markedly improved. In 1995 Canada's debt ratio was 71%. Today it has dropped to 61% and we predict that it will fall to 50% by 2004. Beyond this the downward track must continue. We are still a long way away from the 25% ratio Canada enjoyed in the late 1960s, which in fact was the last time our books were in the black.

The second priority of my constituents was increased social spending with health care, a children's agenda, the environment, affordable housing and eased access to post-secondary education being most often recommended. Several constituents in fact pointed out that spending such as this should indeed be looked upon as investment in human capital.

I am delighted to advise my constituents that all their top priorities were also the government's top priorities. In fact the very first announcement the Minister of Finance made in his first budget of the 21st century was to increase funding for post-secondary education and health care. Moreover the Minister of Finance confirmed “these are priorities of Canadians and they are ours”. That is why budget 2000 transfers an additional $2.5 billion over four years through the Canada health social transfers to help provinces and territories to address pressing health care and post-secondary education concerns.

In addition, the Minister of Finance acknowledged that scholarships and bursaries were an important part of expanding our access to higher learning. Therefore, to ensure that more students receive their full value the budget increases the tax exemption from its current level of $500 to $3,000.

The environment was also addressed in this budget. The Minister of Finance has made it absolutely clear that protecting the environment is no longer an option. It is something that we must do. For Canada to be the place to be in the 21st century our lakes and air must be clean, our green spaces and diverse habitat and species must be protected, and we must deal with climate change. Consequently budget 2000 proposes to invest $700 million to promote the government's environmental agenda.

The budget also specifically noted that affordable housing was also an essential element of our modern society and critical to meeting the 21st century needs of our municipalities. Moreover, the government announced its intention to improve provincial and municipal infrastructure in cities by committing $450 million over the next two years and $550 million in each of the following four years.

The most important commitment made in the budget was to assist families and our children. Assisting families is not only the smart thing to do. It is the right thing to do. Governments can do this in two ways: through income assistance and support for services on which so many of our families rely.

Budget 2000 takes action on both fronts. First, it enriches the Canada child tax benefit with another $2.5 billion by the year 2004, increasing it to more than $9 billion annually. Second, the budget doubles the duration of employment insurance, maternity and parental benefits to 12 months.

Very quickly let us go to my constituents' third priority, tax relief. Although tax cuts were not as widely advocated as debt reduction and social spending, it was evident that the need for them is growing. The majority of my constituents advocated tax relief for lower income families, especially those with children. Employment insurance premium reductions, indexation and other across the board tax cuts were also adhered to.

Once again budget 2000 has responded to my constituents' concern. We have delivered a five year tax reduction plan that provides an average reduction of 21% to middle and low income families with children by the year 2000. The budget restores full indexation to the personal income tax system immediately and retroactively to January 1, 2000. Over the next five years we will increase the amount Canadians can receive tax free to at least $8,000.

The budget also decreases tax rates which have not come down in the last 12 years. Over the next five years the middle tax rate will be reduced from 26% to 23%. Effective July 1, 2000, the rate will be reduced to 25%. In addition, the income level at which the middle tax rate begins to apply has been increased to $35,000. Since 1994 employment insurance rates have been reduced each and every year from $3.07 to $2.40. The budget also assumes that these rates will continue to fall to $2 by the year 2004.

To conclude, I repeat what the Minister of Finance said yesterday in his closing remarks:

This is a budget with many elements, but a single theme: creating better lives for Canadians in a rapidly changing world.

While the budget may have many elements, it attempts to address the main priorities of not only my constituents but of all Canadians. It does so with one major objective: to translate better finances into a better quality of life for all Canadians. Let us never forget that the values of our society are reflected in the fiscal choices we make.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I listened intently to the speech and was really interested in the feedback the member had from people in her riding. It is consistent with what I get from the people in my riding. I would like some clarification. In the last half of her speech the member went through her list pretty much in the same order of priorities as the finance minister did in the budget speech with debt repayment last. Yet if I heard correctly at the beginning of her speech she indicated that the highest priority of people in her riding was to reduce the debt. I think it was around 40% and that was the highest rate. I am wondering whether the member would confirm that I heard correctly.

I would also like to remind all members of the House that the debt reduction plan of the government is dismal indeed. In the document I received yesterday the net public debt every year from 1998 onward to the projection into the year 2001-02 is $576.8 billion, $576.8 billion, $576.8 billion, $576.8 billion, the same number four years in a row. There is no plan for debt reduction at all, except there is $3 billion in a contingency fund and if we do not find some place to spend it, yes, we will apply it to the debt.

I would like the hon. member's comments and clarification on what I think I heard.

[Sarmite Bulte, Liberal, Parkdale—High Park, ON]

Mr. Speaker, the hon. member was right. He did hear that 40% of my constituents advocated debt reduction but I also stated very clearly that no one in my riding suggested that debt reduction should be the government's singular priority. Most people felt that we were now in a position to reduce debt, address social needs and cut taxes.

There were three approaches and three priorities. One perhaps is a little ahead, but no singular one was there alone. We looked at three priorities and that is exactly what this budget addressed.

With respect to the debt repayment, the hon. member has said that we do not have any plans at all to reduce the debt but that is not the case at all. We have reduced the debt by $6 billion. In fact yesterday in his speech the Minister of Finance also noted that market debt, the debt which is issued in financial markets, has fallen even further and by the end of this fiscal year we will have reduced it by close to $20 billion. So in fact the plan is in place.

Let us also not forget what the Minister of Finance said yesterday in his opening remarks. We will not abandon our balanced approach, the approach that this government has taken since it was elected to office in 1993. Again we are following what we said we are going to do. We are tackling the main priorities of Canadians but we are doing it in a balanced and comprehensive manner.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, I have heard enough from the Liberals today to assume that each one of them has been handed a little sheet of paper with a message that says if they are asked questions about tax transfers and cash for health care, they are to deflect, obfuscate and confuse and try to suddenly throw in a tax point argument so that Canadians are put off guard and the Liberals can somehow finagle their way through this one.

I suggest that all members read page 67 of the budget of 1997 where it clearly says that what matters for program spending is the cash. The government knows and we know that the cash is needed to hold provinces accountable to the Canada Health Act. How does the government intend to do that? If we roll in the meagre amount that is in the budget, the federal government is up to a 15% share of health care financing in the country. How is it going to hold provinces to account and stop premiers like Klein, Harris and others interested in privatization?

[Sarmite Bulte, Liberal, Parkdale—High Park, ON]

Mr. Speaker, first I would like to assure the member that I have not been passed any notes by any officials of any department.

I would also like to take this opportunity to tell the member and all of my constituents that I actually wrote my own speech. I do not read speeches of the Department of Finance.

The important thing is when we talk about the budget that we also talk about the things we ask our constituents. In the economic update in November, the finance minister asked Canadians to join in the debate as to what to do with that surplus. What we are going to do with that surplus will determine the Canada of the future. That is what we did. We went out and sought Canadians' input, me in my riding. With all due respect to the member, whom I respect very highly, when she claims that we are trying to confuse people with tax points, she is trying to confuse people by saying tax points do not play a role. Where—

[The Acting Speaker (Mr. McClelland)]

Order, please. If I waited for the member to take a breath, we would still be waiting, but the hon. member's time has expired.

[Tony Valeri, Liberal, Stoney Creek, ON]

Mr. Speaker, it is certainly a pleasure to speak on the budget today.

As the member for Parkdale—High Park indicated, certainly members on this side of the House consult with their constituencies. I did on the prebudget consultation. Quite clearly what came back from my constituency was the direction to essentially focus on the tax file and ensure that Canadians are able to keep more money for their hard work and to ensure the fiscal management we have provided over the last number of years is consistent and to also pay down debt.

The member for Elk Island often speaks of debt reduction. On a constant basis we do provide that continued reduction of the debt certainly on a debt to GDP ratio basis.

Today I would like to provide brief highlights in terms of the tax file. I would also like to deal with something specific that is in the budget, something which I and others in particular sectors have worked on. That is foreign trade zones, referred to as export distribution centres in the budget itself.

I will start with the tax file in terms of what we have been able to provide. We provided some structural changes to the tax file. The reindexing of the tax system is certainly critical. Canadians at the lower end of the income scale will certainly benefit from reindexation. We have provided a reduction in the middle bracket from 26% to 23%. We will move to 24% relatively quickly. We will essentially provide a cumulative amount of $58 billion of tax reduction over the next number of years.

Personal income taxes will be reduced on an average of 15%, and over 20% for Canadian families with children. We targeted the Canada child tax benefit. Most members know that it is the government's primary means of helping families. Some 90% of all children in Canada will receive benefits. Over the past three budgets we have invested a total of some $2 billion in this particular program.

Like the Minister of Finance, and I would suspect most members in the House, I believe that assisting families is not only the smart thing to do but it is the right thing to do.

We have heard some discussion about the transfers to the provinces. The budget transfers $2.5 billion in addition to the $11.5 billion. We should make it very clear as members get up over and over in the House, as the Minister of Finance got up in question period, that the additional $2.5 billion is not the last of our commitment to health care. The ministers of health from the provinces are getting together in May. They need to put together a plan that will deal with the health care challenges in the country. Once they do, and if in fact it does require additional funding, the Minister of Finance has already said very clearly that the national government is certainly going to be there with more money for health care.

As chair of the economic development committee in caucus, we are presently studying the electronic commerce and the new economy in Canada. For me in particular I was very pleased to see the announcements in the budget concerning e-business or e-commerce. Budget 2000 has put Canada in a stronger position to accelerate its leadership in the Internet economy and to encourage Internet investment.

In the papers this morning the managing director of the Boston Consulting Group of Canada commented on the budget. He is also the co-chair of the Canadian e-business opportunities round table. He commented, “It is encouraging to see government on-line emerge as a major priority in the budget. The government is dedicating serious money, $160 million over the next two years”. He went on to comment about the improvements where we have effectively reduced the capital gains tax by taking it from 75% and reducing it to an inclusion rate of two-thirds and also the new treatment of the stock options.

In terms of research, innovation and that sector of the economy, members are certainly aware that there is an additional $900 million put in place with respect to the Canada Foundation for Innovation. There is the funding of the century chairs for research excellence. All of these areas speak to the new economy and speak to the brain drain in a lot of ways. Researchers have said over and over again that it is research money and research grants that will allow them to do the work they need to do in Canada and to not exit the country. That is the kind of brainpower we want to keep here in our great country.

I am sure members are aware of the Federation of Canadian Municipalities and its proposal with respect to the quality of life program. The Minister of Finance has responded with an infrastructure program, a quality of life program that deals with road infrastructure and certainly deals with affordable housing as well.

In my constituency of Stoney Creek there are real demands to deal with road construction, road infrastructure, urban congestion and certainly to maintain the trade corridors that we have been fortunate enough to develop in the province of Ontario.

Let me spend a few moments on what we call the export distribution centres. When we talk about foreign trade zones many members certainly associate them with the United States. We in Canada have a geographic location which we need to take advantage of. We need to exploit it in fact. Our our proximity to Europe and to Asia is such that goods that are trying to access the North American market can flow through Canada. We can become a gateway to the North American market.

There are changes proposed in this budget that will facilitate and in a lot of ways create the logistics industry that has been lacking in this country. The changes proposed in this budget will allow Canadian companies and entrepreneurs to set up shop and attract European manufacturers who are looking to access the North American market. They will allow these Canadian entrepreneurs to add value, to set up shop and to deal with products as they flow through to the North American market.

We made some changes back in 1996. We dealt with bonded warehouses. We dealt with duty deferral programs. That was initially our response to foreign trade zones. We did not see it happen. We did not see foreign trade zones begin to flourish in this country. With the additional provisions in this budget we are now providing to independent Canadian companies expanded capabilities to handle goods for overseas manufacturers and to add Canadian value and content not only free of duty but also free of GST.

We are also able to attract foreign manufacturers who themselves can establish operations in Canada within a foreign trade zone to undertake this value added activity. What does it mean? It means jobs and additional revenue for us as a country.

A number of Canadian firms are already accessing this type of provision through U.S. foreign trade zones. We need to repatriate that type of opportunity. What does that mean? For communities like Vancouver, Winnipeg, Hamilton and Montreal right through to Gander, at locations like airports and ports where there is a natural infrastructure and a natural gateway to the North American market, it means that these areas can take advantage of this type of provision.

What does this really mean? The export distribution centres provision in budget 2000 presents an excellent opportunity for us as a country with respect to economic development. I mentioned some cities but that is only to name a few. We can challenge many others to deal with this export development opportunity.

We have a geographical advantage, as I have indicated. We are closer to Europe. We are closer to Asia. We need to take advantage of that. Combined with the announced tax cuts for small business, the general corporate tax cuts, the personal income taxes and the improvements in road infrastructure that will take place when we finally come to an agreement with the provinces and the regional municipalities, we are positioned with these provisions to grow a logistic sector and a value added sector in Canada. It will increase jobs. It will improve the opportunity for jobs right across the country, from Atlantic Canada to Ontario, right through to the western provinces and certainly in Quebec as well.

I urge hon. members to look for this provision in the budget and ensure that they go back to their communities and talk about it. It is a great opportunity for economic development.

[Christiane Gagnon, Bloc, Québec, QC]

Mr. Speaker, a number of people are disappointed by this budget, regardless of what the hon. member of the Liberal party says.

This budget contains some slip-ups. There could have been a significant sum invested in the social transfer in order to alleviate the burden of the provinces and to be in a position to meet the needs of the population.

Earlier in his remarks, the member praised our health care system, saying that sensitivity to demands in that area was required.

I would like to quote him from an article in this morning's Le Soleil , in which Michel Vastel refers to health care expenditures. He writes:

—provincial health expenditures alone rose from $48 to $68 billion, or 4% annually...provincial social expenditures rising six or seven times faster than the federal contribution.

Where is the hon. member headed with this praise of his government, saying that it is investing $5.2 billion in response to provincial requirements in the areas of health, education and social security?

This morning, I heard what some welfare recipients had to say. Social housing was forgotten. There was an expectation of $1.6 billion yearly, for a total of $8 billion, but the figure ended up being a pitiful $57 million over four years. The hon. member better not try to tell me that this budget shows the government has its heart in the right place.

I wish to hear his reply to this.

[Tony Valeri, Liberal, Stoney Creek, ON]

Mr. Speaker, I am very pleased to respond to the hon. member. When we look at the investment of $2.5 billion as an increase in transfers I think we ought to look at it in the context of the additional $11.5 billion in the last budget. I said earlier in my speech that the commitment to provide additional money for health care is certainly there. It has been made by the finance minister. It will be incumbent on provincial health ministers to come up with a plan that will work.

I also want to mention to the hon. member, since she brought up the question of transfers to the provinces, that she should not forget that the province of Quebec is one of the provinces that receives equalization payments.

I do not know whether this is the correct figure but I am sure it is in or about an approximate one. In the last budget we had about a $1.4 billion increase in equalization payments which I believe the province of Quebec put to its bottom line. It certainly had an opportunity to continue to run the deficits as it always does in that province or to put that increase in equalization payments into health care. It had the opportunity but it chose to put it to the bottom line.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, I heard the hon. member talk about business opportunities, trade zones and the investment into infrastructure that this budget addresses.

I remind the member on the opposite side that due to his government's inaction trade with Europe has fallen dramatically. We know that it is on the rise, but what it used to be historically is not there due to the government's high taxes over previous years.

The hon. member talked about infrastructure. This budget has only committed $150 million toward infrastructure. We know, and everybody knows, there has been a huge outcry because of a need for infrastructure investment. Why did his government not use the dedicated taxes it collects and invest them in infrastructure? Why was such a key area not addressed in this budget?

[Tony Valeri, Liberal, Stoney Creek, ON]

Mr. Speaker, in response to the hon. member's question about trade with Europe, the hon. member said that the lack of trade or the reduction in trade with Canada was particularly due to the high corporate taxes in Canada.

Perhaps the hon. member would like to travel to Europe at some time, or I could provide him with some reading material which shows that most European countries have higher corporate taxes, certainly higher payroll taxes, than we have in Canada. The member opposite is often on his feet advocating that payroll taxes are job killers and reduce the outflow of the economy. Yet he makes reference to Europe.

When I talk about foreign trade zones it presents an opportunity for the hon. member to go back to his community and do his part in terms of trying to increase trade with European countries, to use Canada as the gateway to the NAFTA countries, and to ensure that perhaps individuals in his community have the opportunity to employ and/or set up the entrepreneurial corporations I have described.

[Richard Marceau, Bloc, Charlesbourg, QC]

Mr. Speaker, I am pleased to rise in the House today to address the budget.

One thing that struck me yesterday, both in this House and outside—from what we could see and hear—is that Quebecers and Canadians no longer trust this government to manage public funds, absolutely not. There are a number of reasons for this, the main one being, of course, the ever bigger scandal at Human Resources Development Canada.

When this government gets its hands on public money, what it does with that money is far from being for the well-being of the general public. More specifically, as regards this budget, we can mention three major disappointments shared by many people.

First, there is no real tax relief this year. The government had promised to lower taxes. It even boasted about it, saying “Yes the tax burden of Canadians and Quebecers will be reduced”. Well, it is not the case this year.

Second, the transfers to the provinces are ridiculously low compared to the needs that the provinces must meet year after year.

Finally, some claim that this government's heart is in the right place. Nothing could be further from the truth, because there is absolutely nothing in this budget for the poor and the unemployed.

I will discuss each of these points separately.

I could talk for hours about these issues. Unfortunately, we have very little time. Yet, we could level many criticisms at this budget.

Everyone knows the priorities of Quebecers and Canadians are health care and education. We know. We hear it talked about everywhere. So what is there in this budget for health and education? Pittance.

They talk of an increase of $2.5 billion over four years, when the provinces were unanimously calling for $4.2 billion this year alone, increasing to $4.4 billion next year and $4.6 billion the following year, that is, indexed for the following years. And what will they get? A mere $2.5 billion over four years.

The Minister of Finance could have done a lot better with the surpluses he has. He talked of $95 billion over five years, when we know very well that he will have $137 billion available over five years. The Minister of Finance is playing squirrel again.

We also learn that the $2.5 billion allocated to the one time payment for health and education will be charged to 1999-2000. Another game of the hand is quicker than the eye to make the surpluses the government has in hand disappear.

The minister is keeping his old, less than transparent management practices. They are camouflaging figures to make us believe that Ottawa does not have the means to give back to the provinces, and Quebec especially, what it stole from them for its election coffers.

There is worse to come. Quebecers, who are watching us, and I know there are many of them, realize that Quebec is the real loser in this political announcement, despite what my Liberal predecessor was saying. After being forced to cut in health care, education and social assistance, Quebec will bear over 50% of the total cuts to the Canada social transfer. It represents 25% of the population but it has to absorb 50% of the cuts. That is what federalism means for Quebec.

By including tax points, the Minister of Finance is saying that the total Canada social transfer between 1999 and 2004 will be $156 billion. I think the time is long overdue to lay the tax point myth to rest.

The increase to $156 billion is due solely to the value of tax points which, for the same five-year period, will increase from $14.9 billion to $17.2 billion. These tax points are not transfers. They are revenues that belong, and have long belonged, to the provinces and to Quebec.

According to the federal government, the Canada social transfer constitutes a transfer of cash and tax points. But the Canada social transfer does not consist of cash transfers alone, because the federal government turned over the tax points a good thirty years ago, before I was born. Furthermore, the federal government has no say in how these tax points are allocated. So always wanting to include tax points in the Canada social transfer is completely ridiculous and completely misleading.

What does the Minister of Finance also say? He says “Canada Health and Social Transfer payments will be increased by $2.5 billion. This budget announces an additional $2.5 billion in CHST support, providing an added $1 billion in 2000-01 and $500 million a year in each of the following three years. This means that the cash component of the CHST will reach $15.5 billion in each of the next four years”.

Cash transfers will not be raised $2.5 billion, because they will be put in trust, temporarily at least, until the enabling legislation is passed. This has not happened because of the decision by the Bloc Quebecois, in response to the demand of the people of Quebec, to ensure that Bill C-20 and all other bills introduced by this government are, if not blocked, at least slowed down.

Returning to this trust, we do not know what this is. Does this mean that the social union is going to apply from now on to cash social transfers? Is this to prepare us a bit in advance for the “coast to coast” programs that are the dream of several of those ministers and members across the way, who love to spend money? All this is yet to be determined? We do not know yet?

Returning to the cuts, they are a great little horror story for Quebec. Between 1994 and 2003, the provinces will have undergone $33 billion in cuts under the Liberal administration. In fact, even if the ceiling for the social transfer is raised from $12.5 billion to $15.5 billion in coming years, Quebec's share will drop from $3.9 billion in 1999-2000 to $3.6 billion in 2002-03.

What is Ottawa trying to do? Ottawa wants the provinces to struggle, their heads barely above water, while it is floating nicely along amidst a huge surplus. This is one concrete example of the extreme federalism against which Yves Michaud spoke out not so long ago. They want the provinces to be nothing more than big municipalities, with Ottawa calling the shots and the provinces carrying them out. What they are in the process of doing with the social union is to turn Canada into a kind of de facto unitary state.

This may not be what the texts say, but in fact, with the enormous surpluses Ottawa is reaping and the fact that it is keeping the heads of the provinces barely above the water line, federalism is less and less a fact. Increasingly, we are heading toward a de facto unitarian government.

As for the transfer of funds with the Canada social transfer, the provinces' situation is not improving. The cuts by the federal government have hurt very badly, especially in Quebec where the per capita shortfall in 1999-00 is $225 as opposed to $121 for Ontario and an average of $138 for Canada.

Once again, Quebec is being had. What is even worse is that the ministers and Liberal members are saying “Yes, go on, hurt us, we like that. Go after Quebec, take more money away from it than from the other provinces. Take more, we like that, we are going to stand up on our flippers and applaud like seals for the Minister of Finance, who comes from Quebec, and does it more harm than he does to all the other provinces”. This is unacceptable, it must be made known and condemned.

The annual shortfall for Quebec is $1.7 billion. The effect is dramatic. It means a shortfall of $875 million for health care, $375 million for education and $450 million for social assistance. What does it mean specifically? An additional $875 million for health care would mean the creation of over 3,000 jobs for doctors and 5,000 jobs for nurses. Why do we not have them? Because this government decided to cut health care and education.

It is interesting to compare Ontario and Quebec. Since it took office, in 1993, this government did not merely make cuts to cash transfers. It also unilaterally—they like that word, across the way—decided to change its method of calculation, at the expense of Quebec.

The Liberals respond to accusations of having sabotaged health care by saying that all the provinces suffered cuts, this in a fair manner, and that it is the fault of the sovereignist government in Quebec City if things are not going well in our province.

In fact—and everyone knows that, as I found out when I recently travelled across Canada—all the provinces suffered cuts. The only common denominator between all the provinces is the federal cuts.

As for the alleged fairness of these cuts, the federal government put in place, as early as in the 1996 budget, a mechanism “to reduce current disparities in per capita entitlement between the provinces by half by 2002-2003”.

The mechanism in question would have increased the per capita weighting from 10% in 1998-1999 to 50% in 2002-2003. But, in the 1999 budget, without a word of warning to Quebec, the federal government proposed “to completely eliminate these disparities in three years, that is by the year 2002”. This means that Quebec will absorb 50% of the cuts, when it only accounts for 25% of the country's population. This is the price to pay for federalism; this is the price to pay for not having achieved sovereignty.

The Liberal member who spoke before me talked about tax reductions. He stressed non-indexation, the fact that the government is again indexing tax tables. Let us be clear—indexing is not a real tax cut. With indexing, the taxpayer does not pay more, but he does not pay less; the effect is neutral.

We are most certainly in agreement with deindexing; we have been pushing for it for five years and it is time the government listened to us. In fact, I think that if it listened to us more often, things would improve.

That having been said, it could have done more. It could have reindexed the tax tables, as well as making significant tax cuts, which it decided not to do. Even though it is raking in surplus after surplus, this year it consciously decided not to give the public tax cuts.

Since 1993 when this government took office, the non-indexing of tax tables has accounted for between approximately $12 billion and $17 billion. Surely, with the surpluses it has, it could have relinquished a small portion of this large amount, but it made a conscious decision not to do so.

It proudly announces that it has eliminated the 5% surtax this year for incomes under $85,000 and that it will eliminate it for all incomes over the next five years, by 2004. The complete elimination of the 5% surtax in 2004 will result in a tax cut of approximately $5,600 for the 61,000 taxpayers earning over $250,000. Meanwhile, it will be less than $100 for middle income earners, who make up the majority of those listening. Is this fairness? Is this justice? No way.

The third point I wanted to raise is the lack of any improvement to the employment insurance program for the least advantaged members of society. Yet the demands of the Bloc Quebecois were very clear. Our party made itself the spokesperson of a consensus that exists, not just within Quebec, but in the rest of Canada as well.

The Bloc Quebecois called for five main points. These were: that the employment insurance fund no longer be used as a tax on employment; that the administration of the employment insurance fund be depoliticized and removed from government control, or in other words made into an independent fund; that the employment insurance fund conform to the objectives of the legislation, which is to ensure the unemployed of a decent and fair income during temporary periods without work; that priority be given to returning to contributors the benefits to which they are entitled; that it retain its role as an anticyclical measure.

Yet this budget contains nothing for the unemployed, which means that, in the aftermath of this budget, six out of ten jobless people will still not qualify for employment insurance.

In addition, this budget contains some measures that are specifically anti-Quebec. I shall mention four of them. The first one relates to the shipbuilding industry.

The federal taxation system has just taken back the assistance Quebec has given to this industry in decline, assistance that the Government of Quebec had been intelligent enough to put into place. I come from the Quebec City region, where the Davie shipyard is important for employment. Yet the federal government is doing nothing, worse than nothing, for it is taking back part of the assistance the Government of Quebec had given to an industry that has unfortunately been in decline because of the federal government.

Second, the budget tabled yesterday in the House of Commons will include retroactive taxation of the super-deduction for R and D credits announced less than a year ago by the Government of Quebec. For about 12 years now, Ontario has benefited from such a super deduction. Less than 10 months ago, Quebec set up a similar program and guess what happened? The federal government pulled the rug out from under the province by ensuring that the super deduction cannot benefit people working in research and development in Quebec.

Third, there is the deduction for interest on student loans. We are well aware that Quebec made a conscious choice to have the lowest tuition fees in North America, because we feel this is the best way to ensure the greatest possible access to post-secondary education. That approach has worked. However, because Quebec students are paying lower tuition fees and are therefore less indebted, they are getting less from the federal government. This is unfair.

Quebec adopted a very progressive and modern social measure to promote access to university, and what did the federal government do? It made sure that students from the rest of Canada can benefit a lot more than Quebec students from the deduction for interest on student loans. Quebecers are supporting students twice, first by paying taxes so that tuition fees are the lowest in North America and, second, by helping students in the other provinces, because they made a conscious decision to have lower tuition fees.

The fourth anti-Quebec measure in this budget concerns the deductions for daycare. Less is paid to Quebec families, because they pay less in daycare costs since the Government of Quebec established a $5 daycare plan.

Quebecers are being penalized once again for creating an innovative program, praised by many and the envy of all across Canada.

There are four anti-Quebec measures in this budget.

You are signalling me, Mr. Speaker, that my time is almost up, and I want just to respond to the Liberal member who spoke before me. He said that Quebec received more than its share in equalization payments and so on. If so, it is because it does not get its fair share in active spending, in structuring spending.

Let us talk about all of this. Quebec got an average of 21% of federal purchases of goods and services, 15% of current transfers to business, 18% of federal government investment between 1992 and 1997. In 1998, this translated specifically into 19.5% of jobs in the public service and 19.1% of jobs in the armed forces, whereas Quebec represents 25% of the population.

Quebec's annual shortfall in federal purchases of goods and services, the difference between Quebec's population size and the share of federal spending the province receives, is $1.2 billion. In the case of current transfers to business, the shortfall is $339 million and, for investments, the figure is $219 million a year.

I conclude on this. If the federal government gave Quebec its fair share of job creating spending, that is, $1.7 billion, over 30,000 jobs could be created in Quebec, which would mean a .7% drop in the unemployment rate. The unfair distribution of spending could explain as much as 50% of the difference between the unemployment rate in Quebec and in the rest of Canada.

That is the cost of not having sovereignty.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I listened with some interest to my colleague from the Bloc. I want him to know that as an Albertan, as a member of the Reform Party and as a member of the House I consider him to be part of the Canadian family. He is a Canadian. He lives in Canada and he serves in Canada's parliament.

I heard throughout his speech too often that Quebec was not getting its fair share. I have done a little study on equalization, which is what he was talking about. As I recall, the Quebec population is now about 24% of Canada's population.

The numbers I have over the last 10 years show that of the equalization that was paid out to the seven so-called have not provinces, which excludes Alberta, Ontario and British Columbia, Quebec received in excess of 60% of the money as a percentage. Overall in Canada, including all ten provinces, Quebec received between 40% and 50%. The peak was around 48% in one year according to my records.

With a population of 24% and getting 48% of all equalization payments in the country, how can the member say that Quebec is not getting its fair share? It is getting twice the average, which seems to me to be inconsistent with his statement. Before I sit down, with that I would like to invite him to stay in Canada.

[Richard Marceau, Bloc, Charlesbourg, QC]

Mr. Speaker, the response to his invitation is no.

As for the first part of his comment—for which I thank the member, who is one of the hardest working members in the House—he suggests that Quebec is the spoiled child of the federation and that it is receiving more than its share of federal spending.

I wish to remind him that if Quebec is receiving more than its share of provincial transfer payments for employment insurance, it is mainly because it is not receiving its share of spending to create jobs.

Some spending produces nothing because the money goes to people who stay at home, which does not create any jobs, and some spending that produces jobs.

Quebec is not receiving its share of the money that creates jobs. I will repeat a few figures that I gave just before concluding: 21% of federal goods and services are purchased in Quebec, and yet we represent between 24% and 25% of the population; 15% of current transfers to businesses, and yet we represent 25% of the population; 18% of federal investments between 1992 and 1997, and yet we represent 25% of the population.

Quebec's annual shortfall with respect to federal goods and services spending is $1.7 billion. This represents 30,000 jobs in Quebec and an approximate drop in unemployment rates of 1%. If, instead of doing all its investing in Ontario, the government ensured that Quebec received its fair share, then we could talk again.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I am always fascinated when members of the Bloc talk about fiscal matters because they certainly are inventive and imaginative about the way they restate the books and the public accounts of Canada.

I share with the member for Elk Island the frustration that we have in constantly having to rise to point out the fact that Quebec does quite well by this country. That does not mean that it is favoured or pampered, but Quebec certainly gets its fair share. Having people say that it does not, that it is discriminated against, is, quite frankly, untrue and an insult to our country.

The member talked about moving toward a unitary state. There is no one who has studied political science or social policy, not only in Canada but throughout the world, who would not say that Canada is the most highly decentralized federation in the world.

I want to address the issue of tax points. The member went on and on about tax points. It was once again creative economics. A lot of people do not understand tax points. Let us say that the federal tax was at 40%. I will use that figure for simplicity. The federal government, in agreement with the provinces, including Quebec, said that instead of the government taxing the provinces at 40%, it should reduce the tax by 3 or 4 percentage points and the provinces would take that back. Individual taxes would be the same. The federal government would reduce its share of direct taxation on individuals and the provinces would be able to tax directly. This was done and I am sure the province of Quebec felt it was a wonderful thing because it could tax the people directly to raise money for its social programs.

I would be very interested in knowing if the member is suggesting that we reverse the original concept of tax points and have the federal government reoccupy that level of direct taxation, with the province of Quebec similarly reducing the amount which it taxes Quebecers directly.

[Richard Marceau, Bloc, Charlesbourg, QC]

Mr. Speaker, I hope I have 20 minutes or so to respond, because it is not often that one hears such utter nonsense.

As far as the unitary state is concerned, yes we are heading more and more in that direction, and I trust the hon. member for Durham is listening. His government has implemented what is called the social union. What does social union mean? That the federal government can, merely by notifying the provinces—this is also going to interest my colleague from Anjou Rivière-des-Prairies—interfere in any provincial area of jurisdiction. What is that all about? Is this still federalism? According to what I learned in my law courses, any federalism requires totally different “spheres of sovereignty” for the different levels of government.

When the federal government gives itself the right and the power to interfere in areas of jurisdiction that do not belong to it, this is no longer federalism, and Canada is moving more and more toward a system in which Ottawa dictates to the provinces.

Nine out of ten provinces are relatively okay with that having signed the social union. Why? Because for them the “national government” is located in Ottawa. For them the supreme representative of their interests is in Ottawa.

For Quebecers, however, whether federalists or sovereignists, their national government is in Quebec City. This is why the three political parties represented in the National Assembly, including the strongly federalist Quebec Liberals, refuse to get involved in such a system, and reject the social union proposed by their federal cousins, rightly so, moreover.

There is one other thing that the hon. member referred to, and I am not sure I grasped it properly. He talked about occupying tax fields, wondering, I think, whether the trend that has existed since 1960 had to be reversed.

The transfer of tax points essentially stopped in the 1960s, unless I am mistaken, after another Liberal government, under Pierre Trudeau, decided to take a harder federal line and to centralize Canada increasingly rather than remain flexible. Flexible federalism does not exist in Canada.

With surpluses estimated at $137 billion, the provinces have the need, and the federal government has the money. The federal government is very tight with its money, because it refuses to give back to the provinces what it took from them, while the provinces' needs in health care continue to grow, as my colleague from Québec among others pointed out a little earlier.

As I said earlier, I think rightly, the federal government is keeping the provinces struggling, their heads barely above water, while it is rolling indecently and disgustingly in surpluses.

[Ted McWhinney, Liberal, Vancouver Quadra, BC]

Mr. Speaker, I will be sharing my time with my colleague, the member for Barrie—Simcoe—Bradford.

It is a pleasure to support this budget. It is a budget for the 21st century, the knowledge century, and that is the element of the budget that I will signal in my remarks.

You will remember, Mr. Speaker, the tragedy of the failure of the KAON project, launched by a man of genius, Erich Vogt, but allowed by a previous government to fail for lack of financing. Why did it fail? The previous government, one, did not understand the nature of pure research and its importance for a modern society and for a viable economy, but, two, had doubts about constitutional power, which on examination were unreasonable. “The constitution”, as Lord Sankey said, “is a living tree”. Where the social necessity exists the power will follow for rational men and women.

The KAON project failed and our first mandate when this government was elected in 1993 was to support the successor, the TRIUMF project. It was a period when we had inherited a $42.8 billion deficit budget from the predecessor government. We were asking for $167.5 million to support the TRIUMF project. It took 12 months of discussion in caucus and in the House to explain what pure research is. It is not an esoteric examination of subjects fit for angels but for no one else; it is an examination of the basic intellectual infrastructure of our society. It meant explaining what is particle physics, why is particle physics important to us, that when properly applied in its lessons it leads to highly skilled jobs, it leads to an export economy.

That was the demonstration made with the TRIUMF project. We were able to demonstrate $193 million in export contracts in a single year in spinoffs from TRIUMF. So the battle was won, pure research, the thing that saved Germany and Japan after their devastating defeats and the devastation of their industries in the second world war. Invest in pure research. The federal government has never really looked back from that.

Therefore, it is perhaps a matter of interest to note that we can believe newspapers sometimes. The Vancouver Sun has in some ways jumped the gun and suggested that TRIUMF may be refinanced. I believe the announcement will come next week, but let us face it, TRIUMF was when we turned the corner in the federal government and said that research in the areas of science, technology and medicine was crucial to our survival as a competitive country in the 21st century.

I look through this budget and I see the follow-on of this distinctive philosophy of the knowledge society being carried through. There is a project in which major intellectual contributions were made by Dr. Martha Piper, the president of the University of British Columbia, a distinguished research scientist in her own right, and Robert Lacroix, the rector of the Université de Montréal. It is the establishment of the millennial professorships with 2,000 new university research chairs across Canada and $900 million invested by the federal government.

Why do we spend this money? We want to keep these people in Canada. There are Nobel prize winners there already, but there are also the Nobel prize winners of tomorrow. These are the people who expand the frontiers of knowledge. So that is a very positive step.

I look back at the Foundation for Innovation established with a billion dollar grant by the federal government, with a further $900 million in this budget. This is to provide for innovative research, science, medicine, the equipment of laboratories and the basic infrastructure of research in universities. Dr. David Strangway, the former president of the University of British Columbia, has been extending this in his administrative talent. It is a very vital task.

We took the science minister on a visit to the University of British Columbia and told him that we wanted him to see an historic laboratory. We took him to the second floor of the science building and he asked what was historic about it because it looked like an ordinary rundown university science laboratory, with not enough equipment and out of date. We said that was where the last Nobel prize winner from Canada went as a graduate student and did his research. It is still in the same condition it was in when he attended 30 years ago. It needs rebuilding. The creative idea for the Foundation for Innovation comes from there.

There has been talk of federal-provincial co-operation. We devised this concept of co-operative federalism. I look at the Canada health and social transfer program, with $2.5 billion for that, of which $340 million will go to British Columbia. We wish to co-operate with the provinces, but it is a two-way process. We are tired of giving money—and I think even British Columbia may feel some guilt here—for education or research and finding that it ends up in highways with no end and no beginning, into the never never land. We extend the invitation to the new premier, sworn in several days ago in British Columbia, to come and join us, to spend this money, this transfer, on education, on post-secondary research and on work in the hospitals. We will work with him if we can.

I look at money for forestry research. It is British Columbia's basic industry but it is in some sickness today. We need research in new methods and new technologies. The $15 million is for the three forestry research institutes scattered over Canada.

There is $160 million for Genome Canada to advance the study of genetics. It is led by Dr. Michael Smith, the Nobel Laureate in chemistry. He knows both the possibilities and also the prudent restraints in the application of this new science to plants and to other forms of research. This is a most interesting aspect of the budget.

There is $100 million in the sustainable development technology fund. A good deal of this will go to companies like Ballard Power, the new fuel cell technology that can revolutionize transportation and at the same time reduce to minor proportions the problem of pollution that conventional batteries create with the power involved.

If one looks through the budget, there is $5 million for geoscience to improve new techniques for mining.

Our mining industry needs revitalization. Abstract research? Not on your life. The jobs of tomorrow are there. They are highly paid jobs and vital to our economy.

Over this whole spectrum of work we see an imaginative budget that looks forward, not backward. It uses our surplus at once to reduce taxes, to stimulate the economy in that sense but also to create the knowledge that is the basis of breakthroughs in science and technology which are in essence the foundation of our industry and of our competitive economy with the opportunities for brilliant young Canadians who might otherwise be lured by the temptations to go south and follow the brain drain.

We can keep these people in Canada. We need them. We invite the provinces to co-operate with us. It is a two way process but the basic foundations are there.

It is a pleasure to assist the adoption of this budget, the knowledge budget, a budget for a knowledge based economy. That has been the inspiration of our government, the science minister, the finance minister and the Prime Minister since the inception of this government.

It comes to fruition here with a budget with the first big surplus. All the hard work of saving, prudent pruning of overstaffed departments and the like comes to fruition here with the stimulus we have provided for the economy.

[The Acting Speaker (Mr. McClelland)]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Regina—Lumsden—Lake Centre, Gasoline Prices; the hon. member for Mercier, East Timor; the hon. member for Cumberland—Colchester, Airline Industry; the hon. member for Mississauga South, Foreign Affairs.

[Christiane Gagnon, Bloc, Québec, QC]

Mr. Speaker, I was anxious to address the budget.

Budget day is always an important day for Canadians, for people in all the provinces, including Quebec, because they want to find out what impact the budget will have on their daily lives.

Today, Oral Question Period focused on the current scandal at Human Resources Development Canada. This is not because the budget is not a priority, an important issue for members of parliament, including Bloc Quebecois members, but because we wanted to show how badly this government has failed, in terms of managing programs, of managing one of the most important departments.

This is not the first time. I remind members that in 1984 the federal government lost $1 billion hole through a new tax to promote scientific research. That tax loophole resulted in the robbery of the century. Over a nine month period the tab climbed to $3 billion, while the cost of that initiative was expected to be $100 million.

Considering all these losses created over the years by Liberal patronage, considering the measly $2.5 billion that will be paid, I thought the member would have had a more balanced approach, a vision regarding the needs of the provinces in health and education—

[The Acting Speaker (Mr. McClelland)]

I apologize for interrupting the hon. member but I must give the floor to the hon. member for Vancouver Quadra for his answer.

[Ted McWhinney, Liberal, Vancouver Quadra, BC]

Mr. Speaker, if we are talking about the management of these projects, we are talking about Martha Piper, Robert Lacroix, David Strangway, and Michael Smith. These are well known scientists and physicians; we trust their advice and judgment. That is why I strongly supported their appointments. I have complete faith in their judgment.