Mr. Speaker, I am pleased to rise in debate on this take note motion with respect to the budget. As my esteemed colleague, the hon. Leader of the Opposition pointed out in his remarks this morning, this budget has been far too long in coming.
In fact the budget date still has not been formally announced. The finance minister still has not come before this place to give us a date. All we have is a vague commitment that it will happen before the House rises before Christmas. However, if it is some time near the adjournment of the House that means that we will have waited some 650 plus days since the previous budget to finally get something approximating an accounting of the nation's finances from the hon. Minister of Finance. This is a complete contravention of the convention in this place and in every other Westminster style parliament.
Parliament came into being and exists as the voice of the commons to provide a check and a balance to the power of the crown, the power of the executive and particularly its huge power of the purse. The annual presentation of the budget and the estimates is historically the central legal role of parliament, yet it is a role which, like so many other traditions, conventions and privileges in this place, has been incrementally derogated by the government over time.
I see my friend the hon. Parliamentary Secretary to the Minister of Finance, who says in public debates that this is a moot point, that it is not relevant when the budget is. It may not be for academics or wealthy big bank economists in their towers with gold leaf windows on Bay Street, but it is important to those of us who understand the purpose of this institution, namely, to provide a check and balance to the otherwise unchecked and unbalanced exercise of executive power and particularly its awesome power in matters of money.
I hope all members will join me in saying that it is about time and we hope that never again will Canadians have to wait for two years to finally see the state of their government's finances, not the minister's budget, but the budget of this country and this federation.
It is even more unfortunate that the finance minister has waited until the onset of a recession, a time of war, this moment of crisis, to introduce such a budget. He ought not to have waited. I stood in this place last spring, as did other colleagues, warning about the real, credible possibility of a downturn. I was then looking at the economic data and projections and it seemed evident to me, based on cycles in the economy, the situation in other jurisdictions and softening demand here in Canada, that there was a very good chance of us moving into recession.
I asked these questions last spring. I asked why the finance minister would not introduce a budget that would stimulate the economy to protect us from a potential downturn. He said then much what Michael Wilson and Don Mazankowski said when they sat in the ministry of finance in the early 1990's. They said “Don't worry, be happy, there's no recession, don't scaremonger, don't be a Chicken Little”. Just trust us, they said, the economy will continue to grow.
In fact it was only four years ago that the Minister of Finance told us that we had finally learned to beat the business cycle, that the future in Canada was one of endless, gold paved streets. We were just going to see growth endlessly as long as he was Minister of Finance, he implied.
We see now how wrong he was four years ago and how wrong he was four or five months ago when he refused to take action to prevent a downturn. Now we find ourselves in the middle of a recession. In the second quarter of this year the GDP growth in the country screeched to a halt. Unemployment began to tick up. Of course we have not yet received complete data from September but there is no doubt in anyone's mind that with negative growth in July and in September we will have a contraction in the economy in the third quarter. There is very little doubt in anyone's mind that it will follow through to the fourth quarter of this year.
That equals, technically and in every other sense, a recession, a Liberal recession, a recession that the Liberals have denied. It has happened. There is a recession which they still deny exists. It is here and it presents us with some very serious challenges.
I know it is tempting for members of the government to suggest that the Liberal recession is simply the fault of the tragic events of September 11. It would be factually inaccurate and politically insensitive to make such an argument, because as I have outlined, negative growth was well underway in the country prior to the events of September 11. Undoubtedly that day and its political and economic consequences have deepened the downturn here and abroad and made a difficult situation even more complex, but let us not let the government off the hook in terms of it taking the lion's share of the responsibility for the economic consequences of its policies.
It is very interesting. The finance minister, during the several years of growth we are just coming out of, was very quick to take full credit for any growth in the Canadian economy even though about three-quarters of that growth was driven by exports to the United States, which had been on the rise thanks in large part to free trade, a policy with which he was not associated. Those exports also were being fuelled by the depressed value of our currency, hence the lower cost of exports.
He had a bit of a free ride through the 1990s in terms of economic growth, but he still took credit for the easy ride. Now suddenly when the road gets bumpy he cannot take any responsibility for the government simply being adrift on an ocean of economic tides beyond its control. I do not buy it. He needs to be consistent. If he wants to take any share of the credit for the expansion in the 1990s, then he and his government must take their share of the blame for the downturn in which we now find ourselves and which has a very real, human cost. A recession is not just some statistical accumulation of data that economists look at. A recession is a period when real people suffer real economic harm in their lives through layoffs and uncertainty. We see this with thousands of layoff announcements every month, and in fact every week, in the country.
How is it that the government has contributed to the conditions of a recession which the finance minister must now address in his budget? It has done so by missing an enormous opportunity to finally get Canada's economic fundamentals right. As they say in the west, make hay while the sun shines. We ought to have been making economic hay in the country when we had a period of growth for eight years in the 1990s. We ought to have been moving quickly to deeply reduce our national tax burden and to structurally reform our tax system.
I see my hon. colleague, the member for Toronto--Danforth, a lonely voice for economic common sense in the Liberal caucus and for a single rate tax. His has been one lonely voice for tax reform and broad based tax relief.
It was not until the 11th hour before an election last fall that the government finally, after years of insistent pleas from Canadians, decided to come forward with modest tax reductions. What it did then, typically, was to overspin and overhype what were, relatively speaking, fairly modest tax cuts. It claimed $100 billion in tax cuts from the October statement of last year. One just knows that the finance bureaucrats were told by their minister and the PMO to come up with a six figure number, like $100 billion, so that they could be politically competitive with the Alliance, which was setting the agenda in terms of tax relief.
It played every accounting game in the book in order to rustle up the $100 billion bogus tax cut figure. In fact, $7.8 billion of its so-called tax cut was actually an increase to the Canada child tax benefit. It is a good program but it is not a tax cut. It is a spending increase. It is an entitlement program, a transfer to persons through the tax system. I know the parliamentary secretary will agree with me that it is dishonest to characterize it as a tax cut. Of the so-called tax relief, $29.5 billion has been eaten up by increases in the CPP payroll tax, which was increased phenomenally by the government in 1997.
Of its so-called tax cuts, $20.7 billion was the result of the reindexation of the tax system. Essentially the government said it would stop raising taxes, that it would stop the insidious hidden annual tax on inflation and would count that non-tax increase as a tax cut. It was totally bogus.
When we net it all out the actual tax relief was $42.5 billion over five years and most of that is back end loaded into the last year or two of the plan. I and many commentators are very skeptical that we will ever see all of that tax relief because of the fiscal imprudence and irresponsibility of the government.
That is why 76% of Canadians when polled say they have not noticed any federal tax relief, not because they are dumb or naive but because they have not had any tax relief. They are absolutely right to make that observation. We continue, as I said in question period, to have the highest level of personal income taxes in the G-7 and, according to KPMG and a study published in The Economist magazine, the highest level of corporate income tax rates in the OECD. There is all of this, together with the government's failure to meaningfully address our enormous debt burden of $550 billion, a higher debt to GDP ratio than all but two countries in the OECD. We have the third highest debt to GDP ratio in the OECD. We continue to have, I believe, the second highest level of foreign indebtedness in the G-7 and OECD.
All of these things are reasons for the continued lag in our productivity. As my leader, the Leader of the Opposition, pointed out this morning, Canada's lag in productivity has led to a falling behind, particularly relative to our American major trading partner. In Canada, personal disposable income after tax is now 22% lower than it is in the United States. That means about $7,400 per person or about $29,000 for a family of four. Just think about it.
If an average income family in Canada were to receive a $29,000 cheque tomorrow, that would represent the monetary difference in the standard of living between themselves and an average American family. That difference has been fuelled by our lag in productivity versus American productivity growth. Labour productivity in the U.S. has increased at nearly twice the rate it has in Canada throughout the decade of the 1990s. As I said, that has led the Chamber of Commerce and others to say that the 1990s was the worst decade for productivity in Canada since the 1930s.
The government has missed the opportunity to get its economic fundamentals right. We still spend, as the opposition leader said this morning, more than $40 billion a year on interest, payments that will go up as the dollar goes down because so much of it is denominated in foreign currencies. That is $110 million a day that could go to health care, to broad based tax relief for working families and to cutting edge innovation in scientific research or to education. Instead it is going to bankers and bond holders because the debt of the federal government today is $30 billion higher than it was when this government took office in 1993. The government has missed this tremendous opportunity to get the fundamentals right.
What has it done over the past two or three years? It has gone back to being an old fashioned tax and spend Liberal government, and in so doing has begun to jeopardize the hardest fought prize of Canadians in our economy in the past 25 years, namely the surplus. Due to the fact that program spending has been growing in the past two years at rates of 6% and 7%, because every year in the past five years the finance minister has significantly overshot his spending projections cumulatively by over $20 billion, economists, including the former bank economist from the Royal Bank, have been projecting that there will be a planning deficit by the last year of the minister's fiscal plan. Some economists, including the Bank of Nova Scotia, have projected not just a planning deficit but an actual deficit of $5 billion next year.
In an article published in August, Andrew Coyne stated:
Make no mistake: If we do slip into deficit, it will have very little to do with a slowing economy (or tax cuts)...federal revenues in the current fiscal year should come in at around $176-billion: at worst, $174-billion. Interest on the debt will consume about $40-billion of that: at worst, $41-billion. Had program spending kept to the...track it appeared to be on as of the 1997 budget, we would today be looking at a surplus of $20-billion or more.
That is instead of the $5 billion the finance minister would have us believe as this year's surplus.
That is driving him right up against the wall to the point where he will be hoisted on his own petard. He must make some very difficult choices. This budget is all about priorities. It is all about whether or not the government can get its priorities straight.
The single largest expenditure cuts in Ottawa's program spending review was not in corporate welfare, or in job creation schemes that do not work or in subsidies for crown corporations or special interest groups. It was in national defence, by 23% in real terms. National defence, the protection of our security and sovereignty, should not be the last priority. It must be the first priority of a national, federal government. Under this government, it has been the last fiscal priority.
My leader detailed a number of measures which we believe would likely add up into the range of $3 billion or more in additional resources for national defence, CSIS, RCMP, the coast guard, customs and immigration, new acquisitions, high technology and new personnel to meet the challenges of the war on terrorism. That we must do. However, in closing, we must also fight the recession that we are now facing.
I submit we can do so prudently if and only if we reallocate spending from low priority program areas to the urgent necessities of national security.
We can accelerate prudently some tax cuts, such as the capital tax and employment insurance premiums. I hope that the government will finally get its priorities straight in this budget.