Mr. Speaker, it is an honour to resume debate on the motion with respect to the budget following last night's adjournment of proceedings.
The budget presented by the hon. Minister of Finance yesterday represented a time of choosing for the government, a time to set things right and get priorities straight. However this was a budget that occurred 652 days since the previous accounting to this place on behalf of the Government of Canada, the longest stretch ever in the history of our parliament without an accounting of the nation's finances. That in itself is unacceptable.
It is doubly unacceptable that the government was forced into finally presenting a budget plan to the House because of the onset of an unexpected international security crisis and a recession which has come to fruition under the watch of the finance minister. It is unfortunate that we find ourselves in a position where the government had to scramble to put together something that would have the appearance of a fiscal plan at a time of crisis and uncertainty.
When we look at the budget it is quite clear that the government had an opportunity to get its priorities straight and make difficult decisions to provide adequately for national and economic security. Those were the tests it faced in the preparation of the budget. It failed those tests. It failed to get its priorities straight. It failed to make the difficult decisions and provide adequately for our national and economic security. The government has failed the test.
It is quite clear when we look at the budget that the predictions offered by the senior communications officer in the Prime Minister's Office bore fruit when she said in an unprecedented shot at the finance minister that “This budget will be written by one person. It happens to be the Prime Minister of Canada, not the finance minister”. Apparently that came from Francoise Ducros, director of communications in the Prime Minister's Office.
If indeed it is true that it was the Prime Minister who wrote the budget, and it appears to be, that might explain why it took 652 days. It certainly explains why the budget so closely resembles the tax and spend and spend and spend budgets of Liberal governments during the vintage years of the Prime Minister when he was finance minister in the late 1970s and a member of cabinet in the early 1980s.
We have not seen spending increases in a federal budget at the levels proposed since the heady days when the current Prime Minister was part of a government which helped drive Canada into a deep, deep fiscal hole from which we are still trying to recover.
As I said last night, if the budget were to have a title it would be “2001: A Waste Odyssey”. We have seen a proposal in the budget for an increase in program spending in the coming year of ostensibly 9.2% or $11 billion. That is the largest program spending increase presented to this place in living memory. It is a 9.2% increase.
To put it in perspective, in a year when the economy is projected to grow at only 1.1% the government is proposing a spending increase nine times as large as the rate of growth in the economy and about four times the combined rate of growth in inflation plus population. That is irresponsible. It is unsustainable.
As I said, the 9.2% program spending increase proposed here is only ostensibly 9.2%. When one looks more closely through the fog of the budget numbers as presented by the finance minister it turns out the spending increase next year will more likely be in the range of 10.6%, moving spending up to $133 billion.
Why do I say that? I say that because what was known as the contingency fund, the rainy day cushion against downturns in the economy, has been reduced from $3 billion to $1.5 billion and even that $1.5 billion has been pledged to expenditures in other areas. The government expects to spend that money if in fact it does not end up consuming what is left of the contingency fund to finance an unexpected downturn in revenues as a consequence of the Liberal recession.
We can expect a 10.6% increase in spending next year. That follows from an $8 billion or 8% increase in spending in the current year or a combined spending in two years of over 18%. That is unprecedented in the fiscal annals of this parliament.
The spending far outstrips the productive capacity of the nation. We do not know whether the government will stop there. Its track record on spending is a business and its spending is out of control.
Let me give the House an example for the current fiscal year 2001-02. In the fall 1999 budget the finance minister stood in his place and projected that spending in the current fiscal year to end next March would be $121 billion. He then said in the fall 2000 budget that spending in the current fiscal year would be $130 billion. He now advises us that spending in the current fiscal year will be $136.6 billion. If he plays games with the contingency fund as he suggests, spending would likely be closer to $140 billion. That is $19 billion more than initially projected and $19 billion off budget.
The point of a budget is for the finance minister to give parliament a transparent picture of the fiscal plans for the nation of the executive branch and to allow parliament to pass judgment on it. How can we pass judgment on budgets from the government knowing that its track record is to overshoot spending projections by as much as $19 billion or 20% for a given fiscal year?
I submit that the 10.6% budgetary increase projected for the 2002-03 fiscal year would likely outstrip anything we have seen in the fiscal history of the nation if the government follows the precedents it has set.
All of that would be understandable in certain circumstances. Increasing spending in and of itself is not necessarily a fiscal evil if there were a legitimate national emergency. One can make that the case if we were to find ourselves in emergency-like circumstances following the end of our holiday from history on September 11.
We in the official opposition have been the most vocal and consistent voices of fiscal prudence and discipline. We have recognized the need for additional security spending in the current environment.
Let me anticipate one of the objections from some of my colleagues opposite by saying that objecting to huge increases in overall spending does not mean that we are objecting to increased security spending. What we are objecting to is the government's total abject failure to set priorities. That is the problem.
I am disappointed in the Minister of Finance for whom I have some considerable regard. On September 17, 2001, in an article in the Toronto Star the Minister of Finance was quoted as saying:
—and Ottawa is reviewing its $124 billion in spending on an item by item basis to see where reductions can be made. We are looking at what are the lower priority areas and how do we make sure that we can fund the higher priority areas.
That was a sensible remark. I was encouraged when I heard it because it echoed what we in the Alliance had been saying for years: the idea of reallocating, setting priorities and cutting in low priority areas.
This sentiment was endorsed overwhelmingly by the report of the Standing Committee on Finance. The official opposition concurred in that report partly because it called for the reallocation of spending from low priority areas to high priority areas. The report stated:
To the extent that new spending on security and defence could lead to a deficit, the government must balance this new spending with spending cutbacks elsewhere. The committee recommends that the government make a firm commitment to balanced budgets.
This is not an official opposition publication although we concurred in this recommendation. This is a recommendation from every government member on the Standing Committee on Finance including the Parliamentary Secretary to the Minister of Finance. They understood, as did virtually every business group and responsible think-tank that appeared before the finance committee, that in difficult times difficult decisions and choices must be made. Yet not one cent of reallocation, not one dime of reduced spending in wasteful areas, is found in the budget.
What that says to us is that in the exercise of setting priorities the government has no priorities: every dollar is of equal priority; additional resources for the frontline of our military are equally important as grants and handouts to TV and film producers; additional resources for the provinces to improve the quality of and access to public health care are equally important as the billions of dollars in grants and handouts and corporate welfare provided by the Minister of Industry; and additional resources for our police, security and intelligence agencies are equally important as the hundreds of millions of dollars of waste detailed in the recent auditor general's report.
Andrew Coyne, a leading commentator on fiscal matters in Canadian journalism stated in today's National Post :
At no point in the entire document is a single area identified where the government might reduce spending. Not one. Everything, it seems, is a priority.
I studied formal logic in college and that is a non-sequitur. Priorization means that certain things are identified as being more important than others. Yet the government has utterly failed in that exercise. A bar was set by its own Standing Committee on Finance, by every major business group in the country and by all clear headed people. The government has imperiled the fiscal health of the nation by failing to get its priorities straight.
We have given the government whatever small share of credit is due to it for eliminating the large deficits inherited from the Mulroney government. However the vast majority of the deficit elimination which occurred between 1993 and 1997 was attributable to increased revenues through higher tax rates and working families putting in more hours and working harder to pay more to the government. Canadians were principally responsible for giving the government a windfall in revenues through which it moved toward a balanced budget.
The government essentially made the wrong choices in terms of spending. The vast majority of its program spending cuts were reductions in transfer payments to the provinces to finance the top public spending priority, namely health care.
It cut departmental spending by less than 4%, except in the Department of National Defence, RCMP and CSIS, the frontline agencies of national security, which it cut by over 20%. It was a government that made wrong decisions. It cut health care, national security and raised taxes.
Nevertheless we did manage to find ourselves, thanks to economic growth and free trade with the United States, in a surplus position for the last four fiscal years. The budget imperils that hard won taxpayer surplus through fiscal irresponsibility.
Many Canadians may not be acquainted with the Byzantine accounting methods of the government. Let me offer a brief tutorial on how the government has engaged in its fiscal planning in recent years.
The Minister of Finance developed an innovation starting in the mid-1990s. It was based on an honest analysis of the grotesque fiscal failure of the Mulroney government. The finance minister used to come in with rosy scenarios that were blown out of the water by economic circumstances. We always ended up, year after year from 1984 to 1993, exceeding the projected deficit. That reduced international and market confidence in the fiscal credibility of the government.
The current Minister of Finance sensibly proposed that the government adopt as a line item in its budget something known as a contingency factor. He set it at about $3 billion a year and it was supposed to increase over the years. He added a second prudence line, known as the prudence factor, which was to take into account potential fluctuations in national income and the growth of the economy.
These two factors together were to act as a fiscal cushion should the government's projections not be realized, should revenues fall short of their projected level and should expenditures outstrip those that were planned, which incidentally happened in every year of the government's mandate.
The prudence and contingency factors, cumulatively representing $4.5 billion in the last fiscal year, would soften the blow and prevent us from moving into a deficit position. Further, if the combined prudence and contingency factors were not spent by the end of the fiscal year, they would be applied to reducing the national debt. That has helped some of the nominal reductions in debt we have seen over the past two or three years.
However the whole idea of prudence and contingency is to have a fiscal reserve when times get tough. We do not need a fiscal prudence plan for good times. We need it when the economy turns sour as it currently has under the government's leadership. Yet the government has decided at precisely the wrong moment to make the wrong decision to eliminate the prudence factor and to cut the contingency factor to $1.5 billion.
If the government's projections for the economy were slightly off we would find ourselves in an underlying deficit. However the government applied a new reasonable term called the planning surplus or planning deficit. It appeared in all budget documents since 1996. If the government's surplus were to exceed the combined value of the prudence and contingency factors it would then be known as a planning surplus.
Indeed in this place last spring my colleagues will recall that the Leader of the Opposition and I and others raised questions day after day with the Minister of Finance about projections coming from independent private sector economists indicating that the government was headed for a planning deficit; that is to say, it would have to eat into the contingency and prudence factors to stave off an actual deficit.
The finance minister danced, denied and did not fess up, but what has happened is quite clear. By failing to make tough choices, by failing to set priorities, by allowing the Liberal leadership campaign to take over the spending agenda of the government, by allowing spending to grow at a grotesque rate of 18% over two years, the government is now in a planning deficit and is skating oh so close to an actual deficit. It is skating far too close to threatening the progress that Canadian taxpayers have made over the past years in the hard won fight against the deficit.
In fact, there will be a combined planning deficit of $6.2 billion in the fiscal years 2001 through to 2003. What we projected in the spring has come true. I believe the finance minister's denials have been discredited along with much of his credibility as a fiscal manager.
Let me make another brief note about the way the government presents its budget. This may seem to some an arcane point, but it is critical to the ability of parliament and Canadians who are concerned about such matters to properly assess the fiscal progress of their government.
It is very interesting. If we look through the budget document, I would submit that about 80% of it is produced by the government's propaganda department or sales and marketing. It has nothing to do with transparent presentation of the fiscal plans of the government. There are selectively chosen charts and tables that the government thinks would be helpful in presenting the most positive gloss on its fiscal story.
However, in the document, some plans and programs are presented on a one year horizon, others on a two year horizon, some on a three year horizon and occasionally we actually see five year numbers creep in when the government needs a five year horizon, for instance, to squeeze in its tax plan or its security spending increases.
If this was a public company and the finance minister was its treasurer, and he presented a document of this sort, I submit that the auditing firm reviewing a document like this would throw the book right back at the treasurer. The board would fire him and he would end up making licence plates in a provincial institution. This is not a document presented according to generally accepting accounting standards for the public sector.
One of the central functions of parliament is to give the representatives of the people an opportunity to provide the checks and balances to provide scrutiny against the power of the purse exercised by the crown, vested in the cabinet. We essentially are unable to do so because we do not know where the government is going in five years, as I already have said. In the past three fiscal years alone its combined overspending, above and beyond what it had projected, was $13.2 billion. For the current year alone, it is as much as $19 billion.
Because of our concern about the fiscal direction of the government, made yet more acute by the planning deficit presented in yesterday's budget, we need to see consistent, transparent, five year projections of the government's fiscal plan. We made this point last spring. The official opposition has done its homework. At the finance committee on May 17, the hon. Leader of the Opposition demanded a commitment from the finance minister that he would provide a five year forecast in this budget to allow for full transparency.
Guess what the finance minister said? “We will be providing five-year numbers in the fall, Mr. Day”. That commitment, “preference for five-year planning horizon”, was the preference of the Standing Committee on Finance. Again, the finance minister has flip-flopped on his commitment to provide transparent projections and has rejected the recommendation of his government dominated finance committee.
This may seem like an arcane point, but it is not. Last spring we issued a warning about a planning deficit, which has been borne true. On behalf of the opposition, today I issue a warning that the government is driving us toward not just a planning deficit, but an actual deficit in the out years of its fiscal plan. We want full accounting. We demand it and that is our right in this parliament.
This failure to get priorities straight has not only jeopardized the fiscal health of the country, not only are we again threatened by a deficit, but the government has utterly failed in this document to address one of the largest and most pernicious factors in our long term economic slide as a nation. That is our national debt of $547.5 billion which is still costing us nearly $41 billion in interest or $7,500 in interest payments paid through taxes for an average family of four. It is still the third highest level of public indebtedness in the OECD and the second highest level of indebtedness in the G-7, second only to the infamous fiscal basket case of Italy.
This is not sustainable and yet we see in the budget document not one patina of debt reduction. I refer to page 24, the fiscal outlook, wherein the finance minister projects a net public debt in 2000-01 of $547.4 billion; in 2001-02, $547.4 billion; 2002-03, $547.4 billion; and a net public debt in the year 2003-04 of $547.4 billion. There is not one dime in debt reduction for a country with the third largest debt in the developed world, the second highest debt in the G-7.
This is wrong. The parliamentary secretary is absolutely right. It is wrong for the government to have dropped debt reduction as a priority. Government members say that the debt will shrink as a percentage of national income over time and so on.
I see the finance department is calling my colleague across the way with talking points.