Mr. Speaker, I was disappointed but not the least bit surprised that the parliamentary secretary in his 30 minutes of remarks failed to mention once the subject of the motion before the House, that the House concur in the 10th report of the Standing Committee on Finance.
As an opposition member I find myself in the very peculiar situation of concurring in and supporting a committee report drafted principally with the direction and support of the government majority members on that committee while the Parliamentary Secretary to the Minister of Finance, I gather, opposes the report which the House now seeks to concur in. How do I so gather? Whence do I make that inference? Quite simply from the fact that the parliamentary secretary did not bother to address the report.
How sad it is that he has become a lackey for his minister's department rather than actually being intellectually honest about the budget. How sad it is that he could not even make reference to this report presented to the House by the finance committee. There is one good reason for it. It is because about 90% of the recommendations of the Standing Committee on Finance were either ignored or contradicted by the budget presented in this place this week.
I and other members in this place have had a chance to begin the general debate about the shortcomings of the budget and the wasted opportunity it represents. There is the government's lack of prioritization; the fact that there is no debt reduction, tax relief, support for health care or agriculture; the fact that the government could not find one cent in ways to reduce. We have talked about that and developed those themes but I want to go straight to the point of the motion, concurrence in the standing committee report.
Sitting here at my desk I have identified 25 substantive recommendations of the Standing Committee on Finance, 23 of which were either ignored or contradicted by the budget presented in this place. The finance minister said at the outset of his speech that he wanted to thank the Standing Committee on Finance for the marvellous work it did in consulting with Canadians and how this represented the new open and transparent budgeting process of the government.
What hogwash when we see that the literally thousands of hours of witness testimony, preparation, hearings across the country and work by the members of the finance committee to produce this report were completely ignored by the finance minister. I suspect that he never read it. In fact I suspect that his parliamentary secretary, who sits on the committee, never read it.
I will begin to go through the 25 substantive recommendations in terms of fiscal policy. On page 25 the report states:
Tomorrow's productivity gains also depend on maintaining a commitment to balanced budgets--
The finance minister presented us with a stealth deficit, not a balanced budget, last Monday. It is not only the opposition that says this. It is a growing list of independent economists, such as the TD Bank, which stated that the finance minister “was able to show a zero on his budget's bottom line for this year and next only because of some fancy accounting footwork”. David Rosenberg, the chief economist at Merrill Lynch said “A small deficit in the next two years is a good possibility”. Ted Carmichael at J.P. Morgan said “At least a modest deficit now looks likely”.
The fancy accounting footwork to which TD referred was the fact that the finance minister took $2 billion of revenues that are owed to the public treasury in this year and, through a bogus deferral of that tax to the next fiscal year, moved money from this fiscal year to the next fiscal year. He broke every accounting rule in the process in order to show an ostensible deficit. He also had to cut $3 billion out of his combined prudence and contingency reserves to avoid showing a planning deficit.The government contradicted the first recommendation of the committee to balance the budget.
At page 26 of the report in terms of reallocation it states:
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.
In support of that it quotes the BCNI as stating:
Finding the money needed to ensure the security of Canadians will require determined efforts to chop less essential spending to defer to other proposals for new initiatives.
It also quotes the Insurance Brokers Association of Canada as stating:
If increased spending in the area of national security is to occur in a context of fiscal prudence, funding for other initiatives will inevitably have to be curtailed.
On that point of reallocation, to cut low priority spending and move it to high priority spending is something which the finance minister ostensibly agrees with. On October 6 he told the Toronto Star :
Ottawa is reviewing its spending on an item by item basis to see where cuts 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.
The finance minister agreed with the finance committee but in the budget there is not one dime in reallocation, not one cent. In fact, he was quoted in the National Post today as saying that he could not find any fat in the $130 billion budget, which led columnist Andrew Coyne to write that it would appear that there is no such thing as a priority in Ottawa these days; everything is given equal billing.
At page 27, the finance committee recommended that all government spending undergo a program review which should include: a public interest test; a role of government test; a federalism test; a partnership test; an efficiency test; and an affordability test. It also states:
The Committee recommends that the government follow the program review process while maintaining a balanced budget in the face of new priority spending.
There is no mention, not one word in the budget, of a program review. The committee quoted David Paterson of the Canadian Advanced Technology Alliance in support of its recommendation as stating:
Increased spending on security is essential, but we believe it can be offset by reduced spending on less important programs. New initiatives can be postponed until a budget surplus has been restored to a more adequate level--
Again there was no reallocation and no program review. At page 27 the committee also recommended:
The Committee has in the past recommended that the federal government strive to limit program spending growth to the rate of inflation plus population growth.
Inflation plus population, which the committee recommends, is a 3% rate right now yet the program spending budget increases ostensibly by 9.4% in the budget. Actually, if we look at the dedication already of the contingency reserve, it grows by over 10%. That is three times higher than what the finance committee recommended, the committee of which the parliamentary secretary was a member.
Here is another contradicted recommendation of the report. At page 30 of the committee report it speaks to five year projections. It states:
While the Committee is broadly in agreement with this approach, it is concerned that the May economic update employed only two year fiscal projections. The Committee feels that the five year estimate of surpluses for planning purposes presents a framework within which budgetary debate can take place.
Under questioning from the Leader of the Opposition at the finance committee last May, the finance minister indeed stated “Yes, I will provide five year figures this fall”. He failed to do so. He broke his own word. He broke the recommendation of the finance committee to provide five year projections so we could see the direction the federal government was headed in. The reason he did it in this budget of course is that he did not want to show what he knows, which is a deficit appearing in his plan in the out years. At page 31 the committee recommended:
--any time the full amount of the contingency reserve is not available for debt reduction, the difference should be added to the contingency reserve of the following year.
It went on to state:
The Committee applauds the government's commitment to use unutilized contingency reserves for debt reduction. The Committee also supports the government's commitment to announce each fall how much of the anticipated surplus over and above the contingency reserve will be used to pay down the debt.
It quoted, in support of this recommendation, the Vancouver Board of Trade as stating:
--utilizing a contingency reserve in its annual budget, with an extra degree of economic prudence to provide further assistance against falling back into a deficit. This approach no doubt is proving to be very beneficial this year as the economic decline erodes revenue.
The Canadian Manufacturers' Association said, in support of this recommendation:
--it is essential that the government revise its spending plans in order to ensure that existing reserves set aside for contingency and economic prudence purposes are sufficient to offset any deficit that may arise in its underlying budget balance.
What did the finance minister decide to do in response to this recommendation? He trashed it. He took $4 billion for contingency and prudence, reduced it to $1.5 billion and said that it would not go to debt reduction but rather it would go to new program spending in the form of foundations which have been condemned by the auditor general and another recommendation that the finance committee contradicted by the budget. At page 32 the committee recommended:
That any new spending initiative be subject to the rigorous and detailed tests of the principles of Program Review...that the federal government initiate a regulatory audit of all regulations to ensure relevancy and benefit of regulations in our current context. This audit should include a clear process and schedule for the elimination of undesirable regulations.
I already have addressed the absence of a program review commitment here. With respect to deregulation, the committee made a further recommendation at page 126 that:
--reiterates its call for the government to institute better oversight of the cost of regulations and user-charge programs by reporting on them annually with the budget.The application of these must not be undertaken in isolation but must be consistent with the government's overall policy objectives, namely international competitiveness...and an improvement in living standards via enhanced productivity.
There is no mention, not one word, about deregulation or a review of regulations, another recommendation of the finance committee ignored by the government. At page 35 there is an interesting comment by the Business Council on National Issues.
There can be no doubt that the war against terrorism will require additional spending. Such new costs, however, should not be simply loaded on top of the business-as-usual approach to all government activities.
That is precisely what happened. At page 48 the finance committee renews its call for the government to engage in a productivity covenant. This is a very respectable and positive hobby horse of the finance committee chair.
The Committee reiterates its long-standing recommendations that the government should commit to a productivity covenant. Just as Program Review is an ongoing examination of federal spending, this covenant should subject all existing government initiatives...to an assessment which evaluates their expected effects on productivity and hence the standard of living of Canadians. Every new budgetary initiative should be judged according to this productivity benchmark.
What happened? Nothing, no productivity covenant or benchmark, is in this budget. At page 45 the committee said:
--we must ensure...that tax relief is sustainable, so that we do not embark on a roller-coaster ride of tax cuts followed by tax increases whenever the budgetary position is threatened by financial turmoil and economic slowdown.
We are in that condition now, yet the government not only did not reduce taxes in this budget, it increased taxes. It increased CPP premiums by over $2 billion. It increased tobacco taxes by $400 million with no offsetting decrease elsewhere. It increased taxes on air travel by $400 million. It contradicted the committee's recommendation for no tax increase.
At page 53 the committee recommended a white paper for defence to assist government in revising its defence policy. It quoted the Conference of Defence Associations as saying:
--Canada spends only $265 per capita on defence. The NATO average is $589. The study (of the CDA) concluded that, notwithstanding recent increases, an additional $1 billion per annum needs to be added to the DND budget merely to check the decline of the Canadian forces. Furthermore, the Canadian forces “currently inhabit the worst of two worlds: conventional military capabilities are in decline; and, new capabilities are unaffordable.
At page 55 the committee recommended:
A fast-tracking review of the 1994 Defence White Paper to determine its continued relevance, an acceleration of the replacement of out of date equipment, and additional funds to DND.
All of that was broken except that there was $100 million in additional funding to DND per year in this budget, which is 5% of what the CDA recommended; another recommendation broken.
At page 60 the committee recommended that the government invest in border infrastructure to assist in the rapid flow of goods across the border. The government did that with a $600 million infrastructure commitment, which we support and applaud. At page 76 the committee recommended:
Given the Committee’s views on the dangers of falling back into deficit, we recommend postponing any major new non-security spending initiatives until the longer-term fiscal outlook is secured
The committee said no new spending in non-security areas, yet the finance minister raised spending by $10 billion, about three-quarters of which was in non-security related areas.
There is one other positive point. At page 82 the committee recommended that the government exempt from capital gains the gift of securities to registered charities. The government accepted that recommendation. We applaud it for doing so. That is 2 out of 25 recommendations. On employment insurance premiums at page 83 the report states:
The Committee recommends that the government continue to reduce EI premiums so as to gradually get closer to the break-even rate.
It quotes the CFIB supporting this by saying:
The $100 billion federal tax plan includes a 10¢ EI premium cut for 2002. A lower rate cut will signal to employers and employees that the government is prepared to move off its tax reduction plan.
What did we get? A five cent reduction, not a ten cent reduction. We did not substantially move any closer to the break even rate; another recommendation ignored.
At page 84 the committee recommended “That the government consider implementing a yearly basic exemption for employment insurance”. That would have substantially reduced by several billion dollars the EI payroll burden. It was ignored. At page 86 the finance committee recommended:
That the government undertake the research necessary for a comprehensive reform of the capital cost allowance rates to better reflect the pace of technological change and the ever-shortening economic life of modern machinery and equipment.
That was a very important recommendation that came to us from a number of industry groups. There was not a single word in the budget about capital cost allowance or any other form of corporate tax reform. At page 88 the committee recommended:
That RRP and RRSP limits be indexed to inflation, consistent with the government's decision to restore full indexation to the tax system. Similarly, the Committee recommends that the government consider a one-time increase in contribution limits for the full range of savings plans beyond what is already planned.
Most witnesses recommended that increase be to $18,500 on RRSPs. Of course, there was not a word about pension tax reform or increasing RRSP limits in the budget, which is another recommendation ignored.
At page 91 the committee made a recommendation that we change section 31 of the Income Tax Act to make it clear that horse race operators who had a reasonable expectation of loss and incurred a loss could write those expenses off like other businesses do, and the government ignored that recommendation. At page 92 the committee recommended:
That the government consider measures to promote the use of ESOPs.
This was a very popular recommendation of witnesses, and it is nowhere to be found in the budget. This is another recommendation ignored. Finally, at page 113 the committee recommended:
--given current economic conditions, the government sell its remaining stake in PetroCanada consistent with the government's longstanding commitment.
That plus the continued share ownership in Hibernia represents about $2 billion in government equity which could be applied to the debt, realizing about $150 million in annual interest savings, money which could then go to stimulative tax relief or to health care and agriculture.
The point is that over 85% of the recommendations of the finance committee were ignored or contradicted by the government. The Parliamentary Secretary to the Minister of Finance is a member of this committee. He stood up on a concurrence motion. I presume that he does not concur in the committee report.
The official opposition took the unprecedented move of actually concurring in this committee's report and issued a supplementary, rather than a dissenting opinion even though we did not agree with all of it, because fundamentally it was sound.
The theme of reallocation, the theme of setting priorities, the theme of further tax reduction, the theme of balanced budgets and the theme of further tax reform and reduction, capital tax relief, payroll tax relief were all eminently sensible. In closing, the opposition concurs in the finance committee's report. It is a shame that the government does not.