Mr. Speaker, it is my pleasure to rise today to join in the prebudget debate.
I would like to wish my colleagues in the House a Merry Christmas and all the best in the new year. Sometimes we cross swords in this place, but at the end of the day we can still all be friendly, if not friends. At any rate, a Merry Christmas to all.
I want to address my remarks primarily to the Auditor General's report and how it relates to the prebudget report produced by the finance committee. In particular I want to talk about the employment insurance program and especially I want to talk about the employment insurance fund.
Over the last number of years there has been a lot of concerns raised about how money that comes into the EI fund is used. Right now the actuary of the fund tells us that we have a surplus in the employment insurance account of about $40 billion.
We are told that even in the most difficult recession we would only need a surplus of about $15 billion. Many people are rightfully asking why we are running a $25 billion surplus over and above what we would need in the event of a recession. It is a very good question. In order to address it we must go back in time and ask ourselves how did this come to pass? What is the purpose of this account and therefore what are some of the solutions?
If we were to go back and revisit some of our history, we would remember that the employment insurance account was set up to provide insurance for people who lost their jobs through no fault of their own. If a company closed down and people were thrown out of work, employment insurance was there to provide a safety net for them. The way that was funded was that people paid premiums out of their paycheques as did employers. Employers also kicked in premiums.
That system worked quite well up until about 1996. At that point the former finance minister, the member for LaSalle—Émard, disconnected the premiums from the payouts. In other words, up to that point the premiums were established based on the expectation of the payouts, so if we had just gone through a recession and perhaps we had a deficit in the account, the premiums would have been a little bit higher. If we had a period of low unemployment, the premiums could go down. That system worked very well.
However in 1996 the finance minister at the time decided that he wanted to change the purpose of the employment insurance fund so that it was no longer just an insurance fund for workers. He turned it into an account that became essentially an insurance fund for the government. Year after year the government used the excess that was paid into the employment insurance fund to fund other programs, things for which the account was never intended.
Now we are in a situation where this year alone the government will take about $4 billion extra out of the employment insurance account and put it into general revenues to pay for all kinds of things for which the money was never intended initially.
Over the years this has become a real problem. It undermines the credibility of the government. This is not the first time we have seen funds misallocated from an account and used for purposes other than for which they were originally intended.
I will give many examples. The Canada pension plan, way back when it was brought into being, was set up to provide pensions for people upon their retirement. The idea was that people would pay in premiums, the government would invest the money and get the best possible return. It turns out that it did not do that.
The government used that money to curry favour with the provinces and lent it to them at below market rates of interest. It ended up running a deficit where we now have a huge unfunded liability in CPP. The government then had to hike the premiums through the roof. That is one example of how governments can misallocate funds that have a specific purpose and then use the money for some political reason that has nothing to do with the original intent.
Another example which we referred to yesterday was the GST. People were paying the GST with the understanding that it would go toward paying down the debt. Rather obviously, if it had gone toward paying down the debt, we would not have much of a debt today instead of the $540 billion debt that we do have.
My point is that often governments covetously eye these big pots of money and start using them for things other than what they are intended for and always with an eye toward currying some kind of political favour. There are many other examples.
About a year ago the government raided the public service pension plan which was running a surplus. It does not matter what government is in office, but whenever there is a pool of money it starts to look at that money trying to figure out how it can get its hands on it and use it for things other than what those funds are intended for. In the end the federal government took about $10 billion out of the public service pension plan fund.
In the private sector, whenever there is a surplus in pension funds, a judge would determine how much money workers had put into the fund, how much the employer had put in, how much interest was earned, and then he would come up with a formula for dividing it up. Usually it would be a fifty-fifty split. In this case the government took $10 billion and used it for whatever it wanted to.
The excise tax on fuel is another example. People rightfully expect that when they pay excise tax on gasoline it should go into repairing infrastructure and repairing roads for instance. However it does not. The government puts it into general revenues and uses that money for whatever it wants. People are concerned about that because they believe that if they pay for a particular thing then that is what that money should be used for. In not doing that trust is undermined. We see that over and over again. It is a real problem.
I want to talk about what we can do to fix this problem. The first thing we can do is start listening to the actuary of the fund. The chief actuary of the employment insurance fund said that premiums could be reduced by about 40¢ per hundred to bring the fund into balance. Right now we are running a surplus of about $4 billion a year. The overall surplus is $40 billion. That is about $25 billion more than we would need in the event of a recession.
Not only does the chief actuary say this but the Auditor General herself drew attention to this in her last report. The finance committee also drew attention to it. They are arguing that we should balance the fund over the course of a business cycle. That would suggest that we need to start lowering those premiums more dramatically than the government is doing. When we raise the issue the government says it is lowering the premiums, but it is missing the point and missing it on purpose I am afraid.
We are arguing that if we do not give back all of the money we owe it is like bank robbers telling the judge they are pleading not guilty because they did not take all the money. That is exactly what the government is doing. It says it is lowering premiums although it is not giving all the money back. It should be giving all the money back. It is time for the government to be straight with Canadians and acknowledge the fact that it is using the employment insurance account for purposes other than for what it was originally intended.
I have another interesting point about the EI fund because we do not actually have the money in the fund. If a recession were to happen tomorrow as a result of a terrorist attack somewhere which shook the U.S. economy and our economy, what would happen? Obviously people would be laid off. They would seek their benefits. We would have to pay those benefits by borrowing the money because the EI fund is a notional account. In other words it is a bookkeeping entry and the money is in general revenues, which as we know is quickly spent.
If we went into a recession, we would have to go out and borrow perhaps as much as $15 billion just to pay for employment insurance benefits. There are many problems with the EI fund as it is structured today. We need to make some real changes to how it works.
I will say one more thing with respect to employment insurance. I think there is a real desire among people who have a vested interest in the employment insurance fund to see it returned to its original purpose.
Tonight we will be debating a private member's bill that has to do with using the employment insurance account to provide up to 52 weeks of leave for someone who wants to look after an ill relative. That is a noble idea, but the problem is the employment insurance account is becoming another form of social program for the government. I should say that it is becoming several forms of social programs. We have maternity benefits out of it now. We have all kinds of training. We have the employment insurance account itself used for people who are laid off. Now a member from Nova Scotia is proposing that we use it for something yet again, sort of a home care program.
I think a lot of people would like to see it returned to its original purpose, which is to make it an insurance account for people who are thrown out of work through no fault of their own. If we did that, and the premiums paid for the benefits and it was strictly monitored, perhaps even had the fund run by employers and employees themselves, I think people would have confidence in that fund again. It would not be a political football like it is every election, especially now when the government is in the habit of running out and changing benefits, either increasing them or decreasing them depending on the political situation in the country. That is all I am going to say for the moment about employment insurance.
I want to talk about other things that relate to the economy and some of the things that came up during the debate yesterday after my friend from St. Albert stood up and asked for concurrence in his public accounts report. There were a number of comments during that debate that had to do with employment insurance specifically, but in general with respect to the economy.
The member for Ancaster—Dundas—Flamborough—Aldershot argued that EI premiums are a tax that benefits the economy. That is what he said. I wish he were here because I want to explain this to him. Taxes are a price that is levied on particular types of activity. When there is a tax on work, which is what an EI premium is, it tends to decrease the amount of the quantity, in this case of people who can be employed.
Someone once gave me this example and it is a very good one. Say that someone has $200 to spend on a microwave oven and the seller is willing to sell a microwave oven for $200. In that situation, obviously a sale can be made. If all of a sudden the government comes along and levies 7% GST, then there is a situation where the person still has $200 to spend, but the microwave oven now costs $214. In that case the sale can no longer be made because now the microwave oven is beyond the reach of the person who has the money.
In a situation where an employer wants to hire someone and has a budget of $30,000 to do so, and all of a sudden the government comes along and places some kind of tax on that employment, whether it is an EI premium or whatever, in some cases that extra cost will mean that the employer can no longer afford to hire someone. When there are these premiums and taxes of various kinds, what we have is a price increase on a particular kind of activity that will ensure that the activity does not occur as frequently. In this case it would be the activity of hiring people.
When my friend says that employment insurance is a good tax, he is sadly mistaken. When there are high premiums it effectively ensures that some people will not be hired. People who would have been hired otherwise will not be hired.
I just wanted to make that point for the benefit of my friend from Ancaster—Dundas—Flamborough—Aldershot who made that crazy statement yesterday that it is a tax that benefits the economy.
He also said that Canada is leading the United States in economic prosperity. I want to throw cold water on that idea. Right now, between Canada and the United States there is a 19% productivity gap. It was 14% in 1993. That is important because productivity is the key to rising standards of living.
A generation ago Canada and the United States had very much the same standard of living. We had virtually equal dollars. We could move back and forth between Canada and the United States. There was really no noticeable difference in standards of living. It could even be argued that Canada may have had a higher standard of living.
Because of a lacklustre economic performance in Canada over the last generation and poor public policy that contributed to that, we now have a situation where that 19% productivity gap between Canada and the United States has led to a 29% standard of living gap according to the government's own statistics. Canada now has a standard of living that is only 71% of that of the United States.
Again, I point out that at one time this country had the same standard of living as the U.S., perhaps even greater. When we think about the great resources that Canada has, to me it is very disturbing that we would allow our country to slide into that kind of situation where our country has become poorer and poorer relative to the United States.
We see it reflected in the falling Canadian dollar. Our dollar is now about 36¢ or 37¢ lower than the United States dollar. We could consider the dollar to be a pretty good barometer of the health of the economy.
My friend from Ancaster—Dundas—Flamborough—Aldershot was wrong on that count as well. Even this last year where our economy has done mildly better than that of the United States, the productivity performance of the United States was superior, which means that over the long run the U.S. continues to outpace us with respect to standard of living.
I want to prescribe some possible solutions to get us out of the situation that we are in today in Canada. The first thing the government must do is make the economic performance of Canada its top priority. I do not believe the government has done that. The reason I say that is we have seen example after example of how wasteful the government is with taxpayers' money, money that could be used to lower taxes, pay down debt, or put into education, things that actually improve the performance of the economy. Instead, we see it being extraordinarily wasteful when it comes to things like the firearms registry, that $1 billion boondoggle.
We see the government engaging in awful economic planning with respect to Kyoto, a situation where it has come to the people of Canada, said it is going to ratify Kyoto but it has no plan. Already there is an investment chill simply because of the ratification. We see it in my province.
Right now in the oil sands, we see all kinds of companies cancelling projects even in the little town I live in. I live in a group of 13 acreages and six of the families in those acreages get their employment directly from the oil and gas industry. There is a chill running through my community because of Kyoto. People are very concerned about what it will mean. They are sitting on their wallets and not spending their money. They are concerned that if they spend their money they may lose it because of Kyoto and of how it is implemented.
I am arguing that the government has not made the economy a priority. It has not made increasing the standard of living a priority. It has not made improving productivity a priority. It has to do that. It cannot continue to wander down the middle of the road left, right, left, right. It needs to be single minded and focus on improving our economic performance. There are a number of ways to do that. I do not have time to get into them all, but suffice it to say that it has to make lowering taxes a priority. It has to make paying down the debt a priority. It cannot continue to engage in this frivolous spending.
I will simply wrap up by saying merry Christmas to my colleagues across the way and on all sides of the House. I wish everyone a very safe holiday season. I look forward to seeing everyone in the new year.