Madam Speaker, Motion No. 217 calls for the government to introduce legislation to put in place a federal economic development initiative for the regions of Abitibi, Lac-St-Jean-Saguenay, James Bay, Nunavik, the North Shore, the Gaspé and the Îles de la Madeleine.
While we understand the intent of this motion, which is to improve the health and welfare and economic prosperity of the people who live in those regions, really what the member is asking for is something that comes under different guises, often economic development, regional prosperity and diversification. The motion is asking the federal government to use taxpayers' money to try to create jobs in these regions.
There are many examples of this, such as Western Economic Diversification and ACOA, the Atlantic Canada Opportunities Agency. The hallmark of all of these, though, is that they are a grossly inefficient and wasteful use of the taxpayers' money. I will describe 13 reasons why this motion is flawed and why this way of using the taxpayers' money is completely and utterly inefficient.
First, this kind of distribution of money basically says that government will decide who the winners and losers are with respect to the economy. A study from Queen's University, and I will use only one study of many, showed that in 40% of the cases the government grants represented 50% of a company's net worth. In 20% of the cases the grants represented 175% of a company's net worth. Basically, it was using taxpayers' money to prop up businesses that were inefficient.
Second, this kind of use of money totally distorts the marketplace. Government assistance can entice businesses to invest in areas they would otherwise avoid like the plague.
Third, it produces a welfare mentality. It causes a dependence mentality within the business community that would not otherwise occur.
Fourth, it becomes a job redistribution scheme, not a job creation scheme.
Fifth, it puts tax dollars at risk, of which there are many examples. I looked at some of the facts. If we look at regional development Quebec, a federal program, in 1997-98 it lost $12 million. In 1996-97, $36.7 million was written off, and in 1995-96, $18 million. However this program is not the most appalling. In 1997-98, ACOA, the Atlantic Canada Opportunities Agency, lost $65 million of taxpayers' money and in 1998-99, $56 million. It is an utter waste of the taxpayers' money.
Sixth, it is the taxpayers' money and is it not better to use that money for things like health care, education and infrastructure rather than using it for this kind of maldistribution of moneys?
Seventh, this can force governments to put political decisions over economic ones. In other words, too often this kind of money is actually distributed not on economic grounds but on cold political grounds. While politicians are very apt to take claim for jobs that are supposedly created, they are not apt to take claim for jobs that are lost.
Eighth, these kinds of programs lack accountability. The auditor general has done extensive work on this. It has been found that too often when these moneys are actually distributed to businesses accountability is not put in place. People do not know where the money has gone, why it has gone, how it is spent or where it is spent, and objective criteria are not put in place to ensure that whatever moneys put in place are used and timelines are set to measure objective parameters that can measure success or failure.
Ninth, these subsidies in effect can become business bribes going to the business of the highest bidder. Too often government is afraid to put money into places where it will lose. It puts moneys into places that are supposedly successful and these are moneys that the companies did not need in the first place.
Tenth, this kind of maldistribution of funds stifles the entrepreneurial spirit.
Eleventh, it can promote bad business decisions.
In 1992 the auditor general made the following point very eloquently. He said that “when a business needs funding, banks will often only provide it if the government provides a loan guarantee”. The auditor general also stated “When a lender assumes no risk it has no incentive to lend prudently”. He noted as well that the business receiving the loan guarantees would also “assume little of the risk, but can enjoy any gains”. This principle applies not only to loan guarantees but also to any type of government assistance. Where would the money go anyway? Too often the moneys are maldistributed and go somewhere else.
Lastly, these subsidies create inefficiencies. They cause moneys to prop up businesses that few people would want. Diane Francis gave an example of the newspaper in Nova Scotia, the Courrier de la Nouvelle-Écosse . In 1990 that newspaper received $400,000 from the federal government, $250,000 from Nova Scotia and $150,000 from Quebec. It had a circulation of 3,400 at any one time, which worked out to $240 for every subscriber. That is not the way to create economic opportunities in any region, be it in the province of Quebec or in any part of Canada.
What the province of Quebec, and indeed the country, needs is an economic environment of good monitoring and good fiscal policy, lower taxes, a flattened or flat tax system, a system with less rules and regulations and with investment in primary health and primary education. We should also invest in research and development. If we are able to do that then we will support the underpinnings of a strong economy: research and development, education, rewarding and not penalizing innovation, and the creation of a tax system that works for people rather than one that is punitive.
Our current so-called progressive tax system is not a progressive tax system at all. It is a punitive tax system that hurts innovation. A flattened tax system is a progressive tax system because the more one earns the more one pays absolutely. It does not retard and affect innovation. That is the kind of tax system that I think we need.
Those who would argue against that would say that it hurts the poor. It will not hurt the poor if the basic minimum that people can earn before they pay taxes is actually increased. What we have always advocated is that if the basic minimum is increased it actually enables those who are in the poor and middle classes to have more money in their pockets. If we do the economic analysis we will find that a flattened tax system with a higher basic minimum that people can earn before they pay tax actually increases the amount of money that those who are in the lower socioeconomic conditions have. Furthermore, because it does not act as a barrier or punitive measure against those who choose to innovate and create wealth, it actually provides more tax money for social programs.
What is interesting is that countries that actually lowered their tax amounts found that more money went into the public coffers and more money was available for social programs to help those who could not help themselves. Conversely, they found that if they increased the tax structure, made it more punitive and increased the tax burden on individuals and companies, there was actually less money in the public coffers.
What we have found recently is that the amount of money in the black market has actually increased quite dramatically and amounts to more than $100 billion every year. The reason is that people are fed up with paying high taxes and they have gone underground. This actually saps and diverts from the public coffers moneys that are essential for funding programs like welfare, health care and education. It retards that.
What we are saying perhaps is counterintuitive to what one would ordinarily assume. One would assume that if taxes were increased there would actually be more money. The reason why it does not work is that those high tax structures actually retard the private sector and those private sector creators of jobs and wealth will actually go to another country or flee to another province. Time and time again that has been proven.
I ask the government not to look at this motion in its absolute, but to look at its intent as a way to create jobs and not to follow it as a way to do it, to look at good, sound monitoring and fiscal policy, the elimination of rules and regulations, the strengthening of education and the investment in appropriate infrastructure. That will enable us to have a strong economy that will help everyone.