Mr. Speaker, before I begin speaking to the motion before the House on the third report of the Standing Committee on Finance, I would like to take this opportunity to thank a few people whom I have not had a chance to thank on record since the opening of the 38th parliamentary session.
First, I thank my constituents for having renewed their support for me in the last election and, of course, I thank my family and friends who have always stood by me since my first mandate. I would also like to extend my best wishes to all Canadians from coast to coast to coast for a prosperous and healthy 2005.
Upon my election as chair of the Standing Committee on Finance, the committee's first major piece of business was to conduct its prebudget consultations for 2005.
As in past years, Canadians were invited to share with the committee their views about the taxation, spending and other measures that should be contained in the upcoming federal budget. Unlike past years, this year the committee had only three weeks within which to conduct the prebudget consultations and therefore the committee was unable to travel. We did, however, hear from almost 300 witnesses representing nearly 200 groups during our more than 40 hours of prebudget hearings.
The challenge when preparing the main committee report was gaining consensus to the greatest extent possible. While unanimity on each issue and each recommendation was not possible, I was pleased with the committee's dedication to seeking a consensus on as many issues as possible.
As we started our review of the draft report, we had 33 recommendations. At the end of the review we also had 33 recommendations. While we rejected a limited number of recommendations and replaced some of them with those that enjoyed a greater degree of consensus, many of the recommendations had support among most committee members following minor, if any, modifications.
Therefore I am pleased that today parliamentarians from all sides of the House will have an opportunity to debate not only the committee's report but also to share their prebudget ideas as all Canadians did before the finance committee.
This experience was a first for me as a chair of a parliamentary standingcommittee, here in the House of Commons. I am proud of the work accomplished by my hon. colleagues, the members for Edmonton—Spruce Grove, Beaches—East York and Winnipeg North, as well as the hon. members for Saint-Hyacinthe—Bagot, Peace River, North Vancouver, Portneuf—Jacques-Cartier, Miramichi, Scarborough—Guildwood, Portage—Lisgar and Medicine Hat. With their diversity ofviews and backgrounds, they worked together to prepare a report that we believe will help tomove our country forward.
Their professionalism allowed political partisanship to be putaside as we tried to determine the recommendations that would best lead to prosperity,growth and the realization of potential for all Canadians and Canadian businesses, which led to interesting debate. Atthe end of the day, we shared a common purpose: what priorities must be balanced andwhat choices must be made for our future? Recognizing our differences and the extent towhich we were able to reach agreement, I am proud to be Canadian.
Past Liberal governments have done a great job and Canada finds itself today in an enviable position. Economic growth is solid, inflation is relatively low and stable, employment growth is strong, unemployment rates are relatively low, the value of the Canadian dollar is rising relative to its U.S. counterpart, borrowing costs are relatively low, the household debt is manageable and a federal budgetary surplus is expected each year in the foreseeable future.
Within this context, a key challenge was to determine howbest to move forward. In essence, we will have to determine how to balancepriorities and to make choices for the economy of the 21st century, an economy that willensure that Canadian businesses and Canadian citizens can prosper and maximize theirpotential.
It was with a view to the future that the committee asked witnesses to develop responses to questions that we believe as a committee were important to help us determine the future financial direction of this country. These were questions such as: What should the program spending, taxation and other priorities of the federal government be in the next budget? What federal budgetary measures are needed to ensure a strong economy with low rates of unemployment and high levels of research, productivity and innovation? Are the federal tax revenues sufficient to enable adequate services and investments in Canada, Canada's people, regions and sectors?
We also asked for the estimated cost of their proposals and of program spending reductions and tax changes required to finance the cost of their proposals and which programs should have their funding reduced and/or what tax changes they would suggest.
The fourth question was: With the federal government's five year tax reduction program completed, should the federal government institute a broadly based tax reduction program and, if so, what taxes should be reduced and by how much?
The fifth question was: What opportunities, costs and benefits would there be to reducing the tax burden through the tax rate reductions and changes to thresholds on low and modest income families consistent with the federal government's overall commitment to balanced budgets and sound fiscal management?
The sixth question was: What changes if any should be made to the fiscal arrangements between the federal, provincial and territorial governments to correct what some call the fiscal imbalance and to alleviate other fiscal pressures in order to stabilize the situation?
The seventh question was: What is the optimum rate of growth of federal program spending in relation to the Canadian economy?
The eighth question was: In the event of a federal budget surplus, how should the surplus be allocated among debt repayment, transfers to the provinces and territories, tax reductions and recognizing the constitutional distribution of powers, increased program spending in areas such as quality child care, post-secondary education, housing, research and development?
With such a broad range of questions, and tough ones I may add, the committee in turn equally received a broad range of responses. The witnesses representing diverse interests presented many innovative and useful ideas that I and the committee were able to formulate into 33 recommendations and we believe that these recommendations, if implemented, would move this country forward.
We believe that our future success is a function of success at many levels: at the governmental level in terms of sound fiscal finances that enable us to afford to plan for the future; at the business level in terms of prosperity and profitability for the benefit of not only companies but also Canadians and their communities; and at the individual level in terms of access to health care, lifelong learning, employment opportunities, sustainable communities, affordable housing and the range of supports needed in various circumstances throughout life.
In my view and in the committee's view, governments, businesses and individual are interdependent: the success of any one hinges on the success of the other two.
We cannot view governments in isolation. We must consider the effectiveness of government decisions on business activity and individual behaviour. We cannot view business in isolation. We must consider the need of businesses for well-educated and productive employees and for a competitive environment within which to operate. We cannot view individuals in isolation. We must consider their need for employment and for public services. This very interdependence means that all levels of government, industry and individuals, must work together on a variety of fronts and must be accountable to one another.
Our report on the prebudget consultation tabled in December was divided into four chapters. Chapter one focuses on preserving Canada's fiscal discipline since this discipline enables us to have a better and wider range of options from which to choose. Based on what the government provides us and with what the witnesses said we made six recommendations.
Chapter two focuses on the investments that are needed in order that we have sustainable communities within which to work and live. A sustainable environment and adequate and well maintained municipal infrastructure, as well as a caring and culturally rich environment, are important to Canadians' quality of life and their ability to prosper. This chapter has five recommendations.
Chapter three focuses on businesses, particularly the taxation, regulatory issues domestically and internationally, capital, trade, research and innovation measures that will ensure their growth and prosperity. An important element is the defence of our country and our management of the border we share with the United States, our largest trading partner. From the themes in this chapter the committee made 12 recommendations.
Chapter four focuses on individuals, especially vulnerable groups, and actions that should be taken with respect to issues such as health care, lifelong learning and taxation to ensure that their potential and opportunities are maximized within the Canadian system. This chapter has 10 recommendations.
As we move forward as a nation, and as priorities are balanced and choices are made, I believe that the right decisions with respect to federal finances, communities, businesses and individuals will help to ensure that Canada remains the envy of many countries worldwide. We want to ensure that Canadians, businesses and individuals have the future that they deserve.
In his appearance before the House of Commons Standing Committee on Finance on November 16, 2004, the Minister of Finance asked for the committee's advice in five areas.
First, how the federal government should allocate any available federal budgetary surplus among economic and social programs, tax cuts, debt reduction, and the considerations that should guide these decisions.
Second, with respect to the October 2004 Speech from the Throne and enhanced Canadian productivity and competitiveness in a global economy, the early steps that could be taken in the next federal budget to best advance those goals.
Third, we were asked in the context of the challenges that will be presented by an aging population, the additional steps that should be taken by the federal government now to prepare the Canadian economy for the significant, demographic change that will occur in the years to come.
Fourth, the level of additional economic prudence that should be provided in the next federal budget.
Lastly, how the committee can contribute to fiscally responsible and coherent decision making and the actions that could be taken to ensure the proposed spending and tax measures are examined objectively and in the context of all other priorities for possible inclusion in the federal budget.
Responding to the first area, the allocation of any available federal budgetary surplus among economic and social programs, tax cuts and debt reduction and what should guide those decisions, the committee feels that a balanced approach must be taken. We do not advocate any particular formula, believing that in a rapidly changing world, some flexibility is required in order to respond to the priorities of Canadians, as citizens, employees and employers, as they evolve.
Needs change, wants change, priorities change and the proper allocation of any surplus changes. In allocating any federal budgetary surplus, the federal government must respond in a manner consistent with the highest priorities of Canadians given that, in a very real sense, they own the surplus.
The committee was asked to comment on the early steps that should be taken in the next federal budget to best advance the goals of enhanced Canadian productivity and competitiveness in a global economy. In our view, the recommendations we make throughout the report must be implemented in order to ensure Canadian productivity and competitiveness.
The country needs sound federal fiscal finances, and the tax and program expenditures that focus on the highest priorities of Canadians and Canadian businesses. We need a competitive tax system for businesses and individuals, as well as the proper incentives to invest in research, development and innovation, and the mechanisms to commercialize that research.
We need strong communities, with adequate and well-maintained infrastructure, a sustainable environment and support for the charitable activities and culture that enrich the lives of Canadians and the environment within which businesses operate.
We need a healthy, well-educated and highly skilled workforce that embraces the notion of lifelong learning, which will be critical to long term business prosperity and which will enrich their lives.
We need support for the vulnerable in our society, including the unemployed, the homeless, aboriginal Canadians, disabled Canadians, seniors and children, as well as the vulnerable who live outside our country. These supports must be adequate in both design and amount. We believe that progress in each of these areas must occur if we are to be as productive and competitive as we can be. All of these elements are part of the solution.
Regarding the additional steps that the federal government should take now to prepare the Canadian economy for the demographic change that is in our future, the committee believes that, again, the implementation of many of the recommendations we make throughout the report will help us to prepare.
Sound federal fiscal finances will ensure that we have the funds to finance such programs as old age security as well as the resources needed to ensure adequate health care and other supports, such as affordable housing, that may be needed by seniors. Tax measures that provide incentives to save for retirement will ensure that seniors have more dignity in retirement and will have positive implications for the level of expenditures of such programs as the guaranteed income supplement.
Measures to ensure research, development and innovation will result in lifelong learning by all Canadians, immigrants and native born, and will ensure that businesses have the highly skilled employees they need. In our view, a multi-faceted approach is needed to ensure continued prosperity as a nation, as businesses and as individuals as demographic change continues.
The Minister of Finance also sought the committee's advice on the level of economic prudence that should be included in the next federal budget. We reiterate our ongoing support for the contingency reserve and economic prudence. In chapter 1 we recommend that the contingency reserve should be at least $3 billion annually. We also comment that it would take about 170 years to eliminate the federal debt if the only action taken was the use of the $3 billion contingency reserve. It is in part for this reason we recommend that the contingency reserve be at least this amount.
Moreover, in our view, the contingency reserve should continue to be used to reduce the federal debt if not required for other purposes. Debt repayment has significant benefits in reducing debt servicing costs, thereby increasing the funds available to finance the highest priorities of Canadians. While we cannot recommend a precise figure, for economic prudence the committee believes that an amount must exist in order to avoid a return to federal budgetary deficits.
As we noted in chapter 1, forecasting is far from an exact science and becomes more unreliable the further into the future the period goes for which the forecast is being developed. We cannot be more precise than to suggest that the figure for economic prudence should be an amount considered by experts to be adequate.
Finally, in commenting on how the committee might contribute to fiscally responsible and coherent decision making and on what should be done to ensure that proposed spending and tax measures are examined objectively and in the context of all priorities for possible inclusion in the federal budget, we are reminded of several of our comments and recommendations in the report. We continue to believe that the annual prebudget consultations undertaken by us are an important part of the federal budgetary process since they give Canadians an opportunity to share with the Minister of Finance through us their priorities at that point in time.
We note, however, that our prebudget consultations were abbreviated this year because of the parliamentary schedule. Our consultations are just one tool that may be used to communicate the priorities of Canadians to the Minister of Finance. We support the notion of ongoing expenditure review. We feel that the consultations we recommend be undertaken with Canadians about their priorities are important in helping to determine what the appropriate federal budget measures might be.
In conclusion, I believe that governments, businesses and individuals must work together as we move forward. Governments rely on businesses and individuals to pay the taxes needed to finance expenditures. Businesses rely on governments to make decisions resulting in an environment within which they can prosper and on individuals to play a key role as employees and consumers. Individuals rely on governments to provide the public services they desire and on businesses to employ them and to provide the goods and services they want. We do quite literally share the same future, and success must be experienced by all if we are to prosper.