Mr. Speaker, it is a pleasure to rise at the beginning of the parliamentary new year and help start off the debate on the budget as we gear up to that in the next three weeks. At the outset I want to wish my colleagues in this place a happy new year. The new year starts at a different time here in the House of Commons and I will take this opportunity now to say happy new year and wish my colleagues and their families good health and prosperity.
Before I get into my remarks I also want to say that I think a lot of people in Canada take the freedoms that we have in this country for granted. I know I do at times. We witnessed the remarkable outbreak of democracy in Iraq over the last couple of days. The people of Iraq voted in the first democratic election in 50 years. We saw how excited they were to go to the polls in the face of all the violence and the threats. What an inspiring spectacle that was. It is an inspiration to everybody in this place where sometimes we tend to take those things for granted.
I want to thank my colleague who spoke a moment ago. He is the chair of the House of Commons finance committee. It was under his leadership that we conducted our prebudget hearings. We heard many different things from Canadians with respect to what should be included in the budget.
One of the things we heard a lot, and which I do not think was adequately reflected in the finance committee report on the prebudget hearings, was that Canadians feel they are overtaxed. This is something to which the government has not paid adequate attention in the last number of years, and now the chickens are coming home to roost.
We are seeing it in the form of lower take home pay for Canadians. Their disposable incomes have hardly grown. We see it in the form of an economy that is much less robust than it would otherwise be. This means that there are fewer jobs than there could be. This means that the government does not have the revenues it should have over the long run to ensure that it can fund the social programs adequately today and down the road when the baby boomers hit their retirement years. It will need enough revenue coming in to ensure that it can fund that great unfunded liability called health care, and of course that big social safety net, especially pensions, that will be so strained in the years to come.
These are not just my opinions. They are the opinions of many witnesses, many experts who appeared before the finance committee over the course of the fall. They warned us that we must do more to ensure that we have those revenues coming in to protect Canada's social programs down the road.
We are just coming off a six week break, and what a great experience that was. It was great to go home and see people, even in the cold temperatures that we experienced in southern Alberta. Many of us spent a lot of time doing town hall meetings and sitting in hockey rinks, as I get to do because I have a son who is still playing hockey. Many of us went to coffee shops and talked to a lot of folks. I heard over and over again that people are struggling in many respects.
People said it in different ways. Some people said that they looked forward to when they could pay off their mortgage and they had more money to put toward their retirement, or their children's college fund, or whatever it was. Some people said that their car was just about worn out and that they would have to buy a new one. Some people are struggling with paying for repairs to their homes. Parents of disabled children are wishing they had a little extra money to pay for more drugs or the special needs that their children might have. These are the various and sundry concerns that all of us heard expressed in a million different ways when we were back home over the last six weeks.
There is something Parliament could do to give Canadians a national pay hike, to increase their disposable incomes. We have argued this for a long time. It is not something new coming from the Conservative Party. We have argued that the government could play a direct role in ensuring that people who are struggling out there could in fact keep more of their pay that they work so hard to earn in their pockets.
I have talked about some situations which in some people's minds may be fairly minor. However, seniors paying taxes starting this year on a fixed income of $8,400 as the basic personal exemption moves up a little bit are paying taxes on their poverty. It is simply not fair. We must do more to help this country create jobs and to ensure that in the long run we have a vigorous economy that will support our social programs down the road. We must also do more today to help people at the lowest end of the income scale. People with an income of $8,400 pay EI premiums and CPP. They pay personal income taxes and taxes on fuel. They pay property taxes as municipal landowners. They pay GST. They pay dozens of kinds of taxes. They pay all these taxes with an income of $8,400.
Meanwhile the federal government's take of revenues has gone up and up and up every year. Over the last six years its total expenditures have gone up by 40%. Revenues for the government have gone up dramatically. The government's expenditures have gone up by 40% in the last number of years.
I want to ask members if they truly believe that the value of the services we have received for that 40% hike in expenditures has been realized. Are we seeing the value from that? Are we seeing a 40% improvement in the response we get when we phone to get a passport? Have we seen a 40% improvement when it comes to dealing with immigration? I do not think so. In fact what we have seen is a lot of scandal in the immigration department. We have seen longer and longer waiting lists. Have we seen a 40% improvement in anything? Have we seen it in the military? Have we seen it reflected in how strong or how well equipped our military is? No we have not.
We just see more and more money going into government pockets and less money going into the pockets of Canadians. We do not see that reflected in increased services from the government. If the economy continues to grow, we need to see a greater share of the benefit of that left in the pockets of individual taxpayers.
Taxpayers are much better managers of that money than are government bureaucrats and politicians. We see that reflected so often in this place where unfortunately during question period we have to go after the government pretty hard on some situations that are outright scandals and perhaps even corruption and on other cases of mismanagement to the tune, not of hundreds of millions, but in many cases, billions of dollars of taxpayers' money. We have to turn that around.
We heard reports like this during the prebudget hearings. Witnesses would come forward and would relate to us their theories on what should happen with government spending, taxes and debt repayment.
One of the most compelling reports I have seen since that time was one from Don Drummond, the chief economist at the Toronto-Dominion Bank and former deputy minister of finance. He was responding to a request from the president of the bank who had heard from friends whom he had gone to high school with that they were working harder but they just did not see their take home pay improve. He wanted to know why, so he asked Don Drummond to do some work on this matter. Mr. Drummond produced a fantastic report. I wish it was a report we could have had to present to the finance minister in our prebudget submission.
His report essentially said that since 1989 the output per worker went up 21.8%. We saw the national income rise, but the actual amount of money in the pockets of the workers only went up by 3.6%. Why the difference? The difference can be explained when we understand that the government increasingly had its hand out and took more and more of what these hard-working people earned, which meant less and less accumulated to the individual Canadians. He has argued that it is not time, it is well past time for substantial tax relief for all Canadians.
It is a fascinating report. He has pointed out that the government has argued many things with respect to cutting taxes. It has argued at various times that it does not need to cut taxes. It has argued that it has already cut taxes. Now it is arguing that although it promised to cut taxes in the amendments to the throne speech it is a really low priority. He has pointed out that the government has not really cut taxes substantially. This is something we have been saying for many years. Our colleagues on this side know this.
In the 2000 election, the government, in its haste to beat back a challenge by the Canadian Alliance at that time, brought in a mini budget right before the election and trumpeted a $100 billion tax cut. Right away we said that it was not a $100 billion tax cut. All it was doing was giving with one hand and taking away with the other. Unfortunately, a lot of the media did not catch that, and the government stuck to is message.
However, in his report Don Drummond revealed that in fact that was what was happening. The government on the one hand was reducing some personal income taxes. On the other hand, Canada pension plan premiums were going through the roof. He pointed out that what it counted as a tax cut, when it came to personal income taxes, was not a tax cut at all. It cancelled future tax increases when it came to restoring the indexation of the tax system, which was a good thing to do, and I am glad it did that. However, that did not add anything to people's disposable income. All it was doing was cancelling future tax increases. The government told Canadians they were getting a tax cut and, unfortunately, a lot of the media bought that and dutifully reported it as a $100 billion tax cut.
The other thing Mr. Drummond did not report on was the fact that the government counted the child tax benefit as a tax cut when it was nothing of the sort. This money is taxed away from all Canadians in the form of income taxes, for instance, or GST. It goes into general revenues and the government redistributes it back to people on the low end of the income scale in the form of either a tax break or a cheque. It is a redistribution of income. It counted this as part of its great $100 billion tax break, but it was nothing of the sort.
When we separated all this out, we found that the government delivered a minor tax cut. That meant that many other countries were moving ahead of us at the same time. Many other countries were cutting taxes much more deeply. It also meant, in a way that is important to individual Canadians, that they were not allowed to keep nearly as much of their income as the government had suggested they would keep.
As Mr. Drummond points out, the result is that disposable income per worker has grown 3.6% in 15 years. That is pretty pathetic. When we put it in historical context, we have to remember that after the second world war, up until the late 1960s, Canada's economy grew unbelievably fast and living standards went through the roof. Why was that? The government, whether by good management or by accident, did not tax Canadians too heavily. Government was small and it was focused. It did a few things, and it did a few things well. Taxes were kept at very low levels. We had a stable money supply.
Those are really the things we need to have for a prosperous economy. We do not need a bunch of natural resources. We do not need too many things. We need an educated workforce, which helps a lot. If we have a small focused government that ensures it maintains the rule of law, that there is a justice system in place to ensure that we have land titles and things that are necessary to do business, then beyond that the economy really looks after itself.
During the period after the second world war, individual incomes went right through the roof. Unfortunately, we have forgot the lessons of our history. Today government has become larger, it has taxed more heavily and as a result we have seen the economy slow down. Now when we have a growth in the economy of 3% a year, people say that it is pretty good. It used to be 6% and 7% a year, but that is all part of ancient history now. There are 1.2 million unemployed Canadians today. We used to have an unemployment rate lower than it was in the United States. Now it is about 40% higher. That is unacceptable. We can do better.
Mr. Drummond also pointed out a very interesting fact in his report, one that we have commented on before as well. During the last election campaign we pointed this out and ran on it. We have said that middle income Canadians who are in the lower end of the middle income scale get punished heavily by our tax system today. In certain tax brackets not only do they pay the middle rate of income tax, but for every dollar they grow in income they lose some benefits from the government, like the national child benefit which is clawed back.
The effective tax rate for every dollar in income that people earns when they are in the lower income segment is 80%. In other words, for every dollar people make working overtime, 80% is taxed away from them or they lose it in the form of diminished benefits from the government.
Everybody in this place understands that incentives matter. In other words, the reason people go out, work harder and work overtime is because they feel they will have a bunch of money come in to help them look after their families. However, if there is an effective tax rate of 80%, the incentive for people to work harder, to take risks, to start businesses and to do the things that make the economy prosper, the things that raise living standards, is undermined.
This has been a problem for years and the government simply refuses to deal with it. We have pointed to it dozens of times in this place, yet the government has done nothing about it. This has resulted in 1.2 million people being unemployed and millions of people being under-employed. They have the skills, the experience and the schooling to do more than they are doing today, to have better jobs than they have today and to earn higher incomes. The jobs are not there because the growth in the economy has been retarded by a tax system that undermines incentives. That has to change. If we do not change that, we are relegating millions of men and women to lives that are much less prosperous than they could be otherwise, and that is not acceptable.
As a Canadian member of Parliament, and I hope I speak on behalf of all members of Parliament, this is not acceptable. We cannot, in good conscience, think we are doing a good job if we are prepared to settle for this kind of economy in Canada. It is morally wrong to allow this to happen.
In a letter we recently wrote to the Minister of Finance, we recommended that the government take seriously the problem of stagnant disposable income for individual Canadians because it hurt their ability to make a living. In the long run the government must have a standard of living strategy that is designed over a period of time to remove the disincentives to investment in Canada and the disincentives to capital accumulation, which is necessary to allow businesses to expand and to start new businesses in Canada. We need a standard of living strategy that would invest in certain areas to ensure that we could deliver goods and services to market. In other words, put money into infrastructure to ensure that our workforce is educated.
I know a lot of us in this place have been lobbied hard by students, universities and colleges. They have said that we need to help them out as they are falling further and further behind. The government needs to include that in its standard of living strategy. We argued that in a letter we sent to the finance minister. If we do not do those things, then in the long run we imperil the standard of living of Canadians. We allow people in countries who are far less blessed than us, when it comes to resources and the natural advantages we have here, to go past us in their standard of living, as many have in recent years.
I will digress for a moment. Go to the OECD website and look at how countries like Ireland, Iceland and the Netherlands are shooting past us in terms of their standards of living even though they have none of the native advantages we have. It is shocking and it is shameful. When Canadians look around their country, they say how great they have it. They have all these natural resources and an educated workforce. We are not really using these things to our advantage or to their full potential.
I do not think we are not using the biggest advantage of all, which is the fact that we have unfettered access to the richest market in the history of the world: the United States. We do not exploit that the way we could to the advantage of citizens in our country. As somebody who cares about his constituents and Canadians in general, it is frustrating for me to see us losing these opportunities. These are not abstract things. This means dollars in the pockets of every Canadian. It means they do not have the money to send their children to university, or pay off their mortgages or go on a vacation.
We all ran into this right after Christmas. There were lots of people who were horrified by the tsunami that struck Asia. It was the widow's mite. People were giving out of their poverty. In many cases people were giving what they could give. What a wonderful thing to see. To the government's credit, it matched those donations. Imagine what Canadians would give, even those who are very strapped today, if they had more disposable income in their pockets. They would give more money because Canadians are so generous and want to help. If people do not have the money, they will not go to go into debt to give it to somebody else.
We are missing the boat. We are missing so many opportunities. I grow so frustrated when I see the government's attitude. I know my friend across the way well. He has served in various capacities on the finance committee and as parliamentary secretary. I will address this to him. I grow very frustrated when I hear the rhetoric that has come from the finance department, the Prime Minister and the Minister of Finance over the last little while when it comes to the issue of cutting taxes and addressing the standard of living problem that we have in Canada today.
During the last election campaign the Conservative Party said that it had to do these things. We said we had to help people get on their feet and help the economy move forward. We had a program of tax cuts, debt repayment and targeted spending increases, things that we thought were good ways to help move the country forward. The government attacked us right away and said that if we did that, we would put it into deficit. It had some economists who backed it up on that.
Within weeks of winning the election, the finance minister announced a program of spending that exceeded the fiscal framework that he said was available during the election campaign. He claimed that if we spent the amount of money we wanted to spend, we would go into deficit. He exceeded the amount of money that we said we would spend. It would not drive the government into deficit, because all of a sudden it realized it had a much bigger surplus than it originally announced.
The Liberals said during the election campaign the surplus would be $1.9 billion. We said that they were crazy and that it would be much higher than that. They said, no, that it would be $1.9 billion. Within weeks, the finance minister said that the government was wrong, that it was $9.1 billion. Billions and billions of dollars were available after all, just like we had said all along.
They deceived the public during the election campaign, but it did not end there. During the throne speech debate and debacle, the Liberals said, “We are going to behave like we are a majority government. This is our throne speech. We are in a minority situation, but this is what we are going to do and if people do not like it, too bad”. My leader, and I am proud to say, said, “No, you are not going to conduct this minority government like it is a majority, like you have done for the last 11 years”. We brought in amendments that we agreed upon with other opposition parties in the House, with the NDP and the Bloc. Among those were ideas like cutting taxes for low and middle income Canadians.
We said we wanted an independent process for forecasting the government's financial situation, especially based on the government's deception during the election campaign. Many times in the past it has misled Canadians about the size of the surplus as well.
We said we wanted an independent commission to look at employment insurance because people who paid into the EI fund have been ripped off to the tune of $46 billion over the last number of years. That is how big the nominal surplus is in the EI account. There is no money actually there. It has all been spent. It went into general revenues and it is gone. Canadians were under the impression nevertheless that this was going toward their benefits or would be reflected in lower premiums, but it is gone. It is gone forever now.
We brought in these amendments during the throne speech. The government resisted these amendments. Finally, when it became clear that the Bloc and the Conservatives were quite prepared to oppose the government's throne speech if we did not get these amendments, the Prime Minister called my leader and the leader of the Bloc and said, “What do we have to do to get this done?”
The government accepted these amendments. It accepted the amendment specifically to cut taxes for low and middle income Canadians. It said that it would form part of the throne speech, and presumably part of the plan for the government for the coming session of Parliament. That is what the throne speech does. It lays out the government's priorities for the future.
One of the priorities is to cut taxes for low and middle income Canadians. No sooner had the government agreed to that, it turned around and said that cutting taxes was at the bottom of its to do list. It was not a priority for the government. That is a deceit again. It is morally wrong to do that.