Debates of Jan. 31st, 2005

Vacancy

[The Speaker]

I have received notice that a vacancy has occurred in the representation in the House of Commons for the Electoral District of Labrador, in the Province of Newfoundland and Labrador, by reason of the death of Mr. Lawrence O'Brien.

It is my duty to inform the House that pursuant to subsection 28(1) of the Parliament of Canada Act I have addressed, on Tuesday, December 21, 2004, a warrant to the Chief Electoral Officer for the issue of a writ for the election of a member to fill the vacancy.

It being 11:05 a.m., the House will now proceed to the consideration of private members' business as listed on today's Order Paper.

The House resumed from November 26 consideration of the motion that Bill C-259, an act to amend the Excise Tax Act (elimination of excise tax on jewellery), be read the second time and referred to a committee.

Excise Tax Act

[Paul Crête, Bloc, Rivière-Du-Loup—Montmagny, QC]

Mr. Speaker, since this is the first time I am speaking in this House this year, I want to take this opportunity to express my best wishes for the new year to all my colleagues, my constituents and Quebeckers and Canadians. May 2005 be the best year possible.

I rise this morning to speak to the bill to eliminate the excise tax on jewellery. This tax has existed since 1917. It was introduced to help meet financial needs during the First World War. After the war, the federal government followed its usual practice and kept the tax. The war was over. The tax still exists today.

In my opinion, we need to fix the way our files are handled, to some extent. I am referring here to the speech by my colleague from Portneuf—Jacques-Cartier, who rose on November 26 to make the Bloc Québécois' position known as soon as the debate started. Our position on this is quite clear and has been so for some considerable time. Representations were made to the Standing Committee on Finance. As early as December 1996, we stated that the excise tax on jewellery should be abolished. Our party, like all parties represented on the committee, had accepted this recommendation, which the December 1997 report reiterated in its entirety.

Subsequent representations were, in fact, made. The Canadian Jewellers Association wants this tax to be eliminated. Believe it or not, It still applies to the sale of jewellery over $3, when clearly things have changed. In terms of the overall federal budget, abolishing this tax would generate additional costs of $55 million, although we know what effect this would have on the labour market. We must not forget that in Canada, for example, a diamond market is developing and becoming established.

A round table, created by the government through natural resources, wanted this 10% tax to be eliminated in the context of the development of a Canadian and Quebec diamond industry. Various parts of Canada, but especially Matane, in eastern Quebec, are interested. A diamond-cutting school is being set up and an industry will possibly follow. Now would be a good time to eliminate irritants such as this 10% tax on jewellery.

This tax is included in the price. It can be a fixed amount added to other products. For jewellery, it represents 10% of the price. It still applies to gasoline, tobacco, alcohol and jewellery. In most cases, the aim is to discourage the sale of such items. This is not the case for jewellery.

When this tax was put in place, there was no GST as there is today on purchases. If someone buys a costly piece of jewellery, there is GST charged on it already. At this time, the excise tax is nothing but a hindrance to the development of an industry that needs to become more established. I have referred to the diamond industry, but this is also the case for all the jewellery stores in our ridings, be they large chains or smaller family businesses or the like.

The government therefore absolutely must do something in the coming budget. So much the better if this bill were debated and passed now. The government could be proactive and take the step in the coming budget of abolishing this tax, particularly since it has the backing of the industry involved, as well as the Standing Committee on Finance. In light of the present financial situation, the government ought to do the math, because I am not convinced that, when it comes down to it, it is currently a winning proposition to keep the 10% excise tax. This is a federal tax collected on items that are either imported, manufactured or made in Canada, based on the fair value of imports or the selling price of items manufactured in Canada.

The Bloc Québécois calls upon the members of this House to vote in favour of this bill so that this outmoded tax can be done away with, thereby giving a worthwhile boost to the jewellery industry. A number of people in our part of the country own businesses in this sector. This would, in some ways, also be a means of counteracting the negative effects of globalization and allowing our businesses to offer products to consumers at attractive prices.

People tell us this is a tax on luxury items. However, as the president of the Canadian Jewellers Association said, there are basic products we should be able to buy, because today they are part of regular commerce. There is already another tax that can compensate, that is the GST on the value of the item. Consequently, the fact that an item is taxed from the value of $3 is, in our opinion, completely archaic and outmoded.

The jewellers argue that the tax is unfair because it applies only to their products, thus lowering their sales. In the end, it costs jobs and encourages smuggling and the black market. For these reasons and having assessed the financial impact of such a tax, the Bloc Québécois considers that eliminating it is preferable.

Thus, we will support Bill C-259, an act to amend the Excise Tax Act (elimination of excise tax on jewellery). We believe it is important for the House to take this step.

In conclusion, there are many areas of Canadian taxation policy that need to be cleaned up. It is time for spring cleaning and for a new kind of organization. This is one very clear and very obvious sign. In my opinion, we are no longer in the 1994-2004 period, where the watchword of the current Prime Minister, who was then finance minister, was to wring out every last drop to bring in money. We saw the results of this in the employment insurance fund, from which $45 billion was taken to pay off the deficit and to spend on anything but the employment insurance system.

In practice, we are facing the same situation with respect to this tax. It was a way to accumulate as much money as possible. For the entire economy, the federal government must see itself as a government rather than a corporation. The point is not to amass as much money as possible in the federal government's treasury, but to ensure that there is a balance and that our taxation system corresponds to the economic realities of today.

Therefore, for all these reasons, the Bloc Québécois will vote in favour of this bill.

[Lynne Yelich, Conservative, Blackstrap, SK]

Mr. Speaker, I am pleased to speak this morning on Bill C-259, an act to amend the Excise Tax Act.

This bill was introduced by my colleague from Vancouver Island North. It would end the discriminatory excise tax on jewellery, a luxury tax that discriminates, a 10% levy paid by manufacturers on the sale price of items manufactured in Canada and by importers on the duty-paid value of imports. Exceptions include religious articles, watches that cost less than $50 and gems and jewellery that cost less than $3.

This tax, which was first imposed in 1918 after the first world war, is an outdated tax that no other industrialized nation in the world imposes on its jewellery industry. It is time for the government to recognize the need to eliminate this unfair tax.

Canada's jewellery industry is made up of 5,000 companies, most of which are small, private, family owned businesses. From an economic perspective, it is a $1.2 billion a year industry that employs 40,000 Canadians.

Let me give members some facts. Canada is one of the world's largest leading diamond producers, with all indicators pointing toward potential for future growth. In 2004, 40% of world diamond exploration expenditure was dedicated to the search for diamonds in Canada. We now rank third in the value of global production of rough diamonds.

Canada could strengthen its international position even further by encouraging and advancing domestic manufacturing involving diamonds and other sectors of the jewellery industry. By supporting this bill, we are encouraging domestic jewellery manufacturing instead of burdening the industry with such an archaic tax.

The excise tax addressed by Bill C-259 discriminates unfairly against the jewellery industry, which is the most heavily taxed consumer sector in Canada apart from alcohol, tobacco and gasoline.

The luxury label cannot be used as an argument any longer. In fact, jewellery is a commodity that is broadly purchased by all segments of Canadian society, from the very poor to the very rich.

A large part of the tax is collected from low value jewellery purchased by ordinary Canadians. According to the Canadian Jewellers Association, lower and middle income households account for more than 50% of jewellery and watch expenditures.

Whereas a $10 pair of earrings and a $500 wedding band are taxable, there is no luxury tax on a $250 bottle of perfume, a $2,000 suit or an $80,000 car.

The repeal of this tax would allow the jewellery industry to be on an equal playing field with other so-called luxury industries that are not subject to this discriminatory tax.

The excise tax on jewellery and watches is hurting small businesses. More than 90% of jewellery firms have fewer than 20 employees. These small businesses are subject to higher costs of financing inventory. The jewellery industry has considerable job creation potential, particularly as a cottage industry. While other industries cannot sprout up or survive in remote and rural areas, these small jewellery firms can and do succeed, creating Canadian jobs.

We are also killing jobs through the tax because its favours imports rather than domestic jewellery manufacturing. Imported jewellery is taxed on its duty-paid value when it enters Canada. This value is significantly lower than the taxable value of similar items on which domestic manufacturers pay the tax. Domestic jewellery manufacturers face lower profit margins and they lose to imports.

Canada has some of the best diamonds in the world and yet the excise tax makes Canadian diamonds more expensive at home than anywhere else in the world.

Another hit to the economy occurs when the excise tax is passed on in the form of higher consumer prices. Canadians are enticed to purchase jewellery and watches on their travels south of the border or on trips overseas and they use their personal exemption of up to $750 for a one time, one week absence.

Cost reductions from eliminating the tax would in part be passed on to consumers, which then would lead to increased jewellery sales, industry growth and jobs.

It is also important to consider the black market and how removing the jewellery excise tax could have an impact in reducing the incentive to smuggle jewellery.

One study found that the excise tax may account for more than 50% of the price difference between a smuggled piece of jewellery and a similar item purchased legally in Canada.

Bill C-259 would help Canadian manufacturers get back the market share that gets lost to the black market. Another study shows that the personal smuggling of jewellery from the U.S. and elsewhere, which is very difficult to police effectively, may cost Canadian jewellers up to 15% of their market. Again, Canadian jobs are lost there.

Furthermore, this tax is complex and difficult to administer. As manufacturers pay the tax, complications arise in constantly applying definitions, determining accurate valuations for tax purposes, and defining what constitutes manufacturing. For example, the tax can apply to plastic imitation jewellery, any articles made in whole or in part of coral or natural shells, and items made of gold or silver, except gold-plated ware for the preparation and serving of food or drink.

The flaws of the tax make it prone to evasion and avoidance, which also results in a significant loss to the government of GST and income tax revenue.

These same complexities and problems were also shared by the federal manufacturers sales tax. However, the difference in the case of the manufacturers sales tax was that its flaws and the structural weaknesses of administering the tax eventually led to its removal in 1991.

In addition to lobbying efforts from the jewellery industry, the Auditor General has also questioned this tax. The September 1996 Auditor General's report described a number of practical problems obstructing the fair and effective administration of the tax. Moreover, the House of Commons Standing Committee on Finance has twice recommended eliminating the tax.

In 1996 and most recently in October 2004, in a report on small business tax measures, the tax was called an anachronism that no longer serves any social policy objective. Nor does it fulfill the qualities that should be sought in a tax: equity, efficiency, ease of administration, and transparency. It is time for Canada to join the rest of the industrialized world and eliminate this unjust and discriminatory tax.

In closing, I would like to mention that the MLA from Great Slave applauds our member for Vancouver Island North for introducing this bill. He says, “The Northwest Territories has been blessed with diamond resources that now make us and Canada one of the leading producers in the world”. He says that the Northwest Territories has taken “strong stands to ensure that significant benefits from diamond development accrue to northern residents”. As a result, he says, residents have seen four diamond cutting and polishing plants established in the City of Yellowknife. He applauds and thanks the member for bringing this legislation forward and he can only hope that all members of the House will support this bill.

Let us support the creation of jobs and investment in Canada by repealing the excise tax on jewellery. I urge all members to support Bill C-259.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in this debate, which I think has been with the House ever since I became a member of Parliament. The matter has been before the finance committee for a number of years. As members know, the finance committee has recommended that this tax be repealed.

In 1993 when the GST issue was raised we talked about some of the history of the manufacturers sales tax, which was replaced by the GST. I believe that the same arguments for replacing the manufacturers sales tax and converting it to a consumption tax were made, and for the same reasons, as to why this tax should be repealed, and this should have been dealt with at the same time.

It is a discriminatory tax in view of the fact that the offshore competition does not have that same burden. Additionally, we also have the situation of Internet commerce now, which makes it a lot easier for people to import jewellery items. We are not talking about just luxury items as someone might want to define them. We are talking about normal consumer goods, about people buying watches and about the general jewellery consumption that is part of everyday life. This tax has lost its relevance in terms of these somehow being the luxury tax items of jewellery.

We also have a merging of markets, even with regard to things like diamonds. Diamonds are an integral part of the jewellery business. I know that these kinds of taxes should never be a factor that is significant in terms of the consumption patterns of Canadians. If there are offshore competition products which can be attractive to Canadians, then I think that on their own merit they will get their share of business.

I know that the Canadian Jewellers Association has done what I believe is an objective paper to inform members of Parliament about this battle that has been going on for some time. Let me summarize the four points in which the association lays out why the excise tax kills jobs in Canada.

First, it discriminates against domestic manufacturing of jewellery in favour of imports. Second, there is increased cost of inventories to wholesalers and retailers. Third, it encourages Canadians to purchase jewellery abroad and bring it back tax free under the personal baggage allowance of up to $750. Finally, the tax is squeezing the profit margin of retailers and discouraging investment and employment in the sector.

There have also been other papers done on the excise tax, such as the one by Ernst & Young, which make the same argument: basically it is a tax that kills jobs. This is an important aspect to keep in mind, not only with respect to the jewellery tax, but with regard to taxation policy and philosophy, as it were, as to the best interests of all Canadians.

One of the aspects that entices me about the jewellery industry is in fact what I believe to be the large underground economy in the jewellery sector. In this regard I think we are talking about revenues somewhere under $100 million. The underground economy is a very nebulous matter to deal with.

This is hard to prove on a sector by sector basis, but I believe there is sufficient evidence to show that within the jewellery industry there is a vibrant underground economy. It will also be incumbent on us, should this tax be repealed, to make every effort possible to bring that business, that commerce, to the table, because it is as punitive for legal commercial jewellery enterprises as this tax is.

In fact, the underground economy attacks all businesses. It is well known that if everyone paid their fair share of taxes, all Canadians would pay less, so we have a vested interest in making sure that when we make changes like this, whether it be to this tax or to other taxes, we understand that if taxes are lowered there must be some benefits, that is, it is going to increase the economic activity and have other positive consequences.

I believe that this issue of the underground economy is something that Parliament should keep in mind. We have from time to time made some modest steps relating to the construction industry and to subcontracts, perhaps, but the underground economy has been estimated to be as high as some $30 billion of commerce. We can imagine the tax revenues that are forgone.

I am a big fan of private members' bills. I think they raise important issues for the House to consider, but we need to learn from each and every example. Jobs in themselves are not simply the focus of this bill. I believe it should also be a re-evaluation of the income tax practice and policy that we have to ensure that the inequities or maybe the unintended consequences are dealt with and dealt with in a prompt manner.

This one has not been dealt with promptly. There has been good argument for many years. I do not think the arguments have changed very much over those years, but there has been a reluctance.

I also want to comment on the process of private members' bills and their ability to affect taxation. The whole aspect of managing the finances of a country is very important. We have a bill here that is talking about eliminating perhaps $100 million worth of revenue. It has to come from somewhere. There is a balanced approach that has to be taken by governments to ensure that we continue to provide for the needs of Canadians and to support legislative programs. Members know that well over two-thirds of what we spend is mandated by legislation. I think it is over 70% in fact.

That means that every time we touch revenue dollars which are there for the support of programs and services for Canadians, it can accumulate to be a substantial amount of money. I would think that all private members' bills that in one way or another affect either the revenue flow or increase the expenses of the government affect the government's ability to manage the fiscal affairs of the country.

Therefore, we must be very careful not to use this as a model by which the fiscal affairs of the country can be significantly impacted individually or even cumulatively through bills.

We have substantial rules surrounding private members' bills. They are now all votable. However, there are those which are of a royal prerogative and would require royal assent. They would tend to push the envelope a little bit. I raise that from the standpoint that this is not simply a linear issue of a tax affecting jobs. It affects a government's ability to deliver its programs if it is not properly dealt with. It also affects matters like the underground economy, and the shaping of the philosophy and practice of income taxation in Canada.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I am happy to participate in this debate today.

First of all, I want to wish you, Mr. Speaker, and all the staff in our chamber, a very Happy New Year. The New Democratic Party is back here invigorated and ready to go to work. We are ready to make this minority Parliament work for the benefit of all Canadians.

The first part of this parliamentary session has been off to a rather slow start. Some of the promises of this minority Parliament have not been readily apparent to Canadians, and Canadians expect more. They expect that these Liberals in office will refrain from taking Canadians for granted.

We have great faith in the possibilities of a minority Parliament. We want to make it work for the benefit of Canadians. We are debating an issue here that goes to the very heart of Liberal majority intransigence versus the possibility of action under a minority Parliament.

I want to thank the member for Vancouver Island North for having the inspiration and initiative to bring this issue to Parliament. This is one of those long overdue issues that needs action.

This issue has been before Parliament on numerous occasions and we are debating it again. In 1996 the finance committee recommended resolving this anachronism in terms of an excise tax on jewellery. No action was taken then.

I find it somewhat galling to listen to Liberals standing up in the House today and suggesting that this is a matter for urgent action, suggesting that there are lessons to be learned from these kind of situations, and telling us we have to do the right thing and invest in the Canadian economy to ensure we get more tax revenue, stop an underground economy, and do what is best for our small businesses.

What has kept the Liberals from acting since they took office in 1993? What has prevented them from acting since 1996 when the committee made very clear recommendations? Furthermore, why are we dealing with this today instead of having dealt with it several months ago when the present finance committee made the same recommendations as previous committees and called upon the government to end the excise tax on jewellery? Why do we have to drag the government kicking and screaming into any kind of action?

Back in the fall, the finance committee deliberated on several outstanding issues. One was with respect to the excise tax on jewellery and the other was with respect to remission orders covering the apparel sector and the textile industry. Both reports were delivered at the same time. The difference between the two was that the government finally moved on the textile issue because there was a tremendous outcry of concern by the industry and because parliamentarians forced it to act. It was embarrassed into action. We were at the eleventh hour, the industry was about to go into a serious crisis, and the government decided to act.

Why are we here today debating another recommendation that came out of the finance committee report that was tabled in the House last fall? Why has the government not acted? Why has it not said it has a plan to phase out the excise tax on jewellery? The House can imagine our frustration.

On the other hand, we see there is a change of attitude in this minority Parliament. Perhaps the Liberals are beginning to realize they cannot continue to railroad their agenda. Perhaps they are beginning to realize that they cannot continue to obstruct Parliament and put roadblocks in place to every good idea that comes along. Perhaps this time we have a chance to put into effect a relatively small and inexpensive initiative that will make a world of difference to Canadians.

I want to talk about the impact that this will have on the whole diamond industry in Canada. We have to start talking about our own natural resources. We must ensure that there are benefits there for this country and for all Canadians. How can we justify keeping this excise tax in place at the very time that there is an explosion in terms of findings in the diamond industry?

We have seen incredible growth in this area in the north and in other parts of Canada. How can we justify keeping this excise tax in place which produces the anomaly of Canadians spending more on diamonds produced in Canada than on diamonds purchased outside of this country? That is ridiculous. What kind of incentive is that to the industry and to the future of mining?

Let us not underestimate the significance of diamond mining in this country and the future of mining exploration in the north. A news report in the Yellowknifer at the end of last year stated:

The future of mining exploration in the North looks diamond-bright. Permits were issued for 26 million acres of mineral rights in 2004, and four million acres of new claims were staked. The year “2004 has had the highest level of diamond exploration activity that we've seen in the last three or four years,” said Scott Cairns, district geologist with the NWT Geoscience Office and presenter on NWT mineral exploration at the 32nd Annual Geoscience Forum held last week.

The stats go on and on. We are talking about an area that is rich in terms of wealth that can be invested in Canada, rich in terms of productivity, rich in terms of jobs, and a real benefit for a country that needs to start looking at shifting our economy away from being the hewers of wood and the drawers of water. Here we have a chance to make a change in our tax policy, to grow an industry, to make it relevant, pertinent, and lucrative, and to ensure that it is part of our Canadian indigenous economy and the benefits are spilled over to all Canadians.

So let us get real. Let us not delay a moment longer. Let us do what Canadians want, which is to rid this country of a tax that came into effect in 1918, then considered a luxury tax which helped to finance the World War I effort. Today, because of the failure of the government to keep pace with the times, Canada is the only country with such a tax on jewellery. Russia and Australia, the other two that have such a tax, have eliminated it.

We are not talking about something of luxury. We are not talking about something that benefits just the wealthy in our country. We are talking about the fact that most Canadians spend a little bit on jewellery. The average Canadian household spends about $100 to $200 a year on jewellery items. We are not talking about expensive items either. We are talking about a tax that exists on any piece of jewellery that is more than $3.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It is ridiculous.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Imagine that. It is ridiculous, as my colleague from Skeena--Bulkley Valley has just said.

From the point of view of small business, from the point of view of Canadian jewellers, and that case has already been clearly articulated in the House with strong representation from the Canadian Jewellers Association, and from the point of view of a burgeoning, booming industry, the diamond mining industry in Canada, let us not delay this matter any more.

Let us ensure that this Parliament passes this bill and forces the government to act so it cannot continue to delay and deny Canadians the benefits of a reasonable tax policy when it comes to something so out of date and such an anachronism as the excise tax on jewellery.

We have heard Liberals in the House today suggest that there is a problem because of this tax and the underground economy. We are losing all kinds of tax revenue because we have it all backwards. We have put an excise tax on that which does not make sense. It forces people to sell jewellery underground, and of course we miss opportunities for incredible and significant tax revenues. From all points of view, it does not make any sense for the government to continue to stonewall and delay on something so fundamental.

I end by simply saying to the government that the recommendations in the finance committee were very reasoned and rational. They give the government a way to implement a necessary action without causing huge turmoil because of the sudden and significant loss in tax revenue.

I want to reference for the members on the government side our recommendation which says that the federal government implement one of the following options:

phase out the federal excise tax on jewellery over five years; or increase, in increments over a five-year period, the thresholds at which the tax begins to be paid, eliminating the tax at the end of the period. In deciding between these options, the government should consider which option is the more expeditious and involves the greater administrative simplicity for the jewellery sector.

There is a reasonable option and a solution for the government. The bill should be passed and implemented according to the wishes and will of Parliament and the finance committee.

[John Duncan, Conservative, Vancouver Island North, BC]

Mr. Speaker, the first thing I would like to do, as one of my other colleagues has done, is wish everyone a great 2005. This is the first order of business of Parliament in the new year, and it is an appropriate piece of business. Bill C-259 is obviously the most important thing we could be talking about today.

This is a non-partisan bill. A lot of people have entered this debate over the last couple of months, as this is the second hour of debate on the bill. I appreciate the support that I received today from the Bloc member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, my colleague from Blackstrap, the member for Mississauga South and the member for Winnipeg North.

What is crucial also is to recognize that we have had support from members of all parties in the House of Commons. There have been some off the record discussions as well. For example, I know the member sitting in the chair, the member for Hull—Aylmer, had some very strong opinions on the bill. In his riding he has seen jobs lost in the jewellery manufacturing business as a consequence of this tax. It is a job-killing tax. We also had very strong support during the first hour of debate from the Liberal member of Parliament for Ahuntsic. The bill has been well received in the House.

As many have pointed out, this has been a long-standing issue at the finance committee. It has also been an issue that I have had on the order paper for a number of years as a private member's bill.

Over the last several Parliaments we have managed to strengthen the provisions of private members' business. It is not strictly due to the fact we are in a minority Parliament. It is due to the fact that political parties and individual members have worked hard and exploited opportunities to make changes to private members' business to make it more meaningful. It is now a whole new era. Private members' business is meaningful and significant. A whole range of people, including lobbyists, are having to pay attention to what members of Parliament can bring to the table. Significant things can be brought to the table and the government can no longer stifle them, or put them on the back burner or get rid of them in other creative ways.

The member for Mississauga South said that if we were to end a tax, there must be some benefits. There are some major benefits to ending the tax.

Another way to look at the tax is that we are imposing a tariff on ourselves to ensure that goods made in Canada cost more than goods we import. Nobody would do that, yet we have. That is the net result of what we have done. We have killed jobs.

I think this is another very significant thing. Since we first started looking at this, our diamond industry, which 50% of jewellery sales in Canada include a diamond component, five years ago was basically non-existent. Today, it provides $500 million a year in federal revenues.

The industry needs to have this tax eliminated. We have all kinds of support from the Mining Association of Canada, the Canadian Jewellers Association, the provinces and territories.

I went to a B.C. & Yukon Chamber of Mines meeting in Vancouver last week, and there was great excitement. We need to get rid of this tax. I met a gentleman in Vancouver who has 71 robots cutting and polishing diamonds 24/7. For that business to continue to prosper with Canadian diamonds, this tax needs to be eliminated.

I encourage everyone to support the bill, get it to committee and bring it back to the House for final report stage as soon as possible.

[The Acting Speaker (Mr. Marcel Proulx)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. Marcel Proulx)]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[An hon. member]

On division.

[The Acting Speaker (Mr. Marcel Proulx)]

Accordingly the bill stands referred to the Standing Committee on Finance.

(Motion agreed to, bill read the second time and referred to a committee)

[The Acting Speaker (Mr. Marcel Proulx)]

The House will now be suspended until 12 noon for government orders.

(The sitting of the House was suspended at 11:50 a.m.)

The House resumed at 12 p.m.

[The Acting Speaker (Mr. Marcel Proulx)]

It being 12 p.m., the House will resume the sitting, under government orders.

Finance

[Carolyn Bennett, Liberal, for the Leader of the Government in the House of Commons]

moved:

That this House take note of the third report of the Standing Committee on Finance.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

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.

[Monte Solberg, Conservative, Medicine Hat, AB]

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.

[Wayne Easter, Liberal, Malpeque, PE]

We already had the largest tax cuts in history. We are delivering the largest tax cuts in history.

[Monte Solberg, Conservative, Medicine Hat, AB]

My friend has obviously missed part of the speech because he comes in and says they have delivered the largest tax cuts in history. I would point out to my friend that this myth has been so thoroughly debunked by Don Drummond in his recent report. It needs no further response.

The government is deceiving Canadians again. It said that low and middle income tax cuts will now form a major part of the government's agenda. That is what it did in accepting these amendments into the throne speech. It no sooner did that than both the finance minister and the Prime Minister said that it was not a priority. They were not going to do this. They had other things that were more important.

It is one thing for me to make these arguments and I have made them many times in the 11 years I have been in this place. People will say that I have a political axe to grind and that I have another agenda. Well, if they do not believe me, then I ask them to look at the reports of people like Don Drummond, a former deputy finance minister, now a chief economist for the TD Bank Financial Group. There is a recent report from the C.D. Howe Institute that talks about how Canada has fallen further and further behind on the issue of corporate taxation.

I am sure my friend, the member for Edmonton--Leduc, our industry critic, will touch on this down the road when he speaks later today. This has a direct impact on jobs. I will talk about that later if I have time. I guess I have unlimited time so I might be here all day.

The point I was trying to make is that there are experts out there, people who have studied these things for years, who have become truly alarmed at Canada's diminishment in the world in terms of its economy. This is what I find frustrating and I have touched on this briefly before.

Canada has a heritage of being a leader in the world in so many areas. We have lost that heritage. We had a great military coming out of the World War II. That has been diminished. We had a great authority in the world as a foreign policy power. We have lost that. We had a tremendous reputation as an economic leader. We were one of the Asian tigers before there was an Asian tiger. We were one of the great leaders in the world when it came to a productive economy.

For some reason we seem to be accepting today that we can no longer do that. I do not buy that. I think we could be a world leader again, just like Sweden; Ireland; Australia, which is shooting ahead; and the Netherlands. Luxembourg has one of the highest per capita incomes in the world. In fact, I think it has the highest per capita income in the world. How did it do that? Did it do it because it has oil in the ground? No. Did it do it because it has really high taxes? No. It does it because it is smart about its public policy decisions. It has smart taxation levels that attract investment. That is what we have to do in Canada.

If we do not do that, we will repel investment. Investment goes to wherever it gets the best return. If it is not in Canada, that means we lose jobs, opportunities and the revenue ultimately that is necessary to fund our social programs. We cannot continue to do that. We have all these experts today who are saying that Canada is in serious trouble, that we are falling further and further behind.

One of the things that we run into, and I bet some of my colleagues ran into this when they were out during the break in their riding, is that the high value of the Canadian dollar is hammering businesses today. We export so much of what we produce. About 40% of our national income is derived by trade

[John McKay, Liberal, Scarborough—Guildwood, ON]

You've changed your tune.

[Monte Solberg, Conservative, Medicine Hat, AB]

I am being heckled by the parliamentary secretary for finance. He is talking about how in the past we used to complain about the low value of the dollar. I want to answer his concerns if he would quit talking for a second.

It is true. We used to complain about the low value of the dollar. It reflected the fact that our economy was not as productive as it could have been. Today the high value of the dollar reflects the fact that the U.S. dollar has fallen so dramatically. Unfortunately, because our productive capacity did not rise with the dollar, it means that exporters are being hammered very hard. We see this all the time.

I am sure members in ridings ran into this when they were out and about. I know that in the agricultural industry where I come from this is a big issue. People hear it all the time. I see the parliamentary secretary for agriculture nodding over there. It is a pretty serious issue.

The only way to combat that, if we do not have the ability to raise and lower our currency the way we want to every single day, and we do not have that ability since it is part of the world market like any other market, is to ensure that we pull the right fiscal levers so that people have lower corporate taxes, personal income taxes and we eliminate capital taxes for instance. If we do those things, then we would have the capacity to deal with a rapid rise in the dollar, at least more capacity than we have had until this point.

By not reacting, when it has had the opportunity on all these challenges that the government has been warned about for so many years, the government puts Canadian jobs in peril and the livelihood of millions of Canadians in peril. We see all Canadians poorer as a result of it.

We want to argue that as we approach the budget in three weeks time the government must heed this message. It is not simply to please me that I am asking for this, although I would be very pleased if it would go ahead and implement these things. It is necessary to help people, to help individual Canadians, all those people who we ran into in the hockey rinks, coffee shops and town hall meetings that we all had over the very frigid January we just spent in the ridings.

I urge the government to do the right thing and do what is right for the people of Canada. It would also be right politically for the members opposite, by the way. This is something Canadians are demanding.

In a minority Parliament it is also very important for the government to understand that if it does not do these things, then we as the official opposition will have no reason to support the government's budget. I need not paint a more vivid picture than that to show the government what it would mean if we did not support it. Potentially, it could mean the fall of the government.

We are urging the government to take these concerns seriously. If it does, I can assure the House that I will personally tell my caucus that we should support the budget, if the government cuts taxes deeply and implements a standard of living strategy that would ensure that over the long run incomes will rise and we will have revenues to support Canada's social safety net down the road, especially when our baby boomers start to hit their retirement years.

If the House wants to move that we have a question and comment period, I would be happy to address any questions that members may have.