Mr. Speaker, thank you for allowing me to speak to the hon. members of this House on Canada's national debt strategy and its advantages for Canadians.
As hon. members are aware, the Government of Canada has recorded a surplus of $9.1 billion for the 2003-2004 fiscal year. In keeping with generally accepted accounting practices, the $9.1 billion went to reduce the federal debt. This was the seventh surplus in a row, which has never happened before in Canadian history.
In 1998, the Government of Canada put an end to a series of 27 consecutive annual deficits. The seven consecutive annual surpluses, coupled with sustained economic growth, have made it possible to substantially reduce the ratio of the federal debt to the gross domestic product. From its highest post World War II point of 68.45% in 1995-96, it was down to 41.1% in 2003-04. This is the most pertinent indicator of the debt burden, since it measures the federal debt against the capacity of Canadian taxpayers to finance it.
Nevertheless, the federal debt-to-GDP ratio remains far higher than the average during the 1970s. Hon. members can well imagine that a heavy debt load puts any country more at the mercy of world interest rate fluctuations.
It is important to note that the cost of the federal public debt represented nearly 19¢ on every dollar of revenue in 2004-04, as opposed to 11¢ some 30 years ago. This ratio is expected to drop to around 18¢ in 2005-06.
We should point out that revenues which go to servicing the debt cannot be used to fund the priorities of Canadians, such as health care or post-secondary education.
It is becoming increasingly necessary to reduce the burden of debt, and thus the interest charges on the public debt, because of the economic and budgetary pressures that will be occasioned by the aging population.
This aging will bring a reduction in the percentage of active workers in the general population in coming decades, which will slow the growth of government revenues.
At the same time, the growing proportion of older persons will weigh heavily on government programs, such as health care and pensions.
The government is categorical: the federal debt ratio must continue to decrease. That is why the budget of 2004 set a goal of reducing the debt-to-GDP ratio to 25% within 10 years, an objective that was reiterated in the throne speech of October 5, 2004.
Thus, the debt-to-GDP ratio will return to the level of the mid-1970s. Similarly, the ratio of the debt service charge to revenue will be reduced to 12% in 10 years, which will free up resources for other priorities.
Let us now talk about the contingency reserve. In order to ensure that the government can carry out its goals, the budget includes a contingency reserve of $3 billion per year. If these funds are not needed, they will be used to pay down the debt.
The contingency reserve reflects the government's commitment to prudent financial management and built the foundation for Canada's recent strategic and economic successes. It has also allowed us to deal with some surprises over the past few years.
In fact it is the surprises that make it clear why we ought to put money aside for emergencies. That is what allowed us to cope with some of the serious financial problems that came with the severe acute respiratory syndrome and mad cow disease, and to provide $1 billion in direct support to farmers to help them overcome the disastrous consequences of mad cow disease and the sudden drop in their incomes.
In addition to the contingency reserve, the 2004 budget re-established a supplementary margin of economic prudence of $1 billion, a sum that will increase over the coming years. If this supplementary margin is not needed during a given year, it will be used to finance the priorities of Canadians.
There has been a distinct improvement in the country's economic and financial situation over the past seven years. Canada now has low and stable interest and inflation rates, strong employment growth, lower foreign debt and a current account surplus.
The federal debt has been reduced by $61.4 billion. In proportion to the size of the economy, the debt is the lowest it has been in 20 years. In that period, marketable debt decreased by $38.5 million.
This debt reduction has given the Government of Canada greater financial stability, reduced its vulnerability to internal shocks and helped the country regain a AAA credit rating.
I want to point out that if we consider all levels of government—federal, provincial and municipal—Canada is the only G-7 country to have posted a surplus in 2003. According to the Organisation for Economic Cooperation and Development, or OECD, Canada should be able to achieve this again in 2004 and 2005.
Canada is the G-7 country that has achieved the greatest budgetary recovery since 1992, especially in paying down its debt.
The debt load of all the levels of government in Canada dropped in 2003 to an estimated 35% of GDP and according to the OECD, it should be the lowest of all G-7 countries in 2004.
The advantages of our efforts over the past seven years to reduce the debt by $61 billion are extremely clear and extremely convincing. We now allocate $3 billion less per year to payments of the interest on this debt.
We will be able to invest this money year after year in the priorities of Canadians, such as health and education, instead of lining the pockets of bondholders around the world.
We must continue to reduce our debt so that fiscal dollars can increasingly be used to improve the lives of Canadians, thus saving us from having to further mortgage our children's future.
A balanced budget is not an end in itself. It is a way to build a better Canada for each and every one of us. A sound financial situation is a prerequisite to strong and sustained economic growth. Strong economic growth means more jobs for more people. It increases federal revenues, thereby allowing us to invest more in the social priorities that have helped us to define Canada as a compassionate nation that listens.
In closing, I affirm the determination of the Government of Canada to ensure that balanced or surplus budgets continue to benefit all Canadians. As we continue to reduce our debt burden, we can invest in national priorities, such as the health accord we just concluded with the provinces and territories, and in other priorities, in Canada and abroad.