Mr. Speaker, I am delighted to participate in the debate on the budget implementation bill.
I have spoken a number of times on budget-related matters. After some 11 years of being involved in the process on the finance committee and looking at estimates in government operations committee, et cetera, I have come to realize how complicated governing and the budgeting process are. It is an enormous challenge with tremendous competing interests.
I recall one of the very first finance committee meetings I attended. The then finance minister, currently the Prime Minister, made a statement which I thought was very telling about what I would learn as a member of Parliament. In his address to the finance committee on the state of the financial affairs of the country, he made the overarching statement that good social policy made good fiscal policy and good fiscal policy made good social policy. There is clearly an integration. When we are addressing the social needs of Canadians, it is important to note that we are creating an environment in which economic growth and prosperity can occur and that economic growth and prosperity leads to dividends for Canadians.
We had a terrific discussion in 1996 about how we would dispose of the surplus when we finally slew the deficit and had a surplus. Should it be put toward paying down the debt? Should it be used for tax cuts? Should it be used for program spending or enhancing existing spending?
Having a surplus is a good problem to have. It is better than the alternative. When the government came into office in 1993, there was a $42 billion deficit in Canada. As a country, we were spending $42 billion more than what was coming in as revenues. That was an enormous amount of money relative to all things.
No government would be able to simply cut $42 billion in one year in spending. It would take a concerted effort and rationalization of expenses across a broad range. In fact, everyone in Canada was asked to do their share.
I can recall how people were very concerned about the size of the cuts. I remember the finance minister saying to me at that time that we had to make those cuts to save 80% of what we had. If we did not make those cuts, we would lose it all. Tough decisions have to be made in government. It comes down to that.
One thing I learned about the budget process was that the budget could not be looked at in isolation. It is important to look at a series of budgets. We had to find out where we were and how to move things forward. With the diversity of priorities that Canada has, both social and fiscal, it is difficult to address each and every one of them in every budget and move them forward in a substantive way so they would have the necessary impact to take advantage of the opportunities or the circumstances in terms of global impact.
We have to be strategic when doing budgets. Budget 2005 and the implementation act that we are now debating is another step in the process of securing the fiscal health as well as the social health of Canada.
I want to make a few comments about the budget in particular. Key commitments were made in the following areas. The first was maintaining sound financial management, which we have done since 1997. We have had balanced budgets ever since. People have been complaining that the surpluses, not only balances, are a problem. I will address the importance of debt repayment a little later.
The next area is securing our social foundations. Health care comes to mind. In achieving a productive and growing economy, that mix, what are we doing to make sure that we have an environment that continues to promote a productive and growing economy? It is good fiscally. It is good socially.
The fourth area is moving toward a green economy and sustainable communities. Canadians should link up to the initiatives with regard to our Kyoto commitment to reduce greenhouse gases. They should also look to our commitment to communities in a number of ways to ensure that our communities can provide sustainable activities with regard to infrastructure and other areas of assistance to them so that they can also do their share in promoting a good fiscal environment in which the economy can grow and prosper.
Finally, there is the commitment with regard to our global responsibilities. Canada is respected around the world. The reason for that respect is that it is something Canadians have earned.
They have earned that respect because of the tolerance, generosity and peacefulness of Canada and because of the good governance that it has experienced and the wise counsel that Canadians have been able to give in the global community over so many generations. That is a very important asset for Canada, because we are a global player. We are a global trading partner with many countries. That earned respect has come by making wise decisions, both fiscally and socially, and has continued to grow the reputation of Canada all around the world.
With regard to the economic outlook, we are looking now at growth of 2.9% in 2005 and about 3.1% in 2006. These rates are at the upper end of the G-7 projected growth rates, so again the outlook is very good.
However, our economy does face some challenges because of the high American dollar. I know that a number of members have expressed concern about our competitiveness with the differential against the U.S. dollar, not the high American dollar but in fact the high Canadian dollar relative to the U.S. dollar. It has moderated somewhat, but it still remains a significant influence in terms of the economic trade between our two countries. Seventy per cent of our exports go to the United States.
We do not live in a vacuum. We are not an island. We also have some concerns about the growing deficit in the U.S. It is extremely large. It affects our largest trading partner in ways that will also provide potential difficulties for our Canadian economic activities.
Since balancing the budget in 1997, we have had seven consecutive surplus budgets. I must admit that I am surprised at the amount of discussion that has been going on about how terrible this is. Most of the discussion has been around looking at the forecasting or estimates of what the budget surplus is going to be.
When we talk about the magnitude of things that the government has to deal with and the factors which influence the economic activity in Canada and are beyond our control, I am not sure what level of accuracy anyone could produce in a budget for a forthcoming year, and indeed for the next two to five years in many of the budgets based on economic scenarios given the input of some of the largest economic forecasters in the country.
I am not sure whether it is a useful discussion to say that somehow we are not being forthright in terms of the surplus. One thing I know is that once there was a balanced budget, Canadians said categorically, “We do not want Canada to be operating in a deficit scenario ever again”. Deficits are a non-starter.
Thus, immediately, to respond to Canadians' wish to keep balanced budgets, the budgeting process started to incorporate what are called contingency and prudence factors, which were to be included where there were unseen factors which would negatively affect the economic performance of Canada. There were contingency funds put in for those serious unforeseen items which would have a major impact.
There were also what are called prudence provisions, so that if the economic forecasters were saying that the growth rate was going to be 2.5%, the budget would assume that it was going to be about .25% less. There also were prudent assumptions with regard to short term and long term interest rates.
If everything in the budget came in exactly as planned, there would be a surplus. Since 1997 the government has in fact planned a surplus in its budgets, not just a balance but a surplus.
Earlier I had a conversation with a member of the Conservative Party. I had been talking about debt reduction. As background, let me give members an idea of where we have been in the last decade. When this government took office back in 1993, the national debt, the cumulative deficits of previous years, was $562 billion a year. It was gobbling up an enormous percentage of every disposable dollar that we were taking in. Debt servicing was extremely high. Today the national debt is $498 billion. This means that cumulatively since 1993 $64 billion of debt has been paid down.
We are not much farther ahead right now than we were when we started in government in terms of the scenario on the debt. The surpluses simply have been used; it is automatic. Once the year is over and once the accounts are audited, there is a determination of the final surplus and that final surplus is totally applied against the debt. It is not a choice. That is the way it happens.
I raise this because the member of the Conservative Party said to me that maybe sometimes tax cuts are a greater priority than debt reduction. I had to think about that for a little while. If debt reduction is a consequence of a surplus, but the member wants to argue that tax cuts may be a greater priority than debt repayment, he , therefore must be saying that tax cuts are okay even if we are creating a deficit. We cannot have it both ways. If we are not going to have debt repayment as a priority, we must therefore contemplate that there should be deficits.
There is another aspect the member did not understand. It really concerns me that after all these years the member still does not understand that there is a fundamental difference between tax cuts and spending. Spending can be a one time item as opposed to a new program, whereas a tax cut is a recurring annual charge or a reduction in the revenue of the country.
It is not enough to say that since there was a $4 billion surplus we should have a tax cut. The surplus was a one year occurrence. A tax cut would be each and every year. If we were to give a tax cut that effectively eliminated that $4 billion surplus, we might have a balanced budget in that particular year, but every year thereafter we would have a $4 billion deficit simply because tax cuts are ongoing.
I am a little concerned and a little nervous about the lack of understanding of some of the members, who somehow seem to suggest that a surplus is something that one must spend right away. There has not been an extraordinary paydown on the national debt, but from what we have had we have brought it down. Now we are below the levels we were at a decade ago. It is saving Canada approximately $3 billion a year in interest costs. It has reduced our costs from some 43% of every Canadian tax dollar to about 22¢ on the dollar. That is very significant. Most important, that $3 billion saving is an annual saving. It is available year after year to be able to sustain items, whether it be tax cuts, new programs or enhancement of existing programs.
That is the true fiscal dividend to Canadians in terms of getting one's fiscal house in order. It is getting the debt servicing paid down and it is the savings on interest that are available to Canadians, either to return to Canadians in terms of tax cuts or indeed to enhance programs and important priorities of Canadians, such as health care.
Having said that, let me move on to another aspect. Certainly health care is one in securing our social foundations. In our recent commitment in the health accord, there is $75 billion in support of a 10 year plan to strengthen health care and the new framework for equalization and territorial formula financing.
This has been extremely important, particularly for Newfoundland and Labrador and Nova Scotia in these new arrangements. From time to time there are important needs of regions of our country that we have to address. I am glad that the Prime Minister and the premiers were able to address them, but we have a matter consequential to that, which is e a province like Ontario looking at its own situation in isolation and saying, “How about us too?”
That is a problem. I am going to try to address very briefly at the end of my speech some of the elements of the so-called gap between how much money a province contributes to the federal coffers and how much money goes back into that province. It is a very interesting argument.
In terms of health care, the budget provides $805 million over five years in direct federal health investments, including: $300 million over five years for healthy living and prevention of chronic diseases; $200 million in support of health human resources and improved wait times; and $170 million over five years to implement measures to enhance the safety and effectiveness of drugs and other therapeutic products, which is very important to Canadians.
As members will know, there is also the $5 billion for the early learning and child care initiative. I believe that is a start, but I also personally believe that in a subsequent budget we have to look at the needs of those families who choose to provide care in the home to their own children. It is an important job. It is unpaid work, but it is important work. It deserves to be recognized. I hope we will see some movement on that in a coming budget.
There is the increase in the guaranteed income supplement. There is also new funding of $735 million for aboriginal communities and $398 for immigration settlement services and client services.
These are very important elements of the budget. I know that we have had an excellent debate on it. I know that members would like to see some of our other priorities take a higher line in this budget, but I have to repeat that each and every budget cannot address each and every item, each and every year. It just cannot happen and have budgets still have a meaningful impact, respond to the opportunities or defend ourselves against the threats of the current day. Budgets have to be responsible for the realities of the day.
I would like to look at moving toward a green economy and sustainable communities. Having been the vice-chair of the environment committee, I spent a fair bit of time with my colleagues across the way working on a number of initiatives. I am pleased to see that moneys have been set aside in the budget to look at renewables such as wind power. There is money for that in there. I also am very encouraged that we are moving forward on our Kyoto commitment with $1 billion to make sure that Canada does its share in that regard.
It was a very difficult one, but a very significant arrangement deal has just been made with the auto sector, as members know, whereby it has voluntarily come up with a plan to reduce greenhouse gas emissions by 5.3 megatonnes by 2010, I believe. This is a very significant accord that has been reached with one of the sectors that is one of the largest areas in which we can reduce greenhouse gas emissions. There is no question that we have more work to do on that file. Some of the large emitters, particularly those involved in hydro generation or other heavy manufacturing, are areas that have work to be done. We are going to need some progress, but I know that the House is committed to doing that.
With regard to cities and dealing with sustainable communities, I am pleased that we have been able to respond in terms of the $5 billion in federal gas tax revenues, the $600 million they will receive in 2005-06, the $300 million for green municipal funds and the infrastructure money as well. These are not federal jurisdictions per se, these moneys going to municipalities, but it shows some leadership on behalf of the government when it says that strong communities right down to the municipal level are to the benefit of all Canadians.
I am pleased to have participated in this debate. I welcome the members' questions.