Debates of May 28th, 2008

Finance—Main Estimates 2008-09

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I may need to hear the last part of the question again.

With respect to who administers what, these are trust agreements, and of course the trust agreements are negotiated and put in place by the Department of Finance. The administration of the environmental trusts, for example, is with the Department of the Environment, not with the finance department.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Chair, the associate deputy minister today in committee said that we will not be able to attribute a single megatonne of GHG reductions to a dollar spent under the eco-trust.

Let us go on, if we could, to the government's “Turning the Corner” plan and what it says about carbon pricing. It says:

Our modelling suggests that Canadians can expect to bear real costs...these costs will be most evident in the form of higher energy prices, particularly with respect to electricity and natural gas.

It goes on to say that “these changes will come at a [serious] cost for Canadians”.

Minister, let me turn to your plan for putting a price on carbon. What price, Minister, do you expect for a tonne of CO₂ equivalent emissions under Canadian regulations in the fall of 2008?

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

Once again I will ask the hon. member for Ottawa South to address questions through the Chair, not directly to the minister.

The hon. Minister of Finance.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, I thank the hon. member for the question. That is a specific scientific question. I will get an answer for the member if I can and report it to him.

I note that during the 13 years--

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

You should know the number.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

No, Mr. Chair, finance does the trust agreements, I say to the members opposite.

I will say again to the members opposite that environmental programs are not administered by the Department of Finance.

I do note that in the 13 years of Liberal government greenhouse emissions went up 30% and I notice that the member wants to introduce something called a carbon tax. We know what that will do to gasoline prices for Canadians. They will go up dramatically. We know what it will do to home heating fuel. It will go up dramatically.

We know what it would do to electricity. We know what it would do to manufacturing costs and therefore to exports. This massive punitive tax is what that member supports.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

The member for Ottawa South has 35 seconds left.

[David McGuinty, Liberal, Ottawa South, ON]

So, Mr. Chair, the minister is incapable of telling us what the cost of carbon will be in the fall. He is responsible for designing the pricing of carbon. He cannot tell us. He cannot tell us what the net effect of his tax gimmick in the tax deductible transit pass is in terms of the cost of carbon.

I will tell him what the cost of carbon is. It is between $1,800 and $2,000 a tonne through your tax deductible transit pass and your deputy minister knows it because he actually told--

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

I am going to stop the hon. member there because he is using the first person again and also because he is out of time.

I am going to allow the hon. Minister of Finance a few seconds to respond to the preamble and then we will have to move on to the next time slot.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, just so the hon. member has no misunderstanding, the trusts, including the environment trust, are set up by the federal Department of Finance, the trustee, with the provinces of course, but they are not administered by the Department of Finance. That is done by the relevant federal government departments.

[Gerald Keddy, Conservative, Parliamentary Secretary to the Minister of the Atlantic Canada Opportunities Agency and to the Minister of International Trade]

Mr. Chair, I am thankful for the opportunity to speak to the Department of Finance's main estimates for 2008-09 and more broadly to the economic leadership of our Conservative government.

Under the leadership of our outstanding finance minister and this Conservative government, we have delivered three straight balanced budgets along with two economic statements, truly remarkable achievements in a minority Parliament.

Included in these achievements is our centrepiece economic plan, “Advantage Canada”, which we outlined to Canadians in November of 2006. “Advantage Canada” represents a prudent, long term road map to ensure Canada has strong economic fundamentals. It is a plan designed to help ensure Canada truly becomes an economic leader through tax, fiscal, entrepreneurial, knowledge and infrastructure advantages.

“Advantage Canada” is not the reactionary, short term and ultimately ineffective economic plan, and I use that word loosely, being advocated by the Liberal opposition. This government has rejected the flight to panic the Liberals have embraced when it comes to economic policy.

Instead, with “Advantage Canada” we have brought forward a long term plan that not only addresses the challenges of today but prepares us for the opportunities of tomorrow. There is nothing like a message of hope. The Canadian Council of Chief Executives has observed that “the Advantage Canada strategy...will enable Canadians to take on the world and win”.

Tonight I would like to focus on one key component of the “Advantage Canada” plan: the creation of a fiscal advantage through debt repayment. Our Conservative government has set ambitious debt repayment targets. Indeed, we are aiming to eliminate total government net debt within a generation or by 2021.

Why? Unlike Liberal governments past, our Conservative government refuses to saddle our children and grandchildren with the bill for the excesses of the past and the present. We refuse to pass on a large national mortgage. We understand that debt just delays taxation to the next generation.

However, we are not merely musing about debt reduction with empty words and hollow promises, the hallmarks of Liberal governments past. We are taking decisive and aggressive steps to meet our targets.

Indeed, since forming government a little over two years ago, we have already reduced Canada's debt by $37 billion. We have brought Canada's national mortgage to its lowest level in 25 years and federal debt to GDP ratio to historic lows. Put another way, we have reduced Canada's national debt by almost $1,570 for each and every man, woman and child in Canada.

Yet challenges remain. Despite our aggressive action, our national debt remains considerable at nearly $457 billion in 2007-08. Interest charges on all that debt will cost roughly $31 billion a year or about $85 million every single day, meaning that approximately 13.5¢ of every taxpayer dollar sent to Ottawa will go simply to pay the interest on our debt.

Amazingly enough, though, some in the House have suggested that all of this is not really a concern and have even criticized our government for having the audacity to even consider our national debt a problem. For instance, the Liberal leader flippantly dismisses the national debt as “light”.

Instead, he wants to plunge Canada into a massive $60 billion deficit spending spree that would wipe out our progress in taming the national debt. I want Canadians to think about the Liberal leader's thinking for a moment.

If someone we knew was personally half a million dollars in debt, decided to go out on a reckless shopping spree, max out his or her credit card or rack up a $60,000-plus bill the person could not afford, and as a consequence add to his or her existing debt, what would we say to the that person? I suspect the words “fiscally irresponsible” would jump to mind.

Therefore, I ask Canadians if they really agree with the Liberal leader when he calls our $457 billion national debt “light”. I will let a recent Montreal Gazette editorial answer that question. It states:

--to say that a $457-billion debt is low is like saying winter is short: there's just no sense in such a claim....

--the higher the national debt, the less control our government has over its own finances, and so the less control Canadians have over our own lives. Paying down the debt is in the long run the best social program of all.

We agree. That is why when it comes to debt repayment, we are committed to doing more. We are pledging to bring our government's total debt reduction to more than $50 billion by 2012-13.

It is clear that we are making substantial progress, progress that previously the Liberals failed to make on lowering Canada's national mortgage so future generations can succeed.

In the words of the Liberal member for Halton:

[Debt reduction] is exactly what a majority of middle class Canadians and working families want. It's what Tories are good at...often called upon to save the country's finances after long bouts of...Liberal spending.

Furthermore, we believe that when the debt load falls, Canadian taxpayers, not government coffers in Ottawa, should benefit. That is why we legislated into law the landmark tax back guarantee. Under this guarantee, each year interest savings from federal debt reduction are returned to the Canadian taxpayers through permanent and sustainable personal income tax reductions. What a novel plan for Canadians. What a great idea. As of 2009-10, personal income tax reductions provided under the guarantee will amount to a whopping $2 billion. No wonder the Canadian Taxpayers Federation called our tax-back guarantee music to taxpayers' ears.

I would like to delve into some of the longer term structural benefits of debt reduction which, while not necessarily top of mind, are crucially important to a strong Canada and a strong economy.

First, the most direct benefit of lower debt is that less revenue is absorbed by interest charges, freeing up resources for more productive uses. As the Canadian Institute of Chartered Accountants has recently noted, continued debt reduction remains vital to improving the government's financial condition, enhancing prosperity and providing the flexibility needed to deliver on meaningful tax deductions.

Second, low public debt also helps keep interest rates low. In the early 1990s, inflation adjusted long term interest rates averaged over 6%, reflecting in part the risk posed to investors by the much higher level of indebtedness in Canada at the time.

Since the government sets the benchmark for all the borrowers in the economy--provincial and municipal governments, corporations and households--high federal debt imposes a significant cost to the economy. Higher borrowing costs led to lower private sector investment and a less productive economy.

Today, ongoing surpluses and falling federal debt help keep interest rates low. Inflation adjusted, long term interest rates are currently just over 2%. This makes it easier for Canadian corporations to raise funds to finance capital investment, and that translates into higher private sector investment and a more vibrant, productive economy, creating more jobs for more Canadians.

This also benefits Canadians more directly as well. For instance, lower interest rates produce real savings for families making a big purchase, like the young couple in Oakville buying a new $200,000 house. Having already seen a $4,000 price reduction because of the GST cut, with a $160,000 25 year mortgage, they would save over $1,100 annually for each percentage point drop in interest rates.

Debt also, as I alluded to earlier, represents a tax on future generations.

Before criticizing our Conservative government's record of aggressive debt repayment again, I encourage the Liberal finance critic to take a break from working on the Liberal Party of Canada's secret plan for a massive new gas tax on home heating for seniors and those on fixed incomes, and to listen to his own words. He said that, with an aging population, it is crucially important to pay down debt so we baby boomers do not leave our children and our children's children in terrible shape.

As I conclude, let me ask the Minister of Finance if he thinks Canada should, as suggested by the Liberal opposition, go back to the practice of deficit spending, add to the national debt, and reverse all progress we have made in lowering Canada's national debt. Does he think--

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

The hon. Minister of Finance.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, we went through a time in Canadian political history, and certainly in the political economy, in the 1970s and 1980s and into the 1990s when it was common for federal governments, and provincial governments as well, to run deficits. The substantial public debt we have in Canada now is the sum of those accumulated deficits over those years. We do not want to go back to those years.

The official opposition in this place is saying it is going to spend an additional $60 billion. It voted for a bill this afternoon in the House of Commons that would require another $10 billion a year. There is $70 billion. How is the opposition going to pay for it? Now we are starting to hear about a carbon tax, as the Liberals call it, a tax on gasoline, a tax on electricity, a tax on home heating fuel, a tax that would have the greatest punitive burden on those with fixed incomes, poor seniors in this country, people receiving minimal pensions, and so on.

We do just the opposite. We allow pension splitting which will save people thousands of dollars this year when they file their income tax returns. The official opposition would do just the opposite. They want to prey on seniors and make it more difficult for them to pay their monthly bills by driving up costs by new taxation. It is not surprising, because the Liberal way of doing government is big spending, big tax increases, running deficits, and accumulating public debt.

For all of the reasons expressed by my hon. friend, this is not in the long term best interests of the country and it is not fair. We should think of the next generation and the generation after that. Why should we be living on borrowed money and asking the next generation to pay the costs? It is not fair intergenerationally. Most people would think it is not fair and would say that we should pay our bills as we go.

That is where we are going as a government. We are paying down large sums of public debt and reducing personal taxes. Every time we do it by means of the tax back guarantee. We intend to continue on that path, not on the path advocated on the other side of the House of high taxation, high spending, and running deficits.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Chair, I would like to commend the minister on the great job that he has done as finance minister for this country.

The minister was talking earlier about a couple of things with respect to major trends in the economy. He was speaking about the competitive advantage in Canada. All of this is not complex. Some of this is fairly basic principles.

Managing spending is certainly as important as cutting taxes and paying down the debt. When it comes to prudent and responsible fiscal management, spending has to be managed. I would like the minister to expand on what this government is doing to ensure responsible management of spending through the expenditure management system.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, in the longer term if we are going to have good fiscal management, of course spending has to be controlled.

This is a very large government. More than 400,000 employees work for the Government of Canada in various capacities. That was something we looked at very seriously last year. We got some good advice from within and outside government. Cabinet approved the creation of an expenditure management system, EMS.

It means that Treasury Board is looking at every government initiative, every program, every department, every agency. It has already looked at more than 15% of them, with these questions: Are we still getting value for money? Do we have a program that still fulfills the objectives for which it was created in the first place? Because programs do tend to take on a life of their own. We ask the departments what is the least important 5% of their spending that has the least priority? Does the department need it for something else that has a greater priority, and if not, can we take it back into the consolidated general revenue fund, use it for other spending priorities, use it to reduce public debt, use it to reduce taxes?

This is a strenuous exercise for the public service and for those elected--

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

We will have to move on to the hon. member for Burnaby--New Westminster.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I hate to interrupt this Conservative Party infomercial, but it is about time we got back to reality. I would like to remind the House that the greatest deficits in Canadian political history at the federal level were under the former Conservative administration of Brian Mulroney. There were record deficits and poor financial management.

Since there is this past track record which is pretty deplorable and since the minister himself admits that part of his responsibility is to look at economic trends, I would like to ask him a question. Let us go back to 1989 and the huge deficits under the former Conservative administration. That was the year of the implementation of the Canada-U.S. Free Trade Agreement. I would like to ask him a very simple question about economic trends. Since 1989 to the most recent figures available, is the income of most Canadian families up or down?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Up.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, we are not doing too well because he failed the very first question and of course that does not augur well for the rest of the next 15 minutes.

What has actually happened, and the Minister of Finance should know this, is the following. For those families earning between $36,000 and $56,000 a year, since 1989 they have actually seen their real income fall by 3%. They have lost about a week's income. That is 20% of the Canadian population. Let us go further. For those families earning between $20,000 and $36,000 a year, what have they lost? In real terms since 1989, their real income has gone down by 4%. They lost two weeks of income. The worst collapse in income has been among the poorest Canadian families, that is, 20% of families earning less than $20,000 a year. They have lost nearly 10% of their income. That is six weeks of income they have lost.

What has happened since 1989 is that for two-thirds of Canadian families their real income has gone down. That is the answer and that is what a competent minister of finance would be looking at.

Let me go to another question and see if he gets this one right. Statistics Canada reports indicate the nature of most jobs created in today's economy. My next question is very simple. Are most jobs created in today's economy part time and temporary, or are most jobs created in today's economy full time and permanent?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, 80% full time.

With respect to the previous question regarding cumulative growth in Canadian living standards, I recommend the hon. member look at the budget plan 2008 on page 36. He will see the graph that shows Canadian living standards have increased by more than 20% since the end of 2001. Household net worth has gone up dramatically in Canada as well from 1990 to 2007.

I know you do not like these statistics because they do not support your case, but you might want to review the business documents that are with the budget plan. Perhaps you will find them edifying, although as I say, they do not support the allegations you are making.

The other thing we have done for households in Canada which is quite dramatic is we have reduced the tax burden. We have reduced not only the personal income tax burden, but also the consumption tax, the GST, by 2%. And very important for pensioners, not just seniors, we are allowing income splitting which has meant a dramatic tax reduction. All of this contributes to household purchasing power and household wealth.

[The Assistant Deputy Chair, Conservative, Andrew Scheer]

I would just one more time remind hon. members to use the third person and address comments through the Chair.

The hon. member for Burnaby—New Westminster.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, it is kind of shocking the Minister of Finance does not actually know what is happening to family incomes. Who tells us that family income has declined for most Canadian families? Statistics Canada, the national government's statistical agency. Of course, if we mix everything together, there has been an outstanding growth in income for the wealthiest of Canadians. Members of the Conservative Party are saying, “Great. The wealthy are wealthier than ever”. They now take half of the entire income pie in this country, so one would think the Minister of Finance would chart that. Of course, he has not been following those trends. For most Canadian families, their real income has gone down. If the Minister of Finance doubts that, he should actually talk to Canadians.

In answer to my second question, Statistics Canada actually tells us most jobs created today are part time and temporary in nature. They do not come with pensions. They do not come with benefits.

I am going to give the Minister of Finance a third chance. Hopefully he will get it right this time. He blew it on family incomes. He blew it on job creation. Can he tell us what is the average hourly salary of the manufacturing jobs we have lost? The member for Outremont mentioned this earlier in the night. We are talking about hundreds of thousands of manufacturing jobs lost. What is the average hourly wage and what is the average hourly wage of the service jobs that the government has created? What is the average hourly wage for the jobs we have lost and the average hourly wage for the jobs in the service industry, part time and temporary in nature, that the government has created?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, only an NDP member could talk about governments creating jobs. Actually, governments do not create jobs. Governments create the conditions that help encourage job creation by the private sector, but the private sector is not something the member for Burnaby—New Westminster would be particularly familiar with or supportive of. On the other hand, we do support the private sector.

We also support the accurate use of statistics. He is reaching back into the 1980s now to try to demonstrate that in the late 1980s, over 20 years, to 2008, family incomes have not done well. He ignores, of course, the recession at the beginning of the decade of the 1990s. He loves to not mention that happened then, distorting the numbers. He is enjoying the distortion, all right but it does not help Canadians very much.

If he looks at the cumulative growth of Canadian living standards from 2002 to the end of 2007 he will see a growth of 20%. One would think he would want that to be the way it is and it is the way it is. Canadian families know it is the way it is and that this has been a relatively good run. We are making it better by reducing taxes at the same time.

As I said to him, the data shows that 80% of the more than 750,000 net new jobs created in Canada have been as a result of a Conservative government being in office, and 80% are full time jobs and most of the jobs are in the service sector. We are not talking about McJobs, as they talked about. We are talking about financial services, which is probably something he is against as well.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Chair, I take no lessons from the Minister of Finance. I have won two Consumer Choice Awards for Excellence in Business and was a long time financial administrator. So, yes, we know how to handle money and, in fact, we do it better than the Conservatives do and better than the Liberals do.

Who says this? The Department of Finance did a longitudinal study from 1981 to 2001 and it compared the various governments, the actual fiscal period returns. What did it find? His Department of Finance found that the NDP balanced the budget in the actual fiscal period of time most of the time.

How did the Conservatives do? I know the Conservatives do not want to hear this but two-thirds of the time the Conservatives ran deficits, including the largest deficits in Canadian history. In fact, the only party that is worse at managing finances is the Liberal Party. It was in deficit 86% of the time.

Here we have two political parties that are simply fiscally challenged. They do not understand how to manage money. The NDP, fortunately, does. Who says this? The Department of Finance, under the Liberals and under the Conservatives, says that the NDP manages money better.

I have nothing to add to that. The minister will not contradict his own department.

However, I will come back to the question he refused to answer, either because he does not know or does not care to know. I would ask the minister to please take note that the hourly wage of the jobs that he and his government has lost in manufacturing is $21 an hour.

What have we gained? We have gained service industry jobs, which are time and temporary. What is their hourly wage? It is $14 an hour.

I know the Conservatives are financially challenged but I think that the brightest among them can see that their Flintstone economics, corporate tax cuts being their only approach, when one get two-thirds of the salary in the job created as opposed to the job one has lost, the person is not doing too well, and that is what has happened.

They lost $21-an-hour jobs, good manufacturing jobs in the auto sector and the softwood industry in British Columbia, which we certainly know about, which was as a result of the softwood sellout and other very poor economic choices. When we go across the country, we see $21-an-hour jobs being lost and the $14-an-hour or less jobs, minimum wage jobs, being created.

I will give a softball to this minister since he has not been able to answer any of the questions tonight. It is a very simple question that I am sure his associates can answer. What is the total value of the corporate tax cuts that the government has brought in through 2012?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Mr. Chair, the business tax reductions through 2012-13 in billions of dollars is $50.5 billion. The GST reduction through that time is $72.7 billion. The personal income tax is $64.9 billion. The grand total of all of that is $188.1 billion in tax reductions.

I understand condescending and perhaps obnoxious, from listening to the member, but the one thing I do not understand is an alleged record by NDP governments as strong fiscal managers. I am old enough to remember a government in British Columbia and I am certainly old enough to remember because I was part of the government that replaced it, the one that was led by the member for Toronto Centre in Ontario.

I can remember in 1995, before the government changed, which is what the member considers strong fiscal management, where the government had to pay $1 million an hour in interest on the accumulated public debt in the province of Ontario, where we had a government that thought it could spend its way out of economic difficulties, where we had a government, not unlike the Liberal government opposite here now, that thinks the solution to the problem is to increase taxes, increase the tax burden on people, run a deficit, yes, that is right, and run up spending. That is the way the member for Toronto Centre governed Ontario from 1990 to 1995 and it is the way the Liberal opposition wants to take us back to the good old days.

I congratulate the member for Burnaby—New Westminster on having illusions at 11 o'clock at night that NDP fiscal policy is good fiscal policy for Canada.