Debates of May 28th, 2008

Finance—Main Estimates 2008-09

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

Mr. Chair, we appreciate the information from the hon. minister, but I would note that he left behind about a $5 billion or $6 billion deficit in the province of Ontario. I wonder why he did not give a similar lecture to the premier of Newfoundland or the premier of Nova Scotia, who have also delivered budgets.

While he is at it, maybe he could answer one final question, which is, when is he going to eliminate the carbon tax on gasoline in Canada?

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

Mr. Chair, there are so many interesting allegations.

When I was the treasurer of Ontario, I can tell the member that I left the province with a surplus, which the Liberals could look up if they bothered to get their facts right, which they do not. I am amazed at the low quality of the research over there. I thought they had some money budgeted for research in the Liberal caucus, but apparently they are using it for something else.

We were in surplus when I was the treasurer of Ontario and that is the way it should be. We are in surplus now as well.

[David McGuinty, Liberal, Ottawa South, ON]

You are a Queen's Park denier.

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

Mr. Chair, I know Premier McGuinty's little brother is upset about the carbon tax. I know his big brother is against the carbon tax and I know that the member for Ottawa South is in favour of it. He is chirping about--

[David McGuinty, Liberal, Ottawa South, ON]

And you had nothing to do with Walkerton. Explain Walkerton.

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

Now he wants to talk about water supply.

[The Chair, NDP, Bill Blaikie]

Order. That would bring to an end the first 15 minute round. We will now proceed to a round by the government. I understand the Minister of Finance will be speaking for the government at this time for 10 minutes and then we will have 5 minutes of questions and answers.

The hon. Minister of Finance.

[Jim Flaherty, Conservative, Minister of Finance]

Mr. Chair, I am thankful for the opportunity to participate in this discussion, which is supposed to be on the 2008-09 main estimates for the Department of Finance.

To begin our work this evening, I think it is appropriate to give the House an overview of the current economic situation in Canada.

Let me state at the outset that in this period of economic uncertainty, the Canadian economy remains strong. We are undergoing our second longest period of economic expansion in history. Our budget is balanced and it will remain balanced. Interest rates are low. Inflation remains within the targeted range. Disposable personal incomes continue to go up.

The unemployment rate is at a 33 year low and employment is on the rise in every region in the country. More than 750,000 new jobs have been created since our government took office.

Canada is one of the few countries where public pension plans have a solid financial foundation.

We are on the best fiscal footing of any G-7 country, with the largest budget surplus as a share of GDP and the lowest debt burden.

However, Canada is facing external challenges it has not seen in some time. Economic growth is running out of steam on a global scale and we are not immune to this phenomenon.

Canada is not an island, of course. As a trading nation within the global economy, challenges from abroad impact us here at home. The slowdown in the U.S. economy is impacting our exports. We are experiencing volatility in global financial markets. A strong Canadian dollar has left several sectors struggling, including the manufacturing, processing, forestry and auto sectors. We are seeing increased competition from emerging economies, like China, Brazil and India. Our population is aging and we are already seeing a shortage of skilled workers. These are the challenges that lie ahead, the realities that we cannot ignore.

As they have in the past, the people and businesses of Canada will show their remarkable capacity to adapt and their strong determination to face all challenges.

What is more, we will face these challenges from a position of strength, built not on the false promise of misguided, short term expensive band-aid economic interventions or subsidies advocated by the opposition, but rather built on strength, in large part on the prudent economic management of our Conservative government, strength, built on the long term economic plan, “Advantage Canada”.

Experience has taught us that a balanced fiscal policy, based on low taxes, paying down debt and disciplined spending, lay solid foundations for a strong, vibrant economy. Broader economic policy needs to be squarely grounded in the long term. Like the great Canadian hockey legend, Wayne Gretzky used to say, “Skate to where the puck is going, not to where it has been”.

“Advantage Canada” is our economic plan. We outlined our plan to Canadians in November 2006 to create fiscal tax, entrepreneurial knowledge and infrastructure advantages.

Our plan is to create a climate that encourages growth and stimulates additional job creation, where hard work is rewarded.

One that will better positions Canada to meet today's challenges while seizing the opportunities of tomorrow.

I am proud to announce to the House that since we introduced our Advantage Canada plan, we have made significant progress in its implementation. First, the solid financial management we have demonstrated will be used as a foundation for our plan.

Unlike other countries, we have used our budget surpluses to reduce the debt load for the next generation. Since forming government in 2006, we have reduced the national mortgage by $37 billion. That is nearly $1,570 for every single man, woman and child in Canada. We are doing more. By 2012-13, total debt reduction since our government took office will exceed $50 billion.

Interest savings from reducing the debt will benefit Canadians directly through the tax back guarantee. This measure will provide income tax relief to the tune of $2 billion a year by 2009-10.

We are also continually reviewing all government programs to ensure that spending is not only efficient, but effective and disciplined.

Canadians do not want their tax dollars wasted. They do not want to return to March madness when previous Liberal governments would spend, allegedly on anticipated surpluses, on anything and everything. They certainly do not want government borrowing against our children's futures by running deficits again.

That is why we have implemented a new expenditure management system whereby all government programs will be evaluated every four years. The system will help eliminate programs that waste resources or are not useful.

As well, we are creating a proud legacy of reducing taxes, bringing them to their lowest level in nearly 50 years with nearly $200 billion in tax relief for Canadians, cutting taxes in every way government collects them, personal consumption, excise, business and much more.

For instance, we are ensuring Canadian businesses can compete and succeed globally by reducing the business income tax rate to 15% by 2012, enabling Canada to achieve the lowest, overall tax rate on new business investment in the G-7 by 2010 and the lowest statutory tax rate in the G-7 by 2012.

These reductions will give Canada a substantial tax advantage over the United States, a statutory tax advantage overall of over eleven percentage points and an overall tax rate advantage on new business investment of more than nine percentage points in 2012.

As the Canadian Council of Chief Executives recently noted:

The federal government clearly has done everything it can to reduce tax rates within the boundaries of prudent fiscal management.

Thanks to budget 2008, the government is taking significant, targeted action in order to continue to implement the commitments it made in Advantage Canada.

In particular, budget 2008 proposes to establish a tax-free savings account, extend assistance for Canada's manufacturing sector, improve the scientific research and experimental development tax incentive credit, while increasing in the future funding for people, knowledge, business, innovation, communities, traditional industries and infrastructure.

We are also making the largest federal public infrastructure investment since World War II, over $33 billion in our building Canada plan. In addition, we have created the office of P3 Canada, which will help to lever that money with the provinces and the private sector.

With municipalities in Canada, we made the gas tax permanent for municipalities so they can lever that gas tax year going forward. We expect that this will fund more than $100 billion in new infrastructure for Canada over the course of the next seven years.

Unlike the opposition parties, we do not believe in raising taxes, especially a new, massive, punitive, permanent carbon tax, a new punitive tax on gasoline. We do not believe in doing that and we do not believe in spending recklessly like the Liberals did with their three budgets in their last year in office.

We certainly do not believe in running deficits, but the Liberals have spending plans of $60 billion, plus they voted for a bill in the House this afternoon that will cost another $10 billion, so they are at $70 billion now in new spending. They will fund that by taxing Canadians and seniors, by dramatically increasing the cost of gasoline, of home heating fuel for Canadians, particularly for Canadians who can least afford it, who are on fixed incomes, driving up manufacturing costs in Canada.

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

So put your money where your mouth is. Get rid of the carbon caps. You cut the carbon tax, Jim, 10¢ a litre.

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

I know the member from Scarborough wants to change his mind on the carbon tax, but as far as I know, it is still their policy.

That is where they want to take our country: higher taxes, higher spending, deficits, accumulated debt. We are going just the opposite way in the interests of our country.

[The Deputy Chair, Conservative, Royal Galipeau]

We will now have a five minute question period where members of the government will be asking questions of the Minister of Finance, and we are going to innovate. In this instance, and probably to influence the rest of the evening, the questions will be asked in the third person and not in the second person.

The hon. member for Bruce—Grey—Owen Sound.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Chair, first, I thank the finance minister for his continued strong performance as Canada's finance minister.

I have to make a comment first. Everybody in Canada knows the Liberals have never had a surplus they did not spend. The NDP have never seen a surplus it would not like to spend, but like the Bloc, it will never get a chance.

A question that came from across the way for the finance minister referred to comments about the Premier of Ontario. I come from Ontario so I have a right to speak to this. The premier announced a week or so ago that he would put a whole bunch of money into funding sex changes. However, he will not sign an agreement that will give funding to municipalities in Ontario or right across Canada.

As the finance minister mentioned, some sectors of the economy are having a tough go of it due to the high dollar, especially the manufacturing sector. As we know, the government has introduced significant measures to support the manufacturing sector and its workers.

For workers, we have come out with the community development trust, which provides over $1 billion for communities and laid off workers. I know my home province of Ontario is using this money to help fund a retraining program, which estimates say will help 20,000 unemployed workers make the transition to new careers, and I know the Premier of Ontario is very appreciative of that.

On that note, I would like to ask the minister about something that one of my colleagues, the member for Edmonton—Leduc, brought to my attention, and it was brought to his attention by a business in his riding, City Lumber. Forklifts and other powered industrial lift trucks used for manufacturing do not qualify for the accelerated capital cost allowance. I know some of the businesses in my riding could also miss out because of this opportunity.

Therefore, would the minister explain what is being done or what can be done to correct this situation.

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

Mr. Chair, I thank the member for Bruce—Grey—Owen Sound for the exceptional job he has been doing in Ottawa on behalf of his constituents. I also to thank the member for Edmonton—Leduc for raising this issue with me, as well.

As the member noted, our government has been taking important steps to assist the manufacturing sector, not through the use of ineffective and short term band-aid type solutions but rather longer term measures to create a more productive, competitive business environment, including the historic tax relief of nearly $200 billion and a stimulus that has been created for business, particularly in this time of economic slowness.

In Canada, the corporate tax reductions that were in the fall economic statement were described by the Canadian Manufacturers & Exporters in this way, “important to the long-term competitiveness of the Canadian economy”.

In that spirit tonight and with respect to the question the member has posed, I confirm that forklifts used for manufacturing or processing will be eligible for the accelerated capital cost allowance treatment that was announced in budget 2007 and extended in budget 2008.

Specifically, forklifts used in manufacturing or processing acquired after March 18, 2007, will qualify for the temporary manufacturing and processing incentive. This will ensure that forklifts receive the same accelerated capital cost allowance rate as other manufacturing related machinery.

Again, I thank the member for Bruce—Grey—Owen Sound for bringing this matter to my attention.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Mr. Chair, I thank the minister for that announcement and I know it will mean a lot to my riding. In order to give him some time answer this last question I will keep it short.

We have all heard about the Liberal Party and its leader's plan on the regressive and massive carbon tax proposal. I know we are getting a lot of yipping across the way, but would the minister tell us what he has heard on the reaction of the proposed gas tax increase by the Liberal leader.

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

Mr. Chair, Canadians are outraged, dismayed and worried. They are outraged in all parts of the country, even in Windsor, Ontario.

The Windsor Star wrote today:

A carbon tax will penalize low-income earners, rural Canadians and suburban commuters...and it will negatively affect the ability of Canadian businesses, already struggling under the weight of a rising loonie, to compete internationally.

That is what the Liberals are proposing for Canadians.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chair, I listened to the speech given by the minister a few minutes ago. I find that he is out of touch with the current state of the economy.

China has replaced Canada as the leading exporter to the United States. This has resulted in a very significant loss of manufacturing jobs, particularly in Quebec and Ontario.

Under the Conservatives, 35,000 jobs were lost in 2006 and 43,000 in 2007 because the minister ignored the unanimous report of the Standing Committee on Industry, Science and Technology. He spoke earlier about the member for Edmonton—Leduc. I was a member of the industry committee. We presented a unanimous report containing 22 recommendations to help the manufacturing sector and he only implemented half of one of them.

Does the minister realize that because of his laissez-faire approach forestry workers in my riding—I am thinking of Saint-Pamphile, Saint-Just-de-Bretenières, Montmagny and l'Islet—and throughout Quebec and Ontario, feel that they have no government? I will not ask for an apology this evening but I would like to know if he is prepared to change his approach and his focus. He is presently allowing the economies of Quebec, Ontario and Canada to be completely subordinate to China's exports.

Yesterday, it was announced that Canada, for the first time, now has as many jobs in retail sales as in the manufacturing sector. That means that high paying jobs have been replaced by lower paying jobs. Are those the results he wants? I am asking for an answer from the minister. I will be sharing my time with the member for Saint-Maurice—Champlain

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

Mr. Chair, I thank the member for his question.

I am very proud of the fact that the economic fundamentals of this country are strong. I am very proud of the fact that the government anticipated the economic slowdown this year. I am very proud of the fact that our government anticipated that the U.S. housing sector would, in fact, go into recession and that we took steps in advance.

Yes, we had the very helpful advice of the industry committee of which the hon. member is a member. We had its strong advice with respect to the proposed accelerated capital cost allowance. We took its advice. The member for Edmonton—Leduc was chair of the committee. This was important advice. We brought in the two year writedown on the accelerated capital cost allowance and then extended it in budget 2008 going forward for three more years on a declining basis. This is a great help to industry in Canada.

Why is this important? Just as the industry committee had noted, and the member knows this through his very helpful participation in that committee, if we are going to have a sustainable forestry industry in Canada, and if we are going to have a sustainable auto sector and auto parts sector in Canada, they must be sophisticated technologically.

How can these companies afford to move forward and acquire the technology that they need? They can do it if we help them in the federal government and make sure that we make manufacturing and processing equipment more affordable. This is helped also by the appreciation of the Canadian dollar vis-à-vis the U.S. dollar because it makes a lot of this technology priced in U.S. dollars more affordable.

That is why we are seeing an increase in the acquisition of modern technology, machinery and equipment. Because we take the longer term view, we applaud business for taking advantage of this tax change, so they can get this machinery and equipment so that in the longer term they will be sustainable, competitive and be able to provide long term job security for Canadians.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chair, the problem is that where I come from, people do not eat on a long-term basis. They eat every day and they need their jobs now, this year. When they are told after losing their jobs that they are entitled to unemployment benefits for 45 weeks and social assistance benefits for a year, and that if they get training perhaps they will have a job after that, those people do not find that situation acceptable.

In addition, the owners of companies in sectors that are not making much profit and who could have benefited from refundable tax credits to get through the manufacturing crisis are feeling abandoned.

Can the minister tell me, on behalf of the Department of Finance, what portion of the $14.1 billion in income tax reductions announced in the economic statement will go to the big oil companies? The manufacturing sector, which is not making any profits, has no access to assistance tools. Canadian manufacturers and exporters, as well as the unions, say the same thing on that topic: this is not the right kind of budget.

They should have used part of last year’s $10 billion surplus to stimulate the economy. In my opinion, that would have been a very desirable choice.

I would like the minister to give me that information. How much of the $14.1 billion will go to the oil companies?

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

Mr. Chair, with respect to the big oil companies, I am sure the member noticed that we took away their accelerated capital cost allowance which is actually a tax hike for big oil companies. We transferred that benefit to manufacturers in Canada which I described in my previous response.

If we were to listen to some of the members in this House, we would think they were not aware that there were more than 19,000 net new jobs in this country last month. This is despite the slowness in the United States economy. Since this government took office, employment has increased by 832,000 people. Full time jobs account for over 80% of the increase. This is dramatic success after two years and three months or so of Conservative government. Despite the slowdown in the economy in the United States and globally, our economic fundamentals are strong.

There are some single industry communities in particular which need help and that is why the Prime Minister announced the community development trust, $1 billion to particularly help those communities like Dalhousie, New Brunswick where the mill closed and other parts of the country where specific industries have shut down. So there is that specific assistance for those workers and those communities.

As the Bloc has advocated in this place, and the hon. member who preceded the current finance critic for the Bloc talked to me a couple of years ago, we needed to do something for older workers, which we did. The older workers assistance program for workers between the age of 55--

[The Deputy Chair, Conservative, Royal Galipeau]

The honourable member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup has 30 seconds for his question and 30 seconds for the answer.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Chair, they say they have helped older workers but there is no new program for older workers who cannot find jobs. Since February, the government has had a report in hand and has not acted on it. People who do not find jobs wind up applying for social assistance. Will he immediately correct this situation to give justice to these people who worked for companies for 30 years and who, after a year of unemployment, find themselves living on social assistance?

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

Mr. Chair, the government is spending more on skills training than any government in the history of Canada. Anyone who needs retraining in Canada can get it. The employment situation in Quebec is good. It is about the best it has been in a generation in terms of the number of people employed. Even today, hot off the press, Bombardier launches a hiring blitz, looking for 700 new workers in Montreal, Quebec. That is growth in this economy.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Chair, like my colleague who just addressed the finance minister, I think that the entire issue of the manufacturing sector in Quebec was completely forgotten in this budget. Before it was tabled, I visited a number of places in my riding, together with my colleague, in order to consult and find out what people expected from the budget. It turned out to be pretty close to what the Bloc was demanding. A little while ago, a Conservative said that I and the hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup met with the finance minister and told him what the people of Quebec were concerned about. It was the same thing I had been hearing everywhere in my riding, in Shawinigan, La Tuque or small towns. People definitely did not want to see such a large part of the surplus going to pay down the debt. People clearly needed a large part of these surpluses to go to the manufacturing sector to sustain its workers.

The finance minister said that something like 19,000 jobs were created last month. I am not sure about this figure, but I would like to know how these jobs were distributed. I would like him to tell us a little later where these jobs were created, because I am sure they were not created equitably for all citizens, especially those in Quebec and the regions of Quebec.

I would also like him to revisit one item I could not find in the budget. I have a question for the finance minister. How is it possible that after promising during the last election campaign to make the guaranteed income supplement fully retroactive for our older people, he still has not managed after three budgets to find a way to provide equitable compensation for older people who were done out of the guaranteed income supplement, despite a $12 billion surplus? These people were entitled to it but did not know it. The Conservative Party promised to do this but still has not found a way.

I would like the Minister of Finance to tell us how he has not been able—after three budgets—to find a way to deal with this serious problem for the most disadvantaged seniors in Canada.

[The Deputy Chair, Conservative, Royal Galipeau]

The Minister of Finance has 2 minutes and 40 seconds to answer the question.

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

Mr. Chair, on the GIS, we increased the amount that could be earned to $3,500 in this year's budget. We also created a tax-free savings account which is an important vehicle for young Canadians, however, it is also a very important vehicle for older Canadians in that they will be able to put aside $5,000 a year and earn interest on that, or dividends, or capital gains, or any other type of gain, and not have that money taxed when it comes out.

I expect this will be very popular not only among young Canadians but also among older Canadians based on certainly what I have heard from Canadians across Canada since budget 2008 was announced.

In terms of the employment numbers, employment has been strong across the country. I am pleased to say that in this place. We have seen strength in employment in Atlantic Canada, certainly strength in Quebec and in Ontario, and the west. In fact, in many parts of the country, we are seeing labour shortages.

This is a reality as we go forward with economic growth. We are going to have to seek to have more people working in Canada and deal with the immigration issues that we are attempting to deal with in Bill C-50, so that the economy can grow and we will have the people power that the economy needs to grow.