Debates of March 12th, 2010

Questions on the Order Paper

[Some hon. members]

Agreed.

The House resumed consideration of the motion.

The Economy

[The Deputy Speaker, Conservative, Andrew Scheer]

When question period began the hon. member for Sudbury had 16 minutes left in his speech, and I will give him the floor now so that he may finish his remarks.

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, I believe I left off where I was talking about the Conservatives and their corporate tax cuts. I was relating it to the CEOs.

Let us look at what the Prime Minister has done for his CEO friends. The Prime Minister plans to cut corporate income taxes from 22.12% in 2006 to 15% by 2012 leaving Canada with the lowest corporate tax rates in the G8. By doing so the Prime Minister also deprived the treasury of billions of dollars that could have been invested in Canadians, like lifting seniors and children out of poverty.

Last year, with the corporate rate at 19% and most Canadians trying to cope with the serious recession, Canada's big five banks had profits totalling $15.9 billion. In 2009 the government's tax cuts to that point, 3.12%, fattened those profits by $496.1 million. No wonder the banks had enough money to pay enormous bonuses to their senior executives.

The government's justification for cutting the income taxes on profitable businesses is that the cuts improve competitiveness and lead to investment, innovation and jobs. The evidence is almost entirely to the contrary.

Across the board corporate income tax cuts are a completely ineffective way to grow an economy. They are a blunt weapon of a government without vision. They result in growing inequality, declining public services, and an economy that serves the market, not people.

The Conservatives believe that helping out these corporate CEOs will help create jobs:

Lower corporate income taxes result in more business investment by both domestic and foreign firms operating in Canada, which leads to new and better jobs and increased living standards for Canadians.

That was from the Department of Finance in 2008.

Really? Let us look at the historical context. In 2000 then Liberal finance minister Paul Martin cut corporate income tax rates by one quarter, from 28% to 21%, to be phased in over five years.

The Conservative government has continued those cuts from 21% in 2007 to 18% today. The budget confirmed that the government is ignoring NDP advice and will further reduce the rate to 15% by 2012.

Those cuts have taken hundreds of billions of dollars out of the revenues that pay for things like health care, education, infrastructure and fighting climate change. Why did the government do it? It says that such cuts create jobs through investment and innovation in our future economy. But do they really?

It also argues that we need these cuts to be competitive. That is another canard. The evidence suggests these assertions are misleading and wrong-headed. Who says this? It is stated by Statistics Canada, Finance Canada, leading economists and former Privy Council clerks.

Let us talk about some facts. Corporate tax breaks have not stimulated investment. Despite a 36% drop in corporate taxes both federal and provincial in the last decade, and record profits for much of that time, business spending on machinery and equipment has declined as a share of GDP. Total business investment spending has declined as a percentage of corporate cashflow and this is sourced from StatsCanada and Finance Canada.

Corporate tax breaks have not stimulated innovation. “The intensity of IT use by Canadian businesses is only half that of the U.S” said Kevin Lynch, the former clerk of the Privy Council and cabinet secretary.

In 2007 Canadian business spending on R and D, about 1% of GDP, ranked 14th in the OECD, well below the average of 1.6% and only one-third of that of Sweden, Finland and Korea.

Corporate tax breaks have not increased productivity. Kevin Lynch said that despite Canadian corporate tax rates well below those of the United States, “business-sector productivity growth was actually worse in the decade just ended”. Low productivity growth, of course, is a sign that business has not invested in new labour saving technologies or in productivity enhancing R and D.

Canada's business sector productivity in 2007 was 75% of that of the U.S., down from 90% in the early 1980s. This, despite cuts in federal corporate income tax rates from nearly 40% to the current 18%.

Are we more competitive? In 1999, the year before Paul Martin's tax cuts, Canada was fifth in the World Economic Forum's competitiveness list. Today we are in ninth place, well behind most Nordic countries, which collect as much as 50% of their GDP in taxes each year. Clearly, the link between tax cuts and performance is a myth.

Far from tax cuts influencing business investment decisions, if anything, corporate investment performance has become weaker, even as corporate taxes have been deeply cut. In 2007, before the Conservative corporate income tax cuts began, Canada's combined federal and provincial corporate income tax rate was already below the combined state and federal rate of our chief competitor, the United States, and below the rates of all but one other G7 member, the U.K.

When the Conservative cuts are fully implemented, Canada will have the lowest rate in the G7 by far, 12 percentage points below the comparable U.S. rate. While corporate profits in Canada are on the rise, investment, innovation, and productivity continue to lag.

It is a myth that corporate tax cuts create jobs in Canada, a dangerous myth that leads to reduced support for essential programs, services, and infrastructure on which Canadians rely. It also leads to a bigger deficit, higher debt payments, and increased taxes for the rest of us.

The Conservatives are also keen to help out their friends on Bay Street who are struggling, helping those downtrodden bank executives receive even fatter pay increases. While the finance minister has told Canadians to tighten their belts, the CEOs of Canada's big five banks saw pay increases of 10% in 2009.

For example, the CEO of the Bank of Nova Scotia was awarded the biggest increase, 29%, followed by the Bank of Montreal CEO at 25%. The CEO from the Bank of Nova Scotia was paid $9.7 million and $2.9 million in bonuses, including salary and equity linked compensation, while the compensation for the CEO of the BMO was $7.45 million. The highest paid CEOs in Canada were from the Royal Bank and from the Toronto Dominion Bank, who were granted about $10.4 million each. The Canadian Imperial Bank of Commerce paid its CEO $6.2 million. This information was from Bloomberg on March 5.

The Bank of Nova Scotia became the last of the big five banks to report its profits for the first quarter of 2010. BNS posted a profit just short of $1 billion, which is not bad for three months during a recession.

In total, the big five banks, BNS, RBC, BMO, CIBC and the TD Bank earned more than $5 billion in quarter one of 2010. The 2010 tax rate on that income is 18%, 4.12 percentage points below what it was when the Conservatives introduced these cuts in 2007.

Those cuts to date mean the big five will receive a quarterly bonus of more than $200 million from other Canadian taxpayers. This is shaping up to be a year that will far surpass the excessive benefits the government bestowed on the banks last year.

Where do these banks get their profits? It is no mystery to me, but for those who have been living in a box for the past 18 months, I will explain. Credit card interest rates is one way. These interest rates have been increasing at an alarming rate. These outrageously high rates and fees have continued to pad the pockets of our nation's big banks.

Most of us do not know that credit card fees are also a huge burden on businesses, yes, businesses, a group we would think the Conservatives would stand up for. Small businesses, which make up about 70% of the workforce, are a vital part of the local economies and communities. With these rising rates and the growth in new premium cards, many of these businesses may soon close their doors forever.

Profit margins are tight in a tough economy. Keeping a business afloat is already incredibly difficult. These businesses are facing yet another challenge, this time from the credit card companies. New fees charged on transactions are taking a heavy toll on SMEs' bottom line. Some of those that are hardest hit are restaurant owners. Many are even resorting to asking for payment in cash only so not to fall victim to the creeping transaction costs charged by the big credit card companies. Many restaurants do this. They do not want to raise their prices on already hard hit consumers. Raising prices is bad for customers and their businesses.

The Canadian Restaurant and Foodservices Association estimates that the average cost of accepting payment by credit card is 2% of the bill, which is called interchange fees. This does not sound like much at all but let us remember that the food service industry typically operates at profit margins of 4%. It is outrageous. If a business owner does not want to pass on this cost to its customers, it makes life very tough.

To date the Conservative government repeatedly refuses to take action to regulate credit card fees; as always, on the side of big banks. Instead of taking real action, the Conservatives are holding on to the hope that these companies will follow a voluntary code of conduct for credit card companies, a code which even if they volunteer to follow, they can violate or ignore whenever convenient.

The government claims to be the champion of small business, but it always backs the big banks and credit card companies at the expense of people and consumers who end up paying more. It is time for the government to change its tune and impose strict regulations on credit card companies and to put consumers and Canadians first rather than corporate CEOs and bank bosses.

The most important thing to remember is that while the Conservatives say their priority is jobs and economic growth, what they plan to do is entirely different.

Corporate tax cuts, as mentioned earlier, do not create jobs. A company that is not making a profit, whether because it is losing money or just breaking even, does not pay tax. That is a fact. Therefore, when the government cuts corporate taxes, only the richest companies benefit.

Conservatives have priorities all right. Helping out their friends, not all Canadians. Whether it is with Senate appointments or secret deals with foreign companies, as happened in my riding of Sudbury, we cannot see the Investment Canada Act and we have had Xstrata lay off 686 people and at Vale Inco we have had over 3,000 people on strike for eight months.

Unfortunately, the Conservatives continue to show their true colours and their out of touch nature with the average Canadian family.

[Claude Gravelle, NDP, Nickel Belt, ON]

Mr. Speaker, I would like to congratulate the member for Sudbury on this fine speech. The member for Sudbury and I are neighbours in northern Ontario. In the throne speech the government wants to relax the rules for foreign investment. In our joint ridings we have two foreign companies, one that is trying to implement its third world mentality on our workers and the other one is hydrating the ore reserves in Nickel Belt and Sudbury.

Could the member tell us what the relaxation of the foreign investment rules has done to both of our communities?

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, I would like to thank the hon. member for his great work on this file relating to both Vale Inco and Xstrata.

Our community, although we are neighbours in terms of our ridings, we both live in greater Sudbury, has been devastated by foreign takeover. We understand that there needs to be foreign investment, but foreign takeover has completely changed the way these businesses are doing business within our community. Who ends up getting hurt? Small-sized and medium-sized businesses are having to shut their doors. We have steelworkers who have been on strike for eight months. The company is refusing to go back to the bargaining table.

This is actually stopping these people from going back to work and then helping our economy because they spend money in our economy. They spend money in our small-sized and medium-sized businesses. They use their credit cards. We are talking to them about using them efficiently and that is why we are fighting the credit card companies to ensure that rates are lower. But foreign investment is something that is needed, not foreign takeover. Unfortunately, we have seen that loud and clear in Sudbury.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Mr. Speaker, I listened intently to my colleague from the NDP. He had quite a bit to say about the Conservative government's efforts.

I want to draw to his attention that an estimated 130,000 jobs have been created or maintained to date since the economic action plan was implemented. We are aiming for 220,000 by the end of 2010. Just today we heard that 21,000 jobs were created last month. That does not take into account 225,000 jobs saved through an expanded work-sharing program.

Does my colleague agree that the people of Canada really want the government to stay the course with our stimulus efforts through this year and then they want the government to implement its deficit reduction and restraint plan laid out in the budget?

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, I think what the Canadian people want the government to do is to lift them out of poverty. I think what the Canadian people want the government to do is to ensure that it can help them put food on their table.

However, by giving corporations another huge tax break, the government is giving to the organizations that are already making billions of dollars in profits, $15.9 billion last year just to the five big banks.

A small percentage of that, $700 million, is all we would need to get every senior in Canada out of poverty. That is what I think Canadians want the government to do.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, since we started to talk about the impacts of the recession, the government seems to have talked about a fiscal deficit, but it seems to have totally ignored the social deficit and the impacts of an aging society and other things.

There is another aspect, and I am not sure if the member is aware this. The last time we had a recession violent and property crimes tracked unemployment rates almost perfectly through the recession as a consequence of the recession. When people get distressed, when their EI benefits run out, when they have nowhere to turn, sometimes it forces people to do bad things.

Unfortunately, we have the situation where the policing is delivered by provinces. They are the ones that will have to pick up the tab for increased policing costs. Yet the government has not even mentioned the fact that we have to be prepared to deal with the realities in the population when we go through a severe recession.

Does the member have any other concerns about the social deficit caused by this recession?

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, there are many. I do not think I have enough time to talk about all the concerns that we are starting to see in social deficits.

I found it very interesting that the member brought up how crime and unemployment would go tandem in that there were demonstrations of this in the past. We see the government cutting pensions and funds for RCMP. What is that doing? It is taking officers away from wanting to go into that career. We need more officers.

When we look at all of the things in terms of social deficit, we have talked about EI, which is running out for people. The government is putting that burden onto the provinces because more people are going to have to go on welfare.

If the government is talking about not cutting transfers, unfortunately we are going to see it, when the provinces have more people on welfare rolls or many other reasons.

It is a very big concern.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Mr. Speaker, I thank my colleague for all the information he was able to provide on this subject.

I want to talk about corporate tax cuts again because this is one of the big ones. There have been over $21 billion in corporate tax cuts since 2008. Yet the government will add $166.4 billion to the public debt and $60 billion more within the next 10 years.

The government says that it will not add additional taxes, but it will because it will raise the EI rates, which is a tax on workers, small businesses and business as a whole.

Could my colleague indicate what the impact on these small businesses and workers will mean, because it is to the tune of $19 billion, starting in 2011?

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, I would like to thank the member for all the great work that she does in her riding of Algoma—Manitoulin—Kapuskasing.

Small and medium-sized businesses are the major drivers in my community of Sudbury and I am sure in communities right across the country.

We have the world's best mining supply and services cluster that employs 17,000 people. Right now, unfortunately because of the strike, many of these places are reducing their workforce. These people are unable to then contribute to the economy. Even small businesses have to reduce. We are not seeing anything in place here to actually help small businesses, but the big five banks and the oil companies are getting all the breaks right now.

Page 176 of the budget, table 4.2.4, talks about personal income tax today are about $126 billion and corporate taxes are around $26 billion. By 2014, that number will be five times more, $150 billion for personal income taxes, with about $30 billion for corporate income taxes.

Families are paying for the government's ideology and corporations are paying less and less, making more money to give to their friends and to their CEOs.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I want to follow up on the business of the government reducing corporate taxes and thinking that somehow that would be the solution.

The government is shifting the taxation burden from corporations to ordinary Canadians. In fact, ordinary Canadians are going to be paying four times more in personal income tax than corporation taxes. I remember maybe 20 years ago when those figures were roughly equal.

How can this move by the government be fair to working Canadians?

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Speaker, it is completely unfair. That is the easy answer. We are not looking at how we could actually help everyday working families.

When families have to use their credit cards—

[The Deputy Speaker, Conservative, Andrew Scheer]

I will have to stop the member there and move on to the next speaker.

The hon. member for Scarborough—Guildwood.

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

Mr. Speaker, members will have noticed through the Olympics, post-Olympics and probably for many months still to come the multi-million dollar advertising budget the government is spending on its action plan. I am holding in my hand a summary of “Canada's Economic Action Alan Year 2”, published by the Minister of Finance.

This is supposed to be the plan by which Canada returns to a balanced budget. Unfortunately, there are those who look at the numbers as they are provided by the Minister of Finance and his department and beg to differ with the economic action plan of the government. The Parliamentary Budget Officer, as late as last month, said that the government's current fiscal structure was not sustainable over the long term.

A budget is both simple and complicated at the same time. It deals with revenues, expenditures and the economy. A fairly educated guess is made on what the expenditures will be, what the revenues will be and what the economy will look like over the period of the budget. Frankly, the further time goes on, the less reliable are the figures.

The Parliamentary Budget Officer is highlighting a very important issue, that the government's current fiscal structure is not sustainable over the long term. In simple language, on the basis of the government's projections for the economy, the revenues and the expenditures all that will happen in addition to debt. He states, “under the current fiscal structure, the Government's debt relative to GDP is projected to increase on a substantial and sustained basis over the long term”. Simply put, our debt will grow, it will grow in absolute numbers and it will grow relative to our GDP.

He goes on to say, “To close the fiscal gap, permanent fiscal actions either through increased taxes”, something the Minister of Finance and the Prime Minister do not want to talk about, “or reduced program spending”, also what they do not want to talk about, “or some combination of both—amounting to 1.0 and 1.9 per cent of GDP are required under the baseline and alternative scenarios respectively”. That means that somehow or another some combination of revenues, increased economic growth and reduced expenditures have to amount to 1% or 2% of GDP. We have an economy of $1.3 trillion, so it is $13 billion through to $26 billion. Somewhere or another, we have to find the numbers in order for these numbers to be realistic.

The Parliamentary Budget Officer goes on to say, “The fiscal action plan required to achieve sustainability does not need to be taken immediately”. I agree with that. “Implementing the necessary measures may be delayed until the economy has fully recovered”.

Again, that is essentially buying into the consensus of all of the economists that at this point it is not appropriate to take measures until the economy has actually recovered. It does speak to the long-term sustainability of this economic action plan and he is calling it into question.

Yesterday, the Minister of Finance took the unprecedented step of essentially trash talking the Parliamentary Budget Officer. The Parliamentary Budget Officer, in my experience, is a pretty responsible individual. He has come before the finance committee on quite a number of occasions and lays out the way he sees the numbers.

In his report, which apparently so upset the Minister of Finance, the first point he makes in the first sentence of his report is:

PBO’s assessment of the Budget 2010 outlook is, however, limited by the lack of detailed information and data pertaining to the Government’s assumptions that underlie the translation of the private sector economic forecast into the fiscal forecast...

He goes on to say that he is not disagreeing with the 20 or so private sector economic forecasts that were made. He basically buys it.

It is very interesting that his first point is that the department, the minister and the Prime Minister withheld information from him in order that he could make what we all need, which is an independent assessment of the statements and the viability that this plan projects. In the first sentence, he is taking issue with the availability of information.

We cannot have it both ways. We cannot say that he is wrong and then also say that we will not give him the information to look at. This is not the first time the Parliamentary Budget Officer has complained about the lack of information coming from the Department of Finance and this particular minister.

The report continues:

PBO believes that the private sector economic outlook, on which Budget 2010 fiscal projections are based, provides a reasonable basis for fiscal planning.

To my point, he is not disagreeing with the private sector economists but he cannot do a full bore analysis on the basis of the information that has been provided by the Minister of Finance.

The report continues:

PBO disagrees with the overall characterization of the Canadian economic situation and outlook in Budget 2010.

Essentially, he is saying that the Prime Minister and the Minister of Finance have put a touch too rosy expectations on the performance of the economy.

[Wayne Easter, Liberal, Malpeque, PE]

A touch.

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

Just a touch. As my learned and hon. friend from Malpeque will know that just a 1% error is a $13 billion swing in revenues. At the best of times, when people are all operating in good faith, there can be mistakes made both to the plus and to the minus. However, he is making the point that he thinks the Conservatives are a little over-optimistic about how the economy will perform, certainly out over the longer term.

The report continues:

PBO believes that the dispersion of private sector forecasts likely underestimates the actual magnitude of uncertainty surrounding the economic outlook.

That is economic speak. It really means that he does not think that going out over two, three or four years is anything other than pinning the tail on the donkey.

The report continues:

PBO believes that the risks to the private sector economic outlook for nominal GDP are roughly balanced but would not characterize this outlook as a ‘prudent’ basis for fiscal planning.

In other words, he does not think this is prudent. It is possibly not even conservative. Who knows?

Interestingly, if we start to break out his charts where he goes through the first two years, he is actually slightly more optimistic than the government in the first couple of years. After that, the spread between what the government believes and what the Parliamentary Budget Officer believes gets rather dramatic. There is an enormous gap between what the minister says the plan is and what the Parliamentary Budget Officer says it is.

The report continues:

PBO’s estimate of the structural deficit does not mean that the Government’s budget will not return to balance.

He is optimistic that it still could. It continues:

Rather it suggests that achieving budgetary balance would require: the economy operating significantly above its potential—

In other words, a lot more than what the rosy projections of the Minister of Finance anticipate. It continues:

—the economy operating significantly above its potential; actions to increase revenues or reduce spending relative to their projected paths; or, some combination thereof.

Either the economy has to really cook or the government has to be serious about its constraints on its expenditures or it has to utter the T-word. In fact, the government has, without uttering the T-word, actually increased taxes on a number of levels.

The government will impose a punitive 31.5% tax on income trusts by 2010. That of course is accounted for in the revenues and the government is anticipating that will be in the revenues. It has also put on a 9% increase in EI premiums, which everyone, including the Minister of Finance, has described as a punitive tax. That amount of 15¢ per $100 is accounted for in the budget and anticipated. Similarly, there is an increase in the traveller's security tax. Again, those are revenues that the government anticipates, even in its economic plan.

As I said, it is a combination of revenues, expenditures and the economy and how it will perform.

I would like to think that this is an economic action plan but it is really a non-plan. What is more disturbing is who will actually pay for this non-plan. I would direct the House's attention to page 164 of the budget, which I am sure we have all read by now, possibly even including the finance minister. It projects that there will be expected savings of $17.5 billion over five years.

What does expected savings actually mean? That is sort of like putting 50 cupcakes on the table and saying what a good boy I am because I only ate 48 of them. These expected savings are really kind of mythical moneys. These are moneys that we might have spent in another situation but we will not spend. In order to make the economic action plan work, we need to work in this $17.5 billion of expected savings.

Suppose we bought that this two-cupcake approach is in fact a viable approach. Who is actually paying for this? The first thing we notice is that there will be restraint in the growth of National Defence spending. It will contribute $2.5 billion to this $17.5 billion of expected savings. That sounds pretty good, $2.5 billion on an annual budget of roughly $20 billion, so, over the course of five years, with $100 billion for National Defence, it will contribute $2.5 billion.

The next line is foreign aid. Foreign aid, on the other hand, will contribute $4.5 billion to these expected savings. National Defence will contribute $2.5 billion, and foreign aid, on the other hand, will contribute $4.5 billion.

In absolute terms, foreign aid will contribute $2 billion more than National Defence to these expected savings. In percentage terms, however, it is quite a bit more because the budget for foreign aid is flatlined at $5 billion for the next five years. Five billion dollars over five years is $25 billion. It is contributing about $4.5 billion out of $25 billion, so roughly 20% of its budget. National Defence contributes 2% of expected savings and foreign aid contributes 20%. That is a bit of a difference in proportionality. Who is actually paying for this deficit reduction plan, this so-called action plan?

Our foreign aid goes to the most impoverished people in the world, so it would appear that it will be the most impoverished people in this world, who happen not to vote, who will be the ones who paying a disproportionate share toward these expected savings.

The next line is the $6.8 billion in administrative costs of government. I would be a big believer in that if, over the good times, that had been an administrative cost that had been constrained. However, from 2006-09, in other four budget cycles, what we have seen is a relative growth in expenditures of somewhere between 6%, 8%, and 10% on an annualized basis, which is just spending a silly amount of money over a long period of time. We do not really think this will actually happen, that there will be constraint, although there may now be a number of announcements of cancelling vacant positions so that we can have expected savings of things on which we are not actually spending money.

It is a little disturbing to ask the poor of this world to pay for our deficit spending. It is a little disturbing that we are not paying for it ourselves. That is where we are getting the expected savings.

It actually gets worse. Members will recollect that a couple of years ago this House passed a bill called the better aid bill. The better aid bill had three priorities: to focus on poverty alleviation, to take into account the perspectives of the poor, and to be consistent with international human rights standards. That is the law in this country, the law passed by this chamber but the law the government has ignored.

The government continues to set its own priorities. The minister has a new priority almost every year. In fact, over several governments, since the year 2000, there has been something in the order of 22 or 23 priorities that have existed.

The law is that this money, the official development assistance, is to go to poverty alleviation. However, when we look at how CIDA intends to profile its money going forward, it projects an 8.5% decrease to the poorest nations of the world over the next year. Not only do we expect them to pay the burden because they actually do not vote and therefore have little or no influence on what happens in this chamber, we are decreasing in absolute and relative terms the amount of money that the poorest nations of this world receive.

A further 8.5% will be cut from assistance to fragile countries and crisis affected communities. Haitians have just gone through a crisis and it was amazing how Canadians stood up and contributed significant sums of money. There was a sincere outpouring to the nation and the people of Haiti and yet here we are, simultaneously saying that we will cut back 8.5% from the assistance to poor nations. On last night's news we were told that the government's so-called matching funds of roughly $50 million may well end up at the World Bank. “It is a possibility”, admitted the minister on television last night.

We say that we are helping these fragile folks. I do not even disagree with the minister over the staging of the moneys. I think putting $100 million into an economy like Haiti is actually quite disturbing to that economy.

We have an absolute reduction, a proportionate deduction and a reprofiling. Then it gets worse. Now we are going to have a 370% increase in the advertising budget just to say what grand folks we really are. I am sure the Conservatives have already spent $300-odd million on this, but a 370% increase in the advertising budget for CIDA when it is cutting moneys from the poorest of the poor is just wrong. It makes a very bad statement about our nation. It makes a very bad statement in this chamber and to the people of Canada, and it makes a very bad statement about the people of Canada.

This is an economic inaction plan and it is funded on the backs of the poorest of the poor.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, we have to give the member, as a Liberal, credit for having the guts to talk about advertising. That could lead us right into the sponsorship program, which I am sure he does not want to talk about, considering he was a member of that government.

The hon. member is very selective, but he selects the wrong things. He forgets that under the former Progressive Conservative government in 1993, just before the Liberals came to power, foreign aid was about $5 billion a year.

[An hon. member]

It was $2.5 billion.

[Ted Menzies, Conservative, Macleod, AB]

No, it was $5 billion.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

It was $5 billion a year. In the ensuing Liberal 13-year administration, the Liberals slashed it by 50% down to $2.5 billion a year.

The hon. member might not want to admit it, but this year our foreign aid is back up to $5 billion a year, and we have untied it to make it more effective than it has ever been in the history of this Parliament.

I also find it very unsettling that the hon. member could talk about the Conservatives trying to make cuts. We are not making any cuts, and we are certainly not making them on the backs of the poor and those who can least afford it, unlike the former Chrétien Liberals. When they came to power to balance the budget, former finance minister Paul Martin slashed $25 billion from health care and social transfers to the provinces. That was done on the backs of the poor and the infirm. Does that sound familiar? He remembers that. I remember that. We will not take any lessons from that member, who was a part of that government and voted for every one of those nasty cuts that the former Liberal government introduced to balance the books on the backs of the poor and the infirm.

I would be embarrassed if I were the hon. member, standing up making the comments he did, given the record he has to stand up for, the record of slash and cut to the poor and the infirm, those who needed health care and those who needed help under the social transfers. We will take no lessons from the Liberals and that is for sure.

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

Mr. Speaker, there is no one so dull who will not learn. The hon. member has given a classic demonstration of he who will not listen will not learn.

I will compliment the government on one thing: it did untie the aid. That is a good idea. It was long overdue and well done.

With respect to the foreign aid budget, however, the Martin government and the Chrétien government set in process a means by which we would get to 0.7% over time. It was an 8% increase. It was a locked in increase. It came at the point where we finally dug ourselves out from the mess of the previous administration under Mr. Mulroney.

A path was actually set in place. A commitment was made to the poor of this world and that the budget was going to be increased on an annualized basis for 8%. We had that running for three, four or five years. Here the Conservatives cut it and flatlined it for the next five years after saying what pretty fine fellows they are. There are levels of hypocrisy, and I do not know if the Conservatives have achieved the highest level of hypocrisy, but they are well on their way. They are certainly very capable in that area.

Again, I reiterate my statement that this is an economic action plan on the backs of the poor of this world.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I certainly listen to the member every time he makes a speech in the House.

I recognize that the government claims that it has, in its opinion anyway, good economic statistics, but at the end of the day, we have to recognize that the government is basically making a virtue out of necessity. The reality is that had there been a majority Conservative government in 2006 or 2008, the government would have immediately set on a path of deregulation, following the United States. Had that happened in 2006, the Canadian economy and the Canadian banking system would have been in the same disaster that befell the United States.

In actual fact, the government should be thanking its lucky stars that the previous government had resisted deregulation. We in the NDP had certainly fought deregulation all along. In fact, it was us, collectively, who provided the rules and regulations that kept the banking industry and the investment sector strong. The Conservatives inherited a good, strong situation and they were about to deregulate and cause a disaster, but they were saved from themselves.

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

Mr. Speaker, I remember coming here in 1997 and by 1998 the issue of bank mergers was on the table. The Liberal caucus had a lot of debate about bank mergers, should we or should we not. The arguments on the banks were pretty heavy. They lobbied that they had to become world-class institutions and needed to have mergers. Five were going to become three and they would therefore be able to compete on a world-wide basis.

The Liberal caucus had quite extensive hearings right across the country. We listened quite carefully to people and ultimately recommended to the finance minister that he not do it. That is exactly what happened. He did not do it. He set the ratios for capital and loans fairly vigorously so we did not ultimately end up with the mess that there is in the U.S. I do not know, frankly, how the U.S. is going to dig itself out of that big mess. It is a big mess.

We should just thank our lucky stars that the previous administration under Messrs. Martin and Chrétien did not do it. If people think that this economic action plan is a little dubious, as do I, they can imagine the amount of money we, meaning the taxpayers and the Government of Canada, would have to raise in order to float the financial banking system of this country. This would be nothing, absolutely nothing.

The Conservative government is pretty lucky it inherited a very sound fiscal situation and a very sound regulatory situation. The Conservatives go all over the world patting themselves on the back saying what good boys they are, when they had absolutely nothing to do with it in the first place.