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.