Debates of May 14th, 2014

Finance—Main Estimates 2014-15

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, can the minister tell us in which year the EI account is projected to reach a surplus?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, we have frozen EI increases for a period of three years. We understand that small business is the cornerstone of our economy, creating jobs that support families and communities. That is why we announced the three-year freeze. This will $660 million in the pockets of job creators and workers this year alone.

What is more, beginning in 2017, premiums will be set according to a seven-year break-even rate, and that will ensure premiums are no higher than they need to be.

[The Chair, NDP, Joe Comartin]

The question took about 10 seconds and the answer was almost a minute. I ask the minister to try to bring his answers in line to some reasonable proportionality to the length of the questions.

The hon. member for Kings—Hants.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, what is the minister's view on the relationship between payroll taxes and job creation?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, the view of our government is that it would be a serious mistake to increase the EI premiums at this time, given the international fragility, and certainly payments for pensions would fall into the same category.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, if the minister believes that unnecessarily high payroll taxes are a job killer, why is he projecting a surplus of $2.4 billion in 2015 and $6.4 billion in 2016 under his current levels of EI premiums, and if he actually wants to live by his previous statement, will he cut EI premiums to reflect the sustainability of the program?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

As I mentioned, Mr. Chair, beginning in 2017, premiums will be set according to a seven-year break-even rate. That is preceded by a three-year freeze on EI rates, leaving $660 million in the pockets of job creators this year alone. The break-even will ensure that premiums are no higher than they need to be.

Liberals used EI premiums paid by workers and businesses as a political slush fund. They raided and completely wiped out the EI account of almost $60 billion.

[The Chair, NDP, Joe Comartin]

I would ask the minister to try to direct his answers more specifically and narrowly to the questions that are being asked.

The hon. member for Kings—Hants.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, if the minister believes that unnecessarily high payroll premiums are a job killer and we have long-term unemployment in Canada, twice that of 2008—in fact around 130,000 Canadians have been unemployed for over a year today, compared to 60,000-some back in 2008—why is the minister waiting until 2017 to reduce EI premiums? Why will he not cut EI premiums next year?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, as I have explained at least on two occasions, we have a break-even period of seven years.

The member opposite wants to find out what is in the budget. He apparently likes the current budget so much that he cannot wait for the new one.

We will be consulting extensively with Canadians before we announce the next budget.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, at the House of Commons finance committee prebudget consultations, we heard testimony that:

Debt reduction is a priority, but not the number one priority.... The measures we have been advocating are designed to create a more dynamic and growing economy, which increases the GDP, which by itself reduces the proportion of debt to GDP. It's the ratio that is more significant than the actual absolute dollar amount.

Does the minister agree with this testimony before the finance committee that in fact Canada can grow its economy and that growing the economy will help Canada take care of its debt problem?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, let me just go back to a previous question. The rate on EI will be cut to 1.47%, which is the lowest on record. There is no question that a growing economy addresses the debt issue in part, but of course, that only can happen if we are not in a deficit situation. So when we get out of the deficit situation and move to a surplus next year, the growth in the economy will of course, over time, reduce the ratio of debt to GDP. That is even without the money allocated to the repayment of debt, which is something that we will be considering as well next year.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Chair, I am actually quite glad that the minister recognizes that in fact economic growth can help Canada take care of its debt issue and he actually agrees with my leader in that regard. In fact, the expert testimony I was quoting was the hon. member when he appeared before the finance committee.

I would like to move on to CPP. Does the minister agree with the following statement?

...I am concerned that some Canadians may not save enough for their retirement. ...I heard strong support for the Canada pension plan and the central role that it plays in our government-supported retirement...system.

I believe that we should consider a modest, phased-in and fully funded enhancement to defined benefits under the CPP in order to increase savings adequacy in the future.

Does the minister agree with that?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, first, I must say I am a bit amused. I think the member opposite was actually implying that I agreed with the proposition of his leader, that budgets balance themselves. This, of course, is not reality. When the economy grows, it does reduce the debt burden, provided there is no deficit. That is precisely the point. A balanced budget requires a plan and it requires discipline. Budgets do not balance themselves.

In respect to CPP, Canadians do not want to pay a higher payroll tax, and that is why we lowered taxes and brought forward new incentives for Canadians to save for retirement. We introduced pension income splitting, pooled registered pension plans, and tax-free savings accounts, and launched consultations on a new target benefit pension plan. Despite the opposition's reckless high tax plans, we continue to take action to put more money back into the pockets of retirees.

[Ralph Goodale, Liberal, Wascana, SK]

Mr. Chair, thank you for the rest of the time we have available in this slot. I would point out that by the minister's last two answers, he has managed to contradict both himself when he appeared before the finance committee and his predecessor in the portfolio of minister of finance.

I would like to draw his attention to a couple of very specific taxation issues and the design in particular of the family tax credits that the government has introduced for children in sports programs, for example, for children in arts programs, for volunteer firefighters, and for some others. The eligibility for those tax credits is based on level of income. Above a certain level of income, people are able to claim the tax credit. Below a certain level of income, they are not eligible.

Why would children in higher income families be more worthy of sports programs and arts programs than children from lower income families? Why would it not be appropriate to make those tax credits refundable and therefore available to all Canadians regardless of income level?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, with respect to the beginning of the speech, I would just say assertions without facts prove nothing. Unlike the high-tax, high-spend Liberals, our Conservative government believes in low taxes, leaving money where it belongs, in the pockets of hard-working Canadian families. We have a strong record of tax relief. It has meant saving nearly $3,400 for a typical family of four. This includes cutting the lowest personal income tax rate to 15%, increasing the amount Canadians can earn without paying tax, introducing pension income splitting for seniors, reducing the GST, eliminating over a million poor Canadians from the income tax roles, introducing and enhancing the workers' income tax benefit, and the list goes on.

[Ralph Goodale, Liberal, Wascana, SK]

Mr. Chair, the minister appears to have no explanation for why the government considers children in low-income families less deserving than children in high-income families. That is the problem. It is unfair. It is discriminatory. Availability of tax credit should not depend upon one's level of income.

I have another question. I would like to ask the minister about the registered disability savings plan. It is a plan that I think is broadly supported in the House. It is a good idea as a matter of policy principle and an idea upon which some improvements have been made in recent budgets. That is all to the good.

However, there is still a key flaw in the design of the registered disability savings plan, which is the exclusion of those with certain impending disabilities, like multiple sclerosis, for example, where a person may be diagnosed with that debilitating disease. They do not have any symptoms at the moment, but inevitably, at some point down the line, they will begin to suffer from those symptoms. The requirement of the registered disability savings plan is that to be eligible, one must qualify fully for the disability tax credit. That means one must be fully disabled before one can apply for the plan.

That means if people with MS, who knows what their long-term prognosis is likely to be, wants to set up a plan now, they are ineligible because they are not fully disabled now. It is a simple problem to solve for the government. Does the government have the intention, in the next budget, of bringing this correction into place so that those who are diagnosed but not yet fully disabled can begin to save when they still have some earning power and can still be gainfully employed and therefore take maximum advantage of this good idea?

It is a good idea. The government could make it better. Will it do that?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, we have introduced a lot of programs for those who are disabled and also for low-income families. We have reduced the GST. We reduced the lowest personal income tax rate. We increased the basic personal amount. We introduced the universal child care benefit, which provides $100 a month to families for each child under age six. We are introducing and enhancing the working income tax benefit, thereby lowering the welfare wall and strengthening work incentives for low-income Canadians already working. We are increasing the amount of income that families can earn before the national child benefit supplement is fully phased out. We are maintaining the GST credit level.

We have also taken actions to support vulnerable Canadians, including seniors and low-income veterans, by increasing from $500 to $3,500 the amount that can be earned before GIS is reduced. We are introducing a new guaranteed income supplement top-up for low-income seniors. We have provided almost $220 million over five years to extend war veterans allowances. We have done many things for Canadians.

[Ralph Goodale, Liberal, Wascana, SK]

Mr. Chair, so there is no answer on the registered disability savings plan.

One final question. In its last financial statements, the government indicated that, before it gets to the point of a prospective balance sometime in the next year or so, it will have accumulated $163 billion in new federal debt under this government. That works out to approximately $20,000 in new Conservative debt for every Canadian family.

Does the minister take satisfaction in that debt number? Why, in arriving at that sorry position, did his government put our country into deficit again, before the recession occurred? It was not because of the recession. It was before the recession. That is when they blew the fiscal framework.

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, with respect to the previous question, I did not want to ignore the member's suggestion regarding the disability plan. He can make that suggestion. We will take it into consideration, as we do all legitimate suggestions for the budget.

Here again, like the party of the opposition, the member is implying that the debt that was incurred in response to the great recession would have somehow been less if his party had remained in power. Of course, the opposite is the case, because his party urged us to spend a great deal more. We would have been nowhere near a position of having a surplus this year.

[Andrew Saxton, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Chair, I appreciate this opportunity to speak tonight about our government's work on balancing the budget. It is a key part of our economic policy that has placed Canada in the best possible position to weather the recent global recession. It is why I am especially pleased to report that the government is well on track to return to balanced budgets in 2015. The deficit has been reduced by almost two-thirds since 2009-10 through our Conservative government's fiscal responsibility and sound economic policy. Including measures in economic action plan 2014, the deficit is project to fall to $2.9 billion in the current fiscal year. A surplus of $6.4 billion is expected in 2015-16 after taking into account a $3-billion annual adjustment for risk.

While this is indeed good news, it is also crucial that Canadians understand that balancing the budget is not an end in itself, but rather a means to deliver on the priorities of Canadians, increase Canada's economic potential, improve employment opportunities, and raise all Canadians' standard of living.

First, let me remind hon. members of the distinction between our Conservative government and that of the previous Liberal governments.

Canadians can rest assured that federal transfers to individuals that provide important income support, such as old age security and major transfers to other levels of government for social programs and health care, will not be cut but rather will continue to grow over the forecast horizon.

The cornerstone of the government's efforts to create jobs and opportunities for Canadians is the commitment to return to balanced budgets in 2015. As economic action plan 2014 makes clear, the government is on track to deliver on this commitment.

I will explain, first, what the merits of balancing the budget are; second, how controlling government program spending and improving the integrity of the tax system are crucial to honouring our commitment to balance the budget; and third, how this strategy is and will continue to create the winning conditions for businesses to grow and compete.

I also wish to put this in the broader context by pointing out that since the beginning of the recovery, Canada has achieved one of the best job-creation records in the G7 countries as well as one of the G7's best economic performances.

Balancing the budget and reducing debt are not an end to themselves. Balancing the budget and reducing the debt are a means to increase Canada's economic potential, and as stated previously, to improve employment opportunities and increase the standard of living of Canadians.

The government's plan to return to balanced budgets ensures tax dollars are used to support important social services like health care rather than paying interest costs. It preserves Canada's low-tax plan and allows for further tax reductions, fostering growth and the creation of jobs for the benefit of all Canadians. It helps to keep interest rates low, instilling confidence in consumers and investors whose dollars spur economic growth and job creation. It strengthens the country's ability to respond to longer-term challenges, such as population aging and unexpected global economic shocks. It also signals that public services are sustainable over the long run and ensures fairness and equity for future generations by avoiding tax increases or reductions in services.

Canada's responsible fiscal position is critical to economic growth and job creation for the long term. Canada's efforts to pay down debt before the global recession and control spending have helped ensure that Canada's net debt-to-GDP ratio is the lowest by far of any G7 country and among the lowest of advanced G20 countries as well.

While other countries continue to struggle with debt that is spiralling out of control, Canada remains in an enviable fiscal position among G7 countries. It is also why Canada is among only a handful of countries with an undisputed AAA credit rating with a stable outlook from all major credit rating agencies. I should also point out that Canada is the largest economy that still has an AAA credit rating.

Since budget 2010, our government has controlled direct program spending through targeted savings and reviews focused on reducing spending without compromising priority services to Canadians. Taking into account the new measures in economic action plan 2014, direct program spending is projected to remain broadly in line with the 2010-11 level over the forecast horizon. In fact, direct program spending has declined for three consecutive years, a trend that has not been observed in decades. Rest assured that federal transfers to individuals and major transfers to provinces and territories, including those for social programs and health care, will continue to increase.

These steps have been accompanied by measures to improve the fairness and integrity of the tax system, with a view to ensuring that everyone pays their fair share. Consistent with this commitment, economic action plan 2014 includes measures that address international aggressive tax avoidance, improve tax integrity and strengthen tax compliance, and enhance the fairness of the tax system. Since 2006, and including measures in economic action plan 2014, the government has introduced more than 85 measures to improve the integrity of the tax system.

Together, measures in economic action plan 2014 to address international aggressive tax avoidance, improve tax integrity, strengthen tax compliance, and enhance the fairness of the tax system will provide savings of $44 million in 2014-15 and rising to $454 million in 2018-19, for a total of $1.8 billion from 2013-14 through the following five years.

Our government recognizes the importance of businesses to job creation and economic development. Our government delivered tax reductions totalling more than $60 billion to job-creating businesses from 2008 through 2014. Among these tax-relief measures were the reduction of the federal general corporate income tax rate to 15% in 2012 from over 22% in 2007 and an extension, through 2015, of the temporary accelerated capital cost allowance for machinery and equipment used in manufacturing and processing.

Canada's tax competitiveness and overall business environment have been significantly improved, with the result that Canada now has the lowest overall tax rate on new business investment in the entire G7. The competitiveness of Canada's business tax system is supported by third-party analysis. KPMG's “Competitive Alternatives” 2012 concluded that Canada's total business tax costs are the lowest in the G7 and more than 40% lower than those in the United States. It is also why Canada has been ranked the second best place to do business in the world by Bloomberg, and KPMG's “Competitive Alternatives” 2014 study ranked Canada the most competitive, mature market country for business.

The foundation of our initiatives since 2006 rests on the bedrock of a low-tax plan for jobs, growth, and prosperity. It has seen us through the worst of the global economic and financial crisis. While the NDP and the Liberals keep demanding reckless spending and want to impose higher taxes, our Conservative government remains on track to return to balanced budgets in 2015-16.

We cannot be complacent and must make tough decisions. That is the core of economic leadership and fiscal responsibility, the very same leadership that has allowed Canada to lead the global economic recovery. This is why our government will balance the budget in 2015 and will continue to pursue a prudent fiscal path.

My question to the Minister of Finance is the following: What is the biggest downside risk to the Canadian economy and the assumptions underpinning his fiscal projections?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, I would like to thank the member for North Vancouver for that excellent question.

The key risks to Canada's outlook remain external and tilted to the downside. The risk of a sovereign debt crisis in Europe has declined, but it has not been eliminated as yet. Growth is low and inflation is very low.

The move towards a more normal monetary policy in the U.S. has exposed vulnerabilities in some emerging economies, and several are experiencing higher capital outflows, weaker exchange rates, and declining equity prices. This could translate into weaker than expected growth for these countries and increased volatility in global capital markets. In addition, the pace of economic growth in the U.S. was much weaker than expected during the first quarter of the year. While growth was affected by temporary factors, including severe winter weather, there is a risk that the projected pickup in U.S. growth during the remainder of this year could be lower than expected.

In light of these risks, for fiscal planning purposes, the government has maintained the downward adjustment for risk to the private sector forecast for nominal GDP at $20 billion for 2014 through 2018.

The government will continue to evaluate economic developments and risks to determine whether or not it would be appropriate to maintain this adjustment for risk in the future.

As we have repeatedly said, Canada is not immune to the global economic challenge beyond our borders, which is why we must focus on positive initiatives to support job creation and economic growth while returning to balanced budgets.

While the opposition would introduce reckless spending during a time when the recovery is still fragile and risks remain, our Conservative government will take no economic lessons from them. We will stay the course. Economic action plan is working. It is connecting Canadians with good-paying jobs, and it is securing Canada's long-term prosperity.

As long as Canadians are still looking for work, our job is not yet done. Our government is always exploring new ways to unlock Canada's full economic potential.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Chair, the Minister of Finance uses tax multipliers to model the impact of budget measures on economic growth.

Can the minister tell us the tax multiplier used for infrastructure investment measures in the latest budget?

[Joe Oliver, Conservative, Eglinton—Lawrence, ON]

Mr. Chair, that number is about 1.75.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Chair, can the minister tell us the tax multiplier used for measures targeting low-income households and the unemployed in the latest budget?