Jim Peterson

[Customs Tariff, October 24th, 1997]

moved that Bill C-11, an act respecting the imposition of duties of customs and other charges, to give effect to the International Convention on the Harmonized Commodity Description and Coding System, to provide relief against the imposition of certain duties of customs or other charges, to provide for other related matters and to amend or repeal certain acts in consequence thereof, be read the second time and referred to a committee.

Madam Speaker, this is one of those occasions which rarely arises in this Chamber when all party consent, quickly given, is in the interests of all Canadians.

By simplifying the customs tariff, the bill will result in duty savings next year for Canadian businesses and consumers of $90 million and will eliminate red tape. It will lower the production costs for Canadian firms, increase competitiveness in domestic and global markets and create more jobs.

All of us know that Canada's prosperity depends on trade. Exports account for 33% of the gross domestic product and 29% of GDP consists of imports. If the costs of tariffs can be lowered for Canadian businesses and administrative burden can be lessened, we will have a more competitive job creating economy. This is why the government has worked closely with Canadian businesses to design a more simple, cost effective customs tariff.

Consultations were extensive. Letters were sent to the leaders of the parties opposite from the heads of Canadian businesses and business organizations throughout Canada asking for their unanimous support for these measures. They have asked that priority be given by Parliament to passage of this legislation.

I would remind my colleagues that on January 1 next year, just a couple of months off, under the North American free trade agreement, tariffs with the United States will be eliminated. On this side we share the concerns of business that a simplified customs tariff be ready for implementation on that date. Of course, this implies that business too must be ready. We have to preclude economic disruption, allow for automated systems to be adapted and employees to be educated to the new tariff structure. This is why government has been working very closely with business to ensure that they are ready.

Since April Revenue Canada and StatsCan have undertaken ongoing, extensive outreach programs with those affected. Officials of the finance department have met with businesses and trade organizations and participated in conferences to inform interested parties. Obviously, early passage would enable the government to provide the information necessary regarding what is needed in terms of certainty, clarity and timeliness to the business community.

Quick passage will also demonstrate to Canadian industry that Parliament is not only aware of market realities, but is also able to respond quickly and effectively to industry calls for legislation. Put simply, it is timely that Bill C-11 be enacted.

Why? Because the current customs tariff represents a highly unnecessary hurdle to doing business. It is complex and outdated. It is time consuming and its redundant compliance requirements represent both a financial and opportunity cost to industry, not to mention government and bureaucracy. We have to streamline it, simplify it and update it to make Canadians competitive at home and abroad.

With rates of duty on all trade with our largest partner ending on January 1, 1998, coupled with other real rate reductions and eliminations flowing from the Uruguay round of the World Trade Organization, it is important to simplify our regime by eliminating complex and redundant mechanisms and ensuring that the tariff is responsive to competitive pressures facing Canadian industry.

Our regime has become truly complex. In all there are now 13 tariff treatments, 7 schedules, about 8,500 tariff items and 2,500 concessionary provisions or regulations and over 200 different rates of duty. The system is complicated, lacks transparency and leads, because of its complexity, to great uncertainty. This has been noted in many reports by the World Trade Organization. It is imperative to minimize these costs to industry. Let us recognize that it is not only in Canada but all around the world that tariff rates are going down.

The Uruguay round, the FTA and the NAFTA have resulted in an almost 60% trade weighted reduction in average Canadian tariffs. The tariff system must be better adapted to the competitive Canadian industrial economy. In the context of an increasingly open economy, we have to have dynamic linkages between exports and imports, meaning declining rates of duty.

For all these reasons, the February 1994 budget announced a thorough review of the Canadian tariff system over a three-year period.

The main objectives were to ensure that the Customs Tariff and its regulations better reflect the pressures of international competition and also to reduce the regulatory burden and all the related costs.

Accordingly, a working group was set up within the Department of Finance and was mandated to achieve the objectives within three years. One of the key points of this review was its consultation of all the parties concerned to ensure that the results of the review were in line with the objectives set.

Meetings were held in order to inform those involved of the measures planned and to seek their views. Following public consultations, a draft version of the simplified Customs Tariff reflecting public comments was issued in March 1996 to give everyone an opportunity to prepare their final comments.

Thus, in order to reach the greatest number of interested parties, ads were published in a number of major Canadian papers, and the provisional version was displayed on the Internet site.

The proposed legislation and letters of support from industry leaders received by the leaders of the opposition parties indicate that the consultation process was a success, since business supports the bill and is getting ready for its application.

It is obvious the bill is based on the measures the current government has taken up until now to restructure and modernize the Customs Tariff. We hope in this way to help our businesses become more competitive and prosperous.

In June 1995, Bill C-102 lowered tariffs on a broad range of manufacturing inputs, so as to reduce the pressure exerted by the competition on Canadian industry as a result of the amendments to the drawback program affecting exports to the United States. These amendments were necessitated by NAFTA.

This initiative was the first legislative measure taken to simplify tariff provisions. I am very happy to say that it enabled business and consumers in Canada to save some $60 million a year.

The planned tariff reductions will benefit Canadian producers. What's more, the administrative burden will be lighter—and related costs lower—for both government and business. Finally, the Customs Tariff will become easier to implement.

This bill will replace the seven existing schedules with a single one, simplify the tariff structure and greatly reduce the number of provisions in the Customs Tariff. The number of provisions will be reduced from 11,000 to 8,000. Moreover, obsolete or unnecessary tariff regulations and administrative procedures will be eliminated.

The new Customs Tariff will also have a broader application and permit unilateral tariff reductions for manufacturing inputs and the application of similar measures to the service sector.

I would like, in this regard, to remind my colleagues of the importance of ensuring that the Canadian service sector is as competitive as possible, especially in light of the international lifting of trade barriers in the service sector. We all know that the service sector is one of the most important ones in our country.

Until now I have spoken only in general terms concerning the overall economic benefits of simplifying our tariff structure. To illustrate these benefits allow me to turn briefly to several measures in the legislation.

I have already talked about the duty saving on a wide range of manufacturing products. The legislation will make further reductions in this direction, including the acceleration of most final Uruguay round reductions currently scheduled for the next two years.

As well, we are going to get rid of nuisance rates. Rates under 2% will be eliminated. We are going to round other rates to the nearest half per cent. These will be permanent features of our tariff system.

Rate reductions which affect goods coming into Canada that are used as inputs for manufacturing are very important. These will reduce the cost to Canadian manufacturers. It will make them more competitive and better able to take advantage of the growing regime of free trade. In short, our industries will be better able to compete for jobs.

Government red tape also stands in the way of our competitiveness. A case in point is the remaining not made in Canada provisions in the tariff to which I referred earlier. Under these provisions duty free entry is provided for specific goods, mostly manufacturing inputs.

While these provisions once provided flexibility to take into account the needs of Canadian manufacturers and producers, they have now been rendered redundant by the openness of our Canadian economy resulting from freer trade.

As well, they give rise to inconsistencies in the tariff treatment of goods, impose administrative costs to industry and the government and create uncertainty over what is dutiable.

Therefore we are now converting the remaining not made in Canada provisions to duty free items in the tariff schedule without the not made condition. This, again, will improve our competitiveness, particularly in our manufacturing sector.

Concerning concessionary codes in the current tariff, these provide for reduced rates or free entry for a wide range of goods that are not really part of the main tariff. With freer trade generally and with the United States in particular, changes in trade patterns and technology and other factors, many of these provisions are no longer justified. This is why we have proposed to eliminate about 1,000 of these codes. Another 1,000 or so codes remain relevant, since the amount of imports under them from non-U.S. sources is significant. These codes have been converted to tariff provisions at concessionary rates in a single tariff schedule.

To further reduce costs to industry we are terminating the machinery program and replacing it with duty free or dutiable tariff provisions for unavailable equipment or available equipment, respectively.

Currently duties on a broad range of machinery from all sources are remitted to applicants if reasonable equivalents are not available from Canadian production. Again, however, this program has been rendered largely irrelevant, or less relevant, by tariff reductions.

Implementing tariff items will not eliminate inconsistencies and uncertainty, it will alleviate the administrative requirements of the former remission process. Under the proposed legislation virtually all machinery production parts and most other parts under the program will come in duty free.

Regarding the remaining dutiable production machinery under the existing program, industry will continue to be able to seek and obtain relief under the proposed broadened order in council authority to reduce tariffs on inputs. Any relief granted will be implemented by means of amendments to the schedule.

I wish to note that following consultations with industry and a transitional period of three years, the sole criterion to be assessed in considering these applications for relief from the tariff will be whether the equipment is available from domestic production. This program will lower costs to machinery users, provide greater transparency and predictability and help make us more competitive.

As well, the regulatory burden will also be reduced by revoking an additional 300 duty remission orders that are no longer needed. Yet another 70 regulations will be replaced with simpler provisions in the schedule. For example, for customs duty purposes, 12 regulations and 13 provisions that provide fuller partial tariff relief on certain temporarily imported goods will be replaced by one single tariff item, an item that allows conditional duty free entry for virtually all goods that are imported on a temporary basis, again to help make us more competitive in Canada.

Turning to the legislative provisions of the customs tariff there are a number of proposed changes in the bill. Many current provisions are not continued in the new tariff because they are no longer justified because of free trade. Others such as the machinery program are not continued due to the simplification that we have brought about. Perhaps the most striking change is the way the new single consolidated tariff schedule will look. It has a revised format with two columns pertaining to tariff treatments, reduced from the current five.

The government also proposes to eliminate the British preferential tariff. The reductions in most favoured nations rates of duty over the years have significantly eroded or, in most instances, completely eliminated the preferences under the BPT on most imports from developing commonwealth countries. Over the years this treatment has been overtaken in many instances by other preferential tariff treatments for developing countries and has become largely redundant. The British preferential tariff is therefore not in the proposed legislation.

Another important change to the legislation, which I briefly mention, is the broadened order in council authority to reduce duties on all imports including production machinery used by manufactures and service providers. It will ensure that the government has sufficient flexibility to respond efficiently to competitive pressures facing our industries. It also provides a new three year authority for the Minister of Finance in light of the experience over that time to rectify errors that we find in consultation with our private sector partners. This provision is considered particularly important by the business community in view of the wide ranging changes that this bill envisages.

Given these and other changes to the customs tariff, which my colleagues will address during this debate, we proposed to repeal the current customs tariff and replace it with an entirely new act. Substantive amendments are also being made to the Customs Act including provisions to harmonize the time limits for claiming duty refunds and providing for adjustments to tariff classifications, origin or value for duty determinations without the requirement for a formal appeal.

It will also provide for a single level of administrative appeal in Revenue Canada. These will simplify the appeal process and facilitate a focus on those issues where Revenue Canada and the importer may have disagreements. Overall we will have a much more simplified, transparent and predictable administration and regime.

In conclusion this bill and the measures I have detailed here today have three overriding results. First, they will help make Canadian industry far more competitive within a much freer global trading environment. Second, they will make our tariff system more transparent, more predictable and simpler. Third, they will reduce greatly the regulatory burden and the associated costs of that for both business and government.

Industry, as it has contacted members on all sides of this House, has indicated that it is anxious to see this legislation in place for the January 1, 1998 debut. I am confident that members of this House will accede to the needs of industry and allow us to pass without undue delay these measures in order that uncertainties will not apply throughout our business community.

I reiterate our view that this bill merits all party support and accelerated approval in order that businesses, workers and consumers can reap its benefits.

[Supply, October 21st, 1997]

Mr. Speaker, we have heard an eloquent plea on behalf of our health care system which is dear to every Canadian. It is the one program we have that is universal.

In spite of the difficulties we have faced, last year we increased by $1.5 billion the cash floor for transfers under the CHST going to health care. We have ensured that over the next five years an additional $6 billion will go into this area of provincial jurisdiction.

The principles of the Canada Health Act are very important to Canadians. That is why we are not going to sacrifice, as the Reform Party would have us do, the five essential principles of the Canada Health Act. We will defend those principles in every way possible. Canadians do not have to worry about that. We are not a Reform government.

[Supply, October 21st, 1997]

Mr. Speaker, in rising to comment on the motion of the fourth party today, let me remind Canadians about what we have been able to accomplish.

When the government took office we had a deficit of $42 billion. In just three short years we were able with the support of Canadians to bring that deficit down to $8.9 billion.

During that period we have seen our national debt peak at $583 billion. In the last year we have been able to pay that down by $11 billion. This is not an abstract exercise in dealing with the deficit and debt. We have seen very practical results.

As a result of our prudent fiscal management, monetary and fiscal policy since we first took office, we have seen interest rates fall by a full five percentage points. From two percentage points over the American rate to below short, medium and long term U.S. interest rates.

A couple of weeks ago when interest rates went up only 25 basis points, mortgage rates continued to fall, showing that these policies are working.

The hon member for Qu'Appelle said that high interest rates cost us jobs. How does he think we got the low interest rates which are starting to produce jobs? It is because we have been responsible fiscal and monetary managers.

We have also seen the pay-off in terms of low interest rates and growth of our economy. Our economy is now growing by OECD and IMF estimates over the next few years at the rate of 3.7%. This is the highest of G-7 countries. In the second quarter of this year we saw how our economy grew at an annual rate of 4.9 per cent. This is the way that we are going about the important task of creating jobs.

No one in the House on any side, I would venture to say, does not realize that probably the most difficult thing we as members of Parliament go through as individuals is seeing qualified people who want to work and have the capacity to contribute not being employed to the full extent of their capacities. If any one of us had a wish, I am sure we would all agree it would be to ensure that every Canadian had a job commensurate with their abilities and capacities. How do we do that?

We are seeing the results of our prudent management of the economy now paying huge dividends. When we took office there was 11.4% unemployment. It has come down to 9%. We know that is not good enough but in the private sector in Canada, which is the only place where jobs will be created, we have created 1.1 million new jobs. This is an extraordinary record of accomplishment.

In the first nine months of this year we have created 279,000 new jobs. Estimates are that over the next two years we will be creating them at the rate of at least 300,000 new jobs a year. This is the pay-off for what we have introduced.

I am very sympathetic to NDPers when they talk about the need for jobs. They are telling us that we have to set targets. Did either of their two speakers today tell us what the targets should be? No. Here is how they told us they would achieve them. Let me go through them.

They said that labour sponsored venture capital funds should be forced by the federal government to do retrofits. They cannot do retrofits. Are they talking about increased tax incentives for these funds?

They talked about further tax cuts. I will just go through the list the first two speakers put before us. At the same time they called for increased spending on health care, education, training, culture, environment, child poverty and housing, as well as a major expenditure program on the GST tax break. They were talking about eight new expenditure programs.

They also said “Let inflation go, just let it go. We do not have to worry about inflation”. The actions taken to date do not have an effect on monetary policy until a year to a year and a half down the road.

The member for Qu'Appelle said that high interest rates cost us jobs. How do we get high interest rates? By allowing inflation to go amok. It was when interest rates were at 22% that inflation was in the double digits.

We are never going to allow Canada to go that way again. We are going to keep interest rates low by managing the economy sensibly. Members of the NDP have come out—we will see the details of it later—with a program they think will create jobs, 60,000 they say. The community reinvestment act, which they are going to enact in Canada, will require funds taken as deposits in a community to be reinvested at least to a certain extent in that community.

We have looked at this. Do members know who the net losers would be? They would be the Atlantic provinces and a couple of the prairie provinces because they are now the net beneficiaries of the lending of our banks.

More money is lent to these poorer areas of Canada than is taken from these provinces in deposits. If that is the type of policy that they are advocating for Canada, either their research is wrong or they are on a totally wrong track in trying to give hope to the areas of Canada that most need it.

We are not unmindful of the need to keep fighting to get unemployment down. We are particularly concerned about youth unemployment, which is almost double the rate of unemployment in other areas of the economy. That is why we introduced the federal public sector youth internship program. That is why we have brought in the youth employment strategy which involves summer placements, international internships and science and technology internships.

I am particularly proud of the 6,000 jobs that have been created for the First Nations and Inuit peoples through the internship program that has been provided there.

Yes, regrettably in our quest to deal with the tremendous deficit and debt problem, unfortunately we have had to make cuts in transfers to the provinces, cuts in health care, which when analysed in total, including tax points that have been transferred and cash transfers, is an overall cut at its maximum of $3 billion.

If half of that was allocated to health care, it would be less than 3% of the total health care budget in Canada. We do not like to have to do that but we did have to cut. Our cuts to the provinces were at the level of 8%, whereas cuts to program spending were in the order of 13%.

At the same time, needs have been recognized and increased funds have been allocated in the 1997 budget for health care, $150 million for better approaches to providing health care, $50 million for the health care information system and $100 million for children's health initiatives.

We are very mindful of the fact that education is the key to future prosperity. That is why we have taken recent measures. On Canada student loans, which have a 30-month grace period, the limit has been doubled to $4,000 for registered educational savings plans. We have increased the amount that is deductible for student tuition fees and tuition credits are up. We are conscious of how that has to be done.

We are criticized by the NDP in terms of culture. Yes, our cultural industries are key, not only a major player in the economy, employing almost 900,000 Canadian, but also in defining who we are as a people.

That is why new moneys are allocated, $25 million a year, to the Canada Council starting next year, with another $10 million to it to help us honour the millennium.

One of our most important initiatives in health care, education and the cultural sector was to recognize that as governments have to cut back, perhaps the private sector could contribute more. That is why in so many areas tax incentives have been enhanced, to allow the private sector to help contribute in these areas.

We are going to continue our responsible course. We are not going to inflate ourselves into joblessness and high interest rates. Our path is working. Let us stay the course. Let us finish the job.

[Income Tax Conventions Implementation Act, 1997, October 20th, 1997]

moved that Bill C-10, an act to implement a convention between Canada and Sweden, a convention between Canada and the Republic of Lithuania, a convention between Canada and the Republic of Kazakhstan, a convention between Canada and the Republic of Iceland and a convention between Canada and the Kingdom of Denmark for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend the Canada-Netherlands Income Tax Convention Act, 1986 and the Canada-United States Tax Convention Act, 1984, be read the second time and referred to a committee.

Mr. Speaker, I intend to be very brief this morning.

We intend to enter into three new tax treaties with Lithuania, Kazakhstan and Iceland and we are making revisions to four existing taxation treaties, those with the Netherlands, Denmark, Sweden and the United States.

Canada currently has 61 treaties for the avoidance of double taxation and the prevention of fiscal evasion. With these three new treaties we will be up to 64. This is very important for Canada as a nation which is outward looking and which depends on 40% of its economic wealth in any one year on its exports, on its commerce abroad, on its foreign direct investment and the flows of information, capital, technology, royalties, dividends and interest.

In five of the treaties, those with Ireland, Denmark, Lithuania, Kazakhstan and Iceland, the major provisions, apart from avoiding the double taxation of income, i.e., deciding that if income flows from one country to another, which country has the right to tax it. Obviously both countries cannot if we are to have a modern world. Otherwise the rates of tax would easily exceed 100% of that income.

Through these treaties one country foregoes the right to tax in certain circumstances. For purposes of simplicity we have countries of source and we have countries of destination, usually where the recipient is resident. Will it be the country where the income is owned or the country where the recipient is resident that will determine the primacy of taxation? In this exercise we have followed the general outlines set out in the OECD model convention for the avoidance of double taxation.

In five of these treaties, those of Ireland, Denmark, Lithuania, Kazakhstan and Iceland, one of the main provisions involves reducing the withholding tax that would otherwise be payable by the source country, in this case Canada, 25% under the Income Tax Act, reducing it down to a level which is far less punitive. In most of these cases we have reduced it to 5% where the foreign resident has a controlling or major interest in a Canadian corporation. The rate is often reduced to 10% where interest payments go abroad. In many cases where there are payments on government debt, there is no withholding tax whatsoever.

One of the main concerns in bilateral negotiations has been to try to reduce the withholding taxes to zero, where they deal with royalties on scientific know-how, computer software and things which are necessary to produce a modern industrial state.

I regret that in some of these five treaties we are not able to get that rate down to zero on such royalties. However, in the treaties with Sweden and Netherlands we have confirmed that we will have a zero withholding rate on those types of payments. This is significant progress in a world which is increasingly dependent on the flows of information and technology.

Perhaps the most important change being made today is with respect to the tax treaty with the United States. Its main provision deals with social security benefits which flow across the Canada-U.S. border: a person resident in the United States who receives Canada or Quebec pension plan or old age security benefits or a person resident in Canada who receives from the United States its social security benefits.

Just so we understand these provisions I would like to go back to the law as it existed prior to 1996. At that time the country paying the benefit did not exercise any taxing jurisdiction or taxing power. That taxing power was exercised only in the country of residence. Therefore a person resident in Canada who was receiving U.S. social security was taxable in Canada. The rule was that only half of that social security benefit went into the resident taxpayer's income but it is obvious to members on all sides of the House that this produced unfairness.

For example, if persons resident in Canada were receiving social security from the U.S. of say $8,000 they were taxable on only $4,000 of it, whereas if they were receiving $8,000 of old age security they were taxable on all of it. This was not equitable and not fair.

Therefore we entered into negotiations with the United States to change that law as of January 1, 1996. We said that rather than the country of residence taxing the pensions or the social security it would be the country of source. If a resident of the United States received Canada pension plan or OAS, Canada would withhold 25% on those payments to the resident in the U.S.

If the U.S. person was a low income taxpayer and his or her marginal rate of tax was either zero or less than the 25%, Canada gave that person the option of filing a tax return in Canada. To the extent that the tax would have been less than that 25% withheld by Canada, Canada would give a refund. It worked well for a person resident in the U.S. receiving pension benefits from Canada. On the other hand it did not work so well going the other way.

The U.S. withheld 25.5% on social security payments going to a resident of Canada but it did not allow the Canadian who was in a low income or no income bracket to file a U.S. tax return and be taxed on a net basis; i.e., to be taxed at less than 25.5%.

Accordingly, negotiations were entered into with the United States and that is the result of this protocol. We are saying that the country of residence of the taxpayer or the recipient now has the exclusive right to tax. The country paying the social security, the United States will forgo its withholding tax or Canada will forgo its withholding tax when paid to the United States.

Second, the resident of Canada will include only 85% of U.S. social security in their Canadian income, and a reciprocal right applies to residents in the United States receiving pensions from Canada. This means that low income taxpayers are in effect going to be taxed on a net basis and it will not be punitive. This is a desirable and hopeful result.

In order to protect those who might have already suffered or paid their taxes, this law, when in effect, will be retroactive to January 1, 1996. To help in the transition, if someone has already paid their taxes for 1996 or 1997, we have said that they will pay no more taxes than they otherwise would have. Therefore if a person is in a higher bracket than the 25.5% withheld, they will not have to pay that for the years 1996 and 1997. It will only be on an ongoing prospective basis that these full rates of tax, applicable to domestic or resident taxpayers, are going to be applied.

There is also one other amendment that deals with capital gains. We know that if a U.S. resident owns real estate or resource properties in Canada and disposes of them they would be subject to Canadian tax. Suppose they own those properties through a corporation resident in the United States and sell the shares in that corporation. It would seem natural that they should not be able to get away with something by doing it indirectly through a corporation, that they could not get away with it even if they owned those properties directly. This is why Canada has always had a law in its books which states that where one owns those Canadian assets indirectly through a U.S. corporation, they will be taxable as if one owned those assets directly.

However, the U.S. does not tax Canadian residents on this basis. Accordingly, we have amended the tax convention with the United States in order to reflect that both of our laws be brought into this more modern mode. Quite frankly, in terms of administering a law when a resident of the U.S. sells the shares of a particular company it is very difficult to look behind that corporate shell and find out what all the assets are. In a modern world this does not make a lot of sense.

I am very pleased to say that we have settled this issue of transporter pensions or social security in a way that is fairest to those who have the lowest income and whose tax rates would otherwise be under the 25.5% U.S. rate or the 25% Canadian rate when they are taxed on a net basis. This is a desirable result. It is fair and is evidence of the ongoing good co-operation and strong relationship between our two countries.

[Income Tax Convention Implementation Act, 1997, October 9th, 1997]

moved for leave to introduce Bill C-10, an act to implement a convention between Canada and Sweden, a convention between Canada and the Republic of Lithuania, a convention between Canada and the Republic of Kazakhstan, a convention between Canada and the Republic of Iceland and a convention between Canada and the Kingdom of Denmark for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and to amend the Canada-Netherlands Income Tax Convention Act, 1986 and the Canada-United States Tax Convention Act, 1986.

(Motions deemed adopted, bill read the first time and printed)

[Ways And Means, October 7th, 1997]

Mr. Speaker, pursuant to Standing Order 83(1) I wish to table a notice of a ways and means motion respecting the imposition of duties, of customs and other taxes to provide relief against the imposition of certain duties and taxes and to provide for other related matters.

At the same time, I would ask that an order of the day be designated for consideration of a motion.

[Supply, September 30th, 1997]

Mr. Speaker, we had to cut spending. In 1993-94, our program expenditures amounted to $120 billion. In subsequent years, these fell by 13 percent to $105 billion.

While cutting spending, we kept the cuts in transfers to the provinces to a minimum. They were in the order of 8 percent and we retained equalization, which was really necessary for our vision of the future of Canada, a Canada in which we can share problems and opportunities with Canadians regardless of what part of the country they live in.

[Supply, September 30th, 1997]

Mr. Speaker, you are quite right. I thank you for first of all for reminding me and second, for your excellent presiding over this Chamber.

The hon. member for Medicine Hat is quite at liberty to suggest that debate is needed on what is the optimal size of government debt. We are looking forward to hearing his contribution to this very important debate. We know that, with a federal debt of $600 billion which is 74% of Canada's entire yearly economic output, we are way beyond where we should be. One-third of every tax dollar has to go to pay the interest on the debt. That is money that cannot be spent on tax relief, on debt reduction or new spending programs to help Canadians. This is why—

[Supply, September 30th, 1997]

Mr. Speaker, I welcome the member's question.

What is the optimal size of debt and what is the optimal level of taxes? You have obviously prejudged it. You have called for major cuts in payroll taxes.

[Supply, September 30th, 1997]

Bombardier. The fund to help Canada's aerospace industry to continue its ascent into the top ranks among nations in the world is not a giveaway program. It is refundable and repayable to the federal government. This was a result of consultations which our federal finance committee undertook and suggested and the Minister of Industry adapted. I am very proud of this program. It means the success of our aerospace industry goes back to the credit of Canadian taxpayers through repayments to the federal government.

Is the member saying that he is against what we have done to protect and secure a dignified and secure retirement for seniors through our agreement with the provinces on the Canada pension plan?

He wants to renounce a deal made with the provinces including the province of Alberta, fine. He can go on record and say that he would renounce that deal. That is not the way we operate because we are prepared to operate in consultation and co-operation with our provincial counterparts.

Is the member prepared to renounce the type of co-operative arrangement we have worked out with the provinces in terms of the Canada child tax benefit where the federal government and the provinces will concentrate on children who are members of working families in the poorest income bracket? Is this what the member is talking about?

We believe this is a priority. These children living in the lowest income brackets need assistance. We are directing it to them in co-operation with the provinces to break down the welfare wall.

Does the member condemn our efforts and our tax cuts to help students by making more of their fees deductible and by giving greater tax breaks to parents who invest in registered educational savings plans? Does he condemn the fact that we want to provide scholarships to help make post-secondary education accessible to more and more Canadians?

One of our expenditure announcements in the throne speech which he condemns and which I am happy to stand beside is funding the Canada Council, giving it more funds to provide for arts and culture. I am very proud of our commitment to enhance Canada Council funding. I stand by it completely as do all members on this side of the House.

Does he condemn our program to help provide entry level jobs for young Canadians through our public sector internship program? We are giving work experience to young Canadians who might not otherwise have access to the workforce. It is a very valuable entry into the workforce.

These are some of the priorities we have set out. They have been the subject of consultation through the election. They will be the subject of ongoing consultation through debates in the House and through the finance committee.

We have talked about what we have done for young Canadians, what we are doing for our seniors, and what we are doing for health care in terms of increasing our funding by over $6 billion in five years to the provinces to help sustain the principles of the Canada Health Act.

Does he condemn what we have done in terms of innovation? We have given tax breaks for research and development in Canada. We created the innovation foundation to help restore the research infrastructure of our hospitals and our universities.

Does he condemn SchoolNet? We have helped classrooms to connect with all libraries and with everyone throughout the country. Canada will be the most connected nation in the world. It will have access to expertise and knowledge throughout the country.

I am happy to talk about our priorities for students, for young Canadians whose parents are among the working poor and who need a break. I am happy to talk about our steadfast protection of the Canada Health Act in the face of threats by the Reform Party in the last parliament which said we needed a two tier medical system.

We will not give in to their priorities. We will continue to be a most open government that consults with Canadians when setting our priorities. We will work to address the true needs of future Canadians. That does not rule out tax cuts. That does not rule out paying down the debt. These are priorities we have stated clearly and strongly.

The throne speech said that we would continue to be the government of fiscal responsibility. We are the government that brought the deficit down from $42 billion ahead of the schedule fixed by the Reform Party which called for a balanced budget by the year 2000. We will achieve that long before its target.

We will not take a lesson in fiscal responsibility from anyone, including the official opposition.