Jim Peterson

[Supply, February 14th, 1995]

That is to me a great inconsistency. The member has also said that a large corporation with $10 million in capital that is running at a loss position should not have to pay taxes. I agree. However, if the corporation apart from loss carryovers and apart from capital cost allowances is actually experiencing a profitable year in terms of income but not in terms of taxable income, perhaps it could contribute a little more to our deficit reduction. I do not consider that unfair.

If the member is making the point that we are highly taxed, he is right. We cannot argue with this. Canadians realize this. However, this is the party that said no new taxes whatsoever. Then in the next breath it said it will tax the Governor General. In other words, there are no hard and fast absolute rules.

Let us look at each particular tax measure to see if we can afford it, if it would make us non-competitive, if it would have adverse consequences. Let us look at these things with an open mind.

I go back to the fundamental premise. I cannot guarantee that our entire tax system is fair today, that everybody is paying their fair share of taxes. We know that overall we are just about at the limit. We found over two years $1.1 billion in possible net tax increases that we thought might work. Two hundred million dollars out of the proceeds of lotteries; is it unfair that we should have a 10 or 15 per cent tax on $1 million won through a lottery?

[Supply, February 14th, 1995]

Madam Speaker, I do not believe that for one minute.

There are some inconsistencies here. The hon. member has talked about down loading. That is the concept whereby when we make cuts in program spending or transfers to the provinces, are those services going to be performed at a lower level of government, either the provincial or municipal government?

In some cases those services will not be performed because there is no money available. As the member points out, provinces have increased their taxes in response to certain down loadings that have taken place. Is he saying that we should not be downloading this time? Why are they calling for cuts in transfers-

[Supply, February 14th, 1995]

Mr. Speaker, I am pleased to rise in the House today on this important issue. It is very important that Canadians have access to the facts and to the issues that face us. We are going to be forced in the next budget to make some of the most difficult budgetary decisions that have been made in this Parliament's history, probably the most difficult decisions that we have had to make outside wartime.

As Canadians know, the government inherited a national debt of $500 billion and an annual deficit that had gone up to over $45 billion. As much as we politicians wish we could spend money on people and help people, we can no longer continue at this rate.

If we do not get the deficits down and start to eventually reduce our national debt, we will continue to be even more hostage to the international capital markets whose investors are demanding higher and higher interest rates in order to fund our debt. It is a debt which is so enormous we can no longer fund it out of the pockets and the savings of Canadians alone.

If we do not get the deficit down we will no longer be able to have the economic climate in which we can get lower interest rates, have more investment and create more jobs. Unless we are able to meet the deficit targets that have been set, every one of our social programs will be in jeopardy. We will not much longer be able to go on spending way beyond our means and yet create the type of Canada that all of us want.

It is going to be a difficult task as we go about, over the next two years, of taking maybe $10 billion, $12 billion or even $14 billion in budgetary actions, that is spending and/or tax increases.

One of the things that we must continually bear in mind as we make these difficult decisions and choices is that when social programs are cut, programs designed to protect the most vulner-

able in our nation, it must be done with caution, with compassion and with care. For so many Canadians these programs are the only means to security, dignity and opportunity.

In making the difficult decisions that we are called on to make and that we shall make, let us not only remember those who are most in need, but let us also remember that the burden should, to the extent possible, be shared fairly by all Canadians.

We know and the finance committee in its report recognized that Canadians are just about at the ceiling of taxation. Personal income tax rates are very high. When they are combined with the taxes on commodities, the payroll taxes and municipal taxes, Canadians are saying: "We want less. We are prepared to do with less. We cannot afford vastly higher taxes in order to continue the lifestyle to which we have become used".

However, they are also saying to us that when these cuts are made, please be fair. We will be judged, first of all on whether we meet those deficit targets, and we had better meet them, but we will be judged on whether we have done it fairly.

When we cut social programs are we really asking the wealthy in our society to contribute? How are they bearing their fair share when all we are doing is cutting programs? We have $3.1 billion in business subsidies. We want to get rid of all of those as quickly as we can. However realistically our committee looked at these, we said that we probably could not cut more than 36 per cent of those subsidies over the next two years. That will contribute slightly over a billion dollars to deficit reduction. It is not going to be enough.

We may just have to suggest that the very well-off in our society contribute their share to the deficit reduction targets through a few added tax measures. This is why we suggested in our report that we could perhaps ask the large corporations, corporations with capital over $10 million who do not pay taxes because they have losses carried forward or they have capital cost allowances expenditures, to pay just a little bit more. Maybe we could ask Canadians who have huge winnings on lotteries to put 10 per cent or 15 per cent of the winnings toward the deficit reduction. Is it fair to say to wage earners that they will be taxed at 53 per cent or 54 per cent on their wages but that they can make a million dollars in a lottery and not pay any taxes at all?

We recognize our marginal tax rates over the past nine or ten years of Tory government have become less and less progressive. The wealthy in Canada are paying less tax proportionately than the poor and middle income Canadian have been asked to pay.

We suggested that low and middle income Canadians should have their surtax reduced by one percentage point. We think this would introduce an element of fairness. In the overall package that we called for, recognizing that budget cuts must be the prime factor, we said that for about every $9 billion in expenditure cuts we might need about $1 billion in tax increases over the next two years. I do not believe Canadians are going to be reluctant to accept some of the proposed measures, particularly when they are expressed in terms of the fairness we must go about practising when all Canadians are asked to contribute to helping us get out of the mess we are in.

The principle of fairness applies not only to the most disadvantaged of Canadians who need our programs in many cases. This does not mean that we should not reform our programs to help people get off welfare more quickly or to help them rely less on unemployment insurance. After all, we want Canadians want to be working and not be on the dole.

In setting these difficult courses we have to start with ourselves in Parliament. We cannot ask Canadians to make greater sacrifices than we are prepared to make ourselves. This is why the first item of business must be the pensions of members of Parliament before we ask other Canadians to make their sacrifices. This is why we have called in our report for major areas to be cut, namely the $20 billion out of $120 billion in program spending. This $20 billion applies to our government operations, how we conduct our business and how we conduct our affairs. We have said that over two years it should be cut by 12 per cent. In terms of parliamentarians in our own little niche, we have called for a cut of 15 per cent.

I have mentioned business subsidies. We believe we can get rid of most of them over time. There are outstanding commitments that we just cannot break. Therefore we concluded that we had to be practical. About the most we can hope to get rid of over the next two years is 36 per cent. I believe the total amount would be slightly over $1 billion.

We have to bring a new philosophy to how government deals with the private sector. If the only way a private sector enterprise can exist is through government handouts and government grants, it will not be long before we can no longer afford the grants and handouts. Not only that, it is not fair to legitimate operators who do not rely on the dole or do not rely on the deep pockets of government but compete with industries that get these breaks. Not only that. With the new trading regime, the GATT and the NAFTA, we have less and less ability to interfere in this way because subsidies will be subject to countervail.

We are in a new world. We are in a world that many Canadians would not have believed 10 years ago that we would be facing today. The levers of control we had as a national government are no longer there. Whether we like it or not we have to live with the new reality of global competitiveness, international capital flows and international investment.

This will impose upon us new challenges. However one of the challenges cannot be grants to business. That is why we suggested abolishing all outright grants to business. We cannot give business a leg up by way of a loan because our capital markets are not working adequately to supply all small businesses and entrepreneurs with the startup capital they need.

However, if we are to do it, let us do it only on a loan basis. We will lend the money but let us make sure that we have equity in the company. We do not want a one-way street for the public sector such that if the business goes under we lose it. We want to ensure that if the business profits from the investment we make by way of a loan there is an upside for us so that we have money to fund programs and to make them self-funding and self-liquidating.

There are other areas where we have called for cuts. One such area is subsidies. We have about $7.7 billion in subsidies for various crown corporations and others like that. Let us start weaning them from subsidies. Here we have called for a 10 per cent cut. The lowest cut we called for was within the overall package of social programs worth about $40 billion at which the human resources development committee was looking. Because many of these programs go to the most vulnerable in our society we called for cuts of 7 per cent over two years.

There is a number of areas in which the committee did not feel there could be cuts, such as Canada's native people, the Inuit and veterans, people who have a lot of catching up to do because our programs may not be working adequately to bring about the type of social justice they need.

We were also very concerned about the aging population. Many Canadians have not provided for their own retirement needs. Too few Canadians are taking advantage of the very generous tax breaks available to provide for their own retirement. The ideal would be as our population ages that fewer Canadians have to rely on government.

This is a major issue and none of us pretends to have the answer. That is why we suggested before changes were made to retirement provisions, pension plans and RRSPs that we had to take into consideration a number of principles. One is parity between public sector and private sector pensions. Another is the need of those who are self-employed and have to provide for their own retirement through registered retirement savings plans. They need to be able to build a pension fund comparable to those who have been in the private sector and have had long years of contributions to private pension plans.

We also have to look at our public responsibility. Right now we are spending about $15 billion in forgone tax revenues-we can call them tax expenditures or whatever we want-to encourage self-sufficiency during retirement. Before we change this regime we should do so in the context of how we help more and more Canadians provide for a secure and dignified retirement. We are becoming more and more an aging population.

The challenge before us is not an easy one. We have called for getting our deficit down over a two-year period from about $40 billion to about $25 billion. That is about 3 per cent of gross domestic product.

Why is that 3 per cent level important? It is important because with the current growth that is the level where our economy will be growing more quickly than our national debt. That will be the turning point. It will only be one turning point. We will have to go much further in subsequent years. We will have to start at some point paying down a huge national debt that will absorb one-quarter of our national expenditures this year. It takes one-third of every tax dollar paid to the federal government.

I hope we might be able to go slightly beyond the targets. Why? It is because we never know what the economic circumstances will be a few months down the road. We have seen the volatility of interest rates over the last three or four months that make the moderate projections in the papers tabled by the finance minister now seem passé. We are on to a new scenario. We do not know whether it will happen in the future but we must be prepared for it because our credibility depends on at least meeting those targets.

We need a cushion. It is fundamental to have a cushion for an additional reason. Let us admit that we might make mistakes when making cuts that we are not used to doing and we are probably not going to be extremely good at doing. We might unduly prejudice individuals we did not intend to hurt. We might cause pain where it is not deserved. I know we will bring to these people a Liberal spirit of generosity in attempting to undo any harm that was not intended.

Let us approach this tremendous challenge with the spirit of fairness and with the spirit that every Canadian must be called upon to contribute his or her fair share to getting our national resources and our financial picture in shape. Let us not achieve it on the backs of those who are most vulnerable in the country. Let us do it in a spirit of humility that we cannot be right 100 per cent of the time, that we will make mistakes and that we want to hear from Canadians as to where we have made those errors. If that is the case on reflection, let us freely admit that we have made a mistake and rectify it quickly.

By following these principles we can go into the next decades with a much healthier Canada and with a much stronger Canada. We will be able to pass on to succeeding generations what our mothers and fathers have given us: a strong and united Canada.

[Committees Of The House, February 8th, 1995]

Mr. Speaker, I have the honour to present the eleventh report of the Standing Committee on Finance, a report concerning Bill C-59, an act to amend the Income Tax Act and the Income Tax Application Rules, in both official languages. We will table it with two amendments.

I wish to thank all members of the committee for their hard work and co-operation.

[Committees Of The House, December 8th, 1994]

Mr. Speaker, I have the honour to place before the House today, in both official languages, the 10th report of the Standing Committee on Finance entitled "Confronting Canada's Deficit Crisis: Building Our Next Budget Through Consultation".

Briefly the report is the result of an unprecedented seven weeks of intensive consultations and study involving members from all three parties. I take this occasion to thank members of the committee from all three parties who brought such diligence to this undertaking.

I also thank all those who have worked with us. Far too often they have not been recognized for what they have done. I talk not only of the many witnesses who appeared before us, often on very short notice, but particularly members of the Library of Parliament who worked with us, especially the clerks to our committee, Christine Trauttmansdorff and our chief clerk, Martine Bresson, and all the people of their staff who have been working 24 hours a day over the last week in order that we could meet this deadline.

We have been extremely well served as parliamentarians by these very devoted public servants.

[Violence Against Women, December 6th, 1994]

More.

[Budgetary Policy, November 28th, 1994]

Mr. Speaker, it is a great pleasure for me to rise this morning. We are in the process of a historical evolution of the way Parliament deals with issues and, more important, we are as Canadians in a historic moment in terms of what we are going to do with our economic future.

Our combined federal and provincial debt is now greater than the sum of all economic activity in any one year in Canada, more than 100 per cent of our gross domestic product. This debt has been building for the last 20 years. Every minute that I speak that debt is going up about $85,000.

We are at the point at which one-quarter of all federal government spending is on interest alone. It is not even going to pay down that debt. One-third of all the money the federal government takes in goes to pay that interest. That means it cannot be spent on the programs which are necessary to build our economic future and create a fair and equitable society for all Canadians.

In spite of many declarations in the past by other governments, no government has yet come to grips with the problem of our mounting debt and deficit. In the budget of last February our finance minister said that we must start. We can no longer continue on this route and as an interim target over two years he said we would get the deficit down from about 6 per cent of our gross domestic product to 3 per cent.

This means we will have to go from about a $42 billion deficit this year to a $25 billion deficit within two years. If we assume a certain amount of growth in our economy this means we are going to have to intervene as governments never before have to strip over $9 billion out of this deficit through either increased federal revenues or cuts in spending. This is a monumental undertaking never before seen in the budgetary history of the Government of Canada.

To assist the government and all parliamentarians in this task the minister asked the finance committee, which I am honoured to chair, to undertake public discussions not only on the enormity of the deficit and how much we should try to get it down but whether his economic assumptions are valid. More specifically he asked us to consult with Canadians to find out exactly what we should do, where we should increase taxes if any and where we should cut programs.

Our committee has had less than two months, six weeks so far, to undertake this task. The minister appeared before the finance committee on October 17 and 18 and laid before us two major studies, one of which was the purple book, "A New Framework for Economic Policy", dealing with all of the broad aspects of our economic future, how we are going to sustain employment in the future, how we are going to cope with the changing world economy, the global environment in which we find ourselves, and take advantage of the new economy.

In this book he outlined five principles to which we must look. One is the need for Canadians to acquire new skills. The second is how all of us, including governments, can adjust to the changing economic circumstances, recognizing it is the private sector that creates jobs, and what can be the role of the government in aiding and abetting the private sector in this quest.

One of the major things pointed out is that the standard of living of all Canadians has really been declining in non-inflationary terms for the past 20 years and this just happens to coincide with a fall in the productivity of Canadians. Our major challenge, as we all know, is to take Canada, a country which in many ways has been a third world because of its heavy economic reliance on its resource sectors, to an economy which is really in the forefront of relying more and more on its human resources.

The third principle outlined in this book is getting government priorities right, which are the areas where we should be involved, how we can eliminate those aspects of our activities which are of a low priority.

The fourth principle is recognizing that we must as legislators and as governments play a role of economic leadership, recognizing as I stated that it is the private sector which creates jobs.

Also of concern is how the public sector works with the private sector to help bring about the transformation of our economy to implement the new technologies, to create the new type of infrastructure which can take us into the 21st century and be among the leaders in global competitiveness. How can we enhance further our exports? How can we aid and work with small business which will be the major creator of jobs in the future to ensure that it has the financial resources and the know how to be global players rather than simply backyard putters?

The fifth element of this study shows where government must play a leading role to create the type of monetary and fiscal climate which we need to make all of these other things happen.

I want to deal very briefly with the second study that he put before us. It deals with this fifth aspect of how we go about creating the jobs in the economy of the future, "Creating a Healthy Fiscal Climate". This was tabled by the minister before us on October 18. The next day our committee began its public hearings on this very issue.

Before I get into some of the details of what we have been hearing, members from all parties on this committee have taken the task extremely seriously. They have studied. They have agonized. They have brought different perspectives to our work. In many cases we as members of this committee have been able to arrive at a consensus built not only on our work as members of Parliament but more important a consensus arrived at listening to Canadians from coast to coast.

We have heard many witnesses in Ottawa and in every province as we travelled. We have heard from the usual suspects, the lobby groups that are well entrenched that have their head offices here in Ottawa and that we knew would come before us and whose advice we have actively sought. We have also heard from many individual Canadians who, concerned about our future, have brought their perspectives to our deliberations.

One of the major points of agreement that we have heard right across the country is we must go at least as far as the finance minister suggested to us in meeting our deficit targets. We must within two years get our federal deficit down to at least $25 billion.

A good number of witnesses said that government must go further than the $25 billion. We know we are in a business upswing at this present time. Growth is strong, job creation is strong, but it cannot last forever. There is an inexorability to these business cycles. We cannot sustain them on a perpetual basis, although everyone wishes we could.

There were many witnesses who said please go even further at this time. Some have said if we are going to cut or increase taxes to the extent necessary to reach these even expanded targets, targets beyond what the finance minister has asked of us, we run the risk of putting a brake on the economy and slowing the growth and the job creation that we already are experiencing.

Another consensus that we have reached is that we know we are going to have to make some cuts. Not one member of the committee and not one witness who appeared before us suggested that we could make cuts or increase taxes on the backs of the poor or the most under privileged or the least favoured of Canadians. All of us are aware of the high level of poverty in Canada, particularly among children. It would be unconscionable to think that the cutbacks we are going to have to make would be on the backs of those least able to deal with them.

In terms of specific solutions to our problems, the minister said to us: "Don't come back to me with generalities; come back with specific tax measures or specific cuts that we can make". Unfortunately the consultation process has been less than perfect.

We had a number of categories of witnesses who have appeared before us. There are those who say: "We are so special that we need not be part of this deficit reduction process. Our case is so special that we need added breaks; we need added funding". There are others who have come before us and said: "We are a special case; don't cut us. We will live with what you have given us".

There are others who at least tried to respond to the minister's challenge and came before us and said: "We are special. We can put a little bit on the table, but here is where you really have to cut, in somebody else's backyard". All too rare were the witnesses who came before us and said: "I have something to bring to the table. I seek nothing from it".

Those witnesses stand out in our minds. There was a wealthy person, Bob Blair, from Alberta who said that the generation of which he is a part, the generation of which we are a part, those who have enjoyed the benefits of this huge increased spending way beyond our means to pay it back over the last 20 years, those of us who have benefited so richly, have an obligation to give it back to our country.

He suggested that the wealthy could be called on to actually make donations to a deficit reduction fund for the state. That is the type of civitas, as the Greeks called it, or Greek leadership which I think all of us admire.

I remember a senior citizen who appeared before us in Atlantic Canada. He waited through a whole long day of testimony. He came before us and he said: "I am here out of a sense of guilt. I am a veteran. I get a pension because I was a prisoner of war during the second world war. That pension is about $10,000. I was never asked whether I wanted it or needed it, but it kept coming in and I have never sent it back. It's not even taxed. I am getting that and I don't deserve it. I'm not even a war hero. I bailed out over the Ruhr". This gentleman is prepared to put that money on the table to help the rest of Canada deal with this deficit crisis.

As I go through these deliberations I will always remember these two examples, rare examples, of Canadians who said: "I can be part of the solution". All members of our committee are convinced that whatever solutions we adopt, all Canadians, except those who are the least favoured, must be part of the solution. All Canadians must be asked to bear their fair share of the consequences of what we are going to have to do to wrestle that debt to the ground, to get the debt down so that our economy is once again growing faster than our debt. We owe this to succeeding generations to Canadians.

One of the major things that emerged during the course of our deliberations was that maybe my generation and the generations that have been living off this added borrowing, this added consumption over the past two decades and who are passing the deficit on to younger generations, have an obligation to pay even more than their fair share. It is a very interesting concept that was brought before us. It emerged in the concept of perhaps we should have a tax on inheritances so that some of the wealth that has been built up, at least in very rich estates, should go back to the state to help pay off the deficit.

We had a number of proposals before us which stated that taxes are almost at the breaking point. There is not much more juice to squeeze out of the tax orange by international standards and particularly American standards, which are the most important in this area. There is not much room to increase taxes and there may be no room. We have seen over the past decade how our personal income taxes have mattered and how they have become less and less progressive.

How do we create fairness when we are going about the process of cutting back on the deficit in a way that has never been undertaken before and which is going to have a dramatic impact on all Canadians?

It is going to be really tough. It will not be an easy job for us as members of Parliament and committee members, nor for the finance minister, the Prime Minister and the cabinet. It should and will be their responsibility to present Canadians with specific budget policy projects. We, the committee members, found a nearly universal desire in Canada to deal with the deficit, and to do it in a fair and equitable manner for all Canadians, especially the poorest members of society.

In going about this cutting, and we are going to have serious cutbacks in programs, the committee is not the only body looking at potential ways to deal with the deficit. A comprehensive analysis of all of our programs has been undertaken, a program review by the Government of Canada. Other committees as well have been charged with reviewing particular programs and undertakings. All these will be an important ingredient of this.

However, I suspect that none will have a greater impact than the recommendations of our finance committee which has had the benefit, for the first time in Canadian history, of public consultations with a broad range of Canadians.

One of the greatest advantages of these public consultations, which have never been undertaken, is that in the past those who could get in to the finance minister's office could make their case behind closed doors. The finance minister has said that this will no longer be the way prebudget consultation is carried out. It must be done in public before members of a committee that has all parties represented. We want all Canadians to see what special interests are being advocated, what privileges are being advocated and what solutions are being advocated.

Unfortunately we have not heard enough of the details on the solutions and not enough of a consensus has come to this committee across the board. As I mentioned, too much of the testimony has been "cut others but not us". This is why, as members of the committee, it will be our obligation to make some very hard decisions on where we might get increased tax revenues, where we might get rid of some inequities or unfairness in the tax system itself and where our priority for cutting programs will be. What are those programs which are necessary to sustain the social justice which is so much a part of Canada's fabric?

What are the programs which are necessary to maintain the balance that we have always had and which will always be a hallmark of our country, the balance between a vibrant private sector but a co-operative and supportive public sector which is necessary to maintain the balance of not cutting those programs which are going to actually help us build a strong economy in Canada for our future?

As we wrestle with these issues, I believe that the process of consultation with Canadians must not stop. We will continually seek their input. We must continually seek input from members of all parties of the House on an ongoing basis, members who are of good conscience and conscientiousness who have brought to us and laid out in concrete terms where they feel those priorities lie.

The task is not going to be easy. I know that Canadians expect us to deal with this deficit. They will treat us most harshly if, as previous governments have done, we pay lip service to the problem but do not tackle it directly, concretely and precisely at this moment in history. We have a window of opportunity. We shall not hesitate to act.

[Canadian Labour Market And Productivity Centre, October 19th, 1994]

Mr. Speaker, it is my pleasure to congratulate the Canadian Labour Market and Productivity Centre on its 10th anniversary today. Former Minister of Finance Hon. Marc Lalonde was instrumental in establishing this unique forum for dialogue and consensus building among Canada's business and labour communities.

Admittedly, business and labour have distinct and divergent agendas on many fronts. However, over these past 10 years the CLMPC has brought together leading labour and business organizations, such as the Business Council on National Issues, the Canadian Chamber of Commerce, the Canadian Labour Congress, the Canadian Manufacturers Association, and the Canadian Federation of Labour. Together they have produced many significant consensus reports on important economic challenges facing Canada.

All of us wish to extend our thanks to the hundreds of business and labour leaders who have contributed so much to this worthwhile endeavour. We congratulate the CLMPC today.

[Department Of Public Works And Government Services Act, October 18th, 1994]

Madam Speaker, on a point of order, I would like my vote to be applied-

[Committees Of The House, June 20th, 1994]

Mr. Speaker, I have the honour to present to this House, in both official languages, the ninth report of the Standing Committee on Finance.

This report is about replacing the GST, options for Canada. This work could not have been accomplished without the tremendous hard work and non-partisan co-operation of all members from all parties of the finance committee.