Tony Valeri

[Supply, February 5th, 1998]

Mr. Speaker, I truly welcome the opportunity to respond. I appreciate the member's passion for this particular topic, although I would question some of the facts.

I want to reiterate once again that when we talk about taxes, this government has not once increased personal income taxes since coming into office in 1993.

I would ask the member to perhaps listen to the answer since he had the opportunity to take the floor a little earlier.

I would encourage the member to join us as we move to the next millennium and to stop talking about the 50 years that have gone by. It is only because of the support of Canadians for the actions of this government that we are talking about a fiscal dividend today.

This government is not taking the credit. It is Canadians who should take the credit.

Do not come to this House and continue with this verbiage about how I am standing up and belittling the member. Let us get it clear. Canadians ensured that this government was able to complete a program that was laid out beginning in 1993 continuing through to 1997.

When the member talks about spending, there is spending in this government in this country today that is the lowest in 50 years. It is not this particular government that is overspending.

When we talk about what is so crucially important to sustain this country, it is that we must not and will never overspend or spend more than what we take in. It is quite clear and it has been said over and over again. I only wish that for once a member from the opposition would get up and recognize that fact. They should check Hansard because over and over again it is there, but they agree to ignore it.

Let me move to some of the other members of that caucus. The member for Selkirk—Interlake said that any shortfalls Manitoba suffered from equalization cuts could be made up by provincial tax hikes or spending cuts. Is that coming from that opposition party? Is that coming from that opposition party that just had a member stand up and say “Give back to Canadians no tax increases”. A member of his own party says “Do not worry about cutting, they will jack it up at the other level”. That is something we will not do. That is not the role of this government.

They talk about cutting spending. I will use another example of a member of that particular party and perhaps some will recognize the quote, “I support the idea of regional economic development. As a former mayor of Dauphin I know the importance of it. We need the money to leverage other money”. That was the member for Dauphin—Swan River.

[Supply, February 5th, 1998]

Mr. Speaker, today's motion accuses our government of imperilling the economic and social security of Canadians. The only thing truly at peril is the credibility of the official opposition.

All members of the government share the view of most Canadians that our national tax burden is too high. That is why we have committed clearly and concretely to take significant steps to reduce the broad tax burden shouldered by Canadians as we move from a deficit to a fiscal dividend.

The finance minister also made clear that a balanced budget was not the end of a fiscal turnaround. We must move on to bring down our hobbling public debt as well. These facts, high debt, too heavy taxes, are not signs of a national failure or futile policy. They are the carryover of the economic malaise we inherited five years ago.

It was a wasting sickness in which 25 years of deficit spending played a tragic part. It is a disease that still leaves symptoms when the patient is well into recovery. That recovery is a fact that disturbs and dismays members of the official opposition. Since they can no longer deny the success of our approach to deficit reduction, they must find a new threat to browbeat and bully Canadians. That is the threat of reckless spending.

Let us look at how reckless we have been since coming to office and the direction we have set for the future. Let me emphasize that this is a direction which was endorsed by Canadian voters in the last election.

Last October the finance minister presented the government's fall economic and fiscal update. It demonstrated convincingly that our government's plan to restore Canada's fiscal and economic health was working. We started with an absolute and unequivocal pledge to eliminate the deficit. We did this because we understood that the price a nation pays for years of excessive deficit spending is clear, concrete and corrosive.

Most of all deficit financing means higher taxes. Last year the federal government had to pay over $45 billion in debt charges. That is equal to about 32 cents of every dollar of tax revenue Canadians pay to Ottawa. Looked at another way, that $45 billion is equivalent to 70% of federal income taxes that Canadians pay. It is more than EI premiums and GST combined.

That is why when we first came to office we set about putting our fiscal house in order, something the opposition party clearly did not understand then and does not understand today. We knew it was the essential foundation for lower interest rates and higher economic growth which means jobs. I am sure the NDP will appreciate this point. That is what Canadians want. We knew that without a fiscal turnaround we would never be in a position to pursue broader tax reductions.

As most Canadians know, our deficit control plan centred on cutting government spending has met its targets and in fact exceeded them.

Our deficit progress has delivered real and rewarding results for Canada. We have transformed the vicious circle of higher deficits, higher interest rates and slow economic growth into a virtuous circle where lower deficits have helped produce lower interest rates, leading to higher economic growth and lower unemployment, ultimately leading to even lower deficits.

Even today as we have been buffeted by the impact of the Asian currency crisis, Canadian rates are still below U.S. rates, both for 30 day bills and long term bonds.

Our fiscal turnaround is not a transitory phenomenon. We have confirmed that the federal deficit will be eliminated no later than this coming fiscal year and it will be the first time that the federal government books have been balanced since 1970. This means that we are now looking to the day when Canadians will see a fiscal dividend. To sustain our economic progress, we will make sure that our commitment to fiscal prudence does not change. As the prime minister said, we will never again allow the financial health of our country to get out of control.

What about that fiscal dividend once the federal books are balanced? In fact, what about the Reform motion today that warns of that reckless spending by this government? Again, listen to the real facts.

Our government has committed to a 50:50 allocation of the dividend among, one, expenditures to address economic and social needs and two, tax cuts and debt reduction on the other. Let me touch on some of the issues and concerns that we feel must in fact define this dividend debate.

On the tax issue, our government is absolutely committed to bringing down the tax burden of Canadians. Because the dividend can start off small, it leaves little room to implement a substantial across the board reduction right away. We feel that the most responsible course will be to continue to provide targeted tax relief where it does the most good, as we have done in our recent federal budgets.

Our priority here will be to provide tax relief to low and middle income people and families first. When we can afford it, we will and we must go further and reduce the broader tax burden.

Then there is the challenge of investing in Canada's future. We believe the responsibility of the government today goes beyond debt and tax reduction only. To rule out the need to invest strategically in areas such as health care, education and public pensions is not just bad social policy, it is bad economics. Such programs provide Canadians with the security to participate in our fast changing economy with confidence.

The real question is to find the right balance, a balance that ensures that the quantity of growth we all seek contributes to the quality of life Canadians deserve. For example, growth may be central to a strong economy, but in today's world of accelerating technological change, knowledge and skills are central to growth. They are central to a society that is more fair, where people have the skills that mean good jobs and good incomes.

That is why the federal government has taken measures to make registered education savings plans more attractive and flexible, measures that we just this week debated at second reading of Bill C-28. Just this week we debated and voted on this bill. Of course the members of the official opposition rejected that measure and voted against it.

That is also why the prime minister has announced that we will create a Canada millennium scholarship fund, to reward academic excellence and assist thousands and thousands of low and moderate income Canadians.

I guess this is that reckless spending that the Reform Party says puts Canada at peril. I am convinced that the vast majority of Canadians certainly see it differently. They see it as a wise use of part of the coming dividend.

It is also not good enough to have the right skills if our country does not also offer the opportunities to develop and apply those skills in the laboratory and the workplace.

Again, that is why the government, to help strengthen this synergy, called for and created the Canada Foundation for Innovation. It provides $800 million to help maintain or enhance facilities at our hospitals and universities, facilities to deliver world class research and keep top flight researchers here at home.

I will not put words into the mouths of members opposite, but perhaps this is another example of the reckless spending the opposition wants to attack. However, I do not think I have heard them say openly that this is a measure which should be killed. I will not say they have said that, but I will say that most Canadians see it as a rewarding investment, not a reckless one.

If we are to equip Canadians for success in a new millennium we must first focus on early childhood where the capacity to learn is developed. That is why we are building a new partnership with the provinces on behalf of children and providing $850 million in additional resources under the child tax benefit.

Our goal is clear and concrete, to begin to put an end to the welfare trap where low income parents who return to the workforce see their children's economic conditions actually worsen because they lose services provided under social assistance. Going to work should make people's lives better, not worse. We are addressing that.

Is this, once again, the reckless spending which Reform feels will imperil Canada's economy and society? I do not think so.

There is another measure which was included in the debate on Bill C-28, which is the action of the government to enrich the Canada health and social transfer which goes to the provinces to support health care, post-secondary education and social assistance and services. Because of our faster than expected fiscal progress we are in a position to guarantee that the CHST transfers to the provincial governments will be $12.5 billion for each of the next five years. That is $1.5 billion more over the previous floor and it represents overall $7 billion to the provinces. It is an increase which does not threaten our balanced budget.

Perhaps opposition members will think that is reckless, but millions of Canadians would surely disagree. They want a strong health care system. They value support for education. They believe our country should help the disadvantaged. They know these are valid and vital uses of federal resources, especially when they do not jeopardize our progress to a balanced budget.

I suggested at the start that the only thing in peril, going by today's motion, is the Reform's credibility. I think I have made my point.

I would like to pay specific attention to the prebudget document which the official opposition has put forward.

The Reform Party talks about balancing the budget and applying unused contingency reserves to debt over the next three years. I want to thank the Reform Party. I am very pleased that the Reform Party now endorses the government's budgetary policy.

In October the government committed to balancing the budget no later than 1998-99. The government also made the commitment that if the contingency reserve was not needed it would be applied to the debt. That was in October. Some members opposite were there, some were not. I only hope that those who were there would have communicated that to the rest of their caucus.

They talk about freezing program spending through to 2001. Reform suggests freezing total program spending but allowing the natural increase in the major statutory programs to take place.

Essentially what they are advocating is a cut of $3 billion or 6% of the non-transfer portion of spending over the next three years. Where does it come from?

A number of one-time savings are offered up as advocated by the auditor general but where it will find $3 billion of ongoing savings is yet to be identified. That is what the platform says.

Members keep changing their minds on this. They are all over the map. In the 1997 election they talked about calling for large cuts to EI and equalization. Now they think spending on these programs should be allowed to increase. They have no credibility on the issue of expenditure reduction.

We can go on and on but the one area I need to spend some time on because it is a major plank in the platform that this official opposition has is the wide mix of tax measures.

I would call on this party to go back, redo its analysis, redo the costing of this measure because when the analysis is complete, when the tax measures that are put forward by this party are looked at, when they are mature they would cost around $30 billion in foregone federal revenues and would grow by $4 billion each and every year.

They underestimate the total cost of their package by over $10 billion. As a responsible government, we do not have the luxury of basing our policies on sloppy and incomplete analysis.

We have to get our numbers right and we must look at the consequences of any measures that we undertake, obviously not a criteria of that party. In that regard I think we would have to ask ourselves one very basic question with respect to the Reform Party package. Where is the $30 billion plus for tax cuts to come from?

Reformers have not answered that in their platform. They have not answered that in their prebudget document. I suppose we will have to guess what they might propose to do to make up the foregone revenue, perhaps reduce transfers for health and education, reduce benefits for families with children or the elderly or perhaps the suggestion that we walk away from all the sacrifice and hard work of Canadians.

Canadians have partnered and ensured that we were able to balance this budget. Should we just add it to the deficit and the debt? I am not sure at all.

I think when we look at the spending plan that this government has proposed and how it is balanced with the real commitment to action on taxes and debt reduction, the reckless risk taking and a government out of control is not seen.

What is seen instead is a realistic strategy that invests in Canada's renewal, a strategy developed in consultation with Canadians by a government committed to helping them regain control of their lives and their children's future.

The reason this motion deserves to be dismissed is so that we can get on with the job of building that future in a way that is responsible and responsive to Canadians.

[Supply, February 5th, 1998]

Mr. Speaker, I will try to be as brief as possible because I know there are other individuals who would like to pose questions.

I want to reiterate that when the fiscal dividend emerges Canadians want action on three fronts. That is essentially what we heard from Canadians. They want action on debt reduction, action on investment in a stronger economy and a stronger society, and they want some tax relief.

Let me focus on the tax relief. When we look at securing the dividend submission by the Reform Party, it proposes a wide mix of tax measures that when mature will cost around $30 billion and foregone revenues will in fact increase by $4 billion each and every year. It actually underestimates the total cost of its package by $10 billion.

As a responsible government we do not have the luxury to be irresponsible much like the Reform Party. We have to ask ourselves a very basic question: Where is the $30 billion-plus coming from for tax cuts? The Reform Party does not fully answer this question in its prebudget document. Is it going to come from a reduction in health and education spending, in a reduction in benefits for families, or should we just walk away from the success that we have had and increase the deficit? Should we not go for a balanced budget?

We cannot afford as a responsible government to deal with issues much like the Reform Party because it has not done its numbers. I will give the Reform Party a calculator with batteries.

[Income Tax Amendments Act, 1997, February 3rd, 1998]

Mr. Speaker, I have a brief comment and then a couple of questions.

With respect to the point made by the hon. member pertaining to the supplementary estimates, the $12.328 billion, that is what the transfers would be in 1997-98 if the floor were not established. With this floor and this bill going forward it will be $12.5 billion. According to law we certainly must publish what the entitlements will be. Now the law is changing with Bill C-28 and the provinces know the amount will be topped up once the law is in place. Therefore the rhetoric we heard on the other side is nothing more than just that.

With respect to the comment about student debt and the importance of dealing with the plight of students and that RESPs are not good enough and that the cost of education is rising and that governments need to look at education and the cost of education, I find it somewhat ironic that the Reform Party, in particular this member, is now saying the federal government should be responsible for education and that we should control curriculum. That is the only way we would be able to control the outcome which is what the hon. member is talking about.

This is a party that puts forward the concept that we need to weaken the federation, that the federal government does not need to be in the face of Canadians or the provinces. Now we have the comment that we should be responsible for education. I find that somewhat ironic.

The member then talks about the tax aspect of this bill, that this is nothing more than a tax grab. Is this hon. member then saying he would support the practice going on out there by some corporations with respect to transfer pricing? Is he saying the legislation in front of us today would not allow corporations to manipulate the tax system by setting prices within their multinationals?

We are saying that the transfer price cannot be artificial or arbitrary with this bill and he calls that a tax grab. He calls a tax grab the fact that individuals will not be able to transfer losses between unaffiliated companies. Companies are not in the business of transferring losses. Companies should be in the business of earning a profit and creating wealth, not manipulating the tax system.

The bill is merely reflecting what professionals have said in this country. Accounting professionals who have looked at these things have said this is what is going on and it should be tightened up, rules to apply when a corporation becomes or ceases to become exempt from income tax.

I am sure the hon. member would support this. A tax exempt crown corporation is not able to store up tax deductions or credits it does not need. When it does become commercialized, if that be the case, it cannot use those tax credits and cannot store up those tax credits so it could circumvent the tax system. That is what this bill is all about. That is I think a reflection of what Canadians talk about when they say they want a fair tax system.

I find the comments that are made somewhat ironic, but I certainly hope the hon. member will answer the question with respect to education and those particular changes to the tax system.

[Income Tax Amendments Act, 1997, February 3rd, 1998]

Mr. Speaker, I hope the hon. member would agree with the fact that the finances of the country are now somewhat in order. We inherited a $42 billion deficit from the last government.

Canadians said that we should put our house in order. That is what we did. Had we not taken the measures we did, perhaps we would have been here today asking the House for further cuts. In fact today we are hoping the House will support a bill that will reinvest in the priorities of Canadians.

The member's province along with the rest of the country will begin to receive additional moneys with respect to the Canada health transfer.

Surely the hon. member, for the sake of his constituents, would support the fact that there is a reinvestment in the Canada Health Act.

[Income Tax Amendments Act, 1997, February 3rd, 1998]

Mr. Speaker, I appreciate the hon. member's comments this morning, but I have somewhat of a disagreement with respect to the approach he is taking.

The finance committee went across the country and consulted Canadians on what type of role the federal government should play specifically in health care and other such programs. Overwhelmingly Canadians said they wanted a strong role for the federal government.

The program being proposing to eliminate the cash component and go with tax points would remove the ability of the federal government to enforce the Canada Health Act. In fact we could use the word paternalistic. I would tend to disagree.

Canadians want to ensure levers are in place so that the federal government can ensure the Canada Health Act is enforced. I go back to the example of Alberta. When Alberta attempted to put in place user fees in private clinics the government held back those transfers.

The proposal the member is promoting would eliminate the role of the federal government. If the member were to put that to his constituents they would respond by saying “We want to ensure that there is a federal government to enforce the Canada Health Act”. The program the member is proposing, as was the case in the last election campaign, does not resonate with Canadians. It really has no place with respect to the Canada Health Act.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Mr. Speaker, once again we are listening to the NDP rhetoric. If I could go back to the comments made this morning, the member for Kamloops painted a picture that the economy was going down the drain, that there has been no progress made in this country at all since 1993. Clearly that is wrong, but of course the NDP needs to focus on that rhetoric in order to deliver its message.

The member started her comments by asking why there is silence on the bank issue. What does Bill C-28 have to do with the bank issue? We are talking about an increase in the stabilization of a cash floor in the CHST plus some other tax measures.

The finance minister and the prime minister have stated quite clearly that when it comes to the bank merger, which she made reference to, there is a process in place. This government will continue with that process. There will not be a knee-jerk reaction to this announcement of a merger by the banks. The minister has clearly said that once that information is brought forward, it will be looked at in consultation with Canadians and if that merger is not in the best interests of Canadians, it will not happen. I do not know why the comment was made other than that it is NDP rhetoric.

With respect to her comments on this bill, she made a comment that we are supporting a two tier system, that we support user fees in this country. When the province of Alberta attempted to set up private clinics and put forward user fees, it was this government that withheld and was willing to withhold transfers to that province in order to ensure we maintained the level of health care that Canadians expect. We are ensuring that we will support the principles of the Canada Health Act.

The member went on to say that this bill does nothing to put money back into the social transfers. Let us not be ridiculous. This bill reflects a changing fiscal reality. We now have dollars to reinvest in the priorities of Canadians. In 1998-99 the pre Bill C-28 cash transfer would be $11.6 billion while the post Bill C-28 cash transfer would be $12.5 billion. In 1999-2000 the pre Bill C-28 cash transfer would be $11 billion while the post Bill C-28 cash transfer would be $12.5 billion. That is real cash that is going to the provinces in the form of a transfer. What we have post Bill C-28 is a 2.5% increase in the transfers to the provinces.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Mr. Speaker, I go back to the comments made earlier today. We took office with a $42 billion deficit. Had we not done the things we did when we did them, we might be in front of this House today asking for further cuts instead of asking this House to approve a reinvestment into a Canadian priority.

The hon. member mentioned that Quebec cutbacks were a result of the federal government cutting back in all these other various tax measures. I say quite clearly that post Bill C-28 the province of Quebec will continue to receive additional moneys each and every year when we add together the tax points, the cash transfers and the equalization payments. The federal government is contributing to the province of Quebec and ensuring that the province is able to deliver the health care that Quebeckers and Canadians expect.

When a province decides to cut back in the area of health care it is because the province has taken that decision. This government has been fair and will continue to be fair and equitable in its approach. I challenge the member from the Bloc Quebecois to rationalize and give us a reason. In fact those payments are going up and not down.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Mr. Speaker, I have a couple of points of clarification for the hon. member.

The member said that this government had no impact on interest rates. When the member's party was in office and we had a $42 billion deficit, a climbing debt and all the rest of it, interest rates were way up. The fact that we have our fiscal house in order is the reason interest rates are on a downward track and not on an upward track. But I know it takes some convincing since they do not quite understand the concept.

They talk about the tinkering in this bill. If I recall correctly that was the party that talked about eliminating the cash component of the CHST and going with tax points. They talked about eliminating the role of the federal government with respect to transfers. They said that the federal government has no role in transfers to the provinces.

We put the cash floor in place to ensure there is a federal presence in the transfers to the provinces, to ensure that we can enforce the Canada Health Act. Those are Canadian priorities which is something that party is completely out of sync with.

He talked about a by province floor. I point to the fact that when we talk about transfers to provinces we have to talk about total entitlements. Total entitlements are made up of a cash component and a tax point component. Total entitlements to the provinces are increasing because of the changes that are going on that this government has made. It will continue to increase so that provinces can continue to provide for their own constituents.

I am at odds to understand where this member is coming from.

[Income Tax Amendments Act, 1997, February 2nd, 1998]

Mr. Speaker, it is my pleasure to rise to speak on behalf of the government in support of Bill C-28. This legislation has many parts, as you so clearly outlined a few seconds ago, but its actions are bound by a single consistent dynamic: a strong economy, a strong society.

The relationship between a strong society and a strong economy was highlighted in last fall's federal economic and fiscal update. It has been at the heart of our government's action agenda from the beginning of its first mandate.

We committed ourselves to a historic turnaround in Canada's federal finances because we understood that sustained deficit reduction was the key to lower interest rates and higher economic growth. We also understood, and made quite clear, that lower rates and higher growth are not ends in themselves. Instead, they were the best way to achieve the real bottom line benefits which Canadians deserve, more jobs and the national resources to make strategic social investments where and when needed.

As we near a new millennium Canadians are even closer to the threshold of a major change in our economic history, the day the federal government is deficit free. This progress, coming faster than we originally dared hope, is indeed delivering benefits we always expected. It has created the conditions for lower interest rates and sustained economic growth and these have set the stage for further milestones.

Last year 363,000 new jobs were created. That is the best record since 1994. In December the unemployment rate was the lowest in seven years. This is one important human aspect of the rewards which come from faster than expected fiscal progress.

Another vital dimension is reflected in today's legislation. We are now in a position where we can make key social investments, investments which respond directly and concretely to the concerns of Canadians. Just as important, we can make these investments without jeopardizing our continued advance to a balanced budget.

The most significant part of this legislation clearly is the measure to increase the cash floor of funding to the provinces under the Canada health and social transfer. Bill C-28 increases the guaranteed amount of federal cash funding—funding for health care, post-secondary education and social assistance and services—from $11 billion to $12.5 billion a year through to the year 2002-03. It starts applying this higher cash floor one year earlier than originally slated.

This means the provinces will receive close to an extra $7 billion in cash over six years. That is by far the largest new spending commitment we have made since first coming to office.

The CHST measure represents by far the most financially substantive measure in Bill C-28 and the one ultimately affecting the lives of most Canadians.

Before I get into the specifics of that measure, let me address the other parts of this wide ranging bill and, in particular, the two tax measures that also reflect our commitment to strengthening Canadian society.

First, Bill C-28 follows through on our 1997 budget pledge to help and encourage Canadians to save for the post-secondary education of children. Under this legislation we are increasing the amount that Canadians can invest in a registered education savings plan from $2,000 to $4,000 a year for each student beneficiary.

As well, Bill C-28 will allow someone who has contributed to an RESP but who then sees the intended student not go on to post-secondary education to transfer the income from the plan to an RRSP. This will reduce the risk and the disincentive that parents may face that the benefits of the RESP investment could be completely forfeited if their child chooses not to pursue higher education.

Indeed education is the equalizer, the instrument by which a level playing field can be created for all Canadians to help them compete in a fast paced changing economy. This important change will continue to support the task of improving access to post-secondary education for our youth.

Bill C-28 also takes important steps to encourage and support charitable giving by Canadians. It increases the amount of donations for which the charitable credit can generally be claimed to 75% of net income from the previous 50% mark. This 75% limit will apply equally to all charities, eliminating the previous advantage enjoyed by donations to the crown and crown foundations.

The legislation also reduces the income inclusion rate on capital gains arising from certain donations such as stocks, shares and bonds from 75% to 37.5%. This was an area where the existing tax law in Canada was much less generous than in the U.S. Now, with Bill C-28, Canadian charities will enjoy an equal footing with those in the United States.

Each of these three measures which affect the CHST, registered education savings plans and charitable giving provides concrete bottom line support in areas that contribute to the individual well-being of millions of Canadians and to our nation as a whole.

Using the resources of a strong economy to ensure a secure and compassionate society is a key obligation of government. However, we must not put aside our work to maintain and expand that economic strength. One of the foundations of a well-functioning economy is an effective, fair and transparent tax system, a system that allows companies and individuals to focus on the work of building and growing their companies or personal endeavours through real value added, not through manipulation of tax rules.

That is why Bill C-28 includes a range of technical tax measures, including rules relating to transfer pricing. These rules are based on international standards established by the OECD and will ensure that when goods are transferred cross border between elements of a multinational corporation, the pricing involved is based on the principle of arm's length dealings. In other words, companies will not be able to avoid or manipulate taxes by setting a transfer price that is artificial or arbitrary.

Rules that restrict the transferability of losses between affiliated persons will ensure that the federal tax base is not eroded by, for example, one company selling its tax losses to another unaffiliated company.

Also included are rules that apply when a corporation becomes or ceases to be exempt from income tax. This ensures that a tax exempt crown corporation is not able to store up tax deduction and credits if it does not need them and then use them to reduce its taxable income and tax payable after it has been privatized and becomes taxable.

Finally, it includes a measure that ensures that there will be no tax penalty for Canadians receiving disability benefits should the insurance company paying the benefits become insolvent and an employer takes on the responsibility for paying those benefits.

I should point out that these technical provisions of Bill C-28 regarding taxation were made public long ago through draft legislation and ways and means motions. As a result they have been closely scrutinized by private sector experts. The legislation before us truly reflects the revisions and improvements brought to us by such consultation and expert commentary.

I am confident that these sections of Bill C-28 carry the support and acceptance of the sectors involved and deserve the same support from this House.

Let me return to the subject of the CHST as it is undoubtedly the part of this legislation which touches most broadly on the public interest.

It has been claimed by some, and will likely be said again during the debate in this House, that Canada's provinces have contributed an unfair share to federal deficit reduction. The opposition parties may get up today to belittle the enrichment to the CHST floor that Bill C-28 provides, arguing that we are merely restoring some of the funds that we have taken away. Let us be clear. The fact is that as we launched our deficit reduction strategy a contribution from virtually all areas of federal spending was the only way to get Canada's financial house in order.

Reductions were made in transfers to provinces under the CHST when it took effect for 1996-97. This action was not unfair. It was very necessary. It is because we took the necessary action when we did that we can now say that the era of cuts is over. If we had not taken the tough action that we did, today's legislation might be very different.

Rather than providing renewed funding for key social programs, we might be coming before this House to ask for new cuts and additional restrictions. We do not have to look very far. The Ontario government is today looking for billions of dollars more out of its education programs to finance its premature tax cuts and increased spending. Because we did what had to be done, when it had to be done, we have been able to achieve the federal fiscal success that is beginning to pay real dividends, dividends of solid benefits to each province and all Canadian citizens.

Remember it was the strong majority of Canadians who demanded that the deficit problem be resolved. They have supported our action plan. Without their support our success would not have been possible.

No objective observer can question what had to be done. The hard truth is provincial transfers represent about 20% of all our federal program spending. That is one dollar in every five. There was simply no way we could meet out deficit commitment to Canadians without touching transfers. We worked hard to make these cuts as fair as possible. This deficit cutting exercise was transparent. It was done in consultation with Canadians and their provincial governments. We gave provinces a full year's notice of our plans so that they had time to adjust their priorities and programs.

There is another aspect of the CHST that demonstrates our commitment to fairness and to positive partnership with the provinces. In response to the provinces' request for flexibility we restructured the previous system with its separate targeted components into a single Canada health and social transfer. This addressed the longstanding provincial concern that the inflexible conditions associated with the previous transfer systems did not allow them to meet specific regional needs and opportunities. We instituted the CHST to deliver greater flexibility while still firmly upholding the principles of the Canada Health Act.

Mr. Speaker, you do not bring down a $42 billion deficit by nibbling at the margins. This government tried to be as fair as possible and that meant hitting ourselves harder than we cut anyone else. Let us look at the facts. And as I said earlier, the opposition parties will soon get up to talk about how we have not cut any spending.

In 1996-97 total provincial entitlements including the CHST and equalization amounted to $35.7 billion. That was a drop of $1.7 billion or 4.5% since 1993-94. I had better repeat that just so we are very clear. The facts are that in 1996-97 total provincial entitlements including the CHST and equalization amounted to $35.7 billion. That was a drop of $1.7 billion or 4.5% since 1993-94.

In contrast, our own program spending declined $6.9 billion over the same period. That is 12.5%, more than double the transfer ratio. Some provinces and some in this House may try to give a different set of numbers. That is because they refuse to recognize that tax points are an important component of the total provincial entitlement.

These tax points have been provided to the provinces over the years. They mean real money in their hands and a real loss of money to the federal government. In fact this year alone the value of tax points we have ceded to the provinces is nearly $13 billion. That is why the total support to the provinces under CHST today exceeds $25 billion.

An interesting point which needs to be made over and over again is that the value of these tax points will grow as the economy strengthens. That is why the total value of the CHST to provinces is slated to increase 2.5% annually on average. This means that the CHST is projected to reach more than $28 billion by 2002-03.

There are two final points I want to offer concerning the enrichment of the CHST under this legislation.

First, the cash floor it sets is $12.5 billion. This was not devised by some bureaucrats in the back room. This was not a figure that was pulled out of the air. It is the precise amount recommended by the National Forum on Health.

Some hon. members may remember that in last fall's economic update the Minister of Finance said that the increase in cash floor would mean an extra $6 billion for the provinces. Today, as I said earlier, this cumulative gain will be nearly $7 billion.

Some may be wondering where the extra money came from. The fact is that transfer payment schedules are re-estimated twice a year as economic data moves from the realm of preliminary estimates to final results. What this does is it again highlights the benefits of the tax point component of the CHST. It is because economic growth has been stronger than originally projected that the tax point portion of the CHST is worth more.

When the discussion surrounding CHST occurs in the House, I hope that members will continue to articulate the importance of the tax point portion of the transfer because the tax point portion will continue to increase as the economy grows. We have just seen that in a very tangible way by an additional $1 billion flowing through the CHST because of the increase in economic activity.

Under the previous circumstances, before Bill C-28, before the cash floor was put in, the increase in tax points would have triggered a reduction in the cash portion of the federal funding that provinces would receive. Because this legislation sets the $12.5 billion cash floor, it cannot drop. The provinces get to keep the extra dividend. That is the source of the additional $1 billion.

This legislation guarantees that the future growth in the tax point component of the CHST will not see the cash portion decline below $12.5 billion over the next five years. In other words, at least $12.5 billion in federal funds will be there each and every year. It will be there to help provinces provide the national health care system which is cherished by Canadians. It will be there to support the post-secondary education that gives young Canadians new opportunities for the future. And it will be there to support social assistance so Canadians in need will not be abandoned or betrayed.

Canada's fiscal progress has been won by the hard work and the shared commitment of the vast majority of Canadians. Now that this progress is making possible renewed investment in key social areas, it is only proper that such a dividend go where it does the most good, toward helping the most Canadians. Surely the Canada health and social transfer honours that criteria. Just as surely, Bill C-28 deserves the support of each and every hon. member of this House.