Alex Shepherd

[Budgetary Policy, November 30th, 1994]

Mr. Speaker, I am very honoured to take part in the debate on Canada's budgetary process.

It is important to spend a little time trying to realize how we got to where we are. Studying the history of where we are and how we got here may allow us to reach a conclusion on how to get back out. We got here by getting on what I call the STB formula for disaster, which is basically spend, tax and borrow.

The concept of spend, tax and borrow has caused a ratcheting effect, constantly spiralling interest rates with the debt expanding and growing ever faster. It is very much like a mortgage where you never pay the interest. It just keeps getting bigger and bigger until we get to the point where we cannot pay it off. That is what we have done.

We started back in 1982, just to use a very short period of time to reflect on. From 1982 until 1992 federal government spending increased from $67 billion to $141 billion, a 210 per cent increase. Governments have become insatiable spenders. We have been sold on the idea that somehow we can continue to enjoy services without paying for them.

It is partially the fruition of the baby boom generation. Some of this is psychological. The baby boomers believed they could continue to consume without paying. Politicians told us this was possible and we wanted to believe it.

The exasperating formula of STB is also partially related to the fact that there is no division of these powers within government. In other words, the power to spend, the power to tax, the power to borrow is all in the same hands. Some people have suggested that we should have a special commission, one that simply collects taxes so that governments would have to match their spending to the taxes that were available, rather than the other way around.

In addition to the spending we also started building up a huge civil service. Currently 6.5 per cent of our labour force, 866,000 people, is employed by government. We seem to have growth for the sake of growth.

In most of these areas we did not actually add any productivity into the economy. In spite of the fact we were told we could do this for free, taxes slowly started rising. Many people in the House have complained about the complexity of our tax system. They search for some kind of new Utopia, a flat tax, a simple tax. To me that is a recognition of not knowing why the tax system is what it is and how it got to where it is.

The tax system is designed to extract the maximum amount of money out of the pockets and purses of the people of Canada. It gets more and more intuitive and more and more inventive as our insatiable desire for more taxes increases. A simplistic tax system is very easy but it may allow the escape of some moneys in the system.

For instance, even in the Income Tax Act there is an anti-avoidance section, which simply says in layman's terms that if we cannot catch you somewhere else in here, we are going to catch you anyway; we can override the income tax system. I often thought that we should call the GST or a new value added tax the value added cumulative user utility method or vacuum tax which is basically what we want to do. We can put a vacuum into everyone's house and suck every last cent out of it.

Not happy enough to increase our spending, to increase our taxation levels to the point where people did not have any disposable income, we then started borrowing. First we started borrowing from ourselves. The baby boomer generation borrowed from its predecessors who knew how to save, who had gone through the depression and had great savings. Canadians were the second highest savers in the world. Even so, we outstripped that. We used all their savings.

Then we started borrowing from foreigners. We started borrowing from people in the United States. We started borrowing from people in Japan. Currently 44 per cent of our gross domestic product is accounted for in foreign borrowing. Twenty-five per cent of our total outstanding debt is owed to people outside the country.

This creates an additional problem. We have to keep getting investment money into the country so that we can earn foreign exchange reserves to pay the interest. We are caught in a constant ratcheting spiral.

Where are we today? People talk about continuing to spend. We have curtailed some of our spending. We have discovered that some of the benefits in our current governmental system are really earned by people going back to work, causing upward changes in our revenue and a downward push on the UI account. The reality is we continue to spend. Worse than that we continue to tax.

I have some interesting statistics on the average Canadian family that earns $57,696 in 1994. Here is the bill: social securities, unemployment insurance, Canada pension plan and medical taxes, $5,011; gas taxes, vehicle licences, $926; liquor, entertainment taxes, $1,274; property taxes, $2,041; federal and provincial sales taxes, $4,284; other taxes such as import duties, $2,630; income taxes, $11,037; total, $27,203 which is almost 50 per cent of what it earns.

During the recession this got worse. Suddenly some lost their jobs and half the income went out the window. The Auditor General reports that he is concerned about the over $6 billion in arrears of income taxes. What I cannot understand is why it is so low. The reality is that when people could not put food on their tables they stopped paying their income taxes. We only left a small pittance for these people to pay their mortgages, feed and cloth themselves and still we continue to borrow.

Some of our smarter people started thinking: "Wouldn't another country be better to live in?". Some people think we can continue to tax. People earning over $250,000 pay a 53 per cent marginal rate of tax. In the United States it is 32 per cent. In the United Kingdom it is 42 per cent. Suddenly people start thinking: "Let's get out of here. There are better places to live".

We talk about assisting small and medium sized businesses but in reality the federal government crowds out the capital markets. People cannot borrow. Why loan money to Joe's auto body up the street when you can get a mortgage on all the people of Canada?

The federal government, in trying to resist spiralling interest rates, started shortening the length of its debt instruments. Currently the federal government debt is out to four and a half years. That is the equivalent of refinancing your mortgage 25 per cent every year. What does it mean? It creates all kinds of volatility. What if some day somebody does not want to lend you any money? That is exactly what is happening. People are starting to look at Canada and wonder about our insatiable appetite for spending. They start debating whether they should lend to us at all. They certainly start pushing up the interest rates and for a short term period of time.

In September in the private sector there was the greatest conversion of Canadian denominated bonds in two years; $1.9 billion was converted into foreign currency away from the Canadian market.

Where do we want to go? We want to get the ratchet working the other way. We must look back at these three aspects of spending, taxing and borrowing, and reverse the process. We must cut spending but we have to be very judicious as to how we do it.

Public sector unions are trying to maintain their existing wage structure. The reality is that the public sector unions in all segments of their employment are paid 20 per cent higher than all private sector wages.

We have a guild system in our transportation network. These are things from the past, from history. We cannot afford to continue. Everybody, whether it is labour, business or government has to be part of the solution. Everybody has to realize that they have to accept less to make the country whole again.

As well as the Reform Party, I have made some suggestions. We should roll back RRSPs from $12,500 to $7,500. This would save the government half a billion dollars a year.

On the question of international aid, I do not think it is a matter of being mean. It is a matter of doing what we can afford as a country. Canada's foreign aid is twice as high as that of the United Kingdom as a percentage of our gross domestic product, twice as high as the United States, and a third higher than Australia. We simply cannot afford that degree of spending. By cutting foreign aid by half so it is consistent with all these other countries would save a billion dollars.

We have to restructure our social programs. This is not to take money from the people who need it, it is to make those systems work more efficiently. We are not eliminating them but we are trying to cut those areas of abuse from the system. Over $3 billion could be saved in this area.

Money could be saved in the area of the CPP. We could make it more efficient by being more efficient in collection methodology. That would save a quarter of a billion dollars.

We need a further cut of $2 billion in defence spending. By cutting the funding of cultural and advocacy groups a small amount of money, $.01 billion could be saved. Agricultural subsidies are another area that we are going to have to cut. We just cannot afford it, a billion dollars.

I looked at civil service wage reductions. How we are going to get them, I do not know, but the bottom line is savings of $3.6 billion. We can make our prison system more efficient by making it more income sensitive, saving half a billion dollars. By restructuring of our transportation industry, another half billion dollars can be saved. That is $12.36 billion.

I also estimate that a reduction of that magnitude will actually lower interest rates in Canada by 2 per cent. This will reduce interest on the federal government debt by a further $12 billion. That is a $25 billion reduction. These things are possible. These things are necessary. We have to do this and we have to get on with it.

In conclusion, regardless of whether they are in the labour movement or in business all people in Canada realize we have to address this problem. This country can no longer continue on the road to wrack and ruin. We can no longer afford champagne when we have a beer budget.

[World Trade Organization Agreement Implementation Act, November 29th, 1994]

Mr. Speaker, I would like to thank the member for his every interesting speech on the petrochemical industry, something that I really do not know very much about. I do not have that industry in my riding.

He mentioned the education of people working in that industry. Does he feel that our institutions are keeping up with that? Are they able to graduate the talent we need to be effective in the international marketplace?

[World Trade Organization Agreement Implementation Act, November 29th, 1994]

Mr. Speaker, it gives me great pleasure to enter the debate on Bill C-57, an act respecting the World Trade Organization. This is an extension of the Uruguay round agreement.

It is appropriate to consider why we need free trade. As the history of the world has developed different countries have created trade barriers. We have used all sorts of tariffs in our country to protect local industry.

We support and protect quite often inefficient industries all over the world. In other words when somebody can make widgets a bit better in Africa then we can and should allow them to do it. We may well do better some of the things we are strong at such as the pulp and paper industry. This is why free trade is good.

The important part for Canada is to realize that by freer trade we are making the trading mechanism more efficient. We are also increasing the actual trade in business that goes on in the world. Canada will have a percentage share of a larger pot. We will all be better off. Basically free trade is a win-win situation.

Another aspect in our economy and in the world is that bigness in industry is going out of vogue. Large industries throughout North America, Europe and other industrialized countries are under constant pressure to downsize, to be smaller, to be more effective and to be more efficient to deal with specific niche markets in their own communities. These two factors have a big role to play for Canada.

Canada has been very much involved in the resource based sector. I think of iron mining, steel fabrication and forestry products. All these industries, it would appear to me, are somewhat in decline in the sense that we have to put more value into our products. We have to add more value to them to be more efficient and attract world trade. It is no longer good enough to sell raw logs to China, for instance. We have to fabricate them in our country.

Earlier my colleague talked about the grains industry. It is important that we value add in the prairies before they go into the final markets.

In addition Canada has been typified as a country that has very specific trade alliances. Historically it started with the United Kingdom. It has since switched in the last century primarily to the United States. We talk about Canada being a world trader but in reality our major trading partner, the United States, accounts for something like 90 per cent of our trade. We are really not a world trader; we are a North American trader.

It seems this has to stop. We have to look at the world. We have to look at other markets. There are a number of reasons for it. It could well be that the U.S. market will not be expanding as rapidly as some other markets in southeast Asia, possibly Europe or even eastern European countries. These could well be the trading partners that will push Canada and its economy toward prosperity.

The World Trade Organization gives Canada an open door, a chance to do something different, a chance to trade differently. As we approach the 21st century it is a good time to look at our industrial policy and how it can change.

I talked about small and medium sized businesses. These businesses are growing rapidly and can attract world markets. They are the biomedical research industry, software development, telecommunications and geomatic engineering. These are some of the areas our country excels in. One of the problems is

that Canadians do not realize how good they are. They do not realize that people in other countries think Canada is a world leader in some of these areas.

The smoke stacks are growing idle all across North America. The smoke stack economy is falling into decay. For instance, a recent book by Nuala Beck states that in British Columbia more people are engaged in communications and telecommunications than in forestry. In Nova Scotia more people are engaged in education than fishery, forestry and construction put together. This should turn on a light. It should tell us that things are changing in our own country.

How can the government assist and make Canada a world trader? Small and medium sized business will be the engine of the future fueled by brains. It will be driven by a new set of entrepreneurs. These people will be the new employers. They will be the wealth creators. Statistics Canada recently showed that job growth was almost entirely related to companies with fewer than 50 employees. Those with greater than 50 employees were actually net job losers. When we talk about creating jobs-and indeed our government is committed to it-we must focus on where those jobs are being created. Clearly it is in the small and medium sized business sector. Employment growth in these companies averages 3 per cent to 10 per cent a year.

Canada has been historically a trading country. Thirty per cent of our gross domestic product is related to trade and most of the trade occurs with only a few companies. These are the companies that are downsizing about which I spoke before. Often they are the old industry companies.

We must create a new impetus to move the small and medium sized businesses into the international trading environment. Government can play a big role in this. Indeed the Department of Foreign Affairs and International Trade has some new ventures going with our banking community which are located in most of our international environments.

They are studying what it takes for these small and medium sized businesses to effectively access international trade. They have aggressive training sessions and are looking at new, intuitive ways to finance export trade for the small and medium sized business sector. The Export Development Corporation and the Canadian Commercial Corporation will be retooled and redefined to provide funding and capital support for small and medium sized businesses to access international markets.

We need to restructure our foreign missions. I had the advantage of being in Beijing in early May and visiting our embassy there. I was surprised at the attitude of some staff. Their orientation seemed to be to continue on in the international environment. They were going to move from Beijing to Africa and were never coming home. Quite frankly I took offence to their attitude toward Canada. This has to change. These people have to relate more to how we are going to expand trade for small and medium sized business rather than the IBMs of this world.

As you know, Mr. Speaker, the Prime Minister and others recently came back from the Team Canada mission. I would like to say one more thing about my own mission. Incidentally China is not a signatory of GATT but we feel that it will be in the near future. While I was in Beijing I was able to make a contact for some of the people in my riding. I note that the township of Whitby has entered into an economic alliance with one of the provinces of China. Eighty-five million people live in this province. Some of the small and medium sized businesses in Durham are now trading with these people. This has created employment. This is happening now. This is not an intellectual exercise.

Sometimes governments are the worst enemies of small and medium sized businesses. For instance the small and medium sized business community is assessed high taxation, both commercial and business taxation, meddlesome provincial standards and regulations, the dreaded GST and high levels of personal and corporate taxation.

The deficit has hemmed us in. It has also created a crowding out in the capital markets. The small and medium sized entrepreneurs cannot get the capital they need to establish themselves. Our best commitment to the small and medium sized businesses will be to reduce deficits, to reduce demand on borrowing to allow capital markets to form and be available to small and medium sized businesses.

The government has done some things. They involve the Small Businesses Loans Act, venture capital programs, but there is much more we can do.

I am concerned that the small and medium sized sectors do not have adequate capital markets. We need to create an over the counter small market for small and medium sized businesses, one that is easy to access. It should not be like the TSE which requires five years of financial statements and a fairly substantial track record nor like the Vancouver Stock Exchange of which a lot of the investors of this country are a little afraid.

What we need is a regulatory process that will allow Mrs. Smith at the corner who would rather invest in GICs to invest in those small and medium sized businesses.

In conclusion I would like to reiterate that it is small and medium sized business, together with the GATT negotiations and Bill C-57, that will provide Canada a new future as it moves into the 21st century.

[Budgetary Policy, November 28th, 1994]

Mr. Speaker, I would like to thank the member for her speech. I wonder if she could clarify something that caught my interest in the previous question. We talked about who is responsible for deficits.

The province of Quebec has the highest provincial deficit of all provincial governments. It represents $9,400 for every man, woman and child in that province. Of this debt, 40 per cent is owed outside the province of Quebec and outside Canada. It is owed to foreigners.

Interestingly enough, I went back and discovered that over the last seven years of the PQ administration it raised deficits in that province by 285 per cent at a time when transfer payments from the federal government actually increased to the province of Quebec. After the PQ government, I think in 1985, the deficit continued to increase but less than half the increase occurred while the current premier of Quebec was the minister of finance.

I wonder if the member could possibly give some comments on the previous speaker's dissertation about how all the debts have been created by the federal government.

[Budgetary Policy, November 28th, 1994]

Mr. Speaker, I thank the hon. member for his comments. Throughout listening to him I was mystified because he talked about specifics and the need to be specific. I did not hear him give one concrete proposal on where to cut government spending.

I wonder if the hon. member would come across and be clean about it. His arguments are sound but let us talk about something specific. Let us talk about the cost of operating the civil service. We have a combination of federal and provincial government employees amounting to about 886,000 people. The Canadian Federation of Independent Business tells us that on average they are paid something like 20 per cent higher than similar private sector wage earners.

What is the member's proposal to deal with that kind of problem? Does he propose laying off civil service workers? What is his concrete proposal?

[Mortgage Renewals, November 28th, 1994]

Mr. Speaker, my question is for the minister of financial institutions. A recent requirement as suggested by the Senate committee on banking, trade and commerce is that we require appraisals of renewals of mortgages.

Could the minister assure us that the government is not contemplating this or, if it is, that the cost of these appraisals will be borne by the financial institutions and not the borrower?

[Supply, November 22nd, 1994]

Mr. Speaker, I want to thank the member for his dissertation. I know he spent a lot of time talking about financial independence and the importance of financial independence for members of Parliament.

I wonder how he reconciles that. We have heard a lot in this House about independence for the province from which he is from. I just wonder how he reconciles those two things, the independence of a member of Parliament, the independence to receive money from the Government of Canada on the one hand and on the other hand that somehow we do not need Canada for any other purpose. How is it possible that the Government of Canada is good enough to receive a pension from but not continually tax the people of Quebec?

[Government Operations, November 22nd, 1994]

Mr. Speaker, today the Auditor General released his report reviewing government expenditures and operations.

As vice-chair of the public accounts committee, it will be my and my colleagues' duty on that committee to review and make recommendations to this House on how to improve the way governments do business.

While the opposition may magnify government misspending, we in the government party realize a more mature approach is to consult with the bureaucracy in order to resolve these problems.

One of the areas that was reviewed was that of our prison system. I would like to report that I attended Millhaven penitentiary only yesterday in an attempt to understand how our system could become more cost effective.

I believe if the opposition parties took the time to see first hand how taxpayer dollars were being spent they could made recommendations that were more practical.

[Supply, November 15th, 1994]

Mr. Speaker, I listened with interest to my hon. colleague's speech. With some of the negotiation currently going on between CN and CP there is a possibility that CP may well take over some of CN's track system in the maritimes.

This may be a little thing but there is one thing that bothers me and I wonder if the member could comment. CP changed its logo some time ago and it shows the Canadian flag sort of unfurling and becoming the American flag. I find that very offensive.

In view of the fact that so many Canadians have subsidized and paid for the rail tracking system in the maritimes and east of Winnipeg, I wonder if the member could comment on the appropriateness of having that logo shown over the track system that Canadian taxpayers paid for.

Second, the member talked about infrastructure and the concern for roads in his area. I suggest that the infrastructure spending program and projects, although not directly related to this debate, are selected by the municipality. Therefore, I do not think it is a very fair comment by the member to criticize the federal government. He should really be talking to the municipal politicians.

Third and most important, I listened to the previous member from the Reform Party talk about privatization and I hear this member's concerns about rail abandonment. These seem to be in conflict.

I wonder if the member could explain the abandonment of rail lines in his riding where it is not economically viable.

[Supply, November 15th, 1994]

Mr. Speaker, I listened with intent to the member's dissertation.

I am very interested in the concept of high speed rail transportation for the Montreal-Toronto corridor because those rail systems would go through my riding. I have had some time to examine this.

One of the obvious problems is a matter of population density. It would appear in looking at similar rail systems in other countries-I think of Tokyo and of Paris-that these systems as well do not pay for themselves. We have just watched the recent unveiling of the London to Paris rail system which is encumbered with a huge debt that possibly will never be repaid.

The member spoke about privatization. I guess the question in the back of my mind is this. Is the current Canadian rail system viable as a private enterprise? If it is not viable in its entirety, then would he address breaking up the rail system into small parts and possibly abandoning the whole rail system in parts of Canada?

Is that what the member is proposing, that we break the rail system up, that if private industry decides it is not viable that we cannot get on a train in Toronto and go to British Columbia?