Mr. Speaker, Canada has too often taken a shortcut to economic prosperity. We have been living on natural resources while neglecting the true revenue enhancing areas of secondary manufacturing and technological innovation. The branch plant economy is in disarray. Most research and development occurs south of our border and has crippled our ability to learn from a changing economy and environment.
I would like to ask my colleagues to ponder this as they drive home tonight in their American-built cars and turn on their Japanese television sets.
We are drowning in a sea of debt. This debt is not only at the federal level but involves all levels of government. It is in excess of $650 billion. If we include the unfunded portion of the Canada pension plan, it is over a trillion dollars. This amounts to over $35,000 for every man, woman and child in this country.
A change is sweeping the industrialized world, a change that discards the old smokestack economy for a new knowledge driven society. This is our chance to get our public sector debt under control and at the same time get our economy growing. The easier and least painful way to solve problems is to have the economy grow at a faster rate than government spending; indeed, we should reduce government spending and at the same time get our economy growing.
This is our chance to regain control of our economy and our country for all Canadians, a chance to make the 21st century truly Canada's century.
I will be using two terms in my presentation; one is investment and the other is consumption. I take a rather wide ranging view of the term investment. It is not only building and equipment but also research and development and training and education. In a sense, it is an investment in brains. Consumption, of course, is the simple consumption of goods and services.
We must create and foster more investment and considerably less consumption in order to get our economic house in order, as well as driving our economy on to success as we approach the 21st century.
The two facets of the budget are revenue and expenditure. I will touch only briefly on the revenue side and only with respect to the concept of investment.
The infrastructure spending program is to create investment and thus jobs. Similarly the capital gains tax exemptions are exemptions in support of private sector investment. So to deny these exemptions would be counter productive to stated government objectives. Furthermore, capital gains taxes tend to be inflationary. Without these exceptions it will be a real temptation to government to inflate the economy, and I am sure none of us want to see the days of 21 per cent interest rates again.
Some will argue that these exemptions are for the rich. I would like to point out that the rich most likely have already taken full advantage of these deductions. It is only the middle class that has been unable to utilize these tax advantages.
Specifically I would like to speak in support of the retention of the $500,000 exemption for farmers. Most farmers live a difficult financial life. The constant requirement for capital investment in machinery, equipment and buildings, as well as the low return on these investments, puts a constant hole in their pockets leaving them unable to invest in registered retirement savings plans, or to save. As a result, most farmers regard the farm as a retirement nest egg. So I believe it is very important to retain this deduction.
I note that had the deduction not been available for 1991 this would have only accounted for $235 million. I note that the quantum of revenue from this source has also been declining by 3.3 per cent between 1989 and 1990, and 19 per cent between 1990 and 1991. So you can see, Mr. Speaker, this is not a very significant area of government revenue in any case.
Having argued in defence of capital gains tax exemptions generally, I would like to narrow the focus of this exemption. It should be available only in support of small and medium sized Canadian owned businesses. It should only revolve around trading in small and medium sized shares. I suggest that we eliminate the $100,000 general exemption but expand the $500,000 exemption now allowed privately held small businesses so that this deduction would include minority interests in small and medium sized firms.
I have other ideas for creating secondary markets in these shares so that small and medium sized businesses can get access to the capital they need in order for them to create new businesses and to modernize older ones. Only in this way can they take full advantage of Canada's march to the 21st century.
I would also like to mention in passing that the foreign component of registered retirement savings plans should be eliminated as this deduction is inconsistent with our needs for domestic capital formation.
I would now like to talk about the expenditure side of the budget. This is what appears to the public as the seemingly endless sinkhole of taxpayers' dollars. I have here a statement of federal government expenditures presented by the Department of Finance; old age pensions here, agricultural subsidies there, job creations elsewhere, in short no rhyme or reason, no statement of government purpose.
I come back to my original definition of investment and consumption. I propose that the government prepare its accounts with a view to these two terms. I have briefly attempted to do this. This has been made very difficult for me since no department of government seems to think in this terminology. In any case I have roughly calculated that less than 20 per cent of spending revolves around investment and that the rest of expenditure is in support of consumption.
It seems to me that the government's approach to deficit reduction must have two objectives with respect to consumption spending. First we need to define the core area of consumption spending. Here I think of the genuine need for old age pensions and support for those unable to care for themselves due to physical or mental impairment and so forth. The balance must then be discretionary consumption spending. The overall approach must be a degree of absolute elimination of discretion-
ary consumption spending, and second, for those who remain a conversion to investment spending.
What does this mean? It means we can no longer afford simply to pay people because they do not have a job. We cannot afford to pay mothers a total of half a year's unemployment insurance benefits regardless of the merits or wants for this type of program. We cannot afford to transfer moneys to the provinces that they transfer to the municipalities. In turn they can support youth from the ages 15 to 21 so that they can leave the responsibilities of family life and be unproductive members of society.
Of course we will continue to support the concept of universality for social services in our medical system but we must question whether treating the common cold is an essential service.
The elimination of services or a degree of them is obvious. The conversion from consumption to investment is somewhat more complex. It seems clear that if people are not going to be engaged in work, they should ultimately be trained or retrained in order to regain entry at a higher level than when they left. If for some reason this is not possible these people should be supported based on the degree of their commitment to undertake work directed at the improvements to their communities.
I suggest this will encourage the dignity and self-respect that all humans are entitled to embrace. This commitment of government to upgrade the skills of our labour force will allow all of us to participate in the march to prosperity in the 21st century.
In conclusion the road for Canada is in front of us. It involves a change in attitude by government as it approaches investment and consumption in government finances. Indeed it embraces a change in attitude of all the people in Canada. It recognizes that we can no longer drive our consumption spending based on want but rather it must be based on genuine need. It must recognize in its legislative agenda the need to support investment not only in the small and medium sized Canadian owned business sector but also in the grey matter of all the people in Canada.
The chance to build a greater nation is in front of us. Now is the time to take bold steps to claim Canada's destiny.
