Mr. Speaker, Canada's fiscal consolidation is an essential component of our economic strategy. We are fully aware that the ever-growing debt has a negative impact on our whole economy.
A growing debt leads to tax hikes, as we saw under the Conservative government, discourages investors, pushes up real interest rates, forces us to reduce spending on important government programs and translates into a large external debt. For some years now, a larger portion of our budget has been spent on interest charges than on programs. The interest we must pay is now the main reason why the deficit will not go away.
That is why the government is determined to stop the gradual and rapid deterioration of Canada's public finances. Of course, our first goal is to eliminate the deficit and substantially reduce the federal debt. But, in the meantime, we set for ourselves an intermediate goal that we can achieve provided that we remain vigilant and that everyone shares the burden. Within two years, that is, by the 1996-97 fiscal year, we will reduce the deficit to 3 per cent of GDP, as we promised in the red book.
The last time the annual deficit was limited to 3 per cent of GDP was in 1974, 20 years ago. Of course, to achieve our goal, we must take measures that will affect everyone in one way or another. Attitudes must change. Innovation must be emphasized. The dependence of some groups and sectors on the government must be reduced. We will do it by working hard on two fronts, as we have done since we were elected a year ago today.
We will continue to stimulate the economy to create jobs and to increase our tax revenue; we will also continue to vigorously tighten our spending on all fronts and at every level. The engine of the economy is a dynamic private sector. Nevertheless, the government also has a role to play by showing leadership. In a knowledge-based economy, success depends on skills and the ability to innovate, two factors that can be influenced by government.
The government can play a complementary role to that of the private sector. It can contribute to the innovation process, especially in the early stages of research and development. It can also promote the diffusion of state-of-the-art technologies to small- and medium-sized businesses. The state can ensure access to markets for our exporters and help them get a larger share of emerging new markets. It can also help develop the export capabilities of small- and medium-sized businesses.
We feel it is important to keep the inflation rate between one and three per cent, in order to promote a stable economic climate. We fully recognize that we want to do a good job in that respect. In fact, our government made important decisions to that effect in the last year and the benefits are now starting to be noticeable. Indeed, over the last few quarters, businesses have seen their profits increase substantially.
The recovery is also apparent in that consumer demand increased by 3.7 per cent in the first quarter of 1994. Confidence is slowly being restored. Investments are on the rise and jobs are created. From January to September of this year, more than 327,000 jobs were created. Most encouraging is the fact that almost all are full-time jobs. This has a significant impact on the mood of Canadians who are now beginning to sense a greater stability and are regaining hope.
This is not to say that all the problems have been solved. Far from it. Unemployment remains high, much too high. Interest rates, which are largely influenced by the U.S. economy, have maintained their upward trend in all industrialized countries. And, more importantly, our national debt continues to increase.
Obviously, the issue of public debt in Canada cannot be solved through economic growth alone. Some drastic measures must be taken to reduce spending and improve our taxation system if we are to succeed in reducing the debt.
Our main target remains spending control. In order for our country to become more productive, the state itself must be productive. It must learn to become more efficient to help make our economy more productive. In this respect, I think everyone will agree that we are doing everything we can to implement the principles of sound management and to streamline expenditures. We want to eliminate or at least reduce government activities that do not have a high priority and concentrate our limited resources on the most important programs.
Mr. Speaker, I know that you yourself are involved in this ambitious effort to streamline our operating procedures. In fact, the implementation of the Gagliano Plan has already saved the administration of this House millions of dollars. We have taken initiatives at many levels: we use new technologies to reduce inventory; we have eliminated redundant services; we are asking certain sectors to be more realistic in the way they reflect market prices. We are asking everyone who works on Parliament Hill to do their share to reduce spending. Not surprisingly, the level of co-operation is very high. This is largely due, I am sure, to the spirit of fairness and equity that you, Mr. Speaker, have maintained during this process of rapid change.
All members of this House have also had an opportunity to help streamline federal spending in the course of the many debates we have had for a number of weeks on the restructuring of federal departments. There again, the achievements are impressive.
Under the previous government, the cabinet consisted of 40 people, all heading large bureaucratic structures. Today, we are doing a better job with only 20 departments. The best part is that restructuring not only helps us save money but ensures that government services are more flexible, more efficient and more accessible to the public.
Unfortunately, not all members opposite are taking the battle against the deficit seriously. The Bloc Quebecois members shout and hit theirs desks with their fists to show more forcefully that they want to fight the deficit but, everytime we propose concrete steps to do so, they are against them, especially if the cuts hit close to home. You should cut, says the Bloc, but not in our backyard. Are they really serious?
As to the Reform Party, their approach to deficit reduction is not only unrealistic, it is plain dangerous. If we listened to them, the country would be thrown into a recession which would last our lifetime. We must continue on the path defined by the Prime Minister and the Minister of Finance. We are going to carry on with our attack against the deficit and we are going to concentrate our efforts on job creation. Our goal is not only to increase the number of jobs, but also to contribute to the improvement of our standard of living and to the preservation of our principles of social justice.
The motion before the House leads me to believe that the earpieces of the Reform members are not working. It is either that or they have not been listening to the Minister of Finance when he has spoken on the government's fiscal policy. It also appears they have not read the grey book "Creating a Healthy Fiscal Climate". Had they heard the Minister of Finance speak to the Standing Committee on Finance or had they read the document they would know that our ultimate goal is a balanced budget.
Yes, we absolutely share their realization that the vicious circle of rising debt and deficits must be broken. As the minister noted in his recent speech to the finance committee: "If we don't do the job, we will fail at everything else". We will win. We will not fail. Our party, our caucus, our cabinet and the Prime Minister are committed to reversing Canada's fiscal decline. I realize the Reform is also interested in reversing Canada's fiscal decline. However, unlike the Reform Party, we have presented a realistic strategy so the Canadian people will realize our objective.
The fiscal update book sets out the scope of action needed to achieve the government's fiscal goals. It provides an accounting of government spending together with a detailed description of the source of government revenues. Reform does not have a grey book equivalent. In fact it has nothing but soft generalities, blanket statements about reducing the deficit to zero, or borrowed prescriptions.
This document that the Minister of Finance presented to the finance committee contains the information necessary to begin a broad public debate on the choices to be made and the actions to be taken in the 1995 budget. Its intention is to help focus the 1995 prebudget consultation.
Let me say here that this is the first time in Canadian history that a government has opened the budget process to consultation. Before, the process was that the Minister of Finance would meet privately in his office with pressure groups whether they were from business, labour or social groups. Only on budget night would we learn what were his positions.
A partial process was started right after the election last year. Through the reform of House procedures this year, we are able to have a process where every year the House finance committee will receive an economic statement from the minister and will go across the country to consult with Canadians and report to the minister. Then the minister can make his choice.
Let us not forget that Canada's fiscal position impacts on each and every Canadian, as will the action to bring our debt and deficit under control. That is why we are determined to work in partnership with all Canadians to determine and implement a solution.
The finance committee will hold nationwide public consultation on how to create an economy worthy of Canada's potential. The finance minister will be meeting with people from all walks of life to hear their ideas on issues. We want to know Canadians' budget policy views. They will assist us as we address the difficult choices which lie ahead.
In the grey book we have laid out some principles and values which will apply to the difficult choices which face us. I would now like to turn to those principles.
Principle number one without doubt is that deficit reduction and debt control are essential parts of our strategy to create jobs through economic growth. Indeed there is no greater economic priority than to resolve this issue.
Our government will reduce the deficit and control the debt. Doing so will certainly lower taxes and interest rates. This will ensure economic growth through increased productivity and investment, sustained job growth, entrepreneurial vigour and consumer confidence. However, the debt and deficit cannot be reduced overnight. To do as the Reform Party urged during the election and balance the budget in three years would unleash substantial and lasting economic difficulties on all Canadians. It would also violate the other guiding principles laid out in the fiscal book.
For example, fairness must be a principle characteristic of any action we take to bring our fiscal situation under control. We must ensure that the most vulnerable in our society are not left behind. Expenditure reduction must not be an excuse to abandon those Canadians in greatest need. That is exactly what would happen under the Reform's draconian suggestions. They forget that transfers to individuals was the largest component of program spending in fiscal year 1993-94, over one-third of all program spending went directly to individuals. That includes elderly benefits, unemployment insurance, veterans pensions and allowances and transfers to Indians and Inuit.
In all honesty I cannot find the words when I think of the conditions the most vulnerable would face if Reform were sitting on this side of the House. Deficit reduction would be a mere accounting exercise. Let us not forget it is not merely an exercise out of an accounting book. We are talking about people.
That will not happen with this government. Unlike Reform, we realize that deficit reduction has a significant impact on our broader economic and social goals. That is why in the grey book we have set priorities and made reasoned choices.
For example, we have announced an interim target of reducing the deficit to no more than 3 per cent of the gross domestic product by fiscal year 1996-97. At 3 per cent of GDP, economic growth will exceed growth of the debt. We will then have an extraordinary opportunity to move toward a balanced budget.
The question is: What actions do we take to get there? We believe that to hit our targets the budgetary action should weigh most heavily on the expenditure side. Canadians quite frankly are overtaxed. They know it and we know it. The government must do more with less. The bulk of our savings should come through cuts in program spending and not through higher taxes.
Of course, as the Minister of Finance noted, Canadians must realize that if they want to avoid more taxes they must be prepared to support smaller programs, including programs that benefit them directly.
That is why the Minister of Finance directed the committee to ask the specific question of Canadians who appear before it in the prebudget consultations: Where should we cut and by how much? Believe me, the minister is not looking for generalities. He gets enough of those from the Reform Party. He wants to know the trade offs, the details and specifics. He wants Canadians to put themselves in the government's shoes and make hard choices.
The minister also wants to know if Canadians believe that our economic assumptions are appropriate, if our growth assumptions and our interest rate assumptions are prudent, and the reason is simple. We believe it is essential that government make prudent assumptions to guide its economic and fiscal projections.
In my experience, and I have been in this place for about 10 years, the Conservative government, Reform's Tory cousins, proved that missing fiscal targets destroys credibility and merely postpones the need for tougher measures in the future. However, meeting targets establishes and strengthens credibility for the future and is also considered reasonable progress.
This Minister of Finance believes in meeting targets. He will meet his targets and we will have a better Canada.