Herb Grubel

[Employment, May 31st, 1996]

Mr. Speaker, the Minister for Human Resources Development noted earlier this week that Canada's persistently high unemployment rates are a puzzle to him and that most European countries face the same problem.

What the minister neglected to mention is the United States has very low unemployment rates. He also failed to note the OECD studies which have identified generous social programs as the main cause for the persistent high unemployment rate in Europe and Canada. I wish the minister had mentioned these facts.

We need in Canada a dialogue over the trade-off between unemployment and the generosity of social programs. We may wish to keep the present system intact but we should do so with a full understanding of the trade-offs involved.

[The Constitution Act, 1996, May 3rd, 1996]

Mr. Speaker, I appreciate having two minutes. I will be very fast. I appreciate the thoughtful comments from the members for St. Paul's and Rosedale. It is rare that we have a discussion at this level of intellectual rigour. Nevertheless, some rhetoric sneaked in.

The main point I would like to make in response to what was said is this. It was said that this is an ideological position embodied in this bill. It is.

I have asked my colleagues, my friends, constituents, this question. The governments of Canada are now spending over one-half of your income. Are you getting your money's worth? I have never yet met anyone who said: "Yes, I am".

The question that has to be addressed when we talk about the ideological basis of this kind of an approach to limiting government is, how did we get there and how can we protect ourselves from going even further because of all of the good sounding arguments being made for specific cases of people needing help. Measures get put into place. They never get eliminated. That is the main issue.

I find it somewhat below the intellectual capacity of these individuals to call my ideas faddish or incorporating unreasonable dogma, or go back to the gold standard or that an idea that comes from America is the worst of all possible things.

I will write a letter to all the members of the legislatures of the provinces in this country that have adopted a similar bill to tell them they are faddish, dogmatic and influenced by Americans. There was nothing about the merit of the bill itself. That is very sad.

Almost all the objections that the members raise have been taken care of by provisions in my bill. The fundamental difference is that I represent that segment of Canadians who believe government is too big, has become too bloated and we need some institutional device for slimming it down. We cannot trust the same system that got us here simply on the promise that now that we have learned in the future we will not do it again.

[The Constitution Act, 1996, May 3rd, 1996]

moved that Bill C-213, the Constitution Act, 1996 (balanced budget and spending limit), be read the second time and referred to a committee.

Mr. Speaker, it is a great honour for me to speak on Bill C-213, which one might call the bill to prohibit deficits and limit the size of government. In order to avoid this mouthful of a description, from now on I will call it the taxpayers protection act.

This bill addresses one of the most fundamental problems facing Canada and other modern democracies. It addresses a problem which has already been taken care of by similar legislation in many of the provinces.

It is unfortunate the government has decided all we can do is speak about it for a few minutes today and publish an obscure text. It will not be made a votable bill. I am very disappointed about this. However the people of Canada will have to judge whether or not this was justified.

In the next 20 minutes I will present my arguments for the necessity of this bill. I will provide a background. I will outline briefly the main provisions of the bill. I will take care of the objections which are certain to arise in the speeches the government has prepared in response to my analyses.

The need for a taxpayers protection act has arisen since the 1970s when suddenly outside of wartime, governments in Canada and in other western democracies began to spend money that they had not raised through taxes. In other words, they ran deficits.

It is well known that very soon the federal debt will reach $600 billion. That amount of money is incomprehensible to most people. Suffice it to say that very soon, in order to service the debt approximately one-third of every dollar raised from Canadians will go to pay the interest on the debt. This is more than a transitory problem.

I have attended a large number of university seminars. I have read many studies. I am personally acquainted with a man who received the Nobel prize in economics for developing a theory which I will sketch briefly. It explains that the deficits in the western world run by governments have been called the Achilles' heel of modern democracy. It is called the public choice theory.

Governments have found it to their advantage to increase spending targeted at providing benefits to special interest groups, groups which have assembled and organized themselves for whatever reason. As a result of those spending allocations and tax concessions these groups receive benefits which in the aggregate make it very worthwhile for them to respond positively to the government. It has also led them typically to resist any opposition party which would promise in an election campaign to cut those special benefits.

Those special benefits typically are not in the interests of all of society. Clearly, they benefit the group to whom they are given but not society as a whole. In looking carefully at subsidies to industry, to agriculture, to wherever our money is going, we clearly see a pattern for many. It is such that if there were a free vote and average Canadians had been asked whether they wanted to be taxed to serve this type of program, they would have said no.

How do politicians get away with giving these benefits to special interest groups? Who is paying for it? The answer of course is that the rest of Canadians are paying for it. Why do Canadians not rise up and say to stop this? The answer is quite simple. The cost per Canadian for each individual program is very small. As a result, it does not pay for them to organize and provide politically effective opposition to these kinds of tax concessions.

What is worse, there are Canadians who will have to pay for this bribing of special interest groups, this buying of votes and these people cannot protect themselves. They are our future generations. They will have to pay the interest on the debt because some governments, rather than raising the money now to pay for the special interest groups, have found it more convenient to let future generations pay. Nobody is speaking for them.

This is the modern theory of public choice. It is widely accepted as a fair description of processes that have haunted all modern societies. While we have begun to take care of the current deficit, there is no guarantee these problems will not be repeated in the future. That is why we should have legislation, preferably constitutional requirements to limit deficits and the size of overall government spending.

In all those issues the question always arises, why did all these spending explosions take place in the 1970s? Why were governments suddenly able to get away with adding to the debt and letting the unborn and unprotected generations pay for it, rather than facing the voters and taxpayers of the day? The answer comes in two parts.

Modern communications technology has made it possible even for relatively small interest groups to get together and become very effective in making themselves known to government. They make it known that they can deliver the necessary marginal votes which will bring about a victory in crucial electoral districts.

Also, a revolution in thinking about the nature of capitalism which was brought about by Keynesianism removed the previously existing stricture on deficits. Until the 1970s deficits had been a sin for governments which they engaged in only at the expense of severe punishment by the voters.

Then came a revolution in economics. I was a graduate student at the time and learned and absorbed it. I was soon cured of it and have been fighting against it ever since. Even today there is still a generation of economists who believe that deficits do not matter, that they can be piled on to future generations in order to maximize output today. I believe this is also being reversed.

Having set the stage for explaining the necessity for Canada to have a constitutional provision or at least an act that prohibits deficits and limits the size of government, I will sketch briefly in non-legal form the provisions in my bill.

The first provision is that the government must balance its budget every year. The second provision is that the size of government must be limited to the extent that we take today's spending and allow increases in spending only to reflect inflation and population growth.

What is innovative in the bill is the third provision. If the government does not meet the deficit target, that is, it does not have a balanced budget in any year, there will be penalties. The

penalties will be reductions in the pay of members of Parliament who voted for the budget. For example, if there is a budget of $200 billion with a deficit of $10 billion, that is 5 per cent. According to my proposed legislation, the pay for that year of members of Parliament would be reduced by 25 per cent, the 5 per cent deficit times five.

Similarly, there would be provisions for penalizing government members of Parliament who voted for a budget which resulted in an increase in the size of government going beyond that which was specified. In other words, spending in the next year must increase by no more than inflation and population growth.

Turning now to the topic of the objections I am sure both the government and the opposition will raise to my proposed bill, the first is that the sovereignty of Parliament will be violated. I must confess that for many years I was on the side which I am sure they will represent. In my naivety as a young man I believed that every four years voters had the right to throw out those bastards and therefore there was no reason at all for there to be an externally imposed limit on government. Democracy works that way.

I have written a major study and have read a lot of different thinking on this matter. One thinking is that all parliaments of the world have had limits imposed on them. We could look to England and the Magna Carta and the United States with its constitutional amendment on freedom of speech. Yes, even Canada has put limits on the freedom of Parliament.

Parliament is not able to pass legislation which violates the charter of rights and freedoms. It embodies our fundamental rights which are not to be violated by a simple majority vote in Parliament. I believe that future generations should be protected through a similar charter which would protect their right to their income, unburdened by obligations incurred by past generations over which they had no democratic influence.

An amendment to the Constitution is as important as the charter of rights and freedoms. It does no more than the charter of rights and freedoms does on certain legislation. Democracy cannot be run by simple majority on issues which affect fundamental human rights. It has to be limited because sometimes people, overrun by the heat of a current debate, by a current issue, will be tempted to ask Parliament to pass laws which in themselves will destroy the very foundation of a democracy.

That is the justification for having freedom of speech as one of the most fundamental rights; the right to a fair trial, to be innocent until proved guilty. Those are fundamental rights which no Parliament may override.

I believe that in the same vein we need protection for future generations which cannot be overridden by Parliament.

The second objection that I know will be coming is that it is impossible to balance the budget every year. Here too I had a conversion. I believe the Minister of Finance in this government has given me the clue on how it is done. The government builds in a contingency reserve. It simply makes sure that its estimates of spending are conservative, that its estimates of revenue expected are conservative. If they happen to go in the wrong direction, the government has a cushion so that it does not have a deficit.

In spite of such conservative attempts to make sure there are no deficits, there may be unforeseen contingencies. It could be an earthquake, it could be a war, it could be almost anything. Under those circumstances Parliament should be protected.

I cannot go into the details here. If Parliament is asked to define what is an acceptable contingency, it is in the same position where, in the English style democracy, the government really is a dictator and can say: "We simply define it is a contingency and therefore we can run deficits".

Other parliaments have handled those situations by requiring that there be a 75 per cent majority vote in favour of accepting what is an acceptable contingency which would permit the government to run a deficit in that year.

Similarly, on limits of spending levels I have provided a flexibility that they must be equal only over a three-year period. There will be a downward bias in overall government spending. This is all deliberate because a bias is also offset by the fact that the contingency spending every year will result in a reduction in the debt. Therefore, more money is becoming available every year because the interest cost on the debt decreases and therefore this will sort of wash out.

Finally, I know a general objection which probably will never be raised by the Liberals who have such unlimited faith in the ability and honesty of government. The Canadian public is cynical. They will say: "What good does it do to pass such a bill?" I am an accountant and I could cook the books such that whatever the limits are, they can be got around by redefinition and by the shifting of expenses between periods and categories and all that kind of thing. I was very much aware of this. Therefore I have some technical provisions which suggest that it should not be possible to do so.

I hope we will have a lively debate on this subject and I look forward to the comments from the other members who are here taking their Friday afternoon to debate with me.

[Petitions, May 3rd, 1996]

Mr. Speaker, I wish to present a petition signed by concerned constituents in several ridings around British Columbia.

They urge the government to consider extending benefits or compensation to veterans of the wartime merchant navy equal to that of veterans of Canada's World War II armed services.

[Employment Insurance Act, May 2nd, 1996]

Madam Speaker, I have a long attachment to questions of the economics of unemployment insurance.

I was one of the first scholars in Canada to produce evidence that the imposition of generous unemployment insurance benefits raises the rate of unemployment.

All through the post-war years until the early 1970s, American and Canadian unemployment rates moved very much in unison. They never diverged by more than one-half of a percentage point. But in 1972 the system in Canada became much more generous with respect to the amount paid when people became unemployed relative to the wages they were earning, the number of weeks necessary in order to become eligible, the number of weeks paid after one became unemployed. Our system was one of the most generous in the world.

Studies have been done to explain why these differences between the Canadian and U.S. unemployment rate developed in the early 1970s and have since widened and now have settled at approximately 3 to 4 percentage points. It is not possible to explain these differences by differences in monetary policy, fiscal policy, exchange rate policy, any of the traditional measures.

The one that dominates the results of attempts to explain these differences is the generosity of our unemployment insurance system. This generosity has reduced an enormous amount of lost output. The idea of having a generous system is very laudable. There is no denying all of the arguments made by the speakers from

the Bloc Quebecois. The more generous the system is the better off are the people who are receiving the money.

As people who are concerned with the welfare of all Canadians, what are the consequences of these generous benefits and the resultant increase in the unemployment rate? I have estimated that as a result of this increased generosity, a 3.5 per cent higher rate of unemployment existed than would have been if we had stayed at the levels at which we were in 1972. Then our national output would be over $11 billion higher.

The tax take alone on that $11 billion higher income would be $3.5 billion. The deficit would be cut substantially and a lot of workers who are now unemployed would be employed.

When looking at reform of the unemployment insurance system it is necessary to do something in addition to what the Bloc members have been saying in all of their speeches. If unemployment insurance benefits are cut, if the cost of being unemployed is raised, certain people will be hurt. That is true. However, if that is done benefits are provided to all Canadians. The most obvious one is that the unemployment rate would be lower. Another is that output would increase and taxation revenues would go up.

What has to be done is consider adjustments to the present system which would bring about these gains in output and reductions in unemployment at a cost which would not be too high. I have four measures which I believe would be widely and readily acceptable to Canadians in order to gain these benefits.

The first and most obvious is that the system can be made less generous. Maximum benefits equal to 53 per cent of previous wages offered by our system now are at or very near the top of benefits paid by all industrial countries. However, generosity over the UI system also depends on the ease with which workers become eligible, how long they can receive benefits, what industries are covered, and so on.

It is interesting to note that in recent years the system's generosity has been reduced substantially. That was one of the conclusions reached at a recent conference held here in Ottawa. Some analysts suggested that it may now be no more generous than it was before the 1972 reform.

The pre-1972 levels are not necessarily ideal and further cuts in generosity should be considered as long, and I emphasize this, they do not impose undue hardship on the neediest.

The second measure I believe that Canadians would accept and which would bring huge benefits involves tougher measures against fraud. I have always treated with some scepticism the results of internal audits made by the system which found fraudulent claims to be about 1 per cent of all benefits paid. How did the investigators discover what are deliberately hidden practices? What incentives do they have to show that their bureaucratic and political bosses are running a system that permits lots of fraud?

There is evidence that my scepticism may be warranted. In the equivalent of a social science experiment, five U.S. states recently introduced systems for the positive identification of people making welfare claims. It is difficult to forge ID cards in numbers tracked by computer. They found that fraudulent claims were between 8 and 15 per cent of welfare payments according to a letter published by the Globe and Mail on April 8, 1996.

I have a question on the Order Paper for the Minister of Human Resources Development. In the spending estimates of the national accounts, I discovered that last year the amount of money recovered from fraud in the insurance system rose by about 3.5 percentage points or several million dollars.

I have asked the minister to explain why, in one year, there was such a dramatic increase. Was it because new measures were undertaken? What was the cause? Certainly it could not be explained by people suddenly becoming 3.5 per cent more fraudulent than they were before.

The third measure I would recommend is the elimination of specific types of abuse. I am very careful not to call them fraud. I talk about abuse.

All of us have heard about entire school boards announcing in April that the teachers and other employees of the school board would be laid off in June after classes stop. As a result of this, eligibility for unemployment insurance is established. In September, these people get rehired. That is an abuse of the system. It was never intended.

We know the story that the former Minister of Human Resources Development was bringing forward all the time. Automobile workers were constantly negotiating contracts that involved unemployment insurance benefits in their pay package. Those kinds of things can be made illegal completely and directly.

Finally, for those people who see this program and would like to have a more elaborate explanation of what is going on, there are measures available for reducing gradually the abuse that is taking place by permanent transfers to seasonal industries.

It makes no sense that the rest of Canadian workers, some of them poor, in areas other than those benefiting, that seasonal workers should be receiving, consistently year after year, six times the amount of money that they pay in premiums.

I have some ideas on how to do this. The paper is available. Please write to me at the House of Commons.

[Sales Tax, May 2nd, 1996]

Mr. Speaker, in all of Canada second hand dealers in everything from books to jewellery to boats are fuming about the change in GST regulations that wipes out the tax credits they used to get.

The government's budget bragged "no tax increases". With the nationwide tax increases I just mentioned, is this statement, made so proudly in the budget, still true?

[Sales Tax, May 2nd, 1996]

Mr. Speaker, under the finance minister's plan to hide the GST in Canada he has added to the list of taxable items things like children's clothing, wheelchairs, books and medication.

Before they were elected the Liberals claimed they cared and would not tax these things. Why did they stop caring once they were elected?

[Budget Implementation Bill, 1996, April 24th, 1996]

I only quoted a highly placed employee in the ministry of finance of the Government of Ontario who called it a bribe to the governments of the Atlantic provinces. That will already take a significant proportion of that built-in reserve.

Let us say it will still be worth $2.5 billion. What we are talking about is $5 billion that is put into the budget as a source of income which the government has no right to have in there. By definition, including the contingency reserve, the government will not meet its target. I ask myself: Why is the contingency reserve there? In case something bad happens.

We heard many witnesses in the finance committee say that almost certainly within the next two or three years the United States economy will slow down significantly. Expansions never last forever and it has already had an expansion of almost seven years.

The contingency reserve on spending was put in there because there might be another upheaval in capital markets outside Canada like there was in Mexico. The contingency reserve was put in there because we might find there may be a little disturbance in Canadian capital markets because of political developments in Quebec.

Put that on top of the dilemma in which the government finds itself of having used to achieve its targets money that is not meant for that use. There will be very serious questions raised about the budget. These are questions which I did not raise before. After all, it is one thing for special interest groups, for the representatives of employers and workers, to come before human resources development and make their case.

It is now serious because the Minister of Human Resources Development has added his very influential voice to all of those who have said that money should not be used for the purpose for which it is being used. It reveals that the government has not had the courage to do on the spending reduction side what is necessary to save the country from bankruptcy. Please do not shoot the messenger. Sooner or later the media would have discovered that anyway.

Interest rates may rise because people will find out that a minister who comes to Wall Street and says we are right on target, we will be at 2 per cent per year, will be found either not competent, that he did not know he could not keep that $5 billion, or that he may have been misleading them deliberately. I do not know what the answer is but I would not be surprised if sooner or later that question came up. How do you think the capital markets will react?

I do not want to be a doomsayer. For the sake of Canada, for the sake of the Minister of Finance, for the sake of the government, I hope everything I said can be in practice truly brushed aside as ideas and analyses produced by an obsolete academic economist who does not know what he is talking about and has ventured into the arena of politics and is out of his depth.

For the sake of Canada I hope I am right, but I have the feeling that what we have coming is a major problem for the government.

[Budget Implementation Bill, 1996, April 24th, 1996]

Mr. Speaker, I have spoken on the subject of the budget before and I was going to cede my place to my colleagues, but a new development has taken place which has very serious implications for the budget.

The Minister of Human Resources Development has joined a chorus of demands by labour and employers that there is a need, if not an obligation, on the part of the government to lower premiums on unemployment insurance contributions made to the unemployment insurance fund.

If these premium rates are lowered, as I think they should be and I think they will be, then the government's vaunted target of 2 per cent deficit of GDP in two years' time cannot be met. There is even doubt that this year's projections can be met. This is a very serious matter.

According to the budget document, the government will violate tradition. For reasons I will indicate in a moment, it is almost illegal. However, I do not know if I can call it illegal. On the one hand by keeping up the premiums or on the other hand it does the right thing with respect to premium rates, the government will not be able to meet its target.

This is a summary of what I would like to include in my speech. I would like to build to a conclusion and support it with some more careful analysis and numbers.

Let me first remind people that the unemployment insurance system is an independently funded account which by law has to balance over time. I took the trouble of calling the solicitor for the Department of Human Resources Development to ask what the law is. He told me that it should be balanced over time. A few years ago the auditor general required that the government adhere to this principle.

When the balance accumulates the government is, therefore, obligated to lower premiums. If the balance becomes negative, premiums have to be raised.

The government is making the argument that is really pro-cyclical, that is, it aggravates the business cycle because the funds accumulated in the UI system are likely to become negative when there is a recession. If during this recession the premium rate is raised, it will result in the further withdrawal of purchasing power. It therefore aggravates the size of the business cycle.

Therefore, I agree with the government that we should accumulate a certain reserve during good times so that the fund would be able to ride out the next recession without having to raise premium rates again. However, there ought to be a limit to the amount which the unemployment insurance system can accumulate.

Why is this system separate and is there this rule that the balances must come to zero through time? The reason is quite obvious. The unemployment insurance premiums have two very serious characteristics. First, they are regressive. The maximum contribution that individuals pay to the fund is $1,320 a year. This $1,320 a year is paid by someone making $30,000, someone making $100,000 and someone making $1 million. The percentage which this $1,320 represents of total income is much higher for lower income earners than for higher income earners. This is clearly a regressive tax.

The reason why the rule exists that this must not be used to finance general government expenditures is that general government expenditures accrue to everyone and they are part of a system income redistribution, and so on. Therefore, this is not money that should be used to finance general government pensions and various other things. Those government functions should be financed by general taxes in the form of personal income taxes, the GST and corporate income taxes because all of those benefits are accruing to all Canadians. All are paying for it and it accrues to all of them.

The UI contributions, on the other hand, are simply for providing protection against the risk of becoming unemployed.

The second damaging characteristic of unemployment insurance revenues is that over one-half of them are paid by employers. People who go out and think that they can afford someone to work in their donut shop for $10 an hour will be deterred from doing so because the government says: "That is not enough. You have to pay the 3 per cent to the government in the form of a contribution to UI". This is why it is widely known and has been given the name by the government of a job killing tax.

Any time that the government legislates increases in the cost of labour which have not been negotiated in the labour market, it raises the cost of labour and is therefore detrimental to employment.

It is quite clear that it is not in the interest of society. It is not legal for the unemployment insurance fund to be in surplus for a prolonged time or in a surplus that is used to finance general government expenditures. That is why the representatives of labour and employers have been coming in droves to the hearings of the human resources development committee and have been asking for a reduction in the premium. That is why recently the Minister of Human Resources Development noted that he too believes the premiums are to be lowered.

Just to give an idea of the magnitude of this effect, the revenue from insurance premiums in 1995-96 will be $18.5 billion. People have great difficulty envisioning what $18.5 billion is. Let me compare this with what is expected to be collected from corporations. Corporations are expected to pay $14.5 billion. The UI system is expected to contribute $18.5 billion to total revenue.

On it goes through 1997-98. It is expected that by 1997-98 the unemployment insurance contributions revenue collected by the government will be $19.5 billion. That may or may not be a lot; it all depends on what the obligations of the UI system are.

The budget again has an answer for that. In the year 1995-96, the $18.5 billion is required to provide unemployment insurance benefits worth $13.8 billion. The difference between revenue and expenditure is $4.7 billion. It is in the budget which is being debated today that over this year and the following two years the excess of revenue collected from workers and their employers minus what is being paid back to them through unemployment insurance benefits will contribute to the nation's surplus $4.7 billion, $4.6 billion and $5.0 billion in each of those years respectively.

A surplus also existed in 1994-95. At that point it was the highest it had been in a long time, $5.4 billion. It was used to reduce the accumulated deficit of the system, but by the beginning of this year the surplus, the reserve of the system, has begun to grow. It is estimated that by the end of this year it will be about $4.5 billion, the following year $9 billion and thereafter $14 billion.

Again, people have very great difficulty relating to these numbers. The $14 billion at the end of 1997-98 is equivalent to one full year's outlay in the budget for unemployment insurance benefits, one full year of reserves, the highest these reserves have ever been in the history of Canada. I have a graph which shows this.

It was $2.2 billion. The government has predicated the achievement of its deficit target on the assumption that this accumulation of surpluses will go to $14 billion. It is not reasonable. The largest cumulative deficit that ever existed was $5.8 billion.

These premiums by all standards must be lowered. They cannot go on like this. It is almost illegal. It is killing jobs and it is unfair. As some people have said, the money in the UI fund does not belong to the government for its general programs, it belongs to the workers. I have made that case and it is fair and justified.

A very great problem is developing for the country and for this government. This is what it will mean two years from now using the government's figures. If the government did the right thing and lowered the unemployment insurance premium, there would be no addition to the system's reserves. In 1997-98 the deficit is projected to be $17 billion. If the $5 billion generated as a surplus by the UI fund were not available, the deficit would be $22 billion, just a little bit less than the preceding year, which is next year. There would have been no improvement.

The Minister of Finance brags on Wall Street and everywhere else: "I have achieved our target. I have broken the back of the deficit". The entire government plan and the minister's proud achievement are predicated on keeping money that does not belong to the government but belongs to the workers. It is in the books. The auditor general said so. It makes complete economic sense. The government is coming close to the mistake it made on the GST.

I cannot believe that a man with the intelligence, background and integrity of the Minister of Finance and with the huge resources he has available in terms of this country's best economists would say in front of investors on Wall Street that he has broken the back of the deficit, without acknowledging that his prediction is based on the assumption he will have $5 billion in each of the next two years coming in as revenue he knows does not belong in that account. That revenue belongs to the workers.

That revenue should not accrue because by tradition in the way the UI fund has been set up the premium rates should be lowered. Again I have a graph. It shows that whenever the cumulative deficit was large enough the rates would be raised. If there was a surplus, the rates would be lowered. I have not had time to look at the speeches made by the Liberals when they were in opposition,

demanding I am certain the lowering of benefits because the money belonged to the workers. However, here they are using it to achieve their target.

What are the Liberals going to do? Are they going to shamefully make that fund grow to $14 billion when the highest ever in the history of Canada has been $2.2 billion? It certainly is in the budget. If we do not do it, the target is not going to be met.

Where have the media been? Have they not noticed this? Where are all the incisive analyses that should be going on about this subject? If they would like some background information, they could call me.

There is no way in which this government should resist the supremely justified demands of employers and employees, and organized labour is adding to the chorus that the Minister of Human Resources Development do the right thing and lower this regressive tax which is killing jobs. The government should be lowering the premium rates which are taxed rates. They are regressive because they fall so heavily as a percentage of income on workers in the lower echelons. They are killing jobs and they add to the cost of employing labour. This is a major scandal. It is a scandal which I predict will become very similar to that of the GST.

I know the minister in response to questions on this subject will say that the government has plenty of reserves built into the system. Let us look at that. He has built into the 1997-98 budget a $3 billion contingency reserve. Part of that will already have been eaten up by the money which he has just committed to pay as an inducement-and some people in the Government of Ontario are calling it a bribe-

[Questions On The Order Paper, April 24th, 1996]

How does the Minister of Human Resources Development explain the increases in the value of fraudulent claims between 1993/94 and 1994/95 for old age security, from $256,140 to $1,076,882, and CPP, from $244,571 to $554,947, as reported in the Public Accounts of Canada, Volume ll, Part ll for these two years?