Mr. Speaker, I appreciate the opportunity to participate in today's debate. There are a few clarifications I would like to make with respect to this motion as its wording places a negative connotation on the government's approach to employment insurance.
First I would like to put this topic in some context of the government's overall fiscal management and deficit reduction strategy. When the government took office in 1993, it recognized that the key to a prosperous future for Canadians was getting Canada's books in order.
Thanks to the government's determined and balanced approach, the vicious cycle of high deficits, high interest rates and slow economic growth was transformed into a virtuous cycle where lower deficits have helped produce lower interest rates leading to higher economic growth and lower unemployment and leading ultimately to the elimination of the deficit last year.
Hon. members are aware that the deficit is now dead. It is dead for 1997-98, 1998-99 and 1999-2000. This is the first time Canada has had a balanced budget in 30 years. This will be the first time in almost 50 years that the Canadian government will have had three consecutive balanced budgets.
Canada I am pleased to report in the current economic cycle has had the first balanced budget of any G-7 nation. In addition, the debt to GDP ratio fell last year, the first meaningful decline in 20 years. Again it will fall even more.
We have also pursued budgets of balance, budgets that recognize the need to continue to make key economic and social investments even with demands of fiscal constraint. Over the last four years we have invested in children by enriching the child tax benefit. We have improved tax assistance for the disabled and for charities. We have provided more help for post-secondary students and for those supporting them. We have placed a high priority on improving Canadian health care.
As the books improved, one of our first and most significant initiatives was to introduce legislation to increase the Canada health and social transfer cash floor from $11 billion to $12.5 billion. This will provide provinces with over $7 billion more in cash from 1997-98 to 2002-03.
Now with the deficit millstone gone, we can afford to take even stronger action to help Canadians meet the challenges they face and take advantage of the opportunities of tomorrow. We will do this by pursuing and pushing the balanced strategy we have followed since coming to office, to build a strong economy and a secure future.
First, we remain committed to responsible management of the nation's finances. We will reduce Canada's debt burden to a two front strategy of stronger economic growth and a debt repayment plan.
Second, the improvement in our finances means we can make strategic investments such as the Canadian opportunities strategy. This strategy will improve access to knowledge and skills Canadians will need in the 21st century.
Third, the 1998 budget launches the process of general tax relief starting with those who need it most.
Over the next three years $7 billion in tax savings is being provided primarily to low and middle income Canadians. These measures must be modest in the beginning because the fiscal dividend that makes them possible is modest as well.
The government has made it clear though that it will not allow unsustainable tax reductions to put in jeopardy either Canada's regard for fiscal health or delivery on the country's priorities such as health care and education. As the fiscal situation improves and the debt becomes more manageable relative to the growth of the economy, the amount of resources that can be channelled into other areas, such as increased tax relief, will grow.
This brings me to the subject at hand, employment insurance. As hon. members know, employment insurance first and foremost is an insurance system to help the unemployed bridge the gap between jobs. I can assure the House that our government has no intention of breaking that very important link.
Some of our critics have suggested, and quite wrongfully, that the government is being too prudent and is hiding surpluses that could be used now for other purposes like lower taxes and in particular the tax that supports EI. This is simply not the case.
There is no denying that the EI account has a material impact on the government's fiscal health and stability. The annual surpluses in the EI account have contributed significantly to achieving the fiscal targets over the last four years. However, we should also remember that the government's improved fiscal outlook has a positive impact on employment and the EI account. The decline in the unemployment rate from 11.2% in 1993 to 8.4% at present makes that clear.
Look at what else has been happening. The government has lowered the EI rate four times, from $3.07 in 1994 to $2.70 in 1998. We would like to reduce the EI premiums further but the premium rate must be set to ensure that the EI account will have sufficient funds to pay benefits even during a recession.
In the event of an economic downturn a major increase in EI premiums would be harmful to the economy, as I think the members opposite would agree, and to Canadian workers. Clearly we must avoid that at all costs.
The premium rate will continue to come down but in a balanced manner and in the way to meet all the priorities indicated to us by Canadians, for example, personal tax cuts and health care spending.
I will return once more to the word balanced. Canadians asked for a balanced approach and that is what this government is giving them. We have reduced both the debt and tax burden and increased our spending priorities such as on health care. The fact is that the EI premiums are part of what makes the balanced approach work.
This is not to say that we are not reducing the EI premiums because we are. For 1998 alone, we cut premiums by $1.4 billion. I have just indicated that we will continue to reduce them in a measured way in the future. To those who would say we should cut them faster and deeper than we are already doing, my question would be how? By not cutting the debt? By not reducing taxes? By not spending on health care? I do not think that is what Canadians want.
I should remind hon. members that the EI surplus is currently in the range recommended by the chief actuary of Canada. Let me provide the House with three important facts on which to reflect. The EI premium rate must ensure there is sufficient revenue each business cycle to pay EI costs at relatively stable rates. The current surplus makes prudent provision against rate hikes in the event of unforeseen economic and global changes. It also allows the government to address unemployment where it is most severe.
For example, similar in concept to the 1997-98 new hires programs, the 1998 budget gives employers who hire young Canadians in 1999 and 2000 an EI premium holiday. We must also remember that just a few years ago the federal government deficit was $42 billion. At that time the government looked at all aspects of the fiscal situation and there was no denying the EI surpluses played a role in restoring fiscal health. This was not done in isolation however and contemplated other difficult decisions.
The motion put forward by my colleagues opposite uses phrases such as “catastrophic effects”, “taking over funds destined for unemployed persons” and the government not adapting “to the new realities of the labour market”. I do not believe this is the case.
Canadians and the government and no one else will make the economic and policy decisions for this nation. We have regained control of our fiscal future. By regaining control over the finances, we are setting out a plan to help all Canadians gain access to the tools of tomorrow's success.
I believe we have taken a balanced approach on this issue.