Mr. Speaker, I am very pleased to rise in the House to express my profound opposition to the budget that was tabled last week. Not only is this budget almost completely lacking in substance and content, the government has also used it primarily as a branding opportunity. At the end of the day, it contains a number of measures that are useless and, in many cases, downright harmful to Canadians.
Unfortunately, the budget is lengthy simply because the government added image-boosting measures. I only have 20 minutes to speak, so I would like to get to the heart of the Conservative government's budget 2013 and explain why it goes against Canadians' interests.
I will begin by speaking about the measure that has probably been the most controversial, particularly in Quebec, since 90% of the money allocated to this tax credit goes to labour-sponsored funds in Quebec. I am talking about eliminating the tax credit for labour-sponsored venture capital corporations. The government is looking to eliminate the 15% tax credit by 2017, thus saving $335 million.
Why is the government taking this approach? We are hearing all sorts of reasons and excuses. When the question was put to the parliamentary secretary on Friday, she said that it was not working. The government consulted the OECD, which said that labour-sponsored venture capital was not bringing in sufficient returns, so it is time to move on to something else.
Others are saying that it is because the funds now have sufficient capital and are effective. Depending on who you talk to, the funds are either working or they are not. The parliamentary secretary says one thing and the Minister of State for Small Business and Tourism says another.
The fact is that labour-sponsored funds work. This model for economic development has worked well in Quebec in the past and is still working. For example, I would like to mention Quebec's Fonds de solidarité FTQ, which was created 30 years ago. Since then, the Fonds de solidarité FTQ has invested more than $10 billion in Quebec. The money has been invested in start-up companies and in businesses that are having difficulties and need an infusion of capital to get back on track. Since 1990, the Fonds de solidarité has created or maintained 500,000 jobs in the province. The Conservatives are putting that template for success in danger by eliminating the tax credit for venture capital corporations.
Furthermore, 60% of the fund's assets are invested in Quebec. This came out nowhere. There was no justification or preparation. It was only a few paragraphs, somewhere in the middle of the budget. No justification is given, and if there is any, it is contradictory.
Nonetheless, what is interesting about this budget is that on pages 204 and 205, there is a section on enhancing Canada’s venture capital system. I would like to read part of that section:
Recognizing the importance of the venture capital industry to Canada's future productivity growth, Economic Action Plan 2012 announced resources to support Canada’s venture capital industry, including $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
What does this mean? This means that the Conservative government hopes to save $335 million by taking away a tax credit that benefited all Canadians, and especially Quebeckers who invested in the fund. The government is taking it back, only to turn around and give it to the private sector, to perform the same function. Budget 2013 renews 2012 provisions that allocated $250 million to establish new, large venture capital funds of funds, led by the private sector; $100 million to recapitalize existing large private sector-led funds of funds; and $50 million invested in three to five existing high-performing venture capital funds in Canada.
How can the Conservative government justify ending a measure that does so much to help Quebeckers' and Canadians' ability to save, and taking that money only to give it to the private sector to perform the same function, but less effectively?
Indeed, with the Fonds de solidarité, the 15% allocated to tax credits served to recognize the fact that the fund did not perform as well as private funds.
The reason is quite simple. Labour-sponsored funds, like Fonds de solidarité FTQ and Fondaction CSN, quite often invest in local economies, in industries and in businesses that are of no interest to the private sector because such investments offer high risk and a low return over the long term.
The purpose of the tax credit was not just to build these two funds, but also to recognize the different mandate that labour-sponsored funds have in terms of investing in and supporting local economies. In that sense, the Conservative government is missing the boat.
I would like to quote what Marcel Côté, from SECOR, a consulting firm in Quebec, had to say about Quebec's Fonds de solidarité in particular, since that is the best known fund. He said:
[The fund] has played a very important role in Quebec's economy and has served its purpose quite well. The fund has boosted savings and encouraged people to save for their retirement.
Quebec's Fonds de solidarité has been criticized by the Montreal Economic Institute and the Fraser Institute—the usual suspects, as it were. According to them, the fund is not effective enough and does not perform well enough, and not enough assets are being invested.
Quebec's Fonds de solidarité commissioned two studies to see whether the criticisms were founded, and one of those studies was conducted by SECOR, which, believe me, cannot be accused of having New Democratic leanings.
One of the things SECOR wanted to determine was how long it took for the provincial and federal governments to recoup their initial investment. When money is invested and a business grows, more revenue is generated, either through the economic growth of the community or through the taxation of businesses that are making a profit. SECOR came to the conclusion that every dollar invested by the fund, every dollar of the tax credit allocated to local businesses or initiatives, was fully recouped by the federal government in three years.
There is no net loss for the federal government. What the government does not recognize is that these are investments and that the tax credit represented an investment.
Another measure that seems ridiculous to me is the phasing out of the additional deduction for credit unions. This measure affects credit unions and caisses populaires in Quebec with taxable capital employed in Canada of less than $15 million. Under this measure, the differential tax rate for small credit unions or caisses populaires will be eliminated by 2017.
Why does the government not mention this? The individuals we spoke with on the government side once again gave contradictory reasons.
However, as is the case with the labour-sponsored funds, we must recognize that the lower tax rate for small credit unions was in place as a result of their specific mandate, which is different than that of other banking institutions. An example that I am very familiar with is the caisses populaires in Quebec's rural communities. Very rarely is any trace of a bank found in communities of less than 1,000 people. In Quebec, these small communities have caisses populaires, and in other provinces, they have credit unions.
The measure that the federal government wants to implement does not put everyone on a level playing field since it places credits unions and caisses populaires at a competitive disadvantage compared to major financial institutions, and for no good reason.
I would like to speak briefly about infrastructure because we have talked about this in very broad terms. Although we would have preferred for the deadline to be even longer, we are satisfied with the longer deadline for predictable investments in infrastructure, whether it be through the building Canada fund, the community improvement fund or any other measure that was announced. The infrastructure plan will be carried out over 10 years, which is a good length of time, even though we would have preferred that it be carried out over 15 or 20 years. As the Federation of Canadian Municipalities and the Union des municipalités du Québec mentioned, at least this provides a predictable timeframe during which investments will be made.
The government says a lot of things in its budget to enhance its image and its brand, but it has been very quiet about the fact that, during the first four years of the program, it is going to invest $4.7 billion less than the trend for the past four, five or six years suggested. There will therefore be much less money for the next four years, and municipalities will suffer as a result.
I was shocked to see that one of the federal government's priorities is to help with workforce training and, as it so often mentions, to match job seekers with available jobs.
No one would deny that that is a laudable objective. We have to do something about the shortage of skilled workers in many places across the country.
However, the government is talking about a new initiative and new funding, while it is taking back the funds and mandate already allocated to the provinces. The government gave the provinces this mandate because it fell under their natural jurisdiction. Now the government is taking the money and the mandate back and saying that it will now manage things from Ottawa. Not only will the government not give more money than what it was giving before, but it will also ask the private sector and the provinces—without negotiating or asking for their consent—to contribute dollar for dollar what the government contributes.
Once again, the money that the federal government will invest is the money it was already giving to the provinces to manage this program. This money is being taken away from the provinces and they are being forced to invest the same amount if they want to take advantage of the program. The government is not considering the provinces' budgetary restrictions.
The government is offloading the deficit onto the provinces. Although the government denies it, it is doing the exact same thing that past governments did when struggling with a deficit. This includes deficits under their government and under the Liberal Party.
Once again, it is shocking to me that the government claims to respect the provinces' jurisdictions.
The Supreme Court's ruling made it clear that the federal government was wrong to try to create a Canadian securities commission. The government can be involved, but this falls under provincial jurisdiction.
We know that the provinces, with the exception of Ontario, have established a passport system, a single-desk system, to compensate for the lack of centralization or to compensate for too much decentralization in the securities system.
If the government created a Canadian securities commission, it would be completely unconstitutional. Some provincial commissions, such as the Autorité des marchés financiers du Québec, are working with commissions in other provinces, except Ontario. We hope that Ontario will join the group. They are looking to remove the barriers facing Canadian—and foreign—investors because this commission does not exist.
What is the government doing? Despite the Supreme Court's decision, the government is sticking to its guns in the budget, saying that Canada needs a Canadian securities commission. The government is interpreting the Supreme Court decision as it sees fit and is continuing in that direction.
By continuing down that path, the government will hit the same wall, because the provinces reject Ottawa's determination to interfere in this area. The government will hit another wall at the Supreme Court, which was very clear in its decision.
On this side of the House, we have a lot of difficulty understanding why the federal government persists in going in this direction, which seems to be a waste of time. This government would do much better to work with all the provinces to establish this passport system, which is a single desk for securities authorities across the country and for financial market authorities.
The government is claiming that it does not want to increase taxes. It is accusing us of talking about completely hypothetical and fake tax increases, when we are not even in power. They are the ones who form the government.
The Minister of Finance and the hon. member for York Centre did not brag about it, but a massive tax increase will affect all Canadians. It will take more than $1.5 billion out of Canadians' pockets over the next five years. It is an increase in customs tariffs that, once again, came out of nowhere.
In the next fiscal year, the federal government will start increasing customs tariffs on over 1,200 products from 72 different countries. The increase represents nearly $350 million a year on various products, from table fans to umbrellas to cornstarch. All these products will be taxed.
It will not be the federal government that pays. Even though the government is arguing that it subsidizes these countries with a lower preferential tariff—an argument that makes no sense—it is Canadians who will pay more because of these new measures. It is hypocritical for a government that claims it is not increasing taxes to tax Canadians in this way.
Although it has tried to use all kinds of tricks as a distraction—such as eliminating tariffs on some sports equipment—the increase in customs tariffs will amount to 10 times what Canadians might save on a few small items. This measure to close markets is totally hypocritical on the part of a government that claims to be interested in opening up international markets.
What is more, this could be justified by saying that the government is reclassifying countries that were previously considered to be developing countries and have now become industrialized, such as Hong Kong and South Korea, which are similar. However, it is increasing tariffs for countries it considers to be fully developed and in this group is including Jamaica, the Dominican Republic, Venezuela, Cuba, Kazakhstan and many other countries with economies that are not at all like those of South Korea or Hong Kong. I cannot understand this decision by a government that boasts about opening our country to international markets. Implementing this measure is completely ridiculous.
I would like to talk about one last element. I spent some time looking at the economic indicators used by the federal government. Once again, they show a certain degree of incompetence. The Minister of Finance botched his latest forecasts for revenues and the Canadian deficit. He was mistaken by a margin of more than 35%. I have the impression that the same thing will happen in the next two years. The Minister of Finance is forecasting real growth of 2.5% and 2.6% for the next two years.
Obviously growth is important since it leads to increased revenues that will help determine whether the government will achieve a balanced budget. This past year, economic growth was only 1.6%. For the next two years, the federal government expects the economy to grow by roughly half as much again. I understand that that is what private sector economists are saying, but they were way off in their predictions in the past two years.
If the Minister of Finance really wanted to pay attention to the Canadian economy and not fixate on balancing the budget by 2015 at all costs, then he should consider the fact that private sector economists have been wrong in the past and that their predictions have been far too rosy. This will have an impact on the total increase in revenues. This past year, revenues increased by $4.7 billion, and the government predicts that revenues will increase by $7 billion and $11.8 billion in the next two years. This will have a significant impact on the government's objective to balance the budget.
Another interesting thing is to see what impact austerity measures might have on the budget. A 1% decrease of real GDP will result in $13.7 billion in lost revenues over three years. That is rather significant. A 1% decrease in real GDP is exactly what the Parliamentary Budget Officer and other economists following the Department of Finance's model said would happen as a result of the austerity measures the federal government has adopted since 2012.
The government is clearly incompetent when it comes to economic management. Its ideology is getting in the way of its attempt at sound economic management for Canada. From where I am standing, the Conservatives are not running the country driven by the well-being of Canadians, their families and their communities, but by an ideology that would eliminate any positive role that the federal government might play in the economy and in the daily lives of Canadians.
Services are being cut, the most vulnerable are being attacked and the most affluent are being rewarded.
This budget smacks of economic incompetence. This budget is more about image and branding and less about substance and content. That is why we will be opposing this budget.