Preston Manning

[The Budget, February 16th, 1999]

Mr. Speaker, in about three minutes I will formally move adjournment of the budget debate until tomorrow. Before doing so I would like to thank the Minister of Finance for his speech and also for the improvement in his vocabulary. After much tutoring from the opposition he has finally learned how to say tax relief.

Using the words tax relief and delivering tax relief are two different things. If we cut through all the verbiage and the spin doctoring, if we cut through the shell game that announces modest tax reductions with great fanfare but says nothing about all the other federal taxes that are inexorably taking more money from the pockets of Canadians, if we cut through the inflated announcements about $11 billion in health care spending but forget to talk about the $20 billion in health care cuts that have been taken—

[The Late King Hussein, February 8th, 1999]

Mr. Speaker, I also rise today to join with other hon. members in paying tribute to Jordan's King Hussein, a remarkable man who led a remarkable country for 47 years.

Today we also pay our respects and send our condolences to Queen Noor, and to King Abdullah, King Hussein's son who now takes up the heavy mantle of leadership, and to all the people of Jordan who today mourn the loss of a friend.

What is the difference between a politician and a statesman? I think King Hussein helps define that answer, for during his long tenure he demonstrated time and time again the courage and the wisdom that made him a legend in his own time.

As the funeral proceeded this morning, it was evident that the King's greatest skill, that of bringing together people who differ and differ profoundly, will be his greatest legacy, that even in death King Hussein was able to make the lion lie down with the lamb.

Israeli Prime Minister Benjamin Netanyahu paid his respects along with two former Israeli prime ministers and the widow of Yitzhak Rabin. They attended, just as did Yasser Arafat and Syria's President Assad. Four U.S. presidents were there, as were the president and prime minister of Russia. That was the kind of man King Hussein was, a man who believed in peace and brought together others who saw the possibility of peace.

It is difficult to be a modern, moderate, peace loving man in the Middle East but King Hussein excelled at that difficult task. He was a bridge between the Arab world and Israel. He was a bridge between the west and the east. He was among the first to invest in peace in the region, to take his place among the peacemakers, not the war makers. He did so at great personal risk but that risk paid off. It is not an exaggeration to say that much of the progress, what progress has been made with respect to Middle East peace, would not have been possible without his moral leadership and example.

On behalf of the official opposition and all Canadians, I pay tribute to a great king. May God sustain and guide his successor along the same path.

[Federal-Provincial Fiscal Arrangements Act, February 8th, 1999]

Madam Speaker, I rise to speak to Bill C-65, an act to amend the Federal-Provincial Fiscal Arrangements Act. As the parliamentary secretary said, the primary object of the legislation is to renew the federal equalization program for another five years.

I would like to begin by simply stressing the importance that the Official Opposition, and I am sure all members of the House, attach to equalization. Under our Constitution, as the parliamentary secretary said, parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenue to provide reasonably comparable public services at reasonably comparable levels of taxation. I do not think it can be stressed enough that equalization is an important principle which makes our federation work.

The Official Opposition, the Reform Party, is committed to equalization and has been from the outset. Also I believe that the rank and file people in provinces like British Columbia, Alberta and Ontario who receive no equalization payments and in fact are net contributors to federal-provincial transfers also support the principle of equalization. They have objections as to how the federal government administers it, how the federal government handles transfers, but do not object to the principle itself.

Equalization is linked to taxation. It is linked to the finances of the provinces. It is linked to the financing of social programs. It is linked to the social union. It is literally linked to the financing of federalism itself.

Besides commenting on the particular bill, I also want to take the opportunity to comment on the broader subject of federal-provincial financing arrangements of which equalization is only one part. In particular I want to make the case that the reform of federalism which the government consistently avoids requires the reform of the financing of federalism that should include the reform of equalization and not merely the tinkering reflected in the bill.

The average person reading the bill and the act it amends—and I venture to say most of us as MPs—would find it utterly incomprehensible because equalization payments are now supposedly based on a complicated formula that has over 30 elements to it as well as ceiling and floor provisions which complicate it even further.

Finance ministers and officials of the Department of Finance often imply that every element of this program is based on principles and rationality beyond the ken of ordinary mortals. In other words there is a mystique associated with equalization and federal-provincial fiscal arrangements which often tends to discourage members of parliament and ordinary citizens from investigating the subject or questioning the status quo. I encourage all members to disregard that mystique in considering the bill and to penetrate it with some common sense, analysis and suggestions for improvement.

My own first encounter with the mystique connected to federal-provincial financial relationships occurred at the University of Alberta when I was a student there in the early sixties. I sat through a lecture by a learned economist in which he carefully and cautiously explained the principles and the rationale that lay behind the old tax rental agreements which were the predecessor to the current equalization formula. It was a beautiful theory. It was beautifully laid out. Everything was connected to principle and analysis.

I then went across the river from the University of Alberta and had lunch with my father, who was Premier of Alberta at the time, and attended the dominion-provincial reconstruction conferences initiated by Mackenzie King after the war from which came the tax rental agreements that then later gave birth to equalization.

I rehearsed for him this grand rationale and theory that lay behind the tax rental agreements which I had just learned at the University of Alberta. I got halfway through and he started to laugh. The reason was that when he attended those conferences Mr. Ilsley was the finance minister at that time. Mr. Ilsley presented the tax rental agreements and of course, as usually happens at these conferences, they could not agree. The premiers could not agree. The federal government could not agree. No one could agree on anything.

As also usually happens, they went to the prime minister's house for dinner that night and they did arrive at an agreement. They then hauled in the officials and told them they had an arrangement where Boss Johnson of B.C. was supposed to get so many million, Manning in Alberta was supposed to get so many million, Garson in Manitoba was supposed to get so many million and Douglas was supposed to get so many. They wanted to come up with a formula that delivered those dollars to those provinces, and so on it went right across the country.

I am not saying there is no rationale or there are no principles behind both equalization and federal-provincial fiscal relations, but a lot of it has been added after the fact. Beneath and behind a lot of this complicated formula lay some very basic financial needs and, I would also add, some very basic political considerations.

If members want to be reminded of the political factors that go into equalization, we need look no further than at the events that just preceded the calling of the Newfoundland election which is to be held tomorrow. Just days before the Newfoundland provincial election was called the government of Premier Turbot, as he is affectionately referred to on this side of the House, was projecting a $30 million deficit. Lo and behold on January 15, just two days before the election was called, the federal finance officials recalculated the equalization formula and the payment even though the figures were not supposed to be released until February 15. It was a miracle. Lo and behold, coincidence of coincidences, the projected increase in Newfoundland's equalization entitlement was just enough to cover the deficit and to enable Premier Tobin to announce that the budget would be balanced.

There may be rationality and principles behind equalization but there are also some very tangible political considerations and MPs should not allow the mystique of equalization to deter us from discussing those here.

I will read into the record a brief description of the federal equalization program. It is only 10 paragraphs. As members will know, because of the Official Opposition's interest in federal-provincial relations and reform of federalism, we read a lot of what the provincial governments produce on this subject and we read what the federal government produces and often we compare the two. Sometimes it cannot be recognized that these descriptions are describing the same thing.

For example, the federal description of the Calgary declaration and the descriptions produced by the provincial governments are so different that it is hardly recognizable they are talking about the same thing.

On equalization I am happy to report that the information sheets in most of the provincial information packages and the federal package are almost identical. This is a miracle in itself. It deserves a little recognition.

Here, therefore, is the official description of equalization:

Equalization is an unconditional transfer. Provinces receiving equalization may spend it in accordance with their own priorities. Equalization is funded by the federal government and is authorized by federal legislation covering five-year periods.

The current equalization legislation expires on March 31, 1999. Seven provinces currently qualify for equalization—Newfoundland, Prince Edward Island, New Brunswick, Nova Scotia, Quebec, Saskatchewan and Manitoba. Three provinces do not receive equalization program payments—British Columbia, Alberta and Ontario.

Equalization transfers are determined on the basis of legislated formulae. First, the amount of revenue which each province could raise if it applied national average tax rates is calculated for each kind of revenue that provinces and their local governments typically levy. Second, each province's overall ability to raise revenue from these sources is compared to that of the five provinces making up a representative standard—Quebec, Ontario, Manitoba, Saskatchewan and British Columbia.

This incidentally is one national standard to which Quebec does not object. If a provincial government's total revenue raising ability falls short of this standard its per capita revenues are raised to the standard level through federal equalization payments. If a provincial government's total revenue raising ability exceeds the standard, as in the case of B.C., Alberta and Ontario, it does not receive equalization. As a result of this formula, when the fiscal capacity of a receiving province decreases in relation to the standard its equalization increases. When the fiscal capacity of the receiving province increases relative to the standard its equalization falls.

Equalization is subject to ceiling and floor provisions. The purpose of the ceiling based on the growth of the national economy is to protect the federal government from open ended growth in payments while the floor provisions protect the individual provinces against any large annual declines.

The ceiling and floor provisions are referred by economist Tom Courchesne as part of the bells and whistles connection to equalization which often ensured that the actual payments are not exactly what the formula itself delivers. It is just part of the mystique.

Equalization is the most important federal program for reducing disparities among provincial governments and their relative abilities to raise revenues and based—and this is the bottom line—on current estimates equalizations for 1998-99 will ensure that all provinces with average tax rates have revenues of $5,431 per resident to fund public services.

Now that is the program as it is described. The bill in front of us essentially renews that program with a bit of tinkering.

The broader financial and political considerations affecting equalization are as follows. I was disappointed that the parliamentary secretary did not connect equalization to the other things it is connected to, namely the whole approach to tax policy, to social policy and to the operation of federalism itself.

First, health, education and other social services have now become the largest component by far of the budgets of the provincial governments. Whether or not the federal government recognizes it, Canadians now rely more and more on private resources and the provincial governments for health, education and social assistance expenditures than they do on the federal government.

For example, in the all important area of health care, out of a total of $82 billion in health care expenditures, 30% now represents private spending, 61% represents provincial expenditures and only 9% represents federal expenditures. This incidentally is in a field where a previous Liberal administration once promised, once swore up and down on a stack of Bibles it would never change. The federal government would always assume 50% of the approved cost of health care.

No wonder that more and more Canadians' summary impression of the government is boiling down to two phrases: they raised our taxes and they cut our health care; they make us pay more and they give us less.

Second, it is increasingly clear that all the provinces, including British Columbia, Alberta and Ontario which receive no equalization, are experiencing increasing difficulty in financing health, education and social services. These difficulties are compounded by the insatiable appetite of the federal government for tax revenues, federal tax revenues having increased 38% since this group got into office, and the reduction of federal transfers to the provinces by over $6 billion per year which adds up to a cumulative decrease, if we add up the annual decreases over the period since they have been implemented, of about $16 billion.

In light of these circumstances, what is required? What is required with respect to equalization? I would say something more than tinkering, something more than what is contained in the bill for which the government has had five years to prepare. It is dealing with one of the pillars of social financing and we always hear how passionately committed the government is to social programs. It brings a bill to the House that is mere tinkering with one of the pillars of social service financing.

If we are concerned about hospital closures and the shortage of doctors and health care personnel; if we are concerned about the 200,000 people on the waiting lines; if we are concerned about spiralling tuition fees and Canadian students rapidly increasing their debt load; if we are concerned about the ever increasing number of Canadians, particularly children, living in poverty; if we are truly concerned about all these things, what is needed is a substantive reform of federal-provincial financial relations. That includes a substantive reform of the three pillars that undergird the financing of social services, namely tax policies, federal-provincial transfers such as the CHST, and equalization, the subject of the bill before us.

I also suggest that any significant improvement in federal-provincial financing of social programs requires a substantive rethinking of tax policy, CHST and equalization. These have to be considered together because they are all tangled up together. They are all interrelated. We cannot change one without affecting the other.

What is the record of the Liberal administration with respect to implementing the real reforms needed to revitalize the financing of social programs? There is no record other than defending the status quo.

It is mere tinkering with regard to tax policy. Prebudget discussions have disclosed that the budget will only include token tax relief in comparison to the over $30 billion of increased revenue which the government has collected per year since it took office.

With regard to transfers for social purposes, it is mere tinkering. The recent social union and health agreement proposals disclose that the federal government appears prepared to put only $2 billion to $3 billion back compared to the $16 billion it took. It plans no real reform in the relations between the federal and provincial governments that would allow the provinces to do more with less. What reforms Ottawa has agreed to have been initiated by the provinces and not by Ottawa.

With regard to equalization, as I said it is mere tinkering again. Despite having five years to plan for this bill, it contains no rationale connecting it to the other aspects of federal-provincial program financing. It contains no substantive reform of equalization at all.

In these three things, the federal budget, the social union proposals and the equalization bill, we have only the latest example of fossilized federalism. The status quo is maintained with just a little tinkering to try to create the impression that substantive improvements are being achieved. Meanwhile, Canadians continue to pay more for less in terms of social services. Canadians must look elsewhere for substantive reform of the financial underpinnings of federalism.

I do not want to be entirely negative. In contrast to the fossilized federalism of the federal government, we have the flexible federalism recommended by the official opposition in its new Canada act. I also have to say it is advocated by an increasing number of the premiers. In contrast to the frozen federalism of the federal government, we have the springtime federalism recommended by the official opposition and also advocated by a number of premiers.

What does flexible federalism advocate to reform federal-provincial finances for the 21st century and to rebuild the financial foundations of our social programs, including equalization? Does the federal government not collect any of the thinking that is being done by the provinces on how to reform federal-provincial finances? Does it pay no attention to the work that has been done by the think tanks? Why is it that the federal government shows no leadership in these areas at all? It just clings to the status quo and adds a little tinkering. That is its only contribution.

I am proposing three things that substantive reform of federal-provincial financing would entail.

First, simplify and rationalize federal transfers for social purposes by providing simple equal per capita grants to all provinces for social purposes. Stop trying to equalize through every social program envelope, from health to social assistance to unemployment insurance. This position has been well articulated by both the Alberta and Ontario governments. I anticipate objections to this from some of the lower income provinces but I ask them to wait until I am finished.

Second, reform if necessary and refocus the equalization program we are discussing today even more heavily on the low income provinces. Listen to what I am saying. Equal per capita grants for social program funding across the country, then reform equalization and tip it even more steeply toward the lower income provinces to bring their capacity to finance social programs up to a national standard established by interprovincial agreements.

Third, complement these preceding measures with broad based substantive tax relief to increase the disposable incomes of individuals and families in every province so that private resources are also available for social spending and are enhanced.

For example, a $15 billion broad based tax relief program such as was in the Reform Party platform during the last election delivers financial transfers to the people of each province of the following orders of magnitude. Listen to the orders of magnitude. People do not seem to understand how much broad based tax relief could deliver into the pockets of people, particularly lower income people and businesses in the various provinces.

Newfoundland, $216 million. Nova Scotia, $396 million. New Brunswick, $329 million. P.E.I., $56 million. In Atlantic Canada $998 million in total can be delivered into the pockets of individuals and businesses through tax relief, more than what the federal government currently pumps in through regional development grants. For Quebec, $3.256 billion. For Ontario, $5.45 billion more. Manitoba, $498 million more. Saskatchewan, $438 million. Alberta, $1.4 billion. British Columbia, $1.8 billion. This is the order of magnitude of what can be pumped into provincial economies through broad based tax relief.

If this country had federal leadership committed to reformed federalism rather than fossilized federalism, if this country had a finance minister committed to the positive reform of federal-provincial financial relations instead of mere tinkering, what should have happened over the last year in discussions between Ottawa and the finance ministers of the provinces should have been this.

The finance minister should be meeting with every provincial finance minister to discuss and agree on substantive measures to stabilize and improve the financing of social services in this country. When the finance minister meets with his provincial counterparts, their discussion should occur with a simple table that has four columns.

Column one would show what the province would receive through simple, equal, per capita grants in support of social programs. Column two would show what the province would receive in terms of enhanced and better focused equalization. Column three would show what the people and employers of the province would receive through broad based tax relief which the province is free to either let it do its stimulative work or to tax back in part if it so desires. Column four would give the total and would show that each province would be better off financially, better equipped to finance health, education and social assistance than it would be under the status quo and Liberal tinkering.

In conclusion, the official opposition urges parliament to reject this equalization amendment bill as mere tinkering. The government ought to be embarrassed to bring something like this before the House. It is inadequate just as we consider the financial components of the social union agreement juvenile and inadequate and the tinkering tax changes in the next budget as inadequate.

As more and more Canadians and more and more of the provinces begin to see the inadequacies of this Liberal government's fossilized federalism, I express the hope that at some premiers conference in the not too distant future, instead of meekly accepting these tinkering proposals of the fossilized federalists, the premiers will take off their premiers' hats for just a day and put on their political leaders' hats.

In their capacity as political leaders, I would like to see some of those provincial political leaders, whose views on flexible federalism are more advanced than that of the federal government and more in tune with the need of the 21st century, discuss just for once their vision of flexible federalism and the political alliances and initiatives required to get a new government in Ottawa which is prepared to make the substantive reforms of federalism and federal-provincial financing required for the 21st century.

If and when that day comes, I assure those provincial leaders who favour reform of the federation over fossilized federalism that they will find an ally in federal Reformers united to create a better alternative to this bankrupt administration.

[Health Care, February 3rd, 1999]

Mr. Speaker, the social union talks are supposed to provide a solution to the deterioration of health care and other social programs under this administration.

The premiers have put forward some positive suggestions for change but the federal government's reaction has been primarily negative and reactionary.

When the premiers come to town tomorrow with some positive suggestions, is the Prime Minister going to react positively and enthusiastically to them or is he going to be a grumpy old man saying no, no, no?

[Health Care, February 3rd, 1999]

Mr. Speaker, I am sure that is comforting to the family.

The Prime Minister's government knocked $16 billion out of health care funding and has failed to make other essential health care reforms. One of the consequences of that has been hospital closures and waiting lines now up to 200,000 people.

Canadians want to know, after the so-called health care budget how much shorter are these waiting lines going to be?

[Health Care, February 3rd, 1999]

Mr. Speaker, last month a 93-year old grandmother in Montreal took sick. She went to the hospital, was put on a stretcher, left in a hallway and she died two days later. In her obituary her family said “Don't send flowers, send a letter to the health minister asking him why someone who paid taxes for 93 years had to die in a hospital hallway”.

Will the Prime Minister whose government has cut $16 billion out of health and social programs explain why someone who paid taxes for those years had to die in a hospital hallway?

[Taxation, February 1st, 1999]

Mr. Speaker, surely the Prime Minister is kidding. When he was in the official opposition he publicly attacked Brian Mulroney for raising taxes. Now we know he actually secretly admired him for raising taxes.

How are we to know that when the Prime Minister says he favours tax relief now, he really is not secretly hoping that he can maintain high tax levels?

[Taxation, February 1st, 1999]

Mr. Speaker, twinkle toes.

The finance minister, who is not such a funny guy, is bringing down a budget this month. It seems we just paid for our Christmas presents and now we have to pay the taxes. Every Canadian approaches tax time a little differently. Some people dread it. Some people shrug their shoulders. Some people say one thing and think another.

We know the Prime Minister has mixed feelings. Will he tell us how he feels about tax time 1999?

[Taxation, February 1st, 1999]

Mr. Speaker, our Prime Minister is a funny guy. Whenever he talks about taxes he gets a twinkle in his eye. I am serious. He has it there now.

Last week in Switzerland he said a funny thing. He said he was glad that Brian Mulroney had imposed the GST. At the time he publicly criticized the GST and now he admits that he secretly admired the tax.

I would like to ask old twinkle eyes over there, just between you and me—

[Finance, February 1st, 1999]

Madam Speaker, it gives me pleasure to enter into the debate on the report of the Standing Committee on Finance. My purpose will be twofold. I would like to make some comments on the report of the committee and then I would like to serve the broader purpose of offering some advice from the official opposition to the finance minister and the government prior to the finalization of the federal budget.

The official opposition has also consulted with Canadians with respect to their expectations in terms of federal finances. While we appreciate the consultations that have been conducted by the committee, we think that from our own consultations Canadians are much more specific on the expectations they have in mind.

In particular, Canadians are telling us and anyone who will listen that it is what the federal government is doing to our taxes and our health care that concerns us most. They expect the budgetary policy of the government in the next number of months to focus specifically on addressing their concerns in that area.

It is our view that the report of the committee and the statements to date by the government are not sufficiently focused on these priorities. Therefore, my colleague, the member of parliament for Medicine Hat, the official opposition finance critic, and a number of his colleagues have produced their own prebudget submission entitled “Taxes and Health Care: It's Critical”. That is being released today. I thank all those responsible for its development and commend it to the committee, to the House, to the finance minister and to the government.

The report has three emphases. First, it proposes a real, substantial tax relief package. For example, under that package a single income family of four earning $30,000 would receive an annual pay hike of over $4,000, not the pathetic $143 offered by the government.

Second, on the health side it not only proposes an additional $2 billion per year of reinvestment in health care but complementary measures to start putting the patient first in the rebuilding of the crumbling health care system.

Third, on the debt side it proposes a comprehensive debt repayment schedule designed to reduce the national debt by $19 billion over the next three years.

I turn to the report of the Standing Committee on Finance entitled Challenges and Choices . I do not want to begin by slamming the report or by dismissing its recommendations or analyses out of hand. Like many of us I think there is too much of that in the House.

It is not our intention to slam every effort or proposal that comes from the government simply because it comes from the government. I think the government tends to do that a bit: if it comes from the official opposition, particularly if it comes from Reform, it is automatically banned. Those attitudes on either side of the House cannot encourage debate. They do not earn the respect of the public and they are not very productive. We do not want to fall into the same trap.

With respect to the report we commend the committee for its extensive consultations. I commend the committee on the first chapter of the report which provides a summary of where we are financially and in relation to the economy and the performance of the government financially.

I commend the committee for devoting at least two of its eight chapters to the priority areas of health care and taxes. I also commend the committee for adopting some of the proposals of the official opposition, in particular the proposals for eliminating the 3% surtax, eventually the 5% surtax, and reductions in personal income tax.

When we think that three years ago the subject of tax relief was not in the government's vocabulary, we have to take some satisfaction in the House that the government is at least talking about it. We are encouraged by these signs of progress.

Having said that, I would like to point out two major deficiencies in the report. The first is that the report devotes an entire chapter to a prudent budget making process, chapter 3, and then omits the most important step in prudent budgeting.

Prudent budgeting begins with accurate, transparent, principled accounting and reporting of the government's financial position. Concrete measures are required to prevent the finance minister from playing a shell game with public finances and giving the appearance, rightly or wrongly, of cooking the books.

The shell game on taxes, for example, is that the government is taking $40 billion more per year in taxes than it was in 1995. It gives $2 billion to $3 billion per year back to the taxpayers and calls this token tax reduction tax relief and hopes the public does not notice the difference between what was given and what was taken. This type of rhetoric, this type of approach to presenting tax reduction fools no one. It increases public skepticism about anything said regarding tax reduction at the federal level.

The government also plays a shell game on spending, something that even the auditor general has commented on and gone further than commenting on: he will not sign off on the financial statements because of this shell game.

In the old days when the federal government was running a deficit it practised what is called back end loading. It tried to push costs, if there was any accounting way of justifying it, on to the next year to make the deficit look smaller.

Now that we are into the era of surpluses the government is practising front end loading. It is trying to pull as many costs as it can into the current fiscal year to make the surplus look smaller so that it is under less pressure to reduce taxes.

I pointed out on numerous occasions that if this was done in the private sector and the finance minister was the vice-president of finance of an oil company, he would end up making licence plates in some provincial penitentiary for practising that game.

The shell game is also played particularly with respect to the surplus. Everything is done now to try to make the surplus look smaller so as to reduce the pressure for tax relief. This includes spin doctoring of the projected surplus.

We find the initial projection of the surplus by the government was $10 billion to $13 billion. A series of press releases came out, particularly over the last couple of weeks, indicating why those initial projections were out of line and that probably it would be less and less and less. The purpose is to make this surplus appear smaller and, I am certain, to minimize public pressure for tax relief.

The official opposition therefore recommends that if the government wants to practise prudent budgeting Canada should follow the example of New Zealand and pass a financial responsibility act that creates a legal requirement for the government to produce financial statements in accordance with generally accepted accounting principles, specifies what those principles are in the legislation, and holds officials legally liable for violating those rules.

There is a second deficiency in the report which should be emphasized. It centres around the report's recommendation that the federal government enter into a productivity covenant with Canadians.

The word covenant is a religious term. I do not know whether the intention was to deify the government or to imply that the Minister of Finance would go up the mountain and return with two tablets of stone prior to the budget. If he does that, I hope the tablets will have something in bold print about thou shalt not steal and thou shalt not bear false witness. However that is not my main point.

The definition and elaboration of productivity in the report strikes me as curious. I spent 20 years in the private sector as a management consultant working with companies for whom productivity was a real term which was measured. They even developed computer models in the company to try to measure the development of productivity.

In this report the vague definition is used that productivity simply means getting better results with the same effort. It looks like it was written by a Liberal spin doctor, not by somebody responsible for productivity.

The definition of productivity that is used in the real world, in business, in unions and in the marketplace where people have to produce, where this means something and where they will be measured against it, is a ratio. Productivity is a ratio of the value of production over the cost of doing business. The cost of doing business is the denominator in that fraction. It includes taxes imposed by the government. Anything that increases the cost of doing business without increasing the value of production decreases productivity. It hurts productivity.

If the government wants to talk seriously about productivity and the productivity covenant with Canadians who are not stupid—there are thousands of people in my constituency who can define productivity better than in this report—it needs a clear definition of productivity that makes crystal clear the negative impacts of Liberal overtaxation on the competitiveness and the profitability of Canadian business and employment. I urge the committee to address that point. It fits in with public understanding of what the government is doing to our taxes.

I now turn to a bigger and broader framework than is contained in this report for analysing the government's financial position of what should be in the budget. When Reformers came to Ottawa in 1993 we had a four point list for fixing federal finances that is as relevant today as it was when we first came here: control and prioritise the spending, balance the budget, reduce the taxes and reduce the debt. It is pretty simple.

Five and a half years later under this administration only one of those matters has been dealt with. The budget is now balanced, but that was done not by controlled spending but mainly through revenue increases and offloading to the provinces. There still remains much to be done on the simplest fiscal agenda that is possible to get Canada's fiscal house in order. That is the thrust of our prebudget submission and our advice.

Let me take these categories one by one. With respect to controlling the spending, the federal government is still not doing it. In the 1997 budget plan the finance minister projected that government program spending last year would come in at $105.8 billion. He called his assumptions prudent, taking into account normal demographic and inflation changes. The problem is that when the final numbers came in, program spending for 1997-98 was $108.8 billion or a $3 billion spending hike. All the talk about spending control, all the talk about balancing the budget through cost reduction, and the first year into a surplus position spending escalated $3 billion over the estimate.

This year it is déjà vu all over again. In the same 1997 budget plan the finance minister projected program spending for this year at $103.5 billion. By the time his 1998 budget came out he had upped those spending predictions to $104.5 billion. Now, according to the most recent financial information, program spending is slated to rise even further, by 3.1% so far this year.

This means that if the finance minister follows last year's pattern and continues this year's already documented schedule of overspending, his spending is going to come in around $107.5 billion or another $3 billion over what he told this House it was going to be. That is spending control. What it reflects is a Liberal predisposition to spend and the need for even stronger spending controls.

What the official opposition recommends is really three things. First, to freeze program spending for three years at $104.5 billion to generate the surpluses necessary for real tax relief and debt reduction. That is not an unreasonable figure. It is the figure that the finance minister himself said was adequate for last year.

This does not mean that we cannot increase spending in priority areas. But during the three year freeze it means that can only be done by reducing spending in other areas. In other words, it forces the government to do what every household in the country has to do when there is not quite enough money and that is to prioritize. Why should we not do what millions and millions of Canadians in households and businesses are forced to do every year and every month?

The official opposition therefore recommends increases in both health and defence spending, but primarily from reductions in handouts to business, interest groups and government to government foreign aid. We propose increases in spending, but we would get the money by reducing spending somewhere else rather than adding to the deficit or adding to taxes.

Other members and the government may disagree with our spending controls and our spending priorities. That is fine. That is what we are here to debate. But if they disagree, then it is incumbent upon the government to set out its own spending controls and priorities which will still have the effect of generating the surpluses we need for tax reduction, debt reduction and health care reinvestment.

Let me turn to debt reduction. Again the federal government just is not doing it. We have a $580 billion federal debt. All we see is token debt reduction. Under this government Canada continues to spend almost 30 cents out of every revenue dollar on interest on the debt. That is a burden on the capacity to finance social services. We bleed ourselves white paying out over $40 billion a year and then we wonder why there is not enough money for transfers to the provinces.

It is a drag on productivity. The government says it is concerned about productivity. The greatest thing it could do about productivity is to get the debt burden down. If we work out its own calculation on its productivity, that $43 billion a year on debt service knocks the ratio out the window.

Lincoln once said that excessive debts were like rats gnawing at the vital organs and sinews of the state. I cannot for the life of me understand how the finance minister can sleep at night with $580 billion rats gnawing at the vitals of the Government of Canada. I use rats of course in a general sense, you understand, Mr. Speaker; not attributing it to any personality.

What the official opposition recommends is not rocket science. The problem here is not figuring out what to do; the problem here is to get doing it. We recommend, first, that a debt retirement sinking fund be established; second, that a law be passed to direct a portion of the debt to be retired each year; and third, that a schedule be established to reduce the debt. We recommend that the debt be reduced by $19 billion over the next three years and by $240 billion over the next 20 years. Let us get serious about debt reduction and the mortgaging of the future of the next generation.

I want to talk about real tax relief, and I will draw a distinction between token tax relief and real tax relief. I will draw a distinction between the shell game, where the finance minister pushes a shell that says a $2 billion reduction, a $3 billion reduction and tries to pull to the back of the table the fact that the government is taking $38 billion to $40 billion a year more than when it came here in 1993. I am not talking about the shell game. I am talking about real, genuine tax reduction that can be felt in the pockets of consumers and can be seen on the financial statements of businesses.

Let us consider the taxation record under the government.

Personal income taxes are up almost 38% and now account for 8.2% of GDP, up from 7% in 1993, for a 17% increase. Is it any wonder Canadians are struggling to get by? I have asked public audiences all over this country “Government income has gone up 35% to 40% since 1993. How many of you can say that your personal income or your family income has gone up 38% during that same period?” Not very many hands go up. There is a rumble through that audience that the government ought to take into account.

According to Statistics Canada taxes paid by the average Canadian household were 15% higher in 1996 than in 1992. Canadians pay 46 cents on every dollar earned toward taxes, while Americans, our greatest single competitor and the American labour market being the great drawing card to many of our young people right now, pay only 33 cents. In other words, as a percentage Canadian taxation represents 140% of the U.S. tax rate.

Government members cannot get out of this argument by saying “Oh, but we spend so much on health care”. The Americans spend much more than we do on defence. They wash each other out. It is not that simple. Our rates are simply higher, consistently higher, than those of our principal trading partner.

To put it another way, our personal income tax burden has gone up 136% in the past three decades compared with only 31% in the United States.

The federal government collects $11.2 billion from 7.7 million Canadians who earn $30,000 a year or less. We hear these great protestations of social concern from the government and the finance minister. He wrings his hands in public about child poverty and he wrings $11 billion a year out of families, with children, which make $30,000 a year or less. He sits in the House devising all kinds of programs to try to deliver some help to those families when the best help he could give them from a poverty standpoint would be to simply leave more dollars in their pockets.

Bracket creep is another area where the shell game is played. The minister stood in the House and told us how many people he would take off the tax rolls. That is the shell that is pushed to the front. What government members do not show us is the other shell which they pull to the back, the people who are being pulled onto the tax rolls through bracket creep. They outnumber by far the ones who have been taken off. More than a million low wage workers have been pulled onto the income tax net since the government took office. More than 1.9 million taxpayers were pushed from the bottom to the middle tax bracket and 600,000 taxpayers were pushed from the middle to the top bracket. That is the government's record on taxation. There is no tax relief. There is a consistent record of increased government revenues connected to increasing taxation.

In place of this token tax relief proposed by the government the official opposition proposes real, substantial, broad based tax relief. The proposals contained in the paper “Taxes and Health Care” include a reduction of $26 billion in federal taxes over the next three years, starting with a $7 billion reduction in employment insurance taxes, payroll taxes that kill jobs, and a $19 billion reduction in personal income taxes and capital gains taxes. If members work out the impact of these numbers on the take-home pay of a single income family of four making $30,000 a year, the family gets an annual pay hike of $4,628 under these tax relief reforms.

In case this is too complex for some of our colleagues, it is the intention of the official opposition to go across this country showing people what their take-home pay is under the Liberal tax regime, including the token tax relief measures contained in the budget, and what their take-home pay would be under these tax reforms. I do not think there is going to be much doubt as to which paycheque the public would prefer.

The finance minister plays the shell game and tells the government caucus that if it gives substantial, broad based tax relief the country will be back in a deficit position. Some hon. members actually believe that argument. That is simply not the case if one puts in place the other measures required to maintain the balance, such as the spending controls and the spending priorities referred to, the debt reduction measure that would reduce the interest on the debt, and tax relief that is substantial enough to stimulate economic growth.

If the government truly wants to enter into a productivity covenant with the Canadian people, let it be based on this proposition: that at Canada's levels of debt and Canada's levels of taxation, a dollar left in the pocket of a Canadian taxpayer, consumer or employer is more productive than that dollar in the hands of a federal politician or bureaucrat. That is a statement on productivity. It lies within the power of this parliament to increase the take-home pay of millions of individuals and families this year simply by substantially reducing the demands of the federal taxman. It lies within the power of this parliament to free up billions of dollars for future investment in health care and essential services by paying down federal debt now.

I therefore conclude by asking, by imploring, the Prime Minister, the finance minister and the 156 members opposite not to stand in the way of such noble objectives.