FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 2, 1999

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone here this morning.

This is our second session of the day. We have the pleasure to have with us representatives from the Bloc Québécois. I welcome the leader, Mr. Gilles Duceppe, Yvan Loubier, the finance critic, and Monsieur Antoine Dubé.

You are of course veterans of the finance committee and the pre-budget consultation, so I don't think I have to give you any instructions. You have whatever time it requires to make your report, and thereafter we'll engage in a question-and-answer session.

[Translation]

Mr. Gilles Duceppe, M.P. (Laurier—Sainte-Marie, BQ, Leader of the Bloc Québécois): Mr. Chairman, thank you for hearing us this morning. As you have just mentioned, I am accompanied by two of my colleagues. I would like to point out the sound work done by members of the Bloc Québécois in all committees and all the areas in Quebec, and this is the work they do every year when pre-budget consultation time comes around.

I would also like to thank all those who have participated in these consultations everywhere in Quebec and there are 3,000 of them. In the documents we've handed to you, you'll find a list with a multitude of local organizations as well as the 13 national organizations which, on their own, represent thousands of members, Mr. Chairman.

Following the hearings we held and the proposals submitted to us, we elaborated a certain number of recommendations that Mr. Loubier will be explaining to you in more detail. The consultations we held were proof, for us, of the apropos of our proposals although, of course, we did change a few and added some new elements.

Before Mr. Loubier addresses you, I'd like to point out that earlier this week a poll from Quebec appeared concerning Ottawa's budget surplus. Fifty-four percent of the Quebec population has informed us we should give priority to reestablishing the transfer payments that were slashed and affected the direct services offered to the population, namely health services, post-secondary education and income support.

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I know that the members on the government's side really like polls these days. So they should take this rather clear response from Quebec's population into account. These questions affect Quebeckers very, very closely and they have indicated, as have done the populations of the other provinces, that health should be the priority.

People are starting to notice that if there are problems in the health system, it's first and foremost because the federal government has invidiously slashed or will slash, between 1994 and 2003, an amount of $33 billion. Although we're told that they invested $11 billion last year, what actually happened was that they cut $33 billion rather than $44 billion. That is reality. When we look at Minister Martin's figures over the years, we'll see that between 1994 and 2003, $33 billion have disappeared from the transfer payments item. That's what reality is all about. We don't want to hear hymns to the greater glory of the government about its interest in health, education and income support. It did not invest in these areas; it slashed.

On that, I will let Mr. Loubier explain more specifically and rigorously, as is his wont, the Bloc Québécois' proposal on the use of the surplus while maintaining the zero deficit.

Mr. Yvan Loubier, M.P. (Saint-Hyacinthe—Bagot, BQ, Finance Critic): Thank you, Mr. Duceppe.

At the outset, I wish to apologize for the absence of an English version. You'll be getting the English version during the day and you'll be able to look more specifically at the points I'm presenting.

Mr. Gilles Duceppe: But the figures are in English.

Mr. Yvan Loubier: The figures are in English, so there's no problem at the outset.

First I'd like to say a word about the real budget surplus for this year and next year. I could perhaps also say a word about following years although this kind of forecasting exercise can be rather perilous.

If I stick to this year and the next, it seems that Mr. Martin has a serious problem. He doesn't know where to direct his enormous surplus. There's the first problem. This is a surplus that has been accumulated by slashing social programs, in other words slashing the Canadian Social Transfer for post-secondary education, health and income support while maintaining an unfair tax system for individuals and more specifically for the middle class.

If we have a first recommendation to make to Mr. Martin, it's that he should look at where these enormous yearly surpluses come from and where he expects to get them from in future years. He'll find a major part of the answer there and will know where he should be reinvesting that huge surplus. He must reinvest in health—Mr. Duceppe mentioned that as being the number one priority of Quebeckers and Canadians—reinvest in post-secondary education and, generally speaking, in social programs. He must also ensure that the tax system be more fairer for low and middle income earners.

The surplus is considerable, far more so than Mr. Martin would lead us to believe. I'll remind you that during these last years, Mr. Martin was very parsimonious and very, very, very conservative whenever it came to evaluating the surplus and each and every time, he was out by over 100% in his forecasting over a few months. And this time, Mr. Chairman, I'm convinced that the Minister of Finance has erred by at least 50% in forecasting the surplus over a few weeks.

We could easily double, this year, Mr. Martin's surplus forecast and do the same thing for next year. I wouldn't venture as far as 2001-02 as some have done, but for this year and the next, you can easily double the federal government's forecast surplus.

In any case, this morning, in the Ottawa Citizen, there's something about the analysis done by a CIBC World Markets' group of economists that points out Mr. Martin's conservatism concerning the surplus.

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The title reads:

[English]

“Surplus 50% higher than claimed: economists”.

[Translation]

Mr. Chairman, I'm already not the only one saying that the day Mr. Martin tables his surplus forecast, you'll be able to easily double the estimated surplus for this year. There are even some who talk about five-year forecasts in excess of $150 billion rather than the $95 billion advanced by Mr. Martin.

So there's an immense surplus, immense possibilities and enormous leeway if Mr. Martin is an able manager and can carry forward to next year part of the surplus accumulated this year and if he also undertakes a real tax reform which we've been asking him to do since 1993 and if he finds an extra $5 billion per year, which, as soon as next year, would give the federal government close to 25 billion dollars' worth of leeway.

Mr. Chairman, we did not wait to consult the population of Quebec on the efficacious use of this leeway. As my leader, Mr. Duceppe, mentioned, the vice-chair of the party, Mr. Pierre Paquette and I crisscrossed Quebec from August 22 to 30 to make the population aware of the importance of a pre-budgetary consultation process which the Bloc Québécois actually undertook during the week from September 27 to October 4. During that week, all across Quebec, my colleagues from the Bloc Québécois went through this consultation process which was done in different ways, either through open-house days, round tables with socio-economic organizations and mail-ins based on a document of which we had circulated 15,000 copies in Quebec. In it, there was an analysis of the budgetary situation and the forecasts concerning the real financial leeway the government would have available in future years.

During those consultations, we essentially put three questions. First, we asked them if they agreed with the Bloc Québécois' proposals.

Let's say that if, during the coming year, the Minister could find some 25 billion dollars' leeway, it would be possible for him to decrease taxes by 6 billion dollars a year as early as next year.

We suggested setting up a real employment insurance regime with a coverage rate of over 42% which is in line with the present situation because 42% of the unemployed who, before becoming unemployed, payed contributions have a right to employment insurance benefits while the others don't. We recommended that the surplus which is 6 or 7 billion dollars per year, be reinvested to broaden the employment insurance regime as well as increase its scope and, especially, its coverage.

We proposed to re-establish social transfers to Quebec and the provinces, increasing them by 3,7 billion dollars which means we would be back at the Canadian Social Transfer level that existed in 1993-94 before the Minister of Finance savagely slashed transfers to provinces used to fund health, higher education and income security.

We also ran a test when we proposed, to the population, allocating 3 billion dollars to structure supporting projects in the areas of infrastructures, shipbuilding and social housing. We'll be getting back to that later.

Finally, we suggested a minimum of 3 billion dollars a year of this 25 billion dollars' worth of leeway be allocated to debt reduction. Parallel to this proposal to decrease the debt, we told the population that there would be a possibility of freeing up far more than the 3 billion dollars to be able to allocate an annual amount of between 3 to 7 billion dollars to reimburse part of the debt by undertaking a real tax reform, especially for corporations.

We also asked the population if these proposals should be completed or enriched. Finally, we asked the population if, in their respective regions, they had any priorities in mind as compared to certain structural programs and what those priorities were.

As Mr. Duceppe mentioned, 3,000 people were directly contacted and participated in the consultation process during the week of pre-budgetary consultations. Thirteen national organizations representing 10,7 million people as well as regional organizations, as was the case last year, were quite enthusiastic about this consultation.

Mr. Chairman, allow me to tell you about the five points of consensus that came out of this consultation and that are priorities for all Quebeckers in view of the importance of the democratic exercise undertaken by the Bloc Québécois.

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The first of these priorities on which there was a consensus is a major decrease in individual taxes. The proposal we submitted to the population was very well received as I think it was supported by 95% of all those consulted. People want those who contributed to cleaning up our public finances, in other words those earning between $30,000 and $70,000 and who are part of the middle-income category, to be the ones who derive the major benefit from the dividends of the first surplus to surface at the federal level which was, in part, attributable to their blood, toil, tears and sweat. We shouldn't forget that while the GDP increased cumulatively by 24% from 1993 to date, income taxes on individuals, especially in this category of income, increased by 40%. In other words, this category was impoverished, and so much so, that families earning between $30,000 to $70,000 make up about one quarter of the population but contribute approximately half of all individual income taxes collected by the federal government. There is an unbalance there that has to be addressed.

Mr. Chairman, there's a very democratic tax option that would show some taxation fairness that we lost in Canada and which would consist in eliminating what we've been practising since 1991, in other words the non-indexation of our taxation brackets. Mr. Chairman, not indexing our tax structure in Canada year after year is simply robbery. When we compare provincial and Quebec taxation to federal taxation, you can see that there are major distortions between the two tax structures. Simply take the zero-tax level. If you compare Quebec's zero-tax level to the federal government's, you can see that a couple with two children and one income only derived from work starts paying federal income tax when their income reaches $13,719, Mr. Chairman. In Quebec, that same family with two children and income derived from work only starts paying taxes at an income level of over $30,316. You can see the distortion created, among other things, by the non-indexation of Canada's tax structure. You see the results. Poor families, families at low and middle-income levels, start paying taxes as soon as their income reaches $13,719 whereas in Quebec, with its tax structure, we're talking about $30,316. That must be corrected. Eliminating non-indexation would be the first priority in the tax burden reduction process for individuals. In other words, the tax structure must be indexed.

The speeches made by the Minister of Finance and the Prime Minister, later on, led to some concern. If memory serves, the day after the economic update a few weeks ago, the Minister of Finance and the Prime Minister said, and I quote: "We've started decreasing taxes and we will continue."

Mr. Chairman, if we continue in the same vein as the one we adopted at the beginning of this period, it won't be very reassuring for people in the low and mid-income brackets. To date, those who have benefited from the tax measures presented by the Minister of Finance, especially during this last budget, are people with very high incomes indeed.

Let's take the example of the disappearance of the 3% surtax. As of this year, those who earn $20,000 per year will save $60 with the disappearance of the 3% surtax. Those earning $30,000 and more will have savings of $163 thanks to the disappearance of this surtax. Those earning up to $70,000 will be saving $200 to $250. On the other hand, the 60,000 Canadian taxpayers earning over $250,000 per year will be saving $3,794 in taxes. Millionaires will have the benefit of saving some $8,600 in taxes because of the abolition of this 3% surtax.

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Those are not the measures the population wishes to see, Mr. Chairman. That is not what the population of Quebec asked us to impress upon the federal government. It's really measures that affect the people in low and middle-income brackets. I indicated one to you before, the total indexation of tax tables. Starting there would be a good idea.

So, Quebeckers have shown themselves in agreement with the Block Québécois' proposal according to which the first $6 billion of the surplus should strictly go to decreasing the tax burden of middle-income individuals.

The second major consensus had to do with humanizing the employment insurance regime. I mentioned it before; only 42% of those who pay into the employment insurance plan derive any benefits. When a government policy, whether federal or otherwise, does not cover a majority of the clients it is made for, it is because that policy is not working and should be reformed to eliminate its most serious defects, among others the inequities and the injustice that affects youth and women as well as pregnant women who, in the case of a precautionary cessation of work, are penalized by a regime that absolutely must be corrected.

The vast majority, if not the totality, of the population that was consulted, except for a few representatives from the business world, wanted an improvement in the employment insurance plan to increase its scope and do away with the aberrations in it.

Among those aberrations, there's the use of regional unemployment rates. At the present time, there's an unbalance in what's called the territory served based on regional unemployment statistics. Thus, in an area where the regional unemployment rate is 17%, you need far fewer hours to have a right to employment insurance benefits as compared to a village a kilometre and a half down the road where the regional unemployment rate is 4% and where you are required to have almost twice as many hours of work to be eligible for employment insurance.

The regional borders have to be redrawn. In any case, I'll take this opportunity to point out the contribution made by my colleague in charge of regional and rural development, Odina Desrochers, the Member for Lotbinière, who at this point in time is on a crusade to redefine territories based on regional unemployment rates in order to obtain less of a difference between the sub-regions represented.

The suggestion we made to the population of Quebec to use the annual surplus from the employment insurance plan, $6 to $7 billion, to increase coverage, eliminate injustice for youth and women and generally eliminate the distortions that exist in the plan was supported by a very great majority, if not unanimously, by those Quebeckers consulted.

Those Quebeckers consulted also asked for an unconditional increase in social transfers, in other words that, as early as this year, 2000-01, transfers to provinces be re-established to fund health, higher education and income security and bring it back to the levels that existed before the Minister's drastic 1994 cuts.

You can't confuse people. When the Minister of Finance says that his government put money back into the circuit, that's not quite right. I'll use parliamentary language and try to rein myself in. It's not quite accurate. Some cuts were decreed as early as the 1994 budget and were confirmed in Minister Martin's 1995 budget and are to go on until 2003. These cuts, as my leader mentioned before, are to total $33 billion.

The Minister announced this summer that he was eliminating 900 million dollars' worth of cuts he had ordered for 2000-01. But the cuts he ordered and that are ongoing year after year until 2003 will continue until then, despite the enormous surplus the Minister of Finance has available. You shouldn't pull the wool over the population's eyes.

The population asked, and this confirmed the soundness of our analysis, that the transfers be brought back to the levels that existed prior to 1993-94.

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People realize, far more than you think, that when a hospital shuts its doors somewhere, when beds are shut down, when there is a shortage of nurses, when there is a shortage of doctors, they realize that these shortages and devastating effects are attributable to the cuts in the Canadian Social Transfer made by the federal government.

I'll give you an example of what this can represent for a provincial government using this year's cuts in terms of reinvestment in health, education and income security.

Quebec, which we know best, this year had a shortfall of $1.7 billion in the Canadian Social Transfer compared to what they were getting in 1993-94 from these federal government contributions. If you take those $1.7 billion and divide them out between the three items I mentioned, health, education and income security based on the proportions that existed in the area of federal transfers before 1994, in other words before these specific transfers to each of these items were called "the Canadian Social Transfer", these are the figures you get.

Of this $1.7 billion shortfall, $875 million more would have been injected into Quebec's health sector. Do you know, Mr. Chairman, what that would mean? That would allow the creation of over 3,000 positions for doctors. There's a lack of doctors everywhere, in Ontario, in the West, in B.C. and in Quebec. In Quebec, with $875 million, which is part of the $1.7 billion shortfall in federal transfers to Quebec, we could hire 3,000 doctors. We could also hire 5,000 extra nurses. That is not immaterial, Mr. Chairman. Add 3,000 doctors or 5,000 nurses and you'll see that this would settle many problems in the health sector in Quebec. That could also be the case for Ontario and all the other provinces. These problems would be greatly reduced.

It would be the same thing if we took the $1.7 billion shortfall and allocated the due portion to the educational system. That would inject $500 million more into Quebec's higher learning network. Do you know what that would allow them to do, Mr. Chairman? Instead of increasing student quotas year after year in university classrooms, you could hire 5,800 more teachers.

When we put questions to the Minister of Finance or to the Prime Minister, it's as though the drastic cuts of the last few years had had no effect at all, that they had no negative effects on the health or education sector.

Finally, concerning income security, $325 million would be invested which—hang on to your hat, Mr. Chairman—means that $500 more would be given to each and every one of Quebec's social assistance beneficiaries. It is said that the Minister of Finance's cuts have had only marginal effects. Talk about trying to put one over! They've had major effects.

Quebeckers supported the Bloc Québécois proposal to the effect that federal government payments into the Canadian Social Transfer should be adjusted and brought back to the level that existed in 1993-94. We were talking about an amount of 4.6 billion extra dollars as early as 2000-01. Since then, the Minister of Finance has announced he was cancelling part of the cuts ordered for 2000- 01 to the tune of $900 million which means that to re-establish the level of federal government monies in the Canadian Social Transfer, $3.7 billion would have to be reinjected this year. And these $3.7 billion are in tune with the demand made by the provincial premiers and the Quebec government who met this summer.

The fourth consensus, Mr. Chairman, had to do with debt reduction. The great majority, if not the totality of the population consulted in Quebec, showed they were very sensitive to this matter of debt reduction, but not at any cost. You shouldn't put all your eggs in the same basket, as country folks say in their native wisdom. They say that the debt should be paid down as soon as possible, but that you also have to keep the main priorities in mind and health is the inescapable priority.

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Investments must be made in health, then in education and in income security and taxes have to be reduced before using a major part of the surplus to decrease the debt. We suggested the debt be decreased by at least $3 billion a year for the first and second years. The evolution of economic growth and increases in tax revenue for the federal government could doubtless allow it to go beyond the $3 billion mark.

As we mentioned earlier, the government's surplus over the next seven years will not be $95 billion, but rather a figure that could exceed $150 billion. I find it hard to believe that we cannot devote more to paying down the debt.

However, even if we were to stick to the $3 billion a year, by 2010, at the end of the 10th year, our debt-to-GDP ratio would be less than 40%—some 39.4%, according to the forecast and reservations we may have about the long-term forecast. So the debt- to-GDP ratio would be below the figure considered ideal by the European countries when they established the European Union. That is quite a feat. We would achieve something respectable while at the same time investing in sectors that are priorities for the people of Quebec, and, if we believe the Canada-wide consultations, the people of Canada. We left open the possibility of earmarking more than the $3 billion we proposed for paying down the debt.

Six years ago, we told the Minister of Finance that our tax system was out of date and should be reformed. In 1996, a small group from the Bloc Québécois studied the system. It was not a comprehensive analysis, but we did review the main provisions of the federal tax system, particularly tax expenditures available to corporations and individuals to reduce their income tax. We realized that some of these tax expenditures were out of date and no longer in keeping with the realities of the 90s and were not preparing us to meet the realities of the year 2000.

We suggested some reforms that would result in an ongoing saving of $5 billion a year, and would make the tax system more modern. Five billion dollars is a lot of money. If we got only half that much—$2.5 billion, through the proposed reform' and if we used it to pay down the debt, we would already have $5.5 billion for this purpose. This is roughly the amount set aside by the Minister of Finance for paying down the debt in the last fiscal year. The vast majority of people consulted thought it was a very good idea to link paying down the debt faster with tax reform.

Let me give you a striking example that dates back to 1995. Since that time, the Department of Finance has stopped publishing this type of tax data, because, in my view, it was too shameful to present this type of fact together with increased apparent privileges, year after year.

You know that there are two very important provisions of the tax system for large corporations—deferred income tax and the accelerated capital cost allowance. The combination of these two measures means that although it is supposed to be possible to defer income tax for up to seven years into the future, and even up to four years in the past, I believe, income tax will actually be deferred indefinitely, Mr. Chairman. Some business people and large corporations have actually boasted that they will never pay any income tax to the federal government. And I am not talking about corporations that will not make a profit. You will recall that last week, I tabled with the Finance Committee a list of 200 or 250 large Canadian corporations that make huge profits and do not pay one cent in income tax, or pay very little, Mr. Chairman. Year after year, these corporations amass astronomical profits.

As I was saying, the Department of Finance stopped compiling this data in 1995. In 1995, there were $36.5 billion in deferred income tax unpaid by large corporations, most of which were very profitable. I cannot believe that we individuals are being bled dry as part of some collective effort.

[English]

Mr. Paul Szabo (Mississauga South, Lib.): Mr. Chairman, may I ask, please, for a clarification?

In regard to the $35 billion, are those taxes due and outstanding or are they taxes that will have to be paid at some time in the future?

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[Translation]

Mr. Yvan Loubier: If I might, Mr. Szabo, I will complete my remarks, because I have just one more point to make. Afterwards, I'd be pleased to answer your question based on the analysis I tabled with the Finance Committee. All committee members should have received a copy of this document, because it is interesting.

Without trying to recover all deferred income tax, we should make an effort to recover a small portion thereof to ensure that large corporations make their contributions and stop sending their representatives to the Finance Committee to tell us that we must definitely reduce the debt and the income tax paid by high-income individuals, because the country is experiencing a brain drain. If these large corporations did their part, they might have a little more credibility when they appear before us.

I'm thinking particularly of Thomas d'Aquino, who told us last week that we should not be reducing the income tax of middle-income earners, but rather those of high-income earners, to prevent the brain drain. He also said the rest should be spent on paying down the debt. I suggested he tell his members that they should start by doing their duty before coming to tell us how to help them benefit from the surplus.

Mr. Chairman, I am disappointed that the representative of the Reform Party, the Official Opposition, which should be very interested in consultations of this type, is leaving the meeting. But what can you do? When the Bloc Québécois was the Official Opposition, it was much more conscientious than the Reform Party. However, that is another matter. I won't get into that debate here.

Everyone agrees that there is one final major priority—infrastructure projects. People are urging the federal government to sit down with the provincial governments to work out the details of an even broader infrastructure program than the one we had in 1994-95.

Two priorities emerged clearly from the consultation process. The first concerns social housing. Even people in the business sector think the current situation is dramatic. In Quebec alone, there are 518,000 people who should be eligible for social housing because of their income and the percentage of it they spend on housing. However, there are only 63,000 social housing units available. More and more people are spending up to 50% of their income on rent. A few years ago, a figure of 30% was set as the threshold. If people spent more than that on housing, they did not have enough to spend on food, clothing, child care, and so on. However, at the moment, Mr. Chairman, several thousand people are spending up to 50% of their income on housing.

There is also the shipbuilding policy. It is incredible that the government of a country surrounded by water, which includes almost all the major bodies of water in the world and the largest rivers, does not have a real shipbuilding policy. Mr. Dubé, who is an ardent promoter of this policy, will give you more details on this. I think it is time we had such a policy. I would remind you that in the past shipyards employed more than 12,000 people. At the moment, they employ only 4,000 or 5,000 people, or even less. There are also threats of closing down some shipyards in the relatively near future. People have called on the government to set aside $3 billion for infrastructure projects, particularly in the areas of social housing and shipbuilding.

I and my colleagues and the leader of the Bloc Québécois trust that this eminently democratic exercise undertaken by the Bloc will have an impact on the government and that our suggestions will appear in the upcoming budget.

I would also like to take this opportunity to thank all those who took part in this exercise—all Quebeckers from all parts of Quebec, and all my colleagues in the Bloc Québécois. The process was useful and enriching in all regards. I hope you can someday carry out such a broad consultation of 3,000 individuals and many regional and national organizations. It is a very worthwhile project for parliamentarians. Thank you.

The Chairman: Merci. Mr. Dubé.

Mr. Yvan Loubier: Mr. Dubé will give you some more information about the shipbuilding policy.

Mr. Antoine Dubé, M.P. (Lévis-et-Chutes-de-la-Chaudière, BQ): I will be brief so that there will be time for questions.

There has been a shipyard in my riding for a long time, and two years ago, my leader asked me to handle this file and to consider it in the broadest possible context—the Canadian context. I have visited all the major shipyards in Canada and met with all the people involved, including the Shipbuilding Association of Canada, which is made up of the owners of these shipyards. I also visited a number of small shipyards and met with union representatives and shipowners.

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On December 8, last year, a meeting was held here in Ottawa that involved Mr. Epp, the Reform Party MP, Mr. Duceppe, the House leader of the Conservative party, the leader of the New Democratic Party, the president of the Shipbuilding Association of Canada and a coalition of all the unions. This was definitely one of the first times there had been a meeting between the association of managers and the three major unions, which are located throughout the country and which get along very well. At the end of the meeting, they tabled a joint request made up of seven measures, three of which related to the tax system. They are what I would like to speak to you about today.

Last fall, I tabled bill C-213, which stated almost verbatim the three measures called for by the associations. I would like to emphasize the fact that they were supported by the Conference of Provincial Premiers held in Quebec City last August.

This morning I was reading a report of the Canadian Chamber of Commerce which stated that Canadian shipyards do not have a fair opportunity to compete against other shipbuilding nations. The Canadian industries are affected by the following: no loan guarantees, no capital R&D grants, no direct construction grants, no preferential rate for export financing, and no preferential taxation.

The Chamber recommends:

That the federal government support shipbuilding, ship repair and offshore and related industries by immediately calling together the resources of these industries to initiate and implement a shipbuilding policy that will ensure the long-term viability of a competitive made-in-Canada shipbuilding policy.

At its March 1998 convention, the members of the Liberal Party, including some Liberal members of Parliament, passed the following resolution:

BE IT RESOLVED THAT the Liberal Party of Canada urge the Canadian government to immediately develop a national shipbuilding policy to help out the industry and thereby maintain and strengthen the excellence of the technologies for which we are renowned and which we could lose.

Speaking of losses, I will tell you about what we heard last evening from representatives of a number of shipyards at the Finance Committee hearings, where I was replacing Mr. Loubier. For a year and perhaps even two years, the 1,200 workers at the Lévis shipyard had no contact. The same situation prevailed in St. John, New Brunswick, and the shipyard had to be closed down in December. I won't repeat all the arguments the witnesses made. They also said that their wages were no higher than those paid elsewhere in the world, and that they have high-technology equipment.

The bill that I tabled has had one hour of debate at the second reading stage and there are still two hours of debate left. According to the list, it should be on the order paper at the end of February for a second hour, and the third hour may take place in April. So the next budget will be tabled before we get to these stages, and it's for this reason that I'm bringing this up today. It is absolutely essential and urgent that you, members of the committee, recommend to the Minister of Finance that his next budget include measures to aid the shipbuilding industry in Canada.

One of these three measures deals with the establishment of a loan guarantee program. We must amend the provisions of the Income Tax Act governing leasing so that the maritime industry might avail itself of this opportunity. A boat does not cost $25,000, but millions of dollars. The federal government should, as the government of Quebec did, provide a refundable tax credit which could be spread over several years, especially in the case of the first vessel in a series. And the result of this lack of harmonization between Ottawa's policies and Quebec's policies is that Quebec's shipyard profits are taxable at the federal level, which is, in my opinion, not right.

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[English]

The Chair: Thank you, Mr. Dubé, Mr. Duceppe, and Mr. Loubier.

Before I go to the question-and-answer session, I personally would like to thank you very much for your report and your contribution to the pre-budget consultation process. It's a report that certainly a lot of thought has gone into, and I really appreciate that.

Mr. Epp.

Mr. Ken Epp (Elk Island, Ref.): Thank you, Mr. Chairman.

I'm sorry I left for a while. I was scheduled to speak in the House, and with my excellent negotiating skills I traded time.

I also want to commend our colleagues from the Bloc for what they have done. To me this is a better vision or a better model of how our pre-budget consultation should work, rather than going around and listening to a whole bunch of predetermined special interest groups. I say that without disregard to those special interest groups, because I think they have a legitimate place at the table as well, but they certainly have members of Parliament in their ridings. To go to your people and ask what their aspirations are is to me a very fine way of doing this process. I congratulate you for that and thank you for it.

I have a few questions. I want to get this off my chest. For six years I've heard you saying, “Quebeckers and Canadians”. You always distinguish between Quebeckers and Canadians. I think I know where you're coming from and I think I understand—I'm trying hard to understand—but we're talking here about the federal government, about the federal taxation system. The people in Quebec, as citizens of this country, are paying taxes to Ottawa, and they have as much of a legitimate role to play here as any other citizen across this country in terms of input on how that budget is to be handled, how that money is collected, and how it's spent.

That's not a problem, but I want to get this off my chest. I really wish you'd just say “Canadians” instead of “Quebeckers and Canadians”. I know I won't persuade you that way today, but thanks for letting me get it off my chest.

I want to ask you a specific question on the EI. You indicated that on employment insurance the budget should show $7 billion as an expenditure item. I probably missed it—and unfortunately my facility in the French language is inadequate—so I'm just asking for clarification here. Should that be given as a reduction in the premiums? Or should it be given as an increased benefit to people who are unemployed? If so, in what proportion?

[Translation]

Mr. Yvan Loubier: Mr. Epp, I am very happy to see you have returned. I was very disappointed when I saw you leave. I thought that what we had to say didn't interest you. However now I understand the context. I'm sorry if I was somewhat aggressive with you because I know that you are very interested by this whole process and by everything that the Bloc Québécois does.

With respect to the Employment Insurance Program, we realized through its application, as well as from the government figures provided by Human Resources Development Canada, that currently, despite the fact that everyone pays employment insurance premiums—I'm thinking here of young people, women, seasonal workers, etc.—less than half of them are eligible for benefits when they are hit by the scourge of unemployment. Currently, only 42% of people who have already contributed to the Employment Insurance Fund are in fact eligible to benefit from the program.

When a program no longer benefits more than half of the targeted population, it needs to be reformed. I'm not saying we need to go back to the previous program, which was very lenient. But the program needs to be based on common sense. When you are dealing with a situation where 42% of people are covered, this is not common sense. We need to target 70% or 75%, which is an acceptable percentage.

There are shortcomings that need to be corrected. I am thinking among other things of the treatment of women, young people and pregnant women. It is unacceptable. We are talking about using a large part of the surplus generated. This year, the fund's surplus, despite the reduced contribution rate announced by the Minister of Finance, could exceed $6 billion. Let's use a part of this surplus to reform the program in a way that would make it more humane and more efficient in our fight against the scourge of unemployment.

Regarding a reduction in the contribution rate, there are some representatives, particularly employer representatives, who suggested another reduction in the contribution rate during our consultations. We agree. However, with respect to the use of the surplus, the first priority should be to solve these serious problems with the Employment Insurance Program. This is what we would like to do.

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With respect to your first question, I'm not sure if Mr. Duceppe would want to answer.

Mr. Gilles Duceppe: No.

Mr. Yvan Loubier: With respect to your first question, we are proud to be Quebeckers, certainly. You know that we dream of the day when all of our taxes will be paid to Quebec, and there will be a great partnership with the rest of Canada. This is the reason that we are already making distinctions. We are preparing for the future.

[English]

Mr. Ken Epp: I know you want that. I don't, but that's okay. We try to understand each other.

Am I right in summarizing, then, that your higher priority would be to increase the benefits paid out of EI rather than reducing the premiums? I think that's the general sense I get.

[Translation]

Mr. Yvan Loubier: Without having consulted specifically with respect to proportions, we propose, given what came out during the discussions, that three quarters of it be attributed to program improvement. We think it would be an excellent idea to attribute the remaining quarter to a decrease in contributions.

If you knew how many people came to our offices in our ridings—and you probably see the same thing—believing that they should be eligible for the Employment Insurance Program benefits. These are people who want to work, who are looking for employment everyday, and who haven't been able to find a job for a certain amount of time and who have been completely cast aside because they no longer meet the new and very stringent criteria for the Employment Insurance Program that have been in place for two years now. These people are caught between a rock and a hard place because when they go to apply for social assistance, they aren't eligible for that either, because they have too many assets. So, they get poorer, and poorer and poorer.

And in this process the middle class is getting poorer and poorer. These are the same people who contribute the most to the Employment Insurance Program.

Mr. Gilles Duceppe: Those who have an income below $35,000.

Mr. Yvan Loubier: That's right. Those who are the hardest hit by unemployment are often in the same category. Those who have been taking the brunt since 1994, thanks to income taxes which are too high, are once again being affected. Eventually, we are going to have to take care of them because we mustn't forget that these are the people who have the greatest marginal propensity to spend. In other words, every dollar they spare in taxes, they will spend it, investing and contributing to the growth of the economy and to job creation.

[English]

The Chair: Thank you.

Mr. Ken Epp: I remember many years ago, as a student, being really upset with what was at that time the UIC. I actually wrote a letter and said to the UIC that it was unfair for them to force me into an insurance program in which I did not want to participate, and that it was immoral for them to force me into one from which I could not possibly benefit since I was quitting my job to return to school in the fall. They wrote back and said it was not up to me, it was up to my employer, who would go to jail if he did not deduct and remit.

Are you thinking specifically about something like that when you mention young people? Would you like the finance minister to say that, effective this year, students will be exempt from paying employment insurance? Would you like to see that, or not?

[Translation]

Mr. Yvan Loubier: No, that's not at all right, Mr. Epp. Like you, we are concerned that young people go back to work or find jobs. To have a future, you need a job and the dignity that goes with it. It's unfair to have two classes of citizens, one class of citizens that is treated better than another because of age. What we would like is to review the system in order to see if there is a way to repair these injustices that exist between different age categories and also between men and women, because women are treated very poorly under the program. So we are proposing certain improvements and we would like to make sure that what appears to be a major orphan clause for young people in the Employment Insurance Program be corrected and that everything that is unfair for young people also be corrected.

As I said earlier, we don't want to have a program that is totally relaxed, where people can come and go and where it's an open bar, as they say. That's not what we want at all.

Mr. Gilles Duceppe: Maybe we should specify that the premiums paid by someone who is returning to school are returned to them up to a certain limit. From memory, I believe that it's $2,000.

Mr. Yvan Loubier: There is a certain ceiling.

Mr. Gilles Duceppe: I think that we should raise this ceiling to $3,000 and recuperate this at the income tax report stage. We should raise the ceiling, otherwise this is simply a tax grab from the pockets of people, and they will never get to see it.

[English]

The Chair: Thank you, Mr. Epp.

Mr. Discepola.

• 1225

[Translation]

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): I was in my office and listening to the transmission of your presentation. I have some doubts as to some of the figures that you quoted. Mr. Loubier, you seem to want everything, yet you don't specify how we can pay for all this. Let me explain.

You want $6 billion in personal income tax cuts. You want $3 billion for debt reduction. You want a $3 billion infrastructure project. You want employment insurance to give money back to employers and to employees. However you need to know one thing, and that is that there is not $100 billion to give out.

Since your arrival in Ottawa, you have always criticized the Minister of Finance's forecasts. I believe that the Minister of Finance was cautious and that this was a very wise approach.

We will be hearing from seven or eight economists this afternoon, I believe. And I'm convinced that we will also have seven times eight, that is 56 opinions on the forecasts.

You brought up two things. First of all, you said that our priority should be re-establishing the transfer payments to the provinces, especially in the field of health. In our province, the provincial government recently injected approximately $1.4 billion into health. This did not solve the issue of overcrowding in emergency rooms. When I see that Quebec has decided to act according to their priorities, I have to ask myself if it is simply money that the health sector needs or if there aren't other things we need to do.

With respect to the priorities of the government of Quebec, they wanted to provide $360 million to come to the rescue of a General Motors plant in Boisbriand, even though nobody had asked for the money. Just look at our own minister, Ms. Marois, who decided to spend, not once but twice, $400,000, which means $800,000, to renovate her offices in Quebec and in Montreal and to install silent flush toilets.

I wonder if you have thought of the number of physician's positions that this kind of money could pay for. When I did the same analysis that you did, I realized that Quebec spent 9.2% of its gross domestic product on health. When specialists conducted a study two years ago, they told us that this was the amount of money that we needed to reinject in health care. And that's what the government did in the last budget. So I wonder if we always need to inject cash to solve problems in the health care system or if there aren't other ways to solve these problems.

Mr. Gilles Duceppe: A good way to solve one of the problems would be to eliminate the bureaucracy in Ottawa, which is always interfering in health, even though you don't manage one hospital, one school and yet you are interfering and telling people how to provide the services to the population. The first thing to do might be to withdraw from a sector where you have no business. That would be the first thing to do.

Secondly, you are asking yourself if there are financial needs or not. I find it very bold of you to say this while Ottawa, for its financial needs, went ahead and cut $33 billion from the provinces in the field of health, in post-secondary education and in income support. It's not complicated. If you want to find figures, look in Paul Martin's budgets each year as well as in the forecasts until the year 2003, and you will come to $32.5 billion. It's on the record, very clearly.

When I hear this type of thing, I think it's irresponsible. You make your decisions here in Ottawa, and you wash your hands of them and you ask the province to bear the brunt of the cuts in these essential services, while you have nothing to do with these fields. You have no expertise in these fields. To me these comments are simply shameless. You speak of expenses and you bring up the case of Pauline Marois. If you took stock of expenses here, you would see that it's quite easy to find $400,000 spent here and there. It's certainly not the way you manage the Canadian Army and the secret service, even though just about everyone knows all their secrets, that are very good examples of good management. Neither is it all the events with the Governor General, who doesn't pay a cent in tax, that are a shining example of proper management in this country. You are certainly not the ones to be teaching lessons when it comes to this.

And there are even aberrations. In a three-year period, 4,000 extra hats were bought by the RCMP. I can just imagine that the solution to this problem would be to hire 4,000 people to put under these hats. That's the type of decision that Ottawa makes. Maybe Mr. Loubier has a comment to make.

Mr. Yvan Loubier: Yes.

Mr. Gilles Duceppe: To help clarify the situation.

• 1230

Mr. Yvan Loubier: Yes, I can provide more information. Since 1994, since Mr. Martin's first budget, all of the cuts together until now have taken $21 billion away from the Canadian provinces to finance social assistance, health and post-secondary education.

Mr. Nick Discepola: Mr. Duceppe said $33 billion.

Mr. Yvan Loubier: Wait a minute.

Mr. Nick Discepola: Which is the real figure?

Mr. Yvan Loubier: In Quebec alone, there are $6.3 billion missing from the coffers—

Mr. Nick Discepola: Over how many years?

Mr. Yvan Loubier: —of the government of Quebec to fund—

Mr. Nick Discepola: Over how many years?

Mr. Yvan Loubier: Listen, you want an answer, we're giving you one.

Mr. Nick Discepola: It's over five years.

Mr. Yvan Loubier: If you don't agree with the answer, that's a different issue.

Mr. Gilles Duceppe: Take notes and you might understand better.

Mr. Yvan Loubier: That's right, take some notes, and then you won't have to ask this type of question.

Since 1994, cumulatively in Quebec, there's $860 less per person. You are a member from Quebec and so you should be worried about the welfare of Quebeckers. There is $860 less for each Quebecker thanks to the cuts in the three fields that I mentioned and $711 less per person in all of Canada. How is it that Quebeckers have undergone greater cuts? For Ontario, the figure is $677.

I have another answer to your questions. You ask a lot of questions, but we have a lot of answers.

Mr. Nick Discepola: But you didn't answer my most important question, Mr. Loubier, which was to know—

Mr. Yvan Loubier: Mr. Chairman, what are these cautious forecasts from the Minister of Finance?

Mr. Nick Discepola: Is this a dialogue or a—

Mr. Yvan Loubier: We have our own forecasts.

[English]

The Chair: Let him answer the question.

[Translation]

Mr. Yvan Loubier: We have forecasts on the surplus and we used to do forecasts for the deficit. Mr. Martin said to us: “What kind of forecasts are these?” That's what he said last February, when we made our forecasts public. In June, a few months later, he was making the same or almost the same forecasts as us.

I remember doing the math year after year since 1994. Mr. Martin was off, on average, by more than 100% in three or four months of his forecasts. Where will the money come from? There you have Mr. Martin's answer: according to him, it's $95 billion; according to me, it's $150 billion minimum. According to a team of economists with the Canadian Imperial Bank of Commerce, it's $150 billion over the next seven years. The surplus forecast needs to be 50% higher.

You want to know where we'll find the money? That's where we'll find it. Do you know how this money is obtained? It comes from the provinces, by diverting $33 billion from the Canadian Social Transfer, and from middle income earners, those who earn between $30,000 and $70,000.

Mr. Nick Discepola: That is concrete proof. Mr. Chairman, may I speak now?

The Chairman: Yes.

Mr. Yvan Loubier: One last answer, Mr. Chairman.

With respect to Boisbriand, is the member trying to say that he is critical of Minister Landry for having resorted to regular provincial programs of the government of Quebec, for using long- term loan programs and technological change programs to try to help these workers, while his colleague John Manley, the minister from Toronto, has not lifted a finger to save Boisbriand until now? Is he trying to say that he doesn't agree with Bernard Landry, who wants to save hundreds of jobs in Boisbriand?

[English]

The Chair: We'll let Mr. Discepola speak as well, and then we'll go to Ms. Guarnieri and Ms. Leung.

[Translation]

Mr. Nick Discepola: May I have as much time, Mr. Chairman?

The issue, Mr. Loubier, is that everyone comes before us to say that more funding is required. The concrete proof of this is that in our province...

An Honourable Member: Oh, oh!

Mr. Nick Discepola: May I speak, please?

The concrete proof of this is that our government injected 1.4 billion dollars and this has not solved the problem.

As far as Boisbriand goes, it's strange that the government is offering 360 million dollars to a company that did not even ask for it, at a time when there are problems in the health care sector. It is a question of the government's priorities. That was the province's choice.

You also mentioned the example of a family of four with two children that starts paying income tax to the federal government starting at an income of $13,779, while the same family does not start paying income tax to Quebec until the family income reaches $30,316.

Can you please explain to me then why it is that our province has the highest taxes in North America? Is that the federal government's fault yet again?

Mr. Yvan Loubier: Wait a minute!

We started reforming the individual income tax system in 1994. It is not hard to figure out: this has happened since the Parti Québécois has been in power in Quebec, because the Liberal Party did nothing about this all the years it was in power. Its legacy was a $5 billion deficit. We put our financial house in order, and despite all the difficult decisions made by the Quebec government, that year, we launched a genuine reform of the individual income tax system. One of the things we did was to increase the thresholds at which income tax becomes payable. We started to reform the system.

Here in Ottawa, our federal Finance Minister, Paul Martin, with an interest in ships, is very quick on the draw when it comes time to change tax provisions regarding Canadian-owned ships that sail the seas around certain tax havens. However, when it comes time to assume his responsibilities and to cut individual income taxes, to correct a ridiculous situation that results from the fact that the income tax tables are not indexed, he congratulates us in the House, talking about the wonderful studies and fine proposed reform of the income tax system, but ultimately, he does nothing. We would have preferred fewer congratulations and more work on regularizing the situation regarding tax thresholds and the lack of indexation.

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We have started the process in Quebec. We made a good start by dealing first with low and middle incomes. Do you know where Mr. Martin has started his tax reform? He started it this year by eliminating the 3% surtax, which benefits people whose incomes are $250,000 and up.

In Quebec, the tax structure is highly democratic. We had the decency to start with low-income earners to ensure that low-income families, who are having a hard enough time as it is, do not start paying income tax until they reach the $30,000 threshold. Do your homework first before you start criticizing Quebec like that.

[English]

The Chair: Thank you, Mr. Loubier.

We have three more questioners, and I would ask that the preambles be kept short and that the answers be a little bit short as well. That would be great.

Ms. Guarnieri.

[Translation]

Ms. Albina Guarnieri (Mississauga East, Lib.): If I understood you correctly, you said the problem is determining how to spend the surplus.

You also emphasized that money should be spent to provide some relief for the unemployed. You also said that you have held many consultations. In my view, there is no doubt that the surplus should go to workers in Quebec and throughout Canada.

When I was on the Standing Committee on Human Resources Development, we produced a unanimous report on older workers. One of its recommendations was that the government consider setting up a fund for workers that would be managed by the provinces.

I don't know whether you have heard this or not, but the United States have said that there is a labour crisis and that 90 million people will have to take training programs over the next five or 10 years. I'm sure the same thing will happen here. In light of this, are you prepared to support the recommendations of the Human Resources Development Committee?

Mr. Gilles Duceppe: As far as employment insurance goes, as a result of an initiative by the Bloc Québécois, the four opposition parties suggested that an independent employment insurance fund be established and managed by employers and employees—those who pay the premiums—to make sure that the government does not touch—and I could use a less polite word—the fund, which has a surplus of some 25 billion dollars.

We have to realize that the government has taken money out of the pockets of people who earn less than $39,000, because people with incomes higher than $39,000 do not pay premiums. In addition, employers had to pay an employment tax, and now this money is being used for other purposes. That is totally unacceptable.

If there were an independent fund of this type managed by people who pay into it, because the federal government no longer pays a cent into employment insurance—we could, in consultation with the provinces responsible for manpower, set aside some of the money to train workers to meet current and future needs of the economy. This is not being done at the moment because the money is being used for other purposes. I think there are many points that are compatible with what you are suggesting.

Ms. Albina Guarnieri: The Human Resource Development Committee's idea was to give workers the tools they need to prepare for the new millennium. We didn't want to interfere with the fact that it is up to the provinces to deliver those programs. With that in mind, could you support our recommendations?

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Mr. Gilles Duceppe: If the funds, which are to be used by employers and employees, were given to the provinces under the transfer payment system, the provinces could do this job, because they are closer to the situation than the federal government.

Ms. Albina Guarnieri: Workers know what the needs are. For example, we provide a great deal of money when people are unemployed, but I think it is a poor second-best solution for people who are desperate and are trying to hang on to something.

Take, for example, the case of a school caretaker who knows his job will be ending in two years. If he has a personal fund, he may think that if he learns French, he will improve his chances of finding another job. He can make the decision and choose which course to take. The program would be managed by the province. Would you agree?

Mr. Gilles Duceppe: I think we could look at that in detail, but it does assume, from the outset, that the Minister of Finance will stop using this fund for other purposes. That is a pre- requisite.

Ms. Albina Guarnieri: Yes, but you agree about the reason that we are talking about a surplus here today. We have a surplus because we have a Minister who acted wisely and responsibly. We have never had an opportunity to talk about how the money should be spent.

Mr. Gilles Duceppe: Yes, but if my insurance agent made me pay a premium two or three times as high as it should have been, pocketed the profit and told me, when my house burnt down, that he was sorry, but that the policy applied to the second fire only, I could certainly talk to him and think it was great that this guy had some money, but he would nevertheless have robbed me of my money. That is exactly what's happening in the case of the Finance Minister.

Ms. Albina Guarnieri: I think that the Minister has always acted cautiously and responsibly.

Mr. Gilles Duceppe: Yes, but I would like to ask you a question. Is it responsible to act in such a way that only 42% of people who pay employment insurance premiums are entitled to benefits when they are out of work? The Human Resources Development Department has actually gone so far as to remove this statistic from its report.

That is the tactic used by the Liberals. They think that if they do not talk about something, the problem will go away. We won't talk about this statistic, and the problem will disappear. We won't talk about the referendum, and that problem will disappear too. We won't talk about unemployment, and there will be no more unemployment. That is how their magic works.

I would submit that it is not very honest to hide the truth, to take money from the poorest in society and then to act like some magnanimous prince who claims to run the country's finances reasonably and responsibly.

He took money from the poorest people in society, he made cuts to employment insurance, to health, to education and to income support, and you are asking us to praise this man. I say to you that it is possible to run things so as to meet the needs of the poorest members of society, rather than trying to please its richest members, rather than trying to accumulate money in Ottawa, when it is the provinces, not the federal government, which provide direct service to people.

This federation is dysfunctional. Those providing the services have no money, and those with money are not responsible for providing services. There is something wrong somewhere.

Ms. Albina Guarnieri: But it is because the Minister understands the sacrifice made by Canadians.

Mr. Gilles Duceppe: Who has made sacrifices? People with boats in Panama, registered in another country so as not to pay income tax here? They are setting a fine example.

Let's get serious here.

Ms. Albina Guarnieri: The Minister is well aware that people are making sacrifices. We always need money if we are going to pay for these services.

Mr. Gilles Duceppe: Wouldn't the Minister of Finance be setting a good example if his companies were to pay taxes here in Canada, rather than taking advantage of tax havens? This man knows the system well enough to decide not to pay income tax here. That is what is happening.

• 1245

Look where the Canada Steamship Lines vessels are. What flag do they fly when they sail around the world? Look where they pay their income taxes. Is that what you call setting a good example, when you ask people to make sacrifices? How can he shirk his responsibilities in such a despicable way? You tell me that he is a responsible man. I define this concept differently.

Ms. Albina Guarnieri: I think most Canadians disagree with you.

Mr. Gilles Duceppe: That's because they don't know what is going on.

Ms. Albina Guarnieri: I think they understand very well that for the first time, we have a surplus to talk about. That is the best possible argument. They know that there is a surplus.

Mr. Yvan Loubier: Ms. Guarnieri, they understand that the person who is asking them to make sacrifices unheard of in the last 30 years, incredible sacrifices, this man who claims to be a great, patriotic Canadian, has ships that do not fly the Canadian flag. They fly the flag of Panama, because he does his business in tax havens.

They understand that this man who is asking them to make sacrifices—even the poorest people, because he has increased the street population in Toronto, Montreal and Vancouver—is not paying income tax in Canada. Do they understand that this man does not comply with Canadian labour standards because he deals with countries that are tax havens, that is, countries that have no labour standards? Do they understand that this man does not comply with Canada's environmental laws, because he has set things up in such a way that he does not have to, by having his ships sail the world and locating his decision-making centres in countries with very lax environmental standards?

I think that there are some things that people do not fully understand, or that you do not fully understand. There is some inconsistency there.

Ms. Albina Guarnieri: I would like to point out that when I was young, we did not spend more money than we had. For the first time, we have a Minister of Finance who has been fiscally responsible.

Mr. Yvan Loubier: There are 1.5 million children living below the poverty line, Ms. Guarnieri.

Mr. Gilles Duceppe: To wrap up these discussions, you should ideally support our position on anti-deficit legislation. I do not know why the Liberal Party of Canada is opposed to it. We could agree on that right away.

Ms. Albina Guarnieri: Mr. Duceppe, I am realistic. I know that if you have everything you are asking for, money will have to be collected. And it will still be Canadians who are going to pay for that.

Mr. Yvan Loubier: According to the Minister of Finance, over the next seven years there will be a $95 billion surplus. According to the Bloc Québécois and some renowned economists, it will be $150 billion, and what's more, it is our money. It is not the Minister of Finance's money nor is it yours, Ms. Guarnieri.

[English]

The Chair: I think we're deviating from the essence of the debate. We don't want to talk about who flies which flag. I don't know how many Canadian flags you fly. We're not sure.

Go ahead, Ms. Leung.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair.

I just want to congratulate the honourable colleagues from Quebec for their effort to do this pre-budget consultation. I have just a couple of short questions.

You talk about a shortfall in health. I know about that, and I sympathize with a lot of needs. You know the federal government gave $11.5 billion for the five years, and we seek a united front to have a social union. I think the rest of the country has all agreed and has signed. We do have a privilege to share whatever revenues we have, but in the meantime we have an obligation to join forces to face the problem. It just mystifies me that yours is the only province to not sign. That's one question.

The second one is on your concern about shipbuilding. I'm from Vancouver, where we have a lot of problems. I think you know we're in the same boat. We're very concerned about that. Again, we had a big presentation last night. As you know, you even asked for government assistance on that, and you know we are really facing global competition. We have a system, but how can we face the competition in the world? We know only Korea and China, and we cannot compete. Most of the shipbuilding contracts go to those countries. I would like to hear in what way we can resolve the difficulty.

Thank you.

[Translation]

Mr. Gilles Duceppe: You say that the federal government has freed up $11.5 billion over a five-year period. From 1994 to 2003, cuts of the order of $44 billion were forecast. They were reduced to $32.5 billion. That explains the $11.5 billion you were talking about.

• 1250

You must agree with me: it is simply a reinjection of $11.5 billion, is it not?

If someone takes $44 from me and gives me back $11.50, with a quick calculation, I would conclude that I had been robbed of $32.50, and not that I had received $11.50.

Mr. Yvan Loubier: Exactly.

Mr. Gilles Duceppe: You are not going to thank the person who took the money from your pocket by saying: "I took a little bit too much, I am going to leave you a bit of money for the bus." He took $32.5 billion from us; he did not give us $11.5 billion. I think that is an important distinction to make.

As regards social union, you say that you are mystified by the fact that Quebec has not signed the social union agreement. The problem in Canada is undoubtedly what Hugh MacLennan called the two solitudes. I realize that there are many people in Canada who have been mystified for a long time, who do not understand the Quebec reality. The sovereignist government is not alone in having refused to sign the social union agreement. The Quebec Liberal leader, Jean Charest, also refuses to sign the agreement. It is the same problem as the Constitution of 1982. Robert Bourassa, a federalist, rejected it; Claude Ryan, a federalist, rejected it; Daniel Johnson Jr. rejected it. They are all federalists and they all rejected it.

Instead of remaining mystified, I would recommend that you listen to what people from Quebec have to say, which is different from what your Liberal colleagues are saying, who, in my opinion, are mystifying you.

Mr. Yvan Loubier: That is true.

Mr. Gilles Duceppe: You are not perceiving the truth clearly if you are going by their opinion. I'm not saying that it does not exist, but I am saying that they have too much of an all- encompassing view of reality.

As regards shipbuilding, my colleague will answer your question. I will nevertheless say that when I was in Vancouver, last May, I was truly mystified when I heard Minister Anderson make the following comment to a Chinese delegation in the Vancouver port: "We admire the way you build ships; you do a better job there than we do here." I was a bit mystified and I wondered how a Canadian minister could use such language in the port of Vancouver, in front of Vancouver workers. So this time I agree with you: it was absolutely mystifying.

[English]

Ms. Sophia Leung: Can I just respond?

The Chair: Ms. Leung, Mr. Dubé would like to answer.

[Translation]

Mr. Antoine Dubé: With respect to the state of the shipbuilding industry, you are asking why we do not build more ships in Canada.

First of all, we have to look at the issue of subsidies. In Asia, up to 30% of shipbuilding is subsidized, although in some cases the State-run shipyards do not pay taxes. They are subsidizing people who do not pay taxes.

In Europe, up to 9% of shipbuilding is subsidized in countries that are members of the European Economic Community. In Scandinavia, subsidies can be as high as 16%.

In the United States, there are no subsidies, but protectionist measures exist: a ship that is not built in the United States cannot enter the country.

Canada is a member of the OECD, and Minister Manley has come out against subsidies. So there are none. In fact, we do not disagree with that, because we are asking for a fiscal approach; we are asking for fiscal measures. I mentioned fiscal measures this morning, that would be refundable in certain cases, but the United States prevents us from building ships or denies our ships access.

Moreover, we are very much in favour of free trade with the Americans; we give them a 25% tariff exemption and allow them in Canada. We are in the worst situation. The people from the Maritimes came and explained it to you yesterday: Canada is currently adopting the worst maritime policies imaginable in terms of shipbuilding. First of all, there is no policy. Moreover, we are allowing horrible things to go on. Then there are the fiscal issues.

Since we are still examining the issue of subsidies, I recommend that the Standing Committee on Finance examine the issue of taxes paid by companies in certain countries. That will confirm what my colleague Mr. Loubier said earlier on.

Mr. Gilles Duceppe: In other words, you would like to tell the Member for Lasalle—Émard to act like a Minister of Finance instead of a shipowner.

[English]

Ms. Sophia Leung: I just have a quick comment in response to Mr. Duceppe's reference to Minister Anderson. I think it's perfectly all right to understand that we can praise a competitor. We recognize that reality. I don't think anything's wrong. We still can work hard to set up the competition as a Canadian shipbuilder. Thank you.

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The Chair: Thank you very much, Ms. Leung.

[Translation]

Mr. Gilles Duceppe: The Minister should have added that. It would have been more understandable. That was not part of his comments.

Mr. Antoine Dubé: Just a second. Yesterday, a group told us that recently, the federal government had a ferry that was to be based in Nova Scotia built in another country. I was unaware of that; I learned about it last night. That is in line with his assessment; it is better built elsewhere.

The Chairman: Thank you.

[English]

Mr. Brison, you're the final questioner.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman, and thank you, gentlemen, for your presentations.

[Translation]

My French is very poor. I think I need another week of immersion in Saint-Jean. At this point, I'm unfortunately not bilingual. But I welcome you.

[English]

My first question has to do with debt levels. If you compare Canada and the U.S. in terms of debt-to-GDP levels twenty years ago and those we have now, Canada actually had a lower debt-to-GDP ratio twenty years ago when compared to the levels of the U.S. Of course, today that is quite different.

If we look at almost any ratio of spending as a percentage of GDP, even in terms of health care, U.S. government spending is actually relatively comparable to that of Canada. On defence, of course, the U.S. spends far greater than Canada as a percentage of GDP. But the one number that is significantly different, of course, is our debt service ratio because of the difference in debt-to-GDP ratios.

You're familiar, of course, with Europe, the EU countries and the Euro. The Maastricht Treaty criteria require that all countries reduce their debt-to-GDP ratio to about 60%. Canada would not qualify to join in on the Euro at this point.

My comment would be that I would place a little greater emphasis on debt reduction at this time, with the goal being to have greater flexibility in the future to invest in some of the social spending we value as Canadians.

[Translation]

Mr. Yvan Loubier: Thank you for your question, Mr. Brison. When you look at the consensus that stems from our consultation, the debt is something that is important to Quebec men and women. The same is true for the Bloc Québécois. However, there are other crises that need to be resolved, in areas such as health care, where the situation is currently a disaster. If the money the federal government has cut since 1994 is not reinvested, I do not know where we are going to end up. And that is not only true for Quebec. Ontario, the Maritimes and the West are facing the same problem. It is widespread.

As we mentioned, $3 billion is a minimal amount. But if it were invested year after year, in 10 years, the debt-to-GDP ratio would be less than 40%, which is currently considered ideal in industrialized countries.

The other pressing priority is lightening the tax burden. We cannot continue like this. If, this year and next year, there are not significant tax cuts for people earning between $30,000 and $70,000 a year, as I was saying earlier, we will end up right back in square one. With the economic downturn that is expected to occur in the United States within the next two years, and everyone is talking about it, our exports will decline and will be to a lesser extent a driving force behind job creation and economic growth in Canada.

Measures to stimulate domestic consumption must be put in place immediately. Even though we have been in a recovery since 1994, and economic growth continues, we can see that domestic consumption has been lagging with respect to past forecasts and definitions. Why? Because middle-class people are bearing too much of a tax burden. People who earn between $30,000 and $70,000 are the ones who consume the most, all things considered. They are currently being strangled by their taxes. They need some relief.

There is a principle that government administrators must bear in mind and that has perhaps been forgotten in Canada over the past 25 years. Maybe it has been forgotten about because there has not been a surplus in 25 years. There is nevertheless an economic principle that states that a dollar invested one way does not equal a dollar invested another way. If you invest a dollar in middle- income taxpayers, there will be a multiplier effect. That dollar is worth more than one dollar; it may be worth two, three of four dollars if you take into account the investments that it will generate, the tax revenue that it will lead to and its contribution to economic growth. A balance must be found among all those aspects.

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[English]

Mr. Scott Brison: Thank you.

My next question is on balanced budget legislation or anti-deficit legislation. I have a philosophical problem with balanced budget legislation. I don't have a difficulty with balanced budgets, because in 90% of the cases, meaning most economic situations, I think they make sense. But there are times when it actually makes sense for a government to go into a deficit position during a downturn if the debt isn't too high.

More importantly, there has been a secular decline in the role of the member of Parliament over the last thirty years and a decline in the effectiveness of democracy and of our democratic institutions. While I would agree with what you're trying to achieve with balanced budget legislation, I think it's far more tenable at the provincial level in a sense. At the federal level, I would be concerned with any further reduction in or hindrance of our abilities to do what we need to do as members of Parliament and as democrats. That's just a consideration.

[Translation]

Mr. Yvan Loubier: Two years ago, the Bloc Québécois tabled a private member's bill on a balanced budget. That is how we called it. The bill contained various provisions designed to maintain some flexibility in the middle and long term in the event of a disaster. For example, Canada is forced to send peacekeepers. Because of international conflicts, the costs have exceeded the amounts forecast in the past. We have a deficit. For a number of years, the Minister of Finance was forced to recover surpluses to wipe out the deficit.

So there must be some flexibility. I'll give you another example: an economic downturn. We experience an economic slowdown, even a deep recession or a depression, and the federal government is forced to spend much more money than anticipated on stabilizing measures or employment insurance, for example. Our bill contained the flexibility that the federal government would need to step in immediately.

However, it held the Minister of Finance accountable for surpluses generated to reduce the deficit; he would have been accountable to Parliament. It is important for the Minister of Finance to be accountable to Parliament and to provide real answers, sensible answers, and not the doctored up figures like the ones he has accustomed us to over the past four or five years. That would have been important.

The other aspect that must not be forgotten is that we got ourselves into a hole, as we often say, we experienced our first deficits and accumulated our first debt under the Liberal regime. The Liberals have the ability to go back to their old ways of spending left, right and centre. We saw that in the Speech from the Throne, which mentioned involvement in areas under the jurisdiction of the Quebec government and the Canadian provinces. The Liberals are trigger-happy.

Earlier on, Ms. Guarnieri talked about the Minister of Finance's wisdom, his conservatism. As you know, these things can change quickly. All of the programs and initiatives that will be announced must be monitored carefully. We have to be careful, because they are quick to waste.

[English]

Mr. Scott Brison: I have one last question, Mr. Chairman.

On the question of the infrastructure programs, I think across Canada there was some recognition that the infrastructure program, as a federal government program that was by nature cooperative with provincial and municipal governments, actually was fairly well designed. One difficulty with it was that it appeared about three years ago and it's going to be appearing again now. Based on the throne speech, there's talk of it being introduced in the next federal budget. It seems to appear coincidentally with four-year electoral cycles. Infrastructure, by its nature—

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[Editor's Note: Inaudible]

An hon. member: ...for Mulroney.

Mr. Scott Brison: Oh, you mean the chairman of the Forbes global magazine? Oh, yes, that's right, that Mulroney. He's doing quite nicely. And Canada is too, by the way, based on his leadership.

In any case, on the question of four-year electoral cycles for something as fundamental and important as infrastructure, infrastructure by its very nature is a very long-term investment. Yet when these programs appear, it's almost like a candy toss for governments to invest, not necessarily in the priorities they would like to invest in but in the types of things that would qualify that year. Wouldn't we be better served by an ongoing plan, such as a ten-year plan for infrastructure investment that was cooperative but was not confined by these four-year electoral cycles?

[Translation]

Mr. Gilles Duceppe: I think that provisions like that are an excellent idea, as announced, unless they are just election year ploys, which seems to be part of the Liberal strategy.

Long-term vision does seem like an excellent idea. As I said when I met with Canadian mayors in Halifax last June, we agree that there should be an infrastructure program and agreements between the federal government and the provinces so that the latter can control the work and choose the priorities.

Moreover, the percentage for each province should be based on its demographic weight, as is currently the case for transfer payments. The same logic should apply everywhere. If Quebec represents 24% of the Canadian population, it should receive 24% of all infrastructure spending.

There is a fifth condition: the amounts already budgeted by a province or a municipality must be eligible if they have not yet been spent. We know that the provinces and municipalities face many more financial problems than the federal government. We have seen that. So if an amount of money is earmarked in the budget for something and it has not yet been spent, it should be eligible for the federal-provincial infrastructure program.

Mr. Yvan Loubier: That is a good idea.

[English]

The Chair: Thank you.

Thank you, Mr. Brison.

I have a question now.

As you probably know, we have to comment on the five-year plan, based on the economic and fiscal update. Do you know what the total cost of your plan is over five years? I get $104 billion. I may be wrong, though.

[Translation]

Mr. Yvan Loubier: I admit that we did not prepare a five-year forecast, because we are very cautious, contrary to Minister of Finance. We limited ourselves to the first two years, 2000-01 and 2001-02. When we talk about leeway, we are thinking about estimated margins of more than $60 billion, of which we would like to use $50 billion.

But don't forget that these are balanced measures, measures that affect all sectors and that, thanks to strategic choices, help influence the economy by stimulating economic growth, by freeing up the tax system for low and average income people and by contributing to kickstarting the economy through infrastructure projects, for example.

You are talking to extremely cautious people, because over the past four years we have often put our neck on the line by making forecasts. However, we were not wrong. Mr. Martin also put his neck on the line, but he got his head lopped off a few months later. I think that for these types of forecasts it's better to stick to two years. That does not preclude taking a brief look at the third, fourth and fifth years, as the method incorporating leeway enables the Minister of Finance to do. As for us, we are sticking to the first two years.

There is about $50 billion that could lead to a potential $150 billion over the next seven years. Keep that in mind.

[English]

The Chair: You think the Minister of Finance is conservative in his projections. I'm not arguing the point. I'm just saying that over a five-year period, when you're reducing taxes by $6 billion per year, that's $30 billion over five years, right? And it's the same thing when you're restoring

[Translation]

the health and social transfer to Quebec and the provinces

[English]

by around $4.6 million. Is that your floor, or are you setting up a new floor?

[Translation]

Mr. Gilles Duceppe: In the case of the CHST, I think that it has to be brought back up to 1994 levels. Recovering $44 billion is not even enough, since 11.5 has been remitted and $3.7 billion is less than the $6 billion that should have been there.

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According to your calculations, you say it is $105 billion. Is that correct? Over five years?

Mr. Yvan Loubier: One hundred and five billion dollars?

Mr. Gilles Duceppe: We did not calculate it over five years. You get $105 billion over five years.

[English]

The Chair: Yes.

[Translation]

Mr. Gilles Duceppe: I think that you have just clearly shown that the Minister of Finance anticipates a $95 billion surplus whereas economists are predicting a 50% difference.

Mr. Yvan Loubier: One hundred and five billion dollars.

Mr. Gilles Duceppe: So if you add $45 or $47.5 billion to the Minister of Finance's amount of $55 billion, you would end up with a surplus of about $135 billion, according to the economists. The Minister of Finance's figure is $95 billion. Now you are saying that it would balance out if we had put that over five years. Thank you; that proves our estimates are accurate.

Mr. Yvan Loubier: Even if our estimates only cover the next two years. Like I said, we prefer to not go beyond two years in our estimates, although it is possible to take into account certain parameters. However, as Mr. Duceppe said, we are truly within our budgetary capacity and our leeway as assessed by Mr. Martin. And we even end up with a surplus on the surplus after having implemented these measures. That proves once again that the Minister of Finance has way too much money in comparison with the federal government's responsibilities.

[English]

The Chair: That's fair enough.

As you know, the Canadian economy—and I think it's the same thing in the province of Quebec—is very much driven by the private sector. Unless I missed it, one of your omissions was what kind of recommendation you have made to help the business sector.

I know a reduction of the debt would help in maintaining low interest rates, for example, if that reduction is significant, but there was really no measure vis-à-vis a reduction in EI premiums or anything like that. You're talking about increasing benefits, unless I misunderstood you.

[Translation]

Mr. Gilles Duceppe: Mr. Loubier will complete my response. A comparative study conducted by Price Waterhouse on the tax burden borne by businesses at the provincial, municipal and federal levels has indicated that the situation is better in Quebec than in any of the surrounding areas, such as Ontario and the American states on the eastern seaboard or the New England states. The study was conducted by Price Waterhouse. I am talking about personal income tax, of course, as we know there is a problem there to resolve. I'm talking about corporations. In that regard, Quebec is doing quite well. Regarding the budget more specifically, Mr. Loubier could provide some clarification.

Mr. Yvan Loubier: Ultimately, Mr. Bevilacqua, everything would help businesses, especially tax cuts. The Quebec Alliance of Manufacturers and Exporters, the Conseil du patronat du Quebec, as well as the chambers of commerce in Montreal and Quebec City all told us that they would like to see substantial tax cuts for average-income people. Why? Because they know full well that if people earning an average income had more spending power, their consumption would go up, especially as regards products. I can tell you that tax cuts help the private sector, especially businesses.

As regards the return to a true employment insurance system, one of the most important factors behind the success or profitability of a business is the availability of qualified workers, workers who are not discouraged, workers who remain connected to the work force network, and not workers who are depressed and marginalized with respect to the labour market, and who do not even want to enter the work force and obtain training. Our proposal to restore a true employment insurance regime that is effective and fair would also be beneficial to businesses.

You also told us about restoring social transfer payments to Quebec, in the areas of health and education. Having health care workers is a good thing. Investing in health also provides opportunities in the private sector. No one would say that investing in higher education and university-level research is bad for business. On the contrary, businesses are calling for highly qualified people and university research that will help them in their business activities.

Our consultation also showed the need for support for structuring projects. We talked about structuring projects in the area of road construction, shipbuilding and social housing. Does construction help the private sector? I think it helps it directly. Our proposals lead to that.

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As for debt reduction, it is true that it helps stabilize interest rates, which is beneficial to everyone, businesses and individuals alike.

[English]

The Chair: It's all part of a strategy, and I understand that.

One of the questions we were asked by the minister back in London was on the issue related to business taxation. As a party, when do you feel we should start moving on the reduction of business taxes?

[Translation]

Mr. Yvan Loubier: I would simply like to conclude my remarks.

You will recall the 1996-97 Bloc Québécois report on tax reform. We proceeded in the following way. We looked at which tax expenditures were old or completely outdated and which ones served no purpose in terms of economic growth, apart from improving equity holdings for millionaires in Canada, which I do not think is very laudable in social terms. We identified savings achieved thanks to that tax reform and we distributed the savings elsewhere.

Mr. Chairman, you followed our work assiduously and you will recall that we had suggested turning these tax-related savings achieved by eliminating certain provisions into tax relief for small and medium-sized businesses.

Bear in mind as well that the same is true for employment insurance and average-wage earners. SMEs are the largest contributors to the Employment Insurance Fund because of the various ceilings. I think we have provided many measures to kick- start the economy and support private enterprise.

Mr. Gilles Duceppe: I will add that the appendix contains recommendations made by the groups we consulted, in particular from the business community. I am thinking about the Conseil du patronat du Quebec, the Canadian Federation of Independent Business, the Confédération des caisses populaires et d'économie Desjardins du Quebec as well as the Quebec Alliance of Manufacturers and Exporters. They all agree with the general thrust. They do not agree on all of the points, but I can tell you that generally speaking, three quarters of them agree with the proposals we are presenting here.

The Chairman: The ones dealing with personal income tax.

[English]

Did you have any further questions, Ms. Guarnieri?

[Translation]

Is that all?

Mr. Yvan Loubier: On behalf of my Bloc Québécois colleagues and our leader, I would like to thank you for the time you have given us here today. I think that it shows that the government is serious about hearing the proposals that the Bloc Québécois has put together in consultation with thousands of Quebeckers. I thank you for that. This has been very interesting.

[English]

The Chair: Thank you.

The meeting is adjourned.