FINA Committee Report
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In October 2004, the House of Commons Standing Committee on Finance began its pre-budget consultations for 2004. As in years past, Canadians were invited to share with the Committee their views about the taxation, spending and other measures that should be contained in the upcoming federal budget.
For the most part, Canada finds itself in an enviable position. Economic growth is solid, inflation is relatively low and stable, employment growth is strong, unemployment rates are relatively low, the value of the Canadian dollar is rising relative to its U.S. counterpart, borrowing costs are relatively low, household debt is manageable, and a federal budgetary surplus is expected each year in the foreseeable future.
Within this context, a key challenge for the federal government is to determine how best to move forward. In essence, the government must determine how to balance priorities and to make choices for the economy of the 21st century, an economy that will ensure that Canadian businesses and Canadian citizens can prosper and maximize their potential.
It was with a view to the future that the Committee asked witnesses to develop responses to questions that we believe are important as we look toward the future:
| • | What should be the program spending, taxation and other priorities of the federal government in the next budget? |
| • | What federal budgetary measures are needed to ensure a strong economy with low rates of unemployment, high levels of research, productivity and innovation, etc.? Are federal tax revenues sufficient to enable adequate services for, and investments in, Canada’s people, regions and sectors, etc.? |
| • | What is the estimated cost of your proposal, and if program spending reductions and/or tax changes were required to finance the cost of your proposal, which programs should have their funding reduced and/or what tax changes would you suggest? |
| • | With the federal government’s five-year tax reduction program completed, should the federal government institute another broadly based tax reduction program and, if so, what taxes should be reduced and by how much? |
| • | What are the opportunities, costs and benefits to reducing the tax burden — through tax rate reductions and changes to thresholds — on low- and modest-income families, consistent with the federal government’s overall commitment to balanced budgets and sound fiscal management? |
| • | What changes, if any, should be made to the fiscal arrangements between the federal and provincial/territorial governments to correct what some call “the fiscal imbalance” and to alleviate other fiscal pressures in order to stabilize the situation? |
| • | What is the optimal rate of growth of federal program spending in relation to the Canadian economy? |
| • | In the event of a federal budget surplus, how should the surplus be allocated among debt repayment, transfers to the provinces/territories, tax reductions, and — recognizing the constitutional distribution of powers — increased program spending in areas such as quality child care, post-secondary education, housing, research and development, etc.? |
From the broad range of ideas shared with the Committee by witnesses representing diverse interests, we have developed recommendations that we believe — if implemented — would move this country forward. We believe that our future success is a function of success at many levels: at the governmental level in terms of sound fiscal finances that enable us to afford to plan for the future; at the business level in terms of prosperity and profitability for the benefit of companies but also Canadian citizens and communities; and at the individual level in terms of access to health care, lifelong learning and employment opportunities, sustainable communities, affordable housing and the range of supports needed in various circumstances throughout life.
In the Committee’s view, governments, businesses and individuals are interdependent: the success of any one hinges on the success of the other two. We cannot view governments in isolation: we must consider the effects of government decisions on business activity and individual behaviour. We cannot view businesses in isolation: we must consider the need of businesses for well-educated and productive employees and for a competitive environment within which to operate. We cannot view individuals in isolation: we must consider their need for employment and for public services. This very interdependence means that all levels of government, industry and individuals must work together on a variety of fronts and must be accountable to one another.
Chapter One focuses on preserving Canada’s fiscal discipline, since this discipline enables us to have better, and a wider range of, options from which to choose. For example, with reduced debt servicing costs resulting from a lower federal debt, more funds are available to finance other priorities.
Chapter Two focuses on the investments that are needed in order that businesses and individuals have sustainable communities within which to work and live. A sustainable environment and adequate and well-maintained municipal infrastructure, as well as a caring and culturally rich environment, are important to Canadians’ quality of life and the ability of businesses to prosper.
Chapter Three focuses on businesses, particularly the tax, regulatory, capital, trade, research and innovation measures that will ensure their growth and prosperity. An important element as well is the defence of our country and our management of the border we share with the United States, our largest trading partner.
Chapter Four focuses on individuals, especially vulnerable groups, and actions that should be taken with respect to issues such as health care, lifelong learning and taxation to ensure that their potential and opportunities are maximized.
As we move forward as a nation — as priorities are balanced and choices are made — the Committee believes that the right decisions with respect to federal finances, communities, businesses and individuals will help to ensure that Canada remains the envy of many countries worldwide. We want to ensure that Canadians — businesses and individuals — have the future that they deserve.