SUPPLEMENTARY OPINION OF
THE CONSERVATIVE PARTY OF CANADA

During a five-week period, the House of Commons Standing Committee on Finance travelled the country and heard from hundreds of witnesses.  Witnesses were asked to provide suggestions to improve “Canada’s Place in a Competitive World”. 

While the Conservative Party supports the majority of the recommendations in this report, we feel that several threaten to diminish the report’s overall intent as well as the progress already being made by Canada’s New Government.  It is for this reason that the Conservative Party feels it necessary to provide a supplementary opinion. 

The government is committed to restraining the rate of growth in spending to a more sustainable level.  Debt is being paid down.  Canada is in a position to tackle the ongoing problems of productivity and competitiveness.  The foundations for a strong future are being established.

The Conservative Party believes that it is important to have recommendations that are affordable, realistic, principled and most importantly, relevant to the issues that concerned the witnesses and the choice of Canadians who asked for change just 11 months ago. 

Moving Forward

Last May, Canada’s New Government delivered a budget that substantially reduced the tax burden for individual Canadians and business, and provided value for money.  

While the Committee does provide some positive recommendations, it does not reflect the many submissions and presentations in support of these changes and evidence pointing to the positive results for Canadians. For that reason we oppose a number of recommendations.

For example, the Committee opposition members say they oppose another cut to the GST.  This despite calls for such a cut both from business and low-income Canadians. 

 

(That) one policy move by the government (GST cut) did more than twice as much for Canadians' real disposable incomes than they'd been able to do for themselves over the last 15 years, and more than was done for themselves in a strong economy in 2005. This was a very powerful tool for increasing the incomes of Canadians.

 

            Peter Woolford, Retail Council of Canada, October 16, 2006

 

We do not support recommendations that direct money to advocacy rather than results, that resuscitate a child care plan that never created any spaces, or return to a flawed environmental plan that led to a 35% increase in greenhouse gas emissions.  

 

There is no consistency within the opposition’s attempt to roll back the tax reductions found in Budget 2006.  Would they cancel the Fitness Tax Credit, the Transit Pass Tax Credit, and the reduction of the GST by 1% or the $1,000 Canada Employment Credit?  Their recommendations do not account for how to pay for a host of recommendations that will cost Canadians billions of dollars.

 

Responsible Spending

 

During the last 5 years under the previous government, total program spending grew by an average of 8.2% annually.  In 2004-05, growth in spending reached 14.4%.  This growth was neither sustainable nor desirable.  That is why we support the New Government’s plan to hold spending increases to 5.4% in 2006-07 and 4.1% in 2007-08. The Conservative Party therefore welcomes the Committee’s recommendation to introduce a mechanism to review federal tax and program expenditures.

 

Specifically, we want Budget 2007 to focus on value for money invested in tourism, literacy, aboriginals, the environment, and the child care spaces initiative; on implementing a national museum strategy rather than short-term, inconsistent funding; and ensure that the CBC and Radio-Canada continue to perform their vital role as national public service broadcasters.

 

Reducing the Tax Burden for All Canadians

 

The message we want to send is that you should continue in this direction (cutting taxes). That will improve productivity, which will enhance the wealth of businesses, individuals and the government, because tax revenues will increase.  So we encourage you to continue along this path.  You mustn’t stop; you must even go further in order to achieve the competitiveness levels of our main neighbors.

 

Yves Morency, Vice-President, Caisse Desjardins Group, October 25, 2006

We endorse recommendations in the report calling for continued reductions in personal and corporate taxes.  That is why we not only support reductions to personal income taxes but a further reduction to the GST within the next 4 years, corporate tax reductions, and tax incentives to encourage work.  We also recommend that the government consider effective and fiscally sustainable approaches to reducing taxes on saving, including taxes on capital gains.

 

Paying Down Canada’s Mortgage

 

The Conservative Party supports the Committee’s recommendation to continue to pay down debt.  We are also supportive of the government making a real commitment to ongoing debt repayment and the elimination of net debt by 2021.  Several witnesses lauded the recent $13.2 billion pay-down on the national debt and pushed the committee to continue this prudent fiscal management.  Currently, the Federal and Provincial governments spend as much of their budgets on interest payments as they do on education: $55 billion. 

 

I think it's extraordinarily important that in periods when revenues are a little stronger than anticipated, that we use that opportunity to pay down debt. That's how the system is supposed to work... As I've said before, it's very important, this is important not only for the Government of Canada but it's important in provinces where there is very large revenue growth to take the opportunity to either pay down debt or put money aside for the future. That helps in the short run. It really helps in the long run.

 

David Dodge, Governor of the Bank of Canada, October 19, 2006

 

We regret that the opposition ignored the spin-offs of such a plan and opposed the allocation of all unallocated surpluses to debt.  The recent pay-down means permanent annual savings of almost $700 million a year – a total that will increase as government continues to tackle the debt. 

 

Productivity and Competitiveness – Results and Excellence

 

In 1998, Canada stood sixth in this ranking of our business competitiveness and in 2001 we stood 11th. Over the years we've drifted down in the rankings as countries like Norway and Japan have stepped up their competitiveness.

 

Roger Martin, Chairman of the Institute for Competitiveness & Prosperity

Dean of the Rotman School of Management, September, 2006  

 

Budget 2006 made great strides in addressing ongoing productivity and competitiveness challenges. 

 

We are therefore encouraged by the committee’s recognition of the need to re-invest in research and development and in post-secondary education with a dedicated transfer.  We believe that spending in these areas must focus on results and excellence, focusing our attention on what governments and the private sectors do best.  Investments in R&D should be targeted to areas where Canada has the potential to be a world leader, such as energy, environmental technologies, and health sciences.

 

We encourage the government to explore public-private partnerships, strengthening links between universities, colleges and the private sector.  In order for commercialization of research to become a priority we must better align the needs of businesses with Canada’s post-secondary educations research capacity.

 

Fiscal Balance

 

Intricately linked to improving Canada’s place in a competitive world is action to restore fiscal balance.

 

Canada’s New Government has long recognized the existence of a fiscal imbalance between the federal government and provincial governments.  The report includes several measures that are part of a solution.  However we believe that a stronger focus in this area needs to be done to ensure an efficient and competitive economic union and effective collaborative management of the federation including labour mobility. 

 

A strong and prosperous economic union is essential if we are to remain ahead of the productivity and competitiveness curve.  

Creating Equal Opportunities for Canadians

 

We heard from witnesses that federal spending designated to help disadvantaged Canadians is often lost in outdated bureaucracy.  The spending is often funneled through programs that have outlived their purpose or not achieving intended results.

 

The Conservative Party is concerned that the final report of the Standing Committee is out of balance.  A number of opposition-led recommendations added together suggest a return to larger government and unfocussed spending.  But what we heard from witnesses is not consistent with parts of the report.  We heard that government should lower taxes to create incentives and opportunities for Canadians to work, save and succeed.  Submission after submission confirmed for the Committee that administrative programs that focused only on advocacy do nothing to address the delivery of needed services. 

 

Advocacy was the staple of the previous government.  We are taking practical steps to deliver real childcare spaces and choices, real literacy results and assistance for women, not more regional offices and studies.

 

In particular, the Conservative Party agrees with the calls for a Working Income Tax Benefit to help low- and modest-income Canadians get ahead and get over the welfare wall, as well as for continued streamlined investments for aboriginals, the implementation of the Clean Air Act, reform of our international development assistance, and agricultural programs that make it to the farm gate.

 

Conclusion

 

Our supplementary report is dedicated to improving Canada’s competitiveness and requires a focused forward-looking vision.  Ours is a plan that the government can act on.

 

Standing Committee on Finance

Diane Ablonczy, M.P., Parliamentary Secretary to the Minister of Finance

Dean Del Mastro, M.P.

Rick Dykstra, M.P.

Mike Wallace, M.P.