FINA Committee Report

SUPPLEMENTARY OPINION OF THE CONSERVATIVE PARTY OF CANADA

First and foremost, we thank the many individuals and public interest or industry groups from across the country that made their views heard before the Committee. Their participation was instrumental in ensuring the Committee engages with Canadians in a meaningful way.

While the Conservative Party is generally in agreement with the overall report, we believe the other parties supported several recommendations that were fiscally irresponsible, economically harmful, and showed no concern for the threat of structural deficits. As a result, we qualify our support for this report through this supplemental opinion.

2009 will be remembered as a year when the world combated a synchronized global economic recession that was unprecedented in recent history. While this economic storm did not originate in Canada and we weathered it better than most, it had a marked negative impact on our economy.

We applaud the Government for their quick and decisive response. Canada’s $62-billion, two-year Economic Action Plan went above and beyond our G-20 commitment. Working with all of the provinces and territories, the Plan provided extraordinary fiscal stimulus to protect the economy. We note the injection of stimulus was the largest in the G-7, and among the largest in the G-20.

“The situation would be much worse if governments around the world had not taken unprecedented action to stimulate the economy … There would not be growth in the economy now if governments had not taken this action. I commend you and government officials for recognizing the severity of this crisis and taking strong action. As a result, we are starting to see signs of growth in the economy and GDP.”

Toby Sanger (Canadian Union of Public Employees), September 16, 2009

The Economic Action Plan served as a timely and powerful jolt to Canada’s economy through permanent tax reductions, help for the unemployed, massive infrastructure spending, support for research and technology, improved access to financing for Canadian households and businesses, assistance for struggling industries (such as the auto and forestry sectors) and communities most affected by the global downturn, and much more.

“(Infrastructure spending) seems to be working fairly well across the country …  I know that here in Prince Edward Island, overall it has worked very well … It's the same in Newfoundland. It's going very well there … Things have gone really well here in Summerside … I think we had applied for ten, and I think they were all approved.  As I say, things have worked out well. And they've worked out well in other parts of the country as well … We have no complaints with the way things are going.”

Basil Stewart (Federation of Canadian Municipalities), October 5, 2009

“The Government of Canada has made important investments in knowledge creation and innovation, even in these current times of economic uncertainty. And I would like to register our appreciation for the sustained investment in research, science, and technology made by the Government of Canada over the past few years.”

Judith Wolfson (University of Toronto), October 22, 2009

“I would categorically say (the Home Renovation Tax Credit) has increased the stimulus for our members. I can tell you that back in the spring of this year, our members were reporting negative sales growth … but I can tell you that based on my conversations with many of our members in the past several weeks, they're starting to report double-digit sales growth … So I would have to say yes, it is a definite stimulus for our economy, this HRTC.”

David Campbell (Canadian Retail Building Supply Council), October 22, 2009

With 97% already committed, the Plan is clearly having an impact. Canada is seeing early tentative signs of an economic recovery: our housing market is growing, domestic demand is increasing, our financial system is the soundest in the world, and – most importantly – Canada’s job market is stabilizing. Over the last four months, Canada has seen an average of over 20,000 jobs created. For the first time in a generation, the Canadian unemployment rate is nearly 2% points lower than the US.

“We support the federal government's response to the crisis. We feel that it acted quickly, it acted judiciously, and it came forward with what we felt was the right mix of fiscal policy to address the crisis. I think the way the Canadian economy has withstood the crisis is testament to that.”

Ian Russell (Investment Industry Association of Canada), October 22, 2009

We also applaud the Government for ensuring we entered the recession from a position of strength by paying nearly $40 billion off the national debt during its first three years, putting Canada in an enviable position. We had the lowest debt in the industrialized world going into the global recession and we will maintain that advantage as we exit it. Indeed, the International Monetary Fund projects Canada’s net debt will be only 1% of GDP higher by 2014. While, on average, net debt in other G7 countries will increase by 25% of GDP. Canada’s fiscal advantage has allowed the Government to embark on temporary stimulus deficit spending without mortgaging the future.

“Canada has a number of advantages that will hasten its economic recovery, including a sound fiscal base and an ongoing strategy to achieve international tax competitiveness. This fiscal policy direction has served Canadians well by providing fiscal stimulus in the short term while helping to put the economy on a strong foundation for sustainable growth.”

Terry Campbell (Canadian Bankers Association), October 26, 2009

While the Economic Action Plan is getting results and we have seen positive economic indicators, we acknowledge that we have yet to see an entrenched global recovery and risks remain. Given the ongoing volatility, the Government’s immediate priority must be to stay on course and fully implement Canada’s Economic Action Plan to help secure the emerging economic recovery.  As this is a two-year plan, we recognize that significant temporary ongoing financial commitments are already in place. The Government’s focus in the upcoming federal budget, as a result, should not be on new additional stimulus but getting existing stimulus measures into the economy. Additionally, any spending commitments must be limited and aligned to ensure a timely return to balanced budgets. We further urge the Government to follow through on the exit strategy built into the Economic Action Plan by ensuring temporary measures end as scheduled. Moreover, once the global recovery is secured, the Government’s priority should be the return to balanced budgets and continuing to build on the Government’s record of debt repayment. Ongoing structural deficits are not acceptable.

“Rising debt and the accompanying interest payments severely constrain flexibility and will reduce the ability to address ongoing national competitiveness issues … preserving public trust and the sustainability of public finances are essential for recovery.”

Art Sinclair (Greater Kitchener Waterloo Chamber of Commerce), October 22, 2009

“The federal government must pay attention to debt management, keep a watchful eye over its expenditures, and regularly report to Canadians on progress towards that goal… When Canada entered the global recession, it did so from a position of relative strength on account of years of prudent fiscal management. Like the rest of the world, while we face some degree of uncertainty in the future, we cannot afford to rest on our laurels and undo the incredible progress we've made as a nation.”

Bob Harvey (Certified General Accountants Association of Canada), September 16, 2009

The Government must accomplish this through responsible financial management – especially restraint in federal program spending; not by increasing the tax burden on Canadians, radically slashing direct transfers to Canadians, or downloading on the provinces.

WHAT WE AGREED WITH

The Conservative Party strongly supports the absolute necessity to fully implement Canada’s Economic Action Plan as the single most important recommendation. While we’ve seen early tentative signs of an economic recovery, we cannot become complacent. Again we underline that now is not the time to undertake major new spending initiatives. Instead, we must stay the course and ensure existing measures continue to protect and create jobs.

“Our advice to the government as far as the Economic Action Plan is concerned is to allow the plan to run its full course.”

Bob Harvey (Certified General Accountants Association of Canada), September 16, 2009

We also support recommendations that adopted our fundamental belief that lower taxes are good for families, business and Canada’s long-term economic growth. Witness after witness endorsed the Government’s long-term strategy of lowering personal and business taxes to ensure Canada’s continued international competitiveness, and urged it to stay the course in that respect.

“The good news is that on the tax front, Canada is getting more competitive  … The corporate tax cuts that were made and did affect our competitiveness and our ability to attract new investments were a factor in attracting new investments to and new jobs for this country.”

David Podruzny (Canadian Chemical Producers' Association), October 8, 2009

“Stay the course in moving the federal corporate income tax rate to 15% by 2012. The reduction in corporate tax rates… recognizes the importance of building a competitive tax regime. We commend the federal government for its progress in moving along this path. It's important that the government stay the course in this area.”

Paul Stothart (Mining Association of Canada), October 8, 2009

“Although Canada is not immune to global recessions, the scheduled reductions in the corporate rate … mitigated business cutbacks in Canada and tempered the severity of the downturn for Canadians. We urge the government to stay its course or accelerate the schedule of corporate income tax rate reductions.”

Sherrie Ann Pollock (Tax Executives Institute), October 22, 2009

“We note that Canada has made important progress in reducing corporate taxes, and we applaud the government's goal of establishing the lowest marginal effective tax rate on new business investment in the G-7 by 2010 … We urge the government to stay the course in reducing the corporate income tax rate to 15% by 2012. Canada simply cannot afford to abandon the progress that has been made in reducing corporate taxes … If you do not retain a strong competitive position within the world, then you are going to have to suffer the consequences.”

Bruce Flexman (Canadian Institute of Chartered Accountants), October 26, 2009

The Conservative Party would also like to highlight important recommendations that emphasized the need for the removal of internal barriers to trade within Canada, and its strong endorsement of the proposed Canadian Securities Regulator.

“A national securities regulator is imperative, and we are pleased to see the creation of the Canadian securities transition office to further this important initiative… It's a big competitive world out there, and Canada is a relatively small capital market versus the entire world. So the ease of access for the capital markets is critical … a single securities act and a single set of regulations, improved enforcement, a lot of the things that are currently being looked at the securities regulator just make sense.”

Michael Conway (Financial Executives International Canada), November 2, 2009

We were further encouraged by recommendations that recognized the importance of protecting transfers to the provinces and territories and the services such as health care and education they provide. While we strongly believe returning to balance budgets is of vital importance once the recovery is secure, we strongly urge the Government to avoid the example of Liberal government in the 1990s when they slashed provinces and territories transfers.

“The federal government chose to cut investment in education in the mid-1990s to reduce the deficit. Due to these cuts, Canada faced a brain drain.”

Arati Sharma (Canadian Alliance of Student Associations), September 16, 2009

“As we enter the post-recession period and the federal government begins dealing with the deficit it would be wrong to repeat the mistakes of nineties when federal and provincial governments push deficits of balance sheets into the streets of cities and communities. The damage done to Canada's cities is still evident.”

Basil Stewart (Federation of Canadian Municipalities), October 5, 2009

What we did not agree with

While broadly supportive of the report, we are disappointed that other parties deliberately ignored existing stimulus commitments already in place and disregarded fiscal prudence to endorse excessively expensive recommendations that only serve to invite structural deficits. Examples of positions we cannot endorse include a costly nationalized daycare plan, an ill-conceived tax subsidy for a select few ‘designated’ individuals, massive new costs for an expanded Employment Insurance program, resurrection of failed government programs, and many others.

This regrettable embrace of a ‘free-spending’ attitude among the other parties suggests a clear inability to recognize the dangers of ongoing deficits, especially as Canada is confronted with the challenges of an aging population. We strongly urge them to reconsider that attitude, and admit the importance of returning to balanced budgets and debt reduction. However, based on the previously mentioned recommendations endorsed by the other parties, the Conservative Party doubts they have the discipline required to do so.

CONCLUSION

Canada’s Economic Action Plan is working and making a difference across the country. While we’ve seen early tentative signs of an economic recovery at home and abroad, the global recovery is not secure.  We cannot become complacent, we must stay on course.

The Conservative Party believes that Budget 2010 should not be a typical budget. Its central focus should be the continued implementation of Canada’s Economic Action Plan – it will be year two of our two-year Plan.

While we believe the Government should continue to stimulate our economy, help create jobs and provide assistance for those affected by the economic downturn, the Conservative Party does not feel it to be fiscally prudent to undertake major new spending initiatives. Rather, we must stay on course with the stimulus measures already announced to protect and create jobs.

Once the global recovery is secure, the Government will need to begin the return to balanced budgets – not by relying on hiking taxes, slashing benefits to Canadians, or downloading on the provinces – but rather responsible financial management.

Ted Menzies, MP, Parliamentary Secretary to the Minister of Finance
Kelly Block, MP
Bob Dechert, MP
Daryl Kramp, MP
Mike Wallace, MP