MINISTER DION HIGHLIGHTS FUTURE BUDGET CHALLENGES FOR THE FEDERAL AND PROVINCIAL GOVERNMENTS

MONTREAL, QUEBEC, September 27, 1999 – Speaking to the Canadian Club of Montreal, the President of the Privy Council and Minister of Intergovernmental Affairs, the Honourable Stéphane Dion, stated that future budget pressures such as those linked to the aging of the population will compel governments to demonstrate the same sense of responsibility that enabled them to put their public finances in order in the past decade.

The Minister noted that the Royal Bank predicts increasing budget flexibility for every government in Canada, and that the 1999 World Competitiveness Yearbook ranks Canada third among 47 countries for the improvement of the management of its public finances.

"We are ahead of all our main trading partners in that respect. Not bad for a country which one had to leave in order to escape bankruptcy!," the Minister noted, referring to the pessimistic predictions made about Canada in the first half of the decade. "Our country was underestimated at that time, but it made a liar out of the doomsayers."

We must therefore confront the challenges ahead with confidence and determination, Mr. Dion continued. He insisted on one of those challenges: the financial cost of the aging of Canada's population. "The tax pressures that this phenomenon will exert in ten or fifteen years time impel us to use the budget flexibility we have today intelligently and responsibly."

The Minister noted that Canada, which experienced an especially large and long-lasting baby boom, has a population that is younger than that of other Western countries, 12% of the population was 65 or older in 1996, compared with 17% in Italy and Sweden and 15% in France, the United Kingdom and Japan. However, we will see one of the largest increases in the relative proportion of seniors in the coming decades: "from 12% today, the proportion of Canadians 65 or older will double by 2050. One Canadian in four will be over 65 by the middle of the next century."

"When spending associated with the aging population will increase significantly, in ten or fifteen years time, the provinces will feel the pressure, especially in the enormous health care field, as will the federal government, especially in connection with Old Age Security," Mr. Dion remarked, citing a number of forecasts.

"That is why the governments with the highest debt levels must make a commitment to reduce the burden of this debt," the Minister stated, noting that the Government of Canada currently devotes 27% of its revenues to debt servicing, and the provinces, 13% on average (17% for Quebec). "It is especially important to reduce this part of our debt servicing costs now, before the effects of our aging population reduce our budget flexibility, because we will need the sums thus freed up."

As a result, the Minister concluded, "The Government of Canada is committed to showing foresight, through a sound and balanced policy, comprising strategic reinvestment, tax cuts and paying down our collective debt, a policy that addresses both the needs of today and the needs of tomorrow."

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