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"The short- and long-term
financial challenges
for our federation"
Notes for an address by
the
President of the Privy
Council and
Minister of
Intergovernmental Affairs
the Honourable Stéphane
Dion
Saint-Laurent Chamber of
Commerce
Saint-Laurent, Quebec
April 13, 2000
Check against delivery
Canada is entering a new
economic era: that of budget surpluses. It is of the utmost importance that these
surpluses be used in an optimal manner, given the size of the challenges we have to face.
Now that they have regained
control of their finances, our governments find themselves in the enviable position of
being able to choose how to use this additional budgetary flexibility. As Canada
is a federation, and an especially decentralized one, it is to be expected that the
governments' strategies will differ to some extent. Some will be more partial to tax cuts,
others to program reinvestment, and others will focus more on
paying down the debt.
For its part, the Government of
Canada has opted for a balanced approach: 50% of surpluses will go to reinvestments, while
the other 50% will be allocated to paying down the debt and tax cuts.
It is a good thing that our
governments can try out different solutions. As a result, through healthy emulation, we
can see what works best. But it is equally important that above and
beyond this natural competition, the governments of our federation strengthen their
cooperation where it is necessary, in light of the common challenges they face.
After showing just how booming
Canada's economy currently is, I'll describe the balanced strategy that have emerged from
the last Martin budget. In conclusion, I will show that the real winning condition for
everyone is Canadian unity.
1. All of Canada is now booming
Canada has come a long way. Its
public finances appeared to be in an almost desperate state when
our government was elected in 1993. In 1992, we had the worst deficit of all G-7
countries, after Italy. The turnaround has been so spectacular that we now have one of the
largest surpluses among G-7 countries. The most recent World Competitiveness Yearbook,
that of 1999, ranks Canada in third place in terms of improved management of its public
finances.
This turnaround has been
achieved not only by the federal government, but by the provinces as well. They were all
running deficits in 1993-1994. This year, of the eight provinces that have tabled their
budget, five have either tabled a balanced budget or announced a surplus. And prospects
are excellent, incidently. According to a study by the Royal Bank of Canada published in
September 1999, eight provinces, including Quebec, are expected to run financial
surpluses by 2004-2005 similar in terms of percentage of GDP to those anticipated for the
federal government.
We could spend a long time
discussing the causes of our past difficulties. It's very tempting to point fingers: for
some, to previous governments, for others, to the Bank of Canada. But I think there is a
much deeper cause.
We Canadians have great
ambitions for ourselves. We are pursuing the ideal of a country that combines, on the one
hand, a European-style sense of compassion and social solidarity, and on
the other, an American-style dynamism and sense of competition. We want nothing less than
the best of both worlds. This is an exacting ideal that requires discipline and realism.
Otherwise, we expose ourselves to pitfalls that can be very expensive in economic and
social terms.
The great contribution of
Prime Minister Jean Chrétien and his government, of which I have the honour of
being a part, has been to restore this sense of discipline and realism. Canadians have
supported this leadership, and are now reaping the benefits. Our economy is booming:
investment growth, employment growth. You can see this clearly, as businesspeople in
Saint-Laurent, a city that is in full-blown economic expansion.
It makes you think: the economy
has created 454,000 jobs in the past year, including 109,000 in Quebec, which translates
into a 3.2% increase in the number of jobs in Canada as a whole.
The growth is there; we have a
unique opportunity to strengthen our economy. Canadians feel strongly that we must not
miss this chance. They want finally to reap the benefits of growth, but at the same time,
they want to guarantee a prosperous future for themselves. It's important to use the right
strategies.
2. The balanced strategy of the Government
The business community usually
places great emphasis on tax cuts. That's normal: you're in there fighting for your
businesses every day, on the front lines of global competition. You know all too well how
over-taxation hurts our economy.
But at the same time, precisely
because you are sensitive to the imperatives of economic competitiveness, you find it
important that governments invest with you in research and development. You are aware that
we need world-class universities that can train enough qualified graduates for the jobs
you provide.
And you are also aware that a
prosperous economy needs solid transportation, municipal and tourism infrastructures, to
name but a few. You know as well that social programs do not represent only a cost: they
contribute to justice and social peace that help economic stability.
Last, you also know that
eliminating deficits does not mean an end to our debt burden. We have an enormous
accumulated debt. It is important to pay it down in a period of growth.
It is precisely because it takes
account of all these considerations-tax relief, targeted investments, paying down the
debt-that the Government of Canada places such emphasis on a balanced approach.
The Government of Canada placed
great emphasis on tax relief in its 2000 budget, which featured $16.1 billion in
individual income tax cuts over three years, a $6.9 billion reduction in employment
insurance contributions over four years, and $730 million over three years in
corporate tax relief.
This tax relief is designed,
among other things, to encourage the investment and innovation that we will need to make
our economy more competitive and to take on the challenges of the 21st century. But in
addition, to help Canada become more innovative, the 2000 budget includes
$4.1 billion in new targeted investments.
The Government will allocate
$1.9 billion by 2004 to investments in cutting-edge research and innovation in
universities, research hospitals and the private sector, notably:
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$900 million more to the
Canada Foundation for Innovation.
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$360 million to establish and
maintain 2,000 Canada Research Chairs to
retain in or attract the best researchers to our universities.
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$270 million to support
genome science, artificial intelligence and
leading-edge robotics, and to ensure a prudent regulatory framework for
biotechnology products.
Of course, these are investments
that will be of particular importance to the future of industries that are now prospering
in Saint-Laurent. As you can see, the Government of Canada will continue to provide
substantial assistance to Saint-Laurent and the entire Montreal region, through its
investments in aeronautics, telecommunications, pharmaceutical industries, to name only a
few.
In addition to these investments
in research and innovation, the Government of Canada is allocating $700 million over
three years to develop new environmental technologies and improve environmental sanitation
methods, and $1.6 billion over three years for our road, port and municipal
infrastructures.
The Government is also taking
the opportunity to strengthen our social programs, including $2.8 billion by 2004 to
improve the child tax benefit and $1.5 billion by 2004 for parental leave.
In addition, the Government is
putting $2.5 billion into the CHST, under which it contributes to funding health,
higher education and social assistance, on top of the $11.5 billion over five years
announced last year.
The balanced approach of the
Government of Canada also includes concern about our debt level. That's why it intends to
continue to allocate $3 billion a year to pay down its accumulated debt. The federal
debt burden is still double that of the provinces. The Government of Canada has to devote
25.2% of its revenues to debt servicing. For the provinces, that figure is 13.2% on
average, and 16.7% in Quebec.
Should we do more in all these
areas? Certainly, if we had the means. Spokespersons for the business community found the
tax cuts too timid, and the premiers are calling for billions of dollars more to deal with
rising health costs. The Government of Canada understands these views, and the Finance
Minister, Mr Paul Martin, is confident that we'll be able to do more in next year's
budget. But the Government is asking everyone never to lose sight of the imperatives of
prudence, discipline and realism.
It is clear that our governments
will need to inject more money to address increased health care costs. But it's equally
clear that this is not just a question of money, it's also a question of management, of
how we do things, as Mr Bernard Landry, Quebec's Minister of State for Economy
and Finance, recently acknowledged.
The Government of Canada is
prepared to make its financial contribution to a joint effort to preserve and improve our
health system. But first of all, we have to agree on an overall plan, because just putting
more money in will not be enough.
While fully respecting
provincial autonomy and constitutional responsibilities in respect of health care
delivery, governments need to work together to identify best practices and the best way to
invest the substantial sums of money that will need to be allocated to health.
Conclusion: the era of winning conditions for citizens
Canadians have every reason to
be optimistic in this era of economic growth and budget surpluses. But they feel
that we must go ahead and not lose sight of the imperatives of discipline and realism that
are the hallmarks of Jean Chrétien's Liberal government. In particular, they see
clearly, and I wish to conclude on this point, that it is in unity that Canadians must
take on the economic and social challenges they are facing.
The winning conditions for our
economy and our quality of life lie in Canadian unity. It is in the Canadian spirit of
caring that we Quebecers and our fellow Canadians have put our public finances back in
order and revitalized our economy. And it is by continuing to help and be helped by our
fellow Canadians that we give ourselves the best chances to move ahead.
It makes no sense to claim that
putting our public finances in order is a winning condition for separation. We have
achieved this turnaround within Canada, and it is in our interest to continue to move
ahead within Canada.
Those who see putting our
finances in order as an argument for separation are the same people who urged us, in the
deficit era, to leave Canada to avoid bankruptcy. In the 1995 referendum, they called
on us to vote YES to escape the "cold wind" of cuts. Afterwards, they told us
that cuts were necessary to prepare ourselves for separation. No matter what the state of
our finances has been, good or bad, they've always told us that we need to separate.
These days, they're saying that
now that public finances are in order, we, Quebecers, ought to have enough self-confidence
to effect separation.
Why can't they see that it's not
because of a lack of self-confidence that so many Quebecers support Canada, but on the
contrary, because of pride? It's pride in the country we have built together with other
Canadians. It's solidarity with them, our fellow citizens, who help us and whom we help in
turn. It's conviction that our differences of language or cultural references are a
strength, a wonderful complementarity. And it's conviction that being both a Quebecer and
a Canadian is an extraordinary opportunity in today's world. It's certainty that
identities always give us more, they never take anything away from us. It's confidence in
Canada and its future.
That's why more and more of us
Quebecers are putting their faith in Canadian unity, in the solidarity that unites us with
our fellow Canadians, in our pride as Quebecers and Canadians.
The real winning condition, for
everyone, is Canada.
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