March 2, 2005 Québec, Quebec Check against delivery Good afternoon everyone. Greetings and good wishes from the Government of Canada. Thank you for your kind introduction and to La Chambre de commerce de Québec for inviting me to speak today. One week ago today, I rose in the House of Commons to present a new federal budget¿one that I felt articulated the needs of Canadians from coast to coast. Our budget was the product of consultations with people from all walks of life from all parts of the country. Here in Quebec, I held a roundtable discussion in Montréal in mid-December, while my colleagues, Claude Drouin and Denis Paradis, held several pre-budget consultations across the province to obtain the views of all sectors of the province's economy, as well as from social organizations and non-governmental organizations (NGOs). I am proud of this budget. I believe we, as a government, have crafted a set of measures that clearly address the major priorities facing our nation today. Today, I'd like to summarize the key elements of Budget 2005 and illustrate how we have delivered on our commitments to Quebecers and to the rest of Canada. In drafting this budget, I had three primary goals. First, I wanted to spell out without doubt that Canada's economic performance continues to be impressive by every national and international standard and that Canada's fiscal fundamentals are very robust. Why is that important? It's important because a strong economy and prudent, disciplined fiscal behaviour are the enablers. They make possible everything else that Canadians want to achieve. Twelve to fifteen years ago, this country was in very deep fiscal difficulties. We were trapped then in a vicious cycle of deficits and debt, high taxes and high interest rates, slow economic growth and sometimes no growth at all, jobs being shed, social programs in very real jeopardy. At that point, Canadians decided that the situation was untenable, that Canada needed to change its direction, and they demanded a new plan. Between 1993 and 1997, we ended a quarter-century of chronic federal deficits and skyrocketing public debt. We balanced the nation's books. We started to accumulate surpluses and we put the debt on a steady downward track. It took some tough decisions¿some of them controversial¿but Canadians overall supported what needed to get done. And what are the results now, some eight years later? We now have: eight consecutive balanced budgets and at least five more in the forecast; a debt-to-GDP (gross domestic product) that is on its way down to 25 per cent from what used to be 68 per cent; a triple-A credit rating; the best job creation record; the fastest growth in living standards; and the only government surpluses in all of the G-7 group of world leading economies. We also have the best fiscal performance of any Canadian government since 1867. With this economic and fiscal strength, we have reinvested in the economic and the social priorities of Canadians. We have reduced the tax burden. We have helped to stimulate 1 million net new jobs since 2000, 2 million since 1997 and 3 million since 1993. And we have coped with sudden unforeseen emergencies like the 9/11 tragedy, SARS, mad cow disease and the Asian tsunami without getting pushed back into the red, despite the high expenses associated with those emergencies. The key to this kind of fiscal resilience and fiscal freedom is prudent planning. First, in assessing the nation's economic outlook, we do not do it in-house with just government economists. Neither do we pick one or two of our favourite economists from outside government just to tell us what we want to hear. We regularly consult 15 to 20 of Canada's leading economic analysts in the private sector. Their forecasting data is run through four different econometric modelling firms, again all from the private sector. It is regularly updated. And we take the average of these results from the outside experts to set the fiscal framework for budget-planning purposes. In other words, this work tells us how much "fiscal room" we have to work with. Secondly, we consciously do not use up all the available fiscal space with either spending initiatives or tax cuts. Instead, we explicitly build in some fiscal shock absorbers to give us the capacity each year to deal with the unexpected. All together, over the coming five years, this cushion, to ensure that we will stay in balance, amounts to more than $25 billion. If it proves not to be needed to cope with unavoidable contingencies, then $15 billion of that cushion over five years, or $3 billion per year, is earmarked for further debt reduction. The rest can be invested in priority programs and services if it too is not needed to safeguard against any risk of a deficit. Now I mention all of this as my first point today to reinforce as emphatically as I can that all the Government's fiscal anchors are fully in place and in force in this budget and over the coming five years. The same prudent practices and disciplined behaviours that brought us so successfully from 1993 to 2005 continue to apply. Based on the best private sector advice, we are expecting annual economic growth rates in the 3 per cent range going forward. But there are downside risks. We are a trading nation. Eighty-five per cent of our exports go to the United States. The so-called twin deficits in the U.S.¿their trade deficit and their budgetary deficit¿could lead to higher interest rates or slower growth or a further depreciation in the American dollar¿any of which could negatively affect us here in Canada. So we need to remain vigilant and prudent and we will do so. My second main budget objective was to deliver on the specific promises that we made to Canadians during the federal election campaign in the summer of 2004. Promises made must be promises kept and my budget delivered on those 2004 commitments. On new funding for the provinces and the territories, especially for health care, we have negotiated new agreements with all of the premiers. We have put the legislation before Parliament and it is well along in the parliamentary process. The budget booked this promised money through the Canada Health Transfer and through equalization. Over 10 years, it will total an incremental $75 billion. On cities and communities, we promised to share with local governments up to 50 per cent of the federal gas tax revenues and the budget delivered exactly that. In the coming year we will start at $600 million in revenue sharing and ramp up from that point to reach an annual federal transfer for cities and communities of $2 billion per year. Over the next five years, Quebec cities and communities will share approximately $1.1 billion in new funding from this initiative. This money will be ongoing and it will be in addition to our regular federal infrastructure programs, not instead of them. This may be an opportune moment for me to address an issue that remains a preoccupation with some of our critics, both at the provincial and federal levels. That is the allegation of a fiscal imbalance in Canada. With the greatest of respect, I do not agree! With the greatest respect to those who hold these views, I believe that they are, in my opinion, wrong. And there are several reasons why I think they are in error. First, I think that our critics must acknowledge a fundamental fact that makes Canada unique among federations. It is that both our federal and provincial governments have access to the same sources of revenue to fund their activities. At the same time, the provinces enjoy access to several revenue sources that are off limits to the federal government, such as resource royalties and revenues from gaming. Second, the provinces have full constitutional jurisdiction over all areas of taxation directly under their control. And they have complete autonomy to set their own fiscal policies, to make their own decisions on personal and business tax rates and on how they spend the tax dollars they receive. Third, despite all of the advances our government has made in recent years in reducing the federal debt, it still remains twice as large as the debt of all of the provinces, including Quebec, combined. Fourth, it is important to note that federal and provincial governments work as partners in a number of areas, including several in which the provinces retain complete jurisdiction. These include health care, post-secondary education, social services, infrastructure and housing, and in each and every instance, the federal contribution to these programs has been growing for several years and is now at its highest level ever in history, and will continue to climb. Indeed, when federal transfers are factored in, provincial and territorial revenues have far exceeded federal revenues for more than 20 years now, and are expected to continue to do so for the foreseeable future. So it is not accurate to say that the federal government holds and hoards an unfair financial advantage. In fact, both levels of government, federal and provincial, are facing the same task of providing top-quality services to all citizens, no matter where they live. The same citizens, taxpayers and voters elect us all! And Canadians have made it quite clear that they want to see all of their elected representatives working well together to help ensure their goals are met. One area where we are making some progress is in child care. As you know, my budget delivered on our commitment to provide $5 billion over five years for a new national Early Learning and Child Care initiative¿one rooted in the principles of high quality, universality, accessibility and developmental content. We also signalled our intent to be in for the long haul with our provincial and territorial partners. For seniors, people with disabilities and their caregivers, the budget delivered on a full range of commitments including $2.7 billion to enrich the Guaranteed Income Supplement and the doubling of a tax credit for caregivers. On the huge needs of Aboriginal people, we promised an inclusive process involving Aboriginal leaders with the Prime Minister, the premiers, federal ministers, provinces and territories to build a compelling national action plan on Aboriginal health, education, housing, economic development, land claims and accountability. That process is well advanced. There will be further meetings this spring and summer, and it will culminate in a formal federal-provincial-territorial first ministers' meeting with Aboriginal leaders in the fall of this year. But in the meantime, the budget delivered about $1.4 billion for downpayments on better health, education, children's services and housing. On all these and other fronts, I'm very pleased to say that we have done in this budget exactly what we promised to do last summer. My third objective in the budget was to describe the path forward for Canada, where we want to go and how we plan to get there over the next five years¿built around greater productivity, enhanced environmental sustainability and an influential respected role for Canada in global affairs. The productivity agenda is always important, but especially in light of the higher-valued Canadian dollar and the huge demographic changes that are coming just around the corner as the big baby boomer generation begins to retire. Budget 2005 laid out measures for a more inclusive workforce¿more inclusive of Aboriginal people, new immigrants, people with disabilities and young parents who want to pursue their careers while also caring properly for their young families. The budget also put more money into workplace skills and literacy and into our highly successful innovation agenda to promote higher learning, science and new technology development, particularly at institutions of post-secondary education. We're investing heavily in high-quality public infrastructure. We're promoting more open internal and external trade, smarter regulatory systems including in financial services and securities. And we are reducing the tax burden. Personal taxes will come down through an increase in the basic tax-free personal amount. Over five years, Canadians will save more than $7 billion from this tax cut. More than 860,000 low-income people will be taken off the tax rolls altogether, including about a quarter of a million senior citizens. For those in a higher tax bracket, RRSP limits are being raised and we are removing the restrictions on investments in foreign properties. On the corporate side, we will eliminate the 1987 surtax and we will gradually bring the income tax rate down by two points to preserve our competitive advantage vis-à-vis the United States and keep investment and jobs in Canada. We'll also be improving capital cost allowances¿not just this year, but every year going forward to better reflect the actual useful life of capital assets. On the environment and sustainability, our investments will total at least $7.5 billion. To better deal with the challenge of climate change, we are introducing a full slate of actions, new market-based mechanisms to harness the power of competition in the private sector, new tax measures, new incentives for both consumers and for business, new investment in innovation and new scope for both regulatory and voluntary action. To provide just a few examples, we are creating a new Clean Climate Fund to invest in some exciting new fields of activity like carbon capture and storage, clean coal and a possible east-west power grid, while also facilitating a liquid market for domestic emissions trading. We are quadrupling our investment in wind power. We are quadrupling our investment in residential energy retrofits and we're providing an accelerated capital cost allowance on certain environmental investments of a full 50 per cent. Beyond climate change, my budget also makes major environmental investments in brownfields remediation, protecting the integrity of our national parks, and an Oceans Action Plan. All in all, environmental groups have described this as probably the greenest budget in Canadian history. To better position Canada in global affairs as a strong and respected citizen of the world, our government has undertaken a comprehensive international policy review, which will be forthcoming in the next few weeks. In the meantime, the budget took some major steps forward. For new troops and reserves, for better infrastructure and operational sustainability, and for new equipment and materiel, we are investing, on a cash basis, $13 billion in the Canadian Armed Forces over the next five years. There can be no doubt that CFB Valcartier, a facility with a proud tradition in Canada's military history, will benefit from this increased investment in our armed forces. For air and marine security, border security, police and emergency preparedness, we are investing another $1.2 billion. For greater foreign aid and international assistance, we are booking $3.4 billion over the next five years. Among many other things, this will position Canada as a global leader in the fight against AIDS, malaria, tuberculosis and polio¿especially in Africa! We all recall the outpouring of human emotion and human generosity in response to that terrible tragedy of the tsunami in South Asia. The response from Canadians and from governments around the world was entirely necessary and entirely appropriate as the world tried to come to the rescue insofar as that was humanly possible. But think also of the situation in Africa, where the tsunami caused a relatively minimal amount of hardship, but where people die of AIDS, malaria, tuberculosis and polio at a rate equivalent to a tsunami every single month. That is why we are putting more money in that direction. And the budget also confirms our leadership in reducing the crushing burden of debt on some of the world's poorest countries. Canada has always been a world leader in that regard and we are going to maintain that leadership role. It is for reasons like these that people as diverse as the U2 rock star Bono and the Secretary General of the United Nations, Kofi Annan, have said with a common voice that what the world truly needs is more Canada. And as we build for the future, Canada will indeed have a vigorous role to play in global affairs. The purpose of this budget, therefore, was to reinforce a number of points. We want to build a competitive, productive, 21st century Canadian economy¿one that is knowledge-based, technology-driven, highly skilled and excellent by every possible measure. We want to build an inclusive and caring society¿a society in which fairness and equality of opportunity are the measures of our progress. We want a country that is clean and green, which prizes a natural heritage of extraordinary richness and preserves it with great care. And we want to be a confident people, respected and trusted not just within our borders, but indeed as model citizens of the world. Those are the objectives to which Budget 2005 spoke and I hope that we've moved ourselves along the way toward the future. Thank you very much.
