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7020 - ~ ~ C O M M O N S D E B A T E S ~ J u n e 23, -- 1975 -.

T h e Budget should be, and that they will make a contribution to this committee.

I hope that any subcommittees or commissions appointed to carry out the work of t h e National Capital Commission after receipt of the committee studies, will be representative of all regions of Canada.

If we a r e going to build a truly national capital we must use the history of the country to d o so.
Regionalism m u s t go by t h e board, a n d pride in our nation a s a whole m u s t be the substitute for partisan politics.

Some hon.

Members: Hear, hear!

Mr. Deputy Speaker: I s the House ready for the question?

Some hon.

Members: Question Mr. Deputy Speaker: I s i t the pleasure of the House to adopt the said motion?

Some hon.

Members: Agreed.

Motion agreed to.

Mr. Sharp: Mr. Speaker, perhaps your view of t h e clock is not quite the same a s mine, but could you call i t six o'clock?
Mr. Deputy Speaker: I t being six o'clock I do now leave the chair until eight o'clock tonight.

At 5.45 p.m. t h e House took recess.

AFTER RECESS T h e House resumed a t 8 p.m.

THE BUDGET F I N A N C I A L S T A T E M E N T O F T H E MINISTER O F F I N A N C E Hon.

John N. Turner (Minister of Finance) moved: That this House approves in general the budgetary policy of the government.

He said: Mr. Speaker, this has been a tough budget to prepare.
I n working on i t I have talked with and, more importantly, listened to a lot of people i n all walks of life.

Many members of this House have been helpful and gener- ous i n their advice.

A budget is, of course, a n economic document.

In i t a minister of finance should give a n accounting to t h e country of the existing situation and propose his ideas for the future.

B u t i t also must be a h u m a n document.


If its policies a r e to succeed, it must strike the right note and take into account the mood of the country.

When I brought down my budget last November I warned of the grave risks arising from the uncertain a n d precarious state of the world economy.

During the intervening seven months, the situation has become more difficult.

T h e decline of world economic activity has turned o u t to be more severe and prolonged than we or anyone else anticipated.
At the same time the underlying problem of world inflation remains.

The r a t e of change of prices in a number [Mr.

Hopkins.]

industrial countries has slowed significantly in the of early months of this year, but there is a danger that inflation will re-emerge when the tempo of world econom- ic expansion is restored.

[Trunslation] The world recession has put a brake on our o w n econo- m y a n d we have thus been compelled to scale down our projections for Canadian economic growth this year.
~ u t we have escaped t h e full impact of t h e deep recession in t h e United States.

To a significant extent this is t h e result of the expansionary policies we have followed in the past, t h e effects of which are still working their way through t h e economy.

Recent public opinion surveys suggest that most Canadians feel today that they are better off than they were a year ago.

T h e disposable income of the aver- age Canadian remains high.

B u t we must look down the road lies ahead.


We have experienced a considerable increase in our costs i n the last several months.

This acceleration of o u r costs if i t contin- ues, poses grave difficulties for the future.

to see terrain t h a t the We a r e now faced with a dilemma.

If we follow more expansionary policies a t this time we r u n the risk of making inflation worse.

If, on the other hand, we follow contractionary policies, w e risk worsening unemployment.
In my November budget I spoke of the need for a national consensus about what various groups can safely t a k e from the economy over the next few years.

If such a consensus had emerged by now we would have been faced with a less difficult policy choice.

Since a consensus has n o t been reached, the government has had to examine a wide range of other options for dealing with the problems of inflation a n d unemployment.

I propose to describe them fully.


I t is most important that t h e people of this country understand the nature of the economic problems which confront all of us and the hard choices which have to be made.

[English] At the same time we a r e confronted with major prob- lems in the field of energy.

We are fully conscious of the short-term adverse effects of a s h a r p increase i n the domestic price of oil and natural gas.

We are, however, faced with a growing dependence on imported oil.
We have to recognize the long-term need to develop new sources of supply in Canada and to promote greater economies in the consumption of these scarce resources.

Faced with these conflicting requirements in dealing with inflation, unemployment a n d energy, I have had to s t r i k e a careful balance in the choice of policies.

Taking into account the climate of opinion in the country, the government must give a lead that will enable us to improve our economic performance.
The faster rise of costs in this country than in the United States is casting a shadow over our economic future.

Should this trend con- tinue o u r prospects for t h e expansion of output, employ- ment a n d real incomes will be endangered.

Dealing with this inflation problem without adversely affecting our immediate employment prospects constitutes the heart of this budget.

.Tune 23.
.Tune 23.

1975 C O M M O N S D E B A T E S 702 1 International Developments [Translation] The Budget I should like to begin my review of the situation by referring to a number of developments on the internation- al scene.

One of t h e brighter aspects of t h e global picture over the past several months has been t h e success of the interna- tional monetary system in coping w i t h massive balance of payments problems created by t h e quadrupling of world oil prices.
To date a t least, the process of adjustment has worked much more smoothly than most observers had expected.

We a r e not out of the woods yet.

Although the collective deficit of the oil-comsuming countries will be a little smaller this year than i t was in 1974, large imbalances will continue.

Unfortunately, t h e over-all deficit of the less- developed oil-consuming countries will be significantly larger this year than last, even if there is no f u r t h e r increase i n oil prices.
I n these circumstances, wealthier countries will have a larger role to play in ensuring t h a t financial help keeps flowing to countries facing the great- est difficulties.

For t h e people of some of these countries, it's not just a question of austerity.

It's a question of survival.

a (2010) the Board of Governors of We made some progress this month a t the meeting of t h e t h e Interim Committee of not a s much a s I International Monetary Fund-although should have liked.
We are seeking to resolve important issues in t h e working of t h e international monetary system.

It is urgent, particularly for t h e developing coun- tries, that w e settle t h e interconnected questions of Fund quota increases, the use of gold held by the I M F and t h e exchange r a t e arrangements t h a t members of the Fund should observe.

The settling of these issues would facili- tate several promising plans for opening further channels for the flow of assistance to developing countries.
The settling of these issues will also permit t h e Committee of Ministers t o tackle its principal continuing task.

This task should be to maintain a surveillance over a volatile inter- national economy and to achieve the essential co-ordina- tion of national economic policies.

This can be done only by t h e collective political will of responsible ministers.

Economics is too important to be l e f t to economists.

The choices to be made a r e essentially political decisions.
I have spent a good deal of time on behalf of Canada in the international sphere.

I t was time well spent.

We Canadians depend f o r our prosperity on international trade and a stable world.

Moreover, the economic posture I will announce tonight owes something to the ~ n s i g h t s I have received from my colleagues from many nations.

Countries of the Third World a r e themselves seeking new ways to improve their longer-term growth and de- velopment.
Canada is re pared to join them in seeking out the areas where progress can be made.

We believe that this Search should encompass n e w measures to assist these countries in expanding their economies and raising t h e Standard of living of billions of people.

We a r e looking a t the ways of financing international trade and of helping them expand their exports and increase their export earn- lngs.

But these new initiatives must be firmly based on economic realities, not empty rhetoric.
In m a n y countries the economic slowdown has generat- ed pressures for increased trade protection.

Producers in- evitably seek to insulate themselves from the sharper winds of international competition.

Fortunately, most gov- ernments have resisted t h e temptation to resort to new restrictives trade policies.
At t h e recent Ministerial meet- ing of t h e Organization f o r Economic Cooperation a n d Development, member countries reaffirmed their pledge against t h e use of trade restrictions in dealing with their balance of trade problems.

Canada supported this exten- sion of t h e pledge.

We believe that if we can abstain co!lectively from raising new barriers to trade, we will all be better off.
T h e multilateral trade negotiations underway in Geneva offer t h e possibility, both of more liberalized trade and a more effective use of our resources.

The negotiations a r e far-reaching.

They will cover non-tariff a s well a s tariff barriers, and agricultural a s well as industrial products.

Canada is playing a n active part in these negotiations.

At the same time, w e a r e moving to strengthen bilateral economic relations w i t h our major trading partners.
We continue to place t h e highest priority upon the mainte- nance of our longstanding network of commercial a n d economic relations w i t h t h e United States.

But we are now trying to establish n e w and stronger economic links w i t h other countries, particularly w i t h Europe and Japan.

T h e responses to t h e P r i m e Minister's initiative for establish- ing n e w relations between Canada and the European Eco- nomic Community have been most encouraging.
I should also report t h a t I was particularly impressed during my recent visit to t h e Middle East by the oppor- tunities there for new business.

I have already urged Canadian businessmen to do more to take advantage of the rich and rapidly growing markets in t h a t part of t h e world.

[ E n g l i s h ] O n e of the most unfortunate of international develop- ments h a s been t h e slide of t h e United States into t h e deepest and most prolonged recession since the war.
T h e sharpness of t h e U.S. decline h a s been unexpected.

This h a s adversely affected t h e performance of t h e industrial world.

About 15 million people a r e now unemployed in 24 OECD countries.

P a r t l y a s a consequence of this industrial recession, inflation rates have receded somewhat from t h e very high rates of 1974, particularly in the United States.

Germany and J a p a n .

As the recession h a s deepened, the prospects for t h e future have been scaled down.
Last December the OECD was forecasting real growth of 0.5 per cent for its 24 members in 1975.

Now, in a sharp reversal of that earlier forecast, i t is anticipating t h a t total output will decline again this year.

While i t is widely expected that t h e U.S. economy will begin to move o u t of recession in the latter the other major OECD half of countries by year-end, there I S much less agreement about t h e strength and speed of the recoveries.
The view most generally expressed is t h a t a considerable shortfall of output a n d high rates of unemployment will extend well into 1976.

For some countries t h e immediate outlook for inflation is encouraging because of falling of some world commodity prices, prospects for good harvests, and consid- this year and some of 70 COMMON .

.

.

.

- - S D E B A T E S - - J u n e 23, 1975 - - - - -- The Budgel erable success in bringing costs under control.
But in other countries the immediate outlook for inflation is much less promising.

The Canadian Economy -- - - -.

.

- - -- - - -- I t is against this international background, Mr. Speaker, t h a t we must assess the s t a t e of the Canadian economy and the risks t h a t we face.

We should begin by recognizing t h e extent to which our recent economic performance has d i f f e ~ e d from that of the United States.
As I pointed out earlier, the United States is going through its deepest recession of t h e postwar period, with a n absolute decline in real output of over 7% per cent since the peak a t t h e end of 1973.

On t h e other hand, Canada has experienced a n absolute decline in real output since early 1974 of only 2 per cent.

While unemployment has risen in Canada, it remains more t h a n two percentage points below t h a t in t h e United States.
I t is difficult to disentangle the factors which have helped to shelter us from t h e deep American recession.

In part, this resulted from the nature of t h e preceding world- wide expansion.

Food and other primary products a r e very important in Canadian output, and t h e high world demand and exceptionally high prices for these commodities gave a strong impetus to Canadian incomes.
O u r position as a major oil producer enabled us to protect ourselves from t h e full shock of the increase in world oil prices.

T h e r e has also been a stronger and more sustained increase i n busi- ness investment i n Canada i n recent years, a n expansion which has been encouraged by our manufacturing incen- tives.
The rapid growth i n employment, the increasing number of families with two or more pay-cheques, t h e indexing of personal income taxes, t h e increase and index- ing of social security benefits-all of these have contribut- ed to the expansion of income and expenditures and t h e confidence of Canadian consumers.

More recent expansionary policies i n Canada have also helped to buttress the economy.
O u r measures of last November, which preceded the change i n U.S. economic policy by several months, provided a significant stilnulus.

They have been supported by unemployment insurance and other features of our taxation and welfare system which automatically cushion t h e economy in periods of declining income.

Further strong stimulus has been pro- vided by the provincial budgets introduced in the spring.
We estimate t h a t their cash requirements will be up by something of t h e order of $1 lh billion this fiscal year.

The general stance of monetary policy since the end of last summer has also helped to cushion t h e temporary weak- ness of demand.

All of these factors and policy initiatives have helped to maintain spending, employment and confi- dence in Canada a t higher levels than in the United States.
[Translation] T h e fact remains, however, t h a t t h e world recession has had a dampening effect on economic activity in Canada by restricting the growth of our exports.

This is t h e main reason why our real output, after peaking in the first q u a r t e r of 1974, was virtually unchanged i n the second and third quarters, and has declined somewhat since.

At the s a m e time, the volume of our imports has grown rapidly due to the continued expansion of domestic demand in Canada.
While the prices which w e received for our [ M r .

Turner (brrawa-Carleton, I exports continued to increase in the first half of 1974 more rapidly than the prices of our imports, more recently the terms of trade have moved against us.

As a result of all these factors, the current account deficit reached over $6 billion a t annual rates in the first quarter of 1975.

Certain sectors of the Canadian economy have been particularly hard-hit.
While automotive sales have held up reasonably well in this country, the severe contraction of demand for North American vehicles i n the United States has led to a major reduction in Canadian automotive product~on for sale in the U.S. market.

The sharp decline in U.S. residential construction, which provides the most important single market for Canadian lumber, has severe- prob- ly curtailed demand for exports of wood products-a lem compounded by the decline in our own housing activ- ity.
Exports of a number of other primary commodities have also been c u t back because of declining foreign demand.

Residential construction has been the major domestic source of weakness in t h e economy.

The record levels of activity reached early i n 1974 could not realistically be maintained.

It was also to be anticipated that rising inter- est, land and building costs would lead to some scaling down of new housing starts.
The decline, however, was sharper than we foresaw, with the number of s t a r t s reach- ing a low point in March before rebounding in April and May.

T h e fall in residential construction has resulted in a decline i n demand for a wide variety of household furnish- ings and appliances.

Business capital investment has continued to expand as work goes forward on projects t h a t have already been started.
But we must face the fact that the current eco- nomic slowdown, sharply rising costs and falling profits seriously jeopardize the continued strong growth of new productive capacity needed to increase output, employ- ment and real incomes i n t h e future.

The slowdown of the economy did not begin to have a marked impact on t h e creation of new jobs until the turn of the year.
S o far, employment has been relatively well maintained, but t h e number of Canadians without jobs has risen substantially a s a result of the continuing rapid growth of t h e labour force.

We need strong employment growth to get unemployment down.

The key to this is a better performance on costs and prices.

We have to remain competitive to sell, and sales a r e the only guarantee of jobs.
[English] Up to now, Canada's price performance has compared the major reasonably favourably with that of most of industrial countries other than Germany.

I have already noted that consumer prices in most countries have been rising less rapidly i n recent months.

The annual rate of change in Canada for t h e three months ending i n May was 7.1 per cent compared w i t h nearly 15 per cent i n the three months ended in December.
But these comparisons mask t h e reality of underlying developments in our cost-price structure.

Wholesale prices a r e already moving up more rapidly again.

The fact is that we have been building serious cost increases into our economy which threaten to J u n e 23, 1975 C O M M O N S D E B A T E S - 7023 erode the competitive position of our industries both a t home and abroad.
The major cause of this increase in costs has been the accelerating rise of wages and salaries, which account for some 70 per cent of our total national income.

I t is quite true that t h e rate of wage and salary increases in Canada has been exceeded i n many industrial countries overseas.

But we can never forget t h a t the United States is o u r major competitor and our major market, buying and sell- ing some 65 per cent of all t h e goods we export and import.
And it is in relation to the United States t h a t our competi- tive position is being most seriously undermined.

Mr. Speaker, some supplementary material t h a t I shall table later provides a detailed picture of wage and salary developments in Canada and t h e United States.

I recog- nize fully the defficulty of making precise comparisons of this kind.
The preponderance of the evidence, however, is that wages and salaries, whether frlnge benefits a r e included or not, a r e rising much more rapidly i n Canada than in the United States.

In spite of this more rapid rise in wage and salaries, t h e increase in labour costs per u n i t of output has been only moderately higher i n Canada t h a n in t h e United States because productivity declined much less i n Canada t h a n in the United States.
As the U.S. economy begins to pull out of its present deep recession, however, it is likely to experience a much greater improvement i n productivity than our country.

Under those circumstances, the g a p between our unit labour costs and those in the United States will progressively widen and our competitive posi- tion progressively deteriorate.

I t is perhaps not surprising t h a t wages and salaries in Canada over the past several months should have been rising more rapidly than in t h e United States.
Like t h e increase in our current account deficit, that is a conse- quence of t h e relatively much stronger performance of t h e Canadian economy since the beginning of last year.

What is surprising and disturbing is t h e size of recent increases in Canadian wages and salaries and their continuing acceleration in a period o i slow growth and high unemployment.

I very much understand the concern of working men and women everywhere to maintain and improve their standard of living.
I t was natural that they should have pressed for increased wages and salaries when faced with rapidly rising costs for almost every purchase and when corporate profits were apparently soaring to record levels.

But t h e increase in corporate earnings, much of which was generated by temporary and illusory gains from inventory profits, has been sharply reversed during the past six months.
The share of wages, salaries and supplementary labour income in t h e national output declined signiflcant- ly in t h e earlier stages of the inflation, but the balance has since been fully restored.

Wage and salary increases a r c now r u n n i n g well above t h e increase i n t h e cost 01' living.

These increases in large measure reflect the effort to restore or improve relative positions, and the widespread fear and expectation that inflation will continue or even recent wage and salary accelerate.
But a number of demands appear to bear little relationship to economic reality.

The Budget There a r e some who believe that the surge of wage and salary increases h a s crested and that we can now expect a substantial reduction in the rate a t which we add to our costs.

I very much hope that this will be t h e case, but there is little evidence yet t h a t it is happening.
There a r e others who point out that w e have a flexible exchange rate and if our cost increases continue to exceed those of our major trading partners, our resulting competi- tive disadvantage can be overcome by a depreciation of t h e Canadian dollar.

The weakening of our balance of payments has already produced some depreciation.

But a continuous deprecia- tion of the Canadian dollar over a n y length of time is n o substitute for bringing the spiral of our costs and prices under control.
Indeed, i t would aggravate the inflationary process by driving u p t h e prices of the billions of dollars worth of goods and services we buy from abroad.

Further, depreciation of our dollar raises the domestic prices of some products which we both export and consume a t home.
Unless we a s a nation a r e able to conduct our affairs in a way that will maintain confidence a t home and abroad i n the soundness of our economy, we risk paying a heavy penalty i n terms of lower capital investment, lower output, lower employment and lower real income.

T h u s we a r e brought back to t h e central question of the emerging trend in cost increases.
If t h e r a t e of increase i n our costs does come down, we will be able to look forward to a sustained expansion of output and employment, supported by the major new investment projects which lie ahead of us.

But I cannot overlook the danger t h a t our costs may continue to rise both in absolute terms and relative to our major trading partners.

In that event, growth and employment will be impaired.
The outcome will depend on whether we are moderate i n the claims which all of us will be making in the coming months.

[Translation] Policy Choices Let me discuss now t h e question of policy.

In doing so, I recall that my first words to this House a s Minister of Finance were t h a t my most urgent priority was jobs.

I continue to believe that our greatest challenge is the creation of productive and satisfying jobs for the rapidly growing numbers of Canadians who w a n t to work.
One million more Canadians a r e a t work today than when I took thls office.

But statistics alone are not a measure of human fulfillment.

This achievement must be measured by t h e new opportunities for our young people to pursue their chosen careers, for students to help pay for their education, and for increasing numbers of women to enrlch their lives in a meaningful way.

The policies of this government have played a crucial role In making this happen.
We have used fiscal and monetary policy, but have never believed this alone to be s u f f i c ~ e n t .

We have stressed t h e necessity of a high level of business investment and encouraged it by tax incentives and a wide variety o f othcr policies.

We have launched new direct rmployment programs.

We have broken new ground in the training of workers and in aiding those who have had to move to other parts of the country where jobs COMMONS D E B A T E S J u n e 23, 1975 a r e available.
We have introduced largr new programs of regional development to bring jobs to peoplc.

Today the task of job creation is made immcas~rrably more dilficult by inflation I n its prescnl.

cost-push form.

inflation threatens to pricr our goods out of world markets and to lessen the capacity of our business firms to expand their operations.

I t disrupts financiai markets and impairs rational planning by business and government.
It under- mines the effectiveness of the traditional instruments of demand management policy to keep the economy on course.

When inflation reaches a certain point, the stimu- lation of spending may simply lead to higher prices rather than more goods and more jobs; in t h e longer r u n , i t actually makes unemployment worse.

Not only that, but inflation ultimately inflicts grievous damage to the fabric of society.

I t lowers the living stand- a r d s of those on fixed incomes, including pensioners.
I t leaves people without reliable, understandable guideposts by which to arrange their economic affairs.

It injects grave uncertainty into decisions on family budgets, hous- ing, savings a n d provision for old age.

I t provokes deep frustration, social tension and mistrust of private and public institutions.

Collective bargaining is embittered.

Industrial relations a r e damaged.

We in Canada a r e already beginning to live some of these experiences.
During the past few months, I have h a d the opportunity to talk w i t h many people all over t h e country-from labour, from business, from our farms, from the profes- sions.

I have found a widespread understanding of the risks to our country from persistent inflation.

I now wish to s h a r e with t h e House a n d with the people of Canada the government's thinking as it has developed in the course of the consultations and during t h e intensive review w e have conducted i n recent weeks.
If w e a r e t o find a way out of our present difficulties, no single step is more important t h a n to promote the widest possible public understanding of o u r problems and the real choices which we have to make.

Among t h e various policy options open to us, there is one which this government has rejected, and rejects again, i n t h e most categorical manner.
This is the policy of deliberately creating, by severe measures of fiscal and monetary restraint, whatever level of unemployment is required to bring inflation to an abrupt halt.

S u c h a course of action would be completely a t odds with my own instincts.

T h e cost would be much too high.

T h e hard-won sense of security in our society would be replaced by a sense of fear a n d anxiety, a n d the cost in terms of lost output a n d lowered standards of living would be unac- ceptable.
I n h u m a n terms for me it would be unthinkable.

[English] I t was because we rejected this course of action that w e launched t h e series of consultations with the leaders of labour and business, provincial governments and many other groups a n d associations in the country.

Our objec- tive was to seek a better solution to inflation and slow growth.

We sought a consensus on a new framework to govern the setting of incomes a n d prices in a manner which would be fair to all.
[Mr. Turner (Ottawa-Carlelon) ] Members will recall that my parliamentary secretary-- and a t this stage I should like to pay Lr~butc to him as a n outstanding member of parliament.

S o m e h o n .

Members: Hear, hear!

M r .

T u r n e r ( O t t a w a - C a r l e t o n ) : The hon.

member for Sarnia ( M r .

Cullen) has been invaluable LO me in the discharge of my duties in this House and in the country.

He tabled in the House the report I gave on this-subject to the conference of first ministers.
Let me now Summarize the impressions we gathered from the whole series of meetings.

First, all those who took part in these meetings gave generously of their time, often at short notice.

They spoke Frankly about w h a t worried them.

They gave their opin- ions constructively.

They helped me and my colleagues a good deal and I want to thank them.

Second, those who joined us a t those meetings welcomed the opportunity to exchange views wlth the government on problems and policies.
I think they have learned more about the problems w e are facing.

Certainly, my col- leagues and I have greatly benefitted from hearing their views.

We must find ways of keeping these channels of communication open and I intend to d o so.

Third, there is now, I believe, a clearer understanding in the country of t h e fact that if each a n d every group tries to improve its position by pushing u p i t s own money income, t h e total effort in t h e end is bound to be self-defeating.
If Canadians generally come to recognize t h a t moderation a n d restraint are in t h e interest of everyone-that will in itself dampen inflation.

The most useful result of the consensus exercise has been increased public awareness a n d understanding.

Despite these positive aspects, consensus on a set of voluntary guidelines has not been reached.

The impression w a s created that this h a s been d u e to an inability to formulate a set of proposals that were fair and equitable.
I believe this is not so.

T h e proposals were evolving, and I think w e were on the w a y to rounding them out in a manner which would have met t h e main concerns of the various parties.

But we had to struggle against a persistent doubt whether t h e voluntary guidelines would in fact be followed.

Each group feared that others would be less exposed to the force of public scrutiny or less able to commit its membership.

There was a general concern that t h e burden would not be shared equally.
Faced with the deadline of a budget and in the absence of a consensus, I had to consider other options.

We gave careful consideration t o t h e imposition of statu- tory controls over prices and incomes.

In contrast to the situation in 1973 a n d 1974 when our inflation primarily reflected international forces, and controls couldn't poss- ibly have worked, we a r e now faced with escalating domestic costs in a n under-employed economy.
In these circumstances, controls could provide the most direct response to the problem.

Thus, unlike our position on severe monetary a n d fiscal restraint, we did not reject controls i n principle.

Indeed, in one respect, they would have had a n advantage over a voluntary consensus.

BY using t h e powers of the l a w to m a k e all groups obey the rules, each would have had t h e assurance that all would be making a contribution.
J u n e 23, 1975 D E B A T E S ---- But there would have been-and are-immense difficul- ties and disadvantages in such a course of action.

Govern- ment would have to interfere i n every type of business decision and wage settlement.

T o a far greater extent than in a voluntary program, a new bureaucratic apparatus would have to be set up.

New types of inequity would be created.

The flexibility of the market economy in directing resources where they are most needed would be impaired.
Dislocations would occur.

These costs would be worth paying if direct controls could be successfully imposed.

If this were the case, we might well achieve lower price and cost increases without higher unemployment.

But t h e success of such a program would depend crucially on widespread public support.

As I have said before, I believe t h a t we can resort to direct controls only when there is a public conviction of the need for such action.

T h a t point has not been reached.


As another option, we looked a t several alternative ways of using t h e tax system a s a method of controlling prices and costs.

We examined the possibility of taxing away all increases in income in excess of specified amounts.

We came to the conclusion t h a t t h i s would provoke adminis- trative nightmares, create massive inequities and yet would not ensure t h a t the inflation of costs and prices would be effectively brought under control.
The policy I have chosen is to use our powers over taxation and spending to create the climate a n d set t h e example by which I believe w e can still meet the inter- related problems which confront us.

I would remind the t h e measures taken in the House that the stimulus of November budget was reflected i n my forecast of cash requirements amounting to $3 billion.
Because of the slow- down in the economy, and i t s unavoidable impact o n tax revenues and social security payments, I now expect that our requirements will be in excess of $5 billion.

I d o not believe that this amount should be further increased.

I believe there is enough stimulus already injected into the economy.

There are, however, some areas in which f u r t h e r action is imperative.
I will be announcing certain meas- ures tonight to sustain business investment, to assist hous- ing a n d to create jobs.

But a s I have said, our goals would not be served by a further n e t injection of demand.

The government cannot underwrite-or appear to be under- writing-ever higher rates of inflation by further expan- sionary policies.
I t would be n o service to the people of Canada to hide t h e underlying reality that unrestrained demands for higher incomes will sooner or later mean fewer jobs and lower living standards.

A further reason for not increasing the over-all expan- sionary thrust of our policies is that much of the slack in the economy is concentrated in our export industries.

In spite of our best efforts to promote export sales, we cannot stimulate general demand in t h e economies of our tradlng partners.
We can only try to check t h e deterioration in our international c o m p e t i t ~ v e position.

On the other hand, since unemployment I S already too high, I do not see any justification for weakening thc expansionary thrust which is already in place.

1 have thcreforc dccidcd to stay on our existing fiscal course in terms of our cash requirements and thcir impact o n the economy.
Within that framework, however, it is T h e B ~ ~ d g r t that the government should exercise greater essential restraint over ~ t s own spending.

I will therefore be announcing a series of measures the government is taking to limit its total outlays and to reduce their growth over the longer run.

leadership ( 2 0 4 0 ) O n e thing we have learned from our meetings with labour a n d business was that i f we expected restraint from the country, the country expected restraint from govern- ments.
We are determined t h a t this budget shall show clear the exercise of moderation and restraint.

We will thereby add force to our assertion that Canadians generally will have to moderate their individu- al claims against t h e economy if we a r e all to enjoy the benefits of in output a n d sustained expansion employment.

[Translation ] The Control of Government Expenditure i n a I come now to specific measures.

None is more irnpor- t a n t than the control of public expenditure.
The outlays of the federal government, both budgetary and non-budge- tary, have risen rapidly in recent years.

So have the outlays of provincial governments.

This rapid rise has occurred in response to insistent public needs a n d public demands.

I t has contributed to t h e achievement of the whole range of o u r objectives, economic, social, cultural and international.

I t has been mirrored in the experience of countries around the world.
But t h e portion of the national income s p e n t by governments on goods, services and transfer payments, and financed by taxation, has now risen to levels previously reached only during the Second World War.

This rise is now causing concern in our infla- tionary environment.

The competition for shares of the total national income has become intense.

The government proposes to set a n example of restraint in this regard by imposing strict control over its activities and programs.
O u r budgetary expenditures and our loans, investments and advances t h i s year are already coming under severe upward pressure, a s a result of inflation, t h e growing cost of our statutory programs and the new programs a n d new commitments which have been pressed upon us from all sides.

Unless we act now, the estimates I gave in my last budget will be exceeded by many hundreds of millions of dollars.
Moreover, there a r e strong indications t h a t the cost even of our existing programs will rise substantially further next year.

T h e government has therefore decided upon a wide- ranging set of measures, covering our statutory a s well as our non-statutory programs, budgetary as well as non- budgetary spending, our salary a s well a s our hiring poli- cies.

All a r e directed to bringing outlays under more effec- tive control and to slowing down their r a t e of growth this year and into the future.
Our target of cuts this fiscal year I S $1 billion.

[ E l i g l i s h ] T h e flrst element in this strategy has been a c;trel'ul scrutiny of all non-statutory programs authorized in the main cstimatcs of expcnditurc or subsequently approved by the Cabinet for submission to Parliament.

Under the.

lt~adcrship of t h e P r e s ~ d c n t of th(> Treasury Board, w r have idcntllied a series of items which, although desirahlv and important, m u s t nonetheless be rcducrd or postponed.
7026 COMMONS DEBATES J u n e 23, 1975 T h r H ~ i d y e l Thct Treasury Board has been successful in a p p l y ~ n g cuts to almost evcry dcpartnient of government and to many of the Crown corporations.

Thcse cuts will cause distrc,ss and disappointment to Canadians in all walks of lifr.

But they arc required ~f w e a r c to drmonstrate responsibl[, fiscal restraint.

Reductions totalling $100 million a r e being made to the planned capital expenditures of the Departments of Trans- port, Defence.
Public Works, Environment and others.

R e d u c t ~ o n s totalling $250 million a r e being made in the planned grants and contributions of the Departments of External Affairs, Industry, Trade and Commerce, the Secretary of S t a t e and others.

In the non-budgetary field, planned loans, investments, and advances will be reduced by about $350 million, by cutting back on allocations and by deferring the start-up of some new enterprises.
Crown corporations and agencies which will be affected include Petro-Canada, the Federal Business Development Bank, t h e Federal Mortgage Exchange Corporation and t h e F a r m Credit Corporation.

Over and above these reductions, departments and agen- cies a r e being required to cut planned program expendi- tures by $130 million, and ministers a r e now directing changes in their programs In line with their reduced resources.
The Treasury Board is also directing depart- ments to restrict expenditures on travel and consultants' fees.

- ~ The second element in t h e strategy relates to the growth of t h e public service.

The Treasury Board is directing departments to restrict their salary budgets.
T h e effect of this restriction will be to reduce t h e r a t e of increase in man-years in t h e public service this year from 4.1 per cent to 3.1 per cent, a rate that is down substantially from t h e levels of six to seven per cent i n each of the two previous years.

O n e significant exception to this plan for restraining staff growth should be noted.
The Office of the Auditor General has long acted on behalf of this House to monitor and report to it o n the prudence a n d probity with which the government has implemented its programs.

T h e gov- ernment has always recognized the vital importance of t h e work of the Office of the Auditor General in assuring this House, and through it t h e people of Canada, that t h e operations of t h e government a r e being conducted proper- ly and legally.
However, the increasing complexity of government operations and financial transactions demands major improvement i n the capacity of that office to scrutinize objectively and thoroughly all financial transactions and systems.

The most sophisticated technical and profession- al judgment must be available t o carry out this work.

T h e Auditor General has submitted that he needs additional staff a t the most senior executive levels to fulfil these responsibilities.
The government accepts this position, a n d h a s already increased his executive complement.

I t will now accept a further obligation to more than triple that senior executive complement to give t h e Auditor General the staff he needs to do his job.

The t h ~ r d element of our expenditure restraint stl.ategy concerns the wage and salary p o l ~ c y of the federal govern- [ M r Turner (Ottawa-Carleton).]

ment as an employer.


The policy of the government is to compensate its employees by way of pay and benefits comparable with those provided by other Canadian employers.

The policy of comparability is a demonstrably Fair one and will be adhered to strictly.

The vast majority of our public servants a r e represented by bargaining agents, and their salaries, benefits and con.
ditions of work are e s l a b l ~ s h e d by collective bargaining, The government accepts and indeed initiated collective bargaining in the public service.

This democratic process provides great protection against unfair or arbitrary treat.

ment.

An essential element is the legal right to strike in all but the most essential occupations.

But the government is not to grant increases that are unwarranted by a n y reasonable standard.

This may lead to legal work stoppages.


The resulting inconvenience to the public will have to be accepted.

Beyond this, the government cannot condone and will use every legal remedy within its power to deal with unlawful deprivation of servlce to the public.

The fourth element of our expenditure restraint strategy relates to the two main statutory programs in t h e health field-hospitals and medical care insurance.
Honourable members a r e aware that the federal government pays about one-half of t h e costs of these important programs.

T h e provinces pay the remaining half and administer the plans.

Total costs this year will exceed $6 billion.

These programs have been i n effect for some time- hospital insurance since 1958 and medicare since 1968.

The fundamental objective of providing comprehensive hospi- tal and medical care services to all Canadians, regardless of income, has long since been met.
But even after the development of these plans as mature systems, the annual increase in their cost has on average r u n well ahead of the growth of national income.

These costs trends are due in part to t h e basic nature of health care; but the statutory rigidity of the programs, the lack of national standards.

and the open-ended nature of cost-sharing arrangements with the provinces has made it almost impossible to achieve effective cost planning or control.
Last year, for example, federal contributions to the provinces i n respect of these two programs had to be increased by 19.8 per cent over the previous year.

For several years, the federal and provincial govern- ments have worked hard to try to devise a more flexible and efficient system to provide better services a t a lower cost.

This applies particularly to hospital insurance, and intensive discussions are going forward to achieve this goal.
I n anticipation of a successful conclusion to these ongo- ing discussions, it will be necessary to amend the existing Hospital Insurance and Diagnostic Services Act and cost- sharing agreements with the provinces.

Under the act, the federal government must give five years' notice before the present agreements can be terminated and new :arrange- ments undertaken.

I therefore wish to announce yLiat the government will give immediate notice of its :'c.

;rmal intention to undertake these steps.


A second measure aimed a t more effective cost control involves the establishment of a ceiling on the yearly rise in the contributions the federal government makes to the J u n e 23,1975 .- - .

~ ~.

C O M M O N S D E B A T E S - - - - - - - - p - ~ - - - - - .

The Budget 7027 ~ - _ _ _ provinces under the Medical Care Act.
Since provincial administrations will need some time to adjust their plan- ning, this ceiling will be made effective for 1976 a n d subsequent years.

More specifically a ceiling will be placed on the per capita rate of growth of federal contribu- tions to provinces.

This ceiling will be 13 per cent i n 1976-77, 10% per cent in 1977-78 and 8 % per cent In 1978-79 and subsequent years.
The per capita approach means that varying rates of population growth between provinces or from year to year will be automatically taken into account in total contributions to provinces.

My colleague, the Min- ister of National Health a n d Welfare Mr. Lalonde will shortly introduce legislation to effect this change.
The gradual diminution of allowable r a t e s of increase will t a k e account of the need to discourage unnecessary use of services, b u t will provide adequately for the servic- ing of a growing population.

The continuation of the existing cost-sharing arrangements involving the same federal per capita contribution to all provinces a n d the territories means t h a t incentives to keep costs down will remain.
Lower-cost provinces will continue to have a larger proportion of their program financed by the federal government, compared with higher-cost provinces.

I w a n t to make it clear on behalf of my colleague, the Minister of National Health a n d Welfare, t h a t t h e commit- ment of t h e federal government to share t h e costs of encouraging the development of less-expensive health care services still stands.
(2050) [Translation] Unemployment Insurance The fifth major element i n t h e government program for expenditure restraint concerns the unemployment insur- ance system.

There is no doubt t h a t t h e system, a s expanded in 1971, has proved its worth in stabilizing the economy a n d in providing substantial support for those without work.

I fully support the principles underlying this system.

I t gives many breadwinners who have t h e misfortune to be unemployed, a steady flow of income.
I t helps relieve the anxiety arising from unemployment.

Honourable Members are well aware t h a t some difficul- ties have been associated with this n e w program.

The government has been reviewing i t carefully and in t h e last Speech from the Throne announced its intention to amend the Unemployment Insurance Act.

This continuing review has already shown the need to strengthen certain elements of flexibility and fairness in the Act.
I t has also shown that some features of the new system have undesirable effects on work incentives.

Moreover, both society a n d the structure of the Canadian labour market have been under- going significant changes over the past five years.

Thls has led us to review t h e application of the principle of self-financing.

I t is well known that the' costs of running the new system have proved to be very large.

Total benefit pay- ments amounted to $2.3 billion in 1974-75.
They are expect- ed to exceed $3.75 billion i n 1975-76.

Employer-employee contributions provided $1.6 billion in 1974-75 a n d a r e expected to provide $2 billion in 1975-76.

The balance- $1.75 billion this year-has taxpayer.

to be provided by the general Important changes have already been made to ensure fair and efficient administration of the program.

But there still remain a number of important areas that cannot be dealt with by administrative action alone.
These require amendments to t h e Act itself.

All Canadians want a n Act which is not only fair but credible.

The amendments will deal with the benefit features of t h e Act and the level a t which Canadian taxpayers as a whole should be expected to pay f o r this program in conjunction with the contribu- tions by employers a n d employees.
My colleague, the Minister of Manpower and Immigra- tion, will shortly introduce legislation proposing five main changes relating to benefits, a n d a number of technical and administrative amendments: -first, the maximum period of disqualification from benefits for those who quit their jobs without just cause, refuse to accept suitable employment or a r e dismissed for misconduct, will be doubled from three to six weeks.
This measure will create a greater incentive to remain a t work or to search more actively for a job; -second, the payments of premiums and the receipt of benefits will be terminated a t age 65.

Government-financed programs such as Old Age Security, the Guaranteed Income Supplement, and the Canada Pension Plan are now available to people of that age on a regularly indexed basis.
Those 65 years and over who wish to work are able to do so without reducing their entitlements to C P P benefits under legislation recently passed by Parliament.

Taking all of these factors into account, it is no longer appropriate that older citizens who choose to continue to work should be required to pay premiums for benefits which a r e already available to them under other govern- ment programs.
T h e provision for the three-week l u m p sum payment for those qualified will remain; -third, the special benefit r a t e of 75 per cent to claimants with dependants eligible for extended benefits, or who are so-called "low- income" claimants, will be brought into line with the standard benefit rate of 66% per cent.
T h e recent tripling of family allowances and the many tax reductions I have introduced mean that a special benefit rate for this group of people is no longer required; -fourth, the Act will be amended to recognize the special circum- stances of certain workers now unable to qualify for benefits for reasons beyond their control-those suffering temporary disability or on special training courses.
For these workers, the period during which a claim can be established and benefits received will be extended; -fifth, the payment of the maximum 15 weeks of sickness benefits will be made more flexible by allowing eligible recipients to receive such benefits a t any time during the first 25 weeks on claim rather than the first 15 weeks as now provided.
These changes, along with others to be introduced in t h e legislation will increase t h e incentive to work, adapt cov- erage and benefit levels more to current social circum- stances, and deal more favourably with certain hardship cases.

Finally, t h e proposed legislation will provide for a change in t h e method of calculating t h a t part of unem- ployment insurance benefits financed by employer and employee contributions.
The 1970 White Paper on Unem- ployment Insurance stated that program costs "over and above the self-financing aspects" represent a reasonable charge to t h e government.

This basic position remains unchanged.

T h e White Paper established a 4-per-cent benchmark on the basis of "long term average national unemployment".

An updating of the benchmark used for measuring the self-financing part of the system is now needed.
This new benchmark will be adjusted annually a n d automatically on the basis of a moving average of' unemployment rates over t h e preceding eight-year period.

The Budget The principle of a n eight-year moving average is the same a s that now incorporated in the Act to adjust the max- imum levrl of insurable earnings.

T h ~ s will mean some increase in premiums.

I might note that had this formula been operative in 1975, the new benchmark would have been 5.3 per cent.
This level derives from actual experience over the immedi- ately preceding eight-year period.

I t reflects broad social and demographic changes in t h e structure of the labour market, such as greater participation by married women, young people, students a n d other secondary wage earners.

The regular up-dating of the benchmark will relate only to the sharing of t h e costs of initial benefits payable under the Act.
Extended benefits payable to those who a r e unemployed for longer periods will continue to be based on t h e existing 4-per-cent benchmark, and the cost of these benefits will continue to be financed entirely by the federal government.

Mr. Speaker, our five-fold strategy of expenditure restraint will enable us to meet o u r priorities without placing undue strain on the economy.
While many of the particular economy measures will prove to be very pain- ful, I am convinced that t h e package a s a whole will be welcomed by t h e country a t large.

By giving a lead to others in the exercise of restraint, this strategy will help to break inflationary expectations and get inflation under control.

[English] Measures to Create Jobs Certain special problems i n the economy require policy responses if we a r e to sustain the level a n d growth of job opportunities a n d of production.
I am now going to pro- pose measures, Mr. Speaker, t o deal with these special problems.

Measures to Sustain Business Investment If o u r economy is to remain productive a n d competitive a n d capable of providing jobs, we must ensure that we have modern capital facilities with which to work.

We must guard against any slowdown in investment.


I have been pleased t h a t capital investment h a s continued to expand in present circumstances and I w a n t to do w h a t government can do this expansion to ensure continues.

t h a t It is well known t h a t our policies have sought to encour- age a strong manufacturing sector.

We have provided long-term tax incentives to assist our manufacturers a n d processors to compete i n domestic a n d foreign markets.
The evidence presented in the final report o n these tax measures demonstrates their effectiveness.

But new and broader initiatives a r e needed under current economic circumstances.

I a m therefore proposing t o introduce a n investment tax credit as a temporary extra incentive for investment in a wide range of n e w productive facilities.
The credit will be 5 per cent of a taxpayer's investment i n new buildings, machinery and equipment which a r e for use in Canada primarily in a manufacturing or processing business, pro- duction of petroleum or minerals, logging, farming or fishing.

The cost of new, unused machinery a n d equip- ment acquired after tonight a n d before J u l y , 1977, will be eligible.

I n the case of buildings, the entire cost will (Mr. Turner (Ottawa-Carleton).]
D E B A T E S J u n e 23, 1975 - qualify for the credit i f the building is commenced during this same period.

For buildings now under construction, additional costs incurred d u r i n g the period will qualify.

A simple illustration dcmonstratcs how this credit will work.

If a taxpayer acquires a machinc for $10.000, he will be entitled to a credit of 5 per cent, or $500, which he can apply against his federal tax liability.
In other words, the cost of the asset to the taxpayer is reduced by 5 per cent, and his rate of return on the investment is thereby improved.

(2100) The credit will be claimable to the extent of the first $15,000 of federal tax liability f o r the year and one-half of any excess over that amount.

Any balance of credii not so claimed in the year may be carried forward against federal tax for the five succeeding years, subject to the same limits.
I t will be available to individual small business- men, farmers a n d fishermen as well a s corporations.

The cost of the credit, which will be borne entirely by the federal treasury, will be about $200 million in this fiscal year.

A further measure will m a k e it easier for all Canadian companies to borrow abroad to meet their investment requirements over the next several years.
Earlier this year, the Income Tax Act was amended to provide an exemption from the non-resident withholding tax on in- terest payable on government securities issued before 1979.

I now propose to extend a similar exemption for interest on long-term corporate bonds, debentures and other debt securities, including mortgages.

The exemption will apply to all interest o n securities issued after tonight a n d before 1979 paid to lenders a t arm's length with borrowers.
Full details of these measures a n d a number of technical amendments to the Income Tax Act will be found in the Ways and Means Motions.

Measures to Stimulate Housing In the November budget, I stressed the importance the government attached to residential construction for both social and economic reasons.

Faced with the prospect of a rapid decline in housing starts, we announced a series of measures to improve t h e situation.
These included a fur- ther expansion a n d adaptation of programs of the Central Mortgage and Housing Corporation, the right to deduct capital cost allowance o n n e w rental units from other income.

and reduction of the sales tax on building ma- terials.

As a long-term measure to assist people i n acquir- ing homes we also introduced the Registered Home Own- ership Savings Plan.

There is every reason to believe that this plan will be a n important additional source of funds for housing finance.
We have seen a large increase in the price of housing in recent years; construction costs have risen, land costs in particular have soared and mortgage interest rates remain high although they have fallen from the peak levels of last year.

This is therefore a n area where the effects of infla- tion have been felt with particular severity.

Provincial governments a s well a s the federal government have taken steps to mitigate the problem.

But more needs to be done.


The number of housing s t a r t s fell from a n annual rate of 284,000 in the first quarter of 1974 to 161,000 in the first J u n e 23, 1975 ~~ ~ C O M M O N S .- D E B A T E S -.

~ ~~ - - .

._ -2 - -- - - 7029 quarter of this year.

The rate has since recovered to a level of 213,000 in May.

This recent increase has been welcome, but the level reached in May is still below w h a t appears to be needed over the longer r u n to look after the housing needs of Canadians.
Construction of single-family dwell- ings has increased, but activity in rental accommodation remains depressed.

I believe that further action is appro- priate in order to achieve a n adequate recovery a s soon as possible.

On behalf of my colleague, the Minister of S t a t e for Urban Affairs, (Mr. Danson), I wish to announce the following measures.

First, the government has decided to increase substan- tially the level of housing activity directly financed from public funds.
The $1 billion commitment authority for housing already provided to CMHC this year will be increased by a further $200 million.

This will permit increased lending to limited dividend rental projects, to purchasers of new homes under t h e Assisted Home Own- ership Program and to provincial and other non-profit housing agencies.

All these programs a r e directed towards meeting t h e housing needs of Canadians of modest means.
Second, I wlsh to announce a temporary increase in t h e grants available for housing financed by t h e private sector.

Hon.

members will recall t h a t legislation was passed recently authorizing direct payments by CMHC in order to bring t h e cost of n e w privately financed housing, both rental and owner-occupied, down to a reasonable proportion of t h e budget of moderate-income families.
This important innovation extended to housing financed in t h e commercial mortgage market certain benefits previ- ously available only on housing financed by the govern- ment.

We a r e now introducing a temporary increase in these grants from a n annual maximum of $600 to $1200 for owner-occupied housing and from a maximum of $600 to $900 for rental accommodation.

These measures will stimulate demand and help make adequate housing more accessible to Canadians of moder- a t e means.
They will also give a n important stimulus to a sector of t h e economy which has not in recent months played its full role in providing jobs for Canadians.

Mr. Speaker, t h e details of these n e w g r a n t provisions and t h e increased lending authority for CMHC will be provided by my colleague, t h e Minister of S t a t e for Urban Affairs.

I estimate that their total budgetary and non- budgetary cost in 1975-76 will amount to about $125 million.
Direct Employment Programs In addition to providing for the continuing improvement of our capital facilities and the recovery of our housing industry, specific measures a r e needed to create jobs among those people and i n those areas where the need for employment is greatest.

A further direct employment program will therefore be initiated immediately.
The program is d e s ~ g n e d to act as a catalyst for governments, industry and private groups, enabling them to c o - o r d ~ n a t e their efforts to imprwve the skills of our work force and to create useful jobs.

T h e total program will involvc a financial commitment of $450 mil- lion over the next two years and a disbursement t h ~ s fiscal year of $150 million.
It will conslst of five d i s t ~ n c t ele- T h e Budget ments: occupational training, maGpower placement and mobility, a n e w local initiatives employment program, a n employment program for students for t h e summer of 1976, and a federal program of labour intensive works and activities.

The additional allocation to occupational training over t h e next two years will be $70 million.

Half of this amount will be available for training in industry and half for training in educational institutions.
This will encourage a n d assist many unemployed persons to acquire special- ized technical skills t h a t have a continuing value, thereby increasing their employability and earning capacity.

It will also provide employers with a substantial number of trained workers and assist them to make effective use of plant facilities.

We will also be allocating about $10 mil- lion to intensify job placement and mobility programs of t h e government.
These programs have proven to be a highly effective instrument i n bringing together jobs and workers.

An allocation of $285 million over the next two fiscal years will be provided for a new local initiatives employ- ment program.

This program will operate from November to J u n e in each of the two years.
O u r experiments i n this kind of job creation have proved effective in expanding employment a t t h e community level through a wide range of projects sponsored by private citizens and municipali- ties.

Special emphasis will be placed upon municipal works and projects.

The new program is expected to pro- vide over 400,000 man-months of employment.
The federal government is already engaged in a substan- tial program of student summer employment thls year and a further amount of about $60 million is being set aside for this purpose i n t h e summer of 1976.

We a r e also proposing a temporary $25 million to finance labour-intensive federal projects, particularly in regions where unemployment is most severe.

Based on previous experience, this program should provide about 30,000 man- months of employment over t h e next two years.
My colleagues, t h e Minister of Manpower and Immigra- tion (Mr. Andras) and t h e President of the Treasury Board (Mr. Chrbtien), will elaborate on these measures in t h e next few days.

Mr. Speaker, I have been outlining measures needed in present circumstances to sustain and improve the pace of production and employment in t h e economy.

They will cost money.

This is the kind of cost government should be incurring in present circumstances.
These additional costs, taken together with t h e expenditure cuts I announced earlier, give t h e kind of structure and balance to govern- ment programming which is needed today.

I E n y l i s h ] However, the general balance of ways and means which I shall summarize later tonight, does require some incre- ment of revenue to help pay for these special programs.

Undcr current circumstances this contribution should comc- from the higher income groups of our country.
I t h c r t ~ l o r e propose that the income tax reductions cffectcd ~n my budget of last November should be changed in one sigrlif'lcant respect.

Members will recall that a s a result of that budgct the lederal tax c u t was inc~.eased.

At t h e present time evcry 7030 C O M M O N S D E B A T E S .

- J u n e 23,1975 -- - - -- .- The Budget taxpayer is entitled to a tax credit of 8 per cent of his federal tax, with a minimum reduction of $200 and a maximum of $750.
This evening I a m proposing to roll back the increase i n the $750 maximum to its 1974 level of $500.

No change 1s proposed to the 8-per-cent rate nor to the minimum tax credit of $200.

This ensures that taxes will increase only for those who a r e most able to bear the increase.

For example, i n the case of a married wage earner with two children under sixteen, his before-tax income would have to be in excess of $27,000 before he would be affected by this change.
The increase in federal revenues i n a full year will be about $50 million.

Tariff, Sales and Excise Tax Changes There a r e certain measures relating to the Customs Tariff which I wlsh to announce.

Many of t h e requests which have been received for tariff changes will have to be considered in the course of the negotiations now under- way in Geneva.

I am, nevertheless, proposing a number of tariff changes of a relieving nature.

There changes will become effective tonight.


Free entry for petroleum products such a s gasoline, aviation fuels, fuel oils and diesel fuel will be extended until J u n e 30, 1977; t h i s was scheduled t o expire o n Octo- ber 23, 1975.

Free e n t r y for aircraft and aircraft engines of types or sizes not made in Canada, d u e to expire a t the end of this month, will be extended for a f u r t h e r year.
Duty- free entry will also be extended to a number of other goods either by the amendment of existing tariff items or by t h e introduction of new ones.

I would also like to announce three sales and excise tax changes of significance.

T h e first is a special step to assist in energy conservation.

Effective tonight I propose to remove the remaining 5-per-cent sales tax on building insulating materials.
I t has been amply demonstrated t h a t good insulation can effect savings of 20 to 40 per cent i n the annual costs of space heating for homes and buildings.

The complete elimination of t h e tax will affect all pur- insulating materials a s well a s double-pane chases of glass, storm windows and storm doors.

Second, I have also been persuaded by many representa- tions that the increased excise imposed last fall on wine is seriously affecting t h e domestic w i n e and grape growing the country.
The excise will therefore be industry of reduced to its previous level effective tonight.

Third, I propose this evening t h a t the Excise T a x Act be amended to effect a modest increase in the air transporta- tion tax to help lessen the heavy deficits in airport con- struction and operation.

The increases, to be effective August I this year, a r e essential to reflect t h e general policy that those who benefit most directly from facilities provided by the government help to pay for them.
Full details of these and other tariff items changes will be found in the Ways and Means motions tabled tonight.

Further Steps in Tax Reform Mr. Speaker, may I take a moment to speak about the next stages in the process of tax reform.

IMr Turner (Ottawa-Carleton) I Last January, I stated in the House that a public review of the commodity tax system would shortly be initiated and t h a t a timetable for public participation would be announced before the end of the current session.
Tonight, I am formally initiating the review program by tabling a discussion paper on federal sales and excise taxation.

The analysis and proposals contained in this paper are intend- ed to provide a focal poirit for public discussion which ultimately should lead to significant improvements in the commodity tax system.

The discussion paper analyzes the major problems with t h e present federal sales tax.
O u r evaluation of alterna- tives leads us to believe t h a t shifting t h e federal sales tax from the manufacturing to the wholesale level would have distinct advantages.

I would like to emphasize, however, that t h e government is not committed to t h i s course of action.

Representations from t h e general public and from groups with particular problems on all aspects of com- modity taxation, including alternative approaches, are welcome.
I a m also tabling a discussion paper on t h e treatment of charities under the Income Tax Act.

This paper had its genesis in the m a n y letters I have received and public discussion about t h e role of charities in o u r society.

The paper contains proposals dealing with such matters as fund-raising expenses, the public's right to know about t h e operations of charities to which they contribute, and the distribution of f u n d s by charities.
I hope that both individuals and charitable organizations will respond to t h e discussion paper by submitting their views.

Once I have had a chance to assess t h e public response to these proposals, I shall proceed with the necessary legislation.

Government of Canada Annuities I t u r n now to t h e situation facing holders of Govern- m e n t of Canada annuities.

Hon.
Hon.

members will be a w a r e that inflation and high interest rates in recent years have left holders of these annuities a t some disadvantage relative to persons who bought private annuities having more flexible contractual terms.

Mr. Speaker, I a m pleased to announce t h a t the govern- ment will be introducing legislation to increase the rate of r e t u r n on existing Government of Canada annuities, which a r e held by more than 270,000 Canadians.
This will bring t h e rate of r e t u r n closer in line with that in the private sector and increase benefit payments.

When combined with recent tax provisions for interest a n d private pension income, this will help to protect those who have been prudent and provided for their own retirement.

Sales of government annuities have been on a small scale i n recent years i n t h e light of attractive alternatives from financial institutions.
I a m therefore announcing that t h e sale of Government of Canada annuities will be discontinued.

[Translation] Oil and G a s Pricing I would now like to turn to t h e critical issue of oil and gas prices.

Honourable Members will be familiar with the events which have led up to our present situation.
When interna- J u n e 23,1975 -- C O M M O N S -- D E B A T E S 7031 tional oil prices rose sharply in the fall of 1973, most countries, particularly those wholly or largely dependent on imported oil, allowed their domestic prices to reflect fully those prevailing in t h e world market.

This is w h a t normally occurs i n Canada when t h e prices of internation- ally traded goods rise.

There a r e good reasons for allowing this t o happen.
If the price of a commodity is kept lower in our own market than in international markets, this dis- courages domestic producers from increasing supplies, and discourages consumers from economizing on t h e use of a scarce commodity.

I n the case of petroleum, Canada took a different course.

We concluded t h a t if the full increase in oil prices were allowed t o affect t h e domestic economy directly, this would raise serious adjustment problems.
Very large shifts in income among regions, industries and individual Canadians would have occurred in one step, and those using oil a n d gas would have had t o accept a harsh adjust- ment to t h e conditions they faced.

There would also have been adverse econoniic effects of a general nature.

A sharp rise in t h e price of oil and gas would have raised t h e cost of living and reduced the income people had available to spend o n p t h e r goods and services.
The government's first response therefore was to effect a voluntary freeze on domestic prices and to impose a n export tax a s a necessary part of this policy.

Then, a t their meeting i n March, 1974, the First Ministers provided Canadians with a further breathing space by agreeing to a single national oil price well below t h a t prevailing in world markets.
T h e federal government, acting in co-oper- ation with t h e provinces, took advantage of t h e availabili- t y of domestic supplies and framed a policy which served our national interest well.

We established a single national price for crude oil in Canada of $6.50 per barrel, plus transportation, which was substantially below the deliv- ered international oil price of around $11.
We succeeded in holding down t h e domestic price of oil, introduced a n export tax and used t h e proceeds of this t a x to protect consumers of imported oil in Eastern Canada from t h e full impact of t h e international price.

I n my view, this was a very successful policy.

As Hon- ourable Members know, however, it was never the inten- tion of the present regime of cheap energy in Canada, while t h e rest of t h e world was adjusting to the new realities.
[English] t h e government to maintain indefinitely We must accept t h e fact t h a t our existing supplies of both oil and gas from Western Canada are limited.

They a r e so limited, in fact, t h a t Canada's capacity t o supply i t s own requirements will likely diminish steadily from now until t h e early or mid-1980s.

T h e National Energy Board h a s reported upon our oil prospects and will soon present a similar analysis for natural gas.
The oil report has demonstrated, and by all available public evidence t h e gas report will demonstrate, that we face great difficulties in this country over t h e next decade in supplying established markets for Canadi- an oil a n d gas.

We shall only be able to increase our self-reliance if w e are prepared to pay t h e prices required to meet the high cost of finding, d e v e l o p ~ n g a n d transporting petroleum from new sources of supply.
Neither the tar sands nor the The Budget frontier will yield up their treasure without masslve com- mitment of human and material resources.

We have no practical alternative to continuing a phased adjustment to higher energy prices.

This is essential to provide for our f u t u r e supplies and to conserve the use of this scarce resource.
As the Prime Minister pointed out a t the First Ministers' Conference on April 9: "We cannot go on year after year being extravagant in our use of oil beyond what every other country in the world consumes- mainly because it is being sold cheaply in Canada, a lot cheaper t h a n our f u t u r e supplies will cost."

There was widespread recognition of this hard truth by First Ministers a t their recent conference.
I t was generally acknowledged t h a t a n increase in prevailing oil and gas prices was essential to ensure the development of the new petroleum supplies w e require so urgently in the future.

What First Ministers could not agree on was the extent and timing of f u t u r e price increases.

Subsequent bilateral discussions with provincial governments, between offi- cials, ministers and most recently involving the Prime Minister and all provincial premiers, were helpful in shap- ing views.
But these discussions indicated that it was not possible to reach a consensus on this issue.

Energy considerations alone indicate t h e need for a large upward adjustment in oil and gas prices this year.

We have, however, decided t h a t we should move cautious- ly.

There is still a good deal of uncertainty about t h e future world price of oil.

We have also been very conscious of the need to moderate t h e size of t h e adjustment which particular regions and the economy as a whole will have to make.
At t h e same time w e have tried to meet the legitimate claims of t h e producing provinces.

Without the co-opera- tion of Alberta, t h e natural gas which Ontario so badly needs might not readily be released.

Further, on the price side, w e have been anxious to avoid the necessity of employing t h e Petroleum Administration Act.

t h e federal government's powers in I n all matters, w e have been anxious to avoid acting unilaterally.
But we a r e confident that t h e decision w e have ultimately reached will be supported by many provinces.

Against this background I would like to announce on behalf of t h e government and my colleague, t h e Minister of Energy, Mines a n d Resources, that on J u l y 1 this year the price of crude oil and its equivalents will rise by $1.50 per barrel t o $8 per barrel.

We a r e again asking industry to refrain from reflecting this increase in their product prices until 45 days have passed.
By t h a t time inventories held at the former crude oil price will, on average, have been used up.

This is our decision for t h e next year but we a r e committed to see t h e price of crude oil continue to move towards international levels in succeeding years.

F u r t h e r , on November 1 next, the price of natural gas in Alberta will be established on t h e basls of a n increase in t h e price a t t h e Toronto city gate from the current level of' approximately 82 cents to $1.25 per 1000 cubic feet.
We a r e convinced t h a t natural gas must be priced a t parity with crude oil a t Toronto within not less than three years, but no more t h a n five years.

COMMONS DEBATES T h e Rlrdyel T h e new domestic oil price of $8 plus transportallon may be comparcd with the present cost of imported oil of over $12 lald d o w n in Canada.
T h c n e w domestic gas prlce of $1.25 a t Toronto may be compared w i t h the recently announced export prlcc of $1.60 a t t h e bordcr for natural gas sold to customers in the United S t a t e s .
T h e limitation of t h e present Increase of oil prices to $ 8 per barrrl a n d the increase in natural g a s prlcos to atl0ut 85 per cc,nt of commodity value means, however, that wt: a r e still n o t conserving our non-renewable resourcrs to the e x t e n t required by t h e rise in international prices ancl depletion of domestic supply.
I shall propose a Iurther s t e p this evening to encourage immediate conservation where this will impose t h e least hardship, a n d t o deal with the immediate financial problem which has arisen In the course of maintaining a single national oil price.

I n recent months t h e g a p between c o m p e n s a t i o l ~ pay- ments and oil export charge revenues h a s grown rapidly.

T h i s has c o m e about because the volume of o u r oil exports has fallen while o u r oil imports h a v e risen.
Moreover, mainly because of competitive factors in world oil trans- port and weakness in t h e American m a r k e t , t h e average subsidy paid o n each barrel of imports is currently higher t h a n t h e charge w e a r e able to levy o n each barrel of exports.

Although t h e increase in t h e domestic oil price a n d t h e forthcoming a d j u s t m e n t s i n the import compensa- tion program will help, t h e gap will be substantial.
I t is difficult to be precise about t h e figures because the a m o u n t depends upon international prices, export volume a n d a n u m b e r of other domestic a n d international factors.

T h e cost of the subsidy for eastern consumers will be about $1.3 billion t h i s year.

T h e g a p between t h a t cost a n d t h e export charge revenues is likely to be several hundred million dollars in fiscal 1975-76 a n d may widen in t h e future.
We a r e compelled to t a k e some action to meet this growing cost.

I therefore propose, effective tonight, a special excise tax o n gasoline for personal use.

T h e tax will be a t a r a t e of 10 cents per gallon.

I t will be imposed on t h e producer or importer of gasoline in a m a n n e r similar t o t h e general 12-per-cent manufacturer's sales tax.
Provision will be made, however, to refund t h e full a m o u n t of the tax on gasoline used for farming, fishing, construction, mining a n d most commercial transportation.

Refunds of the tax t o such users will be provided on t h e basis of certificates supported by receipts submitted t o Revenue Canada.

T h e tax will yield t h e federal g o v e r n m e n t approximate- ly $350 million in t h e c u r r e n t fiscal year.
F u r t h e r details concerning t h e tax a r e included in t h e Ways and Means Motion.

T h e increase in the price of c r u d e oil is equivalent to about 5 c e n t s per gallon in t h e wholesale price across t h e r a n g e of products.

This will, of course, be reflected in t h e retail price of gasoline a t the p u m p together with t h e excise tax of 10 cents.
T h e increased cost of gasoline resulting from these measures should encourage motorists to m a k c thcir driv- ing habits more efficient in terms of saving gasoline.

This should not, however, be left totally to the price rnech- anism.

Accordingly, the appropriate departnlerits of gov- IMr Turner (Ottawa-Carleton) I c r n m e n t and the O f f l c e O F Enc:rgy Conservation h;,v(.

already bcc!n ~nec:ting with the motor vehiclv manulactLlr.

ers of Canada and thcir association.

Discussions a r c pro.


cceding on alternative w a y s to Improve the ovcr-all fucg cc:onorny of automobiles sold in Canada.

with p a ~ t i c u l ; ~ ~ reference to changcs in design and thc cstahlishmcnt o f perforrnancc standards.

Both ~mprovc,d driving practices and better operating characteristics can m a k e s ~ g n i f i c a n t contributions to needed fuel conservation.
T h e increased cost of gasolinc will also encouragr the use of public transportation, thereby helping to relieve the growing congestion in our cities.

I recognize that i t will not be easy f o r the average motorist t o a d j u s t to this new situation.

I would point out, however, t h a t the retail price of a gallon of gas here will remaln f a r below t h e prices prevailing in overseas coun- tries.
For example, the price of a n imperial gallon of regular gasoline in P a r i s is $2 a n d in Tokyo over $1.80, in London a n d Geneva around $1.70 and in Bonn and Stock- holm around $1.60.

T h e average price of gasoline in the United S t a t e s has been higher t h a n ours in recent months.
I n t h e United S t a t e s t h e administration has adopted tariff surcharges and proposes measures f o r decontrolling domestic oil prices which would lead to retail prices roughly comparable t o t h e new levels in Canada.

I would stress t h a t t h e government is continuing to hold the price of oil a n d natural gas in Canada well below international levels for industrial a n d agricultural users and for home heating.
T h e new arrangements which I have announced tonight represent w h a t the government believes t o be a reasonable balance among conflicting objectives.

T h e measures will help in increasing t h e petroleum supplies w e will need in the years ahead.

T h e y will assist in meeting the heavy financial costs of maintaining a single national oil price well below international levels.

T h e y will'confront us all with t h e urgent need t o conserve oil a n d gas.
ITranslation] Resource Taxation During t h e past year, Mr. Speaker, the taxation arrange- m e n t s for t h e petroleum a n d mineral industries have posed difficult a n d contentious issues.

L a s t November, in recognition of the financial require- these industries, I introduced major modifica- ments of tions from the proposals m a d e i n t h e previous May and invited provinces t o follow suit.

Relieving action by some of t h e provinces did indeed follow.
I have been encouraged by this a n d by t h e sense of m g t u a l concern evident in f u r t h e r discussions since w i t h provinces and industry.

I propose tonight t o m a k e o n e f u r t h e r effort to resolve this m a t t e r , to the e x t e n t t h e federal government can d o so.

We m u s t establish a clear a n d lasting set of rules upon which i n d u s t r y can rely.

My purpose tonight is to accomplish two n!i'!ri objec- tives.

F i r s t , I wish to meet, a t least in part, t h e 1 .
~ ;f!rxst for some form of deductibility in the tax systcm foi r?

!-ovin- tial resource levies.

Provinces h a v e been seeking i rrlore direct a n d tangible recognition of their special pos,~.,..i, in respect of resources.

Industry has been seeking rec;;d:ii- tion of such payments a s a business expense.

Second, I wish to offer more incentive to those w h o explore and J u n e 23.1975 COMMONS D E B A T E S 7033 develop in Canada and to impose a greater tax liability on those who d o not.
Under t h e present system, resource profits a r e subject to a basic corporate tax rate of 50 per cent.

This rate is reduced by the standard provincial abatement of 10 points of tax and by a special resource tax abatement of ,I5 points, resulting i n a net federal rate of 25 per cent o n resource production profits.
Under the system which I a m now proposing, t h e extra 15-point abatement of federal taxes would be withdrawn, a n d the basic corporate tax r a t e applicable to resource production profits would be reduced to 46 per cent, the same as t h a t applying to most other corporate activity.

After deducting the standard provincial abatement, this would result in a net federal r a t e of 36 per cent on resource production profits i n 1976.
At t h e same time, I a m introducing a new resource allowance, which would be a n extra deduction from income equal to 25 per cent of production income from petroleum, gas or mineral resources.

For this purpose, production income would be calculated after operating expenses and capital cost allowances, but before interest, exploration a n d development, a n d earned depletion.

This new allowance will be available to both corporate a n d individual taxpayers engaged in petroleum a n d mining operations.
All of these new proposals will become effective o n J a n u a r y 1,1976.

[English] L e t me explain how these modifications will meet m y two main objectives.

First, the n e w resource allowance is a practical way to recognize t h a t provinces, in one way or another, impose taxes or royalties and to take t h a t fact into account within reasonable limits in determining tax- able income.
Second, the new system is even more favourable t h a n our present incentives to those w h o continue to develop our resources.

This arises from t h e simple fact that t h e higher t h e tax rate, the more valuable is a dollar of deductible expenditures.

Under t h e n e w proposal, explora- tion a n d development expenditures and the depletion they earn will be deductible against a net federal tax rate of 36 per cent rather t h a n the present lower rate of 25 per cent.
This will augment appreciably t h e incentives already con- tained in the present system s u c h a s earned depletion a n d the immediate write-off of exploration expenses.

This improvement in t h e resource tax system can be achieved within the continuing constraint t h a t a fair s h a r e of resource revenues must be preserved for the benefit of all Canadians.
There will be some modest cost to t h e federal treasury, which I estimate for t h e years 1976 to t h e e n d of t h e decade to be about $40 million annually based on present forecasts.

T o the e x t e n t that these proposals intended effect a n d stimulate even more have their exploration and development than now envisaged, the cost to the federal treasury will be greater.

But this additional loss of federal revenue would be well worth its cost if it brings in new reserves.
in Canada The impact of these proposals on provincial income tax revenues is more difficult to assess.

Several producing provinces a r e already proposing to rebate to industry increases in federal and/or provincial corporate taxes resulting from the non-deductibility of provincial levies.

The Budget Such arrangements will no doubt continue, although per- haps in modified form.
Provinces with their own corpo- r a t e tax systems, which now provide t h a t royalties and/or mining taxes a r e n o t to be deductible, will no doubt wish to take these new federal proposals into account.

(2130) I believe that t h e measures I have introduced tonight represent a reasonable answer to the main arguments raised by both the provinces and industry and will be welcomed a s such by all concerned.
I have sought a better tax system, one which would meet provincial grievances and one which would provide more incentive to industry for exploration.

At the same time, I have sought to pre- serve a fair share of the yield of these resources for t h e people of Canada.

I hope t h a t provinces will do their part to resolve whatever problems still remain.

T h e Fiscal Position I now wish to inform t h e House as to our fiscal position and outlook.
The financial requirements for t h e fiscal year just ended, excluding foreign exchange requirements, were about $2.3 billion.

This compares to the $1 billion I had forecast in my November budget.

Almost half of t h e increase of $1.3 billion resulted from the fact that certain in 1974-75 were corporate received only in 1975-76.
Other factors included larger transfers to provinces under t h e revenue guarantee and equalization programs, a n d payments to t h e provinces under t h e tax collection agreements in excess of t h e amounts collected on their behalf.

instalments expected tax I am tabling tonight a more detailed analysis of the financial requirements for 1974-75.

Since the books a r e not yet closed, the figures a r e still preliminary.

This is the first opportunity for presenting this information to the House.
T h e normal publication of t h e preliminary finan- cial statements i n t h e Canada Gazette will follow later this summer.

I would like to turn to the fiscal outlook for 1975-76.

Total financial requirements, excluding foreign exchange transactions, are forecast a t $5.3 billion compared with $3 billion in my last budget.
This increase in o u r cash requirements reflects t h e fact t h a t t h e economy will not grow a s rapidly in this fiscal year a s had been expected when we prepared the Novem- ber budget.

The revised forecast has resulted in a down- ward revision in o u r earlier estimate of tax collections of approximately $1.7 billion.

I t has also resulted in a n upward revision i n t h e forecast deficit of t h e unemploy- ment insurance account of $800 million.
T h e receipts from t h e oil export charge are currently estimated to be some $400 million lower than previously anticipated.

This decrease in receipts is d u e both to a reduction i n the export charge and in the volume of exports.

Some offset to t h e above changes has resulted from t h e delayed receipts of $600 million of corporate tax instalments referred to earlier.

The revenue measures I have announced tonight a r e expected on balance to increase our receipts by $200 mil- lion.
T h e forecast of budgetary expenditures and loans, investments and advances has been increased by a like a m o u n t .

This is more than accouvted for by t h e direct employment a n d housing measures I have announced tonight..

The very small rise in our outlays has been made 70 O M M O N S D E B A T E S J u n e 23, 1975 -- The Birdgel possible by the very great effort w e h a v e m a d e to restrain I m u s t remind hon.
members t h a t the figures I have presented tonight o n t h e outcome of o u r accounts are o u r expenditures.

I n 1974-75 o u r outlays, that is to s a y budgetary expenditures, O A S a n d G I s , a n d o u r loans, estimates.

T h e actual outcome will reflect t h e d e c ~ s i o n ~ of investments a n d advances, rose by 28 per cent r a t h e r t h a n t h i s House respecting legislation which is now before it, or t h e 25 per c e n t I forecast last November.
T h e largest w h i c h will be placed before it d u r i n g the course of this elements in this 28 per cent rise w e r e increases of $1 session.

All estimates a r e subject to particular uncertain- billion in oil subsidies to e a s t e r n C a n a d a , over $800 m ~ l l i o n ties in t h e circumstances of today.

in family allowances, and over $750 million ln fiscal trans- f e r payments to t h e provinces, including equalization.
T h e increase in our outlays f o r 1975-76 would have amounted to 15% per cent, if w e h a v e not h a d the program o f expenditure restraint.

T h i s program, even allowing f o r s o m e shortfall i n the planned reductions, should hold the increase to u n d e r 13 per c e n t .
With t h e permission of the House, I should like now to include in today's Hansard supplementary tables showing e s t i m a t e s of G o v e r n m e n t of C a n a d a cash requirements, details of t h e budgetary revenues, federal government revenues a n d expenditures o n a National Accounts basis a n d reconciliations of these figures w i t h those compiled on a Public Accounts basis.

T h e information in these tables applies to t h e fiscal years 1974-75 a n d 1975-76.
T h e financing of $5.3 billion in requirements should not p u t u n d u e stress o n capital markets.

O u r cash position a t I should also like t o table several Notices of Ways and t h e beginning of this fiscal year stood a t over $3.2 billion.

M e a n s Motions setting o u t t h e changes I h a v e proposed S o f a r this year sales of foreign exchange h a v e provided tonight a n d I would a s k t h a t t h e y be appended to today's a n additional source of f u n d s t o t h e government.
T h e Votes and Proceedings.

I should also like to table the B a n k of Canada will continue to r e q u i r e federal securities supplementary information of labour costs, t h e two dis- t o finance a reasonable r a t e of monetary expansion.

T h e cussion papers a n d t h e s t a t e m e n t of financial transactions chartered banks will require t r e a s u r y bills f o r statutory f o r 1974-75 t o which I referred earlier tonight.

requirements a n d federal securities t o add t o their liquid assets.
I a m satisfied t h a t a d e q u a t e room will be l e f t in t h e capital m a r k e t for other borrowers.

Mr. Speaker: Is this agreed?

Some hen.

~ [Editor's Note: For notices o/ u!ays and nleans motions, see ~ ~ b ~ ~ ~ ~ ~ ~ The deficit on a national accounts basis i n 1975-76 is now forecast a t $3.7 billion compared w i t h $635 million i n 1974-75.

Votes and Proceedings'1 [The tables referred to above are as follows:] d ~ .
~ : GOVERNMENT OF CANADA FINANCIAL REQUIREMENTS 1974-75 P r e l i m i n a r y A c t u a l 1975-76 F o r e c a s t ( M i l l i o n s o f D o l l a r s ) B u d g e t a r y T r a n s a c t i o n s Revenues E x p e n d i t u r e s S u r p l u s (+) o r D e f i c i t ( - ) Net Non-Budgetary T r a n s a c t i o n s E x c l u d i n g F o r e i g n Exchange T r a n s a c t i o n s L o a n s , I n v e s t m e n t s a n d Advances Exchange T r a n s a c t i o n s - 2 , 3 2 5 F o r e i g n Exchange 767 - 1 , 5 5 8 -4,968 Numbers i n e s t i m a t e s .
t h i s column s h o u l d b e i n t e r p r e t e d a s m i d - p o i n t s o f r a n g e s o f June 23,1975 COMMONS -- DEBATES -- 7035 - The Budget GOVERNMENT OF CANADA BUDGETARY REVENUES 1 9 7 4 - 7 5 P r e l i m i n a r y A c t u a l 1 9 7 5 - 7 6 F o r e c a s t ( M i l l i o n s o f D o l l a r s ) P e r s o n a l Income Tax C o r p o r a t i o n I n c o m e Tax Non-Residen t Tax C u s t o m s D u t i e s S a l e s Tax O t h e r D u t i e s a n d T a x e s T o t a l Tax R e v e n u e s Non-Tax Numbers - p o i n t s o f r a n g e s o f e s t i m a t e s .
COMMONS DEBATES J u n e 23, 1975 - The Bud yet GOVERNMENT OF CANADA REVENlJES A N D EXI'ENDITLIRES ON A NATIONAL ACCOUNTS BASIS 1974-75.
P r e l i m i n a r y A c t u a l 1975-76 F o r e c a s t 1 ( M i l l i o n s o f D o l l a r s ) R e v e n u e s D i r e c t T a x e s , P e r s o n s D i r e c t T a x e s , C o r p o r a t i o n s D i r e c t T a x e s , N o n - Income Goods - R e ~ (+) o r D e f i c i t ( - ) - 6 3 5 - 3 , 6 7 5 Numbers i n e s t i m a t e s .
- p o i n t s o f r a n g e s o f June 23, 1975 _-_ ~ ___.._ .

.

.

C O M M O N S DEBATES _ _ -.- .

_ _ - p p .
p p 7037 The Budget GOVERNMENT OF CANADA REVENUES PUBLIC ACCOUNTS AND NATIONAL ACCOUNTS RECONCILIATION 1974-75 P r e l i m i n a r y A c t u a l 1 9 7 5 - 7 6 F o r e c a s t ( M i l l i o n s o f D o l l a r s ) B u d g e t a r y R e v e n u e s 2 4 , 8 5 6 2 5 , Government ( + ) o v e r C o l l e c t i o n s (-) C o r p o r a t e Income Tax O i l E x p o r t Tax Add Government , N a t i o n a l A c c o u n t s B a s i s - 7 4 6 - 219 - 1 1 8 - 1 3 7 - 409 3 0 , 0 4 3 Numbers - .
, d i s b u r s e m e n t s a r e t r e a t e d a s n o n - b u d g e t a r y A c c o u n t s , a n d e x p e n d i t u r e .
revenue between t h e two f o r m s o f p r e s e n t a t i o n .
T h e s e i t e m s r e p r e s e n t , f o r e x a m p l e , ; ; i m p u t e d i t e m s ; .

t h e p r o c e e d s f r o m COMMONS DEBATES - - J u n e 23, 1975 The.
B u d g e t GOVERhWEN'T OF CANADA EXPENDITURES I'Ui3I.TC ACCOUNTS AND NATIONAI, ACCOUNTS RECONCILIATION B u d g e t a r y Expvnd i t u r e s 2 6 , 0 0 1 2 8 , 9 0 0 ( M i l l i o n s o f D o l l a r s ) Deduct T r a n s f e r s t o F u n d s and ~ ~ e n c i e s ~ Government B u s i n e s s E n t e r p r i s e s 3 Add Government , N a t i o n a l A c c o u n t s B a s i s Numbers i n t h i s column s h o u l d b e i n t e r p r e t e d a s m i d - p o i n t s o f r a n g e s o f e s t i m a t e s .
L I n t h e N a t i o n a l A c c o u n t s , by t h e e x p e n d i t u r e a c t u a l l y made by t h e s e f u n d s a n d a g e n c i e s .
I n t h e P u b l i c A c c o u n t s , , from .
, t h e g o v e r n m e n t p e n s i o n and - b u d g e t a r y A c c o u n t s , r e v e n u e a n d e x p e n d i t u r e .
As i n t h e c a s e o f r e v e n u e s , two f o r m s o f p r e s e n t a t i o n .
T h e s e i t e m s r e p r e s e n t , f o r e x a m p l e , r e s e r v e s a n d w r i t e - o f f s : ; ; ; i m p u t e d i t e m s ; a n d .
.

M r .

T u r n e r ( O t t a w a - C a r l e t o n ) : M r .

Speaker, inflation, recession a n d energy a r e three issues facing C a n a d i a n s .

No single approach c a n solve all three.

Nevertheless, I believe this budget s t r i k e s t h e r i g h t balance of policy.

Throughout, I h a v e h a d a c e n t r a l aim.


T h i s a i m is t o prepare t h e C a n a d i a n economy for a r e s u m p t i o n of eco- nomic g r o w t h w i t h o u t inflation.

I believe t h e k e y t o achieving t h i s a i m is to reduce t h e increase of costs a n d prices now.

T h e g o v e r n m e n t is n o t prepared t o d o t h i s by deliberately p u t t i n g people out of work.
Nor is t h e govern- m e n t prepared t o p u t a t risk t h e s u p p l y of e n e r g y f o r t h e f u t u r e by adopting a short-sighted pricing policy today.

(Mr Speaker I O u r broad t h r u s t is t o allow t h e forces of expansion a l r e a d y a t w o r k i n t h e economy t o h a v e their full effect a n d , a s a n e x a m p l e t o others, to exercise claims o n t h e economy.
[Translation] T h e g o v e r n m e n t h a s responded tonight t o t h e advice w e received d u r i n g o u r consensus meetings, w i t h a clear of i t s o w n e x p e n d i t u r e s .

I a s k C a n a d i a n s to follow thls lead in mode- r a t i n g t h e i r o w n demands.

If w e a r e all a b l e t o d o this, o u r national prospects will b e v e r y m u c h better.
__ June 23, 1975 ~ COMMONS DEBATES ~ .~ 7039 - - - - - -.

In the budget of last November, we deliberately added ,timulus to the economy.

That stimulus is still having its effect and we shall allow i t to achieve its full effect.

But we have decided not to increase that stimulus because we do not wish to feed the domestic inflationary push that has emerged in Canada in recent months.

Our tax reve- nues will be lower a n d social insurance payments will be higher than we forecast last November.
But we shall not counteract these developments since they a r e cusi~ioning the effects of the recession a t home and abroad on Canadi- an employment and output.

[English] While adopting this fiscal stance we nevertheless have proposed specific actions to deal w i t h special problems i n the economy.

Taken together with some of the other meas- ures I have announced, these actions will not add to our net cash requirements.
We have provided for direct job creation in areas and among groups t h a t will be hard hit by unemployment.

We have proposed action to stimulate further t h e building of homes for Canadians and creation of the home-construction industry.

We have announced ineasures to encourage investment in plant and equipment t o create jobs and improve productivity.
We have proposed a series of measures relating to oil a n d natural gas designed t o conserve these vital fuels and bring forth n e w supplies for t h e future.

jobs in Given these policies, how will we fare in the period ahead?

I have tried to m a k e i t clear tonight t h a t prospects for a strong and sustained expansion of output and employment depend critically on moderation t h e demands of all groups i n t h e economy.
Our production and employment should pick up d u r i n g t h e balance of this year as demand revives in foreign countries and a s o u r own underlying expansionary policy achieves its full effect.

But a s 1 have often said, whether Canadian pro- ducers hold their s h a r e of expanding foreign markets, or even hold their s h a r e of o u r o w n domestic market, depends upon whether they stay competitive.

in The government has sought to demonstrate tonight its own resolve to moderate i t s demands.
If this lead is fol- lowed-by other governments, by business, by labour and by the professions-then we can t u r n back inflation.

Only in this way will we ensure t h a t we Canadians continue to enjoy a rising standard of living.

Some hon.

Members: Hear, hear!

Mr. Sinclair Stevens (York-Simcoe): Mr. Speaker, until tonight I thought my leader was t h e only member of this House connected i n some way w i t h long johns.

But tonight we have witnessed something much longer than a long john.
Already known as t h e empty tank budget, this Performance tonight will likely go down in history as the 75 standstill budget.

When the minister stalled for 77 days before bringing in this budget it was natural to wonder why there had been Such a stall and why h e should choose Monday, J u n e 23, of all days, to be budget night.

We know the minister has a Sense of the dramatic, being the play actor h e is.

Like a Student performer he likes to put his acting into historical The Budget perspective.
Now that we have heard and read the budget.

the answers to both our questions a r e quite clear.

The minister stalled for 77 days, only three d a y s less than i t took Phlneas Fogg to go round the world, according to J u l e s Verne.

H e stalled because apparently he had nothing to say.

Not only did h e stall because he had nothing to say but, like Mr. Fogg, h e h a s ended u p where h e began.

But why did h e choose Monday, J u n e 23?


Of coursq that hap- pens to be t h e anniversary of the beginning of the reign of terror in France in 1793.
While t h e Minister of Finance (Mr. T u r n e r ) may have intended tonight to be the beginning of a T u r n e r reign of terror against labour, against business, against unsuspect- ing taxpayers, against spending generally-but of course not against federal spending-it is our belief, now that w e have had a chance to review t h e budget, that i t is simply another budget by t h e same old minister saying many of t h e same old things h e has been saying during his entire reign of error.

Some hon.
Some hon.

Members: Hear, hear!

Mr. Stevens: If I may paraphrase w h a t t h e Prime Minis- ter was saying over t w o years ago: Inflation remains the issue-leadership remains the problem.

I a m really puz- zled why the minister went through two and a half months of charade only to give u s this.

Why did h e bother?

Before we take t h e minister's words tonight too serious- ly, perhaps we should review some of the earlier state- ments h e made d u r i n g his reign of error.

Hon.
Hon.

members will recall that on a similar budgetary evening in May last year h e stated, and I quote, "We a r e on t h e right course now.

We d e not require additional stimulus.

Neither do we need a n y severe contraction of demand."

He emphasized, and again I use his words, "the outlook for t h e Canadian economy is bright", and h e added, "We a r e thriving a s seldom before in our history".
He even forecast there would be a real growth in the economy of 5 per cent i n 1974, and in answer to a question in the House that day h e said the real growth i n t h e first quarter of 1974 was rising a t a n annual rate of about 9 per cent.

Oh, w h a t a difference 13 months has made.

Oh, what a difference now the election IS over.

Oh, w h a t a difference now t h a t the facts a r e before us.
Instead of a 5 per cent real growth in 1974, we a r e told now, i t was 2.8 per cent, and that in the past 12 months our performance was a n amazing negativk 2 per cent.

For t h e first time in his tenure of office as Minister of Finance, and indeed for the first time anyone can remember for a n y minister of finance, the hon.

gentleman offers no prediction for 1975 in relation to any of t h e basic economic numbers.
There is no growth forecast a n y longer, h e mis-shot so badly in his previous four budgets.

He has never given us a forecast of unemployment, and again tonight h e has not given us one.

H e does not give u s a forecast of inflation or even a forecast of housing starts.

To paraphrase another old blue eyes, F r a n k Sinatra, the minister seems to be saying "Come, fly blind w i t h me".
1 ask him whether the near 200,000 extra Canadians who a r e now o u t of work compared to May last year would say, as he h a s said, "We a r e thriving as seldom before in our history", or whether they could take him seriously when h e states once again, a s h e did tonight, t h a t his first priori-