1981-11-12

Hon. Allan J. MacEachen (Deputy Prime Minister and Minister of Finance) moved:: That this House approves in general the budgetary policy of the government.
He said: Madam Speaker, each year budget speeches have become longer and more complex. I intend to reverse this trend. Tonight I wish to speak urgently and directly to Parliament and, through Parliament, to all Canadians. I shall be tabling a comprehensive set of budget documents which expand in substantial detail on all that I shall say this evening.
Over the past two months, energy agreements have been concluded with the three western producing provinces. Last week agreement was reached on the Constitution. Two enormously divisive issues have been resolved and Canadians have shown once again how they can work together. Output and employment grew more over the past year than I expected at the time of my last budget. But major challenges still remain on the economic front.
We are confronted by severe inflation and extremely high interest rates. Inflation and interest rates at their present levels are bringing economic growth to a standstill and creating grave inequities among Canadians. The impact of high interest rates on home owners, small businesses and farmers is visible and damaging. But high interest rates flow from high inflation and there can be no deep and lasting relief until inflation can be reduced. We cannot hope to insulate ourselves from interest rate policies in other countries unless our inflation rate is lower than theirs.
I have attended international meetings throughout the past year and have been struck by the growing conviction around the world that growth cannot be sustained if inflation is not sharply diminished. My concern over unemployment has been heightened by the events of recent months. But we will generate less employment, less growth and more unemployment if we attempt to live with inflation than if we resolve once and for all to see it steadily reduced.
This budget has three themes: restraint, equity and economic renewal.
The first is the need for restraint on the part of the government and restraint on the part of all Canadians. For our part, I believe we must reduce our deficit and our borrowing requirements substantially-even more than I proposed a year ago. This will take pressures off credit markets, ease interest rates and provide room for needy borrowers. The control of the money supply by the Bank of Canada is an essential element in our strategy to fight inflation, but it has to be supported by greater fiscal restraint.
While the increase in our energy revenues will make an important contribution to this objective, I have had to seek additional revenues from the personal and corporate tax, although there is tax relief or no tax increase in this budget for the vast majority of Canadians. Most fundamentally, we are committed to restraining the growth of our spending over the next few years to less than the growth of the economy as a whole while still exercising our responsibilities for leadership and for caring.
But we also call upon all Canadians to accept the challenge of restraint, so that inflation is reduced, interest rates are brought down and growth resumed as soon as possible. I recognize that prices are now slowing down in many markets, and that incomes have not exploded as they did in 1974 and 1975. Canadians give evidence of recognizing that increases in energy prices and other real cost increases must be absorbed and cannot be automatically offset. But successive reductions in money income demands will be required year by year if declining inflation is to be achieved.
It is dramatically clear from everyday experience that excessive income demands on the part of those employed push up costs, reduce our competitiveness, and thereby deny employment to others. Our economic projections also illustrate the fact that higher money incomes for those with jobs add little or nothing to their real incomes in the short run and that the cumulative effect of excessive demands does damage to everyone's longer-run prospects for a higher standard of living.
I believe Canadians understand this. The problem is to provide assurance that some will not gain unfairly by refusing to constrain their demands while others who do act in the collective interest fall behind. This is clearly the responsibility of government.
Thus the second theme of this budget is equity. I dedicate myself and this government in this and succeeding years to maintaining a fundamental sense of fairness in our society. As evidence of that dedication, I am proposing a major overhaul of the personal tax system. I am also announcing a package of

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The Budget-Mr. MacEachen
relief measures for home owners, small businesses and farmers most threatened by high interest rates.
[ Translation]
If the first two themes of this budget are restraint and equity, the third theme must be renewal. The whole purpose of my fiscal strategy is to lay the basis for sustained growth in the future by clearing away the obstacles of high inflation and unprecedented interest rates.
This decade offers exceptional opportunities for strengthening and diversifying growth in every region of Canada. Expanded world markets, massive resource projects and a new industrial revolution: these are the vast development opportunities before us.
The policies and programs of the national government are major instruments for managing and exploiting these development opportunities and ensuring that the benefits are shared fairly. Harnessing the resources of the economy is a national enterprise which includes but extends beyond the interests of particular regions or sectors.

I will be tabling this evening a major policy document on economic development for Canada in the 1980s. The government intends to consult with the provinces, business and labour concerning the five priority areas of economic development policy set out in the document-industrial development, resource development, transportation, export promotion and human resources. In this decade of development we must work together to renew the foundation for the fair sharing of wealth and opportunity that binds us together as Canadians.
You may recall, Madam Speaker, that last year in my budget I announced a generous and new measure to stimulate development in slow growth regions of the country. I am, of course, referring to the 50 per cent investment tax credit for those companies wishing to invest in specially designated areas, the poorest areas of Canada.
I want to report a bit of news I received just a few minutes ago from my colleague, the hon. Minister of Regional Economic Expansion (Mr. De Bane), who informed me that because of this 50 per cent tax credit, Brunswick Mining and Smelting has decided to construct the most modern zinc smelter in the world on the north shore of New Brunswick. This project will involve a total investment of over $300 million, will create 1,500 person-years of work during the construction period, and 400 permanent jobs. It is the single most important investment ever on New Brunswick's north shore, an area that has long suffered the consequences of economic disparity. That is what this government means when it talks about economic development.


Some hon. Members:: Hear, hear!


EQUITY AND INCENTIVES IN THE TAX SYSTEM
Allan Joseph MacEachen: Madam Speaker, I turn now to my tax proposals.
Many Canadians find our tax system unfair, and I agree with them. They realize that taxes are necessary to pay for important government services, but they feel that rates of tax are too high. They sense that others, the well-advised or the wealthy, very often pay less than their fair share.
A study of selective tax preferences available to individual taxpayers, which I am tabling tonight, shows that the revenues lost through selective write-offs, exemptions and deferrals are massive. Over $47 billion of personal income escaped tax in 1979. If these preferences were reduced or eliminated, rates of tax could be halved without reducing federal revenues. Some higher-income individuals are able to reduce their tax rate to well below that paid by lower-income Canadians. Some can escape paying taxes entirely. This is unacceptable.

A cutback of tax preferences will permit a lowering of tax rates. Madam Speaker, the simple truth is that if only half of income is taxed the rates have to be twice as high to yield the same revenue. Lower tax rates will improve the incentives to work, save and invest. These incentives will be direct, easy to understand and available to all. Lower tax rates will also reduce the tendency for taxpayers to devote wasteful effort and money in finding artful ways of avoiding tax. For these reasons I propose to end a number of special tax preferences, to restrict others, and to lower tax rates.
Specifically, I am eliminating tax deferrals through incomeaveraging annuities and the capital gains reserves and also repealing general averaging. In their place I am introducing a new forward-averaging provision. I am ensuring that a number of employee fringe benefits such as low-interest loans and employer-provided automobiles are properly taxable. I am reducing the tax deferral for investment income that accrues but is not received for an extended period. In addition, I am ending the deduction for carrying charges in excess of the related investment income. The details of these and other changes, which mainly affect high-income individuals, are given in the budget documents.
The revenue gained by these measures allows me to reduce tax rates over a broad range of taxable incomes for 5.8 million Canadians. Tax rates will be reduced for all taxable incomes over $11,120. At the top income levels, the marginal rate of federal tax will be reduced to 34 per cent. This means, Madam Speaker, that the maximum tax on each additional dollar of income will be about 50 cents on average depending on the province, compared with about 64 cents at present. This will also effectively limit the top tax rate on capital gains to 25 per cent.
I am also proposing tax reductions which will benefit lower-income Canadians. I am doing this by modifying the federal tax credit. This special credit is currently^ 9 per cent of tax with a minimum cut of $200 and a maximum of $500. This credit will now be set at $200 for all individuals, but married
November 12, 1981

taxpayers will be able to claim an additional $200 for their dependent spouse. This means that for more than 620,000 lower-income families, the entitlement to the federal tax credit will be doubled to $400.
1 am extending for another year the special tax remission to employees working in the north and isolated posts.


Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: Indexation of the personal income tax system will be retained. As a result the personal exemptions for a family of four will rise from $7,230 to $8,110 next year. The child tax credit will be increased from $261 to $293 per child. In total, indexing will benefit all individuals and provide a tax reduction worth over $3 billion next year.

As a result of indexing and the measures I have announced, a typical family of four will be able to earn about $15,000 in 1982 without paying any federal tax. The net effect of the restrictions on tax preferences and lower tax rates will be to increase tax revenues. But this revenue increase will come from those most able to pay. It will be concentrated among those who took advantage of the provisions now terminated. The majority of other taxpayers will see their taxes reduced, many significantly.

The corporate sector must also contribute to the reduction of the federal deficit in the fight against inflation. Lower inflation and lower interest rates will produce a more favourable economic climate for business in Canada. The major changes affecting corporations are a reduction of the depreciation write-offs in the year the property is acquired and a two-year extension of the surtax on large corporations. However, the surtax will be halved to 2.5 per cent in 1983. Even with these changes the Canadian tax system will provide significant incentives for investment and will continue to compare favourably with those in other industrialized countries.
In addition to these changes, I am proposing a number of measures to address the particular problems of small business. As part of this package I am exempting them from the corporate surtax. 1 am also increasing the limit for the low tax rate for small business corporations to $200,000 per year, and I am making the special benefits for small manufacturing corporations more readily available.
It is also my intention to move the federal manufacturers' sales tax to the wholesale level and to reduce the general sales tax rate accordingly.
I would also like to announce reductions in unemployment insurance premium rates. The rate for employees will be reduced from $1.80 per $100 of insurable earnings to $1.65. The employer rate will be reduced to $2.31.
In summary, the changes I am introducing tonight will bring about a major improvement in our tax system. They will raise needed revenue to reduce the federal deficit, ensure that the burden is shared equitably by all Canadians and minimize the
The Budget-Mr. MacEachen
detrimental impact of high tax rates on the efficient operation of our economy. I believe that these are goals that all Canadians can support.


RELIEF FOR THOSE MOST AFFECTED BY INTEREST RATES
[Stage Direction]
Beyond the restoration of equity and incentive to the tax system, Madam Speaker, and the tax reductions which flow to millions of Canadians from the changes I am proposing, I would like to direct further relief to those most affected by high interest rates.
Abnormally high interest rates have had particularly adverse impact on any small businesses. I am thus extending the small business bond for one more year for firms in financial difficulty. The benefits of the measure will be extended to farmers, fishermen, and other unincorporated businesses as well.
Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: Farmers who cannot afford to keep operating at current interest rates will be able to obtain loans from the Farm Credit Corporation at five percentage points below the normal Farm Credit Corporation lending rate, which would now be a special rate of 11% per cent. I have set aside $50 million to allow the Farm Credit Corporation to make these additional loans and to pay for the cost of the interest rebate.
I am also greatly concerned over the distress of home owners having to renew their mortgages at higher interest rates, and over the shortage of rental accommodation. I have sought ways of honouring the government's commitment to protect those most in need. I announce tonight that the government has set aside a further $350 million to fund the following measures.
Those home owners who have a reasonable amount of equity in their home can obtain relief by deferring part of the higher interest. The government is prepared to guarantee the interest deferred, within limits, when mortgage payments exceed 30 per cent of gross income.
Those home owners whose mortgage debt would reach unduly high levels as a result of interest deferral need further assistance. In those cases, the government proposes to pay for all or part of the interest deferred, up to a maximum of $3,000 a year.
In order to encourage the construction of rental housing, the government will provide interest-free loans of up to $7,500 per unit for 15,000 units allocated to tight markets across Canada.
My colleague, the minister responsible for Canada Mortgage and Housing Corporation, will provide very shortly the details of these programs. He will also submit a bill to Parliament to obtain legislative authority for these measures and to make other changes to the National Housing Act.
You may remember, Madam Speaker, that when this Parliament was opened, the government stated in the Speech from

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the Throne that it would act to assist those unable to bear the burden of renegotiating their home mortgages in the present abnormal situation so that the spectre of foreclosure will be avoided. That was the commitment made in the Speech from the Throne. It is being fully discharged tonight.


Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: I want financial institutions, especially banks, to do more. I particularly want them to ensure that ample funds will be available to smaller borrowers at the lowest possible margin of cost over the rates which they pay to their depositors.


OTHER SPENDING PRIORITIES
[Stage Direction]
There are other areas where additional spending is needed, Madam Speaker. We are prepared to provide substantial amounts of money to meet high priority needs. In tabling our economic development strategy for the 1980s we are providing a definitive blueprint to guide the economic renewal upon which this budget is predicated. We intend, Madam Speaker, to see that the required resources are directed in support of these priorities and their realization. In the fiscal plan that is tabled tonight $60 billion will have been allocated in support of economic and energy development in Canada over the term of that plan.
I also recall to your memory, Madam Speaker, another statement in the Speech from the Throne in which the government declared its intention to ensure that Canada plays a vigorous part in the world beyond our borders. That expectation was brilliantly realized in the past year as the Prime Minister of Canada (Mr. Trudeau), as the chairman of the Ottawa Summit and as co-chairman of the Cancun Summit, did so much to project Canada's image abroad.
Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: We intend to back that up by concrete measures in this budget.
Large increases in our Defence and Foreign Aid spending result from our international commitments. In my view, it would be imprudent and shortsighted to go back on these commitments in the interest of budgetary restraint. In the case of defence, we have a commitment to NATO to achieve 3 per cent real growth in our defence expenditure in order to strengthen the security of the Alliance. With rapid increases in costs, this means that our defence spending will grow by 17 per cent this year and over 18 per cent next year.
In the case of foreign aid, we have reaffirmed at recent Summit meetings our commitment to reach the target of 0.5 per cent of GNP by 1985. We must recognize not only the strong claims on humanitarian grounds to assist the poorest countries of the Third World, but also that foreign aid is in our own longer term self-interest in an increasingly interdependent world.
[ Translation]


FEDERAL-PROVINCIAL FISCAL ARRANGEMENTS
[Stage Direction]
In other areas, however, we have had to seek some savings in order to achieve our target of fiscal restraint. Some restraint must be applied to our transfers to the provinces so they grow no more rapidly than our expenditures generally. There has been great concern that I was about to threaten the survival of our post-secondary education institutions or to destroy medicare, which, as Minister of National Health and Welfare, I introduced and saw passed in this House. These fears are without foundation.
[Stage Direction]
The proposals which I will be tabling tonight will enable us to achieve the desired savings without affecting federal contributions to the financing of provincial medical care, hospital care and post-secondary education programs.
I am proposing to eliminate compensation for the 1972 revenue guarantee which was included in the Established Programs Financing arrangements in 1977.
I am proposing a revised and improved equalization system to replace the system that will expire on March 31, 1982.
I would stress again that transfers to the provinces over the next five years are still projected to grow at least as fast as the rest of our expenditures.
Moreover, the tax changes I have proposed will automatically increase provincial revenues, and I trust provinces will agree with me that the proposals are desirable. Indeed, the increase in provincial revenues during the first two years of the new arrangements will virtually offset the reduction in transfers due to the elimination of compensation for the 1972 revenue guarantee.
I am very hopeful that the provinces and the interested communities will find my proposals equitable. In the pursuit of restraint, I am asking no more of the provinces than I have imposed on the Government of Canada.

[Stage Direction]
Under the new expenditure plan the envelopes are set in the expectation that most new programs will have to be financed by reducing the cost of existing programs. But I would like to mention specific areas where we are planning significant savings.
We have been able to reduce the amount allocated to the Energy envelope and we have deferred certain expenditures from the Western Development Fund. The larger part of the Western Development Fund remains within the Economic Development envelope, and will be dedicated to the improvement of the western transportation system. The remaining portion of the fund has been transferred to the Social Affairs envelope, for use in improving the housing conditions and economic opportunities of our native peoples.
November 12, 1981
[Stage Direction]
On October 16, the Post Office became a Crown Corporation. The new corporation has been instructed to eliminate the postal deficit by 1985-86. The increase in postal rates which has already been announced will begin this process. Further increases are likely to be required, but the major contribution should come from better service and improved efficiency.
We are, of course, extremely conscious of the need to reduce the costs of government. One step in this direction is the development of better ways of managing the government's physical assets such as land and buildings. We are also asking the Treasury Board to identify a $100 million reduction in overhead costs. This will reinforce the ongoing search for greater efficiency which is reflected in the fact that the authorized size of the public service this year is less than it was in 1975-76.
Finally, I would note that we expect a very sharp reduction in the growth of our interest costs from 38 per cent this year to less than 5 per cent in 1985-86. This is one of the major benefits of our efforts to reduce the deficit.
I would now like to table the budget documents, all in the interest of freedom of information.
The Budget-Mr. MacEachen
Madam Speaker:: Does the minister have consent to table the budget documents?


Some hon. Members:: Agreed.


SUMMARY OF THE FISCAL PLAN
Allan Joseph MacEachen: The documents are, first, the Budget in more Detail; second, Budget Papers and Notices of Ways and Means Motions; third, the Current Economic Situation and Prospects for the Canadian Economy in the Short and Medium Term; fourth, Fiscal Arrangements in the Eighties- proposals of the Government of Canada; fifth, Analysis of Federal Tax Expenditures for Individuals, and, finally, Economic Development for Canada in the 1980s.
I will be proceeding in the usual way with the introduction of bills to amend the tax laws. I would ask the consent of the House to include in Hansard the standard table which provides the projections of the government's fiscal position.


Madam Speaker:: Is it agreed?


Some hon. Members:: Agreed.


Madam Speaker:: It is so ordered.
The Fiscal Plan
Government of Canada
Summary Statement of Transactions'"
1980-81	1981-82	1982-83	1983-84	1984-85	1985-86Budgetary transactions Revenues Expenditures	45,398 -58,066	54,310 -67,650	(millions of dollars) 64,960 74,525 -75,450 -84,075	82,655 -92,635	91,745 -101,950Surplus or deficit (-)	-12,668	-13,340	-10,490	-9,550	-9,980	-10,205Non-budgetary transactions Loans, investments and advances Specified purpose accounts Other transactions	-523 2,781 293	-650 3,720 495	-850 3,550 1,205	-1,075 3,910 1,170	-1,265 4,705 560	- 1,350 5,420 -230Net source or requirement (-)	2,551	3,565	3,905	4,005	4,000	3,840Financial requirements (excluding foreign exchange transactions)	-10,117	-9,775	-6,585	-5,545	-5,980	-6,365Total outlays'"	58,589	68,300	76,300	85,150	93,900	103,300
For comparability, budgetary revenues and expenditures for 1980-81 and 1981-82 are adjusted to treat Canada Post revenues and expenditures as if this agency were under Crown corporation status throughout the period. The budgetary deficit and financial requirements are unaffected as a result of these adjustments. m Total outlays are composed of budgetary expenditures plus loans, investments and advances.


Allan Joseph MacEachen: The new spending targets contained in this budget grow less rapidly than the economy as a whole. As a percentage of GNP they decline from 20.6 per cent in 1981-82 to 19.2 per cent in 1985-86. On a comparable basis, the new
outlays targets represent a lower percentage of GNP in each year than those shown in the last budget. This is clear evidence of intensified restraint. There are some who will still argue that we are spending too much. But it is not good enough to

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call for greater restraint and at the same time resist reductions in specific programs.
The new energy taxes, which are included in the Notices of Ways and Means Motions I am tabling tonight, will yield $900 million more in 1982-83 and $1.5 billion more in 1983-84 than the energy revenues projected in last year's budget.
The income tax changes I have announced tonight will increase our revenues by $1.4 billion in 1982-83 and by about $2 billion in 1983-84.
A year ago, I anticipated that our deficit as measured by our financial requirements for 1980-81 would be $12.2 billion; in the event it was $10.1 billion, about $2 billion less. I now expect that the deficit this fiscal year 1981-82, will also be much lower-$9.8 billion compared with the $11 billion projected a year ago.
To a large extent we did better in those years because the economy was growing faster than I had expected, but we used those increased revenues to decrease the deficit. We did not use them for additional spending programs. Now I have set myself the task of cutting back the deficit in the next two fiscal years, and this will be more difficult because the economy is growing more slowly. Specifically, I propose to reduce our financial requirements to $6.6 billion in 1982-83 and $5.5 billion in 1983-84.
Hon. members will recall that when I brought in the borrowing authority a few months ago, I asked the House for authority to borrow $14 billion, $3 billion of which was contingency and $11 billion was for real. The next bill I will be bringing in will have reduced that $11 billion to $6.6 billion. That is very sharp in substance and in signalling to the community that we are serious about our dedication to reducing interest rates and bringing down inflation.


CONCLUSION
[Stage Direction]
Madam Speaker, I believe that the economic strategy contained in the budget is the surest, fairest response to the economic problems which confront us. It will not provide a quick fix; such magic is not available. It is only with care, determination and persistence that our economic and social goals can be realized. But we can now reasonably expect that the rate of inflation will gradually come down from the peak levels reached this summer. Already we have seen some decline in interest rates over the past few weeks.
Today we had a significant decline in the bank rate, no doubt in expectation of the constructive character of this budget.
Some hon. Members:: Hear, hear!


Allan Joseph MacEachen: We can look forward to continuing declines in interest rates as the rate of inflation slows. That is the fundamental solution to the problems faced by home owners and farmers and small business, though the specific measures of relief I have announced tonight will be helpful in the period of transition.
During this period, growth is likely to be slower and unemployment higher than we would like to see. But only a decline in the rate of inflation and the rate of interest can lay the basis for renewed and sustained growth in the future.
I recognize, of course, that we live in an uncertain world. We could do worse than I have projected, for reasons which lie totally outside our control or because the self-defeating battle for higher incomes becomes more intense. I am sure we would do worse if we lost our resolve to keep on fighting against inflation. Such a retreat would not only lead to more inflation and higher interest rates, it would damage our prospects for sustained economic growth in the future. I have been urged by some to worry less about inflation and minister to unemployment and growth. There are siren qualities to these entreaties that could well lead us onto the rocks.

We could also do a good deal better than I have projected. Inflation would come down more rapidly if international prices drop and if larger gains in productivity can be achieved. It certainly would if Canadians were prepared to take smaller increases in their money incomes, either in the expectation that prices will rise less rapidly or in order to keep their jobs. Excessive income demands can obviously make it more difficult for employers to maintain their operations when markets weaken. We are beginning to see cases where jobs are being preserved by the giving up of some contractual benefits. This seems to me a fairer way of sharing the burden. But everyone would be better off if more restraint had been shown in the first place.
I have been urged by some to resort to income and price controls to bring down inflation and to exchange controls to prevent depreciation of the dollar. But I am sure that Canadians do not want this much intervention by the government in their affairs except in an emergency. Exchange controls simply won't work. Many are bound to regard price and income controls as unfair, and therefore incompatible with my commitment to equity. The AIB controls helped resolve the emergency situation of 1975, but did not solve the underlying problems. This time we need a more lasting solution.
The key which can open the door to our future is a change in our attitudes and expectations. We will move much more quickly to non-inflationary growth if the conviction spreads that we are heading back towards stable prices and lower interest rates. The whole process will be much easier if everyone feels he is being treated fairly. That is why I have put so much emphasis on restraint with equity. I have also emphasized the promise of renewal. There are great opportunities for us to exploit. It is time to overcome our anxieties and regain our confidence in ourselves and in our country.


Some hon. Members:: Hear, hear!
November 12, 1981


Hon. Michael Wilson (Etobicoke Centre):: Madam Speaker, I have listened to the minister's speech. He calls this his third budget speech, but I think we should draw to the attention of the House that this is probably the first budget speech he has made. The first time he called it a budget speech, he took all the goodies out of another budget speech that had been presented to the House a few months before; the second was a budget speech that was prepared by his colleague, the Minister of Energy, Mines and Resources (Mr. Lalonde). It is very interesting now to look at this budget and try to get some indication of what the Minister of Finance (Mr. MacEachen) thinks.
I would be very careful in reading this budget speech. I am sure that, as you listened to it, you thought some parts of it are good, that there are some nice sounding elements in it.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: I caution hon. members opposite, the Liberal members who are applauding with such pleasure, that they still have to go back to their ridings; they still have to meet the people who elected them to the House.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: I think hon. members will find, as they read between the lines and as they analyse these figures, that they have had another game played on them. The figures that are in the budget today are figures that the minister is using to play with the people of Canada. It is another shell game that the minister is playing.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: I will outline some of these concerns. There have been a number of ministers over the past month or two who have been saying, "Wait until the Minister of Finance gives his budget speech". They did not want to respond to the problems at the time because the minister would come forward with the solutions.
I think that members opposite are looking at the Minister of Finance now and saying, "We have got the Vince Ferragamo of Canadian politics sitting there".


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: The minister has thrown a few gimmicks on the table here this evening. He has not attacked the fundamental problems that are facing the country today. He talks about restraint. That is one of the three features of his budget of restraint, fairness and renewal.
Let us look at restraint. Again, I warn hon. members opposite to be very careful as to how they look at these figures. Government spending in this current year, by this government that is so devoted to restraint, will rise by 22 per cent.


Some hon. Members:: Shame, shame!


Michael Holcombe Wilson: That is a 22 per cent increase. How many Canadians can increase their spending by 22 per cent? How
The Budget-Mr. Wilson
many people will receive a 22 per cent increase from their employers next month? Twenty-two per cent is the increase in government spending this year.
The government has been totally mesmerized by the Constitution over the past year and a half. We have been asking for a budget that would attack these fundamental problems. Canadians have worked very hard over their lives. I talked with a man the other day who was telling me that he worked for ten to twenty years in this country and he had given everything he had. He said, "I don't know where this country is going; I can't believe the things that are happening in this country; things are going completely to hell". This is the way people are responding. The minister called on people tonight to express a little confidence in their country. How can they express confidence in their country when the minister calls upon them for restraint at the same time as he increases his spending by 22 per cent?


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: I believe this budget continues the massive assault that the government's policy has wrought on the average Canadian over the past year and a half. We have seen energy taxes over the five-year period that we are in now rising, on average, $1,400 a year per family. On top of that, the minister can take more money out of the economy. The government is not able to manage its affairs sufficiently well. It has to increase taxes more after taking $55 billion out over the next five years.
There is no attack on interest rates in the budget. The minister talked about the importance of getting interest rates down. We all know that they should be down, but he has not learned about the problem of interest rates. He has not understood that interest rates have been forced to the levels at which they are today by the high borrowings of the government. The Prime Minister (Mr. Trudeau) acknowledged three times in his ridiculous speech to the "fat cat" Liberals about a week ago that the government deficit was an important cause of inflation in the country. The government deficit this year will be $13 billion higher than last year. How does the minister expect that interest rates will decline when he is increasing the size of his budget contrary to the advice he should have received from his seatmate a couple of weeks ago?
Small business, the backbone of the country that we know, has been attacked in the budget. The minister said that there are a couple of things in there to help small business, but let us analyse these. The small business development bond will be extended, but it will only be extended for those companies with financial problems. The small business community which enjoyed the small business development bond over about a two-year period now will have it taken away. There is another element in the budget which we must analyse very carefully. The minister increased the ceiling for the low tax rate for small businesses. But there is another bit of small print which indicates that the ceiling is not the same ceiling we had one day ago. The ceiling will be changed now so that the benefits

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of the increase in the ceiling will be taken away from the small business community. Small businesses have suffered greatly from the high interest rates in the country over the past year and a half. Small businessmen who are supporting their companies out of their own savings now must look ahead to another year of more difficult experiences than they have had over the past year.
Housing is a problem which is affecting people in the country from all sides. I do not think there is a man or woman in the House or a man or woman in the country who has not suffered directly or does not know someone who is suffering a very sharp increase in the size of his mortgage payments or his rental payments. What we have heard from the minister tonight is probably the most minimal program with which he could have possibly come forward and still maintained some sort of relation with the minister responsible for housing, who I see has even left the House now, he must be so disgusted by what he saw in the budget tonight.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: There is also a very minor program for increasing the supply of rental housing. I do not know whether the minister realizes the problem we are facing in rental housing. Housing starts over the past five years have dropped every year, and we still do not have any action taken by the government to address this problem. The minister talked about a small subsidy program for 15,000 units. We need 220,000 units in the country because there are zero vacancy rates in Toronto and in Vancouver and almost zero vacancy rates in many other metropolitan areas. We have minimal help, which will not address the real problems that that part of our economy is facing.
The farm community has received a token amount of $50 million. I say, "a token amount" because in relation to the needs of this community, we believe-and the hon. member for Elgin (Mr. Wise) recommended it-that the funding to the Farm Credit Corporation should be increased by $500 million. That is the amount needed to face the problems which that part of the country is facing. I have to tell the minister that the extension of the small business development bond to include unincorporated businesses that includes farmers is something which we favour, and we support him for it.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: But we are still facing the major problem of interest rates. The average Canadian has suffered and will continue to suffer the most savage attack on his economic position than has been the case since the depression. There are
900,000	people unemployed, 8.3 per cent of the work force. Inflation still stands at 12.5 per cent and will be higher next year. While we applaud the fact that interest rates have come down as far as they have over the past couple of weeks, we still must acknowledge that interest rates at 16, 17 and 18 per cent, depending on who you are, are still far too high for the country to bear. They are far too high for home owners, small businessmen, and farmers.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: I cannot get away from the fact that the government is calling on these Canadians, who have suffered so much over the past year and will continue to suffer over the next year, to restrain themselves. Canadians are restraining themselves. They are forced to restrain themselves when they themselves are facing $200, $300 and $400 per month increases in their mortgage payments, or know someone who is experiencing that. They are restraining themselves because they cannot do anything else. Canadians who face 50 per cent increases in the cost of gasoline, heating oil and natural gas are restraining themselves because they must. Yet the government has the effrontery and the arrogance to come forward and increase its tax take by $1.5 billion, on top of the 22 per cent increase in spending which it has put forward this year. It is an incredible thing to ask of Canadians at this time. There is no compassion on the part of the Minister of Finance, no understanding of the problem, and certainly no honesty in presenting such a budget to Canadians tonight.


Some hon. Members:: Hear, hear!


Michael Holcombe Wilson: 8.3 per cent. I do not know where the Minister of Finance has been, Madam Speaker.
There is no attempt whatsoever in this budget to address the very serious problems of inflation and unemployment which exist in the country today.
I want now to return to the question of restraint, Madam Speaker. If we are to get anywhere with the battle against inflation, we must have leadership from government. That starts with the Government of Canada. For years individuals in the private sector have been saying, "I can do it but I would do it a lot better and I would feel much more commitment to it if the Government of Canada did it too." Instead, the government is sucking more money out of the economy by way of taxes and is increasing spending by 22 per cent.
I would remind the minister that it is possible to cut the rate of growth of spending. My colleague, the hon. member for York-Peel (Mr. Stevens) conducted a study which showed that spending could be decreased by $5 billion at a time when that represented about 10 per cent of government spending. That can be done, Madam Speaker.
What we have, however, is the waste demonstrated by three JetStars landing in Winnipeg within three hours of each other, or that advertisement, which I am told was placed in 100 newspapers across the country, extolling the great things that this government thinks it has done. That full page ad in The Globe and Mail took $105,000 worth of taxpayers money.
People in this country do not want that sort of thing, Madam Speaker. They want to see action. They want the government to use those funds, their tax dollars, in a more effective way rather than to blow their stack from the highest building. They want action, not a lot of talk such as we have had in these advertisements.
Let me refer to this very large amount of energy tax that the government will reap over the next five years. Where has the $55 billion worth of taxpayers' money gone when the government has to increase taxes over and above that amount? I hope hon. members opposite will answer these questions, Madam Speaker. Why do we need additional tax increases over and above the $1,400 per year that we will have to pay in energy taxes?
I must say that as I read the budget, I noticed some interesting elements. From time to time the Minister of
The Budget-Mr. Wilson
Finance has said what a bad thing supply side economics is and that he would not have anything to do with it. I listened to him very carefully tonight when he said that it is important to reduce taxes because that will increase incentives and increase the desire of people to work harder and to create employment. I think we have finally got the minister converted to the benefits of supply side economics. Perhaps he should go down and speak to some people in the United States to learn a little more about it; but he is coming along well.
In this budget we observe that in a time of great economic hardship, a time when inflation is increasing at a rate of 12.5 per cent, there is nothing for pensioners. There is no energy tax credit to give some of that $55 billion back to those people who suffer so much from the high cost of energy. In the Year of the Handicapped, there is nothing for the handicapped person. There is nothing for single women between ages 60 and 65 who are suffering so much.
As I said in my opening remarks, Madam Speaker, there are some nice words but there is no attack on the fundamental problems of inflation and interest rates. There is no attack on the unemployment problem that is going to get far worse over the next few months as a result of the minister's budget.
This is the budget that was written two months ago and presented today when it is totally out of touch with reality. It is not a budget for today, it is a budget for last summer.
I should like to continue further with my remarks tomorrow, Madam Speaker, if I may call it ten o'clock.
I move now:
That the debate be now adjourned.


Some hon. Members:: Hear, hear!


Madam Speaker:: Is it the pleasure of the House to adopt the said motion?


Some hon. Members:: Agreed.


Hon. Yvon Pinard (President of the Privy Council):: In the
circumstances, Madam Speaker, I move:
That this House do now adjourn.


[Stage Direction]
Motion agreed to.
Madam Speaker:: This House stands adjourned until tomorrow morning at 11 a.m. pursuant to Standing Order 2(1).
On motion of Mr. Pinard, the House adjourned at 9.20 p.m.

Friday, November 13, 1981