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Budget Speech
The Honourable Paul Martin, P.C., M.P.
 Minister of Finance
 March 6, 1996

 Mr. Speaker, it is as clear today as it ever has been that
 Canadians do not want rhetoric from their governments. What they
 want is action. What they seek is real progress.
  These are the standards that Canadians have set. These are the
 standards by which this government wants to be judged.
  Seldom in our history have so many experienced such anxiety.
  Canadians feel our very way of life is at risk.
  They look at Medicare -- and feel it is threatened.
  They look at the pension system and wonder if it will be there
 in the years to come.
  They consider the economy -- and worry that the gale force winds
 of competition and change will carry away their jobs.
  And Canadians think about their children, our youth -- and ask
 what kind of opportunities will be left for them.
  If there is one obligation before government today, it is to do
 its part to address these deep concerns.
  It is to do what we must so that confidence can overcome
 anxiety, and hope can replace despair.
  In short, we must act now to help Canadians secure
 their future.
  Canadians know this canât be done by government alone.
  It will require the concerted efforts of individual citizens,
 their governments, business and others for our country to tackle
 these challenges effectively.
  What Canadians want from their government is for it to set the
 goals, to have a plan and then to work as hard as it can -- and as
 long as it must -- to help get the job done.
 This budget is our third in a comprehensive and determined effort
 to restore fiscal health to this country.
  In this budget, we are keeping on course. We are maintaining
 our pace. We are not letting up.
  Indeed, this government will never let up. The attack on the
 deficit is irrevocable and irreversible. Let there be no doubt
 about that.
  We will balance the books. Furthermore, we will put the
 debt-to-GDP ratio -- what we owe as a percentage of what we
 produce -- on a constant downward track, year after year after year.
  Nothing -- I repeat nothing -- will cause this governmentâs
 conviction to change.
  We announced in November that we had bettered our deficit
 target for 1994-95.
  It is now clear that our target for 1995-96 will be achieved -- or
 bettered -- and that we are on track for our 3-per-cent target for
 1996-97. This is proof of the profound impact of the actions set
 in motion in our first two budgets.
  Today, we will make it clear that our deficit target for
 1997-98 -- $17 billion or 2 per cent of GDP -- is also secure.
  We will hit the 3-per-cent deficit target. We will hit the 2-
 per-cent target announced last November. Indeed, we are
 announcing the actions today which will enable us to go beyond
 those targets, to keep us moving towards budget balance.
  To that end, we are further cutting our own departmental
 spending by almost $2 billion to take effect in 1998-99. This is
 over and above the substantial savings secured in our first
 two budgets.
  Most departments will have their budgets cut by at least a
 further 3.5 per cent in 1998-99; some are cut much more.
  Spending on defence and international assistance will be
 further reduced. The growth of spending on Inuit and Indian
 programming will be restrained. The dairy subsidy will be phased
 out over five years and the postal subsidy program reduced.
  This budget, together with our last two, will contribute
 $26.1 billion in savings to secure our 2-per-cent deficit target
 for 1997-98, and a further $28.9 billion of savings for the
 following year, 1998-99 -- to continue the downward deficit track,
 and to give the debt-to-GDP ratio the downward thrust it needs.
  In 1993-94, government spending on programs, that is spending
 on everything but the debt, stood at $120 billion. By 1998-99 we
 will have reduced that to $105.5 billion. This will mean
 six consecutive years of absolute decline in program spending.
  Measured relative to the size of the economy, the decline is
 even more dramatic. By 1998-99, program spending will have been
 reduced to 12 per cent of GDP, down from close to 20 per cent
 just over a decade ago. In fact, it will be at its lowest level
 in 50 years.
  Because we are focusing on spending cuts, not tax increases,
 over the three budgets taken together, we will have
 cut seven dollars in spending for every one dollar in new
 revenues. In this budget, we are not raising personal taxes. We
 are not raising corporate taxes. We are not raising excise taxes.
 In fact, we are not raising taxes.
  This government does not rely on tax increases to hit its
 deficit targets. Nor does it rely on rosy forecasts.
  We are maintaining the prudent approach we have adopted from
 the very beginning. Our economic assumptions are once again
 deliberately more cautious than those of most private sector
 forecasters. As before, we are backing up our economic
 assumptions with substantial contingency reserves. These reserves
 do not exist to be spent on new programs. They are there to
 handle unforeseen changes in the economy. If we donât need them,
 they will not be spent. They will go to reducing the deficit even
  As we have always said -- and as we have now proven -- meeting our
 targets is the least we can do. It is not the best we will do.
  One of the pay-offs in hitting these deficit targets is the
 dramatic decline in the amount of new money the government must
 borrow on financial markets each year.
  This measure, financial requirements, is the way most other
 major economies -- the United States, the United Kingdom, Italy,
 France and Germany -- calculate their deficits.
  In 1993-94, the year we came into office, Canadaâs financial
 requirements stood at 4.2 per cent of GDP -- or $30 billion. By
 1997-98, our financial requirements will drop to only .7 per cent
 of GDP -- or $6 billion.
  Relative to the size of the economy, our borrowing requirements
 will be at their lowest level in almost 30 years. Measured on
 this basis, Canada will have the lowest fiscal shortfall
 projected for any G-7 central government.
  Todayâs fiscal progress is much more than a federal effort. It
 is a national effort supported by Canadians across the country.
  No matter their political stripe, every single province and
 territory has as a primary goal the return to fiscal health. In
 fact, eight are expected to report a balanced budget -- or even a
 surplus -- for the fiscal year ending this month and the results are
  For instance, in 1993, Canadian business and governments
 borrowed $29 billion abroad. That was reduced to $13 billion in
 1995 --  and will be reduced again next year and the year after that.
 In short, Canadian economic sovereignty is being restored.
  The fact is that in comparison with most other countries and in
 the arcane world of statistics we are doing quite well. However,
 that being said, in the real world where we all live, we know
 that despite the gains being made, Canadians continue to worry
 very deeply. The reason is not hard to identify. Because whatever
 the numbers might say, many do not see evidence of improvement in
 their own lives. What they do see is sacrifice. And what they
 want to know is whether their sacrifice will bring positive
 results -- and when it will end.
  Therefore, the job before us is clear. It is to build on the
 progress we have made, to see it translated into good jobs,
 sustained growth and social programs suited to the millennium
 that lies ahead.
  This budget is about consolidating the gains we have made. It
 is about addressing problems before they arise. It is about
 managing ahead, continuing to put in place new building blocks
 for security and prosperity.
  It will show how we will sustain the federal governmentâs
 commitment to healthcare and other social programs into the
 21st century.
  It will put forward a plan to restore confidence in the public
 pension system.
  It will enhance the protection of the most vulnerable in our
  And it will reallocate spending to invest in the economic
 future of the country.
  In short, as all budgets must be, this is a budget about the
 present. However, it is also a budget for the future.
 Canadians want to know that the principles guiding government are
 ones that they share.
  Here are our principles.
  First, governments created the deficit burden. And so
 governments must resolve it -- by focusing first in their own
 backyards -- by getting spending down, not by putting taxes up.
  Second, our fiscal strategy will be worth nothing if at the end
 of the day we have not provided hope for jobs and for growth. We
 must focus on getting growth up at the same time as we strive to
 get spending down.
  Third, we must be frugal in everything we do. Waste in
 government is simply not tolerable.
  Fourth, we must forever put aside the old notion that new
 government programs require additional spending. They donât. What
 they do require is the will to shut down what doesnât work and
 focus on what can. That is why a central thrust of our effort is
 reallocation. Whether on the spending side or on the revenue
 side, every initiative in this budget reflects a shift from lower
 to higher priority areas.
  And finally, we must always be fair and compassionate. It is
 the most vulnerable whose voices are often the least strong. We
 must never let the need to be frugal become an excuse to stop
 being fair.
 Let me address directly the issue of the pace of our efforts.
  This pace has been constant from the outset. It was established
 deliberately. We will not alter it.
  It is our view that chronic deficits constitute a clear and
 present danger to this country -- to our way of life, to our future.
  Chronic deficits put the disadvantaged at risk, because it is
 they who suffer when the financial strength of government is so
 weak it can no longer reach out to those in need.
  However, that does not mean we share the view of those who
 think we should be going to a zero deficit overnight.
  The fact is, draconian budgets are not difficult to write. The
 arithmetic is painless. But the human consequences are not.
  In our view, durable progress requires adaptation, adjustment
 and understanding. A measured strategy lets that happen.
  A measured pace ensures that short-term savings will become
 long-term savings -- a downpayment towards restored fiscal health.
 Indiscriminate cutting, on the other hand, raises the real risk
 that short-term savings will become long-term costs.
  Our goal is to get the deficit down permanently not
 temporarily. We want to solve the problem once and for all. This
 requires considered and careful reform.
  We will balance the books. But we will do so in a way that is
 measured, deliberate, and responsible. That is our plan. That is
 our course.
  This is a question of costs and consequences. But so too it is
 a question of values. We simply do not believe it is necessary to
 toss aside fairness in the quest for fiscal success. That has not
 been the hallmark of this country. And it will not be the legacy
 of this government.
 We have always made it clear that while fiscal progress is
 crucial, equally important is the redesign of government itself.
  What we need is a government that not only spends less money -- but spends more wisely.
  If there is one area where we must never let up, it is the
 effort to root out waste and inefficiency.
  Government should be focused on the needs of citizens -- not the
 needs of bureaucracy. Canadians want their governments to
 co-operate, not compete. And they want better service delivered
 at lower cost.
  One of the best ways to reduce cost is to reduce overlap and
 duplication. This was one of the goals inherent in our Program
 Review exercise led by the current President of the Treasury
  Surely we can all agree that it is simply silly for a food
 processing plant to have a federal meat inspector, a federal
 health inspector, a federal fish inspector, not to mention a
 provincial health inspector and a provincial food inspector
 tripping over themselves on the same day, in the same plant,
 doing essentially the same thing.
  And what small business has not had the experience of a federal
 income tax auditor, followed by a federal sales tax auditor,
 followed by a provincial corporate tax auditor, followed by a
 provincial retail sales tax auditor all asking for the same
 material organized in a slightly different way?
  This sort of duplication wastes businesses time and government
 resources. We want to put an end to such waste.
  Therefore, legislation will be introduced that will allow for
 the creation of fewer, more effective government agencies.
  One of these, for instance, will be a Single Food Inspection
 Agency that will consolidate the activities currently spread
 around several federal departments. This in turn will allow us to
 offer a new partnership with the provinces, which would lead to a
 more efficient, joint food inspection system.
  We will also create a national revenue agency to be called the
 Canada Revenue Commission. The creation of the commission will
 facilitate the development of a closer partnership with the
 provinces in revenue administration.
  Canadians know full well that there is only one taxpayer. A
 number of provinces have asked us why shouldnât there be, as
 well, only one tax collector?
  In the same vein, we are working very hard to replace the
 federal sales tax.
  We believe this is crucial to increase fairness for consumers
 and respond to the concerns of small business, while saving
 taxpayers money through more efficient administration.
  We are working with a number of provinces to achieve this end.
 If successful in getting provincial agreement, the government
 will take such steps as are necessary to implement harmonization.
  In addition, a significant package of measures is being readied
 to streamline and simplify the federal sales tax.
 Restoring Growth to Transfers to the Provinces
 Fiscal health is not an end. It is a means to an end. It gives us
 the strength to move forward on everything else.
  As we continue to address the anxiety of Canadians over the
 fiscal health of their country, we must also look ahead to
 address other problems before they arise.
  Clearly, one of these priorities must be to preserve and
 strengthen our social programs for the next century.
  These programs -- support for health care, for post-secondary
 education, for assistance to the poor speak to the spirit of our
  In last yearâs budget, the Canada Health and Social Transfer
 was created. It was designed to put federal transfers for these
 important areas on a sound footing and to allow the provinces
 more flexibility to better deliver these programs.
  In 1997-98, the CHST will be a $25-billion transfer composed,
 roughly equally, of tax points and cash.
  Since transfers to the provinces and territories represent an
 important part of our total spending, we could not put federal
 finances on a sustainable basis without addressing them. That is
 why, in last yearâs budget, we announced funding arrangements for
 the new Canada Health and Social Transfer covering the fiscal
 years 1996-97 and 1997-98. Those arrangements will remain
  With the framework of the CHST in place, our challenge and
 commitment -- is clear.
  To provide, as the Prime Minister promised, a long-term funding
 arrangement for the CHST transfer that is stable, predictable and
  To this end, we are announcing today a firm funding commitment
 for the CHST to cover the five-year period from fiscal year
 1998-99 through to 2002-03.
  For the first two years of that period, we will maintain the
 overall CHST entitlement -- that is, the value of tax points and
 cash combined -- constant at its 1997-98 level of $25.1 billion.
  For the remaining three years of the framework, total transfer
 entitlements will grow each and every year -- at an increasing pace.
  In addition, we will provide a legislated guarantee that the
 cash component of the transfer will never be lower than
 $11 billion at any time during this period.
  This will put an end to the decline of cash that occurs
 automatically as the value of the tax component grows. The
 provinces will benefit, not only from the growing value of the
 tax component, but from the cash guarantee as well.
  Based on an evolving formula tied to economic growth, overall
 CHST entitlements will increase over this period from
 $25.1 billion in 1999-2000 to approximately $27.4 billion
 in 2002-03.
  As a result of these assurances, Canadians can have confidence
 that as we enter the next century, the commitment of their
 national government in support of health care, post-secondary
 education and assistance to the poor will be intact, and strong.
  As part of that, we will remain opposed to the imposition of
 residency requirements on social assistance recipients who move
 from one province to another, and we will be steadfast in
 upholding the principles of Medicare.
  This budget also addresses our commitment to provide a new
 approach to allocating the CHST among provinces -- one that
 addresses the funding disparities resulting from the limits on
 Canada Assistance Plan transfers imposed on certain provinces by
 the previous government.
  The new allocation will be phased-in during the course of the
 new five-year transfer arrangement. As a result, current
 disparities in per capita funding levels among provinces will be
 reduced by half. We are willing to examine with the provinces
 further refinements to the allocation that may be appropriate
 beyond this framework.
  Finally, on the issue of healthcare, this budget takes
 additional action.
  The Minister of Health will be announcing the establishment of
 a Health Services Research Fund under the auspices of The Medical
 Research Council of Canada. The federal government will provide
 an unconditional $65 million over five years. The goal is to
 bring together governments, health institutions and the private
 sector to fund research identifying what works best in our
 medical system, what does not, and what possibilities might exist
 to improve the efficiency and effectiveness of healthcare.
 Securing Pensions for Canadians
 One of the greatest advances we have ever made as a country is to
 provide a decent level of retirement support for our seniors. As
 a result of our pension system, millions of seniors today enjoy a
 standard of living that is substantially higher than was the case
 for their parents. Our obligation today is to take the action
 necessary to safeguard that accomplishment for our children.
  There is widespread anxiety -- particularly among the young -- that
 the public pension system will not be there for them when they
  Confidence in the pension system must be restored. The party
 that put pensions in place for this country must now act to
 preserve them.
  The challenge is clear -- it is one of sustainability.
  First, the CPP must be put on a sound financial footing -- and
 done so in a way that it is sustainable, affordable and fair.
  This government does not share the view of those who believe
 the CPP cannot be fixed, that it should be abandoned. We believe
 that the right to a secure retirement should be available to all
  -- and not become the preserve only of those who are well-off.
  However, the findings of the Chief Actuary make it clear that
 changes are needed to restore the CPP to health. Clearly,
 governments should have acted some time ago to address this
 problem. We believe the role of government that is responsible is
 to act to prevent problems, rather than letting them become
 crises. And so, together with the provinces and territories, we
 will act.
  The second pillar of the pension system -- Old Age Security and
 the GIS -- is funded out of general government revenues. Here too,
 rising costs have led to concerns that these public pensions are
 at risk. Our obligation is to put those concerns to rest.
  In our last budget we set out the principles of reform. Today,
 we are proposing a new Seniors Benefit to take effect in the
 year 2001. This benefit will be a central element of fulfilling
 our commitment to Canadians to ensure they have a secure and
 sustainable pension system now and into the future.
  As the Prime Minister has said many times, current seniors have
 the right to know that their retirement is secure -- that they will
 always get at a minimum what they receive in pension payments
 today. Our proposal guarantees that. In fact, many seniors will
 get more.
  Furthermore, younger Canadians have the right to know that, in
 the future, government pensions will be there for them. Our
 reform guarantees that as well.
  This reform will make the pension system sustainable. It will
 do so by targeting help to those who need it most. And by slowing
 the rate of growth of public pensions, the danger of crowding-out
 other essential programs and services is being addressed.
  The new Seniors Benefit will be fully tax free -- and it will be
 completely separated from the tax system. It will incorporate the
 OAS, GIS, pension income credit and age credit.
  Furthermore, under the new system, the benefit and the
 threshold levels will be fully indexed to inflation -- an important
 improvement for all seniors who worry about eroding benefits. The
 partial indexing of the clawback threshold will cease to be an
  The Seniors Benefit will be paid monthly -- and in the case of
 couples, it will be divided equally between each spouse. Each
 will receive a separate cheque.
  This will be a fairer system. It will be based on total
 income -- as the GIS always has been. We believe that since the
 incomes of low-income couples are currently combined to determine
 eligibility for additional help, it is also appropriate to
 combine the incomes of higher-income couples to determine their
 level of government support.
  The new benefit will be designed to fully protect low and
 modest-income Canadians. Almost all of them will receive slightly
 more. In fact, all those who currently receive GIS will receive
 $120 more per year.
  Under the new Seniors Benefit, 75 per cent of seniors will be
 as well or better off. In fact, most will be better off.
  For instance, nearly nine out of ten single senior women will
 be better off under the new system.
  High-income seniors will receive somewhat less. The more income
 they have from other sources, the less they will receive.
  The very highest-income seniors will no longer receive
 government benefits.
  In this House, the Prime Minister has promised Canadians that
 no current seniors will have their OAS and GIS payments reduced
 as a result of this reform. In fact, our proposal goes one step
 further. Not only will the pension benefits of every senior over
 age 65 today be protected, but so too will the pension benefits
 of every Canadian who reached age 60 before January 1st of this
 year -- and their spouses, no matter what their age.
  The government will give these Canadians a choice of whichever
 system is more advantageous to them -- moving to the new Seniors
 Benefit five years from now, or maintaining their existing
 OAS/GIS pensions.
  The purpose of this reform is to assure Canadians that the
 pension system will be there for them in the future, as it has
 been in the past.
  Fairness, sustainability, security: that is what Canadians
 seek and that is the hallmark of this new public pension system.
 Assistance to those in Need
 Increased Support for Children
 The next issue concerns children.
  There are many more single-parent households today than ever
 before. Canadians know that too often the needs and rights of
 children following family breakdown are not being protected.
 There is too much hardship, tension and distress resulting from
 the current child support system. The system has added to the
 uncertainty and anxiety many Canadians feel.
  Our view is that children should be first in line. Child
 support is the first obligation of parents. It is not
 discretionary. The government promised to improve the child
 support system. Today, that action is being taken. The Minister
 of Justice will be elaborating on these measures in the
 days ahead.
  First, the tax treatment of child support payments is being
 changed. Currently, child support payments are taxable for the
 recipient and tax deductible for the person paying. In our view,
 this is wrong. We believe these payments are there to provide
 support for children. They are not income for parents.
  Therefore, for all new child support awards -- and all existing
 awards that are varied on or after May 1, 1997 -- support payments
 will not be included in the income of the custodial parent for
 tax purposes nor be tax deductible for the payer. This approach
 will ensure that the children who need support the most get it,
 and eliminate the need for complex tax calculation and planning
 by parents.
  Second, the method used for determining levels of child support
 is being improved. This will result in settlements that are
 fairer and more consistent. It will reduce conflict between
 parents and keep money now spent on lawyers and courts in the
 hands of the parents for the benefit of the child.
  Third, a wide range of measures is being introduced to help
 ensure that child support orders are enforced -- that support is
 paid in full and on time. We are targeting chronic, wilful
 defaulters. Because enforcement is primarily a
 provincial/territorial responsibility, these measures are
 designed to complement and bolster their efforts.
  We believe that more should be done to support children.
  Therefore, we are increasing the Working Income Supplement
 under the Child Tax Benefit. This supplement assists low income
 parents to meet some of the expenses resulting from work -- such as
 child care, transportation and clothing. It also helps make up
 for the benefits lost by parents who leave social assistance and
 re-enter the workforce.
  The maximum annual benefit is being doubled, in two steps. It
 will increase from $500 to $750 in July of next year and to
 $1,000 in July of 1998.
  When fully phased-in, this will result in an additional
 $250 million support annually to approximately 700,000 low-income
 working families -- one-third of whom are headed by single parents.
  Finally, we believe that the current age limit of 14 on the
 child care expense deduction should be raised to 16 to provide
 more support to parents -- in particular single parents whose jobs
 require them to be away from home at night.
  Next, increasingly large numbers of Canadians are providing
 in-home care for adult children and other relatives with
 disabilities. This work is both invaluable and difficult.
 Therefore, this budget proposes to increase the value of the
 infirm dependent credit from $270 to $400 and to raise the income
 threshold for the reduction of this benefit from $2,690
 to $4,103.
  A number of groups, including the Standing Committee on Human
 Rights and the Status of Disabled Persons, have asked that we
 examine measures, including those in the tax system, that have an
 impact on people with disabilities. We will examine these issues,
 because we believe it is important to constantly assess the
 mechanisms through which we provide assistance to persons with
  Every day in every community, Canadians give freely of their
 time and money to support the work of non-profit, voluntary and
 charitable organizations. These countless acts of individual
 commitment are a powerful collective response to meeting pressing
 human needs, especially in this time of fiscal restraint.
  Governments must support Canadians in their effort.
  Therefore, we are adopting the recommendation of the Standing
 Committee on Finance and the Canada Council that the annual limit
 on charitable donations be raised from 20 per cent to 50 per cent
 of net income. That limit will be increased to 100 per cent for
 gifts willed to charities in order to encourage charitable
 bequests. In addition, to encourage donations in forms other than
 cash, the limit will be raised to 100 per cent on the portion of
 a donation of appreciated property that must be included in the
 donorâs taxable income.
  Clearly, a case has been made that more can be done.
  Therefore, over the next year and in consultation with the
 charitable sector, we will examine ways of further encouraging
 charitable giving and charitable activities. We will focus on
 ways to ensure that increased government support leads to
 activities of direct benefit to Canadian society.
 One of the greatest challenges facing Canadians and their
 governments is the changing nature of work. Around the world, on
 every continent, we are facing a revolution whose scope and depth
 rivals that of the industrial revolution itself.
  The contours of that revolution are clear. Distance is losing
 its meaning, as barriers to trade and investment collapse and
 communications become instantaneous.
  The pace of change is accelerating, as technology makes
 possible daily what once was only the substance of dreams.
  Some see this as a revolution about new opportunity. Others
 fear it is a revolution about opportunity lost. What we must
 ensure is that Canada is on the vanguard of this revolution, not
 one of its victims. We must work together to make sure that the
 new economy is also an economy with new jobs.
  Canadians understand that the jobs of today and tomorrow will
 come from the thousands of Canadian businesses that are created
 each and every year.
  We agree. So what is the role of government? It is to provide
 the private sector and all Canadians with a framework for growth,
 the kind of growth on which job creation depends.
  Clearly, despite our problems, the economic climate in this
 country is getting better.
  The nationâs balance sheets are improving.
  As a result: interest rates have come down 3 percentage points
 in the last year; inflation is the lowest it has been in
 30 years. And Canadaâs economy is more competitive than ever.
  The point is that in this world of globalization, of
 competition, of rapid change, focusing on getting the
 fundamentals right is absolutely necessary. But by itself it is
 not sufficient.
  It is in this context that one must view the numbers on job
 creation, the most important statistic of them all. In the last
 13 months, 263,000 private sector jobs have been created. Since
 November alone, 123,000 such jobs were created, the majority of
 which were full-time. These are good numbers, but they are not
 nearly good enough.
  The proof lies not simply in the numbers of unemployed, but in
 the increasing length of time it takes the unemployed to find new
  The effect of change is felt by every segment of society, in
 every part of the country, from our biggest cities to our very
 smallest communities.
  For instance, it is clear that rural Canada faces a
 particularly acute challenge of adaptation. Indeed, while major
 metropolitan areas are often the focus of attention, it is
 absolutely essential that we continue to pursue policies to
 address rural anxiety as well, that we develop policies designed
 to meet the diverse needs of both urban and rural Canada -- needs
 which remain essential to our economic well-being, our way of
 life and our future.
  In other words, if our future is to be brighter, we must invest
 in it.
  And so, in addition to consolidating our fiscal gains and
 securing the future of our social programs, we are strengthening
 three areas of government emphasis that will help Canadians
 manage towards the future.
  Following on the recommendations of the Cabinet Committee on
 Jobs and Growth, headed by the Minister of Agriculture, we are
 making strategic investments in our youth, in technology, and in
  Let me emphasize, that while we are announcing new initiatives,
 none of the funding required represents new money. All of it is
 sourced from a reallocation of existing resources.
  The economy of the future will belong to our young people. The
 success of our economy will depend on them -- just as their success
 will depend on their ability to participate fully in all that the
 economy has to offer.
  There is a clear role for government in helping our young
 people to prepare for a rapidly changing economy -- through the
 acquisition of the right skills, and the provision of
 opportunities to gain work experience.
  And so, in this budget, we are providing an additional
 $165 million over three years, to be funded through reallocation
 within the tax system, so that students and their families will
 be better able to deal with the increased costs of education.
  First, to recognize the non-tuition costs of schooling, we are
 increasing the education credits from $80 to $100 per month.
  Second, in order to support parents or spouses who help
 underwrite the education costs for students, we are raising the
 limit on the transfer of tuition and education credits from $680
 to $850 per year.
  Third, to encourage parents to save for their childrenâs
 education over the long-term, we are proposing to increase the
 annual limits on contributions to Registered Education Saving
 Plans (RESPs) from $1,500 to $2,000 and the lifetime limit from
 $31,500 to $42,000.
  Fourth, as we have said, we are broadening eligibility for the
 child care expense deduction. This measure will assist parents to
 undertake education or retraining. Single parents will be allowed
 the same deductions that today are only available to couples. And
 for the first time, the child care expense deduction will apply
 to those completing high school, not only post secondary
  For our youth, learning is the first step. But increasingly,
 education alone is not enough. What is required is the
 opportunity to gain experience on the job.
  Therefore, the government is reallocating $315 million over the
 next three years from other spending in order to help create
 youth employment opportunities. This is in addition to our
 existing funding provided through such programs as Youth
 Internship Canada and Youth Service Canada.
  Some of these new funds will go to substantially increasing our
 support for student summer employment. Summer employment not only
 provides young people with the opportunity to earn the money they
 need to complete their education, it can also supply critical job
 experience. Therefore, we are doubling our assistance for summer
 employment for 1996-97 -- from $60 million to $120 million.
  Another part of the $315 million will be used to assist young
 Canadians who have left school to find work. Details of these
 youth initiatives will be provided in the near future by the
 Minister of Human Resources Development.
  We are eager to enter into a new partnership between the public
 and private sectors to create entry level jobs for the young.
 Government and business have worked well together on trade, as
 Team Canada abroad. Let us now -- business, labour, educators and
 government -- work together even harder at home, for jobs for our
  Our ultimate challenge is to change the very economic culture
 of the nation -- to make Canada one of the most innovative countries
 in the world.
  Some may think that innovation applies to only one small sector
 of our economy ö to those who write software or surf the
 Internet. Nothing could be further from the truth. This is not
 about part of our economy. It is about all of our economy ö from
 small business to large business, from coast to coast. From
 mining and oil and gas, to agriculture and forestry, the
 application of technology has become essential.
  Clearly, it is the job of the private sector to
 innovate -- because it is their survival and growth that is at
 stake. But government too has an important role -- in levelling the
 playing field against foreign competition, in forming
 partnerships to invest in areas of basic research, of high risk,
 and where the scale of investment is simply too large for the
 private sector itself to carry alone.
  To that end, the Minister of Industry will be announcing the
 creation of Technology Partnerships Canada. This program will
 encourage the development of environmental technologies, advanced
 manufacturing and materials as well as bio-technology. It will
 also help maintain jobs in the aerospace sector -- which is subject
 to very heavily subsidized foreign competition.
  This marks an important departure from past practice. Both the
 risks and rewards will be shared with the private sector. The
 governmentâs investment should not exceed a third of the total.
 The emphasis is on partnership -- not unilateral federal action. The
 reallocated resources provided in this budget, together with
 existing Industry Canada funding, will enable Technology
 Partnerships Canada to grow to about $250 million by 1998-99.
 This will lever substantial, additional investment by the private
  In addition, the government is injecting $50 million into the
 Business Development Bank. This equity will in turn allow the
 bank to provide an additional $350 million in loans to
 knowledge-based, exporting and growth businesses that would not
 otherwise have access to the commercial banks.
  The Minister of Industry will also accelerate the effort to
 bring the benefits of information technology to the
 whole country.
  By 1998, through SchoolNet we will have connected every school
 and library in the country to the Information Highway.
  By that same year, 1,000 rural communities will also be
 connected -- through the Community Access Program.
  And in order to bring to small business the advantages of
 access to the Information Highway, we are instituting a program
 in which 2,000 computer students will connect some 50,000 small
 businesses to the Internet -- not only installing those systems, but
 advising their owners on how best to use them.
  Our financial institutions have a key role to play in
 facilitating the growth of Canadian business. Over the past year,
 the banks have made progress in dealing with the concerns of
 small business. But more needs to be done to ensure our financial
 institutions provide the best possible financing for growing
 export and knowledge- based businesses. The government will work
 with business and all financial institutions, including the banks
 and insurance companies, to ensure that progress continues.
  Finally, we are currently reviewing the legislation governing
 financial institutions with a view to improving the framework
 established in 1992. We have concluded that the financial sector
 has yet to fully adjust to this framework. Therefore, the present
 restriction on banks selling insurance will be maintained. The
 present framework for selling insurance through agents and
 brokers will be preserved. The white paper covering this and all
 other aspects still under review will be released in the coming
  Let me conclude this section on the question of trade. There is
 no doubt that Canadaâs trade performance has been extraordinarily
 good. The export sector has been the fastest growing sector of
 our economy expanding at an average 8 per cent per year over the
 past decade. Our merchandise trade balance has soared -- reaching a
 record surplus of $28.3 billion. And as a share of the economy,
 our current account deficit is at its lowest level in ten years.
  Trade will continue to be a major thrust of this governmentâs
 economic policy. The Team Canada approach, established by the
 Prime Minister, has proven to be a major success and will remain
 a centrepiece of our strategy. The Minister of International
 Trade will continue our determined drive to secure new agreements
 for more open markets around the world, building on the exemplary
 work of his predecessor, the Honourable Roy MacLaren.
  Export financing is critical to ensure that Canadian companies
 can fully realize the opportunities before it. And so, in this
 budget we are providing $50 million of new equity to the Export
 Development Corporation in order to support new export sales
 financing vehicles and new partnerships with exporters in the
 commercial banks. In addition, we are reallocating resources from
 subsidized loans for foreign borrowers to non-subsidized loans
 under an improved system to manage risk. This measure will
 increase the amount of financing available for Canadian exporters
 by as much as $500 million per year.
  These investments -- in youth, in technology, in trade -- build on
 the framework we have been constructing from the outset -- a
 framework for a more productive economy and society -- based on
 fiscal health, successful social programs and a government that
 is focused on key national priorities. They are a step forward in
 our plan to ensure that the Canadian economy adapts and grows,
 creating jobs.
 Let me now come to the question of revenues.
  No one is ever happy with the tax system. For this reason, we
 must do everything we can to ensure that it is fair -- and that the
 system as a whole is as effective as possible. Taxes are clearly
 higher than any of us would like. But the issue is not simply one
 of rates. We must ensure that the system is supportive of the
 nationâs goals.
  To this end, the budget announces the following additional
 revenue measures. The revenue we realize from many of these
 measures is being reallocated to provide tax incentives that will
 assist students, help the infirm and support charities.
  Let me begin with the provision of tax assistance to encourage
 Canadians to save for their own retirement, through RRSPs and
  We are proposing a number of changes that will better target
 this assistance to modest- and middle-income Canadians, while
 limiting the cost to taxpayers.
  First, we know that many younger Canadians have a difficult
 time finding the money to make full RRSP contributions. This is
 often due to other pressing obligations, including education or
 raising a family. We want to give them the maximum opportunity
 later in life to help make up for that lost time.
  Therefore, we will allow Canadians unlimited time to make up
 for any years when they were unable to make their full
 contribution by eliminating the current seven year limit on
 carrying forward any unused contribution room.
  Second, the contribution limit for RRSPs is being frozen at its
 current level -- $13,500 -- until the year 2003. The limit will then
 increase to $15,500 by 2005.
  Third, we are reducing the age limit for contributing to RPPs
 and RRSPs from age 71 to 69.
  In order to improve the effectiveness and fairness of the tax
 system, a number of additional measures are being announced.
  In order to see them established, the government put in place
 incentives for investment in labour-sponsored venture capital
 corporations (LSVCCs). These incentives have worked. These funds
 are now very well established. Therefore, we are proposing
 several measures to reduce the unique incentives in place for
 these funds.
  Next, this budget proposes a variety of measures related to the
 resource sector. In relation to the oil, gas and mining
 industries, we are clarifying and tightening rules related to the
 resource allowance, following the review announced in our last
 budget. While revenue neutral, this will result in a more
 consistent and stable tax structure.
  We are announcing changes to the accelerated cost allowance
 rules for new mines, including oil sands, so that all types of
 oil sands recovery projects are treated more consistently.
  For mining flow-through shares, the current 60 day rule is
 being extended to one year, while the eligibility rules for these
 shares are being tightened for the mining and oil and
 gas sectors.
  We believe that environmental health and economic development
 should be complimentary, not contradictory, concepts.
  To that end, this budget announces income tax changes that will
 provide an essentially level playing field between certain
 renewable and non-renewable energy investments. This is part of
 the baseline study of possible barriers and disincentives to
 sound environmental practices, initiated in the 1994 budget.
  One measure is to create a new Canadian Renewable Energy and
 Conservation Expenses category in the tax system. A second
 measure is to extend the use of flow-through share financing,
 currently available for non-renewable energy and mining to
 similar costs for certain renewable energy and energy
 conservation projects.
  A temporary tax on large deposit taking institutions, including
 the banks, was introduced in last yearâs budget. It will be
 extended for a further year.
  Finally, an effective business tax system should not only raise
 revenue. It should be designed to help create jobs. We believe it
 is time for a comprehensive look at this issue. In order to
 identify any obstacles to job creation currently contained in the
 tax act and to suggest reform, we are announcing today the
 establishment of a technical committee of outside experts that
 will report to me later this year, to be followed by public
 consultations. If the creation of secure jobs is our objective,
 then every effort of government must be directed towards that
 That concludes our description of the measures contained in
 this budget.
  Every one of these is targeted towards a specific set of goals.
  They reflect our desire to put in place the strongest economic
 framework possible for sustained growth and jobs.
  They act on our obligation to preserve our great social
 programs for the next century -- programs such as Medicare and our
 pension system.
  They are designed to help provide the next generation with
 confidence in the new economy -- by investing in our youth, in
 technology, in trade.
  We spoke at the outset about the anxieties that grip our
 country. This budget is about doing what we can to help Canadians
 put those anxieties to rest.
  But let us be clear. A budget is only a small part of
 the answer.
  The full response lies in recognizing where we are in the
 evolution of the country, in the evolution of the world beyond
 our borders.
  It is time to turn the page.
  Because the fact is that success for countries is no different
 than success for families or communities or individual citizens.
 It is based, above all, on one thing: the constant setting of
 goals and the meeting of new challenges. Successful countries do
 more than occupy a place on the map. They live in the soul of
 their people -- because they are relevant to the betterment of their
  And so, for Canada, it is time to set goals anchored in our
 shared values and aspirations.
  We have done that throughout our history in the days when we
 dared speak of a national dream -- and then built it; in the days
 when we aspired to a kinder society -- and then created it.
  Now, it is time to move forward again -- to arrive not simply at a
 common understanding of what we are -- but a common vision of what
 we can be. Our challenge today is to make Canada a place of great
 expectations, a country once again where our children believe
 they have the opportunity to do better than their parents, a
 place where they can dream large dreams once more.
  We must set great national challenges, not small ones -- because
 it is only by reaching as high as we are able that we will
 discover how far we can go.
  Why can we not decide together that ten years hence, Canada
 will be regarded as the world leader in the new industries of the
 new economy -- in bio-technology, in environmental technology, in
 the cultural industries of the multi-channel universe?
  Why not decide together that ten years hence increasing child
 poverty rates will be a thing of the past, that illiteracy will
 be erased from our communities and that when it comes to
 international tests, our students will not simply do fine -- but in
 fact be the very finest?
  Why can we not decide together that Medicare ten years hence,
 will not simply survive, but be the most successful system in the
 world, with a record on prevention, care and cure that is second
 to none?
  Why not decide together that ten years hence our streets will
 be the safest they can be -- not because we have the largest number
 of prisons or police, but rather because we have faced squarely
 the sources of crime?
  These are challenges all of us must meet. They do not belong to
 any one of us alone. They do belong to all of us together.
  If we want to open new doors for our children, there is
 literally nothing standing in our way.
  We are a society that mirrors the diversity of an entire
 planet. We are already building on a great foundation. Now it is
 time to draw on that foundation, to write a new history
  Let us act, not as special interests, but as stewards of the
 national interest -- knowing that the destiny of our children is in
 our hands.
  Let us follow in the footsteps of those who came before, who
 saw challenge as a rallying cry to move forward, never as an
 excuse to give up.
  And let it be said by those who come after us, that we set the
 goals, that we met them together, that we propelled Canada
 forward into a new millennium -- still and always among the front
 ranks of nations.
 Summary statement of transactions:
 Fiscal outlook with budget measures
                       1993-94 1994-95 1995-96 1996-97 1997-98
                                  (billions of dollars)
 Budgetary revenues      116.0   123.3   130.6   135.0   141.0
 Program spending       -120.0  -118.7  -113.8  -109.0  -106.0
 Operating balance        -4.0     4.6    16.8    26.0    35.0
 Public debt charges     -38.0   -42.0   -47.0   -47.8   -49.0
 Underlying deficit      -42.0   -37.5   -30.2   -21.8   -14.0
 Contingency reserve                      -2.5    -2.5    -3.0
 Deficit                 -42.0   -37.5   -32.7   -24.3   -17.0
  transactions            12.2    11.6    12.7    10.6    11.0
 Financial requirements  -29.8   -25.8   -20.0   -13.7    -6.0
 Net public debt         508.2   545.7   578.4   602.7   619.7
 GDP (calendar year)     712.9   750.1   780.0   806.0   841.0
 Per cent of GDP
  Revenues                16.3    16.4    16.7   16.7     16.8
  Program spending       -16.8   -15.8   -14.6  -13.5    -12.6
  Deficit                 -5.9    -5.0    -4.2   -3.0     -2.0
  Financial requirements  -4.2    -3.4    -2.6   -1.7     -0.7
  Net public debt         71.3    72.8    74.2    74.8    73.7
 Direct budget savings
                                                        on net
               1994-95 1995-96 1996-97 1997-98 1998-99    debt
                               (billions of dollars)
 1994 budget       1.5     8.0    10.9    11.9    12.6    44.9
 1995 budget               5.0    10.6    13.3    13.8    42.7
 Total             1.5    13.0    21.5    25.2    26.4    87.6
 1995 Employment
  reform1          0.7     0.8     1.5
 1996 budget       0.0     0.2     1.7     1.9
 Total             1.5    13.0    21.5    26.1    28.9    91.0
  of which:
  Expenditures     0.7    10.6    18.9    23.3    25.6    79.0
  Revenues         0.8     2.4     2.6     2.8     3.4    12.0
 [1]Savings for 1996-97 were included in 1995 budget savings.
 Note: Table shows net savings from deficits that would have
 otherwise occurred in the absence of direct measures in the
 budgets. Numbers may not add due to rounding.
 The revenue outlook
                       1993-94 1994-95 1995-96 1996-97 1997-98
                    (billions of dollars)
 Personal income tax      51.4    56.3    60.5    63.5    67.2
 Corporate income tax      9.4    11.6    14.4    15.1    16.0
 Employment Insurance
  contributions           18.2    18.9    18.5    18.8    19.5
 Excise taxes and duties
  Goods and Services Tax  15.7    16.8    17.2    17.9    18.7
  Customs import duties    3.7     3.6     3.0     2.8     2.5
  Other excise taxes       7.3     6.7     7.3     7.6     7.7
  Other tax revenues       1.6     1.8     1.9     1.9     2.0
 Total tax revenues      107.3   115.7   122.8   127.6   133.6
 Non-tax revenues          8.7     7.6     7.8     7.4     7.4
 Total budgetary
  revenues               116.0   123.3   130.6   135.0   141.0
 Per cent of GDP          16.3    16.4    16.7    16.7    16.8
 The outlook for program spending
                       1994-95 1995-96 1996-97 1997-98 1998-99
                    (billions of dollars)
 Major transfers to persons
  Elderly benefits        20.5    21.2    21.9    22.8    23.8
   insurance              14.8    13.5    13.8    14.2    14.5
  Total                   35.3    34.7    35.7    37.0    38.3
 Major transfers to other
   levels of government[1]
  EPF/CAP ÷ CHST          18.8    18.5    15.0    12.5    11.8
  Equalization             8.5     8.7     8.8     9.2     9.6
  Transfers to territories 1.2     1.2     1.1     1.1     1.1
  Other fiscal transfers   0.0     0.1     0.0     0.0     0.0
  Alternative payments
   for standing programs  -1.8    -1.9    -2.0    -2.1    -2.2
  Total                   26.7    26.6    23.0    20.6    20.2
 Subsidies and other transfers
  Business subsidies       3.7     2.9     2.0     1.6     1.5
  Indians and Inuit        3.7     4.0     4.3     4.3     4.4
  International assistance 2.9     2.2     2.2     2.1     1.9
  Science and
   Technology              1.0     0.9     0.9     0.8     0.8
  Canada Infrastructure
   Works                   0.4     0.9     0.5     0.1     0.0
  Other                    8.3     6.6     5.7     5.1     4.6
  Total                   20.0    17.6    15.5    14.0    13.3
 Crown corporations        5.0     4.4     4.2     3.9     3.8
 Defence                  10.7    10.3     9.8     9.1     8.5
 All other spending       21.0    20.1    20.8    21.4    21.4
 Program spending        118.7   113.8   109.0   106.0   105.5
 [1]Through to 1995-96 includes Established Programs Financing
  (EPF) and Canada Assistance Plan (CAP). Beginning in 1996-97,
  refers to the Canada Health and Social Transfer (CHST).
 Total entitlements under
  the EPF/CAP and CHST    29.4    29.7    26.9    25.1    25.1
 Total entitlements for
  major transfers to other
  levels of government
  (CHST, Equalization and
  transfers to the
  Territories)            38.3    38.8    36.0    34.4    34.8
  © Her Majesty the Queen in Right of Canada

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