Budget Speech

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

SECURING THE FUTURE

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.

SECURING OUR FINANCIAL FUTURE

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
further.

 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
striking.

 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
society.

 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.

PRINCIPLES FOR SECURING 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.

A MEASURED, RESPONSIBLE PACE

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.

A FOCUSED, MORE AFFORDABLE 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
Board.

 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.

SECURING OUR SOCIAL PROGRAMS FOR THE NEXT CENTURY

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
country.

 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
unchanged.

 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
sustainable.

 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
retire.

 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
issue.

 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
disabilities.

 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.

INVESTING IN OUR FUTURE

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
work.

 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
trade.

 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
education.

 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
youth.

 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
sector.

 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
weeks.

 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.

REVENUES ö IMPROVING TAX EFFECTIVENESS AND FAIRNESS

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
RPPs.

 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
end.

CONCLUSION

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
lives.

 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
ourselves.

 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

Non-budgetary
 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
___________________________________________________________
                                                     Cumulative
                                                       effect
                                                       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
 Insurance
 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
 Employment
  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