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The Budget Speech

The Honourable Paul Martin P.C., M.P.
Minister of Finance
Monday, February 28, 2000.

• Adobe Acrobat Version (113,078 bytes).

Table of Contents

• Introduction.
• Economic Strength.
• Building for the Future: Our Plan.
• Reflecting Our Values: Education and Health Care.
• Sound Financial Management.
• The New Economy.
• Skills and Knowledge.
• Supporting Research.
• The Environment.
• Children.
• Tax Relief.
• Conclusion.

Introduction

Mr. Speaker, before I begin, I want to express the Government’s appreciation to the Standing Committee on Finance and the many committees of caucus for their invaluable contributions in the lead-up to this budget.

Most importantly, on behalf of this Parliament, I want to thank Canadians – from all walks of life and all parts of the country – who shared their ideas and insights with us.

The experience of the last few years has confirmed, beyond doubt, that an open budget process is a better budget process.

Mr. Speaker, throughout our country’s history, each generation has undertaken the great task of building Canada.

Today, at the dawn of a new century, we are fortunate indeed to live in a land of promise, in a world of change, in a time of opportunity.

Are there problems? Yes there are – and there is much to be done.

That being said, we are in a better position today to chart our own course than we have been in many a decade.

Economic Strength

Canada’s economic growth is among the strongest of the Group of Seven (G-7) countries.

The size of our economy will surpass the trillion-dollar mark this year.

The deficit is a matter of history. Indeed, today we project the third, fourth and fifth balanced budgets in a row – something that has not been done in nearly half a century.

Inflation remains in check.

The government debt burden is declining.

Canada’s foreign debt burden is declining.

Consumer and business confidence are at near-record levels.

Most importantly, after a number of difficult years, these positive economic indicators are now beginning to be reflected in the daily lives of Canadians.

In 1999, there were more than 425,000 new jobs created in Canada – a pace unmatched by any other G-7 country and, as a result, our unemployment rate stands at 6.8 per cent – its lowest level in nearly a quarter of a century.

In the early and mid-1990s, Canadians saw their real after-tax incomes shrink. Three years ago, that trend began to turn around. Today, disposable incomes are some 3 per cent higher than they were in 1996 and, of even greater moment, private sector forecasters project that incomes will rise much more significantly in the years ahead.

This is clearly good news.

However, Mr. Speaker, while the progress of recent years is a record on which Canadians can be proud to stand, it is not a record on which we are prepared to rest.

Canadians do not want to dwell on the past. They want to focus on the future.

Indeed, that is the message of this budget.

In 1993, we established a plan to eliminate the deficit, to turn our economy around and create new jobs. That plan has worked.

Now – two months into the year 2000 – we must take Canada further. We must create a greater prosperity and see to it that the benefits of that prosperity are shared widely.

Our challenge now is to build on our new-found strength.

Canadians know that this is the time to act. They know that globalization and the rush of technology will not wait for us, nor will these forces pause for us to prepare. The challenges are here and the opportunities are now.

Building for the Future: Our Plan

In last fall’s fiscal update, we asked ourselves three fundamental questions:

First, what will it take to secure our position as a leader in the new economy?

Second, how can we provide every Canadian with an equal opportunity to succeed?

And third, how can we ensure the best quality of life for all Canadians, not simply a fortunate few?

In this budget, we outline our response to those questions.

First, we will continue to provide sound fiscal management. There will be no slipping, no sliding: the days of deficit are gone and they are not coming back.

Second, we will lower taxes to promote economic growth and to leave more money where it belongs – in the pockets of Canadians. As we said last November, Canadians are entitled to keep more of the money they earn. After all, they worked for it. It’s theirs.

Third, in order to ensure equality of opportunity, we will invest in providing Canadians with the skills and knowledge they need to get the jobs they want.

And fourth, together we will build an economy based on innovation. For that, ultimately, is the only means by which a modern nation can control its future.

Reflecting Our Values: Education and Health Care

Mr. Speaker, these four elements speak to our economic framework. But our plan must do more than that.

It must reflect not only the value of our economy, but the values of our society.

Make no mistake – the success we have achieved as a nation has come not only from strong growth, but from an abiding commitment to strong values – caring and compassion, an insistence that there be an equitable sharing of the benefits of economic growth.

These are the bedrock of our nation. They must be the cornerstone of our plan.

For this reason, the first announcement of the first budget of the 21st century is that we will increase funding for post-secondary education and health care.

These are the highest priorities of Canadians – and they are ours.

We have already acted three times to strengthen the cash transfers to the provinces through the Canada Health and Social Transfer (CHST).

Indeed, last year, for health care alone, we made the single largest investment in this government’s history.

At that time, we also said we would do more, as resources permit. Today, we make good on that commitment. We are announcing the transfer of a further $2.5 billion to the provinces to use over four years for post-secondary education and health care.

Furthermore, to meet pressing needs in our universities, colleges and hospitals, the provinces will have the flexibility to draw upon this new cash sooner – should they choose to do so.

As a result of this and last year’s budgets, the cash component of the CHST will rise from the 1998-1999 level of $12.5 billion to $15.5 billion next year – an increase of almost 25 per cent over just two years.

Therefore, the total annual support provided through the CHST – tax points and cash – will reach close to $31 billion next year – an all-time high.

We have guaranteed the provinces stable and growing funding for health care and post-secondary education.

Today, that is what we are continuing to do.

Nor is that the end of the story.

Equalization payments to the provinces will be $500 million higher this year than projected in last year’s budget.

As a result, Equalization transfers as well are now at an all-time high.

This means more money for less prosperous provinces for health care, education and other programs.

Sound Financial Management

Mr. Speaker, let me now turn to our plan for building a stronger economy.

Prior to the fall update, we consulted with a number of economists from Canada’s major chartered banks and four major forecasting firms.

This invited a national debate on our longer-term objectives – a debate based on a series of projections about the size of the budget surplus for each of the next five years.

These projections were sound. But we also know, especially for the later years, that they are just that – projections. They are bets on the future, not money in the bank.

Therefore, while we must always set longer-term objectives, we will continue to make decisions only on a rolling two-year basis.

We will also continue to build additional prudence into our planning and to set aside a $3-billion Contingency Reserve to protect against unforeseen events.

Let there be no doubt, this government will not repeat the mistakes of others and spend money we might not have, or raise expectations we cannot meet.

Nor will we abandon the balanced approach we have adopted from the beginning – an approach which recognizes that debt reduction, tax relief and spending on health, post-secondary education and other key priorities are not competing claims, but complementary components of a fair and effective plan.

Let me now turn to the debt.

Canada has not just eliminated its deficit. We are one of the few countries that is now reducing the absolute amount of its debt, and we will continue to do so.

Indeed, over the past two years, we have paid down the debt by more than $6 billion, resulting in interest savings of more than $300 million a year, every year.

As well, market debt – the debt issued in financial markets – has fallen even further. By the end of this fiscal year, we will have reduced it by close to $20 billion.

Even more importantly, Canada’s debt-to-GDP (gross domestic product) ratio, which measures the amount of debt against the size of our economy, has improved markedly. The lower the ratio, the more manageable the debt.

In 1995, Canada’s debt ratio was 71 per cent. Today it has dropped by 10 percentage points and should fall below 50 per cent by the year 2004.

Beyond this, the downward track must continue. We are still a long way from the 25-per-cent ratio Canada enjoyed in the late 1960s – the last time our books were in the black.

Mr. Speaker, economic growth has played an important role in Canada’s falling debt ratio. So has controlling government spending.

We have previously pointed out that federal government spending, as a percentage of GDP, is at its lowest level in 50 years.

The fact is that even after taking into account the measures to be outlined in this budget, program spending next year will be $4 billion lower than it was when we took office in 1993.

Let there be no doubt – we will control spending.

For instance, beginning with the time we balanced the books and looking ahead to the year 2001-2002, growth in program spending is projected to be in line with inflation plus population growth – the standard used by most economic commentators.

Having said that, the standard of living we enjoy does not come free.

For instance, fully two-thirds of all the new spending measures since we eliminated the deficit have been in the areas of health care, post-secondary education and innovation.

Furthermore, there are other fields where the Government must take action, areas where we have fundamental responsibilities at home and essential obligations abroad.

The crisis faced by farm families and communities across the country is real, and better short- and long-term solutions are required.

The RCMP faces new challenges in the area of organized crime and international terrorism.

The demands upon our military, whose men and women contribute so much at home and abroad, are increasing.

Within our borders, we must strengthen our immigration system.

Beyond our borders, we have an obligation to help the poorest of the world’s poor.

In each of these areas we are providing additional funding.

The New Economy

Mr. Speaker, let me now turn from the responsibilities of the present to the opportunities of the future. Let us address the new economy.

At this, the beginning of the 21st century, we have a unique chance to take hold of our destiny. The basic question we have to answer is: What are the choices we must make today that in 5, 10 and 20 years’ time will be seen as having made a critical difference in making Canada the land of opportunity?

Powered by the information revolution and a cascade of new technologies, distance is disappearing, borders are collapsing and a world once divided is now connected as never before.

Microprocessors and microchips, satellites, fibre optics and the Internet are changing the way we live, work and communicate. The result is the most significant economic transformation of our time.

Today, the strength of a nation is measured not by the weapons it wields, but by the patents it produces; not by the territory it controls, but by the ideas it advances; not only by the wealth of its resources, but by the resourcefulness of its people.

In such a world, successful nations will only be those that foster a culture of innovation. They will be those that create new knowledge and bring the product of that knowledge quickly to market. Our goal as a nation must be to lead the way.

Our goal must be to inspire a spirit of entrepreneurship, one that asks our people to reach higher and look further, one that encourages us to see the world as our market, but Canada as the place to live.

As a country, we are well placed – far better than most – to seize the opportunities of the 21st century.

But there is nothing inevitable about our progress.

If we are to capitalize on the opportunities of the new economy, both the private and public sectors have their roles to play.

The private sector must change its concept of risk. It must improve access to capital, give greater priority to start-up companies and exploit the full potential of new technologies like the Internet to capture markets in every corner of the globe.

Government, in turn, must reduce the regulatory burden. It must help fill the gaps in an economy which is increasingly moving from brick to "click."

What must government do?

It must equip Canadians to succeed.

That means:

An education system second to none.

Basic research – the raw material of the new economy.

Secure social programs that recognize that real progress is made by reaching for the top, not racing to the bottom.

And a tax system that is both fair and competitive.

Skills and Knowledge

Mr. Speaker, if we are to talk about a more innovative economy, we must begin with people.

Skills and knowledge join the ambitions of the individual with the potential of the country. They are the meeting place between social and economic policy – the best means available to us to narrow the gap between rich and poor.

That is why, in 1998, we introduced the Canadian Opportunities Strategy – a multi-part plan to expand access to knowledge and skills.

Last year, we built upon that foundation. And today, we build further.

First of all, as we have already discussed, this budget increases support to the provinces for post-secondary education by increasing the cash available through the CHST.

Second, we will follow through on the commitment made in the Speech from the Throne to create new 21st century chairs for research excellence.

These will be new research positions at Canadian universities, designed to attract the best researchers from around the world and to retain the best from across Canada.

Half of these positions will be directed to Canada’s leading scientists and half to the very best of the next generation of young Canadian researchers.

In October, the Prime Minister said, and I quote: "This investment…will truly make Canada a leader in the knowledge-based economy, and will truly brand Canada as a country that values excellence and is committed to success …"

This initiative will help Canadian universities not only to meet the standards set by others today, but to set new standards that others will have to meet tomorrow.

To this end, this budget provides $900 million of funding over five years for 2,000 new research chairs.

Third, as Canadians – especially young Canadians – turn more and more to the Internet as a source of information, it is important that they see their own reflection and hear their own stories.

Therefore, in this budget, we are providing funding to enhance the presence of Canadian cultural material on the Internet in both official languages.

Fourth, scholarships and bursaries are an important part of expanding access to higher learning. In order to ensure that more students receive their full value, we are increasing the tax exemption from its current level of $500 to $3,000.

Supporting Research

Mr. Speaker, research and development is the foundation for new products and processes. It is what smart companies always do. It is what smart countries must do.

Quite simply, we must ensure that within our borders we have a research capacity that is constantly pushing forward the frontiers of human knowledge.

In the 1997 budget, this government created the Canada Foundation for Innovation (CFI). To date, it has awarded $450 million to help post-secondary institutions, research hospitals and not-for-profit organizations to modernize their laboratories, their equipment and their technologies.

Almost half of its funding has been directed at health research.

The CFI is one of the cornerstones of our plan to support the new economy but if we do not act now, its funding will run out within two years.

Therefore, in order to enable it to extend its awards into the year 2005, this budget provides $900 million to the CFI, raising the Government’s total investment to $1.9 billion.

Mr Speaker, because health research holds such potential – to contribute not only to the quantity of our knowledge, but also to the quality of our lives – last year’s budget announced the creation of the Canadian Institutes for Health Research – an initiative that will transform the way research is done in this country.

Today, we take another important step.

Understanding how genes function opens the door to substantial progress in advancing the treatment of cancer and other life-threatening diseases.

Gene research will save the lives of many. It will enhance the lives of still more. It will surely form the basis for many advances in biotechnology, which many believe will be as important in the new century as computer technology was in the last.

For this reason, we are announcing today that we will commit $160 million to create the Genome Canada project – with five centres across the country, providing laboratory facilities for researchers from universities, government and the private sector.

Mr. Speaker, Canada is one of the world’s leaders in the field of biotechnology. However, we recognize that biotechnology, for all its potential, also raises concerns.

Canadians want to know that we understand and can manage its risks, that health, environmental and ethical limits will be identified and respected.

Therefore, this budget will provide funding over the next three years to ensure that as we receive the benefits of biotechnology, we also have the ability to ensure its safety

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