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Ottawa, January 27, 2004
2004-005
Speech by the Honourable Ralph Goodale, Minister of Finance, to the Toronto Board of Trade
Toronto, Ontario
Check Against Delivery
I want to begin by thanking the Toronto Board of Trade for its kind invitation to be here today. This organization has long been a strong voice of enterprise and economic progress, not only on issues of concern to the city of Toronto or the province of Ontario, but also on major national issues as well.
And, I am pleased to have an opportunity to get together with you early in my tenure as Canada’s Minister of Finance.
I came to this job (just six weeks ago now) believing in a core set of propositions that will guide me in the months and years ahead—propositions to which the vast majority of Canadians also subscribe.
Canadians instinctively understand that we cannot have a strong economy without a secure society—nor a secure society without a strong economy. Both are essential building blocks for a greater Canada.
Canadians also understand that good government is about living within our means. That every dollar counts and must be spent wisely and respectfully. That good government is about making smart choices—starting with a balanced budget and then finding and maintaining the right "balance" among the many competing economic and social priorities of Canadians.
Over the past few weeks, to get ready for my first budget, I have been listening to the views of Canadians from one end of this country to the other, including here in Toronto, about how to achieve the best possible fiscal, social and economic balance for Canada. It’s going to be an intriguing challenge.
I well remember the phone call I received from the Prime Minister in late November inviting me to become finance minister. He said, "The economy has taken some really tough blows this year—SARS, BSE, the power blackout, massive forest fires, a hurricane, floods and a drought. The dollar has appreciated at the fastest rate in Canadian history. Exports are down. Expenses are up. Revenues are down. GDP growth is slower than expected. And, our surplus is just about gone. So, how would you like to be Minister of Finance?"
Well, who could turn that down?
The challenges we now face are ones that we may not have sought, but they are challenges we must address nonetheless—to safeguard the many hard-won gains that have accrued to Canada since we first balanced the federal budget in 1997.
Canadians have worked too hard and come too far to allow our progress to be jeopardized. And, how we deal with the fallout and recovery from all of this past year’s extraordinary circumstances will be an important test of our strategy and skill in managing government and the economy in this post-deficit era. Will we slide back into old paradigms and practices, or can we champion new means and methods of governance that will avoid the pitfalls of the past?
I intend to choose the latter.
Here’s what we have to deal with. According to private-sector forecasters, economic growth in Canada in 2003 was a disappointing 1.6 per cent—half of what had been originally expected, due to all of those unexpected shocks. That’s the bad news.
The better news is that the Canadian economy at the start of 2004 is showing some signs of improvement.
Job growth, for example, picked up steam over the final four months of 2003, with the creation of 219,000 new jobs—the majority of which were full-time positions. As a result, the proportion of the working-age population with a job hit an all-time high of 62.7 per cent in December.
This employment growth would suggest substantial underlying confidence in the Canadian economy. Consumer demand remains strong and business investment is rising, boosted by low interest rates and inflation that remains well within the target band set by the Government and the Bank of Canada.
All of these factors, together with stronger growth in the U.S., contributed to the predictions in late December by private sector forecasters that Canada’s GDP will grow by about three per cent this year. But, that is still below the 3.5-per-cent growth in 2004 which those private sector economists were projecting at the time of the 2003 budget. And, they cited the rapid appreciation of the dollar as the main downside risk to their projections.
Last week, reflecting this risk, the Bank of Canada revised its 2004 growth forecasts down from 3.25 per cent to just 2.75 per cent. All of which means that the Canadian economy is going to take a while—certainly more than all of 2004—to make up for the economic output that we lost in all the tough hits we had to absorb in 2003.
Given the range of views, before we introduce the budget, we will again survey predictions for economic growth by private sector economists for this year and beyond. The average of their revised forecast will form the basis for our fiscal planning in the budget.
So what’s the bottom line to all this?
Quite simply, the Government of Canada faces lower revenues than expected and a smaller surplus than we had anticipated for 2004–05 and subsequent years. This discrepancy—between previous projections and today’s reality—means we could face a real challenge to balance our books and implement a new agenda for the future.
On balancing the budget, Canadians have spoken loud and clear and, believe me, we have heard them. I can assure you today that we will not go back into the red. We will balance the federal budget or better this year and as far into the future as we can presently foresee.
To do that, and also to move forward on our agenda, we have to look at ways to refocus our spending. Doing things differently! We cannot sustain government spending that grows persistently faster than growth in the economy overall as it has been doing in recent years. And we have to become more aggressive and focused in moving existing spending from lower to higher priorities.
But setting a goal is easy. What’s difficult is charting a course to take us there. Tough decisions are required—and we have already begun to make them.
In December, for the balance of this fiscal year, we have frozen new government capital spending and launched a detailed review of every government expenditure. We have also capped the size of the public service.
My colleague, Reg Alcock, the President of the Treasury Board, has been given the job of securing one billion dollars in annual savings for reallocation in the 2004–05 fiscal year and ongoing, as outlined in the 2003 budget.
What’s more, the Government’s Expenditure Review Committee has set to work, conducting an extensive examination of all government spending. Its mandate is simple: make sure that every dollar spent is a dollar well spent. Canadians do no less in their own households; they deserve no less from their government.
That means every minister will face some tough questions about the programs and services their departments offer. Do they still meet the needs of Canadians? Can things be done differently? Or better? Where can savings be realized? We need to make sure that taxpayers are getting the modern contemporary results they require, not simply the consequences inherited from earlier times.
No one should doubt our commitment to this effort. Where programs or services have outlived their usefulness, or could be done more efficiently elsewhere, they will be reduced, realigned, or eliminated.
We need to take a much more results-oriented approach to how we use taxpayer money, one that delivers greater accountability, more transparency and better value for each dollar spent. And we need to make this not simply a "passing phase," but part of the very core and culture of government. For this job to be done well, it must become a job that is done continuously on an evergreen basis.
And we must move forward on other fronts as well. For example, while we have made tremendous progress in lowering our debt-to-GDP ratio—from 68 per cent down to about 44 per cent over the last nine years—we are still far from the 20 per cent levels of the mid-1970's.
Now I know the debt-to-GDP ratio sounds like one of those topics that only a finance minister (and the bondholders) could get excited about. But the fact is that reducing our nation’s debt has yielded substantial—and ongoing—savings to Canadians. And flexibility!
Since balancing the books, we have paid off $52 billion of debt. That translates into interest savings of about $3 billion each and every year, money that is now being reinvested in priority areas such as health care, learning and innovation.
Or, to look at it another way—when we go through tough patches, as we did last year, the wisdom of debt reduction really comes to the fore—without those annual savings of $3 billion, we’d be back in deficit again, right now.
What’s more, looking forward, reducing debt is extremely important in light of our aging population, the soon-to-retire baby-boomer generation, and the inevitable new pressures they/we will impose upon things like health care costs.
So let me say very clearly that a steady pattern of debt reduction will continue to be an ongoing objective of this government and this finance minister.
This approach continues to distinguish Canada from every other G-7 (Group of Seven) country. When faced with the global turmoil and uncertainty of recent years, those other nations have fallen back into substantial deficits and rising debt burdens. Every single one of them!
I am proud that Canada—and Canada alone—has held the line; that we have not pushed that increasing financial burden onto future generations.
These, then, are some of my convictions and commitments—no return to the days of deficit; getting better value for money spent and keeping the growth of spending to that of the economy as a whole; lowering taxes as resources and common sense permit; and keeping our debt-to-GDP ratio on a reasonable downward track.
But, I also know that government and governing are about more than fiscal rules and balance sheets. The financial principles I have talked about are not "ends" in and of themselves—they need to be engaged as "means," "tools" and "enablers" to allow us to achieve the larger social and economic purposes to which Canadians, as a progressive people, aspire.
We did not eliminate the deficit for the sake of mere bookkeeping symmetry, where debits equal credits. We did it because balancing the books gives us the means and the freedom to achieve so much more.
And today, despite the sticky patch we are just now coming through, the progress we have made enables us to turn to greater goals, to doing more of the things that matter—to strengthen the social foundations of our country, to build a 21st century economy, to ensure Canada a place of relevance, influence and pride in the world.
To be sure, all this will not be accomplished in one budget or two. The pursuit of these goals is the work of a full mandate—maybe more. And, our immediate task is to identify the right priorities, develop a concrete plan for achieving them and then make as much progress as we can year after year.
Let me just briefly touch on where we want to make such progress. In some ways, I hesitate to distinguish between strengthening the social foundations of our country and building a dynamic 21st century economy because, more than ever, the two go hand in hand.
In today’s competitive world, the most important resource any nation has is its people—and the start we give our children, the education we give our students, the support we give our families, the hope we give to the underprivileged, and the health care we provide to all our citizens will determine our progress and define our future—both socially and economically.
Canadians have told us that improving our health care system should be the number one priority for both federal and provincial governments. They want to see real, practical and measurable progress. And, it’s more than just money. It’s also about systemic reform. Canadians don’t want to see bickering while waiting times lengthen. They want to see politicians pointing at solutions, not at each other.
We agree. That is why we have said that, despite the tight financial constraints we face this fiscal year, medicare will have first claim on any surplus we do have. Short of going into deficit, we will do everything in our power to provide the provinces and territories with up to $2 billion in additional health care funding this year.
Perhaps more fundamentally, we want to end "the blame game" with a new approach to federal, provincial and territorial relations. Within hours of assuming his new leadership mantle, Mr. Martin met with other first ministers in Regina to set a new tone. And, in a couple of days, he will be meeting with them again to discuss ways of improving cooperation and delivering better health results for Canadians, including shorter waiting lists and greater access to health care services.
This new spirit of cooperation must be extended to other key areas as well.
For example, building the social foundations of Canada also means a New Deal for Municipalities—so, together, we can better tackle tough issues like basic infrastructure, transportation, affordable housing and environmental degradation.
As many of Canada’s mayors have noted, everything cannot be accomplished overnight. But, we need to make a strong start, and I want to send a clear signal in my first budget to municipalities across this country that we are serious about doing our part federally—in concert with provincial and local partners. We all need to be in this new deal, together. It’s not just a fiscal deal. It must be qualitatively transformative.
Municipalities are the level of government closest to Canadians. We need to ensure that they can be strong engines of economic growth, attractive centres of innovation and investment, magnets for skilled workers on an international scale. But, also safe, healthy and interesting places in which to live and work and raise families, and ultimately retire in dignity and security—places that offer a high quality of life.
Also in this "cross-over" between social and economic priorities is the 21st century challenge of learning. In a knowledge-based, technology-driven and skills-intensive world, we will thrive on all fronts by the calibre of our brainpower. And, a key issue is broad-based access to the tools and the opportunities to enrich it.
Learning must be seen as a lifelong continuum. Early childhood development. Primary and secondary schooling. Basic literacy. Formal post-secondary education, including universities, but also many other PSE institutions in the trades and technical fields. Apprenticing. Interning. On-the-job skills development.
There are special issues about the inclusion of new immigrants to Canada. About the treatment of people with disabilities. About the engagement of Aboriginals.
There are also delicate jurisdictional sensitivities that must be carefully respected. But, there can be no shrinking from the learning priority. Because, a successful 21st century economy—one that is distinguished by its prosperity, social responsibility and sophistication—will be powered by new ideas and fired by innovation.
We must continue our drive to make Canada an increasingly attractive venue to pursue world-leading research. And, we need the means and incentives by which to translate the fruits of scientific discovery into successful enterprise—the commercialization challenge.
This will be crucial to our ability to compete and to enhance our productivity. We must strive to make our best the world’s best.
Another of the keys to expanding opportunity is creating the conditions that allow businesses, especially small business, to thrive. And one area where we simply must do better is regulatory reform. Making our various regulatory systems more efficient allows small business to become more competitive and productive. More efficient regulatory regimes will also encourage much-needed investment from abroad, further boosting our productivity.
And yet, as those of you in this room know better than most, it is tough to attract investment for a 21st century economy when you have to rely on a financial securities regulatory system based on a 19th century vision.
Last month I received the report of the Phelps Committee, which looked at ways of improving the present regime. That Committee, as you know, recommended the creation of a single securities regulator—not a "federal" regulator, but a truly national and inclusive one—a recommendation endorsed by many of you in the business community.
There is simply no doubt that the present system (the status quo) is cumbersome, fragmented and expensive. It discourages investment, increases costs and creates delays. It does not meet global standards. It does not meet 21st century standards. I am more than ready to work with the provinces and all interested parties to see how we can best remove the impediments the existing system creates for Canadian entrepreneurs.
Let me touch just quickly on one other key government priority—and that’s ensuring Canada a place of pride and influence in the world.
That priority begins—but certainly does not end—in our relationship with the United States, our closest neighbour, our largest trading partner, and the world’s only superpower.
The tragedy of September 11, 2001, had a profound effect on Americans, and Canada needs to understand the new realities. Nor should we forget that among those killed on that awful day were 25 Canadians. And so we need to act in our own self-interest by working with American partners to strengthen our common border and promote a safer and more secure North America—but always with a keen eye open and alert to the imperatives of Canadian sovereignty and the rights of Canadian citizens.
Beyond North America, we are living at a time when the world is growing smaller and more integrated; where nations are coming together on a level and to a degree unprecedented in human history.
And yet, in many ways, the structures that govern our interactions have not kept pace. We are still struggling, for example, with globalization and how to make it work for the benefit of all. As a result, the gap between the developed and the developing world continues to grow, with all of the potential for resentment and instability that that brings.
This is one of the defining challenges of our time. As a dedicated multilateral player at the United Nations, as a member of influential groups such as the G-7 and the G-20 (Group of Twenty), and given our longstanding ties with nations throughout the Commonwealth and La Francophonie, Canada is uniquely placed to serve as a bridge between the "haves" and the "have-nots" of our world—to influence events and be relevant to the times.
We can—and we must—help to build a safer, fairer and more equitable world. We can—and we must—rejuvenate Canada’s place of relevance, influence and pride on the world stage.
These then, are some of the priorities we have set: securing the social foundations of our country, building a truly 21st century economy and ensuring a stronger, more useful role for Canada in global affairs. I wanted to bring these issues to this audience today because I wanted to challenge you.
The Prime Minister has spoken about doing politics differently and I believe this goes well beyond Parliament or traditional political structures. It also extends to how we engage the public in the great issues of the day—and that includes you as business leaders.
There may have been a time when business could concern itself solely with managing its own affairs. But no longer. Today’s reality requires businesses to be engaged in the public life of this country not only on taxes and regulations, but also with respect to the social issues and the international considerations which are inextricably connected.
That’s because success is about much more than controlling costs and maximizing profits. It is about unleashing human potential and creating opportunity. It’s about communities that attract and hold the best brains and thrive on their sophistication.
It’s about clean air and clean water. It’s about reliable roads and efficient transportation systems. It’s about education—at every level and through every stage of life.
And, it’s about constructive, effective global engagement in a harshly competitive, interdependent and sometimes dangerous world.
That is why the agenda of business can no longer be simply the business agenda—not anymore.
And so I encourage all of you—and business leaders across this country—to take the broader perspective and to become thoroughly involved in all the great issues of the day.
Contribute your wisdom, your energy and your resources to developing policies that speak not only to the bottom line, but to the building of a better land and a better world.
Canada needs not only your good common sense, but your sense of the common good.
I believe our country stands today in a position to aim higher and to reach further than ever before—to launch a whole new decade of achievement.
We all need to work together as never before, to stake out Canada’s new ground in the new economy, to build a unique nation of compassion, position, prosperity and purpose, with a future of distinction among the nations of the world.
Thank you.
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| Last Updated: 2004-11-18 |
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