Annual lists 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

Notes for Remarks by Honourable Ralph Goodale, P.C., M.P. Minister of Finance at the Post-Budget Report 2004 to the Vancouver Board of Trade 

Mr. Dowle. Colleagues and distinguished guests. Greetings and good wishes from the Government of Canada.

It’s my pleasure to report to you today on the 2004 federal budget—my first budget as Canada’s finance minister, delivered in the House of Commons on March 23^rd.

There is a standard way by which the pundits in Ottawa measure a budget’s success. If the first 48 hours go pretty well with reasonable media and expert reaction, and then the budget essentially disappears, that’s a success! On the other hand, if there is a lingering barrage of controversy, you’ve got trouble!

Well, my first 48 hours were more positive than negative, and questions in the House of Commons barely lasted one day. I may now feel a bit like the Maytag repairman, but considering the alternative, that’s just fine with me.

But in case you’ve forgotten, the budget had two central themes.

First, an unmistakable, unshakeable commitment to strong fiscal discipline, prudent government management and careful public spending—with accountability, transparency and value-for-money as guiding principles.

And secondly, tangible progress on Paul Martin’s Agenda for a New Decade of Canadian Achievement—strengthening our precious social programs, advancing a thriving 21^st century economy, and building for Canada a role in global affairs that is influential abroad and a source of pride at home.

On the fiscal theme—one that gets finance ministers and lonely economists all warm with excitement—our position is rock-solid.

After 27 years of sinking deeper and deeper into deficits and debt, I had the honour of delivering Canada’s 7^th consecutive balanced budget. Never before has this been achieved since Confederation.

And internationally, while every other country in the Group of Seven (G-7) is currently operating deep in the red, Canada (and Canada alone) has been able to balance its books year after year—global turmoil and unprecedented domestic shocks notwithstanding.

To make sure we continue to stay in the black:

• we have again adopted cautious economic-planning assumptions going forward, consistent with the best advice of the private sector;

• we have reset our Contingency Reserve at a full $3 billion per year to provide a cushion against the unpredictable, and we have added another $1 billion in extra prudence to further secure our balanced position;

• if that extra prudence proves unnecessary, we will release it to help fund the country’s most pressing priorities;

• if the basic $3 billion in the Contingency Reserve is not needed, it will go to pay down the public debt;

• and finally, for the first time, we have established the clear goal of bringing Canada’s debt-to-GDP (gross domestic product) ratio down to 25 per cent within 10 years. (The ratio reached a peak of 68 per cent in the mid-1990s. It now stands at 42 per cent, and we want to keep it falling on a steady downward track.)

I mentioned that reaction to the budget has been far more positive than negative, but let me pause here to respond to one criticism—from those on the left of the political spectrum who say our Contingency Reserve, our prudence and our debt reduction plan are entirely misplaced or at least excessive. I respectfully disagree.

The amounts we have set aside to guard against the unforeseeable add up to just 2 per cent of our expected revenues. In other words, a simple error in the uncertain world of economic forecasting—either on the money coming in or on the expenditures going out—a simple error of just 2 per cent would drive our balance sheet from black ink to red. So, it’s not an excessive cushion.

Furthermore, what does that cushion get you? Just look at 2003–04, the year just ended. When the year began, everyone was expecting Canadian economic growth in the 3.2-per-cent range.

And then along came severe acute respiratory syndrome (SARS) and bovine spongiform encephalopathy (BSE) and a hurricane across Atlantic Canada and massive forest fires in British Columbia and a big power blackout in Ontario and 20-per-cent appreciation in the value of the Canadian dollar—all in the space of six to eight months. Entirely without precedent and without warning.

And it slashed Canada’s growth rate in half, from 3.2 per cent to 1.7 per cent—meaning lost economic output of some $24 billion and lingering consequences into 2004 and 2005. So, it’s a darn good thing we had some shock absorbers in place.

Because we were prudent, we were able to deal with the extra burden of the SARS outbreak (more than $300 million); we were able to help farmers and ranchers cope with the painful impacts of BSE (about $1.5 billion); we sent an extra $2 billion to the provinces as additional money for health care; we directed $500 million into new public health programs, post-SARS; and we expect $1.9 billion to remain to pay down debt.

But some would still ask: Why not just spend it all, right now, with nothing going against the debt? My answer is fourfold.

First, the vast majority of Canadians think reducing debt is just a good and sensible thing to do—for themselves and for their government.

Second, every dollar we can save from debt servicing is a dollar better devoted to things like health and education. To date, we have freed up more than $3 billion per year by paying down some debt every year since 1997, and we need to keep expanding our freedom in this same way.

Third, there is a huge demographic change coming at us, beginning about 2011. The baby boomers will then be retiring—the biggest generation ever—with a smaller generation following behind them. We will have fewer people in the workforce paying taxes to support our social programs, and more people will be relying on those same programs—especially health care. The more old debt we still have to carry in 2011 (just seven years ahead), the less flexibility we’ll have to respond to an aging population.

And fourth, it was our generation that ran up that debt (some $510 billion), and we have a moral obligation to bring it down—at least to reduce the heavy mortgage that we have placed on the futures of our children and grandchildren.

With the greatest of respect to those who say "ignore the debt and just spend," I sincerely believe there are compelling reasons for a more prudent approach to budgeting and debt reduction.

I also believe in government management that truly reflects integrity, transparency, accountability and value-for-money.

That is why I announced the re-creation of the Office of the Comptroller General of Canada, with on-the-ground professional comptrollers in every department of government. Plus, a stronger internal audit system throughout government. Better information systems, including the automatic disclosure of government contracts. And new standards for the governance of Crown corporations.

In addition, as a policy matter, we will systematically re-examine every form of government expenditure—testing for relevance and for excellence. And over the next four years, we expect to identify at least $3 billion in current low-priority spending that can be made available for reallocation to the higher priorities in Mr. Martin’s new Agenda—that is, finding money internally to invest in progressive change.

Now, let me turn to that new agenda for change—the budget’s second major theme.

It’s an ambitious agenda—more than one budget alone could deliver, the work of more than just one term in a government. But in this budget, we set the direction and made important strategic down payments to get things started. And we will continue to build momentum and to increase our investments—budget after budget, year after year.

For communities—$7 billion over 10 years in GST rebates to municipalities. And further work on fuel tax sharing. Plus accelerated infrastructure funding. Support for the social economy, the voluntary sector, people living with disabilities, Aboriginal Canadians, seniors and new immigrants. And the largest investments ever made by any government in cleaning up contaminated sites and further protecting the environment.

To advance Canadian innovation—Increased funding for our three science granting councils and for Genome Canada. More federal help with the indirect costs of university research. New venture capital funding and support for the commercialization of new ideas. Better capital cost allowances. And stronger support for small business.

On Canada’s place in the world—While a thorough review of foreign and defence policy is underway, we are steadily increasing our budget for international assistance (honouring Canada’s commitment to the poorest countries of the world), and we are rapidly accelerating the acquisition of strategic new equipment for the Canadian Forces. For military families, we are providing a complete income tax exemption for those who are serving on high-risk missions overseas.

Learning, in all of its dimensions, is surely a Paul Martin priority—over this coming Decade of Achievement, and right now!

This is where my budget made some critical and creative investments—in measures that can be truly transformative in people’s lives.

Starting in early childhood, we will speed up our contributions to early learning and child care.

Secondly, to help low-income families prepare well in advance for their children’s education, we are creating a Canada Learning Bond to kick-start a registered education savings plan (RESP) for every newborn Canadian child who needs this special boost—some 120,000 this year alone. On its own, each bond should be worth at least $3,000 when the child is ready for post-secondary education.

Plus, we are enhancing Canada Education Savings Grants. For low-income families, the grants will be doubled. So if they can contribute as little as $5 a week to their RESP, the federal grant and our Learning Bond will combine to produce an education nest egg per child of some $12,000. (For middle-income families, the Canada Education Savings Grant is being enriched by 50 per cent).

We are also introducing new first-year tuition grants for students from low-income families and for the disabled. And we are increasing the value of student loans, allowing computers to be included among eligible expenses, reducing the dependence upon parental income and improving measures to relieve student debt.

All in all, our incremental investment in learning will exceed $400 million per year, ongoing. And it must continue to grow over time.

In this knowledge-based and skills-intensive world, we will thrive on the quality of our homegrown Canadian brainpower. Learning, throughout every lifetime, will be the key to successful living. And access to education will be a crucial determinant of the well-being of our society—including our economic performance and our international competitiveness.

On health care—My budget delivered on our promise to provide another $2 billion to the provinces, bringing the value of the 2003 Accord on Health Care Renewal to $36.8 billion from the Government of Canada—including a growth rate in federal funding of 8 per cent per year over the coming five years.

In total, combined government spending on health in Canada today stands at about $87 billion per year. The federal portion totals about $34 billion. That’s close to 40 per cent, all-in. But we know it will take more.

That is why the Prime Minister has launched a focused process to deal with the issue of health care sustainability, culminating in another First Ministers Meeting this summer—to couple more federal money with a concrete plan for meaningful, systemic change, so waiting times can be reduced and Canadians can be assured of timely access to high-quality care.

In the meantime, we are moving forward on the urgent requirements of our Canadian public health systems—learning from the SARS experience.

The budget directs more than $1 billion to this end, two-thirds of it brand new. It includes federal funding for surge capacity, laboratories, surveillance systems, research, information technology and enhanced immunization programs for children.

At this point, let me respond to a second direct criticism of the budget—this time from those who would argue for dramatically deeper tax cuts, right now.

First, let me say that within the fiscal room I have to manoeuvre, I am always interested in finding ways to reduce the tax burden on Canadians and strengthen our competitiveness.

Secondly, I would note that we are still in the final year of our previous federal tax reduction plan which will, in 2004, generate cumulative federal tax savings for Canadians of $31 billion. Close to $6 billion of that total is a brand new saving this year. And two-thirds of the saving is going to individuals, and especially low- and middle-income families.

In my budget, we were not silent on taxes. We have provided further tax relief for the disabled and for caregivers, for students, for the military, for municipalities, for small businesses, and to encourage the adoption of the newest computer technology.

But the possibility of more general tax cuts in Budget 2004 was tempered by some large fiscal pressures confronting us in the immediate future on three critical fronts—health care, learning and municipalities. These are clearly the leading priorities of Canadians, and the Government of Canada will need to have the capacity to respond.

With respect to learning, we must continue to make all forms of post-secondary education more readily accessible. For municipalities, we must work with provinces to share a portion of fuel tax revenues with municipal governments, or find an effective fiscal equivalent.

On health care, if the Prime Minister is able to achieve the consensus on sustainability—which he is determined to do this summer—the Government of Canada must be in a position to bolster its cash contributions.

And there are other prominent requirements on the horizon—like the transformation of Canada’s relationship with the Aboriginal peoples, the expected requirements for our armed forces, the nation’s preparations for the 2010 Olympics, and now of course, another "unpredictable," the implications of the avian flu.

While the demands are numerous and the pressures large, we are determined to accomplish our priorities in a fiscally responsible manner—consistently balancing our books and keeping overall federal spending growth within the growth rate of the economy.

As we work our way back from the unexpected shocks and tribulations of 2003—recovering our first place position among G-7 economies—I have enormous confidence in Canada’s future.

This nation has so much potential and so much to offer. From Kofi Annan at the United Nations to Bono of U2, there’s a consistent message about how much the world needs "more Canada."

Our diversity. Our tolerance. The unique success of our pluralism. Our talent for accommodating human differences. Finding strength in a complex Canadian mosaic. All of this serves Canada very well.

As does our economic resilience. Our capacity for scientific discovery and new technology. Our fiscal responsibility and discipline.

A nation as fortunate and successful as ours should always aim higher and reach further. We must never be content with the status quo, nor fear the challenge of great expectations.

That is the essence of the Prime Minister’s Agenda—a decade of achievement unmatched in Canada’s history!