Budget Speech 1999: 3
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Archived - Equipping Canadians to Succeed in the 21st Century: Knowledge, Skills and Innovation

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Mr. Speaker, the fundamental economic challenge before us is to complete the task of putting in place the framework for a stronger economy, an economy where incomes are growing, where employment continues to increase, where the Canadian standard of living and quality of life are on the rise.

As the Prime Minister has said, and I quote: "Implementing a strategy to achieve a higher standard of living for all Canadians always comes back to dealing squarely with the same deeply rooted challenge: enhancing Canada's long-term productivity."

Mr. Speaker, greater productivity is about one thing. How to bring our human, natural and financial resources together to produce higher incomes, better jobs, and an enhanced quality of life for all Canadians.

The fact is, much of our economic challenge can be summarized in two words -- knowledge and innovation. These are the new raw materials of the 21st century economy.

They are the key to a country that can race forward when the global seas are calm, and ride out the rough weather safely when they are not. Innovation and knowledge are two sides of the same coin -- the true hard currency of the future, the sources of sustained growth.

Education is critical, for it equips Canadians with the skills, the aptitude and the attitude to seize the new opportunities the future has to offer.

That is why, in this budget, we have invested so much in supporting those engaged in post-graduate research.

However, what we seek is not simply knowledge for the few -- but for the many.

That is why in the 1998 budget we launched the Canadian Opportunities Strategy, a seven-part plan to improve access to skills, training and higher education.

Let me simply describe the results of one of those initiatives since its inception one year ago -- the Canada Education Savings Grant -- a cash contribution from the federal government put directly into Registered Education Savings Plans -- RESPs -- established to help families save for a child's future.

This program has become a huge success in its first year alone.

In the 25 years since their inception in 1972 through to the end of 1997, there was a $2.5-billion net accumulation in RESPs. However, in 1998 alone, with the introduction of Canada Education Savings Grants, the total soared to $4 billion.

This is only the beginning. RESPs are now becoming as essential to saving for education as are RRSPs for retirement.

This and the other measures in last year's and this year's budgets are anchored in a very straightforward proposition: that every Canadian who wants to learn should have the opportunity to do so.

But as we work to develop that opportunity, let it also be clear that Canada's challenge begins well before the age of formal schooling. Our children will only seize the opportunities to learn if they are nurtured from the very earliest age to develop a readiness to learn. That is why in previous budgets we bolstered the Community Action Program for Children, why we are investing in Aboriginal Head Start, why, in this budget, we have expanded the prenatal nutrition program and why, as we will see later, we are increasing the Canada Child Tax Benefit for low- and middle-income families. Going forward, we must build on these initiatives still further.

Earlier, Mr. Speaker, I referred to knowledge and innovation as the flip sides of the same coin. Let us now turn the coin over.

From lab bench to factory floor, from farm to forest, innovation is the engine that creates jobs.

Over the past several years, we have put in place a new framework for innovation -- a strategy that we have implemented step by step in each of our budgets.

That strategy has three parts -- the creation of knowledge, the dissemination and sharing of knowledge and the application of knowledge -- its commercialization, getting ideas out into the market. This budget takes further action in each of those three areas.

The creation of knowledge

Mr. Speaker, in terms of the creation of knowledge, breakthroughs don't just happen. They require sustained investment.

As mentioned earlier, in 1997 the Canada Foundation for Innovation was created with an $800-million investment whose purpose was to fund new and modernized research infrastructure at our universities, colleges, research hospitals and not-for-profit research institutions.

Based on its very clear success -- and the crucial role it is now playing -- this budget allocates a further $200 million to the Foundation.

Through partnerships, the total federal investment in the Foundation will translate into $2.5 billion in world-class facilities and equipment needed to make world-class discoveries -- discoveries that will open the door to exciting commercial opportunities and jobs down the road.

Mr. Speaker, research and access to knowledge support one another. Therefore, building on the increased funding announced in last year's budget, the government's granting councils and the National Research Council will be provided more than $120 million in further support, over and above that announced for health, over the remainder of this fiscal year and the next three years.

Finally, many believe that Canada has the capacity to become even more of a world leader in the field of biotechnology, one of the fastest growing of all new technologies.

This has huge potential applications ranging from agriculture and forestry to manufacturing and medicine.

As a result, we are committing $55 million over the next three years to further support biotechnology research in science-based government departments.

Dissemination of knowledge

Mr. Speaker, in terms of the dissemination of knowledge, we have set a goal of making Canada the most connected nation in the world by next year.

Thanks to SchoolNet, we are on course to see Canada's 16,000 public schools and 3,400 public libraries connected to the Internet by March 31 this year.

Up to 10,000 rural and urban communities will be connected through the Community Access Program in two years.

Building on these efforts, and following the advice of a Blue Ribbon Panel announced by the Prime Minister last year, this budget provides $60 million over the next three years to fund "Smart Communities" demonstration projects. "Smart Communities" use information technology in new and innovative ways to empower their residents, institutions and region as a whole. Our goal is to establish at least one of these projects in each of our provinces, in the North and in an Aboriginal community.

In addition, this budget provides $60 million over five years to build GeoConnections to ensure that Canada stays at the forefront of mapping and its applications. This initiative has tremendous potential for a whole range of industries and services -- including search and rescue, agriculture, the natural resources sector and our efforts to deal with climate change.

Commercializing knowledge

Mr. Speaker, in terms of value-added job creation, we must accelerate the furtherance of innovative technologies in all sectors of the economy.

The Networks of Centres of Excellence have been a successful part of this endeavour. They now link more than 900 researchers in 60 universities with over 400 companies across Canada.

In this budget, we are increasing their funding by $30 million per year -- an increase of more than 60 per cent.

This should support the creation of up to eight new Centres of Excellence, in areas ranging from information technology to molecular science.

In 1996 we established Technology Partnerships Canada to support industry in turning promising ideas into successful products. These investments focus on aerospace, environmental technologies, and enabling technologies such as advanced manufacturing and materials.

Today, we are announcing that the funding for Technology Partnerships Canada will be increased by $50 million per year.

We are also providing $50 million to the Business Development Bank of Canada to strengthen its ability to lend to small- and medium-sized businesses in knowledge-based export fields -- firms that would otherwise have difficulty gaining access to capital.

In summary, the measures we have announced today, above and beyond health research, amount to more than $1.8 billion in additional resources over the remainder of this fiscal year and the next three years for knowledge, innovation and support for employment programs.

These investments are all directed towards a single overarching goal -- and that is to provide Canadians with a more diversified, more innovative economy in which to achieve their goals.

The fact is, as long as we are too dependent on ideas developed in other countries, our economy will remain unduly dependent on those countries. If we are to have a stronger, more innovative private sector, we simply must generate more knowledge and demonstrate greater initiative here ourselves.

Ours must be a country that excels in turning ideas into the value-added jobs of the future -- in rural Canada as well as urban Canada -- everywhere and in everything we do. Ours must be a country that has excellence as its goal. That is the route to a higher standard of living and a better quality of life for all Canadians in the 21st century.

Reducing Taxes for Canadians

Let me now turn to the next part of our plan -- reducing taxes, which is also part of our productivity agenda.

Mr. Speaker, we want to reduce taxes -- as quickly and as broadly as we can.

As demonstrated last year, now that the books are in balance, we will get taxes down. We will do so in every single budget -- and we will do so without prejudicing the soundness of our finances or the security of our society.

Our goal and our commitment is to ensure that Canadians keep more of the money that they earn. After all, they worked for it. It's theirs.

The principles of our tax policy are clear.

First, our tax system must be fair. Tax reductions must benefit first those who need it most -- low- and middle-income Canadians.

Second, broad-based tax relief should focus initially on personal income taxes. That is where the burden is greatest -- where Canadian taxes are most out of line with certain other countries.

Finally, because our debt burden is so high, broad-based tax relief should not be financed with borrowed money.

We want tax relief to be permanent -- not temporary. The worst thing we could do would be to provide structural tax relief one year -- only to have to rescind it the next -- as a result of the country going back into deficit.

Mr. Speaker, in our last budget, with deficit elimination finally secure, we were able to put in place overall tax relief directed at low- and middle-income Canadians.

We said then that we would build on those measures in future budgets as resources permitted -- that as soon as we could afford it, tax reductions would be broadened and deepened. In this budget, we are following through on that commitment, building on the initiatives taken last year.

First, personal tax credits ensure that no tax is paid on a basic amount of income. They make the tax system more fair.

Last year, we increased the amount of income that could be earned before paying one penny of tax by $500 for singles -- and $1000 for couples and families.

As a first step, this measure was targetted to benefit low-income Canadians. The full amount of the benefit started to be reduced at about $8,000 of income and was completely gone at $20,000.

In this budget, effective July 1, 1999, that tax relief is being extended to all taxpayers.

Next, effective July 1, we are increasing the amount of income that Canadians can receive without paying taxes by a further $175.

As a result of these measures, the amount of income all Canadians can earn tax-free will now be $675 higher than before the 1998 budget.

This more than offsets the effect of inflation on the basic credits since 1992.

While all taxpayers will benefit from these measures, the largest proportionate benefit will go to low- and modest-income Canadians.

For example, due to the measures in last year's budget, 400,000 lower-income Canadians no longer pay income taxes. The measures just announced will ensure that 200,000 more Canadians will also be removed from the tax rolls.

Mr. Speaker, in 1986, the previous government introduced a 3-per-cent general surtax -- a tax on tax -- in order to help bring the deficit down.

Last year, with the books in balance, we began to eliminate that surtax, starting with taxpayers earning less than $50,000, and reducing it for those earning between $50,000 and $65,000.

This year, we complete the job. As of July 1, the 3-per-cent surtax will be eliminated for each and every Canadian taxpayer.

Mr. Speaker, we have spoken about the support we are providing low-income Canadians through reducing their taxes. But there are many other ways in which we can provide -- and are providing -- assistance to families with children.

Through the creation of the National Child Benefit System, the federal and provincial governments are embarked on a major co-operative effort to support families and reduce child poverty. The purpose is to ensure that children in this country are always better off when their parents join the workforce.

In 1997, we announced the first federal contribution to this national endeavour -- $850 million which began flowing last July, increasing financial support to over two million children and their families.

In the 1998 budget, we announced that a further $850 million would also be allocated, following consultations with the provincial and territorial governments.

These discussions have concluded in agreement. We are announcing, therefore, that the Canada Child Tax Benefit payments for low-income families will be increased by a further $350 per child. This will be done in two stages -- July 1, 1999 and July 1, 2000.

This means, for example, that a family with two children that earns $20,000 will receive an increased benefit of $700 for a total of $3,750 per year.

Taken together, our two previous budgets provided $1.7 billion for the children of low-income families.

Mr. Speaker, building on this effort, we are announcing today that a further $300 million is being allocated to enhance the Canada Child Tax Benefit for modest- and middle-income families.

As a result, 100,000 more families will become eligible for all or part of the base benefit.

Let me illustrate the impact of the 1998 and 1999 budgets on typical Canadian families.

Consider the impact on a middle-income family -- a family of four with two incomes totalling $50,000.

That family received $183 in tax relief as a result of the 1998 budget. This budget provides an additional $373 to that family -- $189 through the increase in credits and $184 in increased Canada Child Tax Benefit payments.

Putting last year's and this year's budgets together, that means $556 more for such families -- a 15-per-cent reduction in their net federal tax. And this does not include any consequential reductions in provincial taxes.

Consider as well a one-earner family of four earning $30,000. That family received $145 in tax relief from the 1998 budget.

As a result of today's budget, that family will receive $353 more -- $169 through the increase in personal credits and $184 in increased Canada Child Tax Benefit payments.

In fact, when the GST credit is included, this means that as a result of measures in this and the last budget, such families will now pay no net federal income tax whatsoever.

Mr. Speaker, in closing this section, let me summarize the combined impact of the tax measures set out here.

In addition, as a result of the reduction in employment insurance premiums announced in December, employers and employees are now paying $1.1 billion less for employment insurance. Relative to the premium rates that prevailed in 1994, employers and employees are now paying $3.5 billion less.

Mr. Speaker, the tax measures we have announced today are important and they are fair.

But our action to reduce taxes will not end here.

Let me be clear. As resources become available, the personal income tax burden in Canada will be further reduced.

This will occur year after year, each budget building on the progress made before.

Towards a New Canadian Century

Mr. Speaker, the measures we have announced today mark a further stage in the implementation of the three-part plan begun in 1994.

First, when we came into office, the deficit and debt burden was rising relentlessly. The finances of the nation were out of control. Our response was immediate. Initially, we reduced the deficit. Then we eliminated it. Then, last year, we began to get our debt burden down.

Second, in this budget, we have moved to strengthen the confidence of Canadians in their health care system and we have further strengthened the sinews of an innovative, productive economy.

Third, we said at the outset that lowering taxes for Canadians was an ongoing priority. And so, as our financial health has improved, we have moved forward, focusing first on those least able to pay.

And in this budget, tax relief has been provided for each and every Canadian taxpayer.

From rising deficits to balanced books. From an increasing debt burden to one that is declining. From years of difficult cuts to an era where needed new investments are being made. From a tax burden that was rising to a time where it is falling.

That is the summary of this budget.

Looking ahead, there are two dangers that a responsible government must avoid.

First, a government that pretends it can be everything to everyone is a government that, in the end, will do nothing for anyone.

Government must focus on those areas where it can really make a difference. That is what we have done. That is what we will continue to do.

The second danger, on the other hand, is to become fixated on one major issue alone -- and, as a result, leave every other pressing problem to fester.

We must never become a single issue government.

A focus only on new spending to the exclusion of everything else would put us back into the red. A focus on tax reduction alone would leave us unable to respond to the core needs of Canadians. A focus on debt reduction alone might make the books look better; it would also make everything else look worse.

We can never lose sight of the need to take a balanced approach. For the social and economic needs of a nation are not separate. They are not in conflict. The balanced pursuit of both is the key to the health -- and the wealth -- of our country.

Mr. Speaker, as a new century beckons, we can now say with confidence that a new beginning is truly at hand.

Behind us forever is the era of governments promising more than they could deliver and delivering more than they could afford.

We are freer than we have been for a generation to chart a new course for ourselves.

Mr. Speaker, in the early years of this century, Sir Wilfrid Laurier spoke of our prospects as a people. He said that the 20th century would belong to Canada.

Some since have scoffed at those words, pointing to great powers, great empires and great conquests. They have said he was wrong.

Well, Mr. Speaker, Laurier was right.

Not according to the cold calculations of might, but because of the quality of our life. Not because of any single value we have pursued, but because of the many values we have advanced together. The value of tolerance, of fairness. The value of working together -- the peace we enjoy and the openness we show to each other.

Our opportunity today is to see our future as Laurier did, a country that refuses to set limits on what it can do.

There is so much we must continue to build. There is so much that lies ahead to accomplish.

There are barriers we must bring down -- of circumstance and of privilege -- and new bridges to be built that we can all cross together.

The story of this century may be over. But, the story of this country is not, it goes on.

Our goal must be to forge a new alliance -- a free market and a fair society supporting one another.

It is time to act upon a new national dream -- a dream anchored in the good sense of Canadians and their sense of the common good.

It is time to imagine a day when we have fully met the challenge of an aging population, met our obligations to the young and met our responsibility for nature's legacy to us, the environment. It is time to take the steps now that will take us closer to that destination.

Some may say this is too ambitious. We say there is no ambition too great for this country.

And so, let us come together -- all of us -- and make a pledge of common purpose: that we will do everything in our power today so that the generations of tomorrow are able to say not only that Canada belongs to the 21st century, but that the 21st century belongs to Canada.

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