August 20, 2007

Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, to the 108th Annual Conference of the Association of Municipalities of Ontario

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Ottawa, Ontario

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Good morning. It is a pleasure to be here and I do bring you greetings from Prime Minister Harper who, as you know, is occupied today in Montebello. And greetings from our government. And I welcome you all to Ottawa including, of course, the good councillors and mayor from the town of Whitby, the city of Oshawa and the regional municipality of Durham.

And let me say before I talk about infrastructure and other matters that are important to you, as you know, we've had some challenges in the past week, 10 days with respect to international financial market stability, which has occupied a great deal of my time of course in Finance, and things this morning are quite stable in Toronto and New York. The Toronto market is up modestly. The New York market is up a bit. So there's some stability there, which is welcome news in Canada and elsewhere.

So I appreciate the opportunity to share some of my thoughts this morning on cities and communities in Ontario, as I say, particularly dealing with your infrastructure needs and our government's unprecedented plan to make a strong Canadian economy even stronger.

Now I know we share a common goal to ensure Canada remains a shining example to the rest of the world of what a truly great, prosperous and compassionate nation can be. Nothing drives that point home better than your own vision statement at AMO which says this. It says: "In Ontario's municipalities, people and families can live, thrive and prosper in the communities they call home, and children will have the choice and opportunity to live in the communities where they were raised."

Clearly, your goal is our goal. Together, our governments are driving toward the same destination and, in many ways, Canada is setting the pace. You know, we have a great story to tell and, believe me, when I travel abroad I tell that story whether it's the G7, G8, G20, IMF, World Bank or APEC, where I was in Australia a couple of weeks ago. There's great interest abroad in the economic success of Canada. And you as Canadians have every reason to be proud. Our economy is punching well above its weight.

Just a few facts about our economy in this great, great country. My colleagues in government, our economic fundamentals are as solid as the Canadian Shield:

  • We are experiencing the second longest period of economic growth in the history of Canada. The only longer period was the period immediately after the Second World War.
  • Core inflation has remained within our set range of 1 to 3 per cent.
  • Our unemployment rate is the lowest in more than 30 years and there are more Canadians participating in the workforce than ever in the history of Canada.
  • We are reducing debt at a record rate. We have balanced budgets. We're on the best financial footing, in fact, of any country in the G7 and we're the only country of the G7 with ongoing budget surpluses plus a falling debt burden.

In addition, as the Prime Minister often points out, Canada is an emerging energy superpower:

  • We have the second largest oil reserves on the planet, second only to Saudi Arabia.
  • We are the largest exporter of oil to the United States.
  • We rank third in global gas production.
  • We are the world's largest producer of clean hydroelectric power.
  • We are also the world's largest producer of potash and uranium, the world's third largest producer of nickel, aluminum and diamonds, and the largest exporter of forest products in the world.

Canadians are world leaders on many fronts but of course we cannot ever afford to be complacent. We need to be innovative. We need to reach further and go higher and we need to continually aspire to greater prosperity and a better quality of life. And I can assure you that our government is doing just that.

We have moved the yardsticks further in 18 months than ever imagined. You know, we're a minority government. Historically, minority governments have had limited success in achieving their goals. Not this government. Last year's budget was passed unanimously in the House of Commons. Both budget bills passed through the House of Commons and the Senate and are now law in Canada.

In March this year, our second budget was passed, marking the first time in 40 years a federal minority government in Canada has had two consecutive budget ways and means motions passed. Our first budget bill passed through the House of Commons and the Senate before we adjourned in June. Our second budget bill-there are usually two after each budget-will be presented in the House of Commons in the fall and we hope that it also will be passed pursuant to the approval that we already have of the ways and means motion.

So we're getting things done. And these are the kinds of things that we're getting done:

  • We are reducing taxes significantly for individuals and families and business, especially families, because we have a demographic challenge in Canada, as most western industrialized countries do. We need more people so we included a $2,000 child tax credit in the budget this year and, as you know, $100 per month, $1,200 per year, universal child care benefit in Budget 2006.
  • We are reducing our national debt by $22 billion over two years. That's $700 for every man, woman and child in Canada.
  • And we are dedicating all of the interest savings from shrinking that federal debt, all of the interest that we'll save every time we reduce the debt, to personal income tax reductions in Canada. That's our Tax Back Guarantee to Canadians.
  • We are also controlling our spending at the federal level, and it's not easy but we're embarking on an expenditure management system that we will pursue, and we will make sure that it works.
  • We're balancing the books, of course.
  • We're providing significant financial support for farmers.
  • We're taking concrete steps to improve our environment with a plan that is not only achievable but that's responsible in economic terms.
  • We are restoring fiscal balance in Canada and fostering a new spirit of open federalism.

That whole issue of fiscal balance in Canada, this is a difficult issue but it matters to those of us, to all of you in government, your order of government, our order of government, the provincial order of government as well.

But, you know, you can't ignore difficult issues like this, and our government does not so we tackled that difficult issue. We have a solution that is principle-based and predictable and it's all about planning so that the provincial and territorial governments can plan. Just as you need to plan, they need to plan going forward and the more they can plan the more they can plan with you in your relationship with the provincial governments.

We followed the recommendations, for the most part, of the O'Brien panel. Mr. O'Brien, as you know, is a former provincial deputy minister of finance in Alberta, and that panel was appointed, in fact, by the previous Liberal government in Ottawa.

So why am I talking about this? Well, this restoration of fiscal balance is important for you. It's important for Ontario and it's important for all of the municipalities, regardless of size, in Ontario. A restored fiscal balance ensures that the provinces and territories have both the means and the clarity of purpose to develop and provide programs and services that serve Canadians well. To restore fiscal balance, our government is providing an additional $39 billion over seven years. That's billion with a "B." Ontario's share is substantial. This new investment will bring federal funding to Ontario to $12.8 billion in 2007-2008, the current fiscal year, and almost $14 billion in 2008-2009. Ontario's share of the Canada Health Transfer will increase to more than $8.1 billion annually. Ontario's share of the Canada Social Transfer will increase to almost $3.7 billion annually. And we're also addressing fiscal balance through the $33-billion Building Canada infrastructure plan. And I'll say a bit more about that in a moment.

Our fiscal balance package also addresses some historic inequities. We ended back-door Equalization by putting the Canada Social Transfer and the Canada Health Transfer on a per capita basis, and that's in fact what the biggest point was advanced on behalf of the province of Ontario and we've addressed it. We've also adopted a fiscal capacity cap so no Equalization-receiving province will be better off than a non-Equalization-receiving province like Ontario.

Let me repeat that because it's not always clear what it means. A fiscal capacity cap means that no Equalization-receiving province will be better off than a non-Equalization-receiving province like Ontario. We think that's fair and it's long overdue and it's principled.

But that's not all for Ontario. Investments in critical programs are also long overdue. That's why we are providing Ontario funding above and beyond the transfer payments I just mentioned. For example:

  • $586 million from the Clean Air and Climate Change Trust.
  • $205 million to develop patient wait time guarantees.
  • $195 million for labour market training.
  • $97.5 million to support ongoing efforts to create child care spaces.

So that's lots of good news.

But also, as I said earlier, realistically there are challenges to the Canadian economy and we have to be mindful of them. Our economy continues to grow and to grow in all regions of Canada, including Ontario. There are challenges:

  • You're fully aware, of course, of the appreciation of the value of the Canadian dollar. That's really about a depreciation across the board for almost virtually everywhere of the value of the U.S. dollar against other currencies, but our currency has borne the brunt of that here.
  • Increasing competition from emerging economic giants like China and India, we know about that.
  • The slowing of the U.S. housing market, which we monitor carefully.
  • A shortage of skilled workers and an aging population-I mentioned that earlier in terms of trying to incent population growth in Canada through tax policy.
  • And outdated and inadequate infrastructure, which I know is very important to you.

Any of these variables can have a detrimental effect on the Canadian economy but we do have a long-term economic plan for Canada, which we developed and announced in the fall of last year. It's a plan that will lead to a more rewarding future for Canadians and their families. It's a plan to give Canada and Canadians the key advantages to be able to compete effectively and attract new growth and investment. The plan is called Advantage Canada.

As I say, it was published in October. I welcome you to look at it on the Government of Canada website. Advantage Canada focuses on creating five key advantages:

  • The Tax Advantage is important-reducing taxes for all Canadians, establishing the lowest tax rate on new business investment in the G7.
  • A Fiscal Advantage by eliminating Canada's total government net debt in less than a generation, which is our goal.
  • An Entrepreneurial Advantage by reducing unnecessary regulation and red tape and increasing Canadian competition in the Canadian marketplace.
  • A Knowledge Advantage, creating the best-educated, most-skilled and most flexible workforce in the world.
  • And last, but certainly not least, an Infrastructure Advantage for Canada. That is building modern, world-class infrastructure that promotes economic growth, a clean environment and international competitiveness for Canadian businesses.

Now I can assure you that Advantage Canada will not become another document sitting on a shelf collecting dust. We're actively delivering on that vision.

So far, we're reducing Canada's overall tax rate on new business investment from third highest in the G7 to the second lowest by 2011.

We're providing a major new accelerated capital cost allowance-this matters a lot in Ontario-a brand new capital cost allowance acceleration for manufacturers, allowing them to write off their investments in new equipment over two years on a 100-per-cent basis to encourage new economic investment and to create jobs. This is a shot of adrenalin in the arm of manufacturers in central Canada, and particularly Ontario.

And, as I said, we're reducing the federal paper burden for businesses by 20 per cent and reducing the number of tax filings and remittances for more than 350,000 small businesses. And I was pleased in the past year that the Government of Ontario, Minister Sorbara and I were able to conclude the corporate tax collection agreement that had been worked on for years. It's now a reality, and that will save businesses in Ontario a lot of red tape and a lot of work in terms of duplication of filing of tax returns, and about $90 million a year in savings for business.

We're increasing the lifetime capital gains exemption for Canada's 2 million small business owners to $750,000 from $500,000, and that's the first increase in nearly 20 years.

Now, as I mentioned earlier, we are making the largest single federal investment in public infrastructure in the history of Canada. When combined with funding under previous initiatives, our commitment is about $37 billion over seven years for roads, bridges, water systems, public transit and international gateways-infrastructure that Canadians want and our country needs. This unprecedented initiative will have a profound and positive impact on our economic and environmental health now and for generations to come.

So what exactly is our Building Canada plan? Building Canada provides long-term, predictable funding right up to the year 2014, giving all of you-regional chairs, mayors, reeves, councillors and city planners-stable and predictable funding. Planning is important and I know how important planning is for you and for all orders of government. It will allow you to plan over a longer horizon and manage infrastructure assets more effectively. And that's certainly what we heard from you last year, and we've acted upon your views.

Previously, federal infrastructure programs tended to be short-term and impractical, and we all know that large infrastructure projects take years to complete and need firm commitments from all orders of government.

Building Canada provides a solid foundation from which we can collectively build shared responses to our infrastructure needs. Specific elements now, some of the specifics of the plan:

  • Extending the 100-per-cent GST rebate to 2014, thereby providing municipalities with $5.8 billion in predictable revenue that can be used for infrastructure priorities.
  • Secondly, extending the federal Gas Tax Fund by another four years, providing municipalities with an additional $8 billion for a range of transportation-related infrastructure investments.
  • Third, creating an $8.8-billion Building Canada Fund that will in part support smaller-scale infrastructure projects.
  • Fourth, providing $1.26 billion for a national fund for public-private partnerships.
  • Fifth, developing a National Transit Strategy.
  • And, sixth, improving our border crossings and gateways.

This is very important for Canada's economic development. So keeping our country moving is key to ensuring a vibrant national economy.

You know, we are a trading nation and in today's interdependent world of trade and security, modern, smart infrastructure is not a luxury, it is a necessity for Canadian economic growth. Over the years, investments at our border crossings have not kept up with growth and advancements in technology and those of you from border areas certainly are familiar with that. We've established now a $2.1-billion national fund for gateways and border crossings. This is in addition to the $1 billion for the Asia-Pacific gateway in western Canada, and this is a new Gateways and Border Crossings Fund. It will provide resources to strengthen our critical trade infrastructure in key regions across Canada.

Now here in Ontario, we're focusing on the busiest trade corridor in North America, which is the Windsor-Detroit border crossing. The federal government has set a firm timeline for ensuring a new crossing is in place no later than 2013. This is a monumental commitment and to this end we're backing it up with funds. We have already committed $400 million for the new access road that will connect Highway 401 to the new bridge.

Additionally, we are investing over $300 million for improvements in Windsor that will ease congestion and help ensure the efficient movement of goods to market. My colleague, Lawrence Cannon, recently released a new national policy framework for strategic gateways and trade corridors and announced the Ontario-Quebec Continental Gateway and Corridor initiative.

This is important not just for Windsor and for the County of Essex. As you know, if you do business in Ontario, most of our trade goes to the United States. Most of that trade travels by truck at our border crossings. We need Windsor-Detroit to work and to function well for the economy of Ontario, for the economy of Canada.

Mobility is something that many Canadians take for granted-the freedom to move unencumbered to work, to get to school or simply to get away, the freedom to move goods to market on schedule, on time and at competitive cost. And this freedom has been gradually eroded. The tremendous growth of the Canadian economy has pushed our trade infrastructure to the limit. Most of our existing infrastructure was not designed to handle this large and growing volume of trade and traffic.

And there's no better example of that, I suppose, than the Greater Toronto Area. Every year, millions of trucks run along the 401 corridor from Montréal to Windsor directly through the heart of the GTA. According to transportation experts in Canada and the United States, the 401 at highway 400-most of you have been caught there in traffic I'm sure-is the busiest piece of highway in the entire world. Because of 18-hour-a-day stop-and-go traffic, the 401 has been called a "linear warehouse" full of goods destined for millions of consumers worldwide, seven days a week.

Now in addition to highways, of course, public transit must play a much more prominent role. Commuters need a viable, more environmentally friendly option to driving. It's essential if we're going to be able to absorb all of the expected growth without making a bad problem worse. In major urban centres throughout the world-and you know this-in New York, London, Paris, Hong Kong, public transit is seen and accepted as an attractive mode of travel by a large proportion of commuters. Canada is moving in that direction, but our government recognizes we can and we must do better.

So in June, Minister Cannon announced plans to develop a National Transit Strategy when he spoke at the Federation of Canadian Municipalities annual meeting. Discussions with provinces, territories, the Federation and interested partners have already begun, and we will continue to develop this strategy together in true partnership and in the spirit of our government's commitment to the values of open federalism. But keep in mind, the proposed National Transit Strategy is not about new funding beyond what is already committed. And, as I mentioned previously, our commitment is substantial.

Let me give you one example of that commitment. I was just talking about the Greater Toronto Area. In March, Prime Minister Harper announced a federal commitment of up to $962 million for FLOW, a joint initiative with the Government of Ontario and the municipalities of Toronto, York, Durham Region, Mississauga and Brampton. FLOW is an action plan providing funding for a set of major transit and transportation projects across the Greater Toronto Area including the extension of the subway, the Toronto-York extension, Mississauga Bus Rapid Transit as well as road improvements, including an extension of the 407 east to Highway 35 and 115.

Now the National Transit Strategy is not something else, and that is, it is not about federal intrusion. It is about facilitating greater coordination and collaboration between key funders and stakeholders in areas such as capacity building, best practices, performance measurement and accountability. It is about increasing transit ridership and enhancing our quality of life, and we look forward to launching this collaborative strategy in November.

A few words now, if I may, about public-private partnerships.

Investing in infrastructure is about more than roads and bridges, buses and trains or water and sewer systems. It's about keeping our country moving. It's about creating sustainable, functional and liveable communities.

It's about using the human and financial resources of both the public and the private sectors so that major infrastructure projects are built efficiently and effectively, with a minimum of taxpayer funding and risk.

Reaching our destination will require innovation, new approaches and new ways of thinking. It will require not only the resources and expertise of the public sector but the wealth of experience and knowledge accumulated by those in the private sector. We must engage those who have designed and constructed some of the most complex and successful infrastructure projects around the world. The creation of a federal P3 office is a key element of Building Canada and was included and funded in Budget 2007. Overall, the track record for P3s both domestically and internationally is good. They have been proven generally to lower costs, speed up delivery times and add flexibility to infrastructure projects. So we want to see P3s used more extensively but always, of course, in the best interests of Canadians.

Municipalities pursuing innovative P3 projects will be eligible to access the $1.26 billion national fund for public-private partnerships. To oversee the process, as I said a moment ago, our government is establishing a P3 office to work with partners on the funding mechanism.

Of course, infrastructure money will continue to flow as we put Building Canada in place through the Gas Tax Fund, through public transit funding and existing infrastructure programs. The Government of Canada has taken a balanced approach to meeting the needs of both rural and urban communities in these investments. The Building Canada Fund in particular will continue to support projects in smaller communities. We have strived to ensure that project funding is distributed on an equitable basis across the country to meet local needs and national objectives.

In Ontario, we've relied on your association-and I thank you for this-as an invaluable partner in the delivery of the Gas Tax Fund. This important partnership helps streamline program delivery and helps ensure that provincial and local priorities are taken into account.

Earlier this summer, we began talks with all of the provinces and territories to formalize individual Building Canada agreements. We're also talking, of course, with FCM. These agreements, which emphasize the importance of the partnerships, will form the basis for implementation of the plan.

Now, we're making good progress on this front and plan to announce the signing of the agreements in the fall so that together with the provinces and territories we can get on to funding the infrastructure work that will make Canada even more productive.

I would like to conclude with a few final thoughts. You know, the first Prime Minister of Canada, Sir John A. Macdonald, was fond of saying to his colleagues in caucus and cabinet: "Look a little ahead, my friends." And that's what we have to do in this infrastructure and that's why the funding is there from now to 2014. And that's why the funding from the Government of Canada is at the highest level it has ever been in the history of Canada. We need you as partners to work with us, to look a little ahead with us over the course of the next seven years to ensure strong economic growth and a good quality of life for Canadians in your municipalities, in the province of Ontario and across Canada.

We need to do this also to maintain our competitive edge, which is important to me as the minister responsible for finance in the Government of Canada. Our objectives are clear: more and better jobs, modern infrastructure, a higher standard of living, a cleaner environment and greater opportunity for Canadians to learn and earn and invest to create the future they want for themselves and their families.

You know and I know that a strong, growing economy isn't just about funding. It's important but it's not just about that. At its heart, it's about people. It's about where people live. It's about the dreams that people have. No one knows this better than those of you in this room today. You are the stewards of our regions, our cities, our towns and our hamlets. You are the community leaders on the front lines day in and day out. You play a critical role in Canada's future. Our government recognizes and appreciates your vital contribution to our society.

As I indicated at the outset, we have a shared goal and a common destination. We will only be successful by working together, by supporting each other. In the year and a half that we've been here, Canada's New Government has been establishing a good working relationship. We look forward to strengthening our relationship further and making further progress for the betterment of Canadian families and businesses.

Thank you for inviting me to be here today.