November 22, 2010
Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, to the Oakville Chamber of Commerce
Archived information is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.
Thank you very much, Tom, for that nice introduction. I’d also like to thank Mark Brown as Chair of the Oakville Chamber of Commerce, as well as David Mondragon, the CEO of Ford, who’s been very helpful in giving advice on financial matters to me and others during the course of the recession in the past year, in particular relating to the auto industry. We’ve been through some challenging times with General Motors over the past year but we’re very pleased with the results of the initial public offering last week in which we sold 20 per cent of your common shares in General Motors, with more to go, which we will dispose of appropriately over time because the Government of Canada doesn’t need to be in the auto business and we don’t intend to be over the long term.
So that’s all good news. I thank you all for being here today. I’m grateful for your invitation to be here.
It is good to be back home after a great deal of foreign travel in the last few weeks. I’ve been to Japan, Indonesia and, finally, a little over a week ago, I attended the G-20 Summit in Seoul. The discussions in Korea covered a wide range of issues focused on the future and how best to strengthen and sustain the global recovery. And I can tell you, every time I return from abroad I’m reminded of how lucky we are as Canadians to live in this country.
I’m about to share with you our government’s plan on how best to strengthen and sustain Canada’s economic recovery. Outside Canada, for many of my international counterparts, economic recovery remains elusive. We have just been through the most recent challenge relating to Ireland and there are still concerns with respect to some bank situations internationally. Allow me to share with you our priorities and our work as we prepare Budget 2011, which is the sixth budget of our government and it is the next phase of Canada’s Economic Action Plan.
Before I do that, just by way of context, it might be useful to take account of where we’ve come from and how we got here. As has been mentioned, we have been through the deepest recession since the Great Depression globally. Our government responded decisively in January 2009 with the Economic Action Plan to stabilize the economy and put Canadians back to work. This was a difficult decision and it was as a result of pre-budget consultations, the same kind of consultations that we’re embarking on now. But it became apparent, certainly in December 2008, listening to Canadian small, medium- and large-sized businesses, that we were going into a serious recession and that the recession was coming from outside our country. But the question was: how long and deep would the recession be in our country and how high would our unemployment rate go?
So we made the decision, on the advice of Canadians, to run in Canadian terms a relatively big deficit, which we announced in the Economic Action Plan in the earliest budget in Canadian history on January 27, 2009. We knew it would require running fairly large deficits for two fiscal years. We’re now coming toward the end of that second fiscal year.
The stimulus plan that we brought forward was in line with what the leaders agreed to at the first G-20 Leaders’ Summit in November 2008 in Washington, D.C. And that was that we would create stimulus in our economy—the other G-20 leaders agreed to do the same thing—of about 4 per cent of GDP. We engaged and had the cooperation of the provinces and territories in Canada in accomplishing that goal.
It wasn’t just infrastructure, although infrastructure is a very important part of the program, particularly to preserve and create jobs, and to create long-lasting, useful infrastructure which is economically powerful in Canada. It was also tax reductions, and we are continuing on that part of the stimulus. And also very important was support for workers and their families, people who would lose their jobs, people who would need retraining in industries that are subject to substantial change. All of those initiatives were part and are part of the Economic Action Plan.
This has been a shot in the arm for the Canadian economy at a time when the Canadian economy, the Canadian people, needed to be protected from this recession that came from outside Canada. We see evidence of Canada’s Economic Action Plan at work from coast to coast to coast, including here in Halton Region and in the town of Oakville. In Oakville, the Economic Action Plans includes major work on the transit facility, the GO Transit package, significant investments at Sheridan College, which benefits Oakville, Halton Region, all of Ontario, in fact all of Canada, having that standard of excellence that Sheridan College is known for. In the town of Milton, we’re expanding the sports centre and constructing an arts and cultural centre. In Burlington, we’re contributing to a new fire station and a new city park. These are among the many projects that are injecting money into the economy here in Oakville and across Halton Region.
In short, the Economic Action Plan is working here and it’s working across Canada. These important investments are employing people today. They are creating important infrastructure that will improve the lives of our communities for generations to come.
These efforts were necessary at a dangerous time for our country and for the world. The success of the Economic Action Plan is evident. It has protected Canada from the worst of the global storm. In fact, we’ve recovered from the recession quicker than most countries. All the jobs that we lost during the three quarters of recession have been regained and more. Over 425,000 more Canadians are working today than in July 2009—more than the jobs lost during the global economic downturn. Canada has been growing since the third quarter of 2009, with moderate growth in the 2 to 3 per cent range. This is real GDP anticipated for the next couple of years.
Financial commentators and international bodies have recognized Canada’s economic resilience and its comparative strengths going forward. The IMF praised many Canadian initiatives taken through the recession and recovery. It referred to our stimulus initiatives as extraordinary and timely. The Economist Intelligence Unit’s global business rankings forecast for the period 2008 to 2012 notes that Canada has the fastest economic growth in the G-7. It also ranks this country as the best place in the G-7 to do business for the next five years. The World Economic Forum says: “At a time when many countries are struggling with weak financial institutions and macroeconomic stability, these are areas where Canada remains a world leader, retaining its number 1 rating for the perceived strength of its banks for the third year in a row.” An OECD official said recently, “I think Canada looks good—it shines actually. Canada could even be considered a safe haven.”
So our country is in a position other countries would like to be in but that does not mean that we can rest on our laurels.
Now, as our economic recovery takes hold, it is time to enter the next phase of our Economic Action Plan. We will secure our recovery by doing two things: first of all, by maintaining our focus on the economy, jobs and growth; and secondly, by returning our books to balance. We invested a lot of money and ran deficits to stimulate the economy and create jobs when we needed to, faced with an extraordinary global situation. But running deficits cannot become a permanent solution to a temporary problem. Everyone in this room knows that running a successful organization, a successful business, means not spending more than you take in over the long term.
I know that too. We must get our books back into the black to secure our recovery. I am determined to see that happen. As we prepare Budget 2011, that will be one of our guiding principles.
So we will not make significant new government spending commitments this year that would trigger bigger deficits and higher taxes. We simply cannot afford to risk the economic recovery and the future of our children and grandchildren by running deficits longer than necessary.
Now this morning I had the pleasure of visiting a local family in Oakville who are a symbol of that future. Mike and Mary Bucci live here in Oakville with their four daughters, Sophia, Isabel, Fiona and Rosie. I am pleased that they are here and I thank them for letting me into their home today with a bunch of cameras. They and other hard-working families and individuals like them across Canada are why we are focused on returning to balance now that the worst of the economic crisis has passed, because I’m not going to spend recklessly on new schemes that Sophia will have to pay for years from now when she enters the workforce. I’m not going to raise taxes on business, large or small, that will prevent an enterprise in Burlington or Oakville from expanding at a time when Isabel is looking for a job close to her family. I’m not going to create new programs that will bloat bureaucracy and become self-serving at the expense of our health and education systems that Fiona and Rosie will rely on.
We did what we needed to do to get through the crisis. As a result, Canada has realized significant success despite those formidable headwinds. But now the first phase of the Economic Action Plan is winding down and will be complete by the end of the fiscal year, which is the end of March 2011.
In phase two, the Government will focus on laying the foundation for long-term sustainable growth. A key element of that is to return to balanced budgets over the medium term, and we will achieve this by doing three things. First of all, ending stimulus as the economy recovers. We have to end the stimulus spending, because otherwise one starts to run the risk of what we’re seeing in other countries, and that is you can create a structural deficit—a long-term deficit that will result in high interest payments by our children in the future. It’s mortgaging the future of our country and asking the next generation to pay for it, and we are not going to go there. We will restrain growth in government spending through targeted measures. We will undertake a comprehensive review of government operations and costs. In fact, we’ve already frozen administrative spending in the government departments in Canada. We never envisioned deficits to be permanent and the work of returning to balance is a key to our future prosperity in Canada.
And you know this isn’t an abstract concept. This morning, as I said, I had the pleasure of visiting Mike and Mary Bucci in their home here in Oakville. I wanted to hear from them their thoughts as a typical Canadian family on the economy, to listen to their concerns. Families like the Buccis are the backbone of Canada. They work hard. They raise their children. They pay their bills. They play by the rules. They certainly pay their taxes. And they try to put a little away for the future. As a government, we must always remember that we are spending the hard-earned money of families like the Buccis every time we make a spending decision. They know how to balance a household budget. You can’t keep spending more money than you have coming in. Governments must apply the same common sense.
I will not be the Finance Minister of Canada who mortgaged the future of Mike and Mary’s four children or of any of our children or grandchildren for bigger government spending schemes and more bureaucracy, schemes that can only be paid for by future generations through higher taxes and more deficits. We need always to remember that government exists to serve the people of Canada. It does not exist to serve itself. The services government provides are paid for by the money raised from hard-working Canadians like all of you in this room. We have a responsibility to manage that money efficiently and effectively and always to remember that governments don’t have any money they haven’t taken from you in the first place. I’m sure my colleagues and I will remember that the next two months as we prepare the budget.
Last Friday, I began pre-budget consultations with a group of people in Toronto. The process will continue. We’ll travel to lots of places and listen to lots of Canadians from all across the country over the course of the next two months. At the same time, we also launched our online service for people to send us their thoughts on budget priorities. I will also be consulting with my cabinet and caucus colleagues, and with my opposition critics.
Two weeks ago, the Prime Minister launched his economic consultations relating to the next phase of the Economic Action Plan. The Government also has some important decisions to make as we set the fiscal and economic agenda for next year. And we’re actively soliciting public input on issues, on what you think we ought to do. Not only the Finance people, but the Prime Minister and members of cabinet and caucus, will travel to small towns, communities and cities across the country to listen to what Canadians have to say.
We know that people are concerned about the economy, jobs and their household budgets. We know that Canada is doing better than most other countries. We know the economic recovery is fragile. We know we have to monitor the situation closely and preserve the growth that we have in the Canadian economy. So the next phase of our Economic Action Plan will continue to deliver that stability needed to support improvements in the well-being of Canadian families and businesses.
The comments we receive will play an important role in helping to shape the next federal budget and our economic and fiscal agenda looking forward into the medium term. As I said, our plan, which I laid out in Budget 2009, and again in 2010 and in the fall economic update just a month or so ago, takes us to a dramatic reduction in our deficits in the next two years and then to a balanced budget in 2015–16, and we will stay the course.
I’m looking forward to learning what people have to say on all of the relevant issues concerning budget priorities. I can confidently tell you one thing right now—that this is not the time for dangerous and risky new spending schemes that will increase deficits and raise taxes. I want to hear from families across the country, like the Buccis today in Oakville, on how they want their government to continue down the path to balanced budgets and securing Canada’s economic recovery.
I look forward to hearing from Canadians from all walks of life. I had the pleasure the other day at our consultation in Toronto of having the people who are currently running Facebook, Google and eBay giving me advice. I encourage you all to let us know what you think and there’s an easy way to do it at www.fin.gc.ca. Please let us know what you think. I welcome participation in the pre-budget consultation. I’m asking all participants to offer ideas for the budget and the economy that can be realized through prudent measures.
Budget 2011 will maintain our focus on strengthening the economy and fostering prosperity for Canadians and their families by helping to create sustainable, high quality jobs.
Now I know, despite my words here today, some groups, including those in the opposition, will call for more spending, new programs, bigger government. They will say we know it’s not a big spending budget this year but an exception should be made for a certain initiative or project. I hear it every year. The future of initiative X or project Y depends on a significant cash infusion of your money.
As I said earlier, Budget 2011 will not contain significant new spending. As the economy recovers, we need to stay focused on promoting job creation. Our unemployment rate is still too high in Canada. It’s a point and a half lower than the unemployment rate in the United States. That’s good news and it relates to our fiscal fundamentals being on track in Canada, and we will keep them on track. We haven’t had that divergence in our unemployment rates with the United States since 1975 or so; it’s been a generation since we’ve had that kind of relatively good situation in Canada. But we have to do more. We have to preserve jobs and we have to try to create more jobs in Canada to get that unemployment rate as low as possible during the moderate recovery that we are seeing.
At the same time, of course, we have to balance the budget. This is simply common sense. We ran large deficits when it was necessary to protect those jobs, help create jobs and protect our country from a recession that came from outside of Canada.
We can’t continue to do this forever. Families like the Buccis get this. Small business people get this as well, like many of you in this room. Business people do this every month. Householders do it every month as you balance your books, balance your business accounts.
The opposition’s approach would be to add new spending, extravagant new spending, to the deficit and of course raise taxes to pay for it. We choose a different approach. Our government intends to follow the example of regular Canadians. As we move into the next phase of our Economic Action Plan, we will continue delivering the stability needed for the economic well-being of Canadians by first of all controlling spending, secondly reducing the deficit, thirdly eliminating waste and, finally, keeping taxes low both for individuals and for businesses.
For example, we will follow through with our plan to lower taxes for employers. This is important. This is a competitive advantage for our country. In 2007, we announced that we would reduce the federal business tax rate, helping us create jobs, from a little bit over 22 per cent when we took office to 15 per cent by 2012. We encouraged the provinces to get their rates down to 10 per cent by 2012–2013. This means we will brand Canada, because we’re on track, as a 25 per cent business tax rate jurisdiction by 2012–2013, an incredible advantage at a time when other countries are in the position where they will have very little choice but to increase their taxes of all kinds, including business taxes. So this is a tremendous advantage for us in Canada. It is the quickest way to create jobs. One thing that governments can do—you can ask all the economists about this—to increase the creation of jobs is to reduce business taxes. It has almost an immediate positive effect.
More than that, since 2007, Canadian businesses have been planning ahead—as businesses need to do—based on these tax reductions. In fact, the Parliament of Canada passed the tax reductions in 2007 and they continue. There are more already in place for January 2011.
According to the School of Public Policy at the University of Calgary, moving forward with our business tax reduction plan in the years ahead will lead to $49 billion in greater capital investment in Canada and 233,000 new jobs. To change the law that we passed in Parliament in 2007 now, as some of our opponents are proposing, would put hundreds of thousands of jobs in jeopardy at a time when our economic recovery remains fragile.
So we will continue to implement the Economic Action Plan to ensure the recovery is sustained.
We will continue our efforts to create jobs, boost investment and strengthen our nation.
We’ve delivered what Canada needed when it needed it to protect Canada from the recession. It was a difficult decision to decide to run substantial deficits but it was the right thing to do, as history has shown, to protect our country during the difficult recessionary times. We will continue to deliver what Canada needs in Budget 2011.
We’re doing better than most other industrial countries. We are emerging from the recession even stronger than we entered it. Canada is stable. We have a more competitive tax system, encouraging higher levels of business investment. We have renewed infrastructure and new infrastructure. We have a better-skilled workforce. We have a significant tariff advantage. And we have a more prominent voice as a global financial sector leader.
We have more work to do. In Canada, we are building on a solid foundation.
Thank you for inviting me here today.