I appreciate this opportunity to meet with you and the members of the committee to discuss Bill , which as you know, is an act to implement certain provisions of the budget tabled in Parliament on February 26, 2008, which is the third budget of our government.
I am pleased to meet with you and the members of your committee today to discuss Bill , an Act to implement certain provisions of the budget tabled in Parliament on February 26, 2008.
This year's budget builds on the decisive and timely action taken in the October 2007 economic statement to support the economy. The economic statement provided an additional $60 billion in broad-based tax relief for Canadians. Since coming to office, our government is providing nearly $200 billion in tax relief in this and the next five years.
Now, reducing our overall tax burden at the federal level is providing a terrific shot of adrenalin for the national economy. Actions taken by the government since 2006 are providing $21 billion in incremental tax relief to Canadians and Canadian businesses this year. This is significant and substantial economic stimulus, equivalent to 1.4% of Canada's GDP. We have been ahead of the curve, managing the economy prudently and responsibly.
I note for the committee that the IMF World Economic Outlook, released last week, praised the Canadian government for its pre-emptive and ongoing measures, and I quote from the report: “A package of tax cuts has provided a timely fiscal stimulus...” and “... the government's structural policy agenda should help increase competitiveness and productivity growth to underpin longer-term prospects”. So clearly our tax reductions have helped place Canada in a position of strength and allowed us to respond more effectively during this period of economic uncertainty.
This includes historic business tax reductions announced in the October economic statement that will give Canada the lowest statutory tax rate in the G7 by 2012. It will also give Canada the lowest overall tax rate on new business investment in the G7, a goal that we will reach by 2010.
Budget 2008 also builds on the government's record of strong fiscal management. By 2012-13, total debt reduction by the government since coming into office will be more than $50 billion—that's five zero.
Commitment to sound financial management and debt reduction is never easy, but we are committed to eliminating generational inequity. We will not leave our children and grandchildren with the burden of paying for the excessive spending of the past. This bill reflects that commitment.
Budget 2008 also builds on the government's record of strong fiscal management. By 2012-2013, total debt reduction by the government since coming into office will be more than $50 billion. Commitment to sound financial management and debt reduction is never easy, but we are committed to eliminating generational inequity. We will not leave our children and grandchildren with the burden of paying for the excessive spending of the past. This bill reflects that commitment.
Mr. Chairman, with the limited time available to me today, I will only focus on a few of the key provisions in this bill.
Before I do that, I would like to mention Bill , which is the private member's bill that proposed changes to the registered education savings plan, a proposal that could cost the government more than $900 million annually. I note that this cost estimate is a conservative one, as we have recently seen other estimates, like the one by Don Drummond of TD Bank, that the cost could be in the vicinity of $2 billion annually. Bill C-253 is a fiscally irresponsible measure that risks putting the federal government into deficit. In a time of global economic uncertainty, this is a risk our government is not willing to take. I would also note that a vast array of stakeholders, including prominent student groups such as the Canadian Federation of Students, have come out against this legislation. That is why Bill also includes language to protect the government's fiscal plan from the effects of Bill C-253.
Let me stress, however, that this government is supporting post-secondary education in many ways that are fiscally responsible and effective. It is in this spirit that our government has taken action in the past two budgets to improve RESPs by expanding the program and making it more flexible and more available to students. Budget 2008 also builds on past action to help students pay for their education by committing $123 million over four years, starting in 2009-10, to streamline, modernize, and improve access to the Canada student loans program. Secondly, it supports students with a $350 million investment in 2009-10, rising to $430 million by 2012-13 in the new Canada student grant program. This new program will be easy to use, transparent, and broad-based, providing certainty and predictability for Canadian families and their children.
Let me now turn, Chair, to the main measures in budget 2008 that are incorporated in Bill . As I noted, budget 2008 builds on the actions taken in the October economic statement in a number of significant ways. It helps Canadians save with a new tax-free savings account. It provides further assistance for Canada's manufacturing and processing sector. It supports small and medium-sized businesses by improving the scientific research and experimental development tax incentive program. These measures, which I will now address in some detail, are just a few of the actions we are taking to help improve Canada's productivity, employment, and prosperity.
On the tax-free savings account, Canadians now have more money in their pockets as a result of our tax reductions. This is money where individuals, families, workers, and seniors can spend, invest, or save. To help Canadians realize even greater benefits from saving, our government is creating a new tax-free savings account, or TFSA. Christened a tax policy gem by the C.D. Howe Institute, the TFSA represents the single most important personal savings vehicle since the introduction of the RRSP in 1957. It's the first account of its kind in Canadian history. It is a flexible, registered, general purpose account that will allow Canadians to watch their savings grow tax free.
This is how it works. First, Canadians can contribute up to $5,000 every year to a registered tax-free savings account, plus carry forward any unused room to future years. Secondly, the investment income, including capital gains earned in the plan, will be exempt from any tax, even when withdrawn. Thirdly, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for. And finally, the full amount of withdrawals may be recontributed to a tax-free savings account in the future, to ensure no loss in a person's total savings room.
To make it easier for lower- and modest-income Canadians to save, there will be no clawbacks by the federal government. Neither the income or capital gains earned in a tax-free savings account nor the withdrawals from it will affect eligibility for federal income-tested benefits such as the guaranteed income supplement.
I'll say a few words about the manufacturing sector. The Canadian economy remains strong, yet we are mindful of the challenges before us: global uncertainty, volatile markets, and the difficulties confronting some of our traditional industries such as forestry and manufacturing. In budget 2007 we brought in a $1.3 billion temporary accelerated capital cost allowance. This initiative allows manufacturing businesses to fully write off investments in machinery and equipment over a two-year period.
In budget 2008, we extended this initiative for three years, on a declining basis. This will provide the manufacturing and processing sector with an additional $1 billion in tax relief. Manufacturers asked for this extension, and we delivered.
Through the community development trust, the government is also investing $1 billion to support communities and workers affected by international economic volatility. We are now working with each province and territory to identify priority areas for action and to seek their public commitment to support communities, consistent with the objectives of the trust.
Through the community development trust, the government is also investing $1 billion to support communities and workers affected by international economic volatility.
We are now working with each province and territory to identify priority areas for action and to seek their public commitment to support communities, consistent with the objectives of the trust.
I note the Province of Ontario has been particularly appreciative of the trust and their share of this funding of over $350 million. Indeed, the Ontario government has recently outlined its plans to spend all this money in their provincial budget, including programs to provide up-to-date training for Ontario's unemployed workers who require skills upgrading.
Our government made a commitment in budget 2007 to help promote research and development. In budget 2007 and in its science and technology strategy mobilizing science and technology to Canada's advantage, the government committed to identifying opportunities for improving the scientific research and experimental development tax incentive program, including its administration.
Budget 2008 proposes to enhance the availability and accessibility of the financial support for R and D to small and medium-sized Canadian-controlled private corporations. Specifically, proposes to, first of all, increase the expenditure limit for the enhanced scientific research and experimental development investment tax credit; and secondly, extend the enhanced scientific research and experimental development investment tax credit to medium-sized companies by phasing out access to the enhanced benefits over increased taxable capital and taxable income ranges.
This proposed action will help Canada stay at the forefront of R and D, which in turn will help Canada continue to be competitive.
Mr. Chairman, these and other initiatives in clearly illustrate our government's commitment to deliver results. Budget 2008 reflects the stability and responsible leadership that Canada needs for these uncertain times. It builds on efforts we have taken since 2006 to reward Canadians for their hard work, improve standards of living, and fuel economic growth.
Budget 2008 reflects the stability and responsible leadership that Canada needs for these uncertain times. It builds on efforts we have taken since 2006 to reward Canadians for their hard work, improve standards of living, and fuel economic growth.
I now welcome any questions you may have about this bill. I am joined, of course, by officials from Finance Canada, who I'm sure will be of assistance to fully respond to your questions.
Thank you, Minister, for coming here.
I thought I'd try something different in the sense that while I could find points in your statement with which I disagree, I thought I'd try to be non-partisan, in the spirit of this committee, on the asset-backed commercial paper issue, because this committee agreed in a consensual way to have hearings on what went wrong and what could be done to improve the situation. And I don't think there was any partisanship in our recent meeting.
I'd like to focus on that, and if I may, I'd like to focus on the federal role, because you have said this strengthens the case for a single regulator. You have said provinces or provincial agencies were at fault. I don't really deny that, although I would point out that I think the U.S. and the U.K., who do have single regulators, did worse than Canada. So it's not a panacea or a cure-all, but I don't disagree with that angle. I think there's a lot of blame to be shared.
I would suggest that for a federal minister or a federal finance committee, our first responsibility starts with our own federal agencies. So whether the provinces were guilty or not guilty, I'd like to focus on federal agencies, federal responsibilities, and in particular OSFI, the Office of the Superintendent of Financial Institutions.
I'm not making accusations here, but we have heard from more than one expert that to a significant extent, OSFI had inappropriate regulation that made the crisis worse than it otherwise would have been. And what I am referring to is that OSFI allegedly encouraged banks to offer conditional liquidity facilities for issue of asset-backed commercial paper rather than the international--