Mr. Johnston (Westmount):

In fact, Mr. Speaker, the Westmount riding represents the Canada of tomorrow, where learning and speaking both official languages will be considered an opportunity and not an obligation.

At present, Mr. Speaker, we are observing in the West-mount riding a profound change in the attitude of the Englishspeaking population which is willingly taking part in the francization of Quebec. Anglophones, for example, are seeking opportunities to communicate and speak French with their fellow citizens, and it is astonishing to see, Mr. Speaker, that most of my Anglophone friends' children are attending either French schools or French immersion schools where both languages are taught. Therefore, Mr. Speaker, despite the Parti Quebecois' efforts to create an attitude of confrontation between Anglophones and Francophones, exactly the opposite is happening today.

Mr. Speaker, since the conquest, Canadian history has taught us that the division between French and English in the province of Quebec is based on religious rather than language differences. Up until now these religious differences have almost separated the two societies or prevented their integration. In my view, the ease with which English-speaking Irish Catholics have integrated themselves into the French community, for example, is proof of this theory. I believe, Mr. Speaker, that is why today we Find Francophones with names like Burns, O'Neill and Johnson, even in the Parti Quebecois.

As we know, Mr. Speaker, these religious barriers have nearly disappeared. This is a very great change in Quebec. In my opinion, relations have never been as friendly and as positive. I believe that far from being confirmed, these two solitudes, of which Hugh MacLellan wrote, are rapidly getting closer together. We, English-speaking Canadians, who have not the slightest intention of leaving the province of Quebec, see in all this the potential for a multicultural society.

The Acting Speaker (Mr. Ethier):

It being six o'clock, I do now leave the chair until eight o'clock this evening.

At 6.03 p.m. the House took recess.

Mr. Johnston (Westmount):

Mr. Speaker, when the House adjourned at six o'clock, I was discussing the attitude of the English community towards the francization of Quebec. I was explaining that we, English-speaking Canadians, have no intention of leaving Quebec because we are very pleased with what is now happening in the province. We see a dynamic, multicultural and bilingual society which could become the most dynamic society in North America if the economy is not overly weakened by the present political uncertainty.

Notwithstanding these very positive attitudes all of us in the riding of Westmount have, it is also fair to say that all Montrealers and all residents of my riding, be they Francophone or Anglophone, are fearful of what may lie ahead. We have heard our Prime Minister (Mr. Trudeau) and others say on a number of occasions that the health of the Canadian economy is inseparable from the subject of national unity. I say to you, Mr. Speaker, that I know there are many Canadians who may not share that view, but we who live in the riding of Westmount know that view to be correct.

Daily we witness an exodus of talent, French and English, young talent, often the children of friends, sometimes to other provinces in Canada but quite often to the United States. Daily we witness the exodus of businesses and assets. We see businesses closing and families displaced, as I indicated before, again sometimes to other provinces in Canada, but again quite often to the United States. The professional community in the city of Montreal, be they lawyers, auditors or professional counsellors, have been presiding over transactions of this kind on a daily basis for the last several years.

1 ask you, is it any wonder that the people of Westmount are more sensitive to the problems of national unity and the relationship of those problems to the economy than Canadians elsewhere in this country?

-as we say in French, to ask the question is to answer it.

Imagine my disappointment when I attended the first ministers' constitutional conference several weeks ago here in Ottawa and listened to the discussion about entrenching given rights and freedoms in our constitution, hearing Premier Lougheed declare that as far as he was concerned such entrenchment was unnecessary, that Alberta had a bill of rights and that the legislature of any particular province would be able and should respond to the needs and the will of the people at any particular time in this regard. I sat there and thought to myself, how would Premier Lougheed feel were he an English-speaking merchant in the third-perhaps the second, but probably the third-largest English-speaking city in Canada serving almost exclusively an English clientele, unable to erect a sign on his premises in English? So much, I said to myself, for the protection that is to be afforded the minorities of this country, not only in Quebec, but by other provincial legislatures.

The Budget-Mr. D. J. Johnston

Returning for a moment to the budget itself and the economy, I would point out that during my campaign I learned that in Westmount, economic issues are of as much concern as elsewhere in Canada. The people in Westmount want lean, tough government. That message came through loud and clear. They endorsed the policies introduced in 1975, the tightening up of the money supply, the basic freezing of the civil service over the last several years, and cutback in government expenditures. Furthermore, the mandate they gave me was: you go there and make sure these additional budget cuts and this economic plan of August are implemented. They approved the policies of this government as shown overwhelmingly by their vote on October 16.

As I said earlier to day, I am confident they will approve wholeheartedly the very responsible and very economically sound budget introduced by the finance minister last week.

I was very pleased, as, I noted, was the Leader of the Opposition (Mr. Clark), at the added incentive given to research and development in this country. This is very important to all of Canada and particularly to my province, Quebec, where, in the relatively near future, we must establish competitive high technology industries to replace those which we regard as being in the secteurs mous whose years are obviously numbered.

I was also heartened by something for which I have been asking for years, and that is a re-examination of our Income Tax Act to see that it is fair to all Canadians. A carefull look should be taken at the concept of tax neutrality-namely, that Canadians in the same financial circumstances should bear the same burden of tax. I am not by any means satisfied that this job is being done, but certainly in many respects this budget is a step in the right direction.

I might say that I learned several things this afternoon from the Leader of the Opposition, though none had anything to do with the budget. This leads me to conclude that fundamentally the Conservative party endorses the principles set forth in the budget. One of the things which came through loud and clear was that members of the Conservative party have an aversion to Crown corporations, which apparently is not shared by their colleague, Mr. Peter Lougheed. I too favour greater private sector participation wherever possible, but understandably the private sector looks to the competitive return on investment that it can derive from any particular area of endeavour. Those returns are not necessarily readily available in the capital intensive energy areas in which Canada is required to invest in the latter part of this century, not only for our generation but for that of our children, our grandchildren and for the future.

Hence, nineteenth century Conservative philosophy is not appropriate to the kind of capital intensive energy situation we are facing in Canada today. By the same reasoning that I heard this afternoon, I would think that the Leader of the Opposition should postulate that private industry in the United States should be financing outer space exploration. I would doubt that he would even convince General Motors of the

November 20, 1978

The Budget-Mr. D. J. Johnston validity of that kind of investment, yet who knows what kind of benefits may be ultimately derived by mankind from that kind of expenditure in the public sector?

Another thing which I found fascinating was the idea that the acquisition by Petro-Can of Pacific Petroleums was a current government expenditure of some kind. As I understand the transaction-and since I sit on the backbenches perhaps I do not understand fully-the acquisition is an asset. So I said to myself that if the acquisition of an asset was regarded by the opposition as a current expenditure, then it is small wonder that they believe that mortgage interest should be deductible. In fact, the entire purchase price of a house should be deductible.

The Leader of the Opposition also told us that he believed in cutting costs, freezing the growth of the civil service and reducing the deficit, all programs, I would point out, Mr. Speaker, which the government has undertaken. It is not clear to me how he manages another $2 billion in cost saving, but I am somewhat new to this game of politics and perhaps that is what is regarded as opposition licence, rather like poetic licence. If so and that kind of licence is available to us, I think at the same time we should look to full employment, no deficits and reduced taxes. He may be saving that platform for the spring, but I want it on record, Mr. Speaker, that it first came from the backbenches of the Liberal party.

Hear, hear!

Mr. Johnston (Westmount):

1 should like to close, Mr. Speaker, on a rather more serious note. I said earlier that Canada has enormous potential, and the Leader of the Opposition agrees with that. We have a tremendous asset base and we have a population that can exploit that base. The constituent elements of economic growth, as we all know, basically consist of the marriage of resources, labour and capital. We need capital in this country, Mr. Speaker. Unfortunately, political uncertainty does not create a secure environment to attract capital, be it Canadian or foreign.

We in the Westmount riding, Mr. Speaker, are on the front line of the battle not only to save our own economy in Quebec and that of Canada, but to save the country itself. The people in the Westmount riding, be they French-speaking or Englishspeaking, live with this problem every day. I believe that the people of Westmount, like the troops on the front line of a battle, are in a better position to judge what kind of leadership and what kind of leader is required to win that battle than the reserve troops who are stationed many miles away. I say to you, Mr. Speaker, that the vote on October 16 whereby the Liberal party was given an overwhelmingly increased percentage majority compared with 1974 was a message which the people on the front line sent to the people of Canada. And they sent a message that was loud and clear, Mr. Speaker.

Mr. C. A. Gauthier (Roberval):

Mr. Speaker, it is always interesting to speak about a budget such as the one under consideration. Since I have been sitting in this House, Mr. Speaker, several budgets have been introduced but I think that none has ever been so eagerly awaited. Not unlike previous finance ministers this one has only partly succeeded in sitting on the fence, to provide a nice picture while giving as little as possible. The business world is rather satisifed with the budget, because financial restraint is essential, but the small taxpayer is not happy as a result of the budget.

Nothing substantial appears in the minister's speech. For weeks he had been receiving much advice from various quarters about the direction to take to promote the economy. The Economic Council of Canada among others urged him to reduce the excise tax, cut the sales tax from 12 per cent to 6 per cent as well as personal income tax. On the other hand the Canadian Manufacturers Association advised him not to include any personal tax reduction, but to provide tax changes for companies and the business world generally. The minister could choose between one of those options, that is please the large company by taking a more cautious approach or please the small taxpayer by taking stronger steps. He has decided to follow the first option at the expense of the second.

This having been said, let us consider the details of the highlights of the new budget. At the outset, let us examine the sections which seem to be of a certain interest at first sight. The fiscal changes which will prevent professionals from incorporating in order to pay less income tax will be welcomed. Canadians will also welcome the changes relating to income debentures and retractable preferred shares. A number of companies invested their money in that fashion and by so doing avoided paying their taxes. We must note however that Petro-Canada took advantage of that fiscal loophole to buy the Pacific Petroleums Company Ltd. Could there have been a leak of information relating to the budget, Mr. Speaker, a leak that would have allowed Petro-Canada to acquire that company before the budget abolished that form of investment? The increase in the taxes of air carriers means that users only, and not the whole population of Canada, will pay the costs of transportation.

Generally speaking, those are the aspects of the budget which seem acceptable to us; unfortunately, they help only a very small part of the population. The government provides very few new measures for ordinary people. The sections of the budget which seem to favour these people do not actually. Let us take a closer look at them. In his introductory comments, the minister stated that the Canadian economy has made great progress in 1978, but without the results which had been anticipated. Real production growth will be around 4 per cent while the increase in domestic production prices will reach 6'/2 per cent. What has happened in recent months when a 5(6 per cent increase in production was foreseen by the minister? Why

November 20, 1978

this anticipated decrease of IV2 per cent? Moreover, this decline could be more important as economic experts are predicting an increase of approximately 3'/2 per cent. In addition, the minister maintains that the increase in domestic production prices will be 6!/2 per cent. Is he taking into account the increases resulting from imported products? In his speech, the Minister of Finance (Mr. Chretien) specified, and I quote:

But action is needed now to encourage investment, to respond to the needs of sectors and regions, and to keep our costs competitive, while reducing our cash requirements from the present high level.

Anyone hearing such a statement wonders what the minister is getting at. First, apart from Ontario and maybe Alberta, what real advantages will the other provinces of Canada stand to gain from the incentives advocated by the minister? Second, when the minister suggests raising from 30 per cent to 100 per cent the write-off for mining development expenditures it certainly helps the development of enterprises but it does precious little for those who work there. Let us take for example the recent ruling by the Anti-Inflation Board which refused an 8 per cent salary increase to miners in Thetford Mines because it was supposed to be too much: so, there is one law for the rich and another for the poor. In addition, always with a view to helping development, the minister extends the incentive for oil drilling funds. That is another gift for that industry which was going to invest anyway, even without help from the government.

The government, in a sublime and noble effort, saw fit to include in its new tax legislation a new maximum for the deduction of expenses relating to employment, that is $500. At first look, it seems to be a very generous action, but it is not so. First, that change in tax legislation will take place only in one year from now, not in 1979, which would have had immediate effects. Second, that increased deduction will benefit rich taxpayers, those who pay income tax. That exemption means an average real gain of $100 to $125 a year. Mind you, that reduction does not apply to taxpayers whose income is less than $10,000. Provincial income tax will decrease by $400 million for provinces which have signed an agreement in relation with income tax collection.

However, this measure is dependant upon an agreement between the federal government and the provincial government. The terms and conditions are not specified. So the greatest uncertainty prevails. Lastly, we note this quite mysterious sentence by the Minister of Finance (Mr. Chretien), and I quote:

The federal government and a number of provincial governments are working together to reduce the high cost of wood supply.

In his budget, the minister grants these companies other fiscal advantages which will have both directly and indirectly the effect of lowering their supply costs. That is a nice gesture, however the minister ignores the fact that in Quebec, for example, the cost of forest operations concessions in already

The Budget-Mr. D. J. Johnston low. Why then give grants to reduce these costs further? In fact, most of these measures will directly help such already privileged areas as Alberta and Ontario. The wealthy will get richer and the poor poorer.

Mr. Speaker, I will now comment on the measures announced by the Minister of Finance to promote research and development. As for increasing the basic investment tax credit for R and D from 5 per cent to 10 per cent throughout Canada, and to 20 per cent in the Atlantic provinces and the Gaspe region, I think that that is in itself a good measure. But I wonder why the minister did not increase it to 100 per cent as he did elsewhere, for example for expenses related to mining development. I really believe that small and medium-sized businesses, especially in the pulp and paper industry, would have benefited from such measures, when one considers that the main reason why various sectors of job creating companies were closed is their lack of competitiveness because of old, unsatisfactory and inadequate facilities for our time.

As for companies whose head office is outside Canada, I really do not think that the small tax advantages offered by the government would compete with those already offered by countries such as the United States. In that sense, the measures put forth by the Minister of Finance will certainly not have the impact which he wants Canadians to believe, and he knows that, Mr. Speaker.

I want to deal now with another far more important aspect of this R and D issue that the government is trying to hide from the Canadian people. On September 6, 1978, the present government announced budgetary cutbacks which, I believe, will be disastrous for the future of basic and industrial research in Canada. I can already hear short-sighted Liberal ministers say, as they have in the past, that basic research is good only for egocentric researchers. But I for one, Mr. Speaker, predict that the way things are going within two years industrial research will feel the countereffects of the way in which basic research is presently being mistreated, and I think the minister is the only one who cannot understand that the application of new technologies comes after the basic research necessary to discover those technologies.

The minister says on the one hand that he wants to help small and medium-sized businesses, but on the other hand the government announces cutbacks of $14.8 million in the nationally important sector of agriculture. Mr. Speaker, I believe the Minister of Agriculture (Mr. Whelan) will hear about this later on because I think that all hon. members must have received representations from their local federation representatives saying that they are not at all pleased about the Canadian dairy policy which has been frozen for the last two years. I shall come back to this question at the proper time, but I simply want to underline in passing that the government has done absolutely nothing in this area.

The budget of the Medical Research Council had been reduced by $500,000 and that of the Fitness and Amateur

November 20, 1978

The Budget-Mr. D. J. Johnston Sport Branch has been slashed by $6 million. Is fitness not also a matter of national concern, Mr. Speaker? And the list goes on. If the minister continues to damage university research as he has been doing for too long, who will train our scientists, even in the field of industrial research, and will we have to rely even more on foreign technology?

Mr. Speaker, recently, the Science Council of Canada raised the problem of industrial underdevelopment in Canada. Does the Minister of Finance (Mr. Chretien) not agree that this fact coupled with the drop of the dollar on international exchange markets will increase even more the already enormous cost of the transfer of foreign technology? Does that really represent a saving in the long term? What good can such a policy do to Canada? This government seems to have no ingenuity whatsoever, Mr. Speaker.

Indeed, why did the government not subsidize on an equal basis with small and medium-sized businesses the allocation of contracts for research made in government or university laboratories, which already have all the infrastructures needed to carry out this work? In addition to developing and maintaining our scientific customers in Canada, this could have had an obvious beneficial effect on industrial and pure research. This is the type of positive action which calls for the participation of everyone concerned and which could re-establish confidence among the various groups which constitute the Canadian scientific community, which confidence has been dangerously eroded during the last three years by the lack of an adequate policy in the area of research and development.

When I talk about an adequate policy, Mr. Speaker, what I mean is this: first of all, an adequate budget, which implies that the funds allocated to research and development should be increased to 2.5 per cent of the gross national product before 1985, with 50 per cent of these funds contributed by the public sector and 50 per cent by the private sector. This would encourage the business involved to be more serious in its application and in its work on research projects since it would have a 50 per cent financial involvement in these projects.

To avoid the type of political blackmail we are presently facing and to ensure the stability necessary for a good technological performance, a long term science policy supported by three year budgetary commitments revised every year should be established as soon as possible. The final element of an adequate research and development policy would be intensive consultation with the Canadian scientific community and the appointment of competent people to key positions in the research and development field, excluding in fact those experts in general administration. In that respect, Mr. Speaker, I do not think I need to be more accurate. The minister certainly understands what I mean.

In conclusion, the government predicts a reduction of 112,000 jobs in 1979 compared to the 1978 performance. In fact,

[Mr. Gauthier (Roberval).J

some 362,000 new jobs were created in 1978 while they will increase by only 250,000 in 1979, again according to the Minister of Finance: Informetrica Ltd., a statistical data research corporation in Ottawa, predicts that the proposed $2.5 billion financial cuts will result in the loss of 94,000 jobs in the federal government by 1981.

Last August the Minister of Finance predicted a 5'A per cent growth rate but Thursday evening he said that this rate would hardly reach 4 per cent. The weekend edition of the newspaper La Presse referred to a possibility of a mere 2'h per cent growth rate. Each statement made recently by the minister seems to demonstrate the government's inability to stimulate the economy.

In Canada, we have gotten into the habit of taxing production and employment through a large number of very complex fiscal laws while at the same time we subsidize inefficiency and non production through various government programs. The inability of the present government in economic matters as well as the performance of previous governments demonstrate without any doubt that the Keynesian system, the economic bible of our governments for years, is no longer adapted to our present economic and fiscal problems. The coexistence of soaring inflation and high unemployment rates as well as the behaviour of current governments towards budgetary deficits are there to prove it.

Considering the incompetence of the present government, we propose the immediate adoption of the policy advocated by the Social Credit Party of Canada since 1962 in this House.

That policy is what the sum total of money supply plus credit balances must be strictly controlled by the Bank of Canada to avoid inflation or deflation at the retail price level. Moreover, within the framework of an over-all monetary policy ensuring that enough credit is available for all Canadians to buy the goods and services they are able to produce, the national government must adhere to a "cash payment" fiscal policy rather than sinking lower into debt all the time, and undertake to eliminate the national debt in a specific period of time. Since the credit worth created by chartered banks issues from the producing systems capacity and the consumers' desire to consume, the government must maintain a balance between dollar demand and the cost of consumer goods, which they failed to do until now. In order to make available to Canadians sufficient purchasing power to maintain that kind of balance, the government should revert to the 1967 6 per cent maximum interest rate on chartered bank loans. Finally, the total personal exemption for income tax purposes should be increased to $5,000 per person, which means that the basic exemption should now be $5,000 for a single taxpayer, $10,000 for a couple, plus an additional $1,000 per dependent child. Those are initiatives that are called for by many people. Indeed, I urge the Minister of Finance to promptly consider them, if he has not yet done so, because the Progressive Conservative candidate in the Toronto constituency of "Beaches" made

November 20, 1978

comments quite similar to that of Major Douglas, the initiator of the Social Credit, in a recent speech before the Toronto chapter of the Society of Management Accountants.

Although we developed the fiscal proposition he put forward, and quite some time ago, and some people apparently have been making political capital at our expense on the issue for a number of years, we are happy that some federal political organizations finally saw fit to endorse our analysis of the economic situation.

It would suffice, just to name a few, to mention for instance family allowances and old age security pensions, which have been advocated by us since the beginning and which we now have today. The government has again started to talk about a guaranteed annual income program and we are pleased with that. They are even talking about Canadian harmony. I have just read an article in La Presse and I am glad to quote from it:

That is what comes out of the annual congress of the Ontario wing of the Liberal Party of Canada ... Three days of debates on the double theme of Canadian harmony and the economy-

So they will no longer talk about Canadian unity, the new word is Canadian harmony. And this is precisely what we have been saying for a long time. We know that it is impossible to achieve unity if unity is to be taken in the strict sense of the word. People can live in total harmony but they cannot live in complete unity. I am most happy to see the right hon. Prime Minister (Mr. Trudeau) using this new expression. This was very comforting Mr. Speaker.

We now have the impression that changes are taking place slowly but surely. Let us administer this country to the advantage of its human resources instead of sacrificing its human capital for the sake of profit. The Social Credit party represents the triumph of men over money. How simple these words can sound yet how heavy their practical consequences. I see that you are about to rise, Mr. Speaker. I will save you the effort and resume my seat.

Mr. David Orlikow (Winnipeg North):

That is much better than 10 per cent.

Mr. Orlikow:

The hon. member says that is better than 10 per cent. I remind him that we are almost back to where we were in October of 1975 when the government brought forward its anti-inflation program, which has been a failure. Unemployment has increased since the minister's October, 1977 mini-budget and his April budget. Official Statistics Canada figures show that 910,000 Canadians were unemployed last month. That is a substantial increase over the same period a year earlier. During the course of the last year the unemployment rate in my province of Manitoba went up from

5.6 per cent to 6.5 per cent.

In October of this year 4,000 more Manitobans were out of work than in October of 1977. We Manitobans know what a Conservative government means because we have had one for the last 15 months. It is not surprising that unemployment in Manitoba is increasing faster than in any other province. Actual unemployment in September of this year was 30 per cent higher than it was in the same month in 1977. On a seasonally adjusted rate, unemployment rose by 24 per cent. It is not hard to understand why that happened. Manitoba has a Conservative government, and the Conservative party in this parliament is urging the Canadian people to adopt the same policies nationally as those policies which are in existence in the province of Manitoba under a Conservative government.

What has been done in Manitoba, and why is unemployment up? Let us look at the record. Because of the contention of the Conservative government in Manitoba that the province needed more restraint, that government reduced the number of civil servants in that province by 1,500. That meant a reduction of services. A complete freeze was put on all government construction for a whole year. That meant that no government buildings were built. No senior citizens' housing was constructed, and no public housing was constructed.

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November 20, 1978

The Budget-Mr. Orlikow

In the whole province of Manitoba work on only one hospital was done in the whole year. It is not surprising that 2,000 construction workers who were working in 1977 are not working in 1978. That is what a Conservative government and restraint mean.

What the program of the Minister of Finance means, and has meant until now, is an increase in unemployment across the country. Our most industrialized province, Ontario, governed by a Conservative government, experienced a very large increase in unemployment in October of this year compared with the year before. The same was the case in the province of Quebec. The number of jobless in Ontario and Quebec exceeded 520,000 people. Let us face the fact that over 40 per cent of the 900,000 unemployed in Canada are young people between the ages of 15 and 24. That means that probably between

80.000 and 90,000 young people are unemployed in Quebec. It is no wonder that young people, in Quebec, particularly Francophones, have moved to support the separatist government in that province. I would have been surprised if they had not, in view of the record of this federal government in dealing with the major problem of unemployment in the province of Quebec.

The hardships and deprivations suffered by unemployed Canadians also mean losses for the people of Canada as a whole. The difference between the number of unemployed in 1973 and in 1978 is about 350,000. This represents a loss of almost $11.5 billion in terms of our gross national product. It means substantially less tax income for all levels of government and more spending under the unemployment insurance program.

The Minister of Finance has predicted that there will be

112.000 fewer new jobs in 1979. That is a prediction of further recession, less government revenue and more ineffective spending on job-creation programs to cushion the effects of unemployment, which to a large extent has been created by this government's lack of action. Unfortunately, the minister and his colleagues would rather cut government spending and slow down the economy even more than adopt measures which would tackle unemployment. As I have already pointed out, the effects of solutions like than can be seen today in Manitoba.

High unemployment, no major increase in funding for job creation and no real tax cuts demonstrate that the budget is a stand-pat budget and that there are no new policy directions.

The Minister of Finance is standing pat when our economy is at a standstill, consumer spending is low, prices are high and about 13 per cent of our industrial capacity is still unused. The minister continues to predict expansion, but the record of past predictions by this minister and this government give Canadians little hope for the coming year.

Only one element of society has welcomed the budget. Not surprisingly, it is the group which has gained most from the economic policies practised by this government since 1974. I refer to business people. A variety of tax cuts for corporations has been introduced in recent years, although four years of

economic downturn suggests that this is the worst possible way to try to stimulate the economy.

Instead of the stale, unimaginative advice which the minister has been getting from his advisers since he took on his portfolio-advice which has proved to result in failure-the minister should have listened to the Economic Council of Canada. In its recent annual report, the Economic Council of Canada pointed out that economic prosperity will not be assured if governments get out of the way of the private sector. Following the principle of less government-now accepted by both the Liberal government and the Conservative opposition-means more government austerity, more unemployment and more hardships for Canadian people.

The second principle which the Economic Council discussed was the idea that inflation can be eliminated if the rate of growth in the money supply is cut to 5 per cent, approximately the potential real growth of the Canadian economy. This is the policy which is being followed-or at least espoused-by the governor of the Bank of Canada, and I believe it is the policy of the Official Opposition, as expounded often by its spokesman, the hon. member for York-Simcoe (Mr. Stevens). What that policy will mean is that real growth will drop, interest rates will rise, unemployment will rise and the rate of increase in the cost of living will rise sharply. What the Economic Council proposed instead was real tax cuts, not just in the sales tax but also substantial cuts in income taxes for most Canadians, particularly low and middle income Canadians.

These tax cuts which the minister has put in, and the minister's faith in the improved competitiveness due to a lower dollar, reflect his rejection of a real industrial stategy and any real long-term policies to improve the state of the Canadian economy. The long-term prospects are disastrous, even if the most optimistic projections for 1979 are met. The structure of our economy, especially foreign domination of key industries and a multitude of small branch plants, is such that economic opportunities are not now used to Canada's advantage.

A recent background study for the Science Council of Canada entitled, "The Weakest Link" makes this situation very clear. The authors documented their case as follows:

During the 1950s and 1960s Canada lost ground economically to European economies in spite of expanding domestic and international markets. Expanding markets provided a superb opportunity for new investment, new processes, and new products, and should have influenced both productivity and profits. Canada has appeared to have squandered the opportunities of the past 20 years and has been left with inefficient, unprogressive secondary manufacturing firms.

The authors state later on that, even if Canadian costs were reduced:

-the economy would still be less well equipped, compared with most advanced industrial nations, to make positive responses to the problems posed by the growing industrialization of the underdeveloped world. Furthermore, it would still be a weak competitor against other advanced countries which, with their higher levels of technological capability, are more able to replace dying exports with new products.

These long-term structural problems are ignored by the budget. The recommendations of industry, labour committees

November 20, 1978

and the sectoral committees have been almost completely ignored, and the result is likely to be the shameful spectacle of taxpayers' revenue being used to finance corporations' continued movements of jobs and investment out of Canada.

The budget gives another $755 million to business through a variety of new tax cuts and the extension of older ones. This will be in addition to the billions of dollars in corporate tax cuts already provided by the present minister and his predecessors. These taxes are cut with no strings attached, and corporations have taken advantage of the fact.

I would like to point out the ineffectiveness of the tax policies, which have been followed until now and are continued in the present budget, in fostering research and development. We will continue to fail in the future because the minister has not faced up to the problems. The Toronto Star, in its October 12 issue, did some research. They called some of the largest multinational corporations in Canada to find out how much research and development they were doing on a world wide basis and how much of that R and D was being done in Canada. Here are some of the glaring examples of how these giant multinationals have ignored Canada until now.

Ford Motor Company, which spent $1,170 million on world wide research and development, said:

Most of our R and D is done in the U.S., Britain and Germany. We do some here but there are no figures available.

Is it U.S. Ford?

Mr. Orlikow:

It is Ford worldwide. I would like the hon. member to realize that Ford of Canada, one of the largest, most profitable corporations in this country, does not have one science Ph.D. graduate employed in Canada. General Electric spent $463 million for R and D world wide, and $9 million of that was spent in Canada. Kodak spent $351 million on research and development world wide. A spokesman for that company said:

All pure and applied research is done at our Rochester, N.Y., facility. We do some product development in Canada but no figures are available.

Chrysler spent $337 million on R and D international, and they responded by saying:

We don't do any R and D here in Canada. All our design and development work is done in the U.S.

I could go on, but I do not have the time. Most of the multinationals have the same dismal record.

I have not mentioned the large Canadian corporations, but some of them are no better. They are interested in profits only, not jobs for Canadians. One example is Northern Telecom, a Bell Canada subsidiary which has been viewed as a model for Canadian industry. Northern Telecom is treated well by the federal government. The company has received grants and loans that amount to almost $14 million. Its deferred taxes as at December, 1977 were about $50 million. The Export Development Corporation loans to foreign countries for the purchase of Northern Telecom equipment have reached the $200 million mark. The returns to Northern Telecom have been

The Budget-Mr. Orlikow

excellent. Its sales have more than doubled since 1971, going-

Mr. Condon:

Mr. Speaker, on a point of order may I direct a question to the hon. member?

Mr. Orlikow:

Mr. Speaker, I would be very glad to accept a question from the hon. member if I have time at the end of my remarks.

Sales have increased from over $500 million in 1971 to approximately $1.2 billion in 1977. In the same period, profits have increased almost sevenfold from $12 million to $85 million. Similar increases have been recorded in other indicators of this company's wealth. It is today a large and much more profitable corporation than was the case in the 1960s.

This profitability came, Mr. Speaker, at the expense of Canadians in more ways than just tax cuts. In the 1970s, Northern Telecom employed 26,000 people when the then minister of industry, trade and commerce, Mr. Pepin, assured a union representing the employees that the company would not leave Quebec. However, it has left Quebec and other provinces since that assurance. Last year, about 15,000 people were employed in Canada by Telecom, and in 1978 they estimate that it would have only 14,000 employees. At the same time, foreign plants built or bought by Northern Telecom-I suggest with Canadian money, either through profits, tax rebates or loans-now employ 10,000, slightly less than the number of people who lost their jobs in this country. The net effect is that, in my view, taxpayers paid this company to export jobs during a period of immense growth in that company's profits.

Another example of a company using across-the-board tax cuts is International Nickel Company. This corporation, with profits of $1.7 billion between 1967 and 1976, could defer $368 million in federal taxes, although it eliminated 4,000 full time jobs in just one day in 1977. All this was done in Tory Ontario at Sudbury and in Tory Manitoba at Thompson. Inco was able to use profits made in Canada, $17.5 million in federal tax credits, a $25 million provincial sales tax exemption and a low cost $70 million loan from the Export Development Corporation to export jobs to Guatemala and to Indonesia.

The Inco story raises questions about the value of this budget's special tax cuts for the mining industry. The foreign owned firms which dominate this industry seem ready and willing to use such tax cuts to finance their expenses elsewhere, and even to eliminate jobs here. It seems incredible to us that the minister's response has been to help increase the profits of such companies which they use to pay for foreign expansion at the expense of Canadian workers.

Northern Telecom and Inco are two examples which illustrate the flow of investment funds out of Canada. Indeed, the United States department of commerce estimates that there will be $720 million worth of direct Canadian investment in that country this year. Total investment abroad was $1,365

80067-11 y2

November 20, 1978

The Budget-Mr. Orlikow

million in the year ending June 30, 1978, according to Statistics Canada. Canada is now the third largest source of foreign investment in the United States economy.

At the present time, the pulp and paper industry should be using its enormous profits to modernize Canadian plants. The budget provides extra help for this industry, but what happened? B. C. Forest Products recently invested $75 million in the purchase of Blandin Corporation, a Minnesota paper company. Olympia & York invested $350 million in Manhattan, at a time when approximately 170,000 building trade workers were unemployed in Canada. This month, the Bank of Montreal will invest $1 billion in New York State, although key Canadian industries are falling behind in domestic and world markets because they lack the credit needed to innovate and modernize.

These exports of investment funds and jobs came after the corporate tax cuts of 1974, 1975 and 1976. Those carrots were not even sufficient to keep our own money in this poorly structured and declining economy. The November 16 budget offers more carrots, oblivious to the flow of investment under current economic conditions. We need a strategy to revitalize the economy, and sticks, such as the monitoring of Canadian investment abroad, to keep money here and make the economy attractive to investors.

Alternatives are available to the Minister of Finance. He did not have to maintain the pattern of across-the-board unconditional corporate tax cuts, a pattern which has been damaging to the economy and increasing the deficit. He could have applied to all corporate taxes the rule which he announced for small business tax. About the latter, he said the following:

The very generosity of the measures makes it essential to ensure that they are effectively targeted.

Despite what he said, the budget did not adopt any of the recommendations from the second tier committee which represented both industry and labour in the more than 20 industries which it examined. The committee made specific recommendations about research and development incentives. It recommended write-offs and tax credits which could be applied flexibly to each project; a payback mechanism where the subsidized research leads to new profits; a special effort to increase Canadian research and development by foreign firms; and safeguards against the free transfer out of Canada of publicly financed research and development benefits, such as the ones to which I referred in connection with Northern Telecom. Not one of those recommendations was included in the budget, although the minister implied that the changes in research and development tax credits were made in response to the second tier committee. If they were, it was a poor response.

We need to adopt an industrial strategy along the lines suggested by the New Democratic Party for approximately two years. One goal of such a strategy would be the development of industries which supply inputs into key sectors of our economy: housing, transportation and food. Instead, we received cuts in the research budgets for transportation, fishing, farming and energy. This should be done in a way which would improve both the quality and quantity of Canadian

production, as well as make maximum use of Canadian products.

Canada now relies too heavily on imports in the basic high technology industries, such as industrial machinery and equipment, chemicals, plastic materials and telecommunications equipment. Priority development in these industries would replace imports and lead to an international specialization in some of the categories. This would increase the proportion of industrial goods in our over-all exports. Despite what is being done by the Minister of Industry, Trade and Commerce (Mr. Horner), we depend almost exclusively on the sale of raw materials for export, rather than on manufacturing to provide the necessary jobs. Further processing of our natural resources in Canada would represent another opportunity to strengthen the economy and increase employment. These are investment imperatives for future economic strength, not just opportunities.

An industrial strategy will not be achieved by tax giveaways or passive acceptance of the export of jobs and capital from the country. The budget should have replaced the broad range of corporate tax cuts with a Canadian investment fund as proposed by my party. Such a fund, built up of private profits deposited to gain tax credits, would be available for investment under public authority to help rebuild Canadian industry. That is precisely what the Swedish government has done, and that country has surged ahead, while Canada has fallen behind. There would be a penalty for unapproved use of such profits; large firms could be required to contribute a share of their profits in times of inflationary pressure. A constantly revitalized economy, with well planned investment in Canada of at least some corporate profits, would be the result.

Mr. Deputy Speaker:

Order, please. I regret to interrupt the hon. member, but his allotted time has expired. He may continue with unanimous consent. Is there unanimous consent?

Agreed.

No.

[ Translation]

Mr. Speaker, I am really delighted to take part in this debate, and I wish first of all to congratulate the hon. member for Westmount (Mr. Johnston), who has presented his ideas and remarks with quite a remarkable eloquence. 1 take also great pleasure in mentioning that the hon. member represents a linguistic minority within his province, just as I represent one within mine. [English]

Also, it augurs very well for the contribution of that hon. member to future debates. I strongly encourage him to bring to this House in the future the quality which he contributed today.

At the outset, I should like to indicate that as a representative of a northern Ontario constituency, I have followed issues affecting that area with a great deal of interest. I was extreme-

November 20, 1978

ly pleased with the budget and its provisions in terms of how the areas of northern Ontario are affected. Advantage will be made available to industry in northern Ontario, particularly the pulp and paper industry, by the 10 per cent investment tax credit. Northern Ontario has experienced the phenomenon of older mills and equipment in the pulp and paper industry, at a time when the industry is facing a bull market. I strongly encourage major corporations involved in the pulp and paper industry in northern Ontario, to avail themselves of the 10 per cent investment tax credit in order to renew equipment and refurbish old plants.

One item in the budget of considerable interest and importance to me, was the encouragement given to the mineral industry. Since the advent of the railway back in the 1880's, northern Ontario has seen the development of mining, unsurpassed anywhere else in Canada. Indeed, the mining industry has been an essential ingredient to northern Ontario and, as a consequence, to Ontario and the whole of Canada. It is encouraging to see the positive reaction within that industry to the initiatives of the government, such as mining tax incentives, including the write-off of development expenditures which is being increased from 30 per cent to 100 per cent.

In addition, the government has advanced its declared intention to allow costs associated with town sites and social assets of new mines to be subject to depletion write-offs, again a welcome intitiative supported by the industry.

Another example of co-operation with the province in the recent past can be found in a bill introduced at the last session of the Ontario legislature to provide a tax write-off for mining equipment. That tax write-off marries very well with the write-offs that are to be made available, and I would encourage the Ontario government to renew its efforts to pass that legislation which died on the previous order paper. This is a great initiative that we are presenting, and I hope it will receive the support of the Ontario government.

We have received encouragement in the past as a result of co-operation with that government. One example is to be found in the recent agreement between the federal government and the government of Ontario to provide $2.3 million for geoscientific surveys undertaken in the Kirkland Lake area of the province, an area which Your Honour will recognize as one of the most productive mining areas in the past.

Having regard to these budget proposals, let me say that my office has contacted a number of major mining concerns. In the last year I have visited some of those major mining operations in northern Ontario in order to familiarize myself with conditions there. As a result, I have established a rapport with the industry, and there has been a great exchange of information. Following the budget, the industry gave primary approval to its provisions.

I listened with some interest on Friday to what was advanced by the hon. member for York-Simcoe (Mr. Stevens). I listened to a small portion of his speech, and that was enough. For a number of reasons I had to leave, but I found,

The Budget-Mr. Blais

upon reading his speech, there was not very much I missed after the few remarks I heard.

He criticized the government in terms of Crown corporations. He attempted to wax eloquently about these corporations, and he advanced the notion of privatization. He indicated that the government should abandon its initiatives in terms of Crown corporations and launch itself into a program of privatization. Unfortunately, he seized upon two shining examples of government initiative in the Crown corporation field. The first was in respect of Petro-Canada; the other was in respect of a Crown corporation styled the Enterprise Development Corporation.

Let me deal first with Petro-Can. I have very fond memories regarding this corporation. I was a member of the committee on National Resources and Public Works when the concept was approved by the committee and parliament. I have watched its development as a concept and as a fact and its subsequent progress within the private sector. I suggest its progress has been commendable. I find it strange that the Tories selected that corporation in order to exemplify their response to Crown corporations and in trying to discourage the government from protecting the national interest. I find it strange that the Tory opposition, in this instance, should take exception to a national corporation acting within a very important industry in Canada, namely, the petrochemical industry, particularly at a time when they know full well there are other national corporations of foreign governments operating within this field. Hon. members recognize full well that British Petroleum has a large operation and capital investment in this field. They seem to have no objection to that corporation's operations within Canada and would not suggest at all that the British government should discourage BP from taking part in the North Sea play. I find it passing strange that members of the opposition should resist the initiative of this government to introduce a national oil company in the play in western Canada.

Hon. members of the opposition also know full well, especially members from Alberta, that other national corporations have capital investment in this field, including national corporations of Italy, France, Germany and Japan. There is an involvement on the part of the governments of those countries, yet there is no objection to that. However, as soon as the Canadian government introduces a national corporation to protect our national interests, there is objection.

Mr. Speaker, the hon. member for York-Simcoe (Mr. Stevens) stated, and I quote:

-the government no longer can afford the luxury of owning things as Petro-Canada.

-and-

-that the acquisition of Pacific Petroleums will not contribute to the production of one extra barrel of oil in this country, and it will not mean the employment of one more person.

The Progressive Conservative party therefore wants to return Petro-Canada to the private sector. Let it be known that

November 20, 1978

The Budget-Mr. Blais

I am against such an idea. Energy resources have become a major factor of public life. The interaction between government and private industry has become increasingly important and complex. The communication gap that sometimes exists between the government and the private industry represents a stumbling block to the development and realization of major national policies.

Petro-Canada was set up to help fill that gap and to facilitate a more immediate and close interaction between public policy and the operational realities of industry. Petro-Canada is also used for another purpose, that is to increase strongly the part played by Canada in a mainly foreign controlled industry. It also provides to Canadians the best possible profit for their substantial rights as owners of oil and gas deposits held by the Canadian government. The hon. member for York-Simcoe (Mr. Stevens) forgets the basic objective of Petro-Canada when he suggests that Canada cannot afford such a corporation. It is incredible. No doubt he forgets that the utmost priority for Petro-Canada is to help increase oil and gas supplies and assess the potential of main areas offering significant prospects for the increase of Canadian reserves.

Mr. Speaker, you will remember that some time ago the multionational corporations were stating that there were huge oil reserves in Canada, so much so that a government was prompted to promote exports when 100 per cent of that industry was controlled by multinationals. So it became obvious that to protect itself Canada had to have available an industry that could shed light on the sector of the oil industry, and that is why Petro-Canada was set up to be able to see exactly what happened in that industry. And, of course, we used extensively the information we have available which can guide the policy we wanted to adopt. It is important to remember that unlike certain national petroleum corporations, Petro-Canada was also set up as an alternative to the nationalization of the industry.

So it is not a matter of Petro-Canada taking over the area but rather acting in parallel with other corporations in the private sector. The hon. member for York-Simcoe cannot be very serious when he says the acquisition by Petro-Canada will not create a single job and not produce one more barrel of oil in Canada. He does not seem to realize that through that transaction Petro-Canada will have access to a production of oil and natural gas in southern Alberta beyond the bounds of his imagination-if one can find any because imagination on that side of the House, Mr. Speaker, is not in our supply-and as the result of the combination with Pacific Petroleums would become the second natural gas producer and the fifth oil producer in Canada a few steps behind the giant producers. Pacific Petroleums alone ranks second in Canada with respect to natural gas reserves and fifth with respect to natural gas production. Furthermore, Pacific Petroleums ranks fifth and ninth respectively for oil and production reserves.

[Mr. Blais.)

The hon. member of the opposition, the hon. member for York-Simcoe, is pessimistic as to the effect the acquisition of Pacific Petroleums will have on oil production. He does not even dare expand on his argument because he knows quite well that it is not well founded. If he examines the performance record of Petro-Canada, he will see that in 1977 that corporation as a result of its development operations, added 21 billion cubic feet of gas to its reserves. In addition, in 1977, Petro-Canada added 2.9 million barrels of oil and of liquid natural gas by-products to its reserves. Furthermore, in 1976, Pacific Petroleums had estimated reserves of 3.2 billion cubic feet of gas and 180 million barrels of oil. Its production was 396 million cubic feet of gas and 31,650 barrels of oil a day. Those facts clearly show that the Progressive Conservatives did not understand at all the transaction and the role of Petro-Canada.

Mr. Speaker, the hon. member for York-Simcoe (Mr. Stevens) says he is concerned about the fact that the purchase will create no new jobs. Once again his affirmation is without basis and does not take reality into consideration. On the contrary, such a purchase will allow Petro-Canada to undertake daring projects, in addition to strengthening its position in the marketplace. Doubtless those endeavours will create employment. Canadian money spent to finance exploration, production, development and transportation of oil and gas generates economic activity in Canada. At the same time, we have the opportunity of acquiring direct and precious experience in the technology of resource development and international economic activity.

In short, in this world where oil companies play an increasingly important role, Canada is developing expertise of great advantage to it. In any event, by operating at the international level, Canada, through Petro-Canada, will be able to open important markets, among those which supply equipment to the oil industry, allow drillings and offer professional and technical services. Speaking of exports, Mr. Speaker, I should like to point out to you some of the remarks made by the hon. member for York-Simcoe (Mr. Stevens) about the Export Development Corporation. He said he was taking that corporation to task and, again he was on the wrong track. The corporation proved that he knew nothing about the principles which govern it and it continues to serve the Canadian people well. In denouncing the increased support capacity of the corporation, the hon. member for York-Simcoe proved to us once again his lack of competence in economic matters. For the benefit of this House and the Canadian people, I should like to set the record straight and put things back in their right perspective.

First of all, it will be remembered that on June 30 last, Bill C-36, An act to amend the Export Development Act, was given royal assent and increased from $8.5 billion to $26 billion, the capacity of the Export Development Corporation to support and help Canadian exporters who in turn create jobs.

November 20, 1978

We are to be reminded that this increase in the level of support was not pure fantasy. It was brought about as a result of the increase in demand for the services of the Export Development Corporation. We as a nation must recognize the importance of exports. Twenty-five per cent of our GNP is represented by exports. Canada must increase its exports if it is to survive as a nation. The Export Development Corporation has assisted nearly 40 per cent of the exportation of equipment and products.

[ Translation]

What's more, the corporation has always shown profits. [English]

We have heard from the opposition comments to the effect that somehow $26 billion of support was going to come from government coffers. There is no recognition by the opposition of the fact that the Export Development Corporation has been a profitable enterprise. It has made money and it has obtained all the financing that it has needed from the international money markets. It has been able to meet its obligations always. [Translation]

It is important to understand-but the hon. member for York-Simcoe has not yet understood it-that the loans made by the Export Development Corporation do not leave the country, but rather are paid directly by the corporation to the exporter on behalf of the foreign buyer. The only object of the loans is to finance sales of Canadian goods and services to better meet the international competition of other trading countries.

If the suggestion that the Export Development Corporation ought to be disbanded, or somehow done away with, were adopted, it would really put Canadian competitors in the international market at a disadvantage. Hon. gentlemen opposite will recognize that all of our major competitors have organizations similar to the Export Development Corporation which assist their own exporters. They should recognize as well that the Export Development Corporation is most efficient compared with other export development corporations, or their facsimiles in other countries. It just stands to reason that all members of the House need to encourage this particular corporation if they are serious about increasing the manufacturing sector in Canada.

[ Translation]

Canada needed the additional capacity I was talking about, that is the $26 billion to reach the export level it would need in the future. Canada ranks among one of the most export-relying countries in the world. Exports account for $1,900 per Canadian. Given the fact that our domestic market is weak and that without exports our manufacturing prices would be a lot higher than world prices, Canada always had to strive fiercely against international competition.

The Budget-Mr. Blais

It is recognized that in an industrialized society, the competitive nature of the goods in the Canadian market depends on production rates and the level of investment. That, in turn, depends on markets. No Canadian entrepreneur is going to invest money, his or somebody else's, unless he knows there is a market for his goods. If there is no market for the output of his production, he will not invest any money.

So far as international consumption of goods is concerned, 20 per cent only of the world's population consumes 80 per cent of the world's production. There is a massive untapped market for Canadian exports, Mr. Speaker, and that is the market where our exports should go. I congratulate Canadian entrepreneurs who have been bold enough to go to communist China and seek out markets within that area. These are the areas for which the EDC would be ready to furnish funds to finance transactions. I might mention that in the recent past there has been a number of countries with whom we have had no trading experience but which have now benefited from EDC financing, thus encouraging the presence of Canadian businessmen within those areas.

In 1977 the Export Development Corporation offered lines of credit to Morocco, Egypt, Gabon, Algeria and Iran. They are contemplating other agreements with countries strongly interested in Canadian exports which are in a position to honour the loans made. Not only did the corporation join its efforts to those of exporters to make a breakthrough in foreign markets but even here in Canada it placed the emphasis on the closest collaboration with exporters in their own area. Mr. Speaker, the hon. member for York-Simcoe would like to dismantle the Export Development Corporation and use the money in Canadian projects in Canada. He is making a mistake once again because the Canadian economy cannot operate in isolation. It is quite the opposite and I am basing my argument on the statement made by the president of the Corporation Mr. MacDonald, and I quote:

Mr. Speaker, I see the leader of the opposition has joined us-or had joined

us.

Mr. Baldwin:

When he heard you, he went out again.

Mr. Blais:

I simply want to indicate to him as the leader who wants to see the disbandment of the Export Development Corporation and the disappearance of Petro-Can, that those are two major corporations which reflect upon our future. They make Canada, of all the western industrialized nations with which we compete, the only one that has any chance of becoming self-sufficient in energy and the only one that has access to new technology and new technological developments.

We in Canada have advantages in terms of foreign trade which are not enjoyed by any of our competitors.

November 20, 1978

Royal Assent

We need the instrument of the Export Development Corporation in order to get into those markets. Anyone who does not see that has blinders and blinkers and everything else. Mr. Speaker, the hon. member for York-Simcoe (Mr. Stevens) is the prime mover of the retrograde policy being advanced by the Tories.

We have to shift more and more to exporting equipment goods and related services with a view to obtaining the kind of economic growth Canada needs to provide the number and type of jobs corresponding to the skills of our labour. It is precisely these labour intensive goods and services, products of the Canadian technology which will contribute to create future employment. And it is to this effect that EDC support is absolutely necessary.