Hon. Paul J. Cosgrove (Minister of State (Finance)) moved
that Bill C-151, an Act to provide supplementary borrowing authority, be read the second time and referred to the Standing Committee on Finance, Trade and Economic Affairs.
He said: Mr. Speaker, in beginning my comments on Bill C-151,1 would like to draw to the attention of Hon. Members the remarks of the Minister of Finance (Mr. Lalonde) on October 27, 1982 when as the Minister of Finance he presented his comments on an economic plan in Parliament. I quote from his comments:
I have also made it clear by the estimates I have presented that further borrowing authority will be required before the end of this fiscal year. In the budget I intend to present early in 1983, I will review again the fiscal situation for the current fiscal year, set out estimates for 1983-84 and future fiscal years, and then seek additional borrowing authority as required.
The Minister of Finance in his speech on supplementary borrowing authority of February 17, 1983 made reference as well to his intention to seek authority as is sought in Bill C-151 by these words:
I intend to introduce a Bill covering all of the borrowing authority needed for fiscal year 1983-84 after providing Parliament with the necessary information in my budget.
During debate on borrowing authority at the time the Minister made that speech, Members opposite insisted that they were not seeking to interfere with Government operations and they were not necessarily challenging the valuable social assistance programs that are supported by this borrowing authority. It was argued that they were willing to deal with borrowing authority if only they had adequate financial information. For example, on February 17, 1983 the Hon. Member for Vancouver Centre (Miss Carney) stated that her Party:
-would be much more willing to debate and pass this Bill if we knew what the money was needed for-
The Member for Mississauga South (Mr. Blenkarn), who is in the House today, also indicated, both in Committee and in
the House of Commons, that he would be willing to pass the legislation quickly if the Minister would give him a reasonable explanation of the economic position of the country with respect to the current fiscal year. He said that in the House on March 22 of this year.
The budget has been presented, Mr. Speaker. It does contain current and fiscal year projections. The budget contains the Government's economic forecast and its assumptions about the country's likely economic performance. We have, in effect, laid our cards on the table and provided the information which is the basis for the borrowing authority sought in Bill C-151. As Members opposite have indicated, they may quarrel with any or all aspects of the budget or its background information, but certainly they cannot argue that we have not presented, as comprehensively as we are able to, the basis for the request for speedy consideration of the Bill before the House, Mr. Speaker.
The Financial Administration Act stipulates that, except when Section 39 is used, statutory borrowing authority must be obtained from Parliament in order for the Government to increase its debt and to have additional authority for borrowing. Under Part IV Section 36 of the Act is the legislative basis for the request before us today. It reads:
No money shall be borrowed or security issued by or on behalf of Her Majesty without the authority of Parliament.
This refers to new money only, as under Section 38 of the Act there is a continuing authority to borrow funds to repay maturing debts. Consequently, in order for the Government to borrow money to meet its financial requirements, statutory borrowing authority must be obtained from Parliament. Section 39 does provide for the Governor in Council to authorize the borrowing of money when it appears that funds will not be sufficient to meet disbursements from the Consolidated Revenue Fund. This legislation is designed for short-term loans under limited terms to maturity not exceeding six months.
I have indicated the legislative basis of the legislation for which approval is sought today. I have indicated that the material which is the financial basis and foundation of that legislation is before us. We are now seeking speedy consideration of this legislation by the Opposition.
In so far as the budget is concerned, Hon. Members will know that it contains a large number of new initiatives to support and encourage economic recovery, to create jobs and to position the economy to take full advantage of the economic expansion phase that is developing in the world economies and reflected in the Canadian economy.
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The $4.8 billion program of private investment incentives and public spending is the main centrepiece of the budget strategy. We believe it will lead to the creation of good, rewarding jobs for Canadians right across Canada and that it will improve the economic basis on which our growth potential depends so much. Plans for federal capital projects worth half of that amount, that is $2.4 billion, are being finalized. As Hon. Members know, they will be put on a fast track in order to ensure that their contribution to the economic recovery comes quickly, within weeks.
Additional tax incentives through the business sector comprise the balance of the $2.4 billion, and this provision has received almost unanimously favourable comment across the country in the days since the budget. We believe this centrepiece, the $2.4 billion of accelerated and new funding, will contribute greatly to economic recovery.
The Special Recovery Program will go some distance in stimulating job creation in Canada, not only immediately under the capital works projects that we have set for the months and years ahead, but as well by virtue of the building blocks that the tax incentives, which are permanent changes to the Income Tax Act, will achieve.
The Government is doing more toward this end of creating jobs. The housing sector will benefit, and benefit greatly, from the measures in the budget and construction-related employment will continue to expand rapidly. The specific measures which will provide stimulus in this sector include modifications to the Registered Home Ownership Savings Plan, extension of the Canada Home Ownership Stimulation Plan and the Canadian Home Renovation Plan, as well as additional allocations for the Residential Rehabilitation Assistance Plan, for both Indian and social housing.
Furthermore, the Government is providing major additional support to employment through direct job creation measures. More funds have been allocated for the New Employment Expansion and Development Plan for local employment initiatives and for special youth job creation programs of several kinds, including the Summer Canada Program, Katimavik, the new defence Extended Youth Training and Employment Program and youth wage subsidy and internship programs. All of these allocations in the budget to which I have referred bring the total federal amount to be spent on direct job creation in 1983-84 to $1.5 billion, a figure which is impressive both on its own and in comparison to previous spending of the Government.
On the other hand, as indicated in the budget revenue growth is likely to remain relatively weak this year and the budgetary deficit is expected to be $31.3 billion. The net source of funds provided by non-budgetary transactions is projected to be somewhat larger for 1983-84 than it was in 1982-83, due in large part to the increase in Unemployment Insurance premiums that took effect on January 1, 1983. Thus estimated financial requirements, excluding foreign exchange transactions, are forecast to be $26.6 billion this fiscal year.
Passage of the present borrowing authority Bill, Bill C-151, of which we are speaking today, will ensure the Government is
in a position to implement the important measures in the budget and to meet the projected requirements for funds as identified in that plan for economic recovery.
The request for borrowing authority in 1983-84 is based on the financial requirements that I have mentioned, plus a reserve for contingencies. As we already have $14 billion in borrowing authority for the current fiscal year, we are seeking an additional $12.7 billion, to provide us with a total of $26.7 billion borrowing authority for the current year, an amount equivalent to the financial requirements, plus an amount for contingencies.
For purposes of clarity, Mr. Speaker, I would for the benefit of Hon. Members like to set out the history of the borrowing authority numbers in more detail. Part II of Bill C-143 passed last March provided interim borrowing authority of $14 billion for 1983-84. In addition, Part I of Bill C-143 conferred $5 billion of borrowing authority on the Government for use in the years 1982-83, of which an unused amount in excess of $2 billion was to expire on March 31, 1983. As it turned out-and I will provide the House with details later on-there was $2 billion of unused authority available to be carried forward into 1983-84.
Clause 2(1) of the Bill currently before the House seeks additional borrowing authority for fiscal 1983-84 of $14.7 billion. Clause 2(2) of Bill C-151 provides that any unused portion of this amount, to the extent that it exceeds $2 billion, will be cancelled on March 31, 1984. Thus passage of the current Bill, along with the borrowing authority provided in Bill C-143, will provide a total of $26.7 billion in new borrowing authority for 1983-84, plus a non-lapsing contigency of $4 billion.
There are two fundamental reasons, Mr. Speaker, for the non-lapsing contingency. They were the reasons, Mr. Speaker, which had prompted Parliament to put such a contingency in borrowing authorities previously, and they were borrowing authorities not only of this Government, but under the regime of Hon. Members opposite when they formed the Government as well. First, there is a need to have an amount in place to accommodate exchange market pressures and the effect they have on the level of official exchange reserves. Second, it is to enable the Government to continue with its regular debt program when the House is not in session.
In the foreign exchange market, when the Canadian dollar is firm the exchange fund account accumulates American dollars, and in order to finance this increase in official reserves, Canadian dollars must either be taken from cash balances or borrowed and charged against the borrowing authority.
On the other hand, when the dollar is weak the U.S. dollar reserves fall and these balances must be supplemented by drawing on the two standby credit facilities which the Government has with both the Canadian and international banks, or
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by other types of foreign borrowings. Any of these borrowings must be charged against the borrowing authority. This has been the practice of the Government for many years. It was the practice, as I said, which was carried on by Hon. Members opposite when they formed the Government.
Events which took place in May and June, 1982 are probably the best example to illustrate the type of situation which I have called upon just now. In that period the dollar was under pressure and nearly $3.5 billion of borrowing authority was used for foreign borrowing. And for all of 1982-83 foreign exchange operations added $1.5 billion to the financial requirements.
It is in case of any such repeated circumstances, Mr. Speaker, that we have asked for the contingency. As I say, such contingency has been granted by Parliament on all previous requests made heretofore. The request for a non-lapsing contingency amount, therefore, is not new.
I would like to turn, Mr. Speaker, to an explanation of how the borrowing authority situation stood at the end of 1982-83. Including the $5 billion borrowing authority provided by Bill C-143, the total amount of authority granted for 1982-83 was about $26.1 billion. Approximately $23.1 billion of this amount was used; $9.7 billion through the issue of Treasury bills, $4.9 billion through the issue of bonds, and $7.6 billion net Canada Saving Bonds sales. Foreign borrowing added a further $.9 billion to the use of borrowing authority. The foreign borrowing represented U.S. $750 million borrowed in the Eurobond market last June, and a partial redemption of Deutschemark maturity early last year. Thus there was approximately $3 billion unused of which $2 billion, as I indicated, was carried forward, and about $1 billion was cancelled on March 31, 1983.
I mentioned at the outset, Mr. Speaker, that Section 39 of the Financial Administration Act can be used in special circumstances. I would like to make reference to the actual amount of Treasury bills that were used by the Government under Section 39. Hon. Members will recall that in mid-February virtually all of the borrowing authority authorized for 1982-83 had been used. By early March it became apparent that Bill C-143 would not be passed for several weeks. In fact, we know that Royal Assent was not received until March 30.
Projected Financial requirements over the March to June period were extremely large, and in order to continue with a regular debt program that would satisfy these requirements it was decided to make use of the temporary powers granted by Section 39 of the Financial Administration Act. Permission was sought from Cabinet to use Section 39 to authorize a total of $2.3 billion of net new Treasury bill issues over the March 11-31 period. However, due to Canada Savings Bond redemptions occurring during that period which had the effect of increasing the authority, and since new authority was conferred in time to authorize the March 31 issue of Treasury bills, total usage of Section 39 amounted to approximately
$1.4 billion. This amount was in any event charged to the new authority under Bill C-143.
I would like to refer to the final clause in Bill C-151, Mr. Speaker, which has recently been a standard clause. Clause 2.3 refers to the ability of the Government to borrow and repay loans in foreign currency and has been included in the last six Borrowing Authority Acts. Over the years Canada has borrowed and repaid funds in a number of currencies. In recent years, however, this Clause has been added to confirm Canada's right to borrow in foreign currencies.
Bill C-96, which received first reading in the House in March, 1982, proposes a number of amendments to the Financial Administration Act, including a general amendment clarifying the Government's ability to borrow and repay in foreign currencies. Once this amendment has been passed, there will no longer be any need to have the specific request included in the borrowing legislation, such as Bill C-151 before the House today.
In conclusion, Mr. Speaker, I began my comments by pointing out that the Minister of Finance had, in the fall of last year, in his first official statement to the House as Minister of Finance, indicated his intention to seek the authority we are today asking for. He again made reference to his intention to seek the authority once a fiscal and economic plan had been placed before Parliament and we have concluded debate on that budget. The vote recently concluded the initial debate on that exercise.
In the request of the Government for interim borrowing authority, we took the opportunity to remind Hon. Members that the last occasion prior to today when borrowing authority was requested was for borrowing authority pending the production of the budget and the financial material in the budget, although the Estimates had themselves been presented earlier. Therefore, today Bill C-151 is a follow-through of the Minister's intention signalled in October of last year to seek the support of Hon. Members to provide the wherewithal to carry out the economic program which is so important to this country at this time, especially those features of the Government's plan identified in the budget as the Special Recovery Program, at the same time maintaining the Government's support of its social net and safety provisions which have been and are so important to Canadians less fortunate than others who have, for example, needed the support of the Unemployment Insurance Fund. The request today is to continue the Government's new initiative in its economic plan and to continue its social commitment to Canadians who need that kind of support at this time.
The legislation, I understand, would go to committee for detailed examination. Hopefully, the consideration at second reading, the deliberation by committee, the return to the House and the proceeding with the legislation to ensure support for economic recovery, which has been well received
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by Canadians right across this country, would continue in a manner which illustrates the commitment of Parliament toward supporting the recovery which is very apparent.
Subtopic: SUPPLEMENTARY BORROWING AUTHORITY ACT, 1983-84 (NO. 2) MEASURE TO ESTABLISH