Business Leaders say Fiscal Prudence Requires Firm Targets and Clear Priorities, not Wishful Thinking

October 15, 1998

The Business Council on National Issues (BCNI) says Finance Minister Paul Martin’s autumn fiscal update was strong on prudent sentiment but short on the choices and commitment needed to deliver a rising standard of living for all Canadians.

The Council, comprised of the chief executives of 150 leading Canadian corporations, was pleased that the $3.5 billion surplus recorded in the 1997/98 fiscal year was used to pay down the public debt. But in a presentation to the Standing Committee on Finance of the House of Commons today, it expressed disappointment with the lack of commitment to firm targets in future.

“Paying down debt for the first time in 28 years is a good start, but where do we go from here?” said BCNI President and Chief Executive, Thomas d’Aquino. “Mr. Martin says the ratio of debt to Gross Domestic Product could fall to 55 percent in five years, but he made no promise to try and reach that figure. He said that the ratio would continue to be reduced to less than 55 percent, but set no goal.”

The BCNI fully supports the need for fiscal prudence at a time of great uncertainty in the global economy. “Mr. Martin is dead right on this point. We cannot play fast and loose with Canada’s finances,” said Mr. d’Aquino.

“But this is a time for courageous choices and clear priorities, not wishful thinking. Making choices does not mean simply doing less of everything. Making choices means concentrating the government’s efforts on those measures that will be most effective in helping our economy grow and will put the most money back into the pockets of hard-working Canadians.”

Mr. d’Aquino noted that while the Finance Minister endorsed a long wish list of potential government actions, including personal income tax cuts, reductions in Employment Insurance premiums and a vast array of spending initiatives, he gave no indication of their relative priority.

“The Business Council has made it clear that once we have set aside enough money to bring down public debt at a prudent pace, almost all available resources should go to reducing the burden of personal income tax. That is the best way to help Canada grow. That is the best way to leave more Canadians with more money to spend,” Mr. d’Aquino said.

Last week, the BCNI unveiled a proposal to bring down the annual federal tax bill by $18 billion over seven years. About 80 percent of the total, $14.5 billion, would go to reduce personal income taxes.

The BCNI’s proposed framework for continuing tax reduction would begin with a $3 billion tax cut in the 1999 budget. “We believe that such a tax cut is still affordable and sustainable, but only if the government foregoes any new discretionary spending and takes a gradual approach to reducing Employment Insurance premiums,” Mr. d’Aquino said.

While the federal government is under great pressure to reduce Employment Insurance premiums sharply and rapidly, Mr. d’Aquino noted that more than half of any such reduction would go to corporations and other employers rather than to individual Canadians.

As Canada’s largest employers, the companies headed by BCNI members would record immediate gains from EI premium reductions. While the chief executives agree that EI premiums must come down steadily every year, they overwhelmingly support broadly based income tax cuts as a more important priority.

“The EI premiums that flow into general government revenue are no more stolen from workers than are the personal income taxes withheld from the same paycheques,” Mr. d’Aquino said. “What matters most is whether the overall tax burden is allocated fairly and whether Canadians are receiving good value for the money that is taken from them.”

The Business Council on National Issues is a not-for-profit, non-partisan organization that is the vehicle for Canadian chief executive participation in national and global issues. Its members head companies that employ about one in every ten working Canadians, administer close to $1.9 trillion in assets, have a yearly turnover of more than $500 billion and are responsible for a majority of Canadian private sector investment, exports, research and development and training.