Province Législature Session Type de discours Date du discours Locuteur Fonction du locuteur Parti politique Manitoba 35e 2e Discours sur le Budget 16 avril 1991 Clayton Manness Ministre des Finances Progressive Conservative Party of Manitoba Mr. Speaker, I am pleased to present our government's fourth budget to the Legislative Assembly and the people of Manitoba. I would like to thank all the organizations and individuals who took the time to write briefs and letters, and to meet with me and with my colleagues. We received many valuable suggestions, and I believe the 1991 budget reflects the thoughtful advice of concerned Manitobans throughout our province. The goal of our administration is long-term economic renewal, the creation of a climate that encourages entrepreneurship, economic growth and job creation. Economic renewal will allow our children to feel confident that they will apply their abilities and education to world-class endeavours right here in Manitoba. Our commitment to this vision begins with a plan for fiscal responsibility. Ultimately, provinces succeed in stimulating particular industries and creating jobs because their home environment is the most forward-looking, dynamic and challenging. This requires a stable and competitive tax environment in which disposable income drives growth through consumption, and capital Investment drives growth through production. There are many opportunities before us. In the global marketplace, with its vibrant competition, 'Manitoba has the opportunity of providing leadership in bringing about a fresh approach to economic renewal. We recognize the new world reality as a simplified hierarchy consisting of a global economy and many regional economies. We must aggressively pursue new relationships with other governments and industry in mid-North America and throughout the world. It is Important that vital Infrastructure, such as transportation and communication networks, well-equipped hospitals, schools and universities, meet the needs of emerging businesses, and support the quality of life we aim to achieve. However, we also recognize that government can become a burden on job creation through the imposition of an uncompetitive cost and tax structure. Our fiscal plan is the blueprint for establishing a more competitive economic climate that will encourage investment and job creation. Mr. Speaker, in the '70s and '80s, governments allowed spending growth to drive taxation and borrowing decisions. The result is the legacy of debt and uncompetitive taxes which we face today. We cannot change the past, but we can and we must make better choices about the future. There are no magic solutions. Spending must be reduced, or taxes must be raised significantly. Manitobans have all the government they can afford. It is time for us to live within our means. The unprecedented challenge facing the province required an unprecedented search for solutions, an entirely different approach to evaluating public spending. We took the historic step of opening up the budgeting process when we outlined the three main thrusts of our approach to all members of the Legislature in January, and of course those three thrusts include internal reform, a revised Estimates process and moderation in public sector negotiations. Internal reform is a long-term strategy which focuses on the key results which government should achieve. Are there better or more efficient ways of achieving these results? Are there programs or services which are no longer essential? Are there alternative or innovative means of delivery which can provide better and more efficient services to Manitobans? The internal reform process has already resulted in a major reduction In government communication resources, finance and administration and executive level support. Spending in this area of government will be reduced by $4.4 million. Organizational changes within the Department of Health will result in a significant reduction in administrative and middle-management positions. Reducing these costs means more of the Health budget can be spent on protecting and improving health care for Manitobans. Innovations in service delivery can ensure that a larger proportion of tax dollars go to actual services instead of administrative overhead. A revised Estimates process is the second major component in our efforts to implement the fiscal plan. The new Estimates process allows the government to make decisions about taxes and the deficit first, and then make spending decisions within the limits of what the province can afford. The first cost to government is paying the interest on our debt. Even in the depth of a recession, Manitoba taxpayers cannot escape this cost. The revised Estimates process also ensures that the remaining funds are directed towards priority programming through the use of a sectoral approach. The process focuses decision making not on Individual departments, but on four broad sectors: human services, sustainable development, community development, and management and reform. The sectoral committees categorized programming within each sector on the basis of priority and commitment, and developed 1991-92 plans for the sector based on targeted expenditure levels. The third major element of our fiscal plan is public sector wage negotiations. Wage settlements have a very large impact on costs of government. In most areas of government services, salaries make up about 80 percent of the costs, either paid directly to provincial civil servants or indirectly through provincial payments to employees In hospitals, schools, colleges, universities, municipalities and other institutions. We are committed to working with public sector workers to preserve jobs and services by keeping services affordable to taxpayers. To do so, overall costs must be kept In line with our revenue. For that reason, we announced an overall target of 3 percent for public sector wages last December. As always, there are clear choices In upcoming negotiations. The limited dollars available can be stretched further with moderation in demands and settlements, or unions can demand that larger wage settlements be provided, resulting in fewer public sector jobs. In an effort to avoid settlement-driven layoffs, we have offered the Manitoba Government Employees' Association zero percent this year and 2 percent next year, as part of a two-year settlement. Of the four budgets I have been privileged to present, this one has been the hardest to prepare. Our province faces an unprecedented combination of severely constrained federal transfers, recession-induced revenue stagnation, and rising interest costs on past borrowings. This combination of circumstances makes each decision immensely more difficult. The immediate challenge is to keep our province on course to a prosperous future in extremely difficult and trying circumstances. Substantial progress has been made in establishing control over provincial spending in the last three years. Overall spending growth has been cut roughly in half, from 10 percent annual average under the former administration. We also established a savings account for Manitobans, the Fiscal Stabilization Fund. As Intended, the Fiscal Stabilization Fund has given the province some badly needed flexibility to cushion revenue shortfalls during the period of exceptionally low revenue growth which began last year. The deficit, however, remains a very serious concern. We must pay for past choices which ignored reality, which deferred again and again the necessary decisions, and refused to tailor spending to fit the province's Income. The accumulating debt load and rising interest costs threaten to cripple our province's capacity to meet the real needs of Manitobans, and to contain taxes to competitive levels. Despite the progress we have managed to achieve over the last three years, our taxes are still high. We have cut personal income taxes and held the line on corporate, capital and income taxes. Yet overall business taxation is still very close to, if not the highest in Canada. Our corporate Income tax is highest. Our corporate capital tax is second highest. Manitoba is one of only two provinces to tax manufacturing equipment and production machinery, and we are one of only four provinces to apply a payroll tax on jobs. We must recognize that businesses are mobile. They make choices. They can locate in Manitoba or elsewhere. If they locate in Manitoba, we will have more jobs and more income. If businesses choose to locate elsewhere, our sons and daughters will not have the opportunity to remain in Manitoba to pursue their chosen careers. Manitobans are willing to make sacrifices to protect those who are vulnerable. Manitobans are willing to pay fair taxes to support vital programs, but Manitobans should not be asked to sacrifice their children's future. Manitobans should not be asked to tolerate tax regimes which undermine investment and job opportunities, and threaten the very basis for renewed prosperity. In January, I briefed all members of the Legislature on the difficult financial situation facing the government. The enormity of the challenge before us is evident in the near-term outlook for revenue. With virtually flat revenue, if spending increased by 5 percent in 1991-92, the deficit would approach $600 million-the largest recorded deficit in the province's history. Three major factors contribute to the difficult fiscal challenge: the increasing cost of servicing our debt; the dampening effect of the recession; and reductions in federal transfers. As I have said many times, deficits lead to Increasing debt. Increasing debt leads to rising Interest costs. Rising Interest costs ultimately lead to reduced services. Manitoba is bearing dramatically increased costs as a result of past spending beyond our means. In 1980-81, Interest on the province's general purpose debt totalled $79 million, equal to about 19 cents of every dollar collected in personal provincial Income tax. Today, interest costs are $550 million, equal to 45 cents out of every dollar Manitobans pay In personal provincial income tax. The interest on this debt is a continuing and unavoidable burden on taxpayers. Since 1980, Manitoba taxpayers have seen more than $3.5 billion of their hard-earned tax dollars spent on interest payments on general purpose debt. Yet these payments have not reduced the debt one dollar. Instead, our net general purpose debt today is $5.2 billion, some $4.1 billion higher than a decade ago. Mr. Speaker, Canada is in a serious recession. Output of goods and services declined in the last three quarters of 1990. The decline is expected to continue through the first half of 1991. National unemployment is close to 1.5 million, and the national unemployment rate is above 10 percent. Federal high Interest rate policies are a major cause of these current economic difficulties. Manitoba is also experiencing recession. Revenue from our own provincial sources is declining. Still, there are encouraging signs. Manitoba's unemployment rate is third lowest among the provinces and below the national rate. Manufacturing investment for 1991 is forecast at the second highest level in the province's history, auguring well for our future competitiveness. Manitoba's traditional areas of strength in agriculture, resources, hydro, manufacturing and financial services remain fundamentally strong. Our long-term future looks promising. Federal transfers and spending policies have added to pressure on provincial finances. We reject the dishonesty Inherent in the federal approach to health and higher education financing-repeated, unilateral reductions to transfers, with federal cash payments virtually eliminated by the end of the decade, accompanied by loud proclamations of a federal commitment to post-secondary education and to national standards for medicare. The true test of a federal commitment to national standards is willingness to pay a fair share of the cost. Manitoba is also facing considerable offloading of program responsibilities from the federal government in agriculture, in RCMP cost-sharing, social assistance for aboriginal people and other areas. Of all federal transfers, equalization is of paramount concern to Manitoba. It is a program so critical to the country that it is now enshrined in the Constitution. Yet the federal government is currently paying $1.3 billion less to provinces, $121 million less to Manitoba, than the amounts required to achieve equalization under the federal government's own calculations. We will continue to fight for fair treatment from the federal government with every means at our disposal. As part of this effort, we are presently examining the possibility of a legal challenge to the present program, with the ceiling on equalization payments as being in direct conflict with the constitutional commitment to the program. Taken together, federal actions, the recession and interest costs have created a difficult fiscal challenge. Unless we succeed in keeping our finances under control, Manitoba will find itself handcuffed by ever-deteriorating finances regardless of the political stripe of future administrations. If Manitoba's finances get out of control, Manitoba's creditors, and not the people of Manitoba, will set the province's agenda. As I outlined earlier in this address, this government is taking a new approach to budgeting. Instead of following the old budget process with its incremental spending decisions, we began this budget cycle by asking "How much government can Manitobans afford?" Our government recognizes the importance of competitive taxes to achieving Manitoba's full economic potential. The tax reductions in Manitoba over the last three years were in sharp contrast to tax Increases in other provinces. Personal income taxes were reduced to bring the tax burden facing Manitoba families closer In line with other provinces. The provincial education tax on farm land has been eliminated. As a further measure of tax relief to Manitobans, the provincial sales tax is no longer applied on top of the federal sales tax. Manitoba does not tax the GST. These measures, among others, are helping to move Manitoba's taxes closer to the mainstream among provinces. I am pleased that today's budget will protect the gains we have made in tax competitiveness. Mr. Speaker, there will be no Increase In personal income tax; there will be no Increase In the retail sales tax; there will be no Increase in corporation Income tax; there will be no increase in corporation capital tax; and there will be no Increase In the payroll tax. The exceptionally difficult fiscal situation required some additional revenue. The tobacco tax will be increased by 1 cent per cigarette. The gasoline tax will Increase by 1.5 cents per litre, and the tax on diesel fuel will Increase 1 cent per litre. The environmental protection tax levied on non returnable beer cans shall increase from 5 cents to 10 cents. These measures will increase revenue by $32.5 million this year. Beginning July 1, 1991, corporations subject to the corporation capital tax will be required to make quarterly Instalments. Mr. Speaker, each of the last three Manitoba budgets Introduced significant reductions in the payroll tax. To ensure more equitable access to this relief, the exemption will be prorated among associated corporations. The new small business tax reduction introduced in the 1988 budget provides significant income tax relief for new small corporations. The program was intended to benefit genuinely new small businesses, to encourage firms which have successfully put a good Idea into place. After reviewing the experience in the first year of the program, I have become concerned that many of the businesses which benefit have simply purchased established firms. The program will, therefore, be reformed to significantly restrict access by firms which purchase existing businesses. The reformed program will be extended to December 31, 1992. In the 1990 budget, I announced a payroll tax credit for employee training. Employers committed to improving their workers' skills are able to reduce their payroll tax rate to 1.95 percent, the same as in Ontario, and well below the Quebec rate. The program will help businesses put training programs in place and will provide opportunities for employees to increase their skills, their value to employers and their future Incomes. Businesses which have introduced qualifying programs will begin making applications for this credit in early 1992. Mr. Speaker, the future of northern Manitoba mining depends on finding and developing new mineral deposits. Over the last several years, many Manitobans have taken advantage of Incentives in the federal Income Tax Act and purchased interests in junior exploration companies. The funds raised In our province-about $80 million In the last four years alone-helped discover major ore deposits In other provinces. We want to ensure that the funds raised in our province are invested here. I am, therefore, announcing a new Incentive to redirect Manitobans' investment into Manitoba and encourage exploration for mineral deposits, 011 and gas in our province. This program will lead to increased exploration activity and employment, and will lay the groundwork for new mineral and oil and gas development in the province. Mr. Speaker, our government is also working actively with the Manitoba Federation of Labour on the start up of a government-labour sponsored employee ownership fund. This will help Manitoba workers take advantage of the opportunities that arise to take an ownership position in their companies, thereby creating and saving jobs. We are acting to assure more timely delivery of all provincial benefits to social allowance recipients. Effective next January, social allowance rates will be Increase to Include provincial tax credits. By converting the annual tax credit into a regular monthly payment, people will benefit on a timelier basis, and Income tax refund discounters will no longer have access to these entitlements of social allowance recipients. I would also like to comment on the Issue of harmonizing Manitoba's retail sales tax with the federal goods and services tax. The Manitoba government will not harmonize the Manitoba retail sales tax with the goods and services tax in this budget. Nevertheless, the goods and services tax has been introduced. Quebec, Saskatchewan and Prince Edward Island have already decided to harmonize their provincial sales taxes with the GST. Businesses In provinces which harmonize their provincial sales taxes with the GST may have a significant edge over their competitors in Manitoba. For example, a manufacturer In Quebec will be freed from all Quebec tax on its operating and equipment purchases, while a similar business in Manitoba continues to bear sales tax on all these costs. Given the potential negative Impact of this competitive disadvantage on job creation, the Issue warrants further investigation. Accordingly, in the coming months my officials will carefully study the full Implications of harmonizing sales taxes. Earlier, I Indicated that the near-term outlook is for limited revenue growth. Revenue prior to tax changes and before any special measures is expected to grow by one half of 1 percent. With the tax increases announced today, overall revenue growth for 1991-92 is $58 million or 1.2 percent. To sustain services during the recession, we have authorized a special $20 million transfer from Lottery revenues, and a $125 million transfer from the Fiscal Stabilization Fund. These transfers bring total revenue to $4.9 billion or 2.5 percent above last year's estimate. The first draw on revenue is the continuing drain of past decisions to spend in excess of income. At the start of this year, before any decisions on budget allocations for programs and services, we had to find $550 million just to pay the interest on past borrowings. Only after we pay the interest on the debt are we able to fund the real spending priorities of this government: Health, Education and Family Services. Overall spending is up $160 million or 3.2 percent, with particular priority given to Health, Family Services, and Education and Training. Careful attention has been paid to protecting essential programs. An additional $90 million is devoted to Health programs, a remarkable accomplishment in the face of the $32 million decline in federal cash transfers for health and higher education. A further $37 million is provided for Family Services. Education and Training accounts for $23 million of the total increase. As I said earlier, public debt costs budgeted within the Department of Finance increased. The only other departments recording budgetary Increases were Environment, Government Services and Justice. Reductions in other areas were required to permit the increases for the high-priority area of human services. Mr. Speaker, as a result of the reductions in overhead and administration and trimming of lower-priority programming, the budget plans for a significant reduction in staffing authorization of some 958 staff years, or about 5 percent of the total provincial Civil Service. Through a combination of early retirements, normal attrition, and work force adjustment Incentives, we are hoping to reduce the number of permanent layoffs to between 375 and 450 employees. We value the important contribution made by the thousands of Manitobans who deliver our programs and services. We have sought to minimize the impact on these individuals by asking for moderation in salary requests and in making our decisions on program expenditure. While it has not been possible to avoid layoffs and the human costs associated with these difficult decisions, we will take steps to mitigate the Impacts on our employees and their families. Employees affected by program reductions will be provided with enhanced severance assistance and support. Voluntary severance incentives will be offered to employees not directly affected in order to maximize re-employment opportunities within the Civil Service. The government's fiscal plan continues our commitment to fiscal responsibility despite the difficult circumstances of the Canadian recession. The lack of fiscal responsibility at both federal and provincial levels during, and especially after the last recession, resulted in an unprecedented legacy of debt and deficits and Interest burdens which still plague governments In Canada. We cannot afford to repeat those mistakes. Spending growth of 3.2 percent reflects the difficult choices made to control overall spending, while protecting vital health, education and family services. With overall revenue growth of 2.5 percent, including the special measures announced earlier, the deficit will be $324 million. Adhering to a course of fiscal responsibility will mean that the deficit will be much lower than it was for five years under the previous administration. This is essential if we are to put a stop to growing debt and rising interest costs, and protect our capacity to provide priority public services on a basis affordable to Manitoba taxpayers now and in the future. Mr. Speaker, the reforms introduced in this budget build a framework to keep provincial finances under control. The framework permits priority programs to be maintained, while holding overall spending growth to about half expected Inflation this year. Inflation is expected to ease throughout 1991 and be significantly lower in 1992. Interest rates are expected to maintain their downward trend, paving the way for a rebound In the Canadian and Manitoba economies later this year and continuing through 1992 and beyond. With economic recovery, revenue should increase by 3 percent to 4-1/2 percent next year, and in the 2-1/2 percent to 4 percent range In subsequent years. Assuming spending growth continues at this year's rate, the deficit would fall in the range of $270 million to $345 million in 1992-93, and In the range of $240 million to $390 million in 1993-94. Our government's goal will be to move steadily toward balancing the budget over the following years. This will mean keeping spending growth somewhat below inflation next year and very close to Inflation in subsequent years. Staying on course will demand many difficult decisions in years to come. If spending growth is even one percentage point higher, the deficit will rise inexorably adding further to debt burdens and interest costs. The framework relies primarily on provincial actions and decisions. However, federal offloading and constraints would add significantly to the difficulty of meeting these targets. The underlying economic scenario is somewhat more cautious than the federal government's. Manitobans can expect a stable tax and cost environment; an environment that will look increasingly attractive as other jurisdictions come to grips with their own fiscal situations. Holding the course will give Manitoba the fiscal flexibility needed to take new initiatives In economic development and to preserve and enhance essential public services. Mr. Speaker, in conclusion, this budget continues the government's progress In Implementing its fiscal plan to provide our province with the needed foundation for economic growth and prosperity. This government believes in our province and its people. We are confident In the ability of Manitobans to compete with the best in the world and to do so right here In Manitoba. All too often, government has served as a barrier to economic growth Instead of as a partner. Our government is determined to change that. Over the past three years, we have made steady progress in our efforts to improve the climate for economic development. We are committed to protecting those gains despite the serious fiscal challenge that lies before us. We have developed new approaches to budgeting that recognize the limits to how much government Manitobans can afford. This budget avoids major tax Increases. This budget keeps our deficit to a manageable level. Most importantly, this budget ensures that our limited tax dollars are spent on the highest priorities. Thank you, Mr. Speaker.