Prime Minister's Address to the Business Council of British Columbia

Good afternoon, ladies and gentlemen.

It’s always a pleasure to be back in Vancouver, and not least because the hint of spring in the air is a welcome relief from all the snow we’re having in Ottawa, where it seems winter may never end.

Greetings once again to Mayor Sullivan.

Greetings also to U.S. Ambassador Wilkins, another refugee from Ottawa’s winter.

And a thank you to Chairman Larry Berg and all the members of the Business Council of British Columbia for the invitation to join you here today.

But a particularly big thank you to my introducer today, Premier Gordon Campbell.

I’m here before the BCBC to speak about the passage of our government’s third budget,

But I’ve come more generally to Vancouver to work with Premier Campbell to put some of the measures from Budget 2008 into effect.

Premier Campbell and I had a very productive meeting this morning.

We were able to conclude several federal-provincial agreements that will deliver a wide range of benefits for British Columbians.

First, we agreed on the terms for Community Development Trust funding for B.C.

This will assist the province to take action to help forestry workers and communities who were hit by layoffs and mill closures triggered by U.S. market conditions or by natural disasters like the pine beetle infestation.

Second, we agreed that B.C.’s new funding from the national Police Officers Recruitment Fund will be used to provide more front-line officers and improve public safety and security.

Organized crime and gang violence are serious concerns for British Columbians, and more officers will help in the battle to make your streets and communities safer.

Third, we discussed the funding the federal government is providing to the Mental Health Commission of Canada to proceed with pilot projects across Canada.

One project will be targeted to those suffering from mental illness and substance abuse problems in Vancouver’s Downtown Eastside.

The link between homelessness and mental illness is well-established,
and this project will develop solutions that will save lives and restore hope in one of the most troubled neighbourhoods in our country.

Finally, we agreed that new funding from the national Public Transit Capital Trust 2008 will be available for the Evergreen Line rapid transit project.

Linking Burnaby, Port Moody and Coquitlam, and connecting with SkyTrain, the Evergreen Line is a key component of the province’s bold plan to double public transit ridership and dramatically reduce automobile emissions.

And, while I’m on the subject of greenhouse gas emissions, let me just draw your attention to the national regulatory framework announced yesterday by Environment Minister John Baird.

Contrary to some commentary, the national plan and British Columbia’s plan complement each other.

The B.C. plan, which is tax-based, targets mainly consumer emissions and emissions down the production stream.

On the other hand, our regulation-based plan focuses on large emitters higher up the production process, with special emphasis on the challenges created by the oil sands and coal-fired electricity generation.

My point, ladies and gentlemen, is that, taken together the agreements today reflect our Government’s commitment to federalism of openness - an approach to federal-provincial relations that relies on respect for jurisdiction and productive collaboration to get things done for Canadians.

And the positive working relationship between Ottawa and British Columbia is an excellent example of the success of our new approach.

Our governments have worked together effectively – or are pulling in the same direction - on issues ranging from economic infrastructure to business tax policy to environmental stewardship.

And, of course, the ultimate expression of this will be the 2010 Winter Olympics,
which I fully expect will win Vancouver, British Columbia and Canada gold for hosting excellence, as well as produce a record number of gold medals for Canadian athletes.

So, Premier Campbell, may I say that it has been a great pleasure working with you and your government on these and other initiatives.

You are providing strong leadership for British Columbia, while never losing sight of the fact that ultimately, provincial interests and national interests are one and the same.

So, thank you.

Now, as promised, I’d like to talk about our 2008 Budget.

As I’m sure you noticed, there was quite a bit of speculation in the days leading up to the Budget that it might trigger an election.

The NDP and the Bloc were resolutely opposed to everything in it, even before they saw it.

And the Liberals – the federal Liberals - had done their fair share of sabre-rattling in the preceding weeks.

But on the day of the vote, the howls of outrage became whimpers of abstention.

Why? Political gamesmanship aside, I believe the reasons for this are quite straightforward.

The Budget passed because, despite these uncertain economic times, the Canadian economy is strong.

And because, despite the tough budgetary choices such times require, the Government has chosen a clear and balanced direction that is widely supported by Canadians.   

In fact, we’ve charted a consistent course on economic and fiscal policy since the day we took office.

We said we would make affordable tax reductions, reduce the public debt and keep spending under control and focussed on results.

In each of our budgets, that’s precisely what we’ve done.

This approach reflects our clear conviction, as Conservatives – as Conservatives federally - that low taxes, less debt and controlled and effective spending at the national level are a big part of the key to the long-run success of any economy.

And that is our goal - the growth and prosperity of the Canadian economy, for the benefit of working Canadian families, now and into the future.

It also happens to be how hard-working families themselves plan for success – spending on priorities, keeping their debt levels down and making investments in the future for themselves and their children.

Roughly speaking, our budget allocations for the five years between 2006 and 2010 break down like this:

Half of all our discretionary fiscal action has been devoted to lowering taxes, with the remainder evenly split – one-quarter to debt reduction and one-quarter to new spending.

It’s a real, consistent, balanced plan, and it’s working.

Canada’s economic fundamentals are strong.

At a time of growing uncertainty in the global economy, we’re in the best fiscal position of any G-7 country.

Inflation and interest rates remain low and stable.

Personal disposable income has been rising steadily.

Net employment has increased by over three-quarters of a million jobs since our Government took office.

As recently as last month, our economy produced another 43,000 jobs, and the level of employment hit a record high.

The national unemployment rate remains under six percent, the lowest it’s been since 1975.

But, as Finance Minister Flaherty observed in his Budget speech, Canada is not an island - and our export-driven economy is expected to grow more slowly over the next two years.

As we said last fall, the economic downturn in the U.S., the tighter credit market, global financial volatility, the falling American dollar, all do pose some serious challenges for us.

Some sectors, including the B.C. forest industry, are already facing the consequences of this or of longer-term adjustment pressures.

And though overall inflation remains low, rising costs of some goods and in some parts of the country are squeezing the budgets of some Canadian families.

There are a couple of ways to cope with these challenges.

One is to throw money at them, as the Opposition parties demanded in the weeks leading up to the Budget.

But meeting even a small portion of the Opposition demands (100 billion dollars) would require us to raise taxes or run a deficit, or both.

And that would be wrong for the Canadian economy – wrong now, and with worse consequences in the future.

History has proven over and over again that a balanced approach to fiscal policy, based on low taxes, minimal debt and disciplined spending, creates a sturdy foundation for a strong, successful economy.

And broader economic policies must be shaped around building strong, long-term fundamentals with a focus that is forward-looking, not bailouts from yesterday’s problems.

We’ve tried to take this general approach since coming to office.

Our first budget, in 2006, established the broad direction of our government and delivered on a series of specific campaign commitments.

It delivered 20 billion dollars in tax reductions for individuals, more than the previous four budgets combined, as well as important initiatives like the Universal Child Care Benefit.

It restrained the rate of spending growth, and institutionalized a process for identifying and eliminating wasteful spending.

And it launched Canada on the path to debt freedom by committing billions to paying down the national mortgage and setting tough debt reduction targets going forward.

Our second budget, in 2007, was even more focussed on longer-term objectives.

It provided more tax cuts, reduced debt even more aggressively, and kept spending focussed on direct benefits for Canadian taxpayers and families.

It also unveiled our plan to undertake the largest investment in national infrastructure in Canada in half a century.

And it tackled the fiscal imbalance - to ensure long-term, principle-based revenue arrangements with the provinces sufficient to give them similar flexibility on infrastructure and social service priorities.

One of the measures in this package was the enhancement of federal investments in the Asia-Pacific Gateway: up to a level of one billion dollars, an investment critical not just for British Columbia but for the future of Canada as a whole.

As well, we invested heavily in post-secondary education and training, and we provided new funding for scientific and technological research and development.

From this we have created an S&T strategy which, as you all know, is key to maintaining Canada’s competitive edge.

And, of course, I must mention, we were already seized with some sectoral challenges.

That’s why we helped Canadian companies, including B.C. forest producers, improve their competitiveness by allowing them to accelerate write-offs of capital investments in new machinery and equipment.

Budget 2008 stays the course: lowering taxes and debt and focussing new spending while keeping the budget balanced.

But we did something unusual this year.

We announced and passed some of our most important budgetary actions – a series of tax relief measures and the Community Development Trust --  well before Budget day.

Since last August, we have been increasingly worried about the ongoing consequences of the financial volatility that began with the sub-prime mortgage meltdown in the United States.

Given our strong fiscal position, we decided in the fall to take action we had planned for this spring.

Most importantly, we took action to stimulate the Canadian economy with 60 billion dollars in new broad-based tax relief for individuals, families and businesses.

Cutting the GST to five percent, dropping the lowest personal income tax rate and raising the basic personal exemption were key measures.

These are not just intended to be fair to everyone, not just intended to fulfil campaign commitments, but they are also serving to reinforce domestic demand, which is critical as U.S. demand for our exports began to weaken.

But more important to Canada’s long-term economic strength was our move to lower the general corporate tax rate.

Combined with our previous measures, this will reduce the rate by two and a half points on January 1 of this year, and to 15 percent by 2012.

The way we are headed, we will soon have the lowest rate on new business investment and general income tax in the G-7.

We have challenged provinces to work with us to get to a combined federal-provincial statutory corporate income tax rate of no more than 25 percent by 2012.

This can be a powerful selling point for Canadian companies competing for foreign investment – and I’m pleased to see Premier Campbell’s government clearly moving in this direction in its most recent budget.

Launching the Community Development Trust - that I mentioned earlier - was another pre-Budget initiative.

I first announced it at a strong, secondary forestry manufacturer – Marwood Ltd. – in Traceyville, New Brunswick.

Some were surprised I didn’t announce the program at a mill that had shut down.

The choice was deliberate. This program is not a bailout for a failing business – that would be a mistake.

Instead of bailouts for businesses, we are providing funds to the provinces to transition to new opportunities for workers and communities through initiatives like older worker assistance, job re-training, local economic diversification, infrastructure improvements, and new approaches in traditional sectors.

February’s Budget includes other initiatives to help the B.C. forest industry and similarly troubled sectors of the national economy.

These include a three-year extension of the accelerated capital cost allowance for manufacturing, on a declining basis.

We need new investment in the sector, and we want the incentive for it to be sooner rather than later.

We’re also providing assistance to help build new markets for Canadian forest products to offset the decline of the U.S. housing sector.

We’re providing even more support for scientific research, development, and post-secondary education.

And we’re dealing directly with challenges in the auto sector with our new Automotive Innovation Fund – a Fund that will support the development of cleaner, greener, more fuel-efficient vehicles.

This is an example of how we are trying to look forward, not back – to make prudent, strategic investments in a way that will take advantage of inevitable adjustment and the resulting opportunities.

I should also mention that this year’s budget continued the implementation of a comprehensive Expenditure Management System.

In the first round we reviewed 17 federal organizations and identified almost 400 million dollars worth of savings per year.

But, having said all that, I do believe that the centerpiece of this year’s Budget is, as Minister Flaherty has said, the introduction of the Tax-Free Savings Account, the single most important personal savings vehicle since the introduction of the RRSP half a century ago.

For the first time ever, British Columbians and all Canadians will be able to earn tax-free income on their investments.

This will encourage people to set aside more of their hard-earned income - because their earnings will be safe from the taxman – forever.

Not only will the savings be there for proverbial rainy days,

But because the money can be withdrawn at any time without tax penalty, and without any loss to lifetime savings room, the savings and the earnings can be used flexibly - to buy a new car, a home renovation, the trip of a lifetime, or anything else.

Obviously, this is important for individuals and families.

But I ask you to think for a moment about how important this is from a long-term, macroeconomic perspective – the powerful incentive to create a growing pool of national savings.

Compare that with the situation south of the border, with a credit market buckling under the weight of an over-extended housing sector.

All the incentive there has been to borrow against real estate holdings, leading to a housing market bubble that burst, with nothing to fall back on except foreclosure and bankruptcy.

By contrast, the Tax Free Savings Accounts will create a new pool of investment capital that can be used to grow our economy and create new jobs.

It will start small, just as the RRSPs did, but a generation from now I predict that this country will see the difference – a much higher personal savings rates, and much lower government revenues from taxes on investment.

And as a direct result, I predict our economy will be even stronger than it is today much stronger, in fact.

Pretty optimistic, you’re thinking.

Well, I believe we should be aiming far and aiming high.

I believe in Canada’s much bigger economic potential.

And I believe that if governments lift the tax load off Canadians,

Free them from the debt burden,

And focus the spending of their tax dollars on things that actually make their lives better,

Then there truly is no limit to what our country can achieve.

Ladies and gentlemen, as Minister Flaherty said in last month’s Budget speech, Canada has reached a fork in the road.

Indeed, as I said several months ago, we are heading into a period of economic uncertainty and slower growth.

It’s happened before and it will happen again.

But the fork in the road is this: whether, under these circumstances, we will make choices that will exacerbate the problems for the sake of the short term, or whether we make choices that will allow us to exploit our potential in the future.

Some will suggest, as they already are, that we go back to the old ways.

In defiance of reason and experience, they will suggest higher spending, higher debt, higher taxes, business bail-outs or even a return to protectionist trade policies.

I don’t believe that’s what Canada needs, and I don’t believe that’s what Canadians want.

They want lower taxes, less debt and carefully targeted assistance that helps workers, families, communities and businesses build a better future in the global economy.

They want prudent fiscal discipline during uncertain economic times,

Not reckless spending promises.

They want strong economic leadership that, yes, anticipates short-term challenges, but plans for long-term prosperity.

And if we stay the course, Canada will come out of the current international downturn stronger, better and more prosperous than ever before.

Thank you.

And until next time.

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