A Time for Fiscal Responsibility

BRIG. GEN. LEWIS:

Mr. Premier, distinguished guests, members and friends of The Empire Club of Canada: In October of last year Manitobans elected a Conservative government. In that election, the Conservatives captured forty-nine per cent of the popular vote. That is the largest election majority chalked up in recent Manitoba history. The dynamic politician who led the Tories to their stunning victory was, of course, our guest speaker today, the Honourable Sterling Lyon.

The Premier of Manitoba grew up in Portage la Prairie. He has been characterized by a writer as "a red-headed bantam who scrapped his way through school." In any event it was a successful method for he graduated from Portage High School with a Governor General's medal and a university scholarship. Following university and law school he was called to the Bar in 1953.

Five years later, Premier Lyon became a Member of the Legislative Assembly. He spent the next ten years as an elected provincial politician. During this time he served in no less than six different ministries under Premier Duff Roblin, and as Attorney General at thirty-one he was the youngest cabinet minister in the Roblin government.

Mr. Lyon did not contest the 1969 election and returned to the practice of law. But he re-entered the political stage in 1975 on being elected leader of the Manitoba Progressive Conservative Party. In October 1977, campaigning on a platform of less government and more private initiative, his party swept into power. And Mr. Lyon was sworn into the office of Premier on October 26th of last year.

In the last thirteen months Premier Lyon has rarely been out of the news. In listening more to the grass roots majority than the vocal minority, he has changed the Manitoba political scene. It is a change that has earned him the warm admiration of the right and the scorn of the left.

Sterling Lyon is a vocal politician who says what he thinks. He has said "the public sector is on trial." He has said that the federal government is "spending like drunken sailors." He criticizes socialists for their "ideological silliness." He is pitiless in his attempts to reduce what he terms "the maw; the animal"--in short the government bureaucracy.

It is not difficult to see how the strong words of our speaker could result in a polarization of opinion--not only in his own province but across the nation.

There is no doubt he voices the concerns of many Canadians who fear big government as the root cause of many of our economic ills. And these are fears that are fed on the bureaucratic indifference enunciated in the recent Auditor General's report.

However we view the politics and strong words of Sterling Lyon, we must admire the character, courage and leadership of the man. He not only utters words, he backs them up with action.

Ladies and gentlemen, it is my pleasure to present to you the Honourable Sterling Lyon, Premier of the Province of Manitoba, who is telling us it is "A Time for Fiscal Responsibility."

Mr. Premier.

PREMIER LYON:

I'm on my way home from a conference of First Ministers in Ottawa in which we talked of our economy. At that conference we made it clear that as long as the policies of the federal government persist, in terms of excessive deficits, of regulative interferences like the Foreign Investment Review Agency, of policies of taxation on the resource industries that ignore the risks involved in those industries, of monetary policy that is established without reference to the effects of changing interest rates on the regions of Canada, our ability to grow in Manitoba will be hindered.

We made it clear, too, that we find it strange that a federal government corporation, Petrocan, is able to raise $700 million to $1 billion to buy an oil company--and it should be noted that changing the ownership of that company will not create a single additional barrel of oil, or cubic foot of gas, or job in Canada--but the government is unable to find the resources to tackle the inability of our grain marketing and transportation system.

We hear a great deal about the need to stimulate a wide range of Canadian industries, including a number of industries for which there may not necessarily exist markets at the present time. We support many of those pleas for stimulation. But in agriculture, which is still Manitoba's greatest source of wealth, where we have assured markets, where we have positive advantages in terms of productivity at the farm level, we are simply not able to move the grain to meet our commitments. In the last year, Canada lost a minimum of $350 million in sales. That works out to about $2,400 per farmer.

But really ... how can anyone have any faith in a federal government that lets Otto Lang buy another airline?

At this economic conference, as in the early conferences of First Ministers we held last February, there was a general agreement that one of the first and most critical steps in dealing with our economic problems was to establish prudence in the management of the public finances of Canada and of each of the provinces of Canada.

Let me tell you about the steps we have been taking in Manitoba to live up to that agreement. But first let me try to put these changes into context for you. As I am sure you know, from 1969 until just about exactly one year ago, in 1977, Manitoba had a socialist government.

'Editor's Note: The Honourable Otto E. Lang, Member of Parliament for Saskatoon--Humboldt, Saskatchewan, was the Minister of Transport at the time.

Like a great many other governments in recent years, that socialist government in Manitoba began to tax and to borrow and to spend and to legislate its way into more and more parts of our total life in Manitoba. It used the taxpayers' money to buy farms, to set up state-owned businesses, government mineral exploration companies, legislation that forced those who discovered minerals in Manitoba to accept the government as an equity partner. And perhaps most fundamental of all the changes that government attempted to make in Manitoba was its approach to the redistribution of income. It had, as a stated objective of its policies, not simply achieving minimum levels of income that would permit even the poorest person in Manitoba to live with security and dignity. Its policy instead was to use its tax system to put a ceiling on incomes--to enforce a sterile kind of equality of income rather than striving for an equality of opportunity.

The basic formula was spelled out by the N.D.P. Premier of Manitoba. He said that no one in Manitoba should be permitted to earn an income that was more than two and one-half times as large as some sort of composite average income.

And I think in that is where the N.D.P. most misread the nature of the people of Manitoba. In effect, their government asked Manitobans to accept for themselves and for their children a climate in which the most anyone could aspire to in material terms was some government-determined maximum income. They asked Manitobans to settle for a ladder of success, with only two and one-half rungs on it.

And then came the election of 1977.

In that election, our party made a very short list of promises. The promises we were making were, at that time, not really considered to be very fashionable. We promised to reduce taxes. We promised to reduce the rate at which Manitoba was being thrown into debt by deficit government financing. We promised to control the growth of the civil service. We promised to restrain and to reverse the interferences of government in the private lives or enterprises of Manitobans.

We won that election. On October 11, 1977, we received a greater share of the popular vote cast in Manitoba than any party in the modern history of our province has ever received. And, after our election, a very strange thing began to happen across Canada: it began to be fashionable to talk about fiscal responsibility and prudence in public spending. Some of the most unlikely people began to speak about the need to control government spending.

It's gotten so bad that by now, listening to the announcements coming out of Ottawa, I'm beginning to think we should have copyrighted some of the statements and speeches we made over the past three years.

In Manitoba, for instance, people knew that under the N.D.P. the civil service had been growing almost twenty times as quickly as the population. Plain common sense says that's just not necessary.

In Manitoba, for instance, people know that under the N.D.P. the provincial government's share of the total wealth of the province had increased from less than twelve per cent in 1969 to more than eighteen per cent just eight years later. Plain common sense was enough to recognize that there was no corresponding increase in benefit to the people of Manitoba from that growth.

But most fundamentally of all, people in Manitoba decided that they were just not ready to break the chain of achievement that has seen each generation pass on more to their children than they started out with. They were not prepared to break that chain of achievement in favour of the kind of sterile and envy-ridden preoccupation with the redistribution of existing wealth that was all the N.D.P. had to offer.

Instead, Manitobans voted for a climate of aspiration. They instructed us, through their votes, to begin work to create the kind of economic and political climate that will encourage risk-taking and that will permit us once more to increase our wealth as a community.

And that is what we have been working to achieve in our first year in office.

Let me tell you some of the things we have done. - - -

My first action as Premier of Manitoba was to appoint a Task Force to review government organization and economy, involving, I should add, literally hundreds of hours of donated time from people throughout the private sector, with the single intent of making sure that our government operated as efficiently as possible. We have already begun the reorganization of our government based on the recommendations of that Task Force.

In our first budget, we reduced the rate of tax on small businesses by fifteen per cent. We removed more than sixty per cent of the businesses in Manitoba from the requirement of paying corporation capital taxes. We reduced the personal income tax. We abolished succession duties and gift taxes. Manitoba, incidentally, had the most punitive succession duties in Canada--succession duties that even taxed estates passing between spouses. We also took part in the short-term sales tax reduction programme.

The net effect of these tax cuts was to reduce our revenues by $83 million.

But the key to the direction our government has taken is that we did not finance our tax cuts, as the federal government is financing the reductions in its last budget, by increasing our deficit. We made those tax reductions in the same budget that we reduced our inherited deficit from $214 million on a combined current and capital basis to just $131 million on a combined basis.

Once again, to give you some standard of comparison, I can tell you that a proportional federal reduction in the size of the deficit would call for over $4 billion less borrowing by the federal government this year.

Our tax reductions were financed and our program of deficit reduction was made possible because we have controlled government spending. We have budgeted for an increase in spending of three per cent. That is the lowest rate of growth in spending of any government in Canada. And we have reduced the size of our civil service by thirteen per cent during our first twelve months in office. There are about 1,800 fewer civil servants on the public payroll in Manitoba today than there were twelve months ago--a reduction achieved mostly by attrition.

Once again, to give you some sense of the scope of these reductions, I can tell you that a proportionate cut in the federal civil service would call for the elimination of funding for about 55,000 positions.

In other words, we have moved quite quickly and today government in Manitoba is taxing less, borrowing less and, in real terms, spending less than it was twelve months ago.

What are the effects of our program of fiscal responsibility on the essential services of government in Manitoba? What are the effects of our approach on the ability of Manitoba's economy to create the jobs and opportunities our people need?

The answers to those questions are going to be critically important, not just in Manitoba over the next number of years but across Canada, as people assess the feasibility of making do with less government taxing and borrowing and spending and regulation.

Let's talk about those questions. Of course, after only one year in office, most of the evidence is still very preliminary. But let's talk about the early indicators.

There is absolutely no evidence that there has been any measurable reduction in the quality or the availability of essential government services in Manitoba. And I should also stress that there has been no return to the use of premiums for financing health care. In other words, it appears that the taxing and borrowing and spending that we have curtailed caused no measurable diminution in the quality or availability of essential services in Manitoba.

Of course, those who advocate government spending would argue that, in addition to the provision of services, this spending provides an essential impetus to the economy.

According to this argument, the kinds of reductions we have made in Manitoba will cripple the ability of our economy to create wealth, jobs and opportunities. That, incidentally, is exactly the kind of snake oil salesmanship the N.D.P. are using across this country.

But what is the real situation in Manitoba?

Well ... it is not as good as I would like it to be.

There are roughly 30,000 people out of work in my province. And, because we are finding it difficult to create new jobs quickly enough to accommodate the increasing size of our labour force, our rate of unemployment is increasing--although it is the third lowest in Canada.

But the question, of course, is to what extent are these problems caused by the reductions we have made in the taxing and borrowing and spending of government?

Let's look at the evidence. Let's compare our record of job creation with that of the previous government. In the last year of the N. D.P. government in Manitoba, for each hundred people who entered the labour force, there were only twenty-nine new jobs created.

In our first year as government, for each hundred people who entered the labour force our economy has been able to create fifty-six jobs. That is still not good enough--but it is vastly superior to the record of the last government. In fact, if you compare the actual number of jobs created in Manitoba during our first year in office with the record of the previous government in Manitoba, you will find that there have been as many new jobs created in this single year as were created in the entire last three years of the N.D.P.

In other words, the evidence suggests that, far from crippling the ability of our economy to create jobs, the program of fiscal prudence that our government is following is acting as a spur to the economy.

The early indicators are that the program is correct--that it does permit our economy to function more effectively.

But I am not here to tell you that this means that all our economic problems are solved in Manitoba.

We have taken the critical first step to overcoming our economic problems in the establishment of a prudent approach to public finance. Some of the additional steps that are needed can also be taken by government.

Government, for example, can play a major role in solving our grain transportation problems. The biggest single development opportunity in Manitoba is in the public sector in the form of hydro-electric potential--and we will be talking closely to Ontario about how the construction of generating facilities can provide needed orders for Ontario manufacturers as well as a basis for expanded manufacturing capability in Manitoba.

But the basic lesson we have all learned is that government can't do it all alone. We will continue to review our programs of taxation and legislation to assure that we place no unnecessary impediments in the way of enterprise in our province.

But the crucial next steps require the private sector to respond--with investment and with increased business activity in Manitoba. It is up to the private sector to create the jobs, to build the homes, to provide the other goods people need, and to create the wealth.

And so I am saying to the business community--to you, and through you to as many others as you can reach--that in Manitoba, government is doing its part.

But we are a proving ground, in which the ability of the private sector to create opportunities will be evaluated--not simply by Manitobans, but by people across Canada.

Our success or failure at meeting the economic challenges that face us in Manitoba over the next few years will have implications far beyond our own borders. I believe we are on the right track--that the steps we are taking are logical and prudent steps that will contribute to our general prosperity and that will help to restore faith generally in the private sector in Canada.

The appreciation of the audience was expressed by Colonel R.H. Hilborn, M.V.O., M.B.E., C.D., a Past President of The Empire Club of Canada.