Mahsi, Madam Speaker. I would like to make a reply to the 1995-96 capital budget address of the government. My reply will be limited to a brief overview on downsizing and restraint in the territorial economy.

One of the central financial features of the territorial economy is the very large role that our government has come to play. Something in the order of 80 per cent of the territorial gross domestic product is made up of government expenditures. The federal government's formula financing grant and other federal transfers make up most of these expenditures. It follows then that any restraint measures on the part of the federal government will have a major impact on our territorial economy. We have already experienced the effects of recent restraint measures of the federal government.

Madam Speaker, in 1988-89, the federal government imposed a GDP ceiling and introduced the tax effort adjustment factor in the new five-year formula financing agreement of 1990. The GDP ceiling has cost this government millions of dollars in lost revenue over the past four years.

Madam Speaker, in terms of the two largest transfer programs to the provinces and territories, the EPF and CAP, restraints began as far back as 1983 when the federal government capped the escalation formula for education, part of the EPF transfer at six and five per cent for 1983 and 1984 respectively. However, most recently, Madam Speaker, in 1990, both CAP and EPF transfers were put under further federal restraint. In 1991, the freeze on federal payments to provinces and territories for health and post-secondary education under EPF for 1990-91 and 1991-92 was further extended through the end of 1994-95, after which a partial indexation formula of GNP less three percentage points is to apply.

Madam Speaker, also in 1990-91, the so-called cap on CAP was put in place. This limited federal transfer payments for cost-sharing welfare and social services. Also beginning in 1990, social housing began to cut back in this country, and as Members here are all too aware, this program has now been eliminated.

Madam Speaker, earlier this year, the new Liberal government in Ottawa announced that in 1995-96, transfers to all provinces and territories for CAP and the post-secondary component of the EPF will be frozen at the 1994-95 levels until the social policy reforms are put into place in 1996-97. The intent here is that these transfers will be no greater in 1996-97 than in 1993-94, with savings expected to be at least $1.5 billion.

Madam Speaker, the idea of downsizing and restraining have been central concepts in the budgetary politics of Canada during the 1980s and 1990s. This government has now clearly adopted and -- particularly over the life of this Assembly -- instituted various downsizing and restraint measures.

Madam Speaker, restraining budgets is a process for limiting and lessening the size and role of the public sector. The central idea behind restraint seems to be a balanced society which effectively means smaller government and less state intervention. Some of the core ideas here include the inherent superiority of the private sector and market mechanisms in producing and allocating most goods and services. Favoured restraint methods and techniques are generally privatization, deregulation and spending limits. We have clearly seen these methods at work here in the Northwest Territories, instituted at the federal level and through the Government of the Northwest Territories budget and policy process.

Madam Speaker, the point I want to make here is that restraint and downsizing may be the inevitable evils that government must institute in today's fiscal climate. However, nowhere else in this country does the government play such a massive and important role in employment and business development than here in the Northwest Territories. It follows then that nowhere in Canada will government restraint and downsizing measures affect the macro and local economies as severely as in the Northwest Territories. Madam Speaker, we simply cannot follow similar fiscal restraint goals as our federal and provincial counterparts.

In closing, we must make a very strong case with the federal government that restraint and downsizing measures have a much greater impact in the Northwest Territories than anywhere else in Canada. We must ensure the federal government understands this point during our current negotiation to renew the formula financing agreement and other financially related negotiations with the federal government. Mahsi cho.

---Applause