Indigenous and Northern Affairs Committee on March 8th, 2011

[The Chair, Conservative, Bruce Stanton]

Good morning everyone.

Welcome to the 52nd meeting of the Standing Committee on Aboriginal Affairs and Northern Development.

According to today's agenda and pursuant to the order of reference for Wednesday, March 16, 2011, we will be studying Bill C-530, An Act to amend the Northwest Territories Act (borrowing limits).

And we would like to welcome Dennis Bevington, the Member of Parliament for Western Arctic.

Mr. Bevington, we have you in a different spot at the table than we are accustomed to.

You'll know, members, that Mr. Bevington is the sponsor of the bill.

You know the general routine here, Mr. Bevington. We'll go ahead with your opening presentation and then we'll go directly to questions from members. Go ahead.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

I very much appreciate being in front of your committee, although I have to say that a panel of peers is always a difficult situation. I expect no less careful scrutiny than any other witness who might come before you, and I'm sure that's what I'll get.

I want to thank those who have helped get this bill to this point and all parliamentarians who recognize the importance of the development of the north, and I think that includes everyone in Parliament. I had hoped we could have full support for this bill, because to me this bill represents a very important principle for the Northwest Territories, that of responsible government.

When we examined the Northwest Territories Act, which I did in conjunction with people in the Northwest Territories, at one point I had a meeting with the Premier of the Northwest Territories at which we discussed what would be their interest in amendments to the Northwest Territories Act going forward. Out of that discussion I had a number of amendments on the order paper in Parliament, and I chose this one because it was the most relevant to the current situation. It's also relevant to that concept of responsible government in which the ability to make choices on the part of a government is driven not only by the rules but by its capacity to invest, to grow, and to develop, and without fiscal capacity the territory that I represent is very limited.

As a person who has grown up and lived under the NWT Act in Canada my whole life, I know the nature of it. I know we are, compared to other parts of this country, less endowed with responsible government and less endowed with the ability to make choices for ourselves. Improving that situation for the Northwest Territories has been a goal of mine my whole life, so I'm very pleased to be here today.

I think changing the borrowing structure is a very small change within the NWT Act. At the present time, any increases to the borrowing power for the Government of the Northwest Territories have to be put through the cabinet of the Government of Canada. In the time I've been in Parliament here, over five years, we have already seen two requests for increases to the borrowing limit go forward to the cabinet of the Government of Canada.

We have a situation in which there is a problem for the Government of the Northwest Territories because it must come cap in hand to Ottawa. That relationship is not correct. That relationship can cause pressures that are not seemly for a government, pressures that can put a government in the position of having to acquiesce in other ways in order to get what it needs to be able to perform as a government.

My Bill C-530 would change that relationship so that the borrowing limit for the Government of the Northwest Territories would be set at 70% of the total revenues of the government in any one year. We feel that 70% is a very fair accommodation. It fits very well with the present fiscal policy of the Government of the Northwest Territories and the financial policy they enacted, whereby at no time can the debt interest payments exceed 5% of their gross revenues.

The Government of the Northwest Territories has set their fiscal policy very strictly, and that has provided them with an AA-plus rating from Moody's. That's higher than many provinces have; the Government of the Northwest Territories as it stands now has achieved a rating with its fiscal policies that's superior to that of many provinces. This act will give the government an ability to work their borrowing limit to a particular formula.

Why do we need to borrow more money in the Northwest Territories? Well, we're very much a developing territory, and in some years over the last decade we've seen the highest GDP growth of any region in the country. We need infrastructure terribly, and I appreciate the work that this committee has done in establishing a report on northern development. Within that report I think there is much knowledge, and there is an understanding of the situation in the Northwest Territories and in the other territories as well.

We must move away from this colonial structure that we have. It's not seemly. It's not right that the Government of the Northwest Territories has to go cap in hand to Ottawa for legitimate borrowing purposes, for legitimately moving ahead with its agenda as it sees fit. That is the nature of responsible government.

A number of issues were raised in the debate on the bill. I would just touch on them now.

Consultation was something that was questioned. I would just like to refer to a letter that was sent to me by the Premier of the Northwest Territories in October of last year, before I submitted this bill for second reading. He says:

Thank you for your letter of October 5, 2010, in which you lay out the provisions of Bill C-530, an act to amend the Northwest Territories Act. The bill would amend the Northwest Territories Act to allow the Commissioner to borrow money up to a certain limit....

I appreciate your concern and efforts with respect to the borrowing limit, and your offer to involve and coordinate with the Government of the Northwest Territories.

He goes on to say:

...the Minister of Finance...has advised me that he has asked his officials to undertake a review of the operation of the NWT's borrowing limit.

That would be the third review undertaken in the last five years.

He goes on to say:

This review will also include the Yukon and Nunavut governments. It is expected that the review will be concluded by the end of the fiscal year.

Well, there is still no movement on that review. At the same time, this clearly this shows that I have consulted with the government. The government knew about my plan.

The territorial government as it stands now has a need for increased fiscal capacity. It can't put all its eggs in one basket. It certainly couldn't put its eggs in my basket. It must continue to work to get the fiscal capacity from the Government of Canada in order for it to continue business.

My bill would change it, but they can't rely on my bill, because of course it has to go through a very long and rigorous procedure as a private member's bill, unless all parliamentarians consent to allowing it to move forward in a more expeditious fashion.

So consultation has taken place. That's the position of the Government of Northwest Territories, which is interested in the proposal because it sees it as being one that is ultimately stronger than what they can get simply by going to cabinet.

Another question was around the issue of negotiating the borrowing limit with all three territories together. I think that's really inappropriate, because we are three unique territories. It's very clear, with the movement on devolution, that this is the way we're going ahead. We're not going ahead as a single unit. We are three separate jurisdictions, and I think the respect for that reality has to be there. Each unique territory will have its own requirements and move in its own fashion.

The Government of Northwest Territories has a very strong fiscal policy. I would certainly be willing to share what I have on that with you.

In a letter from the Parliamentary Budget Officer it was indicated that this bill will not have an impact on federal government finances. That request was initiated by MP Mike Wallace to the Parliamentary Budget Officer. That letter was dated December 13, 2010.

All of this information is available to the committee, and I'd be willing to provide it if required.

[The Chair, Conservative, Bruce Stanton]

We're just a little over time.

Thank you very much, Mr. Bevington, for your opening comments.

Now we'll go to questions in the usual fashion. We'll probably have time for only one round, and maybe a question or two short questions after that. Members may want to consider splitting time with their colleagues.

Let's go ahead, Mr. Bagnell, for the first question.

[Larry Bagnell, Liberal, Yukon, YT]

Before my time starts, are there any more witnesses on this bill? Is the GNWT coming?

[The Chair, Conservative, Bruce Stanton]

Yes. We will have a meeting with the Government of the Northwest Territories after the break.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you, Dennis. You're very thorough.

To date I really haven't heard of anyone who has any complaints. It's a very simple bill. You've covered all the bases. We'd be pretty nervy at the federal government level if we tried to restrict the limits of your bill, considering we're in much more debt than even this bill would allow the NWT to go into.

I have a technical question. How does the GNWT normally calculate the estimated revenues--the percentage of the borrowing limit that would be allowed? They're estimated in advance, so in a sense you're allowing borrowing of a guessed amount. How do they do that technical calculation?

[Dennis Bevington, NDP, Western Arctic, NT]

Much of the Government of the Northwest Territories revenues are part of the transfer system--probably 70% of them. I have to admit that much of that 70% in the Northwest Territories is taken up in royalties that the federal government collects from our resources and taxes. Nonetheless, 70% comes from a formula that's clearly established.

[Larry Bagnell, Liberal, Yukon, YT]

What about the rest?

[Dennis Bevington, NDP, Western Arctic, NT]

The rest is based on projections from the Department of Finance within the Government of the Northwest Territories and presented with the budget in February every year.

In February of every year a budget is presented with those estimates. With the 30% of the budget that is in question, they would be doing that based on labour market surveys, on--

[Larry Bagnell, Liberal, Yukon, YT]

So it's based on the budget figure.

[Dennis Bevington, NDP, Western Arctic, NT]

That's right.

[Larry Bagnell, Liberal, Yukon, YT]

My other question is related to the royal recommendation. As you very appropriately said, the Parliamentary Budget Officer said there was no cost, so there's no.... I can't conceivably see how anyone would even suggest there's a royal recommendation. Has anyone suggested that?

Because the federal government, by the Constitution, has to provide an equal level of living standard to all Canadians, to me this would reduce federal costs, because now the GNWT would be taking up part of that responsibility. They'd be building infrastructure and doing things that the federal government might otherwise have to do, such as the big dams; taking that away, if anything, would save the federal government money.

As the Parliamentary Budget Officer said, it wouldn't cost the federal government anything for sure. Allowing the GNWT to borrow more, just as if you allowed Ontario to borrow more, has nothing to do with the federal government.

Has anyone suggested to you any possible reason that it would need a royal recommendation?

[Dennis Bevington, NDP, Western Arctic, NT]

We looked at that very carefully before we presented this bill, because we were concerned about that as well. I would welcome that debate, because quite clearly the debate would be based on the principle that we do not have an independent government and that this government is not an independent unit.

There are Supreme Court rulings that give us some comfort that we are a responsible, independent government apart from the federal government. That argument is very important for all three territories. We don't belong to the Government of Canada. Through the Charter of Rights and Freedoms, I believe, with its guarantee of political rights, we are and should be on a basis similar to the provinces.

[Larry Bagnell, Liberal, Yukon, YT]

Well, the federal government has given the Yukon government far more responsibilities, and huge responsibilities, and is treating them as a level of government. It would be very paternalistic if the federal government refused this tiny adjustment to the NWT, don't you think?

[Dennis Bevington, NDP, Western Arctic, NT]

That's why I really would appeal to the government as well, in the spirit of the Mulroney government, which was one of the more progressive governments we've seen in terms of developing an independent northern territories. I can't understand why the government wouldn't want to see an expression of this independence through the support of this kind of bill.

I hope perhaps they will come to the position that this is a good bill, and that by supporting this bill they're supporting the legitimate aspirations of the government in the Northwest Territories and the people in the Northwest Territories for political independence from Ottawa.

[Larry Bagnell, Liberal, Yukon, YT]

Yes, I think we've given far more autonomy and far more money than this couple of hundred million dollars to even some individual first nations, let alone one of the huge provinces or territories in Canada.

Maybe you could just give a couple of examples--such as the dams, etc.--of the infrastructure you need that would help you become more self-sufficient with this borrowing and that would actually reduce federal government costs and help develop the resources of the Northwest Territories.

[Dennis Bevington, NDP, Western Arctic, NT]

One of the projects I'd like to speak to is the Mackenzie Valley highway. Quite clearly, if we build the Mackenzie Valley highway before the pipeline is built, before we develop the resources, it will be less costly to develop the gas and oil resources in the Northwest Territories up the Mackenzie Valley. That means that there will be higher royalties paid to the federal government.

If we go ahead with the plans that we see as important for the Northwest Territories, we will see a reduction in cost to the government as well. If we go ahead with the plans for the Taltson and bring clean hydroelectric power to the mining district of the Slave geological province, we will reduce the costs of development and we will increase the royalties and taxes paid to the federal government. Everything we do with this money can be a return to the federal government.

Take the road to Tuktoyaktuk; if we have an all-weather road into Tuktoyaktuk, which is in the planning stages with an environmental assessment right now, Arctic sovereignty will be better served. Everything will work better with improved infrastructure in the Northwest Territories.

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Bagnell.

It is now over to Mr. Lemay.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

I would hardly call it offensive when I said before that the Bloc Québécois was going to vote against your bill. It is certainly not what we would do—and that is what our party was trying to tell you in the beginning—despite your position on Bill C-20 regarding the change to the development of Gatineau Park. Quebec would have really liked to be able to count on your support when the committee you were on was dealing with that bill. That being said, clearly, we will be supporting your bill. We asked our Bloc Québécois colleagues to respect your position, which we do not share, on Bill C-20. However, Bill C-530, which you put forward, is extremely important, and we will of course support it.

Furthermore, Mr. Bevington, I would like to know what will happen with the taxes and all the royalties. For instance, who gets the taxes payable by a mining company operating in the Northwest Territories? Does the part of the country you represent, the Northwest Territories, get a share or does it all go to the federal government?

[Dennis Bevington, NDP, Western Arctic, NT]

At the present time, all the royalties from mining belong to the federal government, with the exception of a very small royalty that's given in the Sahtu region to the aboriginal first nations who struck that deal, and also within the Inuvialuit region, where there are.... Of course, in the Inuvialuit region they haven't had any resource development yet, so they don't get any royalties, but the present royalty system returns it all to the federal government.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Unless I am mistaken, Mr. Bevington, the Northwest Territories' entire budget has to receive federal approval before the funding is transferred and you can administer it. That is my understanding of the current situation.

[Dennis Bevington, NDP, Western Arctic, NT]

No; like the provinces, the Governments of the Northwest Territories and Yukon and Nunavut have negotiated a transfer agreement. This is a multi-year agreement that delivers x number of dollars to each territory, regardless of the royalties or the taxes or anything else. It's an equalization deal much like the one with the provinces. It's called a transfer arrangement—it's not called an equalization deal—and that is how it's done.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

If you go from 50% to 70%, something we fully support—I might go as high as 80%, but you are asking for 70%—does that give the Northwest Territories, the area you represent, more independence?

[Dennis Bevington, NDP, Western Arctic, NT]

It would definitely give the Government of the Northwest Territories about another $450 million in added borrowing capacity, going from $575 million to just over $1 billion. It can make its own choice about that. It can decide whether it wants to borrow that money.

It has a very strict financial policy that I think lines up pretty well with that kind of limit, because if only 5% of the gross revenues can be applied as interest on loans, that means that relatively speaking the cumulative debt can't be much more than that anyhow. This lines up with their existing fiscal policy. As the government expands—and we are an expanding territory—we probably expect the growth in gross revenues will be incrementally larger over a period of time. That means the debt limit will grow as well, but that we're on a formula, rather than having to go back to Ottawa.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

As I listen to you describe the situation in the Northwest Territories, it makes me think of a large aboriginal community. You are very dependent on the federal government. I think we need to put an end to that dependence and pass this bill.

If we were to agree that approval would be required “[i]f the total amount of money that is borrowed at any time under ordinances made under paragraph (1)(a) exceeds 70% of the estimated revenues”, would it open the door to the Taltson Hydroelectric Expansion Project? Would it help you on that end?