Debates of March 9th, 1999

Federal-Provincial Fiscal Arrangements Act

[Some hon. members]

Agreed.

[Martin Cauchon, Liberal, for the Minister of Finance]

moved that the bill be read the third time and passed.

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, it is with considerable pleasure that I rise to contribute to third reading deliberations on Bill C-65 which proposes to amend the Federal-Provincial Fiscal Arrangements Act.

As hon. members know, the legislation essentially involves two federal programs: the provincial personal income tax revenue guarantee program and the equalization program, each for an additional five years.

The major portion of the bill deals with the equalization program, a program that is really the fiscal cornerstone of Canadian federalism. Hon. members also know and are aware that the commitment to equalization payments is enshrined in the Constitution.

Payments under equalization go essentially to the heart of what it means to be Canadian. The payments provide provinces that are less well off with the resources they need to deliver reasonably comparable public services, including health care, to the their people without having to tax excessively.

Equalization has been a long tradition. It was established as a program in 1957 and has been continuously renewed and improved ever since.

The government's commitment to equalization is clearly evident in the fact that this program is one of the few to be exempted from the restraint measures that took place some five years ago.

For the next five years it is projected that the payments will be $5 billion higher, including increased payments due to the technical improvements worth an estimated $700 million over this same period. Further, last month's budget showed that payments would be even higher this year as well. Current year payments are expected to reach $10.7 billion and that is up $2.2 billion from the 1998 budget estimate.

It is clear that these transfers are indeed very significant. In 1998-99 they make up between 14% and 42% of total revenues of the recipient provinces. These payments are unconditional. This means that receiving provinces can use them as they wish. Experience has shown that they play a significant role in improving the quality of a wide array of public services.

Currently seven provinces benefit directly from equalization payments: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan. There are also indirect benefits for all Canadians as well. We all benefit from knowing we live in a country where health care, education and basic public services are provided at essentially the same levels in all provinces.

In renewing the equalization program the bill proposes a package of improvements. These improvements aim to ensure the program continues to accurately measure the revenue raising ability of each province. The proposed modifications will be gradually phased in over the next five years so the impacts on provinces are smoothed over. In addition this will give federal and provincial governments time to plan for changes in the amounts of transfers.

What will make this happen? There are three components to the equalization renewal package proposed in the bill. First the equalization legislation renewal for five years provides a secure planning framework for receiving provinces.

Second, equalization ceiling and floor provisions are improved. The ceiling provision provides protection to the federal government against unexpected increases in equalization payments. In other words, this prevents changing economic circumstances from unaffordably driving equalization payments through the roof. The new ceiling will be set at $10 billion in 1999-2000 and will grow by the percentage change in gross domestic product thereafter. This change will ensure the program remains affordable and sustainable over the five year renewal period.

The floor provision is the other side of the coin. It provides protection to the provincial governments against unexpected large and sudden decreases in equalization payments. The new floor will be applied equally across all receiving provinces and will reduce fluctuations in floor protection that can result from application of the equalization formula during a period of economic change. What does it mean? It means more predictable protection for provincial governments.

The third change is that improvements will be made in the measurement of the ability of provinces to raise revenues on their own. The equalization formula measures the provincial revenue raising capacity by looking at over 30 different provincial taxes and comparing those results to a standard. It is on the basis of this formula driven exercise, and the formula is applied equally to all provinces, that the size of equalization transfers is calculated for each province.

We all know the taxation environment is not static. It changes and the changes proposed in the bill are needed to ensure that the equalization program reflects existing provincial tax opportunities and practices.

The changes in measurement which will be implemented through regulation relate to five tax bases that require significant improvements and other tax bases that require technical changes because of revised or new data. For example, changes are proposed for the measurement of the ability of provinces to raise sales tax. The new tax base will now reflect the taxing practices of those provinces that have moved to a value added tax, as well as those that have maintained retail sales tax systems.

Similarly, because of increased activity in related games of chance, the treatment of revenues that flow from them needs to be updated. Currently the equalization program only measures provincial ability to raise revenue from lottery ticket sales. The proposed changes will take into consideration the ability of provinces to raise revenue from casinos and video lottery terminals.

In addition a number of resources such as forest products and natural gas will be measured according to value rather than by volume as is currently the case.

It bears repeating that these modifications will happen gradually. The proposed tax base changes would come into effect in stages over the five year period. This renewal caps more than two years of consultation with the provinces. Considerable technical work was performed by both the federal and provincial officials and then that technical work was reviewed by ministers of finance at both the federal and provincial levels.

It is important to review the equalization program on a regular basis to assess accurately what change is needed. I submit to the House that this has been done. Bill C-65 was introduced in the House at the earliest opportunity. It is important to remember there are a number of other inputs like the Statistics Canada reports which contribute to the final outcome of this review. As is sometimes indicated by members of the opposition, the government did not drag its feet on the bill.

Passage of the bill continues a Canadian tradition of providing and showing that we all care deeply about the well-being of residents of provinces that are less well off than others. The renewal we are considering will provide substantial and reliable support. The legislation intends to see that we maintain the fairness with which the equalization program is delivered.

I cannot stress enough the importance of the legislation. It continues a Canadian tradition of generosity and fairness. I believe all members know this. The agreement, as all members know, expires March 31 and must pass in both the House and the Senate.

I am looking forward to the House expediting the passage of the legislation because I know that it is the kind of legislation all members of parliament can support.

[Monte Solberg, Reform, Medicine Hat, AB]

Mr. Speaker, it is a pleasure to rise on behalf of the official opposition to address Bill C-65.

For the benefit of the people who are watching this debate on television, Bill C-65 is an equalization agreement that will transfer somewhere in the range of $50 billion to recipient provinces over the next five years. This is a huge expenditure for the government. The Reform Party, the official opposition, believes very strongly that because it is such a huge expenditure it deserves a tremendous amount of scrutiny, all the scrutiny we can bring to it.

The official opposition attempted to actually bring forward some amendments at report stage. Unfortunately there was a mix-up and we were unable to introduce those amendments. Chief among them was an amendment that called for public consultation between the year 2001 and the year 2003 so that the public would be involved in making decisions about the equalization program which have a profound effect on their lives both as recipients and as people who pay taxes to support the program.

We urge the government to seriously consider the recommendation of the official opposition and allow the public to become involved in the decision making process on a program that is a very large expenditure.

The Reform Party criticizes the equalization program on a couple of counts. First, we believe the formula that is used to determine how much money is paid in and how much money goes out to recipient provinces is simply inaccessible to most people. During the finance committee hearings when Reform members asked finance department officials who in Canada understood how this system worked, the witness representing the finance department looked at his colleagues and said “We do”. I think that is really the case.

A $50 billion expenditure that very few people in Canada really have a handle on lends itself to problems. It lends itself to governments using the formula in ways to manipulate it so that they can get more revenue. We believe that already occurs to some degree.

There needs to be some discussion on ways to make the whole formula more transparent so that we can ensure there is no jiggery-pokery and that everything is on the up and up, something we are not convinced of right now.

The other criticism we level is we are not certain in a country as rich as Canada that we really need to have a system where three provinces support seven. We would argue that it may be time to start looking at ways to change the balance so that it is four or five supporting five or six, depending on how we do it.

Those things need to be debated in the future. We need to find ways to ensure that the public has some input into this issue because it has such a profound impact on people's lives.

This is called the equalization program. As my colleague in government mentioned, it is enshrined in the Constitution. However I do not think it meets most people's definition of what equalization would mean to them. Most people would think of equalization as being equal opportunities. I think that is the way a lot of people would think of equalization if they heard it.

What we need to point out here is that the equalization program provides money for recipient provinces so they can use it to ensure there is better health care in those provinces where they do not have a big tax base and better schooling and that type of thing. That is well and good.

In so many ways this equalization program simply does not meet the standard that a lot of regular folks have which is wanting equal opportunities. They do not just want money going to the provincial governments so they can have better schools. It cannot end there. What people want in Canada is an equal shot. They want an equal opportunity to make a living, make a life, have a job, to raise a family and do the things that people in some of the wealthier provinces maybe take for granted today.

We feel the equalization program simply falls short. It does not go far enough. It is a huge expenditure but it does not go nearly far enough. We are not advocating spending more money. Not at all. In fact the contrary. As members know, the Reform Party advocates keeping the size of government in check. We want a small government. We want lower taxes and a program of debt repayment.

I argue that if we really want to help people in those recipient provinces, we need to take seriously the discussion that is occurring around the world about how we really do improve productivity. I can assert that it is not through huge government intervention. That is not the way we do it. The way to do it is to keep government in check, to lower taxes and to pay down debt.

The Reform Party argues that a dollar left in the hands of an investor, a taxpayer, a business person, a homemaker is far more productive than a dollar in the hands of a bureaucrat or a politician.

We want to encourage the government to open up the debate and let us have the bigger discussion about what will really help people all across this country in the recipient provinces under equalization but also in the paying provinces.

I want to go a little farther afield if I might in discussing this equalization bill. It occurs to me that there are really two ways we can organize a society. We can, and this is the traditional way, organize a society on the basis of voluntary relationships, voluntary exchange. Around the world for thousands of years that is how it has worked. There have been some big exceptions to that but by and large, given their druthers, people choose to associate with each other on a voluntary basis.

If somebody has some wheat to sell and they want some cloves and someone else has cloves they undergo a voluntary transaction and everybody is better off. That is the way civil society has worked for a long time. Relationships are formed with other people on a voluntary basis. That is called civil society and many groups spring up in that kind of milieu that support and enrich civil society. Families are a part of civil society. We need a larger civil society if we are to create the type of prosperity that I and the official opposition in general believe we need in this country.

Another way of organizing society is by coercion whereby the government tells us how to do things. Sadly there are many episodes in history where governments have taken total control of society and have impelled people to do things they do not want to do but nevertheless had to do because the government had the exclusive monopoly on the use of force in some societies.

I am not suggesting for a moment that our government is like that. I do think our government organizes society in Canada far too much on the principle of coercion. This holds back our ability to create the type of prosperity that Canadians want and also the other types of ideals that Canadians believe in strongly. If we believe in compassion, tolerance, security, then the answer is to increase the size of civil society, voluntary relationships, not to make government bigger and compel people to do things. That is how we create a sense of community and real compassion and real tolerance. Ultimately that is how we create the prosperity that gives people security. I think this government is going completely the wrong way.

I want to illustrate what I mean by that and provide some evidence by pointing to the last budget. Over the last several years the government has been in the situation where it has been basically faced with almost bankruptcy. We came very close, I think colleagues in the House would acknowledge, to hitting the debt wall. My friend laughs but I think in 1995 we were pretty close to that. I think there is even some agreement on that on the other side of the House. I believe I have heard colleagues on the other side say exactly that.

In the last several years the government has restrained its spending somewhat. That is laudable even though we believe that it restrained it in completely the wrong areas. It restrained it in areas that were the highest priority to Canadians instead of cutting bureaucracies and cutting the size of the machinery of government. Having said that, it did shrink the size of government somewhat.

Now we see the government, the moment it has some kind of surplus, embarking again on expanding the size of government. Bureaucracies are starting to get bigger again. We are seeing the government expend money on things that simply are not priorities for Canadians.

I do not think if my friends across the way were pushed on this could argue that some of the new expenditures are priorities. I think they would have to agree. My friend says name one. I would be happy to do that. I think it is a waste of money in a time when people are really hurting to start spending money on television production funds. I think that is a good example of how the government is spending money in a wasteful way.

As it increases the size of government, and remember it was supposed to spend $104.5 billion this year, according to its numbers the government is already $7.6 billion over budget. The government has gone away over budget. If the head of a corporation went that far over budget of course they would be fired for doing that.

This government did that. In doing that, not only does it start spending away the surplus and people's tax relief, the money they so desperately need right now, it also gets its fingers into all aspects of people's lives where it simply does not belong.

Again, we have the government coming into people's lives saying you will do things this way and if you do not, you will not get the reward. I want to give my friend across the way an example. Probably the best example is what is going on in the House these days with respect to family taxation. The government has decreed and actually made it worse in this last budget that if a person chooses to send their children to professional day care, they will get a tax break for that. That is fine. That is laudable. What the government refuses to do is give all Canadians a tax break irrespective of how they look after the children.

The government uses coercion. It says the only way you can keep your money is to do it our way. The only way of doing it is to send your children to institutional day care. If you choose to look after your children yourself, we do not recognize that. We do not see that as being valuable. That is essentially what the government is saying.

We argue that is completely the wrong way to organize society. Let Canadians have those choices. Canadian taxpayers do extraordinarily complicated and sophisticated things every day. They run their households, they run their businesses, they raise their families. Let them have the choice.

Hon. members across the way are clapping. I am thrilled to see that. I see we are getting some support from government members for our message. It is about time that they are waking up to that. We will give them the chance to actually put their money where their mouth is tonight when the whole issue of family taxation comes to a vote in the House of Commons. We certainly hope they will stand up for families, for single income families, all families struggling so much today with the high tax burdens we face in Canada.

I want to continue down the track I started on where we were talking about how this government uses coercion so often to get people to do things that it thinks are right but which ordinary Canadians do not necessarily agree with.

My friend says regulation. It is not regulation. Let me give my friend an example. In western Canada today if people grow wheat they have to sell their wheat to the Canadian Wheat Board. They do not have a choice. I think my friend across the way would acknowledge that. My friend in the NDP thinks that is a good thing. My friends on the other side of the House do not understand that farmers do very complicated and sophisticated things every day. They market all kinds of other commodities. They simply want the choice. They do not need that nanny state telling them what they have to do.

Let me give members another example. I am a broadcaster by trade. I used to run a radio station. If someone wants a license to run a radio station in Canada today they have to agree to a certain things. They used to have to play 30% Canadian music. That is now going up and up. A listener's choice is to either turn the radio off or pick up a signal from somewhere else, maybe over the Internet or from a radio station south of the border. That is absolutely ridiculous. Let people make those decisions themselves.

Yesterday we saw Alice Munro, a great Canadian writer, who received an award in New York, recognized as a great writer. She did not regulation to be recognized as a great writer. My friends in the NDP and the Liberals seem to think that is necessary to help Canadians along. I argue that very often what happens is that these regulations hold people back.

If we want to talk about recording artists, there are many Canadian artists who have gone south of the border. They have completely forgone spending any time in Canada. They have gone to the U.S. and made huge careers down there. They obviously saw the opportunity there. They did not need the 30% content regulations.

Terri Clark comes from my riding of Medicine Hat. We are very proud of her. She has become a huge superstar in country music. Shania Twain is another example. These people went directly to where the music industry was and became huge superstars. They are Canadian and I am very proud of them. They did not need the nanny state to baby them along. They do not need that because they have talent. Every time this government gets a chance to impose more restrictions on people and to coerce people it does it.

Look at Bill C-55. This is a good example. If an advertiser in Canada wants to advertise in Sports Illustrated they cannot do it unless they go to the United States and buy an ad that they will have to pay for to go all around the world. If they are advertising from my home town of Brooks, Alberta they probably cannot use all those people around the world. They probably do not need to reach them. The government has said that under Bill C-55 the only way they can advertise in Sports Illustrated is by buying that huge circulation which they can never use. Essentially it is telling people again how to run their lives. I think people get a little sick of this. They are grown up. They know how to run their lives.

We are saying get government out of their face. Let us shrink the size of political society, the coercive state, and enlarge the size of civil society where people exchange goods on a voluntary basis, where they form relationships on a voluntary basis, where they are allowed to be free to do what they want as long as they do not harm one another. I think that is the way most people would like to see society run. Sadly at every opportunity this government expands the reach of government. It is completely wrong.

It is fine to talk about what the government does wrong. As the official opposition we have a duty and obligation to say how we would do it, how we would ensure prosperity for people across the country.

I guess we should be addressing the equalization issue because that is the bill we are debating. Let me first talk about how we can improve things for the provinces that currently receive equalization payments, for the people who pay into equalization through their taxes and for the three provinces that kick in.

I should point out that many of the people in those provinces which pay are themselves not well off, but they have to pay taxes for equalization.

[An hon. member]

Do you support equalization?

[Monte Solberg, Reform, Medicine Hat, AB]

My friend asks if we support equalization. I made it clear that we do support equalization. However, that does not mean we would not find ways to improve it or even shrink its scope so that it is not three provinces supporting seven, but maybe five supporting five or something like that. Nevertheless, we support it in principle.

Let me go a little farther down the road that I started on. We want to come up with a way that goes beyond equalization that would help all Canadians. We believe the way to do that is to keep government small in a large civil society and in doing that produce the type of prosperity that will leave everybody better off.

We should give Canadians the real security they want. The way to do that is to hold the line on spending, not increase it and go over budget by almost $8 billion like this government did this year and last and which it will again do next year. It has already upped the amount it wants to spend for next year. We think that is completely the wrong approach, especially at a time when the world is so volatile.

We say that we should hold the line on spending. We should reallocate resources from low priority areas like a television production fund or some of the grants that go to big business. We actually have a WTO ruling against Canada because of some of the grants that have been going to big business.

We should take some of the money the government uses to intervene in the economy and give it back to people in the form of more money for health care, as well as an investment in defence because the department of defence has been basically emasculated by this government. There have been examples in the newspapers lately of how the Canadian military has really paid the price for Liberal neglect over the last many years.

We also believe it is time to begin finding ways to reinvest in our justice system. We have a situation now in British Columbia where the RCMP is really in a desperate situation. We need to reallocate money from all of the areas that I have alluded to so that we can have more money for high priority areas.

The second step is to begin using some of the surpluses that are going to be a lot bigger now that we are holding the line on spending, somewhere in the range of $43 billion to $45 billion at the end of three years.

Just so my friends across the way know, many economists around the country have pointed to that sort of approach as the best way to ensure that the Canadian economy is better off. I point to recent studies that come from the C. D. Howe Institute which suggest that massive tax relief is in line for what ails the Canadian economy these days. We agree with that. We think it is the right approach.

We are going to run big surpluses over the next three years if we hold the line on spending. There are two things we think need to happen with those surpluses. First we need big time tax relief. The Reform Party is arguing for $26 billion in tax relief over the next three years. That will mean that many of those single income families that we are talking about will be much better off. In fact a single income family of four earning $30,000 a year would receive $4,600 in tax relief under that plan. It would mean a lot of money in their pockets and really would contribute to giving them the type of security they need.

If people are in recipient provinces like Newfoundland, New Brunswick or even Manitoba, under that plan they would receive much more money in their pockets instead of having all the efforts of the government going to just giving money to another level of government. This money would go directly into the pockets of people who are scraping to get by these days, who really need the help. They have paid the price for successive Liberal and Tory governments that have raised taxes incessantly over the last 15 or 20 years. Now it is time for some real tax relief.

I know my friends across the way will say that they gave them some tax relief in the last budget. But by the time we figure in the increases in CPP premiums and the fact that the government has not bothered to do anything about the deindexation of the tax system, Canadians will actually be $2.2 billion worse off over the next three years. Canadians end up a lot worse off even after the government's tax proposal.

We say let us change all of that. Let us leave Canadians $26 billion better off. We have enumerated a number of ways we would do that. We would raise the basic personal exemption to $7,900. The married exemption would be raised to $7,900 so we would not have the discrimination that we have now against single income families.

We would change the child care tax deduction to a credit that would be extended to all families, irrespective of how they look after their children. That would ensure that some of the feeling which a lot of single income families have, where they feel the government does not value their parenting, would disappear.

[An hon. member]

That's not true.

[Monte Solberg, Reform, Medicine Hat, AB]

My friend across the way on the Liberal side said it is not true, but I am simply saying that is how people feel. My friend may say that he does value parenting and that is fine, but actions speak a lot louder than words. As my friend knows because he is a parliamentary secretary for finance, we have had people come before the Department of Finance for years to say that it is time to end discrimination against single income families in the tax code. We agree. It is time to do that.

It cannot end there. We have to lower the tax burden on two income families because they pay way too much in taxes. Our proposals would do that because, again, we want to lift the exemptions. We want to eliminate the 3% and the 5% surtaxes. The government has started on the 3%. We want to completely eliminate those and we also want to start to lower the marginal rates. In fact we would eliminate the top marginal rate of 29% and take the 26% rate and start to lower it as well so that ultimately everybody would be better off. We want to end the deindexation of the tax system which takes $1.1 billion a year in a secret tax increase from people's pockets. That would end under this plan.

We have offered a whole bunch of ways that, through the personal income tax system, we would leave people better off. But we would also take the money that is currently paid into the EI fund, the huge overcommitment that employers and employees make every year, which is about $7 billion, and give it back to folks because it is their money in the first place. We think it belongs to them. That is the other area where we would help people.

Finally, we would cut the capital gains inclusion rate in half because we believe that we need to give an incentive to investors in Canada. So often today in Canada people buy, for instance, a revenue property. When they do that they are essentially ensuring that there are rentals around the country for people on lower incomes. Right now there just are not enough rentals, so we need to give people incentives to do that. But what happens is, if their property only keeps up with inflation in terms of the amount of money they get back from it in the form of a capital gain, for instance if they make a $1,000 on a property and it is all inflation, they still have to pay a capital gain on it. We say that is wrong.

If we want to help people in Atlantic Canada who get equalization today, the real way to help them is to ensure that their tax burden goes down. Our proposals would leave about $1.5 billion a year in the pockets of people in Atlantic Canada alone. That would really help folks a lot.

We encourage the government to consider that the debate is much broader than equalization. If we really want to help people we think it is important that the government find other ways of doing it.

The good news does not end there. In this plan we would also start to pay down the debt. There would be $17 billion in debt repayment over the next three years. We point out that this is a complete departure from the government approach. The government approach is to ad hoc it. The government's own budget documents show the debt being static at $579 billion over the next three years. It says that if it has any money left over, if it does not blow the contingency reserve fund, it will use that to pay down a bit of the debt.

I think Canadians really want to pay down the debt in a serious way. They understand in their own lives that having a lot of debt threatens their ability to fund their household. In Canada today we have debt payments of $40 billion a year. The single biggest cheque the finance minister writes every year is for interest on the debt. We argue that to help folks we should not make them pay so much every year out of their tax dollars to go simply toward servicing the debt. If we start to pay down that debt people will have more money in their pockets and they can make decisions about their lives.

Our program would pay down $17 billion over the next three years. We also have a longer program that would see $240 billion paid down over the next 20 years. We believe the debt issue is that serious that we need to pay it down in that manner.

Equalization is a program that is necessary in Canada. We wish we did not need it, but unfortunately it is necessary. It is also in the Constitution. We think it could be changed quite a bit to make it a better program, but the debate really cannot end there. If we really want to help people there is a much better way of doing it than simply throwing money at it through equalization.

The best possible way to help people is to leave more money in their pockets. Let them make decisions about their own lives. I guarantee that if we allow that to happen they will make far better decisions than the government. Who knows better what is best for their families? Is it the finance minister, the heritage minister or the prime minister? I do not think so. I think it is individual Canadians. They understand better what is important to their families. So leave the money with them.

In that we see the complete departure of the Reform Party from other parties in this place. We believe that money belongs to the people who have earned it in the first place, and it should stay there.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I may not seem enthusiastic, but I am enthusiastic. Under this exterior of certain calmness and seriousness I am very excited about the possibility of speaking to Bill C-65 which concerns equalization payments in Canada.

This defines what is best about being a Canadian. It defines what is best about being a country like ours. I liken it to a family. A well-functioning family, as opposed to a dysfunctional family, is a family that cares for all of its members. If one of the family members is having a difficult time the family rallies around and does whatever is necessary to help. When another member is having a difficult time or runs into some difficulties or problems, the whole extended family rallies around.

That is what distinguishes effective families from those which are less effective. It distinguishes an outstanding family from those we call dysfunctional. Today's discussion reminds me of one of those very functional families, the best of families, a family that cares about all of its members in a real and demonstrable way. Of course in our society that is normally in a financial way.

This bill really says that those provinces which are doing very well for whatever reason, be it location, an abundance of natural resources or whatever the advantage, are seriously prepared to assist those having difficulties or those that are less fortunately endowed in terms of natural resources, location, financial resources or whatever.

What does that tell us about our country? I suspect it is the kind of characteristic that attracts people from all over the world who want to live here. They know no matter where they live in Canada, whether it is in Atlantic Canada, the north, south, east, west, central, wherever, that being a Canadian citizen means relatively the same thing. They would have access to the same kinds of services. They would have access to relatively the same kinds of opportunities, whether it is university or college training in Cape Breton, Nova Scotia or Victoria, British Columbia.

Access would be relatively the same. One of the ways we accomplish that is through programs like equalization. Clearly, when it comes to the vote on this bill, the New Democratic Party caucus members in the House of Commons will be voting enthusiastically in favour of the legislation.

As a matter of fact, the very concept we are talking about today, equalization payments in Canada, is part of our Constitution. It is written right into the Constitution. It is what Canada is all about. The Constitution says reasonable and comparable services no matter where they live. What a glorious phrase. What a glorious statement to hold up to describe what being a Canadian is all about.

[An hon. member]

It is heartwarming.

[Nelson Riis, NDP, Kamloops, BC]

My friend next door says it is heartwarming and indeed it is.

Equalization is a fundamental principle that is very much part of what makes Canada a compassionate and caring society. Surely that is one of the crucial measurements of a country.

I listened with interest, as I always do, to my friend who spoke earlier. He made the case that less government is a better country. I thought about countries around the world where there is very little government. Normally they are not very pleasant places to live. As a matter of fact, countries that have very little government, that have downsized their government, are brutal places to live. Often it reflects a society that is uncaring particularly of those less fortunate.

Obviously we seek to find a balance. When I think about equalization enabling us to be a compassionate and caring society, what better society could we be part of than one that is actually compassionate and caring for all its citizens? One of the reasons we are all proud to be Canadian is that Canada is that kind of country.

This is not to suggest that this bill is perfect, not by a long shot. There are many ways that we can improve Bill C-65 and improve the whole issue of equalization.

What demonstrates this is that most in the House of Commons have tried to figure out what this bill actually does. We have tried to look at the formula used for equalization. I am not a brilliant person. I am probably not even that smart but I am not a stupid person. Quite frankly, I cannot figure out how this thing works. I have asked many others how this equalization formula actually works. I have not found anybody who could explain it to me in a way that I could understand.

There must be somebody somewhere who understands it. When the question was put in committee, it was fascinating. The question was put to the experts from finance. How many people actually understand the equalization formula used between the federal government and provincial governments? The answer was perhaps five people in Canada.

I do not know who those five people are but there are probably five people in Canada who actually understand how this bill works. That is one of the real downsides of this because we are being asked to approve a formula. We are being asked to approve legislation, approve a concept that nobody fully understands. That is not what this place is all about.

It is imperative that members of parliament understand how the equalization formula is applied so that we can judge it. Is it the appropriate formula? Are there more appropriate ways to decide who gets what in terms of where they happen to live in Canada, what province gets an equalization payment and which province would pay one.

If there is one major flaw, it is that it has become so complicated, convoluted and complex that no one really understands how the system works today. We assume it works well. We know that all the provincial finance ministers and officials met regularly for five years to try to figure this thing out. They have come up with some kind of plan which they say on balance is effective and the best deal they can come to.

To be fair, the province of Manitoba has some concerns about this formula which now involves 33 different criteria. When it first started a few years ago, there were only three criteria. The three criteria were personal taxes, corporate income taxes and succession duties. That was it. That was fairly easy to figure out. Everyone could say that the provinces that are getting a certain amount based on this formula makes sense and the ones which are not getting anything also makes sense because they are doing relatively well.

Now there are 33 separate revenue sources ranging from income taxes to insurance premiums, from property taxes to payroll taxes, from sales taxes to sin taxes. It goes on and on. Experts from the provincial finance departments and experts from the federal system get together on a regular basis and fine tune it so that everyone can agree.

Manitoba, as I said, has some disagreements but it will have a chance to sit down soon and start to renegotiate from its perspective a fairer system. Everyone says that is fair enough and they will proceed with this understanding. While Manitoba is not delighted about this, it understands that in the end it will be okay as well.

I might mention that because of the flooding situation Manitoba experienced, the collection of income taxes was disrupted. Consequently the formula that was used to determine this year's transfer to Manitoba was based on erroneous information that could not be avoided. With any luck this will be readjusted later this year so that Manitobans will get a fair deal in the end as well. That is my understanding. From what I can gather, everyone has enough faith in the system to say that will actually take place, including the people from Manitoba.

Before I get into some of the more substantive comments about the legislation, there have been some changes in criteria. There have been many changes but I am going to identify two or three of them.

One is the recognition that a good revenue source for a lot of provinces is gaming. It seems that video terminals, VLTs, and casinos are turning up on almost on every street corner. For some provinces they are a major source of revenue. For others they are not a major revenue source yet. For British Columbia it is not a major revenue source yet, but apparently it is taking steps to expand its casino base, as those who have read the newspapers recently are probably aware. Other provinces are as well. Since gaming is a significant revenue collector, it has now been factored in as a new criterion to be considered.

On the fine tuning, as a member of parliament from British Columbia, I appreciate this one perhaps more than people from other parts of Canada who are not so closely attuned to the timber base. In the past the criteria has been based on the volume of timber. We realize that volume of timber is not necessarily an accurate reflection of the revenues collected from timber sales.

Some timber is a poorer quality than other timber. Others are a higher quality. It is going to be based on the value of timber products. If a province is collecting a certain amount of money in terms of value obviously makes a lot more sense than a province which is collecting less or more but the volume is quite different. Value as opposed to volume when it comes to things like timber makes sense.

Let us look at some of the purposes of this program. The program of equalization is an effort to reduce disparities among the provinces' revenue raising abilities or fiscal capabilities. The equalization payments compensate provinces for the differentials in their tax bases. That is straightforward.

The program allows for the less prosperous provinces to provide public services of a quality and at taxation levels comparable to those in other provinces. Again, to come back to the idea of being a Canadian citizen in this part of Canada or that part of Canada, it ought to mean about the same thing. That is the reasoning behind the program.

This bill represents a completion of negotiations that for the most part have been about what constitutes this tax base. The legislation represents over two years of discussions with federal officials and various levels of provincial people, including all provincial finance ministers.

Herein lies a rather annoying element. It is not a major criticism; it is an annoying point that I have to raise, which is that we have been rushing this through the system. One of the reasons this has become an issue today in terms of how long the debate should be, it that it has to pass before the end of this month. We knew that five years ago. We knew it three years ago, four years ago, one year ago. Negotiations have been for the last two years and have taken a little longer than expected. We are up against the wall.

The government is pushing us saying that this bill has to pass. It should have had more serious consideration, but this goofy time system made it problematic for us. In my judgment, we are rushing this and we ought not to be rushing it. It is too important. Perhaps what we can do the next time around is try to get at this issue earlier than at the eleventh hour.

The equalization transfers are calculated according to a formula set out in the Federal-Provincial Fiscal Arrangements Act. Therein lies another area which requires some consideration as part of an ongoing examination of this process.

Because of the various tax bases that determine the bottom line for the provinces, there is ongoing discussion and debate on the makeup of these tax bases. As I indicated, Manitoba is not a happy camper at this point, but it accepted this and assumed that things will be sorted out shortly. Not just assume, Manitoba knows things will get sorted out shortly.

Members have probably looked at the figures that have come out from the finance department which project, as best as people are able to project, over the next number of years how each province is going to be treated. In my recollection I think every province that collects money now from the equalization program will see their collections expand over this period of time. But the reality is if a province becomes hotter in terms of its economic base and things turn out better than expected, those numbers will be adjusted downward.

It is a funny thing. There is a lot of history attached to these programs. I am an amateur historian by interest and I was looking over the Saskatchewan equalization payments. Lo and behold there was a history story. I noticed that in the past the province of Saskatchewan sometimes never received any equalization payments. My friend across the way will know this as well. Some years Saskatchewan received some, some years it did not. Some years it received a lot. This seemed odd because other provinces seemed consistently to be either haves or have nots.

I wondered why there was a pattern and Saskatchewan got equalization payments some years and other years did not. Lo and behold there was a direct correlation. The years when Saskatchewan worked its way out of needing an equalization payment, guess what political party was in office? The New Democratic Party.

The New Democrats balanced the books, heated up the economy, got things moving well and then for whatever reason, they were kicked out of office. Then Liberals were elected or Conservatives were elected or Reform, I guess we could use that generally as well and they got the province into trouble. The books got out of whack and the economy went into a nosedive and Saskatchewan required equalization payments again. People got fed up with that, tossed them out of office and brought in the NDP again. Everything gets back in order and the equalization payments evaporate.

It is interesting when we see political history as reflected in the economy and reflected now in the history of the equalization payment program for Canada.

Let me talk about some of the purposes behind this program. I mentioned the fact that only five people know what this is all about, which I think tells us a great deal.

[An hon. member]

Six now.

[Nelson Riis, NDP, Kamloops, BC]

Six, after my presentation. That is very encouraging.

The equalization program dates back to 1957 when only three sources of revenue were identified. I mentioned them earlier: personal and corporate income taxes and successive duties. The revenue base is expanded now to 33 and I mentioned what some of those tax areas are. There is a list in the legislation and it is a bit of a shock to read all of the different tax bases that exist in the provincial jurisdiction. I recognize only a few of them.

In the 1982 budget I remember Allan MacEachen introducing a change to the system where the national standard of 10 provinces was replaced with a five province standard. At that time the situation in all 10 provinces was considered. Mr. MacEachen then changed it to only a five province standard. It was felt that Alberta on top with its oil revenues and the Atlantic provinces on the bottom skewed the national standard so much that the five in between provinces of Quebec, Ontario, Manitoba, Saskatchewan and B.C. replaced this national standard. It was done.

However, after all is said and done there can be no disputing that it is all about the bottom line situation and that is how much each individual provinces gets under the operating formula.

This implies that along with the very basic financial need there have always been some very serious political considerations applied in reaching agreement on these transfer payments.

We remember with interest how when the information came to the province of Newfoundland about the change in equalization payments and that this was to bump up the payments to Newfoundland all of a sudden, bingo, Brian Tobin had a balanced budget. That was helpful presumably in the days just before the election in Newfoundland.

Politics does play a role because there has to be agreement with the provincial jurisdictions and I guess whenever agreement is sought politics is certainly an element of consideration at least.

I mentioned already the timing of this situation. To suggest a few weeks of consideration at the tail end of the process for parliament is simply inadequate. I propose that rather than look at this every five years we should look at this annually. This should go to the finance committee on an annual basis with a thorough briefing so that it is parliament that plays a meaningful role in this equalization process as opposed to simply bureaucrats from the federal and provincial governments involved.

It is fair to say without being overly critical of the political element that we really have not had an opportunity to deal with this adequately and effectively to ensure that what we are agreeing to here today is in the best interest of the country. We assume it is because of what people tell us but I do not think we have an adequate grasp to make that decision comfortably ourselves.

It would be better to communicate these changes on an annual basis rather than at the end of the five year cyclical renewal period. I agree with the points made in the 1997 auditor general's report on equalization. It made a number of recommendations that encouraged an improved a more important role for parliament in the renewal process.

For example, in his report to parliament he made the point that a very clear statement of the objectives of the program ought to be made so that it would be perfectly clear in everybody's mind what is behind all this. Someone may say it appears perfectly clear. We have just gone through a federal budget where there were a number of changes to the transfers to provinces, another form, I suppose, of equalization. We appreciate now that the government is moving to a per capita system with those transfers for health, education and social services. This will change things. I am not even certain people know that has happened, that it is moving toward a per capita basis.

With the changes to the transfers from the federal government to the provinces combined now with the equalization program, what does it mean in terms of the provinces? This gets more complicated and it seems to me we need to look very carefully at what the objectives of this program now are in light of the changes being made to the federal transfers to the provinces and perhaps, more important, to have a clear understanding of what the expectations of these transfers are.

I listened with alarm to my friend from the Reform Party when he made his presentation in terms of how he sees the world and how he see what Canada ought to be. I respect his view but it is totally different from mine. I wonder if it is clear what we expect from these equalization payments in terms of how they are spent. Let us face it, when the money goes to the provinces it is just handed over. There are no strings attached. It is done in good faith, here is the money and you folks deal with it as you wish or deem appropriate.

Such an important program is trying to create a level playing field for all citizens in Canada. I hate to use that term because it conjures up the wrong things. We ought to make that very clear, that we have some expectations in terms of what the moneys from these equalization payments ought to be attached to and then have a very clear, acceptable and understandable way of reporting the results from these expectations.

We could apply this to most federal programs in the system where there is little clarity in what we expect from this program and certainly very little reporting on how we reach that expectation. A best example of that would be the tax system. We have had a lot of tax discussion in the House during the last little while and I do not want to get into it at this point. It would be inappropriate.

What is curious to think about is if we took every significant tax expenditure program and applied to that a cost benefit analysis to the country of who benefits, how much, what is the point of this, what is the goal and how effective is this in reaching that goal. I wonder how many of those tax expenditures, or as the Minister of Finance even now calls them, tax loopholes, would continue in the system. My guess would be very few. I suppose they had laudable goals at one point but there was never any measurement put into the system and I suspect most of them have long outlived their usefulness. However, that is a little beside the point.

The resource revenues that are now part of the new formula will reflect the value rather than volume in resources, including timber, which I mentioned earlier, as well as gas and oil receipts.

The recipient provinces such as New Brunswick and Quebec are satisfied with this formula for calculating forestry revenues because the old formula overestimated provincial fiscal capacities.

On the whole issue of oil revenues, there has been another change to acknowledge that new oil is more expensive to extract than old oil. This now also is being reflected in this new formula so that those parts of Canada now that are relying on revenues from a new oil source as opposed to an old oil source will have much higher levels of expense. That reality will be reflected now in these new categories as well.

I mentioned gaming already. The one thing we overlooked in this gaming business, acknowledging that revenues from gaming will be an important part of any province's revenue base, is the cost associated with gaming. Let us face it, when a whole lot of people are gambling in one province, a lot more than in another province where the facilities are less accessible, there will probably be a lot of people having troubles. I am referring to gambling addicts and that sort of thing where there are a lot of costs attached to provincial jurisdictions as a result of dealing with gambling addicts and losses attached to that sort of thing. That is something we want to look at in the future in terms of fine tuning this process of the complicated base.

Once again, recognizing that there are floors and ceilings in this to help out and there are seven provinces eligible for equalization payments, not British Columbia, Alberta and Ontario, the equalization transfers for this year ensure that all provinces with average tax rates have revenues of $5,431 per person in order to fund public services. Most provinces are very supportive but Manitoba has some concerns. I will leave it at that and I look forward to the vote later today.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, it is with pleasure that I rise today to speak to the equalization issue and to Bill C-65.

Equalization is a cornerstone of Canadian social policy. I believe most members of the House recognize that the free market system is a viable and important system for all Canadians to improve their qualities of life individually and collectively. The free market system will work only if all Canadians have access to the levers of a free market system and have approximate equality of opportunity across this country, regardless of where they live, and that is what equalization is all about. The concept of providing effectively level taxation or similar taxation and similar levels of services across this country is a cornerstone of Canadian social policy.

As a reflection of this importance, equalization is the only transfer program that is actually enshrined in the Constitution act. The goal of equalization, of providing equality of opportunity across Canada, is extraordinarily important. We should also recognize that a goal of equalization should be to provide a ladder for provinces and individuals in those province, those recipient provinces, to rise from their status as recipient to the point that they can participate in the free market economy fully. The equalization system should under no circumstance provide barriers to success, roadblocks to success for individuals and provinces as they try to bootstrap themselves into a more prosperous economy.

One of my concerns about Bill C-65 and the equalization formula is that there are direct disincentives for recipient provinces to improve their economies. For instance, in provinces like Nova Scotia and Newfoundland, which have the potential and will be enjoying increased resource revenues, those resource revenues will come off equalization.

The government has addressed the issue partially by phasing in these clawbacks in equalization over a five year period, but five years is a very short period of time in terms of the development of economies. It took more than five years for the economies in Atlantic Canada, for instance, to develop negative spirals downward.

It will take more than five years for Atlantic Canadian economies to participate fully in the Canadian economy and to achieve the level of prosperity that other regions of the country take for granted. Yet the government has only partially addressed the issue of disincentives.

The government needs to encourage provinces to pursue economic activities that will bootstrap individual provinces into prosperity. Instead there are roadblocks to success.

This situation and how equalization provides these disincentives is somewhat analogous to the issue of single parents in any province who are on social assistance and who have an opportunity to work and succeed but see a direct financial disincentive to participating in or pursuing activities and taking a job because the government puts in place a direct disincentive through the tax system for them to do that.

In a perverse way our equalization system, as it is formulated now, can actually create and encourage a continued reliance and a continued roadblock to success for these provinces. That is perhaps the most fundamentally important issue in equalization which has not been addressed and needs to be.

Mr. Speaker, I am sharing my time with the hon. member for Richmond—Athabasca. I should have mentioned that at the beginning.

Another important criticism of the equalization program made by the C. D. Howe Institute has some merit. The C. D. Howe Institute has argued that poor citizens of rich provinces sometimes transfer money to rich citizens in poorer provinces. An example of this is an east Vancouver family living in poverty may end up paying money that will ultimately benefit an affluent Westmount family. That is one small nuance but one detail that has been ignored by the government in terms of the revision to equalization through Bill C-65.

The fact that equalization is based on, to a certain extent, the assessment of a province's capacity to produce in terms of revenues from the final product reduces the incentives for provinces to produce value added products. To actually add value and develop a better secondary manufacturing system within the provinces is reduced by equalization. Provinces are encouraged to sell raw resources in many cases as opposed to trying to add value in their province and create jobs and employment.

This is perverse. It is one way that the federal government, through a lack of leadership and vision, continues to promote policies that are flawed and are not providing the best possible opportunities for Canadians.

One area in which I have significant concern is population as a basis for cost of services. Equalization distributes the funds to the provinces on a per capita basis. For a province like Newfoundland, which has seen a significant exodus of people over the past several years and it is predicted to continue for the foreseeable future, it is grossly unfair and inconsistent with the principles of equalization.

The actual fixed costs of providing services such as health care and education in a province, even when the population decreases, remain fairly consistent for a long period of time because of the fixed nature of those costs.

We would like to see in an equalization formula some accounting for the actual cost of delivery of services. Both Germany and Australia take into account the actual cost of delivery of services. Some of the socioeconomic factors, some of the demographic factors and the rural-urban make-up are issues that should be considered in equalization, not purely population as is proposed here.

One of the biggest flaws in the whole equalization argument has been around the issue of transparency. The fact that the government in recent weeks has engaged in a meaningful effort to dialogue and debate on equalization and on this fundamental issue, a program that costs $9 billion per year, is indicative of the government's continued knee-jerk, crisis management reactionary style of government. There is no vision. We may have a budget surplus but there continues to be a leadership deficit.

We are concerned by the fact that the government, instead of debating the issue and discussing the issue over the past five year and trying to come up with a equalization plan that provides all regions of the country with opportunities to succeed, continues with the same old, tired policies that we need to revisit. If we are ingenuous about giving opportunities to recipient provinces and if we are ingenuous about eliminating barriers to success, it will take more than a few hours of debate in the House of Commons and some witnesses appearing before the House of Commons finance committee.

The issue of gambling revenues is another important one. Bill C-65 will take into account gambling revenues in the provinces. The fact is that many of the social costs of gambling are provincially borne costs, whether in health care or in social program spending. This could have a very negative impact on provinces that currently benefit from gambling revenues.

We need a new visionary approach to equalization, a new equalization program that provides a ladder to success and not barriers to success as this one does. We believe in equalization. Our party believes that an equalization program is necessary and that we should continue to protect and encourage equalization as a tenet of Canadian social policy. We can make it better as parliamentarians. In that light I would move:

That the motion be amended by deleting all the words after “that” and substituting therefor:

Bill C-65, an act to amend the Federal-Provincial Fiscal Arrangements Act, be not now read a third time but be referred back to a committee of the whole House for the purpose of considering amendments to clause 2 to alter the equalization formula to fairly take into account the varying costs of program delivery in different provinces because of differing demographics, geography and urban-rural variations in addition to population; and to clause 2(2), which would eliminate the current disincentives for recipient provinces to improve their finances through innovative economic policies.

[The Acting Speaker (Mr. McClelland)]

The amendment is in order. Debate is on the amendment. We will have questions and comments before we move to debate.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I heard part of the member's speech while I was in my office. I missed some while en route and heard the end of it while I was here. There may be some gaps and perhaps he has addressed this point.

I have a very simple question. The Conservatives were in power for nine years. During that time there were, as with this government, no substantial changes made to the equalization program. There was no concerted effort to fix up the problems in it and to try to make it a true equalization payment system instead of what it has become. I wonder whether this represents a new thrust on the part of the PC Party or whether it just wants to gloss over the errors of the past. I am asking a sort of rhetorical question.

I am really intrigued with the idea that the Tories now want to basically scuttle the bill in order to send it back to committee, which would mean it probably would not meet the deadline for continuing the payments to the provinces. Is he actually interested in scuttling it or in revamping it? What exactly is his purpose?

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, I appreciate the question of the hon. member for Elk Island. He is quite right that the Conservatives should have been in government a lot longer to pursue these types of important policies.

I am sure if he had longer to ask his question he probably would have pointed out that the Progressive Conservatives were very busy making structural changes in the Canadian economy including free trade, the elimination of the manufacturers sales tax, deregulation of financial services, transportation and energy, those policies that ultimately enabled the government opposite to eliminate the deficit.

I appreciate the hon. member's intervention. I would hope, perhaps with his support and the support of members sitting with his party, that we could return to the days when we had an extraordinarily active public policy government that actually developed visionary changes necessary for Canadians. Right now it is not happening.

I am sure if the member had longer to ask his question he would have pointed out the fact that there has not been a single visionary policy from the Liberals since 1993. It has been a status quo, caretakership government without vision.

I am sure if he had longer to ask his question he would have pointed out the fact that the former Progressive Conservative government was busy making important structural changes and if it would have had just a little more time it would have probably pursued the necessary fundamental changes we are discussing as the Progressive Conservative Party of 1999.

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

Mr. Speaker, would the hon. member care to elaborate further on the Conservative economic policies which he is lauding and which I believe led to a doubling of the national debt and an increase in the annual deficit to something in the order of $42 billion a year? It brought in the wonderful GST which we all love so much! Was this visionary? I would like to hear more about this because it gives me a thrill to hear about these so-called wonderful policies that wrecked the Dominion of Canada.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, perhaps it is a generation gap but the hon. member prefers to focus on the past and I prefer to focus on the future.

The fact is that in 1984, if the hon. member checks his facts, the Conservative government inherited a $38 billion deficit in 1984 dollars. It was a far higher deficit than what the Conservatives left in 1993 at $38 billion. In fact as a percentage of GDP that deficit was almost half, from 9% of GDP to about 5%. Government program spending was reduced from where it was growing by 15% per year to zero program spending growth by the Conservatives that recognized the importance of debt and deficits.

In 1988 the hon. member's party started attacking these policies by dividing the right in Canada. It ran a candidate—I think this gentleman is now the leader of the party he decided to wind down—against the current leader of our party on the free trade debate and split the right on the fundamental issue of free trade.

It is very sad that members of his party not only choose to focus on the past instead of the future, but even when it does so it does not have its facts straight.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, it is nice to see the Progressive Conservative Party knows how the House operates. We have introduced motions here to try to improve Bill C-65, while the Reform Party has been saying this morning that they would have liked to but did not know quite how, they did not have the time and they sort of got sidetracked in the procedure.

We manage to do it and it makes for a good debate so that people understand what C-65 is really all about. So we are proud to do it.

What must be remembered in the motion we put forward is that we are attempting to improve Bill C-65 quickly. A Reform member was saying that it might be too late, but we were talking about the committee of the whole House, not a committee outside this chamber. It is the committee of the whole where we can assure all the provinces, including Newfoundland, Nova Scotia and Quebec that—in the last part of the motion, it is mentioned—should there be some extra money, they will not be penalized by the equalization payments immediately, but they will be able to spread it out.

That is what we talked about in committee. There was a discussion of spreading it over five years. Various formulae were discussed. Unfortunately, that is not in Bill C-65.

My colleague from Kings—Hants provided an example to help understand it. The analogy I will now make may not work perfectly, but it will allow members to understand what I am geeting at.

If we do not pass the motion moved by my colleague, the member for Kings—Hants, the provinces will find themselves in a situation something like that of a single parent family on welfare. A job means the immediate loss of the so-called benefits of the social assistance system, such as drug and dental plans, rent to income accommodation, and so forth.

We now know that several provinces, including Quebec, have decided to lessen this impact. We would have liked to see Bill C-65 take the same approach so that a province that put a lot of energy, and often a lot of money, into developing its primary and natural resources would not immediately be penalized. We would have liked Bill C-65 to take a much more logical approach with respect to what could happen in provinces now facing more of an uphill battle than others but wanting to do better.

I hope that all members will support this motion, especially our Reform Party friends who, having been unable to come up with good amendments for the provinces, can turn to us.

Bill C-65 talks about equalization. When I was younger, I viewed equalization as a Robin Hood situation, where the government took from the rich and gave to the poor. This is the simple explanation of a system that unfortunately can have its negative side, as C. D. Howe pointed out. That gentleman wrote an article in which he said that Canada's equalization system consisted of taxing low income Canadians in the have provinces to cover part of the cost of transfer payments to high income residents in the have not provinces.

One must be very cautious about examples referring to Robin Hood or C. D. Howe, for fear of running down a system that does, when all is said and done, work well. Even our friends in the Bloc Quebecois have said so on a number of occasions. In fact, their silence today is probably an indication of this.

According to the C. D. Howe example, a poor family in a rich province is likely to have access to assistance from that province, because it has the means. Care must therefore be taken not to criticize a system that works rather well, when all is said and done.

The equalization payment system has been in place since 1957. It is an unconditional transfer to the provinces, one with which the provinces are generally in agreement. Some provinces even have their own equalization system because there are not only national disparities, but also provincial, regional and local disparities.

For example, for several decades Quebec had an equalization system based on the federal system, as far as its philosophy and calculations go. It used an overall taxation rate, based on a standardized municipal property value, and thus enabled the province to help the least advantaged to get through some hard times.

This changed in 1979. Today, the program scarcely exists any more in Quebec; nevertheless, the philosophy of richer regions helping poorer regions works very well.

I have never heard it said in Quebec that a poor family in a rich region was providing help for a rich family in a poor region. To say so about a system that works very well is pure demagoguery.

Hopefully, Bill C-65 can be improved to help the poorest regions and bring hope to the poorest people. As I said earlier, the amendment moved by my colleague will be a tax incentive to regions starting to make a go of it, without penalizing them.

It is wonderful to see all members in agreement. This morning, I listened to the Reform Party finance critic, who spoke at great length but did not actually say anything useful. He said that they would do things differently. More than once, he commented on how it did not make sense for three provinces to pay for the other seven. He thought it should be five or six paying for three or four.

How is this any different? This is not how the equalization system works. But, according to the Reform Party, it is because things are going well for them in two of the three richest provinces, and they would like to do well in the third. It is not by getting a greater number of provinces to pay for a smaller number that the Reform Party will increase its chances of winning the next election. They are busy creating a new party and trying to come up with a good platform for the next election. We know this will not fly.

The equalization system must continue to improve. That is why the legislation is reviewed every five years. That is why the federal and provincial governments are in constant contact, to monitor the situation on an ongoing basis so that every five years action can be taken to smooth out inequalities in the process.

From three or four criteria in the late 1950s, we now have more than thirty today. This may be complex, but the tax base has broadened and changed, and new tax methods have been introduced.

The leader of the Reform Party said in his speech that he did not understand, that Canadians did not understand. It may not be just equalization payments they do not understand. They perhaps do not understand their tax return either, and that is why there are accountants. The Reform Party does not understand and that is why it is dropping in the polls. The fact that some folks do not understand does not mean that what they do not understand is not good for others.

The tax base has changed, it is better. And that is why we went from three or four items to 30. We hope it is not to complicate things, but to be fairer and more equitable.

For example, 10 or 20 years ago, there were no casinos. Revenues from casinos were not taken into account. Why? Because there were no casinos in Canada. There were community bingo halls, but no casinos. Now revenues from lotteries and games are taken into account in the analysis of equalization payments. Has it made the system more complex? No, I think it is an element to be taken into consideration. Not including it would penalize the regions.

This is why they think there is a change, but the change must be toward really helping, ensuring that equalization payments are at the heart of a country, and of a province and a region. They must serve the purpose for which they were initially intended—to help the people.

We must make sure that, in the regions, in spite of their difficulties and differences, people can enjoy basic services, framework and support equivalent to that of others in this country.

The same thing is done provincially. Quebec did it for decades. It is understandable. It is a principle. We could call it not the Robin Hood of Canadian taxes, but simply charitable, logical.

We are here to make sure that people have excellent services at reasonable cost throughout the country.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I would like to ask the member a question with respect to the province of Quebec.

We know Quebec has been a part of Confederation since the very beginning. It is one of the oldest provinces. It contains one-fourth of the country's population. It has a hardworking population. It has a fair number of natural facilities. It has a lot of natural resources. It has a strong agricultural community. It has a vigorous people and yet year after year somehow it needs money from Ontario, British Columbia and Alberta in order to finance the basic programs for its people.

Does the member have any hopes, any dreams for the country, that the province of Quebec, one of the strongest provinces in the country, will eventually become self-sufficient and be able to provide for its own citizens from its own revenues? Is that an anticipation or are we really looking at perpetually having the other provinces support this very vigorous province?

The reason I ask has to do with the whole basis of equalization. It seems the formula used is such that it demeans the people of Quebec by making them dependent on the rest of the country and does not provide for them an opportunity to be self-sufficient. I would like to see that happen. I wonder what the member has to say about that. I would appreciate his comments.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, at the beginning of the hon. member's speech I was surprised, extremely surprised, very pleased even, to see that a Reform member was showing an interest in Quebec. This was a surprise.

By the end, however, I had seen through his question to the cynicism that lay behind it. In fact, I find the way he presented it somewhat patronizing.

It is as if Quebec were not entitled to its share in this country. I would remind hon. members that Alberta once received equalization payments. According to the Reform's principle, the provinces are equal when that suits them, and unequal when it does not.

Quebec is entitled to the same treatment as all other provinces in this country, no more and no less. Like any other province in this country, moreover, Manitoba, Newfoundland, or whatever, it is entitled to respect.

The problem with Reformers is that, every time there is a minority somewhere, a province or group that is different from them, or what have you, they start saying “It's not right; they are getting preferential treatment”.

Quebec is taking its proper place, and may it be given the freedom to do so. Quebec, francophones, minorities, will most certainly not be able to take their proper place with the Reform Party, but thank goodness, that will never happen. Thank goodness, the Reform Party will never be in power.

This country is blessed. Proof of that blessing is that, in the next election, the Reform Party is likely to have far fewer seats than it does today. Quebec will take its place in an atmosphere of respect, and not of cynicism, particularly from the Reform Party.

[Angela Vautour, NDP, Beauséjour—Petitcodiac, NB]

Mr. Speaker, it is unfortunate having the Reform Party as the official opposition. The Liberal government implements Reform Party policies. When I heard the member say how he wanted to give more power or autonomy to Quebec, I was concerned, because I come from the Atlantic region where help is needed.

The Atlantic region is part of Canada. I think some people in this House forget that. If the Reform Party were in power, it would abandon these regions and its responsibilities toward them. I would like to know whether my Progressive Conservative colleague agrees with me.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, I agree with 99% of my NDP colleague's remarks.

The Reform Party said it wanted to give greater autonomy to Quebec, but that is not the point. The only way Reform would have a mathematical, theoretical or even political hope of forming a government is if Quebec did not exist, if there were no francophones, including Acadians. The Reform style is to divide and conquer. It is Machiavellian. It is cynical.

The hon. member's party and our own share the representation in the maritimes. They are the access for the development of this country and will surely not be the exit for the Reform Party.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, I am honoured to stand in the House to represent the people of the Elk Island constituency which I would venture to say is the best constituency in the whole country. I also say I have the best woman in the world as a wife. I hope that everybody else would say “no, it's my wife”. I really love my constituency and the people in it. They are very good.

I also represent the province of Alberta which has been a net payer into the system except for one occasion approximately 30 years ago when it received a very small equalization payment in one year. In the broader sense I represent the people of Elk Island but also the people of Alberta who have a very great interest in how their money is spent. This money is taken from them through the coercion of taxation and they have every reason in the world to demand accountability on how that money is spent. I am here to represent not only my riding but the province of Alberta.

I really am sorry that the member from the Progressive Conservative Party who answered my question totally misread it. I asked what I thought was a decent question that could have addressed the question of the mathematics and the formula used and whether equality is really equality. The member debased himself into an answer with political rhetoric. The NDP member joined in on it. Somehow they think by oft repeating this message Canadian people will believe it. That is just not true.

People in my riding want to keep this country together. I suppose one of the reasons the support for me and our party out west is so strong is that we are the only party that has ever come up with a decent plan for keeping this country together, reaching out to Quebec in a tangible way, trying to meet its needs and aspirations which this Liberal government and the Conservatives before it rode over roughshod. We are reaching out to it.

These people criticize us because we occasionally have dialogue with members from the Bloc. I think it is about time we dialogued with all people of Quebec. A fairly good number, 50%, have been sending separatists to the House of Commons and to the provincial legislature in Quebec.

That sends a very strong message. There is trouble in Ottawa. It is time to address it honestly and try to find a solution to it. Instead, what we get is this attempt by the Liberals, and now the Conservatives who have joined in, to crawl over each other and put each other down. They do not want us to work together. They want power.

I do not know whether this is going to be misunderstood, but I do not want power at all. I have no need for it. My ego does not require this kind of a cheap ego trip. I want to serve the people of Elk Island, the people of Alberta and the people of Canada. Unless we are going to write off Quebec like these other parties are doing, that includes an honest and open dialogue with the people of Quebec.

My question to the member was very clear and explicit. Does he have a hope that Quebec, with its vigorous population, its strengthened natural resources and all of its other amenities and strengths, will ever become independent in the sense that it will be able to row its own canoe and be financially independent? I would hope so. That would be my desire for every province in this country, and it is certainly true for the province of Quebec as well.

I reach out to them because I believe that we need to do what we are proposing in the new Canada act. We need to make sure that we listen to and obey the Constitution of the country which puts a lot more responsibility with the provinces and gives them the freedom to run their programs. That is what the original Constitution envisioned.

Successive Progressive Conservative and Liberal governments have chewed away at that, primarily by the use of spending power. They tax all Canadian citizens individually. They tax individual businesses. They do not tax the provinces. They tax the taxpayers. They then turn around and with all of this money that they have in their pockets jingling away, they take it and put it into wherever they think it should go.

We have no objection to the principle of equalization. In fact if I were to get this debate right on stream, I think it is appropriate for us to once again read the principle of equalization that was adopted in the Constitution Act, 1982. This is something I believe we could support wholeheartedly, provided it is done properly. Section 36(2) of the Constitution Act reads:

Parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

I doubt if there are very many Canadians across the country who would disagree with that as a principle. There may be some, but I am not one of them. I am one who believes in lending a hand of help to people who are truly in need. Later on I will address how we actually determine this equitability or equality.

The principle of every citizen in this country having access to education and to be not denied the right to extend their education beyond high school because of financial restrictions is a principle that I would endorse most wholeheartedly along with 99.99% of Canadians.

It is unconscionable that we have in this country a two tier education system, thanks to Progressive Conservative and Liberal governments, where the people who come from rich families can march right out of high school into post-secondary institutions. Because they are rich they have the money to pay the big tuition fees, the big cost for books and all of the other expenses that are involved. For many Canadians it involves living away from home while they are going to school. If they are rich they can afford it. But what happens if they are poor?

Over the years governments have deteriorated the transfer of funds to the provinces, which they should not have been into in the first place, but they got into it by use of the spending power. When they did that originally it was for a good cause and it was done well. The principle was that no one in the country should be denied the right to post-secondary education because they could not afford it.

The federal government taxed the money from all of the people and from all of the businesses. Then it paid the money back to the provinces so they could provide educational facilities at reasonable cost.

In the mid-fifties and early sixties I was a university student, a recipient of that largesse. I am grateful to this day. It was a wonderful privilege. I was the first member of my family—and I have mentioned before that I am a first generation Canadian—to go on to university. What a privilege it was to be educated and then later on get into the business of education so that I could pass on the knowledge which I had gathered. I believe in that principle.

What do we have now with this Liberal government? The government has a fancy scheme of putting students into interminable debt. When these students graduate from school they will have a debt as big as half a mortgage on a house.

Shortly after I graduated my wife and I got married and started a household. In today's world, if a young couple were to do that, together their debt load for their education on average is equal to the debt of buying a house. How are they going to also finance a house? How are they going to finance the starting of their business, be it a law practice, a dentistry practice or whatever it is? They cannot because they have so much debt. They are in debt federally because their share of the federal debt is $20,000. They are in debt provincially because all of the provinces have been going into debt. They are in debt personally because they have encountered all of these wonderful student loans.

I really believe that we ought to look at that again. I do not believe that we are investing properly in our young people. I believe that if equalization payments are to be made from the federal government to the provinces it should be done in such a way that it helps those who are in need.

I think about health care. Every once in a while we hear of people, in fact too frequently, who because they are rich can afford to go to the United States to get superb health care.

I know of a family who lives in my community. It is actually a very sad story. This young married man, who has a couple of children, was feeling tired. His mother was also not feeling well. But they could not get any proper diagnosis in our health care system. First, they wait six months to get in line. When they do get into the health care system there is inadequate equipment. Many of the really skilful medical practitioners have gone off to the United States where there is more money available for their research and for them to be able to practise their profession.

These people, because they had the means, went to the Mayo Clinic. Unfortunately my friend was diagnosed with MS, which is a very serious disease. They could not even figure out what it was here in Canada. Fortunately he had enough money to go there. He also took his mother along. Unfortunately they diagnosed a terminal disease and she has now since passed away.

We often hear the hue and cry “We don't want a two tier health care system”. The fact of the matter is, we have it.

This government started out with a good principle. The principle was to make equalization payments so that people in the different provinces could have an equal level of services without undue taxation.

When the federal government originally brought this in it funded 50% of health care costs. It did that quite consistently for a few years. Then payments started to decrease. I do not know if my number is accurate, but a number which I heard recently put it as low as 13%.

In other words, we are still being taxed. Nobody in the country feels that their tax rates have gone down, notwithstanding what the Minister of Finance says. If we look at our bottom line at the end of the year we realize that the average family has, as the statistics from Statistics Canada show, a take home income of $3,000 a year less.

We are still being taxed to the hilt, but health care is no longer being funded adequately. What the government has done in the present budget is woefully inadequate in terms of restoring what it should be doing relative to the original purpose of equalization.

There are two issues. One is to provide comparable levels of services at reasonably comparable levels of taxation.

What does the equalization plan do?

I do not know whether people who are watching on CPAC or even members of the House are aware of this, but one of the strange things is that both the provincial and federal governments tax individuals and businesses and then the federal government pays some of the money back to the provincial governments directly.

Originally that was to be done without strings attached, recognizing the legislative and the constitutional right of the provinces to manage these affairs.

I found a really interesting quotation in the report of the auditor general. One of the recommendations in that report came from the Rowell-Sirois commission which was formed in 1937. That is interesting because it happens to be two years before I was born. It was a dominion provincial relations commission. One of its recommendations was that the dominion government should make annual national adjustment grants to the needy provinces. The report went on to describe that.

Then the commission wrote that the grants would be unconditional and the provinces would be free to decide how to spend them or whether to use them to reduce provincial tax rates. In other words, the principle of equalization was embodied in the report of 1937.

Have we lived up to that? No. Now we have a top-down, heavy-handed federal government saying to the provinces “We will give you the money”. But are there strings attached? Big time.

My province of Alberta, which as I said in my introduction I am here to represent as well as all of Canada, has been dinged several times. Even though this was its own jurisdiction according to our Constitution, the federal government, utilizing its arbitrary and heavy-handed ability to spend the money it taxes, simply withheld funding from the Alberta government's portion of health care. That is unfair. It is wrong. It is illegal, but no one stands up to the government.

Then we have the separatists. Liberal members cannot figure out why they are here. They shake their heads. Instead of trying to ask the question “Why are they here?” they continually accuse them. I will not do that. I will not accuse the separatist members for being here. Their people back home sent them here. As far as we know the elections were fair and square and the ballots were properly counted. There are enough people out there who say “We are so fed up with Ottawa that we want out of this thing”. That is terrible.

I know of several families whose children have left on very, very bad terms. It is painful. Those parents hurt when that happens. We as Canadians all hurt when somebody leaves or threatens to leave.

We do not end up criticizing them, bawling them out and yelling at them. We sit down with them. We want to talk to them. We want to find out what are their true legitimate grievances and to solve them.

What has happened with the Liberals? Over and over all they have done is added more grievances to their list. That has to come to an end. It has to be communicated to the people of Quebec so that they will send people here who want to work with the federal government.

Notwithstanding some of the political rhetoric we get around here, and I say this as humbly as I possibly can, I believe that the Reform Party and the principles we espouse contain the seed of the grand reconciliation we need so desperately in the country. Then we can say to the people of Quebec and to all other provinces that we will respect the Constitution and make sure they have the right to manage their affairs properly.

When I speak to the equalization bill I believe we need to get back to the principle which says that we tried to reach an agreement with the provinces so that their people could have the same level of services in education and particularly in health. When we think of welfare, public services like national highways and roads and so on, there are huge costs of running provincial governments. There is absolutely no problem on the part of the Reform to say that those who are truly in need should be able to have those needs met.

In the last minute I would like to say something about the formula. Given that we are admitting we will do that, how do we determine what is equitable? That is the problem. The legislation requires that the act be renewed every five years. We have known since 1994 that this would expire in 1999. What did the government do? Two or three working days before it was introduced in the House we were given notice of it. Then the government almost immediately invoked closure. It had to push it through because it had to be done by the end of the month. I agree with that.

I disagree with the amendment we are speaking to which says we will basically hoist it. I do not think we want to put the provincial governments into such a disaster as the Progressive Conservatives would propose with their amendment that would not give them these payments. We need to have a longer process.

I propose that we ought to do that. The next process should start as soon as this one is renewed. Let us hear from some academics. We heard some very excellent witnesses in committee. Let us have some academics to answer these—