House of Commons Hansard #147 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was provinces.

Topics

Federal-Provincial Fiscal Arrangements Act
Government Orders

10:40 a.m.

NDP

Alexa McDonough Halifax, NS

Mr. Speaker, I listened with careful attention to the comments of the parliamentary secretary for finance in urging quick passage of the bill that is now before us. He went to great pains to say and in fact repeated I do not know how many times, but ad nauseam, that this is nothing more than an insurance policy to make sure that the current equalization regime continues after April 1 in the unlikely situation that the federal government does not finally get it together to put a new agreement in place.

I heard what the parliamentary secretary said, but there were a lot of things he did not say. What he did not say was that there are inequities in this regime and that in fact the provinces have been pushing for a very long time for changes. On the eve of Parliament virtually collapsing because of the paralysis of two battling male egos, each of whom will not put the interests of the country and the interests of Parliament first, what he did not say anything about is why we find ourselves without that new agreement finally reached.

The second thing the parliamentary secretary did not say anything about is that the provincial premiers and finance ministers are unanimous in asking for these changes to go ahead, not at some future date but at the time of the expiry of the agreement, which is 2004.

I wonder if the parliamentary secretary could please explain to us why we find ourselves in this situation where the inadequacies, the inaccuracies, and the inefficiencies of the current formula are going to be continued because the government has not dealt with this in a timely fashion.

Federal-Provincial Fiscal Arrangements Act
Government Orders

10:40 a.m.

Liberal

Bryon Wilfert Oak Ridges, ON

First of all, Mr. Speaker, surely with all her years of experience the hon. member knows that the negotiations are between the Government of Canada and the provinces. These are negotiations. This is not a one way street.

How can that member stand in her place and have the audacity to say that we have not been listening when the Prime Minister responded in February with the removal of the ceiling, something the provinces wanted? The Prime Minister responded. She is now asking why it is taking so long. We are not going to make this agreement on the back of an envelope, which I know some of the parties over there are good at doing. We do not do that. What we do is sit down and make sure we do it right, and we are going to do it right with the provinces.

This is an insurance policy. Presumably the member has house insurance. I assume she hopes she never has a fire, but she has an insurance policy just in case. We do not expect to have a problem, but in the meantime it is prudent to have this.

I do not know when the House is going to adjourn, but I can say that in the meantime the onus is on all members in the House to make sure the legislation is passed so that the provinces will be assured of receiving continual revenues in the unlikely event. Again I will point out that the minister is working with his counterparts in good faith. I know, whether it is Nova Scotia or Manitoba, that they are very interested in making sure that we continue to have this in place. We are negotiating in good faith. I do not expect any difficulties, but again, this is a contingency. Again let me say that I pointed out in my speech a number of the areas the government has responded to, including the ceiling issue.

Federal-Provincial Fiscal Arrangements Act
Government Orders

10:45 a.m.

NDP

Alexa McDonough Halifax, NS

Mr. Speaker, I have a straightforward question. I wonder if the parliamentary secretary could inform the House of what year it was when the arbitrary ceiling was imposed by the federal government, which has caused great hardship and has resulted in tremendous shortfalls to provinces that have been in a less advantageous financial position.

Federal-Provincial Fiscal Arrangements Act
Government Orders

10:45 a.m.

Liberal

Bryon Wilfert Oak Ridges, ON

Mr. Speaker, is that not typical of the NDP? Instead of praising the government for the removal of the ceiling, for having a floor there now, we are now hearing about this arbitrary ceiling.

We on this side of the House work with our partners. We responded by removing the ceiling. That was a problem. We did that, of course, because of the situation. The problem in this House is that hon. members like to ask questions but they do not want to hear the answers because of course they do not care about the answers. They are only interested in scoring cheap political points.

The point is that this government responded effectively by removing the ceiling and putting in the floor. We do not need any lessons from the NDP members. All they need to worry about is that we are going to move ahead, and if those members really are concerned then that member will stand up and get her party to support this legislation.

Federal-Provincial Fiscal Arrangements Act
Government Orders

10:45 a.m.

Canadian Alliance

Monte Solberg Medicine Hat, AB

Mr. Speaker, I appreciate the chance to speak to Bill C-54, an act to amend the Federal-Provincial Fiscal Arrangements Act.

Let the record show that the parliamentary secretary does not know the answer to the hon. member's question about what year. It is pretty obvious.

At any rate, this is an important issue. I am happy to weigh in on the debate. Many Canadians are curious about why at this stage in the cycle of equalization the government is bringing in amendments that would extend the current fiscal arrangements between the federal government and the provinces for another year. Why at this point would the government be doing this? This is almost without precedent. In fact, I think it is without precedent at least in this form. I think the question is why.

A minute ago the parliamentary secretary was saying that extending the current formula and the agreement for another year is insurance. I understand that argument. We are not arguing against taking that step. He argued that it is prudent to do it. In a sense he is correct, but it is only prudent because the federal government did not get an agreement with the provinces over the last four and one-half years.

The government has had all kinds of time to come to an agreement, but it failed to do it. That in itself was not prudent. Now the government has come to a point where we have to rush the bill through to ensure that the provinces have comparable services, if they do not have the fiscal capacity to provide them themselves, through equalization. This is a program that the official opposition supports. In this case we have concerns about how the bill is being rammed through.

Later on I will speak in some detail about some of the changes we would like to see to equalization. However, I do think the government should be taken to task. A minute ago the parliamentary secretary said that the Prime Minister and the finance minister have had very good meetings with their counterparts in the provinces. That is fine, but it is a little late in the year to get to this point where now we have to ram through something that by anyone's admission is not acceptable to the provinces.

The provinces are unhappy with this formula. However, because the government dithered for so long we are in a position where we now have to bring forward this unprecedented legislation to ensure that in fact equalization payments can continue, so we can provide basic services in those provinces where they do not have the capacity to provide them themselves.

The official opposition is very critical of the government's performance. It points to a deterioration in the relations between the federal government and the provinces over the last many years. Over and over again we see provincial elections where the campaign is more and more about improving relations with the federal government. This bill is just one more example.

I want to speak about some of the concerns that we have about the actual equalization formula as it is today. Many provinces have big concerns about the formula.

Not long ago on television I was watching the new premier of Newfoundland, Danny Williams, talk about the concerns in Newfoundland about the formula. He pointed out that oil and gas has created about $14 billion in revenue out of Newfoundland, but what is the net positive effect for Newfoundland? It is $300 million. Why is that? It is because, unbelievably, the equalization formula today claws back almost every dollar that comes out of non-renewable natural resources.

Let us think about that. Non-renewable natural resources are resources that cannot be renewed, unlike hydro and other types of resources, forestry for instance, that are renewable. Once those resources are gone, they are gone.

In its wisdom, or lack of wisdom, in the past the federal government has insisted that every dollar that comes out of non-renewable resources be clawed back. A province such as Newfoundland which is trying very hard to get on its feet and be a net contributor to the equalization formula cannot do it or it is impeded by the current formula. That has to change.

We have to extend a hand to provinces like Newfoundland and Nova Scotia which have resource wealth and ensure that when they start to develop those resources, they are not penalized by an equalization formula that claws back virtually every dollar they get from the development of those resources. That is completely unfair. That has to change.

It is not only Newfoundland and Nova Scotia that have concerns. Many other provinces have big concerns about the equalization formula as it is today.

In British Columbia people have concerns about the fact that property values are calculated as a way of determining the relative wealth of a province and that figures into whether or not they should get equalization payments. In Vancouver there are very high property values and very high property taxes as a result of that. That is not necessarily an indicator of how well the province is doing economically. British Columbia has struggled over the last number of years, but it still has very high housing prices. As a result of that, it probably does not end up in a situation where it would get equalization where otherwise it would. I know British Columbia wants to see that change. We support those kinds of discussions.

There is a lot of interest and a lot of people are saying that maybe we should change from a five province formula to a 10 province formula so that we get a better sense of what the actual average standard of living or capacity to provide services to the public really is. The five province formula which measures the relative capacity of the five provinces in the middle of our 10 provinces to provide those services may not be a very good indicator of actual capacity to provide services. We favour a debate about going to a 10 province formula.

Let me emphasize again that my party supports equalization. It is part of our constitution. As an Albertan, my province contributes more than any other province per capita to equalization. I always say that I think Albertans are probably more patriotic than any other citizens. I say that because they have to pay a pretty high admission fee to be in Confederation. We pay a lot of money into Confederation.

Other provinces, and I am not knocking them, are net recipients and that is fine. However, I do like to point out, when people say that Albertans are sometimes a little standoffish about Confederation, that we pay a very high price to be in Confederation. We are happy to be Canadians. It is also important that others recognize that Alberta pays a tremendous amount of equalization into Confederation to ensure that other provinces have services that are comparable to the national average.

Having said all of that and that I favour equalization, I want to point out that equalization is really a safety net. It is like a social program in a sense. It provides a safety net to ensure that no province gets itself into a situation where it cannot provide basic services. The Canadian Alliance believes, the official opposition believes, that no matter where we go in the country we should be able to get good health care. To me that makes sense. I think Canadians agree with that. We should be able to get all kinds of government services that are important to the proper running of a society. We believe in that. We have no problem with equalization. It should be there.

I think all members in the House would agree that the ideal would be that every province would eventually get to the point where it had the fiscal capacity to provide those services on its own, without the need to rely on equalization. That should be the goal. I would like to say that we are getting closer to that, but unfortunately we are not. I do not know if members have had the chance to read some of the newspapers today that pointed to the fact that Canada is falling further and further behind in its capacity to compete in the world.

I do not know if members realize this but in 2001 Canada was third in the world on the global competitiveness scale as produced by the World Economic Forum out of Geneva. Today, two years later, we have fallen to sixteenth place, from third to sixteenth. Why is that? Is it because we have had some big natural disaster that has set us back? No, according to the World Economic Forum it is because of government policies.

While we are having a debate today about equalization, I am going to argue that the most important way to help Canadians is not through equalization, it is through a strong vibrant economy that is more and more competitive, because we are in a global competition. Unfortunately, however, the government, despite its rhetoric about wanting to improve our capacity to be innovative and to compete, has failed utterly and completely to address those problems. That is why we have fallen from third to sixteenth in two years.

I want to quote from this morning's Globe and Mail , which in turn is quoting from the report:

Canada's quick fall can be traced mainly to “a perceived decline in the quality of public institutions”.

It goes on to say:

As well, Canada fell to 24th this year from ninth last year on the forum's public institution sub-index, which compares countries based on how conducive to business competition their governments and other public institutions are.

It goes on and on and talks about how Canada has failed to address some of the big problems that it needs to address to ensure that our country is more competitive.

When we talk about being more competitive, we are not just talking about businesses competing. We are talking ultimately about the ability of a country to provide a higher standard of living for its citizens. That is what government should be focused on.

It is one thing to talk about rearranging the wealth we have, which is what equalization does. It is quite another thing to talk about making the pie bigger, creating more wealth and ensuring that Canadians not only have access to that wealth but that they have access to the jobs that allow people to exercise their great talents and God-given abilities. Unfortunately in Canada today with an 8% unemployment rate, that is not an option open to millions of Canadians. They are unemployed as a result of poor public policy and lack of planning that comes from the government.

The current finance minister has failed to meet the challenges that have been laid before him, despite all the talk about wanting to address those things. The industry minister and the human resources minister headed up an initiative that was designed to address our competitiveness and innovation challenges. Rather obviously they failed.

I am not going to let the former finance minister off the hook either. He was here in 2001 when we were ranked third. By 2002 we had fallen way down the ladder, and if I remember correctly it was right down to eighth or ninth. The new Liberal leader who wants to become the prime minister was in charge at the time. He cannot escape unscathed when it comes to ensuring that someone is held to account for this wretched performance by our economy. The blame for this has to fall squarely at the feet of the new Liberal leader. He has failed utterly and completely to address these issues.

He gave a speech in Montreal the other day. He laid out some of his vision for addressing these kinds of problems. One of the problems with the speech was that he had about a $50 billion hole in his accounting as to how he would pay for all of the things.

The report that I have been referring to talks about the credibility problems of public officials. It specifically talks about the credibility problems of public officials in Canada. I want to argue that the new Liberal leader, the soon to be prime minister, the member for LaSalle—Émard, the former finance minister, has a massive credibility problem. He is contributing to this fall in Canada's competitiveness versus other countries.

All of this is more than just an academic debate. It is not an abstract debate. It has to do with the ability of government to provide good, well paying jobs for ordinary rank and file Canadians, for people to grow up in this country and pursue their dreams.

For many people, unlike when I grew up, it is very difficult to simply step out of high school and find a good job. They have to go to university and even then it becomes difficult. Many Canadians end up going elsewhere to find jobs. That is unacceptable.

There are many people in this place who have families that have moved elsewhere in the world. Many of them have moved to the United States but not only there. They have left in some cases to go to Ireland and other countries because that is where the opportunities are for them in their particular fields. It is time that, as a Parliament, we start getting serious about addressing our competitiveness in the world.

The debate we are having today is about equalization, but the greatest help that we can provide to Canadians is not to redistribute income. The greatest help we can give is to create an economy that is conducive to attracting investment, that creates jobs and gives people some real hope. That is not what is happening in Canada today. We are falling further and further behind.

Some people say we are measuring ourselves against the United States. It is true that we have fallen behind in terms of our ability to compete against the United States. Our standard of living versus the United States has fallen dramatically. Even the current finance minister, when he was industry minister, pointed out that the standard of living in Canada had fallen to the point where it was now equal with the poorest of the poor American states like Mississippi, Alabama and Georgia. That is a shame, given the wealth that we have as a nation and the fact that we have unfettered access to the wealthiest market in the world, the United States.

It is not just the United States we are falling behind. We have fallen behind the Finns, the Danes, the Swiss, the Dutch, the Irish and the Icelanders. They are all surpassing us. Why are they doing it? Is it because they have all kinds of resources that we do not have? Obviously not. In Iceland, there are hardly any resources. It is because Iceland makes better public policy decisions.

What we will find when we look at all of those countries I have mentioned is that they have reduced their taxes dramatically, to the point where they are attracting investment from all over the world. This allows them to create businesses that provide jobs and incomes for millions of their citizens.

We need to be doing the same. If Ireland, in the middle of the North Sea, can do it with no resources, surely Canada can do it, with its massive resources sitting atop the United States with an $11 trillion economy and the wealthiest economy the world has ever known.

However, we keep falling further and further behind thanks to poor public policy planning on behalf of the Liberal government, the former finance minister, the current finance minister and the current Prime Minister. They are all in it together. It is a disgrace. It is a lost decade. It is a poor legacy for the Prime Minister who will be departing soon.

In closing, this debate has been about equalization. We want to see changes made to equalization and we want to see equalization continue, but we cannot make that our focus. Our focus must be on creating an economy where Canadians can have good, well paying, long term jobs. That is the real answer in helping people in all parts of this country achieve their goals ultimately to live fulfilled lives.

Federal-Provincial Fiscal Arrangements Act
Government Orders

11:05 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Mr. Speaker, I think my colleague gave an excellent speech. Judging by the total lack of heckling on the Liberal side, I think that stands, does it not? Not a member over there made a single objection.

I would like to ask my colleague to clarify one thing. The principle of equalization is stated in the Constitution. He would probably want to indicate very clearly that our party believes in that principle and that we would like to make it more fair.

I recall a number of years back, when I was a member of the finance committee, looking at the whole question of equalization. There was an anomaly for Manitoba. It lost around $50 million because the people of that province did not buy enough lottery tickets. Lotteries are one of the factors included in this formula. It was deemed that it could have raised so much revenue if it sold so many lottery tickets. The people of Manitoba, being super wise, decided not to buy very many lottery tickets and lost money.

There are these anomalies and I think this is what my colleague was trying to say. We believe in equalization, but we want to make it fair and a more rational process.

Federal-Provincial Fiscal Arrangements Act
Government Orders

11:05 a.m.

Canadian Alliance

Monte Solberg Medicine Hat, AB

Mr. Speaker, I want to thank my colleague for his question. He gives me way too much credit though. He said that Liberal members were not heckling so I must have given a good speech. Actually, I think I put them to sleep. In any event, I appreciate the question.

It is true that the equalization formula needs to be changed. It is not just my party that is saying this. In the last number of days, my office has spent a lot of time on the telephone talking to finance departments in the provinces. They have made it clear, that while they favour going ahead with this particular bill to extend the formula for up to a year, what they really want is a new formula. They feel strongly, as my colleague has pointed out, that there are things about the current formula that are unfair. Therefore, they want those things addressed.

I mentioned that in British Columbia the issue was property values and property taxes which count toward the formula and give a false impression about the relative wealth of British Columbia.

In other cases, the member mentioned Manitoba where the people did not buy enough lottery tickets and therefore missed out on the lottery of equalization and that is unfair.

One of the most important issues, and I think the House generally understands this, is that when we are talking about non-renewable resources, resources that cannot be replaced, it is important to not have a clawback that is so steep that in the end we cause these provinces to deplete their resources. They are not able to take the revenue from that and put it into their province in the way that will give them an economy that makes up for the loss of those resources.

In other words, what they need to do is take that revenue and diversify their economy, so when those resources run out they can continue to provide a high standard of living for their people.

Right now in Newfoundland and Labrador, where it is enjoying tremendous growth in its oil and gas industry, almost every dollar of that revenue is being clawed back by the equalization formula. That must change. There is no question that Newfoundland and Labrador, of all provinces, deserves a break when it comes to ensuring that it gets to keep more of that revenue. It is a province that in many regions has an unemployment rate of 20%. In St. John's right now, because of the activity of oil and gas, it has fallen to under 8% I understand and that is encouraging.

However, imagine what Newfoundland and Labrador could do if it could keep more of that revenue to put into infrastructure and do some of the economic development that it needs to do to ensure that in the long run it can sustain a strong economy.

Federal-Provincial Fiscal Arrangements Act
Government Orders

11:10 a.m.

Bloc

Pauline Picard Drummond, QC

Mr. Speaker, the bill now before us is another example of the democratic deficit we are now experiencing and which is paralyzing the entire parliamentary machinery.

Bill C-54, in fact, was introduced in order to temporarily extend the current equalization program until March 31, 2005. Why? Because the current government is unable to do its job properly; because the current Prime Minister is living in the shadow of his successor; and because the Liberals do not have the courage to put an end to this scheme.

Why should we prolong the existing equalization program? Because the current Prime Minister is secretly planning to put a sudden end to our work in this House in order to avoid replying to our questions, and because his successor is working behind the curtains and staying out of sight in order to avoid answering our questions. It is so obvious that all the journalists are talking about it. Or maybe the Prime Minister is intending to slip his bill under the Christmas tree that already stands in the main hall of the Centre Block? In any case, I am not sure that the finance ministers from Quebec and the provinces will be pleased with this shopworn present.

Just in passing, let me note that it is not only the department stores that get their Christmas decorations out earlier and earlier. Canada's Parliament is doing it too, even though Hallowe'en has not yet come and gone.

As for the bill at hand, the government intends to get it passed quickly, before we rise, so that the provinces are not penalized. That argument does not hold water. For quite a while now, the provincial finance ministers have been calling for equalization reform. Need we recall that in June of this year, at a meeting in Halifax, the ministers unanimously agreed on the urgency of reforming Canada's equalization system. Clearly put, such a reform is expected to be one means of correcting the fiscal imbalance between Ottawa and the provinces.

For the benefit of people listening to the debate, we should explain what the equalization system is. The public is regularly subjected to volleys of figures and heated exchanges over the operation of the system, but is sometimes pretty much in the dark as to what it really is. I would like to take advantage of this debate, not only to help them understand a little better how the system works, but also to illustrate why an overhaul is long overdue.

The equalization system was put in place in 1957 to ensure that all Canadians and Quebeckers, no matter where they lived, would have access to government services of comparable quality. From west to east, some provinces are very rich whereas others are less fortunate. Provincial governments have to live with the decisions made by the Liberal government, which, under the direction of the member for LaSalle—Émard and future Liberal leader, has put a stranglehold on the provinces andstarved them out.

To bridge the gap between the rich provinces and the poor provinces, Ottawa gives the latter what is called equalization payments. These are cash payments, with no strings attached, which means that the provinces can use that money as they see fit.

Even if the Liberals opposite often talk about federal funding, it is actually our money. It comes from the federal taxes we all pay. That money belongs to all Canadian and Quebec taxpayers, which includes those from the poor provinces. In Quebec, it represents 60% of all our taxes.

It is true that the poor provinces send less money to Ottawa than the rich provinces do. However, the purpose of equalization is just that: to bridge or reduce the gap between the rich and the poor. Equalization is a measure for sharing wealth.

That being said, equalization must not be confused with the Canada health and social transfer, commonly referred to as CHST in our parliamentary jargon.

This transfer payment represents the federal contribution to health, education and social assistance. Since 1993, the year the Bloc Quebecois came to the House, it has constantly condemned the federal government for neglecting its responsibilities in this regard. The federal withdrawal from health has caused the collapse of the health system across the country. The current Liberal government, through its arbitrary decisions, and the future Liberal leader, the hon. member for LaSalle—Émard, pose the greatest threat to the universality of health care. We could talk about this for hours.

Now what about the equalization program and this bill? Over the years, the equalization program has been watered down. As Claude Picher, a columnist with La Presse , wrote, “There is a preposterous complicity underlying the calculations; the program is unstable and abstruse to the point of absurdity”. The dictionary defines abstruse as something bordering on folly.

Instead of immediately undertaking a serious reform of the system, the federal government has decided to spend more time, up to one year, negotiating and passing the equalization bill for 2004-09.

It is mental torture to try to decipher the calculation by which a province is or is not entitled to receive equalization payments. It is torture because entitlement is based on a list of 33 revenue sources, each subject to a series of complex calculations. The list includes sales tax, personal income tax, property taxes, fees and royalties, corporate income tax, taxes on gasoline, tobacco and alcohol, capital taxes and so on.

These complex calculations have numerous deficiencies, which led Mr. Picher to write that only a few rare specialists in all of Canada are able to find their way through this mathematical maze.

If that was Claude Picher's conclusion, it is not surprising that our constituents are totally in the dark.

Once we set aside the squabbling among those provinces not entitled to equalization, like wealthy Alberta, so longingly eyed by the hon. member for LaSalle—Émard, British Columbia and the others, we must focus on the work of federal officials. This is highly technical work, and endless hours are required to play this highly technical shell game. Then there are the endless discussions on how to interpret the mathematical formulas.

It is so complicated that, in 1999, Quebec finance minister Bernard Landry found out while preparing his budget that he could get more money with a technical adjustment. That adjustment would give him $1.4 billion more than expected in equalization payments.

But, oh horror, in 2002, Pauline Marois, the finance minister of the day, received a note indicating that an adjustment to property tax calculations would create a $500 million shortfall in her budget. A bit like a Monopoly game: one year you are high roller, get to pass Go and claim the jackpot, while the next time you have to pay it all back. One year, $1 billion more; the next, $500 million less. How can anyone expect the finance ministers to plan with any degree of certainty?

Moreover, the present Quebec finance minister, author of a report proving the existence of a fiscal imbalance in Canada, is one of those calling for a reform of the equalization payments. He says:

We are expecting a lot of changes... if the mechanism were standardized, the provinces would no longer be at the mercy of the good will of the federal government and of political games.

Instead of preparing to pack up and leave, thus avoiding having to answer our questions and evading political debate, the Liberal government needs to get down to real business. The Prime Minister is quicker at absolving his ministers of allegations of ethical misconduct than at solving real problems.

Do the provinces have to raise the Irving family flag on their legislative buildings before they can get the Prime Minister's attention? The Prime Minister has a mess in his ranks that he needs to clean up, but the mess in the equalization payment system also needs cleaning up.

Recently, the leader of the Bloc Quebecois said the following:

This can mean but one thing: the government does not feel that it possesses sufficient credibility at this time to respond to the provincial governments' call for negotiations. What an admission of weakness. We are being told, “Well now, we can give a year's extension, but that is all we can do”. The orders certainly appear to be coming from elsewhere, that is obvious.

He continued:

This is another example of how the government is completely paralyzed, powerless, and unable to address affairs of the state, because the real prime minister is behind the curtain and the one in power refuses to leave.

I saw something interesting on the news today. As a result of the debate on our motion calling on the Prime Minister to leave as soon as possible after November 14, 2003, we learn that the Prime Minister is believed to entered into talks with his likely successor with respect to leaving earlier. Our motion was defeated, but it has had an impact.

Let us come back to equalization. Currently, in order to establish the threshold for provincial entitlement to equalization, the fiscal capacity of five provinces is taken into account. They are British Columbia, Manitoba, Ontario, Quebec and Saskatchewan. Provinces with a fiscal capacity below the average of these five are entitled to equalization. This is not a representative system, since it excludes Alberta and the four Atlantic provinces and thereby disrupts the balance in determining the average.

The provinces are asking that the formula be changed to take into account the fiscal capacity of all ten provinces. In addition, the payment review mechanism is such that it is very difficult for the provinces to forecast the amount of equalization payment they will be entitled to. Therefore, the provinces are calling on Ottawa to make the payments more predictable.

We are proposing that the adjustments based on new statistics be automatically spread out over three or five years, rather than being required the year in which the statistics change, thereby reducing the volatility of the adjustments. This would avoid the type of situation, which occurred in Quebec and which I described earlier.

The provinces also want the calculations for the program, which has 3,000 variables, to be simplified to ensure greater transparency. They are also asking that all general revenues, not just some of them, be included to better reflect reality.

Along the same lines, they are asking that the calculation be reviewed for some of the 33 sources of revenue that are currently used to determine the provinces' fiscal capacity. All this clearly illustrates the work that needs to be done to clean up this mess.

The government's attitude, or rather the Liberals' stubborn insistence on making the wheels of government move exceedingly slow, is a dangerous nuisance. Instead of negotiating a reform of the equalization program with the provinces, the government is introducing a bill to maintain the status quo and shirk its responsibilities.

We have good grounds to believe that there will be a general election next spring, just when the current equalization agreement is supposed to come to an end. Since issues and interpersonal conflicts are making relations between the Prime Minister and his successor rather tense, the government has decided to play it safe, that is to extend the current agreement and avoid one of its responsibilities, which is to reform equalization.

Throughout this debate, we will have the opportunity to spotlight the report of the Séguin commission on fiscal imbalance. Need I remind the House that Mr. Séguin is the new Quebec finance minister. His report concluded, among other things, that we need to restore fiscal balance, improve equalization, put checks and balances on the federal spending power and prevent any future cause for imbalance.

In conclusion, let me add that if we were sovereign, if the taxes we pay in Quebec stayed in Quebec, we would not have to deal with this whole mess.

Federal-Provincial Fiscal Arrangements Act
Government Orders

11:25 a.m.

Canadian Alliance

Ken Epp Elk Island, AB

Mr. Speaker, I listened intently to the member's speech. I have always been interested in what we can do to keep the family of Canadian provinces together. I personally think that our equalization plan is very important to the country. It is important, not only to the receiving provinces but also to the contributing provinces so that all Canadians can have an equal level of services at a comparable level of taxation. This was mentioned throughout the member's speech.

The member's last statement about there being a solution to the problem if the provinces could be on their own rather confused me. I happen to have on my computer a copy of the major equalization payment transfers over the years from 1980. Unfortunately I have not updated it in the last four years. The total transfers every year from 1980 go from $5 billion to $6 billion to $7 billion. By the time we reached 1999 the amounts went from $11 billion to $11.6 billion to $12 billion and then to $10 billion. In the 20 years that I have kept track of this, net transfers to the province of Quebec were $178 billion, a total of 31% of all of the transfers in Canada, although it has only 25% of the population. I think we have been very fair with Quebec.

I would like the member to seriously rethink the fact that if Quebec were to go on its own there would be a net loss in view of the total number of transfers that it has received from the country over the years.

Federal-Provincial Fiscal Arrangements Act
Government Orders

11:25 a.m.

Bloc

Pauline Picard Drummond, QC

Mr. Speaker, I would like to reply to that, just as we have done several times over the last ten years since we came here.

We hand over more than $35 billion a year to the government. We hand over more than 60% of all our taxes to the federal government. We are not getting back our fair share in many areas.

Furthermore, Quebec as a nation, Quebec as a people has proven time and time again that it can manage its own affairs in every area. Whether in the business, cultural or other realms, we have proven that, if we were given the chance to manage our own affairs, our own social programs, we could substantially improve our quality of life. There have been several debates on that point.

I cannot understand those who say that we received $4 billion when in fact that $4 billion represents money that we paid. The amounts that are returned to us or given back by the government do not come out of thin air. The federal government has never given us our fair share. If we could go back in time, we would see who owes what to a province which was there at the beginning and which paid off debts. If we could add up everything the rest of Canada owes us, I think that some folks would have to declare bankruptcy.

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11:30 a.m.

Bloc

Paul Crête Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC

Mr. Speaker, I listened to my colleague's speech with interest. I would like her to expand a little on the reasons why we are talking about equalization payments today when discussions are still ongoing between the federal government and the provinces as to the best way to approach this legislation.

The House is supposed to sit until Christmas and when Parliament resumes in the new year. How is it then that it has suddenly become very important for the government to introduce legislation that is, in fact, somewhat insulting to the provinces? It is like saying they are going to sign the collective agreement before agreeing on the basic terms.

Why is the federal government pushing this bill, which we hope will be amended? A lot of people are not pleased with it, including the Quebec Minister of Finance—as the member was saying in her speech—who is still seeking major improvements to the equalization system.

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11:30 a.m.

Bloc

Pauline Picard Drummond, QC

Mr. Speaker, I thank my colleague for his question. It is a very good question. In fact, it is the first time that the government proposes such a bill.

We must not let ourselves be taken in by what is happening here. I believe that everybody, whether in Quebec or Canada, understands that we cannot go on like this. The government is a two headed monster, as has been said many times before. There is one Prime Minister who is here and says one thing, and then there is a second prime minister, who remains in the background, like a ghost, and says no, this is not going to happen. Given this deadlock, no one is sure of what will happen. We are being forced to put a stop to the business of the House, because nothing is working any more.

I sit on the Standing Committee on Finance, which is supposed to be the most powerful of all committees. We are holding prebudget consultations. At present, it is a bogus committee. Even the witnesses tell us they have talked with the member for LaSalle—Émard and he said he would do this or that.

The current Minister of Finance cannot promise to bring down a budget, because he does not have the power to do so. There is nothing. Despite all the bills tbeing introduced and all the announcements being made, we do not know what will happen, if the future prime minister decides he is not interested and does not want things to go in any given a way. So, how can Parliament go about its business and maintain some credibility?

I understand some senior officials, who think that equalization might be threatened, that is, that the provinces might not receive their cheque on Mars 31. So this bill has been introduced as a kind of insurance policy. From one day to the next, we do not know what is going to happen here.

Therefore, the current Prime Minister should leave quickly and the other one should tell us what he thinks and what his interpretation is, so that can question him.

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11:30 a.m.

Bloc

Marcel Gagnon Champlain, QC

Mr. Speaker, my colleague raised a whole new issue when she talked about the 60% of our taxes that go to the federal government and about what we get in return in the form of equalization payments or other types of payments. An Alliance member said that we are getting our fair share.

I would like to hear what she has to say on one particular issue. There is a difference between keeping the money and managing it ourselves, meaning that we can spend it as we see fit. But when we have to get down on our knees and beg, to negotiate to get what is owing to us, not only are we losing money but, more often than not, when the federal government redistributes the money, it does so on its own terms and not on those of the provinces, including Quebec. I would like my colleague to comment on that.

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11:35 a.m.

Bloc

Pauline Picard Drummond, QC

Mr. Speaker, I thank my colleague for his question, which is very much to the point.

In response to his question, I want to reassure him that what the Canadian Alliance member just told us is utterly false. It is on a per capita basis. Quebec is one of the most populous provinces. We now send $40 billion to Ottawa, and it is not true that we receive our fair share. It is on a per capita basis.

The member can quote figures from his computer and look all over the place, but he has to understand how the system works. Looking at the figures is not enough to determine what equalization is.

We send over $40 billion to Ottawa and we do not receive our fair share in several areas, whether it is equalization payments or federal buildings. We do have federal buildings in Quebec, but how many do we have compared to Ontario?

These are economic spinoffs to which we are entitled since we pay our fair share. We even pay more than our fair share. This is why I said earlier the we have now reached a point where Quebec must achieve sovereignty so we can pass our own laws, sign our own treaties and manage our own money.

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October 30th, 2003 / 11:35 a.m.

Canadian Alliance

Inky Mark Dauphin—Swan River, MB

Mr. Speaker, I am pleased to take part in the debate this morning on Bill C-54, the issue of equalization.

The bill would extend the equalization program for one year until March 31, 2005. I will begin by giving some background information to our viewing audience.

The equalization program helps provincial governments offer comparable levels of service at comparable levels of taxation, that is in theory. Payments are guaranteed under the Constitution Act of 1982.

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 reasonable and comparable levels of public service at reasonable and comparable levels of taxation, that is in theory.

What we have today are eight provinces receiving approximately $10.5 billion per year. The payments are unconditional. The money may be spent according to provincial priorities.

Payments are based on a comprehensive formula that measures the ability of each province to raise revenue against the per capita average of five provinces: Ontario, Quebec, Manitoba, Saskatchewan and British Columbia. The formula includes revenues from several sources, including resource taxes, sales taxes, payroll taxes, fuel taxes, property taxes, user fees and gaming revenues. Changes to the formula would be made through regulations. The program will expire on March 31, 2004, unless Parliament renews the date.

The government does not expect to be in a position to present a package of detailed changes until the federal-provincial finance ministers meeting in January. This should leave enough time for the necessary legislation to be in place by the start of the 2004-05 fiscal year. However the government did not want to take any chances in light of the uncertain political climate and decided to ensure that payments would be made next year. The government says that the legislation to enact a new equalization program will be retroactive to April 1, 2004.

The major concerns that we have heard this morning about the equalization program include a loss of benefits when provinces develop new resource revenues. That is justifiable, especially when people want their own province to be more self-sufficient, as we have seen in the maritime provinces with the new discoveries of both minerals and gas and oil.

The measures of fiscal capacity and the clawback of benefits previously paid would be determined when the revised data becomes available. If we really examine this whole clawback business, it really does not make any sense. There should be a provision or a transitional formula in there to assist provinces to be self-sufficient.

The provinces are seeking changes that would add $3 billion to the annual costs of the equalization program. The provinces recently learned that as a result of revised economic and population data, close to $1 billion will be clawed back from their equalization plans. That is a lot of money. It is like having a second gun control program.

At the same time, the federal government has indicated that a special one time payment of $2 billion for health care promised last winter may not be made because of the deteriorating federal surplus. If the government makes promises, then it should carry them out. Besides, it was the government's efforts that gutted health care in the first place.

The Progressive Conservative Party supports the bill because eight provinces depend on the federal government for equalization payments which are used to provide programs and services to their residents. Any interruption in these cashflows would imperil provincial obligations. In other words, if bills need to be paid they need to be paid with cash.

I wish the government would take that same attitude toward farmers who need cash, certainly with what was experienced this past summer with BSE on the prairies and across the country, as well as how it impacted on the province of Quebec and the maritimes.

The recipient provinces rely upon the timely arrival of equalization funds for planning their own budgetary process and meeting their bottom line.

This bill is up for debate on short notice, as we know today, and I would like to ask, why all of a sudden are we doing this? As the member from the Bloc indicated, we are supposedly going to rise next week for one reason or another. We are not sure, but we hear rumours in this place. Why all of a sudden are we rushing to put this through?

It certainly shows how important equalization is to the government. It is hard to believe that the government knew that the year was coming up and it waited until the bitter end of Parliament before it brought the bill back to the House to extend the dates.

One must question the timing of this bill, given the internal Liberal leadership politics and an impending election call in early 2004.

We have not gotten to that stage yet because Bill C-49 has not made it to the Senate, and that must take place to change the magic date of August 25, 2004, to April 1, 2004. This extension could be motivated by a desire to free the leader-in-waiting of the Liberal government and the Liberal Party from having to deal with this contentious issue during an election campaign.

Let me take some time and talk about federal-provincial relationships. Let me begin by applauding the Premier of Quebec, Jean Charest, for his vision of creating this new council of Confederation. It is long overdue. As members know, federal and provincial counterparts have been at odds for too long.

Let us examine our history and go back to pre-Confederation. Lower Canada, Upper Canada and the Maritimes were all separate units. They all got together because they wanted to cooperate. They wanted to work together in the best interests of what was half of Canada back in those days and of the people they represented. That is why the history of this country is about cooperative federalism. It is long overdue.

When we look at the record of the Liberals over the last 10 years since they have been in power, there has been little cooperative federalism. It has basically been a dictatorship from Ottawa to the rest of the country.

The attitude of the government has always been that if we do not like it, that is it, take it or leave it. It does not work because we are a country of different provinces and regions. We all have different needs.

That is the reason why equalization started, so that we would all be treated equally in this country. That is a principle of Canadian democracy: equality of citizens. That is why we follow-through with equality of governments, provinces and territories.

This past decade has been full of conflict started by the Liberal government. Let us look at health care. The government created the problem we have today. In 1994 it slashed $24 billion. From 1994 to the present, the Liberal government has not even replaced that $24 billion it took away. Meanwhile, the demands of provincial governments, the health care system, and Canadians have elevated to the point of no return.

What do provinces do when they cannot pay the bills? It not only increased demands on the patient side but also for equipment. It is an impossibility.

We all know that when medicare started we had 50¢ on the dollar. The federal government funded 50% of the program. Today, we are down to 15¢ on the dollar, yet at the same time the federal government wants to dictate how health care should take place in this country. It is paying 15¢ on the dollar and it wants to dictate. It is just unreasonable. If it were paying 50¢ on the dollar, it would sound more reasonable that it should have a 50% share in the decision making, but the government is paying 15¢ on the dollar and it wants to make all the decisions. Basically, it is top down.

In fact, this affects my own riding as I am sure it affects the ridings of most members in this House. In my own particular riding, the provincial government shut down six emergency services from six different hospitals this summer. My riding is over 200 miles long and about 100 miles wide. There is a lot of geography. We do not drive 5 or 10 minutes to a hospital, but hours, literally. People spend hours getting to a hospital and hours waiting for emergency services. This puts people's live at risk.

I know that my constituents are so stressed out because they do not know what to do about it. The problem has been downloaded from the feds to the province and the province seems to be downloading it to the municipalities.

We talk about waste of money. It is pretty realistic to say that Canadians are taxed to death. The provinces fight about how much equalization they should get. But, generally speaking, I do not think we would find too many Canadians who pay taxes who would disagree that they are taxed to death. On the other hand, Canadians do not mind being taxed on the condition that their tax dollars are used wisely on things like health care and creating jobs.

Unemployment is a sore point. There is a surplus of over $40 billion in the EI fund. Canadians cannot understand it and neither can I. It is highway robbery. The government has both hands in the pockets of Canadians.

As members know, a people on employment insurance get back I think 55% of the wage they earned. Perhaps we should raise it to 75%. But to literally steal an extra $40 billion from hardworking Canadians over the last 10 years is not acceptable. We talk about fair play. This is the black hole; this is where all tax dollars come.

There is the $1 billion gun registry. As I said in the justice committee last week, it has gone beyond the argument about registration of long guns. It is about the spending of people's taxes. It is so unfortunate that we collect so much in taxes here and waste so much money. Meanwhile, the services that are demanded by Canadians from coast to coast to coast are neglected.

I would like to comment on highways. Many of us have served in municipal politics. We know how difficult it is to get money from the provincial and federal government for infrastructure development, especially today.

We are concerned about the health of people and clean water. Sewage plants in rural Canada are 50 to 60 years old. They are all breaking down. Small communities need $3 billion or $4 billion to clean up the sludge accumulated over the last 50 years.

Where do people who live in small communities across this country get the money from? All their money is being sent to Ottawa. They do not have the tax base to raise $2 billion or $3 billion to clean out the sludge in their sewage systems or to build $7 million to $10 million or $20 million clean water plants. It is nice to say that Canadians need clean and safe water. But who will pay the bill? That is a frustration Canadians are experiencing across this country.

The roads and bridges are basic infrastructures that have been out there for probably 60 years and they are getting very little dollars, even though the greatest amount of dollars collected come to this place.

Today, on average, we collect $8 billion to $10 billion in gasoline tax. I used to sit on the transport committee when I first came here in 1997. Even the provincial ministers sat down and agreed to what was necessary. I read the report. It was great and reasonable. Basically, it became a dust collector. So, what is the point? There is no point talking because it is beyond talking. It is about helping people.

One of the principle values of the Liberal Party is helping people. I do not think the Liberal Party is helping anybody by the way it operates in this country. The oldest trick in the book is divide and conquer. The Liberals, I would say, wrote the red book on that one because they are skilled experts when it comes to dividing people and conquering them, whether it is at the municipal, provincial or federal levels.

We have gone beyond that. When we talk about equalization, it is time that we get back to basics and talk about how this country came into being. Why were we a Confederation at our birth? The people prior to Confederation lived in Lower and Upper Canada. In effect, they operated as nations of their own at that time.

We need to review and not forget the lessons of why we are what we are. We need to look at basic things like taxation and its purpose. It is not about giving money to one's friends and helping ourselves. It is about helping people.