Bill C-18 (Historical)

An Act to amend the Federal-Provincial Fiscal Arrangements Act

Criminal Code

[Dick Harris, Canadian Alliance, Prince George—Bulkley Valley, BC]

Madam Speaker, I am very pleased to rise today to speak to Bill C-46 because it is a completion of a number of steps that have been taken. There are more steps, but in the fight against impaired driving, every time we take a positive action in the House it is another step that will go a long way to saving lives and injuries as a result of impaired driving.

Back in the 36th session of parliament, I introduced a private member's motion recommending that the government have a complete review of the criminal code and how it affected impaired driving. We sat on the committee as it was being discussed and had some interesting debate.

That private member's motion then became a votable opposition supply day. For the first time in 13 years in the House of Commons, the federal government, took some very good leadership in allowing the motion eventually to become a reality. A review was made of the criminal code with respect to impaired driving and changes were made. I congratulate the government on that initiative.

At the same time, I have to point out that 13 years was a long time to drag our feet toward dealing with something as important as this, particularly when organizations like Mothers Against Drunk Driving had been petitioning members of parliament on a regular basis pointing out the need for the overview.

A profound change in thinking took place as a result of that exercise in dealing with the impaired driving issue. I congratulate all members of parliament for this change of attitude toward drunk driving. I believe that, until we got into looking at it in the House and in committee, there was a wide ranging attitude among many people, including parliamentarians, for whom perhaps impaired driving was described as a social ill. I do not fault them for that. I think it is more a lack of education than anything else. By the time we were through the exercise of dealing with impaired driving in the criminal code, I think it became clearly evident to every member of parliament, and indeed a whole lot of Canadians, that impaired driving was a serious crime.

If we have accomplished something in going from one broadly endorsed attitude to another, that is a very positive step. Again, I want to congratulate and commend organizations like Mothers Against Drunk Driving and the people who support that organization. I and a number of parliamentarians support it both financially and in spirit.

In the two previous bills we took some great leaps ahead in the fight against impaired driving. Keep in mind that impaired driving kills well over 1,000 people every year and injures in excess of 50,000 every year, just because someone gets behind the wheel when impaired and drives. I heard it incredulously called a mistake in the House a little earlier by a former colleague of mine. Driving while impaired is not a mistake. It is a crime.

The culpability or responsibility for getting behind the wheel begins the moment someone makes a decision to have a drink of alcohol. I do not accept the excuse, and I know the Ministry of Industry does not accept the excuse “I just wasn't thinking”. There is a time to think and that is before we take that first drink. The idea that it was an absence of thought, or a mistake or something just does not fly. It is a crime and if we commit that crime, there are consequences to it.

This bill will remind people of their culpability because they will know that if they get into their vehicle after drinking, they will to have to blow into this device. In fact, there would be a mapping device which would prevent someone else from blowing into it. My colleague from Elk Island had some concerns about that. However the first time people blow into the device they set the standard. It is like an eye scan or a fingerprint. No one else can blow into that device and try to trick it.

Of course we will support this bill. It is a good bill. It is another step in the fight against impaired driving. As parliamentarians know, this is very high on the wish list of Mothers Against Drunk Driving, which has presented mountains of evidence as to why this device will do the job. I personally, as well as many parliamentarians, have seen the effectiveness of this. We know it is about as foolproof as we can possibly get. The records are there to show how it will stop impaired people from driving.

We will support the bill, as we supported Bill C-18 and Bill C-82.

Just before I close, there is another issue that is very high on the wish list of Mothers Against Drunk Driving. That is the lowering of the BAC, the blood alcohol content, which determines whether a person is impaired or not. MADD has a very good case.

The problem we have is the BAC is at .08 right now. Every study in the world declares that at .08 we are impaired and should not be driving a car. Unfortunately, the courts and the legal system have allowed a margin of error of .02 or .03. Even though there exists no margin of error in the devices which record the blood alcohol content, through courtroom tactics defence lawyers have been able to build in this margin of error which means people cannot get a conviction on impaired driving unless the readout is at least .01.

Therefore, we maintain that if the legally impaired level is .08, let us take into consideration that .03 margin of error, lower the BAC to .05, let them have their .03 and we can start convicting at .08, where we should be, because these people are legally impaired and should not be driving.

I want to congratulate the government for introducing Bill C-46. I hope that it is passed speedily through the House and given speedy royal assent in the Senate. I encourage the government to follow this with another bill calling for the reduction of the BAC to .05. Let us get it to committee, get the experts and let us prove beyond a shadow of a doubt that the BAC level should be lowered to .05.

Impaired Driving

[Anne McLellan, Liberal, Minister of Justice and Attorney General of Canada]

Mr. Speaker, the hon. member raises a very serious question for all of us as the holiday season approaches. In the last year for which we have statistics, 1999, 906 innocent people lost their lives due to impaired drivers. The government has taken action in Bill C-82 and Bill C-18.

Let me say that, with the co-operation of all parties in the House, we are introducing a new amendment to the criminal code that will involve ignition interlock devices. These devices have been used successfully in provinces like Alberta and Quebec. Today's legislation will ensure that we keep more impaired drivers off the road, thereby saving lives.

Customs Act

[Myron Thompson, Canadian Alliance, Wild Rose, AB]

Madam Speaker, it gives me pleasure to speak to Bill S-23. I thank the minister for staying around to answer a few questions. In his speech he referred to Canada customs as one of the most modern agencies in the world. That is just not the case. That is reflected in his answer to my question regarding PALS. He stated that there is an effort being made to upgrade a number of systems, including PALS, that are used on the front lines.

I want to refer to a number of things that I have received in the past couple of months since becoming the critic for customs. They deal with border crossings, seaports and airports. I will refer to some documents but they are actually letters written to the minister. I know he has received these letters because I gave him some on behalf of frontline officers, the first line of defence, who are very unhappy for a number of reasons.

The reason I will refer to them is that I am a believer that if someone wants to learn how things should be done, a good place to start would be right on the front line with the people who deliver the service and face the problems.

We have a problem in Canada with the government. Everywhere I have been the border customs officers are doing a fantastic job given what they have to work with. It is an utter shame that when we visit these places we are denied the opportunity to talk with the frontline people because of directives from the minister, other departmental heads and commissioners.

I received letters that were written by an assistant deputy minister and an acting assistant deputy minister. I have others from a southern Ontario regional commissioner, an assistant commissioner and a regional director. All these individuals are with customs.

One of these letters states very strongly that employees should refrain from making any direct, or through a third party, public pronouncements critical of federal policies, programs and officers or on matters of current political controversy. It states that employees are not allowed to talk when others who are not of the government come to visit. The final sentence in each of these documents states that if they choose to do so they will be subject to disciplinary action up to and including termination.

In other words, customs officers, prison guards, corrections officers, or those holding whatever job in a government department, have strict orders not to speak their mind when people ask questions. When we go to visit these people they are not allowed to answer questions. I get a pile of letters from different individuals doing these jobs with the trust that I will not use their names lest they face the consequences of having provided information to me.

I cannot believe that in a supposedly democratic country when we are looking to the people at the front lines of defence at the borders, in our prisons, or wherever they may be, for suggestions on what we can do to make it easier for them to accomplish their mission, which is to protect and provide security for Canadian soil, its people and its property, they cannot openly discuss their views so that we can take them back, research them and possibly come up with better legislation. They have received orders from the government not to speak out in that nature to anyone.

During my last visit I was denied the opportunity to visit with the front line people. We know what the supervisors will say. They follow the rules very well. That is why they are supervisors. The higher up the ladder they go the better they follow them.

As I walked through these areas it was a shame to see the people on the front lines handing me notes urgently requesting that I call them because they are desperate to speak with me. They really want to speak with us yet are not allowed to. These people from all areas of the system wish to voice some serious concerns.

The response I have heard from the government these last few days during our two supply motions regarding the terrorist legislation and aspects of Bill S-23 was that anything we suggest is simplistic. The government's answer to everything is that it is too simplistic.

The most simplistic thing I have ever seen in my life is a government that was elected by the people to run the show yet in the House of Commons openly admits that it does not, as the solicitor general did during question period when he said he does not run his department.

He is right. The government does not run the show but the bureaucrats sure as dickens do. They hold an iron fist. There are a whole pile of instructions from the bureaucrats to the frontline people ordering them not to speak out or they may lose their jobs. Welcome to the democratic society of Canada. It is disgraceful.

I will point out how difficult it is to get our hands on the information we desperately need to help make the situation at the border safer and more secure, especially since September 11. This is the kind of support the frontline people are crying out for.

Canada customs has been all about collection for years and years. One customs officer said he was getting awfully tired of being referred to as a grocery cop or a tax collector when one of his main functions at the border has always been to provide safety and protection. However customs officers work for a revenue agency which is good for collecting money. It is the type of agency that will provide them with bulletproof vests and then give them calculators. It does not make much sense.

It is time to move out of collection and into protection. Protection is what it is all about. That is the priority we see across the country as a result of the events that took place on September 11.

Where are we falling short? I pointed out to the minister during our short question period that this piece of equipment, PALS, is out of date. A few hundred yards down the road at the U.S. border the system in place there is instantaneously tied into every agency that is essential for a customs official to do his or her job. It immediately identifies the felons, the murderers, the smugglers and those who are being sought for kidnapping.

Ours does not. That sends up a red flag. There is a problem when we must detain and question a person for a few minutes while we go into the main office and try to hook up to all the things we can to gather information about what it is we are looking for. It is time to start bringing things up to date.

I have stood in the booth at the border and have been shown how it works and what its shortfalls are. I know the equipment. We could sit here and start talking again, as I know the member over there who is shaking his head would like me to do, about what it is and what it is not. Unfortunately I do not think most members over there spend their time in a booth at the border to see what is really going on.

I am tempted to paint Liberal all over my car some day, although I would regret it dreadfully, and drive to the border so that I would be welcomed with open arms and able to speak freely with all the people who work there. If one is not a Liberal one cannot do that. They will not allow it. The customs officers are gagged. The documents right here tell them loud and clear that if they talk freely they will jeopardize their jobs.

I was the principal of a school for many years. If I wanted to know what we could do or change to make things work better in Grade 1, I did not go to the Grade 12 teachers. I went to those who were offering the service.

All the university training and all the elections one could have would not change my view that if I wanted to know how to do things right I should talk to the people who spend years providing the service and putting their experience to work. These people look for the best solutions, something the government refuses to do because its bureaucrats have all the simplistic solutions. They are simplistic because they do not believe in consulting with their frontline people.

Long before September 11 the auditor general recognized that with more than 100 million travellers a year entering the country at 147 border points and 13 international airports, the risks to Canada's safety and security were extreme. He recognized it in his reports long before September 11. Last April the auditor general wrote that the main role of customs officers was to protect Canadians against illegal activities such as smuggling of contraband or the unlawful entry of inadmissible people. The audit raised concerns about how well the risks were being managed.

The first thought that comes to some people's minds, including my own, is that if smuggling of contraband and dealing with criminals and inadmissible people is the main thrust and primary function, should it be done by a revenue collection agency like Revenue Canada?

Customs officers are being asked to enforce the criminal code. They are being asked to arrest drunk drivers. They are being asked to arrest smugglers. They are being issued minimal equipment to do their jobs. The government has upgraded that a little. It now gives them bulletproof vests, most of which are used ones donated by the United States because we do not have new ones.

The auditor general points out that if they are to function in this capacity and enforce the criminal code it will not be easily accomplished through an agency designed to collect taxes and revenues. He does not suggest this point blank but he alludes to it.

Why do we not move it to an organization that has the knowledge and ability to work with these people so they can do an effective job of enforcing the law? That is what the majority of their work entails.

That would require upgrading of equipment. It would require upgrading a number of things such as the number of people and hours of training. Frontline officers south of the border in the United States have 16 weeks of training. That is more than a lot of basic training camps in the military.

It is not so on this side of the border, certainly not when it comes to hiring students to fill in for the people we have. These students receive only two weeks of training yet their duties are the same. They must enforce legislation brought forward by the government in Bill C-18, which empowers them to arrest drunks and do everything they can to enforce the criminal code.

I will reiterate once again what happens. We have a number of border crossings where there are only one or two people on duty. They need to close these crossings at certain hours because they cannot keep them open that long.

I understand the government will try to keep all border crossings open 24 hours a day. It will need more people to do that. When crossings are closed they put out little orange cones to block traffic. Would that really stop someone from coming into the country who should not be here? People are under the illusion that criminals, smugglers and people trying to find their way into the country illegally do not know about that. They think they will stick to our main points of entry. That is not the case.

When will we recognize that if we are to properly equip and train our people to enforce the criminal code it could be better accomplished under a different agency than a tax collection agency called Revenue Canada? However the government has said that solution is simplistic.

It has been alluded to by a great number people, including the auditor general, that there are serious concerns.

Let us look at the customs office in Victoria. That is the famous port where Ahmed Ressam was arrested and finally caught on the U.S. side after many years of operating out of Canada. At the Victoria port's main terminal they do not have a single computer. They operate out of a 35 year old trailer. They consult 30 year old lists on a clipboard about how to operate, who to look for and what to do. There is no computer. With more than a million people passing through the port a year, how can a clipboard do the job properly?

I will refer to some comments, not just one comment from one person but some pretty general comments. First, people on the front lines have talked about technology. Technology is extremely important and it needs upgrading severely.

Second, we need more people at our borders. When we consider the number of individuals we will need at Pearson and other international airports, when we look at the 147 border crossings across the country and all our major airports and seaports, 130 people is a drop in the bucket. They need a lot more. They are understaffed by 10% to 50% in most places across the land.

We need to look at eliminating the student program. Members should not get me wrong. I believe in hiring students. It is important that we keep students working and provide them an opportunity for work. However when it comes to the security of the nation and all the training customs officers require to do their job properly, many believe that students are not the ones who can best fulfil the job. It needs to be done by trained professionals, as it is today. We could eliminate the danger by eliminating these kinds of programs.

Let me read one quote to the House: “I would like to talk about another aspect of my job, which is danger. Every day I go to work could be the last day of my life. The customs and immigration part of my job sees me interdicting persons smuggling high value drugs, firearms and weapons, as well as inadmissibles, some of them criminals and terrorists from other countries. Now I have the authority of a police officer and I am responsible for arresting drivers who are drunk or high on drugs, persons abducting children or persons with warrants for their arrest for a wide range of offences right up to murder”.

It is quite astounding what is required of this individual. He also said: “I basically deal with the same persons, goods and situations that my armed colleagues on the other side of the border deal with. As a result it would be prudent to assume that customs officers in Canada would be subject to the same dangers faced by the law enforcement officers in the United States”.

When I went to Fort Erie I noted the equipment issued to the customs officers, like bulletproof vests, batons and pepper spray. They had no sidearms. I went to the other side of the border where they were all wearing sidearms and were equipped with whatever was necessary because they have to deal with the criminal element. On the United States side of the border, frontline individuals can speak with anyone at random. There are no restrictions. They can speak with the press or anyone. They have the freedom to do that, which we do not have on this side of the border thanks to the government, which will not allow it.

The officers in the United States first of all commended the officers in Canada for doing a great job and for doing the best they could with the equipment they have, but they fear daily for each and every one of them and feel they are not in a position to look after themselves properly.

Our government in its wisdom must have recognized that, because it put out regulations. Regulation 16, I believe, in the manual states that in the event someone is coming into Canada and is showing signs of being a real and sincere threat to our nation and its people or to the guards themselves, they are to simply wish that person well and admit him or her into the country then report it to the police. I do not know at how many ports of entry where it might be at least half an hour or up to maybe two, three and four hours before the police can even respond to the situation.

I do not know if members have seen this out west, but in Ontario it is the same. People can come across these borders in these areas and if they want to get lost for a while, boy, it is easy to do. They will not be found. If they are, it will be well after the fact simply because the customs officers do not have the backup or the proper equipment to make an arrest when they should be able to. If there is a threat they have to let these people go.

The people working on the front lines do not like doing that, because they recognize the fact that those people can run free and loose forever. It is really hard for them to accept the fact that they have to let people go who they know will cause real serious problems somewhere down the line for some other people.

We have talked to a number of individuals in regard to some of our suggestions. My colleague from Edmonton, who is the chief critic for customs and revenue, and I visited with a number of people from the union representing the individuals we have talked about. We have talked to the police association and their people. It is always strange: When people get together who always seem to agree with the suggestions that we put forward in terms of what is needed to enhance the bill or what is needed to make the anti-terrorism bill better, they do not look upon the suggestions as being at all simplistic. In fact they agree with them.

They agree that customs and revenue should not be the agency that is working with, controlling or managing the frontline officers or customs officers at the borders. These jobs should not be under that portfolio. They should be under a portfolio that deals with law enforcement. They are just not allowed to arrest or detain people and they cannot use force against them.

I do not understand why the government has such a hard time accepting the suggestions that come through the mail from these people who are not allowed to voice their opinions when they would like to. They have to white out their names and ask that their names not be used for fear of losing their jobs.

A lot of my colleagues have seen the same problem in the coast guard and waterways are another area that needs to be addressed. When we go to a waterway border crossing and look to the south, we see the American coast guard going full scale in regard to protection. If we look to the north, nothing is happening.

I once asked a supervisor how he knew what the boats coming north were bringing in and what was happening. They do not know. Once again, they can only report to the police and the police usually do not have time to investigate because they are tied up with so many things. It is a pretty sad situation when a customs official has to say that a boat docked at one angle is probably carrying cigarettes, at another angle it is probably carrying whisky, at another probably guns and at another probably people. That is the best they can come up with. They simply do not have the forces to look after the continual flow of boats coming in freely at different crossing points, because we do not have officers patrolling those lines.

We are continually looking for legislation to address the needs. One of the needs of course is that we have to keep traffic flowing. We do not want the economy to collapse because of not being able to move freely across the borders. That is why we supported Bill S-23. It worked toward that end. If we do not get our heads out of the sand, start looking across country, recognize what the problems are and be willing to deal with them, we are headed for some serious problems.

I think the government should make one thing happen. It should be willing to allow the voices of the people trying to provide the service to be heard. I will emphasize that more and more. If their voices could only be heard to the fullest extent then we could come up with some very good suggestions and solutions for the problems we face each and every day.

The morale of such individuals is terribly low and I can understand why. They request something and it is not allowed. They write a letter and they get a warning that they will lose their jobs if they do not keep their mouths shut. Welcome to Canada.

I know the Liberals have a real hard time listening to the truth. The truth is an aggravating thing, especially when a party is operating a government that does not allow democracy to work. It is an absolute shame. I just cannot express enough about what it is like to work for a government agency where people's hands literally are handcuffed and their mouths taped lest they lose their jobs. We should think about that for a minute.

They do not have to worry about it on the other side of the House. Maybe they will lose their jobs in an election but they can say anything they like.

The guards at the border crossings have asked me to make certain that their voice is heard in all these respects. They do not enjoy the idea of going to work improperly equipped. They do not feel safe in their work. There are a number of issues that could be so much better if the government would only listen.

I also want to speak on behalf of the remote ports. They are really crying out for help, with one person at one station all by himself. We do not have anything there to address that person. There are many of those crossings, all across the line.

I want to talk about the students once again. They are trained for only two weeks, on average, yet they make up over half of the customs workforce during the two busiest months of the year, July and August. Half the workforce is students. There have been reports of shifts at Pearson airport manned entirely by students. To my way of thinking and to a lot of people's thinking, to have students as the first line of defence is a bit terrifying. I just recently heard about a female student who intercepted an individual crossing the border who had a gun. In the process of the student checking the chamber of the gun, it discharged and the bullet lodged in the building across the street. The students are not trained well enough in the inspection of a gun. It went off, but that was a student. She is not to blame. Sure, there should not have been a bullet in the chamber, but anybody who knows anything about guns knows that is the first thing a person wants to know when picking one up.

The auditor general's report referred to that. It also said that at many ports relations are totally strained among customs, immigration and other agencies and departments. When we add them together, customs, immigration and other agencies and other departments, at these ports, when they are strained to the degree that they are why are we not doing something about it? We are putting on 130 people. That is hardly a drop.

A quality referrals report was recently produced by immigration officers who were frustrated with the poor quality of referrals from the primary inspection line that is staffed by students. They were having a real problem because the expertise was not there to do the job properly.

On October 12, 17 of 29, or 60% of the officers on duty, were students with two weeks of training. This is a common occurrence. Week in and week out more than half the officers at Pearson are students. Our immigration officers are pretty sick and tired of the poor quality of referrals being sent to them. They are bogged down so badly that it is eating at their time. They feel they are not able to properly handle their work.

In 1991 we learned that the immigration department hired a contractor because the quality of referrals from the primary inspection line were so poor. The Ekos report found that in August, a peak travel period when a massive number of students is employed, more than 50,000 immigration referrals to secondary inspections were missed.

I do not understand why the minister will not remove students as a first line of defence or at least make provisions for them to be properly trained. It should be more than two weeks of training.

I want to remind the House that in the past week the American government has tripled its border workforce. The Americans increased their officers by 5,400 people and their border patrol officers to 900 persons along the Canada-U.S. border. Our minister announced last week the addition of 139 employees.

When I look at this I can understand the disappointment from the people on our side as to why this is not much of a priority. If the Americans have information that indicates they need 5,400 people on the border, what information do they have that we do not? Do the American officials understand that our immigration policy is so weak that they must defend against those travelling through Canada with the United States as their final destination and getting prepared for that? They have a lot of reasons to think that.

I want to express one more time that terrorism is an extremely serious situation. We have provided answers through consultation with those on the front lines, as much as we could, and with the police associations at every opportunity and they are on side with our suggestions. We have consulted with other agencies that like what we have to say with regard to what we should be doing. However, there are some people across the way who will not listen. They do not listen. They like their simplistic solution of letting the bureaucrats deal with it.

What else is new? I think that has been going on for 30 or 40 years. Once this government decides we ought to have a few reforms within our own country that respect democracy to a better degree, we might see the changes that are essential.

When I look at what is happening today, it is tiring to see day in and day out that respect for democracy by members across the way is diminishing and that there is little or no concern for protecting our people who are providing the service.

I hope that some day the members on that side will wake up and recognize that our first priority, particularly at this time, should be protecting our country and providing security. I hope that one day they will start acting on this.

Supply

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Madam Speaker, in the few minutes remaining in the debate, I would like to make a few comments with regard to this important issue.

There was a suggestion made by the member for Okanagan--Coquihalla that somehow we on this side of the House would call the measures outlined in the motion draconian.

Personally, I would suggest that individual initiatives that have been presented have some merit and that is what the government is acting on. The Canadian government does not want North America to be anything but a secure place but the decisions must be made by Canadians for Canadians. We must ensure that our policies and procedures are complementary, that we are not working at cross purposes with the United States, and that we do not sacrifice our sovereignty.

In recent testimony at the Standing Committee on Citizenship and Immigration the commissioner of the RCMP claimed he was strongly in favour of the perimeter initiative put forth by the Canadian government. He believes that our border officials already are setting the standard.

All Canadians can be proud of the security measures enforced by our immigration and customs officers at the Canada-U.S. border. Indeed the United States ambassador, Mr. Cellucci, recently commented that his government is very impressed with the co-operation between our two administrations and the work being done in Canada to increase security in its immigration procedures.

Canada deploys immigration and customs officials at the border in numbers that are comparable to those of the United States. Both countries have increased these numbers and are on an enhanced security level since September 11. Last year alone, Canadian officials stopped 21,000 criminals from entering Canada from the United States while the American agents stopped 14,000 criminals from entering the U.S. from Canada.

The commissioner of the U.S. Immigration and Naturalization Service recently praised Canada's security efforts. He noted that Canadian officials helped arrest half of the 8,000 criminal aliens caught in the first six months of this year. This is despite the fact that the U.S. has eight times more agents on its Mexican border. He credited the success to Canada's “excellent system” of information sharing with the American authorities.

Under Bill C-18 passed in 1999, customs officers were given officer powers to arrest and detain individuals suspected of having committed offences under the criminal code, such as impaired driving, child abduction, or those with outstanding arrest warrants. Officers will complement the work of police forces by bridging the gap between the time an officer detects a criminal code violation and the time when police can arrive and intervene.

When proposing the bill, the minister at that time stated on May 13, 1998:

By expanding the scope of their powers to include violations under the criminal code, we will enhance the overall safety and security of Canadians.

Given that Canada customs officers already have the powers necessary to enhance the overall safety and security of Canadians, there is no reason to move Canada customs officers out of the tax collection agency and into a law enforcement agency.

With regard to the issue of detention of refugee claimants, as part of the $280 million anti-terrorism plan, the government recently invested $49 million to accelerate the Department of Citizenship and Immigration's ability to complete an increased security strategy.

Of this new money, $17 million is going to the security screening of refugee claimants. Because of the new security concerns, all refugee claimants must go through interviews and examinations upon their arrival. These include indepth questioning, checking the claimant's information against various databases, taking the claimant's photograph and fingerprints, and keeping all travel documents on file. If the claimant is considered to be a security risk, he or she is detained.

In 2000-01, 8,790 individuals were detained on the average of 16 days. Due to the increased state of alert and more intense security screenings, CIC officials expect there will be more detentions in the future.

It is important to note that when we are making decisions, we are making them in Canada's interest. I am always concerned that our friends across the way would like us simply to be absorbed by the Americans in their approaches.

[Madeleine Dalphond-Guiral, Bloc, Laval Centre, QC]

Mr. Speaker, exactly six weeks ago today, the world was rocked by a quake whose magnitude exceeded anything on the Richter scale. With an epicenter located in the New York-Washington area, the terrorist acts of September 11 have led to especially great concerns in Canada, since they took place in our backyard, so to speak.

The motion brought forward by the official opposition today provides us with a good opportunity to debate the need to reconcile democratic values and security in what can only be described as horrible and cruel circumstances.

This is the fifth opposition day since the reopening of parliament. All but one of these days dealt with votable motions, and all dealt directly with the repercussions of September 11.

I would now like to read verbatim the motion by the leader of the official opposition, and member for Okanagan--Coquihalla. The motion reads as follows:

That, as part of a continental perimeter initiative to secure Canada's borders and protect the security of Canadians and our neighbours, and to protect our trading relationships, this House calls on the government to:

(a) provide both Immigration officers and Customs officers enhanced training and full peace officer status to allow them to detain and arrest suspected criminals or terrorists at the border;

(b) move Customs border officers out of the tax collection agency and into a law enforcement agency;

(c) detain all spontaneous refugee claimants appearing without proper documentation until their identities are confirmed and they have cleared proper health and security checks; and

(d) create a list of safe third countries, including the United States and member states of the European Union, from which Canada will no longer accept refugee claimants.

Everyone recognizes that because it is generating real anxiety in all spheres of society, the current international situation is ripe for extreme reactions. These are never productive and rarely do anxiety, anger and panic help us think straight.

As parliaments reflect on effective and realistic ways to fight terrorism, it is important not to lose sight of the values that underpin our democratic society. I will therefore be studying the opposition motion with the values of justice, freedom and compassion in mind, taking into consideration the international conventions that Canada has ratified, including the UN convention relating to the status of refugees, the torture convention and the convention on the rights of the child.

I would like first off, if I may, to comment on the preamble to the motion. It refers to the continental perimeter initiative. The Bloc Quebecois has expressed its opinion of this perimeter. We believe such a perimeter should exist only in conjunction with the three primary signatories to NAFTA, namely, Mexico, the United States and Canada.

We understand that the aim of this motion is primarily Canadian and American security and the assurance of continued trade relations. However, I saw no reference in the motion to this last objective. We must therefore face the fact that the motion is off the mark. While the events of September 11 raised the issue of security, can we allow the security measures to apply just to refugees, as if they were the guilty parties?

Let us move on to paragraph (a). It reads, and I quote:

provide both Immigration officers and Customs officers enhanced training—

The responsibilities of these officials are important and we support their being given training that will enable them to do their day to day work properly, upholding the law and treating individuals with respect. This is a worthy objective.

In April 2000, the Auditor General of Canada made the following comments “Training is a key element in providing customs staff with the knowledge and skills to speed the entry of travellers and manage risk”.

He asked customs to “ensure that the training needs of all employees are assessed on a regular basis, training plans are developed annually and appropriate training is provided in a timely manner”.

He considered it important as well that “training for term and student employees take into account their skills, experience and the job requirements”.

And he recommended that “training records be complete and be used to assess whether employees have received the training they need”.

Clearly, we will support the first part of paragraph (a).

However, we have some concerns about the second part of the motion which reads, and I quote:

(a) provide both Immigration officers and Customs officers...full peace officer status to allow them to detain and arrest suspected criminals or terrorists at the border;

What is the current status of these two groups of public servants? Subsection 110(1) of the Immigration Act reads as follows:

110.(1) An immigration officer has the authority and powers of a peace officer to enforce any provision of this Act, the regulations or any warrant, order or direction made under this Act or the regulations respecting the arrest, detention or removal from Canada of any person.

Therefore, how do we define full peace officer status?

As for the Customs Act, it provides the following in subsection 98(1):

98.(1) An officer may search if the officer suspects on reasonable grounds that the person has secreted on or about his person anything in respect of which this Act has been or might be contravened, anything that would afford evidence with respect to a contravention of this Act or any goods the importation or exportation of which is prohibited, controlled or regulated under this or any other Act of Parliament.

(a ) any person who has arrived in Canada within a reasonable after his arrival in Canada,

(b) any person who is about to leave Canada, at any time prior to his departure, or

(c) any person who has had access to an area designated for use by persons about to leave Canada and who leaves the area but does not leave Canada, within a reasonable time after he leaves the area,

The Customs Act also provides that the customs officer has the right to seize goods. Moreover, some agents are designated as having peace officer status for the enforcement of certain provisions of the criminal code, such as those on arrest without warrant.

Section 2 of the criminal code defines a peace officer as follows:

“peace officer”

(d) an officer or a person having the powers of a customs or excise officer when performing any duty in the administration of the Customs Act or the Excise Act,

As we can see, immigration agents are deemed to be peace officers when they enforce the provisions of the Immigration Act, while customs officers are also deemed to be peace officers and they have all the necessary powers to enforce those of the act for which they are responsible.

Since we have just finished debating a bill to amend the Customs Act, Bill S-23, which was debated at report stage in the House of Commons last Friday, it is hard to see why the Canadian Alliance did not take the opportunity then to present the amendments to the bill that it thought were necessary.

As we can see, both immigration and customs officers have the necessary powers to enforce the provisions of the legislation, particularly since the Immigration Act also provides that, in certain specific circumstances, an immigration officer may detain an individual.

The difficulty probably lies in the word “full” peace officer status. Perhaps this will become clear later in the debate.

Not only am I uncertain what “full” peace officer status means, but I am hardly reassured when I read that they should be allowed “to detain and arrest suspected criminals or terrorists at the border”.

What is a suspicion? Le Petit Robert defines it as conjecture by which blameful intentions are assigned to someone. It seems to me that the present situation may cause us to be more suspicious and that the very broad wording in the motion is hard to square with the 1986 Landry decision, which defined the notion of “reasonable grounds”. Furthermore, the 1999 edition of the criminal code provides, and I quote:

In order to arrest a person without a warrant, a police officer must have reasonable and probable grounds to believe that the person has committed an indictable offence. This subjective belief on the part of the police officer must also be justifiable from an objective point of view.

We can see how far apart the criminal code, the existing legislation and the Alliance motion are.

Paragraph (b) of the Alliance motion proposes that customs officers be moved into a law enforcement agency. This in itself is not without interest, although it raises a number of questions concerning conditions of work, the administration of customs duties, and budgets.

At this point, it is probably interesting to quote what the national president of the Customs and Excise Union said in his recent appearance before the Standing Committee on Finance regarding Bill S-23:

I believe this was proposed under the Conservative government, some six or seven years ago [--]

It must be a good eight years.

—perhaps longer—I forget now. At that time the Customs Excise Union fully supported that concept for customs officers. We do see customs officers as being a group of individuals that is becoming more and more oriented towards enforcement. In fact, the approval of Bill C-18 in 1998 has made that even clearer—

As for Denis Desautels, who was auditor general at the time, he stated that the role of customs offices “has evolved ...to one of facilitating the entry of travellers and goods, while protecting Canadian society”.

Now we come to what strike me as the two most worrisome paragraphs, (c) and (d). Their objectives seem very clear to me.

The first stipulates that any refugee claimant without proper documentation is potentially dangerous. The second is equally disconcerting, because it radically limits the reception of refugees, even if this represents a break with the Canadian tradition of compassion and openness.

Paragraph (c) reads as follows:

(c) detain all spontaneous refugee claimants appearing without proper documentation until their identities are confirmed and they have cleared proper health and security checks.

We are opposed to automatic detention of refugee claimants without papers.

The reason is a simple one. What reasonable person can believe that a refugee without documents represents such a risk to Canada's security that he or she must be imprisoned? I do not think so. Nor am I the only one, because it would make no sense for anyone who had any ill intentions toward Canada or any other state not to have official identity documents, or at least ones that looked authentic. Why not three or four different passports? We have already seen that. Why would anyone run the risk of an investigation? If I wanted to do some evil deed, I would come across as innocent as possible. That is elementary.

We do not think that this measure will in any way improve Canada's security coefficient. What it will succeed in doing is to treat the innocent unfairly, and we will thus be failing our duties under the charter of rights and freedoms, which is a source of Canadian pride.

We feel that our present procedure meets Canada's needs and requires no changes.

Right now an immigration officer uses the following procedure. He asks for the claimant's identification and the claimant states his true identity. The immigration officer then questions the claimant to determine whether he can provide identity papers. The claimant has to complete a form in which he provides information as to his identity. Finally, the immigration officer can detain the individual if he is unable to establish his identity to the officer's satisfaction.

Should the immigration officer find that the claimant is not properly answering the questions put to him, appears confused or refuses to answer certain questions, the officer may detain him for a period of seven days.

Interestingly the Canadian Council for Refugees notes that it is exceedingly rare for a person seeking asylum to be detained for not having identity papers or for having forged ones.

With paragraph (c) of the motion, we move to an extreme that is unacceptable. We oppose the systematic detention of persons claiming refugee status, since the practice is contrary to the charter of rights and freedoms, which applies to every citizen.

I will move on quickly to the last point, the request to establish a list of third countries. Once this list is drawn up, Canada will no long accept refugee claimants who have come through a third country.

Forty per cent of those claiming refugee status arrive in Canada from the United States. Forty per cent is a lot. What I understand from this is that we do not want any more refugees. I oppose this, especially since applications for refugee status in the States are given much more restrictive treatment than they are here in Canada.

Are we consciously, as a parliament, going to destroy what has been a port of peace and life for many who have suffered through wars and undemocratic regimes? We need only think of the millions of Afghans who are trying desperately to leave their country. Can we say “No, we will allow only those who arrive via Vancouver or Montreal or St. John's, Newfoundland”?

We also oppose this fourth paragraph strongly. I call on all parliamentarians who recognize the importance of compassion, justice and respect for the fundamental values of our society to oppose the Alliance motion.

Customs Act

[Myron Thompson, Canadian Alliance, Wild Rose, AB]

Mr. Speaker, I am pleased to speak to Bill S-23 today. The Canadian Alliance is supporting the bill because it will speed up the flow of goods and people entering Canada.

Bill S-23 is actually the product of indepth consultations with trade and tourism sectors. As far as the amendments which have been introduced this morning, we will support these as well. We do not have any problem with them and it only makes sense to do that.

What I would like to address more than anything else is what is not in the bill that is so important at this time. While assisting with trade issues, the bill does address some equally important issues that we consider to be positive including new penalty structures, improved equipment, more strict controls over export mail and customs-controlled areas at international airports.

We all know that the world as we knew it before September 11 has changed a great deal. I strongly feel that Canada customs must change as well. Since September 11 our frontline officers have done an excellent job in securing our borders. Security is of the utmost importance. To date, Canada customs has been about collection and not about protection. It is time to reverse those. It is now about protection.

The Canadian Alliance would like to see Canada customs removed from the tax collection agency of revenue Canada and moved into a law enforcement department of the solicitor general. Long before the terrible events of September 11, the auditor general recognized the fact that with more than one hundred million travellers a year entering the country at 147 border points and 13 international airports, the risks to Canada's safety and security were extreme.

Last April the auditor general wrote about customs officers and said that their main role now was to protect Canadians against illegal activities such as smuggling or contraband or the unlawful entry of inadmissible people. He said that their audit raised some concerns about how well these risks were being managed. Since the tragedy on September 11, he had the opportunity to meet with the Canadian Police Association and customs and excise union. He said that both of these organizations, among many others, were in full support of moving customs out of revenue Canada and into the solicitor general department.

The role of customs officers is already very similar to other peace officers. Customs officers in the last year have been issued bulletproof vests, batons, pepper spray and have been given self defence and use of force training to better enforce our laws. Recruitment requirements are now more difficult. Labour Canada has also just contracted a consultant to study the inherent risks of the job and this consultant will undoubtedly look at the question of whether customs officers should be equipped with firearms.

Let me just read a paragraph out of the regulations that customs officers are required to follow in regard to security. Paragraph 16 of the regulations states that Customs officers shall not use force against members of the public where it is known or strongly suspected that the individual is carrying a weapon and considered dangerous if, in the judgment of the officer involved, the use of force would present an undue risk to their personal safety or to the safety of another officer or the public. In these circumstances officers shall note the pertinent details of the case, permit the individual to proceed unobstructed and then the officer shall notify police immediately.

One of the problems with this policy is that in our vast country many of the border crossings are hours away from local police response.

In other words, some dangerous character who arrives at the border can come into Canada because customs officers are not properly equipped or trained to detain and arrest and keep the individual from coming in.

I can understand why the revenue agency would not be equipped in that sense. In one agency we issue both bullet proof vests and calculators. That will not detain the most ardent of criminals. It is time to start issuing the proper equipment so customs officers can do a good job at the border of being able to arrest, detain and hold individuals for the police.

It is possible to do that but we must equip them properly. Under the circumstances customs officers are at risk because they do not have the tools to look after their needs. In particular they do not have the tools to do their work at border crossings where there is only one guard on duty. What chance would they have?

Across the southern border they have increased personnel by 5,400. The last figure I heard was that possibly somewhere around 100 to 130 individuals would be moved into these positions in Canada. It does not make any sense, particularly following September 11.

Why would we want to allow a known criminal, smuggler, big drug pusher or terrorist into Canada for any length of time to roam around and then hope the police would be able to round him up before the individual caused any real problem? That does not make sense. The people at the border crossings are our first line of defence. Let us give them the proper equipment and tools so they can do their job as the front line of defence. We must let them detain and let them arrest. Let us give them the tools to do that.

Another thing I find amazing is that at some border crossings where they only have one individual they are only open for eight hours. They shut the port down for anywhere from 12 to 16 hours. They put up a little orange cone indicating that the border is closed. That would really mean a great deal to somebody who wanted to get into Canada. It would not stop them whatsoever.

If anyone thinks the criminal element or terrorists will only try to come through our major ports they need to give their heads a shake. They know about these ports. They know about the ability to come into Canada. These crossings exist and they know it. That is where they will go.

Let us get serious about tightening them up. Let us get them out from under a collection agency and get them under a protection agency that knows what is required to enforce the law to better protect Canadians. It only makes sense to do that. I do not understand why we are hesitating or reluctant to do that at this time.

In 1998 the government passed Bill C-18 which for the first time in the history of Canada customs extended criminal code powers of detention and arrest to customs officers. Does it not make sense that if officers are to be given the power to enforce the criminal code they should come under a different agency than tax collectors or Revenue Canada? One would think that would be the case.

We are supporting Bill S-23 because we want the flow of goods and services to continue in an uninterrupted manner and we want to do the best we can to keep them going. However we must not forget that the top priority today as a result of September 11 is the protection and safety of Canadians, so let us do that.

Having said all that I have said, let us make sure we make it a lot easier and safer for our front line officers by equipping and training them properly, getting the right individuals into position and getting them out of collection and into protection.

Message From The Senate

[The Deputy Speaker]

I have the honour to inform the House that when the House went up to the Senate chamber the Governor General was pleased to give, in Her Majesty's name, the royal assent to the following bills:

Bill C-12, an act to amend the Judges Act and to amend another act in consequence—Chapter No. 7.

Bill S-24, an act to implement an agreement between the Mohawks of Kanesatake and Her Majesty in right of Canada respecting governance of certain lands by the Mohawks of Kanesatake and to amend an act in consequence—Chapter No. 8.

Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions—Chapter No. 9.

Bill S-17, an act to amend the Patent Act—Chapter No. 10.

Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act—Chapter No. 11.

Bill S-16, an act to amend the Proceeds of Crime (Money Laundering) Act—Chapter No. 12.

Bill S-3, an act to amend the Motor Vehicle Transport Act, 1987 and to make consequential amendments to other acts—Chapter No. 13.

Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts in consequence—Chapter No. 14.

Bill C-13, an act to amend the Excise Tax Act—Chapter No. 15.

Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco—Chapter No. 16.

Bill C-22, an act to amend the Income Tax Act, the Income Tax Application Rules, certain acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act—Chapter No. 17.

Bill C-3, an act to amend the Eldorado Nuclear Limited Reorganization and Divestiture Act and the Petro-Canada Public Participation Act—Chapter No. 18.

Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act—Chapter No. 19.

Bill C-28, an act to amend the Parliament of Canada Act, the Members of Parliament Retiring Allowances Act and the Salaries Act—Chapter No. 20.

Bill C-9, an act to amend the Canada Elections Act and the Electoral Boundaries Readjustment Act—Chapter No. 21.

Bill C-25, an act to amend the Farm Credit Corporation Act and to make consequential amendments to other acts—Chapter No. 22.

Bill C-4, an act to establish a foundation to fund sustainable development technology—Chapter No. 23.

Bill C-29, an act for granting to Her Majesty certain sums of money for the public service of Canada for the financial year ending March 31, 2002—Chapter No. 24.

Bill S-25, an act to amend the Act of Incorporation of the Conference of Mennonites in Canada.

Bill S-27, an act to authorize The Imperial Life Assurance Company of Canada to apply to be continued as a company under the laws of the Province of Quebec.

Bill S-28, an act to authorize Certas Direct Insurance Company to apply to be continued as a company under the laws of the Province of Quebec.

Pursuant to order made on Wednesday, June 13, the House stands adjourned until Monday, September 17, at 11 a.m. pursuant to Standing Orders 28 and 24.

(The House adjourned at 5.26 p.m.)

Federal-Provincial Fiscal Arrangements Act

[The Deputy Speaker]

The House will now proceed to the taking of the deferred recorded division on the motion at third reading stage of Bill C-18.

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, it is my pleasure to speak to this important issue because of the profound effect that equalization problems are having on my constituents in Dartmouth.

Simply put, the current transfer formula does not treat my constituents in Nova Scotia and Dartmouth the same way that citizens in other provinces have been treated. I will spend a bit of time talking about that this afternoon.

Equal opportunities need to be given to Nova Scotians under our federal transfer regime. Sadly there are a number of barriers in our equalization formula which continue to work against poorer provinces such as Nova Scotia and which are causing real hardship to ordinary hard working persons in Dartmouth.

Simply put, Bill C-18 does not meet the real constitutional obligations of the government. I will state what they are because I am not sure we all know. Subsection 36(2) of our constitution states:

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 reasonable comparable levels of taxation.

If we look at health care standards and the lack of availability of pharmacare, per pupil funding levels for primary, secondary and post-secondary education, and services for those living in poverty, including the thousands with disabilities in my community in Nova Scotia, it is self-evident that the lofty ideals of the constitution are not being met. Canadians know, and study after study shows, that there are significant inequities in services and taxation levels across Canada.

I concede that some of the inequities are the result of decisions made by provincial governments. Many Conservative governments, rather than using budget surpluses to rebuild social programs, have brought in large scale tax cuts which benefit the wealthy. That is not the fault of equalization.

Some inequities stem from the ability of some provinces to generate revenue from resources. There is no doubt that Alberta has greatly benefited from the fact that it is situated on large lakes of underground oil and gas. It receives full royalty revenues from those resources. There is some accounting of this in the equalization formula. However another inequity is at play here.

That relates to the fact that offshore oil and gas revenues cannot be taxed by provinces in the same way that onshore oil and gas revenues are presently being taxed. Therefore we are leaving the have not provinces in Atlantic Canada without the same ability to provide programs as Alberta has.

While I know there are different jurisdictions for onshore and offshore resources, it is difficult to give the legal mumbo-jumbo explanation to the people of Nova Scotia. Nova Scotians have made their living off the ocean since the province was founded almost 400 years ago just as much as they have made their living off the land.

Alberta's tar sands are a provincial resource, and telling Nova Scotians that Sable Island gas is not part of their province simply does not wash. They do not see the legal argument. They see that they are once again being kept poor by unequal rules set by central and western Canada, and they have a point. The government is not treating them fairly and it obviously could if it wanted to.

For example, there was a temporary exemption of royalty revenue in the calculation of equalization payments which had been granted to Newfoundland and Labrador in the past. This temporary measure helped boost the economy of that province, and Nova Scotia deserves no less.

I call on the government to give Nova Scotia the same deal which was granted to Newfoundland and Labrador. As my leader and colleague from Halifax said eloquently in today's debate, Liberal cuts to the CHST, their elimination of the Canada assistance plan and their general approach to giving a higher priority to tax cuts rather than rebuilding our social programs have hit Atlantic Canada very hard.

These are policy barriers to governments in Atlantic Canada which the government should address, but it should also be fulfilling its constitutional role to create equity in services through the equalization formula.

Bill C-18 leaves barriers in place. The biggest barrier is the cap on equalization payments. It needs to be removed. I am not alone in this regard. As has been mentioned, the provincial ministers and the premiers have brought this matter to our attention. Bill C-18 has failed to remove the artificial cap on equalization payments to poorer provinces for this fiscal year. It means that Ontario and Alberta keep more and Atlantic Canada keeps less. How can the Liberals justify this? Do they know what it means to the people in Atlantic Canada?

What it means is that Dartmouth students suffer with less funding and there is increased labour strife as school boards try to squeeze concessions from already underpaid workers. It means that post-secondary students have the highest tuitions and the most ineffective student aid program in the country. It means that fewer sick people can afford the medications they are told by their doctors they need to stay alive. That is not fair and it is not equal. That does not meet the lofty goals set out in our constitution.

Specifically on post-secondary education, I repeat my request for the federal government to increase the support for legitimate post-secondary educational needs in Nova Scotia through a bilateral agreement that would recognize the significant price that Nova Scotians are paying to support a disproportionate number of out of province students.

I hope the government of Nova Scotia would then use the funds to reduce student tuition fees, currently the highest in Canada, and increase the inadequate student aid plan. Atlantic Canadians do not want handouts. They want fairness. Sadly our party believes that Bill C-18 would not deliver this to them.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I will be sharing my time with the hardworking and faithful hon. member for Vancouver Island North. I could have used more adjectives, but I did not want them to go to his head. It is an honour to stand in the House to talk about Bill C-18, a very important bill, and to address at this stage the broader question of equalization payments and the meaning of them.

I cannot resist the temptation to lay down a bit of what one might call a philosophical foundation for the idea. That foundation is what we as Canadians believe in so strongly. We believe in community and sharing with those who have need. The Liberals have somehow exploited this in their communication pieces to try to pass it off to Canadians that they are the only ones who care. They certainly are experts at caring in one particular way and that is taxing Canadians to death, then deciding how they can distribute the money they have gathered together.

Just yesterday, without any previous debate or approval of the House, the Prime Minister declared some of his values in Toronto when he announced a $500 million program to aid culture in Canada. 180 I shake my head at that when we have that same government saying that it will not increase the ceiling for equalization payments to help provinces pay for hospitals, education facilities for students and things like that. The government is ready to give us $500 million more for its interpretation of what Canadian culture is.

That is a very narrow point of view of what it means to be Canadian and what it means to be community. Very frankly the cultures that I see across the country are many and varied. These cultures for the most instance are very able in representing themselves and thriving without the aid of a bunch of government grants.

In fact in my riding we have a large Ukrainian community that does wonderful things to promote its culture and to keep it and its language alive. I had a conversation not long ago, actually I guess it is over a year ago but at my age years fly into days or weeks, with several people from the Ukrainian community. They said we should support more cultural grants from the federal government.

I engaged them in a little debate and asked them where they thought the money came from. We talked about it a bit. I told them that we were overtaxed with the huge burgeoning bureaucracy that was involved in sending money to Ottawa and that the bureaucrats spun it through their centrifuges. A bunch of that money would spill over the edges but would never get to the target for which it is intended. Then finally some would go back to a select group chosen in some cases by the Prime Minister because, as I understood it, he had a lot of clout in cabinet. However if they did not happen to be one of those they would not get the money.

I was able to show them that we would all do a lot better if we could simply reduce our taxes. Then all of us in all our cultures could fund to our heart's content the Ukrainian schools, the German schools and other schools that we would have liked to have but were prohibited from because of the official program of the government of taking about half of everybody's earnings and distributing it according to its will.

I also say that in the broader sense of community I do not want to restrict my community just to the town near which I live, nor my riding. It is a wonderful riding. I welcome you, Mr. Speaker, to come and visit. We have a national park in our riding. It is called the Elk Island National Park, named after my riding. It is a wonderful place and great place to visit. I would not like to restrict my sense of community just to our province.

It was mentioned earlier today that Alberta in the last year or so had a very good economic picture because of the energy situation. I can remember back a scant eight years ago when that was not the case. Albertans were struggling with their education and health funding probably as much as anyone. We had tremendous challenges in the province to rationalize the delivery of the health care system. A lot of it was due to the fact that this federal government reneged on what was originally an agreement to pay for half of the health care for the provinces. Over the years it eroded it to a point where it was once again the responsibility of the provinces. However it never reduced the taxes it sucked out of our provinces to bring to Ottawa. Therefore, I feel the government funding of those programs was irresponsible.

My country is my community. I came to the House as a Canadian. I stand proudly when we sing the national anthem in the House. Some may remember that I was even unwittingly and unintentionally the centre of a lot of controversy a number of years ago when I insisted that there should be nothing wrong with my having a flag on my desk in the House of Commons. Ultimately, it was ruled not permissible. It was considered a prop, so I am without my Canadian flag. So be it.

However I am a proud Canadian and this is my community. I insist that we would do well by extending the word community across this whole country and that we provide the needed health care and educational facilities to our citizens, which are more or less equal, at comparable levels of taxation. However it is impossible to have them exactly equal as that is just a practical consideration but they should be as equal as is possible.

Again, it is worth drawing the attention of the members to the fact that this is in our constitution. If we look at the Constitution Act, 1982, we will find section 36. I am going to read it because perhaps some people have not heard it. It states:

Without altering the legislative authority of Parliament or of the provincial legislatures, or the rights of any of them with respect to the exercise of their legislative authority, Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to

(a) promoting equal opportunities for the well-being of Canadians;

(b) furthering economic development to reduce disparity in opportunities; and

(c) providing essential public services of reasonable quality to all Canadians.

Then subsection 36(2) of our constitution states:

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.

Although that was brought in by a Liberal government, it seems to me eminently fine. I have absolutely no problem with that particular clause in our constitution. It behooves us to make sure that Canadians across the country have comparably equal services at comparable levels of taxation.

However we need to make sure that there is not duplication. We must ensure there is efficiency in the delivery of those services. We must make absolutely sure that the provinces and the citizens in those provinces continue to have all the motivation in the world we can extend them to improve their situation, regardless of where that is. I insist our country would do best if we neither hung a milestone around the necks of those who are doing well as they will then do better, they will expand our economy and they will provide more jobs, nor leave destitute those whose needs are greater.

Quite clearly I could have spoken for longer but my time is up. I appreciate the opportunity to address the House on this important issue.

[Loyola Hearn, Progressive Conservative, St. John's West, NL]

Mr. Speaker, let me thank my colleague from New Brunswick Southwest for sharing his time with me.

I listened to him explain how we arrived at the present process of equalization and I listened to the leader of the NDP Party and the member for Regina—Qu'Appelle. I must say that the more I listen to people speak on the equalization process, the more I realize that we all agree the present system of assisting have not provinces, and I use those words very loosely, is not working. We all agree it is not working. We all agree there are better ways of doing it. Many of us recommend better ways of doing it.

That begs the question. If most of the parliamentarians in the House understand what is happening across our country, if we understand the fiscal realities of the have and have not provinces, if we understand the sharing, the equalization systems, the goods, the bads and the uglies, why is it that we do not do something constructive about it? Members on this side can only point out, recommend and represent. It is the people on the other side who must to do something, but we have not seen very much being done.

Bill C-18, which would remove the cap on equalization payments for one year, is a positive step and one which various provinces have asked for. They have also asked that the cap be removed entirely, which is something I would also recommend, but removing the cap on equalization would not solve all the problems. Changing the whole equalization reality would equalize it.

The word equalization is deceptive. When we hear the word we think of the old Robin Hood syndrome: if we take from the rich, being Alberta and Ontario, and give to the poor, everybody becomes equal. If that were the case, what a wonderful country we would have, but that is not the case. All we are doing is taking a very minuscule sum of money and sharing it on an equal basis depending upon status.

The province of Newfoundland has been looked upon by our fellow Canadians for years as a have not province, a province that has absolutely nothing to offer. Those who are experienced and travelled politicians, or experienced in the sense of having read and educated themselves about all the provinces, realize that is not the case.

I doubt if there is a province in Canada as rich as Newfoundland in relation to the resources within its boundaries. If we look at the small population of Newfoundland, slightly over half a million people, and divide it into the value of our resources, on a per capita basis we could be richer than any province in the country.

The parliamentary secretary from Alberta asked my colleague from New Brunswick Southwest whether it would not be good for the people of his province to travel to rich Alberta where they could find employment. I say to the hon. member that many people from Newfoundland have travelled to Alberta and have contributed significantly to the growth of that great province. Alberta and Newfoundland have been extremely close over the years. I had the privilege of serving in a government in Newfoundland in the mid-eighties at the same time that Premier Lougheed was the premier of Alberta. There was an exceptionally strong bond between our two provinces and that bond has held.

In recent months, Premier Hamm of Nova Scotia has led the fight for drawing attention to the plight of equalization clawback arrangements. It is interesting to see him being supported by other premiers who have not been directly affected and by the new leader of the opposition, Mr. Williams in the province of Newfoundland.

When Premier Hamm and opposition leader Mr. Williams took their plight nationally, the people of Alberta began to realize what they were being asked for. It was not just more money from Alberta and putting nothing back in return. When they saw the reality of what was happening, the people of Alberta, Premier Klein, former Premier Lougheed, the University of Alberta, the Calgary Herald —and I could go on—in their comments, their speeches and their editorials, all expressed support by saying that what these people wanted was right and proper and that it was not something that Albertans did not get in the past.

I talked about Newfoundland and its riches. Besides our forestry and farming potential and our small business and IT sector, which are growing rapidly, we have one of the greatest tourism potentials anywhere in the world. We are one of the last frontiers in Canada, as many people are starting to see. We are limited only by access because of unfair treatment by the central government in the type of ferry system we have, a monopoly airline, et cetera. Other than that, we have the last frontier as it relates to all the other areas except the far north.

We also have major resources. People must remember that we brought the fishery into Canada. We brought the Grand Banks of Newfoundland and all the surrounding fisheries around the coast of our province within the 200 mile limit. For years Canada bartered Newfoundland fish for deals, such as the sale of wheat and other sales to Russia, China and Europe. Everybody got a piece of our action, such as the Spanish, Portuguese and Russians. Our fishing grounds were ravaged by countries given quotas in lieu of deals made to ship off other Canadian resources.

In the end Newfoundland paid the price. Our water power in Upper Churchill was developed by an agreement with Quebec. Newfoundland receives about $10 million a year while Quebec receives closer to $1 billion in royalties out of our water power. I do not blame Quebec. It was a federally sanctioned deal, with absolutely no federal assistance, that provided a power corridor through to the United States markets, which is what was done for Alberta oil and gas across the rest of the country.

Newfoundland is extremely wealthy with minerals, especially the major find in Voisey's Bay. It is not being developed for several reasons, but the main one is that people want to move it somewhere else in order to create jobs.

Our oil and gas, which is now being developed and, as Alberta grew and prospered on its onshore oil, Newfoundland will eventually grow and prosper. As Alberta slides economically, maybe Newfoundland will be able to pick up the slack and reciprocate on the assistance it has received.

Confederation is supposed to be about sharing. Newfoundland, Nova Scotia and other provinces are not putting their hands out and saying “give us”. They are asking for a chance. They are saying that they have the resources to become a have province but that they need the chance to develop those resources and hold on to the royalties until they can create the infrastructure to make themselves a have province.

If the government wants to create equalization across the country, it should start doing it properly. It should try to be fair so that some day each province in this country will be equal.

[Alexa McDonough, NDP, Halifax, NS]

Madam Speaker, I appreciate the co-operation from members. I was so exorcised and frankly dismayed at the hypocrisy reflected by some of the previous comments that I was distracted from making that point at the outset. I do appreciate their co-operation.

I want to say at the outset that a fair formula for equalization is critically important to the constituents I represent, the people of Halifax. More than that it is critically important to citizens who live in and throughout the four Atlantic provinces, as well as citizens in the provinces of Quebec, Saskatchewan and Manitoba.

I will go further than that. I do not believe it is only the people who are on the punishing end of the measures taken by the federal government to artificially have equalization payments who care about this issue. I think what it means to be Canadian is to subscribe to a fair equalization formula capable of establishing not just the words to express it but the reality of Canadians, regardless of where they live, being eligible for a roughly comparable level of services.

Equalization is about ensuring that we do not experience a growing gap between those who have and those who have not, as it relates to individual citizens and regions. That growing gap is very alarming and is causing real strains in the lives of people, their families, their communities and inter-regionally, as a result of the government turning its back on a fundamentally important principle.

Let me say very clearly at the outset the position of the New Democratic Party. It has been championed by a succession of New Democrats in the House, but none more effectively than my colleague, the finance critic from Regina—Qu'Appelle. He has been a faithful, inveterate champion of the importance of a fair equalization formula throughout the 30 years he has served the constituents of his own community and all Canadians who believe in the fairness a proper equalization formula represents.

At the very heart of our concerns about the bill before us and the inadequacy of the amendments is the fact that there is an artificial limit on equalization payments that will be reinstated in the year that is now upon us. As far as we and fair minded Canadians are concerned the cap on equalization must be removed.

I guess the government needs to be reminded at every opportunity that Canada has a constitutional obligation to ensure that provincial transfers are set high enough so that all provinces have the capacity to serve the public interest and to ensure that the basic needs of the residents of all provinces are met. For historical, legal and moral reasons this must be the principal goal of the equalization plan.

The plan as it stands fails to achieve the goal. I listened to the Parliamentary Secretary to the Minister of Finance say what the bill is about. It would ensure that the objective of roughly comparable levels and quality of services is achieved for all Canadians. If the cap on equalization payments is reimposed then it is absolutely clear the objective he stated in the House this morning simply cannot be met. Not only can it not be met. It will not be met. The government has turned a deaf ear to the pleadings that the cap not happen.

One cannot possibly imagine that the parliamentary secretary, the finance minister and the Prime Minister do not understand that objective cannot be met. One has to go further and say that they do not intend that constitutional obligation and that important principle to be met by the provisions in the Federal-Provincial Fiscal Arrangements Act amendments before us.

We know the Liberal government has absolutely decimated fiscal transfers to the provinces, undermining the national interest and in the process destroying the very moral authority needed by a federal government that professes to believe in the concept of roughly comparable services being available to all citizens of Canada regardless of where they happen to live and regardless of the state of finances of their respective provinces.

Then the federal government shows great surprise and is actually puffed up with indignation when a province like Alberta introduces bill 11, when a province like Ontario is as bold as we saw the premier being this week when he talked about going further into privatization and turning our health care system into a commercialized operation, one based on the notion that profits will be extracted from people's illnesses and misfortunes.

We cannot repeat too often the fundamental flaw in the fiscal arrangements act that is now before us. Bill C-18 seeks to remove from the fiscal year starting April 1, 1999, the ceiling that would otherwise apply to equalization payments, but the bill then reimposes that ceiling for the year 2000-01.

Surely it is worthy of note that all 10 Canadian provinces are in agreement. They want the federal government to remove the cap on equalization. Even the provinces that are in the have category, that are the net contributors to equalization payments, agree that it does damage to the fabric of the nation and that it erodes the quality and comparability of services to people in the have not provinces to artificially impose and maintain that limit on equalization payments.

The Atlantic provinces and Manitoba asked the government very effectively before the finance committee last week that if it will not make a commitment to remove the cap, to remove it permanently, it should at the very least rebase the ceiling on equalization to the higher level of $10.79 billion.

Finance ministers from all five of those provinces made their case this week before the finance committee and did so very effectively. However the government, the Minister of Finance and the Parliamentary Secretary to the Minister of Finance have turned a deaf ear to the concerns of those finance ministers and the people whom their governments represent.

The minister of finance for Manitoba stated it very well. He said that the equalization program should be allowed to do its job by lifting the ceiling as a preferred point. As an accommodation it should be rebased to the level to which it grew in the year the ceiling was lifted, 1999-2000. That would offer much needed support to the provinces that are still reeling from massive unilateral cuts to transfer payments by the government.

The government must use a 10 province standard to ensure a truly equalized equalization formula and, more important, the concrete outcome the equalization formula is intended to achieve. The federal government has so drastically cut CHST transfers to the provinces, strangling their ability to adequately fund health care and post-secondary education, that when Harris and Klein started down their privatization track the federal government was not in a very strong position to defend the Canada Health Act or did not seem to want to.

One does not have to be very insightful, and I do not think it is cynical, to suggest that in the process of weakening the commitment to comparable services across the country and of engaging in massive cuts to transfer payments that enable provinces to deliver health care, education and fundamentally important social welfare services the people need, the federal government knew it was destroying public confidence, absolutely eroding public confidence in the important public services Canadians depend upon.

Further, the federal government must immediately restore funding to CHST transfers to the provinces. It has invested a pittance into infrastructure and transportation, causing delays of much needed essential repairs to transportation infrastructure in every part of the country.

The government has abandoned its federal constitutional responsibilities for far too long. It should recommit on every front to ensuring that provincial governments achieve the goal enshrined in the constitution that goes to the very heart of the kind of country we say we want to be, the kind of country that with considerable success we were becoming. That was recognized by others around the world.

If we fail to do that we are not only letting down the people who need and depend upon those services, but we are striking a blow to the very concept of Canada which means so much to people in this country and people around the world.

The government's actions speak to an attitude of indifference toward the real needs of Canadians. It is not too unduly harsh to say that the government is arrogant and out of touch with the real needs of Canadians, particularly in the less advantaged provinces.

When the government introduced its throne speech it completely failed to address the fundamental issue of ensuring some semblance of comparability of services to every citizen in Canada. At the time I raised a question on recognition and commitment from the government to deal with the problem posed by an unfair equalization formula, one that makes it virtually impossible for governments in have not provinces to make progress because of the excessive clawback of resources from offshore development, for example, that may now give an opportunity to Nova Scotia and Newfoundland to move out of the have not status.

On every front it seems that the government, not the people of Canada, has given up on the Canadian dream. When a government stops dreaming, when a government abandons something as fundamentally important and changes an equalization formula to artificially restrict the capability of provincial governments to deliver on that dream, it should examine what it is all about.

There are many elements to the battle to try to get the Canadian government once again to believe in that fundamentally important dream. I can speak from a Halifax perspective of what it means to the citizens of my community to have the federal government quite cynically make a decision to remove the cap for one year and then turn around and reimpose it.

I can speak about it from the point of view of what it means for citizens not to be able to get the health care they require, from the point of view of students unable to afford an education, or from the point of view of what it does to the lives of students if they go into debt to the level necessary to gain a post-secondary education these days. In a very real way it becomes a double jeopardy situation for the government to artificially cap equalization payments and to pull back on transfer payments. It becomes an out migration policy in effect of people going to the wealthier parts of Canada from the have not regions.

That is not the kind of Canada we believe in and not the kind of Canada we as parliamentarians are supposed to be here building together.

In conclusion, I implore the government to consider that what is a very small matter in terms of the text of this fiscal arrangements bill is a very fundamental matter that will have massive consequences if equalization payments are to be artificially constrained by the continuation of the cap in the year 2001. I ask the government to reverse itself and agree that the artificial cap should be removed.

[Deepak Obhrai, Canadian Alliance, Calgary East, AB]

Madam Speaker, it is a pleasure for me to speak to Bill C-18 on behalf of the constituents of Calgary East.

At the outset I want to make it absolutely clear that the Canadian Alliance believes in the concept of equalization. We believe in the concept that from coast to coast all Canadians should be receiving equal services. The Canadian Alliance strongly supports the equalization method of ensuring that a quality standard of living applies across our nation.

However, we certainly do have a problem with the way it is handled, the way the equalization formula is applied, and the way the Alliance feels it is used by the government to score political points.

Madam Speaker, at this time I wish to advise you that I will be splitting my time with my colleague from Kelowna.

The bill takes away the ceiling and increases the money requested by the provinces. We believe that the equalization system should serve the longer term purpose of equalizing economic opportunity and autonomy in all regions and should not create incentives for perverse economic policies on the part of provincial governments.

The lifting of the cap is a one time ad hoc reaction that fails to address the bigger and longer term problems and it was promised for purely political reasons. It may be good politics but it definitely begs the question, is it a good policy?

The fact that this one time band aid solution is even being proposed indicates the need for an open discourse in parliament to review the equalization program. The bill is part of a political effort to make up for the Liberal government's irresponsible $23 billion or 35% cut in health care funding.

At the first ministers conference the government agreed to increase the CHST but it never restored it to 1995 levels. As a result, the provinces requested more money to address health care issues. Therefore, the crisis was brought about by this government in the first place when it cut the CHST. In order to balance that out and look good, the government said it would commit $792 million to the provinces. That was because of its own shortfall in not raising the CHST transfers, as agreed at the first ministers conference, to the 1995 levels. What we have is the government trying to play politics by trying to lift up the ceiling to address the issue, which originally it failed to do.

The parliamentary secretary has indicated why there is a necessity for a ceiling and we agree. Otherwise it will spiral out of control. We saw during election time the money given to the supposed future contender for the Prime Minister's office, the Minister of Industry, when he received more money in equalization payments just prior to the election so he would look good in Newfoundland.

It is no secret across the nation that when the government cut the CHST it started a health care crisis, a crisis from coast to coast. In my own riding we heard stories from people who came in to tell us what the cuts had done to health care.

On the one hand, the federal government has the Canada Health Act. We agree with the Canada Health Act, but the government uses it as a stick to the provinces, saying “this is how health care services must be delivered”. On the other hand, the government took away the purse. It is supposed to give money to the provinces to administer their rules in the way they feel they should be addressing the health care issues. This is a contradiction.

We are in agreement with the five principles of the health act. As a matter of fact, we tried to put in a sixth principle, stable funding for health care, so that provinces do not in the future have to play games with governments that one morning decide to cut health care but will not make any changes to the Canada Health Act or will not give the provinces the leeway to see how they can deliver the services.

The merits or demerits of how the provinces are going to deliver services or whether they will be private will be left to the Canadian public to decide. As we have stated, we are not in favour of a two tier health care system. As the government of Alberta has said quite clearly under its bill 11, it needs more innovative ways to deliver health care services because it does not have the money, the money that the government cut.

The government cut this money and then said it had balanced the budget, leaving the provinces to handle how they were going to deliver the services. As we all know, as the population increases the demand on health care grows stronger. Our own health care critic, my colleague from Calgary—Nose Hill, will be leaving shortly for Europe to study how the system there is delivered.

The health care report we are receiving for Canada is that for the amount of money we put in, the end product, the delivery of services, is not that efficient. Therefore it needs to be addressed. As a matter of fact I saw today in a report that the premier of Ontario has been saying that he needs more money and that the surplus the government has should be given to health care.

Everyone in the provinces is demanding that. Canadians who have been using health care services are demanding a better system. Health care workers, with their shortage of nurses, doctors and patients are all demanding a better system because health care is failing. This all started because the government cut the funding for health care. It did that in 1995. Even when the government tried to bring the funding back up, even when it had the first ministers conference, it was not brought up to 1995 levels. There is also the factor of inflation and all these other things. When we add up all those figures and include the expansion and growth of services that is needed, the transfer of money from health care is bigger than what is indicated in the figures.

As members of parliament, we receive numerous calls from people who use health care services about how much trouble they have getting services. I am sure members on the government side do as well. Those who are rich are demanding that we do something because they have the money to get those services from the U.S.A. and it is not the right thing to do when we are supposed to have a public health care system.

The government turns a blind eye to that and trumpets about its past when health care was good. Yes, it was good in the past, but the demands were there before the cuts. The Minister of Health keeps saying that our health care system is good. He has tunnel vision. He closes his eyes and then stands up and huffs and puffs in parliament and tells us he is for a public health care system and that the government will maintain the five principles of Canada health care. He keeps saying these things.

That is all fine and dandy, but he forgets to tell us that the finance minister keeps cutting the funding. Of course, he is not the one who is implementing the delivery of health care services. It is being delivered by the provinces and the provinces are asking how they will deliver these services when the federal government cuts funding for health care.

On the CHST there is an agreement. The federal government gives money to the provinces through the CHST. The government says it has addressed this issue. Has it really? No, it absolutely has not addressed this issue, because we read in the newspapers and hear from our television stations that the provinces are still having difficulties and want innovative solutions.

Finally the government woke up. Now we have a commission to look into health care, headed by the former premier of Saskatchewan, Mr. Romanow, which I think started two days ago. I must say it was good for Premier Klein and Premier Mike Harris to say they want everything on the table. I am very happy to hear that Mr. Romanow has said he would put everything on the table. Finally we have somebody to look into the whole situation and see how we can best deliver health care services.

Coming back to the equalization issue, I need to repeat that we in our party are in support of equalization, because we believe that all Canadians from coast to coast should enjoy a comparable quality and level of important government services. However, we have a problem, as usual, with the way things are handled by the government. Our opposition to the bill is not based on disagreement with the equalization principle but more on the way it is being handled, the way it is done, because we do not think this is the most effective way to do it.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I welcome the opportunity to address the House at third reading of Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act with respect to the equalization program. The bill fulfils the government's commitment made by the Prime Minister at last September's first ministers meeting to lift the ceiling for the equalization program for the 1999-2000 fiscal year.

In addition to this commitment, the Prime Minister asked the Minister of Finance to consult his counterparts in the provinces and territories as to how best to ensure follow up. The Minister of Finance concluded his consultations before the bill was introduced on March 15.

At the first ministers meeting, landmark agreements were reached on a plan to renew health care, improve support for early childhood development and strengthen social programs. These agreements resulted, through Bill C-45, passed in the last parliament, in the largest federal contribution ever made for health, post-secondary education, early childhood development and other social programs.

Over the next five years, federal spending in these areas will total $23.4 billion, $21.1 billion of it under the Canada health and social transfer.

As hon. members know, the CHST is one of the three transfer programs through which the federal government provides support to the provinces for health care and other social programs. The other two programs are territorial formula financing and equalization. Equalization is the subject of today's debate. Today the federal government transfers approximately $40 billion to the provinces and territories through these three programs.

The purpose of the equalization program is to ensure that less prosperous provinces can provide reasonably comparable public programs and services to their residents without their taxes being out of line with those of more affluent provinces. Equalization has played an important role in defining the Canadian federation since it was established in 1957. In many ways it expresses the generous spirit of Canadians.

The program is unique among federal transfers in that its objective was enshrined in the Canadian constitution in 1982.

The constitution states as follows:

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.

Equalization is also unique in that it was one of the very few programs not touched during the period when the government was struggling to bring order to the nation's finances. This reaffirmed the importance the government attaches to the program as part of the essential fabric of the country.

Equalization payments are unconditional and provinces can spend the money as they see fit. In 2000-01 the seven receiving provinces, Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan, received payments totalling $10.8 billion.

Since 1993 the program has grown by 33% or $2.7 billion. This rate of growth of the program demonstrates clearly that the government understands what equalization means to receiving provinces.

According to the estimates, which are updated twice a year, the program is now at its highest level ever. Over the same period, other non-transfer program spending has grown by 2.6%. The latest estimates released in February by the finance minister show that payments to receiving provinces will be about $1.8 billion higher than estimated last October. These higher figures are due in large part to the exceptionally strong growth over the last two years in Ontario, one of the non-receiving provinces, not to the poor economic performance of receiving provinces. Those economies have been improving each year.

On February 27, 2001, the Minister of Finance announced that there would be an immediate increase in equalization payments of approximately one billion dollars. Of this amount, $52 million is for 1999-2000 and $955 million is for 2000-01. The other $800 million is the additional funding that will be provided to receiving provinces through passage of the bill.

I would like to stress also, as I did during the second reading debate, that the equalization program is reviewed on an ongoing basis by federal and provincial officials to ensure that differences in the abilities of provinces to raise revenues are measured as accurately as possible. Those discussions are under way as we speak. In addition, the program is renewed legislatively every five years, most recently in 1999.

A province's capacity to provide public services obviously depends on how its economy is performing. Equalization payments therefore are based on a formula that measures the relative performance of provincial economies. The formula applies in the same way to all provinces and adjusts automatically in response to economic developments in the provinces.

When a province's economy is booming relative to other provinces, its equalization payments automatically decline under the formula. Conversely, when a province's economy and therefore its fiscal capacity, or ability to generate revenues, decline relative to other provinces, its equalization payments automatically increase. In this way the program acts as an automatic stabilizer of provincial government revenues.

I would urge hon. members to keep in mind that individual provinces do not receive the same amount of equalization because they do not have the same economic circumstances. This year, for example, Saskatchewan needs $230 per person to be brought up to the equalization standard, while Newfoundland requires $2,000 per person. Equalization payments are also subject to ceiling and floor provisions.

The capping provision, which has been applied in only 5 of the last 20 years, enables the program to grow at a rate that the federal government can sustain. By setting a maximum payment level, this provision ensures that the program does not grow at an abnormally fast rate.

The floor provision is the flip side of this coin. It provides the provinces with protection against large and sudden decreases in equalization payments that would otherwise be warranted by the straightforward application of the formula.

The equalization ceiling does not cut entitlements, as some have suggested. Rather, the ceiling allows the program's growth to mirror the rate of growth in the economy and to grow at a sustainable rate. Based on the forecast for GDP growth in last October's economic statement and budget update, the ceiling will rise to $12.5 billion in the year 2003-04.

I would now like to turn to the specific bill we are debating today, which lifts the equalization ceiling for the 1999-2000 fiscal year and only for that year. As I explained earlier, lifting the ceiling fulfils the commitment made by the Prime Minister last September at the first ministers meeting. The final communiqué released at the end of the meeting states that:

The Prime Minister agreed to take the necessary steps to ensure that no ceiling will apply to the 1999-2000 fiscal year. Thereafter, the established equalization formula will apply, which allows the program to grow up to the rate of growth of GDP.

While the final cost of lifting the ceiling will not be known until the fall of 2002 when the final estimates for 1999-2000 become available, it is currently estimated to be $792 million.

That amount will be allocated among the seven eligible provinces on a per capita basis. In order to determine the payment that will go to each, the per capita amount is multiplied by the total population of each receiving province.

Each eligible province will receive an additional $67 per person. Viewed another way, here is the total breakdown per province. Newfoundland will receive $36 million. Prince Edward Island will be eligible for $10 million. Nova Scotia will qualify for $62 million. New Brunswick will receive $50 million. Quebec will receive $489 million. Manitoba's payment will be $76 million. Saskatchewan will receive $69 million.

In conclusion, the government realizes that not all parts of the country can generate the same revenues to finance public services. Federal transfers therefore help ensure two things: first, that important programs are adequately funded, and second, that all Canadians receive reasonably comparable levels of public services regardless of where they live. Bill C-18 contributes to achieving these goals.

It underscores the priority the government places on equalization and helps ensure that the receiving provinces continue to have resources to provide the services their people need and want.

Further, it fulfils the Prime Minister's commitment to lift the equalization ceiling for the year 1999-2000, which means more money for receiving provinces.

Bill C-18 continues the tradition of fairness through which equalization has been delivered for over 40 years. I encourage all members to support the bill and pass it without delay.

Committees Of The House

[Maurizio Bevilacqua, Liberal, Vaughan—King—Aurora, ON]

Mr. Speaker, I have the honour to present the third report of the Standing Committee on Finance regarding its order of reference of Monday, April 2, in relation to Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act.

The committee has considered Bill C-18 and reports the bill without amendments.

Federal-Provincial Fiscal Arrangements Act

[The Speaker]

The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-18.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, it is good to have an opportunity to participate in this debate on Bill C-18, which really goes to the heart of what we as New Democrats have been trying to do in the House and what so many Canadians are concerned about.

It was interesting to hear the comments of the Parliamentary Secretary to the Minister of Finance. I want to register concern about his suggestion that opposition attempts to lift the ceiling on equalization and to eliminate the cap are in any way, shape or form preferential treatment for one province over another. His comments do a great disservice to a fundamental concept, a philosophical instrument, that has been very much a part of the history of this country in shaping it into what it is today.

I am not sure what the parliamentary secretary's main point was in raising his question on the Conservative member's comments around lifting the ceiling, but it strikes me that what we are hearing from both the Liberals and the Alliance in this debate is a fundamental questioning of a principle grounded in the notion of equality. Surely that is what the debate should focus on. That is why it is so important for the government to hear and to act upon the recommendation, which is not just to lift the cap for the fiscal year 1999-2000 but to in fact lift it permanently.

Many of my colleagues in the New Democratic Party have said very eloquently how important equalization is as a principle in the country. It has been said to hon. members in the House that equalization is not only a moral principle but a constitutional principle. In this debate, we are asking the question: if something is a moral principle, is it not in fact morally reprehensible to disband the concept entirely? Is it not morally wrong to remove or to erode a program that has been fundamental to the notion of equality in this country? If it is, as my colleagues have said, a constitutional principle, is the government not wrong not to address the error of its ways when it so arbitrarily put a cap on equalization in the past, and is the government now not wrong not to act to remove it forever?

That is the point of our submission throughout this debate. We very much believe that equalization is there for a reason. It has been part of our history for a long time in order to ensure some measure of equality among all regions in the country. It is in the constitution for a reason. It has been part of our tradition as a nation in terms of building links from one end of the country to the other.

It is our view that it was wrong on the part of the Liberals to implement this cap on equalization in the first place and that it is wrong of the government at this moment not to lift it permanently. Obviously it is a small step in the right direction to lift the ceiling on equalization for one fiscal year. That is a tiny step. It is an improvement. It deals with some of the concerns that have been raised. However, today is an opportune time and this parliament is an opportune moment for the government to put back in its entirety the full equalization program, without its limitations, without its ceilings, without its caps.

It is interesting to hear such clear support from the Conservative member, the hon. member for South Shore, for lifting the ceiling on equalization on a permanent basis. We appreciate that support and that position. However, it is important to point out that in many ways today we are in this dilemma of trying to address and correct a major assault on social policy in the country because of Conservative policies then and Liberal policies now.

I do not think we should let this moment pass without remembering just what kind of damage has been caused to the social fabric of the nation as a result of the Mulroney Conservatives and now the Liberal government which has followed so steadfastly not only in implementing but in adhering to and accelerating the Mulroney Conservative agenda. It is worthwhile to point out that we are really talking about a decade or more of Conservative and Liberal cuts to social programs, a very deliberate assault on our social policies, which is causing such serious ramifications today and around which we are trying to regroup to redress the errors of the past caused by these governments.

It would be fair of us who have been working so hard on these issues for more than a decade in terms of the right wing agenda of both the Conservatives and the Liberals, at least from the New Democratic Party's point of view, to draw the attention of the House to the consecutive cuts and the slashing of programs over the last while, starting with Brian Mulroney and the Conservatives.

Let us not forget that it was under the Conservatives that a cap on the Canada assistance plan was first introduced. Let us not forget that the Mulroney Conservatives used three consecutive acts to amend fiscal legislation in the country, putting funding for education and health on very shaky ground. It was under those steps taken by the Mulroney Conservatives that the country faced the threat of seeing cash for health care and education entirely dry up.

Under the Conservatives, the changes to the established programs financing formula restricted growth in the formula and made it such that given the combination between cash and tax points, cash for health care and education would dry up in at least one province by this year, right at this very moment as we are speaking in the House today.

Incredible damage was done to our social policies, which had to be corrected. Unfortunately, the Liberals came into office in 1993 and by and large continued with that kind of slashing and hacking at our social policies and at our important health, education and social assistance programs. Let us not forget, in fact, that the Liberals promised in the 1993 election campaign to redress those egregious errors and those horrific cuts of the Conservative government. Instead, they very much perpetuated that direction.

We had hoped that the Liberals, once back in power, would lift the cap on CAP and would put back into the formula for health and education arrangements in order to allow for growth in the transfers to provinces, so that our provincial jurisdictions could keep up with the growing threats to the preservation of health care because of demands, needs and changes in the system.

Instead, as my colleague from Winnipeg Centre pointed out earlier, the Liberal government proceeded to make the most regressive social policy change in the history of the country. It took the single biggest bite out of financing and cash transfers for health and education that we had ever seen in the history of medicare.

Enormous damage was done by the Conservatives and it was perpetuated by the Liberals. Today we are trying to catch up. We are trying to address the fact our medicare system, our public post-secondary education system and our equalization program, the programs that are pride of our country, were dealt enormous damage and are on very shaky ground in terms of meeting the needs of Canadians. In fact, they are failing to do precisely what they were intended to do, which was to ensure that all people in the country, regardless of where they live or what community they are from, regardless of their income, their cultural background or their ethnocultural heritage, are able to access those programs that are considered to be fundamental rights and fundamentally part of what it means to be a citizen in the country today.

The Liberal approach has been very much a band-aid one in the last number of years. We hear a lot of rhetoric about trying to patch up the system, trying to move forward based on the resources available and trying to do things in a balanced and responsible way. However, the band-aids are so small and the approach is so ad hoc that we are not able to put a stop to the bleeding and actually start to build again for the future.

For example, I think of all the rhetoric and the great fanfare from the government around money that it claims to have put back into transfer payments. In the February 1999 budget the government made a great deal of the millions of dollars being put back. In fact, it turned out to be two cents for health care for every dollar in tax cuts. Then of course last fall as we tried to convince the government to take its responsibility seriously, the answer was an supposed additional massive influx of money through the federal-provincial agreement in the September accord. That turned out to be enough money to get us back to 1994 levels.

This is hardly the kind of strategy and leadership that one would expect if medicare was so central to who we are as a country and if our social programs were so fundamental to the very definition of what it means to be Canadian. The parliamentary secretary does a disservice to the definition of equalization when he talks in terms of preferential treatment. Probably the accurate definition of equalization is as my colleague, the hon. member for Winnipeg—Transcona put it: to ensure a comparable level of public services in the country. Regardless of the fiscal capacities of the province, regardless of the wealth each province is able to generate based on natural resources and other economic advantages, no one region should be able to have greater benefits.

It would be fair to define equalization as something that was instituted in order to allow provinces with lower fiscal capacities to fund health, education and other provincial programs at tax rates comparable to those in more affluent provinces. That is certainly the understanding of provincial governments. That is certainly the understanding of the government in the province I come from.

In fact, I just quoted from a letter from the minister of finance from the province of Manitoba. The parliamentary secretary may very well be aware of a very detailed letter from that province. I am sure he has received similar presentations from other provincial finance ministers, who are all concerned about the way in which this government has failed to address the concerns that provinces brought to the table and also concerned about the failure of the government to live up to the Prime Minister's words and the commitment he made in September 2000. In fact, the finance ministers in all of our provincial and territorial governments are very mindful of those words and hopeful because of the wording that was agreed to in the communiqué around the September accord.

I would like to quote a sentence from that communiqué because it shows just how much people and the provinces feel they have been let down by the bill before us today, Bill C-18, and by the failure of the government to restore the equalization program on an ongoing basis and to lift the ceiling on equalization on a permanent basis. That communiqué states:

First Ministers raised the issue of Equalization. The Minister of Finance will examine this issue further after consultation with provincial Ministers of Finance. While final revisions for Equalization purposes for the fiscal year 1999/2000 likely will not be known until October 2002, the Prime Minister agreed to take the necessary steps to ensure that no ceiling will apply to the 1999/2000 fiscal year. Thereafter, the established Equalization formula will apply, which allows the program to grow up to the rate of growth of GDP.

The provinces believed from that communiqué that the ceiling on equalization payments would be lifted for the year 1999-2000, as specified in the bill, but they also expected the Prime Minister to actively pursue an extension to that lifting of the freeze for at least another fiscal year. They also expected to see the Prime Minister and the government address their concerns for a growth factor in the formula so that there would be some way for less affluent provinces to keep pace with the needs and demands on their systems.

As an example, I will outline the kind of impact this would have for a province like Manitoba. Manitoba is a wonderful province with great potential but it is not one of the most affluent provinces. It depends very much on the federal government's fairness and commitment to ensuring that cash transfers meet the growing needs in the fields of health and education. It is a province that depends heavily on the federal government to be firmly committed to the notion of equalization.

In a letter to the government, the province of Manitoba pointed out that its potential cost for 2000-01, given the government's failure to lift the cap for that year, was about $100 million. Application of the ceiling to 2000-01 equalization entitlements may actually result in lower payments than for 1999-2000, despite a significant increase in entitlement as generated by the formula.

The minister of finance for the province of Manitoba, Mr. Greg Selinger, goes on to make a very important case to the federal government for lifting the ceiling on equalization for at least another year and for the government to look seriously at the need to fully restore the program as it was originally intended.

The most important message we can bring to the House today, in hopes of shaking up the government and persuading it to amend the legislation while it has a chance, is to appeal again to the sense of what it means to be Canadian, what is a part of our identity and what is very much central to any notion of national unity in the country today. I do not think I need to repeat this as many members have said it so eloquently. It is our notion of equality between regions and between all people in the country.

What we bring to the debate is the notion based on an old cliché “from each according to his ability to each according to his need”. That is the essence of the debate. We are looking at ways to ensure that the wealth of regions can be shared equally across the country and that everyone has access to decent public service, universal health care, education, decent housing, clean water and clean air to breathe. Those are basics. That is the role of the federal government. That is why we have the equalization program.

I appeal to the parliamentary secretary, who I know has been listening intently throughout the debate, to find a way to amend the bill or to accept our amendment before pushing it through. The government has the fiscal flexibility today to do that.

I hear the rhetoric time and time again. It is now time for the government to show what it means to put its money where its mouth is and lift the ceiling on the equalization program for not only this fiscal year, which is referenced in the bill, but for the next fiscal year, and to look at it as a permanent feature of our system.

As has been noted so many times in the debate, it is a moral principle, is it not? If it is, how can we in any sense of the word dismantle a concept that is about equality and about achieving that kind of adherence to that kind of moral principle?

If it is a constitutional principle, how in any way can we justify that there should be a cap on a constitutional principle? How can we justify a cap on morality? How can we justify a ceiling on equality?

I appeal to the government to amend the bill and to act in the best interests of all Canadians.

[Gerald Keddy, Progressive Conservative, South Shore, NS]

Mr. Speaker, it is a pleasure to discuss Bill C-18 regarding equalization from the federal government to the provinces. The bill, if passed, and I expect the government will be able to get its members into the House for an important vote like this one, would lift the cap off equalization payments for the year 2000-01. Quite simply, that is what the bill is about.

It is not a complicated piece of legislation. It deals specifically with an issue and certainly would be a help and a boon to the provinces that need increased equalization payments, especially in this fiscal year.

As we are debating this bill today we know that the four Atlantic premiers, including one of the only two Liberal premiers in the country, are meeting in Charlottetown to discuss equalization payments. Certainly what they are asking the government to do and what we are expecting they will ask the government to do is permanently lift the cap on equalization. There are a number of reasons the government should seriously consider measures such as lifting the cap on a permanent basis.

The concept of providing effectively level taxation or similar levels of taxation and services across the country is perhaps the very cornerstone of Canadian social policy. That was said in the House not long ago by our finance critic, the member for Kings—Hants. I would like to state—

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Mr. Speaker, it is a pleasure to speak to Bill C-18.

As members know, we are against the capping of equalization payments, especially for provinces like New Brunswick and the other Atlantic provinces, but also Manitoba and Saskatchewan.

In a country like ours, where we talk about national unity and where we should be able to work together for our common well-being, it is important to help each other. The goal of equalization payments was to get money to the provinces that needed it, mainly for social programs like education and health.

Now, the cuts imposed upon the provinces create an unacceptable situation and place them in a difficult situation.

I would like to read a newspaper article published in L'Acadie Nouvelle , which summarizes what has happened in New Brunswick. This article, published on March 1, 2000, reads as follows:

The decapping of equalization payments for 1999-2000 will allow New Brunswick to receive $50 million more from Ottawa than what was initially anticipated for the fiscal period 1999-2001. New Brunswick's finance minister, Norman Betts, is far from carried away by the bonus resulting from the decapping of transfer payments and prefers to put things into perspective.

“Fifty million dollars represent 10 days in health care spending. It represents 1% of our $5 billion budget” said Mr. Betts, adding that the province could also receive less money because of the country's economic performance.

Besides, according to official new estimates by the federal Department of Finance, New Brunswick will receive an extra $5 million for the 1999-2001 period.

For fiscal 2000-2001, New Brunswick will receive $1.207 billion from the federal under the equalization program. This amount represents more than one quarter of the province's budget, which was $4.472 billion in 2000-2001. Before Minister Betts can cash the $50 million cheque from his federal counterpart, the Commons will have to pass the bill reviewing the equalization program formula tabled on Tuesday.

This was for the month of March 2001. The article goes on, and I quote:

The equalization program was created to close the gap between the have and the have-not provinces, so that these provinces can provide to the public services comparable to those provided by the wealthy provinces. Three provinces, British Columbia, Ontario and Alberta, get nothing under the equalization program.

As I said, living in a country is something like the unions, which I will use as an example. Within a union, there are big locals and small locals but every member is part of the same union. It is true there are smaller locals with only five, six, seven or eight persons. It is more expensive to give them services because they cannot afford to pay for all those services. I like this example because I think it is a good illustration of what happens in the case of the provinces.

It is called a union because all the workers of the country, big groups and small groups alike, are united in one union. That is how I imagine the country. The country is a group of all 10 provinces and the territories, including the Yukon and Nunavut. All those provinces and territories form the union which is our country.

Whenever we are no longer able to take care of the have nots, why remain a part of it? Why stay in a country if we cannot take care of each other?

The reason a country takes money from the rich, yes I dare to say it and I am not ashamed of it, is to redistribute it. This sharing can be compared to what happens in a family. Sometimes in families those who have more help those who have less. This is what a country is all about.

I believe we have a problem today because we are too selfish. It is everybody for himself. This attitude runs from the top down: the country, the leaders and the governments down to the provinces and the families. We have to show that we can take care of each other. This is why a cap is unacceptable.

If we can help a province to survive and if we are able to invest to create jobs, I think people will be able to manage on their own. However, if we deprive them every day of these tools and if we are unable to make the transfers needed to help those provinces, I think it will go from bad to worse. This is contrary to common sense and to national unity, utterly contrary.

The federal government has a responsibility, which is convincing people, be they from Ontario, Alberta or British Columbia, that this is the way Canada works; all the provinces are together, and we must have a formula to help Canadians all over the country. We have to recognize this.

For example, if Alberta were to say “We are now rich; we have oil and we don't need anybody anymore”, I hope they will not run out of oil, because they might need this formula also. This is what a country is all about.

In New Brunswick, we never asked that the fisheries go the way they went, and we never asked for the elimination of groundfish quotas. We never asked for this. People in fishplants were working 30 to 32 weeks before the moratorium on groundfish. We never asked for this closure of the fishery.

It can get tough for any province when revenues do not come in. Let me take Alberta as an example. I am very glad for Alberta, because it is a rich province, but when one is rich, one should share with the poor. I do not mean that our own region is very poor but it does have certain needs, just as Manitoba does.

The whole country is glad that we have an agricultural industry in Manitoba and Saskatchewan. Thanks to them, we can have three meals a day. We need provinces where agriculture can prosper. It is the same thing in Quebec. Between Montreal and Rivière-du-Loup, farms line the road on both sides. It is nice that we have farmers but it is also nice to have fishers.

People like to visit New Brunswick and other Atlantic provinces. We have people working in the tourist industry. As I said very often in other speeches, people in Toronto are fond of our two by fours but to have two by fours, we need lumberjacks. These people work hard yet they have seasonal jobs. It goes without saying that seasonal workers cannot pay as much income tax as if they worked 12 months per year. Our provinces are losing out on benefits because these are seasonal jobs.

I would like the federal government to show some leadership in this regard, and to say “This is the rule, this is the formula that will help our poorer provinces and keep our country united”. Again, if there is no advantage in being part of a country, why stay in it? What is the country in the end when the federal government makes such cuts in health, education and all the rest?

I will conclude by asking the federal government, the Liberals, those in power, to show some leadership. This is why we have to oppose the capping of the equalization program.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my hon. colleague from Dartmouth for those remarks, many of which I can relate to as I also come from a province that relies heavily on the whole concept of the redistribution of wealth through federal transfer payments.

I want to raise something that has come up recently with regard to the ministers of finance and the first ministers of the various provinces who recently agreed on the arrangement to lift the cap for a one year period and to then reinstate it. The sentiment we are hearing now is that some premiers and some provincial finance ministers feel this is not quite what they agreed to, that what we are dealing with in Bill C-18 is in fact less than what they thought they were agreeing to on, I believe, September 11, 2000.

For the province of Manitoba this is certainly the case. Is it true for the province of Nova Scotia? Is there disappointment that what is being proposed is less than what Nova Scotia thought it was agreeing to at that meeting?

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, it is my pleasure to stand today to speak to Bill C-18. I will be splitting my time with the member for Acadie—Bathurst.

Bill C-18 is an act to remove the cap on equalization payments for the fiscal year beginning on April 1, 1999. The act concerns me and the other members of the New Democratic Party a great deal because of the implications it will have for the have not provinces in Canada.

The equalization program has enabled less prosperous provincial governments to provide their residents with reasonably comparable levels of public service and taxation. Equalization payments are unconditional in that the receiving provinces are free to spend them in public services according to their priorities.

The NDP has always supported transfer payments and equalization payments as a way of cementing the country and its provinces together. Many years ago we had the EPF, the established programs financing program. It was equal, with 50:50 funding for established programs within the various provinces. The NDP believes it was of far greater benefit to the provinces when we had the federal government in control of implementing national standards with the funding formula of 50% and 50%. It was simple. If one of the provinces chose not to comply with the national standards that were in place, it was jeopardized in that the 50:50 funding formula was pulled back.

The established programs financing worked very well. We then saw CAP, the Canada assistance plan, come in, followed by the cap on CAP. Then came the CHST. Now we are seeing a removal of the cap of the new ceiling imposed in a temporary way.

In earlier debates, New Democratic Party members pointed out the devastating impact of the CHST on social programs in the country. It should be stated clearly and abundantly, so the public hears it over and over again, that the government stripped 33% of the funding out of federal social transfers with the CHST. I believe the total figure since 1995 is $23 billion. The government went from $19.1 billion to $11 billion in social transfers.

When the equalization program was renewed in 1999, the ceiling was reduced by roughly $1 billion per year to an arbitrary level of $10 billion in 1999-2000, in spite of the broad objections from virtually every finance minister in the various provinces. It was then indexed by GDP growth in subsequent years.

Adequate levels of equalization and social transfers are critical to provinces like Nova Scotia. Otherwise Nova Scotians would not get what they are entitled to under the constitution, namely, reasonably comparable services at reasonably comparable levels of taxation.

Why do we need federal transfers to ensure that services in Nova Scotia are reasonably comparable to those elsewhere? We need them because our economy is smaller and weaker and does not produce as much wealth as the economies of most other provinces. Because there is less wealth, tax rates in Nova Scotia need to be higher to raise the minimum revenue needed to maintain public services. However, even though we pay a higher rate of taxation than most other Canadians, when it comes to public services Nova Scotians pay more and get less.

Nova Scotians value education and the role that good education plays in making possible a better and more prosperous future, and we in Nova Scotia invest our scarce resources in education. In 1995 Nova Scotians invested 8.4% of their gross domestic product in education. That was the highest rate of investment in education of any province, higher than Alberta, Ontario, B.C. or Quebec. Only Newfoundland put a bigger share of its collective wealth into education.

What did we get as a result? Did we get well funded schools, low pupil-teacher ratios and gilt-edged support services? Not a chance. Because our economy is small relative to other provinces, putting more of our economy into education still left us at the bottom of the class in terms of educational expenditures per student. I have spoken with many people in my riding who do not believe for a minute that Nova Scotia students are enjoying reasonably comparable services when it comes to education.

Health spending is another case in point. Last year Nova Scotians spent 11.3% of their provincial gross domestic product on health. The national average was just 9.3%, but because we are taking a larger piece of a considerably smaller pie the slice was not big enough to adequately serve our population. Once again we paid more and got less. The health care we can afford left our per capita spending the second lowest in the country. It was a full 9% below the national average. With that, we are expected to serve a population that needs more health care, 10% or 15% more than the national average. With those kinds of numbers, we have to wonder whether Nova Scotians are getting health services that are reasonably comparable to those enjoyed by many other Canadians.

Rather than improving, it is a sad fact that financial support has been declining since the promises of comparable service levels were put into the constitution. In 1980 federal transfers amounted to almost 48% of the revenues available to the province of Nova Scotia. By 1993 when the Liberal government took office, the percentage had dropped to 38.6%. Last year it was down to 37.2%.

By lowering the level of equalization payments, which is indeed where Bill C-18 will take us, the government will be moving us even further away from the goal of providing reasonably comparable services at reasonably comparable levels of taxation.

We in the New Democratic Party oppose Bill C-18. We oppose further cuts to the baseline equalization payments. In fact, in a time of galloping surplus we see the need to augment our equalization payments to allow for equal standards of education and health care across the country.

Now is the time to correct the crippling impact of inadequate funding on our education and on our health care, on our schools and on our hospitals. Now is the time to revisit the equalization formula to ensure that all provinces are afforded an equal level of services and all Canadians an equal level of citizenship.

Business Of The House

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Given the motion that has just passed and the unanimous consent, I would like to clarify the business of the House because it has been changed. In any case, there have been consultations about future business which I would like to share it with the House.

After completing the debate on Bill C-2 at report stage, the House will return to third reading of Bill C-8, the financial institutions bill. After this we will call Bill C-18, the equalization bill; Bill C-17, the innovation foundation; and Bill C-22, the income tax bill, in that order.

Tomorrow shall be an allotted day, as already announced.

Wednesday shall be the day allocated for third reading of Bill C-2. I understand there will be some co-operation to ensure that all parties have a spokesperson on Wednesday. I intend to do my part on this side of the House in that regard.

On Thursday we shall resume the list from today, adding at the end Bill C-9, the elections bill. We shall continue the list on Friday, adding Bill C-12, the Judges Act amendment.

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, this afternoon we will continue consideration of Bill C-2, the employment insurance bill. We will then return to the second reading of Bill C-18, the equalization bill. That will be followed by Bill C-17 respecting the innovation foundation.

On Friday we will consider third reading of Bill C-8, the financial institution, and if necessary we will return to Bill C-18.

On Monday, we will return to Bill C-2. If it is completed at report stage, we will return to Bill C-18, C-17 or C-22 on the Income Tax Act, depending on which of these bills requires further consideration.

Tuesday shall be an allotted day, and I believe it is the Canadian Alliance's turn. On Wednesday, we will return to Bill C-2. We will also try to complete third reading of Bill C-12, the Judges Act amendments, and Bill C-9, the elections bill. If we have the time, I will also suggest completing Bill C-4, respecting the Sustainable Development Foundation, before adjourning for Easter.

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I am pleased to make the weekly business statement and to indicate to the House that I intend to do my utmost to have order paper questions answered as rapidly as possible.

This afternoon we will resume debate on Bill C-12 respecting compensation for judges. We will then continue with Bill C-18, the equalization bill, which we started this morning. That will be followed, if there is time, with Bill C-17 respecting the innovation foundation.

On Friday we will consider report stage of Bill C-4 respecting the sustainable development foundation, and any time left will be used on second reading of Bill C-7, the youth justice bill.

In an effort to complete consideration of the youth justice bill, we will continue discussing that bill on Monday next.

Next Tuesday we will commence report stage of Bill C-8 respecting the financial institutions legislation. Should that be completed, we would then continue with Bill C-22, the income tax amendment. As previously announced and as adopted by the House, in the evening there will be a special take note debate on the summit of the Americas.

Next Wednesday, March 28, we will debate Bill C-2, the employment insurance amendments, at report stage and hopefully have third reading on next Thursday, March 29.

That is the agenda of the House for next week.

Federal-Provincial Fiscal Arrangements Act

[Greg Thompson, Progressive Conservative, New Brunswick Southwest, NB]

Mr. Speaker, Bill C-18 is certainly an interesting debate. I guess it brings out the best and the worst in us. Some members in some parts of the country forget that Canada is a very generous country. Canada, as we well know regardless of our politics, has been defined by the United Nations as the best country in the world.

One of the reasons for that is equalization. It is an accepted reality in the country that not all the provinces are equal in terms of resources and richness. The government and the governments that preceded it, going back to the early sixties, recognized that and have been very generous over the years.

We can argue on points of generosity and whether or not the present formula works. However, if we were living in a perfect world and Canada was absolutely perfect, we would not need equalization. Unfortunately Atlantic Canada and some of the western provinces are not blessed with oil in the ground at $40 a barrel. That is a reality. Who do we blame for that, the Prime Minister or the Almighty? It is beyond the Prime Minister's capacity to put oil in the ground in every province, although I guess if we want to be entirely political we could attack him on that as well.

I wish to point out, and I hope that my colleagues from Alberta are listening, that from 1957 to 1965 Alberta received equalization from Ottawa. What does that tell us?

It tells us that it was not always rich and that it was not always prosperous. The energy there in its early years was just as Nova Scotia's is now, in its infancy. The major difference was that at the time Alberta received 100 cents of every royalty dollar that came in. For every dollar that it took out of the ground in oil, it kept it.

What we are arguing in Atlantic Canada, and especially our friends from Nova Scotia who are now blessed with natural gas, is that it should have the same formula applied to it as was the case in Alberta.

If logic prevails, and it does in this argument, and if we want to raise ourselves to a level of sustainability in terms of the economy and diversifying the economy, we need the tools to do that. The biggest tool of all is a financial tool, the financial resources to build a strong economy as Ralph Klein has done in Alberta and Premier Lougheed before him. It is building on the principle that what is ours is ours and we will use it to benefit the people of our province. That is what we are talking about in New Brunswick. The formula has to be revisited. Mr. Speaker, with your permission I will revisit—

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

Mr. Speaker, I will be sharing my time with the very nearly right hon. member for New Brunswick Southwest, who will continue with the second part of the discussion on this bill.

I must admit that when I was preparing my speech on this bill, when I saw that the minister was introducing a bill, and when I saw that the title on the first page was “an act to amend the Federal-Provincial Fiscal Arrangements Act”, I was pleased. I said to myself that the people of Quebec, the maritimes and elsewhere do have some influence, because they have managed to convince the Minister of Finance.

Perhaps finally the Minister of Finance has listened, perhaps he has travelled around the country without anyone knowing. Perhaps he went to ask the provinces what they thought of the equalization payment system. Perhaps he did this without anyone knowing about it.

I asked my assistant “Did you just bring me the first page of the bill?” She told me “No, that's it”. The title of the bill is an act to amend the Federal-Provincial Fiscal Arrangements Act. I said “There is a problem with the photocopiers at the House of Commons, something is going on. That is it”.

I must say that the Minister of Finance has not travelled in the country, he has not met the ministers of finance of the various provinces and he has not listened to what is going on in the maritimes or Quebec. So, there is a bill with fewer clauses than the clarity bill, but we will not get into that. That is to say that it is not very impressive.

I just want to add one small thing before I go on. Yesterday, it was announced that the former head of the Reform Party would be leaving in the course of the year. It was said that a page of history had been turned, that it was the end of the name Reform and its approach. It is a new century, a new approach. Not really. There he is today.

The government is trying to cover up the fact that, to please people in Ontario, Quebec and the maritimes, there must be no opposition to equalization. Out west, it has to say that it is against equalization, but elsewhere, it has to say it is not. Today, however, we realize that it is opposed to equalization. But there is more to it than that. It is the examples it gives in order to justify it being more or less opposed.

Basically, it is saying “If you get a welfare or an unemployment cheque from a government, if it involves an individual, or equalization payments, if it involves a province, then you are not worth much”. I remind members that they get cheques from the government themselves, and I am not sure what they are worth.

That said, for us, equalization payments are vital, but they need to be modernized. However, we realize that the Minister of Finance is under a lot of pressure. We say to him “You must change your system. It is not right. You are penalizing the provinces, and offending others. So, let us sit down and see what we can do together”. The minister's only reply, so that we will leave him alone, is “I introduced a great bill. I am removing a ceiling”. Yes, but where are the walls, where are the foundations of the equalization program? These are the things that must be rebuilt, with the provinces, with our partners in Confederation. But the government does not listen.

I heard the parliamentary secretary to the minister say “Listen, we are giving you a cheque”. He told the hon. member for Winnipeg—Transcona “You will get an additional $22 million”. This is a paternalistic system. One must practically get down on one's knees. Come on. This is a system that is in effect from coast to coast, not from minister's office to minister's office.

The government should listen to what is being said in all the provinces. I am not saying it should agree with everything. No. The Premier of Newfoundland is going around saying that changes are necessary. We want to make it and we will succeed. Give us a chance. But, no, that is no good, according to the government.

I should point out that the Premier of Nova Scotia is a Conservative. So are the premiers of New Brunswick and Prince Edward Island. And the Premier of Newfoundland will also be a Conservative. The current Premier of Newfoundland, as the hon. member from Newfoundland rightly pointed out in his speech, was recently elected leader of the Liberal Party in Newfoundland. He has contacts in Ottawa and he told his people “They listen to me in Ottawa. I will get a commitment from the federal government to renew the equalization system. You will see. The Minister of Industry and the Prime Minister are good buddies of mine”.

Off he goes to Ottawa. He tells his people back in Newfoundland “It's settled. The Prime Minister agrees with us, and so does the Minister of Industry”. A few minutes later, the PMO says “Not true”.

I know comparisons are odious, but I still cannot help but think of the English Prime Minister who went to Germany, and came back with a piece of paper. He announced “I have settled things with the German boss” but war was declared just a few days later.

All that to say that this system does not work. The only thing Bill C-18 does is to try to silence those who want to see major changes. We are told that more provinces should be added to the five currently used as the basis for calculating the equalization payments. There are arguments on both sides, but our immediate answer is no.

The Maritimes have sufficient resources to return to what they once were, but are told that this is not good, that it will not work. A balance must be struck. There is much talk of openness. As I have said on many occasions, the ruling party's conception of this country differs from ours in a number of ways, and of course from the other opposition parties as well.

For us, the country is comprised of regions and provinces, which decided to join together. As we know, first there was Quebec, Ontario, the Maritimes and later the west and the north. They have joined together and have a central government for shared services. This is a principle we defend.

The Liberals' principle is a different one. Canada is Ottawa, which in its great goodness, its vast generosity, will give little handouts to the regions and the provinces. This is ignoring history.

These two conceptions mean that Ottawa's management style varies from one party to another. When it is them, it means we have to beg the whole time. When it is another conception, it means simply getting together, discussing and agreeing. That is the difference. True, it is not always easy, but it is an approach that must be changed.

On the question of equalization, I remind the House that Bill C-18 is simply a bandaid, what we call a plaster. Do you know where they stick the bandaid? It does not go on a leg.

I listened to the parliamentary secretary say “Stick your bandaid, Bill C-18, here, provinces. Stick it on your lips. That is the end of that. Until 2004, there will be no talk of equalization. It is finished”. Will the Minister of Finance still be here in a few months' time? We will see. We will see who is going to be the next leader of the Liberal Party. That is going to change, we know. We know the individuals are going to change.

Mr. Speaker, between you and me, I hope that the approach will change as well, that the government will connect again with what is going on in the provinces and regions. They will never listen to the argument that the poor in one province pay for the rich in another. If our tax arguments, our economic and political arguments are based on such demagoguery, this is not the country I know. Thank God that people will fight that.

That said, we are very disappointed by the first page of the bill, which could have had the government reconnect with the regions and with the economic challenges facing the various provinces. We do not have a bill, we have a first page, that is all. Together with our partners in the provinces, we will push to have the bill complete.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Mr. Speaker, I am very pleased to speak on this important debate on Bill C-18. This is a bill of a temporary measure, but it is good for us to be able to see it in the larger context.

I would like to say something about the basic philosophy of equalization payments. What it says is people in Canada who cannot afford certain services because of their wealth or lack of it are still entitled to basic services. I cannot emphasize enough that I agree wholeheartedly with this premise.

The Prime Minister sometimes says, when he speaks of helping those in need, that this is the Canadian way. Unfortunately, in our political environment, it is all together too selective at times. We see certain people who have their needs met almost instantaneously and others have to work for years and years to have their needs met.

I am thinking of the tainted blood scandal and the hepatitis C victims. These are people who, because of a lack of proper procedures by the federal government, were injured by that very specific shortcoming of the federal government. Other provinces, such as Ontario, said that these victims should all be compensated for their loss, but not all of them were. In the federal government scheme of things there was a very narrow window defined. If they were outside of that window, it was too bad.

It so happens that my uncle died from hepatitis. He left a widow. He was in that exact category. He was diagnosed with a brain tumour. The operation was successful and he bounced right back. Before the operation he had problems with headaches and disorientation. However, his recovery took very long. He was always ill. Eventually they diagnosed that he was a victim of tainted blood. He had received hepatitis via his blood transfusions during the operation. He was outside the window for compensation. Is there any compensation for that loss? It seems not, so they fight and fight. Yet others receive aid very quickly.

In the larger scheme, when an election is coming and there is a flood, the promises of compensation and aid to farmers suffering from the disaster are immediate and are large. If it is not during an election or if it is in an area where there does not seem to be a great deal of political capital to be gained, it appears to us, as objectively as we try to look at it, that there is some bias on whether or not that helping hand is extended. I personally believe that we need to give a helping hand to those who cannot afford these things.

I grew up in Saskatchewan. I was born on the prairies, a first generation Canadian, my parents having been youngsters when their families escaped from Russia and came to Canada to make it their home. I remember very well in the early years of my life, which would have been in the 1940s, there was not a great deal of aid for people who were in distress. I know it is hard to believe I am that old, but I am getting there.

It was not an unusual occurrence for my family that the church community I grew up in would reach out a hand to those who needed it. Sometimes it was in the form of a loan. Sometimes it was in the form of outright gifts. Sometimes there were food transfers. That was the way things were done because we were people who were compassionate for those in need.

Later on when my wife and I were married we became aware of a couple who had come to Alberta from Ontario or even farther east. I do not remember which province they were from. They had moved to Alberta and they were in dire straits. They had no jobs and no income. He claimed that the police had stolen his car. We later found out that the police had confiscated it because they could not get into the trunk and they suspected there were drugs in it, but that is another story.

This couple was without food and without shelter. We did not go to a welfare agency. We did not see what we could do to get public funds for them. The way we thought was a natural thing. We knew these were people in need and we looked for ways to help them. I remember trundling groceries up to the second floor apartment that we had arranged for them. We made the payments on the rent for the first month or two so that they could get settled. One of the men in our group gave this man a job. We tried to help them.

Through the process of ever increasing taxation and with the present Liberal government and past Liberal style governments we have had over the last 40 or 50 years, we have had an increasing shift of social responsibility away from families, away from churches, and on to the government. Nowadays we end up with very little fiscal capacity as individuals and as families to actually accommodate the needs of people we encounter.

It is much more natural now to say we will see if we can help people get to the social services centre where there is a government program. This seems to be a general trend that our governments have taken over the last 30 or 40 years. In a way it is good, but it also has a tremendous downside, which is that while it trades on the fact that we as Canadians are compassionate to people in need, it takes away from us the capacity to actually exercise that compassion.

We are taxed to death. I was talking to an individual just yesterday and said that as a young family the decision was made that my wife would be a full time mom, so I was the sole wage earner. Even then our marginal tax rates were 40% to 45%.

I taught a night class instead of having my wife take a job. I taught full time in the daytime and I taught a couple of night courses to supplement our income. I used to say I worked Tuesday nights for Trudeau and Thursday nights for my family. Basically people live on half of their incomes.

One of the reasons I became a member of parliament was to try to address the question of the huge overtaxation. My family and thousands of families like us have lived on something between 30% and 50% of our income. I believe in personal charity. Over the years, besides having 50% of my earnings taken away from me for taxation, I have usually given between 10% and 20% of my income to charities.

In addition, since we were looking at retiring on only my pension which was not that great I put a little into RRSPs. Another 8% to 10% went into that. I had 30% of my salary left. We struggled month after month to pay the bills.

The situation has not changed a great deal. I can say it is great that we live in a country where everyone has free health care. I concur with that, but it has to be done efficiently. The federal, provincial and municipal governments took their taxes from money I had worked very hard for. I really needed a greater income for my family. I am speaking now of before I was a member of parliament. I do not want anyone to conclude that I am crying because I do not earn enough here. We struggled and said that if they were to take that money they had better use it very wisely.

One reason the Conservatives fell out of grace with many people in the west was that they were not perceived to be handling the money properly. They were not addressing the question of the debt. They were not addressing the question of huge interest payments.

I resented the fact that half of my income went to taxes and of that 30% was being used for interest payments on a debt which had burgeoned out of control because of lack of fiscal control by the government. That is why I came here.

Today we are talking about equalization payments. While I am in favour philosophically of helping people who need help, I am not in favour of doing that in an inefficient, wasteful or unfair way.

In passing, I should like to make a statement about equalization payments. Since they are done based on provincial numbers, there is no recognition of the fact that poor people are living in all provinces. Over the years I have thought of this often. Here is a specific example.

I was a young teacher with a young family, trying to make ends meet, making $6,000 a year. Through my unemployment insurance, it was called UI in those days, I was subsidizing a fisherman who made $18,000 a year. It somehow seemed to me unfair because I had no eligibility to ever make a claim. This was especially the case in those years when I was a student and my part time job required that I make UI contributions. I would quit in fall to go back to classes and I was not eligible to receive any benefits. That money was going to subsidize people who were making 20, 3 or 40 times as much as I was.

That is one thing the equalization program does not address. If we have poor people living in the so-called have provinces, they are proportionately disadvantaged compared to in some cases rich people who are living in the have not provinces. The well off people in the have provinces are paying huge amounts of money. I guess the Liberal way is to tax them to death.

When we proposed to level off the tax burden for those who make an adequate amount of money, we were told all we wanted to do was give tax breaks to the rich. The fact of the matter is that the equalization program gives transfers to provinces where some very rich people live, and those people benefit from those transfers.

I will put this in perspective. Most people here know the history of transfer payments. I picked up a book which had a chapter on them and found out a few things that were rather interesting. For fiscal year 2001 it is estimated that the total cash payments from the federal government to the provincial, territorial and local governments will total almost $25 billion. That is a lot of money.

I play with mathematics as some people play on the golf course. Whenever I have an opportunity to do some simple math I do it for recreation. Some time back I built a spreadsheet showing the major federal transfers to the provinces. From 1980 until 1999 I have a breakdown of the total major federal transfers from the federal government to the individual provinces.

It is fascinating to see that in that 20 year period Newfoundland received a total of some $22.5 billion in transfers; Prince Edward Island, $4.9 billion; Nova Scotia, $28.7 billion. New Brunswick, $24.9 billion; Quebec, $178.3 billion; Ontario, $154 billion; Manitoba, some $30 billion; Saskatchewan, almost $20 billion; Alberta, close to $40 billion; and British Columbia, almost $53 billion.

From 1980 to 1999 the total major federal transfers to the 10 provinces was $556 billion. That does not include Yukon and the Northwest Territories. At that time Nunavut did not exist. That amount essentially is equal to our national debt. If we add in the Northwest Territories and Yukon, the total major federal transfers to the provinces and territories for the 20 year period was $573 billion. By a strange coincidence that is almost equal to the present value of our national debt.

We agree with transfer payments, but they must be made wisely. It looks to us as if we could have had zero debt if they would have been managed better. I am not in any way suggesting that transfer payments should not have been made, but meanwhile with the growing rate of the debt there are interest payments due every year. The federal Liberal, then Conservative and then again Liberal governments did not address this issue until we came along and pretty well pushed them into it. The debt is out of hand. We are now spending $30 billion a year on interest payments. That should not be the case.

It is also interesting to find out that the whole idea of transfer payments is almost as old as history. It is included in our constitution. As a matter of fact most of us know that the repatriated constitution of 1982 has a clause in it which supports the concept of equalization payments. The formal system of equalization payments as we have come to know it today actually came into being in the mid-1950s when I graduated from high school. Now a very complicated formula is used which I wish I had time to explain to people.

I have been on the finance committee now for several years. Several years ago we had experts explain to us how the federal system of equalization works.

I remember with some amusement that during those hearings I asked one of these officials, after he had gone through a number of convoluted explanations of how these different things work, if there really was anyone who understood this totally. He looked at me and said probably not. He sort of admitted that even he, being one of the officials, did not know everything about it. He specialized in one area.

It is indeed very complicated. The federal government, in computing the amount of transfer payment, does not to compute how much income each province earns. Rather, it has a formula which, in 34 categories, looks at how much income the provinces could earn. There are different categories for the building of a national average. From that national average, the federal government computes, province by province in each category, whether each province in each category is in a surplus or deficit situation.

I remember when the government added the lottery category about five or six years ago. It was not a question of how much money a province earned through lotteries but how much it could earn. At that time, the equalization payments to Manitoba dropped by about $50 million. Why? Because even though there were literally thousands of people in Manitoba who on principle did not support the lotteries, it was deemed that it could have raised this money if those people would have bought those lottery tickets.

The fact that they did not buy the tickets meant that the provincial government did not have the income. If the people of Manitoba could be persuaded to buy lottery tickets, that would give their government more money. The fact that they were not persuaded took the money away from the provincial government and the formula took the federal transfer payments from Manitoba as well, because the federal government deemed that this was an amount that the province could have earned.

We have documented in the public accounts and other sources the formulas that are used to compute these payments. If I look at the lottery ticket revenue, according to this formula Newfoundland is $31 million short on lottery revenue. P.E.I. is $2.4 million over. Quebec is $63 million under. This qualifies the different provinces for transfers based on whether they are in a positive or negative situation. Alberta is in the plus category by $159 million. Consequently its equalization revenue is actually increased because of the amount of revenue that it presumably could earn using lotteries.

That is just one category. There are many others. They include the sale of licence plates for vehicles. They include many other categories. All 34 categories are listed in this documentation. It is interesting to see how, by using this formula, the government is able to arrange for different amounts of money, sometimes motivated for or by political reasons, for transfers to the provinces.

In conclusion I will simply say that we support in principle utilizing the wealth that we have in order to provide a comparable level of services to all of our citizens across the country.

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Mr. Speaker, I rise on behalf of the people of Surrey Central to participate in the debate on second reading of Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act. Earlier the finance critic of the Canadian Alliance, the hon. member for Calgary Southeast, highlighted very beautifully our position and the weaknesses in the bill.

For the benefit of the folks at home I would like to tell them that for fiscal year 1999-2000 the bill removes the ceiling that would otherwise apply to equalization payments.

We recognize that different provinces and regions of Canada have different levels of wealth. All wish to provide similar services to their residents. We are committed to the constitutional principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide their residents with reasonably comparable levels of basic services at a reasonably comparable level of taxation. It will allow all Canadians from coast to coast to enjoy a comparable quality of important government services.

The bill implements a commitment by the Prime Minister to the first ministers to lift the cap on the first year of a five year cycle of equalization payments. Bill C-18 would increase equalization transfers by $792 million with over 50% going to Quebec, a per capita increase of $67.

The increase results from growth beyond the $10 billion ceiling. It was done to accommodate the demands of provinces made during negotiations with the premiers over the $21.1 billion CHST transfer package which was concluded in September 2000.

While the Canadian Alliance is open to exploring a new equalization system, that does not penalize poorer provinces that benefit from unexpected growth or new resource royalties, we believe the equalization formula should be consistently applied.

The official opposition has consistently called for reform of the equalization system to allow the poorer provinces to benefit from their economic development. Nova Scotia's Conservative Premier John Hamm is calling for equalization reform as part of his campaign for fairness. When he was premier of Newfoundland the industry minister also spoke in favour of equalization reform. There is a need for equalization reform and everyone is talking about it.

For every dollar a province gains in royalties, the federal government reduces its equalization payments by about 75 cents. The current equalization formula actually prevents the equalization of economic opportunity among the provinces. The bill merely touches on one aspect of the problem. There are many other aspects that I will be talking about in detail a little later.

Rather than address the issue of equalization payments on a piecemeal basis, a full and thorough debate is needed in the House. The equalization ceiling exists to protect federal taxpayers from excess growth in payments.

The Canadian Alliance supported the $21.1 billion increase in the 2000 CHST fiscal accord. We also supported reviewing the application of the formula to stop penalizing provinces that experience strong growth or increases in the non-renewable resource revenues. We believe that maintaining the ceiling is necessary for the overall integrity of the program.

We also believe that the equalization system should serve the longer term purpose of equalizing economic opportunity and autonomy in all regions and should not create incentives for perverse economic policies on the part of provincial governments.

The lifting of the cap is a one time ad hoc reaction that fails to address the bigger and longer term problems. It was promised for purely political reasons. It may be good politics, but is it a good policy? The fact that this one time band aid solution is even being proposed indicates a need for open disclosure in parliament, in the provinces and among levels of government to come up with ways to prevent the necessity of applying such band aid solutions time after time.

I will describe the equalization payment system that the government operates. Every five years since 1957 the federal government through the finance department reviewed the equalization program. The purpose of the equalization program is to equalize provincial revenue raising capacity. In theory, this enables provinces to provide reasonably comparable levels of public service at reasonably comparable levels of taxation.

Without equalization payments Canada's wealthier provinces would be able to provide more services to their residents than the poor provinces could at the same level of taxation. The equalization formula is important to the Canadian federation.

The program is only as good as the processes that allow it to keep pace with the provincial tax system. The key element in the equalization formula is the representative tax system called RTS. The RTS is a hypothetical tax system that is supposed to be representative of the actual systems of the separate provinces. The key to success rests on how well the RTS reflects provincial tax systems. The RTS should be comprehensive, representative, accurate and appropriately categorized.

The RTS should include all revenue sources used to support public services comprehensively. Partial coverage of the revenue sources yields a biased picture of the relative fiscal capacity of the provinces. The RTS should use definitions of tax bases that reflect the tax structure actually used by the provinces to reflect what governments actually do. It should not represent imaginary, unfair and unrealistic measures. It should be representative of the actual tax systems used in the provinces or in the country. The data used to measure the various tax bases must be as accurate as possible for it to be a reliable measure.

The items in the RTS that make up a category or revenue source should have common characteristics, the ability to be taxed at a similar rate and should be appropriately categorized. The finance department currently uses such criteria for its assessment of the RTS, but nowhere is it explicitly set out.

The finance department has not formalized the set of principles to guide its review of the RTS. The need for a formalized set of principles is necessary if we are to arrive at a common way of estimating the tax base for the provinces. For many of the 33 revenue sources used by the department as measurements, the bases are not straightforward and no consensus exists.

We on this side of the House have been trying to force this weak Liberal government, that lacks vision, to do the work necessary to fix the system.

I spoke to the bill in the last parliament when the five year time period expired. As I mentioned earlier, the House debated the details of the equalization program and how it would operate for the next five years. At that time the government had given the House only a matter of days to deal with a bill that it was passing, the one that has to be passed every five years for the purpose of the operation of the equalization plan.

It was really an outrage. The government did not want the opposition parties in the House to have very much time to talk about equalization payments. It held back the bill for three days and then there were only a few days left before the calendar year deadline approached. The Liberals said that they had to rush the bill because the clock was ticking. That was because they would not put the puck on the ice until five minutes was left in the game.

Today we are debating a bill that is tinkering with the nation's equalization program, a program that we all support and that we all want to operate in the best possible manner. The Liberals do not want to do that work. The bill touches only one aspect of the problem, ceilings. How about the other related and more serious and complicated problems that the bill does not address at all? The Liberals are pretending that other problems do not exist. Maybe the problem will go away by pretending that the problems do not exist.

I will give six examples to prove what I am saying.

First, some provinces calculate their payroll taxes on the total payroll of business, while other provinces tax only a portion above certain thresholds. Still other provinces charge no tax at all. For the purpose of RTS, the base chosen across all provinces must be common.

Second, for sales taxes, the base used in the RTS is no longer representative of the tax structure used by all provinces. The four provinces that account for a third of Canada's population use a common sales tax base, the GST, which is different from the one used in the RTS. We are comparing apples to oranges. They are not equivalent. There is a need to review the way the sales tax base is currently measured.

Third, there are user fees which are not part of the current federal-provincial discussions for the 1999 renewal. it is very important to mention that governments at every level are resorting to alternative revenue sources such as user fees. It is a tax with only a semantic distinction.

Provincial and local government receipts from user fees doubled from $6 billion in 1984 to $12 billion in 1994. It doubled in 10 years.

How these revenues are treated in the equalization formula can have a significant effect on overall equalization payments. User fees imposed by the provinces have been part of the equalization of the RTS since 1967.

Similar fees imposed by the municipalities were brought in with the 1982 renewal. They are currently included under the miscellaneous revenue category of the RTS. It is a category that is altogether different and impacts on the calculations of the complicated equalization formula.

Fourth, since 1977 lottery revenues have been treated as a separate revenue source in the RTS, with gross revenues from the sale of lottery tickets constituting the lottery base. It worked well until the provincial gaming sector became significantly transformed. Today, provinces are operating video games, casinos, bingos, VLTs, break-open tickets and other games of chance.

The RTS base does not cover these newer gaming activities. This is unfair. The revenues are treated differently for equalization purposes. Where a casino is operated by a provincial lottery corporation, profits are equalized under the lottery revenue source. If the casino is operated by a government department, the gross revenues of the casino are equalized under the miscellaneous revenue source in the RTS. Again, the weak Liberal government allows mixing apples with oranges. Similar inequities arise in the treatment of revenues from other games. That is unfair.

The RTS has become less representative of the provincial taxing policy. We will see if the government is addressing these gaming inequities in the bill. It has its chance. It needs to look at it.

Fifth, is resource taxation which is an area where the ground is always shifting. The resource revenue type bases in the RTS are measured on the basis of the value or volume of production.

Ideally they would be measured on the basis of economic rent or the value of the resource over its cost of production. Rent is a measure of taxable potential, not actual but potential. It consists of a value that can be taxed without affecting production because natural resources in different locations can differ in quality and production costs. Rent associated with them can also differ significantly. These differences are not captured by the value or volume of production.

There are many flaws in the present equalization program. It should be completely reformed. We know the equalization provision has limited the cumulative growth of total equalization payments to the cumulative growth of GNP, gross national product, from the base.

Sixth, the ceiling and floor levels were introduced. I will not elaborate on that much but it does not work favourably. Rather it would make it difficult for the provinces, particularly those close to the floor level, to plan their budgets.

There is asymmetrical treatment of underpayments and overpayments. The overpayments are treated as non-interest bearing loans to the provinces. This is an important one. In the last year or so, it cost the federal government $38 million.

Free use of federal funds is not necessarily shared equally by all of the receiving provinces. The federal government does not charge interest on the underpayment. So the government has manipulated the program for political favours. The former premier of Newfoundland, who is Minister of Industry, was given a gift before the election. That is the kind of favours I am talking about. That is how the government can manipulate because the system is not fair.

Evolving over many decades, every five years the traditional political parties have given us an extremely convoluted and complex process. If the design is so archaic and cryptic that it defies logic and reason. It is not fair that our system is such a conundrum. Equalization as it is structured is divisive. It pits one Canadian against another. That is not right. The measurements should be accurate, reliable and sound. In this case, they are not.

The Reform Party of Canada, now the Canadian Alliance, advanced the new Canada act which sought to improve the Canadian political and economic system. There is a need for a single social union agreement on transfers from the federal government to the provinces.

Since we are debating the bill, I ask the government members to please look into the whole issue and make a serious attempt to reform our equalization program.

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise today to speak to Bill C-18.

The official opposition, the Canadian Alliance, supports the principle of equalization payments, but we do have certain concerns relating to this particular bill.

The official opposition does support in principle the constitutional obligation of equalization but has particular concerns with respect to the bill.

We just heard a fairly comprehensive overview of this legislation from the Parliamentary Secretary to the Minister of Finance. We also heard him set it within the larger context of federal fiscal transfers to the provinces. However, the bill is quite narrow in its scope, much narrower than my hon. colleague's comments would suggest. It is strictly limited to increasing or lifting for one particular fiscal year the ceiling for equalization payments. It does so for the fiscal year 1999-2000, now nearly two years past.

At the outset, my colleagues and I are bound by the democratically approved policy of our party to support the principle of equalization. Our manifesto states:

We recognize that different provinces and regions of Canada have different levels of wealth but all wish to provide similar services to their residents. Therefore we are committed to the constitutional principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide the residents with reasonably comparable levels of basic services at reasonably comparable levels of taxation.

We do support the notion that in a large and complex federation with fairly significant disparities in wealth, income and standards of living the federal government ought to play some function to equalize access to core public services at reasonably comparable levels of taxation.

Having said that, we do believe that the current formula and structure of equalization should be open for serious debate and review. Most provinces have called for such debate. We in the official opposition would like to be on the record as embracing that. We believe there are many problems with the current system, many unintended consequences that have the effect of both penalizing those provinces that are successful in terms of economic development and growth and penalizing taxpayers in the so-called have provinces.

It is often observed that in a country as wealthy as Canada it is inappropriate to suggest that we have seven provinces out of ten that are perpetual have not provinces. The mentality of the current equalization system perpetuates an attitude among some which is contrary to economic development.

One point we in the opposition have raised and hope to explore is the idea of opening negotiations to look at allowing provinces that are now bringing on stream certain non-renewable resource revenues to not be penalized in their equalization payments from the federal government for those new revenues for at least a period of time.

As the system is currently designed, there is what many economists refer to as a welfare trap phenomenon, where earning incremental income, or in this case developing incremental revenues to the provincial treasury, results in a proportionate reduction in federal transfers to the equalization program. This is a perverse incentive against domestic economic development among the so-called have not provinces. That is one of the many areas that ought to be explored.

We ought to explore whether indeed the formulae are applied or calculated on a fair and equitable basis and whether all provinces rather than some provinces should be included in the calculation of the equalization formula, as some provinces have suggested. We ought to take a hard and close look at the application of both the floor and the ceiling of equalization. We should see whether this program is really working to equalize access to core public services across the country at comparable levels of taxation.

It has been observed by academic economists including, for instance, those at the C.D. Howe Institute, that perhaps a better way of equalizing access to quality public services across this broad nation is through income sensitive transfers to persons as opposed to insensitive transfers from one government to another.

These economists have asked us to reflect as policy makers on the paradox, for instance, that there are members of, say, my constituency, a western riding in Alberta that is the largest contributor to equalization, who earn below average incomes. They are from modest families with modest means who are nevertheless obliged to pay a very large share of federal taxes. A portion of their taxes goes to finance the equalization program.

Most of my constituents would not object to the general principle of sharing opportunity and wealth across the nation. However, these economists ask us to reflect on how efficient this transfer of wealth is from government to government and from taxpayer to taxpayer in a way that is not sensitive to income. When the lower middle income family in my riding pays more taxes to finance equalization, it may have the impact of improving the road system, or the health care system which, for instance, is used by, among others, higher than average income people in other provinces.

Some economists have suggested that the current way the program is designed is perhaps not the best way to maximize the equalization of opportunities across the country. They suggest that instead the best way to do that is to redistribute wealth from higher income people, wherever they live and in whichever province they happen to reside, to lower income people, the working poor, who need a hand up. That is an interesting observation by academic economists, which I think ought to be included in the broader and more thorough review of the principle of equalization and its application.

I also think that this larger debate unfortunately has not been engaged by the government. Instead, the government tends to approach the issue of equalization on an ad hoc basis and in the crucible of very political negotiations with the provinces. That is not necessarily the best way to make good public policy.

I would point out, for instance, that the bill brings to us an amendment that lifts the ceiling on equalization payments for the fiscal year 1999-2000, pursuant to an agreement struck between the Prime Minister and his provincial counterparts on September 11 of last year.

Hon. members will no doubt recall that the date, September 11, 2000, was about a month before a federal election was called. Certainly the Prime Minister had the electoral timeline in mind. All of the premiers and public commentators were certainly aware of the very distinct possibility of a federal election on the horizon. It was in that very politicized context that this agreement was reached.

Some commentators have said that what we have before us today, this lifting of the ceiling, was a political demand put on the table in a horse trading session with the premiers and that the Prime Minister agreed to lift the ceiling for at least one year. That is not exactly how we ought to make serious, sober public policy decisions regarding hundreds of millions of taxpayer dollars, in this instance increasing equalization payments by some $792 million.

The ceiling is there for a reason: to protect the federal government from unforeseen increases in these payments. It is matched by a floor as well so that provinces are protected from an unforeseen reduction in equalization payments. For some 20 years now, I think, we have had this system that precludes wild variations or aberrations in the payments, either too much or too little, to the provinces. For the Prime Minister to simply politicize this very important part of the equalization structure in the crucible of an election campaign shows that he is not really committed to a serious, sober review of equalization and its application. That is something we would call on the government to engage in.

I am pleased to say that my hon. colleague from Portage—Lisgar, who is the official opposition critic for regional equity, will be speaking to the bill later today and will perhaps outline some of the principles he thinks should be included in a general review of equalization and the federal-provincial transfer arrangements.

Our party did support certain elements of the accord reached between the premiers and the Prime Minister in September of last year, particularly with respect to the restoration of funds stripped out of the Canada health and social transfer fund since the 1995 Liberal budget. I know I do not need to remind this place that in that budget and since that budget, the federal government removed some $23 billion in real hard cash dollars that were designated to the provinces to finance the highest priority program areas of Canadians, namely health care, higher education and other social priorities.

In poll after poll Canadians register health care as their single highest public spending priority. Yet when the government was given an opportunity to demonstrate its fiscal priorities, what did it choose? It chose to slash, gut and eviscerate health care funding to the provinces, a decision that had a very clear and tangible impact on the delivery of care to Canadians in need of health care. My colleagues and I for several years now have been consistent in saying that this was the wrong choice to make, a choice which the Prime Minister sought to undo in the September accord of last year, from which this bill derives.

It was the wrong choice to make because it reflected the wrong priorities. Between 1993 and 1999 the deficit was eliminated. About two-thirds of that deficit elimination came about through increased revenues to the federal government, in part because of higher tax rates imposed by it and in part because of automatic tax increases through the then deindexation of the tax code and various other revenue measures. Basically because Canadians were working harder and working longer hours, they were paying more to the federal government.

About two-thirds of the so-called deficit elimination is attributable to higher taxes which are now at the highest level in Canadian history as a percentage of our gross domestic product. It leaves us with the highest income tax burden relative to GDP in the G-8 and, further, the highest corporate income taxes in the OECD, the 23 principal industrialized economies of the world. That is the legacy of the fiscal policy of tax increases over the past decade.

The other third of the deficit reduction can be traced to the so-called spending restraint. It is the government's worst spending cuts. Three-quarters of the spending cuts involved in the deficit elimination exercise came about in the $23 billion reduction in transfers for health care to the provinces. Another very large chunk came about through gutting the capacity of the Department of National Defence to provide the resources for our men and women to defend our sovereignty and meet our international obligations.

If we take out national defence and the CHST, the rest of the federal government averaged a spending cut of only 3%. That reflects the fiscal priorities of the government. It was willing to cut health care transfers by one-third, by about 33%, and to virtually gut the capacity of our defence forces; but when it came to the myriad of other wasteful Ottawa bureaucratic spending programs they remained virtually untouched.

I will give some examples of wasteful programs: the Minister of Canadian Heritage with free flag giveaways, multimillion dollar handouts, grants to Liberal special interest groups, subsidies to bloated crown corporations, and the Minister of Industry with billions of dollars wasted on corporate welfare.

Then there is the general waste of mismanagement, duplication and misadministration of the federal public sector. It was virtually left untouched because the easier choice for the government was to pass the buck on to the provinces rather than fixing its own problems in its own backyard. They in turn had to pass the buck on to health care consumers. That is a synopsis of the fiscal choices of the government during the past several years.

Bill C-18 has come before us as part of a package. It was a sweetener to have the provinces accept less than a full loaf in terms of restoration of the CHST transfers to 1993 levels. In the September accord last year the governments agreed to increase those health transfers to only $21.1 billion. The money taken out since 1993 was at least $23 billion. The government was still about $2 billion short on its CHST cut in the accord that it negotiated with the provinces last September. In order to make up for this continued shortfall in critically needed health care funding, it offered to raise the ceiling on equalization. That is why the bill is before us today.

I would like Canadians and my colleagues to understand the political and fiscal context of the bill. In other words, had the government not made the wrong choice to slash health transfers by a third in 1995, had it not stubbornly stuck by that, and had it instead made different choices and reduced wasteful spending in Ottawa programs that do not affect real people, we would not have Bill C-18 before us today. The provinces would not have been so short of revenue that the poor ones would have demanded this aberrant lifting of the ceiling on equalization.

In its frantic pre-election effort to cover up the enormous mistake it made in terms of slashing the health care transfers, the government decided to make a change in the pre-existing, longstanding arrangements with the provinces with respect to equalization.

I do not quibble for one moment with certain provincial governments and premiers for seeking any way they possibly could to get more federal transfers into their provincial treasuries to reinvest in the health care and other social spending which had been stripped by the CHST. I do not object at all to their principled and effective advocacy on behalf of provincial taxpayers and health care consumers in this respect.

I am sure all my colleagues would agree that it would be in the best interests of the administration to have predictability and stability in the application of equalization agreements. We ought to try to play by the rules. Surely we could all agree that it is good public policy not to make exceptions from year to year. However the reason the government made the exception it did in the bill before us today with respect to the ceiling on equalization was to cover up for its own political mistake, its enormous policy blunder in its 33% cut in health transfers to the provinces since 1995.

We do not feel the government has much moral authority to come before us and say that it has decided out of the kindness of its heart for one particular fiscal year to raise the ceiling on equalization payments to the provinces to account for unexpected economic events two fiscal years ago. That is nonsense.

The Parliamentary Secretary to the Minister of Finance knows as well as I do that bureaucrats in the Department of Finance are no doubt rolling their eyes today as they watch the debate go forward. They know this is undermining the overall integrity of their program. In a way it, politically it had to happen in order to reinvest the money that had been taken out of the health transfer which the government refused to put back in.

Without a doubt the bureaucrats are standing there knowing that it may be good politics but it is awfully bad public policy. I would just say that we see over and over again this pattern of misplaced priorities leading to bad policy outcomes and then the government trying to wiggle its way out. That is what it is doing with the bill today.

Let me also say, lest the government try to paint itself as the great dispensary of Liberal generosity to the provinces, that this is a one time, one year deal. It does not intend to continue lifting the ceiling in perpetuity. If I had an opportunity to ask the finance minister's parliamentary secretary, I am sure he would be opposed to lifting the ceiling in perpetuity.

He would probably argue that it would contravene the rules set out in the agreements and that if we lift the ceiling, we should lift the floor and so on and so forth. I am sure he would make that argument, but somehow he avoided that question. He avoided mentioning why exactly this deal happened and why it applies to one year and one year only.

Another point I would like to add is that the practice of retroactive legislation in general is not a good one for parliament to pursue. When we consider fiscal matters, estimates, spending authorizations, ways and means motions, authorizing tax measures or any form of legislation, a principle of parliament ought to be that it ought not to try to go back and change history, as it seeks to do in this bill. We should make things right the first time.

Later today we will be considering Bill C-17, another example of the ham-fistedness with which the government administers its legislative program. We will be making so-called housekeeping amendments to correct mistakes that were made in the bill some time ago.

An enormous amount of parliament's time is consumed with correcting the mistakes the government makes in its legislation. Today we are seeking to change an agreement with the provinces from two fiscal years ago to help save the Prime Minister's hide. It was a deal he made at the last minute before a federal election to make up for his callous and irresponsible 33% cuts in health care transfers.

On that point I express my disappointment with the government for the manner in which it has handled its fiscal relationships with the provinces over the past number of years. I express my hope, although not my expectation, that it will begin to get things right in terms of long term stable and predictable cash transfers, tax points and equalization to the provinces so that we do not have these last minute deals and we do not need this kind of retroactive corrective remedy in legislation.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, I appreciate the opportunity to speak today at second reading of Bill C-18 which amends the Federal-Provincial Fiscal Arrangements Act with respect to the equalization program.

This legislation stems from the landmark agreements reached by Canada's first ministers on September 11, 2000 on a plan to renew health care, improve support for early childhood development, and strengthen other social programs.

In support of these agreements, the federal government is making the largest contribution ever to health, higher learning and social services: a new investment of $23.4 billion over the next five years.

Most of this funding, $21.1 billion, was legislated in Bill C-45 last fall and is being provided through the Canada health and social transfer, CHST, which I will discuss in a moment.

At the first ministers' meeting, the issue of equalization was also raised.

The bill before us today fulfils the commitment made by the Prime Minister at that time to lift the ceiling on the equalization program for the 1999-2000 fiscal year.

The Prime Minister also asked the Minister of Finance to consult with provincial and territorial finance ministers on how best to follow through on this commitment. The finance minister has recently completed his consultations.

Before discussing Bill C-18, let me take a moment to set the legislation in context. I want to briefly explain how the federal system of transfer payments works and the importance of the equalization program itself.

The federal government, in partnership with the provinces and territories, plays a key role in supporting the Canadian health system and other social programs. The provinces and territories deliver their own health care, education and social services, while the federal government provides them with financial assistance through transfer payments.

Today the federal government transfers approximately $40 billion to the provinces and territories. It does this through three major programs: the CHST, equalization and the territorial formula financing.

Because of transfers, all Canadians can expect: equal access to public health care; a safety net to support those most in need; the freedom to move throughout the country to seek work; higher education and training available to all who qualify; and reasonably comparable services wherever one lives.

I will take a moment to look at each of these federal transfer programs individually because there has been some confusion and misinformation in the Canadian public.

First, I will speak to the Canadian health and social transfer. The CHST upholds the five medicare principles of the Canada Health Act: universality, comprehensiveness, accessibility, portability and public administration. It also ensures that no minimum residency period is required to receive social assistance.

This block fund is provided on an equal per capita basis to provinces and territories in the form of cash and tax transfers for health care, post-secondary education, early childhood development and social programs.

The new funding legislated last fall is the fifth enhancement in the CHST since 1995. CHST cash transfers to the provinces and territories will now rise to $18.3 billion in 2001-02, $19.1 billion in 2002-03, and $21 billion in 2005-06—at which time CHST cash will be 35% above its current level of $15.5 billion.

I will speak briefly about tax transfers. This is one of the least understood aspects of the CHST despite the fact that tax transfers are fundamental to how the program functions.

In 1977 under established programs financing, one of the CHST's predecessor programs, the federal government transferred tax points to the provinces. The federal government decreased its personal income tax by 13.5% and its corporate income tax by 1% so that the provinces could raise taxes by an equivalent amount.

The net impact of tax points on taxpayers was zero. It was totally transparent. However the impact on the federal and provincial governments was very real. Indeed, tax point transfers represent increased revenues to the provinces and foregone revenues for the federal government. It was done so the provinces and territories would have direct access to revenues to fund health care, post-secondary education and social programs.

In 2001-02 the value of transferred tax points will account for nearly $16 billion, about half the total amount provided to provinces under the CHST. That point is often forgotten by members opposite.

The second federal transfer program, equalization, provides extra funds to less prosperous provinces to enable them to offer comparable programs and services to their residents. Payments are unconditional and provinces can spend them as they see fit. In 2000-01 seven provinces are projected to receive equalization payments totalling $10.8 billion.

Territorial formula financing or TFF, the third transfer program, recognizes the higher costs of providing public services in the north. In 2000-01 payments provided under this program are forecast to be $1.4 billion.

These are the federal government's three major transfer programs and, as I mentioned, they provide approximately $40 billion annually to the provinces and territories.

Bill C-18 specifically deals with equalization, a program that in many ways expresses the generous spirit of Canada. Equalization has been in existence since 1957 and has played an important role in defining the Canadian federation. It is unique among federal transfers in that its purpose was entrenched in the Canadian constitution in 1982.

As stated in the Constitution, “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”.

Phrased another way, its purpose is to ensure that less prosperous provinces can provide reasonably comparable public services without their taxes being out of line with those of more affluent provinces.

At present, seven provinces qualify for federal support under equalization: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan. Ontario, Alberta and British Columbia are not eligible.

The fact that equalization was one of the few programs exempted from restraint measures during the mid-1990s illustrates the importance the government attaches to it. The government clearly understands what equalization means to receiving provinces.

Equalization has increased faster than anticipated. It has grown by 33%, or $2.7 billion, since our government took office. Equalization estimates are updated twice a year as newer data become available regarding economic developments and their impacts on provincial revenues.

Estimates show that equalization is at its highest level ever. The latest official estimates released by the finance minister in February show that payments to receiving provinces will be about $1.8 billion higher than estimated last October.

These higher figures are not due to the poor economic performance of receiving provinces. On the contrary, payments are increasing immediately by an estimated $1 billion due in large part to the exceptionally strong economic growth in Ontario over the last two years.

Of this amount, $52 million is for 1999-2000 and $955 million is for 2000-01. The other $800 million is the additional funding that will be provided to receiving provinces through passage of the bill.

Allow me a moment to explain how the equalization program operates. It is quite technical and misunderstood. Equalization is the most important federal program for reducing differences in the abilities of provincial governments to raise revenues. Federal and provincial officials review the program on an ongoing basis to make sure the differences are measured as accurately as possible.

In addition, the legislation is reviewed every five years. The last renewal was in 1999. Payments are calculated according to a formula set out in federal legislation, and adjust automatically in response to economic developments in the provinces.

When a province's economy is booming relative to other provinces, its equalization payments automatically decline under the formula in proportion to the increased wealth of the province. Conversely, when a qualifying province's fiscal capacity declines due to a slowdown in its economy, its equalization transfer automatically increases.

In this way, the program acts as an automatic stabilizer of provincial government revenues. Equalization payments are subject to “ceiling” and “floor” provisions.

The ceiling provision provides protection to the federal government against unexpected increases in equalization payments. In other words, the ceiling prevents changing economic circumstances from driving equalization payments through the roof. The ceiling thus ensures the program remains sustainable in the long run.

The floor provision is the other side of the coin. It provides protection to provincial governments against sudden large decreases in equalization payments.

The ceiling for 1999-2000 was set at $10 billion and, except for the provisions in this bill, will grow at a rate equal to the growth of GDP in subsequent years.

I now turn specifically to Bill C-18, which lifts the equalization ceiling only for the 1999-2000 fiscal year. As I explained earlier, lifting the ceiling fulfils a commitment made by the Prime Minister last September at the first ministers meeting.

The communiqué issued at the end of the meeting clearly states that “the Prime Minister agreed to take the necessary steps to ensure that no ceiling will apply to the 1999-2000 fiscal year. Thereafter, the established Equalization formula will apply, which allows the program to grow up to the rate of growth of GDP”.

While the final cost of removing the ceiling will not be known until the fall of 2002 when the final estimates for 1999-2000 become available, the cost is projected to be $792 million.

That amount will be allocated among the seven eligible provinces on an equal per capita basis. Each will receive the same amount of money per person because the ceiling affects all provinces in the same way. Removing the ceiling for 1999-2000 means that each receiving province will receive $67 per person.

The total breakdown per province is as follows: Newfoundland will receive $36 million. Prince Edward Island will be eligible for $10 million. Nova Scotia will qualify for $62 million. New Brunswick will receive $50 million. Quebec will get $489 million. Manitoba's payment will be $76 million, and Saskatchewan will receive $69 million.

I want to clarify an issue relating to the new equalization estimates released in February. The recent announcement of an additional $1.8 billion in equalization payments has generated reaction among some people. Some see the funds as a slap in the face if their own province's allocation is small, or they complain of favouritism if the allocation to other provinces is large.

Equalization payments are based on a formula that measures the relative performance of provincial economies. That formula is applied the same way to all provinces.

All provinces that have a revenue-raising capacity below the standard receive payments from the federal government. Why? Because the federal government is committed to the idea that all provinces should be able to provide comparable levels of service to their residents.

Provinces do not receive the same amount of equalization because they do not have the same economic circumstances. This year Saskatchewan needs $230 per person to be brought up to standard, while Newfoundland needs $2,000 per person. Per capita figures are multiplied by the total population of a province to arrive at the total equalization payment.

Quebec, despite the second lowest per capita equalization entitlement, generally receives the highest total payment because of its large population. At the other extreme, P.E.I., with its second highest per capita entitlement, generally receives the lowest total payment because of its small population. I hope these explanations will help clarify the issue for my hon. colleagues.

I will review a few points. All parts of the country cannot generate the same revenues to finance public services. Federal transfers, therefore, help ensure that important programs are adequately funded. Transfers also help ensure that all Canadians receive reasonably comparable levels of public services no matter where they live in Canada.

The result is that we all benefit from knowing we live in a country where health care, education and basic public services are provided at roughly comparable levels of quality in all provinces.

In considering the legislation I urge all hon. members to keep in mind that federal transfers have increased significantly in the last few years. Over $35 billion has been added to the CHST. Equalization entitlements are up $2 billion annually since 1995-96 and are expected to increase. Removing the equalization ceiling for 1999-2000 will add almost $800 million to transfers alone for that year.

I want to impress upon this House that, through this bill, we are fulfilling the Prime Minister's commitment to lift the equalization ceiling for 1999-2000, which means more money for the receiving provinces. Bill C-18 underscores the priority the government places on equalization and helps ensure that the receiving provinces continue to have resources to provide the services their people need and want.

I will conclude with a quote from the finance minister. After his meeting with the Atlantic finance ministers a few weeks ago, he said:

The federal government in the end always has to act in the national interest, and part of that acting in the national interest is ensuring that every single province is treated fairly.

This is exactly what Bill C-18 does. It continues the tradition of fairness with which equalization has been delivered for over 40 years. I urge all hon. members to pass this legislation without delay.

[Lawrence MacAulay, Liberal, for the Minister of Finance]

moved that Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act, be read the second time and referred to a committee.

[Elinor Caplan, Liberal, for the Minister of Finance]

moved for leave to introduce Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act.

(Motions deemed adopted, bill read the first time and printed)

Criminal Code

[Dick Harris, Canadian Alliance, Prince George—Bulkley Valley, BC]

Mr. Speaker, on June 29, in the second session of the 36th parliament, the House passed Bill C-18, which provides for a sentence of life imprisonment for the crime of impaired driving causing death where aggravating factors are present.

Yet today, over seven months later, the bill has still not been put into force by the Liberal government.

Bill C-18 is a very important step in the fight against impaired driving.

I speak not only for the victims of this senseless crime but for all Canadians in demanding that the Minister of Justice get this bill into law to help deter impaired driving, to ensure that the penalty fits the crime where death is a result, and to help save the lives of thousands of innocent Canadians.