Bill C-18 (Historical)

An Act respecting equalization and authorizing the Minister of Finance to make certain payments related to health

Budget Implementation Act, 2004

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, 20 minutes to comment on Bill C-30 is quite a lot. On the other hand, 20 minutes to comment on the budget and this government's financial management is not much.

In Bill C-30 we find elements related to equalization, and I shall look at those in particular. We also find elements related to the Canada Pension Plan, with which we agree, and elements related to the GST rebate for municipalities, with which we also agree.

However, we are worried about the fact that the health and education sectors were not included in the Liberal government's new approach. And in fact, we know the reason well. It is simply an election strategy; they are seeking to create an alliance above the provinces, above Quebec, in order to be able to get around provincial jurisdictions.

The final element is one which relates to extended deadlines, permitting the Canada Customs and Revenue Agency to recover unpaid taxes over a 10-year period, and we agree with this as well, with the exception of the air security tax. We are opposed to this tax, whose need has not yet been demonstrated, unless it is to increase the already large, indeed amazing, surpluses of the federal government.

Looking at equalization in particular, it clearly illustrates the approach of this government. Whether headed by former Prime Minister Chrétien, or the new PM and former finance minister, when it comes down to it, their approach to real problems involves only cosmetic measures that do not solve the underlying problem. Instead, they increase it by giving the impression to Quebeckers, and to Canadians, that they are trying to respond to their concerns, yet this is totally false.

As far as the overall budget and the overall policy of this government is concerned, their approach is to increase Ottawa's power over the provinces, and particularly over the Government of Quebec.

Looking at the equalization formula proposed in Bill C-30, we see first of all that the new formula does not in any way respond to the concerns and needs that have been made clear on a number of occasions by the provinces, Quebec in particular.

Then, as far as the overall transfer of funds from the federal government to the provinces is concerned, we can see that it resolves nothing whatsoever. These continue to decrease year after year.

Finally, and this makes no useful contribution to the debate on fiscal imbalance, we see that there is too much money in Ottawa for the responsibilities the federal level has under the Constitution, and not enough in the provinces, and in Quebec in particular, particularly for health, but also for education and social housing.

Not only does this equalization formula resolve nothing, it also takes away, for the next five years, money from those who are institutionalized. Through the Minister of Finance and the Prime Minister, the federal government has made a unilateral decision to impose this equalization formula on the provinces.

There is something totally aberrant about our having had to vote on Bill C-18 only a few weeks ago, to extend the present equalization formula for one year, supposedly to maintain payments during the negotiations with the provinces. So we voted on that bill—Bill C-18 if I recall correctly—and then, on March 24, along they came with a budget including a unilaterally imposed formula.

This is another example of the government's incompetence, of the fact that the Prime Minister, the Minister of Finance and this House cannot make a decision. A few weeks ago, they probably really thought that they could reach an agreement with the provinces and Quebec before the election. They saw that the provinces were standing up and that Quebec had demands that it wanted the federal government to meet. Mr. Séguin, Quebec's Minister of Finance, repeated it when he tabled his budget, shortly after the federal government had done the same thing; if memory serves, this was on March 30. When the federal government realized that it could not easily impose its views on the provinces during negotiations and that an election was coming, it decided to unilaterally impose its formula for the next five years.

This decision alone is totally unacceptable. The Prime Minister talks about the democratic deficit. This is a perfect example. The federal government did not care at all about the provinces and it did not negotiate seriously. It did not take into consideration the provinces' needs and demands; instead, it unilaterally imposed its own vision. As I said, this alone makes Bill C-30 unacceptable to the Bloc Quebecois.

The federal government did not at all take into consideration the concerns of the provinces. Most of the changes made by the Minister of Finance, the Prime Minister and the Liberal government of Canada are cosmetic.

The government also did not take into consideration the unanimous proposal made by the provinces, whereby the equalization formula should be based on the performances of the ten provinces, as opposed to those of five provinces, as is currently the case, since this formula excludes one rich province, with the result that Quebec is losing several hundred millions, if not a few billion dollars.

This should have been taken into account, as was the case in the past. This is not something new. For several years, the federal government's equalization formula was based on all ten provinces. It is probably when this formula began to benefit the provinces and Quebec, as it should, that the federal government changed the rules of the game to ensure that it would not have to pay too much money in these areas of responsibility.

Property tax was not considered an element of the tax base as it should have been. In the budget, it was suggested that property value would be taken into account when determining the wealth of the various provinces. In British Columbia, property value is extremely high. So, that would have a huge impact on Quebec. It would mean somewhere around $400 million in equalization.

Therefore, it was suggested that property value would be taken into account. That would be the case, for instance, in British Columbia. However, public servants who appeared before the Standing Committee on Finance told us that it would not really be done that way since experts—probably friends of the government—had argued that the value market could not be factored in, as it would lead to bias, distortions, and things like that. So, a halfway compromise was reached, but, in reality, absolutely nothing was solved.

I hope B.C. residents are shocked to realize they were used in that way. In Quebec, we are shocked because our demands and requirements were not met. Whichever way you look at it, Quebec stands to loose over $1 billion. Not only have we lost $1 billion, but we will continue to lose money through transfers.

Let me give the House some figures to illustrate what is really going on. In 2001-02, Quebec's equalization payments totalled $4.690 billion. In 2002-03, they decreased to $3.985 billion, as seen in the budget plan, a $705 million drop. In 2003-04, we are down to $3.802 billion, after another drop of $183 million. In 2004-05, we will get $3.761 billion, and that includes the $150 million in fiscal rebalancing the government has announced in the budget, which is the only real increase. In fact, it is not an increase at all, but a reduction of the decrease Quebec feared. So, for these three years, we are expecting a reduction of close to but not quite $1 billion in equalization payments from the federal government to the Government of Quebec.

Compared to the October 2003 estimates, however, these figures tell the whole sorry tale. In October 2003, transfers to Quebec were estimated at $4.662 billion, as I said, but now they are estimated at $3.985 billion, a $677 million decrease in one year.

In 2003-04, in October 2003 to be more specific—less than five or six months ago—Quebec expected to get $4.525 billion in transfers. Now, according to the budget plan, we are down to $3.802 billion, a $723 million drop.

We should accept this? That is impossible. For people who defend Quebec's interests, it is impossible to accept this. This year, with the shenanigans that the government has announced—the cosmetic part—there is a slight increase of $70 million, but, once again, this is compared to a decrease of $41 million. Thus, the government simply alleviated the decrease, thinking it would distribute a goodie to the provinces, and to Quebec in particular. In total, from 2002 to 2005, the decrease will be $1.330 billion. This is totally unacceptable.

The parliamentary secretary tells us that equalization increases and decreases, depending on economic times. The problem is, this is the only existing formula that takes the needs of the provinces into account.

In the past, the federal transfer was mostly based on the needs and investments of the provinces. For example, the Canada assistance plan ensured that, for every dollar put in by Quebec, the federal government would put in a dollar. Since we had—and still have—poverty problems that were slightly higher than the Canadian average, Quebec would be imaginative and invest based to its people's need. The federal government had to follow; it was the rule.

The federal government changed the rules of the game with the Canada social transfer. Now, it is not based on the needs, but on the percentage of the population. Consequently, whatever amount is transferred to the provinces, Quebec is always receiving a little less than 25%.

Within the Canadian federation, equalization is the only way to take the needs of the provinces into account. However, we told you that the formula is inadequate. The provinces, particularly Quebec and the Minister of Finance of Quebec, said this several times. The federal government cannot deny it. Even recently, I believe that Minister Couillard said that the fiscal imbalance problem was a parasite in the relations between Quebec and Ottawa. This is the reality. Liberals can turn a blind eye and put their heads in the sand, but Quebeckers are not fooled by this situation.

If equalization does not meet the provinces' needs, the formula will have to be reviewed. At present, the transfers for health and social programs are not in keeping with the needs. They are calculated on a per capita basis, and that is that. That is the greatest injustice in the year we have just completed.

On one hand, the federal government makes a lot of fuss about announcements it has already made three times. It is like the case of highway 175—and they think we are fooled. The Prime Minister is holding off the election call so he can make announcements that have already been made. We have heard that they will be going to the Chicoutimi region, probably, I suppose, to help the hon. member for Chicoutimi—Le Fjord, who must be in serious difficulties. They will announce again, for the third time, the investment in highway 175. It has already been announced by Mr. Chrétien and by Mr. Landry. They think that people will not see it is all a flimsy fabrication. Probably they will do the same thing for highway 30. I am just waiting for that. The election call has been delayed so they can announce again the things that have already been announced three or four times.

That $2 billion in transfer payments to the provinces promised by Mr. Chrétien, which the former minister of finance pretended not to be able to give, just like the new Minister of Finance, in order to set the scene economically and financially to enable the new Prime Minister to announce it, has finally been announced. It has even been passed in the House, finally. Thus, $2 billion in transfer payments will go to the provinces, on a per capita basis. Quebec will receive a little under 25% of that, around $460 or $470 million.

At the same time, we are told that, for the same period, there will be $2 billion less in equalization. They would have us believe that they have taken $2 billion away but that the same amount will be given back in transfers. Now look: Quebec receives half of the equalization budget. We therefore have lost half of the $2 billion amount, while we get $470 million through the Canada health and social transfer.

No one is fooled. The Atlantic provinces and Quebec have been the big losers in this Liberal shell game. People know it.

Overall, transfers are decreasing in amount. To give one example, a figure that came out last week in the committee chaired by Jacques Léonard, who was president of Quebec's treasury board. He is very familiar with the public finances of Quebec but also has a very clear picture of federal public finances. It was found that, between 1994-95 and 2002-03, the revenues of this government—with the present PM as Minister of Finance—rose 45%. That is nothing to be sneezed at when there is so much talk of belt-tightening.

Obviously, they used part of this money to increase their bureaucracy. Operating expenditures increased by 39%. I would remind hon. members that, at the time, inflation was around 16% and the population of Canada increased by a little less than 4%. If memory serves, the figure was 3.9%. So the increase was not because of increased needs.

In fact, the needs did increase in the provinces, but not the needs for federal bureaucracy. It was merely a Liberal strategy, of Pierre Elliott Trudeau and all those who followed him, to keep on building up the power of the central state in order to create a unitary state, by strangling the provinces financially.

The proof of this is that, while revenues increased by 45%, while bureaucratic expenses increased by 39%, government transfer payments to Quebec decreased by 7.6%. That is the truth. That is the reality. The rest is just smoke and mirrors.

The machine was beefed up, they made themselves indispensable, and they strangled Quebec financially. They will pay for that at the next election, if only they get their act together and call one.

They are wondering, “Will one week be enough to try and convince Quebeckers and the rest of Canada that we are a good government?” Well, of course not! They have been there 10 years. Taking stock of those 10 years, we realize that in the absence of a strong opposition, they are simply all over the map.

Therefore, in terms of overall transfers to Quebec, we are looking at a net loss of 7.6%. And just to give you some idea, with regard to health, when our present Prime Minister became Minister of Finance, for every tax dollar taken from our pockets, in Quebec as in the rest of Canada, he would transfer 4.5¢ to the provinces. Today however, for every tax dollar he gets, he transfers a mere 2.7¢. Which means that he takes in more and more money, while giving out proportionately less and less to the provinces and to Quebec.

What this means is that, ever since the Liberals have come to power, ever since the former finance minister and now Prime Minister has held the reins in finance, Quebec has been cut by a total of $10 billion. This represents a drop of $1,300. Small wonder then that the provinces and Quebec have been hard pressed to make ends meet. The sheer fact of having been able to eliminate the deficit is a miracle in itself under such circumstances.

This cannot go on forever, though. It is already no longer the case in a number of provinces. Ontario is in a deficit position, B.C. as well. Most of the Atlantic provinces have deficits. As for Quebec, it is experiencing—to use the finance minister's expression—some difficulties with its budget. This year, with sales of some assets, it has managed to balance the budget, but assets cannot keep on being sold.

The responsibility for this lies with the federal government. In this case, neither Mr. Charest nor Mr. Séguin are responsible. They have been strangled financially by this government, as the previous Quebec government was, and as the provincial governments currently are. We have a strike in Newfoundland, and a strike in the B.C. health system. There is not a single politician who would be in favour of a strike in the health sector, knowing what public opinion is on this. Yet they have to make hard decisions.

Having been involved with unions, I can tell you that I have seen governments forced to make hard choices. Sometimes they have to stir up confrontations, as was the case in Newfoundland and British Columbia. They are, however, not the ones responsible for the situation; the federal government is. There is nothing whatsoever in this budget to suggest that any corrections will be forthcoming in the next few years. In my opinion, the people of Quebec are going to have a very clear understanding of just how much it will be in their interests to send as many Bloc Quebecois members to Ottawa as possible in the upcoming election.

So that is what there is in Bill C-30. What is not in the bill, and in the budget, is equally deplorable. As far as employment insurance is concerned, $45 billion has been diverted, while people on the North Shore and in other areas are starving. For months, forestry workers in the northern part of Lanaudière have not seen a cheque. The sawmills have suffered because of the softwood lumber crisis, which is not settled even though we won. The Americans have still not opened their borders to us, and we have not got back the $2 billion they collected illegally.

Employment insurance reform is necessary, and the money is there. Now, on the eve of the election, the Liberals say it is coming. Let them table the legislation, since they are taking their time to call the election. We will vote in favour of a substantial improvement in employment insurance. If the Liberals do not do this, people will remember that, in 2000, the President of the Privy Council went to the Saguenay and told the construction workers, “We are going to improve the employment insurance system”, and then nothing was done.

I could go on and on. I have examples concerning families, the guaranteed income supplement, the sponsorship scandal, and gun control. And as for the sales of Petro-Canada stock, we cannot foresee exactly what will happen with that. Commissions will be paid out. That is worth about $3 billion. What brokerage firm will be hired to sell this stock? Probably some friends of the government. And so it will be exactly the same thing that happened in the sponsorship scandal.

Not only are the federal Liberals—the Liberal Party of Canada—more interested in defending the interests of the Liberal Party than defending federalism, but worse yet, they defend the private interests of certain friends of the government. Regarding the sale of Petro-Canada stock, we want to know who is going to sell the stock and how the brokerage firms will be chosen.

I did not have time to address the issue of tax havens and CSL International. I do not know if members had an opportunity to watch the program, Enjeux . The headquarters in Barbados is just an empty shell, and that is close to the line of illegality, in my opinion. But we will dig into that at another time. With all of this, I simply want to say that the real democratic deficit is the fact that Quebec is being strangled. The only answer for that is the sovereignty of Quebec, and the coming election will be a step toward that sovereignty.

Government Programs

[The Deputy Speaker]

Order, please. I have the honour to inform the House that a communication has been received which is as follows:

Rideau Hall,

Ottawa

March 26, 2004

Mr. Speaker:

I have the honour to inform you that the Right Honourable Adrienne Clarkson, Governor General of Canada, signified royal assent by written declaration to the bills listed in the Schedule to this letter on the 26th day of March, 2004 at 11:01 a.m.

Yours sincerely,

Barbara Uteck,

Secretary to the Government General

The schedule indicates that royal assent was given to Bill C-6, an act respecting assisted human reproduction and related research; Bill C-13, an act to amend the Criminal Code (capital markets fraud and evidence-gathering); and Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health.

Supply

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

Madam Speaker, I compliment my colleague on his comments today. Before I comment on one important point in his speech, I would like to congratulate him on his recent selection as our deputy leader. He is going to do a fantastic job in that role.

The Prime Minister said that it is a brand new government that started office on December 12. He also said that he is a policy person bursting with new ideas and that he could not wait to become Prime Minister to implement his ambitious agenda.

As our deputy leader pointed out, there have been 24 bills introduced thus far in the House of Commons. Three of those bills actually have some difference from those in the last session. Bill C-1 is a pro forma bill that implements the throne speech but does not actually contain any legislation. Bill C-24 was a correction to the Parliament of Canada Act regarding benefits to members. There was nothing whatsoever in that bill about policy.

Bill C-18 actually had something different from the bill in the previous session. Half of the bill was from the Chrétien government and extended equalization. The second part contained a one time payment to the provinces regarding the health care accord of 2003.

In 24 bills, what we have from the policy agenda Prime Minister is half a bill, half a piece of legislation. The government called the House back three weeks late and took six days to invoke closure to reintroduce Prime Minister Chrétien's agenda. The government is so bereft of vision, so bereft of a policy agenda that it is implementing Chrétien's agenda. Why did those members throw the last prime minister out if his agenda was what they wanted to implement?

I would like the member to comment on the fact that the government has absolutely no vision. This is shown in the fact that in all the legislation one-half of one bill is all the government can produce. That is all the policy agenda Prime Minister can produce.

Federal-Provincial Fiscal Arrangements Act

[The Speaker]

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

The hon. deputy leader of the government.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, it is with mixed feelings that I take part in this debate. In fact, I am outraged because the government is putting in the same bill a promise made by Prime Minister Jean Chrétien in February 2003, more than a year ago, to invest $2 billion in health care. That was supposed to be part of what the federal government was going to do for health care. So, in this bill, we have, lumped together, the $2 billion that was promised more than a year ago, and an extended equalization formula that the provinces do not want.

The government has taken a promise, something owed us and made it conditional on the extension of the equalization formula, which will do Quebec out of $723 million this year.

In other words, with respect to the $2 billion, of which Quebec's share is $472 million, members are forced to say “yes”, but if they say yes to the first measure, they have to say yes to the second. Yes, we want $472 million more for health care, but we also agree to get $723 million less in equalization.

This bill is a sham. My colleague from Joliette called it a stunt. We could have a contest to find which synonym best describes the kind of deceit practised by this government.

At first, the Bloc Quebecois wanted to have this bill split so that we could say yes to the proposed health transfer. It is not enough, but it was promised a year ago, so let us have this money before the election. But we are not even sure that it will happen before the election; it could also happen after the election. They will talk about it some more. They have been talking about it for a year, and they will talk about it some more.

Should we say yes to that? The problem is that, if we do, we will have to say yes to the second part of the bill, with which we totally disagree. That is why my colleague asked that the bill be split. And, amazingly enough, our Liberal colleagues, who form the majority and do whatever they want, decided to vote against splitting the bill. They voted in favour of this sham, to try to pull a fast one on us.

We think that Quebeckers will understand the fact that we are opposed to this bill. We will not try to filibuster this legislation, or to take any other action. We are not stupid. We want the money allocated for health to be paid to Quebec and the other provinces as quickly as possible: an amount of $472 million is better than nothing.

However, we want to stress the fact that, by allocating this money, the government is not giving what was anticipated for 2003-04 alone, which is $723 million. For that reason, we will oppose this legislation.

Moreover, we are rather upset at this supposedly new, supposedly transparent and supposedly democratic government. This is some democracy.

The equalization formula must absolutely be changed. Under the act that was passed, the current equalization formula was to end in March 2004. That formula was adopted for a period of five years, from 1999 to 2004. Normally—and this was done, since negotiations were undertaken—the provinces want major changes, so that things are more predictable, because right now the amounts are not predictable, and so that the process is more fair and also more transparent, because there are 3,000 different elements that come into play, thus making it difficult to anticipate the results and to verify them. So, a major reform is in order.

Some work was done. However, instead of using its energy to quickly negotiate and reach an agreement with the provinces before the deadline, this so-called new government came up with a bill that extends the program for an additional year. The former government did that, but the new government maintained it and made it worse. The Liberals want us to agree to extend the old equalization formula for one year.

I will just mention two figures. If we extend it for a year, we can be sure that there will be a difference of $1.4 billion between the forecasts made by Quebec and those made by the federal government. The numbers are there. An amount of $1.4 billion is indicated in the estimates for Quebec. The equalization formula must be changed and it could be changed quickly.

Unfortunately, this new old government has not followed up on the provinces' desire for change, at a time when there is a surplus. We must not forget that when the new Minister of Finance was sworn in, he immediately copied his predecessor, now Prime Minister, in saying, “There will not be a surplus this year; things are tight. If we want to allocate $2 billion to health, there must be changes and cuts”. However, the federal government, in large part, has spent twice as much as Quebec and Ontario. We will not get into that.

How much is the current surplus? It is $7 billion, and we know that another $7 billion of surplus money from previous years has already been put into various foundations. The government would have us believe that it is not able to negotiate a new equalization agreement at this time. This makes no sense.

For these reasons, we will vote against this bill. We cannot help saying that what they are doing is unacceptable. No one knows what will happen to the $7 billion surplus. Will it once again be used to pay down the debt without anyone deciding? What will be done with this $7 billion is not decided democratically. Half of that money comes from the surplus in the employment insurance fund, once again, paid by businesses and workers. Will it go into foundations and then come back in the form of presents come election time? No one knows.

The Bloc Quebecois will vote against Bill C-18.

In conclusion, I will read a paragraph that struck a chord with me from an article by Michel David in yesterday's Le Devoir . It reads:

Someone should perhaps have suggested that federal finance minister Ralph Goodale might wait a few days before announcing the downward revision to the equalization figures. If he wanted to put the provinces' backs up right before the Vancouver meeting, he could not have found a better way. What we heard from the first ministers was a carbon copy of how each of these meetings ended during the Chrétien era.

So here we have this independent writer's corroboration of our own conclusion: this new government is just a rehash of the old one, with faults that are becoming more and more visible with each passing day.

We are opposed to this bill. We want the money for health, but we want to make it clear that the refusal to negotiate equalization, when the government has the money, is an outrage. It has a serious impact on the future, not only for the people of Quebec, but also for those in the Atlantic provinces.

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, I am pleased to be sharing my time with the member for Acadie—Bathurst. Together we are going to be talking about the impact that the equalization program has on Atlantic Canada.

I wanted to start by saying it is a pleasure to speak to this bill but I find that any optimism I once had that the Liberal government was willing to be fair in its dealings on equalization has been sorely shaken by the latest figures on equalization released by Treasury Board. Unfortunately, since November 2003, when I last spoke in the House on equalization and the effects on the Atlantic provinces, the situation has become much worse. I will outline what I mean by that.

Between 2000-01 and 2004-05 total major transfers to the provinces, and that includes the Canada health and social transfer, equalization and tax points, increased by almost 18%. That is up from 15% in October 2003. That is the good news and that sounds not bad. However, in Atlantic Canada, total major transfers dropped by almost 4% during the same period, so the news only gets worse for the poorest provinces.

When I spoke to this issue in November 2003, the Treasury Board estimates indicated that of the $6.4 billion increase in major federal transfers, the Atlantic provinces received minus $200 million. The latest estimates show that out of a $7.6 billion increase in total major federal transfers, the Atlantic provinces received minus $240 million. What a difference four months makes. The have less provinces continue to get even less.

Since Bill C-18 seeks to maintain the status quo on equalization from one year to another, I have to wonder how the government believes it is helping the have less provinces. Apologists for the government will say that the Atlantic provinces should not complain, that we have offshore oil and gas and that our ship has come in. There may be those who say that we should be proud because we are less dependent on federal transfers.

First of all, there is no oil and gas off the shores of New Brunswick and P.E.I. Why have they seen increases in federal transfers that are just one-quarter and one-sixth, respectively, of the national increase? I will tell members why. It has nothing to do with oil and gas. It is that the system of federal transfers is defective. The system is based on population and our region is losing population.

Federal policies are driving people out of our region so our provincial governments are losing hundreds of millions, even billions, in federal transfer money. That is a great system, is it not? Federal economic policies, or lack thereof, drive people out of those have less regions and the government responsible pockets a windfall.

Take equalization payments to Nova Scotia as an example. Last February the Department of Finance estimated that between 2001-02 and 2003-04 Nova Scotia would get $3.72 billion in equalization payments. This February we found that Nova Scotia would only get $3.55 billion. This is a shortfall for Nova Scotia of $170 million, but a windfall of $179 million for the Liberals, almost enough to pay for another Groupaction fiasco.

With an unexpected shortfall of $170 million, there is not enough revenue left to meet the needs of the remaining population in Nova Scotia, let alone to bring forward the economic and social policies we need so that our people will not have to go down the road. It might not be so bad if the Liberals put the money they are clawing back from the Atlantic provinces into the policies we need in order to turn around our outmigration, but they are not doing that. If they are not wasting it on some boondoggle, they are recycling it and claiming it is new.

Over the last two years the government has saved over $3 billion in equalization payments to the provinces. That is roughly half of the “new money” that has gone into health care over that period.

More money for health care, even though it is nowhere near enough, is a good thing, but when half of it is clawed back in equalization, it is like robbing a bunch of Peters, Johns and Garys to pay Paul. When we consider that most of the new health money will go to the provinces with the larger populations, the have provinces, then we have something worse. It is Robin Hood in reverse, taking from the have less to give to the have mores.

The Minister of Natural Resources talked this week about changes to the offshore energy agreement with Nova Scotia and Newfoundland. Please let me emphasize that P.E.I. and New Brunswick do not benefit from offshore energy agreements at all. I am pleased to hear that the Liberals are finally ready to consider that the offshore agreements were not fair to begin with. I recognize that it was the Mulroney Tories who came up with the original deal.

The news about this offshore industry has not been good and many doubt that we will ever have a production boom such as Alberta had. The fact is that getting oil or gas from below the ocean floor is more expensive, more dangerous for workers and the environment, and more uncertain in its values than any land based operation.

People in Nova Scotia and Newfoundland should not be penalized through an equalization program that expects a payoff in the future. Until the offshore industry is guaranteed and long term, instead of a series of underproducing operations, potential offshore royalties should not affect the equalization formula at all.

I want to echo something my colleague, the member for Halifax, said in a previous debate on equalization. The provinces have asked for a 10 province plan, one that considers all the provinces, not the middle five that the federal government uses now.

That would make the payments more equitable and would better reflect the economic situation of the majority of provinces. It would also prevent a huge loss in equalization when one province has a bad year, as was the case last year with Ontario.

The status quo simply is not adequate when it comes to the equalization plan. I fear that giving the federal government another year's grace to renegotiate equalization will result in an even less equitable program as provinces get more desperate for funds. In the end it is not the provinces that suffer, it is Canadians.

I will now turn to the second part of the bill, the payment of an extra $2 billion to the provinces for health care. The intent of the equalization program is to allow every province to offer reasonably comparable services to other provinces and to their citizens.

I was horrified to hear Lorne Calvert, the premier of Saskatchewan, quoted in the papers this week as saying that without immediate aid from the federal government, we can expect to see the Canadian health care system as we know it disappear within 10 years. What is going on for one of our premiers to be saying that?

When I look around, I see how the wealth of Canada has increased many times since medicare was first proposed and implemented. We have more money now than at any other time in our history, but the government chooses not to spend that money where Canadians want to see it spent. Canadians want a health care system that they can depend on. We want the money to be there and we know the money is there with the federal surplus, $7 billion to $8 billion this year.

Why are the Liberals letting the health care system fail when there is money available to sustain and improve it? It is like a homeowner who decides never to repair the leaks or pay for upkeep so that the mortgage can be paid down sooner, but when the mortgage is finally paid off, there is only a pile of wood and tar that can never be put back together.

A payment of $2 billion is a small start in helping the provinces improve health care. However, the way the Liberal government agreed to provide the money was stingy in the first place. It put debt management ahead of sustaining our health care system. Then it did not offer more money when it became clear that there would be a much larger surplus than was expected. This does not give much hope that the Liberal government takes Canadians' concerns seriously.

In conclusion, the NDP will support this bill to ensure the provinces continue to receive their money, but the system itself is flawed. There needs to be a more equitable equalization formula. The NDP will continue to push the government to work with the provinces for a formula that benefits Canadians in all provinces.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, we just had a nice illustration of the fact that this government is not prepared to face the reality. There is a fiscal imbalance. Everyone in Quebec agrees on that. Federal Liberals are the only ones who do not agree. Because of this fiscal imbalance, the provinces, which have responsibilities in areas where costs pose very significant problems, including in health and education, no longer have the means to deliver the services that the public is entitled to.

On the other side, there is the federal government, which generates surplus after surplus and which is wasting our money. It is not just the sponsorship scandal. There is the 40% increase in operating costs, which is double the increase in Ontario and Quebec over the past five years. There is also the $10 billion in additional spending, including $1 billion for defence, when we do not even know what the Canadian army is used for. This is evidence of the fiscal balance.

So, we must find ways to correct this fiscal imbalance. Of course, one of the simplest solutions would be for Quebec to withdraw from the Canadian federation, to take its marbles and to go it alone. Let us not forget that Quebeckers send 60% of their income taxes to Ottawa. As far as we are concerned, this is the preferred option in the longer term.

In the meantime, we will try through every possible means, including the Canada social transfer and the transfer of tax points to Quebec, to correct this fiscal imbalance. We cannot give our support to the federal government for dragging its feet regarding the equalization issue.

At the end of October or in early November, the government already had a bill to extend the equalization program for one year. Back then, there was plenty of time to negotiate with the provinces and quickly reach an agreement. Are we going to support the fact that Quebec will lose $1.4 million, an amount which is not at all compensated with the $2 billion? We are talking about $472 million. We cannot do that.

If the government could give us some guarantees, maybe we could look at things differently, for example, on retroactivity, which is a minimum. Presently, since there is no retroactivity guarantee in Bill C-18, the federal government is under no pressure to solve the issue. Consequently, it will drag the issue until 31 March 2005. In 2005, maybe they will come back with a bill to extend the equalization formula for one more year.

If we were guaranteed that the agreement would be retroactive, that would put pressure on the federal government which, if it played for time, would not be able to unduly penalize the provinces. However, it penalizes them anyway because, when the finance minister will prepare the budget, the provinces will not know how much their equalization payments will be the following year. But they will realize that they will be getting less money than what they got for the current year and less than the year before. Consequently, they will find it very hard to deliver the same services in health care and education.

I have already explained this to you, Mr. Speaker, and I am sure you remember. When we look at Quebec's budget as a whole, if we take out health care and education, there is a mere $9 billion left.

Consequently, it is impossible for a government like Quebec's to balance its books without touching to health care and education, if there is no increase in the federal government's transfer payments through equalization, the CHST or otherwise.

It is in this context that equalization payments must be increased. We must get guarantees that the money will be given to the provinces, particularly Quebec and the Atlantic provinces, which will be facing serious difficulties.

It is clear that the reality of fiscal unbalance has not been recognized. The government is trying to buy time before the election. It wants to get a blank cheque to do whatever it wants after the election. We will denounce that throughout the election campaign.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, a mere nine minutes is not much to criticize this bill, although I have to admit I had a chance to begin my remarks before question period.

I was telling members that Bill C-18 is a vote-getting ploy. Their first stunt was to combine two separate items in this bill. The only common denominator is money. The first item deals with extending the current equalization program. We oppose that because it penalizes Quebec and Atlantic Canada in particular. The second item is the $2 billion for health that has been promised repeatedly.

Obviously, we agree with the second item. There is a great deal of confusion because both items are included in the same bill. But like I said, nobody will be fooled.

The second stunt is that combining two items, they give the public the impression that, even if they lose a little in equalization, they will have a net gain, with the $2 billion. That is wrong. I explained how, with reference to both the federal government's estimates as well as Quebec's expectations. This applies to all provinces that receive equalization payments. However the figures are compared, Quebec must pay back the sum of $1.4 billion. Thus, it loses, in terms of being able to pay for its needs, particularly in health care.

In fact, the federal government is seeking to recover that $2 billion by lowering equalization payments. The problem is that each transfer formula has different objectives. The CHST is based on population percentage. Thus, out of this $2 billion, Quebec will receive about 25% or $472 million. But if this $2 billion had been paid out in equalization, more than 50% of the money would have come to Quebec. Therefore, we lose in this process and we cannot agree to it.

Once again, it does not matter much which angle we look at these things from, the sum of $1.4 billion that we lose in equalization is not offset by the $472 million we receive out of the $2 billion. Thus, for Quebec, Bill C-18 represents a net loss of about $1 billion. In fact, the amount of $2 billion for health covers only one third of Quebec's losses suffered because of the extension of this equalization formula.

Those were the first two stunts I referred to. There are a few more. The third has to do with Ottawa's claim that there is no money. The finance ministers—past and present—have always used the same non-transparent tactics to cover up the real state of Canadian public finances in the federal government. They told us for months that they were going to have to dig deep to come up with $2 billion and that they were not sure they would be able to.

This is untrue. We realize it now, when everyone agrees that the federal surpluses for this year will not be $2.3 billion, as the Minister of Finance said, but $7 billion to $8 billion.

We can see also that federal operating expenditures have increased by 40% in recent years. These are not transfers to individuals or provinces; it is the federal bureaucracy that has gotten bigger. If the government seriously wanted to reduce operating expenditures, it could easily find $3 billion or $4 billion.

There is the money for foundations, and the Auditor General mentioned this in 2002. There is $7 billion to $8 billion sitting in foundations, whether it is the millennium scholarships, the Canadian Foundation for Innovation or the other foundations. All this money would provide enough leeway to quickly solve the fiscal imbalance problem, in particular through reviewing the equalization formula.

I would add another element that proves to us that the federal government has the means to solve the problem in the short term, and that is that, this year, it announced a $10 billion increase in spending. This is a substantial amount. This is another 6% increase.

So the money is there, the means are there, but there is no political will. The fact that there is no political will has meant that the Liberal government, whether under Mr. Chrétien or the new Prime Minister, does not want to quickly solve this issue.

They have been dragging their feet. This is the first time we have seen a bill like C-18, which proposes to extend by one year the equalization Bill with all the problems this entails for public finances in the provinces, Quebec in particular, as I explained earlier.

The federal government has been dragging its feet and wants to continue doing so because there is nothing in this bill that would allow us to pressure the federal government to move forward in negotiations. We therefore cannot support it.

As I just said, this is the first time we have been required to have a bill to extend the equalization formula by one year. In the past there has always been agreement with the provinces by the March 31 deadline.

This time, the government has been dragging its feet, and is still dragging its feet, and will continue to drag its feet because by extending the formula by a year, there is no pressure on the federal government to resolve this in the short term, especially—and this is the fourth stunt—since there is no guarantee of retroactivity.

Why would the federal government be in any hurry to negotiate if, in any case, it can wait a year until the March 31, 2005 deadline to find a solution with the provinces?

The Minister of Finance has twice said, “Yes, I promise there will be retroactivity”. I want to believe him, but then why, at the Standing Committee on Finance when I introduced an amendment asking for retroactivity to April 1, 2004, did the Liberals turn it down? There is no real guarantee. We have no guarantee that the agreement will be retroactive to April 1 of this year.

They may say, “Yes, but the Minister of Finance gave his word”. What good is the word of the finance minister when it is so difficult to get answers from the government about the sponsorship scandal?

There is a fifth stunt. All this is a strategy to put off serious discussions with the provinces about the equalization formula until after the election. What this government and this Prime Minister want is a blank cheque to decide unilaterally what amount they will transfer to the provinces.

We will not be part of it. We will not support this election-oriented strategy that will deprive Quebec of $1.4 billion this year, because there is no guarantee of retroactivity if an agreement is reached during the year.

However, what the provinces are asking for is not all that complicated, and I will leave it at that. The provinces are asking that the formula be changed to take into account the fiscal capacity of all ten provinces and not only five. They are asking that the payments be more predictable. There have been wide variations between the October and the February equalization estimates. They also ask for more transparency. When some 3,000 variables must be taken into account to calculate the size of the equalization payment, that causes problems.

For Quebec in particular, we ask that property value be based on the real value of lands and properties and not on the revenues received by owners. This deprived Quebec of $400 million last year.

We do not need the government to push through Bill C-18 but rather to give clear indications with respect to the equalization program. As I said before, we agree on the $2 billion. However, the government has to give clear indications on what it intends to do in the upcoming budget. What are the expectations?

The finance minister has said already that there was no question of all 10 provinces being taken into account. The government should make it clear, before the election, so that Quebec voters in particular will know what they are voting on.

We would also need to know if the budget will acknowledge the fiscal imbalance between the federal government and the provinces, the fact that the federal government has far too much money compared to its responsibilities, that the provinces are short of money, and if there is a political will to solve this fiscal imbalance.

There was no sign of openness on the government's part in the debate on Bill C-18. This is not acceptable. We are no fools and we will not support Bill C-18.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I am extremely pleased to take part in this debate on this stunt known as Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health. This is typical of the federal government, the Liberals and the Prime Minister. The sole purpose of this bill is to get votes, nothing more.

First, contrary to the bill introduced in the previous session, this bill combines two things that have nothing to do with one another.

On the one hand, there is the one-year extension of the current equalization program and, on the other hand, there is the $2 billion transfer first promised by Jean Chrétien, then by the hon. member for Ottawa South and, finally, promised and delivered by the current Prime Minister.

Obviously, the Bloc Quebecois is not only in favour of this $2 billion transfer, it has been demanding it for a very long time. In fact, we demanded it back when the federal government and the finance minister, both old and new, were telling us that the federal coffers were empty and that the government was scraping the bottom of the barrel to find this money for Quebec and the provinces.

We are therefore in complete agreement. Not only are we in agreement, but I wanted to make an amendment in the Standing Committee on Finance to ensure that this $2 billion was a recurring item, to rectify the fiscal imbalance and help the provinces and Quebec fulfill their health care commitments.

Consequently, we have no real problem with this aspect of the bill. However, with regard to the one-year extension—I want this to be clear, because the bill clearly indicates an extension until March 31, 2005—the current equalization program is not acceptable to those defending Quebec's interests. The loss to the provinces is several billion dollars; the loss to Quebec is about $1.4 billion.

It is out of the question to ask those with Quebeckers' interests at heart, such as the Bloc Quebecois, to approve of such extensive cuts. This would totally contradict the mandate that Quebeckers have given us.

Obviously, the Liberals knew the Bloc Quebecois were opposed to the extension of this equalization formula. As I said, we had made that clear from the time the previous bill on the same subject was introduced. So they thought that, by putting the transfer of $2 billion into the same bill, they would probably manage to trick us, trick the people of Quebec and make us feel obliged to support such a bill.

We are, however, capable of walking and chewing gum at the same time. We are capable—as Quebeckers are clear on that—of explaining that, while being in agreement with the transfer of $2 billion for health, we can be opposed to extending the equalization formula for the coming year, because we will be penalized in the long run, both in Quebec and in the Atlantic provinces.

We asked the committee to split the bill, so that we might vote separately on extension of the equalization formula on the one hand and on the $2 billion transfer for health on the other. The committee refused. The Liberals refused.

As I said, the result of this is that they are making us speak out against the whole bill although—I repeat—we agree with the $2 billion transfer. I even tried to propose that this be a recurring amount, but for procedural reasons, unfortunately, that was not possible.

So, the first stunt was to combine two things that have nothing to do with each other, except that they both have to do with money. The Bloc's position on the two are diametrically opposite.

The people of Quebec are intelligent people and were not taken in by such a stunt. We will not play the government's, the Liberals, and the Prime Minister's game.

Then, there is the second stunt. By combining the two, the Liberals, the Prime Minister, the Minister of Finance, are suggesting to the provinces, Quebec and the Atlantic provinces in particular, that in the end the equalization formula is really not very advantageous. “But, with the $2 billion we are going to transfer to you, you will stand to gain”, they say.

This is false. No matter how one looks at it, Quebec and the Atlantic provinces in particular, stand to lose with Bill C-18.

Let me give an example. There are several ways to evaluate this loss. Let us look at what is happening with the equalization estimates made by the federal government, by the Department of Finance.

In reality, what the federal government, the Liberals and the Prime Minister are doing is this: on the one hand, they are giving $2 billion for health but, on the other hand, they are taking back that money through the equalization program. As I said, we are not fooled by this scheme.

Here are the October 2003 equalization estimates for Quebec. For 2002-03, it was estimated that Quebec would receive $4.662 billion. In February 2004, according to the most recent estimates released on Monday, the amount is down to $3.985 billion for 2002-03. This is a loss of $677 million to Quebec, based on estimates made by the federal government itself.

For the year 2003-04, the estimate made in October 2003 was for a payment of $4.525 billion to Quebec. In fact, it was on that basis that the Quebec finance minister Séguin prepared his budget. Now, based on the February 2004 estimate, under the equalization formula that the federal government wants to extend for a year, we are finding out that the amount of $4.525 billion is down to $3.802 billion. This is a loss of $723 million to Quebec. And the government would want us to approve that?

For next year we have an initial estimate, therefore we cannot compare it to a previous estimate, but there is talk of equalization for Quebec of $3.691 billion. That means that in addition to the cut in equalization for 2003-04, in 2004-05 an estimated $111 million more will be cut. In total, based on its own estimates, the federal government is telling us that this year it is giving Quebec $1.4 billion less. That is the current estimate.

Of course the Minister of Finance says he is going to spread this out over time. Nonetheless, this is a loss. In the coming years, the Government of Quebec will have to make do with a lot less money in transfers from the federal government.

I remind this House that the February 2003 agreement is expiring soon. This year Quebec will receive only $365 million under that agreement. It is clear that the money situation in Quebec—and in the Atlantic provinces—is going to be especially difficult, if not disastrous this year and in the years to follow.

This is all because of the federal government's own estimate. Now, as for Quebec's expectations, what was in Mr. Séguin's budget? For 2001-02, we expected to receive $5.336 billion from the federal government. Just imagine. I am talking about the 2001-02 budget. That money was spent. Ottawa turned around and said it would not be $5.336 billion, but $4.690 billion. That is a net loss of $646 million in terms of what Quebec was expecting and what Quebec spent based on estimates.

For 2002-03, we expected to receive $5.315 billion from the federal government in equalization. On Monday, we were told it would be $3.985 billion. That is a loss for Quebec of $1.330 billion. That money has already been spent.

For the coming year, we are being told we will be given a little more. Quebec had anticipated a cut in equalization. In his September study, Mr. Séguin had reduced his equalization expectations to $3.290 billion, given the problem with this formula. We were told that there would be a little more money, $3.802 billion. Note that this is less than we expect to spend this year.

In total, with respect to Quebec's expectations, with respect to the money that has often been spent on health, in accordance with Quebeckers' priorities, it amounts to $1.464 billion less.

With the exception of Alberta, this is taking place in an extremely fragile financial situation. That is true for Quebec and for all the provinces. There is a risk that some provinces, particularly the Atlantic provinces, will find themselves with a deficit. And they want us to approve that? Whether we look at it from one angle or another, Quebec will be losing about $1.5 billion with this equalization formula. That is the money that was lost in the past; imagine what it will be in the future.

All provinces that receive equalization payments will be affected. If we look at all the provinces, in October 2003, the forecast equalization payment for 2002-03 was $9.709 billion. On Monday, we were told that it would be $8.73 billion, or a decrease of $976 million; the provinces will receive nearly $1 billion less.

For 2003-04, the current fiscal year, the payment forecast last October was $10.097 billion. Now we hear that it will be only $8.779 billion, or a loss to all provinces of $1.318 billion. In total, with the forecasts and the estimates that were published on Monday, this amounts to $2.2 billion less that the provinces will receive in transfer payments because of this equalization formula.

And they want us to agree to extend this for a year, because an election is coming up? No, Mr. Speaker. It is particularly hard on Quebec and the Atlantic provinces. I shall explain it to you, and since you are an extremely intelligent person, Mr. Speaker, you will understand right away.

There are two major transfer payments in the Canadian system. There is the Canadian health and social transfer, which is calculated on the basis of a percentage of the population, and there is equalization, which is based on the goal of reducing the gaps between the provinces' fiscal capacities. In this context, consideration is given not only to population figures, but also to the socio-economic status of the provinces.

Thus, they take $2.2 billion out of the equalization system that helps the poorest provinces, and, they put $2 billion back in, through the Canadian health and social transfer. But the CHST funds are divided proportionally among the provinces, based on population, not taking into account the socio-economic situation in the various provinces.

I see you are signalling me to stop, Mr. Speaker.

[John McKay, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, thank you for the opportunity to enter into this debate.

I would like to start by thanking my colleagues on the finance committee for their cooperation on the bill. As hon. members know, the bill is of great significance to the provinces and to those of us in the House who want to see that the legislative timelines are met. I want to particularly acknowledge the help of the committee chair, the member for Etobicoke North, and all members on the committee from both sides of the House who dealt with this in an expeditious fashion.

The measures in the bill pertain to two of the four federal transfer programs, equalization and the Canada health and social transfer, the CHST as it is commonly known.

Through these programs, the territorial formula financing and the new health reform transfer, the federal government, in partnership with the provinces and territories, plays a key role in supporting the Canadian health system and other social programs.

As the largest federal transfer, the CHST provides the provinces and territories with cash payments and tax transfers in support of health care, post-secondary education, social assistance and social services, including early childhood development and early learning and child care.

Equalization, as hon. members know, is the federal government's most important program for reducing fiscal disparities among provinces. It ensures that the less prosperous provinces have the capacity to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

This is not about the level of equalization. This is about the payment of equalization and extending legislative authority to carry on with payments of equalization.

Bill C-18 supports these two important programs and makes it possible to reach two goals.

First, it provides the Minister of Finance with the authority to continue to make equalization payments according to the current formula for up to a year in the event that the renewal legislation is not in place by April 1, 2004.

Second, it provides the federal government with the authority to pay an additional $2 billion from the consolidated revenue fund to the provinces and territories for health.

Bill C-18 lays out the steps the government is taking to ensure that the provinces and territories receive the payments to which they are entitled, payments supporting the public services provided to Canadians.

The bill before us today enables the continuation of equalization payments while renewal legislation is finalized.

The current version of the legislation authorizing the federal government to make equalization payments to the provinces will expire on March 31, 2004.

While discussions on the five year renewal are underway with the provinces, Bill C-18 represents a preventive measure to authorize the federal government to continue making payments for up to a year, if necessary.

This will assure equalization receiving provinces that they will continue to receive payments if renewal legislation is not in place by the end of March. This is the critical point of the bill. If this legislation does not pass, then those payments cannot be made.

Without Bill C-18, the Government of Canada does not have the authority to make equalization payments, which would result in serious negative impacts for receiving provinces as payments would cease.

Let me briefly review how the program works.

To begin, payments are unconditional, meaning that provinces can spend their funds as they see fit on public services for their residents. Next, payments are calculated according to a formula which responds to the changing economic fortunes and circumstances of all of the provinces.

The formula measures the performances of provincial economies to the average fiscal capacities of the five middle income provinces, which forms a threshold or standard. As the relative fiscal performance of provinces go up and down, equalization entitlements go up and down. These increases or decreases in entitlements are the result of the formula working as it should, not the result of decisions by the Government of Canada to increase or decrease entitlements.

Provinces with revenue raising ability--or fiscal capacity as it is known in the jargon--below the threshold or standard amount receive equalization payments to bring their revenues up to the standard. At present, eight provinces are below the standard and qualify for federal support under the program. Only Ontario and Alberta are not recipients.

The third element of the program involves a floor, which provides provincial governments with protections against unexpected, large and sudden decreases in equalization payments that would otherwise be warranted by the straightforward application of the formula. The floor limits the amount by which the provinces' entitlements can decline from one year to the next.

Two built-in mechanisms ensure that the program remains current. The first is an ongoing review of the program by federal and provincial officials, which makes sure that the differences in fiscal capacity are measured as accurately as possible.

The second mechanism, and the one central to today's debate, is that renewal legislation must be introduced every five years following federal-provincial consultations. The last renewal was in 1999. The current legislation is set to expire on March 31 of this year, as I indicated earlier. The renewal legislation will guarantee that the program remains up to date and that the best possible calculations and data are used to determine equalization payments.

The renewal legislation will also guarantee that the integrity and fundamental objectives of the program are preserved. The government must be able to assure provinces that they will continue to receive equalization payments even if the renewal legislation is not passed by the end of the fiscal year.

Bill C-18 addresses this problem by enabling the continuation of payments for up to a year while the renewal legislation is being finalized. Passage of the bill would ensure that the public services which provinces fund through the equalization program will continue to be protected for the benefit of their citizens. When passed, the renewal legislation will both supersede the extension and be retroactive to April 1, 2004.

In considering Bill C-18, I urge hon. colleagues to keep in mind that the impact on equalization receiving provinces and their residents could be very significant if the bill is not passed. It is therefore imperative that this legislation be passed quickly.

Now, if I may, I will turn to the health part of the bill. As my hon. colleagues know, federal support for the Canadian health system is provided primarily through the CHST and the new health reform transfer.

Bill C-18 would amend the existing CHST to authorize payment of $2 billion as a supplement to the CHST. This fulfills the commitment made by the Prime Minister following the January 2004 first ministers meeting. It is also in keeping with commitments made in the 2003 first ministers accord on health renewal, the 2003 budget and the 2003 economic update.

I would like to point out that this funding is in addition to the increased federal investment of $34.8 billion over five years for health that was confirmed in the 2003 budget. As a result, this funding will bring the federal government's total commitment in support of the 2003 health accord to $37 billion over five years.

I would like to point out that this funding can be provided without the government going into deficit. I want to point out, as I accompanied the minister across the country, that one of the things we heard repeatedly is that the government should not go into deficit under any circumstances.

Passage of the bill will provide the provinces and territories with the flexibility to begin drawing down these funds as they require, which would help them better plan for the future and provide health care services to their residents.

I encourage my hon. colleagues to pass Bill C-18 without delay. The measures in the bill affect the provinces and territories and thus their residents who depend upon them for public services. Not only is additional funding for health part of the federal government's ongoing commitment to health care, it is being provided within a framework of balanced budgets which will ensure its sustainability over the long run.

As hon. members know, the Prime Minister intends to meet with his counterparts in the summer to discuss long term sustainability of our publicly funded health care system. In the meantime, the bill would ensure that our health care system continues to be a proud example of our national values at work, as recently described by the Prime Minister.

Further, the equalization provisions in the bill underscore the priority that the government places on this federal transfer and ensure uninterrupted funding to the provinces until the renewed legislation can be finalized.

Through our federal system of transfer payments, all Canadians are guaranteed equal access to health care, a safety net to support those most in need, freedom to move throughout the country to seek work, higher education and training available to all who qualify, and reasonably comparable services in whichever province they choose to live.

The measures in Bill C-18 are designed to ensure that those goals continue to be met.

[Judy Sgro, Liberal, for the Minister of Finance]

moved that Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health, be read the third time and passed.

Business of the House

[Jacques Saada, Liberal, Leader of the Government in the House of Commons and Minister responsible for Democratic Reform]

Mr. Speaker, I will begin at the end, to be completely logical.

These are Senate matters. They do not concern the House in any concrete way. I would need to know what the Senate was going to decide before I could answer the question.

Also, regarding new bills, I am assuming that a bill that is good for the people is a bill that is good for the people, whether or not it existed previously. That is what we are working on. I hope to have the cooperation of our colleagues across the way to continue this process.

As to the plans for the coming week, as you know, this afternoon, we will continue debate on the opposition motion. Tomorrow, we will begin debate at third reading of Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health, including transfer payments of $2 billion to the provinces. Then, we will consider Bill C-10, an act to amend the Contraventions Act and the Controlled Drugs and Substances Act, followed by Bill C-15, an act to implement treaties and administrative arrangements on the international transfer of persons found guilty of criminal offences, and finally Bill C-12, an act to amend the Criminal Code (protection of children and other vulnerable persons) and the Canada Evidence Act.

On Tuesday, March 9, at 10 a.m., the Secretary General of the United Nations will address both houses of Parliament in the House of Commons. As you know, all parties have agreed that the Wednesday schedule will apply that Tuesday, in order to leave the morning free in honour of the Secretary General.

Finally, Thursday, March 11 will also be an allotted day.

Committees of the House

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, as the new chair of the House of Commons Standing Committee on Finance, I have the honour to present, in both official languages, the first report by the Standing Committee on Finance on Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health.

It was agreed on Thursday, February 19, 2004, to report it without amendment.

Federal-Provincial Fiscal Arrangements Act

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

Mr. Speaker, I rise today to speak on Bill C-18, whose purpose is double.

It is somewhat surprising that, in the same bill, we find one part that finally transfers the $2 billion promised by Jean Chrétien and promised again by the current Prime Minister. This amount really should be transferred one way or another. It is a good idea in itself, but the amount is clearly inadequate. It is rather paradoxical and, I believe, unacceptable that this same bill is being used to extend the equalization agreement.

The equalization period is usually five years, and the current period ends on March 31, 2003. They want to extend it from 2004 to 2009, but without having real agreements with the provinces. It is rather like having an old collective agreement with a few holes and things that need fixing. We would like it to be improved. They assure us that the old agreement will apply for the entire period, unless something new is negotiated.

We would have preferred that the current government had done its homework on time and that we had a new equalization act that included the results of negotiations and agreements with the provinces. But the past predicts the future. We know that the Liberal government has not always kept its word on this.

Today, this is very frustrating. We can see that the surplus for the current year, ending March 31, 2004, will probably be in excess of $7 billion. The former finance minister, who is now the Prime Minister, deliberately underestimated the surplus year after year, and the new Minister of Finance is doing the same thing. On March 31, 2004, at a time when a number of provinces will be in situations where they cannot avoid a deficit, where they will be looking for money to spend on health care, the federal government will have $7 billion.

This is a government that acts as if it were a corporation. It is trying to have the largest profits possible, but it is the only stockholder. I think that the results are not what our society wants. It is true that the government must be well managed, but the bottom line is that, if the surpluses piling up do not make it possible to provide adequate services, there is no sense to it.

Yesterday, Quebec's finance minister was unable to refrain from saying so in the consultations he is holding on his own budget. It is frustrating to hear from farmers and people in social housing or other sectors in committee and see that the Quebec government does not have the money it needs to meet their needs.

Quebec and the provinces shoulder the responsibilities, and they do not have the means to obtain the money. The federal government is not responsible for front-line services in health, education, social housing nor a number of other things such as the current mad cow crisis. The federal government has not listened carefully, or it would have provided adequate funding.

In terms of this bill, we agree with the clause to invest $2 billion, as long as it is understood that this is insufficient. Additional funds are needed, and the federal government has the money. However, equalization, as it exists currently, is not sufficient for Quebec's needs and should be reviewed.

An amendment would have been a good idea. It would be appropriate. The $2 billion for health referred to in the bill should be made a recurring item. In the Bloc's opinion, such an amendment would improve the bill, make it more acceptable and ensure our support for it.

If this were a recurring item, funding would be more secure and dependable. As a result, the provinces would have a guarantee that they will not have to rely on the government's good will from one year to the next. It would be recognition that this threshold must be integrated into the health transfer payments. It would be good to have this in the bill.

We will ask that the bill be split so that these two distinct issues can be considered separately. This will be done in committee. We will likely move an amendment to make the $2 billion a recurring item.

That way, there would be two bills coming back to the House, one which would ensure that the $2 billion is paid to the provinces on a recurring basis and the other, which we will not support as it stands, to renew the equalization payment agreements.

In this part, an additional effort needs to be made over the weeks and months to come. It does not look very professional, in a country like this one, which claims to be a leader in public administration, to be living from hand to mouth. Next month, the provinces will be having to define what sort of budgets they will have for the coming year, and to make five year plans as well. Yet they do not know what they will be receiving from the federal government.

We have memories of episodes in the past when the Government of Quebec, no matter what party was in power, learned in February that it would be $200 million or $300 million under, or $500 million over.

This leads to terrible frustrations. When one learns that there was $500 million more that could have been spent in the previous year, on health for example, one sees a number of needs that could have been met. It would have been put to use if one had known it would be there to use, and people would have been pleased. Worse yet is the situation when amounts are taken away.

As for the part about equalization, it is estimated that a one year extension of the current formula would represent a net loss for Quebec. Consequently, we cannot support this legislative measure that would cause Quebec to suffer. Let us hope our suggestion to split the bill does not fall on deaf ears.

With respect more specifically to the equalization issue, the current formula is extremely flawed. It must be changed as soon as possible. We have been defending this point of view for some time now and we hope the government will listen.

This formula penalizes Quebec, gives the advantage to the federal government and accentuates the fiscal imbalance that has been established and recognized by a commission in Quebec. This commission is considered to be very reputable. It was chaired by Quebec's current finance minister, Mr. Séguin, who, in his current role, has noticed that what he saw in his task force he now sees on a daily basis in his responsibilities as finance minister.

Yet the government has not budged in this area. This would have been a good opportunity for the current government to stand out, but, as in other sectors, it is hard to see the difference between the practices of Mr. Chrétien and the new Prime Minister.

Nothing has changed on the equalization issue. The new finance minister flat out rejected the formula proposed by the provinces, and now we are faced with a no man's land. We do not know what exactly will happen. No solid proposals have been made.

The Bloc Quebecois is calling on the federal government to come back to the table with the provinces as quickly as possible in order to enter into a satisfactory agreement on equalization that would meet the provinces' needs.

If the new Prime Minister is serious about wanting to be more open toward Quebec and the provinces, he has a good opportunity to prove it by quickly negotiating in good faith so that the provinces will have the information they need to prepare their next budgets and plan for the next five years. That is what we would expect from a responsible federal government looking to implement a practice that is different from the one that existed under the former government.

The new administration is currently using the exact same practices the former administration used, and the provinces still have to beg for the money they need, money that taxpayers have paid in taxes, in a very complicated process.

The federal government collects taxes, much more than it needs, and gives a certain amount back to the provinces through the equalization program, but it controls everything. It can decide whether or not it will open the tap, depending on all sorts of conditions.

We witnessed that in the past. When provincial governments are not of the same political stripe as the federal government, the latter turns off the tap just in time. This means that the provincial government does not have the money to table a responsible budget and voters make that government pay the price, when in fact the one that is responsible for this situation is the federal government.

The current Minister of Finance said that the next real formula would be retroactive to April 1, 2004, so that, in the end, no one would lose.

However, at this point, this is still only a promise. There is no guarantee in the bill that the government will live up to that commitment. We do not know when the negotiation will conclude. In the meantime, the provinces have a sword of Damocles hanging over their heads, and this is why the Bloc Quebecois is opposed to the bill in its current form.

The $2 billion health transfer must be paid as quickly as possible and this must become a recurring payment.

However, there is still a lot of work to do as regards equalization. Before we give our support to an equalization formula, we want to make sure that it will benefit Quebec.

[Larry Bagnell, Liberal, Parliamentary Secretary to the Minister of Indian Affairs and Northern Development]

Mr. Speaker, to ensure that the people who are just tuning in understand this finance related bill, the equalization payments are running out at the end of the federal government's fiscal year, March 31, and we need to put a provision in place. Negotiations are underway to renew them but if the negotiations are not finished in time we need to have a stop-gap measure in place to make sure the provinces continue to get their funding.

The second part allows for the provision of the $2 billion transfer to the provinces that the Prime Minister just announced. I am sure no one would be against that. It is a very high priority among Canadians to transfer this money for health care. Health care is a high priority and I am sure everyone would be in favour of this administrative measure in the bill to transfer that money.

The finance minister is meeting with the provinces and territories later this month to continue the negotiations. People should be secure in the fact that if and when new arrangements are made they will supersede anything in the bill and will be retroactive to April 1 so that any new arrangements will be taken into account.

As the member from Newfoundland just outlined very eloquently, the provinces need the money and we must ensure that the money keeps flowing to the provinces so they can provide the essential services, such as health care and education, to their citizens.

Bill C-18 is an act respecting equalization and it authorizes the Minister of Finance to make certain payments related to health. We also have a motion for the legislation to be referred to committee.

The bill is designed to achieve two goals which relate to Canada's system of federal transfer payments. First, the bill would enable the continuation of equalization payments while the renewal legislation is finalized.

Second, the bill would provide the federal government with the authority to pay $2 billion to the provinces and territories for health, as confirmed by the Prime Minister following the recent first ministers meeting.

As my hon. colleagues are aware, 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 large majority of federal transfers are delivered through four major programs: the Canada health and social transfer, equalization, territorial formula financing and the health reform transfer.

Today's bill deals only with equalization and the CHST. Collectively, these programs represent 2.4% of the nation's GDP. Another way of looking at it, and probably more relevant, is that it constitutes approximately 18% of the Government of Canada's budget. Either way, it is a significant sum of money.

I will not be talking about the territorial formula financing right now. I will be talking about the transfer to the provinces through equalization.

Equalization is a constitutional obligation that ensures that less prosperous provinces have the capacity to provide reasonably comparable levels of public services at reasonably comparable levels of taxation. It is not a program that transfers wealth among citizens.

Payments are unconditional. Receiving provinces are free to spend the funds on public services according to their own priorities. Payments are calculated according to the formula set out in the federal legislation. The formula responds to changing economic fortunes and circumstances of provinces and is designed to measure provinces' fiscal capacity relative to the average fiscal capacity of the five middle income provinces, which forms a threshold or a standard.

The formula puts 33 revenue sources in a basket to measure final capacity. Each province's fiscal capacity is measured relative to the middle wealthy five provinces.

The formula is dynamic and as revenues go up or down over the year, the average moves as does the fiscal capacity of each province. If any province has a good year, that affects equalization and, conversely, if any province has a bad year, that also affects equalization.

If a large province has a bad year, naturally there is a ripple effect. Population movement, as reflected in the 2001 census, also affects the flow of payments.

The good news is that over the past 20 years, with all the ups and downs of all the nation's provinces, there has been a slow but steady decline in fiscal disparities.

I am sure, as a nation, we would all hope for that. I am sure none of us would want to move ahead in prosperity, in our ability to take care of our families, in health care and in education if the rest of our brethren in Canada were not able to progress with us.

At the same time, equalization payments are subject to a floor provision which provides protection to the provincial governments against unexpected and large sudden decreases in equalization payments. The floor limits the amount by which a province's entitlements can decline from one year to the next.

Federal and provincial officials review the equalization program on an ongoing basis to ensure that differences in the capacity of provinces to raise revenues are measured as accurately as possible.

In addition, and central to today's debate, is the fact that equalization legislation is renewed every five years to ensure that the review is undertaken and that the integrity of fundamental objectives to the program are preserved. As I said earlier, that is exactly what is occurring right now.

The last renewal was in 1999, and the current legislation is set to expire on March 31, 2004. Discussions on the five year renewal are underway but may not take place exactly on April 1, 2004, and, of course, we would not want to have a gap in the government's administrative authority just to make these payments.

Briefly, the bill would give the Minister of Finance the authority to make these equalization payments according to the current formula for up to a year in the event that the new legislation is not in place by April 1.

The bill would ensure an uninterrupted stream of equalization payments following March 31. It is basically an insurance policy to ensure the continuation of payments while renewal legislation is finalized.

Passage of the bill will ensure the public services provinces fund equalization program will continue to be protected for the benefit of their citizens. Of course, when passed, the renewal legislation will supercede this legislation. When the full renewal legislation is passed it will be made retroactive to April 1, 2004.

The renewal legislation would ensure that the program remains up to date and that the best possible calculations and data are used to determine equalization payments.

As I indicated, until the renewal legislation is introduced and passed, hon. members should regard the measures in Bill C-18 as insurance to continue payments, given that the impacts on receiving provinces could be very significant without legislation. It really appears just administrative so I cannot imagine anyone here voting against allowing us to continue payments to the provinces.

The second part, as I said earlier, is related to health. It would allow the Prime Minister's commitment to the provinces and territories of $2 billion for health care. This constitutes 1.7% of the nation's GDP.

I could go through all this technical information on the health transfer but I do not think I will because the technicality of this has been well outlined. We just want to continue the equalization payments until a new deal is in place and to transfer the $2 billion in health care to which I am sure no one objects.

What I will do now is reinforce the whole concept of equalization. I think equalization is one of the things Canadians point to as being the greatness of our nation. All Canadians want to see each and every one of us succeed and we help each other. In my community, any time there is a tragedy or an emergency the whole community falls in behind the person or the family with the problem.

The nation works like that when one province has a difficult time. We have a nation that is probably bigger than all of Europe. It covers a huge geographic and demographic area with different cultures and economies. Anything can happen to affect any of those areas. It can be seen even more rapidly in the new global environment. Under those circumstances we want to stick together. We want to progress as a people. We want to ensure that everyone progresses together and that the rising tide raises all boats together.

Canadians are a very compassionate people and that is what equalization allows. We are all proud of that and we will make sure it continues through the bill.