Bill C-24 (Historical)

An Act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other Acts (fiscal equalization payments to the provinces and funding to the territories)

This enactment amends the Federal-Provincial Fiscal Arrangements Act to authorize the Minister of Finance to make fiscal equalization payments to the provinces for the fiscal years beginning after March 31, 2004 and to change the manner in which those payments will be calculated. It also authorizes the Minister to pay, under a new legislative regime, grants to the territories for the fiscal years between April 1, 2001 and March 31, 2005 and territorial formula financing payments for subsequent fiscal years. Finally, this enactment also makes consequential amendments to that Act and to other Acts.

Fiscal Arrangements Act

[Rona Ambrose, Conservative, Edmonton—Spruce Grove, AB]

Mr. Speaker, it is correct to say that Premier McGuinty was at the negotiations in September and agreed to the terms of this agreement that is laid out in the framework of Bill C-24, but something has happened in the meantime and that is of course the deal signed today on offshore profit sharing with Newfoundland and Labrador.

I know that the panel of experts is going to look at the issues of non-renewal natural resource revenues, as it should have years ago. Would the member comment on how that has changed, having a one-off deal for Newfoundland and Labrador, which we are very happy about on this side of the House?

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

Mr. Speaker, I thank the House for the opportunity to speak to Bill C-24, the Federal-Provincial Fiscal Arrangements Act.

Hon. members will no doubt recall that the Government of Canada's new approach to equalization and the territorial financing formula was first presented to premiers and territorial leaders in September 2004 at the first ministers meeting.

In October the Prime Minister announced the details of the new framework which, subject to approval by Parliament, will increase the support provided to the provinces and territories under the equalization program and the TFF by $33 billion over 10 years. The increased funding will assist Canada's less prosperous provinces and three territories in meeting their commitments under the 10 year plan to strengthen health care as well as other priorities.

As the Prime Minister said at the announcement of the equalization and territorial financing formula framework, this framework reflects the most significant improvement in the program's history. By providing predictability, stability and increased funding, the framework will play an essential role in ensuring that all Canadians no matter where they live will have access to comparable public services.

I will outline the details of the framework shortly, but first it is important to provide some history of the programs and how they work.

The equalization program has been one of the pillars of the Canadian Confederation for more than four decades. It has been with us since 1957, almost 50 years. The territorial financing formula program has been in effect since 1985. That is coming up to 20 years. Both of these programs have been successful in providing support to the so-called have not regions of Canada by allowing them to provide services despite the existence of fiscal disparities with other regions.

I am sure hon. members will agree that the concept that Canadians should have access to quality health and social services regardless of where they live is fundamental to the fairness and integrity of the Canadian federation. Indeed, equalization has played an important role in defining the Canadian federation, so much so that it is unique among federal transfers in that its purpose was entrenched in the Canadian Constitution in 1982.

Section 36(2) of the 1982 Constitution Act 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.

In other words the intent of the equalization program and the territorial formula financing is to ensure that all Canadians no matter where they live in this great country have access to reasonably comparable public services, without the provinces or territories having to resort to economically punishing levels of taxation to fund the provisions of these services.

I will now explain how these programs operate. Equalization and TFF are the most important federal programs for reducing the differences in the abilities of the provincial and territorial governments to raise revenues. Equalization payments are calculated according to a formula set out in the federal legislation and adjust automatically in response to economic developments in the provinces.

For example, when a province's economy is booming relative to other provinces, its equalization payments automatically decline under the formula, reflecting the increased prosperity of that province. Some think that this only works one way. Conversely, when a qualifying province's fiscal capacity declines relative to the standard due to a slowdown in its economy, its equalization transfer automatically increases.

In this way the equalization program acts as an automatic stabilizer of provincial government revenues. Equalization payments are subject to a floor provision. This provision offers protection to provincial governments against unexpected large and sudden decreases in equalization payments.

Similar to equalization TFF provides payments to territorial governments to assist them in providing services. TFF is based on a gap filling principle that takes into account the difference between the expenditure needs and revenue means of the territorial governments. Federal and provincial officials review these programs on an ongoing basis to make sure that the differences are measured as accurately as possible. In addition the programs are renewed every five years.

I would like to return now to the changes in the equalization and TFF frameworks, the details of which are contained in the bill presently before the House. The framework includes five elements: a new minimum funding floor of $10 billion for equalization and $1.9 billion for TFF for the fiscal year 2004-05; complete protection for provinces and territories against overall and individual declines in payments for 2004-05; a level of $10.9 billion for equalization and $2 billion for TFF in 2005-06; a growth rate thereafter of 3.5%; and finally, an independent panel to advise in the allocation among provinces and territories.

What do these changes mean in dollar terms? Equalization payments will increase from $8.9 billion in 2004-05 to $12.5 billion in 2009-10. This over a five year period is a 41% increase, a substantial increase by any standard and well beyond the anticipated growth in the economy.

Starting in 2005 the Government of Canada will establish a legislative financial framework for equalization and TFF with fixed overall payment levels that provide predictable and growing funding. In 2005-06 the funding levels will be set at $10.9 billion for equalization and $2 billion for TFF, the highest levels ever achieved by these programs. Starting in 2006-07 both amounts will grow at 3.5%. As I already mentioned, the bottom line is an additional $33 billion over 10 years in federal support for Canada's provinces and territories.

The government recognizes that just pumping money into the system is not enough. We need to look at how the current legislation on equalization and TFF allocates money to the provinces and territories. That is why as an integral part of the proposed changes in the funding framework, an independent panel of experts on how legislated equalization and TFF levels should be allocated among the provinces and territories in 2006-07 and thereafter will be established.

Provinces and territories have been invited to appoint two members to the panel. Among other things, the review will evaluate current practices for measuring fiscal disparities among provinces and territories. It will examine alternative approaches, such as those based on aggregate macroeconomic indicators--for example, the gross domestic product, disposable income, et cetera--or expenditure needs.

It will review the evolution of fiscal disparities among provinces and the costs of providing services in the territories to help governments and citizens evaluate the overall level of support for equalization and TFF. Finally it will advise whether the Government of Canada should establish a permanent independent body to advise it on the allocation of equalization and TFF within the framework of legislated levels.

I would like to make it clear that the Government of Canada will retain full accountability and responsibility for all decisions. It will continue to consult extensively with the provinces and territories as before.

The mandate of the panel is that of an advisory one. The government will make decisions based upon advice received from the panel, provincial and territorial governments, and indeed all Canadians.

The expert panel will report back by the end of 2005 in time to provide advice on how equalization and TFF should be apportioned among the provinces and territories in the fiscal year 2006-07. The government is committed to having any changes in allocation for 2006-07 and future years in place by April 1, 2006, about 14 months from now.

The proposed framework contained in Bill C-24 also provides additional floor protection to every province and territory in order to provide greater stability to provinces and territories in 2004-05. That means the Government of Canada will ensure that equalization payments total a minimum of $10 billion over 2004-05, and the TFF payments total a minimum of $1.9 billion for 2004-05.

In addition, each province and territory will be guaranteed its equalization or TFF claims for 2001-02 to 2004-05 will not be lower than what was estimated in February 2004 and included in the budget 2004 for those years.

It is important to mention that equalization and TFF payments are not the only sources of federal assistance for provinces and territories.

At the same first ministers meeting last September, the Prime Minister and all the premiers and territorial leaders signed an accord agreeing to work together to develop a 10 year plan to strengthen and enhance our treasured system of publicly funded health care. The government has committed to provide $41.3 billion in new health care funding to provinces and territories.

Critical to this effort to provide access to quality health care will be the need to improve access to doctors, nurses and other health providers and to reduce waiting times for key treatments and tests.

As so many of the provinces and territories have demonstrated through innovative efforts in select areas, shorter waiting times and better wait times management lead to better care for patients, more efficient health care and greater public confidence in publicly funded health care.

We have created with our territorial and provincial counterparts a shared agenda for the renewal of health care in Canada. The agenda is built on three key elements: one, an agreed upon 10 year plan to ensure that Canadians have access to the care that they need when they need it; two, new federal funding of $41.3 billion in support of the 10 year plan, ensuring that provinces and territories have predictable steady increases in cash transfers for health; and three, support for increased use of evidence based benchmarks and comparable meaningful information on system performance and health outcomes to guide decisions and to allow Canadians to monitor progress.

I trust hon. members can appreciate that putting in place a 10 year plan for health care will require cooperation and collaboration by governments, health experts, stakeholders and Canadians themselves.

Just look at the benefits to Canadians of the health plan when combined with the new $33 billion equalization and TFF framework. That $33 billion put together with more than $41 billion of health enrichments that I just outlined will result in a cumulative increase of $75 billion over 10 years compared to the annual levels estimated at the time of the February 2004 budget. That is a $75 billion increase beyond the base levels in the 2004 budget.

This illustrates the government's willingness to work with the provinces and territories to find new ways to improve the quality of life for Canadians.

To sum up, Bill C-24 underscores the priority that the Government of Canada places on the equalization program and territorial financing formula. Both of these programs help to ensure that receiving provinces and territories continue to have the resources to provide the services their people need and want.

I would like to conclude with a quote from the Prime Minister at the October announcement of the new funding framework:

This new partnership will be essential to our success as we move forward together on the other key policy issues outlined in the Speech from the Throne, such as child care, cities and communities, and the environment.

I urge hon. members to support this legislation without delay.

Business of the House

[Tony Valeri, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, today and tomorrow we will continue third reading of Bill C-29, the Patent Act. This will be followed by second reading of Bill C-31 and Bill C-32, respecting international trade and foreign affairs.

We will then proceed to second reading of Bill C-28, which amends the Food and Drugs Act; report stage of Bill C-8, the public service bill; report stage of Bill C-3, the Coast Guard bill; and report stage of Bill S-17, respecting tax treaties.

On Monday we will begin with report stage and third reading of Bill C-24, the equalization bill. If this is completed, we will then return to the previous list where we left off.

Tuesday and Thursday of next week shall be allotted days.

Next Wednesday we will commence second reading of Bill C-38, the civil marriage bill.

With respect to the question on the Judges Act, that will be forthcoming in due course.

Federal-Provincial Fiscal Arrangements Act

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

Madam Speaker, I am pleased to introduce at second reading an act to amend the Federal-Provincial Fiscal Arrangements Act and to enact an act respecting the provision of funding for diagnostic and medical equipment. It is a very long name, possibly befitting the enormous sums of money involved and the importance of this agreement to all Canadians.

Canadians have told their governments that health care is of primary importance to them. As such, they have asked governments to work together to strengthen the health care system, to improve access to essential services and to reduce the wait times.

Canadians want to ensure the health care system is there for them today and sustainable for future generations. Governments are working to meet those expectations.

In September 2004 all first ministers signed a 10 year plan to strengthen health care. In support of the 10 year plan, the Government of Canada committed to increase its transfer to provinces and territories for health by the sum of $41 billion over 10 years starting in this fiscal year 2004-05. The increased funding of $41 billion will do three important things.

First, it will strengthen the Canada health transfer, the largest federal transfer supporting health care. It will both increase the base level of the transfer and establish an automatic 6% escalator, which is an unprecedented move to ensure predictable and stable growth in the federal transfer support.

Second, it will create a wait times reduction transfer to assist provinces and territories in reducing wait times according to their respective priorities.

Third, the new federal funding will provide an additional $500 million to provinces and territories for diagnostic and medical equipment, helping to improve access to publicly funded diagnostic services. The commitment to provide an additional $41 billion to provinces and territories will help ensure that current and future generations of Canadians have timely access to essential quality health care across the country.

At the September 2004 meeting of first ministers, a broad consensus emerged between governments on a shared agenda renewal of health care in Canada. That agenda focused on ensuring that Canadians have access to the care they need when they need it. As a result, federal, provincial and territorial governments agreed upon an action plan to ensure viable health care for Canadians setting out commitments to improve access and to reduce wait times.

The federal government is committed to doing its part to support the needed renewal and reform of health care. As part of its contribution to an effective working partnership on health care, the federal government brings a commitment to a growing, stable and predictable health care funding so that provinces and territories can plan for the future.

The bill before us today would provide for new federal funding over the next 10 years in support of the agreement signed by the first ministers on health.

To that end, the Government of Canada commits $41 billion in new federal funding over 10 years to meet those goals set out in that 10 year plan. Bill C-39 would implement those funding commitments.

To accelerate and broaden health care renewal and reform, the federal government will take a number of steps to strengthen the Canada health transfer, otherwise known as the CHT. It will invest an additional $3 billion in CHT in 2004-05 and 2005-6 to close the so-called Romanow gap.

A second important initiative is establishing a new, higher base for the Canada health transfer beginning in 2005-06. In that year the new CHT base will be $19 billion.

This commitment fully satisfies and in fact exceeds the recommendations made in the Romanow report on the future of health care in Canada. That new and higher base of $19 billion includes $500 million in targeted funding for home care and catastrophic drug coverage, clear priorities to many Canadians.

This funding for home care and catastrophic drug coverage recognizes and supports the first ministers' commitments to improve access to home and community care services and catastrophic drug coverage. These commitments are important to improving the quality of life of many Canadians and to ensure that no Canadian suffers undue financial hardship in accessing needed drug therapies.

Also of note, the health reform transfer created as part of the 2003 accord is now being rolled into the CHT effective 2005-06 and beyond. This consolidation of federal support for health reflects the continuing commitment to enhanced transparency and accountability and to support reforms established in the 2003 accord, including primary care, home care and catastrophic drug coverage.

To ensure predictable and sustainable growth in health care funding through the CHT, the government has committed to legislate an automatic escalator. An automatic escalator of 6% will be applied to the new health care transfer base of $19 billion effective in the fiscal year 2006-07.

This rate of growth is higher than the projected rate of nominal GDP growth, the rate of growth of the Canadian economy and, therefore, growth in total federal revenues over the periods 2006-07 to 2013-14. This rate of growth is fully consistent with the recommendations of the Romanow report. In other words, the federal government has agreed to increase the funding to CHT faster than the economy will grow and faster than we anticipate that federal revenues will be realized.

Foremost in the 10 year plan is the need to make timely access to quality care a reality for Canadians. The government remains committed to the dual objectives of better management of wait times and measurable reduction of wait times where they are longer than medically acceptable. All jurisdictions have taken concrete steps to address wait times, particularly in such priority areas as cancer, cardiac care and diagnostic imaging. The bill provides for an investment of the Government of Canada of $5.5 billion over 10 years in wait times reduction transfer.

Funding of $4.25 billion will be provided through a third party trust and accounted for by the Government of Canada in 2004-05. The government recognizes that not all provinces and territories are at the same stage in implementing their wait time reduction strategies. Provinces and territories will now have the flexibility to draw down funding according to their respective jurisdictional priorities to meet their wait time reduction commitments.

This funding will primarily be used for priorities identified by each jurisdiction. These priorities include: clearing backlogs, training and hiring more health care professionals, building capacity for regional centres of excellence, and expanding appropriate ambulatory and community care programs and tools to manage wait times.

Beginning in the fiscal year 2009-10, $250 million will be provided through an annual transfer to provinces and territories in support of health human resources and tools to manage wait times.

The government will also provide to provinces and territories a further $500 million for medical equipment in 2004-05. Building on previous investments in diagnostic and medical equipment under the 2000 and 2003 health accords, this funding will assist provinces and territories in improving access to publicly funded diagnostic services by providing funding for new equipment and the related specialized staff training that is required to operate this new equipment.

The $500 million more than fulfills the government's commitment that additional revenues from the goods and services tax as a result of the spike in gasoline taxes would be redirected toward further investments in medical equipment on a one time basis.

As a result of these commitments, total federal cash transfers in support of health are scheduled to rise to $30.5 billion in the years 2013-14 from $16.3 billion in 2004-05. The bulk of this new funding is being provided through the Canada health transfer, which will grow by 6% annually from its new base of $19 billion in 2005-06 to nearly $30.3 billion in the year 2014. This represents a significant and continuing federal investment in the Canadian health care system.

In addition, all funding will be distributed to provinces and territories on an equal per capita basis in order to ensure equal support for all Canadians regardless of their place of residence.

The new federal support of $41 billion for 10 years builds on previous federal investments in provincial and territorial health care achieved under the 2000 agreement on health and the 2003 first ministers accord on health renewal.

In September 2000 first ministers agreed to an action plan for health care renewal. In support of the first ministers agreement for health, the federal government invested an additional $23.4 billion through the Canada health and social transfer to accelerate and broaden health renewal and reform.

Drawing on the 2000 framework supporting reform and renewal, in February 2003 the first ministers accord on health care renewal set out a plan for reforms to improve access to quality health care for Canadians. Building on the significant investments in 2000, the federal government provided $36.8 billion in support of the initiatives outlined in the 2003 accord.

In addition to increased federal financial support, the first ministers also agreed in the 2003 accord that the sustained renewal of Canada's health care system required structural change. That is why they agreed to restructure the Canada health and social transfer into two separate transfers: the Canada health transfer and the Canada social transfer.

The Canada health transfer was designed to provide growing and predictable support for health. It also improves the transparency and accountability of the Government of Canada's support for health. And through the new CST, provinces and territories have continued flexibility to allocate federal funding for post-secondary education, social assistance and social services, including child care programs, according to their respective priorities.

In addition, these transfers meet the recommendation in the Romanow report for the creation of a dedicated cash transfer for health.

These measures contained in the 2000 and 2003 accords provide a predictable, sustainable and growing long term funding and planning framework for transfers to the provinces and territories in support of health care.

The new funding of $41 billion in the 10 year plan builds on the significant federal investments in health care in the 2000 and 2003 accords. This new funding confirms the government's commitment to making major reinvestments in health a clear priority for Canadians.

Improving our health care system is not just about money. It is about results. All orders of government remain committed to an action plan that achieves results. As such, first ministers recognize that making health care sustainable and able to adapt to the ever-changing needs of Canadians will take time, sustained commitment and adequate resources.

Under the 10 year plan, the governments agreed to report to their residents on health system performance, including the elements outlined in the communiqué of September 16, 2004. In fulfillment of its commitment to Canadians, recognizing that it has authorized significant new expenditures of Canadian taxpayers' money, Bill C-39 includes a provision for parliamentary review of progress in implementing the 10 year plan.

As the hon. members know, at the first ministers meeting this past October, the Government of Canada announced fundamental changes to Canada's equalization program and territorial financing formula. These changes will bring stability, predictability and growth to the overall level of funding for these programs.

Bill C-24, currently before Parliament and just reintroduced into Parliament from the finance committee as of this morning, sets out a new $33 billion framework for equalization and territorial formula financing. When combined with the $41 billion health accord, these investments will total a cumulative increase of $74 billion in new money transferred from the federal government to the provinces and territories over the next 10 years. This illustrates the government's commitment to ensuring that all provinces and all territories can offer the best possible services to their citizens.

In summary, Canadians have told their governments, year after year, to work together to ensure that our health system will be there for them and their children. Governments have responded.

On September 16, 2004, all the first ministers signed the 10 year plan to strengthen health care. As stated in the Speech from the Throne of October 5, 2004, “the Plan sets out a clear commitment, shared by all provinces and territories to achieve tangible results--results for patients”.

The 10 year plan provides $41 billion in new federal funding in support of these commitments. This is new funding that goes directly to provinces and territories in support of health care services that Canadians need.

The funding strengthens core support for health care and the principles of the Canada Health Act through increases to the Canada health transfer. It helps provinces and territories reduce wait times through the targeted wait times reduction transfer, and it provides additional funding for diagnostic and medical equipment.

The federal government has confirmed its commitment to health care reform and renewal through the tabling of this legislation to implement the funding commitments of the 10 year plan and provide growing and predictable transfer support for provinces and territories.

The $41 billion in increased federal investment represents the firm commitment of the Government of Canada toward ensuring the sustainability of the health care system and that all Canadians have access to essential health services when they need them.

Hon. members can no doubt appreciate the importance of passing the bill in a timely fashion so that provinces and territories can have access to the 2004-05 funding and begin to plan for future programs. I therefore urge all hon. members to support the speedy passage of the bill.

Committees of the House

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Mr. Speaker, I have the honour to present, in both official languages, the sixth report of the Standing Committee on Finance on Bill C-24, an act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other acts (fiscal equalization payments to the provinces and funding to the territories), and agreed on Wednesday, February 9 to report it with amendment.

Federal-Provincial Fiscal Arrangements Act

[The Acting Speaker (Hon. Jean Augustine)]

It being 5:30 p.m., the House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-24.

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

[Bill Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, it is a pleasure to be able to say a few words today about Bill C-24 at second reading. Hopefully we will be able to dispose of this bill, at least at this stage, later this day, have a vote and get it off to committee, where we can continue this debate about equalization.

Certainly equalization is a very important part of how the country is constituted. It predates the Constitution of 1982. I think it goes back to 1957. In the process of patriating the Constitution in 1980-82, we enshrined the principle of equalization. I was here at that time. I think that was a very important thing to do: to establish at a constitutional level the fact that as a country we want provinces to be able to provide reasonably comparable levels of public services.

In order to do that without so-called have not provinces having to tax at a level that would make them uncompetitive and therefore create an even worse economic situation for them, there is a pooling of resources at the federal level pursuant to a particular formula by which provinces which fall below a certain fiscal standard, shall we say, receive equalization payments.

It is also timely that we are having this debate this afternoon, because we have in recent days witnessed the Atlantic accord between the federal government and Nova Scotia and Newfoundland and Labrador. This bears on the equalization debate, because what was at stake there was a feeling on the part of Newfoundland and Labrador and Nova Scotia, first of all, of course, that a promise the Prime Minister made during the election campaign be kept. That promise had to do with how and when the equalization formula is amended as a result of wealth that accrues to provinces as a result of new revenues, in this case oil and gas revenues. The federal government reached an agreement on January 28, 2005, whereby Nova Scotia and Newfoundland and Labrador can keep 100% of their offshore energy revenues.

This we welcome, but it also at the same time creates questions about how other provinces are being treated. For instance, it creates questions, I know, in the minds of many people from Saskatchewan.

Indeed, my leader, the hon. member for Toronto—Danforth, asked a question today in the House with respect to what the government intended to do in regard to Saskatchewan. Because although Saskatchewan is happy for Nova Scotia and Newfoundland and Labrador, it hopes that this ultimately means good news for Saskatchewan too. It feels that at the moment as a result of the Atlantic accord an argument could be made that revenue from natural resources is being treated differently depending on what jurisdiction that revenue is being raised in.

For instance, looking back over the last 10 years, Saskatchewan makes the argument that a similar deal for Saskatchewan would have realized over $4 billion for the Province of Saskatchewan if the federal government had not taxed back its oil and gas revenues, that is to say, when it was in the have not status. Saskatchewan is no longer in the have not status, but when it was, this is the amount of money that was lost to the Province of Saskatchewan because it did not have the kind of deal that Nova Scotia and Newfoundland and Labrador now have with the federal government with respect to their oil and gas revenues.

It is not surprising that the Government of Saskatchewan, and I believe with the support of the opposition in Saskatchewan and I am certain with the support of the people of Saskatchewan, feels that some similar treatment of the revenue from its energy resources is due to Saskatchewan, if fairness is to be the rule of the land.

I think we will see a growing debate about the ramifications of this welcome agreement between the government and Newfoundland and Labrador and Nova Scotia, a welcome agreement but nevertheless an agreement that has ramifications for other provinces that feel they need to be treated somewhat differently now as a result of that agreement having been reached.

We hope it is not the case that the only difference between Saskatchewan and Newfoundland and Labrador, for instance, is that the Prime Minister did not go there in the dying days of the election and make a promise he had no intention of keeping in order to save Liberal candidates in Saskatchewan. I hope members would not think me cynical to suggest this, but maybe it was because there were no Liberal candidates to save in Saskatchewan, except the Minister of Finance himself, that no such promises were made.

The fact of the matter is that the Prime Minister made this promise in Newfoundland and Labrador. If it is a promise that was rooted in a commitment to fairness and not just rooted in the politics of the moment, a promise which the Prime Minister came to regret and then had to live up to as a result of pressure from those provinces, if it is a promise that was rooted in fairness, then ultimately this Prime Minister is going to have to deal with the legitimate feelings of the Saskatchewan government and the Saskatchewan people that something different is due to them as a result of that promise made and the promise ultimately kept to Newfoundland and Labrador.

The Government of Saskatchewan, for instance, argues that its province loses on average about 90% of all the provincial royalties and taxes collected on oil and gas developments. In fact, it claims that in some years Saskatchewan has lost in excess of 100% of all its provincial energy revenues. This means that the people of Saskatchewan have been realizing very little financial benefit from the depletion of a non-renewable resource. I do not think that is fair, particularly when one considers that now Nova Scotia and Newfoundland and Labrador can retain 100%.

It is only fair, it seems to me, that the case of Saskatchewan be looked at. I understand that Saskatchewan will be making its case to this independent panel that has been set up to advise on the equalization program.

With respect to Bill C-24, we are supporting it at second reading. We want to get it into committee but we certainly do not think that this is by any means a perfect piece of legislation. We feel that we should look at amending Bill C-24 to ensure that, at a minimum, growth in the equalization program keep pace with growth in the nominal gross domestic product. Hopefully this is something the committee can look at.

Under proposed paragraphs 4.1(1)(b) and (c), growth in total equalization payments is being arbitrarily constrained to 3.5% per year. The result of this is that the value of the program will continue to be eroded over the next several years and will increasingly be inadequate to meet the commitment of the federal government to address fiscal disparities under section 36(2) of the Constitution. Thus, we have a formula here that is not sustainable from the point of view of the provinces. Certainly I know that this is how the Government of Manitoba sees this formula that would be enshrined through Bill C-24.

It is widely understood, I think, and accepted, regrettably, that the federal government's financial commitment to equalization has declined over time. Equalization as a percentage of GDP fell from about 1.1% in the mid-1980s to just 0.7% by 2003-04.

This has occurred for the following reasons, the following actions on the part of the federal government. It has happened because the government is now using a five-province standard instead of a more rational all-province standard. It has occurred because, in the same vein, the federal government has made unilateral changes which made coverage under the program less rather than more comprehensive.

I think the provinces welcomed the October 2004 decision by the federal government to boost base funding in 2004-05 and 2005-06 although, as I have already said, they are concerned--and we share that concern--that the escalator being set at just 3.5% will undermine the improvement that this represents over time unless it is changed to reflect economic growth.

It may be that during committee deliberations and perhaps at report stage the bill could be amended. Proposed paragraphs 4.1(1)(b) and (c) could be amended so that rather than 3.5%, total payments under the equalization program could be set at the average rate of growth in Canada and Canada's nominal gross domestic product for the three previous years beginning on April 1, 2006.

It is clear that the federal government is in a position to do this. The provinces are not asking the federal government to do something that is beyond its fiscal capacity to do. When we look at the history of federal surpluses, $61.3 billion between 1997-98 and 2003-04, and the federal government's projections of future surpluses, $61 billion between 2004-05 and 2009-10, the projections made by the Liberals themselves in their own platform, the modest cost associated with the kinds of changes the provinces are looking at is easily affordable. What we are suggesting is easily affordable.

Assuming nominal GDP growth would average about 5.5%, the extra cost of ensuring the value of the transfer is not diminished would be less than a quarter of a billion dollars per year, a drop in the bucket when we think of the overall fiscal surpluses that the federal government is now dealing with. This would go some way but certainly not all the way toward addressing the problem of the équilibre fiscal that my colleagues in the Bloc talked about. It would also go some way toward addressing a concern that we share about the fiscal imbalance that now exists between the federal government and the provinces. Here would be an opportunity, at one level, to address that fiscal imbalance and the government seems unwilling to do the right thing.

I am sure that at some point a Liberal will argue that the government is putting an additional $33 billion into the equalization program with the October 2004 deal. The provinces consider this number to be wildly exaggerated in terms of the actual increase in funding, especially in the medium and long terms, because before that increase in October 2004 funding for the program was at an all time low, both as a per cent of GDP and as a per cent of federal revenue, and would have rebounded in any case over time as the Ontario economy recovered along with the economies of the other provinces.

So the $33 billion improvement that the Minister of Finance likes to talk about is the sum of all additional funds and is based on the naive assumption, or certainly the convenient assumption, that equalization would have remained unchanged at its 2003-04 low point for the entire 10 year period. This is the kind of manipulation of figures and statistics that the federal government is famous for in its dealings with the provinces.

The federal deal actually provides less than what provinces would have received if the federal government had listened to the premiers and moved to the all-province standard with full revenue coverage, something that was also recommended by the Senate standing committee.

These are some of the things that I think need to be put on the record as we move into the closing stages of this second reading debate on Bill C-24.

I hope that the federal government will listen to these arguments and see that it has an opportunity to really live by the spirit of equalization that was enshrined in our Constitution in 1982, and which has been a feature of the Canadian social fabric ever since I was knee-high to a grasshopper.

We look forward to being able to make these arguments along the way and hope that the recent accord reached between the federal government and Newfoundland and Labrador and Nova Scotia will also provide an opportunity for the concerns of Saskatchewan, and perhaps even other provinces to be revisited in a way that leaves no Canadian, no matter where they live, feeling that somehow they have been treated unfairly by the equalization formula or treated unfairly because it just so happened that the Prime Minister did not go to their province and make a last minute promise in the desperate last days of an election campaign that was almost lost by that Prime Minister.

[Guy Côté, Bloc, Portneuf, QC]

Mr. Speaker, Bill C-24 implements the results of the conference on equalization held on October 26, 2004, results that were imposed upon Quebec and the provinces by this federal government. We are going to vote against this bill.

Why are we going to vote against it? For a number of reasons. First of all, Bill C-24 does not in any way correct the fiscal imbalance. The funds available, considerable though they are, will not solve the problems, as they are still far from enough.

Second, there is no in-depth reform of the equalization program, so the problems that have been pointed out, by Quebec in particular, are still there and will continue. Worse yet, the proposed changes to the equalization program will potentially worsen the fiscal disparity between the provinces.

Certain specific agreements have been negotiated by the federal government, with Newfoundland and Nova Scotia for instance, but these are not covered by the bill. As a result there is a major problem of unfairness and the very spirit of equalization is being violated.

The very essence of this bill is flawed. Indeed, this agreement includes, among other things, an allocation formula between the provinces that is unchanged. This bill includes an individual threshold provision to guarantee that no province will get less than what had been estimated at the time of the 2004 budget. While this may seem interesting at first glance, it is always difficult—and the Minister of Finance is an expert when it comes to underestimating—to come up with accurate estimates.

In fact, under Bill C-24, Saskatchewan and British Columbia are the only ones that benefit from this measure, to the tune of amounts estimated at $581 million and $191 million respectively.

For the second year of its implementation, the bill sets out the equalization payments to be made to receiving provinces under the program. In the case of Quebec, for example, we are talking about $4.798 billion, or 44.2% of the total amount. What is rather peculiar is that the allocation between the provinces has already been definitely determined—and the term “definitely” is key here—for a fiscal year that will end in March 2006. However, we all know that the relative economic situation of the provinces does not necessarily evolve in accordance with the forecasts.

In light of the lack of accuracy of federal budget forecasts, how can this government claim to do better when it comes to the provinces? Once again, we are dealing with a federal government that claims to know the affairs of the provinces and of Quebec better than its own jurisdictions.

Third, under this bill, overall funding will increase by 3.5% for the year 2006-07, and for each subsequent year. I should point out that this is by default. A group of independent experts will conduct a review to re-examine the allocation and determine if adjustments should be made.

This committee will give advice to the government, but will not have the authority to change the overall amount. It will merely be consulted. It is the federal government which will continue to make all the decisions. When it comes to equalization, we are far from stable and predictable funding. Again, this government will make unilateral decisions, and that is very unfortunate.

As I mentioned earlier, the bill is far from solving the fiscal imbalance issue. Yet, during the last election campaign, the Prime Minister said he would launch a new era of cooperation with the provinces. The bill before us does not fulfill that objective.

The government had even agreed to amend its Speech from the Throne to include a part on the fiscal imbalance, as we call it. They call it financial pressure. Everyone but the government calls it fiscal imbalance. In its Speech from the Throne the government agreed to correct it. Bill C-24 fails to do so.

The Prime Minister has proven it. The election is over and there are no more fine speeches. He has imposed his priorities, choices and methods on the provinces despite some serious resistance. The Prime Minister did not take any account whatsoever of the true needs of Quebec and the provinces.

No change was made to the calculation method that penalizes Quebec and results in unstable and unpredictable payments.

Furthermore, the Prime Minister not only did nothing to resolve the fiscal imbalance, he still refuses to acknowledge it. Yet, a few moments ago, the Conservative colleague made reference to it: Ottawa is up to its neck in surpluses. We are talking about $60 million in surplus since 1997-98. According to the Conference Board, these figures have been raised often in this House. Bear in mind we are talking about some $166 billion by 2015. I am sure that if we updated these figures, the amount would be even higher.

In the meantime, the provinces—except Alberta—are no longer able to pay for their public services properly. A very large portion of funding in the provinces and Quebec goes to health, a very important sector, and the provinces and Quebec have great difficulty funding their other obligations.

Again, the Conference Board estimates that by 2015, the combined deficits of Quebec and the provinces will be $68 billion, another good example of the democratic deficit the Prime Minister talks about .

The democratic deficit is also a political imbalance because the government does not look after its own areas of responsibility. It can barely handle its own as it is. It is busy interfering more and more in areas under the jurisdiction of Quebec and the provinces.

From 1997-98 to 2000-01, we estimate that Ottawa spent nearly $16 billion on new initiatives in areas under the jurisdiction of Quebec and the provinces. That is outrageous. In 2003 alone, intrusions represented $81 billion, or 44% of federal spending and 55% of the government's operating expenditures. Nearly half of the spending of this government, which claims to be a federal government, was directly in areas under the jurisdiction of the provinces and Quebec.

How could we support this bill after all that I have just demonstrated?

Not only is Bill C-24 inappropriate, but the government itself is indirectly acknowledging it. How? It is acknowledging it by signing specific agreements with other provinces. Following a basely election-minded promise and an inappropriate agreement on equalization, the government had no choice. So, on January 28, the government entered into an agreement on oil revenues and equalization with Newfoundland and Labrador and Nova Scotia.

Even that agreement recognizes that Bill C-24 does not work. Under it, Ottawa will reimburse the two provinces for any loss in equalization due to offshore oil revenues until 2012. It represents a huge amount. Naturally, we are delighted for the people of Newfoundland and Labrador and Nova Scotia. We wish them all the best.

Still, we are talking about approximately $2.6 billion for Newfoundland and Labrador between now and 2012, of which $2 billion will be paid immediately in 2004-05. As for Nova Scotia, the amount involved is $1.1 billion, of which $830 million will be paid immediately. For 2004-05 alone, the amount paid to Newfoundland and Labrador will represent $3,868 per capita. For Quebec, this would mean $29 billion.

If Bill C-24 were really great, there would have been no need for an agreement on equalization. Moreover, it is an unfair agreement. Equalization was designed as an equity measure, to ensure that the provinces could provide comparable services. As they becomes more prosperous, equalization declines, and that is how it should be. The principle of equity is thrown into question by this agreement.

While Newfoundland and Labrador and Nova Scotia can get rich without having their equalization payments cut, Quebec's equalization payments are cut whenever it receives hydroelectric revenues. Is this normal? I think not. We have said it a number of times in this House: the solution lies in resolving the fiscal imbalance.

I cannot wait for June 2, when the Standing Committee on Finance's Subcommittee on Fiscal Imbalance will issue its report.

There are ways to resolve these problems. One of them is to abolish the CHST; in other words, transfer responsibility for the GST or personal income tax to the provinces.

That way, the provinces could secure more stable funding and pick their own priorities. Consequently, they would not be driven by the federal government which can change things almost at its own discretion.

However, since the reality is the equalization program does exist, it has to be improved. Bill C-24 does not meet these objectives. Why does this bill not take into consideration the fiscal capacity of ten provinces, commonly called the ten-province standard, instead of just five, as is currently the case. Why are the floor and ceiling provisions not eliminated in this bill. It would be much fairer.

The government must fully respect the representative tax system approach. This means that measurements of fiscal capacity must be based on reality and not on current estimates that can change over time. Otherwise, we end up in situations where overpayments might be made and then Quebec and the provinces have to make repayments.

Of course, this does nothing to foster balanced budgets in Quebec or any other province. This is exactly the situation in Quebec City, where the finance minister, Mr. Séguin, is trying to square the circle and, unfortunately, he will find it very difficult to make ends meet.

Many of the problems of Minister Séguin in Quebec are the direct result of the actions of the federal government, which does not take into consideration the real needs of the citizens who benefit from services provided by the provinces, specifically Quebec in the case that I am referring to.

Earlier, I mentioned the ad hoc agreement reached with Newfoundland, which also opens the door to injustice. Since revenues will be assessed by using a different formula from one province to the next, we can only arrive at results that do not accurately reflect the tax resources of each of them. Consequently, we are making equalization payments that do not meet the objective of equalization. Yet, this objective is simple: it is to ensure, through taxation, that the quality of public services is at a comparable level from one province to the next.

The Bloc Québécois, like the Séguin Commission, feels that ad hoc solutions create problems of fairness between receiving provinces and that they go against the spirit of the program. This program should normally smooth out the relative disparities between the provinces, not increase them.

As I mentioned earlier, the agreement proposes to arbitrarily exclude certain revenues, but not others. On what basis? We are not quite sure. The provinces have their own sources of revenue, including natural resources, energy, income tax, property taxes and commodity taxes. In order for the equalization program to be fair, all of these revenues must be taken into consideration. They also include royalties from mining or oil activities, and revenues from hydro dams.

Under this agreement, when it comes to calculating equalization payments, offshore oil revenues are not taken into consideration, but revenues from mining or hydroelectricity continue to be taken into account. This is not fair to Quebec. This is not a good agreement for Quebec which, incidentally, is not the only loser. Earlier, an hon. member mentioned that Saskatchewan also has problems with this agreement.

Bill C-24 does not at all alleviate the concerns that we are expressing in this House. This is unfortunate. Despite the fact that this is a minority government, all too often we feel that it is not listening to the other parties in this House.

This is unfortunate. However, we remain hopeful. We repeatedly tell them what Quebec's needs are. We repeatedly tell them what the real concerns of Quebeckers and Canadians are. We remain hopeful that, one day, they will understand.

We must not forget that this agreement gives subsidies to the oil-producing provinces. We have talked a great deal about the Kyoto protocol and its implementation. It is an example of misrepresentation by this government that, on one hand, claims to promote the Kyoto protocol and its implementation and, on the other, through special agreements, gives subsidies to the oil-producing provinces. As a result, the bill is paid by those provinces that generate hydroelectricity, a much cleaner energy source. So, once again, we come back to the polluter-paid principle and not the polluter-pay principle.

This agreement is not satisfactory for any of the provinces. Bill C-24 does not work. What do we have to do to get them to open their eyes? This agreement does not resolve the real problems of the equalization program. The current equalization formula is inadequate in terms of both its objective and its operation because the standard is inadequate. Ottawa does not take into account the revenue of all ten provinces. Thus, the average revenue is artificially lowered.

As a result, the recipient provinces have $297 less per capita than the average of the ten provinces to deliver public services. Equalization is, however, supposed to make things essentially comparable. The widest gaps are not taken into account, so the average is skewed.

Ottawa does not gauge revenues properly either. To take property tax revenues as an example, rather than measuring the tax base according to property values, the federal government has arbitrarily invented a complex formula that takes into account a whole set of economic and demographic variables.

For example, in Quebec in 2002 the residential real estate wealth per capita was $30,621. Using the federal formula, which is complex, convoluted and all but obscure, Ottawa assesses it at $71,406, 133% higher. Naturally, equalization payments are reduced accordingly.

The Minister of Finance has the nerve to tell us “Oh my, we have an unexpected surplus. We did not see it coming”. Yet when we look at calculation methods like those, we should not be surprised that the federal government has money coming out of its ears, so much so that it does not know what to do with its revenues and so takes it upon itself to interfere in areas that are the provinces' and Quebec's jurisdiction.

It is the same thing for other types of revenues, so much so that Ottawa's creative calculations no longer reflect the provinces' fiscal capacity in any way. What is more, the overall amount is clearly inadequate. In fact, calculation of the amounts of equalization does not reflect the reality of provincial tax revenues. Ottawa leaves half the provinces out of its calculations, as well as not taking all revenues into consideration, and assesses them wrongly.

This is the recipe for a financial catastrophe, and unfortunately that is just what is shaping up in the various provincial legislatures and in Quebec. Bill C-24 is badly put together and does not meet the needs of the provinces and Quebec. I will be very pleased to vote against it.

[Ted Menzies, Conservative, Macleod, AB]

Madam Speaker, it is an honour to rise in the House today to talk about Bill C-24, an act to amend the Federal-Provincial Fiscal Arrangements Act. It speaks to one of the most fundamental elements of Canadian character. This legislation is a step toward the modernizing the way Canada operates as a nation and one that is typical of the Liberal government: overdue and incomplete.

For context, it is important to note that section 36 of the Constitution reads:

Parliament and the legislatures, together with the Government of Canada and the provincial governments, are committed to the following three things:

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

A Conservative priority if I ever heard one.

--(b) furthering economic development to reduce disparity in opportunities--

Again an idea I could get behind.

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

I believe all Canadians and parliamentarians should strive for these objectives.

Further, subsection 36(2) reads:

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

There is no question that the Liberal government has not lived up to this commitment. Year after year the premiers have been forced to tell the Prime Minister that they are not receiving sufficient funds. We cannot make this country stronger if we accept that citizens in one region are less valued or eligible to receive services than another. Enactment of this bill will increase equalization payments by 42% from 2004-05 until 2009-10. This means $8.9 billion in 2004-05, increasing to $12.5 billion in 2009-10.

Again I go back to overdue and incomplete. While the increase in payments is needed, the Liberal government has had to set the total level of equalization on TFF for years to come. It is clear that the Liberals have not set the total levels of payments because their formula has been ineffective in setting the total levels of payments.

Also, the bill does not spell out how these payments will be divided among the provinces and territories in the future. Instead, the federal government has launched a review by an independent panel of experts on which the provinces and territories have been provided with two seats. However the federal government has retained decision making authority on how future levels should be allocated.

While the Conservative Party of Canada has repeatedly called for a panel, we must be conscious of Liberal manipulation in this endeavour. The panel could be used as another Liberal delay tactic at best, or simply a ploy to fool stakeholders into thinking that they had input into the process. This also gives the Liberal government one of its favourite escape hatches. When things go wrong, it will now have a fall guy to take the rap. “It is not our fault we got it wrong”, the Liberals will scream, “the experts made us do it”.

It is also important to note that the bill does not deal with non-renewable resource revenue within the current equalization formula. The Conservative Party has long sided with the concern expressed by the provinces with respect to the inclusion of non-renewable resource revenue in the current equalization formula. Under the current formula, provinces that benefit from non-renewable resource revenues are subject to a clawback that results in lower equalization payments. This is unfair and unacceptable.

I come from a province that has prospered enormously from its natural resources and it is inconceivable that the same opportunities and potential for economic growth are not available to Nova Scotia and Newfoundland and Labrador. The Conservative Party, along with the majority of the provinces, have long advocated for the removal of non-renewable resource revenues from the equalization formula. This would ensure that the spirit and intent of the program remains intact and to encourage the development of economic growth in the non-renewable resource sectors all across Canada.

I am proud to stand with my Atlantic colleagues to say in the House that the Conservative Party supports the efforts of Newfoundland and Nova Scotia to receive 100% of their offshore oil revenues outside of the current equalization formula, with no cap and no restrictions.

I believe that all regions of the country should benefit from changes to the equalization formula to encourage the development of natural resources and economic growth. Therefore the Conservative Party of Canada would remove non-renewable natural resources from the equalization program and change the formula.

The territories are an important element to consider as well. Bill C-24 does not address the outstanding concern that the Conservative Party and the territories have in the need to develop a resource revenue sharing agreement between territories and the federal government.

The TFF is an important and necessary grant mechanism to address and present the needs of the territories. The Conservative Party supports the TFF but also believes it is imperative that the federal government take steps to develop a resource revenue sharing agreement with the territories to facilitate their desire for control over their own economy and move to economic independence.

It is important that no province or territory suffer financially under the new formula, and I do not say this lightly. The Liberals portray themselves as the only national party but they stake that claim on the smallest of toeholds in many provinces, and after this summer's election they could not even secure a majority of seats in the House.

Nonetheless, they govern with the arrogance of a Liberal government of the past. I have seen it over the years, especially on the issues that face the agricultural industry. The Liberal government loves to divide and conquer. Whether it is region against region or commodity against commodity, the Liberals are almost automatic in their rush to create a domestic squabble to distract Canadians from their inability to get the job done.

The Conservative Party supports the equalization program as an essential component of Canada's nation building efforts. In order for Canada's provinces to grow and prosper, it is important that an effective equalization program be in place. Equalization is a difficult issue to address. By even using the language “haves and have nots”, this is inevitably causing discord and rancour.

As Canadians we have chosen to govern our country as a Confederation. The balancing of regions and provinces has historically proven a challenge. Some governments have managed the project better than others but citizens across the nation have felt the benefit in many small and subtle ways.

As I stand in the House today, I would like to leave the members across the floor with a final message. It is not just the Canadians who voted for them that deserve the respect and commitment to their best interests. It is not just their friends and cronies who should benefit from the power of governance. This issue, this act, is only one element of ensuring all Canadians prosper. The Conservative Party of Canada is proud to stand with every one of them to demand better.

[Paul Szabo, Liberal, Mississauga South, ON]

The member says it is not a tax cut, but before we indexed it members opposite were saying that because it was not indexed we in fact were raising taxes because there was no inflation put in. They cannot have it both ways.

Even when we talk about child care, the fiscal responsibility issue can really hit home. In the throne speech we talked about a significant contribution to child care because of its importance. We know it is a provincial responsibility, but the health and well-being of people is still the responsibility across the board with regard to the Government of Canada. We cannot ignore a need where it is demonstrated.

We had a program of early childhood development to which moneys were contributed. Reporting was required from the provincial governments with regard to where they spend it, how was it applied and how did it meet the targets that were set. We are now looking at the same situation again with regard to the investment in child care. It may be a provincial responsibility, but the health and well-being of those children, our future leaders, are very important to us.

Providing daycare may be someone's choice, but it may not be everyone's choice. How do we deal with that? That is another area. That is why I said at the very beginning, every time we touch an item in this place, whether it be Bill C-24 and the fiscal arrangements act, or health care or child care, there is a ripple effect. Some get it, some do not. Every budget is not a stand alone budget. It has to be taken in a context of every budget that came before it.

Responsible government is all about that. It is about making tough decisions. It is about establishing priorities. It is about delivering on those priorities. It is fiscal responsibility as well as social responsibility. As a rule of thumb, good fiscal policy makes good social policy and good social policy makes good fiscal policy. That is exactly what the government has delivered.

Then we look at issues such as cities and communities. The government will be making an investment. We have already forgiven the GST. We are also now looking at 50% of the gas tax. These moneys go not just for cities, but for communities as well. I heard the member for Yukon speak earlier. He is a member of Parliament who digs into his own community and shares with the House some of the issues that are so important; 33,000 people, each one of them a Canadian, each one of them entitled to share in the wealth and the riches of our country and to fully participate in national programs.

Those are the kinds of things we have to hear. When we hear stories like that, we hear how we are fighting to ensure that everything which happens from coast to coast to coast is linked into the overall objective. The member for St. John's South—Mount Pearl said that section 36 of the Constitution is about nation building. We have to continue to talk about nation building.

It has been helpful to the House to have the debate about the offshore oil reserves. The member across has raised issues about Saskatchewan. Is it really a have province now? It is an interesting question. It is probably a surprise to many Canadians that all of a sudden Saskatchewan is labelled as a have province because it has been the beneficiary of high oil prices. I am not sure if that is sustainable. I am not sure if oil prices will remain at those levels.

I asked the member for St. John's South—Mount Pearl a question. When we deal with an equalization formula and when we deal with the unique situation of Newfoundland and Labrador, as he put it, the pendulum swings. We help sometimes and sometimes we need some assistance ourselves. Here is an opportunity. I asked him once the oil revenues brought Newfoundland and Labrador up to the Ontario standard or a standard at which the province would no longer be eligible for equalization, what then? I think it will be a long time coming before we get the answer.

Newfoundland and Labrador has an interesting history, a very proud history. However, there have been many attempts in the past, whether it be through special fisheries, et cetera to try to get the fisheries industry back on its feet again. It has not happened. There have been tremendous economic development programs through ACOA to get new business, new enterprise going there. Many of those things have been false starts. I am not sure why. We need to know more about that. As we get to the point where there is a non-renewable resource that will generate revenue for the province of Newfoundland and Labrador, what happens next?

That was the question to the member. Where do we go from there? Where do we invest? How do we stop the brain drain from that province? The young people are not staying. There is no work. There is no economic development. There is no challenge for them there. Newfoundland and Labrador needs help. Is this is a situation where we need special arrangements to ensure that we can help a province that has had a very difficult time? Maybe it is. It is tough decisions.

I know the premiers, particularly the Premier of Newfoundland and Labrador, have made passionate arguments about why it needs this. Why does Saskatchewan not need it? What happens if Alberta says that if oil revenues all sudden are not going to be included, maybe it should exclude them in Alberta, maybe Alberta would be less of a contributor. It is kind of an interesting argument, but it is quite unlikely. This demonstrates that tough decisions have to be taken.

I also wanted to make mention of the environment. Recently, I had a conversation with the member for Ottawa South about the environment of Canada and how it related to our overall responsibility for the health and well-being of our people and how important it was that we needed to start reassessing the priorities with regard to renewables and sustainable energy development.

When moneys are transferred between province and province and the federal government tops up this and cost shares on other things, all these add to the pool. However, each and every region of the country has a responsibility to look at the health and well-being of its people. I know, as past vice-chair of the environment committee, we talked an awful lot about the health connections to the environment. We talked a lot about the need for people to understand Kyoto. We talked about the need to understand what buying credits would do for it. We talked about the need to assess the fact that we have a neighbour, the United States. It has coal generation in the Ohio Valley, which contributes probably most of the environmental problems to the GTA particularly, given the prevailing wind parameters.

We also talked about the need to develop renewables, about wind power and about solar. What were the opportunities? Somehow this has lost its position on the table. I encourage members to move on and to start to talk about how we convince Canadians that investment in the environment is an investment in the health and well-being of Canadians. That is not just the responsibility of the federal government. It is the responsibility of each and every level of government right down to the municipalities, to those who have the authority to generate initiatives that will help us to meet our goals and targets. One important target is to continue to improve the health and well-being of all Canadians.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I am pleased to participate in the debate on Bill C-24. I did have a much longer speech, but I listened very carefully this afternoon to a number of the members. We have strayed quite a ways from Bill C-24 from time to time, but I think it is important because virtually everything we do in this place is inextricably linked to everything else that happens.

Having said that, I have often thought that the measure of success of a country is not an economic measure, but rather a measure of the health and well-being of its people. When we went through this debate today, one of the things we talked about was fiscal imbalance. It seems to connote that something has differed from region to region and from province to province and that something in our system somehow does not quite match up.

The Constitution, under section 36, provides for equalization, but it is this act that Bill C-24 is amending, the Federal-Provincial Fiscal Arrangements Act, that provides the detail on how it would be divvied up in accordance with the agreement between the provinces and the federal government.

I was going to talk about some of the numbers, but I think I want to go back to this whole concept of fiscal imbalance. I was looking at some briefing notes and I noticed that fiscal imbalance in fact has two different forms. One is horizontal and one is vertical. We have to start thinking about some of this.

The horizontal actually refers to the imbalance province to province to province. That is exactly what equalization intends to try to cover. If we were to look, for instance, under the Canada Health Act, we would see that we have the five principles of medicare, those being universality, portability, accessibility, comprehensiveness, and public administration.

The portability one certainly touches on this aspect of horizontal balance, or imbalance as some might argue. Can we say with some certitude that we have portability, comprehensiveness and accessibility province to province to province? I am pretty sure that we cannot. I am pretty sure that we cannot go to every place in Canada and expect to get the same level of comprehensiveness and accessibility in all disciplines of medicine.

So are we really meeting the objectives under the Canada Health Act? Or are there other ways to do it given that we have geographic disparities in our country and we also have other problems?

Money deals with part of that, but the other part, the more important one, which I think members have talked about a lot more, is called the vertical fiscal imbalance. This is between the federal and the provincial governments and whether or not there is enough money being transferred down.

I can recall giving speeches in this place where I talked about what provincial governments were doing at the same time that the federal government was trying to fight a $42 billion deficit back in 1993. How did this go forward? I talked a lot about it and I tried to stick to my own turf about Ontario. All I know is that at the time Ontario was cutting taxes. That was the big deal: to cut taxes. Suddenly today we find that Ontario is in a deficit position. At the same time, to deal with it, what were they doing? Not only was the Conservative government cutting taxes; it was also downloading costs to the municipalities to deal with their problem and then it was blaming the federal government.

Sometimes provinces will argue that all the problems they have are federal, but let us look at what the facts are. Provinces in fact have every opportunity to raise money that the federal government does. The provinces have the ability to charge personal income taxes, which they do. Corporate income taxes, sales taxes and payroll taxes all are common to the federal and provincial governments.

In addition, they also can tax resource royalties within provincial jurisdiction. That is unique to the provinces. The provinces also have control over gaming and liquor profits, and I believe there are some other ones, but they are uniquely provincial, and then there are property taxes within the non-federal jurisdictions.

To the federal government's credit, we have revenues from custom import duties and taxes to non-residents.

The point is that provincial governments have all the tools to raise the revenue to do what they need to do to meet their obligations under the Constitution. It is the Constitution that provides the division of responsibilities between governments.

If the provincial governments want to play a different game, that is their own purview. If they need funds to meet their obligations, how can they cut taxes? How can the Province of Ontario cut taxes, put itself into a deficit and say that it needs more help?

The federal government is still ultimately responsible for everything to do with the health and well-being of its people, so that we work with the provinces, whether it be on the health file or whatever file, and members will know that the health of Canadians and our health care system is the most important priority of Canadians.

How about an issue such as cities and communities? Why is it, for instance, that a municipality that charges property taxes to take care of infrastructure, with capital payments as well as operating expenditures of a municipality, suddenly is getting help from the highest level, the federal level of government, to assist with roads, bridges and sewers? Then it turns around and starts using the savings it has from not funding its own infrastructure to do other things that have nothing to do with the critical priorities of the community.

We all pay property taxes so we can see that level to level to level there are decisions to be taken, but if we look at what has happened in the Ontario model, for one, we see that we had a situation where, notwithstanding the pressures that are put on to deliver health care services, child care services, infrastructure assistance and environmental investments at the provincial level, the province substantively has seconded that responsibility to the federal government.

Can the federal government say no? Let us consider where we have been. The Government of Canada, through good fiscal management, has been able to produce surpluses and to pay down debt as well as provide tax cuts and enhancements to social programs. It is a balanced approach. It is the balanced approach that has not occurred in the provinces consistently. That has not been fiscally responsible.

All members of Parliament have to make sure, notwithstanding the specific case with regard to the resource revenues for Newfoundland and Labrador and for Nova Scotia, that in the broader context every level of government has to demonstrate fiscal responsibility.

Maybe it is time we had a report card. We need a report card to the people of each municipality, to the people of each province and to the people of Canada on whether or not fiscal responsibility has been achieved, whether or not they have taken on their responsibilities as outlined in the Constitution and as outlined in the provincial revenue-sharing agreements they have with the municipalities and the regions.

I will give hon. members one example, even in Mississauga, and then close. When I returned to my constituency last Friday, I received a note from a senior, a lady I know who keeps me informed about seniors' issues, to advise me that on December 8 there is a meeting at city council where there will be a vote to increase the cost of seniors' transit passes by an additional 25% each year for the next four years. Is this fiscal responsibility?

I am sure we can all find examples. Fiscal responsibility must occur at all levels. I believe that members will find and all agree that in Bill C-24 the arrangements made with the provinces with regard to the $10.9 billion that has been--

[Greg Thompson, Conservative, St. Croix—Belleisle, NB]

Madam Speaker, equalization is one of those arcane debates where not only members' but the listening public's eyes tend to glaze over because it tends to get very complicated and controversial. However, it is worthwhile to lay out what equalization is for our listening audience, if we have one, which I think we do, and maybe for some of our members to remind them what equalization is all about.

Equalization is a constitutionally entrenched program which allows all provinces to offer “reasonably comparable levels of public services at reasonably comparable levels of taxation”. Its goals are “to promote equal opportunities for the well-being of Canadians, furthering economic development to reduce disparity in opportunities, and to provide essential public services of reasonable quality to all Canadians”.

It is a fancier way of saying sharing the wealth with other areas, which is truly one of the unique features of Canada. We cannot say that for all countries. We cannot even say that for our neighbours to the south of the border despite the fact that they do a number of things well. Equalization is unique to Canada. We have to be very proud of it, but obviously it is ridden with its problems and difficulties. We are always trying to strike a balance that works at both the federal and provincial levels.

I want to point out what some of the premiers are saying, and then I will go on to our position as a federal party. The province of P.E.I. is an example. We have heard from Nova Scotia and Newfoundland today in the House, but I wanted to point this out because Newfoundland is obviously missing members of Parliament on the Conservative side. I guess we will have to work on that problem in the next election.

The treasurer from P.E.I., Mitch Murphy, is suggesting that cuts to equalization payments may be unconstitutional. He suggests that those cuts to equalization, what we are hearing now and his up to date figures, would indicate an additional $25 million loss, which would bring the total loss in revenue to P.E.I. in the next year to something like $78 million, a substantial amount of money. In my home province of New Brunswick, the premier is looking at a loss of about $100 million this fiscal year if the current formula holds.

What we are discussing now is Bill C-24. Bill C-24 is a bill that would bring in some changes to the arrangement, but I want to put on the record where we stand on it as a party, the Conservative Party of Canada. The Conservative Party of Canada views the equalization program as an essential component of Canada's nation-building efforts. In short, we support it in order for Canada's provinces to grow and prosper. It is important that a strong and effective equalization program be in place.

We accept some of what is in Bill C-24 because in fact the government accepted some of the ideas that we have thrown out during the election period and right here on the floor of the House of Commons. Bill C-24 addresses some of the concerns shared by the Conservative Party of Canada, the provinces and territories, notably the provisions for additional federal equalization and TFF, territorial funding formula, and a structure that sets the total level of funding going forward, not backward. These changes are an admission by the Liberals that their methods are flawed, were flawed in the past, and that the Conservative Party and the provinces have been right in calling for changes. Some of those changes again are inherent in this bill.

Unfortunately, Bill C-24 does not address how the equalization and TFF will be allocated among the provinces and territories from 2006-07 forward. We have to look into the future. One of the things we are suggesting, which again is in this bill, is that it examine the report or the future funding levels through a panel of experts. The government is doing that and it has bowed to some of the pressure we have put upon it to do that very thing. At the end of the day, the federal Liberals will retain the ultimate decision-making in the equalization formula. Although the panel of experts is a step in the right direction, at the end of the day the government will basically call the shots.

Again what I am suggesting is that the government is putting its own political agenda ahead of the provinces and the need for a fair and sound formula. Then there is the other point I want to make about what it does not address. This is a point that the members from Newfoundland and Labrador point out every time they are on their feet on this side of the House, although there is an absence of that on the other side of the House in terms of debate.

Our members from Newfoundland and Labrador and Nova Scotia consistently have talked about the inclusion of non-renewable resource revenue in the current equalization formula. Under the current formula, provinces that benefit from non-renewable resource revenues are subject to a clawback that results in lower equalization payments. We are saying that this should be included in the bill. We support the ending of that clawback so there can be no disagreement.

As you know, Madam Speaker, although your riding is far removed from Newfoundland and if I am not mistaken is in the heart of Ontario, during the election the Prime Minister made that promise in Atlantic Canada. He did that when the bottom was falling out of his campaign and he did it for one reason only: votes. It is very simple.

In the middle of the election he made a promise to the Canadian people, particularly those in Newfoundland and Nova Scotia, for votes. As some members have already mentioned, we probably should have had the Prime Minister put that in writing and sign it. But he is on the record. He was on national television. He went over there and made that promise to resurrect Liberal fortunes on the Island, in Nova Scotia and in Atlantic Canada in general, and he has reneged on those promises. That is wrong.

In terms of the Conservative Party policy, we have four recommendations.

The first is to allow reforms in the 2004 budget to take effect.

The second is to provide a formula driven approach. We have always been in favour of a formula driven approach that works and is consistent.

The third is to provide incentives for sustainability by carving out resource revenue from the equalization formula. I have spoken on that previously.

The fourth is to remain committed to the five year renewal schedule.

I believe that we can do better, as I have pointed out. I will leave my arguments at that and look forward to questions and comments from my colleagues.

[Bill Casey, Conservative, North Nova, NS]

Mr. Speaker, I will be sharing my time with the very distinguished member for New Brunswick Southwest who was recently elected co-chair of the Canada-U.S. Committee. We are all very honoured to be in his midst. He is a very distinguished member. We are pleased that he shares this House with us.

We agree with the direction and concept of Bill C-24. We certainly agree with the concept and principle of equalization. As this country's fortunes shift from province to province and region to region, it will always be an important part of our being and our whole essence that parts of our country that are more prosperous and have more resources share some of their resources with areas that are not so prosperous.

I think it was the member for St. John's South—Mount Pearl who told us how Newfoundland and Nova Scotia used to send salt cod to Alberta. I am sure it appreciated that at the time. I do not know if Alberta would appreciate it now or not, but it appreciated it then. However, it just goes to show how fortunes have changed. That proves the point that this equalization formula is fair and is necessary for our country.

It is not a figment of our imagination either. People should know that it is in our Constitution. Subsection 36(2) reads:

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

I think that is a fair assessment of what we are talking about here today. Another part of this whole concept of equalization that we have been pushing in the Conservative Party is the concept of removing the natural resources revenues from the equalization payments. Basically a province that has a defined quantity of a natural resource would have a very short window of opportunity to pull ahead and become a have province rather than a have not province.

It is such a shame to see a province like Newfoundland or Nova Scotia that has a resource which is defined and will be gone some day. It is a shame to see all those revenues clawed back by the federal government and at the end of the day when the resource is gone, Newfoundland, Nova Scotia or another province, that has a resource that has been totally exhausted, is right back where it started. The resource did no good for the province or for the region.

We would like to see the natural resources revenues removed from the equalization payments because these are finite amounts of resources. They come and go.

In the case of Newfoundland, I understand that 40% of its gas or oil resources, I am not sure which it is, has already been exhausted. It will not be long before all its resources are exhausted, a matter of a decade or two, whatever, and then it will be right back where it started. It needs that money now. It needs that money from these natural resources to build alternatives, to build economies, and to build infrastructure so that it can compete with the rest of the country. It is critical that these natural resources be removed from the equalization formula. It is not in Bill C-24. However, it is something we would like to see in Bill C-24.

This brings us to the promise that was made during the election, that all offshore gas and oil resources revenues would go to the provinces of Nova Scotia and Newfoundland. We now know that the provinces are trying to negotiate to get this deal back. The way I look at it, the Prime Minister went to Newfoundland and said--he obviously knew they would lose seats in Newfoundland--that if Newfoundlanders voted Liberal, he would give them 100% of the gas and oil revenues. Newfoundlanders, to a great extent, kept their end of the bargain. However, as soon as the election was over, the Prime Minister said that we have to negotiate.

It is interesting that today the Prime Minister said how much better his offer was than the opposition's offer. I am not sure which offer he is talking about. I am not sure if he is talking about the offer made during the election or the offer he is trying to slam through now.

Newfoundlanders and Nova Scotians will stand their ground and insist to get the deal that was made during the election because that affected a lot of votes. The Liberals said, “You vote for us, we will give you 100% of the revenues. No time limits. No caps. No nothing”.

Now of course we know that they are trying to negotiate another deal. The Prime Minister refers to their offer as a good deal. Perhaps it is better than what was there before, but it is not the deal that we were promised during the election. In my view, the Prime Minister has a verbal contract with the people of Nova Scotia and Newfoundland and he must honour that deal.

I find it interesting that in the debate tonight the Liberal members are talking about a lot of numbers and I cannot even follow them. I cannot follow all the tos-and-fros and the complex arguments they are making when it is really quite simple.

It is about keeping commitments and keeping one's word, and helping provinces that need help. When Liberals stand up to make a speech, I cannot follow them. When we make a point about keeping our offshore gas and oil revenues in Nova Scotia and Newfoundland, they stand up and say we are not talking about Bill C-24. What is the point of talking about anything if they do not keep their word in the first place.

The commitment by the government to allow Nova Scotia and Newfoundland to keep 100% of their gas and oil revenues is very much a part of the debate tonight. It may not be actually written in Bill C-24, but it is the word of the government that is at stake. If the government makes promises and does not keep them, then Bill C-24 or any other commitments are really not worth a lot anyway.

We are very much of the opinion that gas and oil revenues should be taken out of the equalization payments. I go back to 2001 when Premier John Hamm from Nova Scotia started this debate with the campaign for fairness. The fairness component referred to when Alberta was starting to realize it had gas and oil revenues and started to realize the benefits. It was allowed to keep its resource revenues from those resources 100%, no clawback, no caps, no limits, no nothing.

Premier Hamm's position was that Nova Scotia, Newfoundland and the other provinces on the coast should have exactly the same deal. He called it the campaign of fairness. He waged that war for a long time all by himself. It turns out now that the groundwork he laid was very effective. Newfoundland got involved with it during the campaign.

Premier Danny Williams, another Conservative premier, asked the Prime Minister if he would match the opposition's proposal to remove gas and oil revenues from the equalization formula and the Prime Minister agreed. He said yes publicly, on camera and on the record, that Newfoundland and Nova Scotia can keep 100% of their resource revenues and it will not be part of the equalization formula.

We know what happened since the election. The government tried to negotiate a much different deal. That goes to the point of credibility of the government. We can talk about Bill C-24 and equalization payments, but if the will is not there to keep its commitments and its word, then it hardly matters what we do in the House, unless the government will honour its commitments.

That is our position. We support Bill C-24. We would like to see the gas and oil resource revenues removed from the equalization payments. We want to see the minimum amount of money that the Liberals have committed to the programs stay in so there are no giant fluctuations. However, we should all understand that the concept is solid and valuable, and the circumstances of today will certainly not be the circumstances of tomorrow. Wealthy areas of Canada that are experiencing good times now may some day not have those good times and this money may shift around.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Speaker, it is a pleasure and an honour to speak this evening to Bill C-24. Canadians understand that equalization has been one of the pillars of our federation for more than four decades now. To begin with, the equalization and the territorial formula financing programs ensure that all Canadians, no matter where they live, have access to reasonably comparable public services. This commitment helps to ensure that all Canadians are treated equally from coast to coast to coast.

However, the provinces and territories have been complaining for several years now about how the federal government funds the equalization and territorial formula financing programs. They have spoken about the planning difficulties they face as a result of the year to year swings in the amount of payments they receive under these programs.

These are legitimate concerns and our government has done everything we can to address them. However, the very good news is that on October 26, Canada's premiers and territorial leaders agreed to the government's framework for equalization. This new framework represents the most fundamental and sweeping changes in the program's history. The goal of this new framework is nothing less than to make payments to the provinces and territories more stable and predictable, while significantly increasing the overall level of funding.

The new framework includes five elements: first, an overall floor of $10 billion for equalization and $1.9 billion for territorial financing for the current fiscal year; second, complete protection for provinces and territories against overall individual declines in payments in 2004-05; third, an increase in the funding base for 2004-05 rising to $10.9 billion for equalization and $2 billion for territorial financing; fourth, a guarantee that equalization and territorial formula financing payments starting in 2006-07 will grow by 3.5% per year until 2009-10; and finally, the creation of an independent panel to provide advice on allocating these moneys among provinces and territories.

Let us take a look at what these changes will mean. Over the next decade, this new framework will provide $33 billion more in equalization and territorial financing payments to the provinces and territories. That is an astonishing sum of money. For the sake of comparison, it means that equalization payments will increase from $8.9 billion in 2004-05, what they would have been without the new framework based on the earlier estimates, to $12.5 billion by 2009-10. That represents an increase of 42% overall, or more than 7% per annum on average.

The idea that Canadians should have access to the same high quality of health and social services regardless of where they live is so fundamental to the fairness and integrity of the Canadian federation that it is protected by the Constitution in the form of equalization.

In short, the equalization program transfers money to the less prosperous provinces and territories in accordance with a formula based on the revenue raising capacity of each province. This means that as a province becomes more prosperous, its equalization entitlement declines.

In fact, equalization payments are designed to make up the difference so that Canadians in any part of the country have access to the quality social and health services they expect and demand.

As well, they prevent the less well-off provinces from having to resort to tax rates that would be bad for the economy in order to be able to afford to deliver such services.

In order to cast some light on the importance we assign to the equalization program, I would remind hon. members that the Prime Minister has announced an improved equalization framework. This new framework represents probably the most important change in the program in its history.

The intent of the changes is to bring stability, predictability and growth to the overall level of funding for these programs, in accordance with third party advice on the best way for the Government of Canada to allocate payments among the provinces and territories.

The changes to the programs would encompass three important elements: complete protection for provinces and territories against overall and individual declines in payments in 2004-05; a new framework for equalization and territorial financing starting in the fiscal years 2005-06; and an independent review of the programs by a panel of experts.

The new framework will, therefore, make payments to provinces and territories more stable and predictable, and ensure the sustained growth of financial assistance.

With respect to the financial impact, over the next 10 years the new framework for these programs will be $33 billion more in equalization and TFF payments to provinces and territories than the amounts estimated at the time of budget 2004, a significant increase.

The equalization program is a faithful reflection of the sense of sharing that characterizes the Canadian nation.

I would also be remiss if I did not point out to the House that our government is committing an additional $41.3 billion for health care as part of its 10 year action strategy on health, agreed to by the Prime Minister and the provincial and territorial leaders last month. This brings me to my closing point.

This new $33 billion framework for equalization and territorial formula financing, when combined with the $41.3 billion in new health care funding, will result in a cumulative and whopping increase of $74 billion in new money transferred from the federal government to the provinces and territories over the next 10 years. By any stretch of the imagination, this is a huge sum of money and it illustrate's our government's commitment to ensuring that Canadians are treated fairly and have access to reasonably comparable levels of service, no matter where they live in the country.

The significant influx of new money to support health care and other national priorities is the direct result of two specific initiatives. Let us give credit where credit is due. First, the hard work and sacrifice hundreds of thousands of Canadians who helped boost our economic performance to a level that is the envy of our G-7 counterparts and a host of other industrialized nations around the world. Second, it is also a product of our government's commitment to disciplined spending practices, balanced budgets and debt reduction.

Since 1997, we have posted seven consecutive balanced budgets and reduced our federal debt by more than $61 billion. This has freed up an additional $3 billion annually and lower interest charges to help fund the priorities of Canadians.

Our government recognizes the need to ensure that all provinces and territories can offer the best possible services to their citizens. The equalization and territorial formula financing programs are clear evidence of our commitment in this area.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member for St. John's South—Mount Pearl has been a very forceful speaker on behalf of Newfoundland. It is helpful for the House to hear that perspective.

The member laid out in his speech that the nation-building principle is enshrined in our Constitution, but that indeed it is the Federal-Provincial Fiscal Arrangements Act that from time to time is amended to take into account new cooperation between the federal and provincial governments.

Having said that, we seem to drift a little bit away from Bill C-24, to be generous. However I know this is very important to the member and to all Canadians, quite frankly, because the measure of success of a country is not an economic measure; it is a measure of the health and well-being of its people and dollars simply will not do it.

The hon. member concluded by saying that this is what they would like to have, so that once they achieve some parity with, for instance, the Ontario benchmark, as it were, then equalization could kick in again to help other provinces. That is an interesting perspective. My question relates to what happens after that.

What happens once Newfoundland has been able to bring its dollar figures up to that Ontario standard with a non-renewable source of revenue from the oil? There has to be something after that. Maybe the member would like to share with the House how we start working on what happens after. What does it mean in terms of how we make sure that there is not a false start yet again when we consider all of the moneys that have been invested over a large number of years in programs that have not been able to trigger that self-generated economic growth and well-being for the people of Newfoundland? It is important to hear the member's perspective.