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.

Federal-Provincial Fiscal Arrangements Act

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

Mr. Speaker, I am delighted to have the opportunity to say a few words on Bill C-24. I thank my colleague from St. John's East for sharing his time with me.

When we talk about equalization, quite often we hear people saying, “There goes Newfoundland and Labrador again, looking for more money”. Let me just put on the record quite clearly that our province is not the only province that gets equalization.

Newfoundland and Labrador, according to the legislation, next year will receive--and there is some argument about this--$860 million, probably closer to $861 million, but Manitoba will receive $1,600,000,000, twice as much. New Brunswick will receive $1,347,000,000, almost twice as much. Nova Scotia will receive $1,343,000,000, almost twice as much, and Quebec of course will receive $4,798,000,000, which is just about six times as much.

So right from the start let us make it clear that Newfoundland and Labrador is not the only province in the country that receives equalization.

The legislation itself, as far as it goes, basically just legalizes a process of delivering the equalization payments to the province, adjusting the formula somewhat and legalizing payments. As far as it goes, we have no problems with it. It is where it does not go that causes us real problems.

Equalization has its basis in section 36 of the Constitution. It is a redistribution program aimed at nation building. I want members to remember nation building, because I will come back to it in a moment.

The formula itself is not in the Constitution. Instead, it is set out in the Federal-Provincial Fiscal Arrangements Act. And here is the thing that worries us, particularly in light of negotiations that are going on at present. It has changed a number of times since its inception in 1957. It has changed a number of times and the concern of course is that if it changed once, it can change again. The enactment does not deal with non-renewable resource revenue sharing outside of equalization, and that is the other thing that scares us.

Let us talk about nation building and just talk about what some of the hon. members opposite think about equalization as it deals with nation building. Let me quote one of them. He said:

--we are now 10 independent little countries.

I respectfully submit there is no sense of nationhood or nation building out of these moneys. We have 10 little emperors. Each has his hands on ridiculous amounts of money. They erect trade barriers which interfere with each Canadian's ability to move from province to province and to practise his or her trade.

If I had any impact on the finance ministers of Canada, and that is somewhat dubious, I might ask some rather fundamental questions. How do these equalization transfers help build Canada? How is Canada better off at the end of the day once these transfers are done? How will Canadians know that their money is well spent?

The hon. gentleman actually went on to say:

I cannot quite fathom how we should take $1 billion worth of transfer moneys given to the Government of Newfoundland [and Labrador] own funds, not call on the federal transfer and still complain.

One would wonder who would say it like that, first of all to ridicule 10 provinces and 10 premiers and say they are a bunch of greedy little emperors with their grubby little fingers out reaching for federal dollars, and then to complain that Newfoundlanders or perhaps people from the north or any province with natural resources would sit back and not try to develop their own resources because Ottawa is passing out the money to them.

The interesting thing about it is that the statement was made by the member for Scarborough—Guildwood when he was the member for Scarborough East about four or five years ago.

So when we hear the hon. member, now the parliamentary secretary, constantly belittling equalization and trying to prevent the government from proceeding with its deal to give provinces that have non-renewable resources a fair shake, to develop these resources outside of equalization until and only until they become contributing provinces, this is where the problem is coming from, from people like that.

There he is on the record proving himself to the people of Canada. Maybe his own party will look at him and others who are the naysayers, including the President of the Treasury Board, by the way, and show some leadership.

The Prime Minister today in question period, in answering the question from the Leader of the Opposition, in referring to the deal the federal government has offered Nova Scotia and Newfoundland, said how much better off “our offer is than the Conservatives'”.

The offer that the Prime Minister made was a very good one. The offer he made Newfoundland and Labrador, the offer he made Nova Scotia, was a very good offer. He promised it during the election campaign. The problem is that it does not matter how good the offer was if he has no intention of delivering on that promise or the offer, if the little minions on the other side are saying to him, “You cannot, you cannot, help. One of these days these provinces might be as rich as Ontario. We can never let that happen, Mr. Prime Minister”.

We have a Prime Minister who came to Newfoundland and Labrador, who came to Nova Scotia, and in the case of Nova Scotia the day before the election, to try to save a few seats and save face, and promised to do what any good Prime Minister should do: give them a fair shake.

Do members know what are we asking for? Remember Oliver Twist and “Please, sir, I want some more”? That is almost the position we are in. We are not asking for anything from this government, or anything from this House, or anything from this province, or anything from this country.

What we are asking is that we can keep our share, not the whole amount but our share of our resource, which in reality is less than 50% of the total resource. We get less than 50%. The province gets to keep about 30%. The federal government wants to claw back 70% of our share, less than 50% of the total, on top of the 50%-plus that it has anyway. All we are saying is please let us keep our own revenues until we become a contributing province. Then the government can take equalization and help those who need the help.

Equalization in itself, as we know, is a bit of a joke, because the funds certainly do not equalize anything in this country. It just helps, however, some provinces that are not in a position to help themselves.

Therefore, let us say when we look at a bill like this that as far as it goes all it does is legitimize the delivery mechanism for the next round of equalization payments. That is fair ball as it goes. However, here is what we must look at and why we have so many concerns. When we hear a Prime Minister talk about an offer which he has no intention of fulfilling, when we see members throwing in every monkey wrench they can, when we see that there is no protection in legislation that the equalization will not be changed next year or the year after, is it any wonder that we are holding out for a good deal? No, it is not, and let me tell this House that until we get the deal we want, we will not be signing anything.

[Norman Doyle, Conservative, St. John's North, NL]

Yes, Mr. Speaker, I have something to say about Bill C-24. We as a party support certain components of Bill C-24. The fact that this particular bill will be the subject of a review by a panel of people who will meet over the next year or so to make recommendations on equalization is a positive step.

However I think a full year to review equalization is too long. When we have been talking about equalization for the last 20 to 25 years, I do not know why we need a full year to talk about equalization again. It seems that when the government introduces a committee or a study, it is given a full year. The Gomery commission is one example. I wonder if the government is contemplating an election in the spring when it can tell the people that the sponsorship scandal cannot be talked about because it is before a committee. The equalization will not be a factor in that election because the committee looking at equalization will not report for a full year.

It seems to me that we are supposed to feel and think that the federal government is taking the right direction here but after talking about equalization for 20 years I fail to see why we need another full year to study this particular issue. However we in the Conservative Party at least support the fact that we have a panel of experts to look at this particular issue because it is an important issue facing the people of the country.

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

Mr. Speaker, I listened to the hon. member's speech but I did not hear too much on Bill C-24, the bill that is in front of the House. I heard a lot about offshore accords but I did not hear much on the actual subject matter that is before the House.

I wonder whether the hon. member has anything to say with respect to Bill C-24.

[Norman Doyle, Conservative, St. John's North, NL]

Mr. Speaker, I will be sharing my time with the member for St. John's South—Mount Pearl.

I want to make a few remarks on Bill C-24, an act to amend the Fiscal Arrangements Act. It is quite a complicated act, but what it means is that we are making some changes in Canada's equalization program.

Bill C-24 is quite timely given the current set of negotiations that are ongoing between the federal government and the Governments of Newfoundland and Labrador and of Nova Scotia regarding the division of offshore oil and gas revenues and how equalization could very well factor into all of that.

While Bill C-24 does not address that issue directly, it is nonetheless a bill that acknowledges that some changes are needed in equalization as it currently is and how it applies to various provinces in Canada.

First let me say that the Conservative Party views the current equalization program as an essential component of Canada's nation building. In order for Canada's provinces to grow and prosper, it is important that we have a good, strong equalization system in place and it is equally important that this equalization program effectively deals with the problems that have not provinces have. By striking a panel of experts to revisit the current equalization formula, the government has acknowledged that there are problems with the current formula.

We are pleased that the government has bowed to a little bit of pressure from the provinces to hold this review and we, in the Conservative Party, are eagerly awaiting the results of that review.

One of the drawbacks of the equalization program that I and my colleague, the member for St. John's South—Mount Pearl, have raised consistently over the past seven years has to do with the clawback of a province's non-renewable resource revenues by Ottawa through corresponding reductions in the equalization payments.

I do not know if all members are aware of this but at present, for example, Ottawa claws back 70% of Newfoundland and Labrador's provincial oil revenues. Under that kind of an equalization system, a province is prevented from economically drowning, as we are all aware, but the clawback effectively prevents that province from making any progress on its own. The clawback provisions so far have seen the lion's share of Newfoundland and Labrador's oil money, for instance, ending up in Ottawa.

When we were embarking on the oil industry in Newfoundland and Labrador, that was one of the reasons the province insisted on an extensive multi-billion dollar concrete production platform for its first oil field, which was Hibernia. If the province had gone through a cheaper Hibernia production system and more revenues, most of these revenues would have ended up in Ottawa. Knowing it would have had the money clawed back under the current equalization program, the province instead opted for jobs and industrial benefits.

The equalization clawback became a major election issue in Newfoundland and Labrador and Nova Scotia in the most recent federal election campaign. As a result of that, the Prime Minister and the Minister of Natural Resources called Premier Williams and promised that Newfoundland and Labrador and Nova Scotia would get to keep 100% of their offshore oil revenues without those revenues being subject to the clawback provisions of the equalization formula that we operate under today. At the moment of course we are waiting patiently for the Prime Minister to keep his election promise.

Unfortunately, the Minister of Natural Resources turned the province down and broke his promise and said essentially to the people of Newfoundland and Labrador that here were a few crumbs and that they could take them or leave them. That was his attitude.

We are hopeful that the Prime Minister will keep his promise because we already have a promise in writing from the minister who represents Newfoundland and Labrador in the federal cabinet, the Minister of Natural Resources.

Some observers of the June 28 election have been saying that the province should have received the Prime Minister's promise in writing. However, given that the Prime Minister had made his promise on prime time television, that was not a major consideration at the time. As I mentioned earlier, the Minister of Natural Resources did follow up on the Prime Minister's verbal promise and provided a written statement to the people of Newfoundland and Labrador, specifically to the people in his own riding. I have a copy of a flyer he sent out to people in his riding which states, “The Prime Minister has given me the responsibility of finalizing a deal on the Atlantic Accord as soon as possible that will bring Newfoundland and Labrador 100% of its offshore oil royalties without having any effect on the province's equalization payments”.

It could not be said a whole lot clearer than that.

I am at a loss to understand why the federal government, right in the middle of this equalization debate that is going on across the country, is dragging its heels on this issue and why the Minister of Natural Resources, who represents the province of Newfoundland and Labrador, would offer the people a few crumbs and tell them to take them or leave them.

I have spoken on a number of occasions to this particular issue because it is an important issue to the people of Newfoundland and Labrador. I feel in my heart of hearts that the Minister of Natural Resources should apologize to the people of Newfoundland and Labrador for breaking that promise. He should apologize to the people of Newfoundland and Labrador for his lack of concern for the struggle that Newfoundland and Labrador has had to undergo ever since Confederation to get its rightful place in the Confederation of this country. The minister, most of all, should apologize to the people of Newfoundland and Labrador for putting the party first instead of the province. He should be ashamed.

I have absolutely no reservation about standing here today to repeat in this equalization debate what I have said many times before since the promise was made by the Prime Minister of Canada to Newfoundland and Labrador. I have absolutely no reservations in saying to the Minister of Natural Resources that he should resign rather than break such an important promise to the people of Newfoundland and Labrador.

This is a very important issue and it gives the member for St. John's South--Mount Pearl and myself the opportunity once again to talk about the most important issue facing the people of Newfoundland and Labrador, and that is the broken promise of the Prime Minister and the broken promise of the Minister of Natural Resources concerning equalization.

As a result of that I feel very strongly that the minister should resign. The least he should do is apologize to the people for his broken promises and the fact that he would tell the people of Newfoundland and Labrador to heck with the promise and then offer them a few crumbs saying that they could take them or leave them.

[Larry Bagnell, Liberal, Parliamentary Secretary to the Minister of Natural Resources]

Mr. Speaker, I am pleased to speak to Bill C-24 today. I am going to talk first about the equalization environment but most of my time will be spent on how this will affect the territories and particularly my riding of Yukon. I know that my colleague from Mississauga South will elaborate in great detail on the formula as it relates to the provinces.

On October 26, as everyone knows, the Prime Minister met with the provincial premiers and territorial leaders to discuss the changes in the equalization formula and the territorial formula financing programs that were put forward by the federal government in the September meeting. My colleagues in the Bloc were complaining that the parliamentary secretary said it was almost historic. It was not almost historic; it was historic. This is the most significant improvement in equalization and territorial financing programs in their history.

By providing predictability, stability and increased funding, the new framework will play an essential role in ensuring that Canadians no matter where they live have access to comparable public services.

The new framework for equalization and territorial formula financing will increase the support provided to provinces and territories by $33 billion over 10 years. Regardless of the details of the changes in the mechanism, I think the bottom line will be a huge increase in funding of $33 billion.

Officials in the various provinces and territories will be happy to have an increase in the funding available to them to provide their services. This will assist Canada's less prosperous provinces and the three territories in meeting their commitments under the 10 year plan to strengthen health care as well as funding for other important social and economic development.

As members know, an historic health care agreement was signed recently and the federal government has put in a substantial amount of money. But of course the provincial and territorial governments have to come up with a major share of the funding and this increase in equalization will also help them with their health care over and above the extra funds we have provided in this area.

The spirit of cooperation in which this agreement was developed so new in this mandate is of course very important because it reflects on a lot of other agreements and on a lot of other work that we have to do with the provinces and territories.

We are working on the new child care deal and the deal with cities and communities. We have work to do on the environment and a number of projects with the provinces and territories, so the fact that they have been able to work closely together with the federal government is an excellent start to this mandate.

These increases are not going to stop this year but will carry on. In 2005-06, the funding levels will be set at $10.9 billion for equalization and $2 billion for the territorial formula financing, the highest levels ever reached by these programs. It will go on from there and still increase, because both amounts are going to increase by 3.5% a year starting in 2006-07. Equalization payments will therefore increase from $8.9 billion to $12.5 billion over the first five years of the new framework, a 42% increase.

Just to ensure that when the new formula comes into effect no one goes backwards this time related to the old formula, there was also a floor put on it so that no province or territory will receive less than was originally predicted in the 2004 budget under the old system.

I want to talk more specifically about the territorial financing formula, because it is a different scenario than equalization financing. At the time of the meetings, the equalization process and the territorial financing formula were quite different. They have somewhat different objectives, and I will get to that later on.

At the meeting held from September 13 to September 16, changes were made to the territorial financing formula that are the most significant in history. The changes were made to try to make these payments more stable and more predictable for the territorial governments. The old formula had a lot of determinants and was very complex. Several years behind the statistics arriving, it could result a reduction in funding that made it difficult for the territories to cover certain fixed costs.

To address concerns about the levels of financing and increasing financing, beginning immediately the government will provide protection against those declines, thereby providing stability. The overall level of 2004-05 for the three territories will be protected with $1.9 billion. There of course will be a guarantee that no territory will receive less than was estimated at the time of budget 2004.

The new framework will establish fixed payment levels, and provide predictable and growing funding for the territories. As the provinces will go up, the territories will go up and their funds will go up to $2 billion. It will also grow at a rate of 3.5% a year. Over the next 10 years and subject to review after the first five years, these changes will provide an estimated $4 billion in territorial formula financing, compared to the annual amounts in 2004-05. There are all sorts of challenges to governing in the territories and I know this $4 billion in extra funds will be well received.

All this of course is on top of the extra funds of $41 million in the health care agreement that was signed and invested in the provinces and territories over the next 10 years. This is an excellent sign for future fiscal cooperation. Within a few weeks, the new House has a historic deal on health care and then a historic deal on equalization,

I want to speak about how the agreement and the funding will affect my riding in the Yukon Territory. Once again, it would like more funds and it would like stability in its funding to help cover fixed costs.

The current data indicates that the Yukon Territory will receive about $448 million in this fiscal year of 2004-05 representing $14,907 per person. Even though the territorial financing in Yukon has increased each over recent years, and it has been growing steadily, there were still concerns about the adequacy of funding. I am sure in that respect Yukon will be happy for this additional funding.

The economic environments in the territories are a boom and bust cycle. As I said earlier, if certain parts of the formula were to go down there could be a sharp decrease in the funding available and governments have fixed costs.

Therefore, the territorial financing is slightly different in purpose from equalization. My territory wants to ensure people understand that equalization is to ensure that as the various provinces exceed in prosperity, whereas others are having a rough time at a particular time, then there is equalization of funding so that they can provide similar equivalent services. At any particular time one province could be having a rough time in obtaining equalization payments and at another time it may have a boom and prosper, and can help out those provinces that are less able.

The territories have a fixed challenge that will be there all the time, in that they have a very northern harsh climate and it is very costly to deliver government service. Relative to the rest of Canada there are few constituents in a very large area that increases the costs of delivering government services. There are of course very few taxpayers to fund those services.

Therefore, just the challenge of operating a government in such a harsh situation requires added funding. That is the purpose of territorial financing. It is to ensure that there is increased funding to cover these added costs.

There are always fixed costs. To have a government in place, there are fixed costs regardless of the situation in population, the economy and taxes available. We can only go down below a certain level. The floor permits those funds from going down.

A member suggested earlier in the debate that the government may not recognize the added funding requirement to do business in the north. That is not true. There has been a tremendous recognition by the government. I know that northern members have been very excited and happy about some of the special arrangements that have been made for the recognition of these added costs in the north.

I will refer to a couple of examples of the recognition of the added costs of doing business in the north, which is why we have extra money in the territorial financing formula to help cover those costs.

The first example is with health care. As we know, there was a historic agreement between the federal government and the provinces for health care in 2003. Every province and territory received funds, but in recognition of the added costs of health care in the north, the territories were provided an extra $20 million in that agreement.

Coming along to the new agreement on September 13 to 15, as everyone knows, there will be $41.3 billion provided to the provinces and territories over the next 10 years. Of that, my riding in the Yukon Territory received another increase in funding for health care. Our proportion was at, first of all, $3 million for the health transfer, $34 million for the Canadian health transfer base and $.5 million for medical equipment. That is more than $37 million in additional funds. I am reading out of the November 23, 2004 Hansard . That is another $37 million in recognition of the added costs of providing services like health care in the north.

In places like Vancouver or Toronto when a serious incident occurs, someone could get into an ambulance for very little cost and in very few miles that person would be in a hospital. Whereas, such a situation in Nunavut, the Northwest Territories or Yukon could take $5,000, $10,000, $20,000, or $25,000 simply in Medivac fees for small planes, and in special spots large planes, to get these people to a hospital where major surgery could occur. Of course, with only 100,000 or so people in the north, there is not a large enough volume of people to maintain specialists in every discipline there. That would not make any sense either, so people have to go outside for those specialists and that is another tremendous cost in the north.

We are absolutely delighted that the government has recognized those special costs in the north with the $20 million in 2003 and the extra $37 million in this year's agreement. In this year's agreement there will also be other moneys that will be very helpful in the northern parts of Canada. There was money for aboriginal people related to health care. About 23% or so of my riding is made up of aboriginal people. We are very happy with the attention being paid to aboriginal people.

The first part of that money is $200 million for the health care transition fund. As we know, there are a number of programs delivered by various bodies to aboriginal people and this will help ensure a seamless service there.

There is also, as I mentioned in the debate this morning, $100 million for the aboriginal health human resources initiative. I applaud the government and the Canadian Medical Association for trying to ensure that there are more aboriginal people and professionals working in the health care system.

There is also $400 million over the next five years for health promotion and disease prevention for aboriginal people. In my personal opinion, this was one of the exciting components of the 2003 agreement because the money invested in prevention and promotion is certainly saved many times over when dealing with the health care system.

All the money has been given especially to the north to deal with its special problems, challenges and extra costs in health care. Over and above all of that, the Minister of Finance made a special deal due to these extra costs and provided in the deal in September for an extra $150 million over five years, $65 million for the territorial health access fund, $10 million for the federal-territorial working group, and $75 million for medical transportation.

This kind of money can be used for services like Telehealth, which is an essential way of reducing the Medivac costs. If it can be done with modern technology, where I think we are leading in some ways, medicine over the computer with screens and X-rays can sometimes prevent a trip south and save the costs I was speaking about earlier of $10,000, $20,000, or $30,000, but more important, it can save lives. It was very heartwarming for me to hear about a person whose life had been saved by some of that recently funded equipment.

The other example for my colleague opposite who suggested that the difference was not recognized in the north relates to the infrastructure programs. As we know, when these programs first came out, they were totally done on a per capita basis. For the reasons I stated earlier, this would not make any sense in the northern territories. We could not possibly make enough progress. We have vast areas to cover. If we are building a road, or a sewer along that road, there may be only two or three taxpayers, whereas in an urban area, there would be many taxpayers. That particular sewer could buckle due to permafrost and heaving. We would have all sorts of extra heating costs. In fact, sometimes we would even have extra freezing costs because we do not want the infrastructure to thaw and, therefore, buckle. It is much more complicated, much more expensive, and there are less resources available.

When the strategic infrastructure program came in, the government very kindly agreed to the point made by the members from the three territories. Instead of providing roughly $600,000, which might fix the length of one road and one sewer in a community, and I could tell members that we have needs, the government said, “We will give you a base amount”. A few years ago I saw one of those sewers that was being replaced by the infrastructure program and it was still made out of wood staves. We got $20 million per territory so that we could realistically deal with those challenges in the north.

Subsequently, the strategic infrastructure program was very successful across the country. With major projects being done that could not be funded by all the projects that were done under the smaller community and rural infrastructure funds, that were also very popular, this program was increased again. Once again, instead of getting a few hundred thousand dollars, the territories got $20 million. I know in my riding, for instance, we are finalizing the rebuilding of the Alaska Highway with that money, which is important to our economy, resource extraction and tourism.

When the municipal rural infrastructure fund comes in, all of rural Canada has to thank the government because most of that fund goes to rural Canada, and it is a big chunk for the north. We would have received $600,000 if it had been done on a per capita basis but, instead, our riding will be receiving $15 million. The eight municipalities and the first nations in my riding have a lot of projects waiting for that fund.

Over the next 10 years there would be $4 billion of extra funding for the territorial funding formula. I thank the government and congratulate it on its success in this new regime.

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, it is a strange ritual that goes on with questions and answers when the parliamentary secretary spends the first half of his time seeking clarification as to whether we are supporting Bill C-24. As I said in my speech, yes, we are.

Secondly, he wanted to know whether we favoured the new formula that is contained within the bill. Yes, we do, which is why we are supporting it. However we can turn around a lot of figures, and to every single household, especially low and modest income households, it sounds like a pile of money to say that as a result of this new formula that Nova Scotia will get $151 million extra dollars. That is a large amount of money but it absolutely pales in comparison to the massive blows, and we are not just talking cutting and slashing, but almost death blows that have been dealt to a good many basic services that had to be cut back or eliminated in Nova Scotia over the last number of years.

I will cite one example. While I was in my riding on Friday, I met with a tremendous young woman who heads up an organization that works on behalf of persons living with disabilities. It is devastating what has happened to persons living with disabilities on their own and to the families working to support family members living with disabilities as a result of the combined impact of the cuts to education funding, the cuts to health care funding and the cuts to public transit. For persons living with disabilities to get to a doctor's appointment with three weeks' notice on accessible transportation is challenge enough, never mind the persons living with disabilities who are ready, willing, able and qualified to fill jobs in the community but cannot fill those jobs because they have no way to get to work.

If that does not demonstrate how pathetically short-sighted, never mind mean-spirited, the hacking and slashing has been over the last eight years, I do not know what else does. Yes, $151 million more into Nova Scotia's coffers will be welcomed, but they will not come close to repairing the damage.

I could cite a lot of other statistics about the size of the student debt load. The average debt load for a student graduating in Nova Scotia the year before last was $25,000, and we know that has been growing significantly. It is a disaster at the undergraduate level and an even bigger disaster at the graduate level.

I had representations over the last while from people in the health care field who said that high tuitions have made it virtually impossible for young people from low and modest income families to seek professional training and then to go back to the communities where they are desperately needed, communities ethnically and geographically, returning to rural areas where there is severe underrepresentation of trained health care personnel. The reason for that is that graduating students with debt loads are compelled to go to the bigger and more prosperous centres to try to get that debt load off their back but they end up not returning.

The tuition for students going into medicine rose 16.7% last year and for law it rose 19.4%, which is on top of previous massive increases. This simply means that we will not have representation on our health care professional teams from those lower income areas, from ethnic minority communities and from rural communities, because they simply cannot leap that gap. Nothing in the short term, even with the $151 million extra that would go to Nova Scotia under this new equalization formula, will begin to clear away those obstacles to accessibility that had been erected by the government's reckless short-sighted decisions over the last eight years.

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

Mr. Speaker, I am working on the assumption that the member and her party will be supporting Bill C-24, so I am somewhat hesitant to be critical of her somewhat wandering ways on a variety of issues.

As I said earlier, this has nothing to do with the offshore accords. The offshore accords are altogether separate and, as the member rightly points out, will require separate legislation.

The other point is that for this fiscal year, Nova Scotia will receive an additional $151 million to do with as it sees fit, in that we are bringing the threshold for this fiscal year up to $10 billion and Nova Scotia's share is an additional $151 million. That will translate into about $1,250 per person. Thereafter, Nova Scotia's share under the bill will be $1.343527 billion. That is something that the premier and the finance minister of Nova Scotia have spoken to us directly about. I assume the hon. member supports the representations made by her premier and finance minister.

I wonder if the hon. member would mind commenting on the fact that the Government of Canada has essentially bought down the risk of the equalization receiving provinces by implementing a formula that is $10.9 billion in the next fiscal year and a 3.5% escalator thereafter, which is a guaranteed floor to the equalization receiving provinces. Effectively, that means that if Ontario, which is the largest contributor to the federal revenues, were to have a bad year then the federal government would be forced to find revenues somewhere else while guaranteeing the equalization receiving provinces from the economic shocks of Ontario.

I wonder whether the hon. member in general thinks that is a good idea, or should some other way be introduced that would in effect be the current situation, which is that the equalization formula goes up and the equalization formula goes down largely in accordance with Ontario's economy. Which does she prefer, the guaranteed floor or the equalization variables that currently exist?

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, I am very pleased today to have an opportunity to participate in the debate on Bill C-24, an act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other acts that are impacted by the changes in the fiscal arrangements act.

All members of the House are aware that this is a bill that received first reading in late November. It essentially reflects the new equalization and territorial funding formula framework that was agreed to by the first ministers in late October.

I have been listening to the debate so far and there is no question that there is a certain amount of acrimony and a certain amount of frustration being expressed on behalf of a great many Canadians, not because of the provisions of the bill before the House but because of the context in which this bill is being introduced.

A tremendously acrimonious environment has been created by the tremendous hardship that was imposed by the massive unilateral measures, the massive cuts that were introduced by the Martin budgets of 1996 as well as those that followed.

Everyone knows it was a big job to get us back on a more constructive course. It is important, as we get into this debate, that we remind ourselves that equalization payments are not a handout from one province to another. Often that is the sense that is created. There is a sense that it is the wealthy provinces that give money to the have not provinces, either cheerfully or reluctantly and sometimes it is expressed as reluctant.

That is not what is meant by equalization payments. It is important for us to remind ourselves of that. Equalization payments are from taxes that are paid by people in all parts of Canada, not a payment from richer to poorer provinces. We are committed to the important concept that we should have equality of access to the important programs and services that make up the quality of life. It is to ensure that we have a floor below which Canadians cannot fall, given the immense resources of this nation as a whole. It is important that we think of it in those terms.

It is truly what creates a situation in this country where we do not have, or we have no excuse for having, the kind of growing gaps between haves and have nots that we have seen in recent years as a result of the massive unilateral cuts that were imposed in transfer payments and then the arbitrary cap that was set on equalization payments.

I had the privilege in the early nineties of being at the Constitution table. Some would say it was a questionable privilege because it was a very dragged out process, to say the least. However, at that table, one of the things that was established was that the equalization formula should in fact become part of our constitutional framework. It is extremely important that it now exists.

It would be easy to spend the short time available to go on at great length about the immense damage done as a result of the massive unilateral cuts at the federal level, the damage done to our health care system and education system. The cost of that is being borne more and more and being heaped onto the shoulders of our post-secondary education students.

It would be easy to dwell on what a setback this was for environmental remediation and environmental protection measures for public transit, in particular, the advancement of the cities agenda. The federal government turned its back on promising a national child care program and then said that it could not be afforded for now, even though Canada reached a level of 3% growth within a couple of years of the Liberal government taking office and it could indeed have been afforded.

I want to take a few minutes this afternoon to focus on a couple of positive developments that I see across the country and in particular in my own riding, which I think is typical of many of the areas that have been so hard hit by the federal arbitrariness in the cuts and constraints applied to our equalization payments and transfer payments.

I speak directly about a community consultation this weekend. Basically a chamber of commerce exercise has been conducted over the last couple of years addressing the whole question of the economic potential, in this case focused on what is called HRM. I have to say honestly, I am delighted to be the member of Parliament for Halifax, but to live in a city which now calls itself HRM and not Halifax I think raises the question of how a city called HRM can actually have a soul, because it is just such a nebulous, meaningless notion.

Looking at the greater Halifax-Dartmouth area and all that includes, there has been a wide consultation process conducted to look at the future potential for growth and, one hopes, meaningful development and genuine economic progress. It is not just growth for growth's sake, because growth can be positive or negative depending on how the benefits of that growth are redistributed and how the growth is achieved. On another day we will have more opportunities to talk about that.

The engagement in the community and the leadership shown by the chamber of commerce in bringing many different elements of the community together around these issues helps to focus on not just how much damage has been done as a result of the massive unilateral cuts of the federal government starting in the mid-1990s, but also to focus now on some of the solutions.

It is extremely instructive and I welcome this. We needed to turn the corner on this. I welcome the recognition that some of the greatest impediments to genuine economic progress in many parts of the country and in this instance on my community of Halifax have been the major erosion of funding to things as critically important as education.

It was highlighted over the weekend that we need to be very careful not to lose sight of the fact that the tremendous burden of debt heaped on our post-secondary education students sadly has also been mirrored and paralleled by a serious erosion, at least in the Nova Scotia context, of the quality of our public education system from primary through to grade 12. We have a repair job to do here. We know how incredibly important education is to the future economic growth of our communities and the future genuine progress of our communities.

In supporting the bill that is before the House, we acknowledge that this is a step forward from what we have experienced, the harsh effects of the inadequacy of the formulas. It is not perfect, but it is an improvement. It has been arrived at through the agreement reached with all provincial premiers.

What is now important is that we make sure the lessons of the past are acted upon, with the government turning the corner on its treatment of equalization and transfer payments. We need to make sure that we repair the damage done to the education and health care systems.

We are getting there. Important steps have been taken in that direction. The same kind of pan-Canadian context provided by the Canada Health Act is what is needed with respect to education as well, something that has standards and enforceability mechanisms. That work remains to be done. The bill before us with respect to fiscal arrangements does not get us to where we need to be in that regard.

It was very encouraging over the weekend at the economic potential consultation wrap-up held in Halifax when it was acknowledged that there is a critical central role for arts and culture. There is an economic impact of arts and culture on community. We must recognize that it is the kind of creativity which is stimulated by having a very solid commitment to funding of arts and culture that will allow us to make the kind of judgments that are needed and come up with creative solutions that are desperately needed in this very complex challenging world in which we live.

There are similar considerations with respect to the erosion of our public transportation system, and that applies especially to public transit in the urban context, but also more regionally. Tremendous damage has been done by the massive cuts and frankly, in many cases the blind embracing of purely market driven solutions with respect to an area such as transportation. It clearly does not work for the less prosperous areas and the less populous areas in the country. That certainly is the case for the Atlantic region in general and certainly for my own province of Nova Scotia.

It is important for us to recognize that a lot of damage has been done. Even in instances where it was clear that the government's cutting and slashing was going to heap burdens on the most vulnerable citizens, the government was not prepared to back off, even after it began to introduce surplus after surplus. After seven straight years of surplus budgets the government continued to resist repairing the damage and making the changes needed in the fiscal framework that would enable us to get on to a path of rebuilding.

One cannot speak about this subject without recognizing the massive gutting of employment insurance benefits to create a false impression about the size of the surplus. This has yet to be repaired. It seems so easy for the Liberal members to beat on their chests and talk about the great job they have done in generating this surplus. They conveniently ignore the fact that the surpluses have been achieved by heaping the burden on those who should least likely have been asked to bear the costs of the mismanagement of the Liberal government over the last decade.

The government has conveniently ignored the fact that a big chunk of that surplus has actually been generated by taking money directly out of--and I am going to say--the mouths of children in a lot of cases. This has happened in families where members of the workforce have found themselves without employment through no fault of their own. They have contributed in good faith to the employment insurance fund over the years and have built up that surplus. Then they have found that such restrictive eligibility measures have been introduced that they simply have never been able to draw from the employment insurance fund.

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

Mr. Speaker, as this House knows, the Conservative Party supports the equalization program as an important and necessary means of building our nation. It is responsible for creating, or at least attempting to create, the conditions for relatively equal social services for Canadians regardless of where they live.

We also support the intent of the equalization program to, in conjunction with other federal fiscal structures, help provinces create the conditions that can lead to stronger local and provincial economies.

Over time, the formula calculating the amount of equalization paid to each province has changed. For example, as I told the House earlier this month, when Alberta was a have not province from 1957 to 1965, the oil and gas revenues the province earned were not clawed back by Ottawa under the equalization program. This allowed Alberta to build its oil and gas industry by using the profits to reinvest in the industry.

As we all know, that arrangement does not exist today for provinces like Newfoundland and Labrador, Nova Scotia and Saskatchewan, nor does it exist for the territories. I will talk quite a bit about the treatment of non-renewable natural resource revenues within the equalization formula today, because I think it is an issue that must be examined as we move forward with the renewal of the program.

Over the past several years, Conservatives have argued in favour of moving from the five province standard to a 10 province standard and for the removal of non-renewable natural resource revenues from the formula. We also believe that it is essential to provide for a phase-in period if any such changes are made to the existing formula to ensure that no province is hurt in the transition period.

We are disappointed that the government is not dealing with these issues head-on when there is such a wide consensus among territories and provinces on the changes necessary, but we support the review process that is under way and look forward to hearing from the panel on these very important issues.

The bill makes basic changes to the act, which were necessary to ensure certainty within the equalization program and to allocate the necessary payments over the next year. For that reason, we support it.

The bill sets a minimum funding floor of $10 billion for equalization and $1.9 billion for territorial formula financing for 2004-05. This is something that provinces and territories have called for as a means of protecting provinces against overall and individual declines in payments in 2004-05.

It also ensures that no province or territory receives less than the levels forecasted in the 2004 budget, thereby setting $10.9 billion for equalization and a total level of $2 billion for territorial formula financing in 2005-06.

In the middle of all this, a 3.5% per year escalator has been created for equalization and territorial formula financing, going through until 2009-10.

Finally, the bill offers a breakdown of provincial equalization allocation for 2005-06 and a breakdown of territorial financing allocation for 2005-06.

Very clearly, the bill recognizes, finally, what the provinces, territories and the Conservative Party have called for, that is, greater certainty for payments. However, there are many outstanding issues that need to be addressed and are not reflected in the bill.

The bill does not specify how the equalization in territorial formula financing levels will be allocated among the provinces and territories from 2006-07 forward. 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, we remain concerned that the federal government has retained final decision making authority as to how future levels should be allocated.

Most important, the bill does not remotely address the long-outstanding concerns the Conservative Party and the provinces and territories have had 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.

The bill also does not deal with non-renewable resource revenue-sharing outside of equalization, which means that the bill does nothing to solve the Prime Minister's ongoing broken promise to Newfoundland and Labrador and Nova Scotia.

Equally as important, the bill does not deal with non-renewable resource revenue sharing outside the territorial financing formula. The territorial financing formula is an important and necessary grant mechanism to address the present needs of the territories. The Conservative Party supports it, but we also believe 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 movement toward economic self-sufficiency.

Non-renewable natural resources and how they are dealt with under the current equalization formula has become a major concern, an economic inhibitor for provinces and territories that wish to have full access to these revenues to develop their resource sectors further and to have control over their economic future. Equalization can and should be restructured to deal with non-renewable natural resources like oil and gas in Newfoundland and Labrador, Nova Scotia, Saskatchewan and the territories.

Newfoundland and Labrador presents a timely and interesting case study for this policy. We and many Canadians watched the equalization meeting in October very closely, and were disappointed at the Prime Minister's refusal to honour the promise he made during the election to both the Premier of Newfoundland and Labrador and the Premier of Nova Scotia. The Prime Minister attempted to use the equalization program as leverage to water down the commitment he made to these premiers during the election. The premier of Newfoundland and Labrador was not going to let that happen, and he rightly walked away from the equalization talks.

As I have told the House before, our party supports Newfoundland and Labrador's position with regard to its offshore resources. We will continue to advocate for the Prime Minister to keep his word to Newfoundland and Labrador. Put simply, the Conservative Party supports the efforts of Newfoundland and Labrador and Nova Scotia to receive 100% of their offshore oil revenues outside of the current equalization formula, with no cap and no restrictions.

I have raised this issue because, again, the manner in which the formula accounts for non-renewable natural resource revenues is one of the main points of contention regarding equalization in Canada. While this party believes that it is ultimately good that the government bring more certainty regarding aggregate amounts to the equalization program, we remain clear that we support the demands of the provinces and territories to see changes in the way that non-renewable resource revenues are accounted for within the formula.

I have also raised this because it highlights the neglect of the government on this issue. This is an issue that has been ongoing and needs to be dealt with immediately. Because the government has not addressed this issue, it has become a crisis in places like Newfoundland and Labrador. Other provinces and territories are watching closely to see what kind of deal the Atlantic provinces may receive.

If Newfoundland and Labrador is successful in achieving a deal, then other provinces and territories will ask to receive a similar deal, and for good reason. They are experiencing similar economic clawback due to their resource sector revenues. Of course, changes to the formula of this nature would mean less money in the federal coffers and more money in provinces. Therefore, provinces would have a better chance of providing social services and creating conditions for economic development on their own without the interference of the federal government.

This is a political non-starter for the government, which has for the past 11 years used the fiscal imbalance and the relative poverty of provinces and territories compared to the federal government to push its own agenda in areas of provincial and territorial jurisdiction. If the government were to amend the formula to remove revenues and royalties from non-renewable natural resources, the provinces in question would have the opportunity to use those revenues to further build their industry and infrastructure. The province would take income from taxes paid by companies and employees, which would be accounted for in the equalization program.

The federal government would still benefit from the personal income taxes that workers pay to provinces and to the government. The federal government would also benefit from corporate income taxes paid to the provinces and the government. Under the sort of change about which I am talking, it is not just the local province that benefits; all of Canada benefits.

When we consider economic development, then we start looking down the road, we can open the door to working with provinces to develop economic potential in those provinces and can realize that everyone benefits from a strong and economically vibrant and diverse Canada. By looking at provinces as places of potential, we have the opportunity to see what we can do through economic development to increase quality of life, social services and economic opportunity for young people in every region of our country and help provinces and territories realize their goal of becoming economically self-sufficient.

When we talk about equalization, equity remains the main perspective, but I would argue it is only part of the picture. Talking about equity, especially within the context of the equalization program, has taken on a form of a static conversation. Conversants assume that provinces will remain relatively the same in relation to one another. Ontario and Alberta are the have provinces, Saskatchewan and B.C. flirt between have and have not status and Manitoba, Quebec, and the Maritimes are the less well off provinces.

Taking this arrangement as a perennial constant, those who talk only from an equalizing perspective need to assume that this ranking of provinces in these groups will remain constant, which on the flip side assumes no changes in economic performance. We know this to be untrue. We know that every province works toward developing its economy and we know that all provinces and territories are making successful gains in economic diversification and the raising of quality of life within provinces.

This being the case, equalization program reforms need to be done with an eye toward economic development as a means of raising the quality of life of all Canadians. After all, the end goal of every province is twofold: first, to be able to provide increased and efficient services so that citizens have a better quality of life; and, second, to do it themselves, that is to become so successful that the province in question will not need a federal equalization payment.

It is within the context of an equalization formula, which is cognizant of economic development, that I raise concerns over the place of non-renewable natural resource revenues in any reformed formula. We are not there yet and it will take a Conservative government to get us there.

We also need to have a better sense of how non-renewable resources are accounted for with regard to Canada's territories as well. Bill C-24 does not address the outstanding concern that the Conservative Party and territories have in the need to develop resource revenue sharing agreements between the territories and the federal government. The territorial formula financing is an important and necessary grant mechanism to address the present needs of the territories.

We support the territorial formula financing, but also believe it is imperative that the federal government take steps to develop a resource revenue sharing agreement with the territories to facilitate the desire for control over their own economy and move to economic independence. Yukon has a devolution agreement with the federal government which would make it more independent and give the territory greater freedom in the management of its own affairs. The Northwest Territories is working toward a devolution agreement, and Nunavut is doing what it can to bring the federal government to the table with regard to a devolution agreement as well.

Part and parcel of devolution is greater control over natural resources found on territorial lands. Agreements such as these are important for practical reasons. If we talk to representatives from northern Canada, they will say that most of the money that goes north is actually spent in the south. For example, consider health care. As of now, if a major surgery is required, the northern government will pay for the patient to fly south, receive treatment, stay overnight, perhaps in a hotel, purchase food and then fly back. While a northern government foots the bill, it is the provincial economy in the south that benefits.

A different side of the same problem exists when it comes to resource extraction. Companies are often based out of a centre in the south. Workers often come from the south. These companies pay taxes in the south, as do the workers who do not claim official residence in the north. Likely, many of the workers are supporting families that live in cities like Edmonton, Ottawa or Quebec City, among others. They fly north, work as long as their rotation is in and likely fly home to be with their families or send cheques home regularly. The money is not spent in the north. The taxes are not paid in the north.

It is thus very important for northerners to have a greater say over their resource sector so the government can retain more money and so more year round northerners are working in the sector, thereby giving the government a stronger tax base. With that tax base, northern governments could attack their key priorities: economic development, stronger northern health care, a better education system and affordable housing. This is where they need to go and to get there they need certain adequate territorial financing, as well as an agreement regarding natural resource revenue sharing.

It is disconcerting for me when the Prime Minister goes overseas and muses about territories becoming provinces, when he is not engaging in the proper steps necessary to help territories with their most pressing concerns. That is to secure a resource sharing agreement to create the conditions they need so they can build a strong economy which will create more jobs in the north for both indigenous northerners and southerners and lead to greater self-reliance for northern governments.

One of the other concerns I have with the bill is around the new equalization floor. The bill introduces a new equalization floor which provides certainty for have not provinces that are attempting to create budgets and would like to know in advance roughly the amount of money they will receive from the equalization program. In terms of creating certainty, this is important. A floor protecting have not provinces from drastic changes in the economy already exist. However, while introducing a new equalization floor that better shields have not provinces from potential downturns in the economy, it provides less protection for have provinces and the federal government.

For example, situations may arise where the minimum equalization payments agreed by the federal government are higher than the payments dictated by the formula. In this instance, have not provinces may actually be equalized to a greater fiscal capacity than the national average. This belies the equality that stems from the equalization formula. Further, the equalization floor created in the agreement is based upon the largest federal payout in the past decade and then is escalated.

Looking at this from purely an economic perspective, we know that Ontario accounts for 50% of the economic activity measured by the equalization formula and a significant portion of federal revenues. As the province with the most exposure to the U.S. economy, Ontario faces economic risks created by increased U.S. deficits, risks created by the amount of U.S. debt held by China and Japan and economic shocks created by global uncertainty. These risk factors could conceivably add up to slow Ontario's economic growth to a point where the equalization formula would dictate that payments should be lower than the floor agreed to by the federal government. At the same time economic trouble in the Ontario economy would have a drastic impact on federal revenues.

In this scenario the federal government would have to make up the difference between the formula payment and the floor payment out of shrinking general revenue. By building in such a generous floor, the federal government effectively detaches have not provinces from potentially adverse economic realities.

Placing a fiscally imprudent floor in equalization payments, coupled with other significant fiscal commitments in health care, raises the risks associated with economic downturns. Certainly, these commitments limit the ability of the federal government to respond to a fiscal slowdown with measures such as tax cuts or targeted investments. Governments cannot rely on blind economic optimism when creating fiscal policy, especially in the face of current global volatility.

I want to return to another aspect of our policy, which is that no provinces should receive less money simply because the formula has changed. This is an important point. Provinces that need equalization need it to provide important social services to its citizens. A simple change in a formula does not change the overall economic picture of a province, but it could change the amount a province receives.

The shock of receiving less money is usually followed by the result of providing less services. Therefore, when the government makes these changes, it ought to be careful that provinces are treated fairly and do not end up with the short end of the stick. This side of the House will be watching very carefully to ensure that this problem does not exist and if it does, we will work to correct it.

However, we know the numbers involved are more certain and we look forward to the ideas that will be put on the table in the course of the review process. It is our hope that the end results of these ideas will ensure an equalization system that both fairly and adequately provides funds to provinces and at the same time does not hinder economic development as the current formula does.

We will have to wait for the panel of experts to present its recommendations before we say conclusively whether we fully support the process which the bill sets into motion. However, we agree there needs to be a step toward a system that is predictable. At least in perception, the bill is a good beginning.

As I noted earlier, we would have liked to have seen greater provincial involvement. Given the importance of the equalization program for the efficient functioning of provincial governments and the certainty of provincial economies, their voice would have been welcomed. I am sure they would have welcomed greater opportunities to express their views.

While the government did bow to pressure from the provinces for greater provincial involvement, in my mind it was not enough. If there is a chance that we could see greater involvement from provincial governments, we believe that would be appropriate and we would support such a move.

One thing missing in the reforms, which were implemented in the 2004 budget, is a reform that would have allowed provinces that which were overpaid a longer period to pay back their overpayment. These provinces, which are struggling to provide social services and infrastructure needs to their citizens, should not be forced to redesign their entire budget because the federal government has made an accounting error.

As for predictability, we also would like to see a moving three year average used to calculate payments. This would help to smooth out situations where provinces are over or underpaid and at the same time it would provide greater predictability to the provinces.

Finally, we are glad to see the government is now committed to a five year renewal schedule. Remaining committed to the five year renewal, again provides provinces with greater predictability and certainty and also gives the federal government the opportunity to utilize medium term economic forecasts when considering changes.

By moving to a 10 year plan or commitment, we see greater risk within the program's payment schedule and we are also concerned that the government's flexibility in administering the program is negatively affective.

In the end, our party will support the bill because it is the beginning of much needed changes to the equalization formula. It is an admission by the Liberal government regarding the problems that have plagued equalization in the past and it is a step in the right direction toward making the equalization program a better program. In this light, we anxiously await the report of the expert panel, and hope to see our recommended changes included.

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

Mr. Speaker, my challenge this afternoon is to keep members awake while we talk about equalization. It is an arcane piece of legislation and an arcane concept which is watched by quite a small number of very interested people because it affects how budgeting takes place, both here at the federal level and at the sub-national levels.

This has nothing to do with the offshore accord. That is entirely a separate negotiation. Bill C-24 has to do with the direct results of the first ministers meeting that occurred in September between the Government of Canada and the provinces, where they announced fundamental changes to Canada's equalization program and the territorial formula financing arrangement.

The framework was announced in response to concerns raised by equalization receiving provinces about the funding of equalization and the planning difficulties they have experienced in recent years caused by the swings in equalization payments. A number of finance ministers made the point as we travelled across the country that it was very difficult to make up a budget on the basis of equalization payments if in fact it is not known what it will be year to year.

The government heard that concern and has tried to address that concern through this bill by effectively setting floors and ceilings and a predictable stream of money for each equalization receiving province. This new framework represents probably the most important change in the program in its history. The legislation before us today is integral to effecting that change.

The intent of the changes to the equalization program and the TFF, the territorial funding financing arrangements, is to bring stability, predictability and growth to the overall level of funding for these programs, and to have third party advice on the best way for the Government of Canada to allocate payments among the provinces and territories. As the Prime Minister and premiers negotiated this formulization, it in fact achieves that. I hope this bill will enjoy the support of all hon. members in the House.

Bill C-24 proposes to provide these issues of stability, predictability and growth. I will outline shortly the legislative proposals contained in Bill C-24. However, first, it is important to present some background to the equalization and TFF programs in order to provide some context so that we can say this is where we were yesterday, this is where we are today, and this is where we hope to be tomorrow.

The program was put into effect in 1957 and the territorial program was put in place in 1985. The equalization part of the program has certainly been with us for quite a while and in part is how Canadians see themselves in terms of sharing the wealth of this great country. Both of these programs have been largely successful in providing support, while reducing regional disparities.

The intent of these programs is to ensure that all Canadians, no matter where they live, have access to reasonably comparable public services, that is the key phrase when we are looking at measuring the test of whether this program succeeds, without having to resort to economically damaging levels of taxation to fund the provision of these services. Those are the two ideas that we want to achieve here, having reasonably comparable public services without having resort to economically damaging levels of taxation.

The idea that Canadians should have access to the same high quality of health and social services regardless of where they live is fundamental to the fairness and integrity of the Canadian federation. This is so much so 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 effect, equalization is there to fill in the gap to ensure that all Canadians have access to high quality health and social services that they have come to expect and demand, regardless of where they live in Canada.

Moreover, it ensures that less prosperous provinces do not have to resort to economically damaging levels of taxation to fund the provision of these services.

Again, we are working on a balance here. In the less prosperous areas, they have limited ability to raise taxes, yet, simultaneously, Canadians, wherever they live, are entitled to a certain base of services. Hopefully that base will be achieved in part through the distribution of moneys under the equalization program.

I would like to return to the funding arrangements to the provinces and territories. The changes to these programs encompass three important elements: first, the new framework for equalization and territorial financing starting in the fiscal year 2005-06; second, an independent review of the programs by a panel of experts; and third, complete protection for provinces and territories against overall and individual declines in payments in 2004-05.

I would like to expand on each of these three elements: first, the new framework for equalization; second, the independent review; and third, the protection that is afforded in this fiscal year.

I will begin with the new framework for equalization and territorial financing. Starting in 2005, the government will establish a legislative financial framework for both equalization and territorial financing. The new framework will establish fixed payments levels, which will provide predictable and growing funding for provinces and territories. Funding levels for 2005-06 will be set at $10.9 billion for equalization and $2 billion for the territorial funding. These amounts thereafter will grow at a rate of 3.5%.

When we talk about the stability of predictability, there we have it. We know exactly the floor that we would be starting from. We know exactly the amount by which the program would increase.

The government is committed to reviewing the overall funding levels of equalization and TFF after five years. If appropriate, the government will make adjustments in 2010-11, taking into account evidence based measurements of the evolution of disparities and costs to the territories.

Let us hope, Mr. Speaker, that neither you nor I is talking about equalization in the fiscal year 2010-11.

The second point has to do with the expert review panel. The second element of the changes to the equalization is the establishment of an independent expert review panel. Our government recognizes that simply pumping more money into the system is not enough. We need to take a hard look at how the current level of equalization and territorial financing allocates moneys to the provinces and territories. That is why the new framework calls for a review to be conducted as to how the legislated equalization and territorial financing levels should be allocated for the provinces and territories in the fiscal year 2006-07 and beyond.

We start with a legislated amount of $10 billion in 2004-05. Then we move that up to $10.9 billion in the next fiscal year, and it is 3.5% thereafter. Hopefully the panel of experts will be able to tell us the best way in which to distribute that money among the provinces.

This review will, among other topics, look to the following priorities.

First, to evaluate the current methods for measuring fiscal disparities among the provinces and territories.

Second, to examine alternate ways to distribute equalization and territorial financing, including the possibility of bringing these allocations on economic indicators, such as GDP or disposable income, or based upon the expenditure needs of the province or territory.

Third, to review how fiscal disparities between various provinces developed over time, and to look at the costs associated with providing services in the territories.

Finally, to advise the government on whether it should set up a permanent independent body to advise the government on the allocation of the equalization and territorial financing payments.

I would like to stress that although the panel's role would be advisory in nature, our government is committed to listening to its recommendations and making decisions based upon that advice in consultation with the provinces and territories.

If this framework is adopted by Parliament, the panel would be asked to report back to the government by the end of 2005, which would be within a timeframe to have an effect on equalization and territorial financing allocations set for the fiscal year 2006-07.

This brings me to the third element if I may of the changes to the equalization and territorial formula financing arrangements providing fiscal protection for the provinces and territories. In order to provide greater stability to provinces and territories in 2004-05, the Government of Canada will ensure that equalization payments total a minimum of $10 billion.

As I said, we set a floor of $10 billion. Next year it is a ceiling of $10.9 billion and each year thereafter it is $10.9 billion multiplied by 3.5%. The territorial financing payments will have a minimum of $1.9 billion in 2004-05 which will go up to $2 billion in the years thereafter.

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

With respect to the financial impact on the new framework, over the next 10 years, and subject to a review after the first fiveyears, the new framework for these programs will be $33.4 billion more in equalization and TFF payments to provinces and territories than the amounts in the 2004-05 estimated at the time of budget 2004, $9.5 billion for equalization and $1.8 billion for territorial financing.

That is $33 billion over 10 years on top of what already exists. This is no small change. In fact these proposed changes to the equalization and territorial financing formula framework amount to about $33 billion. This represents the most significant increase ever to these programs.

It is also important to point out that equalization and territorial finance payments are not the only sources of federal assistance for the provinces and territories. We have the Canada health transfer, the Canada social transfer, the equalization payments and then we have a number of other direct programs where the federal government provides assistance to the provinces in the delivery of services to all of our citizens. This money is in addition to that.

Indeed, hon. members will certainly recall that the Prime Minister and all the premiers recently signed the 10 year plan to strengthen health care, which will provide $41.3 billion in new health care funding. Therefore, we have the $33 billion in equalization and the $41 billion in new health care money.

The health plan includes key elements of systemic reform and the best terms ever for reporting and accountability. By meeting and surpassing every financial standard identified in the landmark report, known as the Romanow report, it turns the corner on the annual intergovernmental feud about health funding.

The health accord puts everyone's focus where it should be: on shortening waiting times; getting more health professionals and better equipment; improving primary care, home care and drug coverage; better services in the north and for aboriginal people; more health research and innovation; and improved public health and wellness.

It is important to note that the $41.3 billion health accord, when combined with the $33 billion for equalization and territorial financing, will result in a cumulative amount of 74 billion additional dollars expected over the next 10 years. It is new money transferred from the federal government to the provinces over that period of time.

By any stretch of the imagination this is a huge sum of money and it illustrates 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.

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 funding formula programs are clear evidence of our commitment in that area.

To sum up, under the bill, $33 billion will be allocated for equalization payments over the next 10 years, $41 billion to the Canada health transfer allocated over the next 10 years. We have a commitment to an expert review panel so that it will know whether there is a better way in which to provide the program.

We have put forward a program where we think we have met a number of the stability and predictability concerns raised by the premiers and finance ministers with respect to them trying to set their budgets. They now know that they have a fixed base and that their base will increase on a regular annual basis.

There is no doubt in my mind that the commitment of the government, in partnership with the provinces and territories, is to continue to work toward improving the standard of living of Canadians from coast to coast to coast.

As I mentioned earlier, the legislation I outlined today reflects the most significant investment ever in the equalization and territorial financing framework. The legislation is vital to ensuring that Canadians, no matter where they live, can count on comparable levels of health care and other essential services.

I encourage hon. members to support the legislation as it was negotiated by the Prime Minister and premiers. I hope all members of the House will find themselves supporting the legislation and the work of the Prime Minister and the premiers.

[Raymond Chan, Liberal, for the Minister of Finance]

moved that 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), be read the second time and referred to a committee.

Business of the House

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

Mr. Speaker, this afternoon we will continue with the opposition motion. Tomorrow we hope to complete third reading of Bill C-7, respecting parks second reading of Bill C-22, the social development legislation, and second reading of Bill C-9, the Quebec economic development bill.

Next week we will give priority to second reading of Bill C-24, the equalization legislation. We also will try to complete any business left over from this week.

When bills come back from the Senate or committee, as the case may be, we will add them to the list. Hopefully this will include Bill S-17 respecting tax treaties and Bill C-5, the learning bonds bill. By the end of the week, we hope to be able to proceed with Bills C-25, the radarsat bill, and Bill C-26, the border services bill.

Next Thursday shall be an allotted day.

Federal-Provincial Fiscal Arrangements Act

[Joe Volpe, Liberal, for the Minister of Finance]

moved for leave to introduce 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).

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

Canada Elections Act

[Mauril Bélanger, Liberal, Deputy Leader of the Government in the House of Commons]

Mr. Speaker, when Parliament passed Bill C-24 on election financing, it provided for a statutory review following the tabling, in the House, of the recommendations of the chief electoral officer, which are expected early in the new year.

At that time, the act that was passed will be reviewed, as provided in the legislation.