Finance Committee on April 27th, 2010

[Tom McGirr]

Let me first correct one thing. The payment that's being made is not to protect against declines in equalization; it's a payment to make sure that the total amount of major transfers a province is receiving in 2010-11 is no lower than it was in 2009-10. For provinces who receive equalization, it's being paid as an additional equalization amount, and for provinces not in receipt of equalization, it's being paid elsewhere in the act. I think that answers the first part of your question.

As for the second part of your question, in clause 1647 we're simply correcting a reference mistake that was in the legislation pertaining to a payment for Ontario in 2009-10, I believe. I don't have the exact part of the act with me, but it is an existing payment that's already in the act. It doesn't change the level of the payment, but just corrects this reference.

[Daniel Paillé, Bloc, Hochelaga, QC]

The fact nevertheless remains that the program exists. You are right to say that it's not equalization as a whole, but that it also concerns health and social programs. The Minister of Finance summed up the situation in the Quebec government's budget. It's in Schedule E. It's extremely well done, which you have no doubt noted. It's somewhat a summary of what the Government of Quebec expects from the Government of Canada in terms of payments. Again in the context of Part 6, since I want to respect the order, the Government of Quebec recalls that, in 2002-2003 and 2003-2004, according to the same variables, it received an overpayment of $2.38 billion. Since 2006, that amount has been recovered at a rate of $238 million a year. I therefore assume that it will go until 2016, that it is interest-free and that it is deducted at source, in other words that you are repaying yourselves out of the amounts subsequently transferred to that government.

My question is quite simple: why, in the case of Nova Scotia, New Brunswick, Manitoba, Prince Edward Island, Saskatchewan, Newfoundland and Labrador and Ontario are amounts paid not recovered under a program, whereas that funding is being recovered at a rate of $238 million a year in the case of Quebec? Does that mean that Quebec's experience is today enabling the other provinces to take advantage of this situation?

[Tom McGirr]

Let me first confirm that the payments you are talking about from Quebec, the loan that was given to Quebec, is interest-free. It is a loan that was put in place, from my understanding--and I did not work in the division at the time--because of a significant adjustment that was made to transfers because of a change in census data.

In terms of the payments that are being made in 2010-2011, which are being set out in this bill, these are payments. These are not amounts that are being recovered in any sense of the word. These are additional payments that are going to be going to these provinces to ensure that their total transfers from equalization, Canada health transfer, and Canada social transfer are at least as high as they were in 2009-2010 and 2010-2011.

[Daniel Paillé, Bloc, Hochelaga, QC]

It was done from here for the other provinces.

As regards the interest-free loan, these are amounts paid since 2002-2003 and 2003-2004 that you have transferred in the form of a note, a loan or an interest-free debenture. What is curious is that Quebec expects to receive approximately that same amount of $2.4 billion in respect of GST and QST harmonization, that is $2.2 billion since 1992. I suppose people have offset the two things, thinking that no interest was being charged on the $2.4 billion or $2.2 billion. The fact nevertheless remains that you're recovering that amount of $2.3 billion or $2.4 billion from the source once a year, I assume, or once a month when the transfer payments are made. I assume that's how it's done.

[Tom McGirr]

I don't have the precise details, but my assumption would be that it is just simply deducted equally across the year from all the payments that are being made to Quebec, but I don't have the exact specifics.

[Daniel Paillé, Bloc, Hochelaga, QC]

Another file was referred to, which in fact goes back to the Hydro-Quebec file. Since 2008, all the ministers of finance, including that of Quebec, have corresponded with the Minister of Finance Canada over what we consider unfair treatment between Hydro-Quebec and Hydro One, in Ontario. According to the public service people, is that matter closed or evolving?

[Tom McGirr]

I think I addressed this in a previous response. In response to Quebec's concerns, the Minister of Finance announced there would be multilateral discussions on the issues that were raised by Quebec as part of a larger discussion about the treatment of hydroelectricity within equalization. Those multilateral discussions continue.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you for reminding us that you've already answered those questions, but we are free to ask them once, twice or three times.

Would it be logical to say that the disputes or rather the bilateral discussions that you have with the Government of Quebec simultaneously concern GST and QST harmonization, the matter of Hydro-Quebec and Hydro One, the equalization ceiling, protection payments and the minor matter of income stabilization which dates back to 1991?

[Tom McGirr]

I can confirm that the Minister of Finance from Quebec recently sent a letter to the Minister of Finance for the federal government outlining exactly the same concerns that were expressed in Quebec's budget. That correspondence is being looked at as we speak.

[Daniel Paillé, Bloc, Hochelaga, QC]

Before leaving a little time to the others, I would like to make one last comment on income stabilization.

According to the information we have, Quebec filed suit for $137 million 15 years ago over the amounts paid in 1991. The Federal Court found in favour of Quebec. Subsequently, in a unanimous judgment, the Federal Court of Appeal dismissed the federal government's appeal and found in favour of Quebec. The Government of Canada did not go to the Supreme Court. Despite two court judgments and no Supreme Court challenge, the Government of Canada still has not paid the $137 million it has owed Quebec since 1991.

[Tom McGirr]

I'm not an expert on the stabilization case, so I think I'm going to refrain from responding to that question other than to say that Quebec has once again raised its concerns with the federal Minister of Finance.

[Daniel Paillé, Bloc, Hochelaga, QC]

May I make a humble suggestion? Is there anyone, among the 40 officials behind you, who could answer that question?

[The Chair, Conservative, James Rajotte]

Monsieur Paillé, is this in respect to part 6?

[Daniel Paillé, Bloc, Hochelaga, QC]

Absolutely.

[The Chair, Conservative, James Rajotte]

Is there someone here who can answer that question?

[Tom McGirr]

Not to my knowledge.

[The Chair, Conservative, James Rajotte]

Okay, we can endeavour to get a response to you, Monsieur Paillé.

I have Mr. Wallace, Mr. McKay, and Monsieur Carrier.

Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

These additional payments to Nova Scotia, New Brunswick, Newfoundland and Labrador, P.E.I., Manitoba, and Saskatchewan were previously agreed to. They're in the budget because they need royal assent for the payments to actually happen. Is that correct?

[Tom McGirr]

No payments can be made until royal assent is given.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You seemed to answer Mr. Paillé's question with respect to correcting a cross-reference. I'm not sure I understood it. What was the error that was made in the first place that had to be corrected? It was on the Ontario method.

[Tom McGirr]

From my understanding, there was a cross-reference that was not made entirely correctly, and we decided in this bill to change that cross-reference.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What and why...?

[Tom McGirr]

I'm afraid for that part of the bill itself I don't have the exact references as to what it was in the past. I can give you the answer, but--