Finance Committee on April 29th, 2010

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Mr. Chairman, I would like you to take into account the opinion of the members of this committee before making a ruling.

I want you to take note of the fact that in part 6, the part we are considering, section 3.12 talks about “an additional fiscal equalization payment that can be made to provinces“ — “provinces“ in the plural in the French version. Certain amounts are set out. So this is the ideal place to raise the question: why is there no amount set out for Quebec in view of the discussion regarding the dispute that has been ongoing for at least a year between Quebec and the federal government? This is the ideal opportunity to obtain reasoned answers from the officials, as I mentioned the other day, answers that are not political in nature but logical explanations as to why Quebec is excluded from an equalization payment because Hydro-Québec is being treated differently from Hydro-Ontario.

[The Chair, Conservative, James Rajotte]

So your argument is that Quebec should receive additional funds under the additional fiscal equalization payment.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Yes.

[The Chair, Conservative, James Rajotte]

Okay. It is a clause in the bill, so as long as it's linked to an explanation of how Quebec would be entitled to additional moneys under clause 1646, or related to the other two clauses.... But we should keep our questions related to the clauses of the actual piece of legislation. If there's discussion on a policy that's been determined by the government but not by the public service, those questions are obviously for ministers; they are not necessarily questions we can ask of department officials.

Mr. Mulcair is next, as long as you can link your questions to the clause of the bill and additional funding for Quebec.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

Mr. McGirr, let us get back to part 6 which deals with the Federal-Provincial Fiscal Arrangements Act if I may.

When we had the pleasure of discussing this earlier this week, you made a statement regarding the way equalization is being calculated and which is referred to in Clause 1647 that amends paragraph 24.702(b) of the Federal-Provincial Fiscal Arrangements Act. This is what determines the entitlement to a substantial increase in the payments to Nova Scotia, New Brunswick, Manitoba and Prince Edward Island.

And how come we are also talking about Saskatchewan and Newfoundland-and-Labrador? There has also been a request, which is political in nature and not within your purview, regarding the determination of the value of what is produced by Hydro-Québec and its impact on the calculation referred to in part 6.

So the question I want to ask you is this. I am looking at what you said earlier this week, when you explained two different things. You said, first of all, that it is difficult to know what is generation and what is a different business. You only consider total profit. You raised the possibility of setting up separate corporate entities. These are the words you used. I demonstrated to you that Hydro-Québec has set up corporate entities that are so distinct and separate that they do not even share their figures and report separately at year-end. You just swept this aside saying that these are figures provided by Quebec.

So I would like to know, given your analysis about setting up separate corporate entities, why you refuse to accept the figures provided by Hydro-Québec?

[Tom McGirr]

Let me clarify what payments are being set out in part 6 of the bill. They are simply payments that make sure the total major transfers to provinces are at least as high as they were in 2009-10 and 2010-11. In other words, we compared the equalization amounts of the Canada health transfers and the Canada social transfers that were calculated for each province for 2010-11, with the amounts in 2009-10. If there was any decline in that total global amount, the province was provided with a protection payment as set out in part 6 of the bill.

The other parts of your question deal with the actual calculation of equalization for Quebec. As I responded at the previous session, the policy is that we take the remitted profits in their entirety of a crown corporation engaged in the generation of hydroelectricity. As I said at the beginning of this session, there are eight of them. Of those eight, six are engaged in some form of transmission and distribution, just as much as Hydro-Quebec is.

For example, SaskPower is engaged in both transmission and distribution. Any of the remitted profits of SaskPower, no matter what the source, would be considered part of the natural resource base, just as it is for the province of Quebec in the case of Hydro-Quebec.

[The Chair, Conservative, James Rajotte]

You have 30 seconds, Mr. Mulcair. Then we'll go to Monsieur Carrier.

[Thomas Mulcair, NDP, Outremont, QC]

I'm going to wait. Thank you.

[The Chair, Conservative, James Rajotte]

Okay.

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chairman. I would like to at least ask one question on the subject before we move to other parts of the bill.

Last Tuesday, Mr. McGirr said that if all the other corporations producing and distributing power were considered, the amount of $250 million referred to by Quebec would surely not be adequate. But this amount is not an estimation coming from the Parti québécois. It is set out in the budget document of the government of Quebec that was recently tabled. In the annex, in section E, it says that the inequity represents an amount of $250 million that is expected from the government of Canada, with whom the province is presently negotiating.

So this amount was not taken out of thin air and was surely established using the same method that was used to determine which part of the profits are business revenues rather than natural resource revenues. So I do not understand why you say that since there are several industries, several corporations that distribute electricity, this amount should be lower. The policy is the same. If you apply it to one province, it should be applied the same way to each electricity-distributing corporation from each province in order to be fair. This is why the government of Quebec expects to receive an amount of $250 million.

Do you want to reduce the amount provided to other provinces under the available budget? It would not be fair. The same policy should be applied to all provinces, to Hydro-Québec and to all other electricity-distributing businesses. Do you agree?

[Tom McGirr]

Let me first reiterate what I said about the $250 million. I said the $250 million was the estimate that was put forward by the Province of Quebec. I'm familiar with the $250 million that was put forward into the budget document. That $250 million has been calculated only on the basis of removing the transmission and distribution profits that have been reported by Hydro-Québec and redoing the equalization calculation. Quebec calculates that would give the province another $250 million.

As you have just indicated, the policy should be extended to all crown corporations. If you are in fact going to remove transmission and distribution profits, it should be done for all crown corporations. And on Tuesday I didn't give a figure. I only said the $250 million figure may not be $250 million. I certainly didn't say in which direction it would be. I simply said that $250 million may not be $250 million.

Interestingly enough, I should point out there is a crown corporation also that's involved only in transmission and distribution, called BC Transmission, and like Ontario's Hydro One, it is counted as part of the business income tax base and not part of the natural resource base.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Okay.

[The Chair, Conservative, James Rajotte]

Okay.

Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Chair. And thank you to our witness, once again.

Please correct me if I'm wrong in these numbers that I'm quoting, but it's my understanding that equalization to Quebec has been increased by some 44% from 2006 to 2010; this year alone, $19.3 billion in federal support to Quebec; equalization alone $8.5 billion to the province of Quebec, which is nearly 80% higher than it was in 2005, slightly above the growth of inflation, I would think. And health transfers for all provinces continue to increase at around 6%. Social transfers increased at around 3% for all provinces, to try to be fair. Please correct me if I'm wrong on those figures.

My question is, these transfers that are in the budget, my guess is that each province that has already tabled a budget has actually put these numbers into their budgeting process and are counting on that. Am I correct in that assumption?

[Tom McGirr]

I can't confirm that with any certainty, but I would imagine they have, because they were provided with these amounts back at the meeting of finance ministers in Whitehorse, so any provincial budget that has happened since that time would have taken these payments into account.

[Ted Menzies, Conservative, Macleod, AB]

That was in December--

[Tom McGirr]

Yes.

[Ted Menzies, Conservative, Macleod, AB]

And my figures quoted previously, are they pretty accurate?

[Tom McGirr]

They're accurate.

[Ted Menzies, Conservative, Macleod, AB]

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you, Mr. Menzies.

Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chairman.

I would like to follow up on EC One which was just mentioned. It belongs to which province?

[Tom McGirr]

No. I said BC Transmission.

[Thomas Mulcair, NDP, Outremont, QC]

I just want to ensure I understood correctly.

Hydro-Québec has three corporate entities that are totally distinct, separate and independent from each other. The first is engaged in generation, the second in transmission and the third in distribution. The argument made by Hydro-Québec is that only the generation business should be part of the natural resources base. The other two should be in the income tax base. Do we agree so far?

[Tom McGirr]

Quebec's demand is that the transmission and distribution profits of Hydro-Québec should be moved to the business income tax base in the same way that the profits from Ontario's Hydro One are treated.