I thank the committee for inviting me to come all the way here from western Canada.
I want to talk about three things today very quickly, three of the 30,000-foot type of items.
Number one is fixing the mismatch between taxing power and the federal government's jurisdiction. We have a lot of services that are provincial in nature and are being delivered by the federal government. The federal government collects about 43% of all the taxes. As the largest consumer of the tax pie, it has become involved in all sort of areas of provincial responsibility, such as health, education, municipal transit, roads, and infrastructure.
I have included in my little file a paper on decentralizing services. What we would like to suggest is that we need to go back to the original intent of the Constitution and have the federal government transfer taxing powers to the provinces, particularly the GST and the federal gas tax. We would suggest that you could do this concurrently with a phase-out of some damaging transfer programs.
I'm going to talk a little bit about equalization reform. Equalization is a well-intended program, but it has increasingly undermined and damaged the recipient and source provinces. We have ended up with larger and more politicized public sector services in the recipient provinces. They are rewarded for having higher taxes. Those higher taxes of course discourage private sector economic growth.
There has been a lot of research done around the “flypaper effect”, which shows that the transfers that are provided to provinces end up enlarging the civil service in the recipient provinces. Again, I'm from Manitoba, where we have the largest proportion of our workforce in the public sector and we're also one of the largest recipients of equalization.
What we would suggest—and again, this is a longer-term answer to a fiscally sustainable balanced budget—is that we should be shifting over tax power in exchange for some reform, particularly for the GST. We did a calculation a few years ago: GST revenues were approximately equivalent to equalization a few years ago.
Number three, I would like to talk about core public sector reform in the federal civil service. We see ample opportunity and room to make the federal civil service smarter, smaller, and more effective. We can learn from other countries, from those that have embedded performance management measurement, more useful accounting systems, and more decentralized management to improve asset stewardship and bring an output-and-outcome focus to their service operations. I have included in my folder a paper discussing the New Zealand reforms, which are still very useful although they're getting a little old now, and they would apply nicely to Canada.
If I had to wrap it up, I would say that smaller federal government would be possible if the feds transferred taxing power to the provinces, got out of certain areas, and also did a substantial reform of equalization.
Lastly, I think there's a great opportunity to rethink how the federal civil service works. I am a great fan of the book Yes Minister, and I have to say that when I watched the environmental lakes program being shut down in Manitoba, and for not a lot of savings in my view, there were smarter ways to lower spending. Again, I think the opportunity for the committee is to look at changing the policy DNA within the federal civil service so that we have a focus on outputs and outcomes, push power down, and have the higher-performing civil service.
Thank you.