Evidence of meeting #72 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was equalization.
A video is available from Parliament.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
But the feds have since increased their taxes.
Professor (retired), McGill University, As an Individual
That's for other purposes.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you, Professor Soderstrom. I appreciate that. I'm glad the Internet held up.
I'll just make a quick comment. That doesn't hold water. As I said, the tax points have since gone up. That money's no longer being transferred to the province.
Professor (retired), McGill University, As an Individual
I'm sorry, but you're wrong on that. The money is there.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
I think that's apparent on its face.
Thank you very much, Mr. Soderstrom.
Mr. Béland—
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I have a point of order, Mr. Chair.
When several people talk at the same time and there is crosstalk, the interpreters can't do their work properly.
Liberal
The Chair Liberal Peter Fonseca
You are right, MP Ste-Marie.
Witnesses and members, we don't want any crosstalk. It is very difficult for the interpreter—I can only imagine.
You can continue, MP Lawrence, please.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you very much.
My apologies, Mr. Chair.
My apologies to the interpreters. I know they're doing an incredibly difficult job.
Professor Béland, the challenge I have with your theory of an arm's-length body is that “arm's length” is really another word for “unelected.”
Yes, democracy is messy, and politics is messy. I am the voice of Northumberland—Peterborough South. When we remove elected officials, which, granted, is politics.... But politics isn't all bad. Politics means bringing the voices of Cramahe and other small towns to Ottawa.
Excuse me if I'm a little bit skeptical of another bureaucratic body that at least contends to be an expert to tell the people of Alberta or British Columbia how much money they should or should not receive.
Can you understand my concern there? Is that legitimate at all?
Director, McGill Institute for the Study of Canada and James McGill Professor, Department of Political Science, McGill University, As an Individual
Yes, but the thing is that civil servants, bureaucrats, are already playing a major role in tweaking fiscal transfers. They do a lot of work. Then, of course the executive and the House of Commons play a major role in that.
What I'm proposing is not that these people will make the decisions for elected officials. They will make recommendations that elected officials and Parliament can then decide to adopt or reject.
It's just about getting better and more detached advice than from civil servants who directly depend on the elected official—for example, civil servants working in the Department of Finance.
I think that having the advice and recommendations about equalization coming from an outside body and not coming, say, from the Department of Finance, would probably actually be better in terms of optics, and perhaps also in terms of the quality and detached nature of the advice.
Other countries are doing this, not just Australia. This is not just some kind of weird idea that I'm the only one talking about. This is quite a common practice around the world.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
I wasn't saying it was weird for a second, Professor Béland.
You can understand my concerns here.
My next question is for Monsieur Giroux. I'll jump in and—
Liberal
Conservative
Liberal
The Chair Liberal Peter Fonseca
Yes, that's the time. We've gone over the time. We didn't quite get to the 10 minutes, but it was close.
We are now moving to MP MacDonald for five minutes, please.
Liberal
Heath MacDonald Liberal Malpeque, PE
Thank you, Chair.
It's an interesting conversation, sitting here listening to the different parties discuss how the services are delivered from province to province. Mr. Morantz talked about his son, and even Mr. Chambers talked about unconditional transfers.
I'll go to you, Mr. Giroux, and ask you your opinion of unconditional transfers. Is there an opening, a positive message, or something that you could describe as being more beneficial in your view when evaluating where the money has gone and how it's being spent? Is it just something that we're tossing around for consideration related to the political agenda of whichever party's at the helm?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
My understanding is that equalization is unconditional. CHT is largely unconditional, because money is fungible anyway. The same goes for the CST, the Canada social transfer. The federal government is accountable to the electorate for the amount of money it spends and sends to provinces. Provinces are accountable to their electorate for how well—or not so well—they deliver services with the resources they have.
That's probably as much as I can say on that topic.
Liberal
Heath MacDonald Liberal Malpeque, PE
The tendency for discussion around fiscal federalism is to focus solely on equalization. We're hearing around the table about regional economies and the architecture of federalism that somebody talked about earlier.
In your mind, how important is it for governments to expand the scope of the formula or to at least investigate the formula, relative to what you're hearing today and what you've written about?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
My opinion on that is you, as legislators, have voted on legislation. I think legislation should be based on principles and left alone, unless there are major structural issues. The risk in reopening legislation every few years is that every time one jurisdiction is unhappy with the amounts it receives or with an outcome that was not anticipated, we reopen legislation and we amend a very complex formula which has implications in the billions of dollars.
I think we should have legislation for equalization and other transfers that's based on a series of broad principles that's developed, debated and approved in Parliament. We should leave it alone, unless there are major issues that are found to be of concern by parliamentarians.
Liberal
Heath MacDonald Liberal Malpeque, PE
Back to my initial comment on regional economies, for example, or industries and sectors, it's different right across this vast country of ours, obviously. We talked a bit about demographics. That's going to change year to year. Each province will be different, and so on and so forth.
I remember on Prince Edward Island the growth we've had from many individuals moving from Ontario. When you look at that, it's great to see the numbers coming, but let's be honest. The consumption tax and our health organizations—Health PEI in our case—are being extremely stressed. It's a lot of that older demographic moving to Prince Edward Island.
I guess what I'm asking is, how do you change that complicated formula—because it is complicated—to include those regional economies or demographics or whatever?
Is it possible?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It would be possible to also look at the needs. You can add an element of demographics, not just looking at the overall population numbers, but the composition of that population to take into account, for example, the fact that some provinces have more older folks than others. However, that would be detrimental, so to speak, to provinces that are younger.
That's what I mean. If you start playing with the formula, there's always somebody who is disadvantaged by any change you make. That's why I'm saying, once we have a formula, we let it work its magic.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP MacDonald.
That ends our second round.
We are into our third round. We'll get through the third round and then we'll have to break up the time equally at that the end of that round.
In this third round, the Conservatives are up first. I have MP Hallan for five minutes, please.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Thank you, Mr. Chair, for your generosity today.
Thank you to all of the witnesses.
My questions are for Mr. Giroux.
Energy plays a big part in the fiscal stability of Canada. Energy provides a lot to the revenue. Provinces contribute to equalization. With provinces like mine, in Alberta, we make a substantial amount from energy royalties. The Canadian Energy Centre projects that between 2000 and 2019 the energy sector provided provinces with an average of $35 billion in royalties.
What do you think the overall impact would be to equalization if energy wasn't there to provide so much government revenue?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
The equalization formula includes provisions for non-renewable resources.
If there was not the energy sector in Alberta, it's clear that the economy in that province would not have flourished as much as it has for the last couple of decades. It would be clearly detrimental to both levels of government. I mean the federal as well as, obviously, the provincial government.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Thank you.
We've seen many energy projects cancelled or frozen by federal bureaucratic red tape. What has the impact been on equalization when energy projects like the 15 LNG projects that since 2015 have not been built yet, pipelines like Energy East got cancelled, and mines like the Teck Frontier, the project in Fort Mac, got cancelled? What's your opinion on how big an effect that would have?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's difficult to determine exactly and quantify that impact. But assuming that these projects would have increased GDP, they would have benefited equalization by leading to a slightly faster GDP growth, to which the size of the equalization formula is linked. That being said, there would have been other considerations, for sure, in having these projects go ahead.
But from an economic and federal-provincial transfer dynamic, I think it's safe to say that those would have been the impacts.