Debates of Feb. 9th, 1994

Federal-Provincial Fiscal Arrangements And Federal Post-Secondary Education And Health Contributions Act

[John Harvard, Liberal, Winnipeg—St. James, MB]

Madam Speaker, of course we have serious problems in the country, including the good province of Quebec. I would not suggest for a moment that we overlook some of the serious human problems that arise from unemployment and other difficulties we have in the economy.

All I was trying to suggest in my earlier remarks was that one cannot measure this great country, this Confederation, in financial terms alone. There is a lot more to this country than raw data, raw figures and raw numbers. The Bloc is rather myopic in this and perhaps cannot see through the barrier that it has placed in front of it, but if it would try to evaluate this country in a more wholesome way and take into account all the elements that make up the country it would come to a much more positive assessment of Canada.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, the Reform Party supports the principle of Bill C-3 as was noted by the two Reformers who spoke on the subject before me. Reformers, as well my constituents, believe that it is important to preserve and cultivate the humanitarian instincts of Canadians that drive us to want to help those who find themselves in financial or other difficulties.

My two colleagues have noted two criticisms of Bill C-3. One is its planned increases in the level of transfers while the government is beset by very serious financial problems. All spending needs to be curtailed. Interprovincial equalization payments ought not to be exempted.

The second criticism was that the government has been carrying the principle of equalization too far. If Bill C-3 does what it is designed to do there is no need to use other spending programs to favour provinces with low income and taxation capacity.

These two objections to Bill C-3 are valid. I would like to add an additional one which involves the very nature of the equalization program as it functions now. My criticism is based on my academic research and understanding of the problems which are caused by subsidy programs of all sorts. It is also based on messages which I have received from my constituents.

Finally I should note that the criticism is based on the same kind of reasoning which underlies the recently announced government review of all social programs in Canada. These programs have failed to deliver on the promise which underlies their design. They have blunted incentives, increased unemployment, trapped people in poverty and made them dependent upon government support. These are almost identical words to those used by the Minister of Human Resources Development in the House.

In addition, the programs, not the innocent victims who have reacted to the incentives created by the government, have contributed much to the present fiscal crisis of the country. I believe the compassionate people of Canada are fully in favour of helping others who have fallen on hard times. However, many Canadians have told me they also insist their aid be conditional upon efforts being made by the unfortunate to change their own lot. Some, like those with permanent handicaps, cannot and are not expected to do so. For those the support is happily given on a permanent basis. For others, however, the aid must be limited and conditional.

It is well known that the interprovincial system of equalization payments was designed to create greater equality. However, when the program was designed it was hoped that such transfers would be temporary because the federal government simultaneously started a substantial program for regional economic development.

Since the beginning, regional economic development programs have been beset by difficulties. There have been experiments with a variety of models and with locating responsibility for their administration in different ministries.

During the 1980s I was the academic director of a research project on the Canadian service industries undertaken by the Fraser Institute and financed by what was then the department of regional industrial expansion. One of the prime motives for the study had been the realization that the spending of billions of dollars on infrastructure and megaprojects, as well as direct subsidies to industry, had not narrowed the income gaps between the have and the have not provinces.

The fact that over 70 per cent of all Canadians are working in the service sector had awakened interest in the possibility that perhaps more development per dollar could be obtained by support of service industry projects than the traditional investment in structures and machinery.

I mention this study of the service industries to illustrate the problems which regional development programs have encountered, problems which in the view of many have been so severe they made the programs an almost complete failure. The reasons for this failure are quite clear now.

Historically regional disparities in income in Canada and all industrial countries of the world were due to different endowments with natural resources. The maritimes enjoyed one of the highest levels of income in Canada at a time when rich fisheries and coal were the primary base of the income of people and regions. Later the fertile plains of the prairies gave that region one of the highest incomes in the country.

For at least the last 70 years, however, the wealth of nations has been increasingly based on the accumulation of human and knowledge capital rather than natural resources.

Just look at the per capita income of Singapore and Hong Kong, tiny geographic regions with zero natural resources. Singapore does not even have enough water for its people. Some estimates suggest that as much as 60 per cent to 70 per cent of the wealth of modern industrial states consists of such intangible human and knowledge capital.

Unfortunately for regional development prospects, human and knowledge capital are most productive only in large population centres, where the so-called agglomeration economies generate the high productivity that underlies high personal incomes. In these centres, the proximity of people lowers transportation and communication costs, allows increased specialization and creates other productivity increasing benefits like competition in markets for labour and goods and services.

For this reason, in Canada and all industrial countries, megacities with high population densities have the highest incomes and outlying areas are further behind the more remote they are from the urban centres.

According to this view of the role of human and knowledge capital and the economics of agglomeration, the solution to regional income inequalities lies in the movement of people from outlying areas to the centre. Such movement, which in Canada until the 1960s had been gradual and low cost, permitted higher incomes to be earned by the migrants and, more important, it raised the income of those remaining behind.

Just imagine incomes in the fishing industries in the maritimes or the farm sector in the prairies if the population of these regions were perhaps half its present level. The adoption of the best production technology, regardless of the effect on employment, would permit the smaller number of workers in these industries to enjoy higher levels of productivity and income. No one knows at what population levels emigration would have ceased. It is clear that eventually it would have equalized incomes in the centres and outlying regions, where income is broadly defined to include such intangibles as the quality of rural life and the cost of congestion in cities.

The tragedy of many post-war government policies for Canada was that they disregarded the decreasing role of natural resource wealth in the increasing role of human capital and cities in economic development.

The income equalization program being extended by Bill C-3, the regional development programs and the payment of unemployment insurance benefits to workers in seasonal industries like fishing have severely retarded outward migration from remote regions with low incomes. The natural adjustment which market forces were generating gradually were short-circuited by these policies.

The policies undoubtedly were well intentioned but basically flawed, unfortunately. They have had several unfortunate effects. To finance the transfers and fruitless development efforts in the outlying regions the productive areas had to be taxed more heavily. Extra payroll taxes going to the unemployment insurance funds have raised labour costs and discouraged employment.

The disincentive effects of such taxation on investment, work and risk taking retarded the growth in the entire country's income and wealth. The lower rates of economic growth which started more or less with the initiation of these regional assistance programs in turn retarded the increase in government tax revenue. They therefore contributed significantly to the financial crisis and the need for the redesign of social programs that will be discussed in the House in upcoming months.

Equally unfortunate has been the impact of the policies on the people in the outlying regions. I find it most distressing to see videos of workers in the maritime fishing industries and of farmers in the prairies who have lost their jobs and are afraid of losing their homes and possessions. Perhaps more important, as the Prime Minister kept noting during the election campaign, these people have lost their dignity. They have become dependent upon government handouts, the generosity of the House.

The predicament which these people find themselves in is not of their own making. They are the victims who simply have acted rationally in their response to the incentives created by government policies.

These people deserve better. They deserve that the government and this House initiate a review of the existing programs for regional assistance and development. The government has already announced plans for a major review and redesign of social programs affecting individuals. Regional assistance and development programs should be included explicitly in such a review.

I have my own views on the insights which such a review might produce. Abstracting from all political considerations, Canada needs to restore market incentives for migration, the only fundamental and lasting solution to the problem of regional inequalities that does not also create dependence and a loss of dignity. To create these incentives all present forms of regional transfers must be phased out. Such phasing out should be gradual but certain.

In place of current programs we need to have programs that are both economically efficient as well as consistent with the compassionate nature of Canadian society. Financial transfers to regions and provincial governments must be limited to situations where incomes are reduced to events beyond the control of those affected.

Outstanding examples are the disappearance of fish stocks, bad harvests or low world prices for certain products. The payments must be limited to the duration of temporary adverse influences on incomes. In the case where incomes are lowered by permanent changes in conditions, financial support must be conditional upon the adoption of policies that bring about real adjustment to the new environment.

People who are asked to make payments to help others should have a right in deciding on how this money is being spent. Many people believe the proposed characteristics of regional assistance programs must also be incorporated into social programs serving individual Canadians if the country ever wishes to restore the government's fiscal health and at the same time maintain a sound social security net for those in genuine need. They also agree that the sooner such a review is accomplished and acted upon, the better.

For these reasons I recommend that the government append Bill C-3 to mandate such a review. In addition I recommend that the government send a message to the recipients of the equalization payments suggesting that future transfers will be made conditional upon real adjustment needed to equalize regional productivity and income.

[Ronald J. Duhamel, Liberal, Parliamentary Secretary to Minister of Public Works and Government Services]

Madam Speaker, I enjoyed my colleague's presentation in the sense that he had obviously thought very carefully about what he was going to say. Clearly what he has said reflects the fact that he studied it for some time. Although we may have some differ-

ences on how this major problem he has underlined might be approached, I respect what was said.

What bothers me certainly is not the approach he has taken or the content of the address. But today there were two remarks made by members of the Reform Party which bothered me a great deal.

Looking at the transfer payments it is correct that Quebec gets 47 per cent of the transfer payments, but there is the additional bit of information that Quebec represents roughly 60 per cent of the people who get transfer payments.

I am wondering why his party would want to give the impression, which I got and I am not from Quebec, that Quebec was being favoured. We heard from Quebecers today, our friends the separatists-some of them are friends-who feel they are not getting enough.

Another thing that bothers me is there seemed to be a suggestion that Manitoba was being favoured by this formula. I am from Manitoba. If that was the suggestion I am offended, unless I can be clearly shown that it is true.

Now correct me if I am wrong. I am one of those members of Parliament who accepts the fact that he could be wrong. It seems to me that yesterday one of the hon. member's colleagues said the Reform Party would reduce the amount of transfer payments. If so, by how much and what would be the impact on Saskatchewan and my home province of Manitoba?

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, I welcome the opportunity to respond to some of the points the hon. member has made. I do not obviously know all the reasoning behind the statements made by my colleagues, but I can attempt to give an answer.

The people of my riding are reacting to the fact that a province like Manitoba which according to Statistics Canada has a higher per capita income than Saskatchewan receives more per capita in transfers than Saskatchewan. This simply does not make any sense to people who are no experts in this complicated formula the Prime Minister referred to.

Using the same idea with respect to Quebec, 47 per cent of the benefits are going to Quebec. It has 60 per cent of the population. I am sure the hon. member would like to look at the statistics in light of the per capita income. The per capita incomes of that 40 per cent of the population receiving transfers is way below those of Quebec.

This has to be seen in the light of the complicated formula but also using some intuition. The income of Quebec is only fractionally below that of the average. That is why it is receiving this money. The statement about 47 per cent of the total transfer going to Quebec was not made in any disparaging way. It was made, as far as I remember, in response to a challenge that Quebec is not benefiting from this program.

My constituents certainly are asking why a province with such a high income is receiving 47 per cent, even though it has 60 per cent. This is the formula but I am returning to the point that the hon. member had made on how difficult all this is to understand.

I apologize about the third point that somebody said transfer payments should be reduced. I do not know who said that and in what context. I do not really wish to presume that I could answer that question for the hon. member.

[Pierre De Savoye, Bloc, Portneuf, QC]

Madam Speaker, I appreciated the hon. member's presentation, but I am particularly puzzled by some points in it. First, he says that if transfer payments had not been so high, people would have emigrated because of the lower payments. Perhaps they would have tried something else and found new resources where they were to ensure their economic vitality.

Also, I would point out that if Quebec receives transfer and equalization payments, the total it receives from Ottawa is the same as what it sends to Ottawa, about $28 billion. Unfortunately the money comes back in the form of transfer and equalization payments, when it could come back as normal federal spending, such as Ontario receives.

Thus Quebec wants to break free from this system. Many times we proposed the way to do it. Perhaps that could satisfy our member of the Reform Party. Does he have an opinion on that?

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Madam Speaker, I am pleased to hear probably for the 15th time now that hon. members from the Bloc are insisting that we hear repeatedly the story that Quebec is getting a raw deal in the extent to which it is sending money to Ottawa and the extent to which it is receiving money. I really have no more comment to make on this. It is a very complicated issue and that is why there is a dispute over the merit of this case.

However on the substance of what I tried to say, I would point out that if in the 1960s we had not retarded the incentive for outward migration from some of the outward lying regions of Canada, the process which had gone on for the preceding 50 or 60 years would have continued.

The hon. member is an economist and realizes there would have been increased capital per worker and increased natural resources per worker remaining behind. Therefore the incomes would have gone up. Maybe more resources would have been discovered. Then outward migration would have slowed down. In the end we would have had a solution making everyone happy, those who were moving as well as those remaining behind.

We have destroyed this welfare maximizing process through our programs and I urge that they be re-examined.

[Ben Serré, Liberal, Timiskaming—French-River, ON]

Madam Speaker, I would first of all like to thank the member for Capilano-Howe Sound for his comments. However, I must tell you that I do not share his opinions. To avoid any confusion, I would say to the hon. member that, although I am seated on this side of the House and speak French, I am not a Bloc Quebecois member. I am one of the millions of francophones outside Quebec who consider Canada, including Quebec, as their country.

Nevertheless, Madam Speaker, I have one thing in common with my colleague here from the Bloc; like him, I am puzzled too. From the beginning, since this House opened, I have heard the Reform Party with its far-right agenda telling us that we should not spend money to help the regions, we should not subsidize small business. Implicit in that is that people are poor through their own fault, because they want to be poor.

I also deplore the debate on equalization turning into a battle between Quebec and the rest of Canada. Very little is said about the other provinces like New Brunswick and Newfoundland. I think that the equalization program is unique; it helps define us as Canadians.

It is a program whereby the richer regions help the less well-off regions. I am from northern Ontario and I can tell you that our unemployment rate is probably higher than anywhere in Quebec. In some regions like Kirkland Lake, for example, it is 40 per cent.

That being said, I do not care whether my money is used to help people in Quebec, New Brunswick or Newfoundland. That is what Canada is all about.

In the morning, the people in the Reform Party tell us that we absolutely must keep small rural post offices open, and I agree with that because it is a kind of regional development. We can keep our small post offices open because people elsewhere in the country subsidize them and I fully agree with that.

What I do not understand is that in the morning, they ask us to do it, but in the afternoon, they tell us to cancel these programs. I would like to know what the Reform Party really wants on this.

[The Acting Speaker (Mrs. Maheu)]

Unfortunately the period allocated to questions and comments has terminated. We will have to continue debate.

[Ron MacDonald, Liberal, Dartmouth, NS]

Madam Speaker, the debate that is going on today is important. It actually strikes at the very heart of what type of country we live in.

Many times we engage in debate that has a very narrow interest across the country. This one certainly has not. I have indicated at other times when I have spoken in the House, specifically in opposition, that we have grown differently. We are a different state than our neighbours to the south and we are a different state than our two founding nations, both Britain and France.

We have decided to do something a little different. We are unique. We have believed as a nation-it is a founding principle of our nation-that there is some sort of collective ownership of the resource that is Canada.

We have structured programs through successive governments and have said that we believe in this great nation, Canada, which maybe one day has a disparity in the east, in Quebec or the west, that somehow governments have a responsibility to commit themselves to free market enterprise but at the same point in time to ensure that there is a redistribution of wealth in this great country.

Indeed I can go back to the time of Confederation. Atlantic Canada at that point in time was a have region in this country. It was one of the wealthiest. Some would say that we have never looked up since we joined Confederation. Some others would say that perhaps in the short history of this country-we are not an old country-these cycles perhaps are very small.

During the course of our short history we have believed that central governments have a responsibility to redistribute wealth in this country. We believe fundamentally with regard to those who because of the exploitation of a natural resource or certain trading patterns or routes exhibit great growth and personal wealth, employment and tax revenue that somehow there is a responsibility of government to redistribute that wealth.

We have formalized that in our Constitution. We have federal legislation that is called equalization. The equalization payments are the most visible sign of that fundamental principle of sharing and collective ownership of resource in this country that the federal government does.

Under equalization, the federal government has transferred some of the taxes that it takes to the less fortunate provinces to try to ensure that those provinces have the resources necessary to offer programs that their citizens deserve, indeed demand, programs of national standards so that within this great country we do not have very different applications of our economies.

It has worked very well. Indeed I hear sometimes from the province of Quebec, from some of the members who are here from the Bloc, that Quebec has been shortchanged.

That is up to debate. Sometimes in Atlantic Canada we believe that we have been shortchanged and that it is not just simply a matter of always wanting equalization. Perhaps it is a matter of fundamental government policies that allows each region of this country to develop its resources and its labour market so that some day we can all be contributors to the national economy instead of takers from the equalization pot.

Sometimes we are fighting over scraps. I would much rather see policies enacted by provincial governments that allow for the freer movement of goods and services and people, that allows for various regions of this country to develop their economies so that the people can develop to the fullness of their potential. That day is not yet upon us. Equalization is indeed important. I remember just a few years ago in this place when the government of the day was different. It was the Conservative Party, which is now down to two members in this place. That government saw the the role of the federal government in redistributing wealth a little differently. Every penny it could save, every dollar of its own debt it could transfer to the provinces it saw as a victory. Then hopefully it could go the public and say: "Look how well the economy has been managed". Through the restraints it put on equalization, through its interpretation of some of the clauses we saw the numbers of dollars that the provinces expected to get from the federal government jump wildly.

I think it was three years ago that I rose in my place and questioned the Minister of Finance and the Prime Minister because that small, beautiful province of Prince Edward Island, whose minister of finance was preparing a budget, was given information by the federal government of the day that it could expect so many dollars in equalization under the formula for the previous year. At the last moment, two days before he tabled his budget in the P.E.I. legislature, the federal finance officials called and said: "Sorry, we have reinterpreted some of the provisions and now you are going to get millions of dollars less in equalization".

What did that do to little Prince Edward Island? The treasurer was going to be reporting a surplus in his budget. Can you imagine a surplus in this day and age? That surplus was turned into a deficit.

In my province of Nova Scotia the minister of finance, a Tory at the time, and I guess they did not even talk among themselves because he was caught quite unaware, found out he was going to get $72 million less. The province had already spent the money. Therefore, there was a pressing need from the provincial finance ministers and treasuries to put some order into what they could reasonably expect to receive from the federal government.

This bill puts some order in it. It is a five year plan wherein we tell the provinces: "We cannot give you everything you might want, but we are going to give you some certainty. We will tell you what our plan is and we will guarantee that we will not deviate from that plan in a way that negatively impacts on your fiscal ability to conduct your affairs in your own province". That is a plus. I do not think there is a premier of any of the seven provinces that receive equalization who would not get up an applaud this very positive measure.

There is another area that the bill does not address but it is equally important, called the EPF, established programs financing. These are programs that the federal government gets into to again try to equalize opportunity around the country. These are programs that fund our health care system in Canada and fund post-secondary education.

I told one of my colleagues from the Reform Party who called me a socialist Liberal, the other day-I thank you for the compliment by the way-that if it was not for EPF to the provinces across Canada that as the son of a coal miner from Cape Breton who not through any fault of his own but because of the working conditions of the day saw more pay days than he saw pay cheques, I would not have been able to afford to go to university. In some of the poorest provinces if it was not for the established programs financing, the EPF, we would have different systems of health care right across this country.

Those Liberal policies of days gone by just like equalization were corrupted by the previous administration. The result was that provinces that had programs of national standard dictated primarily by the federal government, as in health care, found in every single year, in every federal Tory budget that came into this place that they could expect less and less.

In a place like Newfoundland if you receive $12 million less for post-secondary education where in the name of goodness are you going to pick that up on your limited tax base in that province? In a place like Nova Scotia, Saskatchewan, Manitoba or Quebec, when a federal government unilaterally cuts because it has mismanaged the economy like the Tories did and says that it is not going to be participating at the same level as it did last year, tell me where those provinces pick it up. They do not.

One thing we said during our campaign and the Prime Minister has also said we will work on is once again to put some certainty into the levels of EPF, establish programs financing. We cannot give them everything. We have a huge deficit and a huge debt but we will put some certainty so that ministers of health and ministers responsible for post-secondary education in each of our provinces will be able to sit down and with some

certainty know that they are not going to get the royal shaft in the next federal budget that comes down from the federal government. That is exactly what we need.

I want to give some statistics. I am not going to criticize members of the Bloc Quebecois for their political beliefs. That is what freedom of expression is all about in the democratic process. We will have great and hopefully historic debates in this place about the issues they wish to put forward. However the reality is that many of the fractures we currently see in our country are recent ones. They can be traced back to a sense of not being listened to, a sense of betrayal by many regions of the country in their dealings with the federal government.

The province I come from does not want handouts. I would desperately love to stand in this House some day and complain that we are getting too much money and that it should go somewhere else.

My role as a member of Parliament is not just to represent and try to build a strong Nova Scotia. It is to try to better Canada. It is to try to ensure that we pass policies and programs which allow each and every one of our citizens, no matter who they are, no matter what their language, no matter where they come from, whether they are native born or immigrant, to participate to the fullness of their potential in this great country. That is what we are all here for.

Over the last number of years we have seen the erosion of the regime where we did transfer and did believe in collective ownership of the resources and riches of Canada. I want to give some sense as to why we are seeing fractures in the east and maybe in Quebec, but certainly in the west. They say that federal governments have not listened to them.

The federal Conservative government, in a number of successive budgets, possibly three or four, changed the established programs financing formula which is another form of equalization. It said it would participate on increases using the consumer price index, CPI minus one, CPI minus two, CPI minus three. What did that mean?

To a province like Nova Scotia it meant that if health care costs went up by 5 per cent the federal government no longer was giving out 50 cents on the dollar on that increase. The benchmark if it was the previous year was 50:50, but any increase over that would only be cost shared on a formula that said cost is consumer price index minus 3 per cent.

If the consumer price index was 5 per cent and the health care costs went up by 5 per cent there was not full sharing on that 5 per cent. Full sharing was received on 2 per cent which meant that the poorest provinces had to find within their limited tax bases a way to fully recover the 3 per cent increase. It was 100 per cent on those dollars, no 50-cent dollars.

What has it meant? It means under the old formula the province of Quebec will be the first province to no longer see a transfer in cash for hospital expenditures. It will be the first. It means that over the course of its 10-year program in health care alone the federal government had withdrawn on full funding 50:50, to the tune of $29.998 billion. In 1989-90 as a result of the government's formula where it rejigged what participation meant, it meant that the health care system in the provinces lost $1.107 billion.

What does one do in British Columbia? It is hard enough to deal with that if it is a so-called have province such as Ontario, which is not really a have any more because of the New Democratic government and its policies. But Alberta and British Columbia are finding it tough enough. What about the economies where there is deep recession and even depression?

What about education? As a result of this rejigging of EPF, this fundamental tenet of Canadian federal-provincial relations, in post-secondary education, during a 10-year period the Conservative policies will have cost $12.109 billion out of federal government participation on post-secondary education.

What does that mean? It means in the poorest provinces, the smallest provinces we have already started to create a society where it does matter where one lives and it does matter what one's tax base is, because the province of Nova Scotia has now seen transferred over nine years of Tory government a huge amount of the federal mismanaged debt. It is down sitting on its desk now. The same can be said for Newfoundland, Quebec, Manitoba and Saskatchewan. That is what it has done. Therefore the pressures on us now have been caused by intentional fiscal policies.

I do not think we can right all the wrongs of the past and I am not suggesting for one second that we could. I wish we could, but I do not think we can. What we can do is work with the provinces. We can tell them we are not going to give them the shaft every time they turn around at budget time. We are prepared to sit down and work with them. We understand that a dollar saved at the federal level by reducing transfers for these necessary programs is not really a dollar saved when looking at the impact on these smaller provinces.

I do not know what the Minister of Finance will come down with but I know our government will uphold the commitment it made to Canadians and to the premiers during the election campaign. We will not do what the previous government did and come in and lay waste to the equalization programs and established programs financing.

I do not think there is an issue that grips Canadians more today than whether or not our health care system can survive. There is a funding crisis and a utilization crisis in our health care system. Surely the way we deal with that is not to continue with the policies of the past government. We must deal with it co-operatively and recognize that the federal government got us into these programs and the federal government cannot be allowed to abandon them.

We also believe in fiscal responsibility. We have to look at the finances of Canada not just at the finances of the federal government. The finances of our provinces, the territories and our municipalities all impact on whether or not we are able to grow and prosper or whether or not we will be weighed down by debt. Our federal government has indicated it is prepared to deal with that.

In every one of the economic policies we pursue as a government, no matter how scary the deficit might be, no matter how many special interest groups may scream, whine and threaten, we will always, always, always make those economic decisions based on the impact on every average Canadian. That is different. That should give some hope to the unemployed. It should give some hope to the people in the poorest regions. It should give hope to some of the have not people in the have provinces who need training, who need to be put back to work, who want to be taxpayers instead of tax takers.

We may debate whether or not it is enough, but this is an initiative that stops the slide of federal dollars into the provinces. This initiative sends out a signal and a sign to the provinces that there is a new gang in town. This is a new Parliament. We are prepared to work with each and every one of the provinces to ensure that the priorities of Canadians are expressed and fulfilled not just by the federal government but by our provincial legislatures as well.

I applaud the government but I also let it know there are some on this side of the House, now that we are government, who still believe we have a fundamental responsibility to stand and speak for the people who elected us. To date the ministers seem to have listened. I know the Prime Minister has.

I know that many on this side of the House and on the other side as well will be vigilant in ensuring the government fulfils the commitments we have all collectively made to our constituents.

[Pierre De Savoye, Bloc, Portneuf, QC]

Madam Speaker, I greatly appreciated the presentation by the hon. member of the government party. I think he painted an interesting picture of the crisis in which the previous government had plunged the country for nine years, I would, however, like to have his reaction to or views on some of my concerns which he touched on.

Earlier on, we had the opportunity to discuss transfer payments. At that time, I expressed a number of reservations and received some answers.

Now we are looking at the issue of established programs financing. Regarding this matter, we know that if the trend continues, as the hon. member mentioned, then in a few years time, Quebec will no longer be receiving any funding at all. Eventually, a number of provinces would see their share also reduced to zero.

In 1977 the federal government made a commitment to the provinces in the area of established programs financing. At the time the commitment was based on the formula that the hon. member mentioned a while ago. On the strength of this commitment, each province set up its own health care and post-secondary education programs.

Over the past ten years or so, the government has gradually reneged on its commitments. At the same time the taxpayers in each province must continue to pay their full share of taxes. The money that the taxpayer was giving to Ottawa was not being reinvested in his or her province, as the federal government and the provinces had agreed it would be in the late 1970s.

Could we not call this a misappropriation of funds? I will ask the hon. member to comment on this point in a few minutes. The fact remains that under the present circumstances, this approach would seem to be the safer bet. I would like to repeat what the hon. member said.

We want to put a certainty into the EPFs. We do not have that at this stage and have not had it for the past 10 years.

The best guarantee we could have that the provinces are receiving their fair share is if the taxpayers in each provinces remit directly to the province, and Quebecers to Quebec, the money which is now sent directly to Ottawa and which is not fully reinvested, and less and less in each provincial health care system.

I will conclude with a question for the hon. member. Does he not think that each province should have exclusive jurisdiction over health care?

[Ron MacDonald, Liberal, Dartmouth, NS]

Madam Speaker, the proposal the member puts forward certainly is debatable. I do not have the figures here for transfers to the province of Quebec. Looking at tax revenues going out and transfers going in, I would suspect that at least recently Quebec has not been hard done by, nor has Nova Scotia. At some point we will be net givers. I hope that at some point the province of Quebec will be a true have province according to the fiscal definitions.

If the question is would it not be better if Nova Scotia just collected its own taxes and kept everything it collected, I would like someone to tell me how it is going to decide what 32 per cent of hospital beds should be shut down in that province. I would like somebody to explain which universities will have to close and how people with my type of background will be able to get a university education.

The reality is that not each province at any given point in time is able to pay its way on all these programs. Equalization is not there as a handout; it is supposed to be a hand up. It is supposed to allow the provinces, dealing strictly with equalization, to have enough resources to try to build the infrastructures within their economies so that they can be competitive. It is not meant to keep them in poverty; it is meant to try to take them out of poverty.

When dealing with established programs financing I would caution my colleague to be very careful. My understanding is that those provinces which get EPFs, at least the seven that get equalization, are getting more than what they would get if they just kept their own tax base.

The question is not whether it is better to be sovereign. The question is whether we can work together as a nation with all our component parts to ensure that if the principles are no longer valid then there will be a debate on it. If the principles of a universally funded health care system are not valid and assistance to post-secondary institutions is not valid then let us have a public debate on it, and not necessarily here.

Let the Canadian people speak. We would find that the people in the Gaspé, the people on the greater northern peninsula and the people from the plains of Saskatchewan might jump up and say: "What are you trying to do to our country?"

The question is not whether or not we should have these programs. The question is whether or not we are able to afford them and whether or not the federal government as the senior partner in Confederation is prepared to work with each individual province to ensure that these programs continue.

I want to speak about EPFs and health care in the province of Quebec. The government in Quebec has done some very neat things in dealing with trying to keep the escalating costs of health care from going through the roof. Other provinces should look to Quebec to see what it has done.

I remember reading an article. One of the major costs of the escalation of health care is that every community has an out patient service and in order to properly staff an out patient service, look at the number of people on average coming through and determine how many doctors have to be there, what equipment has to be there, an anesthesiologist, a surgeon on duty, all of those things, and it is based on volume.

Some people say as many as 80 per cent of the visits to an emergency unit can be handled by a GP. They can be handled by a nurse or a nurse practitioner. Because we have become used to it being free perhaps it is over used. Perhaps it is abused.

The province of Quebec decided not to deny anybody health care but make alternate health care facilities available. If I were in Montreal and walked in needing stitching of a cut on my hand it would agree to do it but it would cost me a few dollars because it is not an emergency service. If I went across the road to the clinic I would be covered under the health care program.

That has saved the Quebec health care system tens of millions of dollars. There are efficiencies that we can look at. The federal government must lead in sharing these good examples as the province of Quebec has done.

I was in London, Ontario, at St. Joseph's Hospital, and London decided it had to better manage the health care budget it had in that hospital. It came in with a new management called total quality management, TQM. Within a year not only did it have better and happier staff in the hospitals, not only did it handle more people in a more efficient manner but it saved about 13 per cent of its budget. It was a large budget. It had not even intended when it set out to try to save money.

In health care, in post-secondary education, we have to lead the way. There are fewer dollars here. We have to lead the way in rationalization of services, both in the health care and in the post-secondary educational system.

I would leave my hon. colleague with this comment. I would ask him, and maybe he has figures to the contrary, to check with his party's research bureau to find out whether the province of Quebec, at this point at least, has a net output of taxes or a net input of taxes. If he could find that out I would be pleased again to debate the issue.

[Jack Ramsay, Reform, Crowfoot, AB]

Madam Speaker, we have heard much about the transfer of wealth of Canada to the provinces.

If we look at our debt and our deficit and the borrowing we have to do we are not transferring the wealth of Canada, one might say, we are transferring the wealth of other countries we borrow from and the people of Canada from whom we have borrowed.

We have seen the Liberal government of past years plunge our country into a debt situation of approximately $200 billion. We have seen the Conservative government more than double that in the last nine years until we are now sitting in a situation looking at a $500 billion debt. We are plunging into debt by another $40 billion approximately and we have paid interest on that debt of $40 billion in the last year.

I would like to ask the member, if he has time to respond to the question, if he feels we can continue in this way in view of the plunge into debt we have experienced over the last 20 years.

[An hon. member]

Is there unanimous consent to continue?

[The Acting Speaker (Mrs. Maheu)]

I am sorry, time has expired.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Madam Speaker, it is not an easy task to explain the equalization process so that our voters, the people of Canada can assess this thing, but I think that it is important that we do so. It is one of the responsibilities that fall upon us as politicians.

As a preamble, I would like to quote the statement the Minister of Finance made on January 21, 1994, when he unveiled the details about the renewal of the equalization program for five years.

He said this: "This is a key program to reduce disparities between provinces in terms of their revenue raising capacity".

He also said: "I have indicated to my colleagues that I will proceed with this renewal in a financially responsible way, taking into account both the needs of the citizens in each province and the need for the seven provinces that receive equalization payments to enjoy the necessary stability for planning".

This is a little arid, but it is important to understand what this statement implied.

Equalization payments are calculated using a method prescribed by federal legislation which takes into consideration the overall capacity of each province as well as local governments to raise revenues through taxes and various dues. This includes personal income tax, corporate income tax, sale taxes in general, taxes on fuel, tobacco products and alcohol, fiscal levies on natural resources, property tax and many more not so far-reaching taxes.

Each year, the fiscal capacity of the provinces is compared on the basis of their individual estimated revenues if the same tax base and tax rate were applied in each case. This requires a standardized tax system known as representative tax system in which provincial governments' revenues are divided up based on 33 different revenue sources, each having a base representative of those actually used by the provinces. The size of the tax base is then calculated for each province and, using the average provincial tax rate from each source, the revenues of each province is calculated for each source separately and globally.

[An hon. member]

Very simple.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Very, very simple indeed.

The standard of equalization is the per capita revenues resulting from the application of the representative tax system in five provinces, namely Ontario, British Columbia, Saskatchewan, Quebec and Manitoba. In 1993-94, the standard was $4,731. Together with equalization come floor or minimum payment level provisions protecting each recipient against a sudden annual drop in equalization payments.

Bill C-3 would renew the equalization program for another five years, from April 1, 1994 to March 31, 1999. The maximum payment level would be maintained at the 1992-93 level. Note that the Department of Finance plans to maintain this ceiling for the five years covered by the bill. This will limit the growth of the payments made to the provinces.

The Department of Finance also planning statutory changes to the tax bases used in the equalization formula. The complexity of the process hints at its inefficiency.

Bill C-3, An Act to amend the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act, can be considered from various angles.

First, one could wonder about the actual impact of the goals of this piece of legislation. Let us not forget that equalization was established to compensate a major shortcoming in the Canadian federal system, in which the federal government has the power to spend tax revenues without authority over provincial areas of jurisdiction.

Equalization was instituted in the federal system based on the proceedings of the Rowell-Sirois commission. Since then, equalization has prevented Canada from breaking up, but it has created negative effects of its own which, among other things, have contributed to the loss of faith of the people in the tax system governing them.

Not being able to establish a direct link between the government levying taxes and the one providing services makes it difficult for the Quebec and Canadian taxpayers to assess fully how each level of government is carrying out its responsibilities.

The main negative effect however has certainly been the introduction of a ceiling on the amount that can be paid to a so-called have not province. This ceiling thwarts the initial goal of equalization by widening the gap. Quebec will have to assume 60 per cent of the cut imposed on recipient provinces, solely because of this ceiling.

Let us recall the basic objectives set by Quebec's finance minister as the basis for provincial transfer reform, in order to adjust to the financial and budget realities of the 1990s.

These basic objectives are: to better balance government responsibilities against tax revenue; to improve the redistribution of wealth in Canada; and to enhance Canadian public sector efficiency.

Mr. Bourbeau, Quebec's finance minister, is known as a passionate federalist. But he went on to say: "I nevertheless find it difficult to accept that the federal government has decided to maintain the ceiling provision of the equalization program". The finance minister of Quebec and his critic in the National Assembly agree on this. Poorer provinces will, paradoxically, help to trim the federal deficit.

I think this provides compelling evidence that the federal system does not work. Only an extensive reform of the overall transfer program structure can correct the present situation.

This reform should be based on the following elements: no cuts in real terms and per capita to provincial transfer payments; no national standards incompatible with Quebec's specific situation; non-interference by the federal government in areas of provincial jurisdiction, which is a well-known cause of inefficiency. This reform must be aimed at a better redistribution of revenue among the provinces, particularly in terms of equalization payments. The equalization ceiling must be removed.

This bill clearly shows that Canada's Liberal government paid no attention whatsoever to the message delivered by the people of Quebec, who elected 54 members of the Bloc Quebecois. Quebecers no longer want to be dependent on a system that encourages them to stay poor. The current system is an incentive to inefficiency.

In spite of all this, the federal government has decided to deal with equalization as if it were business as usual. If I were a member of the majority defending Canadian federalism, I would oppose maintaining the ceiling provision of the equalization program for the sake of equity within the Canadian federation. Unfortunately I did not hear many members opposite say the same thing.

But, as a member of Quebec's national community that has pursued self-sufficiency for 50 years, I know that maturity entails specific responsibilities and powers that will allow people to determine their government's effectiveness. Nevertheless, the removal of the ceiling is a cure the current system cannot do without.

To determine if the equalization system meets its objectives, we should check if it has corrected economic, social and cultural inequalities among the various parts of Canada since its implementation. Unfortunately, that is not the case. If you compare unemployment rates, the exodus of young people from various regions of Quebec in the last 20 to 30 years, the system is a failure as all indicators clearly show.

Furthermore, the imposition of a ceiling does not meet the objectives of the equalization program. This program makes it difficult for taxpayers to assess its effectiveness. That is one of the main reasons why voters distrust politicians like us as well as the process itself because Canadians cannot tell if the money they invest in taxes comes back to them in the form of adequate services. The people we pay our taxes to are not necessarily those who deliver services and I think this is an important shortcoming that should be addressed.

Taxes are collected by the federal government. The federal government then transfers the money to the provinces who, in turn, distribute it among their various programs, while the poor taxpayer must determine the effectiveness of this and that and find out what is going on.

All this to say that, by tabling Bill C-3, the government has demonstrated that it has set aside the real changes expected by Canadians. While waiting for a comprehensive reform package we are asking it to at least remove the ceiling.

[Ronald J. Duhamel, Liberal, Parliamentary Secretary to Minister of Public Works and Government Services]

Madam Speaker, I listened carefully to what was said by the hon. member, and I have a pretty straightforward question.

I also listened to what was said by the hon. member's colleagues, who had nothing constructive to say about the equalization program. They said it made Quebec poorer, that it was no help at all, and that it was clumsy and cumbersome and harmful. But could they not find anything positive to say about it? Nothing at all? Nothing.

Thank you, I don't think I need an answer after all.

The answer is clear. Now it will be up to Canadians and Quebecers to decide whether my question and the answer I got is right: the whole thing is no good.

Now that really sounds responsible. That sounds like a team that is going to make something of this province. Well, I am not impressed.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup, QC]

Madam Speaker, I would like to say to the hon. member-if he has children he will understand-that we have a situation where a group of people or a region is a like a child that grows up. When Quebec entered Confederation, it was looking for some form of security, and it helped to found the Canadian Confederation.

As the years went by, it realized it had no control over the way the house in which it lived was run and that, once past adolescence, it was not treated as an adult. But at some point, you have to go from adolescence to adulthood.

Equalization gave Quebec a chance to survive at least for a couple years? We never said it did not. What we are saying is that the system undermines Quebec's desire to be autonomous.

The equalization system treats us like children who have to be told what to do.

Quebec will no longer stand for being treated like this by societies other than its own.

We have taken charge of our economic development, especially since the sixties when we created instruments like the Caisse de dépôt et de placement, which we had to wrench from the federal government. Otherwise we would have no control over this area today. We nationalized electricity at the expense of outside authorities as well. Little by little, we reached the conclusion that we had to get out of this system.

I think that Quebecers, especially since 1968, have tried a lot of things: we tried a federal Liberal government, with 74 Liberal members, and we did not get what we wanted. We tried "le beau risque" with the Tories, and we did not get what we wanted. Now the people of Quebec have decided to clarify the situation with Canada, and that is our role here, as representatives of the Bloc Quebecois, elected by 50 per cent of the population of Quebec.

[Nelson Riis, NDP, Kamloops, BC]

Madam Speaker, I am pleased to participate in the debate on Bill C-3 at the second reading stage where we are called upon to discuss the principle of legislation. There will be ample opportunity in committee to examine some of the critical questions that members have raised, but here we are talking about the principle of Bill C-3, which refers to equalization as a concept.

I listened with interest while some people suggested they did not like the idea of equalization. To me this is somehow speaking against motherhood. It is fundamental. It is enshrined in our Constitution. It has been a Canadian way of life since 1867, formalized in 1957, where we formed the Canadian family.

We acknowledge that from time to time there are parts of Canada where economically things are thriving more than in other areas, but there has always been this generosity of spirit, this willingness to assist and co-operate. If province x seems to be doing better for the moment it will share some of its wealth and prosperity with some other parts of Canada that perhaps are not experiencing that same prosperity or wealth. This seems to me to be what Canada is all about.

Essentially Bill C-3 extends the principle of equalization for another five years. We will be seeing the $8.5 billion we will be spending in equalization payments this year go from the have to the have not provinces. It will expand over the years at about 5 per cent annually to reflect the realities of Canada. We feel that in principle this is something we endorse. When I say we I am referring to my colleagues as New Democrats. That is what we are talking about today, the principle of this legislation.

That does not mean we do not have some questions and some concerns that we want to raise, but I want to put it on the record because I know my constituents would like to know who is getting what. When the three have provinces of British Columbia, Alberta and Ontario decide to share their wealth with the rest of Canada it breaks down as follows: the Northwest Territories will receive about $910 million; Prince Edward Island will receive $164 million; Nova Scotia will receive $880 million; New Brunswick will receive $995 million; Manitoba will receive $854 million; Saskatchewan will receive $522 million, which I am sure my hon. colleague here will be pleased to hear; and Quebec will receive $3.8 billion. It seems to me this is an equitable effort in distribution.

I listened with interest to some of my friends from the Bloc who feel, for a variety of reasons, that this is not appropriate. I look forward, particularly in committee, to hear the ways and means they will select to make this, in their mind, even more equitable.

As a British Columbian, we are pleased to participate in this sharing program. We are pleased to extend a hand, to share the wealth that is generated in British Columbia with other parts of the country. I know that my colleagues will be pleased if I say a few things about what is going on in British Columbia.

Recently the province of Alberta went through some very painful exercises provincially to deal with some of the economic realities that confront that part of Canada. We have seen other provincial governments take very serious steps at addressing their fiscal realities, one might say in some part of the country brutal steps when it comes to dealing with various social programs.

We have not had to do that in British Columbia. Not only are all of our social programs intact but expanding. Education and health care will see a 3 per cent increase this year. Since November 1991 we have seen an increase of 91,000 new jobs. We have seen economic growth this past year of over 3 per cent. Exports were up by more than 16 per cent last year. Housing starts are up more than 10 per cent. Retail sales were up by almost 9 per cent in 1993. This, however, is an important one, the level of business confidence. This is a good barometer, a good litmus test to see how the world is feeling about a particular area of the country. Capital investment intentions were up 6 per cent for 1992-93, four times the national average. In other words, the business community has confidence in the economy of British Columbia and are prepared to invest their money.

I have a booklet here that just goes on and on, pages and pages of all the positive initiatives being taken by the provincial government. I want to simply refer to one interesting graph. There is a lot of talk about the global economy and how we must be part of it and how the future is our ability to participate globally. It points out that for Canada as a whole about 80 per cent of exports go to a single country, the United States of America. This has been a reality from the very beginning and something that we simply acknowledge as a fact of life. Good-

ness, why would not the majority of our trade be with such a large neighbour to the south with such easy access?

This is why some of us have had difficulty understanding why the past government and now this government is so anxious to increase that unless the ideal would be to have 90 per cent of the trade with the United States. When entering into the FTA and NAFTA the explanation was that this would provide even more trade, increased exports and so on to the United States.

We have to ask ourselves where in the world would we find a country that says that if we put 80 or 90 per cent of our eggs in one export basket it is a wise policy. Perhaps there are some. I am not aware of any. Perhaps some of my colleagues would be able to share their views on that with me. From British Columbia's perspective, 49 per cent of exports from that province go to the United States. One of the major areas is softwood lumber.

What is the major area of harassment in terms of the FTA and NAFTA? It is softwood lumber. Even in the one major export B.C. has to the U.S., with it being 49 per cent of our trade, we have had nothing but trouble since day one. The FTA and NAFTA have done nothing to relieve that continual harassment and hassling.

[Peter Milliken, Liberal, Kingston and the Islands, ON]

What a burden for you, Nelson.

[Nelson Riis, NDP, Kamloops, BC]

My hon. friend wishes to get into the debate a little later as well I hear.

What I am saying is that we are happy in British Columbia. There are all sorts of reasons for the prosperity and that people from all across Canada are moving to British Columbia to take up residence.

[An hon. member]

Good government there.

[Nelson Riis, NDP, Kamloops, BC]

Part of it is because of the good government.

[Some hon. members]

Oh, oh.