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.