Madam Speaker, I would like to associate myself with my colleagues to vigorously protest against the fact that the government does not limit itself to technicalities regarding equalization in Bill C-3.
What should have been done is a comprehensive review of federal transfer payments to the provinces, including established programs financing through which the federal government makes contributions to health and post-secondary education; the Canada Public Assistance Plan through which the federal government makes contributions to the provinces' social assistance programs and welfare services; and all the other programs governed by federal-provincial arrangements.
This piecemeal approach the government is taking will leave the door open to unpleasant surprises when the time comes to renegotiate the other bilateral arrangements. This approach does not give us a complete picture of all the cuts to come.
In fact, the trends are worrying. Federal contributions to transfer programs as a whole are in free fall. In Quebec alone, federal transfer payments have dropped from 28.9 per cent of the gross revenues of the province in 1983-84 to 20.1 per cent in 1993-94, and they should account for a as little as 15.8 per cent of Quebec's revenues by 1997-98.
Fiscal transfers no longer meet the objective they were intended to meet, although this objective was entrenched in the 1982 Constitution to promote equity among the regions. It is common knowledge now that attaching limits to equalization and established programs financing makes have-not provinces poorer and have provinces richer.
The federal government's withdrawal from various transfer programs is proving to be very expensive for Quebec. It is clear that the federal government wants to reduce its deficit at the expense of the provinces, and including Quebec.
Since the Bloc's position on equalization was already explained at some length by the two previous speakers for the Official Opposition, I would like to address two areas where Quebec did not receive its fair share: research and development and established programs financing.
Why is spending on research and development so important for the economy? Why talk about research and development in a debate on equalization? Simply because research and development constitutes a so-called structural investment, an investment that helps create a modern and competitive industry that generates high quality, well paying and permanent jobs. Through its productivity and growth, industry has a positive impact on the entire economy of a country.
The federal government is a very important player in research and development. In fact, it provides two types of funding for R and D activities: internal funding and external funding. Internal spending covers all R and D activities funded and conducted by the federal government. These expenditures are recurrent in nature. As for external spending, this covers all R and D activities which the government finances but does not conduct itself. This type of spending is random in nature since it can easily be shifted elsewhere in subsequent years.
In 1989, the federal government funded nearly 30 per cent of all R and D activities in Canada. Between 1979 and 1989, Quebec received only 18 per cent of federal spending in this area, while Ontario received 50.1 per cent, which works out to $4.6 billion for Quebec and $12.5 billion for Ontario.
In a study dealing with the equity of R and D financing, Pierre-Étienne Grégoire applied four criteria to determine under-funding or over-funding of R and D in the provinces.
These criteria are as follows: demographic weighting; economic weighting, which reflects support for regional economic activities; significance of regional R and D activities, which reflects support for new technology in the region; and significance of R and D involvement by provincial governments.
Accorded to these criteria, Quebec and Alberta are under-funded across the board. The study concludes that the provinces benefitting most in terms of regional development and economic growth are Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Ontario and Manitoba; Saskatchewan and British Columbia benefit in terms of regional development;
and Quebec and Alberta do not benefit, either in terms of regional development or economic growth.
Finally, Quebec and Alberta are the only provinces with a negative balance for internal spending on research and development.
If we consider the amounts paid under established programs financing, Quebec and the poorer provinces are paying a very high price for the policy adopted by the federal government.
Established programs financing was introduced in 1977. Initially, the government indexed the per capita contribution and prorated this indexed contribution according to the population of each province. However, starting in 1982, the federal government gradually withdrew from financing this program by reducing the per capita increment.
We must realize that across-the-board cuts per capita are felt more severely by the poorer provinces, and this situation becomes even worse with the ceiling on equalization payments, since the provinces no longer receive additional equalization to make up for the lost revenue caused by federal cutbacks.
Since 1982, cuts in established programs financing have meant a loss of revenue for Quebec, which amounted to $1.8 billion in 1993-94.
Let us consider the impact of federal disinvestment on post-secondary education, especially at the university level. It is generally agreed that basic requirements in terms of training and skills will increase because of economic globalization and the ensuing need to specialise.
In its third report, the Conseil de la science et de la technologie predicts that by the year 2000, 64 per cent of all jobs will require post-secondary education. The government's withdrawal from funding our universities leads to under-funding of institutions that will be increasingly hard pressed to play the active role one expects them to play in this frenetic race to be competitive. Peter J. Nicholson, vice-president of the Bank of Nova Scotia, defines competitiveness as follows:
"The ability to produce goods and services that meet the test of international markets while citizens earn a standard of living that is both rising and sustainable over the long run".
An economic study conducted at the request of the Organisation nationale universitaire, which deals with the consequences of disinvestment in higher education and was published in 1993, provides some significant figures in this respect. For instance, a 40-year old worker who graduated from high school earns about $23,000 while a university graduate earns $43,000. If we extrapolate what these would earn in the course of their working lives, the university graduate receives additional income that mainly benefits governments, thanks to the current tax system. In Quebec, progressive tax rates allow the state to take an average of 53 per cent of the income of university graduates and 33 per cent in the case of high school graduates.
The study concludes that this sizable difference reflects a potential loss to the State of over half a million dollars every time a high school graduate decides to enter the labour market instead of going on to earn a bachelor's degree.
In the short term, the government saves money by disinvesting in higher education but, in the long term, these so-called savings result in a loss, and as the organization says, when the government wants to save money in the short term and decides to withhold one dollar from its funding of higher education, every dollar not invested will, in the long run, cause the government to lose $10 in tax revenue. The substantial reduction in tax revenue will, sooner or later, have to be compensated by a corresponding increase in the tax burden for all taxpayers. Unfortunately we will never be able to compensate for the net loss in human capital to our economic, social and cultural development. Basically disinvestment means that human potential and creativity remain untapped, and the loss to society is immense.
Of course disinvestment also has a negative impact through the resulting drain on unemployment insurance and welfare.
According to the Bureau de la statistique du Québec, in 1992, the unemployment rate was 14.3 per cent among high school graduates, while during the same period, university graduates experienced an unemployment rate of 5.8 per cent, despite the recession.
There is also a very significant cost in terms of social assistance, and the government's disinvestment in funding for university education will increase the number of people who will need social assistance later on.
According to Statistics Canada, in 1986-87, 52.2 per cent of welfare recipients were people who had only partially completed their high school studies, whereas 2.4 per cent were university graduates.
We could talk for a long time about the negative impact on the economy of the federal government withdrawal in the field of post-secondary education, but all these figures do not say anything about the loss of human potential resulting from this disengagement of the federal government.
After participating in this exercise, my party and myself come to the following conclusions. First, Quebec is far from getting its share in the research and development sector. This loss results in a very heavy price for our province, since R and D is an extremely dynamic sector of a country's economy. I want to point out that, overall, between 1979 and 1989, Quebec received $8 billion less than Ontario for that sector alone. In fact, Quebec's economy will feel the adverse effects of this loss for a long time to come.
Our second conclusion is that tax transfers are no longer a reliable source of financing for Quebec and for all the have-not provinces. Cuts imposed by Ottawa deprive Quebec of important revenues. If at least those cuts helped reduce the deficit, they would provide some benefit, but we are well aware that such is not the case. In fact, the federal government forces the poor provinces, including Quebec, to pay for its mismanagement.
The third conclusion which can be drawn is that all the cuts made to the tax transfer system have the effect of increasing the fiscal burden of the poor provinces, that select club to which Quebec belongs. In 1992-93 Quebec lost $2 billion under the established programs financing alone, yet the law forces the province to maintain national standards regarding the quality of services to which the federal government contributes less and less.
Sovereignty has become more necessary than ever for Quebec. All the measures taken by the federal government to cut these tax transfers to provinces destabilize Quebec's finances. To make things worse, the federal government is not even able to control its deficit.
I want to quote Mr. Jean Campeau who, when he came to my riding during the election campaign, said: "There was a time when Quebec wondered if it could afford to leave Canada. Now Quebec knows that it can no longer afford to remain part of Canada".