Mr. Speaker, it gives me great pleasure to speak on third reading of Bill C-3. Bill C-3 amends the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act. Essentially, Bill C-3 is about one thing, the renewal of the equalization program.
As members of the House well know, equalization is of such over arching importance that the principle has been enshrined in the Constitution. The unique sense of Canadian sharing goes back to Confederation and shows that the Canadian federation works.
In considering the renewal of equalization we on the government side have had to balance the need to provide provinces receiving equalization with the appropriate financial resources on the one hand and the need to be fiscally responsible on the other.
I have no doubt that this bill does both. Equalization is projected to rise from $8 billion this year to $10.4 billion in 1998-99. All seven provinces that receive equalization are expected to gain from these increases. Provinces currently eligible for equalization are Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan.
Equalization is the most important federal transfer program for reducing disparities in provincial governments. Before equalization payments the revenue raising capacity of the seven recipient provinces is 85 per cent of the national level. After equalization it is roughly 93 per cent of the national average.
Let me now go through some of the details of Bill C-3.
First, it is proposed that equalization be renewed for five years. Accompanying a five year renewal is a commitment by the government not to change the structure of the formula. This means that there will be greater certainty in budgetary planning for the provinces. This does not mean that all work on the equalization program will cease, rather ongoing work on measuring the revenue raising or fiscal capacity of the provinces will continue, as will research on the general structure of the program with a view to the needs of the next equalization renewal.
Second, the equalization standard will be unchanged. The so-called five province standard measures the fiscal capacity of Quebec, Ontario, Manitoba, Saskatchewan and British Columbia.
Third, as already mentioned, a ceiling will be retained.
Fourth, the program floors will remain unchanged. The floor provides protection to the provinces against large year to year declines in equalization. The floor depends on provinces' revenue raising abilities, with the less well off equalization receiving provinces receiving the greatest protection.
Fifth, a number of tax base changes to update the measurement of provinces' fiscal capacity will be introduced. This is critical in order to maintain the fairness of the program in measuring provinces' revenue raising abilities. For example, the recent decline in farmland values has particularly disadvantaged Saskatchewan, a technical update to the program calculations adjusts for this.
Finally, the legislation contains a means to alleviate excessive reductions in equalization for provinces with specific and exceptionally large proportions of the tax base for certain natural resources. This will remove a long standing irritant to the provinces on this so-called tax back issue. This will enable provinces to retain 30 per cent of the revenues from the relevant natural resources rather than losing equalization on a dollar for dollar basis. This measure has been welcomed by the affected provinces.
This is very fiscally responsible and I recommend its passage to the House.