Mr. Speaker, it is a pleasure to rise and speak on behalf of the government in response to private member's motion 424.
The motion deals with two of the most important attributes that make both Canada and its federation unique: first, the economic significance of the resource development project and, second, the efficient and equitable system of transfer programs that form the heart of Canadian federalism, in particular the equalization program.
The role of financial transfers in the Canadian federation has a long and rich history. Built on the spirit of a Canadian fraternity our system of transfers illustrates the willing co-operation and coordination which has long become a Canadian trademark that is the envy of federations around the world.
In a recent report to parliament the auditor general referred to the program as one of the main successes of the federation. For over 40 years the federal government has fulfilled its constitutional responsibility to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services and reasonably comparable levels of taxation through the equalization program. It is an example of how the Canadian federation has and will continue to work well.
I confirm to the House once again that the government is committed to the ongoing sustainability of programs as important as the equalization program. As we enter a new era of government financing it is critical that we continue to do what is most important to Canadians and to do it in the most efficient and equitable way possible.
With reference to the motion before us, let there be no doubt that natural resources have long been a staple of the Canadian economy. From coast to coast to coast since the first settlers arrived from Europe in the 15th century, even prior to European settlement on this continent, natural resources formed the heart of aboriginal economic development. From forestry to nickel, from oil and gas to sand and quarrying, natural resources have been the foundation of Canadian economic success for centuries. They are under our constitution an area of provincial jurisdiction.
The sustainable development of our rich natural resources is crucial to provincial economic growth, and sustainable economic growth is critical to fiscal stability and autonomy for all provinces. The government is committed to supporting all efforts by provinces and regions to develop their economies and to promote the sustainable development of our rich natural resources.
The motion presented to the House is concerned with the reductions in equalization payments that occur as revenues from natural resource development projects come on stream. There is no doubt that the government wants to work co-operatively with provinces but I think we must be clear. The government believes it is crucial that such economic development projects go ahead on their own merit. Such economic development projects must go ahead because they make good economic sense and not simply because of government subsidies. This is why we must keep strong, effective programs such as equalization separate from individual provincial economic development decisions.
Equalization is an unconditional transfer that provides provinces with resources to support economic development projects. The federal government does not say where such resources must be spent. Decisions on how to allocate such revenues are at the discretion of provincial governments. In this way equalization is a central component by which co-operative economic development takes place within Canada. Provinces that require support receive such financial support with the maximum amount of flexibility to use as they see fit. Equalization must maintain its transparency, sustainability and underlying principles of fairness.
It works according to a formula approved by parliament that applies equally to all provinces. The amount a particular province receives is determined by a statutory formula and not by the political pressures of the day or a particular development project. As the province's fiscal capacity goes up its equalization entitlements go down. As a province's relative fiscal capacity goes down entitlements go up. It is the way equalization has worked for over 40 years. It is this principle that applies to all equalization receiving provinces. The formula is the very basis of the program.
We cannot compromise a formula driven program that applies to all provinces equally by treating some provinces better than others. This motion would do just that. Compromising the program for one province would undo the 40 years of successful co-operation and sharing that characterizes the equalization program.
As Canadians we are there for each other. We help each other out when times are tough. We saw this in the aftermath of the floods in Manitoba and Quebec last year and in the ice storm in eastern Ontario and western Quebec during January 1998. It is in the same spirit that the equalization program works. When times are tough, when times are bad, equalization payments increase but as a province's economic situation improves its equalization entitlements are reduced. Even when times get better the equalization program has the added benefit of protecting provinces against large, year over year reductions in entitlements.
There is a floor provision that applies to all provinces which ensures not only the predictability of the program as a whole but also that provinces which experience growth will not be immediately or adversely affected by reductions in equalization.
In addition to this protection, Nova Scotia and Newfoundland have traditional protection for revenues that result from offshore developments. Under the Canada-Newfoundland offshore accord signed in the early 1980s, Newfoundland is granted transitional protection against equalization reductions. It lasts for 12 years. It allows the province to benefit from natural resource development projects. Under the Canada-Nova Scotia offshore accord Nova Scotia is also granted transitional protection.
Under the current agreements and arrangements Newfoundland would benefit substantially from the offset arrangements already in place. It ensures that Newfoundland's overall physical position is not significantly impacted and that the provincial economy will benefit from job creation, higher incomes and stronger, more lasting growth. This protection is on top of the expected increase in revenues that the province would derive from the project through royalties and taxes.
Further, the federal government also supported the development of Newfoundland's natural resources through other means, including the $195 million coming from the Canada-Newfoundland offshore development fund, over $2 billion from the petroleum incentive program and over $1 billion in federal cash contributions, interest free loans and loan guarantees entrusted toward the development of Hibernia. This is on top of the fact that both Newfoundland and Nova Scotia have historically been the main beneficiaries of equalization.
Together these arrangements show the extent to which the federal government is an active partner in supporting natural resource development projects that make for long term economic success in the provinces. The current equalization agreements clearly allow for provinces like Newfoundland to benefit significantly from such projects.
As I said earlier, equalization is a program that works and works well. It is one of the most established and successfully recognized transfer programs of the Canadian federation. It is distinctly Canadian. It is about ensuring that all Canadians, regardless of where they live, have access to the same kind of government programs and services at comparable levels of taxation. For 40 years the program has been there for provinces when regional economies faltered. It will continue to be there in the future.
Even when we were forced to reduce expenditures during our deficit battle the equalization program was not touched. Why? It was because of its importance to Canadians from coast to coast to coast. Compromising national programs for the sake of any particular province does not make a strong federation. Canadians want strong national programs that are efficient and equitable. Equalization as an enduring program fulfils these criteria. The government will ensure that it is sustainable, transparent and fair to all Canadians.
It is for these reasons that I urge my colleagues to reject Motion No. 424.