House of Commons Hansard #181 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was province.

Topics

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:45 p.m.

The Acting Speaker (Ms. Thibeault)

Does the hon. member have the permission of the House to move the motion?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:45 p.m.

Some hon. members

Agreed.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:45 p.m.

Some hon. members

No.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:45 p.m.

The Acting Speaker (Ms. Thibeault)

There is no unanimous consent.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:50 p.m.

Oakville Ontario

Liberal

Bonnie Brown LiberalParliamentary Secretary to Minister of Human Resources Development

Madam Speaker, Bill C-65, which renews the equalization program, is renewing one of the cornerstones of this country.

The equalization program has played a major role in defining the Canadian federation. It ensures that all provinces have the resources they need to provide reasonably comparable services to Canadians no matter where they live.

Equalization is an unconditional federal payment. Provinces can use it as they wish. That is a basic outline of what the equalization bill is about but over the years and this year as in other years many questions have been raised about the system. Let us look at some of these questions.

Some have asked if there is not a simpler approach by which to measure disparities among provinces. Some have suggested for example a measure based on gross domestic product of each province. One has to go back to the concept of the equalization program. All provinces are to be brought up to a standard to enable them to provide comparable services at comparable levels of taxation.

The calculation is based on a legislated formula that models typical provincial tax systems. This formula is called a representative tax system. The complexity of the program arises as a result of the complexity of provincial tax systems that are being modelled. The representative tax system has proved to be a reliable and stable measure of provincial fiscal capacity, a measure that has widespread support as a fair and comprehensive approach.

The representative tax system uses around 30 tax bases to measure a province's relative capacity to raise revenues. It might be possible to construct a simpler equalization formula that works satisfactorily and the federal and provincial governments will continue to evaluate and investigate alternative methods.

One suggestion for a simpler approach has been to use GDP per capita as a measure to measure the provinces' fiscal capacities. But a great deal more research is necessary before considering an equalization based on a new approach.

Another question is whether equalization creates disincentives to growth. The government would respond that when a province's ability to raise revenues increases due to growth in that province equalization payments decline. This was how the program was designed to work in the first place, but the equalization program is not a disincentive to provincial economic development. It would be difficult to imagine that a province would turn its back on opportunities to increase incomes and jobs for its people just because its equalization payments might decline.

The Reform Party has raised the question of whether the proposed changes in Bill C-65 address all the recommendations on the topic made by the auditor general. The auditor general's report discussed the design and operation of the equalization program and made a number of recommendations.

During the course of this renewal the federal government discussed all these recommendations with its provincial counterparts. Many of those recommendations are being addressed through this bill such as those involving the resource tax bases and the ceiling design.

But other recommendations were more complex and it is felt by both federal and provincial governments that it needs more research and discussion, but both levels of government will continue this research and discussion once the program has been renewed.

Some people have asked why not move to a ten province standard. This program is based on five provinces. The purpose of equalization is to ensure provinces have sufficient revenues to provide reasonably comparable levels of services at reasonably comparable levels of taxation.

The current five province standard fully meets the federal government's constitutional commitment to make equalization payments and fully achieves the intended purpose. The five province standard was introduced after the significant volatility in the resource sector in the 1970s. These fluctuations generated large fluctuations in equalization entitlements.

Now the risk of volatility is lower with the five province standard than with the ten province standard which increased the potential for volatility. If implemented again, the ten province standard would add considerably to the cost of the program, an anticipated $1 billion each year.

Some people are confused by the terms floor and ceiling. The floor protects individual provinces against large declines in their equalization payments from one year to the next. Some provinces criticize the current floor because the protection it offers could fluctuate by large amounts with relatively small changes in a province's economic situation. The proposed new floor in Bill C-65 provides a similar level of protection to the current floor but will not be subject to the same variations which have been criticized.

What about the ceiling? The purpose of the ceiling is to protect the federal government from unsustainable large increases in equalization expenditures. The current ceiling limits the total size of the program to an amount equal to the 1992 equalization entitlements increased each year by the growth of GDP between 1992 and the year in question.

Whenever the size of the program exceeds the ceiling the program standard is reduced, lowering each province's entitlement. In 1998-99 the ceiling is about $10.4 billion, about $1.2 billion higher than the entitlement. The proposed new ceiling would be set at $10 billion in the years 1999-2000. Like the current ceiling, it will grow in subsequent years by GDP growth rate. Receiving provinces have argued for the removal of the ceiling. The federal government has indicated that the ceiling is essential to ensure the program remains affordable and sustainable.

Some have asked why the lottery and gaming revenues base is changing. The current measure of a province's ability to raise revenues from this source of revenue is based solely on lottery ticket sales in the province. However, significant changes have occurred over the years in the lottery and gaming area. The federal government is proposing changes to the equalization program that will take into consideration all types of gaming activity and their revenue. The proposed changes will recognize provinces' abilities to raise revenues from new and rapidly growing sources, for example casinos, video lottery terminals, break open tickets and other games of chance.

Some have asked why the equalization formula does not take into account the different expenditure needs. The answer is that the federal government has undertaken a number of studies to examine various measures of expenditure needs. Both levels of government concluded that there were too many issues that needed to be resolved before expenditure need could be incorporated into equalization such as how to decide what expenditures are needed. The federal and provincial governments will continue to study the issues surrounding the measurement of need and the inclusion of such measurement in equalization.

The new bill addresses most of the questions that have been raised. It must be remembered by all members that the agreements reached at these five year renewal periods are agreements that have taken a long time to hammer out between federal and provincial representatives. They have agreed. Before us in the House now is the result of much of that work. Each amendment reflects an agreement that has been concluded between representatives of all levels of government. I hope the House will respect the work our colleagues in the provincial houses have put into this and which our own representatives have agreed to.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

5:55 p.m.

Reform

Werner Schmidt Reform Kelowna, BC

Madam Speaker, I enter this debate from a rather different point of view. So far we have heard all kinds of criticisms of the bill. I have some of those to advance. But I would like to underscore the Reform Party position that we do support the concept of equalization payments from the richer provinces to the poorer provinces. I underscore that we do this and the kind of reforms we are considering in the whole business of equalization payments.

It is one thing to suggest that there have been five years of consultation among provinces, that there have been five years of discussion about the various amendments which have found their way into the proposed bill before the House. Whether or not that actually happened I do not know. The important thing I do know is that within less than 48 hours of consultation in the House and open debate we will be forced to make a decision.

I do not know what else went on behind closed doors. We have to accept that hon. members opposite are telling us the way things were. One thing is also true: we in the House have a responsibility to reflect upon those kinds of amendments and to think carefully about them.

Lest anyone misinterpret or misrepresent what the Reform Party stands for, let it be abundantly clear that we support equalization payments. We would like to suggest some reforms and changes that could be made which are not found in the current legislation.

Reform believes in a system that is open to all Canadians and uses a different, simpler basis for comparison. That is part of the issue. It should be a different, simpler and a more accurate and more honest comparison of people. Rather than micro managing equalization, which the current legislation and program do and what the proposed legislation maintains, we should use a simple indicator to determine who gets what. This is called a macro formula.

A shortfall in per capital provincial GDP as an indicator might be a good basis for comparison that would not require arbitrary definitions and an army of bureaucrats to apply them. That is a fundamental issue and one that we should address very carefully. It is this kind of thing that we should have concentrated on and debated in the next while. It is one thing to have a bill proposed to us, but is there nothing else that could be done?

There is a lot that could be done. Using such a macro formula would eliminate the incentive for provinces to adjust their tax bases in inefficient ways to qualify for more federal money. We cannot adjust an entire GDP.

Under a single indicator system equalization would be more focused on the provinces that need it most. It would be hard to argue that we have seven have not provinces in Canada. Canada is one of the richest countries in the world. That is abundantly clear. All we need to do is look at the population figures to see how many people have come into Canada compared to the number of people who have left Canada. In the last 25 years there has been no mass exodus or out-migration from Canada.

By focusing benefits more on the poorer provinces the federal government could reduce overall taxation, leave the money in people's pockets and thereby increase economic efficiency. That is what we are all about. Any province that experiences reduced payments would receive special financing to ease the transition. These ideas are worthy of discussion. They have been discussed. My colleague from Calgary—Nose Hill indicated that and quoted from a particular study.

It goes on from there. I will get very specific on what has happened. In the current situation the average Canadian family is a net contributor of $3,500 to the federal treasury. A family in Saskatchewan pays $2,700 and an Alberta family, more than $6,000. On the other hand the average family in Newfoundland gains $7,000 per year.

To reduce this kind of unfairness the Reform Party has proposed a new Canada act. In this act we call for two basic reforms: first, an equal treatment of all citizens with per capita grants to provinces for shared cost programs and, second, a single equalization grant based on a macro indicator of per capita provincial GDP compared to per capita national GDP. If that is the kind of focus to which we would address ourselves we would be moving forward. We would be taking into account the changes that have taken place in Canada and the changes that have taken place in the world around us.

May I draw the attention of the House to a couple of things that have happened in Canada in terms of the GDP. I want to compare population increases and decreases to the GDP. We will look at the last four years, 1994 to 1998. We find that Canada had a net increase in its population of 4.35%. Newfoundland had a decrease of 5.5%, Ontario an increase of 5.3%, Alberta an increase of 7.7%, British Columbia an increase of 9.03%, and Yukon an increase of 5.3%. Those are the provinces with the greater gain.

Let us compare the gain relative to the GDP in those provinces. Here is what we discovered, using the numbers for 1993 to 1997. Prince Edward Island had an increase in its GDP of 19.9%, Ontario an increase of 19%, Saskatchewan an increase of 23.6%, Alberta an increase of 26.07%, and British Columbia an increase of 16.96%.

If we begin to compare the increases in GDP in this four year period, compared with the population shifts that have taken place, we recognize very clearly that there is an unfairness built right into the formula which currently determines the amount of the equalization payments. That unfairness needs to be eliminated.

The formula is so complicated that it takes an army of bureaucrats to compute them and it makes it almost impossible for anybody to understand exactly how it works. I dare say a lot of people who put forward these amendments do not recognize or understand fully the implications that will take place in their particular provinces and the country as a whole.

We need to recognize as well that the composition of population has changed dramatically. We do not have the same kind of population composition in Toronto today that existed there 20 years ago. All we need to do is look at the changes in retail marketing that have taken place in those marketplaces to recognize those that have not changed with the times are experiencing very serious financial difficulties at this time.

That is exactly the kind of thing we as a country need to address. We need to recognize that the composition of our population has changed. It has shifted from one part of the country to another part of the country.

We in British Columbia are now experiencing a major shift of populations into the province. If we compare the increase in GDP in British Columbia and the GDP increase in Ontario or in Alberta, we discover that the GDP has not increased nearly to the same degree in British Columbia as it did in these other provinces.

This should tell us something. In fact it tells us a lot. If the government is determined that one part of the country shall be preferred over another part of the country, indeed the formula can be adjusted in such a way that it can be politically manipulated so that it will grant to some and take away from others.

What does it do? What has happened here is really interesting. If we take, for example, the people in Prince Edward Island and Newfoundland, they have had a 20% increase over and above what they pay into the revenues for Canada. The program services they receive are 20% more than they contribute into the treasury. In Alberta it is the other way around.

In Alberta there is a 9% decrease in the amount of services and product the people get and the money they pay in. In other words, there is a deficit in the government services received by Alberta people and there is a surplus in Newfoundland.

Perhaps there should be some of this sort of thing, but it is interesting that this happens to people at the lowest end of the income bracket. These are $20,000 to $30,000 people who get 9% less in government services in Alberta and get 20% more in Newfoundland. That is unfair.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:05 p.m.

Liberal

Stan Keyes Liberal Hamilton West, ON

Madam Speaker, I have listened intently to the debate on the bill before us and quite frankly I am astonished at the opposition party and in particular the Reform Party and the lack of debate that has actually taken place on the bill before us now.

The member for Kootenay—Columbia whines and complains about the time allocation motion. Yet only two members of the Reform Party almost came close to addressing directly the government order of the day, Bill C-65.

For the folks at home, in case they have become confused, we are supposed to be discussing an act to amend the Federal-Provincial Fiscal Arrangements Act or the equalization program.

The member for Kootenay—Columbia says he represents 85,000 constituents to whom at this moment I will apologize on his behalf. I know he has to be completely embarrassed by the fact that he has not addressed the issue we are supposed to be debating in this place.

Did the member for Kootenay—Columbia touch on any of the changes to the equalization program? None. Does any member of the Reform Party really and truly understand the importance of the equalization program? No. Given the level of debate on the floor of this place by members of the Reform Party, what an embarrassment.

For members opposite I will try to explain that a co-ordinated team effort produced this cornerstone of the Canadian federation called the equalization program. Many of my colleagues on this side of the House have articulated the definition of the program, the manner of payment in the program, the basic structure of the program and the positive constructive improvements which will increase the cost of the equalization program.

Reform Party members tell us they need more than the 48 hours being provided to debate the bill. The member for Kelowna said that he would strike out on the details of the equalization program. Did he address the fact that the program includes changes to the ceiling and floor provisions of the equalization program? I heard it on this side of the House. It will protect against unusually large fluctuations in equalization transfers. Was that addressed by members of the Reform Party? No, they did not touch on that.

At the time of the 1998 budget it was projected that equalization in 1998-99 would amount to $8.5 million. The last official estimates released last October showed an increase to $8.8 billion. Did they address that or ask why it has gone up to $8.8 billion? Did they examine the equalization program and its importance to the country? No, they did not.

The member for Kelowna—

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:10 p.m.

Reform

Werner Schmidt Reform Kelowna, BC

Madam Speaker, I rise on a point of order. The hon. member opposite is suggesting that we could have addressed all those issues. The important thing is that if we could not—

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:10 p.m.

The Acting Speaker (Ms. Thibeault)

That is not a point of order. That is a matter of debate.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:10 p.m.

Liberal

Stan Keyes Liberal Hamilton West, ON

Madam Speaker, that is the member I was referring to a little earlier.

The member for Kelowna stood in his place with righteous indignation. Did he speak to the issue of the equalization program? No, he did not do that. Did the member for Kelowna or the member for Kootenay—Columbia address the specifics of the equalization program? No. Did members opposite in the Reform Party want days to discuss the equalization program? Yes. Are they going to discuss the issues? No.

The member for Kelowna talks about his party's policy on the equalization program. Maybe the hon. member could save that debate for his united alternative meeting this weekend because there is a policy on equalization in the country and it is working terrifically well. It has been examined for two years by federal and provincial representatives. Does the member want to attack the issue at hand? Does he want to look at all the points that are important to the equalization program? No, he does not. To his constituents in Kelowna I apologize on behalf of the member.

I understand my time is up. I appreciate the opportunity to contribute to the debate and to show how government members are trying to articulate the importance of this cornerstone of the federation.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

Reform

Ken Epp Reform Elk Island, AB

Madam Speaker, I rise on a point of order. We are debating Bill C-65. I think you should ask the member to actually debate the issues he said he was going to talk about.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

The Acting Speaker (Ms. Thibeault)

That is not a point of order.

It being 6.15 p.m., pursuant to order made earlier today, it is my duty to interrupt the proceedings and put forthwith every question necessary to dispose of the stage of second reading of the bill now before the House.

The question is on the motion. Is it the pleasure of the House to adopt the motion?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

Some hon. members

Agreed.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

Some hon. members

No.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

The Acting Speaker (Ms. Thibeault)

All those in favour of the motion will please say yea.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

Some hon. members

Yea.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

The Acting Speaker (Ms. Thibeault)

All those opposed will please say nay.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

Some hon. members

Nay.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

The Acting Speaker (Ms. Thibeault)

In my opinion the nays have it.

And more than five members having risen:

Federal-Provincial Fiscal Arrangements ActGovernment Orders

6:15 p.m.

The Acting Speaker (Ms. Thibeault)

Call in the members.

(The House divided on the motion, which was agreed to on the following division:)

Division No. 317Government Orders

6:40 p.m.

The Deputy Speaker

I declare the motion carried. Accordingly, the bill stands referred to the Standing Committee on Finance.

(Bill read the second time and referred to a committee)

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

Division No. 317Adjournment Proceedings

6:45 p.m.

NDP

Yvon Godin NDP Acadie—Bathurst, NB

Mr. Speaker, on November 23, 1998, I rose in this House to speak of the 4,000 workers on Prince Edward Island who were forced to wait six weeks to qualify for employment insurance or to receive benefits.

The response by the Minister of Human Resources Development sidestepped the question entirely. He said, and I quote:

What I keep saying is that this reform has been such an important one for Canadians that we as a government will monitor very closely its impact and we will make the right changes when they need to be made, as we did not too long ago with the small weeks to address the concerns of my Atlantic colleagues.

I never said anything about small weeks. I spoke about the 4,000 workers on Prince Edward Island who were forced to wait six weeks before receiving EI benefits. That shows how much the Minister of Human Resources Development is out of touch with the real problems people are facing.

In his response, he also spoke of the “gappers”. I did not say anything about “gappers”. I was speaking about people who have had to wait six weeks for an employment insurance cheque.

Today I got a letter from a lady who wrote “How is a person supposed to manage on a starvation income of $636 a month, when the rent is $400 and then there is the phone and the electricity, not to mention all the little payments that have to be made? Food has to be paid for somehow”. She continues “I often ask God to come and take me away. I wonder what point there is in living, why we are put on earth to live in such misery. Help us. Urgently”.

This is the kind of message I am hearing from all over. Our people are suffering. Canadians are suffering.

The minister referred to “7,000 people in a black hole. Today, there are only 2,000”. Only 2,000 suffering. There are only 2,000 with no money coming in from January to May, whose refrigerators are empty and who are sending letters like those I have received from people telling me they want to kill themselves after 27 years of working in plants. It is a disgrace that they are being treated like this by the Liberal government after 27 years of work.

The members opposite should be ashamed because, when they were in opposition, they spoke out against the Progressive Conservative Party's UI cuts. The hon. member for Saint-Maurice, the Liberal leader, said that the Progressive Conservatives were not attacking the real problem, which was the economy, preferring instead to go after unemployed Canadians.

Division No. 317Adjournment Proceedings

6:50 p.m.

Oakville Ontario

Liberal

Bonnie Brown LiberalParliamentary Secretary to Minister of Human Resources Development

Mr. Speaker, the member asked the question in the past and asked it again tonight about people waiting for their claims to be processed in Prince Edward Island. He claimed that 4,000 people had to wait for six weeks.

We went back and looked at the records and in Prince Edward Island from April to October 1998 the average number of claims filed was about 2,000 per month. Ninety-seven per cent of those entitled to EI received their first payment within 28 days. In my lexicon 28 days is not six weeks and is pretty good service to people who apply.

His second point was about gappers. He forgets to mention that seasonal workers or workers with irregular working patterns face particular issues with regard to accessing EI. Some gappers are unable to find enough work so that the combination of work plus EI gets them through an entire year. This problem is most prevalent in his province.

We are sensitive to the plight of seasonal workers, and a change to an hours based system benefits many who work very long hours during the work season. The member has to understand that EI is not intended to be a regular income supplement and the Government of Canada prefers to put emphasis on creating additional employment to address this issue.

We have invested $2.1 billion in active employment measures and have renewed funding for the Canadian jobs fund which provides the most direct response to the gapper issue.

In New Brunswick alone the federal government has made $5 million available directly for the gapper issue in partnership with that province.

Division No. 317Adjournment Proceedings

6:50 p.m.

NDP

John Solomon NDP Regina—Lumsden—Lake Centre, SK

Mr. Speaker, on October 22, I asked the former solicitor general to back away from any decision to implement the so-called alternate service delivery at the RCMP depot division training academy in Regina, in my riding.

Alternate service delivery or ASD, as it is called, is the latest bureaucratic buzzword for privatization, a bad policy of right wingers who do not believe government has or ought to have any role in providing public services. We have lots of experience with privatization and right wingers in my province in Saskatchewan, lots of fiascos that I wish the federal government would try to learn from.

Privatization is synonymous with lost jobs, higher costs, low wages and reduced services. ASD or privatization has been tried in various federal government departments like CFB Goose Bay.

Here is what happens. The government fires you and then if you are one of the lucky 55% a subcontractor offers you your job back at about half the pay. Privatization: jobs are lost, costs go up to the taxpayers, wages do down and public services are reduced.

ASD is being invoked as a potential money saver by this right wing Liberal government. The Liberals believe they need to save money at the RCMP because the force's budget is in a management mess. Things are so bad that when treasury board realized last October that the RCMP had apparently overspent its budget, treasury board would not release any more funds without undertaking a $1 million audit of the operation of the entire force by management consultants KPMG.

How bad a budget management problem do you need to justify spending $1 million on an audit? The RCMP has a budget of $1.2 billion. By October it was overbudget by $11 million, mainly in B.C. and Alberta. Ten million was transferred to B.C. from other divisions of the force, cadet training was frozen at the depot in Regina and other serious cuts in policing were implemented, leaving Canadians dangerously under protected.

Now they are looking around for scapegoats and they have seized on the civilian workers at the depot as prime targets. For the record, civilian services at the depot account for $1.9 million of the division's $40 million budget, or 4.75% of the salaries are for the support services by the public servants in that depot.

I met with many of these workers who are concerned for their jobs and their families. They are also concerned about the RCMP and the credibility the force has. They provide a dedicated and cost effective service to the depot division and the RCMP, a quality service that would be lost if plans for privatization proceed.

These employees have already participated in one study of privatization, a study that proved privatization cost the force more money than if they had just kept the status quo.

There is plenty of evidence that the high management and administrative costs of the RCMP are the real culprit. The rights and privileges of the officer class also come at a very high price. If I were working at KPMG that is certainly where I would be looking first.

But in a rush to jump the gun on any other recommendations that KPMG might suggest, a last minute report from depot division management to old division headquarters in Ottawa is recommending that privatization be pushed ahead instead. The report was not done by outside consultants but by area RCMP management. It was based on out of date and incorrect information and in spite of claims that they consulted, the so-called consultants never actually consulted the affected workers. It is strange but it is true.

I wrote to the President of the Treasury Board and the solicitor general last week based on further meetings with my constituents. I have asked them to hit the pause button on the drive to privatize and to make sure they receive and read the KPMG report before making any fundamental decisions like privatizing the civilian depot employees in Regina.

This is no laughing matter for the civilian depot workers or their families and it is no laughing matter for me or the RCMP. I hope the parliamentary secretary can report to me today that there will be no new moves to privatize those civilian services and that any decisions about the depot will wait for the KPMG report.

Division No. 317Adjournment Proceedings

6:55 p.m.

Brossard—La Prairie Québec

Liberal

Jacques Saada LiberalParliamentary Secretary to Solicitor General of Canada

Mr. Speaker, cadet training has been suspended at the Regina depot.

I want to make it clear that this is a temporary suspension. It is temporary, because the RCMP is carrying out a detailed review of its programs and service delivery mechanisms across the country, not just in Regina, but throughout Canada, as part of its duty to manage its resources responsibly.

The RCMP must make the best possible use of its resources in order to focus on its primary mandate, which is policing.

Once the review is complete, a date will be set for the reopening of the RCMP training centre.

The RCMP is recognized the world over for the quality of its training, and our government will naturally do everything it can to see that this reputation continues.