Madam Speaker, there seems to be a problem with members of the Reform Party on the other side of the floor. Of course there is always a problem with them. We are talking about social responsibility and every once in a while we have to redefine and describe for the Reform Party what the word social means.
Equalization payments are one of the cornerstones of Canada. This country is a family. The children of the family that are better off than the ones that are not take care of each other. That is one of the things that has made this country unique worldwide.
I listened to today's debate and a number of points need to be clarified. Questions were asked by members on the other side of the House which I want to do my best to answer.
I have heard over and over again why time allocation? One question that would lead into that is what does the bill do? The legislation amends two programs covered by the Federal-Provincial Fiscal Arrangements Act, equalization and the provincial personal income tax review guarantee. Both programs expire on March 31, 1999. Today is February 15, which means a month and a half from now we have to have something in place because these other two programs are going to expire. There is a good reason right off the bat. Also, our flag is 34 years old today. This is the importance of what we are talking about.
The bill before us is designed to extend the programs from April 1, 1999 to March 31, 2004. We are basically establishing a five year review. There is nothing wrong with that. Things change in this country on a yearly basis, so why would we not have legislation in place that we can renew and review on a regular basis? Five years seems to be a very good basis to set it on. That will allow the equalization payments to continue to be made and revenue guaranteed payments made as required.
There are a number of points that the bill proposes to change in the equalization programs. I will consider the three most important points.
One ensures that the changes in the measurement of fiscal capacity, that is the provinces' ability to take and raise revenue, are provided for in the renewal and will be phased in over a five year period. It also amends the floor and ceiling provisions that protect provincial and federal governments from large and unexpected changes in the equalization entitlements.
Finally, it will amend and clarify the list of provincial revenues considered in measuring eligibility for equalization payments. That is in addition to the amendments to the act. The regulation will change and make adjustments to the measurement of the provinces' relative revenue raising capacity from different tax sources.
Another question I heard was how did the federal government decide on the contents of the equalization renewal package? This is something the opposition should listen to. The answer is that the federal and the provincial governments established priorities for the renewal in early 1997. This is not just something the federal government came up with. It is something we came up with in conjunction with the provincial governments. It is another example of how the government tries its best to work with all the provinces to get the best deal possible for the whole country.
I talked about family, and that is what it is all about. This is the government doing its best for the family of Canada.
The proposals for the changes to the equalization program will have an anticipated cost of around $48 million in the budget year 1999-2000. That will rise to $242 million when it is fully phased in in the budget year 2003-04. That is being put forward after extensive review of the issues with the provinces and the territories at the official and ministerial level. Again, there is extensive review with the provinces and the territories. We are not just doing this on our own. We talk to them and find out what is the best way they think we should be doing it and we come to a compromise.
My colleague across the way from the Conservative Party just does not understand that. He just does not get it. One of the reasons he is in the fifth party is because he just does not get it. If the hon. member would listen to what I am saying here, I will try to answer some more of his questions.
Another question I have heard here in the House today is why are the changes being phased in rather than being implemented immediately. The phase-in of changes is proposed in order to dampen the distributional impact across provinces over time and also to ensure that federal and provincial fiscal planners have sufficient time to adjust to the changes in a predictable, manageable way. We are not going to say “There it is guys, deal with it”; we are saying “Here it is, it is coming. This is how we want to change this after consulting with you”. It gives the provincial ministers of finance a chance to adjust to it. It is a good old-fashioned family way of doing it. It is logical.
I have heard other general questions today as to how equalization works. It seems relatively straightforward. Equalization transfers are determined on the basis of a legislated formula.
First, the amount of revenue that each province could raise if it applied national average tax rates is calculated for revenue sources that provinces and their local governments typically levy. The program currently includes around 30 tax bases.
Second, each province's overall ability to raise revenues from these sources is compared to that of the five provinces making up a representative standard, an average. Those provinces are Quebec, Ontario, and Manitoba for the member across the way.