Mr. Speaker, in my previous comments I outlined a number of points with regard to the overall equalization program. I thought it might be helpful to the House simply to review some of those basic facts.
First of all, the equalization program is one of the cornerstones of our country and has played a major role in defining the Canadian federation. Equalization ensures that all provinces have the resources they need to provide reasonably comparable services to Canadians no matter where they live without having to resort to higher levels of taxation in other provinces. That point particularly should be noted for Canadians with regard to the mobility rights that Canadians all enjoy as citizens of this country.
Equalization is also an unconditional federal payment and the provinces can use it as they wish.
There are seven provinces that receive equalization payments, Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan. The proposed legislation before the House would renew the equalization program for a five year period, from April 1, 1999 to March 31, 2004, and the basic structure of the equalization program would remain the same
I repeat, the purpose of this bill is to renew the equalization program, and the fundamental program as we know it today would remain the same.
The bill does include some changes to the program to ensure that it continues to measure the ability of provinces to raise revenues as accurately as possible. These improvements will increase the cost of the equalization program by an estimated $242 million. The changes will be phased in over the course of a five year renewal period.
The bill also includes changes to the ceiling and floor provisions of the equalization program which protect against unusually large fluctuations in equalization transfers. The proposed amendments are the results of two years of extensive consultations and review of the equalization program by the federal and provincial governments.
I think members will remember from the debate that was held in the House when we last dealt with this bill that there was much concern about the disincentive for provinces that receive equalization to pursue economic growth and job creation because it would reduce the equalization payments they were otherwise entitled to. I think many hon. members would like to speak to the issue with regard to disincentive of equalization payments.
At the time of the 1998 budget it was projected that the equalization in 1998-99 would amount to $8.5 billion. The last official estimates released in October show an increase to $8.8 billion. The new estimates of equalization will be provided in the 1999 budget tomorrow evening.
The bill would also renew the provincial personal income tax revenue guarantee program for the same five year period. This program protects those provinces participating in the tax collection agreements from any major revenue reductions that may be caused during the course of a year by changed in federal tax policy.
By way of summary, these are some of the principal elements in Bill C-65. In my view one of the important elements raised in debate was whether there was a disincentive to provinces that received equalization. I thought there was also some interesting commentary with regard to the distribution of equalization to certain provinces.
In that debate with regard to the significant amount of moneys transferred to Quebec, there was an awful lot of suspicion raised that somehow this was improper or incorrect. When I gave my initial speech on this subject, I laid out substantive reasons to point out to the opposition that it is not enough simply to identify the numbers of differences between how much one provinces gets compared to another. The important question is to ask why do those numbers differ and is it fair and equitable.
After two years of consultation between the provinces, the territories and the federal government those people have determined that indeed the equalization program as it exists and as it is proposed to be extended is fair and equitable.