Debates of Feb. 8th, 1999

Federal-Provincial Fiscal Arrangements Act

[Deepak Obhrai, Reform, Calgary East, AB]

Madam Speaker, this is my first speech of 1999. I will begin by wishing my colleagues and all of the constituents of Calgary East a happy new year.

As we approach the new millennium Canadians are looking to their elected representatives, and especially the government, for visionary and bold leadership. The role of the official opposition is to point out to Canadians when their government does not meet these expectations. With this in mind, I rise today to voice my concern over Bill C-65. I do so because I am convinced that this piece of legislation does not address the economic inequalities which exist among the provinces in our federation.

The concept and the intent of provincial equalization payments in order to guarantee all Canadians comparable services and standards of living is indeed a noble goal. My party supports this concept.

Reform members who have spoken today have made the point very clear that we support the concept of equalization and of Canadians having a guarantee of comparable services and standards across the country.

The role of every government, including the federal government, is to ensure that the equality of all Canadians is guaranteed. That is the cornerstone of my party's policy. Therefore, why are we opposed to this legislation? This legislation falls short of achieving this goal.

What amazes me is that after so many years of experience—and we have had this program for close to 40 years—one would think that this government would have learned to use our financial resources more effectively. However, what we have before us today is a status quo piece of legislation which is flawed and does nothing but pour more money into this program.

Why do that? Every program this government introduces costs more and more, while Canadians are burdened with oppressive tax rates and coping with the crisis in our health care system. Can the government not use taxpayers' money more prudently? Apparently not.

I am also amazed to learn that in a country rated as one of the best and richest in the world we have seven have not provinces and three have provinces. Why is 70% of the country made up of have not provinces? It is difficult to understand. One can readily understand a province needing assistance when an important sector of an economic activity collapses.

The current fisheries crises on the east and west coasts require attention and the injection of resources. The federal government should intervene to ensure that Canadians living in these regions do not suffer undue hardship.

However, that being said, the systemic equalization program that we are discussing today is inefficient, a waste of resources and fails to address the underlying problem of regional economic disparities.

This morning the Leader of the Official Opposition and my colleagues outlined some of the major problems and flaws in this program. Let me highlight some of them again.

The formula for determining the distribution of funds is overly complex and convoluted. It is based almost entirely on assumptions and not on hard facts or statistics. The current program ends up pitting province against province and results in resentment and conflict, the haves versus the have nots.

There is no accountability, leaving the entire process open to political manipulation and bureaucratic interference. It penalizes provinces which display industriousness and innovation.

I would like to elaborate on my last point. In my home province of Alberta the cornerstone of our prosperity has been the oil and natural gas sectors. We are and always have been proud to share these resources with our fellow Canadians despite the introduction of the unfair and discriminatory national energy program during the early 1980s.

Today oil prices are quite low. This has led to hard times and layoffs in the oil patch. However, due to the resilience of Albertans and their government, Alberta is not facing an economic crisis. This is because Alberta has diversified its economy to avoid such situations.

The federal government could learn much from the Government of Alberta. It could also take some pointers from the Government of Ontario. The Ontario economy is booming through low levels of taxation and job growth.

The question still remains: What are we to do with this inherently flawed equalization program? The official opposition suggests a new approach. For starters, let us discuss a new approach to equalization through open and honest debate in parliament.

We are supposed to be the custodians of the public purse. It is up to us to find cost effective ways to ensure that all Canadians have comparable services. We must also eliminate the arbitrariness of the current program and eliminate bureaucratic interference. We must create a transparent and accountable manner of addressing regional inequalities. This could be achieved through a simpler formula.

The official opposition's new Canada act proposes two basic reforms which have been outlined by speakers from the official opposition. I am going to repeat them so that members opposite will understand what we are trying to say. They are: the equal treatment of all Canadian citizens with per capita grants to provinces for shared cost programs, and a single equalization grant based on a macro indicator of per capita provincial GDP compared to per capita national GDP.

Canadians are respected around the world for their generosity and desire to help others. The citizens of our country are compassionate people who will go to great lengths and sacrifices to ensure that their neighbours are well taken care of.

However, this government should not take this goodwill and generosity for granted. I am sorry to report that our current method of equalization takes advantage of the compassion inherent in Canadians.

I will conclude by stating that what is needed is a frank and open discussion in parliament over the nature of equalization payments in our confederation. I humbly submit that the Reform Party's new Canada act proposals merit serious consideration in the debate over the equalization program in our country.

[John Bryden, Liberal, Wentworth—Burlington, ON]

Mr. Speaker, first and foremost the Canada act to which the member refers is a misnomer. This is not legislation. This is merely a proposal on the part of the Reform Party. If that party were very serious about it, it would introduce it as legislation, possibly as a private member's bill.

I would like to take the member to task slightly in his suggestion that the way to correct or to reform the equalization process is to treat all Canadians equally. The problem with that concept is that there is great disparity across the country. In fact Canadians do not have equality of opportunity either in terms of their resources or their industrial base.

The member suggested that 70% of Canada is have not because seven provinces are recipients of equalization payments and three are the actual ones that give out the equalization payments. This illustrates the weakness in the submission in the Canada act that the key is to treat everyone equally.

In fact, 70% of Canada does not quite describe the situation when the member was talking merely about provinces. The three have provinces probably account for 80% or 90% of the actual industrial and resource base of the country.

Would the member perhaps reconsider his approach to treating everyone equally and consider the disparity of opportunity that exists among Canadians rather than ignoring the inequalities among us all?

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, I am extremely happy that my colleague asked a couple of questions and made some comments. We will introduce the new Canada act when we are over there and they are over here.

The second factor is that under no circumstances will we give up the cornerstone of the policy that all Canadians and all provinces are equal. How did we suddenly come to recognize the factor that 70% of the provinces are have nots? It was from the formula those members came up with that is so complex nobody can understand it. People in my province cannot understand this formula. It is they who have created have not provinces versus have provinces. The Reform Party has stated that.

We agree with equalization. We agree with the policy that all Canadians are equal, but we are asking for a better allocation of resources like we have proposed. Those members must have been listening to what we have said about how the equalization program should work.

[Gerry Ritz, Reform, Battlefords—Lloydminster, SK]

Mr. Speaker, I listened intently to my colleague's speech. One thing he did not talk about was a provision in the new act to tax casino profits. The federal government has realized that some tax dollars are being generated in gaming whether we talk about casinos or VLTs or whatever. I know VLTs have become quite a contentious issue in Alberta, the member's home province.

Would the member share with us whether he thinks there is a taxable net benefit to society? We have Gamblers Anonymous and the social ramifications of family break-ups and so on that are being caused. Does the member really consider that the federal government will see a net taxable benefit in that regard? I know Saskatchewan is struggling with the concept of whether there is anything there that is taxable.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, that is a very good point. I am sorry to see that it was introduced. The member is right that my province is struggling with it. I personally believe that VLTs, as has been done in my province, should only be in casinos where those who want to go there can go. They should not be accessible to the general public. The member is right. I do not agree.

[John Bryden, Liberal, Wentworth—Burlington, ON]

Mr. Speaker, I was intrigued by the member's suggestion that the new Canada act will not be introduced until the Reform Party forms the government. I would suggest that the new Canada act may never be introduced at all.

I would also suggest that he kindly consider calling it something other than an act which suggests that it is already legislation that has passed. He could call it a bill but it has not actually been submitted before parliament. Would the Reform Party be up front and call it what it is, which is simply a proposal?

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, Canadians who will decide who will be sitting on that side. I rest assured that Canadians will ensure that if the Liberals carry on with heavy taxation and continue the health care crisis they will on this side pretty soon. Let us not worry about that. We will leave it to the decision of Canadians.

[Gurmant Grewal, Reform, Surrey Central, BC]

Mr. Speaker, I rise on behalf of the people of Surrey Central to express opposition to Bill C-65, an act to amend the Federal-Provincial Fiscal Arrangements Act. Many of my colleagues have spoken very well from different angles and I shall be looking at some of the technicalities in the bill.

The subject matter of the bill is commonly referred to as the federal-provincial equalization payment arrangement. Every five years since 1957 the federal government through the finance department reviews the equalization program. Bill C-65 deals with the period from 1999 to the year 2004.

The purpose of the equalization program is to equalize the provincial revenue raising capacity which enables provinces to provide reasonably comparable levels of the public services at reasonably comparable levels of taxation. In the absence of equalization payments wealthier provinces would be able to provide more services to their residents than poorer provinces with the same level of taxation. The equalization program is important to the Canadian Confederation. This program is only as good as the process that allows it to keep pace with the provincial tax system.

Let us look at the process. The key element in the equalization formula is the representative tax system commonly called RTS. The RTS is a hypothetical tax system which is representative of the actual systems of the separate provinces. The key to success rests on how well the RTS reflects provincial tax systems. The RTS ought to be comprehensive, representative, accurate and appropriately categorized.

The RTS should include all revenue sources used to support public services comprehensively. Also a partial coverage of the revenue sources yields a biased picture of relative fiscal capacities of the provinces. The RTS should use definitions of tax bases that reflect the tax structure actually used by the provinces to reflect what governments actually do. It should not represent imaginary, unfair or unrealistic measures. It should be representative of the actual tax system.

The data used to measure the various tax bases must be as accurate as possible for it to be a reliable measure. The items in the RTS that make up a category or revenue source should have common characteristics, the ability to be taxed at a similar rate and should be appropriately categorized.

The finance department currently uses such criteria for its assessment of the RTS but nowhere is it explicitly set out. The finance department has not formalized the set of principles to guide its review of the RTS. It is necessary to arrive at a common way of estimating the tax base.

For many of the 33 revenue sources used by the department the bases are not straightforward and no consensus exists. I will give six examples to prove what I am saying. For example, some provinces calculate their payroll taxes on the total payroll of a business while others tax only a portion above a certain threshold. Still other provinces charge no tax at all. For the purpose of RTS the base chosen across all provinces must be common.

For sales taxes the base used in the RTS is no longer representative of the tax structure used by all provinces. The four provinces that account for a third of Canada's population use a common sales tax base, the GST, which is different from the one used in the RTS. We are comparing apples to oranges. They are not equivalent. There is a need to review the way the sales tax base is currently measured.

Another example is user fees. User fees are not part of the current federal-provincial discussions for the 1999 renewal. It is very important to mention here that governments at every level are resorting to alternative revenue sources such as user fees. It is a tax with only a semantic distinction.

Provincial and local governments receipts from user fees doubled from $6 billion in 1984 to $12 billion in 1994. In just 10 years it doubled. How these revenues are treated in the equalization formula can have a significant effect on overall equalization payments. User fees imposed by the provinces have been part of the equalization of the RTS since 1967.

Similar fees imposed by the municipalities were brought in with the 1982 renewal. Currently they are included under the miscellaneous revenue category of the RTS. This is a category that is altogether different and impacts on the calculations of the complicated equalization formula.

The fourth example is that since 1977 lottery revenues have been treated as a separate revenue source in the RTS, with gross revenues from the sale of lottery tickets constituting the lottery base. It worked well until the provincial gaming sector became significantly transformed.

Today provinces are operating video games, casinos, bingos, VLTs, break-open tickets and other games of chance. The RTS base does not cover these newer gaming activities. The revenues are treated differently for equalization purposes. Where a casino is operated by a provincial lottery corporation profits are equalized under the lottery revenue source. If the casino is operated by a government department the gross revenues of the casino are equalized under the miscellaneous revenue source in the RTS. Again we are mixing apples with oranges.

Similar inequities arise in the treatment of revenues from other games. The RTS has become less representative of the provincial taxing policy. We will see if the government is addressing these gaming inequities in the bill.

The fifth example is resource taxation. Resource taxation is an area where the ground is always shifting. The resource revenue bases in the RTS are measured on the basis of the value or volume of production. Ideally they would be measured on the basis of economic rent or the value of the resource over its cost of production. Rent is a measure of taxable potential, not actual but potential. It consists of a value that can be taxed without affecting production because natural resources in different locations can differ in quality and production costs. Rent associated with them can also differ significantly. These differences are not captured by the value or volume of production.

Also, there are separate sources, for example, new oil, old oil, heavy oil or mined oil.

Saskatchewan argues that the current equalization formula lumps together oil sources that have much different profit potential. The resulting national average tax rate overstates the extent to which the low profit oil can be taxed. Royalties generated from low profit oil may not be sufficient to compensate for the loss in equalization payments associated with the production of that oil. Production of such oil may cause a province to lose more in equalization transfers than it gains in oil revenues.

Similarly, forestry revenues include income from logging plus royalties, licences, rentals or fees. The tax base used in the RTS for forestry revenues is cubic metres of wood cut on crown land. The province of Quebec argues that trees are not a homogeneous product and I agree. Spruce grown in Quebec is not equivalent in value to the cedar grown in B.C. The revenue used for forestry products is related more to the value of the product than the volume of production.

To get technical, the revenue yield of forestry products is related more to the value of the product than the volume of production. The current RTS base for forestry revenues may exaggerate the fiscal capacity of Quebec and other provinces with large volumes of relatively low value wood products.

The Department of Finance has failed to find a way to accommodate provincial concerns in the area of resources taxes and appropriately categorize them.

The sixth example is property taxes. It produces $2 billion in this category, the second largest amount of entitlements in the equalization program, almost 22% of the total. When the RTS was first adopted, municipal property taxes had been left out of equalization because there was no suitable measure available to determine the base for the real property tax. Still the government has not developed a suitable measure. The government is using the wrong yardstick instead of the 36-inch one.

Comparable data on real property values across provinces has always been difficult to obtain. The base needs to be assessed rather than observed. The tax base is the income earned by the taxpayer, not the potential. The base is a stock of heterogeneous items, only a small portion of which changes hands each year. The value of the stock must be estimated or assessed.

Assessments inevitably involve judgment and judgments can differ. They can differ from item to item. The problem is compounded by the fact that the assessment practices differ from one class of property to another, from one province to another and from one municipality to another.

In addition, the assessments are infrequent and use different base years. Thus the assessments are not comparable within the same municipality either. The government therefore lacks a common measure of property values. There is no agreement on the appropriate base for taxing property. Market values are volatile and changes in the market value do not necessarily reflect changes in fiscal capacity. The current property tax base measures relative fiscal capacity.

The weights used in the formula to distribute property values across provinces are arbitrary and the formula is not sufficiently sensitive to changes in property values. The formula is not consistent with the basic RTS principle that the tax source used should closely represent what provinces actually tax. Not even one province levies property taxes on the basis used in the equalization program. Despite the red flag by the auditor general, the Liberal government has done nothing to rectify this problem. It continues to measure a yard with a 26-inch yardstick.

There are many flaws in the present equalization program. It should be completely reformed. We know the equalization's provision has limited the cumulative growth of total equalization payments to the cumulative growth of GNP from the base. Ceiling and floor levels were also introduced. I will not elaborate on that but it does not work favourably. Rather it would make it difficult for the provinces, particularly those close to the floor level, to plan their budgets.

There is asymmetrical treatment of underpayments and overpayments. The overpayments are treated as non-interest bearing loans to the provinces. Last year it cost the federal government $38 million. Free use of federal funds is not necessarily shared equally by all receiving provinces. The federal government does not charge interest on the underpayments.

The government has manipulated the program for political favours. Our leader reminded us that the premier of Newfoundland, Brian Tobin, was given a gift before the election. The program could be more effective if the federal-provincial committee on equalization began its review of outstanding issues earlier in each new equalization period.

The final decision about this program rests with parliament. The Department of Finance should have made a greater effort to educate parliament and the Canadian public in general. It could use parliament more effectively by soliciting advice from a wider circle of interested parties rather than just relying on the advice of a federal-provincial committee working behind closed doors.

The government has had five years. Just three days ago we received notice of this bill without draft legislation. I wonder what the government has been doing for five years. The Liberals have denied the opportunity for public consultation or academic input into this case. This process is characteristic of this government. We all know the Liberals are masters of the top down, arrogant, manipulative process. The least the government could do would be to establish a committee of parliamentarians to study this issue in detail.

The constituents of Surrey Central and I have some serious problems with the unnecessary and traditional way the political leadership of our country has handled the equalization program. Evolving over many decades, every five years the traditional political parties have given us an extremely convoluted and complex process. Its design is so archaic and cryptic that it defies logic and reason. It is not fair that our system is such a conundrum. There is no reason for that to be the case. This could be a simple series of calculations. That is where the problem begins.

Liberals are failing Canadians by not providing a system that is capable of providing measurements of provincial revenue raising capacities that are comparable from province to province. What is worse is that the Liberals are satisfied that the best measurements possible are being used. This is unacceptable.

The measurements should be accurate, reliable and sound. In this case they are not. Why would the Liberals allow such measurements to be used? In the five years the Liberals have had to prepare for the new equalization program they have done nothing but tinker with it.

The Reform Party has advanced the new Canada act which seeks to improve the Canadian political and economic system.

There is a need for a single social union agreement on transfers from the federal government to the provinces. The program presently costs $48 million. Eventually it will cost $242 million.

I and many Canadians wonder why every proposal from the government costs Canadian taxpayers more money. Equalization as it is structured is divisive. It pits one Canadian against another. The program is used as a political gift, as mentioned earlier in the case of Premier Brian Tobin of Newfoundland.

In conclusion, on behalf of the people of Surrey Central I am voting against the bill. The people of Surrey Central do not want me to rubber stamp my approval on the work that the government is doing on Bill C-65. I will not do that. I am proud to represent my constituents who would not do that either.

Like British Columbia and Alberta, Ontario is a contributing province. We will see how the 101 members from Ontario will vote and justify it to their constituents.

I oppose the bill until the whole equalization program is completely reformed.

[John Bryden, Liberal, Wentworth—Burlington, ON]

Mr. Speaker, the member's remarks give me an opportunity to express feelings that I have with respect to gaming. Mr. Speaker, if you will forgive me I will go slightly off the topic but I hope that the member will react to my comments.

I have been increasingly uneasy with the way provinces have more and more been exploiting casinos, gambling and lotteries in general. I fear that this is creating as many if not more problems than is worth the money that is being collected. In other words the provinces are causing addiction, breaking up families, contributing to all kinds of problems that in the end the federal government will have to address by increases in transfer payments for social and health spending.

Gaming is becoming a serious addiction, on the same order as alcoholism and drug abuse. We, as legislators, be we at the federal level or the provincial level are forgetting our duty to the citizens by allowing the spread of this terrible problem simply because provincial governments want to make money easily without having to raise taxes. They want to make money by exploiting the weakness of people. This is a serious problem that the governments are going to have to address eventually.

I ask the member whether he agrees that gaming has become a serious sickness in society, that it is aided and abetted by the provincial governments and that sometime the federal government should intervene in order to protect the interests of Canadians who obviously cannot protect their own interests.

[Gurmant Grewal, Reform, Surrey Central, BC]

Mr. Speaker, I sincerely thank the hon. member for bringing forward this issue. I know he is sincere in coming forward with his question.

Last weekend I was in Windsor, Ontario, a city with casinos. I noticed that the small businesses, particularly the restaurants, were closing in that area. The reason is that the casinos were subsidizing the food and the smaller businesses were suffering. The revenue from the casinos was not going to the community where it was doing the damage to the community. The smaller businesses were suffering and complaining. At least seven businesses complained to me. Three of them were restaurants.

Particularly in the gambling industry it is is recreation on the one hand but on the other hand it is a serious disease. It is mostly seniors who are affected by the disease. It is a provincial jurisdiction and I cannot comment on what it should do or what it should not do. Definitely this is a point that all politicians at whatever level should look at seriously so that we can preserve the social values in our society and protect those who are addicted to gambling.

Maybe once in a while it is fine for people to go and enjoy it, but it hurts me when those who are addicted find all their life savings drained into gambling.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to speak to Bill C-65, an act to amend the Federal-Provincial Fiscal Arrangements Act, at second reading.

I have spent some time listening to the debate of hon. members and thought it would be appropriate to get back to the bill and to put on the record some of the principles with regard to equalization.

The equalization program is one of the cornerstones of the country. It 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 than other provinces. That is a very important principle within equalization.

Equalization is also an unconditional federal payment and the provinces can use it as they wish. Seven provinces currently receive equalization payments: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba and Saskatchewan. They all currently qualify for payments.

The proposed Bill C-65 would renew the equalization program for a five year period from April 1, 1999 to March 31, 2004. The basic structure of the equalization program would remain the same as proposed under Bill C-65. There is no change to the basic structure of the program.

The bill includes 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 costs of the equalization program by an estimated $242 million and 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 fluctuation in equalization transfers.

The proposed amendments are the result of over two years of extensive consultations and review of the equalization program by the federal and provincial governments. It is important for members to know that the review of this process that has been with us for some time took two years to look at the rationale of the program, its benefits, its fairness and its equity. The premiers and provincial representatives along with the federal government concurred with the principles of our equalization program.

At the time of the 1998 budget it was projected that equalization in 1998-99 would amount to $8.5 billion. The last official estimates released in October show an increase to $8.8 billion. New estimates of equalization will be provided when the 1999 budget is tabled in the House on February 16.

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 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 tax collection agreements from many major revenue reductions that may be caused during the course of the year by changes in federal tax policy.

Those are the principal elements of the bill before the House. This is second reading. The speaker who just addressed the House raised some concern that he did not want to rubber stamp approval of the bill and that he was opposed to it. This is not the time to deal with approval of the bill. This is the time to look at some of its elements. The bill will go to the finance committee which has representatives of all parties. Members of parliament do a lot of their work in committee where officials appear before the committee—

[An hon. member]

If you believe it, pal.

[Paul Szabo, Liberal, Mississauga South, ON]

Reform members want to deny the fact that at committee important work is done. I know that, having been a member of both the health committee and the finance committee. We have had the opportunity to deal with officials, to deal with the minister responsible and to hear witnesses on a whole host of things.

I know the Reform Party has made some suggestions. It is useful to have suggestions on how the equalization program may be modified or may possibly be improved. The time to get these points before the House is through its committee system. That is why it is there.

I spent the afternoon listening patiently to the speeches. I intervened on a couple of points which I thought were concerning because they may have given Canadians the wrong impression about what the situation was with regard to the equalization program.

One of the examples given by the member for Medicine Hat dealt with the employment insurance system. The member suggested that the EI program was biased and a form of equalization in itself. The member also went on to present the House with a fact, at least in his own mind, that somehow people in Alberta have to wait longer to get EI benefits than somebody in the maritimes.

I am sorry but that is just not correct. It is absolutely wrong and the member should correct the record for what he said. They do not have to wait a half a year. The member said the people of Alberta had to wait a half a year and that is just not the case.

The employment insurance system is very specific. It is prescribed benefits for all Canadians. It has a clawback mechanism as well as intensity rules for frequent users which actually would reduce benefits, but in terms of eligibility for benefits what the member said to the House was absolutely wrong. The member should clarify the record.

The member from South Surrey presented the House with a very creative argument about immigration and how it was awful that Quebec was getting so much money per capita more than anybody else. She tabled the numbers and said that was $3,000 per capita here and $1,000 for somebody else. It begged a question. If the numbers were in fact that different, if the numbers were as they suggest unfair, why did the member not present to the House what the reasons were from the officials, from the department, from the minister, from any colleagues in this place? If only she asked the question, she would have had the answer.

Rather the whole strategy of this debate on behalf of the Reform Party was not to give answers but rather to raise spectres, to raise simple allegations and not to answer them, to leave Canadians hanging, saying that they said so, so it must be wrong.

That was not the case at all. The member for Calgary Southeast decided that he would try to slip one through on taxation by saying that all a province had to do was keep the tax rate low to continue to collect equalization payments. If they raised their taxes then they would lose some equalization dollars.

It is not as simple as one province increasing its tax rates and somehow losing some equalization payments. The system is much more complex than that and takes things into account. It provides for five-province averages of tax rates.

The allegations or insinuations in the House in many of the speeches given by Reform members have been to suggest that there is an inequity, to suggest that there is a wrong, to somehow suggest there is something going on that should not be going on. They have used time and time again a rhetorical question: “Is this fair? Look at these numbers. This could not be fair”. Not one member rose in his place and actually said “I made the inquiries and I now understand why the numbers are different”.

Every member of parliament has heard these questions before on things like Canadian film production subsidies where Quebec gets a disproportionate amount of subsidies for French film production on a per capita basis.

There is a reason for that and I will offer it to the House. The reason is that production for French language film is centred in Quebec and provides that film for French speaking Canadians across the country. It is not just for Quebeckers. It is for francophones in Canada who want to enjoy French language film. That is the explanation. If we take that into account we will see that the numbers are fair and equitable.

We will see with regard to immigration, with regard to property taxes and with regard to many of the examples the Reform Party raised as spectres of inequity that they are explainable. The question then becomes why did these members not do the right thing and explain the variances that they found in some of these issues. Why did they not try to answer the question? The reason is that it is politically opportunistic to raise the rhetorical question, suggest it is wrong and leave it there.

Canadians have a right to know all the facts. With due respect, I think what we have seen today is an example where members have not given all the facts. I do not think they have done Canadians a service by presenting facts without proper investigation, without proper inquiry to ensure that the allegations or the insinuations they are making were correct. These are important points for Canadians to know.

One of the most repeated allegations by the Reform Party today was that this system provides disincentives for the seven provinces that presently receive equalization to pursue economic growth, to create jobs and to improve their lot. This is basically saying that all premiers who receive equalization feel that they will get a better benefit by keeping equalization than there would get by having more growth and more jobs in their province. That is just not the case.

The economic spinoff and the ripple effect of economic growth and job creation in provinces create value added benefit for the provinces that is worth far more than simply the loss in equalization payments that they would otherwise receive.

It is absolutely absurd to suggest that a province would value equalization payments more than it would value jobs for its citizens. Yet throughout the entire debate the Reform Party has suggested that somehow the provinces, the treasury officials, the premiers and so on all get together and connive to see how they can screw the system.

When the provinces get together and they present their cases they know exactly who gets what. They know what the rules are. It is a transparent process. They know what the calculations are. There are adjustment features as the other member from B.C. mentioned. Those things are taken into account.

We have a system that is already in place. We have come forward to renew it for another five years. Effectively it has the same fundamental principles of equalization for the benefit of all Canadians which basically promote equity among Canadians regardless of where they live and regardless of where they choose to live because we are a mobile society. I think that is a very important aspect. The equalization program continues to support Canadians as a mobile society no matter where we choose to live, to work or to play.

Those things are there so that we have the services that we can get, no matter whether we are in the east or in the west. From coast to coast to coast the equalization program is there and working to ensure that all Canadians have those services.

I appreciated the opportunity to put some of these points on the record. It is important to understand that we are here at second reading.

I heard some suggestions where there may be some discussion about how we might change it. I welcome those suggestions from the members. I hope their representatives will be at the finance committee and that they bring their briefing books along to deal with the officials and to explore these possibilities. This is the opportunity to do it. If they believe they have adequate opportunity, they can make changes. That is the way democracy works.

[The Deputy Speaker]

Order, please. When the House resumes consideration of this item, the hon. member will have six minutes remaining in his time.

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

[John Reynolds, Reform, West Vancouver—Sunshine Coast, BC]

Mr. Speaker, tonight we will talk about APEC for four minutes. I want to start off by reading into the record exactly what commissioner Ted Hughes received in a letter addressed to him on February 3 regarding his role in the hearing. In the public interest, he is to inquire into all matters touching upon these complaints, to hear all evidence relevant thereto and to ensure a full and fair hearing with respect to these complaints.

In his letter to the new solicitor general, Ted Hughes points out very clearly “I have concluded for the purpose of the present inquiry, a full and ample opportunity to present evidence to cross-examine witnesses and to make representations can be best achieved by the complainants having counsel. Accordingly I write to recommend in the words of Madam Justice Reed that the state fund counsel. That is the purpose of this letter.

“The question I have under study is not whether state funded counsel should be provided but rather whether I have as a matter of law the authority to order that it be provided. You will appreciate from what I have said that my answer to the former question would very definitely be in the affirmative. While it is going to take time for me to study and research the legal question before me, I believe that, as a courtesy to you while that process is occurring, I ought to make my view of the funding issue known to you and communicate it to you in the form of a recommendation pursuant to the protocol sanctioned by Madam Justice Reed. If such a recommendation has not been previously been placed before you, I believe this is a fair and reasonable course for me to follow”.

Mr. Justice Hughes is a well respected person in British Columbia. He has been on the bench. He has worked for governments in British Columbia. The Reform Party is very happy that he is now heading up this inquiry. We know from his past record he will not be pushed around. He will do what has to be done to make sure that justice is served in this purpose.

I find it very strange that today in the House the minister was asked again by our critic for the solicitor general whether he will agree to these recommendations by Justice Hughes and yet we are still looking at it. This is not something that just happened yesterday. The letter has been there for close to a week, but the government has known for a long time. The previous commissioners requested funding.

There cannot be a fair hearing unless everybody is well represented. I hope Justice Hughes in his own research will find that under the act he has the power to do this funding on his own in case the government refuses once again to go by what he is asking it for.

This whole APEC situation has been a black eye on Canada. A number of things have happened in this inquiry. A minister has had to resign over this issue. The former chairman of the commission has resigned over this issue. The two other commissioners have resigned over this issue. Here we are back now with Justice Hughes starting into this hearing and looking at getting some more support from this government to get ahead and do what needs to be done.

The government in hundreds of questions in this House on this issue has always said “Let us let the inquiry get going. Let us let it happen”. Now the new commissioner is saying to fund the other parties so that we can get this under way in a fair and prudent manner.

I would implore this government to do that. Make sure it is funded. Make sure it moves forward. We are all looking forward to the results that Mr. Hughes will come out with.

[Jacques Saada, Liberal, Parliamentary Secretary to Solicitor General of Canada]

Mr. Speaker, the more things change—

For months now, we have been peppered with questions about APEC and the events in Vancouver. For months now, the opposition has held to a position that is fundamentally contradictory.

On the one hand, they are calling for a public inquiry while, on the other, they want the commission to be allowed to do its work. But when we agree that the commission should be allowed to do its work, they go back to their call for a public inquiry. The opposition's position is completely illogical.

Mr. Hughes, who is now chairing the commission, has said himself, and I am quoting very freely here, that he will do “whatever it takes to uncover the truth of what went on in Vancouver”. He himself, therefore, is saying that the commission is able to get to the bottom of things, to effectively determine what happened and to submit a report, which, I would remind members, will be made public.

We received a letter from him, and this letter was released Friday at noon. What could be more natural than for elected officials to take the time to read this letter, to examine it and reflect on it, and to respond in a balanced manner that takes into account the full proposal, the present context in its entirety, and the mandate of the commission.

[Bev Desjarlais, NDP, Churchill, MB]

Mr. Speaker, the neglect of first nations is an ongoing black mark against the Liberal government. It should be ashamed of the way it ignores the huge problems facing these people. The government claims to be concerned about the problems but it does little about them.

First nations in my riding live in third world poverty. Unemployment is over 70% and over 90% in some areas. There is homelessness and a lack of clean drinking water. Preventable diseases like TB are prevalent. When I go to these communities I can hardly believe what I am seeing. The human tragedy of these conditions is heart breaking.

Last November I questioned the Minister of Indian Affairs and Northern Development about conditions at the Shamattawa first nation. Shamattawa is a sad example of all of these problems. Four out of five children in this community have been or are addicted to solvents. Since 1992 there have been over 100 suicide attempts in this community of under 900 people.

Last week I got a letter from the Minister of Indian Affairs and Northern Development saying that Shamattawa is a high priority community. If it is such a high priority, why has the government ignored its appeals for a healing centre to treat addicts within the community? Why did the government promise to pay for a recreation centre and only commit 16% of the needed funding? If this is what the Liberal government calls a high priority community, I would hate to see the low priority community.

Shamattawa is not the only community that this Liberal government has abandoned. In my short time today I cannot possibly list them all but I will mention a few.

One that I definitely want to mention is Garden Hill. This community of about 2,700 people was shaken by a terrible tragedy last month. An infant choke to death because no nurse at the local nursing station was able to respond to the call in enough time. The station is supposed to have eight nurses but only had three at the time.

The lack of health care professionals does not only affect first nations. Thompson has a severe shortage of doctors. These days someone who wants a simple physical has to book months in advance. Doctors are leaving and nurses are being laid off because of government cuts. These cuts are affecting all northern communities, first nations and non first nations alike.

That is why the New Democratic Party is calling on this government to reinvest at least $2.5 billion into health this year. Anything less will not be enough to patch up the holes we are seeing in our health services.

Earlier I mentioned the poverty and poor housing on first nations. I want to point out the link between this and the health problems we are seeing.

Take the God's Lake first nation. This small community of 1,200 accounts for 10% of all the cases of TB in Manitoba. That is a shocking number but not surprising when only about 10% of the homes on the reserve have basic sewer services. If the government would do something about these kinds of problems, it would save millions in health care costs.

The Liberal government must do more to address the conditions on first nations. These conditions would not be tolerated in Toronto or Shawinigan. It is a double standard to ignore the first nations. The Liberal government always points to the “Gathering Strength” initiative and the aboriginal healing fund as if they are going to solve everything. They do not even come close to what is needed.

We need a real investment in first nations housing, health care and economic development. Token gestures and empty words are not enough.

[David Iftody, Liberal, Parliamentary Secretary to Minister of Indian Affairs and Northern Development]

Mr. Speaker, I am pleased today to respond to the hon. member for Churchill on behalf of the Minister of Indian Affairs and Northern Development concerning the social problem at the Shamattawa First Nation.

The Government of Canada is concerned about the living conditions facing the residents of Shamattawa. We are working in partnership with the first nation to take action in addressing the social conditions.

Numerous meetings have occurred among regional officials and the chief and council over the past few months. On November 20 officials from Health Canada and the Department of Indian Affairs and Northern Development met with Chief Massan of the Shamattawa First Nation and Chief Francis Flett of the Manitoba Keewatinowi Okimakanak. They discussed the first nation's desire to build a multipurpose complex which would contain an arena. On December 24, 1998 a letter committing $400,000 toward the cost of this multipurpose complex was provided to the first nation. These funds include $200,000 in advance to the first nation's base capital allocation and another $200,000 provided through social and educational reform components of the gathering strength initiative.

In addition, $150,000 was made available to enhance education facilities. The first nation anticipates the construction of two portable classrooms to begin in the spring.

Construction of a water treatment plant is also under way at a cost of $4,736,000. A further $33,000 has been identified to assist the first nation in the development of a human resource strategy that will target education and employment opportunities for youth.

Finally, I understand that the community is working on a proposal to access dollars from the Aboriginal Healing Foundation, to which the member referred, to address its needs for a healing centre on the reserve.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I asked a question recently of the Minister of Human Resources Development regarding EI and the changes to EI that have had such an impact on the riding I represent. I was not at all satisfied with the answer. In fact I do not really know where the comments of the minister came from.

The minister maintained that it was our party which has been calling for a reduction in premiums. Clearly our party has been fairly constant in our position that we want the eligibility to be increased and the levels of benefits to be increased, but we certainly do not want the premiums to be lowered. That certainly was not our prime motivation.

The New Democratic Party has been looking at the impact of the cuts to EI for quite some time. In fact our EI critic, the member for Acadie—Bathurst, has toured the country recently, going to virtually every community, getting input from working people and asking them about the impact the cuts have had on their working lives. Certainly the feeling has been that the current system has had an impact greater than I think the government even realized when it introduced the recent changes to EI.

My riding of Winnipeg Centre has seen a cutback or a withdrawal of funding of $20.8 million. One can imagine the impact it would have on any community to pull out that kind of capital.

Looking at the inverse, if a business were to come to Winnipeg with an annual payroll of $20.8 million, one could imagine that any level of government would pave the streets with gold to try to attract that type of business to the riding.

Certainly this has had a devastating effect. The riding I represent has two of the poorest postal code zones in the country. Already an awful lot of people are living very close to the poverty line. It is a very marginal area. To pull $20.8 million out of that community meant that many more people were pushed over the fine line from living marginally close to the poverty line to living in abject poverty. It has had a huge impact.

We believe the changes necessary go far beyond what is being hinted at or alluded to.

We believe there have to be dramatic changes in the eligibility. We want at least 70% of all unemployed people to be eligible for benefits. They should be getting benefits in the neighbourhood of 60% of their working earnings. They certainly should not be penalized the way they are now in terms of clawbacks, where if their income is over a certain level they have their benefits clawed back.

One of the harshest rules that has come into effect recently which has caused the biggest inconvenience is the divisor rule, where the benefit is calculated using all of the 26 weeks preceding the date on which one files, including the dead weeks that one may not have worked. Obviously rolling those weeks where one has no income into the average will bring down one's monthly benefit.

Again, I do not believe the government realized how sweeping this would be. Cases came before the public hearings held by our critic. People came forward who had previously received in the neighbourhood of $350 per week. Their weekly cheques are now $38 per week. Surely this was not the intention of the government. We are hoping that substantial changes will be put into effect in the next budget.

[Bonnie Brown, Liberal, Parliamentary Secretary to Minister of Human Resources Development]

Mr. Speaker, the hon. member has criticized our reduction of the EI premium rate from $2.70 to $2.55, but we feel the new rate provides a moderate reduction for both employers and employees and still provides money to help Canadians find jobs.

The premium rate reduction does not jeopardize benefits to the unemployed. We will spend an additional $800 million per year on active employment measures under EI, bringing federal funding to more than $2.7 billion annually by 2000-2001. We will create even more jobs by using the $3 million transitional jobs fund now in place and by using general revenues to serve high unemployment regions.

On December 14 the minister announced the Canada jobs fund, a permanent program which will build on the highly successful transitional jobs fund initiative. This annual commitment of $110 million will help a greater number of regions across Canada and will help create approximately 10,000 new jobs each year.

We also recently announced that we will be injecting another $465 million over three years into the youth employment strategy to help young Canadians enter the workforce.

The employment insurance system is about making sure people who are laid off or quit with just cause get help in between jobs. A recent study of the system determined that 78% of such people were eligible for benefits. We believe our approach is working and Friday's employment figures bear this out.

We have to remember that the unemployment rate dropped to 7.8% in January, the lowest level in nine years. Last year 143,000 jobs were created for youth, the best performance in 20 years. Last month alone 87,000 jobs were created and 44,000 of these were for youth. Since October 1993, when we came to office, 1.6 million more Canadians are working.

[The Deputy Speaker]

The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 10 o'clock a.m., pursuant to Standing Order 24(1).

(The House adjourned at 6.48 p.m.)