House of Commons Hansard #176 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was provinces.


Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:05 p.m.

The Deputy Speaker

I regret to interrupt the parliamentary secretary when he is in full flight, but the time for questions and comments has expired.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:05 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, it is my pleasure to address Bill C-65.

Unfortunately the Reform Party cannot support this bill. As my colleague from Calgary Southeast said and earlier my leader from Calgary Southwest said today, Reform Party does support the concept of equalization but we do think that the program as it is structured now not only is wasteful, vague and ill-defined but actually does some damage. We would like to see a different approach taken.

Before I get into that I simply must respond to something my colleague across the way said. He said that we have one tier health care in Canada today.

Let me inform my friend across the way that about 30% of health care in Canada today is funded by private individuals. Maybe he did not know that. Maybe he did not know that only 9% is funded by the federal government now. It used to be 50%, but the federal government did its disappearing act which it chronically does when the going gets tough, and now the provinces have been left holding the bag.

Of course, the member and his government provided the latest example of that when they dumped about $20 billion in spending cuts on the provinces, including his own native Newfoundland which really could hardly afford to bear that kind of loss. My friend across the way should explain to his constituents if he cares so deeply for social programs, how it is that he let his own government eviscerate health care in Newfoundland like he did. I think he has a lot of explaining to do.

I will get into some of the specifics of this bill. The Reform Party has problems with Bill C-65 for a number of reasons. I should explain first of all what this is. This is an equalization bill that seeks to extend the current equalization agreement with some tinkering for another five years. It means about $8.5 billion in expenditures or somewhere in that range per year, in other words about $42 billion over the next five years.

That is a tremendous amount of money. It amounts to about 8% of the federal government's budget every single year. Yet are we having a major task force look into this? Are we having a big discussion about this? No. We had three days notice that we were going to debate it today. Probably not too many days beyond today it will be pushed through by this government because that is the way it does business.

I would suggest that this is one of the most important pieces of legislation that can be brought before this House. There is almost universal agreement that the legislation, and I guess it is in the Constitution now, the whole formula and idea of equalization needs radical reform. There is hardly an economist in the country who would argue that the current design is good.

I want to start by pointing out that it is fraught with opportunity for political manipulation. I will mention this to my friend who just spoke, because he comes from a riding that was formerly held by the current premier of Newfoundland.

Not very long ago in January the premier of Newfoundland announced to everybody that there was was going to be a $30 million deficit. This was a great disaster. Lo and behold two days later we found out that the federal government did some tinkering with the equalization payments. All of a sudden he has $30 million in excess of his budget. He will have a balanced budget. It shows us how open to political manipulation the current system is. He went ahead and called an election on the basis of his balanced budget. That is ridiculous. It is an insult to Canadians. We need to have a system that is a lot more transparent than that.

I point out that we have a Constitution that says that equalization should provide reasonably comparable levels of public services at reasonably comparable levels of taxation. That is about as clear as it is. In other words it is wide open to interpretation. However the current government in power wants to structure it, it will structure it. It does not need all the provinces to agree because the federal government, if it so deems, will go ahead and structure a side deal with one of the provinces. We have side deals now with Newfoundland and Nova Scotia that provide different set-ups.

One of the problems with the formula, which is the most confusing convoluted thing I have ever laid my eyes on, is when it talks about calculating revenues. For instance for forestry, it does not take into account the cost of production. When we go to the people's republic of British Columbia where it costs a fortune to cut a tree and compare it to what it costs to cut a tree in Alberta, there is a huge difference. That is not reflected in the formula. Some provinces are discriminated against because of the huge discrepancies in the cost of production. In my judgment we have another disaster there.

We also have problems with this piece of legislation because it does not take into account the other types of social spending that come from the federal government. I want to give some examples of that. In my judgment and in the judgment of people who have followed this for a lot longer than I have, we constantly see in Canada various programs that seem to be equalization programs of some sort.

Look at employment insurance which is structured on levels of unemployment in particular areas. People in Alberta have to wait half a year to get unemployment insurance benefits. People in Atlantic Canada where there are high levels of unemployment may have to wait 10 or 12 weeks. It is now on an hourly basis but it boils down to somewhere in that range. That becomes a big transfer, a big equalization program.

Look at something like the infrastructure program. A lot of people did not realize that in itself was also an equalization program. It was based on levels of unemployment. Again we see a whole bunch of money going from some provinces into other provinces.

Look at regional development which is heavily skewed toward certain provinces. Look at defence spending. There is a good example. All these military bases are being put in particular ridings not because it makes military sense, not for the nation's defence, but because the government wants to plough some money into it.

I would argue that we need transparency. I would argue that we need a system today where we take into account all of this spending. Then we ask whether or not it is an appropriate amount. Maybe there needs to be a more straightforward formula. My leader spoke of that earlier today.

I do not want to make that the central part of my speech today. I want to talk about how we create have provinces. My friend across the way talked about the need to have ways to bring provinces that are currently receiving equalization into the mainstream so that they do become have provinces. I agree with that. We all agree with that. We believe there should be ways to do that. But I can guarantee that having income tax top marginal rates of 69% like they have in Newfoundland is not the way to do it.

My friend across the way who embraces collectivism or spoke of collectivism in some warm way, and gave a speech about how Canada is one big social program, would be shocked to find out that many businesses do not want to set up shop in a province with marginal rates of 69%. They are scared away by high marginal tax rates. They find it passing strange that an equalization program that actually provides incentives to provinces to have high income tax rates, because that is how they receive equalization payments, actually exists.

I think he would be shocked to find that out. But I encourage my friend to consider that perhaps there is a better way to make Atlantic Canada work better. Maybe there is a way through lowering taxes to attract investment to Atlantic Canada. That is why last week the Reform Party spoke of a plan to give Canadians $26 billion in tax relief. My friend across the way will say “Oh, but you are going to cut social programs”. Not at all. In fact we would increase spending on social programs.

We would cut spending for some things that Canadians do not consider to be very important. We would cut spending for the CBC. We think that $800 million a year spent on CBC television is a horrible waste. We think that the money that currently goes into regional development has become a huge pork barrel industry.

My friends across the way will know that even in Atlantic Canada many people are extraordinarily cynical of ACOA. They see all the manipulation that goes on whereby government ministers reward their friends.

I point out the situation in the Prime Minister's riding where all kinds of chicanery is taking place. Somebody who bought a hotel from the Prime Minister has received a bunch of federal grants. That is a little bit ridiculous. I see my friend getting hot under collar, but sometimes the truth stinks.

We argue that those things need to be cut. We would like to see the CRTC cut. It is a terrible waste of money. We would like to see all kinds of money eliminated from the bureaucracy of different programs like Indian affairs. Every year the auditor general pillories the department of Indian affairs for its wasteful expenditure of Canadians' money. In his last report the auditor general chastised the department for spending $91 million to negotiate treaties, yet not a single treaty had been negotiated. That is what goes on in the Liberal government.

We argue that we need to cut spending, absolutely; not in the high priority areas, but in those wasteful areas to which I just referred. We are going to continue to push for that to happen.

I will speak a bit about the best way to help people across the country. It is not by giving them a program. It is not by becoming a huge welfare state. It is not by embracing big government welfare programs like my friend across the way would have us do. We think that is the wrong approach. In fact I would argue that has failed in every country where it has been attempted. Instead it is time to see reality and to understand that it is the private sector which will create the jobs. It is the private sector that will create prosperity for people.

The political allocation of scarce economic resources simply does not work. The definition of insanity is to keep doing the same thing over and over again and expect to get different results, yet that is exactly what this government does. Every year it thinks that if it just throws a little more money at the problem it will get better. So it throws more money at the problem, but it never gets fixed. It just keeps getting worse and the government cannot figure it out.

It is time that my friends across the way embraced a new approach. We offer them an idea whereby we take the money that they currently dole out to their friends and instead leave it in the hands of taxpayers, entrepreneurs, investors and homemakers, the people who know far better than the government how to use that money.

I would argue that Canadians after a generation of seeing taxes go ever upward really do deserve a tax break. It is time for tax relief.

The hon. finance minister spoke in the House today about how he wanted to give Canadians tax relief. His department has been floating for weeks the idea that it wants to give Canadians a $2 billion tax cut in the next budget. What a joke. What the minister does not mention is that this year the government is going to increase taxes by $2.4 billion.

CPP premiums are rising by about $1.4 billion. Bracket creep takes about a billion dollars out of people's pockets every year. What the government trumpets as a wonderful tax cut is actually a tax hike in disguise, and so it has been with this government for five years.

Every year the government says “We are going to provide targeted tax relief because we are Liberals and we care”. It is simply not so. In fact since this government came to power we have seen taxes go ever upward. We have seen disposable income fall like a stone. Canadians have to pay $38 billion in taxes this year that they did not have to pay in 1993.

I would argue that Canadians can ill afford that. It is interesting that as revenues for the government went up $38 billion we saw the savings rate drop $31 billion. Who really balanced the budget? Was it the finance minister?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:20 p.m.

An hon. member


Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:20 p.m.


Monte Solberg Reform Medicine Hat, AB

My friend opposite, the junior finance minister, says it was. I disagree. I think that Canadians balanced it. The finance minister balanced the budget on the backs of taxpayers. He balanced it on the backs of people who are sitting in hallways in hospitals waiting for beds because he took about $20 billion out of spending for health care. He took billions out of essential programs but left lots of money for his slush fund. He left lots of money for ACOA. He left lots of money for the departments that funded the Prime Minister's hotel deal. We need to put an end to all that.

Let me talk about some specific ways in which we can benefit not only the people in Atlantic Canada and Quebec, but the people in provinces across the country.

Reformers believe that we could deliver about $26 billion in tax relief over the next three years if we hold the line on spending at $104.5 billion.

Already the government is headed for a budget this year of around $109 billion. It will probably be $4 or $4.5 billion over budget. It was $3 billion over budget last year. People probably have cause to be pretty concerned about the government falling into its old habits of spending like crazy.

If the government holds the line on spending at $104.5 billion, that frees up a lot of money. It frees up about $17 billion which could be used for debt reduction and about $26 billion which could be used for tax relief.

When that is broken down, it means about $342 million a year, or somewhere in that range, in tax relief for Newfoundland every year. As competent as my friend opposite thinks he is, I can guarantee that the people of Newfoundland would much rather have that money in their own pockets than give it to him to spend for them.

I would argue that the people of Atlantic Canada who would get a total of $1.5 billion would much rather have that money in their pockets than allow hon. members opposite to spend it for them.

We believe that the people of Ontario, who would get $10 billion in tax relief, would much rather have that money in their pockets than allow bureaucrats and politicians to spend it for them.

We argue that people in British Columbia, who could sorely use a tax break right now, would love to have billions in tax relief. It would mean a lot to them, especially as they toil under the socialist government which has done so much damage to that economy.

Our argument is very simple. We think that the money would be better used in the hands of individual taxpayers, investors and homemakers, rather than leaving it in the hands of bureaucrats and politicians who so often misuse it.

Let me touch on some of the things that we would do to help Canadians. We would eliminate the 3% and 5% surtaxes. We would fully index the tax system again so that we would stop this automatic tax increase of a billion dollars a year.

We would cut capital gains inclusion rates in half so that when people make an investment and help the economy they are not penalized heavily just because their investment may happen to keep up with inflation.

We have situations now where people invest in the economy. Their investment keeps up with inflation. All of a sudden they want to sell it, only to find that they have not made a cent in real terms but that they have to pay all kinds of tax. That is absolutely ridiculous.

We want to raise personal and spousal allowances to $7,900.

We want the child care exemption to be given to all families, no matter how they look after their children. We want to have a refundable child care credit so that people on low incomes would actually get a cheque in the mail if they were not paying any tax at all.

We want the rate on the employment insurance fund to come to an end. Instead of giving back a paltry 15% of the money that has been taken, money that was overpaid to the EI fund, we want to give it all back. We want to give back to Canadians the entire overpayment because we believe it is their money in the first place.

Those are some of the things we want to do. We want to drop the three rates down to two rates. If we add up all of those things it comes to $26 billion in tax relief. It would mean that a lot of money would go into people's pockets.

Let me give one example as I close. For the average family of four making $30,000, it would mean $4,660 in their pocket every year. That is what tax relief would do for Canadians.

My friend from Newfoundland would argue that his government could spend it better. I think that family would argue with that. It is time to embrace a new approach instead of continuing with the things that have failed for the last generation.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:25 p.m.

Humber—St. Barbe—Baie Verte Newfoundland & Labrador


Gerry Byrne LiberalParliamentary Secretary to Minister of Natural Resources and Minister responsible for the Canadian Wheat Board

Mr. Speaker, there have been some comments made by members across the way that I think need to be corrected. There was an assertion that there was political interference in the budgetary deficit of the province of Newfoundland and Labrador that could be mysteriously re-corrected by some political interventions by the federal government in order to solve a political problem.

The hon. member has demonstrated that he clearly does not understand equalization. Therefore, when he makes these assertions about the effects of tax cuts and other measures, he is obviously talking from a very ill informed point of view.

Equalization works on the basis of a formula. It is a very transparent, very accountable process that is defined and entrenched in legislation. The payments that are given to the provinces over the course of time are based on the formula. There are adjustments to the variables which are input into the formula based on facts: population statistics, growth in the economy, growth in the ability of the province to tax. Those are the basic variables that are put into the formula, which is very accountable, very transparent and very upfront. It is not subject to political manipulation.

During this entire conversation hon. members opposite have been speaking about the positive influences and effects of a $384 million tax cut for Newfoundland. I would like the hon. member to go to Newfoundland and ask this simple question of Newfoundlanders and Labradorians: “Do you think that it would be acceptable to cut $384 million in public programs for health, education and social services?”

I would like the hon. member to ask that question. That question was asked in the provincial campaign. The answer that Newfoundlanders and Labradorians gave was emphatically and categorically “No. We want strong public institutions and the ability for people to provide for each other”.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:25 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, what did Labradorians and Newfoundlanders say to him when he cut $20 billion out of health care? I would like to know that.

The Reform Party of course would not cut spending for health care and social programs. We would increase it. We have made that pretty clear. We would increase it by $2.5 billion.

My friend across the way has asked a question and I think he deserves a serious answer.

In the last election campaign we laid out exactly where we would cut about $9 billion in government spending. We sent it out to about 15 million households across Canada. I invite my friend to revisit that, but I will touch on some of the highlights again.

As we said then, we would make cuts to the CBC. We think that CBC television should be a private broadcaster. We think it is time, in a day and age when there are all kinds of private broadcasters providing services across the country, to privatize the CBC. We made that very clear.

We would make cuts to the Department of Canadian Heritage. We think that all of these grants for special interest groups are ridiculous. We think it is ridiculous to spend $100,000 on a dumb blonde joke book. I am sure even my friends across the way would question whether that was a wise expenditure.

We would cut all the pork barrel spending that goes on in regional development. It is a very unfortunate joke on Canadian taxpayers when they are paying for all kinds of patronage deals that benefit friends of the Liberal Party. We think that is wrong. We would cut the bureaucracy of Indian affairs. We have made that very clear.

Those are some of the areas where we would cut. If my friend would simply go back and review Fresh Start, he would see that we lay out the entire menu for him. He could go through it and he could use it to guide him when he wonders again where these cuts would come from.

The final point I would make is that it is interesting to me at a time when the government has cut so drastically in health care, and even with the increases it will still be about $4 billion shy of where it was, that it has still managed to ratchet up overall spending pretty significantly, by about $4.5 billion this year alone.

I have a question for the member across the way. Why is the government spending so much more on frivolous programs like millennium grants and things like that? If the hon. member cares so much about health care, why is it increasing in areas like that when it is cutting the heart out of Canadian health care?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:30 p.m.


Louise Hardy NDP Yukon, YT

Mr. Speaker, the CBC is essential for the north because there are a lot of places private broadcasters will not serve.

My other concern is around land claims negotiations and the price we pay for them. Our other alternative is to go to court. When we go to court that means we have no control as politicians or as people. We cannot be a part of a legal process. Therefore we would have absolutely no say in or any control over what we would pay.

Would the member rather we take all our treaties to court to have them negotiated rather than have a process that we can actually be involved in?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:30 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, I thank the member for her good question. We have made it very clear we would not cut CBC radio. We understand that there are remote communities which do not have access to private broadcasters. We have specifically said CBC television.

With respect to the land claims issue, we do not argue necessarily with the idea of having the government engage in treaty negotiations. It would be nice if it could actually come to some kind of agreement. After spending $91 million and not reaching any agreements I would come to question whether or not that is a very good use of taxpayers money.

The final point I would make on treaty negotiations is what is really important is that there be finality. When a deal is reached we do not want to see it reopened again which is what we are seeing now with Treaty 8 in northern Alberta. We think that is a huge mistake. We would like to see these things settled and settled once and for all. We think we owe that not only to natives but to Canadian taxpayers in general.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:30 p.m.


Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, during the member's speech when he was talking to the bill on equalization he referred to the employment insurance system as being an example of other ways in which equalization can take place. He specifically said that in Alberta people had to wait a half year before they got employment insurance benefits whereas in the maritimes it was obviously much less and therefore that equalization was giving more to the maritime provinces.

Would the member like to reconsider his statement? It is important for Canadians to understand we have an EI system that is the same for all Canadians. There are some exceptions which reduce benefits and reduce claim periods, but in terms of eligibility for benefits it is the same for all Canadians.

I raise this matter because if the member is incorrect on this item, how many other items in his statements can we believe?

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:30 p.m.


Monte Solberg Reform Medicine Hat, AB

Mr. Speaker, we can make the same argument about equalization itself. We could say that there are pockets of Alberta where the economy is not perking along like in Calgary and therefore they should have equalization. I do not buy the member's argument.

Previous to 1971 when the reforms were made to employment insurance on the basis of regionally extended benefits previous we had a purer type of insurance program, a program that looked at individual needs and not so much at the needs of regions. Insurance should be something that is based on individual needs, not on regional needs. When we have that we see political manipulation of scarce economic resources. We see politicians using the EI fund just like we saw in the recent raid on the EI fund. We see politicians using huge piles of money for their own political ends.

In this case it has been extraordinarily damaging to workers and small businesses that paid into the fund. They have seen what happens when governments are given control over huge piles of money like has happened through employment insurance.

I reject the member's arguments. I think they are false. I would encourage him to consider that basing employment insurance on a personal insurance basis probably makes a lot more sense for everybody involved.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:35 p.m.


Val Meredith Reform South Surrey—White Rock—Langley, BC

Mr. Speaker, it is my pleasure to speak to Bill C-65 which renews the equalization agreement. Like my colleague from Medicine Hat I am a little disappointed that the government has seen fit to have such a short debate and to rush something through the House when it knew it was coming. It has made no effort to really look at what equalization payments are or at the need for restructuring and some massive reorganization. It seems to think it can add a few band aids and every thing will be okay.

Bill C-65 makes technical amendments to the formula that determines equalization payments. I want to review the three sections. It provides for the phasing-in of tax base changes over the period from April 1999 to March 31, 2004. It adjusts the definitions of resource revenue and revenue to be equalized. It changes the minimum and maximum payment provision.

The question that some Canadians will be asking is what exactly is equalization and what is it for. I would like to review some of its history for Canadians who may be watching the debate this afternoon.

It was introduced in 1957 and it was an effort to balance the vast disparity in potential tax bases among the provinces to ensure that every Canadian citizen had access to similar levels of social programs. Equalization is included in the Canadian Constitution. It is found in section 36 of the 1982 act. It reads:

Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to: (a) promoting equal opportunities for the well-being of Canadians; (b) furthering economic development to reduce the disparity in opportunities; and (c) providing essential public services of reasonable quality to Canadians.

Section 36(2) goes on to read:

Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public service at reasonably comparable levels of taxation.

Most Canadians support this concept. Very few Canadians have difficulty in supporting the concept of equalization, but when Canadians get into the details they start to have some problems.

I want to share with them an experience I had with the unity panel in B.C. In the fall of 1997 I was asked by Premier Glen Clark to sit on the B.C. unity panel. It toured the province of British Columbia with regard to the Calgary declaration. Its purpose was to gauge public support for the declaration. The unity panel used various means to measure the support of British Columbia. It included a mail-in questionnaire, public meetings, focus groups and a province-wide telephone survey.

In the telephone survey the unity panel asked questions about equalization. I want to share some of the results. One question that was asked was: Should the provinces and Canada work together in setting up national standards. They felt they wanted a shared partnership between Canada and the provinces.

The question on equalization was:

The federal government has an equalization program whereby the four provinces receive tax dollars to allow them to provide a similar level of public services to those available in richer provinces like British Columbia, Alberta and Ontario. Generally speaking, do you strongly support, somewhat approve, somewhat disapprove or strongly disapprove of federal equalization programs?

I am glad to share with the House that 37% strongly approved and 44% somewhat approved of equalization programs. The vast majority of participants supported the principle of equalization. To quote from the B.C. unity report:

However there was a great deal of reluctance to accept the possibility that British Columbia should, therefore, receive less than other provinces.

Many participants commented that British Columbia's population has special needs itself such as its specific demographic characteristics, seniors and immigration, that needed more funding and that there should be some recognition of this situation in federal transfers and there should be flexibility in arrangements to respond to this.

It was because of the results of the efforts of this B.C. unity panel that travelled the province that the B.C. government added three additional principles to the Calgary declaration:

(1) That British Columbia supports national standards for health and believes that these standards are best set co-operatively by the federal government with the provinces;

(2) That British Columbia supports the federal government's equalization program and believes that for other federal transfers for health, education, and social programs, provinces should receive the same level of federal funding per person;

(3) That British Columbia believes that provinces should be able to assume greater responsibility in areas that are important to them, such as fisheries in the case of British Columbia.

This resolution passed unanimously in the B.C. legislature. It is the second additional principle that is relevant today. British Columbians widely support the concept of equalization, but we have to remember that it goes far beyond this equalization program.

The federal government unfortunately has built in equalization bias in all of its transfer to provinces. When it comes to the three so-called have provinces, B.C., Alberta and Ontario, they get a reduced level of transfers from the federal government. There is not only the formal equalization program but the transfers to the provinces that show discrepancies. When we combine the formal equalization program with these other biases we get a different picture. I want to share some of the issues that are evident.

In the province of Newfoundland 43.7% of the provincial budget is from transfers from the federal government. In Nova Scotia it is 40.3%. In New Brunswick it is 38.2%. In Quebec it is 15.3%. In Prince Edward Island it is 36.8%. In Manitoba it is 29.3%. There is heavy reliance on federal government transfers. On the other hand we have Alberta with 9%, British Columbia with 8.8% and Ontario with 10.9% of their provincial budgets coming from federal transfers.

This system of bias permeates through all the programs the federal government has with the provinces. It is very evident with the federal spending on immigration settlement in the provinces.

Let me provide the House with some numbers from 1997 when I was the Reform Party critic of immigration. This is the money that is sent to provinces to help new immigrants settle in their chosen home. Quebec, which is a have not province, receives $90,000,000 a year. B.C. receives $23,373,000.

The province of Quebec which takes considerably less immigrants than the province of British Columbia gets three times as much money per capita per immigrant. The province of Quebec gets $3,067 per immigrant. The province of B.C. gets $1,000 per immigrant to help them settle in their chosen home. It is not only in the transfer payments, it is in all these other payments that we see the bias.

I have sat in the House for five years listening to members of the Bloc Quebecois tell Canadians how Quebec is not getting its fair share out of the Canadian federation. Yet when I look at the figures in the equalization program, that is not what I see. In the last complete fiscal year, from April 1, 1997 to March 31, 1998, the federal government spent $8.987 billion on equalization, almost $9 billion, of which $4.177 billion or 46.5% of the equalization program went to Quebec. It would appear to me, although we hear many complaints from the Bloc, that Quebec has done quite well in this regard.

When we talk in billions and millions of dollars, it is quite easy for the eyes of the viewers back home watching this debate to glaze over. It is incomprehensible to them. I would like to relate what we are talking about on a more individual basis.

When going through the website looking at the various programs that are provided to various provinces, I was struck by some differences. In viewing the Quebec government's website, I came across a wonderful program that is available to all Quebec children under the age of 10. Every child under the age of 10 in Quebec has access to free dental coverage.

In the province of British Columbia that is not the case. In British Columbia the parents are responsible for the dental care of their children. In effect the have province of British Columbia is helping the have-not province of Quebec to provide a health program to its children that is not available to the children in British Columbia.

British Columbia sees it as somewhat unfair that it is expected to have less and not to have the same advantages and the same level of care as a have-not province. It sees its money going to allow a have-not province to have better services and better care for its children. Is this equal and fair? I think many British Columbians would say no, it is not. This is only one example.

I will go to the example of the cost of universities. This country has three so-called have provinces. In 1998 Maclean's reviewed the universities in a special issue. It indicated that there were 24 universities in Canada's three have provinces. The average tuition fee in those have provinces was $3,581. By comparison in Quebec where there are seven universities, the average tuition fee was $2,109 for Quebec residents. It amounts to 60% less in cost for a student from Quebec to go to university than a student in the three have provinces. Even when it charges more for out of province students, it comes to $56 less than the average of the three have provinces.

Once again we have a situation where the three have provinces, the provinces that contribute to the equalization program, are not getting the same benefits out of Confederation that the have-not provinces receive. It is a question of a level playing field and a lack of understanding why the provinces that are always putting in get fewer services from the government and why we are always being asked to pay more for those services than the have-not provinces.

British Columbians ask if this is fair. Is this equal? Does the equalization program mean that the have provinces will give money to the have-not provinces to provide services that they do not have themselves?

Then there is the province of New Brunswick which uses the largesse, the money it gets from the have provinces, to subsidize businesses to move to New Brunswick. British Columbia lost some of its UPS people and offices because the money it sent to New Brunswick was used to subsidize the businesses to move out of British Columbia to New Brunswick. For some reason British Columbians do not think it is fair that their money should be used to take jobs away from them.

The largest flaw in the equalization program is that it has lost sight of what it was supposed to be about. It is about providing reasonably comparable levels of public service at reasonably comparable levels of taxation.

The complexities and intricacies of equalization are an accountant's dream. They probably cannot believe this equalization formula, how it is derived and how it is used. The basis of the formula looks at 33 tax elements of the economies of five provinces: Quebec, Ontario, Manitoba, Saskatchewan and British Columbia. It tries to estimate how much revenue the province can raise in each category. This may work if every province had the same kind of tax system but they do not. They are all different. It also does not take into account some of the geographic differences in the country.

In this bill the formula has been amended so that forestry revenues will no longer be based on the volume of wood harvested but changed to the value of production. Like my hon. colleague from Medicine Hat mentioned, this formula does not take into account the cost of production to obtain the forestry revenues. It costs significantly more to harvest trees in the rugged mountainous terrain of British Columbia than it does to cut the same value of trees anywhere else in Canada.

Similarly the equalization formula does not take into account the costs of providing services in each province. Once again let us compare the cost of building 100 kilometres of highway in British Columbia to the cost of building 100 kilometres of highway in Saskatchewan. The disparity in costs seems to be irrelevant to the formula. The government seems to think the cost of delivering services to Canadians is the same everywhere and that is just not so. Because B.C. has the potential to raise more money, it not only has to fund its own highways by itself but it also has to contribute to the building of the highway in Saskatchewan.

I would suggest that there is a grave need for change in the equalization program and Bill C-65 just provides more tinkering. It does not address the real problem. I would suggest that the real problem is why does a country like Canada have seven have-not provinces and only three have provinces? This is what this issue is all about and what needs to be dealt with in the discussion of equalization programs.

The Reform Party of Canada fully supports the notion that all Canadians must have access to the same level of health care, education and social services regardless of the province that they live in.

However, we should also be honest about the program. In the new Canada act we recommended changes to the federal-provincial fiscal relations and I want to quickly go through those. One is to make all payments to the provinces under jointly funded programs in the form of equal per capita grants. Another is to address disparities and regional opportunities through a single equalization cash transfer based on the relation of the per capita gross domestic product of a recipient province to the per capita gross domestic product of Canada. I would like to remind the House of the third element that the Leader of the Opposition brought up earlier, by recommending broad based tax reductions to give the citizens of all provinces additional money to spend, and aid in improving all provincial economies.

I would suggest that the biggest flaw in Canada's equalization payments is that it is only looking at the symptoms and not the ailment itself.

Federal-Provincial Fiscal Arrangements ActGovernment Orders

4:55 p.m.

The Deputy Speaker

It is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for West Vancouver—Sunshine Coast, APEC Inquiry; the hon. member for Churchill, Aboriginal Affairs; and the hon. member for Winnipeg Centre, Employment Insurance.

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4:55 p.m.


Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I listened to the member's comments with interest.

I am surprised that someone did not jump up to make note that the pants of the member for Medicine Hat were in flames as a result of some of the whoppers he delivered to the House. Interestingly enough I found the same kind of attitude coming from the Reform Party again in the comments of the member who just spoke.

The member talked about immigration. She talked about numbers, here is how much per capita in Quebec, here is how much per capita in another province and then just asked the rhetorical question is that fair.

The duty of members of parliament is not simply to raise spectres but to convince the House and others that they have done their homework and that they have made sufficient inquiry so that any obvious reasons for differentials would be taken into account. They are not to raise those spectres and somehow leave everyone hanging as to why, what reasonable explanation could there be.

The member knows that the legislation before the House is renewing the equalization program for another five years and that the basic elements of the program have been reaffirmed by two years of consultations with all of the provinces and the federal government. Does the member know better than each and every one of the provincial representatives at the table discussing the elements of our equalization program? The important element here is that this member has only raised to the House questions which she has not attempted to answer herself.

If the member would look, for instance, at the whole area where she was Quebec bashing and was against the whole issue of bilingualism and the importance of our official languages in Canada. She did not even inquire whether or not the cost of providing services ostensibly in both official languages in that province had a significant amount to do with that and furthermore, that providing those support services with regard to immigration was also to provide support to the rest of the provinces which also have an obligation to provide those services in one of the two official languages on the basis of need.

There is something going on here which the member did not give credit for. The member did not explain it and did not attempt to explain it. Not only that, the member did not attempt to inquire. All she wanted to do was to raise spectres about inadequacies which she believes are there. Each and every premier and the federal government do not agree. The member should explain herself.

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4:55 p.m.


Val Meredith Reform South Surrey—White Rock—Langley, BC

Mr. Speaker, I will certainly explain myself. I am sorry the member did not listen to my speech. He only picked out points that he wanted to challenge me on, but let me explain.

The point at hand is that the equalization program is supported by Canadians. It is a fair program and the understanding of it is supported by the Reform Party. We believe in equalization, the purpose of which is to bring the provinces to the same level of being able to provide social services and health care. We and Canadians have a problem when the federal government brings that equalization bias into every program.

By no means was I using Quebec as an example other than as a demonstration of how Quebec, which has fewer immigrants needing resettlement than British Columbia, gets three times as much money. Quebec gets the benefit of the investment dollars from the immigrants but the investors move to British Columbia.

Although Quebec gets the benefit of the investment dollars and the $90 million a year even though it does not have the immigrants to support, British Columbia receives one-third of what Quebec receives although the majority of immigrants move to British Columbia. British Columbia does not have the benefit of the investment dollars to create economic growth which could be used to create the money to support them.

I was using that as an example of the equalization bias that is carried over in every transfer program the government has for the provinces. I do not apologize for that. I would like them to explain to Albertans, British Columbians and Ontarians, people from their own province, how they can justify always making those provinces pay more to get less. That is not equalization.

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5 p.m.


Pierre De Savoye Bloc Portneuf, QC

Mr. Speaker, I am always very interested in what my Reform Party colleague has to say. She does her research well.

But I would like to draw to her attention a few of the concerns that sprang to mind as I was listening to her.

It is true that Quebec's share of equalization payments, aimed at evening out the ability of the various provinces to provide services for their people, has unfortunately dipped dramatically in recent years. But that is only one facet of the movement of money between Quebec and the other provinces and the central government here in Ottawa.

The other is the taxes paid to the central government and then used by it to purchase goods and services or to fund research and development.

It is a fact, and there are figures to prove it, that the government spends the lion's share of its dollars in Ontario, not in Quebec or in the prairies. It does not spend the lion's share of its dollars in the Atlantic provinces, but here in Ontario.

That leaves us with the paradoxical situation of Quebec sending approximately $30 billion every year to Ottawa and receiving $30 billion back. Unfortunately, while Quebec is forking over taxpayers' hard-earned dollars, its share of goods and services falls well short of its share of taxes, while Ontario's exceeds it by about 15%.

Then the transfer payments kick in to even things up. But now, and this is the question I put to my colleague, we have the sad situation where Quebec is not receiving job creation money, but transfer payments instead. The same is happening in the Atlantic provinces, and that is what is unfair. The only solution, obviously, is for Quebec to become a sovereign nation.

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5:05 p.m.


Val Meredith Reform South Surrey—White Rock—Langley, BC

Mr. Speaker, if my colleague from Quebec is concerned about not getting any contracts or procurement from the federal government, he should try living in British Columbia where we get a very small amount in return.

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5:05 p.m.

An hon. member

Ontario gets it.

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5:05 p.m.


Val Meredith Reform South Surrey—White Rock—Langley, BC

There is no question that Ontario gets the largesse of government. It is no wonder with 99 members sitting opposite representing Ontario. The government is Ontario and that is part of our problem.

I share with the member from the province of Quebec that some of our concern is that although Quebec gets 46.5% of equalization transfer payments to level the playing field, that kind of bias is in other programs.

I mentioned the immigration program. The province of Quebec gets a very large share of the settlement dollars which other provinces do not get. Quebec may feel it is hard done by and I do not argue that Ontario gets the largesse of government, but B.C. is certainly far worse off than the province of Quebec.

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February 8th, 1999 / 5:05 p.m.


Jason Kenney Reform Calgary Southeast, AB

Mr. Speaker, I apologize in advance that my voice is not as robust as usual; I am suffering from laryngitis. There is simply too much to shout at the government about. It is difficult to maintain one's voice.

I am pleased to rise today to address the bill dealing with equalization. At the outset and contrary to some of the comments by members opposite, the Reform Party supports the principle. We object to the equalization which is entrenched in the charter.

Contrary to what some members opposite might have us believe, I and others in my party share the belief that Canadians from coast to coast should have access to generally comparable standards of public services at reasonably comparable levels of taxation. We have some significant differences with the current structure of equalization which is perpetuated in the bill.

We have some very serious objections to the process by which Bill C-65 came before us. Equalization is an automatic entitlement program, a statutory program, which causes us to spend $8 billion a year annually out of the public treasury with no specific annual grant by parliament.

Rather, it is an amount that is automatically included in each year's federal budget and automatically spent out of the federal treasury under the authority of the statute we are discussing and amending today. It is an automatic statutory entitlement program. I have a very large problem in principle with programs of this nature because they do an end run around normal safeguards, checks and balances of accountability in parliament.

It is important we not create programs of this nature that simply proceed on auto pilot year after year spending literally billions and billions of tax dollars without a close methodical serious review of their cost, their design and their implications.

We do not have such a methodical review in the debate on Bill C-65 before us today. Quite to the contrary, the government gave the House only three days sitting notice that the bill would be debated today, a bill which will essentially authorize roughly $35 billion in expenditures over the next five years.

This is one of the largest expenditures of the federal government which parliament authorizes. Yet we have quite a remarkable circumstance of being given three days to prepare for debate on an extremely complex and complicated bill that deals with a formula which, as colleagues have said, nobody really understands expect for a handful of specialist accountants in the government.

The government is attempting to collapse debate by not putting up any other speakers. It is so serious about this $8.5 billion public expenditure that I think it has had one prepared speaker on the bill and another who just stood and gave us 20 minutes of hot air. That is how serious it is about a parliamentary review of an $8.5 billion expenditure. It is shameful.

That is why we ought not to rush through the automatic rubber stamping of this huge public expenditure every five years as we are today. Rather we ought to calm down and make a serious, slow, parliamentary public review of the design of the entire equalization system.

We ought to be allowed to have the bill go before a parliamentary committee for extensive hearings, to bring forward academic experts, to speak to the entire concept and design of equalization, and to hear from Canadians on how they feel this matches with their ideas of social and fiscal equity. We will not do that. We will just ram it through yet once more, treating parliament and the people who represent Canadians as a kind of rubber stamp in the system.

A lot of experts would have a lot to add to the debate. In October the C. D. Howe Institute produced an excellent, thoughtful study on the entire balance of fiscal federalism with emphasis on equalization. It was authored by an esteemed professor from the University of Alberta, Dr. Paul Boothe and sponsored by Koch Oil. Other studies have been done by people like eminent fiscal expert Professor Thomas Courchesne at Queen's University. We ought to be receiving the benefit of the expertise of these people and not just rushing through it.

One of the many problems with this formula is that it is extraordinarily complex. A very simple principle involved in responsible government is that spending and taxing decisions should be transparent. They should be easy to see and understand at least by a reasonably well informed layman. I do not think there is a reasonably well informed layman in the country who is not an expert in the Byzantine rules surrounding equalization that really understands the process.

Even the auditor general pointed out that among the many problems with the equalization formula is the inclusion of property taxes in the assessment of the average tax rate in various provinces. It is incredibly difficult to get to the bottom of that. The auditor general in his 1997 report flagged as a very serious problem the inclusion of property tax in the formula for 33 tax sources. The finance department responded by saying that it would address the issue of property taxes in the renewal process, that is in this bill. There is nothing in Bill C-65 dealing with this one very complicated element of equalization.

Another problem is that the government tells us that this is all governed by a clean, clear mathematical formula but that is not the case. For political reasons we have ended up establishing a roof and a floor of equalization transfers.

Let us look at Newfoundland which is going through a period of considerable growth and suppose that it continued or in fact doubled or tripled over the next couple of years. Newfoundland would find its unemployment rate tumbling down. Let us hope that happens. Revenues would be flush in the provincial treasury but Newfoundland would still receive substantial transfer payments under equalization based on the notion that from a given year to a given year the reduction in equalization can only be x amount.

Even if the formula states that one province should no longer be considered a have not province and should be regarded as a have province, that province would continue to receive the benefit of a transfer from hardworking taxpayers in other parts of the country.

Similarly, if my province of Alberta, which seems to be a perpetual have province, were to suddenly suffer the fate of an enormous reduction in commodity prices, energy prices and agricultural commodity prices and suddenly were to fall into a regional recession, we would not suddenly receive a large equalization transfer payment.

Let us look at British Columbia. Today it finds itself in the worst recession ever since 1981, a very serious and deep recession. B.C. taxpayers are having to work harder and longer than they otherwise would in order to send extra revenues into the federal treasury. Those revenues are then spun around in this enormous costly machine we call Ottawa and sent out to parts of the country which are actually growing and which have considerable growth rates.

Family incomes are on the rise in some parts of the country. They are on the decline in British Columbia yet those hardworking families, because of the bizarre mess of the equalization formula, end up having to pay net into the system so that others can receive the benefit. I think that is just plain wrong.

What we need is a system that is transparent and accountable and one that ordinary people can understand. We also need a system that is fair. I have talked about the unfairness inherent in the system today.

One of the points that Dr. Paul Boothe has raised in his many studies on this issue is that if the objective in equalization is equity, if it is to establish a modicum of social equity through fiscal transfers, then the equalization plan as currently designed is surely not the way to do it. It takes money from every taxpayer in British Columbia, Alberta and Ontario, every single person who pays GST, federal income tax or pays in any way into the federal treasury. Even if they are below the poverty line, as hundreds of thousands of them are, they all end up making a net contribution to the fiscal transfer through equalization to even the highest income taxpayers in the so-called seven have not provinces.

Incidentally, I have a hard time believing in one of the wealthiest countries in the world, in a country that enjoys a level of prosperity and a standard of living almost unparalleled to any other country at any other time in human history, that seven of our ten provinces are purportedly have not provinces. I think that is part of the problem with the formula.

Having said that, a single mom in my riding who has a minimum wage job and is earning $14,000 a year and is trying to raise a couple of children on that meagre, paltry sum is still paying federal income tax because of the enormous equity in our tax system. She is paying federal income tax, the goods and services tax and other taxes which come to us in this parliament. What we are going to do under Bill C-65 is take some of the money from that single mother in Calgary Southeast, spin it around in this bureaucracy in Ottawa and then send it out to subsidize the delivery of social programs, including health care, which accrues in part to the benefit of billionaires who might live in another province.

One could say that my low income constituents, because they happen by accident of geography to live in what is deemed by this formula to be a have province are forced to pay, according to Dr. Boothe, 9% more in taxes than they otherwise would in order to benefit the Desmarais family, the Bronfmans of Montreal or the Irvings in New Brunswick, or the Purdues, or the Crosbies in St. John's, Newfoundland. That is not equity; that is inequity. This is not how to design a system of social equity.

If we want to help people who really need help, if we really want to equalize opportunity and living standards across the country, we need to come up with a system of equalization that is sensitive to income, not to the arbitrariness of region or geography or the accident of where people happen to live, but with respect to the very real circumstances of their standard of living.

That is why we propose that there should be a much clearer per capita transfer from the federal government to the provinces for the various social programs and, I believe, an equalization system on top of that which should be designed on the basis of individual transfers. What does that mean? That means we should look to the tax system which can respond to the different levels of income that people have as the way to transfer wealth in this country.

Really that is what this is all about. If we get all the bureaucratic gobbledegook, legalese and accounting gimmicks out of the way and what we are talking about in this bill is how we transfer wealth from those who have a lot of it to those who have not much of it. I submit we do not do that by penalizing the lower income taxpayers in Alberta, B.C. and Ontario to the financial and fiscal advantage of higher income taxpayers in the rest of the country.

My colleague from Medicine Hat mentioned that an Alberta family that earns $30,000 to $40,000 pays 9% more in taxes to the federal government than it otherwise would, whereas its counterpart family in P.E.I. generates 20% more income. These are families with the same standard of living. They have the same jobs. They are working just as hard. The family in P.E.I. is not living in poverty and is no less able to provide the necessities of life than that family in Calgary, Medicine Hat, Toronto or Scarborough, but it gets the 20% advantage.

This reminds me of a study that was conducted some years ago by the Canada West Foundation under the auspices of Professor Robert Mansell, an economist at the University of Calgary. It was the first real effort to quantify the net impact of what we call fiscal federalism, all of these transfers back and forth between Ottawa and the provinces.

This was in about 1992, several years ago. Professor Mancel found in 1992 that the total cumulative cost of fiscal federalism to the province of Alberta, my province, was nearly $150 billion since 1960. That is to say that because of equalization, because of other transfers and things like the national energy program, the federal government had managed to extract $150 billion more out of Alberta than Albertans received in benefits or transfers from the federal government. There was a huge net transfer out of British Columbia and Ontario, not nearly as large. I think it was in the neighbourhood of $20 billion for British Columbia and $30 billion to $40 billion for Ontario.

We are talking about massive transfers of wealth largely based on geography. I just do not think that is equitable or fair in a society which is trying to assist those who need the help the most.

Another problem with the current equalization system is the classic welfare trap, as it has become known by sociologists. As a way of explaining it, the welfare trap is if we subsidize something we are likely to get more of it.

The current equalization plan essentially subsidizes provinces which do not have high rates of economic growth. It subsidizes provinces which keep their tax rates low. Provinces such as New Brunswick give special tax deals to corporations to locate there, as my colleague from South Surrey—White Rock—Langley pointed out, yet they still receive the benefit of equalization.

It creates this perverse situation where if a province raises its taxes or generates more economic growth, it will be deemed to be a have province. Based on the Byzantine equalization formula its transfer from the federal government under equalization will decrease. We are penalizing success. We are in a sense creating a perverse incentive for regional economies not to succeed.

I am not suggesting that any premier or his cabinet would set out to generate low rates of economic growth in order to avoid a cut in its equalization payments. I am not suggesting that for a moment. Surely the provincial finance minister realizes in the back of his mind when he is planning his annual budget that if he raises certain tax rates and if on the other hand they generate significant growth, that the province's equalization payment from the federal government is going to be cut. That is inevitably going to be a factor. We have entrenched this kind of welfare trap into federal-provincial fiscal arrangements.

For all of those and many other reasons, I am vigorously opposed to this bill. I do not think it is in the best interests of social equity in Canada nor is it equalizing opportunity or creating greater harmony between the provinces and individuals within this wealthy and diverse country. I hope my colleagues will look more closely at this issue.

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5:25 p.m.

Stoney Creek Ontario


Tony Valeri LiberalParliamentary Secretary to Minister of Finance

Madam Speaker, I have a couple of comments on what the hon. member said.

One comment concerns the property tax issue. He is correct that the auditor general has flagged it as an issue of concern. The federal government has indicated that the property tax issue is one that the provinces and the federal government are continuing to discuss. It is a bit of a difficult situation.

Some provinces were recommending that we go to market value assessment although it does not necessarily allow a province to generate the same type of revenue when we compare the market value assessment of a home in British Columbia equivalent to a home in Quebec for instance. That has some flaws in it as well. For the information of the hon. member, the property tax issue would remain on the agenda until there was a solution that is acceptable to the provinces and to the federal government.

The hon. member also went on to talk about the impact on British Columbia that commodity prices are having and why British Columbia is not receiving any sort of equalization given the economic turmoil it is going through. I advise the hon. member that there is a fiscal stabilization program. The federal government compensates even the have provinces if their revenues decline more than 5% due to economic circumstances. Even for the have provinces there is a safety net with respect to drops in revenue.

The hon. member said that equalization provides a disincentive for provinces to raise revenues. It is hard to believe that a have-not province would take into consideration the fact that it is receiving equalization and based on that receipt of equalization that it would not engage in any type of economic activity, that it would not want to create employment for its people. I dispute the argument that equalization is a disincentive to provincial economic development.

I offer the opportunity to the hon. member to speak to that, to put himself in the shoes of a provincial finance minister or premier who would say “I am not going to work in partnership with businesses in my community because we are receiving equalization. We do not want any sort of economic development in this province until we have no more equalization and then we will engage in economic development”. I just do not follow that argument.

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5:25 p.m.


Jason Kenney Reform Calgary Southeast, AB

Madam Speaker, my colleague from Stoney Creek does not follow the argument because he did not listen to it.

With respect, I said explicitly that I did not believe for a moment that any provincial finance minister sat down and contrived ways not to generate economic or revenue growth in order to avoid the reduction in federal equalization payments that might result.

However, I said that it does put them in a difficult position. Let us take one concrete example.

The province of Quebec maintains substantially lower corporate tax rates than the province of Alberta. I am all in favour of tax competition in the federation. I think it is great. The problem is that if the Quebec finance minister raises that tax rate he will likely lose a corresponding amount of revenue or even more revenue out of the federal equalization transfer. So he is much less likely to make that policy change, which means that essentially Alberta, Ontario and B.C. businesses are subsidizing artificially low corporate tax rates in the province of Quebec.

I am not suggesting that the provinces should end up constructing their entire fiscal and economic policy to avoid a reduction in federal transfers. I am saying that we are creating a perverse incentive and it is not a good thing. If we move in the direction that I am advocating, which is to create a system of transfers that are sensitive to individuals and their income regardless of the accidents of geography, that would avoid the kind of disincentives which exist in the current system.

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5:30 p.m.


Paul Szabo Liberal Mississauga South, ON

Madam Speaker, the member is debating Bill C-65, which has to do with equalization payments. I know that he is the finance spokesman for his party and is well aware of the fundamental principles, one of which is that on a province by province basis we do not take individual provincial tax rates into account but rather the average of five provinces. It would be very difficult for any province to structure tax rates which would allow it to maintain equalization payments.

Frankly, I was astounded by the answer that was given to the question posed by the parliamentary secretary. The insinuation by the member was that equalization is a disincentive. He denied it and then he went on to explain how it is a disincentive. It is sucking and blowing at the same time. He cannot have it both ways.

The question to the member is simple. Does he believe that the equalization program, agreed upon by all of the provinces and the federal government following two years of consultation, is a disincentive for growth in a province which would otherwise have opportunities for jobs? Does the member believe a province would turn down opportunities for economic growth simply to maintain equalization payments?

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5:30 p.m.


Jason Kenney Reform Calgary Southeast, AB

Madam Speaker, to be clear, I believe that it can act as a disincentive.

Furthermore, I do not believe that provincial governments necessarily respond by electing policies which slow growth or revenue. However, it is unfortunate that it can have the unintended consequence of penalizing provinces that see significant growth. It is an unfortunate outcome of this kind of system.

With respect to the member's point on an individual tax in an individual province, yes, the five province average which takes into account 33 different criteria is the average against which each individual province's fiscal load is measured in the determination of whether it qualifies for equalization transfers. In the instance I raised, the level of revenues that the province of Quebec generates from corporate taxes is a factor in its overall fiscal load as compared to the five province average. This system does create a situation where provinces can maintain artificially low levels of taxation, levels of taxation which would definitely be higher if there were no equalization payments. That is the whole point.

In some cases the provinces are able to maintain much lower levels of taxation in order to create de facto subsidies. I raised the case of New Brunswick which provides all sorts of corporate tax holidays for people who locate their businesses there.

Again, I am in favour of tax competition, but I am not in favour of a system where the federal government gives a financial advantage to those provinces which use those kinds of tax levers in their competition to attract business.

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5:35 p.m.


Paul Szabo Liberal Mississauga South, ON

Madam Speaker, following on the whole issue of the tax question, has the member given consideration to the benefits received by a province that engages in economic growth and job creation? Does he believe they are simply dollar for dollar with the equalization payments or does he believe that the benefits to a province would greatly exceed the value which it would otherwise receive under the equalization program?

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5:35 p.m.


Jason Kenney Reform Calgary Southeast, AB

Madam Speaker, I would admit that it is possible, but I would also admit that it is possible that provinces take into account the loss of equalization revenues that they would receive if they reduced taxes or increased growth.

It is a problem and that is why I recommend my idea of transferring to individuals on the basis of income and need and not to the provinces on the basis of geography.