My friend next door says it is heartwarming and indeed it is.
Equalization is a fundamental principle that is very much part of what makes Canada a compassionate and caring society. Surely that is one of the crucial measurements of a country.
I listened with interest, as I always do, to my friend who spoke earlier. He made the case that less government is a better country. I thought about countries around the world where there is very little government. Normally they are not very pleasant places to live. As a matter of fact, countries that have very little government, that have downsized their government, are brutal places to live. Often it reflects a society that is uncaring particularly of those less fortunate.
Obviously we seek to find a balance. When I think about equalization enabling us to be a compassionate and caring society, what better society could we be part of than one that is actually compassionate and caring for all its citizens? One of the reasons we are all proud to be Canadian is that Canada is that kind of country.
This is not to suggest that this bill is perfect, not by a long shot. There are many ways that we can improve Bill C-65 and improve the whole issue of equalization.
What demonstrates this is that most in the House of Commons have tried to figure out what this bill actually does. We have tried to look at the formula used for equalization. I am not a brilliant person. I am probably not even that smart but I am not a stupid person. Quite frankly, I cannot figure out how this thing works. I have asked many others how this equalization formula actually works. I have not found anybody who could explain it to me in a way that I could understand.
There must be somebody somewhere who understands it. When the question was put in committee, it was fascinating. The question was put to the experts from finance. How many people actually understand the equalization formula used between the federal government and provincial governments? The answer was perhaps five people in Canada.
I do not know who those five people are but there are probably five people in Canada who actually understand how this bill works. That is one of the real downsides of this because we are being asked to approve a formula. We are being asked to approve legislation, approve a concept that nobody fully understands. That is not what this place is all about.
It is imperative that members of parliament understand how the equalization formula is applied so that we can judge it. Is it the appropriate formula? Are there more appropriate ways to decide who gets what in terms of where they happen to live in Canada, what province gets an equalization payment and which province would pay one.
If there is one major flaw, it is that it has become so complicated, convoluted and complex that no one really understands how the system works today. We assume it works well. We know that all the provincial finance ministers and officials met regularly for five years to try to figure this thing out. They have come up with some kind of plan which they say on balance is effective and the best deal they can come to.
To be fair, the province of Manitoba has some concerns about this formula which now involves 33 different criteria. When it first started a few years ago, there were only three criteria. The three criteria were personal taxes, corporate income taxes and succession duties. That was it. That was fairly easy to figure out. Everyone could say that the provinces that are getting a certain amount based on this formula makes sense and the ones which are not getting anything also makes sense because they are doing relatively well.
Now there are 33 separate revenue sources ranging from income taxes to insurance premiums, from property taxes to payroll taxes, from sales taxes to sin taxes. It goes on and on. Experts from the provincial finance departments and experts from the federal system get together on a regular basis and fine tune it so that everyone can agree.
Manitoba, as I said, has some disagreements but it will have a chance to sit down soon and start to renegotiate from its perspective a fairer system. Everyone says that is fair enough and they will proceed with this understanding. While Manitoba is not delighted about this, it understands that in the end it will be okay as well.
I might mention that because of the flooding situation Manitoba experienced, the collection of income taxes was disrupted. Consequently the formula that was used to determine this year's transfer to Manitoba was based on erroneous information that could not be avoided. With any luck this will be readjusted later this year so that Manitobans will get a fair deal in the end as well. That is my understanding. From what I can gather, everyone has enough faith in the system to say that will actually take place, including the people from Manitoba.
Before I get into some of the more substantive comments about the legislation, there have been some changes in criteria. There have been many changes but I am going to identify two or three of them.
One is the recognition that a good revenue source for a lot of provinces is gaming. It seems that video terminals, VLTs, and casinos are turning up on almost on every street corner. For some provinces they are a major source of revenue. For others they are not a major revenue source yet. For British Columbia it is not a major revenue source yet, but apparently it is taking steps to expand its casino base, as those who have read the newspapers recently are probably aware. Other provinces are as well. Since gaming is a significant revenue collector, it has now been factored in as a new criterion to be considered.
On the fine tuning, as a member of parliament from British Columbia, I appreciate this one perhaps more than people from other parts of Canada who are not so closely attuned to the timber base. In the past the criteria has been based on the volume of timber. We realize that volume of timber is not necessarily an accurate reflection of the revenues collected from timber sales.
Some timber is a poorer quality than other timber. Others are a higher quality. It is going to be based on the value of timber products. If a province is collecting a certain amount of money in terms of value obviously makes a lot more sense than a province which is collecting less or more but the volume is quite different. Value as opposed to volume when it comes to things like timber makes sense.
Let us look at some of the purposes of this program. The program of equalization is an effort to reduce disparities among the provinces' revenue raising abilities or fiscal capabilities. The equalization payments compensate provinces for the differentials in their tax bases. That is straightforward.
The program allows for the less prosperous provinces to provide public services of a quality and at taxation levels comparable to those in other provinces. Again, to come back to the idea of being a Canadian citizen in this part of Canada or that part of Canada, it ought to mean about the same thing. That is the reasoning behind the program.
This bill represents a completion of negotiations that for the most part have been about what constitutes this tax base. The legislation represents over two years of discussions with federal officials and various levels of provincial people, including all provincial finance ministers.
Herein lies a rather annoying element. It is not a major criticism; it is an annoying point that I have to raise, which is that we have been rushing this through the system. One of the reasons this has become an issue today in terms of how long the debate should be, it that it has to pass before the end of this month. We knew that five years ago. We knew it three years ago, four years ago, one year ago. Negotiations have been for the last two years and have taken a little longer than expected. We are up against the wall.
The government is pushing us saying that this bill has to pass. It should have had more serious consideration, but this goofy time system made it problematic for us. In my judgment, we are rushing this and we ought not to be rushing it. It is too important. Perhaps what we can do the next time around is try to get at this issue earlier than at the eleventh hour.
The equalization transfers are calculated according to a formula set out in the Federal-Provincial Fiscal Arrangements Act. Therein lies another area which requires some consideration as part of an ongoing examination of this process.
Because of the various tax bases that determine the bottom line for the provinces, there is ongoing discussion and debate on the makeup of these tax bases. As I indicated, Manitoba is not a happy camper at this point, but it accepted this and assumed that things will be sorted out shortly. Not just assume, Manitoba knows things will get sorted out shortly.
Members have probably looked at the figures that have come out from the finance department which project, as best as people are able to project, over the next number of years how each province is going to be treated. In my recollection I think every province that collects money now from the equalization program will see their collections expand over this period of time. But the reality is if a province becomes hotter in terms of its economic base and things turn out better than expected, those numbers will be adjusted downward.
It is a funny thing. There is a lot of history attached to these programs. I am an amateur historian by interest and I was looking over the Saskatchewan equalization payments. Lo and behold there was a history story. I noticed that in the past the province of Saskatchewan sometimes never received any equalization payments. My friend across the way will know this as well. Some years Saskatchewan received some, some years it did not. Some years it received a lot. This seemed odd because other provinces seemed consistently to be either haves or have nots.
I wondered why there was a pattern and Saskatchewan got equalization payments some years and other years did not. Lo and behold there was a direct correlation. The years when Saskatchewan worked its way out of needing an equalization payment, guess what political party was in office? The New Democratic Party.
The New Democrats balanced the books, heated up the economy, got things moving well and then for whatever reason, they were kicked out of office. Then Liberals were elected or Conservatives were elected or Reform, I guess we could use that generally as well and they got the province into trouble. The books got out of whack and the economy went into a nosedive and Saskatchewan required equalization payments again. People got fed up with that, tossed them out of office and brought in the NDP again. Everything gets back in order and the equalization payments evaporate.
It is interesting when we see political history as reflected in the economy and reflected now in the history of the equalization payment program for Canada.
Let me talk about some of the purposes behind this program. I mentioned the fact that only five people know what this is all about, which I think tells us a great deal.