Mr. Speaker, it is with pleasure that I rise today to speak to the equalization issue and to Bill C-65.
Equalization is a cornerstone of Canadian social policy. I believe most members of the House recognize that the free market system is a viable and important system for all Canadians to improve their qualities of life individually and collectively. The free market system will work only if all Canadians have access to the levers of a free market system and have approximate equality of opportunity across this country, regardless of where they live, and that is what equalization is all about. The concept of providing effectively level taxation or similar taxation and similar levels of services across this country is a cornerstone of Canadian social policy.
As a reflection of this importance, equalization is the only transfer program that is actually enshrined in the Constitution act. The goal of equalization, of providing equality of opportunity across Canada, is extraordinarily important. We should also recognize that a goal of equalization should be to provide a ladder for provinces and individuals in those province, those recipient provinces, to rise from their status as recipient to the point that they can participate in the free market economy fully. The equalization system should under no circumstance provide barriers to success, roadblocks to success for individuals and provinces as they try to bootstrap themselves into a more prosperous economy.
One of my concerns about Bill C-65 and the equalization formula is that there are direct disincentives for recipient provinces to improve their economies. For instance, in provinces like Nova Scotia and Newfoundland, which have the potential and will be enjoying increased resource revenues, those resource revenues will come off equalization.
The government has addressed the issue partially by phasing in these clawbacks in equalization over a five year period, but five years is a very short period of time in terms of the development of economies. It took more than five years for the economies in Atlantic Canada, for instance, to develop negative spirals downward.
It will take more than five years for Atlantic Canadian economies to participate fully in the Canadian economy and to achieve the level of prosperity that other regions of the country take for granted. Yet the government has only partially addressed the issue of disincentives.
The government needs to encourage provinces to pursue economic activities that will bootstrap individual provinces into prosperity. Instead there are roadblocks to success.
This situation and how equalization provides these disincentives is somewhat analogous to the issue of single parents in any province who are on social assistance and who have an opportunity to work and succeed but see a direct financial disincentive to participating in or pursuing activities and taking a job because the government puts in place a direct disincentive through the tax system for them to do that.
In a perverse way our equalization system, as it is formulated now, can actually create and encourage a continued reliance and a continued roadblock to success for these provinces. That is perhaps the most fundamentally important issue in equalization which has not been addressed and needs to be.
Mr. Speaker, I am sharing my time with the hon. member for Richmond—Athabasca. I should have mentioned that at the beginning.
Another important criticism of the equalization program made by the C. D. Howe Institute has some merit. The C. D. Howe Institute has argued that poor citizens of rich provinces sometimes transfer money to rich citizens in poorer provinces. An example of this is an east Vancouver family living in poverty may end up paying money that will ultimately benefit an affluent Westmount family. That is one small nuance but one detail that has been ignored by the government in terms of the revision to equalization through Bill C-65.
The fact that equalization is based on, to a certain extent, the assessment of a province's capacity to produce in terms of revenues from the final product reduces the incentives for provinces to produce value added products. To actually add value and develop a better secondary manufacturing system within the provinces is reduced by equalization. Provinces are encouraged to sell raw resources in many cases as opposed to trying to add value in their province and create jobs and employment.
This is perverse. It is one way that the federal government, through a lack of leadership and vision, continues to promote policies that are flawed and are not providing the best possible opportunities for Canadians.
One area in which I have significant concern is population as a basis for cost of services. Equalization distributes the funds to the provinces on a per capita basis. For a province like Newfoundland, which has seen a significant exodus of people over the past several years and it is predicted to continue for the foreseeable future, it is grossly unfair and inconsistent with the principles of equalization.
The actual fixed costs of providing services such as health care and education in a province, even when the population decreases, remain fairly consistent for a long period of time because of the fixed nature of those costs.
We would like to see in an equalization formula some accounting for the actual cost of delivery of services. Both Germany and Australia take into account the actual cost of delivery of services. Some of the socioeconomic factors, some of the demographic factors and the rural-urban make-up are issues that should be considered in equalization, not purely population as is proposed here.
One of the biggest flaws in the whole equalization argument has been around the issue of transparency. The fact that the government in recent weeks has engaged in a meaningful effort to dialogue and debate on equalization and on this fundamental issue, a program that costs $9 billion per year, is indicative of the government's continued knee-jerk, crisis management reactionary style of government. There is no vision. We may have a budget surplus but there continues to be a leadership deficit.
We are concerned by the fact that the government, instead of debating the issue and discussing the issue over the past five year and trying to come up with a equalization plan that provides all regions of the country with opportunities to succeed, continues with the same old, tired policies that we need to revisit. If we are ingenuous about giving opportunities to recipient provinces and if we are ingenuous about eliminating barriers to success, it will take more than a few hours of debate in the House of Commons and some witnesses appearing before the House of Commons finance committee.
The issue of gambling revenues is another important one. Bill C-65 will take into account gambling revenues in the provinces. The fact is that many of the social costs of gambling are provincially borne costs, whether in health care or in social program spending. This could have a very negative impact on provinces that currently benefit from gambling revenues.
We need a new visionary approach to equalization, a new equalization program that provides a ladder to success and not barriers to success as this one does. We believe in equalization. Our party believes that an equalization program is necessary and that we should continue to protect and encourage equalization as a tenet of Canadian social policy. We can make it better as parliamentarians. In that light I would move:
That the motion be amended by deleting all the words after “that” and substituting therefor:
Bill C-65, an act to amend the Federal-Provincial Fiscal Arrangements Act, be not now read a third time but be referred back to a committee of the whole House for the purpose of considering amendments to clause 2 to alter the equalization formula to fairly take into account the varying costs of program delivery in different provinces because of differing demographics, geography and urban-rural variations in addition to population; and to clause 2(2), which would eliminate the current disincentives for recipient provinces to improve their finances through innovative economic policies.