Mr. Speaker, first I thank the powers that be for the occasion to debate this very significant part of Canadian financial affairs. Within this debate we can come to the realization that many things are happening in Canada which are highly desirable. There are other things happening in Canada that are not desirable.
I want to make it abundantly clear that at the heart of this question is the heart of Canada. What do we as Canadians believe about one another? It is very significant for us to recognize that many people prefer to live in Canada than in other countries. In many instances they were born in other countries and chose to immigrate to Canada because they liked it here and because they felt they could live better lives and create a better situation for themselves. It feels good to have been born in a country where that characteristic is admired and envied in many other parts of the world.
Before I go any further in my particular remarks on the bill, I want to refer directly to the earlier remark of the member of the NDP who suggested that the Reform Party does not care about Canadians and that this is just a postering position.
I would like to read into the record the three points that clarify and are absolutely essential to the understanding of the heart of Canada. Canadians care about one another. I believe these words will probably quash at least partially the hon. member's statement. I hope she is listening because it is significant. I also assure her that I believe what I will read right now. I am there.
For the member's benefit, if for no one else's, Reform will begin negotiations with the provinces to amend the formula for equalization to make it more sustainable and ensure that equalization payments are refocused toward Canada's poorest provinces. Is that not exactly what the hon. member was alluding to? I loved her passion. I think we all need to become far more passionate about Canada than is often demonstrated.
The second point I would like the hon. member to remember is that Reform recognizes the need and the constitutional requirement for equalization and would ensure that transitional funding and flexibility would be available for any province which found its equalization entitlement reduced. If that does not speak directly to the concerns that have been expressed, I would like to know what does.
The third point is that under Reform equalization for the poorest provinces in Canada would not be reduced and could be increased subject to negotiations with all Canadian provinces. We would have this interaction among all Canadians.
That suggests to me that not only do we have a heart but we recognize that all other Canadians have a heart. What we need to recognize is that as we help each other we can help to build an even stronger nation and an even more desirable country than we have at the present time.
I would now like to refer to what exactly is the equalization that we are talking about. It is an unconditional grant. An unconditional transfer is perhaps a better way to say it. It is a transfer to the less well off provinces from the better off provinces. That is what it is. That is what we support.
The principle of equalization is embodied in the Constitution. This is not something which this particular government dreamed of at this time. Neither is it something that we suddenly discovered. It was there at the very beginning when this country came into being. It is in the Constitution. Interestingly, the provision is not in the formula. The provision is that this must happen. The Constitution did not say that a particular formula should be observed. Periodically the formula is amended to take into account changes in economic circumstances. That is the current position of the equalization payment provisions in legislation and in the Constitution.
What we also need to recognize is that as we go through history we notice that it has changed dramatically from a very simple taxation system, of which parts of it were transferred, to a highly complex system. There are 33 different measures to determine whether equalization payments should be made. It is needlessly complicated. It does not need to be that way.
What does that suggest? What does it make possible? Whenever we complicate something three things are possible. One, it is not easily understood. That means that there is a group of people who can become experts and everybody else has to believe their interpretation of how it works.
Second, that creates all kinds of other opportunities. It creates the opportunity to manipulate the formula and the inputs in such a way that would appear to arrive at the same conclusion as anyone else using the same formula would arrive at. However, we all know that when we examine this it does not turn out that way.
Let me give members one interesting example that happened in the first quarter of this year. Lo and behold when the premier of Prince Edward Island looked at the equalization payments he discovered that he was going to have a deficit budget. Then he noticed that it was okay to call an election. He called the election. What happened? The transfer payments were recalculated. All of a sudden he had a balanced budget. It was a $30 billion difference.
How did that happen? Did it happen because the formula changed? Did it happen because taxes changed? Did it happen because we had a new province? Did it happen because we had a new government in Ottawa? It was none of those things. Had suddenly the population base in Prince Edward Island changed? Had suddenly the GDP changed? No. Something went into this thing that changed the whole picture. Who knows exactly what happened. We could make all kinds of surmises, we could have all kinds of speculation, but nobody could prove the point.
What is the third thing that could happen? In that manipulation and development the whole system could become politically motivated and politically driven. It seems to me that the example I just used illustrates that is exactly what can happen.
The present equalization formula also encourages poor economic decision making by provincial governments and impedes free and efficient labour mobility. That point has been made before, but I want to put this in the context of another issue which has to do with the trade barriers that exist among provinces.
We seem to have developed in this country a preferential interpretation of the Constitution. When it suits us to interpret the Constitution one way, we do that. In other words, the federal government chooses sometimes to intervene in provincial affairs. How does it do that? It intervenes in the educational system. It intervenes in the health care system. What does that do?
The federal government has taken the Constitution, which says that those issues are completely within provincial jurisdiction, and it has intervened. Then it turned the other way. The Constitution also says that there shall be free movement of goods and services across Canada from one province to another. It shall be free. What have we got? We have 700 plus barriers to the moving of goods and services from one province to another, which costs Canadians billions of dollars every year.
On the one hand we interpret the Constitution as saying that the federal government can interfere in provincial affairs and on the other hand we interpret the constitution as saying that it cannot. What kind of sense does that make?
The reason that happens is because the formula has become so complex that it becomes the dictator of what happens. The result is that politics becomes the issue, the bells and whistles become the issue, rather than the heart of the matter which is to help people and to be fair, equitable, transparent and democratic about the whole thing.
That is the heart of this issue. That is why we have some real difficulty with this.
Does this mean that we do not want equalization payments? Does it mean that we should not have them? It means that we have to have equalization payments, which is what I said at the outset. We need them, but they should be transparent, they should be simple and they should be fair.
I want to move to another point which was made by Dan Usher, an economist and professor of economics at Queen's University.
I notice the hon. member opposite is laughing. Why is he laughing? Is he laughing because Dan Usher does not know what he is doing? He knows exactly what he is doing.
He concluded that the equalization program was inefficient, counterproductive and should be radically reformed or scrapped altogether. That is not our position. We do not believe it should be scrapped. But should it be radically reformed? Absolutely.
Usher argues that the ultimate benefit of equalization to the poor may be negligible, even non-existent, and is certainly less than if the federal sources were provided to the poor directly.
That is an interesting development. Give it to the poor people directly. That is ultimately who it is supposed to help. It is not supposed to help governments, it is supposed to help people. It is not the province of New Brunswick that is to be helped, it is the people who live in New Brunswick who are to be helped. That is where we are going. That is what we want to do.
A recent study by the Atlantic Institute for Market Studies found that the massive regional subsidies that have become part of Canada's fiscal and political makeup have done more economic harm than good. The conclusion is that Atlantic Canadians should look to their own economic resourcefulness and not to government or transfers from the rest of Canada. Wow. What a conclusion.
I also refer the hon. member to a conclusion of a former premier of New Brunswick, Mr. McKenna.