Mr. Speaker, when I concluded on this very issue a week or so ago, I was talking about the equalization formula as it applied to Alberta a number of years ago and, specifically, the revenues that were generated by resources in the ground.
There is some concern in Atlantic Canada that these are being clawed back to the tune of about 80%, which prohibits the growth of regional economies when the government is basically taking money away from equalization simply because we are making more money on our minerals, oil resources and natural gas. I took exception to that.
I concluded my remarks, just to remind the House and the viewing public, by stating that from 1957 to 1965 Alberta received equalization from Ottawa. The energy industry there was in its early years, just as Nova Scotia, New Brunswick and the other Atlantic provinces, including Newfoundland are today. The major difference was at that time Alberta received 100 cents of every royalty dollar. Ottawa did not clawback the money through other programs like equalization which the government is doing today, which is patently unfair.
It allowed the Government of Alberta to build on success. That is the only way we will move the poorer provinces along the road to economic prosperity.
I wish to outline what equalization is supposed to do. The Constitution Act, 1982, commits the Government of Canada and the governments of the provinces to promote equal opportunities and economic development and to provide reasonably comparable levels of public service across the country with comparable levels of taxation. That is the basic principle behind equalization.
In addition to the clawback issue, which is a serious issue in terms of restricting the growth of poorer provinces, the government has what it calls a capping provision. It caps the benefits to the provinces or caps the growth in equalization payments. The cap was a sore point back in 1982 when the government brought it in. The cap creates a ceiling so that equalization payments are restricted from growing faster than the national economy.
That has been a bone of contention going back to 1982. It restricts the growth or the development of provinces when things are going well. It is a reverse attitude in terms of what is being attempted with equalization. The idea is more or less that they are poor, that they will stay poor, and that we will not do anything about it.
From an Atlantic Canada perspective, and I can speak with some authority to the other provinces as well, it is not any different in Saskatchewan or Manitoba, two provinces that are concerned about the equalization formula. I will stick to my notes because they are fairly technical and I do not want to be misinterpreted in what I am saying.
Imposing a ceiling or a cap on equalization payments interferes with the ability of the formula to equalize fiscal capacity to the level of the program's standard and further hampers the ability of the program to meet its constitutional commitment.
The government told us that it would lift the ceiling. It was announced by the Prime Minister and the Minister of Finance. The Minister of Finance put out a press release on this very subject matter in terms of lifting the ceiling on equalization on March 15, and we appreciate that.
The lifting of the ceiling for one year only, which the government has done, will provide only a temporary solution to the problem. In order to allow the formula to work effectively the ceiling must be eliminated, not just for one year but in perpetuity.
The strength of the Canadian economy combined with the design of the current ceiling provision has put the ceiling in danger of being breached in the year 2000-01 and in future years. This would result in the federal government withholding future equalization transfers to compensate provinces even though these revenues would be needed in future years when economic growth may not be as strong.
In summary, it is an ad hoc approach to a problem. It has to be long term thinking on the part of the federal government if equalization and the strengthening of the economic position of the provinces are to be improved. It cannot be done on an ad hoc basis year by year. We could legitimately accuse the federal government of doing it on an ad hoc basis. It makes it up as it goes along but has no long term plan. It has the same approach on so many other issues. It is a trademark of the government. It works through the problem but does not plan for the future.