That this House acknowledge the existence of a fiscal imbalance jeopardizing the continued quality of social programs, such as health care and education, in Quebec and in the other provinces.
Mr. Speaker, I thank my party, the Bloc Quebecois, for the wonderful opportunity it is offering to me and certain of my colleagues in the Bloc Quebecois to address this important matter of fiscal imbalance.
This is a matter of such importance that there is unanimity on it in Quebec. There are, of course,still a very few people who have not fully understood the analysis and the serious nature of the trends observable between the federal government's fiscal overcapacity and the undercapacity of the government of Quebec and of the provinces to fund essential services such as health and education.
In the recently released survey commissioned by the Séguin commission, it was indicated that 74% of Quebecers feel there is a problem of fiscal imbalance, with the federal government having too much money compared to its responsibilities, and the government of Quebec having insufficient money compared to its fundamental responsibilities such as providing health care, education and income security. Even in Canada, 64% of Canadians share this opinion that there is a fiscal imbalance.
In fact, earlier I mentioned those who do not acknowledge the imbalance. What I should have said before is that it is the key player involved, the federal government, that does not acknowledge that there is a problem. They have money coming out their ears. The Minister of Finance is swimming in money. He has so much money that he is drowning even, to the point that he is having problems explaining himself. Incidentally, this is taxpayers' money, not his money. Yet the members opposite do not acknowledge that there is a problem.
This problem stems from different sources. The first one has to do with changes in tax revenues, particularly over the past five years. Since 1995, federal government revenues from all sources have increased by 45%. This is quite a bit. This is a fabulous growth rate.
If we look at the structure of these revenues, we notice that the federal government dominates a tax field that has increased considerably more than all other tax fields over the last years, that tax field being federal personal income tax.
Incidentally, if we look at the tax base from Quebec, the federal government receives approximately 60% of revenues collected from Quebecers, while the government of Quebec gets what is left, 40%.
With the federal government receiving 60% of the tax revenues from Quebecers' personal income tax, and the government of Quebec only getting 40%, it is understandable that if this revenue source grows considerably more than other sources, the federal government will end up getting richer faster than the government of Quebec and that is has an additional way of getting its hands into the pockets of taxpayers.
In the last few years—since 1993, when we started collecting these figures—federal personal income tax revenues have increased by 7% a year on average, whereas other revenue sources, such as the GST, corporate taxes and others, have only increased on average by 5.3% a year.
The end result is that by getting 60% of personal income tax revenues, the federal government has added to the already quite significant trend of 45% revenue increases, that began in 1994-95. However, the structural factor is such that it is accumulating increasingly greater surpluses. This is especially true since 1997.
The federal government has managed to reduce its spending. But we should consider where the cuts have been the deepest. It has cut the transfers to the provinces more than anything else. But the real cleanup in the federal bureaucracy remains to be done. It is primarily at the expense of the provinces that the federal government has balanced its budgets since 1997.
If we had kept the same transfer payments we had in 1994-95 with an annual indexation year after year until 2001-02, the provinces and the government of Quebec would have received $38 billion more to finance health care and education.
And they would have us believe that such a loss had no impact on health care, education, income security and the ability to plan and manage public finances in Quebec and in the Canadian provinces. Only blind partisans could forget about this important point.
By cutting $38 billion and not transferring that money that should have gone to health care, education and income security, the federal government has put even more pressure by accumulating surpluses.
On the one hand, we have federal revenues going up faster than those of Quebec and other provinces because of the very nature of the federal tax base. On the other, we have often drastic cuts without any warning, with rules being changed in the middle of the game, in the federal transfer payments for health care, education and income security.
When we have rapidly rising revenues and spending cuts year after year, with considerable savings for the federal government, it is a foregone conclusion that we will end up with regular, structural surpluses and a major fiscal imbalance.
For the benefit of all those watching us, let me explain what fiscal imbalance is. It is quite simple. The federal government has too much money compared to the responsibilities it has to fulfill, which are clearly defined in the Canadian constitution, the first law of the land that the people opposite claim to uphold. A contrario , the provinces do not have enough money to meet their responsibilities in terms of health care, income security and education, which are also clearly defined in the Canadian constitution.
This is how things stand. The federal government overtaxes Quebecers and Canadians, while Quebec and the rest of the provinces are underfinanced.
The government tells us “We have to be careful. Everyone was asked to make some kind of effort to put our fiscal house in order”. Fine, but as I mentioned a bit earlier, the federal government made the provinces do the work. It was the provinces and the government of Quebec which put the federal fiscal house in order, not the federal finance minister nor the federal government.
Ever since 1997, year in and year out, the unemployed have helped restore fiscal balance through a $6 billion or $7 billion surplus, which the federal government has claimed as regular revenues or tax revenues. That is the harsh reality. These are the two main sources of income that have helped the Liberals balance the budget and are now helping them to generate a surplus year after year.
So many cuts have been made that we have reached an all-time low. The federal government's contribution to education and health care has never been so low; it stands at 14% for health and 8% for education.
We are being told again and again by the other side of the House, “Yes, but tax points must be considered”. No, tax points must not be considered. They were given up in 1964 by the federal government in a jurisdiction that did not belong to it but had been taken from the Quebec government and the provinces to fund the war effort, that is personal taxes. They were given a portion of what had been taken as a tax jurisdiction, which was not that of the federal government. This was done in 1964, and again in 1977 for the other provinces. When you sell your house, you do not claim a property right 30 years later. This is totally absurd.
But let us take this government at its word and include tax points in cash transfers. One will realize that about 30% of the contribution to health, education and income security expenses is made by the federal government and 70% by the Quebec government and the provinces. It used to be 50-50. This is already extremely serious.
Concerning the federal debt, the government says “We must be careful. We do not have such a great surplus. We must pay down the debt. We are under enormous pressure because of the debt”. In the last five years, the opposite has happened. Pressure turned into depression, if you will. There is an annual saving of $2.5 billion in debt service. I still do not understand why, with a AAA rate, the federal government can get funding sources at very competitive interest rates.
How can it be that the money of the same taxpayers, the same people whether they are paying taxes in Quebec, in the Canadian provinces or to the federal government—all the same set of taxpayers—is being used to quickly finance, quickly repay, the debt that is costing the least to carry? I need someone to explain this to me. This is at the Economics 101 level on public finances.
I do not understand the logic which has them continuing to accumulate surplus funds on the federal side, accumulating them without any thought of redistributing them to the provinces and the government of Quebec through the rebalancing that virtually everyone now wants, and continuing to make use of this surplus. Last year the total was around $17 billion, used to pay down the debt that is the lowest rate in Canada. The federal government's credit rating is AAA, while Quebec is A plus. Ontario is AA minus, Nova Scotia A minus, Newfoundland also A minus. Why, with ratings this low, when we and the provinces are seeking financing for their debts, which will be far more costly, is there no rebalancing of the federal surplus in favour of the provinces, which would primarily enable them to pay off their more expensive debts? This totally defies logic.
This is a very serious situation. If nothing is done in the next ten years, to take the government of Quebec as an example, we will end up with a national assembly that will be solely responsible for administering health and education. Why? Because if things continue this way, with this imbalance, we will end up in 2010 with a situation in which the bulk of program expenditures, that is between 85% and 90% of expenditures, will be allocated to education and to health. There will be between 10% and 15% left for all the other priorities of Quebecers. Is it normal for the environment, road construction, the promotion of culture, and international representation to have to suffer from such reductionist logic? It makes no sense. That is why a turnaround is necessary, and promptly.
Incidentally, the conference board recently conducted a study that was commissioned the Séguin commission. The government members are the worst when it comes to boasting and spouting rhetoric. As is the case whenever it comes to the issue of the surplus and forecasting, the Minister of Finance is off by 174% per year. The forecasts for this year will likely be off by 500%. If he worked as a professional forecaster, he would get the boot in a second. But no, he is the Minister of Finance—he is still the Minister of Finance—and he can say whatever he pleases.
He was critical of the conference board. Yet, he himself has awarded contracts to the conference board, because he considers it a credible institution. He disparaged the conference board and said that they were off in their figures for the first five years. These figures that the conference board used are his own figures—figures from the Department of Finance—contained in its December budget documents. The minister has shot himself in the foot. He shot himself in the foot when he said that the conference board, especially in the first years, was off the mark. The conference board used his own figures. In the worst case scenario, the conference board clearly went easy on the federal government. It gave the federal government every possible chance, it is almost unbelievable. It said, “We will even anticipate incredible growth in spending. We will use revenue growth rates that are really conservative”.
Even then, and taking into account the Minister of Finance's assumptions, which do not make sense for the growth of the surpluses for the first five years reviewed, we arrive at an incredible gap between the surpluses to be generated by the federal government over the next 20 years and the deficits that will be accumulated by provincial governments, particularly the Quebec government. It is the order of magnitude that is important. It goes without saying that, with forecasts that are off by 173% or 174%, the Minister of Finance cannot understand these statistical subtleties. It is all too easy to be concerned about one's image, to say just about anything, to contradict oneself from day to day, and to get away with these contradictions.
The Séguin commission identified the situation very accurately. It released a thorough study after holding consultations over a period of several weeks to produce an incredibly thorough and comprehensive document. The Séguin commission proposed various scenarios to correct the fiscal imbalance. One of these scenarios is the one which the Bloc Quebecois recommended when it tabled its submission to the commission, in December.
Other scenarios are also possible, but the result remains the same. For example, whether the responsibility for the GST is transferred to the provinces in the future, along with related revenues, or whether personal income tax points are transferred, the result will be the same. The Séguin commission says that either one of these scenarios must be implemented gradually. But the other side forgot that. They said “If we implement the Séguin report immediately, if we transfer the GST, if we abolish the CHST, we will end up with a shortfall, we will have a deficit”.
The main recommendation of the Séguin report is to go about this gradually, and this is what the Bloc Quebecois has done. Mr. Speaker, as you know, we work intelligently, and you yourself recognized that on a number of occasions, when we tabled our annual forecasts for surpluses, which were never off by more than 3% or 4%.
We came up with a five year scenario to achieve the conclusions of the Séguin report and right the fiscal imbalance. Starting next year, we gradually transferred GST revenue. We could have done the same with the revenue from personal income tax; the result would have been the same.
Beginning in 2002-03 and for the five years thereafter, the GST field was gradually transferred, one fifth each year, to the government of Quebec and to the governments of the Canadian provinces. The cash Canada social transfer was gradually abolished over five years, one fifth each year. The federal government's cash transfer for health and education was abolished and replaced by one fifth of the revenues from GST, which the Government of Quebec and the provinces could keep.
Equalization payments were not changed until 2005-06. The existing memorandum of agreement winds up at the end of 2004; we would therefore wait until then to amend equalization payments. Sometimes, a gradual approach is a sign of intelligence and subtlety. The Minister of Finance sometimes forgets these basic principles of good and stable public finances management.
We, too, created the worst case scenario. We said that we would establish a separate EI fund, that we were going to take advantage of this fiscal reform. We subtracted the revenues and expenditures associated with the EI system, i.e. the federal government surplus, by one fifth each year; so, $1.2 billion in surplus money next year that would not go to the federal government next year; $1.2 billion the following year, and so on. We took everything away from the federal government and really created the worst case scenario.
And what did this produce over the next five years? Despite everything, the government transferred its GST revenues to the provinces, and gave up the surpluses from the EI fund, because there was a separate fund, which is what the Bloc Quebecois has been fighting for year after year. We took away from the Minister of Finance the surpluses associated with the contributions from employers and employees to the EI fund. We gradually reduced the Canada social transfer. And what did we get over the next five years? Even factoring in the tax cuts, the new security measures, everything, using conservative figures year after year for the next five years, we still came up with a federal surplus of between $7 billion and $11 billion annually, and that is a conservative estimate.
Much of the fiscal imbalance problem was solved. Provincial governments and the Quebec government would now have enough money, year after year, because they could count on an independent source of financing for health, education and income security.
We also solved the unemployment problem because this irresponsible government would no longer be drawing on the employment insurance fund, the fund being independent. There was a cut in the CHST to replace all that, but the federal government would still run a surplus estimated between $7 and $11 billion. This is an intelligent application of the extremely rigorous recommendations found in the report of the Séguin commission.
Taking into account this reality and what happened to the fiscal balance model that was tied to the budget balance model that we have presented in the past seven years, no one will be able to continue to pretend, in a demagogic way, that it does not exist, that the problem does not exist, that everything is perfectly fine.
I invite all my colleagues from the other parties to support this motion and to try and find solutions to this thorny problem.