Debates of June 6th, 2002

Supply

[An hon. member]

Oh, oh.

[An hon. member]

It is very difficult to hear the comments.

[The Acting Speaker (Ms. Bakopanos)]

Yes, it is very difficult to hear the comments of the hon. member over the heckling. Order, please.

The hon. parliamentary secretary.

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Madam Speaker, maybe the hon. member thinks he is in a bar.

In any event I would like to indicate to him that it is appropriate to listen very carefully.

Let me point out some of the facts that the hon. gentleman across the way raised. He painted a picture of an economy in terrible shape and yet GDP growth surged by 6% in the first quarter of 2002, outpacing that of the United States. Growth was well balanced in the quarter with a solid 3.5% raise in domestic demand led by a second quarter of strong residential investment growth.

Let us look at other facts. This strength in the domestic demand was fueled by a pickup in personal income growth. We also note that it is the result of strong recent employment performance. Real exports also contributed to the strength in growth of 5.9%, reflecting resurgence in the U.S. demand for Canadian goods and services. The recent strength in the Canadian labour market continued in April with an increase of 37,000 new jobs, bringing gains in the first four months to 207,000.

[Scott Reid, Canadian Alliance, Lanark—Carleton, ON]

Madam Speaker, I rise on a point of order. My understanding is that under the rules of order of this place the question of relevance applies not only to speakers but also to questions and comments.

[The Acting Speaker (Ms. Bakopanos)]

I do not believe that is a point of order, but we will assume that the hon. member will get to his question very soon.

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Madam Speaker, I am allowed to make comments and that is in fact what I am doing. Since we obviously gave a lot of latitude to my friend across the way who was all over the map on everything under the sun, I thought I would stick with some real economic points.

My friend says that we should write off this overpayment and just let the provinces take the money. There are good examples of provinces giving overpayments to municipal governments in this country. What did they do? They demanded the money back and they got it back. The province of Ontario is a good example.

The member suggests, first, that we have not made a decision. We are reviewing the auditor general's comments on this. I would like to ask the hon. member, does he thinks it is prudent for us to make a decision before we have analyzed the comments of the auditor general in terms of this overpayment issue?

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, I would like to thank the member for his question. I can understand him wanting to make a speech on the finances of the nation thinking that perhaps the position of finance minister might be available again very soon, considering that the finance minister holds so many different positions. My understanding is that his caucus was all over the map on this issue and on many other issues in the last few days so he should be used to it.

He talked about how well the economy is doing, and I have to agree, but it seems strange that the Prime Minister would fire the finance minister under those kinds of circumstances if that is the case.

If we look at it in the bigger light of how we are doing internationally and how we are doing against our major trading partner, the United States, and he raised these issues, the facts of the matter are that we still have the highest personal income taxes in the G-7, we have only 80% of the productivity of the United States and our standard of living is only 70% of that of the United States. This has been happening during the time that the Liberal government has been in power, 1993 to 1997.

I guess the linkage he is making is that the government should recover the money from the provinces that have even more money, but I am suggesting this: What is the government's record in spending this money once it has it? I thought I made a fairly clear point that there has been a tremendous amount of waste in the government. It has happened through patronage projects. We have seen it for months in the House. It is raised almost every day with a new scandal about waste of taxpayers' money. As well, I have suggested that government priorities are all wrong with things like corporate statism and corporate welfare. Money that hardworking Canadians struggle to raise is going to big corporations.

The point I was raising is that yes, we could take the approach the member talks about and we could recover the money from the provinces. That is one approach we could use, but as I put it, that to me seems to be a confrontational approach. The federal government made the error, not just in one year but for almost 10 years, year after year. The provinces have spent the money, so they are going to be put in the position that they somehow have to recover it. In the case of Ontario $2.5 billion would have to be paid back. What are their options? That is what I was pointing out to the hon. member. What are their options? Are they going to raise taxes to do it or are they going to cut program spending?

In the case of Manitoba the premier has told us that money has long since been spent on social programs, education, health and building roads in the province. Does the federal government want the province of Manitoba to pay that back and to suddenly have to come up with some new taxes in order to do so? I think that is the wrong approach.

The Liberal government does not have a good record in provincial-federal relations. Now is the time for it to help clear the air. It could say “We made a mistake, it is our mistake, and we recognize that we could get it back but there is still only one taxpayer out there”. While the government is at it, maybe it could also admit that it does not have a very good record in spending public money to begin with. We see numerous examples of that in the House almost every day.

I think that the better approach, and our party supports it, is to forgive the overpayment, clean up the problem so it does not happen again and move on.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, I am pleased to have an opportunity to address the motion put forth by the hon. member for Peace River.

The issue of overpayments to provinces under the tax collection agreements is a complex one, so I would like to take a few moments to provide some background, beginning with a quick explanation of how the tax collection agreements function.

Under the tax collection agreements, the Canada Customs and Revenue Agency, CCRA, collects personal income taxes from all provinces and territories except Quebec. The federal government pays to those provinces the appropriate share of the taxes collected, based on accounts provided by CCRA.

Overpayment to the four provinces, namely Alberta, British Columbia, Manitoba and Ontario, are the result of a tax accounting problem at CCRA. The problem relates to the accounting of capital gains refunds by mutual fund trusts. Mutual fund trusts pay federal and provincial income tax on capital gains. Under some circumstances, mutual fund trusts can receive a refund of both the federal and provincial portions of this tax paid.

Due to a problem with CCRA accounting processes, however, the provincial portion of the capital gains refund claimed by mutual fund trusts was, for many years, not being deducted in the computation of the provincial tax revenues. Instead, it was deducted from federal revenues.

In other words, when mutual fund trusts paid provincial income tax on capital gains, the amount of the tax was added to the payments to the provinces. However, when the mutual fund trusts received a refund of provincial taxes paid, the refund was not deducted from the payments to the provinces.

The problem did not affect taxes paid by individuals or businesses. It was strictly an issue between governments. Nevertheless, the amounts of the overpayments were significant. They amounted, as was pointed out, to some $3.3 billion for the years 1993 to 1999. Alberta, British Columbia, Manitoba and Ontario are the most significantly affected provinces. Ontario's overpayment is about $2.8 billion and Manitoba's is more than $400 million. British Columbia was overpaid by $120 million and Alberta by $4 million.

In the course of enhancing computer systems used for tax accounting, the CCRA realized that there might be a problem and, as a result, initiated an indepth review. As soon as this internal review process indicated that the problem was real, the CCRA informed the finance department and the auditor general.

I am pleased with how the government has acted on this issue. In all instances we have been upfront and transparent with Canadians. We have been quick to take action. As soon as the auditor general confirmed that the problem existed, we took action to prevent further overpayments, we began discussing the issue with the provinces, and we asked CCRA and the auditor general to confirm the amounts involved, which brings us to where we are this week.

Just a few days ago, on Monday, the auditor general gave the Minister of Finance the reports on the overpayments. There are four reports altogether. There is an auditor general's report for the years 1997-99. There is an accountant's report for 1993-96 and another for the years prior to 1993. For the 1993-96 period, the procedures carried out are the same as those used to conduct an audit. However, because some documentation was not available, the auditor general cannot express an audit level verification on the amount of the overpayments for these periods.

I am sure that when my colleague, the Parliamentary Secretary to the Minister of National Revenue, speaks she will of course elaborate on this. She will be splitting her time with me.

For the period prior to 1993, the auditor general found that the necessary financial information to determine the amount of the overpayments relating to the period does not exist.

The fourth report deals with CCRA accounting practices. It essentially verifies that CCRA has implemented procedures to account for the provincial portion of the mutual fund trust capital gains refund. Practically speaking, it means that problem has been solved.

In the spirit of accountability and transparency the Minister of Finance made the auditor general's report available to the provinces and all Canadians as soon as he received them.

Moving forward, we need to review and thoroughly understand the auditor general's findings before making a decision on how to resolve the issue. I am sure all members would agree that it is prudent to do so. Otherwise we would be taking rash action. We must also consider what the impact may be on the provinces and territories. Because the overpayments made under the tax collection agreements affect the calculation of equalization they have an impact on all provinces, not just the four I mentioned earlier.

I think hon. members will recognize that where there is an overpayment of any kind, whether by a federal or provincial government or by an individual, it is normal to expect the amount overpaid to be returned. However as I mentioned earlier, this is a remarkably complex issue. The solution is far from clear at this point. Suffice to say that the government is determined to ensure the problem is resolved in a reasonable and fiscally responsible manner.

As we work toward resolving the issue I can assure the House that the government will continue to co-operate fully with the auditor general and with the provinces and territories. We will continue to be honest and up front in dealing with the issue for Canadians.

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

Madam Speaker, I thank my hon. colleague for his speech on the issue.

I will ask him a question which was raised by our finance critic regarding the repayable contributions. If the federal government is so intent and keen on going after the provinces for its own mistakes on overpayments, could the hon. member please enlighten me as to why it has not been more diligent in going after things such as the repayable contributions to which our hon. member referred?

I have in my hand a 20 year history of Industry Canada's repayable contributions and the actual repayments by program. About $4.19 billion was paid out under the department's programs. Less than a billion, $.9 billion, has been repaid. Could the hon. member explain why the government has not been more diligent in going after this?

Let us look at a program under Industry Canada, Technology Partnerships Canada. The release of two annual reports this year, one for 1999-2000 and the other for 2000-01, revealed that of the $1.6 billion spent or outlaid since the program was created in 1996 until March 31, 2001, only $20.1 million was repaid.

Why is the federal government going after the provinces for its own mistake while not going after the repayable contributions or loans it makes through Technology Partnerships Canada?

[Bryon Wilfert, Liberal, Oak Ridges, ON]

Madam Speaker, I thank the hon. member for his question.

First, the hon. member suggested we were going after the provinces and territories. As I indicated in my speech very clearly, we are reviewing the auditor general's report. It is a complex issue and no decision has been made. It would therefore be premature for the hon. member to come to a conclusion we in the government have not reached.

We are not going after anyone. We are reviewing. We have been up front with the provinces and territories. We have provided them the information. We have released the auditor general's report not only to the provinces and territories but to Canadians as a whole. An assumption has been made regarding a conclusion which has not been reached.

As far as Industry Canada is concerned, I am sure the hon. member can appreciate that I do not have the information in my hands. I appreciate the comments he has made. He may find it helpful to direct the question in writing to the appropriate individual, probably the minister. Otherwise I cannot comment on it.

It is critical that the information on the overpayment be available in the public domain so people can look at the four reports. As I mentioned, there are four reports and they are very complex. We want to make sure that when we come to a decision we do so in the interest of all Canadians.

[Sophia Leung, Liberal, Parliamentary Secretary to the Minister of National Revenue]

Madam Speaker, I am pleased to respond to the motion tabled by the hon. member for Peace River. My hon. colleague the Parliamentary Secretary to the Minister of Finance has provided a clear explanation as to how we will deal with the issue. However I will discuss it further for the benefit of hon. members.

The motion before the House today fails to recognize the fundamental responsibility of government: When a problem is identified it must be corrected as quickly as possible. When it involves taxpayers' money as this problem does, steps must be taken to ensure the money is put to the use for which it was collected.

I will focus my speech on what I believe was an effective and responsible reaction to the accounting problem on the part of the government. Members of the House will recall that on January 29 the Minister of National Revenue announced that CCRA had identified a problem in tax accounting that resulted in overpayments to six provinces under the Tax Collection Agreements.

I cannot emphasize too strongly that the problem does not affect taxes paid by individuals or businesses. As a result of the accounting problem the Government of Canada over a period of more than 25 years overpaid some provincial governments under the Tax Collection Agreements it has with the provinces. The only significantly affected provinces are Alberta, British Columbia, Manitoba and Ontario.

The accounting problem was detected by CCRA staff in the course of working on the modernization and computerization of one of CCRA's accounting processes. The overpayments to the provinces are the result of a problem in accounting for provincial capital gains refunds of mutual fund trusts.

As soon as the agency's internal review indicated that a problem existed the auditor general was immediately contacted. Every effort has been made to ensure as open and transparent an investigation as possible while ensuring no individual taxpayer information is released. We have respected confidentiality. The government took immediate action to ensure the overpayments would not be continued.

As members know, the auditor general has studied the CCRA accounts to confirm the scope of the problem. Her report was received earlier in the week and was promptly made available to the public. In her report the auditor general gave complete assurances that there had been $2.5 billion in overpayments in the period from 1996 to 1999. She gave a partial assurance that over $800 million had been overpaid in the period from 1993 to 1996. In the spirit of accountability and transparency the reports were released to the provinces and the public as soon as they were received. The auditor general also confirmed that the CCRA had made changes to its accounting practices applicable to mutual fund trust capital gains refunds to avoid a similar omission in the future.

Members should realize that the problem was not simple to detect. It arose with respect to the capital gains realized by mutual fund trusts. Mutual funds are a type of collective investment vehicle which allow Canadians a simple way of investing indirectly in a broader range of stocks and bonds in a number of different markets. The funds are essentially approved investments.

The problem happened like this: When a mutual fund sells one of its investments and makes a profit it has a capital gain and must therefore pay a capital gains tax. When the value of the investment is realized by an investor in the trust, for example when an investor sells his or her share in the trust, the investor realizes a capital gain and must pay tax on the capital gain.

However that is two capital gains taxes on the same profit. The basic principle of capital gains is that tax should not be paid twice on the same transaction. Therefore when the investor pays the tax on the capital gains the CCRA refunds to the trust the capital gains it had paid.

The problem arose because the provinces have capital gains taxes that mirror those of the Government of Canada. The CCRA was collecting the entire tax on the capital gain from both the trusts and the investors, including both federal and provincial shares, and paying the provincial share to the provinces. This is where the error occurred. The provincial portion of the capital gains refund for mutual fund trusts was being deducted from federal revenues rather than provincial ones. In short, the provinces ended up getting more tax revenues on the capital gains of mutual fund trusts than they should have, while the Government of Canada ended up getting less than its share.

As members can understand, this was not easy to detect. In her statement of January 29 the Auditor General of Canada said controls and reviews by CCRA and the Department of Finance did not reveal a problem, nor did their audit work. The problem was only discovered when CCRA automated the tax filing process for mutual fund trusts.

Although the problem was detected in the course of computerizing the accounting processes, members should not assume CCRA does not rely extensively on automated systems already. The agency has one of the largest and most sophisticated information technology outfits in all of Canada. Its expertise is recognized worldwide. The CCRA continues to work full time to modernize its processes so it can provide increasingly higher levels of services to Canadians and Canadian businesses. Our tax administration is truly leading edge.

However the CCRA does not work in isolation in its modernization process. It is consulting with large and small businesses and other interested parties in determining the direction its modernization efforts should take over the next 10 years. The process which CCRA calls Future Directions will ensure that, particularly for business, the computer and information systems it develops will be consistent with those being developed by the private sector.

By making every effort to ensure the systems under development will be compatible and client friendly, CCRA is demonstrating its commitment to better client service now and in the future. The Minister of National Revenue and the management of CCRA should be saluted for their openness and transparency in ensuring everyone knew they had found a problem and that they were taking every step possible to resolve the issue.

For that reason I believe our government will be able to maintain the spirit of co-operation and transparency, and to find an appropriate solution to the problems by working with the provincial governments affected.

I cannot support the motion presented by the member today because we need to explore all our options.

[Lynne Yelich, Canadian Alliance, Blackstrap, SK]

Madam Speaker, I listened with great interest to the member. I listened to all the technological problems she expressed and the 10 years it took to discover this great error.

At the end of her remarks the member said that she was exploring options. I wonder if she would agree to simplify the tax system somewhat. The system sounds very complicated. She talked about the taxes and the difficulty in detecting the serious problems that have occurred. Since billions and billion of dollars were miscalculated, would she consider a simplified tax system?

[Sophia Leung, Liberal, Vancouver Kingsway, BC]

Madam Speaker, yes, we are trying to streamline the system. We are upgrading the computer system to ensure that we will not have mistakes in the future. I think we are trying to simplify matters and trying not to have as many loopholes as we had before.

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

Madam Speaker, I thank my colleague for her speech today and thank her for clarifying some of what happened.

As the member is the Parliamentary Secretary to the Minister of National Revenue, I believe she has direct knowledge of this area.

I understand her argument about capital gains. She said that this was discovered when there was an update in the computer systems and a change in accounting. I believe I heard her correctly when she said that. With her direct experience, could she provide more background on what sort of computer change happened when this error was discovered?

Further to that, she talked about the period from 1993 to 1996 and from 1996 until 1999. The capital gains tax goes back to 1972, so this could go back even farther.

I know the previous speaker said that the government had not made a decision yet, but it does seem intent, through its opposition to the motion, on asking the provinces to pay the money back. If further monies are discovered and further errors are discovered with the provinces, because this does go back to 1972, will the government then ask for those monies back as well?

[Sophia Leung, Liberal, Vancouver Kingsway, BC]

Madam Speaker, the problem for many years was virtually undetectable because the mutual fund trust was not a significant investment vehicle until 1990. That really was the start of our problem.

In the meantime, our improved system will make it easier to detect any future problems or mistakes. We are reviewing other options to know what we should do. I also want to inform the member that the province of Alberta has voluntarily refunded the overpayment.

We all know the government has a lot of distribution for funding, especially the CHST and the equalization payments. We need the funding to support the other provinces.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I am pleased that my colleagues of the Canadian Alliance have raised this major problem, which was discovered last January. It has been analyzed since then by the auditor general.

I will start by asking the government a question. Is there someone piloting the plane, is there anything working properly in this government? For the past two months or so, problems have cropped up every week. When it is not a matter of funding or lost reports, it is problems related to the near-corruption of this government.

Today, we are informed, with a little more precision, based on the analysis of the auditor general, that there have been shortcomings in the administration of our taxes. From 1993 to 1999 in particular, the federal government overpaid four of the Canadian provinces to the tune of $3.3 billion. If we include the year 2000, since we can make an estimate from the data available, we could add on another billion, for the grand total of $4.3 billion.

It is an aberration that there is not more control over the taxes we pay to Ottawa. The other side is constantly telling us about competency, about good governance, about transparency. Over the past two months, there has been one example after another proving that it is just the opposite. This government lacks transparency in the allocation and distribution of government funds. This government is not managing our taxes properly. This government spends its time pondering the issues that we, the opposition, have raised.

These issues often relate to the very integrity of this government, with regard to the allocation of subsidies. In recent weeks, we witnessed it in the area of sponsorship. All that this government was able to say is that it is checking things out, it is investigating, it is examining the problem. The government leader is about to fall asleep over this issue, because whenever we raise a management or corruption problem, he tells us “I will check, I will review, I will examine”. Since he began giving us this line, the files have been accumulating on my desk and we never get answers to our questions on the proper or improper use of public funds, which are made up of personal and corporate taxes.

The issue that confronts us today is a serious one. As we know, the federal government collects all the taxes paid by individuals and businesses, in all the Canadian provinces. It does so on behalf of the provinces, except for Quebec, which set up its own revenue department several decades ago. It is the federal government, based on certain parameters, that redistributes to the provinces the taxes to which they would normally be entitled if they themselves had collected these taxes from their taxpayers.

In redistributing these funds, the federal government made a mistake during the years 1993 to 1999 in one area of personal income tax, namely trust funds. It gave too much money to four provinces: Ontario, Manitoba, British Columbia and Alberta. It gave them $3.3 billion more than these provinces would have been entitled to if they themselves has collected the taxes from their taxpayers.

As I mentioned earlier, in the year 2000, another mistake was made in the redistribution of the taxes, with the result that these four provinces received an additional $1 billion, which they should not normally have received.

All of these miscalculations in estimates from 1993 to 1999 and all of these miscalculations in the redistribution of taxes have had a ripple effect, a domino effect on other aspects of the federal government's fiscal policy, including equalization. From 1993 to 1999, by overestimating the fiscal capacity of the provinces targeted by the equalization calculations, Ontario and other provinces reveived most of the overpayments made by the federal government, the result being that equalization payments to receiving provinces were overestimated.

If we take Quebec as an example, due to miscalculations from 1993 to 1999, it is said to have received an equalization overpayment of $825 million. If the provinces that received part of the $4 billion in overpayments made by the federal government pay it back, it could have a domino effect when it comes to equalization.

We are talking about a lot of money for Quebec: $825 million. This represents 80% of the budget for all of Quebec's CEGEPs. This represents half of the budget for universities and 65% of health care spending in the Montérégie, where the beautiful riding of Saint-Hyacinthe—Bagot is located. An amount equivalent to 65% of health care spending is a great deal of money and not enough right now, incidentally. However, by taking away $825 million, if all of the provinces were asked to pay it back, including indirect reimbursements as a result of equalization, that is the kind of impact this would have.

If we look at the overpayment figures received by the four provinces I mentioned earlier, Ontario, Manitoba, British Columbia and Alberta, when we look at the per capita figure, we come up with fairly sizeable amounts. For example, Ontario received an overpayment of $321 per person.

If we compare this with the equalization payments resulting from this error and received by the provinces, if we look at the $825 million overpayment received by Quebec because of this miscalculation by Revenue Canada on a per capita basis, it works out to an overpayment of $321 per person for Ontarians, compared to $111 per person for Quebecers, for the overpayment resulting from this overestimate of Ontario's revenues, or rather of its fiscal capacity.

There is therefore a difference between the net benefit received by Ontario as a result of this error, which led to $3 billion tax overpayment it should not have received from the federal government. There is a difference of approximately $220 per inhabitant between the benefits that went to Ontario and those that went to Quebec.

If we look more closely at the situation, we agree with part of the motion put forward by our colleagues in the Canadian Alliance, that there should not be a clawback for an error of this magnitude. There would be too many consequences and domino effects on equalization and on other tax considerations. But, if four provinces benefited from an error made by the federal government between 1993 and 1999, and even 2000, if they received more in taxes than they would normally have received from their taxpayers, somewhere it must be taken into consideration that these four provinces benefited from an error, while six provinces did not. The relative wealth of these provinces and others was therefore attributable to an error by Revenue Canada.

Since it is impossible to change history, and since we accept and support the first part of the motion of the Canadian Alliance to the effect that the government cannot demand repayment from these four provinces. The six other provinces that did not benefit must instead be compensated. I noted that, even by comparing Quebec's equalization payment—the other benefiting provinces could have also been used—even comparing the amounts of equalization per Quebec resident with the amounts an Ontarian, for example, received as a result of the federal government's overpayment in tax terms, the difference represents about $220 per capita.

We contend that this is the compensation that should be given, on a per capita basis, to the six other provinces that did not benefit from Revenue Canada's error.

This is the error that is known about, that is, the one made between 1993 and 1999. Then there is also the error we estimate to amount to over $1 billion, for 2000.

However, Revenue Canada has acknowledged that these errors may have occurred since 1972. The auditor general has not closed the door on the possibility that the amount overpaid to the provinces between 1972 and 1992 can be calculated.

She has even cast doubt on Revenue Canada, which is now the Canada Customs and Revenue Agency, in connection with the response given by a senior official, who said that there was not enough information to evaluate the amount of the overpayment between 1972 and 1992. According to the auditor general, the figures could be calculated.

However, if we limit ourselves to the 1993 to 2000 period, it would be appropriate—based on discussions with my Canadian Alliance colleague, who is the sponsor of the motion—if the fruit of the federal government's error is left with the four provinces, to compensate the other six, which did not benefit from the error, on a per capita basis.

I gave an example a little while ago, concerning excess equalization payments and the difference between them and the amounts involved in the federal refund for Ontario and the three other provinces—with Ontario benefiting the most—the refund of excess taxes.

This is the solution we see. The federal government does not have to ask the four provinces to pay for past mistakes. Particularly since the four provinces in question are grappling with financial problems which grow worse with each passing year, as the population ages and pressure is put on the health sector.

Canadian provinces and the government of Quebec are already facing enormous pressures on their public finances. These pressures have grown worse since 1995, when the former minister of finance, who recently stepped down, made the worse cuts in the history of Canadian federalism in health and education transfer payments to the provinces and to the government of Quebec. The provinces were bled dry.

I did not take part in the chorus of praise for the former minister of finance, because praise is not what he deserves. When we look at who did the job, he is not the one we should be describing as a good manager. We have seen the glowing terms used by analysts who have lost their powers of judgment and analysis in recent days and have been saying that he was the best Minister of Finance since Confederation. Let us be serious.

The reason the Minister of Finance was able to eliminate the $43 billion deficit was because he got others to do the work. He did not do anything. He sat back and pressed a button to destroy social programs, and got the provincial ministers of finance to do the actual dirty work of downsizing.

This is what has happened since 1995. Which means that any chorus of praise with respect to Quebec should be directed at Mr. Campeau, who was finance minister when the former minister of finance made his first deep cuts, at Ms. Marois, and at Bernard Landry. They were the ones responsible for putting the federal fiscal house in order. They were the ones who were the good managers and who did more with less, given these deep cuts by the federal government and the former minister of finance, pretender to the throne.

Oh, he did work on this. Since 1995 he has been working at preparing for his exit. The former minister of finance was preparing for his exit, because he kept on announcing really insignificant surpluses and then, at the end of the fiscal year, making spectacular announcements of a surplus. This is a farce. It is the way a trumped up reputation is built. It is also how a person can prepare his exit in order to prepare for a leadership race. That is what the finance minister had been doing ever since 1995.

The unemployed merit congratulations, a handshake and a shower of praise. Every year, the former minister of finance has literally helped himself to the EI fund surplus. And yet he is being praised to the skies as a great humanitarian and a great person. The reputation as a humanitarian and a good administrator both need rethinking.

It is easy to be a good administrator when the EI fund is now being used just like any other source of funds and becomes part of the government's consolidated fund. It is no longer insurance. It is easy to pad the surplus when 60% of the unemployed are shunted aside as no longer eligible, thus making it possible to inflate the surplus and one's popularity as a good administrator. I think the unemployed are the ones deserving the shower of praise, not the former minister of finance and pretender to the throne.

Getting back to the issue before us, after depriving the provinces from a net $24 billion since 1995—this is taking into account the amounts given gradually, the $800 million here and the $800 million there—in transfers for health, education and income security, would it not be a good idea for the federal government to give back some of the money that it literally stole from the provinces, and to begin by not retroactively claw back the $4 billion paid by mistake between 1993 and now, and instead compensate the other six provinces that did not benefit from this mistake, this incompetence in the management of public funds?

It seems to me that this would give back a small portion of what this government stole from the provinces. Normally, that money should have been used to strengthen the health system, which is in great need of additional funding, particularly with our aging population.

Would it not be a good idea to leave them this $4 billion and compensate the other six provinces, so as to partly make up for the money stolen by this government and the former minister of finance and help fund education?

Members opposite talk about youth with their hands on their hearts; they talk about the future; they say that our young people represent our future and that they are proud of them. How many times did we hear the Minister of Finance talk about the future of young people and say that he really cared about it? Such hypocrisy.

At the same time that they were saying this, they would tell us that cuts were necessary, that cuts had to be made in social transfers to the provinces. It might be a good idea to let the provinces benefit from this mistake this time around. It would also be a good idea to compensate the other provinces that did not benefit from this mistake. It would just help them a bit.

They are swimming in money; it should be made clear today that they will not ask these four provinces to reimburse them and that they will compensate the other six provinces. Enough with the jokes from the other side.

I hope that the new Minister of Finance will go over the former minister's figures. There is only so much we can take when it comes to being laughed at like this, to being told that there is no more money left, that things look bad, that the surplus will not be very much, that the economy is in a downturn.

Hon. members will recall, six months ago, our competent former finance minister—who is being heaped with praise today, even the analysts have lost their objectivity—was forecasting a surplus of $1.5 billion for the financial year ending March 31. We ended up with a surplus of almost $10 billion, $9.8 billion to be precise.

Six months ago, our calculations predicted a surplus of between $9 billion and $10 billion. How is it that he, with all of his expertise, he who has received nothing but praise for the past week, could not anticipate this?

Enough with the jokes from the other side; enough with them telling us that they are good managers, that things are being checked, that they are improving, and will be even better in the future. Let them start being normal for once. Let them start by managing public money normally. Let them also see that while Ottawa is sinking under the weight of the surplus, Quebec and all of the provinces of Canada are having trouble making ends meet at the end of every month.

The population, particularly the aging population, has needs with it comes to health care. The future population also has needs, those who will take over for us. These young people need investment in education from the provincial governments, that are responsible for this education.

The four provinces should be allowed to benefit from this mistake, but those that did not benefit from the federal government's mistake should also be compensated.

I would like to propose an amendment to the motion moved by my colleagues from the Alliance.

I move:

That the motion be amended by adding the following to the end of the motion:

“and to give compensation to others which have not benefited from these errors”.

[The Acting Speaker (Ms. Bakopanos)]

The Chair will examine this amendment in order to determine whether it is in order.

[André Harvey, Liberal, Parliamentary Secretary to the Minister of Transport]

Madam Speaker, to be very honest, I wish to take advantage of my colleague's expertise. The bulk of his speech constituted an objective analysis of the opposition motion we are dealing with.

I am sure he is aware that the government, Canada Customs and Revenue and the Department of Finance in particular, are going to give very careful scrutiny to the technical error for the years 1993 to 1999.

I would, however, like to make the following point. Sometimes, when analyzing figures, there is a tendency, not always deliberate, to exaggerate certain information. I recall, for instance, the campaign launched in Quebec by the government in power concerning the 15 cent federal contribution to health care, while we now know that the figure is excess of 40% . This is public knowledge.

In would like to take advantage of the fact that my colleague has spoken on this issue. Given his frequent dealings with funding and his very clear understanding of the difference between tax points and equalization payments, I would like to ask him what he thinks of the present position by the Part Quebecois and even the government—the possibility is being discussed—of holding a referendum on tax points this fall, knowing that the cost of this referendum will be some $50 million and it is supposedly a known fact that a consensus will be readily attainable.

This morning I read an article by André Pratt in which he characterizes such a referendum as an exercise in futility, that will be costly and above all risky.

I would therefore ask my colleague, in all honesty, what he thinks of the appropriateness of holding a referendum which strikes all Quebecers as pointless and would cost between $50 million and $75 million.

[The Acting Speaker (Ms. Bakopanos)]

Before the hon. member responds, I must inform the House that, pursuant to Standing Order 85, an amendment to an opposition motion may be presented only with the consent of the sponsor of the main motion. This consent has not been indicated to the Chair.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, on a point of order. I obtained the consent of the sponsor of the motion, of my colleague, with whom I discussed the matter this morning . He can confirm that.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Yes, we agree with that, Madam Speaker.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Speaker, I would first thank my colleague from the Canadian Alliance for agreeing to this amendment and for being open to discussion this morning. I will remain objective in my response to my colleague of the Liberal Party, as I have since the start of this debate.

First, I would correct his figure of 40% for health. It is very inflated. Second, even taking into account the tax points given up in the 1960s, the figure is around 20%. However, if these tax points are taken away, the figure drops to 13%.

It would be a good idea to take them away. If they gave up a taxation area in the 1960s, they gave it up. After 30 years, a person cannot claim right of ownership of a house that has been given up.

This area of taxation was given to the provinces and to the government of Quebec in the 1960s and to other provinces in 1977. It does not even appear any longer in the columns of Liberal government figures. This then is proof that the funds are not allocated. There is no spending, but it was transferred, sold, given away in the 1960s. This is just a little point I wanted to make.

As regards the holding of a referendum, we are still pondering the issue, both in Quebec City and within our party. However, a referendum has two virtues, even when there is consensus on the question.

First, it makes the federal government realize that this consensus is real consensus. The hon. member knows—because he witnessed it when he was in the opposition, before joining the Liberals—that even when we have had very strong consensuses in Quebec, they were ignored. This government would not accept them, it would just ignore them.

That was the case with the Young Offenders Act, on which there was consensus, and even unanimity in Quebec. Still, this government just would not listen. Having the public express itself clearly on an issue such as tax points is an additional argument. Therefore, we must consider this option.

The second virtue of a referendum is that it informs the public. We may talk about tax points, but the fact is that there is a fiscal imbalance. It is even reflected in the last fiscal year, with this $10 billion surplus, even though the government said there would be no surplus. These surpluses will grow, they will not shrink.

There has been a certain slowdown in the economy in recent months and, despite this slowdown and the new security measures, such as those announced in the last budget in December, there is a surplus. In the years to come, the surplus will increase almost exponentially.

This situation must be explained. The misinformation dished out by the Minister of Intergovernmental Affairs, who says just about anything that comes into his head on this issue, who tries to publish a document so ridiculous that it does not stand up to even an hour of superficial analysis, must be countered. He comes out with complete nonsense, such as that we heard yesterday, when he said that a referendum on a federal issue was illegal in any event, or some such drivel. I no longer really listen to him.

Nonetheless, the public must be given accurate information. This is a serious situation. On behalf of the public, I only hope that the new Minister of Finance is more receptive than the previous one, that the new Minister of Finance analyses the situation properly, unlike the previous incumbent.

I hope for this receptiveness on behalf of Quebecers and Canadians, who hope to have the best services possible, particularly in the health and education sectors.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, I would like to thank my colleague from the Bloc, the finance critic, who has made a good intervention this morning. He did talk quite a bit about the previous finance minister and what his practice was, it seems, of not being very good at accounting. He talked about the employment insurance surplus that year after year has built up a tremendous amount of money for the federal government. Even in this current year there is $3 billion more collected than what is required by the chief actuary. This surplus has been built up to something like $35 billion over the term of the former finance minister.

There is also the matter of the foundations that the former finance minister funded, of which the auditor general is very critical, with essentially over $7 billion in off book foundations.

As well, there is the practice of underplaying or lowballing the federal revenues in his budget to always make it look like he is doing better than he had projected. In this current year it looks like there will be a $7 billion to $10 billion surplus. The finance minister had projected $1.5 billion. It seems to me that was a practice that the former finance minister engaged in. I am not sure what he was trying to do. Perhaps it was to build up funds for an election year or his own campaign or whatever.

Again, it seems to me that it goes with this whole problem the government has of problems with calculations made by Revenue Canada and with overpayments, this current matter we are discussing today. If the federal finance minister and his department cannot run the department in a better fashion than that, is that not really a serious problem we have here in Canada?

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, I thank the member for Peace River for his comments and his question.

Of course, there is a problem. When it is not a problem of cronyism or outright thanking with money friends who have made contributions to the Liberal Party of Canada, it is clearly a problem of management abilities.

The member mentioned it: the fact that a $4 billion error such as this was made in overpayments to four provinces raises serious questions about this government's competency and that of the main administrators at Revenue Canada, or the Department of Finance.

The former Minister of Finance's estimates are a farce. From 1997 to today, the former minister was out by $66 billion in cumulative surpluses. This means that every year, he diverted billions and billions of dollars away from public debate. This was repeated until after five years, a total of $66 billion had been accumulated.

This means that citizens of this country did not get the real picture of public finances, they did not see what this government could have done because the truth was being kept from them. They were being told all kinds of things about the surplus. They were told “there will not be that much of a surplus. We must be careful, we must be prudent”.

There is a difference between being prudent, even being extremely prudent, and saying all kinds of things to the public and taking them for idiots. The former Minister of Finance took the public for idiots. He was $66 billion off in his forecasts; it makes no sense.

During all those years, I think he was trying to set the stage for his exit, the way he did reaping incredible praise on his abilities as a manager. That is what he did. He put his leadership campaign before the welfare of the population. That is what he did.