Madam Speaker, I thank my friend, the NDP finance critic, for sharing some of his time with me. Coming from the province of Manitoba, I felt it very important that I speak to this motion because I believe that the overpayment issue of the mutual trust fund refunds affects my home province in a disproportionate way. In fact the impact is far greater given our financial structure and financial base than it is to some of the other provinces.
Manitobans are very apprehensive, given that a complicated set of negotiations with the former finance minister appears to be at risk. We almost resolved or felt we were getting close to resolving this complex and thorny issue until such time as the person we were negotiating with disappeared from the bargaining table to be replaced by a new finance minister.
Recent headlines give us cause for apprehension. For instance, it says in a recent newspaper that the finance minister sides with the PM on the repayment of provinces and that the Prime Minister took a hard line view that the provinces must repay the money. The former finance minister argued that it was a federal government mistake.
I do not think we are being paranoid when I say that people in my home province are apprehensive that the deal seems to have fallen off the rails. I was very pleased when our finance critic offered me the opportunity to share with the House some of the Manitoba point of view on this issue.
The figure that has been bandied about in other speeches is that the overpayment to Manitoba was roughly $408 million. The figure that we are dealing with is $710 million. For a province with the size of an economy like Manitoba, this has a huge impact in our ability to operate. Of the $3.3 billion, $710 million is the impact on my home province, which is 4% of the population and almost 30% of this debt.
I will back up a little to explain why this has a disproportionate impact on Manitoba. It is true that Manitoba is fortunate to have a robust financial service sector but this means that the federal error has had a greater effect on personal income taxes in Manitoba than any other province. The effect in Ontario is the largest in absolute terms but the largest in practical terms is in Manitoba. These mutual fund trust refunds in other provinces are much smaller and as a result they affect the income tax revenues of both provinces to a much smaller degree.
As I mentioned, the minister of finance for the province of Manitoba had a series of indepth meetings with the former minister of finance federally. What he brought to the attention of the former minister of finance was a similar precedent setting situation. In the late 1980s we had a similar situation arise regarding equalization issues with corporate income taxes.
In this case the refunds were properly netted from the income tax payments remitted to the provinces. However corporate income tax shares were skewed and the entitlements within the equalization program were distorted. Therefore, we had problems because taxes on the capital gains of the mutual trust fund corporations were being included in the province's tax base even though the taxes were also refunded to the companies. Everyone can see this is a serious and very similar problem.
In that example, the federal government took swift, corrective action by amending the equalization regulations and the regulatory change was made immediately and retroactively. In other words, the hon. Michael Wilson, the former federal minister of finance, noted that the failure to act would have created an unjustifiable anomaly within the equalization program. He acted swiftly and corrected it.
I have copies of the correspondence that went back and forth between the former minister of finance, Mr. Clayton Manness, in Manitoba and the former federal minister, Michael Wilson. That arrangement, as I say, was quite satisfactory. They saw the problem, identified it, dealt with it and resolved it.
I do not think the people of Manitoba were as concerned then as they are today. They feel they are not getting that same sort of co-operation or recognition of the impact on Manitoba. It would be of no benefit to anyone if we were to penalize Manitoba by retroactively going back to 1993 and demanding full payment on all these overpayments. Other speakers have pointed out that especially in today's surplus environment it is particularly wrong to be going after this money in such a seemingly aggressive way.
I would like to point out that the $710 million the government says that the province of Manitoba should pay back is equal to one month's surplus in the EI account. The EI fund is showing a surplus of $750 million a month. Less than one month's surplus of the EI account could forgive this terrible burden that Manitoba is carrying. In my riding of Winnipeg Centre $20 million a year is pulled out of the riding in EI claims that would have been allowed under the old rules but are not under the current rules. That is just one example of how we are in an era of unprecedented surpluses. It is a terrible time in federal-provincial relations to go aggressively after the provinces, especially provinces like Manitoba where the impact would be severe.
The principles previously agreed to during the negotiations with the two finance ministers to resolve the issue were that the settlement arrived at should be comprehensive and fair. Both parties were willing to concede that. The approach should be responsible, and that should go without saying. Also revenue stability must be addressed. These have been detailed in Manitoba's position paper and they have been reiterated in a letter of March 22 from the Manitoba minister of finance to the former federal minister of finance. We felt that we were making inroads along that route and that we could look forward to a satisfactory resolution.
Therefore I do not understand the shift in mindset on the federal government side. What happened in the changing of the guard? Why can we not count on a deal that we thought we had with the previous finance minister? We do not have to revisit the case. If we were close to a resolution that both the federal government and the provincial government was satisfied with, why then is that deal in jeopardy today?
I would ask that question of members of the other side. I hope, in speeches from the Liberal Party members, they can answer that question in a more specific way because I have not heard them address it in any positive way. I have heard platitudes about the glory of the equalization program of which we are all in favour. The transfer of funds and the equalization of standards of living around the country is the greatest single achievement of Canadian federalism. However that is not what we are here to discuss. The motion we have before us deals with a specific overpayment regarding these mutual trust refunds, especially as they pertain to the provinces that are so negatively impacted by that.
The other thing we need to mention is that the four provinces affected are not the only ones impacted. The corrections are still being reviewed and we do not know the total effect of this. However of the $3.3 billion we are dealing with today, 90% of that was accumulated during the years 1997, 1998 and 1999. The years 1993 to 1997 are still under study. We do not really know the full effect of this anomaly yet.
I would argue that any resolution that we come to to deal with the outstanding $3.3 billion should also apply to whatever is found in the detailed auditing of the 1993 to 1997 period because that could be equally as large and we could be faced with the same debate one year from now when that study is finished.
I would appeal to the members on the government side and I would appeal to the current Minister of Finance and the Prime Minister to revisit their notes from the negotiations that took place between the finance minister of Manitoba and the former federal finance minister and honour the principle of those negotiations and the agreements that were tentatively struck. The people of Manitoba deserve that sort of recognition. It is also within the capacity of the federal government to show that to the other provinces as well.