Debates of June 6th, 2002

Supply

[Gary Lunn, Canadian Alliance, Saanich—Gulf Islands, BC]

Mr. Speaker, the point that I was trying to make is that I do believe these numbers are credible and I suppose they could be argued many different ways. However, this is what it comes down to. Canadian taxpayers do not care which way the accounting is done. They want to see honesty and credibility. They want health care when they need it. They do not want to see people dying on waiting lists, or tuition in post-secondary institutions increasing dramatically to the point where they will not be able to get an education.

What Canadians are having to go through is deplorable and despicable. It all comes back to the Prime Minister for cutting the funds to the provinces and making them absolutely cash strapped as they try to provide these services to Canadians.

[Jocelyne Girard-Bujold, Bloc, Jonquière, QC]

Mr. Speaker, I wish to take this opportunity to congratulate the Canadian Alliance member and to tell him that his remarks are responsible and make sense.

I cannot say the same for the Parliamentary Secretary to the Prime Minister of Canada or the secretary of state for financial institutions.

It is unbelievable what this government expects people to swallow. Are we being led by illusionists, clowns who have no idea how ordinary people live, as my Canadian Alliance colleague has pointed out?

It is true that the government is only putting in 14 cents on the dollar in health. They can deny it all they like, but it is true. There is a fiscal imbalance in Canada, and they deny that too. They deny that they have paid down the debt and that they have a budgetary surplus because they have helped themselves to $44 billion out of the EI fund.

I would like to ask the Canadian Alliance member to give us other examples in the health sector.

[Gary Lunn, Canadian Alliance, Saanich—Gulf Islands, BC]

Mr. Speaker, the facts speak for themselves. The member's province of Quebec along with British Columbia and other provinces have seen a dramatic decrease in their ability to provide education and health care which Canadians deserve. We hear horror stories everywhere we go. The waiting time for hip replacement surgery can be up to two years in British Columbia. The government refuses to see the real problem, and has an utter disrespect for the provinces by not honouring provincial jurisdictions. It is time for the government to look in the mirror and acknowledge where the problem is. It should start taking some first steps by supporting the motion.

[Paul Forseth, Canadian Alliance, New Westminster—Coquitlam—Burnaby, BC]

Mr. Speaker, the motion before us today states:

That, after overpaying at least $3.3 billion to several provinces as a result of its own accounting errors, this House calls upon the government to forgive any past revenue overpayments to the provinces since retroactively clawing back these revenues would severely affect the provinces' ability to pay for healthcare, education and social services.

Our new finance minister promised to mull over the idea of payback and said he will pay closer attention to the thorny issue of more than $3 billion in overpayments by the federal government to the provinces. Our man of finance of the people's money said he has received a series of reports from the federal auditor general on what has been called the overpayment of taxes collected in the 1990s but has not yet decided what to do. Let us hope he does not forget that it is not his money. It is ultimately the taxpayers' money which the government has erred in how it gives the money back to those from whom it took the money in the first place.

Between 1993 and 1999 Alberta, British Columbia, Manitoba and Ontario received more money than was apparently due them under existing formulas in redistribution of income tax revenues. Most of the $3.3 billion poorly calculated payments, about $2.8 billion, went to Ontario which has vowed it will not return the money. According to the documents the error stems from the way capital gains taxes on mutual funds were accounted for. Finally, one of the silent bean counters found something was amiss.

These acts certainly support the conclusions that I came to in past years through sitting on the House Standing Committee on Finance. The Liberals cannot manage the nation's business. The public has every cause to have low trust levels for what the government says about the state of the nation's finances and why it redistributes tax dollars the way it does.

What we are saying today is that the federal government should not punish Canadians and their provincial governments by clawing back the $3.3 billion of which it lost track. Canadians deserve better management of the public trust and they also deserve a wiser rationale for redistribution. The government must more appropriately consider how in the long term nations prosper, how more people in a society can share in that prosperity and how wealth itself is actually created and how it is so often destroyed by governments.

The federal Liberals play favourites. They use tax dollars for government business but favour contracts to their friends who happen to also donate heavily for partisan political purposes to the political party. There is supposed to be a division between partisan brand name political activity and the operations of government, which is supposed to be done on a non-partisan basis on behalf of all the people regardless of any political affiliation.

Patronage, cronyism, payola, contract bidding manipulation and insider deals of all kinds were supposed to have gone into the dustbin of history like the old bribery schemes of the Conservatives and the Liberals done in Canadian elections when we did not yet have a secret ballot on election day. The Liberals in 2002 are a disgusting throwback to a primitive political time in Canada.

The government plays favourites but in the process usually does not get good value on behalf of the taxpayer. Often the work done is substandard for the main game was the payoff for political gain rather than the work done for Canadians. Then the government plays the game of favourites among the provinces.

The finance minister stood in the House and said that he is considering working out a plan to take back what has slipped away from the government. Surprisingly however, this does not apply to Manitoba. Ottawa has agreed to cover most of the $710 million overpayment.

The Liberals want British Columbia to repay it all but they assured Manitoba that it was off the hook for most of it. The Manitoba Doer government was assured by Ottawa that the federal government will cover between 70% and 80% of the $710 million overpayment it made to that province. In an interview Manitoba finance minister Selinger said the federal government would take responsibility for the bulk of the transfer funds overpayment based on precedents and assurances.

The implication of having to return the entire overpayment would have been significant for that provincial treasury and I say every other provincial treasury as well. Certainly it would destabilize other provinces. If Manitoba had to repay the entire $710 million, it would have meant less money for health care or perhaps a delay in phasing out the education support levy, which is tacked on to property taxes. If Ottawa covers 80% of the overpayment, that would leave $142 million still in dispute.

Nevertheless, despite the promises to one province the federal government is contemplating clawing back money from many other provinces. We say the federal finance minister cannot correct it just for Manitoba. He has to correct it for everyone.

The Liberals still talk about clawbacks yet make a deal for one province. Then they take a swipe at the independent auditor general when they do not like her message. The Liberals launched a calculated campaign to discredit the auditor general to prevent her from unearthing further evidence of the corrupt way the government doles out its millions of dollars in federal contracts.

The Liberals have the gall to say that auditor general Fraser appears to lack impartiality and may be on a witch hunt against the government. The political fallout from the auditor general's reports is explosive. When political leaders go rotten, voters must take notice, wake up from their complacency and stop believing all the pabulum they are fed that everything on Parliament Hill is just okay. Some of my good friends on the Liberal backbench must be very embarrassed, yet with their votes they keep the sick system going.

The situation is clear. The government's mishandling of $1.6 million in sponsorship contracts to Montreal based Groupaction is an indictment of how badly the government manages public finances. Then we observe how far it will go to cover up the evidence.

The government's ideology is clear: abuse public trust; pay off friends; cover up the dirty deeds; and then impugn the messenger. This is an attack on more than the auditor general. It is an attack on the principle of government accountability and duty to the public.

We have to be thankful for the existence of the auditor general. In her scathing report she blasted the government for its appalling disregard for financial probity and revealed that it did not get all the service for which it paid Groupaction $1.6 million. To determine just how more widespread the poison is, she announced she will conduct a government wide audit of advertising and sponsorship programs and contracts.

It seems clear the government uses sponsorship and advertising programs to award companies that were supportive of Liberals and which funnelled political contributions to the party's coffers. That behaviour is highly unethical and is not an acceptable Canadian standard. Now the government is horrified that the auditor general has begun an investigation that could lead to evidence of corruption at the most senior levels of cabinet.

It seems clear to me that we need an independent judicial inquiry that can get at the technical evidence but also look at the political manoeuvrings and broad issues of political honesty and transparency. Financial audits cannot do that by the nature of their scales and mandates. Such an inquiry would complement the auditor general's wide scale review because it would have broader powers to subpoena witnesses, examine documents of private companies and ensure greater protection for public servants who wished to testify.

When the Liberals are shown also to be bad managers of redistribution schemes, they blame the auditor general for taking so long to catch them and then say that the receivers of their mistakes will pay the price of the government's failure. It is all so typically Liberal. It smells and it stinks. The bobbing and weaving is just so low class and repulsively gross.

The opposition is more than just the watchdog of what the government does. We offer hope. We offer an alternative and a way out of the mess. It goes beyond saying that our potential cabinet ministers have character and have real guiding principles to govern them. We also offer basic system change. We offer a new way, that while replacing the ethically challenged Liberals with ethically empowered people, the old system that offers the potential for abuse will also be changed.

The basic nature to be naughty should not be in the realm of possibility. The levers of power must also be professionalized and modernized into ethical management practice and they must be harder to reach. The answer is to change both the people and the system that tends to corruption. Good people can make good things happen. Modernization of systems can allow good people to become great.

We observe a disorderly old Liberal Party of 19th century political ethics where ministers behave as if Canada were their private sandbox in which to play. They leave a legacy of missed opportunity and a malaise of national hopelessness where it seems nothing can improve. Voters believe that probably all politicians are just the same.

What inspires me is that some day the Canadian Alliance will bring governance into the 21st century, of possibility and of bright hope. We can change the system as well as the people, and we can begin for the first time as a country to fulfill our true national potential.

[Jocelyne Girard-Bujold, Bloc, Jonquière, QC]

Mr. Speaker, I congratulate my colleague in the Canadian Alliance and add my voice to his in questioning the new Minister of Finance.

This overpayment of billions of dollars is not the fault of the provinces. The error is the government's. I question the new Minister of Finance. He says he is giving serious thought to the situation. I call on him to do so quickly and to come to a decision, because this is a very serious matter.

The provinces are facing enormous problems in health care and education. The Minister of Finance is also responsible for infrastructures, and I think he should distance himself from the former Minister of Finance. He should say that they will not recover the overpayments from the provinces and that the government will establish a compensation mechanism to ensure fair treatment of all provinces.

This would be one way to say that he understands the situation, to admit that an overpayment was made and that it is not the fault of the provinces. He should give the provinces a shot of oxygen.

If the Minister of Finance did this, would my Alliance colleague agree to join with me in telling him it is a good thing to do and that this minister is reaching out to the provinces?

[Paul Forseth, Canadian Alliance, New Westminster—Coquitlam—Burnaby, BC]

Mr. Speaker, what we are talking about here is a matter of proportion. Certainly we encourage free enterprise. Free enterprise is also the freedom to go broke. Without that discipline free enterprise does not work. At some point a very large firm may go bankrupt but because of its strategic relation and size in the economy, the government has to intervene and cannot let that firm go broke even though it is in the private sector and is operating that way.

It is somewhat the same nature of the proportion and size of what we are talking about here between two levels of government. Within the family it is not the federal government's money, it is the taxpayers' money. We must not let this kind of dispute become a personal matter between two camps within a political party. We are talking about the national business here and one finance minister replacing another and one person's ego over another. The nation's business is far too important to allow those things to have a play.

I draw the parallel to, at some point, the size of a company. Even though it should have the discipline to go broke if it does not operate properly or is not successful, the issue is proportion and sometimes the government has to intervene against the principle. I am also saying it is the proportion and size of what we are considering here, that it is inappropriate for the federal government to even suggest at this point that the money will be clawed back through a system of withholding payments to a province.

It is far too strategic for the national family for this to be contemplated. I am calling upon the federal government to end this dispute right now.

[Gary Pillitteri, Liberal, Niagara Falls, ON]

Madam Speaker, I will be splitting my time with the member from Bras d'Or.

I am pleased to debate the votable motion tabled by the member from Peace River. The motion deals with the identification of a problem in tax accounting by Canada Customs and Revenue Agency, a problem that as soon as it was identified last January, was dealt with by the government in a speedy and responsible way.

The problem was detected by the Canada Customs and Revenue Agency in the course of modernization of its computer system. As soon as the problem was detected, it was brought to the attention of the auditor general. The government took immediate steps to ensure that overpayments would stop immediately.

I assure everyone that the problem did not in any way affect taxes paid by individuals or businesses. The problem resulted mainly in a significant overpayment to four provinces; Alberta, British Columbia, Manitoba and Ontario.

Under the tax collection agreement the Canada Customs and Revenue Agency collects personal income taxes on behalf of all Canadians and provinces, except the province of Quebec. Then the finance department pays the appropriate share of the taxes collected to the provinces. All this is based on accounts provided by the Canada Customs and Revenue Agency.

The problem arose with respect to the capital gains realized by the mutual fund trusts. We all know that mutual funds are a type of collective investment vehicle allowing Canadians a simple way to invest indirectly in a broad range of stocks and bonds in a number of different markets. The funds are essentially a pooled investment.

Mutual fund trusts pay federal and provincial income taxes on capital gains. Then, according to income tax law, mutual trust funds receive a refund on both portions of the tax paid once the funds are cashed in.

In normal circumstances the provincial portion of the capital gains from the mutual fund trusts should be deducted from the provincial revenue and the federal portion should be deducted from the federal revenue. Due to a problem in the CCRA accounting process, and we all know that errare humanum est or to err is human, the provincial portion was deducted from the federal revenues instead of the provincial revenues. In short, the provinces ended up getting more tax revenues on the capital gains of the mutual fund trusts than they should have and the Government of Canada ended up getting less than its share.

As soon as the mistake was detected, the matter was promptly handed to the auditor general to do a rigorous analysis of the accounting error and report to the government. We know that on June 3, 2002, the auditor general released her report on the years in which the overpayment occurred.

At the moment the Department of Finance is studying the report before making any further decision. Prudence demands consideration before making decisions and that is exactly what the government is doing. Our record is clear. It shows five consecutive balanced budgets.

That is the Liberal government's record up to and including last year's federal budget. This is a first in 50 years and a $36 billion payment toward our national debt. It is something to be proud of. Today our nation's finances are among the healthiest in the G-7. Our economy is among the fastest growing and our triple A rating has been restored.

Canadians expect the Liberal government to make the right decision on these overpayments because we have a record of making good decisions that make this federation work. We do not roll the dice. We never did. The Liberal government has managed the federation with success. We have shown it over and over again.

For example, our co-operative approach is reflected in the reform of Canada's social union. The government reached an agreement on environmental harmonization with nine provinces and the two territories of the day. Our government has initiated changes to the federation in co-operation with the provinces and territories in areas as diverse as infrastructure and the Canada pension plan.

No one forgets that the reasons the provinces were crunched by lower transfer payments in the mid-nineties was because of a whopping $42 billion deficit left by the previous government and how that put the whole country in a financial straightjacket.

Yes, an error occurred. Yes, overpayments were made to the provinces but through openness and transparency every step possible was taken to resolve the issue. The Liberal government will consult with the provinces and make a decision on how to best deal with these overpayments. I am sure that when the decision is made it will serve the best interests of all Canadians.

[Rodger Cuzner, Liberal, Bras D'Or—Cape Breton, NS]

Madam Speaker, it is certainly a great opportunity to speak on the motion tabled by the hon. member for Peace River. To fully understand the situation that we find ourselves in now, it is imperative that we look at a little background on these overpayments and an explanation of the tax collection agreement would prove valuable.

Under these agreements, the collection of personal income taxes from all provinces and territories is the responsibility of Canada Customs and Revenue Agency, with the exception of the province of Quebec. In turn the federal government issues payments to the provinces of the appropriate share of taxes collected based on the accounts provided by the Canada Customs and Revenue Agency.

Because of a tax accounting problem at Canada Customs and Revenue Agency, the provinces of Manitoba, Ontario, British Columbia and Alberta received overpayments. Specifically, the problem relates to the accounting of capital gain refunds by mutual fund trusts. Both federal and provincial income taxes on capital gains are paid by the mutual fund trusts. In some specific cases the trusts may receive refunds from both the federal and provincial portions of this tax paid.

As in life, mistakes can be made and a significant one was made. The result was the non-deduction of the provincial portion of the capital gains refund claimed by the mutual fund. Because of this problem with Canada Customs and Revenue Agency and its accounting processes, the deduction did not factor into the computation of the provincial tax revenues. Instead this was deducted from the federal revenues.

To put it in other terms, when mutual fund trusts paid income tax to the provinces on capital gains, that money was added to the payment to the provinces. However when the mutual fund trust received a refund of provincial taxes paid, the refund was not deducted from the payments to the provinces. In no way were the taxes paid by businesses or individual citizens affected as the issue was strictly between governments.

The amounts of money we are talking about are not small. In fact they are fairly significant. Over $3 billion were paid out over a six year period. As previously stated, the provinces most significantly affected include Ontario, Manitoba, B.C. and Alberta. The province of Alberta was paid $4 million; $120 million was paid to the province of B.C.; $400 million was paid to the province of Manitoba; and $2.8 billion was paid to the province of Ontario.

It was during a major retrofit of the computer systems used for tax accounting at CCRA that the problem was first identified and an indepth review was then undertaken. Once the extent of the problem was identified, CCRA officials informed finance and the auditor general.

The government acted quickly and deliberately. Actions taken were open and transparent. It was imperative to move and to prevent further overpayments and that was done. Discussions with those provinces impacted began immediately. To determine the entire scope of the problem, the CCRA and the auditor general were asked for confirmation of the amounts involved.

Reports from the office of the auditor general on the overpayments were presented to the new Minister of Finance this past week. As stated earlier in the debate by the Parliamentary Secretary to the Minister of Finance, the auditor general presented four reports all together. There was an auditor's report for the years 1997 to 1999. There was an accountant's report for 1993 to 1996 and another for years prior to 1993.

For the 1993 to 1996 period, the procedures carried out were 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. For the period prior to 1993, the auditor general found that the necessary financial information to determine the amount of overpayments relating to this period just does not exist.

Finally, the fourth report deals with Canada Customs and Revenue Agency's accounting practices. This report verifies that the CCRA has taken the necessary steps to address these problems. Essentially I would think we could agree that these problems are being addressed.

The reports have been made available to the provinces and indeed to all Canadians by the Minister of Finance. We are now in the process of identifying, in concert with the provinces and territories, the impact of these findings. To further complicate this issue, these overpayments have impacted on the calculation of equalization, so in essence they have impacted on all provinces.

I am certainly not an accountant and, as a matter of fact, on matters of finance I considered myself somewhat challenged, but I think most Canadians recognize it is normal that if an overpayment is made, retribution is sought.

I recognize the complexity of this issue, and the solution is not obvious at this point. I assure the House that the government is committed to the resolution of this problem, to a solution that reflects fiscal responsibility and fairness. We will continue to co-operate with the auditor general, the provinces and the territories on this issue and do what is right for Canadians.

[Wendy Lill, NDP, Dartmouth, NS]

Madam Speaker, I would like to thank the member for Bras d'Or—Cape Breton for his comments on this issue. I have to agree with him that I am not an accountant either.

I want to ask him, as a member of parliament for Nova Scotia such as I am myself, how he thinks that we can find ways of making equalization payments more fair for provinces such as our own and to deal with some crises we are facing in terms of health care and education.

I would say that in terms of health care we know that we have higher rates of cancer. The member knows that himself from his own experience in Cape Breton. Our province in fact does have a special need in terms of its health care issues.

We also have a special need in terms of our special education issues. We are presently $23 million short of what is required to provide special education services in the province. I see on a daily basis the impact of lack of resources on our school system, on our ability to make the whole idea of inclusion work in the schools.

As a member of parliament for Nova Scotia what I see is that we do have a two tier system of health care and education by virtue of the fact that we do not have the resources to provide the same high quality level of service for all Nova Scotians.

Again, in light of this debate we are having today around the issue of overpayment, I will ask him, as a member of the government, about this. He mentioned that the calculation of equalization is and will be affected by this issue. How can we rethink the whole issue of equalization for have not provinces such as Nova Scotia and some other Atlantic provinces?

[Rodger Cuzner, Liberal, Bras D'Or—Cape Breton, NS]

Madam Speaker, I would like to thank my colleague from the NDP, my fellow Nova Scotian, for her question. Certainly I do share the concerns of my colleague.

Let us look at the first issue, that being health care. Back in September 2000 a reinvestment was made after years of cutbacks. We know that tough decisions were made through the mid-1990s and all Canadians paid the price. There were cutbacks in various sectors but specifically in health care. The reinvestment has been made through transfer payments to the provinces as well as additional direct spending by the federal government.

Part of the reinvestment in September 2000 was a fund specifically identified for hospital equipment. Two hospitals in my constituency, one in Sydney and one in Inverness, have purchased major pieces of equipment, which they feel will help reduce lineups and waiting lists for particular services. I am looking forward to being at the ceremonies to recognize the purchases made with those dollars.

With regard to equalization, I as well recognize that our province carries a higher debt load than any other province in Canada. Per capita it is probably close to 50% greater than that of any other province. This does pose additional problems and concerns. I am not quite sure that equalization is the answer. If we had access to dollars there are many national programs that we could get into. Sometimes we are challenged just to get into the national programs because we do not have the entry level dollars to get in.

I know that right now the province of Nova Scotia is receiving its highest share of CHST on record. It is at record numbers right now. Again I think that a major portion of the problem rests with the province of Nova Scotia. We know it has the same taxing powers as the federal government, plus more. It is incumbent that those processes are pursued whether it is through equalization or through another portion of money.

[Loyola Hearn, Progressive Conservative, St. John's West, NL]

Madam Speaker, I listened with interest to my colleague's conversation. Being from Cape Breton is the closest one can get to being a Newfoundlander, so we think alike in many ways.

He mentioned that he is not an accountant, but I would like him to check some figures in relation to the equalization payments and CHST transfers he talks about and how much the increase has been. He will find out that in Newfoundland we are getting fewer dollars today, if we combine all of them, compared to what we got in 1999. The real value of the dollar creates an even greater discrepancy. Newfoundland is the only province getting fewer dollars, simply because of its declining population. However, that creates two problems, fewer dollars and an aging population, with a lot of the out-migration being younger people. This means it costs more to service what we have, but we are getting less to do it. Federal health transfers should be based on need, not on population.

On top of that, we have the clawback arrangement on our resources, the same as Nova Scotia. I am sure the member is a strong supporter of the drive by his premier, Premier Hamm, to get a fair deal in relation to clawbacks on resource funding.

I would just ask the member to comment on that and tell us how he is going to support the drive by Newfoundland and Nova Scotia to get a fair deal on our resource funding.

[Rodger Cuzner, Liberal, Bras D'Or—Cape Breton, NS]

Madam Speaker, my colleague from Newfoundland has intimated to me on several occasions that he would like to have been from Cape Breton.

That being said, I would have to remind the member that equalization is a function of the federal-provincial agreement. In this past year, 2001-02, the transfer to Newfoundland will exceed $1.5 billion, which constitutes almost 39% of the total revenues for the province of Newfoundland. I would think that--

[The Acting Speaker (Ms. Bakopanos)]

Resuming debate, the hon. member for Okanagan—Coquihalla.

[Stockwell Day, Canadian Alliance, Okanagan—Coquihalla, BC]

Madam Speaker, I rise today to support this motion. The motion reflects a concern that we in the opposition have addressed for some time now which is that the finance minister has presided over a very serious error in terms of payments to provinces. Now the former finance minister and the federal government want the provinces to pony up and cover the government's mismanagement of this very serious error.

This fiscal mismanagement is only the tip of the proverbial iceberg. A veritable Titanic of incompetence is what we are witnessing here. The recent shuffling of the cabinet deck chairs will do nothing to ease that sinking feeling in the pits of the stomachs of the federal Liberal MPs who sit across the way because they know the incompetence runs deep and wide in this sea of liberalism.

In the province of British Columbia my constituents in Okanagan—Coquihalla are still reeling from the effects of the federal Liberal ongoing mismanagement of the softwood lumber file. With the federal Liberals refusing to fully restore health care funds which they slashed in 1994, health care practitioners and patients from Hope to Westbank are waiting in increasingly long lineups for essential services. The federal government has totally mismanaged the health care file.

By the way, the last time I checked, health care was still a provincial jurisdiction. It is time the federal government took care of its own areas of constitutional responsibility and got out of the way of the provinces that are trying to fix some of their own.

As the motion indicates, the issue is incompetence and gross mismanagement of taxpayer dollars. I submit to the House today that the handling of financial matters in Canada is absolutely rife with those examples. We could continue for a long time. With this motion in mind I would like to reflect on a most curious sentiment that is being echoed in many circles today regarding the recent firing of the former minister of finance.

Let me make it clear that on a personal note I find the former minister of finance to be an engaging and amicable fellow. The observations I am about to make are not personal in any way. As a matter of fact I wish him well in any future endeavours which he may be brave enough to take on. However, I am compelled to make some observations based more on generally accepted accounting practices and his near total failure to respect many of those professional practices.

The curious sentiment I hear reflected is that with the former finance minister's unceremonious dismissal, we have somehow lost a pillar of managerial competence from the Liberal side. Excuse me, but please allow me to touch on only a few of many examples of extreme incompetence and mismanagement which the former finance minister unashamedly practised or willingly presided over without a peep or without a note of protest.

When he finally tabled a budget in December last year, it ended two years where the government actually went without a formal budget being tabled. There is not a provincial finance minister, there is not a mayor in the country who could have survived the blast from their ratepayers or from the local and regional media had they tried to go two years without reporting and accounting on the expenditure of taxpayer dollars. That was an extreme example of lack of respect for the public purse.

When that budget was finally tabled, we saw a total lack of respect for one of the main areas of concern for taxpayers and that is the crushing weight of debt that sits on our shoulders and on the shoulders of our children and our grandchildren. What was in that budget? Not one cent went to the reduction of the federal debt. Along with that, there was not even a calculation to say how many more years this was adding to the debt load of our children and grandchildren. For a finance minister that is mismanagement, a lack of respect for taxpayers, and a lack of respect for basic accounting principles.

Regarding the Canada pension plan, as we know the finance minister had to gather together the provinces a few years ago and move to a significant tax increase just to cover the projected insolvency of that fund. The Canada pension plan was headed toward bankruptcy. What was the innovative approach chosen to fix that? It was to hike the taxes up for all hard working people in the country.

Just after that particular agreement I had the honour of being the finance minister in Alberta. Calling upon what were acknowledged as some of the best accounting minds in Canada, ways and means were brought forward to see that fund more properly and vigorously invested, giving a greater return to all of us as we head toward our retirement age and bringing in accounting practices which have made for a more efficient handling of that fund.

It has never been acknowledged by the former Minister of Finance. He has never taken any steps to do that other than to hike taxes.

The budget that was tabled as a shining light of fiscal capacity and care for taxpayers was again riddled with incompetency. Instead of dollars going to the debt and to other areas, we saw the former finance minister preside over the shoveling out of millions of dollars to the minister of heritage's culture programs and other areas which have been proven conclusively to do nothing to restore vibrancy in the economy.

Worse than that, to avoid the pressure of having to put dollars to the surplus, what did the finance minister do? He found a way to move billions of dollars into agencies, boards and commissions that are arm's length from government, therefore limiting the ability to which the auditor general can shine her light of fiscal accountability onto the terrible management practices of the government.

I am reminded as I go on and on with this list that I do not have all the time in the world. I will be sharing my time with my colleague from Surrey Central so that he can continue this.

Think of it. There are billions of dollars for which we cannot account because of what the former finance minister did.

On another account, the auditor general has more than once asked a serious question regarding the handling of taxpayers' dollars. Here was the question that was put following all the good work done by the auditor general and all of the accountants that work for her: who is minding the store? It is an indictment on any fiscal manager when the auditor general in exasperation puts her hands in the air and asks who is minding the store.

There was the heating rebate last year where millions of dollars went to dead people and prisoners to try to keep them warm. That did not warm our hearts and it certainly did not warm the accounting pencils of the auditor general and her auditors.

Why was there no acceptance of responsibility on the part of the former minister of finance? It is that same lack of acceptance of responsibility toward this overpayment to the provinces to now demand that the provinces step up to the plate when they have had to use that money to meet the growing pressures of their constituents.

When it comes to fiscal competence, the buck stops at the desk of the chief financial officer of the government. That is the Minister of Finance. Just because that buck is a Canadian one and is only worth 60-some cents U.S., it should not be an excuse to treat it without respect.

In an era when we hear about market bubbles popping, there is another bubble I would like to see pop. It is the bubble of supposed competence that encases the head of the former Minister of Finance. That bubble needs to be popped with the pinpoints of the litany of mismanagement and incompetence which has been at his hands.

It is very curious to hear cries from across the land that the Prime Minister step down--and I might have a certain fondness for those cries--so that the minister of mismanagement can step up. These cries for replacement are based on emotion and are not based on fact. I have observed this interesting phenomenon that it really does not make much difference to the elitist opinion benders of the land when it comes to issues like this.

We are basing it on fact that we have seen terrible mismanagement and incompetence from the former minister of finance. The federal government should step up to the plate, take responsibility on that and not heap it onto the backs of the provinces.

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

Madam Speaker, I cannot believe what I have just heard. The member suggested that the former minister of finance has mismanaged, in the eyes of the hon. member, the state of the nation's affairs.

This is a finance minister who came in with a $42 billion debt. We have had five better surpluses in a row in terms of the books. In terms of the GDP, we have had 6% growth in the first quarter. We have the highest sales in housing starts and cars. Clearly Canada is the only G-7 country that is paying off its national debt.

The member talked about the heating rebate. People do die I would tell my hon. colleague and people do go to prison. It happens when sending out rebates without creating a whole new regime, which of course the hon. member would have been jumping up and down over, that in that time some people went to jail. We got the money back. People die. It happens. It is a fact of life.

We did copy I guess to some degree what the hon. gentleman did when he was the treasurer for Alberta. Alberta had a similar program and look what happened.

The hon. member talked about overpayments. We are now looking at the reports from the auditor general. We will be reviewing them and will make a prudent response in the public interest.

I do not know this and I am merely asking the hon. member as he was the treasurer for Alberta, is it not the policy of the provinces that if they overpay municipal governments they want it back and they get it back? It certainly is the policy in Ontario. In fact Ontario has done that repeatedly. I presume this may be the policy in Alberta.

I do not want to impugn the member in terms of when he was the treasurer but he might at least have some experience and I look forward to his comments in that regard.

Does he think it would be appropriate for us after having the report for only three days to make a rash decision when we have not been able to really look at all of the evidence that we have received?

[Stockwell Day, Canadian Alliance, Okanagan—Coquihalla, BC]

Madam Speaker, I hope my response will be proportionate to the length of the question. I will just continue until Madam Speaker decides somewhere around midnight that I have said enough.

My hon. friend talked about debt. The fact is the debt is higher now than when the federal Liberals took over from the Tories who ran the debt up back in 1993. That is the bare fact of the matter. The other fact is we have asked and Canadians have asked very clearly that the debt be reduced continually.

During the last election--and we do not want to rehash that for obvious reasons as it is a little painful--we asked that the debt reduction be legislated, that the government be required every year to put a certain amount toward the debt. It is called a mortgage. The federal government and the former finance minister said “Trust us. We will always pay down debt”. The first chance the Liberals had, they did not. They abandoned paying down the debt.

If the member wants to talk about my record as minister of finance, we legislated the paying down of debt. We know that one thing about government. It should be limited. We cannot trust even honourable legislators like ourselves with masses of money because we dream about how to spend it on behalf of the hard working people who gave it to us. It has to be legislated.

The former finance minister promised that the debt would continue to be paid down. The promise was not fulfilled.

In terms of the surplus, almost every financial observer has said that there has been a surplus at the hands of the federal government. The main reasons were the fiscal policies, like them or not, of Ontario and Alberta which resulted in pretty significant business rebounds, diversification of the economy and therefore more revenues to the federal government. There was also the low Canadian dollar. Those were the main factors in terms of a surplus.

An hon. member just mentioned the GST. I am going to give him that one. That raked in a pile of money for the federal government.

The government raised taxes, it slashed services and it raided the provinces that had the courage to do the right thing. That is why it had a surplus. The Liberals blew it out the window, did not put anything down on the debt and moved and hid billions of dollars into arm's length agencies.

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Madam Speaker, on behalf of the constituents of Surrey Central, I am pleased to participate in this Canadian Alliance supply day motion debate. Earlier my colleague, the hon. member for Okanagan--Coquihalla, debated the motion very eloquently and I will keep the ball rolling.

Let me give some background. Earlier this year the federal government revealed it overpaid Manitoba, Ontario, Alberta and British Columbia $3.3 billion in transfers due to an accounting error. According to new documents, the error stems from the way capital gains taxes on mutual funds were accounted for. The problem was discovered during a computer system upgrade last year in December. The amounts include more than $2.8 billion to Ontario, $420 million to Manitoba, $121 million to British Columbia, $4.5 million to Alberta, and several thousand dollars to New Brunswick and Nova Scotia.

The former finance minister's office had given assurances to the province of Manitoba, for example, that it would cover at least 70% to 80% of the overpayments and may even bite the bullet for the full amount. The two sides were close to finalizing the deal last week before the finance minister was turfed out of cabinet by the Prime Minister.

On his first day on the job, the new finance minister hinted that the federal government would try to collect the overpayments in tax refunds from the provinces. That is a flip-flop.

The motion we are debating has basically two components. First, overpaying at least $3.3 billion to several provinces as a result of its own accounting error; and, second, the House calls upon the government to forgive any past revenue overpayments to the provinces. Dealing with the second part first, the clawing back of these revenues would severely affect the ability of the provinces to fund health care, education and social services.

This arrogant Liberal government has already cut federal transfers to the provinces by $25 billion up to the year 2000. These cuts were made with totally inadequate consultation with the provinces. Is this the legacy that the Prime Minister and this weak Liberal government are leaving behind?

These cuts have drastically reduced available funds in the provinces for health care, education and social services. We all know about the devastating state of the health care crisis in all provinces. The health care crisis has been the number one issue in Canada in all polls since the government made its drastic cuts. Doctors and nurses are leaving the country, beds are closing, waiting lines are growing and now even surgeries are being cancelled.

We do not know the crisis in education because of its latent nature. In health care we know there is a crisis because we know people who are feeling the pain and suffering but in education we do not have an appropriate yardstick to measure the effect of the cuts by this weak Liberal government. People do not go back to the same classroom year after year but the educators tell us the adverse effects in education as well. Probably in a few years the effects will be more evident.

Who is the root cause? This weak Liberal government that lacks vision and that made the cuts in the first place.

While the federal government cut transfers to the provinces by 33%, it only decreased its own discretionary spending by 6%. Money continued to be wasted in programs of generally low priority to Canadians but of high priority to big Liberal businessmen or the Liberal Party. This includes, in particular, grants and contributions to big business, funding for questionable crown corporations and agencies, such as CBC, ACOA, HRDC and so on.

The federal government continues to use cost shared agreements to distort provincial programming and impose federal priorities on the provinces. If the provinces do not agree to federal conditions then they do not get the money. This means that many programs that the provinces reluctantly buy into may not fully meet provincial needs.

The federal government has continued to intrude in areas of provincial jurisdiction using its spending power. By doing so it has distorted provincial programming.

The creation of the millennium scholarship fund in the area of education is one example. While the millennium scholarship fund, which provides grants to students, appears good on the surface, the money might have been better spent by transferring it directly to the provinces. It could then have gone to address shortfalls in core educational service funding. There is little point providing federal money to send students to university on the millennium scholarship fund when the provinces are still forced to pay the bulk of that student's education but with inadequate resources.

I will now move on to the first part of the motion about the government's errors in accounting, or I may even say some deliberate errors, and the government has been cooking the books.

As a former member of the public accounts committee, I remember that Auditor General Desautels was very critical of the government for not following generally accepted accounting principles and blasted this weak federal government for unilaterally changing its accounting rules to balance the books in 1998.

When the government was running a deficit before the election it deferred payments to the next year so that the amount of the deficit would be minimized; frontend loading or the backend loading.

When the government has more surpluses and it will be quite some time until the next election, then it hides away the money so it can dole some out just prior to the election to buy votes from Canadians with their own money.

So far the government has hidden money in entities that did not even exist at the time the payments were made. The auditor general was very critical and questioned the credibility of the federal government's books. Due to the reason I mentioned and to avoid political pressure to reduce taxes and pay debt, the Liberals avoided reporting a surplus during that time.

The auditor general qualified his audit of federal government books in 1996-97 because the Liberals overstated the deficit by $800 million. The auditor general was not prepared to stamp the books of the government. This arrogant Liberal government inappropriately recorded the $800 million transfer payments to the Canada Foundation for Innovation before March 31, 1997, a foundation that was not legally created until April 1997. The government books closed on March 31, 1997. The money for the foundation was not supposed to be spent until the year 2000. This was a violation of the basic accounting principles as found in Canada's public and private sector. If a businessman or a manager had done that he or she would be in jail.

Let us look at the further arrogance of the deputy minister of finance and the secretary of the treasury board who wrote a letter bullying the auditor general. They wrote a letter to the auditor general registering profound astonishment that the auditor general would publicly state his objections. They did not want him to state what I have stated publicly. What a shame.

This practice has not stopped yet. According to a newspaper report, the auditor general has identified at least another $30 billion that has been secreted away in separate slush fund accounts that she cannot access or question. Only the Prime Minister and the cabinet have access to these funds and, by legislation, they are accountable to nobody.

We know there was a gap of $20 billion between the Liberal's estimates and the actual liability of the federal government employees' pensions. This shell game must end.

In conclusion, equalization is based on a five province standard and it looks at the average revenue raising capacity of five provinces. The average capacity is then compared to the capacity of individual provinces and those provinces whose capacity falls short of the average receive an equalizing transfer from the federal government.

There is only one taxpayer. The overpayments have been spent on the provincial provision of services or goods. and the money is not sitting in Swiss bank accounts, as Gary Doer, the premier of Manitoba says.

According to Gary Collins, British Columbia's finance minister, “if we are going to keep re-opening these things 10 years back, there is absolutely no way the provinces can continue to work with the federal government on a tax arrangement”.

The Canadian Alliance is calling for an audit of all the computer systems and the calculations being done today for the various types of taxes that the CCRA oversees in order to ensure that Canadians are treated fairly and to expose all kinds of boondoogles.

The provinces and Canadian taxpayers should not be punished for a mistake made by the federal government reaching back several decades.

[John Duncan, Canadian Alliance, Vancouver Island North, BC]

Madam Speaker, I would like my colleague to give his opinion on the fact that in January we had the former Ontario finance minister talk about this very situation, the so-called overpayment to the provinces by the federal government. He was quoted as saying “There's no way that this series of mistakes by the federal government is going to be visited on the backs of the taxpayers of Ontario.” He also said “We can also terminate the tax collection agreement with Ottawa and collect our own income taxes in Ontario”.

In the following month we have a quote from the British Columbia finance minister who said, “If we are going to keep re-opening these things 10 years back, there is absolutely no way the provinces can continue to work with the federal government on a tax arrangement”.

This all relates of course to the common federal and provincial tax collection system administered by the federal government.

Does my colleague from Surrey Central believe that the efficiency of one tax collection system is at risk if the federal government takes unilateral action to make the provinces pay for the federal government's mistake?

[Gurmant Grewal, Canadian Alliance, Surrey Central, BC]

Madam Speaker, over a period of years we noticed that the Liberal government was using a confrontational approach with the provinces rather than a co-operative approach.

The government is also weak in its consultations with the provinces and with Canadians. It seems that it is not listening to Canadians. When it does not listen to the provinces and to Canadians it shows the arrogance of the government.

The money is the taxpayers' money. The federal government made the computer errors in calculations. The provinces over a period of time received their money, or transfers overpayments, whatever we call it. The provinces are already strapped for transfer payments for health care, education and social services. They have invested the money in providing services to Canadians.

Moreover, the provinces and Canadian taxpayers should not be punished for a mistake made by the federal government reaching back several decades.

As the hon. member quoted finance ministers from various provinces, it is urgent and necessary for us to look into the issue seriously. I point out that the Canadian Alliance believes that the federal government and provinces with tax collection agreements should hold a three year technical system audit to ensure compliance and to protect Canadians from being overtaxed or denied programs and services by either jurisdiction as a result of processing flaws.

I urge all members to vote in favour of the motion because this supply day motion is votable.

[Steve Mahoney, Liberal, Parliamentary Secretary to the Deputy Prime Minister and Minister of Infrastructure and Crown Corporations]

Madam Speaker, it is always interesting to respond to an opposition day. This is an opportunity for the opposition parties to put forward their policies, ideas and alternatives so that the Canadian voters, whenever they have an opportunity to decide who they might like to support in a given election, would know what these folks stand for.

What do we have today? We have an opposition motion that fundamentally says that it cannot take yes for an answer. It is an interesting proposition.

There has been a discovery of an error. It is astounding. The revenue department has discovered that starting in 1972, believe it or not, there were overpayments in some of the transfers to four provincial governments. I will acknowledge that while it started 30 years ago, the lion's share of the amount occurred between 1993 and 1999.

The minute the error was discovered it was reported to both the Department of Finance and the auditor general. No one tried to hide it, sweep it under the rug, or put it in a brown envelope and seal it in a safe. No one pretended that it did not happen.

[Dennis Mills, Liberal, Toronto—Danforth, ON]

They did not send it to an ad agency.

[Steve Mahoney, Liberal, Mississauga West, ON]

No one sent it to an ad agency as my helpful colleague from Toronto--Danforth says in his great support for me. Perhaps we could get him to move somewhere else.

What is interesting is that if the members of the opposition had discovered this prior to the admission by the department and the referral to the auditor general, I would be hearing the howls of indignation in this place. They would be asking what is wrong with me and demand that I recover the money because it belongs to federal taxpayers. I can almost hear them now. It would be eloquent, I am sure, but loud and vociferous. They would say it is awful and another scandal in their minds.

However, when the government determines that there is a problem and goes about fixing it, what does the opposition do? It does not come up with a policy item that Canadians might wish to think about in terms of what it might offer as an alternative. Rather, it says we should just forget about it.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Flat tax.

[Steve Mahoney, Liberal, Mississauga West, ON]

Flat tax. We have single tax and we have flat tax. I do not know.

The point of the matter is that the government has reduced taxes dramatically by over $100 billion. Canadians will see that reduction when they file their income tax. It is unprecedented by any government in the history of this country. The government has shown real leadership on this file.

Let us take a look at how much we are dealing with. I do not want to be unkind, unfair or inflict too much damage on the member for Okanagan—Coquihalla. We all recognize that anything I do would pale in comparison to what his colleagues have put him through over the past year. However, I must respond to the remarks he made when he was touting the great and wonderful successes during his tenure as finance minister or treasurer of the province of Alberta.

That is an interesting scenario. The province of Alberta is a wonderful part of this country. It is a great place for Canadians to visit. It is a great place for business and very successful. It is the wealthiest province beyond a doubt in terms of per capita numbers in the country. Why is that?

The member that spoke was the treasurer of a province with a population approximately the size of the greater Toronto area, including Mississauga, Markham and all of the areas in the GTA. We are talking three million people. This is also the province that controls the vast majority of the wealth that is derived from the natural resources that exist in that wonderful province.

[Val Meredith, Canadian Alliance, South Surrey—White Rock—Langley, BC]

And that really bothers you does it not?