Mr. Speaker, I am very pleased to speak to Bill C-54, an act to amend the federal-provincial fiscal arrangements, in order to ensure continuity in the equalization payments to Quebec and provinces that are entitled to receive them.
The equalization system in Canada is governed by legislation that usually lasts five years. The current legislation took effect on April 1, 1999 and will expire on March 31, 2004. Effective March 31, 2004, there will need to be new legislation on equalization that governs federal-provincial fiscal arrangements.
The federal government currently does not seem to want to respond favourably to the provinces' demands with respect to upcoming legislation to cover 2004 to 2009. In addition, for a reason that is hard to understand, the federal government is proposing a bill five months before the current legislation expires. Why introduce this bill today when it could do so in February 2004, should an agreement not be reached with the provinces?
The fact that the federal government is introducing this bill when the provinces and the federal government are still negotiating sends a rather offensive message to the provinces. Some very constructive suggestions for improving the legislation have been put on the table by the provinces. Some are political, while others are technical. We know that the equalization system is very complicated and that it has been a roller coaster ride for the provinces for the past few years.
Once it has been announced that the provinces will receive $500 million or $1 billion less, a few months later the numbers are recalculated and we are told that the provinces are entitled to $500 million or $1 billion more. This scenario creates unbearable confusion in the day to day management of provincial budgets. We would like to be able to correct this. The provinces also made proposals to improve the situation.
What we have before us is some kind of temporary legislation to cover this period of uncertainty about who is leading the government in the Parliament of Canada, because Canada currently has a two-headed government, with one head preparing to leave and the other anxious to take over as soon as possible but unable to do so. In the meantime, instead of resolving the situation and determining who is the head of the government who will be answering to the public, every trick in the book is being used not to offend the current Prime Minister, who is on his way out, and to give a fairly free hand to the next prime minister.
It so happens that this one-year extension will also cover the next election campaign and, consequently, place the provinces in a less favourable bargaining position to get what they want from the federal government. The Bloc Quebecois therefore intends not to support the principle of the bill.
We do not have anything against equalization per se, of course. I think that our equalization model has worked in the past. But it is not the best. I think that, ideally, Quebec should become a sovereign state and control 100% of its taxes and 100% of its revenues, so that it can be managed as a self-sufficient and mature state.
Until then, the equalization system in the Canadian context must be maintained. However, it should not be used the way it is currently being used by the federal government, and definitely not in the spirit in which this bill has been introduced.
We therefore cannot support the principle of Bill C-54, even though we support the principle of equalization. We will try to bring forward amendments so that, if an agreement on a new formula can be reached by March 31, 2004 between the provinces and the federal government, the new formula can be applied to payments made to the provinces.
The Bloc Quebecois will try to give back to the provinces the bargaining power the federal government is taking away from them. Indeed, it is taking the wind out their sails by declaring that it will be preserving the status quo for at least one more year. This way, the government is in no rush to negotiate with the provinces and does not need to act quickly to correct the situation.
We will try to amend the bill at committee.
As for our position, we shall see what happens when we get to third reading. We shall see where we are when the time comes to pass the bill. Apart from the future prime minister, hardly anyone wants to see this bill put through as soon as possible. We want time to be taken to allow the provinces to put forward their arguments. They also need to be able to gain some points, and the entire system needs to be improved so that we end up with the best equalization payment system possible.
It is not a matter of simply changing the law to please the potential PM, as we did with the effective date of the electoral map. The same logic applies here. The non-partisan electoral legislation called for the electoral map to take effect one year after its official recognition. The elections ought therefore to be held a year after the electoral map is adopted. The government decided to changethis and move the date to April 1, to suit the emperor in waiting.
So now they are doing the same thing with the bill on equalization payments. Democracy stands to lose as a result of what was done with the electoral map, but in this case it is fair treatment of the provinces that will lose out. I think the public will be able to judge this situation for itself.
The current legislation has another five months to run before it expires on March 31, 2004. Let us allow time for negotiation. As I said, this is one more demonstration of the paralysis that is setting in within the federal government. It seems that no one wants to shake it out of its paralysis.
On Tuesday, we had a votable motion in which the Bloc Quebecois called on the Prime Minister to step down as soon as possible. There are many within the Liberal majority who have been working for a long time to get the present PM to go, but that majority decided to vote in favour of his staying. Unfortunately for them, we have learned that our motion has had some impact on caucus and on the Liberals' discussions. At last, the Prime Minister is wondering whether he ought not to leave as soon as possible. He realizes that there are some major problems.
In practical applications, like the equalization program, we are dealing with the money that allows provinces to balance their budget. It is imperative that the best possible legislation be enacted. And for that, one needs time to negotiate.
For the sake of those who are not familiar with the notion, the purpose of equalization is to reduce horizontal gaps in the provinces' fiscal capacities. There are extremely complex mechanisms to determine how to do that. The basic principle is still to better balance the means of the provinces. Also, the federal government makes equalization payments according to some set mechanisms.
And then there are the demands from the provinces. I talked about that earlier. They should be the reason for the government's action today. Instead of putting forward this bill, the federal government should send a clear message to the public that it is trying to find the best possible equalization arrangement, that the finance minister is in contact with his provincial counterparts, that they are hopeful something positive will come out of it and that a bill taking those arrangements into account will be forthcoming.
That is not the message that is being sent by the finance minister and the federal government. The message we are getting is that they are trying to sweep the issue under the rug, gain one year, and by then the provinces will have no more leverage, and they will be able to get their way in any equalization agreement.
What the provinces are asking is first that the formula be changed to take into account the fiscal capacity of all ten provinces. Currently, it only takes into account the fiscal capacity of a sampling of provinces. It was realized that in actual facts this did not lead to the desired fairness. The formula proposed by the provinces would cost the federal government about $3 billion more a year. It is a lot of money, but that must be put into context. Last year, that same government had a $7 billion surplus .
In fact, for the sake of equity between Canadian provinces, would it not be better to allocate that supplementary $3 billion on an annual basis? It would help solve part of the fiscal imbalance across Canada. This interesting proposal was made by the provinces and other stakeholders at a press conference on October 9, 2003. It was made as they were preparing for the meeting of the federal provincial finance ministers. That meeting was held on October 10, 2003.
Although that meeting with the Minister of Finance did take place, now, even before the month of October has gone by, they are introducing a bill saying that the status quo will remain for one more year. Instead of showing some courage, instead of giving a clear answer to the provinces, the federal government has decided that it would put off dealing with the problem. I think such behaviour is totally inappropriate.
There is another provincial demand that even the federal government has to recognize. The review mechanism needs to be reviewed. As things stand now, it is very difficult for the provinces to know in advance what equalization payments they will be entitled to. Therefore, the provinces are asking that Ottawa make payments more predictable.
In our system, if there is one frustrating thing about managing a provincial budget, it is certainly suddenly finding out that an additional amount is forthcoming or not. That plays havoc with any attempt to balance the budget. If we were to make only one technical change in the agreements on equalization payments, this would surely be the one to make.
We are proposing that any adjustment linked to new statistics be automatically spread over a period of three to five years instead of being required in the year where statistical changes happen; that will reduce the volatility of the adjustments.
I would add that in case of a sudden increase or decrease in available moneys, it can also be frustrating to hear something like, “You have to give us $350 millions back, next year” for example, or, “You will receive $350 million more”.
This has happened to the Quebec government. It was difficult to maintain a balanced budget. We needed more money in health and suddenly, at the end of the fiscal year, we discovered that there was a substantial cushion we could have used during the whole year if only we had known.
Consequently, the people of Quebec did not benefit from the services they were entitled to, not because the Quebec government did not want them to have those services, but because it did not have the right information as to what its budget would be. It is important, therefore, that this be corrected.
We have learned through leaks that the federal government might be willing to agree to this request. If this is true, why not integrate it right away in this bill? Why not find a way to let it be known that this request would be accepted?This would show some good will on the part of the federal government. As far as I know, there is noting of the kind in the bill as written.
The provinces are also asking for a simplification of the program, because reaction to the word equalization itself is that this is something rather mysterious that calls for a lot of expertise. The fact is that the system is very complex system.
For example, there are about 3,000 variables used just to calculate transfers to the provinces. All this should be made more transparent. This is what the provinces have requested. In addition, it has been requested that all general revenues, and not just some of them, be included to better reflect the context within which the system operates.
We would also like some of the 33 sources of revenue currently used to determine the provincial fiscal capacities to be reviewed, particularly the tax-back effect, which can lead receiving provinces to be less interested in adopting measures to stimulate economic growth.
Indeed, when we learn after the fact that funds were available, those are resources that we could not anticipate, because people in the provinces are asking their governments to be prudent and to refrain from counting on revenues that they are not sure they will get. By correcting this situation, provinces will be able to do better.
This behaviour, also seen in the case of Bill C-54 on equalization, is another example of the paralysis now affecting the legislative process in Parliament. Another example is the fact that the government is supposed to bring down a budget in February. The Minister of Finance himself says that he cannot prepare his budget without knowing what the prime minister wants to do. The same thing is true of equalization.
The prime minister in waiting has said, “I reserve the right to review every single government decision”. Thus, the proposal before us reflects that clearly: this bill provides the minimum to the provinces—maintaining the status quo—but it does not correct the legislation. This is another way of saying, “We will see what happens when the new prime minister comes in”. Nevertheless, this bill says nothing about day to day management, the mechanisms that have to be changed, and the recommendations that have been approved, and that should be there.
In my opinion, it would be more responsible to say that we are against this bill because the equalization system must be improved, rather than introducing it as it is, saying that it will be in force for a year, and that later on we will see if there are changes resulting from negotiations with the provinces.
On the one hand, it is an authoritarian and somewhat centralizing behaviour to say, “We will introduce a bill that maintains the status quo, but we do not feel obliged to negotiate improvements before the bill is passed. As the federal government, we are taking out an insurance policy that will enable us to keep operating”.
On the other hand, however, the provinces are given no guarantees that they will be able to obtain some of the improvements they believe are necessary. The federal government shows no signs of the spirit of compromise that would be necessary for such a bill.
As things stand, the Bloc Quebecois cannot vote in favour of this bill at third reading unless, in the end, we see improvements that will satisfy the provinces. Let us take the time to include these improvements. There is no urgent need to adopt this bill in its current form.
Obviously, it is very important that equalization continue, but in order to achieve that, we have the time to do good work, to achieve a satisfactory result, to include appropriate measures in the bill, and to integrate what the federal government is ready to accept as a result of negotiations with the provinces, and which is not there at present.
This is the kind of behaviour on the part of the federal government that exasperates the provinces. If the future prime minister wanted to prove that things are going to be different in the future, that he will not be a Liberal like the rest, that he will not take a centralizing approach like the others, this would have been the perfect opportunity to demonstrate that by taking a different approach here, but this does not appear to be the case.
When it comes to the resolving the fiscal imbalance, improving the equalization program or finding a way to regulate federal spending powers, the current government has done nothing to show that things will be done differently in the future.
Since our party is here to defend Quebec's interests and wishes, like all the other provinces, and since we want Quebec to get its rightful share and ensure the fairest possible system as long as we are part of the federal system, we feel it would be irresponsible to support this bill in its current form only to be told in two or three months, “You agreed to it” or to hear, during the next election campaign, “You voted in support of the bill as it stood and that should suffice. Why are you asking for more?”
In my opinion, the public needs to hear this. People should also understand that equalization is working. However, it must be based on the year in progress and on a functional model that will be operational and that will take into consideration the demands of the provinces. When this has been done and when these changes have been made, we will be able to adopt legislation that meets the requirements of Quebec, the provinces and the federal government.
In the event that no agreement is reached and a bill remains necessary to ensure continuity, there will always be time to obtain the Bloc's cooperation. In the meantime, however, there is no question of adopting such legislation.
The principle of this bill, as drafted, is to recognize the status quo, which is not what people want. I know that Quebeckers will support the Bloc Quebecois, as we are speaking on their behalf here.