Debates of Oct. 28th, 2004

Supply

[The Deputy Speaker]

The hon. member for Portneuf—Jacques-Cartier on debate.

[Guy Côté, Bloc, Portneuf, QC]

Mr. Speaker, this morning, in the Standing Committee on Finance, we hosted the Finance Minister. I heard our Liberal friends rejoicing, naturally, over budgetary surpluses. They were rejoicing particularly over the unexpected surpluses.

It is my intention, soon, to pay a brief visit to Laval University to meet with some of my former professors. Indeed, I feel that I could ask for a revision of some of my marks, because some of my mistakes were on the positive side, not on the negative side. I don't know, though, whether that will be allowed.

Fiscal imbalance has very significant consequences, on both democracy and accountability. What are the effects of fiscal imbalance? One of them, among others, is to put us in a situation where the federal government no longer knows what to do with its money. We are looking at more than $60 billion since 1997-1998. These are numbers often repeated in this House, but I think it is important to repeat them. I hope that one day, our colleagues in government will finally understand them.

The Conference Board talks about $166 billion over the next 10 years. If they were to be revised today, these numbers would continue to increase in light of the unexpected surpluses, which we had in the last budget year.

I spoke about democracy and accountability. The federal government has so much money that it does not know what to do with it. Instead of fully assuming its responsibilities in its own jurisdictions, the federal government invests in jurisdictions that come under Quebec and the provinces.

What is the result of this? During the years 1995-96, the federal government was making cuts everywhere in joint programs, with the result that all the provincial governments, and particularly the Quebec government, were blamed by their population, because they lacked money for health, municipalities and infrastructures.

To a large extent, the problems were not caused by how the Quebec and provincial governments were managing things; they were caused by the drastic cuts made by the federal government. This is really a lack of democracy. It was mentioned earlier that the taxpayer is the same one at every level. Our fellow citizens should know who deserves to be praised and who should be blamed. This is important.

The fiscal imbalance has a significant impact on the provinces' shortfall, particularly Quebec's. The most recent evaluation of the shortfall caused by the fiscal imbalance, and Quebec's most recent demands are presented, along with the dollar figures, in a document entitled “Correcting Fiscal Imbalance”. That document was released when Quebec's most recent budget was presented, in March 2004.

The demands relating to equalization or social transfers are quite similar to those of the Séguin commission. However, while advocating the transfer of tax fields as a basic solution to the fiscal imbalance, the Quebec finance department proposed, as an interim measure, to significantly increase transfer payments for health and education, and equalization payments. In total, the Quebec finance department proposed a $7.2 billion increase in federal transfers across Canada.

As regards equalization alone, the federal government should invest over $5 billion. This is taking into consideration the restoring of the 10 province rule, and a number of other amendments to the formula, to restore some tax fairness between Quebec and the provinces.

For Quebec, these proposals would amount to an additional $3.3 billion for 2004-05 alone. This is, in essence, the shortfall caused by the fiscal imbalance in Quebec, as calculated by its government.

What we are proposing is relatively simple. We did not reinvent the wheel. First, as the Quebec government is requesting, there has to be a significant increase in funding, in the CHST, for example. It is indeed an option, but it is a short term one and it is far from perfect.

The best solution would be to stop the transfer of tax points to the Quebec government. This would give us a much better choice. Such a solution would enable the Quebec government to better predict in it budget planning, because it would have its own revenues. This formula would help to balance the ability to generate revenues for the two levels of government.

These propositions would result in a global return of 26.7 tax points on the personal income tax. Quebec would then have an effective hold on the personal income tax field. The Quebec government would control 57.5% of personal income tax rather than the 42% it is controlling now. It is a very nice solution, but additional measures complement that.

We continue to say that it would be important to adjust the equalization payments calculations. Transfer of tax points alone would not do any good for some provinces, particularly for the Atlantic provinces. This is why we suggest that the increase in the ability to generate revenues created by a transfer of tax points not penalize the provinces by reducing the equalization payments. Those provinces have to have access to additional revenues to be in a better position to meet the challenge of growth and increase in the public expenses.

Myths about equalization abound. Unfortunately, it is often said that Quebec is the one benefiting the most from this program. True enough, Quebec gets 31.5% of federal transfers to the provinces, 43.7% of equalization payments and 24% of transfers for health, higher education and welfare, but when you figure out the per capita payment, it is about $500, which is, as mentioned this morning by Michel Vastel, much less than what the Atlantic provinces, Manitoba and Saskatchewan are getting.

Although 24% of total federal spending is in Quebec, which reflects Quebec's demographic weight in Canada, we are not as elated when we look at the nature of this spending. Quebec does not get its share of job and wealth creating spending. For example, it does not get its share of grants to businesses. It is far from getting its share of federal spending on goods and services. Research and development spending generates jobs and knowledge and brings quality jobs and wealth to the communities. I will not even mention federal jobs, which are concentrated in the Ottawa and Ontario area.

Those policies have made Quebec poorer, and we are now receiving more equalization. If the federal government had implemented other policies, Quebec would not be getting as much equalization and I, for one, would be very pleased.

For instance, if the number of federal public servants in Quebec were in accordance with its demographic weight, $812 million more in salary would be paid to about 15,500 civil servants in Quebec. Those are good jobs. I would not call equalization what is grudgingly granted to us at a conference where such figures are used despite important consensus in Quebec on this issue.

In research and development, the federal government has set up 57.7% of its research centres in Ontario, compared with a mere 19.6% for Quebec. The difference is $800 million. Ottawa needs to change those policies if it truly wants to be fair to Quebec and the provinces.

Quebec companies are receiving 18.5% of federal assistance to businesses, that is $3 billion less than what is granted to Ontario companies. We are not talking about peanuts here—and I am sorry if that expression is unparliamentary—but about $3 billion. So, it comes down to a $200 million shortfall for Quebec also.

These policies have to change. Quebec must gain control over all its economic and fiscal policies and its programs to help businesses and constituents alike.

Tax point transfers were mentioned earlier, and I said that we had not reinvented the wheel. Canada faced a similar situation at the end of the second world war. At the time, the fiscal imbalance issue on which Ottawa and the provinces disagreed led to the 1956 report of the Tremblay commission. It is nothing new.

That commission proposed to the federal and provincial authorities that it agree to a new division of tax fields better suited to the present needs of the public and the public administration, and more respectful of the spirit of federalism and the Constitution. That was 48 years ago.

Unfortunately, even then the government did not always heed commission recommendations. For a number of years, rather than follow that direction, the government began to set up a number of cost-shared programs. It did not take long to realize that the solution did not lie in injecting funding on a cost-shared basis.

This led to the 1964 federal-provincial conference, where at the insistence of Quebec, which once again—with the credit going to Jean Lesage—demanded more access to income tax, tax points were indeed transferred. This solved the problem for thirty years or so. Now for the situation we find ourselves in today.

I believe that one of the major causes of fiscal imbalance is the federal spending power. The government has used that power for several decades to interfere in jurisdictions belonging to Quebec and the provinces. For evidence of this, one need look no further than the Speech from the Throne.

Where do the priorities of the representatives of this government lie? They tell us often enough, and delight in doing so. I do not delight in hearing them; they are a disappointment to me, but not to them. These are all areas over which Quebec has jurisdiction: municipalities, early childhood services, health, education. Even without our signature on the Constitution it seems to me that, if there is one area of jurisdiction that clearly belongs to Quebec and the provinces, it is education.

This federal government absolutely must take action on the fiscal imbalance, must start transferring tax points so that Quebec and the provinces are able to properly administer the services for which they are responsible and properly serve their citizens, within a system that is both more transparent and more democratic, one where people can see whom to praise and whom to blame. Unfortunately, that is not the case at present.

I am not at all used to giving 20 minute speeches in the House, so I must admit that I have rather lost track of time. I have no idea how much time I have left. I believe I may have quite a lot.

[An hon. member]

Quality is what counts.

[Guy Côté, Bloc, Portneuf, QC]

Quality indeed, thank you for that.

The thrust of my speech is that we need a system that is more transparent and more democratic. It was incredible to hear the Minister of Finance, this morning, tell us, “Yes, indeed, estimates are not an exact science and there may be errors. A small error of 2% may have an impact of $300 million”.

Since I see that I have six minutes left, I think that I will start to speak much more slowly. It has often been said that experience is the sum of our errors. I will tell you that I am getting a lot of experience at this time.

Indeed, if estimates are not an exact science, we are still seeing a systematic underestimation of revenues by the government. If, during the 1970s and 1980s, we saw most optimistic forecasts that brought repeated deficits, year after year, this government has taken exactly the opposite direction by both constantly underestimating its revenues and overestimating its spending.

There is only one taxpayer. This taxpayer must know what will be his contribution to the various services that the state will provide him. For example, we talked about employment insurance. This is incredible. Employment insurance has become a hidden tax, an employment tax.

The employment insurance fund has huge surpluses year after year, while these surpluses should go to workers, to people who contribute to this fund and who need it when they go through much more difficult times.

Through accounting gymnastics, the Liberal government manages to get these surpluses and to use them, among other things, to reduce the debt. This is outrageous. It is attacking people who are at a disadvantage and in a crisis situation, who have families and children, who have mortgages, and it tells them, “You have not asked for employment insurance for a number of years, because things were going rather well. You had a job, you do not meet the requirement of 910 hours and, thus, you will not get an income”. The government has huge surpluses. It does not know what to do with them anymore.

The federal government must take care of its own jurisdictions, and not intrude in Quebec and provincial jurisdictions. We see this again here in this House. In the last couple of days, we have heard a lot about the Canadian armed forces, and many parliamentarians have talked about the shortfalls in their financing. I am telling you that if the government was taking care of its own jurisdiction without intruding in the jurisdictions of Quebec and the provinces, the armed forces would probably be much better equipped and the Liberal government would focus on solving the problems that are truly Canadian instead of intruding in Quebec and provincial jurisdictions.

We attended a federal provincial conference on equalization yesterday, and I must say that we were quite disappointed with the Prime Minister's attitude. Under the guise of openness and cooperation, the Prime Minister made a speech in which he is not giving one more cent to equalization compared with the figures given at the last conference on health held in September. There is no change in the calculation formula, which penalizes Quebec and prevents it from making consistent forecasts and knowing exactly what its budget will be in one, two or three years. This forces the Quebec government to beg the federal government for money, and this is not healthy.

Quebec, like the other provinces, must be able to manage the areas under its jurisdiction and tell its fellow citizens “this is what we have to offer in the areas of health, education, social assistance and early childhood services.”

We are talking about a national child care program. For seven years, two of them as chairman, I sat on the board of a day care in Quebec. It was a fantastic experience. It is a fantastic model. I will never stress enough how afraid I am that the Liberal government across the way might barge in with a one size fits all program that will undo all the progress we have made in Quebec since 1995, if my memory serves me right.

Not only it is planning a one size fits all daycare program, but if we go back a few years, when the $5 dollar a day daycare program was introduced in Quebec, Quebec families lost their federal tax deduction. Since 1995, around one billion dollars has been taken out of Quebec tax payers' pockets. The Liberal government is aware of the fact. Nevertheless it has done nothing to address the problem. It would not take much though. If the government really cared and wanted to cooperate and help, it would help those people get back the money owed to them.

I understand I have about one minute left. Let me conclude by reminding the House that the fiscal imbalance is not only about money, it is also about democracy and accountability. People must know how their tax dollars are spent.

[Shawn Murphy, Liberal, Parliamentary Secretary to the Minister of Fisheries and Oceans]

Mr. Speaker, although I do not agree with everything the member said, I certainly was impressed with the way he presented his argument.

I listened intently to the argument and it seems to me that the member is still confusing fiscal imbalance with government policy. He made the statement that the federal government, whether it was good luck, good management or inaccurate forecasting, had a $9 billion surplus and it did not know what to do with it. The government, of course, paid down the debt, which I certainly support.

I want to point out to the hon. member, as he pointed out to the House, that the government has paid down approximately $60 million in debt over the last seven years. As anyone who has been here for a few years knows, when the previous government was in power at the end of 1993, debt was accumulating at the rate of $3.5 billion a month. We have seen what can happen when a government loses the fiscal and monetary policies at its disposal.

I want to point out to the hon. member that at present, and this is a fiscal imbalance, the accumulated debt of the federal government is $501 billion and the accumulated debt of all 10 provinces is $281 billion. That is a very serious imbalance, although I do not refer to it as a fiscal imbalance.

When the member talks about our policy, he makes the arguments, and they are good arguments, although I do not support them, that federal taxes are too high and that the government should not be as involved in some of the horizontal issues, such as health care, child care and infrastructure, as it is. However that does not support the proposition that the federal government should transfer large sums of money to the provinces.

Over the past five years we have had a situation in this country where the federal government has lowered taxes considerably for every person in Canada, including the people who reside in the province of Quebec. If the province of Quebec needed more money, as in any other Canadian province, why did it not just fill the vacuum by raising taxes so it could provide the services for the people who live in Quebec?

[Guy Côté, Bloc, Portneuf, QC]

Mr. Speaker, I thank the member for his excellent questions. Let me point out that we are not talking about a mistake in one year. I can understand that budgetary forecasting is not an exact science and that, in a given year, there be a discrepancy of so much. That is perfectly understandable and, unfortunately, it is almost a given.

In this case, however, we are talking of systematic errors, year after year. Indeed, for seven years in a row, there have been unexpected surpluses much higher that the budgetary forecasts made by various finance ministers.

[An hon. member]

Including the Prime Minister.

[Guy Côté, Bloc, Portneuf, QC]

That is correct, the Prime Minister was finance minister at that time.

Our Liberal colleagues opposite boast about their sound fiscal management and about extricating Canada from a very difficult budgetary situation. Our Liberal colleagues did not do this on their own. They did it by having the unemployed pay the deficit, by cutting benefits. They had sick people pay the deficit, by cutting health transfers. They had the provinces pay, by cutting equalization payments. They reduced it at the expense of the poorest, by cutting social transfers.

In the meantime, this government, which boasts about its sound management increases its operating expenses by 38%. All that we ask the federal government to do is manage the federal government and let the provinces manage their areas of jurisdiction. Let it mind its own business. That's not complicated.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I would like to congratulate the hon. member for Portneuf—Jacques-Cartier on his presentation, which I found very interesting.

I agree with his comments about the Liberal government's bad management. We know full well that at the beginning of the year billions of tax dollars were cut from major profitable companies in Canada. Meanwhile, we know full well that in our communities across Canada people are suffering a great deal.

In my riding of Burnaby—New Westminster, St. Mary's hospital, a major hospital, closed its doors. We lost this hospital because of federal cuts and bad decisions by the provincial government. When I talk to people in my riding, I see to what extent young people feel abandoned by this government. The leader of the New Democratic Party talked about this earlier. The burden is on young people and students who now have to face debt in the tens of thousands of dollars. In my region of greater Vancouver, the number of homeless people has tripled in three years because of cuts at the federal and provincial levels and the existence of this fiscal imbalance.

There are so many crises—in the environment and employment insurance. Maybe it was not such a bad idea to change the name from unemployment insurance to employment insurance, because employment insurance only insures those who have a job. If people lose their job, they are no longer insured and they no longer have access to the money that is supposed to help them support their family.

Look at the situation with the Minister of Citizenship and Immigration. The waiting lists are getting longer.

My riding has felt the impact of all of this. I would like the hon. member for Portneuf—Jacques-Cartier to tell us what impact this has had on his riding and to describe what people are going through because of the fiscal imbalance and the fact that the Liberals are keeping the money for big companies, but also for themselves.

[Guy Côté, Bloc, Portneuf, QC]

Mr. Speaker, as you can easily imagine, the impacts are many and varied. I think in particular of two categories of citizens in my riding, namely youth and farm producers. I think of them for various reasons.

The cutbacks in transfers for education, health and social services have resulted in fewer services for the young people in my riding. My riding being primarily a rural riding with very few large commercial plants, a number of them sometimes have difficulty finding a job that is both rewarding and a quality job. Thankfully, many are successful.

As a result of the cutbacks, the Government of Quebec, like others, made cuts in health, as we know. This means that cuts were made in areas like drug and sexually transmitted disease prevention. It is much more difficult for the Government of Quebec to carry out its mandate because the federal government has made cuts.

Once again, the government is boasting about its good management. I would remind them that, while surplus forecast may not be an exact science, there are still ways to come up with figures that resemble reality. I will not go back too far, and I take this opportunity to commend the excellent work of my colleague from Saint-Hyacinthe—Bagot.

In 1999-2000, when the Liberal government predicted a surplus of approximately $3 billion, we figured it would be closer to $11.5 billion. What was it in fact? It was $12.7 billion. The following year, in 2000-01, the Liberal government predicted a surplus of $4 billion, while the Bloc Québécois estimated it at $18.2 billion. The real number was $18.1 billion. I could go on like this all the way to the current year, but I will stop here. This is no accident, but it keeps happening year after year. That is a shame.

If I were to go back to my economics teachers today and ask them to give me a better grade because my answer was off by only $7 billion, but at least I was in the black, I am not sure they would agree.

[Shawn Murphy, Liberal, Parliamentary Secretary to the Minister of Fisheries and Oceans]

Mr. Speaker, a lot of discussion is taking place in the House and in the media right now regarding the fiscal pressures of the provinces and federal transfers. There is no question that these issues are very important to the governments of each of our 10 Canadian provinces and to all Canadians right across the country.

It is for that reason that we must be very clear when we use the term fiscal imbalance. I believe it is being confused with the whole term of horizontal fiscal imbalance, which does exist between the provinces. The government has been dealing with that issue very aggressively by ensuring all Canadians have access to equitable essential services. To do that the federal government contributes significant amounts to the provinces, including the province of Quebec, allowing them to better fund their provincial responsibilities.

However there is a significant difference from what is being proposed in the motion. What the motion suggests is that there is a vertical imbalance between the federal government and the provincial government. Simply put, this is not the case and cannot be the case under our present Constitution.

When the country was formed in 1867, certain powers were devolved to the federal government, such as defence, fisheries and oceans, and certain powers and responsibilities were devolved to the provinces, such as health and education. I will admit that in recent years a lot of the areas of the fastest growing responsibility are those areas under provincial responsibility.

However the important point that is being lost in this whole discussion is that under our Constitution the provinces and the dominion basically have the same taxing powers. If the provinces want to tax corporate income they can do so. It is the same for the federal government. Both levels of government can tax personal income, impose capital tax and impose taxes on consumption. In fact when we look at it, the taxing powers of the provinces are greater. They have lottery revenue and property taxes, but again, that is not a significant item for this debate.

In Canada, both the federal and provincial governments have access to all major sources of revenue. If the federal government and the provincial government can access the same tax bases, it is impossible to see how a vertical fiscal imbalance can exist.

The example I gave in a question to the previous speaker was that the federal government, whether it was right or wrong, decreased corporate and personal taxes over the past five years. If any of the 10 provinces wish, in their wisdom, to raise taxes they can do so. One can make the argument that taxes are too high, that federal taxes are too high or that provincial taxes are too high, but that is a policy issue. It has nothing to do with the whole concept of fiscal imbalance. There is no limit to the taxing power of any province.

Still, from province to province there are significant differences as to how much revenue they can potentially generate. That is where the imbalance exists, but that is a horizontal imbalance, which I suggest is being addressed very adequately by evolving federal programs. One clear example of this is the new health care deal which will see billions of federal dollars going to the provinces for improving health care across the country. As well, the government recently announced a new framework that will increase the support provided to provinces through equalization programs by $33 billion over the next 10 years.

The new equalization framework will provide predictability, stability and increased funding, all aimed at decreasing the horizontal fiscal imbalance that exists between provinces.

There are further programs that target areas of inequity such as child care, early childhood education, money for post-secondary education, cities and infrastructure. These plans have been developed in the framework of fiscal responsibility--

[Greg Thompson, Conservative, St. Croix—Belleisle, NB]

Mr. Speaker, I rise on a point of order. I have been listening to my hon. colleague with great interest, but I think the folks back home and some members in the House are somewhat confused by his definition of horizontal and vertical tax structures. Would the member explain that a little more carefully because I want to respond to that in questions and comments?

[The Deputy Speaker]

I am sure the hon. member will explain that perfectly as he continues. That is not a point of order, so we will hear again from the member for Charlottetown.

[Shawn Murphy, Liberal, Charlottetown, PE]

Mr. Speaker, I am sure that if the hon. member has a question he will address it to me after.

In supporting the provinces the government transfers federal funds directly to Canadians. This is done through old age security, the child tax benefit and the Canada pension plan. These federal programs further improve the standard of living for Canadians living from coast to coast to coast.

A lot of the arguments that have been made here today have been policy arguments. They have been arguments about federal programs. In a lot of cases, they have been arguments about the lack of federal funding. Members do not want a decrease in the amount of federal funds going into certain programs but rather an increase in the amount of those funds. Housing was talked about as was poverty and child care.

Members have been arguing about waste and allocations vis-à-vis each separate province. The previous member spoke about the amount of research moneys going to Quebec. That is not a vertical fiscal imbalance. That is a horizontal issue between what a province is getting, for what purposes, and when. Those are policy issues that have nothing to do with the motion before the House.

If I read today's motion correctly it basically states that the federal government should transfer, with no strings attached, moneys to the provinces with no horizontal issues at all. I fail to see how anyone from Atlantic Canada could support this type of motion which would take away all the federal government levers to impose some of the horizontal issues that we are trying to impose right now.

I want to repeat something I alluded to earlier. Provinces have the very same taxing powers as the federal government to tax resources, consumption, corporate wealth, corporate income, personal income, property taxes and payroll taxes if they need those funds to provide services to their citizens.

There is a fiscal imbalance and that probably goes back to when our country was formed in 1867. This level of government did not exist in the same state as it exists right now with our cities and municipalities. That fiscal imbalance has evolved over the years. It is my belief that right now our cities in Canada do not have the fiscal capacity to provide the services that their residents need.

I am not going to suggest here for a minute that the federal government is going to solve that issue. The program that was laid out in the Speech from the Throne will go a short way toward helping to resolve the issue of fiscal imbalance, but that will require further dialogue between the federal government, the provincial governments and the cities.

As I said before, I am splitting my time with the member for Mississauga--Streetsville. I would ask everyone in the House to think about the motion, think about its repercussions for our federation, think about its repercussions for the people living in the regions, and vote against the motion.

[Greg Thompson, Conservative, St. Croix—Belleisle, NB]

Mr. Speaker, I listened very closely to the member and he said that there is no limit to the taxing powers of any province. Who but a Liberal could say that? Think about it. There is no limit.

He is here trying to confuse the public, and I might say members of Parliament, on this nonsense of vertical and horizontal fiscal imbalance. Try to figure that one out. There is no logic to that argument at all. This is typical Liberal double-talk.

Double-talk coming from that side of the House is not an unparliamentary expression. It is a word that is acceptable in this place, simply because there is so much of it going on over there. We have become used to that kind of double-talk. That is exactly what this whole issue is about.

The Prime Minister, in the middle of an election, where the bottom had fallen out of his campaign, simply trotted across the country from one end to the other making any promise he had to. What was the reason? It was to stay in power and to win more seats, to sit at 24 Sussex Drive at the expense of anyone else, including the Canadian public.

This is the kind of nonsense that we get from a member of Parliament, who obviously as an individual is a very bright guy. However, imagine a man with that intelligence coming to this place singing from the Prime Minister's songbook. It is just unbelievable. He might as well go home and start knocking on doors.

[Shawn Murphy, Liberal, Charlottetown, PE]

Mr. Speaker, I thank the member for those comments, but I will give him some things to think about.

We as a country kicked out the Conservative government in 1993. What was the debt then? It was $43 billion. There is another thing to think about. What was the unemployment rate then? It was 12%. What were the interest rates then? They were 11%. What was the debt to GDP ratio? It was 71%. I have this almost down to the minute. If that government were to have stayed in power for another 30 minutes, we would have been bankrupt.

I am surprised that a member from Atlantic Canada would talk like that because if the motion were ever allowed to pass, and I assume the member will not vote for it, it would strip the federal government of all power it had to deal with issues like health care and equalization. Every province would be on its own. We would lose the strong federal central government and Atlantic Canada would be out to sea.

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

Mr. Speaker, I believe I have finally understood what our Liberal colleague has been talking about. When he speaks of the horizontal imbalance, he is talking about the federal government lying down on its surpluses. I think that is it. The government is lying down, horizontally, so he talks about a horizontal imbalance.

When he talks about a vertical imbalance, that is when the provinces topple over from the weight of their responsibilities and their lack of money to take care of them. I think that is what he meant.

I have a small piece of advice for him. Instead of talking so as to confuse people with terms such as horizontal imbalance and vertical imbalance, perhaps he should stop speed-reading diagonally when he receives documentation. I think he would serve the people better.

[Shawn Murphy, Liberal, Charlottetown, PE]

Mr. Speaker, obviously my learned friend has missed the point of my argument. There are certain imbalances in the country and they are, by and large, horizontal imbalances. Canada, as everyone is aware, is a very large country and we have different provinces. Things change over time. We have seen this with Alberta.

However, the job, duty and the role of the federal government is to provide a system where every Canadian is basically, and there will always be some inequities, given the opportunity to have essential services and reasonably comparable levels of taxation. That is what the federal government has tried to do.

Persons living in Newfoundland and Labrador or in B.C. are entitled to the old age security. Everything is the same. The equalization program tries to, on a horizontal basis, level out some of these imbalances that do exist. The motion basically says that we should transfer a lot of money from the federal government to the provincial governments so that the provincial governments can do with the money as they see fit.

[Wajid Khan, Liberal, Mississauga—Streetsville, ON]

Mr. Speaker, I welcome the opportunity to contribute to today's debate. In considering the question of a supposed fiscal imbalance, let me begin by suggesting that we should all take a break from rhetoric and reflect on economic reality and national responsibility.

As was highlighted in the recent Speech from the Throne and the Prime Minister's reply, Canada has acquired an outstanding record of economic achievement. In fact, our federation and its federal government are doing many things right.

Over the past 10 years we generated over three million new jobs. Since 1997 we have led all G-7 countries in the growth of living standards. Low interest rates have made home ownership easier than it has been in decades.

This has not happened by accident. It reflects the virtuous circle we have worked hard to achieve, where fiscal discipline and balanced budgets have led to increased confidence, lower interest rates and falling debt. Our better financial results have permitted the government to reduce and improve the fairness of taxes, and make new social and economic investments.

That is the central point we must recognize in today's debate. Our government has indeed made vital tax cuts, and social and economic investments. This spending underscores the obligations and opportunities that the House and Canada's federal government must continue to embrace for the continuing benefit and future prosperity of all Canadians.

It is simply not true, as the advocates of imbalance try to argue, that the needs are with the provinces and the resources with Ottawa. The clearest thing is that we face national needs. Canadians want a federal government that plays an active, accountable role in addressing those needs.

Let me remind my hon. friends of the action agenda and spending pressures that must be considered in any analysis of available federal revenues and the balance between federal and provincial resources.

To start, we must not take for granted our current economic success. In the face of advancing technology and accelerating global competition, Canada must now invest in elevating our performance to the next level.

That is why the throne speech highlighted a five point strategy to build an even more competitive, sustainable and prosperous economy.

First, we must invest in people, our greatest source of creativity and economic strength. This means investing in workers, helping them continuously enhance their skills to keep pace with constantly evolving workplace requirements.

Second, we must strengthen Canada's ability to generate and apply new ideas. We must continue our support for academic and industrial research and scholarships. We must never forget that education and R and D are just starting points for economic success.

The equal challenge is to turn more Canadian bright ideas into dynamic businesses, great jobs and growing export earnings. That is why our government wants to ensure a supply of venture capital particularly for early stage businesses in key enabling technologies such as biotechnology, information and communications, and advanced materials which will be drivers of innovation and productivity in the 21st century economy.

Third, we must invest in providing smart government to make it easier for businesses to do business in Canada. This includes a transparent and predictable regulatory system that accomplishes public policy objectives efficiently while eliminating unintended impacts.

Fourth, the government's overall economic strategy maintains a commitment to regional and sectoral development. The simple fact is, Canada's regional economies are a vital source of economic strength and stability. Support for regional and rural economic development will target the fundamentals, such as skills upgrading, support for research and development, community development and modern infrastructure such as broadband communications, by employing regional agencies and tools, such as the Atlantic innovation fund.

The government's regional objectives are being complemented right now by the most fundamental reform of the equalization program in its 47 year history. This new framework will see provincial and territorial transfers increased by some $33 billion over 10 years and provide them with the greater stability and predictability in payments they have sought so they can better plan and manage their own budgets.

Fifth and finally, our economic strategy must include the promotion of trade and investment. Canada has always been a trading nation, but never more so than today. It is therefore vital that we secure and enhance our access to markets both in North America and around the world.

To this end, the government will build on the successful smart borders initiative and also on measures designed to develop a more sophisticated and informed relationship involving business and government officials in the United States.

This is an active agenda and it is an essential one that must be backed by the funds needed, because only a growing economy can deliver the government revenues needed to meet the significant social challenges we face today and in the years ahead without forcing us back into destructive deficit spending.

This requires that all parties recognize that each level of government has fiscal pressures to deal with. Only by acknowledging this and working together constructively will all levels of government be able to best serve Canadians.

[David Christopherson, NDP, Hamilton Centre, ON]

Mr. Speaker, I listened carefully to the remarks by the member for Thornhill. One of his last comments was that the government faces significant social challenges.

I want to say that those social challenges in large part were created by the member's government. We are talking about a fiscal imbalance because the pressures that exist at the provincial level and at the municipal level in large part were generated at the federal level.

I have served in the Ontario legislature and on Hamilton's city council, so I understand how these things work. When you cut $25 billion from health care, through you, Mr. Speaker, as your government did--

[The Deputy Speaker]

If I could just encourage the member that it is not my government. We have to use either the riding name or the third person so that we know what we are talking about here.

[David Christopherson, NDP, Hamilton Centre, ON]

I am sorry, Mr. Speaker. Then it would be the Liberal government, and I will leave it at that. I will try not to confuse things, especially myself.

I was saying that when you cut $25 billion from health care--

[The Deputy Speaker]

Just a reminder to address all the comments through the Chair and that is the way we will proceed.

[David Christopherson, NDP, Hamilton Centre, ON]

When the member's government cuts $25 billion from health care and cuts the last affordable housing program that we had in the country, that affects provinces because they have to make up for that or their citizens go without housing and without health care. That goes down through to the municipal governments.

As well, the member talked about smart government. I would like to know what is so smart about cutting health care, cutting affordable housing programs and still deciding tax cuts are a bigger priority than health care and housing. How does that create smart government?

[Wajid Khan, Liberal, Mississauga—Streetsville, ON]

Mr. Speaker, I am delighted that the hon. member has enlightened me that he was in the provincial legislature. This is a classic management of Ontario mismanagement of the economy. He should not be that proud of that.

Everyone knows what shape the economy of the country was in in 1993. As my hon. friend said, another 30 minutes and we would have been in worse shape.

Since then we have paid down billions in debt, which is $3.5 billion a year in savings that are being invested in the very social programs that the member spoke about. We on this side of the House take the three million new jobs very seriously. We have set aside $41.3 billion for health care, $33 billion toward investments in seniors and children, and all kinds of infrastructure.

That is what we should be proud of and that the member should appreciate.