Mr. Speaker, I do not think I have had an opportunity to congratulate you on your elevation to that chair. I know you will make a fine and fair Speaker over the course of your term there.
I may mention at the outset that I am splitting my time with the member for Don Valley East.
This is a debate about fiscal imbalance. There has never been a fiscal imbalance. There never can be a fiscal imbalance. It is an intellectual conceit perpetrated by those who wish to somehow or another not take responsibility for their areas of jurisdiction and the raising of funds while trying to get into another area of jurisdiction and take funds from that area. This is a completely misleading debate and it is a misleading phrasing of the debate. As I speak, I hope I will be able to demonstrate to Canadians, when they see sober facts as opposed to the rhetoric on the other side, that this is a resolution which is ill-founded and is an intellectual conceit.
Given the importance of the issues at stake and their complex nature, I would like to take a few moments to establish some fundamental guideposts for the benefit of hon. members and do a comparison for the purposes of the record.
In the fiscal year 2003-04 federal government revenues were $186.2 billion. Provincial revenues were $170.2 billion, an imbalance some would say. The $170 billion includes tax points which account for about $16 billion. Already the federal government has indirectly transferred $16 billion to the provinces. Then there is the cash transfer, and that amounts to $37.4 billion. That reduces the federal government's revenues to $148.8 billion and increases the provincial revenues to somewhere around $207 billion: $148 billion for the federal government and $207 billion for the provincial governments.
However, it does not end there because the federal government has to pay a fairly significant debt. It was a debt that was run up over quite a number of governments and it was ultimately arrested in 1997. We have been paying down some debt since that time, but it still takes up $35.7 billion of the federal government's revenues. Those are moneys that are not available for anything else other than to service the debt. That brings the federal government's useful revenues down to $113 billion. Meanwhile the provinces, which do not have nearly the amount of debt the federal government has, only have to pay something in the order of 10¢ out of their dollars to service their debt.
Out of that $113 billion, there are transfers to those who are unemployed and for pension moneys in the amount of about $29 billion. That leaves approximately $84 billion available to the federal government for use in other programs. So much for fiscal imbalance. At this point, before the debt for the provinces, they have $207 billion, and as I have just demonstrated with the numbers, available for the federal government for all of its other responsibilities is $84 billion.
If there is a fiscal imbalance, it is that the provinces have all the revenues and the federal government has all the debt.
The provinces have argued that vertical fiscal imbalances exist in favour of the federal government. Essentially, they have argued that all the money is in Ottawa while the provinces and territories have all the spending responsibilities. I hope that my going through the numbers enables Canadians to understand that that is basically not true and that the underlying assumption of this debate is incorrect.
Although fiscal imbalance to date is not new, hon. members might be interested to know what the provincial position was a few years ago. Now it has taken a 180° turn in the opposite direction. More to the point, I note that in the early 1980s there was considerable debate as to whether there was an imbalance in favour of the provinces. Eventually these claims were dismissed, largely due to provincial arguments against the existence of a fiscal imbalance.
Hon. members will no doubt be interested to know that in support of this case against the existence of the fiscal imbalance, Ontario's 1982 budget quoted a study by the Economic Council of Canada which said:
In order to say that there is a “structural” economic problem relating to fiscal imbalance, it must be argued that one of the levels of government does not have access to the revenues required to fulfill its obligations.
We have heard that over and over again from the side opposite. It went on to say:
The mere existence of deficits at one level of government does not indicate the existence of such a structural imbalance nor does it mean that such deficits have to be rectified at the expense of another level of government.
We adopt that view, although that view was put forward by a provincial government when the federal government was arguing the opposite case 20 years ago.
Simply put, the Ontario provincial budget was stating that a vertical fiscal imbalance could not exist in the context of this confederation. That is because in Canada, unlike most other federations, the provincial governments have effectively the same access to the same major tax bases as the federal government.
The Leader of the Opposition has quoted favourably the notion that Belgium should be a model to be looked at. I do not think that my friends in the Bloc Québécois members would be quite so enthusiastic if they knew that only 8% of subnational governments control and access their own spending. Ninety-two per cent of the money comes from the senior level of government, as opposed to Canada and the United States where states and provinces have access to their own funds and decide how those funds are to be distributed. If they looked at it for very long, I do not think they would think that was such a great model to be followed.
Both orders of government are therefore at liberty to decide the degree to which they levy personal income taxes, corporate income taxes, sales taxes and payroll taxes to deal with the spending pressures related to their responsibilities, even in Alberta. Moreover, the provincial governments have exclusive access to some of the fastest growing revenue streams, resource royalties and lottery revenues. Alberta does very well out of resources royalties, and the federal government does not realize much at all out of those resources, revenues to which the federal government does not have access.
Thus, when federal support for provincial social programs is included, total provincial-territorial revenues have substantially, as I demonstrated previously, exceeded federal revenues as a share of GDP for more than two decades. At one point the provinces generated something in the order of 19% of the GDP of the nation and the federal government was down around 17%. Both have declined over a period of time so that now the provinces generate something in the order of 17% and the federal government has 15.4% of the revenues of the nation.
If the provinces really wish to generate their own revenues, they are in effect walking away with something in the order of 2% of the nation's GDP on an annualized basis. That is something in the order of $24 billion on an annual basis.
On the expenditure side, the federal debt continues to be much larger than the combined debt of the provinces and the territories. This affects all Canadians and makes the Government of Canada more vulnerable to unexpected fluctuations. As the Minister of Finance said earlier in question period today, with the new deal in the order of $74 billion over 10 years to the provinces in equalization in CHT and CST, we are in fact assuming some of the risk that the provinces appear to have forborne.