Mr. Speaker, just last week when the House was not sitting, some considerable progress was made on the treatment of the offshore resources issue.
Last Wednesday the Prime Minister met with the premiers of Newfoundland and Labrador and Nova Scotia. That was followed by a meeting of the federal and provincial ministers responsible for the file. These were very productive meetings. We want to continue with those discussions in a spirit of goodwill so that all governments can say that progress has been made. That has been reflected in the public comments by both premiers and the Prime Minister.
Let me go back to the offer that was made on October 24. We should be very clear that the offer made would effectively provide additional offsetting funds equivalent to 100% of offshore revenues to compensate for equalization declines associated with increased offshore revenues.
Furthermore, the approach fully meets federal commitments made to the people of Nova Scotia and Newfoundland and Labrador. Under the offer the Government of Canada said it would introduce legislation to provide additional annual payments offsetting equalization declines through an eight year period from 2004-05 through to 2011-12.
A provision in the offer, however, states that no such additional payments could result in a fiscal capacity of either province exceeding that of Ontario. If we think about it, that is a fair caveat. Ontario, which has the second highest fiscal capacity in the country and does not receive equalization payments, is used to provide an appropriate benchmark for the enhanced fiscal capacity that could be achieved under these agreements. Existing fiscal arrangements between the Government of Canada and the governments of Newfoundland and Labrador and Nova Scotia already ensure that the provinces retain 100% of the respective offshore resource revenues. Equalization payments come on top of that.
Last June the Prime Minister committed to Newfoundlanders and Labradorians and Nova Scotians that he would ensure that they remained the principal beneficiaries of offshore development by giving them 100% of effective protection against future equalization reductions caused by resource royalty increases. However, the 100% has to have within it limits to ensure fairness to all Canadians and all the provinces. The eight year arrangement which the Prime Minister has offered to Premiers Williams and Hamm fully meets that commitment.
I will now turn to the contentious issue of limit on revenue which has perhaps been the most widely misunderstood aspect of the agreement. The new special arrangements will not be allowed to cause Newfoundland and Labrador's fiscal capacity overall, including federal subsidies, to exceed that of Canada's second most prosperous province, Ontario.
I want to make the next point very clear. That is that the arrangement does not say that Newfoundland's own resources are being limited to the level of Ontario's. In fact, there is absolutely nothing to prevent Newfoundland's own revenues from surpassing those of Ontario, indeed those of Alberta for that matter. The limit simply means that taxpayers elsewhere in Canada should not be asked to subsidize Newfoundland and Labrador to a higher level than Ontario.