Debates of Nov. 29th, 2004

Federal-Provincial Fiscal Arrangements Act

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Mr. Speaker, I would like to comment about this panel of experts as well. I had the opportunity to speak to some of the NDP members or people tied with the NDP government in Saskatchewan and I encouraged them to pick some experts to put on that panel who really understood the problems of non-renewable resources. However they told me that the instructions they had received from the federal Liberal government was that it did not want any experts who had preconceived ideas on this subject. In other words, it wanted experts that knew nothing about the topic.

To me experts are people who have studied something, understand it very well and have some well thought out ideas on the matter, but apparently that is not what the government wants. It wants people who do not know anything about the issue to be on the panel of experts, which is quite amazing.

I can think of Mr. Mansell at the University of Calgary who would be an excellent person to have on the panel. Brian Crowley from the Atlantic Institute for Market Studies would be an excellent person to have on that panel. Mr. Courchesne at Queen's University would also be an excellent person to have on that panel. They have all spent a lot of time studying this formula and criticizing the defects in it, but I doubt whether any of these people will be appointed to the panel because they have preconceived ideas on the topic.

The sort of sentiment here in Ottawa is that things should be controlled and run out of Ottawa because everyone in Ottawa knows best. I have the suspicion that what would really trouble the centralists, the Trudeau types of people who wanted everything run out of Ottawa, is that it would be dangerous if a province like Newfoundland developed its non-renewable resources and became an economic powerhouse in Atlantic Canada, became a true major have province, a place for investment where people could go, and a collection point for economic activity.

The people of the Trudeau centralist idea of government would find that whole notion dangerous and would not want it to happen. They would not want people to get on their own two feet, really be in control of their own destiny and maximize all their abilities and talents in that region.

I wonder if the member would be able to respond to that kind of concern.

[Norman Doyle, Conservative, St. John's North, NL]

Mr. Speaker, that is a very good question the member asks. I think there is a whole range of things that we do not know about this so-called panel of experts that will be put in place. For instance, will the recommendation by the panel be binding? Will the recommendation be subject to the opinions or the approval of the have provinces if the have not provinces seem to get a better deal?

What I have been saying is that the whole equalization issue is a very useful tool in keeping have not provinces from starving, but it is a very big impediment as well in that it keeps a province from standing on its own.

I feel it is an absolute must that the equalization panel has to address the non-renewable clawback resource revenue issue. Our provincial government right now is quite legitimately making the point that non-renewable resources have to be exempt from the clawback provisions in our resources and our oil revenues.

It is a step backwards not to have this particular issue on clawback addressed by this panel, because it is the one issue that is keeping the have not provinces have not.

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

Mr. Speaker, I am delighted to have the opportunity to say a few words on Bill C-24. I thank my colleague from St. John's East for sharing his time with me.

When we talk about equalization, quite often we hear people saying, “There goes Newfoundland and Labrador again, looking for more money”. Let me just put on the record quite clearly that our province is not the only province that gets equalization.

Newfoundland and Labrador, according to the legislation, next year will receive--and there is some argument about this--$860 million, probably closer to $861 million, but Manitoba will receive $1,600,000,000, twice as much. New Brunswick will receive $1,347,000,000, almost twice as much. Nova Scotia will receive $1,343,000,000, almost twice as much, and Quebec of course will receive $4,798,000,000, which is just about six times as much.

So right from the start let us make it clear that Newfoundland and Labrador is not the only province in the country that receives equalization.

The legislation itself, as far as it goes, basically just legalizes a process of delivering the equalization payments to the province, adjusting the formula somewhat and legalizing payments. As far as it goes, we have no problems with it. It is where it does not go that causes us real problems.

Equalization has its basis in section 36 of the Constitution. It is a redistribution program aimed at nation building. I want members to remember nation building, because I will come back to it in a moment.

The formula itself is not in the Constitution. Instead, it is set out in the Federal-Provincial Fiscal Arrangements Act. And here is the thing that worries us, particularly in light of negotiations that are going on at present. It has changed a number of times since its inception in 1957. It has changed a number of times and the concern of course is that if it changed once, it can change again. The enactment does not deal with non-renewable resource revenue sharing outside of equalization, and that is the other thing that scares us.

Let us talk about nation building and just talk about what some of the hon. members opposite think about equalization as it deals with nation building. Let me quote one of them. He said:

--we are now 10 independent little countries.

I respectfully submit there is no sense of nationhood or nation building out of these moneys. We have 10 little emperors. Each has his hands on ridiculous amounts of money. They erect trade barriers which interfere with each Canadian's ability to move from province to province and to practise his or her trade.

If I had any impact on the finance ministers of Canada, and that is somewhat dubious, I might ask some rather fundamental questions. How do these equalization transfers help build Canada? How is Canada better off at the end of the day once these transfers are done? How will Canadians know that their money is well spent?

The hon. gentleman actually went on to say:

I cannot quite fathom how we should take $1 billion worth of transfer moneys given to the Government of Newfoundland [and Labrador] own funds, not call on the federal transfer and still complain.

One would wonder who would say it like that, first of all to ridicule 10 provinces and 10 premiers and say they are a bunch of greedy little emperors with their grubby little fingers out reaching for federal dollars, and then to complain that Newfoundlanders or perhaps people from the north or any province with natural resources would sit back and not try to develop their own resources because Ottawa is passing out the money to them.

The interesting thing about it is that the statement was made by the member for Scarborough—Guildwood when he was the member for Scarborough East about four or five years ago.

So when we hear the hon. member, now the parliamentary secretary, constantly belittling equalization and trying to prevent the government from proceeding with its deal to give provinces that have non-renewable resources a fair shake, to develop these resources outside of equalization until and only until they become contributing provinces, this is where the problem is coming from, from people like that.

There he is on the record proving himself to the people of Canada. Maybe his own party will look at him and others who are the naysayers, including the President of the Treasury Board, by the way, and show some leadership.

The Prime Minister today in question period, in answering the question from the Leader of the Opposition, in referring to the deal the federal government has offered Nova Scotia and Newfoundland, said how much better off “our offer is than the Conservatives'”.

The offer that the Prime Minister made was a very good one. The offer he made Newfoundland and Labrador, the offer he made Nova Scotia, was a very good offer. He promised it during the election campaign. The problem is that it does not matter how good the offer was if he has no intention of delivering on that promise or the offer, if the little minions on the other side are saying to him, “You cannot, you cannot, help. One of these days these provinces might be as rich as Ontario. We can never let that happen, Mr. Prime Minister”.

We have a Prime Minister who came to Newfoundland and Labrador, who came to Nova Scotia, and in the case of Nova Scotia the day before the election, to try to save a few seats and save face, and promised to do what any good Prime Minister should do: give them a fair shake.

Do members know what are we asking for? Remember Oliver Twist and “Please, sir, I want some more”? That is almost the position we are in. We are not asking for anything from this government, or anything from this House, or anything from this province, or anything from this country.

What we are asking is that we can keep our share, not the whole amount but our share of our resource, which in reality is less than 50% of the total resource. We get less than 50%. The province gets to keep about 30%. The federal government wants to claw back 70% of our share, less than 50% of the total, on top of the 50%-plus that it has anyway. All we are saying is please let us keep our own revenues until we become a contributing province. Then the government can take equalization and help those who need the help.

Equalization in itself, as we know, is a bit of a joke, because the funds certainly do not equalize anything in this country. It just helps, however, some provinces that are not in a position to help themselves.

Therefore, let us say when we look at a bill like this that as far as it goes all it does is legitimize the delivery mechanism for the next round of equalization payments. That is fair ball as it goes. However, here is what we must look at and why we have so many concerns. When we hear a Prime Minister talk about an offer which he has no intention of fulfilling, when we see members throwing in every monkey wrench they can, when we see that there is no protection in legislation that the equalization will not be changed next year or the year after, is it any wonder that we are holding out for a good deal? No, it is not, and let me tell this House that until we get the deal we want, we will not be signing anything.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member for St. John's South—Mount Pearl has been a very forceful speaker on behalf of Newfoundland. It is helpful for the House to hear that perspective.

The member laid out in his speech that the nation-building principle is enshrined in our Constitution, but that indeed it is the Federal-Provincial Fiscal Arrangements Act that from time to time is amended to take into account new cooperation between the federal and provincial governments.

Having said that, we seem to drift a little bit away from Bill C-24, to be generous. However I know this is very important to the member and to all Canadians, quite frankly, because the measure of success of a country is not an economic measure; it is a measure of the health and well-being of its people and dollars simply will not do it.

The hon. member concluded by saying that this is what they would like to have, so that once they achieve some parity with, for instance, the Ontario benchmark, as it were, then equalization could kick in again to help other provinces. That is an interesting perspective. My question relates to what happens after that.

What happens once Newfoundland has been able to bring its dollar figures up to that Ontario standard with a non-renewable source of revenue from the oil? There has to be something after that. Maybe the member would like to share with the House how we start working on what happens after. What does it mean in terms of how we make sure that there is not a false start yet again when we consider all of the moneys that have been invested over a large number of years in programs that have not been able to trigger that self-generated economic growth and well-being for the people of Newfoundland? It is important to hear the member's perspective.

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

Mr. Speaker, the member is very conscientious and looks at things very reasonably. He has really put his finger on the dilemma that we face in this country.

I say to the hon. member that even though we use the word equalization, and the bill is about equalization, he knows as well as I do that the provinces, particularly when we speak in fiscal terms, are certainly not equal. Perhaps they never will be. Some have more than others. That is why we have a central government that tries somewhat to equalize at least to some degree some of the opportunities and abilities.

Back in the 1930s when Alberta was going through an extremely rough time with farming, people from the east, from Nova Scotia, from Newfoundland, sent salt fish out so that people would have something to eat. Times were pretty tough. Things have turned around. Alberta is now the richest province in the country. It is contributing significantly to the funds that go to the have not provinces, if we can refer to them as such, and many of them are not.

Other provinces have resources. Let us look at Ontario, the pride of my friend from Scarborough—Guildwood. If tomorrow some of the major car manufacturers said that they were moving to Mexico, that they were taking their car production factories out of Ontario, imagine what would happen. If the federal government said that to really foster Canadian unity it would move the centre of government to Quebec, to Montreal, or to Regina or St. John's, what effect would that have on the economy of Ontario? Very quickly Ontario would become a have not province.

What I am saying is that the pendulum swings. Today we are well off; tomorrow we may not be. That is what Confederation is about. I have said that before. Alberta's turn today may be ours tomorrow. As its oil wells dry up, ours are coming on stream. Once we hit that magic number of the five province or 10 province formula, whichever one is in effect, we become contributing partners and we stay contributing partners. We do not look for equalization. We contribute then. We get the benefit of our own resources, but we pay into the equalization formula that helps other provinces. Somewhere down the road, the pendulum swings back again.

To answer the hon. member's question in short terms, provinces generally are in confederation to help each other and to share with each other. Whichever one happens to be fortunate looks after the less fortunate, because tomorrow the shoe could be on the other foot.

[The Acting Speaker (Mr. Marcel Proulx)]

Order. It is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Nepean—Carleton, Health; the hon. member for Kootenay—Columbia, Foreign Affairs; the hon. member for Vancouver Island North, Softwood Lumber.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Mr. Speaker, I will be sharing my time with the hon. member for Ottawa South.

The October 26 first ministers meeting flowed from an earlier meeting. That was the historic meeting in September which saw the Government of Canada come together with all the provincial and territorial governments to achieve a $41 billion health accord.

In September of this year the premiers made the point that at least some provinces were not able to have a discussion about fixing and funding health care without also having some long term arrangement in place with regard to equalization, because for some provinces equalization is obviously a contributor to health care. The Government of Canada agreed at that time to have a further discussion not only about health care, but also about equalization.

The final arrangement with respect to health care involves $41 billion in incremental federal funding over the course of the next 10 years. To that $41 billion transfer to the provinces and territories, the government has added a further $33 billion over 10 years through the new equalization and territorial funding formula framework. That is a total of $74 billion altogether in new money over the next 10 years. This is a very strong commitment.

Obviously, an arrangement of this sort and a commitment of this size, is not simply drawn up on the back of an envelope. No, the Government of Canada arrived at its calculation by accepting the unanimous request put forward by the premiers at Niagara-on-the-Lake earlier this year. In their final communiqué the premiers asked that the equalization program be restored to the 2000-01 level; that is, they asked that equalization be restored to the highest level it has ever been at $10.9 billion. The Government of Canada agrees.

Following that meeting of the Council of the Federation in July, the premiers also said that they supported reforms to enhance the stability and predictability of the equalization program. Again the Government of Canada agrees.

There is also an escalation factor built in. It is 3.5% per year. To understand what that means, from today's figures which stand at $8.9 billion, what we have put on the table will move that number to $12.5 billion. That is a 42% increase. That is an annual average increase of over 7% per year, almost twice the rate of growth of the Canadian economy.

The objective is quite clear. We want to fill in some of the gap that currently exists between the more wealthy provinces and the less wealthy provinces, not by taking from one province and giving to another; no one is playing Robin Hood. This money comes 100% from the Government of Canada, not the so-called have provinces.

In total, to enable Canadians from coast to coast to coast to enjoy the same levels of social programs, the Government of Canada, the Prime Minister, has made the very firm commitment over the past month to transfer $74 billion in incremental funding to the provinces and territories to assist them in meeting their very important social and economic priorities.

I would like to point out that our recent commitments on health care and equalization are on top of a further $36 billion per year which the federal government currently invests directly and indirectly in the health of Canadians.

As mentioned a few weeks ago in the House, this means that the government has met and surpassed all of the federal financial obligations laid out by the hon. Roy Romanow in his landmark report on health care. We have a long term agreement duly signed by every premier from every province and territory. It provides the best terms ever on transparency. It is a triumph of successful Canadian federalism and allows all of us to focus all of our efforts at long last on the real substance: shorter waiting times; more health care professionals; better equipment; improved primary care; home care and catastrophic drug coverage; better services in the north and for aboriginals; more health innovation; and improved public health and wellness.

The fact that Canada has been a strong fiscal, economic and social performer over the past seven years is a direct result of our successful battle in the 1990s to beat the deficit. It is a battle that we fought and a battle that we won, thanks in no small part to the leadership of the Prime Minister, and to the very strong commitment, determination and hard work of all Canadians.

After nearly three decades of chronic red ink, no growth, high interest rates and lost jobs, we balanced Canada's books in 1997 and we have kept them balanced every year since. We are the only G-7 country to be operating solidly in the black. Our triple A credit ratings have been fully restored from where they were in the mid-1990s and later.

Since moving into surplus, the average standard of living of Canadians has increased at a faster pace. There has been more improvement in the past seven years than in the previous 17.

Our careful planning and prudent budgeting have given Canada the strength to deal with expensive and unpredictable crises, such as security threats and natural disasters. It also gives us the wherewithal to invest in primary Canadian priorities, such as health care, learning, families and innovation, while also paying down debt, cutting taxes and always balancing the books.

However, we can never take our fiscal and economic success for granted. It is crucial to the well-being of Canadians everywhere, but it is not automatic.

Of course there is still that federal debt of more than $500 billion which, incidentally, is nearly double the size of all provincial and territorial debt combined. Just keeping that debt current consumes about 20¢ out of every dollar of federal revenue. It adds up to about $35 billion a year, probably the biggest single expenditure facing the Government of Canada.

No one should doubt the serious responsibilities carried by provincial governments. Of course their jurisdictions, just like the federal jurisdiction, must always be respected. At the same time, in fairness, it also needs to be noted that both orders of government have access to all the same major tax bases. It also has to be noted that some provincial revenue sources, such as royalties and the proceeds from lotteries, are not available to the federal government.

It has to be noted that the provinces have complete autonomy in setting their fiscal policies. It has to be noted that the federal fiscal responsibility, balanced budgets and debt reduction save interest costs not just for the Government of Canada but for all Canadians, including provincial governments.

It has to be noted further that recent improvements in national economic performance will boost not only federal revenues but also provincial revenues.

Our commitment is to balanced budgets, fiscal discipline, steady and sensible debt reduction, and just as we have done in every budget since 1996, further reduction in federal taxes, especially for lower income Canadians, and to enhance the competitiveness of the Canadian economy.

The fact that Canada has been a strong fiscal, economic and social performer over the past seven years is a direct result of our successful battle to beat that deficit. It is a battle won and our fiscal house is in order.

Now that we have transferred that money, all that is left is to continue working with the provinces to transfer new money and certainty in their planning processes. That is the attitude of the Prime Minister and this government.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Mr. Speaker, I would first like to make some comments about the Prime Minister. When he was in Newfoundland and Labrador, he made a solemn commitment to the people that the government would remove non-renewable resources form that formula, and a bunch of huffing and puffing went with it. When he came to Saskatchewan, which has the same sort of problem, perhaps even more serious than Newfoundland and Labrador, during the election campaign, he and his finance minister said that this was something the government would have to study. However, there were no details committed at all.

That election campaign was full of those kinds of promises. They would go to one area and promise one thing, then go to another area and not even say anything remotely close to the same thing. The one difference is he had a chance to get Liberal MPs elected in Newfoundland and Labrador. However, in Saskatchewan there was not a light at either end of the tunnel in 13 out of 14 ridings. Why would they make that kind of promise in Saskatchewan. When the election was over, he broke his promises.

I have a comment that I want to make. The godfather of equalization payments is a professor from the U.S. by the name of Buchanan. Mr. Trudeau employed his wisdom to set up regional development and to come in with these ideas of equalization. He now is a huge critic of these Canadian programs, He has said that they have been a failure. He points to a couple of very good examples.

In 1986 Ireland had an unemployment rate of 17% and its per capita income was half of the Canadian standard. Today, Ireland has a 4% unemployment rate. People are going to Ireland from all over the world and investing there. Its standard of living is not only higher than Canada's, it is well above the EU average.

Ireland went a totally different way than what we did in this country. Our have not provinces are still the same have not provinces that we had when Mr. Trudeau thought this was such a great idea.

Another example that he uses is the State of Georgia. In 1970 the State of Georgia had a standard of living which was 70% of the U.S. average. Birmingham, Alabama was a bigger city than Atlanta, Georgia. Today Georgia has a standard of living which is 15% above the national average and Atlanta is the hub of the entire U.S. southeast. It is the major centre of that area and a far bigger place than Birmingham, Alabama.

Those sorts of things are not happening here.The Irish example and the Georgia example are not happening in Saskatchewan. Mr. Buchanan has said that his own proposals for equalization and regional development have failed Canada. The same provinces that were haves when he proposed this are still the have provinces and the have nots provinces are still the have nots. His argument is that rather than even trying to converge or get closer to the haves, the gap in many ways is wider.

I guess this is something the Liberal government, which hatched all these programs, has failed to ever address. Maybe at some point in this country's history we will have to seriously re-evaluate the effectiveness of these programs and see if there is not a new and better way of doing things, and maybe listen to people like Mr. Buchanan.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Mr. Speaker, I think we are all very familiar with the success stories of Georgia and of Ireland. Anyone who is involved in economic development knows those models.

Think about what has been achieved by the government in the past while in adopting new and innovative approaches. We have agreement among the premiers. They asked for something very substantial and received it in the $10.9 billion. Those are things on which we start to build. That is how we start. We do not do it automatically overnight, but the fact that it is happening has to be something of which each and every one of us should be glad.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Speaker, it is a pleasure and an honour to speak this evening to Bill C-24. Canadians understand that equalization has been one of the pillars of our federation for more than four decades now. To begin with, the equalization and the territorial formula financing programs ensure that all Canadians, no matter where they live, have access to reasonably comparable public services. This commitment helps to ensure that all Canadians are treated equally from coast to coast to coast.

However, the provinces and territories have been complaining for several years now about how the federal government funds the equalization and territorial formula financing programs. They have spoken about the planning difficulties they face as a result of the year to year swings in the amount of payments they receive under these programs.

These are legitimate concerns and our government has done everything we can to address them. However, the very good news is that on October 26, Canada's premiers and territorial leaders agreed to the government's framework for equalization. This new framework represents the most fundamental and sweeping changes in the program's history. The goal of this new framework is nothing less than to make payments to the provinces and territories more stable and predictable, while significantly increasing the overall level of funding.

The new framework includes five elements: first, an overall floor of $10 billion for equalization and $1.9 billion for territorial financing for the current fiscal year; second, complete protection for provinces and territories against overall individual declines in payments in 2004-05; third, an increase in the funding base for 2004-05 rising to $10.9 billion for equalization and $2 billion for territorial financing; fourth, a guarantee that equalization and territorial formula financing payments starting in 2006-07 will grow by 3.5% per year until 2009-10; and finally, the creation of an independent panel to provide advice on allocating these moneys among provinces and territories.

Let us take a look at what these changes will mean. Over the next decade, this new framework will provide $33 billion more in equalization and territorial financing payments to the provinces and territories. That is an astonishing sum of money. For the sake of comparison, it means that equalization payments will increase from $8.9 billion in 2004-05, what they would have been without the new framework based on the earlier estimates, to $12.5 billion by 2009-10. That represents an increase of 42% overall, or more than 7% per annum on average.

The idea that Canadians should have access to the same high quality of health and social services regardless of where they live is so fundamental to the fairness and integrity of the Canadian federation that it is protected by the Constitution in the form of equalization.

In short, the equalization program transfers money to the less prosperous provinces and territories in accordance with a formula based on the revenue raising capacity of each province. This means that as a province becomes more prosperous, its equalization entitlement declines.

In fact, equalization payments are designed to make up the difference so that Canadians in any part of the country have access to the quality social and health services they expect and demand.

As well, they prevent the less well-off provinces from having to resort to tax rates that would be bad for the economy in order to be able to afford to deliver such services.

In order to cast some light on the importance we assign to the equalization program, I would remind hon. members that the Prime Minister has announced an improved equalization framework. This new framework represents probably the most important change in the program in its history.

The intent of the changes is to bring stability, predictability and growth to the overall level of funding for these programs, in accordance with third party advice on the best way for the Government of Canada to allocate payments among the provinces and territories.

The changes to the programs would encompass three important elements: complete protection for provinces and territories against overall and individual declines in payments in 2004-05; a new framework for equalization and territorial financing starting in the fiscal years 2005-06; and an independent review of the programs by a panel of experts.

The new framework will, therefore, make payments to provinces and territories more stable and predictable, and ensure the sustained growth of financial assistance.

With respect to the financial impact, over the next 10 years the new framework for these programs will be $33 billion more in equalization and TFF payments to provinces and territories than the amounts estimated at the time of budget 2004, a significant increase.

The equalization program is a faithful reflection of the sense of sharing that characterizes the Canadian nation.

I would also be remiss if I did not point out to the House that our government is committing an additional $41.3 billion for health care as part of its 10 year action strategy on health, agreed to by the Prime Minister and the provincial and territorial leaders last month. This brings me to my closing point.

This new $33 billion framework for equalization and territorial formula financing, when combined with the $41.3 billion in new health care funding, will result in a cumulative and whopping increase of $74 billion in new money transferred from the federal government to the provinces and territories over the next 10 years. By any stretch of the imagination, this is a huge sum of money and it illustrate's our government's commitment to ensuring that Canadians are treated fairly and have access to reasonably comparable levels of service, no matter where they live in the country.

The significant influx of new money to support health care and other national priorities is the direct result of two specific initiatives. Let us give credit where credit is due. First, the hard work and sacrifice hundreds of thousands of Canadians who helped boost our economic performance to a level that is the envy of our G-7 counterparts and a host of other industrialized nations around the world. Second, it is also a product of our government's commitment to disciplined spending practices, balanced budgets and debt reduction.

Since 1997, we have posted seven consecutive balanced budgets and reduced our federal debt by more than $61 billion. This has freed up an additional $3 billion annually and lower interest charges to help fund the priorities of Canadians.

Our government recognizes the need to ensure that all provinces and territories can offer the best possible services to their citizens. The equalization and territorial formula financing programs are clear evidence of our commitment in this area.

[Bill Casey, Conservative, North Nova, NS]

Mr. Speaker, I will be sharing my time with the very distinguished member for New Brunswick Southwest who was recently elected co-chair of the Canada-U.S. Committee. We are all very honoured to be in his midst. He is a very distinguished member. We are pleased that he shares this House with us.

We agree with the direction and concept of Bill C-24. We certainly agree with the concept and principle of equalization. As this country's fortunes shift from province to province and region to region, it will always be an important part of our being and our whole essence that parts of our country that are more prosperous and have more resources share some of their resources with areas that are not so prosperous.

I think it was the member for St. John's South—Mount Pearl who told us how Newfoundland and Nova Scotia used to send salt cod to Alberta. I am sure it appreciated that at the time. I do not know if Alberta would appreciate it now or not, but it appreciated it then. However, it just goes to show how fortunes have changed. That proves the point that this equalization formula is fair and is necessary for our country.

It is not a figment of our imagination either. People should know that it is in our Constitution. Subsection 36(2) reads:

Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.

I think that is a fair assessment of what we are talking about here today. Another part of this whole concept of equalization that we have been pushing in the Conservative Party is the concept of removing the natural resources revenues from the equalization payments. Basically a province that has a defined quantity of a natural resource would have a very short window of opportunity to pull ahead and become a have province rather than a have not province.

It is such a shame to see a province like Newfoundland or Nova Scotia that has a resource which is defined and will be gone some day. It is a shame to see all those revenues clawed back by the federal government and at the end of the day when the resource is gone, Newfoundland, Nova Scotia or another province, that has a resource that has been totally exhausted, is right back where it started. The resource did no good for the province or for the region.

We would like to see the natural resources revenues removed from the equalization payments because these are finite amounts of resources. They come and go.

In the case of Newfoundland, I understand that 40% of its gas or oil resources, I am not sure which it is, has already been exhausted. It will not be long before all its resources are exhausted, a matter of a decade or two, whatever, and then it will be right back where it started. It needs that money now. It needs that money from these natural resources to build alternatives, to build economies, and to build infrastructure so that it can compete with the rest of the country. It is critical that these natural resources be removed from the equalization formula. It is not in Bill C-24. However, it is something we would like to see in Bill C-24.

This brings us to the promise that was made during the election, that all offshore gas and oil resources revenues would go to the provinces of Nova Scotia and Newfoundland. We now know that the provinces are trying to negotiate to get this deal back. The way I look at it, the Prime Minister went to Newfoundland and said--he obviously knew they would lose seats in Newfoundland--that if Newfoundlanders voted Liberal, he would give them 100% of the gas and oil revenues. Newfoundlanders, to a great extent, kept their end of the bargain. However, as soon as the election was over, the Prime Minister said that we have to negotiate.

It is interesting that today the Prime Minister said how much better his offer was than the opposition's offer. I am not sure which offer he is talking about. I am not sure if he is talking about the offer made during the election or the offer he is trying to slam through now.

Newfoundlanders and Nova Scotians will stand their ground and insist to get the deal that was made during the election because that affected a lot of votes. The Liberals said, “You vote for us, we will give you 100% of the revenues. No time limits. No caps. No nothing”.

Now of course we know that they are trying to negotiate another deal. The Prime Minister refers to their offer as a good deal. Perhaps it is better than what was there before, but it is not the deal that we were promised during the election. In my view, the Prime Minister has a verbal contract with the people of Nova Scotia and Newfoundland and he must honour that deal.

I find it interesting that in the debate tonight the Liberal members are talking about a lot of numbers and I cannot even follow them. I cannot follow all the tos-and-fros and the complex arguments they are making when it is really quite simple.

It is about keeping commitments and keeping one's word, and helping provinces that need help. When Liberals stand up to make a speech, I cannot follow them. When we make a point about keeping our offshore gas and oil revenues in Nova Scotia and Newfoundland, they stand up and say we are not talking about Bill C-24. What is the point of talking about anything if they do not keep their word in the first place.

The commitment by the government to allow Nova Scotia and Newfoundland to keep 100% of their gas and oil revenues is very much a part of the debate tonight. It may not be actually written in Bill C-24, but it is the word of the government that is at stake. If the government makes promises and does not keep them, then Bill C-24 or any other commitments are really not worth a lot anyway.

We are very much of the opinion that gas and oil revenues should be taken out of the equalization payments. I go back to 2001 when Premier John Hamm from Nova Scotia started this debate with the campaign for fairness. The fairness component referred to when Alberta was starting to realize it had gas and oil revenues and started to realize the benefits. It was allowed to keep its resource revenues from those resources 100%, no clawback, no caps, no limits, no nothing.

Premier Hamm's position was that Nova Scotia, Newfoundland and the other provinces on the coast should have exactly the same deal. He called it the campaign of fairness. He waged that war for a long time all by himself. It turns out now that the groundwork he laid was very effective. Newfoundland got involved with it during the campaign.

Premier Danny Williams, another Conservative premier, asked the Prime Minister if he would match the opposition's proposal to remove gas and oil revenues from the equalization formula and the Prime Minister agreed. He said yes publicly, on camera and on the record, that Newfoundland and Nova Scotia can keep 100% of their resource revenues and it will not be part of the equalization formula.

We know what happened since the election. The government tried to negotiate a much different deal. That goes to the point of credibility of the government. We can talk about Bill C-24 and equalization payments, but if the will is not there to keep its commitments and its word, then it hardly matters what we do in the House, unless the government will honour its commitments.

That is our position. We support Bill C-24. We would like to see the gas and oil resource revenues removed from the equalization payments. We want to see the minimum amount of money that the Liberals have committed to the programs stay in so there are no giant fluctuations. However, we should all understand that the concept is solid and valuable, and the circumstances of today will certainly not be the circumstances of tomorrow. Wealthy areas of Canada that are experiencing good times now may some day not have those good times and this money may shift around.

Business of the House

[John McKay, Liberal, Parliamentary Secretary to the Minister of Finance]

Madam Speaker, I move:

That, notwithstanding any Standing Order or usual practice, on Tuesday, November 30, 2004, private members' business shall be taken up from 1:00 p.m. to 2:00 p.m. instead of between 5:30 p.m. and 6:30 p.m.

[The Acting Speaker (Hon. Jean Augustine)]

Does the hon. member have the unanimous consent of the House to move the motion?

[Some hon. members]

Agreed.

[The Acting Speaker (Hon. Jean Augustine)]

The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

(Motion agreed to)

The House resumed consideration of the motion that Bill C-24, an act to amend the Federal-Provincial Fiscal Arrangements Act and to make consequential amendments to other Acts (fiscal equalization payments to the provinces and funding to the territories), be read the second time and referred to a committee.

Federal-Provincial Fiscal Arrangements Act

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

Madam Speaker, equalization is one of those arcane debates where not only members' but the listening public's eyes tend to glaze over because it tends to get very complicated and controversial. However, it is worthwhile to lay out what equalization is for our listening audience, if we have one, which I think we do, and maybe for some of our members to remind them what equalization is all about.

Equalization is a constitutionally entrenched program which allows all provinces to offer “reasonably comparable levels of public services at reasonably comparable levels of taxation”. Its goals are “to promote equal opportunities for the well-being of Canadians, furthering economic development to reduce disparity in opportunities, and to provide essential public services of reasonable quality to all Canadians”.

It is a fancier way of saying sharing the wealth with other areas, which is truly one of the unique features of Canada. We cannot say that for all countries. We cannot even say that for our neighbours to the south of the border despite the fact that they do a number of things well. Equalization is unique to Canada. We have to be very proud of it, but obviously it is ridden with its problems and difficulties. We are always trying to strike a balance that works at both the federal and provincial levels.

I want to point out what some of the premiers are saying, and then I will go on to our position as a federal party. The province of P.E.I. is an example. We have heard from Nova Scotia and Newfoundland today in the House, but I wanted to point this out because Newfoundland is obviously missing members of Parliament on the Conservative side. I guess we will have to work on that problem in the next election.

The treasurer from P.E.I., Mitch Murphy, is suggesting that cuts to equalization payments may be unconstitutional. He suggests that those cuts to equalization, what we are hearing now and his up to date figures, would indicate an additional $25 million loss, which would bring the total loss in revenue to P.E.I. in the next year to something like $78 million, a substantial amount of money. In my home province of New Brunswick, the premier is looking at a loss of about $100 million this fiscal year if the current formula holds.

What we are discussing now is Bill C-24. Bill C-24 is a bill that would bring in some changes to the arrangement, but I want to put on the record where we stand on it as a party, the Conservative Party of Canada. The Conservative Party of Canada views the equalization program as an essential component of Canada's nation-building efforts. In short, we support it in order for Canada's provinces to grow and prosper. It is important that a strong and effective equalization program be in place.

We accept some of what is in Bill C-24 because in fact the government accepted some of the ideas that we have thrown out during the election period and right here on the floor of the House of Commons. Bill C-24 addresses some of the concerns shared by the Conservative Party of Canada, the provinces and territories, notably the provisions for additional federal equalization and TFF, territorial funding formula, and a structure that sets the total level of funding going forward, not backward. These changes are an admission by the Liberals that their methods are flawed, were flawed in the past, and that the Conservative Party and the provinces have been right in calling for changes. Some of those changes again are inherent in this bill.

Unfortunately, Bill C-24 does not address how the equalization and TFF will be allocated among the provinces and territories from 2006-07 forward. We have to look into the future. One of the things we are suggesting, which again is in this bill, is that it examine the report or the future funding levels through a panel of experts. The government is doing that and it has bowed to some of the pressure we have put upon it to do that very thing. At the end of the day, the federal Liberals will retain the ultimate decision-making in the equalization formula. Although the panel of experts is a step in the right direction, at the end of the day the government will basically call the shots.

Again what I am suggesting is that the government is putting its own political agenda ahead of the provinces and the need for a fair and sound formula. Then there is the other point I want to make about what it does not address. This is a point that the members from Newfoundland and Labrador point out every time they are on their feet on this side of the House, although there is an absence of that on the other side of the House in terms of debate.

Our members from Newfoundland and Labrador and Nova Scotia consistently have talked about the inclusion of non-renewable resource revenue in the current equalization formula. Under the current formula, provinces that benefit from non-renewable resource revenues are subject to a clawback that results in lower equalization payments. We are saying that this should be included in the bill. We support the ending of that clawback so there can be no disagreement.

As you know, Madam Speaker, although your riding is far removed from Newfoundland and if I am not mistaken is in the heart of Ontario, during the election the Prime Minister made that promise in Atlantic Canada. He did that when the bottom was falling out of his campaign and he did it for one reason only: votes. It is very simple.

In the middle of the election he made a promise to the Canadian people, particularly those in Newfoundland and Nova Scotia, for votes. As some members have already mentioned, we probably should have had the Prime Minister put that in writing and sign it. But he is on the record. He was on national television. He went over there and made that promise to resurrect Liberal fortunes on the Island, in Nova Scotia and in Atlantic Canada in general, and he has reneged on those promises. That is wrong.

In terms of the Conservative Party policy, we have four recommendations.

The first is to allow reforms in the 2004 budget to take effect.

The second is to provide a formula driven approach. We have always been in favour of a formula driven approach that works and is consistent.

The third is to provide incentives for sustainability by carving out resource revenue from the equalization formula. I have spoken on that previously.

The fourth is to remain committed to the five year renewal schedule.

I believe that we can do better, as I have pointed out. I will leave my arguments at that and look forward to questions and comments from my colleagues.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I am pleased to participate in the debate on Bill C-24. I did have a much longer speech, but I listened very carefully this afternoon to a number of the members. We have strayed quite a ways from Bill C-24 from time to time, but I think it is important because virtually everything we do in this place is inextricably linked to everything else that happens.

Having said that, I have often thought that the measure of success of a country is not an economic measure, but rather a measure of the health and well-being of its people. When we went through this debate today, one of the things we talked about was fiscal imbalance. It seems to connote that something has differed from region to region and from province to province and that something in our system somehow does not quite match up.

The Constitution, under section 36, provides for equalization, but it is this act that Bill C-24 is amending, the Federal-Provincial Fiscal Arrangements Act, that provides the detail on how it would be divvied up in accordance with the agreement between the provinces and the federal government.

I was going to talk about some of the numbers, but I think I want to go back to this whole concept of fiscal imbalance. I was looking at some briefing notes and I noticed that fiscal imbalance in fact has two different forms. One is horizontal and one is vertical. We have to start thinking about some of this.

The horizontal actually refers to the imbalance province to province to province. That is exactly what equalization intends to try to cover. If we were to look, for instance, under the Canada Health Act, we would see that we have the five principles of medicare, those being universality, portability, accessibility, comprehensiveness, and public administration.

The portability one certainly touches on this aspect of horizontal balance, or imbalance as some might argue. Can we say with some certitude that we have portability, comprehensiveness and accessibility province to province to province? I am pretty sure that we cannot. I am pretty sure that we cannot go to every place in Canada and expect to get the same level of comprehensiveness and accessibility in all disciplines of medicine.

So are we really meeting the objectives under the Canada Health Act? Or are there other ways to do it given that we have geographic disparities in our country and we also have other problems?

Money deals with part of that, but the other part, the more important one, which I think members have talked about a lot more, is called the vertical fiscal imbalance. This is between the federal and the provincial governments and whether or not there is enough money being transferred down.

I can recall giving speeches in this place where I talked about what provincial governments were doing at the same time that the federal government was trying to fight a $42 billion deficit back in 1993. How did this go forward? I talked a lot about it and I tried to stick to my own turf about Ontario. All I know is that at the time Ontario was cutting taxes. That was the big deal: to cut taxes. Suddenly today we find that Ontario is in a deficit position. At the same time, to deal with it, what were they doing? Not only was the Conservative government cutting taxes; it was also downloading costs to the municipalities to deal with their problem and then it was blaming the federal government.

Sometimes provinces will argue that all the problems they have are federal, but let us look at what the facts are. Provinces in fact have every opportunity to raise money that the federal government does. The provinces have the ability to charge personal income taxes, which they do. Corporate income taxes, sales taxes and payroll taxes all are common to the federal and provincial governments.

In addition, they also can tax resource royalties within provincial jurisdiction. That is unique to the provinces. The provinces also have control over gaming and liquor profits, and I believe there are some other ones, but they are uniquely provincial, and then there are property taxes within the non-federal jurisdictions.

To the federal government's credit, we have revenues from custom import duties and taxes to non-residents.

The point is that provincial governments have all the tools to raise the revenue to do what they need to do to meet their obligations under the Constitution. It is the Constitution that provides the division of responsibilities between governments.

If the provincial governments want to play a different game, that is their own purview. If they need funds to meet their obligations, how can they cut taxes? How can the Province of Ontario cut taxes, put itself into a deficit and say that it needs more help?

The federal government is still ultimately responsible for everything to do with the health and well-being of its people, so that we work with the provinces, whether it be on the health file or whatever file, and members will know that the health of Canadians and our health care system is the most important priority of Canadians.

How about an issue such as cities and communities? Why is it, for instance, that a municipality that charges property taxes to take care of infrastructure, with capital payments as well as operating expenditures of a municipality, suddenly is getting help from the highest level, the federal level of government, to assist with roads, bridges and sewers? Then it turns around and starts using the savings it has from not funding its own infrastructure to do other things that have nothing to do with the critical priorities of the community.

We all pay property taxes so we can see that level to level to level there are decisions to be taken, but if we look at what has happened in the Ontario model, for one, we see that we had a situation where, notwithstanding the pressures that are put on to deliver health care services, child care services, infrastructure assistance and environmental investments at the provincial level, the province substantively has seconded that responsibility to the federal government.

Can the federal government say no? Let us consider where we have been. The Government of Canada, through good fiscal management, has been able to produce surpluses and to pay down debt as well as provide tax cuts and enhancements to social programs. It is a balanced approach. It is the balanced approach that has not occurred in the provinces consistently. That has not been fiscally responsible.

All members of Parliament have to make sure, notwithstanding the specific case with regard to the resource revenues for Newfoundland and Labrador and for Nova Scotia, that in the broader context every level of government has to demonstrate fiscal responsibility.

Maybe it is time we had a report card. We need a report card to the people of each municipality, to the people of each province and to the people of Canada on whether or not fiscal responsibility has been achieved, whether or not they have taken on their responsibilities as outlined in the Constitution and as outlined in the provincial revenue-sharing agreements they have with the municipalities and the regions.

I will give hon. members one example, even in Mississauga, and then close. When I returned to my constituency last Friday, I received a note from a senior, a lady I know who keeps me informed about seniors' issues, to advise me that on December 8 there is a meeting at city council where there will be a vote to increase the cost of seniors' transit passes by an additional 25% each year for the next four years. Is this fiscal responsibility?

I am sure we can all find examples. Fiscal responsibility must occur at all levels. I believe that members will find and all agree that in Bill C-24 the arrangements made with the provinces with regard to the $10.9 billion that has been--

[An hon. member]

You have 10 more minutes, Paul.

[Paul Szabo, Liberal, Mississauga South, ON]

I would like to seek unanimous consent, Madam Speaker, from the House, but I will not do that because I know the time is over.

Let me just conclude by saying that fiscal responsibility is an important element of addressing fiscal imbalance, and that fiscal responsibility has not been demonstrated at the provincial level consistently over the last decade.

I am really trying to make the point that every member must look at the balance that has occurred in the federal government. Have we been fair with regard to ensuring that we meet our constitutional responsibilities?

[An hon. member]

No.

[Paul Szabo, Liberal, Mississauga South, ON]

Have we made sure that taxes continue to go down? By indexing the income tax system, we are getting tax cuts every day of the year because of that indexing system.

[An hon. member]

It is not a tax cut.

[Paul Szabo, Liberal, Mississauga South, ON]

The member says it is not a tax cut, but before we indexed it members opposite were saying that because it was not indexed we in fact were raising taxes because there was no inflation put in. They cannot have it both ways.

Even when we talk about child care, the fiscal responsibility issue can really hit home. In the throne speech we talked about a significant contribution to child care because of its importance. We know it is a provincial responsibility, but the health and well-being of people is still the responsibility across the board with regard to the Government of Canada. We cannot ignore a need where it is demonstrated.

We had a program of early childhood development to which moneys were contributed. Reporting was required from the provincial governments with regard to where they spend it, how was it applied and how did it meet the targets that were set. We are now looking at the same situation again with regard to the investment in child care. It may be a provincial responsibility, but the health and well-being of those children, our future leaders, are very important to us.

Providing daycare may be someone's choice, but it may not be everyone's choice. How do we deal with that? That is another area. That is why I said at the very beginning, every time we touch an item in this place, whether it be Bill C-24 and the fiscal arrangements act, or health care or child care, there is a ripple effect. Some get it, some do not. Every budget is not a stand alone budget. It has to be taken in a context of every budget that came before it.

Responsible government is all about that. It is about making tough decisions. It is about establishing priorities. It is about delivering on those priorities. It is fiscal responsibility as well as social responsibility. As a rule of thumb, good fiscal policy makes good social policy and good social policy makes good fiscal policy. That is exactly what the government has delivered.

Then we look at issues such as cities and communities. The government will be making an investment. We have already forgiven the GST. We are also now looking at 50% of the gas tax. These moneys go not just for cities, but for communities as well. I heard the member for Yukon speak earlier. He is a member of Parliament who digs into his own community and shares with the House some of the issues that are so important; 33,000 people, each one of them a Canadian, each one of them entitled to share in the wealth and the riches of our country and to fully participate in national programs.

Those are the kinds of things we have to hear. When we hear stories like that, we hear how we are fighting to ensure that everything which happens from coast to coast to coast is linked into the overall objective. The member for St. John's South—Mount Pearl said that section 36 of the Constitution is about nation building. We have to continue to talk about nation building.

It has been helpful to the House to have the debate about the offshore oil reserves. The member across has raised issues about Saskatchewan. Is it really a have province now? It is an interesting question. It is probably a surprise to many Canadians that all of a sudden Saskatchewan is labelled as a have province because it has been the beneficiary of high oil prices. I am not sure if that is sustainable. I am not sure if oil prices will remain at those levels.

I asked the member for St. John's South—Mount Pearl a question. When we deal with an equalization formula and when we deal with the unique situation of Newfoundland and Labrador, as he put it, the pendulum swings. We help sometimes and sometimes we need some assistance ourselves. Here is an opportunity. I asked him once the oil revenues brought Newfoundland and Labrador up to the Ontario standard or a standard at which the province would no longer be eligible for equalization, what then? I think it will be a long time coming before we get the answer.

Newfoundland and Labrador has an interesting history, a very proud history. However, there have been many attempts in the past, whether it be through special fisheries, et cetera to try to get the fisheries industry back on its feet again. It has not happened. There have been tremendous economic development programs through ACOA to get new business, new enterprise going there. Many of those things have been false starts. I am not sure why. We need to know more about that. As we get to the point where there is a non-renewable resource that will generate revenue for the province of Newfoundland and Labrador, what happens next?

That was the question to the member. Where do we go from there? Where do we invest? How do we stop the brain drain from that province? The young people are not staying. There is no work. There is no economic development. There is no challenge for them there. Newfoundland and Labrador needs help. Is this is a situation where we need special arrangements to ensure that we can help a province that has had a very difficult time? Maybe it is. It is tough decisions.

I know the premiers, particularly the Premier of Newfoundland and Labrador, have made passionate arguments about why it needs this. Why does Saskatchewan not need it? What happens if Alberta says that if oil revenues all sudden are not going to be included, maybe it should exclude them in Alberta, maybe Alberta would be less of a contributor. It is kind of an interesting argument, but it is quite unlikely. This demonstrates that tough decisions have to be taken.

I also wanted to make mention of the environment. Recently, I had a conversation with the member for Ottawa South about the environment of Canada and how it related to our overall responsibility for the health and well-being of our people and how important it was that we needed to start reassessing the priorities with regard to renewables and sustainable energy development.

When moneys are transferred between province and province and the federal government tops up this and cost shares on other things, all these add to the pool. However, each and every region of the country has a responsibility to look at the health and well-being of its people. I know, as past vice-chair of the environment committee, we talked an awful lot about the health connections to the environment. We talked a lot about the need for people to understand Kyoto. We talked about the need to understand what buying credits would do for it. We talked about the need to assess the fact that we have a neighbour, the United States. It has coal generation in the Ohio Valley, which contributes probably most of the environmental problems to the GTA particularly, given the prevailing wind parameters.

We also talked about the need to develop renewables, about wind power and about solar. What were the opportunities? Somehow this has lost its position on the table. I encourage members to move on and to start to talk about how we convince Canadians that investment in the environment is an investment in the health and well-being of Canadians. That is not just the responsibility of the federal government. It is the responsibility of each and every level of government right down to the municipalities, to those who have the authority to generate initiatives that will help us to meet our goals and targets. One important target is to continue to improve the health and well-being of all Canadians.