House of Commons Hansard #22 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was province.

Topics

Presence in GalleryOral Question Period

3 p.m.

The Speaker

I invite all hon. members to meet the recipients at a reception at 3:15 p.m. in room 216 north.

Today being Thursday, I believe the hon. House leader for the official opposition has a question he would like to ask.

Business of the HouseOral Question Period

3:05 p.m.

Conservative

John Reynolds Conservative West Vancouver—Sunshine Coast, BC

Mr. Speaker, yesterday the government talked out debate on the first report of the health committee calling on the government to compensate victims of hepatitis C. As a result, there is a now a government order listed on the order paper as Government Business No. 4. I would like to ask the government House leader if he would consider calling that business tomorrow so that we can adopt this very important and urgent motion for Canadians suffering from hepatitis C.

I would then also like to ask what we can expect from the government for tomorrow and the week following the break we are taking to honour all of those who served Canada.

Business of the HouseOral Question Period

November 4th, 2004 / 3:05 p.m.

Hamilton East—Stoney Creek Ontario

Liberal

Tony Valeri LiberalLeader of the Government in the House of Commons

Mr. Speaker, this afternoon, as hon. members know, we will continue with the opposition day debate.

Tomorrow we will begin with second reading of Bill C-9, the Quebec economic development bill. If that is concluded, we would then return to debate on the motion for reference before second reading of Bill C-16 respecting impaired driving. If there is still time remaining when that is concluded, we would consider a motion to refer to committee before second reading Bill C-18 respecting Telefilm.

As all hon. members know, next week is the Remembrance Week break. When the House returns on November 15, we will call at report stage and if possible third reading of Bill C-4 respecting the international air equipment protocol, and then bring forward Bill C-6 respecting public safety for report stage and third reading.

We would then return to any of the items already listed that have not been completed.

This will be followed by motions to refer to committee before second reading Bill C-19 respecting competition and Bill C-20 respecting first nations fiscal institutions.

We will then be consulting our friends opposite on the appropriate day that week to consider report stage and third reading of Bill C-7 respecting parks, a bill, I am informed, that is about to be reported from committee.

On Tuesday evening, November 16, the House will go into committee of the whole to consider the estimates of the Minister of Canadian Heritage.

Thursday, November 18 shall be an allotted day.

With respect to the specific question with regard to the motion mentioned by my hon. colleague across the way, it is government orders and it is a very important item. I know that we will bring that forward in the fullness of time.

The House resumed consideration of the motion.

SupplyGovernment Orders

3:10 p.m.

The Speaker

Before being interrupted for members' statements and oral questions, the hon. member for Verchères—Les Patriotes had the floor and he still has 14 minutes to finish his comments on the debate.

SupplyGovernment Orders

3:10 p.m.

Bloc

Stéphane Bergeron Bloc Verchères—Les Patriotes, QC

Mr. Speaker, at the end of the first part of my speech before oral question period, you will recall that I was talking about the first ministers conference on health that was held in September. I pointed out that we had said we could consider the conference had been successful only in light of the results of the October 26 conference.

As I was saying, the results speak for themselves. Why would we measure the success of the first ministers conference on health in light of the results of conference on fiscal imbalance? Simply because if the government increases health transfers on one hand, but lowers equalization payments or does not increase them significantly enough on the other hand, then clearly the provinces are still stuck with a shortfall. We were therefore very interested to see what would come of the October 26 conference.

As I was saying, the results have not been very conclusive. It started with the sudden departure of the Premier of Newfoundland, who complained that the government had broken an election promise. It ended in an equally glorious departure of the less wealthy provinces, which went home empty-handed from this conference on the fiscal imbalance, because the money destined for equalization had not been increased beyond the amounts announced by the Prime Minister in September. In fact, it would have been better not to have had the October 26 conference, because the result was just what had been announced at the first ministers conference on health.

Quebec, for example, was expecting additional transfer payments of about $3.3 billion from the federal government, in social transfers for health, higher education and social services, as well as equalization. But after these two conferences Quebec still faces a shortfall of $2.4 billion. In brief, there is every reason to be disappointed, in the case of Quebec and a number of other provinces.

Meanwhile, we have learned that the federal surplus will be around $9 billion for the current year. I would point out that the Conference Board estimated the accumulated federal surplus at the end of 10 years at about $166 billion. During this time, several provinces still have deficits and increasing public debts.

Let us return to equalization. What is equalization? As the hon. member for Saint-Hyacinthe—Bagot explained, it is the only federal program enshrined in the Constitution. Section 36(2) of the Constitution says that equalization aims “to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.”

Consequently, the goal of the equalization program is fairness, trying to make sure that the services offered to all Canadians, to all Quebeckers, are at a reasonably comparable level, taking taxation rates into account.

The Conservative motion before us today suggests the implementation of an ad hoc measure that would have very unfair and inequitable effects. To all intents and purposes, they want all oil and gas revenues returned to the governments of Newfoundland and Nova Scotia, but not included in the calculations for equalization payments, or if they are, they want the federal government to compensate for the loss of revenue that would result with respect to equalization.

The purpose of equalization is to have the richer provinces share with the poorer. So, if one province gets richer, then logically there would be an equivalent reduction in its equalization payments.

What they are asking for, basically, is to have their cake and eat it too. They want 100% of oil revenues, but once that money is in their pockets, they do not want to see it affect equalization payments in any way. This is absolutely unfair and therefore absolutely unacceptable.

This Conservative motion boils down to offering a premium to provinces with non-renewable energy sources at the expense of those with renewable energy sources.

This is all the more unacceptable and unfair because the federal government, which includes Quebec, has generously subsidized the development of fossil energies, including non-renewable energy sources, whereas Quebec has developed its own hydroelectric networks on their own, a renewable energy source

From 1970 to 1999, the federal government contributed some $66 billion in direct grants to the fossil fuel industry—in other words, coal, oil and natural gas—compared to a very modest $329 million for any form of renewable energy. It is important to note that there was not one cent for the hydroelectric energy that Quebec developed on its own.

In addition, the federal government, as part of its bad record when it comes to green energy, unfortunately dropped the development of nuclear fusion in Canada, prompting the closure of the only nuclear fusion reactor in Canada, which, incidentally, was in Quebec.

How can we believe this government when it claims it wants to comply with the provisions of the Kyoto protocol when we know that history shows that this government has never been truly concerned about the environment and that nothing has changed recently?

We have to learn from what this government has done in the past in light of the provisions of the Kyoto protocol. Quebec has paid for oil development just by being part of the Canadian federation. It is out of the question that Quebec will continue to do so.

Ultimately, when we take a closer look at what the Conservative Party is proposing, in addition to being fundamentally unfair to Quebec and the other provinces, which are less wealthy or are focusing on renewable energies, the motion could seem disadvantageous or even disastrous for Newfoundland and Nova Scotia.

Let me explain. We have to understand that if we exclude non-renewable resource revenues from the equalization formula this could be interpreted to mean that we should also exclude them from the revenues of a province like Alberta. That would mean that a province like Alberta would become less wealthy, which could translate into a decrease in equalization payments for all the beneficiary provinces, including Newfoundland and Nova Scotia.

Although at first glance this Conservative Party motion seems tempting and interesting for Newfoundland, a closer look shows that ultimately, it would be detrimental to Newfoundland and Nova Scotia.

We do not need patching-up. What we need is a comprehensive reform, a reform from top to bottom of the equalization system. It has been twisted and completely denatured by the current federal government. We must reform it completely and make it much more equitable.

This morning our colleague from Saint-Hyacinthe—Bagot, who is an economist by training and profession and thus can speak much more competently than me in this field, explained some possible ways of reforming the equalization system in depth. It is not enough to stick on a few band-aids here and there depending on the circumstances of one province or another.

The thorough reform of the equalization system would be the first step toward solving the thorny and enduring problem of the fiscal imbalance. Because of the fiscal imbalance, the federal government takes in too much revenue for its responsibilities in comparison with the provinces, which have much greater responsibilities and levels of services to provide to the people, but which do not have the same tax base as the federal government.

That is what we need and that is what we expected of the conference on October 26. We absolutely must move forward with a thorough reform of the equalization system so that we can begin to find a definitive solution to the problem of the fiscal imbalance.

Although I repeat that we are sympathetic and that we understand the indignation of the Government of Newfoundland, we will not be able to support the motion by the hon. members of the Conservative Party of Canada.

Since I would like to make good use of the seconds remaining to me, I will say that the indignation of the Government of Newfoundland is based on the fact that the federal government, and I refer to the Prime Minister, has broken some of his promises. It would not be the first time.

Take the GST for example. In 1990 he declared, “I think the GST is a stupid, inept and incompetent tax—When we come into office in 1992, I will send the GST back to the drawing board.” Far from withdrawing from any tax field, as we can see, he is still there and so is the fiscal imbalance. That is what provokes the kind of reaction and the problem we are facing today and makes this debate necessary.

SupplyGovernment Orders

3:20 p.m.

Conservative

Gary Schellenberger Conservative Perth—Wellington, ON

Mr. Speaker, I listened to most of what my learned colleague had to say. This whole debate is not about equalization.

My question for the hon. member is a very simple one, much the same as the very simple promise that the Prime Minister made, that Newfoundland and Labrador and Nova Scotia would receive 100% of their offshore royalties. Does the hon. member think the Prime Minister should keep his promise?

SupplyGovernment Orders

3:25 p.m.

Bloc

Stéphane Bergeron Bloc Verchères—Les Patriotes, QC

Mr. Speaker, it is my belief that, generally, the public deserves to have promises made to it kept. That does not mean, however, that we on this side need to agree with this promise by the Prime Minister. I have explained the reasons why I do not agree with what the hon. member has just finished saying.

It is not that I disagree with the provinces getting 100% of the income from their natural resources, because they come under provincial jurisdiction. I am, in fact, most sympathetic to the idea of Newfoundland receiving 100% of the revenues from offshore exploration.

That said, if in getting all of the revenue generated by petroleum resources, Newfoundland receives less in equalization payments, I do not see the advantage of this arrangement for the Newfoundland government.

The Prime Minister's promise was not limited to the province receiving 100% of oil and gas revenues, although that was certainly part of his promise. There was another part as well. It was for the federal government to compensate for Newfoundland's losses as far as equalization payments are concerned. This is exactly where the inequity lies, and it may have a negative effect on Newfoundland in the end.

If we accept what the official opposition is proposing today, we are going to have to exclude from Alberta's revenues, for example, what it receives in oil and gas royalties. That would reduce its level of general wealth as far as equalization is concerned. This would, needless to say, reduce equalization payments for all recipient provinces, including Newfoundland and Nova Scotia.

This is why I do not think that, in the long run, the proposal put forward by the Conservative Party of Canada would be advantageous to the Government of Newfoundland.

SupplyGovernment Orders

3:25 p.m.

Conservative

Gary Schellenberger Conservative Perth—Wellington, ON

Mr. Speaker, again I would like to address my learned colleague. I will try to put the shoe on the other foot.

What would the member's decision be if tomorrow in the Eastern Townships of Quebec there was a great oil find? How would he address the way the government should handle the resources of that oil find in Quebec? How would he like to share that with the federal government?

SupplyGovernment Orders

3:25 p.m.

Bloc

Stéphane Bergeron Bloc Verchères—Les Patriotes, QC

Mr. Speaker, elementary wisdom and prudence have taught me never to answer hypothetical questions. Still, out of courtesy and friendship for my hon. colleague, I shall step out onto the slippery ground where he has invited me to venture.

I do not think that the question right now is to determine what Quebec would do in a similar situation, although I shall answer just for the pleasure of doing so. I will say then, on one hand, that, for decades, Quebec's investments in energy development have been in forms of renewable energy. It has invested in hydroelectricity and never received a penny, not one red cent, of federal subsidies. Quebec developed its hydro alone, while the federal government was massively subsidizing the development of petroleum-based energy in Alberta, for example. That is the end of my digression; I will return to the question.

Should oil sources be discovered in the Eastern Townships what position would Quebec take? We would applaud it because it would increase Quebec's wealth and—it goes without saying—our equalization payments would go down. In any event, it would be great. Quebec does not enjoy receiving equalization. We are not thrilled about it. We would much rather have structuring investments by the federal government in purchases of goods and services.

What does Quebec currently get from the federal government? We get 75% of the money allocated for Canada Day, while Quebec represents only 25% of the population. In other words, 75% of the money for fireworks, hotdogs and balloons is good enough for Quebec. We also receive equalization. We would like to have 25% of structuring investments since Quebec represents 25% of the Canadian population. Structuring investments by the federal government in Quebec amount to only 12% to 15%.

Yes, we would be happy if we found oil sources in Quebec. If it meant a decrease in equalization payments, so be it.

SupplyGovernment Orders

3:30 p.m.

Conservative

Dave Chatters Conservative Westlock—St. Paul, AB

Mr. Speaker, I am splitting my time with the member for Edmonton—Spruce Grove.

I am pleased to join the debate on our supply day motion. I have some interest in the topic, having worked at some length to develop our position on non-renewable resources and equalization in Atlantic Canada leading up to the last election.

Even if I am patting myself on the back to some degree, I think we had a sound policy. We took that policy to Atlantic Canada and presented it to Atlantic Canadians. I believe it found considerable acceptance in Atlantic Canada and in Newfoundland and Labrador.

I would suggest that was one of the reasons that in the middle of a failing federal election campaign the Prime Minister went to Atlantic Canada and made the promise that he did to guarantee 100% of resource royalties to those provinces, without obviously a well thought out plan. If he had had the plan, he would have presented it to Atlantic Canadians at the time and this debate would have been taking place in the middle of an election, not after the election and after the seats had been decided.

That is what the supply day motion is about. I listened carefully to the presentation by the member from the Bloc. Indeed he was going down a slippery slope. If we get into the issue of equalization and whether or not it is fair, I think there are a number of fundamental problems with equalization. The clawback of resource royalties is only one of them. There are others, such as how equalization affects tax decisions in provinces. I think back to those problems.

I remember the huge ore deposit that was discovered in Labrador some years ago. Brian Tobin, a former fisheries minister was the Premier of Newfoundland. He decided to stop development of that ore body until Newfoundland and Labrador got the kind of deal it wanted out of the company proposing to develop it. I believe it was Inco.

The premier at the time knew full well what he was doing simply because there was no incentive to develop that ore body. Had he done that under the same problem that we are talking about here today, the clawback of royalties for oil and gas, the federal government would have clawed back the royalties on the development of that ore body.

This problem is wider than offshore oil. The whole issue goes back many years.

As my leader pointed out this morning, there was a time when Alberta was a have not province. The federal government at the time resisted with everything it had to allow Alberta to keep 100% of its resource wealth. Today Alberta has become one of the wealthiest provinces in Canada. Even after it had control of its natural resources and 100% of the royalties, we all remember the national energy program and the grab of resource revenue that was.

This issue goes away back, as does the issue that is fundamental to this, which is the practice during elections of people making promises which they have no intention to keep. That goes back forever. It has been a long Liberal practice in particular, I would suggest.

I remember the Joe Clark government being defeated over an excise tax on gasoline. Prime Minister Trudeau came in and put a heavier tax on gasoline than Joe Clark would have done, in spite of the fact that Trudeau won the election promising not to tax gasoline.

There is the example of wage and price controls. The Liberals promised that they would not implement them. They defeated the Tories on that basis and went ahead and implemented them anyway.

The one we all remember so well was the GST promise. The prime minister had no intention of ever getting rid of the GST and as a result, the deputy prime minister, who had promised her constituents that her government would get rid of the GST, had to resign to show good faith. Her resignation forced a byelection at some considerable expense because the government invested so heavily in her riding to make sure that she was re-elected. It really was a bit of a joke.

Getting back to the equalization formula, I think in response to some of the comments that I heard earlier, removing non-renewable natural resources from the formula does not affect Alberta one way or the other because Alberta does not receive equalization payments. However it would be fundamentally fair to Atlantic Canada to keep 100% of its resource royalties because that is fair.

It would also be fair, in my opinion, in response to the member from the Bloc Québécois who spoke, that renewable resource revenue that is sheltered in crown corporations should also be part of the formula to calculate equalization. Some provinces have a substantial revenue stream from renewable natural resources that in fact will last in perpetuity because they are renewable, whereas the provinces that are now using their non-renewable natural resource royalties in the formula are selling a capital asset that belongs to them in order to kick start their economies. However those natural resources are finite and they will run out one day.

Provinces have to think very carefully when they sell that capital asset and plan very carefully for the day that it is no longer there. I think that is where there is some fundamental unfairness in the formula that includes royalties from those capital assets that they choose to sell in the formula. Certainly by removing them from the formula would not make Alberta a have not province simply because Alberta's economy is doing so well based on the development of its natural resources and it creates great tax wealth for the federal government and for the province. It also stimulates the economy to the point where even if those royalties that are going directly to the province were not calculated into the equalization formula, Alberta would still be a have province.

However removing non-renewable natural resources from the formula would be of great help to other provinces, particularly Saskatchewan, which is one of Canada's have not provinces. I am surprised that in the current round of negotiations the Premier of Saskatchewan is not standing up beside the Premier of Newfoundland and Labrador demanding the same thing. Saskatchewan has a fair amount of non-renewable natural resources. It is one of the calculations that would help it very much if those resource royalties were removed from the formula. Of course, there are some other provinces as well that would benefit, including British Columbia and Manitoba.

To get into whether equalization is fair or not fair is not the issue that we are debating today. The issue is very simple and very fundamental in that it is about the practice of making promises during an election campaign that one does not intend to keep. Just today in question period the Minister of National Defence got up and piously promised he would never make irresponsible promises.

I think he should talk to his Prime Minister and other members of his party when they develop these election platforms because a lot of promises were made in the last election and many elections leading up to the last election that were clearly made to attract votes and get elected, but the intention was never there to fulfil those promises. That gives us all a bad name and it gives the House a bad name in my view.

I think we should be more careful. We should cost out those election promises and we should make them on the basis that whichever party forms the government it is prepared to fulfil those promises in the mandate that it has been given. I think we should focus on what this is really about.

SupplyGovernment Orders

3:40 p.m.

Conservative

David Anderson Conservative Cypress Hills—Grasslands, SK

Mr. Speaker, my colleague mentioned Saskatchewan in his speech, which is where I am from. We have listened today to a little bit about Newfoundland and how some of its federal representation is not looking after its interest first but is rather reflecting Ottawa back to the people of Newfoundland.

We have had that problem in Saskatchewan for quite some time. We have had a minister responsible for our province who has held senior portfolio positions throughout the years but very rarely has he been able to deliver for our province. When he was agriculture minister and in charge of the Wheat Board he ended up drafting and putting legislation in place which ended putting farmers in jail when they tried to sell their own grain. When he was minister of natural resources there was no movement in our province and no development of those industries. Later, when he was minister of public works, there was a long delay in his attempt to discover what was going on with the sponsorship scandal in our province. It is difficult to see how he has been reflecting Saskatchewan interests.

It is interesting that when we hear the public relations message in Saskatchewan from him and from his people, there are only three things in 10 years that they can really talk about and that is digging out the lake in Regina, building a soccer facility there and then being part of the synchrotron project in Saskatoon. My information on that is that he could only have sabotaged that project as the scientific community had already decided that they wanted that in Saskatoon.

The strangest thing that has happened recently, as my colleague has pointed out, is that there has been no discussion of Saskatchewan and its position on equalization. Because oil revenues have gone up, all of a sudden we will be kind of on the bubble of whether we will be a have or a have not province.

It is strange to me that neither the premier nor the minister responsible for Saskatchewan has really taken the lead in representing Saskatchewan's interest. I would like to ask the member if he has any ideas as to why that might be when it is so important to Saskatchewan that the formula be changed and be applied the way, hopefully, it will be applied in the maritimes.

SupplyGovernment Orders

3:40 p.m.

Conservative

Dave Chatters Conservative Westlock—St. Paul, AB

Mr. Speaker, it is a little more difficult for me to address some of the issues the member raised because they are Saskatchewan issues and I am not from Saskatchewan, but the point is well taken.

If this policy we are presenting were adopted, Saskatchewan, undoubtedly, would be a have province. If it were able to keep both the royalties and the equalization that would boost its economy to where it could to move forward and become a have province.

With regard to the other issues he raised, in my eleven and a half years in this place, the government has been famous for saying the things that need to be said but never delivering on them. That is not only promises at election time, that is throughout their tenure.

Today the current agriculture minister stood in his place and said the right things about the Canadian Food Inspection Agency in response, I believe, to a question from the member for Cypress Hills--Grasslands. The point he raised in his question was that the Canadian Food Inspection Agency was blocking the development of producer owned packing plants to slaughter cull cows. The minister, instead of standing and saying that he would investigate the situation and that if it were happening he would put a stop to it, he stood and made this speech, this rhetoric.

We know full well that this government is not doing anything to stop the problems that the member described. The tile is the wrong colour in the food inspector's office or the wall needs to be moved a few feet or these kind of things. These things are happening. We have evidence. We know that it is happening and he stands there and says that those things are not happening and that we will not compromise food safety.

He should have made a commitment right then to talk to the Canadian Food Inspection Agency to deal with the problem that is preventing these producer owned slaughter facilities to open, instead of this cheap rhetoric that is of no use and which does not move the issue forward.

SupplyGovernment Orders

3:45 p.m.

Conservative

Rona Ambrose Conservative Edmonton—Spruce Grove, AB

Mr. Speaker, I want to thank the Leader of the Opposition for raising this motion and also the member for St. John's East for advocating so forcefully on this issue.

I would like to start by reading excerpts from letters that were sent from Premier Williams to the Prime Minister, because these letters tell a story about a deal gone bad and a promise that was made during an election only to be broken once the votes were in.

Premier Williams thought he had a deal on offshore oil and gas revenues. He thought his province would be allowed to keep 100% of its profits with no restrictions. On June 10, Premier Williams wrote:

The proposal my government made to you and your Minister of Natural Resources provides for 100% of direct provincial revenues generated by the petroleum resources in Newfoundland and Labrador Offshore Area, to accrue to the government of Newfoundland and Labrador and be sheltered from the clawback provisions of the equalization formula....Our proposal is for the current time limited and declining offset provisions in the Atlantic Accord to be replaced by a new offset provision continuing over the life of the offshore petroleum production which would provide a payment equal to 100% of the amount of annual direct provincial offshore revenues, which are clawed back by the equalization program.

This proposal seems clear. I and most Canadians understand what Premier Williams wants and needs to help make his province economically successful. It seems that the Prime Minister also understood the promise that he had made to Premier Williams, because during a July 10 phone call the Prime Minister obviously also agreed to these terms.

This conversation prompted Premier Williams to write, in another letter on August 5, to the Prime Minister:

This letter is further to our telephone conversation of 10 July 2004, during which we reaffirmed our agreement that Newfoundland and Labrador will retain 100% of the benefit of the offshore petroleum revenues it receives, notwithstanding the treatment of those revenues under the equalization program.

The letter from Premier Williams goes on to urge that the province and the federal government quickly put together an agreement. Mr. Williams makes this suggestion with great optimism in his letter. He goes on to say:

I very much appreciate your commitment to implementing our agreement on a priority basis. I am firmly of the view that our efforts will result in significant and long lasting benefits for Newfoundland and Labrador and Canada.

As we can see, Premier Williams believed that he had a deal. He was optimistic about the future of his province and the strengthened role it would play in Canada.

Premier Williams soon realized that this Prime Minister makes promises during an election that he has no intention of keeping. When the election passed, the Prime Minister moved Newfoundland and Labrador to the back burner and hoped that the province's leadership would stay there.

Premier Williams must have begun to suspect something was going wrong, because in another letter dated August 24, 2004, Premier Williams writes to the Prime Minister again. He says:

I am very concerned that we have not begun to implement our agreement. My concern is further amplified by comments made by your Minister of Natural Resources...on a local radio phone-in program yesterday. [The Minister of Natural Resources'] comments demonstrate a misunderstanding of the position my government advanced on this matter and the agreement you and I reached during the federal election campaign.

Again, the premier writes that the terms of the deal need to be negotiated quickly to avoid any more “confusion”. We know the end result. The Prime Minister had ample opportunity to put to paper the commitment that he made to Premier Williams. Instead he delayed and delayed, obviously with the hopes that he could tie any new arrangement to the equalization meeting on October 26.

The Prime Minister's actions forced Premier Williams to walk away from the equalization meeting on October 26, not because the premier wanted to but because he had to in order to protect the resources of Newfoundland and Labrador.

At its root this motion is about broken promises, but it is also about much more. It is about the livelihood of Canadians in Newfoundland and Nova Scotia, who have shown time and time again the determination to achieve economic success. What they need is a willing partner in Ottawa.

The argument coming from the government is that we had better not give these provinces too much, that they had better not get much more than they deserve. We have heard arguments suggesting that a cap is sufficient because the Liberals would have a hard time telling the rest of Canada that Newfoundland and Labrador should receive equalization benefits and at the same time should be allowed to keep its oil and gas royalties.

With all due respect, I think Canadians would understand. I can say this from experience because I have received numerous phone calls from Albertan constituents who support Newfoundland and Nova Scotia on this issue. They understand, as the Conservative Party does, that it is not just about cash that a province has right now. Instead, it is about the base that it is allowed to grow. It is that base that allows the province to sustain itself through economic downturns, and it is that base that allows a province to rev up its economic engine in good times.

Danny Williams is trying to develop and strengthen the province's economy and build the economic base that will underscore future economic development in his province. That is why we are adamant that Newfoundland and Nova Scotia receive 100% of offshore oil and gas revenues with no caps and no restrictions.

Canadians also know that there is a precedent supporting Newfoundland's request, and that is the province of Alberta. At the very beginning of the equalization program in 1957, Alberta was a net beneficiary of equalization. Alberta received equalization until 1965, at which time the province became a have province.

Alberta's history is one that Newfoundlanders can relate to. In the early part of the 20th century, Alberta's legislators campaigned to ensure that Alberta was granted full rights over its natural resources. Ottawa eventually acquiesced, but not without a fight. In the 1940s and 1950s, Alberta began to strike oil. The difference then was that natural resources were not clawed back in equalization, so while Alberta began to build an oil and gas industry, it used those profits to build up its industrial, economic, social and political infrastructure. Alberta was able to become a net contributor to the equalization program, not simply in on again, off again years, but consistently.

We also all know of the pain and the economic ruin that the federal Liberals inflicted on Alberta in the 1970s and 1980s. We also understand that it is because of our political and economic strength in our province of Alberta and the oil and gas sector that Alberta was able to pull through the economic devastation of the national energy program.

Every time Ottawa has pushed, Alberta has pushed back. Premier Williams is doing the same. He has indicated that Newfoundland and Labrador will not put up with the broken promises of the federal government today.

The motion supports those efforts. It says to the premier of Newfoundland and Labrador and to all premiers that the Conservative Party is with them. It is a statement to every province that this party understands the pride that underscores the demand for equal treatment from Ottawa and economic self-sufficiency at home. This party will not allow the federal Liberals to continue to deny economic success to Newfoundland and Labrador or to any other province or territory.

But there is something more to the motion, and that is the cruelty of a broken promise. Premier Williams has said that this opportunity is his government's best shot at economic self-sufficiency and this Prime Minister told him that he had a deal, yet the premier of Newfoundland and Labrador has realized the same thing that Canadians across the country have realized since the government was elected as a minority: the Prime Minister says one thing during elections and does another when in office.

Premier Williams and Premier Hamm of Nova Scotia have been disappointed, but they have taken a stand. We are behind them 100% of the way.

Premiers William and Hamm are not the only premiers who are concerned about these events. We have news that the premiers of the Northwest Territories and Nunavut are now watching the Prime Minister's actions on this file very closely. As the Prime Minister is aware, Canada's north is filled with natural resources and those natural resources are the key to northern economic development. Canada's territories also want greater control over their resources. We also support this initiative.

We understand that every region in the country deserves the opportunity to achieve greater economic self-sufficiency. However, if the Prime Minister is willing to break his promises to Newfoundland and Nova Scotia, what is to stop him from refusing to grant Canada's territories their opportunity for economic self-sufficiency?

The state of federal-provincial relations in Canada has been completely compromised by the Prime Minister and his mistreatment of this issue. We believe that stronger provinces are what will make a stronger federation.

I again draw the House's attention to my own province of Alberta, which was once a beneficiary of equalization and is now a contributor. Why does the government not want Newfoundland and Labrador and Nova Scotia to have the same opportunity? Does the Prime Minister not see that in the long run the entire country will benefit?

I, along with my Conservative colleagues, support Newfoundland and Labrador and Nova Scotia and urge the government to honour the deal it made with these provinces during the election. It is time to ensure that Newfoundland and Labrador and Nova Scotia keep 100% of their offshore oil and gas revenues.

SupplyGovernment Orders

3:55 p.m.

Liberal

Scott Simms Liberal Bonavista—Exploits, NL

Mr. Speaker, I congratulate my hon. colleague on her speech. She seemed quite sincere. I have a quick question regarding the member's own province. Again I thank her for the sincerity she has shown for my own province, where we have reached this critical time. The member has obviously shown her interest.

Pertaining to the member's own province of Alberta, she alluded to equalization and how Alberta struggled through those years while getting equalization and of course reaping the benefits of royalties as well. I am not trying to be combative, but I would like the member to explain to me how they went from being a have not province to being a have province and how this particular deal differs. Also, how is it that Premier Williams' deal is similar to what Alberta went through?

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3:55 p.m.

Conservative

Rona Ambrose Conservative Edmonton—Spruce Grove, AB

Mr. Speaker, when equalization was first brought forward in 1957, non-renewable natural resources were not in the formula so that obviously was of benefit to Alberta at the time. As we know, it collects a great deal in oil revenues.

I think the most important thing was in a recent communiqué from Premier Hamm of Nova Scotia, and I have heard Danny Williams say the same thing: this is something that Alberta has benefited from and it is something for which they feel very strongly that all provinces should have equal treatment, that is, having the opportunity to grow their resource sector and grow their economy. I fully support the initiative of Premier Hamm and Premier Williams in regard to being able to receive equalization but also receive 100% of their resource royalties so they can have control over their own economic future.

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3:55 p.m.

Humber—St. Barbe—Baie Verte Newfoundland & Labrador

Liberal

Gerry Byrne LiberalParliamentary Secretary to the Minister of Intergovernmental Affairs

Mr. Speaker, with the discussion on offshore resource revenues and particularly the flow of royalty payments, would the hon. member be able to assure us on this side of the House and other members in other parties that the Conservative Party of Canada will join with us in supporting and enhancing the equalization program? It is a constitutional requirement. Does that particular program enjoy the long term support of the Conservative Party of Canada? Also, is there an acknowledgement that this equalization program is a key component to the resolution of this particular issue as well?

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3:55 p.m.

Conservative

Rona Ambrose Conservative Edmonton—Spruce Grove, AB

Mr. Speaker, absolutely. This is part of the Constitution. As the member knows, we have absolute respect for the Constitution. The Conservative Party has always viewed and will continue to view equalization as an essential component of Canada's nation-building efforts. We will continue to honour equalization.

However, as the hon. member knows, we have felt for some time, as have Nova Scotia, Newfoundland, Saskatchewan and other provinces, that the current formula has some problems and needs to be revisited. That is why we have also supported the idea of striking a panel and revisiting the formula. We support the government's efforts to do that.

Having said that, I will say that we have also said for a number of years--and it was one of our leaders' promises during the election as well, long before the Liberals were talking about it--that we should be excluding natural resources from the equalization formula so that provinces like Newfoundland and Nova Scotia can enjoy 100% of their oil revenues.

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4 p.m.

Conservative

Loyola Hearn Conservative St. John's South, NL

Mr. Speaker, earlier today when I rose on questions and comments I noticed the support from different parts of the country.

As I watched the new member from Alberta deliver one of the best speeches I have heard in the House, I note that she is surrounded by people from British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia and New Brunswick, and we have already heard from Manitoba. We do not have anybody representing Prince Edward Island yet, I say to her, but we will.

What is quite evident here is that everybody right across the country and their representatives are supporting the request that Newfoundland has made. I will ask the hon. member a question, in light of her experience. She has already mentioned it in her speech, but I want her to reiterate it, because this is the crux of it all. What we are asking for is what her province got. In this situation, the similarities between Newfoundland and Alberta are dead on. They had resources they developed. They benefited. We are trying to develop--

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4 p.m.

The Deputy Speaker

We will hear just a very quick response from the member for Edmonton—Spruce Grove.

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4 p.m.

Conservative

Rona Ambrose Conservative Edmonton—Spruce Grove, AB

Yes, Mr. Speaker, it is true. I think that is why back home I have heard so many responses and received so much support from Albertans. They can relate directly to how important their resources sector has been to their economic self-sufficiency. When they heard what happened with Danny Williams and what Newfoundland and Labrador and Nova Scotia are after, which is control over their own economic destiny, it really went to the heart of Albertans. They have responded very generously with a lot of support--

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4 p.m.

The Deputy Speaker

Resuming debate, the hon. Minister of Finance.

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4 p.m.

Wascana Saskatchewan

Liberal

Ralph Goodale LiberalMinister of Finance

Mr. Speaker, I will be splitting my time with the member for Dartmouth—Cole Harbour.

Let me begin by noting that I come from a province, Saskatchewan, that has historically been categorized as one of those have not provinces within Confederation. We are very likely emerging from that status perhaps this year, maybe next year. However, like the people of Newfoundland and Labrador and like the people of Nova Scotia, Saskatchewan people have always understood very clearly the fiscal disparities that fall unevenly among provinces. Some are clearly more wealthy and more fortunate than others.

We in Saskatchewan understand the frustration and the difficulty that result from not having the same ability as other provinces to raise our own provincial revenues to meet our own provincial priorities. Like Nova Scotians and Newfoundlanders, Saskatchewanians struggle against our historic fiscal limitations and we aspire to the day when we can match the prowess and the success of the more economically fortunate provinces.

In the meantime, we Canadians have, in our typically Canadian tradition of caring and sharing, invented a system to try to even up the economic strengths among the haves and the have nots. It is called equalization. It started in a modest manner back in 1957. It grew to such substantive and symbolic importance that in 1982 it was entrenched into the Canadian Constitution.

By having an equalization system, Canadians are essentially saying to each other that for those of us who live in provinces with such limited fiscal capacity that we cannot on our own reach a common standard of our own source provincial revenues, then in those circumstances the Government of Canada steps in to make up the difference.

Historically, the Government of Canada has been investing somewhere between $8 billion and $10 billion per year in equalization payments across the country. It is a matter of fairness and it is a matter of national cohesion.

However, we in the receiving provinces all aspire to graduate from that system, to be able to stand on our own like the more wealthy provinces do. To accelerate that day in relation to two of the least wealthy and most indebted provinces, namely Newfoundland and Labrador and Nova Scotia, which have come recently upon some new sources of wealth generation, namely offshore oil and gas, the Government of Canada has made some very special arrangements to help deal with the unique nature of those offshore resources and to help deal with the larger and very real socio-economic needs of these two provinces.

Normally, under equalization, when a province's internal fiscal capacity increases, its equalization allotment goes down and vice versa. It is like an insurance policy on provincial government revenues. If a province can raise more on its own, it needs equalization less. If it can raise less on its own, then it needs equalization more.

In the case of Nova Scotia and Newfoundland and Labrador and offshore resources, there is a special incremental arrangement to boost both of those elements. Here is how it works. Nova Scotia and Newfoundland and Labrador receive today 100% of the provincial revenues generated from their offshore activity; natural gas in the case of Nova Scotia, oil in the case of Newfoundland. The revenues flow directly into provincial treasuries and they add to each of those provinces internal fiscal capacity. Obviously, that is a very good thing, but not, unfortunately, good enough.

Even with this new revenue from oil and gas over the last several years, Newfoundland and Labrador and Nova Scotia still have remained below the national standard of fiscal capacity in the equalization formula. Therefore, Newfoundland and Labrador and Nova Scotia still require equalization to bring them up to that national standard.

As their own source revenues, including from the offshore go up, equalization payments go down, but equalization is still required nonetheless to meet the national standard. The special incremental arrangement is this. When equalization in Nova Scotia and Newfoundland drops due to better offshore revenues, the equalization reduction is not on a dollar for dollar basis. The province retains a bonus of 30¢ on the dollar.

Therefore, the existing arrangements today, for Newfoundland and Nova Scotia, consist of three revenue streams: first, of course, their own source offshore revenues, which they already earn and retain 100%; second, equalization, to take these provinces up to that national standard in the equalization formula; and third, that 30% added bonus to help offset equalization reductions.

The discussions in June between the Prime Minister of Canada and the Premier of Newfoundland and Labrador were all about adding more on top of own source revenues, on top of equalization, on top of that 30% extra. The objective was to add a fourth revenue stream, to take that 30% extra to a full 100% extra for a period of eight years, which roughly corresponds with the period of payments defined in the offshore accords, and with that fourth extra stream continue to boost Newfoundland and Nova Scotia up to match the fiscal capacity of the largest and second most wealthy province in the nation.

To the best of my knowledge and belief, the proposal that was put on the table by the Government of Canada is a faithful reflection of the understanding between the two premiers and the Prime Minister. It also reflects the essence of the position that I have taken with the minister of finance in Newfoundland and Labrador and the minister of energy in Nova Scotia.

There have been many conversations, discussions and meetings back and forth among us over the course of the last number of weeks and months. I think we have all been trying sincerely and honestly to arrive at the very best possible outcome, especially for Newfoundland and Labrador and Nova Scotia.

Given the complexity of the subject matter that we have been dealing with, the profound importance and the long history of this issue and the verbal nature of much of the give and take, it is only natural, to use the words of Premier Williams, for there to be some room for potential misunderstandings. There is also ample room on a topic like this for lots of emotion and sometimes some high rhetoric. However, I hope that we can all stay focused upon the real objective before us.

Our goal is to support Newfoundland and Labrador and Nova Scotia in their ambition to emerge from have not status, fulfilling very much what the Prime Minister had in mind this past summer and throughout this whole process.

I want to take this opportunity to thank Minister Clarke in Nova Scotia and Minister Sullivan in Newfoundland and Labrador for their constructive engagement with me in the search for precise and workable solutions. We have had some difficult matters to cope with together, but I believe that we have worked together honourably and in good faith and will continue to do so.

I also want to acknowledge and thank my colleagues, the Minister of Natural Resources, the Minister of Fisheries and Oceans, the Minister of Public Works and Government Services, together with all our MPs and Senators in Newfoundland and Labrador and Nova Scotia. They, too, are working very hard and faithfully for their home jurisdictions. We are all working hard for Canada.

Canada is far more than just a loose collection of provinces and territories. We reach out to each other and we try very hard to accommodate one another. We continue to build together the finest and fairest country on the face of the earth. Part of that effort is sharing our common risks and sharing our common advantages.

Indeed, since the Prime Minister and Premier Williams first spoke to each other on Newfoundland and Labrador's situation back in June, there has been a large material change. We now have a new equalization program, a new equalization formula and an incremental contribution by the Government of Canada to that formula of $33 billion over the next 10 years. We will continue to work hard on getting the right solution for these two very important provinces.

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Conservative

Monte Solberg Conservative Medicine Hat, AB

Mr. Speaker, recently in the St. John's Telegram , the Minister of Natural Resources said, “If the market goes to $1,000 a barrel, you will get all of the revenues, you will get all of the royalties, no cap whatsoever”. I want to argue that if there is some misunderstanding on this issue, it is occurring on the government side.

Does the Minister of Finance stand by Minister of Natural Resources in believing that there is no cap whatsoever on royalties going to Newfoundland? What is his position? Does he take a different position? What is the government's position on this issue?

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4:10 p.m.

Liberal

Ralph Goodale Liberal Wascana, SK

Mr. Speaker, there is obviously no limitation on royalties or offshore revenues. Under the terms of the accord, those revenues are treated, with respect to Newfoundland and Nova Scotia, as if they are onshore resources.

I am glad the hon. gentleman clarified this point. He is not talking about offshore resources. He is talking about the impact on equalization. The impact on equalization is the misunderstood piece in this equation.

As I said in my remarks, there are four streams. The own source revenue is owned 100% by the province and equalization is on top of that. The two of those play off against each other. On top of that there is the 30% generic solution, which gives Newfoundland and Nova Scotia that extra bonus. What we are working on is the incremental 70% on top of all of that to reach the fiscal capacity of the second most wealthy province in the country.