Mr. Speaker, it is my pleasure today to rise on Bill C-18, an act respecting equalization and to authorize the Minister of Finance to make certain payments with respect to health, and to support the motion that the legislation be referred to committee.
The bill is designed to achieve two goals. First, the bill would enable the continuation of the equalization payments while the renewal legislation is being finalized. Second, the bill would provide the federal government with the authority to pay $2 billion to the provinces and territories for health, as confirmed by the Prime Minister following the first minister's meeting.
My hon. colleagues are aware that the federal government is in a partnership with the provinces and territories and it plays a key role in supporting the Canadian health system and social programs.
The large majority of federal transfers are delivered through four major programs: the CHST, the Canada health and social transfer; the equalization payments; the territorial formula financing; and the new health transfer.
The bill today only deals with equalization and CHST. However, collectively, those four programs actually represent 2.4% of the nation's GDP, a significant sum of money by anyone's standard and constitute 18% of the government's revenues.
The equalization program is a constitutional obligation that ensures that less prosperous provinces have the capacity to provide reasonably comparable public services according to their levels of ability. It is not a program that transfers wealth among citizens.
Payments are unconditional. Receiving provinces are free to spend the funds on public services according to their own priorities. Payments are calculated according to a formula set out in federal legislation. The formula responds to the changing economic fortunes and circumstances of each province. It is designed to measure a province's fiscal capacity relative to the average fiscal capacity of the five middle income provinces, which forms the threshold standard.
The formula puts 33 revenue sources in a basket to measure fiscal capacity. Each province's fiscal capacity is measured relative to the middle wealthy five provinces.
The formula is dynamic and, as revenues go up or go down over the year, the average moves as does the fiscal capacity of each province. If any province has a good year, that affects equalization and, conversely, if any province has a bad year, so also is equalization affected.
If a large province has a bad year, naturally there is a ripple effect. Population movement, as reflected in the 2001 census, also affects the flow of payments.
The good news is that over the past 20 years, with all the ups and downs of the nation's provinces, there has been a slow but steady narrowing in the fiscal disparities.
At the same time, equalization payments are subject to a floor provision, which provides protection to provincial governments against unexpected large and sudden decreases in equalization payments. The floor limits the amount by which a province's entitlements can decline from one year to the next.
Federal and provincial officials review the equalization program on an ongoing basis to make sure that differences in the capacity of provinces to raise revenues are measured as accurately as possible.
In addition, and central to today's debate, is the fact that equalization legislation is renewed every five years to ensure that this review is undertaken and that the integrity and fundamental objectives of the program are preserved. The last renewal was in 1999. The current legislation is set to expire on March 31, 2004.
Discussions on the full five year renewal of the equalization program are underway but may not be set by April 1, 2004, which would leave a gap in the government's authority to make equalization payments.
Briefly, the bill before us today would provide the Minister of Finance with the authority to continue to make the equalization payments according to the current formula for up to a year in the event that the new legislation is not ready before April 1.
The bill would ensure an uninterrupted stream of equalization payments following March 31. It is basically an insurance policy to ensure the continuation of payments while renewal legislation is finalized.
Passage of the bill would ensure that public services provinces fund through the equalization program will continue to be protected for the benefit of their citizens.
Of course, when passed, the renewal legislation would supercede this extension. When the full renewal legislation is passed it will be retroactive to April 1, 2004. The renewal legislation would ensure that the program remains up to date and that the best possible calculations and data are used to determine equalization payments.
As I indicated, until the renewal legislation is introduced and passed, hon. members should regard the measures in Bill C-18 as insurance to continue payments and minimize the impacts upon the receiving provinces.
I want to turn now to the other provision in Bill C-18, which is the Prime Minister's commitment to provide a further $2 billion to the provinces and territories for health.
As the largest federal transfer, the CHST provides provinces and territories with cash payments and tax transfers in support of health care, post-secondary education, social assistance and social services, including early childhood development and early learning and child care. It constitutes 1.7% of the nation's GDP.
Since the CHST was created in 1996, the federal government has strengthened the transfer numerous times and it will continue to be a key priority for the government.
Let me take a moment to review the major funding increases.
In September 2000, Canada's first ministers reached a five year health renewal agreement under which the federal government made its largest ever increase to the CHST. The September 2000 agreement provided $21.1 billion to the provinces and territories for health care and early childhood development, bringing CHST payments to their highest levels ever. To support the agreement, the federal government also provided an additional $2.3 billion in targeted advancements for medical equipment, primary care reform and new information technologies such as electronic patient records.
When that money came to the hospitals in my riding the CEO of that hospital identified information technologies as his critical need and, in some direct measure, the federal government responded to that.
Drawing on the commitments supporting reform and renewal outlined in 2000, the 2003 budget confirmed $34.8 billion in increased funding over five years to meet the goals outlined in the 2003 health accord.
As a result of the investments I have just outlined, in 2003-04 the federal will provide a total of $37.9 billion in support to the provinces and territories through the CHST.
That brings me to the second measure in the bill, which is the $2 billion from the consolidated revenue fund in 2003-04 for health.
Additional funding for health care was committed under the 2003 health accord where the government indicated that in an addition to $34.8 billion over five years, it would provide an additional $2 billion for health at the end of the fiscal year 2003-04 if the Minister of Finance determined during the month of January 2004 that there would be sufficient surplus above the normal contingency reserve to permit such an investment. The commitment was reiterated in the February 2003 budget and again in the November 2003 economic update.
This government intends to live up to that commitment. This money is in addition to the increased federal investment of $17.3 billion over three years and the $34.8 billion over five years already confirmed.
The passage of the bill before the end of the fiscal year will provide provinces and territories with the flexibility to begin drawing down these funds as they require, which will help them better plan for the future.
The bill would ensure that Canada's health care system continues to be, in the words of the Prime Minister, “A proud example of our national values at work”.
In considering the equalization measures of the bill, I urge hon. members to also keep in mind that the bill underscores the priority the government places on equalization and ensures uninterrupted funding until renewal legislation is in place. This would ensure that the receiving provinces continue to receive the resources they need.
I encourage hon. members to support the motion.