Mr. Speaker, I thank the House for the opportunity to speak to Bill C-24, the Federal-Provincial Fiscal Arrangements Act.
Hon. members will no doubt recall that the Government of Canada's new approach to equalization and the territorial financing formula was first presented to premiers and territorial leaders in September 2004 at the first ministers meeting.
In October the Prime Minister announced the details of the new framework which, subject to approval by Parliament, will increase the support provided to the provinces and territories under the equalization program and the TFF by $33 billion over 10 years. The increased funding will assist Canada's less prosperous provinces and three territories in meeting their commitments under the 10 year plan to strengthen health care as well as other priorities.
As the Prime Minister said at the announcement of the equalization and territorial financing formula framework, this framework reflects the most significant improvement in the program's history. By providing predictability, stability and increased funding, the framework will play an essential role in ensuring that all Canadians no matter where they live will have access to comparable public services.
I will outline the details of the framework shortly, but first it is important to provide some history of the programs and how they work.
The equalization program has been one of the pillars of the Canadian Confederation for more than four decades. It has been with us since 1957, almost 50 years. The territorial financing formula program has been in effect since 1985. That is coming up to 20 years. Both of these programs have been successful in providing support to the so-called have not regions of Canada by allowing them to provide services despite the existence of fiscal disparities with other regions.
I am sure hon. members will agree that the concept that Canadians should have access to quality health and social services regardless of where they live is fundamental to the fairness and integrity of the Canadian federation. Indeed, equalization has played an important role in defining the Canadian federation, so much so that it is unique among federal transfers in that its purpose was entrenched in the Canadian Constitution in 1982.
Section 36(2) of the 1982 Constitution Act states:
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.
In other words the intent of the equalization program and the territorial formula financing is to ensure that all Canadians no matter where they live in this great country have access to reasonably comparable public services, without the provinces or territories having to resort to economically punishing levels of taxation to fund the provisions of these services.
I will now explain how these programs operate. Equalization and TFF are the most important federal programs for reducing the differences in the abilities of the provincial and territorial governments to raise revenues. Equalization payments are calculated according to a formula set out in the federal legislation and adjust automatically in response to economic developments in the provinces.
For example, when a province's economy is booming relative to other provinces, its equalization payments automatically decline under the formula, reflecting the increased prosperity of that province. Some think that this only works one way. Conversely, when a qualifying province's fiscal capacity declines relative to the standard due to a slowdown in its economy, its equalization transfer automatically increases.
In this way the equalization program acts as an automatic stabilizer of provincial government revenues. Equalization payments are subject to a floor provision. This provision offers protection to provincial governments against unexpected large and sudden decreases in equalization payments.
Similar to equalization TFF provides payments to territorial governments to assist them in providing services. TFF is based on a gap filling principle that takes into account the difference between the expenditure needs and revenue means of the territorial governments. Federal and provincial officials review these programs on an ongoing basis to make sure that the differences are measured as accurately as possible. In addition the programs are renewed every five years.
I would like to return now to the changes in the equalization and TFF frameworks, the details of which are contained in the bill presently before the House. The framework includes five elements: a new minimum funding floor of $10 billion for equalization and $1.9 billion for TFF for the fiscal year 2004-05; complete protection for provinces and territories against overall and individual declines in payments for 2004-05; a level of $10.9 billion for equalization and $2 billion for TFF in 2005-06; a growth rate thereafter of 3.5%; and finally, an independent panel to advise in the allocation among provinces and territories.
What do these changes mean in dollar terms? Equalization payments will increase from $8.9 billion in 2004-05 to $12.5 billion in 2009-10. This over a five year period is a 41% increase, a substantial increase by any standard and well beyond the anticipated growth in the economy.
Starting in 2005 the Government of Canada will establish a legislative financial framework for equalization and TFF with fixed overall payment levels that provide predictable and growing funding. In 2005-06 the funding levels will be set at $10.9 billion for equalization and $2 billion for TFF, the highest levels ever achieved by these programs. Starting in 2006-07 both amounts will grow at 3.5%. As I already mentioned, the bottom line is an additional $33 billion over 10 years in federal support for Canada's provinces and territories.
The government recognizes that just pumping money into the system is not enough. We need to look at how the current legislation on equalization and TFF allocates money to the provinces and territories. That is why as an integral part of the proposed changes in the funding framework, an independent panel of experts on how legislated equalization and TFF levels should be allocated among the provinces and territories in 2006-07 and thereafter will be established.
Provinces and territories have been invited to appoint two members to the panel. Among other things, the review will evaluate current practices for measuring fiscal disparities among provinces and territories. It will examine alternative approaches, such as those based on aggregate macroeconomic indicators--for example, the gross domestic product, disposable income, et cetera--or expenditure needs.
It will review the evolution of fiscal disparities among provinces and the costs of providing services in the territories to help governments and citizens evaluate the overall level of support for equalization and TFF. Finally it will advise whether the Government of Canada should establish a permanent independent body to advise it on the allocation of equalization and TFF within the framework of legislated levels.
I would like to make it clear that the Government of Canada will retain full accountability and responsibility for all decisions. It will continue to consult extensively with the provinces and territories as before.
The mandate of the panel is that of an advisory one. The government will make decisions based upon advice received from the panel, provincial and territorial governments, and indeed all Canadians.
The expert panel will report back by the end of 2005 in time to provide advice on how equalization and TFF should be apportioned among the provinces and territories in the fiscal year 2006-07. The government is committed to having any changes in allocation for 2006-07 and future years in place by April 1, 2006, about 14 months from now.
The proposed framework contained in Bill C-24 also provides additional floor protection to every province and territory in order to provide greater stability to provinces and territories in 2004-05. That means the Government of Canada will ensure that equalization payments total a minimum of $10 billion over 2004-05, and the TFF payments total a minimum of $1.9 billion for 2004-05.
In addition, each province and territory will be guaranteed its equalization or TFF claims for 2001-02 to 2004-05 will not be lower than what was estimated in February 2004 and included in the budget 2004 for those years.
It is important to mention that equalization and TFF payments are not the only sources of federal assistance for provinces and territories.
At the same first ministers meeting last September, the Prime Minister and all the premiers and territorial leaders signed an accord agreeing to work together to develop a 10 year plan to strengthen and enhance our treasured system of publicly funded health care. The government has committed to provide $41.3 billion in new health care funding to provinces and territories.
Critical to this effort to provide access to quality health care will be the need to improve access to doctors, nurses and other health providers and to reduce waiting times for key treatments and tests.
As so many of the provinces and territories have demonstrated through innovative efforts in select areas, shorter waiting times and better wait times management lead to better care for patients, more efficient health care and greater public confidence in publicly funded health care.
We have created with our territorial and provincial counterparts a shared agenda for the renewal of health care in Canada. The agenda is built on three key elements: one, an agreed upon 10 year plan to ensure that Canadians have access to the care that they need when they need it; two, new federal funding of $41.3 billion in support of the 10 year plan, ensuring that provinces and territories have predictable steady increases in cash transfers for health; and three, support for increased use of evidence based benchmarks and comparable meaningful information on system performance and health outcomes to guide decisions and to allow Canadians to monitor progress.
I trust hon. members can appreciate that putting in place a 10 year plan for health care will require cooperation and collaboration by governments, health experts, stakeholders and Canadians themselves.
Just look at the benefits to Canadians of the health plan when combined with the new $33 billion equalization and TFF framework. That $33 billion put together with more than $41 billion of health enrichments that I just outlined will result in a cumulative increase of $75 billion over 10 years compared to the annual levels estimated at the time of the February 2004 budget. That is a $75 billion increase beyond the base levels in the 2004 budget.
This illustrates the government's willingness to work with the provinces and territories to find new ways to improve the quality of life for Canadians.
To sum up, Bill C-24 underscores the priority that the Government of Canada places on the equalization program and territorial financing formula. Both of these programs help to ensure that receiving provinces and territories continue to have the resources to provide the services their people need and want.
I would like to conclude with a quote from the Prime Minister at the October announcement of the new funding framework:
This new partnership will be essential to our success as we move forward together on the other key policy issues outlined in the Speech from the Throne, such as child care, cities and communities, and the environment.
I urge hon. members to support this legislation without delay.