House of Commons Hansard #72 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was revenues.

Topics

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12:35 p.m.

Conservative

Vic Toews Conservative Provencher, MB

They have all left for Alberta.

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12:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

My hon. colleague says that they have all left for Alberta.

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12:35 p.m.

Conservative

Vic Toews Conservative Provencher, MB

It is because they are socialists in Saskatchewan.

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12:35 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

The people of Saskatchewan have the opportunity to replace the government. If they no longer wish to have an NDP government, I suppose they could elect an alternative government. We naturally would suggest a Liberal government.

The unemployment number is around 5% and the quite amusing argument is that all the people have left the province. Nevertheless, it is 5%. Ontario's unemployment rate is around 7% and in Newfoundland it is around 14%. I wonder what the premier of Ontario would say to the premier of Saskatchewan who currently enjoys an unemployment rate that is less than the province of Ontario.

The premier of Ontario is currently facing a budget and he is at this point not facing a balanced budget. Last year he ran a deficit of about $5 billion. We on this side of the House have some sympathy for the premier because he inherited a mess from the previous Tory government. We understand inheriting messes from previous Tory governments. It took us some considerable period of time to dig out from underneath a $42 billion deficit. It took us at least three, probably four, budget cycles before we were able to balance the budget, and we paid an electoral cost in the election of 1997 for balancing that budget.

The premier of Ontario has similar difficulty and it will take him time to dig out from his deficit. Currently, I think his projections are that his deficit will run something in the order of $6 billion this year.

As I understand it, the Government of Saskatchewan has a balanced budget. I wonder what the premier of Ontario, who is looking at a deficit, would say to the premier of Saskatchewan, who is looking at a balanced if not a modest surplus and who is putting forward, through his representatives here in the House, a resolution saying that they are not getting their fair share. I dare say that Premier McGuinty might not be as sympathetic as one might otherwise expect.

I note that in September and October, when the Prime Minister and the premiers negotiated the equalization deal, some $33 billion over 10 years, moneys that the premier of Saskatchewan could not have otherwise anticipated other than through the direct intervention of the Prime Minister, the premier of Saskatchewan pronounced himself to be quite satisfied. He did not raise objections with respect to renewable or non-renewable resources at that time and in fact seemed to be quite satisfied with the undertaking on the part of the Minister of Finance to put forward a panel to analyze equalization. The Minister of Finance has fulfilled that undertaking and has agreed to set up the panel which was announced this week.

We appreciate that this is a complex formula. It is spread over 10 provincial jurisdictions and over three territories. It has 33 constituent elements, all of which are going up and down at any given time. It would, in some respects, cross the eyes of a rabbi just to try to follow the entire thing.

The finance minister said that Canada was not a cookie cutter approach to equalization or fairness among provinces. I hope that in my previous comments I was able to illustrate that this is an extraordinarily complex federation where moneys are being transferred back and forth based on renewable resources, non-renewable resources and other measurements of fiscal capacity.

I would suggest to my hon. colleagues opposite, who are supporting the motion, that at least six of the premiers, if not more, would have serious objections to this motion being passed. I can see how the opportunity to delete non-renewable resources from the equalization formula would be very attractive to members from Saskatchewan but it certainly would not be very attractive to other premiers in other jurisdictions.

The premier of Ontario, as I said, is facing some fiscal difficulties and he has inherited some of those difficulties. He has also created some difficulties for himself in that he, in the previous election, undertook to the people of Ontario not to raise taxes. He has been very constrained in his ability to raise revenues. He has sort of an unhappy choice of breaking his promise and raising revenues through taxation or he can raise debt, which I guess will be an inevitable result. He can no longer blame the previous administration for the financial difficulties. He has had an unanticipated windfall from the Government of Canada because he could not have anticipated that the $41 billion in additional health care over the next 10 years, of which Ontario will receive $16 billion, would be available to him when he was running for election in May of last year. Now he is in a situation where the revenues are not what he anticipated them to be and he is looking to the Government of Canada, as is the premier of Saskatchewan.

We have a very complex system, and I would respectfully suggest to members opposite that while it is not a perfect system, it attempts to redress unique situations in the federation from time to time where there are extraordinary circumstances. I would respectfully suggest that in the case of Newfoundland and Labrador and Nova Scotia those were extraordinary circumstances and that in the case of Saskatchewan members have not made the argument that there are in fact extraordinary circumstances.

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12:45 p.m.

Conservative

Tom Lukiwski Conservative Regina—Lumsden—Lake Centre, SK

Mr. Speaker, I want to take the hon. member opposite to task on a few of the things he said because his facts were not quite accurate.

First, the debt to GDP ratio in Saskatchewan is not at 25% as the member and the Minister of Finance suggest. It is at 34% and that is a significant difference.

Second, the member opposite speaks in almost glowing terms about the wonderful economic situation that Saskatchewan finds itself in with low unemployment and being a have province. I point out to the member opposite that our net per capita fiscal capacity is the third worst in Canada. Newfoundland's is lower, but Nova Scotia's is higher.

Also, with respect to unemployment rates, Saskatchewan has the highest percentage of poor aboriginals in Canada and of course they are not included in unemployment figures.

Also, we have a massive rural infrastructure to maintain, which the minister does not seem to appreciate.

Again, though, the bottom line, which the member opposite does not seem to get, is that with respect to national programs there has to be equality of those programs, in both the formula and the design behind those programs, for all provinces.

I can stand here and make a more cogent argument as to why Saskatchewan is closer to Newfoundland and Labrador in terms of economic capacity, fiscal capacity and net worth than the minister can in standing here and making an argument that Saskatchewan is a have province, yet the member opposite and the Minister of Finance and in fact all members opposite continue to say that it is fair to cut a deal with Newfoundland and Labrador and Nova Scotia, but the rest of the provinces be damned. That is just not fair. We are talking about an issue and the essence of fairness here.

Given the circumstances I have just outlined, which show the true economic and fiscal capacity of Saskatchewan, I would like the member opposite to please explain, if he can, why he does not agree that Saskatchewan deserves the same deal as that afforded Newfoundland and Labrador and Nova Scotia, which, I may say, was an extremely fair deal.

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12:50 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, the member misstates it. This is not an equality system. This is a system of equalization.

If we wanted an equality system, then we would simply eliminate all provincial jurisdictions and there would be only one jurisdiction in Canada, the national government. Money would then be distributed on a per capita basis. It would be pretty simple that way.

As long as there are provincial jurisdictions, there will be differences in fiscal capacity. That is true in Saskatchewan, in Ontario and in Newfoundland.

The hon. member said that he could make a cogent argument. I have been listening to him and I have not heard it. All I know is that Saskatoon, for instance, has a triple A credit rating with respect to its situation. Regina has a very good credit rating as well. Recently Saskatoon was the beneficiary of the synchrotron, probably one of the largest science projects going on in this country now.

I know that the government of Saskatchewan is running at a balance. I do not know where the member gets his 34% versus 25%. My 25% came from the national accounts.

On all of the numbers, I would respectfully suggest that he has not made his cogent argument. In fact, he fails to make a cogent argument that somehow or another Saskatchewan should be treated somewhat differently from all the rest of the provinces.

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12:50 p.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Mr. Speaker, I am a little concerned about the member opposite making the Ontario comparison. It is almost like this is a ploy to divide and conquer.

What is wrong with having equality in our Confederation? All provinces should be treated equally. I cannot believe that the member is suggesting that the premier of Ontario should take exception to the premier of Saskatchewan. Are not all premiers supposed to be equal and are not all premiers supposed to look after their own provinces and do what is best for their provinces?

My riding is in the province of Ontario. We in Ontario want equality as well. The member said that the premier of Ontario cannot break his promise about raising taxes. I do not think the member is on very safe ground there, because the premier of Ontario has broken a few promises since the last election.

Is the member representing the Government of Canada when he says that he is trying to divide, that he should be comparing provinces? I have a hard time understanding that concept in Confederation.

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12:50 p.m.

Liberal

John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, I can understand how the hon. member has trouble understanding and comparing fiscal jurisdictions. That is what the equalization formula does. It takes 33 measurements of fiscal capacity and compares one to another to another and measures the fiscal capacity of each provincial jurisdiction.

Once that is done, a five province average is established and moneys flow according to those who are below and those who are above. That is the way Confederation is. I do not see why that is a terribly difficult concept for the member opposite.

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12:50 p.m.

Conservative

David Anderson Conservative Cypress Hills—Grasslands, SK

Mr. Speaker, I want to follow up on a couple of comments made by the member who spoke previously. Like my colleague from Stormont—Dundas—South Glengarry, I too have a great problem with the fact that the member seems to be driving wedges between our provinces. He wants to compare provinces and how they have done and compare the numbers.

It was interesting to hear him say that equalization is not really about equality. It seems to me that it is. It is about treating people fairly and treating them equitably. Obviously if the idea is that non-renewable resources can be removed from some provinces' formulations in this whole system, it seems to me to say that they can be taken out of everyone else's to make it fair as well.

I want to talk a little about how we came to be here today. I do not really think that we should be here. If the government had been treating people fairly and equitably and dealing fairly with provinces, we would not be in the situation we find ourselves in today.

Basically what this comes out of, unfortunately, is having a political leader, now the Prime Minister, who had no backbone. In the election we saw him travelling around the country into regions that were demanding different things. He got into an area where he felt that he needed to make a huge commitment to try to gain some seats. He made the commitment that he would take the renewable resources out of the funding formula for equalization for eastern Canada, for Newfoundland and Labrador and for Nova Scotia. He made that commitment during the election, with no intention at all, let me add, of keeping it, not that we could tell.

Unfortunately for him and fortunately for Newfoundland and Labrador and Nova Scotia, a number of people from the Conservative Party in this House and the premiers of Newfoundland and Labrador and Nova Scotia insisted that he be held accountable for the promises he made.

So he was. It was a big struggle for everyone to overcome the objections of the Prime Minister and the finance minister to this plan. They finally went ahead with it and granted Newfoundland and Labrador and Nova Scotia what I would see as an exemption, basically; they are taking non-renewable resources out of the formula and have a good deal and a fair deal from that.

It is only reasonable that other provinces affected by that situation would ask for some of the same treatment. That is what we are doing here today.

I particularly want to acknowledge the member for Prince Albert in our caucus, who has been working on this issue for a long time. He was on it before it was popular and before many of the rest of us even realized it was a big issue. He has studied it and understands it well. I also want to thank the member for Regina—Lumsden—Lake Centre who moved the motion today to bring this forward in the House.

Equalization, as hon. members and others know, has a long history in this country. It was included in one of the sections of our Constitution when it was repatriated. The Constitution states that we have a commitment to equal opportunities in this country and that parliamentarians, the Government of Canada and the provincial governments are committed to “promoting equal opportunities” for Canadians, “furthering economic development to reduce disparity in opportunities”, and “providing essential public services of reasonable quality to all Canadians”.

It seems to me that today's request for all provinces to be treated fairly fits in with this.

In the Constitution, a second subsection also talks about how 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”.

That is what we are asking for today: that our provinces be allowed to provide those services at reasonably similar levels of taxation and that in doing so they get the same advantages from agreements that are made by the federal government.

Obviously equalization is the federal government's largest program for trying to reduce the fiscal disparities between provinces. Over the years its success has been questioned. Even the Prime Minister felt that there were problems with it as he agreed to change it. I hope to talk about that later.

Equalization payments are paid to less prosperous provincial governments to provide the residents public services comparable to those in other provinces. Equalization payments are unconditional; I do not know if most people know that. The receiving provinces are free to spend the funds on public services according to their own priorities.

In 2004-05 equalization will ensure that all provinces have access to revenues of at least $6,126 per resident to fund those services. I found this interesting. That is a significant amount of money and it is important that the provinces spend it wisely.

The program was renewed in 1999 for five years and has transferred an average of almost $10 billion a year to the provinces over the last several years.

The equalization payments this year are going to be in that range, about $9.7 billion. Saskatchewan actually has been a receiving province of equalization. It is only because of the skyrocketing oil prices over the last year or so that we have moved out of that situation.

Equalization is calculated using a formula that takes into account a number of different things measuring a province's fiscal capacity. There are 30 sources of revenue figured into that. It includes such things as personal income tax, corporate tax, sales tax, property tax and other such sources. The focus of today's discussion is on one issue, which is the role of non-renewable resources in that formula.

There has been a call for years to change that formula. There has been an unwillingness by the government to admit that the formula is actually flawed, but I would suggest the Prime Minister admitted that it was flawed when he agreed to change the formula for two provinces. He changed it not because of a belief that he had to make a change, but because he was put in a situation politically where he had no choice and his feet were held to the fire by Premier Williams, Premier Hamm and the Conservative caucus in this House, which finally forced the deal. I would like to come back to that deal later if I have the time.

I want to talk specifically about Saskatchewan. Because it is a province that is in the same situation as Newfoundland and Labrador and Nova Scotia, it is important that the finance minister and the Prime Minister realize they need to give the same deal to Saskatchewan as well.

We need to understand that no legislation would be changed. This agreement was made without legislation being changed. Therefore, agreements can be made with the other provinces, including Saskatchewan, without a major change in legislation.

I am disappointed particularly in the finance minister. We have seen before in Saskatchewan that whenever he gets into a tight spot he seems to think if he appoints a committee that somehow it will protect him and keep him out of trouble. It has on occasion, but this time I think everyone is seeing through that.

We recognize that he has appointed a committee. As we look through the structure of that committee, we notice that there are a couple of well connected Liberals there. One in particular has been appointed to other posts by the government. Some Liberal donors are also on the committee. It is interesting how the committee members are selected. Once again, there is really no surprise.

Mr. Speaker, I am splitting my time with the member for Battlefords—Lloydminster.

Saskatchewan has always been a have not province. Over the years oil prices have changed that. We have suffered from decades of poor management from socialist governments that have almost destroyed our economy. We sit beside Alberta. At one time we had the same population as Alberta. Both provinces had the opportunity to move ahead. We have chosen one direction and it has chosen another.

As we see the markets work in Alberta, it has been able to develop and prosper. In Saskatchewan we have suffered in many ways because of the socialist government philosophy which has kept people back. What is most disappointing to me is that we see in so much of socialism, including across the way, that the real intent of it is to keep people back. It is not to bring everyone ahead at the same pace but to keep those back who would be successful. That has made us rely on equalization payments for a long time.

We know that the current equalization formula is flawed. We agree that Newfoundland and Labrador and Nova Scotia deserve to keep their offshore gas and oil revenues. However, we think that what is fair for those provinces is also fair for Saskatchewan.

It is estimated that had Saskatchewan received this deal a decade ago, it would have meant up to an additional $8 billion in the province from non-renewable natural resource revenue. It is interesting because our debt is in the range of $12 billion to $13 billion. We would have been in a very good situation had this deal been made quite a while ago. For much of the past decade, instead of the people in Saskatchewan getting that revenue, the Liberal government has actually clawed back our oil and gas revenues at a rate exceeding 100%. This change should be a slam dunk.

Unfortunately, I am coming to the end of my time and I would like to speak to this issue for quite a while longer. One of our biggest problems has been the finance minister in our province. He has not been a friend for Saskatchewan over the years. He failed on the Crow rate payments. He failed on a number of Canadian Wheat Board issues, which culminated in farmers being locked up in jail because of his action.

Now we are dealing with an equalization situation where he absolutely refuses to do the right thing for his own province. As I mentioned, rather than do the right thing, he has appointed another committee which will not report until the end of the year and then we will discuss it for another year or two. In the meantime, the Saskatchewan economy is not what it should be.

We call on the finance minister to step forward, do the right thing for his province and give Saskatchewan the same deal that he has given to Newfoundland and Labrador and Nova Scotia. In the interest of fairness, we hope that he will do that.

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1 p.m.

Conservative

Tom Lukiwski Conservative Regina—Lumsden—Lake Centre, SK

Mr. Speaker, I would like the hon. member to expand a little on some of his comments. Toward the conclusion of his presentation he said that had Saskatchewan received the same equalization deal for the last decade as now afforded to Newfoundland and Labrador and Nova Scotia, it could have meant up to $8 billion in additional revenue to the province.

In Saskatchewan there is a serious problem in the agricultural sector. The agricultural sector quite frankly has been failed by the Liberal government. The provincial NDP government has also failed farmers. I am wondering if the member could expand on what an additional $8 billion could have meant to the agricultural sector in safety net programs and direct aid to farmers who have been devastated over the last number of years by drought and frost.

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1:05 p.m.

Conservative

David Anderson Conservative Cypress Hills—Grasslands, SK

Mr. Speaker, we are very familiar with the situation, but the Liberal government does not seem to be quite as familiar with it.

The situation on the prairies is desperate for many people who are involved in agriculture. The results of last fall's frozen crop will begin to affect the grain farmers and the people who grow specialty crops. Many of them do not even have the seed money this spring to get their crops into the ground.

The beef industry has been in trouble for the last year and a half. The government has failed in many different areas. Some of us said earlier that we need to put money immediately into processing plants to get them up and running to take care of some of the excess beef. The government has failed in that area. The government has failed in its programs. The CAIS program, as we are all aware, is seen as a universal failure by farmers.

It has been very frustrating. We could have had tremendous fiscal capacity in our province to build processing plants, to move agriculture forward and to provide programs. The crop insurance program is basically broke. The province does not have the money to make it viable. It is frustrating because we see our money going other places. It disappears into a black hole in Ottawa and the people of Saskatchewan are sick and tired of it.

One rancher from my riding actually wrote to me in the last couple of days. Ranchers are not only angry at the federal government but they are angry at the government across the border as well. They are getting desperate. One of the interesting things they are calling for is to put a tax on our energy to try to recover some money for the producers in Saskatchewan. That is an interesting tie that has not been made before. Farmers are desperate. They are getting angry. They want someone to do something that will save them and help them to continue to live the lives they are proud to live.

It is frustrating because the finance minister could very easily make this deal for Saskatchewan, but once again he has failed the people of Saskatchewan. He will not step forward and show the leadership that is needed from him. I really think it is time to make a change in that riding and to elect a Conservative member there so that we do get the representation here.

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1:05 p.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Mr. Speaker, in his comments my hon. colleague mentioned that the finance minister has the ability to make the same deal with Saskatchewan as he has made with Newfoundland and Labrador and Nova Scotia, but he has appointed a committee to study this process. I am wondering if the member could shed any light on why we need a committee now when the finance minister was able to do business with two provinces without a committee.

I would also be interested in knowing what the makeup of that committee is. He mentioned some people who were rather close to the finance minister. I would like some comments on that, please.

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1:05 p.m.

Conservative

David Anderson Conservative Cypress Hills—Grasslands, SK

Mr. Speaker, unfortunately I do not have the list of the committee members with me. It is in my office and I would be glad to supply it to my colleague and anyone else who is interested in it.

In order to make the Newfoundland and Labrador and Nova Scotia agreement, no legislative changes were required. It did not have to be made to the Atlantic accord or to the equalization program. These payments are being made under the offshore revenue agreement and separate from the other accord. There is nothing stopping the finance minister from doing this with other provinces.

I want to point out that when the minister said that he has provided an extra $710 million in equalization for Saskatchewan, that number is misleading. Of that $710 million, the government is going to claw back $233 million in equalization payments. It gives with one hand and takes back with another and spends the money. Of that, $120 million was actually owed to us. That is money the Liberal government was supposed to have paid to us and did not. It gives us basically, according to his figures, $350 million when it could have been $8 billion over the last 10 years and it would be $4 billion over the next several years.

The finance minister needs to be held accountable for the fact that he is not representing fairly the people of this country and the people of Saskatchewan.

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1:10 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Mr. Speaker, it is a pleasure to stand today and represent my province as a whole, as well as the constituents of Battlefords—Lloydminster, heavily benefiting by the oil and gas sector that needs a kick-start as it were. We are sitting on the border with Alberta poised to rush into Saskatchewan to take advantage of the huge reserves there, but to this point in time it has been a negative connotation to do that with the clawback situation that we are facing under this flawed equalization formula.

In this our centennial year, ours and Alberta's, if we look back 100 years to when we both came into this great Confederation, we ask what has changed? What made Alberta surge ahead as it has and Saskatchewan be held back? A lot of it is provincial governments of the day. All the way through Alberta has been more entrepreneurial, more progressive, we may say. Saskatchewan has been held back by some socialist thinking. A lot of it in the last 50 years since the inception in 1957 of this equalization formula has been the basis of the undoing of Saskatchewan.

Alberta got its real kick-start in the 1940s around the time of the second world war when that first oil well came in. Alberta really got a toehold and started to build and blossom from that time forward. Saskatchewan missed that opportunity. Since 1957 with this equalization formula it has almost been regressive to see it move ahead. In this centennial year we would certainly like to see that changed around.

It has been said here before and it bears repeating that under the Liberal government over the last 10 years if the formula had operated as it should have, Saskatchewan would have benefited to the tune of $8 billion. Half of that would have come from oil and gas revenues. There is no way to really sit back and quantify what that number would be today. That $4 billion catalyst over the last 10 years would have returned us 10 times that amount in oil and gas revenues and economic spin-offs in the province of Saskatchewan.

The province has been stagnant. It was said earlier today but it bears repeating that in the 1930s the population was around 930,000 to 940,000. Today Saskatchewan's population is still less than a million. The province has gone up 5% and that is all. It is stagnant.

The finance minister commented in his speech that he had a vision for Saskatchewan which saw the province really going ahead in value added, and as the minister responsible for the Canadian Wheat Board he was one of the guys who shut that down. He certainly made the government a catalyst and it just has not happened.

The one comment I really took exception to was that the government is really pushing immigration for Saskatchewan. That is all well and good, but the problem we have in Saskatchewan is the out-migration of our own kids. We educate them to be the best and the brightest, and out they go. They start running companies that are global in structure. A tremendous number of our graduates and our kids are working in Alberta in that oil patch that Alberta started before this equalization formula became a hindrance. I take exception to that.

The minister also mentioned that Saskatchewan with its huge future potential has the fiscal capacity to tax and all this type of thing, that it could step up and take over where the federal government has come up short. I am paraphrasing, but that is basically the message he was giving.

The problem with that is that the higher the taxation rate, the more regressive it is to any business moving in. We have seen that with our socialist-minded governments that are on side with this initiative at this point. However, they are certainly willing to let someone else do the heavy lifting, as we saw when Danny Williams from Newfoundland and Labrador stood tall, came forward and basically traded blow for blow with the Prime Minister. Danny Williams said that this is what was said, this is what was promised, promise made, promise broken, fix it. The Prime Minister did. Begrudgingly the Prime Minister has signed on to a deal.

No one has seen any cash yet. I know Premier Hamm of Nova Scotia who was also a beneficiary of that deal has been in touch with our caucus to ask, “Can you guys kick-start this somehow and get that cheque flowing?” It is coming to Nova Scotia's fiscal year end and the province would like a little bit of that cash flow up front as well. It is just not happening.

The finance minister has some idea that one year in Saskatchewan of this so-called have status has fixed everything. That is like going to the dentist and having one good check-up. We know there will still be problems later on.

In this our centennial year the time has come to get this fixed. It is somewhat suspect in that the Liberals knew this motion was coming, but the day before we had this supply day motion on fixing equalization, the minister finally tabled his expert panel and gave the panel its terms of reference. One would have to be a Philadelphia lawyer to figure out those terms of reference when looking at them. I am sure those folks are up to the job being the good Liberals that they are. I am sure they will be able to wade through it and come back with something that the finance minister can live with.

I know Saskatchewan took exception to one of the names that was put forward. Now we have a panel of five, instead of a panel of six. We will see how that works out. The panel has a full year to get back to the finance minister with any changes. We could very well have an election before then and we will fix this thing. We will not need a panel of experts to tell us what is wrong because the provinces and the people out there in tax land have already done that.

The whole equalization process, and the fundamental word in there is equal, has become a political process, not a practical process. We see reviews every five years, but what the government does is make the situation more complex. The parliamentary secretary alluded to that. He said, “It is not a perfect system, but it is complex”.

Thirty sources make up the basic formula. We have tinkered with it, we have played with it, but we have never done a fundamental overhaul to get it in today's terms. If we have potential in Saskatchewan, it is ours to get out there and work with, but we do not need the federal government clawing back 110% of that potential. It is regressive and there is no reason for it.

One of the huge hits we see, especially in Saskatchewan, is in the rural areas of the province. Compounded with a provincial government that has no political gain to be made in the rural areas, plus a federal government that has basically taken slap after slap at rural Canada, we see that sliding backwards. There is very poor political attendance in those areas by both the provincial and federal governments because there is no political gain.

We have to turn that around. The potential is there. The potential is not in downtown Saskatoon or Regina. The chambers of commerce may argue that, but those two communities live at the whim of the agricultural sector and of course the oil and gas sector, the cash flow commodities. They make take exception to that, but if they stop and look back, this year's Christmas rush in the malls in Saskatoon and Regina was nowhere what it should have been. The rural economy is hurting. Those people come in and spend their dollars, and it is just not happening at this point.

People are getting angry. The provincial government is crying poor when it comes to ponying up its share of the CAIS, its 40%. One can argue that formula is as flawed as the equalization one and I would agree. It needs to be changed, as well.

The provincial government is withholding the cash flow to my farmers and other farmers of Saskatchewan. Look at the changes the provincial government has made to production insurance, the old crop insurance program. Premiums have gone up as much as 50% in some instances and the coverage has gone down a minimum of 10%. They are getting caught on both ends. That speaks to the very viability of my farmers. We see the hook that is being made by the bureaucrats in both the provincial and federal governments called best farming practices. If they do not have production insurance, it affects their CAIS payout. If they do not have the cash to put on deposit in CAIS, they cannot collect the same amount of money in production insurance because of this best farming practices.

I have a lot of folks who will go through the motions this year, put the seed in the ground which they already have, but no fertilizer and chemicals. Under their historical average, they will get nailed with not following through on best farming practices and that will hit them again.

We have to start to look at some way to get some cash flowing out there. This is probably the quickest way it can be done.

The finance minister will hide behind the fact because he does not want to tamper with it. It is the same excuse the Prime Minister uses on fixing the Senate. He does not want to do it ad hoc.It basically comes down to he does not want to do it at all. The finance minister is falling into that same trap. He does not want to change anything so he hides behind the fact that he needs seven provinces and he has to have this or that. However, they can make sidebar deals with anybody they want for political gain. That speaks to the fact that it has become a political process and no longer a practical progress.

As we go through this, we look at hit after hit that has been placed on the provinces. Then the government is supposed to revive them with the equalization formula, the $25 billion that the finance minister of the day, now Prime Minister, ripped out of the health and social transfer to the provinces. Then he started to pump them back up again with a bit of increase in equalization.

The Liberals have never met a tax under any name they do not like. Tax the heck out of something and when it can no longer bear that burden, prop it up whatever way they can until it starts to crawl again and then hit it again with some more taxes. It is just a merry-go-round. The power is the money and the money is the power. Those guys are great at forming government but they fall short on governing.

When we go through the whole equalization system, look at the complexity of it, look at changes that need to be made, every political party in the province of Saskatchewan, bar none, other than the finance minister, the key Liberal minister, is in favour of changing this flawed system.

I know Harry Van Mulligen, the finance minister of Saskatchewan, was here. His quote when he came before the Senate was, “The current program does not improve stability in provincial finances as it is advertised to do, and it is not responsive to changing provincial fiscal circumstances”. I guess that sums it all up. The program that is supposed to help has become a tremendous hindrance.

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1:20 p.m.

Conservative

Tom Lukiwski Conservative Regina—Lumsden—Lake Centre, SK

Mr. Speaker, I would like to ask my colleague a question. We have heard many members opposite say today that we cannot have a cookie cutter approach to equalization. I disagree with them profoundly on this. I believe that when we have a national program, the formula has to apply equally to all provinces.

I would like my hon. colleague to speak on that. If we need to have equal representation in the formula for provinces in the equalization program, what about the issue of fairness? Should we receive the same deal in essence that we see as being afforded to Premiers Hamm and Williams?

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1:20 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Mr. Speaker, my colleague, the member for Regina--Lumsden--Lake Centre has been instrumental in getting this motion before the House today.

He is absolutely right. The whole initiative back in 1957 was to create fairness, to level the Confederation playing field. It started out with all the best intentions. Now we have politicized it, turned the bureaucracies loose on it, both at the provincial and federal levels, and we have had huge infighting. Government after government has been afraid to tinker with it. It has become like the tax code. It is so complex that where do we begin and once we begin where do we stop?

We are seeing the same noises coming out of Ontario. It is saying that it is missing out on certain aspects of it. I think that is what is stopping the finance minister and his Liberal minions more than anything. Once we start that slide into change, where are we able to build the dam and say that this is enough and we will not go any further”?

Whether Ontario's arguments are valid or not, it has a right to bring them forward. The Premier of Saskatchewan, the Premier of Alberta, the Premier of Nova Scotia and the Premier of Newfoundland and Labrador are all there for the best interests of their people. The federal government, in taking on all the tax measures it has done over the last number of years, now controls the cashflow and the power. It is time for it to start to rework the whole Confederation, and maybe not just the equalization formula. It time it get in there and talk about strengthening the fabric of the country at all levels.

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1:20 p.m.

Scarborough—Guildwood Ontario

Liberal

John McKay LiberalParliamentary Secretary to the Minister of Finance

The member argues, Mr. Speaker, that the Conservatives would fix the equalization program and that we do not need the expert panel.

I would like to ask the member a simple question. How would the member propose to fix it? Would he follow his leader's idea that non-renewable resources be removed from the formula? If so, how will he respond to the five out of eight provinces that would be affected negatively by that idea?

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1:20 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Mr. Speaker, that is more than a simple question. There is a lot of complexity in this situation. As I said, it is where do we start.

I guess the first start is to start. We should not hide behind another year long study of something when the provinces have already told the government what they need and what they want. It is a matter of getting on with that performance.

The member opposite should realize that the one person whom Saskatchewan objected to was taken away all together and no one replaced that person. Therefore, the expert panel is a little circumspect.

However, taking out the non-renewable resources is a great first start. If there are provinces that slide a little, then that is what the equalization formula is supposed to address.

When we start to see a province like Saskatchewan become a have province and build on that, not for one year as the finance minister is crowing about but year after year, we will start to see finances coming from that province, and we are more than happy to prop up someone else.

However, when we see the system now where Saskatchewan receives less than $100 million, our next door neighbour Manitoba receives almost $1.5 billion and we are propping it up with our oil and gas, we say it is not working and it is inequitable. We have to start making those changes.

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1:20 p.m.

Conservative

Guy Lauzon Conservative Stormont—Dundas—South Glengarry, ON

Mr. Speaker, because of the Liberal government's carving out of $25 billion from health care, as the member so eloquently stated, it devastated our infrastructure in Ontario. Would the member comment on what it has done to the province of Saskatchewan?

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1:25 p.m.

Conservative

Gerry Ritz Conservative Battlefords—Lloydminster, SK

Mr. Speaker, it was said earlier by my colleague from Yorkton--Melville that the waiting times we face in Saskatchewan are double and triple that of what we see in the rest of Canada.

The problem goes back to the federal government originally being a fifty-fifty partner in health care. That number went as low as 14¢ on the dollar in some provinces. We have now ramped it back up, with all these side deals that the Prime Minister made to buy votes in the last couple of elections and with his scary health care philosophy, to 25¢ on the dollar. It is still half of what it should have been that many years ago.

When we look at the cataclysmic effect that has had in health care, that is what has led to the lineups. We have lost all of our doctors and our small town health care systems because the federal government did not put in its fair share, and it continues to not do that.

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1:25 p.m.

Bloc

Guy Côté Bloc Portneuf, QC

Mr. Speaker, unfortunately, we will not be able to support this motion of our Conservative friends for certain reasons that I would like to explain today.

As has been said in this House several times, equalization is a pretty complex matter. People often joke that only a few Canadians and Quebeckers actually understand the system. In fact, though, the system is relatively simple, so simple actually that the goal of equalization was even enshrined in the Constitution. The goal of equalization was to ensure that public services could be provided of basically comparable quality and at basically comparable tax levels.

Nonetheless, it could not be as simple as that. Equalization has existed since 1957, but it has been modified several times both in order to reflect new realities, which is entirely to be expected, and occasionally for reasons that were more political than economic in nature. The result, especially over the last ten years, has been an equalization system that has ceased to play its role as the great equalizer. Instead, in several regards, the system has aggravated the disparities between the various provinces and Quebec.

We will not be able to support this motion for several reasons. It does not go far enough. What is needed for equalization is really in-depth reform. Nowadays, unfortunately, the equalization system no longer meets its original goal for various reasons, including the application of what is called the five province standard. This standard, according to which an average is calculated on the basis of only five provinces, results in an artificially low average. Some provinces are excluded from the calculation. Consequently, certain provinces that might have been entitled to equalization find themselves excluded.

As far as the government is concerned, it is a less expensive program. The government can therefore boast at the same time about having enormous surpluses while failing to meet the needs of the public.

The equalization system calculations also do not take all the revenues of the provinces into account. Certain revenues that should be considered in the calculation of equalization are excluded in sometimes arbitrary ways.

In addition, the equalization amounts are highly unpredictable. Even the October 2004 agreement fails to totally correct this situation because it is spread over several years, which is pretty sarcastic in my view.

Once again, the government is not getting at the root of the problem. It tries to find temporary solutions just in order to buy time, have it both ways, instead of getting at the heart of the problem and finding effective solutions.

In the current situation, faced with this very imperfect system, the government had no other choice than to negotiate special agreements with various provinces. As I said earlier, these special agreements have existed since the beginning of the equalization program. However, the recent agreements with Newfoundland and Labrador and with Nova Scotia have crystallized in a way the iniquities in the equalization system and highlighted virtually everything that does not work in the calculation of equalization.

It is important to say that we are not unhappy but actually very happy for the people of Newfoundland and Labrador and of Nova Scotia. Thanks to these special agreements, they will be able to improve their economy, enhance their prosperity, and develop their various industries more effectively while avoiding the fiscal clawback that can result from economic growth based on non-renewable natural resources.

At the same time, we should not forget that these agreements will provide the province of Newfoundland and Labrador with $2.6 billion and the province of Nova Scotia with about $1.1 billion by 2012. The result is an enormous increase in their tax revenue potential, which is not included in the equalization calculation.

This accord makes us happy for the residents of the provinces concerned, but it highlights what is wrong with the equalization system and skews data completely.

The Conservative motion seeks to extend this model to all the provinces and Quebec. I think this would spell the end of equalization. It would completely alter the nature of this system, which, while imperfect, is not beyond reform, at least that is our position.

Also, the second part of the Conservative motion does not go far enough in proposing only transitional measures.

Moreover, this motion penalizes in a roundabout way those provinces which have made a different choice, choosing to develop clean and renewable energy sources—I can think of hydro power in Quebec for instance—instead of basing their economic development on non-renewable and much more polluting energy sources.

The Conservative motion addresses a very real problem. Equalization is showing signs of age and is no longer achieving its mission. Instead of providing an efficient solution to these issues, the motion will increase the iniquities in the system.

That is why I encourage our Conservative friends to continue their consideration of the matter, up to a point, because the transitional measures put forward in the motion are clearly inefficient. The exemption of non-renewable resource revenues from equalization clawback should be extended only in combination with a comprehensive reform to restore fiscal balance to the provinces which have opted for alternatives to non-renewable resource development or those with not as great a potential as others in this area.

Let us not forget that this reform of equalization is part of a larger picture, which is the whole issue of fiscal imbalance. The motion completely overlooks the major impact of such things as federal transfers, the formulas for the calculation of land wealth or potential tax revenues from mining.

In recent months, the fiscal imbalance subcommittee has had the opportunity to visit a number of provinces and provincial capital cities. What was striking in the presentations by the various stakeholders was the realization that equalization is no longer the great equalizer. More amazingly, while there are real problems in every one of the provinces we have visited so far—Nova Scotia, Ontario, Saskatchewan—the problems vary from one province to the next.

Naturally, at first sight, it may seem like a good idea to say that, since each province is experiencing different problems, special agreements must be negotiated. However, I repeat that these special agreements are destroying the equalization program. This is quite unfortunate. Equalization enables each province to provide comparable services, services to which all Canadians and Quebeckers are entitled.

There is a history to this and, once again, we see that the different actions taken by this government have served to further destabilize the equalization program. For example, at the conference last October, the provinces were forced to accept an agreement on equalization. I come back to this once again: the special agreements with Newfoundland and Labrador and Nova Scotia have further destabilized the equalization program.

Ultimately, the Conservatives' motion is proposing an end to equalization. If the agreement on non-renewable natural resources were extended to all the provinces and there were to be no indepth reform, we would say, “Forget equalization and okay to the special agreements for all parties”. The Conservatives believe—as is their right—that this is the solution. We do not agree, obviously.

We believe that the Conservatives are making a mistake because equalization is supposed to ensure equity; it is supposed to ensure that the provinces provide comparable services. As a result, someone living in Quebec, Ontario, Saskatchewan or any other province or territory is guaranteed access to similar services in health and education, regardless of the revenue sources of Quebec, the province or the territory.

One of the effects of equalization is that, all too often, when there is development, there is a clawback.

We were in Regina yesterday, and the Premier of Saskatchewan and the leader of the opposition gave an extraordinary presentation, which exposed clearly the problem with equalization: when a number of economic developments take place, the rate of tax clawback compared to equalization could on occasion be in excess of 100%.

To simplify the figures somewhat, let us take the following example. If, after some economic development, the province earns an additional $1 million in revenue, it could lose $1.1 million or $1.2 million in equalization payments, in other words, more than the revenue generated by the development.

Understandably, in some cases this is not an incentive to economic development. On the other hand, the Premier of Saskatchewan explained very clearly to us that the government had never avoided moving on an economic development because of the clawback implications, and we must congratulate them on that.

So, under this equalization system, which has not worked all that well for some years, and even less well since last October's agreement and the specific agreements with Newfoundland and Labrador and with Nova Scotia, is again being threatened by the Conservative motion. This motion will inevitably increase the iniquities and create new ones as well. It will further complicate a program that needs instead to be simplified. This motion does not address the real problems of equalization, which require a thorough reform.

That thorough reform might address data better reflecting reality and giving an average of the tax potential of the various provinces and of Quebec. For example—and it seems to me that our Liberal friends ought to be able to understand this—when the average has been calculated based on five provinces only, it is not really a Canadian average, but rather an average of five provinces. If the standard were to be changed to ten provinces, the average would then reflect the economic reality and the reality of the tax potential of all of Canada.

To calculate equalization, we would need a better way to calculate property tax capacity. Here again, creative calculations are used to determine property tax capacity. In the calculation of equalization, all provincial revenues should be included. There might have been a time when it was necessary to exclude certain non-renewable resource revenues, but, in my opinion, that time is past. To determine actual capacity, all provincial revenues should be included. In a word, there are a number of solutions available.

With an ounce of goodwill, the government could implement these solutions without challenging the work of the expert panel on equalization established on March 21. This panel will focus mainly on the allocation of equalization payments, not on the functioning of equalization per se; not on the calculation method, but rather on how the amounts will be allocated.

As I said earlier, the equalization issue is part of a broader picture: the fiscal imbalance. Unfortunately, the government does not recognize this reality, and I must say that, as time goes by, I am increasingly getting the feeling that the government is alone in this position.

In Quebec for instance, we have 200 elected members: 125 members of the National Assembly and 75 federal MPs. Out of these 75, only 21 Liberal MPs fail to recognize the fiscal imbalance. During our tour, we heard presentations in Halifax. Many provinces recognize the fiscal imbalance as a problem. In Toronto, the Ontario premier recognizes the fiscal imbalance. I was in Regina, and the Premier of Saskatchewan recognized the fiscal imbalance. I do hope that this government will eventually realize how isolated it has become in its stubborn refusal to recognize these facts.

Changes to equalization are needed to try to resolve part of the fiscal imbalance. What does this mean? For now, it means improvements to equalization. Transfer payments for health and education need to be increased considerably. These are issues that are very important to our constituents.

In addition to addressing equalization and transfer payments, the government must transfer tax fields. One solution, for example, could be to transfer the GST tax field, or some of the personal income tax, or tax points for Quebec, while eliminating some other transfers. The government could consider these solutions, but it refuses to do so.

We currently have a minority government in Parliament. This allows us to help the government in its work. Naturally, I am referring to the Speech from the Throne. Although the resolution on the fiscal pressures—what some call the fiscal imbalance—is very weak, it is a step in the right direction. The creation of the Subcommittee on Fiscal Imbalance of the Standing Committee on Finance is an extraordinary step in seeking solutions to this problem. I am really looking forward to June 2, when the Subcommittee on Fiscal Imbalance tables its report.

In conclusion, the Conservative motion we are considering today will in no way resolve the equalization problem. In fact, it might make matters worse and increase the inequities. Rather than focus on special agreements and transitional measures, we should conduct a thorough reform of the equalization system, which would allow us to determine the real situation for all the provinces and to have a functional equalization system that meets the transfer needs of the provinces and Quebec.

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1:45 p.m.

Conservative

Monte Solberg Conservative Medicine Hat, AB

Mr. Speaker, it is my pleasure to rise to address this issue and thank my friend from the Bloc for his comments. Obviously, the Conservative Party also shares his concerns about the fiscal imbalance. We were quite pleased to participate in the hearings on fiscal imbalance and hope that the government will come to understand that this is not some myth. This really is a truly serious problem.

However, I want to get to the guts of the motion and get some feedback from the member regarding the issue of non-renewable natural resources, and whether or not they should actually be included in the equalization formula.

I want to make the case again for why they should not be included. I trust my friend understands that if non-renewable natural resources are included in the equalization formula, it means that we have a situation where for every dollar that is produced in revenue from these non-renewable resources basically the same amount of money is clawed back through equalization. This means that these resources should be used to help a province get permanently on its feet, build infrastructure, and build capacity for the future. When the day comes when those resources will be gone, all that money will be lost.

Can my friend understand why that is important to provinces who have lots of those types of resources, but maybe not a lot of renewable resources? If he can understand that, why can he not come to support what we are proposing today?

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1:45 p.m.

Bloc

Guy Côté Bloc Portneuf, QC

Mr. Speaker, I would like to thank my colleague for this excellent question, which raises some very important points.

Actually, one cannot help agreeing on the face of it with the member's statement that the resources are non-renewable and, once developed, will have disappeared forever. However, we must never forget that these resources are not developed in a vacuum; the wealth that their development generates for the various provinces is re-invested in infrastructure and services for people and will make it possible to reduce taxes.

Non-renewable resources are not in fact developed in an economic void where money is collected but not re-invested elsewhere. Thus the development of non-renewable natural resources brings wealth to the various provinces.

I feel that it is on this basis that we should calculate the entire potential in order to ascertain all the revenues. That is the first thing.

Second, when one thinks of Alberta and of the Hibernia project, for example, all Canadians contributed to the exploratory phase and to the development of the resources in various ways. As a Quebecker, some of my taxes went to developing these natural resources. Now I am told that, on the one hand, I helped to finance the development of non-renewable natural resources, but on the other, I cannot enjoy any of the benefits of that development.

Although the member may seem to be right, when we examine his suggestion a little more closely, we realize that it is very unfair. This is why I ask my Conservative friends once again to give this some more thought.

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1:45 p.m.

Conservative

Loyola Hearn Conservative St. John's South, NL

Mr. Speaker, I am a bit surprised that the Bloc is not supporting the motion because it is a province that is always looking for special treatment. So, it is difficult to understand why it will not support a province looking for fair treatment in order to benefit from its own resources. If that is the case, if the member does not support or does not think a province should benefit from its own non-renewable resources, then surely he would not support a province benefiting from another province's resources.

In light of that, I wonder if he would commit to talk to his premier and ask him if he would sit with the Premier of Newfoundland-Labrador and renegotiate the Upper Churchill contract.

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1:50 p.m.

Bloc

Guy Côté Bloc Portneuf, QC

Mr. Speaker, once again, a large part of the problem with the Conservative motion is that it examines only one aspect, namely the revenues from the development of non-renewable natural resources. It looks only at the revenue side. We must not forget, though, that all Canadians and Quebeckers contributed through their taxes to the development and the expenditures incurred to produce these revenues. This is why I find it unfortunate that the motion looks at only one aspect of the issue.

For example, Newfoundland and Labrador gets revenues from the development of its resources, and that is entirely as it should be. However, since we all contributed to the outlay, it seems to me that it would be fair if we could all participate in the benefits, even if only indirectly. We are speaking here of indirectly, we are speaking of equalization. We are not asking for a percentage of the revenues and profits from the development of coastal oil. We are just asking for this to be taken into account when it comes to equalization. It is as simple as that.