Debates of March 22nd, 2005

Supply

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Mr. Speaker, that is certainly important. It verges on the issue today insofar as it is an issue of equalization with some equality in terms of choices.

Too many governments get into that habit. Certainly at the federal level the Liberals do it all the time. I would agree with my colleague.

As a party we have made the plain and clear statement that we would allow people to make the choice. A husband and wife could make the choice, whether it be institutional day care, or perhaps one of the spouses who does not have a full time job, or an aunt, a grandparent, a relative. They could make their own arrangements. This would provide real equality.

Certainly in that area rather than the government dipping in, there are things we could do by way of the tax code in terms of rebates and those types of things so that parents could make their own choices. We would insist upon that. In this way again it is equality and fairness because individuals make the choices.

With a province, if it has the proper revenues, instead of those being siphoned and sucked up by the federal government, the province could make the proper choices since it is closer to the people. That level of government can follow the needs in its particular situation in a way that better serves the people in that province.

[Jeremy Harrison, Conservative, Churchill River, SK]

Mr. Speaker, the member for Saskatoon—Wanuskewin made an excellent address and made the points very well.

Anyone in the chamber and anyone watching at home has to realize that the equalization formula is not treating Saskatchewan fairly. Millions and millions of dollars are being taken from the pockets of Saskatchewan taxpayers and are being wasted in Ottawa by bureaucrats who would rather spend that money on sponsorship programs than on pressing issues such as helping the agricultural producers in Saskatchewan.

It is interesting to point out that every elected official in Saskatchewan is on the same page on this issue, everyone except one. That one is the Minister of Finance, the elected official who claims to be looking out for Saskatchewan and defending the interests of the Saskatchewan people. Let me tell the House that he is not doing that.

Saskatchewan is not being treated fairly. Every elected official in the province is on the same page, including my colleague from Regina—Qu'Appelle who has done a lot of work on this issue. I might add that he and his wife just had a new child, an 11 pound baby boy named Thomas. May I add that his wife Jill is doing fine.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Mr. Speaker, I thank the member, a good friend and colleague, for that good question. He comes from a part of our province where there is a lot of natural resource. As one representing very well the constituents of that vast riding up through the Churchill and so on, the gentleman knows the issue well and the negative effect that it can have.

The member has rightly said that all members on a non-partisan basis are on side, except for a Liberal provincial leader who has actually gone off in a different and strange direction on this one. However, the member's point stands because that person is not an elected member and probably never will be with the kind of attitude he has particularly on this issue.

The member is quite correct that we need it for fairness in our province. We need it in particular for the north and his riding, which has more or less had the resources raped out of it all these years with no particular benefit to the aboriginal people that he represents very well in his vast constituency.

[The Acting Speaker (Mr. Marcel Proulx)]

It is my duty pursuant to Standing Order 38 to inform the House that the question to be raised tonight at the time of adjournment is as follows: the hon. member for Renfrew—Nipissing—Pembroke, National Defence.

[Raymond Simard, Liberal, Parliamentary Secretary to the Deputy Leader of the Government in the House of Commons]

Mr. Speaker, I thank my hon. colleague for offering me the opportunity today to respond to his motion calling on the government to extend the benefits of the recent Atlantic accords with Newfoundland and Labrador and Nova Scotia to all the other provinces.

His one-size-fits-all approach to federalism is certainly appealing in its simplicity. After all, would it not make life easy for the federal government to treat all the provinces and territories as though they shared the same geography, the same history, the same resource base and the same level of economic development? No doubt it would.

However I am proud to be able to say that this government will not settle for the easy way out because this government understands that fairness involves more than applying the same cookie cutter treatment to all provinces.

It is about making investments that create wealth and expand opportunity and ensuring that all Canadians have the chance to share in the promise of our society regardless of where they live.

It is about being flexible and responsive to unique regional concerns.

It is about reconciling legitimate but competing demands on the understanding that we all benefit when we direct our energies first to those most in need.

It is in this spirit that the Government of Canada recently renewed its existing offshore revenue agreements with Newfoundland and Labrador and Nova Scotia. By giving these two provinces the maximum benefit from their offshore revenues, these deals will provide a much needed window of opportunity for them to overcome the serious economic and fiscal challenges that they are currently facing, which brings me to the basic premise of the hon. member's motion, which is the assumption that these two provinces are no more deserving of extraordinary assistance than any other province.

Let me take a moment to disabuse him of that notion.

First, Newfoundland and Labrador currently has the highest net debt of all provinces, at 62.8% of its GDP, compared to a provincial average of 25.1%. Nova Scotia's net debt is second highest, at 42.7%.

Newfoundland and Labrador's per capita debt servicing costs are $2,068 per person per year, nearly three times the provincial average. Nova Scotia's per capita debt servicing costs are second highest, at $1,099 per person per year.

With its declining population, Newfoundland and Labrador face the situation in which fewer people remain to pay off this debt. At the same time, Newfoundland and Labrador also continues to have the highest provincial unemployment rate, at more than double the national average. Unfortunately, Nova Scotia is not far behind.

To make matters worse, Newfoundland and Labrador's budgetary balance has been deteriorating over the last few years. In this fiscal year, the province's deficit is estimated at $708, or 3.7% of GDP, the highest among provinces.

In short, these partners in our federation were in danger of falling so far behind the other provinces that they were at risk of never catching up.

True, treating them the same as the other provinces, as suggested in the hon. member's motion, would have been the easy thing to do. However Canadians understand and I, as a Manitoban, understand that this would not have been the right thing to do.

Because it is in all Canadians' interest to see these provinces on a sustainable fiscal track, these agreements on offshore revenues mean Newfoundland and Labrador and Nova Scotia have a fighting chance at getting their fiscal houses in order so that they, too, can make the investments necessary to strengthen our federation in the years ahead.

How exactly will these agreements help these provinces get back on their feet?

Under the renewed accords, they would continue to receive 100% of their offshore resource revenues no matter what the price of oil and gas. As promised by the Prime Minister, this deal will give both provinces 100% protection from equalization reductions for eight years, or as long as they continue to receive equalization payments.

It will also provide the provinces with substantial upfront payments, $2 billion for Newfoundland and Labrador and $830 million for Nova Scotia, giving them the immediate flexibility to address their unique economic and fiscal challenges.

This extraordinary assistance was never aimed at improving the equalization system, as suggested by the hon. member's motion. The new framework for equalization and territorial formula financing, agreed to by all provinces last fall, does just that. I will elaborate on this shortly.

In reality, these arrangements and the existing accords that they supersede operate entirely outside the framework of equalization and in no way affect the integrity of the equalization system. They are targeted investments that illustrate how we all benefit when we extract the maximum potential from our regional advantages, our people and our resources.

Those are not the only recent federal initiatives that extract the maximum potential from our regional strengths. Other examples of such targeted initiatives would include the $88 million in new funding budget 2005 dedicates over the next five years to the federal economic development initiative for Ontario, FedNor, to support the economic development of communities through the northern Ontario and rural southern Ontario.

Another example is perhaps the $300 million in new support for the north through the new framework for territorial formula financing, plus another $120 million for the next three years for the territories to cooperatively develop the first ever comprehensive strategy for the north.

There is also the $50 million in new funding that the recent budget just directed to the Asia-Pacific Foundation of Canada so it can continue its work building networks between Canadian and Asian business leaders and unlocking new market opportunities that will benefit both regions.

There is also the $100 million over two years for the Canadian Space Agency in Montreal which will ensure that Canada's aerospace industry remains a research and innovation leader, and turning investments in knowledge into a global advantage in areas such as robotics and satellite communications.

Let us also not forget the government also recently invested another $500 million to build and further strengthen Ontario's world leading automotive sector.

All these investments illustrate that Canada is more than a balance sheet. It is not about making identical investments all over the country. It is about all parts of the nation working together and recognizing that when one province or region succeeds we all succeed. This, of course, is not to say that balance has no place in public finance. In fact, our entire transfer system to the provinces is based on providing stable, predictable and growing per capita funding to support the provision of health and social services.

These per capita transfers, like the Canada health transfer, the Canada social transfer and the health reform transfer, will commit over $42 billion to the provinces this year alone. In total, per capita transfers will grow from $21.8 billion in 2003-04 to $30.1 billion in 2007-08, an average annual increase of about 8%, which is significantly higher than the projected 5.1% growth in nominal gross domestic product.

Just last September, first ministers signed the historic 10 year plan to strengthen health care, another milestone in federal support for the provinces. The Prime Minister committed $41.3 billion over 10 years in support of the plan, fully meeting the financial recommendations of the Romanow commission in doing so.

However sometimes per capita transfers are just not enough because the fact is that the provinces do not share the same geography, the same history, the same resource base and the same level of economic development, which is why we signed the recent offshore agreements with Newfoundland and Labrador and Nova Scotia, why we made strategic investments in every part of this country and why equalization was built into our Constitution in the first place.

By taking into account the fact that different provinces have different abilities to raise revenues, the equalization transfers ensure that all provinces can provide reasonably comparable public services at reasonably comparable rates of taxation. In doing so, it forms the bedrock of fiscal federalism. Though often poorly understood, it is one of the strongest forces of cohesion in our diverse federation.

What would happen to this country if this program were to suddenly disappear? How would regions with lower populations or less resources or a less developed economic base fund the provision of basic health and social services? By raising taxes to economically damaging levels? It does not take a great deal of imagination to see where this process would lead, and that is not a road Canadians want to head down.

Fortunately, the new framework for equalization and territorial formula financing agreed to by all ministers last fall will ensure that this never happens. By providing predictable, stable and growing funding to the provinces and territories, the framework will ensure that all Canadians, no matter where they live, have access to the government services that they expect and deserve.

Specifically, funding levels for 2005-06 will be set at $10.9 billion for equalization and $2 billion for TFF. Because these amounts will grow at a rate of 3.5% per year, this represents an additional $33.4 billion more in equalization and TFF payments to provinces and territories over the next 10 years.

Moreover, the new framework involves the consideration of third party expert advice on the best way for the Government of Canada to allocate payments among the provinces and territories. Panel chair, Al O'Brien, will be tabling his report before the end of this year. His panel's advice will form the basis for future equalization and TFF allocations for the years 2006, 2007 and beyond, which brings me once again back to my hon. colleague's motion.

In essence, the motion suggests that the government should exclude revenues from oil and gas or other non-renewable resources when comparing the levels of revenue available to different provincial governments. Those provinces with oil and gas tend to think this is a good idea. Those without do not. Both have marshalled interesting arguments in their favour. Both consider this a matter of great significance in their respective provinces and both deserve to have their positions carefully and thoughtfully considered.

I would therefore urge the House to reject this motion and not take sides in the debate until all members have had time to consider the independent expert advice that Mr. O'Brien's team has to offer on this and other significant matters in its forthcoming report on equalization.

The issues at stake are not to be taken lightly. Arguments based on chequebook federalism can be divisive. They pit region against region, government against government and Canadian against Canadian. They are the weapon of choice for those with a sovereignist's agenda, which makes it all the more important for us to cut through the partisan rhetoric of balance sheet federalism so we can identify legitimate regional concerns and respond to them with a fair and balanced approach that characterizes, not only the recent Atlantic offshore agreements, but the Government of Canada's overall approach to economic and fiscal management which has served this country so well in recent years.

The government's record speaks for itself. Ten years ago this country was on the verge of economic disaster. Deficits were out of control, public debt was accumulating at an unsustainable rate, interest rates were high, jobs were disappearing and the engine of economic growth was puttering or stalled. Dealing with the situation was not easy. It required tough choices and sensitivity to the needs of the most vulnerable in society. We had to reconcile competing demands and we did so with the understanding that we are stronger when we work together in common purpose to create wealth and expand opportunity.

This approach paid off. Our balanced mix of tax cuts, debt repayment and strategic investments have turned a vicious circle of 10 years ago into a virtuous circle in which balanced budgets have inspired strong, sustained economic growth, increased confidence, investment and opportunity. As a result, more than three million new jobs have been created, inflation and interest rates have been low and stable and we have experienced more improvement in the average Canadian standard of living in the past seven years than in the previous seventeen.

We have tabled a record seven consecutive surplus budgets since balancing the books in 1997, which has allowed us to slash the debt by over $61 billion. This saves Canadians over $3 billion in interest every year, which can now be invested in their higher priorities, rather than sent to our creditors.

In terms of scope and magnitude, we have introduced the largest tax cuts in Canadian history. We have put the long term financing of health care and equalization on a sustainable footing and over $75 billion in new investments just last fall.

We just tabled a budget that commits substantial new funding for health care, seniors, first nations, national day care and the environment while also providing tax reductions and laying the groundwork for future progress in addressing priorities of Canadians.

Yes, we have invested in every part of this country but, more important, we have invested for every part of this country. We have delivered on our commitments and kept the books balanced while doing so.

However we have one more very important outstanding commitment that awaits the tabling of Mr. O'Brien's report. I will therefore once again urge the House not to prejudice conclusions of this report as they pertain to the inclusion of non-renewable resource revenues in determining equalization entitlements. I once again urge the House to reject one-size-fits-all federalism. I once again urge the House to reject the hon. member's motion.

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

Mr. Speaker, I thank the hon. members opposite for their overwhelming enthusiasm for having me ask a question.

The hon. member's speech is a thoughtful speech and it hits at the very essence of the debate here, that is, the argument that Saskatchewan should not be “penalized” by the counting of its non-renewable resources for the purposes of measuring fiscal capacity.

In the province of Manitoba next door, where the hon. member who just gave the speech resides and the hon. member for Provencher lives, Manitoba does not enjoy the same non-renewable resources as does Saskatchewan, which has oil, potash and a variety of other things which increase its fiscal capacity. The members opposite have been arguing, however, that Manitoba actually has a greater GDP per person than does Saskatchewan and that therefore Saskatchewan is, relatively speaking, impoverished vis-à-vis Manitoba.

Simultaneously they argue that, first, we should not have this panel the hon. member spoke about and, second, that we should just simply take non-renewables out of the equalization formula.

If we took non-renewables out of the formula, that would presumably precipitate Manitoba saying to take renewables out of the formula. It would precipitate Quebec saying to take renewables out of the formula. It would make all of the other provinces that have neither renewables nor non-renewables very upset because then they would be left with the fiscal capacity measurement burden.

Does the hon. member think that one of the things this panel chaired by Mr. O'Brien could actually comment on is whether the formula proposed by the proponents of the motion, namely, measuring GDP per person, should be a replacement or should be one of the things that should be commented upon in terms of measuring fiscal capacity for equalization formula?

[Raymond Simard, Liberal, Saint Boniface, MB]

Mr. Speaker, all day I have been hearing comparisons between Saskatchewan and Manitoba. I find that interesting, because over and above the equalization base, with the deal that was signed by the 10 provinces, this year Saskatchewan will receive an additional $710 million. I believe we have spoken about that today already. Manitoba will receive an additional $184 million. This is because of the new equalization framework and obviously the dedication of our Minister of Finance.

As well, I think we have to speak about the second issue. As a Manitoban, I totally agree with my colleague here that obviously Manitoba's strength is hydro. Obviously it is a renewable resource, but if Saskatchewan starts insisting on putting aside the non-renewable resources, why would Manitoba not say to put aside renewable resources?

The objective here was to assist two provinces that were in dire straits. That is what Canada is all about. We have always been about that. We have not been about cookie cutter solutions and trying to be everything to every province. We have been about assisting provinces in need. I believe we all agree, given the debt to equity ratio, that Nova Scotia and Newfoundland were in dire straits. We assisted them.

Before doing that, however, we did deal with the equalization problem. We did sit down with the four provinces and territories and we negotiated deals there that improved the whole situation across the country.

My colleague is absolutely right. I believe we should wait for Mr. O'Brien's report. I hope he will come up with some long term equalization solutions.

In fact, as a Manitoban I am very proud that we signed these deals with Nova Scotia and Newfoundland and Labrador. I am actually surprised that Saskatchewan and members opposite are not. We always have been about helping our provinces that are in need.

[Rona Ambrose, Conservative, Edmonton—Spruce Grove, AB]

Mr. Speaker, I am very pleased to speak on this motion which originally read as follows:

That the House call upon the government to immediately extend the expanded benefits of the recent Atlantic Accord to all of the provinces since the existing equalization claw-back on non-renewable resource revenues severely curtails the future prosperity of Canada by punishing the regions where the economy is built on a non-renewable resource base.

Before I begin my speech, I would like to take a moment to pay tribute to our Saskatchewan caucus members, who have come together today, one after one, to make very poignant arguments as to why the current equalization formula needs to be changed to better reflect the finances and aspirations of their great province.

Now I come to the issue of equalization.

Last weekend, supporters gathered at the Conservative Party policy convention in Montreal adopted the following policy on equalization:

Equalization is an essential component of Canada's nation building efforts.

The Conservative Party supports changes to the equalization program to ensure provinces and territories have the opportunity to develop their economies and sustain important core social services.

We will remove non-renewable natural resource revenue from the equalization formula to encourage the development of economic growth in the non-renewable resource sectors across Canada.

The Conservative Party will ensure that no province is adversely affected from changes to the equalization formula.

It is extremely important that the provinces currently receiving equalization payments do not suffer financial hardship as the result of any changes to the equalization formula.

One of the problems with the current financial agreement between the federal government and the provinces is that the Liberal Party is afraid to tackle this issue head on.

The Prime Minister is working against the aim of equalization by failing to collaborate with the provinces to establish a program that would enable them to build a better economy.

The Prime Minister should have dealt with the problems posed by the equalization formula back in October at the first ministers meeting. Instead, he signed side deals and adopted policies that have set one province against the other.

To promote harmony among the provinces, it was suggested that the motion be amended to ensure that any change to the equalization formula will come with a transition adjustment measure for those provinces whose compensation will not see sustained growth.

To promote harmony among the provinces, an amendment was made to this motion to ensure that proposed equalization formula will include a period of transition and adjustment so that the provinces to whom these expanded benefits do not apply can receive fair compensation.

The purpose of this amendment is to ensure that changes made to the equalization formula take more fully into account provinces that have both renewable and non-renewable resources, like Quebec and Manitoba, both of which are rich in hydro power.

With this amendment, the future equalization formula will more closely reflect the actual financial situation of provinces that have renewable and non-renewable resources, provinces like Manitoba and Quebec, which both have water resources.

This way, Quebec will continue to fully benefit from the current system in order to pursue its economic and social development.

Equalization and the growing fiscal imbalance show the Liberals' weak commitment to improving relations between the federal government and the provinces and territories.

The federal government continues to rake in way more money than it needs to meet its constitutional obligations, while the provinces cannot put enough together to meet their obligations.

This is crystal clear when the financial situation of the federal government is compared to that of the provinces. The federal treasury is accumulating surpluses year after year, while the provinces are struggling to balance their books and several are actually in a deficit position.

I will note that I am going to be splitting my time with the member for Souris—Moose Mountain.

How can it be that Ontario, one of the strongest and most important economic engines of the country, must carry a 2004-05 deficit of over $6 billion while the federal government rakes in an $11 billion surplus?

Just to focus on Ontario for a moment, there is a great divide between the McGuinty Liberals and the Prime Minister right now. With the new floor in equalization, have not provinces reached an important guarantee that equalization payments will not be scaled back or taken away in the event of a downturn in the Ontario economy.

However, the agreement reached could actually hurt Ontario. If the Ontario economy begins to falter, and there is growing evidence that it is, Ontario will not be able to afford to pay into equalization and fund important social programs for Ontarians.

How could it be that our provinces, charged under our Constitution with carriage of our most valued social programs, cannot financially scrape by, while the federal Liberals, rolling in cash, waste Canadians' hard-earned tax dollars?

It is partly a reflection of the fact that the provinces are responsible for expensive but important social programs, especially health care and education, but it also reflects the fact that the federal government is taking up too much tax room.

The provinces, facing increasing costs and growing deficits, must come to the federal government pleading for financial assistance. The Liberals, reluctant to hand over the fruits of their overtaxation, use the surplus as political leverage and force the provinces to accept conditions and targets that reflect Liberal policy priorities, not the priorities of Quebeckers and Canadians.

I believe that both the original motion and the amendment serve to address some of the problems raised by the provincial governments.

To conclude, the Conservative Party believes the equalization program should treat all provinces fairly and equitably. We recognize that the current formula presents many problems, but we also understand it is imperative that no province currently receiving equalization payments will be worse off financially if any changes to the structure of the formula are made.

It is extremely important that the provinces currently receiving equalization payments not be financially penalized by any changes whatsoever made to the equalization formula.

The Prime Minister has shown a lack of leadership on intergovernmental relations and has pitted province against province. This is no way to strengthen the federation. Saskatchewan, Ontario, Quebec and all the provinces and territories should be treated equally by the federal government.

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

Mr. Speaker, I appreciate the hon. member's speech and I appreciate her contributions to the finance committee. I think she is one of the more thoughtful members of the committee and actually thus far has not been imbued with overly partisan rhetoric.

She is obviously supporting the motion. That does raise some difficulties, because the motion proposes the deletion of renewable resources for a particular province. If we were to delete that measurement of fiscal capacity for the province of Saskatchewan, what would her answer be to other provinces which also would like their unique resources deleted from their measurement of fiscal capacity?

Obviously the province of Manitoba and the province of Quebec would prefer that renewable resources be deleted from the measurement of fiscal capacity. There are other situations, let us say in British Columbia, where some want the measurement of property values deleted from the measurement of fiscal capacity.

I would be interested in knowing whether she supports her party's position that the whole concept of non-renewable resources be deleted from the measurement of fiscal capacity. Would she prefer that prior to hearing from the panel that has just been appointed?

[Rona Ambrose, Conservative, Edmonton—Spruce Grove, AB]

Mr. Speaker, my speech really related directly to the intergovernmental perspective. I raised the issue of Quebec and Manitoba in relation to renewable resources within the equalization formula and in conjunction with the issue of non-renewable resources.

As the hon. member knows, the Conservative Party's position on this issue is that non-renewable resources should be removed from the equalization formula. We have talked about this for several years, as have many if not all of the provinces.

I raised this issue because my largest concern is that the deal since October has resulted in provinces being pitted against provinces, as we see right here in the House today. We have a discussion comparing the fiscal capacity of Manitoba to Saskatchewan within the equalization formula. We have Ontario saying that it wants the same deal that Newfoundland and Labrador and Nova Scotia received under the Atlantic accord.

My largest concern is that the Prime Minister has not shown enough leadership by sitting down with the provinces and actually discussing these issues in October. Now we are left with a situation in which we have infighting amongst premiers and provinces being pitted against provinces. I would say to the member that I would have liked to have seen the Prime Minister deal with this issue upfront and if not then, then shortly sometime in the near future.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Mr. Speaker, during the debate on equalization and the fiscal imbalance, the Bloc members and the Liberals lost sight of what is most important. The Bloc members say there is not enough money in the pockets of the Government of Quebec. The Liberals say there is not enough money in the pockets of the federal government.

However, both parties forget that the money does not belong to the Quebec government, nor does it belong to the Canadian government. The money belongs to taxpayers, families, parents and people who work for a living. It is their money and it is for the independence of individuals and families. That is who the Conservatives are fighting for. We want the money to go back into the pockets of the people who work for it.

For example, when it comes to child care, the Liberals think it is up to the federal government to decide how children should live and how their care should be delivered. The Bloc members think the Government of Quebec should have this responsibility. However, the Conservatives realize that the issue of child care is neither a federal nor provincial jurisdiction, it is a family matter.

I would like our Conservative member to comment on this.

[Rona Ambrose, Conservative, Edmonton—Spruce Grove, AB]

Mr. Speaker, I wish to thank my colleague for his question and comments on the issue of day care and jurisdiction. In fact, he is correct. The delivery of child care services and early childhood education is a provincial jurisdiction.

The provinces are currently delivering this service in a variety of different programs across Canada. One of the major concerns, particularly for Quebec as my colleague raised, is that while this is a provincial jurisdiction, it is also very much a family jurisdiction, to use his language, and I would agree with him that these are the two different issues that are going on in this discussion about child care.

We have Canadian families from coast to coast, and Quebec families, indicating that they want to make choices for their children in child care. The other conversation going on is that provinces want to make the decisions with their communities and with their families on this issue, so that they can make the decisions about the best way to use the tax dollar to deliver the best possible child care for families and communities across the country.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, I rise to speak on the equalization question. One is drawn to the idea that equalization should have a degree of equity and fairness between all of the provinces. In fact, the terms of reference for the committee that is to be established commits the Government of Canada to the principle of making equalization payments to ensure that the provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation. That is the principle behind that.

We can find inequities that exist between provinces particularly as they relate to Saskatchewan. In that regard, there have been many studies commissioned showing that Saskatchewan has had the bad end of the deal on this one. The formula needs to achieve that and we find that it has had many flaws. Unfortunately, there was no mechanism in the past to check or audit the system to ensure that abnormalities do not take place.

One of the formula reviews is by Professor Thomas J. Courchene called “Confiscatory Equalization: The Intriguing Case of Saskatchewan’s Vanishing Energy Revenues”. It shows that in the early eighties there was a shift from an all-province standard to the present five province standard of British Columbia, Saskatchewan, Manitoba, Ontario and Quebec.

Saskatchewan is a rich energy producing province and was affected mostly by the shift in policy. The professor indicated that in the fiscal year 2000-01 Saskatchewan energy revenues totalled $1.038 billion for $1,000 per capita. However, the province's equalization offset associated with those energy revenues was even larger, $1.126 billion or a tax back rate of 108%.

Over that period the clawback rate of 1999 to 2001 reached as high as 125%. In other words, Saskatchewan lost more than the equalization payment by the fact that oil, a non-renewable resource, was produced. How could this happen particularly with the finance minister holding key positions with the government during those periods of time?

The author stated that this was the trigger for Saskatchewan's descent to the lowest rank in terms of provincial per capita disposable income. As the Saskatchewan revenue minister pointed out, in 2001-02 crown leases were taxed back at a rate of 235.9%. This was unconscionable. Who was minding the store at that time? One has to only wonder why Saskatchewan's highway system has deteriorated as it has and why the waiting lists are so long in Saskatchewan. In fact, people from Saskatchewan may travel to Manitoba to get services because of the long waiting list in Saskatchewan.

The finance minister says that Saskatchewan is a have province. If it is a have province, why is the waiting list so long, why are the highways so poor, why is agriculture on the worst crisis condition that it has ever been in the history of the province?

The estimated income loss projected for 2005 is $486 million and the province, which is struggling, has lost over 10 years $4 billion in clawbacks under the equalization formula. Because this formula taxed back or clawed back over 100%, this meant at least to the extent of Saskatchewan's energy revenues that they were transferred to other provinces through the over 100% clawback.

It is true that the province's GDP provides an indication of the province's take of economic prosperity. From 1998 to 2002 Saskatchewan posted an average GDP of .3% and largely that was due to the crisis in the agricultural sector. At the same time the equalization payments were declining. Saskatchewan has received the lowest per capita equalization transfers of the recipient provinces across Canada. It received the smallest equalization transfers on a per capita basis.

We use Manitoba as an example, and good for Manitoba, but Manitoba received $1,110 per capita of equalization. Saskatchewan on the other hand received $123 to $146 per capita. How can that be? Simply put, this is unconscionable.

In my constituency of Souris—Moose Mountain and part of the sister constituency, the total oil extracted production was 52 million of 153 million barrels of oil, or $2.4 billion of $5.5 billion province-wide. All of that oil that was taken out of the ground was clawed back under the equalization payments. This injustice to Saskatchewan requires at the very least, as a minimum, the same deal Nova Scotia and Newfoundland and Labrador received.

All Saskatchewan wants is to be treated fairly and equitably. When we look at the agreement between the Government of Canada and Nova Scotia, it was negotiated bilaterally and in advance of the expert committee that will be looking at what types of factors should be in or out of the equalization formula.

It is our position that non-renewable resources such as oil and gas should not be in the formula. The finance minister says we should wait until the panel of experts decides. Why should Saskatchewan have to wait for a panel of experts to decide, when Newfoundland and Labrador and Nova Scotia have already achieved an agreement excluding their offshore oil resources from the formula. If we look at the agreement that was entered into, it says:

--the Government of Canada will seek legislative authority from Parliament that will authorize additional payments to provide 100% offset against reductions in Equalization payments resulting from offshore resource revenue.

It goes on to say:

This document reflects an understanding between the Government of Canada and the Government of Nova Scotia that:

Nova Scotia already receives and will continue to receive 100 per cent of offshore resource revenues as if these resources were on land;

There is nothing different between those offshore resources and the resources that we have in Saskatchewan. Not only that, the agreement provides that from 2006 and continuing to 2012:

--the annual offset payments shall be equal to 100 per cent of any reductions in Equalization payments resulting from offshore resource revenues.

The agreement then goes on to provide for subsequent years. It says:

Should the province not qualify for an Equalization payment in any year in the period 2012-13 to 2019-20, the province would receive, in that year, an offset payment equal to two-thirds of the previous year’s offset payment and an offset payment equal to one-third of that previous year’s payment in the following year, should it continue not to qualify for Equalization.

It goes on to say:

If, in the future, the Government of Canada enters into an arrangement with another province or territory concerning offshore petroleum resource revenues, which in Nova Scotia’s view provides, on balance, benefits greater than those contained in this arrangement, Nova Scotia may elect to enter into discussions with the Government of Canada to revise this arrangement.

It is not only saying that those resources will be exempt and for a great number of years but it says if a better agreement is made somewhere else, Nova Scotia will be able to negotiate a better agreement for itself.

We do not mind Nova Scotia having that, but we do say this. If Nova Scotia can achieve that bilaterally before the panel of experts deals with the formula itself, then certainly Saskatchewan is entitled to receive at least the same deal for its resources on a bilateral basis. I think the Premier of Saskatchewan has ever right to call upon this government to do that.

The Minister of Finance, a native of Saskatchewan, has an obligation to the citizens of Saskatchewan and those in particular in Souris—Moose Mountain to ensure that the past injustices done to Saskatchewan are not repeated again. He says that Saskatchewan is on the cusp of being a have province. If it is a have province or on the cusp of being a have province, most of the citizens of Saskatchewan do not realize that.

Let me go through some of the facts that are a reality in Saskatchewan. In the farming community commodity prices have dropped dramatically while input costs such as fertilizers and fuel have risen considerably.

Farmers, even though they diversify, have seen declines of virtually every type of commodity. There are increased costs in freight. There have been a number of difficult production years. There has been drought and frost. Europe is increasing its export enhancement programs. This results in decreases of commodity values globally. Subsidies in the United States protect producers from commodity value declines, contributing to global overproduction, which starts a vicious cycle.

When we look at the increases in the costs to farm producers, purple gasoline has increased in January 2002 from 44¢ a litre to 62¢ a litre. Fertilizer has increased from $553 to $676.

There is a financial crisis in Saskatchewan in the agriculture community and it is having a snowball effect. It is not only affecting farmers, but it is affecting smaller communities that are starting to shut down. It is affecting infrastructure. If one came to Saskatchewan, one would be hard pressed to say that it is a have province.

It is time for the government to negotiate a fair deal with Saskatchewan to ensure its non-renewable resources are used by it to recover from the place it has been put because of the inequities of the past.

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Mr. Speaker, I would like to comment on one of the things my colleague mentioned in his presentation. Perhaps he could expand upon it.

He talked about what he called the unconscionable practice of the clawback provision taking more away from the province than it made in revenue. For example, Saskatchewan raised over $1 billion in oil and gas revenues a couple of years ago but the clawback provision took more than that away from the province.

It would seem to me that we have a constitutional argument here. We all know that provincial jurisdiction has constitutional powers over ownership of non-renewable natural resources. It is one of the key reasons that non-renewable natural resources should be removed from the equalization formula.

It seems that every other province in Canada is benefiting from Saskatchewan's oil and gas production, except for Saskatchewan itself. We produce the oil and gas but the revenues created from the sale of that oil and gas do not flow to Saskatchewan. They literally flow to every other province in Canada. I cannot see how anyone in the House would consider that to be fair and equitable. That is one of the main reasons we are calling for the removal of non-renewable natural resources from the equalization formula.

I would like the hon. member to comment on whether or not I have it right. Perhaps he has some different views.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, there is no question that the way the formula was put together Saskatchewan lost on average $1.08 for every $1 of oil it sold. To some degree it was $1.25. In other words, if the oil had been kept in the ground, the province would have been better for it because it lost more money than it made.

Additional funds that were available under the equalization plan went to some other province because of it. In other words, the penalty imposed on Saskatchewan went to other provinces. Saskatchewan should have been the last province supplementing provinces elsewhere that did not need the same equalization as it needed.

The formula is principally wrong. It is not only wrong, but it penalizes Saskatchewan. It is only equitable and right that the finance minister do what he has done already, provide a bilateral agreement with Saskatchewan to ensure that never happens again.

Saskatchewan could use those non-renewable resources to provide jobs, to provide a brisk economy. It could address issues of concern to farmers in Saskatchewan to ensure the contributions to deposit requirements so the farmers would not have to do it. It could address the farm economy and share in the 40%. The province would have some revenue to do that. Young people would be able to stay in our province, to work in our province, to be the sons and daughters on the family farms, which is almost no longer possible because of the crisis we are facing there.

[Larry Bagnell, Liberal, Parliamentary Secretary to the Minister of Natural Resources]

Mr. Speaker, I would like to ask the member whether he believes that Canada should treat every province and territory the same. That is what some of his other colleagues have suggested.

We cannot treat every province equally because they all face different situations. The whole country is based on the foundation of helping provinces or territories at times when they are in need. That is the generosity of this nation. The provinces came into Confederation with different terms and conditions and they continue to be dealt with in the way that is needed. They are treated fairly, not equally. I wonder if the member thinks this is the way to run the nation.

The Prime Minister has solved the greatest issue that has been on the minds of Canadians for a generation and that is health care. Equalization is one of the greatest foundations of our nation. It has just been replaced in a manner that is acceptable across the country. That is why the country is running so smoothly.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, there is no question that the equalization issue is to provide equity and fairness and to ensure that the provinces across the country are able to provide reasonably comparable levels of public services at about the same levels of taxation. However, when the Prime Minister of Canada negotiates a deal with one province without regard to the other provinces, that is not an issue of fair treatment. It is just the opposite. When we find a formula that for over 20 years has penalized a province, that has nothing to do with treating provinces fairly or equally. It has a lot to do with not paying attention to what is happening.

What we have to do is put all the provinces on the same basis of fairness and equity. We need to ensure that non-renewable resources are not part of that, so that the provinces can develop themselves and be self-sufficient across the country to provide those same services without equalization payments or subsidies.

[The Acting Speaker (Mr. Marcel Proulx)]

It being 5:15 p.m., it is my duty to interrupt the proceedings and put forthwith every question to dispose of the business of supply.

The question is on the amendment. Is it the pleasure of the House to adopt the amendment?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. Marcel Proulx)]

All those in favour of the amendment will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Mr. Marcel Proulx)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Marcel Proulx)]

In my opinion the nays have it.

And more than five members having risen: