Debates of April 16th, 2007

Budget Implementation Act, 2007

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I was at the finance committee hearings that the member speaks of. He obviously was at a different committee, because the preponderance of witnesses before that committee supported the government's move to change the arrangement whereby Canada's business sector was rushing headlong into the trust mode.

In fact, the finance minister appeared and provided full and complete accounting for the numbers that he based his decision on. In fact, the member will know, because he has been in government before, that departments do not release advice to cabinet. That is why there was a blacked-out document, but the minister did release to the committee the figures that he based his decision on. No one has suggested that those numbers were in any way incomplete.

More to the point, the whole decision was taken because something unexpectedly changed very massively in Canada, and that was a huge move to the trust mode by Canada's business sector. We saw the telecommunication sector going that way. We knew one of the major banks was talking about it. The biggest oil and gas company was going that way and others surely would have followed.

We would have had a business sector that effectively was not paying tax, that was becoming disconnected from the whole social construct of our country. This had to be stopped. No other country has allowed this. The member's own finance critic said after the announcement that it was absolutely the right thing to do.

I ask the member, would he want a country where all the corporations, all the businesses, were not paying tax and were disconnected from what has to be done in providing social programs? The member says we could tax them at only 10%, then, not the same as other businesses. That would just mean that trusts, at a much lower tax rate, would swallow up other businesses. It would have the same result. Unfair taxation would take place.

Is that the kind of unfairness the member is talking about? I know he has had fun railing against this decision. The government obviously did not take this decision for political points, because we knew we were going to get this kind of rhetoric in return, but we did it for the good of the country. Will the member not at least admit that we cannot have an entire business sector of a country not paying tax?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, what I will admit is that the member has totally misled the House.

[An hon. member]

Oh, oh!

[Paul Szabo, Liberal, Mississauga South, ON]

I did not say deliberately. I said misled.

With regard to the fact that some people came before committee and said they agreed with the government's position, they relied on the government's calculation that the leakage was $500 million a year. Even the Governor of the Bank of Canada came there and embarrassed himself after the other experts came forward and discredited the computations.

The member asks if we do not want corporations and income trusts to pay the same amount of tax. The member is the Parliamentary Secretary to the Minister of Finance. She is on the finance committee. Surely she must know that taxes are paid by either the corporation and/or the investor and that corporations have some corporate tax elements and some personal dividend tax elements, whereas income trusts have no equivalent corporate, but all of the tax is paid by the individual. Why does she separate it? Why does she try to compare company to company rather than looking at the full loop?

Let me conclude my answer to what the member was asking me about not wanting good things to happen in Canada. I have to tell her that the decision of the government to tax income trusts has made our energy sector vulnerable. There have been no less than 15 takeover attempts in the last five months that could threaten Canadian economic sovereignty. The Conservatives claim that their policies are about main street, but the reality is that the benefits are going to accrue to Wall Street, not main street.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, the member talked about the broken promises of the government. I will start off with the broken promise of not using patronage. The first thing the Conservatives did was bring one of their Conservative bagmen into the public works ministry as the minister and made him a senator. Then they accepted a floor crosser, something they said they would not have done before. Then they broke their promise on the income trusts. Then they broke their promise on the Atlantic offshore accords.

The promise that offends me the most is this. If the Conservatives are going to deliberately mislead the widow of a veteran, this is something that should never be allowed in the House of Commons. When the Prime Minister was in opposition, he wrote a letter dated June 28, 2005, to Joyce Carter of St. Peter's, Cape Breton. He promised her that if the Conservatives formed a government, they would immediately invoke the VIP service for all widows and widowers of all veterans, regardless of application or time of death. The Conservatives even went so far as to put that in their policy platform at their last convention.

The member from Kamloops said, “You are talking to the converted, Mrs. Carter. We will do this immediately upon forming government”.

The Conservatives have had two budgets, $21 billion in surpluses and nothing to extend the VIP services for widows and widowers of veterans.

I just spoke to Elizabeth Hamilton of North Bay, Ontario, who herself is very angry at the Conservatives for breaking their promise to that widow.

If the Conservatives can break a promise and deliberately mislead a widow of our beloved veterans, what makes Canadians think that breaking the income trust and everything else is part of the program? This is what the Conservatives do. They become the vicars of vaseline. They have no time in the House of Commons. The sooner they call the election the better it will be because then we can get rid of them once and for all.

[The Acting Speaker, Royal Galipeau]

Before I recognize the hon. member for Mississauga South, I am not as experienced in the House as he is or as the hon. member for Sackville—Eastern Shore is. However, they will both know, and all members will know, that the use of judicious language is more conducive to open discourse and more order in the House.

I would appreciate a more judicious choice of language. Thank you very much.

The hon. member for Mississauga South.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, the member summarized it very nicely at the end of his question. He basically said that this was what we were getting. This is a government that says one thing and does another. The Conservatives make promises that they do not keep, or they do something else and then they tell Canadians that they kept the promise.

A perfect example is the health wait times guarantee. That was in the platform of the Conservatives in the last election. They said that in five priority areas there would be a wait times guarantee. If Canadians could not get it in their hospital, then they would pay to transfer people to another hospital, out of province or even to the United States.

What has the health minister said? Initially he said that was all covered in the $42 billion health care accord, which the previous government had done. Then the health minister admitted that wait--

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Are you against Dalton McGuinty?

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I will finish. In February 2007 the health minister finally admitted that the wait times guarantee would not be delivered before the next election: promise broken.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Hogwash. Tell the truth.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Mr. Speaker, my question for the hon. member is the following. It seems to me that in terms of the government's promise on income trusts one of two possibilities exists. First, at the time when the government made the promise, it fully intended not to keep it. Second, it did not understand the situation that income trusts might be problematic and it woke up to the problem much later. In other words, the government was in fact incompetent.

Therefore, either the government was knowingly misleading the Canadian people or it was incompetent. These are mutually exclusive possibilities, so it has to be one or the other. Could the hon. member comment on that.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, all I can say is that if standing committees of Parliament do not accept the testimony of expert witnesses, those who had done the work after, unanimously said that the calculation of the finance minister was erroneous and wrong. He relied on information that was incorrect and could not get out of the problem. He went forward using bad information, which was a bad mistake politically and a bad mistake for Canadians.

[The Acting Speaker, Royal Galipeau]

The hon. member for Peterborough has 30 seconds.

[Dean Del Mastro, Conservative, Peterborough, ON]

I will summarize very quickly, Mr. Speaker. The S&P/TSX income trust today is 151. On October 1, it was 154. The market has rebounded.

I will stand up for a government that stands up for tax fairness and ensures that the corporations pay their fair share of taxes. Why will he not—

[The Acting Speaker, Royal Galipeau]

The hon. member for Mississauga South.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, we had the market data come before the finance committee. I do not know where the member gets his numbers, but in fact they have recovered from a 12% loss down to only an 11% loss. It is still over $25 billion lost to Canadian investors, their nest eggs for retirement. That is shameful.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, I appreciate the fact that I can voice my opinion on some very important issues. One is in particular to me and to my home province of Newfoundland and Labrador and it concerns the recent debacle about equalization.

I will quote the Minister of Finance who said in his speech on the budget, “We are keeping our commitments on equalization”. He said:

We are returning Equalization to a principled, formula-based program....As we promised, every province will be better off under the new plan. Under the new plan, provinces will get the greater of…

Notice he said, “As we promised, every province will be better off under the new plan”. Therein lies a very good point. Recently in Newfoundland and Labrador we received the opinion of an independent economist who stated quite clearly that we were not, in Newfoundland and Labrador. I will illustrate those points in a few moments.

Before I do, I want to bring up the issue of equalization and the imposing of a cap. On February 14, 2005, we signed the Atlantic accord agreements, which provides offset payments for Newfoundland and Labrador, allowing it to be the principle beneficiaries of our resources, particularly when it comes to oil and gas. I will quote from November 4, 2004. This is from the then leader of the Conservative Party, now Prime Minister. He stated:

Unfortunately, the solemn word of this Prime Minister turned out to be not good enough. The Prime Minister ignored letters from Premier Williams on June 10, August 5 and August 24 urging him to confirm his promise. Suddenly, the Prime Minister and his Minister of Natural Resources fell silent.

There is an eerie similarity between what was then and what is now. Let me go on to also say what the Prime Minister brought to the House in 2004. He said, “Additional annual payments that will ensure the province effectively retains 100% of its offshore revenues”. Therefore, he endorsed the fact that Newfoundland and Labrador should keep 100% of its royalties. Then he quoted the minister:

—for an eight-year period covering 2004-05 through 2011-12, subject to the provision that no such additional payments result in the fiscal capacity of the province exceeding that of the province of Ontario in any given year.

He goes on to say that the eight year time limit and the Ontario clause, which effectively is the cap, gutted the commitment made to the people of Newfoundland and Labrador during the election campaign. That is very interesting because the then leader of the Conservative Party now Prime Minister stated unequivocally in 2004, he did not agree with the idea of a cap. He goes on to give several examples from his own experiences. He said:

Why should Newfoundland's possibility of achieving levels of prosperity comparable to the rest of Canada be limited to an artificial eight year period? Remember in particular that these are in any case non-renewable resources that will run out. Why is the government so eager to ensure that Newfoundland and Labrador always remain below the economic level of Ontario?

Therefore, he is saying why should Newfoundland and Labrador be subject to a cap, when in fact they should be principle beneficiaries of their own resources?

However, all that I have said in the past little while and all the evidence that has been given here in the House on November 4, 2004, suggests unequivocally that the current Prime Minister did not believe in a cap.

Let us fast forward three years later, 2007. The budget states, and the Minister of Finance said this to the House:

A fiscal capacity cap will provide fairness by ensuring that Equalization payments do not result in a receiving province ending up with a fiscal capacity higher than a non-receiving province.

In other words, it is not to go above the level of Ontario currently in that situation.

What happened between 2004 and 2007 to change his mind? A couple of campaigns happened. In that campaign again they stated non-renewals out of the equation, no caps, no hindrances whatsoever, for it is Newfoundland and Labrador and Nova Scotia that should be the principal beneficiaries of their own resources.

I will go on to say what he also said. I am quoting the Prime Minister because I thought he made a good argument on why we should not have a cap, certainly for Nova Scotia, whether it be the natural gas projects, such as Deep Panuke, or in Newfoundland and Labrador, Hibernia, White Rose and Terra Nova. He said:

This is what happened in the case of my province of Alberta. Alberta discovered oil and gas in the 1940s and 1950s. Alberta was a have not province. From 1957 until 1965, Alberta received transfers from the equalization program.

Here is the key. This is good stuff. He went on to say:

Alberta was allowed to keep 100% of its oil royalties and there was no federal clawback.

In other words, Alberta was allowed to punch through any idea of the cap.

What has happened since then? As the Prime Minister pointed out:

This is what allowed Alberta to kick-start its economy, to expand and diversify, to build universities, to advance social services and to become one of the powerhouses of the 21st century Canadian economy.

That is a very good point for being a principal beneficiary of one's own resources.

If we look at the financial circumstances which Alberta is under today, it is quite astonishing and quite successful. Why? Because it was allowed to be the principal beneficiary of its own resources.

Today we find ourselves in this situation where Newfoundland is not allowed to receive that privilege.

The Prime Minister before he was here said that he was president of a company that should have understood. I would think that the current Prime Minister would understand as well given the fact that he speaks so eloquently of it. He said that when the Atlantic provinces rejected the latest federal offers, the caps, the limits and the exclusion, the government engaged in a clumsy divide and conquer tactic, a tactic that gave away its obvious objective of holding back the development of the Atlantic provinces.

The current government set out to fix this fiscal imbalance but it has created a brand new one: a fiscal imbalance between provinces, between those that are rich and those that are poor, but those are relative terms.

Many members in this House perhaps do not realize it but Newfoundland and Labrador, believe it or not, based on a per capita GDP export, has the highest in the country, not particularly poor but particularly in debt.

When we set out to negotiate the Atlantic accords, we knew that by 2020 we would become that economic powerhouse that the current Prime Minister bragged about Alberta being. We would be that place. We would be, as my colleague addressed, the economic jewel of the north Atlantic, buy we do that by taking ownership of our own resources and being that principal beneficiary.

I mentioned a while ago that an independent economist had several things to say about the situation going on now in the 2007 budget and the implementation act and he ran some numbers through. He got all his information and he looked at it and originally came out with a number that stated that if Newfoundland and Labrador went to the new equalization formula touted by the Minister of Finance and the Prime Minister, Newfoundland and Labrador would gain $5 billion into 2020. However, here is the catch. Several days later, after several inquisitions, Dr. Wade Locke came to realize that the new formula did not work that way.

Interestingly enough, prior to that, the Minister of Fisheries and Oceans, the regional minister of Newfoundland and Labrador, even praised Dr. Wade Locke by saying that the provinces do gain. However, when new information was brought forward last Friday, Dr. Wade Locke had a look at those numbers again and put out a release talking about what he had to look at. He said:

The Equalization changes contained in the 2007 budget gave the Government of Newfoundland and Labrador an option of which Equalization formula would apply.

However, s.84 of the budget implementation Act (C-52) makes a significant change to the 2005 Implementation Act...

This was the Atlantic accord deal that was reached when we were in government.

Section 84 states:

The definition “fiscal equalization payment” in section 18 of the Act is replaced by the following:

“fiscal equalization payment” means

(a) for the purposes of section 22, the fiscal equalization payment that would be received by the Province for a fiscal year if the amount of that payment were determined in accordance with section 3.2 of the Federal-Provincial Fiscal Arrangements Act, without regard to section 3.4 of that Act....

That is a very key point. That information was not available when he first ran his numbers.

Let us look from now until 2020. We did the Atlantic accord in two sections, until 2012 and then to be renewed, if still in equalization, until 2020. If those accords were left alone today this is what would follow.

Dr. Locke looked at three revenue streams coming into the provincial treasury of Newfoundland and Labrador. Oil revenue was one, the accord payments or offsets was the other and equalization. The total number came to $18.53 billion in that period over the Atlantic accord. I congratulate some of my colleagues who made that happen, particularly the member for Halifax West.

Dr. Locke took the $18.53 billion and the three revenue streams and put them into the new formula under the old assumptions. He came out with $22.76 billion. Yes, , there were over $5 billion extra with this new formula. However, after talking to finance officials, Dr. Locke brought forward several questions and put them in his release. He asked them the following:

In calculating the accord under the new arrangement, it is my interpretation that the province is entitled to receive the accord [payments] so long as it qualifies for equalization before the cap is imposed, rather than after. Is that correct?

Just last week federal officials said that the legislation before the House proposes that under the new arrangement the test for determining whether Newfoundland and Labrador qualifies for the 2005 accord is whether or not it would receive equalization payments under the base O'Brien formula, that is 50% of inclusion plus the cap--it is bad--effectively the cap on our accords.

If it received equalization under that formula, then the next steps would be taken to determine how much, in this case the offsets would be determined before the cap was applied. The cap is applied when equalization is calculated. This is a pre-cap issue.

Lo and behold, there is a new twist. Instead of $22.76 billion, after clarifying with federal finance what this is all about, the provinces will actually receive $17.5 billion. That is $1 billion less than what we would have received under the Atlantic accord.

Let me remind the House what was said by the Minister of Finance during his budget speech. He said:

As we promised, every province will be better off under the new plan. Under the new plan, provinces will get the greater of--

However, the provinces were not. They are actually losing money under the new--

[Dean Del Mastro, Conservative, Peterborough, ON]

No, that is not true.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Do not say no. The member for Peterborough would like to say no but he does not understand it.

I would suggest that the member go to downtown Peterborough, talk to the people at Haaseltons Coffee & Sweets and find out just how the budget is not selling to the people of southern Ontario as well as Newfoundland and Labrador.

Every province is supposed to be better off and yet an independent assessment by Dr. Wade Locke proves that is not true.

It seems to me that in this run up right now we also had a quote from the Minister of Finance during his budget speech. He said that the era of bickering between provinces is now over.

I would not say that our premier, Danny Williams, is bickering or that he is troubled. He is downright angry. As I have just pointed out, he has every right to be angry. He was promised in two campaigns that there would be a total exclusion of non-renewable resources, no caps, nothing of that sort, no hindrances.

If he had followed through on his promise, he would have given the province of Newfoundland $11 billion more than what it was to receive under the accord.

Let me illustrate just how angry the province of Newfoundland and Labrador is in light of us now being in an era of no bickering. Danny Williams is not the only premier. He just happens to be mine.

In a recent release on April 13 entitled “Federal Government Misled Province on Impact of New Equalization Program”, the minister of finance, Tom Marshall, said:

We identified this problem more than a week ago and immediately wrote the federal government seeking clarification. We have yet to hear back from them.

It is funny because they seemed to be quite chatty back in 2004 and 2005.

The fact that they don’t bother to respond to us, but manage to find the time to speak with and offer clarification to independent economists, is insulting to the elected government and people of Newfoundland and Labrador. The Government of Canada has an obligation to explain themselves.

It tried to but it did not work out.

The federal budget legislation contradicts everything we have been told by Ottawa.

The minister said it is increasingly clear that the cost of the Prime Minister’s broken promise is significant. Dr. Locke’s numbers suggest that the shortfall from the Prime Minister’s commitment is now $11 billion. What’s more, it appears to be more financially advantageous for the province to opt to stay with the existing equalization program as it provides approximately $1 billion more than the new equalization program.

But for all, the Minister of Fisheries and Oceans has said unequivocally that Newfoundland and Labrador would not be worse off. As a matter of fact, the Minister of Fisheries and Oceans put out a press release complimenting Dr. Locke on his findings before he ran those numbers again, before receiving all the information and clarification from the finance department of the Government of Canada. He was quite pleased that we were getting an additional $5 billion but yet not much has been said since we truly found out that we would be receiving $1 billion less.

Did the Minister of Fisheries and Oceans know or did he not know? Was he not properly briefed? It is a question for Newfoundlanders and Labradorians and certainly a question for his own riding of St. John's South—Mount Pearl.

The press release goes on to state:

These numbers contradict everything the federal government and [the] Fisheries and Oceans Minister..., in particular, have said since budget day.

Mr. Marshall also states:

Despite assurances from the Federal Minister of Finance that the accords would be protected, fundamental amendments to the legislation implementation implementing the 2005 Atlantic Accord agreement had been proposed without any consultation with the Government of Newfoundland and Labrador. These amendments can be found in the 'consequential amendments' section of the 2007 Federal Budget Implementation Act. Consequential amendments are normally reserved for housekeeping items to fix technical issues. It is not a place to shroud fundamental changes of this magnitude.

In other words, the second half, up to 2020, is now in jeopardy and hidden somewhere in the back of Bill C-52, this so-called implementation act.

I would like to thank the people of Newfoundland and Labrador for standing behind us 100%.

Notice of Closure Motion

[Peter Van Loan, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, I want to give notice at this time with respect to the consideration of Government Business No. 15 being a procedural motion regarding disposition of the bill on resumption of railway operations, that at the next sitting a minister of Crown shall move, pursuant to Standing Order 57, that debate be not further adjourned.

The House resumed consideration of the motion that Bill C-52, An Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007, be read the second time and referred to a committee, and of the motion that this question be now put.

Budget Implementation Act, 2007

[Dean Del Mastro, Conservative, Peterborough, ON]

Mr. Speaker, I listened to what was quite a technical speech by the member.

Several things keep coming back as being obvious such as, if the Atlantic accord is better, the budget allows the government of Newfoundland and Labrador to keep the Atlantic accord exactly the way it was and we will continue to honour that accord. It also instills some fairness in the equalization program. It is a principled equalization process. Thank God we got back to principles on equalization because it is a redistribution of federal tax dollars. These are not dollars that are taken from any given provincial government. These are federal revenues that are redistributed. Why should any province receive additional money over and above the fiscal capacity of Ontario, my home province? Why should federal tax dollars go to make one region wealthier than another region? It absolutely should not. The federal government has brought forward a principled approach on equalization, one which we can stand behind.

I believe the government of Newfoundland and Labrador should take whatever deal is best for it. If it is the Atlantic accord, wonderful. Take it 100% and we will gladly honour that accord, but we will also stand up for all Canadians in all other parts of the country who deserve a federal government which deals with equalization on the basis of principles.

[The Acting Speaker, Royal Galipeau]

I would like the attention of all members. We are having a question and comment period and I will recognize all members, but the rule of thumb should be that if I can hear the speaker, then everything is okay, but if I cannot hear the speaker, it is because too many people are speaking.

I recognize the hon. member for Bonavista—Gander—Grand Falls—Windsor.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Through you, Mr. Speaker, I would like to address this to two members in the House, to the member of Parliament for South Shore—St. Margaret's and to the member of Parliament for Avalon who are present here.

Did they hear what was just said? How dare we actually go beyond the level of prosperity of Ontario. Let us look at the situation we have here. The fiscal capacity cap which the Conservatives illustrated so eloquently during the campaign that this was not an issue and that they would never impose it, yet here we have it right in our laps.

I do not think the member really understands the true nature of the Atlantic accord and the whole nature of being principal beneficiaries of which his leader preached for years, not just Newfoundland and Labrador, not just Nova Scotia, but Saskatchewan as well and British Columbia and the whole country. Yet the Conservatives have created this fiscal imbalance that exists between provinces. That is what they are doing, juxtaposing one province against the other. This is not the way this federation is supposed to work, yet they turn it around.

I would suggest to the hon. member in this situation that the Atlantic accord is not protected. As my hon. colleague pointed out a few weeks back, he probably does not know the difference between the Atlantic accord and a Honda Accord for goodness' sake. He seems to think it is protected but the independent economists says it is not. And there are caps implied within it.

I suggest at this point that the hon. member touch base with his hon. colleagues from Atlantic Canada who do understand what this is about.

[The Acting Speaker, Royal Galipeau]

Order, please. Before I recognize another member, I would like to point out to the hon. member for Bonavista—Gander—Grand Falls—Windsor page 522 of Marleau and Montpetit on mentioning the presence or absence of other members. I hope this is the last time I have to mention this.

Questions and comments, the hon. member for Scarborough Centre.