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--