Mr. Speaker, I am pleased to respond to my friend's question, the member for West Nova, regarding the government's commitment to Nova Scotia's offshore accord and the inclusion of non-renewable natural resources in the equalization formula.
Of course, as members heard, the member doubts that the government has honoured its commitment, so it would be helpful to put some facts forward.
Our renewed and strengthened equalization program is a key element in the new government's plan for restoring fiscal balance. Budget 2007 delivers a new equalization program that is fair to Canadians living in all provinces. It is formula-driven and principled. It is simplified to enhance transparency and accountability. It is stable and predictable. Most importantly, it meets our commitments on respecting the offshore accords and on fully excluding natural resource revenues from the program.
The equalization program was thoroughly studied by an independent expert panel chaired by Al O'Brien, a former Alberta deputy treasurer. The O'Brien report proposed a comprehensive, principles-based set of reforms to the equalization program. Having reviewed the report and having consulted extensively with Canadians and provincial governments, we concluded that the O'Brien report formed a solid foundation for the renewal of the equalization program.
The government committed to respecting the offshore accords with Nova Scotia and that is what we did. Budget 2007 honours the commitment to respect the offshore accords. There is no cap in the existing system. To give Nova Scotia the flexibility to make the right choice, and in recognition of the short timeframe between the tabling of our budget and the Nova Scotia budget, we allowed Nova Scotia to opt into the new O'Brien formula for this year only, giving that province a full extra year to make the final determination if this is the best choice.
For fiscal year 2006-07, Nova Scotia is projecting a surplus of $118.4 million which is $44.9 million higher than budgeted for in 2006-07. Nova Scotia will be allowed to return to the existing Atlantic accords for next fiscal year, if it so chooses, and then opt in on a permanent basis at a later date to the O'Brien formula thereafter, if it is in Nova Scotia's best interest to do so.
As mentioned, Nova Scotia can permanently opt into the new, strengthened equalization program. We have offered Nova Scotia an extra year to decide if it wants to stay in the new program. If it does, it must in all fairness opt into all the aspects of the new program, including a 10 province standard and a fiscal capacity cap to ensure that no equalization-receiving province has a higher fiscal capacity than a non-receiving province.
Budget 2007 also delivers on our commitment to exclude non-renewable natural resource revenues without lowering payments to other provinces. The new equalization program will give provinces the higher of the payments calculated under 50% natural resource exclusion or full exclusion.
To ensure fairness, payments under the new system are subject to a cap. The renewed and strengthened equalization program will help ensure all provinces are able to provide their residents with comparable levels of services at comparable levels of taxation. It fully respects the offshore accords and the government's commitment to exclude non-renewable resources from--