Mr. Speaker, I want to provide a bit of historical background.
In the 1990s, Ottawa chose to cut transfers to the provinces to balance its books, specifically in the area of higher education. That is why there are now federal grants. When G7 leaders were complaining about protests against austerity outside their Parliament buildings, former prime minister Jean Chrétien told them that he did not have that problem. Basically, he cut transfers to the provinces, the provinces then cut their services, particularly in education, and the protests were held outside the provincial legislatures.
That situation was never corrected. Chrétien's cuts were followed by cuts made by Harper, then Trudeau and now the current government. For example, Ottawa will soon be covering barely 18% of health care costs when it originally committed to covering half. We are dealing with the same level of cutbacks when it comes to social services and higher education. The Parliamentary Budget Officer confirmed this inequity between the levels of government. He looks at the revenue and expenditures and has pointed out that Ottawa has more room to manoeuver when it comes to public finances.
Why is that? It is because, when the 1995 referendum happened, Ottawa got spooked. After realizing that it was essentially absent from Quebeckers' lives, the federal government began a major government restructuring that would benefit the federal government at Quebec's expense. At the time, Paul Martin was the finance minister, and the president of the Treasury Board was Marcel Massé, who was also a former clerk of the Privy Council. He used his expertise on the machinery of government to make some major changes that would make it so that Quebec would be stretched to the limit, while Ottawa would have plenty of financial leeway. He thought Quebeckers would begin to see the federal government as their government, the one they could turn to to meet their needs and to help them get things done. That way, they would go from being Quebeckers to being Canadians.
Marcel Massé made no secret of what he was doing. In speaking about Lucien Bouchard, Quebec's premier at the time, he said, “When Bouchard has to make cuts, those of us in Ottawa will be able to demonstrate that we have the means to preserve the future of social programs.” He succeeded in part. Deep cuts to health and social services transfers—a 40% reduction in transfers over three year—forced the Quebec government to make cuts of its own. Everyone remembers nurses retiring en masse and the difficulties in the education system. We have never fully recovered from that.
Meanwhile, Ottawa began running large surpluses, surpluses so indecent in a time of austerity that they had to be covered up. This is how the idea arose to create a series of foundations. By pouring large sums into these foundations, the government emptied the federal coffers, shrank its surplus on paper and was able to then continue refusing to increase transfers that would have kept services afloat for the people Quebec is responsible for. However, to ensure that the money paid to the foundations was taken out of the books, the government could not have direct control over it.
This led to the scathing report that former auditor general Sheila Fraser published in 2005, with a chapter 4 entitled “Accountability of Foundations”. She found that the government had transferred $9 billion to 15 foundations between 1998 and 2002. Those $9 billion would amount to around $17 billion today. She found that the government had no control over $7 billion of the $9 billion. These foundations included the Canada Millennium Scholarship Foundation, but also foundations in other areas, such as the Canada Foundation for Innovation, Genome Canada, and so on.
The idea was to weaken Quebec, to deprive it of its means, and then to intervene through foundations, notably through the Canada Millennium Scholarship Foundation. While we are discussing federal waste in Ottawa, Quebec is struggling to fulfill its responsibilities, which include virtually all public services, including education and higher education. I am again referring to the Parliamentary Budget Officer, who repeats the following every year in every fiscal sustainability report: The cost of Quebec's and the provinces' responsibilites is rising faster than their revenues, and Ottawa is collecting more money than it needs to fulfill its own responsibilities.
The consequences of this fiscal imbalance are manifold. The Quebec government is stretched to the limit. Once it has paid for the most essential services, it has no more room to manoeuver, while the federal government has no such constraints. It has so much money left over that it can afford to meddle in affairs that are none of its business, and it feels no need to manage its programs efficiently. That is the problem, and that is why having Ottawa issue grants is a problem.
The waste in the current federal system is a natural result of the fiscal imbalance. For example, comparisons show that it costs Ottawa two and a half times more to process an EI claim than it costs Quebec to process a social assistance claim. It costs the federal government four times more to issue a passport than it costs the Quebec government to issue a driver's licence. Before the Sainte-Anne-de-Bellevue veterans' hospital was transferred to Quebec, each procedure performed there cost two and a half times more than a similar procedure performed in a Quebec-run long-term care facility. That is the waste caused by fiscal imbalance. Since Ottawa has lots of resources, it it not as concerned about managing them well.
In 2014, the Government of Quebec released an expert panel's report on federal intervention in the health and social services sector from 2002 to 2013. The Government of Quebec identified 37 federal programs that interfered in health care. It found that, while health transfers were not very generous in terms of dollar amounts, the interference was very significant and very costly to manage, and the public did not get its money's worth. In fact, the expert panel calculated that the amount it cost the Government of Quebec to deal with this interference exceeded the amount of the transfers, leading the panel to conclude that it would be more cost-effective to just turn down the money. That is the problem with the fiscal imbalance and interference, as we are seeing with higher education.
There is $1 billion being spent here and $10 billion being spent there, with no oversight and no obligation to produce results, when Ottawa does not even provide any direct services to the public, except to first nations and veterans, and we all know how that is working out. Take, for example, the fact that the quality of services to the public is declining despite the recent significant increase in the number of public servants. During the 10 years that Trudeau was in office, an additional 109,000 public servants were hired. Imagine if Quebec and the provinces had hired an additional 100,000 nurses. Our health care system would be in much better shape, as would our education system, if it had been given those kinds of resources.
Over the past few decades, Quebec has chosen a different path from the other provinces despite Ottawa's budget cuts. While the other provinces cut social services and leveraged tuition fees, Quebec chose to create new social programs to reduce poverty and inequality. My source is an excellent book published by the University of Toronto Press in 2017, Combating Poverty: Quebec's Pursuit of a Distinctive Welfare State. The authors discuss the neoliberal trajectory of Ottawa and the other provinces, which are becoming more like the United States in terms of inequality and poverty. In contrast, things in Quebec are more like what one finds in Scandinavian countries, which are the best according to these criteria. In particular, Quebec has a unique approach to families, especially single-parent families, with a game-changing family policy that covers parental leave, child care and more. In addition, tuition fees are much lower. A few years ago, economist Joseph Stiglitz applauded this kind of policy in a speech at the Observatoire québécois des inégalités. He noted that public policy plays an essential role in combatting poverty and praised the Quebec model.
This demonstrates our ability to take charge of our own affairs. The issue we are discussing here has resulted from the cuts made in the 1990s, which limited the ability of Quebec and the provinces to take action in education, particularly with regard to student grants. Because Ottawa had surpluses, it was able to intrude, but without a comprehensive framework for accountability. This intrusion was possible because of the fiscal imbalance.
In my view, the bottom line is that it would be much better for us to manage our own finances.