Yvan Loubier

[Taxation, February 14th, 2005]

Mr. Speaker, the hon. parliamentary secretary just proved that he really is living on a different planet. We have vigorously objected to piecemeal deals, because such deals destroy the very objectives of equalization.

Instead of launching into piecemeal deals with the provinces, as he just did with Newfoundland and Labrador and Nova Scotia, would the Minister of Finance have not been better advised to take advantage of his upcoming budget to announce a comprehensive reform of the equalization system?

[Taxation, February 14th, 2005]

Mr. Speaker, the very generous deals signed today with Newfoundland and Labrador and Nova Scotia are piecemeal deals which completely distort the formula and objectives of equalization, presenting a picture of the provinces' fiscal capacity that is not consistent with the reality.

Will the Minister of Finance admit that he has completely totally contorting the rules of equalization and that he is making it blatantly clear that a major fiscal imbalance does exist in Canada?

[Fiscal Arrangements Act, February 14th, 2005]

Madam Speaker, I am pleased with the remarks by the New Democratic Party's hon. member for Winnipeg North. I am also very pleased that she is a member of the special subcommittee on fiscal imbalance which I have the honour to chair. The committee will begin its work in Halifax this week. I think she has a very fine understanding of public finances. On the other hand, the parliamentary secretary does not appear to understand all his files, especially equalization.

I have one question for the hon. member. She has proposed an indexation formula for equalization based on growth in the GDP. With her proposal, what would happen in a case where the GDP growth were less than the indexation factor of 3.5% provided in the first ministers' agreement? Would the provinces not be at risk of losing, in fact?

[Fiscal Arrangements Act, February 14th, 2005]

Madam Speaker, I want to thank the hon. member, whom I have the honour of working with on the Standing Committee on Finance. She provides an invaluable contribution with her openness and understanding of finance-related matters.

For a long time now we have been talking about making changes to the equalization formula. I think there is a consensus on the 10 province standard, but there is no consensus on what direction to take to improve the equalization formula. Nonetheless, the 10 province average is relatively well received, since this is a logical formula. For one thing, we cannot establish an average with half the participants. All the participants have to be included.

Furthermore, several proposals are currently on the table. Some are acceptable to Quebec, others less so. Some are totally unacceptable, but the fact remains that consensus has been reached among the provinces on the calculation methods. The federal government could have taken advantage of this consensus to change the formula rather than simply index the amounts.

There is a real danger at present of the federal government signing specific agreements with certain provinces. This throws the application of the equalization principle out of kilter. According to this principle, a province becomes richer, exceeding the standard, it will not get any equalization payments. That we realize. It would apply to Quebec too; if its fiscal capacity suddenly went up this year, it would not be entitled to equalization payments. We believe in playing fair so we would go along with that. It might be good news, as it would mean the province was becoming better off and exceeding the standard.

We have nothing against an agreement with Newfoundland, but we do have objections to fiddling with the equalization formula so that it takes all revenues into consideration except offshore oil revenues. In the case of Quebec it includes all revenues, including the revenue-producing potential of our hydro-electric resources. This is not right, particular in the Kyoto era.

In the past 30 years, the federal government has invested very close to $60 billion in the gas and oil sector, directly or indirectly. Now a kind of incentive has been added for non-renewable resources, which is totally contrary to the Kyoto protocol we would all like to see incorporated into this government's concerns. So questions need to be asked.

[Fiscal Arrangements Act, February 14th, 2005]

Madam Speaker, I am pleased to speak to Bill C-24, which is a very important bill. I mainly want to go over the fundamental principles of the equalization program. Then we will be better equipped to review the proposals as well as the agreement on equalization reached last fall between the provincial premiers and the federal government.

Allow me also, for review and evaluation purposes, to take a look at the $2.6 billion agreement that was just signed between the federal government and the Atlantic provinces—Newfoundland and Labrador, in particular. This will also help us to understand the position the Bloc Québécois has taken on Bill C-24.

First, what is equalization? Far too often people speak of equalization and far too often they do not really grasp this formula, which dates back to 1947. The report of the Royal Commission on Dominion-Provincial Relations, commonly referred to as the Rowell-Sirois Commission, painted the picture of a type of federal program geared essentially toward one thing. It would be set up so that from coast to coast in Canada, the provinces and territories would have comparable levels of fiscal capacity in order to provide comparable services to their constituents.

It is a wealth redistribution program reflecting the fact that, at the time—and I hope it is still there today—there was a concern for inter-regional equity in Canada in terms of the services provided to the public.

This program was implemented approximately forty years ago, and it is the only federal program that is constitutionalized, which means that equalization is mentioned in the Constitution, and it is the only transfer program that is actually enshrined in the Constitution Act of 1982.

To determine the amount of the equalization payment for a given province, or to determine, in the first place, whether or not a province is entitled to equalization, the fiscal capacity of each province is established . What is fiscal capacity? It is the capacity of each province to raise revenue from their taxpayers, individual or corporate, either through property taxes, direct or indirect taxes, or personal income tax, naturally. There are 33 government revenue sources included in the equalization formula.

Once the fiscal capacity of each province has been established, an average is calculated using five of the provinces. This average is then used to set equalization standards to decide which provinces will qualify for equalization because their fiscal capacity is lower than the average of the five provinces used for calculation purposes, and which will not receive any, because their fiscal capacity is higher than this five-province average.

Once the provinces that qualify are known, the amount of the equalization payment each one will receive is calculated on a per capita basis. This involves figuring how much a given province needs per capita to reach the average capacity of the five provinces used for calculation purposes, that is, how much it should get in equalization from the federal government to make up the difference .

The fundamental principle underlying equalization is inter-regional equity. That is the first broad principle.

The second principle underlying equalization is fairness to the taxpayers, ensuring that, regardless of where they live, be it Newfoundland, British Columbia or Quebec, they receive essentially the same level of service.

The third principle is the strict and rigorous measurement of each province's fiscal capacity.

For that, regular calculations must be done. Each year, the estimates are recalculated and factual data sought for each of the 33 revenue sources, for each provincial government. As a result, each year, it is essential that this fiscal capacity be assessed. If it is not, our outlook might be off. For example, provinces may have gotten wealthier over the previous year or increased their fiscal capacity, so they probably exceed the established average fiscal capacity based on the five-province standard. If so, they would not be entitled to equalization payments, even if they had been entitled to them that year or during the past two years.

It is perfectly logical and normal, when a province's revenues and fiscal capacity increase, for its equalization payments to decrease. Everyone knows this. When a province gets richer, its equalization payments necessarily decrease. This principle is completely acceptable and accepted across Canada, particularly in Quebec.

It is unacceptable, however, when, first, the annual fiscal capacity of each province is not considered and agreements are negotiated such as the one reached last October, whereby the last payments the provinces received, in 2002 and 2003, would be indexed to inflation, meaning these payments would be increased by an additional factor, each year, without however requiring any recalculations. The last year is used to extrapolate the amounts for the next five years, until specialists can examine this matter and find a better way to allocate or index equalization payments.

This is problematic. The very principle of periodic, meaning annual, calculations has just been trampled. We have just been told that the dynamic fiscal capacity will no longer be calculated on an annual basis for each province. Instead, an amount provided in 2002-03 will be indexed to inflation over the next five years, to determine the equalization payment.

How can the first principle of equalization—determining the actual wealth of provinces in any given year to see if they are entitled to equalization or not based on the five-province average—be respected? We no longer have this annual picture. Already, one of the fundamental principles of equalization has been violated.

I am not sure whether the Minister of Finance is aware of this or not. The Prime Minister should know since he was finance minister for eight years and he had to juggle with the equalization formula. Now we are in a situation where the calculation of the 33 funding sources is ignored year after year and for two years now the government has simply been increasing a predetermined amount. That is the first problem.

Another problem is that the equalization formula is dated. For the past 15 years we have been talking about improving it and correcting the implausibilities in calculating the 33 funding sources. Instead of change, instead of implementing any of the suggestions made in all this time—particularly in the past five years—in order to truly achieve greater accuracy in the annual estimates, at the meeting in October the Minister of Finance together with the Prime Minister preferred, as I was saying, to apply an inflation factor to a previously calculated amount. Nonetheless, he has not understood that the amount that was set two years ago was arrived at through an incorrect formula and does not reflect the true fiscal capacity of any given province.

Rather than take their work seriously, the Prime Minister and the Minister of Finance chose to use a faulty formula to calculate the equalization payments for the provinces for the next five years. This is the second rather hazy aspect of this agreement and its terms.

So they began with a faulty formula and ended up with a faulty result, of course, rather than doing a thorough job and reforming the equalization formula once and for all, with three or four major improvements. It seems to me that is what ought to have been done, rather than coming up with a dubious agreement like this.

I will give just two of the suggestions that have been made over the years to improve the equalization system. First, why use five provinces to establish the national average, so that provinces with a fiscal capacity over and above that figure receive no equalization payments, and those who are under that figure per capita do? Why not use the ten provinces and the two territories? Why not have a proper overview with a calculation of the fiscal capacity of each province and a per capita average for the ten? Then the real average of the ten provinces would be used to determine the amounts and the recipients.

This has been discussed for 15 years. I have seen documentation on it ever since 1993. It is enough to make a person's hair stand on end, although in my case that is just a figure of speech, of course. There are piles of documents explaining why the ten provinces need to be included in setting the standard. It does not take that much paperwork to explain that all of the provinces must be included in the calculation. The way an average is calculated—a basic principle I trust the senior bureaucrats have not forgotten—is to take all the data for each participant, in this case each province. Then you divide by the number of provinces. This gives the average. Why use five rather than ten? I invite you to look into this. Apparently there has always been a great deal of effort expended by senior finance officials not to give in to the obvious: an average is calculated by addition and the use of a quotient that includes all participants in the program, i.e. ten provinces and two territories.

There is also property tax. My interests are not strictly parochial, quite the contrary. Give ten economists the mandate to find a way to measure a measurable event and I am sure they will come up with ten different solutions, each more complex than the other. That is what happened with the calculation of property tax. Instead of using actual figures showing each province's capacity to raise tax revenue from property taxes in each major municipality for instance, a complex calculation—several pages of calculations in fact—is necessary to arrive at an approximation which experts call a proxy. Given that it has to be uniform for all the provinces, this approximation results in a terrifying formula. Even for math fans who enjoy trying their hand at complex formulas, this one is unbelievable. It is up there with the worse horror stories ever produced by the human mind.

Comparing this proxy, this approximation, to actual figures often reveals humongous differences. In property tax revenues, there can be a difference of up to 30% or 35% between the reality and the approximations. A statistician looking at these results would say that the error margin is way too high. A 2% or 3% difference is usually acceptable in approximate calculations, as compared to the reality. But when the difference exceeds 30% or 35%, this means that the calculations are wrong. So, this is one problem among many others with this equalization formula. This fundamental problem actually calls into question this formula's capacity to draw an accurate picture of each province's fiscal capacity.

This is the first criticism that can be made. If you start with a defective formula, take the very defective result of this defective formula, say that, over the next five years, this is how it will be in terms of equalization payments and inflate that amount, this simply means that a defective amount obtained through a defective formula has just been indexed.

Since we already have all this documentation and all the arguments for improving the equalization formula, would it not have been easy in October, to come up with a new formula instead of fiddling around with this one? The result is that in the years ahead they will stop working on the problem and simply index the 2002-03 amounts.

This is one of the criticisms we have with respect to this agreement which, in our opinion, tramples the fundamental goal of equalization, which is really to identify which provinces are richer and which poorer, and ensure that by redistributing the wealth, all the people can be provided with services.

There is another problem. It is clear to see that the provinces are unsatisfied with this equalization formula, as they were with last October's agreement. It is clear that there is a basic, even more fundamental issue involving the Canadian provinces, Quebec and the federal government, and that is the fiscal imbalance.

Not so long ago, the federal government said that some people called this issue the fiscal imbalance, while other people talked about fiscal pressures. The government, and particularly the Prime Minister, forgot to say that they must have got the words “some” and “other” mixed up.

All parties in the House, except the Liberal Party, believe there is a fundamental imbalance between the federal government's ability to get tax revenues from the taxpayers and to fulfill its mandates, but that the provinces are unable to collect revenues to provide services directly to the people, such as health, education, income support, and other services which correspond to their jurisdictions as expressly set out in the Constitution.

We find ourselves faced with an agreement in which the problem of fiscal imbalance has not been solved, and it shows. In fact, despite an agreement which the federal government calls very generous, there are still several billion dollars in the federal government's coffers that could be used for purposes other than accumulating political capital, as the Liberals have done, invading provincial jurisdictions, as the federal government has done, especially over the last seven or eight years, since the surpluses first began.

In short, this agreement does not solve the whole issue of the fiscal imbalance. The taxing abilities of each province are not addressed. More inequities are created, because we still have a formula that was far from perfect. Therefore, only imperfect numbers will come out of it.

More important still, we are also faced with a situation where, after the conclusion of this agreement among the first ministers of the provinces, Quebec and Canada, the federal government and certain provinces reached special agreements. I can name a few of them. I will come back to possible criticism of such agreements.

Following last October's equalization agreement, the first special agreement was reached between the Minister of Finance—originally from Saskatchewan—and the Premier of Saskatchewan. This province was offered $590 million. It owed the federal government $590 million in equalization overpayments. The decision was made to reach a special agreement with Saskatchewan. It was not identified as such. That province was told that it would not have to repay this overpayment. It got this money as a gift.

In contrast, Quebec had an equalization overpayment of over $2 billion. The government tells us that we will have to repay this money, but that it will be nice to us and give us 10 years to do so.

It is the same thing for the agreement with Newfoundland. A special agreement was concluded with Newfoundland, for $2.6 billion. An overall improvement to the equalization formula is dismissed and the waters are muddied.

It is impossible to apply a general equalization formula and not consider certain revenues for some provinces and keep revenues for others. That is not how things work. The system cannot work this way.

If offshore oil and gas revenues are not considered and hydroelectric revenues in Quebec are included, an inequitable situation has been created, which adds to the inequity I mentioned with regard to this imperfect equalization formula. We will have the opportunity to talk about this during questions and comments.

[Taxation, February 3rd, 2005]

Mr. Speaker, it may be an excellent question, but I would also have liked to get an excellent answer. I have a supplementary for the minister.

How can the Minister of Finance justify the fact that he erased the $590 million equalization debt of his native province of Saskatchewan, that he agreed to give $2.6 billion to Newfoundland and more than $1 billion to Nova Scotia, while Quebec must still repay $2.4 billion under the same program?

[Taxation, February 3rd, 2005]

Mr. Speaker, the federal government has reached an agreement on equalization with Newfoundland and Nova Scotia. This very generous agreement undermines the very principles of equalization and creates a totally unfair situation for Quebec.

How does the Minister of Finance explain that, in the case of the Maritimes, he can exclude offshore oil revenues from the calculations pertaining to equalization, while including Quebec's hydro-electricity revenues?

[Finance, January 31st, 2005]

Madam Speaker, I want to thank the government for the opportunity it has given us to discuss our expectations for the next budget, especially since it is a minority government budget. It is more important than ever for the government to pay close attention to what the public wants to see in this budget.

I need not remind this House that during the last election, 72% of the members elected in Quebec were from the Bloc Québécois. That said, what we will present as our eight priorities—which were renewed last fall during a prebudget consultation in Quebec—are priorities Quebeckers believe in.

If there is one thing Quebeckers and Canadians agree on, it is the issue of fiscal imbalance. The National Assembly, the people of Quebec and the premiers of all the Canadian provinces all feel that the fiscal imbalance issue needs to be resolved and that tax fields need to be shared better between the federal and provincial governments in order to allow the provinces to fulfill their basic mandate as effectively as possible.

Ontario is running a deficit. Quebec is having financial difficulties. There is not enough funding for basic needs such as health, education and social assistance. Many of Canada's provinces are in a precarious situation and cannot offer their citizens as many front-line services as they should. If tax fields were shared better, the provinces would be better able to accomplish their mandates

I just came from a meeting with the Minister of Finance—at his invitation—and he asked me what my party expected from this budget. I was quite clear. As far as the fiscal imbalance is concerned, there needs to be a sense of political will on his part to ensure transfers of tax fields in the medium term. For now, the federal government absolutely must take concrete action in its next budget. In terms of actually doing something about the fiscal imbalance, it has to increase transfers for education and social assistance.

We know, under the health accord signed last September, that, in four years, the federal government's contribution will be approximately 25% of the cost of health care. When we look at education and income support for the most vulnerable members of our society, we realize that the federal government's contribution in these areas is still between 12% and 13%.

On behalf of my party, the Bloc Québécois, I was clear and I asked the Minister of Finance to include, in his next budget, an increase in transfer payments for education and social assistance. The same goes for equalization. Before the Liberal Party first came to power in 1993, equalization represented over $10 billion per year. However, this year, it is $9.6 billion. Even with increases, we are at $9.6 billion in transfer payments under the equalization program. If we had kept the same structure since 1994 and indexed the equalization payments in effect at that time, this amount would be approximately $16 billion. However, the government slashed it and ignored the fact that the equalization formula, among others, needed to be improved, namely, by using the ten-province standard and correct property tax data.

I stated numerous times that, in the next budget, the Minister of Finance must consider this demand, which has the unanimous support of those provinces receiving equalization payments.

As for employment insurance, all my colleagues in the Bloc Québécois from every region in Québec have been fighting for years to get the government to reinstate better provisions and overhaul the employment insurance system that it destroyed a few years ago by imposing eligibility conditions so restrictive that currently, barely 40% of all workers are able to from the employment insurance system, even if 100% of them are paying premiums.

Women are the main victims of the system. Only 33% of them can qualify for EI benefits, and only 20% of young workers. Young people, women and men all pay into EI, but cannot collect.

For the past seven years, the government has been helping itself to the $45 billion in the employment insurance coffers at the expense of the unemployed. Entire regions where most of the work is seasonal are affected by unemployment, yet workers there are being deprived of money they are entitled to, which has been contributed by employers and employees.

I have made it clear to the Minister of Finance that the employment insurance program needs to be reformed to broaden coverage. For one thing, the number of hours required for eligibility needs to be lowered to 360. There also needs to be a program for workers aged 55 and over who have been the victims of mass layoffs. Some workers have been hit by the abolition of tariff quotas on textiles and clothing, which has allowed products from developing countries to be brought in, and a number of those were age 55 or over. They need to be helped. EI coverage and accessibility need to be expanded.

The commission also needs to be made independent, because the government has acted irresponsibly as far as the EI fund is concerned. It needs to be administered by the employers and employees who contribute to that fund. I also raised that point with the Minister of Finance, and made it clear to him that, if these two points were not included in the budget, we would take appropriate action. These are most definitely fundamental components of the next budget.

As far as the environment is concerned, we are facing the same problem. This is the view of the population we represent. A large majority of Quebeckers, 72%, are concerned about application of the Kyoto protocol, and this is the case in the rest of Canada as well. We want to see it applied fairly, based on the polluter-pay principle, rather than the polluter-gets-paid principle the government has gotten us used to.

In the past 25 or 30 years, the federal government has invested over $60 billion in the oil and gas sector. The first thing we want it to do is to put an end to the variety of deductions and programs designed to encourage the use of these non-renewable and polluting resources.

Second, we are asking it to make massive investments in the energies of the future, such as wind energy, by increasing the amounts budgeted. Also, the government must keep an open mind when presented with proposals, such as we have made over the years, intended to create tax deductions for users of public transit. This is very beneficial for environmental protection.

In the next budget the government must return to two fundamental principles in enforcing environmental policies like the Kyoto protocol: fairness and polluter-pay.

Fourth, I want to repeat publicly here what I said behind closed doors with the Minister of Finance. The agricultural sector, particularly in Quebec, is living thorough the worst crisis in its history because of the mad cow issue. Since the dairy herds and dairy farmers are located primarily in Quebec, we are suffering more from the mad cow crisis than other areas, especially with respect to cull cattle. So far the federal government has not contributed significantly to solving this crisis. We ask it to do its part, and to do it now.

It is not normal that out of the federal government's agricultural spending of $6 billion last year, only 9% was allocated to Quebec producers. Now, Quebec's farmers are struggling through the worst crisis. The federal government says it has done enough. It is not the agricultural producers of Quebec who are putting a strain on the federal agriculture budget. In times of crisis the federal government should increase its contribution substantially. We are not asking for a great deal, just for a payment that would help to compensate for the losses incurred in the past two years because of the mad cow crisis. Future losses should also be compensated, since the U.S. border is not going to be 100% open to beef and cull from Quebec and from Canada.

The federal government also has to honour the commitment it has made to increase milk prices to a level that will allow milk producers to cover their production costs. This is a promise that the current finance minister made a few years ago, when he was responsible for agriculture.

The agricultural sector absolutely has to be taken into consideration. Funding also has to be made available to assist young farmers discouraged by the current situation; agriculture had not been hit by such a major crisis in over 25 years.

Assistance must also be provided to the cooperatives which have requested special tax treatment, which would not cost the federal government much but could help the cooperative sector self-finance in the future as well as to compete, with competition coming from all sides.

With respect to the faculty of veterinary medicine in Saint-Hyacinthe, the only French-speaking veterinary medicine faculty in the Americas, what the federal government has started needs to be seen through. Two years ago, $35 million was provided. Another $24 million is required to complete the upgrading of the faculty's equipment and buildings; otherwise, it will not be able to maintain its accreditation with the American Association of Veterinary Medicine, which is already only a partial accreditation, while the other three veterinary schools in Canada all have a full accreditation. Losing this accreditation would affect the value of diplomas as well as the quality of research in Saint-Hyacinthe. This could have an impact on the agricultural sector as a whole.

I also raised with the Minister of Finance how important it is that the Canadian government meet the international aid target of 0.7% of GDP by 2015. We have been talking about this for a long time, and Canada is one of the most ungenerous countries in the world, one which spends the least on international aid. So, the target of 0.7% of GDP was established many years ago by the United Nations and ought to be met as soon as possible. The finance minister's awareness of this issue was also raised by the Bloc Québécois this morning, during our meeting.

I reiterated to the Minister of Finance that with respect to child care, it is important for Quebec's jurisdictions to be respected and for Quebec to be able to opt out of the federal program with full compensation. We already have a program that works, that the other Canadian provinces want to have and that the federal government is using as a model. The government has to go even further. It has to respect Quebec's program and allow Quebec to opt out of the federal program with full compensation.

The federal government also has to keep the promises it made during the last election and provide the necessary funding to allow the Government of Quebec to implement its parental leave program as quickly as possible. In the meantime, an entire generation is suffering.

The leader of the Bloc Québécois reiterated last week that the federal government needs to help the municipalities through infrastructure programs and other federal transfers. However, the Bloc Québécois strongly opposes the idea of funds being transferred directly from the federal government to the municipalities. The municipalities come under provincial jurisdiction. What we want—and we advise the government to respect this—is for funds to be transferred through the Government of Quebec and for arrangements to be made between it and the municipalities to help them, especially when it comes to gasoline tax transfers.

Social housing is very important to us. We have been talking about this for a long time, debates have been held on the matter and promises from the other side of the House have been broken. The federal government absolutely must invest 1% of its entire program spending on building social or community housing.

Since 1992, the federal government has not put one penny into social housing. It is only maintaining existing social housing units, nothing more. Investments must be made, because too many households are paying over 50% of their income on rent. When families pay more than 30% on rent, the situation becomes precarious.

Finally, as the leader of the Bloc Québécois mentioned during his meeting with the francophone and Acadian associations in Canada, it is absolutely essential—and we are committed to this—that the federal government double allocations to francophone and Acadian associations in Canada. It is a question of survival and assistance for the francophones and Acadians we have supported since we were first elected in 1993, even if we do not directly represent them in the House of Commons.

In closing, I want to send the government a clear message with regard to the coming budget. The Bloc Québécois was clear and, once again last week, its leader was too. The government must take action with regard to these priorities, as well as a number of others mentioned in our minority report included in the work on pre-budgetary consultations by the Standing Committee on Finance. There are eight sectors. The government's response to our demands must be substantial. If it does not respond to the very specific concerns of the public, which were tested again in the fall during a pre-budget consultation across Quebec as well as by the Standing Committee on Finance across Canada, we will not hesitate to vote against this budget and overturn the government if we have the power to do so and if we are also convinced that the government is not meeting our expectations. We will not hesitate to do so if the government goes against the interests of Quebec and even Canada and if it does not meet the expectations of the people and, specifically, the most vulnerable people in Quebec and Canada.

The responsibility lies with the Prime Minister. So, we hope that the Prime Minister will be as responsible as the Bloc Québécois in presenting his budget, which we will also analyze.

We are honourable people. We do what we say we will do and that is why we are making this commitment, unlike some people in this House and outside it. Our beliefs cannot be bought any more than those of Quebeckers can be. If we find that this budget has little substance in relation to the priorities we identified, I will not hesitate to recommend that my party vote against it.

[Finance, January 31st, 2005]

Madam Speaker, I would have a question for my learned colleague from the Conservative Party and member for Medicine Hat, with whom I always enjoy working.

This morning's La Presse had a piece by Joël-Denis Bellavance in which the leader of his party was reported as stating that the Conservatives would vote against the government without defeating the government. Could he tell me what that means? I hope it does not mean that the Conservatives are prepared to act contrary to their own convictions and that, to prevent an election or out of fear of an election being called, they figured that some of them might not show up to vote on the budget.

[Budget Implementation Act, 2004, No. 2, December 14th, 2004]

Mr. Speaker, I thank my colleague for his question. I want to extend him my best wishes for 2005. We have known each other since 1993 and he does excellent work. His only fault is that he is a Liberal, but no one is perfect. He is an outstanding colleague. We also went on interesting missions together in foreign countries. There are nice stories to tell about that.

My colleague is right. It is difficult to change personal income taxation. We tried to have different proposals. Since 1993, I cannot say that the Standing Committee on Finance has examined the issue very seriously, because somehow there is no political will to do so. He is right. When we reduce tax rates on the first income bracket, this also affects other brackets. Thus, not only low income earners, but also very high income earners, can benefit.

There must be a way. Perhaps he showed us the way earlier when he talked about a differential tax rate for some income levels. This is done elsewhere. We could look at some European countries. I often refer to Scandinavian countries. They are ahead of us with respect to personal income taxation.

They created low income categories, and the tax rate varies according to those categories. They do not use universal tax brackets, where the first slice of income is taxed at one rate and the second slice at a higher rate. The change on the first slice of income ends up in the pockets of taxpayers, even those who earn $150,000.

The hon. member for Miramichi feels strongly about this issue, as do we in the Bloc Québécois. In committee, he came up with a proposal that we took into consideration. The problem is that, if there is a lower tax rate for people with an income below $10,000, then we need to provide these people with a tax credit to give them back the income tax they have paid. For instance, a taxpayer with an income of $9,999.99 would get a tax credit of $372 to compensate for the income tax he or she has paid, whereas a taxpayer earning $10,000 will have to pay Ottawa $372, which is an incredible difference just for an extra penny in income. So, we need to look into that matter.

We started to sort out the problems in 1996, but we must take it a step further. And to do so, there must be political will. As my hon. colleague who sat on the Standing Committee on Finance knows, we have been trying for years now to put this issue on the agenda. Maybe we should think about it now that we have huge surpluses. It would help low income families.