Mr. Speaker, I thank my hon. colleague for offering me the opportunity today to respond to his motion calling on the government to extend the benefits of the recent Atlantic accords with Newfoundland and Labrador and Nova Scotia to all the other provinces.
His one-size-fits-all approach to federalism is certainly appealing in its simplicity. After all, would it not make life easy for the federal government to treat all the provinces and territories as though they shared the same geography, the same history, the same resource base and the same level of economic development? No doubt it would.
However I am proud to be able to say that this government will not settle for the easy way out because this government understands that fairness involves more than applying the same cookie cutter treatment to all provinces.
It is about making investments that create wealth and expand opportunity and ensuring that all Canadians have the chance to share in the promise of our society regardless of where they live.
It is about being flexible and responsive to unique regional concerns.
It is about reconciling legitimate but competing demands on the understanding that we all benefit when we direct our energies first to those most in need.
It is in this spirit that the Government of Canada recently renewed its existing offshore revenue agreements with Newfoundland and Labrador and Nova Scotia. By giving these two provinces the maximum benefit from their offshore revenues, these deals will provide a much needed window of opportunity for them to overcome the serious economic and fiscal challenges that they are currently facing, which brings me to the basic premise of the hon. member's motion, which is the assumption that these two provinces are no more deserving of extraordinary assistance than any other province.
Let me take a moment to disabuse him of that notion.
First, Newfoundland and Labrador currently has the highest net debt of all provinces, at 62.8% of its GDP, compared to a provincial average of 25.1%. Nova Scotia's net debt is second highest, at 42.7%.
Newfoundland and Labrador's per capita debt servicing costs are $2,068 per person per year, nearly three times the provincial average. Nova Scotia's per capita debt servicing costs are second highest, at $1,099 per person per year.
With its declining population, Newfoundland and Labrador face the situation in which fewer people remain to pay off this debt. At the same time, Newfoundland and Labrador also continues to have the highest provincial unemployment rate, at more than double the national average. Unfortunately, Nova Scotia is not far behind.
To make matters worse, Newfoundland and Labrador's budgetary balance has been deteriorating over the last few years. In this fiscal year, the province's deficit is estimated at $708, or 3.7% of GDP, the highest among provinces.
In short, these partners in our federation were in danger of falling so far behind the other provinces that they were at risk of never catching up.
True, treating them the same as the other provinces, as suggested in the hon. member's motion, would have been the easy thing to do. However Canadians understand and I, as a Manitoban, understand that this would not have been the right thing to do.
Because it is in all Canadians' interest to see these provinces on a sustainable fiscal track, these agreements on offshore revenues mean Newfoundland and Labrador and Nova Scotia have a fighting chance at getting their fiscal houses in order so that they, too, can make the investments necessary to strengthen our federation in the years ahead.
How exactly will these agreements help these provinces get back on their feet?
Under the renewed accords, they would continue to receive 100% of their offshore resource revenues no matter what the price of oil and gas. As promised by the Prime Minister, this deal will give both provinces 100% protection from equalization reductions for eight years, or as long as they continue to receive equalization payments.
It will also provide the provinces with substantial upfront payments, $2 billion for Newfoundland and Labrador and $830 million for Nova Scotia, giving them the immediate flexibility to address their unique economic and fiscal challenges.
This extraordinary assistance was never aimed at improving the equalization system, as suggested by the hon. member's motion. The new framework for equalization and territorial formula financing, agreed to by all provinces last fall, does just that. I will elaborate on this shortly.
In reality, these arrangements and the existing accords that they supersede operate entirely outside the framework of equalization and in no way affect the integrity of the equalization system. They are targeted investments that illustrate how we all benefit when we extract the maximum potential from our regional advantages, our people and our resources.
Those are not the only recent federal initiatives that extract the maximum potential from our regional strengths. Other examples of such targeted initiatives would include the $88 million in new funding budget 2005 dedicates over the next five years to the federal economic development initiative for Ontario, FedNor, to support the economic development of communities through the northern Ontario and rural southern Ontario.
Another example is perhaps the $300 million in new support for the north through the new framework for territorial formula financing, plus another $120 million for the next three years for the territories to cooperatively develop the first ever comprehensive strategy for the north.
There is also the $50 million in new funding that the recent budget just directed to the Asia-Pacific Foundation of Canada so it can continue its work building networks between Canadian and Asian business leaders and unlocking new market opportunities that will benefit both regions.
There is also the $100 million over two years for the Canadian Space Agency in Montreal which will ensure that Canada's aerospace industry remains a research and innovation leader, and turning investments in knowledge into a global advantage in areas such as robotics and satellite communications.
Let us also not forget the government also recently invested another $500 million to build and further strengthen Ontario's world leading automotive sector.
All these investments illustrate that Canada is more than a balance sheet. It is not about making identical investments all over the country. It is about all parts of the nation working together and recognizing that when one province or region succeeds we all succeed. This, of course, is not to say that balance has no place in public finance. In fact, our entire transfer system to the provinces is based on providing stable, predictable and growing per capita funding to support the provision of health and social services.
These per capita transfers, like the Canada health transfer, the Canada social transfer and the health reform transfer, will commit over $42 billion to the provinces this year alone. In total, per capita transfers will grow from $21.8 billion in 2003-04 to $30.1 billion in 2007-08, an average annual increase of about 8%, which is significantly higher than the projected 5.1% growth in nominal gross domestic product.
Just last September, first ministers signed the historic 10 year plan to strengthen health care, another milestone in federal support for the provinces. The Prime Minister committed $41.3 billion over 10 years in support of the plan, fully meeting the financial recommendations of the Romanow commission in doing so.
However sometimes per capita transfers are just not enough because the fact is that the provinces do not share the same geography, the same history, the same resource base and the same level of economic development, which is why we signed the recent offshore agreements with Newfoundland and Labrador and Nova Scotia, why we made strategic investments in every part of this country and why equalization was built into our Constitution in the first place.
By taking into account the fact that different provinces have different abilities to raise revenues, the equalization transfers ensure that all provinces can provide reasonably comparable public services at reasonably comparable rates of taxation. In doing so, it forms the bedrock of fiscal federalism. Though often poorly understood, it is one of the strongest forces of cohesion in our diverse federation.
What would happen to this country if this program were to suddenly disappear? How would regions with lower populations or less resources or a less developed economic base fund the provision of basic health and social services? By raising taxes to economically damaging levels? It does not take a great deal of imagination to see where this process would lead, and that is not a road Canadians want to head down.
Fortunately, the new framework for equalization and territorial formula financing agreed to by all ministers last fall will ensure that this never happens. By providing predictable, stable and growing funding to the provinces and territories, the framework will ensure that all Canadians, no matter where they live, have access to the government services that they expect and deserve.
Specifically, funding levels for 2005-06 will be set at $10.9 billion for equalization and $2 billion for TFF. Because these amounts will grow at a rate of 3.5% per year, this represents an additional $33.4 billion more in equalization and TFF payments to provinces and territories over the next 10 years.
Moreover, the new framework involves the consideration of third party expert advice on the best way for the Government of Canada to allocate payments among the provinces and territories. Panel chair, Al O'Brien, will be tabling his report before the end of this year. His panel's advice will form the basis for future equalization and TFF allocations for the years 2006, 2007 and beyond, which brings me once again back to my hon. colleague's motion.
In essence, the motion suggests that the government should exclude revenues from oil and gas or other non-renewable resources when comparing the levels of revenue available to different provincial governments. Those provinces with oil and gas tend to think this is a good idea. Those without do not. Both have marshalled interesting arguments in their favour. Both consider this a matter of great significance in their respective provinces and both deserve to have their positions carefully and thoughtfully considered.
I would therefore urge the House to reject this motion and not take sides in the debate until all members have had time to consider the independent expert advice that Mr. O'Brien's team has to offer on this and other significant matters in its forthcoming report on equalization.
The issues at stake are not to be taken lightly. Arguments based on chequebook federalism can be divisive. They pit region against region, government against government and Canadian against Canadian. They are the weapon of choice for those with a sovereignist's agenda, which makes it all the more important for us to cut through the partisan rhetoric of balance sheet federalism so we can identify legitimate regional concerns and respond to them with a fair and balanced approach that characterizes, not only the recent Atlantic offshore agreements, but the Government of Canada's overall approach to economic and fiscal management which has served this country so well in recent years.
The government's record speaks for itself. Ten years ago this country was on the verge of economic disaster. Deficits were out of control, public debt was accumulating at an unsustainable rate, interest rates were high, jobs were disappearing and the engine of economic growth was puttering or stalled. Dealing with the situation was not easy. It required tough choices and sensitivity to the needs of the most vulnerable in society. We had to reconcile competing demands and we did so with the understanding that we are stronger when we work together in common purpose to create wealth and expand opportunity.
This approach paid off. Our balanced mix of tax cuts, debt repayment and strategic investments have turned a vicious circle of 10 years ago into a virtuous circle in which balanced budgets have inspired strong, sustained economic growth, increased confidence, investment and opportunity. As a result, more than three million new jobs have been created, inflation and interest rates have been low and stable and we have experienced more improvement in the average Canadian standard of living in the past seven years than in the previous seventeen.
We have tabled a record seven consecutive surplus budgets since balancing the books in 1997, which has allowed us to slash the debt by over $61 billion. This saves Canadians over $3 billion in interest every year, which can now be invested in their higher priorities, rather than sent to our creditors.
In terms of scope and magnitude, we have introduced the largest tax cuts in Canadian history. We have put the long term financing of health care and equalization on a sustainable footing and over $75 billion in new investments just last fall.
We just tabled a budget that commits substantial new funding for health care, seniors, first nations, national day care and the environment while also providing tax reductions and laying the groundwork for future progress in addressing priorities of Canadians.
Yes, we have invested in every part of this country but, more important, we have invested for every part of this country. We have delivered on our commitments and kept the books balanced while doing so.
However we have one more very important outstanding commitment that awaits the tabling of Mr. O'Brien's report. I will therefore once again urge the House not to prejudice conclusions of this report as they pertain to the inclusion of non-renewable resource revenues in determining equalization entitlements. I once again urge the House to reject one-size-fits-all federalism. I once again urge the House to reject the hon. member's motion.
