Mr. Speaker, I agree with the motion put forward today by a member of the Bloc Quebecois. The motion is on fiscal arrangements. It is a very important issue.
The whole area of fiscal federalism, how we arrange our finances, has always been a debate. It has always been very fundamental to the fabric of Canada. It was a great debate at the time of the founding of Canada. We have had a royal commission on fiscal federalism. We have had many debates in the 1960s and 1970s, as well as the patriation of the constitution in 1980 which had as part of it the constitutionalization of the whole principle of equalization. These are very important questions.
I remember back in 1968-69 when then Prime Minister Pierre Trudeau brought in the Department of Regional Economic Development to address some of the regional inequalities or inequities that existed and the debates that followed thereafter.
I remember when medicare was founded. I was in high school in Saskatchewan. I remember the great debate over health care and the leadership of the Tommy Douglas and Woodrow Lloyd governments in 1960, 1962 and 1963 in Saskatchewan, the funding of health care by themselves, and the royal commission on health care appointed by Mr. Diefenbaker and headed by Mr. Hall. Finally Lester Pearson took it up at the federal level under pressure from the NDP caucus of that day.
We had a national health care program that was cost shared on a 50:50 basis: 50¢ paid by the federal government and 50¢ paid by the provinces. That was our vision in those days of fiscal arrangements, our vision of co-operative federalism.
If we look at what is happening today we see the gradual erosion of the importance of the role of the federal government in terms of paying the costs of programs. In terms of cost shared programs the federal government now pays around 20% and the provinces pay roughly 80% of the cash for these programs. Health care is a good example in terms of cash transfers. The federal government now pays about 13% or 14% and the provincial governments pay 85%, 86% and 87% depending on the province.
This is a very important issue. If we look at the tax base in the country, the provincial governments and the municipalities deliver probably twice as many services as does the federal government. Yet the federal government has about 60% of the taxing room in terms of income tax. I am talking about individual income tax and the corporate tax. There is a great deal of maneuverability for the federal government compared to the provinces.
If we look at many studies, not only the Séguin report but also a study done for the western finance ministers and the western premiers recently, we find the same conclusion: the gap between the wealthier provinces and the poorer provinces is widening. We also find that the ability of provincial governments to deliver services particularly in seven or eight of the provinces is diminishing.
In my own province of Saskatchewan there is now a financial crisis, a fiscal crunch, because of the drop in farm income as a result of the drought, European subsidies and the drop in gas and oil revenues. The federal government is paying fewer of the bills, which makes it difficult for smaller provinces like Saskatchewan, Manitoba, the four Atlantic provinces, and to a lesser extent the province of Quebec, to meet their obligations to the people of their regions.
We have to look at the fiscal arrangements. There is a growing consensus based on the data that the federal government has to play a much more important role. If it does not play a much more important role we will see the erosion of national unity.
In my part of the world, for example, we have a great deal of fiscal inequity between Alberta and Saskatchewan. We just do not have the resources of the province of Alberta. Alberta has been blessed with a lot of oil and gas. One of the problems is that we will have a different level of services based on the ability to pay.
One important thing about being Canadian is that we have comparable services at comparable costs no matter where we live in the country. Having comparable taxes and comparable services is what being Canadian is all about. Whether we live in New Brunswick, Ontario, Saskatchewan, Manitoba or Quebec, we should get roughly the same level of services for roughly the same costs in terms of tax dollars. That is eroding very quickly.
That is one reason in the big constitution debate back in the 1980s, which took place in 1980, 1981 and 1982, it was decided with the support of all parties in the House to constitutionally enshrine the obligation of the federal government to pay equalization payments to the poorer provinces that needed the extra cash.
The principles of equalization were enshrined in our constitution. Every four or five years the equalization formula is renegotiated. The last time the federal government put a cap on equalization payments to the provinces. In terms of prosperity there is a cap, but when the economy goes into a recession we find that the poorer provinces fall further and further behind.
The next negotiations take place in the year 2004. It is very important that the federal government with the extra money it has looks at removing the cap and making sure the negotiations that follow provide a fair amount of services and funds to every province.
There is a fiscal imbalance between the federal government and the provinces and that gap has grown dramatically. I mentioned that about 60% of the income tax was now collected by the federal government.
The conference board has done studies not just for the Séguin report but for other reports. It says that the gap is likely to widen rather than narrow. The conference board projects that if the revenues and expenditures of the federal government are maintained in the next 10, 12 or 20 years we will see a widening of the gap between the abilities of the provincial governments to operate and provide programs and that of the federal government. It also projects that we will see a continuing expansion of the federal government' s surplus.
Last year there was a surplus of some $17 billion, all of it put against the national debt. In the first nine months of this year the surplus is estimated at about $13.4 billion. I suspect that unless legislation is brought in that too will be put against the national debt.
We have some flexibility in terms of having a greater transfer of some of the cash to the provinces by the federal government. My vision of federalism is similar to that of Lester Pearson, Tommy Douglas and Robert Stanfield back in the 1960s when they talked about co-operative federalism. They talked about a strong federal government and strong provinces that would share, co-operate and work together for the benefit of the Canadian people. We have seen that turned on its head in the last few years, in particular by the government and the Minister of Finance.
In 1995 we had the largest cutbacks in our history in terms of transfers to the provinces and transfers to individuals for social programs. It was something that was very un-Liberal, something that I am sure would have scandalized the people in the Pearson government, let alone the Trudeau government, in terms of the vision of where the country should go.
The Prime Minister was in the Trudeau government as a junior minister for most of the period of time between 1968 to 1984. Yet we have had a break in terms of the philosophy of the federal government where the provinces pay more and more of the bills and the federal government pays less and less.
If the government is to be paying less and less of the bills, it obviously will get less and less of the say and less and less of the clout. That is happening now in health care. The time will come when Ralph Klein, because of the wealth of Alberta, will say to hell with the federal government, forfeit the 13% or 14% cash for health care in his province, and devise his own two tier health care for profit system similar to that of the United States.
What could the federal government do? If it were footing more of the bill a province would not do that. It would not be able to afford to do that. That is why it is important we get back to a system where cost shared programs are on a 50:50 basis. We should be moving immediately to health care being funded 25% by the federal government in terms of cash payments, and within a few short years to being funded 50% by the federal government and 50% by the provinces.
The same is true for post-secondary education. The member for Vancouver East has spoken very eloquently in the House several times on the lack of federal cash in transfers to the provinces for post-secondary education and the increase in tuition fees. I have met with students across the country in the last four or five months who are concerned about the rise in tuition fees and accessibility on an equal basis to post-secondary education. This is a result once again of the diminishing contribution by the federal government to post-secondary education.
When that happens provinces compensate for these cutbacks and lack of revenue from the federal government. They do this by increasing user fees. We see that all over the place, for example, provincial cutbacks in transfers to municipalities.
Two weeks ago I was in Regina for the SARM convention, the Saskatchewan Association of Rural Municipalities, where the Minister of Finance was the guest speaker. One of the concerns there was the cutbacks on funding for rural and urban municipalities. The Minister of Finance heard that when he was in Regina speaking to some 2,000 delegates from rural Saskatchewan.
Then of course the municipalities are in trouble. The city where I come from and the member for Palliser comes from, Regina, is now debating a motion to have a flat tax on the collection of garbage. That will be $100 per household for the collection of garbage in the city of Regina. That may be okay for a wealthier person living in one of the wealthier parts of the city, but what about a lot of people in low income areas in the inner city and the city core? Many parts of Regina have a lot of low income people who cannot afford $100 to collect their garbage. That idea is not worth the rubbish it is supposed to collect. It is a flat tax.
We have had the rejection of the flat tax idea that was put forward by the Canadian Alliance. When we have cutbacks on transfers by the federal government to the provinces and cutbacks from the provinces to the municipalities, then the municipalities have to come up with ideas like a flat tax to collect the garbage. That is the domino effect and that is what we are debating in the House today.
We are seeing much of this happening without proper consultation between the federal government and the provinces. The federal government unilaterally decides what the transfers would be.
We do not know when the federal budget would be presented. It seems to me it is only common sense to have a fixed budget date where a budget comes down every year on approximately the same date. It used to be that way by convention or by practice. We should have a fixed budget date by statute, perhaps the first part of February each and every year.
By having a federal budget on the same date every year the provinces could do their planning and so could the municipalities, school boards and hospital boards. That is not a radical idea. It is called common sense and co-operative federalism by planning and working with our partners in confederation.
There was a period of 20 months between budgets in the House by the Minister of Finance. People do not know what will happen nor what are the plans of the federal government.
I have mentioned medicare. That is the funding crisis we are facing today. There are other problems in medicare too, but a funding crisis is at the centre of the health care crisis. The federal government used to pay 50¢ on the dollar and now pays 13¢ or 14¢ on the dollar in terms of cash transfers. There is obviously a funding crunch which creates a lot of inequality between richer provinces and poorer provinces. Ontario can afford to fund health care a lot easier than the province of New Brunswick. Again, we get the two tiers or the three tiers. Soon we will have a ten tier health care system where the people's service will be dependent upon the resources of their province to pay for that particular service.
I mentioned the cap on equalization which is an important part of being Canadian. It was an important part of the constitutional debate back in 1980-81 when the constitution was patriated. When the Queen signed the patriation papers on the lawn of parliament back in April 1982 the equalization commitment was constitutionalized by the federal government. The gap has widened as the federal government put the cap on equalization and put less money into the equalization program according to demographics, inflation and the program obligations of the different provinces.
Those are some of the problems we are facing. This country needs co-operative federalism and this is where I differ with the Bloc Quebecois. We need a strong central federal government. At the same time we need strong provincial governments that work and plan together and bring in cost shared programs that they would be funded on a 50-50 basis.
The federal government has the resources. Last year alone $17 billion went to the national debt. Can members imagine what could have been done if only $7 billion was put on the national debt and the other $10 billion was transferred to the provinces for health care, post-secondary education, social programs and the farm crisis. We could have stimulated the economy and created more justice and equality for every single Canadian. These are things that could have been done if there was some vision across the way.
The federal government talked about balancing the budget. We had the Parliamentary Secretary to the Minister of Finance boasting in the House about an accumulated surplus by the federal government in the last few years of $35.8 billion. The government has a surplus only because it is overtaxing employees in terms of employment insurance premiums. There is now a surplus of $46 billion in the employment insurance account.
The surplus is being funded out of the EI account. In other words, we would still have a deficit if it were not for the extra premiums that were being paid by ordinary working people and by their employers into what was supposed to be an insurance fund when workers were laid off or unemployed. That is the kind of smoke and mirrors that is being used.
We want a country where we have justice, equality and fairness for all, where we have co-operative federalism. It is about time the federal government started paying its bills, its share of the plans, its share of the costs so Canadians are treated equally from sea to sea to sea.
