Mr. Speaker, it is a pleasure to be able to say a few words today about Bill C-24 at second reading. Hopefully we will be able to dispose of this bill, at least at this stage, later this day, have a vote and get it off to committee, where we can continue this debate about equalization.
Certainly equalization is a very important part of how the country is constituted. It predates the Constitution of 1982. I think it goes back to 1957. In the process of patriating the Constitution in 1980-82, we enshrined the principle of equalization. I was here at that time. I think that was a very important thing to do: to establish at a constitutional level the fact that as a country we want provinces to be able to provide reasonably comparable levels of public services.
In order to do that without so-called have not provinces having to tax at a level that would make them uncompetitive and therefore create an even worse economic situation for them, there is a pooling of resources at the federal level pursuant to a particular formula by which provinces which fall below a certain fiscal standard, shall we say, receive equalization payments.
It is also timely that we are having this debate this afternoon, because we have in recent days witnessed the Atlantic accord between the federal government and Nova Scotia and Newfoundland and Labrador. This bears on the equalization debate, because what was at stake there was a feeling on the part of Newfoundland and Labrador and Nova Scotia, first of all, of course, that a promise the Prime Minister made during the election campaign be kept. That promise had to do with how and when the equalization formula is amended as a result of wealth that accrues to provinces as a result of new revenues, in this case oil and gas revenues. The federal government reached an agreement on January 28, 2005, whereby Nova Scotia and Newfoundland and Labrador can keep 100% of their offshore energy revenues.
This we welcome, but it also at the same time creates questions about how other provinces are being treated. For instance, it creates questions, I know, in the minds of many people from Saskatchewan.
Indeed, my leader, the hon. member for Toronto—Danforth, asked a question today in the House with respect to what the government intended to do in regard to Saskatchewan. Because although Saskatchewan is happy for Nova Scotia and Newfoundland and Labrador, it hopes that this ultimately means good news for Saskatchewan too. It feels that at the moment as a result of the Atlantic accord an argument could be made that revenue from natural resources is being treated differently depending on what jurisdiction that revenue is being raised in.
For instance, looking back over the last 10 years, Saskatchewan makes the argument that a similar deal for Saskatchewan would have realized over $4 billion for the Province of Saskatchewan if the federal government had not taxed back its oil and gas revenues, that is to say, when it was in the have not status. Saskatchewan is no longer in the have not status, but when it was, this is the amount of money that was lost to the Province of Saskatchewan because it did not have the kind of deal that Nova Scotia and Newfoundland and Labrador now have with the federal government with respect to their oil and gas revenues.
It is not surprising that the Government of Saskatchewan, and I believe with the support of the opposition in Saskatchewan and I am certain with the support of the people of Saskatchewan, feels that some similar treatment of the revenue from its energy resources is due to Saskatchewan, if fairness is to be the rule of the land.
I think we will see a growing debate about the ramifications of this welcome agreement between the government and Newfoundland and Labrador and Nova Scotia, a welcome agreement but nevertheless an agreement that has ramifications for other provinces that feel they need to be treated somewhat differently now as a result of that agreement having been reached.
We hope it is not the case that the only difference between Saskatchewan and Newfoundland and Labrador, for instance, is that the Prime Minister did not go there in the dying days of the election and make a promise he had no intention of keeping in order to save Liberal candidates in Saskatchewan. I hope members would not think me cynical to suggest this, but maybe it was because there were no Liberal candidates to save in Saskatchewan, except the Minister of Finance himself, that no such promises were made.
The fact of the matter is that the Prime Minister made this promise in Newfoundland and Labrador. If it is a promise that was rooted in a commitment to fairness and not just rooted in the politics of the moment, a promise which the Prime Minister came to regret and then had to live up to as a result of pressure from those provinces, if it is a promise that was rooted in fairness, then ultimately this Prime Minister is going to have to deal with the legitimate feelings of the Saskatchewan government and the Saskatchewan people that something different is due to them as a result of that promise made and the promise ultimately kept to Newfoundland and Labrador.
The Government of Saskatchewan, for instance, argues that its province loses on average about 90% of all the provincial royalties and taxes collected on oil and gas developments. In fact, it claims that in some years Saskatchewan has lost in excess of 100% of all its provincial energy revenues. This means that the people of Saskatchewan have been realizing very little financial benefit from the depletion of a non-renewable resource. I do not think that is fair, particularly when one considers that now Nova Scotia and Newfoundland and Labrador can retain 100%.
It is only fair, it seems to me, that the case of Saskatchewan be looked at. I understand that Saskatchewan will be making its case to this independent panel that has been set up to advise on the equalization program.
With respect to Bill C-24, we are supporting it at second reading. We want to get it into committee but we certainly do not think that this is by any means a perfect piece of legislation. We feel that we should look at amending Bill C-24 to ensure that, at a minimum, growth in the equalization program keep pace with growth in the nominal gross domestic product. Hopefully this is something the committee can look at.
Under proposed paragraphs 4.1(1)(b) and (c), growth in total equalization payments is being arbitrarily constrained to 3.5% per year. The result of this is that the value of the program will continue to be eroded over the next several years and will increasingly be inadequate to meet the commitment of the federal government to address fiscal disparities under section 36(2) of the Constitution. Thus, we have a formula here that is not sustainable from the point of view of the provinces. Certainly I know that this is how the Government of Manitoba sees this formula that would be enshrined through Bill C-24.
It is widely understood, I think, and accepted, regrettably, that the federal government's financial commitment to equalization has declined over time. Equalization as a percentage of GDP fell from about 1.1% in the mid-1980s to just 0.7% by 2003-04.
This has occurred for the following reasons, the following actions on the part of the federal government. It has happened because the government is now using a five-province standard instead of a more rational all-province standard. It has occurred because, in the same vein, the federal government has made unilateral changes which made coverage under the program less rather than more comprehensive.
I think the provinces welcomed the October 2004 decision by the federal government to boost base funding in 2004-05 and 2005-06 although, as I have already said, they are concerned--and we share that concern--that the escalator being set at just 3.5% will undermine the improvement that this represents over time unless it is changed to reflect economic growth.
It may be that during committee deliberations and perhaps at report stage the bill could be amended. Proposed paragraphs 4.1(1)(b) and (c) could be amended so that rather than 3.5%, total payments under the equalization program could be set at the average rate of growth in Canada and Canada's nominal gross domestic product for the three previous years beginning on April 1, 2006.
It is clear that the federal government is in a position to do this. The provinces are not asking the federal government to do something that is beyond its fiscal capacity to do. When we look at the history of federal surpluses, $61.3 billion between 1997-98 and 2003-04, and the federal government's projections of future surpluses, $61 billion between 2004-05 and 2009-10, the projections made by the Liberals themselves in their own platform, the modest cost associated with the kinds of changes the provinces are looking at is easily affordable. What we are suggesting is easily affordable.
Assuming nominal GDP growth would average about 5.5%, the extra cost of ensuring the value of the transfer is not diminished would be less than a quarter of a billion dollars per year, a drop in the bucket when we think of the overall fiscal surpluses that the federal government is now dealing with. This would go some way but certainly not all the way toward addressing the problem of the équilibre fiscal that my colleagues in the Bloc talked about. It would also go some way toward addressing a concern that we share about the fiscal imbalance that now exists between the federal government and the provinces. Here would be an opportunity, at one level, to address that fiscal imbalance and the government seems unwilling to do the right thing.
I am sure that at some point a Liberal will argue that the government is putting an additional $33 billion into the equalization program with the October 2004 deal. The provinces consider this number to be wildly exaggerated in terms of the actual increase in funding, especially in the medium and long terms, because before that increase in October 2004 funding for the program was at an all time low, both as a per cent of GDP and as a per cent of federal revenue, and would have rebounded in any case over time as the Ontario economy recovered along with the economies of the other provinces.
So the $33 billion improvement that the Minister of Finance likes to talk about is the sum of all additional funds and is based on the naive assumption, or certainly the convenient assumption, that equalization would have remained unchanged at its 2003-04 low point for the entire 10 year period. This is the kind of manipulation of figures and statistics that the federal government is famous for in its dealings with the provinces.
The federal deal actually provides less than what provinces would have received if the federal government had listened to the premiers and moved to the all-province standard with full revenue coverage, something that was also recommended by the Senate standing committee.
These are some of the things that I think need to be put on the record as we move into the closing stages of this second reading debate on Bill C-24.
I hope that the federal government will listen to these arguments and see that it has an opportunity to really live by the spirit of equalization that was enshrined in our Constitution in 1982, and which has been a feature of the Canadian social fabric ever since I was knee-high to a grasshopper.
We look forward to being able to make these arguments along the way and hope that the recent accord reached between the federal government and Newfoundland and Labrador and Nova Scotia will also provide an opportunity for the concerns of Saskatchewan, and perhaps even other provinces to be revisited in a way that leaves no Canadian, no matter where they live, feeling that somehow they have been treated unfairly by the equalization formula or treated unfairly because it just so happened that the Prime Minister did not go to their province and make a last minute promise in the desperate last days of an election campaign that was almost lost by that Prime Minister.
