Mr. Speaker, I will be splitting my time with the Parliamentary Secretary to the Minister of Canadian Heritage.
Though their motion does not mention it explicitly, it is clear that our friends in the Bloc Quebecois want to talk about the Séguin commission. Last week the Bloc Quebecois publicly pointed to the commission's report as yet more evidence that federalism did not work, that federalism was unfair to the people of Quebec. They have held it up as some sort of proof of the alleged fiscal imbalance they refer to in their motion and the so-called jeopardy in which they claim it places on our cherished social programs.
The Bloc suggests that the Séguin commission report offers ways to take this unfair system and make it fair. I have three bits of news for my hon. friends in the Bloc. First, federalism works; second, there is no fiscal imbalance; and, third, the Séguin commission is wrong. In fact federalism works in large part because of the very programs that the Séguin commission attacks: the Canada health and social transfer and equalization. The Séguin commission suggests that these transfers create an imbalance among the provinces and between the federal government and the provinces. I say that these transfers serve all regions of this country equally well and are fair to all.
Other colleagues of mine have spoken to various elements in this discussion, so let me be very specific in my choice of subject. I would like to speak to the recommendations of the Séguin report, specifically those changes it suggests would make the CHST and equalization more fair.
What exactly does it want to change? The first thing is the Séguin commission does not like the CHST. Before I say what the Séguin report would like to do with the CHST, it might be helpful to remind the House of a bit of the background of this important transfer, the first being its goal.
The purpose of the CHST is to provide federal funding to the provinces and territories for their vital programs in specific areas: health care, post-secondary education, early childhood development, social assistance and social services.
Something else we should all remember is that CHST is block funded. That means that while it is targeted for certain areas, those areas that I just mentioned, the provinces and territories can spend it as they see fit among those areas. The CHST transfer is made on an equal per capita basis so that all Canadians get the same level of support. In a nutshell, that is what the CHST is all about: a block fund paid out annually on an equal per capita basis to help finance society's most vital needs.
Just what exactly does the Séguin commission propose we do with the CHST? What changes would it make to the Canada health and social transfer to make federalism more fair? The Séguin commission says we should scrap it. Yes, everyone heard me correctly. It says we should get rid of this program altogether. What does the commission suggest we replace it with? It is simple: the GST.
The commission proposes we hand over to the provinces the revenues from the GST, the goods and services tax. The Séguin commission may think that is a terrific idea. My friends across the floor in the Bloc may think it is a great suggestion. I do not believe many people in any other province would think much of Mr. Séguin's proposal. In fact, if they were helped to really understand the proposal, I doubt many people in Quebec would think much of it either. Here is why.
First, we must understand that not all sales tax points are created equally. That is to say that a percentage point of sales tax in a wealthy province is more valuable than in a less prosperous province. While some might agree with the Séguin proposal, I think it is highly unlikely that Canadians in less wealthy provinces would feel the same way.
In fact, at least one premier has already told us as much. Lorne Calvert, the premier of Saskatchewan, has already said “I think that it would be detrimental to the very nature of Canada.” The premier continued by saying “Simply handing over revenues that they are just based on local economies, I'm not sure is the way to build a strong confederation”.
In spite of this opposition, some of my friends in the Bloc might persist. “Quebec is a prosperous province”, they will say. “Let us benefit from the GST”. They are right. Quebec is a prosperous province. It has prospered and continues to proper, and prospers within the federation I might add. If we did scrap the CHST and replaced it with the GST, which province would do the best? Would it be Quebec? As a general rule, the most prosperous the province the most valuable the tax point.
Under the scenario proposed by the Séguin commission, Ontario would receive 22% more than Quebec. Mike Harris might think that is fair and his cabinet might think it is fair. However most people who really understand what fairness means, and I include most of the people in the province of Ontario, would not. Nor do I believe would most Quebecers.
So having got rid of the CHST, what else would the Séguin commission have in store for us? What else does it recommend we do to ensure the fiscal fairness of our land? The commission has some ideas about equalization.
This, like the CHST, is a form of transfer between the federal government and the provinces, but it is different. It is different because it is a transfer not tied to any particular area of spending. The provinces can spend it in any way they please and it is different because not every province receives it.
Equalization helps ensure that all Canadians, no matter where they live, can receive reasonably comparable services without their tax rates being out of line with those of prosperous provinces. It means that people in Prince Edward Island can reasonably expect to receive from their province the same standard of service as do their cousins living in Ontario.
Calculating this transfer is done with a formula that takes into account the fact that not all provincial economies are the same. Not every province can generate the amount of tax revenue it needs to pay for its programs and services. An equalization program calculates each province's capacity to generate tax revenue. It then takes these numbers and figures out an average capacity based on five middle income provinces. This is known as the standard.
For provinces that fall below that standard, equalization payments make up the difference. At the moment, eight provinces receive equalization payments. Two do not, those being Alberta and Ontario.
What does the Séguin commission have to say about a system that has been in place since 1957 and is entrenched in the Constitution of Canada? It has a lot to say, but little of it is very new.
First, the commission says we should remove the ceiling on equalization payments, that is the maximum amount by which they can rise from one year to the next. For obvious reasons this proposal is unacceptable. It would expose the federal government to significant risk of unsustainable increases of equalization payouts. Unsustainable because it would permit equalization to grow faster than the economy does. Expenditures that grow faster than the economy which must support those expenditures are not sustainable. No government in its right mind could therefore agree to the commission's suggestion.
Second, the commission believes that equalization standards should be based on the average fiscal capacity of all 10 provinces, not just the five middle income provinces as now. Before 1982, Alberta used to be included in the average. Over the course of 10 years, as oil and gas prices rose and rose, Alberta's fiscal capacity expanded dramatically. As a result, the cost of the equalization program quadruped. Similarly, when oil and gas prices fell, the average fiscal capacity fell and equalization payments fell. Simply put, including Alberta in the equalization standard made the system too volatile. Therefore, in 1982 it was dropped.
Still, the fact remains that, on average, using just the five middle provinces to calculate the standard for fiscal capacity brings us to 97% of the 10 province average. Even my friends in the Bloc, for whom the fiscal glass is always half empty, must admit that 97% is close enough.
The Séguin commission tells us that the CHST is not fair. I have shown the House today that it is fair. I have tried to show the House as well that the commission's suggestion to replace it is unacceptable.
The Séguin commission tells us that the equalization program is not fair. I have shown the House that it is. Further to this, I could tell the House that every five years the federal government renews the legislation that governs equalization. That happens next in 2004.
The government is already looking ahead to that date and is working with the provinces to improve an already excellent program.
For these reasons and more I cannot support the motion of the Bloc.
