Mr. Speaker, I am pleased to join the debate on behalf of our finance critic and on behalf of the other members of the NDP caucus to share our views.
I am one of the many Canadians who believes that the redistribution of wealth through the federal transfer payments and through the federal equalization payments is probably the single greatest achievement of the Canadian federal state. It is a concept that finds its origins in a generosity of spirit and what is a very real belief that most Canadians share.
They believe that even though all regions of the country are not equal we should be striving for equal treatment in all areas. We should be guaranteeing at least some constant minimum standards in social programs throughout the country no matter what the economic situation of the region.
I should make it abundantly clear that the NDP has always supported the many incarnations of transfer payments and equalization payments throughout history. It is interesting to note that the change in the distribution programs indicates a fundamental policy shift on behalf of government.
Many years ago we had the EPF, the established programs financing. It was equal 50:50 funding for established programs within the various provinces. My political party always believed in a widely shared view that there was a far greater ability for the federal government to control and to implement some national standards when the funding formula was 50:50. It was simple. If one of the provinces chose not to comply with the national standards put in place they were jeopardized in that 50:50 funding formula.
The established programs financing worked very well. We then saw the CAP, Canada assistance plan, come in, followed by the cap on CAP. Then came the CHST. Now we are seeing a removal of the cap of the new ceiling imposed in a temporary way. I will deal with that in greater detail later.
Let me say at the outset for those whose interest I will probably lose in the next few minutes that we are very critical of the bill. Speaking on behalf of many of the provincial finance ministers, even though the cap is to be lifted for one year, when the cap is reinstated one year from now it will be at a lower level than most of the finance ministers understood it to be.
The provincial finance ministers thought that they had an agreement on a certain set of circumstances. They are now finding that what is being announced today, the newly imposed ceiling, will be lower than what they thought they agreed to on September 11, 2000. That is a problem.
It is certainly a problem in the province that I come from. I have spoken about established programs financing and the history of the CAP, the cap on CAP and the CHST.
I am glad that previous speakers have pointed out the devastating impact of the CHST on social programs in the country. It should be stated clearly and abundantly by the opposition members, so that the public hears it over and over again, that the government stripped 33% of the funding out of the federal social transfers with the CHST. I believe the total figure since 1995 has been $23 billion or $24 billion. The government went from $19.1 billion to $11 billion in social transfers. Slowly it has been inching it back up. It went to $12.5 billion to $14.5 billion.
In these figures, and from what sense I can make of them, we will be at $15.5 billion. With some other features the amount will be close to $18 billion. It is still below what it was in 1995, in spite of all that has occurred since then, including greater revenues and a surplus for the government. We are not getting any government largesse, we are getting the restoration of some of the money it stripped away from the federal transfers in recent years.
I hope the Canadian public is not buying this line that the government had this fabulous meeting on September 11, 2000, that the provincial finance ministers convinced it to be more generous, so the government agreed and now it is more generous. The government is still as miserly and as shortsighted as ever in its commitment to try, what I believe to be the single greatest achievement of Canadian federalism, to redistribute the wealth through federal transfer payments.
It was pointed out that we have to look at some of the other origins of the money the government is claiming to share through its great largesse right now. Let us not forget the cuts in programs worth $23 billion or $24 billion. The cuts to the EI program accumulated a surplus of $35 billion to $37 billion, depending on who we talk to. Much to the government's discredit this money went into the consolidated revenue fund to be used for whatever it saw fit. It did not go into any kind of an insurance fund.
The other thing that has almost blown over, and I cannot believe it does not get raised in the House of Commons more often, was another great pool of dough or source of revenue that the government stumbled upon which was the public service pension plan surplus. It took $30 billion out of the of that surplus. Rather than negotiating some deal so that some would go to benefits and some would go to offset future premiums, every single nick of it went into the consolidated revenue fund to be used for whatever it sees fit.
Dribs and drabs of it are going back to actual Canadian citizens in the regions in which we live. Little bits and pieces are being sliced off scrap by scrap. Then with some great fanfare the Liberals announced $23 billion or $24 billion in extra spending. I think of the members of the House of Commons know it is a myth, it is an illusion and it borders on a cruel joke being perpetrated on the Canadian people.
The government can fool some of the people some of the time, et cetera. This is not going to wash. The jig is up on this particular funding formula because there is going to be a hue and cry with the growing realization of where this money really is. The government cannot take our money away from us, then give it back slowly and try to pretend that it is some kind of great largesse on behalf of a benevolent government. That is simply not going to fly.
When the equalization program was renewed in 1999, the ceiling was reduced by roughly $1 billion per year, in spite of the broad objections from virtually every finance minister in the various provinces, to an arbitrary level of $10 billion in 1999-2000. It was then indexed by GDP growth in subsequent years.
The program ceiling is now lower as a proportion of GDP than the entitlements have ever been under the current five province standard. The program was at the lowest level ever at that point in time. At the time the ceiling was reduced the federal finance officials indicated that this level would provide ample room to accommodate entitlements over the present renewal period. Recent estimates have proved them wrong. This is the source of frustration on behalf of the provincial finance counterparts.
The current estimate of equalization entitlements for the 1999-2000 fiscal year, the very first year of these new arrangements, exceeds the ceiling by close to $800 million. That is the origin of the problem.
The impact on my home province of Manitoba is presently estimated at about $76 million. This amount has been agreed to now but as the ceiling gets lifted Manitoba will, in the coming fiscal year, get about $76 million. This is very welcomed and necessary money. Manitoba has places to spend that money because God knows it has been coping with the shortage of funding over all these years. Many of its programs have been cut, hacked and slashed to the point where they are barely functional. It is critical that my province get the restoration of some of that equalization money to put back into the programs that it finds necessary for our people.
The parliamentary secretary told us that we could not just look at the CHST transfers. He told us that we had to look at the tax points as well. It is not just the $18 billion or so total CHST payments, but we have also transferred the ability to tax to the provinces. Let us look at that as a fundamental policy shift too and who that benefits.
The federal government only pays 13.5% of health care funding which is below the 50:50 ratio in the good old days. It has reduced it to the point where it is only paying 13.5%. It is now letting the provinces do the taxing. How does the general public like that? The general public does not like anybody who is responsible for deducting money off their pay cheques. The government has off-loaded the burden of the collection of taxes to the provinces through a tax point transfer. It has withheld money to the point where the funding relationship is 87% paid by the provinces and 13% paid by the federal government.
This is a flawed concept now. It is a system that had its origins in a very noble concept, which was the redistribution of wealth through federal transfer payments to ensure some national standard of quality social programs for all Canadians, no matter where they live. This is the kind of thing that nations are built on. This is the kind of thing that does more to hold Canada together than any 10 constitutions. This one aspect of the Canadian Constitution probably does more to keep the country together, even more than Peter Gzowski and the CBC, which is a very bold and dramatic statement.
We see a familiar pattern as we look at the details surrounding what has been introduced today and what the Parliamentary Secretary to the Minister of Finance outlined. We hear talk of the equalization ceiling which is the maximum payment that the federal government will make to the provinces under the equalization program. That ceiling is set in the upper limits on the growth rate of equalization entitlements.
We know that the goal should be to protect the federal government from rapid and unaffordable year to year increases in payments. That is all very well and good but that is also based on the premise that there will be some stability and predictability out there. Need does not always follow convenient budget lines in a budgetary plan. I argue that the need is great in many parts of Canada. We cannot have economic development and independence and the type of economic growth in areas until all come up to a base level starting point. We are then talking true equality within the country.
There is nothing more unfair in the world than treating unequal parties equally. This happens in all kinds of applications. I hear that sometimes in the speeches made by Canadian Alliance members who want all the provinces treated equally. That means recognizing that not all provinces are equal. Some are quite unequal in terms of their opportunity and the resources they enjoy.
All the provinces and the territories called for the removal of the ceiling on equalization payments as recently as August 2000. They were demanding that this ceiling be lifted because they believed that the ceiling acted as a barrier for them to get their fair share of the wealth that should have been redistributed, money that was taken from the provinces in cuts to program funding over the years which amounted to 33% or $24 billion.
There is inherent financial protection for the federal government on the growth of equalization payments through population adjustments and shared revenue fields. When it comes to population adjustments, some provinces are going to do better than others.
When we look at it on a per capita increase, if the dollar figure is approximately $67 per head, the obvious impact on provinces showing a net population growth, by ratio and proportion, is they are going to enjoy more of the money being shared.
The current distribution of the extra federal transfer payments just took place. We saw the province of Manitoba getting only $3 million which really was not much to celebrate or write home about. We saw the province of Quebec get $1.4 billion out of $2 billion. The rest of us divided up what little was left over.
This is the way these things happen. It is a formula we have all agreed to. I do not think anyone resents that.
In dealing with shared revenue fields, the majority of the equalization entitlements stem from tax revenues that are jointly shared with the federal government. For example, during the fiscal year of 1998-99, the federal government increased the equalization entitlements by $368 million respecting personal income taxes, and then by $259 million respecting corporate income taxes.
In the same period the federal revenue was increased by $2.7 billion from personal income taxes and $1.5 billion from corporate income taxes. This is quite a disparity. Certainly a great deal of the revenue that we felt could have been transferred to the provinces, or could have raised that ceiling, failed to go into the hands of the provinces. We presume it was put to other priorities.
Recent federal surpluses have exceeded the size of the entire equalization program. That is something to remember. Again I ask the House to look at where those surpluses came from. They did not just sprout out of the ground. They did not grow on trees. They were taken from cuts to program funding in the amount of $23 billion or $24 billion. They came from surpluses in the EI fund which meant denying benefits to workers so that no one qualifies anymore. The House may be shocked to hear that the surplus figure in the EI fund is $750 million a month. That is where some of the extra revenue came from.
There is another pot of dough to which I alluded earlier in my speech, something we do not hear enough about in the House of Commons. It is the public sector pension plan. The public sector pension plan had a surplus of $30 billion, partly because of layoffs and wage freezes in the public sector. Actuarial people had made the projections of what needed to be in the pot based on 1985 and 1987 figures. Obviously when one-third of the public service was cut and when wages were frozen for eight years, the actuarial figures were no good to anyone anymore.
We wound up with a $30 billion surplus and the federal government took every penny of it away from where it should have been. We would argue it should have gone to benefits or at least some combination of benefits to people in the program or possibly reducing the premiums or a premium holiday for those who made contributions to the program. Neither of those were contemplated. The President of the Treasury Board simply seized the entire amount and applied it to whatever was seen fit.
Those are the three sources of revenue. Now the government is faced with a surplus which is larger per year than the entire equalization transfer. That should be alarming to Canadians. It is our money. People have to keep in mind that it is our money to serve the needs of our communities.
The federal contention was that the 1999-2000 decision to rebase the equalization ceiling to $10 billion was appropriate, independent of the Prime Minister's commitment. The way we look at it is that the federal government tries to defend the ceiling in terms of making the equalization ceiling affordable. It really makes us question the concept when the surplus is bigger than the entire payout.
The largest downward rebasing of the ceiling, to $10 billion in 1999-2000, occurred in the year of the highest ever recorded federal surplus of $12 billion, so in the same year that the Liberals had never made so much money in their lives, they cut the ceiling to the lowest it had been since the history of the program. These are inconsistencies that need to be pointed out. These are things that need to be exposed.
As noted by the federal auditor general, the equalization ceiling was rebased downward as a per cent of the GNP in the program renewals of 1987 and 1992, but not in 1994. In those program renewals the ceiling went from—and I will read this out—in 1982, 1.34% of the GNP. In 1987 it went down to 1.24% of the GNP. In 1992 it went down to 1.17% of the GNP and then in 1999 we were down to 1.08% of the GNP or 1.04% of the GDP.
Imagine what a trend we are showing there. If we could illustrate that as a chart or a graph on a wall, it would show this going down and down as a percentage of the gross domestic product or the gross national product.
Can hon. members imagine the purchasing power and the progress that communities could have made in the provinces had we remained constant at 1.34% of the GNP, which is where we were in 1982? Those were kinder, gentler times, I suppose, back in the times when we had federal governments that had some vision and some willingness to create strong national standards and strong regional economic development in other parts of the country.
Had we maintained that, the total cumulative amount of money that could have been transferred to the provinces would have been in the order of $80 billion more during that period of time. Can we imagine that? For the total transfer today the Liberals are talking about a ceiling of $10 billion. We, by design, willingly let successive federal governments reduce their commitment to the provinces by that incredible amount of money.
The $10 billion ceiling figure we are dealing with now was based on an early federal forecast of final entitlements for the 1999-2000 year, with an allowance for the transitional adoption of new technical changes in 1999-2000. It was not adjusted when equalization entitlements began to rise in 1999. This led to the contradiction, to the gap that the government was forced to deal with by lifting the ceiling.
Because the $10 billion ceiling was not adequate to allow for the 1999-2000 entitlements, it will be additionally strained as the technical adjustments of another $240 million incrementally enter the formula. Imagine the strain on the system and the strain on the relationship at that point.
Returning to the federal auditor general's direction regarding the establishment of a ceiling, the federal government did not establish criteria for the ceiling beyond it being an estimate of the 1999-2000 entitlements, plus an allowance for the adoption of the technical changes. It is as simple as that. As such, it appears that the ceiling level of $10 billion would not satisfy the federal government's internal rules established in 1997. There is just a host of inconsistencies and problems inherent in what we are being told.
These are some of the key points that have come to mind as the provincial finance ministers are reeling with the growing realization that in regard to what they agreed to on September 11, 2000, even though they called for and welcomed the lifting of the ceiling, they will in fact wind up with a ceiling even lower than they thought they were agreeing to when the cap is reinstated one year from now.
This whole situation raises the issue of and really does challenge and question the long term viability of the constitutional fiscal relationship we have with the provinces. There will come a time of growing unrest and growing discontent in the regions of the provinces that rely on the federal transfer payments. They will want to revisit the entire structural relationship of the transfer of funds.
As I said from the beginning, I believe that is a tragic mindset, a point of view that I find very threatening and disturbing as we look at the long term viability of this tenuous federation. The federal government has to bear some of the burden of responsibility for adding that tension to the federal state.
Certainly the growing discontent and the growing distrust between the feds and the provinces in terms of the fiscal relationship is going to exacerbate the whole growing unrest with the other general discontent. There was a time when the provinces did feel that there was a commitment on behalf of the federal government to regional economic development, to national standards within the country and to some commitment that we should all enjoy at least some basic level of health, education and social welfare funding, no matter where we lived, frankly, and no matter what the state of our provincial treasury was. Those things should not be considered. Some things are too important to be subject to those regional vagaries.
I am fond of using the story that Reverend Jesse Jackson of the United States used when he was talking about our view of equalization. He had a great way of trying to explain what I am trying to get my mind around here. He said that if one has five children and only three pork chops, the solution is not to kill two of the children, but neither is it a solution to cut the three pork chops into five equal pieces, because then all of the kids go to bed hungry and nobody gets enough to eat.
