Mr. Speaker, I rise to lead off our party's contribution to this debate on amendments to the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act. In Bill C-3 we are discussing amendments or renewal of the equalization program.
As I understand it this bill does several things. The parliamentary secretary alluded to these and I will repeat them. It renews the current equalization program to the end of fiscal 1999. It retains the GDP ceiling on equalization transfers. It makes some changes to tax base calculations in the formula tax base updates. It provides relief on tax back of some unique resource capacities in certain provinces.
Under this bill equalization payments are projected to grow from $8.4 billion this year to about $10.4 billion by the end of the century. That will be an annual growth rate of about 5 per cent per year. It includes about 2 per cent additional growth that is being added by the measures in the bill. Because of the cost of the program, rather than the particulars of the formula or some of the elements of the bill, our finance committee within the Reform caucus has recommended to Reform MPs that they oppose this bill at second reading.
During the past election our party campaigned-and I have made reference to this several times-on the need to undertake a dramatic program of expenditure reduction to get us on the path to long run financial sustainability of all our most valuable programs. It was the zero in three plan to balance the budget within the life of this Parliament.
In that plan we have projected and continue to maintain that spending at the national level is at least 15 per cent above our long run ability to sustain it. We have attempted to examine categories of spending and we will continue to do so, including spending on social programs and within that transfer programs to the provinces.
The zero in three program proposed relatively small cuts in these areas. That was the feedback we received through consultation with the public. In fact we had proposed only reducing federal transfers to the provinces by about 5 per cent of the total from this level of government or about $1.5 billion. Another way to put it would be about 1 per cent of provincial tax revenues.
Let me review what we are talking about in this particular envelope of spending. I am quoting from a recent publication of the Department of Finance. It states that in fiscal year 1992-93 this category of spending would include such things as established programs financing in the health care field, $8.3 billion; the equalization program discussed in this bill, $7.4 billion; Canada Assistance Plan transfers, $6.7 billion; established programs financing transfers for post-secondary education, $2.9 billion; and various other transfers, the so-called minor transfers.
Things become minor when they are less than $1 billion. That includes significant transfers to territorial governments, all of which total according to the documents roughly $28 billion that fiscal year. That does not include tax point transfers which add considerably to the total. We are talking about one-quarter of all program spending and more than that if we take into account the tax points.
As I indicated, people did not want to target the area of social programs and transfers generally for reductions. However given that these are now two-thirds of all current spending, it is hard to avoid some kind of action in these areas.
In developing our program we found that what people wanted to preserve most strongly were the funds dedicated specifically to the maintenance of health and post-secondary education programs. The public felt there was some room to reduce
transfer payments toward such things as equalization and the Canada assistance plan.
I suspect the reason for the less strong support for those programs as compared to the others was not just the nature of the programs but the fact that these two programs have strong discriminatory elements that are funded more favourably in some provinces than in others.
I do not want to say that the bill costs too much but I would specifically suggest to the government this alternative. We have proposed that equalization payments should be reduced by about 10 per cent at some point and that these reductions should focus on middle income rather than on the poorest provinces. Something like this could be achieved by reducing the equalization standard to less than 100 per cent of the average fiscal capacity. If one says in the range of 98 per cent to 99 per cent that would achieve the objective.
More important, it would retain the principle of equalization which is not only something we support but which is embedded in the Constitution Act, 1982, which our party recognizes and which other parties do not necessarily recognize. Under our proposal one would retain inflation protection in the growth of formulas over the long term.
I would also suggest that other elements of the equalization formula and calculation should be examined both on grounds of fairness as well as some of the incentive issues in these various programs.
We will be voting on this later this afternoon. We will be voting on looking at fairness and incentive issues in the structure of transfer programs, largely the transfers to individuals such as welfare and unemployment insurance. We will be looking at those kinds of programs.
I would suggest a similar study is warranted in this area. My colleagues will be commenting at greater length later today on some of these problems. Let me give a couple of examples.
The formula used now assigns Alberta, which is not a recipient province, a 25 per cent higher fiscal capacity than the province of Ontario. While this obviously is not going to have a direct impact this year as neither are recipient provinces, I would suggest it clearly indicates some bizarre functioning in the calculations. Alberta does not have a 25 per cent higher fiscal capacity than the province of Ontario.
I would also note that the way this program has increasingly operated, the costs are now linked to economic growth. In other words there is a tendency for the payments under this formula to be limited at precisely the time that provinces are having difficulty with their revenues.
During boom times the ceiling operates in a way that would allow provinces to collect greater revenue in federal transfers. That would seem to me to be something that should be examined in terms of the efficacy of the equalization program.
Maybe I could spend a few minutes commenting on the bill in a little more detail in light of the Liberal position. I have found it somewhat strange that the Minister of Finance would announce he is going ahead with a guarantee on this program and these sets of funds when he has indicated he is reviewing other major transfer programs to the provinces and there is no necessary guarantee at this moment they would be renewed in their current form. That is a series of priorities I have trouble understanding. It is obviously not consistent with our party's priorities. It seems particularly inconsistent with the fact that we are waiting for a budget and most of these issues are soon to be addressed. I do not understand why this particular program has been guaranteed in advance before the budget consultations have been completed.
I can say some things on the positive side, though, in terms of the specific elements. I would like to commend some of the smaller changes, in particular the excessive tax back provision element of this bill. That at least conceptually will move us toward a somewhat fairer system, even if the dollars involved immediately are not terribly significant.
I also would like to urge the government to continue what the previous government did in 1982, that is retain the GDP ceiling. Obviously we would like to see stronger reductions in that, but it is necessary for the federal government to protect itself against a situation in which it would be liable for open ended transfers.
Maybe I could also take a minute to comment briefly on the position of the Bloc Quebecois and on some of the comments that were made by the critic from that party. It is important that we say these things. I do not want to get into these regional kinds of debate at great lengths, but we should be really clear here. I am sure members of the government will agree with me. We are discussing here a very major transfer program of Confederation, and one that is mandated under the Constitution Act, 1982.
Regardless of our differences with the government on the cost, what we are talking about is a program that is going to cost $8.4 billion in the upcoming fiscal year. Of that $8.4 billion, $3.7 billion or 45 per cent of those funds is targeted for the province of Quebec.
My constituents pay into this and our provincial government receives nothing. Surely the appropriate response is not to say it is not enough, but we have serious problems in the country, not just with our annual deficit but with the $500 billion of debt that we have accumulated. Whether we have a major constitutional reform or even the sovereignty of Quebec as the Bloc Quebecois would like, surely we recognize we are going to be stuck managing this debt for decades to come. I would anticipate that
at some point we will get some realistic discussion of how to deal with that and the impact of that from all the parties in this House.
I am floored by some of the comments that I have heard. I would urge the government to consider something that we asked for in the previous Parliament. Our caucus had asked that the government publish regularly the regional and provincial distributions of its tax expenditure and transfer policies so that those things are on paper and clear, so that we can see the impact of changes on provinces and so that we can have this kind of discussion in a rational atmosphere rather than it becoming simply a matter of scoring points in a particular province.
We have done considerable work in this area to get a greater understanding of these kinds of considerations. Let us be clear about it once again. To assist in the running of the government in the province of Quebec $3.7 billion is being voted here. It is a principle we share, an equalization payment, because there is a lower fiscal capacity in that province. Let us be clear that this is what this bill does. I am also looking for some realistic discussion of this in the next couple of years. Let us be clear that the option the Bloc Quebecois is proposing to deal with this, the sovereignty of Quebec, would result in the province of Quebec receiving zero.
I am really looking forward to the day we begin to discuss both sides of the argument and, in a much more realistic fashion, these kinds of considerations.
In concluding my remarks I would urge the House to reconsider Bill C-3 and to reconsider at this point committing to a growth in our financial commitments that will amount to $2 billion over the next five years before we have even had presented a financial framework.
I am under no particular illusion that our colleagues on either side of the House are going to support such reduction proposals. I do not think the time has come yet when all parties are willing to bite the bullet. I would at least suggest that the Liberals give this some consideration as in the upcoming months and year they have to grapple more seriously with the financial mess of the country.
We will be discussing the bill in committee and at third reading. In the meantime there will be a budget. We also will be examining our position on this matter in light of the budget, in light of the data we get out of that, and in light of proposals we have and we are expecting in areas of other fiscal transfers.
Once again, we will examine this in light of our deteriorating financial situation. In the meantime I believe my colleagues will be opposing this extended financial commitment.
