Mr. Speaker, it is truly a pleasure to rise in this assembly today to speak to the motion because equalization is truly a unique Canadian program.
First conceived in 1956 and implemented in 1957, which as we know was coincidental with Newfoundland entering Confederation, this is a program that treats all Canadian provinces equally, in terms of wealth distribution. In fact, the program was designed to allow all provinces to have the ability, in relative terms, to offer the same basic programs and benefits to its citizens at relatively the same tax rate. In other words, the way the program works is to allow the have provinces, or the more wealthy provinces, the ability to assist financially those provinces who are considered to be have not, or poorer, provinces.
This is a very complicated program, and probably in Canada there is no more than a handful of people who actually understand the formula that goes into designing the equalization program. However, suffice it to say there are approximately 33 revenues bases that comprise this program. Out of those 33 revenue bases, 11 of them deal with non-renewable natural resources.
What we are asking today in this motion is that the non-renewable natural resources should be removed from the equalization formula.
Before I go on, Mr. Speaker, I will be splitting my time today with the hon. member for Prince Albert.
There are many reasons why we feel that non-renewable natural resources should be removed from the equalization formula, but I only will deal with two or three of them. I think that will illustrate exactly why the current formula is flawed.
First, right now it is almost a disincentive for many provinces to develop their non-renewable natural resources. The reason for that is quite simple.
Currently, under the formula, provinces are clawed back or taxed back on revenue derived from natural resource development, and I will make most of my comments designed around what is happening in Saskatchewan because I am far more familiar with my home province. We have the perverse situation where for every dollar that Saskatchewan receives from oil and gas revenue in past years, the government has clawed back or taxed back over 100% of the revenue. In other words, if we get $1.00 from an oil and gas sale, the government has taxed Saskatchewan anywhere from $1.03 to $1.08 in previous years. That is just perverse. It should not be allowed to happen.
There is no incentive for provinces to fully develop their non-renewable natural resources if they realize that the more money they make off natural resources, the more money the government will claw back. That program is deeply flawed and should be amended.
We have seen in years past, particularly in the year 2001-02, situations in Saskatchewan where the government has clawed back certain revenues from oil and gas exploration as much as 200%. Other provinces, particularly the Atlantic provinces of Newfoundland and Labrador and Nova Scotia, which cut a separate deal with the government, will only be clawed back up to 70%.
However, in Saskatchewan, particularly, the money that we gain from oil and gas revenues and all non-renewable natural resource revenues should be reinvested back into the province.
In Saskatchewan about 85% to 90% of all our oil and gas reserves are still in the ground. It is very difficult to get oil, particularly heavy oil, out of the ground. Saskatchewan has been an industry leader, with some new innovations such as horizontal drilling. Now we are looking at new and innovative ways to get oil out of the ground by pumping carbon dioxide into the ground, which ends up trapping itself but allowing more oil and gas to come to the surface. That requires an incredible amount of reinvestment in the province to employ these types of technologies and to employ the research and development required. However, how can we do that if the government is taking at least $1.00 to $1.03 for every $1.00 we gain from revenue? This should not be allowed to happen.
Second, I believe there is a very strong economic argument that suggests that oil and gas, non-renewable natural resources, should not be included in the equalization formula. I would like to frame this in the sense of a business model.
If I were a business owner and had a capital asset that I wanted to sell, converted that capital asset in my company into a cash asset, it would not show up on my income statement. It simply would be a balance sheet transaction. The income from my business is from the sale of my primary products. If I owned a shoe store, I would get my income and my profit and loss would be determined by the amount of shoes I sold. However, if I just converted a capital asset into a cash asset, that would not be considered income. It would be a balance sheet transaction.
What the government is doing with oil and gas, which should be considered a capital asset and when sold converted into a cash asset, is treating it as income. That is not the way the equalization program should work.
The economic indices and the tax revenue bases which compromise the economic argument for equalization suggest that revenue bases such as taxation, whether they be corporate, sales or personal, are the types of revenue bases which should determine the fiscal capacity or the net worth of a province. The government should not be allowed to take a capital asset that is converted into a cash asset and say that proves the net worth or the fiscal capacity of a province.
Finally, one of the most overwhelming arguments for why non-renewable natural resources should be removed from the equalization formula is the recent history with the new deal, the Atlantic accord, signed by the government with the provinces of Newfoundland and Labrador and Nova Scotia.
I absolutely believe that the Prime Minister and the Minister of Finance did the right thing. It was a matter of fairness. They recognized that these provinces needed to keep 100% of their oil and gas reserves. They cut a deal, signed an accord and allowed these provinces to keep that money.
While I believe in the inherent fairness of that deal, I also believe, as the name suggests, that the formula for equalization should be equally applied to every province and territory in Canada. In other words, I do not believe the government can make one deal with one or two provinces and not apply the same deal to other provinces across Canada. The formula fundamentally must be the same. We must have the same equity, the same formula applicable to all provinces. We cannot go into a situation where the government says that it will treat one province differently than another. This is equalization and the same equalization formula must be applied to all provinces.
While I believe that Newfoundland and Labrador and Nova Scotia were treated fairly, I urge the government to give the same consideration to Saskatchewan.
I was born and raised in Saskatchewan and I will probably die in Saskatchewan. I love my province. I absolutely know one thing and that is the Minister of Finance loves Saskatchewan as well.
Saskatchewan people are some of the most honest, industrious, hard-working and optimistic people in Canada. We have faced our share of adversity over the years, starting with the dirty thirties and most recently with the drought and the frost situation affecting our farmers. However, one thing the Saskatchewan people have never done is complained unnecessarily. Unlike the comments of some of the members opposite who seem to categorize Saskatchewan people as whiners and complainers, all Saskatchewan people want is to have a fair deal.
That is why I urge all members of the House, when the vote takes place tonight, to recognize that in issues of fairness across the board everyone should vote in support of this motion without equivocation, without compromise and without exception.
