Finance committee  I think this is something that is being discussed, but I'm not aware of a major program in another country that will be the equivalent of what you have in mind. I think it's worth exploring that and looking at what is debated in other countries. There is nothing I can think of right now where I would say, oh, that would be the template that Canada could use.

Finance committee  There is a template. You can find it on the website of the Government of Canada. If you look at it, the template is the Expert Panel on Equalization and Territorial Formula Financing. There is a report that it published in May 2006. The panel was appointed by Paul Martin, and the chair was Al O'Brien from the University of Alberta.

Finance committee  No, no. What we can do is use an existing tax—for example, part of the GST or business income tax—and then allocate it to the provinces. The thing that's important here, of course, goes back to the idea I'd put forward with Trevor Tombe. I think the URL of our paper is embedded in the text I sent to the clerk.

Finance committee  Yes, the populations of poor provinces are on average more vulnerable than wealthier provinces, in a way, when we talk about the negative effects of inflation, in a sense. You could say that. Regarding migration, you raise a very important issue. I think equalization, implicitly at least, is partly about helping people stay where they live by providing them with relatively good public services for a tax burden that's not excessive.

Finance committee  This is a very good question. Thank you very much. Yes, the CPP Investment Board is actually something we discussed in a paper that we wrote for the now extinct Mowat Centre, a paper that I can send to the clerk or someone else at the committee who can distribute it. We wrote this paper quite a few years ago and it's still available online.

Finance committee  Yes, this is a bit outside my area, really, but I could say that inflation is hurting low-income people more than higher income people. Obviously, that is true all across the country. I think we need to address that, but I do think that fiscal federalism is probably not the best tool that we have.

Finance committee  Yes, but the thing is that civil servants, bureaucrats, are already playing a major role in tweaking fiscal transfers. They do a lot of work. Then, of course the executive and the House of Commons play a major role in that. What I'm proposing is not that these people will make the decisions for elected officials.

Finance committee  I think that equalization is something fundamental for not just our fiscal system but for federalism, because equalization doesn't have any strings attached. The provinces that receive equalization can do what they want with the money they receive, so it doesn't infringe on their autonomy; but, at the same time, it provides provinces with a lower fiscal capacity better services to the residents of their province without having to tax them in a way that is really disproportional to the services they receive.

Finance committee  As we propose with Trevor Tombe in our paper, we can revise the CHT so it will actually compensate the provinces for the added cost of demographic aging. I think the federal government should bear these extra costs because it has, of course, a much greater fiscal capacity than the provinces.

Finance committee  Thank you very much. This proposal is not something I've studied directly. However, I have to say that it could be part of the mandate of the expert panel on equalization that I hope will be created soon, because we need to look into equalization, as I said, for a number of reasons.

Finance committee  One thing that could be done to address this issue at a broad level is building some demographic factors into the calculation of the Canada health transfer. This is something we discussed with Trevor Tombe in the working paper published by the school of public policy at the University of Calgary, which is available online.

Finance committee  Yes. Thank you very much for your question. In Australia they have what they call the Commonwealth Grants Commission, which has existed since 1933. Of course, its mission has changed and been updated over the years. You have a body with a chairperson and at least two other members who are looking at fiscal federalism especially in the way, in Australia, they share the GST.

Finance committee  I'm wrapping up. This is the last paragraph.

Finance committee  Thank you. It should also entail a broader discussion about fiscal capacity, the state of our economy, population aging, regional disparities and other key factors that affect the availability of fiscal resources and the varying capacity of provinces and territories. I would like to end by telling you about the forthcoming paper of the fiscal federalism policy network that is titled “The Road Ahead: Rethinking Fiscal Federalism for the 21st Century”, which looks at the big picture of our three main transfers and other aspects of fiscal federalism in Canada.

Finance committee  Thank you very much. Thank you for having invited me to come and testify today on the state of fiscal federalism in Canada. Fiscal federalism is a fundamental aspect of our public policy and our federal system, which is indisputably one of the most decentralized on the planet.