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37th PARLIAMENT, 3rd SESSION

Standing Committee on Finance


EVIDENCE

CONTENTS

Wednesday, February 18, 2004




¹ 1530
V         The Chair (Mr. Roy Cullen (Etobicoke North, Lib.))
V         Hon. John McKay (Parliamentary Secretary to the Minister of Finance)

¹ 1535
V         Hon. Wayne Easter (Malpeque, Lib.)
V         Hon. John McKay

¹ 1540
V         The Chair
V         Mr. Rahim Jaffer (Edmonton—Strathcona, CPC)
V         The Chair
V         Mr. Odina Desrochers (Lotbinière—L'Érable, BQ)
V         Hon. John McKay
V         Mr. Odina Desrochers
V         Hon. John McKay
V         Mr. Odina Desrochers
V         Hon. John McKay
V         Mr. Odina Desrochers

¹ 1545
V         Hon. John McKay
V         Mrs. Clare Scullion (Counsel, General Legal Services Division, Department of Finance)
V         Mr. Odina Desrochers
V         The Chair
V         Mr. Monte Solberg (Medicine Hat, CPC)
V         Hon. John McKay
V         Mr. Monte Solberg
V         Hon. John McKay
V         Mr. Monte Solberg

¹ 1550
V         Hon. John McKay
V         Mr. Monte Solberg
V         Hon. John McKay
V         Mr. Monte Solberg
V         Hon. John McKay

¹ 1555
V         Mr. Monte Solberg
V         Hon. John McKay
V         The Chair
V         Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis

º 1600
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis

º 1605
V         Hon. John McKay
V         The Chair
V         Mr. Rodger Cuzner (Bras d'Or—Cape Breton, Lib.)

º 1610
V         Hon. John McKay
V         Mr. Rodger Cuzner
V         The Chair
V         Hon. Wayne Easter

º 1615
V         Hon. John McKay
V         Mrs. Natasha Rascanin (Senior Chief, Federal-Provincial Relation Division, Department of Finance)
V         The Chair
V         Mr. Monte Solberg
V         The Chair
V         Mr. Monte Solberg

º 1620
V         Hon. John McKay
V         Mrs. Clare Scullion
V         The Chair
V         Mr. Alex Shepherd (Durham, Lib.)
V         Hon. John McKay
V         Mrs. Clare Scullion
V         Hon. John McKay
V         Ms. Krista Campbell (Senior Policy Analyst, CHST and Policy Development, Federal-Provincial Relations and Social Policy Branch, Department of Finance)

º 1625
V         Mr. Alex Shepherd
V         Ms. Krista Campbell
V         Mr. Alex Shepherd
V         Ms. Krista Campbell
V         Mr. Alex Shepherd
V         Ms. Krista Campbell
V         Mr. Alex Shepherd
V         Ms. Krista Campbell
V         Hon. John McKay
V         The Chair
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis

º 1630
V         The Chair
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         Ms. Judy Wasylycia-Leis
V         Hon. John McKay
V         The Chair
V         Hon. Robert Thibault (West Nova, Lib.)

º 1635
V         The Chair
V         Hon. John McKay
V         Mrs. Natasha Rascanin
V         Hon. John McKay

º 1640
V         The Chair
V         Hon. John McKay
V         The Chair
V         Hon. John McKay
V         The Chair
V         Hon. John McKay
V         The Chair
V         Hon. John McKay

º 1645
V         The Chair
V         Mr. Odina Desrochers
V         The Clerk of the Committee
V         Mr. Odina Desrochers
V         The Clerk
V         The Chair
V         Mr. Odina Desrochers
V         The Chair
V         Hon. John McKay
V         The Chair
V         Hon. Robert Thibault
V         Mr. Odina Desrochers
V         The Chair
V         Mr. Odina Desrochers
V         The Chair
V         Mr. Odina Desrochers
V         The Chair
V         Mr. Odina Desrochers
V         The Chair
V         Mr. Monte Solberg
V         The Chair
V         Mr. Monte Solberg
V         The Chair
V         Mr. Monte Solberg
V         Mrs. Natasha Rascanin
V         Mr. Monte Solberg

º 1650
V         Mr. Massimo Pacetti (Saint-Léonard—Saint-Michel, Lib.)
V         The Chair
V         Hon. Robert Thibault
V         Mr. Odina Desrochers
V         The Chair
V         Hon. Robert Thibault
V         The Chair
V         The Chair










CANADA

Standing Committee on Finance


NUMBER 002 
l
3rd SESSION 
l
37th PARLIAMENT 

EVIDENCE

Wednesday, February 18, 2004

[Recorded by Electronic Apparatus]

¹  +(1530)  

[English]

+

    The Chair (Mr. Roy Cullen (Etobicoke North, Lib.)): Good afternoon, everybody. Perhaps we could take our seats.

    This is pursuant to the orders of the day of Friday, February 13, Bill C-18, an act respecting equalization and authorizing the Minister of Finance to make certain payments related to health.

    We have today with us the Honourable John McKay, parliamentary secretary to the Minister of Finance; Natasha Rascanin, senior chief, federal-provincial relations division; Krista Campbell, senior policy analyst, CHST and policy development, federal-provincial relations and social policy branch; and Clare Scullion, counsel, general legal services division.

    I thought, Mr. McKay, perhaps you could take us through the bill, then we could have some questions and answers. Then what I'd like to do is discuss the next process with the bill.

    We have the Bloc Québécois, who would like to call some witnesses. The government, potentially, has some witnesses as well. The Bloc Québécois have some amendments, and I know that the government side is anxious to proceed with this bill expeditiously.

    I have put the wheels in motion to have the panel on Monday and a clause-by-clause on Monday, but I know the government side had some concerns about that and the possibility of losing the $2-billion transfer to the provinces, which I don't think any of us would want to be responsible for. But let's come back to that.

    In the meantime, Mr. McKay, perhaps you could take the committee through the bill. Then we'll have a round of questions and answers and then consider the next steps.

+-

    Hon. John McKay (Parliamentary Secretary to the Minister of Finance): I thank you, Chair.

    I'll try to make my remarks as brief as possible, because the procedure in this matter is probably as important as the substance itself.

    The first part of the bill has to do with the authority of the finance minister to make equalization payments. Point one, I want to emphasize that on April 1 that authority expires. So that's a fairly significant issue for all the provinces involved.

    The second part of the bill has to do with the $2 billion that the previous Prime Minister promised as a conditional promise to the provinces for health care. The current Prime Minister wants to fulfill that promise and this is in fact reflective of that promise. It is to go to health. That money also needs to flow prior to the fiscal year end of March 31.

    That is why the two bills are twinned legislatively. They are both transfers to the province and their expiry dates are effectively March 31. Both measures require amendments to the same legislation, the Federal-Provincial Fiscal Arrangements Act, and since these matters deal with a subject matter that is similar, therefore the bills are twinned.

    The authority to regularly make equal monthly payments expires on March 31, and for some provinces, particularly the equalization-receiving provinces, these are fairly significant sums of money.

    I asked the officials to tell me how significant that money was. For instance, for a province like Nova Scotia, which in 2003-04 receives just under $1.2 billion on an annualized basis, basically if we miss a payment in April it is $100 million. That is not an insignificant sum of money. For Quebec, the money is very significant. Quebec receives $4.5 billion on an annualized basis out of equalization, so merely divide that by 12 and you can get some appreciation of the significance of a delay on this bill.

    I want to talk a little about equalization. I will begin with measures pertaining to the equalization program that ensures that less prosperous provinces provide reasonably comparable services with more prosperous provinces.

    Equalization payments are unconditional. In other words, there are no tags attached to this money and a province is free to spend the money as it sees fit according to its need.

    These payments are based on a formula that measures the performance of provincial economies relative to the average fiscal capacity of the five middle-income provinces, which forms a threshold or standard.

    There are times I wonder when you say that, whether anybody actually really understands what you are talking about. Essentially the five provinces are put in a lump. You establish a standard and you move the equalization payments, relatively speaking, up and down accordingly. For example, when a province's economy is booming relative to the standard provinces, its equalization payments will decline under the formula, reflecting the increased wealth of that province. Conversely, when a province's fiscal capacity declines relative to the standard due to a slowdown in its economy, its equalization transfer increases.

    The payments are also subject to a floor provision that provides protection to provincial governments against unexpected large and sudden increases in equalization payments that would otherwise be warranted by a straightforward application of the formula. The floor limits the amount by which a province's entitlements can decline from one year to the next.

    It should be noted, Mr. Chairman, that the equalization program is reviewed on an ongoing basis by federal and provincial officials, and in fact those conversations occur quite regularly. Further conversations are scheduled for this week, as we speak.

    It should be noted that the equalization program is renewed legislatively every five years, and that's why we're up against our April 1 date.

¹  +-(1535)  

    On the continuation of payments, the purpose of Bill C-18 is to guarantee uninterrupted equalization payments to the provinces. As I indicated, significant sums of money are in play here. I see that the learned Mr. Easter has just arrived. I notice that P.E.I., for instance, receives $235 million, so if we miss a payment, it's $20 million.

+-

    Hon. Wayne Easter (Malpeque, Lib.): Double it.

    Some hon. members: Oh, oh!

+-

    Hon. John McKay: I felt that Mr. Easter would appreciate the significance of that sum and how he can best describe it to his constituents.

    The renewal legislation will ensure that the program remains up to date and that the best possible calculations and data are used to determine payments. When passed, the renewal legislation will supercede the extension provided in this bill. So there is an anticipated retroactive effect to this bill.

    I think there are 33 components in the formula. It's spread over all of the provinces, and it's fairly complex. It's undergoing constant discussion, and how those discussions will actually end up remains to be seen. But in the event that there is some arrangement, a further bill will be presented that will reflect those new arrangements. Equalization renewal is about making appropriate, fair, and accurate changes to the formula.

    The second part of the bill has to do with health. As you know, the largest federal transfer is the CHST, which is a block fund that provides support for health, post-secondary education, social assistance, and social services. The government also provides significant support for health through the new five-year, $16 billion health reform transfer, which assists provinces and territories in accelerating health care reforms in priority areas. I'm sure all members would join me in seeing this reform as the most significant priority of all Canadians. These transfers, the CHST and the HRT, uphold the five medicare principles in the Canada Health Act, all of which you're familiar with. Most recently, the 2003 budget confirmed $34.8 billion in increased funding over five years to meet the goals in the 2003 health accord. The 2003 budget also restructured the CHST into two separate transfers to increase transparency and accountability.

    The measure in the bill is for $2 billion out of the consolidated revenue fund in 2003-2004. In support of the 2003 health accord, the government indicated a commitment, which was reiterated in the 2003 budget and the November 2003 economic update, to provide the additional $2 billion provided there was a surplus in the consolidated revenue fund. The Prime Minister further confirmed in 2004 following the first ministers meeting that the full $2 billion payment will be made providing the government was not going to go into deficit.

    I ask colleagues to bear two things in mind when we're looking at this bill. First, the money is in addition to the increased federal investment of $34.8 billion over five years. It will bring the federal government's total commitment to $37 billion over five years. Second, passage of this bill before the end of the fiscal year will provide provinces and territories with the flexibility to begin drawing down these funds as they require.

    The Prime Minister plans to meet with his counterparts in the summer to discuss the long-term sustainability of Canada's publicly funded health care system. In the meantime, Mr. Chairman, this bill will ensure that Canada's health care system continues to be, in the words of the Prime Minister, “a proud example of our national values at work”.

    In closing, Mr. Chairman, health care is the number one priority of Canadians. The government intends to deliver on that priority and to provide an additional $2 billion. By passing Bill C-18 prior to March 31, the equalization-receiving provinces will continue to have resources to provide services to the people most in need.

    I'm more than open to responding to questions. I have with me some of the people from the department who are experts in this matter.

    Thank you, Mr. Chairman, for your time.

¹  +-(1540)  

+-

    The Chair: Thank you very much, Mr. McKay.

    We'll start with a round of 10 minutes for a representative from each party, and then if there are other members who want to speak, we'll go to a five-minute round.

    We'll start with Mr. Jaffer.

+-

    Mr. Rahim Jaffer (Edmonton—Strathcona, CPC): Thanks, Mr. Chairman.

    I guess I have just one question here, since I missed most of the brief. I was just wondering whether there were any plans....

    Well, actually, you know what I'll do, I'll pass this around and I'll come back, because I didn't get a chance.... I'm just going to look over the brief for a moment.

    Thank you.

+-

    The Chair: Okay.

    Monsieur Desrochers.

[Translation]

+-

    Mr. Odina Desrochers (Lotbinière—L'Érable, BQ): Thank you, Mr. Chairman.

    Good day, Mr. McKay. You say that Bill C-18 must be passed without delay because it provides for transfer payments to the provinces. Does that mean that the announcement made by the current Prime Minister would be compromised if Bill C-18 was not adopted?

[English]

+-

    Hon. John McKay: Would it be compromised?

    If the legislation doesn't pass, we have no legislative authority. If we have no legislative authority, I don't know how we would write a cheque. If we can't write a cheque, it would make a difficult situation for all of the provinces, particularly your province, Mr. Desrochers, which is apparently treating this money as already received.

    So I think there's, how shall we say, a legislative imperative here.

[Translation]

+-

    Mr. Odina Desrochers: What difference is there between the formula used in the past and the one advocated in the bill? What are the advantages associated with Bill C-18?

[English]

+-

    Hon. John McKay: I'm not sure that I follow your question. A parallel?

[Translation]

+-

    Mr. Odina Desrochers: In the past, the Minister of Finance authorized transfer payments. Bill C-18 is supposed to change all of this. You maintain that everything will be integrated. So then, kindly explain the difference to us. What do we stand to gain by passing this legislation? In what way is the new formula an improvement on the old one?

[English]

+-

    Hon. John McKay: I'm grasping to understand your question. I don't understand the difference between what was done before.... You're saying that the Minister of Finance did this by executive fiat?

    Well, in this particular instance, the Minister of Finance has no legislative authority to write a cheque for $2 billion. So if your question was whether it is business as usual, as it has been for the last five years, clearly, the Minister of Finance's authority expires on March 31, according to the legislation. So if in fact we don't get the extension to the legislation, then there will be no equalization payments.

    I hope I'm responding to your question, because I'm not quite sure I'm understanding it.

[Translation]

+-

    Mr. Odina Desrochers: I'll take it a little more slowly then. In the past, before Bill C-18, the Minister of Finance, or the federal government, used a particular formula. Transfer payments were made and equalization was subsequently calculated. You're telling us now that with Bill C-18, the two steps will be integrated. I'm asking what the advantages of Bill C-18 are for the government, compared to the old formula. Am I making myself clear?

¹  +-(1545)  

[English]

+-

    Hon. John McKay: Do you want to take a stab at this question?

    I'm not at all clear how “things” used to be done before, because we're not talking about what used to be done before, but about the expiration of legislative authority. So parallels to how things used to be done are not particularly meaningful.

    Do you want to speak to that, Clare?

[Translation]

+-

    Mrs. Clare Scullion (Counsel, General Legal Services Division, Department of Finance): Regarding health transfers, last year, and in previous years as well, the Federal-Provincial Fiscal Arrangements Act was amended to give the Finance minister the power to make payments to a trust. The act was amended in 1999 with the addition of section 16.1. It was further amended in the year 2000 with the addition of section 16.2 and in 2003, with the addition of section 16.3. The same formula was applied. This year, we decided, through the same bill, to extend the equalization program, which is slated to end on March 31. It's simpler to proceed in this manner because after March 31, we will no longer have the authority to make transfer payments to the provinces. The Constitution stipulates that Treasury Board funds cannot be allocated without Parliament's authorization.

+-

    Mr. Odina Desrochers: Thank you. That answers my question. As you can see, I was trying to draw a parallel between the two formulas.

[English]

+-

    The Chair: Thank you.

    Mr. Solberg.

+-

    Mr. Monte Solberg (Medicine Hat, CPC): Thank you very much, Mr. Chairman.

    And thank you to our witnesses and to the parliamentary secretary for being here.

    I just want to confirm something first of all. Is it the government's position that when a new deal is struck, it would be retroactive back to the beginning of the financial year?

+-

    Hon. John McKay: April 1, 2004.

+-

    Mr. Monte Solberg: Okay, all right. That's something I didn't quite understand.

    One of the issues that has been raised by the Bloc is the possible splitting of this bill. I think the parliamentary secretary has taken the position that he did not want to support that, but I am wondering what the problem is—other than the issue of timing—with splitting this bill to allow the health care dollars to flow while we examine the other aspect of this, which is of course extending the equalization.

+-

    Hon. John McKay: I don't know that anything is gained by splitting off the equalization part of the bill. The equalization part of the bill is not substantive; it merely continues the current regime and allows for payments to continue to flow while discussions occur among the various entities. So I see nothing to be gained, and a great deal to be risked, by not having the equalization payment proceed apace.

    You could even extend the argument further and say that the $2 billion for health care is maybe not as important as the equalization. But frankly, I see them as equally important, both being areas where there's an anticipation that the provinces will receive those moneys.

+-

    Mr. Monte Solberg: I guess the issue, though, is that people would like to understand why the government has failed to get an agreement with the provinces with respect to equalization. I don't think anybody is suggesting that we don't want to see the formula extended; everyone wants to see that happen. But I think people would like there to be some analysis of why the government has failed to get any kind of an agreement to this point. I think that Minister Manley intended to meet with the finance ministers to talk about this issue; I don't know that Minister Goodale has done that yet. Obviously, it's an important thing to get going.

    I don't want to attribute motives, but it's a contentious thing and the provinces have strong opinions about it. Obviously, their ability to provide services hangs on getting a proper formula, and it could potentially be an issue in an election campaign.

    I guess I'm just wondering why we haven't been able to get this dealt with before now.

¹  +-(1550)  

+-

    Hon. John McKay: That's a legitimate question. I would say, first of all, that question would best be raised when the replacement bill is submitted, because we're intending that it be retroactive, as we say.

    But substantively, I think the equalization formula among the provinces is extraordinarily complex. There are something in the order of 33 constituent elements that go into the formula; and every province's view on that basket of 33 elements is unique, and frequently diametrically opposed. Then you've got it spread across 10 separate jurisdictions, if you will. You've got an argument as to whether it should be a five-province formula, an average formula, as it is now, as opposed to a ten-province formula. When you get right down to it, every province wants to have the formula that works best for them. Then of course that soon doesn't work.

    I think it is extraordinarily complex, and there has been a lot of good faith on the part of all the participants. And Minister Goodale is in fact meeting his provincial counterparts on the 20th, I think is correct.

    So I really think this bill is an insurance bill

+-

    Mr. Monte Solberg: I think there's only been one other time in the past when we've had to have an extension. The formula has always been complex. We have five years to come to some kind of an agreement. Here we are at the end of five years almost, and still no agreement.

    In a way it's an extraordinary situation. While I understand provinces have differences on it, they always have differences on it and I'm wondering what's different this time. What stands in the way? What has stood in the way this time of getting this done?

    You've made some generalizations, and I agree with them, but I'm wondering what specifically the problem is this time that has not allowed it to happen.

+-

    Hon. John McKay: I can't give a specific answer as to what is unique about this set of discussions that would prevent it. All I know is that it's not there and that the government is taking what I think is a prudent course to put this legislation before us to make sure the payments continue to flow while discussions continue to flow.

+-

    Mr. Monte Solberg: I appreciate that answer, but it does seem to me that the committee may want to ask more questions about that. It may require the minister to come and perhaps explain--maybe the officials can explain--why we have not been able to strike some kind of a deal to this point.

    Again, we've had five years. It strikes me as odd that we can't get it done. I think the provinces would like to know that this will not happen as a matter of course, that there's nothing that's going to permanently stand in the way of this being determined within a five-year period. It seems like a lot of time to get these things struck.

+-

    Hon. John McKay: I don't dispute that five years seems like a lot of time. I don't want to reiterate the issue other than to say it's extraordinarily complex.

    The federal government is only one of the players at the table. Essentially it can only move on a consensus basis. If in fact the direction of your question is to blame the federal government for all bad things that happen in this country, I'm not sure this is the avenue you want to proceed on.

¹  +-(1555)  

+-

    Mr. Monte Solberg: No, I wouldn't do that. People aren't that naive.

    Perhaps you may wish to mention to the minister that it might be a good use of his time to come and explain what the problem is this time and why we're asking for extraordinary legislation. That really puts the committee in the House in a very difficult situation where you're having to rush through something, because we all want to ensure, obviously, that provinces can provide vital services.

    It is extraordinary, and there is a very tight timeline that we're going to have to meet in order to make this happen. The committee is willing to do that, I'm sure. But I don't think anybody feels like they want to have a gun to their head when they're reviewing something that's important like this.

+-

    Hon. John McKay: I don't disagree with you as far as the timeline is concerned, but I'm not sure that it would be wise for anybody to put at risk these fiscal arrangements while we wait for an explanation. I think that on April 1 we want to keep the status quo moving forward. If there are substantive issues post-April 1, even substantive issues around how this thing gets negotiated, that's a legitimate question to ask.

+-

    The Chair: Thank you, Mr. Solberg.

    Ms. Wasylycia-Leis.

+-

    Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Mr. Chairperson.

    Like Monte, I also have questions about the whole process leading up to where we're at today. I feel like this is a bit of a blackmail for all of us. We're told if we don't support it, provinces won't get the money, equalization won't flow. But actually the problem is a result of your government's inaction. You've been hoisted on your own petard. It's not the provinces' fault. It's not our fault as parliamentarians. As Monte has pointed out, you've had four or five years, ever since you signed the last agreement. It's really hard to understand how a plan wasn't laid out and steps weren't taken to get to the point where we'd have a new deal to be signed by April 1, 2004.

    I have a question. Do you have any idea why nothing was done by your government over the last four years so that we could be signing an agreement instead of asking to buy some more time?

+-

    Hon. John McKay: Let me deal with, first of all, language like “blackmail”. I think that's inappropriate for this particular conversation.

+-

    Ms. Judy Wasylycia-Leis: Excuse me, but you're the one who said that if we don't sign, my province, your province is going to be out of all this money, as if we're to blame.

+-

    Hon. John McKay: “Blackmail” is a pejorative word, and I prefer that at least in this discussion we can leave that out.

    As to negotiations, as they say in the old country, “it takes two to tango”. In this particular case it takes ten plus one to tango. Not all of them are on the same page at the same time. So you have a political dynamic in play.

    In some respects, the federal government is almost a neutral party, as the negotiators, the various interests, try to negotiate out their interests. As you put various options on the table, different interests arise.

    Manitoba, for instance, has a unique set of interests that it would like to protect, and understandably. If you put it forward as a 10-province formula, maybe that's a good thing for Manitoba. If you emphasize this element on the 33-point basket, then maybe that's a bad thing for Manitoba. So there's this constant set of dynamics that's going on. It makes negotiation very difficult.

    I don't know that there's any evidence on which you can lay the inaction blame at the feet of the federal government. This is, as I say, an extraordinary, complex set of negotiations.

+-

    Ms. Judy Wasylycia-Leis: I know it's complex. I know you have to reach a consensus, but you have had four years. My sense of this issue is that in fact there's relative consensus at the provincial level. My understanding is that provinces were quite willing to work together around the 10-province formula, but the holdout is the federal government.

    I think the provinces were anxious to meet last October, when a meeting had been scheduled in fact to iron out some of the details around the new agreement, and were told at that time the federal government wasn't ready to deal, wasn't ready to talk. So we've had another delay.

    You introduced legislation last October, Bill C-54, wasn't it? Bill C-54--this bill, in its old form. We prorogued before you accomplished the passage of that legislation. So you've had five months since then to get something together. The provinces have all said they're willing. All the public statements have been to that effect. Yet it seems that the federal government has made a decision to go the route of buying an extra year, when I think an agreement was feasible. I think the provinces were there, but you weren't.

    I think in fact it almost feels like you've been trying to buy some time to get us through the next election. I think you've created a serious problem for yourselves if in fact we're now looking at an election possibly in the spring of 2005. So you've created a double whammy and a double problem for yourselves by going down that route.

    Were you asked, was the government, was the finance minister or the team asked by the Prime Minister to delay this to give him some time to sort it through as the new Prime Minister of this country? Could you tell us, since all the provinces seem to be in agreement on the 10-province formula, what's the biggest holdout of the federal government? Is it the fact that it will cost $3.5 billion, or is there a principle involved here? Do you agree with the principle of the 10-province formula or not?

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    Hon. John McKay: First of all, there has been no delay on the part of the federal government. In fact, as I understand it, they have met 47 times since 1999 to try to work this thing through. They had continued to meet over the course of the summer to try to work this thing through.

    The finance ministers discussed equalization payments at some depth in their meeting in December 2002. There was a thorough discussion of equalization renewal at the last finance ministers meeting in October 2003.

    As you well know, the new finance minister has gone right across the country over the last month, month and a half, I suppose. I accompanied him on some of those meetings. We met with the finance ministers in each provincial capital. In fact, I remember being in on the meeting in Winnipeg. Again, these consultations, these discussions, came up. My impression in listening to the finance ministers was that the issues were actually starting to get narrowed down to a fairly limited set of issues. I'm somewhat hopeful as the finance ministers meet on this weekend that these final issues may be resolved.

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    Ms. Judy Wasylycia-Leis: So is the federal government going to the table with tentative support then for the 10-province formula?

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    Hon. John McKay: I have no knowledge as to whether it is, or it is not.

    As to your point on whether this is a delay for election purposes, we would hardly make it retroactive if in fact we thought there were any benefit in delay. We'd like this done.

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    Ms. Judy Wasylycia-Leis: You might, if in fact there is significant division between the federal government and the rest of the provinces; you might not want to have that kind of publicity in the middle of an election. I think it's a comment on the intransigence of your government to move on a progressive formula that takes into account the wishes of the provinces and is a progressive option to a very fundamental program for our country.

    Since I'm sure my time has almost run out, let me ask a question on the health care portion of the bill.

    As you know, Canadians have expressed concern for some time about the inadequacy of the federal share of health care financing, and we know we're a long way from the kind of fifty-fifty partnership that was there when medicare was given birth in this country. We also know that the $2 billion was an attempt to try to pacify the provinces and present it on a take-it-or-leave-it basis.

    Is it your government's intention to continue the previous prime minister's tactic of a take-it-or-leave-it approach with the provinces on health care funding? Or can you give us a commitment today that your government is seriously looking at fulfilling the funding need identified in the Romanow report, and will do so in the coming budget?

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    Hon. John McKay: I think the Prime Minister's commitment on health care is quite substantive, and he's backing up his words with a $2 billion cheque. I think that's pretty substantive. He's also called together the first ministers and has arguably been trying to move forward with this problem that vexes us all.

    The health care agenda is that fiscal gorilla imposed on all governments. I can remember conversations with Minister Sorbara and your Minister of Finance as well, who are deeply concerned about how to meet the costs of health care.

    The federal government will be there as a partner, as appropriate, and as fiscal arrangements allow us to be there. I don't think I can be more specific than that.

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    The Chair: Thank you very much.

    Mr. Cuzner for 10 minutes.

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    Mr. Rodger Cuzner (Bras d'Or—Cape Breton, Lib.): Thank you, Mr. Chairman.

    Parliamentary Secretary, I'm a new member to the committee, so please excuse me if my understanding of equalization isn't that great. I've done equalization 101, but we'll take it a rudimentary level.

    Certainly prior to equalization, the province of Nova Scotia was a “have” province. In the early days of our country we had the ability to assist with other provinces. Through the early years and the “dirty thirties” we fed the farmers in Medicine Hat, and up through Red Deer, and Edmonton, and the prairies.

    As I understand, the original deal on equalization was set out, was formalized, in the late 1960s, and again, it was a very complex undertaking. I wasn't aware that there were 32 elements to it, and I can imagine trying to distribute the pie in ten different directions on 33 different aspects or criteria. It's a complicated matter.

    As I understand it, though, everybody pays into equalization. The wealthier provinces, then, don't draw as much out. Let's say the have-not provinces do draw from the account. That's how I understand it. If that is so, would it not make more sense to dispel the theory that there's a huge conspiracy by the federal government to protract these negotiations, and to stretch out these negotiations, and not seek clarification on a new agreement for the purpose of an anticipated federal election? Would it not make more sense, and this is what logical Canadians would see, that those that pay in would like to pay in less and those that draw out would like to draw out more? That would be what would strike me. And you can make a comment on that.

    In our province we currently receive funds from the equalization program--much-needed funds. You referenced this as an insurance policy, and I see the merit and the argument in that comment. We continue to hear that Nova Scotia seeks a special status or recognition where they would like to see oil and gas revenues pulled out of the formula so that it would at least allow them to address various problems. Are they unique in their request to have specific resources eliminated from the formula? Could you maybe make a comment on that as well?

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    Hon. John McKay: We're all in equalization 101. I don't profess to be an expert in this file. I know of Nova Scotia's concerns; it was raised by the finance minister. And I think I'd be particularly reluctant to comment on it, given that there's some sensitivity around those discussions.

    When you're dealing with a basket of 33 issues.... For instance, in British Columbia they're concerned about property values. In British Columbia the incomes are not far off the average, but the property values are quite high, so when you put property values into the formula, you actually end up disadvantaging British Columbia. So that becomes a huge issue for people in British Columbia.

    The issue you raise in terms of Nova Scotia, resource allocation, is of significance. I may be wrong about this, and I could stand to be corrected, but I think Saskatchewan has a similar issue with respect to how resources are counted for the purposes of the formula.

    All of this leads me to this point that there is no electoral benefit that I can see in delay of this bill, or advancement of this bill, or ignoring of this bill. I think if you ignore the bill, you arguably have a legislative disaster on your hands. I wouldn't want to be the Minister of Finance trying to explain why the cheque didn't go through in April. I don't think that has anything to do with any kind of threat--I think it's just a reality.

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    Mr. Rodger Cuzner: That's fine.

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    The Chair: We have now Mr. Easter for five minutes.

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    Hon. Wayne Easter: Thank you, Mr. Chair.

    I think Mr. McKay's last point is extremely valid, Mr. Chairman. This bill is absolutely crucial and absolutely necessary. The fact of the matter is if it doesn't go through I think you'll see several of the have-not provinces in a position where they can't meet their commitments in quite a number of areas, including in their social programs, some of their economic programs, and probably especially in some areas related to health care. So it's absolutely crucial that this bill pass.

    Certainly I'm in favour of lengthening the extension, and I believe the real reason we're requesting the extension is because of the differences of opinion. Some of it does relate, as I understand it, to resource allocation, especially from Newfoundland's and Nova Scotia's points of view, and just the inability to come together in an agreement.

    I have two questions. I expect this is going through basically equalization as is. There is a fairly substantial difficulty, I know, with the current formula in terms of its predictability, and I can talk about my own province. Three years ago they got about a $50-million to $60-million windfall that they didn't expect. This year they got about a $50-million bill that was somewhat expected. But it really does disrupt their budgetary situation. There's an extreme difference in how the Department of Finance does the predictability and what the moneys will be from their side, and what the provinces' predictions are on the money.

    I don't know whether you can answer it or not, John, but this is an issue that has to be dealt with. There has to be greater predictability in what the moneys are, because it really disrupts the ability of the provinces to do what they need to do, and we as federal MPs always get criticized if the money is less than what was expected. It's just natural. So you can respond to that and then to my second question, and then I'm done.

    The $2 billion in health spending.... I don't think our experience on the $1 billion expenditure on special health equipment was a really great experience, because I think there were incidents when that money wasn't actually spent on health. What is the assurance in this bill that the provinces are in fact going to spend this money on health care? Here we have this huge system, and there's one thing I agree with Allan Rock on--it was the report card approach for health care spending. It's one of our biggest expenditures, and really we don't know where the money is going. So what kinds of parameters and restrictions are going to be put around the moneys that are in this bill to go to health care to give us the assurances that the provinces are in fact going to spend that money where they're supposed to be spending it?

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    Hon. John McKay: Those are legitimate questions. The first deals with predictability, and I know there have been some conversations about “smoothing” so the bumps are taken out. You rightly identify that a few years ago there was a big surprise cheque that was in the mail, which was a happy surprise, and it was a direct result of the fact that Ontario was having a pretty good year. The gap widened, and therefore the receiving provinces benefited. The finance ministers regularly made the point to us that their ability to predict that revenue was in jeopardy because of the way the formula worked, with its sensitivities to the economy.

    So I'm going to ask.... Is it Krista or Natasha who would be better to talk about smoothing? And then I'll ask Clare to talk about the second issue you raised, which was about the health equipment and how to make sure this money goes to health. I think there's a really good legislative answer to that.

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    Mrs. Natasha Rascanin (Senior Chief, Federal-Provincial Relation Division, Department of Finance): The stability and predictability of the equalization program has been a point of discussion for a number of years. It was highlighted at the finance ministers meeting in the spring of 2002, and also confirmed at the first ministers meeting in 2003, that this is a priority for the equalization renewal. It was agreed by participants that this would be something that would be looked at.

    It is indeed an element of the discussions that are going on at the moment. It is one of the other complicating factors in the equation that is being brought in.

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    The Chair: I wonder if we could come back to Ms. Campbell and Ms. Scullion, because the time is up.

    I have two more Liberal members on this side who want to intervene. Does anyone here want to go for up to five minutes, and then we'll go back to the two Liberal members?

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    Mr. Monte Solberg: I just have one question. It's very brief.

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    The Chair: Do you want to do it now, then?

    We'll have to come back to that, yes.

    Go ahead.

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    Mr. Monte Solberg: Sure. I don't want to belabour this, but it is important. One of the issues is we've talked with a number of the provincial governments about some of their concerns about all of this, not necessarily the extension, but equalization in general. In a way, they're tied together.

    One of the concerns, for instance, that British Columbia has is with property taxes and how they skew the formula to put it in a position where it is no longer a have-not province, but where in fact, they argue, it should be. What is the view of the federal government with respect to that particular issue?

    Again, I think this is somewhat tied to this. It's an important issue, and I think they have a point. The point, to me, is fairly obvious, and I suppose I'll make it.

    When you have Vancouver wedged down onto a pretty narrow chunk of land, you have property values that are through the roof. You have people who are in positions where they're actually having to take out a second mortgage to pay their property taxes. Property values as a measure of relative wealth probably isn't very helpful in their case.

    I'm wondering if you'd care to respond to that criticism, so we can get some sense of what B.C. might be able to expect from the federal government when we sit down and negotiate this next round of equalization.

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    Hon. John McKay: We're certainly aware of the argument, if you will, of property-rich and income-poor. In order to try to give you a straightforward answer, you essentially have to be at the table where all of the other issues are presently being negotiated. We're not. Certainly the federal government is, but I'm not.

    I can't give you a straightforward response on how British Columbia's concern is taken into consideration. I know there are several ways in which it has been discussed, that it would be a weighted response, a weighted recognition of the property values.

    In Quebec, for instance, it's not an issue at all. In Manitoba, it's not an issue at all. Rodger raises the resource revenues issues, which are of extraordinary importance to them.

    I can't give you a straightforward response in isolation from the rest of the negotiations.

    Natasha, is there anything else you want to respond to on that?

    While I have a moment, Clare, can you respond to Mr. Easter's concern that we have some assurance that this money is going to go to health care?

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    Mrs. Clare Scullion: Clause 3 of the bill will add paragraph 14(i) after subsection 13(2) of the act. The intent of paragraph 13(2)(a) is to ensure that the provinces use the money to “maintain the national criteria and conditions in the Canada Health Act, including those respecting public administration, comprehensiveness, universality, portability and accessibility, and the provisions relating to extra-billing and user charges; and contribute to providing the best possible health care system for Canadians and to making information about the health system available to Canadians.” That's the purpose of the CHST, on the health side. If they don't maintain that, under the Canada Health Act, there are ways of ensuring they use the money for that purpose.

    The example that was given in some provinces, where money was transferred to the provinces and used for other purposes, wasn't a CHST transfer. It didn't have the same ties to it that this money will have.

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    The Chair: Thank you very much.

    I have Mr. Shepherd, for five minutes, followed by Mr. Thibault, and then hopefully we can wrap it up.

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    Mr. Alex Shepherd (Durham, Lib.): Thank you, Mr. Chair, and thank you, Mr. McKay, for sharing your time with us.

    I'd like to follow up. Maybe what I need is an update on the social union framework agreement with the provinces, because this had originally to do with accountability for health care spending. You talked about the aspect of what the money was supposedly earmarked for, but this, as I understand it, was an agreement with the provinces where they were to do some accountability for moneys that were expended.

    I am asking you for an update as to where that file is, because the last time I had contact with it there had been no reporting done by the provinces.

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    Hon. John McKay: Can you respond to that?

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    Mrs. Clare Scullion: I wouldn't have that information. I'm only the lawyer. Sorry.

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    Hon. John McKay: Krista, do you think you can respond to that?

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    Ms. Krista Campbell (Senior Policy Analyst, CHST and Policy Development, Federal-Provincial Relations and Social Policy Branch, Department of Finance): The $2 billion was part of the commitment for the 2003 first ministers accord, and under that accord all first ministers agreed to reporting provisions to their own constituents. So provinces are responsible to explain to their constituents what they do with their health dollars.

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    Mr. Alex Shepherd: I understand what you're saying, but I'm asking you what happened in the past, because we had an agreement with the provinces that they were going to do an accounting for moneys that we've already sent them. I am asking you for an update. Have they done that?

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    Ms. Krista Campbell: There is no requirement for them to report to the federal government specifically on how they spend the dollars and return a report to us. There are requirements that they report to their constituents on purchases of medical equipment or investments, total dollars spent in health care.

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    Mr. Alex Shepherd: As I understand, there was such a thing called the social policy framework agreement, which was signed by all the provinces, in which we actually advanced additional moneys for health care a few years ago. I'm sort of out of the loop; I'm asking you because I don't know the answers. Part of that agreement...in fact, I can well remember, because originally a mainstay of the agreement was that the federal government was going to do the accounting, the accountability thing, and then the argument came that, no, they were going to do this themselves and report back to the federal government. Yet I have never heard anybody come along and say “Here is an accounting.”

    We are talking here about spending another $2 billion. To me, it seems important that Canadian taxpayers know what has happened in the past.

    I don't know what we're saying. We've never got an accounting for all the money that we sent them in the first place?

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    Ms. Krista Campbell: No, not under the SUFA provisions nor under the agreements for the 2000 or the 2003 accord. What first ministers, as I mentioned, have agreed to is reporting on common indicators to their public so that they would be able to compare across provinces what each of the provinces put out.

    We may see advances through the health council with the types of reporting. The federal government has made steps to make sure that its transfers are more accountable and transparent to the Canadian public, in part by splitting the transfer and by trying to make them more clear in terms of the legislation and the purposes for which the funding is provided.

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    Mr. Alex Shepherd: Are you telling me that they defaulted on the original agreement, that they didn't provide the accountability that was part of the original SUFA?

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    Ms. Krista Campbell: We can confirm, but I don't believe the accountability was quite that structured. It was more of a sense of each jurisdiction being responsible to account to its own populations, as opposed to one order of government, say the provinces, being required to report to us.

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    Mr. Alex Shepherd: Yes, I think you're right, but are you cognizant that this happened?

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    Ms. Krista Campbell: I am aware of SUFA, but my understanding is that it's more an accountability to individual constituents, as opposed to an accountability of the provincial governments to the federal government.

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    Hon. John McKay: Maybe we can get Mr. Shepherd a more precise answer, because he raises a legitimate question that moneys were sent out, and what is the accountability for that money? I think that is a legitimate question, so if we can get a more fulsome answer, we will.

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    The Chair: Thank you.

    Ms. Wasylycia-Leis, you had a quick point, and then Mr. Thibault will wrap it up.

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    Ms. Judy Wasylycia-Leis: I have two questions.

    One, I am wondering whether it would be possible for either this committee or the parliamentary secretary to get a reading from the new health advisory council in terms of the precise area we are dealing with--accountability, the flow of money. Is there any coordination happening? I would hope that whenever we're dealing with the health bill we might be able to roll in the work of that new council.

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    Hon. John McKay: Could you just be a little bit more precise? Are you wanting the health advisory council's view on moneys that have already flowed, or on the anticipation of this money flowing?

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    Ms. Judy Wasylycia-Leis: The anticipation of this money.

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    Hon. John McKay: The anticipation; I think that's fair.

    How would you want us to respond to that? I suppose, as Krista rightly points out, the health council is just getting started. I suppose we could put the question to them to effectively track the money. Is that what you're looking at?

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    Ms. Judy Wasylycia-Leis: Yes, I think it would be useful, since it is new and in its formative stages. Therefore, for purposes of accountability to Canadians, we should at least attempt to involve them in the process. It may not be a major one at this point, but we should consult with the council to ask for any guidance pertaining to accountability in the flowing of this money.

    I then have one more question.

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    The Chair: I was just going to say, could you send any information for Ms. Wasylycia-Leis or Mr. Shepherd through the chair, and I'll make sure that all the members get a copy.

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    Hon. John McKay: Okay.

    You had a second question.

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    Ms. Judy Wasylycia-Leis: My last question goes back to the point I was raising earlier about the 10-province formula.

    You indicated there were all kinds of issues to be dealt with at the provincial level and that there wasn't a consensus. My understanding from documents that I've seen—which maybe you could table for us—is that in fact the provinces came together with one position, and presented it to this government, and actually called for a 10-province standard that recognizes the volatility around resource revenues and the full inclusion of all provincial revenues in the calculation of equalization entitlements, in particular, revenues from user fees.

    I think the provinces have been very clear; they've come together with one voice. As far as I can tell, the holdout is the federal government. As far as I can tell, the holdout is a reluctance on the part of the federal government to commit to a new way, or to renew the equalization agreement in a meaningful way and on a solid footing.

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    Hon. John McKay: The current formula brings everybody up to within about 95% of the 10-province standard. That's number one.

    Number two has to do with the fact that the current equalization formula has been relatively successful. I appreciate that there are bumps, but the bumps go both ways. By and large, it has worked.

    The number three point is that over the 20-year life of this program, the fiscal disparities among the provinces have actually narrowed.

    Number four is what the provinces are asking for effectively becomes about a $4 billion ticket item to the federal government. That's a very substantial departure from the current situation.

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    Ms. Judy Wasylycia-Leis: Mr. Chair, I think the last point is certainly one that we understand. We are talking about a $3.5 billion to $4 billion cost to federal coffers. I hear what you're saying on that point, but I don't really—

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    Hon. John McKay: I made three points leading up to that last one.

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    Ms. Judy Wasylycia-Leis: I was just going to say, in terms of the other three points, I don't see much evidence for that level of satisfaction with the equalization program.

    What I hear from provinces is that they have made repeated appeals to the federal government to address some of the growing difficulties and the volatility question. They have tried to get the ear of the federal government to fix the problems. They see these as major. They want the change, and they wanted this new formula. They wanted a new agreement with a new formula, and were ready to cooperate, but the federal government wouldn't and couldn't.

    I think it worries all of us, because this equalization program is so important for this country and the values of Canadians. I think we're worried about what might be behind it all. Why the dragging of the heels? Why the reluctance to get down to fix the problem?

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    Hon. John McKay: We're not arguing about the importance of the program to the country. We are arguing about how much this program is going to cost the federal government. As I indicated earlier, this program has, by and large, worked fairly well for quite a number of years. It is achieving its ultimate design, which was to narrow the fiscal disparities.

    This is not simply another way in which the federal government transfers wealth to provinces. Like the CHST or other forms of transfers, this is to equalize some fiscal disparities that occur because of the various capacities of various provinces. It is not simply another block transfer.

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    The Chair: Thank you.

    And finally, Mr. Thibault.

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    Hon. Robert Thibault (West Nova, Lib.): Merci, Monsieur le Président.

    First, I want to congratulate John on his appointment.

    I have a number of points to raise that you may or may not be able to respond to. I think some of them might clarify discussions if you could respond to us through the chair at a later date if it is not possible for you to do so today.

    First, it's my understanding that there's general support from the provincial governments to proceed in this way on both the equalization from the receiving provinces as well as on the health care funding, where that $2 billion... As you mentioned in your presentation, some provinces have already balked. In the case of the equalization, in Nova Scotia's case, we're looking at $1.2 billion, roughly 25% of the provincial budget--20% to 25%.

    It would be unimaginable to be withholding that money as the negotiations go forward. Good points were raised that it shouldn't be a block in the negotiations. I think the negotiations are advancing very well. There's that question of the predictability--and that is part of the discussions as to paying it over based on the three-year formula, the revenues from three years or five years, so there isn't a big jump from year to year. I think those contribute to the problems.

    The question of the ten-province formula is interesting to me. I'd like a better definition or description of what is exactly at play--who are the provinces advancing it, who are the provinces resisting it, and what effect does it have on us and on those provinces?

    You mentioned the floor, but there's also the question of the ceiling, which was at $10 billion, I understand, and now is increased by the cost of living or by inflation. The ceiling is gone. But in the last year we were below the $10 billion mark. It would be interesting for us, I believe, to see what we paid out in 2002 and 2003, or forecasts for 2004 and 2005, if possible.

    Rodger mentioned the question of the clawback provisions as referred to by the Atlantic oil-producing provinces of Newfoundland and Nova Scotia. I wonder if they're part of the discussions now. It surprises me, but I understand that the Province of Nova Scotia, although it has raised the issue bilaterally with the federal government at all times, has not brought it to the table at the multilateral level, where it should be discussed when the equalization formula is done by all provinces. I wish to have clarification on that question. It's my understanding.

    But there are other elements in the Atlantic accord--such as the federal share, that the provinces should get what is equivalent to the federal share--that could be of great benefit to Nova Scotia. I don't know if it would apply as well to Newfoundland, but if you could get us information on that matter...

    Earlier there was a question about other provinces on the solutions found. I believe we're under the generic solution now for the Atlantic provinces, which was developed in the case of the Saskatchewan potash industry so that it wouldn't have too big an impact on their equalization.

    I don't know if you'd care to answer.

    Mr. Chair, could we have some of those answers now and a response to the others later?

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    The Chair: I'm sure Mr. McKay would like to try.

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    Hon. John McKay: If I were going to enrol in Equalization 101, I think you should be the professor.

    I'll engage the officials as best I can in trying to respond to some of your questions. You had an answer on the ceiling: there is no ceiling any longer. For the last two years, in 2002-03 the gross payout was $9.7 billion, and for 2003-04 the payout is just a touch over $10 billion.

    As you rightly say, this is a pretty significant program to the Government of Nova Scotia. I didn't realize that it's 25% of their budget. That's a pretty significant sum, and I take it that if you add it on the CHST, it brings it up to somewhere closer to 50% of Nova Scotia's budget that would likely come from the federal government.

    As to who's advancing the ten-province formula versus who is advancing the five-province formula, I'd defer to Natasha or Krista on that point.

    Is there any comment you wish to offer?

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    Mrs. Natasha Rascanin: Certainly all provinces have put out a communiqué fairly recently that does say they all are seeking the ten-province standard. At that time there had just been an election in Ontario, so that document did not include Ontario.

    Regarding the offshore accords and the generic solution and so on, we do have a number of public documents that we can certainly share with the committee. These are fairly complicated elements of the formula that I might suggest, to open it up, I could go through now; but it might be more useful to provide you with the documents themselves as background and then see if you have further questions there. So we'd be happy to do that.

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    Hon. John McKay: Krista, do you have anything else?

    Thank you, Mr. Chair, and I suppose we could go over those questions Mr. Thibault raised a little more carefully in the event that we haven't answered them as well as we could have.

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    The Chair: Yes, thank you, and if you have information again, send it through the chair and I'll make sure that the members of the committee receive that information.

    Before everyone goes, I want to thank Mr. McKay and the officials for being here. But I wonder if you could stay for a moment, because we need now to discuss the next steps with this bill. First of all, we have a notice of motion from the Bloc to split the bill, which we need to deal with. We can deal with it anytime, but no later I guess than tomorrow, if need be. We also have a request for witnesses from the Bloc Québécois, and the government has indicated that they would like to also put up witnesses if there is going to be a panel.

    We also need to get to clause-by-clause of this bill, and the government has indicated some urgency to do this so that we can effect the $2 billion transfer and have an equalization agreement in place.

    What I have put in motion is that we have the meeting on Monday, where we have one panel with two representatives who the Bloc would put up and two from the government side, and then we'd immediately go into clause-by-clause. The government side has indicated they'd rather go to clause-by-clause tomorrow, which would mean that there would be no opportunity for witnesses on either side, but that would--

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    Hon. John McKay: If I may, Mr. Chair--

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    The Chair: Excuse me, I'd like to finish up what I was saying.

    So that's the real issue: whether we go to clause-by-clause tomorrow, which would mean there would be no opportunity for witnesses, but might mean that the transfer payments can proceed expeditiously. There is a compromise solution that I could throw out, and it is that we deal with this bill expeditiously, but perhaps at a later date--later this month or in March--we could have a morning session on equalization, a good and fulsome discussion about equalization. The finance committee did one of those a couple of years or so ago. That may not be acceptable to the Bloc--it may not be acceptable to anyone--but I just throw it out as a possibility.

    On that point, who would like to address this issue first? Mr. McKay.

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    Hon. John McKay: If I may, on behalf of the government, and I hope I've made the case for the issue of the timeline....

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    The Chair: Maybe you should remake that case.

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    Hon. John McKay: For the March--

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    The Chair: Who have you made the case to at this point?

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    Hon. John McKay: I hope in the course of the hour we've made the case for the timeline, but let me expand on the complication on the timeline.

    First of all, let me start with the proposition that I prefer to work with the committee in a collegial sort of fashion; that's my preference. I hope with over six years on the justice committee I've established the fact that I much prefer to work in a collegial sort of way. I feel somewhat at odds here, because I'm asking the committee to move on this bill somewhat expeditiously, possibly more quickly than the committee would like to move on the bill, and I have some sympathy, having spent six years sitting on the other side.

    The March 31 deadline I hope has been made clear. The issue, though, is that I would like to put up a panel of witnesses tomorrow morning--I understand we have a slot that's available tomorrow morning. So the Bloc I think wants to put up two witnesses, and we're happy to put up two witnesses, as well. And after the witnesses, I'd like to see whether there's an appetite to move to clause-by-clause.

    The reason for that is, if you look at the legislative calendar, we end up in a particular situation. So if we go to the Monday suggestion that you have, Mr. Chair, it means that if we go through clause-by-clause, we can't get it back into the House for 72 hours. By that time, you've got to a supply day--I think it's an NDP supply day, but I'm not absolutely certain on that. That means that it can't come up until Friday. All Friday votes are deferred to the following Tuesday. But the following Tuesday is not the next week, the following Tuesday is actually a week Tuesday, because it's a break week. So this means that the bill ends up being further debated in the House and further voted on in the House in the second week in March. Then we have another break week, so that cuts the time for our Senate colleagues to have any time with the bill.

    Ultimately, I'm in the hands of the committee, but if we don't proceed with trying to get it through and dealt with tomorrow, that becomes our legislative reality. As I say, I hope I've made the case for the fact that I'm not prepared to put $2 billion at risk or the continuation of equalization payments at risk.

º  +-(1645)  

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    The Chair: Thank you.

    Mr. Desrochers.

[Translation]

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    Mr. Odina Desrochers: Mr. McKay, I have no intention either of risking anything on matters of principle. Quebec needs its money.

    However, speaking to the clerk, I would like to clarify a technical matter. Given the list submitted to you by my colleague, would it be possible to call witnesses for tomorrow morning?

[English]

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    The Clerk of the Committee: I'm not sure.

[Translation]

    I'm not even certain that Mr. Paquette has contacted...

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    Mr. Odina Desrochers: The witnesses.

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    The Clerk: It's still quite problematic.

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    The Chair: I'd also like to say something. I spoke today with Mr. Paquette and he informed me that it might be possible to hear from witnesses on Monday, but not tomorrow.

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    Mr. Odina Desrochers: I see. Basically, I'm trying to find some kind of compromise. Mr. McKay made it very clear that we are working to a tight deadline. However, you're asking to call witnesses. Would it be possible to hear witnesses on Friday, or has everything already been booked? I'm trying to find a solution.

[English]

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    The Chair: Friday I think would be fine. You mean Friday for the witnesses and clause-by-clause.

    What about the timing of that, Mr. McKay, in terms of the tabling of the bill and the sequencing there?

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    Hon. John McKay: I can't see that it's a problem, because our 72-hour clock would be running Monday, Tuesday, and we'd be able to do a vote on Wednesday. Would that be correct? It should be okay?

    I think I can say for the government that we would accommodate to the Friday. I can't speak for the members.

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    The Chair: That's a good proposal. Maybe we should have more discussion on it.

    Mr. Thibault.

[Translation]

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    Hon. Robert Thibault: How would you feel about doing a clause-by-clause study tomorrow and a panel review on Friday?

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    Mr. Odina Desrochers: The committee would hear the witnesses on Friday. Well then...

[English]

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    The Chair: Clause-by-clause.

[Translation]

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    Mr. Odina Desrochers: When would you like to start the clause-by-clause study? On Monday?

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    The Chair: On Friday.

[English]

    Clause-by-clause Friday.

[Translation]

    Then we'll hear from witnesses on Friday, as well as do the clause-by-clause study.

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    Mr. Odina Desrochers: I'm not following you. Are we doing the clause-by-clause study on Monday or on Friday?

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    The Chair: On Friday, after we hear from the witnesses.

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    Mr. Odina Desrochers: Mr. Dupuis says it's impossible to have the witnesses here tomorrow.

[English]

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    The Chair: I thought what I understood--and we're all under pressure--is that when I spoke to Mr. Paquette, he said he was going to try. But maybe we can try harder to have the witnesses on Friday and then go to clause-by-clause on Friday.

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    Mr. Monte Solberg: Mr. Chairman, there are seven clauses in the bill. I don't think we're going to be dealing with it for a long time. Yes, we could probably do it all in one day.

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    The Chair: All in one day, yes.

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    Mr. Monte Solberg: I want to lend support to that.

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    The Chair: Thank you.

    Are we agreed? Friday, the witnesses. We'll have one panel with two representatives who have been put forward by the Bloc and two by the government. I haven't had any other ideas for witnesses. And then we'll immediately go into clause-by-clause on the same Friday.

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    Mr. Monte Solberg: Mr. Chairman, I would just say one more word. That sounds fine with me, but I think we should consider taking Mr. McKay up on his offer to have a larger discussion about equalization down the road. Pretty obviously, the issue of the new formula and all of that kind of thing, that's what we're going to be talking about. That's when I would love to bring forward some experts to discuss the whole issue.

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    Mrs. Natasha Rascanin: Do you mean on Friday or at some point?

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    Mr. Monte Solberg: No, I mean down the road. I can do Sunday, I'm free. I have the debate to watch on Sunday.

º  -(1650)  

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    Mr. Massimo Pacetti (Saint-Léonard—Saint-Michel, Lib.): Friday's one issue, but there are no guarantees we can get the witnesses on Friday either. So I don't know who we're trying to kid here. Let's just do it.

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    The Chair: I was going to say that if we communicate with Mr. Paquette and he says he cannot get the witnesses for Friday, maybe then we move to clause-to-clause tomorrow. Would that be acceptable?

    Monsieur Thibault.

[Translation]

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    Hon. Robert Thibault: It would be rather nice to know what needs to be done if we're going to go ahead with the clause-by-clause study tomorrow. It might be very difficult to get the witnesses here, or even to get all committee members together on Friday, because some people may already have other commitments.

    Earlier, you made a very reasonable suggestion, at least in my opinion. You suggested that we do the clause-by-clause study tomorrow and hold a broader discussion into the whole equalization issue at a later date, with a full complement of members present. As Mr. Solberg said, and as you suggested earlier, such a discussion would not preclude our doing a clause-by-clause study of the bill tomorrow.

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    Mr. Odina Desrochers: My mandate is to ensure that witnesses have an opportunity to be heard. We can't start fiddling around with the dates. If my colleagues have no objections, I'll get in touch with Mr. Paquette and advise him of our decision to hear from witnesses after we've done the clause-by-clause review. That shouldn't pose a problem. Mr. Paquette wanted the witnesses to be heard. I don't want to set up any kind of roadblocks and I understand that the government is facing a very tight deadline here.

[English]

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    The Chair: I'm wondering, Mr. Desrochers.... Normally, of course, you'd have the witnesses before the clause-by-clause, but if we have the witnesses after, is it not possible then to roll it in with...

    I'm actually not sure whether or not it was Mr. McKay who offered up a half-day session on equalization, but I made that suggestion, and I think we could invite the minister or whatever other experts.

    Could we not then proceed with clause-by-clause tomorrow on this legislation and then have a morning session in the next few weeks, say, or an afternoon session, where we bring in your experts, other experts, and have a more fulsome discussion on equalization, but deal with this legislation?

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    Hon. Robert Thibault: So moved.

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    The Chair: Ça marche?

    Some hon. members: Agreed.

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    The Chair: Tomorrow morning at 9:30, then, clause-by-clause.

    Thank you. We're adjourned.