Thank you, Madam Speaker.

The New Liberal Government And The Canadian Economy

In October 1993, the Liberals were elected nationally on a platform of making change: of challenging conventional thinking, being innovative, restoring public confidence in government and "getting government right." The Liberals' approach to economic policy was presented in their campaign "Red Book" and is summarized, as follows, in a document entitled, "How Ottawa Spends, 1994-95: Making Change":

"A two-track fiscal policy is emphasized, directed at job creation and growth while simultaneously reducing the deficit to 3 per cent of gross domestic product (GDP) by the fall of 1996. A large number of specific commitments are made, including a capital infrastructure program; reductions in defence spending; a 15 per cent cut in the $4.1 billion consulting and professional services budget of the federal government; renegotiation of federal/provincial arrangements (especially established programs financing) that are expiring in the near future; replacement of the GST with a system that is perceived to be fairer, but that generates equivalent revenues; and renegotiation of the free trade agreements to iron out certain details."

The Liberal government introduced its first budget on February 22, 1994. This budget took a relatively mild approach to deficit cutting and was seen by many as not very different from previous budgets put forward by the Progressive Conservatives. There was an indication, however, that Canadians could expect to see, in the next budget, major reductions in transfers to the provinces and territories. Overall, the first budget impressed few people, and the real test for the Liberal government is expected to come in its 1995 budget. The 1995 budget will be expected to deliver job creation and social policy reform while at the same time addressing the need to reduce the deficit. The GNWT must remain vigilant to ensure that federal deficit reduction measures do not put the well-being of NWT residents at risk.

Negotiating With The Federal Government

The majority of funding for the Government of the Northwest Territories comes from the federal government. Figure 1, below in your document, illustrates GNWT revenues by source for the fiscal year ended March 31, 1993. Appendix C provides a more detailed description of revenues. It provides a summary of revenues, by source, for the fiscal years 1988-89 to 1992-93 inclusive.

Revenues from Canada come through four different sources:

- Formula financing agreement, which accounts for 70 per cent, is described in appendix A;

- Established programs financing is two per cent. This category includes health insured services, post-secondary education and extended health care.

- Transfer payments which comprises nine per cent. Transfer payments include health care, Indian and Inuit, Canada assistance plan, health-related services, continuing education, Young Offenders Act, legal and correctional services, economic development agreement.

- Recoveries from Canada, which account for one-fifth of one per cent, include airport development, Tuvvik Treatment Centre, recreational facilities, federal sales tax rebate and correction institutes.

Formula Financing Agreement

The formula financing agreement with the Government of Canada expires March 31, 1995. Negotiations for a new funding arrangement are currently under way. Committee Members remain concerned that the Government of the Northwest Territories does not appear to have a comprehensive strategic plan and fiscal policy in place to guide their critical negotiations. Members feel there is an urgency associated with the development and implementation of a long-term fiscal strategy. Further, it is imperative that such a strategy govern negotiations with the federal government, which is also facing an ever-worsening fiscal situation.

The present formula financing agreement, although flawed in some areas, has provided a good measure of stability. However, the federal government has been reducing funding to the Northwest Territories in areas not covered by the agreement. Prime and significant examples of this type of funding cuts are in health billings and the reduction of funding to support social housing.

In view of these considerations, the standing committee made the following recommendation in February 1994:

these issues and develop a political strategy to achieve the following results:

- Certainty of adequate funding to create and sustain two new territories with no diminished level of service; and,

- Each territory be given the economic tools necessary to lessen their dependence on the federal government, for example; that, of course, is the northern accord.

Other Existing Funding Agreements

During the September review, the committee was informed of the possibility that there could be significantly reduced federal contributions to support official languages. Committee Members are very concerned about the impact of these reductions in a jurisdiction where there are eight official languages and where language is seen as the primary means for preserving aboriginal cultures.

The GNWT entered into the original Canada/NWT cooperation agreement for French and aboriginal languages in good faith. Programs were designed assuming that funding would be available. Funding reductions will have an immediate negative impact on both aboriginal languages and the provision of French language services in the Northwest Territories.

This agreement is still in the negotiating stage and the committee strongly urges the GNWT to consider the impact of recent and proposed funding cuts as part of the total "package" of financial arrangements that need to be addressed between the GNWT and the Government of Canada.

New Agreements Being Negotiated

The committee was informed that the benefits associated with the proposed transfer of responsibility, include the following:

- improved system planning;

- increased business and employment opportunities for northerners;

- ability to share resources;

- secure funding levels;

- increased local control; and,

- increased technical resources.

The risks associated with the potential transfer were also discussed. One of the most important considerations in assessing risk is the potential impact of the transfer on the future formula financing agreement. Committee Members would like reassurance that this pending agreement is considered as part of the "package" when negotiating with the federal government.

That, Madam Speaker, concludes my part of this report and with your permission, I would like to turn over the next part to Mr. Patterson. Thank you, Madam Speaker.