Thank you, Mr. Speaker. Mr. Speaker, yesterday the federal Minister of Finance, the Honourable James Flaherty, released the Report of the Expert Panel on Equalization and Territorial Formula Financing.
This report has important implications for the fiscal future of the Government of the Northwest Territories, GNWT, and for the residents of this territory. The expert panel was established by the federal government early in 2005 with a mandate to undertake an independent review and make recommendations on the allocation of the equalization and territorial formula financing programs. The publication of this report sets the stage for formal
discussions between Canada and the provinces and territories to address outstanding fiscal issues. Provincial and territorial Premiers will be briefed by panel members in Edmonton on Thursday.
The formula financing grant represents, on average, about 70 percent of the GNWT's total revenues. It is absolutely critical that formula financing provide adequate funding that will allow us to deliver public services to the residents of the NWT. It is equally important that the arrangements include the right fiscal incentives for us to encourage economic growth, to develop our natural resources and to become less dependent, over time, on federal transfer payments.
We wanted to be sure that the panel understood the unique circumstances we face in Canada's North, as well as our specific issues here in the NWT. Therefore, the GNWT worked together with Nunavut and Yukon and presented the panel with a joint territorial submission on formula financing. We told the panel that the "fixed pool" approach to territorial funding that was put in place in 2004 is inappropriate. The fixed amounts create a zero sum game for the territories, where increases in one territory's grant come at the expense of the other territories. We provided specific proposals for adequate territorial financing arrangements that also include the right fiscal incentives for economic growth.
The panel travelled to Yellowknife in August 2005 and hosted a roundtable discussion where they heard directly from northerners that formula financing arrangements need to take into account the high costs of delivering services in the North.
I met with the members of the panel last August and reiterated our government's concerns that the NWT must receive a net fiscal benefit from the development of our natural resources.
We are pleased with the report. The panel, in issuing a separate report on formula financing, acknowledged that the territories are different, and require different fiscal arrangements from the provinces. The same conclusion was reached by the Council of the Federation Advisory Panel on Fiscal Imbalance in their report in April.
The expert panel members clearly heard the messages they received from northerners. The panel's key recommendations include:
- • replacing the "fixed pool" with a formula-driven approach providing three separate grants to the territories based on each territory's own needs and fiscal capacity;
- • addressing concerns regarding adequacy of funding levels;
- • improving the incentives for the territories to raise our own revenues by decreasing the offsets against revenue growth; and,
- • using appropriate escalators that reflect population growth and the growth in provincial and local government spending, rather than the fixed and inadequate 3.5 percent per year proposed by the federal government.
These recommendations clearly tell us that the expert panel has listened to the territories' concerns. Not only did the panel stretch its mandate to recommend both removal of the "fixed pool" of funding and replace it with the calculation of separate grants for each territory and an escalator that responds to our growing needs, but the panel also accepted our arguments supporting an increased fiscal incentive to develop our economies.
The panel recommends that revenues from natural resources be dealt with in separate agreements and not in the formula itself.
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The panel clearly stated their support, however, for the territories to see direct benefits from the development of their resources. The Prime Minister himself has stated that northerners should be the primary beneficiaries of the revenues generated by resource development in the NWT.
We cannot know with certainty what today's report means to us fiscally until we see the final arrangements that Canada will put in place. From our perspective, however, the report of the expert panel presents a reasonable approach to structuring formula financing arrangements. Although we must continue to focus on ensuring that overall funding levels are adequate, I am confident that, if the federal government accepts these recommendations, we can reach agreement on technical details. In fact, given the consensus of the three territories, my territorial colleagues and I have written to Minister Flaherty proposing that work on formula financing should begin in advance of and independently from discussion on equalization.
We now have the three key reports that we need in order to move forward:
- • the Report of the Expert Panel on Equalization and Territorial Formula Financing;
- • the Report of the Council of the Federation Advisory Panel on Fiscal Imbalance; and,
- • the federal budget paper on restoring fiscal balance in Canada.
Minister Flaherty laid out a process in his budget for reaching agreement on federal/provincial/territorial fiscal arrangements. Finance Ministers will be meeting at the end of June to begin discussions on these three reports and on how to incorporate their findings into new fiscal arrangements. A number of other intergovernmental meetings will be held over the summer, with a First Ministers' meeting to be held this fall. The 2007 federal budget will lay out the new fiscal arrangements. I look forward to meeting with Minister Flaherty to begin these very important discussions.
Finally, I would like to take this opportunity to thank the members of the expert panel for coming north and listening to the concerns of our residents and also for compiling a report that acknowledges these concerns and proposes solutions that will help to address them. Thank you, Mr. Speaker.
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