Tuesday, April 25, 1967

The methods by which transfers are made from the federal treasury to pro- vincial governments, toward the cost of higher education, involve an unique com-

bination of federal tax abatements, equalization payments and unconditional grants. ‘ Each province is to receive the following:

l (a) An additional four per cent of total personal income tax revenue and one additional percentage point of taxable corporate income. Since the federal government will simultaneously lower its personal income tax by four per cent and corporation income tax by one percentage point, the increased

provincial government taxes will not affect total tax payable by individuals and corporations.

(b) An accompanying equalization payment (for provinces receiving equaliza- tion) which will be determined by the equalization formula described earlier. This has been labelled by the federal representative as a “revenue equalization” payment.

(c) An adjustment necessary to bring the above equalized tax abatement to the provincial government up to 60 per cent of operating costs of post-second- ary institutions or $15. per capita — whichever option the province in question has chosen. This adjustment has been labelled “program equaliza- tion", but it is in effect an unconditional grant since the provincial gov-

ernments have no legal responsibility to spend it on post-secondary educa- tion.

One of the final concrete results of the Conference was an agreement to re- consider these federal-provincial financial arrangements in two years’ time. This was done in order to allow all governments time to absorb the recommendations of the

Carter Commission in the interim before deciding on longer-term and more binding federal-provincial agreements.

And finally, the federal government proposes to pay a provincial revenue stab- ilization payment to a province when its net general revenues for a fiscal year fall

below 95 per cent of the province’s net general revenues for the immediately pre- ceding year.

That, Mr. Speaker, completes in review of the new fiscal arrangements be- tween the Government of Canada and e provinces.

BUDGET 1967-1968

In determining a fiscal policy for the current year this government has en- deavoured to achieve an atmosphere conducive to economic growth and an improve- ment in the living conditions of our people. We are attempting to provide a balanced program within the limits of our financial capacity.

I have spent much time, Mr. Speaker, reviewing the financial and economic background against which this budget was repared. There are many demands which it is our desire to meet and these have all n considered, bearing in mind our res- ponsibility to the taxpayer. Sooner or later the funds must be provided by the people, and it is with this sense of fiscal responsibility that decisions must be made. There is an unsettling inclination to encourage deficit financing without due regard to the ultimate effect on the economy or its impact on the taxpayer.

My predecessor in recent budgets expressed the view that the programs of the former government r uired heavy borrowing and that they could not be deferred pending a balanced bu get. This philosophy can be defended if it is pursued for a definite purpose and for a short period of time. The problem which now confronts this Province is that the debt has been largely incurred for rojects which require continued and increasing support, and while more and more do lars are provided each year to stimulate economic growth, the return in revenue to the Provincial Treasury

hasdblfen far less than is needed to provide a balanced budget let alone a reduction in e t.

The departmental estimates presented to the Treasury Board were far in excess of the final figures presented here tonight.

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