The More Things Stay the Same

Worth A Look, Equalization, Frontier Centre

OTTAWA — So many numbers, so much rhetoric, and yet the essential point was missed.

The federal and provincial governments last night renewed the equalization program, based on a new formula aimed at bringing predictability to the annual transfer of wealth from Ontario and Alberta taxpayers to the rest of the country.

And in exchange, nothing. No accountability, asymmetrical or otherwise. No plans to bridge the gap between rich and poor. No hope of ending the debilitating dependence of the have-not provinces on the charity of the haves.

Deep down inside, both Ottawa and the poor provinces prefer it that way.

Had the International Monetary Fund stepped in to provide New Brunswick or Manitoba with a bridge loan, the IMF would expect to see a plan. It would want to know how the provinces intended to eliminate any deficits and reduce their debt. It would want to see an end to wasteful subsidies and frilly government social programs. (Although, for the IMF, delivering even basic education and health care can be considered a frill.) But under the terms of the agreement concluded last night, the federal government will increase its transfer to the have-not provinces, and entrench an escalator that healthily exceeds the expected rate of inflation.

There will be no report cards on economic development, no national standards of fiscal accountability. Just free money.

Contrast this with the health accord signed last month. There, too, Ottawa increased funding. But it expected the provinces to target waiting lists, to improve home care and to report their progress. Ottawa expected results.

The health-care accord was a shared federal-provincial responsibility and funded on a purely per capita basis.

But providing equalization is entirely the responsibility of the federal power. And it is anything but per capita. It is, instead, a transfer program, taking money from the tax base of the wealthy provinces and depositing it in the bank accounts of poor provinces.

Initially, equalization was intended to help poorer parts of the country catch up to the wealthier parts. Now, it is simply assumed that the poor will stay poor. B.C. and Saskatchewan might move in or out of the “have” column, but Quebec and Atlantic Canada will remain firmly entrenched in equalization dependence, and no one expects that to change.

So entrenched is this myth that even Alberta Premier Ralph Klein and Ontario Premier Dalton McGuinty accepted the agreement, once they were reassured that any increases in their obligations would be incremental rather than astounding.

Newfoundland Premier Danny Williams’s sense of entitlement is so absolute that he stormed out of the talks when Ottawa refused to provide an unlimited exemption from any clawbacks, no matter how flush that province might one day become from Hibernia oil.

Mr. Williams has a fair point — Ontario has unlimited access to rents from its nickel and Alberta from its oil; those provinces dependent on offshore natural resources should receive no less.

But it is the subtext that matters, the assumption that Newfoundland is entitled both to all offshore natural resources and to a portion of each and every Alberta and Ontario paycheque.

On behalf of the 14 million long-suffering taxpayers in those two provinces, all governments have an obligation to ensure that have-not provinces do everything in their power to end their debilitating dependence on the wealth of others.

But then, if Quebec were to actually free itself from federal equalization, one vital argument for staying within Confederation would be lost. If Newfoundland and the Maritimes were to achieve true economic self-sufficiency, they would cease to be de facto colonies of the federal government.

So, despite yesterday’s theatrics, everyone is happy to tinker with the status quo. A new panel will look at ways to rejig the equalization formula in the future.

No one will ask the review panel for ideas on how to abolish equalization altogether.