A Frontier Throne Speech

Commentary, Equalization, Frontier Centre

Throughout the last generation, Ottawa has repeatedly become involved in areas of provincial jurisdictions in which it has little or no expertise. This has inflamed separatism and unduly politicized Canadian society.

The most counterproductive of these interferences, the Canada Health Act, has effectively prevented provinces from meeting the needs of thousands of diverse communities. To modernize Medicare and restore a consumer and patient focus, the federal government will return to provinces the freedom to innovate and experiment with alternate models of service delivery.

From a Western perspective, economic flexibility, dynamism, and growth depend on wholesale reform of the perverse incentives in our programs of taxation and regional development. Equalization transfers penalize growth in “have” provinces while inducing “have not” provinces to refrain from creating a more attractive tax and investment climate and developing public sectors focused on results. We will repair this unhealthy dynamic by shifting the GST to the provinces and absorbing a proportion of provincial debt in exchange for an end to equalization and federal social and health transfers to provinces.

Canada’s resource-dependent Western provinces depend on open borders. The federal government will work aggressively to reduce inter-provincial trade barriers and irritants, and standardize health and safety protocols to prevent market disruption. As part of our WTO obligations, and recognizing the humanitarian need to assist developing nations, we will phase out the privileges and extraordinary agency powers reserved for supply-managed commodities like dairy, eggs and poultry. We will compensate quota holders in a fair way.

The West contains the highest concentrations of Canada’s poorest, most dispossessed people, our aboriginals. Massive funding increases directed at First Nations through programs with little performance measurement and poor accountability have enriched a small minority and left the underlying, general causes of poverty unaddressed. In the short term, the federal government will immediately begin redirecting half the existing spending by Indian Affairs as expanded treaty payments to individuals. Provisions for electoral and democratic contained in the defunct First Nations Governance Act will be revived. But long-term prosperity depends on major reforms to the Indian Act, to remove the walls that prevent credit and capital from spreading prosperity on reserved lands.

In a competitive global economy, Canada can no longer afford the simplistic tendency to throw money at complex problems. Had federal spending over the last decade held constant, growing only as much as population growth plus inflation, we would have had enough money left over to chop corporate taxes in half, personal income taxes by 20 percent or the GST by three points. Research indicates that the optimal size of government, where economic growth is maximized, is somewhere near 30 per cent of the economy. Canada’s governments now absorb more than 40 percent.

We can maintain and expand important public spending initiatives by increasing our economy’s growth rate. The federal government will accomplish that by adopting an economic constitution that holds the growth in federal spending to one percent below the economy’s growth rate until we reach a combined provincial-federal ratio of 30%.