Ontario Premier McGuinty’s Speech to the Ottawa Chamber of Commerce

Equalization, Frontier Centre, Role of Government, Speech (historic), Uncategorized

Ontario now leads the way in generating 40 percent of Canada’s wealth. We’ve created a third of all new Canadian jobs since 2003. 59 percent of all Canadian foreign venture capital comes here. 39 percent of Canada’s head offices are here.

Half of all new immigrants to Canada choose to live here, to deepen our competitive advantage, strengthen our diversity, and build stronger communities.

And yet some people look at our economy and see only the short-term challenges. Some people in the federal government even say we’re the last place they’d want to invest.

That’s wrong. And that’s a betrayal of a solemn duty to champion all of Canada. We’re a great place to invest and the world knows it. But we could do more and do it faster if the feds would take the brakes off our economy.

Every year Ottawa collects more than $20 billion from Ontario for distribution to the rest of the country.

Sending all that Ontario money to the federal government for redistribution in the rest of Canada made great sense a few decades ago when – well when the playing field needed to be levelled, when other provinces needed the programs and the services that help create prosperity and needed a little help getting there.

But it doesn’t make sense today because equalizations worked for those provinces. They’re doing better. They’re stronger. And that’s great news for all Canadians.

You may have heard about a new TD report suggesting that Ontario could receive equalization by 2010. Here’s how that in fact could happen. If the price of oil keeps climbing fast then provinces with oil and gas will see much faster economic growth than ours, which means, relatively speaking, Ontario won’t be doing as well. We’ll still be growing, just not as fast as others, which means we could technically qualify for equalization.

Now the fact that other provinces – that more provinces – are doing well, is great news for Canada, as I’ve said. This is a culmination of something Canadians have been working towards for decades. One country, with strong regional economies, each of them firing on all cylinders, and you would think that with this dream fulfilled and the country more prosperous, Ontario’s contribution would be lessened.

But that’s not how it works. Ontario – this is important, folks – Ontario actually has to pay more to the federal government as oil and gas producing provinces get richer. This system is so faulty that growth in other provinces actually costs Ontario.

I want to bring this home to you. So when we pay more in Ontario to put gas into our cars, when our business costs go up because of higher oil and gas prices, when this slows consumer spending in our provinces and decreases Ontario government revenues, Ontarians have to pay more to the federal government for redistribution. That’s not fair and it’s not smart.

And get this: if we did qualify for equalization, the money would come from us, out of the $20 billion we send to the federal government. But even more absurd is this: even if other provinces became wealthier than us on a per capita basis, if they became wealthier than us and we qualify for equalization, Ontario would still be the biggest contributor to the federation. We’d still be sending more than $20 billion annually, which is way more than any other provinces. We’d be sending that to the federal government.

So you’re probably asking yourself: how the heck did this happen? I ask myself that on a regular basis. Here’s my take on this. The way the federal government spreads money around this country – all the formulas, the calculations, the transfers – all have one core assumption: Ontario is rich and the others are not.

Well that just isn’t the case anymore. Ontario is strong and others are strong too. Yet rain or shine, no matter what happens, the federal government extracts almost 4 percent of Ontario’s GDP from our economy every year to spread around the country. In fact, right now, despite the energy boom in other parts of the country, the federal government takes more out of Ontario for redistribution to other provinces than ever before in Canadian history. I’ve been pointing this out now for about five years to the last three Prime Ministers. The system is just not working for Ontario. Worse, it’s punitive. And I’ve been joined by leaders from across Ontario from all sectors.

Together we’re saying that Canada’s fiscal arrangements need to be fixed. They are out of date and they’re out of step. Canada is achieving in a global economy. Some sectors and some regions are stronger than others to be sure, but to speak of have and have-not provinces in 2008 makes no sense.

We’re a nation of haves these days. If we were the ten wealthiest jurisdictions on the face of this planet, according to the existing fiscal construct, we’d still be divided into haves and have-nots. Ontarians don’t begrudge their fellow Canadians their wealth one bit, because in the new Ontario we’re busy competing with Massachusetts and California, Ireland and South Korea to attract investment and talent. We’re not competing with Manitoba or Saskatchewan; we’re complementing them with a new diverse and strong economy of our own, and for the long-term benefit of Canada. We in Ontario need to keep more of our own resources so we can invest more in our future.