Economic expert David MacKinnon slammed regional subsidies during a recent meeting of the Rotary Club of Belleville.
MacKinnon, a former CEO of the Ontario Hospitals Association, said "one of Canada’s most sacred cows — regional subsidies — is, in fact, chewing up the country’s economic foundations, national unity and future prospects."
He asked the audience to imagine for a moment a satellite image of Halifax, NS, over the Belleville and Prince Edward County area and some parts of surrounding counties.
"We are talking about two roughly equivalent areas in terms of population. But if we compare the two regions in terms of resources funded by taxpayers, the differences are nothing short of amazing. Halifax is home to no less than five of the 11 universities serving Nova Scotia’s population of 850,000."
According to MacKinnon, Nova Scotia has 32 hospitals, while this area has eight to serve about 140,000 people.
"So who is paying for the higher standard of services in Halifax and Manitoba and Prince Edward Island? Well — you are. Along with other taxpayers in Ontario, Alberta and other parts of Canada," said MacKinnon.
He said neither the federal nor Ontario government has ever studied the economic impact of regional subsidies–even though taxpayers have spent the most part of a trillion dollars on them.
"The federal government never talks about the issue which should be at the heart of the system: what is the actual population need in each province or territory?" he asked.
He pointed to Quebec and questioned whether equalization payments to that province, in an effort to keep it within Confederation, are having a spin-off effect on other provinces.
"Is it possible that one reason that regional subsidies are so opaque is that they are not so much instruments of economic policy as they are incentives to keep Quebec in the federation? If so, the other recipient provinces are free riders," he said.
In Charlottetown, MacKinnon said, things look good on the surface.
"There are no mass layoffs, public services are much more accessible than in Belleville or Toronto, and a disproportionate number of citizens have gold-plated disability pensions because of the sheer size of government in the province. This acts as a built in stabilizer in economic downturns."
MacKinnon said this level of government hides underlying economic woes.
He said Canada should follow Australia’s model where equalization payments reflect actual population need.
"Regional subsidies are a slowly- unfolding financial and economic catastrophe. Unless we change them, Canada is marching toward industrial irrelevance," said MacKinnon.
MacKinnon is a former Nova Scotia and Ontario public servant and past president of the Ontario Hospital Association.
He was awarded a Centennial Fellowship by the Canadian Imperial Bank of Commerce and York University to study at York, Harvard and Oxford Universities as well as the European Institute of Business Studies. He lives in Toronto with his wife Betsy, a retired teacher for the Toronto Board of Education. He and Betsy will be moving to Wellington in Prince Edward County in April.