Inequalities of Equalization Leave Ontarians Worse Off: Have-nots end up with better services than provinces that are paying the bills

Commentary, Equalization, David MacKinnon


For more than 20 years, the cracks in Canada’s system of equalization and regional subsidies have been increasingly obvious. But few have had the knowledge, or the political will, to find a solution to the problem.
The release of two new studies last week makes it clear that we must confront some painful realities.
A paper by the Winnipeg-based Frontier Centre for Public Policy conclusively demonstrates that public services in the provinces that fund equalization, including Ontario, the largest contributor, are inferior to those available in recipient provinces.
This is shocking, considering that equalization was established in 1957 to help the so-called "have-not" provinces provide the same levels of public services to their citizens as the wealthier "have" provinces, without having to resort to punitive levels of taxation.
Of course, Ontario is now itself receiving equalization payments. But the money coming into the province is far exceeded by the money going out from Ontario taxpayers to the other have-not provinces, via Ottawa.
Despite a 50-year history of massive fiscal transfers – $2,500 in 2008 alone for every man, woman and child in Ontario and Alberta, for example – the most disturbing thing is that there has been no measurement system in place to determine whether or not this is effective, efficient and fair to all Canadians.
Does it really matter if public services are better elsewhere than in Ontario?
You bet it does. If you are a single working mother who needs child care, you have access to upwards of 20 per cent more regulated daycare spaces in Quebec than in Ontario. Can’t find a family doctor? There are 19 per cent more doctors per capita in Quebec than in Ontario and 10 per cent more than in Alberta. There are 20 per cent more nurses per capita in Manitoba than in Ontario – and we all know what that means for the quality of hospital care.
If you are an 18-year-old contemplating university, your tuition fees in Quebec would be just 38 per cent of what you would pay in Ontario.
The Frontier Centre study shows that, in effect, we have "over-equalized." The recent recession, which destroyed so much of Ontario’s manufacturing sector, has laid bare what many have suspected for a long time: this province can no longer afford to fund the current system.
Alberta’s minister of finance has clearly signalled that he will be opening up this subject. Some Ontario politicians have spoken up in the past: Dwight Duncan, Mike Harris, Bob Rae and Joe Cordiano come to mind. Dalton McGuinty also raised the problem a few years ago. But his comments about the Frontier Centre paper made it seem he is washing his hands of the issue:
"I haven’t chatted with any premier that thinks equalization is working well. That’s a part of the Canadian condition. Developing consensus on how to fix it – that’s nearly as complicated as amending the Constitution. So I’ll leave it to others to do what they want to do. … We’ve got too many things on our plate right now to devote much time and energy to that particular issue."
Ironically, many of the serious problems that Ontario faces cannot be solved without the ability to hold on to a greater proportion of the wealth generated by its citizens.
This issue has the potential to divide the country and to create much greater tension within the federation. For years, Ontario citizens have been content to accept the status quo, but there is evidence that is changing.
The second study released last week reveals that public opinion is moving swiftly away from the old complacency. The study, The New Ontario: The Shifting Attitudes of Ontarians toward the Federation, was commissioned by the Mowat Centre for Public Policy at the University of Toronto.
The Mowat Centre found that 63 per cent of Ontarians say their province does not receive its fair share of transfers from the federal government. That is up from 37 per cent in 1998. Similarly, the percentage of Ontarians who feel that the province is not treated with the respect it deserves increased from 27 per cent to 51 per cent over the same period. Today, 50 per cent of Ontarians feel that the province’s influence is decreasing; just 8 per cent think it is increasing.
In conclusion: the current system presents deep and serious problems with real consequences for every Canadian. Ontario legislators, both federal and provincial, have mostly been checking their judgment at the door with respect to this fundamental problem when they get elected to Queen’s Park or the House of Commons.
But times have changed. Polite fictions aren’t going to cut it anymore. This is a time for courageous leadership and honest dialogue – in the interests of all Canadians. In this, Ted Morton, the new Alberta finance minister, is exactly right.