Who can argue that a formula that takes from financially-stressed Newfoundland and gives to Ontario, or exempts Quebec’s hydroelectric revenue, is fair?
Canada, eh?
That Canadians supposedly say “eh” and “aboot” is one of the more tiresome tropes of our national identity. Yeah, I know: we love Timmys, backyard hockey rinks, Canadian stars who make it big in Hollywood, and go soft every time we’re told we’re polite and nicer than Americans.
We also insist we’re a Team.
Except we’re not. “Team Canada” is so neurotic and fractious right now because, deep down, we know we’re not united at all.
Quebec Premier Legault has called Western Canadian oil “dirty” and vowed (until recent hints to the contrary) to never accept a west-east pipeline. The feds have strangled and stalled the West’s energy sector (Steven Guilbeault recently pulled the plug on the Kitimat refinery, which would have increased our oil and gas exports). They’ve killed economy-building project after project, including LNG facilities. Then, when Germany and Japan came practically begging for liquid natural gas, Mr. Trudeau offered them green hydrogen, which they didn’t want.
Go Team!
Naturally, it’s considered unpatriotic to point any of this out. In particular, it’s not nice or obliging to criticize or challenge the feds—unless you’re Quebec.
“Don’t bother me with details!” Patriotic Canadians may as well be saying. “I’m too busy adoring Mark Carney and knitting ‘Go Canada‘ scarves!”
Only with the re-election of Mr. Chaos Theory, Donald Trump, are we finally confronting some of our inconvenient truths, including dysfunctional border security, freeloading on U.S. and NATO defence, and economic stagnation.
Some recent ‘aha’ moments:
Removing interprovincial trade barriers “could lower prices by up to 15%, boost productivity, and add up to $200 billion to the domestic economy” (Trade Minister Anita Anand).
Fast-tracking approvals for $20 billion worth of resource projects is “important” (B.C. Premier David Eby).
The number of federal regulations imposed in Canada over the last decade has “weighed on investment and economic growth” (StatsCan).
No kidding, eh?
Such reality checks aside, we still indulge in knee-jerk denial and offer up some kooky confections — including that Canada hit the U.S. with a carbon tax (Hugo Cordeau, Globe and Mail), that the northern States join Canada (Conrad Black, National Post), or that Canada join the European Union (Dale Botting, StarPhoenix).
And then there’s equalization: the real cancer at the heart of Team Canada.
Last weekend, five former PMs encouraged Canadians to fly the Maple Leaf in response to “Trump’s threats to our economy and independence.” They would have done better to urge the country to fix equalization. Now.
What do they have to lose?
From a constitutional, common sense — anything — perspective, who can argue that a formula that takes from financially-stressed Newfoundland and gives to Ontario, or exempts Quebec’s hydroelectric revenue, is fair?
This year, out of a total equalization pot of $26.2 billion, Quebec will get $13.6 billion (up a quarter billion from last year). Manitoba will get $4.7 billion (an increase of $337 million), and Ontario will be doled out $546 million.
Talk about redistribution of wealth.
Saskatchewan, which contributed $786 million to equalization last year, hasn’t received a dime in equalization payments for the last 18 years. No wonder there’s renewed talk of secession out here.
On reform, the cards are — as usual — stacked against the underdogs. Hardly common knowledge is that in 2023, in a budget omnibus bill, the feds extended the current equalization system for another five years, until 2029. Did our vaunted media cover this story? Do pigs fly?
Finally, last spring, fed-up Newfoundland-Labrador announced it was taking the feds to court. As Saskatchewan’s Justice Minister/AG at the time, I announced that we would join them, in a cross-partisan effort, and support their constitutional challenge of equalization (“Saskatchewan to Join Newfoundland and Labrador in court challenge over equalization formula,” CBC, June 1, 2024).
Curiously, Saskatchewan formally re-announced this intervention again last month. (The province also appears to have decided not to present specific evidence of the effects of equalization on Saskatchewan, so is just along for the litigation ride, so to speak).
Newfoundland argues that a province’s contribution to equalization should not be based on taxation revenues alone, but should also include the cost of delivering public services. Inconsistent at best, and notoriously complex, is the calculation of provinces’ “fiscal capacity” and the “fiscal capacity cap,” which claws in 100 per cent of resource revenues (except for Quebec’s hydroelectric revenues), skews the formula, and ultimately overcompensates ‘have-not’ provinces.
Newfoundland also argues that any excess funding should be distributed to all provinces, not just ‘have nots’, and that the fiscal capacity cap is an unconstitutional appropriation of provinces’ natural resources. Provinces that have developed their natural resources are penalized with lower, sometimes zero, payments—and, as a result, de-motivated from developing their natural resource sectors.
What country does that to itself?
In August, the federal government filed its formal statement of defence — which doesn’t appear to have been reported by anyone, either. Its arguments, in a nutshell, are that the equalization formula and fiscal cap are not unconstitutional, and any decision to change them should be made in the political, not judicial, realm.
Of course, there are risks to fighting equalization in court. Newfoundland could lose. Ideally, as Premier Danielle Smith has said, this issue should be hammered out by the provinces around the Council of the Federation table and advocated for, as one voice, to the feds.
But is that ever going to happen?
After all, with “dirty oil” equalization money, Quebec can keep power rates artificially low and subsidize daycare. Here’s some irony: the Saguenay region of Quebec produces one third of all Canadian aluminum, thanks to “abundant, cheap hydroelectric power”! De rien.
As for Ontario, one might wonder why Premier Ford recently mused about hitting the West’s oil and gas with counter-tariffs. After all, oil and gas revenues disproportionately and massively fund Ontario’s equalization.
Meanwhile Pierre Poilièvre, who needs Ontario and Quebec votes, recently said he doesn’t “anticipate big changes” to the equalization formula.
And so it goes.
What he should be saying — and what every Premier should be saying — is that building energy infrastructure and fixing equalization are not only in the national interest; they’re national emergencies.
And proud, patriotic Canadians should be demanding that Poilièvre and Carney, the premiers, and opposition leaders publicly state their positions on equalization and when, if ever, they think its self-harming inequality is going to end.
That would be a federal election issue.
That would be taking one for the Team.
