Four ways Ottawa can help Ontario – comment – Four ways Ottawa can help Ontario
March 19, 2008
David MacKinnon

In recent years, think-tanks, banks, newspapers, academic institutions and individuals have expressed concern about the $70 million to $90 million every working day that the federal government redistributes to other jurisdictions from this province to support programming that is more accessible than similar programming here.

Taken together, these observations suggest that the biggest single barrier to a reasonable economic future for Ontario is the fiscal redistribution system operated by the federal government. Every timber and joint in the Ontario house is creaking under the strain of this system.

It would be hard to imagine more superficial responses to this and other Ontario problems than the recent attacks on the provincial government by Jim Flaherty and Stephen Harper. The address by Prime Minister Harper earlier this month to the Economic Club of Toronto is especially superficial. He thinks that further tax reductions should be made in the Canadian province that already has the least to spend, in relation to population, of all provinces. This is nonsense.

There are several steps the federal government could take if it had a serious interest – other than deflecting blame – in helping Ontario in the difficult environment it faces:

It could propose, in its next budget, a 10 per cent reduction in the equalization budget to match the approximate reduction in the manufacturing labour force Ontario has experienced in 2007 and will experience by the end of 2008. Such a reduction is entirely compatible with the commitment to the principle of equalization described in the Constitution Act of 1982 and would save Ontario taxpayers about $700 million.

It could eliminate the programs it has to provide funds at below market rates to enterprises in other regions. Flaherty and Harper have indicated their desire not to provide such funding in Ontario. However, they provide unsecured, interest free loans toward the cost of new establishments and expansions of existing enterprises in several other provinces, exactly what they say they don’t want to do here. Consistent policy is usually a virtue and applying it in this case would save Ontario taxpayers at least $100 million.

It could immediately make changes to the Employment Insurance program so that similarly situated Canadians facing unemployment are treated exactly the same wherever they live in Canada and so that the EI program is simply insurance, not another form of taxation. These steps would save Ontario taxpayers a minimum of $1 billion and possibly much more, depending on how they are implemented. They would also bring a measure of much needed fairness to the program.

At the moment, the federal government collects two-thirds of the rentals for the entire airport system from Pearson Airport but Pearson only generates one-third of the traffic of the system. Matching the fees to the traffic patterns would save the airport tens of millions and would be highly significant in relation to the facility that is arguably the most important single piece of infrastructure in Ontario.

These four suggestions would save Ontario taxpayers and the airport authority about $2 billion and would be more equitable and efficient than current practices. Harper and Flaherty should simply get on with it and put them in place rather than blame Premier Dalton McGuinty for problems that are in significant measure caused by the federal government’s voracious appetite for funds from Ontario to distribute elsewhere.

David MacKinnon is a former Nova Scotia and Ontario public servant and past president of the Ontario Hospital Association.

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