Ontario wanes as Alberta waxes

TheStar.com – Opinion/editorial – Ontario wanes as Alberta waxes
July 24, 2008

The high price of oil has generated a perfect storm for Ontario.

It has boosted the value of Canada’s currency, which is now considered a “petrodollar” by international currency markets. That, in turn, has made our exports more expensive.

It has driven up costs for the province’s residents and businesses. That has forced cutbacks in other areas, including payrolls.

It has contributed significantly to the decline in the American economy, the primary market for our exports.

And it will trigger billions more in federal transfers to the “have-not” provinces. That’s because the equalization formula was rewritten last year to reflect Alberta’s oil wealth, which had been excluded. With the inclusion of Alberta, the disparity between the haves and the have-nots widened, thereby pushing equalization payments upward. Since 40 per cent of federal tax dollars come from Ontario residents, that means more money is flowing from this province to the others.

This “fiscal imbalance” occurs not just in equalization payments but also in other federal programs.

Employment Insurance, for example, pays out roughly $4,000 less in benefits per unemployed person in Ontario than in the other provinces. And Ontario is also getting less per capita in federal health-care transfers, at a cost to the provincial treasury of $733 million this year.

Overall, some $20 billion more is flowing out of Ontario to the federal government than is coming back in federal services and transfers.

This is the backdrop for Premier Dalton McGuinty’s campaign for a “fair deal” from Ottawa, which he relaunched this week with a speech in London, Ont. (See excerpt under Worth Repeating.)

McGuinty has made this pitch before, of course, but with limited success. The previous Liberal government in Ottawa agreed to bring federal grants to Ontario for immigration settlement and job training up to the level of the other provinces. And the current Conservative regime has conceded that health-care transfers to Ontario ought to be put on an equal footing with the other provinces, but not until 2014.

Meanwhile, other provinces seem to be doing better in their negotiations with Ottawa. Nova Scotia, for instance, recently bagged $870 million from the federal government in a deal over the sharing of offshore oil-and-gas revenues.

In his speech this week, McGuinty compared Ontario to the oldest child in a large family, whose role is compliance. Or, as McGuinty put it, “just be quiet and set a good example.”

Evidently McGuinty does not intend to keep quiet. The question is: How loud will he get? He could try to make this a ballot-box issue in the federal election, which is expected in the fall. But he then risks a backlash from Prime Minister Stephen Harper and the Conservatives, if they manage to hang onto power in the election. Also worth McGuinty’s consideration is that the federal Liberals were no more accommodating to him on the fiscal imbalance issue when they were in power.

Nonetheless, we can expect to hear more from McGuinty on this subject in the coming months. Is Ottawa paying attention?

1 Comment

  1. The Toronto poverty prolbem is probably overhyped but that they have a prolbem is entirely predictable. When you combine the richest social programs in the province with the most anti business government in the province you create a climate that attracts people who want social programs and encourages businesses to move to the 905. Concentrated poverty is the predictable result. There is no need to start running a socialist experiment in Toronto it is currently on going.

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