McGuinty calls equalization payments in tough times ‘nonsense’
April 30th, 2008 | by admin |Ontario Premier Dalton McGuinty has responded to reports that his province will soon become a have-not province, saying Ontario’s equalization payments in tough times are “nonsense.”
On Tuesday, TD economists said in a report that Ontario could qualify for equalization payments as early as 2010, as the booming West leaves Canada’s biggest province comparatively poor.
The turnaround in Ontario is largely due to soaring commodity prices and a new equalization formula that takes into account non-renewable resource revenues, according to the report’s authors.
McGuinty said it’s not fair that Ontario is subsidizing provinces with booming economies and it no longer makes sense for his province to be sending the federal government more than it gets back in services.
“It’s one thing for us to send $20 billion to the rest of the country in good times. But in a period of economic challenge? This is nonsense. We can’t afford to do that. And I understood that the rest of the country is somehow growing stronger. This is a good thing. Well if they are, why are we still sending $20 billion to the rest of the country?”
The federal equalization program is designed to compensate “have-not” provinces so that their residents can have the same level of services as richer provinces.
In the 2008-09 fiscal year, six provinces — the four in Atlantic Canada, Quebec and Manitoba — will receive more than $13.6 billion in equalization payments.
The authors of the TD report said Ontario’s relative decline is “not so much a story of Ontario weakness as it is of booming economic strength in Canada’s commodity-based economies.”
Since Ontario is a net importer of commodities, its economic performance relative to the West has been hurt.
McGuinty told reporters as he headed into Wednesday’s regular cabinet meeting that Ontario will suffer through a longer and deeper downturn than necessary because of the equalization plan.
The opposition parties say the Liberals are using the equalization formula to deflect attention from the fact Ontario is falling far behind the rest of Canada.
Ontario Finance Ministry officials note that even if the province qualifies for equalization payments, the federal government would simply claw back any money by reducing health transfers to Ontario.
With files from the Canadian Press
