Equalization is political football

Hey there, time traveller!
This article was published 22/8/2016 (1097 days ago), so information in it may no longer be current.

It’s a predictable political strategy: blame the other guy. Manitoba Premier Brian Pallister warned recently that the Liberal government in Ottawa may be planning reductions in transfer payments. This sets the scene for potential cutbacks, with the premier saying he may not be able to protect “front-line” civil servants in core service areas because transfer payments make up one-third of the province’s budget.

Never mind that federal Finance Minister Bill Morneau stated last Monday in Winnipeg cuts are not anticipated and, in fact, transfer payments were the highest in history this year and “the expectation is that they will continue to increase.” Manitoba received a 2.6 per cent bump for a total of $3.5 billion, including $82 million from Canadian Social Transfer and $1.305 billion from Canada Health Transfer. Mr. Pallister wants to go on record the feds may be the reason he may have to renege on a promise not to fire teachers and lay off nurses, or however front-line is defined these days.

It’s not a bad strategy, frankly.

Part of transfer payments are equalization payments. Adopted in 1957, they form the bulk of transfer payments to provinces and aim to ensure there are no regional inequalities. How these payments are determined, however, is where it becomes political, and there is often a battle between the provinces that receive and the provinces that don’t receive the annual transfer of money.

This is something Mr. Pallister knows first-hand from his time in Ottawa as MP for Portage-Lisgar, when the equalization formula was being reformed. In 2006, when the Harper government formed a minority, it incensed resource-rich provinces with what was viewed as an about-face on the Tories’ election promises that revenues from non-renewable resources would not be included in the revised formula. But the revision meant more money for Quebec — the province in which Conservatives wanted to make headway in subsequent elections in order to move up to majority status. It’s all about politics.

And no doubt, it’s a lesson Mr. Pallister watched and learned from as well.

Provinces have long pressured Ottawa to amend the program to suit their needs, and the federal government will look to compensate perceived losers in order to ensure political success the next time around. While Manitoba doesn’t have a large number of federal seats — only 14 — the seven Liberal seats for the city of Winnipeg are not something they will want to lose. Mr. Pallister gets it — and it may explain his pre-emptive strike in discussions with Mr. Morneau.

Granted, a bit of pessimism isn’t necessarily misguided. Have-provinces such as Alberta and Saskatchewan are struggling as oil prices attempt to recover, and the Canadian economy overall is still sputtering.

In 2008, when Ontario’s economy declined, it went on the offensive, arguing the province had been shortchanged. Then-finance minister Jim Flaherty listened to those concerns, announcing Ontario would start receiving equalization in 2009. Alberta and Saskatchewan may do the same in 2017. Changes could also be made to the Canada Health Transfer and the Canadian Social Transfer as well.

Meanwhile, Manitoba, which is trying to dig itself out of a deficit left behind by 16 years of NDP rule, has to do what it can to keep the taps open with a well-worn and, at times, effective strategy.

» Winnipeg Free Press