During his reign, Stephen Harper has famously refused to meet with provincial Premiers as a group, thereby consigning the federal-provincial first ministers’ conference to the political remainder bin along with other quaint last-century ideas like regional development and equal public services at equal rates of taxation. But that hasn’t stopped him from some by proxy rattling of his sabre in the direction of provincial leaders.
Last week’s federal budget was essentially a very long and detailed campaign platform that avoided any mention of national unity or inter-regional equity. Aside from some self-congratulation about increased transfers to the provinces for health and education, the budget was mainly about courting the votes of better off “Canadian families and individuals” through tax cuts and targeted benefits. More cash to provincial governments to help them pay for the health, education and social services that most Canadian families and individuals need and value was not on offer. On the contrary, tucked away in Annex 1 in the 528-page tome was a nasty little section entitled “Maintaining Fiscal Balance in the Federation.”
Annex 1 went right to the point. “There is no fiscal imbalance in Canada,” it declared, exhuming a term much used by provincial premiers in the early 2000s. “All governments have the capacity to balance their budgets,” spake the Annex. “Provincial and territorial governments have access to virtually all of the same sources of revenue as the federal government.” The document went on to advise lower orders of government to cut spending rather than tap those revenue sources. “Provinces and territories must make responsible decisions to achieve balanced budgets and reduce the debt burden on taxpayers, just as the federal government has done. It is their responsibility to implement prudent spending plans rather than demand the federal government fix their budgetary problems.”
So there. A forewarning to any provincial leader who would question income splitting or increased child care benefits for parents of teenagers while teachers and health care workers are losing their jobs. Keep quiet about a “fiscal imbalance” or risk being hectored on your profligacy. Thus it was that when New Brunswick’s finance minister Roger Melanson congratulated the feds for their balanced budget, but expressed disappointment that it did nothing to help hard-pressed provinces like his “to offer what we have to offer” – i.e. health, education and social services – he was smacked down by the local Conservative MP. ” I guess I’m not necessarily surprised,” Mike Allen of Tobique-Mactaquac told the CBC. “I guess if we were giving him (Melanson) 80 per cent of his revenue, he’d probably want 90.” Then showing a mastery of the budget talking points, Allen claimed that federal transfers to New Brunswick were at an all-time high (debatable-see below) and Melanson “should look at the province of New Brunswick and look in the mirror because he’s got a spending problem.”
Now, note that Harper and the Conservatives have not always been fiscal imbalance deniers, far from it. The term was first deployed by provincial premiers more than a decade ago to describe a situation – much like today’s – in which the federal government was boasting surpluses while provincial governments were struggling with deficits and scrimping on health and education spending. Like Harper’s government today, the Chretien-Martin Liberals denied that such an imbalance existed. Then as prime minister, Paul Martin turned around and solved a big part of the problem with the 10-year Health Accord that boosted health transfers to the provinces by 25% in a single year, 2004. But the fact that this move was never categorized as addressing the fiscal imbalance allowed Harper to campaign on fixing that problem before both the 2004 and 2006 federal elections.
The promised fiscal imbalance fix began with the 2007 budget and was modified in the 2009 budget. As the saying goes, the fix was in. The main features – equal per capita cash allocations for health and social transfers and a cap on equalization – delivered for Alberta and Ontario but have been tough on this region. As detailed in my post of Dec. 24, 2014, major transfers to the provinces have gone up 44.6% per capita under the Harper government, with Alberta’s 126.6% per capita increase leading the way, followed by Ontario at 70.7%. But the increase to Nova Scotia has been just 29.6%. P.E.I. and New Brunswick have fared even worse, with increases of only 22.2% and 21.6% respectively since 2006-7.
The trend of the last 10 years continues in 2015-16. The national per capita increase is 3.5% this year, but Nova Scotia and P.E.I will have to make do with increases of around 1%. New Brunswick will get a 1.4% increase in major transfers, but according to the provincial budget, cuts in other transfers brings about an overall reduction of $15 million in federal funds. Another notable trend is the tendency of Ontario to complain about federal transfers, even though its rate of increase surpasses all but Alberta’s. Despite a rise of 5.6% per capita this year, the Ontario finance minister wanted more, calling for changes in the equalization formula to benefit his province.
But in this part of the world, New Brunswick’s Roger Melanson’s dissent was a cry in the wilderness. He received no help from his neighbours to the southeast. Nova Scotia had telegraphed its acquiescence to the Conservative agenda in the budget delivered earlier in the month, blandly attributing a flat outlook in federal transfers to our declining share of the national population (a 148-year trend!) and lower revenues from the offshore. On P.E.I., the new Premier, Wade MacLauchlan, expressed mild criticism of the impact of per-capita transfers on health funding. But it was the Island’s federal Conservative minister, Gail Shea, capturing the headlines with the good news that federal transfers to the Island were going up by $12 million. It appears that no one had the gumption or the math skills to point out that the increase amounted to all of 1.02% per capita, less than one-third of the national average.