Just in time for Canada Day, reports that the federal equalization program has been extended for five years cued another episode of equalization bashing by Conservative politicians from the resource rich Prairies. But while the characters were familiar, the plot contained some bizarre new twists.
It was strange how the news came out – a Globe and Mail story revealed that the feds had renewed beyond its March 31, 2019 expiry date the always-controversial program, without significant change. Even odder was the source of the scoop – the federal budget. Despite immediate complaints from usual suspects that the Liberals had covertly rammed through the extension, it turns out it had been hiding in plain sight for months, part of the federal budget introduced in late February.
Admittedly, I missed the equalization five-year renewal when it was proceeding through parliament, but I don’t normally spend time going through the details of federal legislation. Presumably that’s the job of parliamentarians – 338 of them in the House of Commons and another 100 odd in the Senate. Although it takes some searching out, the extension is made clear in both the legislation itself and in the summary explanation to Bill C-74. The clause in the legislation even has a title that should catch the eye of someone concerned about such matters – “Federal-Provincial Fiscal Arrangements Act”. But if anyone saw the clause and raised issues about the renewal, they remained below the radar during the nearly four months that the budget was before parliament – including eight sessions of the standing committee on finance.
Those “fiscal arrangements” through which the feds transfer $75,000,000,000 (more than one-quarter of its total budget) to the provinces and territories passed through unremarked while the opposition hammered away at a dollar figure with seven fewer zeroes – the $7,500 spent on a new swing set at the PM’s summer residence. The swanky swings were considered of such national importance that Conservative leader Andrew Scheer made them the main subject of the final question period before the Commons recessed for the summer. The next day, the headlines about the renewed equalization deal appeared.
Provinces caught unawares?
The apparent inattention to the equalization renewal is especially curious, given the large number of Conservative MPs from Alberta and Saskatchewan where provincial conservatives have long been clamouring about the need to renegotiate equalization to make it fairer for their citizens. Agitation from the west subsided during the Harper years, moving mainly to Ontario. But with the Liberals in power, a combination of slumping oil prices and the dubious claim that equalization-receiving Quebec blocked the Energy East pipeline have led to a new round of attacks and demands for change.
Last year Jason Kenney used the issue to spice up his campaign for leadership of the new Alberta United Conservative Party (UCP). Kenney promised that if he became Premier he would use a provincial referendum as leverage in an effort to convince the federal government to remove non-renewable resource revenues from the formula.
Should either event – a Kenney premiership or a referendum – come to pass, renewal of the program to 2024 takes some of the urgency out of the referendum thing. Not that Kenney was deterred by the deferral. Within hours of the renewal hitting the media, the UPC had an anti-equalization fund-raising pitch going, beginning with the claim that “In the last few days the Trudeau government rammed through a renewal of the unfair equalization scheme.” But if Kenney and his crew were in fact blind-sided by the “ramming through” of equalization renewal it raises questions as to whether any of the 29 Conservative MPs from Alberta came across the relevant budget material, and if so why didn’t they tell their provincial counterparts about an issue that’s so important it’s deemed worthy of a provincial referendum.
Woe to Moe
If the Alberta response seems curious, what to make of the antics next door in Saskatchewan? Scott Moe, successor to the equalization-bashing Brad Wall, came up with a new 50-50 equalization formula he wanted to negotiate with the feds. That was a week ago last Wednesday. Two days later he was hit by the news that there would be no negotiations because the existing formula was in place for another five years.
It’s just as well there are no immediate negotiations, since Moe’s proposal is really not ready for prime time. He would take half of the $19 billion equalization pot and dole it out on a per-capita basis to all provinces. That would punish Quebec, the Maritimes and Moe’s eastern friend and neighbour, Manitoba. Saskatchewan would get about $300 million but the big winner would be Ontario – about $4 billion on top of the $1 billion the province is already collecting. Rare to see a politician from the Prairies championing a scheme that would make Ontario fat cats fatter.
As the guy most obviously left holding the bag containing his half-baked reform proposal, the Saskatchewan Premier was called upon to explain what he knew of federal intentions and when he knew it. Turns out his finance minister received a letter from the federal finance minister in March, saying that the feds would “maintain the main program parameters” with some technical changes. That letter, plus the budget legislation then before parliament, should have been sufficient to alert Moe to the fact that his equalization reform would likely be DOA. And if that didn’t cause the penny to drop, the fact that equalization wasn’t even on the agenda at this week’s finance minister’s meeting should have. But in some political circles, vowing to renegotiate equalization is a political winner, never mind how feckless.
Clearly, the increased focus on equalization in Alberta and Saskatchewan is the result of provincial politics. This factor has combined with some anticipation – at least in the media – that federal-provincial negotiations would take place before the program’s required quinquennial renewal next year. Hence, the prospect of a political showdown, a media staple. In reality, federal-provincial consultations on equalization – let alone actual negotiations – have been the exception.
In 2004 Paul Martin’s Liberal government initiated consultation that produced both the general framework of the current formula and several years of inter-provincial acrimony. Taking note of this, the Harper government – in which Jason Kenney served – dispensed with any form of negotiation. In 2009, out of the blue, the Conservatives whacked equalization receiving provinces with a cap depriving them of more than a billion dollars a year. That was bad news for the less wealthy provinces, but in 2013 the government made amends to some extent. It nipped in the bud a pressure campaign to further reduce the program, led by right wing think tanks like the Atlantic Institute for Market Studies (AIMS), renewing equalization with a few minor changes.
The Trudeau Liberals can be faulted for not doing more to highlight the budget provisions affecting equalization. The legislation, which theoretically could have waited until next year’s budget, wasn’t even mentioned in the budget speech or in any of the reams of hype accompanying it. If the Liberals did not, as Kenney’s UCP would have it, ram through the renewal, they at least can be accused of sneaking it by.
More interesting is the opposition response, especially the Conservatives. It’s seems unthinkable that over a four-month period the Conservatives and their hard-working staffers failed to pick up on a section of the budget bill committing the feds to transferring almost $375 BILLION to the provinces over the next five years. There needs to be another explanation.
Equalization, despite a few flaws, is broadly accepted by Canadians because it works reasonably well to achieve its goals. No national party wants to go into an election year with an equalization platform that will win them a few votes in one part of the country and lose them a lot in another. That’s especially true of the Conservatives. They have most of the seats in Alberta and Saskatchewan so there’s nothing to gain from making a fuss about equalization. But there’s a lot to lose from attacking equalization if they hope to pick up seats in Quebec and Atlantic Canada. So Jason Kenney and Scott Moe are free for now to roam the Prairies, bad-mouthing equalization, but will be expected to clam up once the writ is dropped for the 2019 federal election campaign.