My recent post on the controversial history surrounding the regional impacts of federal government taxing and spending promised to address claims by the National Post that the Trudeau Liberals are courting votes in Atlantic Canada with “Cadillac handouts.”
The accusation stemmed from a single piece of data – that in 2019 federal spending in Atlantic Canada exceeded revenue collected by the equivalent of $6,400 per capita. The simple answer to whether that factoid proves the Liberals are spending big in this region to shore up electoral support is “no.” In fact, the dataset from which the 64-hundred-dollar exposé was derived – Statistics Canada’s Revenue, expenditure and budgetary balance – shows that all provinces experienced significantly increased federal spending from 2015 to 2019. And newsflash to the National Post – the four western provinces each enjoyed bigger percentage increases than the Atlantic region.
In 2019 federal per-capita spending in the four Atlantic Provinces was $14,519, up 17.4 per cent from 2015. As the table shows, British Columbia and the Prairie Provinces all had larger percentage increases while Quebec and Ontario had slightly smaller increases.
Table 1: Per-capita federal expenditure by region and province 2015 and 2019
|Saskatchewan||$ 7,740||$ 9,818||26.9%|
|Alberta||$ 6,020||$ 7,195||19.5%|
|British Columbia||$ 6,506||$ 7,761||19.3%|
|Ontario||$ 7,360||$ 8,494||15.4%|
|Quebec||$ 7,864||$ 9,052||15.1%|
Source: CANSIM 36-10-0450-01 and my calculation
The amount of the increase varies among provinces in the Atlantic region, ranging from an increase of 26.6 percent in Newfoundland and Labrador to a low of 13.8 percent for Nova Scotia. In addition, it should be noted that the expenditure numbers for Quebec are understated because of an abatement through which the province receives extra tax points in lieu of cash for certain transfers.
Anyone delving into the StatsCan data would find that most of the money Ottawa spends falls into three main categories. About 23 percent is spent on goods and services, including National Defence. About one-third of everything the feds spend is in the form of transfers to households – including pensions and employment insurance. A bit less goes out as transfers to provincial, local and aboriginal governments, mainly to the provinces.
As discussed here and here major transfers to provincial governments in the Maritimes and Newfoundland took a beating during the Harper years while the better off provinces, particularly Alberta, enjoyed larger increases. That was because the equalization-receiving provinces endured a cap on that program while Alberta, Ontario and British Columbia benefitted from changes to the formula for health and social transfers. That history provides justification for the federal Liberals making recompense to the Atlantic region, but aside from some much-needed help for Newfoundland, it has not happened.
Pandemic changes everything?
Much of the foregoing discussion – and the zombie-inspired ruckus discussed in Part One – may be rendered moot by the economic effects of the COVID-19 pandemic. The latest accounts for 2020, when they come out in the fall, will tell quite a different story.
As University of Calgary economist Trevor Tombe predicted nearly a year ago in a commentary for CBC, all of the money that the federal government is spending on pandemic economic relief programs means that for the first time ever all provinces – including Alberta – will have negative fiscal balances. He forecast that because of increased federal spending in the province, Alberta will go from a positive balance of $4,000 per person in 2019 to a negative of $5,000 per person in 2020, not far off the famous $6,400 that turns Atlantic Canadians into moochers.
The Atlantic Provinces will also see increased negative balances, but indications are the increases will be significantly less than provinces like Alberta and Ontario whose economies have been hit much harder, making them more reliant on federal help. For example, transfers to firms in Atlantic Canada under the Canada Emergency Wage Subsidy (CEWS) amounted to about $3 billion according to latest published numbers, compared with $28 billion to Ontario firms, $15 billion to Quebec companies and close to $11 billion to Alberta employers.
The $3 billion to the Maritimes and Newfoundland works to about $128 million/100,000 population, just over half the rate for Alberta and around 30 per cent less than Ontario and Quebec.
Table 2: Wage subsidies ($m/100,000 pop.)
The differing economic impact of the pandemic is also reflected in applicants for the emergency relief benefit (CERB). As of last October, applicants in Atlantic Canada totaled 22,089/100,000 population, compared with 24,231 in Alberta, 23,879 in Ontario and 23,643 in Quebec. But the difference in employment impact is even more even more marked when it comes to Employment Insurance recipients.
According to the most recent data from StatsCanada there was a 70 percent increase in regular EI recipients in the Atlantic Provinces from February 2020 to February 2021. By contrast, the increase nationally was more than 240 percent. In February 2020, 21.3 percent of all EI recipients in the country lived in Atlantic Canada. In February 2021 that was down to 10.6 per cent. The 161,810 Atlantic Canadians receiving EI in February was ten per cent below Alberta’s 178,840 recipients and 67 percent less than the 270,180 in Toronto.
And then there is the much-heralded but as yet largely undocumented pandemic-related in-migration from Central and Western Canada. It is driving up housing prices, and may also be changing the composition of the workforce. StatsCanada’s latest monthly survey of employment by industry (Table 14-10-0201-01) shows employment growth of about three percent from February 2020 to February 2021 in the higher paying – and higher tax-paying – professional, scientific and technical services industries.
All of the above adds up to relatively lower federal spending and higher taxation revenue from Atlantic Canada in 2020. The pandemic is changing the country’s economic balance and at least for now the taxing and spending pattern. If the zombies come back any time soon they may be shambling about in a different fiscal landscape.