According to the Toronto Star, Ontario Premier Doug Ford is considering an early election call because he’s worried that a federal government led by Pierre Poilievre would damage his party’s re-election chances. The Star’s Robert Benzie reported last week that Ford is afraid if the Conservatives take power in Ottawa before Ontario’s scheduled 2026 vote, Poilievre’s “fix the budget” promise will mean cuts to, among other things, federal transfer payments to the provinces. As a Ford staffer explained an early election would “get us in front of a tough budget from Pierre that could hurt the Conservative brand.”

If the Premier of Ontario is uneasy about the negative impact of a Poilievre government on federal transfers, politicians down this way should be terrified. The federal deficits that Poilievre regularly rails against are in some measure the result of growth in federal transfers, which provide more than 30 percent of the revenues of the Maritime provinces and Manitoba. Ontario gets only 16 percent of its revenues from Ottawa but the Ford government is also worried that a Poilievre in power wouldn’t  continue Trudeau’s generous subsidies to the province’s electric vehicle makers. 

The amount of federal transfers is something to fret about, and so is the method of distribution. In recent years transfer policies have been generally kinder to the less wealthy provinces, the opposite of what occurred between 2006 and 2015 under the Conservative government in which Poilievre occupied the right flank. If you are counting, it’s another example of how, the Conservative refrain to the contrary, things have not become worse, at least in this part of the country.

Stephen Harper’s administration disproportionately increased transfer payments to Alberta, Ontario and Quebec. At the same time, political calculation and the quirks of the transfer system left Newfoundland and Labrador, Saskatchewan and Manitoba with lower payments per capita in 2015 than they were getting in 2006. For their part,  the Maritimes had to make do with average annual increases in the two-to-three percent range.

Although Alberta and Quebec have continued to do well under the Liberals, the Trudeau government has at least ensured that no province is getting less in transfers than they were in 2015.  Two of the three Maritime provinces – Prince Edward Island and New Brunswick – have seen increases in transfers that exceed the national average increase.

Looking at numbers

Federal transfers to the provinces can be grouped in three categories.  First, there are Health and Social Transfers which are paid on an equal per-capita basis to all provinces. Then there is equalization which goes to provinces with below average fiscal capacity. Those unconditional transfers make up what the feds call the Major Transfers. Thirdly, there are a number of smaller transfers. Some have strings attached, for things like infrastructure, child care and targeted health initiatives. Others are in response to emergencies like floods, fires, crop failures and fiascos like Muskrat Falls. 

Overall the Trudeau government’s transfers have been more generous than those of the previous Conservative regime. It should be noted that Major Transfers, as reported annually by Finance Canada, actually increased at a slightly slower rate per capita under Trudeau. There are two reasons for that – the population has increased more quickly under the Liberals and Trudeau allowed the health transfer cuts mandated by Harper to come into effect in 2017. 

However, when other transfers are added, total transfers under the Liberals went up an average of almost 4.6 percent a year between 2015 and 2022, versus less than 4.0 percent under the Conservatives – and this is without accounting for increased health spending resulting from the new health deal reached in February 2023.

Comparing records

The website Finances of the Nation presents data on aggregate federal transfers dating back to the 1860s, based on the work of the University of Calgary’s Trevor Tombe. From that storehouse of data it is easy enough to calculate changes in transfer payments overall and by province, and compare the Trudeau government’s record with that of its predecessor.

Change in Per-capita aggregate transfers by province 2006-2022 $$

20062015 Avg. Annual Change 2006-152022Avg. Annual Change 2015-22Increase  2006-22
All Province average$1,492$2,0283.99%$2,6774.57%79.4%
Prince Edward I.$3,561$4,5313.02%$6,3745.81%79.0%
New Brunswick$3,230$3,9092.33%$5,3045.23%64.2%
Nova Scotia$2,969$3,7152.79%$4,8014.17%61.7%
British Columbia$1,343$1,4901.22%$2,1606.42%60.8%

Source: Finances of the Nation, my calculations

As the table shows, Alberta and Quebec, two provinces that complain the most about federal intrusion in their affairs, had the highest percentage increase in transfers from Ottawa between 2006 and 2022. They are followed by Ontario which remained in the top three despite recording among the lowest annual average increase, 3.10 percent, between 2015 and 2022. 

The pattern  that resulted in those three provinces receiving the largest increase in federal transfers was established during the Harper years and involved a number of different factors. Chief among them: 

  • There was a change in the way the equalization formula dealt with real estate values, pushing British Columbia out of equalization and increasing Quebec’s entitlement;
  • Resource revenue growth from potash and fossil fuels meant that Saskatchewan and Newfoundland and Labrador no longer qualified for equalization, severely reducing their overall transfers;
  • Resource revenue growth in other provinces briefly qualified resource-poor Ontario for equalization;
  • Adoption of per-capita transfers for health and education increased transfers to Alberta and Ontario at the expense of  the Maritimes and other equalization-receiving provinces.    

The result of the Harper government’s changes can be seen in the middle column of the table. Alberta, Quebec and Ontario enjoyed increase in transfers averaging around six percent. The Maritimes and British Columbia were limited to increases averaging between one and three percent per year. Three provinces had their transfer payments reduced under the government Poilievre was part of. 

Liberal record

Under the Liberals, every province saw an average increase of  at least 2.5 percent between 2015 and 2022. The western provinces, where the Liberal brand is poison, have seen the biggest jump in federal transfers, with annual average increases in the six-to-seven percent range in all four provinces. Both Quebec and Ontario have seen a slower rate of growth in payments under the Liberals than they enjoyed in the 2006-15 period. 

The Maritime provinces have seen average annual increases ranging from 5.81 percent for P.E.I. to 4.17 percent for Nova Scotia. As was the case during the Harper years Newfoundland and Labrador brings up the rear with modest increases under the Liberals, following cuts between 2006 and 2015. That leaves the province with transfers in 2022 a mere 1.7 percent higher than they were in 2006. Not surprising, the Liberal government of Newfoundland and Labrador announced recently it is suing the federal government, claiming that the formula it uses for equalization payments violates the Canadian constitution – perhaps  a topic for another day. 

COVID factor

Much of the increase in transfers under the Trudeau government occurred after 2019, a response to the COVID-19 pandemic. Poilievre and his Conservatives want us to believe that the budget problems they promise to fix are the result of overly-generous pandemic response programs like the emergency relief benefit (CERB) and the wage subsidy (CEWS), but that’s only part of the story. 

The feds also significantly increased transfers to the provinces, not only to deal with COVID but also to address long-standing deficiencies such as child care and mental health exposed by the pandemic. Nova Scotia, for example, saw its total federal transfers increase by almost $1 billion, from $3.97 to $4.95 billion between 2019 and 2022. The windfall of federal dollars helped Nova Scotia and most other provinces weather the pandemic in good fiscal shape – six provinces actually reported operating surpluses in 2022-3. 

The wage subsidy and the emergency benefits are long gone but much of the increase in transfers to the provinces that began with the pandemic are on-going. Doug Ford’s brains trust has apparently figured out that “fixing the budget” would involve cutting those transfers, hurting Ontarians and Ford’s chances of being re-elected in 2026. Other premiers should take note, especially those in provinces such as the Maritimes that are much more reliant than Ontario on federal transfers. 

The partisan political calculus at play in Ontario does not apply in New Brunswick, where a provincial election is scheduled for this October (and Premier Higgs seems to relish the prospect of running as a Poilievre surrogate). It’s also unlikely the PC government of PEI would get away with going to the polls in advance of the scheduled 2027 election to avoid any possible Poilievre effect. It’s a different story in Nova Scotia, where provincial and federal elections could take place next year within a few months of one another.  

But cynical Ford-like considerations aside, it is incumbent on provincial PC premiers, especially those like Tim Houston, who emphasize the progressive part of the brand, to address the potential impact on their citizens of a right-wing, austerity-inclined federal government. Federal transfers are at risk, as is another Poilievre target, public sector employment, a topic to be addressed in an upcoming post.