The term “fiscal imbalance’ will invite a giant yawn from many of our readers but there is more to the term than political rhetoric would suggest.

The subject concerns you and me. Premier Lord and Dalton McGinty, Premier of Ontario have drawn a line in the sand between recipient and contributor in the long standing debate over wealth distribution in Canada. They represent opposite poles in the divisions between the rich and the poor, the resource-rich and the non-resource provinces.

A little more than a month ago, the ten premiers met in Montreal to discuss a $2 million report on fiscal imbalance that was prepared for them by a “panel of experts”. The report was designed to pry more money from the federal government and concluded that the feds should put an additional $9.6 billion a year on the table for the provinces.

• $4.9 billion would be for healthcare, post-secondary education and social assistance.
• $4.7 billion would increase equalization payments to the provinces.

The problem is that equalization goes to the seven weakest provinces and is paid for by the wealthiest including: Ontario, Alberta and British Columbia.

McGinty claims there is a $23 billion a year gap between what taxpayers in his province send to Ottawa and what they receive in return. He resents the fact that Ontario is funding lower tax rates in the poorer provinces. He thinks the fiscal imbalance between provinces and the federal government should be settled on a per capita contribution basis rather than on the basis of need.

Poorer provinces like New Brunswick say it’s impossible to provide comparable services at competitive tax levels without equalization because the cost of per capita delivery is much higher in small population provinces.

Ironically, Alberta’s Ralph Klein has no problem increasing equalization payments but he’s opposed to the formula recommended for calculating payments. The report recommends that all provincial revenues be used in calculating equalization. Klein doesn’t want resource revenue included in the calculations. Nova Scotia and Newfoundland agree with Klein because they cut side-deals with the previous government to exempt oil and gas revenues from equalization calculations.

Premier Lord takes the view that New Brunswick is entitled to an increase in equalization and that Canada’s richer provinces should be happy to pay.

The so called fiscal imbalance has been a hobby horse of the Bloc Quebecois for the last few years but the new Conservative Government hijacked the issue in the last election with a promise to resolve it.
The recent federal budget includes a discussion paper on “fiscal balance”, mentions nothing about an “imbalance” and offers no solution for an imbalance.

Clearly Mr. Harper’s election promise of fiscal-fixing ranks well below his infamous five priorities (accountability, lower taxes, gun control, child care subsidies and healthcare waiting times).

The discussion paper sounds more like a re-working of the federal-provincial relationship than an attempt to resolve a fiscal imbalance. It talks about the need to clarify roles and responsibilities between levels of government and requirements for local autonomy. It uses the proposed daycare subsidy of $100 a month to illustrate the Government’s interpretation of local and individual autonomy.

It talks about the need to “limit the use of federal spending power in areas of provincial responsibility”. When discussing federal transfers, it uses terms like “formula” and “principle-based equalization”. It sounds like a one size fits all approach to me, one that moves closer to Dalton McGinty’s view of equalization than Premier Lord’s.

The paper floats the idea of giving provinces more access to particular tax fields. It ignores the fact that each province has a finite tax base tied to the size of its population, the size of its industrial/manufacturing base and the extent of its natural resources.

A province like New Brunswick with a small population, a tiny industrial base and limited natural resources has no chance in today’s world without help from either the Canadian family or windfall profits from a major resource find. The only alternative would be an industrial renaissance. Tax points are only helpful when you have something to tax.

The fiscal balance paper is not close to a fix nor does it offer direction in terms of a fix. It does suggest the Government wants to revisit the terms of Confederation in the Constitution Act of 1867 and by implication reduce the federal government’s modern day role in the affairs of Canada.

In that context, one could envision the economic union of our own Maritime Provinces. It would make sense in a world driven by productivity, innovation, competitiveness and border security. A one time “equalization transfer” to the region that would be contingent on economic union and a development plan for the future could bear fruit far heavier than Premier Lord’s demand for increased equalization funds.

At the end of the day, Stephen Harper’s craving for majority government will drive him to resolve the fiscal imbalance issue in favour of Quebec and Alberta (not Atlantic Canada) because Quebec and Alberta are where he will find a majority, if it is to be had. His notion of a smaller, de-centralized federal government has particular appeal in those provinces.

We already have an indication of his appeasement strategy in his cozy-up with Jean Charest and the UNESCO Agreement (an agency of the United Nations that promotes education, communication and the arts) that gives Quebec more presence on the international stage. Premier Lord should be careful when he hitches his wagon to Mr. Harper. He might get blown away by the dust from Quebec.

Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at heronplace1@rogers.com