It has become a fixture on the Canadian political calendar. Each year in mid-December Canada’s finance ministers meet behind closed doors to discuss public business and find out the details of federal transfer payments for the year ahead. Those transfer payments are a pretty big deal. This year, Ottawa is transferring over $65 billion to provincial governments for health, social programs and equalization. That’s a significant chunk (about 30%) of the federal government’s total spending. For some provinces, the transfers represent about the same percentage of their total revenues.
The Harper government prides itself on steadily increasing transfers. In contrast to the Liberals, who severely reduced transfers in the mid-1990s, the Conservatives have increased major transfers by some 60% since 2006. However, for provinces like Nova Scotia, the devil is in the details of how the increased cash has been distributed. More often than not over the past nine years, finance ministers from the poorer provinces have gotten quietly Scrooged at the pre-Christmas gathering.
- In 2008, right after the federal election, the Conservatives used the meeting to announce a cap on a recently-enriched equalization program that was supposed to compensate the less wealthy for the removal of an equalization component in social transfers.
- In 2011, again following a federal election, the Conservative grinches announced that the 6% a year increases in health transfers would end in 2017, to be replaced by increases tied to the rise in the GDP.
- In 2013, the Conservatives confirmed that the extra $800 million in health cash to Alberta would come from the overall health transfer allotment, thereby reducing increases to the other nine provinces from the usual 6% range to anywhere from 0% (Newfoundland) to 4.3% (Saskatchewan). Nova Scotia’s increase in 2014-15 was 2.1%, while PEI and New Brunswick received increases of 2.3%. Thanks to the extra cash, Alberta’s health transfer was up 37.8%.
Making matters worse for the Maritimes was the dropping of the second shoe – termination of the equalization component in health transfers, reportedly worth over $350 million to the three provinces in 2013-14. Despite this, the only complaints to hit the media out of the 2013 meeting came from Ontario which had become an equalization receiving province in 2008. Ontario’s equalization dropped in 2013-14, partly because of the impact on the equalization formula of a decision by Hydro Quebec to shut down a power plant.
The feds opted not to extend a temporary program – known as Total Transfer Protection – designed to shelter provinces against any loss of transfers. As a result, Ontario was out $640 million. To put matters in perspective, by qualifying for equalization and benefitting from the adoption of equal per capita funding for health and social programs, Ontario saw its transfers from the federal government nearly double between 2006 and 2013. However, the drop in 2013 set the stage for a year a bellyaching by the Ontario Liberal government. That was in contrast to governments in the Maritimes, who took the lumps handed out in 2013 with nary a complaint.
It would be in the spirit of Christmas to report that this nice, stoic behaviour by Maritime leaders, in such marked contrast to Ontario’s naughtiness, would be rewarded in 2014. Not so. When the ministers of finance met in Ottawa on Dec. 14-15, it was Ontario coming away with the nicest gift — an increase in total transfers of 6.5% next year. With the exception of have-not Manitoba, all provinces west of Ontario fared not too badly – Alberta’s transfers were up 5.8%, Saskatchewan’s 5.6% and British Columbia’s 5.2%. Manitoba’s increase was only 2.2%, putting it behind Newfoundland at 2.4% and Quebec, at 3.8%. The Maritimes brought up the rear with increases of 1.8% for PEI, 1.7% for New Brunswick and 1.4% for Nova Scotia.
Once again, our leaders appeared to be content with their lumps of coal. If there was any complaining, it escaped my radar. Perhaps that is because of a consensus that since transfers are based on complex formulae, it is hard to mount a political attack, even when those formulae seem to be operating like a reverse Robin Hood. The record over the life of the Harper government suggests that it is past time for such a political challenge. Since 2006-07, federal transfers have increased by 44.6% per capita. Only Quebec at 47.1%, Ontario at 70.7% and Alberta, an astonishing 126.6%, have received more than the national average per capita increase. Because of its new-found (and precarious) oil revenues, Newfoundland and Labrador has seen a significant reduction in transfers and no longer receives equalization. The same goes for Saskatchewan. As for the Maritimes and Manitoba – relatively resource poor and long-term recipients of equalization – their increases over the nine years of Conservative government in Ottawa have been: 29.6% for Nova Scotia (beneficiary of a special deal on offshore natural gas revenues); 22.7% for PEI; 21.6% for New Brunswick, and 10.8% for Manitoba.