Equalization – A simple idea made complicated by politics

Damage to Conservatives from controversy likely to postpone election indefinitely.

OTTAWA, June 14, 2007 — The politics of equalization are in the news. Nova Scotia Conservative MP Bill Casey has been ejected from his caucus, Prime Minister Harper is taunting critics to sue him, and Saskatchewan Premier Lorne Calvert is threatening to take him up on it. Harper Index offers a nine-point backgrounder on a simple idea made complicated by politics and spin.

1. Equalization has been around for years and it is a good idea. It is meant to ensure that people in poorer provinces have access to roughly the same level of services (health, etc) as people in richer provinces.

2. This goal is accomplished by the federal government redistributing money (ie grants) from richer provinces (always Alberta, usually BC and Ontario) to poorer ones (always Atlantic Canada and Quebec, and sometimes Saskatchewan and Manitoba).

3. Provinces richly supplied with "non-renewable resources" (gas and oil) have been arguing that their revenues from those non-renewables should not be put into the formula when equalization is being calculated. For one thing, all of them, except Alberta, have been poor provinces and are just now getting on track. Secondly, those poorer provinces argue that if you build non-renewable resource revenues into the equalization base, that such a policy will discriminate against them when the resource is used up. Although it would seem possible to merely change the way the formula is calculated at that time, their current argument at least enables these large rural and northern provinces to build a nest egg.

4. Paul Martin signed an Atlantic Accord on equalization and he also did a one-of-a-kind deal with Newfoundland premier Danny Williams during the 2004 election campaign after Williams attacked him and started flying federal flags at half-mast etc.

5. Not to be outdone, Stephen Harper promised in two campaigns that he would stand by these enriched accords. But when he brought down the budget earlier this year, he changed the equalization deal available to the provinces.

6. The result, however, is that the receiving provinces won't do as well as they would have prior to the budget. Saskatchewan, in particular, takes a hit, somewhere in the neighbourhood of $800 million. And a study released today concludes the provinces each stand to lose $1.4 billion under the revised formula by 2020.

7. For these reasons, you have: Bill Casey voting against his own party's budget; Danny Williams telling Newfoundland MPs to vote against the budget and Newfoundlanders to vote against the Conservatives federally; Lorne Calvert telling Saskatchewan's 12 Conservative (out of 14) MPs to vote against the budget; Harper losing his cool and kicking Casey out of the caucus and cutting him off from his casework files; Harper telling the premiers, "I'll see you in court."; and, Calvert taking him up on it.

8. Equalization is founded on the uniquely Canadian principle of better off Canadians helping other Canadians gain access to comparable health care, post secondary education and other sorts of social services that have helped define Canada as a nation. Inevitably, there will be political debate as poorer provinces vie to get the best possible deal, while others from the 'have' provinces, such as Ontario's Dalton McGuinty, argue they shouldn't have to pay so much, especially when other provinces have non-renewables (oil and gas). These debates have gone on for a long time.

   What's new here is that Prime Minister Stephen Harper appears to be walking away from actual election promises (see point 5 above). He is being publicly dismissive towards adversaries in the debate while quietly attempting to make deals. (Harper's people were prepared to negotiate with Casey right up until the moment he walked in for the Budget vote.) Harper is being petulant and cruel, for instance, toward the well-liked Casey. And he is using unprecedented bully tactics in taunting the provinces to sue him. These are unique things for a prime minister to do.

9. The politics of this make it unlikely the Conservatives will force an election before the fixed election date set for 2009 because core support in Saskatchewan and the Atlantic provinces has been ruptured. In Saskatchewan, Lorne Calvert will drive the issue because an election is coming up this fall and his provincial Saskatchewan Party rivals are so closely tied to the Conservatives. Calvert now has a stick to beat Ottawa with, which always helps in a provincial election. It will probably hurt federal Conservative candidates whenever an election is held. Last summer, Saskatchewan Conservative caucus chair Brian Fitzpatrick wrote to the PM warning that this could hurt them. In Nova Scotia and Newfoundland, the issue will also hurt Conservatives.

   Newfoundland's Danny Williams is simply telling Newfoundlanders not to trust Harper and to vote against him in the next election. Nova Scotia's Premier Rodney MacDonald is also angry, though still negotiating.

As a result, the Harper Conservatives may have damaged their brand in all three of these provinces. In the end, a face-saving deal may develop. Rebranding himself as a bully and promise-breaker will take a long time to overcome, making more remote the prospect of a federal election anytime soon.

Harper Conservative vs. Public Values Frame
  Sue me / Bullying
  Whining / Fairness

Links and sources
  Ottawa breaking letter and spirit of offshore deals with NS and NL: study, James Keller, Canadian Press, June 13, 2007
  Rift widens between Harper, Williams, CBC News, October 16, 2006

Posted: June 14, 2007

Harper Index (HarperIndex.ca) is a project of the Golden Lake Institute and the online publication StraightGoods.ca