Yesterday I read the piece by Trevor Tombe in the Globe and Mail titled “Why equalization is not unfair to Alberta”. In the article Mr. Tombe goes into detail about the various transfer mechanisms that have been established by the Federal Government, and he knows far more than I would hope to on this particular topic. I will leave the debate regarding the mechanics of the system to people who are more apt and equipped to do so, and to whether the financial structures are fair or not. Below I highlight one part of the article but would encourage you to read the article in its entirety.
There are three major transfer programs: the Canada Health Transfer, the Canada Social Transfer and Equalization. The first two distribute funds to provinces according to their population. Quebec is twice Alberta’s size, so it receives twice the dollars. Today, nearly three in four federal transfer dollars are based on population, making transfers as equally distributed as at any point in Canadian history.
Only the equalization program itself is unequal. But that’s deliberate: Some provinces have an easier time raising revenue than others, so equalization provides additional funds to lower-income provinces to ensure adequate public services can be provided to all Canadians.
What I think Mr. Tombe, and many others, miss in the discussion is the fairness of a system wherein one province can benefit from equalization payments while at the same time being hell bent on stymieing the economy from which it benefited from said payments.
As I mentioned in my previous article, “Is Anybody Listening? I Don’t Want Cake, I Want A Pipeline”, Quebec Premier, François Legault, said last week: “there is no social acceptance for a pipeline that would pass through Quebec territory,” while in the same breath seems perfectly at ease to have multiple oil tankers navigating their way up and down the St. Lawrence every day. Furthermore, he seems to have tacit support from Prime Minister Trudeau when he said on the weekend “there is clarity that under the current approach, there is no support for a pipeline through Quebec.”
Herein lies the source of my frustration and ultimately where my questions surrounding the fairness of the current equalization plan, as it stands, arise from. Last I checked, provinces do not enjoy a veto right when it comes to the building of national infrastructure that aids in the ability of a province to get its wares to market. This is why we have a detailed set of rules and regulations in place, and a national regulator that ensures adequate and appropriate consultation takes place. As a result, an assessment of the merits of such an undertaking takes place, and a ruling is issued regarding the proposal. Based on the comments from Mr. Trudeau, it appears as though he is dismissive of such processes and is willing to ensure the Balkanization of Canada continues unabated.
It is time that equalization payments became tethered to the actions of various provinces. Alberta has done nothing illegal and the tax revenues that are collected at the Federal level and redistributed to the benefit of all come from the development of Alberta’s resources through hard work of people from across this country, under one of the most stringent systems of regulatory and environmental oversight in the world. If Quebec has an issue with the “social acceptance” of the oil that is produced in this province and is working against Alberta in achieving market access, then they should not be privy to the tax revenues that are generated here either. Sticking with my previous cake analogy, you can’t have your cake and eat it too, Monsieur Legault.
William Lacey is the Chief Financial Officer of Steelhead Petroleum