Yogi
08-24-2005, 09:37 PM
TORONTO (CP) - Ontario is five years away from becoming a so-called "have-not" province and dragging down the Canadian economy if Ottawa doesn't change the formula for how wealthier provinces help out less affluent neighbours, a new report warns.
The Ontario Chamber of Commerce report concludes the province, long considered the country's principal breadwinner since Confederation, is paying too much to Ottawa in transfer and equalization payments compared with what it gets back.
As a result, the report warns that on a per-capita basis, Ontario will fall further behind other provinces in terms of funding for hospitals, nurses, college grants, university professors and other public services.
And the economic cost to Ontario, the country's manufacturing heartland, could in turn have a disastrous economic impact on Canada as a whole, chamber president Len Crispino argued Wednesday.
"Equalization, transfer payments and federal government habits are damaging Ontario and risking the very foundations of Canada's economic strength," Crispino said as he released details of the study at the Ontario legislature.
"This is not just an Ontario problem. It is a national problem that every Canadian should be concerned about."
In Regina attending a federal Liberal caucus meeting, Prime Minister Paul Martin denied Ontario is being treated unfairly.
"Ontario is a very strong province and will continue to be that way and our transfers to Ontario are at an all-time high," Martin said. "We continue to treat every province fairly and according to their needs."
A second report from the chamber making recommendations on how to fix the equalization system will be released in October. Ottawa plans to have new payment allocations in place by next April.
The gap between what Ontario pays to Ottawa and what it gets back to fund social programs has in recent months been a favourite topic of Premier Dalton McGuinty, who claims the gap has reached a whopping $23 billion.
Crispino thinks that's too low.
"If anything, he has underestimated the problem," he said.
Finance Minister Ralph Goodale said it would be counterproductive to enter into any Alberta-versus-Ontario debate.
"There are periods of time when the economies of various parts of the countries are moving at different paces or different rates compared to others," Goodale said.
"I think it is important to avoid this kind of beggar-your-neighbour approach, which can only serve to create greater divisions than might otherwise be the case."
Currently, Ontario and Alberta are Canada's only "have" provinces, meaning they don't collect equalization payments. The rest collect the payments on an unconditional basis and use them at their own discretion to offset public service costs.
However, Alberta is now swimming in revenues from sky-high oil prices, while Ontario is suffering from soaring energy and gas costs.
The chamber said Ontario isn't necessarily looking for Alberta to spread its recent cash windfall.
That wouldn't play well in the oil-rich province, which was forced to hand over resource cash in the 1970s under the controversial National Energy Program that stirred western alienation.
Revenue Minister John McCallum acknowledged Ontario's inability to keep pace with Alberta's booming economy is "well-founded."
However, "the idea that Ontario is heading for have-not status is something I find hard to believe," said the Toronto MP and former Royal Bank chief economist.
The author of the chamber's report, David MacKinnon, said without changes to the equalization payment formula, Ontario would likely have to raise taxes to cover public service costs - an unpalatable option among voters and one that would impair the province's tax competitiveness.
Equalization is one of four federal programs that transfers money to provinces and territories. Two pay for health and social services - the Canada Health Transfer and the Canada Social Transfer - while another is geared specifically for the territories.
http://cnews.canoe.ca/CNEWS/Canada/2005/08/24/1186319-cp.html
The Ontario Chamber of Commerce report concludes the province, long considered the country's principal breadwinner since Confederation, is paying too much to Ottawa in transfer and equalization payments compared with what it gets back.
As a result, the report warns that on a per-capita basis, Ontario will fall further behind other provinces in terms of funding for hospitals, nurses, college grants, university professors and other public services.
And the economic cost to Ontario, the country's manufacturing heartland, could in turn have a disastrous economic impact on Canada as a whole, chamber president Len Crispino argued Wednesday.
"Equalization, transfer payments and federal government habits are damaging Ontario and risking the very foundations of Canada's economic strength," Crispino said as he released details of the study at the Ontario legislature.
"This is not just an Ontario problem. It is a national problem that every Canadian should be concerned about."
In Regina attending a federal Liberal caucus meeting, Prime Minister Paul Martin denied Ontario is being treated unfairly.
"Ontario is a very strong province and will continue to be that way and our transfers to Ontario are at an all-time high," Martin said. "We continue to treat every province fairly and according to their needs."
A second report from the chamber making recommendations on how to fix the equalization system will be released in October. Ottawa plans to have new payment allocations in place by next April.
The gap between what Ontario pays to Ottawa and what it gets back to fund social programs has in recent months been a favourite topic of Premier Dalton McGuinty, who claims the gap has reached a whopping $23 billion.
Crispino thinks that's too low.
"If anything, he has underestimated the problem," he said.
Finance Minister Ralph Goodale said it would be counterproductive to enter into any Alberta-versus-Ontario debate.
"There are periods of time when the economies of various parts of the countries are moving at different paces or different rates compared to others," Goodale said.
"I think it is important to avoid this kind of beggar-your-neighbour approach, which can only serve to create greater divisions than might otherwise be the case."
Currently, Ontario and Alberta are Canada's only "have" provinces, meaning they don't collect equalization payments. The rest collect the payments on an unconditional basis and use them at their own discretion to offset public service costs.
However, Alberta is now swimming in revenues from sky-high oil prices, while Ontario is suffering from soaring energy and gas costs.
The chamber said Ontario isn't necessarily looking for Alberta to spread its recent cash windfall.
That wouldn't play well in the oil-rich province, which was forced to hand over resource cash in the 1970s under the controversial National Energy Program that stirred western alienation.
Revenue Minister John McCallum acknowledged Ontario's inability to keep pace with Alberta's booming economy is "well-founded."
However, "the idea that Ontario is heading for have-not status is something I find hard to believe," said the Toronto MP and former Royal Bank chief economist.
The author of the chamber's report, David MacKinnon, said without changes to the equalization payment formula, Ontario would likely have to raise taxes to cover public service costs - an unpalatable option among voters and one that would impair the province's tax competitiveness.
Equalization is one of four federal programs that transfers money to provinces and territories. Two pay for health and social services - the Canada Health Transfer and the Canada Social Transfer - while another is geared specifically for the territories.
http://cnews.canoe.ca/CNEWS/Canada/2005/08/24/1186319-cp.html