Created nearly 150 years ago, at the beginning of Confederation, the equalization payments were meant to reduce disparities between the provinces.
This is done by the federal government which makes these equalization payments to less wealthy provinces in order to “equalize” their ability to generate revenue and provide services.
Over the past few years, the idea behind this system of “have provinces” helping “have not provinces” has lost it meaning and therefore has to be rethought in the pursuit of fairness.
In 2017 alone, the total amount given in equalization payments will reach $17.88 billion. It will be distributed as follows: Quebec will receive $10.030 billion, Ontario $2.304 billion, Manitoba $1.736 billion, Nova Scotia $1.722 billion, New Brunswick $1.708 billion and Prince-Edward-Island $380 million.
As for the rest of the provinces, which include, namely, British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador, well, they won’t be receiving any transfer payments despite contributing much to the system.
The only word that comes to mind after knowing this, is “unfairness”. How could the province of Québec, which is in the best economic situation of all other provinces, receive more than half of all equalization payments? This could be a very good point to make against separatist parties in La Belle province, but speaking of fairness, it’s the total opposite.
In fact, as of 2016, Quebec has created more than 85 000 full-time jobs, more than all 9 other provinces combined. In addition to that, it has a balanced budget and a record low unemployment rate. The contrast is clear when it compares to western provinces that have gone through a significant economic downturn.
The province of Alberta, for example, is on track to reach a $10.8 billion deficit for the year 2016-2017 and its unemployment rate is at a 22 year high. There’s also the special need to mention the numerous layoffs that took place, resulting in a record surge of employment insurance claims. The number of Albertans receiving Employment Insurance benefits, as of December 2016, is 97 900, the highest number since 1997, including during the 2008 recession.
The West Has a Point
The province of Alberta, for example, is on track to reach a $10.8 billion deficit for the year 2016-2017 and its unemployment rate is at a 22 year high. There’s also the special need to mention the numerous layoffs that took place, resulting in a record surge of employment insurance claims.
The number of Albertans receiving Employment Insurance benefits, as of December 2016, is 97 900, the highest number since 1997, including during the 2008 recession.
This is indeed a sad reality, but the formula used to calculate the equalization payments does not take into account the current economic situation, but rather it uses instead the average revenue per capita in a province and its tax rates, grossly.
Since Quebec is more populated than Alberta and its average GDP per capita is much lower, it gets to receive more transfer payments. This system is considered unfair because, yes it gives money to “poorer” provinces with lower GDP per capita, but it doesn’t take into account the unemployment rate and the economic downturns that can occur in a province, at least as long as its GDP per capita is higher than the others.
Neither the Liberals nor the NDP seems likely to even mention this disparity. As for the Conservatives, the only candidate in their leadership race who has spoken loudly for changes to the current system is Maxime Bernier.
In fact, the Quebec MP raised the possibility of a total freeze of equalization payments, should he become prime minister, until changes are added by a parliamentary committee to the existing formula.
The system should be changed to one that helps the provinces that really need money instead of rewarding those with a growing economy. The topic is up for discussion in 2019 when the Federal government meets with its provincial counterparts to tweak the system.
Lets hope, that regardless of who is in power, that this unfair system will finally be changed at that time.