Ontario could become have-not province

[ganjavih]

Chamber of Commerce report says Ontario could become have-not province

Canadian Press

August 24, 2005

TORONTO (CP) - A new report warns that Ontario, long considered one of the wealthiest areas in the country, is in jeopardy of becoming a have-not province within five years.

The report for the Ontario Chamber of Commerce blames a funding shortfall from the federal government, a favourite topic of Premier Dalton McGuinty.

McGuinty has long complained about what he calls the "fiscal gap" between what Ontarians pay in taxes to the federal government and what it gets back in programs and services.

He says the gap has reached $23 billion.

The report backs up McGuinty's complaints.

It concludes the principle of fairness has been taken out of Confederation, and the cost is becoming increasingly apparent in Ontario, and will ultimately hurt Canada.

"Ontario has never shirked its responsibilities to the federation - neither has it questioned the principles behind equalization programs," said Len Crispino, president of the chamber.

"However, the current formula doesn't work for Ontario - and it doesn't work for Canada."

Also troubling is the inability of governments to measure the results of the federal transfer system, the report concludes.

Release of the report - Fairness in Confederation Fiscal Imbalance: Driving Ontario to "Have Not" Status - comes as there is growing unease in Ontario over the money Alberta is receiving from soaring gas prices.

While the increase in energy prices has helped Alberta it has been hurting the economy in Ontario.

© The Canadian Press 2005

 

[afransen TO]

I'd like to see this report but it appears not to be on the web.

 

[Canuck 36]

So what, would Alberta be paying the transfer payments for the whole country?

Ya, that will help Western alienation.

 

[spmarshall]

And Saskatchewan of all provinces has technically become a "have" province, and BC is creeping back up to "have" status.

So Alberta, plus a few bucks from BC and SK, propping up the rest of the country? That would be an interesting twist.

 

[Fighting Madd]

I think Dalton had better keep his mouth shut, otherwise we won't have a moral foot to stand on when we need transfer payments from the new haves out west.

 

[bizorky]

^how so?

 

[Fighting Madd]

Well, if the threads title "Ontario could become have-not province" comes to pass, then we'll need help from the other provinces we have supported for so long. Now is not the time to be complaining.

 

[billy corgan19982]

Yeah because bitching and complaining hasn’t worked for Atlantic Canada and Quebec.

 

[rbtaylor]

It is virtually impossible for Ontario to become a have-not province.

The last time we came close enough to get transfer payments the feds changed the rules. It's far cheaper for the feds to change laws country wide for imports/exports or other items to bring Ontario back up again than to invest dollars directly.

 

[afransen TO]

I agree. Ontario is the only whipping boy in this federation. Alberta tolerates it, but barely.

Equalisation is one of the sacred cows that needs to be re-evaluated. If the transfers aren't yielding quantifiable results, the program should be discontinued.

 

[mpolo2]

For what it is worth, here is a topic paper on the discussion of Ontario's net contribution to confederation by TD (www.td.com/economics go to topic papers, by the way there is lots of interesting stuff in here).

Topic Paper
HOW MUCH DOES ONTARIO CONTRIBUTE TO FEDERAL COFFERS?

March 3, 2005

Since the federal budget was brought down last week, a debate has emerged regarding Ontario’s net contribution to federal revenues. Notably, the Ontario government has argued that $23 billion more flows into federal coffers each year than is spent in the province. And, while recognizing the importance of Canada’s largest jurisdiction as a key national economic driver, Canada’s Finance Minister Ralph Goodale has responded that the province may be overstating its net contribution by failing to take into account all federal spending in the province. This brief topic paper is aimed at setting the record straight so that a well-informed debate can take place.

What is the measure?

The most credible measure of federal revenues and spending by province is found in Statistic Canada’s Provincial Economic Accounts (PEA). In particular, table 7 of the PEA compiles the total federal take and the offsetting federal outlays in each respective province and territory, although the lags in data collection mean that figures are only currently available to 2002. Note that these statistics are indeed all encompassing. Revenues build in all direct taxes from persons and business enterprises, indirect taxes, contributions to social insurance plans and investment income. At the same time, federal expenditures are made up of net expenditure on goods and services, interest on public debt (divvied up on a per-capita basis), as well as transfers to persons, businesses, provincial and local government.

What does the measure say about Ontario’s net contribution to the federal take?

The PEA numbers show that the federal government withdrew $21.2 billion from the province of Ontario in 2002, as it raised $81.2 billion in revenues and spent $59.9 billion. As the chart shows, Ontario’s net contribution has grown steadily since 1993, when the province briefly fell into a net deficit position (i.e., it received more in federal spending than it contributed to federal revenues) following the end of the early 1990s recession. Note that the $21.2-billion tally is slightly smaller than the $23-billion estimate of the Ontario government. This difference appears to be due to the fact that Ontario has attempted to project the figure for 2003, since the actual results won’t be released until the spring.

What do this measure say about other provinces?

The accompanying chart shows that apart from Ontario, only Alberta (+$7.8 billion) and British Columbia (+$1.6 billion) were net contributors to the federal government in 2002. In dollar terms, Nova Scotia, Quebec, Manitoba and Newfoundland & Labrador recorded the largest federal fiscal deficits. On a per-capita basis, the picture changes immensely. Alberta (+ $2,500) leaps over Ontario (+ $1,700) as the largest net per-person contributor to federal revenues. On the flip side, the residents of the territories were the largest winners, followed by the provinces of the Atlantic region.

 

[cassiusa]

I'd like to see this report but it appears not to be on the web.

I believe this is the report it's referring to.