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Jay Currie

One Damn Thing After Another

7/10/2004

More Transfer Payments

Yes, I know Canadian political accounting is just slightly duller than watching lichen grow; but it helps to explain the nature of the weird Canadian political system.

Here is a list of provinces and territories. Beside each is the total amount of their provincial fiscal 2003 budgets came from their own sources. (The figure for Quebec is artificially high because Quebec has negotiated tax abatement programs with the feds which make it appear to be raising more money than it actually does.)

Nanavut 8.5%
Yukon 30.5%
NWT 48.4%

Nfld. 57.4%
NB 61.1%
PEI 62.1%
NS 63.9%

Man 66.0%
Sask 78.6%

Que. 82.2% (notional)
BC 87.8%

Ont. 87.7%
Alta. 92.9%

(source:finances of the nation 2002, pdf)
Since these numbers were compiled British Columbia has slipped into receipient status.

The point the numbers make is that for much of the country transfer payments have become a way of life. However, what that way of life implies has not really been appreciated by any of the political parties.

Each level of government has only one source of revenue - the taxpayer (and yes I realize that it is possible to make money from Crown Corporations but it doesn't happen often) in all of his many guises. Which effectively means that the taxpayers of Ontario and Alberta are handing money to the taxpayers of the rest of the country.

This would not be a problem if a) there was a trend towards transfering less money each fiscal year and b) if there was an end in sight.

At the moment the Conservative Party of Canada has no coherent economic policy other than a program of tax cuts for individuals supposedly offset by reductions in "corporate welfare". For a number of reasons it has been difficult for the Party to come up with an overall economic policy.

One way of bringing coherence to such policy might be to set as a goal and an ordering principle the creation of policies which, over time, would reduce the dependency on transfer payments of the various jurisdictions.

A good deal of such a policy would be on the economic development side of the ledger; but as the bulk of transfer payments are per capita a strategy of encouraging relocation within Canada would make sense.

To give some idea of the dimensions of the problem it is worth considering that as of 2001, since 1957, 180 billion dollars has been transfered by way of equalization with virtually no change in the relative positions of the have and have not provinces. This is not a system which is working.