Yet, each year Saskatchewan and other provinces deemed by the federal government to be wealthy – the “haves” – are forced to give billions of dollars in handouts to provinces deemed to be less wealthy – the “have not’s.” This occurs through the federal government’s $16 billion (per year) Equalization program.
It’s basically a big welfare program between provinces that aims to help recipient provinces provide similar services as provinces that are considered wealthy like Saskatchewan.
However, ‘deemed to be’ less wealthy is not necessarily a reflection of reality.
For example, according to Equalization program rules, Quebec is deemed to be a “have not” province. Meanwhile, it is sitting on massive quantities of undeveloped resources such as natural gas.
Under perverse Equalization program rules, Quebec has a disincentive to aggressively develop those resources as doing so would increase its ‘fiscal capacity,’ (ability to pay for more of its own programs) and therefore decrease the cash it receives from Equalization.
In fact, their separatist premier, Pauline Marois, recently
posted a video to the Parti Québécois website where she states: “If one day, we produce oil and gas in Quebec, why would we let half of this wealth go down the road to Ottawa?” (Translated)
While Quebec continues to sit on significant resource opportunities, one resource it has developed – its vast supply of hydroelectric power – falls outside of the Equalization formula and isn’t taken into consideration by Ottawa. As a result, the province regularly sells power to Quebec residents below its true market value; reducing revenues and decreasing power conservation in the process.
The situation is akin to the government of Alberta deciding to start a gas station company and selling gas to Albertans for $0.75 per litre rather than the going market price.
While Quebec sells power below market rates and sits on resource opportunities, it offers its citizens many benefits that other “have” provinces do not provide; highly subsidized post-secondary education and day care to name a couple. Needless to say, many taxpayers in Saskatchewan wonder why they’re paying for such luxuries in another province?
Make no mistake, the problems with the Equalization program go far beyond Quebec. Whether it’s Manitoba devaluing its hydroelectric power or some Atlantic provinces being encouraged to keep their debt loads high for bonus Equalization payments, the Equalization program needs serious reform.
Who better to champion reform during 2014 negotiations for the program than the province of Saskatchewan?
After all, Saskatchewan has been both a recipient and a contributor to equalization within the past decade. Premier Wall would be on solid footing to discuss the disincentives in the program that contributed to holding Saskatchewan back for so long.
Fortunately, he has already been vocal about concerns with the status quo. What needs to happen next is for the premier to take a leadership role in working with other premiers of “have” provinces to be just as vocal in pushing for reform as other premiers are pushing against.
If he doesn’t, and the voices defending the status quo continue to chirp louder than the rest, be prepared for the federal government to keep Canada’s Equalization program as the nation’s largest hand-out.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
