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Last Chance to Obtain Equalization Fairness is Through a Referendum: Crosbie
Under the current equalization program, Quebec will receive $13.1 billion, Nova Scotia and New Brunswick will each receive $2 billion while Newfoundland and Labrador will receive zero.
Tuesday, October 29, 2019

Office of the Official Opposition 

For Immediate Release

 

St. John’s, NL (October 29, 2019) – In the wake of Premier Jason Kenney’s announcement that his government will hold an Alberta referendum vote on equalization fairness, PC Opposition Leader Ches Crosbie is calling on the Premier of Newfoundland and Labrador to launch a referendum on equalization.

“The equalization program is contained in our Canadian Constitution. A referendum on a constitutional issue, with a clear question and a clear majority requires the federal government to negotiate. Thus, a provincial referendum on equalization is the province’s last way to achieve equalization fairness,” says Crosbie.

Crosbie also noted that the Premier’s failure to act has resulted in our province missing out on equalization payments, money that the province desperately needs. “The Premier did not stand up for our province when the federal Liberals rolled over the equalization formula in 2018. In our time of financial turmoil, the Premier is still not standing up to Ottawa. He is not making the case for this province. A change to the equalization formula, caused by a referendum, could be a tremendous benefit to our province,” said Crosbie.

Under the current equalization program, Quebec will receive $13.1 billion, Nova Scotia and New Brunswick will each receive $2 billion while Newfoundland and Labrador will receive zero.

In the most recent provincial election, Crosbie promised that if elected Premier he would launch a referendum on the issue (see backgrounder). Crosbie remains dedicated to furthering this issue and ensuring that our province gets the equalization payments that it deserves.  “In Alberta, Premier Kenney is launching a referendum on equalization. He is standing up and fighting for the rights of his province. I commit to the people of our province that I will continue to fight for our rights and the equalization payments that our province greatly needs.”

 

Contacts:

Bradley Russell

Director of Policy and Research

(p) 1.709.729.3668

BradleyRussell@gov.nl.ca

-30-

 

Backgrounder

PC PARTY BLUE Book - 2019

0.3. Referendum on Equalization Fairness

 

Equalization is a national program defined under the Constitution.  Subsection 36(2) of the Constitution states: “Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.”

Although the principle is enshrined in the Constitution, the enacting legislation is not.  It can be convincingly argued that Ottawa’s legislation and policies do not fairly reflect the terms or intent of the Constitution.

It is particularly aggravating that Ottawa imposes a lag time when determining whether a province’s revenues have fallen, and Ottawa counts different kinds of revenues differently, in a way that benefits Quebec more than any other province.

While Newfoundland and Labrador is considered to be a “have” province under the current rules, getting zero Equalization or offset payments, Quebec is considered to be a “have-not” province, getting approximately $13 billion in Equalization this year (while running a surplus, cutting taxes and subsidizing child care).

The imbalance is on track to widen.  The Parliamentary Budget Officer’s Fiscal Sustainability Report 2017 stated: “In our projections, Quebec’s share of the total federal Equalization envelope increases from 60 per cent in 2017 to 75 per cent in 2091.”  That report also stated: “Equalization payments help explain part of these long-term trends in transfer revenue, because Equalization is determined according to each province’s fiscal capacity relative to the Canadian average. Widening fiscal disparities across provinces necessitate larger transfers to provinces with lower-than-average per capita incomes, such as Quebec, New Brunswick and British Columbia. Consequently, these provinces will see increases in Equalization payments relative to their GDP over the long term…. In contrast, provinces with relatively higher per capita income growth will see decreases in Equalization payments relative to their GDP.”

The Parliamentary Budget Officer published another report on March 20, 2018 examining some scenarios for reforming Equalization.  Under two of those scenarios, Newfoundland and Labrador would have benefited significantly to the tune of 1.7% of GDP – some $500 million or more a year.

The Trudeau Liberals promised to hold talks on reforming Equalization in 2019.  The Ball Liberals promised to be at the table to fight for Newfoundland and Labrador.  Neither promise was kept.  The Trudeau Liberals quietly renewed the old formula for another five years, and the Ball Liberals said nothing in protest.

Unlike the 2005 Atlantic Accord arrangement achieved by Danny Williams, the arrangement signed by Dwight Ball contains no offset.  An offset would protect our offshore oil money.  Mr. Williams got it, but Mr. Ball did not.  He got it wrong!  That means 50% of our offshore revenues are now included by Ottawa when they calculate whether we can receive Equalization payments.  If Mr. Ball had achieved an offset, we would be receiving Equalization – just like Quebec – to help with our fiscal challenges.  That is how Equalization is supposed to work, but that’s not how it’s happening under the deal Mr. Ball signed.  That means we are not benefiting fully from our offshore, despite the promise of the Atlantic Accord, because Mr. Ball has allowed the federal government to claw our oil money back on the Equalization side.

The Equalization allocations for 2019-20 give Newfoundland and Labrador zero (again) while Nova Scotia and New Brunswick receive about $2 billion each and Quebec receives $13.1 billion.

The Atlantic Accord 2005 agreement negotiated by Danny Williams gave our province a rare commitment to talk with Ottawa about Equalization one-on-one in 2019.  If those talks happened while Mr. Morneau and Mr. Ball shared tea at Confederation Building, nothing came of them.  When the Accord announcement was made, Equalization was not even mentioned.

A Crosbie government will fight for Equalization reform so the program reflects the terms of the Constitution.  We will fight for the scenarios the Parliamentary Budget Officer brought forward to make the program more fair and responsive to Newfoundland and Labrador.

One action that has not been tried is to take this matter to the people in a referendum.  A province can obligate the Government of Canada to negotiate with the province on an issue of importance if that province brings a clear and concise referendum question to the people and receives a decisive majority.

The wording of any question put to the people of NL for a vote would need to be carefully considered. It would balance the complexities of equalization with the need to make the question understandable to voters and fair to all points of view. The purpose is not to impress ourselves, but to impress Ottawa and the rest of the country with our seriousness of purpose. A successful referendum will require a public educational campaign at home and a campaign to recruit champions and opinion leaders elsewhere, if it is to command the respect of the federation.

It's time to make equalization fair. The cost of a referendum or vote of the people is tiny compared to what is at stake.

A referendum on equalization is a constitutional lever with which to open negotiations with the federal government on a joint recovery plan for NL, one that addresses not just fiscal unfairness, but our population crisis, and the repeal of federal infringements on our right under the Atlantic Accord to determine the pace and mode of development of our offshore resource wealth.

The Telegram carried a story on April 26 with the headline "No Need for Equalization Referendum: professor". The professor states that if we were to exclude offshore resource revenues and recalculate equalization based on non-resource revenues, then NL would be receiving about $316 million in 2019. This would be the added revenue to our treasury, in his view, of applying an offset as Prime Minister Martin and Premier Williams agreed in 2005.

Although the so-called Atlantic Accord negotiations between Dwight Ball and Justin Trudeau were carried out behind a curtain of secrecy, we can make an educated guess that Ball requested an offset to offshore natural resource revenues, relying on the principal beneficiary right in the Atlantic Accord, and Trudeau refused. Because there is No Fight in Dwight, he accepted a set of payments spread over 38 years that former Premier Peckford described as "chickenfeed".

The professor is wrong about there being no need for a referendum and the headline in the Telegram story is misspoken, because the story ends by saying that the equalization formula "will remain the same until 2024." And who is to say that the federal government will not, with no consultation, renew an unfair formula in 2024, as it did this year? Consequently, if we want to assert our rights and enter negotiations before 2024 over the core issues that bear on jobs, hope and an affordable future in this province, a referendum is a constitutional lever a small province must be willing to use if it wants to be mighty.

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