Historic First: Ontario In, N.L. Out Of Equalization

[On tha low Brotha]

Source: CTV

Ontario, long considered the economic engine of Canada, will receive a federal equalization payment for the first time in its history. But Newfoundland and Labrador no longer needs the money, prompting Premier Danny Williams to say the "Newfie joke" is over.

Federal Finance Minister Jim Flaherty confirmed Monday that Ontario would receive about $347 million. The grants are usually reserved for "have not" provinces.

"Does it worry me? Yes of course it worries me," Flaherty told reporters at a news conference Monday afternoon. "The reality is, Ontario is entitled to enter the program and will be receiving substantial funds. Regrettably I think Ontario will be in the equalization program for some time to come."

Meanwhile, Newfound and Labrador, riding high on its offshore oil operation Hibernia, has now become a "have" province.

"This is a very proud day for Newfoundlanders and Labradorians," Williams said at a press conference.

"I don't think the Newfie joke is there anymore. I think we're now an example to our fellow Canadians of how it can be done and how to work your way through hardship."

Twenty years ago, when Newfound first announced its plans for Hibernia, then-premier Brian Peckford said: "One day the sun will shine and have-not will be no more."

Ontario, in recent years, has had a difficult time with its manufacturing industry because of the rising value of the Canadian dollar. Several auto manufacturing plants have closed in the past few years.

"It's an odd feeling to see Ontario in such difficult straits," Flaherty said. "We have to work together to try and build a stimulus in the economy."

The province was actually eligible for equalization payments in the 1970s but never received the funding. The program is designed so that richer provinces can help poorer provinces by providing them with the financial support they need to keep providing services.

The equalization payments will begin in January. Other provinces receiving payments are:

Quebec - $8.35 billion
Manitoba - $2.1 billion
New Brunswick - $1.69 billion
Nova Scotia - $1.57 billion
P.E.I. - $340 million

Flaherty spoke with reporters after meeting with his provincial counterparts in the morning to discuss the gloomy economic forecast and future plans for the equalization program.

The minister said Ottawa could not sustain the program's 15 per cent a year growth rate. He said the $13.6 billion equalization program will continue to grow but that costs would have to be capped to prevent bankrupting the system.

"I don't think Canadians will have any difficulty in saything that's the responsible thing to do," he said.

Flaherty said changes to the program have allowed the government to give Ontario about $100 million more than what it would have previously been able to give the province.

'Not unexpected'

Ontario Finance Minister Dwight Duncan said after the minister's meeting that he doesn't expect Ontario will be receiving the payments for very long.

"It was not unexpected and we'll continue to make the investments we're making," he told reporters.

Duncan said the money will help the province but that Ottawa needs to do more.

"Every bit helps," he said about the payment. "I would have preferred to see a government that's dealing with the automotive sector the way the European Union is, the way the United States is, with a $25 billion investment in the energy fund to help get the product mandate. There was nothing on that."

Duncan said the province would respond to the equalization program in greater detail in the future after officials have had a chance to go over the changes thoroughly.

"It would have been helpful for us to look at this before the meeting," he said. "It looks to us at the first glance that we won't qualify for very long based on the constraints they've put on it."

A report by TD Economics released last April predicted that Ontario would qualify for about $400 million in 2010-2011 and $1.3 billion the next year.

Heading into the meeting Monday, Duncan said Ottawa also needs to address health care transfers and fair treatment in employment insurance.

Meanwhile, oil-rich Alberta, which many view as being immune to the global economic crisis, will push for a co-ordinated assistance plan for the provinces, investors and manufacturers.

"Alberta's message today is that the volatility of the energy market, coupled with the downturn in the economy, is having a serious and profound impact on investors, on government and we have to do something to collectively benefit everybody in Canada," Alberta Finance Minister Iris Evans told Canada AM.

Quebec Finance Minister, Monique Jerome-Forget, said she has already told Flaherty that "given the current situation, we cannot cast aside our responsibilities at either the provincial or federal level."

"We have to be very pro-active as governments. I believe very, very, strongly that the situation now requires very active measures to counter the important slowdown, especially in terms of exports to the U.S."

Monday's meeting is being held ahead of a First Minister's meeting on the economy, to be hosted by Prime Minister Stephen Harper, in Ottawa next week.

Following that is U.S. President George Bush's summit of finance ministers from the top 20 economies, including Canada, to discuss the ongoing global financial crisis.