Ontario taxpayers are the ones being shafted by the federal equalization system, says David MacKinnon, a former policy adviser to the Ontario Chambers of Commerce.
“The people of Ontario have much less access to government programs than the people in Atlantic Canada,” he said on Wednesday before an address at the Halifax Club hosted by the Atlantic Institute for Market Studies.
A Prince Edward Island native educated at Dalhousie and York universities, Mr. MacKinnon was a director of planning with Nova Scotia’s Economic Development department from 1976 to 1981. He is also a former CEO of the Ontario Hospital Association.
Mr. MacKinnon, who was speaking as a private citizen, denounced the recent demands by Nova Scotia Premier Rodney MacDonald and Newfoundland and Labrador Premier Danny Williams to keep their province’s offshore revenues under the Atlantic accord while receiving additional revenues from Ottawa’s new equalization system.
“I have never seen two politicians argue with less information, a shorter-term time perspective and a higher risk than the arguments Mr. Williams and Mr. MacDonald are making,” he said. “I don’t think they understand the problem.”
The problem, said Mr. MacKinnon, is that Ontario pays for 45 per cent of the equalization system, which is hurting the province’s growth and its ability to offer services to its own citizens. Mr. MacKinnon said Ontario’s contributions to transfer payments amount to 4.5 per cent of its gross provincial product, which is only growing by 1.5 to two per cent.
“That cannot continue if we are to succeed in the markets of the world,” he said. “If we are paying a cheque to other Canadians that as a share of our output is much greater than our growth, we will not be able to do that and all Canada will lose.”
Mr. MacKinnon, who argues that regional subsidies have hurt Canada’s productivity and competitiveness, said in his address that Ontario’s per capita spending on provincial programs in 2005-06, according to Statistics Canada, was $7,410.
“This was the lowest of all provinces,” he said, noting that Nova Scotia spent $7,700, New Brunswick spent $8,000 and Prince Edward Island spent $9,000 on provincial programs in the same period.
The current equalization system has also financed bloated, inefficient bureaucracies in Atlantic Canada that are “vastly” out of sync with the populations they serve, he said.
“In Nova Scotia there’s one provincial civil servant in the general government category for every 83 citizens. In Ontario, there’s one provincial civil servant in the general government category for every 127 people,” he said. “The civil service in Nova Scotia, relative to population, is half again as large as it is in Ontario.”
Mr. MacKinnon said there’s no quick fix for the situation, which requires better measurement mechanisms, but he suggested some remedies.
“It’s low corporate taxes, economical and manageable public services and a determination to avoid direct subsidies to businesses,” he said, suggesting that the federal government could take on the debt and interest payments of provinces like Nova Scotia in lieu of equalization.
Valerie Payn, president of the Halifax Chamber of Commerce, said Mr. MacKinnon provided an interesting perspective on a complex and potentially explosive issue.
“It’s a real threat to our Canadian federation when you’re moving to a place where you’re having provinces looking at other provinces and making judgments,” she said, adding that she thought his suggestion on the provincial debt warranted consideration. “Why not?”