By Paul McLeod
Ontario would be getting twice as much equalization money as Nova Scotia if the system were fixed, according to a local think tank.
The Atlantic Institute for Market Studies released a report yesterday saying the new system is broken in Nova Scotia’s favour.
“Two of the three richest provinces before equalization effectively become two of the three poorest after equalization,” says the report by Bobby O’Keefe, senior policy analyst at AIMS.
The current system is based on a scale of money per capita, but according to O’Keefe, this doesn’t take into account how the value of a dollar changes widely from province to province. O’Keefe determined, for example, that a bundle of services that costs $1,073 to deliver in Ontario would only cost $934 in Nova Scotia.
“Despite it being called an equalization program, it doesn’t really make things equal at all,” he said.
The report concludes that if cost adjustments were made, Ontario would be in line to receive almost $3 billion in equalization. There’s no data available to directly compare the costs of delivering services between provinces. Instead, AIMS compared the costs for businesses and made adjustments to make them more similar to governments.
Equalization is supposed to allow provinces to offer “reasonably comparable services,” but O’Keefe said no one is comparing the costs of those services between provinces. He points out Quebec subsidizes childcare at a rate that Ontario could never afford, even though Ontario is classified as a “have” province and Quebec is a “have not.”
The study comes just a day after a report from the Atlantic Canada Economic Council saying that Nova Scotia will lose out on $1.4 billion by 2020 under the new equalization deal. APEC president Elizabeth Beale said she’d heard the AIMS argument before.
“That argument has been made by many provinces over the years, that the current system isn’t fair in some capacity,” said Beale.
She argues that equalization is so complex, and can be broken down in so many ways, that it’s possible to show different provinces being hurt depending on the methodology.
Beale said with every report on equalization you need to look at what data is being included and excluded.