A crumbling vision: there seems to be trouble in the Canadian family over the concept of sharing. Equalization is meant to help Canada's poorer provinces, with Ottawa taking revenue from the richer provinces and giving it to the poorer ones so every Canadian can have access to an equal level of government services. (National Unity-Inequality).

While Alberta is super rich, some other provinces are not. New Brunswick Premier Bernard Lord says: "Unfortunately, where you live is increasingly an important factor in how equally you are treated as a Canadian." And that, he says, is causing increasing alienation "not just by province and region, but between have and have-not areas, between rich clusters of urban wealth and poorer, rural communities."

Some are beginning to feel Alberta is a bit out of step with unity concepts. Premier Ralph Klein is floating the idea of taking more river water to feed the provincial thirst, but some of those rivers flow across the border into Saskatchewan where their content is also needed. Alberta pays its nurses way more than its neighbours, attracting them to migrate from other provinces. Soon, Alberta's debt will be gone, and it might even do away with provincial income tax--it is now the only province without a provincial sales tax. That rumbling sound we hear is all the people moving to Alberta to live in a tax-free haven. Almost 22,000 Canadians moved to Alberta in 2000, up from almost 14,000 in 1999, and most of the new arrivals were from B.C. and Saskatchewan, looking not just for tax breaks, but for jobs.

Prime Minister Jean Chretien almost got tarred and feathered in Edmonton in August 2001 when he said Alberta's oil and gas wealth should be shared with the rest of the country and used to help solve Canada's social problems: "We have to make sure that every person in every part of Canada benefits from the potential and the wealth that belongs to the people of Canada." Oooooh, that sounded like Ottawa was thinking about resurrecting the hated National Energy, Plan to a lot of Albertans. The NEP was born in 1980 when oil prices soared from $15 a barrel to more than $35 a barrel in 1981. Ottawa introduced a stiff tax on the revenues of oil and gas companies to beef up its share of the profits. The money was used to soften the blow of high world prices on import-dependent parts of the country. Ottawa also imposed a hefty export tax to prevent Canadian oil entering the high-priced world market. But that all crumbled when oil prices took a tumble, and exploration companies were hit with sky-rocketing interest rates on the money they borrowed to tap the boom that didn't happen. No wonder Mr. Chretien's remark made some folks twitchy. But, he later insisted that he had no plans to introduce any new taxes or measures to redistribute Alberta's wealth.

Yes, the province is highly prosperous, but Albertans already pay about $2,000 a person into various programs that are supposed to help the poorer provinces deliver social programs of similar quality. Another calculation puts that figure considerably higher: Robert Mansell, an economist and dean of graduate studies at the University of Calgary, looked at the flows of cash in and out of each province since the 1960s. He included all transfers including oil revenue, income and corporate taxes, pensions, unemployment insurance, equalization payments. Measured in constant 1999 dollars, he said (in 2001) that Albertans contributed $3,117 per capita each year to the rest of Canada during the 1970s, mostly because of oil revenues after 1973. In the 1980s, thanks in part to the NEP, their average yearly per capita contribution was $3,790.

At the same time, Ontarians contributed an average of only $226 per capita each year in the 1970s, and was on the receiving end by about the same amount in the 1980s. Now, Ontario diverts 5.4% of its provincial Gross Domestic Product to the rest of Canada. Another estimate put the figure into dollars--with Ontario taxpayers sending $17 billion more to Ottawa each year than they get back, or an average of $1,613 per person.

In turn, Ottawa pours $10.7 billion more into the Atlantic region (Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland) than it takes out--roughly $5,366 for every man, woman, and child in the four Atlantic provinces. At the same time, businesses in Atlantic Canada get less money per capita from Ottawa than businesses in the rest of the country, including Ontario. But the region receives more per capita in employment insurance and has the highest equalization payments. But it received far less than it has in the past. In the mid-1990s the federal government cut $2 billion from its spending in Atlantic Canada as part of its deficit-cutting program.

One of the main problems with equalization payments is that the federal government reduces them when have-not provinces manage to boost their own revenue. That sounds reasonable, but the effect is to discourage development in the poorer regions, because even when things improve economically they can't raise revenue enough to climb out of debt. For example, Nova Scotia has received only a small portion of the royalties collected for its natural gas--its been estimated that when gas production is at its peak in 2005, the province expects to collect only $300 million a year in royalties, of which 80% will be taken by Ottawa. Similarly, Newfoundland declined Inco's plan to mine nickel in Labrador because the company wanted to pay royalties and ship the ore to Sudbury for processing. The only way Newfoundland and Labrador would benefit from the mining was if the nickel was also processed locally, creating much needed jobs.

Most people agree that the program needs to be changed. What they don't agree on is how. Some say revenues from natural resources such as oil, gas, and nickel should be exempt from the equalization formula. (Alberta was allowed to develop its oil industry without losing equalization payments.) But that leaves out the poorer provinces whose revenue doesn't come from natural resources. That could split the Atlantic region, leaving New Brunswick as well as P.E.I. the poorer. As it is, the have-not provinces depend on the growing wealth of the have provinces: when provincial revenue skyrockets in Ontario, for example, governments in the poorer provinces automatically get more money in equalization payments.

As writer David Orchard put it, "Without bold and consistent federal intervention, Canada would not exist. The national railways, airline, and broadcaster were all federal initiatives, often created despite bitter provincial opposition. In the early 1930s, when prime minister R.B. Bennett tried to introduce unemployment and health insurance and a minimum wage in his 1935 New Deal, the provinces were outraged. When Mackenzie King's government proposed a national health-insurance and old-age security plan in 1946. Ontario's George Drew condemned the initiative as a socialist threat and denounced centralization."

Under the Social Union Framework Agreement signed by the provinces (except Quebec) in 1999, any new national social programs need only the support of a majority of the provinces. So, only six provinces have to agree. (Formerly seven provinces with 50% of the population had to agree.) Mr. Orchard thinks that, because of the way the Agreement is worded, Canada could end up with a patchwork of different quality programs. And, he says our national government "is systematically dismantling its own powers, giving them to foreign corporations (through NAFTA) and the premiers, reducing Canada to 10 balkanized provinces and three territories with no effective central power."

SUGGESTED ACTIVITIES

1. Premier Pat Binns of Prince Edward Island says Canadian federation can't be based solely on whichever province has economic might. "What kind of Canadian would talk about putting firewalls around a piece of geography that is suddenly blessed with oil and gas royalties at the expense of other Canadians?" he asked in a speech to Toronto's Empire Club of Canada in 2001. Mr. Binns says we need to look out for each other as members of the same family. "It is time to accept that after 133 years, our Constitution has developed some serious dificiencies ... A collective approach is what Canada is all about." Discuss Mr. Binns' view and what structure you think Canada should have.

2. When the Social Union was signed in 1999, the provinces (except Quebec) agreed that all the money the federal government gave them in the following budget for health tare would actually be spent on hospitals. The provinces also agreed to work with Ottawa in finding ways to measure whether the health system was working. Find out what's happened with this vision of an accountability system, and try to explain why, if so much consideration is given to our health care system, service seems to be deteriorating across the country.

3. In 2002, Jim Flaherty, an Ontario Conservative MPP, complained that Ottawa is not recognizing that the demand for services in the provinces is outstripping their ability to pay. "That has to be resolved," he said. "And, if it doesn't get resolved in ... a sensible, pragmatic, businesslike way, then it will fester and it will become a source of disunity within Canada." Discuss.

FACT FILE

Taxpayers in Ontario, Alberta and, to a lesser extent, B.C., supply the money for the equalization payments from the federal government: all other provinces receive payments.

FACT FILE

Since 1945, the federal government has initiated more than 100 shared-cost programs--for the blind, for the disabled, Medicare, hospital insurance. As Saskatchewan's former premier Alan Blakeney put it: "So much that happened in Canada has come from the federal spending power--shared cost programs have been almost an unalloyed good."

FACT FILE

The largest of all have-not provinces is Quebec, which accounts for almost half of federal transfers through equalization.

Websites

Equalization Payments--http://www.fin.gc.ca/FEDPROV/eqpe.html

Frontier Centre for Public Policy (Equalization payments)--http://www.fcpp.org/publications/policy_notes/new_economy /role_of_government/feb212000.html

TALK ABOUT NOT SHARING

In July 2001, Mike Harris, as Ontario Premier at the time, dumped on Atlantic Canadians saying they are like lottery winners who want to stay on welfare after collecting their prize, by accepting equalization payments while retaining their resource revenue. Atlantic politicians were fuming: they argued that they needed to be allowed to keep more of the revenue from natural resource development without losing equalization payments to help build their economies to the point they wouldn't need the payments. Atlantic Canadians DO NOT want to depend on money from elsewhere, they stressed, adding that it's unfair to say you support equalization payments on the one hand (which Mr. Harris did) and then describe anyone who needs them as a welfare recipient: the have-not provinces would like nothing more than to join the ranks of the haves.

RELATED ARTICLE: A new Canada.

Some are suggesting that a generation from now Canada could be divided up into several separate independent regions. Maybe British Columbia and Ontario would go it alone. And Quebec. The Atlantic provinces might form a union.

Thanks largely to the 1988 Free Trade Agreement, Ontario's economic interests are increasingly in the United States. In 1989, foreign trade (almost all with the U.S., around the Great Lakes) accounted for only 30% of the province's Gross Domestic Product. By 1999, the figure had reached 54%. In 1999, at a meeting of governors and premiers, then-Premier Mike Harris was quoted as saying "we really see you as very, very strong allies, more so than many parts of Canada ... (more) perhaps than my national government understands."

The idea of a political union of the Maritime provinces has been around since before Confederation. (Some are thinking more along the lines of an Atlantic union that would also include Newfoundland.) Supporters think that union would reduce costs and make the region more economically efficient, and increase its political clout in Confederation, particularly if Quebec separates. A united "Atlantica" would be bigger than Ontario. Newfoundland, even without Labrador, is bigger than 48 U.S. states, all but Alaska and Texas. But one Maritime journalist doesn't think a union will ever happen in the East. In an article in The Globe and Mail in 1997 Don Cayo wrote: "Cape Breton loves not the mainland; northern and southern New Brunswick snipe a lot at each other. Real animosity lies behind inter-provincial sparring for jobs. We won't ever agree on trivialities, like where to put a unified capital, let alone big stuff like decisions to unpoliticize development."

RELATED ARTICLE: La Belle province.

The main reason Quebec opted out of the 1999 Social Union Agreement was because the agreement opens the door to a greater role by Ottawa in working with the provinces to define future social programs and determine national standards. The province sees that as an intrusion by the federal government into provincial jurisdictions, such as health and education.

Lucien Bouchard, Premier of Quebec at the time, said that by accepting a greater federal role in defining social programs, the rest of Canada put itself on a collision course with Quebec. Furthermore, the agreement does not allow provinces to opt out of federal-provincial social programs with full financial compensation. In other words, if they opt out of a program, they don't get the money.

But David Cameron, professor of political science at the University of Toronto had a different interpretation. In an article in The Globe and Mail shortly after the agreement was signed, he wrote that provinces receive their share of the funding for new programs, "as long as they meet the `Canada-wide objectives' and respect what the agreement calls `the accountability framework.' (This has to do with sharing information, measuring outcomes, providing for citizen participation and ensuring transparent practices.) This is opting out by another name ..."