LIBERALS JUST DON’T GET ALBERTA.
Alberta has a strong case for reform of equalization policy and more generally of its treatment in Confederation. Inequitable equalization payments are typical of Alberta’s status as an exploited cash cow and of the indifference and even disdain it is subjected to by a powerful Laurentian elite, progressive mainstream media and the reigning Liberal Party. Central and Eastern Canadians should pay close attention — if they care about national unity and economic growth.
On Oct. 18 a referendum will ask Albertans: “Do you support the removal of Section 36, which deals with the principle of equalization, from the Constitution Act, 1982.” The vote is not binding on the rest of the country. But it will raise the policy’s profile and may provide leverage for broader constitutional negotiations. A cold shoulder from Prime Minister Justin Trudeau would inflame regional resentment and bolster support for western separatism (a.k.a.,wexit).
Equalization was created by the federal government in 1957 to ensure that all Canadians receive reasonably comparable provincial public services at reasonably comparable rates of taxation. The feds make up the difference for provinces with less than average revenue capacity (not taxes actually raised), based on what they could collect at national average tax rates.
There are several limitations and inconsistencies in the system. It is based on a three-year moving average of GDP growth, so it lags rapid changes in economic fortune, which periodically happen to commodity-reliant regions. Funds can go to a “have-not” province with superior social services, like daycare in Quebec, rather than a “have” province that provides lesser services. But the funds do not have to be spent on social services. Equalization arguably creates a welfare trap, reducing the incentive for pro-growth policies. Critically, there is no penalty if a province refuses to generate resource revenue and at the same time blocks a “have” province from developing its resources.
Alberta’s net contribution, the difference between what Albertans paid in federal taxes and what they received from Ottawa, has been a staggering $622 billion since 1961. Between 2007 and 2018 alone, it totalled $240 billion. The province’s net contribution now averages about $20 billion a year, an amount almost equal to its health budget.
The massive financial outflow might be tolerable to Albertans were federal and provincial governments not so hostile to development of its natural resources. Instead, onerous taxes, draconian regulations and political opposition have devastated their province (and harmed the entire country) by causing the cancellation of oil and gas projects worth more than $150 billion. Premier Jason Kenney summarized his position with brutal clarity: “If you want to benefit from our oil and gas wealth, stop blocking oil and gas pipelines.”
Nevertheless, opposition continues. The most recent provincial assault was Premier François Legault’s decision last week to kill a $14-billion project that would have carried natural gas from Western Canada across Quebec to the Port of Saguenay, then shipped it to overseas markets. The stated rationale for the rejection was GHG emissions. But no apparent consideration was given to the net reduction of global emissions caused by the importing countries substituting natural gas for coal. That puts the lie to supposed climate change concerns.
In 2018 Legault blocked the $12 billion Energy East pipeline because there was no “social acceptability” to transporting “dirty energy” across Quebec. Meanwhile, Western Canada supplied 53 per cent of Quebec’s oil in 2018 and Quebec purchases foreign crude shipped to it up the St. Lawrence River. Moreover, the premier insists that equalization payments, which derive significantly from energy, are sacrosanct. No surprise, since Quebec has received $230 billion over the years — more than half of the $450 billion in equalization revenue distributed by Ottawa. This year it will receive 63 per cent. The hypocrisy is breathtaking.
In 2019, Canada spent $18.9 billion to import more than 660,000 barrels a day of oil. And we sell our oil to the U.S. at a massive price discount. Environmentalists and various rent-seekers are deliberately misleading Canadians when they argue that blocking domestic oil and gas production will reduce global emissions, which is of course all that counts in the battle against climate change.
In the meantime, Premier Legault has introduced legislation to unilaterally amend the Canadian constitution to undermine English language rights in Quebec. The prime minister has not objected, nor have the other party leaders. Premier Kenney was supportive, citing with approval Quebec’s ability to achieve its objectives and expressing the hope the precedent will apply to Alberta. Maybe.
We are in pre-election mode so the prime minister will not do anything to jeopardize his crucial support in Ontario and Quebec, especially to favour Alberta, where his prospects are modest at best. But it is unhealthy for the federation when one region believes it cannot receive reasonable treatment from the central government.
A fair deal for Alberta would strengthen the national economy without sacrificing environmental goals. A win for Alberta would be a win for Canada. Unfortunately, there is no sign the Liberals get that.
A FAIR DEAL FOR ALBERTA WOULD STRENGTHEN THE NATIONAL ECONOMY ...