Is equal­iza­tion even work­ing?

The Aurora (Labrador City) - - Editorial -

To rec­tify fis­cal dis­par­i­ties be­tween prov­inces, the fed­eral gov­ern­ment in­cor­po­rated Clause 36(2) into the 1982 Canada Act. It reads as fol­lows: Par­lia­ment and the gov­ern­ment of Canada are com­mit­ted to the prin­ci­ple of mak­ing equal­iza­tion pay­ments to en­sure that pro­vin­cial gov­ern­ments have suf­fi­cient rev­enues to pro­vide rea­son­ably com­pa­ra­ble lev­els of pub­lic ser­vices at rea­son­ably com­pa­ra­ble lev­els of tax­a­tion.

In other words, the equal­iza­tion pay­ment is meant to in­crease pro­vin­cial rev­enues by an amount that, to­gether with pro­vin­cial rev­enues, will be suf­fi­cient to pro­vide rea­son­ably com­pat­i­ble lev­els of pub­lic ser­vices in prov­inces.

The cur­rent equal­iza­tion for­mula is based solely upon the av­er­age/ capita rev­enue of each province and com­pared to the na­tional av­er­age/capita rev­enue. Equal­iza­tion pay­ments are cal­cu­lated as: na­tional av­er­age/capita rev­enue less the av­er­age/capita pro­vin­cial rev­enue times the pop­u­la­tion. Cana­dian prov­inces have dif­fer­ent char­ac­ter­is­tics, such as vary­ing land ar­eas, dis­tinc­tive to­po­graphic, ge­o­graphic, and hy­dro­graphic fea­tures and dif­fer­ent de­mo­graphic dis­tri­bu­tions. Nat­u­ral re­sources also dif­fer be­tween prov­inces.

There­fore, what rel­e­vance do the na­tional av­er­age/capita rev­enues have when cal­cu­lat­ing the amount that, to­gether with a province’s rev­enues, will be suf­fi­cient to pro­vide rea­son­ably com­pat­i­ble lev­els of pub­lic ser­vices in a province?

Why wasn’t the cost to pro­vide, op­er­ate and main­tain pro­vin­cial ser­vices in­cluded? With­out know­ing the costs, how is it pos­si­ble to cal­cu­late if costs ex­ceed avail­able rev­enues?

If a pro­gram is worth im­ple­ment­ing, it should, at a min­i­mum, achieve its in­tended pur­pose. Pri­vate in­dus­try would re­quire that pro­gram de­vel­oper pro­vide ver­i­fi­ca­tion and val­i­da­tion that the pro­gram meet its ob­jec­tives. Ver­i­fi­ca­tion is car­ried out by the pro­gram de­vel­oper. It in­cludes in­spec­tion of the pro­gram, demon­stra­tion that the pro­gram works, test­ing with pre­de­fined in­puts and ex­pected out­put val­ues and anal­y­sis by us­ing cal­cu­la­tions and mod­els to eval­u­ate per­for­mance. Val­i­da­tion is car­ried out by the owner to as­sure that the pro­gram meets the own­ers’ re­quire­ments. Has the cur­rent equal­iza­tion pro­gram been ver­i­fied and val­i­dated? If so, why haven’t the re­sults been made avail­able? If not, what method has been used to as­sure Cana­di­ans that the cur­rent $19-bil­lion equal­iza­tion pro­gram is in com­pli­ance with the 1982 Canada Act?

In ad­di­tion to the ex­ec­u­tive and leg­isla­tive branches of gov­ern­ment, the fed­eral gov­ern­ment is in­volved in state-owned en­ter­prises, gov­ern­ment en­ter­prises, fed­eral trust funds, spe­cial op­er­at­ing agen­cies, agents of Par­lia­ment and de­part­men­tal cor­po­ra­tions. Most gov­ern­ment op­er­a­tions can be es­tab­lished any­where in Canada.

Surely any equal­iza­tion pro­gram should start with re­dis­tribut­ing of fed­eral en­ter­prises pro­por­tion­ally in prov­inces.

Dave Short, St. John’s

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