Harper's payment gives Charest ammo for next election

Fiscal imbalance issue puts squeeze on Dion and Duceppe

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by L. IAN MacDONALD
The Gazette, Friday, January 19, 2007

With the announcement Quebec will receive another $1 billion a year in equalization payments, the Harper government has taken the first step toward redressing the fiscal imbalance between Ottawa and the provinces.

The next one will come in the federal budget, when Finance Minister Jim Flaherty is expected to announce a new equalization formula, as recommended by a task force named by the former Martin government and chaired by Al O'Brien, a former deputy treasurer of Alberta.

When all is said and done, Quebec is expected to receive another $1.5 billion in equalization, or $7 billion a year, up from $5.5 billion, an increase of about 30 per cent.

So there are two numbers, $1 billion in yesterday's headline, and another $500 million in the budget for a total of $1.5 billion.

Any number that begins with $1 billion, and nets out at $1.5 billion, is not only real and politically defensible, it will enable Stephen Harper and Jean Charest to say they've delivered the goods on the fiscal imbalance.

So where does that leave Gilles Duceppe and Stephan Dion in Ottawa and Andre Boisclair in Quebec?

That depends on them. Duceppe has made the mistake of posting an absurd number, $3.9 billion, as Quebec's share of the pot. Anything less, from his perspective, is, obviously, woefully inadequate. But how does the Bloc vote against another $1.5 billion for Quebec? How would Duceppe explain that to the voters?

This would play right to the gleeful taunts of Maxime Bernier and other leading members of Harper's Quebec team, that while the Bloc whines and gets nothing, the Conservatives are delivering the merchandise for Quebecers.

As for Dion, he has long denied the existence of the fiscal imbalance. And since he was minister of intergovernmental affairs in the Chretien government, there is undoubtedly a paper trail on this, from power-point presentations to letters to the editor.

Typically, the Globe and Mail reported yesterday that Dion said Harper, in the newspaper's words, "made a mistake by offering too many promises to the provinces and by acknowledging that a fiscal imbalance exists."

That's his story, and he's sticking to it. Or at least, that his position. This might win some points for Dion in English-speaking Canada, as a Quebecer putting Quebec in its place. But while his position has the virtue of being intellectually consistent, it can't be sold in Quebec, and it's probably a hard sell for Dion in his Quebec caucus.

Stated in a way Dion might relate to - the fiscal imbalance is to Quebecers as Kyoto is to Quebecers. They might not understand it, but they support it.

Dion's default position is an old Jesuitical debating trick - when you can't answer the question, answer with one of your own. He is trying to turn the tables on Harper by daring him to define the fiscal imbalance.

But at the end of the day, Dion, too, will have to decide whether to vote against this money for Quebec in the budget.

As for Jack Layton and the NDP, who formally acknowledged the existence of the fiscal imbalance at the policy convention in Quebec City last September, they won't be troubled by this. Their price for supporting the budget will be funding to meet climate change targets, and an agenda of fairness for families and seniors.

While Quebec is the primary focus of the fiscal imbalance, there's a second game afoot - beggar your neighbour between the have-provinces and the have-nots.

With Saskatchewan and now British Columbia joining Ontario and Alberta in the ranks of the haves, that leaves only six have-nots, with Quebec set to receive $6.5 billion of the $11.7 billion under equalization in fiscal 2007-08.

By going the equalization route to some provinces rather than topping up $60 billion in transfer payments to all of them, Harper can be accused of preferential treatment. Alberta, with no provincial debt and an $8 billion surplus, has nothing to say.

But Ontario claims its own fiscal shortfall - even though it has moved into a surplus position in spite of a 15-per-cent spike in program spending.

And Dalton McGuinty, looking at a provincial election in early October, has his own designs on federal booty.

But McGuinty has another decision to make: whether to demand Ontario's fair share or to don Ontario's mantle as Canada's honest broker.

Quebec elections, uniquely among provincial elections, involve the future of the country. Does McGuinty want to give Charest a helping hand? Or does he want to be Hamlet? That is the question.

 
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