Newfoundland echoes Danielle Smith's call to fix equalization

OTTAWA — Alberta Premier Danielle Smith is putting a new twist on an old debate over equalization, saying that the federal program should be re-tooled to prioritize the smaller provincial economies like those in Atlantic Canada. At least one Atlantic province, Newfoundland and Labrador, agrees that it’s getting shortchanged under the program’s current rules. “(E) qualization is intended to ensure … fairness for all citizens. Currently, this fairness is not achieved for Newfoundland and Labrador,” Greg Gill, a spokesperson for Newfoundland’s Liberal government told the National Post on Thursday. Smith said in a livestreamed address on Monday that it was time for the ‘big four’ provinces of Ontario, Quebec, Alberta and British Columbia to fend for themselves, and stop siphoning equalization dollars from smaller provincial economies like those in Atlantic Canada. “We have no issue with Alberta continuing to subsidize smaller provinces with their needs, but there is no excuse for such large and powerful economies… to be subsidizing one another,” said Smith. “That was never the intent of equalization, and it needs to end.” Newfoundland’s government likewise says the program shortchanges its residents in a number of ways, including by failing to account for the cost of delivering services in the far-flung, sparsely populated province. “(We) service… more than 500 communities across a large, geographically dispersed, and aging population connected by almost 10,000 kilometres of roads,” wrote Gill. Gill also said the current equalization formula punishes Newfoundland for developing offshore oil and other natural resources. He did not say explicitly that Newfoundland agree with Smith that the four biggest provincial economies should stop subsidizing one another through the equalization program. Newfoundland filed a court challenge against the program in June 2024, arguing it doesn’t fulfill its constitutional purpose in its current form. Smith said in a March statement to the federal party leaders that Alberta “is no longer agreeable to subsidizing other large provinces who are fully capable of funding themselves.” Sixty-two per cent of Albertans voted in a 2021 referendum to petition Ottawa to remove equalization from the Constitution, after the question was put forward by a panel on constitutional issues launched by Smith’s predecessor Jason Kenney. Quebec and Ontario will take in a combined $14.15 billion of $26.17 billion earmarked for equalization payments in 2025-26, with Quebec alone getting half the total pot ($13.57 billion). Smith called on Monday for Alberta to receive federal transfers and equalization payments on the same per capita basis as the other three large provinces. Alberta hasn’t received equalization payments since the mid-1960s but still gets annual federal health and social transfer payments. It will get $8.6 billion in major federal transfers in 2025-26, or $1,695 per person. This is $1,464 less per person than Quebec, $33 less than Ontario and the same as B.C . Trevor Tombe, a professor of economics at the University of Calgary, said that size can be misleading in discussions of economic redistribution. “China is a much bigger economy than Canada, but is the average Chinese person better off than the average Canadian?” said Tombe. Tombe pointed out that the three Maritime provinces of Nova Scotia, New Brunswick and Prince Edward Island will be paid out on a higher per-capita basis than Quebec. He conceded that there are “legitimate concerns” that arise when have-not provinces deliberately make economically suboptimal choices, such as putting in place bans on resource development. “One question we’ll have to grapple with is should we have a program that provides larger payments to provinces that make decisions that hurt their own economy?” said Tombe. Tombe noted that equalization payments have helped Quebec keep its electricity prices artificially low , hampering innovation and growth in the province’s energy sector. He also noted that the no-strings-attached payments can inflame interprovincial tensions when have-not provinces appear to spend frivolously. Ontario, for example, is set to receive $546 million in equalization payments this year, after spending roughly $3 billion on pre-election rebate cheques for residents. National Post rmohamed@postmedia.com Get more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here. Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark nationalpost.com and sign up for our daily newsletter, Posted, here.