31 January 2006

The battle lines might be forming

over the so-called vertical fiscal imbalance and Equalization reform.

Check the Globe and Mail on Tuesday, specifically the story on the Harper budget due for March.

It includes this section at the end:
Experts warn that the new Tory regime will be hard-pressed to pay for a controversial election promise to share Ottawa's surplus riches with the provinces. Last December Mr. Harper pledged to fix the so-called fiscal imbalance between Ottawa and the provinces.

"I think we have to face the fact that Ottawa is rolling in tens of billions of dollars in surpluses . . . at the same time as provinces and municipalities are having trouble meeting the essential core services without going into debt," he said then. "We must find a long-term revenue transfer from the federal government to the provinces and municipalities."

But economists warn that the Conservative fiscal plan provides scant resources for assistance to the provinces. The Tories did not budget any cash for fixing the imbalance, but said they will fund it from $22-billion in budget surpluses their plan would generate over five years.

Dale Orr, chief economist at Global Insight (Canada), said the Tories won't have much cash to spare, especially if they set aside some of each year's projected surplus to guard against economic downturns. He said what's left is small potatoes. "That's not very interesting to the premiers . . . They are talking big, big bucks."