27 January 2006

Double talk can't protect double dip

No matter how hard Loyola and Loyola try and double-talk the coming changes on the Equalization program, there's little doubt the Equalization offsets in the Atlantic Accord will be factored into the calculations.

After all, the 1985 Accord and the 2005 deal are both designed to hand this province Equalization as if oil revenues didn't exist.

The new Harper proposal is designed to hand us Equalization as if oil and gas and other non-renewables didn't exist.

And in the Rob Antle story below, you'll even see Loyola talking about the new Equalization proposal as an Atlantic Accord in perpetuity.

So, it doesn't take a rocket scientist to realise that if the new Equalization deal is done, there is no need for Ottawa to double pay the province with offsets on things that don't need to be offset because they are already offset.

Confused? You would be if you listened to Loyola.

Or Loyola.

No one is going ask for the money back - Loyola is an old enough war horse to understand you can say something silly like that knowing full well it won't come true.

It's called misdirection.

Of course what neither Loyola will say is the simple truth:

In all likelihood, the money already received or provided under the Atlantic Accord (1985) will be looked on as an advance on any new Equalization entitlements. It will be deducted from future payments. Once the advance is gone the old Danny Deal will be dead, just like the offset provisions of the Brian Deal.

There's no way to keep the Equalization offsets off the table.
Thursday, January 26, 2006
"‘Can'’t turn back the clock"’
By Rob Antle, The Telegram

The Williams administration is welcoming prime minister-designate Stephen Harper'ss planned changes to the federal equalization program.

But Finance Minister Loyola Sullivan said the $2-billion up-front payment from last year'’s Atlantic Accord agreement should not factor into any modifications to the formula.

"“That was a deal, it was an up-front payment with no strings attached, as a minimum payment,"” Sullivan told The Telegram Wednesday.

"“We can only go forward, we can'’t go back in the annals of history and do adjustments to the past."”

Harper'’s policy platform included a pledge to exempt non-renewable resource revenues, such as oil and gas, from equalization calculations.

Such a change would likely add more dollars to the provincial treasury, Sullivan said.

It would also effectively enshrine the key principle of the Accord - — sheltering 100 per cent of non-renewable revenues, such as oil and gas, from equalization - — for all provinces.

"“We'’re going to get that break forever, if he took non-renewables out and left them out,"” Sullivan said. "“It'’s going to be an Atlantic Accord in perpetuity."

The Accord deal signed last year expires in 2012, with a renewal provision that could see it extended to 2020.

As part of the agreement with the outgoing Martin government, the province received an upfront payment of $2 billion for enhanced offshore benefits.

Sullivan insisted that cash should not be included in any future fiddling with equalization rules.

"“Look, the federal government has booked this and paid it out in the '’05-'’06 fiscal year. That'’s gone. That'’s an expenditure; that'’s booked. That'’s going to show up in their public accounts for the last fiscal year.

"“They can'’t come back and say, '‘Uh-oh, we want money back two years later on that.'’ If we go forward with a new formula - they can'’t turn the clock back on that."

Conservative MP Loyola Hearn - — pegged as a likely pick for Harper'’s cabinet - — said he doesn'’t think it will be a problem.

"“What we'’re talking about is something above and beyond the deal that was done entirely," ” said Hearn, MP for St. John'’s South-Mount Pearl.

"“It certainly shouldn'’t play any role, from my perspective. I don'’t think it will. I'’ve never heard it mentioned in that light.

"“When we got the commitment on the Accord, then (the Liberals) tried to fool around with every little loophole that they had. I mean, that'’s what we fought against, so we'’d be a bit hypocritical to try and play the same game."”

Harper is expected to take over as prime minister within two weeks.

Sullivan said he will write the new finance minister then to broach the topic.

By the end of the 2006-07 fiscal year, the province will have spent $541 million of the $2 billion Accord pre-payment, Sullivan said.

That leaves $1.46 billion he said should remain exempt from review.

Accord aside, the planned equalization changes should benefit the province, Sullivan said.

Nearly 20 per cent of the province'’s total revenues derive from the oil and gas sector, he noted. That'’s a much larger proportion than most other provinces.

And other non-renewable resources - — such as the mining sector, with Voisey'’s Bay coming on stream - — would also be exempted from equalization, the finance minister said.

"“We would benefit more than we would benefit just by having this Atlantic Accord now,"” Sullivan noted.

Equalization is an important issue for the province.

Newfoundland and Labrador received $861 million in equalization from Ottawa this year, according to the province'’s 2005-06 mid-year fiscal update.

That'’s in addition to hundreds of millions in offshore royalties and new Accord benefits.

The overall budget clocks in at about $4.3 billion.

The planned equalization changes could be detrimental to other provinces, however. Quebec, New Brunswick and Prince Edward Island, for example, have relatively little or no revenues from non-renewable resources.

The Conservative platform promises "“we will ensure that no province is adversely affected from changes to the equalization formula,"” but does not offer further details.