12 September 2008

Layton shafts Williams on key ABC demand

Jack Layton's promise to "honour the Atlantic Accord" doesn't meet one of Danny Williams key ABC demands and would deliver nothing in new federal transfers to Newfoundland and Labrador under the 2005 Williams deal with Paul Martin.

Williams is seeking to have the province's revenues from offshore oil and onshore minerals  - likely $2.0 billion this year - left out of the formula used to calculate Equalization transfers from Ottawa to the provinces.

Canadian Press gets it wrong:

Premier Danny Williams estimated the difference between the accord and the Tories' revised equalization plan was $10 billion - a sum he recently demanded Ottawa pay over 15 years.

The $10 billion number comes from the pledge made by both Stephen Harper in 2006 to drop non-renewables from Equalization. The estimated value to the province came from projections by a Memorial University economist. The actual value of the Harper 2006 promise Williams is looking for now would be considerably more given the current high prices for oil and minerals.

Harper didn't deliver in 2006.  His government instead went with a revised Equalization formula based on recommendations from an expert panel. It's that failure that ignited Williams' anger at Harper.

In 2006, Layton promised only to deliver an Equalization formula with "A better measure of fiscal capacity."

Evidence of Layton's confusion between Williams' demand and the 2005 deal is in the estimated value of the new Layton "commitment, said by Canadian Press to be worth $400 million according to NDP researchers.

Under the 2005 deal Layton referred to on Friday, the Newfoundland and Labrador provincial government will receive extra federal transfers to offset declines in Equalization coming as a result of growing oil money.  But the extra cash comes only as long as the province qualifies to receive Equalization in the first place.

The provincial government won't qualify for the federal transfer this year, hence it won't be entitled to cash under the 2005 deal. 

Layton's commitment won't actually involve any new cash transfers either.

As part of the 2005 deal, Newfoundland and Labrador received an advance payment - essentially a credit against future earnings under the deal. That money won't be completely exhausted this year by the time the province goes off Equalization.  The credit in the account is considerably more than $400 million.