How many times have provincial cabinet ministers or the Premier's parliamentary assistant claimed that the 2005 Equalization offsets deal put $300 million in the provincial treasury this year?
Lots of times? Too many times.
Paul
Oram did it this morning speaking with Randy
Simms on
VOCM's Open Line.
But here's the thing: it isn't true.
The 2005 offshore deal has not added a single penny of new cash to the provincial coffers since 2005.
Here's why.
The 2005 Equalization offsets deal provided for two specific things that are relevant. First, there was an advance payment of $2.0 billion. Second, the
clause covering that advance payment also provided:
Amounts calculated starting in 2004-05 under clauses 3 and 4 will not result in actual payments to the province until such time as their cumulative value exceeds $2.0 billion. [Emphasis added]
The cheque was received and applied against a portion of the unfunded pension liability in 2005.
Spent.
All that has occurred over the past four budgets (FY 2004 to FY 2007) is that the finance minister is accounting for the payment that the province is entitled to receive under the deal.
There's no new cash involved. That's because there won't be new cash until the full $2.0 billion has been accounted for annually. right now, the four year total (including the paper money cabinet minister talk about for this year) is $847 million. Simple calculation: another $1.153 billion will have to be drawn down before that deal actually generates new cash in the bank.
Take a look at any of the calculations done by Wade Locke and you will see pretty quickly that the 2005 deal will not generate any new cash before the deal expires. The provincial government will not qualify for Equalization under either system - fixed pot or 50% exclusion - long before the add-on benefits reach that figure of $1.153 billion.
In some respects, the ongoing racket over the so-called side deals is a bit overblown. The Atlantic Accord (1985) provided for temporary, declining Equalization offsets intended to cushion the provincial treasury against a sudden drop in transfers. The transitional cash was intended to support debt reduction and infrastructure development.
Improving the financial lot of Newfoundland and Labrador makes sense for the province and it makes eminent sense for the country. Temporary transfers from the federal government to Newfoundland and Labrador for a well-understood purpose, even if linked to the Equalization program, is backed by precedent and the focused nature of the transfers doesn't come close to destroying the fundamental fairness of the Equalization system.
Ontarian taxpayers, among others, can rest easy that they will not be funnelling cash into a gaping maw. The whole thing is set up as a limited program. Take a look at even the most
recent assessment of the Equalization program and the offsets, and one thing becomes clear: Newfoundland and Labrador's economy will do so well in the next four years that the provincial government will become a so-called "have" province in short order. Ontarians, and
others upset about the offsets arrangements should follow a simple rule: don't look at the theatrics continuously surrounding the 2005 agreements; look at the facts.
Even the 2005 deal is a temporary arrangement with triggers designed to shut the whole cash tap off when the provincial government becomes a "have" province. The final
agreement - as opposed to the October draft - has a dual trigger to shut down the cash flow. The province must be meet two conditions to keep receiving offsets; the draft version had an "either/or" option that made it easier to extend the deal under any Equalization formula.
Politically, it would impossible for any federal government of any stripe to produce an Equalization program that ignored completely non-renewable resource revenues. It wasn't possible in 1962 when the object of attention was Alberta and it sure as heck isn't possible today when the focus is on Nova
Scotia and Newfoundland and Labrador. Only the most fool-hardy of political parties or a party with no hope of actually forming a government would make a political promise that is politically untenable.
And in Newfoundland and Labrador? Well, aside from the people who voted Conservative on the basis of the Equalization promise - were there any? - few people are likely to organize a lynch mob for Conservatives now or in the future. Sure, there are plenty of provincial Progressive Conservatives who took the cue from the Premier and worked on Conservative campaigns. Realistically, though, Equalization wasn't likely a vote driver except for a very limited number of people.
Conservative candidates may face some heat next time and a year from now they may face a vengeful provincial premier, but realistically, they can rest easy knowing that a year is a long time in local politics. Things change. In 2004, Danny Williams rejected Harper's 100% exclusion option. A year later, Harper supposedly delivered the pyjama's for Danny's cat. A year after that, Harper is "untrustworthy" and his Conservative members of parliament are "traitors".
If nothing else, Conservatives have likely taken heart from the most recent regional poll. That's why they voted for the budget on third reading, despite the intense political pressure. Look at the
whole picture: the only place when
Connies are currently facing a real problem is Newfoundland and Labrador. The federal Conservatives likely are counting on Danny Williams' limited traction outside his own province and, given the available evidence, he doesn't seem to have much traction.
That's because his messages are aimed mainly at his own province. His communications plan ignores the attitudes toward his goals and his approach; it makes no effort to put the local issue in a context that genuinely counteracts perceptions. It does nothing to connect with his audience except, as in the case of teachers and students, with their instinctive, ideological opposition to the federal Conservatives.
Behind it all, though Danny Williams knows full well that his province is not hurting financially. In the worst case scenario, that is where he plays it smarts and opts to maximize the cash, federal transfers to Newfoundland and Labrador through Equalization and offsets will be $2.787 billion over the next four years.
The gap between that and the old Equalization system, according to
APEC figures, is less than $300 million a year over that period and
that amount will likely be generated in the economy anyway. The Premier knows there will be new investment in western Labrador through Consolidated Thompson. He can count on a couple of other major developments in the next five years or so and maybe, just maybe, there will be renewed interest in the offshore oil and gas industry.
Danny Williams is a smart guy and he is playing the whole Equalization racket very smartly. If he has learned one thing over the past three years it is that Danny Williams can make whatever claim he wants and people will react to it without thinking. That's the $300 million thing, for example. He knows he can create a firestorm of domestic political controversy that makes him look good and makes others look like, well, traitors. It reinforces his status as the
only force in provincial politics and that's really the point of the whole exercise.
All politics is indeed very local.
-srbp-
