New Canadian Finance minister caught spreading misinformation on economy

Finance Minister Joe Oliver should stop blaming Ontario

Finance Minister Joe Oliver is compiling a perfect record when it comes to dealing with Ontario and its government. In his three and a half months on the job, he has missed no opportunity to berate and insult the province.

The latest salvo came late last week in the form of an article by the minister in the Financial Post. He dismissed arguments by Ontario’s Liberal government that the province is receiving less than its fair share of federal money as “both false and sad.”

As usual, Oliver didn’t bother to engage with the actual facts of the situation. It’s a tedious and hideously complex subject – but the bottom line is that Ontario is being handed the dirty end of the stick when it comes to fiscal transfers from Ottawa.

It’s not just an abstract concern. The rigged system costs Ontario a lot of money – about $11 billion a year by one authoritative estimate – and that has a serious impact on ordinary people. It means leaner services and much more pressure on the province to cut back even further or raise taxes to do away with its $12.5-billion deficit.

Oliver did throw out some numbers in his Financial Post article. Transfer payments to all provinces will be a record $65 billion this year, up 56 per cent since the Conservatives were elected eight years ago. And, he wrote, federal funding to Ontario “has increased to a record $19.2 billion, up 76 per cent since we took office in 2006.”

Declared Oliver: “The numbers speak for themselves.” In fact, they don’t.

As Matthew Mendelsohn, director of the respected Mowat Centre, points out, a big part of the rise in federal transfers is due to the extension of the Canada Health Accord, which provided for annual 6-per-cent increases in health transfers. Essentially, Oliver is taking credit on behalf of the Harper government for the fact that it extended a deal worked out by the previous Liberal government of Paul Martin.

It’s the Mowat Centre which calculated last year that the whole gamut of federal transfers – everything from the way Employment Insurance is structured to where money for infrastructure upgrades is spent – leaves Ontario short by some $11 billion a year.

But the main point of contention between Ontario and Ottawa is the equalization system, designed to ensure comparable services between richer and poorer parts of Canada. Ontario became eligible for payments in 2009, during the financial crisis, when the province’s manufacturing economy was hit hard.

Oliver writes that the equalization system “operates on a mathematical formula,” as if it was a force akin to gravity beyond the reach of human or political manipulation. In fact, it has been tweaked many times, often to the detriment of Ontario. The latest confirmation of that came in June from the Parliamentary Budget Officer, who issued a report saying Ontario is being shortchanged to the tune of $1.2 billion.

Oliver mocks Ontario for slipping into “have-not” status, and implies that it’s a result of fiscal profligacy by the McGuinty and Wynne governments, or just a refusal to try hard enough. Forget the enormous structural challenges facing the province; forget the fact that Ontario isn’t fortunate enough to benefit from the oil-and-gas commodity boom. Here’s Oliver’s solution to what ails us: “The best approach forward for

Ontario is to resume its role as an economic engine of Canada.”

Thanks much, minister. Don’t know why we didn’t think of that before.

As MP for Eglinton-Lawrence and a veteran of Bay Street, Oliver is ideally situated to think about the serious challenges facing Ontario. That makes his dismissive attitude and failure to address the real issues all the more disappointing – and looking all the more like simple political posturing by the Harper government.

Finance Minister Joe Oliver should stop blaming Ontario
The Star, pfft.
#3  Top Rated Post
Walter, pffft.
captain morgan
Bloc Québécois
Quote: Originally Posted by mentalflossView Post

The rigged system costs Ontario a lot of money – about $11 billion a year by one authoritative estimate – and that has a serious impact on ordinary people.

Guess who else the transfer system costs billions too?
Oliver is definitely no Flaherty.

Joe Oliver’s hands-off stance on mortgages a ‘mistake’ in overheated market, warns Sun Life | Financial Post (external - login to view)

Canada’s Finance Minister is entitled to his own opinions, but not his own facts


This week, the National Post published my op-ed (external - login to view) addressing recent comments made by Canada’s federal Finance Minister regarding Ontario’s long-standing criticism of federal policies governing fiscal transfers and their impact on Ontario’s balance sheet.

This is an important conversation that directly affects Canadians. I appreciated the fact that Minister Oliver is engaging the issue. I also appreciated his direct response in the Post to my own comments. Unfortunately however, it is just as misleading as his original op-ed. (external - login to view)

The Minister and I both agree on something: total fiscal transfers to Ontario are up. But this is not the issue or the point of any complaint that I am aware of. No one has said that transfers are down. The question is equity—whether transfers have been principle-based and formula driven.

No one expects the federal government to randomly pick numbers out of the air, “How about, um, $2 billion more for Saskatchewan, and say, $3 billion more for Manitoba?” “Well, transfers have gone up to everyone” is not a sensible response to Ontario’s concerns over equity. Canadians expect the size of transfers to be based on defensible principles and transparent formulas. After all, if a province expects to receive $2 billion more, only to be told it will get $1 billion instead, the defense that “transfers are up” is neither convincing nor reassuring.

Minister Oliver hasn’t dealt with the substance of the Ontario government’s critique or any of the substantive issues in my piece. I want to address his three main points.

Could Minister Oliver’s public concern with moldy numbers be a sign that the federal government intends to start reporting the data series they ended in 2009? Many of us hope so. If they do, I suspect Ontario’s contribution to the rest of the country – which we peg at about $9 billion – is likely lower due to the fact that Ontario’s Equalization payments are higher than that year. I look forward to new data so we can continue the conversation using up-to-date numbers.

On the issue of redistribution specifically through the Equalization program itself, the Minister is right that the data are outdated. In my piece I cited the figure of $3.1 billion which the Equalization program redistributes from Ontario. That number has now been updated by finance officials—it has now increased to $4.5 billion in 2013-14.

This number is arrived at through a simple calculation that does not involve making difficult methodological choices. It isn’t based on fancy assumptions. It is just the number: Ontario – with below average fiscal capacity – redistributes $4.5 billion to other provinces through the Equalization program, the one program that is supposed to be designed to support provinces with below average fiscal capacity!

Second, Minister Oliver takes exception to the fact that our estimates remove deficit spending from our calculation. We did this for two reasons. One, it is the right thing to do (and I will explain why in a moment); and two, we did this because when we measured Ontarians’ contribution to the federation in earlier reports we were criticized for not removing deficit spending!

I have long argued that federal fiscal transfers should be principle-based and allocation formulas should be transparent. The Mowat Centre released a paper yesterday (external - login to view) that makes the same case. Is this really too much to ask? The lack of transparency and principle-based formulas is corrosive and divisive.

So why 35% of infrastructure funding? Why not 33% or 40%? We’re talking about a $53 Billion program, so the differences are not insignificant. Allocations based on population make sense in major transfers. Needs-based transfers also make a lot of sense, where wealthier provinces receive less and those with lower fiscal capacity receive more. But the federal government didn’t take either of those approaches. It put together a grab bag of different approaches and it refuses to explain or justify the rationale behind the total allocations, hoping maybe people will be confused by the big numbers or comforted by the reassurance that Ontario is “receiving the largest share.”

Well, I’m not comforted. No one in Ontario should be. And Minister Oliver’s response makes me even more uneasy.

A more serious response from the federal Minister of Finance to Ontario’s reasonable critique is overdue.


Canada’s Finance Minister is entitled to his own opinions, but not his own facts | The Mowat Centre (external - login to view)
Free Thinker
+2 / -1
oliver is a moron, giving him a new job doesn,t make him less of one.
No Party Affiliation
Quote: Originally Posted by captain morganView Post

Guess who else the transfer system costs billions too?

Everyone except Quebec. And possibly PEI.
The problem is the world watches and believes what the government puts out as facts.
It can cost us viability and respect.
this government will say anything in order to get elected. It's the Prime Directive, they never leave the campaign trail.
No Party Affiliation
Quote: Originally Posted by Count_LothianView Post

The problem is the world watches and believes what the government puts out as facts.
It can cost us viability and respect.
this government will say anything in order to get elected. It's the Prime Directive, they never leave the campaign trail.

Making them different from any other government exactly how?
Ontario losing, Alberta gaining from federal transfers, watchdog says

Changes to the way federal transfers to provinces are calculated since the Harper government took power appear to have made Ontario a big loser under equalization programs and Alberta the big winner, according to Canada’s budget watchdog.

The parliamentary budget officer says total payments this year will see Ontario obtain $19.2-billion from Ottawa for everything from equalization to health and social transfers, but that is 3.2 per cent less than the $19.8-billion it received last year.

While the province gains under some transfers, it will lose $1.2-billion under the equalization program designed to give so-called “have-not” provinces the fiscal capacity to provide residents services roughly comparable to those in other provinces.

Until this year, Ontario would have received about $640-million from Ottawa under a program that protected provinces from seeing transfers drop in any one year – but that option was scrapped by then finance minister Jim Flaherty in December.

Meanwhile, Alberta – Canada’s richest province – will see its total rise to $5.2-billion this year from $4.1-billion in 2013-14, a 26.8 per cent increase mostly due to Ottawa moving to a per capita funding formula under the Canada Health Transfer program.

The only other province that comes close to Alberta’s windfall is Quebec, which will see its total intake from Ottawa rise 9.9 per cent to $19.6-billion.

Speaking in Toronto, Finance Minister Joe Oliver said Canada has a “fair, balanced and generous” equalization system and that changes were needed to cap growth because it was becoming “unaffordable.”

Ontario was in favour of the changes when it was considered a have province prior to 2009, he said.

“The Liberal government was in favour when it was contributing to the payments, now that they are receiving equalization payments they may have a different view.”

An official with his office said total transfer payments to Ontario had risen by more than $8-billion since the Harper Conservatives took office in 2006.

But Ontario Finance Minister Charles Sousa said the PBO report confirms what he has been saying all along: “The current system of federal-provincial fiscal arrangements is working against, not for, the people of Ontario.”

“Each year, the share of federal revenue raised in Ontario is higher than the share of federal spending in Ontario,” he added. “This money could be used in Ontario to fund more hospitals, nurses or public transit.”

The Liberal government of Ontario has been one of the staunchest critics of the changes. But the federal government responded that it was only applying the formula fairly.

Both are in a sense right, says Mostafa Askari, the assistant PBO, although he notes that the cumulative effect of changes to the system has been to de-emphasize the distributive element of transfers from rich to poor regions.

“The bottom line is the equalization program has moved away from being an equalization program to being another transfer program because, the way it is designed now, it does not equalize to any national standard,” said Askari.

For have-not provinces, “their entitlement will be less, so obviously the larger have-not provinces (like Ontario) will be hit by a larger amount because of their size.”

The PBO looked into the controversial program after a request from Liberal MP Judy Sgro.

Askari said there was little point in examining the bottom line numbers since they are published in the budget each year. Total transfers this year will rise to $62.6-billion from $60.5-billion last year.

But what may surprise many Canadians is how changes introduced by Ottawa have diminished the “progressivity” of the equalization system.

For instance, the equalization program was intended to do just that: give have-not provinces the capacity to offer services more or less available to residents of richer provinces. But several changes, including putting a cap on growth of the transfers, has diminished the program’s capacity.

The move to straight per capita funding on health transfers this fiscal year, for instance, has had a major impact on Alberta. That province will see transfers under that program rise by 33.1 per cent. The Northwest Territories will see a 45.5 per cent increase.

Most other provinces also will get more – about 2.5 per cent – and Newfoundland will get slightly less.

Askari says the per capita funding change will be especially difficult for Ontario and Quebec, which tend to have older populations and are likely to experience higher per capita health costs.

Ontario was also incensed that Flaherty unilaterally dropped the transfer protection program in December, complaining that it would lose more than $600-million as a result. The PBO report notes that Ontario was the only province that would have benefited from the program this year as all others saw a net increase in total transfers.

Overall, the percentage change in total transfers for fiscal year 2014-15 are: Newfoundland and Labrador (+0.5); Prince Edward Island (+4.7); Nova Scotia (+1.2); New Brunswick (+5.0); Quebec (+9.9); Ontario (-3.2); Manitoba (+0.2); Saskatchewan (+4.2); Alberta (+26.; British Columbia (+1.0); Yukon (+4.3); Northwest Territories (+5.9); and Nunavut (+4.2).

Ontario losing, Alberta gaining from federal transfers, watchdog says - The Globe and Mail

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