Quebec's glass house
National Post
Published: Tuesday, April 11, 2006
If the Quebec government believes it has a claim on more of Alberta's resource income because, as it insists, the oil and gas business benefits from heavy federal subsidization, will Quebec also commit to sharing revenue it receives from its own heavily subsidized aerospace industry?
We do not accept the numbers Quebec is using regarding direct and indirect subsidies to the energy industry -- $8.3-billion over the six most recent years on record. But even if that figure were accurate, it would pale in comparison to federal subsidies to Quebec's aircraft manufacturers over the same period.
That is not to mention federal protection of Quebec's dairy and pork industries. And preferential treatment in defence contracts. And non-repayable loans for factories. And so on.
In the last four decades, Quebec and Quebec-based companies have received from Ottawa almost $220-billion more than they have paid back into Confederation. Before Jean Charest, the Quebec premier, goes any further in his argument that Alberta should be obliged to pay more in equalization because of federal subsidies to its key industry, he might want to look around at the glass house Quebec lives in.
Alberta is already far and away the largest per capita contributor to federal equalization and transfers. Since 2002, Albertans' net contributions each year have averaged $14,000 per family, or $3,500 per person. That is five times the national average -- nearly three-and-a-half times more than second-place Ontario. Since interregional wealth transfer became a major federal goal in the early 1960s, Alberta has paid into Confederation $244-billion more than it has taken out.
Nor does the rest of the country benefit only from the enormous taxes Albertans pay into the federal equalization and transfer schemes. Take the oilsands projects in northern Alberta. Over the next 15 years, these are expected to generate nearly $900-billion in new economic activity. From that amount, governments will reap $123-billion, according to the Canadian Energy Research Institute. And of that amount, Ottawa will grab the biggest single share -- $51-billion. Almost one-third of the jobs created in oilsands exploration and service will be created outside Alberta, and almost one-third of those in Ontario. Approximately 12% will be in Quebec.
A major revamping of the federal transfer arrangements is long overdue. Indeed, the first step in such a reworking should come later this month or early next, when the Expert Panel on Equalization and Territorial Formula Financing (EPETFF) will issue its final report. All major moves by Ottawa should wait at least until then.
One consideration that should be added to transfer calculations, however, is a recipient province's ability to spend what it receives wisely. Because of its wealth, Alberta is an easy target of calls for greater contributions. But what of Quebec's own profligacy? It has always been one of the freest spending provinces. Its provincial debt sits at $117-billion, 44% of provincial GDP -- by far the largest burden of any province. Even if Alberta is flush with cash at the moment, why should that oblige it to underwrite the overspending of another province?
If Quebec governments like to dream big and spend big, that should be their business. But Ottawa should not help Quebec City cast around for other sources of income outside the province just because that is more palatable for Quebec politicians.
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