What Are Other Provinces Saying?
All provinces agree—the fiscal imbalance must be corrected. But there are differences of opinion on how to correct the problem.
About Equalization ...
Provinces who do not receive equalization are concerned about further increases in the size of the equalization pot. However, current restrictions on the equalization program are already limiting provinces from receiving the level of financial support guaranteed under the constitution. As a result, the ability of some provinces to provide comparable levels of basic programs and services is already being threatened. If equalization funding is not increased, the differences among provinces will grow, and Canadians’ constitutional right to similar programs and services at similar tax levels will be further compromised.
Provinces which are rich in natural resources believe the revenues they generate from these resources should not be included within the equalization formula. Specifically, they argue that natural resources, such as oil and gas reserves, eventually run out, so the revenues they generate cannot be used to fund programs and services.
However, natural resources generate wealth for a province—whether that money flows directly into programs or is used to reduce a province’s debt. To exclude these resources would seriously misrepresent a province’s wealth and entitle the province to equalization that would increase the inequities among provinces—the exact opposite of what equalization is intended to achieve.
While Nova Scotia expects the federal government will focus on a package of changes that will balance the needs of all provinces, this change—in isolation—would cost Nova Scotia about $200 million. As can be seen in the graph below, the provinces that would benefit most from this change are already wealthier (based on their "fiscal capacity")—than those provinces which would lose money.
About the Offshore Accord ...
Some provinces have criticized the Offshore Accord signed between the federal government and Nova Scotia. However, the Accord did not take one dime away from any other province’s equalization payments. The revenues are fully accounted for within the equalization formula.
Nova Scotia and Newfoundland signed bilateral agreements with the federal government related to the Offshore Accord, and outside of equalization. This again is rooted in a constitutional obligation to further economic development in all regions.
Finally, these bilateral agreements are similar to those that exist with other provinces, to support economic development. Examples include grain subsidies in the west and subsidies to the automotive and aerospace industries in central Canada.