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Equalization payments a failure: report

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TORONTO -- The federal equalization program leads to worse public services in three "have" provinces -- Ontario, Alberta and British Columbia -- while "have-not" provinces maintain gold-plated public services and free-spending governments, say the authors of a new report released Wednesday.

"The evidence presented in this paper strongly suggests that, in many important areas, levels of government services in donor provinces such as Alberta and Ontario are significantly below those that exist in the major recipient provinces," the authors, Ben Eisen and Mark Milke, wrote in the report for the Winnipeg-based Frontier Centre for Public Policy.

They argue Ottawa should freeze the program with an eye toward scrapping it altogether.

According to the report: Recipient provinces have more public servants, nurses, doctors, teachers and long-term care beds per capita than in the three major contributors to Confederation. Tuition at universities and colleges, in general, is cheaper. Daycare spots are more plentiful per capita, and the have-not provinces have more long-term care beds.

While Ontario received equalization for the first time in history in 2009-10, the authors consider it a "have" province because it still contributes substantially more than it receives.

Ontario, Alberta and B.C. are ahead in only one of 10 statistical categories analyzed in the report: subsidies for prescription drugs. Two other categories -- social spending per capita and police officers per capita -- were inconclusive.

Ontario Premier Dalton McGuinty agreed with the report's general conclusions, but said doing anything about it isn't a priority for his government.

"I haven't chatted with any premier that thinks equalization is working well. That's a part of the Canadian condition," McGuinty said. "Developing consensus on how to fix it -- that's nearly as complicated as amending the Constitution."

Quebec is the recipient of most equalization payments; it will receive almost $8.4 billion in 2009-10 out of a total equalization budget of $14.2 billion for the six receiving provinces.

According to the authors, Quebec's equalization payments have grown by 74 per cent in the last four fiscal years, since 2005-06. Payments to Manitoba have increased 29 per cent during this period while equalization for New Brunswick has jumped by 25 per cent.

Beyond producing better-quality services in "have-not" provinces, the authors argue the program also promotes inefficient government spending and a lack of accountability in recipient provinces.

David MacKinnon, a former senior bureaucrat, bank executive and chief executive of the Ontario Hospital Association, said the report brings into focus the failings of a massive, wasteful, program.

He criticized successive federal governments for failing to address the problem.

"Unbelievably, the Government of Canada has never undertaken a serious study of the consequences of shifting $40- to $50 billion each year from high-productivity jurisdictions to those with low productivity and economies dominated by massive inefficiency in their public sectors," he told a gathering at the National Press Club in Ottawa Wednesday.

Equalization was introduced in 1957 to promote comparable public services in all 10 provinces.

The federal program takes federal tax dollars and distributes them to provinces with lower per-capita fiscal capacity.

-- Canwest News Service

Republished from the Winnipeg Free Press print edition February 25, 2010 A9

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