Blast from the past: PQ demands more cash from Ottawa

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Quebec Premier Pauline Marois, right, reacts as she receives a copy of the budget speech from Finance Minister Nicolas Marceau Tuesday, November 20, 2012 at the Premier's office at the legislature in Quebec City. THE CANADIAN PRESS/Jacques Boissinot

QUEBEC - The new Parti Quebecois government is promising to pick a fight with Ottawa over federal payments, arguing the province is on track to be shortchanged by $15 billion.

In tabling its budget Tuesday, the pro-independence party blamed unilateral decisions by the federal government in recent years for hampering Quebec's efforts to balance its books.

Finance Minister Nicolas Marceau indicated the sovereigntist PQ would be more aggressive than Quebec's former federalist government in pushing Ottawa to loosen its purse strings.

"The views we are expressing regarding federal transfers are fairly similar to those expressed by the past government — except that, and this is a key difference, we are saying it loud," Marceau told a news conference.

"We will be loud and clear about it."

The effort is in some ways a throwback to the PQ's last stint in power, a decade ago.

The PQ mounted a fight for more transfer payments because of an alleged federal-provincial "fiscal imbalance." The province's federalist Liberals were drawn into the campaign, as were other provincial governments. The Harper Tories enjoyed a brief honeymoon in Quebec by promising to fix the problem and, eventually, they transferred billions to the provinces.

Asked what the PQ can do this time to pressure the federal government, Marceau replied: "We will, first of all, say those things clearly.''

''In terms of building political pressure, these are things that can be done over the course of the next (few) months. We will see how things go. Of course, as a minority government, all of these things are not so easy."

In his speech, Marceau said Quebec, Canada's most indebted province, has suffered from the Harper government's steps to cap the equalization program and federal health transfers.

"We are witnessing a 10-year setback, to the time when Quebec as a whole was mobilized around the elimination of the fiscal imbalance," he said.

But there are also stark differences with the fiscal imbalance fight of a decade ago.

In those days, Bernard Landry's PQ government united others premiers around the idea that everyone should get more cash from Ottawa.

This time, the PQ is touching a far more divisive topic: equalization. Marceau said Quebec has lost $6.6 billion in equalization transfers that it should have received in the last four years.

Any change to the equalization formula could cause severe rifts between the provinces, or with the federal government, and undermine national unity.

Equalization is a federal program through which funds are gathered from wealthier provinces and transferred to poorer ones, to meet the constitutional requirement that all provinces be able to offer similar services with similar tax rates.

The PQ highlighted in Tuesday's budget that in 2012-13 Quebec was the second-lowest per capita recipient among the provinces in equalization payments at $943.

It said only Ontario received less cash per capita. The equalization formula is based on the principle that the poorer the cash-receiving province, the more it should receive per capita.

The PQ also took up a message shared by other provincial governments on changes to health funding, saying it will incur a shortfall of more than $8 billion in health transfers over the next 10 years.

In concluding his speech, Marceau said his government is making the most of the tools at its disposal.

He reiterated the PQ's long-held desire for Quebec to take full control over its taxation from the federal government, particularly as a means to stimulate private investment.

Marceau said an independent Quebec would save billions of dollars in administrative overlap with Ottawa.

"We will be able to go much farther if we have all the means of a sovereign country," he said.

Marceau announced Tuesday that Quebec will post a balanced budget in 2013-2014, which would occur before the federal government eliminates its own deficit.

Earlier this month, the Harper government pushed its target date to balance the books back by one year due to global economic weakness that has cut into commodity prices and tax revenues.

The update showed a bottom line worse than many expected, with the deficit at $26 billion, up $5 billion from the March budget forecast. The new calculation predicts Ottawa to show a surplus of $1.7 billion in 2016-17.