Concluding comments

In the past year, members of the Panel have reviewed all aspects of the Equalization program, listened to the views of provinces and experts, explored a wide range of options, and developed what we believe is a balanced approach for the future.

During the year, we have also seen growing interest in Canada’s Equalization program starting with fundamental questions about the purpose and
effectiveness of Equalization and fueled by provincial concerns about fiscal imbalances, both among provinces and between the provinces and the
federal government.

While many of these concerns extend beyond the Panel’s mandate, we
cannot end this report without commenting on a number of issues important to Canada’s future.

This is an important Canadian program which for too long has not received the attention or interest it deserves. In the view of the Panel, the more decentralized Canada becomes, the more important Equalization is to the future of Canada.

First, fiscal arrangements in Canada are being reduced to debates about who pays and who gets. The Panel understands the financial challenges faced by many provinces across the country and their concerns about their financial capacity compared with that of the federal government. But this kind of “cheque-book” federalism puts all the emphasis on money and the interests of individual provinces while any sense of a higher purpose is lost. This issue is not helped by what many have seen as a growing lack of trust between the federal government and the provinces.

Related to this concern, some have suggested that Canadians no longer support the concept of sharing across the country as strongly as they did in the past. In fact, one participant in the Panel’s consultations suggested that while the underlying concept of Equalization received unanimous support when it was included in Canada’s Constitution, he’s not sure the same would be the case today. Fundamental questions about the very nature of Equalization and whether it is achieving its intended objective have caused some to suggest that the program should be scrapped entirely. In the Panel’s view, both the provinces and the federal government need to tackle these questions head on. This is an important Canadian program which for too long has not received the attention or interest it deserves. In the view of the Panel, the more decentralized Canada becomes, the more important Equalization is to the future of Canada.

The Panel also has concerns about the potential for growing economic disparities in the country as a result of continuing high oil and gas prices. Our recommendations provide a balanced solution. But if oil and gas prices in particular, stay high over the longer term, disparities among provinces with and without resources will increase and become a source of growing friction. The potential of this issue to undermine the future of Equalization is high, particularly as provinces seek special deals similar to the Newfoundland and Labrador and Nova Scotia Offshore Accords.

It’s up to the federal government and the provinces to address these issues over the longer term and determine how they will, together, deal with the potential for growing disparities across our nation.

In many respects, these issues go to the heart of our federation and are beyond the ability of an unconditional, formula-driven program like Equalization to resolve. It’s up to the federal government and the provinces to address these issues over the longer term and determine how they will, together, deal with the potential for growing disparities across our nation.

Finally, the Panel was struck by how little is known about the Equalization program and how few people across the country are interested in it, even though it involves billions of taxpayers’ dollars. Canadians deserve to know more about the Equalization program, particularly the purpose it achieves and the benefits it provides to people across the country.

In closing, we hope our recommendations will help put Equalization back on track. More importantly, we hope our recommendations will put Equalization on a solid foundation for the future. And we hope our report will bring greater focus and understanding to an important Canadian program.

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