Minister Flaherty states the Fed's case on Equalization...

After the last federal budget - the one in which Stephen Harper reneged on his promise to remove non-renewable resource revenues from the equalization formula - I wrote Canada's Minister of Finance to ask a question and to make a few points.

Well lo and behold his response showed up yesterday in my email (only 6 months later).

Contained in my letter to the Minister was the following question:

My question to you is simple - will you honour the written promise made to voters during the last federal election - that is to remove all non-renewable natural resource revenues from the equalization formula?

Here's the Minister's Spin:

September 12, 2007

Dear Ms. Kelland-Dyer:

Thank you for your correspondence of March 8, 2007 regarding Budget 2007 and the Atlantic Accords. Please excuse the delay in replying.

Budget 2007 delivers on the commitment of Canada’s New Government to restore fiscal balance in Canada. A major feature of this commitment is a renewed and strengthened Equalization program that will now help to better ensure that all provinces are able to provide their residents with reasonably comparable levels of services at reasonably comparable levels of taxation.

The Government of Canada’s position has been clear and fair.

First and foremost, the Budget fully protects the Atlantic Accords. They have not been tampered with; they remain intact. Nothing has been taken away from provinces that currently benefit from the Atlantic Accords. Under Budget 2007, Nova Scotia and Newfoundland and Labrador can operate under the existing Equalization formula for the life of the Atlantic Accords – and receive the same benefits as before, with no fiscal capacity cap on either Equalization or Atlantic Accord payments. This means that Nova Scotia and Newfoundland and Labrador will receive every dollar to which they are entitled under the Atlantic Accords.

This also means Nova Scotia keeps the very same arrangement that provides benefits under the 1986 and 2005 Accords, which includes an $830 ­million up-front payment, and Newfoundland and Labrador keeps the arrangement that provides benefits under the 1985 and 2005 Accords, including a $2­billion up-front payment. This arrangement is not available to any other province.

In addition to respecting the Accords, Budget 2007 goes further by offering both provinces a positive choice for the future. At any time over the life of the Accords, Nova Scotia and Newfoundland and Labrador can choose to opt into the renewed Equalization program, if either province determines this as being advantageous. Nova Scotia and Newfoundland and Labrador could therefore receive even higher benefits than under the existing formula, while retaining their right to offset payments under the Accords. This is a choice that is up to each province to make; it will not be imposed upon them.

Nova Scotia and Newfoundland and Labrador have also been given even more flexibility beyond what was set out in Budget 2007. The budget legislation passed by Parliament allows both provinces to opt into the new Equalization formula for 2007­08, while preserving their ability to stay in the existing formula for the life of the Accords.

If Nova Scotia or Newfoundland and Labrador choose the new Equalization formula, it is only fair that the whole package would apply, including the fiscal capacity cap that is an integral part of the new Equalization program. It would not be fair to other provinces if only these two provinces were allowed to choose those parts of the new Equalization program that benefit them.

It must not be forgotten that placing the Equalization program on a principled basis going forward was an important, shared goal of the Government of Canada and all the provinces. The report of the Expert Panel on Equalization and Territorial Formula Financing provided an independent, balanced basis to do just that. An important principle was the application of a fiscal capacity cap, which sets a ceiling on Equalization payments based on the fiscal capacity of the highest non-receiving province. As stated in the report, “Equalization…should not result in less wealthy provinces having a greater fiscal capacity than provinces that do not receive Equalization.” The Government of Canada recognized this important principle last fall in Advantage Canada.

The growing prosperity of Nova Scotia and Newfoundland and Labrador is something to celebrate. The fiscal position of both governments is getting stronger – both provinces are forecasting surpluses for 2006­07 and onward, while providing their residents with general tax relief. With 100­percent protection of the Atlantic Accords, each province can more than ever make sustained improvements to its economic and fiscal situation.

In short, we have delivered on our commitment to the provinces and territories. Our plan to restore fiscal balance ensures that this federation works for the good of all Canadians – including those in Nova Scotia and Newfoundland and Labrador.

Thank you for communicating your views.

Sincerely,

James M. Flaherty

I highlighted the last paragraph for emphasis.

You will note the one question asked was not answered.

I also note that Flaherty only used commitments stated after they became government. The Minister is not prepared to address Stephen Harper's promises made to get elected. In this one finds the reason not to vote Conservative based on any promises or commitments made during the next federal election - for they are worthless.