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Sunday, November 04, 2007

Federal Conservatives Out of Touch with Provinces

Are you wondering what the federal government is up to?

Has the actions taken by Ottawa (especially the conservative government) got you thinking they are on your side and on the right track?

Then you need to dig past the headlines.

To say I'm not a big fan of the Globe and Mail is the understatement of the year, but every now and then one of their columnists actually maks a point worth noticing. Although the writer clearly missed the point in reference to Newfoundland and Labrador's premier and his attacks on Ottawa, (he was already well above 70% in the polls prior to the election) what follows, from the Globe's Report on Business, is interesting

It raises points that should be considered when it comes to federal/provincial discussions. The question being, who really needs who the most. The conservatives might also want to reconsider their statement that relations between the two levels of government "have never been better in Canada".

From the Globe and Mail:

Finance Minister Jim Flaherty is a master of the headline-grabbing declaration. In the last year, he has told Canadians that Canada's total net debt will be eliminated by 2021; that fiscal balance has been restored; that a planned common securities regulator will enhance regulatory efficiency; and a that corporate income tax rate of 25 per cent by 2012 will be a powerful brand for Canada globally.

The one thing that unites all of these federal claims, aside from the fact that they make short, sweet media hits, is that they won't happen without provincial support. So one would assume that Mr. Flaherty, a former Ontario finance minister, has gone the extra mile to ensure he has buy-in from all his provincial colleagues before presenting his latest plan.

Apparently not.

Spokesmen for a number of provincial finance ministers said this week they hadn't heard a peep from Ottawa before Mr. Flaherty announced his goal of a 25 per cent combined corporate income tax rate. (Ontario's responded with some meaningless twaddle about not wanting to speculate about whether consultations had indeed occurred, but that may have been due to confusion in the new minister's office).

It points to a rather high-handed approach to the very people Mr. Flaherty needs co-operation from if he is to realize the lofty national goals he has set. Running roughshod over the enfeebled opposition parties in Ottawa is all very well. They are, after all, the opposition and would do the same if they had a chance. But the provinces should not be regarded as such if Canada is to work.

Yet if you look at the state of federal-provincial fiscal relations these days, there are lots of signs of acrimony.

Earlier this month, the government of Saskatchewan filed a lawsuit against the federal government over the equalization plan Mr. Flaherty said would restore fiscal balance. Premier Danny Williams of Newfoundland has mused about joining in on the equalization suit, but for now is contenting himself with bad-mouthing the prime minister and threatening to campaign against federal Conservative candidates in the next national election.

Monique Jerome-Forget, the Quebec finance minister, blasted Mr. Flaherty for his tactics, which she called aggressive, in pushing a common securities regulator. She suggested he should spend more time on consultations. And just about every provincial finance minister claims that they are sending more money to Ottawa than they are getting back and want the situation addressed. Some of these provincial utterances can be dismissed as political bombast.

A certain amount of federal-provincial jostling is inevitable when it comes to financial matters, especially if a province is headed for an election, as was the case with Newfoundland and is the case with Saskatchewan. Still, Mr. Flaherty must know that if he wants provincial support for his ideas, it's advisable to at least give his counterparts a heads-up beforehand, rather than forcing them to scramble after the fact.

On the matter of corporate income tax, he acknowledged that the provincial part was not his jurisdiction. But then he announced a goal of 25 per cent that he can't deliver on his own.

A cynical observer might conclude that it's the headline that matters and not the actual achievement. The lowest corporate tax rate in the G7 countries (which is what a 15 per cent federal tax and 10 per cent provincial tax would be as long as everyone else stood still) has a definite ring to it. With luck, media reports will feature that figure rather than digging deeper to see if it is realistic.

Look what has happened with the Alberta royalty changes announced last week: news reports repeated the Alberta government's claims (and oil industry gripes) even though royalty experts noted that it was mathematically impossible for the government to meet its announced targets. A less cynical interpretation is that Mr. Flaherty expects to persuade the provinces to go along on grounds that a low corporate tax rate will attract new business and allow existing businesses to flourish.

Setting aside the lack of groundwork done to prepare for this happy eventuality, there is another problem: the provinces may have other plans for their taxpayers' money. Carole Taylor, the B.C. minister of finance, alluded to this in her immediate response to the federal plan, saying she would have to see how it fit with the province's overall economic plan.

Among the challenges that all provinces face are increasing demands from municipalities for more money, the mounting cost of social programs, and aging infrastructure that urgently needs to be repaired or replaced. Any one of these may appear more urgent to a provincial finance minister than going along with Mr. Flaherty's plan to lower corporate income taxes.

In the past, the federal government could use the promise of more money from Ottawa as a sweetener when asking for provincial support on a particular plan. But the Conservative government says it plans to reduce spending in areas of provincial jurisdiction, a move that will also lessen its clout with the provinces.

The upshot of all this is that unless you are a business operating in Alberta, where the provincial corporate tax rate is already 10 per cent, don't plan on paying a combined rate of 25 per cent any time soon.


Anonymous said...

Myles' preamble should have noted the individual who wrote this story for the G&M. Her name is Madelaine Drohan. You probably noticed her story on the Hebron MoU that ran in the G&M on Sept. 21st. It was astonishing for its even tone...signs of honest leg work and not a drop of hyperbole. So I checked her bio; lo and behold she's the correspondent in Ottawa for The Economist and wrote the stories on N&L that ran last month in that newspaper. Do some more checking and you'll find that, unlike many professional keyboard-clackers up along, it's likely that she actually gives a damn.

A Big Black Dog with Two Tails,
Leduc County, AB ex St. John's

Ussr said...


Impressive.A canadain who see's past provincail border's.Rare.

Calvin said...

Well Myles,i hate to keep scribbling on your blog but as I was saying a few days ago.


Give a Dog enough rope and he will hang himself.Its to easy to beat-up on this guy ,but I want evrybody to know ,i just can't help myself.

Anonymous said...

That isn't the only thing that should be hurting this guy. What about broken promises, plans to extend the Afghan mission, a poll today shows no support for that, his strangle hold on his ministers and his hatred for the supreme court.

there's another dictator in the news who says the supreme court is getting in the way of his governing, it's the president of pakistan.

I guess all wanna be dictators follow the same play book.

Anonymous said...

From the Toronto Star:


Harper's gutter tactics
Nov 06, 2007 04:30 AM

How low will Prime Minister Stephen Harper go to score cheap and dirty political points against his opponents?

For the unsettling answer, Canadians need look only as far as the latest Conservative party television advertisement, which attacks Liberal Leader St├ęphane Dion for saying he might consider reversing cuts Harper's government has introduced to the goods and services tax.

The television spot, which started airing on the weekend, shows Dion frozen in a shrug and accuses him of wanting to make a "multi-billion-dollar tax grab" to pay for his "lack of priorities." It also questions his leadership and warns viewers that he is "not worth the risk."

Never mind that most economists say that slashing a consumption tax like the GST is bad public policy or that the latest percentage point Harper plans to shave off the GST could have paid for much-needed public investments in cities and anti-poverty measures. Harper has chosen to ignore these legitimate criticisms and take the low road by launching a misleading and unsavoury attack against Dion.

But Canadians should by now have come to expect such gutter tactics from Harper. Last spring, he unleashed similar attack ads against Dion. One ad suggested Dion was a "sellout" or "traitor" to Quebecers because he is a strong federalist. Another tried to imply he was a criminal, picturing him behind yellow police tape with former Liberal prime minister Jean Chr├ętien. And yet another linked Dion to the Liberal sponsorship scandal, even though he had no part in the affair.

With this latest ad, Harper has again revealed a nasty side to his personality that raises questions about his ability to set a positive tone for Canada. Partisan politics is a rough-and-tumble business. But Canadians rightly expect their political leaders to take a relatively civil and constructive tone, particularly when there is no election taking place.

For Harper, though, playing dirty is his preferred style, in sharp contrast to his election pledge to run a clean and civilized administration.