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How we take from rich and give to poor

By BRUCE LITTLE
00:00 EST Monday, November 17, 2003   

It's time for that annual bit of nasty business -- the who-pays-who-gets update on the financial workings of Confederation.

Once a year, after Statistics Canada produces its provincial economic accounts, we tally the manner in which Ottawa takes from the rich provinces and gives to the poor. The data tell residents of each province and territory whether they are a net contributor to the national public purse or a net beneficiary.

This is an exercise that federal politicians don't much like since some worry that such numbers might arouse regional resentments.

Rich provinces discover once more that they put more into the federal pot than they take out, while poorer provinces are reminded that they take out more than they put in.

The new data show that the federal government ran a total surplus of $12.8-billion on a national accounts basis in 2001, the latest year for which there are data. According to the Statscan measure, Ottawa took in $192.9-billion in revenue and spent $180.1-billion.

But the provincial figures vary enormously. In some provinces, the federal government raises more money than it spends, producing a surplus. In others, it spends more than it raises, so there is a deficit.

The results for 2001 will be familiar to anyone who has tracked these figures over the years.

Ontario, Alberta and British Columbia were net contributors, while every other province and territory was a net beneficiary. The feds ran surpluses totalling $36.2-billion in those three and deficits adding to $19.9-billion in the rest of Canada. It also ran a deficit of $3.5-billion abroad, where it spent money (financing embassies and military operations, for example) but took in very little revenue.

Populous provinces tend to produce the biggest numbers, though that is changing. Ontario, for example, generated a surplus of $25.6-billion for Ottawa in 2001, almost double the national total, while the surplus in Alberta was $7.8-billion.

Until 1996, Quebec -- with about one-quarter of the population -- could be counted on to generate the biggest total deficit. But in 2001, that honour went to Nova Scotia , with a shortfall of $4.2-billion.

To keep things in context, we'll run through the provinces using per-capita figures, which neutralize the population effect.

Albertans were the country's biggest net contributors; they chipped $2,553 per person into the federal treasury more than they took out. That's no surprise. Alberta has the country's highest personal incomes and fat profits for Ottawa to tax, while its healthy economy limits the amount of money Ottawa needs to spend there for things like employment insurance.

Next in line was Ontario, with a federal surplus amounting to $2,156 per person in 2001. It has Canada's second-highest incomes and a strong economy that produces profits and requires less spending.

British Columbia, despite its economic woes of the past decade, still managed to generate a surplus of $684 per capita ($2.8-billion in total), even though it qualified for federal equalization payments that year.

Now we cruise into deficit territory, where sharp-eyed readers will note that the total deficits for the provinces don't add to their $19.9-billion total; the reason is rounding.

Quebec's per capita shortfall was the smallest -- $412 -- but the total came to just over$3-billion. The recent decline in federal deficits in Quebec -- from about $1,700 annually in the mid-1990s -- reflects the fact that the EI program now runs a surplus there rather than a deficit.

In Saskatchewan, the federal deficit totalled $1.9-billion or $1,942 a head. Neighbouring Manitoba was next with a per-capita deficit of $2,372 or $2.7-billion in all.

The federal deficit in the Northwest Territories has plunged in recent years, likely as a result of the diamond mines that have opened there. In 2001, Ottawa's total shortfall there came to $108-million or $2,646 per person, down from more than $16,000 only two years earlier.

The figures leap as we move east. In all four Atlantic provinces, Ottawa's deficit increased in 2001, reflecting that year's economic slowdown. But all were in line with the results of the previous half-decade. For the record, here are the per-capita numbers (with the totals in brackets): New Brunswick, $3,921 ($2.9-billion); Nova Scotia, $4,483 ($4.2-billion); Newfoundland and Labrador, $5,192 ($2.7-billion); and Prince Edward Island $5,341 ($730-million).

Move north again and there's another huge jump in deficits. Ottawa's deficit in Yukon was only $582-million, but on a per-capita basis, it was $19,317. In Nunavut, the total shortfall was $914-million, or a staggering $32,502 per person.

All told, it's a picture of Confederation working the way it is designed to work -- with Ottawa acting as the vehicle to redistribute income from richer to poorer regions. But some people in richer provinces don't like their donor status and some in poorer areas don't like to see their dependence aired in public. Whatever the reaction, the numbers are worth knowing.

blittle@globeandmail.ca

 

 

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