Pressure from Ottawa puts squeeze on provinces

Dan Leger
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Anyone else experiencing a peculiar feeling, a strange sensation of being squeezed? Feeling hairy hands tightening around the neck? If you are experiencing such creepy sensations, you might be a Maritime premier because federal decisions are putting their budgets under pressure.

The squeeze is on in employment insurance, supports for business, in public health, government program spending and in equalization. Even the lighthouses are being left to rot as Ottawa walks away.

We all know why it's happening, not that it makes it any easier. The federal government, like all of its international peers, faces stubborn deficits and persistent drags on the economy. New tax revenues are hard to come by while new demands are always appearing.

Finance Minister Jim Flaherty admitted last month that the federal books won't be balanced until at least 2015-2016. There are warning signs out there that even that goal might be unrealistic.

So the government is trying to find savings in old-age pensions by raising the age of eligibility. It is extracting a peace dividend from the Canadian Forces now that it is out of combat in Afghanistan. It has issued orders to find cost reductions pretty much right across the board of government: national parks, environmental protection and culture.

Amid the spending cuts, it becomes clearer almost by the day that the federal government won't do much to soften the blows either. It's just the way it is.

Opposition NDP and Liberal MPs from across Atlantic Canada have been complaining for months about changes to employment insurance, which they claim hurt seasonal workers and those who find some work while on an EI claim. They claim that entire towns are being cut off the EI books.

Not only that, but it's getting harder to establish legitimate claims. Office staff in the employment insurance program have been trimmed, lengthening lineups for all claimants. For seasonal workers, the EI reforms could mean no choice but to accept jobs at the end of long commutes and for lower wages.

Statistics Canada said last week that fewer workers were deemed to be eligible for EI, partly because of the federal government's hardening of regulations but also because people are working in more short-term jobs or working only part time.

You'd never know that from the government. In India last week, Prime Minister Stephen Harper described the changes as "improved incentives in our Employment Insurance program to better connect Canadians with available work."

Less money is flowing into the Atlantic Canada Opportunities Agency, which is supposed to create jobs in the Maritimes and Newfoundland. The opposition is complaining about that, too, saying the regional development agency has had its budget cut to $236 million, down from $314 million the year before.

ACOA Minister Bernard Valcourt says the agency needs less because of the great boon of the federal shipbuilding program. The fact is, though, that the ACOA money has already been cut and shipbuilding won't produce jobs or much new business for some time to come.

But EI changes and the slow strangulation of ACOA are small beans when you look just over the horizon, to 2014-2015, when the real squeeze starts. That's when Ottawa's unilateral decision to change the way it funds health care goes into effect.

The new formula, imposed without agreement from the provinces, will now distribute federal support for health care on a per-capita basis. There's no apparent consideration at all to the expected impact in individual provinces.

The new formula also means the rich will get richer. Alberta will get $1 billion more every year while funding to smaller provinces, including all of the Maritimes, will drop.

There are also dark rumblings about the future of the national equalization system, which provides such a large chunk of our provincial revenues. The system is enshrined in the Constitution, but it's not protected from changes that could seriously affect local government services.

At some point, wise people are going to have to find a balance between the federal government's need to balance its books and the needs of provinces. The question now is how much damage has to happen before that balance is reached.

Dan Leger is a Halifax-based writer and commentator. Twitter: @Dantheeditor.


Geographic location: Ottawa

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