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Ontario's back is to the wall

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All is not lost, however. As Premier Dalton McGuinty observes (most often in scoffing at Ontario's designation as a have-not province), there are only three net contributors to the federation and Ontario's contribution is 40 per cent more than those of Alberta and British Columbia combined. Indeed, there is a guarded optimism that happy times will return if Ontario can get past its former reliance on a low dollar and low energy costs and latch on to a green economy using its abundant pool of skilled labour.

But there is an irritation — inside and outside government — that the federal government isn't onside. For four years, Mr. McGuinty has been waging a "fairness" campaign to remove some of the structural inequities in the federation and to reduce what he argues is the gap between the money sent to Ottawa by Ontario taxpayers and the value of the services they receive in return.


Other Ontario premiers made a similar case but faced "a wall of opposition," according to Matthew Mendelsohn, a former provincial deputy minister of intergovernmental affairs who has also worked on Parliament Hill. "The political culture in official Ottawa — across the parties and across the bureaucracy — doesn't see Ontario as having distinct and unique needs," said Mr. Mendelsohn, now with the school of public policy and governance at the University of Toronto.

Mr. McGuinty says he was in the dark until he got his first briefing about the "inequity" file from Ministry of Finance officials after he took office in 2003. He recalls being shocked by the ways in which other regions were favoured at Ontario's expense.

"How could this be?" he said to the officials. "Are you sure this is right?" Why haven't I heard about this before? Why aren't we up in arms here in Ontario?"

He has scored some victories — funding for immigrant services was improved — but plenty of concerns remain.

Federal transfers for health care, for example, are less in Ontario than in other provinces. The McGuinty government estimates it is losing $773-million on this score alone this year. Ottawa has agreed to provide equal per-capita funding but Ontario will have to wait until 2014 for this to happen.

The chief irritant these days is EI, which favours workers in regions of traditional high unemployment. The unemployed in Ontario have to work more weeks to qualify and receive fewer weeks of benefits. The McGuinty government says only 30 per cent of jobless Ontarians receive regular benefits, compared to 58 per cent in other provinces. This costs a jobless worker about $4,630 a year.

And because it's tougher to get EI, fewer workers are eligible for the scheme's training programs, which are essential for the post-manufacturing era that looms. Ontario estimates it loses $478-million because of this.

The Premier wants Mr. Flaherty to rectify the regional bias in EI. "A Canadian is a Canadian is a Canadian, when you lose your job," he said.

He also wants the Finance Minister to establish a regional-development program for Southern Ontario similar to the schemes in place for the Atlantic provinces, Quebec, Western Canada and Northern Ontario. "This is Canada's manufacturing heartland and it's being hit hard," he said.

Private-sector economists applaud those ideas and offer other prescriptions to give Ontario a boost.

Finn Poschmann of the C.D. Howe Institute wants Ottawa to broaden a 10-per-cent investment tax credit that is now available only in the Atlantic region and in Gaspé. Mr. Pecaut would like to see an enhanced tax allowance for incremental research and development spending that would be targeted at the hundred companies (many of them based in Ontario) that account for 90 per cent of all R&D.

Don Drummond of TD Economics recommends that Mr. Flaherty facilitate the proposed new border crossing at Windsor and take the measures to aid the auto industry a step further with a scheme to scrap old cars in favour of new, greener vehicles.

There's one thing that Mr. McGuinty could do for himself. The Ontario Chamber of Commerce, among others, is urging the government to harmonize its sales tax with the federal GST, saying it could save businesses $100-million a year. The Premier has been lukewarm to the idea, because he fears it would hurt ordinary consumers by putting a tax on home heating oil, children's clothing and books.

But yesterday, he said he would take a serious look at the proposal in light of Ontario's ailing economy. We will find out Tuesday whether Mr. Flaherty will show similar flexibility in helping his home province.

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