Western premiers call for a ‘better deal’ on equalization payments

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OTTAWA — Canada’s three westernmost provinces won’t see a cent of the record $26.2 billion in federal equalization payments earmarked for 2025-26, a snub that isn’t sitting well with the region’s premiers.

“The federal government has announced equalization payments for 2025 and once again, SK, AB and BC will be helping support the rest of Canada,” tweeted Saskatchewan Premier Scott Moe on Thursday, in a message that was quickly amplified by Alberta Premier Danielle Smith.

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“The current equalization system isn’t fair or sustainable,” added Smith. “It’s time for a better deal that doesn’t put all the weight on a few provinces.”

While regional tensions over the federal equalization program are nothing new, frustrations are reaching a boiling point, with the three Western “have” provinces struggling to take care of their own residents amidst a national cost-of-living crisis.

David Eby, British Columbia’s NDP premier, lashed out against the program in June, telling reporters “enough is enough.”

Eby said he was frustrated to see taxpayer money continue to flow to central and eastern Canada “when the pain of the cost of living is right across this country.”

The three Western premiers are all backing a lawsuit, led by Newfoundland and Labrador, challenging the fairness of the formula Ottawa uses to calculate which provinces qualify as “have not” provinces and the size of the yearly payment each receives.

Haizhen Mou, a fiscal federalism scholar at the University of Saskatchewan, said that the program’s built-in escalator is one of its key features.

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“Equalization funds keep growing every year… based on the nominal national growth rate,” said Mou.

Critics say the escalator, introduced after a major 2006 review of the program, has led equalization payments to balloon while the wealth gap between the Western “have” provinces and the rest of the country has actually narrowed.

Colleen Collins, head of the Canada West Foundation, said that simmering tensions over equalization reflect a broader regional imbalance.

“The fundamental question of the West is that, financially, we punch above our weight, yet we’re largely underrepresented when it comes to influencing federal policy,” said Collins.

“We felt the same way under Harper,” added Collins, stressing that the problem transcends federal partisanship.

As in previous years, the flow of equalization payments follows a clear west to east pattern in 2025-26.

Quebec is once again the top receiving province, raking in $13.6 billion, up a quarter billion from 2024-25. The three maritime provinces will see a combined $7.3 billion in federal payments.

Meanwhile, Manitoba will get $4.7 billion from Ottawa, an increase of $337 million from 2024-25.

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Ontario and Newfoundland and Labrador round out the “have not” group, receiving smaller transfers of $546 million and $113 million.

Renaud Brossard, the vice president of communications at the Montreal Economic Institute, said that the federal equalization program does no favours in the long run to receiving provinces like Quebec.

“Equalization payments mean that you never pay the full cost of bad policy decisions and never get the full benefit of good policy decisions,” said Brossard, noting that good policies run the risk of nudging a province into “have” territory.

Brossard pointed to anti-growth policies Quebec has pursued relating to its resource sector, such as keeping consumer electricity prices artificially low and banning provincial oil and gas development in 2022.

He also noted that nominally free-enterprise Premier François Legault has fallen into the same spending habits as his predecessors, despite campaigning on an ambitious “zero equalization” platform prior to taking office in 2018.

“That discourse progressively seems to have been forgotten,” said Brossard.

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“If you look at the policies Legault has pursued in recent years, they basically run counter to the growth-oriented policies he promised to bring in as premier.”

National Post
rmohamed@postmedia.com

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