With an election call likely imminent, the leader of the federal Conservative party used a visit to Newfoundland and Labrador to promise changes to a fund intended to cushion provinces from sharp drops in revenue.
Erin O’Toole, speaking in St. John’s on Monday afternoon, noted Newfoundland and Labrador’s oil sector has been hit hard in the last few years by a drop in the price of oil and job losses in the sector.
“Even as the province grappled with these challenges, it was hit again by the pandemic,” said O’Toole, pointing to a 10 per cent decline in production in the first five months of 2021 over last year.
O’Toole said his party would, if elected, lower the threshold on how much revenues need to drop before a province can apply for funds from the program.
For resource revenue, he said, the fund would be triggered by a 40 per cent drop in revenue, rather than the current 50 per cent. For non-resource revenue, a three per cent drop — instead of five — would qualify for assistance. He also said the Conservatives would do away with the per-person cap on a potential payout from the fund, currently $60.
The changes would be retroactive to 2015, said O’Toole. He said Newfoundland and Labrador would be eligible for an immediate $70 million in funds and would be better protected against future shocks in the oil economy.
“It is a form of an equalization rebate, as you were contributing more than you should have during a steep drop in resource revenues,” he said. “This rebate will allow Newfoundland and Labrador to reinvest additional funds into the recovery of your economy and help create jobs.”
Ottawa proposes changes of its own
The Liberals announced plans to change the fiscal stabilization program in the 2020 fall economic statement. Their proposed changes are not as comprehensive as those offered by O’Toole today.
The Trudeau government plans instead to raise the per capita payout to a maximum of $170 from $60. The government says the revised figure better reflects Canada’s economic growth since 1987, when the $60 cap was set.
But unlike the Conservatives, the Liberals did not announce any plans to lower the thresholds for declines in income, which are to remain at 50 per cent for resource industries before payments kick in.
Canada’s parliamentary budget officer estimates that the revised program would cost the federal government $4.5 billion annually in payments to provinces.
That projection represents a $2.9 billion increase for the 2021-22 fiscal year.
Earlier this year, Alberta Premier Jason Kenney described the government’s proposal as a “slap in the face.” He argued that the proposal fails to account for major drops in resource revenue.
O’Toole said during a campaign-style visit to Alberta in early July that his plan to revise the fiscal stabilization program would provide Alberta with $4 billion in rebates, leaving $1 billion for the rest of Canada.
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