Federal Government Misled Province on Impact of New Equalization Program

The Honourable Tom Marshall, Minister of Finance and President of Treasury Board, today confirmed that the federal government has misled the Provincial Government and the people of Newfoundland and Labrador regarding the true implications of the new equalization program as outlined in its 2007 Budget. According to figures released by Memorial University economist Dr. Wade Locke, the net impact of these changes is that the new equalization program will provide the province with $1 billion less than the existing equalization program over a 13-year period. It is also $11 billion short of what the Prime Minister promised the province in writing over that same 13-year time frame.

�We identified this problem more than a week ago and immediately wrote the federal government seeking clarification,� Minister Marshall said. �We have yet to hear back from them. The fact that they don�t bother to respond to us, but manage to find the time to speak with and offer clarification to independent economists, is insulting to the elected government and people of Newfoundland and Labrador. The Government of Canada has an obligation to explain themselves. The federal budget legislation contradicts everything we have been told by Ottawa.�

The minister said it is increasingly clear that the cost of the Prime Minister�s broken promise is significant. �Dr. Locke�s numbers suggest that the shortfall from the Prime Minister�s commitment is now $11 billion. What�s more, it appears to be more financially advantageous for the province to opt to stay with the existing equalization program as it provides approximately $1 billion more than the new equalization program.

�These numbers contradict everything the federal government and Fisheries and Oceans Minister Loyola Hearn, in particular, have said since budget day. Not only does this new equalization formula provide less money to Newfoundland and Labrador than what we are receiving today, it appears to make it extremely difficult to qualify for the second eight-year term of the Atlantic Accord 2005. It is as if the federal government is trying to strip us of the benefits of the Atlantic Accord in its new equalization program,� the minister said.

�Despite assurances from the Federal Minister of Finance that the accords would be protected, fundamental amendments to the legislation implementing the 2005 Atlantic Accord agreement have been proposed without any consultation with the Government of Newfoundland and Labrador. These amendments can be found in the �consequential amendments� sections of the 2007 Federal Budget Implementation Act. Consequential amendments are normally reserved for housekeeping items to fix technical issues. It is not a place to shroud fundamental changes of this magnitude,� continued Minister Marshall.

Minister Marshall said the federal government has completely neglected to provide full disclosure of the true facts surrounding its equalization program and the Atlantic Accord 2005.

�We are calling on the federal government to provide immediate clarification,� said Minister Marshall. "We simply will not accept half answers, partial information and shifting ground rules. What federal officials told our officials on Budget day is now completely contrary to what they are saying to independent economists. The people of Newfoundland and Labrador deserve better than this, and it is time for the federal government to be straight forward and forthright with the people of the province and indeed the country.�

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Media contact:
Bill Hickey
Director of Communications
Department of Finance
709-729-6830, 691-6390
billyhickey@gov.nl.ca