Federal Finance Minister Jim Flaherty defended Quebec Premier Jean Charest's controversial campaign promise to funnel fresh equalization cash from Ottawa into tax cuts, saying the law allows provinces to use this money to ease tax burdens.
"It's within the mandate in the Constitution," he said, adding that this means he can't dictate how premiers spend billions of tax dollars that Ottawa is handing out to balance out provincial fortunes.
The Harper government's March 19 budget enriched equalization payment's for Canada's have-not provinces by $1.5-billion a year, including $700-million for Quebec.
Equalization payments are typically considered funding to help premiers provide similar levels of government services, but Mr. Charest chose to use his extra cash to pledge a new income-tax cut in the dying days of the provincial election campaign.
Quebec had been at the forefront of provinces demanding funds from Ottawa to fill what they've called a fiscal imbalance caused by too many spending obligations and not enough tax revenue.
The Quebec Liberal Leader, whose party lost its majority in Monday's vote, was attacked for the tax cut because critics said the move made it seem as if the province didn't need the equalization cash after all.
But Mr. Flaherty, a lawyer, stood up for Mr. Charest yesterday, saying the move was by the book and citing the Constitution Act as proof.
"The equalization provision in the Canadian Constitution says the goal is reasonably comparable services in all areas of the country at reasonably comparable levels of taxation. So for Premier Charest to have used some equalization money to reduce taxes, which are high in Quebec, is within the Constitution," he said.
Mr. Flaherty, the second most powerful minister in the Harper government, appeared to back Mr. Charest's tax cut, saying "I'm always happy when governments reduce taxes" and suggesting the biggest irritant for critics was when it was announced.
"I think it's perhaps the timing [that] created more controversy than anything else because it happened in the latter stages of an election campaign," he said.
NDP finance critic Judy Wasylycia-Leis said Mr. Flaherty is wrong, and that regardless of what the Constitution might allow, equalization is meant to fund services for all, not tax cuts for some. "I think Mr. Flaherty misses the point and Mr. Charest, by promising the tax cut, has undermined the purpose of equalization."
The provincial tax cut's future is not secure. Mr. Charest's new minority government will require opposition support to pass it but his rivals are less than receptive now.
Mr. Flaherty also spoke positively about the Quebec election, in which the right-wing Action Démocratique du Québec replaced the separatist Parti Québécois as the Official Opposition.
Mr. Flaherty said he thought the probability of a federal election was "less likely" today then it was a month ago, before the Conservatives secured Bloc Québécois support to pass their budget. But he suggested there could be looming clashes ahead with the opposition on environment and justice bills.
Steven Chase