New PBO report to show Ontario being shortchanged $1.2 billion in equalization

A forthcoming new report from the parliamentary budget officer is expected to show Ottawa is shortchanging Ontario to the tune of $1.2 billion under the current system of equalization payments, The Canadian Press has learned.

The report on how the federal government provides financial support to the provinces and territories for such things as health and social programs appears to confirm what Ontario has long suspected — only more so.

The $1.2 billion figure was provided by a source familiar with the report, to be released Thursday, who provided details on condition of anonymity because the report had not yet been made public. Details of how the parliamentary budget office reached its conclusions were not immediately available.

During the election campaign that delivered Premier Kathleen Wynne a majority government last week, the provincial Liberals accused Ottawa of slashing Ontario's latest share of equalization payments by $641 million.

The Harper government has long insisted Ontario was receiving its fair share, based on the performance of the province's economy.

Finance Minister Joe Oliver, who happened to be taking part in a video teleconference Wednesday with his provincial counterparts, said he does not believe there's a fiscal imbalance.

The issue did not come up during the brief meeting, which was Oliver's first with the provincial finance ministers since he was named to the post in March. Disparities between provincial and federal numbers are often "exaggerated," he said.

"We just recently came to an agreement on those numbers; we're not cutting back," he added, noting that transfers had increased by 55 per cent to $65 billion since the federal Conservatives came to power in 2006.

Oliver described the meeting as cordial, even hinting that he was making peace with Ontario's Liberal government. While he may disagree with them on key economic issues, the voters have spoken, he said.

He did say, however, that he disagrees with Ontario's budget, which raises taxes and the province's already substantial $12.5-billion deficit, as well as a plan to create an add-on to the Canada Pension Plan.

"The new government ran on their budget, they were elected, they are entitled in a democracy to implement their platform," he said.

"We have a certain policy and maybe this isn't the time to emphasize differences."

Oliver related the same sentiment on the issue of CPP enhancement, saying if Ontario wants to go it alone Ottawa won't try to stop them, although he said he expressed reservations about what he estimated would be a $3.5-billion price tag.

Ontario and P.E.I. have lead a provincial push to enhance the Canada Pension Plan, but the federal government has said the economy is too weak to saddle employees and employers with higher premiums.

In an email response, Ontario Finance Minister Charles Sousa said he plans to go ahead with the plan that was endorsed by the voters on June 12.

"We hope that they come to the table on a transit strategy, investment in the Ring of Fire (mineral extraction project in northern Ontario) and retirement income security," he said.

Harper government ministers have been critical of Ontario's Liberal government in the past — particularly during the latest campaign.

Oliver went so far as to say deficits and debt levels in Ontario and Quebec — Canada's two most populous provinces — were holding back Canada's economic growth.

He made clear, however, that his government intends to go in a different direction by lowering taxes, likely starting next year after it tables the first surplus budget in almost a decade.

"After we balance the budget the No. 1 priority will be further tax relief," he said. "(Canadians) understand that taxes stifle prosperity, hurt businesses and kill jobs."

The federal Conservatives are expected to introduce some form of income splitting for families with young children next year, fulfilling a 2011 campaign pledge to bring in the $2.5-billion tax relief measure once the deficit was eliminated.