Opinion

Ottawa Pocketed $25 Billion from BC Since 2001

Under BC Liberal reign, we've paid $25 billion more to feds than came back. That's unprecedented.

By Will McMartin, 6 Dec 2010, TheTyee.ca

Small money

Ottawa's 'generous attitude' to B.C. proves a myth.

Text size:

Rate this:

Login/Register

Related

The mainstream news media's beatification of Gordon Campbell continues apace. Saint Gordon, we are told repeatedly, transformed B.C.'s finances, built many wonderful roads and bridges, healed the lame and gave sight to the blind.

Except, well, the darn facts just keep getting in the way.

Take the media's oft-repeated assertion that Campbell fundamentally altered federal-provincial relations between Ottawa and British Columbia. Instead of adopting the confrontational approach of many previous B.C. premiers, Campbell had a conciliatory, friendly relationship with Ottawa that supposedly yielded enormous riches for our Pacific province.

Yet, a simple examination of readily-available empirical data shows that the opposite is true -- far from bringing wealth into British Columbia, Campbell oversaw an unprecedented shift of monies out of our province, and into federal coffers.

Indeed, an analysis by The Tyee of Statistics Canada's annual publication, Provincial and Territorial Economic Accounts, shows that since nice-guy Campbell took over the premier's office in 2001, British Columbians have paid in excess of $25 billion -- yes, billion -- more into Confederation than we received back from Ottawa.

What did 'new era of cooperation' net BC?

Long a bastion of BC Liberal fandom, the Vancouver Sun's editorial page began to trumpet our soon-to-be ex-premier's federal-provincial policies shortly after Campbell announced his imminent retirement.

"He stopped the long tradition of feuding with Ottawa," bubbled a Sun editorial published on Nov 4. "The new era of cooperation has resulted in hundreds of millions of federal dollars flowing into B.C. projects, including the Canada Line and the wildly successful 2010 Winter Olympics."

A column by Barbara Yaffe also appeared that same day in the Sun. "Gordon Campbell had a remarkable record when it came to getting along with Ottawa, at every turn transforming potential conflict into cooperation," read her column's opening sentence.

She continued: "And Campbell's efforts have paid off, with a succession of prime ministers maintaining a positive and generous attitude toward B.C."

Generous? Well, Yaffe seems to think so. Near the end of her column was this whopper: "And federal dollars accompanied all the praise..."

Golly. Maybe Gordon Campbell truly does deserve sainthood.

Except, when one attempts to determine just how great was Gordon Campbell at getting monies from Ottawa for British Columbians, the opposite is found to be true. Far from bringing newfound riches to B.C., Campbell actually saw an enormous -- and historic -- outflow of cash from our province to the rest of Canada.

Instead of becoming wealthier, British Columbians actually were made poorer as a result of Campbell's non-abrasive approach to federal-provincial relations.

True, Ottawa's transfers to BC rose...

There is no question that Ottawa's transfers to the B.C. government -- and, indeed, to all provincial governments -- rose significantly over the last decade.

The reason for this goes back to the introduction of the Canada Health and Social Transfer (CHST) by Jean Chrétien and Paul Martin in 1995 as a means to combat Ottawa's enormous budgetary deficits and the country's soaring debt. The CHST, which replaced two main transfer programs to the provinces (Established Programs Financing and the Canada Assistance Plan), significantly slashed federal outlays.

In 1995, Canada's provincial and territorial governments received federal transfers totaling $33.1 billion; one year later that figure had collapsed to $28.8 billion, and by 1997 it had fallen further to just $25.1 billion. (See here.)

Soon, as Canada's deficit disappeared and federal revenues began to explode (thanks to the global commodity boom that favoured resource-based economies), Ottawa's transfers to provincial governments turned in the opposite direction and soared ever higher.

In 2001, when Gordon Campbell and his BC Liberals took power in British Columbia, federal cash transfers to all of the provinces hit $34.8 billion, or slightly higher than their pre-CHST level.

By 2008, however, that figure had nearly doubled, to $61.4 billion.

As a proportion of Canada's economy, federal cash transfers to provincial and territorial treasuries climbed from a nadir of 2.7 per cent of gross domestic product in 1997/98, to 3.0 per cent in 2001/02, to a very generous 4.1 per cent of GDP in 2009/10. (See Table 31 here.)

All of Canada's provinces -- those headed by milquetoast nice-guys such as B.C.'s Campbell, as well as those headed by confrontational, loud-mouth bullies like Newfoundland's Danny Williams -- benefited from Ottawa's largesse.

Heavenward

Let's look at B.C. alone. Federal cash transfers to Victoria, after averaging $2.6 billion annually in the early 1990s, fell to just $2.1 billion in 1996 with introduction of the CHST, and then collapsed under $1.9 billion in 1997. (See here.) Then they moved heavenward.

In 2001, the year that Gordon Campbell became premier, B.C. obtained $3.1 billion in cash transfers from Ottawa. By 2008, that number had leaped upward to $5.5 billion.

This looks to be a good thing at first blush, but a couple of factors ought to be considered.

One is that a significant portion of the federal monies flowing to the B.C. government under Gordon Campbell's leadership were equalization payments -- a total of $2.4 billion from 2001/02 to 2006/07 -- as our Pacific Province achieved "have-not" status under the BC Liberals.

The other is that the tidal wave of federal transfers allowed the Campbell administration to dramatically reduce its own revenue sources (by slashing corporate and personal income taxes, and abolishing the corporation capital tax).

As a consequence, because federal revenues were growing rapidly while own-source income was plunging, Victoria became increasingly reliant on Ottawa's beneficence.

In 1997/98, federal government transfers were just 9.1 per cent of the income in B.C.'s consolidated revenue fund; by 2009/10, that figure had more than doubled to 18.7 per cent.

As B.C.'s auditor general noted in 2005, our province had "a growing dependence on federal transfer payments," which made British Columbia "increasingly vulnerable to the fiscal decisions of another level of government..."

The point is, though, that all Canadian provinces benefited from rising federal transfers over the last decade, not just Campbell's B.C.

Beyond Ottawa's transfers to provinces

So far we've looked only at Ottawa's transfers to provincial and territorial governments. Yet these annual payments represent a mere fraction (about one-fifth) of all the monies the federal government sends to the provinces each and every year.

There are several other categories of federal transfers in addition to those that go to provincial treasuries:

- Payments to individuals (for Canada Pension Plan payments, Employment Insurance payments, and so on)

- Transfers to businesses

- Transfers to local (municipal) governments

- The purchase of goods and services (including salaries and benefits for federal employees working in B.C.)

And in addition to those outlays are the annual interest charges on our national debt. That is, a portion of the federal government's yearly interest costs are allocated to British Columbians, to represent our contribution to servicing Canada's outstanding financial obligations.

Chart 1 - Federal expenditures and revenues

In 2001, when Gordon Campbell and his BC Liberals won election to government, Ottawa's "total current expenditure" in British Columbia totaled $20.1 billion.

By 2008, the latest year for which figures are available, the comparable figure had risen to $25.3 billion. That's a nifty increase by any measure.

BC's enormous payments to Ottawa

Yet, the increase in monies sent from Ottawa to British Columbia -- the provincial government, individuals and businesses -- over the past decade was dwarfed by the enormous growth in the payments we've made to the federal government.

Those payments include income taxes (from both individuals and businesses), excise taxes, the goods and services tax, and contributions to social insurance plans.

In 2001, the federal government collected almost $22.5 billion from British Columbia. As mentioned earlier, that same year Ottawa sent back to the province just $20.1 billion, leaving B.C. short by $2.4 billion.

Under Campbell's stewardship, the outflow of monies from B.C. to the rest of Canada then skyrocketed ever higher.

In 2007, Ottawa took a record-high $31.0 billion from British Columbians, and sent back a mere $24.6 billion.

The stunning shortfall: $6.4 billion.

In 2008, the revenue and expenditure figures were $29.7 billion and $25.3 billion, respectively, and B.C.'s deficit with Ottawa came in at $4.4 billion.

Years when BC won the equation

B.C. has not always been a "net loser" vis-à-vis Confederation.

Over 12 consecutive years, from 1982 to 1993, our province was a net beneficiary from federal government revenues and expenditures (that is, more monies flowed into British Columbia from Ottawa, than flowed out of the province).

But in every year since 1994, the outflow of monies from British Columbia has been larger than those coming in from Ottawa.

And since Gordon Campbell's election as premier, the fiscal balance deteriorated significantly.

Chart 2 for McMartin, Dec. 5, 2010

From 2001 to 2008, B.C.'s net losses from federal government revenues and expenditures added up to an astonishing $25.4 billion.

In a way -- as is argued by the media elites -- Gordon Campbell certainly was very good for federal-provincial relations. But that good was demonstrably better for Ottawa and other Canadian provinces (which subsequently received the monies taken from B.C.), than it was for hard-working British Columbians whose tax dollars were shifted eastward in ever-increasing volume.

The truly remarkable thing is that all of the data needed to assess Gordon Campbell's record on federal-provincial relations is readily available to the mainstream news media but, for reasons known only to them, they've opted to ignore it.

Saint Gordon? Sure, but only if you're blind to the empirical evidence. [Tyee]

Tyee contributing editor Will McMartin is a veteran political advisor and analyst. Read his previous columns here.

37 Comments:

Login or register to post comments

  • realisticman

    1 year ago

    NEWSFLASH

    "EQUALIZATION PROGRAM

    Equalization is the Government of Canada’s transfer program for addressing fiscal disparities among provinces. Equalization payments enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation.
    The purpose of the program was entrenched in the Canadian Constitution in 1982:
    "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." (Subsection 36(2) of the Constitution Act, 1982)

    Equalization payments are unconditional – receiving provinces are free to spend the funds according to their own priorities.
    SIX PROVINCES TO RECEIVE $14.4 BILLION IN EQUALIZATION PAYMENTS IN 2010-11

    P.E.I.,N.S.,N.B.,Que.,Ont.,Man."

    Of course BC has not recently been getting back what it contributes because BC has been doing very well and under the equalization formula the extra cash has been sent to our poorer cousins!

    This is described as a progressive federal programme.

    The people that complain about Canadian Equalization are usually called right wingers.

  • jacksonupnorth

    1 year ago

    Doing very well, Realisticman?

    How so. Social programs have been cut. Government departments that might have helped the people of BC have had their labour forced slashed although it was Gordon Campbell making all of the decisions anyway. No, "a fool and his money are soon parted" and that's our Gordo.

  • realisticman

    1 year ago

    It's all Relative

    BC has been doing very well compared to the provinces that are receiving equalization. That's the law. And, Canada has done very well compared to quite a few other places, including Britain, Ireland, Greece, Portugal, Spain......

  • Camero409

    1 year ago

    realisticman

    what world are you living in? I guess you can't stand the lies the Fiberals have been passing off as truths being exposed. Seeing them shredded in a article like this must be disheartening. There is no silver lining in this article to put your finger on realisticman, just facts that prove your golden haired boy doesn't walk on water but far below where it's a lot hotter.

    Every article Mr. McMartin writes proves the Fiberals couldn't manage a outdoor toilet. What about the bragging the Fiberals did for the last 9 years about BC not being a have not province? We heard enough of that crap from Gordo, Falcon, Hansen, Clark (on her radio talk show) and Abbott to fill that outdoor toilet to overflowing.

  • Fiat lux

    1 year ago

    Of course, they have a

    Of course, they have a beautiful relationship with each other, after all, both sides belong to the same Socred/Reform/CRAPP clique, who finally achieved a degree of respectability under other cover names.

    "B.C AND CANADA FOR SALE"

    Come and get, we need your "wealth creating foreign investment" so we can buy new planes and arms to defend your ownership !

    Ed Deak.

  • borg

    1 year ago

    [EDITED.]

    I've been observing your comments for a while now. [OFFENSIVE COMMENT DIRECTED AT ANOTHER COMMENTER REMOVED. -MODERATOR.]

  • seth

    1 year ago

    fiberals?

    Giving the BCLiberal party that label is idiocy.

    The Canwest/Gordo fascist cabal that runs the BCLiberal party goose steps in lockstep with their homey's the Steven "Brimstone" Harper fascists in Ottawa. They hate the federal liberal party with a passion and have reduced adherents to tiny whining minority in the party.

    No better proof than the the McMartin's $25B Gordo handed over to that loathsome scumbucket in Ottawa.

  • realisticman

    1 year ago

    Calling all Bathwater Guzzlers

    The link in the article leads to a complex and extensive set of tables and the facts are all there. You need not believe or disbelieve anything written in word form. Just look carefully at the numbers.

    BC has recently had a few years with a few billion in the black. Ergo, no need for payments so monies go to help our needy Canadian brothers and sisters, as decreed in the 1982 Constitution.

    http://www.fin.gc.ca/frt-trf/2010/frt-trf-10-eng.asp

  • Skywalker

    1 year ago

    Right Spaceman.

    I everyone in BC (not just business) was better off than they were in the 90's then I wouldn't mind paying more in equalization payments. As has been pointed out over an over again that is not the case and all you have to do is get out of the lower mainland to prove it. Now thanks to Campbell Ottawa is making a killing at our expense because our government hasn't got the brains to spend it on programs here so we give it away. That makes sense?

  • DNA

    1 year ago

    Part of a country?

    Excuse me, but aren't we part of a country called Canada? The point it seems to me is to participate in the nation, not to see what we "get" out of it. I would expect this article from a Quebec separatist, but not a Canadian.

  • realisticman

    1 year ago

    DNA

    Thank you DNA. Absolutely right.

  • sdgreen

    1 year ago

    Equalization it is...

    This article is really not telling the entire story. The equalization plan that is in place is determined by a complex number of equations. If the author thinks BC got screwed, check out Alberta's share.

    There is no guarantee that the Feds will pour a whole bunch of money back to BC. We have however seen a lot more than in the past.

  • realisticman

    1 year ago

    Skywalker

    It's slightly more complicated than spending on programs, as I'm sure you, being well informed, know. Yes, outside the lower mainland things are not great but we're still better off than almost the whole rest of the world. Things crashed, they will come back. There's a story in today's Globe describing how Alberta is bringing in workers from abroad and there's going to be another skilled-employment shortage - in BC too.

    Here's the structure, it's complicated:

    "Equalization payments are based on a formula that calculates the difference between the per capita revenue yield that a particular province would obtain using average tax rates and the national average per capita revenue yield at average tax rates. The current formula considers five major revenue sources. The objective of the program is to ensure that all provinces have access to per capita revenues equal to the potential average of all ten provinces. The formula is based solely on revenues and does not consider the cost of providing services or the expenditure need of the provinces."

  • borg

    1 year ago

    Spaceman, Nobody is saying

    Spaceman, Nobody is saying that we can't help out fellow canadians in have not provinces when we have extra funds to share but first we should put some of those "extra" funds to use here in BC in areas where we're not as well off as the rest of Canada like child poverty, increasing minimum wage and deterioration of education.

  • Ricky

    1 year ago

    realisticman, DNA

    Your gripes appear to be predicated on the assumption that the difference in revenues can be wholly accounted for by transfer payments going out of the province to help have-not provinces. That does not, in fact, wholly account for the growing difference in revenues under the Campbell government. I would love to see an analysis by a neutral party that accounts for transfer payments; I am certain that the curve would still be there, to the detriment of your assumption.

  • Sask Resident

    1 year ago

    BC contributes, Alberta gives more!

    The equalization is still working under the rules put into place by Martin. Alberta gives much more that BC to subsidize Ontario and Quebec, $16 billion in one year. But the money is collected by the federal government from federal taxes on citizens not on the provincial government. Not Gordon Campbell's fault, but the fault of Paul Martin.

    Once the rules can change in another 2 years, the federal government could transfer taxing power to the provinces to reduce the federal take. But the provinces from Manitoba and east will whine since they use equalization to reduce taxes and fees within their province, such as the $6/day day care and lower electricity rates in Quebec.

  • Van Isle

    1 year ago

    When BC Ferries was a Crown

    When BC Ferries was a Crown Corporation, they never paid GST. When Gordo and his merry band of bandits 'privatized' the Ferries in '03 they now had to pay GST. I remember reading back then it was in the neighbourhood of $19 million a year was going to Ottawa.

  • kmdyson

    1 year ago

    Taxes

    The trouble with facts based on numbers is that they can be manipulated to suit an argument...depending on where you stand politically, you may choose to agree with Mr McMartin's assessment...or not...but one thing seems readily obvious and observable though entirely anecdotal and that is the average working and lower classes of BC have lost out on social programs, education funding, and health care through the slashing of taxes as well as through the deficit in transfer payments...something the government obviously cares little about after all they can tell another bunch of lies and get re-elected under the new "dear leader"...

  • jnewcomb

    1 year ago

    what is this debate about?

    As some commenters note, BC paying more to feds now could be viewed 2-ways. While McMartin sees these higher payments as being a problem, the Libs could make the argument that only the Liberals could have done such a great job managing the BC economy that would mean the feds could even get money from BC.

    With an NDP government causing massive capital flight and disinvestment, a poor BC wouldn't be in a position to make those payments.

  • oldstyle

    1 year ago

    The dollars are irrelevant

    What the story tells is how the press loves to show a biased story in favour of the Liberals.

    The amount of money and the lack of fiscal responsibility is only background for the distorted truth from the public press, which seems to be more of a corporate lobbying media than anything else.

    And as for being responsible to the people of BC I would think that negotiations between Victoria and Ottawa on the transfer payments would be nothing short of taking care of business on behave of BC taxpayers.

  • Skywalker

    1 year ago

    Sure newcomb but...

    ...whose better off now that Ottawa gets all this cash?

  • Driftwood

    1 year ago

    New Leader of the NDP gives speech to change

    John Horgan, the new leader of the NDP, wasted no time making his views known. Read it here.

  • Driftwood

    1 year ago

    Sorry...

    The above article isn't genuine - just Grant having fun. Boy, when you're a fool it's hard to look like anything but a fool.. :-)

  • Driftwood

    1 year ago

    The genuine article...

    this is the speech Carole gave this morning.
    http://www.timescolonist.com/audio/001_Robs_Digital_Record_2010_12_06.mp3
    I hope she can find it in her heart to forget and forgive for the good of the party.
    She says that a new 'interim' leader will be 'selected in the new year' Wow! That doesn't work for anyone as there is now sure to be an election called early next spring.
    Now is the time to have a full leadership convention to select a new leader no later than Feb 2011.
    To drag this out now and encourage infighting is really stupid. It's time to grow up and put the interests of BC ahead of petty politics.

  • Driftwood

    1 year ago

    One more thing

    I was actually on the page to join the party and start donating
    https://www.gifttool.com/donations/Donate?ID=176&AID=631&list=joinmenu
    But now I will wait to see if this is going to be a bunch of bitching or a new start.
    Look at the opportunity NDP:
    1. All this free publicity to have a leadership convention and attract tons of new members.
    2. The press shows up day after day expecting petty infighting (you can hear them playing Carole in the link above the last one) and you use the opportunity to roast the criminal (yes, criminal) actions of the liberal government and show how the NDP will straighten things out and 'give the people who live here a voice.'
    3. The Liberals call a snap election and you are right there just waiting for them.

    OR:
    1. You piddle away this God given, golden opportunity to win the coming election and condemn us all to more sellouts and give aways and lower and lower neocon standards.
    2. There is no two.

  • Martin

    1 year ago

    Will McMartin misses the point, again

    We all pay the same federal tax rates, regardless of where we live in Canada. Gordon Campbell and the BC Liberals have no control over that.

    The reason why more money is raised from BC than is spent, is simple. We are a "have" province, and for most of the period that Will McMartin is talking about, Canada was running a surplus (meaning they were taking more from everyone.)

    With the country now running a deficit, expect that to change. Indeed, the last time we "got more" from Ottawa than they got from us, was during the period 1982-1993 as McMartin noted, when Ottawa's deficits were huge.

    Finally, a lot of money is raised from the taxpayers in each province that never comes back, like centralized government spending in
    Ottawa, and most things they spend on items like national defence, foreign aid, and oh yes, Afghanistan.

    So: they only way we will get "more back" from Ottawa, than we get in paying taxes, is if Ottawa is running a huge deficit, or if BC were a "have-not" province.

    I don't want either of those alternatives.

  • mica66

    1 year ago

    Short Version...

    The tl;dr version:

    Ottawa needs our money so it can continue to dole it out to Quebec, while telling us there is no money to pay for what we need.

  • Michel Joseph P...

    1 year ago

    savings??

    For the geo-politically uneducated out there that still think that quebec is on the dole as they ignorantly call it; they should do more reading and less talking .Facts are quebec has historically been the HIGHEST TAXED PROVINCE IN CANADA FOR SEVERAL DECADES and not to forget that it(the supposed help coming from ottawa taxes repartition plan) is pro rated to the Numbers of tax payers , it than stands to reason that the census numbers talk for themselves !But than again truth is not a great selling point as it doesn't cather to drama kings and queens !
    You mean surely cutbacks on the poor and unable to defend their positions and or falling thru the tracks .The standing order in welfare offices is to deny any claim for pwd regardless of the Facts , now that is but one of the government offices i bet the rest of the burocrats holding dens all have standing orders similar to this , now my question is Does it really help to use the poorest of people to get leverage with Ottawa or is there a hidden agenda here somewhere .like job justification ?????? it sure smells of bad administration and poor vision as well as poor accounting and may be even collusion!

  • Lefty

    1 year ago

    "The mainstream news media's

    "The mainstream news media's beatification of Gordon Campbell continues apace"
    He was anointed by the Bilderbergers and I suspect he'll be run as federal fiberal against Steve Harper.

  • RickW

    1 year ago

    Let Me Take My Shot at R/Man:

    Quote:
    It's all Relative

    As long as it's not YOUR relative living in child poverty, eh?

  • viga01

    1 year ago

    The hate of the liberals makes people blind?

    Let's say I am a rich guy and I don't want to pay taxes because some of my family members are poor. How people on the left will react to this?

    Is it not similar than BC is a rich province, but we can't help poorer provinces because we have poverty in BC?

    I did not know there were a lot of anti- wealth distribution here!

  • Driftwood

    1 year ago

    Changed my mind

    Joined the NDP and contributed in the hope that they will win the coming election.

  • realisticman

    1 year ago

    RickW

    You may not like the equalization system. Many in Alberta don't either. What we have is a progressive federal/provincial monetary balancing structure. Would you prefer the American system where they have rich States like Connecticut and very poor ones like Mississippi? Do you have no compassion for your fellow Canadians in other, less fortunate provinces? Not even the Wild Rose Party is that uncaring.

  • Camero409

    1 year ago

    jnewcomb

    EDITED FOR PERSONAL INSULTS -- MODERATOR under the NDP, with all that flight of capital you infer left the province, they managed to balance the budget and leave 2.4 billion for the Fiberals. We had a much better safety net for the poor and MSP user fees were much less and no tuitiion increases for 3 years. As well, they created more long term well paying jobs than the current bunch of dolts in Victoria. I could go on and on with the excellent job they did. How's that for running the province. EDITED

  • RickW

    1 year ago

    R/M old man....

    When we have an ever-increasing number of food banks in BC, then we do not have a surplus to send to Ottawa - until the food banks disappear.

    Without taking this and any number of other social discrepancies into account, the numbers that determine a "surplus" are strictly hocus pocus.

  • happy

    1 year ago

    Wise words

    "Canada is like an old cow. The West feeds it, Ontario and Quebec milk it. And you can well imagine what its doing in the Maritimes"

    Tommy Douglas

  • realisticman

    1 year ago

    RickW

    Hocus Pocus?

    You on the political extreme right wing always complain about spreading the wealth to the less fortunate.

    "It is my belief that if you are born tomorrow in British Columbia you are richer than pretty much anyone in the world."

    http://thetyee.ca/Views/2009/05/01/CorkyEvans/

    Corky Evans, BC politician, NDP MLA.

    • The discussion for this story is closed. No more comments can be added.