Why does Canada owe Newfoundland

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The Disaster Facing Newfoundland

Newfoundland and Labrador will go bankrupt and all of Canada will suffer unless serious action is taken. The reality is the size of Newfoundland’s real debt – both the amount on the public books and the debt held at the provincial utility Nalcor – amounts to $27.3 billion. The debt at Nalcor counts because there is no way to collect the $9.4 billion the provincial utility owes from electricity ratepayers without shutting down the economy and leaving people to freeze in their homes.

The Newfoundland picture gets more bleak when you consider the net out migration from the province means the population is getting smaller and older at a rapid rate. The average age of the population is already 15 per cent older than the rest of Canada. By 2042, the average age of Newfoundland will be 65 years old. There are a lot of reasons an older population is more expensive for a province than a younger one, but one reason is health care. A person 15-64 years old consumes on average $2,700 in health care resources, while someone over 65 years old consumes on average $11,600.

Newfoundland’s resource challenge

Unlike other provinces, Newfoundland has never received fair payment for its natural resources. In 1966, the Newfoundland government signed an energy agreement that gave the province of Quebec seventy years of hydroelectric power at below-market rates. The Churchill Falls deal helped keep Canada together in the face of rising Quebec nationalism, but it systematically impoverished Newfoundland. When the province later developed its offshore oil resources, Ottawa changed the equalization formula and declared Newfoundland a “have” province, effectively clawing back its oil revenues.

Ottawa needs to help Newfoundland stabilize its debt, by both changing the equalization formula and compensating the province for the raw deal it got in 1966. This would cost Canada $1.4 billion a year until 2041 – less than a third of 1 percent of Ottawa’s annual budget. Otherwise, Newfoundland will go bankrupt. Not only will its people suffer, but the entire Canadian economy will take a hit. More than that, though, this is a question of fairness. The federal government has recognized many historical wrongs done to other groups of Canadians, including First Nations and members of the LGBTQ community. In 2019, the Schroeder Policy Group believes that Newfoundlanders deserve respect and redress as well. Newfoundland did its part for Canada. Now, it’s time to do ours for Newfoundland.

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