OTTAWA, ON (July 9, 2026):
Equalization was designed to strengthen national unity, but has instead become a source of growing division in Canada. A program intended to ensure comparable public services across the country now leaves both recipient and contributing provinces feeling shortchanged.
In Rebalancing Canada: A two-pillar reform of equalization and federal transfers, Senior Fellow Trevor Tombe calls on Canada to reform its system of federal-provincial transfers by adopting a simpler and more fiscally sustainable framework.
“The arrangements we inherited were built in response to earlier circumstances. Some parts of it still work well; other parts less so,” says Tombe.
According to Tombe, the current formula suffers from key structural flaws: it distorts incentives around provincial resource development, relies on an arbitrary funding cap that does not take actual fiscal disparities into account, and overlooks differences in regional costs and demographic pressures.
Tombe proposes replacing the current patchwork system with two programs: an unconditional, equal per-capita Canada Grant to address the fiscal imbalance between Ottawa and the provinces, and a reformed equalization program focusing on differences between provinces in their ability to raise revenue and meet public service needs.
“The current system is more complicated, more distortionary, and potentially more costly than it needs to be,” says Tombe. “Early reform would give governments more flexibility … before rising economic, demographic, and geopolitical pressures force more difficult choices in the future.”
To learn more, read the full paper here:
Trevor Tombe is a professor of Economics at the University of Calgary and a senior fellow at the Macdonald-Laurier Institute.
For further information, media are invited to contact:
Skander Belouizdad
Senior Media Relations Officer
(613) 482-8327 x111
Skander.belouizdad@macdonaldlaurier.ca
