Some tough questions about federal transfers

It's common to hear that the Yukon must allow more resource extraction to reduce our dependency on federal transfers.

It’s common to hear that the Yukon must allow more resource extraction to reduce our dependency on federal transfers. If we don’t develop our resources, so the argument goes, what incentive do southern Canadians have to keep funding our way of life, to the tune of a billion dollars a year?

A desire to limit development is a legitimate political position, and it is one shared by many Yukoners. But we do need to acknowledge the superficial strength of the argument and work at figuring out an answer.

Those Yukoners who take even a passing interest in current affairs know that the Yukon receives a large amount of money from the federal government. Transfers to the Yukon government will top $898 million this year. That’s $24,614 per resident. Millions more are transferred to Yukon First Nations and municipalities.

The amount we receive per person dwarfs the amount received by the provinces.

Federal transfers are absolutely essential to the health of the Yukon’s $2.7 billion economy. Those federal dollars circulating around the territory do not contribute to the economy, they are the economy. Mining and tourism are a nice side dish, but the main course at this table is a federal infusion of cash. If the federal government were to decide one day that the Yukon should “pull its own weight” and reduced our transfer payments so that they were equivalent (per capita) to what the provinces receive, our economy would be utterly decimated.

Fortunately, a sudden cut-off of the federal tap is unlikely, at least in the medium term. But even a modest reduction of federal transfers would choke off growth and lead to hard times for Yukoners. If the federal government was faced with hard fiscal times it is always possible that our transfers just may be targeted in the interests of budgetary restraint. Transfers to the Yukon may be a very minor part of the overall federal budget, but they are not so insignificant that they are untouchable either.

The problem that we Yukoners face is that it is hard to see how our dependence will change any time soon. The Yukon was dependent on transfers when I was born and (if anything) is only marginally more self-sufficient now.

If we are being honest with ourselves we need to acknowledge that our options for economic growth outside of resource extraction are few. Developing a meaningful manufacturing sector is not in the cards far removed as we are from the population centres of the south.

Politicians on the left side of the political spectrum like to talk about growing our “knowledge” economy and “green” jobs which may be an excellent area for future growth, but it is hard to see how these sectors have the punch to really put a dent in our dependency.

Those in the centre talk of a “balance” between development and the environment, which in a sense is great. We should take a balanced approach to development and the environment. But there is balance and then there is balance. I suspect many Yukoners (myself included) would likely balk at just how much more resource extraction (and resulting environmental degradation) would need to take place if we ever intended to pay our own way.

It is easy to see how politicians like our present prime minister rationalize large transfers to the territory. For many conservative politicians in the south the Yukon is where the resources of the future will come from. Our transfer payments are justified on the basis of the jobs, investment opportunities and tax revenue that future resource extraction activity would create.

The rest of us – those who want a Yukon with pristine wilderness, clean water and fresh air – have a challenge on our hands. It is definitely a quandary. We will have to continually justify our existence to the 30 million Canadians whose tax dollars fund our way of life. If we want to prohibit development in large areas of land like the Peel watershed and significantly limit activity elsewhere, what is in it for the rest of Canada? Why should they continue to send money to a territory that has no intention of becoming self-sufficient?

We may well be able to convince Canadians of the intrinsic value of an unspoiled, naturally beautiful Yukon. But it is hard to see how maintaining the Yukon’s natural beauty justifies a billion-dollar federally-funded population centred largely in Whitehorse.

I would be lying if I said I had a good answer to that question, and I raise it to spark a conversation, not propose a solution. We are probably safe for the time being. Our transfer payments continue to grow and government spending continues to provide an excellent quality of life for Yukoners. Southern Canada is content for the time with the promise of a future payoff.

But I think it is time that we start thinking about the question of what does the Yukon have to offer the rest of Canada that justifies the spending of all this money, because some day someone just might ask.

Kyle Carruthers is born and raised Yukoner who lives and practices law in Whitehorse.

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