The premier of Newfoundland and Labrador is demanding the federal finance minister resign after independent calculations showed his province would get $1 billion less than expected under Ottawa's new equalization rules.

Premier Danny Williams said Wednesday that Finance Minister Jim Flaherty must resign immediately — and added that Newfoundland MP Loyola Hearn, the federal fisheries minister, should do the same if he knew about the predicted shortfall.

Premier Danny Williams has called on federal Finance Minister Jim Flaherty to resign.
(CBC)

Last week, Memorial University economist Wade Locke said the province would receive about $17.5 billion between now and 2020 under new equalization rules set out by Prime Minister Stephen Harper and his Conservative government in the 2007 federal budget.

That's about $1 billion less than it would have received under the previous equalization formula and the Atlantic Accord signed under the previous Liberal government in 2005, which protected oil revenues against equalization clawbacks.

It's also about $11 billion less than the $28.5 billion that Williams' government had said it would have received had Harper kept a 2006 election pledge to exclude non-renewable resources from the equalization formula.

"We have a situation in this country right now where the federal minister is saying one thing, his officials are saying another thing and they are both misleading a province of this federation," Williams said Wednesday.
 
"That can't go on. That is not acceptable and I want to make it very clear to the Canadian people as well as the people of Newfoundland and Labrador that this is not about a broken promise anymore.
 
"This is about a federal Finance Department that is acting inappropriately."

In Ottawa, Flaherty all but laughed off Williams's criticism.

"Who said that? Danny Williams?" Flaherty said when pressed by reporters. "Maybe we should have a hockey game together or something — you know what I mean?"

Flaherty continues to insist that Newfoundland and Labrador will not lose any money.

"Quite frankly, I don't understand what Premier Williams is complaining about," Flaherty said.

Meanwhile, Williams drew attention to the fact that federal Conservatives — notably Hearn, the province's cabinet representative — applauded Locke's first analysis, which showed Newfoundland and Labrador would gain.

Williams said it is telling that the federal government now downplays Locke's latest analysis.

Locke initially released an independent analysis on April 5, predicting Newfoundland and Labrador would gain about $5.6 billion under the new equalization rules.

But Locke later issued a new estimate, saying his initial figures were based on a set of assumptions that did not match the fine print in the federal budget. He said he had to revise his analysis when federal officials informed him of rule changes.

"Since we did the analysis, we were informed that there was legislation already in place with a different qualification standard in place, and the impact of that is that Newfoundland really wouldn't qualify for the [Atlantic] Accord after, basically, 2009," Locke said earlier this week.

Williams, who launched a nationwide advertising campaign against Harper and his new equalization plan in March, waited until Wednesday to comment on the revised numbers because he had been away on vacation.