The premier of Newfoundland and Labrador Danny Williams has found a political ally in the province of P.E.I. in lobbying against a budget item that could cost the Island $7 million to $20 million.

Provincial Treasurer Wes Sheridan says the budget's cap on equalization should be reconsidered. (CBC)

Tuesday's federal budget included a cap on equalization. With Ontario joining the list of have-not provinces, that would mean the same amount of money being split among more provinces. Williams has asked federal Liberal Leader Michael Ignatieff to back a one-year moratorium on equalization changes.

"Definitely we are of the mind that we would like them to stall this cap for a year, take a look at the impact it's going to have on provinces," said Provincial Treasurer Wes Sheridan.

Sheridan first expressed his concern about changes to equalization the day the budget came out.

Newfoundland and Labrador stands to lose $1.6 billion in anticipated revenues over the next three years under the provision. Manitoba, Quebec, New Brunswick and Nova Scotia would also be losers.

The changes have rekindled the political feud between Williams and Prime Minister Stephen Harper.

One MP from Newfoundland and Labrador, Judy Foote, said she is ready to break Liberal ranks and vote against the budget if the equalization provision is not changed.