Ontario Premier Dalton McGuinty says the new offshore energy deals mean taxpayers from his province will be subsidizing Newfoundland and Labrador and Nova Scotia as those two provinces become wealthier.

"This is just the beginning," McGuinty said Wednesday of the settlement Ottawa made with the two Atlantic provinces last month. The deals will pay them billions of dollars in oil revenues over the next eight years.

"We're happy to support the country, but you know what? We're running a deficit and we need to put more money into our health-care system," McGuinty said.

Ontario Premier Dalton McGuinty (CP file photo)
Ontario Premier Dalton McGuinty (CP file photo)

Prime Minister Paul Martin will travel to St. John's and Halifax on Monday to sign the agreements, which will allow Nova Scotia and Newfoundland and Labrador to keep their equalization payments for a time, as their economies improve.

Nova Scotia Premier John Hamm said the two Atlantic provinces are owed the royalty deal, promised by four prime ministers.

Ontario, Alberta don't get equalization payments

Ontario and Alberta are the only two provinces not drawing on the equalization program in the 2004-2005 fiscal year.

Equalization is funded from federal revenues, which come in part from income taxes paid by Canadians across the country, including those in Ontario and Alberta. Payments are based on a complicated formula involving many provincial economic indicators.

"Through our contributions to equalization, we're going to end up providing funding to the people of Newfoundland and Nova Scotia that will enable them to exceed their wealth on a per-capita basis, beyond that of Ontarians," McGuinty said.

That line of argument didn't get a lot of sympathy from federal Immigration Minister Joe Volpe, an MP from the north Toronto riding of Eglinton-Lawrence.

Volpe said Ontario gets its fair share of Canada's wealth.

"A lot of our policies at the federal level go on to nurture the great prosperous economy of Ontario," Volpe said.

McGuinty isn't the only premier to comment on the deals Ottawa reached with Nova Scotia and Newfoundland and Labrador on Jan. 28, after months of negotiation.

Days after they were announced, the leaders of both Saskatchewan and the Northwest Territories said they would ask for similar arrangements to let them keep more of their traditional equalization payments without having them clawed back as natural resource revenues rose.