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Harper pledges to settle multibillion-dollar HST feud with Quebec

Conservative Leader Stephen Harper delivers a campaign speech in L'Ancienne-Lorette, Que., on March 26, 2011.


Stephen Harper's Conservatives are promising that if re-elected they will cut a long-sought HST deal with Quebec that could see the province receive about $2.2-billion from Ottawa.

It's a major election goodie for Quebeckers, some of whom are smarting over the Tories' Thursday promise to co-sign a multibillion-dollar loan for a Newfoundland and Labrador hydroelectric project - a pledge roundly condemned Friday by Quebec Premier Jean Charest as a threat to the province's electricity market.

Quebec has for some time pushed for the HST money, noting Ottawa gave Ontario and British Columbia billions of dollars in cash to help cope with the transition to a harmonized sales tax that blends the GST and the provincial consumption tax. The announcement came from Conservative candidate Christian Paradis Friday in an interview with Radio-Canada's 24-hour news channel, RDI.

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He said if the Tories get back into power, they would sign a deal no later than Sept. 15.

The Harper government spent $5.9-billion bankrolling the shift to the HST in B.C. and Ontario. It's estimated the new levy will increase sales taxes on about one in five consumer purchases in these provinces. Economists say this compensation was crucial in persuading B.C and Ontario to adopt the merged tax.

Quebec's argument was that it adopted a form of the HST in 1991 and received no compensation from Ottawa.

The Harper government has pushed provinces where the HST doesn't already exist to adopt it, saying it's good for the economy.

The HST's economic appeal is that it yields a tax break for business and improves the investing climate for provinces that adopt it. What's politically perilous, though, is that it shifts some sales-tax burden to consumers from business, and, in the short term at least, hikes costs for consumers.

The cash from Ottawa helps Ontario underwrite the cost of cheques it's sending Ontarions to help cope with the tax shift.

Conservative officials, speaking on background, said the Tories would give Quebec an amount in the ballpark of what the province was seeeking, which is $2.2-billion.

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The Tories said they would also respect Quebec's request that it be allowed to keep administering collection of the tax.

The Conservatives said they had made progress in recent weeks in negotiations with Quebec, but the election campaign has delayed talks.

Opposition parties toppled the Harper government March 25, passing a no-confidence motion that judged the Tories in contempt of Parliament for stonewalling on the costs of their crime agenda.

The Quebec government and the Bloc Québécois sharply criticized the Tory pledge to provide a loan guarantee for the Lower Churchill River Falls hydro project, saying it would amount to subsidizing Newfoundland and Labrador power.

Mr. Charest, who traditionally sends a letter to all federal parties outlining demands from Quebec during federal elections, weighed in personally instead on Friday, saying Conservatives are threatening wreck an electricity market that works.

He described the promise to back the Lower Churchill hydroelectric construction as "stunning," saying the head of the project has said Ottawa's signature on a loan to finance $4.2-billion of the $6.2-billion project was unnecessary.

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"They are changing the price of electricity. They're changing the price paid by consumers. It's unacceptable. We have a market that works well. The federal government has never intervened; we can't tolerate them intervening now," Mr. Charest told reporters at Quebec's National Assembly.

"Now, it's an election promise, people will take it into account with everything else, and we'll see what happens with the election."

Mr. Charest stopped short of endorsing any party. He said Quebeckers need to take the promise into account when they vote May 2. The Liberals and NDP have expressed some support for the Lower Churchill project.

Bloc Leader Gilles Duceppe, who often crosses swords with Mr. Charest, said the Liberal Premier has his full backing. All Quebec parties, federalist and sovereigntist, from the left and the right, spoke out against federal aid for the project to build dams and a 1,100-kilometre underwater power line from Newfoundland to New England, via Nova Scotia.

"When all those people agree, and Mr. Charest puts if forward, we speak in the name of the National Assembly," Mr Duceppe said. "Whether Mr. Charest is federalist or not, he's the Premier of Quebec and I'm not ashamed to take up his cause when there is consensus."

Conservative Leader Stephen Harper made the promise while in Newfoundland on Thursday. Mr. Harper said the financial backing is part of a national strategy to finance green projects.

But political strategy played a roll as well. Mr. Harper was greeted as a hero by Newfoundland and Labrador Premier Kathy Dunderdale - a far cry from the frosty relations between the prime minister and Ms. Dunderdale's predecessor, Danny Williams.

Quebec and Newfoundland have frequently fought over Hydro. In the 1960s, when Hydro-Québec was in the midst of a massive expansion that would make the Crown utility one of the powerhouses of the Quebec economy, Newfoundland tried to get in the game.

Under premier Joey Smallwood, the province signed a long-term deal with Quebec to develop Upper Churchill Falls that allowed Hydro-Québec to reap almost all of the profits.

The two provinces tried again to strike a more equitable deal to transmit power through Quebec from Lower Churchill. When talks failed, Newfoundland chose the underwater route the Conservative government now promises to back.

Many in Newfoundland say Quebec is always putting up roadblocks to competition in hydroelectricity.

"There are people in the Atlantic who gave the impression Quebec objects to Newfoundland developing its project, not any more than they would judge our projects," Mr. Charest said.

"What's never happened before is that the federal government intervenes in a market that works well, and changes the rules of the market. That's what we are against."

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About the Authors
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

National correspondent

Les Perreaux joined the Montreal bureau of the Globe and Mail in 2008. He previously worked for the Canadian Press covering national and international affairs, including federal and Quebec politics and the war in Afghanistan. More

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