"I expect we will see something significant happen in this regard before the next federal election," said Mr. Grimes. "I think some preliminary work is already being done and the signals which I am getting from federal party sources is that there is a political will to do something like this for the province. I know a number of people in this province who supported Paul Martin’s leadership bid who have been lobbying on this issue for some time now."

"This will be a significant step forward and a major show of good will by the new Prime Minister and Liberal Administration in Ottawa, but I think the Conservative government in this province should be cautious," says Grimes.

"The Conservative government’s main priority should be focusing on long-term solutions to the deficit and getting reforms to the equalization program. As a province we should be very aggressive in making our case that the equalization program is unfair and it has to change. We have to make our case not just to the federal government but also to the Canadian public."

Grimes says it is clear the current equalization formula is not living up to its initial purpose. It was intended to assist the equalization receiving provinces to achieve a greater degree of fiscal self-reliance to enable those provinces to deliver an appropriate level services. Constitutionally, the principle of equalization is set out in the Constitution Act of 1982.

"While the transfer of the federal government’s shares in Hibernia will be beneficial for this province, those revenues will still be subject to the equalization clawback. I think there is a very strong case to be made that the equalization formula must be changed to allow this province to truly reap the benefits from our projects, as intended in the Atlantic Accord."