The tobacco transition program - hastily conceived, poorly executed, open to abuse

Monday, January 2, 2012

That was the verdict of the auditor-general on the 2008 Ontario Transition Program, set up to end the tobacco quota but clearly with political ends in mind

by BARRY WILSON

It is a political axiom as old as politics itself – public policy created on the fly to meet a political need usually is flawed policy.

The 2008 Ontario Transition Program is the latest exhibit. It was hastily conceived, poorly executed, badly explained and rife with the potential for farmer abuse. That's the conclusion of interim federal auditor-general John Wiersema in a report tabled in Parliament in late November.

The result was implementation confusion and an attempt by more than 300 former tobacco quota holders to bend the rules. In the end, much of the policy intent (as well as the political goal) was accomplished but, along the way, the process was abused and tarnished.

What went wrong and why?

The $284 million program to end the southern Ontario tobacco quota system and to help heavily indebted farmers exit the struggling industry was reasonable in its intent.

Farmers had invested to buy quota and the infrastructure necessary to grow tobacco, once an economic mainstay of a small region in Haldimand and Norfolk Counties southwest of Hamilton. It is a legal product and farmers invested in good faith.

But while loving the tax revenues and jobs the industry produced, government policy essentially destroyed it, sharply eroding the value of that farmer investment.

Government health, labelling and tax policies undermined the industry while governments turned a blind eye to massive illegal smuggling of tobacco, often through First Nations reserves, that made the legal industry a shadow of its former self.

Government had an obligation to deal with the mess it helped create. Enter the politics of Haldimand-Norfolk.

The largely rural riding had been a stronghold for Liberal MP Bob Speller until 2004, when Conservative Diane Finley defeated the then-federal agriculture minister, in part on a promise of a better tobacco deal than the Liberals had given.

The Conservatives won government and Finley held the seat in 2006 with more tobacco compensation promises.

Fast forward to the summer of 2008. Another election was looming, the Liberals had attracted a strong candidate and no tobacco money had been delivered.

Suddenly, on Aug. 1, 2008, the government announced a buyout program that would require farmers who took cash to exit the industry. Finley had her election platform plank.

After rushed federal-provincial talks, Ontario refused to join. Information to producers and the industry was imprecise and confusing.

Soon, rumours were swirling that some of the 1,000 quota holders were transferring quota to non-farming family members who would get the money and then rent the land back to the former quota holder, who would have the best of all worlds – potentially hundreds of thousands in compensation while continuing to grow tobacco on license.

By March 2009, Ottawa ordered suspect quota transfers to be reversed. Only 22 of 358 transfers were approved.

Still, the rules were vague enough that despite Ottawa's attempt to curtail it, many farmers still were able to stay in the industry through a "business arrangement" with relatives, who bought or rented their land and then hired them as employees to grow tobacco.

The auditor-general concluded that, in its haste to get the problem solved, the federal government did not properly assess the potential risk of rule bending.

In the end, the program succeeded in closing down the quota system and substituting a tobacco-grower licensing system that is functioning.

But clearly some farmers found a way to benefit more than Ottawa had intended and the image of fair program implementation took another hit.

Political imperatives and good public policy do not easily mix. BF

Barry Wilson is a member of the Parliamentary Press Gallery specializing in agriculture.