Federal Finance Minister Jim Flaherty moved to placate Ontario and Alberta on the eve of a potentially acrimonious premiers conference by indicating new federal-provincial funding agreements will not cost either province money.



Mr. Flaherty said yesterday his government is inclined, as the Tories said during the election campaign, to exclude natural resource revenue from the equalization program.



Both Alberta and Ontario have been livid in recent weeks about the idea of enriching the equalization program by including oil revenues in the formula. Their taxpayers pay into the equalization pot, but receive no equalization money in return because of the relative wealth of their respective provinces.



Mr. Flaherty also said in a speech to the Toronto Board of Trade that he would be prepared to boost per capita transfers to the provinces for infrastructure and postsecondary education. Ontario, as the most populous province, would benefit the most from this proposal.



The Premier of Saskatchewan, which stands to benefit handsomely from the exclusion of natural resources from equalization, said he was "encouraged" by Mr. Flaherty's remarks.