Canada’s health ministers met in Vancouver last week to discuss, among other things, how costs should be shared. These get-togethers have become something of a ritual over the past few decades (although, notably, Stephen Harper refused to participate).
The provinces plead poverty and ask for more money. Ottawa plays hard to get. Both sides fiddle the figures and the outcome owes more to politics than logic.
This time around, however, the provinces do have a case. Two, actually.
B.C. Health Minister Terry Lake points out that federal funding for health care is per-capita based.
But that ignores a major cost driver — the age of the population. Because so many people retire here, B.C.’s residents are older than the national average; much older, for example, than Alberta’s.
As a result, we’re treating more than our share of retirees, whose health costs are usually higher. Lake would like to see aging taken into account.
But there is a larger problem that needs facing. A major imbalance has grown between the revenue-raising capacity of Ottawa and that of the provinces.
In 2015, the federal treasury took in $282 billion. Of that, federal ministries spent only $72 billion on direct program delivery.
Another $110 billion went for entitlement payouts such as tax credits and old-age security. Yet after funding all of its statutory responsibilities, Ottawa still had $100 billion left over. In effect, the federal government is raising 35 per cent more than it needs.
Ottawa’s case is that Canada benefits from a central banker that can collect and distribute cash for good causes. And when it comes to equalization grants to the poorer regions, there is force in that argument.
Yet equalization amounts to only $18 billion — a modest contribution at best. The remainder is transferred to the provinces in the form of various subsidies.
But this is a one-sided arrangement dictated by Ottawa. There is no guarantee these transfers will match provincial requirements. And, in fact, they do not.
B.C.’s program costs, as a share of GDP, are 35 per cent higher than Ottawa’s. But the funds we get from the federal government do not close that gap. They merely narrow it a little. Far more would be needed to eliminate the gap entirely.
It wasn’t always this way. At the time of confederation, when tax powers were created, the federal government was by far the main actor.
The expensive programs that provinces now operate — universal health care, public education, social services — either didn’t exist or were in their infancy. It made sense to give Ottawa the lion’s share.
Today, however, the balance of obligations has shifted markedly. In 2015, the provinces and territories spent $145 billion on health care alone — about 40 per cent of their budgets. The federal contribution, through transfer payments, was a mere $34 billion.
The answer to this imbalance is not more ritual chest-thumping. The long-term solution is a change in our tax regime.
If Ottawa transferred federal income-tax points to the provinces, the revenue gap could be narrowed or, ideally, closed. Fiscally, that makes sense. Taxation and spending should go together.
It would also make provincial governments more accountable, because they could no longer blame Ottawa for failures such as overlong surgery lists or inadequate child care.
Will such a thing happen? Well, it’s a mark of how short-sighted our politicians are that the provinces aren’t even asking for that.
Instead, they went into the meeting pleading for an increase in subsidies — more of the same. Federal Health Minister Jane Philpott agreed to consider it.
There is a historic opportunity here going a-begging. With a new government in Ottawa, it’s time for a more ambitious rethink of our union.
