No news, bad news.
Posted at 4:22 p.m.
Unsurprisingly, the Freeland budget does not provide for an increase in health transfers. But when you read it, you understand that the clock is ticking against the provinces. The more time passes, the more recurring expenses will add to Ottawa’s finances. There will therefore be less money left to share.
It is unclear when negotiations will finally begin. One thing is certain, they will be tough. The feds will demand something in return.
The table is set in the budget. The Liberals politely criticize the management of the provinces. Canada spends a higher percentage of its GDP on health (10.8%) than the average for OECD countries. However, the results are disappointing. Access and quality of care are worse than in France, Germany, Australia or the United Kingdom, it is pointed out.
The federal government wants to take advantage of the negotiations to “promote (its) priorities” and to demand “better results”.
The question of “how” will be omnipresent. As for the “how much”, Ottawa’s means will have diminished.
The Trudeau government is adding hefty recurring expenses.
The last budget provided for a national child care program. True, Quebec receives an annual check without compensation of approximately 1.2 billion, which it can reinvest in health. But this program still costs the federal government nearly $6 billion a year, which reduces its room for manoeuvre.
This time, M.me Freeland is increasing military spending (nearly $7 billion, in addition to purchases that a future report may recommend). She also makes concessions to the NDP. To obtain their support, the Liberals will pay for dental care for people with modest incomes (1.7 billion annually in the long term) and will create a national drug insurance program. A bill will be tabled in 2023, for implementation hoped for in 2025. The bill remains unknown, but it will probably be steep.
On the other hand, the budget offers fewer new sources of revenue.
It is difficult to assess the revenue generated by initiatives in the budget such as the new innovation agency, the strategy on rare metals and the fund to attract investments in green technologies.
The promised savings are also uncertain. A review of expenditure will be made to check, among other things, whether teleworking would reduce the costs of public administration. For the moment, this remains hypothetical.
A 1.5 percentage point increase in taxes for banks and insurance companies, as well as a reinforced fight against tax avoidance, are also on the agenda. In the past, however, such measures have yielded less revenue than expected.
Analyzed individually, the new expenses may appear justified. It can also be argued that they do not exceed Canada’s ability to pay. After all, the debt-to-GDP ratio will fall over time.
But in Canada, we cannot stop at a strictly economic analysis of public finances. The file is inseparable from the vision of federalism.
Ottawa’s expenditures must be evaluated according to areas of jurisdiction and federal-provincial relations.
Of course, it was the Trudeau government that provided the bulk of the aid during the pandemic – 80% of spending came from the federal government. If the Legault government had the means to give 500 dollars to the taxpayers, it is a little thanks to this…
This year, the health transfer is not a problem. It fluctuates with economic growth. As is stronger than expected, the provinces receive a bonus check. However, this favorable context will not last.
The budget forecasts three economic growth scenarios for the period 2024-26. None exceeds 2.4%. This means that the transfer should remain at the floor level of 3%.
However, provincial health spending is increasing faster. They are increasing by at least 4% on average per year, and the aging of the population will do nothing to help. For example, Quebecers aged 70 and over make up less than 14% of the population right now. In 2035, this percentage will be 20.5%.
A structural imbalance is deepening.
This fiscal balance of power makes federal intrusions into provincial jurisdictions more irritating.
In the eyes of the Canadian Minister of Health, Jean-Yves Duclos, the federal government is not an ATM. Demanding results is normal and even responsible, he argues. In his defense, the provinces can probably do better.
He is betting that many citizens do not care about jurisdictional disputes. However, Quebec’s plan to straighten out its health care system relies on decentralization. Accountability could get in the way.
The CAQ government is indignant, but it could lack allies.
Even if the Bloc is campaigning for an increase in health transfers, Justin Trudeau’s alliance with Jagmeet Singh has reduced its bargaining power. The minority government no longer needs him.
For now, the Council of the Federation is united. The complex negotiations to come on national pharmacare could, however, change things. It risks opening the door to concessions with the provinces interested in such a plan. And that is without taking into account the effect of the global economic context on federal finances.
In health, time will not help matters.