The Conservative government is downloading billions of dollars of health-care costs on the provinces, says the parliamentary budget officer, making federal finances sustainable over the long term but leaving provincial governments to stare down severe financial pains in the coming years.The PBO’s annual long-term fiscal sustainability report released Thursday says the Harper government’s decision to scale back the growth in Canada Health Transfer payments means provincial governments will increasingly struggle to afford health-care services for their citizens.
In the first major report under new budget officer Jean-Denis Frechette, the PBO says Canada’s rapidly aging population is placing enormous financial strains on federal, provincial and local governments trying to provide increasingly expensive services.
The Conservative government’s spending cuts, changes to health-care funding, and its move to increase the Old Age Security qualifying age to 67 have created billions of dollars in fiscal breathing room for the federal government in the short term, and leave federal finances sustainable over the long term (next 75 years), the report says.
But Ottawa’s overhaul of medical funding has created an enormous “fiscal gap” for the provinces, the PBO notes. Health spending is expected to grow by an average of 4.9 per cent annually between now and 2050 — a higher rate than federal funding increases.
Provincial governments will either have to cut spending on programs and services or raise additional revenue through measures such as new or increased taxes if they hope to keep their finances sustainable in the coming years, the PBO says.
“The federal fiscal structure has been transformed from unsustainable in 2011 to sustainable — with substantial fiscal room — largely through spending restraint and reform of the Canada Health Transfer (CHT) escalator,” the PBO says in its report, which examines a “what if” scenario assuming existing policies continue in the future.
“However, the federal fiscal room created by the change in the CHT escalator has transferred the fiscal burden to provinces and territories and raised the fiscal gap of the PTLA (provinces, territories, local, and aboriginal governments)…”
The PBO says the federal government’s spending restraint means it should be able to achieve its target of reducing Canada’s federal debt-to-GDP ratio to 25 per cent by 2021, and could potentially eliminate its $627-billion debt by 2044.
The various federal reforms — assuming Ottawa can maintain its debt-to-GDP levels over the long term, in the face of changing demographics — represent an extra $24.8 billion in fiscal breathing room for the federal government in 2013, according to the PBO. The government is projecting an $18.7-billion deficit for the current 2013-14 fiscal year.
“We are pleased to see that the PBO continues to believe that our government’s finances are on a fiscally sustainable path,” Finance Minister Jim Flaherty’s press secretary, Marie Prentice, said in a statement.
On the flip side, the PTLA governments would have to increase revenues or cut spending (or a combination) by $36.2 billion in 2013 to eliminate the fiscal gap and return to more sustainable spending levels.
Flaherty announced in 2011 a 10-year health-funding arrangement with the provinces that takes effect in 2014 and will maintain the annual increase in health transfers at six per cent until 2016-17.
But after that, health-care funding increases will be tied to the rate of the country’s economic growth, including inflation — currently less than four per cent — and will never fall below three per cent.
The scheduled increases in transfers to the provinces will still see federal health funding reach record levels, growing to more than $40 billion in 2020-21.
But Canada’s premiers warned last year in a report the new federal health accord will gut nearly $36 billion in funding to the provinces over the 10-year deal and will erode public health services to all Canadians.
On Thursday, the official Opposition said the PBO report is further evidence the Harper government is trying to balance the books on the backs of the provinces and territories.
“The fiscal imbalance is back and it’s thanks to Stephen Harper and Jim Flaherty,” NDP finance critic Peggy Nash said in a statement.
“Far from putting our fiscal house in order, this report shows how Conservative cuts to the Canada Health Transfer and Old Age Security are actually just downloaded these costs onto the provinces and individual Canadians.”
Original Article
Source: news.nationalpost.com/
Author: Jason Fekete
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