Reductions to Transfer Payments Possible

Blog, Equalization, Marco Navarro-Genie

The Minister of Finance, Jim Flaherty,  introduced yesterday the idea of pegging tranfer payments to economic growth.  As a result, transfer payments could be reduced by a third five years from now, assuming current rate of growth.

Mr. Flaherty said his government will hold the annual increase in the transfer to 6% until 2016-17, which is the current rate the federal government gives the provinces. But then it will begin linking the health care increases to the rate of the country’s economic growth including inflation — which is currently roughly 4%.

To those who have invested work and energy into seeing reform come to the transfer system, this is a bit of  good news. The bad news is that there is no commitment to make the inefficient transfers disappear all together.

The federal government will not lower the annual increases to below 3%, even if economic growth dips below that level, Mr. Flaherty said.

It is also true that six years from now, economic growth could be higher than 6 percent, and therefore transfer rates could be higher than they are now.

Recipients provinces don’t seem to have such optimism. They have begun foretelling the doom for programs like healthcare as “provinces have said will lead to health-care service declines and longer wait lists.”  Yet, the myth that more money makes healthcare delivery better has been consistently challenged by Frontier’s Annual Canada Health Consumer Index, the latest instalment of which was released today. In the Index, “No significant relationship was found between health care spending and health care performance. Stronger performance in the top provinces cannot be attributed to a higher level of spending.”

The complete report is available on our website here.