Federal Finance Minister Jim Flaherty gave an economic update recently that hinted towards adjusting the Canada Health Transfer after 2014.
With the CHT renewal up in 2014, Jim Flaherty has hinted the formula may be changed to match inflation combined with economic growth. Over a projected three year period this could mean as much as $5 billion less transferred to the provinces.
Under the 10-year Federal-Provincial agreement, Canada’s Health Transfer to provinces increases by 6 per cent per year. Paul Martin’s government signed the federal-provincial-territorial Health Accord with the intention to “heal health care for a generation”.
Any changes that would reduce federal contributions would contradict the Harper government’s pledge in the 2010 budget to maintain equalization payments to have-not provinces and not to cut health care or social services.
Conservative Quebec MP Maxime Bernier has broken ranks suggesting the CHT agreement should be scrapped and replaced with the equivalent tax cut to each province.
Bernier told the Globe and Mail that instead of sending money to the provinces, Ottawa would cut its taxes and then the provinces would use the vacated fiscal room. “Such a transfer of tax points to the provinces would allow them to fully assume their responsibilities without federal control,” he said.
Critics say basing health care funding on fiscal capacity would be a regressive move that would leave provinces and territory health care funding based solely on their ability to generate income.
The creation of transfer payments was intended to eliminate the disparity between have and have-not provinces and territories. Delivery of health and social services would solely rely on the provinces or territories income ability.
If Bernier’s idea gains traction it would end the principal of fiscal equity between provinces and territories in Canada.