Paying for Canada

CaledonInst.org – Publications/
January 2014.   Sherri Torjman

Fiscal transfers are the way that Canada pays for the benefits, amenities and protections that effectively comprise this country.  The impact of these transfers upon the quality of life of Canadians is nothing short of profound.  Paying for Canada presents an overview of the key shifts in that financing architecture.  The timing of this expenditure discussion is important.  Three major transfer arrangements – the Canada Health Transfer, Canada Social Transfer and Equalization – are governed by federal legislation that is set to expire on March 31, 2014.  A more recent measure, the Total Transfer Protection program, will be cut altogether.

The purpose of the Canada Health Transfer is to provide long-term predictable funding for health care.  The Canada Social Transfer is a financial transfer to provinces and territories in support of post-secondary education, social assistance and social services, early childhood development, and early learning and child care.  Equalization payments represent the third major transfer in Canada.  Their purpose is to ensure that all provinces have the financial capacity to offer their residents reasonably comparable public services at reasonably comparable rates of taxation.

In 2010, Ottawa introduced the Total Transfer Protection (TTP) program to help provinces address the fiscal challenges related to the 2008-09 recession.  While the TTP was extended into 2013-14, its pending demise was announced by the Finance Minister in December 2013, much to the dismay of the provinces – Ontario, in particular.  The coming year would have been the first in which Ontario qualified for a payment under the TTP program.

Budget 2014 is expected to restate the changes to fiscal financing arrangements made by Ottawa over the past few years.  But it may well come with other surprises, given the March 2014 expiry of major fiscal arrangements in the country.

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