Stefanson should embrace strings-attached deal

Opinion

As part of an ongoing, multi-year campaign, on Dec, 22, Premier Heather Stefanson, writing as chair of the Council of the Federation (consisting of the premiers of the provinces and territories), called upon Prime Minister Justin Trudeau to negotiate a long-term agreement providing greater federal financial support to Canada’s 13 mainly separate health-care systems, all of which are experiencing crises of various kinds.

The premiers claim the national government is paying only 22 per cent of provincial health-care costs, and they called for a 35 per cent boost, which would amount to an additional $28 billion in health money flowing from Ottawa.

The premiers’ demand was clearly a bargaining chip, because the prime minister had already announced the Canada Health Transfer (CHT) would increase by 9.3 per cent in 2023, to $49.9 billion.

It is impossible in a short article to fully explain the context, content, controversies and potential consequences of the fight over health-care spending. The domain of federal/provincial finances is multidimensional and technical. Even brief exposure to the topic can induce drowsiness.

My purpose is to offer a brief explanation that provides non-specialist readers with a greater appreciation of what is at stake for Manitoba.

The explanation begins with the fundamental fact Manitoba is a relatively small, less-affluent province that does not wield as much political clout in the intergovernmental arena as bigger provinces such as Ontario and Quebec.

This became clear in the previous 2016-18 showdown over health dollars. Among the premiers, Manitoba’s Brian Pallister held out the longest, but, once he lost the larger provinces as allies, he had no bargaining power and eventually he obtained the same deal offered to other jurisdictions.

His intransigence may have cost the province goodwill on other files in the corridors of power in Ottawa.

As a “have less” province, Manitoba should not refuse federal money on purely constitutional or ideological grounds. Federal spending in areas of provincial responsibility brings with it the potential for higher-quality health, education, social and other services.

Along with national equalization payments to less affluent provinces, shared-cost arrangements reflect the principle that Canadians are entitled to reasonably comparable services regardless of where they reside.

Cost-sharing in the health field has been happening for decades, and there have been several distinctive periods when different models for federal financial transfers to the provinces have applied. The much-preferred model for the provinces was the former 50/50 model, in which the provinces spent what they wanted on health care and Ottawa paid half the cost.

Not only was this model open-ended; there were no conditions attached to the federal contribution.

There is no prospect the national government would, or should, agree to a return to an unconditional 50/50 cost-sharing. As the pandemic demonstrated, there is clearly a national interest in having a strong federal presence in the health field.

The government of Canada cannot be indifferent to how the provinces spend the money it provides to them. It should identify spending priorities, such as mental health or improved primary care. It must also assure Canadians they are receiving value for their health dollars.

Back in 1977, Ottawa converted its health and social transfers to a combination of cash and tax points. Put simply, the tax points involved the national government partially “vacating” the personal and corporate income-tax fields to “leave room” for the provinces to increase their own taxes.

The provinces insist they have levied the taxes and taken the political credit or blame for doing so for decades. They reject the argument from Ottawa that the tax points represent a continuing federal contribution to their health systems. It is important to note, however, there was no requirement that provinces actually raise taxes to pay for rising health costs.

Also, tax points are an even less transparent type of transfer than cash payments.

All provinces, but particularly low-tax Conservative administrations, preferred to launch pressure campaigns for increased cash transfers rather than face criticism for tax increases. In Manitoba, the Pallister government sacrificed revenues by cutting several types of taxes while simultaneously restraining health spending, and then complained federal underfunding was contributing to a health crisis.

Ideally, the two orders of government could agree on a “menu” of health spending priorities, with the option for individual province to apply federal cash transfers to one or more of those areas. In the interest of transparency and accountability, provinces should report publicly on the results of their spending.

In 2023-24, Manitoba will receive close to $6 billion in major program transfers (including for health) toward its total budget of $17 billion in spending. The premier should not balk at federal policy leadership in health care, and should accept the constraints that come with shared responsibility.

Paul G.Thomas is professor emeritus of political studies at the university of Manitoba.