Ottawa should empower provinces to generate health-care funding
Ontario Finance Minister Rod Phillips and Premier Doug Ford recently called on the Trudeau government to increase the amount of money it sends to the provinces each year to support health-care spending.
Premier Ford said that, along with other premiers, he will call for the Canada Health Transfer (CHT) to be enlarged so Ottawa covers 35 per cent of health-care costs, up from 22 per cent today. If the federal government agrees, this would mean approximately $10 billion in additional funds for Ontario under the CHT.
Premier Ford is right to worry about upward pressure on health expenditures from an aging population. However, he’s identified the wrong solution to that problem.
Instead of simply asking Ottawa to write bigger cheques to the provinces every year, Ford and the other premiers should ask the federal government to reduce federal taxes to vacate “tax room” so they could then raise their own provincial taxes to pay for health-care services without increasing the aggregate amount of taxes borne by Canadians.
To see why this approach is workable, its useful to look at the current circumstances. As it stands, the federal government raises more money in taxes than it needs to deliver federal services and transfers. Meanwhile, the provinces don’t raise enough money on their own to fund the services they provide.
To rectify this imbalance, the federal government provides funding every year to help provinces pay for provincial services including health care.
There are several problems with this approach, including the fact that it undermines democratic accountability. When things go wrong in any provincial health-care system, the provinces frequently blame Ottawa for shortcomings, arguing they just don’t get the help they need. It’s almost impossible for Canadians to assess the accuracy of such claims and understand who should be held responsible for any province’s health-care system.
So how can this accountability problem be solved?
In short, Ottawa can substantially reduce the amount of money it sends to the provinces to fund areas of provincial responsibility while commensurately reducing federal taxes. At that point, it would be up to the provinces to decide how much to increase their own taxes to fund provincial services.
This approach, with the same level of government that delivers services being responsible for raising the funds to provide them, can end (or at least reduce the prevalence of) the confusing blame game. This would make it easier for citizens to decide for themselves whether they get adequate value in services for the provincial taxes they pay.
Again, Premier Ford is right to worry about rising health-care costs due to an aging population, but asking Ottawa for more money isn’t the only solution. Instead, the premiers should ask Ottawa to empower the provinces to raise the money they need for their health-care services.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.