Dear Editor

The Chronicle Herald has tackled the question of federal health transfers to the provinces intelligently.

The Harper government has been running large deficits and is continuing with 6% annual transfers to the provinces in the short term.  While the 6% helps provinces in their efforts to continue to repair the damage of the Liberal cuts of the 1990’s, it may not be economically sustainable. Tying increases in future health transfers to the economy’s growth rate may have to do.

However, the Herald’s editorial team also wisely pointed out that Flaherty and Harper are changing the formula of its total transfer to provinces. And that’s big trouble for Canada:

The transfer is partly in cash and partly a shift of federal taxing authority (measured in tax points) to provinces. Currently, provinces with weaker economies get a larger per capita share of the cash transfer to offset the fact that tax points are worth more in provinces with stronger economies (so the points-plus-cash total is shared equally on a per capita basis). Starting in 2014, the cash will be distributed on an equal per capita basis, regardless of the value of the tax points.

This will yield a $1-billion windfall for Alberta. But provinces with “weaker” tax points, like Nova Scotia, will take an additional hit on the growth of the cash transfer. This is the basis for Premier Darrell Dexter’s complaint that the change will produce health haves and have-nots. And it’s a valid objection.

Rewarding resource-rich Alberta with an extra billion while punishing other provinces like Ontario and the Atlantic provinces is hardly a nation-building exercise. In fact, the actions of the federal Conservatives are a clear  breach of the basic principles which have informed federal responsibilities to the provinces around health care for decades. A government document on the Canada Health Act from 2005 states it well:

The scale of transfer payments from the federal government to the provincial governments has increased in Canada as a result of the characteristics of the constitution and reality. It is because Canadian provinces have been given the potentially most expensive responsibilities in the modern state, while being limited to direct taxation, and because many of them have found themselves faced with a tax base below the national average, that recourse to the spending power has become so important in the practical workings of Canadian federalism. … Against such a background, it appeared unfair to leave it to the provinces to fund the social programs demanded by the people, out of their own resources.

So, while health care is a provincial responsibility under the Constitution, the federal government has never shied away from intervening in it through its Constitutional spending powers. And when it has done so, it has always relied heavily on the criterion of economic equity to justify it’s intervention. Harper’s current stance is a break from that and thus bad news for Nova Scotia and bad news for Canada.

One of the particular problems with Harper’s stance is that at the same time that it moves away from a needs-based assessment of federal transfers, it ignores the impact that the high Canadian dollar is having on certain provinces like Ontario and Nova Scotia. This particular aspect of this story should receive more attention and we hope to say more on it at some point.

Also in need of more attention is the perverse fact that Harper’s change punishes provinces (like Nova Scotia) that are  making the tough choices to get a better bang for their health care buck and get their fiscal house in order generally.

In all, it seems like a strange way to to go about building a better Canada.