C.D. Howe’s analysis calls for reductions in transfers to provinces

In the recent C.D. Howe “shadow budget” document, “Back to Balance: A Shadow Federal Budget for 2010“, the executive summary puts it into perspective:

Sensible, fair, and efficient measures for expenditure reduction include raising the employee share of federal pension contributions from 32 to 50 percent, limiting growth in federal transfers to the provinces beginning in 2014 (emphasis mine), and reducing subsidies to Crown corporations.

Federal transfers to the provinces and territories that support health and social programs are commitments in current federal legislation through 2013/14, as a consequence of federal-provincial negotiations. The C.D. Howe Institute’s
shadow budget proposes to freeze major federal-provincial transfers in support of health and social programs at their 2013/14 levels for five years, after federal-provincial accords and current legislation expire. According to the Institute, this will provide the federal government more fiscal room for tax relief, leaving tax room available for provincial and territorial governments to occupy to institute their own increases to compensate. From a provincial standpoint, this is another version of the trial balloon that the federal government has been floating for months. Renegotiating equalization terms and transfers has been done before, of course, most notably by Paul Martin, but this time there seems to be far more advanced warning. And yet, from the provinces, we have heard precious little.


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