OTTAWA — Parliamentary Budget Officer Kevin Page will release a report Thursday that’s expected to show federal finances are improving dramatically and are sustainable over the long term due to changes to health transfers, Old Age Security and the operating spending review.
But the federal government’s improved fiscal health is coming partly at the expense of the provinces, which are girding for smaller increases in health-care transfers in future years.
The new PBO report will assess the sustainability of government finances by sectors over the long term, including federal, provincial and local governments, as well as the Canada and Quebec pension plans.
It will also examine the estimated impact on the various governments’ finances from major changes to the Canada Health Transfer, departmental spending and the Old Age Security program.
The report follows up on one from early this year from the budget officer that found the Conservative government’s decision to trim the growth in health-care funding will strengthen federal finances but cost the provinces more than $30-billion.
“You’re going to see a lot more of that in this report (Thursday),” Page said Wednesday, noting the federal government’s fiscal track “is sustainable.”
Page said the government’s promise in budget 2010 to effectively freeze operating spending — along with its commitment in this year’s budget to find $5.2 billion in ongoing annual savings — will produce a “dramatic improvement” in the federal government’s long-term finances.
“You get really strong operating balances going forward. The feds are in good shape,” he said.
Also, the new report will show the Canada Pension Plan and Quebec Pension Plan are both currently sustainable over the long run, he said.
“Some people can conclude this, in some ways, is a good story for the government,” Page added. “How many other countries can say we have a federal fiscal structure that is sustainable in a wave of fairly significant demographic transition that’s going to take place in many countries? Well, federally we do.”
There remains, however, “a fiscal gap” at the provincial level, which was made worse when the Harper government announced late last year it will eventually trim the size of annual health funding increases.
It will be difficult for provinces facing aging populations to keep health-care spending increases under five per cent a year, at the same time the economy and federal health transfers grow at a slower rate, he said.
“That problem is really going to be owned by the provinces,” Page added. “We’ve effectively transferred that problem to the provinces.”
Finance Minister Jim Flaherty announced late last year a 10-year health-funding arrangement with the provinces that takes effect in 2014 and will maintain the annual increase in the transfers at six per cent until 2016-17.
But after that, health-care funding increases will be tied to the rate of the country’s economic growth, including inflation — roughly four per cent — and will never fall below three per cent.
Canada’s premiers, however, warned in a recent report the new federal health accord will gut nearly $36 billion in funding to the provinces over the 10-year deal and will erode public health services to all Canadians.
On Old Age Security, the Conservative government announced in the March federal budget that the eligibility age of OAS will gradually increase to 67 from 65, starting in 2023. The government maintains that unless the changes are made, the cost of OAS will soar to unsustainable levels.
But in a report early this year, the PBO said the Old Age Security program in Canada could responsibly continue on its current path — with a retirement age of 65.
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