Evidence of meeting #54 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was impact.
A video is available from Parliament.
Conservative
The Chair Conservative James Rajotte
In terms of your analysis as to why the U.K. economy has recently picked up after embarking on and implementing a series of what most would agree was austerity measures—
Economic Analyst, Economic and Fiscal Analysis, Library of Parliament
We haven't looked at that specifically.
Conservative
The Chair Conservative James Rajotte
Okay.
A final area I wanted to get to was demographic challenges, but the bells are indicating we have a vote in the House.
Colleagues, on behalf of the committee I want to thank you all. As members have said, it's always a very interesting discussion when we have you before the committee.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Mr. Chair, are you going to ask that question?
Conservative
The Chair Conservative James Rajotte
It's on demographic challenges, and I appreciate the reports that you've done. I find them very good.
You talk about a declining birth rate, you talk about people living longer, and as was pointed out by Mr. Van Kesteren, you talk about entering a period of global, modest, economic growth, which is even different from the economic growth going down for the industrialized countries in the 1970s. You talk about the demographic pressure of the population sort of tapering off somewhere after 2033 because of the baby boom population. The challenge is mainly at the provincial level, not at the federal level, as you point out.
If you're looking at the provincial level, in fairness, they've probably never received more transfers from the federal government in history, but the federal government has also vacated certain areas with respect to tax measures. I hear all the time, as a federal politician when I go back home, that the federal government raises too much of the tax and that more tax should be raised at the municipal or at the provincial level.
Isn't that something that provinces have to look at in the sense that they're either going to have to find some way to restrain spending—especially in areas like health care—or they're going to have to look at their revenue issue, one way or the other? Frankly, it's not really a problem they should push upward again; it's a problem they're going to have to face directly.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
You are absolutely right.
When we do the “Fiscal Sustainability Report”, part of the reason we do the provinces, the CPP and QPP, is to give Parliament the view of the total economy and what the situation is. We see that the federal government has room and the provinces don't have room, maybe because of the House expenditure increases. Certainly, they have an option to increase their taxes to pick up that tax room that was provided by the federal government, to take that up and deal with the ratio through higher taxes. Again, that's the choice that the provinces can make.
We also show in our report some simulation and some illustration of the different scenarios that one can consider for the health care transfer and the health care control. They are controlling the health care expenses that would actually, to some extent, reduce that pressure on the provinces. It's a minor adjustment, for example, to the health care transfer from the federal government. You can actually reduce the pressure on the provinces, but they do have that option. When we say that the fiscal gap at the provincial level is 1.7% of GDP, that gives them the option of either reducing their spending or increasing their taxes or a combination of the two to deal with that issue. Certainly, if they can control the health care cost to some extent—I mean, it's not possible to reduce it to nothing but obviously they can bring it down to some extent—then that will help them significantly.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Obviously it is.
Conservative
The Chair Conservative James Rajotte
I'll have to end it at that. I'm well over my time.
Again, I want to thank you on behalf of the committee for appearing. If there are any follow-up reports please do send them to me and I'll ensure all members get them.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Library of Parliament
Thank you very much.
