Good evening.
The pandemic has renewed calls for major changes to Canadian fiscal federalism on pretty well all sides. The motion currently under consideration definitely calls for a reform of current challenges.
I do think it's important to look back historically and recognize that Canadian fiscal federalism is incredibly far from where the system was designed to be almost 150 years ago. The trend in recent years has been for the federal government to increase transfers to the provinces to face growing health care system issues. The problem here is that doing that obscures accountability and allows the level of government with the greatest revenue, in this case in Ottawa, to exert control over choices provincial policy-makers can make.
In a paper that I wrote when I was in the Ph.D. program at the University of Toronto, we spoke of the dangers of what we called “entanglement”. This is the idea that while one level of government has the taxation power to fund programs, there is a constitutional responsibility to another level of government. By having different levels of government funding and operating social programs, Canadians are in many ways losing out on the ability to hold the appropriate level of government accountable for failures within the system when they do occur.
We've known about funding problems within the framework of Canadian fiscal federalism for decades. The Rowell-Sirois Commission, which made recommendations on the state of fiscal federalism in 1940, noted that there was a significant imbalance between the revenue-generating capacity and spending responsibilities of the federal government and those of the provincial governments. I think we can consider the fact that in 1937, when the commission was created, the federal government generated revenues amounting to double those of all the provincial governments combined. The Rowell-Sirois Commission made some sweeping recommendations for reform, and most of them were never actually adopted. What we've ended up with is a complex web of transfer payments from the federal government to the provinces. Canadian fiscal federalism in many ways is broken.
At the time of Canada's founding, the provinces were given responsibility over issues like health care and education. These were seen as more minor issues at the time. These costs have ballooned, and that has led to ballooning spending at the provincial levels, as many have mentioned, but ultimately the taxation power is still in Ottawa. To fund these programs effectively but to also allow for greater responsibility, the federal government should look at transferring taxation points to provincial governments so they can raise the revenue, spend it, and then be accountable to the voters with respect to how that money is being spent.
The status quo in equalization is also in need of reform. We have taxpayers from some provinces who have ended up sending money to other provinces with little in return. Again, the issue is accountability. Provinces that receive equalization funding don't have adequate incentive to strive for improvement. The program is unfair to many provinces, not just Alberta. We've noticed, for example, that Newfoundland and Labrador has been considered to be a “have” province but at the same time has received a $5.2-billion backdoor bailout from the federal government. This is a program as well that has discouraged resource development in provinces other than those provinces that have used that revenue, which has then been transferred to other provinces as part of the equalization formula.
Ultimately, the Canadian Taxpayers Federation, which has been around for more than 30 years now, believes that accountability is one of the most important things you can have in government. If we are going to have government deliver important health care, education or other services, it ought to be the case that voters, when they go to the ballot box, are able to hold politicians accountable for whether or not they've delivered on their priorities, whether those are health care, long-term care, or other areas.
Obviously, the pandemic has certainly brought about a conversation about the appropriate extent of government involvement in health care, the delivery of health care and issues involving long-term care, and I think those are all conversations that can be had. However, the major danger we have gone through here in Canada over the past several decades is having one government sending money to another level of government without an adequate level of responsibility and without being held accountable at the ballot box. If voters cannot hold the appropriate level of government accountable for problems with our health care system, well, that's what's leading to so many of the broken things we see today.
I will just close by saying that we think it's absolutely essential that the government that is delivering services be at the same level as the government that is funding those and that it can be held accountable for the mistakes and the problems that are happening in those areas. That's not the case now, and it's something we need to rectify.