Finance Committee on Dec. 7th, 2022

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We now move to the Liberals with MP Baker for five minutes.

Go ahead, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much, Mr. Chair.

Mr. Giroux, It's good to see you here again at the Standing Committee on Finance. You appeared before our committee last week as well, I believe, and also before the Standing Committee on Government Operations and Estimates, where I was replacing someone. I have the impression that I'm seeing you almost every day. Mr. Chambers would like to see your office expand, and if so, we could well be seeing one another every week.

We've heard the provinces say that the federal government's contribution for health care only covered 22% of costs. I understand that this figure doesn't take the bilateral funding agreements into account, like those that were signed for mental health and home care funding, or tax point transfers to the provinces.

Does your analysis of federal government expenditure on health care also show a 22% rate?

[Yves Giroux]

Thank you for the question, Mr. Baker. It's not that I'm trying to see you so often on purpose; it all depends on the invitations I receive, although I'm always happy to accept them.

With respect to the percentage of provincial expenditures covered by the federal transfers, the figures we arrived at are closer to 32%. To arrive at that ratio, we factor in expenditures covered by the Canada Health Act, things like expenditures on hospitals, doctors, and long-term care centres or homes for the elderly. We don't include services that the provinces opted to provide because that would skew the data somewhat or increase the denominator, which would yield a somewhat lower ratio.

So by the factoring in both federal transfers and expenditures covered by the Canada Health Act, we get to numbers closer to 32% or 33%.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I was a management consultant and I know that in the private sector, at least in well-managed organizations, when you spend money, particularly large amounts of money, considerable resources go towards analyzing how these investments turned out.

Have you analyzed the outcomes of federal investments? Could you comment on that?

[Yves Giroux]

No, my office hasn't analyzed the results for health. I know that other organizations are doing that. Some are comparing things like life expectancy in Canada to life expectancy in other countries. From memory, I know that Canada is leading the pack in terms of life expectancy. Apart from that, I have no performance measurements for the Canadian health system or investments by the various levels of government.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Let's start from the principle that the government always wants to improve it's fiscal performance, or in other words, to obtain better outcomes for Canadians in terms of federal spending of all kinds.

Would it be a good fiscal practice to begin by analyzing or assessing the performance of investments, whether in terms of transfers to the provinces or other programs, and to then make investments where they would be most effective, by tying investments to outcomes?

[Yves Giroux]

I don't know whether it would be desirable to tie investments to outcomes, for several reasons. Nevertheless, measuring outcomes is eminently desirable. If it's to identify best practices and attempt to adapt them to other circumstances, then I don't see how measuring actual outcomes could be a bad thing. The problem likely resides in the measurement of these outcomes, particularly in health. What needs to be measured, and how do you measure the outcomes? That's a question I'd rather leave for others to answer.

In any event, I believe that measuring outcomes is definitely worth doing.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Do I have any speaking time left, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

I was giving out a lot of leeway here, but thank you, MP Baker.

I'll jump on board and say that we always welcome you, Mr. Giroux, and we thank you very much for the work you do for Parliament and parliamentarians.

We're now moving to the Bloc for two and a half minutes.

MP Ste-Marie, go ahead, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

I agree with my colleagues in acknowledging all the work you do, Mr. Giroux.

I'll begin with a brief comment. We all agree, of course, that health is a provincial field of jurisdiction. It's therefore up to the provinces to speak to one another, identify best practices, and then implement them.

The Bloc Québecois has serious reservations about the idea that Ottawa should attach conditions to health funding or additional funding. When you look at practices like that in other sectors, like transportation and infrastructure, it becomes clear that the process is spread over several years and that major, rather than small, projects are prioritized by some municipalities.

We agree with the provinces on that, which is to say that we wouldn't want to tie funding to any conditions placed on it by daddy Ottawa.

You talked about some of the calculations you did while preparing the report called "Federal Support through Major Transfers to Provincial and Territorial Governments", published on September 20. In order to follow up on your previous answers, I'd like to ask you whether you could give us examples of services provided by the provinces that are not covered by the Canada Health Act.

[Yves Giroux]

I was hoping nobody would ask me that, because unfortunately, I don't have an answer. I have a list of what's included under the Canada Health Act, but I don't have any concrete examples of things that would definitely not be included. I will therefore have to check and give you an answer later.

Based on the list, I would say that matters related to pharmacare are probably not included in our calculations, because the report was published over two years ago, nor would optometric services be included. What we're talking about here are services provided outside hospitals and by professionals other than doctors.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

The provinces are therefore all in agreement in wanting more funding for health transfers, beginning with remedial funds to make up for earlier shortfalls and better indexing to reflect actual costs.

If Ottawa were to provide additional funding, what impact would this have on the federal government's financial sustainability, in comparison to the impact on overall provincial sustainability? Have you evaluated that?

[Yves Giroux]

No, I have not evaluated that aspect, but it would be relatively easy to calculate it if the provincial governments were to make specific requests to do so. Based on the July report, the impact on the financial sustainability of the federal government, and the provincial and territorial governments, could be determined. Calculating that would not be a very complicated matter.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Now we'll have questions from the NDP.

Go ahead, MP Blaney, please.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Thank you, Chair.

One of the main arguments for equalization in Canada is the principle of horizontal equality, which is to say that, regardless of where you live in Canada, there should be a basic or standard quality of life, or, as I like to call it, a “bar of dignity”.

I'm coming back to you, Mr. Béland.

In your essay on the economics of equalization, which is part of the fiscal federalism and equalization policy in Canada, you explain that principle, as well as some of the traps we can fall into. Would you be able to walk the committee through some of what you think works and some of what you think doesn't work?

Thank you.

[Daniel Béland]

I think that equalization is something fundamental for not just our fiscal system but for federalism, because equalization doesn't have any strings attached. The provinces that receive equalization can do what they want with the money they receive, so it doesn't infringe on their autonomy; but, at the same time, it provides provinces with a lower fiscal capacity better services to the residents of their province without having to tax them in a way that is really disproportional to the services they receive. That is why this is principle is embedded in the 1982 Constitution Act, and I read subsection 36(2) in my opening remarks.

What works and what doesn't? The first thing I would say is that, overall, equalization does work in the sense that.... We talk a lot about health care, but take another topic like education. We don't have a department of education in this country, as opposed to many other federal countries like the United States. The federal government plays a very limited role in education, especially free secondary education. Jennifer Wallner from the University of Ottawa published a book about this. Despite no federal norms or massive federal intervention in education policy, we are doing very well in international tests, and the inequalities across the country, if you compare the provinces in terms of education, are not that dramatic, so this is a success story.

As Jennifer Wallner argues in her book, it's partly because of equalization. Yes, there is this horizontal redistribution, horizontal fairness, but, at the same time, it's done in a way that protects provincial autonomy, even the autonomy of poorer provinces. Although we can always revise the formula, as I said earlier, there are always things we can improve about equalization. The very logic of equalization is necessary if we want to combine some level of fairness and solidarity with a high level of decentralization, which is what we have in Canada.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Béland.

Thank you, MP Blaney.

Now we'll go to the Conservatives. We have MP Lawrence by video conference for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much, Mr. Chair. Given your generosity, if you could stop me at 10 minutes, that would be great.

Professor Soderstrom, I'm hoping your Internet holds out. If not, I'll have to have another line of questioning, and that's fine.

You mentioned that the federal government gave out tax points. I'm not a management consultant; I'm just a simple guy from Orono, but I believe that the federal tax rates have changed considerably, which seems to poke a pretty big hole in your theory that these tax points equate to additional money to the provinces.

Am I missing something here?

[Lee Soderstrom]

A tax point is a tax point. One tax point generates certain revenue, so that, if you pass one tax point from the feds to the provinces, the provinces then have more power to collect revenue.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

But since then, the feds have increased taxes and reduced taxes as well over the last 30 years or so. It hasn't stayed constant, so I fail to see where that transfer has remained constant.

Doesn't that undermine your point?

[Lee Soderstrom]

The tax points that were transferred have remained constant since 1977.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay, so the—

[Lee Soderstrom]

The number of tax points transferred remains constant.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Just to understand that, when you say that the tax point have transferred, my understanding was that the federal government lowered its taxes, and so allowed the provinces to increase their taxes.

Have I understood that?

[Lee Soderstrom]

Yes.