Let me start with a general comment on transfers. At the Department of Finance we are responsible for four major transfers. Two of those are unconditional transfers—and they're in support of health, of course, depending on provincial and territorial priorities. There's equalization, which is an unconditional transfer that exists to ensure that provinces can offer comparable levels of services at comparable levels of taxation. Territorial formula financing is a similar transfer that takes into consideration the needs and the costs of the north. These two transfers are unconditional, and provinces use them wherever their most pressing needs are.
Two other transfers, health and social transfers, are conditional transfers. The health transfer provides support to health care systems in provinces and territories, and there is a condition attached to them. It is the Government of Canada's main support for the Canada Health Act, so the condition is related to the five principles in the Canada Health Act and to extra billing and user fees. The social transfer is also a conditional transfer, and the condition attached to it is that there cannot be any minimum residency requirements. Those are the two conditions that guide these two large transfers to provinces and territories.
In terms of accountability, Canada is one of the most decentralized federations in the world. Provinces are free to set their own tax rates and to decide what they're going to tax. With that revenue, the provinces are free to set their own priorities as to what their key policies are and what policy priorities they wish to fund with these revenues. Similarly, with the transfers—the $52 billion that we provide to the provinces and territories—they are fairly free to use these large amounts to meet their own needs and priorities, and they're not obliged to report back to the federal government. In a mature federation, they are obliged or encouraged to report back to their own residents, but not to the federal government. This is how the transfers have evolved over time.
If you go back to when we were looking for national standards, our transfers were cost-sharing transfers, and there was a specific goal and purpose defining why these were cost-sharing transfers and why we expected provinces to report back to the federal government. Starting in 1977, we have pretty much moved away from that principle and towards the principle of public accountability.
This is just how the transfers have evolved and how the federation has evolved.