Ottawa to announce health, climate spending, Freeland says

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Finance Minister Chrystia Freeland said Ottawa is prepared to announce new spending on health care and clean energy, but cautioned her provincial and territorial colleagues Friday that Canadian governments must also be careful not to fan the flames of inflation.

The comments from Ms. Freeland, who is also Deputy Prime Minister, represent the federal government’s prepositioning ahead of Tuesday’s first ministers meeting in Ottawa, where Prime Minister Justin Trudeau will host the premiers for a discussion on the future of health care spending.

Canada’s finance ministers dined on Thursday night in midtown Toronto at an Italian restaurant in the city’s well-known Terroni group. They then held a day of closed-door discussions Friday that included a briefing from Bank of Canada Governor Tiff Macklem.

Ms. Freeland said the federal government has two spending priorities: health care and ensuring that Canada can compete with new U.S. green energy incentives adopted last year through the Inflation Reduction Act.

However, she also stressed that any new federal spending in those two areas must not undermine the Bank of Canada’s efforts to cool inflation.

“It really is my responsibility – the federal government’s responsibility – not to do anything that pours fuel on the flames of inflation and forces the Bank of Canada’s hands,” Ms. Freeland said. “And it means that we do need to behave with real fiscal responsibility even as we need to make these two big investments. And it was important for me to be candid with provincial and territorial finance ministers about that reality.”

Ms. Freeland did not present a specific proposal for health transfers Friday.

Quebec Finance Minister Eric Girard said provinces have been told that they will receive a formal proposal on Tuesday.

“We’ll look at the parameters when we see it,” said Mr. Girard. “We need to see the offer.”

He said the premiers stand by the request they made in 2021, which called for Ottawa to increase its share of total government health care costs from 22 per cent to 35 per cent.

The premiers estimated in a 2021 report that this would mean increasing the size of the annual Canada Health Transfer by more than $27-billion a year, plus an annual increase of 5 per cent.

“The ask has been there for three years. Now it’s time to see the offer,” said Mr. Girard.

Mr. Girard noted that Quebec and other provinces have said they are prepared to publish data on health care spending and results, which was a key federal request.

Federal ministers have said the goal is for Ottawa and the provinces to reach a general agreement on health transfers in early February, followed by more specific individual transfer deals focused on the specific needs of each province and territory. Federal ministers have said they would like all deals in place before the release of 2023 federal and provincial budgets.

Federal ministers have pushed back on the premiers’ figures, stating that the premiers fail to acknowledge a 1977 deal in which Ottawa and the provinces traded some tax room so that provinces would have more direct tax revenue for health care.

In its 2021 election platform, the Liberal Party pledged to create a new Canada Mental Health Transfer that would ramp up to $2-billion annually by 2025-26.

Alberta Finance Minister Travis Toews told reporters that Ottawa should increase the CHT without conditions.

“We really believe that the funds should come without strings attached,” he said. “It should simply be an incremental addition to the Canada Health Transfer.”

Mr. Toews said that while all finance ministers recognize there are fiscal constraints when it comes to producing budgets, Ottawa should make increased health funding a priority.

“Our provinces have been really shouldering health care costs disproportionately for years,” he said. “This has been a long time coming in terms of waiting for the Prime Minister, for this federal government, to come back with a proposal to the provinces.”

Ontario Finance Minister Peter Bethlenfalvy said after the meeting that Premier Doug Ford has indicated Ontario is prepared to be “pragmatic” in order to get a health care deal done.

The total size of the CHT currently grows each year in line with a three-year moving average of nominal GDP growth. Because nominal GDP is a measurement that factors in inflation, recent price rises have the effect of producing above-average CHT increases under the existing formula.

The CHT is projected to jump to $49.4-billion in 2023-24, up more than 9 per cent from the $45.2-billion in projected payments for the current 2022-23 fiscal year.

With respect to Canada’s response to new U.S. incentives for clean technology, Ms. Freeland said Ottawa and the provinces will need to work together on convincing global companies to make specific investments in Canada.

“This is a truly historic, once in a generation economic moment, and it will take a team Canada effort to seize it,” she said.

Mr. Bethlenfalvy told reporters Friday morning that provinces have been playing a role, but it’s the federal government’s responsibility to take the lead.

“This is a nation to nation, federal discussion and I’m confident that our government in Ottawa will represent the interests of all Canadians very well,” he said.