Tag Archives: Canada Health Transfer

Fun and games with fanciful figures


David Chaundy of the Atlantic Provinces Economic Council (APEC) asks a question of such thoughtful irrelevance, it’s stunning that no other professional numbers-cruncher has, to my knowledge, raised it.

If you had $56 billion what, would you do with it?

Mr. Chaundy’s challenge to readers of one of his recent commentaries for APEC is equal parts whimsy and gravitas; it stems from a metaphorical gauntlet he threw down to delegates to a recent business outlook conference.

The context, he writes, is the federal government’s Fall Fiscal Update of November 12, in which the finance department “revealed a projected $56 billion in surpluses over the next five years, beginning in 2015/2016. . .Since the government is not going to make you and your friends into overnight billionaires, how would you use these projected surpluses to advance Atlantic Canada’s economy?”

There is, of course, a catch. The feds have already committed to spending $26 billion over five years by introducing the Family Tax Cut, or income splitting ($10.3 billion); increasing the family child care benefit ($13.4 billion); raising the limit on tax-free savings account contributions ($2.3 billion); and investing in infrastructure ($1.3 billion).

That leaves you with a mere $30 billion with which to go to Hawaii and, as the accountants say, get permanently lost or, in the alternative, save the Atlantic Canadian economy for Queen and country.

The honourable route is not as easy as it looks, but Mr. Chaundy embarks jauntily, nonetheless . “Adjust transfers to the provinces,” he advises. “Ensure sufficient infrastructure funding (and) focus on globally competitive innovation.”

Regarding his first prescription, he notes astutely, “By tying the size of transfer programs such as Equalization and the Canada Health Transfer to the growth in the overall economy, the federal government has provided itself with greater fiscal certainty and largely insulated itself from the fiscal impacts of population aging. This is not the case at the provincial level.”

Mr. Chaundy endorses the Parliamentary Budget Office’s recommendation to restore the Canada Health Transfer growth rate to six per cent and factor a sliding scale of regional benefits based on provincial age demographics. Such moves could mean an addition $500-600 million to the Atlantic provinces over the next five years.

As for infrastructure, he writes “The Canadian Centre for Policy Alternatives estimated that underinvestment in infrastructure in Canada amounted to a gap of $145 billion: Canada needs to spend $20-30 billion a year for ten years on top of current spending to return infrastructure spending to historic levels.”

Atlantic Canada’s portion could amount to some $670 million annually if the funding formula was a per-capita calculation. “But if distributed according to need, the Atlantic provinces would receive proportionately more due to the region’s older infrastructure.”

Finally, on the subject of innovation, Mr. Chaundy is as clear as every other economist in the developed world: No amount of spending on social services or, indeed, infrastructure will actually goose a jurisdiction’s earned incomes and overall net worth. “What is critical for the region’s growth are firms that are export oriented and that have differentiated their products and services in the global market through their proprietary technology, specialized competencies or superior quality of their products or services.”

Mr. Chaundy suggests the federal government ponies up an additional $1 billion a year. (That’s not, in fact, a heck-of-a-lot when you consider the several, different diverse economies functioning within individual provinces. Does Newfoundland and Labrador’s offshore oil and gas industry resemble, either in the skills it requires or the technology it deploys, anything remotely comparable on Prince Edward Island?)

The new money could be used to help businesses leverage private sources of funding for innovation, technology commercialization, strategic alliances, mergers, and expansions.

All of which makes eminently good sense and, in fact, always has.

For several decades, two of Atlantic Canada’s great fiscal burdens have been the cost of providing for its disproportionately older workforce and comparatively ancient infrastructure. Both have siphoned off public money that might otherwise have been spend on economic capacity-building exercises of the type Mr. Chaundy describes.

Still, these mind experiments always remind me of those times when, in weak and weary moments, I daydream about winning the lottery.

Let’s see. . .If I had a million dollars, $10 million, $50 million. . .what would I do?

Something or someone always arrives to shake me out of my reverie.

This time, it’ll be falling oil prices.

Hello resource economy.

Goodbye surplus city.

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