New Study Confirms Fiscal Imbalance in Canada

PREMIER'S OFFICE/FINANCE--New Study Confirms Fiscal Imbalance in Canada

A large fiscal imbalance between the federal government and the provinces and territories exists and is growing, according to a new report by the Conference Board of Canada.

The study was commissioned by provincial and territorial ministers of finance following their meeting in Corner Brook, Nfld, in April and was released today, Aug. 1, by the premiers.

The study shows that the distribution of revenues between the two levels of government is at odds with their constitutional spending responsibilities.

Based on a projection of federal and provincial/territorial revenues and expenditures over the next 20 years, the conference board confirms the existence of a fiscal imbalance in Canada and that it will widen in the future. The impact of demographic changes on health care, for which provinces and territories are constitutionally responsible, is a major element in this growing fiscal imbalance.

The conference board report is consistent with the results released recently by Statistics Canada. They show that higher social spending by provincial/territorial governments comes at the same time the federal government has been reducing its expenditures.

The study estimates that federal government surpluses will rise steadily over the next two decades, reaching $85.5 billion. It also estimates that the provinces and territories will need to introduce fiscal restraint measures in order to avoid recurring deficits, which could reach as much as $12.3 billion by 2019-20. This would permit the federal government to virtually eliminate its interest-bearing debt by 2019-20, while the aggregate provincial/territorial net debt will increase by 54 per cent to reach $386.9 billion.

The study, titled Fiscal Prospects for the Federal and Provincial/Territorial Governments, is available on the Nova Scotia Department of Finance Web site at www.gov.ns.ca/finance/pdf/FiscalImbalance.pdf . It is also available on the Conference Board of Canada's Web site at www.conferenceboard.ca or by phoning 613-526-3090.