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Chapter 3 
Securing Canada's Social Foundations

Highlights

• The 2004 10-Year Plan to Strengthen Health Care set out a commitment by all governments to improve access and reduce wait times. In support of the plan, the Government of Canada committed $41.3 billion over the next 10 years in new federal funding for provinces and territories.

• A new framework will be established for Equalization and Territorial Formula Financing providing $33.4 billion more over 10 years than the annual amounts for 2004–05 estimated in Budget 2004.

Health Care

• Budget 2005 provides $805 million over five years to deliver on the Government’s commitment to invest in health care in direct federal support in the following areas:

• Health human resources.
• Healthy living and chronic disease prevention.
• Pandemic influenza preparedness.
• Drug safety.
• Environmental health.

Tax Changes to Improve Fairness and Support Participation

• Budget 2005 makes the tax system fairer by:

• Acting on the recommendations of the Technical Advisory Committee on Tax Measures for Persons with Disabilities.

• Doubling, to $10,000, the maximum amount of medical- and disability-related expenses that caregivers can claim on behalf of their dependants, beginning with the 2005 taxation year.

• Introducing a non-refundable tax credit to recognize specified adoption expenses, up to a maximum of $10,000, effective for the 2005 tax year and beyond.

Improving Support for Seniors

• To address the evolving needs of seniors:

• Guaranteed Income Supplement benefits for low-income seniors will be increased by $2.7 billion over five years as a result of increases in monthly benefits of $36 for singles and $58 for couples by January 2007.

• Funding for the New Horizons for Seniors program will be increased from $10 million to $25 million a year to promote voluntary sector activities by and in support of seniors.

Strengthening Aboriginal Communities

• The Government of Canada is committed to a renewed partnership with Aboriginal people and has initiated a Canada-Aboriginal Peoples Roundtable process that will be completed later this year.

• Budget 2005 invests $735 million over the next five years, in addition to the $700 million over five years for Aboriginal health programs announced in September 2004, to address urgent needs, with a focus on children, youth and their families, including:

• $345 million over the next five years for First Nations early learning and child care, special education, and child and family services.

• $340 million over the next five years for First Nations housing on reserves, Aboriginal languages and culture, and the Aboriginal Healing Foundation.

Supporting Canada’s Heritage

• In support of culture, diversity and sport, Budget 2005:

• Commits an additional $688 million for the Tomorrow Starts Today art and culture package that builds on earlier investments and extends the initiative for a full five years.

• Invests $171 million over five years to celebrate Canada and to help Canadian diversity find its voice in communities across the country.

• Provides $70 million a year to Sport Canada, doubling its ongoing funding to $140 million in 2005–06 from $70 million in 2004–05.

Justice Framework

• Budget 2005 provides funding for measures that will help address the social origins of crime and victimization in Canada, and to ensure that war criminals do not find safe haven in Canada.

Introduction

Canadians believe that everyone should have the opportunity to succeed, to achieve his or her potential and to participate fully in the promise of Canadian society. In this way, Canada’s prosperity is shared by all. This belief drives the Government’s support for strengthening Canada’s social foundations.

Economic and social policies of the Government must reinforce each other. Strong social policy provides the security for Canadians that is necessary to support sustained economic growth and provide opportunity for all. Strong economic performance has enabled Canada to build a solid social foundation and provide equal opportunity for all citizens. All this must be accomplished with unwavering adherence to fiscal discipline now and in the future—a commitment to balance the Government’s budgets and to live within the means available.

In its October 2004 Speech from the Throne, the Government set out an agenda to strengthen and build a more globally competitive and sustainable economy. This agenda involves strengthening Canada’s social foundations through investments in health care, child care, seniors, Aboriginal people, Canada’s cities and communities, culture, and the justice framework.

Initiatives in recent budgets established a solid base on which to move forward with these commitments. There were important investments in the areas of health, learning, knowledge and commercialization, communities and Canada’s place in the world. Budget 2005 builds on these initiatives.

Delivering on Commitments: The 10-Year Plan to Strengthen Health Care

Canadians are proud of their health care system and expect governments to work together to improve access, to be accountable for the use of taxpayers’ money, and to ensure that the system is sustainable for future generations. Governments are working together to meet those expectations.

Building on the commitments in the 2000 and 2003 health accords (see box), all First Ministers signed the 10-Year Plan to Strengthen Health Care on September 16, 2004. The plan sets out a commitment to improve access to publicly funded health care and reduce wait times for key health services. The plan includes an agreement to develop evidence-based benchmarks, comparable indicators, clear targets and transparent reporting to the public on access to health care. The plan also addresses the unique challenges facing the delivery of health care services in Canada’s North, including the costs of medical transportation. As part of the plan, the Government of Canada committed to increase its financial support for provincial and territorial governments.

As part of the First Ministers’ 10-Year Plan to Strengthen Health Care, all governments agreed to report to their residents on health system performance and to seek advice from experts and health providers on the most appropriate indicators to measure health system performance. First Ministers of jurisdictions participating in the Health Council agreed that the Council would prepare an annual report to all Canadians on the health status of Canadians and health outcomes, and would report on progress on elements set out in the 10-year plan. In addition, funding legislation that was tabled in the House of Commons on February 7, 2005, provides for a parliamentary review every three years on progress in implementing the 10-year plan.

September 2004 First Ministers’ Meeting on Health

In support of the 10-Year Plan to Strengthen Health Care, the Prime Minister announced $41.3 billion in new federal funding over the next 10 years, with $18.1 billion flowing over the period 2004-05 to 2009-10. The new funding will be used to increase ongoing federal health support provided through the Canada Health Transfer (CHT); meet the outstanding financial recommendations in the report of the Commission on the Future of Health Care in Canada (the Romanow Report); address wait times to ensure Canadians have timely access to essential health care services; and provide funds for medical and diagnostic equipment.

• A total of $3 billion will be provided through the CHT this year and next—$1 billion in 2004–05 and $2 billion in 2005–06—to close the short-term gap identified in the Romanow Report for health priorities identified by the provinces and territories.

• An additional $500 million will be provided through the CHT in 2005–06 to help deepen progress on home care services and catastrophic drug coverage, bringing the new CHT base to $19 billion in 2005–06. In this regard, the new CHT base fully meets the recommendations of the Romanow Report.

• Starting in 2006–07, the $19-billion base will be increased by 6 per cent annually to provide predictable growth in federal support.

• To assist the provinces and territories in reducing wait times, the Government will invest an additional $5.5 billion over the next 10 years, beginning this year. Funding of $4.25 billion will be paid into a third-party trust upon passage of authorizing legislation. Provinces and territories will have flexibility to draw down funds as required up to the end of 2008–09, according to their specific jurisdictional priorities. This funding will be used by the provinces and territories for key activities such as training and hiring health professionals, clearing backlogs, building capacity for regional centres of excellence, and expanding ambulatory and community care programs, as well as tools to manage wait times (see box). Beginning in 2009–10, funding will be provided through a Wait Times Reduction Transfer of $250 million annually, to be used primarily for both ongoing support for health human resources and tools to manage wait times.

• In May 2004, the Government responded to the spike in gasoline prices by announcing that the additional goods and services tax revenues in 2004 would be directed to investments in medical equipment, on a one-time basis. The value of this commitment is estimated to be $150 million. As part of the 10-Year Plan to Strengthen Health Care, the Government more than tripled this commitment by dedicating $500 million for the purchase of diagnostic and medical equipment.

Table 3.1
Increased Federal Support to the Provinces and Territories Under the 10-Year Plan to Strengthen Health Care (2004–05 to 2013–14)

As a result of these measures, total federal cash transfers in support of health are scheduled to nearly double, rising to $30.5 billion in 2013–14 from $16.3 billion in 2004–05.

Provinces also receive support for social programs and post-secondary education through the Canada Social Transfer (CST). As a result of investments in health transfers and the CST, cash transfers to provinces and territories for health and social programs will grow from a base of $15.5 billion in 2000–01 to $25.7 billion in 2004–05, and a planned level of $35.3 billion in 2010–11. This total includes previous investments in support of early childhood development as well as early learning and child care. Details on further investments in an Early Learning and Child Care initiative can be found in Chapter 4.

Table 3.2
Total Major Federal Transfers Supporting Health and Other Social Programs

In addition to providing support through cash transfers, tax transfers for both the CHT and CST are an important source of growing and predictable funding for provinces and territories that continue to grow in line with the economy. Combined tax transfers will increase to $25 billion by 2010–11 from $17.5 billion in 2004–05. This will bring total CHT and CST transfers to an estimated $60.3 billion in 2010–11, nearly 40 per cent higher than 2004-05 levels.

Support for Health Care Services in Canada’s North

Access to family and community-based health care services is a significant challenge in Northern communities, where the capacity to provide timely health care services to a remote population can be limited. The Government has agreed to help address the unique challenges facing the development and delivery of health care services in the North on a priority basis.

As part of the 10-Year Plan to Strengthen Health Care, the Government is providing additional funding to the territories totalling $150 million over five years beginning in 2005–06:

• $75 million to assist with the costs associated with medical travel. These funds will be allocated based on the amounts each territory spent on medical transportation in 2003–04.

• $65 million in the form of a Territorial Health Access Fund to allow the territories to make sustainable adaptations to their health care systems through transformative change to facilitate long-term reforms.

• $10 million for the establishment of a federal-territorial working group and operational secretariat to work collaboratively on policy and program management approaches to improve health care delivery, to assist in adapting federal programming to better suit territorial needs and to develop work plans for new investments to the Territorial Health Access Fund.

Aboriginal Health

In September 2004, First Ministers and the Leaders of the Assembly of First Nations, the Inuit Tapiriit Kanatami, the Métis National Council, the Congress of Aboriginal Peoples and the Native Women’s Association of Canada reached an agreement to work together to develop a blueprint to improve the health status of Aboriginal peoples and health services in Canada.

In support of this commitment, the Government of Canada announced new investments of $700 million over five years for Aboriginal health initiatives. This budget confirms these investments:

• $200 million for an Aboriginal Health Transition Fund to enable federal, provincial and territorial governments, First Nations governments who deliver health care services, and Aboriginal communities to devise new ways to integrate and adapt existing health services to better meet the needs of all Aboriginal people.

• $100 million for an Aboriginal Health Human Resources Initiative to increase the number of Aboriginal people choosing health care professions; adapt current health professional curricula to provide a more culturally sensitive focus; and improve the retention of health workers serving all Aboriginal peoples, including First Nations, Inuit and Métis.

• $190 million to make permanent and enhance the Aboriginal Diabetes Initiative.

• $65 million for an Aboriginal Youth Suicide Prevention Strategy.

• $145 million for maternal and child health, including enhancements in early childhood development.

October 2004 First Ministers’ Meeting: A New Framework for Equalization and Territorial Formula Financing

Through Equalization and Territorial Formula Financing (TFF), the Government of Canada provides support to eligible provinces and the three territories for the key priorities of these governments, including advancing the health and health care of Canadians.

Provinces and territories requested that changes to these programs be considered as part of the First Ministers’ Meeting on health in September 2004. In response, the Government of Canada proposed fundamental changes to both Equalization and TFF. The enhancements to Equalization and TFF will assist provinces receiving Equalization and the three territories in meeting their commitments under the 10-Year Plan to Strengthen Health Care, as well as their other priorities such as education and social services. The details of these changes were finalized at a second meeting of First Ministers on October 26, 2004.

The new framework will provide stability, predictability and growth to the overall levels of funding, and will ensure that Equalization and TFF continue to play an essential role in ensuring that all Canadians, wherever they live, have access to comparable public services. It will provide considerable financial stability to provinces and territories in setting their budget priorities.

The proposed changes to the Equalization and TFF programs were introduced in Parliament on November 23, 2004 (Bill C-24).

Guaranteeing Funding to Provinces and Territories in 2004–05

In order to provide greater stability to provinces and territories in 2004–05, the Government of Canada will set a floor of $10 billion for Equalization and $1.9 billion for TFF in 2004–05. In addition, each province and territory will be guaranteed that its Equalization or TFF payments for 2004–05 will not be lower than the amounts shown in Budget 2004. No province or territory will see a reduction in its payments for 2004–05 below the amounts estimated in Budget 2004.

New Framework for 2005–06 and Beyond

Starting in 2005, a new framework will be established in legislation for both Equalization and TFF. The new framework will provide for an increase in funding for 2005–06 to $10.9 billion for Equalization and $2 billion for TFF, the highest levels ever reached by these programs. These amounts will grow at a rate of 3.5 per cent per year, providing predictable payments over the 10-year framework.

This new framework reduces the uncertainty resulting from significant swings in recent years in the overall amount of Equalization and TFF funding and the impact this uncertainty has had on provincial and territorial budgets. In the past, revisions to population and other data have resulted in significant—both positive and negative—one-time adjustments to the payments. These effects have been exacerbated by the estimation and payments system that has been in use over the last 20 years. Under the new framework, overall total amounts and individual provincial and territorial shares will be determined independently. This will remove a significant portion of potential volatility, and therefore uncertainty, regarding payments to provinces and territories. Overall, Equalization and TFF amounts will grow at a steady 3.5-per-cent rate in the future. Starting in 2006–07, the Government of Canada will confirm an allocation approach for the overall levels based on the advice of an expert panel (see box).

The Government has committed to review the overall funding levels of Equalization and TFF after five years and make adjustments, if appropriate, taking into account evidence-based measures including the evolution of disparities among provinces and costs of providing services in the North.

Predictable and Growing Support in the New Equalization and TFF Framework

Over the next 10 years, the new framework for Equalization and TFF will provide $33.4 billion more in payments to provinces and territories than estimated at the time of Budget 2004.

Building on the 10-Year Plan: Additional Federal Health Investments

As part of the 10-Year Plan to Strengthen Health Care, the Government of Canada committed to going beyond the $41.3-billion investment in support to provinces and territories and to undertake additional federal actions in such areas as health human resources, prevention, promotion and public health, and performance reporting provisions that will complement provincial actions. In addition, the Government plays a key role in pandemic influenza preparedness, in assessing the safety and effectiveness of drugs and other therapeutic products, and in the area of environmental health.

Budget 2005 provides $805 million over five years in direct federal health investments.

Health Human Resources, Wait Times and Performance Reporting

Budget 2005 provides $200 million over five years to support actions in the areas of health human resources, wait times initiatives, and performance reporting.

First Ministers agreed to continue and to accelerate their work on health human resources action plans. Budget 2005 provides $75 million over five years to accelerate and expand the assessment and integration of internationally educated health care professionals to address Canadians’ concerns about improved and more timely access to care. This funding will be used for evaluating clinical skills, knowledge, language proficiency and prior learning activities of internationally educated health care professionals, and increasing the number of clinical placements for physicians, nurses and other regulated health care professionals.

As noted above, the $5.5 billion in wait times reduction funding will be used by the provinces and territories to achieve meaningful reductions in wait times in priority areas. There are, however, selected areas where the Government of Canada can contribute. Budget 2005 provides an additional $15 million over four years for wait times initiatives that will build on and complement jurisdiction-specific initiatives. This will include research on wait times, and the development of benchmarks and indicators.

As part of the 10-Year Plan to Strengthen Health Care, all governments agreed to report to their residents on health system performance. Enhanced accountability to Canadians and improved performance reporting are essential to show Canadians that reforms to the health care system are occurring. The Canadian Institute for Health Information (CIHI) plays a critical role in ensuring that performance information is collected and made available to Canadians. This budget provides $110 million over five years to be used by CIHI to improve the data collection and reporting of health performance information.

Healthy Living and Prevention of Chronic Disease

In September 2004, a new organization, the Public Health Agency of Canada, was established. The agency’s mandate is to strengthen Canada’s public health and emergency response capacity, and to develop national strategies for managing infectious and chronic diseases.

Public health efforts on health promotion and disease prevention are critical to achieving better health outcomes for Canadians and contributing to the long-term sustainability of Canadian medicare by reducing pressure on the health care system. Obesity, chronic disease and mental health issues are expected to be among the major health problems facing Canadians over the next 10 to 20 years. Chronic diseases, in particular cardiovascular disease, cancer and diabetes, are leading causes of death and disability in Canada.

Budget 2005 builds on the initial investments to the Public Health Agency of Canada by providing $300 million over five years for an integrated Strategy on Healthy Living and Chronic Disease. The Strategy will include a series of activities to promote healthy eating and encourage physical activity and healthy weight that can help to prevent and control chronic diseases, as well as a series of complementary, disease-specific activities in the areas of diabetes, cardiovascular disease and cancer.

The $300 million provided for the Strategy on Healthy Living and Chronic Disease also includes an enhancement to the Canadian Diabetes Strategy (see box), currently delivered by the Public Health Agency of Canada, bringing funding to $18 million a year from $15 million. In addition, the Aboriginal Diabetes Initiative will be extended and enhanced, increasing funding to $25 million in the first year, growing to $55 million at maturity as part of the $700-million Aboriginal health package. This will increase funding for prevention promotion, improved treatment and better surveillance about diabetes and its complications. This funding supports activities related to both juvenile and adult onset diabetes.

The funding provided in this budget for the Strategy on Healthy Living and Chronic Disease complements the May 2004 announcement in which the Government doubled the funding for the Canadian Strategy on HIV/AIDS over the next five years from $42.2 million to $84.4 million annually. In addition, this budget renews the funding for the Hepatitis C Prevention, Support and Research Program for one year, in the amount of $10.7 million.

Pandemic Influenza Preparedness

The Government of Canada has taken several steps to improve national readiness in the event of a possible pandemic influenza, including:

• Releasing the Canadian Pandemic Influenza Plan in February 2004, which outlines the responsibilities of all levels of government.

• Improving surveillance systems to monitor for outbreaks.

• Enhancing communications by establishing a federal-provincial-territorial network to coordinate activities across the country.

• Putting in place a Pandemic Influenza Vaccine Strategy to manufacture vaccines when necessary.

• Improving global collaboration.

On February 4, 2005, the Government announced that it was purchasing 9.6 million doses of antivirals (oseltamivir) at a cost of $24 million. These antivirals will contribute towards the creation of a national stockpile. Antiviral medications are the only virus-specific intervention that would be available at the start of a pandemic.

Building on this recent announcement, Budget 2005 provides additional funding of $34 million over five years to assist in the development and testing of a prototype ("mock") vaccine for an influenza pandemic. The World Health Organization has recommended this as the preferred course of action. The development of this prototype vaccine will improve domestic production capacity and enhance regulatory readiness, which will reduce the time later required to produce an actual vaccine, in the event of a pandemic.

Safety of Drugs and other Therapeutic Products

The Government of Canada is committed to ensuring that drugs and other therapeutic products are safe for Canadians. Evaluating the safety and benefits of therapeutic products throughout the full product life cycle—from pre- to post-market stages—is a core function of Health Canada. As part of the 10-Year Plan to Strengthen Health Care, First Ministers directed Health Ministers to establish a ministerial task force to develop and implement a national pharmaceuticals strategy and report on progress by June 30, 2006. Among other actions, the task force is examining how to strengthen the evaluation of drug safety and effectiveness.

Budget 2003 provided $190 million over five years to improve the timeliness of Health Canada’s regulatory process with respect to human drugs. Consistent with the Government’s approach on Smart Regulations, Budget 2005 builds on that commitment by providing an additional $170 million over five years to implement a series of targeted measures to enhance the safety and effectiveness of drugs and other therapeutic products, including:

• Strengthening the capacity to review clinical trial applications and monitor and respond to adverse event reports.

• Developing and implementing regulations in order to improve safety monitoring of therapeutic products.

• Increasing the compliance and enforcement of therapeutic products by strengthening oversight on: adverse drug event reporting by manufacturers; research of subject safety and data integrity in clinical trials; and post-market compliance verification.

• Implementing a regulatory framework for the safety, efficacy and quality of blood, cells, tissues and organs intended for transfusion/transplantation.

Environmental Health

The Government of Canada is committed to protecting the environment, human life and health from risks associated with toxic substances. Budget 2005 provides $90 million over five years to Health Canada to accelerate actions under the Canadian Environmental Protection Act to conduct health risk assessments and research the effects of substances to reduce exposures by Canadians to toxic substances, thereby reducing the incidence of cancer and developmental diseases. This also contributes to the environmental plan in Chapter 5.

Tax Changes to Improve Fairness and Support Participation

A fair tax system recognizes the special circumstances of certain taxpayers that reduce their ability to pay tax, and helps remove barriers to participation in the economy and society. For example, the Canadian tax system includes a number of measures that recognize the unique costs faced by persons with disabilities. A fair tax system evolves over time to reflect changes in the economy and society.

In recent years the Government has taken significant steps to enhance tax fairness. Budget 2005 builds on those actions by improving the tax recognition of the costs associated with a disability, caregiving and adoption. This budget also proposes initiatives to ensure that that the tax system better reflects recent developments in health care delivery.

Additional information on these changes is provided in Annex 8.

Delivering on Commitments: Response to the Recommendations of the Technical Advisory Committee on Tax Measures for Persons with Disabilities

In Budget 2003, the Government established the Technical Advisory Committee on Tax Measures for Persons with Disabilities to advise the Ministers of Finance and National Revenue on how to address tax issues affecting persons with disabilities. The committee’s final report was submitted in December 2004 and contained 25 recommendations. The Government wishes to thank the members of the committee for their valuable contribution to this important area of government policy. The Government is acting on the committee’s recommendations. More specifically, this budget proposes to:

• Extend eligibility for the disability tax credit (DTC) to individuals who face multiple restrictions that together have a substantial impact on their everyday lives.

• Amend the DTC to ensure that more individuals requiring extensive life-sustaining therapy on an ongoing basis are eligible.

• Clarify other parts of the DTC eligibility criteria, including the provisions dealing with impairments in mental function.

• Add physiotherapists to the list of health professionals who can certify eligibility for the DTC.

• Expand the list of expenses eligible for the disability supports deduction, introduced in Budget 2004, to include costs such as job coaches, deaf-blind interveners and Braille note-takers.

• Increase the maximum amount of the refundable medical expense supplement to $750 from $571 per year.

• Extend, for DTC-eligible students, the contribution period for individual registered education savings plans (RESPs) to 25 years from 21 years and the lifetime limit of individual RESPs to 30 years from 25 years.

• Increase the maximum annual Child Disability Benefit to $2,000 from $1,681 per child beginning in July 2005.

• Increase funding for the Canada Revenue Agency by $2 million per year to improve its administration of the DTC and other disability-related tax measures, in particular to support the creation of a committee to advise the Minister of National Revenue on the administration of these measures.

Taken together, these measures will increase tax relief for persons with disabilities and their caregivers by $105 million in 2005-06, growing to $120 million by 2009–10. The changes will generally be effective for the 2005 and subsequent taxation years.

Table 3.3
Responding to the Recommendations of the Technical Advisory Committee on Tax Measures for Persons With Disabilities

Tax Recognition of the Costs of Caregiving

Many Canadian families face additional costs related to the care of a dependent relative such as an elderly parent or an adult child with a disability. In Budget 2004, the Government modified the income tax rules to allow caregivers to claim up to $5,000 of the medical and disability-related expenses they incur on behalf of a dependent relative.

Building on that measure, this budget proposes that the maximum amount of medical and disability-related expenses that can be claimed by caregivers be doubled to $10,000 from $5,000, beginning with the 2005 taxation year. This measure is estimated to increase tax assistance by $15 million in 2005–06, growing to $20 million by 2009–10.

This measure represents the first step in the Government’s broadly based commitment to increase support for caregivers. The Government is working with the provinces and territories to develop a comprehensive caregiver strategy involving a range of different supports for spouses, children, close relatives and friends who care for seniors and for persons with disabilities.

Tax Relief for Families Who Adopt Children—Adoption Expense Tax Credit

Every year thousands of Canadian families adopt a child. These adoptive parents can face substantial costs that are unique to the decision to adopt a child, including adoption agency and legal fees. Adoptive parents do not currently receive tax recognition of these exceptional costs.

Budget 2005 proposes to introduce a non-refundable tax credit to recognize specified adoption expenses, up to a maximum of $10,000. This measure will be effective as of the 2005 taxation year, and is estimated to reduce federal revenues by $5 million per year.

Updating the List of Expenses Eligible for the Medical Expense Tax Credit

The medical expense tax credit (METC) recognizes the impact of above-average medical and disability-related expenses on an individual’s ability to pay income tax. The list of expenses eligible for the credit is regularly reviewed and updated in light of new technologies and other disability-specific or medically related developments. In order to improve the recognition of medically necessary expenses, Budget 2005 proposes to update the list of expenses eligible for the METC.

These changes will be effective for the 2005 and subsequent taxation years and, collectively, are estimated to reduce federal revenues by $5 million annually.

Expansion of the GST/HST Health Care Rebate

Budget 2003 announced a review of the rebate of the goods and services tax/harmonized sales tax (GST/HST) for health care to improve its application with respect to health care functions moved outside of hospitals to charities and publicly funded non-profit organizations. Currently, hospitals are entitled to recover 83 per cent of the GST (and the federal component of the HST) paid on their purchases used to provide exempt health care services, whereas charities and publicly funded non-profit organizations that provide health care services to the public in a non-hospital setting may only recover 50 per cent.

Further to extensive consultations with provincial and territorial health and finance authorities, Budget 2005 proposes to extend the application of the 83-per-cent GST/HST rebate to eligible non-profit health care facilities that provide services previously performed in hospitals (for example, ambulatory care hospitals and cancer clinics). Specifically, provincially recognized and funded non-profit health care facilities will be eligible for an 83-per-cent rebate of the GST (and federal portion of the HST) paid on purchases related to their health care operations that are similar to those traditionally performed in hospitals.

This measure, proposed to be effective January 1, 2005, will result in a rebate system that is more neutral with respect to provinces’ decisions to devolve services traditionally provided in a hospital setting and will therefore support provincial efforts to streamline the delivery of non-profit health care services. The measure will cost $50 million in 2005–06, growing to $65 million in 2009–10. Funding for this measure was set aside in the fiscal framework in Budget 2003.

Seniors

Canada’s support for seniors is one of the major success stories of government policy in the post-war era. At the same time, it is an area facing new challenges resulting from the longer and more vigorous lives of seniors. To address the evolving needs of seniors, this budget makes significant investments across a wide range of policies that matter to seniors—from health care to income security programs, retirement savings, assistance for people with disabilities and for caregivers, and support for voluntary sector activities by and in support of seniors.

Building on the Success of Canada’s Retirement Income System

Canada is unique among OECD (Organisation For Economic Co-operation and Development) countries in terms of the effectiveness and sustainability of its retirement income system. Canadian seniors have experienced major gains in income security since the 1960s (see box), gains that remain fiscally sustainable over the foreseeable future due to reforms to the Canada Pension Plan and Quebec Pension Plan and the restoration of the Government of Canada’s overall fiscal health.

At the same time, the improving health and vigour of today’s seniors means that many are more active than preceding generations—in the lives of their children and grandchildren, in their leisure activities, in their activity as volunteers and even in the labour force. Since the concept of "retirement" may have a very different meaning in the future than in the past, seniors may well want greater flexibility to choose how they spend their time and how they arrange their finances.

Delivering on Commitments: Increasing the Guaranteed Income Supplement

Together with the Old Age Security pension, the Guaranteed Income Supplement (GIS) provides low-income seniors with a fully indexed benefit that ensures they receive a basic level of income throughout their retirement years. Budget 2005 proposes to increase maximum monthly GIS benefits by $36 for single seniors and $58 for couples. Half of this increase will take effect on January 1, 2006, and the remaining instalment will take effect on January 1, 2007. Corresponding increases will also be extended to recipients of both the Allowance and the Allowance for the Survivor benefits.

This increase will raise total GIS payments by $2.7 billion over the next five years—significantly exceeding the commitment of $1.5 billion over that period. A total of 1.6 million GIS recipients will benefit from this increase (including more than 50,000 seniors who will become eligible for benefits as a result of the change). The increase will be of particular benefit to senior women, who account for over 1 million of the seniors receiving GIS benefits.

Canada Pension Plan Triennial Review

The Government will also be reviewing some of the aspects of another of the key pillars of Canada’s retirement income system, the Canada Pension Plan (CPP). The 21^st Actuarial Report on the Canada Pension Plan concludes that the CPP is financially sustainable for at least the next 75 years. As part of the next triennial review of the CPP, the Government will work with the provinces to ensure the plan’s continued financial sustainability and its ability to meet the needs of Canadians both in their transition to retirement and during their retirement years (see box).

Private Retirement Savings

Budget 2005 also proposes to strengthen the private retirement savings pillar by increasing the registered retirement savings plan (RRSP) annual contribution limit to $22,000 by 2010 and making corresponding increases for employer-sponsored registered pension plans (RPPs). These changes are detailed in Chapter 4.

Life Income Funds

The growing ability of seniors to choose from a wide range of options regarding their voluntary and leisure activities and their participation in the labour force also means they will be looking for increased flexibility as to when and how they can use their retirement savings to provide income during their retirement years.

To that end, Budget 2005 proposes to increase the financial flexibility enjoyed by individuals who transfer funds from their federally regulated locked-in RRSPs into life income funds (LIFs) by eliminating a rule that currently requires holders of LIFs to convert them into annuities on reaching age 80.

Locked-in RRSPs are typically generated when individuals who change employment opt to take the vested pension benefits they have acquired under a registered pension plan (RPP) in the form of a locked-in RRSP, rather than in the form of a deferred annuity or transfer of credits into the RPP of a subsequent employer. To provide income during an individual’s retirement years, a locked-in RRSP may be used to acquire a life annuity or converted into a LIF.

At present, regulations made under the federal Pension Benefits Standards Act, 1985 (PBSA) stipulate that the terms of LIF contracts (under which locked-in RRSPs are converted into LIFs) must require their beneficiaries to use any remaining LIF funds to purchase a life annuity at age 80. Budget 2005 proposes to eliminate this requirement. As a result, future beneficiaries who transfer their locked-in RRSPs into LIFs will be able to retain the option of continuing to withdraw funds from their LIFs in accordance with existing withdrawal rules even after they reach age 80.

Other PBSA rules will continue to apply to withdrawals from locked-in RRSPs and LIFs. These rules are designed to protect vested RPP benefits from being exhausted prematurely (for example, by sheltering them from claims by creditors) and help ensure their beneficiaries receive a stable source of income throughout their retirement years. This objective is of particular importance to senior women, many of whom are particularly dependent on retirement income derived from their own vested pension plan benefits and from vested benefits that are left to surviving spouses.

New Horizons for Seniors

With their income security needs assured, increasing numbers of seniors want to use their energy and vitality to make important contributions to Canada’s society and their communities.

Budget 2004 provided $10 million per year for a New Horizons for Seniors program to promote voluntary sector activities by and in support of seniors. Requests to support worthwhile activities under the program during the first year have exceeded expectations. Accordingly, Budget 2005 proposes to expand funding for New Horizons for Seniors by an additional $5 million in 2005–06, $10 million in 2006–07 and rising to $15 million in 2007–08 and subsequent years, bringing the annual budget to $25 million. These increases will help meet a range of identified needs within the seniors’ community.

National Seniors’ Secretariat

Budget 2005 also proposes to set aside a further $13 million over five years for a National Seniors’ Secretariat, to be established within Social Development Canada, to serve as a focal point for collaborative efforts to address the new challenges facing seniors. The Secretariat will be tasked with working with seniors organizations on an ongoing basis, conducting research, developing seniors-related policy, and promoting better coordination of government programs and services that matter to seniors.

Strengthening Aboriginal Communities

The Government of Canada is committed to a renewed partnership with Aboriginal people. The most recent Speech from the Throne noted that more must be done to ensure that the country’s prosperity is shared by Canada’s Aboriginal people and communities. The Canada-Aboriginal Peoples Roundtable, launched in April 2004, provides an historic opportunity to innovate, move forward, strengthen partnerships and set a new direction for the future.

Federal Ministers, in partnership with Aboriginal leaders and in cooperation with provincial and territorial governments, have been holding follow-up sessions on health, lifelong learning, housing, economic opportunities, negotiations and accounting for results. The conclusions from these sessions will be the focus of a policy retreat in the spring of 2005, followed by a First Ministers’ Meeting in the fall of 2005. The Government looks forward to the conclusions of the Roundtable process and will take action, in partnership with Aboriginal people and provinces and territories, to close the gap in life chances for Aboriginal people.

While awaiting the completion of the Roundtable process, Budget 2005 provides investments of $735 million over the next five years, with a focus on children and youth and their families.

Aboriginal Children and Youth

The Aboriginal population is young and dynamic—a full third are under the age of 14 years. This young population is poised to make a significant contribution to Canada’s society and economic growth, but must have the education and skills needed to succeed. Reflecting this priority, Budget 2005 provides new investments totalling $345 million over the next five years for:

• First Nations early learning and child care.
• Special education.
• First Nations child and family services.

First Nations Early Learning and Child Care

The Government’s commitment to a national system of early learning and child care includes First Nations children and families on reserve and builds on recent budgets’ commitments to strengthen programs on reserve for First Nations children, which have included:

• $320 million over five years ($65 million a year ongoing) for early childhood development programming for First Nations and other Aboriginal children.

• A total of $45 million over three years ($14 million a year ongoing) for early learning and child care for First Nations children living on reserve.

Budget 2005 commits an additional $100 million over the next five years, from the $5 billion provided for the five-year plan for a national initiative (see Chapter 4), to enhance early learning and child care opportunities for First Nations children and families on reserves. This will ensure that First Nations children share in the national commitment to the best possible start in life for Canada’s children. Implementation of these funds will draw on the outcomes of community consultations, upcoming assessments of programs and how they are delivered, and the Aboriginal roundtable discussions.

First Nations Special Education

Investments in primary and secondary education have long-term benefits for both children and Canada as a whole. Some children, however, face special learning challenges in school. These can include fetal alcohol spectrum disorder and mild to severe physical or behavioural challenges. These children require extra resources, such as specialized teachers and equipment that can help them to overcome their challenges and tap into their full potential.

Budget 2001 provided $60 million over two years and $35 million annually thereafter for the Special Education Program for First Nations children living on reserve. Budget 2005 builds on that investment by providing an additional $120 million over five years. Combined with funding from the Department of Indian Affairs and Northern Development, this will bring funding for the Special Education Program to $125 million per year by 2007–08. The incremental funding provided in this budget will enhance the ability of First Nations to provide the additional resources (including teachers, specialized programs, assistive technology and modifications to physical surroundings) required to meet the demands on the program.

First Nations Child and Family Services

The health, safety and well-being of children are everyone’s responsibility. One of the most difficult issues facing many Aboriginal communities and families is the high rate of placement of Aboriginal children in care outside their parental homes. There are about 100 First Nations child and family service agencies that are currently mandated and monitored by provincial governments and funded by the Government of Canada to provide essential child protection and family support services to First Nations communities.

A comprehensive strategy is being developed to help ensure that more First Nations children and parents get the help they need to prevent the types of crises that lead to intervention and family breakdown. In the interim, Budget 2005 provides an investment of $25 million a year to address immediate cost pressures.

Strengthening Aboriginal Social Foundations

Children and their families also need the basic foundations of healthy communities. Budget 2005 provides new investments totalling $340 million over five years on:

• First Nations housing on reserves.
• Aboriginal languages and culture.
• The Aboriginal Healing Foundation.

First Nations Housing On Reserves

Adequate housing is one of the basics of life, an essential support for developing one’s potential. Yet there is a critical and growing shortage on First Nations reserves. The Canada–Aboriginal Peoples Roundtable identified housing as one of its top priorities and the most recent Speech from the Throne stated that "these are the intolerable consequences of the yawning gaps that separate so many Aboriginal people from other Canadians," including unacceptable gaps in basics like housing.

Since then the Government of Canada, Aboriginal organizations, provinces and territories, and housing experts have launched in-depth discussions about what transformative changes are required to improve housing conditions for Aboriginal people. But while these discussions are ongoing, there is an opportunity to take immediate action to start addressing the housing shortage.

Budget 2005 provides an investment of $295 million over five years, of which $200 million will be for the next two years, for housing construction and renovation on reserves. The Department of Indian Affairs and Northern Development and the Canada Mortgage and Housing Corporation will build on their current programs to stabilize the housing situation on reserve by constructing 6,400 new units and renovating 1,500 existing units—enough to stem the growing shortage of housing units and begin to eliminate it. Capital contributions will be limited to new construction or renovations, and rents will be paid on these units. The Government will consider further proposals, including a First Nations Housing Authority, after the Roundtable process is completed.

Support for Languages and Cultures

Aboriginal languages and cultures are an integral part of Canada’s cultural heritage and an important source of pride and identity for Aboriginal peoples. The Government of Canada and a number of provincial and territorial governments support and promote Aboriginal languages and cultures both directly and indirectly, often by assisting communities to take the steps they believe are needed to preserve and revitalize their languages and cultural practices. Yet more is needed to ensure that Aboriginal languages and cultures remain a vital part of the diverse and vibrant Canadian heritage.

In December 2002, the Government announced $172.5 million to support the creation of a new Aboriginal Languages and Cultures Centre. Recommendations from an Aboriginal advisory task force regarding the activities and operations of this centre are anticipated shortly. Budget 2005 provides funding of $5 million to extend the Aboriginal Languages Initiative, which supports community-based Aboriginal languages projects, for one more year until the centre becomes operational.

Aboriginal Healing Foundation

The Aboriginal Healing Foundation (AHF) was established in 1998 with a $350-million endowment and a mandate to support community-based projects that would address the legacy of the physical and sexual abuses that occurred in the Indian residential school system. Consistent with its mandate, the foundation has now committed all its funds and is winding down its affairs.

The AHF has helped many thousands of individuals and hundreds of communities begin their healing journeys and has contributed to a deeper understanding of the legacy of the residential school era. However, individuals and communities are at different stages in their healing work. While the Government takes stock and considers how best to move forward with regard to this important work in the context of the Aboriginal Roundtable process, Budget 2005 will provide an additional $40 million in 2004–05 for the Aboriginal Healing Foundation to continue supporting healing projects and to promote public awareness and understanding of healing issues. The $40 million will enable the Foundation to fund projects over the next two years.

The Government will continue to work with residential school claimants and their representatives, Aboriginal healers and leaders, and the churches to find ways to expedite the resolution of claims of physical and sexual abuse in Indian residential schools.

Building Relationships

Canada’s Relationship With the Métis Community

In the 2003 Powley decision, the Supreme Court of Canada recognized the Métis Aboriginal right to harvest for food in the Sault Ste. Marie area of Northern Ontario, and allowed for the possibility that such rights might exist elsewhere in Canada.

In response to this decision, Budget 2004 set aside $20.5 million in 2004–05 to work with Métis leadership, provinces and territories to address Métis Aboriginal harvesting issues. Over the last year, the Government of Canada has been working with stakeholders to assess the broader implications of the decision, develop possible approaches to implementation, and facilitate responsible harvesting while ensuring public safety. But more work needs to be done.

To that end, Budget 2005 provides an additional $30 million over the next two years to continue work with provincial and territorial governments, Métis organizations and other stakeholders to fully assess the implications of the decision for Métis communities and ensure effective implementation of the Supreme Court decision.

Post-Secondary Scholarships for Aboriginal Canadians

The Government of Canada is committed to supporting the educational aspirations of Aboriginal Canadians. In 2003, the Government established a new post-secondary scholarship program for Aboriginal students with a one-time $12-million endowment, to be administered by the National Aboriginal Achievement Foundation.

To further support and encourage the achievement of higher levels of education among Aboriginal students, Budget 2005 commits an additional $10 million in 2005–06 for the Post-Secondary Education Program administered by the National Aboriginal Achievement Foundation.

Inuit Secretariat

Inuit organizations have long argued that their unique issues, needs and priorities have not received adequate attention from the Government of Canada. In response, at the April 2004 Canada-Aboriginal Peoples Roundtable, Prime Minister Paul Martin announced the creation of an Inuit Secretariat, to reside within Indian and Northern Affairs Canada. The Secretariat will bring a strategic policy focus to discussions and decisions that impact on the policies, programs and services that shape the federal government’s relationship with the Inuit. Budget 2005 provides $10 million over the next five years to establish and operate the Inuit Secretariat.

Supporting Canada’s Heritage

Support for Culture

In 2001, the Government of Canada announced the Tomorrow Starts Today initiative, which provides major support for Canadian arts and culture. Since its introduction, the initiative has provided almost $740 million to all aspects of the creative process—encouraging excellence among Canada’s artists, promoting arts and culture among the population as a whole and providing cultural industries with the means to prosper in the 21st century.

On December 15, 2004, the Minister of Canadian Heritage announced that this initiative would be extended for another year with a budget of up to $192 million, with $172 million of new funding and the remainder from reallocation within the Department. Budget 2005 further extends the $172 million of new funding per year for another four years, for a total of $688 million. This brings total new funding for Tomorrow Starts Today to $860 million over five years. This multi-year investment will help create stability within the arts and culture community by providing predictable levels of funding in the years to come. It will also help cultivate a vibrant and creative cultural life in communities across the country that reflects Canada’s multicultural society and promotes a diversity of views and cultural expressions at home and abroad.

The Canadian Broadcasting Corporation plays a unique and essential role in highlighting Canadian stories and showcasing Canadian talent on radio and television. Budget 2005 provides $60 million in 2005–06 to help ensure that Canada’s stories, reflecting the ever-increasing diversity of Canadian society, find their way into Canadian homes in the form of high-quality programming.

Budget 2005 provides a $6-million contribution in 2005–06 and $1 million ongoing to assist the Canadian National Institute for the Blind (CNIB) in improving the accessibility of information and written culture for Canadians with print disabilities. These funds will help the CNIB to digitize its collection and extend its library services to Canadians across the country.

Celebrating Canada’s History

The Government of Canada has long recognized the importance of multiculturalism and of national celebrations that bring Canadians together, strengthen communities and help Canadians understand the significance of the citizenship they all share. Each summer Canadians celebrate National Aboriginal Day, Saint-Jean-Baptiste Day, Canadian Multiculturalism Day, Canada Day and many others. Centennials, such as those in 2005 for Alberta and Saskatchewan, also celebrate achievements. Budget 2005 provides $5 million per year to the Multiculturalism Program to enhance its contributions to equality for all and $10 million per year to Celebrate Canada for community-based events and activities that offer Canadians the opportunity to share their pride in their country with each other.

It is important that Canadians learn more about the ever-increasing diversity that characterizes Canadian society. The Centre for Research and Information on Canada (CRIC) plays an important role in helping Canadians learn and understand more about each other. Budget 2005 provides $4.5 million in 2005–06 to ensure that CRIC continues this important work while it reviews its current organizational structure and how it can best serve Canadians.

Recognizing the importance of celebrating Canadian history, the Government of Canada is committed to the development of initiatives that support the restoration and preservation of Canada’s built heritage. To this end, Parks Canada will continue to work with its partners to implement a national register of historic places, conservation standards and a certification process for restoration expenditures. Budget 2005 provides $46 million over the next five years to support these efforts.

Parks Canada also plays a major role in the stewardship of Canada’s built heritage. Budget 2005, as part of the package of initiatives on the environment (see Chapter 5), provides Parks Canada with incremental funding to address a series of pressures facing the physical infrastructure in national parks and historic sites under its care. In addition to helping mitigate the environmental impact of daily park operations, this funding will help ensure that Parks Canada’s built heritage continues to be preserved for future generations.

The Government of Canada has declared 2005 to be the Year of the Veteran and is sponsoring a number of high-profile events at home and overseas during the year to commemorate the 60th anniversary of the end of World War II. Looking beyond this key anniversary, for which $16.5 million over two years was announced on November 5, 2004, Budget 2005 provides new funding of $6 million per year for future commemoration activities so that the sacrifices and contributions of Canada’s veterans will never be forgotten.

Canada has committed to host the 2006 World Urban Forum, a five-day international event sponsored by the United Nations Human Settlements Programme (UN-HABITAT). The World Urban Forum is a signature international event with some 6,000 delegates from over 150 countries expected to participate. The 2006 forum will take place in Vancouver, June 19-23, 2006. Hosting an event of the magnitude and profile of the Forum requires significant effort in managing a complex network of interests. The Minister of Labour and Housing is spearheading this effort, with several federal departments supporting preparations and involving their partners. Budget 2005 provides $15 million over the next two years to help ensure the success of the Forum. This investment will be complemented by contributions from participating federal departments as well as the private sector and international and provincial partners.

Building for the Future

The Government of Canada has a long tradition of creating opportunities for the leaders of tomorrow. Canada’s youth are the future, and through programs such as Encounters with Canada and the Summer Work Student Exchange programs, the Government of Canada has ensured that today’s youth have opportunities to learn more about their country and gain a better understanding of Canadian diversity. To this end, Budget 2005 provides $5.4 million in 2005–06 for these two programs so that they can continue to serve young Canadians.

Investing in the future also depends on breaking down barriers to full and equal participation by all in Canadian society. The October 2004 Speech from the Throne indicated that the Government would "strengthen Canada’s ability to combat racism, hate speech and hate crimes." Budget 2005 will do so by investing $56 million over the next five years to implement "A Canada for All: Canada’s Action Plan against Racism." The action plan will reinforce the Government of Canada’s ongoing commitment to eliminating racist behaviours and attitudes.

As a society, looking to the future can be difficult when troubling memories from Canada’s past go unacknowledged. The Department of Canadian Heritage has worked with Canadian ethnocultural groups who carry such memories with them as a result of events that occurred in Canadian history during times of war, or as a result of immigration policies of the day. The objective of these efforts is to ensure that similar events never occur again. In support of these ongoing efforts, Budget 2005 provides $25 million over the next three years for commemorative and educational initiatives that will highlight the contributions that these groups have made to Canadian society and help build a better understanding among all Canadians of the strength of Canadian diversity.

Sport

In 2010, the eyes of the world will be on Canada as Vancouver and Whistler host the Olympic and Paralympic Winter Games. The Games will inspire Canadian pride and achievement—and provide an opportunity to encourage participation in sport by Canadians at the highest level and in communities.

As part of the Government of Canada’s ongoing commitment to the Games, Budget 2005 provides an additional $87 million over seven years, including an additional $20 million for the Paralympic Games, to ensure that Canada is ready when the world comes to visit in 2010. This funding is over and above the Government of Canada’s existing commitment of over $410 million to help build the Games’ sport and event venues, as well as to provide the essential services required for such an event, such as policing and security.

To ensure that Canadian elite athletes have the coaching, equipment and support they require to perform at the top levels of national and international competition, Budget 2005 renews on an ongoing basis the significant investment of $50 million made in the last year. In addition, a further $15 million per year will be provided to respond to the recommendations of the Own the Podium report and provide the resources required for Canada’s elite athletes to reach their potential in the years to come. Also, as part of the Government’s effort to support the Olympians and Paralympians of tomorrow, and to ensure that Canadians across the country have more opportunities to get involved in sport at the community level, Budget 2005 builds on the 2003 investment of $10 million annually for sport participation initiatives by investing an additional $5 million per year.

These investments will bring stability to Sport Canada’s budget. They will provide the sport system with the highest level ever of ongoing funding from the Government of Canada, effectively doubling its base funding of some $70 million in 2004–05 to $140 million in 2005–06.

Strengthening the Justice Framework

Canadians deserve to be protected against criminal acts and to have faith in the justice system. Budget 2005 provides funding for measures that will address some of the social origins of crime and victimization in Canada, and funding to enhance law enforcement and to ensure that war criminals do not find safe haven in Canada.

Budget 2005 renews a previous enhancement to the National Crime Prevention Strategy, which supports community-based projects across the country for both victims of crime and offenders, by providing funding of $30 million for each of the next three years on top of base funding of $32 million per year.

The Victims of Crime Initiative aims to increase the confidence of victims in the criminal justice system by raising awareness of the needs of victims among criminal justice system personnel and the public; bringing the perspectives of victims to the development of legislation and policy; increasing awareness of available services and assistance among victims and their families; and facilitating the provision of services and assistance to victims by third parties. Budget 2005 renews the Victims of Crime Initiative on an ongoing basis and provides funding of $25 million over the next five years.

Canada’s War Crimes Program was formally established in 1998 as a pilot project, and a coordinated policy framework was designed to ensure that Canada would not provide a "safe haven" to persons involved in World War II or modern war crimes. Since then, Canada has become an international leader through its support for international tribunals and one of the first countries to incorporate the provisions of the International Criminal Court statute into domestic law. Budget 2005 commits $15.6 million per year to continue these efforts to deny impunity to persons involved or complicit in war crimes, genocide or crimes against humanity.

Budget 2005 also renews the Integrated Proceeds of Crime initiative on an ongoing basis and provides funding of more than $115 million over the next five years for this purpose, as noted in Chapter 6.

Table 3.4
Securing Canada’s Social Foundations

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