"Quebecers are right to want their governments to work together"
Notes for an address
by the Honourable Stéphane Dion
President of the Privy Council and
Minister of Intergovernmental Affairs
to the
Sherbrooke Chamber of Commerce
Sherbrooke, Quebec
January 14, 2003
Check against delivery
I would like to thank the Sherbrooke Chamber of Commerce for giving me the opportunity, in this new year, on behalf of the government to which I belong, and on behalf of Prime Minister Jean Chrétien, to extend a hand to the Premier of Quebec, Bernard Landry.
On December 28, in an interview with Le Devoir, Mr. Landry once again insulted the Government of Canada by depicting it as "a bird of prey that strangles its prey" [Translation]1. He talked of "war" against the Government of Canada and promised to "attack on all fronts" [Translation]. I am sure you will agree that this kind of military metaphor was particularly inappropriate in the midst of the holiday season, all the more so as Canada and the world may soon be facing a war, but a real one this time.
If Mr. Landry’s objective is try to get himself re-elected and kick-start his referendum machine by demonizing the federal government, by presenting it as the enemy of Quebecers, someone should tell him that Quebecers are fed up with that bellicose rhetoric. Quebecers want their governments to work together. They are saying so in every way, notably in the polls.2
So what has the Government of Canada done to deserve such censure by the Premier of Quebec? Basically, Mr. Landry wants the Prime Minister of Canada simply to transfer new health funding to the Government of Quebec without playing any other role in this vital sector. The Quebec Premier thus raises two issues: the size of the transfer and the role of the federal government. Let me look at these two aspects with you to show to what extent the Government of Canada’s contemplated approach is perfectly reasonable and in the interests of Quebecers and all Canadians.
1. The issue of increased federal transfers to the provinces for health
In a spirit of cooperation, the Prime Minister of Canada will soon be inviting his provincial colleagues to a First Ministers’ Meeting on the health issue. The objective is to agree on a plan to improve health care, accompanied by increased funding. The Government of Canada announced months ago its intention to boost health transfers. The details of the increase will be confirmed in the next Budget.
The good news is that the Government of Canada has enough flexibility to increase this influx of funds, even if that flexibility is not as extensive as one would like. Imagine the difference if our first ministers were set to meet in a few weeks’ time to talk about federal cuts, rather than reinvestments. Let’s not forget that elsewhere in the industrialized world, in the United States, Europe, Japan, national governments are facing major deficits.
At the meeting of finance ministers last December 17 and 18, the provincial ministers reiterated their desire for a major federal reinvestment in health to the tune of $24.7 billion over the next four years. That amount is $4.6 billion (or 30.7%) more than the increase suggested in the Romanow Report for the period 2003-2004 to 2005-2006. Federal Finance Minister John Manley has clearly repeated that it will be very difficult for him to find such an amount because even though health is the priority, other legitimate and pressing needs also require additional spending. Moreover, Mr. Manley has stressed the need to respect the Government of Canada’s financial framework.
Let’s look at that financial framework. You are businesspeople, you know how important it is to manage prudently. That’s true in the private sector and the public sector alike. In the past, Canada forgot that lesson, and imprudently ran up a heavy debt load. But we have learned from our mistakes.
To put its finances in order, the Government of Canada considerably reduced the extent of its spending in the Canadian economy. In fact, as a percentage of GDP, total federal spending dropped to 15.0% in 2001-2002, the lowest level recorded since...1948-1949! That is down 6.7% from 1993-1994. Now that it has recovered a certain level of flexibility, the Government of Canada is facing, not surprisingly, tremendous pressure to reinvest in all areas. The provinces in particular are pressing it to strengthen its partnership with them not only in the health field, which is the priority of Canadians, but also for infrastructure, agriculture, urban issues, the environment, social policy, scientific research, assistance for the lumber sector, and so on.
The Government of Canada will do its best, but without falling back into deficit. You know full well it is not awash in money. Keep in mind that the federal debt load of $536 billion is over twice as high as that of the provinces. The Government of Canada's surplus, which stood at $8.9 billion for the last completed budget year, may seem substantial, but it would melt like snow in summer if we relaxed our budgetary prudence.
To give you an idea of the size of the surplus, $8.9 billion is equivalent to 5% of the Government of Canada’s revenues. Suppose that a family has an annual income of $100,000, and at the end of the year, once all the bills have been paid, it has spent $95,000. That savings of $5,000 would certainly be welcome, but no one would say that family is awash in surplus, more particularly, if it must cope with a $310,000 debt. It would need to remain prudent. The same holds true for the Government of Canada.
It is true that the prudence of former finance minister Paul Martin led him to obtain larger than anticipated surpluses in recent years, which in itself is excellent news, because we have to bring down our heavy debt load. It would be quite wrong to reproach Mr. Martin for having erred "on the right side." It is noteworthy that his budget projections were in line with those of private-sector economists.
Let’s go back to the most recent surplus of $8.9 billion. We would not have had such a surplus if Canada had experienced the economic downturn projected by private-sector economists at the time of the last federal budget in December 2001. Whereas they forecast 1.1% GDP growth for Canada in 2002, it will actually be 3.5% according to the International Monetary Fund (IMF). That unexpected performance by the Canadian economy is nothing less than exceptional under the circumstances. Average growth will be only 1.4% for G7 countries in 2002, again according to the IMF.3
Pendulum effects on budgets are considerable and dictate the greatest prudence. Let us look at the situation in other countries. The US federal government projected a US$230 billion surplus when it tabled the 2001-2002 budget. The most recent predictions show instead a US$158 billion deficit. In Europe, the governments of France, Italy, Germany and Portugal are also experiencing serious financial problems.
Canada is an open economy, subject to international economic fluctuations. If the economies of the United States, Europe and Japan were growing at a rate as impressive as ours, rather than showing signs of weakness, and if the governments of those countries were running surpluses comparable to ours rather than grappling with substantial deficits, our Finance Minister, John Manley, would certainly be looking to the next budget year with increased optimism. But in the circumstances, everyone, including his provincial and territorial colleagues, should congratulate him on his prudence.
The provincial and territorial finance ministers know full well cash transfers are not the principal way the federal government can be useful to them. Above all, the federal government supports them by helping to put in place the conditions of a healthy economy whose growth fills the coffers of the provincial and territorial governments better than federal transfers ever could.
Now, the economic track record of not only the Chrétien government, but the federation as a whole, is impressive. In a very recent report, the International Monetary Fund described Canada's macroeconomic performance since the 1990s as "exceptional," adding it "owes much to the sound policy framework and its skillful implementation."4
The fact is that the Canadian economy is doing exceptionally well. It has been said repeatedly that we have put our public finances in order. (See table 1) But what must be emphasized in particular is that this improvement in our budgetary situation has been accompanied by a spectacular turnaround in our economic performance. Since 1994, this performance has outstripped that of the ten previous years. In terms of both economic growth and job creation, we were barely at the G7 average; we are now in first place. (see tables 2, 3 and 4).
Let's not forget that if health is emerging as by far the top priority of Canadians, it is partly because they are not as concerned about issues such as the economy, jobs, the deficit and national unity as they were ten years ago. (see table 5)
That spectacular turnaround of the Canadian economy must not lead us into complacency or into relaxing budgetary discipline. But it must help us to turn a steady eye in finding solutions to our problems in all fields, including health.
In short, I cannot say what additional amount the Government of Canada will be able to transfer to the provinces for health. But I affirm it will do its best, in accordance with the financial framework.
2. The issue of the federal role in health care reform in Canada
Total health spending (private and public) in Canada was $112 billion in 2002, according to the latest report by the Canadian Institute for Health Information, released last December 18.5 That represents 9.8% of our GDP, one of the highest percentages of all countries. That is a lot of money. Additional federal funding will have an impact only if it helps to fund reforms that will have structuring effects. Improving our health system is not just a question of money. Mr. Landry has said so himself in a television interview on March 15, 2000.6 We need clear objectives.
Fortunately, our governments have everything in hand to reach agreement on setting those objectives. They agreed on a plan at the last First Ministers’ Meeting in September 2000. Former Quebec premier Lucien Bouchard approved that plan, which provided for targeted federal transfers. Since then, our country’s health ministers have met on several occasions to ensure implementation of the plan. They have also worked hard to develop performance indicators so as to make government actions more effective, transparent and accountable to the public. Several governments have commissioned studies, such as the Clair Report in Quebec and the federal Romanow Report, to guide them in their reforms. The conclusions of those reports are quite convergent.
We can build on these achievements so as to reach a new agreement among our first ministers in the coming weeks. We have everything we need to set the right objectives, provided there is good will on all sides. This is what Quebecers and other Canadians expect from the governments of their federation.
Quebec Health Minister François Legault has said he does not want the federal government to impose objectives that would be ill suited to Quebec’s situation. I couldn’t agree more, and the Government of Canada certainly has no such intentions. Federal Health Minister Anne McLellan has strongly stressed the need to develop a flexible action plan, tailored to the situation of each province and territory. The Government of Canada wants to help the provinces achieve objectives that they also share. Targeted transfers have no other objectives than that of helping governments in our federation to attain these goals and to be accountable for them to the public.
These targeted transfers are in the public interest and fully constitutional. Since the inception of medicare, federal transfers for health have been tied to respecting certain principles. The principles set out in the Canada Health Act (public administration, comprehensiveness, universality, portability, and accessibility) have been recognized by the courts as being in compliance with the legal framework. As the Supreme Court wrote in 1997: "the constitutionality of this kind of conditional grant [...] was approved by this Court."7 Targeted federal transfers are also common practice in other federations.
As in September 2000, it is conceivable that the next action plan for health will include targeted funding. This approach is fully constitutional and can help accelerate reforms. And that opinion is supported by Quebecers. The results of a recent poll indicated that two thirds of them agree that additional federal funding for health be targeted to previously identified health services.8 In fact, Quebecers, like other Canadians, want their governments to agree on a plan to make lasting improvements to health care quality and accessibility.
Conclusion
My conclusion will be brief. I want what Quebecers want: for our governments to extend a hand to one another, to work together, in an atmosphere of mutual respect. We have a country that works. In fact, it probably works the best of any country in the world. But tremendous challenges lie ahead, in the health field and many others. The stakes are far too high to waste our energy in petty squabbling.
And if we must use warlike language, let it be not to divide us, but rather to unite us so that we can more effectively "fight" illness, "defeat" poverty and exclusion and "conquer" new markets. That’s the type of "war" we ought to wage together.
"‘Peuple, debout!'; À moins que Jean Chrétien n'injecte sans condition de nouveaux fonds en santé, les Québécois seront appelés à vivre un moment historique'", ["‘People, arise!' : Unless Jean Chrétien unconditionally injects new health funding, Quebecers will called on to experience an ‘historic moment'"] Le Devoir, December 28, 2002, p. A1.
For example, according to a poll conducted in the fall of 2001, 66% of Quebecers feel both orders of government should address most areas together in order to make the best decisions for Canada, while only 30% feel the federal government should have the last word in some areas and the provincial governments in others. CRIC/CROP poll, Environics Research Group, conducted with 2,940 Canadians (1,001 Quebecers) between September 28 and October 14, 2001.
International Monetary Fund, World Economic Outlook , September, 2002.
International Monetary Fund, 2002 Article IV Consultation with Canada, Statement of the IMF Mission, November 15, 2002.
Canadian Institute for Health Information, National Health Expenditure Trends, 1975-2002, December 2002.
Interview by Bernard Landry on "Salut Bonjour", TVA, March 15, 2000.
Eldridge v. British Columbia (Attorney General), [1997] 3 S.C.R. 624, at par. 25.
Health Canada/Environics Research Group survey, conducted with 2,446 Canadians (547 Quebecers) between December 1 and 2, 2002. See also the Le Devoir/Globe and Mail/Léger Marketing survey conducted with 1,005 Quebecers between December 4 and 9, 2002.