Ottawa proposes $7B top-up to transfers for health care, infrastructure

Deputy Prime Minister Chrystia Freeland said today the federal government plans to provide a one-time payment of $7 billion to provinces, territories, cities and First Nations communities to help them cover the cost of health services, COVID-19 vaccination campaigns and infrastructure projects.

"COVID-19 has placed extreme pressure on health care systems across the country. The pandemic is still here and many parts of our country are facing the threat of a third wave right now," Freeland told a virtual press conference.

"This money will ensure that our health system will not buckle under the continued strain of the pandemic, under the pressures of the third wave and new variants."

The proposed cash injection is detailed in a new bill, C-25, that Freeland tabled in the House of Commons this morning.

If passed, it would provide a $4 billion one-time increase to the Canada Health Transfer — the federal government's primary contribution toward the cost of delivering health services in the provinces and territories. Another $1 billion would fund COVID-19 immunization campaigns across the country.

The remaining $2.2 billion would go to the Gas Tax Fund — a twice-yearly payment to provinces and territories which, in turn, transfer funds to municipalities to support local infrastructure priorities.

Infrastructure Minister Catherine McKenna said the increase to the Gas Tax Fund doubles the federal government's yearly contribution and will help fund the construction or expansion of broadband internet access, public transit networks and recreation centres.

"We recognize the vital role that immediate investments in local infrastructure play in addressing the needs of cities and towns, as well as Indigenous communities, across our country," said McKenna. "And of course, this is about getting Canadians back to work."

Federal budget coming in April

The announcement comes just less than a month before the Liberal government unveils its first budget in over two years.

The budget is expected to provide a full accounting of all government spending through the pandemic, which has sent the deficit for the fiscal year to almost $400 billion.

It is also expected to outline the Liberals' plan to spend between $70 billion and $100 billion over the coming years on stimulus to help the economy recover.

The Federation of Canadian Municipalities said the increase to the gas tax transfer would help foster a strong, community-rooted economic recovery.

"Right now, in some communities, that may mean fixing a bridge to keep commuters safe and to support local commerce," said federation president Garth Frizzell, a city councillor in Prince George, B.C.

"In others, it may mean upgrading a recreational facility to keep people healthy and connected — or energy-retrofitting one to save money and reduce emissions. Or it could mean improving critical water and wastewater infrastructure to protect the local environment."

But the $4 billion increase to the federal health transfer falls well short of the $28 billion boost premiers have been pushing for.

Right now, the provinces spend about $188 billion on health care and the federal government covers $42 billion — roughly 22 per cent of total costs. Premiers have asked for a permanent increase in the federal share to 35 per cent cent, which works out to an additional $28 billion and would bring the total federal share to $70 billion.

Today, the premiers repeated that call.

"Short-term funding, while useful, does not, however, enable provinces and territories to address the long-term health care needs of Canadians," the premiers said in a statement.

Prime Minister Justin Trudeau has said the federal government will keep its spending focus on emergency aid for the time being and won't talk about long-term health care funding until after the pandemic is over.

Last summer, the government provided $19 billion to the provinces and territories through the Safe Restart Agreement to cover some of their costs related a number of priority areas in the fight against COVID-19.

Bloc MPs call for more funding

During question period in the House of Commons, Bloc Québécois MPs criticized the government for not meeting the premiers' demand on health care spending.

Bloc MP Alain Therrien pressed Health Minister Patty Hajdu to commit to recurring transfers of $28 billion per year.

"Will the government commit to increasing health transfers on a recurring basis to cover 35 per cent of costs?" asked Therrien in French.

Hajdu replied that the government has supported provinces with purchases of vaccines, PPE and medical equipment throughout the pandemic.

"What I have said repeatedly in this House, and what the prime minister has committed to repeatedly, is to be there for Canadians, to be there for Quebecers … throughout this pandemic and beyond," she said.

"We will do whatever it takes to get Canadians through this pandemic and back on the road to recovery."

To back her call for a "substantial" increase to health transfers, Bloc MP Andréanne Larouche cited a study released today by the Canadian Medical Association. The study predicts that a doubling of demand for elder care by 2031 will increase the annual cost of caring for aging Canadians from $29.7 billion per year in 2019 to $58.5 billion per year in 2031.

Minister of Seniors Deb Schulte said the government has supported seniors throughout the pandemic through tax-free payments, enhanced community supports and billions of dollars for provinces and territories for health care. She said the government's focus in the short term is on managing the pandemic.

In a statement, the Canadian Medical Association welcomed the funding announcement.

"COVID-19 has stretched health care in Canada beyond its limits and this funding will help fill gaps that have only grown since the pandemic was first declared," said CMA president Dr. Ann Collins.

"This new funding should be directed to addressing the ever-growing backlog of surgeries caused by the pandemic and adding sorely needed resources to our public health capacity."

Collins called on the federal government to continue talks with the provinces and territories toward reaching long-term funding arrangements.