Ottawa warns deeper spending cuts coming

A day before federal Finance Minister Jim Flaherty is set to meet with his provincial and territorial counterparts in Victoria, Conservative cabinet minister Jason Kenney says while a new deal on health transfers has yet to be reached, the current level of funding is unsustainable and his party's election promise to fund health transfers to the provinces at six per cent does not extend beyond 2016.

In an interview with CBC Radio's The House, Kenney tells Evan Solomon, "We did commit in the platform, during the election, to six per cent growth for the balance of the Health Accord, plus two years."

With the current Health Accord set to expire in 2014, the federal government "will be having discussions with the provinces on where to go beyond that," said Kenney.  

"Many of the provinces are [already] controlling the growth in health care costs, and it's less than six per cent."

"I think everyone recognizes that we cannot continue annual increases of six per cent, or more in some of the provinces, year after year," said Kenney.

"For some of the provinces, if they continue in that trajectory, there will be nothing left for education, for universities, for anything else."

Federal spending cuts to run deep

Until now, Ottawa had promised to balance the books by finding $4 billion in annual savings over the next three years or 5 per cent of the review base through a strategic and operating review of government spending, which would be announced at the next budget in 2012. But according to Kenney, the cuts could range up to $8 billion annually.

"We are looking at prudent, spending reductions that will range between 5 per cent and 10 per cent of the operating expenses of the government," said Kenney.

When asked whether the cuts could be more than $4 billion, Kenney said, "It could be."

When asked a second time if the cuts could go up to $8 billion, Kenney replied, "It'll be in the range."

"The decisions have not yet been made."

"Every minister has been asked to come to the table with potentially as much as 10 per cent of their operating budget but each decision will be made according to how can we deliver core programs more efficiently," said Kenney.

Interim NDP leader Nycole Turmel told The House she has "always supported the program review."

What she disagrees with is the way the government has been presenting the cuts, "10 per cent at-large." And that "doesn't solve the problem," said Turmel.

For his part, interim Liberal leader Bob Rae told Solomon the problem with this approach is "the government is taking a bit of a sledge hammer."

"The rhetoric that I hear from the Conservatives, that I part company with, is the notion that somehow austerity alone is going to get us to prosperity. And I dont think that's true," said Rae.

"The plan has to be about creating growth. We can't get rid of the deficit without growth."

The government's Strategic and Operating Review will be led by Treasury Board President Tony Clement.