Canada Health and Social Transfer
Encyclopedia
The Canada Health and Social Transfer (CHST) was a system of block
transfer payment
s from the Canadian government to provincial governments to pay for health care
, post-secondary education and welfare, in place from the 1996-97 fiscal year until the 2004-05 fiscal year. It was split into the Canada Health Transfer
(CHT) and Canada Social Transfer
(CST) effective April 1, 2004 to provide greater accountability and transparency for federal health funding.
(which paid for health care and post-secondary education and was established in 1977) and the Canada Assistance Plan (which supported social assistance and was established in 1966).
Under the Constitution of Canada
, health, education and social assistance are all areas of provincial responsibility and authority. The federal government does not directly participate in the administration of government services in these areas, though federal money through the CHST and its successors is used to fund them. But unlike equalization payments
, which provinces can spend on anything, money distributed through the CHST is conditional and must be spent on health, post-secondary education or welfare. Legislation such as the Canada Health Act
specify standards that the provinces must maintain in order to receive funding.
The CHST and its successors consist of both cash transfers and tax transfers. Cash transfers are direct transfers of money from the federal government to the provinces. Tax transfers work because both federal and provincial governments collect personal and corporate income tax
. A tax transfer involves the federal government reducing its income tax rates, leaving the provinces room ("tax points") by which they can increase their own taxes (and thus their revenues) without increasing the total tax burden on their citizens.
Critics of the CHST, CHT and CST note that the programs have allowed the federal government to interfere in areas of provincial jurisdiction by giving Ottawa a powerful hammer (the threat of withdrawing the transfers to any province that displeases the federal government). With the possible exception of Alberta
, any province which lost the CHT and CST would quickly face the collapse of its health care system, fiscal impoverishment or perhaps both.
Penalties for violation of conditions for receiving the health and social transfers have so far been restricted to cash deductions, as opposed to what would likely be a far more controversial penalty of actually attempting to charge differential federal tax rates in the offending province.
Block grant
In a fiscal federal form of government, a block grant is a large sum of money granted by the national government to a regional government with only general provisions as to the way it is to be spent...
transfer payment
Transfer payment
In economics, a transfer payment is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output...
s from the Canadian government to provincial governments to pay for health care
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...
, post-secondary education and welfare, in place from the 1996-97 fiscal year until the 2004-05 fiscal year. It was split into the Canada Health Transfer
Canada Health Transfer
The Canada Health Transfer is the Canadian government's transfer payment program in support of the health systems of the provinces and territories of Canada...
(CHT) and Canada Social Transfer
Canada Social Transfer
The Canada Social Transfer is the Canadian government's transfer payment program in support of post-secondary education, social assistance and social services, including early childhood development and early learning and childcare...
(CST) effective April 1, 2004 to provide greater accountability and transparency for federal health funding.
Background
The CHST was an amalgamation of two federal programs prior to 1996: Established Programs FinancingEstablished Programs Financing
The Established Programs Financing is a financing program created by the Trudeau government, in 1977, to finance the provincially-run healthcare, through transfer payments, by cash and tax points....
(which paid for health care and post-secondary education and was established in 1977) and the Canada Assistance Plan (which supported social assistance and was established in 1966).
Under the Constitution of Canada
Constitution of Canada
The Constitution of Canada is the supreme law in Canada; the country's constitution is an amalgamation of codified acts and uncodified traditions and conventions. It outlines Canada's system of government, as well as the civil rights of all Canadian citizens and those in Canada...
, health, education and social assistance are all areas of provincial responsibility and authority. The federal government does not directly participate in the administration of government services in these areas, though federal money through the CHST and its successors is used to fund them. But unlike equalization payments
Equalization payments
Equalization payments are cash payments made in some federal systems of government from the federal government to subnational governments with the objective of offsetting differences in available revenue or in the cost of providing services....
, which provinces can spend on anything, money distributed through the CHST is conditional and must be spent on health, post-secondary education or welfare. Legislation such as the Canada Health Act
Canada Health Act
The Canada Health Act is a piece of Canadian federal legislation, adopted in 1984, which specifies the conditions and criteria with which the provincial and territorial health insurance programs must conform in order to receive federal transfer payments under the Canada Health Transfer...
specify standards that the provinces must maintain in order to receive funding.
The CHST and its successors consist of both cash transfers and tax transfers. Cash transfers are direct transfers of money from the federal government to the provinces. Tax transfers work because both federal and provincial governments collect personal and corporate income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
. A tax transfer involves the federal government reducing its income tax rates, leaving the provinces room ("tax points") by which they can increase their own taxes (and thus their revenues) without increasing the total tax burden on their citizens.
Criticism
The amount of transfer payments from the federal to the provincial governments is always controversial, particularly in the area of health care, which is of particular importance to Canadians. The premiers of Canadian provinces allege that federal funding has decreased markedly since the beginning of publicly-funded health care, from fifty to sixteen cents of every dollar. The federal government denies this, saying that the provincial numbers ignore tax transfers and that federal funding never amounted to 50% of the cost of health care. The complexity of the funding formula means that each position depends on one's perspective.Critics of the CHST, CHT and CST note that the programs have allowed the federal government to interfere in areas of provincial jurisdiction by giving Ottawa a powerful hammer (the threat of withdrawing the transfers to any province that displeases the federal government). With the possible exception of Alberta
Alberta
Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...
, any province which lost the CHT and CST would quickly face the collapse of its health care system, fiscal impoverishment or perhaps both.
Penalties for violation of conditions for receiving the health and social transfers have so far been restricted to cash deductions, as opposed to what would likely be a far more controversial penalty of actually attempting to charge differential federal tax rates in the offending province.
See also
- Canada Health ActCanada Health ActThe Canada Health Act is a piece of Canadian federal legislation, adopted in 1984, which specifies the conditions and criteria with which the provincial and territorial health insurance programs must conform in order to receive federal transfer payments under the Canada Health Transfer...
- Canada Health TransferCanada Health TransferThe Canada Health Transfer is the Canadian government's transfer payment program in support of the health systems of the provinces and territories of Canada...
- Indian Health Transfer Policy (Canada)Indian Health Transfer Policy (Canada)The Indian Health Transfer Policy of Canada, provided a framework for the assumption of control of health services by Aboriginal Canadians and set forth a developmental approach to transfer centred on the concept of self-determination in health. Through this process, the decision to enter into...
- Health care in CanadaHealth care in CanadaHealth care in Canada is delivered through a publicly-funded health care system, which is mostly free at the point of use and has most services provided by private entities. It is guided by the provisions of the Canada Health Act. The government assures the quality of care through federal standards...
- Canada's Health Care providers, 2007Canada's Health Care providers, 2007Canada’s Health Care Providers, 2007 is a reference on the country’s health care workforce. It looks at how the health provider landscape has evolved, examines the complexities of health human resources planning and management in the current environment and provides the latest information on supply...
- Canadian Institute for Health Information
- Canadian and American health care systems comparedCanadian and American health care systems comparedComparison of the health care systems in Canada and the United States are often made by government, public health and public policy analysts. The two countries had similar health care systems before Canada reformed its system in the 1960s and 1970s. The United States spends much more money on...
- Canada Health ActCanada Health ActThe Canada Health Act is a piece of Canadian federal legislation, adopted in 1984, which specifies the conditions and criteria with which the provincial and territorial health insurance programs must conform in order to receive federal transfer payments under the Canada Health Transfer...
- Medicare (Canada)Medicare (Canada)Medicare is the unofficial name for Canada's publicly funded universal health insurance system. The formal terminology for the insurance system is provided by the Canada Health Act and the health insurance legislation of the individual provinces and territories.Under the terms of the Canada Health...