Canada shifts debt-reduction burden to provinces: budget officer

Tue Oct 1, 2013 5:11pm EDT
 

By Louise Egan

OTTAWA (Reuters) - A move by Canada's federal government to offload some healthcare costs onto the country's provinces will leave provincial governments facing ballooning debt unless they raise taxes or cut spending, the parliamentary budget office (PBO) says.

The federal government is in good fiscal health after it introduced broad spending cuts with the goal of eliminating its budget deficit by 2015, the PBO said in a report on Thursday on the long-term fiscal sustainability of Canada's various levels of government.

The PBO, which was set up by the Conservative government in 2006, has a mandate to provide independent analysis of Canada's finances to legislators.

"PBO's projection of net debt suggests federal debt is on track to achieve the government's G20 (Group of 20) commitment to a debt-to-gross domestic product ratio of 25 percent by 2021," the report said.

Prime Minister Stephen Harper announced the target at the Group of 20 summit in St. Petersburg, Russia, earlier this month. Canada ran 11 straight years of budget surpluses before the 2008-09 financial crisis, and Harper is eager to balance the books again before the next election, scheduled for October 2015.

CHANGE IN TRANSFERS

Ottawa expects a deficit in the 2013-14 fiscal year of C$18.7 billion ($18.2 billion), or 1 percent of GDP.

But in a controversial move in 2011, the Conservatives announced a change to the way the federal government transfers funds to the provinces to cover the country's universal, publicly funded healthcare system.   Continued...

 
Canada's Prime Minister Stephen Harper speaks before a dinner hosted by the National Congress of Italian Canadians (NCIC) for Italy's Prime Minister Enrico Letta in Vaughan, Ontario September 22, 2013. REUTERS/Jon Blacker