VICTORIA, British Columbia (Reuters) - Some Canadian provinces pushed back on Monday against the federal government's plans to limit the growth of its contributions to the publicly funded health system, but the government said it could not spend money it does not have.
Speaking ahead of meetings in Victoria of federal-provincial finance ministers, the federal government said it could not continually increase its healthcare transfers to the provinces by 6 percent a year, as it has done since 2004.
The federal government says spending will become unsustainable if it consistently grows more rapidly than revenue, making it impossible to balance the books.
"I think we all realize that public finances relate to revenues, and we can't pretend that we can spend money that we don't have," federal Finance Minister Jim Flaherty said on the sidelines of the meeting.
"If we do that, then we run the risk of damaging the Canadian brand, quite frankly, which is a strong fiscal responsibility brand around the world."
Flaherty now wants to tie growth in spending to real GDP growth plus inflation, a level that is currently closer to 4.5 percent than 6 percent.
But the provinces face rising demands on the health system as baby boomers age, as well as budgetary pressures - on Thursday Moody's revised Ontario's debt rating outlook to negative from stable.
Ontario Finance Minister Dwight Duncan said slowing the growth in federal healthcare contributions pointed to lower federal support for Medicare, which most Canadians view as very important.
"These numbers...are notional, but what they mean is direct reductions in service and access," he said.
Atlantic provinces have also criticized the plans for slower growth in federal spending, although Quebec Finance Minister Raymond Bachand said the overall economy remained the "most pressing preoccupation."
Writing by Randall Palmer