Morneau set to hear from provinces pushing for more financial help

OTTAWA – The Trudeau Liberals opened the door Monday to changing the way the federal government decides how much financial help it gives cash-strapped provinces, ahead of talks among the country’s finance ministers.

But federal Finance Minister Bill Morneau was clear that any decision wouldn’t be made before meetings begin later Monday, and will depend on responses to other concerns his provincial and territorial counterparts bring up.

Already, the federal government has heard objections about how Ottawa calculates how to much to send to so-called have-not provinces and territories so they can provide similar levels of services to their residents as provinces that are better off.

Alberta, Saskatchewan and some other provinces have been angry at how such assistance is calculated, and are pushing for Ottawa to expand a shorter-term federal program set up to help provinces dealing with sudden economic downturns.

Morneau has agreed to discuss the matter during his meeting with provincial counterparts and noted his lone one-on-one meeting since the election has been with Alberta’s Finance Minister, Travis Toews.

“We’ve been really clear that this is a program that hasn’t been reviewed for a long time, and that we’re open to considering that,” Morneau said hours before a working dinner kicking off the ministers’ meetings, after unveiling an update on the state of federal finances.

“But until I hear what the views are – the different views from different parts of the country – and until I hear what other issues are on people’s minds, I can’t evaluate what actually we should do in that regard.”

Those other issues include concerns about how much money the government transfers to pay for health care, with provinces looking for larger year-over-year increases than the three per cent increases that are currently budgeted.

The federal spending update released Monday shows that payments to provinces and territories are to increase from $76.3 billion this fiscal year, which ends in March 2020, to $91 billion by March 2025.

But the transfers to provinces will stay flat as a percentage of the overall economy. The Finance Department projected that transfers will remain at 3.3 per cent of the country’s economic output in each of the next five years.

Morneau called this round of meetings a first step in revamping the financial relationship between federal and provincial governments.

“It’s not that we’re not going to get to a conclusion. It’s that the conclusion needs to first have an openness to listen, which is what we’re doing.”

Morneau’s fiscal update also showed that the federal deficit will be billions of dollars bigger over the coming years.

Among the hits to this year’s bottom line was a $1.9-billion payment to Newfoundland and Labrador as part of deal to give the province resource revenues from the Hibernia oil operation more than 300 kilometres off the coast of St. John’s. Payments will continue through to 2056, but the largest portion of the costs land this year before plummeting to $36 million next year and continuing to decline in the ensuing years.

The Liberals are also writing off $27 million in three-year-old overpayments to Alberta and Newfoundland and Labrador as part of the fiscal stabilization program.

The Canadian Press