Canadian Social Research Links

Federal Cuts in Social Spending,
1972-1995

Sites de recherche sociale au Canada

Les coupures dans les dépenses fédérales
(domaine social)
1972 à 1995


Updated October 24, 2010
Page révisée le 24 octobre 2010


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The list below of caps and cuts to federal social spending between 1972 and 1995 is copied from Appendix I of:
National Standards and Social Programs:
What the Federal Government can do
September 1997

Source:
Political and Social Affairs Division
Parliamentary Library

"FEDERAL CAPS AND CUTS, 1972-1995

Responding to the combined impact of fiscal, intergovernmental and other pressures, the federal government has, since at least the mid-seventies, been engaged in what has been widely portrayed as a retreat from the social policy role established during the immediate post-war period. Major milestones in this development are:

* Federal post-secondary education (PSE) contribution capped at 15% - 1972

* CAP "replacement funds," negotiated to compensate provinces which had lost cost-sharing by making certain extended services universal - 1974

* Federal Medicare payments for 1976-77 capped at 13% growth over 1975-76 - 1975

* Established Programs Funding* (EPF) program created - 1977, replacing 50/50 conditional grants for Hospital Insurance, Medicare and Post-Secondary Education with a combination of a block grant, indexed to population and GNP growth, and a transfer of tax points. This arrangement initially increased the federal share of aggregate program costs, but from 1978-9 it began to decline.

[ * CORRECTION: EPF stands for Established Programs Financing - see http://www.fin.gc.ca/fedprov/his-eng.asp ]

* Equalization formula modified to preclude payments to any province where per capita personal income exceeds the national average (thereby precluding payments to Ontario, which would otherwise have qualified) - 1981

* EPF renewed, minus the revenue guarantee cash grant -1982

* Equalization program renewed, replacing the "national average" formula with a five-province standard which eliminated the growth in entitlements resulting from the impact of Alberta oil revenues under the earlier formula - 1982
Other features:
* a three-year transitional payment provision, under which entitlements resulting from the new standard were topped-up to the level which the previous standard would have established; and
* a ceiling on grant increases based on GNP growth, and floors precluding drops of more than 5%, 10% or 15% depending on the fiscal strength of an individual province.

* Post-secondary Education component of EPF capped at 6% growth ("Six and Five" restraint program) - 1983

* Post-secondary Education component capped at 5% growth - 1984

* Federal-Provincial Agreement on the Enhancement of Employment Opportunities for Social Assistance Recipients, 1985: for purpose of encouraging training and other employability enhancement measures for welfare recipients. (Q: cost impact?) - 1985

* Federal transfers under EPF partially de-indexed (from adjustment reflecting increase in GNP to adjustment proportional to GNP increase minus 2%) - 1986

* Federal EPF transfers frozen at their 1989-90 level for years 1990-91 and 1991-92, then indexed to GNP growth minus 3% - 1990

* Cap on CAP: welfare and social services cost-sharing transfers to the three wealthiest provinces (Ontario, Alberta and B.C.) limited to maximum increase of 5% per year for 1990-91 and 1991-92 - 1990

* Freeze on federal EPF transfers extended for three years, through 1994-95, after which indexation to GNP growth minus 3% to take effect - 1991

* Cap on CAP (maximum 5% annual growth in transfers to Ontario, Alberta and B.C.) extended for three years, through 1994-95 - 1991

* Equalization program renewed for a five-year period with a modified funding formula expected to increase grant growth rates from around 3% to 5% -1994

* Cap on CAP (maximum 5% annual growth in transfers to Ontario, Alberta and B.C.) extended for an additional year (through 1995-1996), along with a general freeze on payments for the Post-Secondary Education component of EPF - 1994

* Canada Health and Social Transfer (CHST) established 1995, combining the EPF and CAP transfers in a single block transfer which reduced federal funding by some $2.5 billion for 1996-97, and an additional $2 billion for 1997-1998, compared with funding levels projected under previous transfers.

* CHST further elaborated - 1996.
Main points:
** long-term funding established, frozen at 1997-98 levels of $25.1 billion for 1998-99 and 1999-2000, then indexed to GNP growth rate minus 2% for 2000-01, GNP growth minus 1.5% for 2001-02 and GNP growth minus 1% for 2002-03;
** cash transfers do not fall below $11 billion, and begin to grow after 2000-2001; and
** allocation among provinces will, in stages, reduce distortions created by the cap on CAP
by coming to reflect two factors:
*** current CHST share, adjusted for interprovincial population shifts, and
*** provincial share of the Canadian population."

Source:
National Standards and Social Programs:
What the Federal Government can do
September 1997

Source:
Political and Social Affairs Division
Parliamentary Library

Related
Canadian Social Research Links pages:

- Go to the Canada Assistance Plan / Canada Health and Social Transfer / Canada Social Transfer Resources page: http://www.canadiansocialresearch.net/cap.htm
- Go to the Welfare and Welfare Reforms in Canada page: http://www.canadiansocialresearch.net/welref.htm


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