Ottawa is in a tight fiscal spot, Freeland says ahead of health talks with provinces

Richard Raycraft · CBC News

· Posted: Feb 03, 2023 7:24 PM EST | Last Updated: February 4

A combination of a slowing global economy, rising inflation and rising interest rates is restricting the federal government’s ability to take on new spending, Finance Minister Chrystia Freeland said Friday following a meeting with her provincial counterparts.

Freeland said she was up-front with provincial and territorial finance ministers about the federal government’s fiscal situation at the meeting, which took place in Toronto.

“It means that we do need to behave with real fiscal responsibility,” Freeland told a news conference following the meeting.

“It was important for me to be candid with provincial and territorial finance ministers about that reality.”

On Tuesday, Prime Minister Justin Trudeau will meet with premiers in Ottawa to discuss their demand for a boost to the Canada Health Transfer (CHT). The premiers say Ottawa only covers 22 per cent of the cost of providing health care; they want to see that increase to 35 per cent, or roughly $28 billion.

Freeland said she did not make an offer on the CHT to the other finance ministers.

“I did not present anything specific. We’re all going to leave that to the prime minister and first ministers,” she said.

“I did think it was useful for me to be open and transparent about the fiscal constraints that the federal government does face.”

Freeland added that an increase to federal spending could contribute to rising inflation, which she said could prompt the Bank of Canada to raise interest rates.

The bank has raised its benchmark interest rate eight times in less than a year — most recently in January, bringing the rate to 4.5 per cent. Bank of Canada Governor Tiff Macklem said following the latest hike that the bank may continue to increase the rate to get inflation down to the federal government’s two per cent target.

The bank also has warned that the Canadian economy could face a mild recession this year.

Freeland said the ministers also discussed how they can respond to the Biden administration’s Inflation Reduction Act and draw investment to Canada.

Provincial finance ministers eager to see feds’ offer

Under pressure from premiers, Trudeau agreed to the first ministers’ meeting last month.

“We have said consistently, not just in Ontario but right across the country, all premiers … come to the table. You can’t have a discussion if you’re not at the table,” Peter Bethlenfalvy, Ontario’s finance minister, told a news conference Friday. “So that table is starting on Tuesday.”

Bethlenfalvy said the federal government and the provinces are “really close” to a deal on health-care funding.

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“What capital around the world is looking for is where they can get things done,” Ontario Finance Minister Peter Bethlenfalvy told Power & Politics after meeting with federal and provincial counterparts on Friday.

Eric Girard, Quebec’s finance minister, told the same news conference that he’s ready to see an offer from Trudeau.

“We need to see the numbers,” he said.

“It’s time to see the numbers, and to start talking about the numbers, and the parameters associated with the numbers … The ask has been there for three years. Now it’s time to see the offer.”

Alberta Finance Minister Travis Toews, speaking after Bethlenfalvy and Girard, said he’s optimistic the premiers and the federal government can come to an agreement.

“We remain hopeful in Alberta that the prime minister’s going to come forward with a good proposal, with a good offer,” he said.