A NEW STUDY BY THE CONFERENCE BOARD CONFIRMS THE
EXISTENCE OF AN IMPORTANT FISCAL IMBALANCE IN CANADA

HALIFAX, August 1st, 2002 — Provincial and Territorial Premiers today released an independent study conducted by the Conference Board of Canada that confirms the existence of a large and growing fiscal imbalance in Canada between the federal government and the provinces and territories. This study was commissioned by provincial and territorial Ministers of Finance, following their meeting in Corner Brook last April.

Vertical fiscal imbalance is an expression used to describe the situation when the distribution of revenue resources between the federal and provincial/territorial orders of government is inconsistent with the cost of meeting their respective constitutional spending responsibilities.

Based on a projection of federal and provincial/territorial revenues and expenditures over the next 20 years, the Conference Board of Canada concludes that fiscal imbalance “definitely” exists in Canada and is going to “widen in the future”. The impact of demographic changes on health care, a program for which provinces and territories are constitutionally responsible, is a major element in this growing fiscal imbalance.

The report prepared by the Conference Board is consistent with the results released recently by Statistics Canada showing that higher social spending by provincial/territorial governments comes at the same time the federal government has been reducing its expenditures.

The study estimates that the federal government surpluses are projected to rise steadily over the next two decades, reaching $85.5 billion and that the provinces and territories will need to introduce fiscal restraint measures in order to avoid recurrent deficits that could reach as much as $12.3 billion by 2019-2020. This would permit the federal government to virtually eliminate its interest-bearing debt by 2019-2020, while the aggregate provincial/territorial net debt will increase by 54 per cent to reach $386.9 billion.

The study entitled “Fiscal Prospects for the Federal and Provincial/Territorial Governments” is available on the web sites of provincial and territorial departments of Finance and on the Conference Board of Canada’s web site at www.conferenceboard.ca or by telephoning at 613-526-3090.

Canadian Intergovernmental Conference Secretariat (CICS)

webmaster@scics.gc.ca