Skip to content | Skip to institutional links

Common menu bar links

Institutional links

Budget 2000
- Main Page - Publications - Using Budget Info -

Archived - Improving the Quality of Life of Canadians and Their Children

This Web page has been archived on the Web.

Adobe Acrobat Version (192,814 bytes).

Budget 2000

Canada is now in an era of budget surpluses.

When the Government first took office in 1993, it set out a plan to restore the nation’s finances, build a stronger, more innovative economy and improve the quality of life for all Canadians. The plan is working.

The deficit is eliminated, the debt burden is falling, our unemployment rate is at its lowest level in more than 20 years and disposable income is rising.

With a growing economy and our nation’s finances in order, this budget charts a course to greater prosperity for all Canadians in the 21st century. Today’s better finances will be used to help build better lives for all Canadians, now and for future generations.

Crucial to a higher quality of life is ensuring that we continue to increase resources for post-secondary education and improve our system of universal health care.

A key component of the Government’s plan is to cut taxes. This will mean more money in the pockets of Canadians, stronger economic growth and enhanced job creation.

Canadians know that much of our future success hinges on building a stronger, more innovative economy. Developing the know-how, products, skills and services to keep the economy growing is essential to improving our quality of life.

That is why this budget:

announces a $2.5-billion supplement in the Canada Health and Social Transfer (CHST) – the fourth consecutive federal enrichment of the CHST – to help provinces and territories meet what Canadians have clearly identified as their highest priorities: health and education;
puts forward a five-year plan to reduce taxes by at least $58 billion, immediately restores full indexation of the personal income tax system to protect taxpayers against inflation and cuts tax rates for the first time in 12 years;
proposes initiatives to promote leading-edge research and innovation in universities, research hospitals and the private sector; develop new environmental technologies and improve environmental practices; and strengthen provincial and municipal infrastructure; and
increases significantly the income support available to parents by increasing the Canada Child Tax Benefit and enhancing parental benefits.

For further information on budget measures other than those explained in this booklet, please contact the Distribution Centre at the address provided on the last page, or visit the Department of Finance Canada Web site at www.fin.gc.ca.

Highlights

Post-Secondary Education and Health Care

Canada Health and Social Transfer (CHST) payments will be increased by $2.5 billion to help the provinces and territories fund post-secondary education and health care. This is the fourth consecutive federal enhancement of the CHST, providing an additional $1 billion in 2000-01 and $500 million in each of the following three years.
Starting in 2000-01, CHST cash will reach $15.5 billion, almost 25 per cent higher than in 1998-99.
The provinces and territories will have flexibility on when they draw upon the $2.5 billion that is being added to the CHST. They can draw upon it to meet the most pressing needs in universities and hospitals, or at any time over the course of four years, as they see fit.
Total CHST, cash and tax transfers combined will reach an all-time high of close to $31 billion in 2000-01.

Support for Families With Children

In order to increase and broaden support for families with children, the Canada Child Tax Benefit will be increased by $2.5 billion a year by 2004, bringing to over $9 billion its annual support for low- and middle-income families with children. This will mean a maximum benefit of $2,400 for a first child and $2,200 for a second child.
The duration of employment insurance maternity and parental leave will be doubled from six months to one year to give new parents the opportunity to spend more time with their newborn or newly adopted children. As well, the leave will be made more flexible and accessible. This measure will provide additional benefits of about $900 million a year.
As in last fall’s Speech from the Throne, the federal government invites the provincial and territorial governments to agree by December 2000 on an action plan to support early childhood development.

Assistance for Canadians With Disabilities

Building on previous budget measures, the federal government will extend support and implement additional tax initiatives to expand opportunities for persons with disabilities, and help them deal with medical and care-related costs.

Introduction

The purpose of the plan outlined in this budget – sound financial management, lower taxes and investing in skills, knowledge and innovation – is to ensure that Canada will be a leader in the new world economy and that all Canadians will share in the benefits of economic growth. It is by these means that a continually improving quality of life will be secured for Canadians and their children.

Quality of life has many dimensions. It means access to timely and quality health care, and improved access to post-secondary education. Quality of life also means healthy children, secure families, vibrant communities and being able to learn and adapt. It includes sharing the benefits of economic prosperity with those who need special support for daily living or to participate in the job market. It also encompasses participation, particularly by youth, in community life and cultural and amateur sport activities. Amateur sport, because of its important role in the development of Canada’s youth, should and will continue to receive government support.

Investments in quality of life are not just a matter of good social policy, they also represent sound economic policy.

With respect to health care and access to skills and knowledge, Canada’s governments have a long-standing partnership. Most recently, in the 1999 budget, the federal government made its largest single investment ever: $11.5 billion over five years through the Canada Health and Social Transfer (CHST) to support provincial and territorial health care services, and $1.4 billion over three years for better health information, research and innovation, prevention and services. This budget increases CHST payments by another $2.5 billion to help the provinces and territories fund post-secondary education and health care. This is the fourth consecutive federal enhancement of the CHST.

The 1998 budget announced the $1.5-billion-a-year Canadian Opportunities Strategy to improve access to skills and knowledge through better financial assistance for students, support for research and lifelong learning, and incentives for families to save for their children’s higher education. The 1999 budget added $1.8 billion over three years in support of the Strategy as well as other knowledge and innovation measures. This budget adds further tax assistance for students and substantial new support for research.

With respect to children, the federal government has made a number of important investments in the past three years.

In 1997, Canada’s governments initiated the National Child Benefit System, an unprecedented partnership to combat child poverty by helping to protect benefits for low-income parents who enter and stay in the workforce. The federal government, for its part, has invested $1.7 billion a year in this system. The 1999 budget also provided an additional $300 million in support for modest- and middle-income families with children. This brings to $7 billion a year the total federal support to low- and middle-income families delivered through the Canada Child Tax Benefit.
Canada’s governments are also working on a National Children’s Agenda to co-ordinate efforts of governments, communities and individual Canadians to make Canada a better place for all of its children.
The federal government significantly enriched the Canada Prenatal Nutrition Program, the Community Action Program for Children and the Aboriginal Head Start Program.

This budget increases the Canada Child Tax Benefit by $2.5 billion a year by 2004, thus bringing to over $9 billion annual benefits for low- and middle-income families with children.

For persons with disabilities, the Government introduced the Opportunities Fund in 1997 as a pilot project to help Canadians with special needs prepare for, find and keep jobs. The Government also uses the tax system to help persons with disabilities participate as fully as possible in all aspects of life. This budget extends support and introduces new tax initiatives for persons with disabilities.

Increasing Support for Post-Secondary Education and Health Care

Action $2.5 billion more in Canada Health and Social Transfer support for post-secondary education and health care.

Federal Transfers to Provinces and Territories

The federal government transfers approximately $40 billion a year to the provinces and territories through three major programs to help them provide vital services to Canadians:

the Canada Health and Social Transfer (CHST), which supports health care, post-secondary education, social assistance and social services;
Equalization, which provides extra funds to less prosperous provinces to enable them to offer public services that are reasonably comparable to those elsewhere in the country; and
Territorial Formula Financing, which recognizes the unique challenges and higher costs of providing public services in the north.

Canada Health and Social Transfer

The CHST is the largest federal transfer, providing support in the form of cash and tax transfers to the provinces and territories. The federal government has already acted three times to strengthen the CHST. This budget announces a fourth consecutive enhancement of the CHST.

In 1996, the Government took action to end the projected decline in CHST cash due to the growing value of tax transfers with the introduction of an $11-billion cash floor.
In 1998, as soon as a balanced budget was at hand, the Government increased the CHST cash floor to $12.5 billion from $11 billion.
In the 1999 budget, the Government announced the single largest investment it has ever made – an $11.5-billion increase in funding specifically for health care over five years (Table 1). This increased CHST cash to $14.5 billion in 1999-2000. Combined with the value of tax transfers, total CHST is $29.4 billion this year – higher than in 1993-94 (Table 2).

This budget announces an additional $2.5 billion in CHST support, providing an added $1 billion in 2000-01 and $500 million a year in each of the following three years for post-secondary education and health care. Combined with last year’s $11.5-billion investment, this means that the cash component of the CHST will reach $15.5 billion in each of the next four years. This represents an increase of almost 25 per cent from the 1998-99 level.

The $2.5-billion CHST supplement will be allocated to the provinces and territories on an equal per capita basis. The supplement will be accounted for by the Government in this fiscal year and paid into a third-party trust upon passage of amendments to the CHST legislation. However, the provinces and territories will have flexibility on when they draw upon the $2.5 billion that is being added to the CHST. They can draw upon it to meet the most pressing needs in universities and hospitals, or at any time over the course of four years, as they see fit. It is anticipated that the provinces and territories will draw down this supplement in a gradual manner such that cash support will increase by $1 billion in 2000-01, $500 million in 2001-02, $500 million in 2002-03 and $500 million in 2003-04 (Table 1).

At the same time, the tax transfer component of the CHST continues to provide increased support to the provinces and territories. The CHST tax transfer is an important part of the federal government’s ongoing support for provincial and territorial social programs, including post-secondary education and health. The tax transfer occurred in 1977 when the federal government agreed with the provincial and territorial governments to reduce its personal and corporate income tax rates, allowing them to raise their tax rates by the same amount. As a result, revenue that would have flowed to the federal government began to flow directly to the provincial and territorial governments – and continues to grow in line with growth in the Canadian economy.

Table 1
Canada Health and Social Transfer (CHST)
1999-2000 to 2003-2004


	1999-2000	2000-2001	2001-2002	2002-2003	2003-2004	5 years

	(billions of dollars)
Budget 2000 increase¹		1.0	.5	.5	.5	2.5
Budget 1999 increase	2.0	2.0	2.5	2.5	2.5	11.5
Includes:
CHST		1.0	2.0	2.5	2.5	8.0
CHST supplement²	2.0	1.0	0.5			3.5
Budget 1998 cash	12.5	12.5	12.5	12.5	12.5	62.5
Total CHST cash	14.5	15.5	15.5	15.5	15.5	76.5
CHST tax transfers³	14.9	15.3	15.8	16.5	17.2	79.7
Total CHST	29.4	30.8	31.3	32.0	32.7	156.2

¹ The $2.5-billion cash supplement will be paid to a third-party trust and accounted for in 1999-2000 by the federal government. Payments will be made in a manner that treats all jurisdictions equitably, regardless of when they draw down funds over four years. ² The $3.5-billion cash supplement was paid to a third-party trust and accounted for by the federal government in 1998-1999. ³All figures for 2000-01 onward, with the exception of CHST cash, are projections. Note: Numbers may not add due to rounding.

The $2.5-billion investment, combined with growing tax transfers, means that total support through the CHST will reach a new high of close to $31 billion in the coming fiscal year (Table 2).

Governments – both federal and provincial – recognize the need to ensure that the provision of health services continues to meet Canadians’ needs in the future. This is of particular importance as Canada’s baby boomers approach and then move into their senior years. To this end, federal and provincial health ministers have agreed to meet in the spring this year.

Table 2
Canada Health and Social Transfer (CHST)
1993-1994 to 2003-2004


	Cash²	Tax transfers³	Total

	(billions of dollars)
CAP/EPF¹
1993-94	18.8	10.2	29.0
1994-95	18.7	10.7	29.4
1995-96	18.5	11.4	29.9
CHST
1996-97	14.7	12.2	26.9
1997-98	12.5	13.3	25.8
1998-99	12.5	14.2	26.7
1999-00	14.5	14.9	29.4
2000-01	15.5	15.3	30.8
2001-02	15.5	15.8	31.3
2002-03	15.5	16.5	32.0
2003-04	15.5	17.2	32.7

¹ CAP – Canada Assistance Plan. EPF – Established Programs Financing. ² Based on an assumed gradual drawdown of the $2.5-billion cash supplement over four years starting in 2000-01 and of the $3.5-billion supplement over three years starting in 1999-2000. ³ All figures for 2000-01 onward, with the exception of CHST cash, are projections. Note: Numbers may not add due to rounding.

Growing Economy, Growing Transfers

The strong performance of the Canadian economy has significantly increased the value of other major transfers to the provinces and territories. Equalization to less prosperous provinces is up $500 million for this year over last year’s budget projection, taking entitlements to $9.8 billion from the $9.3 billion previously projected. Territorial Formula Financing is nearly $100 million higher this year than projected, taking entitlements to about $1.4 billion from about $1.3 billion previously projected (Table 3).

Table 3
Total Federal Transfers to the Provinces and Territories
1993-1994 to 2003-2004


	CHST¹	Equalization	Territorial Formula Financing	Total transfers²

	(billions of dollars)
1993-94	29.0	8.1	1.2	37.4
1994-95	29.4	8.6	1.2	38.3
1995-96	29.9	8.8	1.2	39.0
1996-97	26.9	9.0	1.2	36.1
1997-98	25.8	9.7	1.2	35.7
1998-99	26.7	9.6	1.2	36.5
1999-00	29.4	9.8	1.4	39.4
2000-01³	30.8	9.5⁴	1.4	40.6
2001-02	31.3	10.0	1.4	41.6
2002-03	32.0	10.3	1.5	42.6
2003-04	32.7	10.7	1.5	43.7

¹ Cash plus tax transfers. ² Equalization associated with CHST tax transfers appears in both Equalization and CHST entitlements. The total has been adjusted to avoid double counting. ³ All figures for 2000-01 onward are projections. ⁴ First official Equalization estimate for 2000-01. Experience shows that first estimates generally tend to understate Equalization and are subsequently revised upward. Note: Numbers may not add due to rounding.

Total transfers to the provinces and territories will reach an estimated $39.4 billion this year and will continue to grow over the next four years, allowing the provinces and territories to strengthen post-secondary education, health care and other social programs important to Canadians (Table 3).

Ensuring Access to Post-Secondary Education Through Canada Student Loans

The Canada Student Loans Program has played an important role in expanding access to post-secondary education since 1964. Through loans and other financial assistance, the program helps over 350,000 needy Canadian students annually access post-secondary education.

Canada Student Loans are administered and delivered, on behalf of the federal government, by financial institutions under an arrangement that expires on July 31, 2000. The federal government will take the necessary steps to ensure that the program continues to serve Canadian students after July 31, 2000

- Next -