The problem with federal-provincial cost-shared programs — such as the "national" childcare program proposed by the federal Liberals Monday — is there’s nothing stopping Ottawa from clawing back funding in the future.
When that happens, provinces get stuck with the bill.
It’s one of the pitfalls of fiscal federalism.
Ottawa loves announcing federal-provincial programs. It gives them visibility and relevancy with Canadians. The federal government collects most of the taxes in Canada, but it doesn’t provide many public-facing services. Ottawa is mostly a broker of money.
Apart from programs such as employment insurance, old age security and the Canada Pension Plan, there aren’t many direct government services that bear the maple leaf logo. Provinces and municipalities provide most of those, whether in health care, education, social assistance or transit.
The challenge for provinces that sign on to cost-shared programs is they never know how long the money will last.
Canadians don’t have to look further than the federal government’s withdrawal of health care funding (once a 50-50 cost recovery program replaced by block funding) over the past few decades to find an example of a "national" program that is increasingly underwritten by provincial treasuries.
Childcare has been a favourite target of federal Liberal governments since at least the early 1990s when they first promised a national daycare program.
Beyond a few bilateral funding agreements, the promise of a national program has never materialized, largely because Ottawa and the provinces could never agree to terms.
The federal government’s 2021 budget proposes up to $30 billion in deficit-financed funding over five years, with the goal of cutting childcare fees by 50 per cent "on average" by the end of 2022. Under the proposed plan, fees would fall "on average" to $10 a day by 2026, outside of Quebec (where fees are already lower than that).
How all these "averages" would work is anyone’s guess, especially with the wide range of childcare fees charged across Canada. Fees in Calgary are more than twice as high as they are in Winnipeg; they’re more than three times higher in Toronto than Winnipeg. Will Ontario have to do more heavy lifting than Manitoba to lower its fees? If so, how would that be measured? Will Manitoba get credit for its relatively lower fees? If so, how much?
This plan is a dog’s breakfast. It was crafted in a top-down manner without meaningful consultation. It seems almost unworkable.
Even if Ottawa could find common ground with the provinces on this, the cost-shared problem remains: how long will the money last? The federal government says it plans to enshrine the program in legislation, a law that could be altered by any future government with the stroke of a pen (much like health care funding has been).
The proposed plan is not only expensive (mainly because it subsidizes all parents, including high-income Canadians who don’t need the financial support), it would become more costly in the future. As childcare costs rise, government would need to substantially increase operating grants to childcare centres to maintain the $10-a-day fee structure. Would Ottawa continue pay its share of rising costs beyond the five-year proposed agreement, or would it decline as it has for other cost-shared programs? Most likely, a national childcare program would fall into the same federal-provincial quagmire as health care, where federal and provincial governments bicker every year over Ottawa’s shrinking financial contribution.
It’s not a great model. Under the current scheme, Canada has some of the worst health care outcomes among industrialized countries. Do we want that for childcare, too?
Fortunately, there are alternatives, including childcare programs with income-based fees that free centres from the constraints of government-imposed price controls. It would allow centres to generate the required income to expand supply while driving down fees for low-income families.
Those are the conversations provincial governments should be having, not more talk of a grandiose "national" program that will probably never get off the ground.
Tom has been covering Manitoba politics since the early 1990s and joined the Winnipeg Free Press news team in 2019.