by David P. Ross

If you have been trying to sort out what is good or bad about the new Canada Health and Social Transfer (CHST), you may have found yourself wading through a flood of misinformation. This $25-billion block fund, approved by Parliament in June and scheduled to take effect in April, 1996, will introduce a fundamental change in the way our federation governs the funding of our three major social programs: health, post- secondary education, and social assistance (welfare) and services. Not all the news about this fund is bad, but make no mistake, some of it definitely is.

To some observers, a lot of the reaction to the legislation has been of the knee-jerk variety. The ubiquitous Queen s University economist Tom Courchene, writing for the business-sponsored C. D. Howe Institute, says criticisms of the CHST are exaggerated and overdone. He may have a point. Nevertheless, the CHST represents the most serious revamping of social policy since the 1960s, and for it to be hastily introduced as a budget bill, aimed almost solely at reducing the deficit, instead of as a well-thought- out major piece of social legislation is cause for real concern. If knee-jerk means rushed and wrongly conceived, then the term describes the CHST legislation itself. A number of alleged problems with the CHST are making the public rounds. But which problems are unique to this new block fund, and which ones would have occurred or already existed anyway? We need to take a careful look.

First, federal funding for health, post-secondary education, and social assistance and services are being put into a single pot and cut by a total of about $7.5 billion over the next two years. These actions are due to deficit concerns, and critics should neither claim that the cut stems from the new block funding principle itself, nor that mean- spirited and shortsighted provincial governments have arisen because of it. The federal funding of social programs would have been cut or capped anyway as a fiscal measure. Right-leaning provincial governments will use the much heralded flexibility of the block fund to drastically reduce social programs in this country. It may indeed provoke a race to the bottom among the provinces, especially in welfare since virtually no standards for it remain. If provinces want to cut social spending, they will now only be constrained by public opinion and the Canada Health Act.

Second, the CHST is being criticized for abandoning national standards, and leading to the creation of a kaleidoscope of programs. In fact, for health care, the CHST retains the five conditions of the Canada Health Act, which together guarantee universal access. And it leaves funding for post-secondary education as it was, with no conditions (and whether there should be conditions for education is a separate question worth considering). But the biggest change being introduced is clearly in the area of social assistance andsocial services, programs previously cost-shared under the Canada Assistance Plan (CAP).

When funding for social assistance and services was governed by the 50/50 cost sharing under the CAP, all provinces were required to meet several important conditions. There had to be an appeal process, there could be no minimum residency requirements, and nobody could be refused assistance if they demonstrated financial need (provinces could not force people to work for assistance). With the new CHST legislation, all these previous conditions except one (no provincial residency requirements) will expire. Thus, the CHST allows a faster race to the bottom among the provinces, if they so choose.

Third, the amounts to be transferred to the provinces are being cut dramatically and will likely be cut even more in the future. This will in turn increase competition for the rapidly shrinking pie. It will also weaken the ultimate threat of withholding provincial payments to uphold whatever standards are adopted. This weakening of the fiscal stick will happen if changes in the financing structure are not worked out.

Health and education were, and will continue to be, funded by a combination of tax points and cash. The tax point portion has been growing over time and, in the near future, will eliminate the need for cash transfers. At that time, the feds will lose their power to enforce, since the tax points are history and are seen as an inherent tax right of the provinces. The federal government has made some overtures toward altering the CHST funding structure to allow for a continuing cash portion. But it should be noted, as the CCSD pointed out years ago, that losing clout was inherent in the old legislation too. The CHST has not changed this. By cutting the overall funding, it has, at most, moved forward the date when the cash portion and the clout could vanish.

As I see it, the biggest problem with the CHST is that without any enforceable standards, how is the reduced common pot going to be divided up among the health, education and welfare domains? More bluntly, who is going to suffer the cuts?

Health spending will undoubtedly look after itself since universal care is protected by the Canada Health Act (assuming the federal government maintains a large enough cash component in the block transfer to serve as a stick). Moreover, the health lobby is articulate, cohesive, highly educated, well financed and politically connected.

Education spending is not protected by standards, but it hasn t been since 1977 and universities and colleges have not withered significantly. The education lobby is also articulate, cohesive, well financed and well connected to the power structure.

That seems to leave social assistance, like its clients, at a high risk of being the odd program out, and poor children will be the biggest losers. Most of the money for family income assistance and virtually all of the spending on child welfare services will flow through the CHST.

Who will effectively lobby for poor children? In the allocation free- for-all that is likely to ensue under CHST, the voices of children will not be heard over those of health and post-secondary education. Not only will the families of these children have less money to care for them, there will also be a sharp reduction in child protection, mental health and other services for disabled children, dental and health services, child care, support services for troubled youth, and counselling and support for troubled and abusive families. All of this is now in danger of disappearing. And let us not forget that we ve never had a well developed child welfare system. We will not be cutting back a Cadillac system, but chopping at a very inadequate base.

With no enforceable standards, the only constraint on child welfare spending will be that imposed by public opinion, since the voices of children do not form a strong lobby. At least under CAP, provinces could bend to public opinion knowing that any dollar spent on poor kids was only costing their treasury 50 cents. Under the CHST, any catering to public opinion will now cost their treasuries dollar for dollar. The price of helping poor children just went up 100 per cent.

In the future, the federal government s investment in social well-being will flow largely through the CHST. All the research tells us that it is cheaper and much more effective to invest early on in a child s development than it is to deal with the consequences when a child grows up in poverty and disadvantage. We also know that Canadians want their governments to maintain an effective social safety net to assist the most vulnerable and to nurture the development of healthy and productive citizens.

Just because the CHST is a block fund doesn t mean there can t be standards or principles to guide expenditures. If the CHST is to be the principal vehicle for our national investment in human development, then we must ensure that it is spent in ways that further the well-being of families and children.

Public debate is now under way about how the CHST should operate. The CCSD has held discussions with a cross-section of Canadians to develop principles and objectives which could be used to determine how the CHST funds are spent (See Roundtables, p. 22). While the size of the federal investment in well-being is shrinking, we should ensure that those who are least able to speak for themselves do not take the biggest hit in the process.

David Ross is the executive director of the Canadian Council on Social Development.

Canadian Council on Social Development, 190 O'Connor Street, Suite 100, Ottawa, Ontario, K2P 2R3