November 2001
November QUESTIONS & ANSWERS
by Joel Emes
Q: How have the top spending priorities of the federal government changed over the past 30 years?
A: The most significant change is for debt charges, which account for almost twice as much of total spending as they did in 1965/66 (12.5% versus 24.8%). The share of federal expenditures devoted to "protection of persons and property," which consists of national defense, policing, courts, and correctional services, has fallen from 19.7 percent in 1965/66 to 10.6 percent in 2000/01. Spending on health in 2000/01 shows a sharp drop from 1985/86 because of the Canada Health and Social Transfer (CHST). Since 1995/96, most federal health spending shows up as transfers to provinces. Spending on education and social services are also affected, although to a lesser degree. Spending on social services, health, education, and general purpose transfers to other levels of government accounted for 41.6 percent of all federal spending in 1965/66 and 46.9 percent in 2000/01; social spending increased by 5.3 percentage points of total spending. Table 1 shows how federal expenditure priorities have changed from 1965/66 to 2000/01. The November graph shows the composition of federal spending for 1965/66 and 2000/01.
Q: How have the top spending priorities of the provincial governments changed over the past 30 years?
A: As with the federal government, the most significant growth area is for debt charges. While the proportion of provincial budgets going to service the debt is smaller than that for the federal government (14.3% versus 24.8%), debt charges as a share of the provincial budgets have grown much more quickly than debt charges have in the federal budget. Provincial interest costs account for almost 3 1 2 times as large a percentage of total spending as they did in 1965/66 (14.3% versus 4.3%). Contrary to changes at the federal level, the percentage of the provincial budgets allocated to protection of persons and property in 2000/01 is close to what it was in 1965/66 (3.5% versus 3.6%). Spending on social services, health, and education accounted for 60.0 percent of all provincial spending in 1965/66 and 66.4 percent in 2000/01; social spending increased by 6.4 percentage points of total spending. Table 2 shows how provincial expenditure priorities have changed from 1965/66 to 2000/01. The November graph shows the composition of provincial spending for 1965/66 and 2000/01. The categories in tables 1 and 2 are those defined by Statistics Canada’s Financial Management System (FMS). Social services includes programs to support the socioeconomic well being of individuals and families. It includes Old Age Security (OAS), the Guaranteed Income Supplement (GIS), Employment Insurance, Workers’ Compensation, Family Allowances, Veterans Benefits, and other social assistance services. Protection of persons and property includes the costs of policing, law courts, correction and rehabilitation, and national defense. Health includes all expenditures related to hospital and medical insurance programs, disease control and prevention, and laboratory services. Education includes all outlays for elementary, secondary, and post-secondary education as well as skills retraining and upgrading.
November Graph
Federal and Provincial Government Spending Priorities, 1965/66 and 2000/01
Sources
Statistics Canada, Public finance Historical Data 1965/661991/92, cat # 68512; Statistics Canada, Public Institutions Division, FMS accounts
Note
Spending on health shows a sharp drop for 2000/01 because of accounting changes most federal health spending now shows up as transfers to provinces.
Joel Emes (joele@fraserinstitute.ca) is Senior Research Economist at The Fraser Institute. He has an M.A. in Economics from Simon Fraser University.
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