Commission on the Reform of Ontario's Public Services

Canada Social Transfer
Chapter 20: Intergovernmental Relations
Canada’s fiscal arrangements have served to narrow fiscal inequities through cash transfers
but experts have argued for more structural reform — to allow provinces to raise more of
their own revenues to fund their services. There is a clear basis to this argument.
As noted, the federal government generates revenues from Ontario at a rate very close to
an equal per capita basis. The CST then returns money to the province, again on an equal
per capita basis. Unlike the CHT, where provinces are technically required to adhere to the
Canada Health Act, there are no such provisions for the CST. It is a block transfer with
effectively no strings attached — little more than a semantic shell game. This unnecessary
step is a source of inefficiency and reduces both accountability and transparency, but it
also presents an opportunity for reform.
Without a clear purpose, the CST should be eliminated and transferred to provinces in the
form of tax points. The federal government should reduce its taxes so provinces could
increase theirs by an equivalent, revenue-neutral amount. A similar approach was undertaken
in 1977 when the federal government transferred personal and corporate income tax points
to the provinces. It should be done again.
Recommendation 20-4: Simultaneously eliminate the Canada Social Transfer and transfer
the equivalent tax points to the provinces.
Employment Insurance
A growing number of organizations have criticized the federal Employment Insurance (EI)
program for not meeting the needs of the modern labour market. In 2010, Ontarians
contributed about 40 per cent of EI premiums, but received only 32 per cent of benefits.
Despite being one of the hardest-hit provinces during the global economic recession and
with the province’s unemployment rate above the national average, 10 Ontarians’ coverage
remained near the lowest in the country, with only 32 per cent of the unemployed receiving EI.
This inadequate coverage in EI benefits also restricts Ontarians’ eligibility for training
measures associated with EI.
It is clear that the system needs reform. The changes recommended by the Mowat Centre
for Policy Innovation, 11 including a single national entrance requirement, as well as consistent
formulas to calculate benefit durations and levels, would improve outcomes for Ontario
workers and employers.
See Chapter 8, Social Programs, for the full recommendation.
10 As of December 2011.
11 Mowat Centre EI Task Force, “Making It Work: Final Recommendations of the Mowat Centre EI Task Force,” 2011, Mowat Centre for
Policy Innovation.
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