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Friday, June 22, 2007
An analysis of data on government finance released in The Daily on June 14, 2007, reveals that between 2002 and 2007, spending on health and environment had annual average rates of growth among the fastest of all spending components (see the note to readers).
Spending on health rose 6.8% on average each year between 2002 and 2007, while spending on the environment went up 7.8%. Social services spending, in comparison, increased at an annual average rate of only 4.0%.
While health expenditures are the second largest component of spending for all levels of government combined, social services expenditures represent the largest component.
Spending on social services has more than doubled in Canada during the past two decades, but it still represents only about one-third of total consolidated government program expenditures. (Program expenditures are defined as being total expenditures less debt charges.)
In the fiscal year ending March 2007, total social services spending in Canada amounted to $172.4 billion, compared with $79.5 billion in 1989.
In both years, this spending accounted for about 33% of total program expenditures.
Social services cover actions taken by a government to offset or to forestall situations in which the well-being of individuals or families is threatened by circumstances beyond their control.
While the federal government represents the largest share of social services spending in Canada, its relative importance has declined considerably during the past 18 years.
Of the $172.4 billion, federal government spending on social services, including transfer payments to other levels of government, accounted for roughly 49% of expenditures in 2007, compared with 59% in 1989.
In 2007, the provincial, territorial and local governments' share was 33% (34% in 1989) and the Canada and Quebec Pension Plans' (CPP/QPP) was 20% (14% in 1989).
While federal and provincial, territorial and local governments have seen their shares decline, the CPP/QPP's share increased as there are more and more people drawing pension benefits.
Note to readers
The Financial Management System (FMS) provides a standardized presentation of government accounting for the federal, provincial, territorial and local governments in Canada. The individual governments' accounting systems are not directly comparable because the policies and structure of governments differ.
The FMS adjusts data from the Public Accounts of governments and other records to provide detailed data that permit inter-government comparisons as well as national aggregates that are consistent over time. As a result, FMS statistics may not accord with the figures published in government financial statements.
In the FMS, revenues are presented by sources, such as personal income taxes, general sales taxes or transfers from other levels of government. Expenditures are presented by functions, such as health, education, social services, transportation, environment and debt charges. In total, the FMS system includes 17 different functions of expenditure.
Consolidated government refers to the consolidation of the financial data for the federal government, the provincial and territorial governments, local governments (that is, municipal governments and school boards) and the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP). Consolidation is the aggregation of levels of governments after the elimination of double counting.
General government refers to government entities created and controlled by federal, provincial, territorial and local governments. This covers all ministries, departments and agencies; autonomous organizations, boards, commissions and funds.
Transfer payments to other levels of government can be related to a wide variety of policy areas such as health, education and social services, and can be categorized in two broad areas: general purpose, where transfers can be applied anywhere, and specific purpose, where the recipient government must use these transfer payments in the specified policy area.
Data for the federal government, CPP and QPP are for the fiscal years ending March 31. Data for the provincial and territorial governments are for the fiscal years ending closest to March 31, and data for local governments are for the fiscal years ending closest to December 31 of the previous year.
All the figures in this release are in current dollars, that is, the data have not been adjusted for inflation.
On a per capita basis, spending on social services in Canada rose from $2,951 in 1989 to $5,267 in 2007, a gain of nearly 80%. In comparison, health expenditures rose from $1,384 to $3,265, a gain of 136%.
During the same period, per capita spending on environment increased 116% and education 90%. On the other hand, spending on the labour, employment and immigration function declined 17% while spending on debt charges decreased 7%.
The federal government is responsible for Old Age Security and Employment Insurance. Total spending for these two programs alone amounted to $44 billion, or 52% of gross federal spending on social services in 2007.
The other 48% was spent on a number of programs, including vocational rehabilitation for disabled persons, veteran's benefits, day care assistance and social services for First Nations, as well as on contributions as an employer to workers' compensation plans and to the CPP/QPP.
In 2007, the federal government spent $12.8 billion on Employment Insurance, representing 6.2% of program expenditures. This compares with $10.6 billion in 1989, or 9.6% of program expenditures.
This decline in the proportion of program expenditures reflects the strong Canadian economy, resulting in the lowest unemployment rate in over three decades.
Old Age Security, the other big component of social services spending at the federal level, amounted to $31.4 billion in 2007, or 15.1% of program expenditures. This is more than double the 1989 level of $15.2 billion, which represented 13.7% of program expenditures.
On a per capita basis, the federal government spent $2,583 on social services in 2007, compared with $1,741 in 1989.
Between 1989 and 2007, social services spending at the provincial, territorial and local levels of government more than doubled to $56.3 billion. This is the third largest component of spending after health and education.
As a proportion of program expenditures, allocations for social services have fluctuated along with the economic cycle. In 1989, these allocations accounted for 18.0%. They peaked at 19.6% in 1994 following the recession of the early 1990s, then fell to 16.3% in 2007.
Among social services expenditures, spending on social assistance, which consists of transfer payments to help individuals and families maintain a socially acceptable level of earnings, represented 33% of expenditures on social services in 2007.
Between 1989 and 2007, only two provinces, Quebec and British Columbia, showed a proportional increase in their spending on social services relative to total program expenditures.
Among the provinces that have shown a decline in their proportional spending on social services, Prince Edward Island had the largest decrease (-5.0 percentage points), followed by Alberta (-4.2 percentage points).
In terms of per capita spending, Quebec spent the most on social services, $2,821 per person, which was about one-quarter (24.5%) of its program expenditures.
Quebec and the territories were the only public administrations showing per capita spending on social services above the national average of $1,721.
Data tables on public sector finance are also available online in the National economic account module of our website.
Data are also available through custom and special tabulation. For more information on products and services, contact Jo-Anne Thibault (613-951-0767; email@example.com), Public Institutions Division.
For more information, or to enquire about the concepts, methods or data quality of this release, contact Claude Vaillancourt (613-951-1820; firstname.lastname@example.org), Public Institutions Division.