Redefining the Federal Contribution

Such statements prompted federal officials to develop alternative financing proposals. At one point, the provinces were sounded out about whether they would accept revenue from taxes on alcohol and tobacco as a substitute for federal funds. Next, a proposal to transfer tax points was made. In 1973, the world economy suffered a severe shock when the Organization of Petroleum Exporting Countries cut oil production and caused the price of oil to rise from $8 to $12 a barrel. Although the price of oil in Canada remained around $6 a barrel because of Western oil reserves, the Canadian economy suffered, unemployment increased and the federal deficit began to grow. At this point, Prime Minister Trudeau was in the first year of a minority government, dependent on the support of the New Democratic Party for survival. Marc Lalonde had replaced John Munro as Minister of National Health and Welfare in 1972, and he had two objectives: first, to control health care costs and, second, to rationalize the health care system. As health care costs skyrocketed due to high salary settlements and increasing use of medical technology, protracted negotiations with the provinces turned into open conflict between Ottawa and the provinces and in the House of Commons. Even the return of a Liberal majority in 1974 did not resolve the problems.

When Marc Lalonde became Minister of National Health and Welfare in 1972, he had two objectives: to control health care costs and to rationalize the health care system.
The Canadian Medical Hall of Fame. Artist: Irma Coucill.