Higher tobacco and vaping taxes offset drug plan spending in federal budget

OTTAWA – The federal government hopes its latest effort to discourage Canadians from smoking, contained in the federal budget presented Tuesday, will generate $1.7 billion in new revenue.

That cash flow boost coincides with the launch of a new $1.5 billion drug plan that offers universal coverage for contraceptives and diabetes medications.

Both programs were presented as new health measures in the budget presented in the House of Commons on Tuesday by Finance Minister Chrystia Freeland.

Health Minister Mark Holland announced the launch of a new pharmaceutical care program in February, following tense negotiations with the New Democrats.

The NDP urged the government to cover several categories of drugs as the Liberals backed off on the cost, citing a “challenging fiscal framework.”

Holland was reluctant to share the cost of the program at the time, saying the price would likely change based on negotiations with provinces and territories.

As things stand, the government plans to spend $59 million over the next year and increase annual spending to $477 million by 2027.

“Free contraceptives are fundamental to a woman’s right to control her own body. That is a fundamental right of women,” Freeland said in her budget speech.

“It is a fundamental human right.”

The new costs will be fully offset by renewed efforts set out in the budget to discourage people from smoking and vaping.

The tax increase comes a month after the Netherlands all but declared war on tobacco and nicotine companies that market to children last month during a news conference outside Parliament.

“Whatever dark corner the tobacco industry goes into to go after our children, wherever they go, whatever loopholes they think they can find, they will face me like an iron wall,” he said at the time.

The government plans to raise the excise tax on a carton of cigarettes by $4 starting Wednesday, which, in addition to the automatic inflation increase of $1.49, the Liberals hope will generate $1.36 billion over five years.

The tax on vaping products will increase 12 percent in July and generate $310 million over five years.

The cost of excise taxes is often passed on to consumers through higher prices, a common – and lucrative – strategy that governments use to encourage smokers to quit.

“Attracted by attractive marketing, millennials and Gen Z are adopting new forms of old bad habits, vaping almost as often as baby boomers smoked cigarettes,” the budget document reads.

The goal of Canada’s tobacco strategy is to reduce the smoking rate to less than five per cent by 2035.

In 2022, the smoking rate among people ages 15 and older was 10.9 percent, and the vaping rate among youth in that survey was 30 percent.

While the pharmaceutical care program is by far the biggest new health care promise in the budget, the Liberals are still on track to spend $13 billion over five years on a new dental program for uninsured, low-income families and means, and have promised the provinces billions. to strengthen their weakened health systems.

Conservative health critic Stephen Ellis said the Liberals’ prescription drug program is “really about preserving the costly coalition” and its agreement to postpone the federal election.

He spoke out against the program during the second reading of the government’s pharmaceutical care legislation in the House on Tuesday.

They were all conditions of the supply and confidence agreement with the NDP, under which the New Democrats support the Liberal minority in key parliamentary votes, including the budget.

Tuesday’s spending plan also announced efforts to deliver on the last outstanding health-related promise made to the NDP: long-term care legislation.

Long-term care as a health service falls under provincial jurisdiction, and there is a patchwork of rules across the country governing how homes must be designed, operated and maintained.

The pandemic shined a harsh light on nursing homes across the country that were devastated by COVID-19 outbreaks.

Freeland’s budget promises to introduce a bill that would enshrine national nursing home standards into law, but leave it up to provinces and territories to decide whether to adopt them.

This report by The Canadian Press was first published April 16, 2024.