-- SOCIAL UNION ISSUES
Political and Social Affairs Division
17 December 1999
TABLE OF CONTENTS
THE CHST TRANSFER
AND THE SOCIAL UNION
HEALTH CARE ISSUES
INTERGOVERNMENTAL RELATIONS -- SOCIAL
With the major
exceptions of unemployment insurance, which is federal, and the old age pension system,
which is shared by both levels, most legislative jurisdictions relating to social policy
(medical/hospital services, education and social security) are provincial. The provinces
have, however, relied on money transferred from the federal government to finance major
programs, such as hospital and medical insurance, and to expand the provision of
post-secondary education. Traditionally the federal government has used its fiscal
capacity to influence social policy, especially in the creation of desired programs and
the maintenance of standards by the provinces. There is thus a high degree of
intergovernmental contact, collaboration and (intermittently) conflict in the social
In the 1980s,
the federal government began to impose restraints on fiscal transfers to the provinces;
this trend culminated in the mid 90s with the consolidation of major social
transfers into one, the Canada Health and Social Transfer (CHST), and the reduction of
cash transfers by some $2.5 billion (or approximately 10%) for 1996-97. These reductions
prompted a rising level of provincial protest. In a number of provinces, initiatives such
as health care clinics that required payments from users were launched, even though such
arrangements contravened the standards set out in federal legislation. More broadly, the
reductions heightened pressures, especially from the larger provinces, for unilateral
federal standard-setting to be replaced with processes involving greater provincial
THE CHST TRANSFER
mid-1997, improvements in the fiscal position of the federal government have added fuel to
provincial pressures concerning transfers. These have expanded to include demands for the
full restoration of transfers to pre-1995 levels. Thus, the 15 June 1998 meeting of
federal and provincial Finance Ministers saw the provinces (except Quebec, which was not
participating, and Newfoundland) press for either a $6.2-billion increase (full
restoration), or a more moderate increase said to reflect cuts in line with those Ottawa
had imposed on itself.
centring on health care spending continued into 1999 and became steadily more
confrontational. The provinces pressed for full restoration of the health care component
(in particular), while the federal government sought a general intergovernmental agreement
setting out provincial obligations to report publicly how health care money is spent,
provincial support for medicare standards, and commitments by the provinces to spend
increases on specified core health care services such as emergency wards, cancer treatment
and long-term care.
began to progress in January 1999, when Prime Minister Chrétien offered greater
flexibility with respect to the health care services to which federal money could be
applied. On 22 January, the 10 provinces and two territories responded by letter, agreeing
to make a commitment that money transferred for health care would indeed be spent in that
area. The fact that Quebec signed the letter was seen as a particularly hopeful sign,
given the provinces traditional reluctance to endorse any arrangements that imply a
federal role in jurisdictions viewed by the province as being provincial.
media reports, on 25 January the Prime Minister welcomed the letter from the premiers and
promised a significant increase in health care funding. Other reports, however, suggested
that Quebecs participation had been strategic aimed at getting restored
funding in order to preclude a larger agreement that would imply a federal role and
that Quebec would not sign a general health accord. The end result was that several
health-related issues were addressed globally, in the Framework Agreement on the Social
Union (see below), which was achieved through Prime Ministerial intervention in the final
stages of negotiations. Though there was no official announcement of the size of the
increase to the CHST that would appear in the next federal budget, provincial spokesman
reported their clear understanding that it would be in the order of $2 billion in the next
year, rising to $2.5 billion two years later.
commitments to increase the CHST by $6.5 billion (cumulative) between 1999-2000 and
2001-2002, and by $11.5 billion over the five-year period starting in 1999-2000, were
announced in the February 1999 budget. While most provincial governments responded
positively to this commitment, reactions were more mixed to the announcement that CHST
funding would be shifted to a per capita basis, thereby disproportionately increasing the
transfer to provinces that had received lower payments in the past. This drew strong
protest from Quebec, and negative reaction from Newfoundland. Premier Bouchard denounced
the change as a "flagrant, arrogant, vulgar and brutal" assault upon Quebec, and
the province launched a public relations campaign featuring graphic pictures of blood
plasma bags and IOU bills, while reports appeared in the media of a memorandum in which
the Justice Minister of Newfoundland accused the federal government of "taking from
the poor to give to the rich."
against the change to the method of calculating CHST payments have proven to be relatively
transitory, provincial pressure continues for the full restoration of all categories of
CHST funding (the budget will have the effect of restoring health care funding only). At
the Annual Premiers Conference, held 9-11 August 1999, Premiers and territorial
leaders unanimously called on the federal government to "fully restore Canada Health
and Social Transfer (CHST) funding to 1994/5 levels with an appropriate escalator."
More recently, at their provincial-territorial meeting on 15 November 1999, Finance
Ministers repeated this demand, as they did in a conference call between the Premiers and
Finance Minister Martin on 25 November.
For CHST details: see Odette
Madore, The Canadian Health and Social Transfer: Operation and Possible Repercussions
on the Health Care Sector, Parliamentary Research Branch, CIR 95-2E.
NATIONAL STANDARDS AND THE SOCIAL UNION
federal transfers have since 1995 coincided with growing provincial experimentation with
alternative delivery mechanisms, notably in the health care field. In a number of cases,
provincial initiatives prompted federal counter-actions to uphold federally prescribed
standards or practices, as well as major conflict with individual provinces.
example was the disagreement between the federal and Alberta governments during 1995 and
1996 over the charging of "facility fees" by private clinics. This resulted in
federal penalties and, ultimately, the provincial governments agreement to absorb
the charges on behalf of clinic users.
over whether the federal government should have an exclusive role in applying national
standards within areas of provincial jurisdiction have since proven to be a major element
in a more general discussions about roles and responsibilities in the social policy field.
On 12 December
1997, First Ministers agreed that a Framework Agreement on the Social Union would be
developed, using the Federal-Provincial-Territorial Council on Social Policy Renewal (an
ongoing forum for intergovernmental social policy discussions), with July 1998 as a target
date. These talks were formally launched on 13 March 1998, under the joint chairmanship of
federal Justice Minister the Hon. Anne McLellan and Saskatchewan Minister of
Intergovernmental and Aboriginal Affairs, the Hon. Bernhard Wiens.
By June of
1998, the provinces (absent Quebec) had developed a proposal relating to the
"process" part of a possible framework. The proposal provided for a range of
collaborative practices, and would also have made new or changed national programs in
areas of provincial jurisdiction subject to the consent of a majority of provinces. As
well, it would have required the federal government to compensate any province or
territory not participating in such a program, provided that the province or territory
established a program that addressed the priority areas of the national program.
however, a scheduled meeting of federal and provincial Ministers at which the federal
government had been expected to respond to provincial proposals was cancelled. When that
government did respond, later in July, it rejected restrictions on the spending power
beyond those to which it had committed itself in 1996, and asserted the continued need for
an exclusively federal role in the interpretation and enforcement of national standards.
The federal position did, however, indicate receptivity to more extensive consultations
with provincial governments over the design and implementation of new social programs,
including 12 months notice of the introduction of such programs.
At the 5-7
August 1998 Annual Premiers Conference, Premiers reaffirmed the position on the
social union announced in June, and called for a draft agreement by the end of the year. A
potentially significant development at the conference was Quebec Premier Lucien
Bouchards endorsement of the provinces social union proposals. Before this
date, Quebec had not participated formally in the social union talks and had rejected
power-sharing proposals on the grounds that the federal government has no role within
areas of provincial jurisdiction.
The fall of
1998 saw a series of sharp exchanges in the media between Prime Minister Chrétien and
Premier Bouchard over the provincial proposals. For example, the Prime Ministers
suggestion, in a 16 September interview, that Premiers should seek election as Prime
Minister if they wanted to run the federal government, was called a "slap in the
face" by Mr. Bouchard and an attempt to brush aside constructive ideas from the
provinces. During this period, a series of intergovernmental meetings on social union
framework issues took place, culminating in Victoria on 29-30 January 1999. Agreement was
achieved, however, only when the issue was shifted to the level of First Ministers; and a
series of telephone calls from the Prime Minister to Premiers established the basis for an
agreement combining remnants from the stalled health accord negotiations, social union
framework elements and (as already discussed) a clear understanding about money.
On 4 February
1999, First Ministers hastily gathered in Ottawa to ratify a general agreement among the
federal, provincial and territorial governments (with the exception of Quebec) entitled A
Framework to Improve the Social Union for Canadians. The Agreement commits
participating governments to:
general principles such as
equality of opportunity and access, and existing federal principles for medicare;
the elimination of barriers
to inter-provincial mobility of labour ;
the public reporting of
outcomes achieved by social programs ;
joint priority-setting and
intergovernmental information-sharing (including 3-months notice by the federal
government of new initiatives within the federal jurisdiction, and 1 years notice of
major changes to federal transfers) ;
the principle that the
federal government will not introduce new cost-shared programs without the consent of a
majority of the provinces.
conclusion of the meeting, Premier Bouchard reiterated Quebecs longstanding
opposition to arrangements that imply a federal role in what are seen to be Quebecs
exclusive social policy jurisdictions, and that do not provide for an unconditional
provincial right to opt out of new federally initiated social programs. The agreement was
described as "
a serious backward step that no Quebec premier could sign."
In the months
since the signing of the Framework Agreement, individual issues appear to have
substantially superseded it on the agendas of most governments. On 27 October 1999,
however, provincial and territorial ministers responsible for social policy discussed
possible next steps for interpretation of the Agreement and the implementation of
reporting requirements, as well as provisions for accountability and dispute avoidance.
For background discussion
see: Jack Stilborn, National Standards and Social Programs: What the Federal Government
Can Do, Parliamentary Research Branch, BP-379E
HEALTH CARE ISSUES
On 15 June
1999, the federal, provincial and territorial governments announced a final settlement
agreement for persons who had been infected with Hepatitis C through the blood system. The
proposed settlement, which requires approval by the courts in B.C., Ontario and Quebec
because it proposes to settle lawsuits through class action proceedings in those
provinces, will provide compensation from a $1.1-billion settlement fund to persons
infected with Hepatitis C between 1 January 1986 and 1 January 1990. This issue had been a
significant source of conflict between federal Minister of Health Allan Rock and his
provincial counterparts since early in 1998, when the federal Minister had initiated talks
on a joint compensation program for Hepatitis C victims. Major issues for many provincial
governments had included: federal refusal to recognize the cost of provincial services
such as welfare and hospital treatment as elements of the provincial contribution to a
joint program and, subsequent federal reluctance to share the costs of assistance to those
infected prior to the 1986-1990 period during which blood testing methodologies had been
available to governments, but had not been implemented.
As has been
seen, the Framework Agreement on the Social Union incorporated specific references to
medicare, reflecting the fact that attempts to negotiate a separate intergovernmental
health agreement in the context of discussions about federal transfers had broken down
early in 1999. Recent affirmations by all governments of the principles underlying
medicare have not, however, put an end to disagreement about the interpretation of these
principles. (It should be noted that, while Quebec did not sign the Agreement, it did sign
the 22 January 1999 provincial/territorial letter indicating willingness to affirm the
five principles set out in the National Health Act and to spend restored health
money on health care).
differences have been seen most recently in the wake of a televised address by Alberta
Premier Ralph Klein on 16 November 1999 in which he announced plans for legislation that
would permit regional health authorities to contract with private sector or non-profit
providers for surgical services, including hip replacements and other procedures requiring
overnight stays in hospital. The announcement provoked a letter from federal Health
Minister Allan Rock which raised eleven questions concerning the Alberta plan and led to
further federal-provincial correspondence. In a year-end interview on 14 December, Premier
Klein declared that nothing planned by his government was in contravention of the Canada
Health Act, and challenged the Prime Minister and federal Health Minister to sit down
and have it out."
principle of equalization was first implemented in a formal program in 1957, after a
degree of reluctance on the part of the wealthier provinces had been overcome. As in
todays program, the revenue-raising capacities of all provinces were compared by
means of the application to all of a hypothetical common taxation base, after which
federal grants were made to provinces falling below a designated standard. Initially, the
standard was based on a national average; since 1982, an average based on five
representative provinces (Quebec, Ontario, Manitoba, Saskatchewan and British Columbia)
has been employed.
the methodology now in use, the fiscal capacity of the province with the strongest
revenue-raising capacity (Alberta, at approximately $7,000 per capita) is twice that of
the weakest province (Newfoundland, at just over $3,500 per capita). Seven of the ten
provinces fall below the current standard, $5,572 per capita, and thus qualify to receive
payments from the federal government.
equalization program is authorized by legislation that requires review and renewal by
Parliament every five years. One of these quinquennial cycles of renewal was recently
completed. Bill C-65, which renews the program until 2003-4, was introduced in Parliament
in February 1999 and received Royal Assent on 25 March 1999. The legislation reflects
federal acceptance of demands from the poorer provinces for increased payments, made at
meetings between federal and provincial Finance Ministers in 1998. The renewed program
will transfer a projected $50 billion to provinces over its five-year life. This is $5
billion more than they received under the previous arrangement. Provincial reaction to the
new arrangements has been generally positive.
Child Benefit (NCB) and Related Issues: Discussions on a co-ordinated approach to
child poverty, integrating federal tax benefits and provincial welfare assistance,
commenced in late 1996. By early 1997, governments had reached agreement on the parameters
of the benefit and federal and provincial roles. The level of federal funding proved more
controversial, and provincial pressure for increases persisted until the February 1997
budget fixed the federal commitment at $600 million per annum, in addition to the
$250-million Working Income Supplement announced a year earlier. During the remainder of
1997 and into 1998, governments jointly established implementation arrangements (including
an innovative accountability regime, which will involve annual publication of performance
data). The National Child Benefit went into effect on 1 July 1998 in all provinces except
Quebec (which will administer its own child income support regime).
A meeting of
the responsible Ministers on 14 May 1999 provided the occasion for the release of the
first NCB Progress Report, giving details of the number of beneficiaries, amounts
invested, reinvestment strategies and potential indicators of progress. Discussion of
plans for the next phase of the initiative also took place, the only dissenting note being
provided by the Government of Quebec, which affirmed its continuing non-participation and
desire to retain full control over income support for children.
On 12 July
1999, Human Resources Development Minister Pierre Pettigrew and his provincial counterpart
jointly announced a phase two of the NCB. The federal contribution was increased by $425
million immediately, and a second $425-million increase was announced for July 2000. The
provinces (aside from Quebec) undertook to reinvest an estimated $400 million in welfare
savings to help meet local needs and priorities relating to children and families. At a
meeting on 26 October 1999, provincial and territorial ministers welcomed the increased
federal commitment, and reaffirmed their intent to channel savings towards complementary
in May 1999, Ministers launched a wider discussion process in order to increase public
participation in a common intergovernmental agenda relating to children, for which the
governments had prepared a vision document during the preceding year. The National
Childrens Agenda (NCA) will provide a basis for coordinating initiatives relating to
childrens health, safety, education and socialization. As with the NCB, this
initiative continues to reflect general harmony among participants. The major exception is
Quebec which, while affirming the objectives of the Agenda, announced that it would not be
participating because of its objection in principle to federal involvement in provincial
social policy jurisdictions.
Training: The process of discussions and agreements on the devolution to the provinces
of responsibilities in the area of manpower training, which was launched by the federal
government in the wake of the Quebec referendum, has continued. Agreements have now been
reached between the federal government and 11 provinces and territories. The most recent
is the Canada-Saskatchewan agreement of 6 February 1998, which, like the others, focuses
on giving the province responsibility to design and deliver employment programs and
services funded through the Employment Insurance Account.
On 7 April
1998, formal negotiations were announced between the federal government and Ontario;
agreement has not yet been achieved, however. As of December 1999, the two governments
remained at loggerheads over several unresolved issues, including federal concerns that
Ontario might eliminate delivery by a public sector entity and contract out labour market
training to the sector, and the same provinces refusal to accept lower federal
contributions (on a per capita basis) than have been provided to other provinces.
to Improve the Social Union for Canadians, An Agreement between the Government of
Canada and the Governments of the Provinces and Territories. 4 February 1999.
Keith, Douglas M. Brown and Thomas J. Courchene, eds. The Future of Fiscal Federalism. School
of Policy Studies, Queens University, Kingston, 1994.
Thomas J. Access A Convention on the Canadian Economic and Social Systems. Working
Paper Prepared for the Minister of Intergovernmental Affairs. Government of Ontario,
Canada. "Renewing the Canadian Federation: A Progress Report." Background
Document for the First Ministers Meeting of 20-21 June 1996. Ottawa 1996.
Sylvia Ostry, Richard Simeon and Katherine Swinton, eds. Rethinking Federalism:
Citizens, Markets and Governments in Changing World. UBC Press, Vancouver, 1995.
William. The Social Union: Background and Issues. Parliamentary Research Branch,
12 August 1998 .
Conference Secretariat: http://www.scics.gc.ca
Health Canada: http://www.hc-sc.gc.ca/
Human Resources and
Development Canada: http://www.hrdc-drhc.gc.ca/
Ministry of Intergovernmental
Parliamentary Research Branch