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93-10E
FEDERAL-PROVINCIAL RELATIONS
Prepared by:
Jack Stilborn
Robert B. Asselin
Political and Social Affairs Division
Revised 1 May 2001
TABLE
OF CONTENTS
ISSUE DEFINITION
BACKGROUND
AND ANALYSIS
A. The Evolving System
B. The Early Eighties
C. The Mulroney Years
1. 1984 - 1988
2. 1988 - 1993
3. Observations
D. Developments and Prospects
1.
National Unity Politics
a. The Calgary Initiative
b. The Supreme Court Reference
c. The Quebec Election
d. The Federal Referendum Clarity Act
(Bill C-20)
e. The Quebec Government’s Response
(Bill 99)
f. The Federal Election (November 2000)
2.
Fiscal Federalism and its Influence
a. Transfer Issues
b. National Standards and the Social Union
c. The Social Union Framework Agreement
(February 1999)
d. The Health Care Funding Agreement
3. The Broader Fabric
4. Concluding Comments
PARLIAMENTARY
ACTION
CHRONOLOGY
SELECTED
REFERENCES
FEDERAL-PROVINCIAL
RELATIONS*
ISSUE DEFINITION
Federal-provincial
relations affect most of the major activities of government in Canada,
and are in a state of virtually continuous evolution. Important
sources of change are:
This paper reviews
major developments on the federal-provincial scene, and relates them to
ongoing issues and trends. On this basis, it attempts to anticipate
probable directions in federal-provincial relations and in evolving institutions.
BACKGROUND AND ANALYSIS
A. The
Evolving System
The existing
pattern of federal-provincial relations is the product of several related,
and persisting, trends. The scope and scale of government has expanded
steadily during this century. Governments have become involved
in a range of policy fields never envisioned by the Fathers of Confederation
and have, so to speak, occupied the “gap” between matters of
national importance and matters of purely local significance expressed
in sections 91 and 92 of the Constitution Act, 1867. As well,
the expanded performance of traditional core activities has revealed that,
in practice, few local activities are entirely without larger national
consequences and few of what were once seen as purely national matters
are entirely unaccompanied by distinctively local significance.
The result has been a tendency to replace, in practice, the constitutional
division of powers and exclusive jurisdictions envisioned by early federalists
with ad hoc and continuously negotiated arrangements under which
each order of government employs the means at its disposal to attempt
to discharge its fundamental responsibilities as it perceives them.
Under such arrangements the electorate serves as an ultimate court of
appeal, while appeal to the courts for decisions on jurisdictional questions
is normally a strategic last resort of governments.
As the complex
legislative and administrative arrangements of modern federalism have
taken shape, federal-provincial relations have undergone a number of distinguishable
phases. The 1950s and 1960s are widely described as the era of cooperative
federalism, when steadily expanding resources and a broad federal-provincial
consensus about priorities favoured technical cooperation by officials.
Low levels of conflict and the rapid expansion of cost-shared programs
were characteristic of this era. As the modern apparatus of coordinated
activity took shape, however, strains began to appear. Provincial
concerns about distorted priorities imposed by federal initiatives, visible
particularly in the new assertiveness of Quebec, emerged both because
newly achieved policy capabilities at the provincial level enabled the
development of distinctive provincial positions and because new governmental
roles raised new opportunities for federal-provincial divergence.
There thus emerged a second phase of federal-provincial relations –
widely termed executive federalism – characterized by:
Contributing
to these tensions were the financial constraints which emerged during
the 1970s, and the centralization of the administration of federal-provincial
relations in the hands of process specialists, which tended to displace
functional cooperation among officials sharing disciplinary specialties
with forms of jurisdictional competition.
B. The Early
Eighties
The return to
power of a Liberal government led by Pierre Trudeau in 1980 inaugurated
a period during which many of the tensions characteristic of executive
federalism erupted in overt conflict. During the early 1980s, the
federal government showed an increased willingness to resort to unilateral
action in the absence of federal-provincial agreement, notably in the
threat to patriate the Constitution and in the introduction of the National
Energy Program in 1980. The early 1980s also saw the application
of federal financial restraint measures to provincial transfers, notably
by an amendment of the Fiscal Arrangements and Established Programs
Financing Act in 1984 (made without consultation of the provinces)
which made federal cash contributions for health and post-secondary education
subject to the “6 and 5” restraint program.
During this
period, also, federal concerns about the lack of visibility of federal
contributions to cost-shared programs fostered a preference for the direct
delivery of federal programs rather than the less visible federal funding
of provincially administered programs. This shift is illustrated
by the umbrella Economic and Regional Development Agreements, emphasizing
coordinated planning but parallel service delivery, which replaced the
General Development Agreements of the 1970s, and their emphasis on joint
regional development programs. An analogous shift occurred concerning
federal funds. The Canada Health Act of 1984, for example,
required that the provinces provide “appropriate recognition”
for federal funding of provincial health insurance programs. This
Act, furthermore, illustrated a renewal of federal concern about the maintenance
of national standards, and a willingness to impose financial sanctions
on provinces not meeting standards formulated at the federal level.
As the Trudeau
era drew to a close, a fundamental question about federal-provincial relations
remained unanswered. Were the high levels of conflict of the early
1980s, and continuing controversy over such issues as the Canada Health
Act, primarily an inevitable result of structural developments that
had occurred during the 1970s and thus, barring fundamental reforms, an
indication of the probable future? Was conflict, on the other hand,
primarily the result of a temporary conjunction of singular and intractable
issues, as well as conflicting political personalities and agendas?
The recurring attention devoted by the Trudeau administration to the possibility
of major reforms of federal institutions, including the strengthening
of regional representation within the federal government by means of an
elected Senate, implied one response to this question. A contrasting
response was apparent, before and after the 1984 election, on the part
of the Progressive Conservatives.
C. The
Mulroney Years
1.
1984 - 1988
During the 1984
election campaign, Brian Mulroney and the Progressive Conservatives emphasized
the importance of a renewed political commitment to federal-provincial
cooperation, the value of skills of negotiation and conciliation, and
the implicitly political (rather than institutional) objective of national
reconciliation. These themes anticipated the initial focus of the
new government.
During its first
few months, the Mulroney government made substantial progress towards
lessening federal-provincial tensions, notably in the area of energy policy
agreements and the signature, with several provinces, of umbrella regional
development agreements. As well, responsiveness to calls for federal
assistance in the agricultural sector precluded significant conflict.
Finally, the conciliation skills of Prime Minister Mulroney were widely
credited with the achievement, at Meech Lake on 30 April 1987, of unanimous
federal-provincial agreement on a package of constitutional amendments
responding to long-standing demands from Quebec.
Newly harmonious
relations did not, however, eliminate all areas of conflict. The
23 May 1985 budget, which proposed reductions in the rate of increase
of certain federal transfer payments, began a cycle in which successive
federal restraint initiatives prompted more and more strident provincial
protest. Other issues, such as provincial participation in free
trade negotiations, a cash crisis in the oil industry in 1986, and individual
regional development decisions, also provoked conflict.
2.
1988 - 1993
The second Mulroney
government followed the broad style of federal-provincial relations established
by the first; however, a combination of systemic factors prevented a full
return of the harmony achieved in the mid-1980s. Among these factors
were lower levels of political support at the federal level (favouring
provincial assertiveness), resentments arising from individual conflicts,
and the diverging priorities of the federal government and some newly
elected provincial governments.
Constitutional
affairs, often a source of federal-provincial conflict, moved steadily
to the forefront during this period. In 1990, governments in Newfoundland
and Manitoba elected after the Meech Lake Accord denied the accord the
support required for ratification, despite a massive effort spearheaded
by the federal government. Resentments arising from this process
still echoed in 1992, although they did not prevent federal-provincial
agreement on the wide-ranging “Canada round” package of amendments
that was subsequently rejected in a national referendum.
Reductions in
federal transfers prompted heightened provincial opposition during this
period, including court challenges and the accusation from at least one
premier that the federal government was guilty of “fiscal terrorism.”
As well, there were major disagreements with some provinces over the merits
of stimulative spending versus those of deficit reduction and tax restraint,
and these disagreements were reflected in conflicting policies.
In other sectors,
the second Mulroney government generally maintained the pattern established
by the first. Agreements such as the Canada-Quebec Accord on Immigration,
signed on 5 February 1991, exemplify the accommodative style that
broadly shaped federal-provincial relations between 1984 and 1993.
3.
Observations
The experience
of the Mulroney governments sheds light on the respective merits of institutional
reform and reconciliatory politics, an issue that had arisen in the early
1980s. There can be little doubt that the more conciliatory approach
to federal-provincial relations practised after 1984 paid important dividends,
most vividly in the speedy resolution of a range of issues that had been
virtually at a stalemate in some policy sectors.
The federal
government’s new spirit of accommodation did not, however, diminish
the outlying provinces’ conviction that structural reforms were required
to remove centrist biases within Canada’s federal system. On
the contrary, these convictions rose to new heights during this period,
as was seen among proponents of Senate reform during the “Canada
round” discussions of 1992. Nor did the approach to federalism
of the Mulroney governments apparently lessen frustrations in Quebec.
Any positive impacts in that province’s approach appear to
have been outweighed by unresolved constitutional dissatisfactions and
economic concerns.
It is unclear
whether the experience of the Mulroney governments illustrates the limits
of accommodative federalism or, rather, the limited capacity of governments
to practise this approach in a fiscal restraint environment. Either
way, the pressures for structural reform that arose in the early 1980s
continued to be salient in the 1990s, and opinions continued to differ
widely on whether existing institutional arrangements could respond successfully
to current pressures.
D. Developments
and Prospects
Two fundamental
issues not resolved during the 1980s have continued to affect decision-making
across the range of federal-provincial relations. The first issue
is national unity, which centres on long-standing dissatisfactions within
Quebec, but has come to involve additional concerns, notably those of
Aboriginal peoples and the West. Although this issue has propelled
cycles of constitutional politics since before the patriation of the Constitution
in 1982, it has also had consequences for a broad range of sub-constitutional
legislative and administrative initiatives. These initiatives may,
in some cases, reduce or defer pressures for constitutional change.
They may also be seen as potential contributors to constitutional change,
if by habituating Canadians to new principles or practices they contribute
to the levels of consensus necessary to achieve constitutional amendments.
The second recurring
issue in Canadian federalism has to do with money – in particular
the consequences for federal-provincial relations of a series of reductions
to federal transfers to the provinces. The original purpose of major
health, education and welfare transfers was to ensure that nation-wide
programs reflecting consistent standards could be established in these
areas of provincial jurisdiction, despite the incapacity of many provinces
to fund such programs. The reduction of the transfers has:
increased pressures from the provinces for reductions in federal influence
within these areas; provoked recurring cycles of federal-provincial conflict
over which level of government is responsible for the cutbacks in programs;
and fostered proposals for reform, ranging from “disentanglement”
(whereby each level would raise the revenues it needed, thus minimizing
transfers) to various co-management mechanisms. Furthermore, the
drop in federal transfers to all provinces has highlighted the impact
of redistributive transfers (flows of revenue from richer provinces through
the federal government to poorer provinces), perhaps contributing to growing
criticism of such transfers by “source” provinces.
Developments
relating to national unity and fiscal federalism are dealt with separately
below, although in practice there is a continuous interplay between the
two. Attention is also given to the broader fabric of cooperative
relations, outside the two perennial problem areas.
1. National
Unity Politics
The 1993 election
resulted in a national government committed to economic priorities rather
than to further attempts at constitutional reform; however, developments
in Quebec soon pushed the issue of that province’s future status
to the forefront of national attention. Major landmarks were:
Federal unity
initiatives in the wake of the referendum were widely portrayed as combining
elements of a “Plan A” (demonstrating the capacity of the federal
system to evolve and respond to the needs of Quebeckers) and a “Plan
B” (responding to the possibility of a “Yes” win in a future
Quebec secession referendum). Major developments included:
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Legislation
establishing de facto regional vetoes over constitutional change
was greeted dismissively by many Quebeckers while provoking controversy
in the West. (Bill C-110, now An Act respecting constitutional
amendments, received Royal Assent on 2 February 1996.)
-
The February
1996 Speech from the Throne announced that the federal government
would not use its spending power to create new shared-cost programs
in areas of provincial jurisdiction without the consent of a majority
of the provinces, and that all new shared-cost programs would entitle
individual provinces to opt out with compensation, provided they established
“equivalent or comparable” initiatives.
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Federal
willingness to devolve administrative responsibilities in the area
of manpower training drew mixed reactions from the provinces, but
was greeted positively in Quebec, following release of a formal proposal
on 30 May 1996 (see below D. 3. The Broader Fabric, Labour
Force Training).
-
At the First
Ministers’ Conference of 20-21 June 1996, participants agreed
that by placing the issue of the amending procedure on the agenda
for brief discussion (during which Quebec Premier Lucien Bouchard
made a highly publicized visit to the washroom), Prime Minister Chrétien
had fulfilled a requirement of the 1982 Constitution for ministerial
review by 1997.
-
On 9 July
1996, the establishment of the Canada Information Office, mandated
to inform Canadians about the federal system and promote Canadian
unity, drew reactions in Quebec and elsewhere ranging from guarded
scepticism to derision.
-
On 26 September
1996, it was announced that three questions relating to the possible
basis (both constitutional and in international law) for the unilateral
secession of Quebec would be referred to the Supreme Court of Canada.
The reference was denounced as anti-democratic by the government of
Quebec, and drew criticism from a number of prominent Quebec federalists.
Federal ministers defended it as being a response to Quebec government
assertions that international law gives the Quebec government a right
to secede from Canada unilaterally, and argued that it reflected the
need for clear rules rather than an attempt to preclude a democratically
sanctioned separation.
-
On 29 June 2000,
the federal government passed Bill C-20 on referendum clarity, which
stipulates that any negotiations following a proposal for secession
must be subject to a favourable resolution of the House of Commons
on the clarity of the referendum question and the majority obtained.
During its first
mandate (and subsequently), the government took the position that national
consensus would have to be obtained before formal constitutional talks
could be productive. However, the June 1997 federal election provided
little evidence of a growth of consensus among Canadians on constitutional
issues; pronounced regional variations were revealed in support for all
political parties and the Liberals achieved minimal gains over the Bloc Québécois
in Quebec while also failing to arrest the consolidation of support for
the Reform Party in the West. The Liberals returned to power with
a significantly reduced majority in the House of Commons, and with limited
room to manoeuvre on constitutional issues. This situation may be
reflected in the relative prominence of federal initiatives relying on
other players (notably the provinces and the Supreme Court) since that
time.
a.
The Calgary Initiative
At a meeting
on 14-15 September 1997, provincial premiers (absent Mr. Bouchard)
agreed on a constitutional proposal to be presented to legislatures following
public consultation processes within the various provinces. The
main points of the proposal are:
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In Canada’s
federal system, where respect for diversity and equality underlies
unity, the unique character of Quebec society, including its French-speaking
majority, its culture and its tradition of civil law, is fundamental
to the well-being of Canada. Consequently, the legislature
and government of Quebec have a role to protect and develop the unique
character of Quebec society within Canada.
Agreement on
constitutional substance was unexpected, given that the purpose originally
announced for the meeting of premiers had been to define a process of
public consultation on national unity issues. The agreement reflects
extensive federal contact with the provinces during the weeks preceding
the meeting, and federal acceptance (as the meeting progressed) of provincial
demands for a federal-provincial meeting on social issues later in the
fall of 1997. During the remainder of 1997, provincial and territorial
governments (excepting Quebec) launched public consultation processes,
typically relying on legislative committees. (British Columbia established
a government-appointed panel composed of elected politicians and others
while Newfoundland relied on consultations by individual Members of the
House of Assembly.)
These processes
led to legislative debates during the early months of 1998 and, in most
provinces, culminated in unanimous endorsements of the Calgary agreement.
Aside from an outbreak of individualism in Ontario, where one legislator
voted against the agreement, the central departure from this pattern was
in British Columbia, where the legislature amended the agreement by adding
three principles. The principles affirm a provincial role in setting
national standards, per capita equality of federal transfers, and greater
provincial responsibility in areas of special importance to each province
(e.g., the fisheries in B.C.).
In Quebec, legislative
hearings were held belatedly, during June of 1998. Widely portrayed
as a device created primarily to publicize provincial Liberal support
of a “less than Meech” proposal, the hearings were boycotted
by the Quebec Liberal Party. At their conclusion, Premier Bouchard
declared that the Calgary agreement had been clearly rejected by Quebeckers
for failing to recognize a Quebec people and for legitimizing federal
intrusions into provincial jurisdiction.
Although opinion
polls found 67% support for the Calgary agreement in Quebec during the
spring of 1998, federal endorsement of the agreement would undoubtedly
provoke strong reaction from the Quebec government as long as the Parti
Québécois remains in power. Also, British Columbia’s amendments
suggest the limited likelihood of support from that province for a constitutional
amendment reflecting the original wording. Faced with these realities,
the federal government has refrained from seeking endorsement of the declaration
by Parliament, and the Calgary declaration has ceased to attract significant
attention.
b.
The Supreme Court Reference
On 20 August
1998, the Supreme Court of Canada released its opinion in response to
the questions referred in late 1996.
The Court found
that the Constitution of Canada does not provide for the unilateral secession
of a province. It added, however, that, according to the global
system of rules and principles which, along with written texts, makes
up the Constitution of Canada, Canadians outside Quebec would be required
to recognize the democratic legitimacy of a clear majority vote in Quebec
on a clear secession question, and that such an event would have to be
followed by a negotiation process. Such a process would need to
reconcile the legitimate rights and obligations of all parties, including
what would then be two legitimate majorities – a majority of the
population in Quebec and a majority of the population in Canada as a whole
– neither of which would have the right to impose terms on the other.
Second, the
Court held that, in international law, a right to unilateral secession
exists only in the context of the colonial or alien subjugation of a people,
or where a people is denied meaningful self-determination within a state.
Otherwise, peoples are expected to achieve self-determination within the
framework of existing states, and states are entitled to maintain their
territorial integrity. The Court went on to recognize the possibility
that unilateral secessions can take place regardless of international
law, and noted that the ultimate success of these depends on whether or
not the international community accepts or recognizes the new political
entities that have emerged.
Finally, the
Court took the view that there is no conflict between the Constitution
of Canada and international law with respect to secession rights, and
therefore no need to determine which should take precedence.
Following the
release of the Supreme Court opinion, both the federal and Quebec governments
claimed vindication of their constitutional positions. Quebec Premier
Bouchard claimed that the ruling gave a boost to sovereignists, because
voters in a future referendum would know that the federal government was
required to negotiate with Quebec in the event of a majority vote in favour
of secession. At the federal level, Prime Minister Chrétien declared
that the ruling was a victory for federalism, and Minister of Intergovernmental
Affairs the Honourable Stéphane Dion argued that, according to the
Court, the Government of Quebec does not have the right to impose unilaterally
the process and terms of a secession (including, for example, future boundaries).
He also claimed that the international community would not support
a unilateral secession, thereby making it unworkable.
The ultimate
impact of the Supreme Court opinion remains to be seen, but it is noteworthy
that assertions of a right to secede grounded in international law have
largely disappeared from the statements of Quebec nationalists in recent
months. Emphasis has shifted, instead, to the argument that the
international community would accept a secession that clearly expressed
the democratic will of Quebeckers.
c.
The Quebec Election
On 28 October
1998, it was announced that Quebeckers would go to the polls on 30 November.
The provincial election, temporarily at least, reinforced the tendency
of the federal government to avoid potentially controversial direct initiatives,
or statements. The main exception was a highly publicized interview by
Prime Minister Chrétien, shortly before the election, in which he downplayed
the need for constitutional change and claimed that Quebec’s traditional
demands had already been met. These remarks provoked a strong reaction
from Quebec Liberal leader Jean Charest, who asserted that pressures for
fundamental change in the federation are an underlying fact of Canadian
politics, and that individual politicians need to respond to them or step
aside.
As the campaign
unfolded, and polls began to indicate a softening of Liberal support,
Mr. Charest shifted emphasis away from early calls for a reduced governmental
role in the economy to health care issues and to heightened criticism
of the Parti Québécois commitment to hold a future secession referendum.
With polls indicating solid approval for the P.Q. record in government,
or at least no confidence that a Liberal government could do significantly
better, Mr. Bouchard focused on broadening P.Q. support. He repeatedly
stressed that the focus of a re-elected P.Q. government would be on creating
“winning conditions,” without which a referendum would not be
held. The final phase of the campaign saw increased emphasis on
working within the federation to achieve benefits for Quebec, notably
implementation of the social union principles that Quebec and other provinces
had endorsed earlier in the year (see section “National Standards
and the Social Union” below).
The election
gave the P.Q. 42.7% of the popular vote and 75 seats, versus 43.7% of
the vote and 48 seats for the Liberals, and 11.8% and 1 seat for the Parti
Action Démocratique led by Mario Dumont. These results do not demonstrate
a significant shift in favour of any political party since the 1994 election.
d. The Federal Referendum Clarity Act (Bill
C-20)
Following
the Supreme Court’s decision on the reference by the Governor in
Council regarding Quebec secession, the Canadian Minister of Intergovernmental
Affairs, the Honourable Stéphane Dion, tabled in the House of Commons
Bill C-20 on referendum clarity (17 December 1999). After being
passed by the House and the Senate, the Bill received Royal Assent on
29 June 2000. The key provisions of the act are as follows:
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The
House of Commons shall, within 30 days after the government of a province
tables in its legislative assembly or otherwise officially releases
the question that it intends to submit to its voters in a referendum
relating to the proposed secession of the province from Canada, consider
the question and, by resolution, set out its determination on whether
the question is clear.
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The
Government of Canada shall not enter into negotiations on the terms
on which a province might cease to be part of Canada if the House
of Commons determines, pursuant to this section, that a referendum
question is not clear and, for that reason, would not result in a
clear expression of the will of the population of that province on
whether the province should cease to be part of Canada.
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Where
the government of a province, following a referendum relating to the
secession of the province from Canada, seeks to enter into negotiations
on the terms on which that province might cease to be part of Canada,
the House of Commons shall, except where it has determined pursuant
to section 1 that a referendum question is not clear, consider and,
by resolution, set out its determination on whether, in the circumstances,
there has been a clear expression of a will by a clear majority of
the population of that province that the province cease to be part
of Canada.
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The
Government of Canada shall not enter into negotiations on the terms
on which a province might cease to be part of Canada unless the House
of Commons determines, pursuant to this section, that there has been
a clear expression of a will by a clear majority of the population
of that province that the province cease to be part of Canada.
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No
Minister of the Crown shall propose a constitutional amendment to
effect the secession of a province from Canada unless the Government
of Canada has addressed, in its negotiations, the terms of secession
that are relevant in the circumstances, including:
-
the division of assets and liabilities;
-
any changes to the borders of the province;
-
the rights, interests and territorial claims of the Aboriginal peoples
of Canada; and
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the protection of minority rights.
Although
the Bill was fairly favourably received in Canada, where it was seen as
a supplementary safeguard against any move toward secession on Quebec’s
part, a number of commentators criticized the Chrétien government for
having taken a hard line toward Quebec, and accused it of having pursued
its “Plan B.” Despite passage of the Bill, a number
of senators energetically protested the fact that only the House of Commons
would be empowered, in the event of a referendum, to pronounce on the
clarity of the question and the majority obtained.
In addition,
many Quebec federalists deplored the idea that the Liberal government
was closing the door to renewed federalism through constitutional means.
The Liberal Party of Quebec also opposed the Bill, and continued to assert
that it was working toward a reform of the federation rather than pursuit
of Ottawa’s Plan B.
e. The Quebec Government’s Response
(Bill 99)
The Quebec
government was not slow in vigorously condemning Ottawa’s initiative.
It launched a huge publicity campaign in Quebec newspapers against the
federal measure. Premier Bouchard said that his government would
be responding to Bill C-20 in the form of legislation of its own.
On 15 December 1999, the province’s Minister for Canadian Intergovernmental
Affairs, Joseph Facal, tabled Bill 99 in the National Assembly:
the Act respecting the exercise of the fundamental rights and prerogatives
of the Québec people and the Québec State. After consideration
in committee, the Bill was amended to include certain provisions recognizing
Aboriginal rights. Only passed a year later, in December 2000, the
Act reasserts various political prerogatives and principles inhering in
Quebec society and the National Assembly. Given the lack of outcry
in Quebec over passage of Bill C-20, Bill 99 was not the object of
sustained attention on the part of Quebec or Canadian media, and its passage
went almost unnoticed. It should be noted that the MNAs belonging
to the Liberal Party of Quebec, and the leader of the ADQ, Mario Dumont,
voted against Bill 99.
f. The Federal Election (November 2000)
Only
40 months after being elected, Prime Minister Jean Chrétien decided to
call another general election. On 22 October, despite the advice
of a good many of his advisers and MPs, Prime Minister Chrétien went to
Rideau Hall and asked the Governor General, the Right Honourable
Adrienne Clarkson, to dissolve Parliament. The lightning campaign,
lasting only 36 days, was dominated by the debate on health care, with
the other parties accusing the Canadian Alliance of wanting to create
a two-tier system. The campaign was marked by heated personal attacks.
The
Liberal Leader led his party to a third straight majority, repeating the
achievement of an earlier Liberal, Sir Wilfrid Laurier. The Liberals
won 172 seats, or 17 more than in the previous election. The
Canadian Alliance now has 66 Members in the new Parliament, or six more
than the former Reform Party. The Bloc Québécois lost six seats
and has 38 Members; the New Democratic Party lost eight seats and has
13 Members; and the Conservative Party also lost eight seats and
has 12 Members. Voter turnout was just above 60%.
2. Fiscal Federalism
and its Influence
Fiscal arrangements
between the federal and provincial governments involve transfers of money
to the provinces, and other matters such as the collection of taxes.
The two major transfers are equalization payments, intended to ensure
that all provinces have the fiscal capacity to provide minimally acceptable
service levels, and the Canadian Health and Social Transfer (CHST), which
combines federal contributions to support post-secondary education, health
care and social assistance. At roughly $30 billion per annum,
payments under the CHST are the major federal transfer to the provinces,
because equalization payments amount to the much lower figure of about
$10 billion per annum.
In an era when
all governments remain under considerable fiscal pressure, the issue of
intergovernmental transfers is predictably sensitive. It acquires
additional sensitivity within the context of Canadian federalism, however,
because the federal government has traditionally used its spending power
to foster programs reflecting federal priorities within provincial jurisdictions
and to ensure that these meet national standards. As federal spending
has been proportionally reduced in recent years, provincial pressure has
been increasing for a corresponding diminution of federal influence.
a.
Transfer Issues
The sensitivity
of transfer issues was amply demonstrated by provincial reaction to the
1995-1996 budget. This announced that existing EPF and Canada Assistance
Plan transfers would be replaced by a single block-funded program, i.e.,
the Canadian Social Transfer (later known as the Canada Health and Social
Transfer), entailing overall reductions of about $2.5 billion in 1996-1997
and an additional $2 billion in 1997-1998. Although initial
reaction from most provincial governments was harsh, generally positive
reception by the public had the effect of muting such criticism (in open
at least) in the weeks following the Budget. An additional factor
here was undoubtedly the increased provincial discretion over the allocation
of funding among the various programs that was enabled by the new transfer.
The impacts
of these reductions, notably on provincial education and health care spending,
have been a continuing source of federal-provincial tensions since 1995.
Recurring provincial demands for the restoration of funding have been
met with federal insistence on provincial guarantees that additional funding
would actually be spent on health care and schools (and not on tax cuts,
for example, which a number of provinces have implemented while simultaneously
protesting reduced federal transfers).
Since mid-1997,
improvements in the fiscal position of the federal government have added
fuel to provincial pressures concerning transfers. As the federal
position has continued to improve, provincial demands have expanded to
include the full restoration of transfers. Thus, at the 15 June
1998 meeting of federal and provincial finance ministers, the provinces
(excepting Quebec, which was not participating, and Newfoundland) pressed
for either a $6.2 billion increase (full restoration) or a more moderate
amount incorporating cuts claimed to be similar to those Ottawa had imposed
on itself. Similar demands were made at the 7 August 1998 annual
premiers’ conference in Saskatoon.
In August
1999 in Quebec City, at their annual meeting, the provincial premiers
and territorial leaders expressed their concern about the provision of
health care services and their belief that these services should be accessible
to everyone and be publicly funded.
In the course
of the meeting, the premiers and leaders established three priorities
for the health care sector:
-
sustainability,
with its components of adequate and predictable federal funding, reliable
staffing to meet projected needs, and improved information systems
in support of decision-making;
The provincial
and territorial leaders also called on the federal government to fully
restore Canada Health and Social Transfer (CHST) funding to 1994-1995
levels with an appropriate escalator for the CHST cash transfer that would
keep pace with cost and special demand pressures.
At their
August 2000 meeting in Winnipeg, the premiers remained very concerned
about the growing imbalance between the federal and provincial/territorial
governments’ ability to finance their respective program responsibilities.
In their view, efficiency and equity in the provision of programs
and services imply that both the long-term vertical fiscal imbalance between
the federal government and provinces and territories, and the horizontal
fiscal imbalance among provinces and territories, need to be addressed.
The premiers
noted that because of the way revenues are currently structured, the federal
government’s surpluses are projected to rise quickly over the next
20 years, while the provinces and territories will collectively be hard
pressed to keep their budgets in balance over this same period.
They expressed their concern that their governments’ finances are
particularly vulnerable if cost pressures in key public services increase
even moderately or in the event of a slowdown in economic growth.
The premiers
also called on the federal government to strengthen its commitment to
the Equalization Program so that the Program can meet its constitutionally
mandated objectives. In addition to restoration of the CHST and
adoption of an appropriate escalator, the premiers reiterated that the
federal government must immediately remove the ceiling on equalization
payments.
The
premiers agreed that the question of fiscal imbalance is an urgent financial
challenge facing the federation today. They instructed their Finance
Ministers to advance their work on these issues and to identify reform
proposals which would address the vertical and horizontal fiscal imbalance
in Canada in a more lasting manner.
The meeting
concluded with recognition of the need for adequate, predictable and sustainable
federal funding in support of post-secondary education and skills development,
and with the formulation of a detailed action plan for early childhood
development.
b. National
Standards and the Social Union
Restraints on
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, leading to major
conflict with individual provinces.
A prominent
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 first in federal penalties and ultimately
in the provincial government’s agreement to absorb the charges on
behalf of clinic users. Tabled in Alberta’s Legislative
Assembly on 2 March 2000, Bill No. 11 also stirred some
controversy vis-à-vis federal-provincial relations. A number of
commentators argued that the Bill did not respect the spirit of the Canada
Health Act and that in the long term it opened the way to a two-tier
system. The federal government, although it did not publicly oppose
the Bill, did voice certain reservations. Federal Health Minister
Allan Rock wrote to his Alberta counterpart setting out Ottawa’s
position.
The primary
aim of the legislation is to allow regional health authorities, with the
Minister’s approval, to contract out minor surgery, which would be
considered an insured service for which benefits would be paid –
pursuant to the Alberta Health Care Insurance Act – to private
surgical facilities approved by the government. The Bill’s
other important aspect is the greater regulation of private surgical facilities
that offer uninsured services involving hospitalization lasting more than
one day.
Differences
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 discussion about roles
and responsibilities in the social policy field. The provincial
position was laid out comprehensively in a December 1995 report endorsed
by the premiers of all provinces except Quebec as a basis for renewing
the federation, and forwarded to the Prime Minister for response at the
1996 First Ministers’ Conference. The report calls for:
At the Annual
Premiers’ Conference of August 1997, a Progress Report on themes
set out the previous year was approved. Premiers agreed to seek
a broad framework agreement with the federal government to deal with cross-sectoral
issues such as common principles, use of the federal spending power, and
new dispute resolution mechanisms. The following month, as a quid
pro quo for their agreement on the Calgary initiative, the provinces
obtained a commitment that federal representatives would meet with them
on social union issues in the fall of 1997.
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) and with July 1998 as a target date. The framework
talks were formally launched on 13 March 1998, under the joint chairmanship
of federal Justice Minister the Honourable Anne McLellan and Saskatchewan
Minister of Intergovernmental and Aboriginal Affairs Bernhard Wiens.
By June 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 subjected
new or changed national programs in areas of provincial jurisdiction (cost-shared
or not) 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 its own program addressing the priority areas of the national
program.
In mid-July
1998, a scheduled meeting of federal and provincial ministers at which
the federal government had been expected to respond to provincial proposals
was cancelled. Later in July, the federal government 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 a program.
At the 5-7 August
1998 Annual Premiers’ Conference, premiers reaffirmed the position
on the social union framework announced in June, and called for a draft
agreement by the end of the year. A significant development at the
conference was the endorsement of the provinces’ framework proposals
by Quebec Premier Lucien Bouchard. Before this date, Quebec had
rejected power-sharing proposals on the grounds that the federal government
has no role within areas of provincial jurisdiction.
c. The Social Union Framework Agreement
(February 1999)
On 4 February
1999, the Prime Minister, the premiers of all the provinces except Quebec,
and the territorial leaders signed a new framework agreement on the social
union. According to the federal government, the Agreement, which
will be reviewed after three years, is intended to encourage equality
of opportunity among Canadians, no matter where they live in Canada, and
to improve their mobility. In it, the federal government makes a
commitment not to introduce new Canada-wide initiatives in the social
sector without the consent of a majority of the provinces, and to work
with them to determine what goals to pursue. The framework agreement
sets out the need to increase transparency, and governments’ obligation
to be accountable. It also provides for dispute prevention and resolution
mechanisms.
Despite the
Quebec government’s refusal to sign, the Social Union Agreement between
the federal government and the other provincial and territorial governments
marked an important step in the evolution of intergovernmental relations
in this country, notwithstanding its administrative nature. In its
follow-up report on the Agreement, submitted to the First Ministers on
10 August 2000, the Provincial/Territorial Council on Social Policy
Renewal voiced certain reservations about its implementation. Among
other things, the Council criticized the federal government for not respecting
the spirit of the Agreement when it launched its assistance program for
the homeless, the first major announcement to follow the signing of the
Agreement.
The Quebec
government’s refusal to sign was based on the following main reasons:
the legitimizing of the federal spending power in the social programs
sector; and the federal government’s recourse to direct transfer
payments to individuals and organizations to launch new Canada-wide social
initiatives.
d. The Health Care Funding Agreement
On 11 September
2000, at a federal-provincial conference, the First Ministers agreed on
a vision, principles and an action plan to guide their intervention in
the coming years in the fields of health care and early childhood development.
The Quebec government chose not to give its support to the agreement
on early childhood development, regarding it as an exclusively provincial
area of constitutional jurisdiction. It did, however, agree to accept
the additional funding for health care.
Through the
agreements concluded by the First Ministers, the federal government made
a commitment to invest $23.4 billion over the next five years.
Of this amount, the government will invest $21.1 billion in the CHST.
The CHST legislation has been extended so the provinces and territories
can benefit from stable and predictable financial assistance until 2005-2006.
The federal government will also provide targeted financial assistance
of $2.3 billion to enable the provinces and territories to cope with
the specific challenges confronting them in the area of health care.
3.
The Broader Fabric
As the modern
federal system has taken shape, federal and provincial governments operating
under their respective constitutional heads of power have both become
involved in a range of policy fields never envisioned by the Fathers of
Confederation. Governments have entered into formal agreements in
many of these policy sectors in order to coordinate activities, clarify
roles, and ensure the meeting of objectives. Thus, while tensions
over national unity issues, fiscal issues and social policy roles continue
to be widely publicized, there is also an extensive area of functional
cooperation.
Since shortly
after the election of the current government, a process involving the
review of federal and provincial responsibilities across a range of policy
fields, clarification of roles, reduction of duplication and increasing
efficiency, has gone forward steadily. The process has achieved
tangible results, such as:
Agriculture:
Negotiations for establishing a federally and provincially cost-shared
national farm safety net provide a more recent illustration of the intergovernmental
agreement process, including vicissitudes that can protract it.
During 1996, agreements were signed by the federal government and Alberta,
Ontario, Prince Edward Island, New Brunswick, Newfoundland and Nova Scotia.
As 1996 drew to a close, however, Alberta reacted to long-standing criticism
of the program among farmers in that province by withdrawing participation.
On 7 January 1997, federal Minister of Agriculture the Honourable
Ralph Goodale responded by committing the federal government to pick up
Alberta’s share of the funding, thus enabling the program to continue
to be fully funded. Since then, a Canada-Manitoba agreement was
announced on 3 April 1997 and a Canada-Quebec agreement emerged on 24
November 1997.
On 24 February
1999 in Victoria, the federal government and the provinces reached agreement
on setting up an assistance program for farmers, 60% financed by Ottawa
and 40% by the provinces. At a two-day federal-provincial Agriculture
Ministers’ meeting, nine provinces agreed in principle to participate
in the Agricultural Income Disaster Assistance (AIDA) program, subject
to provincial approval where necessary. Nova Scotia was not able
to make a commitment at the time, but indicated that it would be continuing
to work with the federal government toward participation. The federal
government agreed to contribute up to $900 million over two years,
under the 60:40 cost-sharing principle. Because AIDA is a demand-driven
program, the ultimate expenditure will depend on the extent of income
problems over 1998 and 1999. On 10 March 1999, an agreement
between Saskatchewan and the federal government was concluded, providing
for an additional $85 million for farmers in that province.
In July
2000 in Fredericton, the federal, provincial and territorial Agriculture
Ministers reached a three-year framework agreement on farm income protection.
This new agreement is designed to give greater financial stability to
the agriculture sector. It paves the way for a series of programs
designed to solve various problems related to farm income and resulting
from a number of factors, notably price fluctuations, poor weather, and
foreign subsidies. Under the agreement, the federal government will pay
out up to $3.3 billion over the next three years. The provinces
will invest up to $2.2 billion. Shared program costs will be
divided between the federal and provincial governments in the usual 60:40
ratio.
Assistance
for farmers was still making headlines through the end of 2000 and into
early 2001.
National
Child Benefit (NCB): Discussions on a coordinated approach to
child poverty, integrating federal tax benefits and provincial welfare
assistance, commenced in late 1996, as a sub-set of continuing social
union talks. 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; 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. Up to 1998,
governments jointly established implementation arrangements (including
an innovative accountability regime which will involve annual publication
of performance data). As well, the 24 February 1998 budget announced
additional federal payments of $425 million by July 1999, and another
$425 million by July 2000. 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).
Since
its introduction, the federal government has continued to invest considerable
sums in this program with each successive budget. In its February
2000 budget, it announced that it would be injecting $2.5 billion
by 2004.
Labour Force
Training: The process of discussions and agreements concerning
the devolution to the provinces of responsibilities for manpower training,
launched by the federal government in the wake of the Quebec referendum,
has continued. The first agreement was with Alberta, on 6 December
1996; and agreement was reached between the federal government and Quebec
on 21 April 1997. 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, the only province or territory still without such
an agreement.
The Environment:
The Canada-Wide Accord on Environmental Harmonization, signed on 29 January
1998 by the federal government and all provinces except Quebec, provides
another noteworthy example of intergovernmental cooperation. The
Accord provides for the coordination of existing jurisdictional authorities
in order to enhance environmental management. It also launched a
process that resulted in 11 September 1998 sub-agreements on principles
for public accountability and for stakeholder participation in setting
environmental standards.
4.
Concluding Comments
Federal and
provincial governments in Canada engage in a complex pattern of simultaneous
conflict and cooperation, propelled by both political and functional imperatives.
In recent years,
national unity politics, in combination with tensions resulting from fiscal
constraints, have had a pervasive impact across the sphere of federal-provincial
relations. Most recently, as illustrated in agreements on environmental
harmonization and continuing social union talks, there appears to be a
new emphasis on the formal definition of roles and responsibilities.
If successful,
this trend may result in the strengthened management of federal-provincial
relations using sub-constitutional norms, rules and principles.
Such an approach could replace the relatively ad hoc arrangements
of the past with a system more conducive to the accountability of both
levels of government to citizens. Less positively, this trend could
impede established practices of functional cooperation by subjecting them
to protracted debates about quasi-constitutional issues of power, recognition
and status.
PARLIAMENTARY ACTION
Federal-provincial
relations are conducted centrally through executive contacts that, from
time to time, produce initiatives requiring ratification by legislatures.
Once intergovernmental agreements have been achieved, however,
the scope for parliamentary influence is normally extremely limited. Changes
by one legislature could result in significant delay, or cause intergovernmental
agreements to unravel.
Several mechanisms
permit “front-end” input by Parliament. These include
the pre-budget consultations of the Standing Committee on Finance, the
special committees periodically established to consult the public on constitutional
proposals, and studies by standing committees of policy issues having
an intergovernmental component. Governments may, however, accept
or reject such input.
CHRONOLOGY
21 December
1993 - Federal and provincial first ministers agreed to cooperate in a
global review of federal and provincial roles and responsibilities, intended
to identify areas of duplication and overlap.
21 January 1994
- Provincial governments reacted positively to federal revisions to the
equalization formula.
14 April 1994
- The Quebec National Assembly passed a resolution, supported by both
the Liberals and the Parti Québécois, asserting exclusive provincial jurisdiction
over manpower.
27 February
1995 - Reductions to provincial transfers announced in the federal budget
drew strong criticism from provincial premiers.
30 October 1995
- The federalist side won a narrow 50.6% victory in the Quebec referendum.
25 September
1996 - The referral to the Supreme Court of three questions relating to
the legality of unilateral secession by Quebec was announced by Minister
of Justice the Hon. Allan Rock.
2 June 1997
- The federal election resulted in a (reduced) Liberal majority, and left
relatively unaltered the pattern of political fragmentation that had emerged
in 1993.
15 September
1997 - Provincial premiers (absent the Premier of Quebec) agreed on a
set of principles (the Calgary Agreement), to be used as a basis for national
unity consultations.
13 March 1998
- Talks were launched on a general framework agreement for the social
union.
20 August 1998
- The Supreme Court of Canada issued its opinion responding to the 1996
reference of questions relating to unilateral secession.
4 February
1999 - An agreement on the social union was signed by the Prime Minister,
nine provincial premiers and the territorial leaders (Quebec refused to
sign).
1 April 1999
- The territory of Nunavut was created.
29 June 2000
- Bill C-20 on referendum clarity received Royal Assent.
SELECTED REFERENCES
Asselin,
Robert. The Canadian Social Union: questions about the
division of powers and fiscal federalism. PRB
00-31E, Parliamentary Research Branch, Library of Parliament, March
2001.
Canada, Government.
“Renewing the Canadian Federation: A Progress Report.”
Background Document for the First Ministers’ Meeting of 20-21
June 1996. Ottawa, 1996.
Banting, Keith,
Douglas M. Brown and Thomas J. Courchene, eds. The Future of
Fiscal Federalism. School of Policy Studies, Queen’s University,
Kingston, 1994.
Cairns, Alan
C. Reconfigurations: Canadian Citizenship and Constitutional
Change. Douglas E. Williams, ed. McClelland and Stewart Inc.,
Toronto, 1995.
Courchene, Thomas
J. Access – A Convention on the Canadian Economic and Social
Systems. Working Paper Prepared for the Minister of Intergovernmental
Affairs. Government of Ontario, August 1996.
Knop, Karen,
Sylvia Ostry, Richard Simeon and Katherine Swinton, eds. Rethinking
Federalism: Citizens, Markets and Governments in a Changing World.
UBC Press, Vancouver, 1995.
Olling, R.D.
and M.W. Westmacott, eds. Perspectives on Canadian Federalism.
Prentice-Hall Canada Inc., Scarborough, 1988.
Reference
re Secession of Quebec, Supreme Court of Canada, 20 August1998.
Simeon, Richard.
Division of Powers and Public Policy. Published by the University
of Toronto Press in cooperation with the Royal Commission on the Economic
Union and Development Prospects for Canada and the Canadian Government
Publishing Centre, Supply and Services Canada, Toronto, 1985.
Stilborn, Jack.
National Standards and Social Programs: What the Federal Government
Can Do. Background Paper BP-379E,
Parliamentary Research Branch, Library of Parliament, September 1997.
* The original version of this Current Issue
Review was published in February 1994; the paper has been regularly updated
since that time. For a more detailed summary of federal-provincial relations
between 1986 and 1993, see Jack Stilborn, Federal-Provincial Relations
(1986-1993), CIR 86-2E (archived), Library of Parliament.
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