Ongoing Conflict with Quebec: Since the federal government initiated the use of its spendingpower in areas of exclusive provincial jurisdiction in the post-warperiod to establish manyof the programs that are now the basis of the modern Canadian welfare state,the government of Quebec has voiced strong objections to this use of thespending power and to the role of the federal government in collectingprovincial taxes through tax rental and tax collection agreements. Quebec hasconsistently argued that this use of the federal spending power and the role ofthe federal government in collecting provincial taxes was an invasion of the constitutionaljurisdiction assigned exclusively to the provinces. Rather than come to anintergovernmental agreement with the federal government on the implementationof national programs within Quebec, the Quebec government has instead been ableto negotiate a different set of fiscal arrangements with the federalgovernment. These agreements allowed Quebec to opt-out of some federation-wideprograms but still receive funds from the federal government to implement itsown programs that had objectives similar to the federation-wide programs58. This process was alsoflexible enough to accommodate Quebec’s desire to have its ownprovincial tax system. While all the other provinces signed a taxcollection agreement withthe federal government limiting the full exercise of their constitutional right to levy and collectcorporate and personal income taxes, in 1962 Quebec chose to establish its ownprovincial tax system and collect its own corporate and personal income tax.59
In this way the processes ofintergovernmental negotiation between federal and provincial executives(“executive federalism”) and the fiscal arrangements between the federalgovernment and the provinces have been flexible enough to accommodate thedemands of Quebec while allowing the federal government to implement federalpolicy objectives that would otherwise be beyond the fiscal capacity of theprovinces operating on their own revenues. Intergovernmental relations havebeen the site for many disputes between the different orders of government (andbetween governments), butthese processes of “executive federalism” have generally helped tomaintain stability whileallowing for the evolution of the federation. However, “executive federalism”and the issue of fiscal relations between Quebec and the federalgovernment have also beenthe source of major political and constitutional conflicts that have threatenednational unity.
Quebec’s objections to the federal useof its spending power in areas of exclusive provincial jurisdiction havetranslated into calls for comprehensive constitutional reform to revise the division of powersin order to provide Quebec with greater fiscal revenues and expandedlegislative powers. Quebec has pressed for greater fiscal autonomy that wouldallow it to meet its expenditure obligations under the constitution. The federal government has beenreluctant to give up revenue and its ability to implement federation-widepolicies. Part of the federal government’s reluctance to meetQuebec’sconstitutional demands was that by giving Quebec expanded legislative powers and additional revenuesthe federal government feared that this would lead only to further claims foradditional powers and fuel the nationalist movement in Quebec that supported Quebec’s separation from the rest ofCanada.
The differences with Quebec over fiscal andlegislative powers led to a prolonged series of constitutional negotiationsbetween the federal and provincial governments since 1967. These debates and anongoing series of constitutional negotiations on these issues between thefederal government, Quebec and the other provinces have at times fuelled thenationalist movement in Quebec and led to further tension between Quebec andthe federal government and the other provinces. These tensions reached a crisispoint when a separatist party was elected in Quebec in 1976 and proposed tohold a referendum in Quebec on the issue of “sovereignty association” in1980. The referendum failed to obtain a majority, but another round ofcomprehensive constitutional negotiations from 1984 to 1993 resulted in an impassebetween Quebec and the rest of Canada. That led to a second referendum in1995 that resulted a razor-thin victory againstseparation. Despite losing two referendums on the issue of sovereigntyassociation and independence the Parti Québécois (the independentist partyin Quebec) has won thelast two elections in Quebec. The Parti Québécois has indicated that it plans to hold another referendum in the future, althoughsome apparent decline in support for separation since 1995 has led to deferralof the proposal.
Although the efforts at constitutionalreform and the processes of executive federalism and intergovernmentalagreements have resulted in considerable intergovernmental conflict between Quebec, thefederal government and the other provinces, nevertheless, the pragmatic processes ofexecutive federalism and intergovernmental negotiation have provided a methodby which the federation has adapted to changing circumstance, and theseprocesses have been more flexible and less politically divisive than attemptsto amend the constitution formally.
Asymmetry ofConstitutional Powers: As indicated above (and inA.4) Quebec has alwayssought greater fiscal and policy autonomy from Ottawa than the other provinces.In recent constitutional negotiations (1985-1993) the other provinces have beenunwilling to meet Quebec’s demands for greater fiscal and legislative powers that wouldresult in increased asymmetry between the legislative and fiscal powers ofQuebec and the rest ofthe provinces. One of the reasons that the other provinces have objected tothese demands by Quebec for further asymmetry is because some of the provinceswould like similar powers for their own province and therefore haveobjected to specialfavoured treatment for Quebec. The issue of asymmetry or “special status” forQuebec has been a major roadblock to formal constitutional reform and hascontributed to the tensions between Quebec and the rest of Canada. Of coursethese same concerns have caused disagreements between Quebec and the federalgovernment inintergovernmentalnegotiations.
Extending the use of the Federal SpendingPower: The federal government has used itsspending power to establish social programs that are within theconstitutionaljurisdiction of the provinces. The provinces were unable to establish theseprograms on their ownbecause they lacked sufficient revenues of their own.60 Thefederal government usedits spending power to share with the provinces the cost of delivering newpolicies in areas such as healthcare, post-secondary education, and socialassistance. As described above, the initial agreements with the provinces thefederal government contributed approximately half of the provinces costs forthese programs. In order to receive these funds the provinces had to meet aseries of modest conditions that were specified in federal legislation (therewere no conditions for post-secondary education funds). In later years theamount of the transfers was subject to a formula that was determined through aprocess of intergovernmental negotiations.
In the years following their establishment,the costs of these cost-shared social programs increased rapidly just asgovernments were facing increasing financial pressures and escalating budget deficits.Both federal and provincial governments sought to reduce their expenditureswhile facing public pressure to maintain the level of public services. This led tocontinuing disputes and ongoing tensions between the federal and provincialgovernments. This tension came to a head in 1995 when the federal governmentunilaterally cut the fiscal transfers to provinces by replacing the previoussystem of transfers with the Canada Health and Social Transfer (CHST) in thefederal budget. The unilateral decision by the federal government to cut fiscaltransfers, combined withthe steady reduction in transfers to the provinces before 1995, hascontributed to anatmosphere of distrust between the provincial and federal governments.
The provinces argued that the federalgovernment was not living up to its financial obligations to finance its shareof jointly financed programs, and that the federal government should restorethe transfers to the provinces before financing any new policyinitiatives. The federal government held that unlike the old system oftransfers, the CHST was at least financially sustainable and minimisedunnecessary restrictions on provinces in areas of clear provincialresponsibility.
Now that the federal government haseliminated its budget deficit (that had persisted for 22 years) it has expressedan interest in extending the use of the spending power to establish new oradditional programs in response to social and economic changes brought on byglobalisation and increased pressures from international competition. The provinces have beenreluctant to cooperate with the federal government on new or additionalprograms, however, because they fear that once these new programs are instituted, the federalgovernment may at some time in the future again act unilaterally to reduce ordrastically cut transfers as they have in the past. This would leave theprovinces with the burden of funding programs that they lack the fiscalresources to sustain.Instead, they are pressing the federal government to restore the funds thatwere cut in 1995.
The signing of the Social Union FrameworkAgreement (SUFA) in February 1999 was an attempt by the federal and provincialgovernments (except Quebec) to reach an agreement on how new oradditional programs might be implemented when the federal government uses itsspending power. Although the signing of the Agreement indicates that some progress isbeing made on important issues, there are still continuing disagreementsbetween the two orders of government that have prevented any substantialagreements on the extension of the federal spending power in areas of exclusiveprovincial jurisdiction.
Finally, although Quebec participated inthe negotiations, Quebec did not sign SUFA because of its objections to the useof the federal spending power in areas of exclusive provincial jurisdiction andbecause of the lack of provisions in SUFA that would allow Quebec to opt out ofnew programs (financed through the spending power) and receive compensationfrom the federal government to implement its own provincial program. Thus, theagreement of nine provinces to the Social UnionFramework Agreement but not Quebec has introduced afurther degree of de facto asymmetry among the provinces.
The Introduction of New Direct Transfers toIndividuals: The federal government also uses its spending powerto make direct transfers to individuals and organisations for policy purposes thatare within provincial jurisdiction (e.g. post-secondary education scholarshipsand research chairs at universities). The introduction of new direct transfersto individuals and organisations and institutions by the federal government hasalso been a source of considerable conflict between the federal and provincialgovernments, especially the government of Quebec.
Provincial governments have objected to theintroduction of new direct transfers to individuals and institutions becausethe federal government has spent money on newtransfers to individuals before restoring the fundsto jointly financed programs that were unilaterally cut in 1995. These types ofdirect transfers to individuals and institutions by-pass the provincialgovernments and give the federal government higher visibility with citizens. The provinceshave been concerned that the federal government will in future make greater useof direct transfers in order to by-pass provinces and maximise the visibilityof the federal government in the delivery of program.
Ability to Adapt toChanges
Despite the considerable achievements of“executive federalism” in facilitating intergovernmental relations, thesedisputes between federal and provincial governments, the federal government andQuebec, and between Quebec and the other provinces point to some weaknesses in theability of “executive federalism” as a process to respond to the need forchanges in social and economic policy.
A major challenge that is hampering theability of “executive federalism” and the use by the federal government of itsspending power to respond to changing circumstances is a lack of trust betweenthe two orders of government. The federal government’s gradual reduction in fundingof existing jointly financial programs and its unilateral decision to cut dramaticallytransfers to the provinces left the provinces with the burden ofcompensating for the reductions in federal transfers. This made itincreasingly difficultfor the provinces to predict and plan their budgetary revenues andexpenditures. As a result of the federal government reducing its commitment tomaintain transfers forexisting jointly financed programs the provinces have been extremely reluctantto enter any new joint agreements with the federal government. Thisstalemate between thefederal and the provincial governments on the introduction of new jointprograms represents a considerable constraint on the ability of theintergovernmentalprocesses to respond to changing economic and social circumstances.
Another considerable constraint on theability of the intergovernmental process to respond to changing circumstance isthe continuing objections of Quebec to the use of the federal spendingpower in areas of exclusive provincial jurisdiction and its claims foradditional fiscal and legislative powers. Quebec’s ongoing objection to this useof the federal spending power will either have the result of extending theprocess of negotiationsand reducing the responsiveness of the intergovernmental process or it willresult in Quebec continuing to be excluded from future intergovernmentalagreements (such as SUFA, the NationalChildren’sBenefit and the NationalChildren’sAgenda). A trend towards intergovernmentalagreements that consistently excludes Quebec could re-enforce the arguments ofthe pro-separatist forces in Quebec (including the current Quebec government) that Canadian federalismcannot accommodateQuebec’s culturaland linguistic needs.
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