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One feature of Canadian federalism that hashad a significant effect on the dynamics of intergovernmental relations is theasymmetry that exists between the various provinces. The data in section Bprovides some indication of the range in relative wealth of the 10 provinces.The relative wealth of provinces has played a role in the dynamics of executivefederalism and negotiations over fiscal arrangements. The significantdifferences in the wealth of the provinces means that some provinces are muchmore dependent on transfers from the federal government than other provinces.Generally, the three wealthier provinces (British Columbia, Alberta, andOntario) raise a higher proportion of their revenues from their own provincialsources and federal government transfers constitute a relatively smallpercentage of their provincial revenues (approx. 11 percent).30 To varyingdegrees and at different times, these provinces have expressed greater concernsthat the use of the federal spending power trespasses on provincialjurisdiction. They have also expressed greater concerns to varying degrees overthe conditions that apply to the use of the federal spending power.31

For the other provinces, especially thepoorer provinces, the federal government transfers account for a much largerpercentage of provincial government revenues (almost 40 percent for PrinceEdward Island and Newfoundland)32 and these provinces are muchmore dependent on these transfers as a method of funding their social policyexpenditures. Because of their dependence on these transfers these provinceshave generally expressed fewer concerns about the use of the federal spendingpower.33

Although the spending power gives the federalgovernment considerable power and influence in intergovernmental relations, itis the provinces that have the constitutional jurisdiction that is necessaryfor most social policy programs. This means that although the federalgovernment has the ability to use its spending power to establish cost-sharedprograms (conditional transfers) it still relies on the cooperation of theprovinces to provide similar levels of funding and implementation of theseprograms. Because the wealthier provinces rely on the federal government for arelatively small percentage of their total revenues they have a strongerposition in negotiations with the federal government concerning the financingof jointly-financed programs. These provinces are more likely to challenge thefederal government on the conditions that are attached to intergovernmentaltransfers and threaten the existence of country-wide programs with country-widestandards.

The Role of Quebec

Quebec is not among the group of wealthyprovinces but its unique status in the federation as the principal home ofFrench speaking Canadians means that it has consistently sought much morepolitical and fiscal autonomy from the federal government in order to preserveand promote its French language and culture. The result has been that Quebechas always been critical of the federal governments use of the federal spendingpower to implement policies that are within the exclusive constitutionaljurisdiction of the provinces. Quebec has used its political power andsignificance, along with the argument of exclusive provincial jurisdiction, tonegotiate a much reduced role for the federal government in influencing thedevelopment of social programs in Quebec. As early as the 1950s, the Quebecgovernment began its opposition to federal government initiatives to establishfederal programs in areas of provincial jurisdiction (such as funding forpost-secondary institutions). Quebec’s opposition to federal governmentinterference in its provincial jurisdiction also meant that Quebec refused tosign tax rental agreements with the federal government in the 1950s and laterrefused to sign tax collection agreements with the federalgovernment.34 Quebec has consistently argued that these agreements interferewith the province’sexclusive power over direct taxation. As a result Quebec is the only provinceto have its own provincial tax system (see section D Systems of Tax Harmonisation and Tax Collection for further details).

Quebec is also unique among the provinces inthat it receives a larger percentage of its transfers from the federalgovernment in the form of tax points rather than cash transfers. This is theresult of Quebec opting-out of national programs established through thefederal government’sspending power. Instead of participating in the national programs Quebecreceives cash transfers from the federal government that allow Quebec to designand deliver its own provincial programs in the areas where the federalgovernment has established a Canada-wide program. Because a larger portion oftransfers to Quebec are in the form of additional tax points, these revenuesare unconditional and provide greater discretion to the Quebec government inhow they are spent. Therefore, a larger percentage of transfers to Quebec areunconditional in form than is the case for other provinces.

The constant pressure from Quebec for greaterpolitical and fiscal autonomy has presented a significant challenge to thefederal government in creating new and additional social programs that achieveCanada-wide policy objectives. When the federal government initiated thecreation of social programs that are the basis of Canada’s modern welfare state there waslittle opposition from the English-speaking provinces to the use of thespending power.35 After forty years ofexperience with the federal spending power many of these provinces, however,especially the wealthier provinces, have become more critical of the federalgovernment’s use ofthe spending power. When the federal government has sought to extend the use ofits spending power Quebec has registered its usual objections and sought toopt-out of any new initiative while receiving compensation from the federalgovernment. Now that some other provinces are reluctant to agree to anyextension of the spending power they are also demanding the opportunity toopt-out of new programs with compensation. The result is that the federalgovernment is finding it increasingly difficult to accommodateQuebec’s demands whileat the same time coming to a common agreement on financing country-wideprograms with the other provinces. Furthermore, the other provinces areincreasingly reluctant to agree to any extension of the spending power unlessthey are given the same opportunity as Quebec to opt-out of country-wideprograms with compensation. However, extending this option to all the otherprovinces, or even a few of them, would undermine the objectives of acountry-wide program with uniform country-wide standards.

The Social UnionFramework Agreement is the latest attempt by thefederal and provincial governments to reach an agreement on the conditionsunder which the federal government could extend the use of its spendingpower. However, Quebec did not sign that Agreement because its provisionsrecognised the political legitimacy of the federal spending power and did notexplicitly allow provinces to opt-out of new programs (created by the use ofthe spending power) with compensation.

Role of the Federal Government inIntergovernmental
Relations

The federal government plays a leading rolein the process of intergovernmental relations. A large part of the federalgovernment’s influencein intergovernmental relations comes from its use of the spending power. Thefederal government’sspending power is used to provide funding for major social and other programsthrough intergovernmental transfers to the provinces and through transfers thatare made directly to individuals, or organisations. As noted earlier, there arevery few restrictions on the federal government’s use of the spending power, andwith the exception of limitations it has accepted in intergovernmentalagreements, the federal government retains unilateral decision-making power onthe use of its spending-power. The use of its spending power therefore allowsthe federal government to influence programs delivered by the provinces byoffering funding to the provinces with the requirement that programs fulfilcertain conditions. Alternatively the federal government can use its spendingpower to transfer funds directly to individuals or organisations to createprograms that will have a substantial effect on existing provincial programs.

Therefore the effects of the federalgovernment’s spendingpower, and its ability to make unilateral decisions on the use of the spendingpower,36 gives the federal government a powerful role in intergovernmentalrelations. However, the power and influence of the federal government isconstrained by the fact that it lacks the necessary constitutional jurisdictionto implement its own programs in many areas and must rely on the cooperation ofthe provinces to implement many policies. Therefore, the federal governmentmust be careful not to generate disagreements with the provinces on aparticular issue in case the provinces use this as a reason for not negotiatingor cooperating on other policy issues.

5. Transparency andAccountability

Revenue and Expenditure Responsibilitiesof Governments

The complexity of the fiscal arrangementsbetween the two orders of government and the complexity of constitutional lawsurrounding the division of powers (and the exercise of the spending power)means that there is very little transparency in this area. In regards to theaccountability of governments in this area, the primary method of ensuringaccountability is through the traditional conventions of executiveresponsibility to the legislature within each of the participatinggovernments.

As described earlier, the division of powersbetween the federal and provincial governments is easy to identify in theConstitution but the provisions themselves are not as clear as they might seem.The constitutional division of powers concentrates on dividing legislativepowers that were significant in 1867 and does not reflect the functions thatare carried out by modern governments that are responsible for maintainingmodern welfare states. In addition, some of the powers granted to the federaland provincial governments are of a very general nature and it is not at allclear what power is being allocated to the respective governments. For examplethe federal government’s power to legislate for the peace, order and good government ofCanada and the provinces power to legislate in regards to all matters of amerely local or private nature in the province have been the subject ofextensive litigation by governments and have resulted in many differentjudicial interpretations. The language used in the division of powers and thelegal complexity surrounding the interpretation of government’s legislative powers have made itvery difficult for ordinary citizens to determine what order of government isresponsible for a particular policy or program. In fact, governments arethemselves often uncertain about the extent of their legislative powers andhave made use of the reference procedure to the courts to seek clarification ontheir powers under the Constitution.

These problems of transparency areexacerbated by the complex system of intergovernmental transfers from thefederal government to the provinces. The use of the spending power, and to alesser extent Equalization, allow both orders of government to claim a role inmany of Canada’s mostimportant social policies but the use of these transfers makes it difficult forcitizens to determine which government is politically responsible for aparticular program or policy. As discussed earlier, the use ofintergovernmental transfers makes most social policy areas de facto concurrent powers rather thanexclusive powers as indicated in the provisions of the Constitution. In thisrespect the formal provisions of the Constitution can be very misleading inindicating the de facto responsibilities of each order of government. It is not uncommonfor governments to exploit the lack of transparency and argue that the otherorder of government is responsible for any problems being experienced or that adecline in levels of service is the result of decisions made by the other orderof government. Therefore, a lack of transparency on government’s legislative powers hasundermined accountability to some extent.

The primary method of ensuring thatgovernments are accountable in relation to the exercise of their expenditureand revenue responsibilities is through the standard parliamentary proceduresof responsible government. This means that the members of the executive must beavailable each day in the legislature to answer questions from the oppositionparties on any issue relating to the governments activities. The other aspectof accountability is that citizens are given the opportunity to judge theperformance of their government in the election process. It might be added thatan additional form of informal accountability is achieved through the publicrelations efforts of each government. Governments will seek to maximise theirvisibility and seek recognition for their contribution to a policy or programor attempt to blame policy failures on the other order of government. Theeffectiveness of these accountability measures is undermined, however, by thelack of transparency and clarity concerning the role and responsibilities ofeach government in a particular policy or program.

Executive Federalism

There is a low level of transparency inintergovernmental relations and the process of executive federalism. The highprofile First Ministers’ Meetings between the Prime Minster and the Premiers are verypublic affairs with governments issuing press releases indicating theirpositions on certain issues. Despite the public attention given to theseevents, and the public statements of the governments, to ensure effectivenegotiation the most important negotiations are carried on in closed sessions.This prevents citizens from knowing what their governments’ bargaining positions are on aparticular issue or what compromises their governments are making in theprocess of negotiations. However, these First Ministers’ Meetings constitute only a verysmall amount of the negotiations that go on between governments and theirvarious departments. The vast majority of intergovernmental activity is carriedout at a much lower level and receives much less, if any, public attention.Most intergovernmental meetings take place at the bureaucratic level betweenthe public servants in the various departments of the federal and provincialgovernments. These are closed meetings and they receive little, if any, publicattention.

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