Social Union Sellout

Reasonable people can differ in their views on the importance of the Social Union document signed by the federal and nine provincial governments (Quebec excepted) on February 4, 1999. I have concluded that the net result is a considerable setback for Canadian federalism, but let me outline the case for the opposite view.

The pros

The signatory governments take the position that, for the first time, the document sets out some ground rules about how federal spending power is to be used.¹ For instance, it includes requirements that necessary objectives be co-developed with respect to shared cost and block-grant programs, and that with regard to direct federal-to-persons spending initiatives, the federal government give a three-month notice and consultation period. There may be considerable flexibility in ways of meeting program objectives. There is to be a one-year notice of significant funding changes. The document also contains good intentions regarding mobility irritants, and a non-binding dispute resolution procedure that at least has some political teeth.

The document also says good things about public accountability—though significantly without any teeth, political or otherwise. Overall, it is argued that this document is a sound basis for a more constructive partnership between the levels of government.

Let us hope that this sunny view proves to be the right one. However, human nature and the history of federal-provincial relations suggests a more realistic view is in order.

The cons

Fiscal situation

Begin with fiscal reality: the most easily found money is in Ottawa through its national tax system, while the major spending responsibilities are in the provinces. That means Ottawa has an enduring fiscal leverage. By nature, governments and politicians seek to expand their power. For various reasons recently, the use of the federal spending power to influence provincial priorities had fallen into political disrepute. The new agreement ends that constraint, except in Quebec, by having the other provinces sign on to an unusually effusive endorsement of the spending power as “... essential to the development of Canada’s social union.” This is important. While nothing has changed in law, the practical use of the spending power has been legitimized by the provinces for the first time ever.

Six province constraint

Consider next the “6 province” constraint, whereby a “majority of provinces” must agree to the principles of any new funding program. This really means little, when one recalls that the test can be met by simply gaining the assent of the 6 small and poor provinces, holding only 15 percent of the population of Canada. The permanent fiscal dependency of these 6 in practice allows the central government to obtain whatever it wants from them in exchange for cash. Had the 7-and-50 test of the constitution (7 provinces containing at least 50 percent of the population) been used here, one would really have something. Six-and-15 means little.

Mobility

Mobility provisions are generally thought of as a Good Thing in all circumstances, but this is not so. If the effect of a so-called mobility provision is to limit the experimentation or diversification which is one of the major reasons for federalism, we are all the losers. For example, a requirement that all provinces levy equal taxes to induce business mobility, or that no province experiment with medical user fees because they might impede individual mobility, would clearly be counterproductive overall.

Accountability

The accountability provisions are inadequate and add nothing, as governments are simply to be accountable to themselves and their electorate, which, of course, they already are. An independent social union auditing agency (say Statscan) with a mandate to report to the public would be real progress, but we see nothing of the kind here.

Other features

The main feature designed by the provinces (in their united front prior to their February 4 meeting with the prime minister) to truly free the provinces from the priority-distorting power of federal cash was the “opting out with full compensation” formula. In its purest form, this would allow any province to take the money the feds wished spent on “X” and spend it on “Y” instead, but the common provincial position (which included Quebec) did require a “similar objectives” test. This opting out feature is absent from the deal that was done, and is the main reason Quebec did not sign, that having been its well-advertised bottom line.

Supporters of the deal argue that the flexibility accorded in terms of delivery systems and credit for existing programs as already meeting new objectives² amounts to the same thing, but in fact it does not. Why not? First, it ties the activity more closely to Ottawa’s objectives. Second and more importantly, Ottawa retains a judgemental power to assess performance.

Now, most Canadians will think of the above as just more counting of angels on the head of a pin, especially since it is only a three year administrative agreement that can be amended in due course. Many premiers would say, “Once we get past our elections this year, and don’t need the money and show of cooperation on health care so desperately, we will be back to improve provincial rights!”

Alas, it is not so easy. The federal camel has its nose well and truly into the moral tent with the above-cited effusive provincial endorsement of the spending power. Even more remarkably, the provinces signed on explicitly and for the first time to the “five principles” of the Canada Health Act, some of which—especially that of “public administration”—are increasingly recognized as the enemy of good health care for Canadians. What the provinces have signed to get a bit of fast cash cannot easily be repudiated.

The unity challenge

Still, the worst is yet to come, and it has to do with our never-ending challenge of unity. Prior to February 4, in a quite remarkable common front, the provinces articulated a new vision of the Canadian federation, which included Quebec. Since February 4, the Quebec premier has been isolated by his colleagues in favour of the Ottawa proposal. Lucien Bouchard signed on to the August 1998 common front with a well-known bottom line on opting out. His colleagues accepted that adhesion with delight—and then left him in the lurch.

Quebeckers remember events such as these. Former Premier Rene Levesque learned a similar lesson leading up to the 1982 constitution—and it has become an accepted and powerful part of Quebec mythology. This latest abandonment of a Quebec premier by his colleagues carries less weight because it is administrative rather than constitutional, but it is similar in class and kind, and is guaranteed to have an impact on future trust.

However, from the sovereigntist viewpoint, there is a good side to this. The Rest of Canada (ROC) has again clearly demonstrated that it has a vision of the federation different from that of Quebec. (Note that Quebec Opposition Leader Jean Charest stated that he, too, would not have signed the deal as written.) Moreover, ROC is prepared to move forward with the evolution of Canada based on that different view, without Quebec. That is a powerful statement.

The obvious sovereigntist response, already being articulated in mid-February, is that we are in fact two different societies, that this is but the latest proof, and that we must all get on with our separate lives.

In operational terms that will surely include Quebec’s withdrawal from many of the usual linkages of the federation (recall when Premier Bourassa’s government simply did not attend most federal-provincial conferences?) and a renewal of the “Quebec sait-faire!” and “two nation” strategies.

This is not surprising in the circumstances. Quebec has always insisted that it is “not a province like the others,” and the response in defence of Canada has been that “all provinces are equal—and important.” The surprising collapse of the provincial common front on February 4 demonstrated that, in fact, Quebec’s description is closer to reality. This has grave implications for the future.

Notes

1"Spending power" refers to the ability of the federal government to raise revenues generally across the country and spend the funds whenever, wherever, and for whatever purpose it deems fit, including areas set out in the constitution as provincial responsibilities. Thus, the federal government can, by offering cash inducements to provinces for particular federally-endorsed purposes, distort spending priorities. This is a long-running federal-provincial dispute, going back at least 50 years, and complained about by premiers from Maurice Duplessis on the right to Tommy Douglas on the left.

2This is a clever move; if Ottawa wishes to avoid a fight with Quebec in instituting any new program, it can simply “deem” that Quebec, with its well-developed network of social programs, is already meeting the target. Ottawa can then send Quebec its share of the program money with no action by the province at all—but no cause for objection either.

info@fraserinstitute.ca You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.

If you know someone who would be interested in this web page, please enter their email address below, and we will forward this URL to them: Email Address:

Last Modified: Wednesday, October 20, 1999.