The
discussion thus far has focused on constitutional doctrine and
values. Yet those who support the federal spending power seem
less concerned with constitutionalism than with realpolitik. They
suggest that, without the spending power, politics in Canada would
regress: regional disparities would increase; there would be a
lack of revenue for social programs; political advances would
grind to a halt. These are the myths, but what are the realities?
One
of the strongest political claims made on behalf of the federal
spending power is that the power is required to promote the principle
of equalization. This argument takes a number of forms. Its most
common version maintains that conditional grants promote equalization
both by guaranteeing all Canadians equal access to a minimal level
of social services and by redistributing tax revenues from richer
to poorer parts of the country. The problem with the argument
is that it makes an unwarranted link between the principle of
equalization and the need for federal interference in the delivery
of particular social programs. If the federal government is concerned
about the need to equalize the position of citizens across the
country, it is free to achieve this goal through unconditional
grants, either to provincial governments or directly to individuals.60
Given that the goal of equalization can be met through unconditional
payments, equalization cannot provide the rationale for conditional
grants. Conditional grants are necessary only if the federal government
wishes to influence the way in which equalization payments are
spent - in other words, if it wishes to use equalization as a
pretext for influencing policies within provincial jurisdiction.
Some
commentators have expressed concern that, if the federal government
were unable to attach conditions to provincial subsidies, it would
be less inclined to equalize regional disparities. This concern
should not be discounted, but neither should it be exaggerated.
The pressures that regional communities can bring to bear at the
federal level serve as a strong inducement for Ottawa to provide
equalization grants even on an unconditional basis. This is evidenced
by the history of unconditional transfers provided to the provinces
since Confederation61
and by the entrenchment in the Constitution Act, 1982 of a federal
commitment to "the principle of making equalization payments to
ensure that provincial governments have sufficient revenues to
provide reasonably comparable levels of public services at reasonably
comparable levels of taxation".62
It is further evidenced by the fact that, in recent years, federal
governments have maintained their commitment to equalization while
loosening the purse-strings on conditional programs (with the
exception of medicare) and increasing the proportion of unconditional
subsidies and tax transfers to the provinces.63
Moreover, this concern could be addressed by spelling out the
federal government's commitment to regional equalization more
specifically in the text of the Constitution.
It
is also worth noting that conditional grants, because of their
preoccupation with guaranteeing particular social benefits to
Canadians in all parts of the country, serve as an inefficient
mechanism for equalizing revenues on a regional basis. The degree
of regional equalization achieved by such grants could be attained
far less expensively by means of unconditional transfers. Thus
even a lowered federal commitment in dollar terms to the provision
of unconditional grants could produce the same degree of regional
equalization that is currently achieved by means of conditional
payments.64
A second argument commonly made in support of the federal spending
power is even more problematic than the first. According to this
claim, the spending power is necessary because the provinces lack
the financial capacity to fund social programs themselves. Yet
how can this be so? If a province's incapacity to fund social
programs stems from regional disparities, these disparities can
be redressed through unconditional equalization grants. On the
other hand, if that incapacity stems from an absence of taxable
revenues, then this absence should inhibit the delivery of federal
programs as much as provincial ones. It is true that provinces
can levy only direct taxes but, given that income taxes are direct,
this limitation does not pose a major constraint on provincial
revenue-raising.
Of
course, it may well be that there is insufficient tax room at
present to allow provinces to assume the full cost of funding
existing shared-cost social programs. But, if so, this is because
the federal government is currently generating revenues to fund
provincial programs. In the words of Trudeau, the federal government
is violating its duty "to ensure that it does not collect taxes
for that part of the public interest not within its jurisdiction".65
If the federal government were to relinquish the tax room it now
occupies to fund initiatives within provincial legislative competence,
that room would provide the same revenue-raising capacity to the
provinces.
A
third argument commonly made on behalf of the federal spending
power is that such a power is necessary to promote new, and to
protect existing, social programs and initiatives. Underlying
this claim is an assumption that the central government is better
trusted with the social welfare of Canadians than are provincial
governments. There are two responses to this argument. The first
is to question the relationship between the assumption and the
solution. If it were true that the central government is more
trustworthy, surely the solution would be to seek a constitutional
amendment transferring jurisdiction to the central authorities.
The use of the spending power to overcome jurisdictional shortcomings
is a poor alternative. As shown above, the spending power provides
federal authorities limited control over the programs it funds,
while compromising the ability of both regional and national majorities
to influence policy and to hold governments politically accountable.
The
second response is to challenge the centralist assumption on which
the argument is based. Why should it be that the central government
is more trustworthy in terms of social policy? The national electorate,
after all, is simply the sum of the regional electorates. What
reason is there for believing that voters, when they enter a federal
polling booth, possess different attitudes about questions of
social welfare than when they enter a provincial polling booth?
Perhaps there is a view that central Canadians, who comprise the
bulk of the national population, are more enlightened in their
attitudes to social welfare than Atlantic or western Canadians.
If so, there is no evidence to support this view. On the contrary,
Poel's statistical study of the diffusion of legislation among
the Canadian provinces shows that, in the period from 1945 to
1975, Saskatchewan was by far the most innovative province in
terms of initiating social welfare programs.66
Besides, even if it were true that the population of central Canada
is more strongly dedicated to a particular vision of social justice,
what political justification would this provide for requiring
that view to be imposed upon those in other regions who embrace
a different vision?
Another
ground for questioning the centralist assumption concerns the
nature of national and provincial politics. In a country as large
and varied as Canada, national politics are necessarily preoccupied
with mediating among competing regional, cultural and linguistic
interests. Preoccupation with these "traditional" political cleavages
has tended to inhibit the development of class-based politics
at the national level. It is within the smaller and less diverse
provincial units that traditional cleavages are diminished and
ideological cleavages are more likely to come to the fore.67
Thus it is no coincidence that, while the two mainstream political
parties have dominated national politics since Confederation,
ideological parties have fared much better at the provincial level.
In the past twenty years, for example, social democratic parties
have formed governments in four provinces and served as the official
opposition in two others.68
There
is also the question of size and numbers. Provinces provide special
opportunities for social innovation simply because they are small
and because there are ten of them. Given their limited and relatively
homogeneous populations, it is generally easier to forge a provincial
consensus on a given social issue than it is a national consensus.
Moreover, even in conservative times, there are usually a few
provinces whose governments remain sympathetic to a reformist
agenda. And successful implementation of a reform by one provincial
regime inevitably lends legitimacy to that reform and fuels political
demand for its implementation elsewhere. As Breton and Scott have
observed, federalism permits creative provincial governments to
undertake "pilot projects" for the rest of the country while avoiding
the political risks "implicit in large or national projects".69
This is a phenomenon that is familiar to most Canadians. Hospital
insurance, medicare, labour codes, human right codes, even bills
of rights, were pioneered by innovative provincial regimes before
gaining political acceptance across the country. The same pattern
continues today with initiatives such as public auto insurance,
gay rights and pay equity. The implementation of public auto insurance
in Saskatchewan fueled demand for a similar scheme in Manitoba;
the example set by the two prairie provinces paved the way for
voter acceptance of government plans in British Columbia and Quebec,
and the track record of these four provinces has bolstered campaigns
for public auto insurance in Ontario and elsewhere. Similarly,
the move to amend human rights codes to prohibit discrimination
on the basis of sexual orientation began in Quebec and has since
spread to the Yukon, Ontario and Manitoba. The example set by
these provinces will undoubtedly encourage other provinces, and
eventually the federal government, to follow suit. The same process
is likely to occur with respect to pay equity. Ontario's enactment
of pay equity legislation applying to the provincial private sector
is already placing pressure on other provincial governments to
undertake similar initiatives.
The
point is not that provincial politics is invariably preferable
to national politics. There are many problems that, for a variety
of reasons, may demand national as opposed to regional resolution.
Moreover, just as provincial political units are more amenable
to calls for social reform, they are also more responsive to demands
for social retrenchment. The recent British Columbia experience
with human rights codes, labour legislation and abortion stand
as stark reminders. The point is simply that, for those concerned
with social progress, there is nothing inherently reactionary
about provincial politics. On the contrary, there is much to recommend
provincial politics as a staging ground for social reform.70
Having confronted the myths it is time to deal with some realities.
One such reality is that we live in a country that for the past
four decades has structured its political system around the assumption
of a federal spending power. Terminating that power would pull
the rug out from under a vast array of grants, programs and tax
expenditures.71
For example, the validity of federal health grants, student loans
and child tax credits would be undermined. Any proposal for reform
that failed to anticipate and to counteract such political disruption
would be doomed from the start.
A
second reality is that Canada is no longer the same society that
it was even four decades ago. Social relations have become increasingly
interdependent and complex. Problems that were once of local concern
today attract national attention. New issues have emerged that
require innovative solutions or fall between the cracks in the
constitutional order. These changes demand constitutional adaption
and, in some instances, the spending power has served as a tool
for such adaption. If that tool is to be taken away, formal mechanisms
for constitutional adjustment must be made more flexible.
These
two realities point to a third: there are limits on the ability
of courts to use legal norms to control governmental behaviour.
At some point, the requirements of constitutionalism must yield
to the demands of political practice. To quote Trudeau once again:
"There are areas in which even the courts cannot provide enlightenment:
no matter how clear one's rights, the federal system must ultimately
rest upon a basis of collaboration."72
While the authority wielded by judges may enable them to strike
down particular programs, it does not permit them to dismantle
the structure of modem government.73
It is simply beyond the capacity of courts to undo forty years
of political development.74
And
so we have come full circle. Having determined that the federal
spending power cannot be supported on the basis of doctrine or
constitutional values, we are confronted with the cold reality
that courts are incapable of doing anything about it. Reform of
the spending power can be accomplished only through political
action. Such reform requires a carefully managed process of governmental
collaboration aimed at producing maximum jurisdictional disentanglement
and minimum social cost.
What
are the chances of politicians rising to this challenge? The history
of the past forty years would seem to suggest that they are not
great. Yet the limitations on the spending power proposed by the
Meech Lake Accord provide some cause to question this assessment.
Even if the Accord fails to attract the unanimous provincial approval
that it requires, the support it has already received from the
federal Parliament and from the legislatures of more than two-thirds
of the provinces is significant. This support demonstrates that
a substantial number of politicians across Canada are now prepared
to acknowledge a problem with the spending power, and to entertain
proposals for constitutional reform. Moreover, it is a measure
of support that, while insufficient to implement the Accord, would
be sufficient to enact a constitutional amendment limited in scope
to the spending power.75
Given
that equalization of wealth among regions is a discrete
function that falls beyond the scope of provincial legislative
power, a federal law whose purpose is limited to equalization
should be sustainable on the basis of the national dimensions
component of the peace, order and good government power.
Moreover, since 1982, the Constitution has explicitly acknowledged
the right of the federal government to make "equalization
payments to ensure that provincial governments have sufficient
revenues to provide reasonably comparable levels of public
services at reasonably comparable levels of taxation": Constitution
Act, 1982, s. 36(2).
61.
See
La Forest, op. cit., footnote 23, ch. 1 and pp. 150-15
1.
62.
Section
36(2).
63.
Hogg,
op. cit., footnote 6, p. 129.
64.
See
Smiley, op. cit., footnote 2, pp. 59-60.
65.
Trudeau,
op. cit., footnote 49, p. 87.
66.
D.H.
Poel, The Diffusion of Legislation among the Canadian Provinces:
A Statistical Analysis (1976), 9 Can. J. Pol. Sc. 605.
67.
There
is a whole body of literature concerning the impact of federalism
upon class and power in Canada. The orthodox view among leftist
writers appears to be that federalism, by reinforcing traditional
political cleavages, has inhibited the development of class-based
politics at the national level, thereby imposing "a conservative
tone on the Canadian political system": J. Porter, The Vertical
Mosaic: An Analysis of Social Class and Power in Canada (1965),
p. 385. The difficulty with this view is that it underestimates
the extent to which these traditional cleavages would exist
absent federalism and, at the same time, discounts the impact
of federalism on regional politics. What writers like Porter
fail to note is that, while federalism serves to reinforce
traditional cleavages at the national level, it creates a
second tier of political decision-making at the regional level
in which traditional cleavages are minimized and which therefore
is more conducive to the development class-based politics.
68.
In
the past twenty years, the New Democratic Party has formed
governments in Manitoba (1969-77; 1981-88); Saskatchewan (1971-82);
British Columbia (1972-75), while the Parti Québécois formed
the government of Quebec (1976-85). The New Democratic Party
has served, and continues to serve, as the official opposition
in both Alberta and Ontario.
69.
Breton
and Scott, op. cit., footnote 55, p. 18.
70.
As
Trudeau put it to Canadian socialists in 1961: "Federalism
must be welcomed as a valuable tool which permits dynamic
parties to plant socialist governments in certain provinces,
from which the seed of radicalism can slowly spread.", The
Practice and Theory of Federalism, in Federalism and the French
Canadians, op. cit., footnote 49, p. 127.
71.
It
might also call into question the right of governments to
control various Crown corporations, although a strong case
could be made that, even in the absence of the spending power,
government ownership of such corporations (including those
outside its normal regulatory jurisdiction) is supported by
federal authority over public property and provincial authority
over property. It should be noted that this argument is quite
different from the one that seeks general support for the
spending power on the basis of federal jurisdiction over the
public debt and property. That argument is based on the assertion
that a law authorizing the expenditure of federal funds for
any purpose should be characterized as a law in relation to
public debt and property. The argument here is based on the
narrower and more tenable proposition that a law authorizing
the expenditure of federal funds for the particular purpose
of acquiring a government interest in property ought to be
characterized as a law in relation to public property. Similarly,
the fight of provinces to acquire Crown corporations would
be grounded upon the provincial power over property, which
presumably includes provincial public property.
72
Trudeau, op. cit., footnote 49, p. 99.
73
Some
may believe that judges, while incapable of assuming full
responsibility for reforming the spending power, could still
play an important role as catalysts for such reform. The Supreme
Court of Canada has recently shown how this might be done.
In Reference re Manitoba Language Rights, supra,
footnote 53, the court believed that striking down all Manitoba
legislation enacted only in English would be too politically
disruptive. It therefore issued an order declaring such legislation
to be unconstitutional but allowing the Manitoba government
a period of grace in which to translate the laws in question.
Presumably a similar order could be issued here, declaring
the spending power to be unconstitutional but allowing governments
time to adjust to this ruling. Such an order would place the
burden upon governments to initiate the institutional reforms
required to preserve existing programs. The trouble with this
scenario is that the changes that would be required to preserve
programs threatened by the elimination of the spending power
are far more complex and contentious than the translation
of laws. For this reason, the potential disruption that would
be caused by such a court order would be far greater, making
it improbable that any Canadian court would assume the political
risks of even this form of action.
74
This
assessment is supported by the cursory manner in which the
Alberta Court of Appeal dismissed the recent constitutional
challenge to federal health, education and welfare expenditures
in Winterhaven Stables Inc. v. Attorney-General
of Canada, supra, footnote 34, and by the subsequent
decision of the Supreme Court of Canada to refuse leave to
appeal in that case: Supreme Court of Canada, Bulletin of
Proceedings, April 14, 1989, p. 905.
75
An
amendment limited to restricting the use of the spending power
would require the support of the federal Parliament and of
the legislatures of two-thirds of the provinces representing
at least fifty per cent of the population: Constitution Act,
1982, s. 38(1).