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Chapter 1: Canada

• Background
  • Population
  • History
• Political structure
• Taxation system
  • Distribution of tax-raising powers and revenue
  • Federal and Provincial personal and corporate income taxes
  • Federal and Provincial sales taxes
  • Tax administration
  • Taxation Rates
• Federal financial arrangements
  • Federal transfers prior to 1996-97
  • Canada Health and Social Transfer
• Interstate commerce
• Intergovernmental relations
• Federal-provincial-territory intergovernmental relations
  • First Ministers’ Conference
  • Ministerial Conferences
• Inter-provincial/territory co-operation
  • Premiers’ Conference
  • Council of Maritime Premiers
  • Conference of Atlantic Premiers
  • Western Premiers’ Conference
  • Council of New England Governors and Eastern Canadian Premiers
  • Provincial Ministerial Conferences
  • Summary of intergovernmental meetings in Canada
• Canadian management of intergovernmental relations
  • Canadian Intergovernmental Conference Secretariat
  • Federal management of intergovernmental relations
  • Provincial/Territory management of intergovernmental relations
• Developments in the 1990s
  • Renewing the federation
  • Changes in social policy administration
• Summary of observations
• Endnotes

1.0 Canada is in many respects similar to Australia. Like Australia, it is a constitutional monarchy, with a parliamentary system of government based on Westminster principles. There is a Governor-General, and a Lieutenant Governor in each Province. It is a geographically vast country, and Canadian federalism is, in part, a response to this regional diversity. However, it is also Canada’s response to the circumstances of a large French-speaking community in a majority English-speaking country.

Background

1.2 Canada has ten Provinces and three Territories:

• Alberta;
  

• British Columbia;
  

• Manitoba;
  

• New Brunswick;
  

• Newfoundland and Labrador;
  

• Nova Scotia;
  

• Ontario;
  

• Prince Edward Island;
  

• Québec;
  

• Saskatchewan;
  

• Northwest Territories;
  

• Nunavut;
  

• Yukon.

Population

Alberta	British Columbia	Manitoba	New Brunswick	Newfoundland and Labrador	Nova Scotia
2,913,400	4,014,300	1,141,000	752,400	543,200	936,100
Ontario	Québec	Prince Edward Island	Saskatchewan	Northwest Territories (including Nunavut)	Yukon
11,404,800	7,334,100	136,200	1,025,600	67,900	31,600

1.4 Canada has two official languages, French and English.³ The French-speaking population is approximately 24 per cent of the total population. However, approximately 80 per cent of the French-speaking minority live in the province of Québec, and in that province, they constitute a majority. The Constitution provides entrenched rights for linguistic and religious minorities to be educated in their own language in schools of their own denomination.⁴

History

1.6 The Quebec Act 1774 made Ontario part of an extended colony ruled from Québec. Nova Scotia (from which Prince Edward Island and New Brunswick were later separated) and Newfoundland remained distinct colonies. An influx of English loyalists fleeing the American Revolution increased tensions between the French-speaking and English-speaking communities, and the Constitutional Act 1791 therefore divided Québec colony into Lower (French) and Upper (Loyalist) Canada.

1.7 British North America was subject to political and military pressure from the United States, and to internal pressures which included ongoing tensions between French and English-speaking Canadians. There were uprisings in both Canadas in 1837, and in 1841 Upper and Lower Canada were united to form the Province of Canada, with Upper Canada becoming known as Canada West and Lower Canada as Canada East. This rendered the French-speaking community a minority.

1.8 Britain granted responsible government to Canada in 1849. Nova Scotia had been granted responsible government in 1848, and New Brunswick, Prince Edward Island and Newfoundland were granted responsible government in 1849, 1851 and 1855 respectively. Vancouver Island became a colony in 1849, and British Columbia in 1858; the two were joined in 1866.

1.9 Confederation took place on July 1^st 1867, forming the Dominion of Canada. Canada West became Ontario, Canada East became Québec, and Nova Scotia and New Brunswick joined the new nation. Prince Edward Island, Newfoundland and British Columbia did not join until later.

1.10 Until 1870, the rest of Canada had been under the control of a chartered corporation, the Hudson’s Bay Company. In 1870 the Canadian government ordered the transfer of this territory from the company to the government, in return for £300,000. It was from this territory that Manitoba, Alberta and Saskatchewan were created. The Yukon was separated from the Northwest Territories in 1898, in order to meet the demands on government created by the gold rush of the 1890s. In 1992, a plebiscite in the Northwest Territories agreed to partition the territory, effective April 1^st 1999. The eastern portion of the territory will become the new, predominantly Inuit, territory of Nunavut.

1.11 The following table indicates the year in which each Province was admitted to the Confederation:

Province	Year of admission to the Confederation
Alberta	1905
British Columbia	1871
Manitoba	1870
New Brunswick	1867
Newfoundland and Labrador	1949
Nova Scotia	1867
Ontario	1867
Prince Edward Island	1873
Québec	1867
Saskatchewan	1905
Northwest Territories	1870 (became Federal Territory)
Nunavut	1999 (separated from Northwest Territories)
Yukon	1898 (separated from Northwest Territories)

1.12 Like Australia, Canada gradually achieved full independence from Britain in the period between the World Wars. Canada remains a member of the Commonwealth of Nations.

Political structure

1.14 The Canadian Parliament has two chambers: the House of Commons, which has 301 elected members (156 Liberal Party, 59 Reform Party, 44 Bloc Québecois, 21 New Democrat Party, 19 Progressive Conservative Party, 2 Independent), and the Senate, which has 105 members appointed by the Government (53 Liberal Party, 42 Progressive Conservative Party, 5 Independent, 5 Vacant (as at April 22^nd 1999)). Senators serve until they reach the age of 75 (Senators appointed prior to 1965 sit for life). The legislative power of the two Houses is equal in all respects, except with regard to bills for raising revenue or spending funds, which must originate in the House of Commons. The Senate may pass or defeat such a bill, and may amend it, but only to reduce taxes or expenditures.

1.15 Senate seats are distributed on a regional basis.⁵ Each of four divisions receives 24 Senators:

• Maritimes Division (New Brunswick 10, Nova Scotia 10, Prince Edward Island 4);
  

• Ontario Division (Ontario 24);
  

• Québec Division (Québec 24);
  

• Western Division (British Columbia 6, Alberta 6, Saskatchewan 6, Manitoba 6).

There are 8 additional Senators representing those provinces and territories not included in any Divisions (Newfoundland and Labrador 6, Northwest Territory 1, Nunavut 1, Yukon Territory 1). The Constitution allows the Government to temporarily expand the Senate by adding four or eight more seats (ie one or two Senators in each Division),⁶ but the total number of Senators may not exceed 113.⁷ A Government can use this power to appoint additional Senators to break a legislative deadlock; the power has been used only once.⁸

1.16 Each Province has a unicameral elected parliament known as the Legislative Assembly (except in Newfoundland and Labrador, where it is the House of Assembly, and Québec, where it is the National Assembly).

1.17 The leader of the political party with the largest number of seats in the House of Commons usually serves as Prime Minister. The leader of the party with the largest number of seats in each provincial parliament serves as Premier of that Province. The Prime Minister since 1993 has been the Right Honourable Jean Chrétien, who is leader of the Liberal Party of Canada, and a member for Québec Province.

1.18 The principal political parties are the Liberal Party (Moderate), led by Jean Chrétien; the Progressive Conservative Party (Centre Right), led by Kim Campbell; and the New Democratic party (Left), led by Audrey Mclaughlin. Major regional parties include the Bloc Québecois (Québec Nationalist) and the western provinces’ Reform Party (Populist Right), which became the second- and third-largest parties in Parliament in 1993.

1.19 Elections must be held at least once every five years (more frequently in the case of certain provincial parliaments), or whenever the majority party loses a vote of no confidence or calls an election. Each parliament follows its own electoral cycle, independent of that of the others.

1.20 Most provincial legislative powers are exclusive and not concurrent with those of the national parliament. The principal areas of exclusive power granted by the Constitution to provincial legislatures are:

• education;⁹
  

• health;¹⁰
  

• management of public lands, natural resources and electrical energy;¹¹
  

• direct taxation;¹²
  

• licensing;¹³
  

• civil law and the administration of justice;¹⁴
  

• municipal affairs.¹⁵

The Constitution gives the Federal Government the power to disallow provincial legislation,¹⁶ but this power is not in use.¹⁷

1.21 Canada has a strong tradition of provincial autonomy. This is in part a result of the constitutional distribution of powers. It is also a result of a strong preference for autonomy on the part of the Provinces, particularly Québec, and of the need for the federation to accommodate this demand. Despite a pattern of intergovernmental agreements providing special arrangements for Québec, there continues to be a significant Québec nationalist movement advocating secession from the federation. The impasse between English-speaking and French-speaking areas remains the principal challenge facing Canadian federalism. The Canadian Minister for Intergovernmental Affairs and President of the Privy Council, The Hon Stéphane Dion, made the following comment during a meeting with the Committee:

[O]ne of the differences between our two federations is that Canada is a country where the unity of the country is not secure. In Australia you may have a lot of these arguments, but there is no strong political force advocating for break up. This is a problem we have in Canada and we are very confident that we will solve it.¹⁸

---

Observation 1:

Dynamics of federalism

The Federal-State Relations Committee found that intergovernmental relations issues confronting Canadian Members of Parliament and those involved in the political system resonated with their own concerns as Members of Parliament, and as expressed in the Committee’s Second Report.However, direct comparison should be tempered by an acknowledgment of several differences between Canada and Australia, which include:

• the possibility of secession by Québec;
• the proximity of the United States as a major cultural and economic power;
• progress in reconciliation with indigenous peoples; and
• the greater legislative and fiscal powers of the provinces.

Taxation system

Distribution of tax-raising powers and revenue

The system of income and sales taxes in Canada is quite complex, reflecting the high degree of federal-provincial overlap and provincial taxation autonomy. The Honourable Stéphane Dion commented on this feature in a meeting with the Committee:

[Y]ou have seen how powerful our provinces are compared with your states, although the taxing capacity - you know that the federal government do[es] not even have 50% of the taxing capacity . . . we are a very decentralised federation with strong provinces.²¹

Federal and Provincial personal and corporate income taxes

Tax

Federal Government

Alberta

British Columbia

Manitoba

New Brunswick

Newfoundland and Labrador

Northwest Territories

Nova Scotia

Prince Edward Island

Québec

Saskatchewan

Yukon
Territory

Personal Income

4 ^*

4 ^*

4 ^*

4 ^*

4 ^*

4 ^*

4

4 ^*

4 ^#

4 ^*

4 ^#*

4 ^*

4

Corporate Income

4

4 ^#

4

4

4

4

4

4 ^#

4

4 ^#

4

4

Corporate Capital

4

4

4

4

4

4

4

4 ^#

4 ^#

4

Customs and Excise

4

Sales

Goods and Services Tax

Nil

Provincial Sales Tax

Provincial Sales Tax

Harmonised Sales Tax

Harmonised Sales Tax

Nil

Harmonised Sales Tax

Provincial Sales Tax

Provincial Sales Tax

Québec Sales Tax

Provincial Sales Tax

Nil

Real Property

4

4

4

4

4

4

4

4

Tobacco

4

4

4

4

4

4

4

4

4

4

4

4

4

Fuel

4

4

4

4

4

4

4

4

4

4

4

4

Payroll

4

4

4

4

4

4

Insurance

4

4

4

4

4

4

4

4

4

4

Financial Institutions

Health and Education

4

4

4

4

Environment

4

4

Mineral/ Natural Resources

4

4

4

4

4

4

Pari Mutuel

4

4

Horse Racing

4

Liquor

4

4

4

Cars and/or Heavy Equipment

4

4

Hotel Room

4

4

1.25 The system of dual federal and provincial income taxes has evolved since the beginning of this century. The Provinces were the first to begin imposing personal and corporate income tax; the Federal Government entered this tax field during World War One to increase its revenue raising capacity. During World War Two, the Provinces agreed to relinquish their personal and corporate taxes to enable the Federal Government the widest possible base for its own personal and corporate taxes. In return, the Provinces received tax rebates from the federal government.

1.26 This system continued, with slight modifications, until 1962, when the first Tax Collection Agreements were struck between the federal and provincial governments. This allowed the Provinces to set their own tax rates on personal and corporate income, and for these taxes to be collected by the Federal Government and then returned to the Provinces. The Federal Government retreated somewhat from this tax field in order to create ‘room’ for the provincial income taxes.²³

1.27 The provincial income tax utilises the same tax base as the federal income tax. The provincial income tax rate is expressed as a percentage of the federal income tax rate and applies to the amount of federal tax payable. For example, a Canadian with a taxable income of CAD$29,500 has a marginal federal tax rate of 26%.²⁴ The federal tax payable will be CAD$5,030.²⁵ If this person lives in Saskatchewan, then a provincial income tax rate of 50% applies to the CAD$5,030 payable in federal tax.²⁶ Therefore, an additional CAD$2,515 is payable as provincial income tax. The combined federal/provincial tax payable is CAD$7,545. Through a Tax Collection Agreement between the governments of Canada and Saskatchewan, this person will file only one tax return to Revenue Canada. Saskatchewan’s portion of income tax is then remitted to it by the Federal Government.

1.28 Québec does not have a Tax Collection Agreement with the Federal Government, administering its own personal and corporate taxation revenue. Québec’s system of provincial personal income taxes is not directly comparable with other provinces and territories. Québec utilises a different tax base from that of the Federal Government, and sets marginal rates of taxation depending on income, rather than defining its rate of tax as a proportion of federal tax payable. Under a special arrangement with the Federal Government, Québec residents receive a 16.5% federal tax abatement. This separate tax regime requires Québec residents to file tax returns separately from their federal tax returns.

1.29 Like personal income taxes, corporate income taxes are levied by both the Federal Government and the Provinces. The Federal Government has set a basic corporate income tax rate of 38%. From this rate, 10% is abated for income earned in a Province, allowing the Provinces room to impose their own corporate income taxes.²⁷ Unlike provincial personal income taxes, provincial corporate income taxes are expressed as a percentage of taxable income, not as a percentage of federal tax payable.

1.30 Tax Collection Agreements with most provinces means that corporations can simply add the provincial rate of tax to their federal corporate income tax form. Québec, Ontario and Alberta each have a separate income tax act in which provisions vary from the federal basic tax base. The governments of Alberta and Ontario have Tax Collection Agreements with the Federal Government, but corporate income tax is excluded from these Agreements. As stated above, Québec does not have a Tax Collection Agreement with the Federal Government. Corporations in these provinces must therefore file a separate provincial and federal tax return.

Federal and Provincial sales taxes

1.32 A Goods and Services Tax of seven per cent is imposed on most goods and services provided in, or imported into, Canada. It is a value-added tax, applying to all sales throughout the production and distribution chain, including the final retail sale. Health and dental services, daycare services, most sales by charities, municipal transport, legal aid services, financial, and education services are exempt from the Goods and Services Tax. Basic groceries, medical devices, prescription drugs, most agricultural and fishing industry inputs, and exports are zero-rated. Suppliers of exempt goods and services cannot claim input tax credits; suppliers of zero-rated goods and services can claim input tax credits.²⁸

1.33 The Provincial Sales Tax is applied at the provincial level only and is imposed on the price of most goods and some services. It is collected at the retail level only. The range of goods and services subject to the Provincial Sales Tax is similar across provinces, but the tax base is not uniform as different provinces seek to favour different producers or products.²⁹

1.34 The Harmonised Sales Tax operates in Newfoundland and Labrador, Nova Scotia and New Brunswick. In these provinces it replaces the Provincial Sales Tax and the federal Goods and Services Tax. It is applied as a single rate on the same tax base as the Goods and Services Tax. Input tax credits which apply to the Goods and Services Tax also apply to the Harmonised Sales Tax.³⁰ The Harmonised Sales Tax came into operation on April 1^st 1997.

1.35 The Harmonised Sales Tax is levied at a Goods and Services rate of seven per cent for supplies outside the participating provinces and at the Harmonised Sales Tax rate of fifteen per cent for supplies in participating provinces. For the time being, the Harmonised Sales Tax will be administered by Revenue Canada. Rebates on the provincial component of the Harmonised Sales Tax will be available to: charities and non-profit organisations; provincial public sector bodies (except in Newfoundland and Labrador); and new home buyers. This rebate will also apply on the sale of books and in order to allow recovery of tax in certain cases.³¹

1.36 The Québec Sales Tax is similar to the federal Goods and Services Tax. It applies to all sales throughout the production and distribution chain, including final retail sales. Registered suppliers may claim a credit offset (input tax refund) in so far as such inputs are used for the provision of taxable supplies.³² The Québec Sales Tax is harmonised with the federal Goods and Services Tax, but not on the same basis as the Harmonised Sales Tax.

Tax administration

1.38 Prior to the early 1990s, the role of Revenue Canada was limited to collection of personal and corporate income taxes in most Provinces (Québec, Ontario and Alberta administer their own corporate income tax). Since then, Revenue Canada has also collected border revenue such as provincial retail sales taxes, tobacco taxes and liquor mark-ups for some provinces. As the Canadian taxation system also allows distribution of social benefits, Revenue Canada has a role to play in the administration of provincial social benefit programmes in British Columbia, Alberta, New Brunswick, Newfoundland and Labrador and Saskatchewan.

1.39 The Tax Policy Branch of the Ministry of Finance and Corporate Relations in British Columbia has assessed the costs and benefits of a Tax Collection Agreement with Revenue Canada. Overall, benefits are seen in:

• a reduction of government administration costs;
  

• a reduction of compliance costs for taxpayers; and
  

• a reduction of biases in economic decisions.

The major disadvantage lies in the fact that a Tax Collection Agreement limits tax policy flexibility by limiting the Province’s ability to implement social and economic development measures through the tax system.

1.40 With regard to personal and corporate income taxes, further advantages are that:

• the Province pays no collection costs;
  

• federal payments to Provinces are based on assessed tax returns;
  

• tax credits are administered for a fee; and
  

• residents need only file one tax return each year.

The disadvantages are found in the restrictions on provincial tax policy, and that interest and penalties on tax revenue are forfeited in return for federal collection.³³

1.41 In Québec, the federal Goods and Services Tax is collected by the Province on behalf of the Federal Government.

Taxation Rates

Personal Income Tax

Sales Tax

Fuel Tax

Tobacco Tax

Corporate Income Tax

Capital Tax

Payroll Tax

%

%

¢/litre

$/carton

%

%

%

Basic

Surtax

Flat tax

Basic rate

General rate

General rate

Maximum rate

Federal Government

17/26/29

3/5

Nil

7.0

10.0

2.25>5.35°

Nil^#

0.225

Nil

Alberta

44.0

8.0

0.5

Nil

9.0

14.00

15.5

Nil

Nil

British Columbia

49.5

30/49

Nil

7.0

11.0

22.00

16.5

0.30

Nil

Manitoba

50.0

10/25

2.0

7.0

11.5

16.00*

17.0

0.50

2.15

New Brunswick

60.0

8.0

Nil

8.0

10.7b

7.70*

17.0

0.30

Nil

Newfoundland and Labrador

69.0

10.0

Nil

8.0

16.5*

22.00*

14.0

Nil

2.0

Northwest Territories

45.0

Nil

Nil

Nil

10.7

25.20

14.0

Nil

1.0

Nova Scotia

57.5

10.0

Nil

8.0

13.5*

9.04*

16.0

0.25

Nil

Ontario

40.5

20/56

Nil

8.0

14.7

4.70*

15.5

0.30

1.95

Prince Edward Island

59.5

10.0

Nil

10.0

13.0

12.65

16.0

Nil

Nil

Québec

N/A

N/A

N/A

7.5

15.2*

8.00

8.9

0.64

4.26

Saskatchewan

48.0

10/25

2.0

7.0

15.0

16.80*

17.0

0.60

Nil

Yukon Territory

Nil

15.0

Nil

Nil

1.43 Surtaxes are a high income tax which is applied when the amount of tax payable goes beyond a nominated threshold. The Federal Government, British Columbia, Ontario and Saskatchewan have a two-tiered surtax. The federal surtax will become a single rate by eliminating the 3% tier, effective July 1^st 1999.³⁵ Flat taxes are levied at the same rate for all individual taxpayers. Both the surtaxes and the flat taxes are assessed as a percentage of income tax payable. Both types of tax have been introduced as deficit-reduction measures.

1.44 The following table indicates Québec’s personal income tax rates.³⁶ These are separate from the Federal Government’s tax rates, and are not expressed as a percentage of the Federal Government’s tax rates.

CAD$

%

0–7,314

0

7,315–13,999

19.06

14,000–22,999

21.06

23,000–30,999

23.07

31,000–49,999

24.44

50,000–51,624

25.28

52,625+

26.48

Observation 2:

Federal financial arrangements

In Canada both the Federal Government and the Provinces have broad tax powers, with most major taxes being shared.

With the exception of Québec, personal income taxes are administered centrally by Revenue Canada, under a system of “piggy-back” taxation.

This arrangement promotes provincial financial autonomy without the burden of excessive administrative costs arising from federal-provincial duplication.

Federal financial arrangements

Federal transfers prior to 1996-97

• Equalisation programmes;
  

• Established Programmes Funding to support health care and post-secondary education; and
  

• Canada Assistance Plan to fund social assistance programmes.

1.47 A Province becomes eligible for equalisation payments when its fiscal capacity falls below the “five province standard”, a population-weighted average of British Columbia, Manitoba, Ontario, Québec and Saskatchewan. All Provinces except Alberta, British Columbia and Ontario receive equalisation payments.

1.48 The Established Programmes Funds consisted of cash payments and a notional tax point value. In 1995-96, the last year of the programme, the Federal Government transferred CAD$10.6 billion in cash and CAD$11.4 billion through the tax component. Cost limitations through restriction on Gross Domestic Product increases had been in place since 1982/83 and a freeze on per capita transfers had been in place since 1990/91. In 1995/96, the Canada Assistance Plan provided CAD$7.8 billion in transfer payments. It was originally designed as 50:50 cost share arrangement, but annual growth limitations on some Provinces and frozen levels of entitlements have reduced this.

1.49 Beginning in the financial year 1996-97, the Established Programmes Fund and the Canada Assistance Plan were rolled into one programme, the Canada Health and Social Transfer. Equalisation was continued as a separate programme. The Federal Government was concerned to restrict the growth in transfer payments under the Established Programmes Fund and the Canada Assistance Plan and so when these programmes were consolidated into the Canada Health and Social Transfer, large funding cuts were imposed.

Canada Health and Social Transfer

Interstate commerce

Intergovernmental relations

1.53 Intergovernmental relations in Canada are conducted through a series of regular meetings occurring at and across each level of the federal system. Federal, Provincial and Territorial meetings are held at the First Ministers’ level and at the sectoral level. The Provinces and Territories also meet regularly, as a whole and in regional groupings, in order to harmonise policy positions and foster regional co-operation.

1.54 This density of networks has received some criticism within Canada, with an argument that this system of intergovernmental relations creates a ‘democratic deficit’:

[T]he argument is that a lot of the time this relationship between our two sets of executives is behind closed doors, that there is not a great deal of involvement of the public and that in terms of democratic decision-making very often you do deals and then emerge with the deals and there is not a lot of room for the public once the deal is done to comment and change the arrangements.³⁸

1.55 However, according to The Honourable Andrew Petter, British Columbia’s Minister of Intergovernmental Relations, the web of inter-provincial meetings is viewed positively by Canadians:

[T]here is a very strong sense of provincial identity amongst citizens right across this country . . . there is a sense that commonality of interest amongst Provinces is as important, or perhaps even more important in terms of maintaining national cohesion than the role of the Federal Government, particularly as the Federal Government’s ability to influence policy has diminished along with its . . . resources and transfer payments.³⁹

Federal-provincial-territory intergovernmental relations

First Ministers’ Conference

1.58 During the 1970s and 1980s, these Conferences took place about twice a year. Under the Chrétien Government these Conferences have been held less frequently and have been less elaborate affairs. They are currently referred to as ‘meetings’ rather than as ‘conferences’. The most recent meeting was in February 1999 and the previous one was held in December 1997.⁴¹

Ministerial Conferences

Inter-provincial/territory co-operation

[T]he Federal Government has very often played off Provinces or blocks of Provinces against each other. It’s not uncommon for the Federal Government to make common cause with the have not Provinces against the so-called have Provinces or to make alignments with Québec as opposed to other Provinces or the like, and I think Provinces have found that it’s been very much to their detriment not to at least try to co-ordinate, in some cases to come to common positions. So I think that has been the driving force plus there are a lot of common issues, a lot of experience that can be shared, I mean, when you are trying social innovation and social programming within an area or provincial responsibility, probably the best object lessons for positive and negative for you to look to and test are those of other provinces.⁴²

Premiers’ Conference

Council of Maritime Premiers⁴³

1.63 The Council has its legislative base in the Council of Maritime Premiers Act 1971, which has been adopted by all of its participating governments. It outlines the aims of the Council and establishes a fiscal base for the operation of the Council. In the fiscal year 1996-7, New Brunswick contributed 50 per cent of the operating costs of the Secretariat and Council agencies, while Nova Scotia and Prince Edward Island contributed 40 per cent and 10 per cent respectively.

1.64 The Secretariat of the Council organises its work and has a policy development function. It co-ordinates the activities of the Council, provides a central service to Provincial Ministers and officials in the co-ordination and implementation of regional programmes and projects, and acts as a head office for regional agencies and employees. The services of the Secretariat are also provided to the Atlantic Provinces Education Foundation, the Maritime departments of transportation and communications, the Conference of Atlantic Premiers and the Conference of New England Governors and Eastern Canadian Premiers.

1.65 The Council has established a number of regional agencies in order to promote and ensure effective co-ordination of policies. Those currently in operation are the Maritime Provinces Higher Education Commission, the Atlantic Provinces Education Foundation, the Maritime Municipal Training and Development Board and the Maritime Provinces Harness Racing Commission.

1.66 In 1992, the basis for co-operation was extended with the adoption of the Maritime Economic Co-operation Act. The goals of the Act are the removal of trade barriers, the creation of a competitive business environment across the three Provinces, increased self-reliance and improved infrastructure.

Conference of Atlantic Premiers

1.68 Similarly to the Council of Maritime Premiers, the Conference of Atlantic Premiers operates as an instrument for public policy, and co-operation and co-ordination of regional policy. Its primary focus is the expansion of trade and economic opportunities throughout the region, to be facilitated by greater intergovernmental co-ordination. In addition to these functions, it seeks to develop a distinct Atlantic approach to regional and national issues. In this last respect, it has a broader role than the Council of Maritime Premiers.

1.69 The Atlantic Premiers have signed agreements such as the Atlantic Canada On-Line Agreement to enable dissemination of public information on-line through a public-private sector partnership, and the Atlantic Procurement Agreement which seeks to open additional markets across the region to suppliers to academic institutions and hospitals. Other agreements include the Atlantic Investment Fund and Co-operation in Distance Education.

Western Premiers’ Conference⁴⁴

Council of New England Governors and Eastern Canadian Premiers⁴⁵

1.72 Recently, the Council has concentrated its efforts in the areas of economic development, re-building the Northeast Atlantic groundfish industry, cross-border environmental issues and energy. These efforts have led to a number of initiatives:

• the implementation of a regional programme to reduce sulphur dioxide emissions;
  

• the adoption of principles of a good neighbour environmental relationship;
  

• sponsorship of ten international roundtables on energy;
  

• international tourism projects to promote the region;
  

• the Mystic Covenant on trade relations; and
  

• sponsorship of a conference on air quality.

1.73 Meetings of the Council alternate between American and Canadian jurisdictions, with the 1998 meeting held in Fredricton, New Brunswick. The Canadian section of the Council is served by the Secretariat of the Council of Maritime Premiers.

1.74 The Eastern Canadian Premiers do not meet separately or apart from this Conference.⁴⁶

Provincial Ministerial Conferences

Summary of intergovernmental meetings in Canada

Meeting

First Ministers’ Meetings

Annual Premiers’ Conference

Conference of Atlantic Premiers

Council of Maritime Premiers

Western Premiers’ Conference

Council of New England Governors and Eastern Canadian Premiers

Federal Government

4

Alberta

4

4

4

British Columbia

4

4

4

Manitoba

4

4

4

New Brunswick

4

4

4

4

4

New foundland and Labrador

4

4

4

4

Northwest Territories

4

4

4

Nova Scotia

4

4

4

4

4

Nunavut

4

4

4

Ontario

4

4

Prince Edward Island

4

4

4

4

Québec

4

4

4

Saskatchewan

4

4

4

Yukon

4

4

4

Canadian management of intergovernmental relations

Canadian Intergovernmental Conference Secretariat⁴⁸

1.77 The Secretariat was formed as an agency of the Federal and Provincial Governments, is financially supported by both governments and has its staff drawn from federal and provincial administrations. An intergovernmental cost-sharing agreement sets out the funding arrangements for the Secretariat and means that no extra cost is charged to governments for using the Secretariat’s services.

1.78 Its mandate is to provide support services to federal, provincial and territorial departments who are called upon to organise and chair intergovernmental meetings. It is designed to relieve its clients of the technical and administrative tasks associated with the planning and conduct of senior level intergovernmental meetings. It remains the task of the participating governments to set the agenda of meetings and to undertake the negotiations necessary to reach intergovernmental agreements.

1.79 The Secretariat can provide a Conference Officer to act as Secretary, assisting and advising the Chair of the meeting with planning, organisation and logistics management for the meeting; the preparation of a conference programme and briefing material; on-site secretarial services; media relations services; and security services. The Secretariat maintains a permanent archive of all records and documents associated with each of the conferences it serves.

1.80 The Secretariat serves the meetings of the First Ministers, the Annual Premiers’ Conference, the Eastern Canadian Premiers’ and New England Governors’ Conference and the Western Premiers’ Conference. The bulk of its work comes from the multilateral meetings of Ministers and Deputy Ministers across all policy areas.

Federal management of intergovernmental relations

1.82 The Minister of Intergovernmental Affairs is responsible for the management of Federal-Provincial-Territorial relations across all policy areas. The Minister is required to co-ordinate the Federal Government’s efforts in clarifying Federal and Provincial roles, thus making the work of government more efficient. He is supported in this work by a Deputy Minister (a civil service position in Canada) who provides policy advice and support and who directs the day-to-day management of the Intergovernmental Affairs Office within the Privy Council.

1.83 Within the Intergovernmental Affairs Office, the Deputy Secretary (Intergovernmental Policy) is responsible for strategic planning, integrated analysis and options and policy advice. This work is supported by four divisions: Aboriginal Affairs, Policy and Research, Constitutional Affairs and Intergovernmental Policies and Strategy and Plans. This policy research function is bolstered by the Deputy Secretary (Intergovernmental Operations) who is responsible for providing an integrated view of relations with the Provinces and Territories across the Federal Government’s policy agenda and advise on communications issues related to intergovernmental relations. This work is concerned with the functional and operational consequences of intergovernmental policy. The Deputy Secretary is supported in this role by a further four divisions: Provincial Analysis, Co-ordination and Advisory Services, Strategic Analysis, and Intergovernmental Communications.

Provincial/Territory management of intergovernmental relations

1.85 The governments of New Brunswick and Saskatchewan each have a Department, and the government of Alberta has a Ministry of Intergovernmental and Aboriginal Affairs, within which the Intergovernmental Relations section has responsibility for the management and development of intergovernmental affairs. Ontario has a Ministry of Intergovernmental Affairs with similar responsibilities. Each of these departments is headed by a Minister of Intergovernmental Affairs, and each has a mandate to review policies, programmes and legislation for their intergovernmental implications and to participate in the negotiation of intergovernmental agreements. They are required to provide strategic advice to the government, and to make recommendations on the implications of issues and policy initiatives advanced by their governments. They also have responsibility for co-ordinating and preparing briefs for intergovernmental meetings and conferences.

1.86 The Minister of Intergovernmental Relations in British Columbia is also Minister of Advanced Education, Training and Technology, and Federal and Provincial Relations is a section within the Ministry of Advanced Education and Training.

1.87 In Manitoba, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Québec, the Northwest Territories and Yukon Territory, responsibility for Intergovernmental Affairs lies with a division or secretariat located within the Executive Council (Cabinet Office). Of these governments, only Québec has a distinct Minister for Canadian Intergovernmental Affairs; in the other four Provinces and two Territories, responsibility for Intergovernmental Affairs lies with the Premier. Administrative and policy support is provided by a small number of staff who work within the Premier’s Office.

1.88 Beyond the common task of managing Federal-Provincial-Territory relations, each Intergovernmental Affairs section varies according to Province and Territory. Their policy goals differ between those that have national focus (particularly New Brunswick, Alberta and Ontario) and those which concentrate on regional co-operation (Prince Edward Island, British Columbia and the Yukon). ‘Inter-governmental affairs’ tends to be a broadly interpreted term, and in the cases of Newfoundland and Labrador, Alberta and New Brunswick it can also refer to international co-operation. The mandate of each Intergovernmental Affairs ministry or secretariat is to communicate that Province/Territory’s view of itself within the Canadian federation and its relationship to the outside world.

Observation 3:

Intergovernmental institutions

Intergovernmental relations in Canada reflect a strong provincial identity and the need to seek out the national and regional interest. Intergovernmental relations in Canada are focussed on an extensive range of meetings (provincial-provincial, federal-provincial) and multi-lateral activity. A permanent conference secretariat exists to provide a neutral support for all governments involved and to facilitate meeting organisation. This dynamic range of meetings is promoted by a high level Minister for Intergovernmental Affairs at the federal level and in six of the Provinces.

Developments in the 1990s

Renewing the federation

• limitations on Federal Government’s spending power: the Federal Government committed itself to not creating cost-shared programmes in areas of provincial jurisdiction without provincial co-operation;
  

• existing cost-shared programmes, particularly in areas of social policy, would be reviewed for more effective and co-operative planning and implementation;
  

• the issues of overlap and duplication would be directly addressed: the Federal Government immediately proposed withdrawing from sectors such as labour market training, forestry, mining and recreation; and
  

• a Federal-Provincial-Territory partnership in promoting Canada’s economic union and interprovincial free trade.⁴⁹

By mid-1996 the Federal Government reported that progress had already been made in a broad range of areas. Federal-to-provincial transfers of management had occurred in transportation, labour market arrangements, and social housing. The Federal Government had announced its withdrawal from mining and forestry and the management of freshwater fish habitat, with consequent reductions in federal funding to those programmes.⁵⁰

1.91 Environmental management, not being a clear federal or provincial competence, was subject to overlap and duplication. By the end of May 1996 the Canadian Council of Ministers of the Environment had agreed to the goal of a comprehensive, multilateral umbrella approach. Mr Bruce Morgan, Director of the Corporate Policy Branch of the Ministry of Environment, Lands and Parks for British Columbia described the purpose of this approach:

One thing I did want to touch on with you is that back in January of this year (1998), all of the Environmental Ministers from across Canada save the Province of Québec, signed a harmonisation agreement on environmental matters, and this is a document that we were working on for a number of years. What it tries to do is recognise the fact that we’re both strong players in the environmental field and that we need to do a better job of meeting our respective roles and responsibilities. Why did we move towards this agreement? First of all, at the very senior levels, the level of the Prime Minister and the Premiers, there was a very keen interest to streamline and improve the efficiency of federation. . .

We have to recognise the legitimate authorities of both the Federal and Provincial government, but move towards a situation where there’s . . . co-ordination and co-operation.⁵¹

1.93 The basis for “Renewing the Federation” appears to stem from budgetary pressures on the Federal Government⁵² but it allowed some consultation with Provincial and Territorial Governments on the impact of those cuts and the administrative re-arrangements which would be necessary. While concern was expressed in some quarters about the extent of federal spending cuts, Provincial and Territorial Governments were positive about the refining of Federal-Provincial-Territorial roles that resulted from the process.⁵³

Changes in social policy administration

In comparison with other federations we probably have more emphasis in our constitution on defining areas of exclusive responsibility for the two tiers of government than is the case in other federations, and that some of the dynamic in relations between the Federal and Provincial Governments here relates to the fact that they do have exclusive legislative authority on most social programs and education and social assistance, health, and the Federal Government gets into those [areas].⁵⁴

• Clarification of roles and responsibilities between Federal and Provincial/Territorial Governments. Where overlap is unavoidable, consultation should occur between the two levels of government with regard to programme design, financing and delivery;
  

• Health: establishment of a Federal-Provincial-Territorial process which clarifies, refines and interprets the parameters of the Canada Health Act;
  

• Education: co-operation between Provinces and Territories to eliminate barriers to student mobility and work with the Federal Gvernment on harmonising student loan programmes nationally;
  

• Social services: possible consolidation of income support for children into a single national benefit, jointly managed by both levels of government; joint administration or consolidation of other income supports;
  

• Labour market: reform of Unemployment Insurance to consider the effects on Provincial-Territorial social programmes and the distribution of costs and savings associated with reform; clear delineating of Federal-Provincial-Territory roles and responsibilities and fiscal responsibility; and
  

• Fiscal arrangements: improvements in Federal-Provincial-Territory fiscal policy co-ordination to prevent cost shifting, improve the process of pre-budget consultation and co-ordination, and action to ensure that federal conditions on fiscal transfers are not increased.⁵⁵

The proposals were accepted by the First Ministers and the Ministerial Council Report was presented to the Prime Minister in June 1996. A Ministerial Council of Social Policy Renewal was established to further pursue the report. Meetings of this Council occurred at the Provincial-Territorial level and at Federal-Provincial-Territorial level. The co-chairs of the process were Mr B. Wiens, Minister of Intergovernmental Affairs of Saskatchewan and Ms A. McLellan, chair of the federal Cabinet Committee on Social Union.

1.96 By mid-1997 progress in the following areas had been made: preparations for the implementation by July 1998 of a National Child Benefit scheme; Provincial-Territorial agreement on a joint vision for health roles and responsibilities; and bilateral Labour Market Development Agreements with eight Provinces. In all other areas nominated in the Ministerial Council Report progress was made on Provincial-Territorial agreements on proposals to be put to the Federal Government.⁵⁶

1.97 Progress on the reform and renewal process meant that by December 1997 the First Ministers were able to commit themselves to negotiations on a framework agreement for Canada’s social union which would apply to Federal-Provincial-Territory governments. The objectives for this framework agreement were a set of principles for social policy, collaborative approaches to the use of the federal spending power, appropriate dispute settlement mechanisms between governments, clarifying the ground rules for intergovernmental co-operation and identifying processes for clarifying roles and responsibilities within social policy sectors.⁵⁷

1.98 The third progress report to First Ministers noted negotiations with the Federal Government on a Framework Agreement on the Social Union had commenced in March 1998. Under the Framework Agreement work had begun on health policy, including consideration of the clarification of roles and responsibilities and Canada Health Act interpretation. Nine bilateral agreements between Federal-Provincial governments on the Employability Assistance for Persons with Disabilities programme had been concluded with work continuing on completing agreements with all Provinces and Territories. With respect to the Canada Health and Social Transfer and fiscal equalisation, the First Ministers developed a set of proposals for reform of fiscal arrangements and had met with the Federal Government to discuss these proposals.⁵⁸

1.99 The Framework Agreement on Social Union is a comprehensive review of social policy development, financing and delivery of services in the Canadian system. Initiated by the Provincial and Territorial First Ministers, the process of signature has been marked by significant co-operation and co-ordination between the Provinces and Territories in presenting their negotiating position to the Federal Government. Throughout this process Québec has exercised its right to “opt-out” of Federal-Provincial agreements in order to maintain complete control of its social policy.

1.100 The Framework Agreement was signed by the Government of Canada and the Governments of the Provinces and Territories on February 4^th 1999. The Framework Agreement outlined a common set of principles, commitments to increase internal mobility, public accountability and transparency, joint planning and collaboration between governments, an agreed use of the federal spending power and provided a dispute avoidance and resolution procedure. The Agreement will be reviewed at the end of the third year of the agreement (2001).⁵⁹

Observation 4:

Role of the States in the federation

The 1990s saw in Canada the establishment of a number of intergovernmental agreements. This was motivated by a need to reassert the viability of the federal system after failed attempts at constitutional reform. Particular efforts have been made in the areas of overlap and duplication (eg environment policy) and federal funding in areas of provincial responsibility (eg health and social policy). Premiers have jointly described the process as successful. The presence of strong intergovernmental relations mechanisms and the regularity of their use definitely facilitated the changes.

Summary of observations

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Endnotes