Federalism

The Canadian federal system has changed dramatically since Confederation in 1867, and it continues to evolve in important ways. 

In this section, you will find material on the federal-provincial division of powers, intergovernmental relations, fiscal federalism, and the constitutional development of the territorial governments. 

DIVISION OF POWERS

The basic division of powers between the federal (Dominion) and provincial governments was set out in the Constitution Act, 1867, particularly in sections 91-101. Several formal changes have been made to this original division of jurisdiction: 

The legislative powers of the federal and provincial legislatures have been changed considerably over the years by court decisions interpreting the terms of these documents, and by a multitude of administrative agreements between the different levels of government.

The Center for Research and Information released the results of a survey in 2003 of Canadians' attitudes towards federalism. A summary of the results are available online and reveal that 56% believe that the federal government has too much power.

 

TERRITORIAL GOVERNMENTS

The Northwest Territories and the Yukon have two distinct forms of government in Canada. They were created by federal legislation, yet have powers similar to the provinces and operate autonomously. To see the similarity between the jurisdiction of the provincial and territorial governments, compare s.92 of the Constitution Act, 1867 with s.17 of the Yukon Act. Note that a new Yukon Act was passed in 2000, but has not yet come into force; the legislative powers of the territorial legislature are in s.18 of the new Act.

On April 1st, 1999, the Northwest Territories were divided, and the eastern half became a new territory, Nunavut. To find out more, visit the Nunavut Planning Commission and read the Nunavut Act passed by Parliament in 1993. The CBC has a special In Depth section devoted to the creation of Nunavut, which provides a lot of background information. The creation of Nunavut also means substantial changes to the Northwest Territories; see the NWT government’s Agenda for the New North. 

 

INTERGOVERNMENTAL RELATIONS

Very important changes have occurred through more informal practices between the two levels of governments. Considerable co-ordination of policy innovations has been brought about through intergovernmental negotiations among the first ministers, ministers responsible for particular policy areas, as well as among federal and provincial civil servants. Many federal-provincial and inter-provincial meetings are supported by the Canadian Intergovernmental Conference Secretariat. At this site you will find information and press releases and reports from a number of these meetings. 

The Privy Council Office in Ottawa has a useful collection of material outlining intergovernmental relations in a range of areas of public policy.

Annual meetings are now held between the Prime Minister of Canada and the provincial first ministers. Read the press release from the February 1999 First Ministers' Meeting for the Framework Agreement on the Social Union agreed to at this meeting. 

The premiers also meet each year, without any federal participation. All the press releases from intergovernmental meetings are available from the CICS. The Alberta government has posted useful material from the annual premiers' conferences as well as the Western premiers' conferences. 

In 2003, the provincial governments agreed to create the Council of the Federation to institutionalize much their meetings and ongoing attempts to coordinate public policy.

Following the 1997 premiers' conference, the first ministers of the territories and all the provinces except Quebec met in September in Calgary and agreed on the Calgary Declaration, a resolution to undertake public consultations on national unity that was based on a set of agreed-upon principles that included the recognition of " the unique character of Quebec society."

You can access some very useful information about federalism issues at the intergovernmental affairs departments of the following governments: 

The Government of Canada's Intergovernmental On-Line Information Kiosk is another very useful site for gateways to information on federalism and intergovernmental relations. 

Many restrictions to trade among the Canadian provinces have emerged over the years, but some effort to ease trade was made in the mid-1990s. The result was the Agreement on Internal Trade negotiated in 1994. One major weakness of this agreement, however, is the lack of effective enforcement measures. 

Other major agreements reached between the federal and provincial governments are the:



FISCAL FEDERALISM

Very important aspects of Canadian federalism are determined by the need to transfer money to provincial governments to fund the programs for which they are constitutionally responsible. There are two kinds of money transfers: equalization payments paid to the poorer provinces in order to compensate for their smaller revenue base; and program payments paid by the federal government to all provinces to fund programs it considers important. 

The federal Finance Department provides a range of interesting material that explains the various kinds of transfer payments, as well as facts about the actual level of funding involved. The Finance Department documents federal cash and tax transfers to the provincial governments paid since 1999, with forward projections to 2003. 

Equalization Payments

Because provincial economies vary tremendously, many provinces need financial resources transferred to them in order to provide government services roughly equivalent to those in the rest of Canada. A better understanding of the economic disparities can be gained from comparing the differences in the 1995 provincial per capita GDP. Varying economic conditions mean that provinces and territories have very different tax rates; the table of comparative tax rates prepared by the Nova Scotia government illustrates this. 

The need for equalization payments to overcome regional economic disparities is so important that it was written into the Constitution Act, 1982: 

EQUALIZATION AND REGIONAL DISPARITIES   

36. (1) Without altering the legislative authority of Parliament or of the provincial legislatures, or the rights of any of them with respect to the exercise of their legislative authority, Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to 

(a) promoting equal opportunities for the well-being of Canadians; 

(b) furthering economic development to reduce disparity in opportunities; and 

(c) providing essential public services of reasonable quality to all Canadians. 

Commitment respecting public services 

(2) Parliament and the government of Canada are committed 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. 

 

Program Payments

The Canada Health and Social Transfer was the main vehicle for the federal government to help pay for health, education, and welfare programs. In 2004, however, these transfer funds were split into two separate programs.  The Canada Health Transfer -CHT is the main program through which the federal government funds health care expenditures by the provinces. The Canada Social Transfer - CST transfers federal funds to the provinces to support a variety of social programs such as post-secondary education, social assistance, and child welfare programs.

Considerable controversy arises because the federal government has been able to attach conditions to the money it gives the provinces. The federal spending power allows the federal government to set standards in policy areas that are normally under provincial jurisdiction. For example, see the legislation covering health care in Canada, the Canada Health Act. 

Because of the large amounts involved in transfers to the provinces, the federal government unilaterally imposed cuts in the growth of these transfers. In the 1996 federal budget, Finance Minister Paul Martin outlined the rationale for these cuts, which is essentially the large share of federal spending that is made up of transfer payments of various kinds (see in particular the tables at the end of the document). With the Adobe Acrobat Reader, you can examine useful graphs in the 1996 Budget Chart Book. 

The provinces objected to the federal cuts to transfer payments, because they have become an important source of revenue for the provinces. Statistics Canada has posted tables that show the sources of revenue for each of the provincial and territorial governments; as you will see, transfer payments form a substantial portion. The extent of P.E.I.'s reliance upon fiscal transfers from the federal government and the impact of federal cuts in this area are evident in the P.E.I. Finance Department's paper on Federal Fiscal Issues. (Note: this file requires the Adobe Acrobat Reader.) 

The Quebec government has a background paper on Québec's historical position on the federal spending power, in pdf format. 

Larry Brown paints a grim picture of the effects of transfer cuts in "Canada After the Cuts." 

Connect to the latest federal and provincial budget sites, where you can examine the issues in more detail. 

 

RELATED LINKS

You can find more information related to federalism issues in other sections of Nelson's Canadian Politics on the Web: