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MINISTER DION SUGGESTS THREE PRINCIPLES THAT THE GOVERNMENTS OF OUR FEDERATION SHOULD OBSERVE WITH PARTICULAR CARE IN THIS ERA OF FEDERAL SURPLUSES

TORONTO, ONTARIO, December 6, 2002 – Speaking to the Toronto Board of Trade, the Honourable Stéphane Dion, President of the Privy Council and Minister of Intergovernmental Affairs, underlined that intergovernmental relations present a special challenge while the federal government is running surpluses. To that end, the Minister quoted Prime Minister Jean Chrétien: "It seems to be the case, in Canada at least, that managing a surplus can prove to be as challenging as managing a deficit."

The Minister of Intergovernmental Affairs said he understood why provincial and territorial governments pressure the federal government to transfer more money, as its financial situation seems better than theirs. Furthermore, Mr. Dion reiterated the Government of Canada's desire to support its partners in the federation as best it can in the circumstances, in the health sector and in other areas.

However, the Minister pointed out that the provincial and territorial governments should not give Canadians the impression that the federal government is awash in never-ending surpluses. They should not evoke the so-called fiscal imbalance to avoid their own budgetary responsibilities, Mr. Dion added. Moreover, these governments must stop using counterproductive measures, such as negative ads, to communicate their viewpoints – measures which only tarnish their image with Canadians, the Minister remarked.

To further improve intergovernmental relations in this era of federal surpluses, Mr. Dion proposed three principles that the governments of our federation would benefit from if followed with particular care. He thanked the Toronto Board of Trade for the opportunity to outline these principles at a time when discussions are underway among governments leading up to the First Ministers' Meeting in early 2003.

The first principle is budgetary discipline: all governments must call on Canadians to never relax that discipline, said the Minister. Failing to do so, he emphasized, would see the surpluses melt like snow in summer, pointing to the federal government's heavy debt load and the uncertain economic situation. Mr. Dion also underlined that the Government of Canada's contribution to fostering a healthy economy supports its partners in the federation much more than mere cash transfers ever could. The Minister referred to a recent report by the International Monetary Fund which described Canada's macroeconomic performance since the 1990s as "exceptional," adding it "owes much to the sound policy framework and its skillful implementation".

The second principle is budgetary responsibility: all governments need to assume their own responsibilities, the Minister asserted. Certainly, one of the federal government’s responsibilities is to support its constitutional partners, particularly through cash transfers, the President of the Privy Council acknowledged. But the provinces must assume their responsibilities as well, which are very extensive, the Minister observed, citing a recent OECD study indicating it would be difficult to find constituent entities in a federation more autonomous and responsible for their budgets than our provinces.

The provinces have cut taxes since 1995, giving them a shortfall of over $22 billion, while federal transfers have been restored to 1995 levels, the Minister remarked. They must assume their responsibility for the consequences of those tax cuts, good or bad, he added

The third principle the Minister of Intergovernmental Affairs emphasized is mutual respect: all governments must strive to ensure the tone of their debates is a credit to Canadians. Noting that tensions and disagreements arise in all federations, and that a federation of nirvana does not exist, the Minister called on all parties to stop continually dramatizing these normal disagreements: "It is normal for our federal, provincial and territorial governments to have disagreements. We cannot expect them to agree on everything right away. The important thing is that this tension inherent in federalism generates a synergy that is beneficial to all Canadians," said Mr. Dion.

In conclusion, the Minister demonstrated to what extent Canada's macroeconomic performance is exceptional. This spectacular turnaround in the Canadian economy must not lead us into complacency, it must help us to turn a steady eye in finding the solutions to our problems, in the health field and other areas alike. The President of the Privy Council closed by saying: "To do so, we will need a good dose of discipline, a sense of responsibility and mutual respect. It is up to all our governments to set an example!"

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