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LETTER TO PREMIER LUCIEN BOUCHARD
REGARDING FEDERAL TRANSFERS TO PROVINCES
(TRANSLATION)
February 23, 1999
Dear Premier,
On February 17, 1999, you described the federal budget as "shameful", and the
attitude of the federal government as "arrogant", "crude",
"brutal", and "unimaginable", "an incredible offensive", and
an "attack". Even allowing for your propensity for strong superlatives, these
are serious accusations which merit a response.
Your indignation, which you have chosen to express through ads in Quebec’s daily
newspapers that are as garish as they are misleading, is based on three assertions:
First, you claim that Quebecers will not receive their fair share of the new funds that
the federal government will transfer to provincial governments.
Second, you maintain that the method of allocating the Canada Health and Social
Transfer, which helps to fund health care, among other things, has been modified without
prior consultation, contrary to the commitments made in the Social Union Framework
Agreement.
Third, you claim that the federal government is trampling upon provincial jurisdictions
and transforming our federation into a unitary state.
These three assertions are unfounded. Allow me to examine each of them in turn.
1.
Quebec’s fair share
How can you describe as unfair to Quebec an increase in new transfers to the
provinces of which one third will go to Quebec, which makes up one quarter of the Canadian
population?
In fact, if you add up the positive readjustment in equalization for the past three
years, the increase in equalization over the next five years, and the increase in the
Canada Health and Social Transfer over the next five years, you get a total of $21.7
billion in new transfers to the provinces. Your government will receive $7.4 billion of
that amount, or 34% of the total.
In comparison, Ontario’s share will be only 25% of that total $21.7 billion,
even though it makes up 38% of the Canadian population.
"This equalization is owed to us", you declared. I agree. We Quebecers are
entitled to it because Canada belongs to us in its entirety, with the solidarity that
unites us with other Canadians. We are entitled by virtue of the
Constitution Act, 1982,
the very Act that you so unfairly denounce, which makes equalization a constitutional
obligation. We are entitled because of the exceptionally strong economic growth in our
sister province, Ontario.
Our government believes in equalization, which helps to ensure services of comparable
quality throughout the country. That is why it has completely spared equalization from the
cuts made in recent years and has increased it in the last budget.
Quebec is not the milk cow of Canada, contrary to your self-victimizing accusations.
But neither are we its spoiled child, even though we receive almost half of all
equalization payments. We receive our fair share as a province less wealthy than the
Canadian average.
According to Statistics Canada, Quebecers’ contribution to federal revenues
fluctuates from year to year between 21% and 22%, whereas they receive between 24% and 25%
of federal spending, which roughly corresponds to the difference between our economic
weight (21.7% of Canada’s GDP) and our demographic weight.
If ever the day were to come when our economic health allowed us to financially assist
our fellow citizens in the other provinces, I know that we would give with the same
generosity that Ontarians, Albertans and British Columbians have been showing for so
many years. Because that is what Canadian solidarity is all about.
I can assure you that Quebec does receive its fair share
of what you call structural spending. For example, in 1996, the most recent year for which
data are available, 26.3% of federal science and technology spending, excluding spending
in the National Capital Region (NCR), was made in Quebec.
In addition, Quebec received 39.1% of all R&D grants and contracts awarded to
Canadian industry by the Government of Canada. Quebec universities also received 28% of
R&D grants and contracts. Finally, the Government of Canada is investing in Quebec
over 50% of the funding allocated under the
Technology Partnerships Canada program.
The Government of Canada has played and will continue to play its role in the growth of
knowledge industries in Quebec.
2.
Respecting the social union agreement
Your complaints about the Canada Health and Social Transfer have hidden from
Quebecers the fact that they were the ones, in per-capita terms, who benefited from it the
most. For example, this year, each Quebecer will receive $939, compared with $919 for
Newfoundlanders, $830 for Ontarians and $800 for Albertans. This budgetary anomaly is not
based on any logic, certainly not the logic of need: after all, Quebec is wealthier than
Newfoundland!
The Government of Canada’s intention to restore the Canada Health and Social
Transfer to an equal footing has been known for quite some time. Let’s review the
chain of events.
On February 20, 1990, the federal government of the day announced that, as a budget
austerity measure, it would limit increases in transfers under the Canada Assistance Plan
to 5% a year, for a temporary two-year period, in the only three provinces that do not
receive equalization payments.
You were then a member of that federal government. You supported that decision, that
temporary two-year imposition of a ceiling on British Columbia, Alberta and Ontario.
The federal budget at the time projected that this measure would deprive the wealthier
provinces of only $155 million over two years. In fact, it saved the federal government
$10.1 billion between 1990 and 1995, of which $8.2 billion came from Ontario alone.
The Liberal Party of Canada made a commitment to end this imbalance before it won the
1993 election. The Government of Quebec was prepared for this. The 1995 Campeau budget
assumed that equal per-capita distribution would be in effect as of the 1996 federal
budget.
In fact, to assist the less wealthy provinces, Minister Martin announced in 1996 a
six-year transition period to halve the gap separating the province that benefited the
most from this measure, Quebec, and the province that was the most penalized by it,
Alberta.
Thus, the following year, the first Landry budget was able to count on an unexpected
$1.7 billion in federal transfers, spread out over three fiscal years. Mr. Landry
himself acknowledged that "the slope is not as steep as we might have thought"
(March 6, 1996). That’s probably the nicest compliment your finance minister has ever
paid to the Government of Canada!
Since then, the debate on how to accelerate this process of achieving equal treatment
has continued. On June 15, 1998, the provincial finance ministers, with the exception of
your government’s, submitted a document to Minister Martin calling on him to equalize
the Canada Health and Social Transfer on a per-capita basis if equalization payments could
be increased at the same time. This document was in fact considered by the provincial
premiers on August 7, 1998, at the Saskatoon Conference in which you participated.
It is this change, desired by the vast majority of the provinces, that Minister Paul
Martin announced in his last budget, but to be phased in over three fiscal years. This new
combined reallocation of the Canada Health and Social Transfer and Equalization will
provide your government, as I pointed out earlier, with one third of all new transfers to
the provinces.
And as I have just explained, this announcement has come after a lengthy debate which
fully meets the requirements for consultation set out in the social union agreement, an
agreement that you cite and reject at the same time.
3.
Respecting provincial jurisdictions
You say that this is a centralizing budget, when in fact 68% of new
discretionary spending will go directly to the provinces. I lack enough space to describe
the extent to which this third criticism is unfounded. I will simply point out two facts.
First of all, over and above the additional moneys transferred to the provinces, most
of the new federal initiatives are designed to enhance research and development in Canada.
There is certainly nothing in the Constitution that makes research an exclusive provincial
jurisdiction. With respect to health research specifically, the federal government has
been playing an important role since the 1930s, for one thing to facilitate the
dissemination of knowledge among researchers throughout Canada.
Quebec has greatly benefited from this. For example, around one third of grants awarded
by the Medical Research Council of Canada go to Quebec. If health research and the
biomedical industry are so well developed in Quebec, it is in part because of the role the
Government of Canada has played in this regard. For Canada to be on the leading edge of
this crucial research sector, all our governments need to assist one another and work
together, in the spirit of the social union agreement.
Second, Canada is in no way evolving into a unitary state. There is nothing to confirm
such an assertion on your part. On the contrary, in the past 20 years, federal
program spending has decreased relative to the gross domestic product more quickly than
that by the provinces, and there is no reason to expect that this trend will not continue.
In 1997, federal program spending represented 12.6% of the gross domestic product, or 10%
if transfers to the provinces are excluded. That same year, program spending by the
Government of Quebec represented 19.2% of the province’s gross domestic product.
In other words, the Government of Quebec carries almost twice as much weight in the
Quebec economy as the federal government. Is this what you call a unitary state?
Furthermore, never in the history of this federation have federal transfers been less
conditional, a trend that runs contrary to that in other federations. Federal transfers to
the Government of Quebec will be even less conditional over the next five years, because
they will be made increasingly in the form of equalization, which is completely free of
conditions. I’m surprised that you don’t welcome this.
As you can see, Mr. Premier, your criticism is completely unjustified. This is a good
budget, which is fair to Quebecers as it is to other Canadians, and which will help us to
work together to improve this decentralized federation, this country united in solidarity,
in its continuing quest for greater prosperity and justice.
Yours sincerely,
(French version signed by)
Stéphane Dion
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