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"Fiscal balance in Canada"
Notes for an address
by the Honourable Stéphane Dion,
President of the Privy Council and
Minister of Intergovernmental Affairs
Keynote for the annual speech to
the Saint-Laurent Chamber of Commerce
Montreal, Quebec
March 27, 2002
Check against delivery
Link to the
tables referred to in the speech (PDF format)
At around the same time every year, the Saint-Laurent Chamber of Commerce
invites me to review the financial state of the Canadian federation. I am
especially grateful for your invitation this year, as this issue is very much in
the news. Indeed, according to a theory in vogue, which you know well and which
is being discussed widely, the federal government’s budget surplus would prove
the existence of a fiscal imbalance to the detriment of the provinces.
Before explaining why the Government of Canada does not subscribe to this
fiscal imbalance theory, I would like to make three preliminary remarks.
First, the existence of a federal budget surplus is good news for all
Canadians. That our federal finances are now showing a surplus, after having
been in deficit for so long, and that at the same time our provincial
governments have succeeded in putting their finances in order, when all were in
the red in 1993, is a recovery we can all rejoice in and congratulate ourselves
on, because it is the result of our efforts in recent years.
Second, it is normal for us to have different views on how this budget
surplus ought to be used. This is a usual debate in any federation: how best to
allocate tax dollars between the orders of government. It is normal for us to
have different views on this issue, including between political parties that
believe in Canadian unity. What is abnormal is for some people to try to use
this debate to justify secession. When the Premier of Quebec, Mr. Landry,
depicts the Séguin report as "a powerful educational tool for
sovereignty," what he is saying is disconnected from reality: countries
do not break up over budget surpluses.
Public finances often spark heated discussions in all countries. In the
United States, the states now find themselves with an unexpected deficit of over
US$50 billion and they are reproached with having reduced their taxes too much.
This debate, which is similar to ours, is not of course creating any separatism
in the United States.
In Germany, the wealthy Länder have almost threatened to go on strike
in terms of equalization and have gone to court and have obtained less demanding
equalization rules. This very complex and arduous debate is not causing any
separatist tension in Germany.
And I could also talk about the situation in Belgium, where, to convince the
Flemish government to further assist the Belgian French community in its very
precarious financial situation, a series of concessions had to be made that,
according to some, resulted in a weakening of the linguistic protections
hitherto enjoyed by municipalities that offer services in French to the
Francophones of Flanders. As we can see, the debate on the fiscal capacity of
the orders of government exists in other federations as well, and often raises
greater difficulties than is the case here.
My third preliminary remark is that the argument of the "consensus"
should in no way be a barrier to individual thought: we can all reach our own
conclusions. It is true that many people in Quebec and elsewhere in Canada
believe that a fiscal imbalance exists to the detriment of the provinces. But
for one thing, this consensus pertains to a very complex issue and does not
rally all the experts, far from it. It does not include Quebec business leaders
(Table 2),
nor the many financial analysts who regularly congratulate Canada’s Finance
Minister for his financial discipline. Moreover, it is normal for provincial
political parties to continually call for more money from the federal
government, just as it is normal for our municipalities to believe that "
the needs are in the municipalities and [...] the money is in Quebec City."
[Translation]
Above all, we cannot rule out the possibility that a consensus can be forged
on the basis of a misconception. There is no need to hark back to Duplessis to
find examples of this in Quebec. In the early 1990s, there was a
"consensus" that the federal budget deficit, which at that time was
very substantial, was the result of tens of billions of dollars in unnecessary
duplication between federal and provincial programs. Job training alone was
supposed to cost us hundreds of millions of dollars in duplication, it was
widely rumoured. "Studies" were supposed to prove this. "Release
those studies," [Translation] Mr. Parizeau roared in a televised debate
with Mr. Daniel Johnson during the 1994 provincial election campaign.
Of course, once in power, Mr. Parizeau found only a pile of documents that
proved nothing. The "consensus" was based on a misconception.
This time, however, the Government of Quebec has released a study: the
Séguin Commission report. The argumentation in this report can be summed up in
a single sentence: the federal government is piling up surpluses that it uses in
large part to invade provincial fields of jurisdiction, while the provinces are
lacking own-source revenues to fulfil their own responsibilities, such as in the
health field. The Séguin Commission thus amalgamates two debates.
The first is a financial one: do federal surpluses prove there is a fiscal
imbalance to the detriment of the provinces?
The second is a constitutional one: is the federal government using its
budgetary latitude to invade provincial legislative jurisdictions?
I would like to answer these two questions in order (Table
3).
I. The myth of fiscal imbalance
To gauge the balance of our public finances, we first need to be backed up by
the facts, specifically, on the historical evolution of three key variables:
revenues, spending and surpluses. Once this historical foundation is laid, we
can then look at projections (Table
4).
The facts
Tables 5
and 6 show
it is inaccurate to claim that the money is in Ottawa while the needs are in the
provinces. Table
5 shows that, taken as a whole, provincial revenues have long outstripped
federal revenues, and there is no indication of a future reversal of that
situation. In fact, the federal tax cuts announced in the 2000 Budget and the
October 2000 economic statement – totalling $100 billion over five years
(three quarters of which are on personal income tax) – will reduce federal
revenues even further.
Table 6
shows that program spending by both orders of government has grown less quickly
than the economy. To put their finances in order, our governments have
considerably reduced the weight of their spending in the Canadian economy since
1993, which explains the strong pressures being exerted on them now to reinvest
in all areas: economic development, health, education, income security, research
and development, culture, environment, security, social housing, infrastructure,
and so on. These pressures are being exerted on the federal and provincial
governments alike.
Health and education are by far the two main sources of spending for
provincial governments. But, there is no indication of any sort of
"financial strangulation" that would be depriving them of the means to
fulfil these responsibilities within our federation. Canada is a country that
has invested a great deal in health and education. Table
7 proves that our federation has been perfectly capable of providing an
appreciable financial effort for these two priorities.
While it is true that spending in the health field has increased considerably
in recent years, it nevertheless represents a proportion of provincial revenues
and the economy that is comparable to the situation in the 1980s (Table
8). In Canada, as in other countries, growing health spending is due mainly
to the higher number of drugs and new medical technologies, and to the aging
population (which is just beginning to be felt). A number of opinion leaders,
including Mr. Landry, have already stressed that it is not merely a
question of money but also of how things are done. A number of commissions have
examined or are currently examining this issue, including those by Mr. Clair in
Quebec, Mr. Fyke in Saskatchewan, Mr. Mazankowski in Alberta,
Mr. Léger in New Brunswick, and Mr. Romanow at the federal level. The
Government of Canada is determined to continue to do its share, both through
increased funding – it contributes approximately 40% of public health spending
(Table 9)
– and through the search for better policies and practices.
Now let us look at the evolution of budget surpluses. Table
10 reminds us that, for two decades, federal deficits were much larger than
those of the provinces. If federal surpluses in recent years have been larger
than those of the provinces, the fact remains that those surpluses have still
been very small in relation to the deficits that preceded them – and in
relation to the debt these deficits left to us. Surpluses of the provincial
governments are smaller than that of the federal government, but the provincial
deficits that preceded them were also much smaller. Consequently, debt servicing
costs are now twice as high for the federal government (23.6 cents on each
dollar of revenue) as for the provincial governments (11.5 cents on each dollar
of revenue).
Table 10
raises another comment. The debate on the alleged fiscal imbalance has appeared
only recently, in the past few years, by chance at the same time that federal
finances ceased to be in worse shape than those of the provinces. In all the
years when the federal government was running substantially higher deficits than
did the provinces, no one talked about a fiscal imbalance to the detriment of
the federal government.
As economics professor Jean-Yves Duclos of Université Laval has noted, the
gap between the federal surplus of $17 billion in 2001 and the $12 billion
combined surplus of all the provinces is small despite appearances: "Indeed,
it could be closed, for example, by an increase of less than 1% in provincial
sales taxes." [Translation] The provincial governments have chosen
instead to cut taxes since 1994-1995, which represents $22.7 billion in lost
revenue for 2002-2003, while the federal transfers they receive have been more
than restored to their 1994-1995 levels (Table
11). I want to make it clear that I am not reproaching the provinces for
cutting their taxes, any more than I am recommending that they raise them. I am
merely saying that the fact that these provincial governments are choosing to
cut taxes is one of the signs that demonstrate there is no fiscal imbalance in
Canada.
There is no more of a fiscal imbalance today than in the past. There is only
good news: our federation’s public finances are now in order. But this
turnaround has required a draconian reduction of the weight of spending by our
governments in the economy, so that now strong pressure is being exerted on them
to reinvest in all areas.
1.2 The projections
But the cornerstone of the Séguin report is a projection by the Conference
Board. According to this projection, in 2019-2020, federal surpluses would reach
$87.8 billion, while the Government of Quebec would have a deficit of $4.8
billion dollars (Table
12). So the much-denounced fiscal imbalance would be on its way, but is not,
however, here just yet. The Conference Board itself projects only very small
federal surpluses for the next five years (Table 13).
You have heard Canada’s Minister of Finance, the Honourable Paul Martin,
say it would be irresponsible to establish our budgetary policies on the basis
of 10- or 20-year projections, when economists cannot even predict the beginning
or end of a short-term recession. Mr. Martin cited the example of the
United States, where, in little over a year, projections have changed radically
because of events and economic conditions. The US Congressional Budget Office
now projects a slight surplus of US$5 billion, while only 15 months ago its
projections pointed to a surplus of over US$300 billion (Table
14).
Mr. Martin is sometimes reproached with making budget forecasts in recent
years that underestimated the surpluses actually obtained by the Government of
Canada. In light of the vanishing of the US surpluses shown in Table
14, one would be more likely to congratulate Mr. Martin for having
erred "in the right direction" by relying, it should be stressed, on
private-sector projections. The financial experts have good reasons for calling
on him to maintain this healthy prudence. In point of fact, the few billion
dollars in surpluses that Canada’s federal government now enjoys would melt
like snow in the sun if it relaxed its budgetary discipline even a little.
Pendulum effects in this area are devastating, as we are reminded once again by
the American example.
Though we ought not to rely on long-term projections, let us nevertheless
look at the methodology through which the Conference Board arrived at its
projection of an $87.8 billion budget surplus for the federal government in
2019-2020, compared with a $4.8 billion deficit for the Government of
Quebec. The fiscal imbalance theory would suggest that such a gap would result
from the Government of Canada’s revenues growing more quickly than the
Government of Quebec’s, and its spending growing less quickly. But the
Conference Board contradicts these assumptions. Its calculations lead it
instead to project that own-source revenues and program spending by both
governments will evolve at the same rate (Table
15). Rather, the gap between the budget balance of the two governments will
widen, according to the Conference Board, because of the automatic dynamic of
the debt repayment: it assumes that the federal government will introduce no new
measures and will allocate all its latitude to debt repayment.
So, the key hypothesis of the Conference Board is that governments would not
undertake any new spending or introduce any new measures affecting revenues
throughout the entire period. In other words, it is basically assumed that
governments would put themselves on auto-pilot and take a 20-year vacation. Of
course, as the Conference Board itself specified, "the exercise is
purely hypothetical." That is not the way things happen in the real
world. Governments – especially when their approach is as balanced as Mr.
Chrétien’s – allocate only a portion of their latitude to debt repayment.
Another portion goes to tax cuts and another to program spending.
Well, federal tax cuts free up tax room that the provincial governments can
choose to occupy. Federal program spending obviously includes higher transfers
to the provinces.
When you make projections assuming that governments put themselves on
"auto-pilot," you get results that are far removed from reality. Let
us see for ourselves by imagining that we had undertaken this exercise in 1997.
At that time, we would have projected a $55 billion federal surplus in
2001-2002 and a $12 billion surplus for the Government of Quebec (Table
16)!
But there is no need to go back five years, as Quebec’s Finance Minister
herself has demonstrated that such projections cannot be relied on for even one
year. Indeed, only 12 days after the Séguin report was tabled, Ms. Marois
produced a budget statement which shows a balanced budget for the Government of
Quebec in 2001-2002, whereas the Conference Board study instead projected a $600
million deficit (Table
17).
So this methodology is unreliable. You cannot project governments’ budget
balances in such a mechanical and linear fashion, not only because their
revenues and spending fluctuate in accordance with events and economic
conditions, but also because governments act, and their actions alter the course
of events. I will never be dissuaded that governments can make a difference
depending on whether their policies are good or bad. For example, if you would
allow me a partisan digression, I believe that the Quebec economy and the
finances of our provincial government will be in much better hands if, at the
next election, they are entrusted to the Liberal team of Jean Charest rather
than to the secessionist government of Bernard Landry. But to get back to
the subject.
If there is one thing we must certainly not do, it is to implement the
recommendation of the Séguin Commission: abolish the Canada Health and Social
Transfer in exchange for transferring the GST to the provinces, accompanied by
an equalization increase that would help offset the lower return that this tax
transfer would cause for Quebec and the other less well-off provinces. As the
Séguin Commission itself acknowledged, such a reform, if applied immediately,
would plunge the federal government back into deficit for several years.
If you add in the cost of another of the Commission’s recommendations, that
of replacing the current standard for calculating equalization based on the
fiscal capacity of five provinces with a standard taking into account the fiscal
capacity of ten provinces, you would have the effect of increasing equalization
payments by $2.9 billion in 2002-2003 alone, giving us a bottom line which is
even more negative for federal finances. Even the methodology of the Conference
Board study, which the Séguin Commission asks us to rely on, leads us to this
conclusion (Table 18).
It is understandable that the Séguin Commission is shocked at its own
recommendations to the point that it suggests they be applied only "gradually",
with no further clarification. It must be clearly understood that, in the real
world, as opposed to abstract projections, repeated federal deficits would have
negative effects on confidence in the Canadian economy and undoubtedly on
interest rates as well, which would adversely affect provincial government
finances (Table
19).
The Liberal government of Jean Chrétien, for its part, intends to maintain
its balanced approach that has served the Canadian economy so well. It will
maintain its disciplined management, which makes it possible to pay down the
debt, cut taxes and make strategic investments. From that perspective, it is
determined to help its constitutional partners, the provincial governments, as
much as it can. Indeed, the Government of Canada increased its transfers to the
provinces as soon as its budget situation allowed it to do so.
Accordingly, total transfers to the provinces will increase by an average of
6.1% a year until 2005-2006, whereas anticipated federal revenue growth will be
only 1.9% (Table
20). In 2001-2002, of the $11.2 billion in increased program spending, the
federal government will allocate $4.4 billion, or 40%, to increase the transfers
to the provinces (Table
21).
Rather than being a sign of a fiscal imbalance, the current surpluses of the
federal government are, just like the improved finances of the provincial
governments relative to previous years, the result of a necessary discipline
that must be maintained. In spite of all the progress made in recent years, the
fact remains that Canada’s debt level remains high (66% of GDP) in relation to
other G7 countries (Table
22). As TD Bank Financial Group Chief Economist Don Drummond warns us,
"there is definitely still a vulnerability."
2. The myth of a centralizing federalism
The Séguin Commission states that the Government of Canada is using its
surpluses to invade the legislative jurisdictions of the provinces (Table
23). That statement is inaccurate and, incidentally, is not proven by the
Commission.
It must be said that the Séguin Commission is quick to see
"invasions" where none exist. For the Commission, then, a federal
initiative such as the Canada Foundation for Innovation is an invasion of a
provincial jurisdiction. But just where is it written in the Constitution that
research is an exclusive provincial jurisdiction? Does anyone know of a single
modern federation in the world where the federal government does not support
university research? Such a conception is irrational from an economic standpoint
and has nothing to do with good federalism.
More generally, reading the Séguin report gives one the impression that
Canada’s federal government is abnormally big, and that its presence spills
over into provincial territory. The Séguin Commission also reproaches the
federal government with attaching certain conditions to a portion of its
transfers to the provinces. It believes such conditional transfers are contrary
to the spirit of federalism. Is the federal government too big? Are its
transfers to the provinces too conditional? Let us look at the reality.
2.1 Is the federal government too big compared to provincial
governments?
In point of fact, it is the federal sphere that has shrunk in recent decades,
not that of the provinces. Whereas federal program spending accounted for half
of all government spending in the early 1950s, it now accounts for only one
third. As a percentage of GDP, federal program spending dropped to 11.3% in
2000-2001, the lowest level recorded since 1948-1949! That percentage is 5
percentage points lower than that of 1993-1994 (Table
24).
This federal government that is reproached with being too big actually looks
quite svelte when its size is compared with that of federal governments in other
federations. In fact, the federal government’s share of total own-source
government revenues is smaller in Canada than in any other federation but
Switzerland, according to the Séguin Commission’s own data (Table 25).
Even in Switzerland, cantons do not have the fiscal weight our provinces do; it
is rather the Swiss communes that receive a much larger share of revenues than
do our municipalities: 29% as opposed to 12%.
The fact is that the provincial share of government revenues is higher in
Canada than in other federations. This can be explained in large part by the
fact that in our federation the two main orders of government, federal and
provincial, have access to the four main tax bases: individual income tax,
corporate income tax, sales taxes and payroll taxes (Table
26). This is not the case with our third order of government,
municipalities; indeed, the mayors of our larger cities complain that their tax
base is too small for their responsibilities. Moreover, our provincial
governments are the only ones in Canada with access to natural resource
royalties. This gives them a monopoly over that tax base that is not found in
other federations with abundant natural resources like our own. In the United
States, for example, it is the federal government that collects such royalties.
Among federations, not only is it in Canada that one finds the constituent
entities with the largest share of tax revenues, but our provinces also have
complete autonomy over this exceptional fiscal weight. In fact, they set their
own tax rates, a degree of fiscal autonomy equalled only by the American states
(Table 27).
And that’s not all: own-source revenues, as a portion of total provincial
revenues, are very high, in comparison both with past practice in Canada and
with what exists in other federations (Table
28). And not only do our provincial governments depend relatively little on
federal transfers, but also those transfers come with relatively few conditions.
They are less conditional than in the past and less so than what we see in other
federations.
In fact, it is in Canada that federal transfers are the least coupled with
conditions. In the United States, for example, 100% of federal transfers are
conditional. In comparison, if we look at our two main transfers, we see that
equalization is completely unconditional and the Canada Health and Social
Transfer – through which the Government of Canada helps provincial funding for
health, social assistance and postsecondary education – has only very modest
conditions in comparison with current practice in other federations. As a study
by Professor Keith Banting of Queen’s University has concluded: "The
politics of the Canadian federation ensured from the outset that the conditions
attached to federal transfers were less specific than in other federations; and
the shift from conditional grants to block-funding for health care in 1977
largely eliminated day-to-day federal scrutiny of specific provincial decisions."
All of this shows that in the world of federations our provinces are leading
in all categories in terms of fiscal capacity, from the viewpoint of share of
government revenues, access to tax bases, freedom to set their own fiscal
policies, proportion of own-source revenues to their total revenues, and the
importance of conditions that accompany federal transfers.
The debate as it is currently taking place in Quebec tends to follow the
traditional logic of "it’s the feds’ fault." But at the
same time, Quebec is moving straight into a provincial pre-election campaign.
Well, I have shown that in our decentralized federation, the provincial
governments have considerable latitude to make their own fiscal and budgetary
choices. The cumulative effect of their decisions entails major consequences for
citizens.
The accumulated decisions taken by the Government of Quebec leave Quebecers
with a debt load and a fiscal burden much higher than those of their fellow
citizens in the other provinces; in return, their provincial government spends
more on average than the other provinces (Table
29, left column). The fiscal burden, for individuals as well as
corporations, is 40% higher in Quebec than elsewhere in the country (Table
29, right column). Choices are made, priorities emerge.
It is not my role, as Minister of Intergovernmental Affairs, to criticize the
budgetary choices made by the provincial governments. I am simply saying that in
our decentralized federal system, a provincial government has the capacity to
make its own fiscal and budgetary decisions and to be accountable for those
decisions to its voters. Mr. Landry’s government already spends much more than
those of other provinces, and it spends in its own way, according to its own
priorities. It must justify the extra fiscal load it is imposing on Quebecers
and the way it is using it. It is too easy to blame the federal government all
the time: with 27% of all federal cash transfers, Mr. Landry’s government
already receives assistance from the federal government that is higher than the
provincial average.
2.2 Are transfers too conditional?
It is true that even in Canada federal transfers are not completely
unconditional. For its part, the Séguin Commission states that in a good
federation, transfers of funds from the federal government to the provinces
ought to be unconditional. The problem with such a position is that, in one
stroke, all federations in the world become unacceptable, because they all have
conditional federal transfers. To find a federation answering to the Séguin
Commission requirements, one would have to look on another planet. Or else agree
that the most acceptable one of all is still the Canadian federation.
Jean Chrétien, that alleged great centralizer, has incidentally considerably
reduced the conditionality of federal transfers to the provinces. Whereas the
conditions used to be included in the cost control process, since 1995 they have
been linked only to compliance with the five main principles of the Canada
Health Act (public administration, comprehensiveness, universality,
portability and accessibility) and to a ban on residence requirements in a
province or Canada for eligibility for social assistance.
Such conditions, modest as they are, are still contrary to the federalist
spirit according to the Séguin Commission, which goes so far as to question
their constitutionality. In fact, the federal spending power is recognized in
our case law just as it is recognized in the Constitution or the case law of
other federations. Similarly, the conditions attached to the Canada Health
Act are fully compatible with the legal framework (Table
30).
But it is not just because a measure is constitutional that it is indeed
desirable; it must also contribute to citizens’ well-being. Is it desirable
for the Government of Canada to provide assistance through its transfers to
ensure that Canadians are eligible for social assistance throughout Canada and
that access to health services does not depend on the size of the patient’s
wallet? I say it is, for at least four reasons.
First of all, the modest conditions accompanying the Canada Health Act
are in no way a "straitjacket;" they do not prevent the provinces from
innovating. In reading the report by the Clair Commission, for example, I do not
see anything that is contrary to the Canada Health Act.
Second, all of the premiers and territorial leaders have expressed their
approval of the principles of the Canada Health Act on many occasions.
The debate among governments does not pertain to these principles as such, but
rather to how they are defined and applied and to how intergovernmental
conflicts should be resolved. And such conflicts are rare: the Government of
Canada has only very rarely reduced its transfers because of non-compliance with
these principles by a province. The total funding withheld since 1984 has been
only $8.3 million, and no funding has been withheld from Quebec, as noted
by the Séguin Commission itself.
Third, in a federation, the federal government, just like the governments of
the constituent entities, receives its mandate from the people, through direct
election to the federal Parliament. Well, in the last federal election,
Canadians had to choose between the Day approach and the Chrétien approach, and
they re-elected a Liberal government determined to enforce the main principles
of equity in the Canada Health Act. If one wanted to free the federal
government from this commitment, one would need to go back to the Canadian
people, one could not do it in response to provincial study commission. It is a
question of democracy. And the polls confirm that Quebecers, just like other
Canadians, want our governments to work together in the health field as in other
areas (Table 31).
Fourth, Canadians are right in wanting to maintain a federal role in the
health field. We are not in Europe where social programs are relatively similar
from one country to another, but rather alone in the face of an American giant
that treats health care quite differently. The number of Americans without
health insurance is greater than the total number of Canadians. We need
cooperation and discipline by all our governments to protect ourselves against
rampant Americanization of our health policies. This must not prevent us from
examining how we define and apply these main principles, as the Romanow
Commission is doing. But it does mean that health is attached to a sort of right
of citizenship that extends to all Canadians, whereby everyone has access to the
solidarity of all when struck by illness.
To rise to current and future challenges in the health field and in other
sectors, Canada, like other countries, will need to unite its forces. The
governments of our federation will have to work together, both on cost-sharing
and on developing better policies, while respecting their constitutional powers
and responsibilities.
Conclusion
Fiscal imbalance is a myth (Table
32). The facts show that:
. federal surpluses are small in relation to past deficits;
. all governments face pressures;
. all governments have access to the revenues they need to fund their
spending;
. the recommendations by the Séguin Commission would return federal
finances to the cycle of deficits.
The invasion of provincial jurisdictions by the federal government is also a
myth (Table 33).
The facts show that:
. federal program spending is at its lowest level since 1948;
. the provinces have access to the same revenue sources as the federal
government and federal transfers have few conditions attached;
. the Government of Canada respects the Constitution;
. Canadians, including Quebecers, want their governments to work together.
In closing, I would like to make a further comment on the current debate
about the alleged fiscal imbalance. This comment pertains to a possible
referendum on the recommendations of the Séguin Commission. Mr. Landry and his
party seem to take the possibility of resorting to such a trick seriously. I
have explained on previous occasions why a provincial referendum on federal tax
point transfers would be absurd. I will say the same thing for a provincial
referendum on transferring the GST to the provinces.
Holding such a referendum would be an utter waste of taxpayers’ money. The
federal government would be obliged to declare that it would not be bound by the
results, for as soon as it declared itself bound to act on the results of a
referendum in a province, it would have to acknowledge the same obligation in
the case of other possible referenda in other provinces, on budgetary or other
issues: the death penalty, for example. Some of those referenda, by the way,
could have negative consequences for Quebec (a reduction in equalization, for
example).
The Séguin Commission provides one such example. In its report, it expresses
its opposition to the bilateral agreements that the Government of Canada has
signed with Newfoundland and Nova Scotia which have resulted in a downward
adjustment in equalization entitlements for those provinces because of new
offshore oil and gas resource development: "The Commission believes that
such ad hoc solutions raise problems of equity among the recipient provinces."
Among the recipient provinces the Séguin Commission believes are harmed by
these agreements is, of course, Quebec. Well, I can guarantee that if the
premiers of Newfoundland and Nova Scotia were to hold referenda on strengthening
those agreements, they would win with over 90%. Accordingly, the federal
government should not be bound by such referenda, whether in those provinces or
in Quebec.
No federation could govern itself in such a fashion. If those referenda
pertain to provincial jurisdictions – such as lotteries, to use Mr. Landry’s
example – there is no problem. But once it involves a federal jurisdiction
with implications for all the provinces, a provincial referendum is a dead end,
a false emergency exit which is really a side track for broken-down separatists.
In the 1993 federal election, Mr. Lucien Bouchard, then head of the Bloc,
campaigned using the argument of budget deficits to persuade Quebecers to leave
Canada: "If they (the rest of Canada) are intent on going bankrupt, let
them go. But we’re going to save our skin," he said on August 14,
1993. That was the era of federal deficits.
Today, Mr. Landry wants to relaunch his referendum machine by denouncing
federal surpluses. Whether the federal government has a surplus or a deficit, it
will always be in the wrong as far as the secessionist leaders are concerned.
The fact remains that the Séguin Commission addresses a normal problem in
any normal country: how best to allocate budgetary resources. The Commission on
Fiscal Imbalance concludes unremarkably that there is a fiscal imbalance. I hope
I have shown that this conclusion is erroneous.
There is no fiscal imbalance, but there is an obligation for the governments
of our federation to help each other out, while respecting the role of each, and
within a permanent framework of necessary budgetary prudence.
NOTES
- Press conference by Bernard Landry and Pauline Marois following the
tabling of the Séguin Commission’s report, March 13, 2002.
- Mémoire présenté à la Commission sur le déséquilibre fiscal,
Union des municipalités du Quebec, September 28, 2001, p. 9.
- Televised debate, August 29, 1994. Le Soleil, August 30, 1994, p.
A1.
- "L’illusion du déséquilibre," La Presse, March 19,
2001, p. A15.
- Fiscal Prospects for the Federal and
Québec Governments. Conference Board of Canada., February 2002, p. 7.
- "A New Division of Canada’s Financial Resources". Report of
the Commission on Fiscal Imbalance, Government of Quebec, March, 2002, p.
149.
- TD Economics, February 19, 2002.
- "A New Division of Canada’s Financial Resources". Report of
the Commission on Fiscal Imbalance, Government of Quebec, p. 128.
- Keith G. Banting and Stan Corbett, eds. Health Policy and Federalism: A
Comparison of Five Federations, Papers and Presentations from Workshops
on Health Policy and Federalism, Sao Paolo, October 15 -16, 2001 and Mexico
City, October 18, 2001, p. 13.
- A New Division of Canada’s Financial Resources". Report of the
Commission on Fiscal Imbalance, Government of Quebec, March, 2002, p.71.
- A New Division of Canada’s Financial Resources". Report of the
Commission on Fiscal Imbalance, Government of Quebec, March, 2002, p.101.
- The Toronto Star, August 15, 1993, p.
A11
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