First Ministers Win Concessions

The First Ministers had barely tucked into their beef consommé when Alberta Premier Ralph Klein began to denounce the federal government’s betrayal.

First Ministers Win Concessions

The First Ministers had barely tucked into their beef consommé when Alberta Premier Ralph Klein began to denounce the federal government's betrayal. How, he asked, could Ottawa have dared to strike a deal on global warming in Kyoto, Japan, that completely ignored an earlier federal-provincial agreement on targets for greenhouse gas emissions? His fellow premiers leaped into the conversation, contending that once again Ottawa had made a unilateral decision for which the provinces would have to pay the price. As Quebec Premier Lucien Bouchard, the traditional defender of provincial turf, sat in bemusement, Prime Minister Jean Chrétien struggled to defend himself and Ottawa's traditional privileges. "It's not that simple," he said, arguing that the federal government must always choose among competing interests for the good of the country. Two hours later, his audience remained unconvinced. "Deciding to agree to reductions without knowing how much it is going to cost or how you are going to get there is a little bit crazy," B.C. Premier Glen Clark said later. "It is like putting the cart before the horse."

That strained, if amicable, discussion, which kicked off last week's First Ministers' conference in Ottawa, captured the new mood in federal-provincial relations: after decades of squabbling among themselves, the premiers, with the crucial exception of Quebec, are united in their insistence that Ottawa must treat them as equal partners in tackling social ills. Throughout dinner and their daylong meeting, the premiers maintained that their provinces had suffered heavily when Ottawa, in its efforts to balance the federal budget, slashed its cash transfers for social programs throughout the 1990s. Now, they insisted that they have earned a voice in determining how the federal government spends the coming surplus on social programs, including health, education, child care and measures to combat youth unemployment.

Faced with that nine-province front, the federal government ceded ground: it agreed to explore "collaborative approaches" on how it uses federal money. Although both sides bickered over the scope of that commitment, it was clear that the provinces had finally forced Ottawa to work with them, instead of alone. In future, said Ontario Premier Mike Harris, "there is absolutely no doubt that they will not embark unilaterally." Added Manitoba's Gary Filmon: "It is collaborative. There is no dictate from on high."

Perhaps predictably, Bouchard will not participate in those discussions. Although he clearly sympathized with his fellow premiers as they struggled to curb Ottawa's spending power, he would not abandon his unwavering stand: Ottawa has no right to spend in areas of provincial responsibility such as social programs - but must transfer those funds to the provinces without conditions. "I spared Quebec a very heavy political cost," Bouchard maintained as he defended his decision to boycott the planned talks. Insiders, however, say that his refusal to participate sparked fiery exchanges with Newfoundland Premier Brian Tobin.

Undeterred, his fellow premiers and Chrétien cited their four-page agreement as proof that both levels of government can work together. Among the highlights:

» The two sides will negotiate a so-called framework agreement, which is intended to clarify the ground rules for co-operation on social programs, and set up mechanisms to resolve disputes. Although the premiers insisted this could allow them to determine when and how financial penalties are imposed under the Canada Health Act for violations such as user fees, Chrétien staunchly resisted that interpretation. He asserted that Ottawa would merely agree to a formal process before it took action. "The law can only be enforced by the federal government," he said.

» The First Ministers agreed to devise joint measures by next June to alleviate youth unemployment, which is hovering at 16 per cent. Those measures likely will include improved access to skills training and expanded internship programs.

» They agreed to work together to determine exactly what the Kyoto agreement means for each level of government - and how they will go about the task of implementing a complicated deal hammered out in the back rooms.

But the novel spectacle of the nine provinces flaunting their hard-won, if still tentative, unity almost obscured those individual accomplishments. Stung by federal cutbacks in cash transfers, those provinces have worked hard over the past two years, churning out position papers on everything from youth unemployment to the future design of federal transfers. As a result, they marched into the First Ministers' meeting with a unified position: Ottawa must work with the provinces on all future social initiatives. For starters, they added, as the federal deficit disappears Ottawa must use much of its so-called fiscal dividend to shore up basic transfers to the provinces for health and education before it launches new ventures such as home care and pharmacare. A senior federal official said Ottawa agreed "not to shove them down their throats," deferring those programs until provincial concerns about the current health-care system are resolved. "That puts the money where we say it should go to," asserted Ontario's Harris. "We are a united group on this."

That very unity ensured the conference's one clear result: Ottawa is gradually and grudgingly accepting the fact that it can no longer spend as it wishes in the social policy field. Such recognition is a political, not a legal, fact of life. Despite Quebec's insistence that provinces alone have the right to occupy the social policy arena, the Constitution Act, 1867, merely grants exclusive power to "make laws" in that domain to the provinces. It does not curb Ottawa's right to spend its tax dollars as it wishes.

Although Ottawa has only affirmed that there will be no new shared-cost programs without the consent of the majority of the provinces, consultation on any future social spending has become the unofficial watchword. "The federation is changing even though the federal government has been slow to understand that these changes are taking place," says University of Alberta economist Paul Boothe. "Ottawa unilaterally changed the contract once, when they cut transfers - and the provinces and the voters won't tolerate that again."

Even before the First Ministers met, provincial finance ministers earlier last week demanded a voice in how Ottawa spends its coming surplus, and called for increased transfer payments and lower Employment Insurance premiums. Although federal Finance Minister Paul Martin refused to commit himself to such measures, he may find it hard to ignore the provinces' united front. And after repeated refusals, he finally agreed that provinces should gain the right to set their own tax rates and tax brackets. At present, provinces can merely peg their rates as a percentage of the federal rate. "In the past, Ottawa has always said that they didn't want too much provincial variation," notes David Perry, senior research associate at the Canadian Tax Foundation. "Now, the pressure to lessen the federal rigidity is getting greater."

That pressure can only increase as the nine provinces speak with greater authority in their newly united voice. As the First Ministers' meeting broke up, a buoyant Chrétien sent the premiers on their way with the cheery reminder that he would see them on the Team Canada trade mission to Latin America next month. Thrown together on a lengthy jaunt, he can only hope they concentrate on trade, not common-front tactics.

Maclean's December 22, 1997