Intergovernmental Relations in Canada

Intergovernmental Relations in CanadaAuthor(s): Ronald M. BurnsSource: Public Administration Review, Vol. 33, No. 1 (Jan. - Feb., 1973), pp. 14-22Published by: Wiley on behalf of the American Society for Public AdministrationStable URL: http://www.jstor.org/stable/974781 .

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14

INTERGOVERNMENTAL RELATIONS IN CANADA

Ronald M. Burns, Queen's University

Most of us, if asked what was the constitution of Canada, would automatically answer the British North America Act. This is true only in part, for the constitution does not consist of any one document. Even though that act of the British Parliament does form the most important and

specific part of it, important elements of Canada's constitution are contained in other acts, in British convention and custom, and decreasingly although still importantly in the Royal Prerogative.

The Constitutional Base

While the main written Canadian constitution is thus only an ordinary statute of another (even though related) parliament, it is not so baldly independent of Canadian content and influence as that statement would make it appear. When in 1867 the British Parliament passed the British North America Act, it did so on the specific basis of extensive proposals of the British North Ameri- can colonies concerned (Nova Scotia, New Bruns- wick, and what became Ontario and Quebec). In effect it consolidated many of the democratic

gains which had been made since the conquest at Quebec in the previous century.

While there have been a few formal constitutional amendments, generally the courts, particularly in earlier periods, have tended to enhance the

power of the provinces through their interpreta- tion of the statutes. On the other hand, national economic influences and the military crises of two world wars, along with developing economic and social demands, have stimulated federal power through the interjection of federal spending into areas of provincial responsibility. But in recent years the growth in areas of provincial responsibility and the political influence of a few rather than many provinces-some of which are very powerful and one, Quebec, of particular influence-have swung the pendulum of authority pretty far over. In these circumstances the danger of fragmentation of national policy cannot go unregarded. The pendulum may well swing again, but portents of the current constitutional review so far are for a weaker rather than stronger element of control in the Canadian federation. As

things now stand, while in concept much more

highly centralized, Canada in practice is a less

nationally controlled federation than the United States.

The Distribution of Powers and Responsibilities

The basic elements of the federal form of

government are in the distribution of powers and

responsibilities. Without adequate revenue resources, the ability to perform, regardless of the

legal right, is impaired. It is an unfortunate fact of

political life that the balance between resources and responsibilities is usually an uneven one; this fact has many important effects upon the nature and extent of intergovernmental relationships.

By Section 91 of the British North America Act, the central government is given the basic functional responsibilities which one would

expect-defense, money and banking, postal service, criminal law, and regulation of trade and commerce, etc., and what was almost certainly intended to be the residual clause, "Laws for the Peace, Order and good Government of Canada." To this has since been added by constitutional amendment the responsibility for old age pensions and unemployment insurance; the former a con- current federal-provincial power along with agri- culture and immigration.

The provinces were originally restricted by Section 92 to those responsibilities which in 1867 were considered of minor importance in the public sector: welfare, health, natural resources, municipal institutions, and local licenses. Local works were also included, but the extent of the desire of the founders for strong central authority is illus- trated by the provision allowing works for the

general advantage of Canada to be declared a federal responsibility. Education is assigned provincially under Section 93. Provinces were also given the power to amend their own constitutions, other than with respect to the office of lieuten- ant-governor.

There seems to be little doubt that the makers of Canada in 1864-67 saw a much more limited role for the provincial governments than has since developed. In fact some of the most important of them believed that a legislative union was the

JANUARY/FEBRUARY 1973



CANADIAN PUBLIC ADMINISTRATION

desirable form; while that was not possible, due to the various divergencies of language, culture, and geography, they did succeed in developing what was in the beginning a highly centralized form of federalism.

Under different circumstances the federal

government might have been able to consolidate more permanently the role which it developed from about 1933 to 1952, when federal authority seems to have reached a modern peak in Canada. But the situation has been basically influenced by historical developments, and particularly in the

present era by the distinctive attitude of the

governments of the Province of Quebec. The basic division of language and culture which so influenced the original selection of the federal form has become the basis for a drive for political power in that province, causing a swing away from central and toward provincial responsibility which is now

being reflected in part elsewhere in the country. On the revenue side, the constitutional division

on paper appears to be heavily weighted toward the central government, which has unrestricted

powers of taxation. The provinces (and with them their municipalities) are limited to direct taxation within the province for provincial purposes. This, however, has turned out to be much less restrictive than it appears and was intended; by administrative ingenuity, aided by some rather broad court decisions, the provinces for all practical purposes enjoy a field of taxation almost as unlimited as that of the central government. The one exception of importance is that of customs and excise.

In their turn, the municipalities have had to depend, to a substantial extent, on the taxation of real property for their tax revenue, by reason of

provincial policy and practical administrative con- siderations. This has been a cause of increasing concern and discontent, particularly in the circumstances of rapidly rising education costs. While this tax has proved to be surprisingly productive and reasonably responsive to economic growth, and is still much the largest single source of provincial- municipal revenue, there is a widespread feeling that the government sector is relying too heavily on a tax which has inherent regressive characteristics.

No one has yet been able to decide the way in which the value of relative priorities of jurisdic- tional activities can be assessed, with the result that not only is there a serious situation of imbalance as between the financial positions of

levels of jurisdiction as such, but there are serious imbalances as between units of the jurisdictions themselves. Even if it were possible to arrive at a reasonable distribution of revenue and responsibilities as between the central government and a specific province, the formula would have little

significance for most of the other provinces, as the

principal revenue sources are very unevenly dis- tributed. For example, the personal income tax is worth close to four times as much per capita in Ontario as it is in Newfoundland or Prince Edward Island. This situation seems to be a more or less

permanent part of the Canadian public financial structure despite strong efforts to correct it. The federal and provincial/municipal positions in ex-

ploiting revenue sources and in the support of various governmental activities are shown in the

accompanying Tables 1 and 2.

The Search for Adjustment

One who listened uncritically to various provincial and municipal claims might conclude that the problems of imbalance would be readily settled by some simple adjustments. If one jurisdiction's expenditures are out of line with its revenues, then it is easy to assume that a switch of powers and responsibilities is called for. To some extent that should be possible, but there are some fairly difficult hurdles to be negotiated. In the first place, what responsibilities are to be transferred? Governments in most instances have been more concerned with expanding the area of their authority than limiting it. Even though, for example, most municipalities might gladly relinquish financial responsibility for education, school boards without that financial responsibility seem dis- inclined to surrender control. Public officials, regardless of their standing, are not easily convinced that someone else is better fitted to perform a public task than they.

But if the transfer of responsibilities has only a limited utility, what alternatives are there? Ob- viously the obverse is the transfer of additional revenue powers. There are few limitations on provincial authority to raise revenue, but the legal position is somewhat less restrictive than the practical one; in the more lucrative areas of income taxation the federal government has established rights of possession which are difficult to ignore. Even though the federal government has had a controlling fiscal influence over the years since the war, the provinces have made steady


15



PUBLIC ADMINISTRATION REVIEW

TABLE 1

FEDERAL AND PROVINCIAL/MUNICIPAL REVENUES BY SOURCE 1968-69 (Intergovernmental Transfers Excluded)

Revenue Sources

Federal

Percentage of Total Collections

Provincial/Municipal Percentage of

Total Collections

Income

Corporations Individuals

Interest, etc., going abroad General and other sales taxes Motor fuel and fuel oil sales Customs and excise Real and personal property and business Estate and succession

Hospital insurance premium Other

Total Taxes

Nontax Revenue

Privileges, licenses, and permits Government enterprises Sales and services Other

Total Nontax Revenue

Total Gross Revenue (own sources)

Dollar Value Total ($ million)

Source: Canadian Tax Foundation, The National Finances (Toronto: the Foundation, 1971-72), Table 1-13.

inroads on the federal share, not without effort and some cost to national political harmony. In the personal income tax, under the revised tax

system, provinces have now reached 30.5 per cent of the federal take of the tax, without additional burden to the taxpayer, owing to a federal reduction provided to make room for provincial taxes. Several provinces have exceeded this level, however, Manitoba by as much as a 12 per cent surtax on personal income earned in the province. But there seem to be very real limits to how far this competition between regions can go, and there

can be political penalties attached. Quebec is a

special case: having retired from several joint programs, its share is now 54.5 per cent of the federal tax, made up of 30.5 per cent of the basic tax plus 24 per cent in lieu of specified program grants. Provinces also have a subtantial interest in the corporation income tax and participate to the extent of close to 25 per cent of the total return from this source. Canada has avoided so far a return to the unrestricted competition of the 1930's. With the present level of taxation, however, there is really very little room for innovation,


16

Taxes

77.0 71.1

100.0 55.9

100.0

48.0

1.5

55.1

2.5 31.4 31.2 62.6

34.8

51.6

11,614.3

23.0 28.9

44.1 100.0

100.0 52.0

100.0 98.5

44.9

97.5 68.6 68.8 37.4

65.2

48.4

10,982.9



17 CANADIAN PUBLIC ADMINISTRATION

TABLE 2 FEDERAL AND PROVINCIAL/MUNICIPAL EXPENDITURES BY ACTIVITIES 1968-69

(Intergovernmental Transfers Excluded)

Expenditure Function

Federal

Expenditures as Percentage

of Total

Provincial/Municipal Expenditures as

Percentage of Total

Defense services and mutual aid 100.0 Veterans' pensions and benefits 100.0 Health 28.4 71.6 Sanitation and waste removal 1.8 98.2 Social welfare 77.6 22.4 Education 12.3 87.7

Transportation and communication 25.3 74.7 Natural resources and primary industries 63.7 36.3 Debt charges (ex retirement) 60.4 39.6 Contributions to government enterprises 85.9 14.1 Protection of persons and property 22.5 77.5 General government 51.6 48.4 Other 66.3 33.7

Total Expenditure 47.5 52.5

Dollar Value Total ($ million) 11,299.6 12,505.8

Source: The National Finances, Canadian Tax Foundation (Toronto: the Foundation, 1971-72) Table 1-14.

and what goes to increase the share of one level of

government almost inevitably must come from that already pre-empted by another. The prognosis is not encouraging.

Revenue Transfers

If the answer does not lie in the shifting of

expenditure responsibility or revenue powers, it must be in some type of revenue transfer. These can take several forms: tax sharing, unconditional transfers, or conditional grants and shared cost

programs. Canada has had rather extensive experience

with tax sharing in one form or another. Starting with the tax agreements negotiated at the start of World War II (although there had been federal-

provincial tax collection agreements prior to that), an extensive system of sharing in the personal income and corporation tax fields was developed. These agreements, which extended from 1941 until 1961, were essentially rental agreements whereby the provinces retired from the tax fields

in return for an amount based on a formula, which from 1947 was based on a per capita amount with a growth factor related to per capita GNP.

In 1957 a new approach was introduced by which the provinces were given a specific share of the federal personal income tax (10 per cent in

1957, rising in 1972 to 30.5 per cent, including the allowance of about 4 per cent for post- secondary education) and part of the tax on

corporation profits (9 per cent of corporation taxable income in 1957 and now 10 per cent, including 1 per cent for post-secondary education). The federal government continued to assess and collect all taxes except in the cases of Quebec, which had resumed its own tax-collecting function in 1947, and Ontario, which remained in the

corporation income tax field for all years after 1947 except 1952-57.

In 1962 the federal government, apparently wearied by continuing provincial pressures, decided to discontinue the tax rental approach and allow the provinces to impose their own taxes on





personal and corporation income and succession duties. Essentially this is the system now in force. The provinces are able to impose personal and corporation income taxes without additional burden on the taxpayer up to a level established after negotiation by the federal government. Federal taxes are abated by reducing the level of federal taxation for the specific purpose of leaving tax room for the provinces which wish to use it. Both these taxes are collected without charge by Canada for any province which so elects and is prepared to make its own law basically consistent with the federal law. In the case of federal estate tax, provinces which desired had been able to accept either a federal abatement of 75 per cent or a direct payment of an equivalent amount, but the Government of Canada has now announced its withdrawal from the field with the introduction of capital gains taxation, leaving estate taxation open to the provinces to use as they wish.

In 1966 the central government announced its intention of discontinuing the abatement in respect of personal income tax and of reducing its rates sufficiently to allow the provinces to continue to levy the tax at existing levels without further cost to the taxpayer. Action has now been taken to implement this policy by the Federal- Provincial Fiscal Arrangements Act, 1972.

Unconditional subsidies or transfers from the federal to the provincial governments go back to the very founding of the country in 1867, when financial adjustments were found essential to the balancing of the agreed division of powers. These original grants were of considerable importance in the early years, but have rapidly diminished in relative weight. From time to time they have been supplemented by special purpose grants. It was not until the first postwar tax agreement was entered into in 1947 that provision was effectively provided for fiscal need through the form of per capita payments, although some indirect recognition had been provided in the wartime agreements. The Minister of Finance stated in the 1946 budget:

...now, what the Dominion proposal does is to provide a method whereby the three maritime provinces and the three prairie provinces will be enabled to derive from these sources the same per capita revenue as Ontario and Quebec.'

Essentially the same system with some improve- ments was continued through 1952 to 1957. In the federal-provincial conferences of 1955 and 1956, which were preliminary to the renegotiation

of the fiscal agreements, some fundamental changes were proposed. The problem with the 1947-57 arrangements lay in the fact that the fiscal need element was linked to the surrender of taxing authority. It soon became clear that this was not going to be acceptable to the Province of Quebec, and a situation of some delicacy and difficulty was rapidly developing. Aside from the political costs of Quebec's continuing opposition, the federal government had become convinced of the weaknesses of a position that placed an increasingly heavy penalty on a province's mainte- nance of its constitutional rights; when fiscal aid had been an incidental element of the rental payments, it was perhaps acceptable that it should be linked to them. In the changing circumstances of the growth of provincial power in the postwar era, however, this was no longer the case, and changes in approach were obviously unavoidable.

For the period of the tax-sharing arrangements of 1957-62, the Government of Canada developed the equalization payments, which it kept distinct from the reimbursement payment for taxes, thus making it possible for a province to receive fiscal aid without yielding its constitutional taxing powers. This was done by a method which provided that each province should receive a per capita payment sufficient to bring its return from the standard provincial tax rates under the tax- sharing arrangements up to the average per capita level in the two provinces with the highest per capita return from personal and corporation income taxes and succession duties. Stabilization payments, under which the level of provincial returns from shared tax fields were maintained, were also introduced at this time.

While there were some changes in 1962 and 1963, principally relating to the inclusion of certain revenues from natural resources in the calculations, the essential structure of the 1957 equalization formula stood until 1967. At that time a new approach was adopted.2

The original formula-which embraced only four revenue sources: personal and corporation income, succession duties, and natural resources- had never been considered a final answer, but was accepted in the absence of agreement on anything more comprehensive. The new formula as finally developed by the federal Department of Finance was a substantial advance in its attempt to develop equalization of the total provincial revenue capac- ity to the national average per capita.3 In his report to the Federal-Provincial Tax Structure


18




Committee, the Minister of Finance explained it in these words:

The payments would be arrived at in this way. We would determine what it is the provinces generally tax-in technical terms the tax base for each revenue source-and the average level of the rates or levies which the provinces generally impose. Then we would apply the average tax level to the tax base in each province-to find out whether the per capita yield in that province is below the national average. If the total yield of all provincial revenues calculated in this way were to yield less than the national average in any province the federal government would make up the difference in equalization payments.4

While a considerable improvement over what had gone before, the new approach still has two basic shortcomings: municipal revenues have been excluded, and no allowance has been made for differences in provincial-municipal costs of services. These two omissions are clearly related, since it would obviously be desirable to take account of the relatively high costs of services in certain parts of the country, such as metropolitan areas, as well as relative revenue capacities. While some refinements have since been made, the next

logical step in the development of the equalization program would appear to be in the direction of the measurement of fiscal need. This in itself might change the total cost and distribution of equalization somewhat. There can be no doubt that the cost of bringing municipal revenues into the equalization formula would be large, which may explain in part at least why this apparently reasonable step has not yet been taken.

Conditional Grants

While conditional grants predate the First World War, the programs were isolated and of no continuing importance. The first venture of magnitude did not come until 1927 with the passing of the Old Age Pensions Act. During the depression of the 1930's, a number of makeshift arrangements were developed, for the catastrophic nature of those days emphasized as nothing else could have done the obligations of the central government to the provincial and hence the local governments, regardless of the strict provisions of the constitution.

Further developments were interrupted by World War II. By the time the period of recon- struction came, the federal government and most of the people in Canada were so impressed by the merits of central authority and the need for a national standard of services that a program of intervention was begun in areas of provincial

responsibility through grants, particularly in health and welfare, which, while the center of much controversy, has continued up to the present time.

Federal administrative control was originally quite lax; with the later developments in these programs a substantial element of central rule

making and post auditing became common, al-

though the standards differed widely between programs. At no time, however, did Canada go as far as was the case in the United States. While the right of the federal government to spend public moneys as it sees fit has never been successfully challenged, there has been no inclination to accept the extent of administrative interference by the central government that has characterized the United States.

As a greater degree of understanding has developed, there has been a gradual loosening of federal control, both financially and in the transfers between categorical proposals. Not all control has been relinquished, however, for a measure of financial supervision is a prerequisite to parliamentary responsibility, and control over standards is an important element in the achievement of a program's purpose. Nevertheless, there is increasingly an indication of the relaxation of attitudes which, so far, has reached its ultimate in the medical care program, where federal conditions covered only four main requirements of a general nature and did not attempt to dictate the administrative structure or exercise detailed financial control. More and more, with the provinces led by what might truthfully be called Quebec's frontal assault on federal activity in provincial fields, the federal government has accepted the

inevitability of its reduced role, particularly in areas of social welfare: reduced but not elimi- nated, for there remains a noticeable determina- tion on the part of the Trudeau government to retain for the central government a responsibility in areas of public activity which have a recogniz- able national impact.

The new approach was first contained in the Established Programmes (Interim Arrangements) Act of 1965, although earlier indications of the federal reassessment were to be seen in the granting of tax points in lieu of university grants to Quebec in 1960 and the successful melding in 1964 of the Quebec Pension Plan with the Canada Pension Plan, which applied in the other nine provinces.

What the Established Programmes (Interim Arrangements) Act did was to allow a province to


19




"contract out" of certain established social secu-

rity and health programs in return for a share of the federal personal income tax, with the provision that a provincial program of similar objectives must be continued for a stated period. Only Quebec accepted the opportunity to "contract out" under this program and accept the additional

taxing room in lieu of federal grants-and this for

ideological rather than economic reasons. The Established Programmes (Interim Arrangements) Act only succeeded in a sense in setting Quebec further apart from the other provinces in its relations with the national government.

In September 1966 the Minister of Finance of Canada announced some far-reaching proposals which would in effect have restored a considerable measure of fiscal responsibility to the provinces. Among other suggestions he promised:

.. .a number of steps under which the cumulative and continuing influence on provincial decision-making re- sulting from past initiative in fields which are primarily provincial will gradually be brought to an end.5

Under this proposal the federal government would continue its role in areas of economic interest, but was prepared to withdraw from certain important social programs such as hospital insuiance, the health grants, and The Canada Assistance Plan

(Welfare) as soon as suitable arrangements could be made for the provinces to assume full responsibility in return for increased taxing powers. This, it was then hoped, would be in 1970. The

anticipated changes have not yet been effected, and there is still doubt in some informed circles as to their ultimate wisdom. It is extremely difficult to forecast exactly how the situation will develop. The problem of responsibility for social policies and the related question of the powers to raise the revenue to meet them are a central issue in the discussions on constitutional change in Canada.

The freedom of provinces to determine the

range and quality of services and to determine their expenditure priorities is restricted by the

grants-in-aid device, apart from the value they attach to their autonomy.6 In an attempt to meet this problem in June 1969, the Government of Canada made certain tentative proposals which would have placed restrictions on the spending power of Parliament to finance such nationwide

programs, subject to a predetermined provincial consensus and compensation of individuals in

nonparticipating provinces.7 While this approach seems to have had the approval in principle of

most of the provincial governments, the actual details of the scheme have not progressed beyond that point. At this time it is impossible to state how the concessions proposed in the draft constitutional charter of June 1971 will affect the situation when and if they are finally accepted by Quebec, which, so far, alone among the provinces has rejected them.

The charter,8 a product in some degree of

public impatience with the slow progress of constitutional review, had two important clauses which could be said to be of influence in federal-

provincial relations. First, in the field of social

policy, provincial paramountcy in areas of family allowances, youth allowances, and occupational training allowances has been added to that existing in old age and supplementary benefits. This in effect transfers a considerably increased measure of authority to the provinces should they choose to exercise it and is a partial gain by Quebec in its current efforts to secure complete control of social

policy in that province. Secondly, commitments are made to the "reduction of disparities in the social and economic opportunities for all individuals in Canada wherever they may live."

Obviously two important questions arise from this. First, to what extent will the provinces (other than Quebec) be interested in assuming their rights over these fields of social policy, in view of the inevitable uncertainty over the relative revenues to be derived in the future from tax points offered in

exchange? There is little evidence so far that many of them (and this applies with emphasis to the smaller provinces) are possessed by an overwhelm-

ing desire to be "masters in their house" failing financial guarantees, real or implied. But the second and more important question lies in the difficult task of redistributing resources, with all its implications for federal authority and national

responsibility. Much of the progress made in Canada in the postwar period has been linked to federal initiatives and to the development of

equalization of standards and opportunity throughout the Canadian provinces. Whether it will be possible to retain this ability and the

powers essential to national fiscal policy under the stress of provincial demands for greater taxing powers to meet their additional responsibilities so far remains a completely unanswered question; the

question is one to which some provinces, at least, seem quite unwilling to address themselves.

The dilemma is made even more obvious when one considers the implications in the adjustment


20




of "regional disparities provisions" of the charter. If there is to be a constitutional responsibility for the promotion of equal opportunity in Canada, it is almost certainly going to have to be assumed by the national government. Canada has made substantial efforts in recent years toward the

adjustment of regional inequalities; while the wealthier provinces have generally accepted this as a price of national unity, there are signs that resistance to further, and perhaps to the extent of

existing, transfers is not far off. Given this fact, it seems questionable that the provinces would assume such a responsibility, failing federal initiative in the future.

However, we may be learning a lesson from our

inability to develop a new formal structure of federalism over the three years or more of constitutional review. There now seems to be a slowly growing recognition of the necessity of practical approaches related to changing demands. These will be found not in formal constitutional documents but in more general and flexible provisions managed through a structure of intergovernmental relations which can adjust to the varying needs. It is pertinent to note that in the proposed charter a section has been added which, for the first time, recognizes the need for a formal structure of

intergovernmental liaison.9 Matters, however, are for the present stalemated and no immediate

progress is in sight.

Federal-Local Relations

While in the United States a strong practical relationship has grown up over the years between the federal government and the cities, this seems to be a product of a virtual abdication of authority by the states in many cases. The same is not true in Canada, and in these circumstances there has been little direct relationship of federal and

municipal governments. In the 1971-72 fiscal

period, federal payments to the provinces totalled

roughly $4 billion, and to municipalities about $92 million. Federal-municipal relationships are a field which the provincial governments, and particularly that of Quebec, watch with a good deal of care, for their political control remains strong even over the largest cities, a control they show no desire to relinquish.

While the direct relationship of federal and local governments may be tenuous, the indirect

relationships are numerous and often of substantial importance. For example, there is an indirect

but evident relationship between the magnitude of financial grants to the municipalities from the

provinces and the financial relationships that are

developed at the federal-provincial level. Even more vital is the influence of federal economic and social policies in many fields which, in most cases, will operate to the greatest effect within municipal boundaries.

For a good many years the municipalities have been content to accept their junior position as a fact of life about which there was little that they could do. If it had not been for the accelerating pace of urbanization in Canada this situation would likely have continued, but the pressures of demand in the rapidly growing urban areas have been such in the postwar period that municipalities, and particularly the large cities, have begun to see advantages in more direct access to the central government, particularly access to the federal treasury.1 °

While the essence of the problem in Canada, as in the United States, is in urban growth, this situation is by no means as clearly delineated as the facts would seem to indicate it should be. Canada is rushing, not without doubts as to its wisdom, toward a completely urban society, but so far the influence of the rural communities is

strongly felt. Most legislatures are still dominated

by rural members out of proportion to their numbers, and there is an obvious reluctance in

many provincial governments to change this situation, partly for fear of losing effective political control.

Nevertheless the situation is changing, for it is evident that it must. In two particular instances steps have been taken with a good deal of success to meet the challenge of urban growth in the development of effective metropolitan governments: in Toronto in 1953 and in Winnipeg in 1960. Similar moves have more recently been undertaken in Montreal, Ottawa, and elsewhere.

More generally, however, at the present time the trend is toward consolidation through the formation of regional districts. This is an approach which has had considerable study and some action in Ontario, and is now being tackled in a preliminary way in other provinces. These steps have indicated one fact very clearly: any effective

progress in municipal rationalization must come from the senior government of the province. If left to local initiative, too many vested interests and local pressures work to the detriment of any logical development.


21




Conclusion

All in all, comparative studies of federal-

provincial/state and federal-provincial/state-local relations in Canada and the United States are less

rewarding than might at first be expected. Canada with its parliamentary system, its far fewer political divisions, and the predominant power of a few

large and powerful provinces-one of them with distinct linguistic and cultural characteristics-has become of natural necessity a less closely centralized federation than the United States, despite the fact that its constitution as written is essen-

tially much more centrally directed. The decisions of the courts, too, in Canada, in contrast with those in the United States, have favored decen- tralization.

In recognition of the need for some binding ties which are not as necessary where central control is

strong and unquestioned, the Canadian governments-federal and provincial-have accepted the

logic and inevitability of large unconditional transfers directly and through tax-sharing. The United

States, by contrast, has only now begun to dabble its feet in these waters. Canada is engaged in a

1. Minister of Finance of Canada, Budget Speech (Ottawa: King's Printer, 1946).

2. For a complete analysis, see D. H. Clark, Fiscal Need and Revenue Equalization Grants (Toronto: Institute of Intergovernmental Relations and Canadian Tax Foundation, 1969).

3. For a related approach, see Advisory Commission on

Intergovernmental Relations, The Role of Equaliza- tion in Federal Grants (Washington, D.C.: the Com- mission, 1964), and J.H. Lynn, ComparingProvincial Revenue Needs (Toronto: Canadian Tax Foundation, 1968).

4. Report of the Federal Provincial Tax Structure Committee (Ottawa: Queen's Printer, 1966), p. 16.

5. Report of the Federal-Provincial Tax Structure Com- mittee (Ottawa: Queen's Printer, 1966), pp. 12-30.

6. Donald V. Smiley and Ronald M. Burns, "Canadian

struggle to maintain the fiscal and political viabil-

ity of the central authority, in contrast to the trend in the United States, which seems more concerned with the resurrection of the power of the states.

On the local scene as well the differences are noticeable. There are a number of reasons why the situation differs in Canada. For one thing our

problems are smaller and came later, giving us the chance to profit from the experience of others, and we have faced up to them in a modest way through the arbitrary power of senior governments under our governmental system to act where local

governments cannot or will not. Neither do we have that soul-destroying dilemma of racial con- flict as an urban problem. Cultural and linguistic problems we certainly have, but they are only marginally those of local government. In Canada we do not face the death of cities. They are

increasingly the central points of our growth and

vitality. It all leaves much to be desired, but we look on the problem with anticipation rather than with the despair that currently suffuses-as many observers would have us believe-so much of the urban scene of the United States.

Notes

Federalism and the Spending Power: Is Constitution- al Restriction Necessary?" Canadian Tax Journal, Vol. XVII, No. 6 (November-December 1969), p. 468.

7. Government of Canada, Federal Provincial Grants and the Spending Power of Parliament (Ottawa: Queen's Printer, 1969).

8. Constitutional Secretariat, Canadian Constitutional Charter, 1971 (Ottawa: Queen's Printer, 1971).

9. Ibid., Article 48. 10. See Canadian Federation of Mayors and Municipal-

ities, The Municipality in the Canadian Federation (Ottawa: the Federation, August 19, 1970), and Brief to the Special Joint Committee of the Senate and the House of Commons on the Constitution of Canada by the Joint Municipal Committee on Intergovern- mental Relations, Canadian Federation of Mayors and Municipalities, Ottawa, March 2, 1971.


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Documents

Intergovernmental Relations in Canada