Federalism and structures of government and intergovernmental institutions

in CanadaPresentation by David Péloquin in the conference

“Desafíos institucionales y económicos en países federales:Los casos de Canadá y Argentina”

Embassy of Canada in Argentina and Fundación Dos Siglos, in cooperation withthe Universidad Nacional del Litoral (FCE-DAP) and Instituciones Regionales

Santa Fe (Argentina), March 29 to 31, 2016

Competition and/or cooperation?

The constitutional framework

The evolution of intergovernmentalism

Lessons for others?

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Outline of presentation

Competition and/or cooperation?1

Significant Canadian literature on the existence, advantages and challenges of competition between levels of government: governments are not “benevolent dictators” but instead are complex

organisms that pursue an amalgam of private and public interests thus: for citizens, a multitude of providers of public services (and competitors

for their allegiance) can be advantageous as a source of “checks and balances”

but: citizens also want order, transparency and intergovernmental harmony (as public goods in and of themselves)

Intergovernmental competition in Canadaand the dynamics of cooperation

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No contradiction between: an underlying competitive dynamic between governments, and the much-observed phenomenon of governments cooperating in the public

interest

However, this happy outcome – of a (different kind of) “invisible hand” – depends crucially on: a high degree of policy autonomy on the part of two or more levels of

government that overlap each other (i.e. rather than imprisoning them in a “joint decision trap”)

an informed electorate (supported by engaged media and “public academics”) that are able, willing and eager to hold their governments accountable

There is no necessary contradiction between competition and cooperation…

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… but a clear need to manage potentially problematicentanglements in their expenditure policies

Provincial-local

Federal

0 50 100 150 200 250 300 350CAD billions

Overlapping expenditure categories Policing /protection

Debt service

Defence /foreign

Transfers to othergovernments

Debt service

Other

Income support / social services

Supportto industry

Environment

Educationand researchHealth

Transport /communication

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Provincial-local

Federal

0 50 100 150 200 250 300 350CAD billions

Jointly occupied tax fields Property taxes

Federaltransfers

Other

Resource/ Investment revenues

User fees

Payroll taxes

Corporatetaxes

Sales and consumption

taxes

Personalincome taxes

… as well as revenue-raising entanglements (given a significant joint occupancy of tax fields)

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… and ongoing challenges in intergovernmentallegislative / regulatory coordination

• (Federal) employment insurance spillovers onto (provincial) social assistance

• (Federal) bank regulation interacting with (provincial) securities regulation

• Many other regulatory areas (e.g. environmental, health), plus budgetary policy and public debt

…but significant de facto cases of “intertwined” jurisdictions

(i.e. those with significant mutual spillover effects)

• Public contributory pension plans• Agriculture• Immigration / immigrant settlement

Only a few examples of formally concurrent jurisdiction

• (Federal) criminal law interacting with(provincial) administration of justice

Very few examples of formally “coordinate” jurisdiction

Competition and/or cooperation?1

The constitutional framework2

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Federal Legislative PowersGeneral power to make laws for “Peace, Order, and good Government” and enumerated powers over:• general government functions (e.g. federal public borrowing / debt / property)• revenue raising (“by any mode or system of taxation”)• criminal law ⁄ penitentiaries• national defence• cross-border transportation and related matters (including navigation, shipping, lighthouses, interprovincial ferries, railways,

canals and – through later jurisprudential interpretation – telecommunications)• regulation of trade, commerce and industry: fisheries, agriculture (concurrently with provinces, but with federal paramountcy),

money ⁄ banking, weights ⁄ measures, patents ⁄ copyrights, bankruptcy ⁄ insolvency)• postal service• immigration (concurrent with federal paramountcy), naturalization, marriage ⁄ divorce• census and statistics• “Indians” and “lands reserved for the Indians”• certain social programs, e.g.: unemployment insurance (since 1944), contributory pensions (since 1964 and concurrently with

provinces but with provincial paramountcy), quarantine and national public health

Note: Residual powers in principle lie with the federal parliament

Constitution Act (1867) envisaged “watertight compartments” for federal and provincial legislative powers

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Provincial Legislative PowersEnumerated powers over:• general government functions (e.g. provincial public borrowing / debt / property, including public lands and natural resources

on them, as well as local public works)• direct taxation within a province (though this has been very broadly interpreted by the courts)• non-criminal penalties ⁄ fines ⁄ imprisonment to enforce provincial laws• administration of justice, including provincial courts (civil and criminal) and prisons• health services (including hospitals)• education• municipal governments and institutions• regulation of trade, commerce and industry (e.g., incorporation and licensing of businesses)• solemnization of marriage• private law, property and civil rights• “all matters of local or private nature” (which jurisprudence has effectively made into a de facto residual power)

Constitution Act (1867) envisaged “watertight compartments” for federal and provincial legislative powers

Canada’s constitution makes minimal provision for managing intergovernmental relations

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Canada’s Senate was originally described as a “House of the regions” However, as in many other federations (e.g. US, Australia), it has not turned out

that way Instead, it has increasingly become a second partisan chamber (albeit a strange

one, since it remains an appointed chamber, not an elected one)

The Constitution effectively makes the Supreme Court the ultimate arbiter of intergovernmental conflicts

However, the federal executive appoints all members of both bodies…usually without consulting the provinces formally or informally

The “separate lives” of the levels of government aggravates the lack of provincial input into federal institutions

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Compared to other countries, in many provinces it is relatively rare for elected officials (and a fortiori its unelected officials) to jump from the provincial to the federal sphere … since, inter alia, provinces are in many respects the “senior” order of government

with public policy agendas that are particularly important to citizens

Moreover, political parties in Canada tend to play less of a “bridging” role (between levels of government) than in other countries

While federal Cabinets usually contain representatives from each province, they are often seen as lacking understanding of the interests and capabilities of provincial governments

2 The constitutional framework

Competition and/or cooperation?1

The evolution of intergovernmentalism3

Ongoing desirability of / need for federal and provincial governments to coordinate and harmonize the exercise of their powers: to legislate or regulate behaviour – where state power over citizens is at its

greatest to impose taxes – where state power to compel citizens is also very great (as is

the need to minimize their associated compliance costs) their power to spend – where power to compel is largely absent (though there

still remains a need to avoid confusion on the part of citizens and ensure the effectiveness of government spending)

their power to borrow – since one government’s credit-worthiness can affect those of other governments (and of citizens and businesses)

Managing intergovernmental entanglements in Canada constitutes a constantly evolving challenge

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Elaborate structures of “executive federalism” have evolved to manage these entanglements

In most policy areas, federal and provincial ministers and officials meet regularly: many standing and special federal-provincial committees meet to discuss

areas of common interest (often several times each year)

Given their high profile, meetings on budgetary and related policy matters (e.g. federal financing of health care) raise particular controversy: both federal-provincial and inter-provincial tensions often surface occasionally, these issues have even needed to been dealt with at meetings

of “First Ministers” (Prime Minister and provincial Premiers)

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Ministerialmeetings

FMM

+ Fr

eque

ncy

- + Profile -

First Ministers Meetings(FMM) are high-profile

but less frequent

Lower-profile “sectoral tables”at Ministerial / officials’ level

meet on a more regular basis to share information

and deal with common challenges

Meetings atlevel of officials

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Elaborate structures of “executive federalism” have evolved to manage these entanglements

In recent years, inter-provincial coordinationhas increasingly grown in importance …

Except in areas of exclusive provincial jurisdiction (e.g. education), the history of intergovernmental meetings had usually involved both federal and provincial participation federal participants chairing the meetings (i.e. both performing secretariat

functions and tending to set their agenda)

Since the mid-1990s, provinces have increasingly met among themselves to plan strategy prior to federal-provincial meetings… especially those dealing with financing and other high-profile issues

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… and has become more formalized as part of a“Council of the Federation”

Though federal-provincial meetings tend to attract greater public attention, the long-running series of meetings among provincial Premiers are growing in importance: occasional Premiers’ meetings began in the 1880s and have been held at least

annually since 1960 (with an annual rotation of the chair among the provinces) in 2003, they were further formalized, with the addition of a permanent

secretariat… and renaming themselves the “Council of the Federation” (even though

the federal government typically does not participate)

The Council of the Federation has increasingly set Canada’s public policy agenda in recent years

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A “natural sorting” of roles and responsibilities, reflecting: “first mover” / “follow the leader” dynamics the public’s aversion to wasteful overlap and duplication

Regular exchanges of information and meetings of first ministers, ministers and officials

Hundreds of actual agreements on specific policy issues Some semi-codified “rules of the game” (e.g. 1999 “Social Union

Framework Agreement”) A few examples of highly formalized joint decision-making

(e.g. on the Canada Pension Plan)

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Intergovernmental coordination is not limited to formal agreements, but has more broadly encompassed:

Constitutionally “fixed” jurisdictions

Main formsof cooperation

Nature of policy jurisdiction Example(s)

Informal information sharing, consultations and coordination

“Parallel”(with “spillover

effects”)

Employment insurance / social assistance;

most regulatory matters

Informal information sharing, consultations and coordination“Coordinate” Criminal law / administration

of justice

Joint decision-making (CPP) and informal coordination (QPP)“Concurrent” Public contributory pension

plans (i.e. CPP/QPP)

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… with the form of cooperation varying by policy area:

Main formsof cooperation

Nature of policy jurisdiction Example(s)

Formal agreements onharmonized tax collection;

“first mover” / “follow the leader”Taxing power Management of jointly

occupied tax fields

Specific-purpose federal transfers(with few conditions);

non-binding commitments;“first mover” / “follow the leader”

Spending power

Most major programs(e.g. health, education;

income support; support to industry)

Constitutionally “fluid” jurisdictions

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… with the form of cooperation varying by policy area:

… and in line with governments’ comparative advantage

Government-funded policy “pillars”

(usually highly subsidized)

Income support

e.g.: pensions,social

assistance

No clear comparative advantage

Servicesand in-kind

benefitse.g.: education,

health care

Clear provincial advantage

“Assisted self-help”policy pillars

(unsubsidized or partly subsidized)

Tax-assisted savingse.g.: private retirement

savings plans

Strongfederal

advantage

Contributions-funded

insurancee.g.: CPP,

employment insurance

Modestfederal

advantage

Direct or assisted lending

e.g.:studentloans

Modest federal

advantage

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2 The constitutional framework

Competition and/or cooperation?1

The evolution of intergovernmentalism3

Lessons for others?4

Key takeaways

Static (e.g. constitutional) frameworks often offer limited guidance or insights on the dynamics of intergovernmental relations

Cooperation across orders of government is not inconsistent with the reality of intergovernmental competition …… and can even be a sign of a healthy competitive dynamic between highly

autonomous “public policy entrepreneurs”

Intergovernmental cooperation does not imply “joint decision-making” and can take many alternative forms

Governments should focus on what they do best (“comparative advantage”) – though this can and does evolve over time

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