We Mustn’t Short Change Canada

Worth A Look, Role of Government, Frontier Centre

The first obligation of any prime minister is to keep the country together. Most Canadians go about their lives thinking that, on that front at least, all is well.

We are told that the Prime Minister’s advisers — they would appear to be numerous and influential — are governed by “the numbers.” No doubt, the numbers on the national unity front are very quiet.

But leadership is more than putting your finger in your mouth and seeing which way the wind is blowing. Jean Charest’s government is well down in the polls. The Parti Québécois is deeply committed to another referendum should they win the next election.

If Quebeckers’ view of federalism is what’s happened over the past year and a half, there is every possibility that a referendum could result in a win for those committed to breaking up Canada.

The Gomery inquiry is only one problem, albeit a real one. The news that the federal surplus (with the fiscal year ending March 31) now stands at several billion dollars was buried as a sidebar to the recent federal budget. Coupled with the huge fiscal surpluses in Alberta and, to a lesser extent, British Columbia — as a result of energy prices — it’s no wonder the other premiers are busy reflecting on the deep fiscal imbalance in the country.

The fastest growing public expenditure in Canada, by far, is health care. When Ontario’s Health Minister threw $200-million on the table for the province’s hospitals and got chants of “Chump change, chump change!” as a response, you know something’s not quite right — what used to be 30 per cent of provincial spending is now in the mid-40s and climbing. Education, infrastructure and social services are faring poorly by comparison. Housing is being ignored by all governments — it has never come close to being revived as any kind of serious public responsibility after the cuts of the mid-1990s.

Toronto Mayor David Miller is right to point out that cities fare poorly in this equation as well. The worldwide downloading trends of the past 20 years have not been met by a retooling of tax-sharing systems. We should be trying to put in place the simple principle that the government that has the spending responsibility should also have the taxing responsibility.

If, for a moment, you think Mr. Miller is just an NDP whiner, listen to this comment from Tasiwaju Tinubu, the state governor of Lagos: “The city is collapsing,” he told The Guardian. “We provide 65 per cent of all the VAT [value-added tax] in Nigeria, yet Lagos gets only 15 per cent of it.” Sound familiar? It’s a worldwide trend that must be reversed.

Both the cities and the provincial governments that are not oil rich have a grievance — the government that is the furthest from the coal face of dealing with the real condition of the people appears to have more money than it knows what to do with. There may well be defence needs that are unmet and, no doubt, creative souls can figure out ways to spend federal money, but, given the pattern of the past few years, there needs to be a profound righting of the balance.

If the best desired results are more efficient programs, more transparency to citizens, less whining and finger pointing, and more responsibility, the answer is clear enough. The federal government should take responsibility for specific, dedicated programs of national responsibility (a national catastrophic drug program, for example, or a national program to help students and apprentices with their living costs), and transfer tax room to the provinces and municipalities. The provinces and municipalities should engage in the same kind of exercise.

Politics, of course, speaks to the contrary conclusion: A minority Parliament means an incipient election, which, in turn, means more election-style goodies. The risk is that the provinces, in a wave of neo-conservative orthodoxy, will keep slashing budgets to keep their own close to balance. This will have a perverse effect since, from a broader economic standpoint, what matters is that accounts overall (i.e., including the feds and Alberta) are in relative balance and, indeed, surplus when the economy is doing well. Given the fiscal imbalance, it is unreasonable to expect Ontario to balance its budget every year.

There is another kind of damage as well. Citizens wake up to their morning radio shows only to hear the Mayor blaming the Premier, and the Premier blaming the feds. Then the Minister of Finance says they have their “math wrong.” The public’s answer is to put a collective pillow over our heads. People want their governments to stop squabbling and deliver better programs.

No doubt, a budget with “a little of this and a little of that” will give a little bump in the polls. But this misses the bigger picture. The failure to address the huge mismatch between needs and responsibilities and money fuels a discontent that is more than just grousing. We need a renewed commitment to a federalism that works. The premiers should put more resources into the Council of the Federation, figure out a way to make common cause, and help the federal government to focus on the longer term.

The provinces and the cities need more tax room. Ontario needs the assurance that federal spending on human resources, immigration, aboriginal programs and higher education are based on the simple test of population. That isn’t true today. It should be. Quebec needs the space to be itself within the federation. But asymmetry only works up to a point, a point at which other partners feel the centre is not holding. The trouble with the Danny Williams offshore agreement was not that something more needed to be done to deal with oil and gas revenues; it was the sense that someone could treat the Canadian flag as a flag of convenience and be rewarded for it. No doubt, the polls show that Mr. Williams is a hero in Newfoundland. But at what price? That may not be his problem. But it is definitely a problem for the Prime Minister.

Mr. Charest will face an election in a couple of years. His defeat would plunge the country right back into the separatist bog. Transparency, a leaner, more focused central government, fiscal decentralization (not “tax cuts by everybody”): These are good policies and, ultimately, good politics.

Mr. Charest has to be able to run as an unapologetic federalist. This means, in turn, that Canadian federalism should have less to apologize for.

Mr. Charest should also be careful in his language and arguments not to be fuelling the case for sovereignty. He is best when he is a builder, and when he puts the separatists on the defensive. That is where they belong. That is what all the premiers and the Prime Minister have to do. Whatever the solutions arrived at, it will only happen with leadership, with a vision for Canada and the challenges facing its governments that go beyond whatever “the numbers” say. By my reckoning, we don’t have much time to get it right.

Bob Rae, a former premier of Ontario, practises law with Goodmans LLP.