Strengthening Fiscal Responsibility Through Decentralization: Empower local voters to increase government accountability and efficiency

Publication, Role of Government, Steve Lafleur

Executive Summary

• Canada’s constitution lays out a division of powers between the federal and provincial governments. However, there are many policy areas that fall under provincial jurisdiction where the federal government has taken an active role. Similarly, provincial governments delegate certain functions to municipal governments, and both provincial and federal governments often intervene in these areas. This overlap creates redundant bureaucracies and weakens political accountability. When more than one level of government has some responsibility for a program area, it is often unclear who ought to be held accountable for mistakes and praised for success. To increase efficiency and accountability, the federal government should end its role in areas of provincial and municipal responsibility.

• While simple in theory, eliminating the federal role in these areas would require a rebalancing of fiscal capacity in the country. Because the federal government collects more revenue than would be required were it to terminate its involvement in areas such as health and education, lower levels of government have a diminished capacity for revenue generation. There is only so much that people are willing to pay in taxes. To devolve its responsibility successfully, the federal government would need to pare back its revenue collection to allow lower levels of government to raise more revenue.

Key findings

• In 2009, the federal government controlled 43.33 per cent of government spending, leaving 40.69 per cent for the provinces and 15.87 per cent for the municipalities.

• Because the federal government controls such a large proportion of spending, federal intervention is rampant in areas of provincial responsibility such as health care and education, as well as municipal areas such as roads, water treatment and public transit.

• In many cases, all three levels of government provide funding for the same project.

• These point to a fiscal imbalance between the federal and provincial governments as well as

between the provincial and municipal governments.

• Federal involvement in areas of provincial and municipal responsibility creates more opportunities for politicized spending decisions.


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