Source: Federalism Renewed by Tom Kent for the Caledon Institute of Social Policy, March 2007, ISBN 1-55382-221-8
from Federalism Renewed
by Tom Kent
It is easy to identify other purposes for which financing of people might be better than the subsidisation of provinces that distinguished the second half of the 20th century, and for which reformers most often continue to call. A present example is the campaign for funding for cities.
The case is strong. It is made here in order to say that it should be heeded by provincial governments. It is not a case for federal action.
Politically, big cities carry less than their due weight in provincial legislatures. They are chronically underfunded. Neglect of their burgeoning infrastructure and service needs has become an obvious hindrance to economic change and growth — so much so that there is now plenty of steam behind the efforts of city mayors to summon Ottawa to their rescue. The responses have been, inevitably, inefficient improvisations failing to use public money where it could do most good.
Nothing in the Canadian constitution is clearer than provincial jurisdiction over municipal business. There is nevertheless some evasion. Relatively small federal cheques get to Winnipeg or wherever, on the excuse that they are for special, experimental, short-term projects. For regular funding of any size, the law has to be respected. Federal dollars can penetrate to the third order of government only through the intermediary of a provincial treasury.
They therefore have to be spread widely among municipalities. Provincial politics rule in that respect. But federal politics rule the amount to be spread. It is rarely a lot or assured for the long term. The combined consequence is that, while over the years there have been many federal interventions in municipal activities, they have not added up to great improvements in urban living. And they have been at the cost of confused accountability in a stream of postures and arguments.
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Nevertheless, eliminating them will not be easy. Too many MPs are too set on being local heroes. A substitute might help. Instead of meddling in a great variety of local affairs, Ottawa could concentrate on one definite purpose. Affordable housing is often suggested. Its shortage is not only central to the deprivations of families in severe poverty. So many people are now concentrated in the great urban agglomerations that people with around average and better incomes cannot find housing within their financial reach that is at all near their work. Their commuting is at great cost in personal time, energy and impaired family life, as well as in the pollution and congestion that disfigure city living and help to impoverish municipal government. And the economy is made less flexible. People short of work in more remote areas often have better housing at much less cost than city dwellers. Their reasonable reluctance to move, or to stay moved, is not the least of the market economy’s imperfections requiring offset by the public economy.
The need is for a variety of accommodations in a variety of inner-city locations at a range of low to moderate rents. The efficient role for government is not to subsidise the building or renovation of such housing. It should be let at market rents covering capital and maintenance costs. The efficient and equitable role for government is to make the accommodation affordable for a variety of tenants by reimbursing them for some of the rent, on a scale related to family income. Such action would better serve the public interest in a manner with more public appeal than another confusion of responsibilities.
Again, the case is strong. But it is not a case for federal action now. The time might come. If the provinces do not do more, in particular do not give their major cities a better deal, the time will come. But it should not. Federalism will not be well modernised, will not be made stable for the early part of this century, if Ottawa rushes to take on functions that are, in the language of the BN A Act. “local” in the sense that the need for them is heavily concentrated in particular communities.
The national government’s responsibility is for the nation-wide needs of Canadians everywhere. The contemporary world makes it a bigger agenda. The priorities that have been identified in this paper are fully enough for action now. Great good as more affordable housing would be. Wisdom requires it to be seen as a leading example of a good for provincial governments to do.
On to the rails
Affordable housing is one example of many. Across Canada, it is easy to point to deficiencies in infrastructure that handicap the economy and limit the well-being of citizens. Water, sewage, roads, power supply, parks, public buildings and all: in older communities they are crumbling; in others they limit growth. The big cities have both problems at once. The demands for federal subventions are endless. The ingenuity of the calls for national programs is impressive. The incentive for politicians to respond is intense.
The fact is still that each such project is local, whether to Montreal or to Moose Jaw, whether for Torontonians escaping to cottages or Calgarians to ski runs. The multitude of the needs does not mean that they add up, in a federation, to a national cause. They are, in Canada, provincial business.
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Provinces have the authority for it. With equalisation supplementing national programs for the economy and for people, provinces also have the necessary finance. A case can be made for reducing their capital costs by enabling them to borrow, as the smaller ones might wish, through Ottawa rather than going directly to the bond market themselves. For federal subventions there is no reason. There is only the inherent tendency, in public even more than in private organisations, to shuffle responsibility and confuse accountability.
The political pleasure of sharing in ribbon-cutting ceremonies for local projects has a price. It takes money from genuinely national purposes. Research, now of first importance among infrastructures, has been chronically underfunded. Responsive policy, providing money for projects submitted, is not in itself adequate. Its success depends on the range and quality of the submissions. A creative policy requires the federal government to play also its necessary role as the primary source of core funding for research and development institutes.
There are other examples. No country is more in need of a coast-guarding service. Climate change will make the consequences of its neglect increasingly severe. Again, Ottawa has been slow to build the infrastructure for alternative energy sources and efficiencies, slow to take advantage of the information and communications technologies that can help to protect against epidemics and other disasters, natural or man-made.
Perhaps most striking of all, given the role of the railroads in the building of Canada, is their latter-day neglect by the federal government. It has persisted in a tax and expenditure structure that has massively encouraged freight to shift to long-distance trucking, passengers to cars and planes. Again, pollution intensifies the need for a new industrial policy. A greenly progressive government would see equity investment in the railroads, in their equipment and tracking, among its priorities.
The general point is clear. Both orders of government have heavy responsibilities for the modernising of economic and social infrastructures. Ottawa would be well occupied in doing its share well. It does not need the political aggrandisement of involving itself in the provincial share.
The choice: change or retreat
Canada is in one of the periods, as much of the world was 60 years ago, when individual policy decisions are made in the context, whether at the time recognised or not, of a central choice of national direction.
Few people are happy with the way Canadian federalism is now operating. Prime Minister Harper and others talk of tidying it up by scaling down Ottawa’s responsibilities to those of Victorian times. If it were feasible in the contemporary world, that would be a retreat from nationhood to a sovereignty-association of regions. It won’t happen. The neo-con time is over. The only appeal of retreat is that at its beginning its course is clear. The only alternative as yet in political prospect is to continue to muddle through with the mechanisms for economic and social policy that have given us
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such confused conflicts between federal and provincial politicians, such absence of democratic accountability, such debilitating slowness of decision and action on the issues that will determine our future.
Retreat into the past will not do but nor will our governmental system as it is. Canadian federalism must be urgently refashioned to its third shape, to a people’s federalism.