The federal spending power in Canada: nation-building or nation-destroying?

In 1972, Walker Connor published a provocative article entitled "Nation-building or Nation-destroying?" (1) Connor suggested that the failure of academics and political leaders to distinguish between nation and state created assimilationist pressures on minorities. Indeed, he argued that many social theorists in the 1950s and 1960s assumed that ethnic identity would "wither away" with "modernization." In short, "[s]ince most of the less developed states [and many of the developed states] contain a number of nations, and since the transfer of primary allegiance from these nations to the state is generally considered the sine qua non of successful integration, the true goal is not 'nation-building' but 'nation-destroying.'" (2) Connor concluded that many efforts at state-building in the developing world lead to ethnic conflict and secessionism.

This article will argue that while the federal spending power has helped to build the modern Canadian state, the spending power has also precipitated a process of nation-destroying. The spending power has undoubtedly contributed to the rise of Canada's welfare state. Furthermore, many of the social programs established by the spending power, especially health care, have become part of the "national" identity of Canadians, at least outside of Quebec. In this sense, the spending power has been an instrument of nation-building. The federal spending power, however, has been the object of considerable resentment in Quebec. Successive governments of Quebec have objected strenuously to the use of the federal spending power and to the concomitant encroachment into areas of provincial jurisdiction. (3) In this sense, the federal spending power might be viewed as nation-destroying. (4)

THE FEDERAL SPENDING POWER AND THE CONSTITUTION IN COMPARATIVE PERSPECTIVE

The federal government's spending power underpins federal conditional grants in Canada. Conditional grants were introduced in Canada in the 1910s, and employed extensively in the 1930s and post-war reconstruction years. (5) In the post-war period, the provinces were lured into accepting conditional grants on the promise of equal cost-sharing for medicare, welfare, and other major social programs. Conditional grants stemmed initially from the federal government's superior fiscal position but, with sustained opposition from the government of Quebec in the 1950s and 1960s, the federal government was forced to develop a constitutional justification for its spending power. Quebec has never accepted the constitutionality of the federal spending power. Governments of Quebec view federal conditional grants as an exercise of raw fiscal power, not of constitutional authority. No province is forced to accept federal conditional grants, but fiscal and political realities almost always compel the provinces to accept such grants, despite their frequent protests especially by Quebec. Although it is conceivable that a province might reject a new federal initiative, the sums involved for established programs are too great to forgo and too large to recover from other revenue sources. Without fiscal self-sufficiency, the government of Quebec, like the other provinces, is forced to rely on fiscal transfers from the federal government but, unlike the other provinces, this creates a perception of cultural or national subordination in Quebec.

The federal government has defined the "spending power" as "the power of parliament to make payments to people or institutions or governments for purposes on which it (parliament) does not necessarily have the power to legislate." (6) How can the federal government spend money outside its areas of legislative competence? Peter Hogg has suggested that the federal spending power, "a power which is nowhere explicit in the Constitution Act of 1867," may be "inferred from the powers to levy taxes (s.91 (3)), to legislate in relation to 'public property' (s.91 (1a)), and to appropriate federal funds (s.106)." (7) Section 102, which allows for the creation of the consolidated revenue fund, has also been cited as part of the basis for the federal spending power. (8) Hogg notes further, "[p]lainly the Parliament must have the power to spend the money which its taxes yield and to dispose of its own property. But of course the issue is whether this spending power authorizes payments for objects which are outside federal legislative competence." (9)

The specific wording of these clauses does little to clarify the issue. Sections 91 (1a) and 91 (3) give the federal government the power to make laws in relation to "public debt and property" and "the raising of money by any mode or system of taxation," in as much as these laws do not affect matters "coming within the classes of subjects by this Act assigned exclusively to the Legislatures of the Provinces." These sections of the Constitution Act of 1867 give the federal government the power to raise revenue by any mode of taxation and to spend this revenue in areas of federal jurisdiction, but it is still not clear that these sections permit the federal government to spend monies outside its areas of jurisdiction. Andrew Petter, a professor of constitutional law and formerly the minister of intergovernmental relations in British Columbia, has argued that none of the constitutional arguments for the spending power are particularly convincing. (10) Jeremy Webber, also a constitutional law professor, has stated that the federal spending power is of "doubtful constitutionality." (11) The federal spending power thus appears to sit in a vacuum of political and legal uncertainty. Justice John Douglas Lambert of the British Columbia Appeal Court has described the constitutionality of the federal spending power as "fragile," (12) and the Canadian Bar Association has described the legality of the federal spending power as "uncertain." (13)

The ambiguity of the Canadian Constitution is evident when compared to the constitutions of India and Australia. The drafters of the Indian Constitution, aware of the problems encountered in Canada with the Judicial Committee of the Privy Council in the 1930s (see below), anticipated that there might be instances when a government would wish to spend money outside its area of jurisdiction. Section 282 of India's Constitution consequently declares that "[t]he Union or a State may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws." (14) Section 96 of the Australian Constitution permits the federal government to "grant financial assistance to any State on such terms and conditions as the Parliament thinks fit." Quebec's Seguin Commission on Fiscal Imbalance argued that the absence of a spending power in the Canadian Constitution is "no accident." (15) For the commission, it was omitted deliberately to better ensure provincial autonomy.

In the United States, "neither the Constitution nor judicial rulings have been taken to prohibit federal spending (either by transfers to subnational governments or by direct transfers to individuals or organizations) in areas of exclusive subnational jurisdiction." (16) The federal spending power was disputed vigorously in the American founding era, and from time to time subsequently, it has been the source of some controversy. The Anti-Federalists feared that the power of Congress "to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States" would permit the federal government to exercise power beyond its explicitly delegated powers. James Madison refuted this argument in Federalist 41. (17) Later, Alexander Hamilton and Thomas Jefferson similarly sparred over the extent of the powers implied by the necessary and proper clause. (18) Anthony Birch notes that "since 1865 the Hamiltonian view had been generally accepted, and Congress has appropriated money on many occasions for the payment of conditional grants to states." (19) The federal Social Security Act of 1935 briefly sparked the debate again, (20) but the U. S. Supreme Court's ruling in favor of the act settled the matter. (21) More recently, the Supreme Court upheld the federal spending power in South Dakota v. Dole. (22) John Kincaid has identified the federal spending power as one of the elements contributing to the rise of "coercive federalism" in the United States. (23)

The government of Canada has adopted a strongly Hamiltonian view of federalism, while successive governments of Quebec have adopted Jefferson's more state-friendly view of federalism. In fact, Quebec sovereignists, including those in the governing Parti Quebecois, more closely resemble the American Anti-Federalists. Former Premier Lucien Bouchard once declared, "If one thing is essential for Quebec, it is the respect for Quebec's exclusive areas of jurisdiction, particularly in health, income security, education and family policy. For the past thirty years, the federal government has sought to interfere in Quebec's area of jurisdiction. It has essentially done this through what is called a spending power that Quebec has never wanted to recognize, seeking to protect its exclusive areas of jurisdiction." (24) The government of Quebec opposes the deployment of the spending power in all its variants-payments to individuals, institutions, and the provincial government. For all the major political actors in Quebec, the federal spending power erodes provincial autonomy, especially in social policy, and "[i]n a broader perspective, federal initiatives distort the provinces' budgetary choices by favouring certain sectors or approaches to the detriment of other options." (25) For many Quebecers, this constitutes an affront to their national aspirations.

JUDICIAL INTERPRETATION OF THE FEDERAL SPENDING POWER

A Globe and Mail editorial declared in 1999 that "the courts have ruled that, while Ottawa can't pass laws in areas of provincial jurisdiction, it can spend money there." (26) Ronald L. Watts has also asserted that the courts have interpreted the Constitution to permit federal spending in areas of provincial jurisdiction. (27) Although the Supreme Court acknowledged in the Canada Assistance Plan case that "the federal spending power is wider than the field of federal legislative power," (28) it has not determined the limits of the federal spending power. In a subsequent case, Justice Beverly McLachlin wrote, "I have not considered the constitutional limits, if any, on the federal spending power. That issue was not raised before us and should, in my view, be left to another day." (29) The Supreme Court has thus indicated that the matter is not yet settled. Keith Banting has concluded that the question of the federal spending power "has never been settled authoritatively." (30)

The judicial decision that most directly considered the federal spending power remains the Employment and Social Insurance Act case of 1937. In that case, the Judicial Committee of the Privy Council (JCPC) rejected the federal government's contention that a spending power can be inferred from the Constitution. Lord Atkin wrote toward the end of his judgement, "[i]t only remains to deal with the argument ... that the legislation can be supported under the enumerated heads, 1 and 3 of s.91, of the British North America Act, 1867." (31) Atkin allowed that the federal government may collect revenue by any mode of taxation, but, he continued, "assuming the Dominion has collected by means of taxation a fund, it by no means follows that any legislation which disposes of it is necessarily within Dominion competence. It may still be legislation affecting the classes of subjects enumerated in s.92, and, if so, would be ultra vires." (32) Although this decision would seem to prohibit a federal spending power, Bora Laskin has noted the obvious: Atkin's "statement has not had any noticeable effect upon Dominion spending." (33)

The spending power was also tested when the Family Allowance Act (1944) was challenged before the Exchequer Court of Canada (now known as the Federal Court) in Angers v. Canada in 1957. (34) Justice Jacques Dumoulin ruled the Family Allowance Act could be justified with the federal government's general power in Section 91 to make laws for "peace, order, and good government" (POGG). It is important to note that the Family Allowance Act itself was not supported as a corollary of the federal government's taxing powers. This decision thus does not sanction the spending power, unless the legislation is subsumed by the POGG clause. This interpretation reverses more than half a century of judicial interpretation by the JCPC, which restricted the POGG clause to an emergency provision. (35) Gerald Beaudoin describes Dumoulin's decision as questionable. (36) The federal government evidently could not accept Dumoulin's reasoning, for it has never tried to justify its spending power in this manner.

In light of the JCPC's earlier decision, the federal government tried to defend the spending power as "gift-giving." (37) The federal government derived the gift-giving idea from the minority judgement of Chief Justice Right Honourable Sir Lyman Poore Duff in the 1936 Employment and Social Insurance Act case before it proceeded to the JCPC. Duff wrote, "it is evident that the Dominion may grant sums of money to individuals or organizations and that the gift may be accompanied by such restrictions and conditions as Parliament may see fit to enact. It would then be open to the proposed recipient to decline the gift or accept it subject to such conditions." (38) This argument was elaborated by F. R. Scott, who argued that the spending power derives from "the Royal Prerogative and the common law" and not the written constitution. (39) Hogg suggests that there might be some merit to this position:

 It seems to me that the better view of the law is that the
 federal government may spend or lend its funds to any government,
 or institution, or individual it chooses, for any purpose it
 chooses; and that it may attach to any grant or loan any conditions
 it chooses, including conditions it could not directly legislate.
 There is a distinction, in my view, between compulsory regulation,
 which can obviously be accomplished only by legislation enacted
 within the limits of legislative power, and spending or lending or
 contracting, which either imposes no obligations on the recipient
 (as in the case of family allowances) or obligations which are
 voluntarily assumed by the recipient (as in the case of a
 conditional grant, a loan, or a commercial contract). There is no
 compelling reason to confine spending or lending or contracting
 within the limits of legislative power, because in those
 functions the government is not purporting to exercise any
 peculiarly governmental authority over its subjects. (40)

However, as Pierre Trudeau noted before he entered public office, "governments may give donations only within the limits of the constitution; and it is precisely these limits, stemming from the theory of federalism and defined by the Privy Council, that must be respected." (41)

The federal government has circumvented the Constitution and the judicial interpretations of the spending power by employing a narrow definition of legislation. The federal government reasons that parliament has "the power to spend from the Consolidated Revenue Fund on any object, providing the legislation authorizing the expenditures does not amount to a regulatory scheme falling within provincial powers." (42) Hogg, however, admits that "if ... federal funds are granted on condition that the programme accord with federal stipulations, then those stipulations will effectively regulate the programme even though it lies outside federal legislative authority." (43) Donald Smiley has written, "[a]lthough it is not within my competence to judge the constitutionality of the various uses of this power ... it appears to a layman to be the most superficial sort of quibbling to assert that when Parliament appropriates funds in aid of say, vocational training or housing, and enacts in some detail the circumstances under which such moneys are to be available that Parliament is not in fact 'legislating' in such fields." (44)

Although the Supreme Court has not fully sanctioned the federal government's position on the spending power, it is not entirely clear how the courts could handle a matter of this magnitude. Andrew Petter has noted, "we live in a country that for the past four decades [now five decades] has structured its political system around the assumption of a federal spending power. Terminating that power would pull the rug out from under a vast array of grants, programs, and tax expenditures." (45) He notes further that "[w]hile the authority wielded by judges may enable them to strike down particular programs, it does not permit them to dismantle the structure of modern government. It is simply beyond the capacity of the courts to undo forty [now fifty] years of political development." (46) However, as long as the federal spending power sits in a legal vacuum, it will remain contentious.

In summary, the federal parliament has declared its right to spend money in areas outside its jurisdiction, although the Constitution does not provide it the authority to make such a declaration. Moreover, the federal government has employed its spending power despite strenuous and repeated objections from successive governments of Quebec. In 1999, Stephane Dion, the federal minister of intergovernmental affairs, said, "Mr. [Lucien] Bouchard ... and his ministers can claim all they like that we [the federal government] don't respect the constitution in using the federal spending power. They can repeat it 1,000 times a day if it makes them happy, but it's wrong. It's legal, and we're completely within our rights to use it." (47) The force of Dion's statement betrays his conviction; something that is clearly constitutional does not have to be stated so strongly.

THE SPENDING POWER AND THE FEDERAL PRINCIPLE

The federal principle, following Kenneth Wheare, may be defined as "the method of dividing powers so that the general and regional governments are each, within a sphere, co-ordinate and independent." (48) For Albert Dicey, federalism represents a system of government "under which the ordinary powers of sovereignty are elaborately divided between the common or national government and the separate states." (49) If this division of sovereignty is to be meaningful, each order of government requires autonomous legislative, taxing, and spending powers. While Wheare's definition of federalism has a venerable heritage, a number of scholars have considered his strict separation of the two orders of government to be anachronistic. (50) Anthony Birch modified Wheare's definition of federalism. He suggested that federalism is a system of government "in which there is a division of powers between one general and several regional authorities, each of which, in its own sphere, is co-ordinate with the others, and each of which acts directly on the people through its own administrative agencies." (51) In short, the federal government of Canada has implicitly tended to follow Birch's model of federalism, while governments in Quebec have advocated Wheare's understanding of federalism.

In the early 1950s, Premier Maurice Duplessis announced the establishment of a royal commission on constitutional problems to be chaired by Justice Thomas Tremblay. In language almost identical to Wheare, the commission wrote, "we may define the federative system properly so-called as being the system of association between states in which the exercise of state power is shared between two orders of government, coordinate but not subordinate one to the other, each enjoying supreme power within the sphere of activity assigned to it by the Constitution." (52) This definition of federalism has endured in Quebec over time, and it has been embraced by all political parties in Quebec since the 1950s. The most recent constitutional policy paper from the Quebec Liberal Party states unambiguously: "The sovereignty of the provinces in their area of legislative jurisdiction is one of the key principles of federalism ... More specifically, in a true federation, the provinces are free to do what they want within the limits of their constitutional power, without federal control or legal subordination vis-a-vis the federal government." (53) The Quebec Liberal Party has thus called for clear constitutional limits on the federal spending power. (54)

Since World War II, however, the federal government has insisted that it is not possible to maintain a division of sovereignty within the federation:

 this 'either-or' approach--either it is federal jurisdiction or it
 is not--does not meet the situations so prevalent in today's
 society, where there is a solid national interest in certain
 provincial problems or policies, but not such a 'total' national
 interest as to call for the transfer of jurisdiction to the
 Parliament of Canada. It is for these 'in-between situations' that
 some such vehicle as federal-provincial programmes, involving on
 occasion the spending power, is required. (55)

Birch once declared that "[t]he problem of finance is the fundamental problem of federalism." (56) This is certainly true in Canada, where the division of revenue has been much more problematic than the division of powers.

For Wheare, and successive governments of Quebec, "[t]he federal principle requires that the general and regional governments of a country shall be independent each of the other within its sphere ... Now if this principle is to operate not merely as a matter of strict law but also in practice, it follows that both general and regional governments must each have under its own independent control financial resources sufficient to perform its exclusive functions." (57) In Canada, however, the federal government has much stronger taxing powers. Under the Constitution, the federal government is permitted to raise revenue by "any mode or system of taxation." The provinces are restricted to "direct taxation" as well as licensing for all manner of activity and the management and sale of public lands, including wood and timber thereon. All the provinces, save Alberta, have also introduced sales taxes, essentially by appointing shopkeepers as provincial tax collectors. Nonetheless, the federal government has almost always been in a stronger financial position than the provinces, which have consequently had to rely on federal subsidies and transfers. (58) The provinces presently receive about 20 percent of their revenue from federal transfers. (59)

The federal spending power in Canada is frequently justified on the premise that the provinces have insufficient sources of revenue to meet their constitutional obligations. This reasoning, however, is specious. The provinces have access to the income tax, which is the largest source of revenue in the country. The problem is that the federal government has commandeered a majority of this revenue for itself. The federal government's dominance in the income-tax field dates to World War II. In 1940, the provinces, including Quebec, voluntarily "rented" their income-tax space to the federal government in exchange for fixed-sum payments. During the war, for all intents and purposes, Canada had a unitary tax system. The provinces forfeited their fiscal autonomy with the understanding that the war-time tax agreement would be temporary. After the war, however, the federal government was anxious to renew the agreement. Quebec and Ontario refused to enter another tax-collection agreement, although the other provinces consented again. Ontario re-entered in 1952. The federal-provincial tax-collection agreements were renewed every five years, with the provinces demanding and receiving larger portions of the income-tax field. (60) Quebec always refused to join these arrangements. It has thus been the only province in Canada to collect its income tax separately, although Alberta and Ontario collect corporate taxes separately. This allowed Quebec to tax directly on income. For Quebec, this was a corollary of the federal principle.

From the early 1950s to the late 1990s, the income tax in the English-speaking provinces was calculated as a percentage of the federal income tax, with the federal government establishing the tax base. Only recently have the English-speaking provinces moved to tax citizens directly on income, although all the provinces, save Quebec, still rely on the federal government for income tax collection. (61) Provincial income taxes, however, still only amount to about half the federal level. (62) Conceivably, the provinces could raise their income-tax rates and drive the federal government out of this field, but undoubtedly a collective action problem would arise among the provinces. The smaller and financially weaker provinces would be reluctant to challenge the federal government in this manner and, if only one or two provinces confronted the federal government, the latter would have no trouble holding its ground. In sum, the federal government is in the peculiar position of dominating the most lucrative source of provincial revenue only to transfer money to finance provincial programs.

Edgar Benson, the federal finance minister in the late 1960s, maintained that the two orders of government ought to have unlimited powers of taxation:

 [t]he application in the Constitution of the 'principle of access
 to revenue sources' should result in virtually unlimited powers of
 taxation being granted to both the federal and provincial
 governments, each within its jurisdiction. Parliament should have
 the power to tax all persons, incomes, property and transactions
 (sales and purchases) in Canada, and each province should have the
 same powers within the province. (63)

The federal government still maintains that the "[p]rovincial governments have access to all the major tax bases and they are free to set their own priorities." (64) The power of taxation is limited, however, by the ability of taxpayers to pay.

In Canada, the federal government and the provinces are competing for the same tax sources-income, corporate, sale taxes, and "sin" taxes. The Canadian tax system stands in marked contrast to the Swiss tax system in which the federal government relies largely on a variety of indirect and value-added taxes, while the cantons rely primarily on personal and corporate income taxes. (65) The separation of tax fields in this manner is more consistent with the federal principle, as defined by Wheare. With two orders of government sharing the same tax fields, each has to be at least cognizant of the other's tax rates, and frequently the two orders of government will have to negotiate these rates. The establishment of tax rates in this manner thus introduces the issue of bargaining power, and it is bargaining power, as much as constitutional authority, that has placed the federal government in a stronger financial position than the provinces.

In 2001, the government of Quebec appointed a commission to investigate the fiscal imbalance in federal-provincial relations. The commission concluded that the federal-provincial fiscal imbalance "stems essentially from three separate causes, namely [an] imbalance between spending and access to sources of revenue, the inadequacy of intergovernmental transfers from the federal government to the provinces and the 'federal spending power.'" (66) The commission stated pointedly that "[f]ederal government initiatives in conjunction with [the] 'federal spending power' in the provinces' fields of jurisdiction are, ultimately, only possible because of the resources available to the federal government, which exceed those that it needs to assume its jurisdiction. The 'federal spending power' is therefore directly tied to the division of tax fields between the two orders of government." (67) The commission recommended that separate tax fields should be apportioned to the two orders of government, as in Switzerland. In particular, the commission recommended that the federal Goods and Services Tax be transferred exclusively to the provinces, although the commission "did not wish to reject the scenario calling for a new division of the personal income tax field." (68) The Quebec Liberal Party has similarly proposed a new division of the tax base to address the fiscal imbalance. (69) The federal government has summarily rejected the commission's analysis. In April 2002, the federal Department of Finance stated unequivocally that "[t]here is no evidence of a vertical fiscal imbalance in Canada." (70)

Under Trudeau, the federal government concluded that Wheare's admonition that each order of government should have independent control of financial resources sufficient to perform its exclusive functions was impossible:

 It can be argued that the Constitution should be contrived so as to
 avoid any need for a spending power--that each government ought to
 have the revenue sources it needs to finance its spending
 requirements without federal assistance ... The difficulty with this
 tidy approach to federalism is that it does not accord with the
 realities of a Twentieth Century state. (71)

Governments in Quebec have tried repeatedly since World War II to have fiscal relations in Canada conform to the federal principle as defined by Wheare. In the above passage, the federal government states categorically that the Quebec's understanding of federalism does not and cannot work.

THE FEDERAL SPENDING POWER AND NATION-BUILDING

Under Trudeau, the federal government attempted to justify its spending power, and its interference in areas of provincial responsibility, as serving the "national" interest. The federal government reasoned that "because the people of Canada will properly look to a popularly elected Parliament to represent their national interests, it should play a role with the provinces, in achieving the best results for Canada from provincial policies and programmes whose effects extend beyond the boundaries of a province." (72) The federal government concluded, "[i]t is in the nature of federalism, in other words, for the citizen to look to Parliament for an expression of his national or extra-provincial interests." (73) The spending power is the "vehicle," argues the federal government, "by which the 'national interest' in the level of general provincial public services or of a particular public source can be expressed." (74) The idea of "national standards" for social programs is a corollary of the "national interest" justification for the spending power. More recently, in the spring of 2002, the federal Department of Finance stated that "[o]nly the federal government can stand behind nationwide programs and standards." (75)

In the late 1960s, the federal government proposed that it would only introduce new conditional grants for federal-provincial programs if there was "a broad national consensus in favour" of the program. (76) The federal government suggested that a "national consensus" would exist if three of the four Senate regions supported a particular program initiative. By this scheme, a "consensus" could conceivably exist with as few as five provinces agreeing to the initiative. If Ontario, two western provinces, and two of Nova Scotia, New Brunswick, or Newfoundland supported an initiative, the federal government would conclude that "a national consensus" existed for the program. This is a weak consensus, and it could exist without the agreement of Quebec.

The notion of a national consensus and national standards, furthermore, implies the presence of only one nation. This has been disconcerting to the government of Quebec, which finds the notion of national standards doubly offensive. First, in political practice, national standards mean federal standards in areas of provincial jurisdiction. This, of course, is contrary to the federal principle, at least as understood by the government of Quebec. Second, national standards are interpreted in Quebec as the standards of the English Canadian nation. They are viewed as an imposition by the majority upon a minority nation. Claude Ryan, a former leader of the Quebec Liberal Party, has argued that "'national standards' should be governed by an agreement among the governments concerned. The concrete search for these standards must be effected in ways that fully respect provincial sovereignty." (77) Note how Ryan qualifies the concept of national standards with inverted commas. Louis Balthazar expands upon this point when he writes, "[t]he very tendency to use the word 'national' to refer to a federal government reflects a trend toward a kind of federation in which federated states are hardly more than junior governments or administrative units." (78) While the Qugbgcois cannot speak about national standards (in a Canadian sense), Canadians outside Quebec have come to insist upon country-wide, or so-called national, standards for social programs.

Despite the concerns expressed by the government of Quebec, the federal government has appeared unfazed. It has argued, "there seems to have been little disposition on the part either of the federal or provincial governments to seek further judicial clarification of the matter [i.e., the spending power] ... Only governments of Quebec have advanced the more general proposition that it was constitutionally improper for Parliament to use its spending power to make grants to persons or institutions or governments for purposes which fall within exclusionary provincial jurisdiction." (79) Quebec's opposition to the spending power, however, is problematic. It threatens the stability of the federation.

THE FEDERAL SPENDING POWER: THE SEARCH FOR A SOLUTION

The federal spending power has been central to the constitutional negotiations designed over the past 30 years to keep Quebec in confederation. As the various governments in Canada have searched for a lasting solution to the question of the federal spending power, a typically Canadian compromise has emerged; a temporary ad hoc arrangement has evolved for a chronic ad hoc problem. The federal government has permitted the government of Quebec to "opt-out" of shared-cost programs. The opting-out arrangements were introduced with the Established Programs (Interim Arrangements) Act of 1965. If a province opts not to participate in a shared program, the federal government will either provide a direct cash transfer or additional tax room, as long as the province agrees to establish a similar program with comparable standards. Quebec is the only province that has made extensive use of the opting-out procedure.

Opting out, however, only provides Quebec an illusion of autonomy. It does not restore the province's sovereignty in areas of provincial jurisdiction. Hogg, who, as seen above, generally supports the federal spending power, admits this himself:

 All of these opting-out arrangements bind the opting-out province to
 continue established programmes without significant change, or in
 the case of new programmes to establish or continue comparable
 provincial programmes. All that opting out really involves is a
 transfer of administrative responsibility to the province. It does
 not give the province the freedom to deploy resources which would
 otherwise be committed to the programme into other programmes. The
 province gains little more than the trappings of autonomy: the
 federal government 'compensation' to an opting-out province is
 really just as conditional as the federal contribution to
 participating provinces. (80)

The fact that the federal government has allowed Quebec to opt out of certain fiscal arrangements and social programs could be interpreted as a tacit admission that the spending power is unconstitutional and a violation of the federal principle.

Quebec has complained, furthermore, that when it opts out of shared-cost programs, the fiscal compensation it receives from the federal government is not sufficient to cover the costs of its comparable program. Quebec has thus taken to demanding "full compensation" when it opts out of federal-provincial program arrangements. To date, the federal government has been unwilling to meet this demand. Theoretically, it would be possible for Quebec, or any other province, to opt out without compensation and simply not offer a comparable program. However, this would present any government with a serious conundrum. The problem, of course, is that the federal money comes from provincial taxpayers. Premier Jean-Jacques Bertrand noted the dilemma in 1969 when the government of Quebec was deciding whether to accept the federal government's Medical Care Act: "Either Quebec joins the programme, and thus flies squarely in the face of the Canadian constitution, or else we do not join up and thus deprive our people of a lot of money to which they have the right. What does one do in case like this?" (81) In relation to established programs, like health care, no province could afford to decline federal transfers. With the federal government dominating the major tax fields, the provinces would not have sufficient tax space to raise the revenue to continue financing established programs.

Although constitutional reform has been on the political agenda since the 1930s, (82) the first attempt to limit the federal spending power constitutionally occurred with the Meech Lake Accord in June 1987, which was initiated by Brian Mulroney's Conservative government and endorsed by all the provincial governments. (83) The Meech Lake Accord proposed to insert a new Section 106A to the Constitution Act of 1867. The new clause was to read:

 (1) The Government of Canada shall provide reasonable
 compensation to the government of a province that chooses not
 to participate in a national shared-cost program that is established
 by the Government of Canada after the coming into force of
 this section in an area of exclusive provincial jurisdiction, if the
 province carries on a program or initiative that is compatible
 with the national objectives.

(2) Nothing in this section extends the legislative powers of the Parliament of Canada or of the legislatures of the provinces. Although the Meech Lake Accord only institutionalized the status quo, Premier Robert Bourassa was pleased with the spending power provisions in the accord. He told the National Assembly,

 [w]ith respect to the federal spending power, we have obtained the
 best possible framework for its exercise through a guarantee of
 flexibility and respect for provincial areas of jurisdiction. The
 exercise of the federal spending power has for the past 30 years
 been a zone of constant friction between the federal government and
 the provinces. Quebec has always vigorously denounced the unilateral
 exercise of this spending power, which has been the equivalent of
 actual constitutional amendments made de facto to the division of
 areas of legislative jurisdiction. (84)

Bourassa explained, "[t]he new section 106(A) is drafted so that it speaks solely of the right to opt out, without either recognition or defining the federal spending power ... So Quebec keeps the right to contest before the courts any unconstitutional use of the spending powen" (85)

The Meech Lake Accord collapsed on 23 June 1990, when new governments in Manitoba and Newfoundland withdrew their support. The accord encountered much criticism, not least of which were vigorous claims that it would lead inevitably to a "decentralized" federation with a concomitant diminution of Canada's social programs. In the next round of megaconstitutional negotiations to obtain Quebec's consent for the Constitution Act of 1982, the new premier of Ontario, Bob Rae, sought to prevent this from happening again. Rae was particularly adamant that the next constitutional agreement had to include a constitutionally entrenched social charter. In the Charlottetown Accord, the governments of Canada committed themselves to "the principle of the preservation and development of the Canadian social and economic union." (86) Although the terms of the economic and social union were to be non-justiciable, the statement was supposed to reflect commonly held Canadian values.

Despite the non-justiciable nature of the social and economic union, its presence in the Charlottetown Accord symbolized the attachment of Canadians, especially outside Quebec, to social programs and to the federal role in governing these programs. The framework established in the Charlottetown Accord for the expenditure of government money similarly reflected the growing appreciation of an activist federal government. The spending power provisions of the Charlottetown Accord were stated as follows: "The government of Canada and the governments of the provinces are committed to establishing a framework to govern expenditures of money in the provinces by the government of Canada in areas of exclusive provincial jurisdiction that would ensure, in particular, that such expenditures contribute to the pursuit of national objectives." (87) This enunciation of the federal spending power, rather more in accordance with the views of Canadians outside Quebec, clearly enshrined the federal government's practice of intervening fiscally in areas of provincial jurisdiction. This was a tremendous setback for Bourassa and made the accord all that more difficult to sell in Quebec. The Charlottetown Accord failed after it was rejected by Canadians in a referendum in October 1992, partly because many Canadians felt that too many concessions were made to Quebec. Since the death of the Charlottetown Accord, the debate in Quebec has centered on sovereignty and the province's potential separation from Canada.

The latest agreement on the spending power is included in the Social Union Framework Agreement (SUFA), negotiated by the federal government and the nine English-speaking provincial governments in February 1999. The government of Quebec refused to endorse SUFA. The agreement declares that "[t]he use of the federal spending power under the Constitution has been essential to the development of Canada's social union." The agreement permits the federal government to continue using its spending power to establish new social programs in areas of provincial jurisdiction. The federal government agreed that it would not initiate new social programs without first negotiating with the provinces, but the agreement also stipulates that the federal government requires only the support of a majority of provinces to proceed with new programs. The more stringent constitutional amending formula is thus circumvented and, as Claude Ryan notes, "[s]ince a majority of the provinces can be attained with a mere 15 percent of the population and since the smaller provinces are more inclined to rely on federal government support, this requirement will be relatively easy to satisfy." (88) While the nine English-speaking provinces (especially Ontario and Alberta) have occasionally objected to the federal spending power, the fact that they could endorse SUFA indicates that their opposition to the spending power is not as fundamental as Quebec's opposition to it.

Judy Rebick, a well-known social activist, described the agreement as "amazing" and stated approvingly that the agreement "means that Ottawa, along with the have-not provinces, could launch a new social program without the agreement of Ontario, Quebec, Alberta or British Columbia." (89) Premier Roy Romanow of Saskatchewan exclaimed, "to me this is how Canada should work and how it does work best." (90) By contrast, Ryan lamented that SUFA "represents the third time in the past twenty years that Quebec has been abandoned by its partners [the nine other provinces and the federal government] after having decided to make common cause with them." (91) Furthermore, he warned, "[s]ince the negotiations on the Canadian social union failed on the question of the spending power, we must sooner or later re-open conversation around this issue." (92)

SUFA institutionalizes the position on the spending power that the federal government articulated in the late 1960s. The federal government has maintained this position without compromise, despite sustained opposition from the governments of Quebec. SUFA, in fact, makes no reference to compensating provinces that opt out of joint programs, much to the consternation of Quebec. It is thus not surprising that the government of Quebec rejected the social union agreement. Indeed, former Premier Bouchard exclaimed, "There isn't a premier of Quebec who could sign something like this." (93) Jean Charest, the leader of the opposition Quebec Liberal Party, indicated that he would have not endorsed SUFA either. Bouchard put his finger on the core issue, "the rest of Canada," he said, "is defining its own country in accordance with what it wants without being concerned about what we want, without being concerned about the conflicts." (94)

THE CONFLICT OF NATIONAL VALUES: WHERE DOES SOVEREIGNTY LIVE?

"What does Quebec want?" asked Trudeau. (95) He answered, "[a]s far back as memory serves, French Canadians were essentially asking for one thing: respect for the French fact in Canada and incorporation of this fact into Canadian civil society, principally in the areas of language and education, and particularly in the federal government and provinces with French-speaking minorities." (96) This, he claimed, was accomplished with official bilingualism and the Constitution Act of 1982. Quebec, however, has wanted more. From Confederation to the Quiet Revolution, political leaders from Quebec have insisted on sovereignty in their sphere of jurisdiction and on sufficient revenue to make that sovereignty meaningful.

The various governments of Quebec, federalist and separatist alike, have objected strenuously to the erosion of provincial sovereignty, especially in the realm of social policy. Ryan argues:

 [p]rovincial sovereignty in the fields of health and higher
 education must be clearly recognized and respected. Sovereignty
 here means primary and exclusive provincial jurisdiction over
 hospital and health insurance programs and the structure and
 management of higher education. Federal funding of these programs
 must not serve as a means of encroaching on areas of decision that
 are within the exclusive jurisdiction of the
 provinces. (97)

Bernard Landry, formerly the deputy premier of Quebec and currently the premier, has stated, "[t]he Constitution is clear: Education or health, it is our jurisdiction. The federalists should practice their own doctrine and respect the Constitution." (98)

Canadians outside Quebec seem unaware that the federal bargain with Quebec may have been broken. The majority of Canadians outside Quebec have an identity that corresponds to the Canadian state. Indeed, they regard Canada as the nation, much to the consternation of many Quebecois. For example, the Canadian Broadcast Company's flagship news program is called "The National," while the Globe and Mail describes itself as "Canada's National Newspaper," not to mention the National Post, the Globe's principal competitor. In these instances, the nation is presented as coterminous with the Canadian federation. As nationalists, many Canadians outside Quebec believe that sovereignty should be vested with the federal government. Many Canadians outside Quebec have been highly suspicious of the federal principle and the concomitant notion of shared sovereignty, and they are strong supporters of federal social programs, especially medicare. Indeed, health insurance seems to have become a part of the Canadian identity outside Quebec. Michael Valpy argued that "[t]hrough its spending power, Ottawa initiated national hospital insurance and health care.... Without it, we would not have achieved what national standards exist in other social services and programs. We would not have, in short, much of a country." (99)

Many English Canadian nationalists are concerned that provincial primacy in social programming, including areas that are constitutionally matters of provincial jurisdiction, would transform the country into a "patchwork quilt." This, of course, is what federalism is supposed to do. The objective of federalism is to stitch together diverse social communities while maintaining cultural distinctiveness. Federalism is supposed to provide "unity with diversity." Canadians seem eager to preserve Quebec's cultural distinctiveness, but there seems to be little point to this if Quebecers are not granted the freedom to determine their own social and cultural policies, at least within the sphere of provincial jurisdiction. If Quebecers are distinct, they cannot be expected to make exactly the same policy choices as other Canadians. Policy diversity is as much a part of federalism as cultural diversity. The enforcement of "national standards" in areas of provincial jurisdiction is a rejection of diversity, and unity without diversity is not federalism.

The federal government is now in a political bind. While the government of Quebec wants limits placed on the federal spending power, the left in English Canada wants the federal spending power to be made stronger. This dynamic has generated pressure for asymmetrical federalism, but any move in this direction raises the ire of the political right in English Canada, especially in western Canada. The Reform Party of Canada, now the Canadian Alliance, is a strong advocate of what it calls the "equality of the provinces," and asymmetrical federalism violates this principle. Thus, between the left and the right in English Canada, and nationalism in Quebec, the federal government has little room to maneuver around the federal spending power issue.

There is, however, an irony in this political dynamic. The left in English Canada perceives itself to be sympathetic to Quebec culturally, but the social policies of the left leave Quebec feeling alienated. While the right in English Canada seems less favorably disposed toward Quebec as a distinct cultural community, its predisposition against federal intervention in social and economic policy is perhaps politically more amenable to Quebec than the cultural sympathy expressed by the left. However, as long as the center-left vote remains stronger in English Canada, the federal government is unlikely to circumscribe its spending power.

CONCLUSION

Will Kymlicka has argued that "[t]he problem in Quebec-Canada relations, therefore, is not simply that Quebecers have developed a strong sense of political identity that is straining the bounds of federalism. It is also that Canadians outside Quebec have developed a strong sense of Pan-Canadian political identity that strains the bounds of federalism." (100) Many Canadians outside Quebec now equate their national identity with the Canadian state, and they have come to regard the federal government as the guarantor of (provincial) social programs. These programs, for the most part, were established and have been maintained by the federal spending power. In relation to Canadians outside Quebec, the federal spending power may thus be regarded as an instrument of "nation-building." For many Quebecois, by contrast, the federal spending power has allowed the federal government to meddle in areas of exclusive provincial jurisdiction. In turn, successive governments of Quebec have claimed that the federal spending power has disrupted the national priorities of the Quebecois. From this perspective, the federal spending power may be regarded as an instrument of "nationdestroying."

All of the means by which the federal government has tried to justify the spending power have been inadequate. The federal spending power, at best, can only be inferred from the Constitution; the JCPC ruled that legislation premised on the spending power was ultra vires; the gift-giving argument is specious; and justifying the spending power as in the national interest is highly problematic in a multinational federation. Even if the federal government could prove the constitutionality of the spending power in a court of law, it violates the federal principle as defined by Wheare and supported by successive governments of Quebec. As Lord Atkin concluded, if the federal spending power were constitutional, it "would afford the Dominion an easy passage into the Provincial domain." (101)

It should be acknowledged that the spending power can cut both ways. After he left office, Trudeau lamented that "[p]eople always want to limit federal power to spend. But they neatly forget that the provinces make abundant use of their own spending power." (102) The provinces do, in fact, spend money on television stations, ferry systems, and international trade offices that fall outside their area of legislative competence. Although the federal government would certainly be within its rights to demand that the provinces limit their spending power as the quid pro quo for limitations on the federal spending power, the provincial spending power is on the whole less problematic. The federal government is not at all dependent on provincial transfers, whereas the provinces receive about 20 percent of their revenue from federal transfers. As such, provincial spending does not distort federal budgeting or alter federal spending priorities. On the other hand, the federal spending power is detrimental to provincial autonomy.

Although governments of Quebec have consistently opposed the federal spending power, they have never suggested that it should be eliminated. On the contrary, Quebec's historical position is that the federal spending power should be entrenched in the Constitution, with explicit limits on its application. Quebec insists that the Constitution should also guarantee full compensation for provinces that opt out of federal initiatives. Further, Quebec would prefer that the federal government obtain an amendment to the constitutional division of powers before initiating new programs. These were the sorts of limitations sought in the Meech Lake and Charlottetown accords. Although constitutional reform is presently in remission in Canada, the government of Quebec and the major political parties in Quebec have made it clear that the federal spending power will have to be re-addressed in future constitutional negotiations. Until it is constitutionally defined and limited, the federal spending power will continue to be a major source of contention between the governments of Canada and Quebec.

(1) Walker Connor, "Nation-building or Nation-destroying?" World Politics 24 (April 1972): 319-355. This essay will not elaborate the theoretical concepts of "nation-building" or "nation-destroying." These ideas are employed here in a metaphorical manner for heuristic purposes.

(2) Ibid., 336.

(3) See Secretariat aux Affaires intergovernmentales canadiennes (SAIC), Quebec's Historical Position on the Federal Spending Power, 1944-1998 (Quebec City: Government of Quebec, 1998), 8 May 2000; http:// www.cex.gouv.qc.ca/saic/english.htm. See also, Commission on Fiscal Imbalance, A New Divison of Canada's Financial Resources (Quebec: Government of Quebec, 2002), especially the commission's supporting report, The "Federal Spending Power", Report Supporting Document 2 (Quebec City: Government of Quebec, 2002), which provides a comprehensive survey of the literature and Quebec's position on the spending power. Other important sources in French or by Quebecers include, Andre Tremblay, "Federal Spending Power," The Canadian Social Union Without Quebec: 8 Critical Essays, eds. Alain-G. Gagnon and Hugh Segal (Montreal: Institute for Research on Public Policy, 2000), pp. 155-186; Michel Maher, "Le defi du federalisme fiscal dands l'exercise du pouvoir de depenser," Canadian Bar Review 75 (September 1996): 403-432; Pierre Blache, "Le pouvoir de depenser au coeur de la crise constitutionelle canadienne," Revue Generale de Droit 24 (Mars 1993): 29-64; Jacques Dupont, "Le pouvoir de depenser du gourvernement federal: A Dead Issue," U. B. C. Law Review 69 (Centennial Edition 1967): 69-102; and the essays in A. Costi, ed., L'adhesion du Quebec a l'Accord du lac Meech (Montreal: Themis, 1988).

(4) The intention of my essay is to examine the federal spending power in relation to the principles of federalism and political discourse in Canada. It will not engage in an actual analysis of spending patterns or government behavior. For an analysis of these, see Ronald L. Watts, The Spending Power in Federal Systems: A Comparative Study (Kingston: Institute of Intergovernmental Relations, 1999). Other important sources from English Canada include Andrew Petter, "Federalism and the Myth of the Federal Spending Power," Canadian Bar Review 68 (September 1989): 448-479; Keith Banting, "Federalism, Social Reform and the Spending Power," Canadian Public Policy 14 (September 1988): S81-S92; E. A. Driedger, "The Spending Power," Queen's Law Journal 7 (Fall 1981): 124-134; Donald V. Smiley and Ronald M. Burns, "Canadian Federalism and the Spending Power: Is Constitutional Restriction Necessary?" Canadian Tax Journal 17 (November-December 1969): 468-482. There are also some excellent essays on the federal spending power in K. E. Swinton and C. J. Rogerson, eds., Competing Constitutional Visions: The Meech Lake Accord (Toronto: Carswell Company, 1988).

(5) Donald V. Smiley, Conditional Grants and Canadian Federalism (Toronto: Canadian Tax Foundation, 1963).

(6) Pierre Elliott Trudeau, Federal-Provincial Grants and the Spending Power of Parliament (Ottawa: Government of Canada, 1969), p. 4. For further defenses of the federal government's position on the spending power, see Lester Pearson, Federalism for the Future (Ottawa: Government of Canada, 1968), and E. J. Benson, The Taxing Powers and the Constitution of Canada (Ottawa: Government of Canada, 1969). The aforementioned monograph published under Trudeau's name represents the government of Canada's definitive statement on the spending power. For a more recent, but less authorative, review of the government of Canada's position, see Mollie Dunsmuir, "The Spending Power: Scope and Limitations," Background Paper BP-272E (Ottawa: Library of Parliament Research Branch, 1991): pp. 1-14.

(7) Peter Hogg, Constitutional Law of Canada, Second Edition (Toronto: Carswell Company, 1985), p. 124.

(8) Vatts, The Spending Power in Federal Systems, p. 1.

(9) Hogg, Constitutional Law, p. 124. (10) Petter, "Federalism and the Myth of the Federal Spending Power," 455.

(11) Jeremy Webber, Reimagining Canada: Language, Culture, Community, and the Canadian Constitution (Montreal: McGill-Queen's University Press, 1994), p. 213.

(12) Quoted in [1991] 2 S. C. R. 525 Reference Re Canada Assistance Plan, 11 August 2000; http:// www.lexum.umontreal.ca/csc-scc/en/pub/1991/vol2/html/1991scr2_0525.html.

(13) Canadian Bar Association, Submission on Established Program Financing to the Parliamentary Task Force on the Federal and Provincial Fiscal Arrangements (Ottawa: 14 May 1981), p. 1.

(14) Although Section 282 was inserted "to meet an unforeseen contingency," it has now become the primary means by which funds are allocated to the states, primarily as a result of the planning process. See M. V. Pylee, Constitutional Government in India (New York: Asia Publishing House, 1965), p. 618.

(15) Commission on Fiscal Imbalance, A New Division of Canada's Financial Resources, p. 114.

(16) Watts, The Spending Power, p. 10.

(17) Alexander Hamilton, James Madison, and John Jay, The Federalist, ed. Benjamin E Wright (New York: Barnes and Noble Books, 1996), pp. 293-302.

(18) See Stanley Elkins and Eric McKitrick, The Age of Federalism: The Early American Republic, 1788-1800 (New York: Oxford University Press, 1993), pp. 232-233.

(19) Anthony H. Birch, Federalism, Finance, and Social Legislation in Canada, Australia, and the United States (Oxford: Oxford University Press, 1955), p. 151.

(20) Ibid., 32-33.

(21) Ibid., 152-153.

(22) South Dakota v. Dole, 483 U. S. 203 (1987).

(23) John Kincaid, "From Dual to Coercive Federalism in American Intergovernmental Relations," Globalization and Decentralization, eds. John S. Jun and Deil S. Wright (Washington, DC: Georgetown University Press, 1996), pp. 29-47.

(24) Quoted in SAIC, Quebec's Historical Position on the Federal Spending Power.

(25) Commission on Fiscal Imbalance, A New Division of Canada's Financial Resources, p. x.

(26) Editorial, "A Good Deal on Social Union," Globe and Mail, 6 February 1999, p. D6.

(27) Watts, The Spending Power, p. 1.

(28) [1991] 2 S. C. R. 525 Reference re Canada Assistance Plan (British Columbia).

(29) [1993] 1 S. C. R. 1080 Finlay v Canada (Minister of Finance), 24 June 2002; http:// www.lexum.umontreal.ca/csc-scc/en/pub/1993/vol1/html/1993scrl_1080.html.

(30) Keith Banting, The Welfare State and Canadian Federalism, 2nd ed. (Montreal: McGill-Queen's University Press, 1987), p. 52.

(31) Attorney General of Canada v. Attorney General of Ontario (Employment and Social Insurance Act Reference), Privy Council [1937] A. C. 355, III Olmsted 207, in Peter Russell, ed., Leading Constitutional Decisions (Ottawa: Carleton University Press, 1982), p. 116.

(32) Ibid., 117.

(33) Bora Laskin, Canadian Constitutional Law (Toronto: Carswell Company, 1969), p. 667.

(34) Angers v. Canada (Minister of National Revenue), Ex. C.R. 83, 1957.

(35) See Russell, Leading Constitutional Decisions, pp. 54-88.

(36) Gerald-A. Beaudoin, Le Federalisme au Canada (Montreal: Wilson and Lafleur, 2000), p. 722.

(37) Trudeau, Federal-Provincial Grants, pp. 12-14.

(38) Quoted in Trudeau, Federal-Provincial Grants, p. 12.

(39) F. R. Scott, Essays on the Constitution (Toronto: University of Toronto Press, 1977), p. 296.

(40) Hogg, Constitutional Law, p. 126.

(41) Pierre Elliot Trudeau, Federalism and the French Canadians (Toronto: MacMillan, 1968), p. 89. (Trudeau first published his essay "Federal Grants to Universities" in Cite Libre, February 1957).

(42) Trudeau, Federal-Provincial Grants, p. 12.

(43) Hogg, Constitutional Law, p. 123

(44) Donald Smiley, "The Rowell-Sirois Report, Provincial Autonomy and Post-War Canadian Federalism," Canadian Federalism: Myth or Reality, ed. J. Peter Meekison (Toronto: MacMillan, 1968), p. 73.

(45) Petter, "Federalism and the Myth of the Federal Spending Power," 472.

(46) Ibid., 473.

(47) Quoted in the Globe and Mail, "Quebec Gains No Special Privileges by Opting Out, Dion Says," 6 February 1999, p. A10. Lucien Bouchard resigned as Premier of Quebec in March 2001, and was replaced by Bernard Landry, the former deputy premier of the province.

(48) Kenneth Wheare, Federal Government, 4th ed. (London: Oxford University Press, 1963), p. 10.

(49) A. V. Dicey, Introduction to the Study of the Law of the Constitution, 10th ed. (London: MacMillan, 1959), p. 143.

(50) William H. Riker, "Federalism," Handbook of Political Science: Volume 5, eds. F. Greenstein and N. Polsby (Reading, MA: Addison-Wesley Publishing Company, 1975), p. 103.

(51) Anthony Birch, Federalism, Finance, and Social Legislation in Canada, Australia, and the United States (Oxford: Clarendon University Press, 1955), p. 306.

(52) Royal Commission of Inquiry on Constitutional Problems, Report Volume 2 (Quebec: Government of Quebec, 1956), p. 102.

(53) Special Committee of the Quebec Liberal Party on the Political and Constitutional Future of Quebec Society, A Project for Quebec: Affirmation, Autonomy and Leadership: Final Report (October 2001), p. 42.

(54) Ibid., 69.

(55) Trudeau, Federal-Provincial Grants, pp. 30-32.

(56) Birch, Federalism, Finance, and Social Legislation, p. xi.

(57) Wheare, Federal Government, p. 93.

(58) See David B. Perry, Financing the Canadian Federation, 1867 to 1995: Setting the Stage for Change (Toronto: Canadian Tax Foundation, 1997).

(59) Watts, The Spending Power, p. 53.

(60) See Perry, Financing the Canadian Federation, pp. 33-172.

(61) See Douglas Brown, ed. Tax Competition and the Fiscal Union: Balancing Competition and Harmonization in Canada: Proceedings of a Symposium, June 2000 Working Paper Series (Kingston: Institute of Intergovernmental Relations, 2001).

(62) In the year 2000, federal income tax rates were set at 17 percent for $30, 000 (Canadian) or less, 25 percent for incomes between $30,000 and $60,000, and 29 percent for incomes over $60,000. Provincial rates varied from a high in Newfoundland of 62 percent of the basic federal tax (i.e., aggregate income tax rates in Newfoundland in that year would have been approximately 27.5 percent, 40.5 percent, and 47 percent for each of the three income tax brackets). Ontario had the lowest provincial income tax rates, at 6.37 percent, 9.62 percent, and 11.16 percent for each of the three brackets, or about 38 percent of the basic federal tax.

(63) Benson, The Taxing Powers and the Constitution of Canada, p. 16.

(64) Department of Finance, The Fiscal Balance in Canada: The Facts (Ottawa: Government of Canada, 2002). http://www.fin.gc.ca/toce/2002/fbcfacts2_e.html.

(65) Richard M. Bird, Federal Finance in Comparative Perspective (Toronto: Canadian Tax Foundation, 1987), p. 50. The Swiss government does have a direct tax on personal income and corporate profits, but it is quite small in comparison to cantonal and municipal income taxes.

(66) Commission on Fiscal Imbalance, A New Division of Canada's Financial Resources, p. viii.

(67) Ibid., x.

(68) Ibid., xii.

(69) Special Committee of the Quebec Liberal Party, A Project for Quebec, p. 77

(70) Department of Finance, The Fiscal Balance in Canada.

(71) Trudeau, Federal-Provincial Grants, p. 30.

(72) Ibid., 34; emphasis original.

(73) Ibid., 34; emphasis added.

(74) Ibid., 30.

(75) Department of Finance, The Fiscal Balance in Canada.

(76) Ibid., 38.

(77) Claude Ryan, "Federal Transfer Payments: A Quebec Perspective," Ottawa and the Provinces: The Distribution of Money and Power, Volume 1, eds. Thomas J. Courchene et al. (Toronto: Ontario Economic Council, 1985), p. 218.

(78) Louis Balthazar, "Global Integration and the Sovereignty of States," Managing Change in the 21st Century: Indian and Canadian Perspectives, eds. Hugh Johnston and John R. Wood (Calgary: Shastri-Indo Canadian Institute, 1998), p. 108.

(79) Trudeau, Federal-Provincial Grants, p. 14; emphasis added.

(80) Hogg, Constitutional Law, p. 123.

(81) Quoted in SAIC, Quebec's Historical Position on the Federal Spending Power.

(82) See Peter Russell, Constitutional Odyssey: Can Canadians Become a Sovereign People?, 2nd ed. (Toronto: University of Toronto Press, 1993).

(83) The purpose of the Meech Lake Accord was to obtain Quebec's support for the Constitution Act of 1982, which had been enacted by Trudeau's government without the consent of Quebec. As such, the accord addressed a number of Quebec's grievances. It provided constitutional recognition for Quebec as a "distinct society;" it granted Quebec a veto over future constitutional amendments; it placed some limits on the federal spending power; and it gave the provinces a greater role in immigration policy and some input into the selection of Supreme Court justices.

(84) Quoted in Pierre Elliott Trudeau, With a Bang, Not a Whimper (Montreal: Stoddart Publishing, 1988), p. 139.

(85) Quoted in Trudeau, With a Bang, Not a Whimper, pp. 139-140.

(86) The Charlottetown Accord stated that the social union was intended to obtain the following objectives: "a) providing throughout Canada a health care system that is comprehensive, universal, portable, publicly administered, and accessible; b) providing adequate social services and benefits to ensure that all individuals resident in Canada have reasonable access to housing, food and other basic necessities; c) providing high quality primary and secondary education to all individuals resident in Canada and ensuring reasonable access to post-secondary education; d) protecting the rights of workers to organize and bargain collectively; and e) protecting, preserving and sustaining the integrity of the environment for present and future generations." The objectives of the economic union included "the free movement of persons, goods, services and capital; the goal of full employment; ensuring that all Canadians have a reasonable standard of living; and ensuring sustainable and equitable development."

(87) Charlottetown Accord, Draft Legal Text, 9 October 1992, p. 47.

(88) Ryan, "The Agreement on the Canadian Social Union," 34.

(89) Judy Rebick, "Union Rules," Elm Street 3 (April 1999), p. 112. See also Barbara Cameron and Judy Rebick, "Social Union is a Step Forward," Globe and Mail, 8 February 1999, p. A13.

(90) Quoted in "PM Gets Social-Union Deal but Quebec won't Sign," Globe and Mail, 5 February 1999, p. A1. Roy Romanow retired as the premier of Saskatchewan in February 2001.

(91) Ryan, "The Agreement on the Canadian Social Union," 27.

(92) bid., 40. For further commentary on the social union from Quebec's perspective, see Johanne Poirier, "The Social Union: Solution or Challenge for Canadian Federalism?" Sociaal Beleid en Federalisme, eds. Steven Vansteenkiste and Marc Taeymans (Bruxelles: Vlaamse Juristenvereniging, 1999), pp. 25-84; Alain Noel, "Without Quebec: Collaborative Federalism with a Footnote?" IRPP Policy Matters 1:2 (March 2000): 1-26; Christian Dufour, "Restoring the Federal Principle: The Place of Quebec in the Canadian Social Union," IRPP Policy Matters 3:1 (January 2002): 1-26.

(93) Quoted in "PM Gets Social Union Deal but Quebec won't Sign," Globe and Mail, 5 February 1999, p. A7.

(94) Quoted in "Bouchard Warns of Fallout from Social Union," Globe and Mail, 9 February 1999, p. A4.

(95) Pierre Elliott Trudeau, "Poverty of Nationalist Thinking in Quebec," Towards a just Society, eds. Thomas Axworthy and Pierre Elliott Trudeau (Toronto: Penguin Books, 1990), p. 438.

(96) Ibid., 438.

(97) Ryan, "Federal Transfer Payments," 218.

(98) Bernard Landry, quoted in the Globe and Mail, 27 January 1999, p. A4.

(99) March 1997, p. A.19; emphasis added.

(100) Will Kymlicka, Finding Our Way: Rethinking Ethnocultural Relations in Canada (Toronto: Oxford University Press), p. 166.

(101) In Russell, Leading Constitutional Decisions, p. 117.

(102) Pierre Elliott Trudeau, A Mess That Deserves a Big No (Toronto: Robert Davies Publishing, 1992), p. 28; emphasis original.

AUTHOR'S NOTE: I wish to thank Harvey Lazar, Tom McIntosh, Ronald L. Watts, Stephen Bornstein, Nelson Michaud, Leslie Seidle, Santiago Lago-Penas, Aaron Shoichet, and Victoria Crites for reading and commenting on drafts of this article. Special thanks are owed to the anonymous reviewers and the editor for their helpful comments.

Hamish Telford teaches political science at the University College of the Fraser Valley, Abbotsford, British Columbia. He is also a Research Associate at the Institute of Intergovernmental Relations, Queen's University, Kingston, Ontario. Telford and Harvey Lazar recently co-edited Canada: The State of the Federation, 01: Canadian Political Culture(s) in Transition (2002).

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