Intergovernmental Relations inCanada: Lessons for the UK?

by Alan Trench

October 2003

ISBN: 1 903903 23 8

First Published October 2003

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ContentsAcknowledgements 4

Executive Summary 5The working of the Canadian system 5Lessons for the United Kingdom 5

1 Introduction: The Canadian constitutional background 71.1 The development of the Canadian constitution: constitutional politics and

intergovernmental relations 71.2 Party politics and party politicians in intergovernmental relations 9

2 Finance and Canadian intergovernmental relations 112.1 The financial framework of Canadian federalism 112.2 Fiscal aspects of federalism 122.3 Use of the federal spending power 132.4 The impact of finance on intergovernmental relations 14

3 Issues in intergovernmental relations 153.1 Health 153.2 International affairs 153.3 The relationship between constitutional “mega-politics” and day-to-day

intergovernmental relations 16

4 Mechanics and processes 194.1 Meetings and formality 194.2 Intergovernmental agreements 204.3 Dispute resolution and the courts 214.4 Legislation 234.5 Staffing and bureaucratic organisation 24

5 Lessons for the UK? 275.1 Generally: build trust, don’t destroy it 275.2 Make sure that there is consistent advice—and follow it 285.3 Legislative powers all round—including for Wales 295.4 Sort out the finances 295.5 Make the nuts and bolts work, but don’t fret over inessentials 305.6 Think through the role of central institutions 30

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AcknowledgementsThis report is part of a research project on ‘Intergovernmental Relations in the devolved United King-dom’, based at the Constitution Unit and funded by the Leverhulme Trust as part of the programmeof research on ‘Nations and Regions: the dynamics of devolution’ based at the Unit. I am mostgrateful to the Trust for its support.

The report is based on work on Canada over the last 12 months, which included a study visit toCanada in September 2002, when I interviewed officials of the Governments of Canada, Ontario andQuebec. It covers event up to July 2003. I am conscious that my choice of officials to interviewmeans that this report is concerned far more with issues that concern central Canada than either theAtlantic or western Provinces. I hope to be able to rectify this in due course.

In his novel The Life of Pi, Yann Martell describes Canada as “a great country much too cold for goodsense, inhabited by compassionate, intelligent people with bad hairdos” (Edinburgh: Canongate,2003, p 6). I cannot agree about the hair but can about the compassion and intelligence; and wouldadd that I encountered immense helpfulness and kindness too in all my dealings with Canadians,whether in academia, public service or on the train. My interviews with officials were conducted onthe basis of anonymity, so I regret I cannot thank them by name. I am immensely grateful to them alland hope that this report represents fairly what they told me. On the organisational side, I would liketo thank Bill Lawton of the Canadian High Commission in London, and Russ Mellett and Louis Guayof the Privy Council Office in Ottawa; Pierre Boyer of the Délégation-Générale du Québec in Londonand Patrick-Neko Likongo of the Ministère des Relations internationales in Quebec; and Justin Vaiveand Janis Tomkinson of the Ministry of Intergovernmental Affairs in Toronto. I can thank the academ-ics who were so generous with their time and advice: they are Keith Banting, Harvey Lazar, PeterLeslie and Ron Watts of Queen’s University, Kingston; Richard Simeon, Grace Skogstad and JulieSimmons of the University of Toronto; Jean Leclair of the Université de Montreal, Alain-G. Gagnon ofMcGill University and Guy Lafleur of Université Laval, Quebec.

I am also grateful to my colleagues at the Constitution Unit for their help, particularly our administra-tors Helen Daines and Matthew Butt, and Robert Hazell, Scott Greer and (again) Ron Watts for theircomments on a previous draft of this report. I am, of course, solely responsible for any errors thatremain.

Alan Trench22 September 2003

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The working of the Canadian system• Canada now has a highly developed sys-

tem of intergovernmental relations (IGR).IGR is accorded considerable importanceby Federal and Provincial governmentsalike.

• IGR in Canada is dominated by the execu-tive in each order of government, andwithin each order by the centre of eachgovernment—the Prime Minister or Pre-mier, and his or her specialist advisors inthe public service.

• Although Canada is a highly decentralisedfederation by many measures, the Federalgovernment remains the dominant force inIGR. This is partly because of the greatermaterial and financial resources availableto the Federal government and partly be-cause of easily-overlooked constitutionalprovisions that in practice confer a signifi-cant advantage to the Federalgovernment.

• A notable example of this is in the area offinance: not only does the Federal govern-ment have more funds available to it thanmost Provinces, but it also has a legalpower to spend money on exclusively-Provincial areas of competence. As aresult, although matters such as health oreducation appear to be purely for theProvinces, in practice the Federal govern-ment has a major role to play.

• Nonetheless, the possession of separatetaxing powers and tax bases underpinsProvincial autonomy to a considerable de-gree.

• Administrative arrangements for IGRwithin the Federal government reflect con-cerns over national unity, and the threat tothis that Quebec has posed for more thantwo decades. However, those arrange-ments are unlikely to change significantlyeven though that threat has now receded.

• Intergovernmental negotiations are highlyintricate matters, conducted at various lev-els and taking up a considerable amountof officials’ and Ministers’ time. The mostimportant issues fall to be resolved at thelevel of First Ministers, but that setting isused less now than in the 1980s.

Lessons for the United Kingdom• Canada may offer an insight into how the

UK might work, after devolution has be-come fully bedded-in and if regionalgovernment in England increases thenumber of units and complexity of inter-ests involved.

• Trust is a vital commodity in intergovern-mental relations. It is also easily lost. Allthe governments involved need to bear inmind the need to act in a consistent andconsidered way, even when the demandsare pressing. The onus is particularly onthe UK Government, given the over-whelming dominance it still has in IGR inthe UK.

• Trust requires respect for the boundariesof competence that do exist. The arrange-ments for Wales mean that devolutionthere has such an unclear boundary thatthis becomes very difficult.

• Financial autonomy also helps to maintainclear boundaries. While Canadian finan-cial relations are highly complex, theyensure that Provinces are confident oftheir sources of funding, and not depend-ent on the Federal government.

• For the UK Government, Canadian experi-ence suggests expertise in IGR needs tobe concentrated in the heart of govern-ment, not fragmented across a number ofoffices concerned with particular territo-ries.

• Detailed scrutiny of devolved legislation isunlikely to be a fruitful use of UK Govern-ment time or resources, as major issueswill be identifiable without the routine line-by-l ine examination that presentlyhappens.

• Canadian experience suggests that articu-lating territorial interests trough thelegislative upper chamber could be a use-ful way of reducing intergovernmentalfriction. This should not be overlookedwhen House of Lords reform returns to thepolitical agenda.

Executive Summary

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1 Introduction: The Canadian constitutionalbackgroundThe purpose of this briefing is twofold. First, itseeks to explain how intergovernmental rela-tions work in Canada at the present time.Second, it tries to see what lessons the UnitedKingdom, with its relatively new experience ofdevolution, might draw from Canadian practice.

As far as its first purpose is concerned, the goalis explain to outsiders how the Canadian systemworks in its own terms. Given the rather closednature of the world of intergovernmental rela-tions, that means explaining a good deal thatseems basic or obvious to those who study orwork in the field, but which is distinctive or sur-prising to one looking from the outside. In doingso, it draws on elements of politics, law and pub-l ic administration in a way common inintergovernmental relations. It is helped by thefact that Canada has a large literature on feder-alism generally and intergovernmental relationsin particular. However, this briefing also drawson interviews conducted with a large number ofofficials working for the Federal government anda number of Provincial governments, conductedin September 2002. These interviews were car-ried out on terms of anonymity and I thereforecannot name my interviewees to express mythanks to them. I am, however, most grateful tothem all for the time and help they gave me andfor their candour in talking to me.

1.1 The development of theCanadian constitution:constitutional politics andintergovernmental relationsIt is impossible to discuss the Canadian struc-ture of intergovernmental relations withoutsketching the key features of Canadian federal-ism. The present arrangements originate in theBritish North America Act 1867, which estab-lished a federation of several of the Britishcolonies in North America. Although enacted bya Westminster statute those arrangements werelargely formulated by Canadian politicians, and

established a Federal Parliament and govern-ment responsible for a variety of functions andlocal legislatures and governments responsiblefor others, generally of a more local nature. TheFederal Parliament’s powers included a generalgrant of powers to legislate for the ‘peace, orderand good government’ of the Dominion (asCanada was styled), as well a residual power tolegislate for all matters not assigned to Provin-cial legislatures.1 That Parliament included anappointed Senate as well as an elected Houseof Commons, but had no direct representationfor the Provinces. The only formal point of liaisonwas in the Lieutenant-Governor of each Prov-ince, appointed by the Governor-General (anImperial appointee) on the advice of the Govern-ment of Canada, whose powers includeassenting to all legislation passed by the Provin-cial legislature.

The intention may have been to establish afederation with a strong central authority, butthat did not last more than twenty years.Disputes about the division of power under the1867 Act went ult imately to the JudicialCommittee of the Privy Council for resolution,which greatly strengthened the powers of theProvinces and limited those of the Federal orderof government in doing so.2 (A number of thesecases and their implications are discussedbelow.) While the Privy Council heard its lastCanadian appeal in 1948, those judgments hada lasting effect on Canadian federalism. Ofcourse, Canada in effect became self-governingin 1931, when the Statute of Westminster endedthe power of the UK Parliament to legislate forCanada without Canada’s consent. Yet theproblems of resolving other constitutionalissues, notably a mechanism by which theconstitution could be amended, meant that thebasis of Canadian government remained aWestminster Act which no body in Canada couldalter. While the constitution was ‘patriated’ in1982 (becoming the Constitution Act 1867, andhaving a new Canadian Charter of Rights and

1 See sections 91 and 92 of the Constitution Act 1867.2 There is a huge literature about the role of the Privy Council. See, for example, A.C. Cairns ‘The Judicial

Committee and its Critics’ Canadian Journal of Political Science vol. 4 no. 3 (1971), reprinted in D.E. Williams(ed.) Constitution, Government, and Society in Canada: Selected essays by Alan C. Cairns (Toronto: McClelland& Stewart, 1988).

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Liberties added to it) by the Constitution Act1982, this change was itself highly contentious.There were sustained objections by bothAboriginal peoples (whose challenge in Manuelv. Attorney-General went to the England andWales Court of Appeal) and by Quebec, whichrefused to acknowledge the legitimacy of thechange or to sign the new constitution, becauseof concerns that its rights were not adequatelyprotected under the new amendingarrangements.3 (These were not resolved evenwhen the federal House of Commons undertooknot to enact an amendment without Quebec’sconsent, in effect lending Quebec its own vetoover change4). Quebec’s objections to Canada’sconstitution derived from the development ofQuebec nationalism during the ‘QuietRevolution’ of the 1960s, as well as the immensegrowth in the number of English-speakers inCanada as a whole causing a sense of isolationon the part of Francophone Canadiansconcentrated in Quebec. The rejection of the1982 Constitution by Quebec triggered aprocess through the 1980s of seeking to find acompromise between maintaining equality of theProvinces (a demand particularly from westernCanada), while recognising Quebec’sdistinctiveness. This dominated the PrimeMinistership of Brian Mulroney, resulting in twoagreements between governments which failedto secure acceptance by all the Provinces (only8 of the 10 endorsed it) or the population as awhole. These were known respectively as theMeech Lake and the CharlottetownAgreements.5 The latter failed, at the lastmoment in 1993, to secure approval in aCanada-wide advisory referendum. It led to thesecond referendum in Quebec called by thegoverning Parti Québecois (PQ) to determinewhether Quebec should remain part of theCanadian federation or have ‘sovereignty-association’ status. That referendum was held inOctober 1995 and resulted in very narrow defeatfor the nationalist cause, but raised as manyproblems as its outcome solved, regarding thefuture of Canada, of Quebec within Canada, and

of the strategy each side should follow from nowon.

However, one consequence was that constitu-tional politics changed in character and in theforum in which they took place. The Federal gov-ernment referred the issue of whether Quebeccould secede from Canada to the SupremeCourt of Canada, which in its 1998 judgment de-termined that Quebec could not unilaterallysecede but that a ‘clear’ majority vote in favourof independence in a referendum with a ‘clear’question would require the Federal governmentand other Provinces to negotiate the terms of se-cession in good faith.6 The Supreme Court’sjudgment was treated as at least a partial victoryby many Quebecois nationalists, although theprocess of referring the issue to the court hadcaused considerable anger. It led to the FederalParliament passing the ‘Clarity Act’ reiteratingthe Court’s requirement of a clear question anda clear outcome to a referendum, passing thedecisions about whether these were clear to the(federal) House of Commons and setting outsome criteria to determine whether these re-quirements were fulfilled. There the issue haslaid since, and with the election in April 2003 ofan avowedly-federalist majority government inQuebec the questions of referendum and seces-sion are unlikely to resurface at least for someyears. That is not to say that relations are likelyto be uncomplicated or straightforwardly harmo-nious, as safeguarding Quebec’s place inCanada is likely to mean that Quebec forgesmore meaningful alliances with other Provincesand so strengthens the Provinces’ hand againstthe Federal government, while increasing theneed for the Federal government to reachagreements with a federalist Quebec.7

This thumbnail sketch of Canada’s constitutionaldevelopment is necessary to explain how Cana-da’s intergovernmental relations now function.Canada lacks formal central institutions to dealwith Federal-Provincial relations (no ‘Council ofthe Federation’, let alone a legislative chamberlike the German Bundesrat). At the same time,

3 Manuel v. Attorney-General [1983] Ch 77. Its lawfulness was also questioned in the ‘Patriation’ and ‘Quebecveto’ references: [1981] 1 SCR 753, [1982] 2 SCR 793

4 See the Constitutional Amendments Act 1996.5 For an account covering events to the collapse of the Charlottetown Accord, see Peter H. Russell Constitu-

tional Odyssey Second Edition (Toronto: University of Toronto Press, 1993).6 Reference re Secession of Quebec [1998] 2 SCR 217.7 See for example Brian Tobin ‘He’s ready. Is Canada?’ Globe and Mail 15 April 2003, or Norman Spector

‘Not everyone is overjoyed at Jean Charest’s election’ Globe and Mail 21 April 2003

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the complex structure of the constitution meansthat the two orders of government frequently in-teract, and that such interaction is vital to mostareas of government, especially if the Federalgovernment wishes to see Canada-wide ar-rangements for social welfare (most of the policyareas involved are within Provincial not Federalcompetence). The fact that the issues of consti-tutional reform and Quebec’s position withinCanada have ended in stalemate means thatintergovernmental relations have turned to moremundane matters, although these are probablyof more direct concern to most Canadians. TheFederal government has sought to use the op-portunity to engage in ‘non-constitutional reform’of Federal-Provincial relations. Much of the heathas gone out of the issue, and the politiciansgenerally avoid constitutional questions as muchas they can. (Nonetheless, the Alberta govern-ment has recently repeated its desire for reformof the Senate, which if pursued will open debateabout other constitutional issues.8)

Two key terms are widely used to describe thepractice of intergovernmental relations. One is“executive federalism”: IGR is something thattakes place between executives, largely in pri-vate and with minimal accountability to thepublic or legislatures. It can be seen as part ofthe general trend for executives to dominate inParliamentary systems, and has the effect of al-ienating the public and reducing participation inpolitics.9 The second is “collaborative federal-ism”: IGR is about finding ways of enabling theFederal and Provincial orders of government towork together in the interests of better govern-ance and more effective policy-making, giventhe responsibilities allocated to each order bythe constitution.

1.2 Party politics and partypoliticians in intergovernmentalrelationsOne distinctive feature of the Canadian systemis how party politics affects intergovernmentalrelations. Federal elections are dominated by

the Liberal party, which remains the only party tohave support across the whole of Canada. The1993 election saw the emergence in westernCanada of a free-market populist challenge tothe Progressive Conservatives, previously themain right-of-centre party; the PCs dropped to 2seats in the Federal Parliament in that year’selection. While they have recovered somewhatand are strong in parts of Atlantic Canada andOntario, they still hold no Parliamentary seatwest of Ontario. In the west, what is now theCanadian Alliance (and was formerly the Reformparty) dominates. The split in the right-wing voteand the weakness of the social-democratic NewDemocrats mean that the Liberals appear to beunassailable in federal elections.

Not that this greatly affects intergovernmentalrelations. Canadian political parties do not act asa common thread uniting the two orders of gov-ernment. Rather, two distinct party systemsoperate at Federal and Provincial level. Majordifferences of approach exist even within oneparty. The federal Liberals are a centrist (or mar-ginally right-of-centre) party, with a strongcommitment to social welfare; but in British Co-lumbia they are a free-market, almostneo-conservative party, while in Quebec theyare a nationalist party seeking to expressQuebecois nationalism in a federalist rather than‘sovereigntist’ way, and seeking to reform publicservices in a less dirigiste fashion. (The party’sleader was formerly a Progressive ConservativeMP and briefly led the PCs federally.) Mattersare further complicated by the habit of the Cana-dian electorate to vote for different parties tohold office in Federal and Provincial elector-ates.10 In effect, Canada has 14 partysystems—one for each of the ten Provinces andthree Territories, and one for Federal purposes.

One consequence of this is that party politicsplay a minimal role in intergovernmental rela-tions. Only very occasionally do politiciansappear to let their behaviour be affected by partyconsiderations. For the most part their concernsare governed by the order of government in

8 See Government of Alberta News Release ‘Resolution proposes constitutional amendment to create TripleE Senate’ 14 May 2003 (available at www.gov.ab.ca/acn/200305/14388.htm)

9 These criticisms were made by D.V. Smiley when he invented the term in 1979, and remain as valid todayas then. For an updated discussion of the problem see R. Simeon and D.R. Cameron ‘IntergovernmentalRelations: An Oxymoron if Ever There Was One’ in H. Bakvis and G. Skogstad (eds) Canadian Federalism:Performance, Effectiveness and Legitimacy (Toronto and Oxford: Oxford University Press, 2001).

10 See C. Jeffery and D. Hough ‘Elections in Multi-Level Systems: Lessons for the UK from Abroad’ in R.Hazell (ed.) The State of the Nations 2003 (Exeter: Imprint Academic, 2003).

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which they hold office. Thus Quebec, which un-der both Parti Québecois and Liberal (PLQ)governments has followed broadly social-demo-cratic policies, has found Alberta’s right-winggovernments to be its most consistent ally, asboth seek to defend Provincial powers from Fed-eral predations. The Federal government findsits most supportive partners in the Atlantic Prov-inces (New Brunswick, Nova Scotia, PrinceEdward Island and Newfoundland), which mayelect PC governments but which are also heavilyreliant on federal funds.

The limited role of party is accentuated by thelack of engagement in intergovernmental rela-tions on the part of the Federal Parliament orProvincial legislatures. The structure of intergov-ernmental relations and the issues that arise inthem are of only very limited interest to electedback-bench politicians. There appears to be noregular or sustained scrutiny of them in any Ca-nadian legislature. At Provincial level mostquestions asked by backbenchers are plantedand friendly, apparently, and they generally con-cern specific policy matters like health or childcare, not intergovernmental relations overall.

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2 Finance and Canadian intergovernmentalrelationsThe financial and fiscal arrangements of Cana-dian federalism are key to understanding howCanadian federalism actually works. The detailof the financial arrangements is complicated andhighly technical (and beyond the scope of thispaper). This section will seek to explain the ba-sic financial structure of Canadian federalism,and to explore the relationship between the fi-nancial arrangements and intergovernmentalrelations more generally.11

2.1 The financial framework ofCanadian federalismIn essence, Canadian Provinces have twosources of income: revenues they raise them-selves, through taxes, and transfers from theFederal government. Both Federal and Provin-cial orders of government have access to a widerange of ‘direct’ taxes, including taxes on per-sonal and corporate income and taxes onsales.12 In total, Federal transfers account for17.6% of total Provincial spending,13 but that var-ies considerably from Province to Province inrelation to the aggregate level of spending andthe Province’s ability to raise its own revenue(fiscal capacity). Ontario raises about 90% of itsown spending, while a poorer Province likeManitoba or Newfoundland will raise only about60%. The balance is accounted for by transfersfrom the Federal government, which take twomain forms: CHST and Equalisation.14 One isthe Canada Health and Social Transfer (CHST),a block grant designed to support the provisionof health care, education and other social serv-ices. It is largely unconditional (thoughProvincial compliance with the principles of theCanada Health Act is a requirement), and as ablock grant it is not hypothecated or tied to par-ticular policy areas. It is also paid to all

Provinces, with a formula to determine the shareof each Province in relation to the whole amountprovided by the Federal government. Budgetcuts therefore reduce the amount of cash trans-ferred to each Province, but not the proportionthat Province receives compared to other Prov-inces.

To complicate matters, the funds comprisedwithin the CHST mechanism can be calculatedin two different ways: as an amount of cash, oras tax points. Tax points are a proportion of thetax raised from taxpayers in the Province towhich the funds are paid—in other words, theFederal government hands over part of the taxtake from taxpayers in a Province, according tothe amount the Province levies. This creates adivision of interest between the Provinces.Poorer Provinces prefer cash grants as the taxrevenue they generate is small compared withthe richer Provinces. But richer Provinces (suchas Ontario or Alberta) prefer tax points, as theirmore prosperous tax base means that producesmore revenue.

The other main type of grant are Equalisationfunds. This is mandated by section 36 (2) of theConstitution Act 1982 which commits the Fed-eral government and Parliament to providing thetransfer of funds to the Provinces “to ensure thatprovincial governments have sufficient revenuesto provide reasonably comparable levels of pub-lic services at reasonably comparable levels oftaxation”. Entitlement to Equalisation is de-signed to compensate the poorer Provinces fortheir lack of fiscal capacity, calculated on the ba-sis of the standard tax yield in the median fiveProvinces of 33 separate taxes. As a result,eight Provinces are entitled to receive Equalisa-tion funds (the four Atlantic Provinces, Quebec,

11 For a general summary, see Douglas M. Brown ‘Fiscal Federalism: the new equilibrium between equityand efficiency’ in Bakvis and Skogstad op cit.

12 In the Canadian context, a direct tax is one collected from the person who bears the cost of the tax. Thus,both sales taxes and income taxes are direct taxes, and as a result the tax bases of Federal and Provincialorders largely overlap. The chief difference between them is that the Federal government can raise excisetaxes and customs duties, which are paid by a producer or importer but ultimately borne by the consumerof the goods and so are considered indirect taxes.

13 Conference Board of Canada Vertical Fiscal Imbalance July 2002: Fiscal Prospects for the Federal and Provin-cial/Territorial Governments (Ottawa, 2002), Table 3, p. 27.

14 CHST and Equalisation funds account for 89% of Federal transfers. The balance is made up of a numberof small conditional grant schemes, and the Territorial Funding Formula for the three Territories.

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Manitoba, Saskatchewan and now also BritishColumbia, but the latter has only recently slippedinto entitlement and receives only a minimalamount.) Only Alberta and Ontario do not re-ceive it; these are not only the most prosperousProvinces on a per capita GDP basis, but alsotogether account for about half of Canada’spopulation.

From a political point of view, the two forms oftransfer raise quite different issues. For Ontario,for example, CHST is a relatively benign form offunding. Funds channelled through Equalisationwill not reach the Province and effectively cost itmoney (as they may reduce the size of the potfrom which CHST is paid). While the Provincewould generally prefer an outright transfer of taxpoints to Province, so that income tax payable tothe Federal government was reduced and thatpayable to the Provincial government increased,the Federal government is rarely if ever willing toconcede that. (It did so in 1977, but is regardedby the Provinces as having reclaimed that taxspace since then.) For Quebec there is a mildpreference to have funds transferred throughCHST rather than Equalisation, but the Prov-ince’s greater concern is with the overall ‘fiscalimbalance’ between Federal and Provincial gov-ernments. However, the problem for allProvinces is the use of 33 tax bases to calculatethe amounts payable. This is not only opaquebut can also cause swings from year to year inwhat constitutes normal fiscal capacity andtherefore the amounts transferred.

Quebec’s concern with fiscal imbalance is thatthe present arrangements have given the Fed-eral government generous revenues in recentyears compared with the services it provides,while limiting both the tax revenue and transfersto Provincial governments for the (generallymore expensive) services they provide. Theprovince has mounted a large-scale campaign toseek redress of this, involving a high-level Com-mission on Fiscal Imbalance chaired by YvesSéguin (who became PLQ Finance Minister afterthe April 2003 election), which reported in March2002.15 Its concerns are shared by a number ofother Provinces (and have been the subject of

independent research, public debate and pressadvertisements), but Quebec’s approach to theproblem and the high profile it has given the is-sue have been distinctive.16 So farEnglish-speaking Provinces have allowed Que-bec to make the running. Whether that willchange with the new Quebec government re-mains to be seen.

2.2 Fiscal aspects of federalismFiscal imbalance and the allocation of ‘taxpoints’ are among the most important fiscal is-sues arising from Canada’s federal structure, butare not the only ones. The receipt of revenuethrough a Province’s own taxes means thatProvinces have a substantial degree of account-ability to their own electorates. It also means thatthey have a substantial degree of scope to de-velop their own economies, since they can tailortheir tax systems to encourage or discouragecertain sorts of activity. That depends on theProvince having an economy able to generatemeaningful revenues, however. The absence ofsuce revenue leads to political as well as finan-cial dependence on the federal government.17

The freedom of even affluent provinces is re-stricted by the Federal government’s role in taxcollection. Except for Quebec, all personal in-come taxes are collected by the Federalgovernment and then remitted to the Provinces.So are corporate income taxes, except in Que-bec, Ontario and Alberta. In total the Federalgovernment collects some $32 billion on behalfof the Provinces, and charges $10 million for do-ing so. One consequence of this—andaccording to the Federal government a majorreason for doing so—is that taxpayers have tocomplete only one tax return, not two, each year.

In addition, in three Atlantic provinces (NewBrunswick, Nova Scotia and Newfoundland) asingle Harmonised Sales Tax incorporates Fed-eral GST and Provincial sales taxes, and iscollected by the Federal government and distrib-uted to the Provinces. Conversely, Quebeccollects GST for the Federal government alongwith the Provincial sales tax.

15 The report and its supporting documents (Commission on Fiscal Imbalance, A New Division of Canada’sFinancial Resources (Quebec: 2002)) can be found on the internet at http://www.desequilibrefiscal.gouv.qc.ca/index_ang.htm

16 See Conference Board of Canada op cit. This report was commissioned by the Provincial and Territorialgovernments and concerns fiscal imbalance as it affects all the Provinces and Territories, not just Quebec.

17 Recent discoveries of oil off the Atlantic coast may change that, however.

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Box 1: Losing revenue but not alienating provincesIn January 2002 the Federal Department of Finance told Provincial governments of a problem ithad identified in tax returns dealing with Capital Gains Tax. These contained a line for calculatinggains that was coded to allocate funds to both Provincial and Federal governments. However, thecorresponding line dealing with deductions was for the Federal tax only—so Provinces got thebenefit of all the tax collected on gains without subtracting from that the deductions which shouldhave been set against it. On enquiry it emerged that the problem went back to the establishmentof CGT in 1972. Ironically, the problem only emerged when payments to the Provinces weredelayed due to a change in computer system, and some Provinces questioned the amounts thatwere being transferred to them.

Four Provinces were overpaid as a direct result of the error. As a knock-on effect, seven (includ-ing these four) would have been paid extra amounts by way of Equalisation. The Federalgovernment decided not to seek recovery of the Equalisation payments, and then calculated thebenefit to those Provinces of that money—being $62 per capita. (That benefit was wholly no-tional, since the amounts varied from Province to Province, and Equalisation is not calculated ona per capita basis in any case.) It then set that amount, multiplied by population, against theoverpaid tax to the four Provinces directly overpaid. That eliminated any amount due from two ofthem, and left Saskatchewan and Ontario with appreciable repayments to make.

Resolving the problem involved negotiations at the whole range of levels, from First Ministersdown to staff officials. The intellectual rationale for it remains dubious, involving allocating whollynotional benefits calculated on revenue no-one received, to avoid the Federal government beingforced to recover money from the governments of poorer Provinces or being charged in publicwith acting capriciously. One Federal official involved described the process as “a painful experi-ence—a hell of eight months sorting it out”. A Provincial official suspected that the Federalgovernment had known about it for some months before it was communicated to the Provinces.The Ontario Minister of Finance denounced the settlement publicly when it was announced, butthen went silent on the point. She may have considered that that Province had in fact done quitewell, as a sizable part of the overpayment had been forgiven by the Federal government—but stillhad to be seen to criticise the arrangement reached to resolve it.

Those Provinces that collect their own taxes doso largely because they want the freedom to de-fine their own tax base. One condition ofcollection by the Federal government is that theProvince must accept the Federal government’sdefinition of tax bases (though not tax rates).Quebec is therefore able to encourage certainsorts of industries in the natural resources orhigh-tech sectors. However, collection is itselfnot automatic, and can lead to curious situationinvolving significant amounts of revenue.

2.3 Use of the federal spendingpowerProbably the most important lever of power forthe Federal government in intergovernmental re-lations is its spending power. It is also one of the

most controversial tools used by the Federalgovernment. Part of the reason is that the powerlacks any explicit constitutional basis in the Con-stitution Acts, although it has been recognised inthe jurisprudence of the Judicial Committee ofthe Privy Council and the Supreme Court ofCanada, most notably in the Reference regardingthe Canada Assistance Plan.18 The power enablesthe Federal government to spend money onfunctions identified under the Constitution Act1867 as exclusively Provincial ones, as well ason Federal ones. Such spending can be on di-rect services to citizens (although Provincialopposition to such programmes may preventthem working in practice), or on providing fund-ing to Provincial governments for them toprovide services. Such programmes may befunded wholly by the Federal government, but

18 [1991] 2 SCR 525.

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that is unusual. More often programmes havebeen funded by the Federal and Provincial gov-ernments on a shared-cost basis, and only for alimited time (although that has declined sincethe creation of Established Programmes Fund-ing in 1977, for programmes now fundedthrough CHST).

Shared-cost programmes spark much of thecontroversy. Funds may be made available toProvinces to pursue goals which are Federalpolicy but not a priority of some or all Provinces.When the programme is funded for only a limitedperiod of time it puts the Provinces in a difficultposition at the end. The Provinces have to de-cide whether to continue to fund a programmethey would never have introduced in the firstplace, or to incur public displeasure by ending orscaling down a programme for which Federalsupport has ended.19 By giving the Federal gov-ernment such influence over Provincialdecisions and being able to take the credit for in-troducing the programme while enabling it toavoid criticism for ending or reducing the pro-gramme, the spending power hands a powerfultool to the Federal government.

This is a tool which it is hard for Provinces tocounter, even if they are affluent. Either they turndown money offered by the Federal government,which comes from taxpayers in the Province inthe first place, or they lose their scope to directpolicy in areas of Provincial jurisdiction as theProvincial government sees fit. Provincial re-sponses vary, but most try to manoeuvre theFederal government to allow them to opt out ofthe Federal policy with full compensation if theProvince provides a policy seeking to achievesimilar objectives. This has been a long-standingposition of Quebec, in particular, but rarely suc-ceeds in practice. The Provinces are left havingto agree to Federally-initiated programmes,knowing what will happen later on. The SocialUnion Framework Agreement was an attempt todeal with this issue, by regulating the Federalgovernment’s power to initiate or reduce socialprogrammes (as discussed in Box 3, p. 16).

2.4 The impact of finance onintergovernmental relationsIn many ways Canada is highly decentralised fi-nancially. The OECD thinks so, and so does theFederal government.20 From a Provincial point ofview it is not so clear. All Provinces are depend-ent to a considerable degree on the Federalgovernment, even the well-off ones. The Federalgovernment’s control of money, and informationabout money, give it powerful ways to influenceall Provinces. When the Provinces have a highdegree of financial dependence on the Federalgovernment that is increased considerably. Not-withstanding the formal constitutional equality ofthe Provinces, their different financial positionsmean that in reality there is much inequality. As aconsequence the Atlantic Provinces and Mani-toba are viewed as ‘friendly’ by the Federalgovernment, and as being nearly Federal de-pendencies by some other Provinces.Conversely, Alberta and Ontario’s prosperity andconsequent financial autonomy underpin theirfreedom of action. Finance therefore governsthe structural aspects of intergovernmental rela-tions

Finance also becomes the major source of ten-sion and contention in intergovernmentalrelations. This contributes to the lack of public in-terest or engagement, as the issues involved areconceptually unclear to start with, and mademore confusing by the many ways of looking atthe data. For example, the Federal governmentclaims to contribute about 40% of the cost ofhealth care in Ontario. Ontario’s public positionis that the Federal government pays about 11%.While both can produce figures to support theirposition, there is no one—or even just five—an-swer to the question of how much the Federalgovernment pays. This is made worse by theneed for solutions to disputes (like the capitalgains tax collection issue) to be presented in away that everyone can claim to have won. Theonly way to do that is to structure the agreementin such a way no-one can really understand it.None of that contributes to better or more ac-countable governance.

19 For criticisms of the use of the power, see A. Tremblay ‘The Federal Spending Power’ in The CanadianSocial Union without Quebec: Eight Critical Analyses (Montreal: Institute for Research in Public Policy, 2000).

20 Organisation for Economic Co-operation and Developement OECD Territorial Reviews: Canada (Paris;OECD, 2002).

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3 Issues in intergovernmental relations3.1 HealthHealth has become a key issue in Canada for anumber of reasons. It is an area of great impor-tance to the public, which is expensive toprovide and which is largely within Provincialcompetence. The Canada Health Act, passed in1984, provided for the Federal government tosupport Provincial health-care systems providedthey satisfied the criteria of being publicly admin-istered, comprehensive, universal, portable andaccessible.21 Public administration of healthcarein fact means operation by public, non-profitbodies and in effect creates a state legal mo-nopoly of the provision of healthcare—a pointwhich has caused friction with Alberta in thepast.

The growing costs of healthcare have meantthat reform has become a growing issue. It isalso one of which the Federal government hastaken charge, appointing Roy Romanow, aformer Premier of Saskatchewan (where Cana-dian Medicare first began) to chair aCommission on the Future of Health Care inCanada to inquire how reform should takeplace.22 His report was published in November2002, and the First Ministers’ Meeting in Febru-ary 2003 adopted an ‘Accord on Health CareRenewal’, identifying a number of specific areasfor reform including even performance indicatorsto measure how the system should work. But itonly dealt with the vexed issue of health carefunding in outline, providing for a Health ReformFund to be established and the replacement ofpart of CHST with a Canada Health Transfersolely to fund healthcare.23

3.2 International affairsCanadian federalism is rather unusual in how ittreats international affairs. In principle defenceand the conduct of foreign affairs are matters forthe Federal Parliament and government.24 How-ever, thanks to a 1937 Privy Council decision,the implementation of international treaties con-cerning matters of Provincial competence falls tothe Provinces not the Federal Parliament or gov-ernment.25 Consequently Provinces need to beinvolved in the formulation of policy regardingsuch treaties, as otherwise the treaty may fail tobe implemented. A recent and notable examplehas been the Kyoto accord on climate change(see box 2, p. 16).

A second characteristic feature of Canadian fed-eralism is the position taken by Quebec. Citingwhat is known as the Gerin-Lajoie doctrine,Quebec claims competence over all aspects offoreign relations concerning exclusively Provin-cial matters such as education, the environmentor health.26 It therefore denies that the Federalgovernment or Parliament have competence insuch matters, and has entered into over 500ententes with other governments (some sover-eign states, some component units of otherfederal or quasi-federal states) since 1965. To alarge degree this has created space for debaterather than actual disputes with the Federal or-der, as the Federal government has oftenpre-empted agreements entered into by Quebecwith sovereign states by entering into one con-cerning similar subject-matter itself, creating thescope for Provinces to establish a bilateralagreement under the umbrella of that treaty.There have, however, been cases where theFederal government has advised sovereign

21 Canada Health Act, sections 7–12.22 The Commission’s interim report, Shape the Future of Health Care, was published in February 2002. The

final report Building on Values: The Future of Health Care in Canada was published in November 2002. Bothare available from the Commission’s website at http://www.healthcarecommission.ca

23 For a more detailed discussion of health and intergovernmental relations in Canada, see S. Greer Inter-governmental relations, public policy, and the welfare state in Canada (forthcoming: Constitution Unit, London).

24 Sections 91.7 and 132 of the Constitution Act 1867 and section 3 of the Statute of Westminster.25 A-G for Canada v. A-G for Ontario (the ‘Labour Convention Case’) [1937] AC 327, PC26 The Gerin-Lajoie doctrine has hardly been uncontroversial. Its clearest academic statement is by J-Y.

Morin; see his ‘Comment’ (1967) 45 Can. Bar Rev. 160–173. A riposte is that of G.L Morris; ‘The Treaty-making Power: a Canadian Dilemma’ (1967) 45 Can. Bar Rev. 478–512. See also the contributions byLaskin, Delisle and McWhinney in Ontario Advisory Committee on Confederation Background Papers andReports (Toronto: Queen’s Printer of Ontario, 1967).

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Box 2: The Kyoto AccordThe Federal government committed itself to the Kyoto Protocol on climate change at the Kyotosummit in December 1997. However, the agreement affects a variety of environmental mattersreserved to the Provinces. While most Provinces are happy to accept the obligations arising un-der the accord, a number are not, most notably Alberta—partly because of the Albertagovernment’s free-market approach but mostly because of the implications for Alberta’s relianceon oil.

Alberta’s response has been to say that it would not implement the accord, forcing a confronta-tion with the Federal government. That has involved much public grand-standing and threats ofboth court action if the Federal government sought to interfere with Provincial competences toimplement the treaty, and an attempt to forge an alliance with other Provinces—notably Ontario;but British Columbia and Newfoundland are also opposed—to block the treaty. Quebec, by con-trast, is an enthusiastic supporter of the Accord. None of this stopped the House of Commonsfrom approving the Protocol’s ratification on 10 December 2002 (and the Federal governmentratifying it a week later), but it does raise the question of what the Federal government will do ifAlberta and the other Provinces opposed to Kyoto’s implications continue to decline to help im-plement Canada’s obligations. By committing itself to do something beyond its power the Federalgovernment put itself in a difficult position. It compounded that by ratifying the Protocol—and tosucceed on an issue that profoundly affects several Provinces, it may have to make significantcompromises in other areas.

states that in its view Quebec lacked the author-ity to enter into an agreement, with the result thatthe agreement has not been signed.

The lack of open confrontation over the Gerin-Lajoie doctrine appeared to increase with the Actrespecting the Ministry of International Rela-tions, passed by Quebec’s National Assembly inJune 2002. The Act provides for the Quebecgovernment to assent to all treaties affectingsuch Provincial matters, and for all importanttreaties to be submitted by the Quebec govern-ment to the National Assembly for approval.27

Thus, while the Act only alters the procedures af-fecting treaties, its effect is for Quebec to claim aveto over much treaty-making by the Federalgovernment and to create the basis for open andpossibly legal confrontation between the twogovernments in the future. However, the electionof a Liberal government in Quebec in April 2003makes the prospect of such confrontation re-cede considerably.

3.3 The relationship betweenconstitutional “mega-politics” andday-to-day intergovernmentalrelationsAs noted above, since about 1993 Canadianintergovernmental relations has been dominatedby issues of practical policy rather than high-level debate about the nature of Canadianfederalism and the future of the federation whichhad taken centre stage during the 1980s and1990s. The fact that “constitutional mega-poli-tics” (to use Peter Russell’s phrase) is no longerthe main focus of attention does not mean that ithas lost all importance. In practice, constitutionaland more pragmatic concerns interact con-stantly.

While this manifests itself most conspicuously inrelation to Quebec, it affects all intergovernmen-tal relations to a certain extent. All the officialsinvolved exploit the advantages their govern-ment enjoys under the Constitution so far aspossible. It is always possible for a mundane is-sue to turn into a major political flashpoint, andeven if that does not happen the issue may fuelintergovernmental tensions for some time into

27 An Act to amend the Act respecting the Ministère des Relations internationales and other legislativeprovisions; assented to on 8 June 2002.

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the future. The cuts imposed by the Federal gov-ernment as part of its 1995 budget (whichsignificantly reduced Federal transfers to theProvinces to pay for health and social care,while leaving the Provinces with continuing re-sponsibility for delivering these services) hascaused long-standing resentment and meantthat any Federally-funded scheme is treated withgreat scepticism. Even the attempt by a Prov-ince to follow a different ideological approachcan fuel tensions. Federal officials regard Al-berta and Ontario (notably under the formerConservative Premier, Mike Harris) as being al-most as difficult to deal with as Quebec. ForOntario, an issue like criminal justice remainsvery difficult; the Province (which has responsi-bility for criminal procedure and policing) takes amuch more hard-line approach to law and orderissues than the Federal government, which hasresponsibility for the substantive criminal law.Each party therefore tries to implement policiesreflecting its own view, but with disagreementsso fundamental the result is often stalemate.

So far as Quebec is concerned, Parti Québecoisgovernments and their officials have tended to

Box 3: The negotiation of the Social Union Framework AgreementThe initiative for an intergovernmental agreement in this area came from the (English-speaking)Provinces, and they produced a common negotiating position at Saskatoon in August 1998. InJanuary 1999 a revised position was agreed at Victoria, with which Quebec agreed and to whichit committed itself. However, a number of these points were abandoned during the final discus-sions, and Quebec considered that the final agreement, signed in February 1999, was so flawed(for example, in failing to establish binding limits on the Federal government’s use of the spend-ing power) that it could not sign it. As a consequence Quebec sees itself as abandoned if notbetrayed by the other Provinces, which—when it came to the crunch—preferred to cave in beforethe Federal government rather than maintain solidarity and the common position that had beenagreed.28

From the point of view of English-speaking Provinces, SUFA is a real advance. It creates a muchclearer process for dealing with Federal involvement in social policy matters—which may consti-tutionally be exclusively Provincial matters but which in practice need Federal funding if nothingmore. By putting an end to unilateral Federal initiatives, it removes a major source of tension inFederal-Provincial relations. And SUFA also creates a way of manageing future disputes, whicvhhas been lacking hitherto

For the Federal government, Quebec’s self-exclusion from SUFA is a consequence of Quebec’salready-high level of social provision. As it stands the agreement enables the Federal govern-ment to improve social policy and policy-making without compromising its own freedom ofmanoeuvre (for example, by keeping any disputes away from the courts).

interpret every action of the Federal govern-ment, and often those of the English-speakingProvinces, as being directed first and foremosttoward Quebec. Even if such actions are notseen as deliberately directed against Quebec,they are regarded as showing disregard for Que-bec’s concerns or insensitivity toward thoseconcerns. The Millennium Scholarships are oneexample (see box on page 24). Another is theway the Social Union Framework Agreement(SUFA) was negotiated.

This has reinforced Quebec’s determination (atleast under PQ governments) to protect its rightsand privileges under the 1867 Constitution, andmeans that Quebec’s position in any Federal-Provincial discussion has been governed byQuebec’s larger and long-standing constitutionalconcerns. It made Quebec sceptical about form-ing any alliance with other Provinces even forlimited or tactical goals (although the new PLQgovernment has indicated this will be a key partof its approach), and has also made Quebecdoubtful about the value of participation inCanada-wide schemes or activities. That in turnhas often become a self-fulfilling prophecy, how-

28 This is a somewhat crude summary of the views expressed in Social Union without Quebec: Eight CriticalAnalyses (Montreal: Institute for Research in Public Policy, 2000).

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ever. Quebec may have mistrusted the otherProvinces but could be counted on to take amaximalist position as regards the Provinces’power. The English-speaking Provinces coulduse Quebec’s intransigence to obtain a betterdeal from the Federal government, knowing thatthey lose little from breaking a position agreedwith Quebec because Quebec never reallytrusted them in the first place.

With a new Quebec government committed toactive engagement with other Provinces, this islikely to change. The question will be howsucessful that new approach is in practice.

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4 Mechanics and processes4.1 Meetings and formalityCanadian intergovernmental relations appear tobe highly formal and formalised, at least com-pared with the UK. Its institutional frameworkinvolves a large number of meetings at a varietyof levels; this constitutes the main mechanismfor collaborative federalism. The main meetingsare:

• Annual Premiers’ Conferences of Provin-cial and Territorial Premiers. Thesemeetings usually take place in August andwill be timed to precede a First Ministers’Meeting (if one is taking place that year).

• Regional Premiers’ Conferences, againtaking place annually and involving thePremiers from a particular region of thecountry. The Western Premiers’ Confer-ence is particularly important.

• The First Ministers’ Meeting, comprisingthe Federal Prime Minister and the Pre-miers of the Provinces and Territories.There is no fixed schedule for such meet-ings, but they normally appear to takeplace every 18 months or two years.These are the place for discussing issuesof the highest political importance—theywere common during the late 1980s andearly 1990s, when constitutional mega-politics was in train. (Their use alsoreflects the personal approach of thePrime Minister; Jean Chrétien has beenreluctant to use them as he would havebeen facing a chorus of unanimous oppo-sit ion.) They have been much lesscommon since 1993; none was held be-tween September 2000 and February2003 for example. The February 2003meeting was concerned with reform of theCanadian health system, following publi-cation of the Romanow report.

• Ministerial Conferences in particularsectoral policy areas. These take twoforms: the Provincial-Territorial (‘P-T’ forshort), and the Federal-Provincial-Territo-rial (‘F-P-T’ for short). These usually takeplace between once a year and once aquarter, but depending on the area ofpolicy involved and the issues that are

current. Such meetings normally last twoor three days, with a P-T Meeting oftenpreceding the F-P-T meeting (there wereabout 15 P-T meetings annually between1998 and 2001, and 30–34 F-P-T ones).P-T meetings are a forum for discussion ofareas of common interest but also serveto agree a P-T line for the following F-P-Tmeeting, at which the host Province’s Min-ister normally speaks for the Provincesand Territories as a whole. Communiquésare issued routinely after such meetings,which are usually reported in the betternewspapers, if only in a couple of lines.

• Meetings of Deputy Ministers29, which alsotake place in P-T and F-P-T forms in muchthe same way as Ministerial meetings.These largely prepare Ministerial meet-ings or conferences (and are roughly asnumerous), with the chief difference thatsuch meetings are wholly private, and nocommuniqué is issued afterward.

• Meetings of other officials take place withgreater frequency. These can be at a vari-ety of levels. Most appear to be atAssistant Deputy Minister or Director level(the equivalent of Grade 2 or Grade 3 inBritain), but they may involve more juniordesk officials too. In a complicated and im-portant area like finance, there are threeseparate committees at that level, operat-ing at F-P-T level, and a separate P-Tmeeting dealing with transfers. Suchmeetings are largely preparing the groundfor Ministerial-level meetings.

Below all this there is a good deal of informalcontact, particularly between officials from linedepartments (rather than intergovernmental af-fairs specialists). The number of parties involvedmean that there is a limit to what such informalcontacts can achieve, at least when they are be-tween Provinces, and the main purpose of suchcontacts appears to be trying to agree a line topursue at P-T meetings and thereafter at F-P-Tones. Contacts between particular Provincesand the Federal government are much morecommon, and are treated as a major part of aFederal official’s job. Thus, for Provincial finance

29 The Deputy Minister is the most senior permanent official in a Ministry or Department—in other words, theequivalent of a Permanent Secretary in the British system.

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officials keeping abreast of what will be in theFederal budget requires good contacts with theFederal Department of Finance, done largely in-formally and bilaterally.

At meetings between the Federal governmentand the Provinces, the Federal Minister and theProvincial Minister from the host Province act asco-chairs. However, they are not responsible foradministrative arrangements for these meetings.With the exception of meetings of Finance Minis-ters and Deputy Ministers, the secretariat for P-Tand F-P-T meetings is provided by the CanadianIntergovernmental Conference Secretariat. Thisis an independent body which exists to ensurethat all parties have confidence in the impartialityof the arrangements for the meetings. It is basedin Ottawa and staffed by officials from both Fed-eral and Provincial governments onsecondment, for administrative purposes onlyforming part of the Federal government.30 Itsbrief is largely logistical and practical, and itsrepresentatives at a meeting do not provide ad-vice to the chairs or co-chairs about proceduralmatters, and they do not draft the minutes ornotes of meetings (that is left to the co-chairsand their staffs). Even so, there is a consider-able volume of work; each meeting needs ateam of 4 people per meeting (more for FirstMinisters’ Meetings), and it usually has 4 suchteams working on a sequence of meetings atany time.

This process of using many formal, inter-provin-cial meetings is itself contentious. Under the PQ,Quebec (with its strategy of limiting its engage-ment in Canadian intergovernmental relations)has been rather sceptical about the process, es-pecially when it comes to meetings of morejunior officials (at Director or working level), andin areas of exclusively Provincial competencesuch as health or social care. When they re-viewed Quebec’s involvement in such groups,off icials in the Secrétariat aux Affairesintergouvernementales canadiennes (SAIC) identi-fied over 700 groups in all, with 93 concernedwith health. When undertaken on such a scale,and given the size of Canada, meetings likethese are very time-consuming—those attend-ing may have to spend a day travelling in eachdirection to a meeting, as well as the time of themeeting itself and the preparation it requires.

The travel costs involved if many officials are en-gaged in such meetings is also considerable. (Afurther concern from Quebec’s point of view wasthat staff may develop a greater sense of fellow-ship with their colleagues from othergovernments working in the same professionalarea than they have with their colleagues withinthe Quebec government.) As a result, Quebecreviewed the number of such meetings its staffattend and announced its intention only to attendessential ones and to decline to take part in newgroups. Again, this may well change followingthe PLQ’s election victory.

This system will be familiar to many in the UK, asit closely resembles the sort of sherpa-ing andmulti-lateral summitry used in European Unionmeetings. It is far more elaborate than the ar-rangements for relations between the UKGovernment and the devolved administrations.There are major differences, however. Few ifany provinces have standing representation inOttawa, in the way EU member states have intheir Permanent Representations in Brussels.Provinces work much harder to co-ordinate theirpositions multi-laterally, rather than in the infor-mal and usually bilateral way it is done in theEU. The Provinces and Territories thereforepresent a single negotiating position to the Fed-eral governement. Only the largest and mostconcerned Provinces make a serious and sus-tained effort to ensure they are aware ofdevelopments elsewhere and to use that infor-mation to build alliances with other Provinces.Unlike the EU, the fundamental inequality of thepoorer Provinces means that they are vulnerableto overtures from the Federal government, per-haps to support a Federal line or possibly just tosupply information to the Federal governmentabout the attitudes of other Provinces.

4.2 Intergovernmental agreementsIntergovernmental agreements have proliferatedas an instrument of Canadian collaborative fed-eralism. They take two main forms: bilateral andmulti-lateral (involving the Federal governmentand all or most Provinces). The differences be-tween them are more substantial than simply thenumber of formal parties.

30 The Secretariat’s website is at http://www.scics.gc.ca/. It is frequently updated with details of the latestmeetings.

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Bilateral agreements have a long pedigree andare simpler to understand. They are oftendrafted by lawyers and in form resemble anyother legal agreement, although it is not clearwhat their legal status is.31 Such agreements arevital to making collaborative federalism work, bydefining what each party will do for the other orsetting out the terms of a policy to be followed bya Province using Federal funding provided un-der the spending power. Examples of the formerare the tax collection agreements by which theFederal government collects provincial personalincome tax for all Provinces save Quebec. Ex-amples of the latter are agreements for provisionof legal aid services by the Provinces. The com-plicated nature of such agreements and the factthat they reflect administrative practices whichdevelop and change over time means that suchagreements often require amendment and revi-sion. In the case of the tax collectionagreements, this has been accomplished by ex-changes of letters over the years. However, amore fundamental change in the nature of taxcollection procedures (the move from ‘tax on tax’to ‘tax on income’) has led to a need to re-writethe agreements altogether. Such agreementsexist with nine Provinces, each of which has itsown agreement reflecting a different set of ar-rangements in each case, and is likely to takethe whole time of the Director in charge of thematter for over a year. While the clarity and legalcertainty that comes from such a large invest-ment of time is considerable, that time is also nota commitment to be undertaken lightly.

Multi-lateral agreements are rather different.These have developed in the years following thecollapse of the Charlottetown Accord as ameans of improving collaboration between gov-ernments to demonstrate the value of theexisting constitutional arrangements of the fed-eration. Examples include:

• The 1995 Agreement on Internal Trade(signed by all 10 Provinces)

• The 1998 Canada-Wide Accord on Envi-ronmental Harmonization andSub-agreements on Canada-Wide Stand-ards, Inspections and EnvironmentalAssessment (signed by 9 Provinces, Que-bec declining to sign until the agreement’s

provisions were incorporated into Federallaw)

• The 1999 Social Union Framework Agree-ment, often called SUFA (signed by 9Provinces, Quebec refusing to participate)

• The 2003 Accord on Health Care Reform,supplementing SUFA.

These agreements are vaguer and broader inform than bilateral agreements. As a result it ishard to see that their provisions could be subjectto litigation, as they seldom (if ever) create clearand unambiguous provisions on which a courtcould pronounce (as well as the problems notedabove regarding bilateral agreements.) In somecases—such as the provisions for dispute reso-lution in SUFA—the clauses were simply left outof the agreement, to be dealt with subsequently.And while these were reportedly agreed in theautumn of 2002, the terms of that agreement areconfidential to the governments involved andhave not been made public at the time of writing.

The use of this sort of agreement as a key tool ofexecutive federalism suggests a limit to theirvalue as a tool for renewing the federation.While they may enable better policy outcomes,and so show the public at large that ‘federalismworks’, they will not open up the processes ofintergovernmental relations or enhance demo-cratic accountability. Their legally-doubtful statusmeans that it is hard for the parties to rely on thecourts enforcing such an agreement, should theneed ever arise.

4.3 Dispute resolution and thecourtsThe courts have played a very important part inthe historical development of Canadian federal-ism. The Judicial Committee of the PrivyCouncil, sitting in London, was the final court ofappeal for division-of-powers cases fromCanada until the middle of the twentieth century,with civil appeals finally ended in 1948 (althoughthe last case was not decided until 1959).32 ThePrivy Council was widely criticised (at least inEnglish-speaking Canada) for its many judg-ments enhancing Provincial powers and limitingFederal ones. One effect of this, for example,was to narrow to practically nothing the scope of

31 The key issues are contractual intent or its absence, and public-policy issues (the Canadian term for whatUK lawyers call the fettering of discretion). See A. Heard Canadian Constitutional Conventions: the marriage oflaw and politics (Toronto: Oxford University Press, 1991), pp. 112–116.

32 A-G of Ontario v. A-G of Canada (References re Abolition of Privy Council Appeals) [1947] AC 128, PC.

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the Federal Parliament’s power to regulate tradeand commerce, and enhance instead the scopeof the Provinces’ powers regarding ‘property andcivil rights’.33 Since 1948 the Supreme Court ofCanada has taken a rather different approach,more often upholding the powers of the Federalorder at the expense of the Provinces. It is oftenviewed by Quebecois scholars as showing apro-federal bias, even if its record is more bal-anced. (In a number of notable cases, it hasdecided in favour of the Provinces: for example,in the Patriation reference or the Reference re theSecession of Quebec.34) The Federal governmentis therefore able to approach constitutional litiga-tion regarding federalism issues with a degree ofequanimity. However, division-of-power caseshave become much less common over the lasttwenty years, with a torrent of litigation relatingto rights arising under the Canadian Charter ofRights and Freedoms established by the Consti-tution Act 1982. In these cases, the interests ofFederal and Provincial governments are likely tobe similar, as governments affected by the rightsof individual citizens.

Litigation is a less attractive prospect for theProvinces than for the Federal government.They go to court with limited expectation of suc-cess, regarding the Supreme Court of Canada(and many Provincial supreme courts, whosejudges are appointed by the Federal govern-ment) as having a centralist bias. Theprocedures by which they raise such issues aremore cumbersome than they are for the Federalgovernment (a Province can only refer an issueto its Provincial court of appeal and then take iton appeal to the Supreme Court, but the Federalgovernment can refer a matter directly to the Su-preme Court of Canada).36 Provinces thereforelook to other ways of resolving an issue, notablysome sort of intergovernmental agreement.Even for the Federal government, however, liti-gation is far from risk-free and a recent string ofnotable successes does not breed a high level ofconfidence about litigation. Most division-of-powers cases have tended to reach the court asa consequence of litigation between other par-t ies, in which Federal and Provincialgovernments can choose to intervene. (The

Box 4: A recent division of powers case: Hydro-Québec35

The (Federal) Canadian Environmental Protection Act allowed an administrative agency to im-pose limits on emissions from power stations, backed up by criminal sanctions for breach.Hydro-Québec (an electricity generator) breached those limits and was prosecuted. It appealed,on the ground that the legislation imposing limits was unlawful as the Federal Parliament had nopower to legislate on the exclusively provincial matter of the environment.

The Supreme Court of Canada held, by a majority, that the legislation was properly made underthe criminal law power (s. 91.27) of the Constitution Act 1867, on the basis that the legislationconstituted a limited prohibition applying to a limited number of substances, and the use of anadministrative agency to set those limits a way of tailoring the prohibitions to suit the substancesand circumstances involved. Consequently, there was a valid and appropriate public purpose (aswell as the criminal prohibition and penalty) required to make the prohibition a valid use of thecriminal law power—rather than a use of the criminal law power to enable the Federal govern-ment to regulate a matter that otherwise was beyond its competence.

This judgment has been widely criticised, particularly but not only in Quebec. Its effect is tobroaden considerably the scope within which the Federal criminal law power can be used. Itenables the power to be used to regulate a wide range of activities that otherwise fall withinProvincial jurisdiction. The vague terms in which the judgment was couched—using the criminallaw to “underline and protect fundamental values”—attracts controversy by begging the questionof what values they are and by whom they are held.

33 Constitution Act 1867, s. 91.2 and s. 92.13 respectively.34 [1981] 1 SCR 753; [1998] 2 SCR 217.35 R. v. Hydro-Québec [1997] SCR 21336 Supreme Court Act, 1953. See also P. Hogg Constitutional Law of Canada 3rd edition (Toronto: Carswell,

1992), pp. 214–219.

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Federal Government’s Department of Justice re-ceives many calls to intervene in such cases, butusually declines.) When it does involve itself in acase, it does so at a late stage, allowing the ear-lier litigation to proceed between the parties inthe lower courts and intervening either in theProvincial supreme court or in the SupremeCourt of Canada.

One key feature of such cases is how the politi-cal and the legal aspects of the case becomeintimately intertwined. Court hearings become asetting for rhetorical statements about the par-ties’ cases, with lawyers giving interviews on thecourt steps and becoming involved in the politi-cal and public relations aspects of the case.Equally, the litigation becomes both a focus oroccasion for lobbying as well as an attempt tosecure a legal resolution.

4.4 LegislationThe control of Provincial legislation by the Fed-eral level (by the government, theLieutenant-Governors in the Provinces and theGovernor-General) loom large in the originalframework of the Constitution Act 1867. TheFederal order, in particular, had extensive pow-ers to prevent the enactment of legislation whichwas beyond a Province’s powers. The Gover-nor-General, on the advice of the Federalgovernment, could ‘disallow’ Provincial legisla-tion even if it had received assent from theLieutenant-Governor, in effect repealing it withina year of it receiving assent.37 The Lieutenant-Governor could ‘reserve’ legislation for a year,withholding his assent and placing the matter inthe hands of the Governor-General.38 Thesemeasures were available whether or not the leg-islation exceeded the powers of the legislaturewhich enacted it; they could be used to curb anexercise of powers that was inappropriate eventhough lawful, as well as measures which wereunlawful because they exceeded Provincialcompetence. Similarly, the Governor-Generalcould withhold assent from Acts of the (Federal)Parliament if these intruded into Provincialcompetences. And the option of a reference tothe Supreme Court of Canada (and thence tothe Judicial Committee of the Privy Council) wasalso available.

In practice these measures work rather differ-ently. Both reservation and disallowance havefallen into disuse (the last case of disallowancewas in 1947 and that of reservation in 1961) andmany authorities now regard them as being un-usable by constitutional convention.39 Thereference to the Supreme Court of Canada isavailable, but that is a prerogative of the Federalgovernment not the Provinces, and (as notedabove) litigation is a remedy which the Prov-inces are reluctant to use anyway. In reality, theFederal government appears to take a relaxedview of Provincial legislation, which it makesonly limited efforts to scrutinise as a matter ofroutine. The volume of Provincial legislation andthe Federal government’s own limited resourcesare compelling reasons for this, and instead theFederal government relies on major instancesbecoming conspicuous by virtue of being contro-versial enough to come to its attention. It doesrespond in cases where there is a clear interfer-ence with Federal functions, but reactively ratherthan actively.

For Provinces Federal legislation affecting Pro-vincial matters is a much more routine hazard.Part of SAIC’s remit in Quebec is to examine allFederal legislation to see whether and in whatways it affects Provincial matters. The Federalgovernment accepts that it often does so, partlyto see how far it can go in extending itscompetences. From Quebec’s point of view thisa significant problem, although it appears to be amatter of greater sensitivity for Quebec than forEnglish-speaking Provinces. Yet even when in-trusions into Provincial competence are found,there is little Provincial authorities can do. Theiroptions are to try to find a way of litigating thematter, which (as they lack the power to refer thematter directly to the Supreme Court) may bedifficult; or to raise the matter with the Federalgovernment and remonstrate with it, in whichcase the Federal government alone can decidewhether to amend the legislation. It may helpthat the Federal government will not want to addto Quebec’s stock of grievances against theFederal order, but that is a political rather thanconstitutional safeguard.

37 S. 56 and s. 90 Constitution Act 1867.38 S. 55, s. 57 and s. 90 Constitution Act 1867.39 See Heard op cit, pp. 102–105; Hogg op cit, pp. 112–113.

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4.5 Staffing and bureaucraticorganisationIn any Canadian government, a significantnumber of staff are concerned wholly or largelywith intergovernmental relations. Each govern-ment (even the smallest Province) has somesort of central unit dealing with the subject. Thismay be a free-standing Ministry or Department(as in Ontario), or be linked with other ‘intergov-ernmental’ issues such as international issues(as in Alberta or New Brunswick), or be part of alarger central Ministry (as in Quebec or the Fed-eral government). As well as these staff (whoserole is discussed below), there are sections inmost if not all Ministries with service functionsspecialising in intergovernmental issues affect-ing that Department. In an area such as financethis will involve a number of senior officials. Inothers such as child-care, it may be only a singlefairly junior person. Those involved deny thatthis is duplication—they say that the centralintergovernmental affairs unit is intended to en-sure co-ordination and provide an overview ofintergovernmental relations generally, while de-partmental specialists have expertise in thatarea of policy which line officials lack. Suchclaims need to be treated with a measure ofdoubt and there does appear to be a degree ofduplication—arising largely because service de-

partments want their own specialists as they arenot sure of the central unit’s understanding oftheir policy area, or of its desire to secure theirdepartment’s objectives at the expense of otherdepartments’ goals.

At the political level, there is a similar pattern ofvariation. Some governments such as the Fed-eral government or Alberta have a Minister forIntergovernmental Relations. While the FederalMinister, Stéphane Dion, has a high profile, heappears to have a comparatively light workload.In other governments, like Ontario, the Ministeris the Premier. In practice this seems to meanrelatively limited interest from politicians in thearea, although it would enable direction to begiven at the highest level if that were called for. Athird option (as in Quebec) is for the Minister tohave a range of central responsibilities. Whilethe Federal government also has Ministers (withother portfolios) responsible for particular Prov-inces, their role is much more one of politicalliaison and representation, primarily with the Lib-eral party in that Province. So far as themanagement of intergovernmental relations isconcerned, those Ministers are irrelevant; thekey actors are the Minister for IntergovernmentalRelations, the Prime Minister or Premier, and theMinister for the portfolio involved.

Box 5: The Millennium Scholarships Endowment FundBy section 93 of the Constitution Act 1867, education (including support for students in highereducation) is an exclusively Provincial matter. Some Provinces, such as Quebec and to a lesserdegree Ontario, provide direct support for students from that Province. Others operate systems ofsupport through loans along the lines of the United States.

In June 1997 the Prime Minister, Jean Chrétien, announced the establishment of MillenniumScholarships to support students from low and moderate-income families at university. The costof the scheme was some $2.5 billion. The announcement was made without consulting the Cabi-net, the Federal-Provincial Relations Office or even departments such as Human Resources orCanadian Heritage that would have been directly affected. It also appears to have been takenwithout advice from the Attorney-General or the Department of Justice who—like the FPRO—would have had to advise that this was a matter of Provincial competence. The only peopleoutside the Prime Minister’s office who appear to have been consulted were the Finance Ministerand his Deputy Minister.

While the scheme is now up and running, it has had a lasting effect on Federal-Provincial rela-tions. For Provinces like Ontario, where it duplicates an already-existing scheme, it is simply badpolicy design. To Quebec it is not just an intrusion into Provincial competences but effectively awaste of money, duplicating an existing Provincial programme. However, both Provinces’ prag-matic response has been to reduce the amount they themselves spend in this area, effectivelyallowing the Federal government into the field while they direct their resources elsewhere.

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In the Federal government, matters are furthercomplicated by the extent to which power is cen-tralised in the hands of the Prime Minister andhis (or her) office.40 As a consequence the PrimeMinister is able to take decisions (often far-reaching ones) and then announce thempublicly without consulting the Cabinet, Federalgovernment departments or even on occasionthe Privy Council Office. The same applies inmany Provinces too. While this may permit astrong political direction to be given to the man-agement of Federal-Provincial relations, it hasmany shortcomings. It means the policy adviceto the Prime Minister (or Premier) is likely to bevery limited, and to omit key considerations suchas legal issues or the wider ramifications of astep taken to deal with a particular problem.

Staffing is an area in which the Federal govern-ment has a clear advantage over the Provinces.The Intergovernmental Affairs Office is now partof the Privy Council Office (the Canadian equiva-lent of the Cabinet Office), although it has in thepast been a separate office. It has its own Minis-ter and Deputy Minister, as well as the closeattention of the Prime Minister and direct accessto him or her when critical issues arise.41 It alsohas about 300 staff, split into ‘Policy’ and ‘Opera-tions’ branches, and comprising a mix of peoplespecialising in intergovernmental aspects of par-ticular policy areas and those concentrating onmatters affecting particular regions or Provinces.As part of the centre of the Federal governmentit has a powerful position. Yet even so it is strug-gling to co-ordinate the position of the Federalgovernment’s various departments, which maykeep it in the dark or seek to evade its influ-ence.42 In practice, its control depends on thePrime Minister taking a direct interest in a matterand ensuring that his involvement is communi-cated through IGAO. In the case of theMillennium Scholarships, this was clearly not thecase.

It is worth asking why the Federal governmentemploys so many people to work on intergovern-mental relations at the centre of government, aswell as having many IGR specialists in other de-

partments. The first part of the answer is thatfederalism is an integral part of Canadian gov-ernment, and that it requires specialists to dealwith its administrative implications. That helps toexplain its importance for line departments if notat the centre. For the centre, the issue is politicalnot administrative. Here, the answer appears tostart with Quebec, not in the sense that Quebecneeds many officials to help ‘manage’ it but be-cause of the concern that separatist demandshave fuelled for a government wishing to pre-serve the unity of Canada as a state. Whilemany of IGAO’s officials are concerned largelywith matters relating to Quebec it is not their soleconcern. Once close attention is paid to Quebec,attention also needs to be paid to the other partsof Canada, in case a measure intended to havea particular effect in relation to one Province orregion has a different effect elsewhere. If thethreat to national unity were to decline, onewould therefore expect the need for central co-ordination through IGAO to decline too.However, that is unlikely to happen in the shortterm (and even with a PLQ government in Que-bec), because the new government will engagewith other Provinces in a way that increases thecomplexity of Federal-Provincial relations evenas it reduces the stakes.

The contrast with even the best-resourced Prov-inces is dramatic. The smaller Provinces suchas the Maritimes may have only 3 or 4 peopledealing with intergovernmental affairs as awhole. Ontario does better and has about 33people in its intergovernmental section, mostlyconcerned with sectoral matters and with onlylimited capacity to monitor developments inother Provinces. Alberta similarly has a largeand experienced group of officials in the Ministryof International and Intergovernmental Rela-tions.43 The best-resourced Province is Quebec,whose intergovernmental staff form part of theSecrétariat aux Affaires intergouvernementalescanadiennes (SAIC) within the Ministry of theExecutive Council.44 SAIC has a total of 70 or sostaff, but that includes staff who deal with rela-tions with other Francophone communities inCanada as well as those dealing with functional

40 For a detailed discussion, see Donald J. Savoie Governing from the Centre: the concentration of power inCanadian politics (Toronto: University of Toronto Press, 1999), especially chaps. 2–4.

41 The Intergovernmental Affairs Office has a useful web-site at http://www.pco-bcp.gc.ca/aia42 See also Savoie op cit at pp. 148–153.43 See R. Gibbins ‘Alberta’s intergovernmental relations experience’ in H. Lazar (ed.) Canada: the State of the

Federation 1997: Non-constitutional renewal (Kingston, Ont: Institute of Intergovernmental Relations, Queen’sUniversity, 1998). The Alberta Ministry’s website is at http://www.iir.gov.ab.ca

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policy areas and those dealing with constitu-tional and institutional matters. SAIC conceivesof its role much more broadly than its counter-parts in other Provinces. Its mandate includesnot only overseeing relations with the Federalgovernment or other Provinces, but also approv-ing all intergovernmental agreements and thesystematic examination of Federal legislation tosee whether and how that intrudes into Provin-cial competences. It also has offices in otherimportant Canadian cities such as Toronto, tomonitor local developments and maintain localcontacts. No other Province appears to do that,and (unusually for a Canadian Province) the taskis undertaken by lawyers working within SAICrather than within the Ministry of Justice.45

What all these administrative units have in com-mon is the nature of their remit. All are supposedto co-ordinate their governments’ approach tointergovernmental relations, to prepare meetingsand support the Ministers (including the Premier)attending them. This should enable each prov-ince to develop and implement a coherentintergovernmental strategy across government.In reality these sections’ job appears to belargely one of co-ordinating co-ordinators, andwhen (as at present) the political stakes are lowso is Ministerial interest. This exacerbates thenatural tendency of individual Ministries or De-partments to pursue their own approach withoutregard to their government’s broader interest (acontrast to how the UK, at least, deals with EUmatters). The greater resources of the Federalgovernment enable it to undertake this withgreater effectiveness than other governments asfar as routine matters are concerned. However,the highly centralised nature of the Federal gov-ernment and the power enjoyed by the PrimeMinister and his office mean that an uncontrolla-ble element will always exist. The MillenniumScholarships demonstrate that vividly. While thelegal powers of SAIC in Quebec give it greaterweight than its counterparts in other Provinces, itstill appears to be struggling with centrifugal ten-dencies in other parts of the Quebecgovernment.

44 SAIC’s English-language website is at http://www.mce.gouv.qc.ca/v/html/v0368002.html45 Most Canadian governments, including the Federal government and the Ontario government, provide that

all legal advice is to be provided by the Attorney-General and his or her officials. The monopoly of legaladvice is key to ensuring that the Department or Ministry of Justice is aware of all constitutional develop-ments and able to intervene if it has concerns about their legality. However, the Federal Prime Minister andhis office are able to operate outside the scope of that monopoly in practice.

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5 Lessons for the UK?5.1 Generally: build trust, don’tdestroy itDrawing lessons from Canada for the UK is notstraightforward. There are many differences be-tween the two systems, and these are notalways the obvious ones. Canada is obviously afederal system, while the UK has only a limitedmeasure of devolution which in its most ad-vanced form (in Scotland and Northern Ireland)affects little more than 10% of the population.The asymmetry of the UK—the different ar-rangements for Wales and the lack of them forEngland — is a greater difference than the issueof federalism. Canada also has many more unitsto deal with than the UK—ten Provinces andthree Territories—as well as a much larger land-mass and smaller population.

But Canada took many years to reach thepresent state of affairs. During the early years af-ter Confederation, intergovernmental relationswere much quieter. The federation was muchsmaller as only four Provinces—Ontario, Que-bec, Nova Scotia and New Brunswick—joined in1867. Manitoba, British Columbia and PrinceEdward Island joined within a few years, but thefirst two had insignificant populations until thetwentieth century. Federal-Provincial relationswere dominated by arguments about legislation,and the use of the powers of disallowance and(to a lesser degree) reservation. Finance figuredlarge too—whether in arguments about theamounts of Federal grants to the Provinces, orabout interest on debt assumed by the Federalgovernment from the Provinces at Confedera-tion, or about other forms of Federal supportsuch as for infrastructure projects (notably rail-ways). Contact was often informal, relied heavilyon personal acquaintance itself frequently pre-dating Confederation, and was greatly affectedby whether the party in office was the same as(and therefore friendly to) the Federal govern-ment, or different to it and hostile.

The politics of intergovernmental relations wasvery different. The ‘awkward partners’ wereNova Scotia and Ontario. Nova Scotia had en-tered Confederation reluctantly in the first placeand threatened to secede on several occasions,while Ontario (with a Liberal government facingthe Conservative one in Ottawa) enjoyed itsprosperity and regularly confronted the Federalgovernment over Provincial powers. Quebecwas an enthusiastic part of the new arrange-ments, and was concerned chiefly with gettingextra money from the Federal government. As itslarge bloc of Conservative voters provided a keyelement in the Federal government’s Parliamen-tary majority it was in a relatively strong position.Meanwhile, much of the territory of Canada fellunder the direct control of the Federal govern-ment, including what is now the Provinces ofSaskatchewan and Alberta, and also what isnow northern Ontario and northern Quebec.46

To a large extent, this is a familiar picture to anyobserver of intergovernmental relations in theUK now—especially in the asymmetry, the im-portance of the financial power of the Federalgovernment as well as control over legislation,and the reliance on personal contacts to oil thewheels of the machine.47 To that extent, Canadamay offer a vision of how intergovernmental rela-tions in the UK might develop, especially if theestablishment of regional government in Eng-land increases the number of units andcomplexity of interests involved.

Apart from some institutional differences (suchas the role of the office of Lieutenant-Governor)there are three major differences betweenCanada in the 1870s and the UK in the earlyyears of the twenty-first century. First, in Canadathe creation of a modern state, with its many ac-tivities in managing the economy and promotingsocial welfare, has taken place in the context ofan established federal system, while in the UKthese developments have already taken placeand one of the major difficulties of devolution isto maintain that framework while transferring

46 See G. Stevenson Ex Uno Plures: Federal-Provincial Relations in Canada 1867–1896 (Montreal and Kingston:McGill-Queen’s University Press, 1997).

47 Perhaps the best single account is in House of Lords Select Committee on the Constitution Session2002–03 2nd Report Devolution: Inter-institutional relation in the United Kingdom HL Paper 28 (London: TheStationery Office, 2002).

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control of part of it to the devolved institutions.Second, devolution in the UK exists in the con-text of a rapidly-changing world in whichglobalisation and the international mobility ofcapital are key forces. Third, the European Un-ion is a key force for all governments in the UK,and access to EU institutions and the controlsexercised by EU law are vital issues for the de-volved administrations and their legislatures andassemblies. Yet for Canada there was some-thing similar in the nineteenth century—the roleof the UK as colonial power, and the supremeposition (until 1931 and the Statute of Westmin-ster) of the Imperial Parliament. Confederationmeant that the Provinces no longer had a directright of access to the Crown or Imperial institu-tions but had to operate through the Federalgovernment (a shock for the Maritime Provincesin particular, as they had been self-governingcolonies prior to Confederation), but London stillloomed large in the Canadian consciousness. Itis little wonder that most Provinces quickly es-tablished representative offices in London evenwhen they had none in Ottawa.

Offering Canada as a vision of the future is likelyto horrify many in the UK, pleased as they arewith the largely uncontentious and consensualintergovernmental relations that exist at present.The large amount of politicians’ attention, thelarger amount of officials’ time and the formalityof the Canadian arrangements can easily causealarm. However, looked at in the light of howFederal-Provincial relations have developed onecan perhaps draw a large lesson for the UK fromCanada, and one that is more for the UK Gov-ernment than the devolved institutions. That isthe importance of trust. This is a notably scarcecommodity in Canada. Each government is surethat the other governments are trying to exploittheir own positions and powers, probably at itsexpense. Each has shown considerable re-sourcefulness in maximising the resourcesavailable to it, whether those be financial, ac-cess to the courts or the framing of legislation.Yet this resourcefulness and ‘uti l i ty-maximisation’ serve to undermine even furtherthe level of confidence any government has inthe others, making the process self-perpetuat-ing. In the UK context, the dominance that theUK Government enjoys under the devolution ar-rangements gives it a degree of control that theCanadian Federal government would envy. If itwishes to avoid the sorts of formalised and con-frontational relations to be seen in Canada, it willhave to exercise that power with great discre-

tion. Repeated intrusions into or interferenceswith devolved matters—as exemplified by someof the provisions in the Anti-terrorism, Crime andSecurity Act 2001—are likely to lead to the levelsof mistrust that will result in the UK resemblingCanada sooner rather than later.

5.2 Make sure that there isconsistent advice—and follow itIt is telling how much the centralisation of powerwithin the Federal government has contributedto harming intergovernmental relations inCanada. The Prime Minister’s concerns with en-suring Quebec remains part of Canada whilemaintaining his popularity in English-speakingCanada and (more recently) with safeguardinghis own legacy have not been effectively re-strained by advice about the implications of hisactions for Federal-Provincial relations. That isnot for want of skill or effort on the part of thePrivy Council Office, but rather because PCO’sintergovernmental affairs section has not beenconsulted or involved. The consequences of thishave been serious: matters like the MillenniumScholarships have seriously undermined trust,and made it harder to reach agreement on othermatters like health-care funding or implementa-tion of the Kyoto accord. Avoiding this sort ofepisode means having in-house experts and al-ways consulting them—not just doing so when itis convenient or expedient. The UK’s practice inthis area so far has been good—and is greatlyhelped by the emphasis placed in the Memoran-dum of Understanding on good communicationand careful consultation. The time will comewhen the political stakes involved will be high, ina way that they have not been up to now. As theUK Government still places much greater em-phasis on officials’ advice to the Prime Ministerthan the Canadian does, the signs are good. Butthat will be the key test—and if making the pro-cedures work is obscured by a pressing crisis,the consequences may be serious too.

A further point is that ensuring consistent adviceis given across government (any government)involves a great many people. The Canadianpractice of having intergovernmental affairs spe-cialists at the heart of government,complemented by IGR specialists in line depart-ments and l ine off icials who deal withintergovernmental issues in the course of mak-ing or implementing policy, appears to create agreat deal of duplication. To an extent that istrue, but the amount of duplication is more ap-

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parent than real. Each set of officials bringssomething different to the table—a different setof skills, and a different perspective on what isimportant. The real question that needs to beasked is the extent to which those skills and per-spectives are needed.

In the UK, that question has received the answerof ‘not much’. While most line departments had asmall team dealing with devolution or constitu-tional matters in the first few years after the 1997election, most of those have now been dissolved(though a network of legal contacts remains).While there are a good number of specialistsdealing with matters relating to Scotland in theScotland Office, the Wales Office has manyfewer even given the difference in size betweenthe territories; and the small team in the Office ofthe Deputy Prime Minister lacks the staff to doany thorough-going job of co-ordination.48 Thecombining of all three groups as part of the newDepartment of Constitutional Affairs in June2003 may help improve internal co-ordination,but not if each remains a separate unit within theDepartment as appears to be the intention.If devolution is to play a major role in the govern-ance of the United Kingdom, the Canadianexperience suggests the number of officials di-rectly involved will increase.

5.3 Legislative powers all round—including for WalesOne practical lesson does emerge from Canada,however; the need for clear dividing lines be-tween governments for them to be able to havea sustained relationship in which trust can exist.While perfect separation of powers in a federalsystem in the classical formulation is long gonein Canada, the fact that parties have a clearsense of what is and is not their responsibilityunderlies their relations and helps to make themwork. That is particularly important when lookingat Wales. The form of executive or quasi-legisla-tive devolution adopted there is alreadybecoming highly cumbersome for administratorsas well as being inherently constitutionally un-

stable. The closest Canadian parallel to theWelsh arrangements would be with the threeTerritories (the Yukon Territory, the North-westTerritory and Nunavut). But these have a legisla-ture and a separate government accountable tothat legislature, and differ from Provinces chieflyin the ability of the Federal government to over-rule their legislatures or executives for anyreason if it sees fit, not only when they exceedtheir constitutional authority. (Another practicalbut not constitutional difference is that all threegovern large, sparsely-populated areas.)

The many problems posed by the Welsh ar-rangements have been widely discussed andcriticised, by the Constitution Unit and others.They are presently being considered by the Ri-chard Commission which is due to report later in2003. The sooner the UK Government bites onthe bullet of sorting out the unsatisfactory com-promise established in 1998, the quicker itavoids the danger of those arrangements be-coming unworkable.

5.4 Sort out the financesEven with good overall relations, the thorny is-sue of finance will be very difficult to deal with.The parallel with Canada here is much less ex-act. In 1880 Federal grants accounted for about47% of total Provincial spending. In 1890 theyaccounted for some 35% (and now for 17.6%).49

That is a far cry from the situation in the UK,where the block grants from HM Treasury ac-count for practically all the revenue of thedevolved institutions. Even though the Provinceswere raising a large proportion of their own rev-enue, they remained heavily dependent onFederal funds, especially as the Federal govern-ment had more scope to increase its revenue(more elasticity) than the Provinces did. Cana-dian history is littered with rows over fiscalfederalism—for example, the attempts by theProvinces after World War 2 to secure the returnof income tax revenues they had ‘rented’ to theFederal government during the war, which didnot succeed until 1957 (to be replaced by the tax

48 For other objections to the continuing role of the Secretaries of State, see House of Lords Select Commit-tee on the Constitution op cit, chap. 2.

49 The figures (in thousands of Canadian dollars) are1880 1890 2000–01

Federal grants to Provinces 3,431 3,905 29,275,000Total Provincial spending 7,366 11,132 166,595,000Sources: Stevenson op cit, Table 2.5, p. 46 (for 1880 and 1890); Conference Board of Canada op cit, Table 3,

p. 27 (for 2000–01).

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collection arrangements that remain largely inplace today).

The existence of separate fiscal bases gives theProvincial governments a substantial degree ofautonomy and so limits the scope for disputeabout financial matters. (That scope would be al-most unrestricted if the Provinces were moredependent on the Federal government than theypresently are.) If the Provinces were compelledto rely on the Federal government even morethan they do they would be disputing everypenny they did not receive. While there might belittle they could do about their lack of revenue,their objections would be voiced loudly and of-ten, and would prevent intergovernmentalco-operation on other matters. Even formula-based financial arrangements will only work ifthe formula is demonstrably fair given the obliga-tions of the governments involved and theresources they have. (This is of course been anotable current problem in Germany, as richerLänder in the west object to the extent of trans-fers to poorer ones in the east now mandated bythe formula used. The Federal ConstitutionalCourt upheld their objections in 1999, and thepresent solution is unlikely to last long.)

A further lesson from Canada would thereforeappear to be that the financial arrangements fordevolution need to be on a firmer footing thanthe UK’s present ones presently allow, and thatthis would be better done sooner than later. Oth-erwise, the issue will come to take over all othermatters, inhibit co-operation generally and leadto precisely the sort of formality and confronta-tion that the UK Government is trying to avoid.One way of doing so is to look to the Australianmodel of an independent commission chargedwith the allocation of finance, rather than leavingthis to the parties themselves. In the hands ofthe parties (and especially in the absence ofmuch trust), finance quickly becomes disputa-tious and heated; an impartial body is the onlyway to take that heat out of the issue.

5.5 Make the nuts and bolts work,but don’t fret over inessentialsLikewise, it seems axiomatic in Canada thateach government should have its own officials,forming a separate and independent service.The idea that there should be a single civil serv-ice embracing both Federal and Provincialgovernments would confound expectations thatofficials should have a clear and undivided loy-

alty to the government for which they work. TheUK Government’s reluctance to contemplateseparate civil services for Scotland or Waleswould seem incomprehensible in a Canadiancontext (although some other federal systemssuch as India have a single service for officials).Officials there have little difficulty in identifyingeach other as belonging to the same ‘breed’,even if they work for different governments in dif-ferent services (as, of course, happens inNorthern Ireland already).

Part of the process of building and maintainingtrust is allowing governments to get on with whatis properly in their domain, and not being subjectto the tutelage of another government in doingso. The disuse of the controls over legislation(the powers of reservation and disallowance) isan example of that. There is a marked contrasthere, on the administrative level, with practice inthe UK. While the UK Government has taken noaction regarding any legislation before the Scot-tish Parliament under sections 31–33 of theScotland Act 1998, it continues to scrutiniseevery bill and Act, several times and in great de-tail. The Canadian experience is that this sort ofscrutiny is unnecessary, at least for the Federalgovernment. If Provincial legislation were to bebeyond Provincial powers, the fact wouldemerge quite quickly and probably result in athird-party challenge. The UK Government’spractice of detailed scrutiny seems inappropriateand excessive in the light of such an approach.

5.6 Think through the role ofcentral institutionsCanadian federalism seems highly formalised,operating through a variety of Ministers’ meet-ings and conferences and a large supportingnetwork of officials. However, it is easy to over-look why this system comes about—theabsence of any formal institution to representProvincial interests within the Federal political in-stitutions. In this respect Canada is at theopposite end of a continuum with Germany atthe other end; the German Bundesrat is the upperchamber of the legislature and is composed ofrepresentatives of Land governments, with votesroughly weighted according to size. (It also de-parts from the US model of a Senate withelected representatives chosen equally fromeach State.) The Canadian Senate, by contrast,is an entirely appointed chamber. Although seatsare allocated proportionately to four regions (At-lantic Canada, Quebec, Ontario and Western

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Canada) the power of appointment is a matterfor the Federal government (by advising theGovernor-General), and there is no requirementto make appointments when vacancies arise.The lack of a central voice for the Provinceswithin the Federal institutions leads to the use offrequent Ministerial meetings to compensate. Itis telling that the most significant demand of thenew Liberal Premier of Quebec, Jean Charest, isfor the establishment of a ‘Council of the Federa-tion’ to give a voice to the Provinces in Federalmatters. That is a role that could have beenplayed (alongside its legislative role) by the Ca-nadian Senate—or in the UK, by the House ofLords.

The idea that a reformed House of Lords mightalso represent the interests of the devolved terri-tories was recommended by the WakehamReport.50 It subsequently disappeared from pub-lic attention, overshadowed by the debate aboutthe extent to which a reformed House should beelected. The collapse of any sustained effort atreform after the votes in February 2003 mayhave killed off the issue altogether, but the valueof representing territorial interests through theupper house should not be neglected. Its lack isclearly felt in Canada. It would enable the de-volved territories to feel more confident that theirinterests could not be ignored at UK level. Thereare of course many problems with such an ap-proach, not least how representatives ofdevolved territories might be selected and theirrelationships with the assembly or legislature fortheir territory and its administration, but tacklingsuch a concern would avoid the problems seenin Canada with a remote, ill-respected andlargely illegitimate Senate.

50 See Royal Commission on the Reform of the House of Lords A House for the Future Cm 4534 (London: TheStationery Office, 2000), chap. 6.

ISBN: 1 903903 23 8