Federal Spending Power: The Makings of a Phoney Debate
There have been suggestions that the Conservative governmentâ€™s forthcoming Throne Speech will surrender the federal spending power. Through an op-ed in todayâ€™s Globe and Mail, Bob Rae tries to position himself, and presumably the Liberal Party, as defenders of the power. This posturing will help the Conservatives woo Quebec nationalists and help the Liberals appeal to Canadians who believe in a strong central government.
However, in one sense, the federal spending power has fallen into disuse for more than a decade. Paul Martin rolled the Canada Assistance Plan, a cost-shared transfer that induced provincial governmentsÂ to spend more on social assistance, into the Canada Health and Social Transfer (CHST), a block grant that allows provincial governments to spend as they see fit. The CHST was later divided into the Canada Health Transfer and the Canada Social Transfer. While theseÂ block grantsÂ are supposedly “conditional”, neither Liberal nor Conservative governments have done much of anything to enforce the Canada Health Act or other conditions.
Are the Conservatives going to formally repeal the Canada Health Act? Are the Liberals proposing to reinstate cost-sharing or rigorously enforce existing conditionality? If the answer to both questions is “No”, then I am not sure what all the fuss is about.Â Indeed, the main thing that Rae says the Liberals would do differently is to “knock down” unnamed “barriers between provinces.”
The whole point of the “spending power” is that it is not a constitutional power at all, but rather the federal governmentâ€™s capacity to spend money. I do not see how the Government of Canada can relinquish this capacity in any permanent sense. More likely, the Harper government will make some symbolic statement of intent not to intervene in areas of provincial jurisdiction.
However, the Harper governmentâ€™s stated priorities – post-secondary education, wait times, infrastructure, the environment, etc. – largely lie in areas of provincial jurisdiction. Budget 2007 used the federal spending power quite aggressively to pay provincial governments to eliminate their Corporate Capital Taxes. A similar use of the power will be needed if the Conservatives are serious about harmonizing provincial sales taxes with the GST.
The question is not whether there should be a federal spending power in some theoretical sense. As long as the federal government has money to spend, there will be a federal spending power. The question is to what ends this power will be used. For more than a decade, neither Liberals nor Conservatives have deployed the federal spending power to significantly expand and improve public services and standards across Canada.