English-language version of presentation made in Santa Fe, Argentina, March 2016 as part of the conference “Desafíos institucionales y económicos en países federales:Los casos de Canadá y Argentina” ("Institutional and economic challenges in federal countries: The cases of Canada and Argentina")

1. Federalism and structures of government
and intergovernmental institutions
in Canada
Presentation by David Péloquin in the conference
“Desafíos institucionales y económicos en países federales:
Los casos de Canadá y Argentina”
Embassy of Canada in Argentina and Fundación Dos Siglos, in cooperation with
the Universidad Nacional del Litoral (FCE-DAP) and Instituciones Regionales
Santa Fe (Argentina), March 29 to 31, 2016

2. Competition and/or cooperation?
The constitutional framework
The evolution of intergovernmentalism
Lessons for others?
1
2
3
4
Outline of presentation

3. Competition and/or cooperation?
1

4.  Significant Canadian literature on the existence, advantages and
challenges of competition between levels of government:
 governments are not “benevolent dictators” but instead are complex
organisms that pursue an amalgam of private and public interests
 thus: for citizens, a multitude of providers of public services (and competitors
for their allegiance) can be advantageous as a source of “checks and
balances”
 but: citizens also want order, transparency and intergovernmental harmony
(as public goods in and of themselves)
Intergovernmental competition in Canada
and the dynamics of cooperation
4

5.  No contradiction between:
 an underlying competitive dynamic between governments, and
 the much-observed phenomenon of governments cooperating in the public
interest
 However, this happy outcome – of a (different kind of) “invisible hand”
– depends crucially on:
 a high degree of policy autonomy on the part of two or more levels of
government that overlap each other (i.e. rather than imprisoning them in a
“joint decision trap”)
 an informed electorate (supported by engaged media and “public academics”)
that are able, willing and eager to hold their governments accountable
There is no necessary contradiction
between competition and cooperation…
5

6. … but a clear need to manage potentially problematic
entanglements in their expenditure policies
Provincial-local
Federal
0 50 100 150 200 250 300 350CAD billions
Overlapping expenditure categories Policing /
protection
Debt
service
Defence /
foreign
Transfers to other
governments
Debt
service
Other
Income support /
social services
Support
to industry
Environment
Education
and researchHealth
Transport /
communication
6

7. Provincial-local
Federal
0 50 100 150 200 250 300 350CAD billions
Jointly occupied tax fields Property taxes
Federal
transfers
Other
Resource/
Investment
revenues
User fees
Payroll taxes
Corporate
taxes
Sales and
consumption
taxes
Personal
income taxes
… as well as revenue-raising entanglements
(given a significant joint occupancy of tax fields)
7

8. 8
… and ongoing challenges in intergovernmental
legislative / regulatory coordination
• (Federal) employment insurance spillovers onto
(provincial) social assistance
• (Federal) bank regulation interacting with
(provincial) securities regulation
• Many other regulatory areas (e.g. environmental,
health), plus budgetary policy and public debt
…but significant de facto cases of
“intertwined” jurisdictions
(i.e. those with significant mutual
spillover effects)
• Public contributory pension plans
• Agriculture
• Immigration / immigrant settlement
Only a few examples of formally
concurrent jurisdiction
• (Federal) criminal law interacting with
(provincial) administration of justice
Very few examples of formally
“coordinate” jurisdiction

9. Competition and/or cooperation?
1
The constitutional framework
2

10. 10
Federal Legislative Powers
General power to make laws for “Peace, Order, and good Government” and enumerated powers over:
• general government functions (e.g. federal public borrowing / debt / property)
• revenue raising (“by any mode or system of taxation”)
• criminal law ⁄ penitentiaries
• national defence
• cross-border transportation and related matters (including navigation, shipping, lighthouses, interprovincial ferries, railways,
canals and – through later jurisprudential interpretation – telecommunications)
• regulation of trade, commerce and industry: fisheries, agriculture (concurrently with provinces, but with federal paramountcy),
money ⁄ banking, weights ⁄ measures, patents ⁄ copyrights, bankruptcy ⁄ insolvency)
• postal service
• immigration (concurrent with federal paramountcy), naturalization, marriage ⁄ divorce
• census and statistics
• “Indians” and “lands reserved for the Indians”
• certain social programs, e.g.: unemployment insurance (since 1944), contributory pensions (since 1964 and concurrently with
provinces but with provincial paramountcy), quarantine and national public health
Note: Residual powers in principle lie with the federal parliament
Constitution Act (1867) envisaged “watertight compartments”
for federal and provincial legislative powers

11. 11
Provincial Legislative Powers
Enumerated powers over:
• general government functions (e.g. provincial public borrowing / debt / property, including public lands and natural resources
on them, as well as local public works)
• direct taxation within a province (though this has been very broadly interpreted by the courts)
• non-criminal penalties ⁄ fines ⁄ imprisonment to enforce provincial laws
• administration of justice, including provincial courts (civil and criminal) and prisons
• health services (including hospitals)
• education
• municipal governments and institutions
• regulation of trade, commerce and industry (e.g., incorporation and licensing of businesses)
• solemnization of marriage
• private law, property and civil rights
• “all matters of local or private nature” (which jurisprudence has effectively made into a de facto residual power)
Constitution Act (1867) envisaged “watertight compartments”
for federal and provincial legislative powers

12. Canada’s constitution makes minimal provision for
managing intergovernmental relations
12
 Canada’s Senate was originally described as a “House of the regions”
 However, as in many other federations (e.g. US, Australia), it has not turned out
that way
 Instead, it has increasingly become a second partisan chamber (albeit a strange
one, since it remains an appointed chamber, not an elected one)
 The Constitution effectively makes the Supreme Court the ultimate
arbiter of intergovernmental conflicts
 However, the federal executive appoints all members of both bodies
…usually without consulting the provinces formally or informally

13. The “separate lives” of the levels of government aggravates
the lack of provincial input into federal institutions
13
 Compared to other countries, in many provinces it is relatively rare for
elected officials (and a fortiori its unelected officials) to jump from the
provincial to the federal sphere
… since, inter alia, provinces are in many respects the “senior” order of government
with public policy agendas that are particularly important to citizens
 Moreover, political parties in Canada tend to play less of a “bridging”
role (between levels of government) than in other countries
 While federal Cabinets usually contain representatives from each
province, they are often seen as lacking understanding of the
interests and capabilities of provincial governments

14. 2 The constitutional framework
Competition and/or cooperation?
1
The evolution of intergovernmentalism
3

15.  Ongoing desirability of / need for federal and provincial governments
to coordinate and harmonize the exercise of their powers:
 to legislate or regulate behaviour – where state power over citizens is at its
greatest
 to impose taxes – where state power to compel citizens is also very great (as is
the need to minimize their associated compliance costs)
 their power to spend – where power to compel is largely absent (though there
still remains a need to avoid confusion on the part of citizens and ensure the
effectiveness of government spending)
 their power to borrow – since one government’s credit-worthiness can affect
those of other governments (and of citizens and businesses)
Managing intergovernmental entanglements in Canada
constitutes a constantly evolving challenge
15

16. Elaborate structures of “executive federalism” have
evolved to manage these entanglements
 In most policy areas, federal and provincial ministers and officials
meet regularly:
 many standing and special federal-provincial committees meet to discuss
areas of common interest (often several times each year)
 Given their high profile, meetings on budgetary and related policy
matters (e.g. federal financing of health care) raise particular
controversy:
 both federal-provincial and inter-provincial tensions often surface
 occasionally, these issues have even needed to been dealt with at meetings
of “First Ministers” (Prime Minister and provincial Premiers)
16

17. Ministerial
meetings
FMM
First Ministers Meetings
(FMM) are high-profile
but less frequent
Lower-profile “sectoral tables”
at Ministerial / officials’ level
meet on a more regular
basis to share information
and deal with common
challenges
Meetings at
level of officials
17
Elaborate structures of “executive federalism” have
evolved to manage these entanglements

18. In recent years, inter-provincial coordination
has increasingly grown in importance …
 Except in areas of exclusive provincial jurisdiction (e.g. education),
the history of intergovernmental meetings had usually involved
 both federal and provincial participation
 federal participants chairing the meetings (i.e. both performing secretariat
functions and tending to set their agenda)
 Since the mid-1990s, provinces have increasingly met among
themselves to plan strategy prior to federal-provincial meetings
… especially those dealing with financing and other high-profile issues
18

19. … and has become more formalized as part of a
“Council of the Federation”
 Though federal-provincial meetings tend to attract greater public
attention, the long-running series of meetings among provincial
Premiers are growing in importance:
 occasional Premiers’ meetings began in the 1880s and have been held at least
annually since 1960 (with an annual rotation of the chair among the provinces)
 in 2003, they were further formalized, with the addition of a permanent
secretariat
… and renaming themselves the “Council of the Federation” (even though
the federal government typically does not participate)
 The Council of the Federation has increasingly set Canada’s public
policy agenda in recent years
19

20.  A “natural sorting” of roles and responsibilities, reflecting:
 “first mover” / “follow the leader” dynamics
 the public’s aversion to wasteful overlap and duplication
 Regular exchanges of information and meetings of first ministers,
ministers and officials
 Hundreds of actual agreements on specific policy issues
 Some semi-codified “rules of the game” (e.g. 1999 “Social Union
Framework Agreement”)
 A few examples of highly formalized joint decision-making
(e.g. on the Canada Pension Plan)
20
Intergovernmental coordination is not limited to formal
agreements, but has more broadly encompassed:

21. Constitutionally “fixed” jurisdictions
Main forms
of cooperation
Nature of policy
jurisdiction
Example(s)
Informal information sharing,
consultations and coordination
“Parallel”
(with “spillover
effects”)
Employment insurance /
social assistance;
most regulatory matters
Informal information sharing,
consultations and coordination
“Coordinate”
Criminal law / administration
of justice
Joint decision-making (CPP) and
informal coordination (QPP)
“Concurrent”
Public contributory pension
plans (i.e. CPP/QPP)
21
… with the form of cooperation varying by policy area:

22. Main forms
of cooperation
Nature of policy
jurisdiction
Example(s)
Formal agreements on
harmonized tax collection;
“first mover” / “follow the leader”
Taxing power
Management of jointly
occupied tax fields
Specific-purpose federal transfers
(with few conditions);
non-binding commitments;
“first mover” / “follow the leader”
Spending power
Most major programs
(e.g. health, education;
income support;
support to industry)
Constitutionally “fluid” jurisdictions
22
… with the form of cooperation varying by policy area:

23. … and in line with governments’ comparative advantage
Government-funded
policy “pillars”
(usually highly subsidized)
Income
support
e.g.: pensions,
social
assistance
No clear
comparative
advantage
Services
and in-kind
benefits
e.g.: education,
health care
Clear
provincial
advantage
“Assisted self-help”
policy pillars
(unsubsidized or partly subsidized)
Tax-
assisted
savings
e.g.: private
retirement
savings plans
Strong
federal
advantage
Contributions-
funded
insurance
e.g.: CPP,
employment
insurance
Modest
federal
advantage
Direct or
assisted
lending
e.g.:
student
loans
Modest
federal
advantage
23

24. 2 The constitutional framework
Competition and/or cooperation?
1
The evolution of intergovernmentalism
3
Lessons for others?
4

25. Key takeaways
 Static (e.g. constitutional) frameworks often offer limited guidance or
insights on the dynamics of intergovernmental relations
 Cooperation across orders of government is not inconsistent with the
reality of intergovernmental competition …
… and can even be a sign of a healthy competitive dynamic between highly
autonomous “public policy entrepreneurs”
 Intergovernmental cooperation does not imply “joint decision-making”
and can take many alternative forms
 Governments should focus on what they do best (“comparative
advantage”) – though this can and does evolve over time
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