First Ministers Constitutional Conference – The Spending Power Suggestion Of Priority Option Grants

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The June 1969 Constitutional Conference, “Agreed that the Parliament of Canada should continue to have the power to make conditional grants to provincial governments, providing there is a satisfactory formula for determining a national consensus in favour of particular programs, and provided there is a satisfactory formula for compensation in non-participating provinces”.

It is within this context that I wish to discuss the spending power.

The Government of Manitoba believes that this Confe» rence must continually keep in mind that it is our task to meet an obligation to individual Canadians. Therefore, we urge that objectives or tasks and the power needed to realize them should be allocated to the federal and provincial governments not on the basis of which has the fiscal or economic capacity for a task but rather on the basis of which level of government is best equipped to deliver the service in question most effectively to the individual citizen.

Several conclusions flow from this premise. Firstly, it is wrong to insist that there must be uniformity in the relationship between the central government and the provinces in all matters. nThe practical tasks involved in achieving a common goal will vary from region to region and thus the level of government best suited to complete the task may similarly vary. Priorities in programs designed to achieve the common objective may vary from region to region. For example, some regions at any given time, will have advanced further towards the achievement of a common goal than others.

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On this basis, the Government of Manitoba believes that it is reasonable, and wholly in keeping with the objective of allocating power to the level of government best able to provide service, that it should be constitutionally possible to delegate the exercise of responsibility and power between levels of government. After all, the constitutional objectives are the important obligations to people that governments accept. The governments must exercise their full capacities in co-operation to ensure that these obligations are met effectively. Therefore, delegation should be possible in all cases when such an action would best support expressed constitutional objectives.

Using the same basic criterion of effective delivery of services, the taxing power must be employed in a manner to ensure that each jurisdiction has the money to carry out its assigned responsibilities. This means that the Federal Government must control the major tax fields because only the Federal Government can effectively employ taxation as a means of equitably redistributing the wealth of the nation. Spending powers, too, should be related to this practical distribution of responsibilities for tasks in meeting the objectives of the country and of all its regions. To the provinces should go the particular spending powers which relate to the tasks assigned to them under the Constitution. To the Federal Government must go the spending power necessary to meet its assigned obligations plus the unlimited spending authority required to fulfill federal obligations when matters of national interest are involved. This right to spend in the national interest is a reserve of power that any truly effective national government must possess.

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In short, the Government of Manitoba believes that, even given the sort of distribution of power we advocate, together with the supporting distribution of taxing and spending power and the delegation power we have outlined, there remains the need to provide for national initiative in primarily provincial fields, where delegation is not acceptable to one or both parties.

In recent years, shared cost programs have helped to meet, however inadequately, the several criteria of flexibility, equity and regional balance just outlined.

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However, there have been many problems associated with shared-cost programs. The federal government had great difficulty in planning its budget because it had very little control over the rate of increase of costs in some programs which it was financing jointly with provincial governments. The provinces on the other hand felt, that federal initiatives were often taken without adequate consultation with the result that provincial spending priorities were distorted. Moreover, it was within the power of the federal government cost program on its own, once it was underway. This left the provinces which it had drawn into the program to deal with the total burdenof costs. In recent years when withdrawing from shared-cost programs, the federal government has sometimes offered the provinces fiscal equivalents. But for many provinces, because their tax base is too narrow or because the natural rate of growth of tax revenues has been too slow, this approach has been entirely unsatisfactory.

Manitoba proposes the use of a system of Priority Options Grants as a means of overcoming these difficulties while maintai- ning the federal power to spend in the national interest. It is assumed thatlthe federal government would be prepared to leave some option of choice to the provincial governments in reaching national program objectives where primarily provincial functions are involved, and that at any given time there exists a range of such possible program initiatives all with approximately equal priority. The programs need not be similar in kind or, indeed, in regional application. In fact, the Priority Option Grant process we suggest might very well apply in cases of different regional needs for national initiative. ARDA offers although in a narrower context, some precedent.

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To be more specific: assume that the federal government has decided that, in fields of essentially provincial responsibility, it has identified national interests requiring federal action on:

i) special university course support in the sciences and technologies.

ii) a regional highway feeder system to complement the Trans-Canada highway system.

iii) a specific set of community and individual mental health services complementing the medical care service now in force.

Please understand that I do not, necessarily, advocate any one of these specific programs; I merely use them as illustrations.

Having determined upon the programs and their probable cost through consultation with the provinces, the federal government would decide upon the total budgetary commitment it would be willing to make to the several programs on an annual basis. It would then make available to each of the provinces, subject to conditions to be outlined below, allocations of that total budgetary commitment. The proportion could be determined by either allocation according to an equalization program or according to program requirements. There are ample precedents for working out such allocations. The Technical Vocational Assistance Program or the Trans-Canada Highway Program, the Health Resources Fund are examples.

The conditions under which the grants could be obtained by the provinces would be very simple. The respective provincial governments would, through bilateral agreements with the federal government select the program and time table which best meshed with their internally determined priorities, General entitlement conditions could satisfy Parliament in much

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the same way as Parliament has been satisfied under so many of the sharod-cost arrangements or other fiscal transfers relating to previous programs in post-secondary education.

Variations on the theme would be obvious. A province might choose to apply to split its grant and undertake more than one of the programs. This could be wholly appropriate in a small province. Provinses sound also timetable their programs according to their resources. The conditions for the entitlement would remain the same.

The condition imposed upon both governments would be that mutual consent would be required before a federal-provincial agreement of this nature could be altered or terminated. This condition would apply for a specified term of years.

Clearly, the concept we have advanced involves broad ranging application of money, rather than particular program functions. For example, we would assume that a grant in relation to the sciences and technologies would not isolate performance in a particular science or technology but rather, would apply to a broad science or technology category in university development.

It could be argued that the exact federal goals could not thus be assured of fulfilment given the financial choice. On the other hand, it could be argued with equal strength that at least there would be some hope that the provinces would move in the general direction, along a number of alternative routes, toward a national goal of greater social and economic equality in the country.

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Let me make quite clear that our total objective in approach to a Constitution is to make it work – this or any Constitution we may devise. In Canada, we require full flexibility to make a very complex mechanism of government work. The Constitution alone can not do this. Without the support of such options of judgement – or responsible choice – in harmony with the principles of the Constitutional objectives. That is the meaning and intent of our Priority Option Grants – and of our entire position or distribution of responsibilities. In brief, the Government of Manitoba suggests Priority Option Grants both as a means of making the present constitution work and as a device to be employed in support of a new constitution.

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