EMBARGOED UNTIL WEDNESDAY OCTOBER 13, NOON

Restoring our Federal Union

By Maxime Bernier, MP for Beauce

The Albany Club, Toronto

October 13, 2010

(Words of thanks.)

It is a great honour for me to be invited to speak here today, at such a prestigious venue.

When I told a friend I was coming here, he said: Oh, this is the club of the Toronto Tory
establishment. And I thought: Wow! They still have a Conservative establishment in Toronto?

In Montreal, we certainly have a very old Liberal establishment, and a strong PQ establishment.
But the Conservative establishment must have disappeared about 100 years ago. Mind you, we
don’t have an NDP establishment either, so I guess that’s one plus for Montreal!

In any case, it is very fitting that this club has existed since 1882 and counts Sir John A.
Macdonald as one of its founding members, since my talk will take us back to the Fathers of
Confederation. So I hope I am not going to offend anyone by starting with a quote from a
political opponent of Sir. John A.

Wilfrid Laurier was another of our greatest prime ministers. He was a classical liberal, not a
liberal in the modern sense. He was a supporter of individual freedom, free trade and free
markets. I think if he were alive today, he would probably be a Conservative!

In a speech before the Quebec Legislative Assembly in 1871, Laurier said:

"If the federal system is to avoid becoming a hollow concept, if it is to produce the results called
for, the legislatures must be independent, not just in the law, but also in fact. The local
legislature must especially be completely sheltered from control by the federal legislature.

If in any way the federal legislature exercises the slightest control over the local legislature, then
the reality is no longer a federal union, but rather a legislative union in federal form." End of
quote.

Now, it’s obvious that what Laurier feared has unfortunately come true. Ottawa exercises a lot
more than “the slightest control” over local legislatures. The federal government today
intervenes massively in provincial jurisdictions, and in particular in health and education, two
areas where it has no constitutional legitimacy whatsoever.
This is not what the Fathers of Confederation had intended. The objective of the 1867 Act was
not to subordinate provincial governments to a central authority. But rather to have sovereign
provinces within the limits of their powers, dealing with local matters that directly affected
citizens; and a sovereign federal government within the limits of its own powers, dealing with
matters of general national interest.

The Privy Council in London, Canada’s highest court of appeal at the time, indicated in 1937
that these were “water-tight compartments,” essential to Canada’s original structure as a federal
state.

During the 20th century however, this fundamental principle was gradually pushed to the
wayside. That century witnessed the rise of communism and fascism, two totalitarian collectivist
ideologies. In a milder form, collectivism was also a very fashionable idea in democratic
countries. We saw everywhere the growth of the state, the rise of central planning, of command-
and-control Keynesianism and of government interventionism. No advanced country escaped
this trend.

In Canada, government activism grew both in Ottawa and in the provincial capitals. Predictably,
federal planners decided that to make central planning more efficient, Ottawa had to have its
say on all kinds of social issues, despite the fact that these matters were the responsibility of the
provinces in our Constitution.

At first, it was done in the proper manner – by amending the Constitution. This is why after the
Privy Council ruling in 1937 which said that Ottawa had no authority to establish an
unemployment insurance program, the BNA Act was amended to allow it. In 1951, old age
pensions were established in the same way.

However, several other programs, from family allowances to grants to universities and hospital
insurance were set up which clearly did not respect the constitutional division of powers. Some
of these programs are direct transfers to individuals and tax measures. While others, such as
the health and social transfer programs, are money sent by Ottawa to the provinces, to the tune
of nearly 40 billion dollars today.

This intrusion into provincial jurisdiction was accomplished by the so-called federal spending
power.

No constitutional provision to legitimize this federal spending power was ever adopted. The
Supreme Court of Canada has never explicitly recognized this power either. The federal
government was certainly aware that the power to spend in areas of provincial jurisdiction does
not exist in the Constitution, because it has twice attempted to constitutionalize it. First in 1987,
in the Meech Lake Accord, and again, in 1992, in the Charlottetown Agreement. Both these
attempts failed.

These constitutional amendments would have left intact the existing intrusions. And they would
have allowed new federal programs in areas of provincial jurisdiction to be set up if a majority of
the provinces consented to it, with an opting-out clause providing compensation only if a
province offered a similar program.
This however, would still be a clear violation of the intent of the Fathers of Confederation and of
the basic principles of our federal system.

I believe that our goal should not be to enshrine the current violations of the Constitution, nor to
set up a process that would allow further federal encroachment into provincial jurisdictions. We
should be going much further than that.

Why not take a principled stance? Isn’t this what we Conservatives should be doing when
confronted with such matters?

Clearly, our goal should be to bring back the balanced federalism envisioned by the Founders. It
should be to restore our federal union, as Wilfrid Laurier and most people understood it back
then.

This would be done by putting an end to all federal intrusion into areas of provincial jurisdiction.
Instead of sending money to the provinces, Ottawa would cut its taxes and let them use the
fiscal room that has been vacated. Such a transfer of tax points to the provinces would allow
them to fully assume their responsibilities, without federal control.

This proposal is in no way original of course. It has been the position defended by successive
Quebec governments for several decades, regardless of the political status they favoured for
Quebec.

More recently, two of the greatest conservative statesmen of our generation, Preston Manning
and Mike Harris, made the same proposal in their series Canada Strong and Free, published by
the Fraser Institute and the Montreal Economic Institute. The Fraser Institute also published
other studies in recent years on this topic.

If we want to solve this problem once and for all, we have to keep putting this issue on the
agenda and discussing it.

Since the Séguin Commission, set up a decade ago by the Quebec government, the debate has
focused mainly on the fiscal imbalance, the discrepancy between the fiscal resources of the
federal government and the growing financial responsibilities of the provinces. This problem was
solved in large part by our government when we increased the social and health transfers to
provinces in our 2007 budget. But this has not solved the legislative imbalance, which is the
heart of the matter.

As we saw two months ago during the premiers’ meeting in Winnipeg, the provinces have
already started to pressure Ottawa to increase health transfers when the ten-year health
agreement expires in 2014. If transfers do not increase as fast as provinces want them to, you
can be sure that the debate over the fiscal imbalance will be back in the news three years from
now.

This is a recipe for permanent discord. The provinces act like special interest groups who would
rather get money from the central government than increase their own taxes. But at the end of
the day, the money comes from the pocket of the same taxpayer.
It also guarantees confusion and a lack of accountability. Despite the existence of the Canada
Health Act, it is provincial governments that are mainly responsible for managing the health care
system. But the debate over federal funding makes it difficult for the average citizen to see who
is responsible for what.

Why do we have waiting lines for surgery, overcrowded emergency rooms and not enough
family doctors? Is it because of bad provincial management or because of insufficient federal
funding? Each level of government can blame the other to score political points.

There would no longer be any ambiguity if each province stopped depending on federal
transfers and raised the amount of money necessary to manage its own programs.

Freed from federal conditions and unable to shift the blame to another government, provinces
would also be more inclined to experiment. Especially in finding better ways to deliver health
care services.

The genius of federalism is that we can try more than one type of solution to solve public policy
problems. If one province finds a better way, others will copy its good policy. It allows provinces
to deal with their own specific challenges and needs. It’s also easier to find out what doesn’t
work. Just like in a free market, ideas compete with each other and the best ones emerge in the
competition.

On the contrary, a one-size-fits-all solution imposed on everyone from the centre precludes
experimentation, kills innovation and makes it awfully difficult to extricate oneself from failed
policies.

Now, it’s obvious that today’s central planners, those who believe in top-down decision-making
by the central government, will not like what I am saying.

Our Liberal opponents constantly come up with new ideas to intrude on provincial matters. Not
content with the existing intrusions, they would like a national childcare program, a national
pharmacare program, a national home-care program, and what have you! They fall for anything
big, centralized, bureaucratic and costly.

As Conservatives, on the contrary, we should be defending the principle of subsidiarity, which is

inherent in our Constitution.

This means that issues should be handled by the smallest or lowest-level competent authority,
the one closest to the people. This way, each province, each region, each community, develops
according to its citizens’ preferences. It allows unique or different particularities to be expressed.
And it prevents conflicts.

Also, the central government would probably be more efficient at managing its own important
files if it stopped meddling into provincial affairs.

All these arguments are not only relevant for Quebecers, but for all Canadians. As a federalist
Quebecer though, I am acutely aware of this issue, for obvious reasons.
For half a century, Quebecers have been offered two extreme choices: a centralized type of
federalism or separation from the rest of Canada. None of these extremes have the support of a
majority of Quebecers.

In fact, it has been a truism for over a generation that there is only one constitutional position
that could rally a large majority of Quebecers: a more autonomous Quebec within a united
Canada. Essentially, what they want is our country as it should be if we simply followed the
constitutional arrangement that was agreed to in 1867. I firmly believe that a significant
proportion of Canadians from other provinces could also support this idea.

We don’t need to reopen our Constitution. We don’t need to change our Constitution. What we
need is to restore our Constitution.

I am convinced that if what I am proposing here were implemented, we would at once remove
one of the most potent arguments in favour of separation. Separatists have been pointing for
decades at federal intrusions in provincial matters as proof that Quebec’s autonomy was
threatened and that federalism could not be reformed.

Nationalism can be a destructive force when it promotes intolerance and division. But it can also
be a force for good, when it seeks to defend local autonomy against the homogenizing forces of
larger entities.

Without Quebec nationalism acting as a counterweight, Canada would very likely be an even
more centralized federation today. It would have an even bigger, more wasteful and
unresponsive bureaucracy, trying to micromanage local issues across this huge country from
offices in Ottawa.

Ending the federal spending power, eliminating the federal programs that violate the division of
powers, and transferring tax points to the provinces would be the right thing to do from several
perspectives.

First, it would be the constitutional thing to do. A Constitution is not meant to be a flexible
arrangement which evolves from one decade to another depending on political expediency.
When we tolerate violations to the Constitution, the entire moral foundation of our political
system is shaken to its core.

Second, it would be the federalist thing to do. Solving this problem would send a powerful
message to Quebecers and strongly reinforce support for Canadian unity in that province.

Finally, it would be the Conservative thing to do. We Conservatives believe not in big,
interventionist, centralized government. But in small and limited government, government as
close to the people as possible.

For all these reasons, I believe this proposal should be brought back to the forefront of our
political debates. And stay there until we’ve managed to implement it. If we succeed, we will
have restored our federal union to its former greatness, and contributed to making the 21st
century what Laurier would have called the Canadian century.
Thank you.