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Home , Meech Lake Accord, Victoria Charter

caledon commentary

October 1995 ISBN # 1-895796-42-3

Social Policy After the Referendum

On October 30th, the people of sound analysis of what has happened in the past. will make a fateful decision – whether to vote Unfortunately, most outside of Quebec for sovereignty or remain a part of . If have very little understanding of that history, even they choose the former, we will all be thrown those involved in social policy. into an immediate crisis. The TV news will report daily on a dizzying round of marathon meetings When Bourassa rejected the as our politicians struggle to keep the rest of the in the summer of 1971, the stated country together while negotiating – or not nego- reason for doing so was the ambiguity of the tiating – with Quebec. treatment of income security: “The texts dealing with income security have an uncertainty which But if Quebec decides to stay a part of meshes badly with the objectives inherent in any Canada, there is an opposite danger: that of idea of constitutional reform” [Smiley, 1972:49]. sinking into the seductive lethargy of business For many Canadians outside of Quebec, this must as usual. If we succumb, the dreary world of have seemed disingenuous. How could such a Canada’s shrinking social security system will minor matter as textual uncertainty regarding continue on course. We will have verified the income security cause the rejection of a Con- separatists’ claim that a no vote means ‘no stitutional compromise that had absorbed the pro- change.’ Instead, we should recognize now that vinces and the federal government for much of a no vote does not endorse the status quo.l the past three years? Rather, we should treat it is an affirmation of Canada and its capacity to meet the aspirations But for Quebec in the early 1970s, income of Quebecois as part of Canada. security was more than an incidental matter of whether a family got a few dollars more or less. Social policy has long been central to Nor was it just a question of which government Quebec’s search for its identity within, or without, would sign the cheques. Rather, income security Canada. It will necessarily be at the core of any was a critical component in the Quiet Revolu- rapprochement in the future. A viable social tion’s reinvention of Quebec. policy strategy for the future must be based on a In the early 1960s, Quebec began its preferred a single mandatory, private scheme for emergence from the dark days of the Duplessis all of Canada. Because contributory pensions era. With tremendous “energy and optimism, the were clearly a provincial matter under the Con- Quebecois took on the task of constructing a stitution, Quebec had the negotiating leverage modern French-speaking society. The govern- to achieve its aims. Not wanting to be too far ment of Quebec was the vehicle to undertake this out of step, was dragged into great change. Examples of the transformation setting up a public plan [Simeon, 1972]. are to be found throughout all of Quebec society. For instance, setting up Hydro-Quebec was not Quebec created the QPP and the Caisse just a dry business deal, as it might have been de depot et de placement to support it. viewed in the rest of Canada. It was the beginning Through the private sector investments of the of a cherished dream of repatriating Quebec’s Caisse, the QPP successfully accomplished much economy and giving francophone Quebecois an of its broader economic goal of development and opportunity to work in French, own their pro- repatriation. Canada outside of Quebec, by con- vince’s businesses and prosper as a modern trast, set up the CPP without a private sector nation.2 The state, often regarded in the rest investment fund. By lending money to the pro- of Canada with suspicion and distrust, was in vinces at reasonable rates, the CPP helped Quebec an instrument of national expression and finance the expansion of public institutions such sometimes of national liberation. as hospitals, community colleges and univer- sities in the 1970s, but it was not otherwise used This presented an extraordinary conflict as a tool of economic development. The CPP of visions to reconcile within a single country. and the QPP are two different pension pro- Yet, for a time, Canadians found a way to achieve grams, yet through working together coopera- this reconciliation. In the decade from about tively, Ottawa and the provinces have maintained 1964 to 1974, the resolution of Quebec’s and the them as parallel plans with almost identical rest of Canada’s conflicting vision was achieved benefits for the last 30 years, creating a common by a coalition of progressive Quebecois and non- standard for all Canadian citizens. In the CPP Quebecois Canadians within the federal govern- and QPP, a solution was found to everyone’s ment. With a view to solving social problems, benefit, con-sistent with the pervasive spirit of this coalition was able to find common ground reform in the late 1960s and early 1970s. in forward-looking reforms for all of Canada, tailored where necessary to the special needs of But pensions were not the only social pro- Quebec. grams at issue in the Quiet Revolution. New secular institutions had to be developed in health, This approach is exemplified in the esta- education and social services. The Quebec blishment of the Canada Pension Plan (CPP) and Commission of Inquiry on Health and Social Quebec Pension Plan (QPP). In Quebec, the for- Welfare, popularly known as the Castonguay- mation of a public pension plan was seen as a Nepveu Commission, was set up to devise a plan means of pooling a large amount of capital to for the future of human services in Quebec. The invest in the Quebec economy and, more than Commission carefully set out the precise details incidentally, help develop an indigenous franco- for a totally revamped and rational new income phone business class. Quebec would have set up security system, including as its centerpiece the a public pension plan with or without the rest of establishment of a substantial family allowance, Canada. Ottawa, on the other hand, would have with rates varying according to the children’s

2 Caledon Institute of Social Policy age [Quebec, 1971: 143]. The family allowance This was a critical juncture in Canadian would allow Quebec to set up a two-tier “General history. The federal government had two possi- Social Allowances Plan” to guarantee a basic ble ways to proceed in light of the rejection of level of income to all Quebec citizens. the Victoria Charter. One approach would have been to adopt a ‘provincial rights’ stand and Family allowance is a common feature gradually vacate the whole field of social security of most countries’ social security systems. In to the provinces. This would have left Quebec 1945, Canada had instituted its own universal to develop its own and very different social secur- family allowance. But over the years, its value ity system from the rest of Canada. It would also had plunged due to the failure to index benefits have diminished greatly the degree to which to keep up with inflation. By 1970, the pur- Canada is a genuine nation, with a commonality chasing power of family allowance had shrunk of purpose, sharing similar social supports for to about half of the original in 1945. More all its citizens wherever they live. importantly, in 1951 it represented 8.1 percent of the income of a two-child family with half of The other alternative was to undertake the average income: by 1971 it was only 3.2 percent redevelopment of all of Canada’s social security of income for two-child families with half of system, reflecting both Quebec’s goals and those average income [Statistics Canada, 1982:40,89]. of the rest of the country. Where Quebec had As a result, what had originally been seen as an unique requirements, these could be accommo- essential element of a comprehensive income dated through offering the provinces a choice of security system was now little more than a bit of arrangements, while still maintaining strong extra spending money for most Canadian fam- Canada-wide programs and basic consistency ilies. Not only was the amount insufficient to throughout the country. This was the C/QPP meet Quebec’s goals for its reform of income model. It was this strategy that was adopted by security, but the federal family allowance also Prime Minister Trudeau, who appointed one of did not permit age variations in the manner his most trusted and respected Ministers, Marc recommended by the Castonguay-Nepveu report. Lalonde, and one of his most capable and senior Deputy Ministers, Al Johnson, to the Depart- Quebec wanted a different type of family ment of Health and Welfare to carry it out. allowance and it wanted it to be much larger. But this was not merely an isolated ideal for a specific By 1974, Lalonde and Johnson had ini- program; it was part of a vision that encompassed tiated the Federal-Provincial Social Security the reconstruction of the whole province. So Review. The Review was a massive effort to when Bourassa turned down the Victoria Charter develop cooperatively with the provinces a new supposedly due to uncertainty regarding income design for Canada’s social security system. The security, it was not just the income security text federal government kicked off the review with a or the federal family allowance program that he bang. It announced the tripling of family was rejecting. Rather, it was his perception and, allowance, which also would be fully indexed to more to the point, the view of his voters, that the cost of living. As well, any province wishing Quebec would be unable to pursue its goals of to do so could reconfigure the federal family social and economic renewal. Bourassa could allowance by family size or age of child. Ini- not have signed the Victoria Charter. He would tially, Alberta, PEI and Quebec took advantage have been viewed as sabotaging the Quiet of this opportunity. This effectively responded Revolution of which his party, the newly re- to Quebec’s requirements. It showed that feder- elected Liberal Party of Quebec, was the founder. alism could find flexible ways to meet the needs

Caledon Institute of Social Policy 3 of individual provinces while still maintaining and Welfare were only those that could be national programs. While Trudeau was opposed financed internally within his Department. The to ‘asymmetrical federalism’ when it came to reform of family allowance in 1974 and the giving provinces special powers not available to Refundable Child Tax Credit in 1979 were others, he was apparently not opposed to asym- virtually the only products of this period, instead metrical outcomes where these were the result of the first instalment in a comprehensive reform of options available to all provinces. of social policy.

The Social Security Review proceeded The Liberal government of the day lacked with great intensity. Joint federal-provincial the will to find a way around the fiscal obstacles working groups were formed to review in depth and carry through with reform, but it remained the alternatives available. The Income Main- committed to Canada’s social programs, most of tenance Working Group issued a paper setting which it had founded, as well as to the idea of a out several options for a basic income security basic expressed through the program, some of which bore a strong resem- sharing of adversity across provincial boundaries. blance to the recommendations of the Quebec The social progressives in the Cabinet could not Commission. In February 1976 “the federal gov- marshal the support to go forward. Neither would ernment proposed a form of GAl (Guaranteed the Cabinet agree to go backward. So it remained Annual Income) inspired by the two-tiered sys- more or less stationary.3 tem of Castonguay-Nepveu” [Canada 1994:31]. There was great hope for new national social The stalemate remained in place for programs. almost a decade, but with the coming into power of the Mulroney government it was finally shat- But all this activity ground to a sudden tered. The Mulroney government represented halt. While Lalonde and Johnson were doing an unlikely alliance of Quebec nationalists and their best to construct a new social future for western conservatives. Of course, as we now Canada, and Simon Reisman, the know, in the end this coalition proved satis- Minister and Deputy Minister of Finance, res- factory to neither group – one becoming the Bloc pectively, were pursuing quite a different agenda. Quebecois and the other the Reform Party. In In an effort to cut down the size of government, the meantime, however, Mulroney could appease they drastically reduced revenue growth. How- both partners in the coalition by adopting a ever, things did not work out quite as they had ‘provincial rights’ strategy. This would allow the planned. The deficit began to explode. The nationalists in Quebec to claim success, while federal government, and many of the provinces permitting western conservatives to satisfy their along with it, turned suddenly from many ideological commitment to reducing the size of years of balanced budgets to chronic deficits government. [Mendelson, 1993]. The result was a gradual dismantling of Faced with the burgeoning deficit, the social security system built since the Second increased spending seemed out of the question. World War. Through a policy of only partially Taking advantage of the new reality, the Social indexing social benefits, huge cuts were gradu- Security Review was quickly knee-capped by the ally implemented in many direct federal programs Department of Finance. Funding was withdrawn and in funding of provincial social programs and options available to the Minister of Health [Battle 1990]. In 1990, Ottawa abrogated the

4 Caledon Institute of Social Policy Canada Assistance Plan (CAP) agreement by spending power. This is not surprising given the imposing a five percent ceiling on increases in context of distrust and erosion of national social federal cost-sharing for BC, Alberta and . programs. Had a similar amendment been pro- Coming at the beginning of a massive downturn posed in a context such as the introduction of of the Canadian economy, this meant a huge gap the C/QPP, a very different reaction might have would grow between what Ottawa would have been anticipated. to pay if it restored full cost-sharing in the CAP and what it was actually paying on a capped CAP. Unlike Meech, Charlottetown would No government in the future would close this have entrenched the federal responsibility for multi-billion dollar gap. Through this round- many federal transfer programs. In fact, Char- about route, the ceiling spelled the certain doom lottetown would likely have made it impossible of the CAP, the last major cost-shared federal- to abolish the Canada Assistance Plan and the provincial funding arrangement.4 Established Programs Financing Act without a replacement, since it would have constitutionally But as Mulroney discovered, the policy entrenched the principle of federal funding for of feeding the monster did not work. Gradually social assistance and other provincial social pro- ceding more and more of the national role to the grams. Again, despite this and the relatively mild provinces failed to satisfy the demands of Quebec restraints on federal spending power reflecting nationalists; rather, it whetted their appetites for the Meech formulation, Charlottetown was again more. Yet Canadians, both in Quebec and out- unacceptable to most social groups for much the side of Quebec, were becoming increasingly same reason as they opposed the Meech Accord worried about erosion of national social security in the first place. programs. What this brief history shows is that the The Meech Lake constitutional proposals ‘provincial rights’ strategy just ends up increasing were the first attempt to resolve this contra- the contradiction between Quebec and the rest diction. Meech would have formally recognized of Canada rather than decreasing it. Premiers’ the federal spending power in areas of provincial posturing about developing alternative national jurisdiction while allowing provinces to opt out standards is a “constitutional oxymoron” [Cairns, “if the province carries on a program or an ini- 1991:94]. Premiers will do what they are elected tiative that is compatible with the national objec- to do – represent their provinces. It is no acci- tives” [ 106A; from Cana- dent that Quebec separatists react so positively dian Public Policy, 1988: 149]. when Premiers call for increased provincial powers. This is just a resurrection of Mulroney’s During the ensuing debate, the likely failed coalition, part of which were many of those effect of Meech on national social programs was self-same separatists. greatly exaggerated [Banting, 1988; Courchene, 1988]. The consequences would certainly have The sole option which has worked and been less than the cumulative impact of the pro- brought satisfactory results for Quebec and for gram changes being made by the Mulroney all of Canada is that of cooperative reform, government without any constitutional amend- wherein the provinces and the federal govern- ments at all. Nevertheless, the Meech Lake ment work together to achieve an improvement Accord was opposed by most social groups in Canada’s social programs, although not because of its perceived limitations on the federal

Caledon Institute of Social Policy 5 necessarily through cookie-cutter imposition of This process would require tough nego- standardized federal programs. tiations to extract real compromise from every- one. All will not be sweetness and light. In some The newly-elected federal Liberal gov- instances, the federal government may have to ernment appeared to be undertaking exactly this reach directly to the people of some provinces, strategy when it promised a comprehensive ‘above the heads’ of the provincial governments, review of Canada’s social security system. The as it did with the . Some rebirth of the Federal-Provincial Social Security asymmetry doubtless will arise, as in the C/QPP. Review of the 1970s seemed to be under way. There is nothing impossible about such an enter- But such was not to be. Once again, in a chilling prise. With patience, perseverance and time, the imitation of the events of two decades previous, Canada-Quebec social policy riddle can be Finance withdrew its support for the review solved. process and effectively killed it with the Canada Health and Social Transfer [Battle and Torj- If Quebec votes ‘no’ on October 30, man,1995]. Canada should say ‘yes’ on October 31.

Which brings us back to today and the referendum. If Quebec rejects separation, how Michael Mendelson do we proceed next? Senior Scholar

The answer does not lie in the current Endnotes federal policy of continuing Mulroney’s strategy. When Premier Parizeau argues that a ‘no vote’ 1. In a CROP Inc. poll conducted from September 7 will mean reduced federal pensions, he is not through 12, 1995, 81 percent of Canadians outside of calling for cut-backs in social programs. Just Quebec said that a no vote would “mean Quebeckers want change but not sovereignty: only 13 percent said the opposite. The threat of reductions in federal rejection would mean Quebeckers are satisfied with their social programs for people strengthens the place in Canada” [Globe and Mail, September 19, separatist argument. A satisfactory response to 1995:A5]. a no vote will not be found by Ottawa getting out of the business of helping people. 2. In the words of the Royal Commission on the Eco- nomic Union and Development Prospects for Canada: “During the Quiet Revolution, Quebecois sought to use In social policy, the path to national recon- an activist provincial state to redress the historic under- ciliation lies in reviving the enterprise of coop- representation of Francophones in the ownership and erative federal-provincial redevelopment of our management of the provincial economy. The instru- social security system. This will require a long- ments that they used included Hydro-Quebec, the Caisse de depot et de placement and the Sociite generale de term view. Present fiscal circumstances are con- financement, and sweeping reforms to the education straining, but they will steadily improve. Wor- system. In many respects these efforts proved successful” king now to design better social programs that [Canada, 1985:145-6]. are phased in over the next decade is not impossible. If the federal government wanted 3. Other than the Refundable Child Tax Credit of 1978, the two major social policy changes of this period were to see such a process occur, it would be natural the introduction of the Established Programs Financing to initiate it as part of the renegotiation of federal- (EPF) Act in 1977 and the Canada Health Act (CHA) in provincial transfers that is about to begin 1984. EPF replaced prior cost-sharing with block funding [Mendelson, 1995]. but it was not at all a cutback in funding to the provinces

6 Caledon Institute of Social Policy – most enjoyed large increases. The CHA was the quin- Quebec. (1971). The New Plans. Report of the Com- tessential defense of the status quo. mission of Inquiry on Health and Social Welfare, Vol. V, Tome n. Quebec: . 4. The coup de grace was delivered by the Liberals in the 1995 Budget through the introduction of the Canada Mendelson, Michael. (1993). Social Policy in Real Health and Social Transfer. Time. Ottawa: Caledon Institute of Social Policy, Summer.

Mendelson, Michael. (1995). Looking for Mr. Good- References Transfer: A Guide to the CHST Negotiations. Ottawa: Caledon Institute of Social Policy, October. Banting, Keith. (1988). “Federalism, Social Reform and the Spending Power.” Canadian Public Policy Special Simeon, Richard. (1972). Federal-Provincial Diplo- Supplement XIV: The Meech Lake Accord. macy: The Making of Recent Policy in Canada. Toronto: University of Toronto Press. Battle, Ken (under the name Grattan Gray). (1990). “Social Policy by Stealth.” Policy Options. 11(2), March. Smiley, Donald V. (1972). Canada In Question: Feder- alism in the Seventies. Toronto: McGraw-Hill Ryerson. Battle, Ken and Torjman, Sherri. (1995). How Finance Re-Formed Social Policy. Ottawa: Caledon Institute of Statistics Canada. (1982). Family Allowances and Rela- Social Policy, April. ted Programs: 1982. Ottawa: Supply and Services Canada. Canada. (1985). The Report of the Royal Commission on the Economic Union and Development Prospects for Canada, Vol. 3. Ottawa: Minister of Supply and Services Canada.

Canada. (1994). Guaranteed Annual Income: A Sup- plementary Paper. Ottawa: Minister of Supply and Services Canada. © 1995 The Caledon Institute of Social Policy. Cairns, Allan C. (1991). “Constitutional Change and the Caledon publications are available online at Three Equalities.” Options for a New Canada, R.L. Watts www.caledoninst.org. and D.M. Brown eds. Toronto: University of Toronto Press. 1600 Scott Street, Suite 620 Ottawa, Ontario, Canada Courchene, Thomas J. (1988). “Meech Lake and Socio- K1Y 4N7 Economic Policy.” Canadian Public Policy Special phone: (613) 729-3340 fax: (613) 729-3896 Supplement XIV: The Meech Lake Accord. e-mail: [email protected]

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