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A RECONSIDERATION of FEDERAL JURISDICTION OVER SOCIAL Policyt Sujit Choudhry*. RECASTING SOCIAL CANADA: A RECONSIDERATION OF FEDERAL JURISDICTION OVER SOCIAL POLICYt I Introduction: The constitutionalframeworkof the politics of socialpolicy Who speaks for Canada? For the past fifty years, during both the expan- sion and the retraction of the Canadian welfare state, the politics of social policy has revolved around this single question. At issue, though, have been not only the respective roles of the federal and provincial govern- ments but, more fundamentally, the very nature of the Canadian political community. On the one hand, there are those who claim that we are a community of communities, or a union of founding nations, bound together for the limited purpose of cooperating on matters of mutual advantage. For them, social policy is the quintessential provincial area of responsibility, and federal attempts to direct the growth of Social Canada, except to facilitate and enable provincial decision making, run against the grain of the division of powers. On the other hand, there are those who assert the existence of a truly Canadian political identity, one that both encompasses and transcends our linguistic and regional diversity. Social Canada is the cement of that political identity, both acknowledg- ing the existence of and giving effect to obligations of distributive justice between the citizens of the constituent units of the federation, bound to- gether in a community of fate. For those who hold this view, the federal government, as the single government that represents all Canadians, has not only a legitimate but also a central role to play. The provinces' grow- ing resistance to federal involvement in the social policy arena thus represents a worrisome turn in the evolution of the federation. In this article, I step back from the politics of social policy to reflect on the constitutional framework within which that politics occurs. My focus is the scope of the federal government's jurisdiction over social policy. A distinctive feature of Canadian social policy since World War II has been the central role played by the federal government in the development of * Assistant Professor, Faculty of Law, University of Toronto. t This work was funded by grants from the Social Sciences and Humanities Research Council of Canada, the Cecil M. Wright Foundation, and the Connaught Foundation. I thank Claire Hunter, Roy Lee, and Amir Sperling for stellar research assistance. I also thank Robin Elliot, Ira Parghi, and an anonymous reviewer for challenging comments. None of them necessarily holds the views that I express here. The title of this article is drawn from T. Courchene, Social Canada in the Millennium: Reform Imperatives and RestructuringPrinciples (Toronto: C.D. Howe Institute, 1994). (2002), 52 UNIVERSrY OF TORONTO LAW.IOURNAL 164 UNIVERSYY OF TORONTO LAWJOURNAL the Canadian welfare state, now commonly referred to as the social union. The federal government has played this role through a variety of policy instruments, centred on conditional and unconditional grants to the provinces (shared-cost grants, block grants, and equalization pay- ments), as well as income support to individuals, both in the form of direct benefits (e.g., Old Age Security) and through the personal income tax system. The conventional wisdom is that the federal role has been so central that the Canadian welfare state would be far less extensive than it is today in the absence of federal activity.' The federal role has been all the more remarkable in light of the constitutional limits on federal jurisdiction over social policy. Although jurisdiction over social policy has long been and continues to be disputed by both levels of government, I argue that underlying the politics of social policy lies a set of legal assumptions. These assumptions hold that the Constitution draws a sharp distinction between jurisdiction over the financing of contributory social insurance and social services, and jurisdiction over their design and delivery. Short of explicit constitutional amendment (as occurred in the case of unemployment insurance and pensions), federal jurisdiction is thought to be confined to the former realm, largely exercised through the use of the so-called federal spending power, whereas provincial jurisdiction encompasses both the former and the latter areas.2 In this article, I question this assumption. I begin, in Part II, by ex- ploring the foundations of the limited view of federal jurisdiction over social policy. The origin of the standard view lies in a pair of decisions handed down by the Supreme Court of Canada and the Judicial Commit- tee of the Privy Council in 1936 and 1937 that narrowly construed the scope of federal legislative power over social policy.3 In brief, these decisions held that the federal government was incompetent to enact the impugned national unemployment insurance scheme, other forms of contributory social insurance (e.g., health insurance), or laws that regu- lated or even provided social services. However, the judgments gave the federal government an entree into the social policy arena by recognizing 1 K. Banting, The Welfare State and Canadian Federalism (Montreal: McGill-Queen's University Press, 1987) at 47-58 [hereinafter Welfare State]. 2 In this article, I will not be examining the income tax system, another key instrument for the federal government in the social policy arena. 3 Canada (A.G.) v. Ontario (A.G.), [1936] S.C.R. 427, 3 D.L.R. 673 (Reference re The Employment and Social Insurance Act) [hereinafter UI Reference (SCC) cited to S.C.R.]; Canada (A.G.) v. Ontario (A.G.), [1937] A.C. 355, 1 D.L.R. 684 (P.C.) (Reference re The Employment and Social Insurance Act, 1935) [hereinafter UIReference (PC)cited to A.C.]. Although the Privy Council's judgment was handed down in the same case as the Supreme Court of Canada's reasons, I refer to these judgments collectively as the UJ Reference decisions, in order to emphasize that, although the two judgments were handed down in the same appeal, each must be considered on its own. RECASTING SOCIAL CANADA 165 the existence of the federal spending power, whereby the federal govern- ment can make grants in areas of provincial jurisdiction and attach conditions thereto. Critics of these decisions argue that the spending power allows the federal government to circumvent the division of powers, noting that the distinction drawn between program financing and delivery rests on a weak doctrinal foundation and runs counter to important constitutional values. I am sympathetic to these arguments, but, in my view, constitutional scholars have ignored a logically prior question - why social policy falls under exclusive provincial jurisdiction at all. Upon closer examination, the legal foundations of this proposition are weak. This fact throws into question a generation of scholarship on the division of powers and social policy. In Part III, I explore the extent to which this legal assumption, though problematic, has framed the politics of social policy for the past fifty years. Despite rhetoric to the contrary - especially the disagreement between the federal government and Quebec over the scope of the spending power - the assumption that the Constitution draws a sharp distinction between the financing and the design and delivery of contrib- utory social insurance and social services, with federal jurisdiction confined to the former, has secured widespread acceptance among political actors. In Part IV, in light of the conclusions of Part II, I return to first princi- ples. The most promising source of insight is the economic literature on the allocation of responsibilities among levels of governments within fed- erations. What is striking is the prevailing consensus that federal govern- ments have a crucial role to play in redistribution, to prevent races to the bottom through inter-jurisdictional competition for mobile capital and high-income labour. In Part v, I argue that the rationales offered for a federal role with respect to social policy require that we reassess the assumption that, short of explicit constitutional amendment, the federal government's jurisdic- tion over social policy is limited to finance and does not extend to program design and delivery. My claim is that the economists' arguments canvassed in Part IV can count as reasons in legal argument for federal jurisdiction over social policy. I focus on the federal government's power to legislate for the peace, order, and good government of Canada (the POGG power), although I also touch on the federal government'sjurisdic- tion over trade and commerce.4 The contemporary Supreme Court has 4 Andrew Coyne, a noted political commentator, has recently made a similar suggestion: It is true that as federal transfers diminish, so does federal leverage. Bur rather than simply wash our hands of national standards altogether, I think it is time that we looked at equipping the federal government with other means of enforcement. If it can no longer buy its way into provincialjurisdiction, what about the legislative route? I do not think you would need a constitutional amendment. It seems to me that so far as there 166 UNIVERSITY OF TORONTO LAWJOURNAL significantly expanded the scope of federal legislative reach under these heads ofjurisdiction in the areas of economic and environmental policy. At the heart of both heads of jurisdiction lies the so-called provincial inability test. My central point is that, properly understood, the provincial inability test allows for federal jurisdiction
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