The Institute of Intergovernmental Relations The Institute is the only academic organization in Canada whose mandate is solely to promote research and communication on the challenges facing the federal system. Current research interests include fiscal federalism, health policy, the reform of federal political institutions and the machinery of federal-provincial relations, Canadian federalism and the global economy, and comparative federalism. The Institute pursues these objectives through research conducted by its own staff and other scholars, through its publication program, and through seminars and conferences. The Institute links academics and practitioners of federalism in federal and provincial governments and the private sector. The Institute of Intergovernmental Relations receives ongoing financial support from the J.A. Corry Memorial Endowment Fund, the Royal Bank of Canada Endowment Fund, and the governments of Manitoba and Ontario. We are grateful for this support, which enables the Institute to sustain its extensive program of research, publication, and related activities. _______________________________ L’Institut des relations intergouvernementales L’Institut est le seul organisme universitaire canadien à se consacrer exclusivement à la recherche et aux échanges sur les questions du fédéralisme. Les priorités de recherche de l’Institut portent présentement sur le fédéralisme fiscal, la santé, la modification éventuelle des institutions politiques fédérales, les mécanismes de relations fédérales- provinciales, le fédéralisme canadien au regard de l’économie mondiale et le fédéralisme comparatif. L’Institut réalise ses objectifs par le biais de recherches effectuées par son personnel et par des chercheurs de l’Université Queen’s et d’ailleurs, de même que par des congrès et des colloques. L’Institut sert comme lien entre les universitaires, les fonctionnaires fédéraux et provinciaux et le secteur privé. L’Institut des relations intergouvernementales reçoit l’appui financier du J.A. Corry Memorial Endowment Fund, de la Fondation de la Banque Royale du Canada, et des gouvernements du Manitoba et de l’Ontario. Nous les remercions de cet appui qui permet à l’Institut de poursuivre son vaste programme de recherche et de publication ainsi que ses activités connexes. ISSN 0827-0708 ISBN 978-1-55339-197-5 (bound) ISBN 978-1-55339-196-8 (pbk.) © Copyright 2012 To the Memory of Tom Kent Outstanding Public Servant and Public Intellectual iii CONTENTS vii Preface I Introduction 3 1. Introduction John R. Allan and Thomas J. Courchene II The Spending Power: Context 19 2. Federalism Dreams John D. Whyte 41 3. The Political Economy of the Federal Spending Power Roderick A. Macdonald 85 4. Reflections on the Federal Spending Power: Practices, Principles, Perspectives Thomas J. Courchene 119 5. The Spending Power and the Harper Government Harvey Lazar III The Spending Power: Legal Considerations 133 6. Imperium in imperio? Des déséquilibres, du pouvoir fédéral de dépenser et du Constitutionnalisme au Canada Marc Chevrier 167 7. How Do You Limit a Power That Does Not Exist? Alain Noël 183 8. The Myth of the Federal Spending Power Revisited Andrew Petter 193 9. Section 36(1), New Governance Theory, and the Spending Power Hoi Kong v IV The Spending Power and Positive Law 245 10. Current Exercises of the Federal Spending Power: What Does the Constitution Say? Andrée Lajoie 261 11. The Spending Power, Cooperative Federalism, and Section 94 Marc-Antoine Adam 299 12. Building Firewalls and Deconstructing Canada by Hobbling the Federal Spending Power: The Rise of the Harper Doctrine Errol P. Mendes V The Spending Power in Perspective 317 13. The Federal Spending Power Is Now Chiefly for People, Not Provinces Tom Kent 327 14. Constitutional Change in the Twenty-First Century: A New Debate over the Spending Power Sujit Choudhry 339 Contributors List of Publications vi PREFACE This 2008 edition of Canada: The State of the Federation examines “open federalism” and the federal spending power, topics that were given increased prominence, if any were necessary, by the commitment by the Conservative Party in its 2005–06 campaign and subsequently, to the pursuit of “open federalism” and “strict constructionism”, i.e., to a strict adherence to the division of powers set forth in the Constitution. The organizers of the conference perceived that the Harper government’s first years in office presented an opportunity to examine afresh the controversy over the spending power, to enquire whether it was in fact being used differently by the new government, and to consider other, potentially less controversial ways, of sustaining the federal role in the Canadian welfare state. Accordingly, Dr. Thomas J. Courchene and Dr. John R. Allan, then respectively the Director and Associate Director of the Queen’s Institute of Intergovernmental Relations, Marc-Antoine Adam, a Director in the Secrétariat aux affaires intergouvernementales canadiennes, Québec, and then a Visiting Fellow at the Institute, and Hoi Kong of the Faculty of Law, Queen’s University, undertook to organize the conference and seek presenters for the selected topics. In addition to the Institute, the conference was cosponsored by the Faculty of Law of Queen’s University. I would like to say how very much we appreciate their efforts. The conference itself was held at Queen’s University on January 25–26, 2008, in Kingston. General financial assistance for the conference was provided by the Province of Ontario and by the Forum of Federations, while funding in support of the publication of the proceedings was provided by the Department of Justice, Canada. We very much appreciate the support of all three sponsors and are pleased to acknowledge our indebtedness to them. We would also like to thank our presenters: Marc-Antoine Adam, Marc Chevrier, Sujit Choudhry, Thomas J. Courchene, Tom Kent, Hoi Kong, Andrée Lajoie, Harvey Lazar, Roderick A. Macdonald, Errol P. Mendes, Alain Noël, Andrew Petter, and John D. Whyte. Not only have they contributed excellent papers, they also participated actively in the discussion prompted by their papers, thereby adding greatly to the value and stimulus of the conference. Four years have passed since the conference was held. The gap between the conference and the publication is largely explained by the uncertainties resulting from the transition from one Institute director to another. Nevertheless, the editors and I are confident that the debate over the use of the federal spending power is still alive and that this publication remains timely. It should also be vii pointed out that a version of the conference papers was published in 2008 by the Queen’s Law Journal. In addition to the presenters, the success of the conference also owed much to the staff of the Institute, who were responsible for all conference arrangements. In particular, I should like to thank Patti Candido, then the Administrative Assistant to the Director, and Mary Kennedy, the voice and face of the Institute to all conference participants. Under their skilful management, conference arrangements were faultlessly executed. They were most ably assisted by Dr. Nadia Verrelli and by Ryan Zade, then our post-doctoral fellow and research assistant respectively. Preparation of the text for publication was expertly undertaken by Sharon Sullivan, of the John Deutsch Institute at Queen’s, and we are grateful to the JDI for making Sharon available. Ellie Barton was our most thorough copy editor. Once again our cover design was undertaken by Mark Howes, and we are most appreciative of his efforts and patience, and for the assistance of his colleagues at McGill-Queen’s University Press. It is with sadness that we note the November 15, 2011 death of one of our presenters, Tom Kent, an extraordinary public servant, one of the principal intellectual architects of the Canadian welfare state, and Fellow of the School of Public Policy at Queen’s University. It is an honour to dedicate this book to his memory. André Juneau Director viii _______________ _______________ _______________ _______________ _______________ _______________ _______________ I _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ Introduction _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ 1 Introduction1 John R. Allan and Thomas J. Courchene Ronald Watts has defined the federal spending power as “the power of Parliament to make payments to people, institutions or provincial governments for purposes on which Parliament does not necessarily have the power to legislate, for example, in areas of exclusive provincial jurisdiction” (Watts 1999, 1). The combination of no clear constitutional authorization but widespread, at times coercive, use of the federal spending power in building and sustaining the Canadian welfare