Provinces Unite on Social Programs

The atmosphere was at once optimistic and wary. As they arrived in Saskatoon for last week's premiers' conference, provincial officials thought the stars were lining up for an agreement on a united front to carry them into negotiations with Ottawa on social programs. But what to make of Quebec Premier Lucien Bouchard's unexpected decision to attend? Bouchard was ending Quebec's year-long boycott of the talks on reforming the so-called social union. What was he up to? Surely the arch-separatist was not really buying into a process of smoothing relations between the two levels of government. By the lunch break on Thursday, the first full day of talks, host premier Roy Romanow was gushing about just that - the prospect of Quebec joining a 10-province consensus. When the premiers emerged a few hours later to announce a unanimous new position, early suspicions about Bouchard's sincerity had evaporated in the dry Prairie heat. Or was another kind of warmth at work? "You could feel some emotion in the conference room," Ontario Intergovernmental Affairs Minister Dianne Cunningham told Maclean's, adding that her boss, Premier Mike Harris, "was quite moved."

Warm feelings about Bouchard's return to the premiers' club were not shared in Ottawa. Still, the federal government took pains to respect the conciliatory tone that was prevailing on the banks of the South Saskatchewan River. "We will work with the provinces to find a solution that will satisfy their concerns and our concerns," said Stéphane Dion, the federal intergovernmental affairs minister. A bland reaction - considering that the position the premiers adopted, and that won Bouchard's favor, seeks to severely restrict the federal power to spend on new social programs. Independent observers responded more bluntly. "This would be a radical transformation of the way the federation functions," said Harvey Lazar, director of the Institute of Intergovernmental Relations at Queen's University in Kingston, Ont. "My guess is the federal government will never agree with something like this that prevents it from interacting with Canadians."

At stake is how new social programs are designed and delivered. Even though the Constitution hands the provinces jurisdiction in areas like health and education, Ottawa has long used its spending power to buy itself immense clout in those fields. In the so-called social union talks that began last January, the provinces are trying to get Ottawa to agree to a new set of rules. The bargaining position adopted unanimously by the premiers in Saskatoon proposes that the federal government compensate any province that opts out of a new social program, even if the program is funded entirely by Ottawa. To qualify for compensation, the province would have to spend the money in the same general area - but not necessarily by setting up its own comparable program.

In agreeing to those terms, Bouchard made a key concession. He retreated from Quebec's long-standing demand for the right to opt out with full compensation and no strings attached. And he accepted that Ottawa must have some say in social policy. "We can live with it," he shrugged, "if there is a new program created by the federal government." A big step for Bouchard, perhaps, but one that still leaves him - along with the rest of the premiers - a long leap from Ottawa's current position.

Prime Minister Jean Chrétien's government accepts the notion of compensation for a province that opts out, but only from new programs that are jointly financed by federal and provincial governments. So when Ottawa is going it alone in a social-spending initiative - as it is with its Millennium Scholarship Fund - no province would be able to reject the new program and get federal cash instead. The provinces complain that this means the federal government can still move unfettered into areas they regard as their own.

Chrétien also holds that compensation should be paid only if the province opting out establishes its own version of the program, meeting national standards. The provinces argue that requirement leaves the system far too inflexible. One senior western provincial official argued, for example, that the federal Liberals' scheme for a new national home-care program makes sense only for provinces that have lagged behind in satisfying the demand for at-home health services. Those provinces that have already begun investing heavily in home care, such as Manitoba, should be free to funnel at least a portion of any new federal spending into other health priorities, such as hiring more rural physicians. The premiers will press Ottawa to accept a new dispute-settlement body with the power to decide what sort of program a province could offer with its compensation money.

Debate over such details now shifts from the spotlight of Saskatoon to shadowy give-and-take among ministers and their advisers. The social union talks are being co-chaired by federal Justice Minister Anne McLellan and Saskatchewan Intergovernmental Affairs Minister Bernie Wiens. A personal rapport between the two politicians could be a key factor in pushing the negotiations towards a conclusion by the end of the year. Wiens telephoned McLellan after Bouchard joined forces with the rest of the premiers to brief her on the dramatic development. One important personal link: Wiens' deputy minister, constitutional lawyer Brent Cotter - widely regarded as one of the most influential behind-the-scenes players in the social union process - has been a friend of McLellan since they were students at Dalhousie University's faculty of law in the early 1970s.

Wiens and McLellan are expected to convene a meeting of ministers to begin the haggling over the new unanimous provincial proposal late this month. McLellan is widely regarded by the provinces as an honest broker. Even senior officials for Ontario and British Columbia - two provinces whose relations with the Chrétien regime have been sorely strained - say they trust her. And she will need all the goodwill she can muster to keep the negotiations from turning sour. Bitterness lingers in many provincial capitals over the deep cuts in social transfers imposed by Finance Minister Paul Martin when he was slashing spending to eliminate the deficit. That resentment intensified when the Liberals pushed ahead last year with their millennium scholarships and proposed an ambitious new national home-care program. Lazar says that launching a scholarship scheme while provinces were being forced to hike university tuitions, and suggesting a splashy home-care initiative while provinces were closing hospitals, amounted to "provocations" from Ottawa.

If they were feeling provoked, the premiers were careful last week to avoid sounding like they were itching for a turf war with Ottawa. "This is not a power grab," insisted Romanow. Still, some provincial officials admitted privately that they expect some federal politicians to interpret their pact as exactly that. A minister from a large province predicted Chrétien's cabinet will be split between a hostile "strong central government" camp, including Heritage Minister Sheila Copps and Trade Minister Sergio Marchi, and a group leaning towards compromise, perhaps including Quebecers like Dion and Human Resources Development Minister Pierre Pettigrew.

Bouchard's entry puts the federal cabinet in a dicey negotiating position. Rejecting a proposal that came from only the nine federalist premiers would have carried relatively little political risk. But if Ottawa now spurns the provincial common front that includes Quebec, Bouchard will use the failure as fresh fodder for his argument that federalism is too rigid to evolve - even when Quebec makes common cause with every other province. Yet a deal between Ottawa and the provinces on a new social union framework might be just as politically valuable for Bouchard. It would allow him to refute the claim of his rival, Quebec Liberal Leader Jean Charest, that the separatist preoccupations of the Parti Québécois prevent it from defending Quebec's interests effectively within Canada. According to Lazar, if the Saskatoon deal "creates a large difficulty for Jean Chrétien, it is an even bigger one for Jean Charest."

Not everyone viewed the Saskatoon pact through the prism of Quebec politics. Newfoundland's Brian Tobin told Maclean's he signed on to the agreement largely because it represented a softening of the hardline positions of the big English-speaking provinces. "Two years ago, Alberta, British Columbia and Ontario were saying that Ottawa should abandon social policy to the provinces entirely," he said. "I am onside now because we are acknowledging right up front that both levels of government have a role."

The part played by Ottawa in social programs is about to be reinforced by an injection of new cash. As Martin prepares to deliver the first federal surplus in a generation in his 1999 budget, the top federal priority is health. A boost in transfers to the provinces is probably in the cards. But Ottawa will also want to play a direct role, likely in home care. Whether that new thrust meets fierce provincial resistance, or marks the start of a new era of accommodation, could be decided this fall.

Maclean's August 17, 1998