In the wake of Finance Minister Jim Flaherty's surprise announcement on the future of health-care funding, the hand-wringing has already started. Many in the media were looking forward to months of rhetorical pre-positioning leading to a make-or-break first ministers conference with 13 angry premiers arrayed against a recalcitrant Prime Minister. And the dark talk has already started about the presumed federal abdication of national leadership: "If the feds aren't telling the provinces how to fix health care, well, they obviously don't care."
But there's another story here. It's about a Prime Minister with a very different federal-provincial agenda, based on a view that seriously respects the Constitution. It's also about provinces finally coming of age and being mature enough to manage their own affairs.
The Finance Minister's announcement this week is a surprisingly generous offer: continued 6-per-cent annual increases in federal transfers for three years after the current health accord ends in 2013-14, after which transfers will be pegged at the rate of nominal GDP growth with a guaranteed base of 3 per cent a year. By short-circuiting the expected federal-provincial negotiating process, it effectively marks the end of executive federalism, that time-honoured Canadian way of running the federation. It also provides the clearest window yet into how Prime Minister Stephen Harper views the federation.
Much of the history of our federation has been defined by the mismatch between provincial responsibilities and their corresponding taxing authorities. In the 1950s and 1960s, successive federal governments used their superior revenue muscle to create the architecture of the modern welfare state, largely in areas of provincial jurisdiction. The result was a 40-year evolution of federal transfers to the provinces through a series of complex mechanisms leading, ultimately, to the Canada Health Transfer and the Canada Social Transfer that exist today.
Signed in 2004, the Paul Martin health-care accord was the logical outcome of this long evolution, both in its contents and how it was achieved. In exchange for stable and predictable federal transfers escalating at 6 per cent a year, the provinces promised to improve wait times in several areas and to work toward other reforms to make the system more efficient and effective. How the deal was achieved was another matter, involving non-stop negotiations over several days, raised voices and threats, and pressure-filled all-night sessions with pizza deliveries to exhausted participants at 3 a.m. It was a noisy and messy process.
Mr. Harper had a better idea, and it started with the Constitution. As a classic federalist, he believes passionately in the sanctity of Sections 91 and 92, which define the respective responsibilities of the two levels of government. As he told Policy Options in March of 2006: "It's always been my preference to see Ottawa do what the federal government is supposed to do. … Ottawa has gotten into everything in recent years, not just provincial jurisdiction but now municipal jurisdiction. And yet at the same time if you look at Ottawa's major responsibilities, national defence, for example, the economic union, foreign affairs, beginning obviously with the most important relationship, with the United States, Ottawa hasn't done a very good job of these things."
From the beginning, Mr. Harper started by addressing a number of long-standing federal-provincial issues. These included the transfer of billions to the provinces to address the fiscal imbalance, federal recognition that provinces and territories are best placed to design and deliver labour-market training, and legislation to limit use of the federal spending power to create new shared-cost programs in areas of provincial jurisdiction with opting-out.
There have been changes in style as well. Much has been made of the Prime Minister's avoidance of first ministers conferences, those clambakes of inflamed rhetoric in which premiers play to their home parish and lacerate the prime minister of the day for real and imagined slights. Mr. Harper's approach is different: quiet, calm, private conversations conducted one on one by telephone or in person with premiers. The issues are worked out or there is agreement to disagree quietly.
Mr. Flaherty's announcement should be viewed as the next logical step in a maturing federation. The Martin accord contained all the vestiges of the old executive federalism – glowing commitments on the part of the provinces to make things better, and grand federal claims about "buying change."
Seven years into the agreement, the proof has not been in the pudding. There have been some improvements in some areas; in others, not so much. The Martin accord bought peace, but it didn't buy nearly enough innovation in health care. The federal approach announced this week finally recognizes that the levers of change for the health-care system reside in 13 provincial and territorial capitals, just like it says in the Constitution.
Geoff Norquay was social policy adviser to Brian Mulroney from 1984 to 1988 and director of communications for Stephen Harper in 2004 and 2005.