Canadian Federal System

Canadian Parliament-hill, Ontario

Parliament of Canadá, Ottawa.

Federalism in Canada1

(A brief review)

The fundamental basis for federalism in Canada was and remains the need to reconcile, balance and accommodate diversity 2

It is generally agreed that the following characteristics are among those shared by states with a federal system of government3 :

  • at least two orders of government;
  • division of powers between the orders of government defined in the constitution;
  • division of revenue sources to ensure each order of government certain areas of autonomy, also set out in the constitution;
  • written constitution that cannot be amended unilaterally.

Reasons for a state to adopt a federal system include the need to reflect linguistic, economic and cultural differences of a population, especially one that is concentrated geographically.

British North American colonies unite4

Up to 1867, the colonies5 of British North America had no political or geographical links. Each had its own governor appointed by Britain and its own administration including customs and postal system.

In 1867, three colonies in British North America – the Province of Canada6 , New Brunswick and Nova Scotia – agreed to be “federally united”,7 and form the Dominion of Canada8.

A number of external factors encouraged those colonies to unite, including:

  • the possibility that the United States would not renew the Reciprocity Treaty of 1854, which ensured market opportunities for the colonies’ products; the colonies had already lost a substantial share of British markets with the end of the British Preferential System, which until 1848 had provided tariff protection to the colonies’ products;
  • growing insecurity over American expansionism as well as over diplomatic incidents and border incursions in connection with the American Civil War;
  • Britain’s desire to reduce its obligations and responsibilities towards its colonies.

But it was the political conditions prevailing in one of the colonies, the Province of Canada, that favoured a federal type of union.

The Province of Canada (also known as United Canada)

1791-v3-e

Canada, 1791
Source: Library and
Archives Canada

1849-v5-e

After 1841
Source: Library and
Archives Canada

The Province of Canada had been established in 1841 following the Act of Union which amalgamated two hitherto separate colonies, Lower Canada (majority Francophone) and Upper Canada (Anglophone), which had their own elected legislative assemblies that enabled them to make certain respective domestic political choices.

After the union of 1841, it proved virtually impossible for a single government to ensure political stability, despite measures designed to preserve the specificity of each of the communities. Those measures included :

  • two prime ministers, one for the Francophone section (Canada East) and one for the Anglophone section (Canada West), located on either side of the Ottawa River;
  • two attorneys-general (the common law remained in force in Canada West and the civil law in Canada East);
  • some laws applied to only one of the sections, so that such matters as education could be governed differently.

Another compromise would considerably aggravate the political situation. One of the provisions of the Act of Union provided that an equal number of members be elected from Canada East and Canada West to the single legislative assembly of the Province of Canada. That measure had been taken in response to a demand by Canada West, to guarantee it equal representation even though it had some 200,000 fewer inhabitants than Canada East.

As of 1850, Canada West’s population was greater than Canada East’s. Equal representation was no longer to Canada West’s advantage, and it called for representation proportional to its population. However, a substantial portion of Canada East’s political class was opposed to such a change, as it feared for the survival of French-Canadian institutions.

By the early 1860s, it had become clear that a certain level of autonomy had to be given back to the two sections forming the Province of Canada. It was also clear, however, that in light of the prevailing economic and international situation, it was in the best interest to maintain a certain level of unity.

It was proposed that the Province of Canada be divided into two entities united within a federation. The powers would be shared between two orders of government, which would ensure unity (federal order) while allowing for the expression of diversity (provincial order). The possibility of the other British North American colonies being a part of that federal union was also considered because of the advantages that an expanded union would bring.

Colonies opt for the federal union

An initial meeting to discuss the union was held in Charlottetown, Prince Edward Island, in September 1864. A proposal for a maritime union of the Atlantic coast colonies quickly gave way to the proposal for a federal union of all the colonies advocated by the delegates from the Province of Canada.

The maritime colonies expressed interest in the proposals by the Province of Canada, which were to their advantage as well. Although similar with respect to language, they were different from both an historical and socio-economic standpoint; through their own elected legislative assemblies, they already exercised a certain level of autonomy over domestic policy.

A second meeting was held in Quebec City, Province of Canada, in October 1864 , at which the division of powers between the constituent entities and a federal government was discussed, among other things. The 72 Resolutions of Quebec included proposals that the existing legislative assemblies (or re-established, in the case of the Province of Canada) would exercise responsibilities related to local issues and that a new federal Parliament would assume powers related to common policies, including in the economic and military fields.

 1867-v5-e Canadian Confederation

Canada in 1867
Source: Library and
Archives Canada

The foundations were laid for Confederation in 1867. Canada would originally be composed of four constituent entities: the provinces of New Brunswick, Nova Scotia, Ontario and Quebec, the latter resulting from the division of the Province of Canada. Over the years, the other British North American colonies and all territories in British North America would also become part of Canada, as eitherprovinces or territories.

The new federation was born in large part out of the need to reflect two different linguistic realities. At the time of the first census after Confederation, Canadians of French origin accounted for 31.1% of the population. The vast majority of them, or 85.5%, lived in the new province of Quebec, while some 150,000 others lived in the other provinces.

The men who would become known as the Fathers of Confederation oversaw the creation of a federation which protected the rights of Quebec’s Francophone population – which was determined to preserve its language, its religion and its law – and allowed for the use of both French and English in the federal Parliament, the Legislative Assembly of Quebec, and the federal courts. That protection and recognition of the French language and culture have greatly evolved since 1867.

The Constitutional Distribution of Legislative Powers

One of the main characteristics of Federal States is the distribution of legislative powers between two or more orders of government. In Canada, there are two orders of government: the federal government and provincial governments1.

  1. Powers of the Parliament of Canada
  2. Exclusive Powers of Provincial Legislatures
  3. Concurrent/Shared Powers
  4. Residuary Power
  5. Court Interpretation of the Distribution of Legislative Powers
  6. Amendments to the Constitutional Distribution of Legislative Powers
  7. The Distribution of Legislative Powers in Other Federations
  8. To Know More about the Distribution of Legislative Powers

1. Powers of the Parliament of Canada

The powers of Parliament, enumerated in ss. 91 and 92 (10) of the Constitution Acts, 1867 to 1982, concern matters of national interest (see also notes). They include the following:

  • Public Debt and Property
  • Regulation of Trade/Commerce
  • Unemployment insurance
  • Direct/Indirect Taxation
  • Postal Service
  • Census/Statistics
  • Defence
  • Navigation/Shipping
  • Quarantine
  • Sea Coast and Inland Fisheries
  • Ferries (interprovincial/  international)
  • Currency/Coinage
  • Banking /Incorporation of Banks/Paper Money
  • Weights and Measures
  • Bankruptcy
  • Patents
  • Copyrights
  • Indians/Indian reserves
  • Citizenship
  • Marriage/Divorce
  • Criminal law, including Criminal Procedure
  • Penitentiaries2
  • Works connecting provinces; beyond boundaries of one province; within a province but to the advantage of Canada/or more than one province

2. Exclusive Powers of Provincial Legislatures

The exclusive powers of Provincial legislatures, enumerated in ss. 92, 92(A) and 93 of theConstitution Acts, 1867 to 1982, concern matters of a local nature (also see notes). They include the following:

  • Direct Taxation within Province
  • Management/Sale of Public Lands belonging to Province
  • Prisons
  • Hospitals
  • Municipalities
  • Formalization of Marriage
  • Property and Civil Rights
  • Administration of Civil/Criminal Justice
  • Education
  • Incorporation of Companies
  • Natural Resources
  • Matters of a merely local or private nature

3. Concurrent/Shared Powers

Concurrent powers are specified in ss. 94A and s. 95 of the Constitution Acts, 1867 to 1982 (also see notes):

  • Old age pensions (see note 51)
  • Immigration
  • Agriculture

Certain areas of government action – some of which have become priorities over the years – are not specifically identified and assigned to one or both orders of governments in the Constitution Act, 1867.  The courts have found that these areas come under various legislative powers, some federal, others provincial. Two such areas are theEnvironment and Health.

Click here to know more about federal/provincial constitutional powers in these areas.

4. Residuary Power

The Constitution Acts, 1867 to 1982, s. 91, confer on the Federal Parliament the power “to make Laws for the Peace, Order and good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces”. This power is “residuary” in the sense that any matter that does not come within the power of provincial legislatures comes within the power of the federal Parliament. This residuary power ensures that every area of legislation comes under one or both of Canada’s two orders of government.

5. Court Interpretation of the Distribution of Legislative Powers

When a question arises as to whether a law enacted by Parliament or a provincial legislature comes within their respective constitutional powers, an authoritative answer can come only from the courts. Thus over the years, through the process of judicial review, the content and scope of the federal and provincial legislative powers have been clarified, defined, limited or expanded.

  • For example, the federal Trade and Commerce power (s. 91(2)) has been interpreted to mean that Parliament can regulate trade generally in Canada, as well as the flow of trade across provincial or international borders, but cannot regulate the operation of particular industries, businesses or professions within provinces. The provincial power over Property and civil rights (s. 92(13)) gives provinces the authority to regulate trade and commerce within their respective territory.

6. Amendments to the Constitutional Distribution of Legislative Powers

The distribution of legislative powers has been modified on a few occasions, notably :

  • Constitution Act, 1930. This amendment concerns the provinces of Manitoba, British Columbia, Alberta and Saskatchewan. According to the Memorandum of Agreement for each of these provinces contained in the Schedule to this Act, these provinces were given jurisdiction notably over crown lands, or/and other public lands, or/and natural resources, thus giving them the same powers in these areas as the other provinces already had.3
  • Constitution Act, 1940. The provinces yielded to the Federal Parliament some of their power over social policy allowing the establishment of the national program of employment insurance.
  • Constitution Act 1951 and 1964.  The provinces yielded to the Federal Parliament some of their power over social policy allowing for the establishment of the national programs of old age pensions (1951) and supplementary benefits (1964).

Procedure for Amending the Constitution of Canada

Part V (sections 38 to 49) of the Constitution Act, 1982 sets out how the Constitution of Canada can be amended.

  • Through the general amending procedure, generally referred to as the 7/50 formula (section 38.(1)). Some amendments require resolutions of the Senate, the House of Commons, and the legislative assemblies of at least two thirds of the provinces (7) that have at least 50% of the population of Canada as a whole. These include amendments in relation to the powers of the Senate and the method of selecting Senators, and the extension of existing provinces into the territories (section 42).
  • By unanimous consent (section 41). Other amendments require resolutions of the Senate, the House of Commons, and the legislative assembly of each province. These include amendments in relation to the Governor General and to the composition of the Supreme Court of Canada.
  • Amendment of provisions relating to some but not all provinces (section 43). Others require resolutions of the Senate, the House of Commons and the legislative assemblies of the provinces to which the amendment applies. For example:
    • the 1993 amendment to the Constitution Act, 1982 which added section 16.1 entrenching official bilingualism in New Brunswick;
    • the 1993 amendment to the Schedule to the Prince Edward Island Terms of Union allowing the construction of a bridge which would relieve the Government of Canada from its constitutional obligation to provide ferry services to/from the continent;
    • the 1997 amendment to the Constitution Act, 1867, which added section 93A allowing Quebec to replace its denominational education system with a linguistic system;
    • the 2001 amendment to the Schedule to the Newfoundland Act, 1949, which changed the name “Province of Newfoundland” to “Province of Newfoundland and Labrador”.
  • Amendments by Parliament (section 44). Subject to sections 41 and 42, the Parliament of Canada may exclusively make laws amending the Constitution in relation to the Senate and the House of Commons. For example:
    • the 1999 amendment to the Constitution Act, 1867, to ensure the Territory of Nunavut representation in the Senate (section 3) and in the House of Commons (section 52.1).
  • Amendments by Provincial Legislatures (section 45). Subject to section 41, the legislature of each province may exclusively make laws amending the constitution of the province.

Act respecting constitutional amendments (regional veto)

The 1996 act respecting Constitutional amendments provides that proposals for certain amendments to the Constitution must be consented to by a majority of the provinces before they can be tabled in Parliament.

The majority of the provinces must include:

  • Quebec
  • Ontario
  • British Columbia
  • At least two of the Atlantic provinces comprising at least 50% of the region’s population
  • At least two of the Prairie provinces comprising at least 50% of the region’s population

Among others, this act applies to proposed constitutional amendments pertaining to:

  • Changes to parliamentary institutions;
  • The creation of new provinces;
  • The division of powers between Parliament and the provincial legislative assemblies

The act does not apply to amendments which the Constitution provides that the provinces can veto or express their dissent to 1. These include so-called bilateral amendments, i.e., that affect only one province.

The act respecting Constitutional amendments affords the provinces greater protection within the Canadian federation by imposing an additional obligation on Parliament.

  • The Constitution Act, 1982 which provides for a general amending procedure 2(known as the 7/50 formula), under which certain constitutional amendments require the assent of at least two thirds (2/3 or 7) of the provinces that have at least 50% of the population of Canada as a whole; however, it does not specify which provinces must necessarily be included in the two thirds (2/3 or 7) required.
  • The act respecting Constitutional amendments provides that Parliament should obtain the consent of Quebec, Ontario, British Columbia, two of the Atlantic provinces comprising at least 50% of the region’s population, and two of the Prairie provinces comprising at least 50% of the region’s population, before proposing a constitutional amendment in accordance with the so-called 7/50 formula.

The act respecting Constitutional amendments is part of the Consolidated Statutes of Canada and is binding on the government of the day and its successors. It is not a constitutional act. It could, however, be constitutionalized with the consent of all the provinces.

FISCAL FEDERALISM

EQUALIZATION PROGRAM

WHAT IS EQUALIZATION?

  • Equalization is the Government of Canada’s transfer program for addressing fiscal disparities among provinces. Equalization payments enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation.
  • The purpose of the program was entrenched in the Canadian Constitution in 1982:
    “Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” (Subsection 36(2) of the Constitution Act, 1982)
  • Equalization payments are unconditional – receiving provinces are free to spend the funds according to their own priorities.
  • The Government of Canada has ensured that Equalization continues to grow in line with the economy.
SIX PROVINCES TO RECEIVE $16.1 BILLION IN EQUALIZATION PAYMENTS IN 2013-14
(millions of dollars)

P.E.I.

N.S.

N.B.

Que.

Ont.

Man.

340

1,458

1,513

7,833

3,169

1,792

HOW EQUALIZATION WORKS

  • Equalization entitlements are determined by measuring provinces’ ability to raise revenues – known as “fiscal capacity”.
  • Before any adjustments, a province’s per capita Equalization entitlement is equal to the amount by which its fiscal capacity is below the average fiscal capacity of all provinces – known as the “10 province standard”.
  • Provinces get the greater of the amount they would receive by fully excluding natural resource revenues, or by excluding 50 per cent of natural resource revenues.
  • Equalization is adjusted to ensure fairness among provinces while continuing to provide a net fiscal benefit to receiving provinces from their resources equivalent to half of their per capita resource revenues.
  • Equalization is also adjusted to keep the total program payout growing in line with the economy.  The growth path is based on a three-year moving average of gross domestic product (GDP) growth. This helps to ensure stability and predictability while still being responsive to economic growth.
  • The program also maintains the benefits of the Atlantic Accords for Nova Scotia and Newfoundland and Labrador.  In 2007, the two provinces were given the choice to continue to operate under the previous Equalization system or to permanently opt into the new program at any point prior to the expiry of the offshore accords.  Having chosen the new program, Nova Scotia benefits from a guarantee that it will do at least as well, on a cumulative basis, as it would have under the formula agreed to at the time the Accord was signed.  Newfoundland and Labrador no longer qualifies for Equalization.

FEDERAL TRANSFERS TO PROVINCES AND TERRITORIES

MAJOR FEDERAL TRANSFERS

The Government of Canada provides significant financial support to provincial and territorial governments on an ongoing basis to assist them in the provision of programs and services. There are four main transfer programs: the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization and Territorial Formula Financing (TFF).

The CHT and CST are federal transfers which support specific policy areas such as health care, post-secondary education, social assistance and social services, early childhood development and child care.

The Equalization and TFF programs provide unconditional transfers to the provinces and territories. Equalization enables less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. TFF provides territorial governments with funding to support public services, in recognition of the higher cost of providing programs and services in the north.

Notes:


  1. Hyperlinks in this document link to Government of Canada websites.
  2. Richard Simeon, Federalism in Canada, A Visitor’s Guide2002 (unpublished document)
  3. Ronald Watts, Comparing Federal Systems, Institute of Intergovernmental Relations, Queen’s University, Kingston, Ontario, 1999, page 7
  4. Term used following the American Revolution to refer to the colonies in North America that remained British.
  5. The colonies were the Province of Canada, New Brunswick, Nova Scotia, Newfoundland, Prince Edward Island and British Columbia. There were also vast, scarcely inhabited territories belonging to the Hudson’s Bay Company or the British Crown.
  6. The term province was used at that time in the sense of a colony, not a constituent entity. The Province of Canada was established with the amalgamation of the colonies of Lower Canada and Upper Canada by the Act of Union of 1840.
  7. « Whereas the Provinces of Canada, Nova Scotia, and New Brunswick have expressed their Desire to be federally united into One Dominion… » Preamble, Constitution Act, 1867
  8. The Dominions were at that time quasi-autonomous colonies within the British Empire.

 ——————–

RATING FOUR FEDERAL SYSTEMS – AN “IMPRESSIONISTIC” EVALUATION

Selected Indicators Australia Canada United States Germany
National Unity  Strong Fairly strong strong Strong
State Influence on
Federal Policy-
makers
Fairly strong strong Fairly weak Strong
State Government
Constitutional
Status
Strong Fairly strong de jure;
very strong
de  facto
Fairly weak Strong
Actual State
Control of Local
Government
Strong Strong Varies from fairly Strong to fairly weak Strong
Range of Local
Government
Responsibilities
Limited Fairly extensive Fairly extensive Limited
Local Government
 Influence on
State
Policy makers
Weak Fairly strong Fairly strong Weak
Local Government
Influence on
State Policy
Weak Fairly strong Fairly strong Weak
Local Government
Influence on
Federal Policy
Weak Weak Fairly strong Weak
The Character of
Fiscal
Federalism
Two- tiered;
centralized
Two-tiered;
decentralized
Three-t iered;
unstructured
Two-tiered; quite integrated
Federal-State Inter-
governmental
Transfers
Important; em-
phasis on condi-
tional grants
Important; em-
phasis on uncon-
ditional gants.
Important; em-
phasis on condi-
tional grants
Unimportant; emphasis on tax sharing
Federal-Interstate 
 Equalization
 Performance
Very strong;
revenue and ex-
penditure
disparities
reduced
Strong; revenue
disparities
reduced
substantially
Weak; some tax effort equalization Strong; revenue and some expenditure
disparities
reduced
substantially
State Tax
Performance
Fairly weak Strong Fairly strong Fairly strong
Local Government
Fiscal Indepen-
dence
Fairly strong Fairly strong Fairly strong Weak
Horizontal relations between Local Governments
Referendums in Local Governments
SOURCE: Table prepared by John Shannon, Washington, DC, ACIR, 1980.  http://www.library.unt.edu/gpo/acir/Reports/information/M-130.pdf   

More information:

Un pensamiento en “Canadian Federal System

  1. Bizarre that as republicans, you should be proposing a constitutional monarchy as a model – and a country with a weak and unelected Senate.

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