Harper gets burned by provinces on 'open federalism'

Fiscal imbalance, equalization and Kyoto have all caused trouble for PM

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The Gazette, Saturday, June 23, 2007

Through no real fault of Stephen Harper's, his vision of open federalism has run into rough seas, with no prospect of smoother sailing ahead.

First, there was his promise, in the famous Quebec City speech during the campaign, to resolve the fiscal imbalance between Ottawa and the provinces.

After months of intense negotiations, particularly with the Charest government, the Harper government announced in the March 19 budget that fiscal balance would be restored by transferring an additional $39 billion to the provinces over the next seven years. Quebec's share would be $2.3 billion, including $700 million in new equalization money in the first year alone.

"Problem solved," declared Finance Minister Jim Flaherty. Except that the very next day Jean Charest screwed up, big time, when he announced that the entire $700 million in equalization money from other Canadians would be given to Quebecers in a tax cut. No mention was made of the other $1.6 billion for health, education and the environment, which disappeared from the political radar.

This was the moment Charest lost his majority, by reminding Quebecers of broken tax-cut promises from his first term. It was also the moment that Charest lost his standing in the country as federalism's champion in Quebec. The blowback from the rest of Canada, of seeing their money used to buy an election in Quebec, was immediate and intense.

Neither Harper nor Flaherty, nor any of their staff, had any inkling of Charest's announcement. When told by his staff they'd received no heads-up, Harper replied that they would just have to live with it, but that didn't diminish his annoyance at being blind-sided.

The one blessing in disguise for Ottawa is that after Charest's incredibly shortsighted announcement, no province will ever dare raise the fiscal imbalance, nor will any serious student of federal-provincial relations ever write about it again.

As one of Flaherty's top advisers put it: "We closed the door on the fiscal imbalance, and Charest locked it tight."

Then when the Harper government announced its climate- change policy, and could have used a few friends in Quebec, provincial Environment Minister Line Beauchamp couldn't get out there fast enough to say it was inadequate in terms of Kyoto targets. This was not three months after Harper, in a highly public event, signed over $350 million for Quebec to meet its Kyoto targets, which happened to be millions more than Charest was asking for. The federal environment minister, John Baird, went ballistic. To say that Quebec shouldn't be looking for any favours from him, anytime soon, is to understate the matter.

Then there's the ongoing equalization fight between Ottawa and three dissenting provinces, Newfoundland, Nova Scotia and Saskatchewan. At least Saskatchewan Premier Lorne Calvert and Nova Scotia Premier Rodney MacDonald have kept the conversation civil. But Newfoundland's Danny Williams sounds like the president of Iran thumbing his nose at the United Nations on arms control. There's simply no talking to this guy, and while his tough talk might win him votes at home in his election this fall, he has burnt all his bridges with Ottawa.

Finally, the Harper government has mismanaged its democratic reform file, failing to adequately consult the provinces, notably Quebec and Ontario, on term limits to Senate appointments and the proposed enlargement of the House of Commons. Sunday voting was something they just threw in as an afterthought. One good reason for proroguing this session of Parliament, and bringing in a new throne speech in the fall, is that Ottawa would have to do this work over again, maybe with a better chance of getting it right.

In all of this, with the provinces never satisfied that more is enough, the moment might well have passed for Harper to propose limitations on the federal spending power, according to the division of powers in the Constitution Act.

This is nothing more than classical federalism, with Ottawa's powers invested in Section 91, and the provinces' in Section 92.

But why would Harper go down that road now, especially after what happened on the fiscal imbalance? If Charest is wondering why the federal spending power file has gone quiet, he has only himself to blame.

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