VANCOUVER, BC- Canada's federal government should stop
spending tax dollars in areas of provincial jurisdiction or
seek an amendment that would bring current political practices
in line with the written Constitution, recommends a new paper
from independent research organization The Fraser
"The federal government is now using its spending power to
transfer more than $42 billion in tax dollars each year to
provincial governments," said Sylvia LeRoy, co-author of
Questioning the Legality of the Federal Spending Power.
The term 'spending power' refers to the perceived power of
Parliament to spend money in areas of provincial jurisdiction.
"Not only does this practice rest on shaky legal ground, it
also distorts local policy preferences, transfers power to
federal politicians, and blurs the accountability of both
levels of government," LeRoy added.
LeRoy and co-author Burton H. Kellock, Q.C., evaluate the
complex tax-and-transfer system in light of the intentions of
Canada's founders, original constitution, and binding legal
"It is important to emphasize the general consensus among
legal academics that there is no such thing as a federal
"spending power" in the Canadian Constitution and there has
been no explicit mention of this power in any judicial decision
either," Kellock said.
The validity of the federal spending power has been the
subject of much academic debate and has only been alluded to by
the Supreme Court of Canada and never fully debated or
The British North American Act gives the federal government
broad powers to raise money "by any mode or system of
taxation," but these tax revenues may not be directed to
"The exclusivity of federal and provincial jurisdiction is a
founding principle of Canada's federal system," Kellock
The paper looks at the landmark legal decision where
Canada's highest court recognized constitutional limits on
federal spending power. The 1937 Unemployment Insurance case
resulted in Parliament passing an amendment to the Constitution
in order for the federal government to move ahead with its
plans for a national unemployment insurance program.
"While a constitutional amendment was required before the
federal government could establish a national unemployment
insurance scheme, Ottawa has since moved ahead with countless
other spending programs notwithstanding their relation to
matters of provincial jurisdiction," LeRoy said.
Included among these federal spending initiatives are family
allowances and hospital insurance and medicare, as well as
recent federal child care initiatives.
"Previous research calculates that conditional transfers from
Ottawa to the provinces grew from less than one per cent of
federal budgetary expenditures in 1945, to more than 13 per
cent of federal expenditures in 1965, and almost 20 per cent of
federal expenditures a decade later," LeRoy said.
"This has resulted in a profound redistribution of legislative
power in Canada."
The authors note that the provinces (with the exception of
Quebec) have seldom objected to - and indeed, frequently
encouraged - the use of the federal spending power to increase
transfers for education, health and other social programs.
Federal spending now supports so much of the established
political, social and economic structure that governments are
hesitant to take any steps to limit it. Both levels of
government have avoided legal certainty, preferring to
negotiate politically rather than risk a judicial decision that
would upset the status quo.
"Unless the federal government amends the Constitution, as
it did in 1937, the continued transfer of tax dollars to the
provinces contradicts established legal precedents, the written
word of the Constitution, and the intentions of Canada's
founding fathers," LeRoy said.