Week 3; Chap 18
Federalism & Canada's Regions
Chapter 18 -The Federal System
The provinces are autonomous within the powers given them by the Constitution, but the territories
are constitutionally subordinate to the federal govt.
The federal system is closely related to regional, economic cleavages and regional identities; it is imp
for ethnic cleavages and identities; it influences the Canadian pol culture, and it affects the operation
of the electoral system, pol parties & advocacy groups.
Federalism can be defined as a division of powers b/w central & regional govts such that neither is
subordinate to the other. Provinces are “coordinate” or equal in status to the central govt.
This equality of status is provided for in the constitutional division of powers between the 2 levels of
govt, which is found primarily in sections 91 & 92 of the Constitution Act, 1867.
The institution of federalism are embedded in a very diverse “federal society” that supports such a 2-
tier structure of govt.
When the provinces are all treated alike by the constitution and by the federal govt, the system is
called “symmetrical federalism”, and when they are singled out for distinctive treatment, the term
asymmetrical federalism is used.
The Confederation Settlement
The fundamentals of Canadian federalism, often called the Confederation Settlement, were
incorporated into the British North America Act, 1867, which in 1982 was renamed the
Constitution Act 1867. The Confederation Settlement was not consistent with the modern def of
federalism because in certain respects the provinces were made subordinate to the central govt.
As far the division of powers b/w the central and provincial govts was concerned, the Fathers of
Confederation gave the provinces 16 specific enumerated powers in section 92 (e.g hospitals and
municipal institutions) and then left everything else- the residual powers-to Ottawa, in section 91.
Section 91 also included a list of 29 federal powers, such as trade/commerce & national defence. The
fathers gave Ottawa the power to levy any mode or system of taxation, which included both direct
and indirect taxes.
Evolution of Canadian Federalism to 2000
The very centralized federation created in 1867 became the highly decentralized Canada of today.
This trend can be documented in all three areas- the division of powers, financial resources, and
Division of Powers
The evolution of the division of powers between federal & provincial govts can be examined in
2respects; formal constitutional amendments that altered the division of powers, and judicial
decisions that interpreted sections 91, 92 & 132 of the Constitution Act, 1867.
Since 1867, only 5 formal constitutional amendments have been adopted that directly affected the
division of powers.
1 , in 1940, unemployment insurance was added to the list of federal powers in section 91 after the
courts had earlier declared it to belong to the provinces.
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Week 3; Chap 18
Federndism & Canada's Regions
2 , in 1951, old age pensions were made a concurrent power, allowing the federal govt into this area
Finally, in the Constitution Act, 1982, the new section 92A increased provincial jurisdiction over
natural resources, while the Charter of Rs & Fs generally reduced the powers of both levels of govt.
Before 1949, the Judicial Committee of the Privy Council (JCPC) in London was Canada’s final court
of appeal, and most constitutional decisions were rendered by that body.
Its decisions had a major impact in transforming the nature of Canadian federalism from a centralized
to a decentralized system. The JCPC decisions can be examined primarily in terms of the Peace,
Order and Good Govt clause, the Trade and Commerce power, and the Treaty power.
In addition to drawing a rigid line between interprovincial trade (federal) and intra-provincial trade
(provincial) , the courts created a no-man’s land wherever the 2 kinds of trade were unavoidably
The general result of this interpretation was to enhance the provincial power over property and civil
rights, and to downgrade the federal commerce power.
In the Confederation Settlement, the federal govt was given the power to levy any kind of tax, while
the provinces were restricted to direct taxation.
Ottawa assumed provincial debts (also paying debt allowances to those provinces with smaller debts)
and paid unconditional grants to the province.
A wholesale change in the grant system followed in 1907. By this time, too, provinces had begun to
levy their own direct personal and corporate income taxes.
With both levels of govt taxing the same personal & corporate incomes, but in a totally uncoordinated
fashion, and with the 2 levels starting to become intertwined in conditional grant programs, the
federal-provincial financial situation became increasingly complicated.
State of affairs worsened with the advent of the Depression, when ever fewer funds were available to
go around. The result was the appointment of the Rowell-Sirois Commission.
1 of the recommendations of its 1940 report-that the costly responsibility for unemployment
insurance be transferred to the federal govt- was quickly implemented by means of a constitutional
The complicated federal-provincial financial situation since 1940 might be simplified somewhat by
taking 3 aspects separately: taxation agreements, conditional and block grants, and equalization
The 3 aspect of federal-provincial finance consists of equalization payments. In 1957 the federal
govt began to pay unconditional grants to have not provinces based on provincial need, so that all
provinces could offer a relatively equal standard of services.
Any province whose total per capita revenue is below the average receives a payment based on the
per capita shortfall multiplied by the province’s population.
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Week 3; Chap 18
Federalism & Canada's Regions
Other provincial and territorial revenues
The combination of unanticipated federal grants, direct taxes, and natural resource revenues has
contributed significantly to the enhanced status of the provinces in the Canadian federal system.
It should be added that pressure for decentralization and for turning taxation power over to the
provinces comes from those provinces that have substantial personal and corporate incomes to tax.
The 2 levels of govt began by operating more or less independently of each other, taxing and
spending in different areas, w/ federal grants being unconditional in nature. As time went on, the
federal and provincial govts became closely intertwined by taxation agreements on the revenue side
and by conditional and block grant programs in terms of expenditure.
The 1867 Constitution Act contained 3 specific federal controls over the provinces: reservation,
disallowance, and the declaratory power. The decline in the use of these powers has also enhanced
the stature of the provinces.
Of the 5 parts of the Confederation Settlement, then 3 have contributed to the decentralization of
Canadian federalism: the division of powers, federal-provincial finance, and federal controls.
But some of the societal forces underlying this decentralizing evolution should be identified
explicitly. They include geography- the distances, divisions, and some very large provinces, the
development of strong, distinctive provincial and regional identities and pol cultures ; and Quebec
nationalism, characterized by demands for more powers, which were often echoed by other provinces.
Phases of Canadian Federalism
Canadian Federalism, 1867-1945
The period 1867-96 can be classified as 1 of quasi-federalism, in which the provinces were
subordinate to Ottawa. The period 1896-1914 can be termed one of classical federalism.
During these years the 2 levels were equal in s