The election of the federal Liberals under Wilfrid Laurier in 1896 marked one of the most significant changes in Canadian political history and in federal-provincial relations. Macdonald and his supporters had never really accepted that federalism meant that both orders of government were autonomous in their respective areas of jurisdiction. The Laurier Liberals did. As leader of the Opposition, Laurier had declared publicly that he believed in genuine federalism, and he had long supported provincial rights.
Laurier came to power with the help of the provincial Liberal regimes in Nova Scotia, New Brunswick, Ontario, and Manitoba, all of whom believed strongly in provincial autonomy in their own areas of responsibility. He then forged one of the strongest and best federal governments in Canadian history, including four former provincial premiers: Oliver Mowat from Ontario, William Fielding from Nova Scotia, Andrew Blair from New Brunswick, and Henri-Gastav July de Lotbinière from Quebec. The West was represented by the powerful former Manitoba Attorney General Clifford Sifton. The Laurier cabinet unquestionably had a deep appreciation for the rights, responsibilities, and problems of provincial governments.
Canada entered almost two decades of relative peace on the federal-provincial side of politics. Peace between Ottawa and the provinces was actually relatively easy to attain. The main thing Ottawa had to do was simply stop trying to dominate the provinces, and that was the policy Laurier pursued. The period after 1896 was the Golden Age of Federalism and of federal-provincial relations. Both orders of government knew and followed the rules, both had a great deal to do in their respective spheres, and both had growing revenue from a boom in the world economy to spend on their respective tasks. The two orders of government worked as partners in supporting the growing population and prosperity of a colony that was moving towards nationalism internally and towards independence internationally. Involvement in the Boer War and the build-up to the First Word War became important issues for Ottawa, but had little direct effect on its relations with the provinces until after the First World War began.
The Manitoba Schools Question
Before Laurier could get on with his own challenges, however, he had to settle a major conflict from the Conservative era. That was the Manitoba Schools Question, one of the most difficult, complex, and important issues ever to dominate the federal-provincial agenda. When Manitoba entered Confederation in 1870, French-speaking Catholics outnumbered English-speaking Protestants, but both were given equal rights in education and in the official use of language. Massive immigration produced a large English-speaking Protestant majority, plus a dozen ethnic groups with various religious and linguistic cultures. The situation in the 1890s was completely different from that of 1870 and from that of central Canada, and in 1890, the Liberal government of Thomas Greenway cancelled government support for religious schools.
That measure violated the federal Manitoba Act of 1870 and provoked an immediate protest by Catholics throughout Canada. Macdonald’s government was in an almost impossible position because any federal action was bound to upset Protestants, Catholics, or both. He procrastinated for a year, which meant that the option of disallowing the legislation lapsed. His plan was to keep the issue in the courts and hope that they produced a solution. The Manitoban courts declared the legislation within provincial power and the JCPC in London agreed. The next question was whether Manitoba’s Catholics could appeal to Ottawa to overturn the provincial law. That issue also went to court and eventually to the JCPC, which ruled that Ottawa did have the power to overturn the provincial legislation.
In March 1895, the federal government issued an order demanding that the government of Manitoba restore the rights of the religious minorities. Ottawa did not, however, have the power to enforce the order, and the federal Liberals opposed it. Laurier argued that if Ottawa protected the French minority in Manitoba, other minorities would demand similar protection and that would lead to conflict rather than harmony. He argued that the provinces were autonomous in education, and the solution was to negotiate an acceptable agreement. In the election of 1896, the Church in Quebec issued instructions for Catholics to vote Conservative. But Quebeckers were well aware that if Ottawa could intervene in Manitoba to overthrow provincial legislation, then it could intervene in Quebec. That was a precedent few of them were willing to see established, even if it meant abandoning Manitoba’s French-Catholic minority. They defied the Church and voted for provincial rights, the federal Liberals, and their native son Laurier.
The Manitoba Attorney General Clifford Sifton had been elected to Parliament, so Laurier put him in charge of negotiating a settlement with his former colleagues, that is, to yield to Manitoba as gracefully as possible. Premier Greenway had won the war and was willing to make some concessions: religious instruction could be provided in public schools for half-an-hour at the end of the school day, and schools with a significant number of Catholic students had to have some Catholic teachers. French was not restored as an official language, but bilingual instruction could be provided if ten pupils in any school spoke French. That right was extended to every linguistic minority in recognition of the fact that French was only one of many languages now spoken in the province. Manitoba’s French Catholics had no choice but to accept the outcome. Laurier’s “Sunny Ways” had triumphed, and politics had trumped the courts as the proper forum for dealing with such issues. It was a huge victory for provincial rights; it was not so for the constitution. Manitoba’s actions were unconstitutional, but Ottawa did not have the political power to enforce its remedial legislation school-by-school throughout the province of Manitoba.
Co-operation and Confrontation over Logging and Hydro-Electric Power
With that crisis out of the way, Laurier and his new government could turn to other matters. In 1898, the United States passed a tariff law designed to prevent the importation of lumber from Canada. The goal was to import logs and have all the processing work done in the United States. Canadian companies demanded that Ottawa impose an export tax on logs sufficiently high to offset the American tariff and keep the processing jobs in Canada. That request clearly fell under federal responsibility for trade and commerce, but Laurier was interested in a broad economic deal with the United States and did not want his plans complicated by a dispute over lumber.
The companies then went to Ontario’s Liberal government, now headed by Arthur Hardy. The provinces controlled resources, and Hardy passed a law saying timber could only be cut if it was then processed in Ontario. Under pressure from American companies, the United States asked Laurier to disallow the legislation. Laurier refused, and the courts upheld the Ontario law. Subsequent Ontario legislation seemed to touch on federal jurisdiction, and Ontario changed it when Ottawa identified problems and threatened to disallow it. Ontario’s law led to processing within the province, and it was then applied to other resources. Excellent co-operation between the two governments was an important factor in the development of the Canadian lumber and mining industries.
Other issues were not so easy to resolve, such as the control of hydro-electric development, which produced some conflict between Laurier and Ontario’s James Whitney, who led the provincial Conservatives to power in 1905. His victory was another example of how federalism was evolving. Throughout the Conservative ascendency in Ottawa from 1878 to 1896, one of the main pillars of opposition to Ottawa was the Ontario Liberal government. Laurier’s victory in 1896 put Liberals in power in both Toronto and Ottawa, but the election of Whitney restored the old Conservative-Liberal rivalry. Now, however, the positions were reversed, with the federal Liberals inheriting Macdonald’s responsibility to manage the overall interests of the Dominion and the provincial Conservatives inheriting Mowat’s imperative to stand up for Ontario.
Ontario was determined to use its vast hydro-electric resources to build the economy, and Ottawa was certainly interested in economic development anywhere in the Dominion. Both had constitutional grounds for becoming involved, with the provinces responsible for the rivers and Ottawa responsible for navigation on them. Whitney set up what became Ontario Hydro to create a province-wide monopoly. Hydro-electric firms petitioned Ottawa to disallow the relevant provincial legislation, but Laurier backed off. He wrote: “the power of disallowance should not be exercised, except in cases of extreme emergency . . . where the interests of the Dominion . . . are likely to suffer.” He added that he could detect no great support for disallowing the legislation, and if there was, it was up to the Ontario electorate to demand that their provincial government make the change.
Alberta and Saskatchewan Become Provinces
Central Canada was not the only area where rapid economic development was leading to changes in federal-provincial relations. With the prairie population and economy surging, the time was rapidly approaching for new provinces to be carved out of the North-West Territories. The region had a Legislative Assembly in Regina and its executive controlled some local matters. In May 1900, the Territorial Legislature asked Ottawa to begin discussing the conditions for granting provincial status. The pressure increased when the territorial government of Frederick Haultain won a resounding victory on the issue in 1902. That same year, the federal Conservative Party announced its support for provincial status, so Haultain supported them in the next federal election. Bowing to the inevitable, Laurier’s Liberal government promised provincial status if it won the election of 1905, which it did.
A decision had to be made as to whether there would be one, two, or three provinces on the prairies, that is, whether Manitoba would be extended westward to BC or whether the area between them would become one or two provinces. There was little support for extending Manitoba westwards, and Premier Haultain and many others wanted the remaining area to be a single province so it would have a strong government to deal with Ottawa. For that reason, many central Canadian politicians wanted the prairies to be divided into several provinces and it was they who controlled the federal government that would make the decisions.
Two provinces were created: Alberta, named after a daughter of Queen Victoria, and Saskatchewan, named after the largest river on the prairies. They were divided roughly into equal parts at 110 degrees longitude, with their northern borders fixed at 60 degrees north latitude. That was the same as BC’s northern border, but well north of Manitoba’s, and Manitoba was bitterly disappointed with its inferior size. The rationale for dividing the prairies into three provinces proved correct, as three different societies developed with three provincial regimes that were seldom able to present a united front to Ottawa, unlike the regions of Ontario and Quebec with their single governments.
Control of Crown Lands and natural resources was another issue of contention. At Confederation, the original provinces retained control of natural resources, as did PEI and BC when they joined. In the United States, new states controlled natural resources and were equal to the older states. But when Manitoba was carved out of the Territories, it was not given control of resources, and Alberta and Saskatchewan were treated in the same manner. The main arguments were that the federal government had to control land in order to build railways and attract immigrants. The arguments were specious. There were no political problems building the CPR and the Intercolonial Railway in provinces that controlled their own natural resources, and immigrants were attracted to all parts of Canada regardless of which government controlled the land. The West needed railways more desperately than the other provinces, and the area was being given provincial status because the prairies had already been largely settled.
Other facts suggest that Ottawa simply wanted to maintain control of the Prairie economy. In the 1870 land survey, seven sections per township were set aside to support education. Though education was a provincial matter, Ottawa refused to surrender that land in 1905. Saskatchewan’s Premier Walter Scott requested that all land in northern Saskatchewan be turned over to the province. That land could not be used to promote immigration, but Ottawa refused. Ottawa’s argument that it needed land sales to finance railways was also contradicted by the fact that it gave generous compensation to the provinces in return for retaining control of resources. As with so many federal-provincial disputes, the real issue was power.
The most important controversy concerned education. Since education was a provincial responsibility, it should not have been an issue at all. The system in the North-West Territories included both non-denominational and religious schools with a single body to administer all of them. Education was not an issue in the negotiations and discussions leading up to provincial status. Laurier then decided to restore French-Catholic education rights as they had been in 1875, when the French were a significant part of the Prairie population. It was a blatant attempt to dictate a key element of education policy for the two new provinces after they gained control of education. It is not clear why Laurier took this tack as it clearly violated his views on provincial rights, as well as the solution he had devised for the Manitoba Schools Question. It also revived the animosity between French Catholics and English-speaking Protestants, the very problem Confederation had been so successful in solving.
Laurier’s chief western minister, Clifford Sifton, resigned in protest. The Opposition Conservatives took up the defence of provincial rights, trading places with Laurier, who had always defended them when he was in opposition. An acrimonious and divisive debate took place in the House of Commons. Laurier had miscalculated, and he was forced to back down. The outcome was that the school system would be public, religious minorities could establish their own schools with government support, and the language of instruction throughout was English.
Another question was whether provincial politics would continue to be non-partisan, as the Territorial government had been, or whether the eastern Canadian two-party system would be imposed. Municipal governments had always been based on the non-partisan principle, as was the Territorial government and most Westerners wanted to retain that system in their new provinces. For political reasons, Laurier decided to impose the federal party system, that is, the federal Liberal party system. On September 1, 1905, he appointed a Liberal, George Bulyea, as Alberta’s first lieutenant governor four days before Alberta became a province of the Dominion. Instead of calling an election and asking the leader with the most seats to form a government, Bulyea appointed another Liberal, Alexander Rutherford, as Alberta’s first premier. That put Liberals in charge of the new administration well before the first election. This, of course, is what Macdonald had done for Conservatives in Ontario and Quebec before their first elections, and Laurier had learned well from the master.
With pro-farm and pro-immigration policies, support from Ottawa, and loads of patronage, the Liberals won the first Alberta election with twenty-three of twenty-five seats, and they went on to win another four successive elections. Safely ensconced in office, the Liberals rewarded the northern part of the province for its support. Edmonton was made the capital and also the seat of the provincial university. Half the civil service from the old Territorial government in Regina was transferred to Edmonton, and construction began on a new Legislative building overlooking the North Saskatchewan River. Given the way it was established, the close links between the federal and provincial Liberal parties and governments, and the fact that the dominant Liberal in the old Territorial government, Frank Oliver, became Laurier’s new Minister of the Interior and chief lieutenant on the Prairies, relations between Ottawa and Alberta were excellent. Albertans got on with the challenges of building a new province and did so with great success.
Laurier selected another Liberal, A.W. Forget, as Saskatchewan’s first lieutenant governor, and four days later, Saskatchewan became a province. Many people expected that Haultain would remain premier, but he had supported the Conservatives in the 1904 election. He had also fought with Laurier on the controversial issues surrounding the creation of the two provinces. So Laurier had Forget appoint another Liberal, Walter Scott, as premier and Haultain was not even asked to speak at the celebrations when Saskatchewan became a province. Scott quickly organized a provincial government including good Liberals, none of whom had served in the Territorial government. Their main job was to get the new provincial Liberal party elected, and they had ten weeks in control of the government to arrange the desired result.
The Liberals created more constituencies in the north where they were popular and fewer in the south where Haultain and the Conservatives had support—so much for George Brown’s principle that democracy should be based on rep by pop. With pro-farm and pro-immigration policies, support from Ottawa, and loads of patronage, the Liberals easily won sixteen of twenty-five seats, and the provincial Liberal party became a bastion of federal Liberal strength for decades. Regina remained the capital, but unlike in Alberta and Manitoba, there was a sense that government institutions should be fairly distributed around the province. The university was therefore situated in Saskatoon, the provincial jail in Prince Albert, and the mental hospitals in Battleford and Weyburn. With Liberal regimes established in Saskatchewan and re-elected in Ottawa, the relations between the two governments were set for decades of co-operation.
The Imbalance between Revenue and Responsibilities
Halfway through his second term, Laurier decided to tackle the problem of subsidies that had marred the workings of federalism since 1867. Perhaps the biggest miscalculations the Fathers of Confederation had made were in underestimating the proportion of customs revenue that Ottawa had to return to the provinces in order for them to fulfill their remaining responsibilities. Almost every year after Confederation, one or more provinces complained to Ottawa that they could not pay their way. Provincial legislatures passed motions outlining the case for more funds, and premiers beat a steady path to Ottawa to present their cases. Ottawa often replied that the provinces should raise taxes, cut spending, and live within their means. The cases were so compelling, however, that Ottawa repeatedly increased its transfers to the provinces by various means, usually calling each such deal a “final” one. Politics played a huge role, as friendly provincial administrations received favourable treatment. These ad hoc adjustments were bandages, not solutions, and each one created a different relationship between the federal government and whichever province received the latest deal. Between 1867 and 1927, there were twenty-six increases to the subsidies, twenty-one to provinces governed by the same party as Ottawa, all coming shortly before or after federal elections.
The statistics paint a clear picture. In 1868, the subsidies provided half the revenue of all the provinces; by 1906, they provided a quarter. In 1868, the subsidies consumed 20 to 25 per cent of the federal budget; by 1906, that had fallen to under 10 per cent. At first, Laurier handled the problem the way his Conservative predecessors had, with one-off deals arranged province-by-province, and hints that more might come to friendly provincial governments. The subsidies provided to the new provinces of Alberta and Saskatchewan were very generous and were certainly noted by the other provinces, especially in the Maritimes. But with the economy booming and Ottawa’s revenues rapidly growing, the highly politicized ad hoc approach was increasingly unacceptable. To address the issue, Laurier called the first-ever heads of government meeting, set for January 1906, which was followed by a second conference in October. The federal subsidy was raised from $6.7 million to $9.3 million, a long jump from the $2.2 million of 1867. There was a special addition for BC because of the needs created by its small, scattered population and mountainous geography.
Unlike the case of all ad hoc adjustments of the past, the BNA Act was amended to reflect the changes. The Maritimes still complained that they had been disadvantaged, and in 1912, the new federal Conservative government of Robert Borden provided them a cash settlement of $2 million. Laurier’s “final” settlement was no more final than the previous ones because it did not solve the original problem of an inadequate formula. Within five years, the grants were again insufficient and declining as a percentage of provincial revenue, prompting another predictable chorus of provincial complaints. By the time the Depression hit in 1930, this imbalance between federal surpluses and provincial deficits was one of the most serious problems facing Ottawa and the provinces.
Immigration and Borders: Ottawa vs. BC and Manitoba
When Laurier came to power, the problems over Asian immigration had not been solved. Many of the Chinese workers brought to BC to complete the CPR had remained, and more had joined them. Their presence was bitterly resented by the white population for a combination of reasons including racism, fears that they drove down wages, and health concerns as Chinese immigrants were crowded into slums. In response to public pressure, the BC Legislature continued to pass bills restricting the flow of Chinese immigration, and the federal government kept disallowing those bills in response to pressure from the companies that employed Chinese labour. In 1907, Premier Richard McBride’s government passed yet another bill restricting Asian immigration. There were anti-Chinese riots in Vancouver, and Laurier allowed some reductions in the rate of immigration from Asia. Of the thirty provincial acts disallowed by the Laurier government, twenty of them affected BC, almost all concerning immigration policy. The positions of the two governments were simply irreconcilable, and the only option for Ottawa was to disallow the bills that the BC Legislature kept passing to reflect the interests and wishes of its white population.
Another issue that had bedevilled federal-provincial relations since 1870 was that of the borders of Manitoba. Few issues irked Manitobans as much. Manitoba’s Conservative Premier Rodmond Roblin argued that Manitoba had become a third-class province, not controlling natural resources like the original four, and now greatly inferior in size to its sister Prairie provinces. But Roblin was Conservative, and Laurier refused to deal with him. The main issue in the 1911 federal election was free trade with the United States, with the Liberals in favour and the Conservatives opposed. Free trade was very much in the interests of the Prairies, and Alberta and Saskatchewan voted overwhelmingly for Laurier. Roblin threw his powerful political machine behind the victorious federal Conservatives, and Laurier lost the election partly because he had played politics for too long and treated a province too unfairly. Ottawa’s relations with Manitoba thus played an important role in two of the most important federal elections in Canadian history, the one of 1896, which brought Laurier to power, and that of 1911 which sent him back to the Opposition benches for the rest of his long and illustrious career.