On October 25, 1993, Jean Chrétien led the federal Liberals to a convincing victory, winning 177 seats out of 295 based on 41 per cent of the popular vote. Of the other two national parties, the NDP elected only nine MPs and the Progressive Conservatives only two. The separatist, Quebec-based Bloc became the Official Opposition with fifty-four seats, and the western-based Reform Party came third with fifty-two seats. Canada had never been as divided.
The new government soon faced two crises that had been brewing for decades—a financial crisis that almost cost the country its economic sovereignty, and another Quebec referendum that almost cost the country its unity. For ten years, the Chrétien government lurched from centralist to decentralist policies, from unbalanced to balanced budgets, from sharp cuts to expenditure to sharp increases, from being tough with Quebec to being soft. Some of these conflicting trends were pursued simultaneously, and it was sometimes difficult to tell what was happening to federalism under Prime Minister Chrétien.
Given the failure of the Charlottetown Accord, Mulroney’s strategy of attempting to make massive, all-inclusive changes to the constitution was abandoned for the traditional approach of dealing with one issue at a time by legislation or federal-provincial agreement. One of the first examples was the July 1994 Agreement on Internal Trade, the AIT. The proposal had been in the Charlottetown Accord and was designed to reduce barriers to trade involving government procurement and the movement of goods, labour, and professional employees across provincial borders. Another agreement facilitated better co-operation on the environment. Both showed that progress could be made and that elements of the Meech and Charlottetown Accords could and should be implemented.
The Financial Crisis
One of the biggest problems the Chrétien government faced was a very serious financial situation. The national debt had ballooned to $500 billion and the deficit for 1993–94 was an all-time record of $42 billion. Interest on the debt was consuming 36 per cent of revenue, and that proportion was growing. The first budget of Finance Minister Paul Martin made fairly modest cuts to spending, and Chrétien said that there would be no more cuts after the first two rounds. Then, in December 1994, Mexico plunged into a financial crisis, and in January, the influential Wall Street Journal published a front-page article saying that Canada was heading for a similar crisis. There was a good possibility that international bankers would downgrade Canada’s credit rating, which would lead to a sharp rise in interest charges. Ottawa could not afford higher interest payments, and the IMF might have had to save Canada from bankruptcy. If it did, it would impose conditions on the Canadian government’s financial and economic policies, and while those were in effect, Canada would not be completely independent.
This threat produced a complete reversal in thinking by Chrétien and Martin. They now decided that the entire deficit had to be eliminated, and that it should be done quickly. Their goal jumped from cutting a few billion dollars to chopping over $40 billion, an unheard of change to government financing. That required massive cuts to almost every program, including the ones providing financial transfers to the provinces. The financial situation thus put federal-provincial relations near the top of the new government’s priorities, because it had to figure out what programs to cut and how to manage the negative reaction from the provinces.
There was strong opposition within cabinet and caucus to this plan. It undermined a main Liberal policy dating back to the Second World War, namely the centralization of power based on conditional shared-cost programs in provincial areas of responsibility. If Ottawa substantially reduced its share of funding, its leverage would also be reduced. The threat of losing the levers of power touched off bitter fights within cabinet and the party. Ministers who tried to fight Martin lost almost every battle. Those who appealed to Chrétien over Martin’s head also lost, and the cuts could not have been made without Chrétien’s full support. Martin’s second budget, delivered in February 1995, is justly famous in the annals of Canadian constitutional history, as well as financial, economic, and political history.
During that first year in office, Marcel Massé, one of the most powerful and knowledgeable ministers, headed a bureaucratic initiative known as program review. The object was to study every program to determine whether it was needed, whether it was meeting its objectives, and whether it was efficient, the main goal being to reduce costs. Such exercises are fairly routine when new governments take over, but this one took on enormous significance when it became clear that departments had to make massive cuts to their spending. In effect, Chrétien, Martin, and Massé forced an unprecedented level of slashing on almost every department and program.
The budget cuts and program review led to one of the most significant changes ever in Ottawa’s relations with the provinces. Ottawa had been transferring money to the provinces through the EPF, which covered health care and post-secondary education, and the CAP, which covered welfare and social services. The 1995 budget combined both into the Canada Health and Social Transfer, the CHST, to be financed by a combination of federal tax points and cash transfers tied to growth in the GDP. Ottawa then reduced the cash portion of the CHST by $4.2 billion for April 1, 1996, and a further $2.8 billion the following year, a total reduction of $6 billion, from $18 billion to $12 billion, in its transfers to the provinces. In future, the cash component was not to fall below $12 billion in order to leave Ottawa with some leverage over the provinces. The conditions for Medicare were maintained, along with the rule that provinces could not make residence a requirement to receive welfare. The CHST now covered Ottawa’s transfers for welfare, child welfare, social services, post-secondary education, hospitals, and Medicare. The CHST cuts reduced Ottawa’s share of provincial health spending by 25 per cent, leaving it somewhere between 15 per cent, the figure the provinces calculated, and 30 per cent, the figure the federal government calculated.
The cost-cutting exercise was remarkably successful in financial terms. Within two years, the deficit was reduced from $40 billion to $20 billion, the next budget was the first to be balanced in twenty years, and there was a surplus of $12 billion in 1999–2000. But while Ottawa could maintain its conditions for Medicare, it lost the ability to impose conditions on the other programs. There, the increased flexibility allowed the provinces to adjust their systems to local circumstances, and Canada clearly had ten different systems with some important common elements. There were safety nets for the poor in every province, but they varied and no longer reflected the “national standards” that had been a primary objective of the federal programs introduced after the Second World War. By 2000, Canada had moved part-way back towards a more even balance of power between the two orders of government. When a CBC reporter asked Chrétien if the cuts would change the nature of federalism, he replied, “Yes, for years the provinces said, ‘Let us run these programs . . .’ I said, ‘Fine. Run them . . .’ This is changing . . . yeah. It’s changing to respond to the request of the provinces that say, ‘We need more flexibility.’”
The provinces had no choice but to make major cuts to programs. They also had to reduce assistance to municipalities, so the federal, provincial, and municipal governments all reduced the level of their services to the public. In just two years, Canadians saw spending by all three orders of government decline sharply, while levels of taxation remained the same or rose slightly. In effect, the citizens of 1995 were suddenly paying for three decades of government extravagance. The provincial governments were enraged with the cuts to their revenues; the fact that they were imposed without any consultation; the fact that it was Ottawa that had launched most of these programs and imposed them on the provinces; the fact that the provinces had argued since the 1960s that the programs were unaffordable; and finally, the fact that they would face most of the political backlash from the cuts. There was, needless to say, a sharp deterioration in Ottawa’s relations with the provinces, and the howls were as loud in the wealthy provinces as in the poorer ones, and in English-speaking Canada as much as in Quebec.
The Second Quebec Referendum
At the same time, the new government faced an even more challenging problem in Quebec. Canada was heading for the most serious crisis of national unity in its history, more serious than the problems that had forced the colonies to embrace federalism in 1867, more serious than the referendum of 1980. On September 12, 1994, the PQ romped back to power in Quebec and Jacques Parizeau became premier with seventy-seven seats based on 44.8 per cent of the vote. Their election was virtually inevitable given the failure of Bourassa’s Liberals and Mulroney’s soft Quebec nationalists to meet Quebec’s demands in the Meech and Charlottetown Accords.
Parizeau was a hard nationalist and an out-and-out separatist who believed that Quebec should become fully independent. After achieving that status, it would attempt to negotiate some sort of arrangement with the rest of Canada. To him, independence was the important and immediate goal, and any subsequent arrangement with Canada might be desirable but was not essential. His party had promised another referendum on separatism, and he was determined to carry it out early in his mandate. Bouchard, leader of the Bloc of MPs in Ottawa, was a soft nationalist who wanted sovereignty-association, but not outright independence. Mario Dumont and the ADQ were soft nationalists who definitely wanted change and could have been appeased by minor concessions. Chrétien refused to make any gesture, and Dumont joined the PQ and the Bloc for the referendum campaign. On June 12, the three leaders reached a compromise. The referendum would ask: “Do you agree that Quebec should become sovereign, after having made a formal offer to Canada for a new economic and political partnership . . . ?”
It was a clever compromise, and the Quebec Liberals and the federal government naturally condemned it for being vague. But whatever the wording, everyone knew what it meant—if 50 per cent of the electorate voted Yes, Quebec would be headed for independence, and Canada would be sundered into two parts minus its biggest province. The referendum was scheduled for Monday, October 30. Canada was launched on perhaps the most gut-wrenching exercise in its history. Since Ottawa had no plans for dealing with a victory by the Yes side, the short-term effects of such an outcome would be chaos.
Chrétien’s policy towards Quebec was roughly the same as Trudeau’s and the opposite of Mulroney’s, namely, that no concessions should be made because concession would demonstrate weakness and whet the appetite for more. According to this argument, if enough concessions were made, Quebec would eventually become practically independent. This was the opposite of Mulroney’s view that many of the demands of the soft nationalists and Quebec governments were justified and should be met in order to undermine support for separatism. Mulroney and three successive leaders of the Quebec Liberals—Bourassa, Ryan, and Johnson—had tried that approach, but it had failed. Now it was back to the Trudeau-Chrétien tough-love approach. Trudeau’s and Chrétien’s policy defied all the rules of negotiating, which by definition is based on a willingness to compromise. Their goal was the all-out defeat of Quebec nationalism. It was all or nothing, and nothing was now a possible outcome.
At the onset, Chrétien said, “I have a good and clear strategy: it’s faith in Canada. If we provide a good, honest, solid working government, everybody will want to remain in Canada.” The “everybody” obviously did not include the 25 to 45 per cent of Quebeckers who had been telling the pollsters for over two decades that they did not want to remain in Canada. And the idea that Canada enjoyed a “good . . . solid working government” was not necessarily the view of a majority of the Québécois.
The Yes side was headed by Parizeau, with help from Bouchard and Dumont; the No side was headed by Daniel Johnson, leader of the provincial Liberal Opposition, aided by the federal Liberals. It was not clear how Bouchard and Dumont would help Parizeau, and there were animosities and differences amongst them, but few major problems were envisioned in the Yes camp. The No side faced a very different situation. Chrétien and Johnson and their supporters did not like each other, had different if not opposite views of federalism, and there was definitely no trust between the two groups of politicians.
The provincial Liberals believed strongly that a significant amount of power should be transferred back to the provinces from Ottawa, while the federal Liberals believed in maintaining the status quo or making Ottawa even stronger relative to the provinces. This was the same situation that had prevailed during the first referendum campaign, only at that time Prime Minister Trudeau had created the impression that he agreed with the provincial Liberals. The official document issued by the Quebec Liberal Party for the 1995 referendum campaign said that Quebec was a distinct society and should have full autonomy in areas of provincial jurisdiction. That, then, was the official position of the No side, so when the federal Liberals supported the No side, they were endorsing a policy they strongly opposed. Few Quebeckers would be fooled. On constitutional issues, Johnson’s Liberals were closer to their PQ opponents than to their federal allies. Taking advantage of this ambiguity, Parizeau asked Chrétien if Ottawa would withdraw from provincial areas of responsibility as the Quebec Liberals wanted; Chrétien would not and could not give a clear answer.
As the campaign began, polls put the No side ahead by roughly 55 per cent to 45 per cent. Those polls reinforced the view of both the provincial and federal parts of the No side that Quebeckers would never vote to separate from Canada. The softer question had been defeated by a 60–40 margin in 1980; now the harder question would certainly be defeated by at least 55–45. In Ottawa, this complacency reinforced the view that the federal Liberals did not have to do much to support Johnson. That fit well with Johnson’s intentions and strategy, because he did not believe he needed any assistance and probably suspected that help from the federal Liberals could be counter-productive. Chrétien was very unpopular in Quebec, and it was understood that his involvement would be limited to three speeches, while Trudeau was not asked to participate at all. Federal MPs would campaign in their own constituencies, and various departments in Ottawa would continue to pour federal money into the province, especially on advertising the benefits of federal programs and spending with the unsubtle message that all that would be lost in an independent Quebec.
Little changed during the first three weeks of the campaign. Neither Parizeau nor Johnson were inspiring leaders or speakers, the positions were all well known, the polls showed little movement, and the outcome seemed predictable. The responsible federal minister, Lucienne Robillard, was a member of the No committee, but no one there was interested in her views. Federal ministers such as Deputy Prime Minister Sheila Copps were not welcome. When they did contact the No side, they were surprised at how poorly it was organized and how badly its campaign was going, but the polls still pointed to a decisive victory. Chrétien and his Quebec ministers repeatedly assured cabinet that all was well.
In his first speech, Chrétien bragged about French power in Ottawa. This may not have had the desired effect because, over the past three decades, federal ministers from Quebec had not produced the changes the nationalists wanted. Indeed, Quebec’s position within the federation had grown weaker due to the policies and actions of Trudeau and Chrétien, two of the best examples of “French power.” And the drastic budget cuts had been carried out by the three Quebec ministers, Chrétien, Martin, and Massé. Under Mulroney, a weaker team of Quebec ministers had obtained much of what Quebec wanted in Meech and Charlottetown, but that government had failed to implement those agreements. Apart from encouraging bilingualism, having more Francophones in senior positions, and spending billions in Quebec, it was difficult to identify many achievements stemming from the presence of more cabinet ministers and senior officials from Quebec in Ottawa. With the federal debt at $500 billion and Martin’s cuts to transfers to the provinces, it was no longer possible to argue convincingly that separation would make Quebec a lot poorer. In addition, the FTA had shifted part of Quebec’s trade from the rest of Canada to the United States. That was an argument for independence and closer relations with the United States, not for staying in a pan-Canadian economic union. Fortunately for the No side, Chrétien’s Quebec City speech received little coverage.
The Yes side was, of course, fully aware that it was heading for defeat if things did not change. So they made a change. On Saturday, October 7, it was announced that Bloc leader Lucien Bouchard would be the chief negotiator for whatever arrangement might be made with Canada after a Yes vote on independence. Parizeau remained premier, but Bouchard was now de facto head of the Yes campaign. Chrétien thought that changing horses in mid-stream was a sign of weakness and confusion. That was another miscalculation, because Bouchard was the most popular politician in Quebec, a brilliant speaker, a man of intelligence, passion, charisma, and integrity. There was no comparison between him and Parizeau, Johnson, or Chrétien, and he changed the debate from one based on reason to one based on passion, an advantage for the Yes side.
Polls taken between October 15 and 17 showed the No side’s lead narrowing to forty-seven to forty-five. As the Yes side gained momentum, federal ministers grew more alarmed. On October 17, Martin gave a speech in Quebec City in which he argued that there was no guarantee that an independent Quebec would be admitted to NAFTA. That was seen as odd since the United States wanted to expand NAFTA, not shrink it. He also said that 90 per cent of Quebec’s exports could be affected by independence and that a million jobs could be lost. Parizeau immediately pointed out the absurdity of these claims and accused Ottawa of scare-mongering, a view shared and publicized by most of the Quebec media.
The day after Martin’s speech, Chrétien gave his second speech of the campaign, this one to the Quebec City Chamber of Commerce. In it, he raised doubt that there could be a partnership between Quebec and Canada. This was a questionable strategy when decade after decade, between 45 and 55 per cent of the population supported sovereignty-association, proving that they did believe a partnership was possible if not inevitable. Chrétien failed to correct Martin’s musings about Quebec losing a million jobs should it separate.
Although the polls still showed a victory for the No side, Johnson realized he had to promise something to turn the momentum around. On October 21, he reiterated a key statement in the Yes side’s position, saying that the Canadian constitution should recognize Quebec as a distinct society. That, of course, had been Bourassa’s key demand in 1985 and was the main element of both the Meech Lake and Charlottetown Accords. Chrétien was caught off-guard, and when asked to comment, he said that the real issue was separation rather than the constitution. That statement was half right and half wrong. The referendum was indeed about separation, but it was the constitution that had created the referendum, and the solution to Quebec’s grievances lay in constitutional reform, not in simply winning the referendum campaign. His comment was therefore seen as a direct contradiction of Johnson.
The polls changed the following weekend. One on Monday, October 23, showed the Yes side ahead; another on the following day showed it seven points ahead. The complacency of the No side then became a major problem, because they had made no plans for how to campaign if the momentum shifted to the Yes side, as it clearly had done. What they did have was ineffective leadership at both levels, a sharp difference of views about Quebec’s place in Canada, and, in Ottawa, an inability to comprehend the reasons for the strength of separatist sentiment. Suddenly, Chrétien, his cabinet ministers, his backbenchers, and much of the rest of Canada realized that Bouchard and Parizeau could very well win. The question was how to turn the vote around, a question for which Chrétien had no answers. Anglophone ministers from outside Quebec, such as David Collonette, Sheila Copps, and Brian Tobin, urged him to make the two concessions that might win the vote: promising to recognize Quebec as a distinct society and restoring the veto it had lost in 1982.
Chrétien’s position on both issues was ambivalent, a tribute to the political deftness he had demonstrated in his in three decades in politics, but not an advantage in the dying days of the campaign. He would probably have no political problem endorsing both the veto and the distinct society, but doing so on the eve of the vote would look like death-bed conversion. It would also raise a number of questions. If he believed in them, why had he not spoken earlier or reacted positively to Johnson’s request? How could he deliver the two concessions when every previous effort to do so had failed? And what, exactly, would recognizing Quebec as a distinct society mean this time? Though Trudeau was not active in the campaign, no one could forget that he strongly opposed both these key elements in the Meech and Charlottetown Accords and that Chrétien was his key minister for federal-provincial affairs before 1984.
These questions could not be answered, but something had to be done. On Tuesday, October 24, Chrétien told cabinet that he would offer Quebec hope for change in his third and final speech, to be delivered that evening in the Verdun Arena near Montreal. Was this a repeat of Trudeau’s 1982 promise to “renew” the constitution? He gave no details and allowed no discussion. In the speech that evening, he promised to restore Quebec’s veto and recognize the province as a distinct society. Thus two of the most important policy promises in modern Canadian history were decided by Chrétien alone, without the approval of either cabinet or caucus. The following day, he met the Liberal caucus in Ottawa, a group who knew that the country was in danger of disintegrating and that one of the main reasons was the prime minister’s mismanagement of the relationship with Quebec. Chrétien wept; the party remained united; and the federal Liberals seemed to agree at last that Quebec should have a veto and be recognized as a distinct society. Chrétien repeated those promises that evening in a TV address to the nation.
It was not clear at all that the two last-minute promises would turn the tide. Quebeckers were well aware that Chrétien needed support from the nine English-speaking provinces and that Mulroney had failed to implement them in two major attempts over a period of ten years. Unsurprisingly, the PQ scoffed at the promises. Johnson and the provincial Liberals were not impressed either, and Johnson criticized Ottawa for not promising change until defeat was staring them in the face. Nevertheless, the speech appeared to have had a positive effect with the next poll showed the No side in front again by a scant 3.5 per cent margin.
The feeling in Ottawa was that something else had to be done, but no one seemed to know what. Then Fisheries Minister Brian Tobin heard that the Montreal Chamber of Commerce was organizing a rally in Place du Canada for Friday, October 27, three days before the vote. The thought emerged: what if thousands of people from across Canada joined that rally as an expression of their love for Quebec? The idea was immediately and enthusiastically endorsed and plans launched for its execution. Air Canada, Canadian Airlines, and bus companies offered discounts as high as 90 per cent for travel to Montreal. Federal civil servants and employees in many companies were given time off to attend the rally. Tens of thousands of Canadians converged on Montreal, where they were conveniently supplied with a giant maple leaf flag. The rally may have been counter-productive, as some had predicted, because the No side’s lead dropped from 3.5 to 2.5 per cent. As the weekend began, the race was too close to call, and as polling ceased, an anxious nation wondered whether they would have one or two countries come Tuesday.
On Monday, October 30, the referendum was defeated by a vote of 50.6 to 49.4 per cent. The turnout was 93.5 per cent, the largest in Quebec history. Of the electors, 2,362,648 voted to stay in Canada, and 2,308,360 voted to leave, a difference of just 54,288. Quebec would have been independent if 55,000 No sympathizers had stayed at home, if 55,000 more Yes sympathizers had come out to vote, or if 28,000 people had voted differently. Bouchard had almost led them to victory, but his role ended with the campaign. Parizeau was in charge of the Quebec government, and he had a clear plan should the Yes side win. He would immediately declare Quebec independent, take the necessary steps to implement that decision, and see how Ottawa reacted. That would take time, since Ottawa had no plan for dealing with a Yes victory or an immediate declaration of independence. It was not clear what role, if any, Quebec MPs and ministers, including Chrétien, could play after their provincial government declared Quebec independent, and many people in the rest of Canada believed that Quebec MPs and ministers could not represent Ottawa in negotiations with a Quebec that had declared independence.
One of the first results of a Quebec declaration of independence would therefore have been a political crisis in Ottawa over whether Quebec politicians could still be MPs and ministers, including Chrétien himself. The declaration would have violated the Supreme Court’s ruling, but it was not clear whether that ruling would have any meaning—how could a court with six English-speaking justices overrule the democratic decision of several million Quebeckers? As far as Parizeau was concerned, the Court would no longer have any influence over Quebec’s destiny, as its sovereignty lay in the hands of the people who had just voted for independence.
But the Yes side lost, and an infuriated Jacques Parizeau said that the outcome reflected money and the ethnic vote. This was probably true, as non-French Quebeckers voted overwhelmingly against independence and Ottawa had been pouring billions of dollars into Quebec for decades with the goal of buying support. That included the enormous advertising budget launched after the election of the PQ in 1994. The travel subsidies for the Montreal rally probably also violated the referendum rules. But Parizeau’s statement was a political blunder because it suggested that independence was designed for the Québécois and not the rest of the population. He resigned immediately and was replaced by Bloc leader Bouchard.
Quebec: A Veto and Status as a Distinct Society
Back in Ottawa, Chrétien faced some enormous problems. Many in the cabinet, caucus, and party remained opposed to his two promises. He wanted to put an end to the Quebec problem as quickly as possible, but few others agreed. The rest of Canada had not been consulted, and in the past, it had repeatedly made clear its opposition to recognizing Quebec as a distinct society. Two days after the referendum, Chrétien met with new Ontario Premier Mike Harris, but he was strongly opposed to the changes. Harris and the premiers also opposed a hasty approach to the Quebec problem. Clearly, Chrétien would not be able to obtain an amendment to the constitution to implement his two promises.
The next best option was unilateral federal action, and Chrétien decided to use that means to “lend” its own veto to Quebec. If Quebec made clear that it objected to some proposed amendment, Ottawa would veto that proposal on Quebec’s behalf, even if Ottawa favoured the proposal. That would be unfair to the other provinces, a case of “special status” that went far beyond anything envisioned in either the Meech or Charlottetown Accords, so Chrétien had to devise a suitable formula covering all the provinces. The one he proposed was familiar to anyone who remembered the aborted Victoria Charter of 1971. By it, four regions had vetoes: Ontario and Quebec, and any two Atlantic provinces and any two western provinces with 50 per cent of their respective populations. Ottawa would thus pass legislation saying it would refuse its own approval to any amendment that any of these regions opposed, and Quebec would have its veto back.
British Columbia had never seen itself as merely part of a western Canadian region—that was a view from east of the Rockies. In 1971, it had reluctantly gone along with the Victoria Charter, but since then its growth had substantially outstripped that of the Prairies and its sense of identity as a separate region had grown as fast or faster. Now, BC demanded that it be treated as a region and have its own veto, just like Ontario and Quebec, and Chrétien agreed. Alberta did not see itself as inferior to BC, but oddly, if BC was no longer part of the western region, then Alberta had over half the remaining population of the Prairies and would therefore have its own veto too.
Instead of requiring the support of any seven provinces with 50 per cent of the population as the constitution dictated for most amendments, change would now require the support of Ottawa, Ontario, Quebec, BC, and two more provinces from Atlantic Canada and the Prairies. So the number of provinces required had changed to seven or eight, but the population they represented had jumped from 50 per cent to 90 per cent, which actually made constitutional change almost impossible. Parliament passed the legislation on February 2, 1996, leaving political scientists mystified and Canadians confused. What, exactly, had the five decades of debate about the amending formula been about? Was the outcome worth the effort? And what was the outcome—the amending formula in the Constitution of 1982, or the one in the new federal legislation? And how could a federal law overrule the constitution? Apparently, Chrétien had contacted Trudeau over the issue, but what they discussed was not revealed, possibly because a crucial part of Trudeau’s 1982 constitutional package was now being trashed.
Alberta was not the only province to object to BC being recognized as a separate region. Chrétien’s new legislation was designed to give Quebec back its veto, but now BC also had one and it was smaller than Quebec! The Québécois noted that in six days of discussion, BC gained something Quebec had been fighting for ever since 1982, and had gained it only because of Quebec’s referendum. And Alberta, with a fraction Quebec’s population and much less “distinctiveness,” had not even demanded a veto but got one anyway. Once more, Bouchard, the Bloc, the PQ, and the soft and hard nationalists could complain that Quebec was being “slighted.” They were also well aware that the Chrétien government itself and any future government could take away the veto by simply repealing the federal legislation. That only required a vote in the Commons of 50 per cent of the MPs, and Parliamentary majorities often represented only 40 per cent of the population, certainly not the 90 per cent required in the new formula.
Fifty years of debate had produced this mess of an amending formula and guaranteed that most future constitutional changes would be made by legislation and federal-provincial agreement, not by the process agreed in the constitution. The Constitution of 1982 would thus grow more and more irrelevant. It was no wonder that Canadians increasingly honoured the Charter of Rights and Freedoms, because it was one of the few parts of the constitution that still made sense. In a bizarre twist to constitutionalism, Chrétien’s compromise reversed the concept that a constitution overrode legislatures because his new formula overrode the one in the constitution! This process only operated in one direction though—Quebec could now have a change it did not want vetoed by Ottawa, but it would be almost impossible to obtain any change it wanted. Some might have wondered if patriating the constitution had been worth it.
Honouring the second major promise—recognizing Quebec as a distinct society—was much easier as it could be done through federal legislation that did not involve any province other than Quebec. The objection of Trudeau, English-speaking Canada, and the other nine provincial governments to inserting a distinct society clause in the constitution was that it supposedly gave Quebec powers the other provinces did not have. Recognizing Quebec as a distinct society through federal legislation clearly did not bestow any addition power on the Quebec government and could be ignored or repealed by any federal government. On December 11, 1995, Parliament recognized Quebec as a distinct society.
Whether Quebec had obtained half a loaf, a slice of bread, or some crumbs depended on one’s point of view. What observers could clearly see, however, was that the two most important and controversial elements of the defunct Meech and Charlottetown Accords had now been implemented. And since the Charlottetown Accord had been rejected by the Canadian people in a referendum, Parliament was now overriding the will of the people. Thirteen years after the adoption of the Charter of Rights and Freedoms, Canadians once more discovered that sovereignty still lay with the government, not the people, and with the legislative branch, not the judiciary. This time, Trudeau was strangely quiet as Chrétien implemented Mulroney’s main Meech and Charlottetown proposals.
Carrots and Sticks
Chrétien then decided to bury whatever remained of the threat of separatism. For decades, Quebec provincial Liberals and some federal Liberals had been calling for concessions, for a positive federal approach to Quebec’s demands. More recently, the Reform Party had been calling for a tough approach to Quebec. Chrétien decided to embrace both approaches more or less simultaneously and they became known as Plan A, the soft approach, and Plan B, the tough one, a classic example of carrots and sticks.
A key element in that strategy was recruiting the Quebec academic and constitutional expert Stéphane Dion. As the new Minister of Intergovernmental Affairs, Dion mapped out a clear strategy to replace the fuzzy thinking that had almost led to disaster. To implement Plan A, the government would use legislation to provide a number of the concessions that had been demanded by Quebec Liberals for decades. The list was outlined in the Speech from the Throne in February 1996. Ottawa would devolve to all provinces control of mining, forestry, social housing, recreation, tourism, and manpower training. Ottawa’s spending power was also to be clarified and perhaps limited. The list was hardly surprising—all these elements had been in the defeated Charlottetown Accord.
All Ottawa had to do to satisfy the provinces on social housing, recreation, and tourism was reduce or suspend its programs. In the case of mining and forestry, the responsibilities were really being transferred back to the provinces, because the BNA Act listed them as exclusively provincial. Ottawa also signed another agreement with the provinces on harmonizing environmental policies, which reduced that area of friction. Plan A also included a continuation of massive federal spending on advertising in Quebec, a program that would play a crucial role in the defeat of the federal Liberal government in January 2006.
Abandoning manpower training was more complicated. Ottawa had managed the UI plan since 1940, but in some cases the unemployed needed more than half a dozen monthly payments to tide them over until they found another job. Sometimes they needed training for a different type of work. Federal bureaucrats and politicians had long concluded that federal government responsibility for “unemployment insurance” could be expanded to mean responsibility for “unemployment,” and that could include retraining the unemployed. Ottawa began using part of its unemployment fund for the retraining of unemployed workers. These programs were often shared-cost with the provinces administering them.
As usual, the nine English-speaking provinces welcomed the federal program because it freed up provincial funds for other purposes. As usual, Quebec objected because manpower training was education and education was a provincial responsibility. Manpower training thus joined the long list of conflicts between Quebec and Ottawa. Now, in 1995, Ottawa was retreating from shared-cost programs. There did not appear to be any compelling reasons for the federal government to be involved in programs, which all provinces were operating and where needs differed widely. The downside included duplication, waste, and, with Quebec, a fight in which political dimensions were vastly out of proportion to any economic benefits of federal involvement.
Chrétien was still opposed to transferring manpower training to the provinces, but two of his most powerful cabinet ministers—Paul Martin and Treasury Board Secretary Marcel Massé—wanted to downsize and rationalize the federal bureaucracy, and both, as MPs from Quebec, wanted to decentralize power to Quebec to undermine support for separatism. That, of course, was Mulroney’s policy. Neither saw how federal involvement in training unemployed people was essential for the preservation of national unity or the power of the federal government. Chrétien finally agreed, and Ottawa withdrew from manpower training, or, as the Québécois would say, from one part of the exclusive provincial field of education. There were separate agreements with each province, and Ottawa provided the provinces with the amounts it had previously been spending on the program with relatively minor conditions. The manpower agreement was signed in November 1997, and it did not undermine national unity.
Going hand in hand with the carrots in Plan A were the sticks in Plan B. At the top of the list was ensuring that the next referendum question, if there was one, would be worded clearly, something the Reform Party had been demanding. Only the government of Quebec could draft the question, which meant some mechanism had to be established so that the rest of Canada could decide whether they accepted that the wording was clear. A second matter was whether a vote of 50 per cent plus 1 was sufficient for Quebec to achieve independence. By participating in both the 1982 and 1995 referendums, and by making it clear how important those referenda were, Ottawa had de facto recognized that Quebec’s 50 plus 1 formula was the benchmark for those votes. What it wanted to do now was move the goalposts by requiring a higher percentage vote to separate.
The PQ, for its part, could point out that 50 per cent plus 1 was the normal rule for democratic decisions, and had been the accepted number for the referendum on the Charlottetown Accord and for Newfoundland’s referendum on joining Confederation. The counter-argument regarding the Newfoundland vote was that breaking up a country should require a higher threshold than joining one. That, however, implied that for joining a country, Yes votes counted the same as No votes, but for separating, No votes carried more weight than Yes votes. For Quebec, that meant that the No vote of an English-speaking Quebecker was worth more than the Yes vote of a Québécois voter, a rather blatant discrimination against a majority and a clear distortion of democracy. The matter was tricky indeed.
In September 1996, Ottawa made a reference case to the Supreme Court for an opinion on Quebec’s right to independence. Premier Bouchard was furious. He believed that only the people of Quebec had the right to decide how their future would be determined and that the issue was political, not constitutional. For him and others, the matter certainly should not be decided by a court that was appointed by the federal government, with six of its nine judges being Anglophones from outside Quebec. Almost 70 per cent of Quebeckers opposed the reference to the Supreme Court, including Johnson, Ryan, and federal Progressive Conservative leader Jean Charest.
On August 20, 1998, the Court handed down its unanimous decisions. It said that Quebec did not have the automatic right to secede and that secession must meet four criteria: constitutionalism, federalism, democracy, and respect for minorities. Thus the will of the majority had to be given weight, but so must the will of affected minorities. Quebec could secede only through the legal process, the rule of law. That meant that Quebec’s separation required an amendment to the Canadian constitution, and an amendment of this importance fell under the unanimous rule by which all provinces would have to agree. This was a major victory for the federal government and for Quebec’s minorities.
But the Court also said that in the event of a clear decision on a clear question, the rest of Canada had an obligation to negotiate. That was a firm rejection of the position of Ottawa and the other provinces. The Court also said that the size of the majority and the wording of the question were political, not constitutional, issues. The verdict was generally seen as a balanced, important, and judicious decision, with both sides having won partial victories and the issues tossed back into the political and federal-provincial arenas.
The Court’s rejection of Quebec’s right to secede unilaterally may not have been as valuable as some people thought. Premier Bouchard said that Quebec was not bound by the decision, just as it had not been bound by the 1982 Constitution. On the day of the 1995 referendum, Parizeau was prepared to declare unilateral independence if the Yes side won, and the Supreme Court had no power to prevent a future Quebec government doing the same after another referendum. However satisfying the decision, it left the rest of Canada with the problem of what to do if a future Quebec government defied the Supreme Court and sending in the army was not an option. The importance of the Court’s decision lay, rather, in its effects on the voting in a future referendum as it would certainly strengthen the No side.
The Supreme Court decision left unanswered the question of what was a clear majority and a clear question. The federal Liberals were sharply divided on whether the government should introduce legislation setting out its views on the two issues. The danger was that such legislation could inflame opinion in Quebec and create the very “winning conditions” the PQ said it wanted to see before launching another referendum. A large majority of ministers and MPs were opposed, but Chrétien’s gut instinct told him it was the right thing to do. The Department of Justice had great problems trying to draft the legislation, and its minister, Allan Rock, tried several times to talk Chrétien out of it.
Eventually, the Clarity Act was presented to Parliament in 1998 and passed in January 2000. It did not say what a clear question or majority was, but it stated that soon after Quebec tabled its referendum question, Parliament would determine whether it accepted that the wording was clear. If it decided the wording was not clear, and Quebec did not change it to meet Parliament’s demands, then Ottawa would not have to negotiate. If it was clear, then Parliament would determine whether the majority was adequate. Again, if it found the majority too small, then Canada did not have to negotiate any new arrangement with Quebec.
The Clarity Act thus put a future Quebec referendum under the control of a Parliament with over three-quarters of its members drawn from outside Quebec. In 1949, the British writer George Orwell published Nineteen Eighty-Four, the book which famously predicted that, in the future, government statements would reach a level of distortion in which words would be used to mean the opposite of what they said. The Clarity Act was a wonderful Canadian contribution to the Orwellian lexicon, because it was anything but clear. With no fixed time limit to decide if the majority was adequate, Canadians might not know for days, weeks, or months whether the majority was acceptable to Ottawa. What if the House of Commons said it was, and the Senate said it wasn’t? What if MPs from Quebec said it was, and those from the rest of Canada said it wasn’t? Or vice versa?
The Bloc and the Reform Party had said that 50 per cent plus 1 was adequate; the Liberals had said it was not, at least not any longer, since they had campaigned in 1980 and 1995 on the basis that a 50 per cent margin would lead to separation. A Commons decision on the acceptability of a Quebec referendum would therefore depend on the strength of various parties in the House at the time of the next referendum, something that was totally unpredictable. An important question that had already arisen was whether MPs from Quebec would have any legitimate status in the Commons after their province had voted to separate. Another question was how the Commons would interpret the vote if most Quebeckers wanted to leave but the west end of Montreal, the Quebec side of the Ottawa valley, and the north voted substantially or overwhelmingly to remain in Canada, as most people expected.
For Quebec, this was another example of Ottawa both making the rules governing the hockey game and being one of the teams playing the game. In this case, it would decide if the game was being played fairly, and after the game, it would decide how many goals were required to win, whether controversial shots counted, and when the winner would be announced. One thing the Clarity Act did make clear was that Ottawa and the rest of Canada would decide whether Quebeckers had voted for separation. If its purpose was to tell the Québécois that separating was going to be far more difficult than they previously imagined, then that purpose was well served. The Act was, of course, rejected by all of Quebec’s provincial political parties and was opposed by federal Progressive Conservatives, the NDP, and the Bloc. It was opposed by parties representing a majority of Canadians and the overwhelming majority of Quebeckers. Then to avoid appearing to give recognition to Quebec’s special status, it was applied to all provinces, none of which had any interest in separation, a move that theoretically weakened federalism.
As a reaction to the Clarity Act, the Quebec Assembly unanimously passed the Fundamental Rights Act on December 7, 2000. It stated that the required majority was 50 per cent plus 1, that Quebec’s territorial integrity could not be compromised, that Quebec was sovereign in provincial areas of responsibility, and that it had the right to self-determination. It also stated that the legitimacy of the Assembly flowed from the sovereignty of the people; that treaties affecting provincial matters could apply to Quebec only if approved by its Assembly; that French was the language of the province; and that minority rights, including the rights of eleven named Aboriginal nations, had to be respected. Unlike the federal Clarity Act or the Constitution of 1982, it was a model of clarity.
Another part of Ottawa’s hardball strategy was to raise a number of questions that would cause unease amongst many Québécois who might be leaning towards separation. Accordingly, Stéphane Dion stated that if Canada were divisible, then so was Quebec. This referred to the possibility of west-end Montreal, the eastern half of the Ottawa Valley, and the Inuit-dominated north remaining in Canada. Quebec, however, was a province with a government, recognized borders, geographical unity, and the presence of a number of foreign consulates, which implied that foreign countries understood it to be a political state. The three regions in question had none of those characteristics. The statement was inflammatory and divisive, even within the federal and Quebec Liberal parties and among Quebec’s minorities. It raised serious questions such as where any borders would be, how they would be decided, and whether force would have to be used to separate the three areas from Quebec. The questions helped serve the purpose of sowing unease over separation. Bouchard said Quebec’s territory was indivisible and denounced the statement, and both Bourassa and Johnson supported him.
In the years following the near-death experience of the referendum, support for separatism declined significantly. Chrétien claimed credit, but a number of factors were responsible. Losing the second referendum took the steam out of the separatist campaign. Parizeau’s post-referendum comments and resignation were serious blows. The restored veto, recognition of distinct society status, and Ottawa’s withdrawal from mining, forestry, recreation, tourism, and manpower training addressed some of the grievances that had led so many Québécois to see separatism as the only way to be masters in their own house. And Plan B probably made a number of those who voted Yes in the referendum think twice about voting that way again.
Perhaps more importantly, the loosening of federal control over shared-cost programs that accompanied the cuts in Ottawa’s contribution to those programs removed part of the grievance that had first led Lesage to challenge federalism as it existed in 1960. Many of the grievances that had produced separatism had been solved by Quebec governments themselves, especially the threat to the survival of the French language, the domination of the economy by non-Francophones, and the disparity in income between Francophone and Anglophone Quebeckers. Though the referendum had been very close, it revealed an important and growing demographic gap: younger Québécois did not share their parents’ dislike and distrust of the federal government and of English-speaking Canada. They were likely to be comfortable speaking French in Montreal and English in Florida, and as the separatist generation died off, support for separatism declined.
More Changes to the Functioning of Federalism
While the nine English-speaking provinces were not interested in constitutional change, they were still very interested in changes to the functioning of federalism. They wanted a clarification of the responsibilities of the two orders of government, the elimination of duplication and overlap of federal and provincial programs, stability and predictability in federal financing, co-operation in implementing programs, a provincial role in the development of new ones, and a legitimization of the whole shared-cost system. Some of these issues would have been solved by the Meech or Charlottetown Accords, which they had negotiated and signed, and they now intended to see such resolutions implemented through federal-provincial agreements. This would provide a considerable degree of the renewal of federalism that had been promised repeatedly and would demonstrate to Quebec that federalism was flexible. The nine English-speaking premiers reached agreement on this package of demands at a conference in 1996. This was the sort of thing Bouchard wanted, and he joined the process.
The most important element was the section on the federal spending power. Gradually all of the provinces had come to share Quebec’s concerns, but none to the same degree. After the experience of the 1995 referendum, the nine English-speaking provinces decided to address it, and they agreed on the formula Quebec had been advocating since the 1960s. Ottawa could launch programs on provincial matters, but if any province decided not to participate, it was to receive its share of the money to spend as it chose. That, of course, was what the Gang of Eight had agreed on in 1982. Ottawa remained inflexible: a province could opt out of the federal financial arrangements for a program only if it had a similar program. The federal government would continue to dictate priorities to the provinces and articulate the broad outlines of the policies they had to implement in those programs. Ottawa did respond to the provinces’ demand for prior consultation and input, saying that any new programs would require the agreement of any six provinces.
The nine English-speaking provinces accepted this position, but Quebec was furious. Ottawa had now obtained provincial agreement to its ability to use the spending power. Not only that, the formula—approval by any six provinces—meant that the six smallest could legitimize a new federal encroachment on provincial responsibilities, and they accounted for less than 15 per cent of the population! Politically, the new arrangement provided an even lower bar because the six smallest provinces were also the six poorest, the ones that benefited most from shared cost programs, the ones that had supported Ottawa’s encroachment on provincial jurisdiction for half a century. That made Ottawa’s “loan” of a constitutional veto to Quebec meaningless, because the federal initiatives that mattered to Quebec came under the weak spending power rules rather than the tougher constitutional amendment rules.
This was one of the most centralizing policies ever enacted in Canada, the reversal of whatever trend towards decentralization Chrétien had been forced to implement in the wake of the 1995 referendum. Once more, Ottawa and the nine English-speaking provinces had shifted the balance in federalism significantly towards English-speaking Canada and Ottawa. Once more, Quebec was helpless to prevent the new concentration of power in the nation’s capital. Once more, Ottawa was managing the federation through the policies of divide and conquer, this time playing the poor provinces against the rich and the English-speaking ones against Quebec. In this constitutional repeat of the Battle of the Plains of Abraham, Quebec had suffered another conquest.
The new arrangements were documented in the Social Union Framework Agreement, or SUFA, which was signed by Ottawa and the nine English-speaking provinces in February 1999. There was agreement that both orders of government would advise the other of any major change to social policy that might affect the others’ programs, and both would consult on implementing them. Ottawa had to inform and consult the provinces three months before implementing new agreements. Any new federal program negotiated with one province had to be available to all. Quebec was more isolated than ever, but it was also more “distinct” and “special” because it alone refused to sign the new agreement. SUFA marked the further implementation of elements of the Charlottetown Accord, but in this case they were ones Quebec did not want.
Meanwhile, Martin’s cuts to federal spending were so severe that the budget was balanced by 1997, and the surplus mounted rapidly due also to a burgeoning economy and the success of the GST in raising revenue. Ottawa spent part of the surplus on large tax reductions—good economics and good politics. Part went to pay down the debt of $500 billion, which was the cause of the financial crisis. The government had three options for the large remaining surplus: increase spending in federal areas of responsibility, such First Nations, that were drastically underfunded; restore part of the reductions it had made to transfers to the provinces, which had left them in such dire circumstances; or launch new initiatives in provincial areas of responsibility.
Old habits die hard, and Ottawa began launching new programs with all the dangers and problems they implied for the state of federal-provincial relations. The centre of the new initiatives was Paul Martin and the Department of Finance, fresh from their victories over the deficit and greatly enjoying the power within government that those successful battles had yielded. Martin was concerned with the state of higher education and issues such as Canadian weaknesses in the fields of innovation and research. The logical focus for any federal programs in these fields would be the Department of Industry, which had just faced a budget cut of 60 per cent, but Martin was planning to establish the Canadian Foundation for Innovation, CFI, as an arms’-length organization to support research in universities and research foundations. He not only ignored the relevant department but also the fact that previous federal grants to universities had created so many problems that Ottawa had gradually withdrawn from shared-cost programs in that field.
Another new program was the National Child Benefit. It was announced in July 1998 and was the first new social program in three decades. This plan was aimed at lower-income families and addressed the fact that, under provincial social assistance, a family could be worse off if the parents obtained a low-paying job and lost the benefits of welfare, a policy that encouraged them to remain on welfare. Under the NCB, the family did not lose those benefits. Quebec had its own program in this area and did not participate, but the program did not create problems between Quebec and Ottawa. Another example of successful federal-provincial co-operation from this era was the Canada-Wide Accord on Environment Harmonization of January 28, 1998.
The 1998 Millennium Scholarship program was another new and controversial federal incursion into the field of education. An endowment of $2.5 billion was given to a foundation in order to provide $325 million annually in university scholarships, mainly for poorer students. Canadian universities were facing serious financial problems, partly because of the cutbacks in provincial funding as a result of Martin’s budgets. They and the provinces were wrestling with all the problems that created, and raising tuition fees was only one part of the solution. The Millennium Scholarships helped tens of thousands of students pay higher tuition, but did nothing for the students who did not receive them and nothing for all other areas where universities were facing difficulties. That was not the way provinces and universities would have used the money, especially as circumstances varied between universities and provinces. This was another “one-size-fits-all” program launched by a government with little or no expertise on the situation in the dozens of institutions of higher education across the country, but with a sharp eye to the political appeal of such a program.
Quebec predictably condemned the program as a violation of the constitution. In his memoirs, Martin says that he consulted the Ontario and Alberta finance ministers and a number of Quebec universities, but he does not mention contacting any ministers of education or anyone in the Quebec government. The provinces were furious and they demanded that, instead of scholarships, Ottawa should restore the previous level of funding. The initiative was a contradiction of other thrusts towards better co-operation, especially the spirit of SUFA, which carried the promise to consult.
Ottawa was also expanding its role in other areas, one being using the UI fund to cover maternity leave. That duplicated a Quebec program, and Quebec regarded maternity leave as a matter of welfare. UI was designed to help unemployed people who were able to work until they found another job; pregnant women were unemployable and needed paid maternity leave. Both governments proceeded to develop their own programs, and the fact that there were provincial ones called into question the need for a federal one. The dispute went to court where the Quebec Court of Appeal upheld Quebec’s position. Ottawa appealed that to the Supreme Court and won, leaving both governments with overlapping programs and a new issue of constitutional conflict and confusion. Canada was becoming even more asymmetrical as Quebec refused to join these new federal programs while the other nine provinces welcomed them.
The Chrétien government knew that the cuts in transfers to the provinces had weakened Ottawa’s ability to impose conditions on the provinces. One of Chrétien’s top priorities was therefore to restore some of the federal funding for health care to get back more leverage over the provinces. Transfers to the provinces were thus increased substantially in the budgets of 1999 and 2000. These increases did not bring Ottawa’s contribution close to the 40 per cent of the original health schemes, and the provinces desperately wanted Ottawa to raise funding towards that level. Ottawa saw this provincial desperation as an opportunity to assert more control. At the federal-provincial meeting on health in September 2000, Chrétien announced that the amount of the new federal offer was non-negotiable, but in return for that money the provinces had to commit more expenditure to four specific areas: primary care, home care, drug costs, and hospital equipment. It also demanded new accounting practices for the monies. These were additional conditions to the original four of the 1967 Medicare scheme, which had grown to five in 1984.
Any province that did not agree would receive no money. Six provinces, including Quebec, objected but eventually had to accept. This incident indicates that after cutting its share of health to around 25 per cent and promising co-operation, Ottawa was still acting unilaterally and was restoring part of that money in return for new and additional conditions. It had returned to the policy of using the federal spending power to encroach on provincial responsibility, the policy that had produced three decades of political crisis and the rise of separatism, as well as contributing heavily to the financial crisis of the 1990s. It was also cherry-picking provincial priorities for spending, because the four areas it identified were among dozens that needed more money, each having different priorities in the ten different provincial health budgets.
The Chrétien era had been a roller-coaster of conflict between Ottawa and Quebec, the decline and resurgence of Ottawa’s ability to use its spending power to impose its views on provincial programs, the near-death experience of the 1995 referendum, the soft Plan A attempt to meet Quebec’s legitimate concerns combined with the tough Plan B effort to make separatism unpalatable and more difficult, and the federal government’s reassertion of its right to impose its programs on the provinces in their areas of responsibility with the money freed up by the cancellation of its previous commitments. On November 13, 2003, a reluctant Chrétien passed the federation to the overly eager Paul Martin, whose long list of proposals and priorities included many that affected the provinces. Martin’s optimism was welcomed, because polls taken at the end of the previous century had revealed deep pessimism about the future of Confederation.