Defining Canadian Federalism And Relative Decentralization Politics Essay

Federalism can be defined as a sovereign state with central and regional governments that can directly regulate the activities of its citizens (McRoberts, Page. Typically, the areas of activities regulated by the levels of government are set out in a constitutional document that can’t be unilaterally altered by one level of government or another. Canada’s constitutional creators chose to dub Canada a Confederation, a system in which the member states are sovereign with equal power to the federal government. Although there is great debate on whether Canada is a true Confederation, there is no doubt that it is federal in Nature. With Federalism defined, we can go onto understanding the unique features of Canadian Federalism. There are three distinctive features of Canadian Federalism: relative decentralization and asymmetry (McRoberts, Page 152). In this essay, I will be examining the financial and bureaucratic relations between the provincial and federal governments and discuss how they help explain the development of Canadian Federalism.

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Relative Decentralization

It is hard to measure the relative significance of federal or provincial jurisdiction but a rough way of determining the level of activity for each level of government is spending (McRoberts 152). With spending in mind, we can conclude that Canadian federalism is relatively decentralized. Not only is the portion of government spending by the provinces relatively high but also have taken on a number of other functions, usually assumed by the federal counterparts, in other federal systems (McRoberts, Page 152). For example, Canadian provincial governments have had state enterprises in a variety of fields like railways and airlines; many provinces maintain government offices in foreign countries; and they have succeeded in imposing a variety of non-tariff barriers to the free trade of goods, services and capital within Canada (McRoberts, Page 152).


A third feature of Canadian Federalism is the degree of asymmetry in the relationships between the federal and provincial governments (McRoberts, Page 153). A wide range of functions are assumed by the provinces and if not, by the federal government. For example, Ontario and Quebec maintain their own police forces; all other provinces have the function performed by the Royal Mounted Canadian Police, under contracts with Ottawa (McRoberts, Page 153). Another example is that Ontario, Quebec, and Alberta collect their own corporate income tax; other provinces have Ottawa collect their corporate income taxes and transfer a portion to those respective governments (McRoberts, Page 153).

The formal definition of federal-provincial responsibilities and functions under the Constitution Act, 1867 are almost the same for all provinces (McRoberts, Page 153). Thus, Canada does not have asymmetry in formal terms underlined in the constitution like most systems. Yet on the basis of federal-provincial agreements and activities, Canada displays an asymmetry that exceeds most federal systems, which is a defining feature of Canadian federalism (McRoberts, Page 153).

Financial Relationships

In 1867, confederation set out to create a highly centralized government; The federal government was given the power to levy any kind of tax, while the province were restricted to direct taxation such as income, or corporate (Dyck, Page 421). Ottawa assumed provincial debts and paid unconditional grants in support of governments and legislatures.

Provincial debts were proven to be inadequate so special grants from the federal government were needed, such as the conditional grants, like the old age pensions (Dyck 421). During the early 1900s, the federal-provincial taxes overlapped in jurisdiction and created a complicated situation of highly decentralized federalism which was further multiplied during the great depression. A royal commission on federal-provincial relations was then created to settle the uncoordinated situation; the federal government assume the function of income and corporate taxation, but would give unconditional grants to the provincial governments(Dyck, Page 422). Since World War Two, Ottawa has taken the lead in establishing the federal-provincial financial relationships; these relationships are represented by three aspects: taxation, block grants and equalization payments.


The taxes in question that were mainly questionable in jurisdiction have been income and corporate taxation. Since 1962, provincial portion of personal income tax was calculated as a percentage of the federal income tax. Aside from Quebec, whose portion has been allowed to vary, the federal tax is standard across Canada, an example of strong asymmetry that is present in Canadian Federalism (Dyck, Page 422).

Block Grants

Grants mostly deal with social policy, funding for post-secondary, healthcare, and welfare. Over the years, Ottawa has been reducing funding for social policy programs by more than 50 percent (Dyck 424). A prime example would be the combining of all the funding for all aspects of social programs into one transfer, the Canada Health and Social Transfer (Dyck 424). These actions have further shaped Canadian federalism into what it is now, by being highly decentralized with provincial governments shouldering most of the costs of social policy.

Equalization Payments

Another aspect of federal-provincial financial relationships have been equalization payments where the federal government has to pay unconditional grants to provinces based on formulas involving national average tax yield per capita. Provinces like Ontario, British Columbia, and Alberta are above the national average and do not receive equalization payment (Dyck 425).

Other Provincial Revenues

Another revenue that the provinces receive are natural resource taxes. They receive revenue from taxes from mining operations, logging operations, petroleum and much more (Dyck, Page 426). The combination of federal grants, direct taxes, and natural resource revenues has contributed to the enhanced status of provinces in the Canadian federal system by granting provincial governments more taxation power than the federal government (Dyck, Page 426). This has lead to the further decentralization in Canadian Federalism.

Bureaucratic Relationships

To understand the bureaucratic relationships between federal-provincial governments, we must first define bureaucracy. The traditional function of bureaucracy is to administer policies established by the executive branch of the government; the prime minister, the cabinet, and legislature (Dyck, Page 534). The Canadian bureaucracy encompasses a large number of governmental departments, agencies, and crown corporations. Their responsibilities and activities cover a wide range from the environment to national defense. For example, the Canadian Armed Forces is under the wing of National defense and is part of bureaucracy.

Much interaction between federal and provincial levels of government take place on a bureaucratic level. The division of powers between the federal-provincial governments is often vague and their jurisdictions often overlap but there is much interaction between the federal and provincial levels of government; Officials often communicate with provincial counterparts in letters, faxes, emails, telephone or more formally with conferences.

One initiative that involved cooperation between the federal and provincial levels of bureaucracy was the Canada Assistance Plan. Both levels of government cooperated to provide funding for social assistance such as employment insurance. With a financial crisis recently avoided, and economy in recession, the levels of government are trying to reduce redundant bureaucratic initiatives that are overlapped by federal and provincial levels of government rather than create new programs that involve both levels of government (Dyck, Page 547).


How has the financial and bureaucratic relationships defined Canadian federalism? First, the financial relationship between the federal and provincial levels of government involve taxation, block grants and equalization payments. Confederation constitution-makers intended the federal system to be relatively centralized, the powers of taxation embedded in the constitution has brought the provinces up on a higher level, not subordinate to the federal government. Although the federal government has the power to levy any type of tax, the power of direct taxation, grants from the government and natural resources taxation has allowed provincial governments to secure high revenues from their respective provinces resulting in higher government spending and activities compared to the federal government. This situation leads to a decentralization of the federal system, not because the federal government has less power or less control, but the provincial government having much autonomy and more control in their own affairs with less federal intervention.

The financial relationship between the federal and provincial levels of government have come a long way but has settled in a very asymmetrical way, defining Canadian Federalism. The problems of overlapping and redundant jurisdiction after the World Wars has been dealt with; the federal government collects corporate and income taxes from most provinces, and the provincial government collects other taxes for revenue. There are continuing relationships between the federal and provincial levels of government but the functions are defined and mostly asymmetrical. Ontario, Quebec, and Alberta collect their own corporate taxes, while Ottawa collects it from other provinces.

Taxation is not the only function which has shaped asymmetry in Canadian Federalism, bureaucracy has also helped to define the asymmetrical relationships between the federal and provincial governments. An example of a large bureaucratic agency which demonstrates the asymmetry in the federal system is the Royal Mounted Canadian Police. Their police services are contracted by many provinces from Ottawa, but some provinces like Ontario and Quebec have their own police force, and the RCMP are not needed there.

Bureaucratic organizations like crown corporations are an example of the relative decentralization in Canada. While in most federal systems crown corporations are owned by the federal government, in the instance of Canada, the province of Ontario owns most of the crown corporations residing in its jurisdiction. Companies like Go Transit, Ontario Hydro, or Ontario Lottery and Gaming Corporation which deal with transportation, electricity or legalized gambling are all owned by the provincial and fall under their control. In the U.K. for example, a larger number of crown corporations are owned and controlled by the executive branches of the government versus the provincial levels.


To summarize, in this essay I set out to examine the impacts of the financial and bureaucratic relationships has had on the development of Canadian Federalism. There is little doubt that Canada’s system of government is federal but there are defining features that make it unique such as decentralization and asymmetry. Decentralization can be seen in the distribution of taxation revenues, and government spending; the provincial government is much more active in comparison to the federal government. For instance, decentralization might be the solution to disorganization and overlap:

aˆ?In some ways, the remedy for the dysfunctions of inter-governmentalism is to have less of it.aˆ? (Simeon and Nugent, Page 105).

Asymmetry is also highly visible in the financial and bureaucratic relationships between the federal and provincial levels of government. The federal government takes on functions like policing and social programs, and the provincial governments have the option of opting out if they provide a suitable replacement for what the federal government offers. In the 2006 election and budget:

aˆ?Emphasis is on re-centring federal spending on core responsibilities such as defence, immigration, justice, and law enforcement and Aboriginal peoples.aˆ? (Simeon and Nugent, Page 105).

Cooperative initiatives involving social programs with the federal government withdrawing support is a good indication of streamlining and the increasing asymmetrical direction that the federal system is headed in. This complicated situation of asymmetric cooperation, whether beneficial or not to everyone, defines what Canadian Federalism is. Thus the long process of solving the problem of overlap of financial and bureaucratic relationships have helped shaped and defined Canadian federalism into what it is now.

Work Cited

McRoberts, Kenneth.(1993). Federal Structures and the Policy Process. Governing Canada: Institutions and Public Policy. Pages 151-177.

Dyck, Rand. (2004). The Bureaucracy. Canadian Politics: Critical Approaches. Pages 533-564.

Simeon, Richard. Nugent, Amy. (2008). Parlimentary Canada in Intergovernmental Canada. Canadian Federalism: Performance, Effectiveness and Legitimacy. Pages 89-106.