Federal transfers: A skunk at the 150 garden party

A lot of folks who have been badly treated by the entity named “Canada” have come forward over the last few days to cast a pall over the country’s 150th anniversary celebrations.

Many indigenous Canadians have been speaking out for months in an effort to shift the focus from celebration to contemplation of the treatment of indigenous people since Europeans set up shop on the northern half of North America over 400 years ago. They carried their message to Parliament Hill over the weekend.

In Halifax, some Chinese Canadians were on the news last week drawing attention to the Chinese Immigration Act, which came into effect on July 1, 1923, the 66th anniversary of what was then a very white country. The act, which banned Chinese immigration for the next quarter century, was a ramping up of the racism inherent in the infamous head tax.

Although the grievance pales by comparison, Maritimers who know their history may also want to put an asterisk on the day of celebration.

Because it was in the history textbooks most people know that many Nova Scotians, with Joseph Howe as their advocate, were strongly opposed to the confederation deal.

The provincial government led by Charles Tupper had refused a plebiscite on confederation and pushed it through the legislature in 1866. But the voters of Nova Scotia showed their disdain for confederation a mere two months after it came into effect. In a general election on Sept. 4, 1867, 54 of the 57 successful provincial and federal candidates were anti-confederates.

Many New Brunswickers were just as negative. Between negotiation of the terms of confederation in Quebec City in 1864 and proclamation of the British North America Act (BNA) on July 1, 1867, New Brunswick elected an anti-confederation government. It took skullduggery by the province’s lieutenant-governor and the threat of an invasion from the United States to spook that province into joining the Ontario-inspired confederation project. And PEI and Newfoundland opted out of the plan altogether.

Nova Scotia short-changed

There were a number of factors contributing to the anti-confederation sentiments in the eastern provinces – fear of domination by the more populous Ontario and Quebec chief among them. But in Nova Scotia’s case, the unfairness of transfer payments from the new federal government -still a bone of contention today- was one of the key issues in dispute. Shortcomings of the original revenue-sharing arrangement that came with confederation fuelled the anti-union movement. Negotiated improvements helped quell opposition.

There can be little doubt that the original fiscal terms left Nova Scotia in a bind. There was a two-fold problem. Firstly, as a trading province Nova Scotia took in a disproportionate amount of its revenue from customs and excise, income sources that were assigned to Ottawa under the confederation deal. The second problem was that Nova Scotia had almost no municipal tax base, leaving the provincial level to pay for many services that were paid for with municipal taxes in more urbanized Ontario and Quebec.

Negotiators at Quebec City in 1864 agreed that the provinces should be compensated for lost customs revenue, but deadlocked on the amount of compensation. An estimate produced by Quebec’s Alexander Galt showed that because of its over-reliance on customs revenue, Nova Scotia would need compensation of $1.70 per capita to maintain its operations.

Although the same formula showed that Ontario and Quebec would need only 38 cents per head for provincial purposes, delegates from the big provinces argued successfully that if Nova Scotia received $1.70, all provinces should. That was considered too costly for the federal level and the entire confederation project was in jeopardy until Nova Scotia Premier Tupper stepped up to save the day – at the expense of his own province.

A centralist who believed that provincial governments should be reduced to the status of municipalities, Tupper agreed to compensation of 80 cents a head for all provinces. By Galt’s earlier estimate, that would leave Nova Scotia 90 cents short while delivering a windfall to Quebec and Ontario, especially the latter. Tupper’s compromise solution thus left Nova Scotia with less than half the revenue it needed to carry out its responsibilities.

Better terms?

The impending shortfall didn’t stop Tupper from pushing through the resolution in support of confederation. Neither did it convince British parliamentarians to change the confederation deal, despite lobbying at Westminster by Howe and other opponents. But after Nova Scotia voters sent their strong anti-confederation message in the 1867 election the complaints received further attention.

Notwithstanding the election result, changing the BNA Act to allow Nova Scotia to secede was not going to happen. Britain would not allow it, and the first allegiance of Howe and most other anti-confederate was to the British Empire. However, the John A. Macdonald government wanted to repair some of the political damage in Nova Scotia. To that end, Howe was offered and accepted a post in Macdonald’s cabinet. Nova Scotia was also given “better terms,” which amounted to a temporary 10-year increase of 25 cents in the per-capita subsidy.

The increase still left Nova Scotia almost 40% short of the revenue needed to replace lost proceeds from customs and excise. The Ontario-dominated Liberal opposition in the House of Commons vigorously attacked the “better terms” legislation” anyway. Using a logic that is still being heard from some quarters in debates over federal equalization and health transfers, they argued that the new deal (and additional expenditure of federal revenue) required the approval of the provinces.

If that sounds familiar it would be because we’ve recently heard something similar from the McNeil government. Defending the decision to drop demands for a much-needed demographic top-up in federal health transfers, the Premier and the former health minister have explained that it’s because some other provinces wouldn’t agree to it.

Back in 1869 John A.’s Conservatives rejected that argument, but unfortunately it seems to work for the current federal government. Happy Canada Day.

-30-

 

 

 

 

 

 

 

 

About Richard Starr

RICHARD STARR has had careers as a journalist, public servant, broadcaster, political staffer and freelance policy adviser. He is author of numerous newspaper and magazine articles, appearing in everything from Atlantic Insight to Atlantic Progress. A lifelong student of Maritime history, Starr is married to playwright and former MP Wendy Lill. They live in Dartmouth.
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