by Paul Martin
At an Asia-Pacific leaders meeting I attended in Korea when the threat of bird flu was on everyone’s mind, I was asked by the prime minister of Malaysia why British Columbia had engaged in a mass chicken cull, killing some thirty thousand chickens. I explained that this was the best way of preventing the spread of the disease. One of the other Western leaders then asked the Asian countries why they did not engage in the same kinds of mass culls that the West did when they were faced with the threat of bird flu. We were told that if a farmer discovered bird flu among one of his ten chickens and slaughtered all ten — as he should — it would wipe him out. What he was more likely to do was to go to market with his chickens and sell them all fast, thereby ensuring the disease would spread. Asked why the government didn’t step in, the answer was that most Asian countries did not have the money to engage in the kind of prevention that we did, and even if they did the Asian market system simply did not lend itself to the kinds of action we could take in the West.
The discussion that ensued was quite an eye-opener for both sides. The Western leaders appeared to come to grips for the first time with just how different the market system was in much of Asia with its myriad of small farmers compared to big agriculture companies of the West. On the other hand, many of the Asian leaders appeared to understand for the first time that the threat of a pandemic was not an issue that could be put on the back burner. The problem was that this discussion — an important bridge across the cultural divide — occurred just before the mandatory photo op, which, as in so many international meetings, meant that all serious discussion came to an end.
Subsequently at my request Canada convened a meeting of ministers and officials from the relevant countries to follow up on the opening created by this discussion, and to ensure that the concerns of the world’s leaders were conveyed to the World Health Organization, which welcomed this alarm bell. Not long after that, the threat of the pandemic subsided, however, and as with so many international crises, once it was over the leaders went on to other things, and once again the WHO found itself a voice crying in the wilderness.
The fact is, however, there will be further pandemic threats, and we cannot continue to wait for them to descend upon us before we come to grips with what they represent. I raise this because I know that the Public Health Agency of Canada will play the key role in dealing with prevention in Canada, but I would also hope it will play a leadership role globally in ensuring that prevention not reaction becomes the order of the day whatever the health threat, fulfilling Carolyn Bennett’s dream.
CHAPTER TWENTY-ONE
Sharing the Wealth
The beauty and the challenge of Canada is its diversity. Some of us live in Newfoundland outports or small prairie towns. Others inhabit the high-rise towers of Montreal, Toronto, and Vancouver, or the sprawling suburbs that spill far beyond their boundaries. But we are all Canadians, and part of being Canadian is having similar expectations of what our governments can and will do for our health, education, well-being, and economic development. That principle is broad, simple, and easy for most of us to understand. But the mechanisms for transforming that principle into a practical reality are often complex and arcane. Discussions about them are often played out in the public sphere as federal-provincial squabbles. The public hears the heated rhetoric — which grows more and more tiresome — but for the most part it is only a few policy specialists who understand the details.
When we agreed on the health accord in Ottawa in the summer of 2004, we ended up putting $41 billion on the table for the provinces, and you may think that was the end of the story. But it wasn’t. The support Ottawa gives the provinces for health care is distributed among the provinces according to a relatively simple formula based on their population. So Alberta receives roughly the same amount of support per person as New Brunswick does, for example. The problem, of course, is that the provinces fund much of the healthcare system from their own provincial tax bases, which may be very different depending on the wealth of the province. That’s where equalization comes in.
The idea behind equalization is fairly simple: that Ottawa should transfer money to the poorer provinces to make sure their citizens enjoy similar levels of services to other Canadians. That principle is enshrined in the Constitution in just a few words, but it takes many more to explain how the system works. Under the equalization system, provinces receive money based on a formula that compares their relative wealth — or more specifically, their relative ability to raise taxes inside their borders. The less wealthy provinces are then given “equalization payments” from federal funds to help them close the gap. Those calculations were made every six months, and they shifted according to the changes in the economies of the different provinces. So equalization payments to some provinces could go up and down like a yo-yo. The way the formula worked meant that a serious economic downswing in one of the richer provinces could plunge a poorer province suddenly into an unanticipated deficit through no fault of its own. Because the payments were unpredictable and because they represented an important part of many provincial budgets, some provinces could never be sure whether they could fulfill their health-care obligations.
That’s why, at the health-care conference, we planned another meeting with the provinces and there we agreed to make changes to the program. First we agreed to provide an additional $33 million to assist the less prosperous provinces in meeting their commitments during the ten years of the health-care agreement. Next we made changes to ensure greater stability and predictability, essentially smoothing out the variations in equalization payments by changing the period of time on which the calculations were based to a three-year moving average, to reduce sharp fluctuations and make payments more predictable.
We then committed to a mandatory review of the system every five years to determine whether the overall amount Ottawa was transferring to the provinces should be raised or lowered, and finally we created a panel to report back on the fairness of individual provincial shares of the equalization pie.
If all of this sounds terribly complicated that’s because it is — not the principle, it’s in the Constitution — but the formula, ay, there’s the rub! When I was at the Department of Finance, I was told there was only one person who understood equalization, a fellow named Doug Clark. You can imagine my mixed feelings when I went to his retirement party.
And then there were the Atlantic accords. Not long after I became finance minister, Premier Clyde Wells had appealed to me to help find a solution to Newfoundland and Labrador’s fiscal problems that would allow the province to lift itself up rather than be perpetually dependent on federal assistance. I spoke to Ralph Klein about this and he was very sympathetic to Wells’s concerns. Unfortunately other provinces were not, but I always kept in mind the need we would eventually have to deal with — the intractable financial problems facing Newfoundland and Labrador, as well as Nova Scotia, their sizable deficits and incredibly high debt loads. Both provinces were caught in a no-win situation. Each of them was in such severe financial straights that we had to find a way to repair their balance sheets and I felt it would be better if the solution was based on their own resources.
This is why I sought to strengthen the Atlantic accords. Nova Scotia and Newfoundland and Labrador were on the brink of new oil and gas developments that promised to transform their provincial economies and lift them out of their relative dependence on the rest of Canada. If the accords had been left as they were, much of what they gained in oil and gas revenues would have resulted in reduced transfer payments. In other words, the governments of the producing provinces would not be the prime beneficiaries of the Atlantic oil and gas boom. That would have deprived them of a unique opportunity to shuck off their debts and set off on a new economic and social path. These provinces (and particularly Newfoundland and Labrador) had an opportunity to pull themselves out of an historic hole, not with federal bail outs, but with money they generated within their borders. It would have been a national as wel
l as a regional misfortune not to let them to do so, an unforgivable missed opportunity.
The accords went back to the time of John Crosbie and the Mulroney government. The problem was their real benefits would have ended just when both provinces were about to realize them. I wanted to allow the two provinces the immediate lift they would get from their new oil and gas revenues and extend the arrangements long enough for them to launch themselves on a new economic course. I was not prepared, however, to perpetuate the arrangements indefinitely. They needed to have a termination date.
Unfortunately, our ability to reach a deal was complicated by the fact that we had a negotiating partner in Danny Williams, the premier of Newfoundland and Labrador, whose negotiating style was not exactly built around “getting to yes.” During the 2004 election campaign, I had pledged to ensure that Newfoundland and Labrador and Nova Scotia would be the primary beneficiary of the offshore developments. When Williams raised the issue during the first ministers meeting on health in September 2004, I reiterated my intention to keep my promises to Newfoundland and Nova Scotia. I gathered all the premiers in the room and asked them whether they were prepared to accept that I was going to take action to strengthen the accords. “Speak now or forever hold your peace,” I told them. No one spoke except for New Brunswick’s Bernard Lord, who did not object but indicated he was not very happy.
I do understand, given their history, why Newfoundlanders like to have a provincial leader who is a visible champion ready to take on the powers that be, and I had no problem with that. But when Williams ordered that Canadian flags be lowered at the provinces’ government buildings, I drew a line in the sand and said I would not negotiate with him until they went back up. In any event, we kept at it with John Hamm, the premier of Nova Scotia, and came close to a deal early with him. The problem was that Hamm would not sign until Williams did, which meant that after the flags went back up we had to go through a couple more months of talk before we ratified the deal. My basic purpose was to put both provinces in a position where their debt and deficit positions would improve to the point where they were on a closer footing to the other recipient provinces. This meant they had to use the monies primarily to retire debt. Both premiers agreed to do so. Both kept their word. I hope their successors will honour that understanding.
I stand by the measures I took to strengthen the Atlantic accords. My goal was to provide both provinces with a new start so that in the future they could win through their own efforts. I regret, however, that the negotiations have been perceived as a unique one-off. First of all, the Atlantic accords had been in existence for fifteen years. Second, our intention to proceed was set out at the health-care meeting and everyone knew it. Third, every province enjoys one-off arrangements, though they take various forms. The Auto Pact had enormously benefited Ontario over the years, and subsidies to aerospace have benefited Quebec, just as the accords will benefit the two Atlantic provinces. But these other arrangements were much less controversial, because they were not wrapped up in the public’s mind with the equalization system in which every province has a stake.
The other thing I regret in all of this is that Energy Minister John Efford, who fought vigorously for the accords, and his native province, was attacked at home when the federal government insisted that the deal reflect a fair balance and that it have a termination date. Just as I believed that Williams and Hamm fought for their provinces, so did Efford as the federal minister for Newfoundland and Labrador fight for his province. He also fought for the national interest, as was his responsibility, and this should be recognized.
The federal government has a well-established constitutional right to develop programs and spend money in areas of primary provincial jurisdiction. This spending power is what allows Ottawa to launch or maintain national programs where the issues themselves are national in scope or have national implications. The spending power is what enabled my father and Monique Begin to bring in health insurance and medicare, and what enabled me to introduce a national system of child care and put in place a new deal for the municipalities.
As I have said before, one of my preoccupations as finance minister, and later as prime minister, was to make sure that my generation would live up to its responsibilities to the generations to come. This is why as minister of finance (despite many late-night debates with my departmental officials, who disapproved of the measure), I was so supportive of the government’s decision to extend maternity and paternity leave to a full year. I remember describing those debates to my daughter-in-law years later, after she gave birth to her second child. Watching the two parents cope with two children under the age of two, and talking to their friends in similar situations, I was certainly glad my view prevailed.
This is also why I reacted the way I did, one day in 1996, when a paper arrived at my office, authored by the social policy expert Ken Battle at the Caledon Institute, an important social policy think-tank. The covering letter was almost apologetic, saying that I probably didn’t have time to read the whole document, but perhaps I could take a look at the executive summary. The paper outlined an imaginative scheme for using the tax system to get money to the families with children most in need. It was well known that poor families often found themselves in a “welfare trap.” If mom or dad went out and got a job, usually at the bottom of the pay scale, they not only lost their welfare payments (as well as having to pay taxes and other premiums on their paycheques), but they also lost the many other benefits they and their children received, including, for example, dental and supplemental health care, eligibility for nutritional and early education programs, and so on.
Ken’s idea was groundbreaking: he proposed that the federal government would provide monthly payments to low-income families with children through the tax system. That would allow us to use a sliding scale of need, so that when someone took a job, they didn’t suddenly get cut off from financial support. In exchange for Ottawa taking over the burden of income support for these poor families with children, the provinces would guarantee that the money they saved would be redirected to other programs for helping poor children through early childhood learning, for example, or better nutrition, public health, and dental programs. And these programs would be available to the families of the working poor, who often have been frozen out in the past.
I thought the scheme was ingenious, and I phoned Ken up one Sunday morning to talk about it. We didn’t know each other at the time, and he was plainly a little startled at being peppered with questions from the minister of finance as I played devil’s advocate, trying to suss out any vulnerabilities. At the end, the conversation left me convinced this was the right thing to do, and that we had the resources to do it.
I was very lucky at the time to have Pierre Pettigrew as my colleague at Human Resources. Obviously, Ken’s idea could not succeed without provincial buy-in. Pierre quickly forged strong relationships with his provincial counterparts across the political spectrum. The agreement Pierre worked out with them over the coming months for the National Child Benefit embodied my view of federalism.
True, the federal government was getting directly involved in an area of provincial jurisdiction. But not every national program involves the national standards required of the Canada Health Act. In this instance the federal government was able to build on the provinces’ individual accomplishments, allowing each great latitude in determining their specific needs and in developing the programs to address them. Truth be told, there are considerable benefits in competitive federalism where provinces attack similar problems in different ways and learn from one another’s successes and failures. Thus when I revived the idea of a national child-care strategy after I became prime minister, I was building on what we had already accomplished for the neediest of our children.
My interest in early learning and child care went back to the 1980s, when I first met Dr. Fraser Mustard, the brilliant Canadian scientist and physician who had conducted pioneering work on the relationship between earl
y nurturing and future health and development. He walked me through his thinking about the way in which the minds of infants and young children are wired neurologically, and how that is affected by the care they receive from their very earliest moments, long before they reach school. It was the exposure to Dr. Mustard’s ideas that led me, along with Chaviva and Terrie, to lace the Red Book in 1993 with so many proposals for daycare, nutrition, and literacy. Later on, Margaret McCain, who worked on similar issues, and co-chaired a task force on early learning in Ontario with Dr. Mustard, had a similar influence on me. The ideas of Fraser Mustard and Margaret McCain make it abundantly clear that a child who is well-fed, secure, loved, and well-educated is likely to be a stronger, smarter, more well-balanced, and better contributing member of society.
The debate that ensued was sometimes framed by my opponents as a question of whether children were better off in the home with a parent or in an institutionalized setting. I’m afraid the cattle had long ago left the barn on that one. Whatever some social conservatives might prefer, most Canadian families find the need to put their children in child care at some point, and often for several years until they reach school age. I am also at a bit of a loss to understand how the opponents of child care think that single mothers, not to mention Aboriginal Canadians and immigrants, can acquire the skills and education they need to thrive without adequate child care.
