Hell or High Water

by Paul Martin

  In the Red Book, we had put the emphasis on a national daycare strategy that unfortunately fell foul of our absolute priority to get control of our finances in the mid-1990s. But now the time had come. We started working on our strategy as soon as we were elected, and it was developed under the guidance of Ruth Thorkelson in my office and Yaprak Baltacioglu at the PCO. Ken Dryden was the minister who went out and made it all happen. The idea was not to impose a one-size-fits-all child-care plan on the provinces. The provinces already had different approaches to for-profit and not-for-profit child care, for example. Furthermore in the latter case, some charged parents a fixed daily rate, while others had a scale related to income. I didn’t think it was our job in Ottawa to impose our strictures on each of these issues.

  The idea was to build a national child-care program based on provincial structures in place and working together to fill in needed gaps. Ken is quite simply a star, and not only because of his hockey career. His low-key seriousness and obvious goodwill meant that he was extremely effective in building relationships with his provincial counterparts, and because of this he achieved a profound level of commitment from the provincial social development ministers. Unfortunately, because the provincial systems were so different, and the level of attachment to child care so varied, discussions involving all the provinces tended to drift toward general “principles” that would have led us to committing very large sums of money under the vaguest of rules.

  Therefore our approach quickly became to focus on a bottom line: to make sure that each province made substantial progress toward more regulated child-care spaces and toward enriched early learning. While the starting points and the paths to that objective might vary, the important thing was that the goals be defined for each province in a readily measurable way. None of us wanted to reach a national agreement that amounted to us transferring a large amount of cash based on general principles and nothing but provincial goodwill.

  Eventually, Ken started negotiating individual agreements with the provinces, beginning with Manitoba because they already had a well-developed system that emphasized early childhood learning. Our idea was to establish as much as possible a model for the rest of the country. Because the provinces were so different the negotiations were tricky at a technical level. Some provinces, such as Alberta, had highly measurable minimum standards with regards to space and staff-to-child ratios, for example. Other provinces, including Manitoba, had more sophisticated goals, related to the quality of curriculum, that were also more challenging to measure. Nonetheless, the province-by-province approach proved to be much more effective than trying to cobble together a single national agreement. It was also a recognition of the asymmetrical reality of Canada. In the months that followed, we signed first with Manitoba, as we had planned, and then with the other provinces one by one, until at the end we had a truly national agreement.

  These signing ceremonies were joyous occasions, in part because they were invariably attended by child-care workers who were proud to have their work recognized in such a visible and substantial way. There was only one problem from my point of view. We usually set up the signing ceremonies so that Ken would sit beside the provincial minister and ink the documents, while I stood behind them smiling proudly at what we had accomplished along with the premier. But the cameras didn’t start flashing until they stood up for the ritual handshake — with me now having disappeared from view behind Ken’s six-foot-four frame.

  It is a tragedy that when they came to power, instead of building on what was a major breakthrough, the Conservatives decided to cancel the early learning and child-care program. They replaced it with a gimmicky political contraption rather than a serious effort to address the issues involved, and then after the election they reneged on their own promise to create more daycare spaces. Sadly, it is not just the children as individuals who will have lost precious years of opportunity, but Canada as a nation. What gives me some solace is that the agreements we achieved in my time as prime minister represent a template that a future government will inevitably draw upon. I mean “inevitably.” This is not about whether, but when.

  I realize that the provinces face immense financial pressures, and one of the reasons it is important that the federal government remain fiscally healthy is to do its part in relieving those pressures. I have never believed, however, in the so-called “fiscal imbalance” between Ottawa and the provinces. A fiscal imbalance implies that Ottawa has greater taxing powers or debt raising authority than the provinces, and that is quite simply not the case. There is one order of government, however, that does suffer from a fiscal imbalance and that is municipal government.

  While health care and child care were by no means easy issues to navigate with the provinces, my desire to see our municipal governments become the economic and social catalysts they should be raised even more complicated issues of federalism and how it should work. Our municipalities are constitutionally creatures of the provinces. They are where people live, but they do not have the revenues or the decision-making powers adequate to their responsibilities. I think Canada’s municipalities and especially our great cities are too important to be languishing in the background as national policy is made and national issues are confronted. I was all too aware, however, that if the federal government appeared to be crowding in on the provinces’ turf, the effort to strengthen our municipalities could end up in a jurisdictional mess.

  In my time at Finance, the cities agenda had become more and more important to me. As prime minister, I finally had the chance to do something, ably assisted by Brian Guest, the prime advocate for the cause among those closest to me.

  What we came to call the New Deal for Cities and Communities marked the first involvement of the federal government in urban affairs in twenty-five years. Pierre Trudeau’s decision to create an urban affairs ministry in the 1970s had ended badly. The Trudeau-era ministry had tried to use the Canada Mortgage and Housing Corporation as its point of entry into urban issues, only to be rebuffed by the provinces. A lot had changed in twenty-five years. Canada had become even more urbanized, cities were under greater financial pressure, and our understanding of what made great cities had evolved. But how to get back in the game without offending the provinces?

  Part of the answer were the infrastructure programs our government had first established in 1994 as a way of creating employment. Over the years we had developed good working relationships with the provinces and municipalities as we sorted out common priorities for infrastructure. Frequently we shared the costs three ways, though increasingly the municipalities were having trouble financing their share. Once I became prime minister, I was convinced we could leverage the goodwill accumulated over the years to get back into the discussion of urban policy. At the same time, we could direct our investments in infrastructure increasingly toward greener and more sustainable projects. This time, there was no push back.

  As prime minister, I had two goals in the near term. The first was to help the municipalities get the revenues they needed to undertake their responsibilities. Of course, that was tricky because the municipalities are provincially created entities, most of which rely heavily on property taxes and provincial grants. We did feel, however, that we had a couple of levers. One was to refund the GST that municipalities paid. This would provide a significant new revenue flow. Even more importantly, we also decided to divert five cents of the federal tax on gasoline to them, something that seemed sensible, since municipalities maintain roads and run our mass transit systems.

  The second goal was to get municipal leaders more deeply involved in those national issues in which they had special experience and responsibilities. As it happened, on the same day as my second throne speech, October 5, 2004, there was a meeting of Canada’s twenty-two big-city mayors in Ottawa. I decided that I should invite them to 24 Sussex for an informal get-together over drinks. As the conversation buzzed, I was off in one corner talking with a couple of the mayors and the ideas were flying around.
It occurred to me that we should get everyone involved. So I got their attention and said we should have a collective bull session right there. Some of the mayors were standing, some were sitting on the spiral staircase leading up to the second floor — and we got all into it. Then I offered them a place at the national table — literally. We moved into the dining room, crowded around the big table, ordered more food and drink, and away we went for two hours while I questioned them on what kind of targeted investments we should be making in Canada’s large cities. This was the first time that a group of this kind had been able to have a direct discussion with a prime minister — something that went a long way toward building goodwill for what I wanted to do.

  In my first government, I had appointed John Godfrey to be parliamentary secretary with responsibility for the cities. The fact that I did not put him in cabinet was not a reflection either on him or on the cities agenda as a priority, quite the opposite. I did not want to provoke a constitutional spat with the provinces over our relationship with the municipalities right before an election. Immediately after the election, I appointed him minister of state for infrastructure and communities. This was an inspired appointment. One of the challenges John confronted from the start was the inherent tension among municipalities. He asked me, “So you want me to do cities: down to what size?” I replied, half facetiously, “No village too small!” I received a lot of criticism subsequently for “diluting” the cities agenda, but my objective was that all communities, whatever their size, deserved our attention, not only because all citizens, wherever they lived, deserved our attention, but because all communities had their issues. For instance, it is ludicrous to discuss regional economic development without rural governments at the table.

  This isn’t to say there weren’t problems. The big cities made a claim for the most resources because of their size and rates of growth, while the smaller communities made special claims based on the problems of isolation and depopulation. Nonetheless, we acted quickly. In the 2004 budget, even prior to the election, we announced the 100 per cent GST rebate to all municipalities.

  David Miller, the mayor of Canada’s largest city, Toronto, and a former NDP candidate, became strongly supportive in public, as did Bob Chiarelli from Ottawa, Dave Bronconnier from Calgary, Pat Fiacco from Regina, Larry Campbell in Vancouver, Peter Kelly in Halifax, Gérald Tremblay in Montreal, and many others. During the 2004 election, I had also received an enthusiastic response to a speech I made in Edmonton at a big-cities conference, in which I elaborated on my plan to give municipalities a share of the federal tax on gas to develop their infrastructure. Some of my political advisers would probably complain that the cities agenda, which was always more driven by policy than politics, was less successful at the level of ordinary voters. After all, the architecture of the plan offered the municipalities greater fiscal resources and more autonomy in planning their projects, making it harder to stamp the federal government’s “brand” on new subway stations or water plants. So be it.

  After becoming minister, John Godfrey devised what proved to be an exceptionally successful strategy — in which he was assisted by a task force led by former Vancouver mayor and former B.C. premier Mike Harcourt. John quickly recognized that the most effective way forward was to embrace the variety and complexity of our urban life. Instead of developing a single, rigid national mould and then trying to cram each particular municipality into it somehow, he decided to go after the provinces one by one, with the aim of signing three-way deals involving the city, the province, and our government. Although he worked on the major cities in parallel, his first target was Vancouver, where we were assisted enormously by the B.C. premier and former mayor of Vancouver Gordon Campbell and his constructive view of the way federalism should work.

  Campbell’s help came at a very difficult moment for us in the House. In April 2005, we were being threatened constantly with defeat by the combined forces of the opposition parties. Although he was only a week away from launching his own re-election campaign, at the signing ceremony in Vancouver on April 15 Campbell appeared with a large number of B.C. mayors from all parts of the province, and the deal was universally heralded as a great success and a sign of good things to come for other provinces, cities, and communities if only our government could survive long enough to achieve them. It was a real morale booster at a tough time. I flew back to Ottawa that night, and as soon as I got off the plane, well into the small hours of the morning, I phoned John Godfrey back in Vancouver, who was in a bar celebrating with his staff. He was a little surprised to hear me ask, “Who’s next?”

  The B.C. agreement was not only the first; it created a gold standard that we followed elsewhere. It was important because it involved the Union of British Columbia Municipalities in a direct way, and as we found out, in British Columbia and elsewhere, one of the best ways around the urban-rural and big city—small city divisions was to involve these associations, and allow them to do much of the logrolling and compromise among themselves. So, for example, the B.C. agreement stated that while municipalities of more than twenty-five thousand people could not use the infrastructure money for roads but had to devote it to public transport or other sustainable development, smaller communities had more freedom.

  After the B.C. agreement, we were able to get the ball really rolling and signed deals with most provinces, even as the media and consequently the public were focused on the dysfunctionality of the minority Parliament and the almost daily intimations of the government falling. We actually got a little rivalry going, at one point, between those working on the cities file and those working on child care, over who was ahead in the race to sign up provinces.

  Interestingly, in the negotiations to get the NDP’s agreement on our budget in the spring of 2005, Jack Layton and his advisers had only the vaguest idea of what to ask for. We offered to speed up some of our plans for the cities, notably increased funding for public transit, that we were intending to go ahead with anyway. This worked splendidly for us and allowed Layton to claim a policy victory.

  Despite all this progress, we actually needed one more budget to complete our agenda. Had we been re-elected in 2006, we would have been able to give the commitment on gas tax revenues more permanence by enshrining it in law. Our idea was to make a fifteen-year legal commitment. I said this during the election campaign and I was glad to see the new Conservative government pick up on at least this part of the new deal. This will allow the municipalities to borrow against that expected stream of revenue, and create truly sustainable municipal development.

  The New Deal for Cities and Communities accomplished three things. The simple act of creating a ministry dedicated to the interests of cities and communities denoted a new respect for them. It meant that there was a place in Ottawa for mayors and councillors to discuss their problems and their hopes. By taking them seriously (by involving them, for example, in formal budget consultations), we were treating them as a mature order of government.

  Second, by treating the municipalities as full partners in decision-making, not only on infrastructure matters but on issues as various as immigration settlement, housing, community safety, economic development, and urban Aboriginals to name a few, we were edging our way toward a new way of doing business in Canada. There had been tripartite agreements for urban development before, in Winnipeg and Vancouver, for example, but during our time in government, we increased the number of such agreements, focusing on their specific needs. Most of these were in the West, but we were within days of signing a major agreement with Toronto and Ontario when the government fell.

  We also created “sector tables” under the auspices of the Canadian Federation of Municipalities, which, had they been fully developed, would have allowed the cities, provinces, and federal government to sit down and talk about specific challenges such as immigration, or ports, or housing where a group of cities and towns shared a common problem. These meetings would have been called by the cities, not the federal government, limi
ting provincial push-back.

  All of this was done while working with the provinces. Indeed, when we signed the gas tax deal with Quebec on June 22, 2005, Jean Charest declared, “This is the most important agreement between Ottawa and Quebec City in recent years. This is proof that the federal system can benefit Quebec and show good results.”

  Finally, we managed to make the existing infrastructure programs increasingly “green,” by dedicating ever-larger percentages of the funds to municipal water and transit projects. We insisted that the funds the municipalities reaped from the gas tax be invested in what we called “environmentally sustainable municipal infrastructure.” Every municipality, large or small, had to sign an agreement promising to show how each new investment had led to a measurable improvement in air quality, water quality, or reductions of green house gases after five years. And each municipality had to produce a thirty-year “integrated community sustainability plan” relating these investments to four aspects of long-term sustainability: environmental, economic, social, and cultural. Over time, this requirement has encouraged and rewarded longer term thinking about issues like sustainability and global warming in Canadian communities of all sizes.

  The reason that we were able to embark on these large new initiatives with the provinces, whether it was health care or child care or the cities agenda, was that we had managed our fiscal situation so well in the 1990s. I have always taken the view that the strength of the federal government’s balance sheet must not be compromised. That’s the balance sheet the international markets look to first, and the one that has the predominant effect on our interest rates, and the investment we are able to attract. In fact, the soundness of the federal government’s balance sheet has as great an effect on the borrowing terms the provinces confront as do their own books. That’s why, except in an extraordinary case such as Alberta when the price of oil is high, Ottawa’s fiscal position should be the best in the country. When I was minister of finance, that took priority over everything. By the time I became prime minister, things had opened up, it is fair to say, precisely because of the attitude I had taken in the previous decade. We now had a strong balance sheet. We now had surpluses instead of deficits, and it was right that some of that money should find its way into the hands of the provinces and municipalities. Together there was a lot we could do.