Europe’s plan to simplify government

DIANE FRANCIS November 7 1994

Europe’s plan to simplify government

DIANE FRANCIS November 7 1994

Europe’s plan to simplify government



The exercise now under way in Ottawa by civil servants to “reinvent” and streamline the central government will yield few results. This is because it is being done by bureaucrats with a vested interest in maintaining the status quo. Instead, Ottawa and the provinces should establish a blue-ribbon committee with the power to restructure Canada using the European concept of “subsidiarity.”

The word is torturous, but subsidiarity is a clear-cut policy that aims at rationalizing government layers and eliminating duplication. In essence, it puts the onus on the new super layer of government in Europe—headquartered in Brussels—to prove that it can better handle a portfolio than can the European Community’s 12 national governments.

As The Economist defines it: “The central government [Brussels] should expect to exercise power only where flows of things or people across borders make such power truly necessary. The principle of subsidiarity must . . . minimize interference from Brussels in the status and authority of national legislatures. The local government has much in its favor. It is better informed about what electors want and it is more accountable. But centralization may sometimes make sense.”

If Brussels can make the case, it assumes prime responsibility. If not, power remains with the member countries. This is an exercise Canada should undergo, given that the country has too many governments, too many government layers and too many tiresome power plays between governments.

Europeans invented the concept of subsidiarity in order to juggle the competing demands for centralization by Brussels’ Eurocrats versus the jealously guarded power of civil servants working for the EC’s member countries. Its guiding principles have not been totally applied to Europe, but the concept presents a brilliant architecture for streamlining political systems.

In Canada, the onus should be placed on

The word is torturous, but the concept of ‘subsidiarity’ could make a big difference in how Ottawa and the provinces share power

Ottawa to prove that it should be involved in any portfolio. Conversely, subsidiarity does not mean that power moves downward only and never upward. If a compelling case can be made to transfer authority to Ottawa from the provinces or to a province from a municipality, then the responsibility should move up.

Following the principles of subsidiarity, Ottawa should axe departments or directorates dealing with environment, forestry, mines, energy, tourism, labor, health, small business, consumer and corporate affairs, culture, education, welfare and fisheries, to name the most obvious. These services are already provided by provincial entities. On the other hand, Ottawa must retain control over the nation’s monetary policy, foreign affairs, trade, immigration, citizenship, justice, national security and defence.

These portfolios must be federal for obvious reasons. Foreign governments want to sign treaties with one entity, not with 10 tiny provinces. Trade disputes must be handled in concert. Immigration policy must be uniform to avoid the possibility that economically declining provinces would open immigration floodgates only to find that most of their new immigrants would end up in Vancouver or

Toronto where opportunities have been greater. Such discrepancies would be unfair to regions that did not want more immigrants, so a uniform policy is necessary.

A dramatically downsized Ottawa is long overdue. But that does not mean a decentralized, weak Ottawa. In fact, Ottawa should rein in the provinces more than it now does by stopping them from borrowing abroad to the extent that they have. The proclivity of provincial treasurers to borrow offshore and in other currencies has led to the frightening foreign indebtedness that has resulted in the dramatic devaluation of our currency.

If continued, this practice will further devalue our dollar, which, in turn, will put more upward pressure on interest rates. Already, an estimated 40 per cent of the collective government indebtedness in Canada of roughly $700 billion is owed to foreigners. This represents a staggering interest rate bill of an estimated $76 million per day, or $28 billion per year.

This is destroying our nation’s wealth because these massive interest payments are subject to a withholding tax of only 15 per cent. The remaining income paid to foreigners is taxed by their governments, not ours, and what’s left after they have paid taxes is invested or spent in other countries. This is a nation-threatening hemorrhage of wealth that is equivalent to a flow out of Canada of $1 out of every $25 of wealth generated all year by our entire economy.

That is why Ottawa should exert its muscle by forbidding provinces from borrowing abroad without special permission. It should also hike dramatically the withholding tax collected on foreign bond dividends.

The role of tax collector is another question. One possible way to go would be for Ottawa to expand on its role as the country’s primary corporate and personal income tax collector and become the country’s sole consumption tax collector through a national sales tax.

On the other hand, the provinces could do all the collecting and give Ottawa its share of the pie. Neither system would prevent governments at either level from establishing their own separate tax levels. The goal should be to eliminate collection and filing costs for taxpayers.

Without question, a more efficient division of powers in this country is long overdue. The principle of subsidiarity should also be applied at the municipal-provincial levels where duplication also exists. But the biggest waste is at the federal level.

The role of Ottawa should be simply to guarantee the rights of citizenship—that Canadians may live, work or do business anywhere in the country. It should ensure that Canadians have their right to their day in court, their civil rights and government entitlements wherever they live. It must also protect the national borders, prevent the provinces from harming each other, control population inflows, negotiate treaties with foreign nations and protect the value of our currency.

Just about everything else is better left with the provinces.