COVER

WHAT A NO MEANS

MARY JANIGAN October 30 1995
COVER

WHAT A NO MEANS

MARY JANIGAN October 30 1995

WHAT A NO MEANS

Even if the federalists win, Canada will change

COVER

MARY JANIGAN

It is the morning after Quebecers have declared No to sovereignty—and the nation gasps in collective relief. Across the land, families muster their trick or treats for the frivolous fun of Halloween. The financial markets adjust to the comforting tidings of stability.

Politicians on both sides measure their dreams against their reality—and decide their futures.

Canada remains whole.

But those who assume that nothing has changed are mistaken. Throughout the campaign, as the neck-and-neck polls have clearly illustrated,

Quebecers came dangerously close to leaving the federation. That flirtation with sovereignty indicates a deeper dissatisfaction with how governments work. And the lesson has not been lost on Ottawa or the other provincial governments. If the No forces win by a relatively small margin—less than 55 per cent of the vote—there will be enormous pressure for change in the division of responsibilities between the federal and provincial governments. If the No wins by a large margin—in the range of a 60-40 split in favor of federalism—that pressure will be somewhat eased. But it will not go away. The consequences of a No:

POLITICAL

If the No forces win by a large margin, the political landscape of Quebec could drastically alter. Because pollsters assume that 90 per cent of non-francophones will vote No, the Yes side need only win 45 per cent of the votes to claim that most French-speaking Quebecers opted for sovereignty. If the Yes side receives only 40 per cent or less of the vote and the No side romps to victory, the force of the sovereigntist cause could well abate for another generation. In such circumstances, Premier Jacques Parizeau, who has dedicated his political career to the goal of independence, would probably resign within six months.

Bloc Québécois leader Lucien Bouchard would probably resign his parliamentary seat—and replace Parizeau.

Without its charismatic leader and its rivetting cause, the Bloc would likely fade as a force within

Parliament. Some of its disillusioned MPs might = well stay on, arguing that they are needed to defend 1

the interests of a weakened Quebec, but others would gradually resign. The Reform party would then take its place as the official Opposition—and would shift the focus of House of Commons debate to its western perspective. Whereas the Bloc concentrated on separation and attacks on spending cuts to social programs, Reform would redouble its push for faster action to control Canada’s debt and deficit woes. In response to such relentless pressure, the Liberal government could cut program spending far more deeply.

If the No forces win at less than 55 per cent, the Yes forces will proclaim a moral victory. They will likely insist that the majority of francophones want sovereignty. And they will remind the rest of Canada, with chilling accuracy, that the issue has not gone away. In such circumstances, Parizeau will likely remain in power, squabbling with Ottawa and complaining about Quebec’s humiliating position. Similarly, Bouchard and the Bloc would likely remain as a force within Parliament, arguing that they must stay to prevent an assault on Quebec’s interests. Just as the Yes forces will be humbled but not crumpled, the No forces will be equally chastened. Because Prime Minister Jean Chrétien and such powerful Quebec ministers as Finance Minister Paul Martin threw themselves into the campaign, a narrow No victory will constitute a considerable setback to their credibility in

their home province. That, in turn, will add urgency to their efforts to reform the federal system. As well, Chrétien is likely to shuffle his cabinet to highlight its strong members and eliminate any sources of embarrassment.

ECONOMIC

The financial markets have been relatively optimistic throughout the referendum campaign about the prospect of a No victory— although they have grown jittery as the Yes side surged in the polls. As a result, in the short term, there are not likely to be big changes in the level of the Canadian dollar or interest rates. If the No side wins massively, the dollar may rise marginally and interest rates may fall slightly. If the No side wins by a narrow margin, if the prospect of future instability lingers like stale cigar smoke in the air, the dollar could drop slightly.

It is in the longer term that Canadians will reap the benefits of a No vote. After a slowdown during the first six months of this year, the Canadian economy is slowly reviving. Its prospects look good: the economy of its largest trading partner, the United States, is picking up steam; interest rates are floating at moderate levels.

Political stability will nurture that trend, shielding the dollar and interest rates from the wild roller-coaster rides that panicky investors can launch. Says Ted Carmichael, chief economist at J.

P. Morgan Canada in Toronto: “We are looking for a good improvement in the Canadian economy next year: unemployment rate down; growth rate up, getting to around four per cent in the first six months; and interest rates slightly higher, but only as a reflection of the fact that the economy has been doing quite a lot better.”

Ironically, such rosy growth rates will be an enormous help to the Quebec government because they will generate needed tax revenue. Throughout the referendum campaign, the financial community largely tolerated Quebec’s difficult deficit and debt problems—if only because it did not want to rock the boat. If the No side wins, there will be no excuses: market pressure will force the government to put its fiscal house in order. By March 31, 1996, the province’s debt will hit $78.4 billion—or more than $10,000 per person—the highest in Canada. That figure could go higher if Quebec does not

achieve its optimistic deficit target of $3.9 billion, down from $5.7 billion in 1994-1995. Even if the No side secures only a narrow victory, even if Parizeau persists in his scathing attacks on the federation, his government will have to focus its attention on the economy.

CONSTITUTION

The rest of Canada may groan from sheer constitutional exhaustion—but many Quebecers, including provincial Liberal Leader Daniel Johnson, remain adamant that there must be reform. At the very least, those Quebecers want the Constitution to affirm Quebec’s position as a distinct society, to give more powers to the

If the No side wins narrowly, the prospect of instability remains

provinces and to recognize a Quebec right to veto amendments. After two failed attempts at constitutional change in less than a decade, the rest of Canada is understandably reluctant to risk another damaging round of talks. But it is unavoidable: according to the Constitution Act, 1982, the Prime Minister and the premiers must meet before April 17, 1997, to review the provisions of the amending formula. And there is nothing to stop any leader from raising other constitutional issues then.

Still, it is difficult to believe that such conferences will produce results. The Parti Québécois will still hold power in Quebec City— and it is in its interests to prove that federalism does not work.

Meanwhile, westerners, especially those from Alberta and British Columbia, have grown increasingly impatient with any proposal that smacks of special status for Quebec. As Patrick Monahan, a law professor at York University’s Osgoode Hall, says: “While the Prime Minister has to take account of Quebecers’ desire for some kind of new arrangement within Canada, I cannot see that there can be any value in reopening formal negotiations. It would be counterproductive because it would just end up with another excuse for Mr. Parizeau to have another referendum whenever those negotiations failed—as inevitably they would. Instead, what Ottawa has to do is to pursue its line from the 1995 budget: it is pulling back for fiscal reasons from areas of social policy.”

In fact, the federation is changing—in ways that will affect almost everyone’s daily life. For almost four decades, Ottawa has used its immense spending power to fund programs in areas of provincial jurisdiction, and to set the rules for those programs. That clout is eroding. In its February, 1995, budget, Ottawa announced that, over the next two years, it is cutting about one-third from the $16.8 billion in cash that it now transfers annually to the provinces for health, postsecondary education and welfare. To compensate for that reduction, it will remove most of its conditions on how that money is spent on April 1,1996. As Ontario Premier Mike Harris noted in a recent speech to Toronto’s Canadian Club: “Fiscal realities mean that no single government can dictate uniform behavior across the country.”

Meanwhile, behind the scenes, Intergovernmental Affairs Minister Marcel Massé is reactivating his cabinet committee to review, systematically, all federal programs. Since mid1994, under Massé’s chairmanship, that committee has applied a tough test to all federal programs: can another level of government deliver this service more efficiently? If the answer is yes, Ottawa will scrap the program. It has, for example, turned over the administration of large airports such as Ottawa’s to regional community authorities. Massé told Maclean’s that program review constitutes “true reform” of the federation. “A number of the premiers have indicated that they want change,” he said. “We also believe that change has to take place. The process is there. And we are going to use its efficiency criteria to help the taxpayer.” In the end, it may be that such painstaking progress goes further along the road of reform than any grand constitutional gathering. □