Toward sustainable federalism

Fiscal federalism in Canada is under immense strain and ripe for reform. The full range of fiscal arrangements, from Equalization to the Tax Collection Agreements to Established Programs Financing (EPF) and the Canada Assistance Plan (CAP) is under review. In this timely and closely argued analysis, experts Paul Hobson and France St-Hilaire review the main provisions of existing federal-provincial transfer programs, isolate the critical pressure points and address the need for restructuring in the interests both of equity and efficiency. The study includes a useful historical perspective on Canadian fiscal federalism and a program-by-program review of the system's key features. Drawing on this analysis, the authors present innovative proposals for reform of EPF and the CAP. The federal and provincial governments are faced with the difficult task of redefining their respective roles in the financing and delivery of social programs, at a time of rising deficits and crippling debt. Existing fiscal arrangements have become a stumbling block in the reform process. A new approach is required - one that will facilitate rather than impede change but that will leave intact the fundamental principles of fiscal federalism. By recommending practical steps that governments might take, Hobson and St-Hilaire sketch one possible path on the way toward sustainable federalism.