Reforming the Framework for Intergovernmental Fiscal Relations

to appear in Policy Options

Harvey Lazar

Published: September 2006

Keywords: intergovernmantal, government, reform, fiscal, International Financial Management and Crisis


Since the late 1970, fiscal relations in Canada have been driven first and foremost by Ottawa's decisions and handled on a program-by-program basis. Though pragmatic and flexible, this approach, writes Harvey Lazar, "fails to provide a sense of direction to the federation and makes it hard for provinces and territories to anticipate federal behaviour and plan for their fiscal future." In this article, he argues for a revised intergovernmental framework to achieve greater fairness and predictability. To that end, he discusses three necessary changes and proposes ways to achieve them: limit Ottawa's freedom to act on its own by adopting some form of "protected agreement," increase Ottawa's share of the fiscal risk currently shouldered by provinces by returning to a form of cost-sharing on a 75-25 basis, and establish a better balance between the provinces' longer-term program commitments and Ottawa's shorter-term commitments by removing time limits on federal transfers.

Disciplines: Governance

Publication: lazar-irpp-article.pdf