In his acceptance speech as the new Liberal leader on 14 November, Paul Martin promised that the traditional Liberal stance of helping the underprivileged would not be forgotten. But the virtually uncontested lead- ership campaign produced few details about what he thinks that tradition demands of him today. So, what can we expect from the new prime minister? What will be the social policy of the man who many describe as a ”œmodern liberal,” and who himself promises to introduce a ”œnew era”?

Some look to his past behaviour for an answer. This is because Martin himself is particularly proud of the main item in that history, the taming of the federal deficit in the mid-1990s. Hence, they argue, when faced with a choice, we might expect financial and fiscal prudence to rule. But Paul Martin has also promised change, a theme that dominated his acceptance speech. Therefore, the notion that he will try to innovate in social policy needs to be entertained, at least.

If we were, for the sake of argument, to accept that Prime Minister Martin will try to make change, his first chal- lenge will be to overcome the legacy of the policy actions of previous governments. But that legacy is very much one of his own making. Thus, the challenge for Prime Minister Martin is to deal with the legacy of Paul Martin, minister of finance.

What is the legacy and how much policy room is there to move beyond it?

Despite having headed the Department of Finance from 1993 until 2001, Paul Martin’s social policy legacy is huge. Decisions made in that department under his leadership have remade the basic principles and objec- tives of the social policy regime. We now live with a very different philosophy. Whereas ensuring income security for those excluded from the labour market might once have been a primary objec- tive of social assistance programs, the goal is now to design policies and pro- grams that will ”œmake work pay.” If the goal of unemployment insurance was to provide a replacement income so as to ensure a counter-cyclical eco- nomic intervention, according to the tenets of Keynesianism, the goal of employment insur- ance is to re-insert claimants into the labour market as soon as pos- sible, on the principle that ”œany job is a good job.”

More than any other decision since the mid-1960s, the 1995 Martin budget reshaped the world of Canadian social policy by redesigning financing and delivery. The seven subsequent budgets and financial up dates rein- forced the new principles.

One key budget decision was to end the Canada Assistance Plan, originally constructed in the 1960s as a shared-cost program with the provinces. Its design allowed the federal government to give significant shape to provincial decisions, and in particular to set rules about how money could ”” and therefore should ”” be spent. The Canada Health and Social Transfer (CHST), announced in the 1995 budget and implemented in 1996, released the provincial and territorial governments from any conditions; they would no longer, for example, have to meet the federal government’s require- ment that provinces provide for those ”œin need.” The CHST thereby allowed for greater variation among provinces and territories in social policy. It also limited the room for manoeuvre for the federal government. It would have to rely on the spending power to provide transfers and tax credits directly to Canadians. Intergovernmental transfers could no longer shape provincial choices.

This loss of influence over inter- governmental transfers was embedded in the design of the major new pro- grams set up once the federal govern- ment was ”œback in the social policy business.” The National Child Benefit (NCB) is exemplary here, over whose design the influence of the Depart- ment of Finance was not negligible, despite its having been overseen by the Department of Human Resources Development.

The NCB was innovative in two key ways. Beyond the new social policy commitments to ”œmaking work pay” and investing in children, themes not present earlier, use of the tax system as the delivery mechanism is significant. The design of the NCB limits the federal government’s role to providing income transfers, via the Canada Child Tax Benefit (CCTB) and the National Child Benefit Supplement (NCBS). That is, it is confined to using the spending power directly to transfer or credit income to individual families. All decisions about the design and delivery of services for families and children have been ceded to the provinces and territories.

Why does this matter? Research into children and child outcomes finds over and over that, while adequate income is fundamental to child well- being, services are absolutely essential as well. Families, even middle-income families, cannot purchase all services if they are forced to pay full market prices. The Government of Canada is fully aware of this need, and has tried for several years to promote early childhood education and care (ECEC) services. It has tried via the NCB, again via the injection of extra funds such as the Early Childhood Development Initiatives in 2000, and most recently via the 2003 budget promise to provide $900 million for child care over the next five years.

Each attempt by the federal gov- ernment, however, to ensure Canada improves its international ranking on this key social program runs up against the refusal of some provinces to follow federal priorities. Quebec is by no means the most recalcitrant on this issue. The Harris government in Ontario systematically refused to spend its NCB ”œreinvestments” and ECDI funds on new services for early childhood education and care. It was like pulling teeth even to get an agreement on accounting for the 2003 funds explicitly targeted to child care to ensure that they would be deployed only for new spend- ing on child care (rather than used to release provincial funds for other purposes).

Prime Minister-to-be Paul Martin promises to make improved intergovernmental relations the first item of business, and he met with the premiers at the Grey Cup. This is one area where his social policy legacy as minister of finance weighs particularly heavy. The 1995 Martin budget poi- soned intergovernmental relations. Almost a decade later, they have not recovered. Freedom from conditionality did not make up for the unilateral cut- back of billions in intergovernmental transfers to the provincial and territori- al governments. Provinces responded immediately after the budget by demanding both a return of the lost transfers and new institutions for inter- governmental co-operation. These have been slow in coming, and therefore the challenge facing the PM-elect is signifi- cant. He has promised to address this matter immediately, and an improve- ment in the atmosphere will have sig- nificant consequences.

Welcome as they will be, saner intergovernmental relations are not enough. The knock-on effects of the Government of Canada’s deficit-fighting, led by the ex-finance minister, will also constitute a key challenge for the new prime minister, and this in two ways. First of all, as provinces found them- selves strapped for cash, they too cut back on spending and often down- loaded responsibility to municipal authorities without a commensurate transfer of funds. Because so much social spending falls under provincial jurisdic- tion, the social consequences of this have been significant. Canada’s safety net is much more tattered than it was in the mid-1990s. Paul Martin will govern a country in which income inequalities have widened since the mid-1990s, in which the intensity of low income has increased, in which housing costs are swamping families, in which recent immigrants are failing to move into the mainstream, and in which Aboriginal people are still excluded.

Therefore, the social policy agenda is laden, and the problems have no easy solutions. They tend, moreover, to cumulate, so that a single individual or a single neighbourhood ranks poorly on several indicators of inclusion or well-being. These is an accumulation of disadvantage, and social policies in the next few years will have to deal with this multiplication of difficulties, espe- cially as they are spatially concentrated.

Beyond the difficulties faced by many individual Canadians, these cut- backs in funding with backward linkages to deficit cutting have put many cities in an extremely difficult position. Municipal governments and other local authorities deliver many social programs, even when they do not have full respon- sibility for their design. They are the places in which more and more of the social problems associated with immi- grants’ inability to thrive, rising poverty and skyrocketing housing costs are phys- ically located. They also have authority over some of the solutions, such as pub- lic transit that can ensure all workers can get to work, social housing, recreation and in many cases early childhood edu- cation and child care. Innovation gurus, such as Richard Florida, hasten to explain that world-class cities capable of fostering and supporting innovation are those in which inclusion is maximized and the diversity index is positive.

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The new PM will need to get beyond the legacy of the minister of finance, and answer the cities’ call for new partner- ships to address the gaps in social as well as physical infrastructure. He has prom- ised to bring them into the room, but what will be on offer?

Many Canadians, policy-makers in Ottawa and in provincial and territorial capitals as well as ordinary citizens, are watching what Paul Martin will do in the area of social policy. The signals are not clear, and the room for manoeuvre left by the redesign he undertook as minister of finance is not large. Nonetheless, it is possible to identify some directions for change. But there are also a number of identifiable points where he is at risk of bumping up against his own competing values, those he espoused in the past and those he promotes today.

It is now a fundamental truth in Canadian politics that nothing can be done in the social policy realm without improving intergovernmental relations. With the NCB and the Social Union Framework Agreement (SUFA), a com- mitment was made to new governance practices, based on transparency and accountability as well as fiscal prudence. The latter may have been achieved. The first two, however, are no more than a shadow of what they must become a national social policy ”” and Paul Martin promises to deal with national problems ”” is to be achieved.

Angry at past treatment by the Government of Canada, the provinces and territories are doing the bare minimum to report on their spending and to develop meaningful indicators. And they have not granted the Government of Canada the space to do much itself. Thus, its actions have continued to be unilateral (the Millennium Scholar- ships, for example) or limited in their effects (the ECDI, for example). The provinces’ and territories’ position is easy to understand and appreciate. Why play ball with a federal government that insists on changing the rules?

Improving intergovernmental rela- tions is an important first step to a social policy agenda, then. But that said, what will the role of a Martin gov- ernment be? A continued commitment to past practices, albeit in an improved intergovernmental atmosphere, will limit the Government of Canada to use of the spending power, that is, to taxes and transfers such as the CCTB, employment insurance, health care transfers, and so on. Important as ensuring adequate income is, transfers to low-income Canadians are not suffi- cient, even for fighting poverty. Other interventions are necessary, whether they are services (such as training, ECDC, home care, and immigrant inte- gration) or programs to ensure a supply of affordable housing and the like.

Therefore, a key challenge for the Martin government ”” and one about which we have few clear signals ”” is the way the Government of Canada will play its role in the post-CHST era. Will it seek to lead, without imposing? For example, will it make use of its intellectual resources by focusing on good knowledge transfer about policy possibilities and best practices? Will it be able to bring all governments to the table to discuss and negotiate? In other words, will the Government of Canada seek to move toward a method of co- ordination similar to that emerging in the European Union ”” another frac- tious and fragmented polity, but one that has made good strides at moving a common employment and social agenda forward?

This would be a new role. It would rely neither on the conditionality of the first post-1945 decades, nor the unilat- eralism of recent ones. An alternative to this innovation is simply to continue as is, albeit in an improved intergovern- mental atmosphere, targeting federal programs via the spending power and exhorting the provinces to use their transfers wisely, whether in the health or social realms. Paul Martin has given few signals about which he will choose, but his choice will have a major influ- ence on the social policy future.

Canada is a country of cities, but the governments with considerable responsibility for stewarding this space are not at the table with the other two levels. A second major governance fac- tor shaping social policy is expanding intergovernmental relations to include municipal authorities. Increasingly, social policy-makers are challenged to develop new strategies and instruments for coping with a conjunction of flows into our major cities, flows of people, capital and ideas. Cities are the spaces where innovative economic activities and social inclusion challenges co-exist. Despite almost three of every four of Canada’s new immigrants heading to only three cities, those municipal gov- ernments have no channels for consid- ering the social policies that will ensure the integration of new immigrants and their children. Despite general agree- ment that innovation in the knowl- edge-based economy not only happens in cities but depends on a healthy social fabric, city governments have not been involved in the key decisions.

Again Paul Martin faces a choice. Will he, as he as already promised, endeavour to ensure a more solid finan- cial footing for Canada’s cities, and leave it at that? Or, will he act in recognition of the best knowledge about the social foundations of economic well-being, and push his innovation agenda in the direction of ensuring all governments can act in an integrated and coherent fashion to develop and maintain the social infrastructure of our cities?

Thus far, the new prime minister has not placed a great deal of stress on the economic benefits of good social policy. In part, this is because he has not said much about social policy at all. However, when he has made pro- nouncements, they have tended to be of the traditional sort, for example, that he will not allow concern with fis- cal responsibility to undercut transfers to the ”œunderprivileged.” Indeed, under his watch at Finance, the bulk of new money for federal spending under the NCB went to the supplement for families with the lowest incomes.

The result of this traditional approach is that the economic develop- ment agenda and the social policy agen- da remain quite distinct entities. Economic development is seen to be about competition, innovation and investing in human capital. Social policy is described as about ensuring programs are effective (he has announced another program review) as well as limiting some transfers in a significant way. Yet, social policy is also about ensuring opportunity for the disadvantaged, with the target groups being Canadians living with dis- abilities, children and Aboriginal people. While these groups certainly merit signif- icant and sustained policy attention, Paul Martin and his team must still face up to a significant question confronting all ”œmodern liberals”: How can the goal of ensuring opportunity for all be met when social policy effort is concentrated prima- rily on fighting poverty?

Many other countries have come to the conclusion that a society that wishes to ensure its own well-being must follow a strategy that does more than alleviate poverty. It must be able to provide high quality ECEC, healthy cities, good schools, safe and afford- able housing, good working condi- tions, and leisure and recreation opportunities to all its citizens. They must all be able to participate in the mainstream via political or communi- ty activities as well as via employment.

In other words, innumerable stud- ies of social policy regimes and popula- tion health, as well as the newer literature on innovation, demonstrate that the well-being of everyone depends on everyone being able to count on much more than simply an income that is ”” slightly ”” above the poverty line. It involves being able to participate in a significant way in education, communi- ty activities, recreation and work.

There are, however, few signs that Paul Martin has taken this knowledge on board in his vision of the new Canada. He must do this, however, if he truly wants to introduce a ”œnew era.” To do so he will need to acknowl- edge, and then move beyond, his lega- cy as minister of finance.

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