Because of the lack of support from some of the provinces and the disappearance of the problems it was meant to deal with (Great Depression), the Rowell-Sirois report was shelved in 1941. In any case, the federal government assumed near total power, for the duration of the war, by virtue of emergency federalism. Thus, the provinces were relegated to a minor role and, in particular, gave up their most important source of revenue (direct taxes) in return for an annual cash payment by the federal government. As the end of the war approached, and fears of depression and unemployment loomed ever larger, the government of Mackenzie King presented a White Paper on Employment and Income. In it the federal government committed itself to ensure to Canadians a stable level of employment and income in the post-war period (referred to at the time as the reconstruction period). Such stable employment and income policies would take into account the new Keynesian theories and be generated by high expenditures on exports, private investments, consumption and public investment. To achieve its goal, the federal government required the continued cooperation of the provinces beyond the end of the war. For this purpose a Conference was called.
The federal proposals were made at the Dominion-Provincial Conference on Reconstruction in the summer of 1945. To this conference was submitted the most important package deal ever offered to the provinces in such conferences. Under the federal plan, the provinces would abandon the field of direct taxes (personal and corporate income taxes, as well as succession duties) to the federal government in return for the payment of an unconditional subsidy ($12.00 per capita) that would be paid by the federal government. Thus, the federal government would not have to return the direct taxes it had taken over during the war. Furthermore, the federal government offered to share with the provinces the cost of a health insurance plan that it proposed to implement in stages. In the field of social security, the federal government would undertake to assume exclusive responsibility for old age pensions and unemployment insurance. The federal government also offered comprehensive assistance plans in the fields of transportation, agriculture, forestry and other natural resources.
The sum total of the proposals would put nearly all the financial resources at the disposal of the federal government and would make it the prime force in the fields of employment, social security, health, transportation and natural resources, all of which were largely, when not exclusively, provincial in nature. For all intent and purposes, the provinces would be left to take care of education and municipalities (new federal proposals contained in the Massey Report, a few years later, would even remove education from the exclusive jurisdiction of the provinces).
The proposals, which came to be known as the "New national policy", aimed, according to King, at creating a new era of "partnership" between the Dominion and the provinces. It would have been more accurate to say that it aimed at completing the subordination of the provinces to the central authority in a near legislative union.
Opposition developed in Quebec, Ontario and Alberta and some of the propositions were shelved. However, most were implemented between 1945 and 1960 in one way or another leading to the highest point of centralization ever reached in the history of federalism in Canada.
© 2001 Claude Bélanger, Marianopolis College