DOES OTTAWA MATTER?

The federal government's biggest job is to find a new sense of purpose

Vancouver's Downtown Eastside is the sort of place where it's easy to forget
the federal government even exists.

The heroin-ravaged neighbourhood that radiates out from the corner of
Hastings and Main may be nationally notorious, but its troubles are
profoundly local.

The drugs create crime, a problem for the city's police.

The addicts are sick, a burden for the province's health system.

The classic federal jurisdictions as set out in the Constitution -- trade
and banking, say, or defence and foreign affairs -- are as remote from these
streets as the parliamentary dining room is from a soup kitchen.

Yet this toughest of urban precincts is emerging as a laboratory for a new
bid by Ottawa to get directly involved in the issues that most worry
Canadians. It's just one sign that the federal government is searching for
new roles again after the long slog of grinding the deficit down to nothing.
This chance to venture into new territory began four years ago when the
Vancouver/Richmond Health Board declared a public health crisis in the
Downtown Eastside. Since then, an unusual partnership of the three levels of
government has formed to tackle the problem, an arrangement that is finally
close to producing results.

By winter, three new centres where junkies can find help -- from medical
attention to a shower and a cup of coffee -- should be open for business in
the area.

In the past, a social-service offensive like this one might well have got
some federal funding, but the money would typically have been sent from on
high to the provincial agencies or municipal groups that would deliver the
services. This time, Ottawa will not be merely a distant banker.

Health Canada, working closely with several other departments, is
maintaining a street-level view of how its three-year, $7-million-plus
investment is spent. A joint secretariat representing the federal,
provincial and municipal partners, to be headquartered in or near the
Downtown Eastside, is being set up to oversee the work.

If including Ottawa in the front-line team tackling an intractable problem
just sounds sensible, consider how rarely this sort of co-operation happens.
Often rivalries among the three levels of government derail co-operation
efforts -- witness the recent squabbling over a federal bid to ramp up
construction of subsidized low-cost housing.

Health Minister Allan Rock, the key federal participant in the Vancouver
Agreement, has a tongue-in-cheek explanation for why this initiative hasn't
been torn apart by politicians vying for power and profile. "The issue here
is not so much who is going to get the credit," Rock says, "but who is going
to get the blame, because the Downtown Eastside is just a terrible problem."

There is, of course, more to it than a desire to spread the political risk.
Vancouver Mayor Philip Owen happens to be a close ally of federal Liberals.
And Rock is among the federal cabinet ministers most determined to be a
player in areas previously dominated by the provinces and cities. "It's time
for the government of Canada to have a more active role," he declares.

That impulse to activism is now driving Ottawa's agenda as it hasn't at any
time since Jean Chretien won the 1993 election and quickly made beating the
deficit his government's top priority.

His first two terms were summed up in adjectives like "managerial" and
"frugal." With budget surpluses now the norm, the deep-seated Liberal
hankering to actually do something is back in style.

But what? The trouble for federal Liberals is that the top-of-mind issues of
the day tend not to be ones they can easily take command over. Health care
may be the subject of a federal royal commission, but the premiers --
particularly Ontario's obstreperous Mike Harris -- have served notice they
will resist any federal incursion into this core provincial jurisdiction.
While the federal government leverages influence through the money it
transfers to the provinces to help pay for health, the delivery of services
is where the action is -- and Ottawa isn't. Another hot topic is what gets
taught, or not, in Canadian classrooms -- again, mainly a provincial matter.
And other everyday worries, from setting the laws for smoking in bars to
minimizing traffic jams, are first and foremost municipal concerns.

So as MPs prepare to return to the House of Commons next month, the most
urgent theme for Parliament's fall session is finding a new sense of
purpose. The Vancouver Agreement shows one potential strategy -- look for
ways to work closely with the cities, where, after all, most Canadians live.
Or the answer could be found in the so-called innovation initiative, a bid
to package a wide range of policies for boosting working Canadians' skills
and companies' competitiveness under one inspiring framework.

In its scope, it is perhaps the most un-Chretien-like scheme hatched by the
congenitally cautious Chretien regime.

The innovation policy white paper now being drafted in the top levels of the
bureaucracy, under the watchful eyes of a high-powered committee of deputy
ministers, is meant to stake Ottawa's claim to leadership in the prime
preoccupation of many Canadians -- their own prosperity. Whether a
convincing version can be delivered this fall is still an open question.

The challenge facing human resources development and industry officials
heading up the initiative is to keep it from bloating into a loosely
connected wish list as many other departments push to get their pet projects
included.

The hunger for a new mission is palpable around Ottawa these days. In
earlier eras, the fact of a big federal presence in just about every corner
of Canadian life was taken for granted.

For nearly four decades after the Second World War, Ottawa had no shortage
of grand visions.

The Keynesian economics of the day dictated that governments should spend to
smooth out the business cycle, offsetting recessions. Industrial policy
ideas gave birth to regional economic development schemes, while state
enterprises from Air Canada to Petro-Canada proliferated. In social policy,
universal health care was created, unemployment insurance expanded, and
Ottawa became a full partner in welfare by splitting the cost of social
assistance with the provinces.

But by the 1980s, Big Government was coming to be seen as Bad Government.
The notion that strategic public spending could stave off recessions was
widely repudiated. Regional megaprojects were seen as a bust, and Crown
corporations were privatized. Social programs were sustained, but under
constraints. Even during the years of steady economic growth after the 1993
election, proposals floated by the Liberals for new social benefits -- such
as bringing prescription drug costs under medicare -- went nowhere.

The big Ottawa policy stories of the 1980s and '90s were the Conservative
negotiation of North American free trade and the Liberal elimination of
deficits. Neither achievement had much to do with any new role for
government. One was about relying on the private sector to create wealth,
the other sopping up the red ink left behind by the era of public-sector
grandiosity.

Nobody in Ottawa is talking seriously about turning the clock back now. The
more restrained model of government that took hold during the past two
decades is all but unchallenged. Still, there are signs that Ottawa is
looking for ways to flex its muscle.

Public-policy guru Thomas Courchene, whose books on the way federalism works
are must-reads for politicians and mandarins who aim to be taken seriously,
says the feds are growing less content with being mainly a source of money
in social-policy fields dominated by the provinces.

Courchene sees signs of things to come in the ways the Chretien government
has already found to go it alone.

The Millennium Scholarship program links Ottawa directly to university
students without much regard for provincial education priorities. The Canada
Child Tax Benefit steps around provincial social assistance plans to send
federal cheques straight to low-income families. "These are very popular
programs, so there's some concern on the part of some provinces that Ottawa
is going to continue with this," says Courchene. "The federal government
wants a more direct relationship with Canadians."

The personal income tax might be the most powerful tool in the federal
policy kit. Finance Minister Paul Martin has shown an enthusiasm for using
the tax system to pursue social aims. He counts enriching the registered
education savings plan, a tax break for parents who save to send their kids
to university or college, as one of his most popular innovations. Federal
officials are working out the details of a parallel scheme to reward
Canadians who save to upgrade their skills as working adults.

The plan could be a highlight of a "lifelong learning" thrust in a fall
innovation initiative.

That skills agenda is perhaps the most fully fleshed-out part of the
initiative. Human Resources Development Minister Jane Stewart is hoping for
boffo reviews for the plan, being developed by her department, to complete
her long political rehabilitation after the controversy over mismanaged job
grants that broadsided her early last year. She argues Canada will face a
critical shortage of skilled workers in 10 to 15 years unless we start
taking the issue seriously.

The information revolution means companies need better-trained graduates
from universities and colleges, and those already in the workforce will have
to upgrade their skills more regularly to keep up with technological change.

But federal officials concede that a major push into education risks riling
up the provinces.

To minimize friction, they plan to mostly steer clear of the core
kindergarten-to-Grade 12 classroom years.

Instead, they are focusing on measures to bolster early childhood
development to get kids ready for the school system -- an emphasis supported
by a determined lobby of Liberal MPs -- and on adult learning.

Funding for postsecondary education and university research are
well-established federal roles that the Chretien government has already
beefed up, and they stand to get another generous injection of new funding.

Playing a more direct role in making sure Canadians already in the workforce
get more chances to upgrade their skills would be politically trickier.
Ottawa ceded manpower training to the provinces under a series of deals
signed in the 1990s. Jumping back in now would require some delicate
federal-provincial diplomacy.

But strains between Ottawa and the provinces are, of course, as old as
Confederation. The divvying up of powers in 1867 lies at the heart of
Ottawa's current dilemma about what direction to take. The British North
America Act gave the federal government control over some big 19th-century
concerns, like trade, the post office, banks and criminal law -- all areas
that still matter.

But the provinces got the jurisdictions that rose to greater prominence in
the 20th century, especially responsibility for hospitals and schools, and
these continue to rank among the most pressing issues.

Federal politicians, though, have always found ways around the formal
division of powers.

In fact, fans of Canadian federalism, led by Courchene, praise its
competitive tensions as a force for spurring governments to be more
creative.

The feds use the so-called spending power to elbow a path into provincial
jurisdictions, essentially transferring money in return for a say in program
standards.

The iconic example is the Canada Health Act, which sets basic guidelines for
medicare across the country.

The provinces sign on, but are generally left with plenty of room to
experiment to find the best ways of delivering services.

The system has proven flexible, but in some quarters provincial resistance
to any new federal thrusts is growing.

Quebec's separatist government has fought just about every big move Ottawa
has made in recent years.

Ontario's Harris has pulled his province back from its tradition as a
natural ally of Ottawa to a more prickly, autonomous stance.

In Alberta, a group of prominent academics set an almost surly tone early
this year by urging the Conservative government to "build firewalls" around
the province.

No wonder working much more closely with cities is starting to be seen
around Ottawa as a tempting alternative. Municipal politicians are viewed as
flexible -- and under the charismatic influence of Toronto urban planning
visionary Jane Jacobs, big cities are in vogue among policy experts who see
them as the level of government to watch in the new century.

Rock touts the Vancouver Downtown Eastside as a model for action. "I'd like
to work in the coming years in developing a more robust role for the
government of Canada with cities," he says. "That's where the people are,
and urban issues are national issues.

It's a national issue how we're going to deal with transit. It's a national
issue how we're going to solve problems of affordable housing."

If that sounds like a politician presenting himself as a guy who thinks big,
keep in mind that Rock is lined up as a leadership candidate for whenever
Chretien retires.

So is Industry Minister Brian Tobin, who, along with Stewart, is
spearheading the innovation initiative. And both Rock and Tobin are, of
course, chasing Martin, the man behind using the personal tax system to play
a more popular role in Canadians' lives.

Combine those sorts of prime ministerial ambitions with Ottawa's wider
inclination to stretch out, and the stage is set this fall for a more
assertive brand of federal politics. The question now is how far Chretien --
a lifelong believer in modest steps over visionary strides -- is ready to
go.