Expect more government spending if Canada moves to proportional representation

On December 1, the committee tasked by the federal government to consider alternatives to Canada’s current first-past-the-post electoral system delivered its recommendations, favouring a more proportional system, which allocates seats in parliament closer to the share of votes each party receives.

Unfortunately, the committee ignored how a move to a proportional representation (PR) voting system would affect public policy, specifically fiscal policy. In reality, as demonstrated by a wide body of research, a move to PR would likely lead to higher government spending and larger deficits (borrowing) in Canada.

So how does PR voting ultimately lead to larger government and more borrowing?

It’s based on the likelihood that a move to a PR system would result in more parties being elected to the legislature, which means an increased likelihood of coalition governments.

As the number of parties increases, and particularly the number of parties receiving seats in parliament increases, it’s difficult for any one party to control a majority of the seats and form government. Thus, in order to form government, larger parties must win the support of smaller parties, often by capitulating to smaller parties on their main issues of interest, which more often than not requires additional spending.

In this sense, smaller, even fringe parties, in PR systems can wield a disproportionate amount of power at the expense of the preferences of the majority of voters who didn’t vote for such parties.

For example, a recent study looked at the average level of central government spending over a 15-year period in advanced industrial countries, from 2000 to 2014. It found that the average size of central governments in countries with PR was almost 25 per cent larger than in countries with majoritarian/plurality election rules, similar to what Canada currently employs. The study also found that PR countries tend to finance this extra spending by running larger deficits.

A number of academic studies have reached similar conclusions. For example, in their seminal book The Economic Effects of Constitutions, noted economists Torsten Persson and Guido Tabellini found that governments were six per cent of GDP larger in countries with PR election rules than in countries with majoritarian/plurality systems. In other words, countries with PR maintained much larger government sectors than non-PR countries in large measure because of the special interest-driven spending that accompanies having to negotiate coalitions with smaller political parties.

No electoral system is perfect—each has its benefits and costs. The unintended consequence of increased government spending and debt—which, in Canada, would compound many of Ottawa’s current fiscal problems—remains a significant flaw of PR voting.

Given the impact that a move to PR could have on the country’s finances, it’s curious that the committee ignored the broader implications of proportional representation.