Indigenous and Northern Affairs Committee on Oct. 27th, 2009

[The Chair, Conservative, Bruce Stanton]

Good morning everyone. Welcome to the 33^rd meeting of the Standing Committee on Aboriginal Affairs and Northern Development.

This morning we welcome representatives from two departments of government, the first from the Department of Human Resources and Skills Development, the second from the Department of Finance.

This is our second meeting on consideration of the barriers and opportunities or solutions we can identify in advancing the economic development of Canada's north. I say that, members, because as we go through the course of our questioning and hearing from witnesses during this study, I think we need to be mindful of the mandate we have at hand and keep our questioning on the orders of the day. Obviously there are times, particularly depending on the witnesses, when any number of questions may arise. I simply remind members that we need to focus on these important questions, identifying where those gaps may exist, for the purpose of eventually formulating what all committee members believe to be important recommendations that we can recommend to the House and to the government in advancing economic development in Canada's north.

Without taking that any further, I would like to introduce Mr. Thompson, the associate assistant deputy minister of the skills and employment branch of HRSDC; and also Mr. Chris Forbes, the directeur général, Direction des relations fédérales-provinciales et de la politique sociale du ministère des Finances. I know that you probably both know we typically allot ten minutes for each presentation. I see that you have circulated your remarks in advance. We appreciate that.

We'll go through each presentation, followed by questions from members. I'm sure you also know that when we get to questions, the first round will be seven minutes—that is for the member's question and for your response. We guide our responses as succinctly as we can.

Monsieur Lévesque, avez-vous une question?

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Mr. Chair, could we have the names of the two gentlemen accompanying Mr. Keenan and Mr. Ram, as well as their positions?

[The Chair, Conservative, Bruce Stanton]

Mr. Forbes, in the course of your presentation, perhaps you can introduce the other representatives who are here with you today. They were added at the last minute, and we appreciate your indulgence in that respect.

Monsieur Lemay, avez-vous une question aussi?

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

I have an important point to make. It does not have to do with our witnesses, so I apologize for taking up some of their time; it is for the committee members.

I was told some things. Mr. Chair, I urge you to call some of our colleagues to order. Last week, when the minister was here, we were served a meal. At least 10 or so people in the room ate when they should not have. I would like you to remind everyone who the food at the back is for, so that it is clear once and for all.

[The Chair, Conservative, Bruce Stanton]

I understand. The food that we provide is for members and their immediate staff. Perhaps we'll put some proper signage on the table in the area of the food, so other guests and witnesses understand that this is the case.

I'd remind members that we do have a time for committee business at the end of today's session. We'll set aside at least ten minutes. There are a couple of other administrative items that we will deal with also.

Gentlemen, we'll be looking to end our questioning at approximately 12:45 today as well.

Thank you, Mr. Lemay.

We will proceed with the presentations.

First, we'll go to Mr. Thompson, if you wish.

You have the floor for 10 minutes.

[Paul Thompson, Associate Assistant Deputy Minister, Skills and Employment Branch, Department of Human Resources and Skills Development]

Thank you, Mr. Chair and honourable members of the Standing Committee on Aboriginal Affairs and Northern Development.

My name is Paul Thompson. I am the Associate Assistant Deputy Minister for the Skills and Employment Branch at Human Resources and Skills Development Canada.

I am pleased to appear today to provide the committee with information pertaining to our labour market programs that we deliver in the territories as well as to discuss some of the linkages between HRSDC and the new Canadian Northern Economic Development Agency, or CanNor.

But before I outline the current programs that we deliver in the three territories, I would like to begin by outlining some of the labour market challenges in the territories, which are an important context for the programs that we deliver. As may be well known to the committee, the territories experience a number of socio-economic and demographic challenges that impact on the level of economic and labour market development for all the inhabitants.

Northerners inhabit a very thinly populated region in a very vast area. The territories encompass 39% of Canada's land mass, where approximately 100,000 people live spread across 77 communities. This is important information for how we deliver our programs. The northern population growth rate is nearly double the Canadian average, with a large aboriginal—

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Can you speak slower?

[Paul Thompson]

Yes, of course. I apologize.

The northern population growth rate is nearly double the Canadian average, with a large aboriginal and youth population, especially in Nunavut and the Northwest Territories, where two-fifths of the population is under the age of 25.

Labour market performance in the territories has been strong overall. However, labour market outcomes for aboriginal Canadians in the north continues to lag. In fact, the unemployment rates of aboriginal Canadians in the territories are more than double those of other northerners. Lower education and literacy skills, remote locations, severe housing shortages, and significant health concerns as well as distance to employment are all factors that contribute to the higher incidence of unemployment.

As the economy rebounds, there will be increased pressure for skilled workers in the north.

HRSDC has designed a number of programs to ensure that northerners participate in and benefit from economic activity in the territories.

The Government of Canada recognizes that provinces and territories are best placed to design and deliver labour market training to meet their particular regional needs.

HRSDC provides support to territorial governments through a number of agreements, including labour market development agreements, or LMDAs, labour market agreements, and more recently, the skills training and transition fund, or the STTF, which was introduced through Canada's economic action plan.

HRSDC will provide $11.3 million to the territories through labour market development agreements in 2009-10. This includes additional funding of $1.6 million, which was announced in the economic action plan. These benefits were received by individuals who lost their jobs and are eligible to receive employment insurance benefits.

HRSDC also recently signed labour market agreements with all three territories, which are designed to promote greater labour market participation by providing access to employment programs for non-EI-eligible workers. In 2009-10, these agreements totalled $3.24 million.

Under the economic action plan, HRSDC will also provide the territories with $4.53 million in support through the new skills training and transition fund in 2009-10. This fund, which is managed through the labour market agreements, helps individuals regardless of their eligibility for EI in sectors, occupations, and communities that are affected by the economic downturn.

Along with this suite of labour market agreements, HRSDC has several national labour market programs that target aboriginal people. The programs are designed to improve the skills and workplace readiness of aboriginals to enable them to fully participate in the economic development of the north.

The aboriginal human resources development strategy, or AHRDS, is the largest of our labour market programs delivered by HRSDC in the territories, where we have 13 agreements worth approximately $25 million in 2009-10.

AHRDS is designed to expand the employment opportunities of aboriginal people across Canada through a number of programs and services, including skills development, job creation partnerships, and employment assistance services. Through AHRDS, the program has employed 135,000 aboriginal clients since 1999 and has resulted in over 42,000 aboriginal Canadians returning to school.

Building on the successes of the AHRDS and the need to adjust the program to the new economy, HRSDC is modernizing the AHRDS program to respond to the current economic environment and to the realities with the new successor program, which is known as the aboriginal skills and employment training strategy. This renewed program will come into effect in 2010-11. This new program will focus on three strategic priorities, which include demand-driven skills development, partnerships with stakeholders, and accountability for improved results.

As part of the economic action plan, HRSDC also recently launched a new $25 million aboriginal skills and training strategic investment fund to support short-term, focused initiatives that are designed to help aboriginal Canadians receive the specific training they require to benefit from immediate employment opportunities. As of November 2009, this fund will support 71 projects across Canada.

Furthermore, budget 2009 provided $100 million over three years in funding for the aboriginal skills and employment partnership, or ASEP, program, which fosters partnerships between provincial and territorial governments, aboriginal organizations, and the private sector to create training and employment opportunities. The new funds will support up to 20 new partnerships, which will ensure a highly skilled aboriginal workforce and help to secure long-term, sustainable jobs.

HRSDC's efforts in the north through programs like ASEP and AHRDS have resulted in investments in skills upgrading and have led to aboriginal labour market successes. For example, with the help of an ASEP program, currently 25% to 40% of employees in mining industries in Baker Lake and Mary River are Inuit.

HRSDC also delivers national programs that target the territories’ largest cohort, youth. Through the Youth Employment Strategy, the department has invested approximately $1.85 million in 12 youth projects in the territories, this year alone.

The youth employment strategy includes initiatives such as the skills link program, which successfully assists youth, particularly those facing barriers to employment, in gaining the skills, the work experience, or the abilities that they need to make a successful transition to the workplace.

HRSDC also works directly with employers through sector councils, which provide employers with tools and strategies to attract and retain northerners in the workplace.

Sector councils are platforms for stakeholders to share ideas, concerns, and perspectives about human resources and skills issues and to find solutions that benefit their sector. Two sector councils have a particular focus on activities in the north. The mining industry attraction, recruitment, and retention strategy, operated by the Mining Industry Human Resources Council, is developing a tool kit for employers to facilitate the attraction, recruitment, and retention of aboriginal people. In addition, the Aboriginal Human Resource Council runs the mastering aboriginal inclusion workshop program, which encourages organizations to incorporate aboriginal people into their workforce and shares best practices on how this can be done.

In September 2008 the Government of Canada announced $1.94 billion for housing and homeless investments for low-income Canadians over five years, through to March 2014.

As part of that announcement, the Homelessness Partnering Strategy was extended for two years from April 1, 2009 to March 31, 2011, thereby confirming an annual commitment of $134.8 million to reduce and prevent homelessness in Canada.

In addition, the government committed to consulting with its provincial and territorial partners, as well as community and aboriginal groups, including those in the north, that work to combat homelessness. Consultations will focus on improvements to federal investments in homelessness between 2011 and 2014, the last three years of the five-year period.

The objective of the five-year funding extension is to continue to assist communities, including those in the north, in providing community-specific, coordinated response to those at risk of homelessness.

Last, I want to speak to the relationship with CanNor, the Canadian Northern Economic Development Agency. HRSDC, as I have indicated, makes important investments in labour market programming in the territories. However, the department continues to ensure that a broad labour market framework relates to other key policy areas, such as economic development, education, and social assistance. To this end, HRSDC is collaborating with other federal departments to ensure that we move forward together to maximize northern participation and benefit from the Canadian economy. The creation of the new agency provides an excellent focal point for federal dialogue and collaboration on these priorities. Given the clear link between the department's social and labour market programs and CanNor's mandate to enhance economic development in the north, we are collaborating in innovative ways and working together.

We are currently negotiating a memorandum of understanding that would see employees of the department co-locate in the CanNor office in Iqaluit. The goal of this co-location is to ensure the effective coordination of economic development efforts and social and labour market programs. These efforts will ensure that programs and initiatives are streamlined in a manner that eliminates duplication and improves labour market efficiencies.

In conclusion, Mr. Chair and honourable members of the committee, I want to thank you again for inviting me to outline the role that HRSDC is playing in labour market development in the north.

It will be my pleasure to respond to any questions that members may have.

[The Chair, Conservative, Bruce Stanton]

Thank you very much, Mr. Thompson. That was a little over time, but we'll certainly allow a similar period for Mr. Forbes. We'll do our best to not go too far after the 10 minutes.

Mr. Forbes, you have the floor.

[Chris Forbes, General Director, Federal-Provincial Relations and Social Policy, Department of Finance]

I will be under time.

Thank you, Mr. Chair.

I would like to thank the members of the committee for this invitation to appear before you today as a witness on the subject of northern economic development.

I would like to begin by introducing my colleagues. Sean Keenan is the Senior Chief of the Tax Policy Branch at the Department of Finance, and Elisha Ram is the Director of Economic Development, also at the Department of Finance.

Let me begin by talking about the two areas where Finance has direct responsibilities bearing on northern economic development. It would, first, be providing transfers to territorial governments, and also the design of federal tax policies. I'll start with the transfers.

Territorial governments are recipients of the three major legislative transfers administered by the departments. In total, these transfers add up to about $2.9 billion in 2009-10. This is in addition to other federal support delivered by departments such as HSRDC. So there are three transfers.

First, we have the Canada health transfer, which provides the annual funding for health care and support of the principles of the Canada Health Act.

Second, we have the Canada social transfer, which is an annual federal block transfer. That transfer is in support of post-secondary education, social assistance and social services, and programs for children.

Third, and perhaps most importantly from a territorial perspective, would be the territorial formula financing. The territorial formula financing is the largest single federal expenditure to each of the three territorial governments. In 2009-10, the TFF, as we call it, amounted to $612 million for the Yukon, $864 million for the Northwest Territories, and just over $1 billion to Nunavut. So the total is about $2.5 billion for 2009-10, and this is the primary revenue source for territorial governments.

The territorial formula financing grant is an unconditional grant from the Government of Canada that takes into account the unique circumstances in the north and the high cost of delivering programs and services. Territorial formula financing enables territorial governments to provide a range of public programs and services that are comparable to those offered by provincial governments at a comparable level of taxation.

Finally, I would mention on the transfer side that Finance Canada is also responsible for the resource revenue-sharing portion of negotiations around the devolution of natural resources to the territories.

With that on transfers, I'll turn to the department's role in designing federal tax policy.

The fundamental role of the tax system is to raise revenues necessary to fund government spending priorities in a manner that balances economic efficiency, fairness, and simplicity. In some circumstances, the tax system can also be used directly to achieve public policy objectives.

With respect to the north, the Income Tax Act contains the northern residents deduction, which is intended to assist in drawing skilled labour to northern and isolated communities by providing recognition for the additional costs faced by residents of these areas. There are, in fact, two income tax deductions available to residents of the north who live in the prescribed northern zone or the intermediate zone for at least six months: a residency reduction, which provides $8.25 per day per person in the northern zone; and a deduction for employer-paid travel expenses for any number of trips made to obtain medical services, and up to two trips per household member per year for other reasons. The residency component of the northern residents deduction was increased by 10% in 2008.

It's worth noting, too, that the Department of Finance is also responsible for the development of tax policy related to aboriginal issues more generally, for negotiating and administering tax administration agreements with aboriginal governments, and for developing negotiation mandates and for negotiating the tax elements included in comprehensive land claim and self-government agreements—and I have colleagues here who can speak to that if necessary.

My final point would be that the Department of Finance, as you know, is also responsible for providing advice to the minister in the context of the federal budget, budget 2009, tabled last January—the economic action plan. It included a wide range of measures that will benefit the north. Mr. Thompson talked about some of the skills and training initiatives. There are also infrastructure projects, northern economic development such as CanNor, and housing projects for the north. Altogether, those investments from budget 2009 are worth about $770 million.

Thank you very much. I'd be pleased to answer any questions from the committee.

[The Chair, Conservative, Bruce Stanton]

Thank you very much, Mr. Forbes.

By the way, Mr. Thompson, I wasn't trying to draw any kind of parallel that somehow going over the 10 minutes was a bad thing. Obviously your presentation included many important pieces of information that we need to hear.

With that, we'll begin the first round of seven minutes.

Mr. Bagnell.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you.

Mr. Thompson, I was told that the youth at risk programs that are still operating and have been operating for some time for youth employment, which is obviously critical, were cut back either last year—I'm not sure about this year—but from previous years. Do you have any comment on that?

[Paul Thompson]

I can share some numbers as to what we're currently spending in 2009-10. I have that program in my notes as well. We're spending a total of $1.8 million in 2009-10 in the three territories.

What I don't have, though, are their comparatives from the previous year. That is something I would have to follow up on.

[Larry Bagnell, Liberal, Yukon, YT]

Yes, could you follow up on that and get back to the committee?

We just want to go on record that, of course, we think it was a bad thing to do. Youth at risk could certainly help to fill the labour force, and it's very important that they get jobs.

Relating to aboriginal housing in the north—because everyone knows that's a huge issue—the structure of the most recent funding had some local funding and national funding in it. It turns out that from the national funding, I think the first nations said they believed there would be about $140,000 for the Yukon, which would build all of one house, which is not very helpful.

Do you have any comments?

[Paul Thompson]

Are you referring to programs delivered through Canada Mortgage and Housing Corporation? I suspect that's what you're referring to, which is not an area of programming that I'm familiar with or am able to speak about. My colleague may be able to speak to that broadly.

[Chris Forbes]

At a high level, I don't have the specific numbers here by territory, but there was a variety of components of the social housing package in budget 2009. There was a specific northern housing program, which was $200 million, which went just to the three territories. There was also money for on-reserve housing, which largely went south of 60. There was a renovation and retrofit program, which the territories would have got a share of. I have here that their total share of that money was $11 million among the three territories. There was also social housing money for low-income seniors and persons with disabilities. It's important to note that there was a separate northern housing program, and CMHC would be able to provide you with more details.

[Larry Bagnell, Liberal, Yukon, YT]

Okay. The problem was that the first time around the minister had originally promised the allocation for first nations and then ended up going to the territorial government. The first nations got a large chunk of that, but not all of what they were expecting, and then it has been reduced since then. So we certainly encourage that that be kept up at the previous levels.

When you talked about the transfers to the territories, that was good, but there's also a special health transfer, which I think expires on March 31 next year. Are you intending to renew that, as we would like?

[Chris Forbes]

I can't speak to what the government will or won't do, obviously, but that does expire at the end of the current fiscal year. That was a five-year territorial health sustainability initiative that was started in 2004. As to the next steps for that program, I couldn't answer that question.

[Larry Bagnell, Liberal, Yukon, YT]

So you haven't booked it into the fisc?

[Chris Forbes]

As to what's in the fisc or what's not in the fisc, the government will have to take a decision, obviously, as to how to proceed once that program expires and what the next steps are.

[Larry Bagnell, Liberal, Yukon, YT]

So they haven't taken a decision as to that major component of northern health care systems?

[Chris Forbes]

I couldn't speak specifically to the decisions the government has taken, but there's no public statement, I don't believe, to that effect.

[Larry Bagnell, Liberal, Yukon, YT]

In the land claims in the Yukon in particular, the first nations can take down major parts of government, like health care and education, which is right now funded through the territorial government. But if you take a chunk out, the territorial government—you know they guarantee in the land claims that they can't diminish their service—won't be able to pay for the whole thing. Is the federal government prepared to pay for their part of those commitments for first nations?

[Chris Forbes]

Can you ask that question again?

[Larry Bagnell, Liberal, Yukon, YT]

When a first nation takes down a program—let's say the health care system or the education system—there's a cost to that. Is the federal government prepared to pay for that commitment?