Community capitalism flowering among some First Nations

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Bending the Curve: Recent Developments in Government Spending on First Nations

How much money are governments spending on Indigenous peoples? How have these amounts been changing over time? How effective is the spending? This is the third in a series of Fraser Institute studies of these questions. This paper extends the previous work on government spending in support of First Nations, including federal transfers from Indigenous Affairs and Northern Development (INAC), Health Canada spending on First Nations, Aboriginal program spending by provincial governments, and own-source revenue (OSR) generated by First Nation governments. Basically, the same methodology has been used as in the earlier papers: INAC expenses recorded here do not include Northern expenditures or internal administration. Own-source revenue is counted slightly differently from the previous attempt to tabulate it.

Main empirical findings

  • INAC support for First nations as measured in constant dollars continued to increase from 1995/96 to 2015/16, but not as rapidly as in the preceding 40 years. The very large cost of the Residential Schools Settlement Agreement (about $5 billion), which was paid to individuals rather than First Nation governments, has inflated the apparent amount of transfers.
  • INAC spending per Registered Indian has declined in this 20-year period because legal changes have led to a rapid increase in the number of Registered Indians. INAC spending per Registered Indian living on reserve has experienced ups and downs but is now about the same as it was 20 years ago.
  • After growing rapidly from 1995/96 to 2005/06, provincial spending on First Nations grew less rapidly in the last ten years. It is a significant total but remains small compared to overall federal spending.
  • Own-source revenue declined slightly in constant dollars from 2013/14 to 2015/16; the reasons for this decrease are not certain, though it was obviously a time of low natural resource commodity prices.

In its first two budgets, the Liberal government of Canada promised a substantial increase in federal spending on First Nations, but figures from the Public Accounts are not yet available to determine how great an increase has actually been implemented. The announced spending hikes will have to contend against an already large deficit, increasing interest rates, and other claims on the budget, such as higher defence spending.

Increased expenditure is not a panacea because some problems faced by First Nations have deeper causes than shortage of money. Clean water, for example, may be difficult to supply in remote locations subject to flooding. Educational deficits may arise more from family disorganization and lack of community support than from budgetary shortfalls. Thus, increased spending should be accomplished by rigorous program evaluation to ensure the increases actually achieve results and are not merely transferred to organized rent seekers.

Own-source revenue, which is already equal to over 50% of federal spending, is a way for many First Nations to improve their well-being. Natural resource development is promising for some First Nations in remote locations but, unfortunately, the contemporary environmental movement and the federal government are making resource development more difficult even as it promises to increase fiscal transfers to First Nations.

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Incentives, Identity, and the Growth of Canada's Indigenous Population

Statistics Canada has reported unprecedented growth in Canada’s Indigenous population (Indian, Métis, and Inuit). Over the 25 years from 1986 to 2011, it grew from 373,265 to 1,400,685, an increase of 275%, while the population of Canada increased by only 32% in the same period of time. Although Canada’s Indigenous peoples have higher birth rates than other Canadian groups, most of this increase resulted from “ethnic mobility”—individuals changing the identity labels they apply to themselves.

By far the greatest growth occurred in the categories of Métis and non-status Indian, which is purely a function of how respondents describe themselves in the census. But the numbers of Registered Indians (a distinct legal status) have also grown much faster than can be accounted for by natural increase. This paper deals with identity issues surrounding Registered Indian status and First Nations membership; a subsequent paper will deal with the Métis.

Ethnic mobility resulting in the growth in the numbers of Registered Indians has been fostered by adoption of equality rights in the Canadian Charter of Rights and Freedoms (1982); court decisions such as Lovelace (1981), McIvor (2009), and Gehl (2017); statutes such as Bill C-31 (1985) and Bill C-3 (2011); and the recognition by order-in-council of landless bands such as the Qalipu Mi’kmak First Nation (2011). The Registered Indian population is now at least 40% larger because of these legal changes than it otherwise would have been.

An important factor in the growth of the status Indian population is the set of positive economic incentives conferred by Registration, including free supplementary health insurance for all Registered Indians and Inuit, and in some circumstances financial assistance for higher education, exemption from taxation on reserve, and special wildlife harvesting rights. Such benefits can be substantial and are particularly attractive now that the former legal disabilities connected to Indian status, such as not being able to vote, have been repealed. The medical insurance plan alone is worth about $1,200 per person per year. Though social disadvantages of Indian status may still exist, the legal and economic benefits are now substantial enough to create incentives to seek Registered status.

First Nations were established as distinct political communities; but political, judicial, and administrative trends are combining to confer Registered status upon many people who have some degree of Indian ancestry but are not really part of First Nation communities. Ethnic mobility resulting in growth of the Registered Indian population means upward pressure on federal and provincial budgets, because population counts affect Indigenous programming. But expense is not the only concern; these changes also raise a fundamental question: is it justifiable to offer special government benefits solely on the basis of ancestry?

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