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Money Isn't the Problem

Author: Tanis Fiss 2002/10/03
On many reserves, there is poor housing, poor schools, poor healthcare, and a third world standard of living. The recent Throne Speech promises to ease the poverty of aboriginal peoples. In other words the federal government plans to increase spending to improve living conditions. If this sounds like a familiar movie, it is. Fact is, money is not the problem - accountability is.

The federal government spends approximately $7 billion annually on aboriginal affairs. From 1991 to 2001, the amount of federal funding increased by approximately 49%. Federal spending on a per capita basis has also increased during the same time period. Spending increased (figures adjusted for inflation) from $6,801 in 1991 to $9,623 in 2001, an increase of almost 30%.

According to Auditor General reports, 80% of the federal government's total expenditures are transferred directly to native bands. Native bands are required by the Department of Indian Affairs to have their expenses audited; however, this information is not available to the general public or to the Auditor General. Once in possession of the bands, how these funds are dispersed is decided by the Chiefs and their band councils.

Unfortunately, as news reports increasingly remind us the money is too often spent on excessively high salaries for the Chief and council, leaving little money for health care, housing, social services and education.

According to an Access to Information request filed by the Canadian Taxpayers Federation, for the year ending March 21, 2000, there was one native politician for every 177 people. These politicians earned salaries and honoraria of approximately $91 million tax-free. Their travel expenses were another $29 million. If all Canadians were as thoroughly governed as reserve natives, there would be 295,000 politicians costing almost $10 billion annually.

Accountability on native reserves is lacking. The entire funding structure and whether federal payments should be directed to band governments and their Chiefs or to the individual band members for whom the support is needed must be considered.

Even the modest step of the federal government transferring a portion of the money directly to individual natives would increase accountability. The federal government could withhold a specified amount (as indicated on the cheque), and transfer that amount to the native government in question -- that alone would inject greater accountability into the system than now exists. After all, it works to a degree for other levels of government.
Another possibility is to transfer all the money directly to individual natives and have native governments collect taxes the way other governments collect taxes: through income taxes, property taxes and a multitude of other measures. This would have an immediate effect on the size of government on reserves, which is unreasonably large in comparison to non-native communities of similar sizes.

Regrettably, neither proposal would end the cycle of dependency created by such transfer payments. However, as an interim step, changing the funding structure to enhance accountability would move towards greater freedom of choice and personal responsibility. In either proposal, it is up to the individual natives to decide what types of services their local government is to provide with their tax dollars.

The Thorne Speech promises to end aboriginal poverty presumably by spending more money. Aboriginal poverty is not about more money, but about how the existing funds are spent and all the perverse incentives inherent in the current system. By restructuring the system greater accountability for all Canadians can be achieved.