Brief 2013 Federal Budget Outlook
The 2013 Federal Budget probably disappointed people who might have been hoping for a change in the slow growth in federal transfers to First Nations or major new initiatives. There was slow growth or cuts in most expenditures and a lot of tweaking around the edges. However, this is going to be typical of federal budgets for the next twenty years. We know this because an aging society means the costs of programs directed to the elderly are gradually but irreversibly crowding out spending in other areas. The slow erosion of per capita funding to First Nations is similar to what is happening to a lot of so called "discretionary” expenditures.
The math is irreversible. Older Canadians are retiring. They are putting pressure on old age security and provincial health care. This must all be paid for from a workforce that is shrinking in relative terms. When the number of people receiving government services (retired Canadians) rises faster than the people paying for those services through taxes(working Canadians) then something has to give. In fact, it would be accurate to say
that politics over the next twenty years is going to be very different from politics of twenty years ago. In those days, it was still, “who gets what?” Today and in the future, it’s “who is
going to pay for services to retired Canadians?” Or more accurately who is going to pay
for the costs of an aging society.
Answering the question “who is going to pay?” will imply a steady litany of funding cuts or tax increases. There will be serious differences between the political parties about who should bear the burden but regardless of the political party, tough choices will have to be made. The news however, is not all bleak for First Nations.
For the first time, federal and provincial governments are“discovering” First Nation potential. In a 1999 pre-budget submission we wrote for the AFN we predicted this very outcome. An aging society is making it more important that each person of working age be employed, and if possible, employed in a good paying job. And First Nations are the fastest growing component of this labor force. While there might be some pressure to reduce transfers, there’s more interest now than ever before in initiatives that create business on reserve and put First Nations people to work. Also significant is the fact that there is a real shift underway in our major trading partners. There’s strong demand emerging for Canadian resources in the so-called emerging economies. Some may balk at the idea of Canada being only “hewers of wood” but in fact, resource development is a high-tech industry in many respects and it brings high paying jobs and resource royalties and offers a real chance to affect some of the irreversible math that aging will otherwise have on Canada. A significant number of these jobs are going to be in places where a large portion, or often a majority, of the workers are First Nations. Any government is going to prefer training First Nations people for these jobs over bringing in foreign workers. And finally, the government has recognized that in order to take advantage of demand for resources, it needs the support of First Nation governments.
That support is going to be difficult to secure so long as resource development creates far more revenues for the federal and provincial governments in a First Nation’s traditional territory than it does for the First Nation government itself. In a nutshell that is what is going to change over the next five years. It can be through revenue sharing, tax collection, or enhanced transfers but the federal and provincial governments are ready to make deals.
That is not to say that these deals are going to be easy to make. However, Fiscal Realities Economists can help. We can start by making you aware of what kind of revenues a resource project will generate beyond royalties that only exist during the operating phase of a development. We can help you identify how much of these revenues are flowing to First Nation services. We can help you to negotiate an agreement that provides sustainable revenues to raise the standards of First Nation services and improve community infrastructure. Generating independent revenues and building an economy from the resource development opportunities is the real name of the game for First Nation leaders in the coming
generation.
The math is irreversible. Older Canadians are retiring. They are putting pressure on old age security and provincial health care. This must all be paid for from a workforce that is shrinking in relative terms. When the number of people receiving government services (retired Canadians) rises faster than the people paying for those services through taxes(working Canadians) then something has to give. In fact, it would be accurate to say
that politics over the next twenty years is going to be very different from politics of twenty years ago. In those days, it was still, “who gets what?” Today and in the future, it’s “who is
going to pay for services to retired Canadians?” Or more accurately who is going to pay
for the costs of an aging society.
Answering the question “who is going to pay?” will imply a steady litany of funding cuts or tax increases. There will be serious differences between the political parties about who should bear the burden but regardless of the political party, tough choices will have to be made. The news however, is not all bleak for First Nations.
For the first time, federal and provincial governments are“discovering” First Nation potential. In a 1999 pre-budget submission we wrote for the AFN we predicted this very outcome. An aging society is making it more important that each person of working age be employed, and if possible, employed in a good paying job. And First Nations are the fastest growing component of this labor force. While there might be some pressure to reduce transfers, there’s more interest now than ever before in initiatives that create business on reserve and put First Nations people to work. Also significant is the fact that there is a real shift underway in our major trading partners. There’s strong demand emerging for Canadian resources in the so-called emerging economies. Some may balk at the idea of Canada being only “hewers of wood” but in fact, resource development is a high-tech industry in many respects and it brings high paying jobs and resource royalties and offers a real chance to affect some of the irreversible math that aging will otherwise have on Canada. A significant number of these jobs are going to be in places where a large portion, or often a majority, of the workers are First Nations. Any government is going to prefer training First Nations people for these jobs over bringing in foreign workers. And finally, the government has recognized that in order to take advantage of demand for resources, it needs the support of First Nation governments.
That support is going to be difficult to secure so long as resource development creates far more revenues for the federal and provincial governments in a First Nation’s traditional territory than it does for the First Nation government itself. In a nutshell that is what is going to change over the next five years. It can be through revenue sharing, tax collection, or enhanced transfers but the federal and provincial governments are ready to make deals.
That is not to say that these deals are going to be easy to make. However, Fiscal Realities Economists can help. We can start by making you aware of what kind of revenues a resource project will generate beyond royalties that only exist during the operating phase of a development. We can help you identify how much of these revenues are flowing to First Nation services. We can help you to negotiate an agreement that provides sustainable revenues to raise the standards of First Nation services and improve community infrastructure. Generating independent revenues and building an economy from the resource development opportunities is the real name of the game for First Nation leaders in the coming
generation.
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