The Modern Treaty Era


Chapter 17 Header (background of blue sky and tower of the parliament building)Summary: Any and all federal transfers were very small at the beginning of the twentieth century, but they rose steadily after World War II. In this Chapter we learn that federal transfers to Indigenous people in 2015-2016 were in rough proportion to Indigenous population and location and have increased significantly since then. The impact of this money is reduced by the fraction spent on non-Indigenous service providers and moreover by the apparent inefficiency and lack of transparency of programs.

In this Chapter we’ll consider how much money Canada’s federal government allocates to Indigenous individuals and communities. Some of this could be considered obligatory, in keeping with treaty responsibilities or in compensation for past wrongs. Some could be considered part of the government’s aspiration to enhance all citizens’ well-being. In this day and age, we expect social spending from the government.

Some History:

At the time of Confederation, Canada had no social assistance as we know it today: no publicly-funded medical care or schools, and no public pensions. A very different mentality prevailed. The federal government at that time had no intentions regarding the Inuit, no inkling of duty towards Métis communities, and no willingness to spend a nickel more on First Nations than was promised in the various Treaties or that was necessitated by emergencies such as famine.

It might be said that the federal government’s sense of responsibility to provide a social safety net for anyone, Indigenous or non-Indigenous, awoke during the Great Depression and became quite energized as soldiers returned home after World War II.

While the provinces and territories took on the responsibility to deliver health care, education, and social assistance to Canadians not living on reserves, the federal government expanded its service delivery to Status Indians on reserves. It now funds health care, education, income support, child welfare, and infrastructure on all reserves.  There is, however, no formal statement of what this support entails, and the funding that individual reserves and other Indigenous communities receive has evolved in an ad-hoc manner.

Over and over again we hear people ask the question: Where does the money go?  Why does our government spend billions and billions of dollars on Indigenous communities, with so little to show for it?

An important question indeed. One that has been ignored for years by academics.

Why do you think academic economists have done more research regarding developing countries than regarding Canada’s Indigenous communities? Do Indigenous people appear to be thriving? Does the government spend on anything without strong pressure from voters? 

In this chapter we shall argue that the government of Canada does not spend an excessive amount on Indigenous peoples; that the spending has not been transparent; that much of it goes to non-Indigenous service providers; and that the government has been largely unaccountable for how it spends the money.

Spending on Indigenous People – not that much:

Before we use data to make the case that the Canadian government hasn’t spent as much as we might like to think on Indigenous communities, consider the logic. Is a marginalized group, often living far from the public eye, for generations associated with unfavourable stereotypes and racist slurs, likely to have received appropriate support from non-Indigenous voters or the governments elected by those voters?

A quotation from Sherlock Holmes comes to mind, something the fictional character said when traveling through the English countryside[1] :

“The pressure of public opinion   can do in the town what the law cannot accomplish. There is no lane so vile that the scream of a tortured child, or the thud of a drunkard’s blow, does not beget sympathy and indignation among the neighbours, and then the whole machinery of justice is ever so close that a word of complaint can set it going, and there is but a step between the crime and the dock. But look at these lonely houses, each in its own fields, filled for the most part with poor ignorant folk who know little of the law. Think of the deeds of hellish cruelty, the hidden wickedness which may go on, year in, year out, in such places, and none the wiser.”

Think indeed of the con artists, the predatory professionals, the incompetents who consider remote communities easy marks.  Think of the suffering and poverty which may go on, year in, year out, in such places, and none the wiser. Which did go on in Residential Schools, and which few non-Indigenous people knew about, nor were they inquiring.

Now to the data.

In 2015-2016, the federal government allocated approximately 4% of its program expenses on Indigenous people. [2] Since Indigenous people made up 5% of the Canadian population in 2016, this does not seem unreasonable.

In 2018-9, it was 5%.[3]

For the twenty years before 2016, while the Status population on reserve was growing, probably by over 1 percent per year,  the  federal government funding to First Nations reserves was capped to grow at a rate of 2% per year, similar to the average rate of inflation (1.9%).

Spending on Reserves compared to Spending on Provinces and Territories:

It is the long-standing policy of the government of Canada to distribute money to Provinces and Territories based on how much their needed spending exceeds their tax revenues.  Distributing money to reserves can be thought of as much the same exercise, except that reserves are not expected to raise their own tax revenues. Recall our discussion of tax exemptions in Chapter 11.

All provinces receive some amount of Canada Health Transfer (for healthcare) and Canada Social Transfer (for social assistance, childcare, and post-secondary education); less prosperous provinces also receive the more general “Equalization Payment”.  The purpose of Equalization Payments is to ensure the same standard of living for all Canadians.

The table below compares the total amount of money transferred by the federal government to various entities. Prince Edward Island is the province that typically receives the highest per capita transfer from Ottawa.

The 2016 number for reserves comes from the Parliamentary Budget Office (2017).  The 2019 number for reserves comes from the financial statements of Indigenous Services Canada (ISC) as detailed in the first pie chart later in this chapter.[4]

Consolidated Table of Federal Transfers (by Region/Province) for 2015-16 compared to 2018-19. Based on Reference Tables and Reports of the Department of Finance, 2017. Consolidated by: Anya Hageman & Pauline Galoustian [118]
Consolidated Table of Federal Transfers (by Region/Province) for 2015-16 compared to 2018-19. Based on Reference Tables and Reports of the Department of Finance, 2017. Consolidated by: Anya Hageman & Pauline Galoustian [118]

We see that the amount reserves receive seems in line with what northern territories receive, and rose almost 25% between 2015-6 and 2018-9, more than enough to cover inflation and population growth. This is in keeping with the Trudeau government’s promise to honour treaty commitments and invest in reserves.

In addition to the $22,588 per person spent on reserves by Indigenous Services Canada, Crown-Indigenous relations and Northern Affairs Canada contributes an additional $6,337 per person to fund land claim negotiations, treaty settlements, northern nutrition, and northern development.[5]

Would $22,588 cover what you use each year in terms of education, medical treatment, and infrastructure?  Does it seem like a reasonable amount of money?

According to the Parliamentary Budget Office, of the $18,400 per person allocated to reserves in 2016:

  • 2% was not actually given, but was included to make up for the fact that reserves do not pay income tax to the federal government
  • 16% funded Band governments
  • 16% was for social benefits
  • 66% was for infrastructure and programs
Did you know? Before being split into “Indigenous Services Canada” and “Crown Indigenous Relations”, the federal department responsible for Indigenous issues was called “Indigenous and Northern Affairs Canada” or INAC. It has had many names; for a long time it was known as “Indian Affairs”.

Spending on off-reserve Status persons:

The federal government also spends on Status persons who do not live on reserve. According to the Parliamentary Budget Office (2017), in 2015-6 the federal government spent about $1,860 per Status person not living on reserve. $1,388 went to supplementary health care and $415 to postsecondary education.

The Parliamentary Budget Office noted that 35% of the health care spending goes to transportation costs, leaving $902 per person. Besides transportation to hospital, medication, dental care, vision care, medical supplies, and mental health counselling are covered. Status persons, and also Inuit, can receive supplementary health care at any health care facility; the federal government will then reimburse the facility. The postsecondary money goes to paying for students’ tuition, books, travel to school, and living expenses, and also to the Indspire program, which provides scholarships and educational programs.

How much supplementary health care does $902 per person cover? Would we expect health and education expenses to be higher for Indigenous people?

Status persons also can benefit from administration of the estates of deceased persons ($5 per person per year) and support for entrepreneurs ($50 per person per year).

Spending on Indigenous People Generally:

In 2016 we had the federal government spending $1,800 per Status person not living on reserve multiplied by 416,000 individuals, plus $18,400 per Status person on reserve multiplied by 329,999 individuals, amounting to $6.8 billion. But in 2015-6 Ottawa spent over $11 billion on Indigenous people, almost twice as much. It was not clear what Departments the rest of the money was coming from or on what that money was being spent. The Department of Indigenous and Northern Affairs’ financial statements conflated spending on on-reserve, off-reserve, non-Status, and non-Indigenous programs. Since then, the Department of Indigenous and Northern Affairs Canada has been split into two Distinct Departments: Indigenous Services Canada, and Crown-Indigenous Relations and Northern Affairs Canada.

Crown-Indigenous relations and Northern Affairs Canada (CIRNAC) is mostly responsible for general spending categories such as environment, land claim negotiations, governance, resource development, and reconciliation strategy.

Indigenous Services Canada Department (ISC) has a much more service-oriented function and is the source of funding for most categories directly related to Indigenous people’s immediate material well-being. Figures 1 and Figure 2 below, we show a breakdown of the spending of these two federal departments in 2018-19, from biggest to smallest spending category. As of 2021, the most up-to-date information on expenditure categories and the amounts allocated within federal departments can be found in the Government of Canada’s InfoBase, which combines data from sources such as Departmental Reports, the Treasury Board of Canada, and Statistics Canada.


Data compiled from: Report Builder - Expenditures by Standard Object - Crown-Indigenous Relations and Northern Affairs Canada. Chart by: Pauline Galoustian; [119]
 Data compiled from: Report Builder – Expenditures by Standard Object – Crown-Indigenous Relations and Northern Affairs Canada. Chart by: Pauline Galoustian; [119]
Data compiled from: Report Builder - Expenditures by Standard Object – Indigenous Services Canada. Chart by: Pauline Galoustian;[120]
Data compiled from: Report Builder – Expenditures by Standard Object – Indigenous Services Canada. Chart by: Pauline Galoustian;[120]

Some of the categories of spending do overlap. Both CIRNAC and ISC spend on governance, climate, education and facilities.

In aggregate, for the year 2018-19, Indigenous Services Canada spent $11,587,017,459 total (72%) and Crown-Indigenous Services and Northern Affairs spent $ 4,431,657,305 (28%) for a total of $16,018,674,764. This total is 50% higher than the 2012-3 amount.

Money Spent on Non-Indigenous Service Providers:

Not all the 16 billion spent in 2018-9 went directly to Indigenous communities. A significant chunk was designated as “other expenditures”. 18% of ISC money and 24% of CIRNAC money goes to “other expenditures”, relating to Department salaries, transportation, legal services, and other overhead expenditures. It has long been noted that a lot of money intended for Indigenous needs benefits non-Indigenous service providers. In 1975, Hugo Muller wrote:

“I am not a statistician, but if I were, I would have a very interesting time figuring out exactly what percentage of the huge Indian Affairs budget is really spent by Indians on Indians.

Let me give just one example.  At a certain period of this decade, a number of Indian students from James Bay were sent out to places [like] Noranda, Quebec, in order to attend high school there….There was a time when we had over a hundred students in Noranda, let’s take 100 for easy figuring.

Foster parents boarding the students were paid $100 a month, and clothing vouchers issued three times a year amounted to $125 a season. Tuition was $820 per year per student, paid to the School Board.  For ten months, the cost per student was $1,945 – for one hundred students $194,500. And that does not include the transportation charges (they were flown in and out, since there are no roads in that area).  That would be over two hundred thousand dollars in all.

This was money spent for Indian education from the Indian Affairs budget, and only [comprised] a small part of the total cost of educating the high school students. But all this money ultimately ended up in the cash-registers, bank accounts and pockets of the white people living in the Noranda region.

The Indians did not benefit from it – as a people. If all these students had been educated in their hometowns, and all these hundreds of thousands of dollars would have flowed into the Indian community, providing jobs and services and generating development in their own surroundings, then, and only then could we begin to say it was beneficial to them.

…And until we see a dramatic change in that emphasis, we cannot complain that we are spending too much on the Indians where most of the money flows back into the pockets of merchants in Noranda, pilots in Val D’Or, civil servants in Ottawa, teachers in Hull, officer planners in Toronto, and so on.  It helps our economy.  Not the Indian economy. And as long as we do this, we cannot really ask the Indian, “Why don’t you stand on your own feet?” especially when we are forever telling him to move there, go to school here, not to live there, not to move around so much, and whatever else we can find to say to him.”

Another example of misplaced spending is the tendency, on the part of many child welfare agencies, to pay foster parents rather than spend money supporting birth families with coaching, counselling, rent payments etc. This tendency has impacted thousands of Indigenous and non-Indigenous children. As we will learn in our next Chapter,  First Nations (and other Indigenous communities) have been taking Child and Family services into their own hands to remedy the situation.  Change is happening in non-Indigenous communities too.  For example, in 2019, Kingston, Ontario’s Family and Child Services announced “the biggest change in more than 125 years of service”:

“… in the past, such as with Indigenous peoples, we’ve sometimes failed to look beyond the child to how the child is connected to family, culture and community. We’ve come to believe that these connections are essential to a child’s wellbeing, too. Every child needs to know where they come from and who they’re connected to. The outcomes for the kids we serve are always better when these bonds are strengthened. That’s why we’re refocusing our work so that we see every child in the context of their connections to family, culture and community. And we will preserve and promote those connections. For that we will need to make fundamental changes to what we do and how we do it. That’s why this is such a monumental change for our Agency.”[6]

Lack of Accountability in the Federal Government:

We mentioned in a previous Chapter that there is no document, not even the Indian Act, that spells out the federal government’s obligations to Indigenous people.  This was a focus of criticism when the Auditor General, Canada’s spending watchdog, reviewed the federal government’s delivery of programs for First Nations on reserve in 2011. The Auditor General wrote:

While the federal government has funded the delivery of many programs and services, it has not clearly defined the type and level of services it supports. Mainly through INAC [Indigenous and Northern Affairs Canada], the federal government supports many services on reserves that are normally provided by provincial and municipal governments off reserves.  It is not always evident whether the federal government is committed to [funding] services on reserves of the same range and quality as those provided to other communities across Canada.


The federal government has often developed programs to support First Nations communities without establishing a legislative or regulatory framework for them.  Therefore, for First Nations living on reserves, there is no legislation supporting programs in important areas such as education, health, and drinking water. Instead, the federal government has developed programs and services for First Nations on the basis of policy.  As a result, the services delivered under these programs are not always well defined and there is confusion about federal responsibility for funding them adequately.

The Auditor General also noted that most money is provided under contribution agreements which are specific to each First Nation. Many agreements must be renewed yearly and involve a heavy load of paperwork for First Nations. Except for ongoing health and education programs, funds are often delayed until several months into the year they are required, because they are not released until last year’s spending has been scrutinized and the current application reviewed by INAC.

A recent change provides a partial remedy. In December 2017 the Minister of Indigenous Services announced that, going forward, First Nations in good financial standing will receive commitments of specified amounts of funding for 10 years into the future, and reduced reporting requirements. Details are being worked out with the Assembly of First Nations and with the First Nations Financial Management Board (FNFMB).

In 2011 the Auditor General noted that the federal government does not have clearly stated goals regarding indigenous welfare, and thus no way to evaluate its own performance. There has also been a lack of coordination among the various federal Departments involved with Indigenous communities, but coordination is improving. INAC does not believe itself to be responsible for service and delivery; but only for funding.  Meanwhile, most reserves are small and do not have the expertise needed to oversee service and delivery, nor do they typically have school boards, health boards, and other regional authorities to manage service and delivery.

In 2011 the Auditor General expressed frustration at the government’s lack of progress since previous audits, noting the following:

  • Education. In 2000 and 2004, our reports identified a gap between the secondary school completion rates for First Nations people on reserves and the rates for other Canadians.
  • Water. In 2005, we reported the lack of a legislative regime to ensure that water quality on reserves met the Guidelines for Canadian Drinking Water Quality, despite the existence of such a regime in every province and territory.
  • Housing. In 2003, we reported a significant housing shortage on reserves and the need for major renovations of about 44 percent of existing housing because of problems such as mold contamination. In 2006, we reported unsatisfactory progress in addressing the problem of mold.
  • Child and family services. In 2008, we reported that First Nations children were eight times more likely to be removed from their homes than other Canadian children.
  • Land claim agreements. In 2003 and 2007, we reported that the federal government was not implementing all of its obligations under land claim agreements and was not living up to the spirit and intent of the agreements.
  • Reporting requirements. In 2002, we noted that First Nations communities, many of them having fewer than 500 members, had to fill out an excessive number of reports for INAC each year, and that many of the reports were never reviewed and served no purpose.

The Auditor General then went through each of these categories and noted how the Federal government had addressed the issues. The overall conclusion was that, while some steps had been taken to adopt the Auditor General’s recommendations:

“…INAC, the Canada Mortgage and Housing Corporation, and Health Canada have not made satisfactory progress in implementing several of our recommendations. 

…In some cases, conditions have worsened since our earlier audits:  the education gap has widened, the shortage of adequate housing on reserves has become more acute, and administrative reporting requirements have become more onerous.”

The lack of progress in adopting the Auditor General’s recommendations has been tolerated by Canadian voters. For example, in 2017 the Auditor General expressed his frustration[7] that the general public doesn’t care enough that First Nations’ needs are not being met.  He used as an example the oral health program run by the federal government for First Nations and Inuit at a cost of $200 million per year.

The goal of the program is to “manage” the payments for dental services, but there is no strategy to improve the level of oral health in these communities, which is much worse than in non-Indigenous communities.  The only news network interested in discussing his audit of the oral health program, released the previous week, was the Aboriginal Peoples Television Network.

  1. From “The Adventure of the Copper Beeches” by Sir Arthur Conan Doyle
  2. Total INAC spending of 11.2 billion (Department of Finance, 2017, p. 172), divided by total federal spending before debt charges, 271 billion (Annual Financial Report of the Government of Canada).
  3. Total ISC and CIRNAC spending of 16 billion (Report Builder - Expenditures by Standard Object 2018-19 – Indigenous Services Canada, and Crown Indigenous Relations and Northern Affairs Canada) divided by total federal spending before debt charges, 322.9 billion (Annual Financial Report of the Government of Canada).
  4. From the 9,787,946, 287 spent by Indigenous Services Canada (ISC) in 2018-9 we subtract 1,799,071,172 in non-transfers (presumably salaries, transportation and overhead for ISC) and 51,241,658 in urban programming as well as 233,731,994 which is one-tenth of education spending, our estimate of education spending off-reserve. This leaves us with 7,703,901,463 which is $22,588 per person.
  5. This amount is calculated by taking total CIRNAC spending and subtracting spending on non-transfers (presumably salaries etc.), the Federal Interlocutor Program for non-Status persons, Northern Contaminated Sites, the Canadian High Arctic Research Station, and  60% of the spending on programs which don’t just apply to Status persons on reserve:  Land, Natural Resources and Environmental Management; Economic Development Capacity; Northern and Arctic Governance; Nutrition North; Consultation and Policy Development; Climate Change Adaptation; Basic Organizational Capacity; Individual Affairs; Northern and Arctic Environmental Sustainability; and Northern Regulatory and Legislative Frameworks.
  6. Family and Child Services of Frontenac, Lennox and Addington (2020)
  7. Galloway (2017)