Spending on Indigenous settlements has spiralled out of control

Since the election of the Trudeau government in 2015, federal spending on Indigenous programs has more than doubled during the six fiscal years between Budget 2015 and Budget 2021. It may accelerate even faster now that the Liberals have another minority government, which will probably depend on NDP support to remain in power. Both the Liberal and NDP campaign platforms contained proposals for additional Indigenous spending.

To an ever-increasing extent, the fiscal explosion is driven by offers of financial compensation for past injustices including settlements of specific claims for alleged violations of treaties or the Indian Act. After 47 years of payments, the number of claims continues to grow as Ottawa funds research to discover new claims of past mistreatment.

Initially intended to be a onetime effort to right past wrongs, the satisfaction of specific claims has become an ongoing fiscal transfer with no end in sight. It would be advisable for the government to eliminate or at least reduce research funding for the endeavour. It could also follow the example of the United States and set a termination date for the specific-claims process. Half a century should be enough time to have a special process for claims of this type.

A more recent aspect of the fiscal explosion is the rise of class-action litigation leading to financial settlements. The prototype of Indigenous class action was the residential schools case, which resulted in a $6 billion settlement in 2006. Since then, at least 10 class actions have been announced. Four deal with educational issues not resolved in 2006—the residential schools of Newfoundland and Labrador; Indian day schools, usually located on reserves; “day scholars” (i.e. Indigenous children who attended residential schools during the day but continued to live at home); and boarding home students (i.e. Indigenous students who attended public schools while boarding with families in town).

More recent class actions concern adoption practises known as the “Sixties Scoop,” funding of foster care for Indigenous children, treatment of patients in Indian hospitals, long-term water advisories on Indian reserves, and discrimination against Indigenous employees of federal departments. There have been six settlements of such class actions, with four more still under negotiation, and an unknown number in preparation.

As class actions have proliferated, their scope has also increased. Recent class actions demand payment not just for individuals who allegedly suffered harm but also for their family members, heirs and entire communities. Nor are these class actions petty ante lawsuits. Most demand payments in the billions of dollars, with tens or hundreds of millions for the law firms who carry the litigation plus additional large sums to create new organizations and programs in the name of commemoration, healing and reconciliation.

The class-action settlement process drives spending not just through multi-billion-dollar payouts to individuals but through declarations that past federal programs were inadequate, leading to promises to provide more funding for programs in the future. As these class actions proliferate, the Indigenous budgetary envelope is increasingly controlled by the outcome of judicial processes rather than government officials. In effect, many spending decisions are now made or heavily influenced by the lawyers who bring these class actions and the other lawyers who negotiate settlements rather than elected governments.

The federal government’s policy is to prefer negotiation to litigation, but the prospect of easy and quick settlements encourages more class actions to be filed. If the government want to bring the fiscal explosion under control, instead of rushing to negotiate settlements, it should contest these class actions more vigorously in court, through the appellate courts if necessary.

It’s not just a matter of dollars. These cases offer many novel interpretations of law and the Constitution, which deserve to be considered by Canada’s best legal minds on appellate courts and ultimately the Supreme Court of Canada. The government’s current approach of rushing to negotiate settlements short-circuits the normal process by which the interpretation of law and the Constitution develops.