Clawback of Ottawa training fund draws fire

Posted on October 9, 2013 in Governance Policy Context – Business – Provinces warn of potential for abuse and fraud if feds take over program
October 9, 2013.   By Peter O’Neil, Vancouver Sun

In 2007, Prime Minister Stephen Harper’s minority government delivered a budget to satisfy provincial governments that wanted a reduced role for Ottawa.

Harper portrayed his party as sympathetic to provinces that had complained successive Liberal governments would create popular social programs, like health care – and then walk away from funding commitments and leave provinces holding the bag.

In 2007, Harper transferred $2.5 billion a year in training funds to the provinces. “This approach respects the primary role and responsibility that provinces and territories have in the design and delivery of training programs,” the budget stated. The Harper government, now with a majority, has decided provinces aren’t doing a good job and has decided to start taking training money back.

Ottawa, anxious to get credit for fixing Canada’s so-called skills gap, was supported by business groups who have complained businesses are being hurt by a lack of skilled labour.

So the 2013 budget said $300 million a year would be taken from the training transfer, specifically from $500 million a year that goes into a program called the Labour Market Agreement. Ottawa would use that money to fund its share of a proposed $900 million-a-year Canada Jobs Grant.

The CJG would provide businesses up to $15,000 a worker – split three ways by Ottawa, the provinces and the employer – to be spent on training or a skills upgrade.

Provinces are furious with the plan to slash the Labour Market Agreement by more than half.

They use the money to help people not eligible for Employment Insurance – especially older workers, aboriginals, youth and the disabled – enter the workforce through programs such as literacy training.

Adding insult to injury, Ottawa said provinces would be expected to chip in another $300 million to fund their onethird share of the CJG – even as they struggle to deal with the $300 million being cut from the Labour Market Agreement.

“This is the fatal flaw,” said Don Drummond, a former senior Finance department economist. He said Ottawa is creating a program in an area of provincial jurisdiction and asking provinces to pay two-thirds of the cost without even consulting them.

“What is the logic behind this, that someone would think that this was going to fly?” The provinces, especially B.C. under Premier Christy Clark, are fuming and threatening to boycott the CJG. (B.C. gets $66 million a year under the Labour Market Agreement.) “All premiers agreed that the program as it stands will not go ahead in any province,” Clark warned last week.

Federal Employment Minister Jason Kenney is meeting his provincial counterparts in Toronto next month to try to break the impasse. But he has said Ottawa is prepared to simply take the $300 million from the provinces and run the program itself.

That threat came under scathing criticism Tuesday.

The Harper government is opening the door to “abuse and fraud” if it runs the CJG without the help of the provinces, critics warn.

When Ottawa handed over the training dollars after 2007, it also handed over the employees and infrastructure needed to run jobs training, said Michael Mendelson, who has been a senior official in both the Ontario and Manitoba governments.

Mendelson and Chris Atchison, chief operating officer of a B.C. organization that represents 175 agencies involved in training programs, said Ottawa therefore lacks the capacity to properly administer $900 million a year in training funds.

“This is risky and has the potential for a lot of abuse and fraud,” said Mendelson, a public policy specialist at the Caledon Institute think-tank in Ottawa. Mendelson said governments have got in trouble in the past by directing money directly at individuals. In 2001, Britain’s Labour government shut down, after only a year, a program that combined tax incentives for businesses with direct cash contributions to individuals. By then 30 people had been arrested for suspected fraud.

While Kenney said the CJG could be run without cumbersome bureaucratic oversight, that approach could be “very dangerous because it’s a program that can be abused,” said Mendelson.

“You’ve got to vet these things and there’s got to be follow-through and followup. Doing it by just handing out a cheque is just asking for trouble.”

Atchison said he shares Mendelson’s concern: “I don’t think there’s an intention of a boondoggle, but this is just not well thought through, and if it goes ahead we could be looking at this five years down the road and saying, ‘well, that was a colossal waste of money.’ “This concept, in his current form, is destined to fail.”

A spokesman for Kenney said Ottawa has the capacity to manage the CJG.

“The federal government has extensive experience delivering over $1.8 billion in funding directly to the public, including aboriginal training funds, youth training funds, and grants and contributions. These total significantly more than the Canada Job Grant,” Nick Koolsbergen said in an email.

Kenney argues the Labour Market Agreement involves “training for training’s sake.”

The provinces, by contrast, released a report last month arguing it is meeting a need to bring Canadians lacking basic skills, and even literacy, into the labour market.

The report said it helped more than 425,000 Canadians in 2011-12, and 87 per cent of them were employed after the program, compared to 44 per cent when they entered the program.

The latest B.C. report involved the results of a survey sent to 13,642 participants, of whom 6,733 responded three months after their training program was completed.

Of the respondents, 94 per cent said they were satisfied and felt it helped improve their employment opportunities. Their mean hourly wage after the program was $16.16, compared to $15.59 before it began.

One of the success stories touted by the B.C. government’s is Kyle Huinink, who got a $5,000 grant through the YMCA’s Youth Means Business program, which is funded by the Labour Market Agreement.

It required him to prepare, with the help of a mentor, a business plan for his proposed custom furniture and home furnishing studio in east Vancouver, called Hue. N. Ink Designs.

“I had intended to open up my own woodworking studio coming out of school, but I didn’t have the know-how to do that,” said Huinink, 27, who graduated with a degree in industrial design. He said it was “sad” that Ottawa is taking the scalpel to the Labour Market Agreement.

However, business groups strongly back the proposed CJG.

Matthew Wilson, vice-president of policy at Canadian Manufacturers & Exporters, said his organization is lobbying for some changes but likes the overall thrust. “We think the current training programs aren’t fulfilling the needs of industry and we think it’s better if it’s employer-directed.”

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