Nutrition North Canada: Real change is yet to come

Michael Fitzgerald & Fred Hill 

The Liberals came to power with a majority government after the October 2015 federal election. One factor that played into that result was undoubtedly Northern residents’ dissatisfaction with Nutrition North Canada (NNC).1 When in opposition, the Liberals were strongly critical of NNC, with the Hon. Carolyn Bennett, then the critic for Aboriginal Affairs and Northern Development, stating bluntly in this journal that “Nutrition North Canada … has failed,” and castigating the Conservative government for being “intransigent in admitting that their program is a failure.”2

The Liberal government inherited a program that, in opposition, they had considered a failure. Nevertheless, the former Conservative government’s misleading communications material setting out how NNC was an improvement over the Food Mail Program (FMP) remains on the NNC website.3 We have refuted these false claims elsewhere in some detail.4 In our view, this new subsidy mechanism is incapable of passing any reasonable tests for program transparency, accountability, sound public administration, or fair and equitable treatment of large and small retailers across all isolated Northern communities. It involves an opaque process through which the INAC minister approves the rates for payments to Northern retailers and southern suppliers, for each category of eligible foods in each community. There is also no official oversight of the quality or eligibility of the foods as they enter the distribution system.

So how have the Liberals fared now that they are responsible for this program? In this article, we examine what the Liberal government has done so far, and some of the challenges that lie ahead.

Budget 20165

The only significant – and welcome – change the Liberals have made so far has been to expand NNC to include isolated Northern communities that the program, since its inception in 2011, had either excluded or had provided with a useless “partial” subsidy of $0.05 per kilogram.

When NNC was implemented, the inclusion of such a derisory figure for those communities may have helped senior officials and ministers to pad their subsequent claims about the increased volume of shipments subsidized under the new program. However, it did nothing to address the affordability of food in those communities.

Budget 2016, tabled in the House on March 22, 2016, announced “$64.5 million over five years, starting in 2016–17, and $13.8 million per year ongoing to expand Nutrition North Canada to support all Northern isolated communities.6 This appeared to make good on the Liberals’ election platform, which had promised additional funding of $40 million over four years for NNC “to ensure that Northern families have access to affordable, healthy food.”7 That platform said nothing specifically about expanding the program, although this promise was made in both the NDP and Conservative platforms – a cynical move in the case of the latter, since the Conservatives on June 17, 2015, just seven weeks before the writs were issued for the election, had defeated an NDP motion calling for just such an expansion in a motion supported by the Liberals, as well as the Bloc Québécois and the Green Party. There can be little doubt, however, that the Liberals also intended to use the $40 million in their platform to expand the program to include all isolated Northern communities.

The story behind communities eligible for NNC

Why was NNC not made available to all isolated Northern communities when it was introduced in 2011? As the Auditor General (AG) pointed out in the performance audit of NNC conducted in 2014, this was because “the Department has not established community eligibility criteria that are fair and accessible,” because “community eligibility is based on past usage [of the Food Mail Program] instead of current need.”8 The result was that the policy failed in the government’s commitment “to having transfer payment programs designed, delivered, and managed in a manner that is fair and accessible for recipients,” as required by the Treasury Board’s Policy on Transfer Payments.9 In fact, this was a cost containment decision made once officials realized that the new program could not serve all the communities that had been eligible for food mail service within the level of funding approved for NNC without triggering sharp increases in food prices in communities that had made extensive use of the program.

Under the FMP, all of Canada’s isolated Northern communities (134 at that time) were eligible for the program, although only 104 made use of it in 2009-10 and, of these, only 81 used it extensively. The reason for this, though poorly understood by bureaucrats, ministers and the public, was as follows: In situations where the uniform postage rate charged by Canada Post for shipping perishable food to all isolated communities did not represent a significant saving compared to the air freight rate that a shipper was able to negotiate with an air carrier, the FMP was not used, as it required shippers to physically separate food mail from other cargo shipments. In other words, the uniform postage rate acted as a cut-off point for program use.

Under NNC, on the other hand, subsidy payments to Northern retailers and southern suppliers are only dependent on the volume of eligible foods shipped by air and the subsidy rates set by the department.10 Eligible and ineligible foods are shipped together, with no physical inspection carried out by departmental officials. With this kind of subsidy mechanism, then, there is an incentive for all eligible isolated Northern communities to take advantage of the subsidy, as is evident in the extent of NNC use in the 22 “partial” subsidy communities.

According to the Public Accounts, in 2009-10 and 2010-11, FMP payments to Canada Post reached $58.3 and $59 million respectively,11 whereas NNC was implemented with an unrealistic budget cap of $60 million, of which only $53.9 million was for subsidy payments.12 To live within such a cap, the department made two significant changes to the criteria under which the FMP had operated. First, it attenuated the list of eligible goods, removing all non-food items and severely constraining the range of non-perishable foods.13 Second, it decided to base eligibility for full subsidy on prior extensive use of the FMP, thereby forestalling greater uptake of the program than had occurred under the FMP. In this way, the government hoped NNC would appear to provide similar benefits in terms of food affordability as the FMP while reducing the risk of blowing the budget. So the list of eligible communities was reduced to 84 for full subsidy and 22 for partial subsidy, with 28 former FMP-eligible communities no longer eligible for any kind of subsidy.

The rest, as they say, is history, and a particularly sad one at that. The department got the initial subsidy rates badly wrong, leading to a spike in Northern food costs for the first six months under NNC. Between 2010 and 2014, there was a substantial increase in food insecurity in Nunavut, where all communities have been eligible for NNC since its inception, and in the Northwest Territories.14 Not once during this period did the department manage to live within the budget cap, and program costs increased annually. In fact, there is no evidence that NNC has ever implemented a cost containment strategy, despite the government’s commitment to do so. The reason is simple: To contain program costs, subsidy rates would have to be reduced or more food products removed from the program, thereby increasing food costs. This would be a political risk the Conservative government certainly wasn’t willing to take.

Nevertheless, AANDC responded to the AG’s recommendation that the department  “should review its community eligibility criteria … to base the criteria on need,” indicating it had been “examining this matter for a year, conducting a detailed review of all isolated northern communities.”15 In fact, the department estimated “that it would cost $7 million per year to add about 50 fly-in, isolated Northern communities that are not currently eligible for the full subsidy.”16 This was the very basis used by the NDP for its motion in the House.

Expanding the program to all isolated Northern communities

Arguably, then, expanding NNC to all isolated Northern communities was an easy win for the Liberal government. First, it has justifiably and commendably addressed a gross inequity that has tainted the program since its implementation, although it is somewhat difficult to reconcile this measure with the minister’s expressed view that NNC is “not working.”17 If this government does in fact believe that NNC is not working, then why expand such a dysfunctional program to additional communities? In explaining why the government intended to increase NNC funding, she stated that “what I’ve been asked to do is at least include the communities that weren’t included in the Food Mail Program … so we’re including those and then we’re going to spend a year figuring out how to fix it.”18 Again, although it is laudable that this government is addressing the arbitrary exclusion of some communities from NNC, it is somewhat perverse that they are doing so when they believe the program doesn’t even work.

Second, it has allowed the Liberals to make good on their campaign promise to provide additional funding for the program, although the way this has been effected has hardly been transparent. The additional funding announced in Budget 2016 did not appear in the Main Estimates, which provided only $53.9 million in “contributions to support access to healthy foods in isolated Northern communities.” Such contributions had amounted to roughly $65.5 million in 2014-15, and the Main Estimates had provided $68.5 million for this purpose in 2015-16,19 a figure supported by INAC’s 2015-16 Departmental Performance Report.20 This discrepancy was raised during the minister’s appearance at the Standing Committee on Indigenous and Northern Affairs (SCINA) on May 5, 2016. Her response suggested that the figures in the Main Estimates failed to reflect the additional $18 million awaiting the completion of a Treasury Board process and $10.2 million for expanding the program to cover additional communities, to be provided through Supplementary Estimates.21

Not until the Supplementary Estimates were tabled in October did additional funding of $29.9 million appear for NNC, including $26.7 million for INAC contributions, $1.3 million for NNC operating expenditures, $1.4 million for Health Canada and, for the first time, funding to the Public Health Agency of Canada, in the amount of $0.4 million.22 This additional money was described in that document as the cost of extending the program to 37 additional communities, provided through Budget 2014 and Budget 2016. About two thirds of the additional money for INAC contributions, however, would have been required just to maintain the existing subsidy rates in previously eligible communities. This additional funding will do nothing to make nutritious food more affordable in those communities that were already eligible for a full NNC subsidy.

At no time during the 17-month period since the election has the department or the minister been transparent about intentions for total expenditure on this program. The minister’s appearance at the Standing Committee in November, where the Supplementary Estimates were the subject of discussion, was a lost opportunity to be more forthcoming. Since this expansion did not come into effect until October 2016, the additional cost in 2016-17 could not possibly be as much as $10.2 million, let alone $29.9 million as stated.

Accountability for this additional expenditure is another matter. There has been no indication that the department has any plans to change its practice of relying almost entirely on unverified prices reported by the North West Company and La Fédération des Co-opératives du Nouveau-Québec to track Northern food costs, despite the minister having argued that “there is a lack of price monitoring, accountability and transparency under NNC,” and that “we need to resume food price surveys.”23 Nor has the department revealed whether baseline data for the newly eligible communities were collected before the program was expanded. Given the cost of this expansion and the amounts of subsidy per kg provided in most of these communities, one would expect the government would wish to be in a position to document a substantial drop in the cost of perishable foods in particular. As this article is being written, there have been no updates on Northern food costs covering the period since the election, and the latest compliance reports available date back to 2014-15.

Public engagement

The minister can also be commended for meeting with Northern organizations very early in her mandate to discuss NNC and access to healthy affordable food. The track record of previous ministers and departmental officials in this regard since 2006 is hardly stellar. As Dr. Bennett stated when she was the Liberal critic, “while the Conservatives superficially consulted with Northerners, they ignored their input.”24 We hope the Liberal government will do a better job consulting with Northerners than their predecessors.

Early in 2015, the department awarded a $590,000 contract to “develop subsidy models and support an engagement with communities for the Nutrition North Canada Program in 2015-16.”25 This engagement was suspended during the election campaign, but resumed thereafter, and engagement sessions were conducted between May 30 and December 9, 2016. At the time of writing, 15 community meetings and three stakeholder meetings, plus three more rescheduled for January 2017, are listed on the NNC website. On November 28, 2016, the minister told SCINA that “it’s now time for northerners to design a program that will work for northerners,”, that NNC “needs a total renovation because it goes to the stores instead of to people,” and that “I believe there’s going to be an overhaul. That’s certainly what we’ve heard. The consultations went on throughout the summer, and we didn’t hear too many people in love with the program the way it is right now.”26

The stated purpose of these engagement sessions was to seek “input from community leaders and other stakeholders on how the program can be more transparent, cost-effective, and culturally appropriate in the face of growing demand for healthy food in the North,” with this input to be used to “develop options to update the program and help it stay sustainable.”27 One thing, however, seems evident: Northerners’ input won’t lead to substantial modifications to NNC. Nowhere in the discussion guide that INAC produced for these engagement sessions is there any mention of either “total renovation” or “overhaul.”28 Unsurprisingly, then, the formulaic summaries of community and stakeholder meetings made available so far cover issues such as support for country foods, giving higher subsidies to ingredients used in making traditional foods such as bannock, the need for more information about the program, evidence that the subsidy is being passed on, the continuing high cost and unaffordability of food, and retaining direct orders. The only suggestion for radical program change is to “provide the subsidy directly to consumers.”29

Real change?

Decades of studies of Northern food insecurity have established that most residents of isolated Northern communities experience food insecurity. The reasons are complex, as documented in the report of the Expert Panel on the State of Knowledge of Food Security in Canada.30 Transportation subsidies such as the FMP and NNC serve to make nutritious food less costly and more available, but they can only be a partial solution to the serious food security and nutrition problems in these communities. As the minister herself has acknowledged, “Northern food security cannot be addressed in the absence of dealing with the overall cost of living in the North.”31 A wide variety of programs and interventions to address these issues are being delivered by all levels of government (often in partnership with Aboriginal and non-governmental organizations), among them the Liberals’ changes to the child benefits system and the increase in the Northern residents deduction.

At the same time, however, the need for complementary actions should not divert the government from the urgent need to fix NNC itself — if, indeed, this method of delivering a food-focused transportation subsidy is fixable. The efficacy of NNC is questionable and difficult to determine. If the department has been collecting information on retailers’ profit margins over time, as the Auditor General recommended, we would hope to see how that information has been used to demonstrate more clearly that retailers have been fully passing this subsidy on to consumers and how it has improved the compliance reports.

It remains to be seen what the Liberal government will do about this program. We do not doubt for a minute the minister’s sincerity in wishing to see improvements, if not a complete overhaul — and not only for political reasons. We would be pleasantly surprised if, by the next election, the Liberal government had achieved measurable and measured improvements in food prices, food security and nutrition in isolated Northern communities, noting of course that food prices in the 37 communities to which the program has been extended should have declined already, since the program expansion took place in October 2016. More likely, though, the deeply flawed subsidy mechanism that the Harper government imposed will continue to be an albatross around the Liberals’ neck and in particular the necks of the ministers of Indigenous and Northern Affairs and Health.◉

Fred Hill managed the Food Mail Program in different capacities at Indian and Northern Affairs Canada from 1991 until 2010, in collaboration with Michael Fitzgerald between 2008 and 2010. They co-author Food for the North, a blog about Northern food security, at https://foodforthenorthblog.wordpress.com.

Endnotes

  1. Fred Hill and Michael Fitzgerald, Nutrition North: Conservative disaster, Liberal opportunity? www.nunatsiaqonline.ca, December 10, 2015.
  2. Carolyn Bennett, “Missing the Mark,” Northern Public Affairs, Fall 2012, p. 75.
  3. From Food Mail to Nutrition North Canada.
  4. ‘Refutations,’ August 14, 2016. Food for the North blog.
  5. This article was written before the release of Budget 2017.
  6. Finance Canada, Budget 2016: Growing the Middle Class, p. 179.
  7. Liberal Party of Canada, Real Change: A New Plan for a Strong Middle Class, pp. 20-21. The NDP and Conservative platforms had remarkably similar spending commitments, as we have described elsewhere (Hill and Fitzgerald, op. cit.).
  8. Office of the Auditor General of Canada [OAG], “Chapter 6: Nutrition North Canada—Aboriginal Affairs and Northern Development Canada,” Report of the Auditor General of Canada, Fall 2014, p. 4.
  9. Treasury Board of Canada, Policy on Transfer Payments, 2008.
  10. In this sense, just as with the FMP, NNC is a transportation subsidy, although in the latter case it is delivered through retailers. Departmental officials and ministers have insisted on referring to NNC misleadingly as a “retail subsidy.”
  11. Government of Canada, Public Accounts of Canada 2010, Volume II, p. 15-8; Government of Canada, Public Accounts of Canada 2011 Volume II, p. 15-8.
  12. OAG, op. cit., p. 2.
  13. These items were restored for an 18-month period by the Conservatives in March 2011, just prior to the implementation of NNC, during the run-up to the 2011 election.
  14. Valerie Tarasuk, Andy Mitchell and Naomi Dachner, Household Food Insecurity in Canada, 2014, Toronto: Research to identify policy options to reduce food insecurity (PROOF), 2016, p. 17.
  15. OAG, op. cit., p. 5.
  16. Ibid.
  17. Standing Committee on Aboriginal Affairs and Northern Development, March 10, 2016. Although this statement was made 10 months ago, the minister has said nothing subsequently that would lead one to believe she has changed her views on this.
  18. Ibid. As discussed above, this claim is somewhat inaccurate, since all such communities were included in the FMP.
  19. Treasury Board of Canada Secretariat, 2016-17 Estimates: Parts I and II, The Government Expenditure Plan and Main Estimates, p. II-139.
  20. Indigenous and Northern Affairs Canada, 2015-16 Departmental Performance Report, “Nutrition North Canada.” This amount was also reported in the Public Accounts (Government of Canada, Public Accounts of Canada 2016, Volume II, p. 11-17).
  21. Standing Committee on Indigenous and Northern Affairs – May 5, 2016. Evidently the $18 million that the minister was referring to is the Vote 10 escalator for NNC, which the 2015-16 Departmental Performance Report indicates was “frozen” until some unspecified condition was met.
  22. Treasury Board of Canada Secretariat, Supplementary Estimates (B), 2016-17, pp. 1-19, 2-37, 2-40, and 2-80.
  23. Bennett, op. cit., p. 77.
  24. Ibid.
  25. CBC, “Government looking at changes to Nutrition North food subsidy,” January 26, 2015.
  26. Standing Committee on Indigenous and Northern Affairs – November 28, 2016.
  27. Indigenous and Northern Affairs Canada, Nutrition North Canada Engagement 2016.
  28. Indigenous and Northern Affairs Canada, Nutrition North Canada: Have Your Say!
  29. Nutrition North Canada website, “What we heard about Nutrition North Canada,” December 19, 2016.
  30. Council of Canadian Academies, Aboriginal food security in northern Canada: An assessment of the state of knowledge. Ottawa: The Expert Panel on the State of Knowledge of Food Security in Northern Canada, Council of Canadian Academies, 2014.
  31. Bennett, op. cit., p. 77.

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