February 8, 2006
Right Honourable Stephen Harper
Room 309-S, Centre Block
House of Commons
Ottawa, ON K1A 0A6
Dear Prime Minister:
One of the most important tasks of the Prime Minister of Canada is ensuring strong ties between the federal government and the regions of the country. As you know, this is a complex and often times difficult undertaking. One initiative that I feel would help address this situation is the decentralization of government departments, agencies and Crown corporations to the regions of Canada.
I believe that for too long bureaucratic power has been centralized in the hands of a small group of institutions concentrated in the national capital region. At the highest executive levels of the public service, the Ottawa area continues to employ 70% of all Ex 1 to Ex 5 positions.
There are many potential benefits of decentralization in Canada. The initial, up-front costs of relocation would be recouped many times over, in many different ways:
-The region receiving the relocated institutions would secure well paying, permanent positions; In turn, such moves would reduce the need for other forms of regional development; The affected departments or agencies would reduce staff turnover, and save recruitment and training costs; Perhaps just as important as any other factor, the Government of Canada would gain a permanent and strong presence in the affected region - which would help to reduce the stresses of regional alienation.
Relocation makes sense not only as an economic development tool, but because it reflects the challenges of a geographically vast and diverse nation. One example of how this has already taken place in Canada is the National Energy Board which was relocated to Calgary many years ago and is now closer to energy production.
One must ask, why then is the Export Development Corporation currently located in Ottawa? It could be situated in Vancouver; after all, Canada does more than 20 billion dollars in trade with the state of California. Further, does it make sense for the employees of the Department of Fisheries and Oceans to locate themselves in downtown Ottawa, where they cannot see a harbour or a fishing boat? I suggest that it would make more sense for them to be located on one of Canada’s coasts, where they can see the impact of their decisions on fishing communities and their residents more directly.
There will be some who will say that it is too difficult to embark on a real program of decentralization, but this argumentation is based on the opinion that important work can only be done in Ottawa. While this may have been the case at an earlier time, it is not the case today. New communication technologies, including videoconferencing, allow far greater flexibility to all organizations, including the Government of Canada.
This is by no means a uniquely Canadian initiative – decentralization has been pursued abroad in both the United Kingdom and Norway. In 2003, the Norwegian government announced plans to move eight state regulatory agencies outside of its capital. British Prime Minister Tony Blair announced in his spring budget of 2004 the relocation of 20,000 public servants from London to the regions of the United Kingdom. The 2005 Budget updated the situation announcing that over 4,300 jobs had already been moved from London and that a further 3,600 jobs were to be relocated by March of 2008.
The best example of decentralization in Canada is located in downtown Charlottetown. Twenty seven years ago the headquarters of Veterans Affairs was relocated to Prince Edward Island and the benefits are obvious - and highly valued.
In economic terms, relocating the Veterans Affairs headquarters to Charlottetown has had many positive effects which currently include: 1200 full time jobs; a 68 million dollar yearly payroll; many student jobs during the summer; and a career path for future generations who want to stay in the region.
Beyond the economic contribution, the presence of Veterans Affairs has also made a significant contribution socially. The presence of Veterans Affairs has broadened Prince Edward Island society to include a vast array of highly trained professional public servants who contribute their every working day to public affairs and to Prince Edward Island society.
Another exciting impact of the Veterans Affairs headquarters being in Charlottetown has been the remarkable growth in the use of the French language. Prince Edward Island has always had a thriving Acadian community, but the addition of Veterans Affairs deepened the role of the French language. According to Statistics Canada, after Quebec and New Brunswick, Prince Edward Islanders are third, among the provinces in their knowledge of both languages. There is no doubt that the strength of the Acadian community assisted in that regard, but, the greatest single contribution, to the growth in the French language, is the presence of Veterans Affairs.
Veterans Affairs is the only federal department with its national headquarters located outside of the Ottawa area. I believe it is time to restart the decentralization process, and give the other regions of Canada the same opportunities and benefits, enjoyed by Prince Edward Island over the past twenty seven years. The only recent example of relocation has been the Canadian Tourism Commission, which has moved to Vancouver, but with fewer than 100 employees this is not a significant development.
I hope that as you begin your tenure as Prime Minister, you will work to repair the relationship between the federal government and the regions of Canada and make decentralizing government departments, agencies and Crown corporations to the regions of Canada a top priority.
I have enclosed for your information a research paper prepared by the Library of Parliament on the economic impact of the relocation of the Veterans Affairs headquarters to Prince Edward Island. I hope you find it to be of interest.
Sincerely,
Percy Downe
Senator
Encl.
********************************************
THE ECONOMIC IMPACT OF THE RELOCATION OF VETERANS AFFAIRS HEAD OFFICE
TO PRINCE EDWARD ISLAND
20 September 2005
The Honourable Percy Downe
Room 702
Victoria Building
The Senate
Ottawa
Dear Senator Downe:
Further to your request of 26 August 2005, please find attached a paper entitled The Economic Impact of the Relocation of Veterans Affairs Head Office to Prince Edward Island.
The attached paper provides detailed information on current employment and budgetary expenditures of Veteran Affairs Canada (VAC), as well as an analysis of the direct and indirect economic impact of the relocation on the regional economy. For your information,
I have also attached a 2000 Study by the Atlantic Provinces Economic Council detailing the impact. Unfortunately, it is impossible to update this study based on more current information as the analysis used internal financial information provided by VAC. It was also not possible to obtain detailed information on the status of retired VAC employees.
Should you require further information on this or any other subject, please do not hesitate to contact the Parliamentary Information and Research Service.
Yours sincerely,
Tara Gray
Economics Division
Parliamentary Information
and Research Service
******************************************************************
THE ECONOMIC IMPACT OF THE RELOCATION
OF VETERANS AFFAIRS HEAD OFFICE TO
PRINCE EDWARD ISLAND
This paper discusses the economic impact of the relocation of Veteran Affairs Canada from Ottawa to Charlottetown in the 1970s and includes an analysis of the current employment situation and expenditures of the department. The paper also provides some insight into the status of francophone and retired employees of the department.
BACKGROUND
As part of its decentralization program of the 1970s, the federal government announced in 1976 that it would move the Head Office and a major portion of the activities of the Veterans Affairs Portfolio (comprised at the time of the Bureau of Pensions Advocates, the Canadian Pension Commission, the Pension Review Board, and the War Veterans' Allowance Board) to Charlottetown, Prince Edward Island (P.E.I.). Although the federal government had moved agencies and parts of departments to other regions of the country, this was the first time it attempted to relocate the entire head office of a department.
The relocation took place over a number of years, with the first employees relocating to Charlottetown in 1979. The move was not completed until 1984, with the completion of a new federal building to house the department. Veterans Affairs Canada (VAC) estimates that the relocation cost approximately $65 million over five years, of which
$20 million was for the new headquarters.
To encourage a stable and experienced work force in Charlottetown, the government provided a guarantee to anyone relocating from outside the Atlantic region of at least two years employment in their place of origin, provided they stayed in Charlottetown for at least two years. Regardless of this guarantee, less than 5% of about 900 staff members whose positions were transferred from Ottawa to Charlottetown actually made the move.([1]) Consequently, there was extensive hiring on Prince Edward Island during this period.
The minister remained in Ottawa, as did a small support staff.
At present, the Veterans Affairs Canada portfolio consists of one department – Veterans Affairs Canada (VAC) and one board (which operates at arm's length from the Department) – The Veterans Review and Appeal Board. VAC provides services in three main areas: pensions, health care, and remembrance programming.
ECONOMIC IMPACT
A number of studies have analyzed the economic impact of relocation, including several unpublished internal studies completed by the (now defunct) Department of Regional Expansion (P.E.I.) and Veterans Affairs Task Force. This analysis draws upon Treasury Board data on employment statistics, VAC departmental performance reports, and a recent study by the Atlantic Provinces Economic Council which references internal economic impact studies.
A. Current Employment
As of December 2004, VAC employed 3,545 people, of which 1,099 are located at the Head Office in Charlottetown. This does not include governor-in-council employees or individuals working on contract for the government.([2]) The Veteran Review and Appeal Board has approximately 30 Governor-in-Council appointed members; some of these members live in P.E.I.
Veterans Affair Canada is an important employer in P.E.I. In all, VAC represented over 30% of all federal government positions on the Island. About 66,700 people were employed in P.E.I. as of December 2004, making the contribution of VAC to overall provincial employment levels about 1.6%.
Table 1: Labour Force Characteristics, 2004 Prince Edward Island
|
|
Population |
Labour Force |
Employment |
Full-time Employment |
Part-time Employment |
Unemployment Rate(1) |
|
2004 |
110,900 |
75,200 |
66,700 |
55,600 |
11,000 |
11.3% |
Note:
1. The unemployment rate is the number of unemployed persons expressed as a percentage of the labour force.
Source: Statistics Canada, Labour Force Survey Estimates, Annual 2004.
The majority of positions at VAC are full-time, smoothing some of the fluctuations of the highly seasonal local island economy. Of the 1,099 employees at the Head Office, about 94% of employees are full-time indeterminate (permanent) while 68 are part-time, casual or term employees. This includes summer students.([3])
Full-time positions tend to be highly paid. As the Head Office is located in Charlottetown, the majority of VAC executive positions are found in P.E.I.; as such, over 35% of positions in Charlottetown are at an EX equivalency level.
Table 2: Public Sector Employment, Prince Edward Island as of December 2004
|
|
Employment (Persons)(1) |
|
Sector |
Public Sector Total |
Federal General Government(2) |
Provincial and Territorial General Government |
Others(3) |
|
|
17,132 |
3,532 |
3,338 |
10,262 |
Notes:
-
Employment data are not in full-time equivalents and do not distinguish between full-time and part-time employees.
-
Federal general government data includes reservists and full-time military personnel.
-
Health and Social Services, Universities, Colleges and trade institutions, local government including school boards and government business enterprises.
Source: Statistics Canada.
B. Current Expenditures
Veteran Affairs plays a significant role in the P.E.I. economy. In 2003-2004
(the latest year for which finalized numbers are available), net budgetary expenditures by Veteran Affairs totalled $2.6 billion. The majority of these expenditures – some $1.8 billion or 70% of net budgetory expenditures – were made on transfer payments and providing services to veterans and their families.([4]) Approximately $730 million (28%) of net budgetary expenditures were spent on operating costs, which include wages and salaries. The remainder was spent mainly on contributions to employee benefit plans.
For the current fiscal year (2005-2006), planned expenditures by VAC across all locations are as provided in Table 3. While the Head Office is located in P.E.I., VAC also retains an office in Ottawa and operates over 40 offices or service centres across the country. As well, in Sainte-Anne-de-Bellevue, Quebec, it operates Ste. Anne’s Hospital, employing approximately 900. No detailed breakdown of budget expenditures by location is available.
Table 3: 2005-2006 Estimates Government Expense Plan
by Standard Object of Expenditure (dollars)
|
Personnel(1) |
220,232 |
|
Transportation and communications |
32,000 |
|
Information |
2,500 |
|
Professional and special services |
325,483 |
|
Rentals |
15,000 |
|
Purchased repair and maintenance |
6,000 |
|
Utilities, materials and supplies |
228,000 |
|
Acquisition of land, buildings and works |
32,351 |
|
Acquisition of machinery and equipment |
3,500 |
|
Transfer payments |
1,987,004 |
|
Other subsidies and payments |
1,000 |
|
Total net |
2,853,070 |
Note
(1) Personal includes not only all wages and salaries but also contributions to employee benefits plans.
Source: Veterans Affairs Report on Plans and Priorities 2005-2006.
C. Economic Impact – Direct Effects
The value of VAC expenditures made out of Head Office cannot be estimated from departmental reports and budgetary documents alone. In 2000, the Atlantic Provinces Economics Council (APEC) conducted an in-depth study of the socio-economic impact of the relocation of Veterans Affairs to P.E.I.
In consultation with Veterans Affairs finance staff, APEC estimated that in the fiscal year 1998-1999, expenditures by the Department in the P.E.I. economy totalled
$71.4 million. This includes wages, salaries and expenditures on goods and services (at the time, net budgetary expenditures for VAC was approximately $2.0 billion). This represented a considerable investment in the P.E.I. economy, equivalent to about 2.8% of the entire provincial GDP in 1998.([5])
The same study estimated that wages and salaries paid to staff in Charlottetown averaged $48 million in 1996-1997 to 1998-1999, generating approximately $13 million in tax revenues for the federal and provincial governments. Of this $8.6 million were personal income taxes, generating $3.3 million for the provincial government and $5.3 for the federal government. The provincial government was estimated to have collected $2.7 million in retail sales taxes on purchase of goods and services by VAC employees, with a further $1.7 million collected by the federal government due to the GST.
D. Economic Impact – Indirect Effects
Using Statistics Canada’s Input-Output model, as well as detailed information provided by VAC APEC estimated the indirect economic impact of the department on the P.E.I. economy.
Table 4: Total Impact of the Veterans Affairs
Head Office in Charlottetown 1998-1999
|
(in $million) |
Direct |
Indirect |
Total |
As a % of P.E.I. Total |
|
On the Provincial Economy |
|
|
|
|
|
Employment (# of jobs) |
883 |
1,026 |
1,909 |
3.11 |
|
GDP |
52.1 |
48.5 |
100.6 |
3.97 |
|
Labour Income |
48 |
28 |
76 |
5.01 |
|
Business Surpluses |
n.a. |
20.5 |
20.5 |
n.a. |
|
On the Provincial Government |
|
|
|
|
|
Personal Income Taxes |
3.3 |
1.6 |
4.9 |
3.15 |
|
Retail Sales Taxes |
2.7 |
1.7 |
4.4 |
4.98 |
|
Other |
n.a. |
4.4 |
4.4 |
n.a. |
|
Total Provincial Taxes |
6 |
7.7 |
13.7 |
3.85 |
|
On the Federal Government |
|
|
|
|
|
Personal Income Taxes |
5.3 |
2.6 |
7.9 |
n.a. |
|
Retail Sales Taxes (GST) |
1.7 |
1 |
2.7 |
n.a. |
|
Total Federal Taxes |
7 |
3.6 |
10.6 |
n.a. |
Source: APEC 2000.
According to the model, VAC expenditures in P.E.I. created or maintained
1,026 indirect jobs elsewhere in the P.E.I. economy in 1998-1999. An additional 227 jobs were created elsewhere in Atlantic Canada and 349 further positions elsewhere in Canada. In P.E.I., these jobs were concentrated in professional and other business services as well as entertainment industries. Veterans Affairs indirectly contributed $48.5 million to P.E.I. value-added output (GDP). About $10.2 million in GDP is generated in other Atlantic provinces, mostly in
Nova Scotia, while $18.5 million is created in the rest of Canada, primarily in Ontario and Quebec.
Island workers gained $28.0 million in labour income indirectly from Veterans Affairs while businesses in P.E.I. generated $20.5 million in operating surpluses. Veterans Affairs spending indirectly created an estimated $4.2 million in personal income tax revenues in P.E.I., $2.6 million for the federal government and $1.6 million in provincial taxes. About $2.7 million in sales tax revenues is generated for the federal and provincial governments along with $4.4 million in commodity and other indirect taxes.
STATUS OF FRANCOPHONE EMPLOYEES
While there are no public surveys into the satisfaction of Francophone employees relocating to P.E.I. to work for the federal government, the presence of Veterans Affairs seems to have contributed to the use of French on the island. Francophones tend to be well represented in the public service.
According to Statistics Canada, Francophones make up 4.3% of the total population of P.E.I. The number of Prince Edward Islanders with French as their mother tongue has remained relatively stable since 1981. Seven out of every ten Prince Edward Island Francophones were born on the Island. People born elsewhere in Canada make up about 30% of the population, with most coming from the other Atlantic provinces. The number of Francophones relocating to P.E.I. from other areas of Canada is negligible.
Outside of Ontario and Quebec, P.E.I. is second only to Ontario in terms of the population being able to speak both English and French. It is possible that the relocation of Veterans Affairs contributed to the use of French in P.E.I. According to the Public Service Human Resources Management Agency of Canada, as of March 2004, 25.7% of positions in the federal public service on Prince Edward Island were designated bilingual. Francophones represented 12.7% of new public service hires in P.E.I. in 2003-2004.
RETIREES
No statistics are available on the number of relocated employees that are retired and now live in P.E.I. Originally, less than 5% of about 900 staff members whose positions were transferred from Ottawa to Charlottetown actually made the move. There are no statistics available on the number of employees that moved to P.E.I. since the relocation of the department.
--------------------------------------------------------------------------------
([1]) 1986 Report of the Auditor General of Canada: The Veterans Affairs Portfolio.
([2]) Although the number tends to fluctuate, there are generally 30 Veteran Affairs Canada governor-in-council appointees each year, of which 15 to 20 live in P.E.I.
([3]) Detailed statistics by department on summer student hires is not available. According to the Public Service Commission, in P.E.I. for the federal public service as a whole, 212 summer students were hired in 2004-2005, including 36 under the CO-OP program and 176 under the Federal Summer Work Experience Program (FSWEP).
([4]) Veteran Affairs 2003-2004 Departmental Performance Report.
([5]) Atlantic Provinces Economic Council, The Socio-economic Impact of Veterans Affairs Charlottetown Head office on P.E.I. and Atlantic Canada, 15 June 2000.
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