Hundreds of billions in Indigenous ‘contingent liabilities’ loom large over Canada – Fraser Institute
December 20, 2024
On Monday, the Trudeau government’s budget update included a change in the 2023-24 deficit from $40.0 billion to $61.9 billion—an increase of $21.9 billion. Obscured by all the chatter about Chrystia Freeland’s dismissal as finance minister and resignation from cabinet was the fact that most of this increase is due to a transfer of “contingent liabilities” to actual costs in last year’s financials.
“Contingent liabilities” is an accounting term for future liabilities that are reasonably foreseeable but have not been paid out yet. At the end of March 2023, the federal government had booked $76 billion in contingent liabilities—mainly for as-yet-unpaid Indigenous claims. These claims were mostly the result of negotiated settlement in class actions filed over alleged historical wrongs including residential schools and failure to provide clean water on reserves.
These liabilities have been accruing for years, as settlements were slowly hammered out and potential recipients were enumerated, but now it’s time to pay up—to the tune of $16.4 billion in 2023-24. It would be nice if the payout of contingent liabilities was a onetime write down that cleaned up the books, but unfortunately that’s far from true. Even after the government’s $16.4 billion payout, it still reports $56.6 billion in contingent liabilities as of the end of March 2024. Those claims must be paid out as well. Thus, this year’s increase in the deficit is just the first of many such payouts of Indigenous contingent liabilities from the backlog of claims accepted in principle but not yet paid.
