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David Clinton

What Happens When Ministries Go Rogue?

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The Audit

 David Clinton

Global Affairs Canada and the strange, wonderful world only they can see

This is an older (and longer) version of an article just published by the Macdonald-Laurier Institute.

Some may think of the people behind Global Affairs Canada (GAC – also known as Department of Foreign Affairs) as Canada’s brightest and best, executing a sophisticated and far-seeing foreign policy. They may be right. But the description that more readily comes to my mind is “completely out of control.” I may be wrong.

But if I am wrong, I’m not the only one. Vivian Bercovici – a former Canadian ambassador to Israel – quoted former Prime Minister Harper as saying “that in his 10 years in office, the most difficult department for his government to work with was Foreign Affairs.”

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What is it about GAC, and Western foreign services in general, that makes them so subversive? Bercovici puts it this way:

“In the postwar years, foreign-affairs bureaucracies in Western democracies ballooned in size. Foreign-service officers saw themselves as better-informed and -trained to manage diplomatic complexities than the elected officials they supposedly served. They also mastered the art of diffusing responsibility and outcomes among the many layers and offices engaged in any particular issue. As a practical matter, this means that neither success nor failure is attributed to individuals, resulting in a lack of accountability throughout the organization. It also means that internal sabotage of the will of government is more easily effected and concealed. Where authority and responsibility are blurred, accountability is impossible.”

All that’s well above my pay grade. But I’m perfectly capable of observing the work GAC actually does. So I’m going to discuss three specific GAC programs that seem to present some unhealthy processes and patterns. Perhaps they’ll help us reach useful conclusions.

GAC and the Global Fund

According to GAC’s Project Browser tool, between 2008 and 2022 Canada committed $3.065 billion to the Global Fund to Fight AIDS, Tuberculosis and Malaria. Which on the face of it is great. No one here is cheering for Team Malaria, right? But we should ask a couple of questions:

  1. Is the scale of the support appropriate given financial constraints back home?
  2. Was that money well spent?

I’m not going to even try to answer the first question: that’s something for Canadians to talk about as a society. For context though, GAC’s total annual budget for foreign aid funding seems to be in the neighborhood of $16 billion (of which around $2 billion goes to United Nations agencies). $16 billion would represent roughly 4 percent of total annual federal government expenditures.

However I do have a lot to say about question number two. First of all, the Global Fund to Fight AIDS, Tuberculosis and Malaria has been dogged by serious accusations of corruption and lack of transparency for more than a decade. That means there’s a good chance a substantial proportion of our money ended up moving through private Caribbean bank accounts on its way to cozy dachas in Sochi.

But I’m going to ignore that for now because we can’t be sure the funny business is still happening. And because if we canceled all government programs that were at risk of misuse we’d have to lay off the entire federal civil service. Which would be a very bad thing, because…well it just would.

Instead, I’ll focus on measuring the impact of our investment. What were the goals GAC set for its Global Fund contribution? Their own website fills us in:

The expected results are defined by the “Global Fund Strategy 2017-2022”. This strategy includes the following targets, to be achieved by 2020: (1) 90% of persons living with HIV (PLHIV) know their status, 90% PLHIV who know their status and receiving treatment; and 90% of people on treatment have suppressed viral loads; (2) a 20% and 35% decline in TB incidence rate and TB deaths respectively, compared with 2015; and (3) at least a 40% reduction in malaria mortality rates and malaria case incidence, compared with 2015.”

The GAC planners obviously felt that spending $3 billion over five years or so was reasonable as long as, between 2015 and 2020, it contributed to a 35 percent decline in TB deaths, a 40 percent decline in malaria deaths, and the 90%-90%-90% formula for people with HIV. And I’ll admit that it’s a compelling argument.

The thing is though, that no one could have known whether we’d actually achieve those results. And given the built-in ambiguity of the program’s goals, it’s not we could ever know whether it was a success. The decision therefore was a gamble. And the table stakes were $3 billion belonging to Canadian taxpayers.

Should nameless, unelected planners have that much power over our money? Assuming that they’re genuine domain experts, then sure. Who else is better? But:

With great power comes great responsibility. (Nietzsche? Kant? Aristotle? Nope. Spiderman’s uncle)

Claiming to possess domain expertise isn’t free: if you break it, you own it. So if death rates happily fell during the program years then the planners should be rewarded for their service to humanity. But if they didn’t fall, or if they didn’t fall as much as predicted then, at the very least, people should lose their jobs.

Fortunately, with the hindsight allowed us by historical data, we can easily see how things worked out. Unfortunately, it looks like the fine folk at GAC stepped on a rake.

Our World in Data numbers give us a pretty good picture of how things played out in the real world. Tragically, Malaria killed 562,000 people in 2015 and 627,000 in 2020. That’s a jump of 11.6 percent as opposed to the 40 percent decline that was expected. According to the WHO, there were 1.6 million tuberculosis victims in 2015 against 1.2 million in 2023. That’s a 24.7 percent drop – impressive, but not quite the required 35 per cent.

I couldn’t quickly find the precise HIV data mentioned in the program expectations, but I did see that HIV deaths dropped by 16 percent between 2015 and 2019. So that’s a win.

But it’s clear that the conditions underlying the GAC wager were not met.

To be fair, GAC reporting in 2023 claims that: “Since 2002, (their) efforts have contributed to a significant decline in deaths caused by AIDS (‑70%), TB (‑21%) and malaria (‑26%).” – but those figures are unsourced, badly outdated, and completely fail to account for program spending subsequent to 2015.

The government gambled more than $3 billion of taxpayer funds and lost the bet. To date, they have yet to apologize, assure us that they’re busy reassessing their future commitments, or publicize their plans for the individuals who so carelessly lost our money.

For that matter, were those individuals even GAC employees? It’s possible that the decision was made by representatives of the uber-expensive contract consulting firm, McKinsey. When will that information become public?

GAC and the World Food Programme

The Global Fund deal was one bad multilateral bet. Were there others? Sure. Over the five years between 2016 and 2021 GAC entrusted a total of $125 million with the UN World Food Programme to provide emergency food aid. Africa represented 60 percent of the program’s target, and the one policy marker designated as a “significant objective” was gender equality. The programs expected results included:

  • Improved access to food and nutrition assistance for food-insecure populations
  • Increased ability of the World Food Programme to provide appropriate responses to humanitarian crises

Overall, the “expected ultimate outcome is the reduced vulnerability of crisis-affected people, especially women and children.” Unfortunately, here too, the numbers moved in the wrong direction. As the graph shows, numbers from Our World in Data show that the percentage of people across the African continent who lack the minimum daily caloric intake – despite years of declines – has been climbing steadily precisely through the GAC’s program timeline. Malnutrition went from 15 to 19.7 percent since 2013.

I’ll admit that I can’t be sure I’m not oversimplifying things here. There could well have been powerful geopolitical or macro economic changes behind surges in malaria and malnutrition. Perhaps those crises would have been even worse had Canadian funding not been in place. Global events seldom have easy explanations.

But what I can see is a fairly consistent pattern. GAC spends hundreds of millions and billions of dollars on multi-year agreements with multilateral organizations. Key success indicators are rarely met. Persistent rumors of corruption and incompetence (and worse) often hover above the largest aid organizations. But there’s never any evidence of comprehensive program and mandate assessments within GAC itself. They might happen, but they’re not telling us. And that’s a problem.

Note: I received no response to repeated efforts to reach GAC officials for comment on these programs.

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GAC and the United Nations Relief and Works Agency

The government of Canada – through GAC – has long been among the major financial supporters of The United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). Leading up to the Hamas massacre on October 7, 2023, the 75 year-old United Nations agency had a yearly budget of more than 900 million U.S. dollars, and had long been accused of antisemitism, corruption, and complicity in war crimes.

At various points long before the current war, the Netherlands, Switzerland and the Unites States had all felt compelled to suspend payments to UNRWA over related concerns. The Harper government cut funding to UNRWA in 2010, but Prime Minister Trudeau restored it in 2016. Canada briefly froze funding to UNRWA in January 2024 due to the organization’s connections to the October 7 attacks but once again restored payments in March.

I’m curious to know what the quarter billion dollars that Canada has donated to UNRWA since 2016 was used for and what safeguards the government imposed to ensure we weren’t facilitating criminal or genocidal behavior.

In fact, the official record of Canada’s parliament includes the unanimous agreement of the Standing Committee on Foreign Affairs and International Development from Thursday, February 4, 2021, when they declared:

That the committee express its deep concern about certain educational materials circulated to students by UNRWA during the pandemic in error that violates the values of human rights, tolerance, neutrality and non-discrimination, at a time when UNRWA is receiving funding from the Government of Canada, and report this motion to the House”

It’s noteworthy that the final version of the text included the phrase “in error”. That addition was not agreed to unanimously, because it would suggest that the copious educational material openly promoting extreme nationalism and violence against Jews somehow only found its way into classrooms by some weird accident. (Someone might have left a window open and the wind blew book-filled boxes in. Could of happened to anyone.)

In the end, only the four Conservative members of the committee opposed the “in error” phrasing.

The motion was originally inspired by a report published by the Institute for Monitoring Peace and Cultural Tolerance in School Education (IMPACT-se). That report documented many instances of the glorification and promotion of violent Jihad, martyrdom, and terrorism within UNRWA educational materials.

As it turns out, it’s now clear that not only was the content created by UNRWA and included in their curricula by design, but it’s still being printed and widely taught in UNRWA schools (when they’re operational). The agency’s only practical response to the criticism was to remove references from their public-facing website.

Further research by IMPACT-se in the aftermath of the October 7 attacks has revealed how, for instance, “13 UNRWA staff members have publicly praised, celebrated or expressed their support for the unprecedented deadly assaults on civilians.” The report also documents how at least 18 UNRWA graduates have “died carrying out acts of terror.”

Of course, our concerns go far beyond education. Since the start of Israel’s land offensive in Gaza, it’s become painfully obvious that UNRWA schools and hospitals have been used as rocket launching areas, weapons storage facilities, and access points for Hamas military tunnels – all clear war crimes. It’s difficult to imagine how a reasonable person could conclude that UNRWA officials – and those providing program oversight – were not aware of those violations.

More recently, the UN itself admitted that at least nine of its employees “might have” been involved in the October 7 massacres and will be fired.

GAC – at least in its public statements – hasn’t ignored the problem. In June of 2023, they announced that:

Canada will remain closely engaged with UNRWA and continue to exercises (sic) enhanced due diligence for all humanitarian and development assistance funding for Palestinians. This work includes ongoing oversight, regular site visits, a systematic screening process and strong anti-terrorism provisions in funding agreements.”

The problem is that subsequent credible revelations have demonstrated that the “oversight” and “regular site visits” promised by GAC either never happened, were an embarrassing failure…or something much worse.

Canadians have a right to know how their money is spent. It would be helpful if the government, and Global Affairs Canada in particular, would at the very least tell us exactly how they’re going to fix these messes.

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Addictions

So What ARE We Supposed To Do With the Homeless?

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The Audit

David Clinton

 

Involuntary confinement is currently enjoying serious reconsideration

Sometimes a quick look is all it takes to convince me that a particular government initiative has gone off the rails. The federal government’s recent decision to shut down their electric vehicle subsidy program does feel like a vindication of my previous claim that subsidies don’t actually increase EV sales.

But no matter how hard I look at some other programs – and no matter how awful I think they are – coming up with better alternatives of my own isn’t at all straightforward. A case in point is contemporary strategies for managing urban homeless shelters. The problem is obvious: people suffering from mental illnesses, addictions, and poverty desperately need assistance with shelter and immediate care.

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Ideally, shelters should provide integration with local healthcare, social, and employment infrastructure to make it easier for clients to get back on their feet. But integration isn’t cost-free. Because many shelters serve people suffering from serious mental illnesses, neighbors have to worry about being subjected to dangerous and criminal behavior.

Apparently, City of Toronto policy now requires their staff to obscure from public view the purchase and preparation of new shelter locations. The obvious logic driving the policy is the desire to avoid push back from neighbors worried about the impact such a facility could have.

As much as we might regret the not-in-my-back-yard (NIMBY) attitude the city is trying to circumvent, the neighbors do have a point. Would I want to raise my children on a block littered with used syringes and regularly visited by high-as-a-kite – and often violent – substance abusers? Would I be excited about an overnight 25 percent drop in the value of my home? To be honest, I could easily see myself fighting fiercely to prevent such a facility opening anywhere near where I live.

On the other hand, we can’t very well abandon the homeless. They need a warm place to go along with access to resources necessary for moving ahead with their lives.

One alternative to dorm-like shelters where client concentration can amplify the negative impacts of disturbed behavior is “housing first” models. The goal is to provide clients with immediate and unconditional access to their own apartments regardless of health or behaviour warnings. The thinking is that other issues can only be properly addressed from the foundation of stable housing.

Such models have been tried in many places around the world over the years. Canada’s federal government, for example, ran their Housing First program between 2009 and 2013. That was replaced in 2014 with the Homelessness Partnering Strategy which, in 2019 was followed by Reaching Home.

There have been some successes, particularly in small communities. But one look at the disaster that is San Francisco will demonstrate that the model doesn’t scale well. The sad fact is that Canada’s emergency shelters are still as common as ever: serving as many as 11,000 people a night just in Toronto. Some individuals might have benefited from the Home First-type programs, but they haven’t had a measurable impact on the problem itself.

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Where does the money to cover those programs come from? According to their 2023 Financial Report, the City of Toronto spent $1.1 billion on social housing, of which $504 million came in funding transfers from other levels of government. Now we probably have to be careful to distinguish between a range of programs that could be included in those “social housing” figures. But it’s probably safe to assume that they included an awful lot of funding directed at the homeless.

So money is available, but is there another way to spend it that doesn’t involve harming residential neighborhoods?

To ask the question is to answer it. Why not create homeless shelters in non-residential areas?

Right off the top I’ll acknowledge that there’s no guarantee these ideas would work and they’re certainly not perfect. But we already know that the current system isn’t ideal and there’s no indication that it’s bringing us any closer to solving the underlying problems. So why not take a step back and at least talk about alternatives?

Good government is about finding a smart balance between bad options.

Put bluntly, by “non-residential neighborhood shelters” I mean “client warehouses”. That is, constructing or converting facilities in commercial, industrial, or rural areas for dorm-like housing. Naturally, there would be medical, social, and guidance resources available on-site, and frequent shuttle services back and forth to urban hubs.

If some of this sounds suspiciously like the forced institutionalization of people suffering from dangerous mental health conditions that existing until the 1970s, that’s not an accident. The terrible abuses that existed in some of those institutions were replaced by different kinds of suffering, not to mention growing street crime. But shutting down the institutions themselves didn’t solve anything. Involuntary confinement is currently enjoying serious reconsideration.

Clients would face some isolation and inconvenience, and the risk of institutional abuses can’t be ignored. But those could be outweighed by the positives. For one thing, a larger client population makes it possible to properly separate families and healthy individuals facing short-term poverty from the mentally ill or abusive. It would also allow for more resource concentration than community-based models. That might mean dedicated law enforcement and medical staff rather than reliance on the 9-1-1 system.

It would also be possible to build positive pathways into the system, so making good progress in the rural facility could earn clients the right to move to in-town transition locations.

This won’t be the last word spoken on this topic. But we’re living with a system that’s clearly failing to properly serve both the homeless and people living around them. It would be hard to justify ignoring alternatives.

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Solving the Housing Affordability Crisis With This One Cool Trick

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David Clinton

The Audit has a growing library of posts addressing the housing crisis. I’m particularly proud of my Solving Canada’s Housing Crisis because of how it presents a broad range of practical approaches that have been proposed and attempted across many countries and economies. But the truth is that the affordability end of the problem could be easily and quickly solved right here at home without the need for clever and expensive innovation.

As you’ll soon see, local and provincial governments – if they were so inspired – could drop the purchase price on new homes by 20 percent. Before breakfast.

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It’s all about taxes and fees. This post will focus mostly on taxes and fees as they apply to new construction of relatively expensive detached homes. But the basic ideas will apply to all homes – and will also impact rentals.

Here are some estimated numbers to chew on. Scenarios based on varying permutations and combinations will produce different results, but I think this example will be a good illustration.

Let’s say that a developer purchases a single residential plot in Toronto for $1.4 million. In mature midtown neighborhoods, that figure is hardly uncommon. The plan is to build an attractive single family home and then sell it on the retail market.

Here are some estimates of the costs our developer will currently face:

  • Construction costs on a 2,000 sq. ft. home (@ $350/sq. ft.): $700,000
  • Land transfer taxes on the initial land purchase: $35,000
  • Development fees: $100,000
  • Permits and zoning/site approvals: $40,000

Total direct development costs would therefore come to $875,000. Of course, that’s besides the $1.4 million purchase price for the land which would bring our new running total to $2,275,000.

We’ll also need to account for the costs of regulatory delays. Waiting for permits, approvals, and environmental assessments can easily add a full year to the project. Since nothing can begin until the developer has legal title to the property, he’ll likely be paying interest for a mortgage representing 80 percent of the purchase price (i.e., $1,120,000). Even assuming a reasonable rate, that’ll add another $60,000 in carrying charges. Which will bring us to $2,335,000.

And don’t forget lawyers and consultants. They also have families to feed! Professional guidance for navigating through the permit and assessment system can easily cost a developer another $25,000.

That’s not an exhaustive list, by the way. To keep things simple, I left out Toronto’s Parkland Dedication Fee which, for residential developments, can range from 5 to 20 percent of the land value. And the Education Development Charges imposed by school boards was also ignored.

So assuming everything goes smoothly – something that’s far from given – that’ll give us a total development cost of $2,360,000. To ensure compensation for the time, work, investments, and considerable risks involved, our developer is unlikely to want to sell the home for less than $2,700,000.

But various governments are still holding their hands out. When the buyers sign an agreement of purchase, they’ll be on the hook for land transfer taxes and – since it’s a new house – HST. Ontario and Toronto will want about four percent ($108,000) for the transfer (even though they both just cashed in on the very same transfer tax for the very same land at the start of the process). And, even taking into account both the federal and Ontario rebates, getting the keys to the front door will require handing over another $327,000 for HST.

Here’s how development fee schedules currently look in Toronto:

And here’s a breakdown of the land transfer taxes assessed against anyone buying land:

In our hypothetical case, those fees would give us a total, all-in purchase price of $3,135,000. How much of that is due to government involvement (including associated legal and interest fees)? Around $695,000.

That’s $695,000 our buyers will pay – over and above the actual costs of land and construction. Or, in other words, a 22 percent markup.

Let’s put this a different way. If the cost of the median home in Canada dropped by 22 percent, then around 1.5 million extra Canadian households could enter the market. Congratulations, you’ve solved the housing affordability crisis. (Although supply problems will still need some serious work.)

Now it’s probably not realistic to expect politicians in places like the Ontario Legislature and Toronto City Council to give up that kind of income. But just lowering their intake by 50 or even 25 percent – and reducing the costs and pain points of acquiring permits – could make a serious difference. Not only would it lower home sale prices, but it would lower the barriers to entry for new home construction.

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Just what were all those taxes worth to governments? Let’s begin with the City of Toronto. Their 2023 Financial Report tells us that land transfer taxes generated $944 million, permits and zoning applications delivered $137 million, and development fees accounted for $1.45 billion. Total city revenues in 2023 were $16.325 billion.

We’re told that all that money was spent on:

  • Roads and transit systems
  • Water and wastewater systems
  • Fire and emergency services
  • Parks and recreation facilities
  • Libraries

Well, we do need those things right? We can’t expect the city to just eliminate fire and emergency services.

Wait. Hang on. I seem to recall being told that revenue from my property tax bill covered those services. Yes! My property tax did fund those things. Not 100 percent of those things, but a lot.

Specifically, Toronto property tax revenues cover 65 percent of the municipal costs for roads and transit systems, 85 percent of fire and emergency services, 75 percent of parks and recreation facilities, and 95 percent of library costs (even though very few people use public libraries any more).

Granted, property tax revenue covered only five percent of water and wastewater systems, but that’s because another 40 percent came from user fees (i.e., utility bills).

So revenues from land transfer taxes, developer fees, and permitting aren’t an insignificant portion of City income, but they’re hardly the linchpin propping the whole thing up either. City Council could respond to losing that income by increasing property taxes. Or – and I’m just throwing around random ideas here – they could reduce their spending.

Now what about the province? I couldn’t get a good sense of how much of their HST revenue comes specifically from new home sales, but Ontario’s 2023–24 consolidated financial statements tell us that provincial land transfer taxes brought in $3.538 billion. That would be around 1.7% of total government revenues. Again, a bit more than a rounding error.

Politics is about finding balances through trade offs. Sure, maintaining program spending while minimizing deficits is an ongoing and real challenge for governments. On the other hand, they all say they’re concerned about the housing crisis. Foregoing just one to five percent of revenues should, given the political payoffs and bragging rights that could follow, probably be an easy pill to swallow.

A few weeks ago I reached out to the City of Toronto Housing Secretariat and the Province of Ontario’s Municipal Affairs and Housing for their thoughts. I received no response.

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