Annex 2: Some Evidence of Expenditure Needs and the Costs of Providing Public Services in the Territories

Unique circumstances affect the volume and costs of public services in the territories

Some of the unique circumstances and needs in the territories are population growth and structure, climate, and geographically dispersed and isolated communities. These circumstances affect both the volume (workload) and cost of providing public services in the territories.

Population

The table below shows that the population in the territories is younger, on average, than in the rest of Canada. Twenty-three percent of people living in the provinces are under the age of 18, compared with 32 percent in the Northwest Territories and 43 percent in Nunavut.

Table 1 – Selected Demographic Statistics in the Territories Compared with the Provincial Average, 2001

Source: Statistics Canada, Census 2001

There is a larger proportion of Aboriginal and Inuit people living in the territories, ranging from 23 percent in Yukon, 51 percent in the Northwest Territories, to 85 percent in Nunavut. This is very high compared with the provincial average of three percent of the population.

In the period from 1999–00 to 2004–05, the population growth rate in Nunavut was double the provincial average. A large part of the explanation for the higher growth rate in the population in Nunavut is due to a high birth rate, which is estimated to be 26.3 births per 1,000 people. This is close to three times the Canadian average of 10.5 births per 1,000 people.³

Over the medium term, population growth rates in the territories are expected to exceed those in Canada, in particular in Nunavut and among the Aboriginal and Inuit population. As shown in the Table 2, from 2009 to 2019, Nunavut’s population is expected to grow by 16.5 percent, compared with 7.1 percent in the Northwest Territories, 3.7 percent in the Yukon and 6.4 percent in Canada as a whole.

Table 2 – Comparison of Projected Population Growth Rates in the Territories, 2004–2019

Source: Statistics Canada, Northwest Territories Bureau of Statistics, Yukon Bureau of Statistics

Climate

On average, the climate is harsher in the territories than in southern Canada. For example, in Toronto, the average temperature is –4 degrees Celsius in January and 22 degrees Celsius in July. In Iqaluit, the average temperature is –27 degrees Celsius in January and 8 degrees Celsius in July. Although these temperatures are not that different on average, winter is longer and extreme low temperatures in winter are more common in the territories.⁴

One of the largest contributors to territorial program expenditures is utility costs. Electricity costs in the territories are high due to the harsh climate and the cost of transporting fuel north to generate electricity. Electricity rates vary significantly among the territories, primarily due to the fuel choice and method of generating electricity.

Electricity rates in the Northwest Territories and Nunavut are, on average, three times as high as in southern Canada. Yukon electricity consumers are much better off due to the development of large hydroelectric projects in the territory. For example, in 2004, provincial hydro rates varied from a low of 6.33 cents per kilowatt-hour in Québec to a high of 9.22 cents per kilowatt-hour in Nova Scotia. In Yukon, residential rates in communities with hydroelectric generation capacity are 13.64 cents per kilowatt-hour, increasing to 15.97 cents per kilowatt-hour in diesel-powered communities to 32.4 cents per kilowatt-hour in Old Crow.⁵ In the Northwest Territories, electricity generation is primarily based on diesel power and varies from 11.72 cents per kilowatt-hour in Yellowknife to $2.67 per kilowatt-hour in Colville Lake.⁶ In Nunavut, electricity generation is based on diesel power in every community and ranges from a low of 36.8 cents per kilowatt-hour in Iqaluit to 85.62 cents per kilowatt-hour in Kimmirut.⁷

Dispersed and Isolated Communities

In the territories, population settlement patterns and less developed transportation infrastructure affect the cost of providing public services.

Forty-three percent of Northwest Territories residents live in Yellowknife, 74 percent of Yukon residents live in Whitehorse, and 20 percent of Nunavut residents live in Iqaluit. In both the Northwest Territories and Nunavut, most people live outside of these major centres. They reside in remote, isolated communities of less than 3,500 people. On average, there is one person per square kilometre in Nunavut compared to 29 per square kilometre for Canada as a whole.⁸

Communities in Nunavut depend on air and water transportation links to southern Canada. While some of the smaller communities in the Northwest Territories are also only accessible by air or ice roads, others like Yellowknife have road access to southern Canada. Communities in Yukon are even less isolated, since all but three are accessible by road. To illustrate Nunavut’s situation, it is useful to note that there are 4,681 kilometres of road in Yukon compared with one inter-community road of about 21 kilometres in Nunavut.⁹

The cost of providing public services to a dispersed and isolated population is higher than with a compact, urban population. For example, in 2003, relative to Edmonton, it cost 1.5 times more to purchase a given basket of goods and services in Iqaluit, 1.3 times more in Whitehorse and 1.2 times more in Yellowknife.¹⁰ As illustrated in the table below, per capita spending on transportation and communications are four to six times higher in the territories than the provincial average.

Government administration costs are also higher in the territories compared with the provinces since small populations mean losses in economies of scale. For example, per capita expenditures on general government services are eight to 17 times higher in the territories than in the provinces.¹¹

Table 3 – Selected Measures of Dispersion and Transportation Costs in the Territories, compared with the Provincial Average

Source: Finance Canada; Government of Canada, Statistics Canada, Financial Management System, Consolidated Provincial and Local Expenditures, 2003-04; Cost of Living Differential – Government of Canada, Treasury Board of Canada, Classification of Isolated Posts; Statistics Canada, Census of Canada, 2001

3. Government of Canada, Statistics Canada. (2004). Births and Birth Rate, by province and territory, projections for 2004–05; Government of Nunavut, Nunavut Housing Corporation.(2004). Nunavut Housing Corporation and Nunavut Tunngavik Incorporated, Nunavut Ten-Year Inuit Housing Action Plan, September 2004.
4. Environment Canada,Meteorological Service of Canada. (2006)., Canadian Climate Normals, 1971-2000, various locations.
5. Government of Yukon, Department of Energy, (2005).Yukon Energy Corporation, 2004 Annual Report.
6. Government of the Northwest Territories, Northwest Territories Power Corporation. (2004). NWT Electricity Rates by Community; Government of the Northwest Territories. (2004). NWT Public Utilities Board, NWT Electricity Rates, 2004.
7. Government of Nunavut,Qalliq Power Corporation. (2005). Annual Report, 2004.
8. Government of Canada, Statistics Canada. (2001). Census of Canada, 2001.
   
9. Government of Nunavut. (2005). Nunavut Economic Outlook, 2005.
10. Ibid.
11. Government of Canada,. Statistics Canada. (2004). Statistics Canada, Financial Management System, Consolidated Provincial and Local Expenditures, 2003-04.

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