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Finance Minister Jim Flaherty will table his next budget on March 21, 2013.Chris Wattie/Reuters

Thursday's federal budget will take a new look at how provinces handle the $2.5-billion a year Ottawa spends for job skills training programs, following on the Harper government's rising concern that they are not delivering Canadians the skills they need to fill empty jobs.

A close look at how provinces spend a portion of that money, the $500-million-a-year Labour Market Agreement fund, found that they spent 79 per cent of their allotment on "generic employment information" rather than more specific options, such as hands-on training that matches workers to jobs, according to a report prepared for Human Resources and Skills Development Canada.

That research, along with a growing sense that the rest of Ottawa's contributions are being similarly spent, is squarely behind the Conservative plan to make skills training a focus for the 2013 budget, a government official told The Globe and Mail.

Finance Minister Jim Flaherty's budget is not expected to contain significant new spending, but it is expected to call for stronger accountability from the provinces over the money Ottawa transfers to them for skills training.

The federal Labour Market Agreements were created by the Conservative government in 2007 and signed with all the provinces.

They were temporarily enhanced for two years during the recession, but now transfer a combined total of $500-million a year. The program reached almost 500,000 Canadians during its first two years, according to the HRSD report.

The agreements are aimed at Canadians who don't qualify for employment insurance. The deals ask provinces to spend the money in five areas: employment services, which are described as "generic employment information"; skills development and upgrading; work experience; combination of skills development and work experience and workplace-based skills development.

The report shows provinces spent 79 per cent of the transfers on the first category in 2008-09, which includes areas like career-counselling, and no more than 6 per cent on any of the four other categories, which are aimed at achieving more concrete results. There was virtually no change the following year, and the department has not yet published more recent results.

"Governments in general are terrible at managing these kinds of resources," said Dan Kelly, president of the Canadian Federation of Independent Business. "It's been my strong suspicion for some time that the only job creation really is for a whole bunch of civil servants, rather than helping the private sector work force actually re-skill or become better-trained."

The Labour Market Agreements were created as an additional form of skills funding. That $500-million a year is on top of the roughly $2-billion a year that Ottawa transfers to the provinces under the EI program.

Addressing Canada's growing labour and skills shortage – along with balancing the budget by 2015 – is shaping up as a dominant theme of Mr. Flaherty's budget.

In addition to the talk of a new skills plan, the government is taking a close look at recommendations that would require the private sector to hire new workers as part of any successful bid for government procurement contracts.

Pat Bell, British Columbia's Minister of Jobs, Tourism and Skills Training, defended his province's handling of training funds.

"British Columbia has an excellent record of skills training under our Labour Market Agreement partnership with the federal government," the minister said in a statement to The Globe. According to Mr. Bell, more than 77,000 people have been served by the program in B.C. since 2008-09, with almost 50 per cent receiving some form of credential and over 90 per cent stating that the training sufficiently prepared them for employment.

"We are proud of this record and will continue our good working relationship with the federal government," he said.

Mr. Flaherty said this month that the provinces should continue to deliver skills training, but Ottawa does want the provinces to be more accountable and produce better results.

"There's no question that the delivery of those kinds of services generally are better placed with the provinces and territories," he said. What we are looking at though is outcomes."

Craig Alexander, chief economist of TD Bank Financial Group, said the government should focus on skills training, but private-sector employers need to do more as well.

"I worry that when we hear the business community constantly harping on the fact that the university system isn't generating the workers or the skills they need, I always think at some point, the answer is businesses also have to do their part in developing the skills of workers," he said.

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