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The federal government will earmark $40-billion to compensate First Nations children and families for the failures of Canada’s child-welfare system and to pay for long-term reform, in the hopes of settling the matter out of court before the end of the year.

The $40-billion pledge is related to class-action lawsuits, as well as a continuing court battle over a finding by the Canadian Human Rights Tribunal. The CHRT’s decision required Ottawa to provide up to $40,000 in compensation to each First Nations child unnecessarily taken into foster care as a result of underfunded government services since 2006. The order also required payments to parents or grandparents.

In October, the government announced that it would be appealing a September Federal Court decision that upheld the CHRT finding. In the same announcement, the government said it had agreed to put a pause on the litigation while it negotiated outside of court with First Nations groups.

The $40-billion figure emerged from the talks, and is a public sign that negotiations are proceeding. But all sides have been careful to note that there is still no final settlement. The discussions are being facilitated by Murray Sinclair, the former chair of the Truth and Reconciliation Commission, who left the Senate in January. The parties to the talks include the Assembly of First Nations (AFN), the First Nations Child and Family Caring Society and representatives of class action lawsuits related to Indigenous child welfare.

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Ottawa made the spending plans known on Monday ahead of its fall economic statement, which will be released on Tuesday. The fiscal update will be the first formal revision of the federal government’s books since the release of the April budget.

Crown-Indigenous Relations Minister Marc Miller said Monday that the $40-billion would be divided in two. Half of the money would be designated for compensation, and half for long-term reforms of federal programs. When asked about the timeframe over which the funding would be made available, Mr. Miller declined to comment.

He said he is cautiously optimistic about the discussions, but he noted that there is still disagreement on the proper allotment of compensation among the various parties involved.

“I want everyone to be conscious of the fact that there still are some very fragile discussions under way,” he said.

He added that if Mr. Sinclair was not facilitating the discussions, they probably would have broken down by now. Although there is no final agreement, Mr. Miller said the amount of progress made in the past few weeks would have taken years in an “adversarial process.”

Ottawa said it expects to provide further details on the outcomes of its discussions with the parties by Dec. 31.

When the talks were first announced, the federal government made it clear it would be willing to put a significant amount of money on the table, although it did not specify how much. Mr. Miller said at the time that it would likely take billions.

On Monday, he said the $40-billion for both compensation and long-term reform is the government’s estimate of what it will cost to address 30 years of “failure” and to fix the system so it does not fail Indigenous children again.

“We are a country that prides itself on treating people fairly,” he said.

Assembly of First Nations Manitoba Regional Chief Cindy Woodhouse said Monday in a statement that the $40-billion announcement is a result of long-term advocacy by her organization on behalf of First Nations children and their families. She also called it a “concrete example of what you can do when you are at the table instead of fighting in court.”

Cindy Blackstock, the executive director of the First Nations Child and Family Caring Society, said in an interview that she finds it encouraging that the compensation is being booked in the government’s fall economic statement.

“The government of Canada has a track record of discriminating against First Nations children in ways that cost them their childhoods and in some ways their lives, ever since Confederation,” Dr. Blackstock said.

“That pattern has to stop. We need to find ways to make sure that the government does better when it knows better.”

Federal spending on Indigenous issues has more than doubled over the past five years, according to a report released last week by Parliamentary Budget Officer Yves Giroux. The report noted that projected spending for the two main departments responsible for Indigenous files is projected to reach $27.9-billion for the current fiscal year.

Dr. Blackstock said if Canadians were to have assessed the cost of solving the child-welfare problem more than 20 years ago, it would have been in the hundreds of millions of dollars.

“But because the government chose not to spend the money to fix the problem back then, so many people were hurt,” she said. “Some of them died and we’re now in the place where fixing that trauma is going to cost a lot more.”

NDP Crown-Indigenous relations and Indigenous services critic Lori Idlout said her party has long criticized the Liberal government’s position on the legal battle over First Nations child welfare and will be watching the government’s commitment of $40-billion closely over the days and weeks to come.

Tuesday’s fall economic statement from Finance Minister Chrystia Freeland is expected to provide further details on the accounting of the $40-billion commitment, as well as the Liberal government’s overall spending plans.

In April, Ottawa estimated last year’s federal deficit would hit $354.2-billion, while the deficit for the current fiscal year was projected to be $154.7-billion.

As Finance Minister in a minority Parliament, Ms. Freeland is facing calls from the Opposition Conservatives to curb planned spending, while the NDP and the Bloc Québécois press her to reverse recent moves to end direct COVID-19 supports for individuals.

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