There will be job cuts at Veterans Affairs despite Opposition demands that the federal department's budget remain untouched.

An NDP motion to exempt the $3.6-billion department from Finance Minister Jim Flaherty's budget axe on March 29 was defeated 147-122 by the Conservative majority in the Commons late Tuesday.

Both opposition parties voted in favour of the motion and interim NDP Leader Nicole Turmel expressed frustration afterwards, calling its defeat "shameful."

The Conservatives have gained a lot of political mileage in their support for veterans and have tried to reframe the impending cuts as an attack on government waste.

Prior to the vote, Veterans Affairs Minister Steven Blaney told a House of Commons committee that the reduction in staff is expected to be handled through attrition over five years. But he acknowledged the jobs of pay and benefit sections are being relocated out of Charlottetown.

"We expect most of our workforce adjustment will be made of those members who are eligible to retire and some (other) adjustments as you mentioned," Blaney said in response to a question from Liberal critic Sean Casey, a P.E.I. member.

There have been suggestions for months that as many as 500 positions will be lost as the dwindling number of Second World War and Korean veterans eases expectations on the department.

Determined to make cuts

No figure was confirmed during Tuesday's committee, but Blaney told the Commons he's determined to cut the "rampant bureaucracy" — a move that he claims will not affect services or benefits to veterans.

New Democrat Irene Mathyssen said she was left wondering who would deliver those services, especially since only 10 per cent the department's budget is dedicated to administration.

While before the committee, Blaney defended the arms-length Veterans Review and Appeal Board, which has been rocked by a privacy scandal and complaints from ex-soldiers that they are often subject to patronizing and disrespectful treatment.

New Democrats demanded Tuesday the review agency be abolished and its $11 million budget redirected back into the department in order to create a better system for ex-soldiers to challenge their benefits.

The review board acts as a quasi-court of last resort for veterans who've been denied benefits or pensions by the federal bureaucracy.

The Conservatives promised before they were elected to either reform or disband the agency, which many veterans have come to loathe and describe as a dumping ground for partisan appointees who don't understand the military.

Blaney now says getting rid of it would be a mistake.

"I find it important for our veterans to have a tool so they can revisit (these) decisions," he said. "The tribunal is important for veterans .... (But) there are improvements that can be made."

Refused to answer questions

The chair of the review board appeared before the same committee late Tuesday, but John Larlee refused to answer questions about the privacy scandal involving a long-time member, Harold Leduc, who claims his diagnosis of post-traumatic stress was used to discredit him.

Leduc said he and other members who sided too often with the claims of veterans have been singled out for harassment.

"I'm not prepared to speak to individual cases at the board or matters that deal with individual's privacy," Larlee said.

He acknowledged that members face annual performance assessments "where all aspects of the cases are reviewed and looked at," but said in the end individuals are responsible for the decisions they render.

New Democrat veterans critic Peter Stoffer said the accusations are serious and just another reason the board should be disbanded, as the Conservatives had promised.

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NDP Veterans Affairs critic Peter Stoffer wants the Veterans Review and Appeal Board to be disbanded. (CBC)

He pointed to the claims of disrespect by ex-soldiers as proof the agency wasn't working and didn't understand those it serves.

"I find it sad and this is what happens when you put political hacks in charge," he said.

But Larlee defended the board as professional and said it contains both ex-soldiers and RCMP members.

Sean Casey, the Liberal critic, said he wasn't sure scrapping the agency would be a good idea, but believes it is in need of an overhaul in order to make it more responsive.

Casey said he'd like to see the government "go slow and get it right."