Economic analysis

Ottawa has boosted benefits, but too many are still not getting them

Red tape and confusing applications get in the way of payouts, which means a big chunk of federal benefits go unclaimed

Finance Minister Bill Morneau shakes hands with Prime Minister Justin Trudeau after delivering his fall economic statement in the House of Commons in Ottawa, Tuesday, Oct.24, 2017. THE CANADIAN PRESS/Adrian Wyld

Finance Minister Bill Morneau shakes hands with Prime Minister Justin Trudeau after delivering his fall economic statement in the House of Commons in Ottawa, Tuesday, Oct.24, 2017. THE CANADIAN PRESS/Adrian Wyld

Jennifer Robson is an assistant professor of political management at Carleton University.

Earlier this week, Finance minister Bill Morneau tabled his Fall Economic Statement.

One not unreasonable critique of this fall update has been about whether the government is exercising prudent fiscal management.  From my read, the government’s commitment to a falling debt-to-GDP ratio, which you may or may not like as an anchor, isn’t the only guideline. As one official put it to me, they had an unexpected gain in their fiscal position since Budget 2017 and made choices about how to make use of that new room. About a third of the changes in the fiscal update are new social spending through indexation of the Canada Child Benefit [1] and an enhancement of the Working Income Tax Benefit.

From a social policy perspective, these are good changes.

READ: Bill Morneau has a good news story to tell—if anyone’s listening

Indexation of benefits is an important thing, especially for families with low or modest incomes. When inflation increases the costs of buying essentials like food, clothing and shelter, de-indexation of benefits hits lower-income household much harder, both because they spend a much bigger share of their income on consumption and because benefits make up a much bigger chunk of their total income. When benefit rates aren’t tied to inflation, governments might increase benefit levels, but they might not. The Harper government introduced the Universal Child Care Benefit in 2006 at $100 a month, and there the rate stayed until 2014, by which time families had lost nearly $200 a year in the real pre-tax value of the benefit.

A boost to the Working Income Tax Benefit (WITB) is likewise a laudable measure. Compared to the U.S. benefit it’s modeled on (the Earned Income Tax Credit), the WITB is a relatively modest benefit. For example, working full-time at minimum wage in Ontario won’t let you live comfortably but you could still earn too much to benefit from the WITB. The feds have promised to talk to provinces about how to best use the new WITB dollars, either by increasing the value of the benefit to those who qualify, or by expanding the number of low-wage workers who are eligible. That conversation is a good idea and I wouldn’t be surprised to see it happen as part of the federal poverty reduction strategy that Minister Jean-Yves Duclos is working on.

You could argue that the Liberals have made a bet that this kind of new social spending will yield economic (and maybe political) dividends down the road. There’s good evidence that cash benefits can make a big and positive impact on the lives of low-income children. Over the summer, the governor of the Bank of Canada, Steven Poloz, even lauded the Canada Child Benefit (CCB) as “highly stimulative“. Officials, however, were quick to insist that this spending isn’t about economic stimulus, it’s about fairness.

But here’s the thing about fairness, new spending on progressive benefits only increases fairness if they get to the Canadians they are meant for.

I tried to figure out how many families who might be eligible for the CCB aren’t getting it. This is the take-up gap. Estimates I got ranged from about two per cent (according to internal federal estimates I was given) to seven per cent using public data. Put another way, between 70,000 and 240,000 families in Canada aren’t currently getting the child benefits they are likely eligible for. As the government has already acknowledged, many of these families are Indigenous Canadians who don’t get the benefit because they haven’t been filing a tax return. That should be worrisome for a government that has made the CCB their signature social policy.

READ: Morneau’s shift from long-term strategy to immediate benefits

Likewise, the government has already noticed that not everybody who is eligible for the WITB is collecting it. Why? Well, it seems to again have to do with filing an income tax return. Even if a low-wage worker does file, he or she may not know to apply for the benefit or may be put off by the application. If you file a tax return by paper (and, based on work in progress  with new data from the Canada Revenue Agency, lower income Canadians might be more likely to use a paper return), the WITB application has 42 different steps to see if you’re eligible.

This isn’t really news to the government. After all, in the 2016 budget, the Trudeau government promised to be much more proactive in helping low-income Canadians file returns and get the benefits they’re entitled to. I believe that there are officials working under Minister Lebouthillier at the Canada Revenue Agency who are serious about that mandate commitment. But it has been two steps forward, one step back. As benefit rates have increased, so too have the agency’s semi-automated reviews of individual claims, putting hundreds or even thousands of low-income families at risk of losing benefits for administrative reasons. Rather than expressing disappointment in her officials, as she did after the CRA briefly considered taxing employee discounts as income, it would be nice to see Minister Lebouthillier put some more energy into improving access and take-up of benefits for low-income families.

This week, the finance minister and the PM made a fiscal and political bet. How that bet ultimately pays off may be up to the revenue minister. Fairness, in practice, means you have to pay attention to take-up and administration and on that front, I’d like to see the government invest a little more of their political capital.


[1] An author’s mea culpa here. In a 2016 post, I had mistakenly written that the Liberals hadn’t promised indexation. I can only blame limited access to documents in the budget lock-up. They did promise indexation and I quickly corrected my mistake in my subsequent commentary.

Looking for more?

Get the Best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.