Poor families will share $510 million in new benefits
It was on the cusp of Canada’s Centennial that Ottawa, awash with cash and heady with power, grandly offered to pick up half of the provinces’ welfare tabs. The resulting Canada Assistance Plan of 1966 was the last expansive, and expensive, federalprovincial program in the social security framework. As funds grew scarcer over the following decades, governments cut back medicare, postsecondary education and welfare—until the very survival of the social security network occasionally seemed in doubt. So it is perhaps fittingly symbolic that Ottawa and the provinces chose to introduce the first federalprovincial social program since CAP on July 1—when Canada marks its 131st birthday. As fireworks boom over Parliament Hill, as Canadians toast their nation, the Canada Child Tax Benefit for low-income families officially debuts. “It is a phoenix that rose out of the ashes of the cuts to social programs, all of the painful things that were done to fight the deficit,” says Ken Battle, president of the Caledon Institute of Social Policy. “And it is the first in more than a generation.”
The new program is crafted to ease the worsening problem of child poverty—and to facilitate the movement of welfare families into the workforce. On July 1, Ottawa will increase the funds in its existing $5.1-billion child tax credit program, which delivers benefits to most Canadian families. But those new funds—$850 million—will be specifically targeted at 2.5 million children in low-income families, both working poor and welfare recipients. More than 1.4 million families with incomes under $25,921 will receive larger federal cheques. Most provinces, in turn, will lower their welfare payments to take account of the fact that those families are receiving additional federal funds.
They will deploy the estimated $510 million in savings in a range of initiatives against child poverty. The programs, such as Ontario’s childcare supplement for low-income working families, are designed to ensure that welfare families do not lose their children’s benefits or incur extra costs as they move into the workforce. “The situation now is that many parents could not leave welfare for a first job without depriving their children of some very important programs such as dental care, child care, optical services,” federal Human Resources Minister Pierre Pettigrew told Maclean’s. “Those programs were born out of good intentions—but all of a sudden you realize that you are actually forcing people to stay on welfare. The system just does not serve Canadians well. And that is why we are correcting it.”
The new benefit is, in many respects, a child of
the times. In the 1960s, Ottawa designed the programs, set the rules and policed implementation. But the federal government lost most of that clout in 1995 when it unilaterally pared $6 billion from its annual cash transfers to the provinces, folding CAP into a general block grant for all social programs. The rancor has lingered. On June 15, provincial finance ministers heatedly insisted that Ottawa restore those funds for basic health and education—before it introduced novel initiatives such as home care. Prime Minister Jean Chrétien flatly refused. “It’s traditional,” he said. “Every time there is a meeting of finance ministers, they ask for something and offer nothing.” Provincial ministers angrily retorted that Ottawa had cut their transfers far more than it had curbed its own spending in its quest to balance its books.
The child tax benefit was born in the midst of similarly bitter clashes—and its structure reflects that provincial discontent. In fact, the provinces initially assumed the lead role in its creation. In March, 1996, provincial social affairs ministers suggested the “possible consolidation of income support for
the gram, ders children jointly ensuing of government.” into managed a negotiations, single national by Throughout both prothe orprovinces flatly refused to let Ottawa set the rules unilaterally or enforce the standards. Many pointedly noted that social programs were the constitutional responsibility of the provinces. As Queen’s University economist Tom Courchene notes: “Ottawa is losing the financial ability and the moral authority to dictate standards in areas of exclusive provincial jurisdiction.” Instead, Ottawa and the provinces have hammered out an approach that grants enormous flexibility to each province in its choice of projects. New Brunswick and Newfoundland have even opted to allow welfare recipients to keep this year’s additional funds. Nor will the federal government function as the police officer, scrutinizing each province’s efforts: each year, Ottawa and the provinces will publish a report, explaining how each province used the money and how it improved the lives of its children. “The whole framework is based on the idea of being accountable to the public as opposed to signing agreements among governments,” says a senior federal official. “It is not the old cost-sharing model—but a model of joint action.” Adds Pettigrew: “Between 1980 and 1995, we have lost so much energy on jurisdictions with the two levels of government fighting each other. But we can’t say, ‘Children are provincial or children are federal.’ We have to work better together.”
Ironically, the new model even allows Quebecers to benefit—although the provincial government has officially refused to participate. Low-income Quebec families, like all low-income Canadian families, will receive extra federal funds: in this case, an estimated $150 million. That, in turn, frees up $150 million in provincial funds. Quebec social services officials told Maclean’s that the province will adjust its family allowance program for all low-income families: payments for first and second children will decrease as Ottawa’s money increases. The savings will be put towards increased payments for low-income families with three or more children—and towards the province’s program to provide lowcost child care. But the province will not participate in the annual reports—because it maintains that social programs are areas of exclusive provincial jurisdiction.
The drive to alleviate child poverty has become the intergovernmental crusade of the late 1990s— if only because the number of poor children is growing. In 1989, 934,000 children belonged to families with incomes below the Statistics Canada low-income cutoff. In 1996, the most recent year for which figures are available, there were 1.49 million—an increase of almost 60 per cent. The trend is evident—and worrisome. As the federal government grimly noted in a recent summary: “Poor children are at greater risk of suffering from inadequate nutrition, mental and physical health problems, poor school achievement and encountering difficulties with the law.”
The new benefit uses the tax system to target aid. At present, all families with annual net income of $66,700 or less—about 85 per cent of Canadian families—receive at least some portion of the child tax benefit: a maximum of $1,020 each year per child for the first two children. On July 1, that maximum will increase to $1,625 for the first child—and $1,425 for each additional child. Families with net income of up to $20,921 will receive the maximum, through monthly cheques. Families with incomes between $20,921 and $25,921 will receive some portion of the increased amount. Families with incomes above $25,921 will continue to receive the same benefits as now. Ottawa will add an additional $425 million to its initial $850 million on July 1, 1999—and another $425 million on July 1,2000.
Most provinces, in turn, will use their savings to erode the so-called welfare wall. According to federal estimates, in many provinces a parent with two children who leaves social assistance for a job loses child benefits of about $3,000, plus dental and prescription drug benefits. That parent also faces work-related expenses such as transportation costs, child care, pension and employment insurance premiums and income taxes. As a result, many welfare parents find that work becomes almost prohibitively expensive.
The provinces currently provide about $2 billion in social-assistance benefits for children—including the $510 million that they will now be free to redirect. And most have carefully focused their new initiatives to lower the welfare wall. Alberta, for example, has created the Child Health Benefit, which will cover most of the dental, optical, prescription drug and emergency ambulance bills for 138,000 children in working-poor families with net incomes of up to $20,921. As Alberta Social Services
Most provinces will aim to erode the welfare wall
Minister Dr. Lyle Oberg told Maclean’s'. “Quite frankly, I’m not a huge federalist. But this is a very good example of how governments can work together.”
Although many social activists have guardedly praised the benefit, they maintain that governments should find more funds to fight child poverty. In the end, however, many critics concede that the very existence of the new benefit is heartening—at a time when Ottawa and the provinces are squabbling over everything from compensation for hepatitis C victims to the size of employment insurance premiums. They hope that the child tax credit will set a trend for future co-operation in other areas of social policy. Ontario, for one, has offered to work with Ottawa to expand the $2.5-billion Canada Millennium Scholarship Foundation into a joint federal-provincial fund. “Clearly, tensions are growing,” Premier Mike Harris told Maclean’s. “So we have tried some different tacks, saying, ‘Let’s work together on this.’ ”
Meanwhile, Pettigrew and his provincial counterparts are broadening their discussions into a proposed National Child Agenda. That could include federal money for long-term research on families—and perhaps the creation of another fund to extend child-care facilities. Such co-operation amid the federal-provincial clashes is almost startling. Says the Caledon Institute’s Battle, one of the designers of the current tax benefit: “The child program is a little point of light, a flashlight. My hope is that governments take a page out of their own success—and apply it to other areas of federal-provincial relations. I hope its batteries don’t wear out.”
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