March 19, 1996
Hon. Paul Martin
Minister of Finance
House of Commons
Room 515S, Centre Block
Dear Minister Martin:
In response to the 1996 Federal Budget, I would like to express to you the views of the Canadian Council on Social Development. Before starting, I should make it clear that we at the CCSD are well aware of the need to balance the diverse needs and interests of all Canadians while balancing the federal budget, and that doing so fairly and effectively is a challenging task. That having been said, I will take this opportunity to identify some of our key concerns with the federal budget while highlighting announcements that we find encouraging.
As we have expressed to you both publicly and privately in the past, the CCSD views the introduction of the Canada Health and Social Transfer (CHST) as the most profound change in social policy in Canada in the past two decades. We were encouraged to see that your government acted on the widely-supported proposal to introduce a "cash floor" to the transfer. This move should provide the federal government with "fiscal leverage" to ensure that the standards under the Canada Health Act and the residency requirement for social assistance and services are respected at the provincial level.
The 1996 Budget did not change the previously announced cuts to health, post-secondary education and social assistance and social services. The CHST envelope will fall from $29.7 billion to $25.1 billion between 1995-96 and 1997-98 as expected. More importantly, the amount of cash transferred to the provinces during this period will fall from $18.5 billion to $12.5 billion - - an enormous cut of $6 billion. And, following the 1996 Budget, we see that cash will continue to fall to $11.1 billion by 1999-2000. As much as we support the establishment of an $11 billion cash floor, we must recognize that these massive reductions in cash -- $7.4 billion over just four years -- will not be without impact. These cuts, coupled with the elimination of all but one standard for social assistance and social services in the last budget, will likely translate into widespread cuts to programs and supports directed at the most vulnerable Canadians.
It is already becoming clear that when provinces are faced with difficult budget cutting decisions, social assistance and services lose out to the more powerful interests protecting health care. This is unfortunate given the widely recognized link between income adequacy and health outcomes. The failure to ensure the security of vulnerable Canadians now will inevitably lead to remedial and costly health care expenditures later.
The CCSD is greatly discouraged by the social welfare "race to the bottom" that has taken hold in a number of provinces. The massive cuts introduced in several provinces have forced neighbouring provinces to either adopt similar short-sighted policies to avoid an influx of people seeking assistance, or to erect barriers as in the case of British Columbia. The federal government's ability to reverse this trend will be severely compromised unless standards are set to ensure the following:
- the right to assistance based on need;
- an adequate level of assistance to meet basic human needs for food clothing and shelter;
- the existence of an appeal mechanism.
- We urge the federal government, in consultation with the provinces over the next 18 months, to establish standards for social assistance and services.
Although the steps taken in the Budget to assist low income families and reduce child poverty were helpful, when considered in light of the other cuts announced, they are less than adequate. For example, we were pleased to see that support intended for children will no longer be taxed, and that measures will be taken to ensure that non-custodial parents meet their child support commitments. Furthermore, the establishment of child support guidelines should inject a degree of predictability and equity into the process of determining child support levels. Lastly, the increase in the Working Income Supplement should assist low income families make the transition from welfare to work. But these measures only scratch the surface.
To the extent that cuts to CHST cash transfers result in reductions in welfare rates and family services in a number of provinces, assistance to all low income families -- those with and without earnings -- is becoming increasingly important. The CCSD therefore, believes there should have been an increase and full indexatuib in the general Child Tax Benefit. We applaud the federal government's commitment to protecting seniors' benefits against inflation, and we would ask that the same be done for benefits for children in low income families.
In addition to improving the incomes and security of low income parents and their children, the provision of quality child care is extremely important. We were disappointed to see that the government has not yet acted upon its Red Book commitment to improve quality and the number of child care spaces in Canada. The cuts to child care at the provincial and local level, in part stimulated by the elimination of the Canada Assistance Plan which used to match provincial spending in this area, has increased the need for federal commitment on this issue simply to make up for lost ground. We hope that the federal government will make good on its promised by announcing action on this issue in the coming year.
As governments continue to devolve their responsibilities to the local level, there is an expectation that the voluntary sector will address the growing need for community services and programs. It should be made clear though, that the voluntary sector, regardless of the tax assistance for charitable donations, cannot effectively replace governments. The CCSD supports the federal government's efforts in assisting the voluntary sector to meet the growing demand for its programs and services, but such assistance does not relieve the federal government of its responsibility for safeguarding the social and economic security of Canadians.
Seniors and Retirement
As our population ages, particularly as babyboomers begin to retire in large numbers, steps are required to ensure the future sustainability of our pension system. It is clearly a challenge to balance the need to protect seniors' incomes while ensuring that the burden of supporting these incomes does not fall too heavily on the working generation. Although we regret that the introduction of the new Seniors' Benefit marks the end of universality of seniors' benefits -- the erosion of which began with the "clawback" of Old Age Security benefits in 1989 -- we support the other basic principles of the reform: that the benefit will be equally divided between spouses, non-taxable and fully indexed to inflation.
Also related to seniors and retirement is the announcement that the limit for RRSPs and RPPs will be frozen at $13,500 until the years 2003 and 2002 respectively. We are pleased to see that the government has recognized that these limits are excessive and that the average Canadian taxpayer should not continue to subsidize the pensions of the highest income earners. The impact of freezing the maximum contribution, assuming 2 per cent inflation, should bring the RRSP limit for example, to about $11,700 (in 1996 dollars) by the year 2003. Although the limit would still only be available to Canadians with annual incomes in excess of $65,000 (instead of the current $75,000), this announcement is a step in the right direction.
As we identified in our brief to the Standing Committee on Finance in 1994, and again in our presentations to the Committee last fall, the CCSD would like to see a still lower RRSP contribution limit of about $8,000 a year, along with the elimination of the 18 per cent rule which would allow all Canadians the opportunity to contribute to the annual maximum. Furthermore, by changing the deduction to a credit, all contributors would receive the same tax assistance for similar contributions. The indefinite extension of the "carry forward" clause in the 1996 Budget is said to be aimed at allowing modest and lower income earners better opportunity to contribute to RRSPs, but it is much less effective at doing so than would the combination of measures mentioned above. We encourage the Finance Department to investigate whether these proposed measures would meet the government's goals of expanding participation in the RRSP program to modest and lower income earners, and making the system fairer. We would be happy to assist your department in this endeavour.
As governmentcontinues to downsize and change its role, it is increasingly important that the private sector play a larger part in job creation. The CCSD supports the federal government's challenge to the business community to create jobs, but we would go beyond the call for hiring youth at the minimum wage, as the government has done with its "Jobs First" program. The federal government should also urge private firms (particularly the most profitable ones), to reassess the short-sighted downsizing philosophy that has been used to justify the shedding of thousands of well-paid workers in recent years. The impact of this destructive philosophy has brought with it tremendous pain and insecurity for thousands of families, and has contributed to the current weak state of our economy. Measures to encourage greater corporate responsibility in Canada should be investigated over the coming year.
As well, we recommend that the federal government's initiative to examine the impact of business taxation on job creation be expanded to include various federal programs and policies. We recently raised this issue with the Standing Committee on Human Resources with regards to the changes included in the new Employment Insurance (EI) bill. The reduction in the Maximum Insurable Earnings under the EI bill is an example of changes in federal policies which discourage job creation. This change will make it more expensive to hire new workers than to ask existing employees to work overtime. In addition to avoiding policies which discourage job creation, we ask that the federal government investigate ways of encouraging job sharing as a way of dealing with the high level of unemployment in the country.
In closing, I would like to thank you for the opportunity to express these views on behalf the CCSD and our members. As was stated in the recent Speech from the Throne, "economic growth is not an end to itself. Government has the obligation, in accordance with basic Canadian values, to ensure security for Canadians in a rapidly changing world." In this vein, we look forward to working with your government in balancing the nation's fiscal and social objectives in the year to come, and to strengthening Canada's social and economic union.