Maintaining a National Social Safety Net: Recommendations on the Canada Health and Social Transfer

March 5, 1996

Foreword

The Canada Health and Social Transfer (CHST), introduced in the federal budget of February 1995, has become law and will take effect in April 1996. The Canadian Council on Social Development* expressed its strong concerns about the move to block funding before the 1995 budget and conveyed its criticisms to the federal government subsequently. Over the course of the summer and fall of 1995, the Council, with the support of the federal government and several provincial governments, convened a series of roundtable discussions on the CHST and on the principles and objectives which could guide its operation. The results of these roundtables can be found in a summary version and a complete report available at the beginning of March.

The Board of the CCSD has considered the results of these roundtables and discussed the implications of the CHST, and now puts forward its position on the future directions for social spending.

Introduction

The decision of the federal government to introduce the CHST eliminated the Canada Assistance Plan (CAP) and combined the funds for social assistance and social services with those for health and post- secondary education (previously under the Established Programs Financing), into a single block transfer. This measure fundamentally changed the social safety net and, by implication, the role of the federal government in the social policy field. It was made with virtually no public debate either before or after in an atmosphere where public attention was focussed overwhelmingly on the deficit. This deficit preoccupation, together with a great lack of understanding about social services (in contrast to health care and education) meant that the introduction and passage of legislation on the CHST went almost unnoticed by the general public.

However, since June, when the legislation was approved, the public climate appears to be shifting. The October referendum in Quebec and subsequent reflection has stimulated widespread consideration and debate about our core values as Canadians, about what we have that is worth preserving and defending, and about what we expect from our governments. Many prominent Canadians from all walks of life have been pointing out that our social safety net is one of the critical features which define us as a people and that its preservation is expected from governments, particularly the national government. In the recent Speech from the Throne, the federal government committed itself to strengthening Canada's "social union".

A second key development is the election in Ontario, Canada's most populous province, of a government committed to drastically reducing the role of government in public life and to realizing major cost reductions largely at the expense of the least well-off in society. Ontario is not the first province to elect a government with such objectives, but it is the largest, and its proportionate reductions are the greatest ever undertaken. Ontario is therefore providing a graphic example of the consequences of such an approach. As people see the impact of such policies, they are questioning the pursuit of expenditure reductions in the absence of a vision of the kind of society we want to preserve and build for the 21st century.

The results of several comprehensive surveys, including Rethinking Government by Ekos Research, have demonstrated that the majority of Canadians do not share the directions being taken by their leaders, public and private. Unlike the opinion leaders from business, the media, and the public service, surveys indicate that the public does not want less government and reduced benefits and services. They want their governments to lead, to articulate a social vision, to maintain Canada's compassionate and collective approaches to social programs and services, and to do this efficiently and responsively.

Position

It is within this context that the CCSD sets out the following position on the CHST. These recommendations build on each other, and should be considered as inter-linking components that, taken as a whole, would strengthen Canada's social and economic fabric.

The CCSD is conscious of the federal deficit and the need to exercise restraint as well as to increase revenues. However, the CCSD's concerns about the CHST extend beyond levels of funding to its implications for social policy, governmental roles, and its design and impact on the social safety net.

1. Maintain federal funding

The new transfer significantly reduces the overall amount of federal money available for health, post- secondary education, and social assistance/services. Over the next two years, $7.4 billion less will be transferred to the provinces for health, post-secondary education and social assistance/services. This represents a 25% reduction in the federal investment in these areas between 1996 and 1998, at a time when the needs and demands on all these areas are growing. The CCSD predicts that reducing the national investment in people will decrease the productive capacity of thousands of Canadians, and increase demands on public services in future years.

The CCSD therefore recommends that federal funding for social assistance/services, post- secondary education, and health care be restored to the 1995-96 level over the next four years.

The CCSD further recommends that in order to maintain the real value of these transfers, provincial entitlements in future years be fully indexed to the consumer price index.

2. Stabilize federal cash component

The new federal transfer is composed of tax points and cash. The current formula will see the cash portion of the CHST drop dramatically as the value of the tax points grows, with the cash portion reaching zero for some provinces within a few years. This is a major concern because the cash component represents the principal federal lever to enforce compliance with national conditions and standards. Such levers are critical to the maintenance of a national approach, and to implementing the current standards within the CHST as well as others which it is hoped will be adopted in the future.

The CCSD recommends that the cash component of the transfer be stabilized at the 1997-98 level of $10 billion (exclusive of the Quebec abatement).

3. Establish national standards for social assistance and services

The CHST maintains the national standards for health care which are enshrined in the Canada Health Act the conditions of comprehensiveness, universality, portability, public administration, and accessibility and the residency requirement in relation to social assistance/services. Post-secondary education (PSE) has never been the subject of national standards and the CHST does not propose any, despite a growing view that portability and accessibility to PSE should be defined and protected.

But the largest change has occurred with respect to social assistance/services where all the previous standards of the Canada Assistance Plan entitlement based on need, adequacy, no forced work requirement, and the right to appeal with the exception of no residency requirement, have disappeared. Eliminating the principle of entitlement opens the way for jurisdictions to provide little or no assistance to those in need. Dramatic reductions in some jurisdictions will put pressure on others to match those reductions in order to avoid an influx of people, thereby precipitating a "race to the bottom" or alternatively, to maintain higher rates while erecting barriers as in the recent case of British Columbia. In addition, removing the requirement for a mechanism to appeal decisions on social assistance diminishes the civil rights of the most vulnerable Canadians, and violates a number of international principles. The CCSD is not in favour of forced work as a requirement for receiving social assistance benefits, however it would support continued investigation into ways of providing incentives for social assistance recipients to enter meaningful training and employment.

The CCSD recommends that the federal government amend the CHST to include standards for social assistance/services that would ensure the right to assistance based on an adequate level of assistance to meet basic needs, and would include an appeal mechanism.

4. Provincial spending decisions

The creation of an integrated fund, which is much smaller than the sum of its previous parts, ensures that provincial governments will face very difficult allocation decisions. There is little doubt that health care wields the greatest political clout, followed by post-secondary education, as priority areas for the public. Everyone believes they will need health care one day; most expect that their children or grandchildren will pursue higher education; but few assume that they will ever need to use welfare or social services, despite the realities about actual usage of both. Experience shows that when certain social program resources are reduced, greater costs for society are incurred in areas such as health care, housing and the criminal justice system. Provincial governments, therefore, should examine the long-term as well as the short-term implications concerning the use and allocation of these block funds.

The CCSD recommends that the proportion of the CHST funds that provincial and territorial governments allocate to social assistance/services be no less than the share these represented from combined CAP and EPF funds in 1995-96.

Furthermore, the CCSD recommends that provincial spending decisions accord a priority to prevention and early intervention, in recognition of the longer term benefits and ultimate cost- savings of such investment.

Future Directions

The CHST raises some larger fundamental questions about the roles and responsibilities of governments for promoting social well-being and about the role of the federal government specifically in defining and advancing the national dimension.

5. Need for a social investment framework

The CHST should be considered as part of a larger social investment framework that meets the economic and social needs of our citizens. We need to be able to measure the social and economic well-being of Canadians in order to determine the effectiveness of our programs and policies.

Such a frame of reference should be comprehensive, covering not only the CHST programs, but other social measures such as Employment Insurance which constitute important parts of the framework. A social investment framework would be built around agreed-upon goals and objectives, with appropriate indicators for measuring and reporting progress towards achievement of those goals. The respective roles and responsibilities of the different levels of government and others would be more clearly defined. A proper framework would also relate the resources not just the money required for social programs to the criteria used by decision-making bodies responsible for assigning them.

While we recognize that concepts such as "health" or "well-being" are inherently difficult to measure, societal goals could be established in areas such as employment, wage levels, housing, social security and child development.

The furtherance of such objectives, interpreted to reflect current knowledge about the interrelated factors that determine well-being, should form the basis for the allocation of public resources to social purposes. This should be done within a framework which allows for consideration not only of what resources are available, but also improves our understanding of how spending (or reducing) in one area impacts on others.

The CCSD recommends that the federal government, in an open process and in conjunction with provincial governments, develop a comprehensive social investment framework within the next 18 months.

In order to be able to set social objectives and prioritize needs, we must be able to measure our social progress. At present, measures such as the gross national product, the consumer price index and the balance of trade are used to gauge our economic progress. Yet they fail to capture the well-being of individuals, families and our society overall. In order to guide decisions around social investment or disinvestment that would determine where to make reductions there is a need to identify benchmarks or measures to assess our social progress. Recognized definitions and measures would allow us to set social goals and targets and to allocate our resources and energies accordingly.

The CCSD recommends that new indices or measures of social progress be developed within the next 18 months and that they be used to measure progress and account for the use of public resources.

6. Maintain federal leadership

Canada's social safety net is viewed by Canadians as an important part of our national fabric. The preservation and advancement of this social safety net can only be secured if the federal government plays a strong role. Over and over, Canadians have said that they do not want fragmentation that would leave each province to operate independently. They expect the federal government to exercise a leadership role in social programs in order to create and preserve a national framework for all citizens.

The CCSD recommends that the federal government continue to demonstrate leadership by creating and maintaining a national framework. This framework should enable all governments and other sectors to provide resources and services that will ensure the social and economic security and development of all Canadians.

Foreword

The Canada Health and Social Transfer (CHST), introduced in the federal budget of February 1995, has become law and will take effect in April 1996. The Canadian Council on Social Development* expressed its strong concerns about the move to block funding before the 1995 budget and conveyed its criticisms to the federal government subsequently. Over the course of the summer and fall of 1995, the Council, with the support of the federal government and several provincial governments, convened a series of roundtable discussions on the CHST and on the principles and objectives which could guide its operation. The results of these roundtables can be found in a summary version and a complete report available at the beginning of March.

The Board of the CCSD has considered the results of these roundtables and discussed the implications of the CHST, and now puts forward its position on the future directions for social spending.

Introduction

The decision of the federal government to introduce the CHST eliminated the Canada Assistance Plan (CAP) and combined the funds for social assistance and social services with those for health and post- secondary education (previously under the Established Programs Financing), into a single block transfer. This measure fundamentally changed the social safety net and, by implication, the role of the federal government in the social policy field. It was made with virtually no public debate either before or after in an atmosphere where public attention was focussed overwhelmingly on the deficit. This deficit preoccupation, together with a great lack of understanding about social services (in contrast to health care and education) meant that the introduction and passage of legislation on the CHST went almost unnoticed by the general public.

However, since June, when the legislation was approved, the public climate appears to be shifting. The October referendum in Quebec and subsequent reflection has stimulated widespread consideration and debate about our core values as Canadians, about what we have that is worth preserving and defending, and about what we expect from our governments. Many prominent Canadians from all walks of life have been pointing out that our social safety net is one of the critical features which define us as a people and that its preservation is expected from governments, particularly the national government. In the recent Speech from the Throne, the federal government committed itself to strengthening Canada's "social union".

A second key development is the election in Ontario, Canada's most populous province, of a government committed to drastically reducing the role of government in public life and to realizing major cost reductions largely at the expense of the least well-off in society. Ontario is not the first province to elect a government with such objectives, but it is the largest, and its proportionate reductions are the greatest ever undertaken. Ontario is therefore providing a graphic example of the consequences of such an approach. As people see the impact of such policies, they are questioning the pursuit of expenditure reductions in the absence of a vision of the kind of society we want to preserve and build for the 21st century.

The results of several comprehensive surveys, including Rethinking Government by Ekos Research, have demonstrated that the majority of Canadians do not share the directions being taken by their leaders, public and private. Unlike the opinion leaders from business, the media, and the public service, surveys indicate that the public does not want less government and reduced benefits and services. They want their governments to lead, to articulate a social vision, to maintain Canada's compassionate and collective approaches to social programs and services, and to do this efficiently and responsively.

Position

It is within this context that the CCSD sets out the following position on the CHST. These recommendations build on each other, and should be considered as inter-linking components that, taken as a whole, would strengthen Canada's social and economic fabric.

The CCSD is conscious of the federal deficit and the need to exercise restraint as well as to increase revenues. However, the CCSD's concerns about the CHST extend beyond levels of funding to its implications for social policy, governmental roles, and its design and impact on the social safety net.

1. Maintain federal funding

The new transfer significantly reduces the overall amount of federal money available for health, post- secondary education, and social assistance/services. Over the next two years, $7.4 billion less will be transferred to the provinces for health, post-secondary education and social assistance/services. This represents a 25% reduction in the federal investment in these areas between 1996 and 1998, at a time when the needs and demands on all these areas are growing. The CCSD predicts that reducing the national investment in people will decrease the productive capacity of thousands of Canadians, and increase demands on public services in future years.

The CCSD therefore recommends that federal funding for social assistance/services, post- secondary education, and health care be restored to the 1995-96 level over the next four years.

The CCSD further recommends that in order to maintain the real value of these transfers, provincial entitlements in future years be fully indexed to the consumer price index.

2. Stabilize federal cash component

The new federal transfer is composed of tax points and cash. The current formula will see the cash portion of the CHST drop dramatically as the value of the tax points grows, with the cash portion reaching zero for some provinces within a few years. This is a major concern because the cash component represents the principal federal lever to enforce compliance with national conditions and standards. Such levers are critical to the maintenance of a national approach, and to implementing the current standards within the CHST as well as others which it is hoped will be adopted in the future.

The CCSD recommends that the cash component of the transfer be stabilized at the 1997-98 level of $10 billion (exclusive of the Quebec abatement).

3. Establish national standards for social assistance and services

The CHST maintains the national standards for health care which are enshrined in the Canada Health Act the conditions of comprehensiveness, universality, portability, public administration, and accessibility and the residency requirement in relation to social assistance/services. Post-secondary education (PSE) has never been the subject of national standards and the CHST does not propose any, despite a growing view that portability and accessibility to PSE should be defined and protected.

But the largest change has occurred with respect to social assistance/services where all the previous standards of the Canada Assistance Plan entitlement based on need, adequacy, no forced work requirement, and the right to appeal with the exception of no residency requirement, have disappeared. Eliminating the principle of entitlement opens the way for jurisdictions to provide little or no assistance to those in need. Dramatic reductions in some jurisdictions will put pressure on others to match those reductions in order to avoid an influx of people, thereby precipitating a "race to the bottom" or alternatively, to maintain higher rates while erecting barriers as in the recent case of British Columbia. In addition, removing the requirement for a mechanism to appeal decisions on social assistance diminishes the civil rights of the most vulnerable Canadians, and violates a number of international principles. The CCSD is not in favour of forced work as a requirement for receiving social assistance benefits, however it would support continued investigation into ways of providing incentives for social assistance recipients to enter meaningful training and employment.

The CCSD recommends that the federal government amend the CHST to include standards for social assistance/services that would ensure the right to assistance based on an adequate level of assistance to meet basic needs, and would include an appeal mechanism.

4. Provincial spending decisions

The creation of an integrated fund, which is much smaller than the sum of its previous parts, ensures that provincial governments will face very difficult allocation decisions. There is little doubt that health care wields the greatest political clout, followed by post-secondary education, as priority areas for the public. Everyone believes they will need health care one day; most expect that their children or grandchildren will pursue higher education; but few assume that they will ever need to use welfare or social services, despite the realities about actual usage of both. Experience shows that when certain social program resources are reduced, greater costs for society are incurred in areas such as health care, housing and the criminal justice system. Provincial governments, therefore, should examine the long-term as well as the short-term implications concerning the use and allocation of these block funds.

The CCSD recommends that the proportion of the CHST funds that provincial and territorial governments allocate to social assistance/services be no less than the share these represented from combined CAP and EPF funds in 1995-96.

Furthermore, the CCSD recommends that provincial spending decisions accord a priority to prevention and early intervention, in recognition of the longer term benefits and ultimate cost- savings of such investment.

Future Directions

The CHST raises some larger fundamental questions about the roles and responsibilities of governments for promoting social well-being and about the role of the federal government specifically in defining and advancing the national dimension.

5. Need for a social investment framework

The CHST should be considered as part of a larger social investment framework that meets the economic and social needs of our citizens. We need to be able to measure the social and economic well-being of Canadians in order to determine the effectiveness of our programs and policies.

Such a frame of reference should be comprehensive, covering not only the CHST programs, but other social measures such as Employment Insurance which constitute important parts of the framework. A social investment framework would be built around agreed-upon goals and objectives, with appropriate indicators for measuring and reporting progress towards achievement of those goals. The respective roles and responsibilities of the different levels of government and others would be more clearly defined. A proper framework would also relate the resources not just the money required for social programs to the criteria used by decision-making bodies responsible for assigning them.

While we recognize that concepts such as "health" or "well-being" are inherently difficult to measure, societal goals could be established in areas such as employment, wage levels, housing, social security and child development.

The furtherance of such objectives, interpreted to reflect current knowledge about the interrelated factors that determine well-being, should form the basis for the allocation of public resources to social purposes. This should be done within a framework which allows for consideration not only of what resources are available, but also improves our understanding of how spending (or reducing) in one area impacts on others.

The CCSD recommends that the federal government, in an open process and in conjunction with provincial governments, develop a comprehensive social investment framework within the next 18 months.

In order to be able to set social objectives and prioritize needs, we must be able to measure our social progress. At present, measures such as the gross national product, the consumer price index and the balance of trade are used to gauge our economic progress. Yet they fail to capture the well-being of individuals, families and our society overall. In order to guide decisions around social investment or disinvestment that would determine where to make reductions there is a need to identify benchmarks or measures to assess our social progress. Recognized definitions and measures would allow us to set social goals and targets and to allocate our resources and energies accordingly.

The CCSD recommends that new indices or measures of social progress be developed within the next 18 months and that they be used to measure progress and account for the use of public resources.

6. Maintain federal leadership

Canada's social safety net is viewed by Canadians as an important part of our national fabric. The preservation and advancement of this social safety net can only be secured if the federal government plays a strong role. Over and over, Canadians have said that they do not want fragmentation that would leave each province to operate independently. They expect the federal government to exercise a leadership role in social programs in order to create and preserve a national framework for all citizens.

The CCSD recommends that the federal government continue to demonstrate leadership by creating and maintaining a national framework. This framework should enable all governments and other sectors to provide resources and services that will ensure the social and economic security and development of all Canadians.

CCSD

Canada's Social Development Convenors

info@ccsd.ca

Phone: 613-236-8977

Kanata, ON

P.O. Box 13713 K2K 1X6

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