Social Policy: National Post View

Posted on October 14, 2015 in Social Security Debates – Full Comment – The Choices Before Us, Part 3:
October 14, 2015.

Broadly speaking, the Liberals, the NDP and the Conservatives have similar social policy goals: better childcare, healthier retirement savings, improved employment opportunities and so on. They differ in how they would try to achieve these objectives.

On childcare, NDP Leader Tom Mulcair certainly has the most ambitious proposal: $15-per-day daycare, modelled on a similar program in Quebec — a plan whose finances are increasingly under pressure and whose impact on the children in its care has lately come under criticism. Mulcair insists the $5-billion-per-year program will pay for itself through more women entering the workforce, though the program’s financing relies on the provinces forking over 40 per cent of the cash, which few have yet signalled their intention to do.

A more fundamental flaw is in the design: the NDP’s plan puts more money in the hands of provinces and daycare operators; parents only get the benefit of it if they happen to choose to put their children in government-approved daycare centres. We prefer the approach taken by the Conservatives and Liberals: putting money directly in parents’ hands, allowing them to choose the type of care that best suits their families.

The Conservatives’ taxable Universal Child Care Benefit (UCCB) provides a monthly payment of $160 per child under six, plus up to $60 for kids aged six to 17 (a needless addition, in our view, since children in school all day long do not impose additional costs of supervision). The benefit is paid out regardless of income, though it is taxable. The Liberals, by contrast, would replace the UCCB, along with the Canada Child Tax Benefit and the National Child Benefit Supplement, with one program, called the Canada Child Benefit. This would pay a maximum of $6,400 annually per child under six (vs. roughly $5,900 at present), tax-free, but benefits would be reduced at higher incomes, disappearing altogether at around $200,000. This is a well-designed and progressive proposal, even if it would add $4 billion to the existing $18 billion annual child benefit budget.

The Liberals say they will pay for this, in part, by cancelling the Conservatives’ policy of income splitting for couples with children, dismissing it as a “tax break for the wealthy” — an appeal to class envy with which they hope to distract from the manifest injustice income-splitting is designed to address, and which their plan would reintroduce: that is, the heavy tax penalty paid by households in which one spouse earns substantially more than the other, versus households with the same total income, but divided more equally between the two (since Canada taxes individual, rather than household income, and since it taxes higher incomes at higher rates). Correcting this inequity would make two-million-plus Canadian families better off; if some of them happen to be well-to-do, so what? The Liberals are already planning on whacking them with a higher tax rate. Isn’t that enough?

The Liberals have made a similar argument against raising the ceiling on annual contributions to Tax-Free Savings Accounts, from $5,500 to $10,000 — like income splitting, a Conservative promise from 2011, enacted in the spring budget. Both Trudeau and Mulcair have said they will roll back the measure, since, according to Trudeau, it is “only the wealthiest Canadians who have $10,000 laying around at the end of the year.” Again: the idea behind progressivity — the notion that the rich should pay more of their income in tax than the poor — is that the tax system as a whole should be progressive. It does not require that every single line of it must be. It is an axiom of sound tax policy that income should be taxed as it is consumed, not as it is saved. Along with the more familiar RRSPs, TFSAs remove the bias against savings inherent in any system of income tax.

This is particularly apt given the fiscal challenges presented by population aging — the doubling of the share of the population over 65 by 2030. Under the circumstances, the last thing we should be doing is discouraging people from saving for their retirement. Yet that is the most probable effect of the expanded Canada Pension Plan both the Liberals and NDP are touting (though implementing it would require provincial approval): whatever increase in savings individuals are forced to make through the government-run plan is likely to be offset by reductions in private savings. We prefer the Conservative proposal to allow workers to voluntarily top up their CPP contributions. For the same reason we favour the existing policy under which the age of eligibility for Old Age Security will be gradually pushed back to 67, not rolled back to 65 as the opposition parties propose.

An EI that is not based on insurance principles is just a spending program like any other

On Employment Insurance (EI), we like the sound of the NDP’s plan to create an independent board to ensure the EI fund isn’t treated as a government piggy bank — though we recall the Conservatives promised much the same. Until EI is reconstructed as a genuine insurance plan — one in which premiums and benefits are related to the relative risk of being unemployed — we fear governments of any stripe will be tempted to use it as a slush fund.

Indeed, they might as well: an EI that is not based on insurance principles is just a spending program like any other. That’s the root of the problem, and it’s unlikely to change no matter who’s elected. No party in this campaign has so much as acknowledged the inequity of the current system, under which payouts vary wildly from region to region, but premiums do not; in which workers in seasonal industries can collect benefits year in, year out and still pay the same premiums as workers for whom unemployment is a rarity.

Still there are differences, at the margin. The NDP would keep EI premiums where they are, at $1.88 per $100 of insurable earnings; the Liberals would lower them to to $1.65 per $100, starting in 2017; and the Conservatives would cut them to $1.49. Worse, both the NDP and the Liberals would roll back even the modest eligibility revisions proposed by the Tories, such as requiring all recipients to look for work within an hour’s commute.

For young Canadians, the Liberal platform is likely the most appealing, with promises to increase the maximum Canada Student Grant for low-income students and to exempt students from loan repayments until they earn a salary of at least $25,000. The NDP stands out, though not in a good way, with the promise of a $15 federal minimum wage, which (as his opponents have pointed out) would not affect 99 per cent of minimum wage earners in Canada — and would price a good number of those who are eligible out of the labour market.

Mulcair has pledged to restore the rate of increase in transfers to the provinces “for health care” (in fact the provinces can spend it how they like) to six per cent per annum, reversing the Conservative policy under which increases are tied to growth in the economy, with a minimum guaranteed increase of three per cent. (Trudeau has been vague on this question.) Again, we find ourselves favouring the Tory position: if anything, the federal government should be moving away from cash transfers to the provinces (other than equalization), which blur lines of accountability without evident offsetting benefit.

Overall, the Conservatives’ offerings on social policy, while slim, strike us as providing Canadians with the greatest flexibility, allowing them to decide for themselves how to care for their children or save for their retirement, at the lowest cost in additional taxes. As such they best fulfill the doctrine to which doctors adhere, but which policy makers would do well to follow: first do no harm.

< >

Tags: , , , , , , ,

This entry was posted on Wednesday, October 14th, 2015 at 1:13 pm and is filed under Social Security Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

Leave a Reply