Budget 2005:
Missed Opportunity to Move Forward on Poverty Reduction
February 24, 2005

Given the large surpluses the Finance Minister had to work with, NAPO expected more from this government and poor Canadians deserved much more than the Liberals delivered.

Broken promises on housing

The Budget for 2005 was titled “Delivering on commitments” but there were only broken promises on new money for social housing. Despite the Liberal Party having made an election promise for $1.5 billion new money for housing as well as a reiteration of their commitment to action on the crisis in affordable housing in the Speech from the Throne, there was nothing in the budget for those in housing need, including the homeless. This was a big disappointment because there was wide expectation of forward movement as a result of the government’s initiation of cross-country consultations on a national housing strategy over the past two months. There was some money for Aboriginal housing but this was limited to on-reserve projects. This means that these funds will not address the serious housing crisis in Inuit communities or the large number of Aboriginal people who live off reserve or in urban areas where more than half of aboriginal people live.

Income taxes become more regressive

In an obvious pitch for Conservative Party support, Finance Minister Goodale announced further tax cuts, which he claimed would provide relief to low and modest income Canadians. Raising the basic personal amount to $10,000 by 2009, however, will deliver less than 4% of its benefit to low income families – 96% of the benefit will go to middle and upper income families. NAPO told the Minister in a meeting last December that this was the least effective way to deliver tax relief to the poor. A more effective measure would have been to increase the GST credit, which would have delivered far more of its benefit to poor families. (for more information see NAPO discussion paper on Tax Relief for Low Income People) Mr. Goodale chose to ignore the advice and the evidence.

Nor were Canadians with disabilities provided much relief by the government’s focus on tax measures rather than program expenditures. The tax breaks in yesterday’s budget do help but mostly they leave unaltered the poverty Canadians with disabilities face on a daily basis. They also fail to follow through on promises of a national disability strategy based on income support and employment opportunities.

Something for seniors but nothing for poor children

There were some bright spots in yesterday’s announcements with a commitment of $298 million for immigrant settlement and job training and an increase in the GIS for low-income seniors. While the increase is welcome (modest as it is), it is puzzling that there was no similar measure to deal with child poverty. The Child Tax Benefit, a measure aimed at decreasing child poverty, remains a half measure – set at a level that is insufficient to lift families out of poverty and denied to most families receiving social assistance through the claw-back of social assistance benefits practiced by most provinces and territories. NAPO had hoped for an increase to $4,900 for the first child. No increases were announced during the budget speech.

Step forward on Early Learning and Childhood Education

NAPO is pleased to see a $5 billion commitment to Early Learning and Child Care initiative but we need the federal government to insist on national standards and public delivery in negotiations with the provinces in order to ensure quality and accessibility, which can only be assured if the system is non-profit.

Wait and see on improvements to Employment Insurance

The budget delivered some changes to the Employment Insurance system that employers have been demanding, but no changes that would improve access or improve benefit levels for the unemployed. Only $300 million has been allocated to EI improvements in the form of 3-year pilot projects that are restricted to regions where unemployment is over 10%. We have been told there will be further announcements on this soon.

By making these meager changes the Minister has ignored the recommendations of the Parliamentary Sub-Committee on EI, which recommended, among other things, the hours needed to qualify be reduced. Had this change been implemented it would have helped poor people, especially youth and women.

Paying off debt and tax cuts for corporations continue to take priority over feeding the hungry

Perhaps one of the more disturbing aspects of the Liberal financing is the continued trend of the last 10 years – the trend of cutting government revenues through regressive tax breaks for wealthy Canadians and corporations and maintaining surpluses for the sole purpose of paying down the debt. Both of these practices hurt poor Canadians by reducing government funds for much needed social programs and services. After 8 years of surpluses people in low-income continue to do without.

The tax system has become more regressive and unfair with the lowering of the general corporate income tax rate by 2% (down from 21% to 19%) to try and keep ahead of the Americans. Canada now has a lower corporate tax rate than the U.S. The corporate surtax will also be ended. Increasing the RRSP and RPP contribution limits mainly benefit the rich. These policies will result in billions of dollars in lost revenue that could have been available for social investment.

This budget may have given the Conservative Party what they wanted on tax cuts and military spending to ensure their support of the federal budget but it did not deliver on the things Canadians voted for in the last election. NAPO will be joining with a broad range of groups in a major campaign to make poverty history. We hope it will deliver a strong message to the federal government resulting in a very different budget next year.