Reports / Articles
Canada Afford to Help Cities, Provide Social Housing,
Are Provincial Governments Doing So Little?
Canada’s Financial Status as of 2001
Annual Financial Report of the Government of Canada, Fiscal Year
2000-2001 and the Fiscal Reference Tables (published in
September 2001) place current expenditures and revenues in the context of
20- and 40-year series of annual public finance data together with
selected comparisons to G-7 nations. Most of the data is also provided in
a format (as a percentage of GDP) that allows for easy comparison of
different years, making the identification of trends possible without
worrying about adjustments for inflation (constant/current dollars).
financially sound and secure is Canada as a nation?
The numbers are impressive.
$36 Billion Budget Surplus.
There have been four consecutive budget surpluses for the first
time since the late 1940s. The most recent was $17.1 billion in 2000-01.
The four-year total budget surplus is $35.8 Billion.
$17 Billion Pay Down on the Public Debt.
In September 2001 Paul Martin announced the largest ever pay down
made on Canada’s public debt: $17.1 billion during 2000-01. As a result
of series of such pay downs over the past four years the net public debt
as a percentage of the economy (GDP) is now 52% compared to its peak of
71% in 1995-96. Annual expenditure on financing the public debt has, as a
result, fallen from a peak of 6.2% of GDP in 1990-91 to 4% of GDP in
2000-01. This is the lowest level in twenty years.
$2.5 Billion annual savings on public debt interest payments.
The smaller debt means annual savings on interest payments on the debt,
something the finance minister refers to as the ‘fiscal dividend.’ The
net interest savings are now about now about $2.5 billion per year.
$100 Billion in tax cuts announced in the February 2000 budget.
The country was in such good shape financially that the Minister of
Finance, several months before the federal election, announced the largest
ever tax cut in Canadian history. The tax cuts began in 2001and add up to
$100 billion over a five-year period.
15% of GDP spent by the federal government – down from 24%.
Federal Government spending is now 15% of GDP – down from 24%. In
addition, the government is now spending a much smaller share of the GDP
than it has for decades. Total federal budgetary expenditures are now 15%
of GDP compared to 24% two decades ago. (See graph below.)
cash transfers to the provinces and territories have been falling
dramatically. Over the past twenty years there are three distinct periods.
short, huge piles of money that were once transferred to provinces and
territories were unilaterally withdrawn. The money mainly helped pay for
health, education and welfare.
way of looking at these cuts is to examine the share of total budget
revenues that federal cash transfers represent. In Ontario, for example,
during the first period (1980 to 1986) an average of 17% of provincial
revenues came in the form of federal cash transfers. During the second
period (1987-1995) this had fallen to an annual average of 13.4%. By the
third period (1996-2001), only 9.3% of Ontario’s budget revenues came
from federal cash transfers.
cuts in the second and third periods resulted in the termination of the
Established Programs Financing (EPF) approach to federal transfers that
was introduced in 1977, as well as the Canada Assistance Plan that was
introduced in 1966.
the EPF provinces received 13.5 personal income tax (PIT) tax points and 1
corporate income tax (CIT) equalized tax point, plus a cash transfer. The
value of tax points would grow as the economy expanded, and the cash
transfer was escalated by GNP per capita growth. Entitlements were
distributed equally on a per capita basis (i.e., no distinction between
‘have’ and ‘have-not’ provinces).
were a number of changes in this formula but the most dramatic began in
1986, when the EPF growth rate was reduced from GNP to GNP -2%. Just after
the 1988 election the Mulroney government further reduced the EPF growth
rate to GNP -3% and then in 1990 imposed a freeze on any further growth.
The freeze included federal transfers under the Canada Assistance Plan
(transfers for providing cash assistance to low-income Canadians). In
addition to the temporary freeze further cuts were introduced for the
three ‘have’ provinces (B.C., Alberta and Ontario).
Unfair distribution of the impacts of federal budget cuts
Back in 1990, just as the
last recession was taking hold, the Mulroney government put a cap on the
amount it would contribute to supporting the needy in Ontario, Alberta and
British Columbia. Traditionally, Ottawa paid 50 per cent of the cost of
welfare, the provinces paid 30 per cent and cities made up the final 20
per cent. But just as the welfare rolls began to shoot up - in Toronto
they doubled - Mulroney started spending less on welfare. In a couple of
years, the federal contribution had fallen from 50 per cent of the cost of
welfare to less than 30 per cent. The Chrétien government, elected in
1993, continued the Mulroney tradition of stinginess to the needy.
federal and provincial budget cuts did not affect all income groups
did provinces respond to the loss of significant federal revenue? Raise
taxes? Some did, for a while. Cut spending programs that are popular with
the middle-class voter (health care, education, environment)? Some tried
this, but not for long. The easiest response was the most common:
introduce significant cuts in support for
poor people. They don’t vote at the same rate as others and when they
do, they may not vote for the two major parties.
cuts in income support levels begin in Alberta in 1993. Until that time,
most jurisdictions periodically increased their welfare rates. In October
1993 Alberta cut most shelter allowance benefits by $50 a month, and
stopped paying damage deposits for welfare recipients. In 1994 Manitoba
reduced by 5.8% the maximum shelter rate for employable single people on
welfare. In 1994 PEI reduced by 36% the maximum shelter allowance for
employable singles. In 1995
Ontario cut basic social assistance benefits for employable single persons
and couples by 21.6% (with equal cut to shelter allowance; e.g., dropping
the shelter allowance maximum from $414 to $325 per month). In 1996 Nova
Scotia reduced shelter allowances for the same group by 36%, from $350 to
$225 a month. By the late 1990s most jurisdictions had either reduced or
froze benefit rates for the poorest and most disadvantaged people in
Canada. According to the National Welfare Council, from 1986 to 1995, of
48 welfare client groups (4 client categories in each of 12 jurisdictions)
tracked by the NCW, 31 (65 percent) saw the real purchasing power of their
benefits decline over this eight-year period. (Prince, 1998:838-844)
Mulroney government cuts in transfer payments to the provinces, though
huge (equal to about one-half of a percent of the GDP annually), were in
fact quite modest compared to the Chrétien government (equal to a further
one percent of GDP annually). Just after the 1993 election both CAP and
EPF transfers were frozen at 1993 levels until in 1996-97. Then the 1995
federal Budget announced that EPF and CAP were to be scraped and replaced
by the Canada Health and Social Transfer (CHST) block fund system starting
is the most significant change in both federal transfer policy and federal
social welfare policy in 30 years. CAP and EPF replaced with a single,
substantially smaller block fund, with fewer federal conditions attached,
in the name of federal restraint and ‘flexible federalism.’ From
1995-96, the final fiscal year of CAP and EPF, to 1999-2000, the fourth
year of the CHST, total federal cash transfers for these strategic policy
areas dropped by $7.4 billion, or 40 percent. (Prince, 1998:828)
demise of the Canada Assistance Plan CAP represents the loss of the
federal government’s main policy instrument for providing (through the
provincial and territorial welfare systems) shelter assistance and
services for many low-income Canadians. The offloading of costs and the
removal of most conditions mean that any federal influence on affordable
housing for low-income households through the welfare system is gone.
Further, with the CHST, federal leadership in welfare is effectively dead.
a result of the cuts to social expenditures, the purchasing power of
social assistance benefits was lower in 2001 than in 1986, and
substantially lower than the peak amounts over the 15 year period
(National Council of Welfare, 2002. Table 1 below provides a summary for
four provinces. The 2001
rates are twenty to forty percent lower than the peak rates in these four
Benefits in Four of the Largest Provinces, 1986 to 2001
Couple with two children (in constant 2001 dollars)
National Council of Welfare (2002) Welfare Incomes, 2000 and
2001, Ottawa, Table 5A
if families on social assistance spend 50% of their benefits on rent
(about $7,000 per year), this amounts to only $580 per month for rent.
There are very few one bedroom apartments available in the larger
cities for that amount of money. Housing appropriate for families is much
was during this fifteen-year period that mass homelessness emerged – a
form of severe destitution that includes being unhoused. The number of
people affected keeps rising and the problem is not limited to the large
cities. All lower-income Canadians have been affected by these federal and
provincial funding cuts.
Canada’s Total Social Spending Compared to Other Western Nations
net social spending has been falling dramatically. In its most recent
comparative assessment of social spending in fifteen countries, Canada
ranks near the bottom. In addition, Canada’s 1997 spending level, 18.9%
of GDP, is a sharp decline from the 1995 level of 20.4% of GDP. No other
country in the OECD survey had such a sharp cut in net social spending.
social expenditure” is defined in the OECD research as the provision by
public and private institutions of benefits to, and financial
contributions targeted at, households and individuals in order to provide
support during circumstances that adversely affect their welfare.
benefits can be cash transfers, or can be the direct (in-kind) provision
of goods and services. Tax system benefits are included. It is ‘net’
meaning after tax (the benefits an individual or household receives minus
any tax they pay on the benefits).
aim is to provide a comparable measure for that part of an economy’s
domestic production that is allocated to people in need of social
benefits. It is an indicator of the share of resources a nation devoted to
meeting social need in 1997 (the latest available data). Data limitations
currently preclude analysis of all OECD countries.
therefore, can do better. The problem is not one of Canada doing too much
for its citizens and thereby potentially affecting the country’s
competitive situation. Too much has been stripped from one group of
Canadians – lower income households.
The burden of fighting the deficit was not equally shared.
nearly every major urban region, the Task Force heard that the shortage of
affordable housing is one of the biggest challenges affecting economic
competitiveness and quality of life. Municipal governments and housing
providers cannot meet the demand for affordable housing and emergency
shelter. As more and more people migrate to cities, the pressure to find
suitable accommodation has a ripple effect on society as a whole. As
competition for existing housing stock intensifies, tenants at the lower
end of the market increasingly have no choice but to turn to shelters or
remain in already overcrowded conditions.
Interim Report of the
Prime Minister’s Caucus Task Force on Urban Issues,
April 2002, pp. 17-18
major policy and program changes over the past twenty years mean that the
right to adequate housing, the right to an adequate standard of living,
and even the right to live, depends upon having enough money. The income
and wealth gap between rich and poor has increased over the past fifteen
tears. In Canada, if you have little or no money you have no housing. If
you have no housing, your physical and mental health suffers, and you may
die. Federal and provincial policies have played a significant role in
causing severe housing problems and homelessness and in allowing them to
continue and worsen. They can play a significant role in reversing these
trends. The social, economic and quality of life implications of fiscal
policies tend to be concentrated in our cities and are a major reason for
the urban crisis that is now gaining widespread public recognition.
cannot be claimed that the government lacked knowledge about the problem
and/or did not know what to do about it. One of the best blueprints for
addressing Canada’s housing problems, including ending homelessness, is
contained in a 50-page report written in 1990 by Paul Martin, the former
Minister of Finance. The report is called Finding Room: Housing
Solutions for the Future. (The full text is available at: http://www.housingagain.web.net.)
after an extensive national consultation, the report contains 25
recommendations to improve the lot of Canada’s houseless population,
aboriginal people, renters and low-income homeowners. The report states:
federal role in housing must not be a residual one. The connection between
housing and other aspects of both social and economic policy means that
the federal government must take a lead role.... Our market housing system
has not responded adequately to all of society’s needs.... The Task
Force believes that ... all Canadians have the right to decent housing, in
decent surroundings, at affordable prices.”
is one of the rare studies where the author, shortly after releasing the
report, was in a position to implement it (he became Canada’s finance
minister in 1993), but refused to do so.
death in early February 1999 of “Al”, a homeless man who was sleeping
on a heating grate directly under the office of Ontario Premier Mike
Harris, along with the death later the same month of Lynn Bluecloud, a
homeless woman who was five months pregnant, who died within sight of the
Parliament buildings in Ottawa, dramatically underline the consequences of
the governments’ actions and inactions. There are concrete identifiable
‘homeless making processes’ and ‘homeless making policies” at work
country as wealthy as Canada can respond to the macro-economic conditions
and personal life circumstances of people who become houseless. Canada
does not have to let its cities and its lower-income neighbourhoods
decline, as happened in the United States. No Canadians ‘need’ to
become houseless, penniless and, for those with mental health and
substance abuse problems, supportless. The federal, provincial and
territorial governments have the authority and the resources to ensure
respect for and the implementation of all human rights of all Canadians.
The current conditions faced by people who become houseless can be changed
and/or ameliorated rather quickly. The processes and policies that produce
homelessness are well known and a wide variety of remedial forms of action
are available. There is a vast array of policy instruments available and
they are technically and financially feasible.
the United Nations issued its highly critical 1998 report on Canada’s
compliance with social and economic rights, it did note, under ‘positive
aspects,’ that the UN’s Human Development Index (HDI) ranks Canada at
the top, as long as it excludes poverty measures.
Committee notes that for the last five years, Canada has been ranked at
the top of the United Nations Development Programme's Human Development
Index (HDI). The HDI indicates that, on average, Canadians enjoy a
singularly high standard of living and that Canada has the capacity to
achieve a high level of respect for all Covenant rights. That this has not
yet been achieved is reflected in the fact that UNDP's Human Poverty Index
ranks Canada tenth on the list for industrialized countries.” (para. 3)
Committee then added that “Canada has the capacity to achieve a high
level of respect for all Covenant rights.” As the Department of
Finance’s own fiscal data indicates, outlined at the start of this
paper, the UN committee was correct.
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