The annual federal budget presents a blizzard of numbers over hundreds of pages. The general skew is always toward the optimistic, and the government tries to narrowly focus everyone’s attention by encapsulating a large document in a few big themes.
It is also always a political document, today’s choices and compromises surfing the undulating waves of decisions made years or decades ago.
Ahead of the March 28 budget, this space will spend a week probing six major related topics. The conclusion on Saturday will assess the state of Ottawa’s bottom line, the deficit.
Federal budget 2023
This is part of a series on the federal budget to be unveiled on March 28.
Child care: Ottawa must follow through on subsidized system
Health care: Provinces need more tax room, not blank cheques
Defence: Canada’s indefensible military spending
We begin on Monday not at the start of a typical budget, with its big promises, but near the back. Look for the page headlined “Outlook for program expenses.” These are Ottawa’s outlays, present and future, distilled to a page. The first line item, the biggest number and the one rising most rapidly, is “elderly benefits”: Old Age Security, money that goes to almost all seniors; and the Guaranteed Income Supplement, paid to low-income seniors, about a third of people aged 65 and older.
Elderly benefits, as of last fall’s budget update, are $69-billion in 2022-23, the fiscal year ending this month. In 2027-28, they are forecast to hit $96.6-billion. That’s 40 per cent higher in five years.
Here’s some perspective: Ottawa spends more on elderly benefits than the Canada Health Transfer and equalization combined. They are more than double the Canada Child Benefit and child care in the current fiscal year – a gap that will grow in coming years, as the chart shows.
Perhaps most surprising and revealing? About half of all new federal spending between this fiscal year and fiscal 2028 will go to pay for the rising cost of elderly benefits.
And yet, each year this barely merits a mention in budget coverage. One reason is there’s rarely much new news. The increase is in part automatic, thanks to benefits indexed to inflation and a rising number of Canadians 65 and older.
But there are political choices. Just as the first baby boomers are turning 75, OAS last year was upped for people 75 and older to about $9,100 a year, compared with $8,250 for people 65 to 74. And 2023 happens to be the year when OAS eligibility would have started to rise to 67 from 65 – announced by Stephen Harper in 2012 and cancelled by Justin Trudeau in 2016.
Elderly benefits are important, a needed boost for many seniors and a big reason for the low poverty rate among older Canadians. But the benefits are spread too widely – seven million of 7.3 million seniors get at least some OAS. The full amount is paid to people with annual incomes as high as $81,000. Partial benefits are still paid to people with incomes of $130,000. Two seniors with a household income of nearly $260,000 can still receive some benefits.
This does not make sense, from a fiscal view or one of generational fairness.
Unlike the Canada Pension Plan, which is fully funded by previous and continuing contributions, money for elderly benefits comes each year from current taxpayers. That means today’s retirees, when they were working, supported a much lower level of elderly benefits compared with today’s workers. And today’s retirees enjoyed much lower costs for education and housing compared with today’s younger people.
Ottawa needs to reconsider how many seniors receive Old Age Security.
Clawbacks, to propose one important change, should be steeper, to push down the income level where benefits disappear. Those savings could be allocated to lower-income seniors, to increased funding for working parents or, if only for the thrill of novelty, simply not spent.