Ottawa’s $4-billion boost to workers benefit to go mostly to Canadians no longer eligible, PBO says

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Finance Minister Chrystia Freeland’s $4-billion increase to the Canada Workers Benefit will primarily go to Canadians who are no longer eligible for the program, according to a new report by Parliamentary Budget Officer Yves Giroux that raises strong concerns with the government’s latest financial plan.

The Canada Workers Benefit (CWB) boost was billed as one of the fall fiscal update’s main new measures to help Canadians most in need of financial help during a time of soaring inflation and rising interest rates.

The update announced that rather than paying out the benefit after eligible low-income Canadians file their taxes for the year, the government will start providing three advance payments to individuals who qualified in the previous year.

An example provided in the update – Jesse who works at a grocery store and makes $25,000 a year – showed the individual would still receive the same $1,200 a year, but spread out through advance payments. The update did not explain why the government was spending an extra $4-billion to provide the same level of benefits.

The PBO report says most of the $4-billion will go to providing CWB advance payments to people who qualified in the previous year but who would not have qualified under the previous system because their income had risen above the program’s threshold.

The report says “not requiring repayment of federal benefits for ineligible individuals is a pronounced departure” from existing rules related to income-tested benefits.

“I think a more accurate description would be that the government will be providing $4-billion to previously low-income workers,” Mr. Giroux said in an interview. “It seems to go well beyond what was initially understood by most people. … In fact, it seems to be not only an advance but almost a year of a free pass.”

If the goal is to provide more support for low-income workers, Mr. Giroux said, this policy does not accomplish that.

“The advance part? Yes. But the advance part, regardless of your income? That does not make sense,” he said. “Because it’s providing money to those who are not targeted by the very design of the benefit.”

The benefit provides up to $1,395 a year for single individuals. The amount is gradually reduced as net income exceeds $22,944. It is not available to individuals with income above $32,244. Higher amounts are available for families.

Canadian Labour Congress president Bea Bruske said she was not previously aware that most of the $4-billion will go to ineligible recipients but still supports the measure. She said most people in that situation are likely just over the threshold and still need help with the cost of living. She doubts many in that group would have seen a major jump in income.

“Unless you won the lottery, I would say that’s highly unlikely,” she said, describing CWB recipients as some of the lowest-paid and most vulnerable workers in the country. “This is a time of high inflation when people are falling further and further behind, and so we do support these changes.”

Adrienne Vaupshas, a spokesperson for Ms. Freeland, said in a statement the government is committed to being prudent and transparent about its finances. She said the CWB change will mean the benefit could reach nearly 4.2 million low-income working Canadians, up from the current three million.

“In an inflationary context, it’s even more important to support the most vulnerable working Canadians,” she said.

The PBO report, released Tuesday, provides an analysis of several aspects of Ms. Freeland’s Nov. 3 fall economic statement. At a high level, the report notes several instances in which the government has booked billions in new spending with little to no detail as to what the money is for.

The report also takes issue with the government’s claim that it has exceeded its announced target of finding $3-billion in internal savings, noting that it is based on unspent funds for pandemic relief measures during the previous fiscal year and not – as promised in the April budget – a reduction in planned spending “that has yet to occur.”

“I think at the very, very least, it is misleading,” Mr. Giroux said.

On the broader issue of financial transparency, the report notes that the government’s update lists $14.2-billion in new spending measures without providing specific details. The report says this represents 27 per cent of all new measures in the update.

The government’s update projected that the federal deficit for this fiscal year will be $36.4-billion, an improvement over the $52.8-billion deficit forecast in the April budget. The update also said the government could return to surplus by 2027-28.

Tuesday’s PBO report projects budgetary deficits will be $4.3-billion higher, on average, than what the update forecasts. The PBO says this difference is because the office expects personal and corporate tax revenues will be lower.

“The government had indicated that it wanted to keep its powder dry. But I don’t see that much powder that’s left,” he said.

Conservative finance critic Jasraj Singh Hallan said in a statement that the PBO report shows the government “intends to throw even more fuel on the inflationary fire” and that the update’s claim of finding internal savings “has nothing to do with fiscal restraint whatsoever.”