More than one year ago, Justin Trudeau stood in Dinty’s restaurant in Gatineau, Que., and promised a new child benefit that would help low-income Canadians. On Wednesday, he stood in the same restaurant and pointed to almost $1.74 billion in new Canada child benefit payments that rolled out that morning to more than three million families.
And in one year’s time, the government is promising that some 300,000 children will no longer be living in poverty after 12 months of payments under the new benefit plan.
“That is something that we are committed to,” Trudeau said.
“This is, according to many anti-poverty activists, one of the most significant measures any country has taken in terms of addressing child poverty and addressing poverty in general.”
During the election, the Liberals promised to lift about 315,000 children out of poverty by handing out a benefit that would add to family income. The estimate was based on a review by outside economists and experts at the Library of Parliament.
Once in power, federal officials ran the numbers and estimated that 284,000 children would be lifted out of poverty in the provinces, a further 900 in the territories, and 8,000 on-reserve aboriginal children.
The average family will see $2,300 a year under the new payments, with the maximum of $6,400 per child under six going to families with net incomes of less than $30,000. The value of the benefit drops as incomes rise, phasing out entirely around $189,000 according to the government’s online benefits calculator.
Research conducted for the Martin Prosperity Institute at the University of Toronto found that low-income families in receipt of child benefits generally spent the extra money on groceries, child care and transportation. Those same families also spent less on alcohol and tobacco, a result that could mean the extra money reduces financial stress and the need to use booze and cigarettes as a crutch.
Replaces Universal Child Care Benefit
Conservative critic Karen Vecchio said some families may not get as much as they think under the new benefit because of other taxes and claw backs the Liberals are looking to bring in, including higher Canada Pension Plan premiums.
The new benefit replaces the Conservatives’ Universal Child Care Benefit, income splitting for families, and tax credits for arts and sports programs for kids.
“There are going to be taxes put on families and so they’re giving with one hand and taking with the other,” Vecchio said.
But the new benefit won’t count as income, meaning it won’t be taxed at the end of the year or count against other income-tested benefits like provincial housing supplements.
Nor is it indexed to inflation, unlike benefits under the Canada Pension Plan, for example. That could become a long-term issue as the rising cost of living erodes the benefit’s value, said Lindsay Tedds, an associate professor in the school of public administration at the University of Victoria.
NDP critic Jenny Kwan said she is concerned that because of data gaps, families like those living on First Nations reserves may not receive the benefit. Only half of aboriginal families on reserve file their taxes — and it is through tax returns that the government calculates the new benefit.
“What’s worse, even for those families that do see an increase in benefits, an average of $6 a day does not come close to covering the rising cost of childcare,” Kwan said.
While the benefit is intended to help low and middle-income earners, there is an argument to send child benefits to wealthy families because raising children isn’t cheap and the costs cut into any family’s ability to pay taxes even at higher income levels, Tedds said.
“To the extent that we should be worried about families with income over $180,000, it’s not obviously high on the concern list, but we do have to remember that our system is based off of ability to pay. And families with kids, regardless of their income, face expenses that families without kids don’t,” she said.
“We have no way to reconcile that fact for higher income households now.”