Canada blows past estimated cost of Canada Recovery Benefit at $2,000 a month

Canada blows past estimated cost of Canada Recovery Benefit at ,000 a month

The Canada Recovery Benefit was initially estimated by Finance officials to cost $6.3B by the end of March. But it has now almost doubled to $11.1B

Article content

OTTAWA — The federal government has blown past initial cost estimates for a key COVID-19 support program, prompting more warnings that Ottawa should modify some of its pandemic benefits as a way to trim spending.

The Canada Recovery Benefit (CRB) — which pays unemployed Canadians $2,000 a month — was initially estimated by Finance officials to cost $6.3 billion by the end of March. But it has now almost doubled to $11.1 billion as of Feb. 28, according to data posted by the government.

“I would say this speaks to the generosity of some of the federal government’s income replacement programs,” Parliamentary Budget Officer Yves Giroux said in an interview.

Higher than expected costs come after months of warnings from economists and the Parliamentary Budget Office, among others, who said Ottawa should have already been scaling down its benefits programs or perhaps target specific sectors in order to ensure public dollars are spent efficiently. Pandemic relief spending under Prime Minister Justin Trudeau has outpaced that of other developed nations, which has been partly attributed to the wide scope of Ottawa’s biggest aid programs.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

The CRB, which replaced the widely-used Canada Emergency Response Benefit (CERB), acts as a financial cushion for people who lost their jobs during the pandemic. Ottawa spent a total of $74 billion on the CERB, which has since been wound down.

Applicants to the CRB were previously eligible for 26 weeks of coverage, but Ottawa in February extended eligibility to 38 weeks in total. The program is currently scheduled to end at the end of September 2021.

The Liberals last year signalled an intention to lower the CRB to $1,600 per month, amid concerns that it could act as a disincentive for people to return to work. Those plans were later scrapped after the NDP pressured the government to maintain payments at $2,000, where they remain.

Economists and other experts have been generally supportive of benefits like the CRB and CERB, particularly after a second round of lockdowns was imposed in Alberta, Ontario, Quebec and elsewhere in late December, causing a spike in layoffs. Canada’s current unemployment rate sits at 9.4 per cent.

But experts nonetheless say that programs like CRB need to be scaled down or possibly narrowed to hard-hit sectors like food services, hotels or tourism. Continued extensions risk creating an atmosphere in which government support programs become unsustainable.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

“The more you extend these benefits, the higher expectations are that you will make them permanent, or to enrich other benefits that we had pre-COVID,” Giroux said.

According to a PBO report published Wednesday, which reviewed the government’s main spending estimates for the next fiscal year, total federal spending in 2021-22 is so far expected to be $342 billion, with $22 billion related to COVID-19. Those estimates don’t include a range of additional spending measures expected in the 2021 budget, which will be tabled in the second half of April. Finance officials have said they would spend up to $100 billion over three years in stimulus funding that they have yet to specify.

Temporary COVID-19 spending measures are being extended at the same time that permanent transfer programs continue to place additional burden on the public purse.

Government estimates suggest elderly benefits costs will be $62 billion in 2021-22 — or roughly one out of every five public dollars spent — reflecting Canada’s quickly aging population. A January 2020 report by economists at RBC estimated that elderly benefits costs in Canada would reach $99 billion by 2030, doubling in cost in a single decade.

This speaks to the generosity of some of the federal government’s income replacement programs

That will in turn put more pressure on provincial health systems, and has prompted calls in recent months from provincial and territorial leaders for Ottawa to boost the Canada Health Transfer.

Even so, the PBO has said the federal government continues to enjoy plenty of fiscal room as interest rates remain low. In its report Wednesday, the parliamentary watchdog estimated debt costs in 2021-22 to come in at $21 billion, or $2.8 billion lower than pre-pandemic borrowing costs.

Advertisement

This advertisement has not loaded yet, but your article continues below.

Article content

“Despite the record increase in federal debt in 2020-21, PBO expects the federal debt servicing burden to continue to decline due to low interest rates throughout the medium term,” it said.

Still, Giroux said, long-term debt obligations remain far more uncertain, and should prompt Ottawa to lay out a sharper vision next month of how it intends to maintain a strong fiscal position.

“The budget will be interesting in the respect that it will signal the future direction of government programs, whether the government will be firm in saying that COVID-related spending will be withdrawn over the next couple of months, or whether it will show an intention to introduce new programs.”

• Email: [email protected] | Twitter:

Advertisement

This advertisement has not loaded yet, but your article continues below.

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Source link

Be the first to comment

Leave a Reply

Your email address will not be published.


*