Budget 2016—A missed opportunity to reform senior benefits

In Analysis, Research by Michael Rae

Last week’s federal budget included a proposal to increase the top-up benefit for some of Canada’s most vulnerable seniors. This may well be a good move since the policy will provide assistance to seniors who actually need it, namely single seniors at higher risk of living in low income than their peers. However, the Liberals, who also propose to run a $29.4 billion deficit this coming year, missed an important opportunity to pay for the entirety of the increased transfer with a cost-saving reform to the Old Age Security (OAS) program.Specifically, the budget proposes to increase the top-up benefit that a single senior can receive through the Guaranteed Income Supplement (GIS) by up to $947 annually, depending on the senior’s income.The increased transfer targets single seniors, who are more likely in need of assistance in retirement than other seniors. Consider that in 2013, 10.7 per cent of single seniors had incomes below Statistics Canada’s low income cut-off, compared to 3.7 per cent of the general senior population.The federal government estimates that the increase to GIS benefits will cost more than $670 million per year, putting additional financial strain on the programs related to OAS (including GIS). Critically, there’s no dedicated fund to pay for OAS since the benefits are financed with current taxes.For 2016/17, the government plans to spend $48.4 billion on OAS and related programs, representing one sixth of every total program spending dollar. Spending on elderly benefits is projected to grow to $60.1 billion by 2020/21.The longer term