Entitlement Program Reform
(fourth in a five-part series)

Ottawa - Monday, June 9, 2003 - by: Walter Robinson, Federal Director, Canadian Taxpayers Federation


For the 2003/2004 fiscal year, the federal government will spend $143 billion (up from $124.2 billion 2001/2002 and $138.6 billion last year) on programs. This amount will climb to $149.6 billion in 2005/2006. On top of this, Ottawa will dole out an average of $38.1 billion annually to pay interest — not reduce — but simply pay interest on our $508 billion national debt.



Elderly &
health care

The major components of this year’s $143 billion in spending include $26.8 billion in elderly benefits (increasing at a rate of 4% per year), $15.7 in employment insurance (EI) benefits and $20.3 billion on health care transfers to the provinces.




For years the Canadian Taxpayers Federation has offered up examples of Ottawa’s annual $4 billion corporate welfare and regional development binge as an example of government waste. Or more recent examples of the $1 billion ($2 billion by 2012) gun registry as places where spending could be cut to facilitate faster debt reduction and accelerated tax relief.




However, such cuts and other examples of waste identified by the Auditor General will generate at best, 5% to 8% savings on the total $143 program spending envelope. Unless we are willing to honestly examine the reform of entitlement programs, talk of cutting corporate welfare et al adds up to less than a substantive contribution to permanently reducing the size of the Canadian state.



spend only
for purpose

If we are going to press for 10% or 15% or more in reductions in federal expenditures, we can only do so many program review exercises before every last paperclip, post-it note and taxi chit is accounted for and used only for its intended purpose in the federal bureaucracy.




But there is an equally compelling and patently obvious social policy reason to engage in an open, objective and forward-looking debate when it comes to entitlement program reform … from EI to income support for Seniors to aboriginal policy to health care transfers: demographics.




Canada’s population — like that of every other industrialized nation — is graying and becoming older. Targetting benefits to those most in need is not only the right thing to do fiscally, it is equally important from an intergenerational fairness perspective to do so for people who will live much longer lives and to be fair to the succeeding generation of working taxpayers that will bear the majority of these costs through income and other taxes.



EI surplus
$42 billion

The place to start this discussion is with Employment Insurance reform. The EI surplus — the difference between what Ottawa collected from workers and employers and what it paid out in benefits over the past eight years — is now pegged by the Auditor General at over $42 billion.




Plainly put, workers and employers were robbed of this money and it was used for other spending and/or debt reduction. On top of this, Ottawa continues to overtax employers by $750 million in overpayments — taxpayers get these back after filing their returns — employers don’t.




If an opposition party (or a Liberal leadership candidate) wanted to shake the nation and help Canada, EI reform would be at the top of their list. To start, EI must be unbundled. A real premium based insurance scheme (following market principles) must be set up for workers — the more you use it, the higher your premium and vice versa. All other retraining, parental leave and ancillary benefits should be hived off into a separate program for review.



deck chairs

This is just the first of many steps that must be taken to reform EI, but if it is not taken all the tinkering in the world with intensity rules, rate setting mechanisms and eligibility criteria is akin to shuffling the deckchairs on the Titanic. But alas it appears that politicians with the foresight to implement such reforms have not been seen since the days of the Titanic. Would sure love to be proven wrong

Walter Robinson
Federal Director



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