Ottawa gave province fiscal breathing room but did little to help poor and unemployed

John Stapleton, Janet Gasparini, Neethan Shan

Two important questions faced Ontario’s poverty reduction plan after its December release:

How much further would Ontario’s economy deteriorate?

What would the federal government do in its winter budget to support Ontario’s goal to reduce poverty by 25 per cent in the next five years?

Well, we now have the answers. Ontario lost 71,000 of the 129,000 jobs lost in Canada in January 2009. And Ottawa intends to do just about nothing at all about poverty.

But judging by the positive reactions of Premier Dalton McGuinty and Finance Minister Dwight Duncan, Ontario did extremely well by the federal budget. They applauded the fact that Ontario will receive – by some accounts – $17 billion in federal economic stimulus from a national pot of $40 billion.

This means Ontario has been given the fiscal breathing room to weather short-term economic uncertainties as it contemplates its own options around a stimulus budget.

Yet while the premier and his finance minister were pleased by the federal influx, the Conservative budget fell far short in a number of areas critical to reducing poverty in hard times.

True, some federal moves will help. Doubling expenditures on the working income tax benefit and allocating new money for affordable housing and aboriginal education are positive steps. However, Ottawa overlooked too many critical pieces of the poverty reduction puzzle.

Given Ottawa’s reluctance to step up as a willing poverty reduction partner, the pressure is now on Ontario to do its part to tackle the social deficit. To do that, Duncan has to deliver concrete action in the next provincial budget.

Among the more serious omissions, anticipated Employment Insurance eligibility rule changes were completely absent. Given that Ontario’s unemployed workers face considerable barriers to receiving EI, the fallout will hit the province and municipalities hard as the recession takes root.

The federal budget was silent on child care, even as federal-provincial agreements on early learning are set to expire. Child benefit hikes target only those with incomes above $25,000. In fact, the budget offered virtually nothing for the poorest of the poor. Any Ontarian earning less than $3,000 a year, or with taxable income less than $9,500, was ignored in the federal budget.

That’s why Queen’s Park must step in where the federal government did not by providing an immediate increase in income to Ontarians without resources. This is vitally important because of what happened in Ontario’s last recession in the early ’90s.

By 1990, annual welfare caseloads had already risen by 35 per cent. A year later, caseloads had shot up by a whopping 70 per cent.

In today’s context, it is unlikely that Ontario will face as big a rise in caseloads. Low rates and rule changes introduced in the last decade have served to effectively clamp down on access to welfare.

That will lead to hardships of a different nature, which will likely worsen over the course of this recession. Many Ontario workers who find themselves ineligible for EI will face closed welfare office doors and those who do make it on social assistance will discover those rates are unconscionably low.

On budget day, Ontario’s finance minister should do double duty of protecting the most vulnerable and stimulating the economy when we need it most. He should start closing the gap between low social assistance benefits and the actual cost of basic necessities by at least $100 per adult.

He should also accelerate increases to the Ontario child benefit to $92 per child per month in 2009 and $125 in 2010. These increases should lead to real gains for all poor families.

Duncan and his government must remember that a single person on social assistance receives only $572 a month – $300 less in real terms than it was 16 years ago when the cost of housing was much lower.

The finance minister also needs to pay attention to the mounting evidence that investments in social infrastructure, such as affordable housing and early learning and child care, along with strengthening the incomes of vulnerable families and adults, reduce poverty and provide payback for years to come.

Within his tool kit for economic stimulus, Duncan should introduce a new housing benefit and pump $2 billion into affordable housing initiatives, including retrofitting and rehabilitation, over the next two years.

He should invest in early learning and child care by targeting $300 million in capital funding in 2009 to support the rollout of full-day learning, operating shortfalls and wage equity.

The finance minister must also take the relatively cost-neutral step of integrating the federal working income tax benefit with Ontario’s housing, social assistance and social services programs.

It’s disappointing, to say the least, that the federal government chose to ignore its important role in supporting provincial moves to reduce poverty. But Ontario’s finance minister still has plenty of options to demonstrate his own government means business when it comes to reducing poverty.

There is no doubt that we live in difficult times and the economic parallels to the Great Depression are striking. But unlike the 1930s, we do not need to wait for years before we do something about it.

By ensuring Ontario’s provincial budget allocates adequate resources to protect the vulnerable in uncertain times, Ontario will not only maintain the important leadership role it has set for itself in poverty reduction, it can also address the most dramatic economic challenge it has faced in a generation.

The challenge is formidable. The times demand extraordinary action.

John Stapleton is a policy fellow at the Metcalf Foundation; Janet Gasparini is chair of the Social Planning Network of Ontario and a city councillor in Sudbury; Neethan Shan is executive director of the Council of Agencies Serving South Asians.