Freeland defends government’s $4-billion change to Canada Workers Benefit, despite PBO criticism

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Finance Minister Chrystia Freeland defended her government’s changes to the Canada Workers Benefit after criticism from the Parliamentary Budget Officer that the new program design “does not make sense.”

Ms. Freeland’s Nov. 3 economic update announced $4-billion over six years to provide automatic advance payments to individuals who had qualified for the income-tested benefit in the previous year. That’s a departure from the current system, in which an individual files their taxes, and if their income was low enough to qualify for the program, they receive the full amount.

The Finance Minister appeared Monday before the House of Commons finance committee, which is conducting a brief review of Bill C-32, government legislation that adopts elements of the fall economic update. She spoke ahead of an appearance by Yves Giroux, the Parliamentary Budget Officer.

“I also know that you’ll be hearing from witnesses about the Canada Workers Benefit,” she told MPs in an apparent reference to Mr. Giroux. “We’ve expanded the Canada Workers Benefit to reach up to 1.2 million additional hard-working low- and modest-income Canadians. This was an intentional policy choice, and it means CWB will top up the income of up to 4.2 million of the lowest-paid Canadians.”

The CWB provides up to $1,395 a year for single individuals. The amount is gradually reduced as net income exceeds $22,944. It is not available to individuals with income above $32,244. Higher amounts are available for families.

What the update did not make clear, however, is that most of the $4-billion will not be going to people with incomes in the program’s target range. Rather, the PBO said in a report that most of that cost will be to give people automatic payments even though their income increased above the threshold. Under the previous system, they wouldn’t have qualified for the benefit, or for as large of a benefit, because of their income. The new program rules will not require these individuals to return the money.

Mr. Giroux said in a recent report that “not requiring repayment of federal benefits for ineligible individuals is a pronounced departure” from existing rules related to income-tested benefits.

Mr. Giroux told The Globe and Mail at the time that providing advance payments regardless of an individual’s income “does not make sense” because it sends money to people who are not targeted by the very design of the program.

Ms. Freeland did not explain the policy rationale for the change in detail Monday and no MPs asked her to comment on Mr. Giroux’s concerns.

In his comments to MPs Monday after the minister had left, Mr. Giroux reiterated his concern with the government’s approach to CWB payments. “This expensive policy change was not mentioned in the fall statement,” Mr. Giroux told MPs.

Finance Department associate deputy minister Nick Leswick told MPs earlier this month that the new approach represented “a fundamental change in the program design.”

The notion of ineligibility will no longer apply to individuals in those situations under the revised program, he said.

“It will be an entitlement based on the previous year’s income. It’s a fundamental restructuring of the program,” he told MPs on the public accounts committee on Nov. 22.

Conservative MP Kelly McCauley asked Mr. Leswick where the idea of the redesign came from. “Whose decision was it? Was it a political decision?” he asked.

“I mean, it’s always a political decision in the sense that the government has made a program choice to fundamentally change the program so that a recipient is now eligible for quarterly payments based on their previous year’s income,” he said.

Conservative Party Leader Pierre Poilievre made general comments during the party’s leadership race this year that he was in favour of tax reform aimed at easing the pace of clawbacks to benefit programs aimed at low-income workers.

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