Proceedings of the Special Senate Committee on Aging
Issue 1 - Evidence, November 26, 2007
OTTAWA, Monday, November 26, 2007
The Special Senate Committee on Aging met this day at 12:39p.m. to examine and report upon the implications of an aging society in Canada.
[English]
Senator Sharon Carstairs (Chair) in the chair.
The Chair: Good afternoon. Welcome to this meeting of the Special Senate Committee on Aging. This committee is examining the implications of an aging society in Canada. Today's meeting will focus on the federal government's role regarding our aging population.
To help us understand the issues surrounding this topic, we have before us officials from Human Resources and Social Development Canada, Shawn Tupper, the Director General of Social Policy Development; and Dominique La Salle, Director General of Seniors and Pensions Policy Secretariat. Welcome to the Senate of Canada.
We will begin our opening remarks and then move to questions from the committee. My understanding is that two of our members have been held up due to a plane but should join us shortly.
Dominique La Salle, Director General, Seniors and Pensions Policy Secretariat, Human Resources and Social Development Canada: Good afternoon and thank you for having us.
[Translation]
My colleague and I are honoured to be here with you today.
[English]
We would like to speak to a number of issues related to aging and the role of Human Resources and Social Development Canada, HRSDC.
As you well know, the issue that affects the lives of seniors cut across boundaries and they are not the sole responsibility of any one department or, indeed, any one level of government. In this respect, HRSDC plays two roles, one to coordinate horizontally, and the other to administer programs and policies within its mandate.
HRSDC provides support for horizontal coordination on issues related to seniors within the federal government. This support is provided primarily through the Interdepartmental Committee on Seniors, which allows for the exchange of information and discussions on proposed initiatives to address seniors issues.
We must also work across other levels of government. On virtually every issue that concerns seniors, be it health care, housing, safe communities and homes or societal attitudes toward aging, the federal, provincial and territorial governments share responsibilities for policies, programs and services that affect the overall well-being of Canada's older citizens.
For more than two decades, federal, provincial and territorial ministers responsible for seniors have come together periodically to share information and perspectives and to collaborate on research projects and other initiatives with a shared goal of improving the lives of seniors. This group, the forum for Federal-Provincial-Territorial Ministers Responsible for Seniors, co-chaired by the Secretary of State for Seniors, will meet in Saskatoon later this week. It is the tenth such meeting since 1992. The forum has held meetings every year since 2005 and now meets on a regular annual basis.
There is also a need for collaborative work on the international front. The best example is that Canada is signatory of the 2002 Madrid International Plan of Action on Ageing. In 2007, HRSDC coordinated the preparation of an update, which I will speak about in a moment.
The other role of the department, as I have mentioned, is with respect to our own programs and policies. Key among these roles is managing Canada's $56-billion statutory pension programs, including the Canada Pension Plan, Old Age Security and the Guaranteed Income Supplement.
Work that also affects seniors is our work with persons with disabilities, the homeless, children and family, the labour market and support for the voluntary sector. HRSDC also pursues a robust social policy research agenda, supports such endeavours as the Expert Panel on Older Workers and provides support for the National Seniors Council, which reports to the ministers of HRSD, the Minister of Health and the Secretary of State for Seniors.
Let me now turn to the specific materials that are of interest to your committee. As I noted earlier, the United Nations Second World Assembly on Ageing in Madrid resulted in an International Plan of Action on Ageing. This plan aims to ensure that people are able to age with security and dignity, and they can continue to participate in their society as citizens with full rights.
The recommendations contained in the action plan relate to three priority directions: Older persons and development, advancing health and well-being into old age and ensuring enabling and supportive environments. Canada fully supports the plan's objectives.
In February of this year, on behalf of the Government of Canada, HRSDC prepared a report entitled Addressing the Challenges and Opportunities of Ageing, which you have copies of. It outlines the substantial efforts made in the last few years to prepare for an aging population. It was a report on progress achieved in moving ahead the implementation of the Madrid action plan.
You know about most of these initiatives, but let me talk abouta few. With respect to the retirement income system, we have acted through BillC-36. We have increased the GIS by $2.7billion over five years, as well as introduced a number of tax measures.
To increase participation, we have enabled phased retirement for a defined benefit plan — I say "we'' in a general sense; it is the Minister of Finance, etcetera — and launched the Expert Panel on Older Workers, which we will discuss later. At the community level, we have the New Horizons for Seniors program.
With respect to healthy and active aging, we have initiatives on fall prevention, disabilities, emergency response, elder abuse, housing, Employment Insurance compassionate care provisions and work on age-friendly communities.
With respect to the research and knowledge front, there is the CIHR Canadian Institute on Aging, a research program within HRSDC and, of course, the work of this committee, the Special Senate Committee on Aging.
In 2005, federal, provincial and territorial ministers responsible for seniors drew on their past work and on the Madrid framework to produce a document entitled Planning for Canada's Aging Population: A Framework. You also have this document.
While it is not prescriptive, the document provides a useful lens with which to guide the work of jurisdictions in their own right and within their own priorities in developing policies and programs, and it underscores the need to focus on the three broad pillars of health, wellness and security: continuous learning; work and participation in society; and, finally, support and caring in the community.
This planning framework allows jurisdictions to work in a coherent way and to develop strategies and tools that respond to the needs of current and future seniors in Canada.
Since releasing this document, the federal-provincial-territorial ministers have undertaken a number of important initiatives. Among them, they have commissioned and released reports that help promote active and healthy aging and help to understand and prevent social isolation among seniors. They have developed a guide for rural and remote communities that will soon be made available to communities across the country to help them become more age- friendly. They have also jointly developed material to promote World Elder Abuse Awareness Day on June15, 2006 and 2007.
Recently, federal-provincial-territorial ministers sponsored a working forum held in Vancouver that brought together experts, front-line workers and stakeholders from all regions on the issue of elder abuse, which generated ideas for action. Ministers will consider these other opportunities for collaborative work to benefit seniors at their upcoming meeting.
One important area of interest for both levels of government is addressing the challenges faced by displaced older workers. The establishment in January of this year of the Expert Panel on Older Workers, chaired by retired senator, the Honourable Erminie Cohen, was, as you are aware, the federal government's response to this issue.
The panel's mandate is to look at potential measures to help older workers, including training and income support, such as early retirement benefits. In March, the panel issued a discussion paper to provide background in context to help stakeholders in discussions. The panel then undertook extensive consultation with the provinces and territories, as well as employers, labour groups, the academic community and other stakeholders. The members also received testimony from OECD representatives to make sure that their recommendations took into consideration the best international evidence. The panel is now developing their final report and recommendations and expect to submit those to the Minister of Human Resources and Social Development at the end of December.
In conclusion, meeting the challenges and opportunities of an aging population is becoming embedded as a key public policy consideration in the development of programs and policies within the federal government and other jurisdictions.
[Translation]
My colleague Mr.Tupper and I would be happy to answer any questions that you may have.
[English]
The Chair: We have heard testimony to the effect that the Canada Pension Plan is not equitably distributed, that those who collect early, at the age of 60, do so at a penalty, and those who collect late, at the age of 70, receive a benefit, and that while the penalty may be actuarially sound, the benefit is not actuarially sound.
Has that situation been examined by the department for any potential future changes?
Mr.La Salle: That question is an interesting one. You are referring to the adjustment factor. The full pension is available at age 65. Canadians have an option of retiring earlier than that age with a reduction in the pension they would receive at age 65. The reduction is 6percent per year. If you retire at age 60, you receive 30percent less than you would at age 65. Conversely, if you retire after age 65 and up to age 70, you receive an extra 6percent per year, up to 30percent.
The Chief Actuary of Canada, who poses independent judgment on the financial state of the plan, has determined that the adjustment factor was a little over-generous for those who retire before age 65 and not generous enough for those who retire after age 65. He quantified that difference and he estimates that in 2025, I believe it is, the discrepancy would be in the order of magnitude of about $1 billion a year.
That discrepancy translates into an incentive to take a pension earlier and a disincentive to take it later. The numbers look big on an aggregate basis, but for individual pension recipients, the amounts are not huge.
Nevertheless, the question warrants examination. In the context of the CPP triennial review, such issues are discussed. The CPP plan is co-managed by the federal and provincial governments. Any changes that have a cost attached must be ratified by two thirds of the provinces with two thirds of the population, which ensures that a big program like that does not turn on a dime.
The plan is predicated on a couple of principles. First, any new changes must be fully funded, and there is a set contribution rate. The contribution rate is defined and has been examined over time by the Chief Actuary, and it is good for 75 years. Changing parameters such as the adjustment factor probably would have a resulting collateral impact. It would be examined in that context as part of a triennial review, and decisions would be made.
The Chair: When is the next triennial review?
Mr.La Salle: We are beginning that process. It was launched with the release of the Chief Actuary's report, which was either at the end of October or the beginning of November. At the end of the last triennial review, finance ministers, who are the custodians of the CPP, indicated that they wanted the next triennial review — the one beginning now — to examine rigidities that may exist that would prevent full choice in career paths or transition from work to retirement, with a view to encouraging increased labour participation.
The Chair: That view is exactly where your committee is coming from as well, because the issue of more and more seniors wanting to work beyond the age of 65 is uppermost in our minds. We do not believe that anyone should be forced to work beyondthat age, but if they do work, we think they should be compensated adequately, not only by the salaries they earn in the period between ages 65 and 70, but also by the pension they receive at the end of that time. That is where your committee is coming from with respect to that issue.
When do you anticipate that this triennial review will be completed?
Mr.La Salle: It is a federal-provincial process that will be completed in 2009. Typically, the first year is spent doing research, agreeing on an agenda of what is doable and what requires more work. The second year is spent obtaining approvals on particular options and making decisions. The third year is implementation. I believe that is how it goes.
The Chair: You said that the report of former Senator Erminie Cohen's Expert Panel was due to the minister later in December. Will that panel's report, which was requested by the government, be released, or is it only for advice to the Government of Canada?
Shawn Tupper, Director General, Social Policy Development, Human Resources and Social Development Canada: We do not know yet what the release plan is. The committee works independently from the department, so we must wait and see until they are prepared to put out the report.
The Chair: Have you released a final update on the Madrid International Plan of Action on Ageing? I know you have been working on it, and the last time you appeared here my understanding was that there would be a final update sometime in 2007.
Mr.La Salle: The update is the one you have, which was submitted by our ambassador to the UN committee. The goal of the UN commission is to have countries voluntarily provide reports every five years.
The due date is 2008, and we submitted this update, I believe, in February 2007.
The Chair: You mentioned the adjustment benefit on the CPP. When the Chief Actuary reported, he indicated that we were stable. It was interesting because when I was the minister responsible for representing seniors — we did not have a minister for seniors at that point — I was the person who went to Madrid. One interesting debate that took place was the reflection on Canada's changes to the Canada Pension Plan. Particularly, many European countries were amazed that we had moved forward and made the adjustments necessary to make our CPP viable. You say the actuarial reports state it is viable for 75years, which in actuarial sense is a long time.
Have you undertaken any kind of analysis to indicate how out of whack it might be actuarially if we were to give a greater benefit to those who had waited until age 70 to collect?
Mr.La Salle: I am not personally aware of that work. Actuarial work is not a pure and exact science. The actuaries must make a certain number of assumptions. They make assumptions in terms of take-up. Most Canadians take their pension before 65, but that trend can shift. It varies from region to region as well. There are a certain number of assumptions. The model is a multi-parameter one. I cannot speak for the actuary.
The Chair: You made an interesting statement. You said that most people begin their payments before 65?
Mr.La Salle: Yes: Most Canadians start collecting their CPP before the age of 65. The numbers I think are in the order — is it 70percent before 65? We are not sure, but I can provide the committee some numbers.
The Chair: Could you send me that information, because that is not the information we have. I thought the majority took their benefit at 65, a large group at ages 60 to 64 and a small group at age 70. I would appreciate those exact figures.
Mr.La Salle: Absolutely.
[Translation]
Senator Chaput: My first question ties in with the one put by the Chair.
Often, seniors want to continue working to make ends meet at the end of the month. Perhaps they are having trouble getting by. In such cases, do you look at ways of preventing this individual from being penalized? It may be beneficial from a health standpoint for a senior to continue working. Is an analysis of some kind done to consider what will happen to the income earned? Should this be taken into consideration?
Mr.La Salle: The Canada Pension Plan system includes something we call the work cessation test. In order to begin receiving CPP benefits, a person must stop working for a period of two months, after which he can resume working and start collecting CPP benefits. However, if a person continues to work and to earn an income, he will no longer be paying CPP premiums. That is how the system works at the present.
We cannot say if this situation is fully adapted to the kind of society we have today, where people might want to continue working, either because they are interested in doing so, or because they want to work part time and begin drawing a portion of their pension. These are relevant and complex questions. However, often the problem is evaluating how the program affects people's behaviour. Will the flexibility of the program encourage people to stop working at an earlier age or, on the contrary, will it keep them in the work force longer so that they can take advantage of this flexibility? Unfortunately, I do not have an answer to your question.
Senator Chaput: However, will an analysis be done of this phenomenon? Seniors who stay in the workforce to keep themselves busy and to maintain a sense of purpose in their lives are happier individuals. I am less concerned about these individuals than I am about the ones who need to work to make ends meet. Many seniors fall into that category.
Is your department working, among other things, to identify and assess the future needs of seniors? Is any work being done on that front?
[English]
Mr.Tupper: In part, picking up on what we understand today in terms of where people sit and the choices they make when they retire and when they take their benefits, we are starting to understand only now the transitions and choices that people make. We have an active research program right now that is investigating that transition, trying to understand the trends that have gotten us to this point and trying to do some predictions for the future.
[Translation]
Senator Chaput: At that point, the annual income of individuals who are truly in need could be a factor to be taken into consideration?
Mr.Tupper: Absolutely.
Senator Chaput: Over the weekend, I attended the annual meeting of the Fédération des aînés francophones du Canada. One issue that was discussed was seniors in Canada who still do not receive the Guaranteed Income Supplement, either because they live in very remote regions and do not have access to it, or because they are simply unaware that they qualify or do not know how to apply. Or it could simply be that their name does not appear on the list. Are you aware that there are still many Canadian seniors who should be receiving the GIS and who are not, and that the vast majority of seniors who fall into this category live below the poverty line?
Mr.La Salle: You are quite right. Vulnerable population groups, such as aboriginals, immigrants who speak neither official language and the homeless are extremely difficult people to contact. It is impossible to get in touch with them simply by accessing on a computer a list of all those who pay taxes and who have a social insurance number. This is not to say that some efforts to contact them are not made. Since 2002, everyone who is 65 years of age is sent a letter encouraging him or her to apply. In the case of low-income earners who would likely qualify for the GIS, a completed form is mailed out. Service Canada officials estimate that 32,000 Canadians in fact applied for the GIS as a result of receiving this form, but these numbers are not good enough. The homeless and the most vulnerable population groups are not being reached. Over the past few years, we have launched several pilot projects. We work with municipalities like the City of Ottawa. Police officers who come in contact with the homeless ask them questions, such as whether they are 65 years of age. Efforts are being made on this front.
The same applies to first nations members. We organize workshops and working groups. A month or two ago, we organized one such event in British Columbia at which over twenty first nations were represented.
We need to devise innovative solutions and reach out to cultural communities and to associations representing new immigrants, for example, individuals who speak Chinese or Vietnamese. We need to find a way to reach out to these groups. Will we achieve a 100percent success rate? I can tell you right now that we will not. Some people pass away, others move, while still other are unwilling, for various reasons, to complete the tax forms. However, we are working hard to get the message across. And you are right; individuals most likely to qualify for the GIS are the ones who need it most.
Senator Chaput: What do you do if you happen to identify, through one of the measures you just mentioned, seniors who qualify for the GIS, but who have never filed a tax return? I have heard of cases like that.
Mr.La Salle: They must apply for the GIS. Income is one consideration, but to qualify for the GIS, a person must have lived in the country for the past ten years. We are devising ways of reaching these people. I would not want to speak for Service Canada, but I can say that they are developing different types of approaches. People can come in person to their offices, they can use the Internet, the telephone and so forth. However, they also use a different approach for dealing with different groups, for example, seniors, and focus on other ways of reaching out to them.
So then, there is still some work to be done. We want people to receive all of the benefits to which they are entitled.
[English]
The Chair: I know it was not done in the past, so it is not a critical question of the present or past government, but has there been any attempt to translate any of the application forms into various languages? A group representing the Inuit of Northern Canada raised this issue with us. The group said that if the person making the application is literate — and many are not — the person is literate in Inuktitut only. Have we attempted to translate the application forms?
Mr.La Salle: I would certainly hope so, but I do not know. Iwill get back to you, but I know that Service Canada has visited communities on a rotation basis. Certainly, that type of outreach activity is precisely what we must do to address some of the identified situations. I would be inclined to say yes, but I will have to get back to you.
Senator Keon: As you mentioned, when people turn 65 years, depending on their financial state, it can be a very confusing situation for many of them. I would like to lead you through a scenario.
Let us take a couple, both 65 years, neither of whom has a work-related pension. Collectively, they do not have a lot of money; let us say they have saved $100,000 in their lives, so they do not have any sort of cash flow. Let us look at their predicament and see what they are eligible for and then I want to start asking you about different employment scenarios that will affect their income. In fact, people that I have encountered, for example, who work part time for me at the cottage are afraid to work because it will affect their pension. There must be a tremendous number of people in that position.
Let us go back to the couple with no income except the pension benefits. Starting with that base line, what are they eligible for?
Mr.La Salle: The assumption is that they have not contributed to the CPP. If they do not have CPP, at 65 years, like every other Canadian, they are eligible for Old Age Security. They are, obviously, in a situation of low income, and so they are eligible for the Guaranteed Income Supplement.
The GIS is reduced by $1 for every two dollars of income, but there is a $500 exemption. The first $500 earned is exempt, and after that there is a reduction. The maximum payment of GIS is in the order of $7,000, and that is not taxable. To reduce to zero, you would have to earn $15,000 of income.
Senator Keon: Let me take you to another scenario. Take the same couple, but this time the couple has contributed to the Canada Pension Plan. Please tell me what they are eligible for, and how they will be affected by part-time or casual employment.
Roman Habtu, Manager, OAS Benefits Policy, Human Resources and Social Development Canada: A person receiving the Canada Pension Plan would have the GIS benefit reduced by $1 for every $2 of the Canada Pension Plan benefit. In that sense, as Mr.La Salle has indicated to you, any income that person receives, except for the $500, which is exempted from earnings, is reduced by $1 for every $2 of other income.
Senator Keon: Let us say they are each drawing a Canada pension of $10,000 a year, and they both want to do some part-time work. Let us say they each make $10,000 a year in part-time work. How does that affect their overall income?
Ms.Habtu: That means each would have about $20,000 from CPP as well as earnings. The threshold for a single person is $15,000. That is, if your income is below $15,000 you are then eligible for the Guaranteed Income Supplement. In this case, they would be looked at as a couple, but if we were to look at an individual, he or she would not be eligible for the Guaranteed Income Supplement because his or her income would be above the threshold.
Senator Keon: In other words, if each of them made $7,500 a year in part-time work, it would cancel out their supplement?
Ms.Habtu: Are you indicating in addition to the Canada Pension Plan?
Senator Keon: Yes.
Ms.Habtu: Yes, that would absolutely do that. You are correct.
Mr.La Salle: Would it be useful if we were to run typical scenarios and provide them to the committee, such as typical scenarios at the margin?
The Chair: Yes, that would be extremely useful for us.
Mr.La Salle: I think we can provide you with these numbers. If there are other obvious scenarios, we would be happy to accommodate your request.
The Chair: I will turn to you, Mr.Tupper, but perhaps in anticipation of what you will say, there is a lot of confusion among the population, and not so much about the Guaranteed Income Supplement. I have had people say to me that if they earned a certain amount, they would have their CPP reduced. We know that the CPP cannot be reduced. CPP is what they have paid into and matched by an employer, and that payment is guaranteed.
There is confusion among seniors that they cannot afford to work because their Old Age Pension would be cut. We know air Old Age Pension can be cut if they are over $63,000, but we are not talking about people earning more than $63,000; we are talking about marginal employees.
Mr.Tupper: I wanted to be clear. Our desire is to understand the interactions; we are not looking for particular dollar scenarios. We can pick some scenarios that would help you understand those interactions.
Senator Keon: Madam Chair, through you, our desire is to understand the interactions as they affect the people who are really hurting financially.
Senator Cordy: You spoke earlier about the numbers of studies that you are doing. I know that Canada's poverty rate has gone down substantially in recent years, which is a positive thing, but if we look closely at the figures, we see that certain groups suffer more dramatically than others. One of these groups is women, single women in particular. In days gone by, many women left the workforce as soon as they got married, even before they had children, while others left when their children were young. Their earnings were interrupted. When it comes time to get CPP, their contributions were lower and what they receive will be lower. Have you done any studies in this area to see how we could be more helpful in those situations?
Mr.La Salle: There is a general drop-off provision in the contribution period of CPP, and that drop-off is 15percent. Fifteenpercent of your years of lower income are not counted to establish the amount of your pension. We think that is a good approximation. When I say "we,'' it is a large "we'' because the CPP is a jointly managed program, managed federally and provincially.
To work around that exemption period or drop-off provision would probably have an impact on the contribution rate; it seeks to do a balance between the benefit payable and affordability and fairness. It would have an impact on contribution rate, and that would have to be looked at very carefully. In the meantime, the clause in the CPP that addresses those issues is the general drop-off provision.
Senator Cordy: That would mean that the lower income years would not be counted in terms of determining what they would receive. I understand that, and it is a good policy. However, many women are out of the workforce for 10 years or 15 years or longer. I have heard of 60-year-old women who receive $35 a month because they left the workforce to raise their children. Have you looked at any ways where women could, if they were able, contribute for the years they were home raising their children? Is this an area you have looked at?
Mr.La Salle: There are pockets of low-income seniors. That issue is resolving itself through increased labour participation, etcetera. The problem is that the instruments we have, such as GIS, which contributes in a major way in reducing poverty among seniors and brings many above the low-income cut-off, are big, blunt instruments. I believe there are 215,000 seniors in Canada who would be under the low income cut-off. Just to describe the situation a little bit, one of their defining features is that their housing costs are more important. That is what puts them below the low- income cut-off. That happens particularly in urban settings — Toronto, Montreal, Vancouver, Calgary, etcetera. In the rural areas, usually it is not as much of an issue, although transportation costs are definitely a factor in certain places.
The instruments the federal government has in terms of income support are too broad. To get to these 215,000 people, you would have to spill a lot of money. To give you an idea, the increase in the GIS, 3.5percent in January 2006 and 3.5percent in 2007 provided $58 for a couple and $36 for an individual. That cost $2.7 billion over five years. Just to do a little bit in a huge program like that is very costly.
We have to find a way to provide support, but in a very targeted way. Perhaps we need to look further at the spending side and the type of programs that bring you into the realm of provincial programs, although not exclusively; but much in-kind support provided to low income seniors is done at the community level.
Senator Cordy: One of our big concerns is reaching those who are in need. Those who have substantial savings and whatever are not the ones we should be as concerned about, although they have other needs.
One of the things that I have learned in this study, and I guess it is just that I had not thought about it, is the diversity among seniors. People tend to stereotype seniors, and that is not appropriate. As with any group in Canadian society, we in Canada are such a diverse population, much more so than we were 50 years ago.
How can we design programs and services to meet the needs of the diverse population? Unfortunately, often in government programs, be it provincial or federal, it is the situation of the square peg in the round hole. That is, if you do not quite fit in the round hole, then there is nothing there for you. You explained that you are trying to meet the needs of certain individuals and the costs related to meeting those needs.
Our life expectancy has gone up; however, one group for which life expectancy is not nearly as high as the rest of Canada is our Aboriginal population. Yet, Aboriginal peoples must wait as long as people who do have a life expectancy into their 70s or 80s to receive Canada pension or old age pension, whatever the case may be.
You talked earlier about research in the studies that you are doing. Are you doing research and studies in the area of the diversity of seniors and how to best to create programs to meet that diversity?
Mr.Tupper: As you mentioned at the outset of your question, we have clearly made progress over time. In one sense, it is that square peg and round hole. When you have a high percentage of people who have been living in poverty and have been at risk, it is easier to develop broad-based programs. We have hit a point where about 5percent to 6percent of seniors who are living in poverty. What we need to do now, and what the department has embarked upon, is trying to get a granular understanding of whom that 6percent represents. That will be the struggle of the program design and policy work. As you said, they are incredibly diverse. We see a fair consistency about the at-risk populations that make up that 6percent. Right now, our biggest focus is developing the evidence base to understand the characteristics of those at-risk groups and the kinds of initiatives that would serve them. Clearly, one generalized initiative will not deal with all the needs of at-risk groups. The Aboriginal people are a particular area in which we will spend some time working with the Department of Indian and Northern Affairs and Aboriginal organizations. We will work with them to get a better understanding of the characteristics of Aboriginal seniors' needs and through that understanding how we can design programs and initiatives to respond to those needs. That would apply equally to seniors who are living alone, seniors who are homeless and seniors who are disabled. We would look at their specific needs and understand what governments may do at all levels.
The Chair: It is not just now that women are taking time off to raise children. They are also now taking time off to become full-time caregivers to senior parents. They get hit not only for the years in which they have raised children but also for the peak earning years for which they have become caregivers — either because they have had to reduce their working time to part time or, perhaps, to no time working at all.
Has any research or development been given to the possibility of paying into CPP for these people as some kind of a caregiver benefit program? For example, if we took the $1,000 that are given now to families for child care, would that make, in some ways, more sense to move it over into a payment to the woman's CPP plan so that at some point she actually can collect that kind of benefit in CPP equivalent to that of a woman who has been able to remain in the workforce all of that period of time? Have we done any of that kind of analysis?
Mr.Tupper: Over the last two years, we have done a tremendous amount of work understanding the pressures of unpaid caregivers. We have pursued most of our research in the context of understanding the demographic shifts that families have experienced over recent years. We do not limit our analysis of care giving just to care giving of seniors. We also look at family illness and to families of disabled children. We are looking at all types of care giving, with the exception of traditional child care, and trying to understand the pressures that families experience. On average, over the last 20 years, families are working 1.5 to 3months more per year than they were before. We are seeing data that would suggest, in terms of time use, that families have 48 minutes less per day to devote to the family. That is 22 hours amonth. There are real pressures as we see the start of what we call "the sandwiched generation.'' As the population ages, that pressure will only increase. We are in the midst of taking our evidence and developing advice that we would be prepared to provide to the government in terms of what the government can do to support Canadian families in addressing care giving issues.
The Chair: My final area of questioning concerns people who may be eligible for CPP but have not applied. You may be aware that there have been a number of questions in the Senate about this recently.
Do you have any data on how many people out there may be eligible but are not receiving benefits because you, perhaps, lost their addresses, because their names have changed, or because they have moved goodness knows where and they have not kept up? Do we know how many people might be eligible for CPP but are not collecting it?
Mr.La Salle: We certainly have an idea. Does it cover everything? No. There are a number of people who have paid taxes and have paid into CPP but they disappear or move to another country. When we look at the data, for the most part it is people who have contributed very little, so the benefit in question is somewhat limited, and so on.
Canadians receive the forms and a constant reminder through inserts in their taxes, advertising campaigns, and so on. However, there are Canadians who have paid in but they do not seek the benefit or apply for the benefit.
The Chair: I receive an update — I think it is every second year, but I could be wrong — on what I have paid into CPP and what Iqualify for. If you have lost my address or you do not know where I am, obviously I do not get that information. I am thinking of people who may have paid into this, for example, 35years ago and then stopped working to raise families and never returned back into the workforce. In an equivalent situation, I suppose I might be eligible for social security in the United States because I taught there for two years. I never thought about it, actually, until right this moment. Perhaps Ishould be applying for American social security; I do not know.Is any attempt being made to track down these people orto provide, through Service Canada, an avenue for them to make an application for CPP?
Mr.La Salle: That is a question that I would rather have Service Canada answer because it is their business. There is no doubt in my mind that a lot of outreach efforts are being made.
If we do not have the address, it is difficult, and we are back into my response to Senator Chaput, that is, outreach through community organizations. It is not a computer-driven exercise then; it is almost like going knocking on doors. We find that people who do not collect have very little to collect.
The Chair: There was an insert a week or so ago in one of the three newspapers. As I was putting papers in the blue box, the insert fell on the kitchen floor. The insert was full of information about new seniors' benefits. I found it interesting — and I want you to take note of this — that it addressed eligibility for CPP, but it did not address people who may not think they were eligible for CPP. My reading of it was that this applies to me, obviously. However, if you did not know that you were eligible for CPP, nothing in the pamphlet made you think that maybe you should apply.
Mr.La Salle: I will pass this on to my colleagues at Service Canada.
The Chair: We want to thank both of you. We know this was difficult for you because you are getting ready for your meeting later this week, but it was important for us to hear from you. Good luck with your meeting on November29. Hopefully all your federal and provincial counterparts can sing from the same hymn book.
Honourable senators, I will discuss a couple of business matters with you now. Our witnesses for two o'clock have not yet arrived. We have drawn up a budget. I will have the clerk pass it to you so we can approve it. We will also distribute a piece of information that our researchers have prepared regarding our plans and organization for the next few meetings.
Let us begin with the budget. We have drawn up a budget for$61,475. The cost for our research consultant, additional research assistants, working meals and hospitality absorb $27,000 of this amount. Then we have put $3,000 aside for conferences, and that, of course, would include airfares and other expenses. Ishould tell you that in the past we have not used nearly the amount that we have submitted for conferences, but I like to build it into the budget just to ensure that if conferences do come onto the horizon that we think would be of value to members, that they are able to go. In the last session, we sent Senator Mercer to the Workshop on Seniors and Emergency Preparedness, and Senator Cordy went to St.Gallen in Switzerland to the World Ageing and Generations Congress. I want to have funds available so senators can attend these meetings, as they are very informative.
Are there any questions or comments on the budget?
Senator Keon: It seems very straightforward, Madam Chair.
The Chair: Could we have a motion to accept the budget?
Senator Keon: I so move.
The Chair: Moved by Senator Keon. All those in favour?
Hon. Senators: Agreed.
The Chair: Hopefully we can get that into the Internal Economy Committee as soon as possible. We are working at the present time, as are all committees, on emergency funding, so we have enough to get us through probably to Christmas if there is no difficulty in this particular issue, because the Internal Economy Committee has not yet given an indication of when they will deal with budgets. We understand this might be the first budget that they receive.
The tentative work plan has been prepared for the committee based on our discussion last week. It is obviously an order of reference, the background, and phase 2. What I think is most interesting, senators, is to look at phase 2, and the issues we still want to deal with.
If you look on page5, we had planned, in terms of the completion of phase 2 hearings: competency issues, housing needs, transportation and emergency preparedness. We covered the fifth item today and will move on to number six later. We have heard with respect to the seventh item, although we need to decide if we want specific input from the provinces concerning number five. There were meetings planned for November26, December3, and December10, and we have already heard from witnesses with respect to all three of those weeks.
If you move on to page6, you will see the option papers that our hard-working Library of Parliament researchers are going to prepare for us. They have given us these titles, listed on pages 7-8. They are Active Aging, Older Workers/ Transition to Retirement, Health of Seniors, Regional Distribution of Aging Costs, and Supports to Aging in Place of Choice.
Rather than try to have any realistic discussion about that today, I just wanted the option papers to be distributed and to ask you to review them at your leisure over the next week and report back, particularly with respect to gaps in the options and issues papers. If you read those options and issues papers suggestions and you see some gaps that you think we are not addressing, would you please identify those for us next week so that we can ensure that they are covered in the options and issues pages. Thank you, senators.
Honourable senators, we will now hear from our second panel on the topic of the federal government role regarding our aging population. Because our witnesses had short notice, they gave us a copy of their presentation, but we cannot distribute it because it is not in both official languages. However, I will have it translated and distributed. Meanwhile, it will be presented orally in both languages.
We have Frank Vermaeten, Director General of the Assistant Deputy Minister's Office of Finance Canada; Krista Campbell, Senior Chief of the Federal-Provincial Relations Division; and Andrew Staples, Acting Chief of the Federal-Provincial Relations Division, Finance Canada.
It is a pleasure to have you here. We will start with opening remarks and then move to questions from the members of the committee.
Krista Campbell, Senior Chief, Federal-Provincial Relations Division, Finance Canada: Good afternoon. We apologize for having the presentation only in English. We have sent it to the translation department, so it should be available shortly and we will send it to you as quickly as we can.
You posed specific questions looking for a brief overview of major transfers. I will say a quick word or two on the evolution of transfers and then we will move into a brief discussion on allocating transfer support. By all means, you may pose any questions you might have as we go through the presentation, or we can have more of a discussion towards the end.
The presentation opens with an overview of Canada. As you know, we are 33 million people. We have a great deal of disparity in terms of where we are located geographically across Canada. We are spread unevenly across the country. The level of economic activity varies by province and territory. Gross domestic product per capita in Canada is about $46,500, but that figure varies considerably by province and territory. There is more information on that in the written presentation.
Fiscal capacity, the ability of provinces and territories to raise revenue, varies considerably as well. It is about $6,700 per capita, ranging from over $10,000 per capita in Alberta to $5,100 or $4,400 in some of the Maritime provinces. Disparities are particularly noticeable in the North as well, due to the small population, the geographic location and the relatively less developed economic bases in the North.
With respect to fiscal arrangements, there are four broad major transfers. The Equalization Program is nearly $13 billion, $12.9billion this year. The main purpose of the Equalization Program is to address the horizontal disparities that exist among the provinces. The program is a cash payment, and is formula driven.
Similar to equalization is the Territorial Formula Financing program, TFF. It is about $2 billion, $2.2 billion this year. The program addresses the special needs of the three northern territories, and is similar in purpose to equalization. Again, it is a cash payment and is formula driven.
There are two large transfers for health and social programs, the Canada Health Transfer and the Canada Social Transfer. The CHT is the largest cash transfer, at about $21.3 billion this year. It supports the principles, criteria and conditions of the Canada Health Act. It is both a cash and tax transfer. Total entitlements are equal per capita. The Canada Social Transfer is about $9.5billion this year to support provinces and territories for post-secondary education, social programs and programs that support children.
This presentation does not go into any of the arrangements with respect to, for example, infrastructure. It focuses only on those four main transfer programs. I know members of the committee are familiar with a number of these transfers, so I will speak briefly to only a few of them. If there are questions, we can go into the design of the programs in more detail.
Equalization is particularly important. It is enshrined in the Constitution. The principle of equalization is that provinces should have access to sufficient revenues to provide reasonably comparable levels of public service at reasonably comparable levels of taxation.
Equalization looks at how much revenue provinces can raise. Itcompares them against a national standard, currently the 10-province standard, and then provides sufficient revenues to bring provinces up to that standard. The transfer is an unconditional one intended to be used by provinces for any and all services they need to provide to Canadians. It is paid for exclusively by federal revenues, and it includes only one broad indicator of need, which is population per capita.
Equalization represents anywhere from, for the provinces that do not receive it, obviously zero, up to 25percent of provincial revenues, so it can be an important source of revenue for provinces. A number of changes were introduced in the budget, and we can provide more information if it is relevant.
Equalization is intended to evolve and go up and down as fiscal disparities evolve among provinces. Provinces are always eligible for equalization, but whether they are entitled in any given year can change. For example, Ontario is eligible but has never qualified for equalization. As a province's economic fortunes improve, its equalization entitlement is intended to go down, and the opposite is the case as well.
Over the last few years, we have seen that while equalization is growing in terms of nominal dollars, fiscal disparities among provinces are tending to narrow. We have seen some impact on disparities recently due to resource revenues, but we are seeing that equalization is generally doing the job it is intended to do.
Territorial Formula Financing is intended to do the same in theNorth with respect to addressing disparities. Because circumstances are unique in the North, costs tend to be somewhat higher. TFF is the primary revenue source for the territorial governments: about 66percent of the Yukon's revenues, 64percent for the Northwest Territories and nearly 84percent of Nunavut's revenues.
The transfer is an unconditional one. However, it includes a certain component of need in the sense that TFF is a gap-filling formula. It looks as how many expenditures territories need to make to provide services and how much they are able to raise through their own source references. Then, the transfer fills the gap between how much they can earn on their own and how much they need to spend to provide services roughly comparable to what is available in the South.
The Canada Health Transfer has been legislated to the year 2013-14. It is growing at a rate of 6percent annually. It is the federal government's main tool for providing support with respect to the Canada Health Act and the five criteria and two conditions under the Canada Health Act. The transfer reflects a number of commitments made over the last few years with respect to the three health accords. Total entitlements are allocated on an equal per capita basis. At the time of the renewal of the Canada Health Transfer, in 2014-15, the CHT will move to an equal per capita cash entitlement. This change reflects what has happened to the Canada Social Transfer.
With respect to the 10-year plan to strengthen health care, in2004, the federal government committed to providing $41.3billion over ten years in additional transfers to provinces and territories. The bulk of that, $35 billion, is provided through the Canada Health Transfer. It is targeted for primary health carereform, home care and catastrophic drug coverage. There was also a transfer of $5.5 billion for wait times reduction and $500 million for medical equipment purchases. In addition, first ministers committed to an accountability and reporting regime whereby they would provide information to residents on health system performance, including the money that was spent. Provinces and territories are working on developing common indicators and benchmarks. For example, one commitment with respect to primary care is that 50percent of all Canadians have access to multidisciplinary teams, 24 hours a day, seven days a week, by the year 2011.
The Canada Social Transfer has been changed recently as a result of Budget 2007. It is now allocated on an equal per capita cash basis. The cash grows at 3percent annually. It supports the restriction against minimum residency requirements for social assistance. It is a block fund, meaning that provinces and territories allocate the cash and the tax transfer support that they receive among the supported areas — post-secondary education, social programs and programs for children — according to their respective priorities.
A graph we are fond of shows recent investments in transfers. A number of discussions have taken place over the last few years about the cuts that happened in the mid-1990s and the considerable reinvestments. The main point to keep in mind with transfers is that they are at an all-time high, the largest they have been, fully restored with respect to the past cuts.
That is a quick overview of federal transfers.
I want to say a word or two about the evolution with respect to the principles and ideas behind how transfers were allocated, conditionality, accounting for transfers and reporting. Transfers reflect the evolving nature of the federation, intergovernmental relations and fiscal circumstances. Equalization has remained pretty much unchanged over time. The principle as stated in the Constitution is the same. The number of bases that are covered has changed, along with how comprehensive it is and the standard that we measure it against, but principles of equalization have not. However, Health and Social Transfers have changed considerably. They were established primarily as cost-sharing grants to encourage establishment of national social programs, such as medicare, for example.
While these cost-sharing programs are important, or were important, for allowing and incenting the establishment of some of these major health and social programs, at a certain point they become less flexible. In 1977, we saw major reforms to transfers so that cost-sharing programs for health and post-secondary education, for example, were replaced with the Established Program Financing block fund. It was the first major, national cash and tax transfer, and it was allocated for the most part on an equal per capita basis. There was a bit of transition at the beginning, but it was an equal per capita block transfer.
In 1996-97, we saw the introduction of the Canada Health and Social Transfer. Part of the impetus for this change was definitely fiscal reconsolidation. The last major cost-sharing program, the Canada Assistance Plan for social assistance and social services, was rolled into the CHST in the 1995 budget. After a period of transition, the CHST was also equal per capita entitlements.
With major transfers over time, we have seen that with respect to conditionality, grants have changed very much from governments — and the federal government in particular — creating a series or a list of eligible expenditures for which provinces were reimbursed at 50percent, to much more open block transfers where provinces have flexibility to determine where specifically they want to allocate their resources. The accountability and reporting for these transfers has also changed over time. We have moved from a government-to-government system of accounting and reporting, where provincial governments report directly to the federal government on what their expenditures were, to a system of public accountability first outlined in the Social Union Framework Agreement, SUFA, in 1999. SUFA, the health accords and the child care framework agreements all indicate that the federal government makes a commitment and a contribution to these programs; provincial governments design and deliver the services that their residents want; and provinces are then responsible for reporting back to their residents on how they used the federal funding. Provinces do not report back to the federal government.
Budget 2007 reinforced the importance of certain principles with respect to fiscal balance. A couple are particularly important for this discussion. First is the accountability through clarity of roles and responsibilities. The government committed to the principle, and recognized, that provinces and territories are best placed to design and deliver certain programs under their jurisdiction, for example, health care delivery, post-secondary education systems and kindergarten to Grade 12 education.
The budget also reinforced the importance of predictable long-term stable fiscal arrangements and took a two- pronged track with respect to strengthening equalization and legislating itto 13-14 and, at the same time, making a commitment that general transfers outside of equalization would be provided on an equal per capita basis, ensuring fair treatment for all Canadians, regardless of where they reside. These reforms were part of a package of broad consultations that took place with provinces and territories, Canadians, academics and experts.
The last component of this presentation is a bit of an overview on the idea of expenditure need and the questions of why transfers are or are not weighted in certain ways. Transfer allocation formulas can address both revenue differences or disparities and expenditure differences. Addressing differences in spending is called expenditure need. It basically refers to the ability of governments to finance their responsibilities by considering factors that affect the cost of providing those programs and services.
Typically what we see in the academic literature is that expenditure need is influenced by two broad sets of factors. Demand factors influence the quantity or volume of services provided; for example, how many people does your health care service have to provide or how many houses does a fire protection unit have to cover. Then there are cost factors, and these are the factors that influence the cost of actually delivering the service; for example, what are the wages paid to your doctors, what is the cost of heating the school or what is the cost of snow removal, which can be very different from province to province.
We have a bit of an overview, which you will see in the print version of the presentation that provinces vary considerably in terms of their tax and spending decisions. Because Canada's federation is highly decentralized, provinces are able to establish their own tax bases and tax rates. The Constitution outlines what their powers are. Provinces can decide what to tax and at what rate to tax it. Provinces also decide on the design and delivery of their programs and services and are held accountable by their residents for those decisions.
What we see on a per capita basis when we look, for example, at health spending is that the average is about $3,100 per capita, but that ranges from about $2,700 in Prince Edward Island to nearly $3,600 in Newfoundland. We see similar variations in social expenditures, although the variation can be a little bit higher. The average is about $1,700 per capita, ranging from $775per capita in Prince Edward Island to over $2,800 in Quebec.
What we see with the variations when looking at this data is that provinces decide whether or not they want their systems to be more expansive, more inclusive or more restrictive, and their decisions come out in the numbers.
We see the same thing with respect to revenues. Provinces and territories are able to levy their own taxes and while the average per capita total revenue is around $11,500, provinces range from somewhere around $10,500 per capita all the way up to $14,000 for Alberta.
There is some theoretical appeal to including the idea of expenditure considerations in transfer design. Academics support both a comprehensive equalization scheme that looks both at the revenue equalization and the expenditure equalization. The main rationales for this scheme are to deal with equity and efficiency concerns. By equity, I mean that in a federation we want governments to treat citizens similarly across the country. Equalization programs are intended to enhance a province's ability to provide comparable public services at comparable rates of taxation, and an equalization program can look at those two sides at both the level of service and the taxation.
The efficiency argument is that government actions in terms of their specific policies should not be the rationale for individuals moving from one province to another. We want individuals to live, work and study based on the decisions with respect to the most productive use of their time and where they should most productively be putting their efforts as opposed to moving for beneficial government programs, for example.
In practice, the idea of equalizing for spending could mirror what we do currently in the equalization program. Under the equalization program, we use a representative tax system, RTS. It is considered the gold standard for an equalization program. It is data driven. It looks at classifying revenue sources. Currently, we have five different types of revenue sources. This has changed over time.
The system tries to standardize the sources where provinces can raise revenues. It looks to define a standard or average tax base. Ifall provinces taxed the same, what would that base look like? Itthen looks at applying a national average tax rate.
The important thing about the RTS is that it divorces somewhat from the individual provinces' policy decisions. It looks at what revenues provinces could raise if they all behaved the same as opposed to trying to adjust for individual policy decisions.
On the expenditure side, the same thing can be established. A representative expenditure system, RES, would mean classifying expenditure categories. For example, provinces spend on a number of things. Would an RES system want to cover all the different spending categories, or would it be more beneficial to look at some of the high-volume and high- cost services. For example, health and social programs and education make up about 65percent of total provincial spending, so would it be sufficient to simply look at those three categories, or should an expenditure system look at all the various ways down to the last dollars?
The next step would be to define workload measures to reflect expenditure need and to look at a national average cost unit to see what the average cost burden is for provinces and territories. Again, the important thing to keep in mind is that the RES system is built to be divorce from individual policy choices and look at a representative standard so that if all provinces created the same type of system, independent of their actual policy decisions, how much would they need to be able to provide those kinds of services.
An RES system would be a considerable or fundamental policy change. There are arguments that suggest this would be considered intrusive. The provinces and territories set their own standards and determine what services they want to provide; for example, with respect to kindergarten and pre-school education, do we want a system for four- and five- year-olds as a provincial choice?
There is also consideration with respect to determining the national standard. With respect to health care, for example, what will the provincial reaction be in trying to determine what level all provinces should commit to providing services and if we are measuring them as being above or below that standard?
Trying to determine what data sources to use is also a difficult activity and likely to be somewhat controversial. Charges are that trying to decide what data to use effectively results in picking winners. For example, with respect to post-secondary education, is it better to use a measure of how many students are studying in a province, which would privilege certain provinces that have more post-secondary education institutions and tend to import students; or is it better to pick a measure of all the 18- to 24-year-olds in a province? Other provinces that do not have as many institutions and tend to export students say they would prefer that type of measure to ensure they are able to build the capacity to have a broader post-secondary education system. The correct answer is not inherent.
Picking the data to use is value-laden; it requires choosing different factors and the approaches to measuring those factors. Then there are basic data concerns; for example, with respect to social assistance and social services. There are no good measures currently to use on, for example, poverty measures. Statistics Canada has a low-income cut-off, but it has certain data limitations.
The literature suggests difficulties with respect to the appropriate weights and how to evaluate the weight to be given to any specific factor. If we look at the two broad sets of factors that need to be considered, the volume versus the cost, is it a 50/50 allocation? Does it matter how many seniors you have versus how much doctors have to be paid? Or is the cost of providing the services — for example, the wage — the more important consideration and the bigger cost driver? Should it be given a heavier weight?
In a decentralized federation, is it appropriate for the federal government to set national standards and to try to measure these types of considerations? That is one of the main points to think about.
As indicated, there are many factors that affect the determination of need. With respect to health care, in particular, if we look at demographics, we can look at income levels, vulnerable groups such as the Aboriginal population, the unit cost of providing a service and the population density. Some countries consider a more densely populated area less expensive to service, while other countries consider them more expensive to service.
There are geographical considerations as well as labour costs. Political choices need to be considered; for example, the provincial choice to respond to demand for services not offered in other jurisdictions. Child care is one example. There are also considerations with respect to how well provinces manage delivery of labour and materials compared to their neighbours.
We provided an overview of a very simplified example on health care. For example, with respect to workload, if we had 10patients at a cost of $1,000 per patient, the need would be$10,000. In fact, in determining the workload, instead of measuring 10 patients we could measure the number of patients with heart disease, the number with cancer, the number of premature babies and the number of car accidents. The cost factors must also include salaries paid to health care practitioners and the cost of infrastructure, building new hospitals. The cost of living is considered a very important factor, as is the standard of care to be delivered. We then move from 10 patients times $1,000, or $10,000, into considering whether that is the appropriate weight, whether with 10 patients the $10,000 factor should be increased because the costs can vary. Similar difficulties would arise with any other subject matter, area or sector being considered.
Finally, the O'Brien expert panel report on equalization specifically rejected including expenditure need in the equalization program. It felt that it would increase the complexity of equalization, which would be equally true under a Canada Health Transfer model; that it is difficult to have a policy-neutral evaluation of expenditure need equally as applicable under the Canada Health Transfer; that the measurement of need can be intrusive in provincial areas of responsibility; and that it is difficult to determine exactly what elements are material and should definitely be reviewed as part of an expenditure need consideration.
We have recently heard a lot of debate about transfers. They have been put on a long-term, predictable track. There is a fair amount of consensus, although not unanimity, with respect to federal transfers. The Budget 2007 commitment was relatively clear with respect to the balanced commitment in terms of strengthening equalization and moving to equal per capita cash transfers. While measuring expenditure need is supported in some academic literature, it is recognized as an incredibly complex exercise — not simply a technical change but an actual policy choice.
The Chair: Thank you very much for that very thorough presentation. Senators will want to focus particularly on the Canada Social Transfer, because that is where seniors' programs and aging programs would be funded.
I will begin with an issue that has been controversial for at least 50 years, that is, the concept of per capita transfers. I will give yousome historical perspective. I presented a brief to Mr.Diefenbaker in 1961 about the inequity of per capita transfers with respect to universities. Nova Scotia, which is where I was educated, has, per capita, more universities than any other province in the country. As a result, it educates many students from outside the province of Nova Scotia. Therefore, Nova Scotia is significantly disadvantaged by a per capita transfer.
That is not the topic here, but that is what led me to my interest in per capita funding. We now have a situation with aging Canadians that is happening at a very uneven rate across the country. As an example, from 1956 to 2006, Newfoundland's aging population, that is, those over the age of 65 years, increased from 6percent of the population to 13.9percent, a growth of 7.9percent. At the same time, Alberta's aging population increased from 7.2percent to 10.7, a 3.5percent growth. Therefore, we are now giving far more money to Alberta for people over the age of 65 years than we are giving to Newfoundland.
You talk about equal per capita cash transfers and then you use the phrase "equal treatment of Canadians no matter where they reside.'' Is it equal treatment if the money given to Newfoundland has to fund far more seniors than the money given to Alberta?
Frank Vermaeten, Director General, Assistant Deputy Minister's Office, Department of Finance Canada: That is a very interesting question, and it is covered off in Ms.Campbell's presentation. Ihave been looking at this issue for quite a long time too, although not since 1961.
The issue is whether we will measure one factor in determining the allocation of transfers to provinces. If we measure one factor and make an adjustment for that one factor, do you end up with a more fair transfer system or a less fair transfer system? It is like a partial equilibrium analysis versus a general equilibrium analysis.
You could decide, since there is a higher proportion of older people in Nova Scotia, to make an adjustment for that. However, when counting, will you count the number of students, as you would like to advocate? I suspect that Newfoundland would have less university students than Alberta, so you will adjust the transfer for that. That addresses the workload aspect. Then you will adjust for the number of seniors, the number of students, and also for the number of young children, because children go to primary and secondary school. The obverse of there being many seniors in Newfoundland is that there might be less students in primary and secondary school, so they will get less money for that while Alberta will get more.
In a partial equilibrium analysis we can do that for not only one thing, but for 100 things, because once we decide to adjust for the number of seniors and the number of younger people going to university, we will also have to adjust for the number of snowploughs and the number of roads. Again, this all has to do with workload. The question will be: What is the right amount of support? How much paved road and gravel road should Newfoundland have versus Alberta? This becomes a slippery slope, and you have only looked at the workload factor.
The second aspect is the cost of providing those services. You have given me statistics on what has happened in terms of the number of seniors. Look at what has happened to the cost of living in Alberta and the cost of building a school. Real estate prices have skyrocketed in Alberta. In the last couple of years they have increased 50 or 60percent. If you want to build a new school or new seniors' home, it will cost you much more than it will cost in Newfoundland. Now you are starting to make an adjustment on the cost side. You will do the same thing for universities, snowploughs, etcetera. You must then decide how much you will pay workers, teachers, doctors, or people working in seniors' nursing homes. I do not know whether it is true, but I have heard that in Alberta they pay people $20 an hour to work at McDonald's.
The cost of hiring people has increased, so then you have to make adjustments for that. If you do all that and magically obtain agreement on all those things — it would be a miracle to get agreement from the provinces to go forward on even a few measures — it is not clear what the results would be. In the end would Alberta or Ontario get less than Newfoundland or Nova Scotia? There are all kinds of papers and academic studies out there, and you get mixed results when they measure it because the cost of providing services tends to be higher if you simply look at the cost of living in the more populated provinces. For many academics, that outweighs the cost of the higher workload and numbers you may have to deal with than in Newfoundland and Nova Scotia.
The Chair: You have done a lot of apple and orange comparisons. For example, the federal government does not contribute to primary or secondary education, but does contribute to post-secondary education and a number of programs that specifically target seniors, such as New Horizons for Seniors Program. I am talking about federal programs and federal programs alone. I am not talking about equalization or provincially run programs. I am talking about federal dollars going to a province on a per capita basis, which may not be reflective of the needs of that particular province.
Mr.Vermaeten: You are right that there are general-purpose transfers, specific-purpose transfers and equalization which support all provincial services. It is true that you could say for equalization we are not going to take into consideration expenditure needs. The expenditure needs would include all the things I discussed: snowplows, primary and secondary education and so on. You could look at some general purpose ones, and you could look at the CST, which is there for covering a wide variety of things, social services of all kinds. You would probably want to set that aside and look at only at the Canada Health Transfer. Then I would come to the same question again. It is true that you could come along and take one variable and count the number of seniors, but I think my point would still stand. Have you made a more fair transfer system to provide support for provinces by looking at one thing? We are going to look at only the number of seniors for example, but we are not going to look at the cost of providing those services. Even if you could somehow imagine a way to measure the cost and the workload aspect, have you then made the system more or less fair by picking out one particular element?
The Chair: If you were looking to providing a senior citizen's home in Calgary, even the land cost would be much more significant than perhaps in Newfoundland that you would have to do that. Interestingly enough, the provinces where things like land value are the most expensive also happen to be "have'' provinces in this country as opposed to "have-not'' provinces. It is the "have-not'' provinces with the greatest increase of senior populations, with the exception of British Columbia. Atlantic Canada has a great senior population because, quite frankly, the young people of those provinces are leaving to find work in other parts of the country. The elderly far out number the young in the Atlantic provinces.
Senator Cordy: I am from Nova Scotia, born, raised and still living, so I will continue along this line of questioning. I will not touch the post-secondary issue because this is the committee for aging. I will continue along with how much weight should be given to any one factor.
Ms.Campbell, you referred to the O'Brien report. Maybe 1percent of the population understands the O'Brien report. I am trying to, but it is challenging when you are not an economist, and I am sure two economists could read it and give you different two different viewpoints. You did mention a couple of things. If you weight things, the O'Brien report says it would increase the complexity of equalization. Mr.Vermaeten gave his explanation of that. You also said the measurement of need can be intrusive, and I was not sure what you meant by that remark. How could the measurement of need be intrusive? I believe that is what you said. I jotted it down when you were talking. In the Atlantic provinces, Senator Carstairs explained that we have a higher percentage of seniors. Looking at the need of seniors in Nova Scotia or the Atlantic provinces, could you explain how measuring and looking after that need could be considered intrusive?
Ms.Campbell: The answer has to do with how provinces determine what services to provide. If we try to measure expenditure need, we would look at how many individuals need the service and whether the indicator we are going to use is the number of seniors between 65 years and 75 years or the number of seniors 75 years and older. We could look at census figures. Whether those are the right numbers is a judgment call, but there is no measurement issue. We have standard numbers we can use.
We say we will determine the cost of providing services, so we need to determine what services that provinces provide. Is it ahome care system or a daycare program? Are there transportation-related programs for seniors? For example, is this about providing certain drugs that seniors have a specific need for and difficult to access? What is the gamut of services for seniors we are considering and what level of service do you want to provide? Are we indicating that we want to ensure home visit services that will come four days a week? If we determine that is the average standard appropriate for social services, we can determine how much it would cost to have this home care worker come in four times a week, but is that what provinces are saying they want? Do provinces want someone available to come in every day or only once or twice a week, and is it up to the federal government to try and measure that service provision? Is that really the point?
Provinces determine what services they want to provide, how generous they want those services to be and what the targeted populations are. In order to come up with some way to effectively equalize them, the federal government would need to measure and compare those programs. Is that an appropriate federal role? That is sort of the question about intrusiveness. Even with respect to measuring across provinces, we see this with the health accords pushing to have greater use of common indicators so individuals can compare their health care services from province to province. Provinces are making headway in terms of coming up with common indicators, but it is not easy to agree on the indicators and measure and report on them. The same thing would need to be done for social assistance, seniors programs and whatever area of expenditure need we are considering.
Senator Cordy: Are you suggesting that there be no national standards or policies for seniors?
Ms.Campbell: No. We have linked major federal transfers to the broad criteria and conditions of the Canada Health Act and to the requirement that there be no residency requirement for social assistance. If we were to move into a different regime, that would be a large, broad policy question, and it should not be done simply by making a technical change to the transfers. It is something that would merit national debate.
Senator Cordy: What about targeting funding specifically for seniors? I was on the committee that earlier studied Canada's health care system, and we discovered, unfortunately, that there was money sent to the provinces for health care that was not necessarily used for health care. It was used for roads or whatever. I can remember one situation where money was sent for health care equipment and used at one hospital in one province to buy lawn mowers for the hospitals. Maybe technically you could say that lawn mowers for a hospital fall into the category of medical equipment, but I do not think that was the intent when the money was forwarded to the provinces.
What about targeting money for seniors or for having some strings attached when the federal government forwards money tothe provinces? How do you feel about that, and how would O'Brien feel about that?
Ms.Campbell: I do not believe the O'Brien report really strayed far from the considerations of equalization, that it was important that the have-not provinces receive a sufficient amount through equalization to be able to provide that basic level of services, which includes services for seniors.
With respect to targeted funding, there have been issues in the past, for example, one of the first medical equipment funds, and unfortunately, sometimes the communication coming out from the transfers is difficult.
When we look at health care, for example, provinces spend close to $100 million. The federal transfer is $21 billion, and there are targeted support measures on top of that. Provinces spend as much as the federal government gives them and more on health care, so the money is going where it is supposed to be going.
However, regarding increased targeted transfers for provinces for specific areas — we have had recent examples with respect to child care. In the provinces and territories, the ministers responsible for child care have come together. They have had discussions and framework agreements. Interestingly, the money that is committed flows through the Canada Social Transfer to ensure the greatest amount of flexibility to provinces and territories. That is the consensus among the social services ministers, among the first ministers at the discussions on child care funding, and then provinces report to their residents on how they use that funding. That has been the model that we have been using in the federation for new fiscal arrangements with respect to transfers.
Senator Cordy: When you look at transfers and you say they report to their residents, the form of accountability would be reporting directly, is that right? The Nova Scotia government, for example, would report to the people of Nova Scotia.
Ms.Campbell: Yes. Many of the health accords and the child care framework agreements have specific requirements about reporting, listing some common indicators and deadlines for when they would like to see provinces moving toward using these common indicators. Child care reporting is one of the better examples we have seen in the last years. Annual reports come out. There are delays perhaps in terms of how quickly the information gets out. There is information that goes from all of the provincial departments through their legislative assemblies, much like our departmental reports in the parliamentary system.
Mr.Vermaeten: I will supplement that with one important thing. Ms.Campbell is absolutely right. From time to time, money has been put into transfers, but the general trend here is to work with provinces to determine a collective purpose for what to do with that money, but the allocation itself is still equal per capita. For example, money is provided for electronic health records, for creation of child care spaces and various other things. However, when you are using the major transfers, the approach has been to provide the money on an equal per capita basis.
That does not preclude the federal government from having other transfers for specific purposes, whether it is transfers to individuals or other levels of government. There are many instruments that governments can use, but the overall trend has been, if you look at the relationship between the federal government and the provinces, one of cost sharing where, de facto, it was intrusive. The province submits a bill saying that it has just spent money on a seniors home and thus the federal government should pay half because it is eligible for cost sharing, and a federal administrator says this one is eligible and that one is not. That process has moved to providing block transfers that reflected the allocation of past spending patterns, and that has moved to equal per capita allocation, where, as Ms.Campbell said, the accountability is one of provinces to the people in the province. Therefore, many things are possible, but there is that overall trend, and it is, arguably, a good trend in terms of maturing of the federation.
Senator Cordy: I should like to get back to the point that Senator Carstairs made earlier, namely, the weighted per capita. If we look at provinces other than British Columbia, they are the have-not provinces. How are we to expect that Newfoundland, Nova Scotia, New Brunswick and P.E.I. will provide equal treatment for their seniors under the Canada Health Act if they are being given money per capita and not looking at some of the other "weights,'' as you referred to them?
Ms.Campbell: It is a broad policy question, but the transfers are designed to provide the flexibility to provinces to create health care programs and social programs that reflect the policy choices and the preferences of their respective residents, that they are not expected to create a program reflecting a national standard that has not been agreed to. As provinces move forward on designing and delivering their programs, they have federal support and they are able to raise their own source revenues, they have equalization to ensure the revenues are there. There are disparities across provinces in terms of geography and dispersion, and these are not taken into account in the health and social transfer, in the sense that the discussions have taken place on how many variables would need to be considered and whether it is worth it trying to make all the adjustments to the transfers. On the other hand, do we say that the best proxy of need is looking at how many people are in your province or territory, and the different pressures — more youth, more need for child care services, more need for support for seniors, post-secondary education — all tend to come out roughly the same, namely, that provinces and territories do not need to worry about how to design and deliver the program to see if they can effectively ensure that their programs help to get more money for them out of the health and social transfer because they are weighted.
It is a bit of the balance between the policy discussion, which is broad — provinces and territories make the choice — and simplicity. Maybe there is some trade-off as a result of the fact that different factors are not taken into account but the agreement is there that, overall, per capita, population, is the best proxy of need.
Mr.Vermaeten: I will supplement that. The important part is that you do have equalization, and if you believe that equalization is doing what it is supposed to do, it brings all provinces to the same level of capacity. It is true that before equalization a province like Prince Edward Island has much lower capacity to deliver services, much less revenues than, say, Ontario or British Columbia, but post-equalization their fiscal capacities in terms of revenues are virtually identical. The only thing at issue then is the cost — and again, you can measure a workload factor, namely, number of seniors, but then you also have to measure the cost of providing that service. If you take Ontario and P.E.I. or Nova Scotia and Newfoundland, they have virtually identical revenue-raising capacity after equalization. Let us say the amount is $6,400 per capita, give or take a couple of bucks. You might say now that province X has more seniors but it costs province Y more to provide those services.
[Translation]
Senator Chaput: Still with respect to the per capita funding formula, to my way of thinking, Canada is a federation and as a federation, certain standards should be federal standards. You say that age is only one factor among many others. That may be true, but seniors have never accounted for a higher percentage of the Canadian population than they now do and the numbers will increase.
Should this particular factor not be looked at more closely?
There are more senior citizens than ever before and in those provinces with higher concentrations of seniors, I think this factor has other implications.
It is a recognized fact that some seniors live well below the poverty line. It is also no secrete that many of the seniors who fall into this category are women and that often, they are poorer and more isolated. In some provinces, seniors live in remote regions. Isolation can lead to depression and illness and travel can be a very costly proposition.
Furthermore, these provinces have lower revenues because poorer seniors pay less tax as a result of their lower income. They consume less as well. All of these factors must be taken into consideration by the provinces that have a higher percentage of seniors.
I would like to hear you views on the subject. What do you think about this?
[English]
Mr.Vermaeten: Those are all good and important points. Yes, the aging population is certainly a major issue that we have to confront, and there are many associated costs. We are back to the same answer again. This is a major factor, and there are several other major factors. You could say, we will not look at the other major factors, such as the number of students, we will look at only one — seniors. Does this make the system fair?
The challenge is how to adjust for these differences in costs. Some programs within the government already do that automatically. For example, the GIS and OAS systems automatically transfer to individuals. They are income-tested and will automatically go to the seniors. As the number of seniors in a province increases, that province will benefit from more support. There is something in place for that.
We return to the question of whether simply counting the number of seniors in each province and therefore giving more money to that province increases or decreases the fairness. Given that there is a fixed pot of money to give to provinces, you will now give some provinces more because they have more seniors. Does it make it fairer if you have not taken into account the cost of providing that service?
It is true that low-income seniors will pay less tax, but the equalization program does account for that; so if you have more seniors and they are paying less tax, that province will be eligible for more equalization. There is an automatic compensation that already happens on that front.
Senator Chaput: If a province has a higher degree of poverty in its elderly population, would you say that that could be a factor? If, as an example, 75percent of a province's elderly people are considered to be in poverty whereas only 20percent of the elderly of another province are considered to be poverty, does that not make a difference?
Mr.Vermaeten: Yes, I would say it absolutely does. However, from an equalization perspective, to the extent that a province has a low number of seniors paying taxes because 75percent are living in poverty, that province will then be appropriately compensated, so that it has the same amount of revenues as the province with 20percent seniors.
You can argue that, yes, they now have to provide these services, and that is when we are back to how much it costs to provide those services and whether we can measure it. Then are you making the system fairer by compensating for one specific cost. Ms.Campbell will add to that.
Ms.Campbell: I have two points. One is with respect to the aging of the population, and we have seen under the health accords that first ministers and health ministers were clearly concerned with the impact of the aging population. One of the three priorities of the health accords is home care and home care reform, primary care reform, and home care in particular with respect to having people appropriately cared for in a setting that is less expensive than a hospital and trying to approach the aging of the population from the policy perspective of what services can be provided.
My second point is with respect to the investments in the health transfers. They have been considerably increased. The have-not provinces, because of the way the tax transfers are handled, receive considerably more cash — equal per capita total entitlements but considerable cash entitlements — compared to the have provinces, where tax transfers are worth so much more.
Senator Keon: This is a fascinating discussion. When it comes to equalization, no one with a social conscience can argue againstit.
Transfer payments are such a blunt instrument that there is a tremendous waste and they are horrendously inefficient. We have certainly seen that in health.
As it relates to seniors, we have a problem. It is all very fine to sit there and say, "We have tweaked the transfer payments here and there,'' and so forth, but the reality is that nothing is being done for seniors at the end of the day.
The federal government under the Charter says that everyone has the right to health, and it is implicit when you say that they have the right to food and shelter. Many seniors do not have appropriate food and shelter, and nothing is being done about it, because we are going to give the provinces money and that is their responsibility; they can do what they like about it. Provinces must preserve their flexibility.
It is true that through special programs and special instruments the federal government can step up to the plate on occasion and institute a program, but they are frightened about that as well because they do not want to leave the provinces holding the bag when they step out, when the sun sets in five or 10 years.
Here is the dilemma for a committee such as ours: We would like to write some recommendations that would have a real effect on the lives of seniors. This is a unique time in the historical evolution of our country. It probably will not occur again for a while. When we get through the bulge, we will have time to breathe and time to adjust, and we will not get caught in this.
There should be much more of an emphasis from Finance Canada on leadership — leadership with commitment and leadership with money. Forget about the sunsetting. Solve the problems of the day. There are plenty of resources in the country to help us solve those problems of the day. It is unthinkable that, in a country like this, we have old people without a decent meal in the evening, without a decent bed to lie in and without a decent house. That is not expensive. If this were organized at the community level, and if the Government of Canada would encourage the organization of this at the community level, many of these problems could be overcome.
A few years ago, I visited President Carter at one of his projects, where he was there with his wife. He had a carpenter's apron on and he was building houses for poor people. He was no longer president, so he could not build enough of them, but he was doing his bit. I think the housing problem for seniors in Canada could be solved very quickly. It is just that we have this tremendous, insufferable inertia through federal-provincial community relations or federal-provincial-civic community relations. Getting to the ground with a program is almost impossible.
You were very good, Ms.Campbell. I thought you preached your gospel very well. You were also good, Mr.Vermaeten. You know your stuff and answered questions very well. I am not underestimating what you know. However, I do not agree with your message. What I want to hear from you is your thoughts — and let us just focus on the housing program for seniors. Let us not even move into the property thing and the food banks, and all of that stuff. Let us leave that for another day. Let us just talk about housing and giving a senior a decent place to go to when it is 30 below zero. I want to hear what you have to say about that.
Ms.Campbell: You started your comments with a very astute observation, which is that these are very broad fiscal arrangements and they are not fine tools to target an individual or a very relatively narrow problem under health, post- secondary education or social programs, for example. If there is the will, more targeted programs are better served either by things with shorter time lines or by more concrete examples with respect to where the funding is supposed to go — that is, more of a parameter-driven program.
The federal government has provided money, for example, for affordable housing in the last couple of years. It has used trust funds to provide the funds to provinces and territories, again indicating that affordable housing is a provincial responsibility, that the federal intent is that the money go towards capital rather than, say, ongoing operating costs, and that provinces and territories then turn around this funding as they determine is most appropriate in their jurisdictions.
Provinces are responding and are showing where the money is going. There are ways to get targeted transfers out to provinces and territories. However, with respect to determination of priorities, it is important to put it in the context of developing an overall set of budget programs and decisions that would be taken going forward — for example, the actual needs and measurements in trying to determine what kind of programs would be good responses — and the government has succeeded in some areas and not so much in others.
Trying to determine or trying to target specific needs with broad transfers does cause some concern with respect to what actually can be achieved.
Senator Keon: You obviously are not in a position to influence policy, so it is unfair to be targeting you. However, the reality is this: I do not think the federal government shows leadership. Regardless of who is in power politically, they just do not show leadership and flexibility in solving social problems of enormous importance. This great cop-out of the federal-provincial mosaic, shall we say, lets everyone off the hook, but it does not involve the problems of the day.
I think Finance Canada should have more flexibility. They are giving too much money away without any accountability. They should have flexibility for spending money accountably on problems of the day that need rapid solutions instead of this ongoing ho-hum.
Ms.Campbell: These are concerns that we heard during the fiscal balance consultations. As you are aware, there is the other side of the story as well, which we also heard. Your points are well taken.
Senator Keon: I am just making my points, because I do nothave much time for the points on the other side of the equation.
The Chair: Any other questions, senators?
If not, I wish to thank the witnesses for their presentations. Wedo realize that you administer the programs. You are sometimes invited to propose new programs, but for the most part the policy angle comes from the elected and sometimes appointed parliamentarians, it does not come from you. Thank you very much for the depth of understanding that you have presented to us on the programs as they do exist.
Mr.Vermaeten: You are welcome.
The Chair: Thank you.
Honourable senators, I will now declare the meeting adjourned.
The committee adjourned.