Budget does little to help low-income earners

Hey there, time traveller!
This article was published 03/06/2016 (3446 days ago), so information in it may no longer be current.

Manitobans have been promised a comprehensive approach to poverty reduction by the new Progressive Conservative government. Initial details of its plan are scant, including a tax freeze that will not buy low-income people as much as a book of bus tickets. There are also some positive commitments to follow through on programs in housing and rent assist; however, the extent of what was revealed as a poverty plan in Manitoba Budget 2016 lacks the focus required.

A legislated requirement to assess poverty in Manitoba was barely met with a three-page budget paper on poverty and social exclusion. Manitobans are left with a murky understanding of the government’s strategy and “the budget measures that are designed to implement the strategy,” mandated by the Poverty Reduction Strategy Act. Manitobans will have to wait to hear how the government intends to proceed with initiatives around food security, adult literacy, child care and mental health.

EIA recipients will not have their basic-needs budgets increased in 2016. Households with only four dollars per day per person for food will continue to need to rely heavily on food banks. Meanwhile, food costs are expected to continue to rise at more than double the rate of inflation.

Low-wage workers will be hit hard if the province does not follow the pattern of annual increases in minimum wage. While tax brackets are now indexed to inflation, inflation will cut deeply into minimum-wage-earners’ incomes. Freezing the minimum wage would cost workers $400 in lost real income in 2016. Meanwhile, the small business tax-free threshold was lifted by $25,000. If government can help small businesses with tax subsidies, it should also help their employees by increasing the minimum wage to a living wage. This will give everyone more buying power and will help the economy overall.

There were some positive initiatives in the budget. Much of the existing infrastructure of poverty reduction will be left in place. Manitobans who depend on the programs delivered by neighbourhood renewal corporations will be pleased to see there are no funding cuts to Neighbourhoods Alive. Rent Assist and shelter benefits will continue to be set at 75 per cent median market rent and be tied to inflation, a pledge that will cost government an extra $29 million in 2016. The completion of 500 units of social housing over three years, along with declining federal operating agreements, will lead to a 56 per cent increase in the housing budget.

The budget also announced Manitoba will cut the seniors’ school tax credit for high- and moderate-income seniors. Seniors with incomes over $63,000 per year do not face a housing crisis in Manitoba. It is fair to ask them to contribute to the education of the next generation. As well, by administering the credit through the income tax system, there will be administrative savings and more low-income seniors will be likely to apply.

Government intends to spend much of the next year pivoting towards new policies, defining its own direction. The outlines of its intended course are provided in the budget: there will be a further emphasis on tax cuts for low-income Manitobans in 2017, more use of social-impact bonds for service delivery, and economic-development zones for First Nations.

There are opportunities for new economic development with First Nations urban-development zones. Long-standing land claims need to be settled to provide a firm basis for indigenous economic growth. However, with poverty rates of aboriginal people off-reserve exceeding 26 per cent, a broader approach is needed.

Social-impact bonds are, at best, an untried experiment in poverty reduction. The limited experience of other jurisdictions suggests they may only have applicability in pilot programs when combined with a social enterprise approach. In other places, they have been a costly diversion of resources from direct service delivery to the profits of bond holders. The evidence to date suggests they should not be seen as a “silver bullet” to the multifaceted social problems in Manitoba.

The province’s tax plan will not put a dent in poverty rates. This budget will save most low-income people $16 per year, while providing nothing to the lowest-income earners. Middle-income earners will get a further $10 under the tax plan. Wealthier Manitobans, the least likely to notice, will get an $83 windfall. A continuation of similar tax cuts will reduce neither poverty nor inequality.

Manitoba would be better off making investments in a comprehensive approach including higher social-assistance rates, housing, child care, living wages and mental health to bring down poverty rates. With record-low interest rates, our government has an opportunity to borrow now to strengthen the long-term infrastructure for poverty reduction in Manitoba.

Josh Brandon is a community animator with the Social Planning Council of Winnipeg.