Moving the policy dial: How are we doing?

22 June 2018
Nobody working to financially empower people with low incomes needs to be convinced that policy change is needed to remove systemic barriers, create a fairer playing field, and enable more equitable financial outcomes for all Canadians.  So when it comes to moving the policy dial, how are we doing? 
 
To answer this question, we need a yardstick to measure progress, so I’ll use the recommendations in the ABLE Network’s submission to the federal government’s 2017 poverty reduction consultation. These recommendations touch on a wide range of policy issues and many are equally à propos for provincial governments.
 
  1. Expand our definition of poverty to include asset poverty
  2. Monitor and report publicly on the financial inclusion and health of Canadians and investigate disparities
  3. Invest in community capacity to connect Canadians to their benefits
  4. Build financial empowerment into other government programs where it can improve outcomes
  5. Help Canadians with low incomes to save for emergencies and longer term goals
  6. Work with provinces to lift asset limits for people receiving social assistance/disability support
  7. Increase RESP and Canada Learning Bond uptake by making enrolment automatic at birth
  8. Ensure people with low incomes have access to financial products and advice they need
  9. Curb predatory financial services to protect consumers reliant on high cost, alternative financial services  

1. Expand our definition of poverty to include asset poverty

What gets inspected, gets respected but no Canadian government is formally tracking and reporting on asset poverty, so there is still work to be done on this front. There is growing awareness in policy circles, supported by evidence, that savings and assets play a key role in preventing, and improving people’s ability to exit, poverty. Forthcoming federal and B.C. poverty reduction strategies will tell us whether or not this message is getting through. 

 

2. Monitor and report publicly on the financial inclusion and health of Canadians and investigate disparities
 
Better monitoring and research are also important ways to shine a light on asset poverty, and other challenges like financial exclusion and income volatility, that are undermining the financial health of Canadians. Canada has real strengths when it comes to monitoring household financial health, but also important gaps when it comes to longitudinal, micro-economic, community-level and ethnographic data. Statics Canada is exploring promising ways to do more with existing data, as well as new data sources, but the real goldmine lies in Canada’s banking and payments data. These are vast untapped resources that could dramatically increase our understanding of Canadians’ financial lives and challenges. To tap into these, though, the federal government needs to bring key stakeholders from all sectors together to collaboratively build a more up to date, comprehensive and effective monitoring and research program. Prosper Canada is working to encourage this process.
 
3. Invest in community capacity to connect Canadians to their benefits
 
ABLE members have been remarkably successful at getting benefits take-up onto the federal policy agenda. Major investments have been made to double CRA’s Community Volunteer Income Tax Program (CVITP), expand regional outreach and telephone services, and automate key benefits to lift 70,000 more Canadians out of poverty.  
 
But many vulnerable Canadians are not eligible for CVITP services or live in unserved rural, remote and northern communities. Complementary community supports and delivery capacity are needed to ensure those who need hands-on help that CRA can’t provide on its own are not left out. 
 
Federal and Ontario funded pilots have enabled over 56,000 vulnerable Canadians in 14 communities to improve their incomes by $128 million in three years, but strategic collaboration with community sector networks and provincial/municipal governments is needed scale these efforts. CRA is doing its part, so it’s time for Employment and Social Development Canada (ESDC), as the federal poverty reduction lead, to step up too. Connecting Canadians to the benefits already promised to them should be job one in the forthcoming federal poverty reduction strategy with investments to match.
 
4. Build financial empowerment into other government programs where it can improve outcomes
 
This is very much a work in progress.  The Ontario government has two large scale financial empowerment (FE) pilot programs underway to help assess whether financial empowerment services should be rolled out more broadly, possibly within its social assistance program. Federally, Immigration, Refugees and Citizenship Canada (IRCC) is funding innovation and tools to help integrate FE into settlement services for newcomers and ESDC is evaluating proposals to expand support for Canada Learning Bond enrolment, but other important opportunities to build financial empowerment into key programs on a sustained basis are largely unexplored.  
 
The most obvious priority would be to integrate financial empowerment into the federal government’s revamped Homelessness Partnering Strategy. This strategy is based on the ‘housing first’ policy approach developed in the United States, in which financial empowerment is a core component to build housing stability and reduce recidivism. Financial empowerment somehow fell off the truck when ‘housing first’ was imported to Canada, but ESDC should be reintroducing it ASAP to improve key strategy outcomes. 
 
5. Help Canadians with low incomes to save for emergencies and longer term goals
 
Currently, the federal government offers people with middle and higher incomes generous financial incentives to save for retirement in RRSPs, but no comparable investment to people with low and modest incomes saving in Tax Free Savings Accounts (TFSAs). People with disabilities can access generous incentives through the Registered Disability Savings Plan (RDSP), but steep eligibility and enrolment barriers severely limit participation. At the same time, most Canadians with low and modest income, have little or no liquid savings for emergencies, so are just one income ‘dip’ or expense ‘spike’ away from financial trouble. 
 
Common Wealth, a social purpose business dedicated to improving financial security for modest income workers, has begun developing a ‘savers tax credit’ proposal they would like to see adopted in the 2019 federal budget. This would offer financial incentives to low and modest income Canadians who save for emergencies and/or the longer term. This proposal aligns well with federal efforts to encourage Canadians to save more and to build a more equitable tax system. We will be bringing this to ABLE’s Policy and Research Action Group for feedback in September, so stay tuned!  
 
6. Work with provinces to lift asset limits for people receiving social assistance/disability support
 
This responsibility lies with provincial governments and progress was very modest and incremental until 2015, when British Columbia (B.C.) increased asset limits for people receiving disability support to $100,000 ($200,000 for couples). Following In B.C.’s footsteps, the Ontario 2018 Budget lifted asset limits for singles on Ontario Works to $15,000 ($20,000 for couples) and eliminated limits altogether for people on disability support starting in 2019.  As the impact of these changes is assessed, more provinces should soon be comfortable following suit, so this is a huge policy win.  
 
7. Increase RESP and Canada Learning Bond uptake by making enrolment automatic at birth
 
ESDC’s Learning Branch has been working hard and collaboratively with stakeholders to expand take-up of the Canada Learning Bond, but progress remains slow due to the inherent unwieldiness of the program’s design.  ABLE Policy and Research Action Group member, Dr. Jennifer Robson from Carleton University has put forward a bold idea for redesign, but policy makers have been reluctant to go down the redesign road, despite their desire to help more families save for their children’s education. More advocacy is needed to get them over this hump, because good design is a far more cost-effective solution than more outreach, however welcome this may be in the interim. 
 
8. Ensure people with low incomes have access to financial products and advice they need
 
Canada’s banks are at an important crossroads when it comes to their role and relationship with Canadians. The globalization of the financial marketplace, explosion of new financial products, rise of fintech, and data analytics enabling banks to know their customers like never before, have all enabled banks to deliver value and drive sales and earnings in new ways. These have all coincided, however, with an appreciable decline in the financial health of Canadians. 
 
It’s time to articulate a new consensus on what we can and should expect from our banks.
We would argue that ensuring banks adhere to the rules is not enough. Banks alone cannot eliminate barriers to financial inclusion, capability and opportunity for Canadians, but they are powerful institutional actors with infrastructure, expertise, data, tools, resources and the potential to make an even greater positive impact for Canadians. 
 
Our goal should be to make Canada’s banks the best in the world at actively supporting all citizens to build their financial well-being.  Last fall, the ABLE Network presented its ideas on how to do this in its submission to the federal financial sector review -- This is Nation Building in the 21st Century: Building Financial Inclusion and Health. Governments are growing more concerned with Canadians’ flagging financial health and more open to new ideas on how to fix it but concerted advocacy will be needed though to move these ideas forward. 
 
9. Curb predatory financial services to protect consumers reliant on high cost, alternative financial services  
 
Thanks to advocacy leadership by organizations like ACORN, a national membership organization of people with low incomes, and Momentum, a Calgary-based Financial Empowerment Champion organization, provincial governments have introduced significant new legislative and regulatory measures to push back against high cost, high risk alternative financial services. In some provinces, they have also empowered municipal governments to do the same. Quebec already had very strict consume protection laws in place but the remaining nine provinces have all implemented important regulatory changes or (in Newfoundland’s case) are waiting for federal approval to do so. Kudos to the Financial Consumer Agency of Canada (FCAC) for producing excellent research on payday lending and its impact and for convening provincial regulators to share info on their approaches and what was working. This is a great example of federalism at its best. There is still room for tightened rules and stepped up enforcement, but these changes are a great start!