AFB 2020 as COVID-19 policy response: A plan to protect workers and the public from an unprecedented crisis

Canada and countries across the globe face a daunting challenge with the advent of COVID-19, the novel coronavirus. The World Health Organization (WHO) has declared a pandemic, as countries the world over try to contain the spread and health authorities race to treat casualties under incredible pressure.

These are not normal times.

Several provinces have implemented mass closures of educational institutions, child care centres and community centres; some have cancelled large events and requested people returning from travel to self-isolate to try and slow the spread of COVID-19. Social distancing being recommended, in pursuit of containment.

We are entering uncharted territory, as the combination of COVID-19 and a global oil sell-off threatens not only public health and safety, but also the stability of our economy. Now is a time for social solidarity, government leadership and expedient, non-partisan co-operation to do everything it takes to protect the public.

The federal government has announced a $1-billion financial package divided between research, provincial and territorial supports, and employment assistance. This is an unprecedented response to a situation that continues to evolve. But is it enough? While the 2003 appearance of Severe Acute Respiratory Syndrome (SARS) led to new investments in public health, that funding dwindled over time. And because we are only as strong as our weakest link, ongoing investments in disease prevention, health promotion and protection are critical—something the COVID-19 pandemic makes starkly evident.

Every year, the Alternative Federal Budget (AFB) maps out a fiscal plan to ensure public health, safety and well-being, reduce poverty and income inequality, and foster greater inclusion. AFB 2020 is no exception, though the rapidly changing reality of COVID-19—and the necessity for fluid government responses—means the plans laid out in this roadmap should be considered a baseline. Bolder fiscal measures will most likely be required in the weeks and months to come.

AFB 2020 has ready solutions to combat the present crisis along three timelines: short term, medium term and long term. Our AFB 2020 COVID-19 emergency plan would address the immediate needs of workers, shore up the resilience and responsiveness of social programs and ensure that the needs of vulnerable communities are adequately addressed.

Short term

The economic impacts of this crisis on workers and Canadian households could be severe. The federal government’s most responsive tool for income supports is employment insurance (EI), which has the capacity to respond rapidly to emerging economic impacts on workers. Unfortunately, many unemployed workers can’t access the system and its supports, and even when they do, benefits are low. COVID-19 is exposing the inadequacy of Canada’s EI program. To address these issues the AFB will:

1. Reduce the number of working hours required to qualify for EI to 360 hours for regular and special benefits (like sickness leave): $510 million.
2. Increase the benefit replacement rate of EI from 55% to 60% of insured wages, though the crisis would merit an even higher replacement rate: $1.7 billion.
3. Double the EI sickness benefit from 15 weeks to 30 weeks: $645 million.
4. Create a $300/week floor on benefits for low-income claimants to EI: $900 million.
5. Create a separate emergency fund for workers who need to quarantine but don’t qualify for EI. This approach was employed during the SARS outbreak, but in a limited manner for health care workers. Given the rise in precarious and gig economy workers since then, it should be expanded to all workers, with similar payouts as those who qualify for EI under current regulations.
6. Double the Canada Child Benefit (CCB) for a month. The CCB is paid monthly and the next payments go out on March 20 and April 20. Simply doubling this benefit would forego any complex redesign and expediently support parents whose children are out of school who may have additional child care costs or be missing shifts. This would provide an additional $564 a month to families with young children at a time when they need it most: $2.1 billion per month.

Medium term

Over the coming months, the Canadian economy will likely be pushed into recession by the economic impact of the coronavirus and the oil sell-off. One way to expediently help Canadians weather the blow is through income transfers. To that end, the AFB will:

1. Implement the Dignity Dividend: $4.6 billion

This new federal transfer will provide up to $1,800 per adult and child living with low-incomes, although the benefit tapers off as income rises. It has the potential to lift 370,000 people out of poverty, which would act as a key stabilizer during a recession and make those households more resilient thereafter. This credit uses the pre-existing GST credit infrastructure and could piggyback those payments on April 3, 2020 and July 5, 2020.

2. Improve transfers to low-income seniors: $5.7 billion

Seniors risk being hard hit by the COVID-19 crisis. Infection rates among older adults are much higher than other age groups, and so are fatality rates. The Guaranteed Income Supplement is a key income transfer to support low-income seniors. Allowing more of it to be kept by seniors receiving Canada Pension Plan revenue and increasing the base value by up to $1,000 will help sustain these seniors’ incomes. The next payments are on March 27, 2020 and then April 28, 2020.

3. Expand the Canada Housing Benefit to support self-isolation: $250 million

The Canada Housing Benefit is starting to provide benefits in 2020 to low-income families who devote large amounts of their income on rent. The AFB doubles the federal contribution to that program so that an additional 200,000 low-income families would be able to afford rent during the COVID-19 crisis. This expansion would prioritize families forced to isolate and lose income as a result.

4. Eliminate interest on loans received through the Canada Student Loan Program: $650 million

The AFB not only eliminates interest on student loans, it extends the six-month post-graduation loan repayment grace period for full-time students to part-time students.

Long Term

The COVID-19 crisis will severely test our social infrastructure over the coming months and years. It will also highlight how decades of funding inadequacies through inadequate investment, cost-cutting, and austerity budgeting have diminished the public system’s ability to respond in times of crisis. The following substantial reforms must be made to our social infrastructure:

1. Boost the health care escalator: $600 million

Federal transfers to the provinces are now linked to nominal GDP growth or 3%, whichever is more. The upcoming recession will almost certainly pull GDP growth below 3%, resulting in a 3% health care escalator. Paradoxically, this means that the growth in federal transfers will fall from 3.6% (in 2019-20) to 3% (in 2020-21) in the middle of a health crisis and probable national recession. The AFB would set the health care escalator to 5.2% a year, as agreed upon by the provinces and health advocates. These new funds would help end hallway medicine once and for all, to ensure we have capacity during seasonal surges like flu season, but also to ensure more humanitarian conditions for anyone in emergency.  They will also support public health units to face outbreaks like coronavirus and seasonal flu.

2. Implement a National Seniors Care Strategy for long-term care and home care: $800 million in first year

Unfortunately, older adults are at greater risk from infections such as COVID-19. Our systems aren’t up to the task of caring for seniors currently, and things will get much worse as the epidemic progresses. The AFB would create a National Seniors Care Strategy. It would start by ramping up spending on long-term care, from 1.3% of GDP to 2% of GDP, with $800 million in the first year, and would target home care funding, which is set to expire in two years.

3. Create a poverty reduction transfer to provinces: $4.5 billion

The recession that will likely accompany this health crisis places a further burden on families at or under the poverty line. The AFB would create a dedicated transfer to the provinces to support poverty reduction strategies already in place, premised on meeting their poverty reduction goals. The AFB’s poverty reduction measures would halve poverty rates by next year, moving up the present federal plan from 2030 to 2021 (using 2015 as the base year).

4. Invest in child care: $1 billion

Child care workers will be on the frontlines of the COVID-19 battle, caring for children and supporting families who may be employed in sectors that are also vulnerable to the current pandemic. With child care closures during the crisis, some workers will be unemployed with little financial buffer, given how low-paying the sector is. The AFB would build a more affordable system for parents, which boosts worker wages while expanding the number of child care spaces available in Canada.

5. Address the just transition for energy workers and communities: $1 billion over 10 years

As COVID-19 hit Canada, oil prices have plummeted. This means energy workers and their communities will be doubly impacted. As we continue toward a decarbonized Canada, these workers can’t be left behind. The AFB will implement a National Decarbonization Strategy and a Just Transition transfer to retrain workers for the jobs of the future. The full value of the transfer is contingent on an equity assessment to ensure the benefits are fairly distributed to all affected people in each community, whether or not they work directly in the fossil fuel industry.

6. Restore fiscal capacity, including by closing tax loopholes, so we can pay for these priorities: $52.6 billion in new revenue

As we move swiftly to invest in social programs and provide immediate and longer-term assistance to workers and families, deficits should be the furthest thing from governments’ mind. At this point the federal government has never paid a lower interest rate on its debt. In the long term, making the tax system more fair, accountable and progressive, by closing tax loopholes and shifting taxation to those who have benefited most from the last decade of growth, is necessary to restore the fiscal capacity required to pay for key programs like health care and income supports on an ongoing basis.

Summary

A global pandemic is a sobering reminder that public priorities matter, that governments have an active role to play in ensuring the public’s health and safety, and that we need to act in social solidarity, to invest in lasting changes that will make us more resilient, improve community well-being, ensure that inequality is addressed, support the most marginalized and disadvantaged, and improve the quality of life of all Canadians.

The priorities in the AFB have always addressed both the basics and the big picture. They target assistance and support to the workers, families, communities and sectors that need it most, and support a robust public sector with broad programs that improve sustainability and equity on a socially transformative scale. In times like this, the AFB’s prescription is the cure.

Housing and food insecurity are critical determinants of health, and we’ve underinvested in strategies to tackle these challenges for far too long. The AFB provides meaningful investments to address both.

Education and social inclusion are also key determinants to a healthy society and resilient, cohesive communities. The AFB outlines provisions to ensure newcomers get the support they need and advances a progressive vision for cradle-to-grave education. Its investments in early learning and child care, youth supports and post-secondary education and training provide young people and students of all ages with the foundation they need to thrive.

The AFB proposes necessary policy changes to address the rise of low-wage, precarious work—from the gig economy to the creative sector—and its disproportionate impact on women and racialized workers. As a result, the AFB rapidly accelerates the government’s poverty reduction goals of cutting poverty in half by 2030. We can do it in 2021.

The AFB also sets out a bold plan to address issues that have been neglected for more than a generation: poverty; declining infrastructure; the lack of potable water, decent housing and other infrastructure in Indigenous communities; and the immediate and urgent need to address the climate emergency. It demonstrates an international trade agenda that enshrines workers’ rights and protections while protecting the environment.

COVID-19 has presented political representatives, policy-makers and the public with an unprecedented point of reflection on the society and economy we have built, who has been left behind, and what needs to be improved. Since 1995, the AFB has set out a plan to address inequality while investing in social programs and infrastructure to ensure their efficacy and long-term sustainability. It addresses the scourge and the racialized and gendered impacts of low-wage, precarious work while meeting our commitments to the environment, reconciliation and the elimination of poverty. And its proposals provide a clear roadmap to address the immediate and medium-term impacts of COVID-19—or any crisis of this magnitude—while providing long-term solutions to strengthen our society and economy going forward.

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The CCPA thanks Trish Hennessy for her help in drafting this post, which is included as a preface to AFB2020. The Alternative Federal Budget 2020: New Decade, New Deal is available for download at www.policyalternatives.ca. For more information and interviews, contact: Alyssa O’Dell, CCPA Media and Public Relations Officer, at 343-998-7575 or media@policyalternatives.ca.

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