It’s been a busy season for backtracking on government efforts to rein in the costs of pension and benefits programs.
In March, the federal Liberals announced they’d reverse a decision by the previous Conservative government to raise the eligibility for old-age security to age 65. Then in April, the Ontario government said it would backtrack on a plan to increase the deductible and copayments under the Ontario drug benefit program for seniors with incomes above the low-income threshold.
Change is hard but is often necessary, particularly when, as is the case in these two instances, the government is improving support in other ways. The federal budget, for example, provided for a significant boost to the top-up benefit under the guaranteed income supplement for low-income seniors. Similarly, the Ontario government is raising the low-income threshold to qualify for no deductible and a $2 copayment under the drug program.
It’s certainly valid to question such changes. Ontario’s low-income threshold under the drug program is quite low, so the change would have meant cost increases for people who still earn very little. And it’s not surprising people would challenge changes to a long-established entitlement program such as OAS.
Read: Why OAS needs a makeover
Nevertheless, as Morneau Shepell chief actuary Fred Vettese pointed out in a recent column on benefitscanada.com, Canada was following other countries in raising the age of eligibility for government pensions. And with people living and able to work longer, in addition to a shrinking workforce, it may no longer be sustainable to leave programs like OAS as they are. In many ways, raising the age of eligibility made sense.
As with many reforms, politics and expedience can get in the way.
In 2012, economist Don Drummond, in his report to the Ontario government on public finances, suggested the province should terminate its pension benefits guarantee fund or look at transferring it to a private insurer given the concerns about sustainability. Four years later, the fund still exists despite Drummond’s comment that “Ontario is the only sub-national jurisdiction in the world with a pension benefits guarantee fund.”
While there may be good reasons not to proceed with such changes, the trend towards backtracking on reforms that, in some cases, make sense from a policy perspective in the name of political expedience is unfortunate. It’s not a new trend, of course, but given Canadians’ reticence to pay more in taxes, premiums and fees and the general concern about deficits and Canada’s long-term prosperity and productivity, something will have to give.
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