Budget 1997 Building the Future for Canadians - Budget Main Page -

Fact Sheet

Investing in a Stronger Society: Towards a National Child Benefit System

Too many Canadian children who are growing up in low-income families are not getting the start they need to become healthy, happy, educated and productive adults who can contribute fully to the Canada of tomorrow. There is a growing consensus that the current child benefit system does not do all that it should for these children.

Canada's first ministers and their governments have been examining ways to improve assistance to children in low-income families. The proposed approach is a National Child Benefit System under which the federal government would introduce a strengthened Canada Child Tax Benefit, while provinces and territories would redirect some spending to improve services and benefits for low-income working families with children.

Problems with the current system

One concern about the current system is the level of support it delivers. Another issue is whether support is delivered in as fair and effective a manner as possible. A particular difficulty is that parents who would like to leave social assistance for a job often encounter a drop in benefits that can keep them up against the "welfare wall". For a parent with two children, for example, moving off welfare to take a job may mean losing child benefits of $3,000, as well as dental and prescription drug benefits.

The existing system

The existing Child Tax Benefit provides:

• monthly tax-free payments to 85 per cent of Canadian families with children;

• a basic benefit to families with annual net income under $25,921 of $1,020 a year per child, an additional $75 for the third and subsequent children in the family, and a further supplement of $213 for each child under age seven when no child care expenses are claimed; and

• a Working Income Supplement of up to $500 per family.

An enriched Canada Child Tax Benefit

The 1997 budget is proposing an enriched Canada Child Tax Benefit that will provide a platform for the support of children in low-income families across Canada. The new benefit will:

• increase existing spending on the proposed Canada Child Tax Benefit by $600 million annually beginning in July 1998. This is in addition to the $250 million announced in the 1996 budget; spending on child benefits, therefore, will be increased by $850 million from $5.1 billion to $6 billion annually;

• increase federal child benefit payments to more than 1.4 million Canadian families with about 2.5 million children by July 1998; more than 720,000 Canadian families and 1.3 million children will be better off by July 1997;

• target additional spending to families with incomes below $25,921; and

• pave the way for provinces and territories to redirect their resources towards improved children's services and income support for low-income working families.

An enriched Working Income Supplement

As an interim step, the 1997 budget is also proposing to restructure the Working Income Supplement (WIS) and to enrich it by $195 million from July 1997 -- $70 million more than the $125 million increase proposed for July 1997 in the 1996 budget.

• The maximum benefit will be increased from $500 per family to $605 for the first child, $405 for the second child and $330 for each additional child.

• Benefits will continue to be phased in based on family earned income over $3,750 and reduced as family income exceeds $20,921.

Working with provinces, territories and First Nations

The federal government will continue working with provinces and territories to design measures that help to reduce child poverty and barriers to work. It will also work with First Nations, provinces and territories to ensure that First Nations' children living on reserves benefit like other Canadian children from these initiatives.

A major step forward

The federal government is firmly committed to improving the assistance to children in low-income families. It will proceed immediately with legislation to enrich and restructure the Working Income Supplement in July 1997. Legislation to implement the enriched Canada Child Tax Benefit will be brought forward this fall. A National Child Benefit System is a major step forward, both in investing in children and in building the future for Canadians.

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