Canada Child Benefit (CCB)

Background and Development

Investigation into the causes of poverty in England and elsewhere in the early 20th century demonstrated that family size was a significant factor. Wage rates in industrial society reflect the worker's production, without regard to the worker's family responsibilities. What may be an adequate wage for a single person can be a poverty-level existence for someone else doing the same job with a family to support. Family allowances paid by the state were proposed as not only an attack on poverty but also a way to advance the principle of "horizontal equity" between workers bearing the costs of raising the next generation, and those without such responsibilities.

The idea of a family allowance was discussed in Britain, Australia, the United States, Canada and in the League of Nations in the 1920s. In 1929, a Canadian parliamentary committee was asked to hear evidence and consider the subject. A Quebec commission of inquiry into social welfare issues (1930–32) also received submissions on the topic. However, neither recommended family allowances.

Creation

Little more was heard on the subject in Canada until the Second World War. In 1943, Canada's plan for post-war reconstruction was released. The Marsh Report was a comprehensive attack on poverty and economic insecurity. It was based upon a broad scheme of social insurance supported by universal family allowances, a national health system and a large-scale national employment program. The plan was too radical and expensive for the federal Cabinet of the day. But political and economic factors prompted Prime Minister William Lyon Mackenzie King to select the family allowance discussed in the report as a vote-getting device in the next election. This was also a bid to outflank the political left, which was making electoral gains. (See also Rise of the Co-operative Commonwealth Federation.)

The move by King had the backing of economists. The majority predicted large-scale unemployment at the war's end — as happened following the First World War. Family allowances were also seen as a means of maintaining purchasing power. From a constitutional viewpoint, a program of family allowances was well within the spending jurisdiction of the federal government, so few provincial hackles were raised. (See also Distribution of Powers.)

Controversy

Critics, though, called family allowances a waste of taxpayers' money because they went to rich and poor households alike. They said the "baby bonus," as it was then described, was a bid for votes in French Canada, where large families were more common. It was suggested the money be distributed by way of services rather than by cheque. Meanwhile, supporters of family allowance argued the service approach alone was paternalistic and that the allowance enhanced the autonomy of families.

There was some half-hearted opposition by the Conservatives in the House of Commons in 1944. But despite that, the legislation was passed unanimously on second reading — a remarkable feat for such a momentous law.

Evolution

Tax-free family allowance payments varied according to age. For children under age five, these were $5 per month; for six-to-nine-year-olds $6; 10–12 years, $7; and 13–15, $8. The average payment per child was $5.94 — considerably below the Marsh Report's recommended minimum payment of $7.50 per child. Initially, allowances were reduced for the fifth and subsequent children, but this provision was removed in 1949.

Even with the program's popularity, it was largely neglected by the federal government. And despite inflation, between 1945 and 1973 only one marginal increase in the benefit was legislated. This extension was prompted by Quebec, which had instituted a similar scheme on its own in 1961.

In 1972, in response to public concern about growing poverty in Canada, the federal government attempted to replace the universality of the program by connecting allowances to family income. The proposal would have paid maximum benefits to the poorest 36 per cent of families, partial benefits to 34 per cent and no benefits to 30 per cent of families. Allowances were to be based on the previous year’s income. The plan was heavily criticized for its inadequate attack on poverty and its administrative complexity. The legislation never made it through the House of Commons before the federal election of October 1972. It returned a minority Liberal government. But the New Democratic Party, a strong proponent of universality, held the balance of power.

Faced with a minority, the government dropped its selective plan and introduced a new Family Allowances Act. It incorporated selectivity with universality by declaring family allowances taxable. However, even high-income parents could retain a portion of their benefit. Thus, the principle of "horizontal equity" was observed.

In 1978, with the Liberals again commanding a majority in Parliament, a major restructuring of family allowances occurred. It expanded the role of the tax system in child support. This saw a diminished role for family allowances. The government instead established a Refundable Child Tax Credit of $200 per year for families with incomes of $18,000 or less. As incomes rose above this level, benefits would be taxed away to disappear entirely at $26,000. As the median income for families in 1978 was $19,500, a majority of families received some benefit from the new program. It came into effect in 1979.

In 1985, the Conservative government of Brian Mulroney was concerned about government debt and deficits. It announced a four-year plan to restructure family benefits. Beginning in 1986, family allowances were partially indexed to the cost of living. The refundable child tax credits were to be increased for three successive years, from 1986 to 1988, to $549 per year. Beginning in 1989, they were also to be partially indexed in the same manner as family allowances. The qualifying income ceiling was also dropped from $26,330 to $23,500.

By 1989, the Conservative government ended the universal nature of family allowances by requiring upper-income parents to repay all of their benefit at tax-filing time. This was part of the government’s program to target social benefits to low-or-moderate-income recipients. Paradoxically, it maintained and increased a tax deduction for child-care expenses. This provided the greatest benefit to high-income families.

In 1992, with a minimum of public discussion, the Conservative government then replaced the Family Allowance with a new Child Tax Benefit. Under this umbrella, the Family Allowance, the Refundable Child Tax Credit and a non-refundable child tax credit were consolidated. The new benefit — paying a maximum of $85 per month per child up to the age of 18 — was tax-free and income-tested on the basis of net family income as reported in the preceding year's income tax returns. Maximum benefits were gradually reduced as family income exceeded the income ceiling.

In subsequent years, a similar process of policy fragmentation and reconsolidation would occur. In 1998, the Liberal government of Jean Chrétien launched the National Child Benefit program. It was aimed specifically at low-income families. In 2006, the Stephen Harper government added a new child tax credit as well a new program called the Universal Child Care Benefit (UCCB). Both of these were criticized for turning child benefit policy in a regressive direction. The tax credit was not accessible to low-income families. The UCCB was not exempt from provincial taxation, and at $1,200 annually, did not go far toward its stated objective of covering child-care costs.

In 2016, the Justin Trudeau government folded these programs into a unified Canada Child Benefit (CCB) program. In reorganizing the benefit, the government also expanded it significantly. The average benefit rose from $3,790 per family in 2014 to $6,430 in 2017.

Canada Child Benefit (CCB)

The CCB is designed to be highly accessible and distributionally progressive. All primary caregivers are eligible so long as they live with a child under the age of 18 and are a resident of Canada. In the 2023–24 fiscal year, the CCB paid over $27 billion to Canadian households. This makes it one of the largest cash-transfer programs in the country, along with the Canada Pension Plan and Employment Insurance.

Since July 2018, CCB benefits have been indexed to inflation. As a result, the dollar value of the benefit changes every year. In 2024–25, families in the lowest income bracket could receive $7,787 for each child under 6 and $6,570 for each child aged 6–17. However, the benefit declines for families earning more than $31,000 annually and declines further for families earning over $67,000. Additionally, the benefit per child declines. For instance, a family earning $50,000 with one four-year-old child will receive the 7 per cent less than the baseline benefit — $7,242 rather than $7,787. If that same family has two children under six, they will receive 13.5 per cent less than the baseline benefit — $13,549 rather than $15,574.

The indexing of the benefit by income gives the CCB a highly progressive social impact. An analysis by the Canadian Centre for Economic Analysis (CANCEA) found that in 2017–18, the CCB reached 3.7 million families and 6.4 million children. Approximately 650,000 families earned less than $20,000 before the CCB. Of these, about half obtained an income of over $20,000 after the CCB. This lifted an estimated 750,000 children over the poverty line. (See also Child Poverty in Canada.)

The CCB is thus one of the most effective poverty-reduction programs in Canada. For highly impoverished recipient families that earn less than $10,000 annually, approximately 68 percent of their income comes from the CCB. For families in the $10,000 to $20,000 range, 41 percent comes from the CCB. This indicator diminishes progressively, reaching 1.1 percent for families earning $140,000 to $150,000.

The CCB has also been found to have broad economic benefits for Canadian society. CANCEA estimates that since 2016, the CCB has boosted Canada’s GDP by 2.1 per cent per year, contributing the equivalent of 453,000 full-time jobs. Another analysis by Finances of the Nation found that secondary earners (often women) in middle-class households slightly reduced their working hours to spend time with their children. For lower-class families, however, the CCB has work-enabling effects such that secondary earners increased their independent earnings.

(See also Welfare State; Social and Welfare Services; Child Welfare in Canada.)