Politics

Canada Child Benefit indexation will cost extra $5.8B by 2026, PBO says

The parliamentary budget watchdog says the government's cornerstone child benefit will end up costing billions more after the next election if its value increases with the cost of living.

Benefits won't rise with the cost of living until 2020, when indexation will cost an extra $301 million

The Canada Child Benefit, a cornerstone of the 2015 Liberal election platform, started rolling out last summer. But it won't be indexed to inflation until 2020. (Adrian Wyld/Canadian Press)

The parliamentary budget watchdog says the government's cornerstone child benefit will end up costing billions more after the next election if its value increases with the cost of living.

The Canada Child Benefit isn't indexed to inflation for now, and the Liberals haven't agreed to do that until 2020 — after the next scheduled federal election in 2019.

The parliamentary budget officer previously forecasted that the cost to the government would fall over time to the same level of spending as seen under the previous Conservative system of benefits and tax credits which the Liberals replaced with the new, income-tested benefit.

The PBO says in a report today that keeping up with inflation would cost federal coffers an extra $301 million in 2020, rising to an extra $5.8 billion in 2026.

The total extra cost over that time frame? Almost $22.3 billion, if the government in 2020 follows through on the Liberal plan.

The new benefit, a central plank in last year's Liberal election platform, kicked in on July 1.

The government says the transfer provides the average family with an extra $2,300 a year per child, with a maximum of $6,400 per child under six going to families with net incomes of less than $30,000.

The value of the benefit drops as incomes grow, phasing out entirely around $189,000, according to the government's online benefits calculator.

This year, almost 3.6 million families are eligible for benefits, but the number is forecasted to decline to about 3.4 million by 2021 and will continue to drop as some families see their income levels rise.

The program is expected to cost the government $22.4 billion next year — its first full year.

In five years, that number falls to $21.5 billion, as lower-income families move into higher income brackets and see the value of their benefits decline.

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