Rate Hikes and Cost-Of-Living-Increases: Obstacles in the Fight Against Poverty and Social

Rate hikes and cost-of-living-increases: obstacles in the fight against poverty and social exclusion

The issue of rate hikes and cost-of-living increases comes up regularly in the news. It was the subject of the Comité’s first Advisory Opinion, in 2007.1 In this online bulletin, the Comité wants to bring that issue to the fore again.

Increases that cut into the budgets of people with low incomes

In its 2007 Advisory Opinion, the Comité pointed out that rate hikes weaken efforts to fight poverty and ensure better income redistribution. It is no surprise that later events confirmed that observation: rate hikes have continued. When rate hikes are compounded by price increases for several essential goods and services, the situation of many people deteriorates instead of improving. Such increases contribute to poverty and social exclusion by depriving people of access to various services, forcing them to further reduce their spending on basic necessities and limiting their mobility. For several groups of people, (single-parent families, social assistance beneficiaries, low-income workers, etc.), recurring increases further weaken an already precarious financial situation and make access to recreation, training and even a job more difficult.

1. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE (2008), Rates that exclude… Solutions that unite, 32 pages.

1 Because of increases in the cost of electricity, child-care, schooling, the health contribution, drugs, vehicle registration, driver’s licences, insurance, gasoline, public transportation, rent, heating, telephone, cable TV, Internet and food, the portion of household income for those items, most of which are essential, has increased considerably and is under constant upward pressure. Payments for some of those goods and services are made to private businesses, but several are made for public services whose revenues go directly into public coffers.

In 2007, the Comité reported that the proportion of public monies derived from personal income taxes was decreasing. That phenomenon has since become more pronounced; the portion was 28.8% in 2012.2 To offset the decrease, monies from other taxes, dividends, fees, licences and permits are constantly increasing. The regressive nature of these measures leads to a reduction in the redistribution of our collective wealth and unfairly transfers onto the shoulders of all taxpayers the shortfall resulting from tax cuts that have mainly benefited those who are better off instead of people with low incomes. In proportion to their incomes, people with low incomes are saddled with a very heavy burden.

2. Ministère des Finances, 2012-2013 Budget, Historical Data.

2 The cost of several goods and services has a greater effect on people living in poverty

A study made by the Comité when it was preparing its 2007 Advisory Opinion showed that energy and transportation costs were the main concerns of people with low incomes when faced with rate hikes. Consultations carried out by the Comité between November 2012 and June 2013, with respect to a forthcoming Advisory Opinion on recognition of citizen participation, confirmed that the question of transportation, particularly its accessibility and high costs, remained a major obstacle to social integration of persons living in poverty. Since 2008, rate hikes for public transportation have been considerable, particularly for monthly passes at reduced rates, cash fares and single-trip tickets. The last two payment methods are often the only methods available to people living in poverty who cannot afford to purchase monthly passes. For people living in outlying areas or in rural areas, the necessity of a car for getting around also represents a major and constantly increasing expense, especially because of frequent increases in the cost of gasoline.

We can never overemphasize the role played by rate hikes in public transportation and increased costs related to using a car in the exclusion of persons living in poverty. Depriving people of transportation diminishes their power over their own lives, reduces their chances of finding work and cuts them off from a network that makes it possible to feel like they have a place in society.

Electricity rates alone currently account for 8.75% of average income for a household in the first income decile3 but

3. Decile grouping of income provides a summary ranking of a person’s economic situation based on his or her relative position with respect to the adjusted after-tax income distribution for

3 represents only 1.8% of the average income of a ninth-decile household.4 The rate hikes requested by Hydro-Québec for 2014, if granted, will contribute to increasing the gap even more. An increase in electricity expenses, added to increases for other necessities, has much greater repercussions for people living in poverty.

Among the other expenses considered essential, we can mention the average rental cost for a studio apartment, which was $556 in April 2013 in Québec.5 A food basket survey carried out by Ipsos Reid in May 20136 showed that the average monthly food cost per household in Québec was $448. Those two budget items alone show that it is impossible for an independent adult receiving benefits under the Social Assistance Program to meet his or her basic needs with a 2013 disposable income of just over $700 a month.

We see that the cost of most basic necessities weighs heavily on the budget of many people living in poverty and economic families. The population of deprived households is distributed according to adjusted after-tax family income and is then divided into ten equal groups, each representing 10% of the population. (Statistics Canada) 4. COALITION OPPOSÉE À LA TARIFICATION ET À LA PRIVATISATION DES SERVICES PUBLICS (2013), Hydro- Québec ─ Histoire d’un détournement [PowerPoint presentation], page 53. Retrieved from www.nonauxhausses.org/outils/hausses- dhydro-quebec/. 5. CMHC, Rental Market Report ─ Québec Highlights, spring 2013. Only privately initiated structures with at least 3 housing units are included. 6. Canadian Press. (May 16, 2013). Canadians turn to comparison shopping as cost of food rises: survey. Financial Post. Retrieved from http://business.financialpost.com/2013/05/16/canadians-turn- to-comparison-shopping-as-cost-of-food-rises-survey/.

4 that the portion of their income allocated to those costs are constantly increasing. We must acknowledge that faced with incomes that are already insufficient, the situation of many people is worsening, not improving, from year to year. It is important to ensure that benefit amounts and compensatory measures (indexation of benefits, solidarity tax credit, etc.) keep pace with increases in the cost of basic necessities: housing, food, clothing, transportation, etc.

Relevant recommendations for alleviating rate hikes

Some of the recommendations made in the 2007 Advisory Opinion on rate hikes have already been implemented, for example, the solidarity tax credit and full indexing of last- resort financial assistance for all beneficiaries.

Other concerns raised by the Comité in its 2007 Advisory Opinion are still relevant. One of them is mobility rights, particularly for people living in poverty and social exclusion. Mobility could be promoted by reducing the cost of a monthly transportation pass and by facilitating the movements of people, particularly those in outlying areas or where access is difficult. The Comité also recommended that measures be put forward to significantly improve the capacity of low- income households to meet their energy costs.

The solidarity tax credit is a measure aimed at reducing the effects of tax increases. It should be adjusted to meet new needs. However, the Comité reiterates that the real problem is the income insufficiency faced by a significant portion of the population, which does not have the resources needed to satisfy basic needs. The Comité’s members are still firmly convinced that everyone must be ensured of having an income that makes it possible

5 for them to be able to house, feed and clothe themselves and move around. That is a strict minimum in a society that is serious about fighting poverty and social exclusion. In that respect, the recommendation made in 20097 to implement an integrated income support system that would ensure sufficient resources to meet basic needs, facilitate economic and social integration and, as a first step, ensure that all Québec households have an income corresponding to 80% of the Market Basket Measure threshold would represent a significant improvement in the living conditions of low- income people and limit for them the consequences of rate hikes and other increases in the cost of essential goods and services.

With less poverty, all of us stand to gain immeasurably…

7. COMITÉ CONSULTATIF DE LUTTE CONTRE LA PAUVRETÉ ET L’EXCLUSION SOCIALE (2009), Improving Individual and Family Incomes… Opting for a Better Future, 47 pages.