Canada’s CERB: How an emergency benefit designed for exposed people became a giant windfall for governments

“The protected make public policy, the unprotected live in it.”[1]

– Peggy Noonan, Wall Street Journal, 2016

I frequent three online chat forums visited by low income people with disabilities in receipt of a program called the Ontario Disability Support Program (ODSP). For the last month, one of the hot topics has been the Canada Emergency Response Benefit (CERB) which will provide – as of this writing on May 16, 2020 – up to $8,000 to people who lost work because of the COVID19 pandemic and earned at least $5,000 last year.

The CERB is one of the simplest and most straightforward income programs ever designed. Just one monthly amount of $2,000 with just 3 qualifying rules surrounding COVID19 and ‘Bingo’: you get it.

But that is not what online participants are talking about. They are talking almost incessantly about the conditions under which the CERB will be confiscated from them by governments. The Ontario government has decided to take $900 of each $2,000 from social assistance recipients in that province[2].

And that is actually not that bad comparatively as seven jurisdictions (Saskatchewan, Nunavut, Quebec, Nova Scotia, New Brunswick and Newfoundland and Labrador) are going to confiscate the entire $2,000 in each month the CERB is paid. Only Canada’s great northwest (BC, NWT and the Yukon) are going to fully exempt the CERB from social assistance payments. Kudos go to them. The rest (Alberta, Manitoba and Ontario) will treat the CERB as earned income which results in partial exemptions and partial clawbacks.

But social assistance clawbacks are just the beginning.

Subsidized housing rents in Ontario have begun to soar because rent geared to income housing providers have started charging rent on the CERB. In one situation in the online chat, a single woman with disabilities chronicled how her rent soared by 418% in one month as a result of receiving the CERB. Others face similar increases over the coming months.

Can we imagine for just a moment what the outcry would be if a private landlord increased a rent by over 400% because a tenant got the CERB?

Many low income seniors in Canada who are eligible for the CERB also receive the federal Guaranteed Income Supplement (GIS) and it is yet to be made clear by the federal government whether the CERB will be clawed back from the GIS.

But it’s worse than that:

Some seniors – especially those living in subsidized housing – will see rent hikes of 30% based on the CERB. These rental increases are mandated by CMHC. The overall result for some will result in marginal effective tax rates of over 100% based on the combination of the GIS clawback, the GIS supplement clawback, income taxes paid, provincial clawbacks based on GIS, and rental increases.

It is becoming very clear that the CERB is not only a taxable benefit but a massive windfall to provincial and territorial Treasuries and their public housing providers. And it’s more than interesting that this cavalcade of confiscation is taking place on the backs of poor seniors, low income working age adults and people with disabilities, the very people who are most vulnerable to COVID19 and those in greatest need of the CERB.

We now look to why this would happen but we don’t have to look too far. It appears that policymakers are much more consumed by the pedigree of a benefit than they are its purpose. CERB is a taxable benefit meaning that it will attract a T4A. It is an income replacement benefit and under welfare programs’ finest traditions, such benefits are deducted at 100%.

The pedigree of CERB also makes it ripe for rental charges as the name: ‘rent geared to income’, says it all. If CERB is income and rent is geared to income, the syllogism is easily completed: rent must be paid on the CERB.

But the federal government has placed itself in the middle of a delicious contradiction when on April 16, 2020, a spokesperson for Minister Carla Qualtrough said:

“Our government believes the CERB needs to be considered exempt by provinces and territories in the same way as the Canada Child Benefit to ensure vulnerable Canadians do not fall behind.”

So the federal government admonishes sub-national jurisdictions to do as they say, not as they do. But this will work itself out. Stay tuned. Why?

Because this play is far from over. Just as the CERB has paid out benefits that some say amount to as much as $45 billion, a very significant amount is being clawed back. I have tried to discover the aggregate amount that governments are pocketing but I just don’t know. I won’t venture a guess at that.

But here is one thing I do know.

The largest amounts of CERB money that are being confiscated by governments are being taken from the poor and vulnerable: social assistance recipients, low income people with disabilities and low income seniors.    

As Bret Stephens said in the New York Times on May 15, 2020:

“…the balance of public sympathy will rest with the comparatively small numbers of acute Covid-19 sufferers. But what happens when their numbers are dwarfed by those suffering from awful personal hardship?”[3]

Perhaps we will soon know the answer to that.


[1] “Trump and the Rise of the Unprotected”, Peggy Noonan, Wall Street Journal, Feb. 25, 2016

[2] In Ontario’s case, they are not allowing anyone to be cut off benefits and they are reinvesting all confiscated funds back into benefits for social assistance recipients.

[3] “In This Election, It’s the Remote Against the Exposed”, Bret Stephens, The New York Times, May 15, 2020