Two quick things at the outset. First, this will only look at the Liberal’s Monday announcement on student financing. Tomorrow, I’ll look at their science/innovation policy in conjunction with that of the NDP, which apparently released a similar platform in conditions of complete secrecy last week. Second, in the interest of full disclosure: I was asked by the Liberals to comment on a draft of their platform a few weeks ago. I did so, as I would have for any party had they asked. Judging by what I see in their platform, they took at least some of my comments into account. So bear that in mind when reading this analysis.
The main plank of the Liberal announcement is that they are planning to increase grants for low income students by $750 million, rising to $900 million by the end of the mandate (which more than doubles the total amount; however,it’s not clear if this increase includes alternative compensation to Quebec… if it does not, add another $200 million). The Canada Student Grant for Students from Low-Income Families (CSG-LI) will rise in value from $2,000/year to $3,000/year, and the Canada Student Grant for Students from Middle-Income Families (CSG-MI) will rise in value from $800 to $1,800. The thresholds for both will be increased, meaning more students will receive the low-income grant, and more students with incomes in the $80-100K family income range (precise values not set, but this looks like about what they are going to do) will receive the middle-income grant. In addition, the Liberals propose raising the repayment threshold (i.e. the level below which borrowers in repayment are not required to make payments on their loans) from just over $20,000 to $25,000. It’s unclear what this would cost (take-up rate is uncertain), but a good bet would be somewhere in the neighborhood of $100 million.
So, a $1 billion promise. Except the Liberals are promising that this will all cost the taxpayer… nothing. And the reason for that is that the Liberals have decided they will axe the education amount and textbook tax credits (something I, and, others have been suggesting for many years – for instance here). Now, I actually don’t think this will quite cover the entire spending bill, but it will be within $100 million, or so (basically, it will cover the grants, but not the loan threshold change).
However, what this means is that the plan creates winners and losers. The value of those federal tax credits for full-time students is $558/year (for part-time students it is $168). Everybody will lose that amount. For those who currently receive the CSG-LI, and those who receive CSG-MI and remain in the CSG-MI bracket after the thresholds move, the extra $1,000/year the Liberals are offering means they will be better off by $442 (but they will also benefit by getting the entirety of their $1,000 sooner in the form of grants, rather than delayed in the form of tax relief). For those in the CSG-MI moving into the CSG-LI category, the net benefit will be $1,642. For those who currently do not receive grants, but will now become eligible for CSG-MI, the net benefit will be $1,242.
So there are winners. But there are losers, too. Families with incomes over $100,000 (or so) will simply be out that $558. And part-time students, who are ineligible to receive CSGs, will also be out $168. But this is what happens when you try to do big policy without spending (many) additional dollars. And there’s always the risk that they will come under political fire for “raising taxes”, which is arguably what cutting tax credits amounts to.
So, full marks for creativity here: these policies would make the funding system somewhat more progressive (in a slightly quirky way). And full marks for putting out a backgrounder that makes it clear that these moves will create costs for provinces (their co-operation will be needed in order to raise the loan threshold) that need to be mitigated, even though the Liberals are vague on how this will actually work.
But it should be noted that by their own claim (which, as I said above, is probably not quite true), Liberals are choosing not to invest another dime in the sector, which puts them last among political parties in new spending commitments. As pleasing as the re-arrangement of inefficient subsidies is, wouldn’t it have been better if they had added some funds on top of it?