Thank you very much.
On behalf of SEDI, I'm extremely pleased to be invited here to speak before you. We appreciate this opportunity to address an innovative area of socio-economic policy that has been used as a poverty alleviation strategy around the world and across this country.
If you've ever had the opportunity to open up a savings account, save within it, enter into and/or achieve post-secondary education, obtain job training, start a small business, save for first and last month's rent, buy a home, save for your child's education in an RESP, or save for your own pension within an RRSP, congratulations, you're an asset builder.
Saving and asset building for the poor through inclusive policy-making can, with the right incentives, allow the poor to save, build assets, and transition out of poverty. This is about social and financial inclusion in Canada. Low-income individuals who have the incentives to accumulate assets will do so. Asset accumulation has the effect of altering specific behaviours that can lead to self-sufficiency, thereby allowing individuals to exit poverty.
Research and development in this area has led to several innovative demonstrations and research projects that have provided thousands of low-income Canadians the means to build assets. I want to detail two of these for you today.
First is learn$ave. In 2000, HRSDC invested $34 million into learn$ave, an innovative asset building project that tested whether financial incentives and supports could help the poor build assets and transition out of poverty. The intermediate research results have shown that incentivized savings and related support can cause the poor to save. Learn$ave positively affected financial goal-setting and budgeting and positively contributed to an improvement in attitude toward education. The project showed that incentivized savings can impact the take-up of university or college education and improve labour market outcomes. Changes in investments in learn$ave did not create undue hardships, and the program was particularly attractive to newcomers and younger participants.
These are encouraging results, but I can tell you that we've even tested this program in shelters across the country. The independent living accounts project has been designed in collaboration with people living in shelter systems, with input from agency representatives working with the at-risk population. In this project, asset building was modified to enable account holders to use their own and matching savings for costs related to affordable, sustainable rental housing. These included rent deposits, savings to cover rent for multiple months in subsidized housing, deposits for utility hookup, and the cost of setting up a household.
The result of this public, private, and non-profit project was that 57% of the participants who opened bank accounts successfully saved and moved out of the shelter system. Many participants retained their bank accounts and saved beyond what was required by the project; 95% of these participants were still housed independently eight to 15 months out of the project; and 82% of the participants indicated that they felt secure and would remain housed independently for the rest of their lives.
We've done a return on investment on this project, and after the first year of graduation this project will provide society with a $2.19 investment rate of return for every dollar invested. That's a conservative calculation.
On asset building, the federal government could first create the legislative framework to set these policies and programs in place. For example, the federal government could create a national strategy on asset building for the poor. This would entail research- and policy-related actions that would allow asset building for the purposes of accessing post-secondary education, job training, micro-enterprise capitalization, home ownership, supports to learning and employment, and access to affordable and appropriate housing as eligible goals for participants. This would also include a national program of independent living accounts for persons living within shelters.
Second, the government could contribute financially to asset-based measures in the form of matched funds, grants, or bonds. Provincial, territorial, and municipal governments could be encouraged to match these as well. The private sector could also be encouraged to match funds and contribute in kind. Tax incentives could encourage financial institutions to contribute to these accounts and their opening.
Third, the federal government could encourage the exemption of the value of these assets in the determination of initial and continued eligibility for provincial social assistance and other income-tested programs, such as the child tax benefit. As asset-based measures are intended to improve the quality of life, counting them as income and subsequent disqualification from other benefits would negate their very purpose.
The Canada learning bond is an asset-building measure that has been implemented for low-income families that are accessing the national child benefit supplement. Today this benefit has only a 13.3% take-up among eligible Canadians. That is extremely low. We would like to suggest that the federal government establish three methods to increase take-up of this benefit.
First is that you establish a voucher system in which parents or guardians of children eligible for the CLB--and we know who's eligible because they are accessing the national child benefit supplement--would receive documentation proving their eligibility and outlining the steps necessary to set up an RESP account.
We would also like to suggest that automatic enrolment be established for those who do not respond to the voucher system before its expiry. Anyone accessing this benefit should get a no-frills RESP product that is simple, low-risk, and has a reasonable annual cap on fees.
On pension reform--and I think you've heard a lot about that in the last little while--matched savings would encourage people to actively save for their retirement.
The research exists. The political will exists. You can be bold and act with certainty on these measures to assist thousands of Canadians to move from poverty.
I would like to end with a quote from one our participants in our project:
This project was a springboard and it caught me on the way down. I never thought about banking or even how important saving really is. No one ever invested in me before and that is what really made the difference. Everyone living like me should have the same opportunity.
Two words in that paragraph are really significant: invested and opportunity. I'd like to leave that with you today. Thank you.