Question Period Note: VETERANS BENEFITS INCREASE COMPARED WITH INFLATION

• The Government is committed to supporting Veterans and their families, and values the significant contributions that Veterans have made protecting Canadians.

• Over 90% of the Department’s budget funds Veterans’ programs, benefits and services.

• Each year, Veteran benefits are increased to reflect the cost-of-living.

• Annually increasing Veteran benefits using established measures like the Consumer Price Index ensures that Veterans receive the respect, support, care, and economic opportunities they deserve.

BACKGROUND — VETERANS BENEFITS INCREASE COMPARED WITH INFLATION INCREASE - ANNUAL ESCALATION PROCESS

The majority of Veterans Affairs Canada’s programs and over 90% of its $5.98 billion budget in fiscal year 2023-24 are quasi-statutory based on the fact that these programs (e.g., Pain and Suffering Compensation, Income Replacement Benefit, Veterans Independence Program) are demand driven and non-discretionary.

For these quasi-statutory programs, Veterans Affairs Canada inflates its benefits at least once annually (usually January 1st). This adjustment process (referred to within VAC as “escalation”) ensures that VAC’s benefits and related allowances reflect cost‑of‑living adjustments.

Programs under the Veterans Well-Being Act are adjusted by changes to the Consumer Price Index (CPI), while programs under the Pension Act (e.g., Disability Pensions) are adjusted based on the greater of two options: the change in CPI, or the average composite wage calculation (i.e., an amount equal to the monthly after-tax income of certain federal public service workers based on the province with the lowest combined provincial/federal income tax rate).
Consumer Price Index is a measure of the rate of average price change for goods and services bought by consumers in Canada and is the most widely used indicator of inflation.

For those benefits adjusted annually by CPI, the adjustment applied on the first of January each year is the increase in CPI calculated as the change between the annual average CPI from November 1 to October 31 of the previous year and the annual average CPI from November 1 to October 31 in the year before that. For this reason, it will not align with the point in time provincial or national rate of inflation as at the end of December.

Currently and historically, rates for the most recent five years are/were:
Calendar Year Rate of Adjustment
Programs under the Pension Act (i.e., rate used is the greater of the annual average change in CPI or the composite wage rate) Programs under the Veterans Well-being Act (CPI)
2024 4.4% 4.5%
2023 6.5% 6.6%
2022 2.7% 2.8%
2021 1.0% 1.0%
2020 1.9% 1.9%
NOTE: Regulatory requirements for “rounding” under the Pension Act vs. the Veterans Well-being Act are not the same which occasionally results in slight differences in the CPI rate (i.e., 4.4% vs. 4.5% in 2024).

Annex

Below is summary of the programs VAC escalates each year and the different ways in which they are escalated (depending on the program).

1. The benefits listed below are adjusted annually (effective January 1st) based on the greater of two options: (1) the Consumer Price Index (CPI), or (2) an amount equal to the average monthly after-tax income of certain federal public service workers, using the province with the lowest combined provincial/federal income tax rate:
   • Disability Pensions and other allowances for disability and death (including Treatment Allowance)
   • Compassionate Award
   • Veterans Independence Program (maximum rate only)
   • Long Term Care (maximum rate only)
   • Prisoner of War Compensation
   • Additional Awards for Disability or Death
   • Children of Deceased Veterans Education Assistance (monthly amount)
   • Remuneration for Escorts both under the Pension Act and the Veterans Well-being Act
   • Flying Accidents Compensation

2. The following benefits are indexed annually (effective January 1st) by CPI:
   • Pension for Life benefits:
   o Pain and Suffering Compensation (including the Additional Monthly Amount and any additional payments required by legislation)
   o Additional Pain and Suffering Compensation
   o Income Replacement Benefit (including IRB protected amounts)
   • Death Benefit
   • Detention Benefit
   • Critical Injury Benefit
   • Education and Training Benefit
   • Caregiver Recognition Benefit
   • Funeral and Burial Estate Exemptions
   • Children of Deceased Veterans Education Assistance (basic allowance, costs for education)

3. The following benefits are adjusted quarterly (effective Jan 1st/Apr 1st/July 1st/Oct 1st) by CPI:
   • Canadian Forces Income Support
   • War Veterans Allowance

4. Accommodations & Meals (maximum rate only) – adjusted annually (October 1st) by either the lowest A&M rate in a province or WVA increase, whichever is less.

WHEN PRESSED:

Q1 - Why is the rate of CPI used to escalate VAC programs not the same as the Statistics Canada rate published for December 31?
VAC’s programs are indexed in accordance with the methodology set out in the applicable Acts and Regulations governing each program. In general, the indexation of VAC programs is based on two twelve month averages rather than a one-month comparison.

Q2 - What method will be used to index VAC’s programs as of January 1, 2024 and why is the rate different across programs?
The vast majority of VAC’s programs were adjusted by the CPI on January 1, 2024. In spite of this, there can be a difference in the rate used according to the requirements for “rounding” under the Pension Act vs. the Veterans Well-being Act which is not the same and occasionally results in a slight difference in the rate applied (i.e., 4.4% vs. 4.5% this year).

Calendar Year Rate of Adjustment:
Programs under the Pension Act (i.e., rate used is the greater of the annual average change in CPI or the composite wage rate calculation) Rate of Adjustment:
Programs under the Veterans Well-being Act (CPI)
2024 4.4% 4.5%

Q3 – Do all of VAC’s programs get adjusted by the same amount?

No, there are varying methodologies for VAC programs. Each program is indexed in accordance with the timing and methodology set out in the applicable Acts and Regulations governing such programs.

Q4 – Do programs ever get decreased in times of low CPI?

No, in the case of negative or zero inflation, the rate remains the same.