The federal government is increasing the amount it pays to veterans who are so incapacitated they can no longer work, but many of those who currently make the least will get raises of just a couple percentage points while those at higher ranks will get 20 per cent more.

The unequal adjustments are part of a deliberate attempt by the Liberal government to ensure that those who are discharged from the lower ranks after being injured in the line of duty make less money than soldiers who are still actively serving.

To do that, the government will essentially demote some veterans to a rank below the one they held when they left the military – something that the veterans say is not only unfair but humiliating.

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"And they are only doing it for the bottom ranks," said Don Leonardo, the founder of the advocacy group Veterans Canada who, because he retired 20 years ago as a master corporal, will be among those affected. "Why would you pick on the most vulnerable?"

The Earnings Loss Benefit pays those veterans who are "totally and permanently incapacitated" 75 per cent of what they were making on the day they were released from the Armed Forces until they reach the age of 65.

In 2011, the then-Conservative government said no one who is entitled to that benefit would receive less than $40,000 annually, which was then 75 per cent of the salary of a basic corporal. That provided a substantial boost, especially to those who were injured in places such as Bosnia, Somalia and Yugoslavia and who were discharged at salaries far below what their successors were making as a result of significant raises in the late 1990s and over the past decade.

But for years, veterans advocates and politicians have said 75 per cent is insufficient.

The Liberals promised during last year's election campaign to invest an additional $40-million annually to provide the permanently injured veterans with 90 per cent of their prerelease salary. It was a commitment they kept in their first budget, with changes that are slated to take effect in October if the budget legislation passes without amendments. But there is a hitch.

The Liberals say the minimum payments will be based on the current salary of a senior private, even if the disabled soldier left the military at a higher rank.

The government says on its website that this is being done in the interest of fairness. "To do otherwise," it explains, "would mean that some veterans receiving the benefits could be making more than their comrades on active duty."

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When asked to explain why it is so important to ensure that injured veterans do not make the equivalent of serving members of the Canadians Forces, the Veterans Affairs officials did not offer a direct response. "What is of paramount importance is that injured veterans have access to benefits that allow them to focus on their recovery," they said in an e-mail.

Those former members of the Armed Forces who were discharged at salaries higher than the $49,449 that is currently paid to a senior private – the majors, the colonels, the generals and even the high-ranking non-commissioned officers – will not be affected by the rank reductions. Their Earnings Loss Benefits payments will climb by 20 per cent under the government's plan, which, in some cases, will amount to tens of thousands of dollars.

But those at lower ranks, the mid-range non-commissioned officers who departed the military decades ago, and the reservists who were paid by the day, will get much less.

Mr. Leonardo, who was diagnosed with post-traumatic stress disorder related to his service as a peacekeeper in the former Yugoslavia, and who makes $42,426 annually through the Earnings Loss Benefit, will get an increase of less than 5 per cent.

"If you can't provide for your family, eventually you are going to give up," said Mr. Leonardo. Politicians "keep talking about mental health. Well, if you can't provide for your family, why would you even stick around. You feel like you're not worth anything any more and they demote you a rank to private. It just gets worse and worse and worse."

Veterans advocate Sean Bruyea said one of the harshest aspects of the government's plan for veterans such as Mr. Leonardo is the loss of esteem.

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"I know intellectually this is humiliating," said Mr. Bruyea, a former captain and military intelligence officer who was also diagnosed with PTSD. "What's Don's value as a Canadian civilian now? His value is his memory of being honoured by Veterans Affairs. How do they honour him? They say, 'We are going to demote you for no reason whatsoever other than to save money.'"

Cathay Wagantall, a Conservative MP who is her party's deputy critic for Veterans Affairs, said she is trying to amend the budget bill to protect the lower-income disabled veterans. "I don't have an answer for why they are choosing to do it this way," Ms. Wagantall said of the government.

Irene Mathyssen, the NDP critic, said it is clear that the higher ranked officers will benefit the most. "And those poor guys at the bottom get very, very small increases," Ms. Mathyssen said. "When you start to crunch the numbers, it's Liberal voodoo."