Finance Committee on May 7th, 2008

[John McCallum, Liberal, Markham—Unionville, ON]

A real difference in what?

[Andrew Jackson]

I'm talking about the cap on premium changes from one year to the next, which is 15¢ per hundred dollars. It's the same under the new system as it was under the old one. I just wish you'd changed it when you had the chance. This is the point.

[David Stewart-Patterson]

On this one, I don't think there's a huge difference between us. The important point is that we're at least setting up an arm's-length agency to make these decisions. Whether that independent board is going to be able to set rates in a counter-cyclical or pro-cyclical fashion depends essentially on the size of the reserve.

There is some discussion and concern about whether $2 billion is a sufficient initial amount to have as a reserve. I don't have a particular number in mind. I think $2 billion could be enough, but it depends on the rules, the cap on changes, and things like that. That's a detailed design issue; we're more concerned with the principle. At least we're getting the arm's-length agency, and we can build better reforms from there.

[John McCallum, Liberal, Markham—Unionville, ON]

I think it's an extremely important issue. We could be saddled with a new premium-setting method that makes recessions more severe than they otherwise would be.

[David Stewart-Patterson]

Putting that decision into an independent, arm's-length body is going to lead to better decisions. They are likely to be more counter-cyclical, because they're going to be made by the people who are affected by them.

[The Chair, Conservative, Rob Merrifield]

Mr. Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chairman.

The Liberals tackled the employment insurance issue by speaking to employers and to unions. However, I have the feeling that they forgot about unemployed workers.

My question is for Mr. Céré.

The act does in fact provide for a $2 billion reserve fund. How will this provision affect the EI system, compared to all of the other shortcomings noted since the 1994 reform? Eligibility requirements are now more stringent. People must work more hours in order to qualify and the number of weeks they qualify for benefits has been reduced.

Is it possible to improve the system, given this $2 billion cap on the reserve fund?

[Pierre Céré]

At present, even the premium rate set a decade ago under the compressed system is generating surpluses. As of March 31, 2007, the accumulated surplus in the account totalled $3 billion. These surplus amounts are accounted for in the eleventh Employment Insurance Monitoring and Assessment Report which we have just received. The current premium rate of $1.93 is much lower that it was fifteen years ago. The accumulated surpluses in the account could be used to improve the EI system and ease eligibility requirements. Other countries are facing a similar reality.

Still according to the Employment Insurance Monitoring and Assessment Report, the current benefit-contribution ratio is 46.1%

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

You mean that 46% of workers...

[Pierre Céré]

For every 100 salaried workers who have paid EI premiums, only 46 will qualify for EI when they need it. The remaining 54 will be out of luck. In most cases, we're talking about people who are in temporary jobs and who do not accumulate the hours of work required to qualify.

Our message is the same as the one we conveyed with respect to employment insurance. Creating an independent account is probably a step in the right direction. Never again must we allow the surplus to accumulate as we did for 12 or 13 years, as a result of premiums paid by employees, only to see the money misappropriated and confiscated. Quite aside from the creation of the Board, parliamentarians must seek a consensus on ways of improving the EI system. The benefit-contribution ratio of 46% makes no sense. The percentage needs to increase. Eligibility criteria must be eased.

That being said, I also realize that this has nothing to do with Bill C-50. However, parliamentarians must never forget that $54 billion in employer and worker premiums were misappropriated. I hope that the majority of members will refuse to allow this scandal to be swept under the rug.

Section 80 of the existing act and the proposed changes which would create the Board provide that if the account is in a deficit situation, an advance may be authorized from the Consolidated Revenue Fund. However, the Board will have to repay this advance, with interest. It goes both ways, however. The Consolidated Revenue Fund owes $54 billion to the employment insurance system. Obviously, we're not expecting a cheque for $54 billion to be cut next week, but this money should be accounted for somewhere. Each time the account experiences a shortfall, the money to make up the deficit should come from this surplus. The money is there.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Jackson, you have the actuaries on your side, as Mr. McCallum said. The Canadian Institute of Actuaries had this to say about the system:

[Translation] [...] the plan should instead have a $15 billion fluctuation reserve, to avoid premium increases in the event of a recession when businesses and employees have the hardest time finding money.

What is the potential impact of the current economic slowdown—or recession, if you will— if the act is amended as the government would like it to be, that is with provision for a $2 billion reserve? What can we expect over the next two to three years given the economic downturn, particularly in the manufacturing sector?

[Andrew Jackson]

I'm having difficulty myself working out just precisely how this new fund would set the premiums in the kind of economic context moving forward. I guess the new board will have to set the premium on a forward-looking basis, what's going to balance the account in the coming year, and establish a reserve fund that will initially be $2 billion, or what the government is allocating.

I guess it really remains up to the board how big a reserve fund they think will need to be built up, and that's going to be set by the government. But certainly if we enter a recession next year, as Mr. McCallum said, the premiums would have to rise, and certainly if it was a recession that went on for more than a year or two.

According to the calculations I've seen, I guess the ones the chief actuary quotes based on historical experience, if we went into a fairly prolonged and severe recession, then you would need a reserve fund in the order of $10 billion to $15 billion. Those numbers are several years old, so I suspect it's from the higher end.

As for the $2 billion, I think since the new premium-setting mechanism came in, the intent was to balance funds, but in fact a $1 billion surplus has been run while we're notionally balancing. I think the intent here is that if you get a bit of an overshoot, it's not lost to the EI system more than it is to create a large reserve fund to ride us through a recession.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Wallace, you have seven minutes.

[Mike Wallace, Conservative, Burlington, ON]

I'm sharing my time with Mr. Dykstra, but I think the NDP is first, normally. No?

[The Chair, Conservative, Rob Merrifield]

I don't believe so. I'll chair the meeting, Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, and thank you for the time.

I'll be about three minutes and I'll be very quick. I need fairly quick answers from you, and I want thank you all for coming here.

Ms. Sahar Zerehi, you're here with the Campaign in Defense of Undocumented Immigrants. You say “undocumented”, but another word would be “illegal”. They're here illegally, is that correct?

[Sima Sahar Zerehi]

We mean the people who fall into the cracks of the immigration system or are between status.

[Mike Wallace, Conservative, Burlington, ON]

They don't have any legal status, which would make them illegal. Would that not be correct?

[Sima Sahar Zerehi]

That would mean that they have fallen out of status.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

At our last meeting, Ms. Hall Findlay asked some questions of a Ms. Andrea Lyon, who is the assistant deputy minister, and I want to quote what she said and get your response.

But first of all, there are no amendments you're recommending here. You would like it removed from the bill. Is that an accurate statement?

[Sima Sahar Zerehi]

That is accurate.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Wong, you would say the same thing. Is that correct?

[Victor Wong]

Yes.

[Mike Wallace, Conservative, Burlington, ON]

Okay. That's not going to happen.

You asked about the H and C applications, the humanitarian and compassionate applications. Ms. Hall Findlay asked, “Yes, but the concern is the prohibition on the ones outside the country.” Ms. Andrea Lyon said, “It's not a prohibition.” And she goes on to explain that.

Then Ms. Findlay asked again, “Again, there is concern about discretion. Is it your understanding that the discretion would have to be used in a case such as you just described, where somebody has applied only after not being accepted under another basis?”

Ms. Lyon: “Certainly, the intention of that particular provision is not to deny H and C access to those deserving of H and C. Those people deserving of it will continue to have their applications heard in the normal manner and normal fashion.”

Now, based on a bureaucrat telling us that this is the way it's going to be, what in here is different from what she told this committee at the last meeting?

[Sima Sahar Zerehi]

I think we all like to think that everybody has the best intentions, but unfortunately there is a difference between intentions and how things are written in the law and in the bill. We've heard legal opinions again and again from lawyers, and certainly I am not a lawyer so I am not here to present a legal opinion. But sir, again and again we've heard legal opinions from the Canadian Bar Association and from lawyers in the community that these amendments could be read--