Finance Committee on June 5th, 2012
A recording is available from Parliament.
On the agenda
- Gordon Boissonneault Senior Advisor, Economic Analysis and Forecasting Division, Demand and Labour Analysis, Economic and Fiscal Policy Branch, Department of Finance
- Sue Foster Acting Director General, Policy, Appeals and Quality, Service Canada
- Margaret Strysio Director, Strategic Planning and Reporting, Parks Canada Agency
- Stephen Bolton Director, Border Law Enforcement Strategies Division, Public Safety Canada
- Michael Zigayer Senior Counsel, Criminal Law Policy Section, Department of Justice
- Garry Jay Chief Superintendent, Acting Director General, HR Workforce Programs and Services, Royal Canadian Mounted Police
- Jeff Hutcheson Director, HQ Programs and Financial Advisory Services, Coporate Management and Comptrollership, Royal Canadian Mounted Police
- Darryl Hirsch Senior Policy Analyst, Intelligence Policy and Coordination, Department of Public Safety
- Ian Wright Executive Advisor, Financial Markets Division, Financial Sector Policy Branch, Department of Finance
- Nigel Harrison Manager, Legislative and Parliamentary Affairs, Department of Fisheries and Oceans
- David Lee Director, Office of Legislative and Regulatory Modernization, Policy, Planning and International Affairs Directorate, Health Products and Food Branch, Department of Health
- Anthony Giles Director General, Strategic Policy, Analysis and Workplace Information Directorate, Department of Human Resources and Skills Development
- Bruno Rodrigue Chief, Income Security, Federal-Provincial Relations and Social Policy Branch, Department of Finance
- Gerard Peets Senior Director, Strategy and Planning Directorate, Department of Industry
- Suzanne Brisebois Director General, Policy and Operations, Parole Board of Canada, Public Safety Canada
- Louise Laflamme Chief, Marine Policy and Regulatory Affairs, Department of Transport
- Judith Buchanan Acting Senior Manager, Labour Standards Operations, Human Resources and Skills Development Canada
- Mark Hodgson Senior Policy Analyst, Labour Markets, Employment and Learning, Department of Finance
- Stephen Johnson Director General, Evaluation Directorate, Strategic Policy and Research Branch, Department of Human Resources and Skills Development
- James McNamee Deputy Director, Horizontal Immigration Policy Division, Department of Citizenship and Immigration
- Graham Barr Director General, Transition Planning and Coordination, Shared Services Canada
Brian Jean Fort McMurray—Athabasca, AB
This is an issue that I identified 15 years ago as being a real live issue in Canada, as it has been in most western democracies. Demographics is the trend...most people are set on making money because of the growing population. Seniors are going from 4.7 million to 9.3 million over the next 20 years. That's almost a doubling of the population.
I can't say enough to Mr. Marston and others, that notwithstanding that the age is being changed, the reality is that Canadians are living longer, healthier lives, which means that 30 to 40 years ago, at 65, very possibly they were in need of social assistance and help from the federal government, but today it's a very different scenario.
My mum is 80 years old and very healthy. She is working full time—a spry young lady, I would call her. She just wrote a book and works at least 50 hours a week. She walked around India with me for two weeks and most of the time she was outrunning me.
This is not what took place 40 to 50 years ago in this country. People are much healthier, because we have such a great, generous health system, because we have a good system of taking care of our society. I think the reality is that the cost of the OAS program will increase dramatically. It will increase to such a point that it will not be sustainable, and we can see that by the numbers we have seen for years, which is that we are going to be in a situation, if we continue, that by 2030 there will be two taxpayers for every senior, down from what they are today, which is four, so a doubling of the burden on the same number of taxpayers, in essence. I think that is substantially more than it was 20 years ago; I think there were 8 or 10.
There's no question something needs to be done. I think most western democracies have done this, and they've done this because it's absolutely necessary. Anybody who doesn't see the writing on the wall is clearly playing politics, in my mind, and not dealing with reality.
The Chair James Rajotte
Thank you, Mr. Jean.
I have Mr. Brison, and then Mr. Van Kesteren.
Scott Brison Kings—Hants, NS
Thank you very much.
On this issue, the reality is that the OECD and the Parliamentary Budget Officer have said the OAS is sustainable in its current form, 65 being the age of eligibility. It's important to realize that while today it is 2.7% of GDP, at its peak in 2030 it will be 3.1%. This is manageable, and it's really important to realize that 40% of the people getting OAS make less than $20,000 a year. These are the most vulnerable.
Mr. Jean's mum is a very active and healthy person. I've met her. She's a tremendous entrepreneur and a pretty remarkable person. My father worked until he was 82, and he was a pretty amazing person in that sense. But there are people who, either due to their health or the nature of their work...if you're in physical work, if you're working in a fish plant in a cold, damp environment in rural Newfoundland, if you are working on your feet all day, if you are a labourer, at 65 your body could be ready for a break, and I think it's important to realize that.
I have a question for Mr. Rodrigue, who appeared before us on a Thursday, quite late at night, a few weeks ago, I believe. I asked you for the information on the impact of this change on the fisc and you responded that you couldn't comment on that, it was a cabinet confidence, and I was able to refer you to section 69 of the Access to Information Act.
The next day, less than 24 hours later, I think it was in the afternoon, this information was provided, not to Parliament, but broadly as part of a press release. What changed in that period of time?
Bruno Rodrigue Chief, Income Security, Federal-Provincial Relations and Social Policy Branch, Department of Finance
The government decided to release that information.
Scott Brison Kings—Hants, NS
But it was not a cabinet confidence at that time, though, on the Thursday night?
Chief, Income Security, Federal-Provincial Relations and Social Policy Branch, Department of Finance
Scott Brison Kings—Hants, NS
I just wanted to make...and I appreciate very much your being here. I understand the difficult position you're being put in.
The Chair James Rajotte
Mr. Van Kesteren.
June 5th, 2012 / 7:05 p.m.
Dave Van Kesteren Chatham-Kent—Essex, ON
Thank you, Chair.
I just want to maybe add a few thoughts about this particular issue. I was going back in my notes, and I recollect...I think it was a professor from the University of Toronto who we had in. I liked what he said, because often what we hear is a lot of opinion. And opinion is great. We all have our opinions, and often they're formed by some good information. But this particular gentleman quoted the OECD, and I think he quoted at the same time the International Monetary Fund. That basically reinforced what this government has said, which is.... And it's not rocket science. When you know that at one point there were seven people supporting one retired and that's going to shift to four to one and then three to one, the writing is on the wall.
I often marvel...and I wonder if the opposition is reading the paper and seeing what's happening in countries like Greece, and it's now coming to a crisis point in Spain—countries that haven't addressed this issue. We are being warned repeatedly by organizations that have no skin in the game, when there's no reason why they wouldn't give us a fair analysis, and they're saying the same thing: we have to make adjustments. This government has done this, and not in a cutting method or a draconian way. It's giving us ample time to give people an opportunity to prepare for these changes.
It just amazes me. This is something that is so clear, so absolute, that I can't understand why it's not being embraced by the opposition.
I just want to share Paul Martin's Red Book. The Liberals love to try to take the credit for some of the good things that are happening, and rightfully, Mr. Martin made some important changes. One of the things he says in his Red Book is:
The Canadian population is growing older—first, because our birth rate for the past three decades has been below replacement....
He is saying that we have to meet this demographic challenge. This is nothing new. This is something that has been debated for many years. This government has recognized that we don't want to go down the same path that countries like Greece and Spain and Italy and Portugal have gone down. We want to do the prudent thing, and that is to make adjustments but give people enough time so that they can prepare for those adjustments.
The Chair James Rajotte
Thank you, Mr. Van Kesteren.
Monsieur Caron, please.
Guy Caron Rimouski-Neigette—Témiscouata—Les Basques, QC
I would like to go back to the argument that we absolutely have to act now because it will be impossible for the cost increases to be assumed by the government or by all Canadians.
The information confirmed by the government was that the amount that will be saved by these measures in 2030 will be about $10.8 billion. In 2030. In today's dollars, that means about $6 or $6.5 billion.
The GST reductions that the Conservative government has put in place since it was elected in 2006 amount to two per cent. As the government says, the GST has gone from 7% to 5%. That was a cost to the treasury. Each one per cent is between $4 and $6 billion, to be on the safe side. So the amount that the government is no longer collecting because of the two per cent reduction in the GST is between $8 and $12 billion. The government made the choice to reduce the GST by two per cent, costing the public purse between $8 and $12 billion per year. And yet it comes up with a plan, not announced or debated during the election campaign, that increases the age of eligibility for old age security, which will save $6 billion per year in today's dollars.
Governing means making choices, and the Conservative government has made its choices. With the harmonized sales tax, it chose to give tax reductions for which our retired Canadians are going to have to pay by working two years longer. Someone who is 53 today will receive $12,000 less in old age security than someone who is 54 today, given that the change goes into effect in 2023.
So please do not tell me that the current program cannot be paid for by Canadians as a whole. As has been mentioned, the OECD has shown that it can. The Parliamentary Budget Officer said so too. The chief actuary of the Canada Pension Plan, who also looks after the books of the old age security program, has also shown that things can be adjusted without resorting to such draconian measures.
We completely agree with the need to deal with the question of demographic change. But this measure alone does not address the situation and does not represent an overall assessment of the situation. It is just one action in one of the programs that provides economic security for our retired Canadians. It simply scratches the surface of the larger problem we have to come to grips with.
In those terms, the argument that we cannot afford the program at the moment and that we absolutely have to increase the age of eligibility makes no sense, given the choices the government has made in the past.
According to the Chief Actuary of Canada, the cost increase of the program, as a percentage of the GDP, is about 1%. And that 1% is being used to justify taking away $12,000 in income from people currently under 53, while those 54 or older can keep it.
Nothing has been done to convince the opposition, Canadians and Quebeckers that this scheme is fair and appropriate.
The Chair James Rajotte
Okay. Thank you.
Peggy Nash Parkdale—High Park, ON
I just want to get on the record, once again, our concerns around OAS. Comments that we're going to end up like Greece if we don't make that change are absolutely ridiculous.
Quite frankly, the government can't have it both ways. They can't say the government is running the best financial management of any country in the world—which is not accurate—to claim credit for doing things well, and at the same time say that if this change isn't made, we're going to end up where the country is almost bankrupt. It's simply not the case.
I want to get in on the subject of what this is actually doing. At one point, one of the ministers commented that we're doing this because other countries are doing it. Canada's demographics are not the same as Europe's. Our country is aging, but less rapidly than many other European countries, and our finances are in better shape.
The reality is that this kicks in for people who are age 54 and younger. It means no one who is a senior today is affected, but for people who are 54 and younger, they're going to be affected. By the time this takes effect, it's going to be coming up to the peak of the demographics of the baby boom. After that, the cost of OAS as a percentage of GDP will decline. It's scheduled to go from about 2.43% of GDP in 2012, up to its absolute peak of 3.16% in 2030, and then it falls back to 2.35% in 2060. This is a demographic bulge. It's going to go up and it's going to go down again.
To cut the benefits, not for the baby boomers who are creating that bulge, but for the people who come after them, in my view exacerbates intergenerational inequity. Baby boomers had better access to jobs, to education, and they will have better access to OAS and pensions, but the people who come after them are going to have less of everything. I don't think it's right and I don't think it's necessary.
After asking several questions of the minister and the Prime Minister in the House of Commons, and asking officials, we were not told what the impact of this change would be. Everyone refused to give us numbers. Then, the day after we sit as a finance committee, a Friday afternoon before a long weekend, the numbers came out, and it's $10.8 billion by 2030. In 2030, that's what the number will be.
What does that mean for people who are affected? OAS is just over $6,000 a year, so for a couple, for two years, that's about $25,000 out of their pockets. It's very significant for individuals. Yes, it's an issue we have to address, but this is not the right way to go about it.
This is not something the government campaigned on. We had an election a year ago. The government never mentioned it. It gets announced by the Prime Minister when he's with some of the wealthiest people in the world—an elite gathering in Davos. That's how the people who are going to lose $25,000 found out they're going to be impacted by this.
The people who will be impacted most may have 10 years or more to prepare, but the reality for people at the bottom end of the income scale is that they're not going to be able to prepare because they don't have the wherewithal to put that kind of money aside.
For all these reasons, we think this is wrong. It's the wrong move. It's the wrong measure.
If you're looking for $10 billion, you could maybe look at redrafting the military procurement and not pursuing the F-35s, where you were out $10 billion in your costing, and put that money into the pockets of Canadians when they need it most, in their retirement years.
The Chair James Rajotte
Your turn, Mr. Mai.
Hoang Mai Brossard—La Prairie, QC
Thank you, Mr. Chair.
Mr. Rodrigue, we were a little hard on you when you came here. That is typical of what is going on at the moment.This is not a personal attack: you had the information, but you could not provide it because the government did not let you. The next morning, the government provided the figure we were looking for.
Now that you are able to, can you tell us how much the government is going to save by changing the retirement age from 65 to 67?