Human Resources Committee on May 6th, 2008

[Michael Atkinson]

It's a very important issue. They don't want to see seepage out of the fund, even for good purposes along the way. Let's be honest, when successive ministers of finance were asked where those funds were going, it was to balance the government's books. We'd like to see it stand alone so funds collected for a purpose are applied to that purpose.

As a second answer to your question, and to Mr. Savage's point, this legislation is bringing in another significant change to the rate-setting process, which I don't think we're spending enough time talking about. The problem with the current process is that you aren't allowed to look at your own mistakes when setting a break-even rate going forward. That is a serious flaw in the current situation. The chief actuary's hands are tied, and so are the commission's. If they are off on predictions on the unemployment rate and the demand on the fund, etc., that can't be factored into their decisions going forward. It's a bit like saying, “I'm going to blindfold you. Now go in and find the light switch.”

Despite the things we have to massage a bit to make sure it works going forward, there's another very strong reason for seeing this change. My members would very much support having the ability to truly set break-even rates based on the funds you have.

On what a crown corporation structure might bring, over and above the current commission status--and in answer to Mr. Murphy on whether we'll get to keep the investment returns coming back--you would want a crown corporation in place so any investments would come back.

And to answer his other question, which I think is very important, to ensure there is no dividend to be paid by that crown corporation when the sun shines back to government, as other crown corporations do, my understanding to date is that the money earned by that fund will stay with that entity.

You have better intelligence on this in talking with departmental officials. There is no payment back to government, no matter how large the reserve might grow over time. I think that's an important point from our members--that the money generated by the reserve will stay in place for the benefit of employers.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I want to comment on the reserve amount, which seems to be the main concern of almost everybody at the table. Everybody seems to view this as a significant move forward in terms of the yardsticks, but there's this question of the reserve and maybe potential miscommunication or misunderstanding.

Based on what we heard from the witnesses the other day, my understanding is that the rate-setting and reserve amount determination are two entirely separate issues or exercises. The rate-setting, the one-year window looking forward, is one exercise. The reserve amount determination, which was done by the chief actuary for the EI fund, was done separately at $2 billion, with the consolidated revenue fund backstopping that if there was a need. My understanding is that the reserve amount will in no way affect the operation of the EI program in terms of the amounts. If there's a deficit of some sort, which seems to be the biggest concern, the CRF would backstop it, and eventually things would be brought back into balance through the mathematical formulas that are in place.

If you know that the reserve amount will in no way affect the operation of the EI program, does that allay some of those concerns you have expressed?

Mr. Hanson.

[The Chair, Conservative, Dean Allison]

Mr. Lake, that's all the time.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'd like to hear, though.

[The Chair, Conservative, Dean Allison]

We can hear from the witnesses quickly.

[Dannie Hanson]

Most of our concerns are what you just addressed. If you can show us what mechanisms you're putting in place to control this so those things don't just bounce up and hit us, the bill can grow and develop as you're going.

That is our concern. You had your CEOs and ministers here yesterday or last week, right? So you have the benefit of knowing what's in their heads. We're sitting out here and don't know. They've already given you the answers—

[The Chair, Conservative, Dean Allison]

No. We were supposed to hear from the CEOs today. You guys are it. You don't trust yourselves.

[Dannie Hanson]

Put those conditions in and show us how, and we'll be with you, to a point.

[The Chair, Conservative, Dean Allison]

Mr. Gagnon.

[Bruno Gagnon]

We see that there's still a pro-cyclical system in Bill C-50--the rates increase when unemployment increases--and we are not comfortable with that. Even though you can repay over more than one year, we're still not comfortable with the fact that premium rates will increase. It's the worst time for increasing premiums.

[The Chair, Conservative, Dean Allison]

Are there any other quick comments?

Cliff, you can have one last comment.

[Cliff Murphy]

If the fund builds up, my friends from the Construction Association would say that premiums should be evened off for employees and employers. We don't see that as a problem at all as long as the fund is successful, the investments are good, there are good returns, and that kind of stuff. Not only could the employer's portion be reduced to what the employee portion is, but the whole thing could be reduced.

[The Chair, Conservative, Dean Allison]

I have a final point of clarification. I know that Mr. Lake was getting to this. It is capped at $2 billion and indexed. I think that's been brought up, but I just want to clarify it.

The last person to ask some questions is Mr. Lessard. You have five minutes, sir.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you.

I agree, the reserve is not big enough. I still maintain what I said to my committee colleagues earlier.

In 2005, this committee—which was comprised of different members, but which still had the same valiant clerks and advisors—had made unanimous recommendations. One of these recommendations was that there should be a reserve fund equivalent to one year's worth of benefits. At that time, the amount was between 15 and 16 billion dollars. I remember that the decision was unanimous. Based on the testimony we heard here, and on the way the fund and the situation had evolved since, I still maintain that position.

As for using the fund to pay for training or other social measures, we would have to study that option. Wasn't there some confusion when the name and the identification of the fund itself were changed from unemployment insurance to employment insurance? Some witnesses, including Mr. Hanson, Mr. Murphy and Mr. Atkinson, said that the fund should help people who had lost their jobs, namely those who were unemployed. The change to "employment insurance" was done for a reason. Today, the fund pays for training to help workers re-enter the labour market. I think we agree on that, but we will have to see whether that is the best way to go about it.

I find it interesting that Bill C-50 is compelling us to engage in this debate which, I believe, is timely. The debate is about how the money from the fund should be spent. So we are now engaged in a debate. People have referred to Denmark and its system called "flexisecurity". Under this approach, all income support contributions to the government go into the same pot. That's the opposite of what we have just been talking about. For instance, when someone is not eligible for employment insurance benefits, which are paid for by the federal government, welfare kicks in, which is paid for by the provinces.

Have you ever really thought about that? If so, what do you think about "flexisecurity"?

[Bruno Gagnon]

In Canada and Quebec, it was very difficult to peg the rates at which premiums are paid under the Quebec and Canada pension plans to a high enough level. Personally, the idea of "flexisecurity" scares me a bit because we are already having problems with a single well-defined system, which has a specific framework. Perhaps we even acted a bit too late, because we are now paying 9.9% in premiums into the Quebec Pension Plan and the Canada Pension Plan, whereas a rate of only 7.5% would be needed to maintain a long-term balance within the fund. We are paying for the mistakes of the past, and that frightens me.

[The Chair, Conservative, Dean Allison]

Go ahead, Mr. Hanson.

[Dannie Hanson]

You asked if we have looked.... Quebec, I believe, was one of the first provinces to take the training allocation, the training adjustments, out of the EI. We're doing that in Nova Scotia. We're looking at it in different ways. Industry is looking at it in different ways. We're looking at it--for social services, when you're on that, for parental leave, for disability, for shortage of work--as income security, as guaranteed income. It's no different. They have it in other places. But that's not EI; that's guaranteed income.

This debate is taking us into that world, and in 2009, I'm sure, that's where we'll go. But there will be a time when we have a guaranteed income. We'll have training, the same as we now have in Nova Scotia in our training and trades department and as you have in Quebec. We'll do it that way, and it will work quite well.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, I will give Mr. Atkinson the opportunity to reply to a question I asked at the beginning and which he wanted to respond to.

You say you are concerned about the fact that the money from the fund always goes into the Consolidated Revenue Fund, and that it can be spent for other purposes.

[Michael Atkinson]

One of the concerns I have about this whole process is this. Let's say that we put the new financing toward a crown corporation in place and that we have a new rate-setting mechanism. I'm hoping that parliamentarians don't say that we're now finished with it and we don't need to look at EI, because there are other things about EI that I think need to be looked at.

This committee, in the past, has recommended the early basic exemption, for example, which I think is an excellent idea, which sort of shadows the CPP. Particularly in our industry, in which we have workers who are temporary or who come in and work for only short periods of time for a particular employer, the fact that a certain amount of their income is exempt from EI makes eminent sense. So I think there are other things we have to look at.

This whole discussion we're getting into about whether there should be some separation between the more social types of programs and the training or point types of programs in EI really needs a bigger audience. We need to look at that. I would certainly welcome that kind of discussion. But again, we run the risk of suggesting to the public that somehow the establishment of this board is going to have a say in that. I think we'd better watch what we're saying, because that may be contributing to the miscommunication that this bill is somehow going to influence how we look at those issues.

To answer your question, I think those are very valid points. They're very valid concerns. We should continue to look at EI to improve it. We shouldn't allow the establishment of this board, although it's very important, and the new rate-setting mechanism to somehow be the be-all and end-all. There are other things we have to look at in this area.

[The Chair, Conservative, Dean Allison]

Thank you very much. That concludes the time we have right now.

I want to thank all the witnesses again, as I know all the members have, for responding quickly to this issue. I believe there has been some good constructive discussion today that will help us as we move forward with this important initiative.

Once again, I want to thank all the members and all the witnesses. You guys are dismissed. The committee does have some more business. You guys are not dismissed.

We'll let the witnesses go.

[The Chair, Conservative, Dean Allison]

Colleagues, if I could have the members come back to the table, we can deal with our business expeditiously, I hope, and then we can move on.

We have a subcommittee meeting just after we're done, and I'm hoping to have everyone out of here by sometime this afternoon. How about I just say it that way, and then we won't jinx anything.

What you have before you is the third report. If I could just....

Okay, go ahead.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Mr. Savage brought up his point of order a couple of times when I was speaking. I didn't want to address it, because I didn't have time in my five minutes.

I want to clarify this. You spoke of the back door in terms of forward-looking concerns about the legislation. My point was to suggest that in fact the Liberals used the back door to spend $54 billion. That was my assertion, not yours.

[Lynne Yelich, Conservative, Blackstrap, SK]

This is through the chair, of course.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Yes. I never meant to make it sound as if Mr. Savage would criticize his own government.

[The Chair, Conservative, Dean Allison]

Okay.

Do you accept that apology?