House of Commons Hansard #45 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was c-2.

Topics

Income Tax Act
Private Members' Business

5:40 p.m.

Conservative

The Acting Speaker Royal Galipeau

The Speaker has already indicated that a definite ruling on the procedural admissibility of this bill will be made before the question is put at third reading.

Since today's debate is on the second reading of the bill, the matter can proceed.

The House will now proceed to the debate on private members' business.

Income Tax Act
Private Members' Business

5:40 p.m.

Liberal

Dan McTeague Pickering—Scarborough East, ON

Mr. Speaker, I thank you for allowing that and being consistent in your ruling. I realize this will not be an easy bill but behind the bill comes the challenges, not only for the Department of Finance but, I suspect, for the entire economy.

Bill C-253 is an act to amend the Income Tax Act which will deal with the amendment to the Income Tax Act to allow contributions to registered education savings plans to be tax deductible. It would come as a surprise to many Canadians it currently is not the situation.

Is it any wonder today that students face the kind of debt situation that they are now seeing at a time when manufacturers and others around the world are demanding that Canada do better in order to provide a more skilled workforce and more vibrant economy to meet the challenges of a modernizing economy against a highly competitive world.

The bill provides a regulatory regime similar to that of RRSPs and it also has built in penalties and guidelines to prevent the RESP from being used as a tax shelter, as some will indicate, instead of its sole purpose of generating funds to be used to pay education costs.

I would like to speak about the rationale of this bill. Nothing is more important for the future prosperity of our great nation than having a highly educated workforce. However, the reality is that contrasted against the backdrop, with soaring tuition costs at universities and colleges, these are creating concern that post-secondary education may soon only become the purview of the wealthy.

This, in my view and I think in the view of most Canadians, indeed the constituents in my riding and ridings across Canada, is simply unacceptable as it would place Canada at a considerable economic disadvantage, both domestically and in the international marketplace.

It is very clear that it is not just students who know this and businesses. I would like to refer to some of the comments that were made today coming out of the industry committee's report which it tabled earlier today. It reflects on how manufacturers are responding to this.

According to a survey conducted by the Canadian Manufacturers and Exporters in 2003, more than 40% of manufacturers say that skill shortages are seriously constraining their ability to improve business performance and grow. About 17% of those surveyed indicated that skill shortages pose a major constraint on their ability to develop and commercialize new products. Finally, slightly more than 25% report that a lack of skilled and experienced personnel is a challenge that will fundamentally change the nature of their business over the next five to ten years.

It is clear that Canada must do more to motivate younger people and to provide Canadians with an opportunity where they can best meet that. We can talk about assistance for students who are at the very low end of the economic scale, through no fault of their own, who can get access to higher education to better themselves. We can talk about wealthy students for whom any education anywhere they want to go is no object.

We are dealing with a fairly large middle class in this country with a hodge-podge of programs that simply cannot make the grade. Many of them choose not to go to university or college, or to get a diploma, a certificate or a degree. As a result of that, the singular loss of an 18 or 19 year old and his or her r ability to get access to higher education is not just a loss for that individual but it is indeed a loss for our country. Our ability to attract investments and, most important, yes, for the finance department and the bean counters to generate revenue for the next 30 or 40 years, we want to look at it from a selfish point of view.

As I said earlier, this issue is not confined. It is simply a question of whether the finance department thinks it is a good idea or a bad idea and whether it is concerned about the loss of revenue. If we are going to navel gaze and look at today, I suggest that if we cannot plan 10 years from now and give our students an opportunity to get access to higher education and allow universities to bring people in to pay the kind of resources, to pay for the kind of personnel and to pay for the kind of expertise that will make our universities and colleges and our certificate granting institutions the best in the country, then this country will fail the next generation.

In the absence of a hodge-podge of programs that exist, this bill simply provides the best step forward with resources that are already available to all Canadians who pay taxes and who may want to direct to a loved one, a family member or their sons and daughters the opportunity to gain access to a better job through access to higher education.

To contrast the difficulty we currently have, 27% of Canadian families have an RESP to help pay for their children's education. One major reason for this relatively low percentage is the financial burden placed on families to maintain an RESP.

Regardless of the long term benefit, RESP contributions require after tax monthly family income. Some families are simply unable to afford the minimum monthly contribution, usually $100.

Making contributions tax deductible, as the bill proposes, offers families incentives and financial assistance to create and manage an RESP. In addition, making contributions tax deductible not only provides a means to help address educational costs, it will impact on lessening post-graduation debt which often is a debilitating financial drain on the graduate.

There is no doubt that the need for higher learning cannot be gainsaid. According to Statistics Canada, in today's labour market two out of three jobs require more than a high school education. Post-secondary graduates, according to the same institution, have a high employment rate, are less vulnerable to economic downturns and they receive higher incomes which, for the Department of Finance, which I am sure is listening today, also means generating more revenue.

I want to talk about measures for preventing the RESP from being a tax shelter. It has been raised by my hon. colleagues and I am sure others that this might somehow see itself as a shelter. Let me read into the record what the bill would do.

When contributions to an RESP are withdrawn either by the subscriber or the beneficiary, this is referred to as a “refund of payments”. Payments of investment income made out of an RESP to a student beneficiary are referred to as “education assistance payments”, EAPs. Payments of investment income made out of the RESP to the subscriber, in the event that a student does not, or is unable to, attend the post-secondary education are referred to as “accumulated income payments”.

At present, and this is a point that I made to the hon. House leader, EAPs and AIPs are taxed under section 146.1(7) and (7.1) of the Income Tax Act, but a refund of payments is not taxable under section 146.1 since contributions are made from after tax income.

The bill inserts a refund of payments into one section, 146.1, and repeals 146 (7.2) which would l make a refund taxable when withdrawn. After Bill C-253, the EAPs and AIPs will continue to be taxable when withdrawn.

To ensure that the RESP is not used as a tax deferral vehicle, the AIPs are subject to part X.5 penalty tax under section 204.94 of the Income Tax Act. If the AIP is withdrawn by a subscriber in the event that the child does not attend the educational institution, the accumulated income payment will be subjected to a 20% tax in addition to the regular tax payable.

There is a lot here as to whether or not one can reasonably conclude this would be a tax deferral. In fact, it is an opportunity with some fairly strict guidelines and a substantial firewall.

The high cost of education, and again I will use Statistics Canada as a source, average undergraduate degrees almost doubled, from $2,023 in 1993-94 to $4,000 in 2003-04 and is expected to hit nearly $8,000 by 2012.

Increases in tuition fees are partly responsible for increases in student debt. The average amount owed to student loan programs by university graduates increased 76% between 1990 and 2000.

One-third of students who left before graduating in 2002 did so for financial reasons. That is the gap. That tells us exactly what is occurring right now because young people, students cannot make the grade. This financial barrier, notwithstanding all the programs that are there, federal and provincial, simply does not meet the test of ensuring that those who want an education and who have the means of obtaining a higher education cannot do it because there are financial impediments. It is important for us to understand this.

It is projected that by 2010 a four year degree could cost in excess of $100,000, in residence. In 2002, with only 50% of children under 19 having an average of $8,600 put aside for them by their parents for their entire education, this represents a significant savings shortfall. According to Statistics Canada, parents who expected their child to receive grants for post-secondary education based on financial need saved significantly less.

The interesting part of this is that almost one-third of all children who are 19 had parents who expected them to receive such assistance even though it is likely that many will not. With respect to saving for a child's education by others, grandparents and other relatives, few actually do so.

Under the existing program, notwithstanding the generosity of the 20% top up, in 2002 only 14% of children had savings plans established by persons other than parents.

Where does that leave us? It leaves us with a large question on student debt. These loads are rising. According to Statistics Canada, bachelor graduates in 2000, with student loans owed on average 76% more than their 1990 counterparts after adjusting for inflation. A similar increase in student debt over the same period was found for college graduates. I can go over the list of people. Only one out of five graduates, who owed money, was debt free two years after graduation. On average, of graduates still owing money, only 25% of their debt had been repaid.

We have talked a bit about the question of royal prerogative, and I will not debate that point. It was made abundantly clear by yourself, Mr. Speaker, that this matter was never signalled or flagged for that reason. What it does is it responds effectively to a number of foreign organizations that are concerned about the current status of education.

My province of Ontario has decided to lift the freeze on tuition fees. Students are going to find it very difficult, earning $8 or $9 an hour, to earn enough money to pay a $7,000 or $8,000 tuition base for five credits per year over four years, and that is if they are lucky enough to find a job for a three month period. They may have to live in residence and have other incidental costs. Notwithstanding the government's budget, which allocated a small credit for books, there will be a substantial shortfall.

Others have suggested that we need to do more, and that includes the Governor of the Bank of Canada. At Humber College on March 30, 2005, David Dodge suggested that we needed a system of incentives for continuous learning and upgrading of skills and an infrastructure that delivers the training. This has always been important, but as I mentioned earlier, it will be particularly important in the next two decades as the labour force growth in Canada slows.

We are on the precipice of a significant and dramatic change in our demographics, and this is clear. Right now about one in eight Canadians is aged 65 years or older and therefore drawing a pension. By 2026, in 20 short years or less, this ratio will be one in five.

We have a challenge ahead of ourselves and it must be met with a robust attempt by Parliament and, I hope, the government. I suspect it will not support this, if not for the fact that it is concerned about the short term loss of expenditure.

The Governor of the Bank of Canada went on to say, “The first step to improving skills is to build an excellent infrastructure for early childhood development, feeding into a school system that effectively teaches basic skills”. He went on to point out that Canada's concerns must be founded on three global trends: technological change, globalization and demographic shifts.

Contrast this with what manufacturers are saying and with the heavy debts that students are currently incurring, it appears to me, and I think to most reasonable onlookers, that the existing situation is not tenable.

To ask our students to take on a burden and to ask government to cover the costs of those burdens in terms of loans, when an existing facility exists right now through the income tax system, seems to me, and I think to most reasonable people, an opportunity not for the government to go out and spend money, but to review the programs it has and channel much of that effort toward depriving itself of a bit of revenue in order to achieve a long term objective. If we look at where we are going with this legislation, it provides us with ample opportunity to ensure that Canadians have what many others around the world seem to get.

Long before manufacturers decide to hop on a plane and make their future investments in China, or in Brazil or in India, because of the quality and level of education, it is incumbent for our future programs, for the prosperity that we have in this nation, that we at least give students a fighting chance. In the absence of no existing programs in our country to address the fundamental needs of so many students with a large level of debt, this is an important step toward ensuring that Canada has a vital, vibrant skilled workforce. To do that, let us give Canadians and their families the tools to do it. Let us support the bill.

Income Tax Act
Private Members' Business

5:55 p.m.

Conservative

Dean Del Mastro Peterborough, ON

Mr. Speaker, I listened with great interest to the member's speech. He is very passionate about this issue. I can tell he cares a great deal about our students, and that is important.

The member seems to indicate in the absence of programs. The RESP program already exists and there are incentives in the it. In fact, we have seen this program grow by sevenfold since 1997, so people are using it.

In its budget, the government provided significantly more availability to student loans. It has provided tax credits, invested in infrastructure at universities, and we are moving toward assisting the provinces in other ways.

While I appreciate the motivations of the bill, I question whether it is useful in any way.

Income Tax Act
Private Members' Business

5:55 p.m.

Liberal

Dan McTeague Pickering—Scarborough East, ON

Mr. Speaker, I thank the hon. member for Peterborough for complimenting Liberal initiatives, but I suspect that if the hon. member looks at 1998, 27% take-up is insufficient. That means that 73% of students cannot or do not have the capacity to use the existing RESP system. It has been condemned by students. It has been condemned by the Fraser Institute. He should speak to students in his riding. Whether it is Sir Sandford Fleming College or Trent University, students, like my nephew or others who I know, say there are tremendous impediments in the possibility of going those universities or colleges to get the kinds of degrees and education they need.

If the hon. member took a bit more time to look at the way in which the income programs work, it is not based merely on the income of parents or whomever. The needs test is much more prohibitive. As a result of that, students are not only winding up in debt, but one-third of the students right now cannot finish their education because they cannot afford to continue, notwithstanding available programs.

The Liberal Party may have built the base, but it is now time for Parliament to go one step further to meet the challenges of a globalized economy. Fisher Gauge in his riding is looking for skilled workers and cannot find them. People, with meagre salaries, cannot afford to pay tuition for four or five years. It should be obvious to the hon. member, and in particular to his riding, why the bill is necessary.

Ask the middle class people in his riding what they think about this, those who pay taxes, if they could direct a portion of that to give their young kids an opportunity to higher education.

Income Tax Act
Private Members' Business

6 p.m.

Conservative

Laurie Hawn Edmonton Centre, AB

Mr. Speaker, I listened with great interest to my hon. friend's remarks. In a previous life, I sold RESPs. I have never heard anybody condemn the RESP program. Would people like more to be done? Absolutely they would.

However, I would like to ask three maybe slightly technical questions. I may have missed it in his earlier remarks. Is the hon. member suggesting we retain the Canada education savings grant, as well as making contributions tax deductible? Are we talking about tax deductibility on a limit of $2,000 that currently qualifies for the CESG or on $4,000 that is allowed to be put in every year? Has the hon. member costed out what this would cost, in terms of revenue to the government?

Income Tax Act
Private Members' Business

6 p.m.

Liberal

Dan McTeague Pickering—Scarborough East, ON

Mr. Speaker, I compliment the hon. member for Edmonton Centre on his questions.

The hon. member will know that the current RESP system provides an incentive of up to 20%. Our government proposed 30% and 35%, which passed just before the last federal election. This is to help students who have a much more difficult time of getting in the system. It provides plentiful opportunity for some students to take advantage of this.

However, I want to underline this for the hon. member. The contributions that people make and the incentive that the government gives only comes after they have paid their taxes. This in fact is a deduction from their taxes. Hard-pressed families, who are trying to make ends meet and who want the young ones to do very well, will have an opportunity to do so.

An average family making $45,000, $55,000 a year, paying $10,000 income taxes, may be able to take a portion of that, up to $18,000, although it is not likely they will do that, and over a period of time up to $42,000. It is similar to the system under RRSPs. They can achieve that goal simply by continuing their job. If they pay taxes, they can direct some of those taxes as a tax credit to do something that is not just good for themselves and good for their families, but ostensibly for the well-being sustainability of our future economy.

Income Tax Act
Private Members' Business

6 p.m.

Calgary—Nose Hill
Alberta

Conservative

Diane Ablonczy Parliamentary Secretary to the Minister of Finance

Mr. Speaker, I am pleased to speak to bill, sponsored by the hon. member for Pickering—Scarborough East. I want to applaud his concern and his actions with respect to affordable education.

It is important and I agree with his comments about our need to ensure we continue to have a very strong knowledge based workforce and affordable education. I only wish the member had been as passionate back when his government sharply cut back funding for post-secondary education and started us down the path of high tuition and increasing student debt. Here we are today. We need to examine the provisions of this suggestion and whether this is the right way to go.

The bill proposes major changes to provide a more favourable tax treatment to registered education savings plans, RESPs. More specific, the bill would make RESP contributions deductible, in addition to very low taxation of the growth of the RESP on the other end. It would increase limits on contributions as well to the same level as those applying to RRSPs. We have looked at these measures very carefully. The goal is the same, to have affordable post-secondary education and the lowest possible student debt.

The examinations suggest that these measures are really not the best policy direction at this time, given the assistance that is already in place for this purpose. In fact, there really is no evidence, and the member did not bring forth any evidence, to suggest that existing measures in support of post-secondary education savings are inadequate. In fact, he pointed out that nearly one-third of Canadian parents already were accessing the RESP for the benefit of their children. I think most parents find that very adequate.

I want to explain how the current RESP regime works for Canadians watching this debate. It already provides considerable assistance to parents and grandparents to save for their children and grandchildren's post-secondary education.

Currently, up to $4,000 can be contributed annually to RESPs for each beneficiary. I did not hear the member explain why ordinary families could, under any circumstances, contribute more than $4,000 a year. That is a lot of money to almost every family in the country. The amount of $4,000 can be contributed each year, to a lifetime maximum of $42,000 per beneficiary.

These contributions are not deductible, but there is no tax payable when the contributions are withdrawn for the beneficiary's post-secondary education.

The amounts invested in RESPs grow tax free. As a result, the assets grow much faster than if they had been saved outside an RESP. When the investment is taken out, it is taxed in the student's hands rather than the contributor's hands. This means that savings in an RESP results not only in deferral of tax on the investment income, but when the income is taxed, it will be taxed almost always at a very low rate, since full time students generally pay little or, more common, no income tax.

In addition to this generous tax treatment, the government provides the Canada Education Savings Grant, which is an additional contribution by the taxpayers of Canada to each and every RESP. It makes registered education savings plans even more attractive. Under this grant, the government provides 20% of the grant up to $2,000 of contributions for a child under the age of 18. That grant is annual. There is a lifetime maximum grant of $7,200.

In addition, to help promote more saving by low and middle income families, this grant on the first $500 of savings is 40% for families with incomes below $36,000 and 30% for families with incomes between $36,000 and about $73,000. This gives extra incentive to the broad base of Canadian families for savings in an RESP.

This grant grows tax free within the education savings plan. It is not lost. Even if a family for some reason cannot contribute in a particular year, there is flexibility so that families can catch up on missed contributions but still receive the yearly grant.

Taking into account the tax deferral, the Canada education savings grant and the fact that most students pay little or no tax, saving in an RESP often earns a higher rate of return than saving for retirement in an RRSP.

This tax assistance for education savings plans costs the Government of Canada about $130 million a year in forgone revenue and about half of that amount to the provinces. In addition to the $130 million in forgone revenue, over $440 million is provided for the grants that I spoke about. That was in the year 2005. The federal government already provides over $570 million per year in savings assistance for post-secondary education just through this program alone. There are many other programs as well. There is over half a billion dollars already in this plan.

This bill proposes to make contributions to RESPs tax deductible in the future. The contributions would be taxed in the hands of the contributor when they are withdrawn rather than be tax free to the contributor as is currently the case. The Canada education savings grant would still provide the grants on the first $2,000 in contributions. The contribution limits would be raised to be the same as RRSPs. Under this bill contributions could be up to 18% of earned income or up to $18,000 in 2006.

There are three main concerns with this proposal and I would like to go through each of them. First, there is really no evidence that the current plan is not working well for Canadians. If one reads the bill, one would be tempted to believe that the existing plan is not very generous and that Canadian parents are not saving enough for their children's post-secondary education. It is quite the contrary.

With the current education savings plan's limit, saving $2,000 annually in a child's RESP means that almost $75,000 could be available for that child's post-secondary education by age 18. About $95,000 would be available if a parent contributed the current $4,000 limit annually until the $42,000 lifetime limit was reached. That is a considerable amount of money for each child's education.

To put things in perspective, this is more than the annual cost of a typical undergraduate program today, including tuition, books and living expenses for someone studying away from home. Right now the cost is about $18,000 a year, or $72,000 for a four year program. This means that existing RESP limits are adequate and do not need to be raised.

Are parents saving for their children's post-secondary education? I am happy to confirm to members of the House that contributions to RESPs have tripled since 1998. In 2005 the total contributions to RESPs were roughly $2.4 billion. In fact, total assets held in RESPs have skyrocketed to seven times their value nine years ago. It is very clear that the RESP regime is working.

It is also a concern that parents and grandparents on pension or investment income would no longer be able to make a contribution.

In addition, there are the technical problems that I talked about. Someone who has only one child can save as much as someone with five children. Someone with more children cannot save any more under this plan.

We need to continue with the measures that governments have brought in and that we brought in in the last budget to assist students. There are problems with the member's proposal and I have outlined them. I would ask my colleagues in the House to consider very carefully following the government's lead in not supporting this bill.

Income Tax Act
Private Members' Business

6:10 p.m.

Bloc

Thierry St-Cyr Jeanne-Le Ber, QC

Mr. Speaker, I am very pleased to rise here today as deputy finance critic for the Bloc Québécois and as a young critic.

Generally speaking, the Bloc Québécois is in favour of reducing the tax burden on the middle class. It is therefore not against the idea that taxpayers who make contributions to an educational savings plan should receive a tax break.

In my short speech, I will identify a few flaws in the bill; however, we believe that the proposed measure is nonetheless very commendable. The flaws will have to be fixed, however, and clarifications about the bill must be provided before we can confirm our support later on in the legislative process.

It would also be wise to consult experts to get an idea of what such a measure will cost, as well as its social, economic and tax implications.

We see the advantages of this bill, which seeks to target a certain class of taxpayers that is often neglected and that already sacrifices more than its fair share, namely, the middle class. This will no doubt be popular with parents and grandparents who could benefit from lower taxes when they pay into an RESP for their children or grandchildren. I would be willing to bet that, if this bill were passed, more and more people would want to take advantage of this program and that, in the case of people who already have RESPs, they would want to contribute even more generously.

That said, as I mentioned earlier, we have some reservations about this bill. The first is its potential cost—it could become a very expensive proposition. For example, the existing Canada education savings grant program cost the federal government $318 million in 2000-01 when the grant applied to only 20% of the first $2,000 in contributions to an RESP. That means that over $1.5 billion was contributed that year, representing the minimum amount that taxpayers could have deducted from their taxes. Today, this amount is undoubtedly much greater taking into account inflation, the annual ceiling that has risen to $4,000, and the fact that if the terms of the plan are more generous many more people will want to enrol.

Clarifications are required about the intent of the bill. It seems to be modeled after the registered retirement savings plan in that unused deductions under the RESP can be carried forward and applied to future income tax returns. However, an RRSP is not a contract like an RESP. The taxpayer is not bound to put aside money for an RRSP; there is only the opportunity to do so up to a fixed amount based on previous income and a fixed ceiling. However, with an RESP contract, contributions must be made, generally on a monthly basis.

Thus, is difficult to understand how a taxpayer could have unused deductions unless he can claim the contributions in the fiscal year of his choice, which the current bill does not seem to allow.

It is also difficult to understand the purpose of and the reasoning behind the mathematical formula used to calculate unused deductions. This formula adds the RESP ceiling amount to unused deductions and excludes contributions to the RESP. It is difficult to understand the logic of this calculation, unless it is an attempt to go beyond the ceiling or to artificially increase it for the purpose of deducting contributions.

Under the present legislation, any excess contribution made into the plan in respect of a beneficiary is taxable, except in certain cases of transfers from one RESP to another. This could result in the imposition of a tax penalty on all subscribers as long as they do not withdraw that amount. Since the bill does not repeal the sections that impose these penalties in cases of excess amounts, there is a contradiction between the current legislation which imposes penalties on the one hand, and this bill which would permit tax deductibility on the other.

There is another thing we have a lot of difficulty understanding. That is the connection the bill makes in clause 4, which permits the tax deduction, between the excess amount of the contributions an individual has made over a fiscal year or in the first 60 days of the following year, and the portion of his contribution that he deducted from his income tax for a preceding taxation year.

This bill seems to assume that the portion in question is an excess amount, which might not be the case.

With regard to the definitions in this bill, it says that a taxpayer may deduct the lesser of the following amounts: the amount, if any, of the contributions made in 2007 and in the first 60 days of 2008, or the deduction limit.

Next, it defines the excess amount as the lesser of the following amounts: the sum of the payments exceeding the deduction limit, or the excess amount accumulated in preceding years.

On the one hand, the excess amount is defined as the excess contributions for the current year plus 60 days of the following year. On the other, it is defined as the excess of the amounts accumulated in preceding years. I grant that this is rather technical, but I am not mistaken: there seems to be a contradiction here in the bill, which will certainly require some work in committee.

In paragraph 146.1(1), the bill also repeals the definition, in monetary terms, of the annual limit of the registered education savings plan, but does not replace it with another limit. It does not say that the minister will be able to set this limit, which leads us to believe that the present limit will apply. In that case, there is no explanation of why the bill proposes to repeal the paragraph that currently sets the limit.

One may also question the equality of opportunity available under this bill to families with higher and lower levels of income. Because of the weight of that 18%, we will find ourselves in a situation where farmers with low incomes will not be able to benefit from the deduction limit, while those with a higher income will. Finally, 18% seems to us an arbitrary percentage under the circumstances. It would be interesting to see in committee where this percentage comes from.

In socio-economic terms, and particularly for Quebec which has opted to make higher learning accessible by keeping tuition fees below the Canadian average, the enthusiasm of Quebec households for the RESP may be not as great as it is elsewhere. It will certainly be necessary to take account of the societal choices that Quebeckers have made, as they are already paying a good deal for their children’s education, more through income tax than through personal contributions.

The Bloc has a number of improvements to propose to this bill. It will be necessary to clarify the more technical aspects I referred to earlier. We also propose a non-refundable tax credit instead of a tax deduction. That would surely be less generous and hence less expensive for the federal government than the deduction now being proposed, the costs of which are unknown.

The bill could also establish an income cap beyond which a taxpayer might not benefit from the measure. That cap could fluctuate according to the number of beneficiaries, that is, children, in a family within the same RESP.

Finally, since married and common-law couples are almost four times more likely to contribute to an RESP than single parents, a special provision could be made for those couples.

To conclude, in all cases, even though the principle of the bill is interesting, it deserves to be clarified and improved. The Bloc Québécois will be working in that direction.

Income Tax Act
Private Members' Business

6:20 p.m.

NDP

Denise Savoie Victoria, BC

Mr. Speaker, I am happy to speak to this bill. I think all members in the House certainly concur that we must make access easier to post-secondary education and skills training for our young people and that government has an important role to play.

Recently, an OECD study of countries stated that one of the most effective things that governments could do to facilitate this access was to concentrate first of all on families of low income revenues. This would begin to help address a very serious skill shortage in many countries including Canada.

Recently, in British Columbia a survey done throughout the province has shown that for the first time the private sector has indicated that skill shortage takes precedence over tax cuts by government as an action that needs to be taken. This is something that we should all consider in these questions.

However, I have concerns and questions about the bill. Some of them were raised earlier by members opposite about the effectiveness of the bill. There were also some technical questions and the cost that it would represent.

As I said, we must facilitate access for students in underrepresented groups, students with disabilities, aboriginal students, students of low income families and from rural areas. We know that they are not accessing post-secondary education and training as easily as others.

We also know that the RESP has been effective in attracting families who earn over $80,000. However, as for the other underrepresented groups a recent study has said that the RESPs, including the Canada education savings grants, while providing enhanced incentives to lower income families to increase their contributions to RESPs, they do not appear to solve the more fundamental problem of insufficient family income which prevents some families from contributing to RESPs and taking advantage of the CESG program.

Approximately six in ten future saver and non-saver parents in the 2002 survey gave no disposable income or insufficient money as a reason for not yet or never saving.

Therefore, this is a very serious problem in considering this particular bill. It seems like a little bit of tinkering rather than the major overhaul of the learner assistance program that we would need to consider.

The Conservatives, in their recent budget as a solution to the problem of increasing student debt, have offered to raise the ceiling that students can borrow. That is their solution. I believe they even offered $80 for a book.

The Liberals, while they were in government, cut transfers to education and that sent tuition fees spiralling upward and with that student debt.

The Liberal post-secondary education critic yesterday called on the government to invest in students and not tinker with the tax system. I am wondering if this bill is a little bit of tinkering. The bill by the member from the same caucus seems to do just that instead of ensuring genuine investment in lower tuition fees, lower debt, and needs-based grants for students.

Liberals talked about investing in students when they were in opposition and that was great to hear. Yesterday I heard the post-secondary education critic claim credit for a $1.5 billion investment in lower tuitions from Bill C-48 which I think we are all clear was the NDP money that was conceded after negotiations with the Liberal government. This was basically money that the Liberals were forced to put into post-secondary education after years of cutbacks.

In considering this bill, I looked at what the various stakeholders were saying about the existing system of loans and various types of assistance for students.

La Fédération étudiante universitaire du Québec said that the federal government must completely review its national registered education savings plan and Canada education savings grant which amounted to $125 million and almost $500 million respectively. It felt that instead of eliminating financial barriers, the system has become so complex and convoluted that it is very difficult for students to access it.

Similarly, the Canadian Federation of Students said:

We therefore recommend that the federal government transfer the money now spent on the RESP program and other tax credits to the low-income grant. We estimate this transfer alone, a revenue-neutral transfer, would reduce student debt by 41%.

These are just some of the comments from stakeholders who are themselves paying for tuition. They are advising us on solutions that they feel would begin to address the problems they are facing.

The NDP has never opposed the RESP. We think it is part of a solution, but as students associations and federations have indicated, the system requires a major overhaul, not just tinkering. We feel there is a need for a comprehensive learner assistance program that would create a clearer, simple path for students, one that would be more flexible and more transparent.

In the last election we clearly indicated to everybody that we believed there was a need for the re-establishment of a single transparent transfer to provinces to re-establish adequate levels of funding for post-secondary education and training. The previous Liberal government failed to do that. We are still waiting to see how the present government will respond to this situation.

We are still considering many of the concerns that I have raised about this bill. We will see how it evolves through the House.

Income Tax Act
Private Members' Business

6:30 p.m.

Liberal

Michael Savage Dartmouth—Cole Harbour, NS

Mr. Speaker, I am very pleased to have the opportunity to speak on the bill that has been wisely put forward by my colleague from Pickering—Scarborough East.

The old issue of post-secondary education is one that has been very important to me before I came to this place, but particularly since I have come to this place.

I had the privilege last year to be the chair of the government caucus on post-secondary education which afforded me the opportunity to travel the country to talk to students from CFS; CASA; and other students; university presidents; CAUT, the professors who teach our students; alumni; and a lot of different people involved in university.

For me there is no more compelling or important issue in Canada than the issue of post-secondary education. How do we maximize the human potential of Canadians?

For a long time, Canada has done very well in the world for reasons that are more by accident than design. We live in a place that does not have world wars occurring in it. We have natural resources that are great. We have been very fortunate, but the nature of the world is changing. It has become so globally competitive with the rise of China, India and Brazil, and the resurgence in Russia. Other nations are investing in post-education and we must ensure we do the same.

To set the stage, there are several components to post-secondary education. One of them is the whole issue of how we are preparing for a new world. Not only have we, as a nation, been successful financially, but in the last number of years we have invested massively in post-secondary education, research, innovation, technology transfer, and things like that. Members do not have to take my word for it. The blue Conservative budget book says:

Since the deficit was eliminated, the federal government has increased its support for post-secondary education research, with nearly $11 billion in incremental funding. These investments have assisted Canadian universities in strengthening their research capacity and building a global reputation for excellence, which has helped reverse the “brain drain” and attract leading researchers to Canada.

Canada now ranks first in the G-7, and second in the OECD (behind only Sweden) in terms of research and development--

I am sure everybody will join me in a round of applause for former Prime Minister Chrétien and finance minister Manley and particularly the member for LaSalle—Émard who was a leader in this, as well as the finance minister last year, the member for Wascana.

We have done well in that area, but it became clear to me, as an individual and a member of the Liberal caucus on post-secondary education, that the ground has shifted toward the whole issue of access for students. I am not just talking about universities. I am talking about community colleges. I am talking about skills upgrading and a whole host of other issues.

This is important to understand. I have heard, particularly from colleagues in the NDP including my friend from Burnaby—Douglas, who I respect a great deal, that we did not do anything for students. Again, I refer to the Conservatives, who are not particular friends of ours, who indicate in these books that in 1995-96 approximately $2 billion in direct support measures for post-secondary education were provided. By 2004-05 this direct support had grown to approximately $5 billion. It says:

Federal direct support to post-secondary education students totals about $3.5 billion annually, including Canada Student Loans to some 330,000 students; non-repayable student financial assistance through the Canada Study Grants and Canada Access Grants; and measures to help students and families save for future education--

The fact remains that access is still an issue. My hon. colleague from the New Democratic Party mentioned that. She is very sincere about that need.

In fact, it is not just the tax system. I believe, as she does and as members of our party and many other members believe, that we must do more in direct assistance to students. We did that last year. She mentioned Bill C-48 as well.

She should take note that I asked the Minister of Finance a month ago, when he appeared before the finance committee, where is the Bill C-48 money of $1.5 billion?. The Minister of Finance said he thought it was $1 billion. I said it was $1.5 billion. It was checked and it is only $1 billion, and it is not going to access. It is going to infrastructure.

We need infrastructure. We need research. We need to keep the pressure on research and we need infrastructure, but we need direct support for students. The Minister of Finance indicated that infrastructure is access. I would say infrastructure is not access. Infrastructure is important, but access is important for the very reasons that the member mentioned: low income families, aboriginal Canadians, and persons with disabilities.

Last fall we introduced our fall economic update in the House which contained the following measures: $2.2 billion over five years to improve student financial assistance for low and middle income Canadians; $550 million to expand the Canada access grants for four years to the lowest income families; $3.5 billion over this year and the next five years to increase workplace training; $1 billion for the innovation fund; $265 million for five years to assist Canadians with disabilities to participate in the workforce; and $1.3 billion over five years to improve settlement and integration services.

We made that commitment to the lowest income Canadians, the Canadians most marginalized, those people whose skills we are not taking advantage of.

Since I have been elected I have had students with Down's Syndrome and cerebral palsy come to see me. Some of them have been sitting at home for two years after finishing high school with a real sense of momentum. They are falling off a cliff in terms of what is available to them.

The measures in our economic update would have helped those people and it would have helped the lowest income Canadians to go to community college or university and get a post-secondary education. Our economic update could have been passed in this House. If the NDP had been sincere in supporting it, we could have given students a break, aboriginal Canadians a break and the environment a break. We could have given all Canadians a Christmas break if we would have had our election six weeks later. I do not like to keep bringing this up, but those are the facts. We could do better.

I agree that tinkering with the tax system is not the only solution. When tuition at Acadie is around $8,000 and at Dalhousie $6,000 for a first year arts and science degree, giving a student $80 for books is irrelevant. It does not help those who need help the most.

This is a way of using the tax system to make a substantial improvement in access for students. We have all had students come into our office who tell us that they cannot get any student assistance even though their family is not rich. They need some kind of support. Making RESPs tax deductible would be a significant investment in the future of Canada.

I have RESPs for my children, and I think they are a great way to go, but a lot of Canadians cannot afford to invest in RESPs. If we make them tax deductible, if we follow the plan from the member for Pickering--Scarborough East, we will get a lot farther than we otherwise would.

Anything we do for students is good but what we have seen from the government since the election has been nothing for students except some tax changes that affect scholarships and books. Those changes are not significant but this bill is.

In Maritime Canada, average student debt skyrocketed 33% in five years from 1999 to 2004. In five years it went up by one-third. The average student debt of somebody coming out of a Maritime university is now $28,000. The study found that 73% of all students had to borrow to finance their degrees. This bill would help with that.

Not only is skyrocketing student debt leaving our students after they graduate from university with a mortgage but no house, it is affecting their decision-making. I met with a medical student from around the Amherst area in Nova Scotia who wants to go back and become a family doctor in her community. She had that as her goal ever since she was a little girl. She is now some years into a medical degree with a student debt of $150,000. She has decided that she has to specialize in order to pay off her loans. If we do not make significant, serious investments in post-secondary education, people will make decisions that are not good for them, not good for their community and, I would suggest, not good for the country.

I think we have all spoken to students. As the chair of our caucus I have had the chance to travel the country. I have discussed this with the Canadian Federation of Students, with CASA and with universities. What I hear is that we have done a lot in research. We have sustained the universities in the last five to six years in the investments that I talked about. It is a good thing for universities. Infrastructure is a good thing for universities. The government put $1 billion into the budget for infrastructure, which matches what we had put in our economic update. The government's investments in research are one-tenth of what we put in the economic update. That is not enough. There is absolutely nothing for student access or to help a broad range of students and their families prepare for post-secondary education.

If the country wants to compete and to continue to do as well as we have, fortunately, through good government in the last decade or so, we need to invest in our students, those who need help the most and those who cannot afford to go university because of high tuitions. We can do it. The bill is part of that and I commend my colleague. There is more that the government should do but this is what we can do to have a positive impact so we can take advantage of the human capital that exists in Canada and continue Canada's success in the world.

Income Tax Act
Private Members' Business

6:40 p.m.

NDP

The Deputy Speaker Bill Blaikie

The time provided for the consideration of private members' business has now expired and the order is dropped to the bottom of the order of precedence on the order paper.

Business of the House
Private Members' Business

6:40 p.m.

Niagara Falls
Ontario

Conservative

Rob Nicholson Leader of the Government in the House of Commons and Minister for Democratic Reform

Mr. Speaker, there have been consultations and I believe you would find unanimous consent for the following motion. I move:

That, notwithstanding any Standing Order, special orders or usual practices of the House, on Thursday, June 22, statements by ministers will be taken up, pursuant to Standing Order 33, at 3:15 p.m.; when statements by ministers are complete the House will stand adjourned until Monday, September 18, provided that, for the purposes of Standing Order 28, it shall be deemed to have sat on Friday, June 23.

Business of the House
Private Members' Business

6:40 p.m.

NDP

The Deputy Speaker Bill Blaikie

Does the minister have the unanimous consent of the House to move the motion?

Business of the House
Private Members' Business

6:40 p.m.

Some hon. members

Agreed.

Business of the House
Private Members' Business

6:40 p.m.

NDP

The Deputy Speaker Bill Blaikie

The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?