Bill C-58 (Historical)

An Act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act

Canada Pension Plan

[Rob Anders, Canadian Alliance, Calgary West, AB]

Mr. Speaker, I would like to make this quick because I realize everyone wants to go home.

There is a requirement under section 115 of the Canada Pension Plan act that when a bill is introduced in parliament that alters the Canada Pension Plan act it is to be accompanied by a report from the Chief Actuary of Canada. The reason is to provide members with necessary information to consider the changes.

However, the law has a flaw, or perhaps I could describe it as a loophole, that gives the minister the excuse to proceed with the bill without the report and that is exactly what happened with Bill C-58. We had to consider Bill C-58 at second reading without the report and that impeded members' ability to be effective legislators. The report was tabled 11 days after its introduction. This type of delay is frankly unacceptable. Therefore, I move:

That the motion be amended by replacing all the words after the word “that” with:

this House declines to give second reading to Bill C-58, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, since the bill fails to address the current situation whereby changes to the Canada Pension Plan act can be considered by this House before the required report of the Chief Actuary of Canada is tabled, a situation that diminishes the ability of the House to competently perform its legislative role.

[Lorne Nystrom, NDP, Regina—Qu'Appelle, SK]

Mr. Speaker, Bill C-58, follows the 1997 government policy of moving away from a “pay as you go” pension system, with a system of a two year reserve fund, to a more fully funded pension system with a five year reserve fund managed by an arm's length investment board. We have had the “pay as you go” pension system since the days of Lester Pearson,

The CPP Investment Board, a crown corporation, was created by an act of parliament in 1997, one of the first acts that we passed in the House of Commons after the election. It has a mandate to focus strictly on the prudent rate of return. The CPPIB, which is the Canadian Pension Plan Investment Board, is expected to cover 25% of liabilities by the year 2012. The total amount of funds managed by the board at that time will be in the range of $120 billion to $150 billion, which would make it by far the largest investment fund in the country.

The investment board will implement a market oriented approach as controlled by a 12 member board of directors appointed by the Minister of Finance with input from the provincial ministers of finance. The members of the board are largely representative of the financial community and the board has some 40 employees who co-ordinate the investment board with large financial institutions.

Bill C-58 is an amendment to the Canada pension plan and the Canada Pension Plan Investment Board Act. Essentially what it would do is transfer the control of CPP reserve funds to the Canada Pension Plan Investment Board over a three year period. The board also implements the Liberal policy of allowing the CPP Investment Board to hold 30% of its investments in foreign property, in line with the budget of December 2001.

The government contends that the transfer of CPP funds would increase the strength of the Canada Pension Plan Investment Board by allowing for a higher rate of return on investments. The argument in support of a better rate of return rests on the historical performance of financial markets that generally outperform the rate of return of government securities. Moreover the Liberal government across the way contends that increasing the limit on foreign investment would also improve the rate of return. Currently the Canada pension plan holds investments worth some $53.6 billion, which as I said before is expected to increase to $120 billion to $150 billion by the year 2012, really a very large investment fund.

The Canada Pension Plan Investment Board should represent all stakeholders, not just the financial community. Right now the CPPIB does not represent all the stakeholders. Labour for example is not represented. The trade union movement, which represents millions of workers in the country, is not represented. Pensioners are not represented, yet they are very much at the heart of being important stakeholders in Canada pension plan.

However the banks and the brokerage firms, with the short term goal of increasing their profits, manage the board. The CPPIB invests on behalf of some 16 million Canadians but is only required to hold public meetings once every two years. The Canada Pension Plan Investment Board should be committed to a balanced representation so that pensioners as well as investors can have a say in the management of the fund. More transparency and more accountability is important in any open, free and democratic society.

Funds that are generated at taxpayer expense in my opinion should not be invested in foreign markets. We are not, and I certainly am not, against foreign investment for private investment groups but the dollars from a pension plan fund that is funded by taxpayers should be invested in Canadian companies and in Canadian securities. In other words, let us use the Canadian public pension fund to invest in the Canadian economy, strengthening our economy and creating jobs for future generations.

Investing government securities will help the economy by channeling money to the provinces and municipalities where it will fund improved infrastructure, housing initiatives and other projects, which are sorely needed as the infrastructure in this country has deteriorated in many ways right across Canada. I think of housing. I think of the water system and the water treatment system. I think of roads and transportation. I think of railways and many other public investments that could be much helped by CPP investment money.

Investment in Canadian businesses, especially new businesses, is important for the economy. In the United States, pension funds provide nearly 50% of venture capital. Canadian entrepreneurs should have access to such venture capital through the Canada Pension Plan Investment Board. The returns on investments in government securities and Canadian businesses may be less initially, but the new jobs created by reinvesting in the Canadian economy will create new pensions for new pensioners and increase the funds of the Canada pension plan.

The Canada Pension Plan Investment Board should implement the use of ethical screening for investment. This is something I have raised in the House of Commons on more than one occasion and also at the finance committee with the Minister of Finance. Why not use an ethical screen to make sure that the investments made by the board are made on an ethical basis?

The Canada Pension Plan Investment Board must have ethical screening to prevent investment in companies with poor environmental standards, for example, or with poor child labour standards or sweatshops, and to prevent investment in tobacco companies and other companies that harm people. Currently the CPPIB does not have an ethical screen for its investments. It has been shown that ethical screening does not reduce the rate of return. In fact, if one looks at many ethical funds in the country, one sees that their rate of return is not reduced but is in some cases higher than that of the funds that do not have an ethical screen. I think of the ethical funds in the credit union movement, for example, which have a very good track record in Canada.

It is interesting to note as we debate the Canada pension plan and look at the review of the CPP that the CPPIB now plans to invest some $350 million in foreign companies over the next five years. Companies involved in leveraged buyouts will receive a good deal of this. As of March 31, 2002, the Canada Pension Plan Investment Board has a realized a cumulative loss of $64.8 million, despite reporting portfolio gains in recent years of up to 40.1%. Since its inception the board has had a healthy return in Canadian equity investments, annualized at the rate of 13.8%, and has had a consistent loss on foreign investment, at an annualized rate of -0.3%.

Until 1997, provinces borrowed funds in 20 year loans from the CPP at a preferred rate, the cost to the government to lend these funds. They were lent to provincial governments at cost. Now they borrow the money at market rates set by the Minister of Finance. Of course that becomes more expensive to the provinces over the long run than it was under the previous rules and regulations of the Canada pension plan.

The market value of the CPP Investment Board is $14.2 billion in terms of what is currently invested in equity, with 70% of investment in Canada and Canadian companies, 15% in the United States and American companies, and 15% in other nations and other companies. As a matter of fact there was an article this morning in the Ottawa Citizen in which the headline stated “CPP [Canada Pension Plan] puts $500M [million] into risky business”. The sub-headline stated “It plunges into angel funds and venture capital” funds. The article is raising some concern about the risk for the Canadian pensioner who contributes to the Canada pension fund. The article also states that some $2 billion Canadian will be going into the American private equity funds over the next few years and some $537 million Canadian into European buyout funds over the next few years.

There is this move to invest more and more of Canadian taxpayers' money and pension money into foreign funds, foreign equities and buyout funds, to invest in certain equity funds that are highly risky on behalf of the people who are the owners of the Canada pension plan.

According to the Canada Pension Plan Investment Board, concerning the issue of ethical screening its position is the following:

Our legislation specifically prohibits us from engaging in any investment activities other than maximizing investment returns...The policy fully states that we will not accept or reject investments on non-investment criteria.

That is the position of the board when it comes to ethical investments and I am saying that we should look at an amendment to make sure that we have an ethical screen.

Tobacco is a very good example of that. Tobacco and cigarette smoking are very harmful and very costly in terms of the health of Canadians and the funds of our country. I do not think we should be investing the Canada pension plan money in Philip Morris or any other tobacco companies. We do not want to send a signal that smoking is a good thing for the people of this country, yet the government across the way so far has not agreed to look at an ethical screen. I know that some members across the way would support the idea of an ethical screen on tobacco. I have heard them speak out against tobacco and talk about a national campaign to stop cigarette smoking in the country.

So on the one hand we have the government advertising to young people and others that they should stop smoking and we have spent hundreds of thousands of dollars over the years in campaigns to stop smoking, but on the other hand we have the Canada Pension Plan Investment Board investing in tobacco companies. It is doing the exact opposite of a policy that the Government of Canada is advocating. Here we have a conflict in policy and a contradiction between the left hand and the right hand of the government.

The rates of return for the 2001 fiscal year, which ended in March 2002, were a modest 3.4% for equity. This is lower than the return on government bonds, which I think was 5% for the same period of time. Investment outside of government securities involves risk. For an entity mandated to reduce the risks as well as to realize a profit, government securities are a lot stronger investment. Certainly the facts on that in the last year or two speak for themselves.

In 2001, Canada Pension Plan Investment Board investments in private firms suffered a loss while government securities remained stable. I think a lot of people in this country, including the member for Davenport, would appreciate a stable, guaranteed rate of return for our nation's public pension fund, which is the foundation on which to build retirement income for each and every single Canadian.

The real rate of return for the Canada Pension Plan Investment Board is about 7%. The change in government securities returning 1% or 2% less would be worth the growth in the economy from the investment and the low risk, because we would be investing in our own country, investing in our own businesses and investing in our own infrastructure. We would be investing in public programs of value to Canadian people. We would be growing the economy and having all the spinoffs from a growing economy with fewer people unemployed and so on.

The total assets of the Canada Pension Plan Investment Board come to $53.6 billion. This includes the two year fund of $40 billion that was initially transferred from the Canada pension plan. Government bonds total nearly $32.6 billion. Some $13.8 billion is invested in publicly traded companies. Nearly $400 million is currently invested in venture capital and buyout funds. The fund is meant to represent 25% of the liabilities, leaving the system largely pay as you go. When the Canada pension plan was first established in the 1960s it was a pay as you go plan and remained one until the amendments of recent years by the Liberal government.

As we look at what is before us today, I would recommend that we oppose the bill unless changes are made that provide the CPPIB with a mandate to put an ethical screen in place. I also would like to see the bill's provision for investment in foreign markets eliminated, because I think we should put the money from Canada's large pension fund into Canada.

Investing in private equities is a way of improving the rate of return for CPP funds. It makes sense if they are in Canada, but having no ethical screen for those investments is bad policy. Canadians are forced to pay their CPP premiums into an investment fund that has no rules against investing in tobacco or companies that make use of child labour or companies that have very poor environmental standards. The government must develop an ethical screen for the CPP investment fund through public hearings and consultations with those who have developed ethical screens in the private and co-operative sectors. In that regard I would mention the credit union movement, which has seven, eight or nine different ethical investment funds for the credit union movement in the country. Improvements to pension legislation should also give employees the opportunity to decide if they want an ethical screen to be part of the investment decision in their pension fund.

Finally, at this time we should also bring in an amendment to the Canada Pension Plan Investment Board legislation that would provide for representation of other stakeholders on the board of directors. Here I am thinking of the pensioners themselves who should be represented on the board. Here I am thinking of the trade union movement, which represents the workers who will be future pensioners. They too should have representation on the board of directors.

If we do these things, if we have the ethical screen and representation on the board for the working people and retirees, and if we roll back the amount of money going into foreign markets with more money going into the Canadian markets such as the provinces and municipalities at low interest rates at cost to the federal government, with those three things, I think we would have a Canada pension fund that would reflect what the Canadian people want.

When I go across the country people tell me they are concerned about their security in terms of the Canada pension fund. They are worried about the future of the Canada pension fund. I believe there is no need in a country as wealthy as ours to worry about the future security of our major pension fund, but if more of it were invested in Canada, in provincial bonds and bonds to municipalities, schools and hospitals, it would strengthen the economy and the pension fund itself would be that much more secure.

I hope we can have a real debate on this in committee and come out of it making some amendments in those areas to make the Canada pension fund, which is the foundation for retirement income in the country, an even better fund for the Canadian people in the years that lie ahead.

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, I am pleased to answer the question of the hon. member about the business of the House for the foreseeable future. Like most people I would not want the attendance of the opposition to dwindle any further next week than it has this week, so I do not think we should venture on that ground too much.

First, I express my thanks and that of my predecessor to members on all sides of the House for their co-operation in making progress on the government's legislative program since January. I say so on behalf of myself, perhaps myself once reincarnated, and of course my immediate predecessor as well.

This afternoon we will consider government Motion No. 30 concerning the Special Joint Committee on a Code of Conduct, and we will do it tomorrow if necessary if the item has not been disposed of by then. We will then return to Bill C-58, the Canada pension plan legislation. If there is any time left, and subject to further negotiation with hon. members and officers of all parties in the House, we will then return to Bill C-55, the public safety bill which some but not all members have expressed enthusiasm in passing. Should there be time we will then return to Bill C-57, the nuclear safety bill.

It is my intention to inform colleagues about our agenda upon our return in early September. I have done that in previous years, contacting members a few days ahead of time so party critics could be available when debate resumed. I intend to do the same when the House resumes in September.

Meanwhile, Mr. Speaker, I take this opportunity to wish you, our staff and all hon. members my very best wishes for an interesting, fruitful and, to a point I hope, restful summer.

Canada Pension Plan

[The Acting Speaker (Mr. Bélair)]

In fact, the hon. member for Saint-Hyacinthe—Bagot will have 18 minutes when we resume debate on this bill.

I am ready to rule on the amendment tabled earlier. The hon. member for Lanark--Carleton has proposed a reasoned amendment to the motion for second reading of Bill C-58 concerning the Canada pension plan. The amendment argues that the House cannot evaluate the impact of these changes without a report from the chief actuary as provided by section 115(2) of the Canada Pension Plan Act.

The House will recall that this report was also the subject of a question of privilege last week. The Chair wishes to inform the House that the chief actuary has today tabled the 19th actuarial report on the CPP in accordance with the terms of the act. Accordingly the issue raised by the amendment having been resolved, I must conclude that the amendment is not in order.

[Yvan Loubier, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, you have no idea what an honour and a pleasure you are giving me in allowing me to speak to Bill C-58, an act mainly consolidating the Canada Pension Plan Investment Board.

At the outset, I am announcing that the Bloc Quebecois will support this government's initiative by wishing it as much success and joy as has resulted from the creation of the Caisse de dépôt et placement 36 years ago.

Contrary to what our colleague from the Canadian Alliance has done, we are going to provide a totally different picture of the Caisse de dépôt et de placement experience, to enlighten our Canadian friends on what they could do with this major instrument, the Pension Plan Investment Board, the positive things they could do, as opposed to the negative things, as our Alliance colleague has mentioned.

I remind the House that for Quebecers the Caisse de dépôt et placement is the main spearhead of their financial autonomy. With the nationalization of electricity, the creation of the Régime des rentes and the Caisse de dépôt et placement, to manage Quebecers' savings, is probably the cornerstone of what we, Quebecers, have become financially and economically in the last 36 years. It is our cherished child, so to speak.

Our colleague having painted a dark and negative picture, we can only disagree and be somewhat upset about the way some people feel about the Caisse de dépôt et placement.

Like him, this is how many Canadians keep on depicting the Caisse de dépôt et placement year after year, because it has become a major force on Canada's financial scene. This scares many people, including the big financiers on Bay Street, who have done everything they could to try to weaken the Caisse de dépôt et placement since it was first created. This is something that is a bit visceral with Canadians and Canadian financiers, especially those in Toronto.

When they see how much Quebecers have saved over 36 years through the Caisse de dépôt et placement, how much wealth its decisions have created during that period, and what a formidable financial force the caisse, which started out with capital of $1 million in 1966, has become, they are upset. The caisse is so formidable that it has become the 12th largest manager of general funds in North America and the largest in Canada. It ranks eighth in real estate holdings.

Naturally, this does not please everyone, and it has not pleased everyone in the past. I will come back to this, however. I will talk about the attempt in 1982 and the aborted attempt in 1983 to weaken the caisse.

I will begin by painting a positive picture of the past 36 years.

The Caisse de dépôt et placement was created in the wake of the quiet revolution by one of the founders of this revolution, the main one, because he was then Premier of Quebec, Jean Lesage. In 1964, at the Quebec City conference, Mr. Lesage had a bit of a creative temper tantrum in reaction to Mr. Pearson's desire to impose a Canada-wide pension plan run by one manager, which of course was the federal government at the time.

Quebec had already given thought to setting up a typically Quebec pension plan with just one caisse to manage these considerable savings.

I find it hard not to mention all those who laboured, both politically and technically, in the 1960s to build the Caisse de dépôt et placement. One of those involved was the late Michel Bélanger, who had been president of the Montreal Stock Exchange and a member of the Bélanger-Campeau commission. At the time, he was a senior government official and one of those who had come up with the idea of the pension plan and the Caisse de dépôt et placement. There were also Claude Castonguay, whom everyone knows, André Marier, Marcel Bélanger, Roland Giroux and Roland Parenteau.

There was also the first president, Claude Prieur, who started off in a little office in downtown Montreal, with very few means when he began as president of the Caisse de dépôt et placement du Québec.

I would like to quote Mario Pelletier, who wrote an excellent history of the Caisse de dépôt et placement du Québec, because it really has been excellent, contrary to the bleak picture our colleague from the Canadian Alliance painted earlier.

Mr. Pelletier wrote that, in January 1965, Claude Prieur, the first president of the Caisse de dépôt et placement du Québec—a manager with the powerful Sun Life company until then—he was a pretty sharp tack, as they say—moved in all alone to the decrepit office on McGill street.

During the two months that went by before any income came in from the Régie des rentes, he was forced to take out loans in his name, with no help whatsoever from the government, in order to set up what would later become the Caisse de dépôt, which today has some—hang on to your hats now—$133 billion in capital.

Today the Caisse de dépôt does $10 billion worth of transactions every working day. That was last year's average. Listen carefully, because this is important to highlight: $10 billion worth of transactions each working day.

Last year alone, the Caisse de dépôt et placement du Québec carried out $2 trillion in transactions, or three times Canada's GDP. I am talking about the word billions in French, I mean trillions, there are thousands, millions, billions and then trillions. There were $2.5 trillion worth of transactions last year, three times Canada's GDP, or more than $10 billion every working day.

We are talking about the 12th largest manager of global assets in North America; it is the eighth largest in terms of real estate holdings. This is no small institution.

There is also another person who was involved in creating the caisse, whom I neglected to mention on purpose. It was Jacques Parizeau. He worked very hard to make the Caisse de dépôt what it is today, an institution that has stood the test of time, with a few updates, mostly since the early 1990s, with respect to the Caisse de dépôt's international activities.

Mr. Parizeau was known at the time as a brilliant economist, recognized as such, a senior government official, a great builder of the Quebec state, and he would become, some years later, Quebec's finance minister, then premier.

Mr. Parizeau did not only contribute to make the Caisse de dépôt what it is today, being one of its main creators. Indeed, he has played a key role in everything that has to do with the modernization and dynamism of Quebec's financial sector.

Mr. Parizeau drew from the experience he gained with the Caisse de dépôt et placements and with the Quebec pension plan, which allowed him later on, when he was appointed to such strategic positions as finance minister, to develop modern tools to move Quebec forward, to move the Quebec business sector forward, a business sector which, in the late 1960s, did not resemble at all what it is today.

Among other things, the creation of the Caisse de dépôt et placements marked the start of a move toward a greater participation of small investors in Quebec's economic and financial evolution. This goes back to the Parizeau commission on guaranteed investment funds, which means guaranteed deposits.

Mr. Parizeau initiated this commission, which created the Régie de l'assurance-dépôts, allowing small investors to be sure to keep a portion of their deposits in financial institutions. Their investments were guaranteed.

From 1967 on, it has been a big help to small investors in Quebec, enabling them to take part in the economic and financial evolution of the country they love and cherish.

Mr. Parizeau was the one behind the stock savings plan created in 1979. Once again, this was an effort to get everyone involved in the economic and financial progress of Quebec. It was also the basis of the modernization of the tools for monitoring and properly administering our securities, such as the Commission des valeurs mobilières du Québec and the Inspecteur général des institutions financières.

Building on this experience with the Caisse de Dépôt et de placement et de la construction and the ensuing construction, and particularly on the original stakeholders behind its creation and the addition of fundamental and democratic tools to democratize the financial sector, a Caisse de dépôt et placement was created. It has evolved over the years and contributed to the creation of various companies that have grown into major undertakings, such as Alcan, Hydro-Quebec and Bombardier.

In this connection, let us keep in mind that the first government involvement was via the Caisse de dépôt et placement, with investments in Bombardier, Domtar, Vidéotron, Noranda and Canam Manac. In 1985, the decision was made to focus more on small and medium businesses that were creators of employment in the regions. Investments were made in 63 companies, with an average performance of 30%. This is nothing to sneeze at, although my Canadian Alliance colleague looked down his nose somewhat at these figures, but for startup companies this is an extraordinary performance.

So much so, that the Caisse de dépôt et placement became an incredible agent of the economic and financial development of Quebec and it was ranked tops among fund managers in Canada in the 2000 Reuters Survey, which Tempest carried out by contacting—not just anyone—but TSE 300 companies.

In the year 2000, the biggest companies in Canada considered—and this still holds true today—the Caisse de dépôt et placement du Québec, a source of pride and a vital tool that has played a cutting edge role in the financial emancipation of the people of Quebec since the late 1960s, to be the best money manager in Canada. Let my colleague, who has nothing but disdain for its accomplishments and those of the economic stakeholders of Quebec, put that in his pipe and smoke it.

Since I have ten minutes left, I shall speak on a situation that occurred in 1982, although some may feel this is ancient history. However, it still has echoes today, particularly since 1993.

I sit on the Standing Committee on Finance, and we meet business people from across Canada. As I mentioned earlier, some people show contempt toward the Caisse de dépôt et placement. The Canadian Alliance member is one of many. We met Bay Street financiers who hate the Caisse de dépôt et placement, even though it makes a positive contribution to the Canadian economy and has become a key player in a number of so-called Canadian businesses that make Liberal, Conservative, Canadian Alliance or New Democrat members so proud.

Still, some continue to despise the Caisse de dépôt et placement and to say that it is bad, that it is rotten. Because the Caisse de dépôt comes from Quebec and has become Canada's largest manager, there is reluctance on the part of Canada to recognize achievements by Quebecers. This is because until this financial emancipation occurred, it used to be said that Quebecers were not cut out for business, economic and financial matters. But now that we have created something as fundamental as the Caisse de dépôt et placement, they are a little less blunt about Quebecers.

In 1982, the federal government decided to table a bill, Bill S-31. We still remember that. Bill S-31, introduced by André Ouellet, the then Minister of Consumer and Corporate Affairs, prohibited the Caisse de dépôt et placement from holding more than 10% of the stocks of major businesses in Canada. At the time, the Caisse de dépôt was considering investing in Canadian Pacific.

This generated incredible controversy. Owned by Quebec interests and built on Quebecers' savings, the Caisse de dépôt et placement would become CP's main shareholder. This created an incredible uproar in Canada, so much so that business people from English Canada decided to wage a war against the Caisse de dépôt et placement.

They decided to put unbelievable pressure on the federal government to get it to introduce Bill S-31, which provided that the Caisse de dépôt et placement could not hold more than 10% of the shares of companies involved in interprovincial transport.

This did not target Canadian Pacific alone—it was clear that the railways affected all of Canadian business. Do you want to know why? Because all Canadian businesses at the time had a stake in transportation. If it was not air transportation, it was shipping, in the oil industry, for example, it was in pipelines, it was in the railways, which was a secondary activity, but which was added on to manufacturing and also the service sector.

For the year that the saga of Bill S-31 dragged on before the government decided to withdraw the bill due to pressure from Quebec business, during that whole year, from 1982-82, we Quebecers lost incredible opportunities to invest the significant sum at the time of approximately $17 billion that the Caisse de dépôt et placement held in capital.

During that year, we lost the ability to benefit from the increase in value of Canadian Pacific shares. In 1982, CP shares were worth $30, in 1983 they were worth $50; we could have made a $20 profit per share if the Caisse de dépôt et placement had been allowed to own more than 10% of CP shares. The caisse lost some $15-$20 million dollars, with CP alone. We have to assess all opportunities that were lost, involving the purchase of shares of other Canadian businesses, given the provisions of Bill S-31 that were retroactive.

Before this bill, we were told it would be retroactive. If the Caisse de dépôt et placement had invested more than 10% in the specified businesses, it would have had to get rid of the difference. Selling shares when you are being forced to do so means you end up selling off shares at a loss.

This is what they were going to force the Caisse de dépôt et placement into, as it was getting too powerful for the liking of English Canadians. The president of the Toronto Stock Exchange at the time, Mr. Bunting, launched an incredible offensive to bring down the Caisse de dépôt. All of the big Canadian corporations like Bell Canada, Stelco, The Bank of Montreal, the Royal Bank, Dominion Textile, Nova, Inco and Hiram Walker fought against the Caisse de dépôt et placement to keep us from moving forward.

Totalling the losses, for example for 1982-83, we lost $100 million in opportunities. This is a plausible figure because for CP alone it is around $15 million or $20 million. Given the average yield of the Caisse de dépôt et placement, between 1982 and 2001, this means over $1 billion of potential capital lost to Quebecers.

Thus today the value of the Caisse de dépôt et placement is not $134 billion but $133 billion. Quebecers would have had $1 billion more to invest and to build up their savings with.

Because of the Bill S-31 episode, we have $1 billion less, and that is a real drag. Today, here we are faced with your bill, which creates and consolidates the activities of the Canada Pension Plan Investment Board. We are here to support it, despite our memories of Bill S-31. We said to ourselves “Let us put that in the past for now”.

People take much delight in recalling this episode. But we are supporting you in this wonderful plan to create another sort of caisse de dépôt et placement in Canada, using the money in the pension plans of Canadians outside Quebec, because it will open up opportunities and thus democratize the economic growth of Canada.

I wish you—as do all my colleagues—as much success with the Canada Pension Plan Investment Board as we have had with the caisse de dépôt et placement.

But I hope that nobody puts obstacles in the way of this wonderful initiative such as we have had to face since 1982. And there were all sorts of subsequent criticisms of the caisse de dépôt et placement. There were all the smear campaigns I have seen since I became finance and economic critic. It is unbelievable.

When one visits Toronto and talks about the caisse, it is as though one had mentioned the plague. People are afraid of it. We are flattered by this reaction. But, at the same time, it would have been nice if, in the past, you had been as enthusiastic about the growth of the Caisse de dépôt et placement du Québec as we are now about the creation and consolidation of the activities of the Canada Pension Plan Investment Board.

It would also be nicer if we did not have such outrageous comments from our colleagues about the experience of the past 36 years, the marvellous experience of the caisse de dépôt et placement. I will have an opportunity to come back to this later, because you are indicating to me that my allotted time is up. I will have about 20 minutes when we resume debate on this bill and I will have more to say about this fabulous experience.

[Scott Reid, Canadian Alliance, Lanark—Carleton, ON]

Mr. Speaker, when I left off a couple of days ago, I was making reference to the way in which the legislation and this series of changes to the Canada pension plan was modelled by the former minister of finance, the member for LaSalle--Émard, to allow moneys in the Canada pension plan to be used for purposes other than the goal of achieving a maximum rate of return. First, I was in the process of pointing out to the members of the House how this had the effect of reducing the likely rate of return that would be achieved through the Canada pension plan investment fund.

Second, I was demonstrating, through a history of the minister's prior actions on RRSPs, old age security and earlier changes he made to the Canada pension plan, how this was part of a pattern he had demonstrated of repeatedly seeking to accomplish other goals with pools of money in our various pension plans, how this would have the impact of greatly reducing the amount of wealth available to Canadians when they retired and how this would cause a great deal of damage to the economic interests of all Canadians, both those currently at retirement age and those who would eventually be of retirement age.

Having gone through this demonstration, I pointed out that the finance minister had based his model on the Quebec pension plan and on the Caisse de dépôt et placement, which is the vehicle by which the government of Quebec invests its pension moneys. In fact I quoted from him. On a number of occasions he had made it quite clear that the Quebec pension plan and the Caisse de dépôt et placement was his model. He went so far as to describe himself as an apostle of the Caisse de dépôt et placement.

Members on this side of the House have a problem with this. We feel that the only suitable use for Canada pension plan moneys is to invest them to achieve the maximum rate of return. No other consideration should be taken into account, not regional development, which the minister has suggested, not stabilizing the economy, which is an idea that has been floated and not dealing with any social goals that might occur. Raising the best rate of return is the only consideration that should be taken into account.

I want to describe what happened a few years ago when the first stage of this transition of the Canada pension plan was underway. The National Post and the Ottawa Citizen carried a column by Andrew Coyne and he commented a little on these changes. I will quote from what he said at that time. He said, referring to the former finance minister, that he “confesses to being 'an apostle' of the Caisse de dépôt's approach”. Then Mr. Coyne asked:

Is this what we really want: a mammoth, government run investment fund, with the money and the mandate to take controlling stakes in private firms, hire and fire directors, block takeovers and otherwise tilt the scales in the capital markets to suit the whims of the government of the day? Socialism by the back door? Is the Canadian Caisse, as Martin is already calling it, to be the vehicle for the same mix of nationalism, dirigisme and plain-old cronyism for which the original is justly famous?

That is a good question.

There are no guarantees of non-intervention on the part of the Canadian Caisse de dépôt et placement in the Canadian economy. All we have right now as guarantees is the goodwill of the people who are running it, the people who are appointed by the Department of Finance to the 10 man board that runs the Canada pension plan investment board.

Going through the commentary of the individuals who are on the board, I am somewhat encouraged for the short term by the current appointees. In particular I am encouraged with the situation with John MacNaughton who is on the board. I will quote from an interview that was reported in the Financial Post about two years ago when he was appointed to the board.

He was asked about some of the interventionist activities that the Canada pension plan investment board might make. I am quoting not from him but from the article which paraphrases him. It states:

Unlike high-profile U.S. pension funds such as California Public Employees' Retirement System, Mr. MacNaughton has no plans to be a crusader on corporate governance. For him, a solid board of directors is every company's best watchdog.

Nor does he intend to mimic [the] Teachers' [plan] by joining other outside investors to force change in executive suites.

...Mr. MacNaughton is adamant that the government will never be able to use CPPIB [Canada Pension Plan Investment Board] to support any industrial strategy. Nor will he heed a government plea to restore calm if the stock market tumbles.

I am reassured about Mr. MacNaughton, but as another article which I quoted in my prior remarks a few days ago pointed out, Mr. MacNaughton is dispensable and over time it is not inconceivable, indeed, given the record of the government it is a virtual certainty, that more politically compliant individuals will be placed on the board. Moreover, the pressure to do so will be there.

Looking at the results of this kind of model, the obvious question is, what kind of results can we get? We do have a model. It has been in existence for nearly 40 years: the Caisse de dépôt et placement. What kind of rates of return does it have? I am looking at the 16th statutory actuarial report of the Chief Actuary of Canada, who reports that from 1966 to 1995 the average real yield after inflation on the Quebec pension plan account, which has always been invested in the manner in which the Canada pension plan account will now be invested, was a little under 4%. By comparison, the average of the largest private managed funds in Canada was just under 5%. Compounded over several decades these are huge amounts of money, particularly when the government is talking about an investment capital of over $100 billion. This adds up to an almost incomprehensible sum of money, which is deliberately being forgone.

I say deliberately because the proposals put forward by the former finance minister when he was proposing this Canada pension plan investment scheme stated that the projected rate of return on the Canada pension plan, once inflation is taken into account, is 3.8%, that is to say, less good even than the Quebec pension plan has been achieving, less good than that substandard, sub-market rate of return.

I should mention as well that if we examine just the rate we would get by using a passive index, a passive North American index would have produced a substantially better rate of return. It would also have been, and this is a remark I will be returning to later, insulated from the government's long term policy of allowing the dollar to fall and therefore all investments that are demarcated in Canadian funds to fall as well. None of this is contained in the bill and that is just unacceptable.

With the Quebec pension plan, what do we see it being used for? There are many things I could point to, but in general it is the industrial and economic development of Quebec. I do not want to suggest that the idea of regional development is not a worthwhile goal. It is not a worthwhile goal when we are talking about the hard-earned savings of Canadian taxpayers who are depending on this money for their future. The result of the regional and industrial development plans in Quebec has been a very unsatisfactory rate of return and those funds that have been focused upon real estate developments and so on have been the worst funds in terms of rate of return in Quebec, achieving in fact in many cases a substantial negative return. That is to say, it is just lost.

As well, we have seen the Quebec pension plan funds being used during the last referendum period to help the government of Quebec shore up its short term credit, so that in the event of a yes vote the government of Quebec would not have had to refinance its debt for two years. That may be an intelligent strategy if one is trying to break up the country and is worried about a lenders' strike. It was not a wise strategy for the moneys in that plan. It was completely unacceptable. That kind of use of funds is not prevented in the legislation.

I do not think the Government of Canada would seek to do quite that with the money, but we can see the argument being made that we have a unity crisis and we need to use the money for something else because we have a unity crisis and we need to shore up the unity of this country. How can we say that Canadian pension plan moneys should not be used for this? Is there anything more sacred than the unity of the country, than child poverty, than regional development or than whatever the policy demands of the government at that time might happen to be? This is simply unacceptable.

Finally there is the question of the use of the moneys for political intervention and the potential for the kinds of misuse of funds that we see being virtually endemic in the government. I do not want to suggest that this was ever part of the plan when this strategy for managing Canada pension plan investment funds was being set up. It is merely a likely consequence and one against which there is no protection.

I want to turn, then, to the question of the way in which some limits are put on the Canada Pension Plan Investment Board as to how it can invest the money. I have already mentioned that the fund is interventionist, but I think it should be pointed out just how severe a problem this is. One of the rules that governs the Canada Pension Plan Investment Board, and this is a rule that is being set in place by this piece of legislation, is that the rules that apply to RRSPs with regard to foreign content will also apply to the funds in the bill. Therefore, the hundred billion dollars or more in this fund will be kept within the Canadian market. Only 30% will be allowed to be placed outside of the Canadian market.

The Canadian market is approximately 2% of the world market. It is the market in which we are all participants by virtue of being participants in the Canadian economy. Our salaries are denoted in Canadian dollars and are paid in Canada. We find that all of our real assets, our non-pension assets, are trapped within the Canadian economy, which means that if it goes down we have no insurance against that because of the fact that the Canada pension plan and its moneys are kept within this economy rather than in the other 98% of the world economy. This is a severe problem that increases the risk on Canadians and Canadian pensioners.

We know what kind of impact this can have because we can look at the rate of return that RRSPs have been able to achieve when they are subject to similar rules. A few years ago, Keith Ambachtsheer, a noted pension expert in Canada, did some research and published a report which indicated that as a result of this rule applying to RRSPs they achieved on average a rate of return which was 5% lower than it would have been had that money been invested more broadly on the international market.

I will just quote from the Financial Post , which stated in 1995 that:

Ambachtsheer's research showed that the price of this limitation on diversification is a significant increase in risk to achieve the same return. In addition, he estimated a conservative balanced portfolio subject to the...limit [on foreign investments] earned approximately 1% less on average each year over the last 10 years than an unrestricted portfolio.

This is what we will impose on our national pension pool of investments. I have talked about the risk increasing because we are trapped in this same pool of money. We have all our eggs in the same basket, our pension moneys and our non-pension moneys. However, that is not the only kind of risk that exists. There are currency risks, of course, and there are others, such as if the stock market takes a tumble. Again, a smaller stock market is far more likely to take a tumble than the world as a whole.

Here is a question that was raised in an article in the Financial Post on July 17, 2000. The author asks this question:

But suppose 15 years down the road, the CPP Investment Board has $100-billion or more tied up in the stock market and the market threatens to plunge 40%. Would Canadians be willing to have the Investment Board sit tight and see $40-billion in collective pension assets go up in smoke?

It is a good question, is it not? It is a question that this legislation forces us to ask because it does not protect us from this kind of risk. Indeed, it forces this kind of risk upon us.

There are other problems. When we are a large player in a small market we affect the market with everything we do. In a small market, a large player that goes in to purchase a stock has the effect of driving up the price of that stock, which means it automatically pays a penalty, a fine, simply for having moved in that direction. When it sells a stock it automatically drives the price down by virtue of the fact that it is a substantial proportion of the market itself. That has the effect of causing it to pay a fine when it gets out of a stock.

Therefore, in fact, an actively managed portfolio that dominates the Canadian market, as this fund will, will have the effect of driving down the rate of return on investments. I want to suggest that this is a consideration that was not taken into account when the 3.8% rate of return was projected. I see nothing in the government's documents that indicates it was ever considered. That means that the rate of return is very likely to be below the 3.8% the government projects.

That in turn means that when the next crisis in the Canada pension plan comes along, a crisis fomented on the Canadian people by the government and in particular by the former finance minister, we will face the same kind of decision that occurred on the part of the former finance minister five years ago when he was dealing with the last crisis in the Canada pension plan. Aside from raising the rate of Canada pension plan payroll tax, which he did by a substantial amount, he also reduced Canada pension plan benefits to seniors by about 5%. That was the first step. We can expect, if this plan goes into effect, a lot more of that sort of thing. Anybody who is a senior now or who will be a senior in the future had better think about that. That is the almost certain consequence of this structure for these investments.

There is an alternative, which is to use an index, to use what is called a passive investment. Earlier I mentioned the California public employees' retirement system, the largest privately run investment fund in the world. That pension fund invests its assets passively by simply purchasing a basket of stocks that mimics the Wilshire 2500 index of American stocks, which is basically as close to a publicly traded index as possible in terms of reflecting the United States economy. The reason this pension system uses this system is that even though it is in a vastly larger market 10 times or 12 times the size of the Canadian market, nonetheless it finds that trying to get actively involved results in lesser rates of return. It simply does not want to get into that sort of thing. I think we should follow this example. I should point out that we actually have some experience in Canada with a comparison between active and passive management of publicly managed funds, which extends over the past few years.

In its first year of operation, the Canada pension plan investment fund was simply invested in a passive index that mirrored the Canadian market. By contrast, the Quebec pension plan was actively managed on the model that it is now suggested the Canada Pension Plan Investment Board should follow. The result in that first year was that the Canada pension plan investment fund, which was passively managed and which simply mirrored the index of the Canadian market, did more than twice as well in that year as the Quebec pension plan. So why on earth would we want to go from something that is working, I would suggest, not perfectly well but tolerably well, to something that is following a model that is clearly dysfunctional? It makes no sense.

That is without considering the problems I have mentioned with regard to potential political interference in corporate governance and in the internal affairs of the Canadian economy. The government talks at great length about a pension plan investment board that is at arm's length. We have seen that this is an easy matter to overcome if this government or any future government chooses to set that rule aside.

However, what we really want is a pension plan and a pension fund that is politician proof, not at arm's length but politician proof. The legislation was brought to the House in great haste in an effort to make it look like the government has an agenda. It was brought here despite the fact that there is no report from the chief actuary stating what the implications of the legislation are for the pension system and that is something that the existing legislation clearly states is not acceptable. It makes it impossible for us to know whether this suggested series of changes will accomplish the goals that the government claims they are going to accomplish.

For this reason, I move that the motion be amended by replacing all the words after the word “that” with the following: This House declines to give second reading to Bill C-58, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, since the bill is not accompanied by a report of the Chief Actuary of Canada who reported to the government that the changes proposed in the bill will increase CPP assets by approximately $75 billion over 50 years and that members of the House cannot evaluate the impact of these changes properly without a report.

[Scott Reid, Canadian Alliance, Lanark—Carleton, ON]

Mr. Speaker, I am rising today to respond to government Bill C-58, an act to amend the Canada pension plan and the Canada Pension Plan Investment Board Act.

The bill's function as stated by the government is to achieve the following four goals: first, it would permit the transfer of money from the Canada pension plan account to the Canada Pension Plan Investment Board; second, it would permit the transfer of assets held by the finance minister to the account for technical reasons; third, it would apply to the Canada pension plan fund the 30% foreign content limit that applies to registered retirement savings plans and employer and union sponsored pension plans in Canada; and fourth, it would deal with assorted housekeeping and technical amendments.

Those are the stated goals of the bill. It has other goals in mind as well, but before I speak to them I will turn to the remarks made by the hon. government House leader with regard to the government's compliance with its obligations under subsection 115(2) of the Canada pension plan. The Canada pension plan says a report of the chief actuary is required when the House is proceeding forward with a bill dealing with the act. Subsection 115(2) states:

--the Chief Actuary shall, whenever any Bill is introduced in or presented to the House of Commons to amend this Act in a manner that would in the opinion of the Chief Actuary materially affect any of the estimates contained in the most recent report under this section made by the Chief Actuary, prepare, using the same actuarial assumptions and basis as were used in that report, a report setting forth the extent to which such Bill would, if enacted by Parliament, materially affect any of the estimates contained in that report.

Moreover, the report must be laid before the House of Commons by the Minister of Finance forthwith. Subsection 115(8) states:

Forthwith on the completion of any report under this section, the Chief Actuary shall transmit the report to the Minister of Finance, who shall cause the report to be laid before the House of Commons forthwith on its receipt if Parliament is then sitting, or if Parliament is not then sitting, on any of the first five days next thereafter that Parliament is sitting, and if at the time any report under this section is received by the Minister of Finance Parliament is then dissolved, the Minister of Finance shall forthwith cause a copy of the report to be published in the Canada Gazette.

This answers the question the government House leader raised as to whether he could submit such a report or whether a report could be submitted while the House of Commons was not sitting. It could be and should be. It is difficult to have an intelligent debate in this place on the bill when we lack the requisite actuarial data from the Chief Actuary of Canada to determine what the likely effects of the legislation would be.

This is no small matter. We are talking about amounts in the tens of billions of dollars. The speaking notes given out by the government indicate that the proposed changes in the legislation would shift the earnings of the fund by $75 billion. That is not pocket change.

This is the result of a material effect on the fund. For those of us trying to come to an intelligent understanding of the legislation, the question arises as to whether the extra $75 billion would allow the 9.9% contribution rate to the fund to fall. This would have a substantial impact on employment prospects for Canadians. A reduction in a job killing payroll tax would be tremendously beneficial.

On the other hand, would it mean the CPP would be unsustainable without the projected $75 billion infusion of cash? If that is the case, what we are really discussing is how to avoid a financial calamity which would deprive many Canadian seniors and all of us of our anticipated pension benefits under the Canada pension plan.

We are discussing the issue in parliament without knowing which of these two situations is the case because we do not have the report of the chief actuary. While the government may not be infringing the law or the rules of the House by bringing forth the bill without having produced a report from the chief actuary, the rules of good governance are very much infringed.

Quite frankly, the bill is before the House at this time for the same reason a flurry of other bills have been rushed forward in the last few weeks. About three weeks ago one of the newspapers, the Globe and Mail or the National Post , published a warning that we could expect a large number of bills to be rushed forward in every department to give the impression the government had something on its agenda while it floundered around trapped by internal controversy over its leadership. Bill C-58 is one result of the government's effort to create an impression of energy and activity or sound and fury signifying nothing.

I am not saying the bill is not an appropriate matter to be considered by the House. It is absolutely necessary that the House consider the bill in a timely fashion when the appropriate work has been done by the authorities delegated to carry out these tasks under the Canada pension plan. I am referring to the chief actuary with whom I have worked in the past and whose office does excellent work when given the chance to so do. I am also referring to the Minister of Finance.

The appropriate course of action would have been for the government to bring forward the bill in the autumn after a report had been done by the chief actuary and tabled in the House. I gather that this will happen prior to committee stage. However second reading of the bill is not being conducted in as informed and intelligent a manner as it should be. We are all the losers for that.

Again, we are not talking about pocket change. We are talking about $75 billion. We are talking about the retirement money that would keep millions of people across the country living at the standard they have been promised. We are talking about money that would be taken off people's paycheques whether they wanted it to be or not, money that could not therefore be put in their RRSPs or used in manners that could allow them to build for their pensions.

When dealing with these vast amounts of money we should proceed with caution and care. We should never put forward legislation for the purpose of making the government look like it has something on its agenda or is more prepared to deal with affairs of state than it is. We could such achieve propaganda goals through less costly means.

I do not know if the text of the bill is substandard. It may be very well drafted. The legislative drafters may have worked closely with the experts. I do not know. I do not have the report to compare the text of the bill and go through that kind of analysis.

However ill prepared the bill may or may not be, from what we have seen of it the bill's general theme is part of a pattern of pension legislation under the government and more particularly the former minister of finance who was responsible for drafting the bill and all the government's prior bills dealing with pension reform. It is a consistent pattern in which the government has said the purpose of pension funds and moneys set aside for pensions is not solely to achieve the best possible return on investment and therefore the best pension income for Canadian seniors and the best security for all Canadians who will one day become senior citizens. It is rather to achieve other political and social goals, some of which may be very worthwhile.

All this will have the consequence of diverting attention from the solitary goal of producing the best possible return on investment and therefore the best level of retirement income for Canadian seniors and the millions of people coming down the pike who will retire, become seniors and depend on the Canada pension plan and various other plans in our pension system.

I will go through a few examples to make the point. There were three key points in the process of redefining the goals of our pension system under the former minister of finance, the hon. member for LaSalle—Émard. First, in 1994-95, early in his tenure, the minister of finance floated a series of trial balloons. Canada faced a tremendous potential shortfall in its ability to raise revenues. We faced enormous deficits. The minister of finance tried to determine whether he could find ways of clawing back revenue from registered retirement pension plans to put it into the hands of the government so it could be changed from tax exempt or tax deferred money into money that was taxable. This would have had dire consequences for those who depend on registered retirement savings plans to take care of their retirement.

In one example, an article in the Financial Post on December 31, 1994 suggested the government might try to place a capital tax on firms through which RRSP investments are made. RRSPs must be invested through a bank, trust company or some other financial institution. The idea was that the capital tax would be placed on these firms based on the invested amounts. It would have been presented as a tax on corporations. It would in fact have been a tax on RRSP capital.

The former finance minister floated another trial balloon in early December which did not work out well or meet with a positive reception. He proposed a 1% capital tax on amounts in RRSPs every year. This would have caused average Canadians to pay a total of $4,141 extra in tax on their RRSPs over the lifetime of the RRSP, with no benefit at the end to reflect the cost. This would have reduced the amount average Canadians had to pay into their RRSPs. It would have reduced their benefits by 36% to give the government a small financial short term benefit as part of its attempt to pay down and eliminate the deficits.

A trial balloon which was successfully implemented was a proposal to raise from 69 to 71 the age at which individuals are forced to roll over their RRSPs into RRIFs. This has a significant impact on people who are still working at age 69 and can reasonably expect to live for many more years and require substantial retirement income.

Second, the attack focused on old age security. Many people have heard that the Canada pension plan has not been properly financed for the past couple of decades. The old age security system suffers from similar problems. The problems are not accounted for in quite the same way and are therefore not as visible and have not received as much publicity. However many billions of dollars of pension income have been promised which may not be deliverable by the federal government.

To deal with this the former finance minister came up with the idea of replacing old age security or OAS with something called the seniors benefit. Fortunately, such a hue and cry was raised by my own party in opposition, the then reform party, and by seniors groups like the Canadian Association of Retired Persons that the bill was killed. The bill's goal was to raise the clawback, the marginal tax rate paid by senior citizens, on money they received through OAS.

Effectively, billions of dollars would be saved or captured by the government, of course captured in the form of reduced income for Canadian seniors. Moreover it would have had the impact of causing Canadians not yet in their senior years to say there is no point in setting aside money in their RRSPs because when they get to retirement age they can expect to see, depending on their income, as much as 90% of the money they put in taxed back by the government through its new hidden clawback disguised under the name of the seniors benefit. That was the second wing of the former finance minister's effort to change the purpose of our pension system from providing the best possible income for Canadian seniors and on to other government priorities like deficit reduction.

His third attempt was the changes to the Canada pension plan. That process was started in 1997 with an act that was passed by the minister raising the payroll tax significantly and creating the Canada Pension Plan Investment Board. The process is being completed today with the current legislation. I want to give some examples of the things that the new board's mandate will cause it to invest money on a basis other than producing the best possible return on investment.

In an article in the Financial Post on July 17, 2000 we read that a number of people were being appointed to the board, including some with excellent credentials, such as a past chairman of the Investment Dealers Association of Canada, John MacNaughton. The article praises that appointment but adds:

The investment board opens the door to demands that collective equity funds be used for collective equity goals--

Collective equity funds are funds in the Canada pension plan investment plan.

--to meet ethical criteria, stabilize the stock market or develop an industrial strategy. And if the politicians so desire, Mr. MacNaughton can be replaced.

No sooner had Mr. MacNaughton announced the board's splendid returns than the NDP finance critic was urging the finance minister to intervene in the board's decision making. He recommended it be instructed not to invest in companies that profit from human rights abuses or threats to health. Mr. Martin replied that Mr. Nystrom's concerns were to be taken “quite seriously”. That is the beginning of a process we are going to see of CPP funds being restricted in how they can be used, being tapped for other uses and when necessary, individuals being appointed to the board who will be compliant in that process.

Another example has been on the former finance minister's mind for a long time. This is from the Toronto Star of January 26, 1990 dateline Halifax.

The Canada pension plan should be broken up, and its money used to set up regional funds to back promising businesses across the country, Liberal leadership candidate Paul Martin says.... Money now going to the Canada pension plan should be channelled into a chain of regional funds across the country.

The following is a direct quote from the former finance minister who was a Liberal leadership candidate then as now:

Take the savings of Atlantic Canadians, kick-start it with federal government money and allow the money to back Nova Scotia entrepreneurs who are going to create jobs, Mr. Martin told students.

[Bryon Wilfert, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I rise to speak at second reading of Bill C-58 which amends the Canada pension plan and the Canada Pension Plan Investment Board Act.

Through the bill the federal and provincial governments as joint stewards are completing the final stages of the 1997 reforms to the Canada pension plan.

Future generations of Canadians, including our children and grandchildren, would benefit from these measures which transfer all remaining CPP assets to an independent investment board, namely, the Canada Pension Plan Investment Board, CPPIB.

Endorsed by the federal and provincial financial ministers five years ago these reforms would help ensure that Canadians have a pension plan on which they can always depend.

The end result of moving to complete the market investment policy for the Canada pension plan would be increased performance, better diversification and enhanced risk management of the entire CPP portfolio.

To put Bill C-58 in context, it is necessary to take a moment and review the role and the responsibilities of the Canada Pension Plan Investment Board. However, it goes without saying that any discussion of the CPPIB must also include some remarks about the Canada pension plan itself. The background I am about to provide will be useful to hon. members in understanding why the amendments in the bill are needed.

I wish to begin my remarks with some general comments about Canada's retirement income system. As hon. members may know Canada's retirement income system is supported by three pillars--a blend of public and private pension provisions that are considered internationally as one of the most effective ways to provide for retirement income needs.

First, there is an old age security program which provides public pensions for seniors and ensures all Canadians a basic income in retirement.

Second, there is the Canada pension plan, a national contributory pension plan, which provides working Canadians and their families with income support at retirement and in the event of disability or death. It is central to today's debate.

Third, there are tax assisted fully funded employer sponsored pension plans, RRSPs and other private savings, the private component of the system.

Most Canadians take our retirement income system for granted, but that was not always the case. In Canada, in the early years, taking care of older citizens and those with disabilities was primarily the responsibility of individual families. The introduction of income tax in 1917 allowed the federal government to adopt national social programs, such as Canada's first old age pension in 1927, which included a means test. Unemployment insurance, family allowances and a universal old age security program were introduced after the second world war.

There was also a need for a public pension, one that could be carried from job to job and, indeed, from province to province. The answer was the Canada pension plan, a compulsory earnings based national plan set up jointly by the federal and provincial governments in 1966 to which all working Canadians contribute.

The CPP provides all wage earners with retirement income and financial assistance to their families in the event of death or disability. Quebec administers its own complementary plan, the Quebec pension plan, QPP. The Canada pension plan was designed to complement, not replace, personal savings and employment pension plans and for 30 years it worked well. By the 1990s, however, the sustainability of the plan had become a concern.

The Chief Actuary of Canada predicted that the assets of the Canada pension plan, the equivalent of two years of benefits, would be depleted by 2015 and contribution rates would have to be increased to more than 14% by 2030.

The federal and provincial governments subsequently released a document entitled “An Information Paper for Consultations on the Canada Pension Plan”, which outlined the challenges facing the plan in the coming years.

They followed up in February 1996 with the announcement of public consultations on the Canada pension plan. Guided by panels of federal, provincial and territorial elected representatives, extensive consultations were held in every province and territory. In joint hearings from coast to coast, governments heard from actuaries, pension experts, social planning groups, chambers of commerce, seniors' groups, youth organizations and from many interested individual Canadians.

A common theme that emerged was that Canadians wanted governments to preserve the Canada pension plan by strengthening its financing, improving its investment practices and moderating the growth costs of benefits.

Following these consultations, the federal and provincial governments in 1997 adopted a balanced approach to CPP reform so that the plan could meet the demand in the coming years when the baby boomers would be retiring. These changes included: a rapid increase in CPP contribution rates and a building up of a larger asset pool while baby boomers are still in the workforce, investing this fund in the markets at arm's length from government for the best possible rates of return, and slowing the growth costs of benefits. Altogether, these measures ensured that a contribution rate of 9.9% could be sufficient to maintain sustainability of the plan indefinitely.

A key part of the 1997 CPP reforms was a new market investment policy for the CPP. The Canada Pension Plan Investment Board, an independent professional investment board, was set up in 1998 to implement this market investment policy. The mandate of the CPP investment board is to invest for CPP contributors and beneficiaries and to maximize investment returns without undue risk of loss.

Until 1999, when the CPPIB began operations, the CPP's investment policy was for funds not immediately required to pay benefits to be invested in provincial government bonds at the federal government's interest rate. This represented an undiversified portfolio of securities and an interest rate subsidy to the provinces. Since then, under the new policy, CPP funds that are not needed to pay benefits and expenses are transferred to the CPPIB and are prudently invested in a diversified portfolio of market securities in the best interests of contributors and beneficiaries.

The CPP investment board operates under investment rules similar to those of other pension plans in Canada, which require the prudent management of pension plan assets in the interests of plan contributors and beneficiaries and, like other pension plans, is subject to the foreign property rule. This market investment policy is consistent with the investment policies of most other pension plans in Canada, including the Ontario teachers' pension plan, the Ontario municipal employees' retirement system, OMERS, and the Quebec Caisse de dépôt.

Because the CPPIB is responsible for billions of dollars of retirement funds belonging to Canadians, it is imperative that the board be fully accountable to them. These funds must be managed prudently to the highest professional standards and at arm's length from governments, with qualified managers making investment decisions.

The CPPIB act was designed to ensure full transparency and accountability. Let me explain. To begin, the CPP investment board is accountable to CPP plan members and federal and provincial governments. It keeps Canadians well informed of its policies, operations and investments by: making its financial results and investment policies public; releasing quarterly financial reports; publishing an annual report that is tabled in parliament; holding regular public meetings in each participating province to allow for public discussion and input; and maintaining a very informative website.

A robust process with strong checks and balances that is in place for identifying and appointing CPPIB directors also assures full accountability of the CPPIB. Great care was taken in structuring the CPPIB to ensure that the board of directors is independent and accountable to CPP contributors and beneficiaries. Directors are appointed by the federal government following consultation with the ministers of finance in the participating provinces. The Minister of Finance also consults with provincial ministers of finance and with the board of directors on the appointment of the chair.

Based on specific criteria, directors are chosen from a list of qualified candidates recommended by a joint federal-provincial nominating committee, which comprises one representative from each of the nine participating provinces. In addition, in making appointments to the board of directors, consideration is given to ensuring that a sufficient number of directors have proven financial ability or relevant work experience to enable the CPPIB to carry out its objectives. As a result, the board includes individuals with business, financial and investment expertise.

I am pleased to say that the independence and the quality of the CPPIB board of directors have received strong support from the public and pension management experts. Independence from governments in making investment decisions is critical to the CPPIB's success and public confidence in the CPP investment policy. This is of utmost importance, because the money the CPP investment board invests today will be needed by the CPP to help pay the pensions of working Canadians who will begin retiring 20 years from now.

This brings me to the measures in Bill C-58. Bill C-58 proposes to transfer all assets remaining with the federal government to the CPPIB over a three year period. This includes a cash reserve and a large portfolio of mostly provincial government bonds. In other words, these changes would mean that all CPP assets would be managed by one independent professional organization.

These asset transfers would represent the final steps of the path established by the federal and provincial governments in 1997 to invest CPP assets in the market by an independent professional investment board. Consolidating all assets in one organization would also put the CPP on the same authority and footing as other major public pension plans, thereby providing fund managers with the flexibility to determine the best asset mix and investment strategies to manage risks and optimize returns.

This may sound theoretical, but I want to take a moment to point out that the analysis undertaken by the Chief Actuary of Canada indicates that CPP assets fully invested in the market would be expected to earn a greater return and thereby grow more rapidly. The benefit, as estimated by the chief actuary, is very significant, in the order of an additional $75 billion over 50 years. Obviously this welcome result would add considerably to the soundness of the Canada pension plan and enhance Canadians' confidence in the their public pension plan. In addition, transferring the bonds to the CPP investment board over three years would provide a smooth transition for capital markets, provincial borrowing programs and the CPPIB.

Last, all changes in the CPP and CPPIB regulations require the approval of the provinces. I am happy to report that all provincial and territorial governments unanimously support these changes and let me emphasize that it is unanimous. Also, before new legislation comes into force, the provinces need to formally approve the changes. As I have stated more than once during my remarks, the bill essentially would complete the process the federal and provincial governments began in 1997 of investing CPP assets in the market by an independent professional investment board.

Let me reiterate a few of the other points I made earlier. First, as I have just stated, according to studies, investing CPP assets in the market will produce a very large benefit in the order of $75 billion over 50 years for the Canada pension plan. Second, as I also indicated, phasing in the transfer of the assets over a three year period will help to ensure that the transfer is absorbed smoothly by capital markets, the CPPIB and provincial borrowing programs. Third, placing all CPP assets under the management of the CPPIB will allow the board to develop a more coherent investment policy for all CPP assets to enhance rates of return and better manage risks on the total portfolio, thereby helping to ensure the sustainability of the CPP. This puts the CPP on the same footing as other public pension plans.

As hon. members know, the CPPIB is responsible for establishing and fully disclosing its investment policies and for investing CPP assets while properly minimizing risk. With the transfer of the assets to the CPPIB, Canadians can feel secure that prudent, sound investment diversification as well as increased performance will result. I should mention, too, that the transfer of the CPP assets to the CPPIB will have no impact on the Quebec pension plan, which is administered separately from the CPP.

In closing, may I remind the House that during the 1997 public consultations on CPP reform, Canadians told their governments to fix the CPP and to fix it right. As I noted at the beginning of my remarks, Canadians also told their governments to preserve the CPP by strengthening its financing, improving its investment practices and moderating the growth costs of benefits. The provincial and federal governments have completed their work and have complied with all these requests.

The establishment of the Canada pension plan in 1966 was one of the most important public policy initiatives ever undertaken in the country. The CPP reflects a national benefit that retirement for working Canadians should not be a time of hardship. It also captures the Canadian value of shared responsibility among contributors and governments to provide reliable support to wage earning Canadians after they cease active work.

Ours is a government with a conscience. Together with the 1997 reforms, the measures in the bill ensure that the Canada pension plan will remain on sound financial footing for future generations, to which I am sure all members can relate. Through Bill C-58 the government is well on the way to fulfilling its goal of making the retirement income system secure for all Canadians. Most certainly, Canada's success as a nation must be the security of its seniors and the protection of those at risk.

I urge hon. members to support the passage of this legislation without delay.

[Don Boudria, Liberal, for the Minister of Finance]

moved that Bill C-58, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be read the second time and referred to a committee.

Privilege

[The Deputy Speaker]

The Chair is prepared to deal with this matter now. The Chair had been apprised of the matter when the question of privilege was raised yesterday by the hon. member for Yorkton--Melville.

He alleged that the Minister of Finance had failed to comply with the provisions of the Canada Pension Plan Act because he had not tabled a report of the chief actuary pursuant to subsection 115(2) of the act.

Since Bill C-58, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, was to have been called for second reading debate yesterday afternoon, the hon. Minister of State and Leader of the Government in the House of Commons undertook to inquire into the situation and report back to the House. In the event he was not able to report back, the House proceeded with other business at that time yesterday.

Bill C-58 is scheduled for debate this morning. The Minister of State and Leader of the Government in the House of Commons has now reported on the situation. The Chair is satisfied that no breach of the rules has occurred, and accordingly I am prepared to proceed with the business before the House.

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, yesterday in the House of Commons immediately prior to consideration of Bill C-58 the hon. member for Yorkton--Melville rose in his place and suggested that in some form the Minister of Finance may have been in contempt of parliament over an issue. The issue did not involve contempt of parliament at all. There was a question, at least in my mind and perhaps in the minds of several members, whether it would have been in order for us to consider Bill C-58 at second reading.

I had some time to reflect upon this and obtain advice. With or without what was before us yesterday the second reading consideration of Bill C-58 would have been in order. In terms of proceeding beyond that it would at least have been questionable, particularly in view of the issues that were raised yesterday.

Section 115 of the Canada Pension Plan Act requires the Minister of Finance to ask the chief actuary to prepare a report “whenever any Bill is introduced”. That is the requirement. This has been done. Section 115 states that when the Minister of Finance receives the report, he must table it forthwith.

I can confirm that the Minister of Finance has not yet received this final report so therefore he has not breached any rule. He is not in a position to table it forthwith because he has not received it. Meanwhile, that does not stop us from proceeding with the legislation. The act has been complied with fully to the point possible, namely asking for the report. It will be further complied with as soon as the final report is received.

I should have checked this out before, but I could endeavour to determine whether these kinds of reports can be tabled even when the House is in recess. This is possible with a certain number of reports on the 15th of every month when the House is in recess. In any case if that is not one of those reports, perhaps we should pass a special order before rising for the summer to ensure that it can be tabled. If that is necessary I would endeavour to do that, further demonstrating the minister's intention to adhere to this rule.

There is nothing in the act nor elsewhere that prevents the House from proceeding with the bill. The hon. member for Lanark--Carleton and I would probably agree on that point because parliament should be able to consider legislation, particularly at second reading, almost at any time. The minister cannot fail to table a report because he has not received the report.

It is important to note that the act does not require the preparation of an actuarial report before the bill is introduced. There is no mention of that. Nor is there mention that it should be done before the bill is considered. That is not there either. I invite the Chair to take note of that as well.

I contend that the minister has complied with the act by requesting such a report and he will fully comply with the act by tabling the report when he receives it. As I indicated a while ago I will take even further measures should those be necessary if and when the House rises.

There is no substantive reason to claim that the law has not been complied with or that the minister is in contempt of parliament, which I do not think has ever been the case, at least not from my vantage point. No standing order of the House has been breached. Proceeding with the bill is not out of order; it is fully in order. I would hope that the House could now proceed with the legislation.

Message from the Senate

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I understand that some hon. colleagues in the House were inquiring earlier as a result of a point of order, which was somehow described as a question of privilege, as to what the next item on the agenda would be after the completion of the bill that is before the House.

Should I not obtain the answers on Bill C-58 that I had committed to getting to the House, which it does not look like I will get now, I will not call the bill. I will not call Bill C-58 if I cannot get the answers by the time we get to the completion of this. Instead I will call Bill C-55 as the next item.

Privilege

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, there has been a reference to a deadline made by the hon. member regarding this issue, which of course is a serious issue and I am not diminishing the importance of it. He says to buttress his argument that there is no deadline in this and it is based on the consideration which he refers to as forthwith.

Notwithstanding the fact that it is there, during the course of his presentation the hon. member might have forgotten one of the original propositions he raised in the House. It stated that it was in the chief actuary's opinion to trigger the mechanism of issuing this letter, or note which was the expression the hon. member used a while ago. I do not know, nor do I suggest the House knows yet whether the chief actuary has given such an opinion at this time.

I have asked officials to verify and to report to me. I will report to the House as early as possible. Hopefully later this day I would be able obtain that information for the benefit not only of the Speaker but of course for the benefit of all hon. members. However I do think that the triggering mechanism, which the hon. member admitted is there, is the chief actuary's opinion.

I would undertake to verify if he has given such an opinion and what the opinion is. If the chief actuary has given an opinion that in fact the triggering mechanism does not apply, the point of course is not valid. If he has not given an opinion at all, it is not valid either because the whole argument is based on the chief actuary providing that opinion, and that is the contention of the hon. member who raised the proposition in the House.

Perhaps I can assist the House and undertake that if, by the time we complete consideration of the bill now before the House, I have not obtained the information to be able to rise and give further explanation to hon. members, I would then call the other bill that is on the order paper instead, namely, Bill C-55, and call Bill C-58 at a later time, perhaps tomorrow. That would satisfy the hon. member because the proposition is not before the House given that the bill has not been called for debate and I could delay perhaps for a little while.

That being said, if anytime between now and the completion of the debate on the other bill, Bill C-53, I could rise on a point of order and give further explanation to the House, I would do so at that time.

[Garry Breitkreuz, Canadian Alliance, Yorkton—Melville, SK]

Mr. Speaker, I rise today on a question of privilege to charge the Minister of Finance with contempt for his failure to comply with the legislative requirement compelling him to table a report from the chief actuary in compliance with section 115 of the CPP Act.

Subsection 115(2) of the CPP Act says:

--the Chief Actuary shall, whenever any Bill is introduced in or presented to the House of Commons to amend this Act in a manner that would in the opinion of the Chief Actuary materially affect any of the estimates contained in the most recent report under this section made by the Chief Actuary, prepare, using the same actuarial assumptions and basis as were used in that report, a report setting forth the extent to which such Bill would, if enacted by Parliament, materially affect any of the estimates contained in that report.

On June 6 the government introduced Bill C-58, an act to amend the Canada pension plan and the Canada Pension Plan Investment Board Act. The speaking notes given out by the government indicate that this will change the earnings of the fund by $75 billion. This is a material effect on the fund and must be accompanied by a full report of the chief actuary.

Moreover, the report must be laid before the House of Commons by the Minister of Finance forthwith. That is subsection 115(8), which states:

Forthwith on the completion of any report under this section, the Chief Actuary shall transmit the report to the Minister of Finance, who shall cause the report to be laid before the House of Commons forthwith on its receipt if Parliament is then sitting, or if Parliament is not then sitting, on any of the first five days next thereafter that Parliament is sitting, and if at the time any report under this section is received by the Minister of Finance Parliament is then dissolved, the Minister of Finance shall forthwith cause a copy of the report to be published in the Canada Gazette. (Section 115(8).

The chief actuary has completed his report. The speaking notes from the department read:

The transfer is expected to improve the investment performance of the CPP. The Chief Actuary of Canada estimates that the change will increase CPP assets by about $75 billion over 50 years.

The last time a bill was introduced in the House making changes to the CPP Act, the chief actuary had his report prepared one day before the bill was introduced in parliament. Bill C-2 was introduced on September 25, 1997, and I have a copy of a letter sent to the minister from the chief actuary dated September 24, 1997, one day before the bill was tabled indicating that:

In compliance with subsection 115(2) of the Canada Pension Plan Act, which provides that a periodic actuarial report shall be prepared whenever a Bill is introduced in the House of Commons to amend the CPP, I am pleased to transmit the sixteenth actuarial report on the Canada Pension Plan.

I will table both of these documents with you, Mr. Speaker.

Clearly, our chief actuary is on the ball and respects parliament and follows the law. The fault does not lie with the chief actuary but with the Minister of Finance. The report regarding Bill C-58 is obviously finished and should have been tabled.

Members of the House cannot evaluate the impact of these changes properly without a report. For example, an extra $75 billion may allow the 9.9% rate to fall. On the other hand it could be that the CPP would be unsustainable without this act and that this act was assumed in the preparation of the last, that is the 18th, report. Parliamentarians need to know this.

In 1993 the Speaker ruled on a similar question of privilege raised by the hon. member for Scarborough--Rouge River. The issue at that time concerned the failure of the Minister of Finance to table an order made under the customs act as it was his statutory duty to do. The member for Scarborough--Rouge River stated that he entertained no doubt that:

...the minister's failure to table a document required to be tabled by this House, whether intentional or accidental, tends to diminish the authority of the House of Commons and is something that might reasonably be held to constitute contempt by this House

Speaker Fraser ruled on April 19, 1993, that a prima facie case of breach of privilege had been made and allowed the member to move a motion referring the matter to the standing committee on House management. In his ruling Speaker Fraser reiterated that:

The requirements contained in our rules and statutory laws have been agreed upon by this House and constitute an agreement which I think all of us realize must be respected. Members cannot function if they do not have access to the material they need for their work and if our rules are being ignored and even statutory instruments are being disregarded.

The Speaker also agreed that disregard of a legislative command, even if unintentional, was an affront to the authority and dignity of parliament as a whole and the House in particular.

On November 21, 2001, the Speaker delivered a ruling in regard to a complaint by the member for Surrey Central who cited 16 examples of where the government failed to comply with the legislative requirements concerning the tabling of certain information in parliament. In all 16 cases raised on November 21 a report deadline was absent from the legislation. As a result the Speaker could not find a prima facie question of privilege. However the Speaker said in his ruling at page 7381 of Hansard :

Were there to be a deadline for tabling included in the legislation, I would not hesitate to find that a prima facie case of contempt does exist and I would invite the hon. member to move the usual motion.

The reporting date in section 115 of the CPP Act is “forthwith”. The term forthwith is used all through our standing orders, Mr. Speaker, and I have watched you comply with such orders. When our standing orders instruct us to put a question to the House forthwith, that is exactly what we do. We do it right away without delay. We do not do it the next day or a week later.

By breaching a statutory requirement to table the chief actuary's report in the House the Minister of Finance is in contempt of the House. I am prepared to move a motion to refer this matter to the Standing Committee on Procedure and House Affairs.

I would also request that Bill C-58 not be allowed to proceed until a report of the chief actuary has been tabled. This is more of a point of order and ask that you rule on that related matter as well.

Business of the House

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

Mr. Speaker, I understand that many members would have suggestions about the government business over the next few days. However, in the absence of hearing all that, I will inform the House of the following.

We will continue this afternoon tomorrow with the following: Bill C-53, the pesticide legislation, to be followed by Bill C-58, the Canada pension plan investment board bill and any time remaining on Bill C-55, the public safety bill.

On Monday we will begin with a motion by the Minister of Indian Affairs and Northern Development to refer to committee before second reading the bill on first nations governance that he will introducing tomorrow, notice of which is already on the order paper. We would then turn to report stage and third reading of Bill C-54, respecting sports. We would then turn to the specific claims bill introduced earlier today and any business left from this week, that is the bills I named a moment ago.

We would also like to debate report stage and third reading hopefully of Bill C-48, the copyright legislation and, subject to some progress, I would also like to resume consideration at second reading of Bill C-57, the nuclear safety bill.

In addition, it would be the wish of the government to dispose of the motion to establish a special joint committee to review proposals made concerning the code of conduct for parliamentarians.

This is the list of legislation that I would like to see completed over the next several days.