Bill C-3 (Historical)

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

Canada Pension Plan

[Greg Thompson, Progressive Conservative, New Brunswick Southwest, NB]

Madam Speaker, I just have a few comments. I probably will not take the entire 20 minutes because I know there are other members who would like to speak.

In answer to the member for Esquimalt—Juan de Fuca, the Progressive Conservative Party position on the CPP is simply this: We recognize it as a fundamental part of Canada's social safety net. We support that plan and we want to ensure the continuity of that plan. When we talk about the continuity and security of the plan, that simply means we want it to be around for future generations.

Madam Speaker, if your memory serves you well, you will remember that the idea of a Canada pension plan first surfaced during the Diefenbaker days. To give the Liberal government at the time, in 1966, full credit, it was the Liberals who took that idea and moulded it into the Canada pension plan that we have today.

I really do get uncomfortable when I hear the Canadian Alliance members talk about those super RRSPs. They seem to forget about the other aspect of the Canada pension plan that a lot of our citizens depend on. It is not just the retirement side of it. If our earnings were high enough, we could receive, I believe, up $9,345 per year when we retire depending on how long we had contributed to the plan and on our employment earnings over the period of our work life. I am sure, Madam Speaker, you will probably be up in that upper range when you retire. The same would apply to the Quebec pension plan. The two plans are somewhat modelled after each other.

However I think some members forget about the people with disabilities who depend on that plan for income, widows, widowers and orphans as well. I do not think we can lose sight of that. It is the responsibility of government to create plans that can support people who need the support of the citizens because we are in this as a collective group, citizens of a country that is perceived as being one of the most generous countries in the world. It is up to us to put the proper mechanisms in place so that plan will be around for future generations. Some of what I see I am not completely comfortable with.

We are not against putting that fund into equity markets. Many of the surplus dollars in that fund over the years were simply lent out to the provinces in bond form and those bonds did not really pay a very good rate back to the Government of Canada. It was almost, in a sense, free money for the provinces, although they paid sort of a marginal rate of interest on those secured bonds. I think there is about $40 billion left out there on those long term bonds that continue to be administered by the Canada Pension Plan Investment Board.

Where some of us have a problem is on the simple fact that the investment board has not performed well over the last number of years since its first inception back in 1977 when the last round of changes occurred in the Canada pension plan. That board was set up with what we would expect is a level of expertise in determining where the moneys would be invested and where they would not be invested. Some of the suggestions that we have heard in the House have been that the level of transparency, or how that board was created might be a better way to express it, probably is not consistent with good governance.

In other words, it politicized the make up of the board. The board consisted somewhere around 11 members. There is no question that some of the people on that board do not have that level of expertise that we would expect to manage a fund like the Canada pension plan. What we are doing essentially is throwing money into the marketplace and hoping we will get a better rate of return on that money than we did when we simply lent it out to the provinces at a minimal rate of interest.

I guess most of us are involved in the marketplace, in the equity markets. I was in that business before I was elected to the House of Commons. In any investment there are good days and bad days and we have to take our lumps. They often say there are only two things that drive the market, fear and greed. I guess the greed aspect of it is where the NDP might have some legitimate concerns because to throw money into the marketplace hoping to maximize profits, but there is always a degree of risk in doing that.

I wish to point out some exaggerated examples of that level of risk in the last number of months. We only have to look at the Toronto Stock Exchange, the level where it is today and where it was four or five years ago, or even two years ago, or the New York Stock Exchange which is in a sort of a free fall itself. It is up one day, down the next and some days losing 3% or 4% of its value.

I can remember when I was in the investment business on October 17, 1987, we called it “black Monday” or maybe “black Tuesday”. It was a black day in the investment world when the Toronto Stock Exchange lost 17% of its value in one day. Those are some of the concerns that have been expressed by some of the members. When we go into the marketplace, we are going in with the expectation that we will do better than we would if we just simply left the money in a bond or a savings account, in this case lending it out to the provinces.

However, the markets have taken a big hit in recent months and there is no question that the hit in the marketplace has hit every Canadian because every working Canadian contributes into that fund. In other words, it is our money out there in the marketplace. The question is how much risk is this money exposed to? Those are legitimate questions.

The question would be: When do we get into the market? I am no different than most investors and most investors would tend to buy in probably too high and we sell out a little earlier than we should on the basis of fear. There is the idea that none of us want to take a bath at the marketplace but unfortunately, we cannot time these ups and downs in the marketplace. I am not against putting it out there in the marketplace, do not get me wrong, but we have to be vigilant.

Going back again to the make up of that board, we must have the best people on that board. When the returns for that fund come in at the end of this fiscal year, and I think the year end for the fund is some time in December. I am sure the parliamentary secretary can correct me if I am wrong but I do not think we are expecting a huge return. My guess would be that it will probably be in a deficit position. Last year's rate of return, if I am correct, was somewhere around 6.2%. That is not bad, but not really good either, so the question will be, where will it go this year?

The other aspect in relation to the board is that we must take another look at how those appointments are made, how much thought the Government of Canada puts into them, and who makes up that board. We do not want to leave Canadians exposed to the dictates of a particular board when they do not have a lot of confidence in the make up of the board. We stand to lose a lot of money if it makes the wrong moves at the wrong time in the marketplace.

A CPP actuary said that the changes to Bill C-3 would increase returns on the Canada pension plan assets by $75 billion over 50 years. The actuary said that this reflects both the higher returns of a more diversified portfolio and a reduction in the amount of money that earns lower returns as part of a cash reserve.

That $75 billion could be a little more optimistic than most realists would accept. When a fund loses money, which I suppose we will be in a position to know about a little later on, it is really a lot more difficult to bring it back, because the principal investment is reduced and the return on a diminished principal makes it much harder to gain back 5% than if we lost 5% on a higher capital account. Those are some of the things we must be concerned about. Actuaries earn their living by planning as best they can with an awful lot of unknowns out there. We must be concerned about it.

On the question of foreign content, our party's position was staked out prior to the 1997 election. The Conservative senators had a few comments to make on that. One of the issues they brought to the floor of the Senate on the bill at that time was the foreign content rule. I am not saying I am objecting to our party's position on that, but I am a little bit uncomfortable with the foreign content rule. In other words, raising the foreign content level in RRSPs. I am saying that for a number of reasons. With the Canada pension plan, the confidence that we should have in the Canadian market should be the driving force in terms of our considerations.

Perhaps the parliamentary secretary would have a little bit to say about that. He is at least one chartered accountant and financial planner in the Chamber here tonight. Maybe we should have a little more clarification in this area. A lot of us are uncomfortable with putting a lot of our own RRSP money into foreign markets. Most of the foreign markets, as hon. members know, are simply U.S. markets and some of those markets have been hit harder than the Canadian market in recent months.

It almost defies what we are here for because we are policy makers. The government goes on at great length talking about how we have been cushioned from recession and how we are in a much better position than the Americans in terms of an economic downturn. Basically the government itself has more confidence in the Canadian market, over which it has some control, than in foreign markets. The government has to make a connection with the Canadian public, because it is not me it has to convince; it is the greater public, which has an inherent interest in the Canada pension plan.

[Paul Szabo, Liberal, Parliamentary Secretary to the Minister of Public Works and Government Services]

Madam Speaker, Bill C-3 would basically carry on with the work that was done in a prior Parliament under Bill C-2 establishing the Canada Pension Plan Investment Board. Some of the points the member has raised were discussed and considered when we went through that process.

One of the principles that was discussed was whether the Canada Pension Plan Investment Board should be an instrument of policy. By that I mean whether it should be an instrument used to promote social or fiscal policy or other objectives that Parliament might have such as ethical investment which the member mentioned. Should we have any investments in tobacco companies because tobacco is bad? We want to clean our environment therefore should we not be supporting those areas?

Those are all very important goals that we try to work on. However considering the size of the pool of funds available to the investment board it is clear that there is a high risk that those investments, if strategically placed, could have a significant disruptive effective on the marketplace.

The decision was taken back then that the Canada Pension Plan Investment Board and its investment funds would not be utilized as a policy tool. In fact, we would have investments. Our objective was to maximize the return on investments comparable to what other investors receive in the marketplace and that investments would be made in the broad cross section in Canadian markets as well as having a balanced debt and equity, and to afford up to 30% of those investments offshore as under the RRSP program. That is where Parliament made that decision.

This particular bill is not bringing that subject back up again although the member again raised the concern that we would like to do those things. Upon reflection, I am sure the member would agree that it would be a dangerous thing to take the money of participants in the Canada pension plan and use it to somehow steer social or public policy considering that such a large amount of money is intended to provide pension benefits for retirees, death benefits for spouses and children, survivor benefits and disability benefits which are substantial. The member may want to comment on those points.

He may want to comment on the fact that the Canada pension plan system was under some question about whether or not it was viable over the long-term. He may also want to comment on the fact that the changes made in Bill C-2 were necessary to ensure the long-term sustainability of the Canada pension plan system.

Notwithstanding the member's noble intent to advance social and public policy, I think he would concede that it is in conflict with the premise of ensuring that the Canada Pension Plan Investment Board optimize the return for pensioners to ensure that the cost of operating the plan is as fair and reasonable as possible. At the same time it should be maintaining the benefit levels of all of those benefits, whether they be pension benefits, survivor benefits, death benefits or disability benefits. We must ensure that they remain at levels which would allow our seniors to get the benefits.

[Pat Martin, NDP, Winnipeg Centre, MB]

I do not know why I am being heckled by the Canadian Alliance. They are not even heckling on topic. It is really quite bizarre.

When the board does report back once every two years, there are not even the same rights that shareholders have at meetings. At least at a shareholders' meeting the shareholders can move a motion, an amendment or a resolution and maybe give direction to the board as to how they would like it to conduct itself.

We do not have that privilege. We do not have that right. We will be told how it did and did not do. I suppose the board will allow us to speak at the mikes and say a few things, but there is certainly nothing binding about those meetings. It is completely undemocratic. It has nothing to do with good corporate governance. It encompasses none of the basic tenets of good governance, which is now gaining a certain popularity throughout the investment world.

These are some of our serious concerns about Bill C-3. I would add that the fund controlled by the Canada Pension Plan Investment Board will become so massive that it will be impossible to invest that amount of money throughout Canada, even the 70% that will be invested in Canada, without political implications. Some of the decisions made by this 12-person political patronage board will surely be driven by some regional political or sectoral political influence. We cannot move that amount of money around Canada without causing a wave, a ripple effect. This is billions and billions of dollars. What if it were decided that an area needed some political tweaking, perhaps, a little more economic activity? Instead of the government spending some money there in economic development, it could simply direct its political patronage employees, and I will say could, to invest a whole bunch of money in that particular region, sector or industry sector. These are all worries that are very valid and very real. I am not saying that this will happen. I am saying it could happen without the proper guidelines and controls built into the system. None of that do we see in Bill C-3.

This bill started out as Bill C-58. We had a similar debate when it was introduced. I believe it was introduced last spring and had second reading on June 21 before Parliament prorogued. We had these same debates and frankly we were optimistic because we thought we had made a sufficient number of points. We thought that when Bill C-58 was reintroduced and tabled as Bill C-3 some of those concerns would have been addressed, the very least of which is the ethical guidelines. The government chose not to avail itself of the window of opportunity to give us some satisfaction on these issues.

On the issue of ethical guidelines, we do not even have to compromise profits. As many members here will attest, for instance, some of the ethical mutual funds perform better than the general mutual funds. I would argue that ethical investment funds can perform at least as well and in many cases better.

In terms of foreign investment, if I may I will restate the argument that we do not want our pension plan invested offshore. We want it to do the maximum amount of good in terms of secondary benefits in this country. Again, the experience to date has been, ideology aside, that those offshore investments of the Canada pension plan investment fund have lost 3%. They are minus 3%. They are showing a negative. In the investments made locally, other than stock market investments, which have been disastrous, there has been an average gain of 13%. Investing domestically has actually performed better than investing internationally, so we really do not need any more arguments.

First, we can be ethical and show a better rate of return. Second, we can be domestic and show a better rate of return. Third, we could be a lot more transparent and introduce a code of good corporate governance at least in terms of the structure of the 12-person investment board. Last, we could have a board that would be accountable to the Canadian people in a structure that at least would report back more than once every two years, something that I think is almost comical. There also should be some give and take, some mechanism or vehicle by which the Canadian people could make their wishes known and which would be binding on the board in terms of giving direction, through some kind of motion, plebiscite, vote or process. We have none of that.

No one tried very hard with respect to Bill C-3 to meet any of the concerns that we raised last spring with Bill C-58 and which we now see again before us in the same type of document. We in the NDP are disappointed, and as might be expected our caucus will vote against Bill C-3 based on the items I cited and many others.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I was only five minutes into my speech when the House adjourned for the day yesterday so I am glad to continue with some of our thoughts regarding Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

Yesterday I dealt with some of the reservations of the NDP. To summarize the points I raised, the question that arises is this: Is it a good idea for us to be on the open market with our Canada pension plan savings? I will try to answer that not in an ideological way but just by looking at the empirical evidence.

If we look at the actual experience in the last period of time since the Canada Pension Plan Investment Board was struck, put in place and put in charge of investing our hard earned pension contributions, the experience has been terrible. I could have done better by playing pin the tail on the donkey when it comes to the stock market investments it has made. Unfortunately, it chose to get into this free market, the stock market, at exactly the wrong time, like a bunch of amateurs or a bunch of tourists. It was seduced by the high earnings in the bubble that took place in the high tech sector when people were getting returns of 20% and 30% per year on their investments. The board wanted a piece of it and got in, but it got in at the wrong time and has lost a fortune. Originally the board was given $11 billion to invest on our behalf. In the first return that came back, it had lost $1.5 billion of that.

I am not trying to argue ideologically that it should not be in there. I am just trying to share with the House the empirical evidence. It has been a disaster. What struck me as odd in that first quarterly financial statement is that the board doubled the CEO's salary even though he lost $1.5 billion in the first venture into the stock market. It also doubled his performance bonus. His performance bonus went from I believe $140,000 a year to over $200,000 a year. Imagine that. If the board is going to reward bad behaviour so generously, what if we ever do show a profit? It will be staggering. What I am saying is that we seem to have adopted the worst corporate models in the structure of this board, not some best practices or some unique structure, because let us face it, this is unique. This is the taxpayers' money being invested on our behalf on the private market. Those are my reservations. Yesterday I did raise some of the details of what our reservations are but this summarizes them.

We are apprehensive. Now the fund is no longer $11 billion. The fund has grown, not because we have made smart investments but because the rate of contribution has been massively increased. It is now $53 billion in spite of the fact that in the next quarterly report the board reported a loss of $800 million. In the quarter after that it lost another $1.5 billion. In the quarter ending in September 2002 it lost $1.3 billion. The fund is hemorrhaging. We are making bad investments. The people we have put in charge of our retirement security are investing badly on our behalf.

Whether it is a good idea or not, we cannot argue with the fact that had we not gone down this road those many billions of dollars would not have been lost and would still be sitting there or maybe would have been loaned to municipalities or provinces, as was our past practice, so that the money could have been used in relatively low interest infrastructure loans to benefit Canadians. It certainly would not have been invested offshore, which is the experience now.

Part of the bill would allow the Canadian Pension Plan Investment Board to invest on foreign shores 30% of the $53 billion it now plays with. Surely parliamentarians would argue that we are trying to maximize the benefit to Canadians with the use of this money by providing a good rate of return, yes, but that we have as a secondary objective economic development in our own country. Besides, there are no ethical guidelines built into Bill C-3. In fact it specifically states in the CPPIB mandate document that no other consideration other than the “maximum rate of return” shall be contemplated in the investment strategy.

I will not buy shares in a mutual fund if I know that mutual fund is investing in some maquiladora sweatshop on the Mexican border where child labour or rampant abuses take place. I choose not to have my investment dollars invested in unethical investments, but no such guidelines exist within Bill C-3 or within the trust document of the Canada Pension Plan Investment Board. What if it would get a great rate of return for clear cutting the rain forests of the Amazon? Do Canadians want to participate in that even if we would get a better rate of return? I say no.

If we were to put it to Canadians they would say no, but they will not have a chance to say no. Why? Because of the other thing I raised yesterday, which was the composition of the 12-person board entrusted with our the security of our pension future. It is not representative of Canadians. There is no worker representation. There are no working people, no organized labour, no pensioners and no participants in or beneficiaries of the plan represented on the 12-person investment board that makes the decisions. It is a basic tenet in the trade union movement I come from that any employee benefit plan should have equal joint trusteeship. Labour and management jointly decide how a pension plan is invested, not a bunch of Bay Street appointees of the Liberal Party who are appointed by the minister.

One of them who was appointed is a Liberal member of Parliament whom I beat to win my seat. He has no financial background. David Walker is a political scientist. He is now one of the 12 people in charge of investing $56 billion on our behalf. What is his brilliant financial experience? I am not saying he is not a competent and capable guy, but he is certainly no financier nor does he represent any of the groups that should be represented on the board. I think it is crazy.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I will use this opportunity to speak briefly to Bill C-3 and some of the areas of concern to the NDP. We did not have an opportunity to raise many of them during the debate.

One of the issues I would like to raise in this short period of time is that there is nothing in Bill C-3 or the guidelines for investment that give direction to the Canada Pension Plan Investment Board to deal with ethical investments. In other words, even though this is a popular trend and a popular theme in many other pension plans, the pension board has very few guidelines because it is not mandated to invest locally to advance domestic businesses and it does not have to follow any ethical guidelines.

Theoretically, my pension plan dollars could be used to invest offshore in some sweatshop operation that I do not approve of, or in some tobacco industry investment that I do not approve of. We have very little or no say. There should have been a process whereby ethical screening would take place for any of these investments. Certainly one of the shortfalls of Bill C-3 is it fails to give direction to the board that Canadians by and large want ethical investments.

We argue that we do not have to accept a lower rate of return to invest ethically. In fact many of the green funds and the ethical investment funds on the market currently, some of the financial instruments, are outperforming general funds. We do not believe that is necessarily any kind of a compromise.

Speaking of the composition of the board, the documents circulated by the government which talk about Bill C-3 say that the board is made up of experts in the field, if I could put it that way, from the financial community, people who have a history and a background of dealing with large scale investments of this nature. Keep in mind that we are dealing with $120 billion to $130 billion within five years. That just has not been true.

At least one of the eleven people appointed is the former member of Parliament who represented my riding before I beat him in 1997. He is a university professor in political science with no experience or history in financial investments of this nature. Therefore, at least one is clearly a political patronage appointment, a reward or fallback position, so to speak. The composition of the board is still one of the real shortfalls of this whole idea.

Now $120 billion to $130 billion is being invested on the open market by a group of 12 people. It is being invested badly because in every quarterly report that has come out so far another $1 billion has been lost. Frankly we would have been better off if we had remained with the status quo and had not been seduced into the open market by the high rates of return during the high earning years when the IT sector was showing rates of return of 20%, et cetera. We were seduced into that market.

There is a rule in that sort of investment arena. One does not gamble with scared money. One does not go in there unless one is prepared and knowledgeable. Tourists are not brought to the table. Amateurs should not be part of the board.

Even when we lost $1 billion per quarter, the CEO's salary was doubled. In the first quarter that the board reported, $1.2 billion was lost. The CEO's salary was doubled, as a reward I suppose for that great track record, and his performance bonus was doubled.

This smacks of the worst kind of corporate governance that no one has any tolerance for any more after watching the corporate fraud fiascos in the United States as well as across the border in this country with Livent as of today. We seem to be replicating the very worst aspects of corporate governance rather than setting some new higher standard with a well structured board that meets, that has to report back more than every two years and that is composed not by Liberal patronage appointments but actually by qualified people.

First of all, I do not believe we should be rolling the dice with Canadian pension investments. We should be following the model of the Quebec pension plan, which mandates that a maximum rate of return is one objective, but secondary objectives are to promote business within the province of Quebec. That way we kill two birds with one stone and maximize the benefit of those hundreds of billions of dollars that will be invested.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, moving on to another issue, I note that under Bill C-3 the Canada Pension Plan Investment Board, even though it invests on behalf of 16 million Canadians, would only be required to hold public meetings once every two years. Even though this is a fairly new venture and we are breaking new ground by rolling the dice with pension dollars on the open market, only once every two years would the board have to come back to the shareholders, the actual people who would be affected by the investments. Even the shareholders' meeting, or the pensioners' meetings or the public meetings, would not really be democratic in any kind of way because unlike a shareholders' meeting those pensioners would not be able to move amendments or give direction to the board.

When the buzzwords these days are transparency and accountability, how does the government defend the idea that the board would only have to answer once every two years to the very pensioners for whom they are investing?

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, we note that Bill C-3, the amendments to the Canada pension plan and the Canada Pension Plan Investment Board, contemplate changing the rules regarding foreign investment, so that now under Bill C-3 the board would be allowed to invest offshore in foreign investments up to 30% of the amount that it is investing. It is certainly our view that if we are to invest taxpayer money on the private market it should be invested locally to get the maximum return for local businesses, for Canadian enterprises, and that any benefit from this investment, whether it is venture capital or an equity investment in a company, should be geared to yield the maximum returns. I would ask the hon. member to comment on why the bill contemplates foreign investment of up to 30%.

I will add one more detail to that. The experience to date has been that the board's Canadian investments have yielded a 13% return and all its offshore investments combined have yielded a negative, a minus 3% loss. For all the reasons I have stated and the obvious reason that these foreign investments are not yielding a higher rate of return than local investments, would he not agree that we should not have this 30% ceiling for foreign investment?

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am pleased to rise and join the debate on Bill C-3. The bill is basically completing the implementation of the Canada pension plan reform that was started in 1996. We know the policy and the platform of the Alliance members opposite, and that is to set up private pension plans. They talk about distributing it to Canadians so that everyone has their own account and their own private plan. If we look at it in more detail we do know who benefits from that. It is all their buddies, the investment advisors and the brokers on Bay Street. They have modelled it after what they have in Chile. We all know what happened in Chile. The plan did not work.

What we have in Canada is probably one of the most respected pension schemes, pillar approaches to pension management in the world. It is recognized around the world. It is based on the three pillars: the old age security program, the Canada pension plan, and the employer-sponsored pension plans, RRSPs. These pillars are closely integrated and form a cohesive approach to retirement planning and income.

The bill would transfer the balance of the assets that were held by the federal government to the Canada Pension Plan Investment Board. It would complete the process. The board would be able to manage this portfolio in a balanced way. It has a clear mandate to optimize the returns for the contributors to the pension plan. It would remove one of the bottlenecks or ways that it was hamstrung previously when it had to invest in provincial government bonds and was receiving a less than optimal return for the contributors to the pension plan.

We need to go back a bit in history as well to the mid-nineties and perhaps earlier where many Canadians were concerned about the sustainability and the soundness of the Canada pension plan. The government launched an extensive consultation process across Canada, talking to various experts and Canadians in general, the provinces and territories. There were two main approaches that were under debate: first, the government could have increased the premiums; and second, it could have reduced the benefits. However, the government, in its wisdom, decided to do a combination of both. There was some modification of benefits but there was also an increase in the premiums to a level of a 9.9% contribution rate.

Contrary to what the members opposite say, there have been three actuarial reports since those measures were undertaken that have confirmed the soundness, the actuarial soundness, of the Canada pension plan. We now know that the Canada pension plan is on a sound footing and that Canadians can rest assured that their pension requirements will be met through the Canada pension plan.

When we look at investment returns, we need to look at it over the medium to long-term. I know in my own account I look at mutual funds. Some mutual funds have achieved high rates of return in the short run but over the medium to long-term are not as successful. Therefore, we need to give the board an opportunity to prove that it can optimize and diversify this portfolio of investments. I am sure that it is up to the job because, as my colleague pointed out, it has a capable, independent and arm's length board that is managing this portfolio. The bill would transfer the balance of the assets to the control of the board so that it could manage a diversified portfolio in a sound way, one that spreads risk and manages risk in a much more cohesive way.

This board would have a sound governance that it is designed to achieve. We hear a lot about corporate governance these days. The board of directors would be independent and accountable. There would be quarterly reports. There would also be an annual report to Parliament. The policies of the investment board would be open and transparent. It would hold public hearings every two years. There is a website so that Canadians can dial up and see how the fund is doing.

This board has a mandate to operate in the best interest of CPP contributors and its beneficiaries. It is very much like any large pension plan that has the ability to diversify into bonds and equity investments. Today's market has been badly hit, so in this market any pension board that is beating the market is doing very well and once the market returns to a sounder footing, I am sure that the CPP board will achieve some excellent results.

I would like to comment on the three pillars because the bill is fairly routine in the sense of completing the implementation of the CPP reform and transferring the balance of assets to the board. I would like to look at the old age security program and the GIS. I have many constituents in my riding who are on fixed income. In my area property taxes have increased and I have a number of constituents who have worked hard all their lives who are living in modest suburban homes and are finding that on a fixed income the pressures on them to maintain their property taxes and their standard of living are severe. It is something that we need to look at in terms of seniors and how they are able to cope, people who are on fixed incomes.

We know that the old age security is adjusted by inflation and the GIS but perhaps we should be looking at that in a more comprehensive way. Doing so would have a cost attached to it. Canadians do not want to go back into deficit but it is something that the government should be mindful of. Likewise I hear from many Canadians in my riding, of modest income, who are concerned about the clawback provisions, individuals who have worked hard all their lives and contributed to a private pension and to the CPP and suddenly now because they are at an income that is not excessive but at a modest income level, a lot of these pension benefits are taxed away. That is something over time that the government should be looking at to see if there is a way to remove a disincentive in the system that has a tendency to penalize those Canadians who have been responsible and put away money for their retirement.

We have other issues under the private pension schemes and RRSPs, that is, that there are limits in terms of the deductibility of contributions to pension plans for companies. For example, an auto worker with Ford, GM or Chrysler, the amount of contribution that the employee can make and that the company can make to a company pension plan is limited by our tax rules. It is something that our government should look at over time. Likewise there has been much discussion regarding RRSP contribution limits. The government has increased them quite substantially and consistently over time. However if we look at the three pillars of our retirement system, we need to ensure that all the pillars are acting in a uniform, consistent way so that if the government was to do anything with the RRSP contribution limits it seems to me that it would also need to look at the CPP contribution limits for private or corporate plans.

The bill before us is fairly straightforward. I cannot imagine that the members opposite would not want the contributors and the beneficiaries of the Canada pension plan not to have an actuarially sound plan, not to provide the opportunities for the managers of that portfolio to achieve the maximum benefits within a sound and a risk managed environment so that the returns could be increased and the contributors would receive the maximum benefits that they could. I cannot imagine that the members opposite would vote against that.

To conclude, I would say that this CPP reform is really another segment of the government's approach to fiscal management. The member opposite talked about tax cuts and paying down the debt. I guess he has not been listening or has not been around, but in the year 2000 our federal government introduced the largest tax cut in Canadian history. In fact, this year those tax cuts are saving Canadians $20 billion a year.

With respect to the debt, the government has now paid some $45 billion or $46 billion against the federal debt. Is it still too high? Of course it is, but without the actions of the government in eliminating a $42 billion deficit in only five years we would not have been able to even attack the debt. We have started that process. By paying down in excess of $45 billion, the federal treasury is saving $3 billion a year annually. That is an annual saving. Those funds can be redeployed to more tax cuts or to strategic investments in social programs or other economic programs or to pay down the debt.

CPP reform is another step or another cog in the wheel that is improving the lives of Canadians from coast to coast to coast. For members opposite, once they have had their comments in the House for the benefit of I am not sure who, perhaps their investment adviser friends on Bay Street, given their fundraising constraints and I am not sure who they are trying to reach with this private pension scheme, we do know that it will not work. In Canada we have a culture of doing things together, of acting as a community of people sharing risks among ourselves. We do not just throw everyone to the hounds. We have that culture in Canada. The CPP is something that everybody in Canada appreciates and benefits from.

The members opposite often talk about the CPP as a tax. When we talked about the increase in CPP premiums, I remember that the members opposite on many occasions said in the House that it was an increase in tax. Of course it was not. The CPP is not a tax. It is a contribution based plan that takes contributions and premiums from employers and employees and puts them into a fund that will help Canadians plan and execute their retirement in a sound and reasonable way.

Again, I think the members opposite really do not have it right. They should be thinking more clearly about these measures that our government has implemented and continues to implement. I know that we all look forward to the next budget. In fact next week the Minister of Finance will be giving an economic and fiscal update. I am sure he will comment on the Canada pension plan and its soundness.

I am very glad the government has taken these steps. I look forward to my own retirement one day when this plan will have optimized my contributions and the contributions of other Canadians to the benefit of all.

[Monte Solberg, Canadian Alliance, Medicine Hat, AB]

They were fibreglass coffins, a new concept. I do not think the company sold a single one. It went down the tubes. That is the sort of thing the finance minister thought Canada pension plan should be used for. That was 11 years ago, but we have no reason to believe he has changed his beliefs.

I want to point to some of the other funds that the government has said in the past should be beyond the reach of government and should be used for very specific purposes. In fact, that is not the way it has panned out. Let us look, for instance, at employment insurance. Employment insurance ostensibly is there to provide benefits for workers in times of unemployment. Therefore, premiums should reflect the amount of money that is necessary to carry the country through a recession in order to provide benefits for unemployed workers. Typically, if I recall correctly, actuaries say that we would need to have a fund of about $15 billion. Right now the federal government has raised premiums to such a point with employment insurance that it has taken about $46 billion more out of workers' pockets than is necessary to provide benefits. That is $46 billion. I think people have every right to be concerned that the government will not leave the Canada pension plan fund alone. There is every reason to believe that perhaps it might dip into it at some point.

If people say that is nonsense, like my friend said a minute ago, I remind him of what happened to the public service pension plan when it ran a surplus. It ran what I think was a $10 billion surplus. I cannot recall exactly, but my friend says yes, it was $10 billion. What do we usually do when a pension plan runs a surplus like that? We go to a judge in whatever province we are and the judge decides how it should be divvied up based on how much the employer and the employee have put in. But there was no such due course in this case because the lawmaker was also the arbitrator, and the federal government took all of it. The public servants, of whom I suppose members of the New Democratic Party would be wildly supportive, were left high and dry because of it.

My point is simply that government is not a very good protector of pension funds or of the public's money in general. There are many other examples I could point to. In fact I could point to how well the NDP in British Columbia looked after the public's money when it came to certain elections in which that government was proposing that it had balanced budgets. In fact it was running a surplus, but in the end we found out we could not rely on what that government said.

That, in short, is the concern. We cannot rely on what governments say, so let us not speak about the unreliability of the markets. The markets at least are widely diversified, but government has total control over taxpayer money. We have no options when it controls that money. The result is that when things go sour, they go sour for everyone. We should be deeply concerned about that.

That is why I have very little faith in the government to keep its hands out of that big pool of cash, which is what is being proposed under Bill C-3. No, in fact the government cannot be relied upon.

I want to address the straw man that the member for Mississauga South erected and then proceeded to tear up, attributing the straw man to be the position of the Canadian Alliance. The member for Mississauga South said that the Canadian Alliance believes in a mandatory pension plan that people would have to contribute to whether or not they had a job. At least I think that is what he said. That is complete hokum. We have no such position. That is absolutely ludicrous.

We said that we should be open to exploring other ways to enhance the public's retirement benefits. That includes looking at other systems where they take at least a portion of the premiums that people pay toward a mandatory plan and use them to invest in RRSPs that would have to be locked in until a person's retirement. One could not speculate with these investments. There would be a fairly narrow range of things one could invest in. There would be all kinds of safeguards to ensure that there was prudence built into the plan. That is all we are advocating.

We are advocating that precisely for the reason my friend from Lanark--Carleton proposed a minute ago. We have a coming generational war between people who have been contributing into the Canada pension plan for a short period of time and who will then go into retirement and will receive in some cases eight or nine dollars to one dollar, compared to people who are just starting to pay into the Canada pension plan now and down the road will actually end up with a negative return. The member for Mississauga South doubted it but all he has to do is consult the chief actuary's report. He will see that people coming on stream today will not end up better off under the Canada pension plan.

When we take into account the opportunity cost, in other words what people could have done with that money if they had invested in bonds or an index fund, and compare it to the return they would get on the Canada pension plan, they end up definitely much worse off. That is no exaggeration. That is precisely what the chief actuary of the plan is saying.

We want to ensure that young people today have some options. That is all we are saying. We do not think it is fair to condemn those people to paying more and more of their money to taxes, thanks to the government, and more and more of their premiums to a Canada pension plan that leaves them actually worse off over the long run.

The final point I want to address is the lack of emphasis in this whole debate on the need to increase people's standard of living, their take home pay, as a way of enhancing their retirement. The Canadian Alliance for a long time has said that tax relief is an additional pillar that needs to be considered when we are talking about retirement incomes. It is fine to talk about changing the rules with respect to RSPs. We agree with that by the way. We think that RSP levels should be raised and we have argued for that. It was a plank in the last election campaign. We believe that very strongly and will continue to argue for that.

We believe that the CPP should be changed and I have just said a little about that. We believe in sustaining old age security and the spouse's allowance and all those things. We have no argument with that.

What we do say is that everyone will be better off, both in their current spending and in their ability to fend for themselves in their retirement, if we start to lower taxes in a more dramatic fashion. The government has run up a number of surpluses over the last number of years. What has it done? It has driven spending levels through the roof.

Today I heard the most hilarious thing I have heard in this place in a long time when the finance minister got up and said that as a percent of the GDP our spending has gone down. That is interesting but completely irrelevant. What is relevant is the amount of spending per capita. Has the spending per capita gone up in real dollars over the last number of years? It has gone through the roof. That is the real issue.

What we should be doing is establishing a level of spending per capita and staying at it, not continually raising it, crowding out private investment in the market.

Now that, in our judgment, we have more than adequate amounts of money going into the government coffers to provide all the goods and services that we need, we need to do a couple of things. We need to ensure that money goes to the things that are most important.

After the resignation of the Solicitor General today we can make a pretty strong argument that clearly that has not been the case in the last little while. We see all kinds of money going to pork-barrel type programs in different regions of the country, which is completely wrong. It is an offence to see the Prime Minister stand up and defend it, especially when one considers that the Solicitor General was breaking the criteria for the program that he was getting the money from.

If the rules are there, they should be abided by. It is the government that sets the rules. If it does not want them there, then get rid of them and at least be honest about it, but the government itself put the rules in place supposedly to protect the interests of taxpayers.

We believe that billions of dollars can be saved by pruning unnecessary programs, programs that are used for patronage and pork barrelling, programs that are of little or no benefit, or in some cases are actually injurious to the health of the private economy. Let us get rid of those, take the savings and put them toward things that really do help people, things like health care, which makes sense to us, and things like a few million dollars for the disability tax credit.

The members across the way try to claim the high ground when it comes to being concerned about the disabled. They are the ones who are proposing that the tax credit rules be tightened, thereby denying many thousands of disabled Canadians the ability to save a few dollars because they have extra expenses because of their disability. We think it is meanspirited. We would like to see the government take some of the savings pruned from pork barrelling and put it into things like that.

We would like to see the military strengthened. We would like to see money for health care. These are clearly things that Canadians value. There is about a $15 billion to $20 billion envelope in the government that we know is rife with waste and we would like to see that pruned. We also believe that we should take the savings, pay down debt and lower taxes.

If we look up on the wall in this place, there is a carved relief that reads “impôt tax”. Now if that does not speak volumes about this place, because it is a money-sucking hole when it comes to tax dollars. It is entirely appropriate that the relief up there has a little family of three, a mother, a father and a child. To me it just speaks volumes about the attitude around this place.

Families like that family depicted up there are held hostage by ridiculously high rates of taxation. It has an impact on the ability of people not only to look after their families but it also has an impact on their ability to set aside money for their retirement. We know that.

The statistics tell us that very few people can contribute to their RRSPs to the maximum. That has a lot to do with the high levels of taxation. We know that people have a negative savings rate or a very close to zero savings rate today because we have very high levels of taxation in Canada. When the finance minister was the industry minister, he pointed out that Canada's standard of living relative to that of the United States was lower than the poorest of the poor American states of Alabama and Mississippi. Those are not my words. It was the finance minister, the Deputy Prime Minister, who said those things when he was the industry minister.

The government needs to have a plan to lower taxes dramatically. It has no such plan. It needs to pay down debt in a rigorous way, not whenever it just decides to do it but as a line item in its budget. We would like to see a plan that overall convinces the world that Canada is a great place to invest, something that is certainly not reflected in the strength of the Canadian dollar today. We would like to see a government that produces a plan that gives Canadians some real hope.

[Monte Solberg, Canadian Alliance, Medicine Hat, AB]

Mr. Speaker, it is my pleasure to rise and address Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. I would love to just jump in and start addressing some of the things I just heard but I want to do this in some semblance of order.

First I want to attack some of the myths I heard perpetuated earlier today by members of the NDP, primarily about the reliability of the market. I also want to say a little bit about the reliability of government. I want to address the straw man that the member for Mississauga South erected about the Canadian Alliance's plan to address the Canada pension plan. I also want to say a little about the lack of emphasis in the whole debate on the benefits of reducing taxes and increasing disposable incomes as a way to enhance people's retirement. Let me start with some of the myths I heard earlier today.

Every time the NDP members get up they talk about Enron. They want to talk about the lack of reliability of the market as an investment vehicle. There is no denying that Enron has been an unmitigated disaster, but there are thousands of companies out there and it is only the very few that go bad and get all the publicity. I do not think there is any question that overall the market provides a superior rate of return to anything else we have found to this point. If people stick with it and invest over the long run they end up better off.

I ask my friends from the NDP, where do they think jobs come from? They come from the market. That is where people find their incomes on a day to day basis. They rely on the market. They do not rely on government. Government cannot create jobs and the societies that have tried to create jobs through government of course are the ones that have crashed and burned and imploded on themselves. The fact is that we get our income standard of living from the government. We get the premiums that are available for the CPP from the market.

Finally, we get all the taxes that are necessary to run the government from the market. That does not mean that the market does not go down sometimes, that people do not become unemployed, but rather obviously it is in the interest of a country to ensure that the private sector and the market are as strong as they can possibly be because that is where our wealth, our prosperity, will come from.

The very first thing that we need to do when we sit down to have a big debate about retirement systems is to ensure that whatever we do enhances the ability of the private sector, the market, to produce jobs and incomes for people. To run it down as being unreliable really ignores some facts.

That brings me to my second point, which is that the government is far more unreliable in terms of its ability to safeguard people's money than the market. Look at the Canada pension plan as a starter. When the Canada pension plan was formed, the government took the money and lent it to the provinces at below market rates of interest. In other words, Canadians were dutifully paying their premiums while the government, instead of looking out for people who would be getting their pensions, decided it would distribute this largesse to the provinces at below market rates of interest, which maybe would enhance its standing with the provinces but would cheat Canadians out of their pension benefits. That was the first thing it did.

How well does it administer the Canada pension plan even today? Let us remember that it was not very long ago, and I see some Liberals across the way who will remember this, when the government proposed to raise the Canada pension plan premiums by 73% and max them out at 9.9%. The chief actuary at the time called into question the government's assumptions about whether or not those types of premium hikes would be adequate. He was fired for that. It really calls into question the assertions from members across the way that somehow the investment board will be at arm's length from the government, because the actuary was supposed to be at arm's length from the government as well. Notwithstanding that, the chief actuary was fired for having the temerity to point out that the premiums the finance department was proposing would not be adequate to fund the Canada pension plan over the long run.

I also want to point out that there is good cause to suspect that Canada pension plan funds would be redirected beyond just putting them into the stock market index, as has been proposed right now. Where does that come from? Why do I make that assumption? I make it because in 1991, when the former finance minister, the member for LaSalle—Émard, was running for the Liberal leadership, he proposed at the time that the Canada pension plan be used for regional development. In other words, he wanted to take those billions of dollars which were being set aside for people's pensions and gamble them on all kinds of crazy schemes out in the regions.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, that would be an interesting subject for discussion for a broadly based round table, because it really is all about the impacts of an aging society, in every aspect. We know how the baby boomer spike has moved through the system and has affected us over the decades in various ways. It used to be that tennis rackets and golf clubs were the big investment for baby boomers and now it is bird-watching equipment.

The impact on the Canada pension plan system is significant in terms of the ratio of workers to retirees. It is going from about five workers per retiree down to three. It means that there is a greater demand. By the same token, if we follow it out to its logical extension, once the baby boomers get into the late retirement years and in fact pass away, all of a sudden the demand is going to shift again. We are going to go through this and we are going to get the echo generation.

Canadians were saying at the time that they thought the Canada pension plan system was bankrupt or was maybe going to be bankrupt and they were concerned about it. The government, through Bill C-2 and now through this bill, Bill C-3, is completing a process to ensure that the Canada pension plan system is on a sound footing, that the returns on the moneys invested are comparable to other investment opportunities and that this plan will be there for them in their retirement.

[Paul Szabo, Liberal, Parliamentary Secretary to the Minister of Public Works and Government Services]

Mr. Speaker, it is my pleasure to participate in the debate on Bill C-3, having been a member of the finance committee when the former Bill C-2 established the CPP Investment Board. Having spoken on it, I feel I have a little bit of background knowledge on it.

I was astounded today to hear some of the commentary by some of the members. There was one speaker, I believe from the NDP, who suggested that when the GIS increased, the CPP would automatically decrease. That is absolutely incorrect. Canada pension plan benefits are determined independently, they are not subject to an income test or a means test. Canadians get reports periodically on their prospective pension benefits so that they know exactly what they have to work with in terms of their overall retirement planning.

Bill C-3 would provide another step toward the fuller implementation of the creation of the Canada Pension Plan Investment Board which was set up under former Bill C-2 to bring the Canada pension plan into the next phase to take into account the fact that we have an aging society. That is what it comes down to.

Let me comment briefly on the investment board. I then want to get back to the Canada pension plan because it is important that we reassure Canadians exactly what the Canada pension plan system is and how it works for them.

The board established in 1998 and it is an independent arm's-length board from government. It has a mandate to invest only in the interest of plan members. It has full authority to develop and implement investment policies and has a process for choosing its own board of directors.

It now has a track record with regard to the moneys that have been transferred to it for its investment and indeed on a calendar year basis, the Canada pension plan's last reported annual return was 6.2% which outperformed many other large public sector pension plans. Canadians should understand that the board has a good track record. I wish to note some comparatives. People might be familiar with the Caisse de dépôt which over the same period had a return on its investment of negative 5%. It lost 5%. The Ontario teachers pension plan lost 2.3%. In terms of the performance measures, the Canada Pension Plan Investment Board has been doing a good job on behalf of Canadians through the management of Canadian funds.

There was a question raised by some members about a number of issues such as, why we do not invest in certain types of investments rather than others, for instance, why do we not have an ethical filter, or a health filter? For example, let us not invest in tobacco companies because tobacco is bad. There were a number of principles involved in establishing the investment board and one of those was that it was not going to be manipulated and used as an instrument of policy. It was not going to be used to direct how we were going to influence certain activities either in the marketplace or in terms of social policy.

Therefore, the thinking at the time was that given the size of the fund the investment board was going to manage the fund on behalf of Canadians. It was important that this large investment body, with this large pool of funds, was not going to be used in a way which would bring disruption to the marketplace. It meant that it was going to invest in a balanced way right across the spectrum and basically emulate the investment patterns of all other investors in the Canadian marketplace as well as foreign investment content.

The House has dealt many times with foreign content in registered retirement savings plans, et cetera. Certainly it continues to be a matter which the finance committee has looked at.

It is another element of a good investment strategy to ensure that there is an opportunity to have a balance in a portfolio and that Canadians can earn a fair and equitable return relative to other investment opportunities. However with a restriction on foreign investments, it could be argued that those who have a different investment strategy and utilize investment funds outside of their RRSPs have no limitations on how much they can invest abroad.

They do have options if in fact the returns were that much greater, but in this volatile marketplace the CPP Investment Board is not meant to be an instrument of high risk or volatility. It has to support the marketplace to the extent necessary not to impair the availability of capital for Canadian capital markets. At the same time it should be supportive of Canadian businesses through equity investments that reflect the broad base of listed equity investments as well as debt instruments that are available to all investors.

The issue regarding foreign investment is always under discussion and it is useful to have. I know that the CPP Investment Board is made up of some of the best experts in the industry and those kinds of questions come up. As members will know, the Canada Pension Plan system is a collaboration of federal and provincial governments and there is a tri-annual review, I believe there is a review this fall, at which time the provinces and the federal government get together to look at some of the matters which have come to their attention, and where they may want to review policy positions.

I would encourage all members who are interested in the process to make suggestions to the Government of Canada, to the Minister of Finance, maybe through the parliamentary secretary, about items they would like to see discussed with regard to the future of the Canada pension plan and how it operates. It is constructive to get those items on the agenda so that when the provinces and the federal government get together and sit down and talk about the CPP, they have the benefit of the ideas we have from Canadians and from our own work, whether it be through the finance committee or otherwise. Their deliberations will determine how the Canada pension plan can better serve Canadians over the longer term.

I was a concerned about one speaker from the Canadian Alliance, the member for Peace River. It reminded me of the discussions that were taking place in the House about the future viability of the Canada pension plan system. The then Reform Party, now the Canadian Alliance, came up with a view that the Canada pension plan system should be replaced by another system which was described as a mandatory pension contribution by Canadians. It is almost a mandatory retirement plan.

This was the solution to the problems of the Canada pension plan system because it has higher premiums than it used to, and it has an unfunded liability. According to the Canadian Alliance we should take that system, put it over here, and the best thing we can do for Canadians is have a mandatory contributory plan to pensions.

I have never, ever thought that this idea was well thought out. I was concerned that someone actually would suggest that somehow retirement contributions would be mandated, knowing that in a volatile world, more often than not people are not only living from paycheque to paycheque, they are actually borrowing to live. How does a Canadian make a mandatory contribution to a pension plan, to a pension program, when cash flow is not available? How does he or she provide for those pension benefits? It makes no sense. I have not heard the explanation and I hope that the members who are suggesting that would explain that point.

There is another aspect. Let us look at the Canada pension plan system and what it does today. It provides pension benefits to Canadians when they reach retirement age. Canadians have the opportunity to retire early, up to age 60 instead of 65, by taking a slightly reduced pension. They also have the opportunity to extend or defer the collection of Canada pension plan benefits and earn even a greater benefit. So there is a little bit of latitude here, depending on personal circumstances. Canadians have this opportunity either to take pension benefits early or to defer them.

The Canada pension plan also provides survivor benefits to the spouse of a pensioner who passes away. It is very important that there be this continuity of the benefits for a family or a part thereof because they have responsibilities.

There are also death benefits. I am not sure if Canadians are aware but under the Canada pension plan system a person does have a death benefit. Should a pensioner die, a death benefit is there for the surviving spouse and for any surviving children. I think the amount was $2,000 but I believe it is now just $1,000. It went down but the benefit is there.

Then there is the disability benefit, which most Canadians probably have not figured out why it is in the Canada pension plan system. Under the Canada pension plan system Canadians who become disabled and are contributors to the Canada pension plan system qualify for disability benefits.

We have talked quite a bit in recent days about the importance of disability benefits and to make sure that people who are entitled to those disability benefits get them. There is some controversy now about whether the rules have been changed and maybe some people who should get disability benefits are not getting benefits. I think members know, through our work in our constituency offices, that there are venues and that every case can be dealt with on a case by case basis to justify a disability benefit.

That is an expensive proposition. Members can imagine how when we build up pension benefits, survivor benefits, death benefits and disability benefits, the CPP is a very important program for Canadians. For the life of me I do not understand how a mandatory retirement plan replacing CPP would address all those other benefits. What would happen to the survivor benefits? What would happen to the death benefits? What would happen to the disability benefits?

I asked the member for Peace River what would happen to the disability benefits. He said that was a very good question and that he would have to think about it.

Those things are not thought about after one says “here is our solution to the problem”. Those things have to be thought out in advance. I must say that it is disconcerting to me to think that when suggestions like that come out they could actually become part of a policy or a platform item of a party to suggest that by a stroke of the pen we could get rid of the CPP and do something else, which I am not sure Canadians could manage, particularly in those early years.

We made a number of changes in the plan over the years. They were important changes to respond to the needs of Canadians.

The Canada pension plan system has an unfunded liability and members know that. It has become a source of criticism by the members of the government and of the Canada pension plan system itself. However members must understand from where we came.

The Canada pension plan system started in 1966. When it was first started the initial premiums I believe were about $35 a year. It was very nominal. At that time there were at least five working persons in Canada contributing premiums for every one pensioner.

Why was the Canada pension plan system set up? If we look back and we figure out who these people are who receive pensions, they are the people who came through the depression years. These are the people who in the most important part of their earning life went through a depression and had no opportunity to provide for retirement. It was devastating for families. They could hardly feed themselves. It was a period of time before I was born, but we educate ourselves and we have to understand where Canadians came from. So that was a big part of why the CPP was set up.

Canadians had nothing for themselves in retirement. We had to take care of them somehow so we established the Canada pension plan system in 1966 to provide some measure of retirement dignity for those who had built this country. What more noble cause could there be?

The people who started collecting pension benefits back in 1966 made no contributions to the pension plan. They just started collecting benefits because they had nothing. So all of a sudden this principle that we are always in arrears, today's workers are paying for today's pensioners.

When there are over five workers for every one retiree there can be low premiums. What has happened as we have moved through the decades? Our society started to age. In the next 10 or 15 years instead of having five workers for every pensioner there will only be three. It is clear that something has to change.

Pensioners collecting CPP who had worked some 40 years and made regular contributions to the CPP from 1966 to 2001, their accumulative premium contributions were less than $16,000. I will put that in perspective.

Today's pensioners paid in about $16,000 if they had worked from 1966 to 2001. What can we get for $16,000 even if we assume that it was invested and received a fair and reasonable return over all the years of contributions? We would not have received much, and yet our Canada pension plan system paid out pension benefits, death benefits and later disability benefits, the child benefit and survivor benefits.

Things changed to the point where premiums had to increase. Today's pensioners receive about $8 for every $1 they put in. The opposition is suggesting that it is a travesty that tomorrow's pensioners will not get the same $8 for every $1. I do not know where anyone can make investments like that anymore. We did it at the time because it raised the quality of life of yesterday's pensioners up to a reasonable standard so they could live in the dignity to which they were entitled. It was not equitable but it was the right thing to do.

Now we have to look at the reality of an increasing retirement population. We have to look at the fact that all of a sudden it is expensive to continue to provide retirees with those ongoing benefits and still maintain some stability in that. It costs money and there were increases.

Members continue to say that this was a tax grab, the biggest tax bite ever, and all the hyperbole one can think of. All of the funds in the Canada pension plan are separate and apart from the government's revenue. They are not included in the determination of a surplus or deficit for the year. It is a separate fund. All CPP premium contributions go to the plan and all benefits are paid out of that plan.

When the actuaries did their numbers they told us what we had to do to ensure the long term sustainability of the Canada pension plan system. There were substantial increases. It was important for Canadians to continue to support pension benefits, survivor benefits, death benefits and disability benefits up to a level so that our retirees could live in dignity in their retirement years. To suggest that we are somehow going to take this away and force Canadians to fend for themselves is not only wrong, it is irresponsible.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, as I was mentioning, this bill seems to complete the transfers that have already been made for the Canada Pension Plan assets. Therefore, we are most happy to support this bill, but this allows me to come back to a less happy page from Canada's parliamentary history, when the Senate was considering Bill S-31, in 1982.

The purpose of that bill was to regulate the activities of the Caisse de dépôt et placement. This allows me, as I mentioned, to come back to this part of our history. I consulted a fairly recent book, written by Pierre Duschene. It is a biography of Jacques Parizeau, in which the events surrounding Bill S-31 are related.

Allow me to read an extract from the book.

In March 1982, the Caisse de dépôt et placement increased its holdings in shares of Canadian Pacific. The Quebec institution came within a few decimal points of the 10% mark in controlling shares. It posed a dangerous threat of breaking the ceiling set for Paul Desmarais, who is, as everyone knows, the president of Power Corporation, by the company's board of directors. CP panicked and sounded the alarm. The Anglo-Saxon establishment mobilized and readied to launch an offensive against the caisse. The president of CP first obtained the support of the following companies: Bell Canada, Steelco, the Bank of Montreal, the Royal Bank, Dominion Textile, Nova, Inco, Hiram Walker, Consumers and still others. Then, he called on Pierre Elliott Trudeau, the Prime Minister of Canada, and asked him to stop the Caisse de dépôt et placement. At the same time, the president of the Toronto Stock Exchange met with directors of three other Canadian stock exchanges, Vancouver, Montreal and Calgary, to prevent francophone shareholders from gaining control of CP. “I took this initiative because it seemed clear to me that what was happening here, what Paul Desmarais was doing, and the position of the Caisse de dépôt—”

Obviously, this is the president of the Toronto Stock Exchange talking.

—it was clear that this would become a cause of concern.

The wall erected around CP transformed it into an impregnable fortress. The English speaking establishment formed an alliance and then attacked, using the Parliament of Canada. In the night of November 2, 1982, the government of Pierre Elliott Trudeau introduced a bill in the Senate, Bill S-31, the Corporate Shareholding Limitation Act, which was specifically aimed at the Caisse de dépôt et placement du Québec, although not mentioning it by name. Bill S-31 made it impossible for any crown corporation to own more than 10% of the shares of any company involved in interprovincial transport.

Thus the caisse's hands were tied, and it could not purchase the CP shares.

In the eyes of Jacques Parizeau, the finance minister of the day under René Lévesque, this was an incredibly crude manoeuvre. At the behest of CP and Ian Sinclair, its chairman of the board, the federal government tabled a bill in the Senate.

And we must not forget that Ian Sinclair was Pierre Elliott Trudeau's father-in-law—

These are Jacques Parizeau's words here.

—a man who was the incarnation of the old guard of the corporate world.

This is still Jacques Parizeau speaking. Reading on:

The very evening that the bill was tabled, Jocelyne Ouellet, the woman in charge of the Quebec bureau in Ottawa, was informed. Jacques Parizeau rallied his troops. Jean Campeau, then president of the Caisse de dépôt et placement, was on side, and the caisse, which had 9.97% of the CP shares, set up a defence strategy in conjunction with the finance minister. Despite the Conseil du patronat's support of Bill S-31, the influential Montreal chamber of commerce adopted a position clearly opposed to this federal initiative. Its director, André Vallerand, and its chairman of the board, Serge Saucier, set out to defend the Caisse. Serge Saucier recalls “the corporate world rallying round in defence of a body that was becoming a major force for the Quebec economy”.

This is perhaps the most tangible sign that can be found in the contemporary history of Quebec of a body that did something for Quebec, for its economic development, so much so that people came to its defence, saying “Listen, we have something that works well. Hands off. Leave it to run itself”.

The fight to sway public opinion had begun.

André Ouellet, the current president and chief executive officer of Canada Post, who was then the federal Minister of Consumer and Corporate Affairs, inflamed the situation once again by declaring before the Senate Committee on Bill S-31 that the fund was practising indirect socialism. For the first time, he recognized publicly that the Caisse de dépôt et placement du Québec was the main target of Bill S-31. This bill was swiftly denounced by the francophone media as a scheme by the English-speaking business establishment to defend its turf against francophone investors. For its part, the Liberal Party of Canada felt increasingly isolated.

This would be neither the first nor the last time. It also says:

Other federal parties opposed the bill. Senators who were studying the bill were informed that Jacques Parizeau would come to Ottawa to criticize the legislation before them. Since the birth of Canadian Confederation, more than 100 years ago, it could not be remembered when a provincial finance minister had ever taken such a step. On the morning of November 25, 1982, the day Jacques Parizeau was to come before the Senate, Parliament Hill was in turmoil.

If you will allow me, I would like to read the presentation of Mr. Parizeau on Bill S-31. It was delivered on December 7, 1982. I will read the comments of Mr. Jacques Parizeau, the then Finance Minister, on Bill S-31. He said:

Bill S-31 does not impact only Québécair. It affects numerous operations of the government and its crown corporations. For instance, the transport minister has already referred to the participation of the Government of Quebec in Sonamar and Les Entreprises Bussières. This bill may also have an impact on the SGF, the SDI and even SOQUIP. However, the Caisse de dépôt et placement du Québec is obviously the main target of this bill. First and foremost, this legislation aims at preventing the Caisse de dépôt et placement du Québec from acquiring acquiring major holdings, first in Canadian Pacific and eventually in numerous other companies. More specifically, this bill protects the traditional Canadian establishment against intrusions by the CDPQ and it even succeeds in providing this establishment with the means necessary to disqualify bona fide investments now being made by the Caisse de dépôt and inflict potentially significant losses on the Caisse de dépôt and pensioners in Quebec.

Of course, the Caisse de dépôt administers the Régie des rentes du Québec.

This bill introduced in such a hurry really seems to protect the management of Canadian Pacific. The Caisse de dépôt had acquired very close to 10% of the shares of that company, and as soon as that threshold was exceeded, the agreement between Canadian Pacific and Power Corporation, controlled by Paul Desmarais, under which the limit imposed on Power for the shares of Canadian Pacific was set at 15%, was changed.

Of course, the federal government had to see that Canadian Pacific would not experience the suspicious fate of being threatened in its traditional control.

The act has of course much broader consequences than just trying to create an impossible situation at Quebecair and to consolidate Canadian Pacific's management.

Any company that would want to avoid the Caisse de dépôt—or the SGF for example—taking a significant share of its capital stock could, to protect itself, try to buy an interprovincial or international transportation company, no matter how small, or create one.

By contrast, when the Caisse de dépôt wants to associate itself with a private group by holding more than 10% of the shares, that group will have to first pledge that it will not invest in transportation, for an indefinite period. In any case, the shares that the caisse could, from now on, acquire in the targeted companies, cannot be voting shares, even though the caisse were to hold less than 10%.

This voting right that can be enjoyed by any shareholder, including foreign investors, is removed in the case of any provincial Crown corporation.

Clearly, Bill S-31 is likely to significantly hinder the operations of the Caisse de dépôt. This is not only about control operations, but about the development of businesses. Some businesses that are experiencing major growth could count on an increasingly important influx of venture capital from the Caisse de dépôt, up to the 30% stock limit provided under the act. This influx of venture capital is now seriously impeded. We are thinking, for example, of the new container company Sofati, which was just created in Montreal--

—incidentally it is doing very well—

--and whose successes are already remarkable. The bill restricts investment opportunities for the Caisse de dépôt in this type of businesses. At the same time, foreign competing corporations are allowed to control such businesses, as mentioned in November 6 edition of the daily The Gazette, which announced that the Compagnie Maritime Belge had acquired 50% of the stocks in Dart Containerline, a Montreal company.

The same influx of venture capital is also jeopardized in the case of Sonamar or any other business in which the SGF, for example, could take an interest.

No doubt the federal government will allow for exceptions, if it sees fit to do so. But it will then be the one that will decide the major operations of the Quebec government, of the Caisse de dépôt and of other Crown corporations, and if it reserves the right to allow for exceptions, it will also have the right to rescind them.

It is only by investing abroad in a significant proportion that the Caisse de dépôt can continue to fulfill its role of good manager and avoid the kind of trusteeship the federal government wants to impose on it. The diversification of investments in various activity sectors is a basic condition to the sound management of funds. The bill significantly changes the investment of Quebeckers' savings as we have known it and practised it for over 15 years. At the same time, it diminishes the performance and the return of the Caisse de dépôt, which has succeeded in getting a higher return than the Canada pension plan, ever since it was created.

And he went on:

We were already familiar with FIRA, the foreign investment screening agency, and all the problems it caused to foreign investment. A few weeks after the government announced its intention to relax its regulations with regard to FIRA—even though it has not yet followed through on that—it decided, through Bill S-31, to more or less extend the FIRA policy to provincial government corporations, particularly to the caisse. This is exactly what it is: Bill S-31 creates a control mechanism similar to FIRA, except that instead of being applied to foreigners, it is being applied to the provinces, particularly to the Caisse de dépôt, which will not even be treated as well as a foreign investor, since it will not be able to vote with any new share it acquired in the targeted sectors. Bill S-31 is another FIRA, but this time it is directed against us.

Canadian Pacific is the bigges corporation in Canada. The Caisse de dépôt is the largest portfolio in Canada. Canadian Pacific is the most fundamental expression of the traditional establishment. The Caisse de dépôt, in cooperation with a large number of Quebec business people, supports business shares in the best interests of its depositors and of Quebec as a whole.

I want to read to you a last paragraph of this presentation by Mr. Parizeau.

Instead of choosing the development of Quebec, the participation of Quebeckers in large corporations through their savings and support for Quebec business leaders, the federal government preferred to protect its establishment and to take away the freedom of government institutional investors and provincial government corporations. It is difficult to imagine what kind of intellectual gymnastics can bring one to conclude that a profitable investment (because the Caisse de dépôt does not subsidize, it invests) that is beneficial to Quebec can be regarded as disadvantageous to Canada's economy. Unless, of course, what is beneficial to the establishment is equated to what is beneficial to the economy.

Under these circumstances, we have no other choice but to call on the government to withdraw this bill immediately.

That is what the finance minister of the day had to say when Bill S-31 was introduced in the Senate in November. As I mentioned, Mr. Parizeau made this presentation in early December.

In the end, the Senate committee rejected Bill S-31. One could have expected that following the debate—in the end, senators seemed to acknowledge the discriminatory nature of the bill—that would have been the end of it all. Unfortunately, and we hear less about this development, on November 3, 1983—one year later—the federal government, through the Minister of Consumer and Corporate Affairs at the time, came back and introduced a new, reworked version of Bill S-31, in the hopes, once again, of stopping the Quebec institution known as the Caisse de dépôt et placement from purchasing shares in different Canadian companies that were controlled by the Toronto establishment that Mr. Parizeau was referring to.

This time, it was the chair of the board of the Chamber of Commerce of Montreal, Serge Saucier, who led the fight in this second battle against the newly minted version of Bill S-31, and who rallied not all, but a large number of Quebec's French-speaking business people. At the time, this business community was just beginning to operate.

For example, Mr. Parizeau set up the stock savings plan, which allowed a number of companies to develop, because they were able to gain access to capital that they were never able to access before.

So, Mr. Saucier successfully mobilized the French-speaking business community at the time and, on November 23, 1983, La Presse published the list of 21 business leaders under the headline “St. James Street Calls for Withdrawal of Bill S-31”.

When Jacques Parizeau read this headline, he was understandably very pleased because, to him, this was proof that St. James Street, now Saint-Jacques Street, was now French. During the fall 1983 parliamentary session, the bill was finally and definitely scrapped.

This page in parliamentary history shows that, in the past—and in the present as well, sometimes—the federal government has been extremely petty in its dealings with Quebec's institutions.

I view, to some extent, Bill C-3 now before us as Quebec's revenge in terms of initiatives taken by the Government of Quebec through its successive finance ministers. It was true under Jean Lesage's Liberals, under the Union Nationale with Daniel Johnson, and then under Robert Bourassa and René Lévesque.

There is a degree of revenge for these political figures who, in their days, took initiatives that benefited Quebec and now enable Canada to draw inspiration from Quebec's experience to establish an institution that will foster economic development in Canada.

Of course, we are not taking the reductionist vision Pierre Elliott Trudeau may have had at the time, thinking that what is good for Quebec is bad for Canada. Let us hope that, this time, what is good for Canada will also be good for Quebec, even though Quebec's pensions are not administered by the board.

Again, this is some kind of revenge against history, and we hope that, as I indicated, this board will not only foster the economic development of Canada and Quebec, but also ensure workers in Canada a decent pension.

In this context, we have no problem supporting the bill.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, it is a pleasure to rise to speak on Bill C-3. This bill to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act establishes the Canada Pension Plan Investment Board. This board will be an investment corporation similar to the Caisse de dépôt et placement, which has been operating in Quebec since the mid-1960s.

The mandate of the board will be to invest funds received from the Canada Pension Plan so as to generate maximum return. The income derived from investment will enable the plan to pay pensions to Canadian workers.

As I indicated, this bill is warranted as it permits the transfer of all funds from the pension plan to the board. As I said, in this instance, the federal government keeps modeling its board on the Caisse de dépôt et placement, Quebec's success story.

This also provides me with an opportunity to address a bleaker moment in Canadian parliamentary history, namely the introduction in the Senate of Bill S-31 seeking to—

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

My friend opposite has corrected me. It is 30%. That is the limit on foreign investment of our Canada pension plan funds.

The last amendment in the bill has to do with accountability. All of us in the House are true believers in the process of accountability. The trick is to get the right mechanisms that reflect what is happening with these types of investments to allow at least trained observers, and some untrained observers like most of us here in the House, to assess how the pension plan is doing.

The final amendment which I am referring to with regard to Bill C-3 relates to changes in reporting mechanisms for the Canada pension plan. In saying that we want good and effective reporting mechanisms, I have to point out what is probably obvious to most of us, which is that in requiring our public pension plan to report, it is important that we not remove from our pension plan the ability to make appropriate moves with respect to investments.

If a large fund is going to make a big investment, it probably is not a good idea to announce it in advance. Sometimes the movement of moneys in capital markets needs appropriate levels of confidentiality before and after they are moved to protect the integrity of the investment. At the end of the day, there is no confidentiality. It has to be reported. It has to show up on the books. Reporting mechanisms that we design and put in place have to take into account the need for large pension plans like this to operate with reasonable confidentiality and integrity as they move our money around.

That is the list of housekeeping reforms. All of them are important in their own way. I hope I did not diverge too much onto other issues. We are back on relevance and back on focus on this very boring bill. Maybe there are some questions from members about this very important subject.