Bill C-3 (Historical)

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

Message from the Senate

[The Deputy Speaker]

Order, please. I have the honour to inform the House that a communication has been received as follows:

Rideau Hall

Ottawa

April 3, 2003

Mr. Speaker,

I have the honour to inform you that the Right Honourable Adrienne Clarkson, Governor General of Canada, signified royal assent by written declaration to the bills listed in the Schedule to this letter on the 3rd day of April, 2003 at 4:35 p.m.

Yours sincerely

Barbara Uteck

Secretary to the Governor General

The schedule says that royal assent was given to Bill C-3, An Act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, Chapter 5; and Bill C-227, An Act respecting a national day of remembrance of the Battle of Vimy Ridge, Chapter 6.

It being 5:30 p.m., the House will now proceed to consideration of private members' business as listed on today's Order Paper.

Sex Offender Information Registration Act

[Kevin Sorenson, Canadian Alliance, Crowfoot, AB]

Madam Speaker, I rise today to take part in this important debate, which has been a long time coming. Although this issue has been debated numerous times in the House, every time initiated by the Canadian Alliance, the official opposition, it is the first time an actual bill, Bill C-23, an act respecting the registration of information relating to sex offenders, has been the topic of discussion.

I stood in the House more than two years ago in support of a Canadian Alliance motion requesting the establishment of a national sex offender registry. Two years ago, that motion resulted in the government committing to the establishment of a registry. At that time, members opposite stood unanimously in support of their government's commitment to establish a national sex offender registry by January 30, 2002.

Quite obviously the government again has failed to meet another commitment. It failed to meet its commitment of having the sex offender registry up and running by January 2002. I am confident that had we not pushed and prodded the government, it never would have met that commitment on its own accord. The time it has taken to force the government to bring Bill C-23 before the House clearly demonstrates to all Canadians and all parliamentarians the priority, or the lack thereof, that it places on the protection of our children in this country.

Ontario established a registry three years ago. Christopher's law, or Bill 31, received royal assent in April 2000. That bill established a registry to enhance public safety by providing law enforcement agencies with a modern, reliable and effective electronic tool to support services to track sex offenders in our communities and to improve the investigation of crimes of a sexual nature.

Despite the efforts of Ontario and other provincial governments, the Liberal government has failed to protect Canadian children from sexual predators.

This will be the third time that I have stood in the House quoting from a document that was produced by the Liberal Party of Canada, produced before the 1993 election. Before the election, their promise, their commitment and their vision sounded pretty good in the red book. I quote this today because it is absolutely imperative that we point out the clear justification for a national sex offender registry as recognized not just recently but 10 years ago by those who now sit across the way in government. Yet the government has moved very slowly. It has done absolutely nothing to this point but fail to once again make good on a promise. It has failed, and that is this government's record. It has a record of failure.

In 1993 the Liberals fully supported the establishment of a national sex offender registry of convicted child abusers. Their rationale, quoting directly from their own document, was this:

Sex offenders represent almost 20 per cent of the incarcerated population and 10 per cent of the conditionally released population.

Repeat sex offenders are more than twice as likely to commit further sex offences, much more likely to violate conditional release conditions and more likely than other offenders to reoffend... However, treatment programs for sexual offenders are sorely lacking.

The Liberal government recognized the chances of reoffending. It recognized that they were a threat. All those it recognized. These facts were highlighted three years prior to the publication of the Liberal document.

A 1990 report by a working group established by the Department of the Solicitor General concluded that offender treatment programs have shown limited results. The report said that they gauged and looked at the programs that were in place, followed them through, did an evaluation and the programs showed limited results. The report showed that practitioners in the field of sex offender treatment do not claim to cure sex offenders. The Solicitor General's department in 1990, in a previous government, recognized that they cannot simply claim to have 100% cured the sex offender, but rather the treatment strategy is to manage the risk of reoffending.

That document says that although they will put them in a program, although they will give them treatment, at the end of the day they recognize that basically the best they can do is risk manage. I am not sure as a parent that I am quite satisfied with the response the report brought out, although it is true. As a parent it causes me some concern that people who recognize that programs are not working and recognize the recidivism rate are saying they are going to risk manage pedophiles and sex offenders back into the communities.

The report also said that there were not enough experts to meet the demand for sex offender treatment and the limitations of treatment were recognized. This research based information, produced by the Department of the Solicitor General, clearly demonstrated well over 10 years ago why Canada needed a national sex offender registry. Yet the government and its predecessor failed to establish such a registry despite recognizing the risks, despite the ample justification to do so.

The question must be asked, recognizing the rights, recognizing the risk, why would it fail to meet such a requirement? The only plausible answer in my mind to that question is that the government has and continues to place the rights of the offender before the rights of the victim. It has continuously placed the rights of the offender above the concerns of the protection of our society. We have seen this over and over and over again.

This is evident in almost all of the justice legislation the government has brought forward in the last few years, including the establishment of the DNA database. Enacted in 1998, Bill C-3, an act respecting DNA identification, created a new statute governing the establishment and the administration of a national DNA bank. It also amended the Criminal Code to permit a judge to make a post-conviction order authorizing the taking of bodily substances from a person found guilty of a designated Criminal Code offence in order to include the offender's DNA profile in the national DNA database.

The DNA data bank was officially opened on July 5, 2000. My party, the Canadian Alliance Party, is firmly committed to restoring confidence in our justice system by providing law enforcement officers and law enforcement agencies the latest technological tools to quickly detect and apprehend criminals. The attempt to amend Bill C-3 was unsuccessful.

We live in a day and age where every sector of society is looking for the newest technology available to enhance their way of life, to enhance their business, to enhance their safety perhaps, every aspect, every area of society.

Look at some of the things that are happening in health care and the new technologies that are available. It has only been for a few years that we have been able to have laser surgery done on our eyes to repair loss of vision. That is old technology now. Now health care has the technology to do many things.

We demand high technology in travel. There are vehicles now with global positioning systems that can detect when there has been an accident. When the air bag is inflated a signal is sent automatically by satellite to an office and medical attention is called without ever making a 911 call.

Our society has moved to a place where we accept and want the latest in technology. We see it. We have turned the television on in the last few days and we have seen the latest technology in the war on Iraq. We have seen missiles being sent from hundreds of miles away. We have seen the latest in laser guided missiles.

We see it in health sciences with research and development. We want the newest in technology. However, when it comes to law enforcement, when it comes to dealing with crime, when it comes to dealing with criminal offences and offenders, the Canadian Alliance argued that DNA identification, if used to its full potential, could be one of the newest technologies. We argued that DNA identification could be one of the greatest resources in fighting crime since the introduction of dusting for fingerprints.

To deny the police agencies the full use of this technology, as Bill C-3, did was reprehensible. It was unacceptable, inasmuch as it maintains an unnecessary level of risk to the lives and safety of our citizens. We have the technology. We have the ability to fight crime. When it comes to giving those resources to our law enforcement agencies, we handcuff them and then tell them to go out and do their job. Shame on the government.

There are literally hundreds of unsolved rapes. Hundreds of murders are outstanding in the country. There are victims across the nation where one event, one criminal offence has changed their life forever.

I have looked into the faces of mothers whose children have been murdered, some who have been murdered in prison. The twinkle in their eye is gone forever. When we talk with a parent whose young child has been sexually molested or raped, it not only leaves a scar on the primary victim, the child, it scars that family and the extended family forever.

Many dangerous offenders remain on our streets because of the government's failure to deploy the DNA tool properly as requested by police across the country. Bill C-3 did not allow for the taking of DNA samples at the time of the charge. The bill did not permit samples to be taken retroactively from incarcerated criminals, other than designated dangerous offenders or multiple sex offenders or multiple murderers.

However, Bill C-3 did provide a dangerous and an unnecessary exemption that could be authorized by judges not to issue a warrant for the taking of a sample if they believed that in doing so it would impact on an individual's privacy and security. Here again we see where the courts have the ability to disallow the taking of a DNA sample if that individual's privacy or security could be jeopardized.

This misplaced consideration for the privacy of offenders is more than apparent in the bill we are debating today. It is more than apparent in Bill C-23.

Sex offenders may be excluded from the registry, according to Criminal Code section 490.03(4) as set out in clause 20, if the court is satisfied:

--that the person has established that, if the order were made, the impact on them, including on their privacy or liberty, would be grossly disproportionate to the public interest in protecting society through the effective investigation of crimes of a sexual nature, to be achieved by the registration of information relating to sex offenders.

While not all sex offenders will be successful in exempting themselves from the registry, this one thing we can be sure of: many will delay having their names put on that registry and many will not register their whereabouts, arguing in court that with regard to their privacy, their liberty and their freedom, it would be too negative an impact for them to handle. One thing we can be sure of is we will see a log jam in the court system like we have never seen before. The lawyers across the way sit back and wipe their hands and lick their chops. This becomes a lawyer's dream.

If they are not successful in convincing the judge that their names should not be on the registry, we can be sure they will take their cases to the Supreme Court of Canada and they will string out those cases for just as long as they can.

In the papers just two days ago, one headline read, “Rapist asks Supreme Court to strike down DNA law. Lawyer argues sampling bodily substances violates constitutional rights”. The article went on to say:

An Edmonton man convicted of raping and impregnating a 14-year-old girl has made the first Supreme Court of Canada challenge to laws allowing police to take DNA from suspects....The case being argued involves a man whose name is subject to a publication ban, who was boarding during the week with the victim and her family at their Hinton, Alberta trailer....The man had sex with her against her will for 30 minutes....Four months later she realized she was pregnant....The girl, described as intellectual delayed, told her mother what had happened and was taken for an abortion....Police seized the fetal tissue as evidence. In January, 1997, RCMP officers armed with a search warrant, pricked the man's finger for a blood sample to make a DNA comparison with the tissue [that they had taken]....He was found guilty of sexual assault and sentenced to six years in prison. In 2001, the Alberta Court of Appeal ruled two to one to uphold the conviction. Mr. Anderson, whose client is free on $5,000 bail, wants the Supreme Court to overturn that decision.

The defence is contending that the DNA legislation breaches the Charter of Rights and Freedoms, that it hinders the protection of his personal security and that it should be banned because it was an unreasonable search.

The convicted rapist's lawyer is not arguing his client's innocence. He is not arguing in a court of law that there has been a miscarriage of justice, that the individual was innocent of the charge that was put against him. He is arguing against how the police obtained the evidence to prove that he was guilty. He is arguing a technicality.

While the wheels of justice grind slowly or they grind to a halt, our sons and daughters may be victimized all because the government continues to stack the deck in favour of the offender and the offence over the protection of society.

A number of years ago the Supreme Court of Canada in a 5 to 4 decision held that privacy rights under the charter demanded that police obtain a warrant prior to entry into a dwelling house to arrest a suspect. The decision in response to the Feeney case resulted in evidence being thrown out because the police did not have a warrant when entering his premises. Feeney's blood soaked shirt which had been obtained by the police, and blood all over the place where this individual lived, clearly proved his guilt to the first degree murder charge. That shirt or that blood was not allowed as evidence.

In her dissenting opinion, Supreme Court Judge L'Heureux-Dubé said that while the rights of the accused people are certainly important under the Charter of Rights and Freedoms, “they are not all the equation”. I like what the judge said. The judge did not question whether someone who was charged had rights under the charter. She did not question whether someone who was a suspect by the police force and who had a charge levied against them had rights. She did not question whether the Charter of Rights and Freedoms applied. She said that it was only one part of the equation and not all the equation.

That quote should be a wake-up call to the government. That quote should be a wake-up call to those who are continuously looking only at the rights of the offenders with the rights of the victims forgotten.

The judge cautioned her colleagues not to automatically exclude even illegally obtained evidence without considering the consequence for victims, the protection of society and the reputation of the justice system. She stated:

When an attacker or a murderer is acquitted in the name of the regularity of the criminal process, it is not only past victims who are ignored, but also future victims who are sacrificed.

The Supreme Court judge boldly suggested that it was time to reassess the balance the court has struck between protecting the individual rights of the accused and preserving society's capacity to protect its most vulnerable members and to bring and to expose the truth. I challenge the government today to strike the necessary balance because as Judge L'Heureuz-Dubé said:

--perhaps it is time to recall that public respect and confidence in the justice system lies not only in protection against police abuse, but also in the system's capacity to uncover the truth and ensure that, at the end of the day, it is more likely than not that justice will have been done.

I emphasize this, “it is more likely than not that justice will have been done”.

She is saying that when someone goes through the system, the public wants to look and have the faith that justice has been served. When we read about offenders back on the street because of technicalities, the public begins to question if justice was served. Did they come to justice? Although they are very seldom ever satisfied when the offender is caught, the public questions if there a degree of closure that can be brought to the victim because justice has been served. That is the question. That is the secondary part of the equation that needs to be considered.

The only way we can ensure that justice is done is to ensure that police officers in Canada have all the investigative tools necessary to do their jobs effectively and to uncover the truth through the bringing together of all the evidence that they can gather.

It will indeed be an injustice if the DNA warrant provisions are found unconstitutional. It will indeed be an injustice if it severely restricted the use of DNA as evidence.

More than 10 years ago six year old Punky Gustavson was kidnapped, sexually assaulted and then murdered. The story captivated all the country, certainly my province of Alberta. It was a story that, not only in Edmonton where it happened but throughout the province, horrified people as when they heard about little Punky Gustavson going missing.

It happened over 10 years ago. Less than a week ago, Punky Gustavson's murderer was finally charged. In November of last year, an Alberta provincial court ordered that DNA sample be taken from Clifford Mathew Sleigh, who is a prisoner in the Bowden Institution. That sample was matched with a very small sample of DNA that was taken in 1992 when Punky's body was found.

As I stated earlier, only three types of prisoners who were found guilty prior to June 2000, when the DNA data bank was created, were eligible to be included. The first were those who were listed as being dangerous offenders. The second was multiple murderers. The third was multiple sex offenders. Across Canada 2,000 such offenders were identified. Three hundred of them were in Alberta prisons. The Alberta court however had to obtain court orders for the seizure and inclusion of DNA from the 300 inmates as it was not automatic.

The Canadian Alliance Party has argued that DNA samples should be automatic, should be retroactive and should be taken from all convicted offenders. Similarly, we have argued, not so successfully apparently, to have all convicted sex offenders retroactively entered into the registry. However we will continue to push for the inclusion of all past and current sex offenders to be listed on the registry with absolutely no exceptions.

The retroactively part of the bill is of huge concern to Canadians. The fact that the government boasts of a registry with no names on it and the fact that the government boasts of a registry that for many years down the road will not help law enforcement is wrong. It is wrong for the minister to stand up in front of the House or in front of any television camera across the country and brag about how the registry, as soon as it is brought into legislation and is passed, will help. Without retroactivity on that list, absolutely nobody will benefit.

We will push to have any sex offender who fails to comply with an order to register to be held liable for a significant terms of imprisonment. Currently, clause 20 of Bill C-23 adds subsection 490.09(1). It states:

Every person who knowingly contravenes an order...is guilty of an offence and liable

(a) in the case of a first offence, on summary conviction, to a fine of not more than $10,000 or to imprisonment for a term of not more than six months, or to both.

It is absolutely outrageous and a complete insult to law-abiding firearm--

Canada Pension Plan

[The Speaker]

The House will now proceed to the taking of the deferred recorded division on the motion at third reading stage of Bill C-3.

[Norman E. Doyle, Progressive Conservative, St. John's East, NL]

Mr. Speaker, I am pleased to say a few words on Bill C-3, the Canada Pension Plan. As we said when we spoke on this bill before, there is nothing major in the bill that would necessitate voting against it so we will be supporting the bill.

The bill would consolidate management of all CPP investments under the Canada Pension Plan Investment Board. It would no longer require the CPP to hold cash reserves equal to three months of benefits. The bill would also make various technical amendments as well.

The Canada pension plan is a very important cornerstone of the future retirement savings plan of most or all of Canadians. Certainly it is one plan that is broadly supported by a wide range of Canadians. Canadians support the notion of a secure government pension plan but also of course it maximizes their retirement income.

Generally, Canada's system of retirement saving has three main pillars. The first is the universal old age security and the low income supplement. Second, there are the earnings based Canada and Quebec pension plans as well. Third, there are private retirement savings and pension plans.

The Diefenbaker government initiated the work leading up to the 1966 introduction of the CPP. Progressive Conservatives have traditionally viewed the CPP as a fundamental part of Canada's social safety net, an obligation that government must meet and government has to honour. More than 2.8 million Canadians outside Quebec receive retirement benefits of up to $9,345 a year, depending upon how long they contributed and their employment earnings. Special benefits are also provided for people with disabilities, widows, widowers and orphans. The Quebec pension plan is not a lot different.

For three decades the CPP was a “pay-as-you-go” plan. Premiums only provided a fund equal to two years of benefit. By 1997, there was only $40 billion in that fund, while the cost of promised future benefits totalled $600 billion. Without changes to the overall plan, premiums would rise to 14.2% of pensionable earnings by the year 2030.

In 1997 Ottawa and the provinces agreed to two major changes to the CPP. The first was to increase premiums more rapidly than had been previously planned but to cap them at 9.9% in 2003, which would be $4.95 for employees and $4.95 for employers. This equalled an $11 billion increase in the annual premium revenues. The plan right now is sustainable over the long run at next year's rate. All Canadians will receive the benefits that they have been promised and that is a very good thing.

Second, changes were made to the way benefits were calculated reducing slightly the pensions of new beneficiaries, reducing the death benefit and making it harder to get disability benefits.

Third, new funds flowing into CPP funds would be invested in the marketplace and managed by an arm's length agency, which is the CPP Investment Board. Previously funds not immediately needed to pay for benefits were loaned to the provinces at the rate paid by the federal government on its long term bonds.

By 2010, CPP assets will equal $142 billion. By 2050, they will approach $1.6 trillion. Therefore, by the turn of the decade, the CPP will be by far the largest investment vehicle in all of Canada.

The CPP actuary says that the changes in the bill would increase returns on CPP assets by $75 billion over 50 years. That reflects both the higher returns of a more diversified portfolio and a reduction on the amount of money that earns lower returns as part of the cash reserve. This movement of the Canada pension plan beneficiary pool toward capital markets is one that in the long term should benefit all Canadians and improve their retirement incomes.

Notwithstanding what has happened in the last year or two in the capital markets, by and large managers recorded that the return last year on the Canada pension plan compared to most mutual funds and investment portfolios was fairly good.

The CPP Investment Board's governance model is built on two fundamental principles. First, the investment professionals must be able to make their decisions without political interference, which is a good thing. Second, there must be full accountability and reporting to Parliament, to the provinces and to the people of Canada.

The legislation seems to be carefully crafted to effect accountability while ensuring independence. Whether it actually plays out that way remains to be seen. Time will tell. However it is a start in the right direction. For example, the legislation would require the board to have a sufficient number of directors with proven financial ability or relevant work experience. Why the standard would be anything lower really is not an issue. In fact that should be the minimum prerequisite.

How the directors are appointed is a departure from the traditional practice for crown corporations. The committee appointed by federal and provincial finance ministers would nominate candidates and the federal minister would select candidates from the nominating lists of the committee in consultation with the provinces. At the end of the day the appointments would still come by way of a final recommendation from the Minister of Finance, only to be rubber stamped by an order in council. That may or may not produce the very best people, but let us hope it does.

The proposed bill is a very good step in the right direction. As a result, future boards will consist of professionals with accounting, actuarial, economic and investment credentials. They will be experienced in the private and public sectors and will bring to the board informed opinions on public and private sector governance.

There are other proposed legislative measures to ensure transparency and accountability. The board will also appoint external and internal auditors who will report directly to the audit committee of the board.

Despite these powers, government can check on what is being done with the public's money. Indeed the federal finance minister will be required to authorize a special examination of the CPP Investment Board books, records, systems and practices every six years. Perhaps there might have been some utility in the suggestion of performing examinations more frequently.

Our political and public accountability is especially important at a time when some Canadians may be worried about equity markets. The Canada pension plan has to be invested for the long term. Good portfolio management expertise will prevail with the right quality of people at the management level. That one reason why it is so important that the board of the Canada pension plan be chosen very carefully.

We have had and continue to have significant concerns about the way in which the government makes order in council appointments. The correlation between Liberal Party contributions and the appearance in the board's order in council appointments is somewhat unsettling. The degree to which this level of partisanship can threaten the potential quality of the board is a very important consideration. When we are talking about the future retirement incomes of Canadians it is absolutely essential that the individuals on these boards be beyond reproach and that they be chosen by absolutely no partisan influence.

Furthermore, the government has to take a look at other ways to address Canadian retirement planning right now. We are just a few years away from seeing a significant reduction in the number of Canadians who are actually working and paying taxes, along with a significant increase in the number of people who will be drawing pensions.

Therefore the government should heed the finance committee's report and the PC's dissenting report both calling for the increase of RRSP contribution limits. Of course, we have seen that over the last few days. Hopefully this is a step in the right direction. It is one way in which we can defer taxes to the future as people withdraw from the these RRSPs.

The Progressive Conservative Party supports the bill but we want to make sure that the elderly in Canada do not suffer due to rigid policies and misguided principles or bureaucratic holdups. As I said a moment ago, the bill is a step in the right direction.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I am very pleased to rise today to speak for the second time about Bill C-3, which deals with the establishment of the Canada pension plan investment board.

As I said previously, the Bloc Quebecois supports this bill. This initiative is very similar to the one Quebec took in the 1960s when it established the Caisse de dépôt et placement du Québec. This bill puts the final touch to a reform that is already underway, by transferring the Canada Pension Plan's assets to the board.

This is as good a time as any, just a few days after the finance minister tabled his budget, to point out the link between the bill and an issue of great concern to Canadians and Quebeckers, namely our aging population. As we know, the number of retirees will increase over the next few decades. The latest budget, which mentions the consequences of Bill C-3, does not adequately address the issue of making sure Canadians and Quebeckers will have sufficient savings upon retirement to keep them from poverty's doorstep. In this respect, Bill C-3 only deals in part with the issues of the aging population and the number of retirees.

There is still a lot of work to do and, as I said yesterday, I would have expected this budget to announce a thorough rethinking of the ways we, as a society, can make sure Canadians and Quebeckers put aside the money they will need when they retire.

The only rather worthwhile thing the finance minister has come up with in the budget is a measure to raise the limit of RRSPs from $13,500 to $18,000 over a number of years, but this will only benefit a minority of Canadians and Quebeckers. In Quebec, only 1.5% of taxpayers contribute the maximum of $13,500.

The budget did not put enough emphasis on this, and that is unfortunate. Although Bill C-3 is a major step toward ensuring that workers have adequate retirement incomes in the coming years, I have to admit, unfortunately, that this is just a drop in the bucket, compared to the challenges facing society in Canada and Quebec.

Therefore, as I said at the beginning of my speech, we will be voting in favour of Bill C-3. The Canadian Alliance has withdrawn its amendment, which, in our view, was totally inappropriate. When society agrees to defer tax payments for a number of Canadians, it is entitled to expect that the savings will be reinvested in Canada and in Quebec first.

As I mentioned earlier, the Bloc Quebecois will be supporting the government on Bill C-3, although we do realize that it is a just a tiny drop in the bucket, given the scope of the problem.

Business of the House

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

Mr. Speaker, I understand that on some of the bills there is perhaps not much debate left, but for greater clarity and for the benefit of all colleagues we will be calling Bill C-3, Bill C-19 and Bill C-22 in that order this morning.

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

Mr. Speaker, I rise on a point of order. There have been further consultations and I wish to be quite clear. Pursuant to the same terms as a moment ago I would like to move that the following items be disposed of as follows. I move:

That the amendments to Bill C-3, Bill C-19 and Bill C-22 be deemed to have been withdrawn.

Mr. Speaker, I am moving that the amendments be deemed to have been withdrawn, nothing else, that is, all amendments and/or subamendments on Bill C-3, Bill C-19 and Bill C-22.

Canada Pension Plan

[John Duncan, Canadian Alliance, Vancouver Island North, BC]

Mr. Speaker, while listening to the speech by the NDP member for Palliser earlier, I was getting more and more concerned when he was depicting the entire legislation in terms of where the Canadian Alliance and, before the Canadian Alliance, where the Reform Party stood in terms of pensions, and of course misrepresenting considerable things.

I thought the exercise of opposition in the House of Commons was to hold the government to account and to deal with legislation put forward by the government, not to create or exacerbate divisions between the opposition parties.

I found most of what was said by the member for Palliser to be essentially irrelevant to the debate and counterproductive.

I would like to be irrelevant to the debate for a moment just to point out some things that the same member for Palliser recently said in the House of Commons that were basically contrary to where people are coming from.

I will quote briefly:

--in response to the member's specific questions, the position that I take, and I believe would be shared by a majority if not all of my caucus colleagues, is that if it has not specifically hurt a minor in the production of it, if it is created by people's visual imaginations and if the main purpose of it is not simply about pornography and sexual exploitation, then under the laws people do have a right to their own imaginations and thoughts, however perverse the member might think they are.

I want to hold that member accountable for a defence of child pornography in this place which I find indefensible. If he wants to carry out what I consider to be uncharacteristic descriptions of the Canadian Alliance, then I will ask him to be accountable for his actions in this place.

It is really my job today to talk about Bill C-3, which is a step in the government's attempt to put all the CPP assets under a single entity called the Canada Pension Plan Investment Board. We have had quite a bit to say about this board over time. I have heard the NDP member for Palliser and I have heard Liberal members say how wonderful it is that the Canada Pension Plan Investment Board will copy or emulate the Caisse de dépôt et placement du Québec.

I think this is clearly a backward step and one that we should all be very concerned about. We will end up with a very large, in a Canadian context, government run investment fund with the money and the mandate to essentially, within our small economy, take a controlling stake in private firms, to hire and fire directors, to block takeovers and to tilt the scales in capital markets.

All of this can be done at the whim of the government who is responsible for the appointees to this board. We are entirely captive of the goodwill of those government appointees to the board to put priority on the shareholders, the Canadian public, who are the eventual recipients of the Canada pension plan, as opposed to their political masters.

We know from recent history that the Caisse de dépôt et de placement in the province of Quebec has been used consistently for political initiatives. It was, for example, heavily used in the lead up to the last referendum when the Parti Québécois wanted to ensure that it had a two year period after the referendum before it had to go to the markets for money. That was all put in place ahead of time on the basis that if it won the first couple of years could have been a real difficult time.

It put the aspirations and needs of its separatist movement ahead of the aspirations and needs of either current or future pension recipients. We know that the former minister of finance, the member for LaSalle—Émard, would love to designate the Canada Pension Plan Investment Board direction to be utilized for all kinds of social policy and economic regional development initiatives as opposed to allowing that board the freedom and independence to seek the maximum rate of return for its shareholders.

This is part of a pattern that is consistently demonstrated by the Liberal government in most initiatives that it takes. There is in every case an attempt to utilize the board or the institution or the crown corporation in a way that would benefit the Liberal Party of Canada and its attempt to retain control in this place in the national governance of the country.

I find this very problematic. Although we are heartened by some of the comments from the people who have actually been appointed to the board, that is not good enough. We are not talking about good intentions here. We are talking about the inevitable reality of poorly designed legislation that would allow the entire exercise to come under the political control of the minister responsible for the board .

We can talk about some of the details of performance that would demonstrate quite clearly what kind of problems we could get into with rates of return when we attempt to emulate something like the Quebec model.

The Chief Actuary of Canada reported that from 1966 to 1995 the average real yield after inflation on the Quebec pension plan account, which was invested as it would be under what is envisioned by this bill, was under 4%. If we compare that with the average of the largest private managed funds in Canada, it came in at just under 5%.

If we were to take the huge amounts of investment capital that would be invested by the Canada pension plan and compound that over several decades, like the example I gave from 1966 to 1995, that would be a huge differential. We are forgoing that money by allowing this kind of scheme to be the operative scheme for the Canada pension plan.

When the former finance minister, the member for LaSalle--Émard, put these pension plan proposals forward, he projected a rate of return of his Canada pension plan after inflation to be 3.8%, even less than what was being achieved by the Quebec pension plan. Why would the former minister be targeting that kind of a rate of return unless he had strong designs on using it for political purposes and knew that it would reduce the rate of return? What kind of a message does that send about how caring our government is about the future incomes of our seniors? Even if those motivations were not there the inevitable result of this kind of legislation eventually would be that we would end up with that kind of a consequence.

A big problem with the current arrangement of the legislation is that the moneys that the Canada Pension Plan Investment Board invests would have to follow the same rules as an organization that we as individuals are stuck with in terms of investing in RRSPs, that is, dealing with Canadian content and how much we are allowed to invest outside of Canada. Canada has about 2% of the world's capital market. What that means is that a large pool of money is funnelled into a very small capitalization. This increases the risk for Canadians and for Canadian pensioners.

I believe that we need to free the Canada Pension Plan Investment Board and individual Canadians from these restrictive Canadian content rules.

The Canada Pension Plan Investment Board would look at $100 billion tied up in the stock market potentially as a large investment indeed. To demonstrate how insignificant Canada's capital markets are, when we look at that number, it is instructive to realize that yesterday's announcement of AOL Time Warner's loss for last year came in at $100 billion in the U.S. Here is one company that lost approximately the asset base of the Canada pension plan.

The other aspect that could show up is that in a very down market, we could end up with a large captive drop in the market of anywhere from 30% to 40%. That is why we need to spread the risk. That is why we need to get beyond these restrictive Canadian content rules that are tying up too much of the capital base into a small market.

We did have a crisis in the Canada pension plan during the tenure of the former finance minister, the member for LaSalle--Émard. What happened then? We watched the payroll burden for Canada pension plan contributions increase. That is a job killer; it is hard on employers and employees. There was a reduction of about 5% in the CPP rates to seniors. Those were not happy measures and were counterproductive. If we had that once before, we are potentially looking at a situation under this legislation that would be exacerbated, in other words, actually made worse.

What could we to look at? We could look at, for example, a year of investment where the Canada pension plan would be invested in a passive fund as opposed to the active engagement of choosing a capital mix. This could be done by contrasting the Quebec pension plan with a passive investment, and guess what? The passive investment plan in the example of the first year of operation did twice as well as the Quebec pension plan.

I find it puzzling to hear so much support coming from the government and the NDP in terms of them saying this is an enlightened measure when what it is sure to do is reduce pensions for seniors and put us in peril of political manipulation of the entire pension assets of this country. I find this totally unacceptable. We need a better context than what the government is providing for our pension assets.

[Norman E. Doyle, Progressive Conservative, St. John's East, NL]

Mr. Speaker, I am pleased to say a few words to on Bill C-3, the Canada pension plan. At the outset, there is really nothing major in the bill that would necessitate our opposing it. Progressive Conservatives will be supporting the bill. I am delivering these remarks today on behalf of my colleague, the member for Kings—Hants, who is unable to be here. He is on Her Majesty's business elsewhere.

The purpose of the bill is to consolidate management of all CPP investments under the Canada Pension Plan Investment Board. It will no longer require the CPP to hold a cash reserve equal to three months of benefits and the bill will also make various technical amendments. As I said at the beginning, I do not believe that there is anything major in the bill that would prevent us from voting for it.

The Canada pension plan is an important cornerstone of the future retirement savings plans of most or all Canadians and certainly is one that is supported broadly by a range of Canadians. Canadians support not only the notion of a secure government pension plan but also one that maximizes their retirement income.

Generally, Canada's system of retirement savings has three main pillars. The first is universal old age security and the low income supplement. Second are the earnings based Canada and Quebec pension plans. Third are the private retirement savings and pension plans.

The Diefenbaker government initiated the work leading up to the 1966 introduction of the CPP. Progressive Conservatives have traditionally viewed the CPP as a fundamental part of Canada's social safety net, an obligation that government must honour.

More than 2.8 million Canadians outside Quebec receive retirement benefits of up to $9,345 a year depending upon how long they contributed, and their employment earnings. Special benefits are also provided for persons with disabilities, widows, widowers and orphans. The Quebec pension plan is quite similar in that regard.

For three decades, the CPP was a “pay-as-you-go” plan. Premiums only provided a fund equal to two years of benefit. By 1997 there were only $40 billion in the fund, while the cost of promised future benefits totalled $600 billion. Without changes, premiums would rise to 14.2% of pensionable earnings by 2030.

In 1997 Ottawa and the provinces agreed to two major changes to the CPP. The first was to increase premiums more rapidly than previously planned, but they were kept at 9.9% in 2003, which was the equivalent of $4.95 for employees and $4.95 for employers. That equalled an $11 billion increase in annual premium revenues. The plan is sustainable over the long run at next year's rate and all Canadians will receive the benefits they have been promised. That of course is a very good thing.

Second, changes were made to the way benefits were calculated reducing slightly the pensions of new beneficiaries, reducing the death benefit and making it much harder to get disability benefits.

Third, new funds flowing into the CPP funds will be invested in the marketplace and managed by an arm's length agency, the CPP Investment Board. Previously funds not immediately needed to pay benefits were loaned to the provinces at the rate paid by the federal government on its long term bonds.

Under current numbers, contributions to the plan will exceed benefits until 2021. At that point some investment income will be used for some CPP benefits. By 2010, CPP assets will equal $142 billion. By 2050, they will approach $1.6 trillion. Therefore, by the turn of this decade the CPP will be by far the largest investment vehicle in Canada.

The CPP actuary says that the changes in the bill will increase returns on CPP assets by $75 billion over 50 years. 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 the cash reserve.

This movement of the Canada pension plan beneficiary pool toward capital market is one that will in the long term benefit Canadians and improve their retirement incomes. Notwithstanding what has happened in the last year or two in the capital markets, by and large the return last year on the Canada pension plan, compared to most mutual funds and investment portfolios in the last year, was actually fairly good.

Relatively good changes in accountability structures are made to the board's governance provisions with this bill. The CPP investment board's governance model is built on two fundamental principles. First, the investment professionals must be able to make their decisions without political interference. That could only be a good thing. Second, there must be full accountability and reporting to Parliament, the provinces and the people of Canada. That could only be a good thing as well.

The legislation seems to be carefully crafted to effect accountability while ensuring a certain level of independence. Whether it actually plays out that way will be seen as years go by. Time will tell. However, it is a very good start in the right direction.

For example, the legislation requires the board to have a sufficient number of directors with proven financial ability or relevant work experience. Why the standard would be anything lower really is not an issue. In fact, that should be the minimum prerequisite.

How the directors are appointed is a departure from the traditional practice for crown corporations. A committee appointed by federal and provincial finance ministers nominates candidates and the federal minister selects candidates from the committee's nomination list, in consultation with the provinces. However, at the end of the day the appointments will come by way of a final recommendation from the finance minister, only to be rubber stamped by an order in council. That may or may not produce the very best people. Let us hope it does.

The bill is a step in the right direction and as a result future boards will consist of professionals with accounting, actuarial, economic and investment credentials. They will be experienced in the private and the public sector and will bring to the board table informed opinions on public and private sector governance.

There are other legislative measures to ensure transparency and accountability. The board will also appoint external and internal auditors who will report directly to the audit committee of the board. Despite these powers, government can check on what is being done with the public's money. Indeed, the federal finance minister is required to authorize a special examination of the CPP investment board's books, records, systems and practices every six years. Perhaps there might have been some utility in the suggestion of performing examinations much more frequently.

Our political and public accountability is especially important at a time when some Canadians might be worrying about equity markets.

The Canada pension plan has to be invested for the long term. Good portfolio management expertise will prevail with the right quality of people at the management level. That is one of the reasons why it is so important that the board of the Canada pension plan be chosen very carefully. They are doing very important work.

We have had and continue to have significant concerns about the way the government makes orders in council appointments. The correlation between Liberal Party contributions and an appearance in the board's order in council appointments is somewhat unsettling to say the least.

The degree to which this level of partisanship can threaten the potential quality of a board is very important.

When we are talking about the future retirement incomes of Canadians, it is absolutely essential that the individuals on these boards be beyond reproach and that they be chosen by absolutely no partisan influences. I hope the two latest appointments, Germain Gibara and Ronald Smith, do their jobs exceptionally well as Canadians expect them to do. Hopefully there is no reason to believe that they will not do a very good job.

Furthermore, the government has to take a look at other ways to address Canadian retirement planning right now. We are just a few years away from seeing a significant reduction in the number of Canadians who are actually working and paying taxes, along with a significant increase in the number of people who will be drawing pensions.

Therefore, the government should heed the finance committee's report and the Progressive Conservative's dissenting report, both calling for an increase in the RRSP contribution limit. That is one way in which we can defer taxes to the future as people withdraw from these RRSPs. Also, the increase in RRSP contribution limits would give Canadians an opportunity to shelter more income today than they would otherwise be able to do.

While Bill C-3 does address some much needed governance, housekeeping, administrative and technical issues, the bill does not turn its attention to any substantive change in pension policy that would actually help alleviate some of the financial pressures currently being experienced by many of our elderly, one of our most vulnerable groups in society.

In addition to addressing the structure of the CPP, the government might have done well to address some policy questions concerning seniors and how their GSI, guaranteed income supplement income, private savings and CPP are currently being administered under the all the present federal schemes. I know our party would want to make sure that the elderly in Canada do not suffer due to rigid policies and misguided principles or bureaucratic holdups.

Speaking of the guaranteed income supplement, it was just today that I had a call from a senior in the St. John's area who was appalled at a story coming out of Quebec about a senior who did not know that in order to actually receive the GIS, the guaranteed income supplement, that one actually had to apply for it. I think it was in today's Globe and Mail and the Ottawa Citizen . In other words, it is not automatically sent unless one applies.

When a senior finally does apply, the mother of all injustices kicks in. If the person qualified, say three or four years ago, Ottawa will only retroactively pay for one year, even though the person might have qualified for the benefit three or four years ago but did not know about it and therefore did not apply.

A parliamentary committee has discovered that about 380,000 people are eligible for the guaranteed income supplement but that they do not receive it because they did not apply for it. That is heart-rendering. The most needy in our society would certainly have to be people who are eligible for the guaranteed income supplement but 380,000 of them did not apply for it, saving the Government of Canada $3 billion.

As I said, once they apply, the mother of all injustice kicks in, in that Ottawa will only pay them retroactively for one year even though they might have qualified for the supplement three or four years ago.

These are very important points. We support Bill C-3. Hopefully the government will pay a little bit of attention to the last issue I raised about the guaranteed income supplement because seniors are the most vulnerable in our society and they need a co-operative federal government, a government that will look at the policy and say that it needs to be adjusted and changed because it is costing the seniors of our society dearly.

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

It does not even cover the rate of inflation as my colleague has just said.

However, a different generation that retired in 1995 would receive a 9% return on their investment.

We are not saying one generation should receive less. What we are saying is to have some intergenerational fairness by proposing some genuine reforms to the system.

Despite the painful and expensive Liberal solution, the Canada pension plan's unfunded liability is hovering around a half a trillion dollars and is continuing to grow at 6% a year. Since the CPP investment board first invested funds in 1999 the board has delivered roughly 2.6% annualized performance, which is slightly better than the TSE over the same period. It is not enough to make up for the ever growing unfunded liability.

I am always perplexed as to why the government feels that the government and the wise men that it sets up in this board can investment the money in private markets, and yet Canadians such as ourselves do not have the wisdom to act in our own best interest to invest the money in a mandatory personal retirement account.

This could be a retirement account where the government could say to Canadians that they have to set aside a certain percentage of their income in a pension plan to ensure that they have something as a nest egg, as is done in the system in Australia.

In Australia there is one system where Australians have three options. Australians can choose to take the fully government directed plan where it is safe, secure and conservative because it is invested in government bonds. They get a minimal rate of return over a 20 year or 30 year period. They know that there is something there at the end, but then a second group can say it wants to invest a little more in equities or private markets. They have more of a mixed portfolio. In the third group, even though they still have to invest a certain amount in government bonds, there is more risk and they know that their rate of return will vary. Over time it will generally be much better, but it is not as conservative.

This gives the options to Australians that says they have to put aside a certain amount each year to invest in a nest egg. Instead of it being a pay as we go system, it is a system where it is actually invested in a person's name as a nest egg, but it is actually in one of three accounts.

In Canada we say to Canadians that they do not have the wisdom to invest themselves, that they are not concerned about retirement so the government has to take on the role for them. It is simply a patronizing attitude that many Canadians find offensive because they themselves take much more concern over their own retirement and the future of their children than the government does. It is just simply obvious.

Getting back to the ever growing unfunded liability in the Canada pension plan, this explains why in 1995 the Chief Actuary of Canada stated that contribution rates would have to nearly triple, from 5.6% to 14.2% over the next 30 years, simply to ensure the benefits could be paid for the immediate and indefinite future. Of course, we know what happened to him. He was simply fired. The messenger was fired because someone did not like the message.

By 2021 it is expected that the Canada pension plan payouts would exceed contributions again. After that, investment income would be needed to pay for benefits. At that time we can expect the percentage that Canadians would be asked to put into the Canada pension plan, I should not say asked because it would be demanded, would be increased again.

I now want to turn to some specific clauses within Bill C-3 and offer our critique of the clauses. Clause 15 applies to foreign property limits in the Income Tax Act to the CPP Investment Board.

During clause by clause consideration of the legislation, the director of finance, markets division, of the finance department's financial sector policy branch, Bill Mitchell, admitted to members of the finance committee that no particular study was done by the department to determine what the negative impact of this restriction would be on the long term performance of the CPP investment fund.

It is known to be a bad thing for private companies to invest the assets of their pension plans in their own securities and it can be argued that it is the same thing for governments. CPP Investment Board President John MacNaughton has said that all large investors face the challenge of having to manage within the capacity of the Canadian market. The Canadian market is small relative to the amount of capital in the country and it is small relative to world markets. Canada only represents 2.2% of global capital markets yet on the investment side we are much bigger than that.

As the CPP holdings get larger with regard to the opportunities available to invest in Canada, the limit is going to matter for other reasons as well. Baby boomers will begin retiring in 2012. By that time the CPP fund would have an excess of $140 billion. That would make it the largest investor in Canada, and among the largest in the world.

The CPP currently accounts for only 1% of the Toronto Stock Exchange's market capitalization. It could be as high as 10% by 2012 which is a dangerously high number for a single investor in a single market. There are concerns that public money would be competing with private money for the best investments. As time goes on the problem is only going to get worse. Every year the CPP will be piling in $16 billion to $18 billion in new money. It will own the market and this is a concern.

At the time that Bill C-3 was introduced I recall Andrew Coyne raising concerns about the undue influence that the CPP Investment Board, because of its size, would have within the private market.

This is something we should look at seriously. We in the Canadian Alliance feel that the bill is not a simple housekeeping bill. It is a bill that we should actually use to address some of these concerns. The concern obviously is that the government could then move money and unduly influence where the market goes in Canada. That simply is something we should not want and should seek to prevent.

The fact is that bigger is not always better. As an illiquid large investor, the CPP Investment Board will be unable to trade freely and smaller funds will delight in playing off the Canada Pension Plan Investment Board positions, which will only serve to the detriment of Canadians.

Ironically, the rise of the CPP Investment Board may entrench that 30% foreign property rule because when it is raised, Canadian markets could stumble badly if the Canada Pension Plan Investment Board tried to sell even a percentage of its immense holdings. The longer the government waits, the larger and more significant the fund will be to the Canadian investment climate.

I want to return to the issue of younger Canadians and the notion of intergenerational fairness. We in the Canadian Alliance feel that the Canada pension plan, as it is, is not fair to younger Canadians. We have a serious problem with the Liberal approach and its solution to the Canada pension plan and to its unfunded liability.

The chief actuary says that for every Canadian worker born after 1980 their CPP investment will offer them this 2% real return that I have been talking about. We have a situation where those Canadians born after 1980, and even before that, will be receiving a pathetic return on their investment. Even when they retire their maximum benefits are only $9,000. By the time Canadians who were born in 1980 reach retirement age, to be receiving $9,000, or even at that stage $12,000, is simply pathetic and will not enable them to secure a safe retirement.

According to the Canadian Taxpayers Federation, if young adults entering the workforce today invested their CPP contributions in a mandatory plan, they would have, at the very least, a $1 million nest egg by 2036. Does it not sound better to have a $1 million nest egg instead of the $9,000 or $12,000, whatever it will be, each year? The present value of the benefit package for the CPP will be worth about $570,000. Clearly there is a better solution available to younger people if we had a mandatory pension plan which was not a pay as you go plan.

The CPP basically is a transfer of resources from younger to older generations. As the population ages, the transfer will have to increase because there will be more older people in relation to younger working people. The problem is compounded because people are living longer. Today pension eligibility is age 65 and life expectancy is age 79, so the average Canadian can expect to collect CPP for 14 years. Life expectancy is likely to continue to rise due to medical advances, which is a good thing.

Many younger Canadians feel that they are paying into a system of pensions, health care and massive public debt, and they are not sure that they will get many benefits back. There is a possibility of a real ugly generational war within the next couple of decades. As Thomas Courchene at Queen's University has said, “We older Canadians, many of us tenured, are revealing ourselves to be a very selfish lot by turning the tables on generation X , a cohort with nowhere near the employment or income prospects that we enjoyed when we were young”.

However, Canadians are not doing this. Older Canadians themselves are extremely concerned about the futures of their children and grandchildren. It is the government that has done this. It is the government that has created a schism between generations.

Another issue with which the Canadian Alliance takes issue is the CPP Investment Board's vulnerability to political pressure and interference. It already has been suggested that CPP investments should be required to adhere to so-called Liberal societal values. There are calls that CPP should only be allowed to invest in certain companies that increase employment, that are environmentally friendly, that comply to employment equity and bilingual federal regulations, et cetera, the priorities determined of course by the board and by the government.

If the purpose of the board is to provide the best pensions we can manage for the price we are paying, these kinds of demands for social strings to be attached must be rejected outright.

It is not sensible to take a fund like the CPP and use it for industrial or social policies. That is because once the principle that other criteria will come into play has been established there is no obvious place to stop. The overall record of these types of public funds around the world is terrible.

The Canadian Alliance also takes issue at how individuals are appointed to the CPP Investment Board. I would like to stress of course that the people who are currently on the board seem quite up to the job in our perspective and we certainly have a high regard for them in a personal way.

Nevertheless, they are and will be in the future, and we always have to imagine what will happen in the future, appointed by governor in council on the recommendation of the Minister of Finance. The minister appoints them after receiving advice from provincial committees but he is under no obligation to follow this advice.

What protection does Bill C-3 offer members of the CPP to ensure that it does not go down the similar path of moving away from professional investors to those who are professional bureaucrats with a primary political focus? There is none.

In conclusion, we in the Canadian Alliance hope the government will come to its senses on this bill. We hope Parliament will reject the bill and send it back for much needed amendment and will look at some serious reform of the Canada pension plan so that younger Canadians will have a genuine opportunity to have their retirement secure and to have the good life that all Canadians enjoy.

I would like to propose an amendment, seconded by the member for Athabasca. I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:

Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be not now read a third time but be referred back to the Standing Committee on Finance for the purpose of reconsidering Clause 15 with the view to change section 15 of the act to remove the cap on the percentage of Canada pension plan money that might be invested outside of Canada.

[James Rajotte, Canadian Alliance, Edmonton Southwest, AB]

Mr. Speaker, I believe I have 40 minutes for my speech and I will not be splitting my time with anyone, so you will have the pleasure of listening to me for up to 40 minutes.

Later I will address some of the comments made by the parliamentary secretary, but first I want to detail what Bill C-3 is supposed to do. I want to talk about some of the history of the Canada pension plan just to give members some background and then I want to propose alternatives or state where the Canadian Alliance stands on the bill.

Bill C-3 is an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. It will transfer the management of the cash operating balance and the bond portfolio, which is about $40 billion, to the CPP investment board. Specifically this will permit all amounts held to the credit of the Canada pension plan account to be transferred to the Canada Pension Plan Investment Board by repealing the requirement to maintain in the account a three month operating balance.

Second, it will establish a means by which the investment board may be required to transfer funds to the government to the credit of the Canada pension plan account so that the immediate obligations of the account can be met.

Third, it will transfer to the investment board over a three year period, 1/36 per month, the right, title or interest in each security held by the Minister of Finance and establish the conditions on which the securities may be redeemed or replaced.

Fourth, it will provide a 30% foreign property limit. The Income Tax Act applies to the investment board and its subsidiaries on a consolidated basis, to provide that the investment board will be considered to hold the property of its subsidiaries for the purpose of applying the foreign property limit. Of course at second reading our party proposed an amendment to expand this to allow at least a small way for Canadians to access capital markets to further increase their retirement savings. They themselves then would be more independent at a stage in life when they want to enjoy the full benefits of life rather than being dependent on government assistance.

Fifth, the bill will make housekeeping amendments to the investment board's reporting requirements.

I have some observations and a little history. The CPP investment board was incorporated by an act of Parliament in 1997. It was set up as an arm's length crown corporation and was charged with ensuring the soundness and sustainability of the nation's pension plan.

The assets were planned to be transferred over this three year period to ensure a smooth transition for capital markets, provincial borrowing programs and the CPP investment board itself.

By investing CPP cash not needed to pay current pensions, the board's aim is to enable higher returns in the stock and bond markets over the long term. The CPP investment board currently manages about $14 billion, mostly in equities, for the pension plan. The assets to be transferred include the CPP bond portfolio, made up mostly of provincial government bonds, and a three month cash operating balance. The Department of Finance is currently managing this money.

The CPP investment board made $360 million in fiscal year 2001-02 but lost $845 million in the previous year. About two-thirds of the board's money is invested in indexed stocks tied to the S&P/TSX composite while some is allocated to U.S. and international stock indexes. Including returns from the CPP bond portion, the entire pension plan made $2.3 billion in fiscal year 2001-02.

The federal government's chief actuary estimated that the proposed changes would increase returns on CPP assets by about $75 billion over 50 years. Of course in that estimate we have to take into account the serious decline in the stock market over the last three years, which certainly affects the specific prediction that the chief actuary made.

At this point I want to basically give an overview of Bill C-3 and also speak about the Canadian Alliance position and what we in the official opposition would do if we were in government.

The main thrust of the bill is to transfer all the amounts held in the Department of Finance within the Canada pension plan account, including the bond portfolio which is worth about $40 billion to the CPP Investment Board over a three year period. It would establish a means for the transfer of assets between the Department of Finance and the CPP Investment Board so that immediate payout obligations of the plan could be met. The legislation also spells out how the provincial securities currently held on the account may be redeemed or replaced.

As I mentioned earlier, it applies the 30% foreign property limit. We were quite disappointed that the government did not consider increasing that limit so that it would allow Canadians to access more foreign content within the CPP investment as it should within RRSP accounts as well.

To give a brief history of the Canada pension plan, the government is representing this as a housekeeping bill, but it deals with one of the main pension programs which Canadians receive and it is incumbent upon us to give a history before we vote on this at third reading.

The Canada pension plan was devised over 36 years ago as a mandatory plan on a “pay-as-you-go” basis and would be transferred from generation to generation. There is no account in my name or someone else's name and it is not tied to a social insurance number that would then be invested as a nest egg for retirement. The people who are currently working are paying for those who have retired. When this was started, people who were retired at the time started receiving the benefits but they had not gone through the system in that way. That was one problem.

The actuary at the time advised the Liberal government that this would be problematic, particularly as a demographic shift would occur in which the population growth would not be as much as it was in the post-war period. The government was advised that it would encounter some real financial crunches. Unfortunately, the government at the time disregarded that advice. It shadowed the future in which later on the finance minister completely disregarded the advice of the chief actuary in the mid-1990s and fired the actuary when the person gave advice contrary to what the government wanted.

In 1966 Canadians were told that their payroll deductions required to fund the Canada pension plan would never go above 5.5%. This is important to note because the present government is guaranteeing it will not go above the 10% level. Obviously the 1966 guarantee was untrue. The actuary at the time warned that percentage would not be sustainable over the long term, particularly with the fact that the population was not growing at its previous level.

The government of the day has told Canadians that it will not increase it past a certain percentage, but how can Canadians be expected to believe the government will hold it at a certain percentage when it clearly has not done so in the past?

When it was designed by the government at the time, it was assumed that there would be six tax paying workers for every dependant retiree. That was true when it was set up, although even at the time the actuary pointed out that with the demographic shift this would not happen in perpetuity. The government unfortunately did not set up a system whereby it was invested in people's names in an account and set aside over a 20 or 30 year period so it would be there as a nest egg when they retired. Unfortunately it was a situation where the government counted on this in perpetuity growth in the population that would fund the Canada pension plan. This was unrealistic at the time and the government should have realized that.

By 1993 contributions and interest could not produce the revenue required to cover the benefits paid out. The crunch started by the early 1990s. In 1996 the Canada pension plan was in a great deal of trouble. Over 10 million Canadians were paying $11 billion into the plan but three million people were being paid about $17 billion in benefits. Even though we had a ratio where 10 million Canadians were working and paying into the plan and only 3 million were receiving benefits, we still had a fiscal situation where the amount being paid out in benefits was above the amount being paid in. As we go into the future imagine the stress and the pressures that will be put on the Canada pension plan when the population does not grow at the expected level and when more people retire, particularly the baby boomers.

At that time, the $6 billion difference had to be made up out of general tax revenue so clearly it was not sustainable. The Canada pension plan's chief actuary warned that without changes the plan would be in very deep trouble, particularly when the baby boomer generation began to reach the age of 65, about the year 2012 which is not that far off.

By 1977 the Canada pension plan's assets had fallen to $35.5 billion. During the fall of that year, the Liberal government introduced Bill C-2, which was designed to save the Canada pension plan by the only way it knew how. It increased the cost to taxpayers and took more money from Canadian taxpayers rather than introduce some real fundamental reform to change the system.

Starting in 1998, Canadians saw their take home pay shrink as contribution rates for both employees and employers were jacked up in a series of increases to Canada pension plan premiums. CPP premiums went from 5.6% of the average industrial wage to 9.9% in five years. This is a staggering 73% increase and the biggest tax grab in Canadian history.

The government and the Minister of Finance love standing and saying that they have introduced a $100 billion tax cut, which is completely untrue because they neglect to mention the Canada pension plan tax increase. They also neglect to mention the EI surplus which they have been hiding and using for general revenues. The fact that they stand and talk about this $100 billion tax decrease is just simply untrue.

In 1995 the chief actuary of Canada noted that contribution rates would have to nearly triple, from 5.6% to 14.2%, over the next 30 years simply to ensure benefits could be paid for the indefinite future.

This is an important point because the contribution rate is now up around 10%. The government says, as it said before with the 5.6% level, that it will never go above that. This is not what the chief actuary said in 1995. This person stated that it would need to go to 14.2% over the next 30 years to deal with the retirement of the baby boom generation. The result is that employers and the self-employed are feeling the brunt of this Liberal tax cut.

The Canadian Federation of Independent Business has been conducting letter writing campaigns, both on this and on the employment insurance account. What it is notes is that while employers have received a 7¢ reduction in their employment insurance premiums, the Canada pension plan premiums have gone up by 40¢, and they are said to increase another 25¢ in 2003.

That may not sound like a lot but for small businesses with very small margins, increases like this for each worker are very substantial and certainly cause a lot of businesses to really look for ways to cuts costs. The most obvious way they can cut costs, unfortunately, is through labour. If the costs of labour for small businesses, a coffee shop or whatever, increases, the only way they can really deal with that in the immediate term is to cut labour, which means laying people off. The CPP premium increase is not only a tax grab, it is a job killer as well. Everything the employers have gained back in their small employment increases has been eaten up and more by the Canada pension plan increases.

The worst injustice of the Canada pension plan in general, is the intergenerational unfairness. This is a point I want to return to a number of times in my speech.

Every Canadian worker born after 1980 will see their Canada pension plan investment offer them a 2% return on investment for their retirement. This is unbelievable and unacceptable. However for those who retired in 1995, a different generation, they will receive a 9% return on their investment which is a greater return. However, if one looks at the long term investments over a 20 or 30 year period, this is obviously unacceptable as well.

Economist David Foot has suggested that the federal government should raise the retirement age by two or three years so that boomers can contribute to the CPP longer, thereby creating a bigger pool to invest and from which to draw. It would not have to raise premiums or cut benefits. It is something the government obviously has considered but not acted upon.

Another consideration is that the government could bring in more flexible workplace policies to address some of the problems which I talked about earlier, where employers faced with increased CPP premiums unfortunately have to lay off workers.

A lot of Canadians who are approaching retirement or who have retired have said that if we bring in more flexible workplace policies, older workers nearing retirement could work part time and still make full pension contributions to maintain revenues in the pension fund while creating employment for younger workers. This would also mean that they would still contribute and would draw upon that for a longer period because it would be more sustainable.

Economist David Foot, in describing the 1997 reforms, said, “They do not recognize the profound demographic changes that have taken place since the program was launched”. That is indisputable. The fact is the government has not recognized this pay as we go plan setup where we had a huge population explosion after the second world war with a relative decline after that. It has not recognize that a demographic shift would cause some serious constraints on the Canada pension plan.

The Canada pension plan will take just under 10% of income to receive 25% after age 65. The average annual payout is $5,500 a year. That figure is something we should all consider, because the government loves to say that it is providing for Canadians in their retirement. The average annual payout is $5,500 a year. Obviously a Canadian cannot live on that so for the government to say that it is providing for Canadians in their retirement through this plan is simply farcical.

Another figure we should keep in mind is the number of seniors in Canada will double to 22% of the population by the year 2031. This will place a heavy burden on workers who have to support these pension and health programs. It is important to note that the demographic shift causes a lot of other pressures as well, particularly in health care. As we age we require more and more of the health care. That is just simply logical. Canadians are rightly concerned about where the tax revenues will come from to pay for our social services. Instead of dealing with these problems, unfortunately the government has pushed these off by introducing marginal changes, as it has done with this bill.

Members of the Canadian Alliance do not believe that our future security lies in the wages of a shrinking workforce. It lies in the vast productivity and production capacity of a full economy. We value retirement security as a vital element of independence. The government's goal should be to ensure that as many Canadians as possible are independent in their retirement years, that they can afford to have a good standard of living, that they can afford to take a relative amount of trips when they need to and that they have the quality of life they deserve.

Our policy platform states that we will honour obligations to retired Canadians and those close to retirement under the current state run programs. We will also maintain support for low income seniors.

We believe that future retirees deserve a greater choice. People in my generation who are extremely frustrated with the Canada pension plan deserve a greater choice and a greater opportunity to increase their retirement savings. We should have a choice between a government managed pension plan and a mandatory personal plan. Giving Canadians greater control of their own affairs and retirement plans would eliminate the foreign investment restriction for retirement investments, thereby allowing access to greater capital and investment opportunities. We would devise options allowing individuals greater opportunities to save for themselves as the current system failed its original objective from 1966.

This is an important point because friends my age in their early thirties see the RRSP contribution limit each year. A lot of people in the 55 to 65 age group do not have a lot of money put away. Let me use for an example dentists who own their own dentistry business. They have taken quite a while to pay off debts they incurred when they started out after graduating from dental school. By the time they reach 55 they do not have a lot of money put away because they spent the first 15 or 20 years in their business paying off their debts. At the age where they are making profits or their earlier investments have paid off, they would like the opportunity to put some money into their RRSP. With the present contribution limit it is simply impossible for them to put enough away so that they are fiscally secure when they retire in 5, 10 or 15 years. I hope the Minister of Finance will look at raising the contribution limit for RRSPs in the next budget.

I was talking to a friend recently who said the forms the government sends out indicating the amount an individual can put into an RRSP is a joke. She indicated that the government takes so much from her in taxes that she does not have anything left at the end of the year to invest in an RRSP. The contribution limit is a slap in the face because the government takes so much in taxes. Canadians are taxed at the highest marginal rate of $60,000 per year, and that is an absolute joke.

Canadians who get out of university usually have a high debt load. If they are lucky they may get a job making $30,000 or $35,000 a year. They have to pay down their loans and pay taxes while trying to establish themselves at the same time. Paying high taxes simply creates a crunch on them that is unfair. The government should create opportunities so that these people can pay down their student loans and pay less tax so they can start establishing themselves. For those individuals who are far-sighted they could then start putting away even at that age for their retirement.

Bill C-3 is a step in the government's planned development of the public pension plan in this country. It is managed at arm's-length by a crown corporation. As the Canadian Alliance noted at second reading, the bill is more than a housekeeping bill. The government says it has only presented some minor changes, but we regard them as much more.

We are opposed to the solution proposed by the government. Canadian workers and employers would be bilked out of billions of dollars to pay for a plan that is unquestionably unfair to Canadians of all generations, but particularly to the younger generations in our society.

The Canada pension plan began floundering in the 1990s. In 1996, 30 years after its inception, the plan was going bust. It was fulfilling the prediction of the original actuary who said that this pay as we go plan was unsustainable in the long term. This created a situation where the benefits exceeded the amount going in by about $6 billion. This had to be made up out of general tax revenues.

The Liberal solution was to take more money from the Canadian public. It was similar to health care. Instead of addressing some overall issues and proposing fundamental reforms, it resorted to taking money from the Canadian taxpayer. This is something the government is doing now with the new elections bill. Instead of addressing genuine concerns about the ties between businesses, unions and government, what does the government do? It asks the taxpayer to pay for everything. It wants taxpayers to pay for everything in the elections bill, despite the fact that they may or may not support a particular party. Taxpayers now would have to support every political party that attained a certain number of seats in the last election.

I will go back to the CPP premiums. Beginning in 1998 the CPP premiums were jacked up from 5.6% of the average industrial wage to 9.9%. As I mentioned earlier, the government promised it would never go past this 5%. The government said this promise could be carved in stone. It is now up to 9.9%. The chief actuary at the time said it would have to go to 14.2% over the next 30 years.

Now the promise was that the premiums would never go above 10%, yet the chief actuary said they would go over 14%. Unfortunately we do not receive his advice any more because he was summarily dismissed once the finance minister realized that he did not like his advice. This is a tradition that we see all too often with this Parliament.

It is interesting that people such as the Auditor General who have independence and are able to observe the government and how Parliament operates, are the ones who are bringing to light, as is the case with the firearms registry, the actual substance the opposition has been stating for years. We need objective and independent analysts such as the chief actuary to help us.

When the finance minister fired this person simply for giving advice that the finance minister did not want I think that was a serious breach of independence that Parliament should have addressed. Unfortunately, the government simply let it happen and did nothing.

The worst injustice by the government and its Canada pension plan hike of 73% is the intergenerational unfairness. The government simply has not addressed this and it does not want to address this. In the last election campaign the Liberals simply engaged in scare tactics about this, rather than address the actual problems with the Canada pension plan.

What is meant by intergenerational unfairness? Every Canadian worker born after 1980 would see his or her Canada pension plan investment offer a 2% return on investment for the retirement years. That amount might as well be stuck in a mattress. It is pathetic that we would allow younger Canadians, such as the pages here before me, to receive 2%. Imagine that over a 30 year period there would be a 2% return on the investment. That is completely unfair and it should be changed.

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

Mr. Speaker, I welcome the opportunity to speak today at third reading of Bill C-3, which amends the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

As hon. members are aware, this legislation completes the reforms to the Canada pension plan which the federal and provincial governments, as joint stewards of the plan, initiated back in 1997. Those changes were necessary because of the warnings in the early 1990s from the Chief Actuary of Canada that the sustainability of the Canada pension plan was at risk.

Governments heeded the warning and overhauled the system. Reforms included bringing forward scheduled increases in CPP contribution rates, building up a larger asset pool before baby boomers retire and investing it in the markets at arm's length from government for the best possible rates of return, and slowing the growing cost of benefits through administrative and expenditure measures.

By transferring all the CPP assets remaining with the federal government to the Canada Pension Plan Investment Board, Bill C-3 represents the final steps in CPP reform. Hon. members will recall that a key element of CPP reform was a new market investment policy for the plan, which the CPP Investment Board was established to implement. Clearly the need existed for this independent organization.

Prior to 1999 when the CPPIB began operation, the investment policy in place for the CPP required that funds not immediately needed to pay benefits be invested in provincial government bonds at the federal government's interest rate. That policy resulted in an undiversified portfolio of securities and an interest rate subsidy to the provinces.

As members know, the CPPIB is now responsible for the development of the CPP's market investment policy. Since 1999, funds not immediately required to pay benefits and expenses are transferred to the board and prudently invested in a diversified portfolio of market securities in the best interests of contributors and beneficiaries.

The CPPIB prudently manages billions of dollars of retirement funds belonging to Canadians to the highest professional standards and at arm's length from government, with highly qualified, professional managers making investment decisions. In addition, the board is fully accountable to CPP members and governments.

I also want to mention that the CPPIB functions under rules similar to those that govern other public sector pension plans in Canada. Its market investment policy is consistent with the investment policies of plans like the Ontario Teachers' Pension Plan and the Ontario Municipal Employees Retirement System, OMERS. The CPPIB is also subject to the foreign property rule.

Until now, not all CPP assets have been managed by the CPPIB. Certain assets have remained with the federal government. These assets include an operating reserve of about $6 billion and a large portfolio of mostly provincial government bonds valued at about $32 billion. Under Bill C-3 these remaining assets would be transferred to the CPPIB over a three year period.

This means that all CPP assets will be managed and invested in the market by one independent professional investment board, a move that essentially completes the process of reforming the CPP that was initiated in 1997 by the federal and provincial governments. Let me briefly review the benefits that will ensue with the passage of this legislation.

First, consolidating all assets under the management of one organization will allow the CPPIB to develop a more coherent investment policy for all CPP assets in order to enhance rates of return and better manage risks on the total portfolio, thereby helping to ensure the sustainability of the Canada pension plan. This will put the CPP on the same footing as other public sector pension plans, providing the CPPIB's investment managers with the flexibility to determine the best asset mix and investment strategies for the CPP.

Second, phasing in the transfer of the remaining assets over three years will help to ensure that the transfer is absorbed smoothly by capital markets, the CPPIB and provincial borrowing programs.

The CPPIB is responsible for establishing and fully disclosing its investment policies and for investing CPP assets while properly minimizing risk. With the transfer of the remaining assets to the CPPIB, Canadians can feel secure that prudent, sound investment diversification, as well as increased performance, will result for the entire CPP asset portfolio.

In considering this legislation, I encourage hon. members to keep in mind that the Chief Actuary of Canada has indicated that the CPP assets fully invested in the marketplace are expected to earn a greater return and thereby grow more rapidly. In his three actuarial reports since 1997, the Chief Actuary has confirmed the long term viability and financial sustainability of the CPP. According to the last actuarial report, investing the transferred CPP assets in the marketplace will produce a benefit of about $85 billion over the next 50 years for the Canada pension plan.

As I indicated earlier, it was the Chief Actuary who first brought to the government's attention in the early 1990s the fact that CPP assets, the equivalent of two years of benefits, would be depleted by 2015 and that the contribution rates would have to increase to more than 14% by 2030 if nothing was done. At that time the Canada pension plan had worked well for 30 years, but its sustainability was becoming a concern.

As a result, following coast to coast consultations with Canadians, the federal and provincial governments in 1997 adopted a balanced approach to CPP reform so that the plan could meet the demand of the coming years when the baby boomers would be retiring. As I mentioned, those reforms included an increase in CPP contribution rates, a buildup of a larger asset pool while baby boomers were still in the workplace, its investment in the markets at arm's length from government for the best possible rates of return, and administrative and expenditure measures to slow the growing costs of benefits.

All together, those measures ensured that a contribution rate of 9.9% could be expected to maintain the sustainability of the plan indefinitely, and now, through Bill C-3, with the transfer of the remaining assets to the independent professional CPP investment board, the 1997 reform of CPP investment policy will be completed.

I would like to remind the House that Canadians told their governments during the 1997 public consultations to fix the CPP and fix it right. Canadians also told their governments to preserve the CPP by strengthening the financing, improving the investment practices and moderating the growing costs of benefits. Governments met this challenge. Now, through the measures in Bill C-3, Canada's retirement income system will be even more secure for all Canadians.

Together with the 1997 CPP reforms, the measures in the bill will ensure that the Canada pension plan will remain on sound financial footing for generations to come. I urge all hon. members to give speedy passage to this legislation.

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

moved that Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be read the third time and passed.

Business of the House

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

Mr. Speaker, let me start with the parliamentary agenda.

We will continue this afternoon with Bill C-13, the reproductive technologies bill, followed by, if there is time, Bill C-20, the child protection bill, as well as Bill C-22, the family law bill.

Tomorrow, we will call third reading of Bill C-3 regarding the Canada pension plan. The next item will be Bill C-6, the bill regarding specific claims for aboriginal people.

On Monday, we would return, if necessary, to Bills C-6, C-20 and C-13. We will continue this business on Tuesday morning, but in any case at 3 p.m. on Tuesday, it is my intention to call Bill C-22, the family law bill.

I will be consulting with a view to returning at some point to debate on the Senate amendments to Bill C-10A, the Criminal Code amendments.

On Wednesday, we will continue the debate on Bills C-13 and C-19 if necessary, at whatever stages they are at then.

I wish to announce that Thursday shall be an allotted day.

Colleagues across the way particularly have asked about what they claim to be a principle that military intervention has a vote. I have a number of them here.

For Korea in 1950, there was no resolution in the House and no vote. For Sinai in 1956, there was no vote. For the Congo in 1960, a recorded vote was asked for but no division was held. For Cyprus in 1964, there was a debate before deployment, the motion was agreed to on division with no recorded vote. For the Middle East in 1973, the motion was agreed to with no division and no recorded vote. For the UNIFIL mission in 1978, there was no motion and no vote. For Iran-Iraq in 1988, the motion was agreed to with no division. For Namibia in 1989, there was no vote. For the Persian Gulf in 1990, it was debated after deployment, with a recorded vote and a division.

There were many cases where there were no votes, no debate, no uniformity.

We have established the coherent system which we enjoy today. We have utilized it as late as last night.

I am also prepared to offer to other parties, should they want it at some point, perhaps as early as next week, yet another evening to debate the situation in Iraq. I know many colleagues on my side of the House would like that. We are quite prepared to offer that.

Canada Pension Plan

[The Speaker]

It being 3.03 p.m. the House will now proceed to the taking of the deferred division on the report stage of Bill C-3.

Call in the members.

(The House divided on Motion No. 1, which was negatived on the following division:)

Points of Order

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

Mr. Speaker, while being totally happy about the continuing support we will be getting from the opposition for our legislation, let me indicate to the House the legislative program for the following days.

This afternoon we will continue the consideration of Bill C-20, the child protection legislation. If and when this is completed, we will then turn to Bill C-19, the first nations' fiscal bill in the name of the Minister of Indian Affairs and Northern Development.

Tomorrow we will commence report stage of Bill C-13, the reproductive technologies legislation. On Wednesday we will call report stage of Bill C-6, the specific claims bill. On Thursday we will resume consideration of legislation not completed and add to the agenda Bill C-22, the family law bill. On Friday, my present plans are to call Bill C-3 respecting the Canada pension plan.

Consultations have taken place between the parties. I believe that you will find unanimous consent for the following motion that I would now like to move for a take note debate.

I move:

That, Wednesday, January 29, 2003, a debate pursuant to Standing Order 53.1 shall take place concerning the situation in Iraq and, that after 9:00 p.m. on the said day, the Chair shall not receive any dilatory motions or quorum calls.

Canada Pension Plan

[Marlene Catterall, Liberal, Ottawa West—Nepean, ON]

Mr. Speaker, there have been discussions between all the parties and there is an agreement, pursuant to Standing Order 45(7), that the recorded division requested on report stage of Bill C-3 be redeferred until Tuesday, January 28, 2003, at 3 p.m.

[John Williams, Canadian Alliance, St. Albert, AB]

Mr. Speaker, I rise to speak on Bill C-3 and the amendment put forward by my colleague from Lanark—Carleton, who feels that the bill would be improved by the amendment.

I would like to talk about the Canada pension plan in general and the fact that this has been set up for many years to provide pensions to our citizens in the years that they want to call their golden years or sunset years when they can sit at home and enjoy the fruits of their labours.

We have had some considerable concern over the last number of years about the capacity of the plan to do exactly what it was intended to do. Members may recall that the Minister of Finance brought out some new premium structure that would see the Canada pension plan premium rate jump to 9.9% of earnings.

It seems rather strange that he would arrive at the figure of 9.9%. We in the Alliance felt that he was pulling the wool over our eyes, that it would require a substantially higher amount of contributions to sustain the fund as we get into the baby boomer years. He has maintained that 9.9% was that maximum, just a hint and a fraction short of the double digits. I was surprised that he did not go to 9.99%.

I think that the Liberals are pulling the wool over our eyes because we are getting into the baby boomers. We only have to look around this see place and see the amount of grey hair. We are supposed to be representative of--

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

Mr. Speaker, shortly I will address the amendment before the House, but I first want address the Canada pension plan. We and the provinces have been joint stewards of this plan initiated back in 1997 in terms of the reforms. In the early 1990s, the Chief Actuary of Canada questioned the sustainability of the Canada pension plan. This government, along with its provincial partners, heeded that warning and we now have reforms that of course bring forward a schedule of increases in CPP contribution rates. We are building up a larger asset pool before baby boomers retire. As we know, the fact was that the moneys were not keeping up and the pool would have dried up. Therefore, investing in the markets at arm's length is another important requirement, which we have in this legislation. As well, slowing the growth costs of benefits through administrative and expenditure measures is very important.

Hon. members will recall that a key element of the reform was a new market investment policy for the plan, and the CPP Investment Board was established. Clearly the need existed for an independent organization, and I stress that because it is very important to note the independence of the board.

Prior to 1999 when the Canada Pension Plan Investment Board began operations, the investment policy in place for CPP required that the funds not immediately needed to pay the benefits be invested in provincial government bonds at a federal government interest rate. That policy of course resulted in an undiversified portfolio of securities and an interest rate subsidy to the provinces.

Fortunately, now that we have the CPPIB, we have an investment market policy. Since 1999, the funds that are not immediately required to pay benefits and expenses are transferred to the board and are prudently invested in a diversified portfolio of market securities in the best interests of the contributors and the beneficiaries.

I would point out that we have an all star board of directors, with its members recommended by provincial finance ministers in conjunction with the federal Minister of Finance. They manage prudently, as I have said, billions of dollars on behalf of Canadians. The board is fully accountable to CPP members and to governments through annual reports and material on the website, again making sure that although it is at arm's length from government it is accountable to Parliament and to the very people who benefit from the plan.

It is a market investment policy that is of course consistent with other pension plans. One might think of OMERS, the municipal employees retirement system, or the Ontario teachers' pension plan, which some members are familiar with.

It is important that certain assets have remained with the federal government. These assets included an operating reserve of about $6 billion and a large portfolio mostly made up of provincial government bonds valued around $32 billion. Under Bill C-3 these remaining assets will be transferred over a three year period to the CPPIB. That of course is very important. As I have said, we have an outstanding board made up of investment professionals, people who know how to invest money, and they are doing it in a prudent fashion. That again is important for all members to note.

Here we are developing a more coherent policy in terms of investment, which I think is important for those who will benefit from this plan. A point that must be stressed is that it puts it on the same footing as other public pension plans, providing CPPIB investment managers with the flexibility to determine the appropriate mix of investment strategies for the Canada pension plan, which again I think is important. It is also important to remember that the transfer of the remaining assets over the three year period will help to ensure that the transfer is absorbed smoothly by the capital markets and the CPPIB in terms of the provincial borrowing programs as well.Again, this is extremely important.

The amendment being proposed here has to do with section 37 of the Canada Pension Plan Investment Board Act. The issue is one of the foreign property rule. I will not support the amendment, because in terms of government policy the 30% limit strikes a balance between two important objectives that I think the House should be aware of: ensuring that there is a significant portion of tax assisted retirement savings invested in Canada and providing diversification opportunities for pension plans and RRSP owners. The government is conscious of the need to maintain an appropriate balance. The minister certainly is aware of achieving those objectives and making sure that the impact is appropriate. The foreign property limit was increased from 20% in 1999 to its current 30%.

In fact, I will provide some background history for those members who may not be aware of this. During the initial period of the reforms in 1997, as I have said, expanding the foreign property rule was in fact part of those very discussions. It was a key recommendation from the Senate banking committee from its review of the legislation.

We know that initially in the 1971 budget it was at 10%. Of course what has happened over the years is that we have increased it to 20% and now to 30%. I think that is prudent. I think that makes a lot of sense. Again this is in keeping with government policy. I think it provides the objectives we need in terms of the plan.

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

moved

That Bill C-3, in Clause 15, be amended by replacing lines 41 to 46 on page 9 and lines 1 to 5 on page 10 with the following:

“15. Section 37 of the Act is repealed.”

Mr. Speaker, I am here to discuss a very important amendment to Bill C-3, which is an act to amend the Canada pension plan and the Canada Pension Plan Investment Board Act.

In general terms the bill is a disappointment, not so much for what it includes, which is on the whole unobjectionable, but for what it fails to include. It fails to include measures that would make the management board politician proof, that is completely secure from political interference, and it also fails to ensure that the Canada pension plan money that is invested through the investment board--and we are talking about an amount that will eventually total something in the nature of $100 billion--cannot be used for any purpose other than maximizing the rate of return for the beneficiaries of the Canada pension plan, which is the only purpose for which pension moneys should ever be invested and not, for example, some of the proposals that have been made in the course of the discussion of this bill.

Pension moneys should never be invested for the purpose of industrial or regional development, or for the furthering of ethical as opposed to other types of investments. If we choose to make the decision, for example, that we want to forbid the investment in certain areas, we ought to make it illegal to invest in certain areas. We ought not to lower the rate of return that the Canada pension plan earns by restricting it from investing in these areas.

These were all proposals that had been made, some of them by the former minister of finance, the member for LaSalle--Émard, who was the author of the bill.

The amendment I am proposing today is designed to eliminate one of these limitations, the most important of the limitations, upon the invested returns that the Canada pension plan can expect to earn through its investment board. This is the provision that forbids more than 30% of the moneys invested through the Canada Pension Plan Investment Board from being invested outside Canada.

Let me explain the technical aspects of the amendment I am proposing. I have referred in the amendment, in section 15 of the bill, to another section of another bill. The way section 15 currently is worded, it makes a series of changes to section 37 of the Canada Pension Plan Investment Board Act, a prior act that was passed several years ago. Section 37 of the Canada Pension Plan Investment Board Act refers in turn to a section of the Income Tax Act which states that pension plans, whether they be corporate, union or registered retirement savings plans, are not permitted to invest more than 30% of their assets outside of Canada.

What I am proposing is to change section 15 of the act currently under consideration to now read, “Section 37 of the Act...”, that is of the Canada Pension Plan Investment Board Act, “...is repealed”, thereby removing the cap on the percentage that might be invested outside of Canada.

The reason for this is straightforward. The Canadian economy represents something between 2% and 3% of the total world economy. When a decision is made to restrict the percentage of the Canada pension plan moneys that can be invested outside of Canada, we make the decision to take that 70% of Canada pension plan money and require it to be invested in less than 3% of the world economy, and not, I might add, the fastest growing 2% to 3% of the world economy.

We make a decision therefore to reduce the rate of return that will be earned by that 70% of the Canada Pension Plan Investment Board money. To give a sense of just how significant this is, in committee I asked the chief actuary of Canada, who was appearing as a witness, what the rate of return would be on the three main components of the Investment Board moneys.

The three components are a series of provincial government bonds which earn, quite frankly, a very unsatisfactory rate of return, largely because of a sweetheart deal that was cut with the provinces by the government and the former finance minister in order to secure the support of the provincial governments. This ensures that they will get a preferential, extra low rate of interest on the bonds that they sell to the Canada pension plan. This will result in billions of dollars, which should go into the pension plan and eventually be paid out to Canadian pensioners, being taken out instead and given to the provinces to be used on whatever projects they see fit.

The second component is the money that will be invested internationally. The expectation is that we will get a reasonably good rate of return; about 5.5%. The moneys that are invested in the Canadian equities market are anticipated to get about a 4.5% return. On that component, which is something in the neighbourhood of $25 billion to $30 billion, we should get a 1% lower rate of return out of the total capital per year. In fact, measured by comparison to the 5.5% rate of return, we can see it is substantially lower. It is about a 20% lower rate of return every year, year after year compounding, and therefore this will result in literally billions of dollars lost permanently to Canadian pensioners.

In the end, this will result in either the Canada pension plan having to hike its premiums yet further to well over 10% in order to pay for these benefits; or it will result in Canada pension plan benefits being cut so that pensioners will not get the moneys that they were promised. It may not happen to the current generation of pensioners, or at least those who are fairly well on in their senior years, but it will happen to those who are expecting to retire, as I am, some 30 years from now. They will almost certainly find themselves with a reduced--

[The Speaker]

There is one motion in amendment standing on the Notice Paper for the report stage of Bill C-3. Motion No. 1 will be debated and voted upon.

Business of the House

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

Mr. Speaker, my response will not be in prose and verse. I just have not been hit yet with the attack of Jingle Bells , which undoubtedly seems to be striking here and there in the House.

We will continue this afternoon with the prebudget debate.

Tomorrow we shall consider report stage of Bill C-3, the Canada pension plan amendments. If there is any time left, we would then proceed with Bill C-15 respecting lobbyists. I intend to speak to other House leaders about that.

I shall communicate directly with members concerning the order of business, when we return from the adjournment on January 27. This will include any of the aforementioned business not completed, which includes: Bill C-3 and Bill C-15, obviously; Bill C-2, the Yukon bill; Bill C-6, specific claims; Bill C-10, the Criminal Code amendment; Bill C-19, the first nations bill; Bill C-20, protection of children; Bill C-22, the divorce legislation; and Bill C-23 respecting certain offenders.

As members can see, there are lots of items on the legislative agenda.

I would like to take this opportunity to express my best wishes for the holiday season and, of course, a happy new year 2003 to all hon. members, our staff and pages, not to mention the busboys.

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

Mr. Speaker, today we will continue with the business of supply. I understand that the votes are scheduled for a 5:15 p.m. bell, followed by the votes of course.

Tomorrow the House will consider the message from the Senate with regard to Bill C-10, the Criminal Code amendment.

In spite of the fact that we have debated it extensively, the government is prepared to offer yet another day, next Monday, with regard to debating the Kyoto protocol.

On Tuesday and Wednesday we will return if necessary to Bill C-10, and if and when completed, followed by Bill C-4, the nuclear safety bill with the possibility of also doing Bill C-3, Canada pension plan amendments, and Bill C-15, the lobbyists registration bill.

While I am on my feet I might as well give the plan for the rest of next week. Next Thursday and Friday, I will be calling the annual prebudget consultation debate.

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

Even I have to admit that is a good comeback.

This afternoon we will debate the third reading of Bill S-2 respecting a number of tax treaties. Tomorrow we shall consider report stage and if possible third reading of Bill C-4 respecting nuclear safety. If necessary we will continue with this bill on Monday. We will then return to the debate on the Kyoto protocol.

A little later next week we will deal with Bill C-3, the Canada pension plan amendments. Thursday, December 5 shall be an allotted day.

I am in the process of consulting with colleagues and other parties with a view to having one or more take note debates starting early next week.

Committees of the House

[Sue Barnes, Liberal, London West, ON]

Mr. Speaker, I have the honour to present the first report of the Standing Committee on Finance regarding its order of reference of Tuesday, October 29, in relation to Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

The committee has considered Bill C-3 and reports the bill without amendment.

Business of the House

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

Mr. Speaker, we will continue this afternoon with the discussion of parliamentary modernization. As a result of the great interest by members on all sides of the House and the level of participation in this debate, I will be consulting with colleagues to see if it is possible, notwithstanding the scarcity of time around here, to find more time to debate this motion.

Tomorrow we will consider Bill S-2 respecting a number of tax conventions.

Pursuant to the request of the Leader of the Opposition in the House of Commons, I am pleased to announce that on Monday we will commence debate on the long-expected motion with respect to the Kyoto agreement. I thank the member for his interest. This motion will be put on notice later this day. Given the considerable interest in this matter, I expect it is not impossible that the debate might take longer than one day. Therefore I will also announce to the House that on Tuesday and perhaps other days we will debate the Kyoto motion.

In terms of legislation, I would like to do report stage and third reading of Bill C-4 when it is reported from committee. It is my intention then to call Bill C-3, the Canada pension plan amendments, as legislation following that. Because of the very large number of bills presently before committee, as they are reported to the House of Commons we will bring those forward for debate at report stage and third reading.

Pension Benefits Standards Act, 1985

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, it is my pleasure to rise today to speak to Bill C-226, an act to amend the Pension Benefits Standards Act, 1985. The intent of the bill is to have an administrator prepare a report each year setting out the social, ethical and environmental factors that were considered in the investment of the money in the fund each year.

I am in total support of this private member's bill and I believe the NDP is as well. The NDP is in solid support of any measures which would strengthen and deepen the transparency and accountability of public pension funds.

Canadians depend on the viability of their pension funds. It is clear and simple. We need them for our old age and for times of vulnerability. Whether it is QPP or CPP Canadians with disabilities depend on these funds to provide them with income support when they are no longer able to work. We must have confidence that the investments which our pension managers are making are effective and we must ensure that they are ethical.

I agree with the member for Drummond that we must have a rigorous and regular reporting on how our funds are being invested because our future depends on it. This is in fact our future nest egg as a nation and as a people.

Recently my colleague from Winnipeg Centre spoke about Bill C-3, the act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. He spoke about the alarming state of the Canada Pension Plan Investment Board. He asked the question which needs to be addressed by all parliamentarians: Is it a good idea for us to be investing on the open market with Canadian pension plan savings?

If we look at the actual experience in the last period of time since the Canada pension plan board was struck and put in charge of investing our hard earned pension contributions, the experience has in a word been terrible. One could have done better by playing pin the tail on the donkey when it comes to the stock market investments it made.

Unfortunately, the investment board chose to enter the stock market at exactly the wrong time. 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 part in that but in fact entered at the wrong time and lost a fortune. It was our 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. Not only did this management board manage our funds badly but it then proceeded to reward the chief administrator of the fund. In the first quarter financial statement the board doubled the CEO's salary even though he lost $1.5 billion in the first venture in the stock market. It also doubled his performance bonus. His performance bonus went from $140,000 a year to over $200,000 a year. If the board rewarded bad behaviour so generously I wonder what it would do if it showed a profit?

We seem to have adopted the worst corporate models in the structure of this board but not the best practices or some of the unique structures that we must have in place now to manage the money of Canadians. This is taxpayers' money being invested on the private market.

The fund has grown not because we have made smart investments but because the rate of contributions has been massively increased. It is now at $53 billion in spite of the fact that at the next quarterly report the board reported a loss of $800 million. In the quarter after that it lost $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 savings are investing badly on our behalf.

Whether it is a good idea or not to be involved in the stock market, we cannot argue with the fact that if we had not gone down that road there would be billions of dollars which would not be lost and would at least be sitting there and could in fact be invested in other ways. It could be invested in municipalities, in provinces, or in low interest infrastructure loans that would benefit Canadians. It would not have been invested offshore, which is the experience we have now.

The NDP promotes socially responsible investment of workers' benefit funds, such as the Crocus Fund in Manitoba. We support this bill. We support the call for any regular critique of the social, ethical and environmental considerations involved in the investment of our public funds. We support the idea of an ethical screen for the CPP investment fund through public hearings and consultations with those who have developed ethical screens in the private and cooperative sector. We support the ban of CPP investment in industries that harm people, such as big tobacco industries.

The considerable experience with ethical screening has shown that introducing an ethical screen when making investment decisions does not mean earning a lower rate of return on investment. Experience has shown that ethical investments not only enhance social capital but are financially wise investments as well.

The NDP is committed to continuing a publicly funded pension plan because it works. Our public pension system is the cornerstone of Canada's retirement system. The CPP has brought most Canadians seniors out of poverty and allowed them to retire in dignity.

We support Bill C-226 and the safeguards it would put in place to protect the ethical, environmental and social standards. I regret that so far the bill has not been made votable because it would have a considerable impact on strengthening the public pension plan structure.

Canada Pension Plan

[The Acting Speaker (Ms. Bakopanos)]

The House will now proceed to the recorded division on the motion for second reading of Bill C-3. The question is on the motion.

[Paul Szabo, Liberal, Mississauga South, ON]

Madam Speaker, I rise on a point of order. Discussions have taken place between all parties and there is agreement, pursuant to Standing Order 45(7), to further defer the recorded division requested on second reading of Bill C-3 until 3 p.m. on Tuesday, October 29.

[Brian Masse, NDP, Windsor West, ON]

Madam Speaker, sitting in between the two hon. members, it was much like watching a tennis match left and right. My neck is sore from the last five to ten minutes of debate, but at least it was lively.

I am thankful for the opportunity to talk about Bill C-3. I have some concerns with regard to the bill, as do my New Democratic colleagues. There are three main points I would like to talk about.

The first is the lack of rules with regard to pension funds and how they would be administered, monitored and where they would go. The second is that there does not seem to be a comprehensive business plan for such a large investment that is really in a public trust through the Canada pension plan and the historic relevance to Canadians. The third is just outright bad timing, looking at the market right now. If a person's house were on fire, the person would not rush the furniture back inside the house.

This is very bad timing. We have seen tremendous upheaval and losses in markets. They will be rushing public funds, suitcases full of Canadian taxpayers' money, into the fire and making them very vulnerable at a time when the market needs to straighten itself out.

The Canada pension plan is one of those pillars in Canada and in the free world with regard to securing some type of relevance and more important, some type of stability for one's working commitment and then having the ability to retire with security. It is about the ability for a person to pay for his or her housing, food and clothing and to participate in a meaningful social life once the person has completed his or her term of service in the workplace. That is something that is being put at risk with regard to this particular amendment.

That is one of the reasons the timing element is so critical. By 2012 there will be $120 billion to $150 billion that will be put into the basic domain and at risk. That is a concern because that growth is something that should be secured as opposed to potentially put at risk at this particular time.

Today we saw the release of an ethics package by the Deputy Prime Minister. Canadians are yearning for more ethical conduct in Parliament. As well they are looking for more ethical conduct in the business community. We have seen the recent scandals. A few examples are Enron, WorldCom and Arthur Andersen, where there has been clear void of ethics in terms of reporting their financial earnings, what their business plans have been and what their actual profits were. That is a real concern. That is no different from the ethics issue in Parliament.

Canadians feel really uncomfortable with the current conditions and the treatment by the business community in business practices that have cost them earnings that they and their families have worked for. They have put that in the trust of investment and they have not had returns but have had significant losses. I do not think there have been many people who invest in the market who have not been affected by some of these things. Some of it is poor ethical behaviour on behalf of corporations. They have boards of directors too and some of them may not have been aware of all the things that were happening with their prospective businesses.

That brings me to the appointment of the 12 member board. There does not seem to be a clear process with regard to the appointment being independent. It is going to be a patronage system. It is not going to be representative of the public trust, being the actual pensioners and their earnings, citizens or different types of representative organizations. They are going to be appointments. That is not very fair and that is not proper. More important, it is going to lead to some very questionable practices.

Even if the 12 members are selected in earnest, their decisions in terms of the financial investments could have ties with regard to patronage or government contracts, all of those things. Whether it is intentional or unintentional, it casts a cloud of concern or at least ill repute over the whole process. We need to make sure that the Canada pension plan is one that is above reproach.

Canadians want to feel comfortable that their pension and future are tied significantly to a process that is pure, pristine and proper and not one that can be evolved through patronage appointments and basically who the appointees supported and how they contributed. That is the potential element with regard to the process that is underway.

We have had in this last stock market year 14% to 33% losses where normally we would have had 8%. Once again the timing is bad. We know that there is volatility. We know it is not resolved.

We know that the United States is having a difficult time with its economy. The latest projections are that it will actually have to borrow money. It will be in a deficit and it will have to borrow money to give tax incentives back to its citizens. We know that the market might be connected toward its productivity in terms of Canada and that makes us more vulnerable.

One of the concerns we have is the 30% in foreign ownership and once again the lack of rules with regard to the process. I quote from the actual document:

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

That is very disconcerting because we could have the potential of no screening of where the money in the funds goes. We could actually prop up businesses as well as products that are harmful to the objectives of the Canadian government and Canadian people, whether it be sweatshops, arms production or any of the child labour situations that we have seen evolve. There will not be that due process and the board will not focus on that either. That will not be a criteria.

If Canadians had the reverse happening to them, where we had other investors propping up investment opportunities in Canada that had significant economic and social impacts on our communities, we would not feel very comfortable about it. I think that role by Canada would be very shameful if we had situations evolve where we had business investments made on the backs of immoral or questionable practices just so that we could extract a couple of percentage points more out of the system.

With regard to the opportunities that are facing the country, the challenges also lead to opportunities. With some of the funds there could be more of a focus on the municipal bonds programs or the Ontario bonds program. I note they do not pay the same rates of return as other opportunities but there is one taxpayer and the fact is that if we do not achieve the full result from the actual investment in terms of maximizing profit with maximized return, we will have stability. There are plenty of infrastructure opportunities to build our economy and to build our business community through the bond system.

I know municipally we have always sold bonds and they have been sold out within a day or two. They present anything from 6% to 7% at times for the actual return which is solid in terms of the inflation rate. It also provides an opportunity for the municipality to retrieve long term vision and goals so that we are able to build society, a community and advance our future business plans as a people.

We have to keep that in mind because there is only one taxpayer. Perhaps in getting a sense of security we would lose a couple of points. We could save because we know that even in the last results the Canada Pension Plan Investment Board lost $1.5 billion on stocks, just from April to June. We know that the money could have been paid off through lending to municipal projects or provincial projects that were actually offering successful rates of return. It is actually a win-win.

There is a real problem with regard to the bill and the lack of public participation. We have a problem with regard to the actual reporting of the board. It has 12 members. We know that they will be selected by the minister and they are going to be above reproach.

We have a situation where the fund will be up to $150 billion by 2012 and there will have been only four board meetings accountable to the public by then, one every two years. We will have $150 billion potentially and the board will only have to report to Parliament and to the citizens of Canada four times. That is incredible. It is an incredible public trust on people who are appointed through a patronage system and I do not think it is proper. It is shameful because it puts this situation at risk.

Canadians are looking for more stability now. We have our situation with our health care, our pensions and with regard to deciding upon where we want to move forward with social planning. We do not want to put things further at risk. For that reason, I cannot support this bill. I believe it should be turned down by the government, especially in the time frame we have right now.

[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.

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

Madam Speaker, my remarks will not be lengthy. The House will know why they are not going to be lengthy after I begin my preamble. Listening to the debate today made me think about the issue of relevance. It is definitely a fact that most of what is being discussed today is in some way relevant to the Canada pension plan, most of it.

I have noticed that members on both sides of the House have taken advantage of the debate on Bill C-3 to raise issues relevant to the Canada pension plan. That is all well and good, except that the bill in question is relatively a housekeeping bill with five or six types of changes to the existing Canada pension plan.

Maybe those elements in the bill are just too darn boring for everybody. Maybe they are not that important. It makes me wonder why we just would not adopt the provisions and move on to debate something else. It is not that the Canada pension plan is not a worthy subject of debate. It is just that the debate today is supposed to be on the contents of the bill, yet the debate seems to be on more general issues involving the Canada pension plan.

We have heard about the process of appointments to the pension plan investment board. We have heard about how the pension plan should be investing its capital, the level of benefits to those who receive the pension, the survivor pension or the disability pension, and the health of the plan itself. All of these are important public issues but none of them deal with the contents of the bill.

I will try to focus my remarks on the bill itself. I know that earlier speakers will have done that. I know it may be boring, but such is the nature of these types of legislative amendments. Let me address the five or six changes just so the record can show it and so we can all be bored as we get ready for members' statements and question period.

As everyone knows, the 1998 legislation created a Canada Pension Plan Investment Board which would take all of the money contributed into the plan, or most of it, and invest it to obtain a return to the plan higher than that which was originally being obtained by the silly practice of lending the pension plan moneys to the provinces. That practice was based on a political deal struck two or three decades ago here in Ottawa. The money was lent out from the pension plan pool to the provinces, I suppose at appropriate rates of interest but using investment methods that did not allow for any appreciation or accumulation of capital. Most of that money is still outstanding I guess. The money was lent. The provinces owe it. They pay interest and they repay it over time.

That provided very little in the way of growth to the pension plan pool. That became painfully obvious in the 1980s and 1990s as we saw other public pension plans grow, public pension plans where the funds were invested in the capital markets in a prudent fashion. There are several pension funds in Canada and the United States which have grown hugely with prudent investments, even grown beyond expectations. There are private pension plans that have so much money they have to take some of it back. There are fights by labour unions and corporations about how much money should be taken back because the pension plan has been invested so wisely.

Here we have our own public Canada pension plan and to some degree the Quebec pension plan, which does not run exactly the same way but in a sense runs in tandem for the same objectives. We have now allowed the definite investment of these moneys which proves beneficial for our whole country over the long term and medium term.

The first tinkering amendment to that existing legislation is one which seems to be pretty trite stuff. It would allow some or all of the money which, by law, has to be held not in the investment account but in the plan account, which was three months worth of capital sitting there just in case it was needed, to be turned over to the investment account so it can be invested as well. At the same time as we do that, the pension plan itself needs a legal mechanism to draw back from the investment account the money it needs monthly, daily or whatever to run the pension plan. It pulls it back from the capital markets.

Those two amendments run in tandem. They make sense. We could ask why those provisions were not there before. They were not there when the amendments were made in 1998. Some elements of the original pension plan legislation were kept in place and better foresight on the part of the managers and the government now allows us to see that we should make these changes.

There is also the matter of long term investments held not by the investment fund but by the Minister of Finance. Over all of the years, the Minister of Finance, on behalf of the Government of Canada and on behalf of Canadians, was the named owner of many investments that the fund had. Those investments are principally loans to provinces.

Just to pick an example, the province of British Columbia or Ontario owes the Canada pension fund $20 billion. The debt instrument reflecting that account is in the name of the Minister of Finance for Canada. This amendment will allow the Minister of Finance, who is statutorily obliged to be the named owner as trustee, to turn those long term investments over a three year period over to the investment fund.

It is possible in theory that the investment fund in prudence and with good investment intent may decide to actually sell some of that debt. It may decide to cash it in now depending on the interest rates, sell the money that is owed by Ontario on the open market, take the cash and reinvest it elsewhere.

I hope I am not making it sound like the investment board is into funny money investments and playing Monopoly with our pension funds. These are financing and investment techniques that are in use now and if used properly and prudently will serve the beneficiaries, the annuitants of our national pension plan, the Canada pension plan.

At some point in time over the last few years it has been questioned whether or not our Canada pension plan should have to live by the same foreign investment rules that our personal pension plans, statutory pension plans, RRSPs, have to live with. There is a limit on how much Canadian law will allow a statute based pension plan to invest in foreign funds. Forgive me for not knowing precisely what it is, but I think it is 20% now. That is a cap on how much can be invested in foreign funds.

Should our pension plan be able to be invested in no foreign funds or some and how much? This statutory amendment makes it clear that our Canada pension plan will follow the same rules as all of our other pension plans. If I am correct that the limit is 20%, that is the limit of investment of our Canada pension plan funds.

[Antoine Dubé, Bloc, Lévis-Et-Chutes-De-La-Chaudière, QC]

Madam Speaker, although I do not share some of the member's views, I must admit that I agree with what he had to say about the debate we are having on Bill C-3, namely that because the House was prorogued we have been forced, as it were, to do again what we had already started, a waste of time that could have been avoided if the House had not been prorogued.

One wonders why we had to have a throne speech when several bills still remained to be considered. And last, these bills are being brought back to the House and committee work will have to be done all over again. On this point I agree with the previous speaker.

However, he also mentioned the Caisse de dépôt et placement du Québec and the fact that the caisse had problems one year with some of its investments. It is true that there was a drop once, but to my knowledge it has happened only once in over 30 years since the caisse was created; and during all that time it has been making investments and profits. It is extremely profitable.

I would like the member to give us the opportunity to somewhat change his opinion of the Caisse de dépôt et placement du Québec. In keeping with his party's ideology, he favours both private and public investments. Is he criticizing the current pension plan? He is critical of the government's position, which we support since, for all intents and purposes, it is the same as what we have in Quebec with the Caisse de dépôt et placement.

I would like the member to tell us what solution his party is advocating to make sure that, at the end of the day, taking into account demography, the demographic deficit and so on, our young people too will able to enjoy a pension. I would like to hear what he has to say about that.

Moreover, as I sit on the Standing Committee on Human Rights, I know that the member is concerned about how little money is being invested abroad. I would like him to reassure me as to what his party's position is regarding ethical investment, that is refraining from investing in businesses around the world when it goes against human rights.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, there was quite a bit there. The member talked about the Canada Pension Plan Investment Board. The board is appointed by the cabinet of the Liberal government. He talks about its record. My point in talking about Canadian investment is that it cannot exceed the 30% foreign investment limits that we are all governed by.

If the hon. member was listening, my point was that the Canadian market for such a big investment fund is rather a small market. Countries, such as Chile, after about 15 years of having investment by people in their individual RRSPs or in retirement funds, decided that it was too small a country in terms of overall investment and it needed to spread it across investments outside of Chile. That way the risk was not quite so high. If it suffered a major downturn in its economy it was spreading the risk.

It seems to me that when there is $48 billion, and it will rise rapidly, dumped into the Canadian market in terms of where it will be invested, it does limit the ability to spread that risk. That is the point I was making.

In terms of the provinces buying into this, the provinces have benefited quite a bit in the past. There have been low interest loans from the Canada Pension Plan Investment Board that the provinces can still maintain. In fact, the provinces get to roll this whole thing over one more time if they wish in order to buy. That is the rule of the Bill C-3 legislation. Some of the interest rates the provinces are paying, unlike what the member talked about of a 6% return, is more in the range of 1.5% to 2%. The provinces have had a pretty good deal out of the Canada pension plan in the past. Maybe it is not in their interest to change that with these low interest rates.

I would think that the member would want to look at the dynamics of what is happening to our aging population and how we will address the issue of how we will have retirement income for young people in the future. This is the major concern I have and it should also be the concern of the members.

The former chief actuary of the Canada pension plan recognized the problem of having retirement income for our young people in the future. He recognized that the 6% or the 5.8% that was going into the Canada pension plan fund in terms of deductions was not enough and that it had to be raised. In fact, it was raised to 9.9%. The former chief actuary suggested that it still would not be enough and most people agree that it will fall short.

I know the Liberal government is pinning its hopes on the Canada Pension Plan Investment Board to make good investment decisions to make up some of that shortfall.

The member says that the board is at an arm's length from government. Crown corporations are at an arm's length from government and the Export Development Corporation is one of those. In fact, members cannot get information from the EDC because we are told we must go through the minister. Some of their investments are falling pretty flat these days. They are subject to too much political interference or the possibility of political interference on who to invest in.

We all know that the Liberals have some favoured corporations in Canada that have funded some of the campaigns of the major politicians in the House today. The Liberals continue to fund those corporations.

Our concern is that these investments will not necessarily be made with the best interests of Canadians in mind. It might be in the interests of those corporations and the Liberal government. That is our concern.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, it seems we have hit a nerve on the other side. I guess I know why. These are the architects of a failed plan. Not only do they not recognize it is a failed plan, they continue to make the same mistakes over and over again. This is really not anything new.

It does not just deal with the Canada pension plan and Bill C-3. It applies to a whole bunch of sectors. The government is more concerned about looking good with window dressing legislation than it is about addressing serious problems of Canadian society. I would put this in the same class as a number of those other problems that it is not really serious about. It wants to look good but it is not concerned about the young people of the country having a retirement income. Otherwise it would do something about changing this plan to respect young people when they are coming up and ensuring they have the same kind of retirement income that the rest of us have.

It does us all a big disservice not to recognize the changing demographics of the country, the aging population as it is coming forward, and to understand how we will deal with a shrinking workforce paying for the retirement incomes of a lot more people. We must address this issue. It must be taken seriously. We all want to have retirement income when it is our turn, but this current plan will not help in that regard.

My prediction is that in the next few years under this scenario we will have to increase Canada pension plan deductions again, probably up to 15%. That is what the last chief actuary said before he was fired. It may be even more than that. If we are not going to have replacement people coming into our country to replace our population, where will the money come from to provide for this plan?

Other countries are looking at this. It is not just Canada. The United States is looking at the issue. Great Britain has the same problem, maybe even worse in terms of birth rate than we do. Chile has undertaken a major program on pension reform that goes back some 10 to 15 years. It has worked out a system that seems to be working there. It is giving young people an opportunity to invest their income into some pension plans from a diverse group.

Canadians are not well served by this legislation. We will oppose it and hope that something better comes forward to serve young Canadians and their need for retirement income.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Speaker, I am happy to rise today to speak to Bill C-3, an act to amend the Canada Pension Plan Act that has been brought back in this Parliament after Parliament prorogued last spring.

The main thrust of Bill C-3 is to propose a transfer of all amounts held in the Department of Finance within the Canada pension plan account, including the bond portfolio which is worth about $40 billion. It is the transfer to the Canada Pension Plan Investment Board. This transfer would take place over a three year period.

Bill C-3 would establish a means for the transfer of assets between the Department of Finance and the CPP Investment Board so that immediate payout obligations of the plan can be met. The legislation also spells out how the provincial securities currently held in the account may be redeemed or replaced. Lastly, the bill would apply to the Canadian pension plan fund the 30% foreign content limit that applies to registered retirement savings plans and employer and union sponsored pension plans in Canada.

While Bill C-3 is a step in the government's planned development of the public pension plan, managed at arm's length by a crown corporation, the bill is more than a housekeeping bill. The Canadian Alliance is opposed to the Liberal solution of bilking Canadian workers and employers out of billions of dollars to pay for a plan that is unquestionably unfair to younger generations in our society.

The Canada pension plan was devised over 36 years ago by a Liberal government with a noble objective, one which I believe all members then and now can agree on, to provide retirement security to all Canadians and to reduce poverty among seniors. A mandatory pension plan was devised and paid for through equal payroll contributions and deductions from workers and employers.

Back in 1966 Canadians were told that their payroll deductions required to fund the Canada pension plan would never go above 5.5%. However, how times change. When the plan was designed it was assumed that there would be six taxpaying workers for every dependent retiree. Of course, we know that has changed significantly. The member for South Surrey—White Rock—Langley just talked about the changing demographics in our society. Anybody who does not have a plan to deal with that is in for some nasty surprises.

We know that the birth rate in Canada for every two people is 1.2, not even a replacement factor for those people. It will certainly have a major impact on how governments operate and how we will continue to fund retirement savings with a bigger percentage of our society being in the older category and less people in the younger group paying the bills.

From 1966 to 1982, annual Canada pension plan contributions exceeded the plan's annual benefit payouts. The funds were invested in provincial bonds and the plan's assets accumulated to almost $24 billion. Beginning in 1983, however, contributions fell short of benefits. Nevertheless, the interest on the $24 billion was sufficient to keep the overall CPP in surplus for another 10 years. By 1992, the pool of assets had grown to $42 billion.

However, in 1993, the year this current Liberal government took office, was the year that the culmination of contributions and interest could not produce the revenue required to cover the stream of benefits. That was a major turning point. The Canadian pension plan's chief actuary warned that without changes the plan would be in very deep trouble, especially when the baby boomer generation began to reach 65 in about the year 2012.

By 1997 Canada pension plan's assets had fallen to $35.5 billion. During the fall of that year the Liberal government introduced Bill C-2 which was designed to save the Canada pension plan by the only way it knows how to govern: take more money from Canadian taxpayers. We see it over and over again and again this year in the Speech from the Throne.

The Liberal government showed its contempt for Canadian taxpayers and Parliament all at the same time by invoking closure after a mere eight hours of debate on a huge issue that Canadians needed to be concerned about.

Starting in 1998, Canadians saw their take home pay shrink as contribution rates for both employees and employers were jacked up in a series of increases to the Canada pension plan.

Canada pension plan premiums went from 5.5% on the average industrial wage income to 9.4% where it is currently. By 2003 it will be up to 9.9%. That is a staggering 73% increase and the biggest tax grab in Canadian history. What is really scary is that the former chief actuary of the Canada pension plan had suggested during that time that a rate higher than 9.9% was necessary to save the pension plan. However that did not suit the former finance minister's plans for his political career and instead of listening to the chief actuary he had him fired. That solved a lot. I guess what goes around comes around. Eventually the former finance minister met the same fate himself and he was fired.

With more money flowing into the Canada pension plan as a result of these jacked up rates, the plan's total revenue exceeded benefits slightly in 1998 and by 2000 contributions alone were high enough to cover all the benefits. By the end of 2001 Canada pension plan assets were approaching $48 billion. Yet despite extracting all that money from Canadian taxpayers, the Canada pension plan's unfunded liability is estimated to be a whopping $430 billion. Just in case people cannot relate that to what is currently in the plan, the current plan's assets are approaching $48 billion but the liability is $430 billion. It has almost 10 times as much in liability as we have funds to cover it.

The current chief actuary of the Canada pension plan, the one who replaced the one fired by the finance minister, admits that the contributions will once again fall short of benefit payouts but the government is betting on the Canada Pension Plan Investment Board to beat that system. We heard from the member for Burnaby--Douglas that he was concerned about that because the Canada Pension Plan Investment Board had losses when the market went down.

The member for Lanark—Carleton, who spoke before me, also has a big concern with this. Our concern is not so much that there is a Canada Pension Plan Investment Board, it is that government tends to use these boards for political expediency and political operatives. Pressure can be put on these boards to invest in favoured companies that happen to give a lot of money to the governing party of the day, and which maybe the Liberals favour. We know the Quebec pension plan has had difficulty managing its money wisely and it tends to be politically motivated.

The other problem is that in a small market like Canada the huge amount of money has a disproportionate effect on our markets. What does it invest in? At one time Nortel made up 30% of the Toronto Stock Exchange. We know where it is at today and I think the Canada pension plan also knows where it is at because that was one of its major investments at the time, but what else do we invest in if we have to invest in Canada? Even more so, the legislation would restrict the Canada Pension Plan Investment Board to invest 70% of all that it has in Canada. There is a 30% foreign investment rule restriction that ties the hands of the Canada Pension Plan Investment Board.

Employers and the self-employed are feeling the brunt of the Liberal CPP tax grab. The Canadian Federation of Independent Business is currently conducting a letter writing campaign on the subject of the government's job killing payroll taxes. It notes that while employers received a 7¢ reduction in their employment insurance premiums, Canada pension plan premiums went up by 40¢ and they are set to increase another 25¢ in 2003. Everything the employers gained back in the employment insurance premium reductions has been eaten up by Canada pension plan increases.

If the government plans to see the CPP hike through, I would hope that at least it would look at the mangled EI program where revenues far outstrip EI costs and disappear into general revenue.

The worst injustice by the Liberal government and its CPP hike is the intergenerational unfairness. Mr. Ménard admits that every Canadian worker born after 1980 will see their Canada pension plan investment will offer them a 2% return on investment for their retirement. However those who retired in 1995, a different generation, will receive a 9% return on their investment.

What does that say to our young people who are expected to pay the bills? They are expected to pay the bills for our generation's retirement and they will not even have enough for their own as a result of this mismanaged plan. That is totally unfair and it simply will not work. As these young people get into positions of power in government and other places in society they will not accept this. They will throw it off. It seems to me that it would be better to change our plans now than to have a mangled system thrown out down the road in 10 years by the generation that sees this as being totally unfair.

The fact is that the Canada pension plan will take in just under 10% of income to receive 25% after age 65. The average annual payout is $5,500 a year. The best one can hope to receive from CPP is under $9,000 a year.

We talked about how things have changed and are changing in terms of demographics. The number of seniors in Canada will double to 22% of the population by the year 2031. This will place a heavy burden on workers who support pension and health programs.

I am sure that hon. members know if they examine their hearts on this issue that when the young people of today form the majority in this country they will be sorely tempted to change the plan to ensure that they will get some of the benefits that will now only go to the people who are currently in the plan.

The Canadian Alliance does not believe that our future security lies in the wages of a shrinking workforce. Rather, it lies in the vast productivity and production capacity of the economy. We value retirement security as a vital element of independence. The Canadian Alliance policy platform states that we will honour obligations to retired Canadians and those close to retirement under the current state run programs. We will also maintain support for low income seniors. However, and this is a very important distinction, the Canadian Alliance believes that future retirees deserve a greater choice between a government managed pension plan and a mandatory personal plan.

With the objective of giving Canadians greater control of their own affairs and retirement plans, we will eliminate the foreign investment restriction for retirement investments and devise options to allow individuals greater opportunity to save for themselves as we see that the current system failed its original objective from 1966. Times have changed considerably in terms of demographics.

What we are interested in is fairness in the system and a system that will actually work for future generations. That is why we think the Canada pension plan in its current form is failing young Canadians who are coming up. We are concerned that when young Canadians discover this as they become adults and they come into positions of authority, that they will take matters into their own hands and make changes. Instead of waiting for that to happen, let us look forward a little, be proactive and try to devise a plan that works and will work for future Canadians and will respect the demographic change happening in Canada. As I said earlier, we have an aging population.

We hear a lot of chatter from the other side but the fact of the matter is that it is the Liberal government--

[Charles Caccia, Liberal, Davenport, ON]

Madam Speaker, the Liberal Party to which I belong is the party that gave Canada the Canada pension plan, the old age security, the guaranteed income supplement, the widows' allowances, the child benefits and so on. In other words, it is the Liberal Party that has given Canada a vast array of programs and measures that are the foundation of our social security system.

I am very proud of that fact and I think we on this side of the House are all very proud of our record. We welcome suggestions to improve it, but I must also indicate that our record has been an outstanding one and all we want to achieve now with Bill C-3 is to improve upon it.

[Charles Caccia, Liberal, Davenport, ON]

Madam Speaker, the context of this debate is the fact that the Canada pension plan will have a very sizeable investment to manage. I am told that by the year 2012, will be an amount of between $120 billion and $150 billion. This is quite a responsibility. It is understandable therefore that so many colleagues wish to participate in the debate. This is the broad context. In my brief remarks I will talk about how to invest, where to invest, the issue of ethical screening, the issue of return on investments, what people tell us about the CPP, and frequent complaints.

I will begin with the question of how to invest it. There is a unique opportunity for the board to be instituted by way of Bill C-3 to proceed in a rather creative manner in finding ways to establish its long term program by investing in a manner that will facilitate the construction of infrastructures. Examples would include: sewer separation; the rehabilitation of toxic sites; and initiatives that would lead to energy conservation and energy shifts in order to help Canada achieve its Kyoto goals. In other words, a number of investments would have a municipal flavour in relation to water and air quality and also a flavour that would somehow be coordinated with the long term objectives of the Government of Canada in the decades ahead.

On the topic of where to invest, many interventions have been made. We definitely seem to differ in our approach from that of the official opposition. Many of us on the Liberal side feel very strongly that investments should be made in Canada and that they should be intended to facilitate, as I mentioned a moment ago, the long term pursuit of Canadian interests, particularly in relation to air and water quality and the very difficult pursuit of sustainable development.

The issue of ethical screening was raised in the previous session by the member for Regina—Qu'Appelle, whom I congratulate. He and I are on the same wavelength in the sense that an ethical screening procedure ought to be incorporated by the board to be established by this legislation. This screening would ensure that the funds were not allocated to opportunities which are contrary to the public interest, which are contrary to long term goals, be they human rights or be they other very difficult objectives that the government intends to pursue.

On the return on investments, we will see from the record that the debate has been quite intensive. I tend to agree with those who wish to adopt a policy for stable and guaranteed investments rather than investments of a speculative nature. These funds are Canadians' hard-earned savings. Therefore it would be a natural conclusion to recommend that the funds be invested in a manner whereby they would be safe and productive, even if not in a spectacular manner in terms of interest rates, but safe and guaranteed.

My next topic is what people are telling us about the level of Canada pension plan payments. Canadians are increasingly concerned about the erosion of the purchasing power of the dollar, namely the effects of inflation, and it has been kept down to a minimum. Nevertheless, the pensions are less significant today than they were a few years ago. Therefore, the time has come for a revision of the Canada pension plan payment policy so as to allow for higher pensions for those who qualify.

We all know that higher pensions will require greater and larger contributions, which is a burden both to the employee and the employer. Nevertheless, a very strong case can be made that a good, healthy pension scheme, and Canada can say that it has one of the best pension schemes in the world, certainly reinforces social cohesion. Social cohesion is a very important factor these days, namely the ability of operating as a mutually supportive society. The element of the pension level is an important contributor to the cement which binds us together and makes us function every day.

I would argue in favour of a review of the system so as to permit an increase in the level of pension. This cannot be done in isolation. Evidently not only the CPP system will have to be examined, but also old age security and in particular, the guaranteed income supplement, which is a very important instrument in the overall pension policy. That kind of supplement goes to people who do not have a Canada pension to draw from and who can only rely on old age security, if they qualify for it.

It seems to me that the entire pension sector ought to have the attention of the Department of Finance, so ably represented by the parliamentary secretary in this debate, and also HRDC and other departments so as to produce a coherent and constructive long term policy. The time has arrived to do that.

The next item is the frequent complaints in relation to the Canada pension plan. I must repeat the complaint about the five year rule for the acceptance of disability claims. It is a rule that has had its time. It has also damaged potential claimants who have seen their claims rejected. It seems to me that this five year rule needs to be re-examined and possibly changed, let us say, to seven years or perhaps 10 years, so as to permit people who are disabled to make their claim and receive it without being denied.

Another complaint that has been raised in recent times is the delays on the part of the pension appeals board. The pension appeals board is probably understaffed. The claimants who appeal have to wait long periods of time until a decision is made. We have seen cases with waiting periods of up to two years. Obviously this is not good. It also does not compare well to two decades ago when the waiting period was six months at most. There has been some slippage. I submit that this item requires attention on the part of the authorities in charge of the Canada pension plan.

We need to pay close and regular attention to Canada's current pension regime and ensure that our seniors do not live in poverty. This exercise of revision should be a regular one rather than one done at infrequent intervals, as seems to have been the case in the past.

It seems to me that the debate on Bill C-3 and the amendments to the Canada Pension Plan Investment Board Act is a terrific opportunity for all of us to make proposals on how to invest carefully but also in a creative and new manner. Considering the large amount in question, we have everything to gain in investments that will lead to improvements in the health condition of the population and in projects that are oriented toward health and the environment which will improve water and air quality, human condition and ultimately the economic condition of the country.

Clear evidence has emerged in recent years that shows that health and the economy are closely interlinked. Pension funds offer a great occasion to look at opportunities to improve our performance in relation to basic elements such as water and air. I hope the comments made in the course of this debate will help to move in that direction.

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

Madam Speaker, my colleague across the way made some comments which, as I had indicated in my speech, I want to reinforce because I was concerned there was some suggestion about the politicization of the CPPIB board of directors.

I want to make it clear to the House and to this member that the board of directors is independent and accountable. The ministers of finance federally and provincially appoint directors with high qualifications. There is consultation with the provinces. The directors are chosen from a qualified list of candidates recommended by a joint federal-provincial committee, one from the federal government and from the nine participating provinces. The criteria that is used for this nominating process is a public document and is out there for the public to see.

In making the appointments it should be emphasized that the directors must have proven financial ability and relevant work experience for them to carry out the objectives of the CPPIB. As a result the people who sit on that board of directors have extensive business, financial and investment expertise.

I want to emphasize the independence and the quality of the board because the hon. member implied that somehow there may be government, that is, Liberal Party bias in the selection. That is of course nonsense given the fact that nine participating provinces and the federal government are nominating a list of candidates. Both Conservative and New Democratic governments as well are nominating. It is important for the public to know that the independence is there.

I am sure that this was maybe an oversight by the member, but I wanted to emphasize this on the public record and any comment that the member might make. Otherwise I was pleased with his comments about the direction of Bill C-3. I also want to emphasize that these proposals have the support of all of the provincial and territorial governments involved and the changes are now before the House.

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Madam Speaker, it is with pleasure that I rise today to speak on Bill C-3, an act to amend the Canada pension plan. It is worth noting that this was originally introduced as Bill C-58 in the first session. This government is the first government in the history of the Canadian Parliament to have twice as many throne speeches as budgets and it has again unnecessarily delayed legislation, allowing legislation to die on the order paper which then has to be introduced again, discussed again and ultimately passed.

From purely a parliamentary productivity perspective it is ludicrous that the government, in the interest of re-imaging its supposed vision for the country and trying to polish the Prime Minister's legacy, actually delays action. A good legacy for any government would be action. A bad legacy, I would posit, is one that delays action. This is a government that time and time again talks but does not act.

Throne speeches are typically more about talking than acting. Budgets are about acting. The government should have had a fall budget for full accountability and action to address some of the issues facing Canadians, whether it is the capital markets downturn, notwithstanding what has happened in the last week, which hopefully will be sustainable. But by and large Canadians are concerned about the future of their retirement plans. Increasingly, every month when they get their RRSP statements they have great concern about their futures.

Clearly the Canada pension plan is an important cornerstone of the future retirement savings plan of most or all Canadians and certainly is one that is supported broadly by a wide range of Canadians who support the notion of a government pension plan, one that is secure but also one that maximizes their retirement income in retirement.

Earlier in the comments of my colleague from Burnaby--Douglas he said that he was waiting with bated breath to hear what my comments would be on this. I suggest, if we look at market performance historically over the long term, that in fact participation with a diversified portfolio in the equities market over the long term is a far better way to build equity and ensure a secure retirement than the previous treatment of the Canada pension plan capital pool, which was to lend it to provinces at substandard rates.

If we look at the union funds and the pension funds in Canada, whether it is teachers' unions, or OMERS, which I believe is the largest investor in the capital markets in Canada, or many of the government unions that invest in the capital markets, all those individuals and pension funds that invest in the capital markets, we see that they invest in the capital markets because they realize that maximizing the retirement incomes of their membership in the long term requires prudent participation in the capital markets. I would urge the member, as a member of a political party that espouses equality and egalitarianism, and suggest that he ought not to deny all Canadians the opportunities that union members have currently to benefit from participation in the capital markets in order to maximize their retirement incomes.

This movement of the Canada pension plan capital pool toward capital markets is one that in the long term, and I think the hon. member will share this, will benefit Canadians and improve their retirement incomes. Notwithstanding what has happened in the last year to two years in the capital markets, by and large the return last year on the Canada pension plan, compared to most mutual funds and most investment portfolio manager records in the last year, was actually fairly good. That is not to say that it was a positive return. I do not know too many investors or portfolio managers who enjoyed positive returns over the last year, but we cannot pick market timing completely.

The Canada pension plan has to be invested for the long term. Good portfolio management expertise will prevail with the right quality of skill sets on the management level. That is one of the reasons why it is so important that the board of the Canada pension plan be chosen very carefully. We have had and continue to have significant concerns about the way the government makes order in council appointments. The correlation between Liberal Party contributions and an appearance in the board's order in council appointments is uncanny. The degree to which this level of partisanship can threaten the potential quality of a board is very important.

When we are talking about the future retirement incomes of Canadians, it is absolutely essential that the individuals on these boards be beyond reproach, that they be chosen with absolutely no inclination or partisan influences. I would hope that we would see a greater commitment from the government to selecting the absolutely best possible members of the Canadian pension plan board, based on their expertise, experience and understanding of investment principles in the capital markets, and not based on either Liberal memberships or their propensity to contribute to the Liberal Party funds.

I believe that we also have to take a serious look at other ways to address the demographic time bomb that exists in terms of Canadian retirement planning right now. Moving forward, we are really just a few years away, just 10 or 20 years depending on the demographer, from seeing a significant reduction in the number of Canadians who are actually working and paying taxes, along with a significant increase in the number of people who will be drawing. As such, I support the increase of, for instance, RRSP contribution limits. That is one way in which we can defer taxes to the future as people withdraw from these RRSPs. Also, the increase in RRSP contribution limits would give Canadians an opportunity to shelter more income today than they would otherwise be able to.

With the most recent changes in the tax brackets, there is an anomaly in our tax system now. The current $13,500 RRSP contribution limit is not consistent with where our tax brackets are, so we ought to see a significant increase in the contribution limit. It is not a write-off of tax revenue for the government. In fact it is a deferral of tax revenue to a time when we are going to need a tax revenue even more than we do today.

I would also urge the government to use the infusion of the CPP capital into the capital markets as an opportunity to move more aggressively to raise foreign content limits, to allow Canadian investors to achieve a greater level of geographic diversification in their RRSPs, which is important from a portfolio management perspective. Currently many of the mutual funds and the professional managers are already flouting the foreign content limit. It seems perverse to create rules that can be escaped by highly paid financial and tax advisers and by mutual fund managers and not have this available to the ordinary Canadian investor. That is exactly the perverse system that the government has today in terms of our foreign content limit on RRSPs.

Beyond that, it is time for us to consider some new approaches, to give Canadians more options in terms of ensuring that they have adequate retirement incomes in the future. One suggestion, for instance, would be to allow Canadians an opportunity through a new approach to employment insurance policy. We know that the government has benefited significantly by padding its books with outrageous employment insurance surpluses. Perhaps it would be a good idea to use some of those surpluses to actually strengthen Canada's employment insurance system in the following way.

Perhaps after paying into the employment insurance system for a period of 10 years, for instance, as part of a vesting period, if you will, Canadian workers ought to receive a statement every year telling them that their employment insurance account balance is whatever it happens to be. It will not be a terrific investment because clearly for those who do not draw from employment insurance frequently, or who in many cases do not draw at all, their contributions will be used to top up those of people who draw more frequently. But the fact is that some recognition for those who do not draw frequently would make a great deal of sense. To actually reward people who do not draw from EI frequently would accomplish some of what the Liberals wanted. The Liberals moved to reduce benefits for those who draw seasonally, but in some ways we could accomplish the same end goal with a lot less hardship if we were to find ways to reward those who do not draw frequently.

Also, what about the notion of allowing Canadians to withdraw money from their EI accounts to further their education, to upgrade their skills, to study a computer course, or for an MBA or a CFA, to go from being underemployed to fully employed? That would be consistent with labour market mobility, which we recognize as being important in today's society and a hyper-competitive global environment.

What about allowing Canadians, after a lifetime of paying into EI, to roll some of their EI account balance into their RRSPs? I have heard so many times from people in my constituency that they have paid into EI for 15, 20 or 30 years, have never drawn a cent and will never be able to. This would be one way to reward Canadians for not drawing from EI. It would be a way to augment their retirement savings. It would be an EI system that works for people who work. I think that might make sense when we are considering issues of helping Canadians ensure a more prosperous and secure retirement future.

I hope that the dire predictions of the member for Burnaby--Douglas for the capital markets do not come true. When he points to the Enrons and the WorldComs he is pointing to some of the most egregious examples of corporate governance offences. In the U.S., we are seeing the Sarbanes-Oxley act, a strong action by U.S. government to enforce and bring forward concrete action to improve the corporate governance framework in the U.S. In Canada we are seeing absolutely nothing. There is talk, but there is no action.

There is the recent appointment of Harold MacKay as the chairman of yet another task force, and the government loves task forces, to study the corporate governance issue, when there are some tangible steps that could be taken to improve corporate governance in Canada today. I think that the federal government should be working with some of the provincial governments. For instance, for 30 years there has been discussion on the notion of a national securities commission.

I say to some of my colleagues from the Bloc about the issue of a national securities commission that I recognize wholly that securities regulations are within the provincial jurisdictions, but the fact is that there could be greater cooperation between the various provinces with the federal government playing a leadership role in working with the provinces to ensure that there are across Canada very uniform approaches to securities regulations. That would benefit people on the buying side of the market in terms of raising capital. It would also benefit us in the long run, by greater resources, focus and expertise, with a greater protection of investors. These investors, whether they are in Quebec, Nova Scotia or Ontario, are concerned about the future of their retirement holdings. They want to know that the greatest efforts are being made across the country to ensure that securities commissions have the level of expertise and resources required to enforce consistent, uniform securities regulations and to be able to do so forcefully.

Currently, we have about 10 securities commissions in Canada. Many of them are underfunded and underresourced such as, Nova Scotia, P.E.I., Newfoundland and New Brunswick. The Canadian capital market is only 1.5% of the global capital markets. For us to divide those capital markets into 10 or 11 securities commissions does not make a great deal of sense. What it means is that we do not have the resources or the expertise at the provincial levels to do as good a job as we would if there were a national effort.

I recognize the inherent complexities of these proposals but I submit to my colleagues from the Bloc that it bears consideration in the interests of all Canadian investors, whether they live in Quebec, Ontario or British Columbia. The best possible expertise and resources must be committed in a uniform way across Canada to ensure that the WorldCom and Enron type of debauches do not threaten to further damage trust in the capital markets. Currently the capital market issues are surrounding trust. Not seeing action taken by the Canadian government, while we see such aggressive action taken by the U.S. government, is something that is purely unacceptable. I am concerned as well.

Mr. Harold MacKay presented an excellent report, as head of the task force on the future of the financial services sector. That excellent, objective, thorough report was butchered by the government. It was more interested in plucking the politically palatable from it and ignoring some of the important public policy parts of a report that might have been controversial but which would have furthered the interests of the financial services sector in Canada.

One of the things that work well in Canada is our financial services sector. That is a sector which has the capacity to lead globally, yet we have taken the perverse steps in Canada of handcuffing our financial services sector while at the same time exposing it to foreign competition. Whether it is in the banking sector, the insurance side or the trust companies, we do not have a financial services sector that fears foreign competition, but there is significant trepidation about the notion of being exposed to foreign competition and having their hands tied behind their backs. That is exactly what our current financial services regime in Canada is doing. We have significant concerns about that.

In addition to supporting the direction of this legislation, I would hope that the government does not delay developing and implementing policies to improve the confidence of Canadians in the capital markets. The corporate governance issue is critical and we must address that in Canada. The U.S. government is affecting change in that regard and taking dramatic and important steps. I would hope the Canadian government would do the same.

I would hope the government would also increase flexibility with RRSP limits and reduce foreign content limits, which would help Canadians save in their RRSPs. Further, the government ought to consider the notion of helping Canadians, through their EI contributions, further augment their retirement savings and ultimate security.

[Pauline Picard, Bloc, Drummond, QC]

Mr. Speaker, I am pleased to speak to Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

I am rather offended by the comments made by the member from the Canadian Alliance. He seems to despise one of the finest institutions that Quebec has created for its own growth. This can be clearly seen, it is creating jobs. The Caisse de dépôt du Québec has created the largest number of jobs; this has been confirmed by Statistics Canada data. It is largely responsible for the job creation and economic growth that we are now experiencing.

His comments demonstrate how little he knows Quebec's institutions, not to mention Quebeckers themselves. If the Alliance hopes to make inroads in Quebec someday, it will not be with this type of statements, which basically insult all Quebeckers who worked to set up these institutions.

I would like to provide some context on Bill C-3. First, the Canada Pension Plan Investment Board is closely modelled on the Quebec Caisse de dépôt et placement. It too has the mandate to achieve the best possible rate of return on the funds it receives from the Canada Pension Plan. Revenues generated through the investments will allow the CPP to pay Canadian workers their pensions.

The Canada Pension Plan Investment Board was established as a federal Crown corporation by an act of Parliament in December 1997 and made its first investment in March 1999. At that time, both the Bloc Quebecois and the Caisse de dépôt supported the bill overall. As I said earlier, we have our own pension plan, the Régie des rentes, which is managed by the Caisse de dépôt.

To summarize, this bill would consolidate the management of all Canada Pension Plan assets through the board, which should help ensure the stability of the public pension plan. The changes outlined should allow for the management of the operating balance and the portfolio of bonds to be transferred to the Canada Pension Plan Investment Board.

This bill seems justified in order to complete the transfer of all pension funds assets to the board. Again, the federal government is copying one of Quebec's proudest achievements, namely the Caisse de dépôt et placement du Québec.

We certainly support this initiative. However, I have some reservations about the provisions of the bill dealing with the limitations on foreign assets. I think we need a more thorough analysis to understand all their impacts. We must not forget, however, that if the board becomes too active abroad, it will lose the role of wealth creator it plays within Canada's borders and indirectly, sometimes, in Quebec.

As I said, the position of the Bloc Quebecois on this issue has not changed. As hon. members know, this bill was introduced during the first session and the government has now revived it. Our position since the last session has not changed. We support this government initiative and wish it as much success as the Caisse de dépôt et placement du Québec, created 36 years ago, has knowm to this day.

Once again, a model from Quebec that has left its mark has caught the attention of the House.

Like my colleague from Saint-Hyacinthe—Bagot before me, I would now like to draw a picture of the Caisse de dépôt et placement in order to inform hon. members of this House and Canadians about the positive things they could do with this major instrument which is the Pension Plan Investment Board.

For Quebeckers, the Caisse de dépôt et placement is somewhat the spearhead of their financial emancipation, as I already mentioned earlier. This is why I was stunned to hear the position of the Canadian Alliance. Again, it is as if they were putting Quebec down.

The Caisse de dépôt et placement helped Quebec become what it is today. We are happy that Canada is using it as a model and an instrument, as I said earlier, to support the assets of Canadians in a very positive way.

The nationalization of electricity, and the creation of the Régime des rentes and the Caisse de dépôt et placement to manage Quebeckers' savings, are probably the cornerstone of what we, Quebeckers, have become financially and economically in the last 36 years. And we are very proud of that, whatever our Canadian Alliance friends' views on the matter. The caisse is our cherished child; hands off. They think they can make a breakthrough in Quebec, but they will not win our support by turning their nose up at our tools and the means we have devised to pull ourselves out of the rut, out of poverty.

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

People are upset to see how much Quebeckers have saved over 36 years through the Caisse de dépôt et placement, how much wealth its decisions have created during that period, and what a formidable financial force the caisse, which started out with capital of $1 million in 1966, has become. It is so formidable that it has become the 12th largest fund manager in North America. I will repeat for the Alliance members who may not have heard and for the last speaker: it has become the 12th largest fund manager in North America. It is the largest in Canada. Also, it ranks eighth in real estate holdings.

Of course, such success does not please everyone. I will remind the hon. members of sad events in our history, events such as the attempt in 1982 and the aborted attempt in 1983 to weaken the Caisse de dépôt et placement. But let us first review the rich history of the past 36 years.

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

I find it hard not to mention all those who laboured, both politically and technically, in the 1960s to build the Caisse de dépôt et placement. One of those involved was the late Michel Bélanger, who had been president of the Montreal Stock Exchange and a member of the Bélanger-Campeau commission. At the time, he was a senior government official and one of those who had come up with the idea of the Régie des rentes and the Caisse de dépôt et placement.

There were also Claude Castonguay, whom everyone knows, André Marier, Marcel Bélanger, Roland Giroux and Roland Parenteau.

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

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

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

Today, the Caisse de dépôt does $10 billion worth of transactions every working day. That was last year's average. Listen carefully, because this is important to highlight—and I am also mentioning it for the Canadian Alliance—we are talking about $10 billion worth of transactions each working day.

Last year alone, the Caisse de dépôt et placement du Québec carried out $2 trillion in transactions, or three times Canada's GDP.

I should point out that the term billion in English does not refer to the same thing as the term billion in French. We have thousands, millions, billions and, finally, trillions. In French, the term billions refers to a greater number than billions. So, there were $2.5 trillion worth of transactions last year, which is three times Canada's GDP, or more than $10 billion every working day. We are talking about the 12th largest manager of global assets in North America; it is the eighth largest in terms of real estate holdings. This is no small institution.

There is also another person who was involved in creating the Caisse de dépôt, whom I neglected to mention on purpose. It was Jacques Parizeau.

He worked very hard to make the Caisse de dépôt what it is today, an institution that has stood the test of time, with a few updates, mostly since the early 1990s, with respect to the Caisse de dépôt's international activities.

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

Mr. Parizeau did not only contribute to making the Caisse de dépôt what it is today, being one of its main initiators. In fact, he played a key role in everything pertaining to the modernization and dynamism of Quebec's financial sector.

Mr. Parizeau drew from that experience with the Caisse de dépôt et placement and the Régie des rentes du Quebec, the Quebec pension plan, and from his experience as finance minister at the time, to develop modern tools to move Quebec forward, to move the Quebec business sector forward, and to get the business people to move forward, since the business sector of the late 1960s was quite different from what it has become today.

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

Mr. Parizeau initiated this commission, which created the Régie de l'assurance-dépôts, guaranteeing small investors would keep a portion of their deposits in financial institutions. The security of their investments was guaranteed. From 1967 on, that was a big help for small investors in Quebec, enabling them to take part in the economic and financial evolution of the country they love and cherish.

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

It is based on this experience with the Caisse de dépôt et placement, from the work done by the original stakeholders behind its creation to the addition of fundamental and democratic tools to democratize the financial sector, that the Caisse de dépôt et placement was built up over time. It has evolved over the years and contributed to the creation of various companies that have grown into major undertakings, such as Alcan, Hydro-Quebec, and Bombardier. In this connection, let us keep in mind that the first government involvement was via the Caisse de dépôt et placement, with investments in Bombardier, Domtar, Vidéotron, Noranda and Canam Manac.

In 1985, the decision was made to focus more on small and medium size businesses that were the ones creating jobs in the regions. Investments were made in 63 companies, with an average performance of 30%. This is nothing to sneeze at, although my Canadian Alliance colleague looked down his nose somewhat at these figures, but for startup companies this is an extraordinary performance.

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

In the year 2000, the biggest companies in Canada considered—and this still holds true today—the Caisse de dépôt et placement du Québec, which is a source of pride for Quebeckers, to be a vital tool that has played a cutting-edge role in the financial emancipation of the people of Quebec since the late 1960s. Moreover, it is ranked as the best money manager in Canada.

In the context of globalization, the caisse model continues to be successful. We cannot escape globalization; it shapes our environment and affects us all.

Globalization is the source of both fear and enthusiasm, and is replete with both opportunities to be seized and pitfalls to be avoided. The Caisse de dépôt et placement is interested in globalization from the point of view of its investors, its impact on the development strategies of its partners, and of the role it will be required to play as a result.

For a number of years, the caisse has developed based on solid values with two aims: growth and cost-effective performance.

The caisse's assets have risen from their 1981 level of $11 billion, to $44 billion in early 1995, and now to in excess of $110 billion. Just do the math: ten times the 1981 level, and more than twice the 1995 level. That is what success in Quebec is all about.

The caisse continues to respect the decision of its board and its administration to provide its depositors and its clientele with the financial products necessary for a diversified and cautious portfolio, but one that is above all efficient.

In Quebec the caisse has bolstered the fund administration industry. Its objective is a simple one: to share its success with other similar funds. It administers mutual funds for Cartier, whose funds are available throughout Canada.

As far as performance goes, all we need say is that the 1999 results of all of its investment teams overshot their objectives, with an overall performance rating of 16.5%. This is worthy of mention because it is not seen very often.

I would point out to those who might underestimate this, that over a five-year period, most of the teams of the caisse were at the leading edge of their industry, with an overall performance in the order of 14.7%.

The caisse approach, as we call it, contributes to the growth of the economy of Quebec, the growth of our industries, the growth of our companies. As a result, the quality of life of millions of people in Quebec is enhanced, and their future assured. The caisse operates with respect for its members.

The approach the caisse takes in order to achieve those aims focuses on partnership. Whether in Quebec, in Canada, or elsewhere, the caisse draws upon the expertise and experience of its partners in their respective areas.

Another key to success is information. There is no doubt that the quality and the originality of the information available to its decision-makers play a major role. The caisse devotes significant resources to process and make use of the huge pool of information that its managers and partners have. As we can see, the caisse respects some fundamental values while actively promoting and developing these values.

It is obvious that the history of the caisse and the way it does business is rich in happy developments. Let me talk about a situation that occurred in 1982, although some may feel this is ancient history. However, it still has echoes today, particularly since 1993.

As members of the Standing Committee on Finance, Bloc Quebecois members--especially my colleague from Saint-Hyacinthe—Bagot--meet business people from across Canada. Some of them have shown contempt toward the Caisse de dépôt et placement.

When this bill was last debated, my Canadian Alliance colleagues were among its critics, as they are again today. We met Bay Street financiers who hate the Caisse de dépôt et placement, even though it makes a positive contribution to the Canadian economy and has become a key player in a number of so-called Canadian businesses that make Liberal, Conservative, Canadian Alliance or New Democrat members so proud.

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

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

This generated incredible controversy. Owned by Quebec interests and built on Quebeckers' savings, the Caisse de dépôt et placement would become CP's main shareholder. This created an incredible uproar in Canada, so much so that business people from English Canada decided to wage a war against the Caisse de dépôt et placement. This is why the Caisse de dépôt was not very popular at the time. It was impossible for Quebeckers to become CP's main shareholder.

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

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

For the year that the saga of Bill S-31 dragged on, from 1982 to 1983, before the government finally withdrew the bill due to pressure from Quebec business, we Quebeckers lost incredible opportunities to invest the significant sum at the time—I think it was around $17 billion—that the Caisse de dépôt et placement held in capital.

During that year, we lost the ability to benefit from the increase in value of Canadian Pacific shares. In 1982, CP shares were worth $30. In 1983, they were worth $50. We could have made a $20 profit per share if the Caisse de dépôt et placement had been allowed to own more than 10% of CP shares. The caisse lost some $15 to $20 million dollars, with CP alone. We have to assess all opportunities that were lost because shares of other Canadian businesses could not be purchased, given that the provisions of Bill S-31 that were retroactive.

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

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

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

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

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

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

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

But I hope that nobody puts obstacles in the way of this wonderful initiative such as we have had to face since 1982. And there were all sorts of subsequent criticisms of the caisse de dépôt et placement. There were all the smear campaigns I have seen since I became a member of the Standing Committee on Finance. As a member of that committee, I have heard a lot of incredible comments.

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

I remind the House that we are in favour of this bill to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. The board acts as an investment corporation not unlike the Caisse de dépôt du Québec with a mandate to invest the money from the Canada Pension Plan in order to get the best possible return.

The Quebec Caisse de dépôt et placement also provides support for clients interested in the long term strategic development of their business, regardless of where it is located in the world. It is an accessible partner much sought after by businesses that think big. It is among the most active investment bodies in the world in the area of private investments. People who are interested in exporting their products and services and opening up new markets will find the support they need at the caisse.

Furthermore, clients of the Quebec Caisse de dépôt et placement benefit from its worldwide network and its specialized services. I do not understand why the Canadian Alliance is against the bill before us, when the board in question would allow the regions to promote strategic development and provide support for businesses. These are businesses that want to think big, that hope to export and want support. I do not understand. What other kind of wonderful instrument are they trying to come up with or have they already come up with to replace an instrument as effective as the caisse de dépôt et placement? It has proven itself in Quebec and an equivalent body in Canada would definitely contribute to strategic development, as has been the experience in Quebec.

It also provides, at each major stage of expansion, a unique source of capital for businesses. It supports the sustained growth of businesses from all sectors of the economy, from the most traditional to the most modern ones. Its professionals, who are active in their respective areas of expertise, share their skills and know-how by making available to these businesses a one-stop financial service.

Regardless of the projects, including business start-ups, support for expansion, a public call for savings, local or international expansion, a merging or takeover, financial restructuring, asset acquisition, exports or setting up abroad, family property transfer, or the sale or redemption of stocks, the goal of the caisse is to build the future and make the present better.

The Caisse de dépôt et placement du Québec is active in all the world's major financial centres and it has been developing its skills as a manager of public funds for over 36 years. It uses its own expertise, along with that of its partners, that is the institutions and businesses. Its clientele, which is mostly made up of public organizations, puts its deposits in the hands of the experts of the Caisse de dépôt et placement, because the caisse's management, which relies on a combination of daring moves and caution, guarantees returns higher than the main reference indicators, year after year.

As I mentioned earlier, the Caisse de dépôt et placement is Canada's largest investor in the private placement and venture capital sector. It is the primary holder of bond certificates from Quebec's public sector, and it has the largest real property portfolio in Canada. I am repeating this so that members opposite can understand clearly: in order to develop new structures for the financial management of collective savings and take advantage of the best investment opportunities, the Caisse de dépôt et placement is the place to go.

It is making ever greater use of its experience abroad, particularly on emerging foreign markets. Through consulting services and in partnership with the local expertise available, it is involved in the setting up, management and administration of social and collective savings programs such as retirement funds.

The objective is twofold: to stimulate local financial markets through sound and rigorous management, and to be involved in the establishment of a social protection structure, in particular through the creation of retirement funds.

In conclusion, I hope that Canada can have such an instrument, which has contributed to the economic expansion of all of Quebec. This is the wish that I am making for all the other Canadians.

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

Mr. Speaker, I am rising today to respond to government Bill C-3, formerly Bill C-58, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. The bill is being introduced at second reading because it was introduced, died on the order paper and has been reintroduced in this Parliament.

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

As presented by the parliamentary secretary, he suggests there is an overriding theme of providing greater security to Canadian seniors. I would contest that. The bill is merely another stage in a long progression of pension legislation and pension proposals put forward by the government and more particularly by the former finance minister now running for the Liberal leadership. It is designed to dip into the assets of Canada's pension system, whether they be the assets of the Canada pension plan, the non-secured and promised assets of old age security or the private moneys that have been set aside in RRSPs and in union and company sponsored pension plans. It would use those assets for purposes other than guaranteeing the retirement incomes of Canadians. I will demonstrate that in the course of my speech.

This theme goes back to the very beginning of the government, right back to the time when the former finance minister, the member for LaSalle—Émard, became finance minister and proceeded to look at how he could deal at the time with the government's debt crisis. I would like to show what he did to get his hands on these assets for purposes other than guaranteeing the best possible retirement incomes for Canadian seniors. I will point out that there have been three steps in this process. This particular piece of legislation, Bill C-3, represents the third step in this three stage process.

First, in 1994-95, early in his tenure, the then finance minister floated a series of trial balloons. Canada faced a tremendous potential shortfall in its ability to raise revenues, an enormous debt crisis. We faced an enormous deficit at the time. The minister tried to find ways of raising such revenues, including a number of problems before him at that time, through clawing back pensions and dipping into pension funds.

One example is an article in the Financial Post on December 31, 1994, which recorded how this was a trial balloon being floated, as these things often are, through an exclusive to one newspaper. It recorded how the government would try to place a capital tax on firms through which RRSP investments were made. RRSPs have to be invested through a bank, a trust company or an institution of that sort. The idea was that a capital tax would be placed on these firms based on the amounts invested in or through those firms. It would have been presented as a tax on corporations as the public relations spin, but in reality it would have been a tax on the capital placed in registered retirement savings plans.

That did not sell very well. It was withdrawn and the finance minister, the member for LaSalle—Émard, floated another trial balloon in early December of that year, which also did not work out very well, but he was trying. He proposed a 1% direct capital tax on RRSPs every year. This would have caused average Canadians to pay a total of $4,141 extra over their lifetime in taxes on RRSPs with no benefit at the end of that process to reflect the cost that had gone in.

Of course, the cost to the average Canadian would have been much higher because as that money was taken out it lost its capacity to earn interest or be sheltered from income tax. The result would have been that the average benefit to the average Canadian of this tax on RRSPs would have been a loss in RRSP retirement income of 36% in order to get that 1% capital tax for the purpose of dealing with the government's short term financial goals.

A second trial balloon which was put out and which was successfully implemented was a proposal to roll back the age at which RRSPs are rolled over into RRIFs, or Registered Retirement Income Funds, from age 71 to age 69. I will not go into the arguments that were presented by the former finance minister in favour of that particular proposal. I will simply point out that it is exactly the wrong measure to take, given that the average lifespan is expanding and therefore there is a greater long term need for that pension income.

What should be happening is that the age at which money is required to be rolled over should increase as the average lifespan and therefore the average retirement age increases. This hurts all Canadian seniors, particularly female seniors because women live substantially longer than men and therefore can expect to have a retirement that is on average 30% to 50% longer than their husbands or than male Canadians. This means that this measure directly and specifically focussed the impact of the government's short term financial needs and placed it on the shoulders of elderly females who, incidentally, are one of the highest poverty groups in the entire country.

The second prong of this three-pronged approach to get those pension assets for the government's own goals and diverting those funds from the only long term goal that should matter, which is increasing and maximizing the pension incomes of Canadian seniors, took place in an attack the former minister of finance launched in the mid-1990s on old age security.

Many people are aware of the fact that the Canada pension plan has not been properly secured for the past few decades due to faults in its original design. However, the old age security system, the old age pension, guaranteed income supplement and so on, have no security whatsoever. These problems, which are not accounted for in the same way as the Canada pension plan, attract less publicity. This is a huge problem the government has not dealt with. However it did raise the issue in, I believe, 1996. Its approach at the time was to replace old age security with something called the seniors benefit. This would have solved the problem of the lack of financing for the old age security system by essentially raising the height of the clawback on seniors pensions. This would have had the effect of raising the clawback when one took into account all forms of pension income, as high in some cases as 90%.

The goal of the proposed bill at that time seemed pretty clear to a number of groups, including my own party and the Canadian Association of Retired Persons, and we fought very vigorously against it and it was withdrawn. That was the second prong of the approach. It would have captured billions of dollars for the federal government but it would have substantially reduced the incomes of perhaps most Canadian seniors.

The third attempt to divert funds away from the sole goal of increasing the pension income of Canadian seniors is the government's attack on the Canada pension plan. This process, of which Bill C-3 is part, started in 1997 with a bill that was moved by the former minister of finance and the current candidate for the leadership of the Liberal Party, which raised the payroll tax significantly and created the Canada Pension Plan Investment Board. This process is being completed today with this bill.

I want to spend a little bit of time talking about some of the problems that exist with this current legislation and will cause us to invest money based upon considerations other than producing the best possible return on investment, which should be and could be its sole goal if the government cared about making that its sole goal.

I will begin with the underlying philosophy of the former minister of finance which may explain why he chose this model for the legislation. I would emphasize that the bill we are discussing today is very much the product of the former finance minister. It is coming back unamended from the form that he proposed when he was still the minister of finance.

Going back to January 26, 1990, I would like to quote an article from the Toronto Star which says the following things about the minister of finance:

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

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

Mr. Speaker, I am pleased to present Bill C-3 for second reading in the House today.

Bill C-3 would amend the Canada pension plan, CPP, and the Canada Pension Plan Investment Board, CPPIB, Act in order to accomplish a prudent and accelerated transfer of CPP assets to the CPPIB. This transfer would represent the final step in the process of transferring CPP assets not required to pay current pensions and benefits to a market based independent investment organization. Before discussing the bill, I would like to take a few minutes to provide some background that will help to put these measures in context.

As hon. members know, the federal government is fully committed to making Canada's retirement income system secure to all Canadians. Today Canadians from all walks of life take this system for granted without realizing that it did not always exist. Years ago caring for older citizens and those with disabilities was solely the responsibility of individual families. With the introduction of the Income Tax Act in 1917, the federal government was able to adopt national social programs such as Canada's first old age pension in 1927, which at that time included a means test.

Following the second world war other programs such as employment insurance, family allowance and a universal old age security program were introduced. There was also a need for a public pension plan, a portable national pension, that could be carried from job to job and from province to province. This need was met in 1966 with the introduction of the Canada pension plan, a compulsory earnings based national plan to which all working Canadians could contribute.

The CPP provides wage earners with retirement income and financial assistance to their families in the event of death or disability. Set up jointly by the federal and provincial governments, the CPP was designed to complement, not replace, personal savings and private employment pension plans. It should be noted that Quebec administers its own complementary plan, the Quebec pension plan.

As hon. members know, the Canada pension plan is one of three supporting pillars of Canada's retirement income system. This system is a blend of public and private pension provisions and is considered internationally as one of the most effective ways to provide for retirement income needs.

The first pillar is our old age security program provides public pensions for senior citizens and ensures all Canadians a basic income in retirement.

The second pillar is the Canada pension plan, the focus of today's debate.

The third pillar, the private component of the system, includes tax assisted fully funded employer sponsored pension plans, registered retirement savings plans and other private savings.

Some 30 years after the Canada pension plan was launched concerns were raised about its sustainability. In the early 1990s the Chief Actuary of Canada warned that CPP assets, the equivalent of two years of benefits, would be depleted by 2015 and that contribution rates would have to increase to more than 14% by 2030 if the plan remained exactly as it was. These concerns needed to be addressed. After all, future generations of Canadians, including our children and grandchildren, needed assurance that the plan would be there for them at a reasonable cost.

As the plan's joint stewards the federal and provincial governments subsequently released a document entitled “An Information Paper for Consultations on the Canada Pension Plan” which outlined the challenges facing CPP in the coming years and options for reform.

In February 1996 the federal and provincial governments announced that joint cross country public consultations with Canadians would be held on the Canada pension plan to find out what ordinary citizens wanted to see done. Guided by panels of federal, provincial and territorial elected representatives, extensive consultations were held in every province and territory. Governments heard from actuaries, pension experts, social planning groups, chambers of commerce, seniors groups, youth organizations and many concerned individuals.

A common theme emerged during the consultations. It became clear that Canadians wanted the government to preserve the Canada pension plan by strengthening its financing, improving its investment practices and moderating the growth costs of benefits.

In 1997 the federal and provincial governments adopted a balanced approach to CPP reform so that the plan could meet the demand of the coming years when the baby boomers would be retiring.

Changes to the plan included limited changes to benefits and their administration, a moderate increase in CPP contribution rates and the building up of a larger asset pool while baby boomers were still in the workforce. The asset pool would be invested in the markets and managed at arm's length from government for the best possible rates of return. All together these measures ensured that a contribution rate of 9.9% would be sufficient to maintain sustainability of the plan indefinitely.

These reforms, which were endorsed by the provincial and federal finance ministers five years ago, will help ensure that Canadians have a pension plan on which they can always depend.

In the three actuarial reports since the reforms, the chief actuary has confirmed the long term viability and financial sustainability of the CPP.

A new market investment policy to be implemented by an independent organization, known as the Canada Pension Plan Investment Board, was a key element of CPP reform. The CPPIB was set up in 1998 and began operations the following year.

Before the CPPIB was established, the CPP investment policy dictated that all funds not immediately required to pay benefits and administrative costs had to be invested in provincial government bonds at the federal government's investment rate. This represented an undiversified portfolio of securities and an interest rate subsidy to the provinces.

The creation of the CPPIB, with a mandate to invest in the best interests of CPP contributors and beneficiaries and to maximize investment returns without undue risk of loss, meant that CPP could be partially funded, in contrast to the 1966 “pay as you go” CPP. The CPPIB reflects a fundamental policy change with respect to investment CPP funds.

The CPP funds that are not needed to pay benefits and expenses are transferred to the CPPIB and prudently invested in a diversified portfolio of market securities in the best interests of contributors and beneficiaries. Certain CPP assets will remain with the federal government and are the focus of Bill C-3 which I will discuss in a moment.

Before doing so, I want to point out that the CPPIB functions within an investment policy framework that is similar to other large public pension plans in Canada, such as the Ontario Teachers' Pension Plan and the Ontario Municipal Employees' Retirement System, OMERS.

For example, it operates under similar investment rules which require the prudent management of pension plan assets in the interests of plan contributors and beneficiaries and is free to hire its own independent professional managers. The Canada Pension Plan Investment Board is subject to the foreign property rule like other pension funds.

I would like to make a few additional comments about the CPPIB and how it functions before discussing the bill.

It is important to understand that the governance framework of the CPPIB was designed to ensure full transparency and accountability. Because the CPPIB operates at arm's length from governments and is responsible for billions of dollars of retirement funds belonging to CPP contributors and beneficiaries, it is imperative that the board be fully accountable to the public and governments. CPPIB funds are managed prudently to the highest professional standards, with qualified managers making investment decisions.

Let me assure the House that the CPP Investment Board is fully accountable to CPP plan members and federal and provincial governments. It keeps Canadians well informed of its policy operations and investments in a number of ways.

First, the CPPIB makes its investment policies and financial results public. Second, it releases quarterly financial statements. Third, the CPPIB publishes an annual report that is tabled in Parliament. Fourth, the board holds regular public meetings in each participating province at least every two years to allow public discussions and input. Fifth, the CPPIB maintains a very informative website.

Full accountability is also assured through a robust process, with strong checks and balances, that is in place for identifying and appointing CPPIB directors. Great care was taken in structuring the CPPIB to ensure that its board of directors was independent and accountable to CPP contributors and beneficiaries.

Following consultations with the ministers of finance in the participating provinces, the federal government appoints directors with high qualifications. The Minister of Finance also consults with provincial ministers of finance and with the board of directors on the appointment of the chair of the CPPIB.

Directors are chosen from a list of qualified candidates recommended by a joint federal-provincial nominating committee which is comprised of one representative from each of the nine participating provinces. The criteria used by the nominating committee to identify potential candidates for director have been made public. In addition, in making appointments to the board of directors, consideration is given to ensuring that a sufficient number of directors have proven financial ability or relevant work experience to ensure that the CPPIB carries out its objectives. As a result, individuals who sit as directors have extensive business, financial and investment expertise.

I am pleased to say that the independence and quality of the CPPIB of directors has received strong support from public and pension management experts.

Independence from government in making investment decisions is critical to the CPPIB success and public confidence in the CPP investment policy. This is of the utmost importance because the money that the CPPIB invests today, and the higher returns earned, will be used by the CPP to help pay the pensions of working Canadians who will begin retiring 20 years from now.

Let me turn now to the measures we are debating today.

Through Bill C-3, the federal and provincial governments are implementing the final steps of CPP reform launched in 1997. All CPP assets remaining with the federal government would be transferred to the CPPIB over a three-year period. These assets include a cash reserve and a large portfolio of mostly provincial government bonds. These asset transfers will represent the last steps of the path established by the federal-provincial governments in 1997 to invest in CPP assets not immediately required to pay benefits in the market by an independent professional investment board.

There are several advantages to putting all CPP assets under one independent, professional organization.

To begin, consolidating all assets under one organization will put CPP on the same footing as other major public pension plans, thereby providing fund managers with the flexibility to determine the best asset mix and investment strategies to manage risks and optimize returns for all CPP assets.

Analysis undertaken by the chief actuary of Canada indicate that CPP assets fully invested in the market would be expected to earn a greater return and thereby grow more rapidly for the benefit of present and future CPP contributors.

The benefit of the transfer of assets under Bill C-3 is very significant. Based on the financial projections in the chief actuary's 19th report, CPP assets would increase by approximately $85 billion over the next 50 years and by $72 billion in 2050.

Obviously this welcome result would add considerably to the soundness of the Canada pension plan and enhance the confidence of Canadians in their public pension plan. In addition, transferring the CPP bond portfolio to the CPP investment board over three years would provide for a smooth transition for capital markets, provincial borrowing programs and CPPIB.

Finally, all changes in the CPP and CPPIB legislation would require the approval of the provinces. I am happy to report to the House that provincial and territorial governments unanimously support these changes. This is important. Also, before the new legislation comes into force the provinces would need to formally approve the changes.

Bill C-3 essentially completes the process that the federal and provincial governments began in 1997 of investing CPP assets in the market by an independent professional investment board.

The end result of this move for the Canada pension plan would be increased performance, better diversification, and enhanced risk management of the entire CPP portfolio.

I wish to remind the House that during the 1997 public consultations on CPP reform, Canadians told their governments to fix CPP and to fix it right. Canadians also told their governments to preserve the CPP by strengthening its financing, improving its investment practices and moderating the growth costs of benefits. The provincial and federal governments have addressed these requests.

I should mention that the transfer of CPP assets to the CPPIB would have no impact on the Quebec pension plan which is administered separately from CPP.

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

Ours is a government with a conscience. Together with the 1997 reforms the measures in the bill would ensure that the Canada pension plan remains on sound financial footing for future generations. With the transfer of all CPP assets to the CPP investment board Canadians can now feel secure that prudent, sound investment diversification, as well as increased performance would result.

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

[Claude Drouin, Liberal, for the Minister of Finance]

moved that Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be read the second time and referred to a committee.

Business of the House

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

Mr. Speaker, obviously the government will not stop functioning. It works all the time, seven days a week.

This afternoon we will continue with Bill C-4, the nuclear waste legislation. It will be followed by Bill C-2 respecting the Yukon and Bill C-3, if we have time available, respecting the Canada pension plan investment legislation.

Tomorrow shall be the sixth and final day of the address debate. This will result in a deferred vote until our return. Next week is a constituency week for all hon. members. When we return we will pick up the legislative agenda where we left off today. I will add that Bill C-14, the diamonds legislation, was introduced earlier today.

I should like to announce that the first allotted day shall take place on Thursday, October 24.

Canada Pension Plan

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

moved for leave to introduce Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

(Motions deemed adopted, bill read the first time and printed)