Bill C-253 (Historical)

An Act to amend the Income Tax Act (deductibility of RESP contributions)

Income Tax Act

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

moved that Bill C-253, An Act to amend the Income Tax Act (deductibility of RESP contributions), be read the second time and referred to a committee.

[The Acting Speaker, Andrew Scheer]

The hon. government House leader is rising on a point of order.

[Rob Nicholson, Conservative, Leader of the Government in the House of Commons and Minister for Democratic Reform]

Mr. Speaker, I rise on a point of order concerning Bill C-253, an act to amend the Income Tax Act (deductibility of RESP contributions) standing in the name of the member for Pickering—Ajax--Uxbridge. While the intent of the bill is to alleviate the tax burden for individuals who contribute to registered education savings plans, it is my submission that Bill C-253 contains specific provisions that would effectively increase the amount of tax payable by the taxpayer.

If I am correct, the bill should have been preceded by the adoption of a ways and means motion and is therefore improperly before the House.

Two of the amendments proposed in the bill are amendments to section 146.1 of the Income Tax Act, which sets out RESP payments that are to be included in computing a taxpayer's income for a taxation year.

Subclause 2(5) of the bill would add a paragraph (c) to subsection 146.1(7.1) that would require refunds of payments made in respect of any contribution paid by a taxpayer to be included in computing a taxpayer income per taxation year. Subclause 2(6) of the bill would repeal subsection 146.1(7.2) of the Income Tax Act, which excludes certain amounts received under RESPs as income for a taxation year.

Taken together with paragraph 56(1)(q) of the Income Tax Act, which identifies amounts to be included as taxable income under section 3 of the act, these amendments would effectively increase the amount of tax payable by the taxpayer.

Citation 980 of the sixth edition of Beauchesne's states:

A Ways and Means motion is a necessary preliminary to the imposition of a new tax, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of the incidence of a tax so as to include persons not already [tax] payers.

In other words, any measure that would have the effect of increasing the tax burden on an individual should be first preceded by a ways and means motion.

Although the general purpose of these bills is to reduce the tax burden on individuals, this legislation should not evade the requirements of a ways and means motion.

The 21st edition of Erskine May states at page 730:

To escape the rules of financial procedure, a scheme for the alleviation of taxation must not include any incidental increase of the burden upon any taxpayer, however indirect or relatively insignificant that increase may be.

I therefore submit to you, Mr. Speaker, that Bill C-253 is improperly before the House, and if you agree, I ask that the bill be stricken from the order paper.

[The Acting Speaker, Andrew Scheer]

The hon. member for Pickering—Scarborough East.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Speaker, I thank the hon. member for getting the name of my riding right and also for preceding the Chair in pre-empting his comments as to the receivability of the bill.

I have had perhaps as much experience as any member in the House on private members' business. When a bill is presented, it must satisfy two tests, such that your own legislative counsel has been involved with this, Mr. Speaker. Number one is the constitutionality of the bill, on which clearly the bill qualified, and number two, of course, is to ensure that the legislation itself does not require a royal recommendation.

Based on this and the ruling that you made in respect to May 31, 2006, I am going to read this into the record:

Where it seems likely that a bill may need a royal recommendation, the member who has requested to have it drafted will be informed of that fact by the legislative counsel responsible for drafting the bill. A table officer will also send a letter to advise the member that the bill may require a royal recommendation.

Should the member decide to proceed with the bill and select it for inclusion....

Members may then make submissions regarding the royal recommendation and, if necessary, the Chair will return with a definitive ruling later in the legislative process.

Mr. Speaker, you said:

There are a number of bills on the order of precedence which cause the Chair some concern. At first glance, certain provisions of these bills raise questions about the need for a royal recommendation.

I will not exhaust the list, but they are limited to Bill C-292, Bill C-257, Bill C-293, Bill C-286, Bill C-269, Bill C-284, Bill C-278, Bill C-295, Bill C-303 and Bill C-279.

Nowhere in that have the table officers or the legislative counsel been concerned about this bill inviting a question of royal recommendation. What the bill in fact does is provide ample opportunity to reduce for most people the burden of student loans. As a result of that, it is faithful to the existing Income Tax Act.

I point out that if there is any question with respect to taxation, it is already contained within the Income Tax Act as it relates to a withdrawal by a subscriber or a refund in payments; it is subject to a 20% penalty in addition to the regular tax payable. This proposed legislation does nothing to change that and therefore does not invite a question of a royal recommendation.

What is important is precedents, Mr. Speaker, not only by your ruling very recently, but if the hon. member wishes to go back to October 16, 1995, I would ask the hon. member to listen to this very carefully. When Bill S-9 came before the House it was ruled by you, Mr. Speaker, on that date that the bill did not appropriate tax revenue but rather exempted or reduced taxes otherwise payable. I will read this into the record:

The parliamentary secretary to the government House leader noted in his intervention that Bill S-9 is not a bill for appropriating any part of the public revenue or for any tax or impost and therefore does not require a royal recommendation. There will be no expenditure of public funds--

Which of course is contemplated in this bill.

--though money already collected from Canadian citizens pursuant to the tax laws of Canada may be refunded.

As the parliamentary secretary pointed out, the repayment of tax revenues already received is not an appropriation of public money.

Mr. Speaker, I turn your attention to Marleau and Montpetit, at page 711, under the financial procedures section:

A royal recommendation not only fixes the allowable charge, but also its objects, purposes, conditions and qualifications. An amendment which either increases the amount of an appropriation, or extends its objects, purposes, conditions and qualifications is inadmissible on the grounds that it infringes on the Crown’s financial initiative. However, a royal recommendation is not required for an amendment whose effect is to reduce taxes otherwise payable.

Given that ruling by your Chair and your more recent ruling, Mr. Speaker, with respect to the bills that caused difficulty, and notwithstanding the opinion of the House leader of the Conservative Party, who has referred to this not only to myself but seems to have done it with the hon. member for Bourassa last week on his bill with respect to Kyoto, i seems to be a tried and true measure to try to avoid important legislation that can be derived from private members' business.

I would suspect that given previous rulings and the wisdom of your legislative counsel, Mr. Speaker, the bill is very much in order, and I do wish to proceed, with your help, in getting the bill on its way to help students in this country.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, last Friday we had a similar situation on Bill C-288, in which the government House leader rose and made argument with regard to the necessity for a royal recommendation. Today we have another intervention by the government House leader laying out some arguments on Bill C-253, which will be debated shortly.

In both cases, the Speaker, in his earlier statement, identified for the House and flagged 10 of the 30 bills on the order of precedence as likely requiring royal recommendation. That provides an opportunity for members who are in that situation to determine whether there is a way to remedy that requirement, whether it be at committee stage or at report stage, to ultimately get a royal recommendation, which is one of the reasons that the Speaker also indicated that he would not make a final determination until the point at which a vote on third reading will be called.

Under the circumstances, where the government House leader is dealing with bills that have not been flagged already, pursuant to the procedure that has been outlined by the Speaker's office, I would appreciate it if direction could be given and that there can be assurances that should the Speaker's office find that there was some error with regard to the flagging that should have been done but was not done, that the members would be appropriately notified of the basis for that, and that members of the House be given an opportunity to make further representations with regard to the argument that has been made by the government House leader once we can see the details of the arguments that have been made.

[Rob Nicholson, Conservative, Niagara Falls, ON]

Mr. Speaker, first, I apologize to the mover of the bill. The name of his riding is in fact Pickering--Scarborough East. I just want to correct the record on that.

I think I have made it very clear, and I am sure the blues will back me up on this, that this is not a question of royal recommendation. It is the need for a ways and means motion. It is on that basis that I intervened.

Most of the comments were directed with respect to royal recommendations but I made it very clear that the bill needed a ways and means motion to proceed and that therefore it should be struck on that basis.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Speaker, it is very clear where the hon. member is going. If he had taken the time to read the bill, as the legislative counsel has done, I want to make it abundantly clear to him that the tax payable is negated by the initial tax credit.

Mr. Speaker, your legislative counsel looked at this and examined all of the concerns, whether it be a ways and means or whether it be a question of royal recommendation. I merely wanted to point out to the hon. member and to the Chair above all that I am governed by the wisdom of the Chair and I stand by the wisdom of the chair, which is why the bill is in fact receivable. I would like to proceed with debate.

[The Acting Speaker, Royal Galipeau]

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

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

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

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Dean Del Mastro, Conservative, Peterborough, ON]

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

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

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

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

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

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

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

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

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

[Laurie Hawn, Conservative, Edmonton Centre, AB]

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

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

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

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

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

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

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

[Diane Ablonczy, Conservative, Parliamentary Secretary to the Minister of Finance]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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