Bill C-253 (Historical)

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

Income Tax Act

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Denise Savoie, NDP, Victoria, BC]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Similarly, the Canadian Federation of Students said:

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

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

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

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

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

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[The Deputy Speaker, Bill Blaikie]

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

The House resumed from June 21 consideration of the motion 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.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

Mr. Speaker, it is a privilege to engage in debate today with my fellow colleagues on Bill C-253, sponsored by the hon. member for Pickering—Scarborough East.

The bill proposes two major changes to registered education savings plans, or RESPs, that would affect contributions made in 2006 and future tax years.

We all agree that post-secondary education is important for the future of our children and for the future of this country. A well-educated workforce is a critical factor to improving Canada's productivity and raising our standard of living. In a knowledge based economy, our young people must have the skills to compete successfully in an increasingly sophisticated labour market.

More than half of the new jobs created today require post-secondary education. We can only expect education requirements to increase over time. We want our children to have access to post-secondary education and we want that education to be second to none.

The bill before the House today proposes an increase in support for post-secondary education by providing additional tax preferences for RESP savings. However, I believe this bill is not the best way to promote post-secondary education.

First, I will give a brief overview of the considerable support the Government of Canada provides for post-secondary education; second, I will explain the significant support that is already provided for education saving; and third, I will explain why measures proposed in the bill presented by the hon. member for Pickering—Scarborough East would not be cost effective ways to support post-secondary education.

The Government of Canada provides significant support for post-secondary education. In addition to transfers to the provinces, the Government of Canada provides over $5 billion annually in direct support to post-secondary education. Of this amount, $1.7 billion is provided to educational institutions for research to help ensure our brightest researchers stay in Canada and contribute to maintaining Canada's edge in innovation. Also, $1.8 billion is provided in grants, scholarships and loans to improve access to post-secondary education for low income students and rewarding those who attain academic excellence. We also provide $1.7 billion in tax relief to students and their families in recognition of the cost of post-secondary education through measures such as the tuition tax credit and the education tax credit.

This government's commitment to post-secondary education was evidenced in the 2006 budget presented in the House on May 2, 2006. The budget follows through on our platform commitments by proposing to create a textbook tax credit. The credit will be provided of $65 per month for full time study or $20 per month for part time study.

This government also recognizes that post-secondary students need to be supported in their hard work in the pursuit of academic excellence.

[Dan McTeague]

It is a pittance. It is one textbook.

[Joe Preston, Conservative, Elgin—Middlesex—London, ON]

I am glad to hear that the member opposite agrees with me.

Budget 2006 discards the previous $3,000 partial exemption and proposes to make all scholarships and bursaries received by students enrolled in post-secondary studies completely exempt from tax.

Budget 2006 also proposes to improve access to student loans by reducing the parental contribution required for students from middle income families for the purpose of student loans. It is estimated that this change will enable 30,000 students to gain access to assistance and 25,000 to have access to increased loans.

The government will also provide a one-time payment of $1 billion into the post-secondary education infrastructure trust, providing that the 2005-06 surplus is in excess of $2 billion. The trust will support critical and urgent infrastructure and equipment in colleges and universities.

Budget 2006 also included funding for research and development and measures in support of apprenticeships and trades.

Let me turn to the assistance that is already provided for education saving. RESPs are given preferential tax treatment to help parents save for their children's post-secondary education. Up to $4,000 can be contributed to an RESP in a year for each beneficiary to a lifetime maximum of $42,000 per beneficiary. Funds invested in the plan grow tax free until they are withdrawn. Contributions are not deductible, but can be withdrawn tax free. Investment income earned in the plan is taxed in the hands of the students when withdrawn for post-secondary education. In short, the tax benefits in an RESP come from two sources: the deferral of the tax would be investment income and the fact that this income is taxed at a low rate because students generally pay little or no tax.

In addition to the tax preferences I just described, RESP savings qualify for the Canada education savings grant, or CESG, which makes saving in an RESP even more attractive. Under this program, which is aimed at encouraging saving for post-secondary education, the government provides a 20% grant on the first $2,000 in RESP savings for each beneficiary in a year.

To illustrate how this works, assume a parent contributes $2,000 to an RESP for his or her child, the contribution would earn $400 in CESG and the income on both the contribution and the CESG would grow tax free until the funds were withdrawn to cover the cost of the child attending college or university.

Further, because it is more difficult for low and middle income families to save for a child's post-secondary education, the Canada education savings grant provides a higher grant rate on the first $500 in contributions by these families. Depending on family income, the grant rate could be as high as 40%.

In addition, since 2004, the Canada learning bond kick-starts education savings for children born after 2003 and who are in families entitled to the national child benefit supplement. Up to $2,000 in total Canada learning bond grants could be paid in a child's RESP by age 16. These measures were adopted with our support.

In fact, the current RESP limit, saving $2,000 annually into a child's RESP, means that almost $75,000 could be available for that child's post-secondary education by age 18, and about $95,000 would be available if the parent contributed $4,000 annually until the $42,000 lifetime limit was reached.

The combination of the generous tax treatment of the RESP and the CESG that tops up private savings has provided powerful incentives for parents to save for their children's post-secondary education. At the of 2005, these plans held almost $18 billion in savings for future post-secondary education, seven times their value nine years ago.

Since 1998, $2.7 billion in Canada's education saving grants have provided for over 2.2 million children. Over $440 million in grants was paid into RESPs under the program in 2005. In addition, the tax deferral provided by RESPs represents about $130 million per year in forgone revenue for the Government of Canada and about half that amount to the provinces.

In total, the Government of Canada devotes over $570 million annually to tax relief and grants to help parents save for their children's post-secondary education. I believe nobody would dispute that the current RESP regime has been extremely successful at promoting savings for post-secondary education.

Let us consider the impact of the measures under Bill C-253.

First, the bill proposes to provide a deduction for contributions to RESPs made in 2006 and future tax years, with contributions withdrawn being taxed in the contributors hands rather than tax free as is currently the case.

Second, contribution limits would be raised to be the same as those applying for registered retirement savings plans, or RRSPs, that is 18% of the earned income up to $18,000 for 2006.

The bill is supposed to encourage parents to save more for their children's post-secondary education, but I suggest that the measure proposed in the bill would be ineffective and would be expensive.

For these reasons and many others, I am unable to support the bill and invite my colleagues to do the same.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I am pleased to rise and speak to a subject of ever-increasing concern here in Ottawa and in the eyes of the population. Post-secondary education, and particularly its accessibility, is a very topical issue.

The Bloc Québécois is in favour of the principle of this bill because it is an improvement over the current provisions of the Income Tax Act, which governs the registered education savings plan—RESP—program.

To summarize the bill briefly, a registered education savings plan is created from contributions out of after-tax income. Such contributions do not entitle contributors to a tax deduction, as is the case for contributions to a registered retirement savings plan or RRSP, but the investment income that is earned on the contributions accumulates in the RESP and is tax-free. The investment income is taxed only when it is withdrawn from the RESP. If the savings are withdrawn to finance the beneficiary’s post-secondary education, the investment income will end up in the hands of this beneficiary.

The problem is that not everyone can afford to make contributions to a registered education savings plan, since a substantial income is necessary in order to do so. People prefer to contribute to an RRSP rather than an RESP.

This bill, if passed, will make it possible for parents and families to benefit from a tax deduction, as they do with an RRSP.

Putting such a measure in place would come with a cost, of course, but it would foster the growth of our society and have an undeniably positive impact on its development.

Bill C-253 has numerous shortcomings. It nevertheless remains that it is an improvement as far as the RESP program is concerned.

During the first reading of this bill, my colleague from Jeanne-Le Ber identified the bill’s chief shortcomings in his speech. I would like to do a quick review of the RESP program and the advantages for society of passing such a bill.

Although the registered education savings plan program has been around for 30 years, the federal government has given it special attention of late. In 1998, the federal government created the Canada Education Savings Grant, the CESG. This is a grant of a maximum of 20% of the contribution made, which provides the beneficiary with an extra $400. This means that, when a parent or grandparent contributes $2000, $400 will be added to the RESP of a child under the age of 18.

Bill C-253 is a continuation of the improvements that began a few years ago. According to the statistics for 2002, the participation rate for the registered education savings plan was only 6% in Quebec; that is right, I said 6%, while it was about 10% in Ontario and in British Columbia.

At present, a large number of parents and grandparents do not contribute to a registered education savings plan because it does not constitute a deduction from an individual’s taxable income. In addition, some people do not have the financial resources to do so.

Therefore, people prefer to put their money into registered retirement savings plans. However, it is a good bet that more people would like to benefit from a RESP if there were an income tax deduction similar to the deduction for RRSPs.

What the bill seeks to do is to target an often-neglected group of taxpayers, who are already asked to make more than their share of sacrifices in our society. I am talking about the middle class; the class that includes the largest number of Canadian citizens. What this bill offers is greater accessibility to post-secondary education.

The education of our children and our grandchildren is often a cause for worry and concern not only for parents, but also for the expanded family, the grandparents, aunts and uncles. Many of them fear that they will not be able to pay the increasingly higher costs of post-secondary education. The introduction of an incentive for the contributor and the beneficiary represents an investment by the government in today’s young people and gives hope to a great many young parents, young families and grandparents.

On the other hand, if the beneficiary does not pursue post-secondary studies and no other beneficiary is designated, the contributor can receive the income from the investment under certain conditions. The funds could be transferred to a registered retirement savings plan without penalty, up to a maximum of $50,000 if the individual’s RRSP contribution ceiling allows. Otherwise, a 20% income tax deduction would be made on the withdrawal and the amount that could not be transferred to an RRSP would have to be added to the individual’s income for the year. We are talking here about only the accumulated investment income within a registered education savings plan because the capital is not subject to income tax.

It is certain that the adoption of such a bill could be very costly for taxpayers because, at present, those who contribute to a registered education savings plan are not able to deduct that contribution from their income. Therefore, those households with higher incomes will benefit even more from such a measure and low-income families will see little or no advantage. However, no program is perfect and Bill C-253 represents an excellent incentive to parents and families.

In summary, I would say that this bill would enable an individual making a contribution to an RESP to deduct that contribution from income, which is almost identical to the practice for an RRSP. In closing, I want to congratulate the member for his bill and thank him for his interest in the education of our children and our grandchildren.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, I am pleased to have the opportunity to join in this debate on Bill C-253, a private member's bill put forward by the member for Pickering—Scarborough East to adapt and change the RESP contribution program.

Unlike my colleagues from the Bloc and my colleague from the Conservative Party who has spoken, I am going to put on the record remarks of deep concern about this particular private member's bill. I am sure it will come as no surprise to the member for Pickering—Scarborough East that while we appreciate his work in this area, we feel that his efforts are misplaced and the focus of the bill is misplaced. Through this bill we will not necessarily accomplish what I believe he wants and what we all want, which is greater access to post-secondary education for our young people. That is clearly a burning desire from all of us.

We hear daily from constituents and from young people across this land how much they want to go to university or college to pursue their educational dreams and aspirations only to learn that the obstacles sometimes are so great as to prevent them from fulfilling those dreams. Here are the questions we have to ask today. Does this bill advance the public agenda in that regard? Does it make it easier for our young people to access post-secondary education? Do the costs outweigh the benefits or not?

That is why I rise today with deep concerns about this particular bill. We have just finished a whole series of pre-budget consultations. We heard from numerous groups involved in education, students, teachers, researchers and administrators. In each and every case the demand from the education community, and from families who are concerned about opportunities for their children, was for increased responsibility and roles on the part of the federal government in the post-secondary education system.

Each and every one of those representatives called upon the government to redress the serious problems that befell our system when the Liberals cut the heck out of education back in 1995 with their infamous federal budget. They basically set us back an entire decade with their regressive and extreme views in terms of dealing with the fiscal challenges of the day. We are still trying to recover from that period. It is not helpful to have another patchwork approach to a very serious systemic issue.

All we have had over the last decade is one band-aid after another. That has been the Liberal approach to education in this country. First the Liberals cut the heck out of the system, then they promised when they had a surplus, they would deal with it and put the money back. What did they do instead? They gave huge tax breaks to corporations and put all the surplus available against the debt. Nothing was done in terms of dealing with the systemic problems facing access to post-secondary education.

This bill is another band-aid on top of a band-aid. This is like trying to fix up a patch that is already on a system that is bleeding and hurting. This is not serving the country.

I do not need to tell the House how difficult it is these days for students to access university given the rising costs of tuition. The evidence is all around us.

Mr. Speaker, it would certainly help if you could bring some order to this chamber. It is very hard to hear oneself think when there is that kind of nattering going on in the Liberal benches.

[The Acting Speaker, Andrew Scheer]

Order, please. I think the member for Winnipeg North makes a good point. It is often difficult to hear members, especially those who sit down at that end of the chamber. It is difficult for the Chair to hear her comments when so many people are carrying on side conversations. If anybody needs to converse, please take advantage of the lobbies on either side of the chamber.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you Mr. Speaker, I was having trouble hearing myself think. I know I was saying a few things that are agitating the Liberals, but I hope they might appreciate that there are different views on this issue. We are not speaking against the RESP per se, except that it is a time of limited resources and I will concede that point.

We heard from the Liberal finance critic many times about limited choices and limited resources. Therefore, there are choices that we have to make and I will concede that we have to make some hard choices.

I want to ensure that the dollars we spend go the furthest. I want to ensure that whatever we do is opening the doors wider for students from all backgrounds. I know from this proposal that we are going to see a huge loss of public revenue that could be spent elsewhere.

In fact, right now we spend about $135 million as a result of foregone revenue with the RESPs. With this proposal, we will lose much more than that, at least $460 million in the first year. That is a lot of money that serves a very small group of people and is confined to not middle income earners, as my colleague from the Bloc has suggested, but is restricted to benefiting largely those at the high end of the income scale.

It would probably be useful for the House to know what a couple of the organizations told us during our pre-budget consultations with respect to the general matter of education tax measures.

I would like to quote from a reputable organization, the Canadian Association of Student Financial Aid Administrators. These are people who deal daily with the problems students are facing. They deal daily with trying to find ways to ensure that access is there for students of all backgrounds for post-secondary education. They concur with all of us when we say that probably the most important thing we can do as parliamentarians in a competitive world is develop a skilled and educated workforce and a post-secondary education is the primary means of achieving this objective. This organization tells us:

Since 1998 the federal government has spent increasingly on student assistance through fiscal measures introduced to the tax system...scholarship and bursary exemptions, credits for tuition fees and an allowance for each month of full time enrolment, as well as contributions to Registered Education Savings Plans.

--these tax credits are distributed almost entirely without reference to need. Several studies suggest that families from higher income ranges benefit disproportionately...they do little to assist high need students and underrepresented groups, for example, students from low income families, students with disabilities, aboriginal students, adult learners to enter our post-secondary education system.

This organization goes on to say:

We believe that means tested student financial assistance that is accessible through a simplified application process, that delivers funds at the time that expenses are to be incurred represents the most effective use of taxpayers dollars.

I think that is a point that has to be considered in this debate. I would further point to a brief presented to our finance committee by the Canadian Federation of Students which also exemplifies the problems we have in pursuing a tax credit approach to education as opposed to an investment in our post-secondary institutions to ensure greater access. The Canadian Federation of Students brief states:

Since the mid-1990s, the federal government has increasingly looked to tax expenditures as a substitute for directly allocated student financial assistance. In total, federal tax expenditures for post-secondary students have grown from $566 million in 1996 to more than $1.46 billion in 2005. This represents a 213% increase in real dollars and more than the total amount the federal government will spend on upfront grants this year.

It goes on to say that, in fact, this approach has virtually benefited those at the high end of the income scale and contributed to the growing barriers that low income people face in trying to access post-secondary education. The problem is about choices. It is about where do people put their money, how do they get the best bang for their buck.

While this RESP is something that could be part of an overall package, if one has to make choices in the context of a time when we are still recovering from the gutting of our post-secondary education transfer system and down to a federal share of a single digit, we have to do something much more significant and meaningful than tinkering with this band-aid approach.

I would suggest that we put this on hold and get down to the real issue at hand which is access for all students to post-secondary education.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Mr. Speaker, I am pleased to speak to this bill tonight and congratulate my colleague from Pickering—Scarborough East for this initiative. I think it is very important. As a former educator I can say how important this is to students across the country.

I heard earlier about the gutting of transfers to the provinces with regard to post-secondary education. I might point out to members in the House that in 1993 the Liberals inherited a $42.5 billion deficit, of which 33% of the money was borrowed. When we were transferring money, we were transferring borrowed money. It was not real money.

So, to suggest that we gutted the system, we in fact got our fiscal house in order, so that we could now do the kind of program that the hon. member who just spoke would like to see. What is the proposal this evening? It is basically to help young people and their families better save for an education.

We know that two out of every three jobs require more than a high school education. Tuition fees have continued to double. Tuition is the responsibility of the provinces not the Government of Canada. We know that it has gone from around $2,000 six years ago and by 2012 we are looking at about $12,000, and never mind the books and residence costs, et cetera. Then we are talking tens of thousands of dollars.

The hon. member for Pickering—Scarborough East has proposed to build on a Liberal initiative, which of course is the issue of the registered education savings plan. At the moment it is not deductible. I am assuming that all members in the House have constituents who pay taxes. When we pay taxes, we would like to see some benefits.

Unlike an RRSP, a registered retirement savings plan, currently under the registered education savings plan, we cannot deduct, there is no tax benefit. Imagine a family that saves $100 to put into a program that the hon. member has put before the House. If one does that 12 times in a year, there would be $1,200 which would be tax deductible. Individuals would get a break and that would be an incentive for the family, whether it is the parents, grandparents or whatever, or the student.

Having worked with students over the years, they do not earn a lot of money at summer jobs. They do their best, but it is not going to cover all of the bills. How do we fix that problem? The hon. member is proposing that we have a tax deduction.

We are not going to solve all the ills or all the problems of a post-secondary education, but we want to be on the leading edge of technology. If we want to be a knowledge based economy, we must have the people in universities and colleges to learn. They cannot learn unless they obviously have the money to go. This is really important.

We hear educators talk about the proposal as an important step in advancing educational opportunity. We hear unions talking about the importance of advancing this for educational opportunities for young people. We are investing in young people and if I have an opportunity to put $100 a month or a $1,000 or whatever it is, and I am going to get a tax break, that is an incentive.

However, it also builds and it does not mean that it is going to be the be-all and end-all. There are going to be other ways that people are obviously going to deal with it, whether they have a summer job or whatever it happens to be, but the important part is that this is going to stimulate people in that regard.

The prosperity of the country is based on knowledge and on higher education. We are very fortunate that we have an excellent post-secondary system across the country. In fact, our college system in the province of Ontario was modelled in Vietnam. The Vietnamese modelled the college system in the province of Ontario because they saw that it was an important level that they did not have. We have a great system here. We need to motivate people.

If we are going to deal with skill shortages, which we do have in this country, one of the things we must do is invest in young people. Again, this program will do that and I think it is very important when we are talking about our competitiveness with other countries around the world. We need a highly skilled, motivated workforce. We want to ensure that we have continued economic prosperity and this bill will assist in efforts to obtain those funds.

I do not think the member for Pickering—Scarborough East said that this would cure all the ills around post-secondary education, but I believe his bill should be before a committee for review in order to have a good discussion about the points that all members have raised. There have been good points from all sides but the bill needs to be studied and to move forward.

At the moment only 27% of Canadians actually have RESPs, only 27%, so 73% of Canadians do not have them. This again is an incentive for people, which is extremely important. Twenty-seven per cent is a very low figure. Making contributions tax deductible, as this bill proposes, would give that initiative to families. It would be another opportunity to move this agenda forward. I know we in the House all believe that the betterment of young people is important and we want to make sure they have the kinds of opportunities and education that the generations before them did not necessarily have.

It is a way of addressing some of the educational costs. Yes, there are other issues in terms of transfer payments to the provinces which I am sure the government looked at, as the Liberal government did. Again we have to make sure when we transfer money to the provinces that the funds are earmarked for the purpose for which they are being sent. If they are sent simply in bulk form to deal with health, post-secondary education, social programs, et cetera, and it is administered by the provinces, there is no guarantee the money will get to where it should have gone.

When this bill comes to a vote, I think all members in the House will look at the situation in their own ridings. I know that other members have been visited in their offices by young people who have talked about the massive debt that often occurs after they leave university. There are some students who cannot even go to university because their families cannot afford it and they wish they had some kind of vehicle to help them. This is what this bill addresses.

Employers are demanding post-secondary graduates. It is not enough to have a bachelor of arts degree these days. Employers are demanding masters of arts degrees and MBAs. If students cannot afford to get a bachelor of arts degree, where are we going to be against the emerging economies in the world? Where are we going to be against Japan? Where are we going to be against the European Union and the Chinas of the world in devoting that kind of energy? We need to make sure.

For me it is a motherhood and apple pie issue. How could people not want to support something which may advance education in this country? At least send the bill to a committee to look at. The hon. member has put a lot of thought and effort into this bill. He sees the same problem that I see, that even though people have the ability, they cannot go to university.

It was the previous Liberal government that brought in the millennium scholarships, which made a huge difference to students in my riding. Unfortunately, certain provinces clawed back. The hon. member knows about the clawback that occurred, including in the province of Ontario, under the previous Conservative government.

[An hon. member]

And the NDP voted against it.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

And the NDP voted against it my friend reminds me.

This is not a cure-all but it is a very important tool in assisting students and we need to look at that. I am sure the government will be looking at other issues with regard to transfers, but at the end of the day I would not want a student to come into my office and say that we had an opportunity to help but we did not do it because of some issue about not solving all the problems of the world. Let us look at it.

When I was on the finance committee as parliamentary secretary these were the kinds of initiatives that were important to look at because they advanced a big agenda. The most important agenda that I think members in the House support is the knowledge agenda.

I again want to thank the member for Pickering—Scarborough East. I urge colleagues to look at this issue very carefully when it comes up for a vote.