Mr. Speaker, I am pleased to speak to Bill C-253, An Act to amend the Income Tax Act sponsored by my colleague, the hon. member for Pickering—Scarborough East. I am also pleased by the Speaker's announcement today that the bill can proceed in its present form in spite of previous concerns that it might have exceeded the jurisdiction of private members' business. The purpose of the bill is to allow contributions to registered education savings plans, RESPs, to be tax deductible similar to the way Canadians already deduct contributions to registered retirement savings plans, RRSPs.
I need to digress a little. Today has been a rather difficult day for Canadian investors. Contrary to what Conservatives told Canadians prior to the last election, the finance minister announced that he has decided to flip-flop on the income trust issue and slap a tax on the distribution. Within two hours of trading today Canadian investors lost $25 billion in retirement savings affecting virtually all sectors of the economy and unfortunately creating a sudden and bleak future for hundreds of thousands of pensioners.
That being said, I wish to return to the proposal brought forth in Bill C-253. I believe this proposed legislation warrants further consideration. I believe it is important to support this bill at second reading so that it can be referred to committee for an in-depth analysis. The reason is simple. We acknowledge that the cost of post-secondary education is becoming extremely expensive for average Canadian families, especially those with more than one child to educate.
Students are graduating with an excessive amount of debt and many say they simply cannot afford an education. This is a troubling situation especially since our future productivity is dependent on the next generation of students. Currently Canada has the highest participation rate in post-secondary education among the OECD countries, but that ranking is in severe jeopardy if the federal government does nothing to change the situation.
Bill C-253 would encourage more parents to participate in the registered education savings plan because they would see the fruits of this program at the end of every tax year. As we heard from my hon. colleague, only 27% of parents participate, so the bill would encourage more participation. This would be beneficial to Canada because we would have a more educated population and hence a more productive population.
In addition, the savings that are incurred from this tax deduction could be reinvested into an RESP in order to assist families with the goal of maximizing their annual RESP contribution. At present the maximum annual contribution is $4,000 a year with a lifetime limit of $42,000 per beneficiary. These investments grow tax free until a child needs money for tuition. While it is true that Bill C-253 would shift the tax burden from the parents to the child beneficiary, the annual income of a full time student is quite low and any tax liability would be offset by other tax credits while students are still in school.
Currently students emerge from universities with a huge debt. This bill would ensure that students emerged from their education with a much lower student debt. Consider that by 2010 a four year degree program could cost in excess of $100,000. It becomes quite clear that long term planning is required on the part of the students and parents, but also the federal government. This would ensure that post-secondary education does not become a luxury only those families with money can afford.
It is also quite clear that an RESP worth $42,000 would offset a significant portion of the cost of a proper education.
I note with interest that the author, the MP for Pickering—Scarborough East, has considered measures to prevent RESPs from abuse. Bill C-253 proposes severe tax penalties for those who would attempt to take advantage of an RESP's simple tax shelter without any serious regard for the potential beneficiary. In the event that a beneficiary has no intention of going to school, the accumulated income would be subject to a 20% tax on top of the regular tax normally payable on such investments. That I call accountability.
Roughly 50% of college and university graduates graduate with a debt. The average debt amounts to $20,000, making it very difficult for young people to get a headstart in life.
I ask for the support of all members in this House so that serious thought can be given to helping all Canadians access post-secondary education regardless of their economic circumstances.
