Bill C-501 (Historical)

An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay)

This enactment amends the Bankruptcy and Insolvency Act to ensure that the claim of a clerk, servant, travelling salesperson, labourer or worker who is owed termination and severance pay by a person is secured as of the date of the bankruptcy or receivership by security on the person's current assets.

[Michael Powell, President, Canadian Federation of Pensioners]

Good morning.

My name is Mike Powell. I am the president of the Canadian Federation of Pensioners.

CFP's 23 member organizations advocate directly for over 300,000 defined benefit pensioners, and our allies represent millions more. We support Bill C-253 and the extension of superpriority to pension deficits. This is the simplest solution to meaningfully improve pension protection for Canadian seniors.

In our Canadian regulatory environment, the only single place to protect pensions is within insolvency regulations. This committee and Parliament face a decision between the status quo—which leaves seniors' future financial well-being at risk and perpetuates an unfair system designed to exclude seniors from protecting their own financial interests, an unfair system that has been proven to significantly harm older Canadians—and a new future that offers protection to vulnerable seniors.

I'd like to address five concerns that stakeholders in insolvency may raise.

The first is that lending rates would increase for companies with defined-benefit plans, leading to more insolvencies. This argument was central in 2010 when a similar bill, Bill C-501, was debated. In 2011, though, the pension deficit was ruled a deemed trust by the Court of Appeal for Ontario in the Indalex case. A deemed trust is the highest priority in insolvency, above the superpriority envisioned in Bill C-253. This ruling stood for two years before it was overturned.

It is critical to note that there was no fallout from this decision. The wave of insolvencies of companies with DB plans that was predicted did not occur. Borrowers and lenders made accommodations, and business continued.

The second is that there would be fewer restructurings and more liquidations. This is also an old and flawed argument that would get a failing grade in a first-year business policy course. Envision submitting a paper whose key assumption of your argument was, “Given a significant change in a regulatory environment, business management would not change their critical strategic decisions; therefore, I will use past results without adjustment in my future model.” Along with a failing grade, there would likely be a comment that basing your argument on inept company management is not recommended in policy development.

The third concern is that this would discourage new DB plans and lead companies to close existing plans. The harsh reality is that DB plans have been on the decline for many years, despite actions taken by governments to reduce costs for companies.

The fourth is that other creditors would be disadvantaged. This is based on the false notion that stakeholders are treated equally today. The impact of insolvency is much greater on pensioners than on other creditors. Pensioners lose a significant portion of their income for the rest of their lives; other stakeholders only lose a portion of the money owed them at the time of insolvency, not their entire contract, nor do they face future reductions in revenue due to the insolvency of one of their customers.

There's also a difference of control. The other stakeholders at the insolvency table have all negotiated their financial exposure. They've made conscious decisions to address payment terms, prices, interest rates and contract conditions. Government treats seniors as wards of the state. Pensioners have no ability to control, approve or even influence their financial risk in insolvency. Pensioners are not even ensured a seat at the insolvency table.

The fifth is that changes made in the 2019 budget have levelled the playing field. Pension protection in 2019 is the proverbial bailing of the Titanic with a teacup. You can measure progress, but it won't change the outcome. We need to ask this: Would the changes in budget 2019 have protected the Sears pensioners? The answer is no.

In summary, government has appointed itself as sole guardian of the vulnerable seniors' future financial well-being. Government legislation precludes pensioners from any form of control or even influence over their pensions in insolvency. Bill C-253 addresses this imbalance.

This committee and Parliament are faced with a decision. You know of the real price paid by seniors left in collateral damage in an insolvency. This is fact. You will hear concerns raised by other stakeholders of theoretical harms. This is speculation. The choice is yours to make. Our 300,000 members strongly urge you to stop treating pensions as piggy banks in insolvency and support Bill C-253.

Thank you.

Third Reading

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I am pleased to stand today to speak on this bill. Members will remember Bill C-501 in the last Parliament, my bill to protect workers' pensions in case of bankruptcy. Although it was not successful and the parliamentary session ended before there was a chance to pass it into law, I was very pleased to see a number of Conservatives stand to support Bill C-501. As they did, it was very clear to the government in the last Parliament that something needed to be done about pensions.

This is the government's answer to protecting pensions for all Canadians. As this bill does not guarantee an actual pension, it is best to refer to this as a savings scheme. That would be a better term for it. I will not go into detail about how it is set up, but there are some problems with it and I would like to outline some of those today.

This pooled pension or savings plan would be managed at a profit by financial institutions, banks, insurance companies and trust companies, and by the very nature of it, there will be an administrative cost on the money everybody puts into the plan. There is no regulation in this bill to regulate the costs that could be charged, and I guess the government's reasoning is that, by doing that, the costs will remain low because there will be competition among the institutions.

By the way, I will be sharing my time with the member for Brossard—La Prairie.

Unlike other pension plans we have seen in the past, workplace plans and the like, this particular pooled plan would not require matching contributions from employers. That is problematic in itself. I suppose there would be some provincial regulations put in place when the plan is set up on whether employers would have to be part of it, but in the bill right now there is nothing like that.

The first big problem with the pooled savings scheme is that it is not indexed to any kind of inflation. Workers would be putting their money aside for their retirement, which is a good thing, money would be deducted for administrative costs over the course of 20 or 30 years or however long they are putting money into this plan, and they would not have an opportunity to take advantage of inflation.

In addition to that, the other problem is that they are not really protected. Because it is not indexed, people will not be protected from the vagaries of the marketplace. As we have seen in the last couple of years, people who have been saving for most of their working lives and had RRSPs, which are not unlike this particular plan because they are privately managed by institutions, in many cases saw the value of their RRSPs drop by 25% or 30%. People have come to my office in Thunder Bay and talked about a 35% drop in the value of their RRSPs. Therefore, there is no real protection.

I would suggest to the government that there is another much simpler way to help Canadians save for their retirement, with fewer fees, indexed to inflation, and the money will be guaranteed to be there when they retire. In fact, they will have a pretty good idea of how much they will be receiving when they do retire. That is using the best pension plan we have in this country, which is the CPP. We put money into the CPP now and most Canadians are happy to do that. I see the benefits of that every day when people come to my office and ask me to help them apply for their CPP or CPP disability, OAS, GIS and these sorts of things. It is wonderful that we have this in the country.

However, what we could have done, and what we still can do, instead of a savings scheme like this, is we could open up the CPP. We could open up the CPP so that people could contribute to the CPP over the course of their working life, at a higher rate for example, or people who are self-employed could pay into it, or people could pay on behalf of a spouse who might be a stay-at-home mom or dad. They could pay into this scheme over the next 20 or 30 years.

Let us just say for example that people were allowed to pay double the contributions they are making now. If they did that, they would of course reap the benefits of CPP because right now they get out of CPP what they put into it, so it would still work.

What happens is that we reduce all those fees. I understand that the government is interested in having private business involved in pension plans. I understand where it is coming from that on that. What I am suggesting is that is not the best way to go about doing this.

If someone were to double their contributions to CPP, if they were allowed to do that over the course of their working life, and that kind of change is not going to help people like me who are nearing retirement, but let us just think about the people who are in their 20s and working. Not many people in their 20s think about retirement.

CPP would be a wonderful vehicle for them to start planning for their retirement. If they did that now, then 10 years down the road the benefit would be somewhere in the neighbourhood of about $1,900 a month when they retire. If it were a gradual shift, a gradual increase in contribution, let us say doubling over the next 10 years, that is what is would be worth. I think it is actually $1,920.

Imagine younger workers being able, over the next 10 years, to double their contributions. There can be an assumption, I suppose, that people who are working will have their wages increase over that time. They are not going to take a disposable income hit to make that investment.

If people did that, we would not be caught in a situation, as the government seems to think we would be, where OAS would have to be raised to 67 from 65. It thinks a big crisis is coming. We can avoid all of that kind of talk. We can avoid that situation by simply doubling the CPP over the next 10 years and allowing a wider contribution pool for people to get into it.

It is safe. It is secure. The market does not affect it at all to the same extent as private savings plans, RRSPs for example. We would have a very secure fund.

The other reason I like the CPP, and I am talking about that as the alternative to these pooled savings plans, is of course that the government cannot get its hands on it. I think that is critical. It is an important part of the CPP and how it is managed today.

There is a protected pension fund that is guaranteed to be there. People know what they are going to have. It is a defined benefit plan. We have seen what has happened in the past with defined benefit plans. We have seen what happens when organizations like Nortel go bankrupt and people are left out in the cold.

In the pooled plan, I wonder what is going to happen. First of all employers are not required to put any portion into it. It is simply a savings plan, an RRSP-related kind of savings plan, for people to have for their retirement. My understanding from the bill is that it is portable.

If employers are not required to match or make contributions, and I suppose some will, perhaps with some kind of collective agreement, but what happens if that company goes bankrupt? What happens to that employer's contributions? Are they safe and secure? There are some very serious concerns about this.

From 2008, when I introduced—

Bankruptcy and Insolvency Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

moved for leave to introduce Bill C-338, An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay).

Mr. Speaker, I am pleased to stand in the House today to introduce my severance protection bill.

As we found out, since 2008 a lot of companies are struggling, which means that a lot of workers and their families are struggling. When companies close their doors, what happens to workers in this country is that their severance pay is unsecured when those bankruptcy proceedings occur.

This is a very simple, straightforward bill with only one clause and it would elevate the status of those payments from unsecured to preferred. My old bill from the last Parliament, Bill C-501, has now been taken over by my friend from Hamilton. I am very glad that the pension part will also be taken care of. This is the severance part.

I want to let everyone in the House know that this is not a political statement. It is a measured and effective proposal that could help workers who are owed money during bankruptcy proceedings. It would do so without disrupting capital markets or negatively affecting the borrowing costs of struggling companies. It would also fulfill a promise that I made to workers from Buchanan Forest Products and others in my riding and, indeed, workers right across this country, that we would protect their severance when their companies go bankrupt.

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

Restoring Mail Delivery for Canadians Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I welcome the opportunity to speak on this today.

As you know, Mr. Speaker, and as my colleagues in the House know, especially my friend from Peterborough, I like to think the glass is half full. He knows that is true.

I just want to point out to everybody in the House that over the past 18 hours or so the government is no longer referring to this as a strike. It is now referring to it as a lockout. That is a very positive step forward, for that is exactly what it is.

Speaking of that, I had an email from someone who publishes a weekly paper in my riding. He asked why, if the government was going to lock people out, it did not give notice to people like him. That is a very good question. We have had that question in the House a number of times. Why all of a sudden did things get stuck at the post office? Things were not going anywhere. People were upset. It was a hardship for many, including this small business owner in the west end of my riding.

Why did the government not give notice, for example? That is in the spirit of compromise. That is in the spirit of saying that the government may have to do something, so we had better sit at the table and work things out.

Why did the government not do that? I do not know. I told the fellow who owns that weekly paper that I would ask that question today. Perhaps in the question period we will have a chance to do that.

The government's insistence on locking out Canada Post employees and sending them back to work is not just an attack on collective bargaining rights. It is also an attack on young workers and an attack on the retirement security of all Canadians.

I want to talk about what the bill says about imposing new hourly pay guidelines on the workers at Canada Post. It is significantly below Canada Post's last offer, which makes no sense at all. In fact, over the four years of this contract, $35 million will be taken out of the pockets of Canada Post workers and their families. That is important: it is workers and their families. That is $35 million that will not be taxed. That is $35 million that will not be spent in the local economy.

What this boils down to is fairness. That is what we are really talking about today and tomorrow. We talk about the younger workers coming into Canada Post and not getting the same deal, getting partial deals of what the older workers get.

We do not have a two-tier system of rent in this country. We do not have a two-tier system of mortgages. We do not have a two-tier system of going to the grocery store and buying groceries. We do not have a two-tier system of filling up our gas tanks. It is outrageous to say that young workers in our country should be paid less than their older counterparts. It is outrageous. They are doing the same work.

I want to say something about pensions, an important element of this, and about the pension changes that the government is trying to impose on workers at Canada Post. In the last legislative session, pensions and retirement security came to the fore in just about every discussion. Bill C-501, my bill, came to Parliament, was voted on a couple of times, and was passed those times. I know that there is a will on that side of this place to ensure that Canadians have the retirement security they need.

In fact, before the last election, the government was actually warming toward increasing CPP and making CPP better. Then the Minister of Finance said it would hurt the economy. He forgot that we were talking about phasing it in over seven years. We were not talking about some big shock.

The Minister of Finance has also suggested that increasing CPP is administratively difficult. The president and CEO of the CPP investment board, David Denison, has made it clear that there is no administrative impediment to enhancing CPP. In fact it is quite the contrary. He says private plans will cost significantly more for the same benefit.

In 2007 Canadian RRSP holders paid private fund managers $25 billion in fees, fees that we do not have with CPP. CPP is simply the lowest-cost option. If that were enhanced, the kinds of negotiations that go on at Canada Post on retirement security would be made easier and clearer and we could plan for the retirement security of those beginning work in their twenties.

A phased-in CPP is an increase from $960 a month to $1,868 a month over the next seven years. What would that mean to the average earner? For people who make $30,000 a year, every week over the next seven years they would pay $2.27 out of their salary to ensure their CPP doubled. It simply makes sense.

We have heard some stories from business owners and other people. Let me talk about Canadians who are hurting, and I am not going to put any blame here. I will read a couple of passages from emails I have received from northwestern Ontario.

This is from a postal worker and her husband. She says:

Our sick leave provisions are such that a fulltime employee earns 10 hours per month of sick leave credits. This sick leave accumulates until you retire. At that time, any sick leave you have not used is gone. WE ARE NOT PAID OUT!!!

That seems to be a misconception of many people. Their sick leave provisions in their contracts are protecting them in case of long-term disability. She goes on to say:

Well, last August, my husband...was diagnosed with cancer and shortly went off work on sick leave. Fortunately, he had almost a year of sick leave credits. As such, he has been able to still provide for us by receiving a regular pay check. His drug benefits were still active as well. This has been a great comfort for him as he has gone through months of treatments and surgery and made this situation much more tolerable. He could just concentrate on healing. He was hoping to be able to return to work by the end of the year and work a few more years. We still have a mortgage and bills like everyone else. We put three kids through University...

On June 2, 2011, CPC declared that our collective agreement was no longer in force. This resulted in [his] sick leave and benefits being cut off....

Lest people think, from this discussion, that it is small-business owners, seniors and others who are suffering because of this. Many people who work for Canada Post are also suffering. This means that Canadians right across the country are suffering.

Another person writes, “I am 62 years old, a single mother. Nine years ago, I became partially disabled, only working a half shift at Canada Post”. Her son is just coming to the end of university. She is already poor. She is asking why her employer proposes to make her poorer.

Here is one from a woman in my riding. She says, “I'm currently on sick leave after experiencing a heart attack. I also have numerous other related health issues”. All her benefits have been cut off. She continues to say, “After only two days without my insulin, my glucose levels have doubled and I'm experiencing difficulty breathing without my puffers and heart medications”, which she can no longer afford. That is what is happening.

We, on this side of the House, and I am sure many on the other side, believe in free speech, free association and free collective bargaining. This legislation hurts the values that our country stands for and is an attack on the rights of workers and their standard of living. The proper role is for the government to tell its own crown corporation to get back to the bargaining table and negotiate a collective agreement, but first it must unlock the doors.

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

Mr. Speaker, first of all, I want to take a moment to wish all Quebeckers, and especially those from my Portneuf—Jacques-Cartier riding, a happy Saint-Jean-Baptiste Day.

This holiday is a special opportunity to spend time with our families, our loved ones, and to celebrate our pride in being a part of the Quebec nation, which has a rich heritage and culture. I especially want to thank the municipalities of Sainte-Brigitte-de-Laval and Saint-Casimir for inviting me to attend their holiday celebrations.

I would have really liked to take part in the activities organized throughout my riding over the last few days, but I absolutely had to be here, in the House of Commons, to support the Canada Post workers with my NDP colleagues who are working very hard. We are working very hard for those people today.

Despite everything that is happening in Quebec, it is very important for me to be here in Ottawa and join the Canada Post workers in defending and retaining their basic rights. Those rights include the right to free association, the right to collective bargaining—which seems to have been forgotten in this case—and the right to safer working conditions and fair wages.

The current situation is utterly deplorable, but we have to remember that this is not a strike, as I heard some of my government colleagues say repeatedly during the night. The workers are instead facing a lockout imposed by Canada Post. This is something we must remember and always keep in mind as we debate this situation. The executives are the ones who made the conscious decision to lock the doors and deprive Canadians of their mail services, despite the fact that these are so essential.

Canada Post workers, even when they were holding rotating strikes, always made sure that Canadians received their government cheques and other important documents. The union even offered to end the strike if Canada Post agreed to let the expired collective agreement stay in effect during the negotiations. To my mind, that was a very obvious sign of good faith.

It is only since Canada Post ordered a lockout that service has been suspended; prior to that, it was not. It is because of this lockout that Canadian individuals and small businesses are not receiving their mail anymore.

Now the Conservative government wants to impose an agreement on Canada Post employees. The Conservative government's special legislation is unacceptable. It is an irresponsible bill that runs counter to the fundamental and inalienable right of workers to negotiate a collective agreement in good faith.

These actions of the Conservative government are depriving both parties of any opportunity to negotiate their own agreement, an agreement they are going to have to live with and work under during the next few years.

In addition, the Conservatives' offer adds insult to injury, as it is worse than what Canada Post had offered workers before the government's useless and unnecessary intrusion. Lower salaries, job insecurity, an attack on their pensions; this is what the Conservatives are offering Canada Post workers. It is a complete disgrace.

Do my Conservative colleagues realize that Canada Post workers deserve better? Improved occupational health and safety, decent salaries and a pension; is that really so much to ask? Apparently so, according to our fine government.

But should the Conservatives' attitude in this matter really surprise us? This is far from the first time that the government has shown such utter contempt toward workers, in particular when it comes to pensions.

In my riding, I do not have to look very hard for a tangible example of the Conservatives' dismissive attitude in recent years. We need only look at what happened to the workers at the AbitibiBowater plant in Donnacona in the spring. Unfortunately, it was announced last spring that the plant would be torn down. As the hon. members are all probably aware, 9,000 pensioners are literally watching their pension benefits disappear before their very eyes because of AbitibiBowater's financial difficulties. Even though their pensions are nothing more than deferred wages, wages that the employer formally agreed to pay them when they retired, in accordance with the terms set out at the time of their hiring, the big bosses at AbitibiBowater have no qualms about dipping into the pension fund whenever it suits their needs.

What have the Conservatives done to help these pensioners? Absolutely nothing. There were calls for help, but nothing was done. To this day, those pensioners are still experiencing problems.

Back then, the hon. member for Thunder Bay—Rainy River introduced Bill C-501, which sought protection for workers' severance and termination pay in the event of a restructuring or corporate bankruptcy, as in AbitibiBowater's case.

In short, Bill C-501 would have given pension funds, as well as severance pay and termination pay benefits, secured creditor status, making them a priority in the event of a bankruptcy. Employers would have lost the ability to choose to reimburse all subcontractors before paying their own employees their deferred wages, as companies should have always done from the outset.

Despite lingering in the House for some time, being debated and seemingly receiving approval, the bill was ultimately defeated by the Conservatives, of course. Shame!

The Conservatives are clearly turning their backs on Canadian workers. Last spring, it was the Donnacona retirees who suffered because of the Conservatives' indifference and contempt. Today, it is the Canada Post workers who are suffering. Who will be next? Which group of workers will the Conservative government try to impose similar working conditions on next? Who will the government try to control once this special legislation has been passed? Everyone is in trouble. Make no mistake. It could happen to anyone, to any group of workers. We need to be very wary.

Personally, I am disturbed by the Conservatives' current attitude. I think that many of my colleagues and fellow citizens from across the country share that sentiment. I am worried about the future of workers' rights when faced with pressure from an employer.

The government's reckless actions are a direct attack on Canada's labour organizations and only serve to reinforce my belief that we need unions that are dedicated to defending the rights of citizens who, like us, work tirelessly to improve their communities. I do not feel that members on the other side of the House are ready to stand up to defend workers' rights as all of my colleagues did throughout the night last night, and as we will continue to do throughout the coming days.

As you know, unions have fought for many years to ensure that our children can go to school instead of having to work in factories, that the salaries workers receive are fair and just, and that workers have safe working conditions.

Very important rights were won through many fierce battles, and these rights include the right to negotiate as equals and in good faith with their employers in order to establish a collective agreement that works for everyone.

It is high time that the government stop eroding the rights of Canada Post workers by interfering so brutally in the collective bargaining process. The government must stop continually siding with management, and it must take concrete action to ensure that the conflict is resolved quickly and satisfactorily. The government has the authority to demand that the lockout cease and that the two parties return to the negotiating table.

Canada Post workers are ready to return to work. They know that they provide an essential service to Canadians and they are aware of their responsibilities and importance in their communities.

All they are asking for is to return to work with dignity and that their request be heard and respected. It is a very small request in the current circumstances. It is high time to end the lockout. We must respect the right of workers to collective bargaining by ending the lockout that prevents the workers from exercising their rights.

Opposition Motion--Seniors' Poverty

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Speaker, as we debate the issue within the House, I first want to thank my colleagues for giving me this opportunity. I also thank the preceding speakers. One of the benefits of talking later in the day is the opportunity to collect bits of information from everybody and then try to articulate as best we can.

I have heard some of the debates. I have heard some very off-the-wall comments, certainly about seniors' poverty. I have also heard some comments that deal with topics other than seniors and poverty, as we sometimes get off track here and start talking about those typical lines we use. It seems like some people are still in campaign mode. Nonetheless, it makes the issue very important.

Everybody has that one essential story, or maybe two or three stories, that encapsulates what it is we try to do here, that we ensure that in a country as great as this, the most vulnerable in society do not slip through the cracks. We want to ensure that those people we identify as completely impoverished do not fall through the system, although we know people do. We see them everyday in our positions, whether we are in the bureaucracy or we are in elected office on any of the three levels. Therefore, we come to the House and bring these stories with us. I am glad to hear a lot of those stories coming out today. That is why I congratulate the preceding speakers.

The motion states:

That, in the opinion of the House, ending seniors' poverty in Canada is fiscally feasible, and, therefore, the House calls on the government to take immediate steps to increase the Guaranteed Income supplement sufficiently to achieve that goal.

To lift the vulnerable of our seniors out of poverty requires the payment that is strategically invested in the GIS, that guaranteed income supplement. It is a wonderful piece of machinery, the third pillar of seniors' pay that is so essential across the country. We have the old age security, the Canada pension plan and now the guaranteed income supplement.

Back in 2005, when I had been elected for only about a year at that point, I remember one of the initiatives we put in place was a strategy for a home heating energy rebate. A lot of people forget that. I have tried to push the government into reconsidering bringing that back. It was in January and it was a heating rebate that was given to recipients of the GIS. For many of the people in my area, and certainly across the country, it allowed people to get over the hump of Christmas and the holiday season, when heating bills are the highest, whether it be through hydro, wood, oil or natural gas.

This is the type of strategic measure that interests me the most because it is one of those initiatives that allows the people who are most vulnerable to stay within their means and in their own homes.

Earlier today, I was talking about a charity that was set up in Toronto and it is called “Share the Warmth”. It is a fantastic little charity that provides energy credits for the most vulnerable to avoid homelessness. One of the things it stated was that over the years, the median age of the recipient was getting much higher, say from the 1980s through the 1990s and into this decade.

The baby boomer surge that is running through the system is now making its presence felt here, even in this debate as we talk about the guaranteed income supplement. However, the issue is all the facets of government investing into bringing people out of poverty. The energy rebate is just one. The guaranteed income supplement that seems to be the king we are dealing with is the one measure that is most talked about. It is the one measure that got most of the attention during the campaign simply because it was the one that was most desirable.

Interestingly enough, sometimes when we debate, we get caught up into the minutiae of the language we use. I noticed earlier that, if I am not mistaken and a simple nod from the opposite will suffice, I believe those members are supporting this motion.

However, one of the things the motion says is “ending seniors' poverty is fiscally feasible and therefore, the House calls on the government to take immediate steps to increase the guaranteed income supplement”. The Conservatives are agreeing with it because they feel they have just gone through this measure.

However, the problem is that every study we have seen puts that dollar value to lift all seniors out of the poverty level at $700 million, at least. What we witnessed in the budget was less than half of that, which leads us to believe one of two things. First is denial. Second is there is more money coming. I like to think the second option is coming, but I really have my doubts.

I want to congratulate the mover of this motion. This is certainly a good time to have this debate, given the fact that we are now into, as I mentioned earlier, the area of our population growth that is burgeoning, around that age level between 60 and upwards towards 80.

I want to go back to couple of other issues. Two years ago I brought a private member's bill to the House. What I noticed was a lot of seniors were very worried, not just about the amount of money that was available, but their ability to budget.

I spoke to a group in Newfoundland and Labrador. It was the umbrella organization for all the seniors' groups. We had a very interesting meeting about the things that seniors needed, those certain measures, those small investments that would make a big difference in the lives of a seniors.

They talked about new horizons, educating them for computer training, allowing them to download pictures of the grandkids, allowing them to take the bus, discounts, whether it be tax credits or not, but discounts were a big one, and payment of utilities. For instance, if people lose a connection to the basic utilities, the reconnection fee is incredibly expensive. Therefore, seniors were looking for major discounts or even a wiping out of the reconnection fees for those who had reached a certain age. I thought that was a great idea, and it is something with which the government could get involved.

The other issue was that every senior, whether he or she was receiving CPP, old age security or guaranteed income supplement, gets paid once a month. Seniors told me that without an increase, they would like to have the option of bi-weekly payments.

We brought in a private member's bill. Now I have heard the government does not support that as of today. I hope, at some point down the road, it will support it. This is one of the greatest listening exercises that we can engage in, and that is with the most vulnerable in society and certainly for seniors who are most vulnerable.

In my riding of 193 communities, the median age is around 56. Therefore, to say that this issue means a lot to me in my position is probably the understatement of the day, certainly by me.

I think about the people in my riding and about all that I have gone through, all that I have seen, all that I have witnessed. People are in desperate need and do not know where to go. We have become the place, whether it is at the federal level or the provincial level, where the most desperate come to, yet we are locked into these departments and these payment programs. We cannot do anything because we would have to change the legislation.

A lot of the seniors in my area are turning to the churches as an act of desperation. To be quite honest, the churches are doing good work to ensure these people are connected to the avenues by which they are able to receive help. I have been here seven years and in the past four years the churches in my area, the Salvation Army, the catholic church and the Pentecostal assemblies, have been on the forefront of providing the most basic assistance.

What is wrong with that picture? The picture shows that we need to get out there more. We need to have a debate that is germane to the situation, something that is relevant, something that is tangible to the most vulnerable seniors.

If there is one thing I noticed in the past while, it is we just have not become tangible to seniors as a place for help, assistance and information. However, at least with motions like this, we can go a long way to alleviating that.

I hope that through programs like the GIS, CPP and OAS we will be able to do a lot more, but the very basic issue is that $700 million investment to bring that large bulk of people out of the poverty level. That is what has been agreed upon, but for some reason we get caught up in the argument of whether that is enough or this is enough, if this is the right number and that is not. I have heard many people say that the money is not available so therefore we have to be more prudent.

That was last year's excuse. This year all of a sudden it becomes a good thing to do. I heard many government members today say that we just had an election which therefore delayed the payment of the $300 million. If the $300 million meant so much to the government today or before the election, why did it not do this four years ago?

The Conservatives have been in power since 2006. There was a time when there was no recession. When they came into power in 2006 I remember quite well that we were flush with a surplus. We were able to forecast surpluses out for a good six or seven years. Then things turned south. Yet at the time just before the recession hit that $300 million was never mentioned.

At least all members of the House have pushed the point. I will not be specific to any particular party, but we feel the need for raising our most vulnerable out of the poverty level as I mentioned earlier.

Just poring over some of the facts when we talk about pension plans, two years ago the largest employer in my riding at the time was AbitibiBowater, a mill that existed for over 100 years. It had what was called the direct benefit plan. Quite frankly, with the closure of the mill last year, that plan is sustaining a large part of the community in which I live. That is right. That DB plan that people villainized is sustaining communities as we speak. Would a direct contribution plan do that much for the most vulnerable communities? There is not a chance.

The world is changing. Finances are changing. Companies are moving away from this. We cannot legislate them to go back. Nonetheless, as government, we have that responsibility to step in and give people choices.

In that particular situation, the solvency ratio was poor with AbitibiBowater. Two years ago it was at 71%. Trouble was ahead. Had it closed out, wound up that account, people would have ended up with 71% of their pension, which still was only a fraction of what they were earning when they were working full-time. It would have been devastating. It has rebounded somewhat, but what can we do to fix that?

We can make better laws. One of my colleagues in the NDP brought in Bill C-501, An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay). The bill itself had some problems, but it had a great principle in mind, which was that the most vulnerable should line up to get attention first.

The companies pay a whole assortment of people when they finish, yet the most vulnerable always end up on the bottom part of that formula. We have to work to get that the other way around and we can do that with the right discussion, the right debate and the right legislation. It is time for all members in the House, from whatever party colour one wishes to put out there, it is a decent debate to be had. The most vulnerable would be the recipients of what it is we are paid to do, which is to discuss, debate and enact.

Some of the statistics we heard earlier today are that upwards of over 70% of the people do not have a pension outside of what is guaranteed through the old age security and the guaranteed income supplement. It is a staggering figure.

One of the issues that I brought up earlier, which we brought up during the campaign and one that I think is a good idea was discussed ad nauseam in Great Britain about a decade ago. It is called a supplementary CPP.

It is the component of a voluntary payment to top up people's CPP to allow them to receive greater payments once they reach the age of 65, or 60, if they choose to do so.

However, the one element of that supplemental CPP that I thought was very important in the changing dynamics of this world, of this country and of our communities, is the fact that it was a portable mechanism for taking a pension that is not vested into one entity, not one company, but people could take it with them as they travelled throughout their working career. No matter what company people went with they could take this pension they have invested in and move it with them.

When I fly back and forth from Newfoundland to Ottawa, there are a tremendous amount of people I see each and every week, or biweekly, who go to the oil fields, primarily in Alberta, some in Saskatchewan. I worry. They make good salaries, but where they do invest for their future, for their retirement? It is all over the place, I am not really sure and I am very worried about it. If we do not worry about these things, we will find that our children and grandchildren will have to deal with that discrepancy much like we are dealing with now.

Will direct benefit plans exist at that point? I really have my doubts. As much as I do not want to say it, it looks like it just might happen that way, given the current trends toward direct contribution. I have no great qualms with RRSPs, RRIFs and these type of investments, but the issue is that it does not always provide that steady income that we think it is going to provide.

I would implore anyone to see a financial advisor. I have never been an insurance salesman and I am not the one to advocate for the industry, but I have talked to financial advisors and they provide good advice. However, not everybody does that. So, we have GIS and old age security. That is the backdrop, that is the very backbone by which people have to survive if they have nothing else to rely on.

Why can we not provide that bar, why can we not reach the bar that was set to bring everybody, virtually all these people, out of the poverty level? That is what the $700 million is about. It is not just a round number that is pulled out of the air, as was insinuated by some people in the House. It is a number that represents the greatest investment in impoverished seniors in this country probably in the last 50 years, because we have that responsibility. It does not matter if people line themselves up with a particular ideology. We have to admit that if people are poor, if they are vulnerable and if they are desperate, where is their ideology then? It means absolutely nothing. If that happens, if more people fall below that line, then we, as parliamentarians, squandered a fantastic opportunity to invest in the most vulnerable. As members will recall, the most vulnerable of seniors invested in us many years ago.

How many people in this House can actually say that they are here inspired by our seniors today? Everyone can. Who cannot? No matter whether they are uncles, aunts, mothers, fathers, grandparents, friends, next-door neighbours. Do we not owe them, at the very least, an investment in the basic income support of that $700 million, not $100 million, not $300 million, but $700 million? That is the story behind this $700 million investment. That is why I support this motion. That is why we need to have more debates on motions just like this.

[Mike Wallace, Conservative, Burlington, ON]

I'll be very quick, Mr. Chair.

I just want to ask my Bloc friends who spoke earlier what their response would have been on Bill C-501, which we just dealt with here at this committee. There were 14 clauses, I think, or 15 clauses, and two that you agreed with. Because we were able to go clause by clause, you were able to support two clauses in that private member's bill and you were able, with us, to defeat other clauses.

I want the same right: to be able to make the arguments for this bill. Why are you denying me that right, the same right that you had two weeks ago on Bill C-501? I think it's only fair that we go clause by clause.

Thank you. I'm on the record for that.

Oral Questions

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise on an issue arising out of question period today.

A government member asked the Minister of Industry a question and I was very disappointed with his answer. On top of that, I believe the Minister of Industry misled the House with his answer when he neglected to say that Bill C-501 would protect every worker in this country.

I believe the Minister of Industry should be making an apology to workers right across Canada. In fact, he should be apologizing to the people who worked for Buchanan Forest Products in my riding, many of whom received no severance pay, no termination pay, pensions or anything of the kind.

If you look at the blues, Mr. Speaker, you will find that his answer was purely intended to mislead the House and Canadians.

Pensions

[Tony Clement, Conservative, Minister of Industry]

Mr. Speaker, of course, last night the Liberal-NDP-Bloc coalition ganged up again and supported en masse Bill C-501 that would ensure, and listen to this closely, folks, that CEOs and their friends get a larger share of the remaining assets while workers are left with little or nothing.

As a government, we have implemented the wage earner protection program to protect workers' severance and termination pay. But that is what they have been working on, this multi-million dollar severance plan for their CEO friends. That is what they work on when they are not trying to engineer—

Bankruptcy and Insolvency Act

[The Deputy Speaker, Conservative, Andrew Scheer]

The House will now proceed to the taking of the deferred recorded division on the motion for concurrence at report stage of Bill C-501, under private members' business.

The House resumed from March 4 consideration of the motion that Bill C-501, An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay), as reported (with amendment) from the committee, be concurred in.

Pensions

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise today to present a petition signed by hundreds and maybe thousands of Canadians right across the country.

The petitioners are calling on the government to affirm that pension benefits are in fact deferred wages, to elevate defined pension benefit plans to secured status in the Bankruptcy and Insolvency Act and in the Canadian Creditors Protection Act, and to pass into law any legislation before it that will achieve these objectives.

I will remind the House that Bill C-501 is a related piece of legislation that is coming up for a vote today.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise today with two petitions to present.

The petitioners call upon Parliament to affirm that pension benefits are in fact deferred wages, to elevate defined benefit pension plans to secured status under the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act, and to pass into law any legislation before it that would achieve these objectives. This petition is signed by hundreds, and perhaps even thousands, of Canadians.

I remind those present here today that these petitioners and millions of other Canadians across Canada will be watching very closely this coming Wednesday when Bill C-501 comes before the House for a vote at report stage.

The House proceeded to the consideration of Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), as reported (with amendments) from the committee.

Industry, Science and Technology

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Speaker, I have the honour to present, in both official languages, the 14th report of the Standing Committee on Industry, Science and Technology.

In accordance with its order of reference of Wednesday, May 26, 2010, your committee has considered Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), and agreed on Tuesday, February 15, 2011 to report it with amendments.

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Bonjour à tous. Welcome to the 57th meeting of the Standing Committee on Industry, Science, and Technology.

We'll be dealing with Bill C-501 today in clause-by-clause consideration.

We have with us Mr. Rafferty, who is the sponsor of the bill and who I understand has some amendments as well.

We'll go directly to Mr. Rafferty and we'll be dealing with clause 1.

(On clause 1)

Protection of Workers

[Bruce Hyer, NDP, Thunder Bay—Superior North, ON]

Mr. Speaker, I would like to address a very serious issue in Thunder Bay—Superior North and across Canada.

Recently, hundreds of forestry sector workers in northwestern Ontario lost their severance and termination pay, which they had earned through many years of hard work. Many are out tens of thousands of dollars because bankrupted companies are not held accountable to ensure that pensions, severances or back wages are protected. We have even seen companies or parent companies raid their workers' pay for their assets. Many people have lost their homes, small businesses, marriages and some have even lost their lives to suicide.

There is legislation before the House that will start to fix these wrongs. I seconded Bill C-501, introduced by the member for Thunder Bay—Rainy River, after seeing the damage done to communities when owners and bankers come before workers. We must protect workers and their families and pass Bill C-501.

[The Chair, Conservative, David Sweet]

Thank you very much.

To members, you need to know that we have two more meetings scheduled on this, so we will need to have witnesses as well. After that we will be dealing with Bill C-501, clause by clause. We were able to get a date on the 15th, so our two meetings on this subject will be done and then we'll deal with that.

The meeting is adjourned.

Parliament of Canada Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I was heartened by the House leader's words.

I rise today to seek unanimous consent for the following motion. I move that it be an instruction to the Standing Committee on Industry, Science and Technology that it have the power, during its consideration of C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), to amend section 136 of the Bankruptcy and Insolvency Act. I ask for that because Canadians want us to work for them not against them.

If you seek it, Mr. Speaker, I am hopeful that you will find unanimous consent.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair, for the opportunity to speak to this motion. The motion deals with the Investment Canada Act and to begin with it in our next set of meetings, excluding the meeting set aside for Bill C-501, whenever it comes.

To be frank with you, this is interesting, being from Burlington, across the bay from Stelco and Dofasco, both now foreign-owned, one having difficulty, the other not. In fact, one announced an expansion, an increase in staff, and more investment. So I'm very interested in finding out why one investment in the exact same industry on the same street is successful and one is not. I am looking forward to it. I think it's an important discussion.

I can tell you, Mr. Chair, that of all the calls I get—there are lots of calls on individual problems, of course, and those are case issues and on broader policy—the vast majority have to do with either CRA or Investment Canada, to be honest with you, and what's happening with investment.

People will ask me, “How can your government allow for foreigners to come in and buy this?” My response, Mr. Chair, to be perfectly frank with you, is very polite, but I do ask them about what needs to happen for Canadians to be investing in Canadian companies. Why are Canadians, seeing what's happening in the world...? Why didn't Dofasco, for example, know that there were going to be amalgamations in the steel business? Why? They're a very big player, a very good player, with a quality product. How does their saying go, that steel is their business, but people are number one, or whatever that saying was? So why do Canadian companies wait to be sold?

Let's be frank about the Investment Canada Act. This government is the only government that ever turned down an investment. It's happened twice now. The potash one was the recent one, and a few years ago the Canadarm manufacturer--I forget the name of the company--was under threat of being sold to a foreign entity.

I watched a show last night on the CBC, or whatever. They had a roving reporter in Winnipeg and they were asking people why they weren't paying any attention to federal politics. I think today is an example of why people aren't paying attention to federal politics. There were lots of comments about how we should be working together, and so on and so forth.

At the end of the day, I think what the parliamentary secretary has proposed in terms of a priority for Canadians...it's a look at what we're doing in the Investment Canada Act. We came to a conclusion among all of us that we should study the Investment Canada Act. The parliamentary secretary indicated that people have talked about it in the past. He's quoted them. I don't have those quotes, but he's quoted other members of Parliament from other parties. It's a reasonable request.

The part to deal with the CRTC decision comes next in his proposal, and it's still in front of the length of time that's allowed for that decision, which is coming out at the beginning of March. So there is time for this committee to deal with those issues.

Is anybody paying attention? It's unbelievable. Are you paying attention to me? Oh, that's very good.

There is time to deal with the issues. Then, again, we talk about Bill C-568--

[Brian Masse, NDP, Windsor West, ON]

I want to speak to the motion. I just want to make sure it's clear that we can and will study the Investment Canada Act.

In fact, actually we'll do a better study the way I'm going to propose it after this. I'm going to propose that we actually look at the CRTC's recent decisions for three meetings. Following that, we can then work concurrently at the Investment Canada Act, as well as on the census bill that has come forward. I think that could be done very well, and we can probably have more and better meetings for that. I think they're very serious issues that Canadians do want to hear more about.

I don't see a downside on the CRTC decisions right now. I want to make sure we get the best witnesses possible, and I'm not sure we can do that by rushing through in the next couple of days to try to get people. On the Investment Canada Act, we might want some international witnesses to come forward too. For me, that gives us a chance to get our witness lists up and going, and we certainly can do concurrent meetings and we can actually review that at some point in time.

I also have a notation here that at some point, when Bill C-501 becomes clearer, we ought to spend one meeting to finish that bill too.

So I will be immediately proposing that, followed by Mr. Lake's motion.

Pension Protection

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise today to present two petitions signed by literally thousands of Canadians, calling on the government to affirm that pension benefits are in fact deferred wages, to elevate defined benefit plans to secured status in the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act, and to pass into law any legislation before it, such as Bill C-501, that would achieve these objectives.

Pensions

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, on Friday, a high court in the United Kingdom handed down a game-changing ruling. Pensioners in that country have been moved to the front of the line of creditors during bankruptcy proceedings. Here at home, Canadian retirees are at the bottom of the list when it comes to claiming the money owed to them.

New Democrat Bill C-501 is at the industry committee right now but the Conservatives have opposed it from the beginning.

What are the Conservatives waiting for? When will they support Bill C-501 and stand with Canadians instead of their friends on Bay Street?

[Malcolm Allen, NDP, Welland, ON]

Mr. Speaker, I am pleased to present a petition today on behalf of literally hundreds and hundreds of constituents in my riding who are talking about the inadequacies of the OAS, GIS and CPP and what it is doing for seniors across the country who are living in poverty. The petitioners need this situation addressed today.

The seniors in our region and, indeed, across the country who are living below the poverty line is a travesty, an injustice and a black mark on all of us in this House of Commons, and one that we ought to rectify.

The petitioners are not only calling for an increase, but are saying that when companies go bankrupt, as my colleague from Thunder Bay has done with Bill C-501, we need to put those seniors and pensioners at the front of the line when it comes to creditors. They also say that we ought to ensure that pensions are funded from private enterprises and private companies.

Ultimately, the petitioners are saying that no senior in this country should live in poverty. The petitioners are calling on the government to end poverty for seniors today.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

That motion was not to end Bill C-501. The motion of instruction is what you're talking about, right? The motion of instruction was originally put forward to increase the scope of the bill. In other words, what's happened with the bill now is that if amendments were to be introduced now that go beyond the scope of the bill or are judged to be beyond the scope of the bill, the chair would likely rule them out of order, and they wouldn't have an opportunity. The motion of instruction was there in case I wanted to use it to move forward, to possibly bring it forward.

I'll tell you what the intention would be, had I used that motion of instruction. It would have been to open up, I think it's section 136, and move it from “secured” to “preferred”. That would have been the idea of that motion of instruction.

I guess the motion of instruction is still sitting on the table, but that's not my intention here today.

[Judy Sgro, Liberal, York West, ON]

Well, he tabled this yesterday, but then on the order paper today, under number 26, under motions--I didn't bring it with me--it was specific to not going forward with Bill C-501 today, a standing order for us not to proceed with Bill C-501. Mr. Rafferty put it on the order paper.

Could he clarify that? He didn't speak to that in his comments.

[Judy Sgro, Liberal, York West, ON]

On a point of order, on the order paper this morning there was also a motion referring to the standing order and referencing not going forward with Bill C-501. Could Mr. Rafferty speak to what his intention is?

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen. Bonjour à tous.

Welcome to the 50th meeting of the parliamentary Standing Committee on Industry, Science and Technology. Our intention today is to go clause-by-clause with Bill C-501, but I understand that Mr. Rafferty has a motion he wants to move right now. I'm certain there will be some discussion of that.

Mr. Rafferty.

Canadian Human Rights Act

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, I am pleased to speak today to Bill C-481, a bill that would, among other things, eliminate the exception in the Canadian Human Rights Act that currently allows federal public sector and federally regulated private sector employers to have a mandatory retirement age for their employees.

Currently, only about 10%, or 840,000, of the Canadian workforce is subjected to mandatory retirement, and these individuals work within federally regulated sectors, such as transportation, telecommunications, the postal service and, of course, the armed forces, which we just heard about from the minister a moment ago.

Before going further, I want to make it clear that mandatory retirement provisions do not mean that people are not allowed to work beyond a certain age. Mandatory retirement provisions only apply to a specific workplace or pension plan.

When the government supports the lifting of mandatory retirement, it typically tells us that retirement is increasingly a lifestyle choice, as people are living longer and leading more active lives. Both the Governments of Ontario and Nova Scotia have in the past used similar language in support of the elimination of mandatory retirement rules.

However, we in the NDP know there is much more to the situation than this. It is a very simple argument that we are hearing so far. Saving for retirement has become increasingly difficult for Canadians. One-third of Canadian families have no retirement savings at all and two-thirds of Canadians do not have a company pension plan.

Equally troubling is the situation of those workers who are forced to retire at age 65 only to have to take another job immediately afterward at a fraction of the pay simply because they do not have a proper pension plan.

The NDP believes that older workers should have real retirement choices. For example, I think of the working conditions in the steel mills in my home town of Hamilton, the suffocating heat from the furnaces, the air thick with particulate matter and the long hours drenched in sweat. No one wishes to endure these circumstances any longer than they need to. When workers, such as those, choose to work past age 65, they do not do so because they want to. It is because they must. There is often a mortgage that remains to be paid, or college or university tuition for their children still waiting to be cleared.

For many, the freedom to work past age 65 is fast becoming an obligation to work as long as one is physically able. Eliminating the remaining mandatory retirement rules may be helpful to workers who lack a workplace pension but it will do nothing to guarantee that their income will be adequate. For New Democrats, income adequacy is the issue. We have called for an immediate increase to the GIS to lift seniors currently living in poverty out of it, and for a phased-in long-term doubling of the CPP.

The concern I have with respect to the issues of mandatory retirement is the suspicion that businesses push for it because doing so averts attention away from the inadequacies and inequities of Canada's retirement income system. Allowing people to work longer is for them a substitute for programs that would work to ensure that every Canadian has a solid and secure pension on which to retire. Working longer is, for the business class, what we might call an anti-poverty program for seniors, one that requires no contribution by way of taxes and one that leaves the onus on the individual. In other words, from their perspective, perfect indeed.

Meanwhile, these employees who support banning mandatory retirement do so largely because they are already financially secure and work in non-physically demanding jobs. Let us face it, people are living longer. It makes a certain amount of sense that individuals who hold non-physically demanding jobs and who work in safe and comfortable work environments might want to stay on the job longer than someone who, for instance, works pouring concrete all day.

Many of us here in this august chamber probably feel this way. As the member for Hamilton Mountain recently observed, this place does not exactly have a physical workload. It may be stressful to many but it is different from pouring concrete.

Let us be clear. Working longer is not nor will ever be a substitute for an adequate retirement income system.

We have had a number of debates in the House about the inadequacy of public pensions and the increasing incidence of solvency deficiencies of private pension plans. To date, the government has merely paid lip service to improving these pension systems. While they wait for the government to act, literally thousands of Canadians who have worked hard all their lives and who have played by the rules are finding it impossible to make ends meet on their meagre pension incomes.

Meanwhile, New Democrats have been calling for a suite of substantive reforms to improve the situation. As I mentioned before, we have called for an immediate increase to the guaranteed income supplement to lift all seniors out of poverty and for a phased in long term doubling of the CPP.

We would also like to see Canada's bankruptcy laws amended to ensure unfunded pension liabilities, that is, the moneys that companies promised but failed to contribute to workplace pension plans, are given the same status as unpaid wages and go to the front of the line of creditors for payment during bankruptcy or insolvency proceedings. Bill C-501 is being debated in the industry committee at this time and it is designed to do just this.

New Democrats are also calling for security for workplace pension plans through a mandatory pension insurance program paid for by the pension plan sponsors and guaranteeing pension payouts of up to $2,500 a month in the case of a plan failure, and also a national agency managed by the CPP investment board or a similar body to adopt pension plans of failed companies and continue to take advantage of market conditions and to maximize the payouts.

Members can think of our proposed pension insurance plan as being akin to the deposit insurance required of Canadian banks to guarantee the security of bank accounts for Canadians. The banks pay for that insurance. In this case, pension sponsors would be responsible for purchasing pension insurance to guarantee minimum pension payouts for their plan members.

In recent months, ex-employees of insolvent companies such as Fraser Papers or of course Nortel, while having to endure the indignity of taking a massive haircut to their pensions, have watched their American counterparts who work for the same companies located in the United States have their underfunded pension plans propped up by the United States pension benefits guarantee.

Now many of these pensioners will certainly have to work past 65, but they should not have had to do so simply because their government does not care enough to secure their pensions in a way that the great bastion of free market to the south of us has already done for its workers. A national pension insurance plan would ensure that Canadian pensioners are no longer left in the lurch like this while their American cousins are able to retire with a pension that they had been promised.

Getting back to the specific issue of Bill C-481, at this point let me say that I will be supporting sending the bill to committee. I very much look forward to hearing from Canadians when the bill is dealt with there.

I suspect that once in committee, we will hear from many sincere individuals who wish to continue their professional pursuits. Nevertheless, I still have serious reservations that eliminating mandatory retirement rules is in the interest of the people of my riding of Hamilton East—Stoney Creek. I believe there should be meaningful and comprehensive reforms to the retirement income system of Canada.

Forcing Canadians to work longer should not be just a way for the government to download some of its pension obligations. Working past 65 should be a real choice, one not driven by the fear of destitution but by the genuine desire to continue with a rewarding work life.

Statistics Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Madam Speaker, I appreciate the opportunity to speak about the bill today. Let me say right off the top that the rural parts of this country very much need a long form census. We need to know who lives here. We need to know where they live. We need to ensure that services like health care, education, employment assistance and so on are provided fairly and equally right across this country.

For urban areas of course the long form census is just as important, but I am going to keep my remarks mostly to my riding and to the issues that we face and why the long form census is so important to my part of northern Ontario.

Therefore I am very pleased to speak today on Bill C-568. It is an act to amend the Statistics Act in which we are dealing with the long form census.

The New Democratic Party is generally supportive of the bill because it seeks to reverse the ideologically based decision of the Conservative government to cancel the long form census. The bill also removes the punishment of imprisonment for a person convicted of providing false or misleading information.

While I am supportive of the bill and while my party is supportive of the bill, it is also important to note that I do not think it goes far enough. Bill C-583 introduced by my colleague from Windsor West goes one step further by enshrining into law the primacy of evidence-based decision making over political manoeuvring, the likes of which we have seen with the Conservative government.

To be clear, both elements of Bill C-568 are fully supported. For the record one more time, not a single Canadian has been imprisoned for failing to fill out the long form census. The imprisonment element should be removed right now.

However we need to go further by removing political interference from Statistics Canada's ability to do its job and provide an accurate picture of our country. The Chief Statistician must be able to do his or her job in an environment free of political meddling by an ideological government intent on suppressing evidence and information that contradicts, in this case, the narrow Conservative agenda.

We can just imagine the outrage from the national and international community if the government were to meddle in the independence of the Bank of Canada, for example. It would not be tolerated.

Therefore why should we accept the government's heavy-handedness when it comes to interfering with our Chief Statistician in his or her ability to do the job?

Hundreds of individuals, organizations, businesses and governments coast to coast raised the alarm bells because of the terrible decision to cancel the long form census. Despite the unsubstantiated claims by Conservative MPs about mythical complaints about the intrusiveness of the long form census, we know that the majority of citizens support and understand the need for the long form census.

Losing the long form census will have a detrimental impact on our communities in Thunder Bay—Rainy River. Let us just look at the first nations communities for example. There are 10 first nations in Thunder Bay—Rainy River. While they are connected by the road system, some are very far away from the main road, and it is important to have an accurate picture.

If we do not have a long form census that asks the kinds of questions that it does, we may not know what is going on in these isolated communities.

For example, without a long form census we would not know that the Couchiching First Nation, as of this past September, had 22 students who had graduated from high school but did not have the ability to go on to post-secondary education because the funding was not there.

We would also not know that in that same community last year it sent its very first student to medical school. It had its first PhD. return to the community.

Here we are making advances right across my riding and I would suggest that is duplicated right across the country.

Just when first nations are beginning to see the light at the end of the tunnel, particularly as far as education is concerned, the taps get turned off. Without a long form census, we do not know and we will not know that is happening. It is important for all of our communities to have the input into the long form census to protect them and to let all Canadians know, to give all Canadians a snapshot of what is going on in those communities.

When we see the importance of the long form census, is it any wonder that the government was taken to court on the issue? It seems as if the government is trying everything, making relentless efforts to shut down any source of credible data that provides any sort of objective evidence necessary for developing good public policy.

A short while ago on Parliament Hill, parliamentarians and members of Canada's very professional public service were invited to a special panel discussion on a very timely topic, evidence versus ideology of Canadian public policy. The event was sponsored by the Canadian Association of Professional Employees, the Association of Canadian Financial Officers and the Professional Institute of the Public Service of Canada.

The event aimed to launch a public debate regarding the current state and possible future of evidence-based policy making in Canada. There were a number of distinguished speakers on the panel, and the discussion was fascinating because these panellists and participants acknowledged that there has always been a role for ideology in public policy. However, they noted that in the past two years we have seen the emergence of a worrisome pattern.

First, the government gagged public servants and fired others who dared to disagree with it or give it policy recommendations that did not fit into its ideologically driven agenda.

Second, the government cancelled surveys and the long form census to ensure that statisticians, economists, academics and other professionals did not have access to objective data that provided damning evidence of the government's policy failures.

I am just guessing, but I suppose the object is to put it all into the private domain and let private companies do the work of the long form census. They do sometimes. For example earlier this week there was a BDO Dunwoody study about my pension protection bill, Bill C-501. BDO Dunwoody asked CEOs from across Canada what they thought of the bill. More than half of the CEOs who replied said it is a good bill and Parliament should move it ahead. Those are the kinds of things that the government should be finding out about legislation that happens in this place.

I fear that the Conservative government is dragging the country backward, and a clear majority of Canadians are saying, “No, you cannot drag us backward”. A majority of parliamentarians in the House support restoring the long form census, protecting the professional role of Canada's Chief Statistician and removing the threat of imprisonment in the act. Yet the minority continues to thumb its nose at the majority will of Parliament, an insult to democracy, an insult to this place itself.

Bill C-568 is specific to the government's decision to cancel the long form census. I believe the House needs to have a wider debate about the government's treatment of public servants; its setting of public policy based on belief, not public interest; its rejection of evidence-based public policy; its attempt to shut down public access to objective data; and its attempt to stop credible analysis of its failed policies. This will not work. We are on to the Conservatives, and so are Canadians.

I offer my party's support for the bill and urge the House to bring other necessary changes to protect our professional public service from the kind of pervasive political interference by ministers and their political staff. We need to end this trend and we need to do it quickly before we are dragged any—

Pensions

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, Canadians are worried about the high cost of living and their retirement income. In northern Ontario the price of gas went up 10¢ last night. Home heating costs are skyrocketing, thanks to the government's HST scheme.

A poll of Canadian CEOs on my pension protection bill, Bill C-501, found that a majority believe the bill is fair and that Parliament should pass the bill.

Will the government respect the wishes of Canadian CEOs and pensioners and support Bill C-501 and protect six million Canadians?

[The Chair, Conservative, David Sweet]

Mr. Farrell, Mr. Aitken, Mr. Lopez, Mr. Robertson, I appreciate your being here.

I wanted to correct one thing, and I think this is the first time I've asked a question or had any comment in this committee other than in chairing it. Just for accuracy, Mr. Lopez, when you answered a question, you said that all pensions would have been paid if you'd gone into CCAA bankruptcy protection, and that had Bill C-501 been in place, the pensions would have been paid but the jobs wouldn't have been saved. Actually, the pensions would only have been paid if the assets were there, correct?

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you, dear members. You are most kind.

I believe that it goes without saying that all our witnesses and committee members are primarily concerned with companies and their ability to operate properly. It's easy for us to say that we're favourable to maintaining jobs in the companies and respecting mutual commitments toward current and retired employees, as far as pension funds go.

However, the reality of the matter may be different. The Nortel situation is a good example. Mr. Farrell clearly stated that this was the worst-case scenario when it comes to pension funds, among other things, and even when it comes to company management and how the company came to an end.

Now, we are discussing a bill whose objective is to help retirees retain their pension fund. However, it appears that the business and finance community sees things differently and, according to its basic principles, pension fund retention is not a likely outcome if the bill passes.

Mr. Robertson and Mr. Lopez, you say that, had Bill C-501 been in force, the companies would no longer exist, but pension funds would have been retained. You also say that, without this bill, meaning as things currently stand, the company is still alive and can become increasingly healthy. The idea is that, once the economic situation improves, the business situation will improve as well, and pension funds will also be retained at 100%.

As for the deficit, will it be absorbed by all the pensioners, on the one hand, and future pensioners, on the other hand, who have retained their pension fund, in your case?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair, and thank you, witnesses, for coming.

I want to go on from where Ms. Sgro left off. In this whole debate there's a disturbing element of “them against us”. Earlier this week we heard from some of the witnesses from Nortel that this bill could become retroactive and that there was a court ruling in B.C. We on this side and, I think, most people would disagree with that. It shows how the whole drift of the bill is heading in the wrong direction.

We just talked about Bill C-393, and I'll get to that in just a second. I remember being challenged by the grandmothers when I walked out the door, and they told me to do the right thing. I said at one point in this committee as well that we passed legislation in 2006, the Federal Accountability Act, that stopped every one of us in this room and everybody in the House from taking any funds from anybody except from private individuals, and then only to the amount of $1,000. That was a significant bill, because we're no longer tied to any one person or any one group. We can say as parliamentarians, “I want to do the right thing. I don't have a bank or something that bankrolls my campaign”.

There was a time not too long ago.... It was before my time, but if you go back in the records, you can see members who had almost their entire bankroll funded by one group or one individual. Those days are gone.

As a government we try to keep the ship afloat, and I've got to dump on my friend John again.

I like our member across the way. I think he's a great guy, but the NDP consistently comes up with bills that are mischievous. This is another example, and I could give you more. It all sounds good. Affordable housing is an example: we're going to save the housing crisis in this country. We're struggling with that. I say we need to keep the ship afloat. Affordable housing.... There was Bill C-393, the grandmothers' bill. Who would disagree with grandmothers trying to save people in Africa from dying of AIDS? Who would disagree with that? But the fundamental principle, again, is wrong.

Bill C-501 is one of these bills.

Today we have an NDP motion in the House to stop oil tankers from floating down the west coast. There's been one accident. Correct me if I'm wrong, though not at this point, because it's my time. One ferry has sunk, and it's leaking oil, and that's tragic. Again, I could go on.

The NDP constantly wants to shut down the oil sands. They like to call them the “tar sands”. In the end, when everything is said and done, we have to realize that the hallmark of a free and open society is a free and open marketplace.

I think Ms. Sgro was absolutely right. We have to make sure that when we move legislation forward, it's not them against us. We, as a group of parliamentarians and as the government, want to make sure we have a healthy and transparent society that allows the free flow of goods. This bill seriously undermines that. It more than undermines it; it threatens it.

I often say I've seen societies that have attempted this, and it's not pretty. I've been to Cuba. They have everything in common, but it's common misery. I know everybody here doesn't want to see that; I certainly don't.

I had to give my rant because I, like everyone else, feel terrible about what's happened to Nortel. I feel bad when these things happen, but we don't want to do something as a knee-jerk reaction that's going to cause even more grief.

My time is almost up, but I think I've got 30 seconds. If anybody wants to comment, go ahead.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

You're here as the restructuring officer, and your task is reorganizing and getting the company back on its feet. It is not an easy job. It is a very difficult job, I'm sure.

You've chosen to attend these hearings to fight Bill C-501. Let me ask you, though, in terms of your job, whether you have also spent time scheduling meetings with the federal government to ask for loan guarantees to help in those efforts. Have you ever asked the federal government to match or negotiate an end to the massive billions of dollars in U.S. subsidies--such as the black liquor subsidy or the BCAP program--that provided your U.S.-based competitors with more than $10 billion in capital while you were in the middle of restructuring?

Did AbitibiBowater press the federal government and tell them to listen? I'm saying this because I have done that. I have done it in the House. I have pressed the government either to match those subsidies or to ask the Americans to get rid of them. They put our forest companies at a disadvantage. Was part of what happened with restructuring pushing the federal government and saying that these subsidies have to be matched?

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

No one will ever forget what happened to Nortel in 2008.

Canaccord Capital estimated that BIMCOR also had a full 58% of the BCE pension fund riding on the stock market, and that pension lost about $2.8 billion in that year alone. The comment I have for you, Mr. Farrell, is to ask you to please go back to your membership and ask them to start investing conservatively—in bonds instead of stocks—and simply live up to their fiduciary and, I would say, legal obligations to the pensioners. That's just a comment that I want to make, because I think we need to be clear.

The next question is for Mr. Lopez. We need to be clear that there has been a lot of mismanagement here too. You talk about markets, and certainly that has been a problem in the wood industry, but what you don't talk about is that for decades and decades, the forest industry, instead of making investments where they should have--in their properties and elsewhere--paid shareholders when times were good. The industry has always been like this, but when times have been good, management has failed to make those investments. Abitibi is, I think, a good example. When you talk about management and you talk about the kinds of decisions management makes, I will put it to you that in terms of Bowater, Abitibi was maybe not the best investment to make for the forest industry.

There are problems with the market, absolutely, but let us not forget that these companies were not always well managed. I just want to put that to you.

You said earlier that you didn't know how many pensions would have been saved if Bill C-501 had been there, and later you corrected yourself when you said they would all be saved. Of course they would. That was actually my question for you, and you answered it. Thank you for that.

I have questions for Mr. Robertson.

Thank you for joining us, Mr. Robertson. I'm sure you're aware that in my riding of Thunder Bay—Rainy River you have two plants that are still operating, and they represent thousands of current and former workers who depend on AbitibiBowater for their income and for their retirement, so I'm glad to see you here.

Bill C-501 was tabled partly because of the problems that AbitibiBowater is having and will hopefully soon be out of. You entered supervised restructuring partly because your executives, the board of directors, and the pension plan administrators failed to live up to their simple obligations to adequately fund the pension plan. That's one of the reasons you're there. I see that your job tasks you with saving a company that perhaps has not been as well run as it could have been over the last number of decades. You talk about more than $1 billion, and so in essence you have reneged on some of your duties there with regard to pensions.

My questions today are posed in that context. I'm hoping you'll be brief, because I have some other questions too.

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

Had Bill C-501 been in force, would the outcome have been the same? Would you have been able to fund their retirement benefits?

[Bruce Robertson]

Thank you, sir.

If you look at the liabilities of the company, particularly as they relate under Bill C-501, you would have pension solvency deficits in the neighbourhood of $1.3 billion. Then you would have some secured debt on top of that, which would be securing all of the Canadian assets.

For a company to emerge from creditor protection, they need to make sure that they have a proper balance sheet, not too much leverage, and sufficient access to capital. Creating a super-priority basically creates a first charge for the entire solvency deficit over all of the assets of the company. We're talking about, in Canada, liabilities of $1.3 billion, and that number can float all over the place. As we've recently discussed, the solvency deficit is at times a function of interest rates. It is largely a function of interest rates, as well as plan performance and what have you.

To successfully emerge, you need access to capital. You need liquidity. At the end of the day, we wouldn't have had sufficient assets for us to be able to secure the exit financing to be able to continue ordinary operations. It would have resulted in liquidation of the company.

Perhaps some of the mills might have found new owners. We've recently seen that mills that have continued to operate have been basically operating with the help of provincial support, but it is extremely unlikely that the company as a whole would have continued to operate.

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

Thank you, Mr. Chair.

Good morning and thank you for coming in to testify.

I will direct my questions first to Mr. Robertson, and then Mr. Lopez can add to the answers.

Both of you said that, had Bill C-501 been in force, you would have had to liquidate your facilities and assets. I believe that you both said this. Basically, you're both against Bill C-501.

Mr. Robertson, you said that the bill would have made things difficult in terms of credit. I would like to get more details on this issue. Would bankers or your lenders have raised the interest rates they charge? What real consequences would you have suffered?

Mr. Robertson could answer first, and then Mr. Lopez could go ahead.

[John Farrell]

I wanted to say that I think there are solutions. The problem with Bill C-501 is that it's just not the right kind of solution. I've observed what AbitibiBowater has been doing. They worked with the regulator in Quebec and the regulator in Ontario. They found a way to protect their pensions without reducing their value for current employees and they restructured the basic pension formula moving forward, so there was not as much of a contingent liability for their plan.

Bruce, I could let you speak to that, but I'm aware that you've done a great job, and a very difficult job, in working with the provincial governments, the provincial regulators, and the unions. You've put together a deal that works for everybody, and it allowed you to restructure.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

How many would be left after this, if Bill C-501 were in place?

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Very good. Thank you.

I'll go to Mr. Robertson. After that I have a question for Mr. Farrell as well.

Mr. Robertson, you're restructuring. You're coming to a certain point where everything looks very positive. You have 8,500 employees and 20,000 pensioners, mainly in Ontario and Quebec.

I basically have the same question for you. If Bill C-501 had been in place when you started restructuring, where would we be right now?

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you, Mr. Chair.

I want to thank the witnesses here today for coming out and making what they've gone through and the effects that Bill C-501 would have had on them very graphic and real. As you know, Bill C-501 is an attempt to fix a real problem, a pension problem, and it's a problem that has developed over years. Someone mentioned a perfect storm. It just seems that the interest rates, the bond and equity markets, a weak economy, and everything else all seemed to happen at once. We're reacting to that and trying to prevent it from happening again.

The bill, as it was introduced, secures what is owed to pensioners from the date of insolvency to bankruptcy. That was my understanding. Now amendments brought forward have revised the wording, and now, as Mr. Farrell has mentioned, it would make it so that all pensioners would have priority over all creditors, or priority status.

It's difficult here because we're all sitting here trying to balance the interests of the pensioners, the employees, and industry. We're trying to get the results right and trying to make it work.

Mr. Lopez, I know the story of Tembec and the success rate that has come up. With the modified amendments giving full priority status, I think you alluded to where Tembec would be today. Where would it be today if this bill were in place? It's a very simple question.

[John Farrell, Executive Director, Federally Regulated Employers - Transportation and Communications (FETCO)]

Thank you, Mr. Chairman.

My name is John Farrell, and I'm the executive director of Federally Regulated Employers - Transportation and Communications. With me today as an advisor is Mr. Brian Aitken, vice-president, CFO, and treasurer of Nav Canada. Nav Canada is a member of FETCO.

Regarding the amendments to Bill C-501 proposed by Mr. Rafferty, the revised wording clearly extends the super-priority treatment to the entire solvency deficit, such that the entire deficit would have to be paid in order for plans of arrangement under CCAA to be approved by the courts. This is consistent with the preamble of the bill. It is also consistent with the basis upon which FETCO made its submission to this committee on November 23. Our submission on November 23, 2010, remains unaltered by the proposed amendments to Bill C-501.

It is clear that the former Nortel employees and pensioners have suffered significant losses as a result of the bankruptcy of Nortel. This is extremely unfortunate. Employees much prefer defined benefit pension plans over defined contribution plans because they reduce many of the risks to employees. However, it is not possible to remove all the risks.

Bankruptcy is fundamentally the death of a company. CCAA is a mechanism that is analogous to intensive care, where the object is to prevent the death of the company so that it can recover and continue as a going concern. However, if the company cannot be saved, bankruptcy follows, and it is a process designed by legislation to settle the estate of the deceased company in a way that is fair to all stakeholders.

The CCAA bankruptcy proceedings at Nortel happened at the worst possible time. The company failed. We all know that. Financial markets were crashing, and equity values were extremely low. The major culprit was and continues to be persistent low long-term interest rates not seen in over half a century. Low rates have dramatically increased the calculated value of solvency liabilities. Simply put, typical defined benefit pension plans' solvency liabilities, which are a proxy for the cost of settling the plan's obligations, have increased by 30% as long-term Canada bond yields have fallen over the last decade from approximately 5.5% to 3.5%. For a large, mature, defined benefit plan, a 0.25% reduction in long-term interest rates can cause an increase in pension liabilities in excess of $250 million.

I have no doubt that those advocating Bill C-501 are well-meaning. However, the facts demonstrate that Bill C-501 will inflict far greater harm than good on employees, pensioners, and companies with defined benefit pension plans. It would also hurt individual Canadians who hold corporate bonds issued by these companies in their RRSPs, their mutual funds, and their individual retirement portfolios.

There is no doubt that this a complicated matter. This committee has seen a parade of expert witnesses and has received a number of written submissions. The people who have been here include the top solvency and bankruptcy experts in Canada, the top actuaries and pension experts and consultants in Canada, a major Canadian law expert in pension law and bankruptcy proceedings, several top credit market analysts and experts, and some of the leading employers' organizations in Canada. Witnesses from the forest products industry have provided real examples of the harm that Bill C-501 can have on a company's ability to raise capital, make investments for future growth, and maintain employment for thousands of Canadians.

What are all these witnesses saying? They're all saying the same thing: Bill C-501 is bad medicine. It is medicine that kills the patient and infects everyone in the community. You've heard the witnesses say the following: companies with defined benefit pension plans that are in financial difficulty may be forced to seek protection under CCAA. Some companies in CCAA may not be able to restructure and emerge. They may be forced to liquidate, causing the unnecessary loss of jobs. It will increase the cost of capital for companies with defined benefit pension plans, particularly those companies with investment grade bonds. They would see Bill C-501 cause their ratings to fall below investment grade. It would reduce the value of corporate bonds that have been issued by companies that provide defined benefit pension plans.

As a result, countless Canadians holding corporate bonds of the companies that sponsor defined benefit pension plans will have their individual RRSPs, mutual funds, and personal retirement savings portfolios hurt. The passing of Bill C-501 would inflict serious harm and could cause a sudden event that will raise the cost of capital for many Canadian companies that provide the bulk of defined pension benefit plans in Canada. This bill will be the death knell of DB plans in Canada as we know them today.

Pensions and retirement security are a major public policy issue in Canada. The federal and provincial governments have been modifying their laws to strengthen pension plan funding rules, which will improve the security of private pension plans and benefit entitlements.

Further, finance ministers across the country—

[James Lopez, President, Tembec Inc.]

Good morning, Mr. Chairman, honourable members, and ladies and gentlemen. My name is Jim Lopez. I'm the president and CEO of Tembec Inc. We are a company that has 5,000 employees worldwide, 4,000 of whom are right here in Canada.

My business is the forest products business. We produce lumber as well as pulp and paper in many rural communities throughout Canada. In this country our company operates in Quebec, Ontario, and British Columbia, so it's safe to say that Tembec is the most pan-Canadian forest products company in Canada. I think we have a good breadth when we touch our communities and when we talk about the impact of Bill C-501 on our operations.

I'm here today not to talk to you hypothetically; I'm here to talk to you about real experience, practical experience, that I personally have had with Tembec, just as Mr. Robertson has had with Abitibi.

This industry went through a decade of very difficult times, a decade of downturn in virtually all our commodity products that was exacerbated by the high Canadian dollar. It has been very difficult for a lot of companies in Canada to compete and has created financial stress on many of our balance sheets. Tembec was a perfect example of that.

That resulted in a need for the company to restructure its balance sheet in February 2008. Our company's restructuring was done through a CBCA plan of arrangement, as opposed to a CCAA arrangement. The difference is that in a CBCA, the creditors and the shareholders do a consensual deal. As opposed to a court-imposed deal, it's a consensual deal that the court blesses once the shareholders and the other debt holders agree to it.

The linchpin of getting through that process was how this company was going to deal with its new debt going forward. During our restructuring we were able to obtain a $300 million U.S. term loan and renegotiate the company's operating line, which was an asset-backed loan. With that were first and second liens on the company's fixed assets.

Without this arrangement with our ABL lenders and the new term lenders, our CBCA plan of arrangement would never have happened. With this bill in place, those arrangements could never have been made with those lenders. What would have been the consequence? Our restructuring would not have gotten done, and we would have been, in all likelihood, in a liquidation mode.

Given the fact that this industry was going through very difficult times and that many operations were unprofitable at that time, it likely would have meant that 30% to 40% of our assets would have been liquidated. They would have been shut down. The balance probably would have been sold, but 30% to 40% would have been shut down, thus involving 30% to 40% of our employees, including, in all likelihood, the largest pulp and paper operation in Canada, in Témiscaming, which was going through very difficult times at that point in the cycle. It would have been shut down.

In this industry, we have 4,000 jobs in Canada. The traditional multiplier for indirect jobs is four. That's 16,000 people, so 30% to 40% of the 16,000 people who have depended on Tembec to get its restructuring done would have been let down if this bill had been in place.

I'm happy to say that we did get a restructuring done. I'm also happy to say that defined benefit pension plans for all of our employees were unaffected by our restructuring. I'm happy to say that all the solvency requirements for the various provincial jurisdictions where we operate continue to apply for our pension plans, and we're funding them as per the law.

Furthermore, the loans that were put in place in the restructuring had a maturity date of 2012, so it still was a black cloud hanging over the company's head, because it was still a relatively short-term loan. We went to the public debt markets this summer and sold $255 million U.S. of new debt, which we used to repay the other debt. We extended their maturities to 2018, and now the company is in a great position to be able to invest $50 million in operations this year, with a plan to spend several hundred million dollars over the next five years. We never would have gotten that indenture done in the U.S. with this bill in effect.

In summary, I think this bill is going to be a killer of Canadian jobs and a killer of investments in Canada.

Thank you, Mr. Chairman.

[Bruce Robertson, Chief Restructuring Officer, AbitibiBowater Inc.]

Thank you, Mr. Chairman. I'll do my best.

My name is Bruce Robertson, and over the past 18-plus months, I've been serving as the chief restructuring officer for AbitibiBowater as the company works through the challenging period of restructuring itself under the Canadian CCAA and U.S. chapter 11 creditor protection processes.

I'm pleased to respond to your request to appear today to provide my thoughts on Bill C-501.

I must say at the outset that we're in the final stages of restructuring AbitibiBowater, and the company anticipates emergence within the next couple of weeks. Through the restructuring efforts, the company has been transformed to become one of the lowest-cost forest products companies in North America, with 18 pulp and paper facilities--11 of which are in Canada--24 wood products facilities in Canada, and close to 12,000 employees. The company has $5 billion in revenues and markets its products in more than 70 countries around the world.

Now, as a restructuring professional, I'll do my best to help the committee in its review of Bill C-501.

I'm afraid that however well-intentioned, Bill C-501 would have significant unintended consequences and would likely further penalize the very people the bill's author desires to protect.

Let me explain with a real-life example. If the proposed legislation had been in force in Canada two years ago, AbitibiBowater would have most likely been forced to liquidate its Canadian assets. Why? Because required financing for the Canadian operations, both debtor-in-possession and exit financing, would not have been available due to the huge reserves necessary to account for the pension solvency deficit super-priority.

What would have happened? In a liquidation scenario, employees and retirees would have taken a significant loss in their pensions. Canadian pensions for the company would have paid anywhere between 65¢ and 80¢ on the dollar. In effect, this would have locked in losses at the absolute bottom of the market and would have had the opposite of the intended effect. Also, as a result, up to 8,500 direct AbitibiBowater Canadian jobs would have likely been lost. In addition to these direct jobs, another 32,000 Canadians working in indirect jobs in communities across Quebec and Ontario would have been impacted. More than 40,000 Canadians, mostly in rural regions that are economically dependent on the forestry sector, would have been out of work.

Furthermore, the headquarters of AbitibiBowater would most likely have then moved to the U.S., where the Canadian portion of the company would have likely restructured and emerged with its American mills operational, a further potential hollowing-out of Canadian corporate head offices.

This real-life example demonstrates that the proposed legislation puts Canadians, companies, employees, and our country overall at tremendous risk and at a significant competitive disadvantage.

Mr. Chairman, I encourage you and the other committee members to also review the public record on another company that was recently under CCAA protection, Terrace Bay Pulp. Again, if this bill had been in place, I believe that this company in northwestern Ontario would not have emerged. Four hundred direct jobs would have been lost, many times that number would have been affected in indirect employment, and the pensions would have been significantly and adversely impacted.

An area of grave concern I have with Bill C-501 relates to the ability of companies to raise capital in credit markets to operate their businesses and provide jobs to Canadians. If passed, this legislation would make it extraordinarily difficult for Canadian companies to raise capital. Canadians would once again be at a strategic disadvantage in the marketplace. Financial institutions would have to take into account the possibility of even greater losses if a company were to enter bankruptcy proceedings, thus raising the cost of doing business in Canada.

Canadian companies would suffer from reduced available liquidity. During the credit crisis over the past two years, all Canadians saw what a loss of liquidity means to the economy. I'm concerned that this proposed legislation would reduce the productivity and competitiveness of our nation. With fewer Canadians working and fewer companies making profits and paying taxes, our governments and the social programs they provide would be impacted.

I believe that the best way to deal with pension deficits with companies in creditor protection is the approach taken by AbitibiBowater. Positive collaboration by management with the unions, provincial governments, retiree groups, creditors, and other stakeholders has resulted in no reduction to the pension benefits of the 20,000 Canadian AbitibiBowater retirees, and the company will continue to pay 100% of pension benefits to retirees and beneficiaries as the company emerges from creditor protection.

Let me make one further point. With today's extraordinarily low interest rates, the way we calculate solvency of pension plans in Canada creates a flawed reality. The formula utilized in Canada results in a significantly larger headline solvency deficit relative to the U.S., for example. Because of these differences, the companies do not face a significant pension deficit south of the border.

I realize that it's not the subject of today's hearings, but I encourage federal and provincial governments to consider alternative calculation methods and pension solvency formulas, as well as pension insurance, improved regulation, and other reforms.

In summary, Bill C-501 will kill credit for many good businesses and put them in danger of liquidation. This would obviously not be good for employment or economic growth. It will also encourage businesses to cancel what remaining private sector pension plans exist. As the penalty in terms of lost credit and risk will be too high, it will not actually protect existing pensions better than the current regime.

Policies that help strengthen the financial position of companies are the best solution to ensure that pension benefits are paid over the long term. These policies would include those that attract capital and encourage investment to improve productivity and to create jobs and economic wealth.

Thanks, Mr. Chairman.

Industry, Science and Technology

[The Deputy Speaker, Conservative, Andrew Scheer]

The House will now proceed to the taking of the deferred recorded division on the motion to concur in the 11th report of the Standing Committee on Industry, Science and Technology concerning the extension of time to consider Bill C-501.

[Anne Clark-Stewart]

I think the other organizations that were in favour of Bill C-501 will be more in favour of Bill C-501 as a result of this.

[Anne Clark-Stewart]

I don't think it would be better protection than that under Bill C-501 even if it were all across Canada for $1,000 a month. That legislation in Ontario was put in place in 1980 based on 1980 salaries and norms.

There was a report put together by Professor Harry Arthurs, which was submitted to the Ontario government in 2008. In it he recommended that the pension benefit guarantee fund be immediately upped to $2,500 a month. The Ontario government is not pursuing that recommendation.

He made 144 recommendations with regard to pensions and bankruptcy in Ontario. I read those recommendations, and if four or five of them had been in place before Nortel declared bankruptcy protection, we wouldn't be in this room.

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

Suppose the federal government were to bring in this measure which now applies only in Ontario and made it part of Canadian legislation? Do you think that it would provide broader protection than Bill C-501?

[Anne Clark-Stewart]

I wouldn't say it was more attractive than Bill C-501, because it only affects the people who work in Ontario.

In the Nortel case, where we had people working all across Canada--we have huge populations in Calgary and Edmonton, and 30% of our employees work in Quebec--they will not get any of that pension benefit guarantee.

So if they only have a $600-per-month pension, that's all they get.

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

Thank you, Mr. Chair.

Good day, Madam. Thank you for coming here to testify this morning.

You stated that there was a retirement fund in Ontario that provides $1,000 a month in benefits to recipients. In other words, if recipients are drawing $600 in pension benefits, this fund provides additional compensation up to a maximum of $1,000. Do you think this kind of provision could be beneficial or more attractive than Bill C-501?

[Anne Clark-Stewart, Member, Nortel Retirees and former employees Protection Canada]

Good morning, members of the committee.

First of all, I would like to thank you for making the amendment as outlined in the reference document submitted by Mr. Rafferty. We are pleased to see the inclusion of the unfunded liability or solvency deficiency in the amendment to Bill C-501. We feel, however, that these changes do not go far enough to secure pensions for Canadians caught in the lack of justice for employees and retirees in bankrupt companies.

Why do I refer to justice? It's because justice underpins every functioning society. Justice allows us to cooperate, to subjugate our self-interest for a greater common good, knowing in the end that not only we will be treated fairly, but that we will all be better off. And it is our laws that must deliver the justice that we are commanded to seek. In a nation's laws, one finds its true soul.

Professor Sandel of Harvard in his class on justice defines justice as “getting what you deserve”. Let's use that definition to look at how current federal bankruptcy law treats our pensioners.

Once a company files for creditor protection, that law pushes all pension and employee claims to the very bottom of the creditor heap. The elderly and disabled are forced to slug it out with sophisticated junk bondholders for the last scraps of company cash.

Is this justice? Is everyone getting what they deserve?

We believe all employee-related claims, for pensioners, the disabled, and terminated employees, should have preferred status in bankruptcy.

The proposed amendments are correct to require the funding of unfunded liabilities or solvency deficiencies. To be clear, once a company enters CCAA or BIA, the solvency deficiency is the amount to be addressed. By definition, “unfunded liabilities” assume that the company is a going concern, which is not the case once CCAA or BIA has been invoked.

Once a company enters CCAA or BIA, solvency deficiencies can be very large, and under current rules, top-up by the company is not mandatory and pensioners are left holding the bag.

The amendment refers to inclusion of the solvency deficiency as determined at the time of bankruptcy. To be clear, it should be specified that such payments must be for the full amount of the deficiency under windup assumptions, and the full responsibility must be attributed to the company as soon as it enters CCAA or BIA, should be fully payable before it exits CCAA or before it ends its responsibility for the pension plan, and must be based on current valuations of the plan.

In the case of Nortel, the gap between the solvency deficiency and the windup deficiency will be in the range of $1.2 billion on a $2.5 billion funded pension plan, a huge impact to pensioners.

Our former colleagues in the U.K. and the U.S. have virtually 100% pension protection, because all their pension deficit is covered. Their governments have recognized the fundamental immorality of depriving pensioners of their retirement incomes, which are in fact deferred wages.

Canada must be no different. We are actually one of the few major industrialized countries not to have pension protection for all workers in bankruptcy, another black eye for Canada on the world stage.

Bill C-501 as it stands will not help Nortel pensioners, because it does not apply to companies already in the bankruptcy process. Minister Bairdhas been recorded as saying that it would be unconstitutional to make Bill C-501 retroactive.

Our legal advice says he is wrong. A recent Supreme Court of Canada decision, in British Columbia v. Imperial Tobacco Canada, has authoritatively resolved the constitutional ability of any legislature, either federal or provincial, to enact retroactive legislation. The Supreme Court clearly and unequivocally held that except in the area of criminal law there is no constitutional requirement of legislative prospectivity. The court confirmed that if the intended retroactive effect is expressed sufficiently clearly, the statute is effective according to its terms.

The Supreme Court acknowledged that retroactive legislation can overturn settled expectations and may sometimes be perceived as unjust. Nevertheless, it is held that except in the area of criminal law, there is no constitutional impediment to retroactive legislation.

To save time, I have e-mailed copies of this ruling to the clerk of the committee for your information. Therefore, if the political will exists within this room, retroactivity could be added to Bill C-501 and Canadian pensioners would receive justice in bankruptcy.

However, legal precedents and numbers don't begin to describe the desperation spreading across the country. Angry widows and pensioners, led by Gladys Comeau, whom I know you all know, are withdrawing funds from the Royal Bank and changing their Bell-related services, as they don't like the attitudes their representatives presented at INDU, the industry committee, in hearings earlier this month. They hope their gesture will stimulate the banks and big business to have a change of heart regarding the passage of Bill C-501.

This bill represents a significant step towards protecting pensioners from a harm that many other civilized countries have already recognized and addressed. It should be suitably amended as described, with the inclusion of windup assumptions and retroactivity, and passed into law as soon as possible. We hope the committee will undertake its duty to Canadians and find the wording to make it applicable to companies already in bankruptcy process and thereby bring Canada into the 21st century. There is no impediment in law to doing so.

Thank you for listening to our concerns and our recommendations.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Speaker, I have the honour to present, in both official languages, the 11th and 12th reports of the Standing Committee on Industry, Science and Technology in relation to its study of Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), and in relation to its study of Bill C-452, An Act to amend the Competition Act (inquiry into industry sector).

The committee requests a 30 day extension in order to give the bills their proper consideration.

[Mike Wallace, Conservative, Burlington, ON]

My point, Mr. Chair, is that I've had a private member's bill myself before, and it required a royal recommendation and it did not pass because it needed a royal recommendation--and I'm on the government side.

Private members' bills, in my view.... This has what, eight clauses, seven clauses, and we have eight changes to it. I think whether it's from a legislative clerk's perspective, it's a significant change, a wording change. Obviously, the wording has been difficult. The public has dealt with it in its present wording, and all of a sudden it's changed. The principles are basically the same. Based on the witnesses we heard, I think the mover of the bill has certainly made a point on this particular topic.

My personal view--and I'm not speaking for my party or my colleagues here--is that the issue has been brought to light. We've talked to witnesses who at first thought this would help the Nortel folks. We heard from many witnesses, including the head of the Nortel pensioners' group, that it is not going to affect them--not going to affect them. So my suggestion is that whether the wording is fixed a little bit or not, to make it a little clearer, I don't think we should be proceeding with this in the form it's in here. I'm happy to send it back in title and let the mover of the motion talk about the issue in the House, which is a very important issue, which I don't think anybody on either side of the House isn't concerned about.

Then a new Liberal private member's bill was introduced in the House to deal with the pensioners' bill of rights. The issue is being presented--I think this is what this private member's bill does--to put pressure on us as legislators to find the solution. I think we heard clearly that Bill C-501 is really not the solution. It may highlight the need for a solution, but it's not the solution.

In my view, whether the amendments pass or not, I think we should be frank with people that this doesn't work and that we need to find a better solution than what is here.

The other concern I have, and I'm going to put it right on the table here, is that there's no amendment to royal recommendation, but to remind my colleagues, if that clause does not pass, then this may not need a royal recommendation, and that will make a difference in the House of Commons.

Those are all my comments at this time. Thank you, Mr. Chair.

[Roger Charland]

As a number of witnesses indicated when they appeared before the committee, Bill C-501 covered all unfunded pension liabilities. The motions don't change that. The motions say the same thing, they just say it in a clearer way. So we're dealing with providing a super-priority for all the amounts needed to bring back the pension plan to a solvency ratio.

[Roger Charland]

In our reading of the motions, it clarifies that Bill C-501 covers all unfunded pension liabilities and provides a super-priority. These amendments only make it clearer that that's what the bill does.

There was, as some witnesses expressed, some discussion as to whether or not the current language was doing this. These amendments make it clear that it's all unfunded pension liabilities. It makes it clearer that that's what the bill achieves.

[Roger Charland, Senior Director, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry]

Bonjour.

The way we understand the motions—and this is probably true of all eight of them, because they change the bill in the same fashion but in different circumstances--as a number of witnesses have indicated, the current version of the bill covers all the unfunded pension liabilities, but the language can be open for debate. The motions we see here would make it clearer that we are indeed talking about all unfunded pension liabilities covered by the super-priority that Bill C-501 would grant.

That's how we read and understand the motions.

[The Chair, Conservative, David Sweet]

Order.

We're going to be considering Bill C-501. We have received eight amendments, and you should have copies in front of you. They are numbered NDP-1 to NDP-8. We'll be considering those as we consider the clause-by-clause.

I should remind members of the committee that the Speaker has ruled that a royal recommendation will be required for this bill, due to clause 6.

We will begin, then, with the amendments.

On amendment NDP-1, Mr. Garneau.

Pensions

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Chair, on June 16, 2009, the New Democrat motion calling for action on pensions passed with unanimous support of this House. The motion provided that, in light of the legitimate concerns of Canadians that pensions and the retirement security may not be there for them in their retirement years, the Government of Canada should begin work with the provinces and territories to ensure the sustainability of Canadians' retirement incomes. This should be done by bringing forward, at the earliest opportunity, measures such as: expanding and increasing the CPP, OAS and GIS; establishing a self-financing pension insurance program; ensuring workers' pension funds go to the front of the line of creditors in the event of bankruptcy; and, protecting CPP from imprudent investment practices by ceasing the practice of awarding managers performance-based bonuses and recovering those bonuses for 2009.

Canadians have been pleading for action on safeguarding and improving pension benefits. Yet a year and a half after voting for these measures, where is the government action?

In the time I am allotted I will speak to just a few of those agreed actions that have not yet occurred.

First of all, I wish to share a little of my personal experience in assisting seniors in my riding.

This summer, in response to a number of tearful calls to my office from distraught seniors, I did some house calls. I found it deeply troubling to find seniors who have worked hard all their lives, many of them widows of retired farmers, struggling to get by on their meagre savings and pensions.

We have, over the past few months, hosted sessions for seniors to provide information on pension and disability benefits. However, from the majority, the message I have taken away from these sessions with seniors is that they do not just want more information, they want the government to respect their contribution to society and provide greater pension support.

A senior wrote to me a few weeks back to remonstrate that this October seniors' OAS rose a maximum of six-tenths of one per cent; a mere 10¢ a day. He despaired that many seniors received zero increase due to clawbacks. He requested that an MP from any party rise in the House to thank seniors for their support of the economic recovery program, as among the few to have increased taxes are seniors. He specified the HST in Alberta and clawbacks.

On behalf of this gentleman I stand here in the House to thank all of Canada's seniors for all they have contributed and for their patience and forbearance.

We need this government to stand up for those who have worked for a lifetime contributing to our prosperity, yet are left struggling just to get by in the last years of their lives. Considering the state of the economy and minimal pension supports forthcoming, it is sadly probable, given the lack of government action, that even more will fall between the cracks.

Canadians need more than endless consultations. This is a time of restraint due to job losses; increased taxes, and that includes the HST; as well as seniors and far too many families living on fixed a income. Canadians need the federal government to make them a priority. Tax cuts continue to be extended to major corporations while a growing number of working, retired and laid-off Canadians struggle.

Why am I and all New Democrats calling for an increase in CPP pensions? Why the call to inform seniors of the benefits they are entitled to?

A September 2010 poll commissioned by CUPE reports 66% of Albertans support expanding the CPP. More than 11 million Canadian workers, 68% of the workforce, have no workplace pensions. There are eight million Canadians who are reported to have no private pension plan or RRSP. The vast majority of Canadians rely on public pensions and private savings for their retirement.

With only 31% of Canadians contributing to an RRSP last year, the government merely calls on Canadians to set aside more savings for retirement. Where, pray tell, are the majority of middle income, let alone low income, Canadians to find that extra cash?

Canadians' meagre savings are fast being depleted by rising costs for basic services: electricity, fuel, food, accommodation, extra school fees and new taxes.

Over 266,000 seniors are barely surviving at poverty level incomes. Given today's cost of living, it is a struggle for anyone to have quality of life on $16,000 a year.

It has been estimated that, by 2030, two-thirds of Canadian retirees will not have enough retirement income and are looking at relative poverty. Alberta's situation is the worst in Canada, with Albertans only able to replace 45% of their income in retirement. In my province of Alberta, more than half of senior families have no private pension. Among those without pensions, only 38% have RRSPs or registered investment funds.

For Canadian women, access to basic living support, or frankly any pension at all, is all the more critical.

In budget 2009, the government set women workers further back by killing measures ensuring equal pay for work of equal value for federal workers.

Canadian women are still not receiving the equal treatment they deserve, as they receive almost one-quarter less than what men receive on every dollar of income.

Almost half of Canadian workers are women, 60% of whom are over 50 years of age.

Three-quarters of Canadians living in poverty are women and children.

We all know that it is the majority of women who set aside their working careers to look after children at the front end, and at the back end to look after their aging parents. As a result, they qualify for less pension benefits than men, and that is the case for those lucky enough to have any pension plan at all.

By doubling the CPP, we could lift many Canadians out of poverty. We have the money. It is a political choice to grant yet deeper, unneeded corporate tax cuts or to allocate the dollars to quality of life for seniors.

Another proposed solution would be to allow for voluntary contributions to top up CPP. While the government has talked about this option since last June, so far it has not acted. The right to choose to invest in one's CPP is an important one, given how many lost their life savings through private RRSPs.

Yet another example of the government ignoring the will of the House and reneging on its own undertakings to act expeditiously to protect pensions is the delayed action to protect workers' pensions in the event of bankruptcy.

When the government failed to act, our party did. My NDP colleague, the member for Thunder Bay—Rainy River, introduced Bill C-501. The bill would ensure that pensions for employees of private companies that go bankrupt are granted priority over large creditors. This is a critical measure for Albertans, as the province has suffered the highest rate of bankruptcy during this recession, including small and medium-sized companies, an increase of 82% in one year.

Workplace pensions are nothing less than unpaid, deferred wages. Workers have a right to receive them.

Bill C-501 is currently before industry committee. I strongly urge support for the expedited completion of the review and a vote for it by all parties, including those in the other place.

In summary, the first step is to recognize the pension crisis. It was presumed that this occurred in the passage of last year's motion. The next step is for the government to take action on the many sensible measures put forward in this House. Canadians are still waiting.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Chair, the member from the Bloc raised earlier the issue of the guaranteed income supplement.

The government knows the people's age and it knows how much money they make. Would it not be nice if the bottom of the assessment said that in the future they may qualify for this and they should check it out, or something to that effect? It should be that simple because it is an entitlement really.

We heard the member for York West talk earlier about the Nortel situation with the LTD workers. The LTD workers at Nortel had a problem because, instead of premiums being paid to an insurance company, the company was self-insured. That is why when the assets went down there was a problem.

We have talked in the House under one of the bills I proposed, Bill C-476 and now C-501, about protecting workers' assets in their pension funds at the time of bankruptcy and insolvency or the CCAA because corporations are hiding behind CCAA, in particular, to get out of their responsibilities to the pensioners.

I am very curious. Would the Bloc be supportive of Bill C-50l, which was before committee today?

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Madam Chair, I would like to change tack a bit and not get into all the arguments they are having. This is a question for the member that I hope he can answer at some length, if we still have time.

Today marked the third day of committee hearings on my bill, Bill C-501, which is an act to protect pensions for six million Canadians and their families right across this country. While there are some problems and some difficulties, we are working on them, and I hope that all the parties are working together on this.

One of the things that happened today was that we had a lot of witnesses from industry. They seemed very concerned that defined benefit plans are going to disappear or they are going down. They said, “Woe is me; what are we going to do?” I suggested an alternative and I would like the member to make a comment on it.

The alternative was the we have the best pension plan in the country that we can be part of, and it is the CPP. The Canada pension plan is the best pension plan we have. Everybody can participate. Everybody can be protected and, most importantly, the government cannot get its hands on the money.

I would like to ask the member if he would expand on his thoughts about the CPP and the value that it will have on an ongoing basis as we move forward in this debate.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Madam Chair, I am most pleased to take part in the debate on those pension reforms that are needed to protect and enhance the lives of Canada's seniors as they live out their sunset years.

From my reports, the House will know that over the last 19 months, I have been crossing Canada, holding some 39 community meetings, so far, on what I call the listening to seniors tour. I want to assure the House that these seniors have been very quick to tell me of their fears and their concerns about the future.

Today far too many of our seniors are forced to live in fear, just one crisis away from financial catastrophe. Seniors are worried about their private pensions and how they might be significantly less than what they were told they would be, or, as in the case of companies like Nortel, where there was a significant loss to the amount of pension income, they worry if they will have a pension at all going forward.

The genesis of my listening to seniors tour was when I was visited by a prominent group of seniors. One of my guests stated that seniors felt invisible to their government. This group also wondered why the government had given $14 billion a year in corporate tax breaks while, as they said, doing nothing for them.

The government will argue that there were things done over the past five years on behalf of seniors and some of that is factual. However, from the point of view of the seniors, they do not see that immediate impact for them.

One of the things we heard today was the corporate tax rate in Canada as compared to the United States. I may be incorrect but it is my understanding that the corporate rate in the U.S. 36% and we are nose-diving to 15%, and we are taking the fiscal capacity out of the government to respond to seniors needs.

Last fall, I told the House something worth repeating. It is the story of a senior who came to my office. He had a letter from the government saying that his pension had been increased 42¢ a month. I am pleased that the finance minister is here to hear this. This man was so upset, he had tears in his eyes. He said, “Not only does the government not give a damn about seniors, but it goes out of its way to insult us by sending us a notice that cost more to post than what it cost in the increase to the government”. He was very concerned.

We faced down the worst recession in years and some credit should go to the government, but Canadians throughout that process were vividly reminded of why we had a social safety net in the first place.

I am pleased to see the government has taken an interest in reviewing the benefits paid under old age security, GIS and CPP. I have to stress that this has also been done with an eye to increasing benefits for seniors.

Repeatedly tonight we have heard references between 200,000 and 300,000 seniors who live below the poverty line. An economist at the Canadian Labour Congress reported that an annual infusion of about $700 million would raise all seniors above the low income cut-off, what is more commonly known as the poverty line.

We heard the Bloc speak about a motion that it had before the House calling for an increase in GIS.

The 200,000 or 300,000 living below the poverty line is a very sobering statistic, but when we consider of that number, 60% are single unattached women, many of them women who never participated in the Canada pension plan because they stayed at home, this is nothing short of a national disgrace. We can do so much more and we must do much more for all senior Canadians.

Today only 38% of Canadian workers have workplace pensions. Nearly one-third have no retirement savings at all. Earlier today the Liberals presented a bill on guaranteeing a charter for the rights of seniors to save. For the one-third of Canadian workers who are outside the umbrella of having a pension plan and cannot save at all, we have to question what the charter would do for them.

More than 3.5 million Canadians are not saving enough in RRSPs, and I am sure the finance minister could back that up. They are not taking advantage of the opportunity that is presented by the government. Seventy-five percent of private sector workers are not even able to participate in a registered retirement plan. Clearly the notion that retirement savings can be adequately accounted for through the purchase of RRSPs has not worked out and requires urgent government action.

In June 2009 the NDP opposition day motion started, in a very public way, a national discussion on the future of our retirement security system. Members in this place today are continuing that discussion.

Part of the discussion from our perspective centred around increasing CPP and QPP funds. I would remind members that CPP and QPP are self-financing, so it then becomes a question of whether Canadians are prepared to pay more for security in their senior years as part of a secure public pension plan. Canadians certainly face insecurity today in the context of their private options, like RRSPs or defined contribution plans, that leave them uncovered or victimized by the market.

We believe it would also be a benefit to beef up CPP. That would be the cheapest way for Canadians and the government to pool risks, take the burden off individuals and secure their senior years. Any voluntary supplemental CPP system would simply not meet the needs of Canadians any more than what an RRSP has done in the past. The NDP believes it would be better to use the resources of CPP and QPP to enhance a retirement system.

I would like to discuss the need that Canada has for a pension benefits guaranteed fund.

Federal leadership is urgently needed to set about working with the provinces to develop a pension insurance regime. This must be done to ensure workers actually receive the retirement benefits they have earned, even if their employer goes out of business.

As I said, we insure our cars and our homes and we have deposit insurance to cover our savings. Why not insure our pension plans? The system would be funded by contributions from federal workplace pension plan sponsors administered by the federal government and designed to ensure efficiency and fairness to all parties.

Another notable model that is worthy of study is the American Pension Benefit Guaranty Corporation, and there are some issues with that. Similar to the Canada Deposit Insurance Corporation, the Pension Benefit Guaranty Corporation is not financed through tax revenues but by premiums paid by sponsors of defined benefit plans, assets from plans that are taken over, recoveries from refunded pension liabilities from plan sponsors' bankruptcy estates and through investment income.

Canada may choose not to follow the American model, but it could create some form of pension insurance uniquely its own or a hybrid of other plans, such as those in Switzerland, Sweden, Germany and Japan and even the Netherlands, which is probably not an option that we would look at here. The government of the Netherlands insures the plans.

Once a guaranteed plan is successfully combined with funding rules or other protection measures, it can effectively perform as a last resort benefit protection measure.

Another clause in our opposition day motion called for ensuring that workers' pension funds would go to the front of the line of creditors in the event of bankruptcy proceedings. My colleague from Thunder Bay was responsible for putting forward Bill C-501. He has worked hard on that file, trying to protect the pensions and severance of workers across the country.

Canadians need to know that there will be a level of pension income for their retirement to ensure that they will spend their final years with financial security and live in dignity.

[Judy Sgro, Liberal, York West, ON]

Madam Chair, yes, I have been attending the industry meetings dealing with Bill C-501, which I am sure we will hear more about as the evening progresses. We have had a lot of very important people come in and give testimony, whether it was Nortel pensioners, Bowater or the many companies across Canada that are very concerned about the impact Bill C-501 will have. As parliamentarians, I think we are all trying to make a difference and many of us have different opinions.

This bill is important. It will soon have an opportunity to be looked upon in discussion with the department. At the appropriate time, we will make the appropriate decision.

[Mike Wallace, Conservative, Burlington, ON]

Madam Chair, it is my pleasure to take part in tonight's discussion on pension reform.

The Minister of Finance and the Parliamentary Secretary to the Minister of Finance have spent a lot of time over the last number of years looking at this issue. I am fortunate enough to be on both the finance committee, which dealt with this issue last spring, and on the industry committee at present where we are discussing Bill C-501.

Parliament and this government have been engaged in this issue and we have made a number of changes over the last couple of years.

However, I am not absolutely sure about something. The member for York West has been sitting in on our industry committee on the issue of Bill C-501 but I cannot tell whether the Liberals are supporting that private member's bill. I wonder if the member could tell us. I know that is a private member's bill and probably an individual decision, but based on the work that she has done and whether that bill would actually help Nortel employees, will the Liberals be supporting it coming back to the House?

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

This would be after Bill C-501, yes, for sure, so not including Thursday's meeting. It would be starting next week.

[The Chair, Conservative, David Sweet]

Is this after Bill C-501?

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

A final question for Madam Bastien.... For those remaining defined benefit plans, we have talked about risks to employers in terms of access to credit, increases in interest rates, impacts on markets. What about the relationship between the plan provider, the pension provider, and the plan sponsor?

If Bill C-501 is passed, will that create risk for the plan provider that they will want to cost and pass on to the plan sponsor?

[Leigh Ann Bastien]

Are you asking what the case is if that regulation I referred to is not redrafted? No, my comments don't change, because Bill C-501 is worded in such a way that it can do more than Bill C-9 does by itself.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Okay.

I guess the last part is that if none of the things that are to be rewritten for Bill C-9 occur, does the impact of Bill C-501 change for you?

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

What you're saying is that if one is looking at the 30 other countries, most of them are only really dealing with a very limited.... They're looking, as in Bill C-501, at special payment in arrears, and really at just that.

[Leigh Ann Bastien]

I can make a couple of observations, first about Bill C-501.

The stated intention for Bill C-501 is that the entire deficit become one held by a super-secured creditor. The words in Bill C-501 are less definite. I would say that when you're doing your clause-by-clause, it's very important to be sure that the words match what you think they ought to mean.

Bill C-501 refers to regulations made under the Pension Benefits Standards Act. It defines the liability that it's targeting by way of a regulation. Under Bill C-9 that regulation has yet to be rewritten; it's going to be rewritten.

So you have a moving landscape. That's my first observation.

Secondly, what we see in Bill C-9—in the statute itself, prior to seeing the regulation—is that there are special payments that are due up until the date of a plan termination. I think I heard a reference to this earlier today. Some think this is the intended scope of Bill C-501. But Bill C-9 introduced a new element to pension plan funding. That's an obligation to fully fund the deficit after a plan is terminated and to fully fund it over five years.

In my view, the language in Bill C-501 is not clear enough to tell me with any certainty that this liability has been excluded. In fact, I think you can even read it to say that the entire deficit is captured, even though Bill C-9 doesn't require a full deficit funding in one moment but requires it over five years.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

I'd like to ask my question to Madame Bastien.

I know you were here in the previous session, so you may have heard me asking a question of Mr. Breton. It was concerning the issue of arrears and special payments. That seemed to be what Bill C-501 was addressing. I was asking how much effect that would have, really, on the markets. He brought in the fact that it wasn't just Bill C-501; it was also Bill C-9.

I heard you mention that you're familiar with Bill C-9, so I was wondering if you might shine some light on the linkage, to show why it's a bigger thing than perhaps I've appreciated.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

One last question to Towers Watson.

Your work estimates that this bill would increase the corporate bond market. I know you didn't want to talk about basis points, but you say 12 to 29 points. What you say is certainly in line with other testimony that we've heard. Philips, Hager & North, which I guess you're familiar with, and Monsieur Carte, whom you're also familiar with, both estimated a quarter-point hit in the corporate bond market, about $3 billion to $4 billion in investment-grade bonds. And these are the ones that are preferred. These are the secured ones.

So when we speak of Bill C-501 and we talk about investment-grade corporate bonds being approximately $300 billion—I think that was the estimate in this report—we're really talking about a 1% hit on investment-grade bonds, $3 billion to $4 billion.

[Phil Benson]

The whole issue of defined benefit plans is interesting. For about 40 years of regulation the goal was to encourage defined benefit plans. Quite bluntly, I don't think we'll see another one come into being unless it's through negotiations, collective agreement, or some other thing. It's been an abject failure.

When we're talking about risks and costs, I support the idea of putting funding more securely--more like insurance companies: get out of the marketplace. There are lots of things that can be done in that regard.

There's also another risk, but I didn't talk about risk and cost. I'm at the tail end of the baby boomers. When we all retire, if those pensions that were promised aren't there, we're also going to transfer that risk and cost onto taxpayers. At the end of the day, if some of our members are going to get 26 cents or 36 cents on the dollar, they'll be getting guaranteed income supplements, HST credits, GST credits.

That's another thing for you to think about as the legislators. Bill C-501 is one piece of the pie; it's not the total fix. But I think it's something that will have to be done eventually, if not now.

[Michel St-Germain]

Thanks.

I want to start by saying that no private plan sponsor is forced to have a defined benefit plan. It's something they decide themselves, subject to labour negotiations. It seems to me that you have to encourage private sector sponsors to set up and maintain their defined benefit plans and to fund them properly. Make their lives easier by having more flexible and better regulations. Encourage them to put more money in the pension plan by telling them if they put too much money into the pension plan they will not lose it.

This bill, Bill C-501, makes the lives of plan sponsors more difficult. It doesn't encourage them to maintain pension plans. It encourages them to terminate their pension plans.

[Gaston Carrière]

First of all, because employers have to stop taking advantage of workers and commit to complying with provincial and federal legislation, to paying workers' severance, separation and pension plans. Yes, we want to be secured creditors. Our severance and termination pay must be secured claims. I repeat: what they're doing is abominable.

Since when are workers paid in shares? The multinational is going to pay us our separation and severance in shares, up to 36.5% of what it owes us. Find me a Metro store, an IGA store, a car dealership, a city, that will accept shares as payment? That's how the multinational wants to pay us, 36% and not 100% of the value of our separation and severance pay.

The multinationals aren't penalized by Bill C-501. This one doesn't have enough teeth. It has to be given some. The multinationals come after our materials and don't invest in infrastructure. They transport them to other countries, if not to other continents. Bill C-501 is so weak that three-quarters of Canada's forest mills are under the protection of the Companies' Creditors Arrangement Act. It's not just AbitibiBowater, Fraser or White Birch. There was Smurfit-Stone. Some are lining up to be placed under the act's protection, Domtar, Catalyst Paper, in the west, or Cascades. They're all lining up. The entire sector will be under protection because these companies won't be able to compete with the companies that are restructured under the CCAA, not to mention all the other sectors of the Canadian industry that will want to take advantage of the same opportunity. This is one of the reasons why the bill has to be given some teeth.

I've also heard it said many, many times that what happened in the case of the renewal of AbitibiBowater's collective agreement is good. We saved the pension plans. It should not be forgotten that the Quebec Pension Plan overrode its provincial regulations. Instead of repaying the $1.3 billion in balance benefits over five years, it has extended them over 10 years.

There's also the fact that we've always stayed in a benefit plan. We stuck with the traditional system, but they're starting a new plan at AbitibiBowater through the CEP. It's still a benefit plan. Workers and employers will pay more. I'm not a banker, but everyone knows that it takes 15% to administer a plan. They're going to allocate 18% to it and 3% will be held back. The employer will no longer be exempt from paying premiums. It will have to continue paying its fixed share into the plan to rebuild its solvency.

Workers have abandoned the equivalent of 17% of their working conditions when the last collective agreement was renewed in 2010, 10% of payroll and 7% benefits, not to mention what the Government of Quebec did to protect this multinational. Don't come and tell me that, if we put some teeth into Bill C-501, we're going to force the multinationals into bankruptcy. That's false. In the case of AbitibiBowater, what the Quebec Pension Plan and workers did, no banking institution would have been able to do. If the Quebec Pension Plan and workers hadn't done it, that would have been the end of AbitibiBowater.

To thank us, company officials want to award themselves bonuses. Fortunately, the media are reporting this morning that the restructuring of the business has been accepted in the United States. We know why that was being blocked. The Americans didn't want Canadian managers to award themselves bonuses. These companies come and exploit our natural resources in Canada. They have no right—no right—to dump workers. These are Canadian citizens, and they have no right to dump them as they've done. It isn't happening just in Gatineau, but in Dolbeau, Beaupré, the Belgo plant in Shawinigan, in Mackenzie, Grand Falls, Newfoundland, and Thunder Bay as well. It's not true; it isn't clear. They don't have to do that.

For all these reasons, gentlemen, we think Bill C-501 has to be given some teeth, for the workers' sake.

Thank you very much for listening to us.

[Guy Caron]

Thank you, Mr. Garneau.

We understand that there are concerns among the companies, investors, actuaries and pension plan managers, and a proposal that we submitted last year could address those concerns.

In fact, in the middle of the crisis last year, 70% of our members were working for a company that was under the protection of the Bankruptcy Act or the Companies' Creditors Arrangement Act.

Our proposal provides for the creation of a national investment and pension fund, somewhat similar to what there is in Quebec, and we discovered in the meantime that the two concepts were very similar. The federal government could establish a fund without investing any money. The fund would be administered by the Canada Pension Plan, separate from the plan itself, and we could have a guarantee that the assets of the companies that have put themselves under creditor protection could be invested in it in order to grow. At that point, those funds would no longer be subject to a plan termination and could be managed less conservatively than the funds of insurers. So we're talking about a mix of stocks and bonds that would permit a higher return.

That would subsequently assist the companies because, when restructuring, they would ultimately no longer need to calculate their shortfall on a solvency basis. They could consider the shortfall on an ongoing basis since we would have a guarantee that the plans would not be terminated.

I know it takes quite a long time to explain, but I have inserted the explanation in your documents. This kind of fund would help allay the companies' fears about this and it should be an essential partner for Bill C-501, which is still absolutely essential in protecting workers and retirees.

[Phil Benson]

We couldn't agree more.

There are three points we raise consistently. One is that Bill C-501 is some kind of approach. But that's to close the gate. Before it happens, we have to put in rules and regulations to ensure that money is invested more like an insurance company, with more in bonds and bond equivalents, and second, that they're adequately funded. We should never have a situation where a company can get up and say “Rather than giving the money I should to my pension fund, I need the money to run my company”.

I think if that were in place, this bill would not be onerous, because the marketplace would have taken care of it. We have to get the horses in line, but this is certainly part of our three ideas for fixing it. And I think it's needed. Whether it's this bill, the next bill, or some other time, this will eventually have to become law.

[Leigh Ann Bastien, Partner, Mercer (Canada) Limited]

Thank you for the opportunity for Michel and me to speak today.

I'm Leigh Ann Bastien. I'm a pension lawyer. I have expertise in pension legislation across Canada, including the Pension Benefits Standards Act, as amended by Bill C-9.

Michel St-Germain is a pension actuary. He has 36 years of experience providing advice on the funding and design of employer pension plans.

Our statement today, in simple terms, is that defined benefit pension plans are good things. They deliver pensions to many people through most market downturns and through most downturns in an employer's business. But the retirement system is struggling. Governments are trying to strengthen the defined benefit pension plans and to strengthen the retirement system. Bill C-501 would work in the other direction, making plan sponsorship less viable for employers.

Private sector sponsors of defined benefit pension plans will likely change the funding and design of their plans or leave defined benefit plans entirely if the bankruptcy laws change to make the pension deficit a fully secured creditor.

I'll turn it over to Michel, who will provide more details.

[Karen Figueiredo, Member, Towers Watson]

The cost of preferred creditor status is not evenly distributed among all employers who issue bonds. The impact of Bill C-501will depend on their credit rating, the relative size of their DB plan, their DB plan's funded position, and on prevailing economic conditions. Although the average impact on corporate bond interest rates may only be a quarter of 1% in normal market conditions—for example, moving from 5% to 5.25%—some companies will pay much higher costs than others.

Ian has a page that has the top 60 bond issuers in Canada, all of them investment grade, and visually you can see the ones in orange are the ones rated triple-B. It's those triple-B-rated companies with DB deficits that are likely to experience a downgrade in their credit rating and could see their financing costs increase by 2%, 3%, 4%, or even 5% as a result of the bill. If the rating drops them below investment grade, this would—as opposed to could—result in forced sale of their bonds by most Canadian pension plans.

It's important to note the dichotomy in the Canadian bond market. Most of the corporate bonds that are highly rated—i.e., that pay the lowest interest rates—are issued by financial institutions, whose DB plans tend to be less material relative to their corporate balance sheet and income statement, and by regulated utilities that arguably have an automatic ability to pass the pension costs through to ratepayers. Many triple-B-rated companies are household-name industrial companies, such as CP Rail, Telus, and Bell, where the DB plans are hugely material. In effect, it's Canada's industrial base that would take the majority of the hit if preferred creditor status or super-priority were given to DB plan deficits.

There will be increased volatility for corporate bond issuers, and that may deter foreign investors from investing in Canadian corporations with DB plans. Several fixed income experts indicated to us that they would develop new models to assess risks associated with DB plans, something that many foreign investor firms may be unwilling to do, given the time and complexity involved. By the same token, investment capital could focus more on investment opportunities outside Canada. While many DB plans face risk for their members' employers, market upheavals will happen. No one predicted how far along bond interest rates would affect DB solvency in the last five years. We can absolutely assure you that the best form of security for pension benefits of DB plan members is the existence of financially sound employers, combined with pension benefits legislation that enhances the funding of ongoing plans in a balanced and sensible manner.

[Gaston Carrière, President, Local 142, Communications, Energy and Paperworkers Union of Canada]

Good morning. I want to thank the committee, ladies and gentlemen, for hearing us. First I want to emphasize that we agree on Bill C-501. However, we sincerely believe that additions should be made to it to give it more teeth.

Why? Who is currently suffering most from the deficiencies of Bill C-501? The situation of AbitibiBowater's Gatineau and Dolbeau workers should be enough to bring about changes to Bill C-501. But as my colleague said earlier, we need more than that. What happened at Fraser Papers was abominable.

They took away 35% of total benefits from retirees who were already receiving retirement benefits, in addition to scrapping the pension plans, before other owners started the plant back up.

An even worse situation is that of White Birth Papers, formerly Masson Papers, where they are in the midst of negotiations. There too they are working to try to save pension plans and working conditions. Negotiations are underway, and a conciliation meeting is being held this morning.

The worst part of all that is having the courts sanction all the actions taken against workers in the pulp and paper industry. It has been accepted by the courts that our working conditions have been greatly weakened. The companies are entitled to do that in order to restructure. It's abominable and terrible. Let me tell you that the situation is extremely serious and a major concern because it's all being done with the courts' authorization under the Companies' Creditors Arrangement Act.

The companies now have a right and the opportunity to liquidate their debts. Do you think they hesitate to do so? No, not at all. That's why the act has to be revised and corrected in order to provide better protection for the amounts owed to workers, while equipping them to maintain their pension plans and so on. What's being done is abominable, abominable, and it's spreading to other sectors. Employers have found a crack because Bill C-501 is weak; it has deficiencies. They are weakening our working conditions, our pension plans, termination and severance pay, in addition to penalizing us for unemployment purposes. We'll have to pay money back.

Thank you very much.

[Guy Caron, Director, Special Projects, Communications, Energy and Paperworkers Union of Canada]

Thank you very much, Mr. Chairman.

Thank you, committee members, for agreeing to hear us.

You will not be surprised to hear that we support Bill C-501. We think the present system really works to the detriment of workers, as demonstrated by a number of examples from the great recession. I would like to talk to you about a specific example.

In some cases, we were able to salvage the situation. In the case of AbitibiBowater, for example, we were able to negotiate with the company to protect retirees' pensions. Of course, that required concessions on the part of workers, but pensions were protected during the major crisis, particularly as a result of the fact that it was possible to work with AbitibiBowater.

Fraser Papers is a much sadder story. A company, Brookfield Asset Management, owned a 70% interest in the business. It was one of the most viable forest companies. Fraser Papers was able to weather the crisis and to come out of it stronger than the rest of the industry.

And yet Brookfield Asset Management decided to place Fraser Papers under Bankruptcy Act protection. Under the restructuring plan that was adopted, a new company was created, the major shareholder in which was still Brookfield Asset Management, and it managed to secure repayment of the money that Fraser Papers owed it on paper and to repay secured creditors. Ultimately, what that meant for workers was that the Thurso plant shut down. Workers have yet to receive severance pay.

As for other retirees, their pay was cut by 30% to 35%, and all that was because Brookfield Asset Management had no remorse in shutting down a plant that was profitable and was doing better than other companies in order to secure its concessions under the Companies' Creditors Arrangement Act. That was a flagrant abuse of the CCAA for specific purposes that ultimately hurt the workers.

In that sense, the CCAA is currently an obsolete tool, and we advocate passage of Bill C-501. With regard to the issue of investors—I know that has been the subject of extensive discussion and that you have heard from companies and restructuring experts who tell you that's impossible—and we have a proposal, which I won't have time to present to you, but I invite you to ask me questions on the subject. I will be pleased to answer them.

[John McKenna]

We've been talking about pension deficits. I would like to say that Bill C-501 covers severance and termination super-priority as well. That will impact every single employer across the country negatively. You heard from the CBA, who said that the availability of credit for smaller and mid-size companies is purely driven by the asset value—the recoverable value from those assets if liquidation is required. If there is a priority ahead of the bank's security, it will come off the availability they calculate, and every single employer will suffer.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you all for coming. It's been very enlightening.

I'm pleased to hear, and I was aware of it too, that AbitibiBowater has restructured and has come out of bankruptcy protection.

Much of the dialogue has the unfortunate premise that it's them against us. I think this is an obvious example of how that's just not the case.

I want you to tell the committee one more time why, in a situation such as this, it is important that we not force the hand, so to speak. Maybe you could share with this committee how many you would say, in today's market and considering that we've experienced some real tremors in that market, would be in the position, if a bill like Bill C-501 were enacted, under which the banks would have to pull the trigger? What would your assessment be, just quickly?

[Michael Boychuk]

I'm talking specifically to Bill C-501.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Is that assuming the effect of both Bill C-501 and Bill C-9 and what it might imply, or is it strictly based on Bill C-501 and its focus on special payments?

[Jean-Daniel Breton]

Unfortunately, Bill C-9 is something that has already passed and is already law. Certain provisions of Bill C-9 could bring about an acceleration of the payments in an insolvency situation. That brings the entirety of the deficit into play at that point.

Even though we are absolutely in agreement with the fact that the special payments should be protected and should be afforded super-priority status, the other legislation that is out there extends the effect of Bill C-501 to things that are other than just the special payments amount. That is the difficulty.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

We're talking about Bill C-501. We're not talking about something that might come along.

[Jean-Daniel Breton]

If I may, the problem is not with Bill C-501, it is with the other legislation that would then push those special payments—

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

As a legislator, if I have a pensioner in my office and he or she tells me they have contributed to a pension plan during their working career and that they regard this as deferred wages, if their company goes bankrupt after they are on pension, it is probably true to say they have very little alternative but to absorb a loss of pension income. I understand that part. I also understand where many of you are coming from with respect to the importance of having access to credit for companies to prosper and grow, and having certainty in the market.

The fact is that this Bill C-501 is very limited in its scope, although it may not have appeared that way to many people. It does not talk about retroactivity, it simply deals with arrears in special payments up to the moment of bankruptcy. That period of time can vary from one bankruptcy to the next.

What I have been surprised by is the range of analyses and estimates as to the impact of that. I have heard that this is not really that big a deal and it is not going to cause bond market instability, while other people have said the hit is really big.

I am trying to get a sense of that. I haven't got that sense of it. As legislators, where we are talking about prioritizing and the impacts on different groups, whether it's the bond markets or pensioners, it would be good for us to have a real impact, since we need to make decisions like Solomon.

It seems to me, Mr. McKenna, you were talking about this issue. The special payments in arrears didn't seem to be an impossible thing to deal with. I'd like to hear a little more from you and others on that, as to where you situate the problem.

[John Farrell]

I can.

Among other things, in addition to my responsibilities for managing FETCO, I have been, and continue to be, involved in the pulp and paper industry. I'm responsible for working with the companies to coordinate the collective bargaining activities from the Manitoba border through to Newfoundland.

AbitibiBowater has been a member of this group that I manage for over 25 years. As a consequence, I know the officers and people at the company. Just yesterday I was speaking with Bruce Robertson, who's the chief restructuring officer of AbitibiBowater. Fortunately, after almost two years of restructuring at AbitibiBowater, the company is restructuring and is emerging from bankruptcy protection under the Companies' Creditors Arrangement Act, which is extremely good news for all the people who live in the communities where AbitibiBowater operates.

How did they get there? An arrangement has been made with the pension regulator in Quebec and Ontario to preserve the value in the pension plans for current retirees, so that the plan was not wound up, and it prevented the crystallization of the losses in the plan.

As well, the company and the union have agreed that in the future they will scrap the defined benefit plan and they will move forward with a form of target benefit plan, which is similar to a defined contribution plan, with far less risk. They have found a way to work with the regulator over a two-year period to sort out their restructuring. They fortunately didn't have to go bankrupt and they found a solution.

So I asked Bruce Robertson, “What if this Bill C-501 had been in existence two years ago?” His answer was that it would have increased the risk dramatically, that we would not have been able to achieve restructuring, and liquidation would have been almost certainly what would have happened. If liquidated, the company would have been forced to eliminate the employment of 8,500 direct jobs.

In a mill community, where the entire community is dependent on the operation of the mill, it's well known that every single job that's lost in a mill will cause the further reduction of four jobs in the community. So this would have resulted in the eventual demise of an additional 34,000 jobs, for a total of 42,500 jobs that would have been lost if AbitibiBowater was unable to find a solution to its pension problem and its restructuring issues.

[Michael Boychuk]

In percentages, once again, we're talking about basis points. I don't want to go too far into the technical details, but I can say one thing: most credit agencies do their calculations based on current events. We included some charts in our submission. I'm going to use a good example of what happened in the case of a company called Manulife so that everyone around the table will understand.

On August 5, Manulife reported its second quarter results. This is a company similar to a pension fund; it does asset liability management. Its earnings release resulted in downgrades by the credit rating agencies. In a very brief period of time, the cost of its credit on the 2018 bond rose by 55 basis points. That means more than half a point. That's just one case among many. I could give you examples of a number of other situations in which an event occurred. Perhaps Mr. Dafoe can talk more specifically about the events, about what would happen if Bill C-501 were poorly perceived by the capital markets.

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

Thank you, Mr. Chairman.

Good morning and thank you for coming to testify this morning. In listening to you, we can see there is some similarity in your remarks. I believe we can say you are not much in favour of Bill C-501. I thought I heard the same reasoning from a number of you with regard to the cost of capital. I understand that the cost of capital, interest costs, would be higher if Bill C-501 were implemented. Perhaps I'll put my question to Mr. Farrell or to Mr. Boychuk.

Did you estimate how much it would cost if Bill C-501 became law, if it were adopted? What would be the cost of capital for businesses that would have to borrow?

[John Farrell]

Ms. Sgro, if I could be of some assistance here, obviously these pension matters are very complicated. It's very difficult for the average Canadian, the average person, and the average politician to understand how pension plans work and how capital markets work. A great deal of work has to be done by the members of Parliament to understand the complexity of this issue.

It's unfortunate. I think that Mr. Rafferty has the best of intentions for his constituents, some of whom may be employees of AbitibiBowater, a company that's been in serious difficulty and is beginning to come out of it. But this is a knee-jerk reaction. This is a bill that is going to create far more collateral damage than any net good. So it really is incumbent, I think, on the politicians of this government and the politicians in all of the provinces to join together to effectively review the pension legislation that exists across this country, because it's not, strictly speaking, a federal matter. Find some reasonable approaches, understand the problem, and fix it. But if we engage in a knee-jerk reaction, such as Bill C-501, we'll end up with a situation in which we're worse off in the long run.

[Michael Boychuk]

And therein lies the inequity of what comes out of Bill C-501.

[Judy Sgro, Liberal, York West, ON]

Thank you very much, Mr. Chair.

And thank you very much to all of you this morning. Certainly the intensity of your comments solidifies your concerns about Bill C-501.

From this end of the table, of course, we're very concerned about the implications, but we're very concerned about trying to help people, such as the Nortel employees we have heard about this year, who have lost so much of their pension income. Just how do we go about protecting them?

Bill C-501 is very narrow as far as that special payment category goes. Mr. Rafferty has indicated that he would be moving to the preferred unsecured category rather than to super-priority status. It's only that special payment. We're trying to find some way to help some of the people who are clearly suffering as a result of the bankruptcies. I'm sure that you are all sympathetic. I've heard that in your voices. The question is how we change it. How do we fix it?

Can you suggest any way we can help the Nortels of the world? Will this bill help Nortel?

[John McKenna]

Essentially, Bill C-501 deals with three areas, all related to employee protection. Due to time constraints, we will not deal today with the third area, which relates to a change to the Canada Business Corporations Act to facilitate the processing of claims against directors.

Regarding the first area, the bill proposes that super-priority protection will be extended to any arrears of special payments. To the extent that this is the change that is contemplated, we would support such a change, as we see no substantial public policy reason that would justify a different treatment between the normal cost arrears and special payment arrears, and it could be accommodated with reasonable efficiency in insolvency proceedings.

However, to the extent that the intent is to create protection for the entirety of the pension deficit, CAIRP has identified a number of significant issues that would materially negatively impact companies sponsoring defined benefit pension plans. These issues are set out in detail in CAIRP's paper, but the net effect of these can be summarized as, firstly, to reduce by a potentially significant amount the credit available to all companies that have or are viewed as having defined benefit pension plan deficits. It may also make it impossible for an insolvent company to borrow to finance its operations during a restructuring.

Secondly, it could cause downgrades in the credit rating and/or in increased interest rates for such companies. Thirdly, it could accelerate the probability of insolvencies for such companies due to reduced availability of both secured and unsecured credit. Fourthly, it could make insolvency proceedings lengthier and more costly.

Finally, it could decrease the possibility of achieving a successful restructuring. In our view, this would be counterproductive to the interests of many stakeholders, such as current employees, suppliers, customers, and investors, as experience tells us that restructurings return more value to creditors and preserve jobs.

[Jean-Daniel Breton, Senior Vice-President, Ernst & Young Inc., Canadian Association of Insolvency and Restructuring Professionals]

Given its mission, CAIRP has cooperated closely in the insolvency reform since 1992 and, more particularly, as consultants on preparation of the act adopted in 2007. It was with that in mind that we prepared our brief on the various bills tabled in the House of Commons and Senate which contains our comments on Bill C-501, which is being examined today.

CAIRP acknowledges the importance of providing adequate protection for employees and former employees who constitute groups of vulnerable creditors—

[John McKenna, Chair, Corporate Practice Committee, PricewaterhouseCoopers Inc., Canadian Association of Insolvency and Restructuring Professionals]

Good morning, Mr. Chairman and distinguished members of the committee.

My name is John McKenna, and with me today is Jean-Daniel Breton, appearing on behalf of the Canadian Association of Insolvency and Restructuring Professionals, known by the acronym CAIRP in English, or ACPIR in French.

CAIRP is the national not-for-profit organization that represents some 900 insolvency and restructuring professionals in Canada. As licensed trustees in bankruptcies, receivers, monitors, and financial advisors, CAIRP members are, and they have been, involved in every major insolvency and restructuring filing in Canada, both on a corporate and a personal basis.

As such, CAIRP's comments on Bill C-501 come from experienced insolvency professionals who are called upon daily to apply insolvency law.

[Stephen Dafoe, Director, Corporate Bond Research, Scotia Capital]

Mr. Chair and committee members, I want to thank you for the opportunity to appear.

I'll begin by clearing up some misconceptions that may be left from previous comments.

First, a billion dollars is a lot of money. If you want to make the denominator large enough, say the entire Canadian economy, almost any cost or loss can be made to appear small or manageable. But in the context of the Canadian corporate bond market, which is what I think we should be considering here, a few billion dollars would be very, very damaging. Even a billion dollars would be a very significant loss, and it wouldn't be easily recovered.

Corporate bonds are relatively safe investments, especially in Canada, where the vast majority are of investment grade. Investment-grade bonds have low volatility, which is what makes them safe compared to equities or trust units. If that low volatility means a 1.5% loss, or whatever the loss might be, it would be difficult, if not impossible, to be quickly and easily recovered.

On another matter, regarding credit default swaps, there's very little net CDS protection outstanding on the bonds of Canadian corporations. A characterization that there's more net CDS insurance protection than there are bonds outstanding is not the case generally, and it is certainly not the case for the Canadian corporate bond market.

These bonds aren't held by faceless speculators, or just by wealthy sophisticated individuals; they're mainly held by ordinary Canadians, both workers and retirees, through their savings in mutual funds, life insurance policies, and pension funds. They're managed by professional investment managers. These managers have a fiduciary responsibility to avoid undue risk and to be adequately compensated for the risks they do assume by holding these bonds.

As you know, the credit rating agencies made terrible mistakes with ABCP and other structured securities, and they have seen their reputations suffer for that. But the rating agencies by and large understand and evaluate corporate credit pretty well, so professional investment managers still pay attention to what the rating agencies have to say.

In discussing this bill the image has often been made of a queue, and the question is posed about who is at the head of the queue. This is exactly the way the rating agencies view the bankruptcy scenario. If through this legislation corporate bonds were suddenly placed behind pension liabilities, downgrades could ensue in many cases.

This would be virtually certain to happen, in my experience. I've worked at two rating agencies for twelve years, and I've been critiquing and predicting the actions of the rating agencies for the nearly ten years I've worked at Scotia Capital. If the rating agencies downgrade, and especially if the market agrees with the rating agencies' reasoning, the losses on outstanding bonds would be very significant and very hard, or impossible, to recover.

As well, because such bond market losses would be based on prudent estimates of possible future scenarios by managers seeking to avoid risk, there's no reason to think there's an even offset between the amounts lost because of downgrades and spread widening and the amounts gained by the relative few who stand to benefit from the bill. The losses could easily outweigh the benefits.

I've published research on the bond market effect of Bill C-501, and it's being submitted to the clerk of the committee. While it may seem technical, I respectfully wish that it will be of some use to the committee in understanding how the Canadian bond market could react to the proposed legislation.

I can tell the committee that the bond market professionals I've spoken to about my research in the past few weeks all agree that the bill is very concerning. While they understand it's been proposed with the best of intentions, it could have very serious unintended consequences.

Mr. Chair and members, thanks for the chance to appear today, and thank you for your attention. I'd be pleased to answer any questions.

[William Randle, Assistant General Counsel and Foreign Bank Secretary, Canadian Bankers Association]

Thank you, Mr. Sweet.

Good morning. My name is Bill Randle. I am the assistant general counsel at the Canadian Bankers Association. With me today is Bill Kennedy. He's vice-president, special loans, with the National Bank of Canada. We appreciate the opportunity to appear before the committee today to discuss Bill C-501.

We sympathize with Canadians who face a reduction in their current or future pension benefits upon the bankruptcy of their former employer, and we applaud MPs and senators who are championing efforts to find solutions. We believe that every effort should be made to attempt to prevent Canadians from experiencing such hardship, but we are here today to raise our concerns about the particular solution that is proposed in Bill C-501 and about its potential impact on the ability of employers who sponsor defined benefit plans to invest in research, new equipment, and expansion; on the ability of employers to successfully restructure and maintain jobs and operations when they themselves are in difficulty; and on the savings, including the retirement savings, of millions of Canadians who hold corporate bonds through their RRSPs, employer-sponsored pension plans, the Canada Pension Plan, and the Quebec Pension Plan.

There is a delicate balance that has been achieved over the years in the order of priorities in bankruptcy legislation. This balance aims to ensure that the rights of various creditors can be met while also ensuring that companies are able to access reasonably priced credit to fund their operations and make the investments they need in order to grow and be successful in an increasingly international marketplace. Changes to the order or priority in bankruptcy threaten to seriously undermine this delicate balance, with ripple effects across the economy.

Our major concern with this bill is that giving priority to potentially very large pension deficits will decrease the funds available to repay other creditors. As a result, both lenders and investors would experience a significant increase in their risk.

Financial institutions, as you know, manage risk very carefully, and the amount of risk they are allowed to take is closely regulated by the federal government. As the recent financial crisis highlighted, there are very good reasons for paying such close attention to the risk in financial institutions.

One of the main methods financial institutions use to manage risk is to carefully assess the amount that will be available to repay a loan if a company enters bankruptcy proceedings. As a result, if funding deficiencies in a company pension plan are given priority, as proposed in this bill, and therefore the amount a lender can expect to recover is reduced by the amount of the pension plan deficit, there will be a corresponding reduction in the amount a company will be able to borrow. Indeed, prudent lending practices, which require an abundance of caution, will probably result in further pressure on the availability of credit in order to reduce the risk of losses.

Large and well-established companies often turn to the financial markets to borrow funds. For investors who purchase financial instruments such as bonds, a change in the order of priority once again increases the risk that they will recover a smaller proportion of their investment if the company experiences financial difficulties. This increased risk means that investors will be more reluctant to buy a company's bonds, thus depriving it of financing, or would do so only if there was a higher risk premium on the bonds, making financing more expensive. In effect, higher risk means increased financing costs, which in turn will prevent some businesses from effectively financing their operations or expansions. Ultimately this leads to reduced economic growth and job creation.

Beyond the direct impact on the financial markets and the cost to businesses of raising funds, the super-priority contemplated in this bill will have a number of other negative consequences, including the following: first, companies with a defined benefit pension plan would find themselves at a competitive disadvantage either to companies without such a plan or to international competitors in other jurisdictions. This may provide a further incentive to employers to switch to defined contribution plans or to close their defined benefit plans to new entrants, to the detriment of younger Canadians. As well, other unsecured creditors, such as suppliers--many of them small businesses--will have a significantly reduced likelihood of recovering the amounts they are due, which may put pressure on their own finances. Since lenders and investors will be less likely to agree to advance funds to help save a company due to the additional risk, it may be more difficult for companies to restructure and ultimately avoid bankruptcy. Finally, by increasing the risk for many corporate bonds, a super-priority would have a detrimental effect on the investments and retirement savings of millions of Canadians.

As I noted earlier, the challenge for lawmakers and stakeholders is to find the appropriate balance in addressing the problem of unfunded pension liabilities without damaging the ability of companies to raise capital to invest in research and development or expand their operations, which may limit their growth and their potential success. In our view, amendments to bankruptcy and insolvency statutes are not an appropriate solution and will tip this balance in a way that could impair economic growth and ultimately be detrimental to workers when companies find it more difficult to restructure or invest in projects that could lead to job creation and higher wages.

We would be pleased to answer your questions.

[Craig Hill, Co-Chair, Task Force on Pension Reform, Insolvency Institute of Canada]

I wish to thank the chairman and the members of the committee for the invitation to speak to these important hearings on Bill C-501.

It is clear that Bill C-501 creates a priority charge on all of a debtor's property for unpaid termination and severance pay and the full amount of any pension deficiency. The charge in Bill C-501 includes, and I quote, “any amount considered to meet the standards for solvency determined in accordance with section 9 of those regulations”--that is, the pension benefit standards--“that were required to be paid by the employer to the fund”.

The charge is not limited to special payments that are past due on the day of the insolvency proceeding. The honourable member for Thunder Bay--Rainy River said upon the introduction of the bill that if passed, Bill C-501 will mean that every working Canadian can take comfort in knowing that their pension, their retirement, is secure in its entirety.

The impact of Bill C-501 is not limited to an increased cost of borrowing in the bond markets. Smaller and mid-size companies borrow funds from banks for their operating lines to pay their daily expenses. Access to lines of credit is based on their available collateral. Most operating lines of credit are on a demand basis or have strict review provisions that will be triggered by the imposition of the priority charges created by Bill C-501. If Bill C-501 is passed, lenders will change the margin requirements and impose additional discretionary reserves on the borrowing base. This will remove from the calculation of available collateral dollar-for-dollar amounts of any priority charges.

This is precisely what occurred when the priority charges were granted for unpaid wages. However, in the case of termination pay, severance pay, and pension deficiency amounts, the carve-outs will be substantially higher. The impact will be to severely limit access to credit for all employers, particularly pension plan sponsors. Bill C-501 will materially affect solvent companies. It will be the death knell for many struggling or financially troubled companies.

The cornerstone of Canadian insolvency laws is the flexibility provided to financially troubled companies to attempt to restructure, and continuing is a going concern. That is the best way to attempt to protect employer-related obligations. Priority charges and mandatory criteria for restructuring add roadblocks to those objectives. They cause financial difficulty for employers who are already struggling and significant impediments to their ability to restructure. The result will be an increase in the number of insolvencies that have no alternative but to head straight to liquidation.

Substantial reforms are required in Canada's pension law to address the weaknesses that the economic events of the last decade have revealed. However, taking that agenda to insolvency legislation by expanding priority charges and setting bottom-line conditions for restructuring are commercially imprudent, ineffective, and inappropriate. The additional financial burdens created by Bill C-501 will worsen the situation for the vast majority of solvent companies, while providing only limited impact for employees of the minuscule percentage of companies that become insolvent. Bill C-501 will cause more insolvencies by generating the conditions for a tighter credit market and reducing the number of businesses that will be able to successfully restructure if they become insolvent. As importantly, the financial burdens placed on Canadian employers will impede their ability to compete in a global marketplace, all of which will occur in a sensitive stage of economic recovery for Canadian companies.

Mr. Davis and I will be pleased to answer any questions the members of the committee may have.

Those are my comments.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm sorry. I have to address that.

Just to be clear, Mr. Chair, what we're studying right now in the industry committee is a private member's bill dealing with Nortel pensioners. We have two more meetings still—today and Thursday—to deal with it. Yes, it's important to the government. It's an NDP private member's bill. And yes, it is important to the government that we finish studying that bill. I'm not sure whether Mr. McTeague has a problem with our continuing and finishing studying that bill, but I'm surprised to hear him suggest that somehow it's not important to him.

What I've made clear to him is that, beyond the study of that bill, in industry committee—and we're about to go over there right after this meeting—we'll be supporting cancelling what's on the agenda or moving forward what's on the agenda so that we can clear our schedule for the following meetings of the industry committee. But again, to be clear, right now we're studying a bill on Nortel pensioners, a private member's bill from the NDP, and we think it's important that we finish that study.

Second, in regard to all the commentary around timelines here, you can say what you want about the parliamentary schedule and the way things happen in the House of Commons. There are all sorts of reasons that things take a little while to work their way through the House of Commons. On some bills, certain parties insist on putting up virtually every member of their party to speak on the bill, and that eats up a significant amount of time. From time to time, a party will move a concurrence motion and eat up three hours in a day. There are all sorts of reasons why things take time to go through the parliamentary schedule. Of course, there is negotiation among the House leaders of the parties to determine what actually goes through.

But let's be clear. We did a consultation in 2009 over the course of the summer, intensive consultation in which we heard from stakeholders on this. The bill was introduced several months ago, obviously, and that has allowed time to have various stakeholders study the bill themselves to come to positions, so that when we get to this point, at committee, we can do a proper study of the legislation. There are more stakeholders on this piece of legislation than any piece of legislation I've seen, and I think we're all aware of that.

So that's where we are in terms of timeframe. I think most Canadians who looked at that timeframe would think it's reasonable. Now it's time to get to work studying the legislation. What we're saying at this point is that four hours a week is not enough. It's plain and simple: four hours a week is not enough. I'll be careful in the way I word this, because there's some sensitivity on the other side, but it's quite clear that the opposition parties had discussions prior to this meeting, because they all came in with the exact same position—four hours a week.

We were surprised by that. Up until 15 minutes before this meeting, I hadn't had a conversation with somebody from the other side who had suggested that to me. We had conversations, but no one had suggested four hours a week until fifteen minutes before the meeting. Yes, it did surprise us, thus the reaction on this side. It sounds like it's a done deal. It was decided long ago by the other three parties. There's apparently not much that we can do about that, and we're going to move forward on it, but I hope that as we move forward we'll have the opportunity to take a look at our schedules within the industry committee and the heritage committee to try to clear up some time.

Certainly it sounds from what Mr. McTeague is saying as though, once we finish hearing from witnesses—hearing from the people affected by the Nortel situation—and get through the study of Bill C-501, there will be some cooperation among parties to clear the schedule. If this committee wishes to take up that time, that would give us four more hours a week, moving forward after this week. Perhaps we can see the same thing happen in the heritage committee.

My hope is that moving forward we'll see some increased level of cooperation among the parties to place a higher priority on this particular issue. Again, I implore the members of the committee, whatever your position is or whatever it is you might want to change about this legislation, hopefully there's a commitment to try to ensure that the legislation passes before we wind up coming to election, whatever it might be that precipitates that election at some point in a minority Parliament. Otherwise, we're just going to be doing this over and over again, and that's not in the interests of any of the stakeholders.

[Joe Hanlon]

I believe Bill C-501 is going in the right direction in assisting workers. I speak passionately on it, because as a rep and the president of our local I've unfortunately had to deal with the thousands of members who are facing the problems I've spoken about here today.

Can we do anything politically as a federal government to ensure that they have livelihoods, that their pensions survive, and that they get the severance and termination pay they deserve? That's all in our means to do, and we should do it.

Bill C-501 is a good start, but is there something else we can do? We should be doing that today, because the financial institutions aren't going to loan money today based on the changes of Bill C-501. I say that because it's the economy: in the forest industry, lumber prices are down in the toilet--

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

Mr. Hanlon said that the workers don't have many ways to protect themselves when a company goes bankrupt or closes.

The companies told us that if we adopted Bill C-501, there would be an increase in the cost of capital. So we are facing two situations that could be considered to be opposing. Mr. Hanlon, you were talking about means.

Would there be changes or amendments to make to Bill C-501? What could be done to give companies flexibility, but also meet the needs of those people who are concerned, like you?

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

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen. Thank you for coming to testify.

You have spoken about the great difficulties that you have had since losing your respective jobs. In addition to losing your job, you have been deprived of severance pay, and even your pension has been drastically reduced.

I presume that most of you have reviewed Bill C-501. I'd like to hear your thoughts on a solution that could be proposed. What would you say if the federal government assumed the trusteeship of the pension fund, like the government of Quebec, to avoid disposal at a loss? In the case of a quick disposal, the pension funds would really be insolvent, it's true. But if there was a better period, there could be more monetary interest added to the value of the pension funds. Do you think this would provide better protection to retirees with respect to Bill C-501?

Perhaps Mr. Wacheski, Mr. Hanlon and Mr. Hanrieder could answer this question.

[Joe Hanlon]

I'll be very brief. Employers have an obligation to fund, but in relation to Bill C-501, if you take AbitibiBowater in the middle of the CCAA announcing that they're going to put $6 million as a bonus to their supervisors, why isn't that money going into individuals' pensions and severance pay, into the money that's owed the workers? Never mind the people who put the companies into the distress they are in today.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Actually, I was going to touch on derivatives.

Mrs. Comeau mentioned deferred wages, which is what pensions are. It's a liability to employees. What Mr. Wacheski said is true as well: employees have few options. This is all they have. It seems that the previous panel talked about pension rules. They talked about Domtar being good and AbitibiBowater being bad.

Mr. Hanrieder and Mr. Phatak, what restrictions can we put on pensions so that employers actually put the money where it belongs? They should not be able to use it as a slush fund to keep operations going. I'm looking outside of Bill C-501. If we can make Bill C-501 functional, that would be great. We have to stop that money from being used as a slush fund to keep companies going. It's not an easy-credit place; it's a place where people put deferred wages. They should have that money back when they retire; they should be able to count on that money down the road.

[Serge Cardin, Bloc, Sherbrooke, QC]

Good morning, gentlemen.

We know that situations like this are relatively difficult for retirees. The example of the Nortel workers who came to testify this week is very enlightening and we have many questions as a result.

A defined benefit pension plan is something negotiated between the company and the employees. It is a contract between the two. It's a contract that sets out that the employer must put all contributions in this pension fund. If an unfunded actuarial liability arises, the agreement is that the employer will inject funds into it. So there is a contract, and the company assumes the risk. Someone—I think it was Mr. Harden—just asked who would take on the risk. For the agreement between the employers and employees, it is a matter of assuming a risk.

More difficult situations can arise, such as bankruptcy or potential bankruptcy. The bill requires that special amounts covering the unfunded actuarial liability be prioritized. At that time, the financiers, who do business with large companies, knew that there was a significant risk. In the event of bankruptcy, the financiers assume their risk as well. So I do not currently see a major problem in assuming the risk right up to the end.

A company like Nortel should have paid. It had the means to pay that amount, which I realize would not have been anywhere else. But in this case, perhaps everyone was expecting to lose, at least the retirees. They had a contract with their employer and they are going to really be taken to the cleaners. The employees honoured this agreement over the years.

In my opinion, the bill still brings an important dimension of justice and fairness. Everyone has to take on their own risk. I personally don't see a major problem with financing. The financiers assumed the risk right up to the bankruptcy as well.

In the case of Nortel, who would lose if Bill C-501 was in force? Who would be from the Nortel list and who would have paid the most?

Have you reviewed this case, have you gone back to the drawing board with it?

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Our Liberal critic, Judy Sgro, is the author of a white paper that looks at pensions from a holistic point of view. It has 28 recommendations. She's also going to be in debate next week on second reading of a private member's bill that deals with what's called a bill of rights for pensioners.

I want to make sureof this: are you aware that Bill C-501 only deals with special payments in the way that I described it in my first question, and that it does not affect all pensions by moving them up to super-priority? Is that something that you clearly understand? This has an effect on how much you see by way of turmoil in the credit markets.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Mr. Chair, one of our challenges as legislators is to try to sort through what is actually the real picture as opposed to something that is perhaps a little bit misleading.

One thing about Bill C-501 that has been advertised, and advertised falsely, is that it would elevate pensions to super-priority status. That's simply not the case. The reality is that it only deals with special payments that have been paid up to the date of a company's bankruptcy, which is really a much smaller portion. In that sense, it's unfortunate that this bill is misleading a lot of people.

At the same time, perhaps from the other side of the coin, I have difficulty understanding how the situation I've just described with Bill C-501 is going to cause so much turmoil in the credit markets that it's going to shut off all of that capital that has been mentioned.

As you can appreciate, it's difficult for us to get an accurate picture of the truth.

What I would like to ask Mr. Everson first, and then Mr. Casey afterwards, is how you would answer the question for somebody who has contributed for his or her entire career to a pension and is now in a situation in which the company they worked for has gone bankrupt, and they're only going to get a portion of their pension. I'll use the example of Nortel in your case, Mr. Casey, and of AbitibiBowater in your case, Mr. Everson.

How would you explain the situation to them? Do you have an alternative that would perhaps satisfy them?

[Warren Everson, Senior Vice-President, Policy, Canadian Chamber of Commerce]

Thank you, Mr. Chairman.

My name is Warren Everson. I am from the Chamber of Commerce. With me is Jonathan Allen from RBC Capital Markets.

Thank you very much for inviting us to appear.

The Canadian Chamber of Commerce is Canada's most representative business association. Through our network of over 400 local member chambers of commerce, we speak on behalf of 192,000 active companies of all sizes across Canada.

My part in our presentation today will be to outline the policy concerns of our members who offer defined benefit pension plans and whose businesses would be fundamentally affected if pension plan liabilities are accorded the status of secure debts in the event of a bankruptcy.

Then I'm going to ask Mr. Allen to quickly speak to Bill C-501 from the perspective of a debt market expert.

It's clear to everyone in this room that pensions will be the dominant public policy issue in finance over the next few years, and presumably would have been, had we not experienced the meltdown we did in the last couple of years.

I wish we could support a bill that deals with such a significant issue and such an emotional one. However, this particular bill does not attract our support. We're here today because of significant potential for damage that could be done to many of our members and to millions of Canadians who invest in them if this bill moves forward.

I'd like to deal immediately with two misapprehensions regarding Bill C-501.

The first misapprehension is that Bill C-501 would help members of pension plans whose sponsors have already declared bankruptcy. I think members of the committee heard in the last couple of days that this is not the case. This is not a bill that would rescue Nortel pensioners.

The second misapprehension is that companies who sponsor defined pension benefits have been underfunding their plans. That's not the case. The current underfunding of defined benefit plans is a result of a combination of unusually severe financial circumstances, the 2008 collapse in equity markets, and a very significant decline in long bonds to a level not seen in 50 years. I think it's important for the committee to recognize that we're dealing with a once-in-50-years circumstance.

We do think there are several unintended and adverse consequences in granting creditor protection to defined benefit pensions for employers, for plan sponsors, and for millions of Canadians.

I'd like to ask Jonathan to speak to that.

[Andrew Casey, Vice-President, Public Affairs and International Trade, Forest Products Association of Canada]

Thank you, Mr. Chairman, and thank you to the committee for this opportunity to appear before you today on this very important matter of Bill C-501.

By way of introduction, the Forest Products Association of Canada is the national voice of Canada's wood, pulp, and paper producers. Our industry represents about 12% of Canada's manufacturing GDP. We directly employ over 230,000 Canadians from coast to coast, and we are the economic lifeblood of well over 200 communities across this country.

As you might imagine, a number of our companies, given the number of employees we have, have significant defined benefit pension plans. For that reason, we're very pleased to have this opportunity to appear.

As members of this committee and of Parliament are well aware, this industry has faced some fairly serious, challenging times over the past couple of years. Indeed, parties on all sides of the House, as well as individual members, have gone to great lengths to try to find ways to support the industry throughout this challenging period. We're now looking at somewhat of an economic recovery. There are some encouraging signs on the horizon, but in our view it's still in a fragile state of play right now.

While we're waiting for the recovery to fully take hold, one of the things the industry is doing is preparing for when markets do return. To that end, a couple of things we are doing that will help us prepare for that return are reinvesting in--retooling--our mills and getting ready for when markets return. A key component of that ability to retool is access to capital.

Capital is the lifeblood of our industry. It is in great shortage. It is a very fickle guest. It will go wherever it feels most comfortable, wherever there is the least amount of risk, and wherever there's the greatest return on that capital.

In our view, Bill C-501, while well intended, risks capital. It risks shutting off capital for our industry at a very delicate time. I would say that this risk probably extends to the economy more broadly, and that is our biggest concern with this bill.

We certainly can understand trying to address possible loopholes in Canada's pension system going forward, particularly as they relate to bankruptcies and insolvencies. There are other jurisdictions around the world where certain measures have been put in place, including backstop mechanisms similar to what we have here for our banking system in the form of CDIC. Maybe that's something this committee should study. Certainly this committee has undertaken studies in the past for which they've brought together all stakeholders and departments; in this case, maybe that would be industry, finance, and HRSDC. They could take a comprehensive look at this issue to come up with solutions to address any inadequacies in the system.

I think we have to look at this from a going-forward perspective. The reality is that as we look forward, one of the best ways to ensure that we keep jobs and ensure the safety of pensions is to have healthy companies. The way to ensure that we have healthy companies is to ensure that we have access to capital in a timely fashion, in a reliable fashion, and in a competitive way. For that reason, we urge the committee to reject Bill C-501 and look for ways to address the pension deficiencies in another fashion.

Thank you very much for the time. I look forward to any questions.

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

Thank you, Mr. Chair.

Before hearing from the witnesses, I would like to present a motion. I believe there was some confusion. Mr. Gaston Carrière, president of local 142 of the Communications, Energy and Paperworkers Union of Canada, was supposed to have been asked to appear this morning. According to information I obtained, we apparently invited Mr. Coles, the national president, instead.

Mr. Carrière was prepared. Since he expected to be asked to appear, he made preparations. He learned yesterday that he would not be coming. This is why I would like to present a motion. It reads:

That the committee invite Mr. Gaston Carrière, president of local 142 of the Communications, Energy and Paperworkers Union of Canada at the AbitibiBowater plant in Gatineau, as part of the review of Bill C-501.

I therefore table this motion. I hope that my colleagues here and opposite, the members of the Conservative Party, will understand that this man had been informed—I don't know whether it was by the clerk or someone else—and prepared himself. According to the information I obtained, there was apparently some confusion and someone else—Mr. Coles—was asked to appear.

This is why I'm asking you to respect the steps we took to invite Mr. Gaston Carrière to appear.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, today the Standing Committee on Industry, Science and Technology began two weeks of debate on an important piece of legislation, Bill C-501. It was sent to committee with strong support from members of all parties in the House. I want to extend my thanks to my colleagues for that support, for their participation so far, and for their further participation over the next two weeks.

I invite all members of the House to speak with me about concerns, bring their ideas forward, and explore ways in which we can work together to improve pension security in Canada and pass Bill C-501.

Every member of the House represents constituents who have defined pension benefit plans and who are presently stuck at the back of the line when a company runs into difficulty. Together we can protect the pensions of six million Canadians who have worked hard, played by the rules, and earned the right to retire with dignity.

I look forward to working with all of my colleagues to pass a bill that will serve as a shining example for Canadians of how we can all work together in this place and do the right thing for the people whom we have the honour of serving.

Eliminating Entitlements for Prisoners Act

[Judy Sgro, Liberal, York West, ON]

Mr. Speaker, it is always a pleasure to be here to speak to issues, especially things that we went on record some months ago as supporting, without having to listen to some of the rhetoric. I heard my colleague behind me use words that are inappropriate in the House, and I will just leave it at that.

It has been suggested that we on this side of the House are not supporting this bill. It has also been suggested that this has been a fast process. The bill was introduced in June. This issue was brought up first by the media, by the way, not by anybody else, in March. It took until June for the legislation to be introduced. Here we are on November 16 finally getting a bill passed. That has a lot to do with the fact that the committee worked very well with the intent of getting the bill back into the House. Otherwise who knows how long it would take to get it here?

Some of us are concerned and frustrated when we hear the other side say that we are not helping. We are the ones who have been pushing this forward since it was first announced in the media. The government has been advancing it at nothing short of a snail's pace. Let us be clear on that point.

The committee has done a good job. After all, it was a little more than a month since the committee was asked to examine Bill C-31. Members of the committee took the bill seriously. They did their homework and asked questions to make sure that we avoided unintended consequences. Hence the bill is now before us and it could be passed very quickly here and in the other place. It is fair to say that the committee members did a quick and thorough job of reviewing the bill, contrary to, as I indicated earlier, what the government did not do.

My primary concern stems back to the pace that business is being advanced in the House. A proactive government would move quickly on issues that concern Canadians and parliamentarians.

Most members know that Bill C-31 is legislation that is relatively simplistic from a legal perspective, which does not happen too often. It is not particularly controversial, nor is it divisive in its scope. After all, the entire bill, in both English and French, is less than six pages in total length. It is a very small bill.

Put another way, after more than five months of working on this legislation, we have successfully completed just 25% of the legislative process. Imagine, just 25% in five months; that is a snail's pace if there ever were one. If this is the best we can do, Bill C-31 will not pass into law until July 2012, long after when every reasonable person expects the next election to be held. We know what will happen. An election will be called; everything will die on the order paper and nothing will ever get done. This could have been done in September. The bill could have passed in September and gone to the other place. It is not often that we are asking the government why it is not moving something forward faster, but this is a very simple and small bill and it could have been passed by both houses by now.

This means the government wants to talk about this bill more than it wants to pass it. It wants to say that it is tough on crime more than it wants to back its rhetoric with real action. Most particularly, the government is clearly more interested in optics than it is in the elements of governing as responsible Canadians.

Permit me to be completely clear though. We are of the belief that the changes are long overdue and we do not oppose them. In fact, we support them. As I have said before, from the Liberals' perspective, we are certainly prepared to fast-track this legislation. I indicated in June when the minister introduced the legislation that we were prepared to fast-track this bill.

When I last spoke in this House on Bill C-31, my primary concern was simple. I wanted to make sure there were no unintended consequences attached to the bill. It is a requirement for all of us as legislators to ensure there are no unintended consequences on any legislation that is introduced in the House. Even though many of us had strong feelings from the start when the media flagged this issue, our government was not aware of this issue any more than anybody else was. It was members of the media, in the kind of work they do, who discovered Mr. Olson was receiving old age security cheques, which clearly bothered all of us.

While I was anxious to punish the guilty and to ensure that tax dollars were not being wasted, I also needed to be sure we were not punishing the spouses for the crimes of their partners. We all know that the spouses pay a big enough price and I do not believe any of us wanted to add to that difficulty.

It seems that the committee members were satisfied by hearing witnesses from various organizations throughout Canada. They listened to all sides of the issues to make sure that Bill C-31 would not have a negative impact on the spouses, and that the spouses, families and children would be protected.

In my mind there would seem to be no other reason that we would not send Bill C-31 to the other place. If the Prime Minister were truly committed to its speedy passage, he could direct his Conservative-dominated Senate to pass the legislation immediately. It could all be done before we rose for Christmas, if he really wanted it done. Of course, the Prime Minister has little interest in this approach, so one would wonder how serious he is about the issue, or is he just more interested in looking as though he were serious about the issue? That is for the Canadian people to decide at the appropriate time. After all, this is just another in a recent string of examples of the government's relentless drive for good optics.

According to the recently released public accounts, lapsed funding for the victims of crime initiative last year amounted to just under $4 million, or 45% of the available funds. That means in 2009-10, the Conservatives spent $4.8 million helping victims of crime versus $6 million which they spent this year to advertise how they helped those victims of crime.

One of the motions that was introduced at committee was that the $2 million, the amount of money saved by not sending the pension to the likes of Mr. Olson, should be given to the victims of crime organization so that we could help victims in as many ways as possible. However, my understanding is that the amendment was not passed at committee.

Those commercials we continue to see in the government's massive advertising campaign fail to mention that when the Prime Minister prorogued Parliament, he killed his entire crime agenda that we had heard so much about for so many years, much of which had the Liberals' support. However, once Parliament was prorogued, all of that fell off the agenda, just as this bill would if the Prime Minister were to prorogue Parliament tomorrow.

People have to understand what proroguing Parliament really does. The legislation that all of us work for, although not all of us necessarily support, is lost once Parliament prorogues. Every single bill at that time was back to square one. When Parliament resumed sitting in the spring, each one of them had to be reintroduced, one by one. That delays them, because they have to go through the same process again: first reading, second reading, consideration at committee, report stage, third reading and then they go to the other place. All that so-called big crime agenda that was necessary was lost. Some of it was not as good as it could have been; there were lots of problems with some of it, but we were supporting it. Then we had to start all over again in the spring. Yet if we listen to the Prime Minister's multi-million dollar ad campaign, we would swear that all of that legislation was in effect right now, which is simply untrue.

Call it retail politics, spin, wedge politics or whatever one wishes, but Canadians are being misinformed again and again by the government. I say it is time for that nonsense to stop and for the government to be honest about the kind of legislation that is being passed and the timelines in doing that.

In simple terms, Bill C-31 seeks to amend the Old Age Security Act to preclude incarcerated persons from receiving benefits under this act and at the same time to maintain entitlement to benefits for their spouse or common law partner. When we talk about unintended consequences, we had to ensure that the spouses and children of these individuals would not be harmed with the passage of Bill C-31.

As I have already said, the latter of these elements is, in my estimation, a pivotal thrust of this particular piece of legislation. We should never be too eager to cast a net without first ensuring that only those deserving of punishment are actually forced to endure it, and not their spouses and children.

Despite our often fierce partisan differences in the House, today we are looking at an issue that should unite all of us regardless of our political affiliation.

As we know, the old age security pension is intended to help seniors pay for their housing, clothing, food and transportation, which are expectations that many seniors struggle with each and every day.

I just came from a meeting at the industry committee where we were talking about Bill C-501. This is a bill that was put forward by one of my colleagues in the other party to try to deal with pensioners and bankruptcy collapse, to deal with what happens to people who work for companies that go bankrupt. This bill deals with the impacts on current pensioners and would-be pensioners. It deals with the devastation of trying to live on $1,200 a month and the many pensioners who are in poverty as a result of their company's going bankrupt.

This is a call on the government and all parliamentarians, and we were all very serious this morning regardless of party, to try to find solutions to the problem of Nortel, for example, and other companies. How do we better protect pensions and people's contributions in this country?

For thousands of seniors who are struggling with these growing bills on a fixed income, the thought that convicted and imprisoned criminals would be eligible for the same OAS benefit as they are is quite offensive and totally unacceptable for all of us.

Moreover, given that the old age security is meant to help a recipient pay for housing, clothing, food and transportation, it seems unnecessary for prisoners to get a cheque given that their housing, clothing, food and transportation are already paid for as a condition of their incarceration. It does not make a lot of sense that we give the same amount of money to seniors out there having to pay rent and buy their own groceries and clothing and all the rest of it, and yet people in prison, regardless of what they are there for, get all of that plus their old age security.

One senior said, “Maybe I should go to jail. At least I would have some extra money and all of my needs would be taken care of”. I assured that senior that once the gate was closed it might not seem like such a good idea.

As a legislator, I see the current reality to be redundant, unacceptable and, as I indicated earlier, something that should be changed without delay, without delay. I would like to hear the government move this through at votes tonight, move it into the Senate and ask the Conservative-dominated Senate to pass Bill C-31 immediately. This is precisely why I am of the belief that Bill C-31 should be advanced, as I indicated before.

I last addressed this issue in June when the minister introduced the legislation. I said at that time that I would not seek to draw this process out for the sake of speaking longer in the House. I did not intend to do that then, nor do I intend to do it today. What is needed today is action and it is needed now.

For the sake of clarity, contrary to my colleague's asking if we would vote for it, the Liberal position has been on the record since June, maybe before that, that we would support this kind of legislation. So that there is no question whether we will, the Liberal side of the House supports the stated notions of Bill C-31 unequivocally.

The next thing we know, though, there will be a massive email campaign going around to everybody in Canada saying to go after the Liberals, NDP and the Bloc because they may not support Bill C-31. Let me be clear. We have indicated from the beginning that we support it. We are going to continue to support it. In fact, we are asking the government to fast-track it through the Senate.

We agree that convicted and incarcerated criminals should not receive societal benefits, like the monthly old age security cheque. On a purely personal note, I would take this belief one step further.

I, like most Canadians, was horrified as I watched the trial of the former Colonel Williams. This person is now sitting in jail, but upon his formal retirement he could be eligible for a pension that he earned while a member of the Canadian Forces, a time that coincides with the time he committed his heinous crimes. There is something fundamentally wrong with the notion that he will be rewarded on the same scale as Canada's veterans of the war in Afghanistan. There is something terribly wrong with that.

Canada's pension systems, both public and private, need a great deal of attention. The Canada pension plan, old age security, the guaranteed income supplement and the various private options available are good. We are grateful that we have them and that the investments were made, but we need to do better.

We need to examine all facets of these systems in a way that will close the gaps, reduce the redundancies and enhance the benefits for all Canadians. I recently released a white paper on pension reform. That document was the product of more than a year of work by nearly 20 industry and pension specialists of every partisan stripe.

Whether we addressed the creation of a supplementary Canada pension plan, the tightening of regulatory loopholes, the enhancement of regular Canada pension plan benefits or the establishment of a pension bill of rights, the focus was not on politics. It was on substantive pension reform. Our primary focus was, and is, finding ways to make pensions stronger. Some days I wish that example could be adopted more often by the government and this House.

Twenty-eight recommendations later, I am convinced that we have a winning strategy, a comprehensive, multi-generational plan that puts people and their pensions first. The white paper, which can be found on my web page, fits hand-in-glove with Bill C-574, which I introduced on October 1.

Bill C-574 is a pensioners' bill of rights. Since the Mackenzie King government, a Liberal government I should remind the House, first introduced the Old Age Pensions Act 83 years ago, Liberals have fostered a long history of creating, enhancing and expanding pensions available to Canadian seniors.

From old age security, introduced by the Liberal government, to the Canada pension plan of previous Liberal governments and the supplement, also from a previous Liberal government, we understand the extreme importance of protecting and preserving pension security, adequacy and coverage for all deserving and law-abiding Canadians.

Bill C-574 is the next step in that process. Too often, financial illiteracy, inadequate opportunity and economic instability strip away the hard-earned savings of our seniors. That must stop.

Bill C-574 is the first bill of its kind ever proposed to better protect our seniors and their nest eggs. I am proud to have presented it. I clearly hope that all members in this House will adopt it at the appropriate time. I would urge colleagues to take part in that debate on November 23. As always, our seniors are counting on us.

Bill C-31 is yet another step that could be taken down this road. I stand ready to do whatever it takes to achieve these goals, and I look forward to working with my colleagues and with the government to pass measures geared to the same.

With the help of the government, I am hopeful that we can advance Bill C-31 quickly in this House and then, with the help of the Prime Minister, quickly through the other place.

[Jim Cole]

I think the big thing, speaking to Bill C-501 as an investor in bonds, is that as bond holders what we really took to and what we don't like is uncertainty. If changes are made in legislation that change the pecking order of who receives assets and liquidation and what not, we can respond by pricing that into.... If we're behind other secured creditors, we will price the demand that we require in the way of an investment accordingly. The challenges are things like this that come in on existing bond holdings. We can't respond to that because we've already made investments on behalf of clients.

The second one is that I know there have been some comments made about the clarity in the minds of others about what this bill represents, but we have seen a lot of market commentary with this impression or understanding that it applies to the entirety of the unfunded pension liability. As a bond holder, while certain legal opinions are expressed that, no, no, it just applies to past service payments, we on the other hand have to rely on how the courts will interpret it. That lack of clarity creates uncertainty in our minds. That's a challenge.

[Judy Sgro, Liberal, York West, ON]

The difficulty is that Bill C-501 isn't doing that. That's the problem we're facing today. And we wanted it to do it. At least I'm speaking for us, as the Liberals. We wanted this to be able to do that. The bill is crafted in such a way that it can't be amended to accomplish what we need to accomplish, both on retroactivity, as well as being able to widen it so that it's not just special payments. This is that narrow window of special payments that this would help if it was passed, or at least that's what we're led to believe.

The question is what are we doing to move forward? As a result of all of what many of you have gone through, I hope we do end up with changes, which is the reason for the 28 recommendations I put out in the white paper last week. So you don't have to do the changes at the end of the process in the Bankruptcy and Insolvency Act. You do the changes at the beginning.

I believe that pensioners should not be treated like everyone else. I think pensioners have a special place, because you've contributed and you're not getting an equal voice at the table, which is why you're ending up where you are now.

What else can we do? I appreciate Mr. Hilton's comments, but what else can we be doing in the future, since this isn't going to help the people we want to help today?

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

Yes, I'll share my time with Ms. Sgro again.

You've raised a very interesting point, Ms. Stewart, about the question of retroactivity. It sounds to me, from all you've said, that Bill C-501 won't do all the things that we need to do to address the problem down the road. It will only go so far.

Mr. Hilton, your point about extension of time, for instance, I think speaks to the need for the government to actually take a proactive position with a larger, more comprehensive and detailed piece of information.

Mr. Sproule, if I have you correctly, I just want to make sure we understand that this will do nothing for your colleagues and pensioners with Nortel.

[Jack Walsh]

Just to finally wrap up, our pensioners and their widows from these companies I outlined to you are very deeply concerned about the pension scenario as it's developing in this country. They also are aware of the critical role that getting Bill C-501 right could play when other companies start to hit the wall, which I'm sure is going to happen over the next couple of years. We haven't seen the end of this Nortel kind of scenario. That's one thing we all have to be concerned about.

We thank you legislators, first of all, for listening to us. This is kind of rare. Normally, pensioners are completely ignored, so it's good to see that parliamentarians are finally saying that they want to listen to the people who are being affected. That's terrific, but we look forward to you really pushing and getting Bill C-501 right so that we can go back to our people and tell them that we're on the right track and that this thing is going to get fixed.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Things have, in your case, wound up, and Nortel is very far along.

I just want to clarify for everybody in the room here that no one, neither the Liberal Party, the NDP Party, me, my staff, or anybody else, has ever said or made any promises that this is going to help your cause. That's just so we're clear, because there seemed to be quite a few questions about it. I just wanted to be sure that everybody is on the same page.

I would like to continue that line of questioning.

Mr. Walsh, that was the first time you had to chat. I'd like to give you a moment extra.

Mr. Hilton and Ms. Clark-Stewart, I'd also like to give you a chance to speak. Do you have anything further to say to this committee or to your individual MPs who are not here today about Bill C-501?

Mr. Hilton, go ahead.

[Serge Cardin, Bloc, Sherbrooke, QC]

Given the current economic situation, funds are not performing that well, so there isn't likely to be much of a surplus. We witnessed what happened during the financial crisis. You depend on company management when it comes to pension funds. Pension fund managers and the large financiers are also part of the equation. We've only to recall the negative impact of asset-backed commercial paper on many people. So, there are a number of Canadian pension funds that are very close to being in the red if they are not already.

You talked about the consequences for Nortel. Let's imagine that Bill C-501 had been implemented. You feel that $200 million should have been contributed to the Nortel pension fund as privileged debt. Is that right?

[Judy Sgro, Liberal, York West, ON]

Thank you all very much for being here. I'm very sympathetic to your cause, to all of you.

You talk about pensioners having no other options. I think bond holders have lots of options, and other people have lots of options. But pensioners getting caught in this bind don't have any options, or have very limited options. I think we have been trying to find ways to address this issue.

I have a couple of straight questions. By the way, in the white paper I just recently released, which has 28 recommendations, most of those are up front, not at the end. If those changes were to be introduced and become part of government policy, I would hope they would go a long way toward preventing many other people here in Canada from having to undergo the terrible status that many of you from Nortel or otherwise have gone through.

The issue before us here is Bill C-501. Sadly, the bill is flawed, and there are some serious problems with it. It's not going to help the Nortel people, as you've indicated, which is very sad, because I believe many of us wanted it to. But the other thing is that Bill C-501 helps only with special payments. We heard this morning that there would be a major financial crisis throughout this country and so on if Bill C-501 were passed. Bill C-501 goes only to those special payments that are announced, let's say, in June when insolvency is announced until the time that the bankruptcy is finalized. The special payments for six months or eighteen months is all this bill addresses.

One of the gentlemen this morning said that it wasn't clear enough. Everyone I have consulted says it's very clear. This bill—Bill C-501—only handles special payments. So maybe it's two years maximum until insolvency is finalized, but that's all it does. So the sun isn't going to fall out of the sky tomorrow. This is giving a little bit of protection—that's all it's doing--but we're trying to find ways of making a little bit of protection out there to help a few people.

Don or anyone who wants to can comment. How familiar are you with this? And do you realize that this covers only special payments?

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

I will, Chair.

I'll just assure Mr. Wallace I wasn't going to ask that question, but I'm glad he's clarified it for the committee.

Mr. Sproule, my party has made a number of recommendations, and my colleague Judy Sgro, who is our pension critic, has made 20 recommendations. I acknowledge what has happened to you and Nortel pensioners as something that has certainly seized Parliament and has created a lot of attention for us here, and we do want to try to find a way out of this. We know that the Supreme Court of Canada several times has said that retroactive changes to pensions are not possible. Each and every time a request has come, they have struck it down.

If you're looking for a modification, how would you go about it? We need the silver bullet here. We need your help. How are you going to be able to do this? You've suggested that the approach of Bill C-501 misses the mark. It goes for a super-process. You're looking for just the preferred status. Mr. Sproule, how do we do it?

[Donald Sproule]

Thank you, Mr. Chairman.

Let me begin with where I will end in five minutes. Since the spring of 2009, our Nortel group has been asking for pension deficits to receive preferred priority status, not the super-priority status as currently tabled in Bill C-501. We want pension deficits to be at the front of the line of unsecured creditors.

I'm a Nortel pensioner with 27 years of service. The NRPC, my organization, was formed in January of 2009 to protect the interests of some 20,000 former employees and pensioners who would be affected by this bankruptcy. We now have 8,200 paid members in our group, despite having to find people who were ill and unable to access e-mail. Basically, we've reached out as well as we can to that pensioner class. Within that group, there are some 11,700 pensioners in pay, with an average age of 74 years. I'm one of the younger guys, and that's why I'm here; I have the energy to do it.

The average pension is $17,500. It is not a gold-plated pension by any standard. In addition, our retirees have been receiving health and life insurance benefits from the corporation. For the past 22 months, we've all been receiving 100% of our pensions and benefits.

Here is where I have to stand up and feel like the ghost of Christmas future. I know what's going to happen to the Nortel pensioners. First, at the end of this year our health benefits will be taken away. Second, some time early in 2011, the pensions will be cut back by 36%. There will be hardship for all Nortel pensioners, and poverty for some. A modified Bill C-501 could significantly improve that situation.

The assets of Nortel are being sold off. What we will get from them will be determined by how the global lockboxes into which all of the assets are going will be unlocked. The judges within the U.K., Canada, and the U.S. have to decide how to unlock them. We're going to get some money out of them, but we don't know how much or when. The problem, we think, is that the amount may be ten cents on the dollar—twenty cents on the dollar could be optimistic for us. But we're also appalled by the fact that the U.S. estate is probably going to get more than the Canadian estate. There's not much here to console Canadian Nortel pensioners who work in the service of a global Canadian company.

Again, we are looking at Bill C-501 as a mechanism to improve our lot within the Canadian estate.

To give you some idea of the magnitude of what's happening to the Nortel pensioners, approximately $1.5 billion in assets will be taken away from us, with $1.1 billion coming from the pension plan and another $250 million in lost health insurance. When you take into account the combined loss of pension plan and health benefits, we calculate that some people, especially those outside of Ontario who don't have the pension benefit guarantee fund, will suffer a loss of 45% of their income.

How did the pensioners get into this sorry state? Nortel faltered during the economic crisis and meltdown, and the pension plan was collateral damage. From 2006 to 2010, the wind-up rate of the pension plan went from 86% down to 64%. While it's harder to prove, we also believe that the bankruptcy was strategic and probably driven by the junk bond holders, who had no interest in the company actually resurrecting and restructuring itself. The gain of the junk bond holders would come on the backs of the pensioners. None of us pensioners—none of us, I repeat—ever figured out that we'd be in this situation. None of us ever thought that our registered pension plan was at risk. I had long discussions with our lawyer, saying no, this cannot be true, and he kept coming back and saying yes, it's true.

Let's compare the two competing classes of unsecured creditors, the bond holders and pensioners. Bond holders never want for sophisticated money managers. They negotiated bonds with a sophisticated corporation. The pensioners were not sophisticated, let me tell you. The bond holders can distribute their risk across many corporations, whereas the Nortel pensioners have all of their assets tied up in one single entity. Bond holders calculated the probability of Nortel going bankrupt—that's what it's all about—and they have many different instruments to manage their risk. The bond holders have cross-licensed their bonds between Canada and the United States, so if the United States estate paid out better, they'd do well, as they can double-dip in both estates. We in Canada are only dependent on what actually ends up in the Canadian estate—and it's a cash-poor Canadian estate, because we had the global headquarters and the global R and D, but none of the money.

The bond holders could actually buy credit default swaps and buy a form of insurance against a corporation going bankrupt.

Again, I have a list of many things the bond holders could do, but the pensioners were totally unprotected. So we never contemplated that we were going to go into default. In fact, our taking a pension was a form of risk mitigation: Would I live too long and not have enough money to carry into my retirement, or would I die too soon and my spouse not be looked after?

So our conclusion is that it is unfair and it's an uneven playing field when you pit pensioners against bond holders initially, and now against junk bond holders. That's why we're asking for Bill C-501 to provide preferred or higher priority to pensioners.

Thank you.

[Jim Cole, Vice-President, Fixed Income, Phillips, Hager & North]

Thank you, Mr. Chair and members of Parliament. I do thank you for inviting me to meet with you today.

I'm a fixed-income portfolio manger with Phillips, Hager and North Investment Management. PH and N has been investing in corporate bonds for over 25 years and currently invests approximately $18 billion in corporate bonds, many of which are held by defined benefit plans and other retirement vehicles.

We requested to meet with the committee today to express our views on the potential impact of Bill C-501 on credit markets, and we hope these comments will be helpful to the committee and all members of Parliament in considering Bill C-501 as a way to enhance the security of defined benefit pensions for Canada's workers and retirees.

The first point that we wish to make is that Bill C-501 has the potential to affect most of the significant issuers of investment-grade corporate bonds in Canada. Today 60 entities represent about 90% of the market value of all investment-grade corporate bonds outstanding; 54 of these issuers are corporations, and of those 54, 48 report having defined benefit obligations in their public accounts. The impact from a credit market perspective, therefore, is potentially broad.

Second, we believe the cost to existing bond holders and to the issuers of corporate bonds could be in the billions of dollars if unfunded pension obligations are given super-priority or preferred-creditor status. We estimate that existing bond holders could see the value of their investments decline by as much as $4.5 billion. Corporations will also face higher costs for new debt issues, and we estimate that these costs could be in the range of $7 billion to $17 billion. We do not expect these costs would be shared equally across the market. Corporations with large pension liabilities, particularly those with lower investment-grade credit ratings--triple-B, for example--and the investors in the bonds of these corporations are the ones that stand to be most affected.

Third, we believe there is a potential for perhaps unintended consequences that could result from Bill C-501. For example, some corporations could become at risk of a credit downgrade if unfunded pension obligations are given senior credit ranking in the event of insolvency. Credit downgrades increase the cost of borrowing to varying degrees, but as an example, a 150 to 200 basis point or 1.5% to 2% increase in the cost of debt would not be unreasonable for a triple-B rated company that is downgraded to below investment-grade status.

Corporations may also find that they're not able to raise debt when they most need to. Unsecured bond holders will be less willing to lend given a large senior claim that could rank ahead of them should the corporation default, or alternatively, they may demand a punitive interest rate on any new bond issues. Constrained access to capital markets could force more companies into bankruptcy.

I would like to conclude by saying that we do understand the importance of securing retirement benefits for Canadian workers and retirees and we appreciate the objectives of Bill C-501. We also believe that Bill C-501 will impact credit markets in meaningful and potentially unintended ways and we hope the committee will find our raising these points helpful to its deliberations.

Thank you for your attention, Mr. Chair and members of the committee. I look forward to answering your questions.

[Brian Rutherford, President, GENMO Salaried Pension Organization]

Thank you.

Thanks, Bob. And I thank the committee for seeing us.

I'm going to take a different twist at this. My name's Brian Rutherford. I'm the president of GENMO, which is an organization of salaried General Motors retirees. We formed and incorporated in 2009, when General Motors was in deep distress.

I will talk about the rights of deferred payment first.

Most business transactions have terms of payment, such as net immediate, net 25, net 30. Most of those terms of payment are deferred. The company I worked for had payment terms of second month, second day—there's a new one for you—that stretched the suppliers' payments to 45 days. As for the Companies’ Creditors Arrangement Act, or CCAA, these deferred payments only to suppliers are recognized. Suppliers are unsecured creditors. After their obligations owing to the secured creditors are satisfied, the unsecured creditors have the opportunity to receive payments for goods or services that they provided to the insolvent company prior to and during bankruptcy protection.

Employee pensions are a deferred payment. Employees have contracts with their employers. It is a legal understanding that as an active employee, you will receive an agreed-upon compensation at a set frequency. You're also earning a deferred compensation that you will receive at a future date. This deferred compensation is normally in the form of a registered pension plan. As for federal and provincial pension laws, the employer as the plan sponsor is legally obligated to ensure that the pension plan is adequately funded. A healthy pension plan fund should be in excess of 85% funding on a solvency basis.

The suppliers and their deferred entitlements are recognized in CCAA as unsecured creditors. Pensioners, at the very least, should be no different. This is just.

Current bankruptcy legislation does not reflect the unique circumstances faced by pensioners. In bankruptcy proceedings the pension plan solvency deficiency--that is, a shortfall of assets on the fund as compared to the liabilities of the fund--is treated as an unsecured claim. This claim is addressed after all super-priority claims, secured claims, and preferred claims have been met. After these claims, if there are assets remaining, pensioners must share the assets with the rest of the unsecured creditors.

Pensioners are unlike most other creditors. Other creditors can amend their business plans to help make up for the loss of compensation they had been expecting from bankrupt companies. Current employees have the potential for securing employment elsewhere, albeit with some challenges. Most pensioners have no opportunities. Pensioners have already lived their lives of employment, a life where deferred compensation was promised.

While the provisions of Bill C-501 would not guarantee the pension promised, they would be an improvement over the situation that pensioners face under the current legislation. It is more than likely that a pension plan is in distress in CCAA. Current legislation would provide no aid for the plan. Preferred status, if as amended in Bill C-501, could provide aid for the plan and vulnerable pensioners. Pensioners' rights should be no less than the rights of other creditors.

My own experience with GENMO: The General Motors of Canada salaried pension plan, as of the report of the actuarial valuation as of September 1, 2009, has 12,445 members, of whom 7,361 are retirees and beneficiaries. The average yearly pension is $22,007, which is fixed. The wind-up ratio of the plan was 5.99 at this point. A large portion of this deficiency was due to the Ontario government's 'too big to fail' legislation, which allowed the sponsor to underfund the pension on a solvency basis. Had General Motors of Canada followed its parent into bankruptcy, the value of the average yearly pension would now be $13,182. The current wind-up ratio is approximately 0.8. At this rate, the average yearly pension will be $17,606.

To make matters worse, there is an insufficient capacity in the Canadian insurance market to support the immediate purchase of annuities for all the plan beneficiaries who would want to retain the right to a monthly pension in the event of a plan wind-up. In bankruptcy, pensioners would lose all of their benefits, and that would be an additional financial burden. Most benefits are required, more so for the aged versus the young actives. For the current bankruptcy legislation, everything is stacked up against the vulnerable pensioner. There would be less income to support higher costs due to loss of benefit support and inflation. Independent and secured pensioners could now become a social and economic burden to society.

In conclusion, it is time for Canadian pensioners to enjoy similar protections for their pensions in bankruptcy as are enjoyed by pensioners in most developed countries in the world. Preferred status protection is the norm, not the exception. It is time that the Government of Canada passes legislation to protect pensions in bankruptcy. It is time for economic and social justice for Canadian pensioners.

Thank you.

[Robert Hilton, President, Canadian Federation of Pensioners]

I'll endeavour to do that.

I'm here today as the former president of the Hamilton Specialty Bar Slater Steel Salaried Pensioners Association to talk about Bill C-501.

I want everybody in this room to be fully aware that nobody from the Slater Steel group is going to get any benefit out of this, because our plan has been wound up. What I would like to point out is that when our plan was wound up, while the pension side of the plan meant I lost 23% of my income, when you add to that the compounding effect that I lost all of the benefits that I was supposed to get for life, the net effect is 35% of my pension.

Now, my pension was better than average within the company.

I'm also the president of the Canadian Federation of Pensioners, and as president of CFP I'm here on behalf of the 15 pension associations, with memberships exceeding 150,000.

We as a group certainly hope that all members of Parliament in attendance today are here with a truly open mind, even though my own MP has issued an e-mail that indicates that's not truly the case for everybody.

There are some people in this country who think that pensioners on private pensions are fat cats, or, because some are or were members of unions, they don't deserve any consideration. Neither comment is either correct or fair.

I'm going to provide you some simple statistics from the Bell pensioner association. They total some 32,000 members in their defined benefit plan. Their pensioners' average age is 68. Their average annual pension is the grand sum of $22,000. For the survivors, their average age is 74 years of age. Their average pension is less than $15,000.

So let's put a little bit of an equation there: take $15,000 and 10% is $1,500; 20% is $3,000; and 30% is $4,500. Now, for most of the people in this room, if your income dropped by $4,500, you would complain bitterly. But for those pensioners, if it dropped $4,500, they're in a disastrous set of circumstances.

And I might point out that the Bell pension plan is more generous than most.

I would also point out that our pension plans are nothing but deferred wages. And I can state that at one point in time, when the marketplace went south for steel, the company did not give out salary increases. They said to the employees, “We can't give out salary increases this year, but we're going to modify your pension plan and improve it a little bit.” That meant that they were giving a little bit, but they were delaying how they were having to pay it out.

Now, if you're protecting current employees at a certain level for that last little bit of their payments, their salaries, why should we be treated any differently? To do so is unfair. On that basis alone, we should in all fairness be granted “preferred” creditor status—and I read the word “preferred” as opposed to “secured” or “super-priority” for a very good reason. We certainly feel we should be ahead of the bond holders and the junk bond lenders or any unsecured creditors.

The other thing I'd like to point out is, as a member of a DB plan, there was a limitation that was placed on the amounts that we could contribute to registered plans, such as RRSPs. That limitation reduced the amount that we could have done compared to other people. Hence, if we're forced to take a reduced pension, then we're being victimized twice over: once on the pension itself and secondly due to the RRSP limitations.

I don't have to talk about what Diane Urquhart has said because she's been here today; you've heard it. Mr. Manley and his fellow CEO associates take exception to a lot of what has been said and they certainly would like to not change the plans. In fact, my MP has stated it could be as high as a 35% cost. Yet you heard this morning what Diane said. Interestingly enough, they haven't provided the studies that would say it would be much higher. Diane Urquhart has been very open about where her studies were done and how.

Preferred status is the norm in many countries. Yes, it's not the status in all countries, but in many of the countries where it is not the status there are other mechanisms put in place to take care of failed pension plans.

[Diane Urquhart]

Yes, I was a financial expert in the asset-backed commercial paper bankruptcy, which was the largest bankruptcy in Canada. It involved $220 billion of credit default swaps.

I have updated my analysis and have determined that there are $4.5 trillion of credit default swaps on the global junk bond market. There are only $2.5 trillion of junk bonds. The conclusion I reached is that credit default swaps are a form of insurance for the bond owners of the world. You can purchase credit default swaps, which have the impact that, should a company enter bankruptcy, you can get a cash settlement for all of the damage on the bond that the bankruptcy creates.

There is a serious problem in the bankruptcy laws of Canada and throughout the world, because there is no requirement to disclose your position in credit default swaps. You may be fully hedged or in fact short and yet drive a bankruptcy process.

The problem is this. In the 1750s you could buy insurance on ships you didn't own. Needless to say, many ships sank in the oceans. The reason for having this insurance is that you could collect on the insurance of the sinking ships and were able to make substantial profit. Exactly the same is happening today in the credit default swap markets affecting junk bonds.

We believe that if there isn't change in bankruptcy law, the credit default swap has the impact of substantially increasing the frequency of bankruptcies. It also has the impact of creating liquidation of companies without any effort to continue as an ongoing concern, which is what we saw in the Nortel case.

If we don't adopt Bill C-501, we have a situation in which more than twice the value of the junk bonds of the world is covered by credit default swaps, the impact of which is that you get to receive a cash settlement, you get to keep the bonds, you get to take the billions of dollars out of the obligations to top up the pension fund, the consequence of which is that you make a higher profit as a result of the bankruptcy and that you prefer a liquidation.

If we do Bill C-501, we believe it will be the stick that ensures you do not want to liquidate, because if you do liquidate you have to owe up all the billions that are owed. You would rather restructure.

So I have the opposite opinion from the council of CEOs.

Thank you.

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

If the federal government were to take responsibility for pension plans, as Quebec has done to avoid pension funds being liquidated, do you think this move would provide better protection for retirees than that provided under Bill C-501, which is currently before us?

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

Thank you.

If the federal government were to take responsibility for pension plans, as Quebec has done to avoid pension funds being liquidated, do you think this move would provide better protection for retirees than that provided under Bill C-501, which is currently before us?

[Douglas Rienzo]

I understand what you're saying and I understand that it could be interpreted to just apply to those payments, so there are two other concerns there. First of all, Parliament is already passing Bill C-9, which deals with other ways to strengthen the pension system, at least on the federal level.

There's a provision the bill which provides that if a company becomes bankrupt, then all the money needed to fund the deficit becomes immediately due and payable. So there's a balloon payment due on bankruptcy. The concern there is that Bill C-501, in combination with Bill C-9, could cause the entire deficit to be due right on bankruptcy, and therefore that super-priority could apply to the whole deficit. So there's a concern there.

The other concern is--

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

I want to get a second question in, so I'm going to stop you at that point.

This question is for Mr. Rienzo. Interpretation of what Bill C-501 actually says is problematic. You spoke quite a bit about it. Our interpretation of the bill is that it in fact makes changes to only a very small portion of what we call the “special payments” that were to have been paid by the company pension plan during the time between restructuring and actual bankruptcy. That's our interpretation of what Bill C-501 actually does. It touches only that special payment part of it. So given that, would it be fair to say that maybe we're making too much out of the predictions that this is going to throw the credit markets into turmoil as a result of what is actually contained in Bill C-501?

[Douglas Rienzo, Partner, Pensions and Benefits, Osler, Hoskin & Harcourt LLP]

Thank you.

Good morning. My name is Douglas Rienzo. I'm a partner with the law firm of Osler, Hoskin & Harcourt.

I'd first like to extend to the committee our appreciation for the opportunity to appear before you and to contribute to the work of the committee studying Bill C-501. My colleagues and I at Osler believe we can provide this committee with a unique perspective on the issue of protecting pensions, which is the cornerstone of Bill C-501.

Osler is home to one of the largest groups of full-time pension law practitioners of any Canadian law firm through our teams in Toronto, Montreal, and New York. Our group represents a broad range of clients in the private and public sectors. Our clients sponsor some of the largest defined benefit pension plans in the country, regulated at both the federal and provincial levels.

My colleagues and I collectively have decades of experience in the area of pension law. We have worked with our clients in corporate Canada through years of constant change, from the times of pension surpluses to the present day when many are facing challenging pension funding issues.

Many of you have heard and read about the precarious health of private sector employer-sponsored defined benefit pension plans. The comments and concerns have come from employees, retirees, organized labour, and also from employer organizations. Consultants and academics have also expressed their views. The proposals that are put forward by these stakeholders are often conflicting, and the issues are extremely technical and complex.

One issue on which most commentators would agree, however, is that the health of a private sector defined benefit plan is entirely dependent on the financial ability of the employer to support it. This is particularly true in times of financial crisis, such as the one Canadian employers have been struggling with since 2008.

Although some may think that the financial crisis is now behind us, given the rebound in the stock markets over the last year, long-term interest rates are at a historic low and the impact of these low interest rates on pension plan funding is very significant. In fact, one might say that the current financial crisis facing pension plans results more from low long-term interest rates than it does from employer underfunding. In addition, market volatility has not disappeared and employers’ contribution obligations continue to be onerous.

The stated purpose of Bill C-501 is “to ensure that unfunded pension plan liabilities are accorded the status of secure debts in the event of bankruptcy proceedings”. That's from the summary.

Certain provisions of the bill appear to be limited to expanding the so-called super-priority status to all amounts that were required to be paid into the pension fund and are in arrears, including solvency deficit amortization payments. However, when the amendments to the Bankruptcy and Insolvency Act and to the Companies’ Creditors Arrangement Act proposed by the bill are read in light of its stated purpose, the wording could result in the extension of super-priority status to the entire solvency deficit itself, and not just those solvency deficit amortization payments that are due but not yet paid.

Extending either super-priority or preferred creditor status to the entire solvency deficit would place significant additional burdens on the financial capacity of defined benefit plan sponsors and impede their ability to cost-effectively raise capital, adversely affect their ability to invest in Canada's economy and remain competitive, and negatively impact their ability to fund their pension obligations.

It is therefore critical that the amendments to the BIA and the CCAA proposed by Bill C-501 not be adopted.

A number of submissions to this committee have been or will be made showing the massive negative impact on credit markets in Canada that would result from granting priority status to solvency deficits. In addition to this impact, the proposed amendments to the BIA and CCAA could have the following results: first, the amendments could elevate billions of dollars of potential pension claims ahead of lenders in the priority ladder; second, the amendments could cause credit markets to re-value assets available for security and deduct higher-priority claims, thus resulting in a significant reduction of available credit; and third, the amendments could result in immediate default situations based on covenants in existing trust indentures restricting the existence of claims that would have priority over the existing lender.

The proposed amendments to the BIA and CCAA would, in certain circumstances, also result in the acceleration of the amortization of DB plans solvency deficits, which in most Canadian jurisdictions can be paid over a period of five years. In fact, it could be said that Bill C-501 is tantamount to mandating the permanent full funding of DB plans in certain circumstances, which is currently not required in Canada.

Let me briefly explain the current funding rules under both federal and provincial pension standards legislation.

While a plan is ongoing, every three years an actuarial evaluation has to be prepared, in some jurisdictions every year. The assets are valued and the liabilities are assumed to be fully settled. If the assets are insufficient, the deficit must be paid by the plan sponsor over a period of five years.

The proposed amendments to the BIA and CCAA would result in the acceleration of the amortization payments in certain circumstances by requiring a full deficit to be funded on a super-priority basis in the case of bankruptcy, or as a condition precedent to the approval of a proposal under the BIA or a plan of arrangement under the CCAA.

[Diane Urquhart, Independent Financial Analyst, As an Individual]

I'm going to speak technically this morning on the impact of Bill C-501 on the cost of credit.

My conclusion is that the cost-of-credit impact is small on investment-grade owners and corporations with defined benefit pension plans. By comparison, the impact is small relative to the high damages and costs to retirees and severed workers of maintaining the status quo.

With respect to the junk bonds, there is a higher impact, but these are speculative securities that investors recognize when they invest in them.

First of all, the impact of Bill C-501, based on my research, is that the overall bond market exposed to defined benefit pension plans will have an increase in the cost of credit of 20 basis points. This is consistent and in the middle of the range of the 12 to 29 basis points determined by Phillips, Hager & North, owned by the Royal Bank. In addition, my estimate of 20 basis points is consistent with the 25 basis points that has been the outcome of the research of Towers Watson. I believe both of those organizations will be before you.

This level of 20 to 25 basis points impact on the investment-grade markets is consistent with all of the international research that I have reviewed. The basis of my analysis is that the increase of 20 basis points is a calculable matter, as we have also seen with the other financial organizations, since the credit market is the present value of the impact of cash flows. What Bill C-501 does is to reduce the recovery rates for those corporations that do enter default; as a consequence, the risk premium needs to go up in order to compensate for the reduction in recovery rates. If we were not to take legislative change because there was a negative impact, then no legislative change would be undertaken.

The impact of a 20-basis-point increase in the cost of credit for the investment-grade markets is that all of the bonds that have exposure to defined benefit plans will go down only 1.5 percentage points. You'll hear later in this hearing that Phillips, Hager & North have done a roll-up of the top 60 bond issuers and they have determined that most of the bond issuers do have exposure to the defined benefit pension market. However, they too concur with my work that the degree of increase is approximately in the.... They say 12 to 29 basis points, and they consistently also agree that the impact on the bond market is only down 1.5%.

Based on the 20 basis points, the impact on the bond market as a whole is approximately $3 billion, and that's consistent with what the Royal Bank has indicated the bond market impact is as well. There is also an increase in the cost for corporations. I'm saying that that cost is approximately $3 billion, so the total cost of Bill C-501 on the Canadian economy, on a present-value basis, is approximately $7 billion. Seven billion dollars is a nominal amount in relationship to both the bond market values outstanding and the corporate profitability dynamics.

What I'd like to note also is that with respect to pension funds the deficit today, on average, based on the Royal Bank analysis, is 20%. So what we're saying is that the bond market goes down by 1.5%, but for those companies that go bankrupt, the average deficit is 20%. Depending on what the value of the estate recovery is, that will be the degree to which the pension income must be cut in the case of the liquidations, and upon liquidation of corporations pension funds must be wound up.

As a consequence, I weigh the $7 billion to the economy as a whole against the $50 billion of deficits, of which a small proportion will have to be borne, and with fairly significant negative consequences, by the pensioners of companies that are in liquidation.

I'd like to make the point that there is a difference between liquidation and ongoing concern. When you have this small impact on the cost of capital, even in the fallen angels or junk bond part of the market, I'm saying that's 90 basis points. We are not saying that you must pay upfront the deficit in the case of a restructuring as an ongoing concern. That will still continue to be a matter of negotiation and determination with the liability remaining outstanding. The difference is, as in the case of Nortel, where the management decides to conduct a liquidation, there should be no basis where they've already determined to liquidate that the pension deficit isn't taken as a priority over the creditors at that point in time, the consequence of which is that it will have nominal impact on the rest of the bond market and yet will be the right social policy as well as economic policy for the country.

[Ross Laver, Vice-President, Policy and Communications, Canadian Council of Chief Executives]

Mr. Chair, honourable members, thank you for the opportunity to appear this morning.

I'd like to begin by acknowledging the efforts of John Rafferty and other parliamentarians on behalf of private sector workers who are covered by defined benefit pension plans.

The issue of pension benefit security is both serious and complex. Particularly in the wake of the global financial crisis, it has received a great deal of attention in Canada and throughout the industrialized world.

As you know, Parliament has already taken a number of important steps this year to strengthen protection for pension plan members. In the past, for example, a federally regulated company that terminated its DB plan would have been free to walk away from any deficit. As a result of legislation passed this year, such a plan will now have a claim on the assets of the corporation similar to that of any other unsecured creditor, the same level of protection offered to members of provincially regulated plans. Moreover, if the company is behind in its contributions or has failed to remit employee contributions, those amounts will be treated as super-priority claims. Both of these changes are fully consistent with OECD recommendations on pension benefit security.

On top of those reforms, plan sponsors are now also required to file actuarial updates every year rather than every three years. This is intended to reduce the size of future pension deficits by requiring that companies act sooner to make supplementary payments. Also this year, the federal government moved to restrict the ability of employers to suspend contributions when pension plans are in surplus, and to revise the previous tax rule that actually forced companies to halt contributions when the plan was more than 110% funded. Taken together, these changes represent a substantial and important overhaul of the rules surrounding defined benefit plans for employees of federally regulated companies.

Most provincial governments have implemented or are in the process of implementing similar reforms. So let's be clear. The pension system as it now stands is very different from the one that existed prior to the economic downturn.

The issue now with Bill C-501 is whether to go dramatically further by enacting changes that have not been tested in any other advanced industrialized country with a pension system similar to Canada's. Let me expand on that. The proponents of this bill have said repeatedly that most other developed countries already provide the kind of protection offered by Bill C-501. The truth is that most of the countries they cite have pension systems that are in no way comparable to Canada's because they rely predominantly on defined contribution or state-sponsored plans, as opposed to the private sector plans that would be affected by Bill C-501. On the other hand, Germany, Ireland, the Netherlands, Portugal, the U.K., and the U.S. do have pension systems similar to Canada's, yet in not one of these countries are pension deficits given priority over all other creditors in the event of bankruptcy.

Bill C-501, in other words, is an experiment. Before you decide to embark on that experiment, the members of the CCCE would urge you to consider the risks.

The most obvious risk is the impact that this bill will have on the cost and availability of credit. I suspect you're going to hear a lot about this during these hearings. The bill's supporters are going to tell you that the impact would be negligible, that you can go ahead and experiment with the pension system because the financial consequences would be minimal. That's not what the OECD says, however. In a 2007 study of pension protection, the OECD called the idea of giving priority rights to pension creditors controversial--their word. The OECD report said, and I quote, that “assigning ‘super priority’ rights ahead of even secured creditors would likely have a major impact on capital costs, particularly given increasingly market based pension accounting and funding standards”.

Recently a number of independent studies in Canada have reached the same conclusion. I'll leave it to other witnesses to discuss the specifics, but they demonstrate convincingly that the cost to bond holders and companies would be in the billions. What's more, the impact of Bill C-501 would be greatest for precisely those companies that are most in need of credit to stay in business. Lenders would either refuse to provide more credit, or would demand punitive rates.

The bottom line is simple. If passed, this bill will almost certainly force into receivership and into liquidation companies that would otherwise have had a chance to survive. Far from helping workers, it would destroy jobs and hurt Canadian families.

In closing, let me again congratulate members of Parliament for the important steps you have already taken to strengthen Canada's system of private sector defined benefit plans. Bill C-501, however, is clearly a step in the wrong direction.

Thank you.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much, Chair.

As parliamentarians we're charged with a high duty; that is, above all else, to look out for the public interest. To do this we must weigh the benefits of implementing certain public policies against the costs of inaction. It's a heavy responsibility, but I'm sure we can agree that when confronted by a social injustice we are necessarily compelled to act to remedy it.

What we have witnessed in recent years, during the economic downturn, is the emergence of a massive social injustice that went largely unimagined for a long time, largely because the conditions never existed. With the economic downturn we saw employers like Nortel, Air Canada, General Motors, and AbitibiBowater fail and the value of certain assets and investments sink on a scale not imagined in recent times. It was a perfect storm for workers. Employers failed, jobs were lost, and pension funds became insolvent. Lives were decimated, and I have no doubt that some lives were lost during this crisis.

As parliamentarians we must bear the collective responsibility of having allowed these conditions to exist in the first place. But we bear an even greater responsibility today, and that is to ensure that such an injustice can never occur again.

Bill C-501 will do what, surprisingly, has not been done before. It would in most cases secure the pensions of all Canadians whose employers have fallen on hard times, have undertaken restructuring, have entered bankruptcy protection, or have collapsed entirely and had their assets liquidated. If passed, Bill C-501 will mean that every working Canadian can take comfort in knowing that their pension, their retirement, is as secure as possible.

We'll hear in these proceedings from those who will outline the dire need to implement these reforms. We'll hear from those who oppose such reforms. And we'll hear from others who are no doubt conflicted or have alternate prescriptions. In the end, I urge all members to remember that we alone have the ability and bear the responsibility to act in the interests of the people who have elected us to this place to govern on their behalf.

I believe it's time for Bill C-501 to become law. I believe the testimony of the witnesses will bear this out.

I ask all members of this committee who have thus far worked so cooperatively with me on this bill to continue to do so and to exercise our unique powers to ensure that such an injustice is never faced by a hard-working Canadian again.

Thank you, Mr. Chair.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you, Mr. Chairman.

I would like to express my thanks for your comments.

Mr. Simard, what is happening in your community is occurring all across Canada. In my riding, whether it's in White River, Smooth Rock Falls, Opasatika or Wawa, we have all seen this before and we continue to see it happen. I sympathize with you. I wanted to mention that you do not seem to have much hope with respect to the company and what it is trying to do. You seem to have great doubts that the company is actually trying to find a buyer or seeking a different option.

There are a lot of issues I would like to address with you today and I will try to put them in perspective. As I said, this is a national issue. We have seen job losses all across the country, from Newfoundland to British Columbia by way of Quebec and Ontario. Many of the workers are still without jobs. In most cases, it is also because they are older. But this is really a question of survival for them, for their families and for the communities. I would also like to address some other points with you.

The NDP has been saying for a long time that one of the first things to be done when a company in Canada—which might be a company in our community—is going to shut down, or even before it shuts down, is to ensure the survival of the workers, their families and the communities.

You also talked about natural resources and the fact that they should remain in the community. There was discussion of protecting pensions and severance pay. I would just like to say that the Conservatives have almost completely abandoned their responsibilities. There has been a lot of inaction. And I mustn't forget to mention that the Conservatives are not the only ones at fault, because the job losses and plant closures began under the Liberals. People saw the problem coming but the Liberal and Conservative governments did not respond.

I would like to know whether you agree with me. This is addressed to the unions and to anyone else who wishes to answer. We tabled Bill C-501, which talks about pension protection. What is important, in your view, when companies fail? Is there a significant need for a government that will respond immediately and try to resolve these problems, so that these people's lives are not ruined?

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

It's going to be very quick.

First of all, to our Liberal friends who were talking about having a superpriority, Bill C-501 is at committee, and we're looking at having a priority, not a superpriority. We can work together on that, I'm sure.

To my friends from the business community who are here, I really appreciate your engagement today.

The CPP offers a safe, well-managed vehicle. It's a defined benefit plan, and as we heard, many of those are just disappearing. So it's a very real outcome that we can work towards.

I'm not going to ask a question because there's not enough time, Mr. Chair. I appreciate it.

Bankruptcy and Insolvency Act

[The Acting Speaker, NDP, Denise Savoie]

The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-501 under private members' business.

The House resumed from May 11 consideration of the motion that Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), be read the second time and referred to a committee.

Royal Recommendation—Bill C-501—Speaker's Ruling

[The Speaker, Liberal, Peter Milliken]

I am now prepared to rule on the point of order raised on May 11, 2010, by the hon. Parliamentary Secretary to the Government House Leader concerning the need for a royal recommendation for Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), standing in the name of the hon. member for Thunder Bay-Rainy River.

I would like to thank the parliamentary secretary for having raised this matter, as well as the hon. member for Thunder Bay—Rainy River for his comments.

In his point of order, the parliamentary secretary pointed out that Bill C-501 makes provision for the appointment of adjudicators by the Minister of Labour in connection with claims against directors for the recovery of debts filed under the Canada Business Corporations Act. These provisions are found in clause 6 of the bill.

He drew the attention of the House to section 23 of the Interpretation Act, which indicates that the power to appoint public officials includes the power to pay them. In his view, the appointment of adjudicators under the Canada Business Corporations Act would constitute the naming of officials for a new and distinct function not currently authorized by any existing appropriation.

The Chair has examined Bill C-501 carefully and has taken note of the authorities cited by the parliamentary secretary. The Chair has also looked closely at the existing provisions of the Canada Business Corporations Act.

During his intervention, the member for Thunder Bay—Rainy River maintained that the Minister of Labour has the power to name adjudicators under other legislation. However, what is specifically at issue here is the minister's ability to appoint such officials under the Canadian Business Corporations Act.

As this act in its current form does not provide for the appointment of adjudicators, it is clear to the Chair that the proposal in clause 6 of Bill C-501 proposes a new and distinct function for the Minister of Labour, which would require an expenditure of public funds.

In accordance with Standing Order 79(1), the Chair must therefore rule that the bill requires a royal recommendation, and will decline to put the question on third reading of the bill in its present form unless a royal recommendation is received.

The recorded division later today, however, is on the motion for second reading, which can proceed as scheduled.

The Chair would like to take this opportunity to remind all hon. members of the importance which the Speaker attaches to questions of this nature. The orderly conduct of our proceedings, particularly where it touches on matters relating to the appropriation of public funds or the imposing of charges on the people, is of great importance in permitting the House to deliberate in a calm and well-considered manner. Procedural issues which may arise from time to time are often complex and it assists both the Chair and the House as a whole when they are raised as early as possible in the proceedings.

I thank hon. members for their attention.

Royal Recommendation—Bill C-501

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise on a point of order to respond to the government concerns about Bill C-501.

The week before last the Parliamentary Secretary to the Leader of the Government in the House of Commons argued that Bill C-501 required a royal recommendation. The basis of his argument was that clause 6 of the bill imposed an additional financial responsibility on the Crown. This particular clause would mandate the Minister of Labour to appoint an adjudicator to hear a claim made by a former employee of a company against a director of the same company.

The basis of my bill moves workers' pensions to secured status after a bankruptcy. It gives the pension so-called super-preferred status, meaning workers receive their pensions before shareholders and other creditors receive their money. In the event of a dispute or should a former employee bring a claim against the director of a company, the bill would mandate the minister to appoint a arbitrator to hear the claim.

The parliamentary secretary's arguments fell into two parts, the first being that the appointment of an arbitrator was a new purpose or created a new mandate for the minister. The second argument was that the payment of an arbitrator would increase government spending.

I reject these arguments and do not believe the bill requires a royal recommendation. First, it is already within the mandate of the Minister of Labour to appoint an adjudicator. The Minister of Labour regularly appoints adjudicators, conciliators, mediators and referees often under the powers of the Canada Labour Code. The minister's mandate to resolve disputes, adjudicate claims and protect workers' rights is broad and encompasses the intent of the bill. No new responsibilities or duties are being imposed on the Crown by this bill.

In previous cases stated by the parliamentary secretary to support his argument, all involved bills where new commissions or committees were being created by the minister and where the minister had neither a previous role in appointing such committees nor a mandate to involvement himself or herself in the issue being studied for resolve by that said committee.

In the case of Bill C-501, the minister regularly appoints adjudicators to hear claims concerning workers' rights, labour issues, grievances. In addition, the minister has a clear mandate to involve himself or herself in labour disputes and bankruptcies.

When an adjudicator, mediator or referee is selected to assist with claims or grievances, they are often employees of the federal mediation and conciliation service. These are Government of Canada employees. In this case, no royal recommendation is needed as the staff already carries out very similar tasks. The bill would not change their roles, their duties or their responsibilities nor the cost of their employment.

Should the minister decide to appoint a third party adjudicator, as happens in some cases, the common practice is for the parties involved to pay the costs of the arbitrator. Nothing, and I want to make this perfectly clear, nothing in Bill C-501 makes the Crown responsible for the costs of an arbitrator. In fact, the bill does not even state that there will be a cost.

The parent act to the Canada Business Corporations Act also does not provide for any compensation for an arbitrator. While the minister certainly has the power to pay, the bill does not mandate any payment. In fact, the minister could ask for an eminent Canadian to take the case and discuss and decide in the particular case. Therefore, no money actually has to be spent according to this clause.

Therefore, I respectfully suggest, Mr. Speaker, that the parliamentary secretary is wrong in suggesting that Bill C-501 requires a royal recommendation. These are my arguments for it. I hope you will take them under consideration.

Bankruptcy and Insolvency Act

[The Acting Speaker, Conservative, Barry Devolin]

Pursuant to an order made earlier today the question on the motion for second reading of Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), is deemed put and the recorded division is deemed requested and deferred to immediately before the time provided for private members' business on Wednesday, May 26.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I rise to close debate on my private member's bill, Bill C-501, and thank the House for the opportunity to do so.

The legislative process at times can be messy. We know this and we have seen it with other business presently before the House. However, we also know that sometimes, when there is a common interest and a shared commitment among parties, such as between the Liberals and Conservatives on HST, we know that legislation can pass through this place and the other place in as little as four days.

Bearing that in mind, on June 16, less than a year ago, every member of every party in the House passed a motion that said they fundamentally shared a desire with the NDP to:

—ensuring that workers’ pension funds go to the front of the line of creditors in the event of bankruptcy proceedings...

The Liberal block and, yes, the members who sit with the Conservative government agreed that pension funds must go to the front of the line when a company entered bankruptcy.

Bill C-501 is a simple bill, straightforward, that respects and fulfills the unanimous desire of all parliamentarians in this place to put pension funds at the front of the line when the company enters bankruptcy. If members support this objective, then they will support my bill and vote to send it to committee. If a party opposes the bill, then it is going back on its word and misleading Canadians. It is really that simple.

Today the Conservative government appears to be sliding back on its word or on its commitment to more than 4.7 million Canadian families who worry every day about their retirement income. The Conservative government and its members, who are planning to vote against Bill C-501 or who are trying to stop the bill by other frivolous means, are slaves to an outdated ideology that says we must put the vultures and the shadowy backroom financiers, like those who used to work at Lehman Brothers and those who still work at Goldman Sachs, ahead of hard-working Canadian men and women who have earned their wages, who have earned their pensions and who have earned a dignified retirement.

The Bloc Québécois members have stood by the commitment they made to working Canadians last June and have indicated they will support the bill. I thank them for their support and I hope they will prove to be reliable supporters throughout the legislative process.

The Liberals have made similar noises, but in the past have proven to be unreliable when it comes to supporting workers' rights or progressive bills or motions for that matter. I remind the Liberal caucus that in finance committee on March 25, the Liberal finance critic, the member for Markham—Unionville, said:

—the pensions critic for the Liberals, and myself as finance critic, will be recommending that the Liberal Party support the NDP private member's bill on amendments to the BIA, as and when it comes to the House of Commons.

I thanked the hon. member at that time for his remarks. I remind him and his Liberal colleagues today that words mean nothing if they are not accompanied by deeds.

However, the Liberals do appear to have come around to the New Democrat position that pension security must be among the highest priorities in Parliament. I thank Liberals for their support, if it is forthcoming for the bill, but I remind them that in the end they will be held accountable by the voters for their actions.

It must be said again that each and every member of this place must live up to the commitment that they made to millions of Canadians on June 16, 2009 and that they must vote now to send Bill C-501 to committee, where it can be properly examined, debated and perhaps even amended as need be.

I thank the members of the House who have shared their thoughts, concerns and support for Bill C-501 during this debate. I urge them to live up to their commitment on pension security and pass this bill unanimously.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I appreciate this opportunity to join in the debate on Bill C-501. I should point out I am not rising to speak just because I was challenged to do so by my colleague from Elmwood—Transcona. I have a legitimate and longstanding interest in the subject matter.

I want to begin by complimenting and thanking my colleague from Thunder Bay—Rainy River for bringing forward Bill C-501 on the subject of workers' pensions or the status of pensions in the event of bankruptcy.

We should start by recognizing the magnitude of the problem. There are more than 10,000 commercial bankruptcies per year in this country. In fact, that number is probably two or three years old. The number is probably higher, given the economic turndown we have seen happen in recent years.

Of those 10,000 commercial bankruptcies per year, there is over $2 billion in lost wages and benefits when employees are left holding the bag. In the current Bankruptcy and Insolvency Act, wages, back wages and pension contributions rank dead last in order of priority for those claimants waiting to be paid when the assets of the bankrupt company are liquidated by the trustees of the bankruptcy.

A lot of people were surprised to learn that working people, ordinary Canadians, would rank dead last in priority. In fact, if we can trace it back through the NDP, the origins of the bill actually germinated in the riding of Winnipeg Centre, I can say with some modesty.

A number of my constituents, in 2002, came to me with the details of a bankruptcy going on in Winnipeg at the time, involving Storm-Tite doors and the United Steelworkers of America. The bankruptcy was taking place and not only were a bunch of employees owed back wages but the pension plan was in deficit by tens of millions of dollars. They were not able to meet the actuarial promises to the beneficiaries of the plan.

They came to me, shocked to learn that they were ranked so poorly in terms of priority when the trustees of the bankruptcy liquidated the company and that their pensions would be cut. Not only were some pensions cut in half, but some 20-year members would have no pension at all even though, when the assets of the company were liquidated, there were tens of millions of dollars left in assets, more than enough to make the pension plan whole. In other words, other creditors were secured, but the workers were not.

This led to an initiative that we called the workers first bill. We took it to Parliament and we had some co-operation from the Liberal government of the day. We met at length with Joe Fontana, the former minister of labour, and we negotiated and negotiated to try to correct what we thought was a horrible problem with the Bankruptcy and Insolvency Act.

The push-back was not from business owners or the corporate community, because frankly if they are at the point where their business is bankrupt and they have walked away from the company, they do not really care what happens to the division of the remaining liquidated assets. In fact, many would be pleased if that money went to their employees rather than to other creditors. No, the push-back came from the banks. The banks said if they were not number one on the list of secured creditors in the event of a bankruptcy, if the debt to them was not prioritized as number one, they would never lend venture capital again. They were not going to lend money to business if they could not be guaranteed they would paid back first. That is where the push-back came from.

Again ordinary Canadians were frustrated, and we started to do a great deal of research around the country to find out the extent of the problem. We traced the origin of the problem. The real origin of the problem was the fact that so many Canadian pension plans are underfunded, as my colleague from Elmwood—Transcona was saying, not just by the 10% that is contemplated by the Bankruptcy and Insolvency Act, but by 30%, 40% and 50%, because there has been no aggressive and diligent policing of the enforcement of the legislation surrounding pensions. It was at the point where, as soon as private companies started getting into trouble, as my colleague pointed out, they were dipping into the pension plan as a last-ditch effort to try to find some operating capital to keep the company and the plant going for another year or two.

Again, if pensions had joint trustees, this would not happen. However, many of these pension plans are in the absolute control of the company and the company just cannot keep its fingers out of that pool of dough, especially when the going gets tough and it is has a problem. Conrad Black, with Dominion stores, is a classic example. He was taken to court because he took $80 million out of the pension plan of employees and never put it back.

I am proud we are at this juncture in Parliament today.

Some progress was made in the treatment of back wages owing to workers in this initiative. When we did raise the workers first bill, we did get the co-operation of the Liberal government of the day to put in place a special super priority fund for up to $3,000 for back wages payable to employees, so they would get super priority. That was a huge benefit. The $3,000 was adequate. If a guy has not been paid wages for two or three weeks or a month, he probably will quit the job anyway. About 95% of claimants were owed less than $3,000 and would get satisfaction from that fund. I am glad to say progress was made on that front.

The big problem remaining is not the guy who is owed $1,500 or one two-week back pay cheque. The problem is some of these pensions are underfunded by $10 million, $30 million and $50 million. When a company goes bankrupt, the pensioner, who has worked all his or her life in good faith and whose pension has been held as deferred wages on his or her behalf by the company, finds out the money is not there.

We had one example in New Brunswick. There were over $100 million in assets in the company when it was liquidated. It had a great deal of high-tech machinery and property and buildings that were of significant value. The pension shortfall was $40 million. We brought some of these people to Ottawa to plead their case with the government of the day. There was more than enough money in the assets of the company, when liquidated, to make this pension plan whole. We had examples of workers who had 32 years of service and they did not get one nickel in pension.

This was the tragedy in real terms. The effect is overwhelming when we consider 10,000 bankruptcies per year and over $2 billion in back wages per year that should have gone into the pockets of the employees in the company. I would argue that most business owners would rather the moneys realized from liquidating the assets go to their employees as a gesture of good faith as the company wraps up and is closed.

Bill C-501 would address this measure. I know there is broad interest and support from the other parties. If we do nothing else in this session of Parliament, we hope we make Canadian workers who suffer bankruptcies whole in their pension savings and in their retirement security by passing Bill C-501.

[Jim Maloway, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I am pleased to speak to Bill C-501, which was introduced by my colleague. He has analyzed the problem correctly and I think that he is introducing the remedy that is required for the moment.

It is amazing to me that we have found ourselves in this place, given what we and our parents have gone through since the Great Depression of 1929 and on. Our parents went through the Great Depression and came out of it. It took perhaps 30 years for the stock market to recover. By that time, anyone who held stocks was likely to find that the companies they held the stocks in were never to come back.

One would have thought, given the situation out of that recession, that people would have thought ahead and come to the conclusion that we had to work out an insurance scheme for the retirement plans themselves. It only makes sense. If we look at historical records, we will find that companies rarely last for huge amounts of time. We have situations where consumer tastes change. We have obsolescence in companies. Just plain bad management of companies leads companies to fall into tough times.

Workers and their representatives had an undying trust that they would somehow put their money into a pension plan and be able to have the benefits last until the end of their lives. This trust came at a time when there was a lot of optimism on the part of the workers. I also think that when young workers start, they rarely question the pension plan. Whether they are in unions or not, I think most people will agree that it is only when people get to be middle age that they really start to take a deep interest and question what their pension plans are all about and whether the money is going to be there.

Previous speakers have indicated already that we have a patchwork quilt of pension benefits across the country. I believe that only 33% of people have taken advantage of the RRSP program. Only another rather small percentage of people actually have a company pension. Of those, some have the defined benefit plans. Those have peaked and they are not increasing in numbers at all. If anything, they are decreasing over time. Those are the best plans, the Cadillac plans, that came around in the 1950s and 1960s. Those are more or less at an end in terms of their expansion.

Now we are seeing the defined contribution plan taking over. That type of plan is not as good as the defined benefit plans were. Through all of this, I fail to see why successive governments and workers' organizations themselves were not calling for an insurance plan for pension plans as early as the 1960s, knowing what we know can happen and does happen over time to the economy. I can point out other industries that have formed their own compensation plans or insurance plans.

All we have to do is look at the P and C, property and casualty, insurance companies. In 1987, I believe, after several bankruptcies of small P and C companies in Canada, the industry realized that this was bad for business to have a house insurance company go bankrupt and leave people stuck without having the claims paid and the premiums not returned. I could mention some names of some companies, but I will not do that now. It was a long process and at the end of it the companies decided this was a big enough risk that they got together with the governments, or vice versa, and they formed a pool. The P and C companies now have a pool so that if someone's house insurance company goes bankrupt and goes out of business, this pool steps in and there is an orderly wind-down of the company and the policies. As a matter of fact, it is so painless that the public does not even notice it is happening.

The same is true of the life insurance industry. It has a similar type of pooling structure. We have had travel acts in Ontario, in Quebec and in B.C. now for a number of years. Consumers in those provinces know, when they buy airline tickets, that if their agency or tour operator goes bankrupt, like Conquest Vacations did last February, that they are protected. There are provinces like my own, Manitoba, that do not have their own travel fund. They are not protected at all, but the consumers in Ontario, Quebec and B.C. are.

I was at a Canada-U.S. conference in New Orleans on the weekend. We were given a briefing on the oil spill on Sunday morning. They talked about the potential for the worst-case scenario and there is a fund set up for a limited liability of $100 million for oil spills, and the companies pay into this fund. Of course, if there is a case of an oil spill that exceeds the amount, or if the liability is determined that the company was negligent, of course it could be unlimited liability.

Potentially a company like BP, very healthy only a few weeks ago, might end up in a bankruptcy situation in the future. All the shareholders who thought things were going fine two weeks ago would lose their money, and the workers at BP would be in a similar situation to some of the workers we are looking at here, such as those from Nortel.

These are not isolated examples. They happen in the economy all the time, so the question is: Why can we not look forward and take precautions when we know it is going to happen? We are going to have workers who have paid into pension plans for many years and through no fault of their own are going to have a deficiency in what they can draw.

Bear in mind that the workers are not running the companies. It is the management that is running the companies. It is management that is making the bad business decisions that get companies occasionally into trouble. Then we have a situation when the company is going into bankruptcy, when the management ends up looking after itself. It was mentioned by the previous speaker that Canwest is an example. Management took $41 million to take care of itself.

The public gets outraged when it sees that happen. I know the member for Winnipeg Centre is listening right now and I can just see a speech starting to develop over this issue, because people see this happening. They see that management takes care of itself and the workers are the ones who are left holding the bag.

It is time we passed this bill and moved the workers to the front of the line.

[Mike Lake, Conservative, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, I welcome the opportunity to join my colleagues in speaking to the issue of pensions and income security of Canadians in retirement. In particular, I wish to address the actions already taken by the government to provide protection for the claims of pensioners in insolvency and how these actions are consistent with or exceed the protection provided by other countries under their insolvency laws.

Let me begin by acknowledging the challenges faced by Canadian pensioners and their families during the recent economic downturn. This government understands the issues and considers them extremely important. It is for that reason that we have taken and continue to take measures that will better protect pensions and pensioners, whether it be in a bankruptcy or company restructuring context, in the context of overall retirement adequacy, or in the more general context of how the national economy is doing.

Let me also acknowledge the specific challenges created for pensioners when a company files for bankruptcy under the Bankruptcy and Insolvency Act, BIA, or restructuring under the Companies' Creditors Arrangement Act, CCAA. Such proceedings have an impact on both current and former employees, as well as on the interests of creditors and stakeholders.

The concerns of employees and pensioners who find themselves in the insolvency process cannot be minimized. They have followed the rules. They have made their pension payments. But as a result of the insolvency of their employer, in some instances, they find themselves facing the prospect of reduced pensions.

The protection of pensions where an employer becomes insolvent is a significant element of our existing economic infrastructure. When considering the protection of pensions or any other obligation, it is important to recognize that both the BIA and the CCAA are fundamental marketplace framework laws that play an important part in maintaining Canada's economic well-being. They both set out rules for how individuals and companies may become bankrupt or may restructure their affairs.

It is always unfortunate when individuals or businesses find themselves in the position of being unable to meet their obligations. The economic reality of insolvency is that the creditors and stakeholders of an insolvent business that is no longer viable will receive less than what they are owed.

The insolvency system serves a vital economic purpose by allowing for a fair and orderly treatment of creditors, generally in accordance with the legal rights and obligations that were in place before the insolvency, as well as the fair treatment of the insolvent person or business.

In light of these principles, the government has already taken action to protect the claims of pensioners in insolvency. In recent years amendments were made to Canada's insolvency legislation, both the BIA and CCAA, to provide a higher priority for outstanding regular pension contributions.

This means that unpaid regular contributions are now paid ahead of secured creditors in bankruptcy proceedings under the BIA. In the case of a restructuring under CCAA, a restructuring plan cannot be approved by the court unless the plan provides for the repayment of unpaid regular contributions.

In the consideration of Bill C-501, where we are talking about giving super priority status to unfunded pension plan liabilities, we must assess the potential impact of such changes on the economy as a whole.

Unfunded pension liabilities are made up of the deficit between existing pension assets and the obligations to pay benefits to pensioners. Unfunded liabilities can occur as a result of poor market performance, even if all required regular contributions have been made.

To emphasize the point, the BIA and the CCAA are both important marketplace laws that potentially impact economic activity and business decisions of all sectors of the economy. Lenders, investors, suppliers, landlords, employees and customers, all make decisions based in part on the consequences that may ensue if a business were to become insolvent. Any changes to insolvency legislation should be approached with the effects on all of these players in mind.

When considering the protection of pensions through the use of the insolvency system, it is worth remembering that Canada is not alone in dealing with this issue. The practises of other countries can provide useful guidance in consideration of potential solutions.

As a result of the economic downturn and changing demographics, countries around the world are examining how to respond to the challenge of financing secure retirements for their citizens. Given the shared international challenge, it would be instructive to consider how pension claims are treated in bankruptcy in other major countries, and compare Canada's treatment of such claims in bankruptcy with that of countries with similar economies.

Clearly, any comparison will not be exact. Some countries, such as Italy and France, have mainly state-funded pensions and few private employer-sponsored pensions, which make the insolvency of contributing employers largely irrelevant to the amount received by pensioners.

Other countries, like New Zealand, treat pension claims as wage claims, giving claimants access to wage guarantee funds instead of protection in the bankruptcy process.

Still others, like the United States and the United Kingdom, have pension guarantee funds, financed by premiums or general tax revenues.

Bearing in mind these differences, it is very significant to note that Canada is one of the few countries among the members of the G20 and the 30 members of the Organization for Economic Co-operation and Development, or the OECD, that grant a super priority for outstanding pension contributions. Among OECD members, only Canada, Japan and Poland provide for such a super priority. The other countries have a preferred or unsecured claim, providing for a lower degree of protection than Canada.

However, with respect to the protection of unfunded liabilities, like Canada, a large majority of members of the OECD, including such countries as Australia, France, Germany, Italy, New Zealand, Sweden, Switzerland, and the United Kingdom, treat unfunded pension liabilities as unsecured claims in insolvency.

This government has taken measures to better protect pensions through amendments to the BIA and CCAA, with the steps already taken being more protective of pension claims than that of most economically advanced countries.

The government, consistent with its throne speech commitment to better protect workers whose employers go bankrupt, is looking at broader issues and exploring comprehensive solutions, both inside and outside of insolvency law, to protect pensions and enhance the security of incomes for Canadians in retirement.

A further response to the complex equations implicit in pension discussions will be carefully balanced to do the most good for pensioners while continuing to protect the health of our economy as a whole.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, I seek unanimous consent for the following motion. I move:

That, notwithstanding any Standing Order or usual practice, at the conclusion of today's debate on Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), a deferred recorded division be deemed requested, and the vote deferred to immediately before the time provided for Private Members' Business on Wednesday, May 26th, 2010.

The House resumed from April 26 consideration of the motion that Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), be read the second time and referred to a committee.

Royal Recommendation—Bill C-501

[Tom Lukiwski, Conservative, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order with respect to Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection).

Without commenting on the merits of the bill, I submit that its provisions to require the Minister of Labour to appoint an adjudicator to hear and adjudicate claims would require new government spending and therefore would require a royal recommendation.

Page 834 of the second edition of House of Commons Procedure and Practice states:

—a royal recommendation is required not only in the case where money is being appropriated, but also in the case where the authorization to spend for a specific purpose is significantly altered.

Bill C-501 would amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act so that the unfunded pension plan liabilities would be accorded the status of secured debts in the event of bankruptcy.

The bill would also amend the Canada Business Corporations Act to provide for a procedure by which former employees of a bankrupt corporation who were owed amounts by the corporation could proceed with claims against its directors. That procedure is set out in clause 6, which would require the Minister of Labour to appoint an adjudicator to hear and adjudicate claims and would set out the powers and functions of the proposed adjudicator. Section 23 of the Interpretation Act makes it clear that the power to appoint also includes the power to pay.

The requirement for a royal recommendation for a new officer of the Crown is made clear in the Speaker's ruling of November 9, 1978, which states, “If this bill is to impose a new duty on the officers of the Crown, these objectives will necessitate expenditures of a nature which would require the financial initiative of the Crown”.

On September 19, 2006, in the case of Bill C-293, An Act respecting the provision of official development assistance abroad, the Speaker ruled on the need for a royal recommendation for the creation of an advisory committee that:

—the establishment of the advisory committee for international development cooperation provided for in clause 6 clearly would require the expenditure of public funds...

On February 11, 2008, in the case of Bill C-474 provisions, for the appointment of representatives for an advisory council, the Speaker ruled that this required a royal recommendation:

Clause 7 of the bill provides for the governor in council to appoint 25 representatives to the advisory council....As the provision in Bill C-474 is such that the governor in council could choose to pay a salary to these representatives, this involves an appropriation of a part of the public revenue and should be accompanied by a royal recommendation.

These precedents also apply to Bill C-501. As I have mentioned, the bill's proposal to appoint an adjudicator would increase government spending for a new purpose and therefore must be accompanied by a royal recommendation.

Bankruptcy and Insolvency Act

[Merv Tweed, Conservative, Brandon—Souris, MB]

Madam Speaker, I too welcome the opportunity to speak on the issue of pensions, the proposed amendments to the Bankruptcy and Insolvency Act, and the Companies' Creditors Arrangement Act as envisaged by Bill C-501.

I think it is certainly appropriate that we have these conversations and discussions in regard to dealing with the issues that impact Canadians in such a way. My comments today will be on the necessity that we must always keep in mind the potential economic effects of a higher priority in insolvency for unfunded pension liabilities, and in particular the importance of considering the impact such a priority may have on capital markets and the access to credit for Canadian companies.

I would like to begin by acknowledging the challenges that are being faced by today's Canadian pensioners and their families in this uncertain economic environment, and it is for that reason that our government has taken and will continue to take measures that will better protect the pensions and pensioners.

Indeed, the government committed, through the throne speech of last March, to explore ways to better protect workers when their employers go bankrupt. Canada's insolvency and restructuring laws are an important part of our economic framework legislation and play a key role in making our economy strong and stable. They strive to find the proper balance between the competing interests of debtors and creditors as well as those between the various categories of creditors. I say competing because, of course, there are usually insufficient assets in the debtor's estate to satisfy the entire amount of debt owed to creditors.

To meet that test of balance, the law has to be fair and be seen to be fair by all those who might be affected by its provisions. To do otherwise could lead to unintended consequences.

It is of fundamental importance that insolvency legislation be structured in such a way that it does not impede our ability to promote a competitive marketplace nor impinge on our ability to increase the availability of credit to businesses and maintain efficient capital markets.

Rational and reasoned legislation contributes to building confidence in the economy, to improve the competitiveness of Canadian businesses, and serves to make Canada a more innovative and productive country. Without such a principled approach, our efforts could result in little long-term relief for potential aggrieved parties.

While assessing the various ways to protect workers and their pensions, the government must be mindful of the effects such changes may have, including the effect they could have on credit markets, which are integral to the smooth operation of businesses in Canada.

Here is what is critical. Amounts related to unfunded pension liabilities can represent significant claims in bankruptcy and can arise without any wrongdoing on the part of the employer. Let me emphasize this point, if I may. Several external factors, such as investment performance, can affect the funding level of a defined benefit pension plan. Therefore, a plan can be underfunded even if the employer provides for all regular contributions, which are already protected by a super priority in insolvency and other required payments in a timely manner.

We should remember that, when a company is insolvent, its assets are usually insufficient to cover all the claims. This means that everyone will not be fully paid. I will continue.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Madam Speaker, I am very pleased to finally have the opportunity to rise and speak to this most important issue. I thank the member for Thunder Bay—Rainy River who has taken up this bill. In 2008 the NDP started looking at the problems with pensions. Over the period of late 2008, early 2009, we had two consultative meetings and one of the things that began to surface were the stories around the serious situation of Nortel.

In 2009 I introduced a bill very similar to the member's, Bill C-476. It was the hope of the NDP, me and the people at Nortel that the bill would have been dealt with. We hoped that by February of this year we could have had it through all stages in the House, to committee and back to the House. It would have allowed for action that would have helped the situation of the Nortel workers in particular. Unfortunately, the government took the decision to prorogue and as a result there was a delay.

My Bill C-476 would not make it here except with the unanimous consent of the House. I raised it in this place and both sides of the House said no. Therefore, it put us in the position of having the good member for Thunder Bay—Rainy River using his order of precedence to put this bill forward, and that is important. A private member only has so many opportunities to move a bill and he set aside his own critic area in order to do the right thing for the workers of AbitibiBowater, Fraser Papers and others.

As we went forward in the debate, the Liberal Party spoke about 1963 and The Gazette, referring to the opposition. I will remind this place that it was Stanley Knowles who first proposed CPP and under a minority government of the Liberals, it was put forward.

Last fall, on the steps of our Parliament, speaker after speaker addressed the 4,000 Nortel workers about what we would try to do for them. In a subsequent throne speech, the government of the day said very clearly that it would look at the situation of bankruptcy, insolvency and pensions.

However, we have to change the debate. When we listen to the business community and certain people in the House, they talk about payroll taxes. When we think of pensions and the assets of them, those are deferred wages. Had the employees of those companies decided they wanted to invest on their own, they would not have negotiated with their companies to have a pension plan in the first place.

Imagine the horror when they wake up to a newspaper headline like the workers at Nortel did. Nortel had $2.4 billion in cash assets and $4 billion in other assets. It said that it would not cover the shortfall in the Nortel pension. Today, because of the delay of prorogation, because this matter did not get to the House, Nortel workers face a pension of 69%.

About two weeks ago, a couple that had retired from Nortel just before the 1990s visited my office in Hamilton East—Stoney Creek. Their pension to begin with was small because it had not had the growth period of the big money. They were going to lose 30% of their pension and their benefits. Along the line before of Bill C-476, I also put in Bill C-487 to address the long-term disability problems faced by workers at Nortel. In December some 400 of these good folks will lose all their LTD benefits. These workers are not re-employable and to be quite frank it is a tragedy because they will wind up on welfare.

Last week I stood with a Bloc member as the Bloc put forward a bill to address the guaranteed income supplement. In the House last June, we had an opposition day motion from the NDP. The first part of that motion was to address an immediate increase to the GIS. We also talked about doubling CPP, a national pension insurance plan. I was proud of members of the House because the motion passed unanimously.

Over the summer, I went to 19 different communities across the country. I listened to seniors talk about their fears on their pensions. One of the things that surfaced repeatedly was how low the GIS was and how it did not rise with the rate of inflation. This varied across the country. People who had retired from major corporations and thought their company had no chance of failure now faced problems.

We have heard about AbitibiBowater in the House many times from me, from the member for Thunder Bay—Rainy River and other members, particularly from Quebec and Northern Ontario. I ran into workers in B.C. who lost their pensions because the forestry industry had been wiped out. They clearly did not know what they were going to do.

In the House today is my good friend from Outremont, who at my request moved a motion at finance committee to have it look at pensions. Eighty-eight witnesses came before that committee and gave testimony about the situation faced by Canadians and Canadian pensions.

I have noticed, with concern, that the speaking notes of government members have changed. In committee, they were saying that they would look at this, that they were consulting. They were referring to the parliamentary secretary who was traveling the country, as was I. They made reference to those consultations. Now they are starting to talk about the opposition coming up with answers too quickly. I am afraid I have to disagree with that.

The NDP started on this file in 2008. We consulted with people during 2009. I went to 19 communities, now up to 26. We have listened to people.

We have listened to such people as Joel Harding, the CLC pension expert, Monica Townson, from the Canadian Centre for Policy Alternatives, Bob Baldwin, a pension expert, Don Drummond, an economist with TD Canada Trust and a gentleman whose name is used in the House quite frequently, Mike McCracken from Infometrica, Glen Hodgson, the senior vice-president and chief economist from the Conference Board of Canada, and others.

Members on all sides of the House have to really pause for a second when we look at Bill C-501. We need to understand the change in language of deferred wages.

Deferred wages means, very simply, it should be considered the property of the pensioners who will use that money for their retirement. Deferred wages are not a gift that the company has decided to set aside for them on their retirement. This is a sharing in a process that put aside moneys to give them dignity in their retirement.

Members of the government have talked to me about seeing their constituents leave their office and then going into food banks. We have heard the stories of Canadian veterans moving to food banks. Our seniors deserve much more than that.

In the opposition day motion about which I talked, the NDP proposed an immediate increase to the GIS, similar to what the Bloc and others have spoke about. We also talked about doubling the Canada pension plan.

Some people in the provinces and in the Liberal Party have talked about a supplementary voluntary CPP. In Canada 63% of working Canadians have no savings and no pension. It is very clear that the only way they will have a pension in 40 years is if we invest. If we grow the core assets in the CPP, and we do not have to add administration, then we can go forward. However, it must be mandatory to ensure that in 35 to 40 years Canadians will have a pension to rely on, a foundation for a pension plan.

Again, I thank the member for Thunder Bay—Rainy River for moving Bill C-501. I look forward to the support of the entire House when the bill comes to committee.

[Luc Desnoyers, Bloc, Rivière-des-Mille-Îles, QC]

Madam Speaker, I am pleased to take part in this important debate, in light of the situation facing Canadians and Quebeckers.

We have weathered all sorts of financial and economic crises, but now, because of a major pension plan crisis, pensioners are faced with major reductions in their pensions. I am talking about people like the employees of Nortel, Atlas Stainless Steels and the Jeffrey mine. We have to look at all the possible solutions to these problems.

Bill C-501 amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to ensure that unfunded pension plan liabilities are accorded the status of secure debts in the event of bankruptcy proceedings. It also amends the Canada Business Corporations Act to provide a new procedure by which former employees of a bankrupt corporation who are owed amounts by the corporation can proceed with claims against its directors.

In times of economic crisis, pension funds lose value when security prices drop. If a company goes bankrupt at that point, its pension fund will not be able to cover retirees' pensions.

I would now like to talk about the protections that pension plans currently provide. Under the new provisions in the legislation, regular contributions that have not been paid when a company goes bankrupt or into receivership take priority over all the debtor's assets. But the same does not hold true for unfunded pension plan liabilities.

Regular contributions that have not been paid at the time of bankruptcy include the amounts deducted from employees' paycheques to be paid into the pension plan and all unpaid employer's contributions. This priority does not apply to special payments ordered by the pension regulator to liquidate an unfunded liability or claims related to such unfunded liability.

The limited super-priority ranks below the rights of unpaid suppliers to repossess goods under section 81.1 of the BIA; the claims of farmers, fishermen and aquaculturalists in respect of unpaid products supplied to the bankrupt or insolvent employer, under section 81.2 of the BIA; unremitted income tax deductions, which are deemed to be held in trust; and priority wage claims.

Bill C-501 contains three measures. First, it would give priority status to pensions plans with unfunded liabilities. This way, in case of bankruptcy, retirees will be among the first to be paid and will have precedence over the banks.

Second, the bill ensures that the assets guarantee the termination or severance pay of any clerk, servant, travelling salesperson, labourer or worker.

Third, it offers retirees who were wronged by their employer a procedure that is supposedly more effective for making claims against directors—members of the board of directors. In fact, subsection 119(1) of the Canada Business Corporations Act states:

Directors of a corporation are jointly and severally, or solidarily, liable to employees of the corporation for all debts not exceeding six months wages payable to each such employee for services performed for the corporation while they are such directors respectively.

The Bloc Québécois supports workers and retired workers. We have always promoted social justice.

We can understand the frustrations and the concerns of people who have lost their retirement income because their retirement fund was inadequate at the time the company they worked for ceased operations. They are unfairly deprived of a source of income they were counting on.

For a long time, we have been wanting to look at giving pensions plans with unfunded liabilities preferred creditor status, as well as making directors accountable.

We feel these measures are fair as long as they do not compromise business development or competitiveness or unduly affect the labour market.

The Bloc Québécois would like to hear from witnesses in committee in order to understand these effects. For example, an increase in unemployment and social assistance recipients would be too high a price to pay to protect pension funds against stock exchange fluctuations. Other measures could then be considered.

We must remember that despite the urgent need to help pensioners who were hard hit by the economic crisis, the Conservatives prorogued Parliament, thus slowing down the process of studying bills.

The Bloc Québécois' interest in protecting pensioners and workers is not a recent phenomenon. Not only have we waged a lengthy battle to stop the looting of the employment insurance fund and increase benefits for recipients, but we have spoken in favour of many other initiatives, including wage protection in the event of bankruptcy and the creation of a tax credit to protect pensions, which are measures that we ourselves proposed.

During the summer of 2009, we defended Nortel pensioners and we continue to do so. At that time, we should have given them the opportunity to appear before the committee that was studying the impact of the sale of, among other things, Nortel's wireless division to Ericsson in order to allow them to share their fears and questions with elected members. Unfortunately, the Conservatives and Liberals preferred to shut down the debate.

This fall, to deal with the pension situation, the Bloc Québécois proposed a series of measures, one of which was that the federal government follow Quebec's lead and take trusteeship over the pension plans of federally regulated bankrupt businesses. This would prevent these pension funds from being liquidated while the markets are at their lowest.

Another proposal was to get rid of the six-month delay for the wage earner protection program. Victims of massive layoffs followed by delayed bankruptcy, which is something we have seen, would then be eligible for the severance they are due.

We also proposed raising the contribution limits for pension funds to 125% of the break-even point, which would encourage a pension reserve. The government went back to this after trying to pass the buck to the provinces.

Another measure is Bill C-290, which would provide a refundable tax credit equal to 22% of the loss sustained by beneficiaries of a pension running a deficit. Despite Conservative opposition to the bill, it will soon be studied in committee.

We are also talking about changing the threshold for automatic review of foreign acquisitions from $1 billion to $300 million. Such a measure would ensure that companies like Nortel would not be sold off at a discount or piece by piece.

We are also discussing bringing in preferred creditor status for disabled employees who lose their benefits following an employer's bankruptcy. These people are desperate and destitute because, in Nortel's case, they will lose over 70% of their benefits even though they still have to cover significant medical costs. None of these people were negligent. They had every reason to believe that they were properly insured by an insurance company.

The Bloc Québécois supports pension supervision to help avoid high-risk investments, such as numerous investments in a single company. We have to consider all of our options.

Lastly, workers expect to benefit from the pensions funds that they spend their lives contributing to. Parliament cannot ignore the needs of these workers and those who have already retired.

That is why the Bloc Québécois supports Bill C-501 in principle.

[Judy Sgro, Liberal, York West, ON]

Madam Speaker, both legislative packages sought to place people further up the list of priority in cases where an employer becomes insolvent. I believe this would help to enhance fairness during bankruptcy proceedings. It would also serve to help protect people from having the rug pulled out from under their feet when their employer becomes insolvent after a lifetime of work and investment.

I also believe that Bill C-501 would complement some of the other reforms that the Liberal Party has proposed, things like creating a supplemental Canada pension plan, establishing a stranded pension agency and measures such as those contained in Bill S-216. I should mention that Bill S-216, which was introduced by a Liberal senator, would seek to do some similar things with disability benefits as Bill C-501 seeks to do with pensions.

Despite the past denials and the stall tactics put forward by the government, I know that pension reform is a subject members of all political persuasions can support. With that in mind, I want to pay tribute to my colleagues, such as the member for Thunder Bay—Rainy River, the mover of the motion, the member for Ottawa—Vanier, the member for Madawaska—Restigouche, and the member for Random—Burin—St. George's. These four members and many others have made pension reform a top priority, and I thank them for their efforts.

I am pleased to offer my support for Bill C-501 and I eagerly look forward to collaboratively dealing with it further in committee.

I certainly renew my calls for the Minister of Finance, his parliamentary secretary and the government as a whole to get on board with the need that exists out there. Current seniors, former and current employees of companies like Nortel and AbitibiBowater, and future pensioners all have a right to expect that we will take this matter seriously.

Canada is sitting on the cusp of an unprecedented population shift. The baby boomers are getting ready to retire and that will present a range of challenges for the social structures of this country. The upside is that we can see it coming, so if we adopt a proactive approach, many of those challenges can be mitigated or resolved in advance. If we sit idle, I fear those challenges may overwhelm our ability to deal with them, a scenario that would threaten the future income security of an entire generation of Canadians.

I am pleased to lend my support to current seniors, former and current employees of companies like Nortel and AbitibiBowater and future pensioners alike. I certainly hope that all members of the House will support sending the bill to committee.

[Judy Sgro, Liberal, York West, ON]

Madam Speaker, I am pleased to have an opportunity to address Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts. I say I am pleased because, as the opposition critic for seniors and pensions, I have been following this issue for quite some time. More importantly, I am glad to see Bill C-501 come to the floor because of the impact it could have for all Canadians.

In recent weeks, people such as the former and current employees of Nortel have come to understand that their pension benefits are in real jeopardy due to the financial insolvency of their employer. Many Canadians have followed that discussion and have seen the rallies that have happened all across Canada. In many cases, after working for a lifetime, these workers and many like them will be placed at the end of the line when it comes to benefiting from a Nortel settlement agreement.

Our current laws have done nothing to right this long-standing wrong. I for one will be voting to send Bill C-501 to committee where it can be explored and finally set into motion various actions that could help thousands of people across Canada. This measure has been a long time coming to the floor of the House, mostly because the government has been so desperate to stonewall on the entire issue of pension reform.

When I first raised the issue of pension reform with the Minister of Finance, I was met with a flat refusal to tackle the issue. The minister emphatically stated that this issue has no place in the federal realm and that it is a provincial responsibility. I pressed for federal leadership on this issue, citing the toll that was being taken on Canadian families and seniors. Again, the minister and his representatives told the House that this matter was best left to the provinces.

In October of last year, I called a group of experts and stakeholders together on Parliament Hill, over and above the round tables that I have held for well over a year across Canada. We set aside politics and explored some of the problems and potential solutions for Canada's retirement income security, coverage and adequacy systems. Once that convention was over, I shared the unedited finding of the group with the minister and offered my help in crafting a thoughtful response to the growing pension crisis. Again, the minister chose to keep his head in the sand.

The minister's parliamentary secretary went even further than that, openly mocking the entire event as recently as Friday's question period. Sadly, those taunts showed the existence of an even greater problem facing all of us and facing Canadians. Simply put, the government does not believe that there is a role for government to play in preserving the fiscal security of Canadian seniors.

To their credit, this is not a new position for the Conservatives. For example, I recently came across a November 8, 1963 edition of the Montreal Gazette. If one were to read that, one would see how the Conservatives of the day back in 1963 were hoping to derail the creation of the Canada pension plan. They said that the Liberal-sponsored plan would upset credit markets and undermine the private sector in Canada. It is now more than 40 years later and the sky has not fallen.

This trend of Conservative opposition to pension reform continues in more recent times. The same arguments the Conservatives used then are the same arguments they use today. When the current Prime Minister was the leader of the Canadian Alliance, he advocated for the elimination of the Canada pension plan in favour of super savings accounts. The premise of his plan was simple. Seniors would not get a Canada pension plan cheque each month, but they would be given the opportunity to put all of their extra money into a bank account for a really great interest rate.

The problem is that by eliminating the Canada pension plan, the Conservatives would have eliminated the source of income for tens of thousands of Canadian seniors. Imagine where we would be today if the Conservatives had been successful in thwarting the creation of the Canada pension plan, or if they had been successful in collapsing the Canada pension plan in favour of bank accounts for extra money. Let us just say that Canadian seniors have every right to be happy that the Conservatives' short-sightedness did not prevail. This brings me back to Bill C-501.

The bill clearly will have its flaws and we will all need to work on it to make sure it accomplishes the intent, and that is to protect pensions across Canada when companies are going bankrupt, but what it represents is a step in the right direction. It also can represent another step forward for Canadian seniors and pensioners.

The Liberal Party has a very long history of protecting and preserving Canada's retirement income, security and adequacy systems. While the caucus does not have a party position on Bill C-501, I would suspect Liberal members would work to ensure that Bill C-501 makes its way to committee without any further stalling by the government.

Even the NDP obviously acknowledges that the issue of pension reform is not cut and dried. After all, Bill C-501 is a re-write of Bill C-476, which had its first reading in the House of Commons on November 3, 2009.

[Mike Wallace, Conservative, Burlington, ON]

Madam Speaker, I am pleased to speak to the important issue raised in Bill C-501 put forward by my colleague, the hon. member for Thunder Bay—Rainy River, dealing with unfunded pension liabilities.

The bill is a sign of his and his party's concern about pensions and the income security of Canadians in or approaching retirement. This is a concern shared by the government as evidenced by the number of initiatives that we have undertaken in response to the concerns of many Canadians across the country.

We appear to be coming out of the recent economic downturn experienced by countries all around the world. In that regard, I am pleased to point to the April 7 OECD interim economic assessment report that noted that the Canadian economy grew 6.2% in the first quarter of this year compared to 1.9% overall growth estimated for the other G7 countries. Our economy will continue to expand in the second quarter at 4.5%, twice the G7 average.

I mention this because a healthy economy can only be good for the stability of companies, the pension funds they support and the employees who will benefit from them. However, I do not suggest that this is not a reason for concern for individuals and for their companies that have not weathered the economic storm well.

During the downturn, which has led to a number of employers filing under insolvency legislation, many people, especially senior citizens, were understandably concerned that their pensions would be affected. While Canada is showing signs of emerging from this downturn, the financial well-being of these older Canadians must not be taken for granted.

Although the government has undertaken a number of specific initiatives to deal with those heartfelt concerns, debate on this bill allows us an opportunity to stand back and see where we are when it comes to our pension and bankruptcy legislation. The best place to start is in understanding exactly what the current legislation covers.

Canada's insolvency regime relies mainly on two statutes: the Bankruptcy and Insolvency Act, often called the BIA, and the Companies Creditors Arrangement Act, or the CCAA. These two statutes set the rules for the process of bankruptcy or, in the alternative, companies restructuring. Both are important pieces of marketplace framework legislation. They influence Canada's economic health, so much so that we must take great care not to tinker with their provisions on a piecemeal basis.

In broad strokes, the following is how the legislation works.

In bankruptcy, a trustee in bankruptcy seizes the non-exempt assets of the bankrupt company and sells, liquidates and distributes the proceeds of the sale among the creditors according to the distribution scheme set out in the BIA.

In the alternative, a company may choose to restructure. In restructuring, the company becomes a debtor rather than bankrupt. Rather, it works with an insolvency professional to try to find a repayment scheme for its debts that will satisfy the debtor's creditors and allow the firm to continue perhaps in a different and restructured form.

Historically, creditors receive better recovery under restructuring than they would if the debtor simply became bankrupt. Furthermore, it is better for jobs, growth and opportunity as it allows for the quick redeployment of assets from insolvent businesses to new and profitable ventures in a controlled and orderly manner, which is essential in today's economy.

That brings me to today's debate. One of the objectives of the insolvency legislation is to balance the competing interests of creditors, including employees and pensioners, for the scarce resources available in insolvency files as there is not usually enough money to satisfy the full claims of all creditors.

Great care must be taken when amending insolvency legislation because if the proper balance is not achieved, it is possible that the cost and availability of credit for companies with defined benefit pension plans could be negatively affected. This could, in turn, reduce the ability of companies to create or continue to fund benefit pension plans for their employees.

We also should be mindful that while exploring the various ways to help pensioners of insolvent companies, we do not impose additional constraints on reorganizing firms that could interfere in the reorganization process and eventually push still viable businesses into bankruptcy. Evidence has shown that restructuring and reorganization, as opposed to bankruptcy, provide better recovery for creditors and help to save jobs, which ultimately protects employees' wages and pensions.

I leave it to my colleagues to go over in greater detail the factors of which we must be mindful in considering the implications of pension protection in insolvency for the interests of stakeholders and the economy as a whole.

In the Speech from the Throne, the government committed to explore ways to better protect workers when their employers go bankrupt, and it certainly understands the value of secure and sustainable pension plans.

In order to promote more secure private sector pensions in the federal sphere, in October 2009, the government announced a comprehensive reform plan for the federal private pension plan legislation and regulatory framework. Many of these significant pension reforms announced by the finance minister are to be implemented through Bill C-9, the jobs and economic growth bill.

The Minister of Finance has also announced consultations with Canadians to obtain their input on this important matter, as well as consultations with his provincial and territorial counterparts that are currently ongoing concerning retirement security. A review of policy options is scheduled for the finance ministers' meeting to be held in May 2010.

In considering this bill, we must be mindful of the larger issue of pension and retirement income security. We must consider as well the interaction of this bill with the initiatives that are currently ongoing to promote the security of pensions as an important component of the retirement income security system. The government is considering all of these factors in fulfilling its commitment to explore ways to better protect workers whose employers go bankrupt.

I have a final note on this issue. Based on our experience at committee, I want to be clear on the present structure of the BIA. In fact, there is a super-priority group of current employees of a company that is looking at bankruptcy. That money that is available goes to those wages that are earned but not paid and they are a super-priority.

The next level is the secure level of debtor, which, to be frank, is the banks, those that have security against the bankrupt company in terms of hard assets and so on. It is really the banking level that most people consider.

The third level at present is everybody else, which includes the pensioners but also includes the suppliers, bondholders and a number of other debt instruments that companies use to operate.

This bill, from my understanding, and I will need some clarification as we debate this bill further, would move the pensioners above the secure level into the super-priority area. That was what was indicated in the speech by the mover of the motion. I will check into that further. However, what the Nortel employees who came to see us at the finance committee said is that they do not want to be a super-priority. They do not believe they could qualify for the secure level but they would be interested in a preferred position, ahead of suppliers and ahead of bondholders.

Through the debate over the next number of weeks on this and if it makes it through to committee, those are the questions that, as a member of the finance committee, I will be asking the mover to ensure we have clarification on what this bill would do. We need to be very careful when making these changes to the Bankruptcy and Insolvency Act to ensure everyone is treated fairly through this process.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

moved that Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), be read the second time and referred to a committee.

Mr. Speaker, I am pleased today to introduce my private member's bill, Bill C-501, for debate.

Canadians know that New Democrats have always, in good times and bad, looked out for the interests of hard-working men and women in Canada, and that we have done so from day one. We are also the only group of parliamentarians that has always made pension security a top concern. Like our member for Hamilton East—Stoney Creek, I am proud to continue this strong and principled tradition today.

Bill C-501 will do, suprisingly, what has never been done before. It will secure the pensions of all Canadians whose employers have fallen on hard times, that have undertaken restructuring, entered bankruptcy protection, or have collapsed entirely and had their assets sold off.

If passed, Bill C-501 should mean that every working Canadian can take comfort in knowing that their pension, their retirement, is secure in its entirety.

I am sure that all members in this place, no matter what region they represent, have constituents in their ridings whose pensions have been lost due to bankruptcy or the restructuring of their employer, and have many others whose pensions are at risk today. This is, sadly, something that we all have in common, but it is also something that should unite us in a common cause.

Record job losses, the decline of entire industries, like forestry and manufacturing, the collapse of large employers, like Nortel Networks and AbitibiBowater, are throwing tens of thousands of hard-working Canadians out of work. These hard-working Canadians, through no fault of their own, are finding out, after years and years of work, that their pensions and retirement income are threatened.

With thousands of pensions lost in recent years and many thousands more under threat, I would not hesitate to call what we are experiencing a full-blown pension crisis. The forestry sector has been in a near-decade long decline and has taken many large corporations and mills down with it.

AbitibiBowater, one of the largest employers in my riding, is undergoing restructuring after filing for creditor protection. When their books were finally opened, it was found that the pension fund, which holds the retirement income of nearly 20,000 hard-working Canadians, was underfunded by about $1.3 billion.

Literally thousands of people in my riding of Thunder Bay—Rainy River, who counted on their pensions being there when they retired, were faced with losing up to 40% of their retirement income. That was not just money that they were given or promised, that was money that they have earned.

At town halls meetings, in correspondence and in phone calls, my constituents have asked me to help them, to fix this problem, to bring them justice, and to secure their pensions. Bill C-501 is my response.

Bill C-501 is a simple, effective bill that should secure every pension in Canada without costing the Canadian government or Canadian taxpayers a cent. It will secure termination and severance pay in the event of bankruptcy. It will mean that unfunded pension liabilities and the shortfalls in pension plans are moved from unsecured status to secured status. It would close loopholes that have allowed companies that go into restructuring proceedings to leave their retirees high and dry.

The changes to existing legislation that are contained in Bill C-501 are simple, effective, and could secure more than four million pensions in Canada at no cost to the government.

As this bill moves forward and we examine the contents and the possible effects of this bill, we must do so knowing that there is no social or economic problem that exists in a vacuum. A pension problem of one employer affects not just the retirement income of one employee but more often than not that of their spouse as well.

A loss of retirement income means a loss of security, a loss of wealth, a loss of independence, and a loss of dignity for workers, their spouses and their families as they try to enjoy the peace and rewards of their retirement.

A loss of retirement income will also affect their children who, though most of them will be adults, worry as all children do about their parents as they enter what should become their golden years. It may mean that those children spend more of their time, energy, and financial resources to secure their parents' retirement, to help them live in the dignified peace that they are entitled to.

A loss of pension income for one worker will likely be accompanied by the loss of pension income for hundreds, if not thousands of other workers. Such a large scale loss in one local economy is sure to take its toll on small and local businesses.

Take 40% of the household income of 1,000 families out of a local economy and see if commerce does not suffer. Local commerce will suffer, small businesses will go under, and more jobs and pensions will be lost.

For many small northern and rural communities where a single mill, mine or manufacturer employs a huge percentage of the local population, a loss of pension income, just like the loss of jobs, is devastating to the local economy.

Living in northwestern Ontario, I have seen such loss with my own eyes, but I have made a commitment to the people who have elected me. I have promised them to do my utmost to ensure that I support policies that save our local jobs and protect our local pensions.

Earlier, I mentioned the many constituents who have raised their concerns about pension security with me in various ways, so I would like to take a moment to acknowledge them on the record for raising their concerns. They are: Marvin Pupeza of the Ontario CEP; George Chabot and Bill Shine of the CEP in Fort Frances; Gary Bragnolo and John Jaciuk of the CEP in Thunder Bay; and many hundreds of citizens in Thunder Bay--Rainy River including: Robert Elvish, Dr. Bob Lidkea, Barry Bailey, John McGrath, Joe Hanlon, and all our friends at USW. They have all indicated to me that something needs to be done.

There are many others, too many to name today, but I would also like to thank them all for taking the time to raise my awareness about their situations.

I would like to conclude my remarks by saying that this legislation is long overdue. Hard-working Canadians are entitled to their compensation, to retire in dignity, and to know that their pensions are secure under any circumstances.

They earn their pensions and those pensions must be there when they retire. We must close the loopholes that allow underfunded pension plans to be put at the back of the line of claimants and creditors, when a company enters restructuring or declares bankruptcy or has its remaining assets sold off.

They should know that I, like all the members in this place, would like to see all creditors receive all that is owed to them in these unfortunate circumstances. There can be no question of that.

I believe that, while banks and investors should be paid, it is the people who must come first. With so many companies undergoing restructuring, in bankruptcy, or even worse, we must remember that there are many more who are on the verge. With so much economic uncertainty still we must pass Bill C-501 and we must pass the bill quickly.

Those millions of Canadians who are facing an uncertain future deserve to know now that their pensions and their retirement income are secure.

I have talked to many members in the House about this bill, hoping to get their support. I have talked to a number of Conservative members. The one question they always have is, what about the investors, if we move workers' pensions from unsecured to secured, people will not want to invest any more?

This is my response. My response to that has been and will always be this. Are they telling me that people do not invest in companies because they have great management? Do they not invest in companies because they have a fabulous product, they have great workers, they have a wonderful plant, they have a terrific future and wonderful marketing, and they are likely going to make a whole lot of money? Do people not invest in companies like that or do they invest in companies, so they can use someone else's money for their cashflow or investments?

I would suggest that people invest in companies because they are good companies. Moving pensions from unsecured to secured would ensure that these companies have excellent workers and they will continue to be because they will go to work every day knowing that some day, after 30 or 40 years of work for a company, they are going to have a retirement that they can count on. That is what we are doing today.

I urge all members of the House from all parties, from all regions of Canada, to help pass the bill quickly on behalf of my constituents and on behalf of their constituents. Let us prove the skeptics and the naysayers wrong and show that we can all work together in this place, that we all can get things done for people who have placed their trust in us.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

I agree, and that was the point I was trying to make. We talked earlier in this particular meeting about something needing to be done for OAS and GIS right now, for those people who are in poverty now, and then we're looking at the mid-term in the evolution of a plan.

Mr. Cadieux talked about seven years doubling the CPP before you start to get some return, 40 years before it's fully funded. That was at the 5% for each.

If you think in terms of a national process—CPP—it takes you away from the encumberment of all those different provincial laws as well if we're able to make that adjustment there. Would that not make sense to the private employers who are struggling through the maze that they have to go through, especially if they happen to have their business over two or three provinces?

You have yourself a national plan to begin with. We're seeing that as a foundation. We're not seeing that as a resolution of all the problems. God bless them; if somebody has a private defined benefit plan, more power to them. If somebody is an entrepreneur and can make better and invest, that's wonderful too. That's not meant to be an impediment to future investment; it's to build that foundation going forward to ensure that we capture the bottom end who are getting lost along the way now.

So I'm pleased to hear that you did take those people into account, but again, as you said yourself, 90% of minimum wage is still 90% of very little.

On the CCAA, Mr. Lockwood, there is Bill C-501, which Mr. Rafferty has put in for our party, which was originally my bill. Are you aware that there was an Australian study in 2005 that said that having preferred status for pensions had very little impact on the investment climate?

You're aware of that.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

I'm sure that there would have to be some changes made to accomplish that.

One of the things that strikes me has not been part of the conversation. This morning at 11 o'clock I was with the Bloc member, Mrs. Carole Freeman, talking about the need for increased old age security and GIS immediately. We've talked about that before. The ground between us and the Conservatives I don't think is all that far, in that we're saying that we have to do something for old age security immediately. I have Bill C-501, which addresses bankruptcy insolvency. We have in the Senate what the Liberals have done. Those are priorities that must move forward.

I heard again in Mr. Cadieux's presentation the call for a national summit on pensions. There are two stages. If we do those things that are urgent, if we look at the doubling of CPP and all the implications, we do it over a reasonable period of time. Nobody's talking about rushing into it.

Mr. Wacheski, in your presentation I heard some concerns, I'll call them, about the process you were in. I'd like to know what those concerns are, if you want to elaborate on them and if you want to make any suggestions. Principally, I guess it's about the agreement that was put in place

Jobs and Economic Growth Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Madam Speaker, as the member knows, I am not part of that committee and not privy to things that are said in camera. I am not really sure what is going on there.

However, I remind the member that one of the reasons we are in the House is to listen to our constituents and to represent them to the best of our ability. I continue to do that as do all members of the NDP.

Sometimes things are very clear in terms of how our constituents would like us to vote, or in terms of things that we would like to speak on, like my pension bill, Bill C-501. My constituents would like to see that bill go through for the benefit of all Canadians.

I would like to think we are all here for that reason.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Madam Speaker, I am pleased to speak to Bill C-9, the budget implementation act. I would like to spend my time talking about some of the things that are in the bill but also about some of the things that are not in the bill and things that should be discussed.

I certainly appreciate the comments of my colleague across the way and thank her very much for those comments.

Let me talk about a couple of things that are in the budget that will create hardships not just for people in Thunder Bay—Rainy River in northwestern Ontario, but right across northern Ontario and other regions across the country. There is the increase of 50% in security fees in the airline tax. That is one of those hidden things that people will be hit with. There is the HST on financial services. We have talked about some of the problems with that before. Another is employment insurance.

Employment insurance is of particular interest to our party, to me and to our member from New Brunswick who is the critic in that area. The budget implementation bill empties the employment insurance account which held a surplus of roughly $57 billion. That was money paid by workers and employers which had built up over many years. The bill empties that account once and for all.

People talk about the budget being a budget that says nothing. There are a number of things in it that we need to be aware of.

There is very little said about pensions. I suspect that the Minister of Finance who is now going across the country will be getting an earful about pensions. We know where pensions need to go in this country. We are really in the dark ages as far as pensions are concerned. The NDP has a plan and we put it forward. The Minister of Finance is aware of what we are talking about regarding reforming the pension system.

I will make a quick plug for Bill C-501 which will be coming up for debate next month. It is a bill that moves workers' pensions from unsecured into secured status. It is a very simple, straightforward bill. I am hoping that everyone in the House will support it, including my colleagues from Saskatchewan and other places whom we try to co-operate with as much as possible. I am sure we will find some common ground on Bill C-501 and will be able to push it through very quickly to protect workers.

Imagine a country where workers and employers who paid into pension funds actually get the money back in the case of bankruptcy. That is what the bill would do. I certainly hope that members will support it.

I do not want to be completely negative when I talk about the budget. The budget extends the mineral exploration tax credit for another year, which is good. I am glad that the government has done that. The government is at least taking a couple of steps forward to fight contraband cigarettes with a new stamping regime which is a good thing. The budget also enacts certain payments to some charities, for example the Canadian Youth Business Foundation, the Rick Hansen Foundation and others. That is also a good thing.

Let me move from examining the propaganda in the budget speech to the nuts and bolts of Bill C-9. We see that the Conservative government continues to sell out our long-term interest for questionable short-term gains.

I was not surprised to see many items in Bill C-9, the HST payment to McGuinty's Liberals for example, a freeze on MPs' salaries and office budgets and huge corporate tax cuts. These were all expected.

Buried deep in the 904 pages of legal jargon that is Bill C-9 there are also provisions that eliminate the need for environmental assessments for stimulus projects, enable the sale of crown assets like Atomic Energy of Canada Limited, and increase the export tariff penalty for Canadian forestry producers.

Given that we are blessed with a beautiful and relatively pristine natural environment in northwestern Ontario, I am very concerned that environmental assessments will no longer need to be completed before infrastructure stimulus projects get under way.

While the Canadian economy is in desperate need of public investment, northwestern Ontario is in desperate need of new roads and highways right through the region. I would rather have a month or two delay on these projects so as to ensure that they comply with existing environmental regulations and do not have negative long-term effects on our natural environment, which many families in our region depend upon for their economic well-being.

Just as it does not make sense to cancel environmental assessments in the name of short-term economic stimulus, it also makes little sense to sell off profitable crown corporations and crown assets when we are facing many years of large fiscal deficits.

In the case of AECL, Bill C-9 lays the groundwork for the selling off of particular assets or of the company as a whole, even though the company is one of the world's largest producers of nuclear technology and brings in millions of dollars each year through the sale and licensing of its cutting-edge technology. Would it not make more sense to halt the $100 million ad campaign the Conservatives are using to promote their budget? Imagine $100 million being spent on ads to promote themselves; the Conservatives are using that to promote their budget supposedly.

How about reducing the $60 billion in corporate tax cuts before selling off a proven long-term money maker? The answer is obvious but the government has never shown an ability to look beyond the next poll when it comes to its decision making.

Perhaps the most troubling detail contained in the fine print of Bill C-9 is the acceptance and enforcement of the London Court of International Arbitration ruling that Canadian forest companies owe $68 million to their U.S. counterparts, $68.26 million to be exact, due to an unintentional violation of the softwood lumber agreement. In fact, the unintentional violation is the government's fault. To comply with this ruling, the Conservative government included a provision in Bill C-9 that increases the export tariff on softwood lumber products from Ontario, Quebec, Manitoba and Saskatchewan by 10% immediately.

When one subtracts the paltry $25 million in new forest sector investment that is also contained in the budget, Canada's forestry sector will actually be forced to pay out $43 million in new taxes and tariffs this year just as it begins to emerge from a catastrophic decade-long downturn. It makes no sense. At the very least, since the tribunal has already ruled, the government should be on the hook, not forest companies that are struggling to manage and are just starting to see the light at the end of the tunnel.

It is a horrible situation in Bill C-9, eliminating the need for environmental assessments on infrastructure projects and selling off profitable assets while running massive long-term deficits.

I talked about AECL. Also contained in Bill C-9 is the beginning, the thin edge of the wedge, in starting to dismantle Canada Post. Think of all the fine public sector workers who have good jobs, work hard, are paid well and have pensions at the end of their time. There is nothing wrong with people working hard, getting paid well, raising their families and having a little pension when they get to the end of their working lives. There is nothing wrong with that, but the government is making it more and more difficult for people in Canada to do that.

Surely Bill C-9 will go down as one of the most shortsighted and misguided budget documents ever before the House of Commons. Should the Liberals and Conservatives band together to pass this bill, as they did with the HST, then both parties must share the blame for the substantial damage that it is likely to cause to the long-term economic and environmental interests in our region.

Pensions

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Speaker, today I announced the tabling of Bill C-501 which will put pension plans at the front of the line when a company enters bankruptcy protection or undertakes restructuring.

Workers at AbitibiBowater and other forestry companies across Canada have waited too long for the government to assist their struggling sector or failing that, at least protect their pensions.

Now, we know the Conservative government can move quickly when it chooses to do so. After all, it banded together with the Liberal caucus in December to pass its federal HST bill, Bill C-62, in just four days.

I hope all members of this place will recognize the urgency of securing the pensions of hard-working Canadians and will commit to not just supporting, but fast-tracking the passage of Bill C-501 in the interests of all our constituents.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, Nortel workers now have a gun to their heads. A judge ruled the February deal on extending health and disability benefits could not be approved because a clause would allow pensioners to argue for a higher priority if the government changed bankruptcy laws.

Nearly 20,000 pensioners have three days to decide whether to accept the deal without the protection of future legislative changes or lose everything.

Will the minister act immediately and use the NDP bill, Bill C-501, to change these unjust bankruptcy laws now?

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chair.

I know everyone's going to run out and get a look at Bill C-501 to see what I tabled yesterday. I'll give you the summary quickly here.

This enactment amends the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act to ensure that unfunded pension plan liabilities are accorded the status of secure debts in the event of bankruptcy proceedings. The enactment also amends the Canada Business Corporations Act to provide an efficacious procedure by which former employees of a bankrupt corporation who were owed amounts by the corporation can proceed with claims against its directors.

That's the summary of Bill C-501. I hope everyone has a look.

Ms. Urquhart, I thank you for talking about the cost, and the cost of not acting, which you talked about earlier. This bill that I have brought forward is a reworked bill from Wayne Marston, Hamilton East--Stoney Creek, and I think it's going to be acceptable to all parties once they have a look at it. One of the reasons I brought it forward is that tens of thousands of forestry workers in my riding in northern Ontario and tens of thousands more forestry workers right across this country, as well as manufacturing workers, did not receive any severance and did not receive any of their pension or their deferred wages. That is going to be a question in a second. What is happening now is that employment insurance is running out for many of those people, and they'll soon be on the welfare rolls, so if you want to talk about the cost of not acting, that's one of the costs.

I have a question for Mr. St-Michel. One of the things you said earlier--and this is my translation, so I hope it's right--is that the employer told you that a pension is a part of your salary that we don't give you right away. I call that “deferred wages”; I think you called it “forgone wages”. I wonder if you'd like to make a few more comments on that in the small time we have left.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you very much, Chair.

I'd first like to emphasize the words of Mr. Mulcair that things can happen quickly in government. If you think back to before Christmas, it only took the government four days to pass harmonized sales tax right through the House of Commons and through the Senate for Ontario and British Columbia. Imagine, it took four days.

Things can happen quickly, and things do have to happen quickly, because every weekend when I go back to my riding I talk to seniors who can't pay their electricity bills now. I'm sure you know people also who cannot pay their electricity bills or their heating bills, or whatever the case may be. We do need to act very quickly.

Let me just tell you quickly about Bill C-501, which I introduced into the House yesterday, and I do thank the Liberals for indicating their support for this bill. Essentially what this bill does is it moves pensions from unsecured to secured, and that's what I've been hearing today. It doesn't move it to the top of secured. It moves it into the secured area and into the preferred secured area.

I hope that is the first step in a number of changes that are going to be made over the years, and I certainly hope the Conservatives and the Bloc will also be supporting this. I will be working very hard to make that happen.

One of the things that is very clear that statistics and science tell us—this is really for Ms. Comeau and Ms. Blanchard—is that the best indicator for seniors' longevity is how many friends they have. Related to that is the less money you have, the fewer friends you have. So this is directly related to a health outcome and longevity.

I wonder if both of you, in the last minute or so that we have left here, would have any comments on what science tells us.

Bankruptcy and Insolvency Act

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

moved for leave to introduce Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection).

Mr. Speaker, I am proud to introduce an act to amend the Bankruptcy and Insolvency Act and other acts, on behalf of the active and retired forestry and manufacturing workers in the riding of Thunder Bay--Rainy River and Northern Ontario, and indeed other active and retired workers around the country who fear for the security of their hard-earned retirement income.

This legislation is long overdue and respects the right of hard-working Canadians to the pensions they have earned throughout their working lives. I would also like to thank the hon. member for Hamilton East—Stoney Creek for his strong leadership on this issue and his ongoing involvement in the promotion of this bill.

This bill should ensure that underfunded pension plans receive a greater share of the assets of bankrupt or restructuring companies. It would do so by moving pensions up the priority list in the bankruptcy and restructuring process, which requires no spending of revenue whatsoever by the federal government.

With this bill, it is clear that New Democrats stand once again with workers and their families. I hope that all members of this place will recognize the importance of this balanced bill and offer it their full support.

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