Bill C-26 (Historical)

An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act

Part 1 of this enactment amends the Canada Pension Plan to, among other things,
(a) increase the amount of the retirement pension, as well as the survivor’s and disability pensions and the post-retirement benefit, subject to the amount of additional contributions made and the number of years over which those contributions are made;
(b) increase the maximum level of pensionable earnings by 14% as of 2025;
(c) provide for the making of additional contributions, beginning in 2019;
(d) provide for the creation of the Additional Canada Pension Plan Account and the accounting of funds in relation to it; and
(e) include the additional contributions and increased benefits in the financial review provisions of the Act and authorize the Governor in Council to make regulations in relation to those provisions.
This Part also amends the Canada Pension Plan Investment Board Act to provide for the transfer of funds between the Investment Board and the Additional Canada Pension Plan Account and to provide for the preparation of financial statements in relation to amounts managed by the Investment Board in relation to the additional contributions and increased benefits.
Part 2 makes related amendments to the Income Tax Act to increase the Working Income Tax Benefit and to provide a deduction for additional employee contributions.

Canada Pension Plan

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Speaker, I would like to start out, as many of the members have this week, by giving recognition to the veterans in my city, particularly in Edmonton Strathcona. I will be joining many at Holy Trinity Anglican Church in my riding, with the Light Horse regiment, where we will have a service and then march to the cenotaph. I look forward to joining Edmontonians in thanking our veterans for their service and remembering those who did not come home.

I am also pleased to rise to speak to the reforms proposed in Bill C-26. The pension reforms are a welcome response to the growing pension crisis in Canada. Contrary to what some members in the House allege, people are not able to save, and we are in a crisis. We need to support those who move to retirement.

My colleagues and I have been calling for these reforms for a considerable amount of time, as have many unions, provincial governments, and seniors organizations, including CARP.

While better was possible, and the full benefit will not be felt for five decades, the proposed benefit enhancements are a good first step. Challenges will remain for those currently retired or approaching the age of retirement.

Today's seniors will not personally benefit from these changes, but as Wade Poziomka, CARP's director for policy, has explained:

CPP enhancement is important to CARP's membership because they recognize the challenges that young people face today when it comes to savings.... With less access to workplace pension plans, a CPP that meets the needs of Canadians today is so crucial.

The federal and provincial governments are to be commended for having reached the agreement that led to this bill. I am pleased that the Government of Alberta was among the first to support this critical step forward, contrary to the case with previous governments of our province.

As has been pointed out by previous speakers on the bill, fewer and fewer Canadians are being provided access to workplace pension plans. Where pension plans are provided, they are in many instances offering reduced retirement security.

Additionally, with younger workers increasingly likely to change their jobs many times over their lifetime, and with many, as my colleague, the member for Churchill—Keewatinook Aski, has pointed out in this place, facing precarious work, the need for secure and adequate public pensions is becoming increasingly important. Only about a third of those who are eligible to do so actually contribute to RRSPs. It is clear that Canadians need support in saving for retirement. This is not because they are profligate or irresponsible. Young families have to prioritize paying for rent or, if fortunate, a mortgage, paying down substantial and growing student debt, and simply putting food on the table. Later in life, they may be faced with helping to cover significant and growing education costs for their children, and retirements needs for their own parents.

The Canada pension plan has proved to be a reliable and safe way to save for retirement. Why would we not use it as a mechanism to ensure retirement with dignity for future generations?

Concerns have been raised by some about the additional costs to employees and employers of increased contributions to CPP. However, with respect to the costs to small business, we are still awaiting the promised—the long promised, frankly, by both the Conservatives and Liberals—reduced taxes to small business.

The economy has taken a hit recently, particularly in my own province. Therefore, the contribution of seniors to the economy remains essential to all of our communities, in particular to small and medium-sized independent businesses, of which my own riding of Edmonton Strathcona has so many. We need future retirees to be sufficiently economically secure to ensure economic health in the future. The most cost-effective way to do that is to enhance CPP and QPP.

CARP has been among those who have pointed out that the proposals in Bill C-26 only go part way toward a full solution of the problems we face in ensuring retirement with dignity for all Canadians.

It is estimated that we need about 70% of our income at retirement to maintain our standard of living. Currently, CPP and OAS together bring us to about 40% of that. The changes in Bill C-26 would increase that to only 50%, meaning that Canadians will still need to have some kind of workplace or private pension plan to stay ahead, or ability to save.

According to a recent Statistics Canada report, currently about 12%, or 600,000 seniors in Canada, live in poverty. This includes more than one in four seniors, most of whom are women.

In my constituency office, we hear from many facing the challenges of insufficient income to pay for the basics of life. This is especially true for those relying solely on OAS and GIS. Many of those who are eligible for those benefits are not accessing them because they are either unaware of those benefits or they do not know how to apply.

The question I wish to put to the government is this. Why should seniors have to apply for these payments? Why not issue them automatically to those in need, as is the case with GST credits?

We are also discovering, while checking on applications for constituents, that the processing times for OAS and GIS have exploded. It is now six to eight months, whether they applied before they turned 65 or after. In some cases, they wait a year. In the meantime, the applicants are relying on nothing at all, bare cupboards. It is important to recognize that few seniors are actually receiving the maximum CPP benefits, as meagre as they are.

If they have some RRSPs and decide to cash them in to get by while waiting for OAS or GIS to kick in, they may be penalized in the following year by having the GIS clawed back. We need to end this GIS clawback.

Among the reasons that our offices hear from so many seniors is that it is almost impossible for them to contact a government department employee to discuss their issues. While it may be efficient to have everything online, it does not suit everyone or every situation. Even at Service Canada offices, it is difficult for people to find someone who has access to the files. It is pitiful that seniors cannot call and talk to a real person over the phone about their pensions.

We have waited a long time for the reforms contained in Bill C-26. Let us make sure we take this important step towards ensuring retirement security for the people we represent. Let it not be the last time we look at the issue of pensions or support for seniors in this place. It is time to ensure greater availability of affordable senior housing and care, including home care, palliative care, and pharmacare. Canadian seniors should not live in poverty. It is our responsibility to make sure they do not.

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Speaker, I am happy to rise in the House today to speak to Bill C-26.

I want to first acknowledge that yesterday the Prime Minister held another news conference to celebrate his first year in office. While I am sure Canadians are getting a bit tired of the Prime Minister's endless PR stunts, it is even more frustrating that he is celebrating a record that is hurting Canadians.

Let us talk about that record: widespread job losses, massive tax hikes, more debt, higher deficits, no plan. It is not a rosy picture, which is why I, along with my colleagues on this side of the House, am a little surprised that the Liberal solution to higher taxes is yet another tax hike, but it is okay, they will call this one a CPP expansion, hide the details, and maybe Canadians will let it go.

The government seems to be selling us a line from the hit Dire Straits song Money For Nothing, but there is no money for nothing. This tax hike will cost jobs, wage growth, and GDP growth.

The Canadian Federation of Independent Business projects that by 2020 total employment in Canada will have dropped roughly 110,000 jobs because of the CPP expansion and higher tax. Two-thirds of small businesses surveyed indicated they would cut hours and wages to offset this tax hike. One out of every three are looking at lay-offs to offset it. The hike is also forecast to move wages lower by 0.8%.

Every time the Minister of Finance stands in the House he talks of the low-growth economy. He forgets to mention his own finance department says the CPP tax expansion will shrink the economy.

We stand opposed to all wasteful tax hikes designed to fund the Liberal government's continued expansion, and this CPP tax hike is no exception. In fact, it is worse, and let me tell members why.

There are several problems with the CPP tax hike besides killing jobs and stifling growth. First, quite ironically, it cancels out the Prime Minister's much beloved middle-class tax relief. Remember the 1.5% Canadians were supposed to see back? Shockingly, the government decided that maybe it likes having more money to take limos, have expensive meals, and take pretty pictures in exotic locales, so it designed a tax hike that will take away that tax relief. One thing the government never seems to realize is that government cannot give what they have not already taken from us.

Let us consider Martha and Henry. They are both middle-class wage earners who work hard and pay their taxes. Tired of being slammed with the new Liberal taxes and a slow-growth economy, Martha and Henry diligently save part of their paycheque every month. They cannot take another hit. However, because the government has priorities that are out of touch with Canadians, Martha and Henry can now see up to $2,200 more deducted every year, wiping out the meagre 1.5% saved with the much vaunted middle-class tax cut. Keep in mind that neither Martha nor Henry will see any of this money back for an extra 40 years.

The government will tell us that it is okay, because at least Martha and Henry will have something to show at the end. The problem is that the government assumes Canadians have no idea how to manage their extra money.

Where could the extra money have gone? Let me tell hon. members because it leads directly to the next problem with the CPP tax hike. The CPP as an investment vehicle is weak. According to the Fraser Institute, the average return, long term, on investment for Canada bonds is 3.5%. The return on investment for Martha and Henry's CPP investment on the new expansion is 2.5%. That is right, 2.5%, barely enough to cover inflation. This is not exactly ideal, because the CPP will need to cover far more than just inflation as more Canadians move into retirement over the next several years, or what is more likely is that the government will simply come back, hat in hand in the future, and demand more money from Canadians to cover the shortfall.

Why does CPP have such mediocre returns? Among a host of reasons, primary ones are high fees for asset management. Andrew Coyne of the National Post comments on a gathering momentum of more staff, higher pay, and rising operational expenses, and he concludes, all for no appreciable payoff for Canadians.

More worrying is that because finance ministers looking for cash have a strong tendency to lean on pension funds as a source of investment for infrastructure projects, the CPP would earn even lower returns. This tendency was confirmed by the Minister of Finance's own economic advisory council, which stated repeatedly that pension funds should be looked at as a source of untapped potential for infrastructure by government.

This approach undermines the independence necessary for a fund to be truly profitable and provide meaningful returns. Without that independence and with constant interference from the Minister of Finance to fund whatever project his government sees fit on a given day, the ability for pension funds to garner higher returns is undermined; hence 2.5%

It is fairly clear the government wants more cash and this CPP tax hike is the way it is going to get it.

I know what members are thinking, Martha makes a decent wage, could she not just move a little more of her income into a fantastic and well-received investment vehicle such as a TFSA? Sure, she could, but the same Fraser Institute, those pesky policy wonks, studied hard and found for every dollar increase in CPP contribution, private savings are reduced by 90¢, fully 90%. This is not a winning formula and misleads Canadians on the benefits of CPP.

Speaking of misleading, the next problem with this hike is that Canadians are rapidly finding out the finance minister is selling them a bill of goods. The finance minister wants to help the vulnerable and this is a good goal, a worthy goal. This goal will not be accomplished by a CPP hike and here is why.

First, CPP only pays those who pay into it. If I die tomorrow, my wife would not receive my CPP pension. If I invested this money in something smart like those fantastic TFSAs I mentioned earlier, my wife and kids would have a tidy sum to walk away with. However, because CPP has punishing rules for the survivor's pension, my wife would receive 60% of the CPP at best. If she collects CPP on her own, she would receive even less.

There are fewer retired Canadians living in poverty now than at any point in our history. For Canadians on our bell curve, our bell is located above the high average. The thing with bell curves is that they all have a tail on the lower end, but the solution is to help the lower end and it is not to move the rest of bell even lower. Those struggling at the lower end of the tail need help directly. Lowering the rest of the bell to meet the tail does not help anyone.

The shame of the bill and the whole deceit of it is that this added CPP expansion will do nothing to address those seniors living in poverty. It is misleading for the finance minister to tell Canadians that this CPP expansion helps those who need help, because it does not.

It is simple. We could double or triple the CPP payouts, but if people have never paid into it, they get nothing. A huge amount of our seniors who are living in poverty are in that position because they, for whatever reason, did not contribute or contributed little to CPP during their working years.

We want to help those who need it. We want to help the widowed grandmother struggling to get by on a fixed income or the disabled grandfather trying to make ends meet. We want to help Martha and Henry ensure that they are planning for their retirement. We want them to use those TFSAs and RRSPs and invest their savings in the market because the market earns far more than 2.5%. A simple ETF invested in the Standard & Poor's 500 would yield a far greater return and allow Martha and Henry to access their savings at any time.

We want to help those who are struggling at the lower end. This is why the previous government expanded the GIS. It is why the previous government expanded the tax-free savings account to $10,000. It is why we introduced income-splitting for seniors and why we lowered the mandatory withdrawal rate for registered retirement income funds. These are evidence-based policies that benefit every senior today and we are proud of our record to help the most vulnerable.

We do not believe it is fair for the finance minister to mislead Canadians, raise taxes on workers, and leave the most vulnerable behind.

I move:

That the amendment be amended by adding after the words “seniors in need” the following: “; and (d) will impede Canadians' ability to save for the future.”

The House resumed from October 25 consideration of the motion that Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act, be read the second time and referred to a committee, and of the amendment.

Business of the House

[Bardish Chagger, Liberal, Leader of the Government in the House of Commons and Minister of Small Business and Tourism]

Mr. Speaker, this afternoon we will continue to debate the Conservative Party motion.

Tomorrow, we will resume debate on Bill C-26, on the Canada pension plan.

Next week, as the hon. member said, we will be working hard in our constituencies and attending Remembrance Day ceremonies on Friday to collectively stand in honour of all who have fallen in the service of Canada.

When we return on Monday, November 14, the House will then have the fifth day of second reading debate on Bill C-26, the CPP enhancement bill. On Tuesday, the House will also have the fifth day of second reading debate on Bill C-29, the second budget implementation bill.

On Wednesday, the House will consider Bill C-16, the gender identity bill, at report stage, and hopefully at third reading. On Thursday, the House will debate Bill C-25, the business framework bill, at second reading.

Budget Implementation Act, 2016, No. 2

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Mr. Speaker, it is a pleasure to rise on behalf of my constituents to talk about Bill C-29.

The first thing I note about Bill C-29, a second act to implement certain provisions of the budget tabled in Parliament, is that it is an omnibus bill. In terms of size, it is 230 pages of omnibus legislation. I remember well when the member for Beauséjour was the House leader for the Liberals and they were the third party in the House, how he used to rail against bills of this size. It did not matter what was in them; it was the fact they were omnibus bills that created so much angst.

The member for Winnipeg North made a career in the last Parliament out of railing against omnibus legislation. It was said to be dastardly thing for a government to choose to implement its budget via a budget implementation act. That is what is happening today. We are talking about an omnibus budget bill. I guess the principles and policies the Liberals had when they used to sit in the third party seats change a little when they cross over to the government side. Now they are a big fan of omnibus bills. That was the first thing I wanted to mention.

This bill is supposed to be the plan to implement the budget. The government clearly has no plan when it comes to budgeting. During the election campaign, Liberals promised there would be a $10 billion deficit that would be paid back within the mandate of a majority government. How long did it take them to abandon that promise? Was it 10 minutes?

I remember Prime Minister Stephen Harper saying that the Liberals' position was that everyone should trust that it would be a modest, little deficit. How right he was. We are going to hear today at four o'clock just how much more than a $10 billion deficit the government has blown in less than a year. The fiscal update will show that the government is, by a magnitude of at least three times, past its initial deficit target. It misled Canadians during the election and has blown through it.

What do Liberals have to show for it? I would argue they have nothing to show for it. There is no increased growth and there are zero net new jobs. The parliamentary budget officer has confirmed that there are zero net new jobs as a result of $30 billion or so of borrowed money being spent. This was supposed to stimulate the economy and take us to untold heights. The Liberals have done nothing they promised and have blown through their deficit target, so they have no budget plan. The plan is just to borrow more money and spend it. Canadians know that debt has to be repaid, that borrowed money has to be paid back. If my generation does not repay it, it will be our children and grandchildren who get this bill, because eventually it will come due.

One of my constituents, a small businessman, has certainly seen that the Liberal government is no friend of his. He told me the government is like a teenager who has one parent who provides him with a credit card with no limit on it, and that parent is very popular, but the other parent who hands the credit card bill to the teenager and says it is his to pay back is the less popular parent. Right now, the Liberals are playing the role of the sugar daddy who hands out the cash, but what Canadians will soon realize is that the bill will be paid by them. That is clearly what is happening.

What have the Liberals done in less than a year? They borrowed $30 billion, as I said, and they have also misled small businesses. All parties agreed that the small business tax rate would be lowered from 11% to 9%. How long did it take the Liberals to break that promise? It was broken in their first budget. They broke their promise to small businesses, and I think we know why.

During the election campaign, the Prime Minister made it clear that there were an awful lot of people who were using small businesses to avoid paying their fair share of taxes. That is what the Prime Minister said about the industry that creates the most jobs in this country. He said that small business was just a tax avoidance scheme. We found out during the election campaign that he has set up some of those companies himself to avoid paying a lot of taxes, so perhaps he knew what he spoke of. However, that is not what was promised to small businesses.

I spoke earlier this month in the House about Bill C-26, a bill dealing with CPP rates. Again, that would do nothing for seniors. It would do nothing for people approaching retirement. In fact, the finance minister has admitted that it would do nothing for anyone for more than 40 years. However, what it would do is reduce the incomes of Canadian families by up to $2,200. That $2,200 is taken from the paycheques of Canadians to go into a fund they likely will never be able to access. That is in addition to the $1,100 coming out of the pockets of small businesses who are paying their portion of that tax.

So they are increasing taxes on small businesses. They are also increasing taxes on Canadians through a carbon tax.

I was honoured to be given the role of critic for natural resources. Since the government has taken office, over 100,000 energy workers have lost their jobs. What do we see from the government? We see no jobs plan. We see no lifeline to families in the energy sector. Instead, we see them being thrown an anchor, the anchor of a carbon tax.

What would that do? The member for Oshawa talked about what it would do for manufacturing.

I will tell members what it would do for the energy sector. It would put an already crippled energy sector at an even greater disadvantage vis-à-vis the people we are trading with, the U.S., which has no intention of implementing a federal carbon tax any time soon. They are our major customer.

When we moved a motion at the natural resources committee to have the Liberal members tell us what analysis they have done to show what impact the carbon tax would have on the natural resource sector, they voted against it. We know why. It is because they have not done any economic analysis of that impact. They do not care. They do not care about those 100,000 family-supporting jobs that have been lost. We have seen they do not care about that sector because they continue to layer regulatory burden after regulatory burden upon a sector that is already suffering. When there are pipelines to be approved, they do not allow for evidence-based scientific policy to take place. They layer on an extra political layer in which the minister will make the final decision, in which the cabinet will make the final decision, in which red tape is layered upon an already burdensome process. That would do nothing to protect public safety. It would simply add to the regulatory burden.

The government is fond of saying how it has cut the taxes of middle-class Canadians. It is just not true.

The average income of people in my riding is under $40,000 a year. Guess how much they receive from the income tax cuts from the Liberal Party? Zero. They receive nothing. The most vulnerable, low-income Canadians got nothing from the Liberal tax cuts, while people like members of Parliament, who make up to $150,000 a year, get the most benefit one could possibly get out of that tax cut. The Liberals have done nothing for an average family in Chilliwack—Hope with that tax cut, and anything they have done for some families, they are going to tax back with the extra carbon tax and additional payroll taxes. Canadians are not better off.

They also cancelled things like the child fitness tax credit, the child arts tax credit, and tax credits for textbooks. They said that is because they do not like to complicate the Income Tax Act. They do not like those boutique tax credits, they said, that help families, that help moms and dads put kids in sports and in dance lessons. However, what they do like are boutique tax credits for talk show hosts for Canadian shows, or for someone who needs to take a first aid course. They are all for those tax cuts. It does not seem to matter, as long it's not a family, as long as it is not people supporting their children. We do not want to support people like that. However, if people are creators of content, then they need a tax break from the Government of Canada.

Their priorities are wrong. They are not looking after Canadian families. They are looking after special interests. We have certainly seen that over the last little while, with the revelations about their fundraising practices, in which they are meeting with the well-heeled insiders they regulate, who are giving them money for access. It is not the right way to go. This is not a budget plan, and we cannot support it.

[Mark Machin]

Thanks for the question.

On the changes in Bill C-26, we recognize that there will need to be separate and joint financial statements, and we're working through those details. We think it will be possible to manage the consolidated fund while taking into account the funding requirements and the difference between the base and the additional CPP. As I said previously, we think there is an additional reliance on investment income in the additional CPP because of its fully funded nature. We think there will be a need for a more conservative asset mix for the additional CPP. That is something the details of which we'll be working through carefully in the coming months.

[Scott Duvall, NDP, Hamilton Mountain, ON]

Thank you, Mr. Chair.

Would the changes to the CPP that are being proposed in Bill C-26 result in adjustments to the CPPIB investment strategies? What would be the nature and extent of any such adjustments?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

That's been with the pay-as-you-go and you also mentioned that with Bill C-26 we would actually see the fund become self-sustaining and therefore have less tolerance for risk. The question I would have, then, is, do you foresee that this active management strategy, which has doubled in its cost, roughly, over the past seven years, by going from a half a point of assets to now $2 billion of assets...? Will the same approach increase similar costs or will we see marginal returns because there will be less capacity for risk?

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you very much.

I know that even a $300-billion fund, which is a hard number for Canadians to understand, is not a particularly large fund in a global context, but as we grow with CPP 2 we will move up the league table, so to speak, in terms of size. What I'd like to ask you about is perhaps a more philosophical question in terms of accountability and transparency to Canadians.

In terms of your cost structures and your governance structure, what do you envisage philosophically in terms of how the CPP reports to Canadians? What level of accounting will it provide to Canadians? How understandable will that accounting be? How will CPPIB be governed? Could you provide your reflections on those topics so that we can consider them, both in the context of evaluating Bill C-26, and also in performing our role of oversight and reassuring Canadians that their pension funds will be there when they need them?

[Mark Machin, President and Chief Executive Officer, Canada Pension Plan Investment Board]

Good morning, Mr. Chair and members of the committee.

Thank you for having me here today to speak with you and answer questions regarding the Canada Pension Plan Investment Board and how we are helping ensure that the CPP remains sustainable for future generations.

With me are Michel Leduc, our senior managing director of public affairs and communications, and Ed Cass, our chief investment strategist.

I'm Mark Machin. I joined the CPPIB four and a half years ago as their first president for Asia and then became head of international work in 2013. Prior to that, I worked for Goldman Sachs for 20 years in Europe and Asia. While I'm a new resident of Canada, so far I've had the pleasure of travelling across the country meeting with finance ministers, the stewards of the CPP, and some of our contributors.

I was enormously honoured to be chosen by CPPIB's board of directors to lead such an important professional investment organization with a compelling public purpose. International organizations such as the OECD, the World Bank, the Harvard Business School, and The Economist have all praised the “Canadian model” of pension management due to its strong governance and internal investment management capabilities.

Our governance structure is a careful balance of independence and accountability, enabling professional management of the CPP fund while ensuring that we're accountable to the federal and provincial governments, and ultimately to the Canadian public. We know that contributions are compulsory, so we're motivated to work even harder to earn that trust.

We hold ourselves to an extensive disclosure policy, including quarterly reporting, annual reports, triennial reviews, and special examinations, and we announce all major investments and corporate developments.

It was just over 20 years ago that the Chief Actuary of Canada projected that the CPP would run out of money by 2015 if changes were not made to the management of the CPP. In 1997 the federal and provincial governments addressed this challenge head-on by increasing the contribution rate and creating CPPIB to manage the contributions not required to pay benefits. There was a clear imperative: to expose the fund to capital markets in order to achieve growth objectives.

Since then, CPPIB has been focused on getting the best investment returns possible. Our ten-year rate of return is 7.3%, and our five-year rate of return is 12%. More than half of the assets of the CPP fund today are now the result of investment returns, not contributions. The chief actuary noted in his report last month that over the last three years investment income was 248% higher than anticipated due to the strong investment performance of CPPIB.

Most importantly, the chief actuary reported that the CPP fund would be sustainable for the next 75 years, with an assumed 3.9% net real rate of return after inflation and all expenses. CPPIB's five-year net real rate of return as at September 30, 2016, is 10.5%.

At CPPIB we know we can't take these results for granted. It's a difficult investment climate around the world, and single years can produce very different results. In 2009, we had our worst year ever, losing over 18%, but in 2015, we had our best year ever, with a gain of over 18%. We know we can't focus on the yearly results. Our ability to see past these short-term pressures and pursue the best long-term strategy depends on strong, independent governance and the clarity of our mandate.

With the CPP's risk exposure, including wage growth, demographics, longevity, and economic risks, being highly weighted towards Canada, it's especially important that CPPIB's investments hedge against these risks.

To address these risks, CPPIB is diversifying the fund around the world and across asset classes. Currently, over 80% of the CPP fund's assets are in international jurisdictions and in a variety of asset classes, from private equity, infrastructure, and real estate to public markets.

While we're confident that this is the right strategy, we also know that competing with the largest investment firms around the world to secure the best assets comes with costs.

CPPIB, at approximately $300 billion in assets under management today, is a mid-sized organization competing with global giants. BlackRock, the largest asset manager in the world, has over $5 trillion in assets under management. Closer to home, Sun Life has almost $900 billion. Among global competition, we fall well down the list in size.

To fulfill our long-term investment goals, CPPIB took the decision 10 years ago to pursue an active management strategy that would both maximize returns and create a more resilient, diversified portfolio.

Pursuing an active global strategy was a decision taken very seriously, with considerable analysis. Success depends on sufficient resources to compete and manage risk effectively, and this is important context when looking at our costs. In order to compete, we need expertise and skill as a knowledge-based enterprise. There's no doubt that the winners will be those investment firms with the most talented investment teams and a global footprint to cultivate critical relationships with partners, governments, and others to secure deal flow and manage the risks over time in order to maximize returns and manage risks for our contributors and beneficiaries.

Before concluding, I'd like to address Bill C-26. CPPIB is currently analyzing the legislation to ensure that we are completely ready to implement the amendments that affect us.

With or without reform, the CPP fund is projected to grow significantly in the future, and we're well prepared to manage a larger fund. When we evaluate investment programs, new processes, and supporting technology, we always want to ensure that they can be scaled to take into account increased size. We are very confident that we'll be ready to manage the additional funds.

Bill C-26 requires separate and joint financial statements for both the base CPP and additional CPP. While we're working through the details, we will be able to meet this new requirement.

We believe that it's possible to manage the consolidated fund while having regard to the funding and the requirements of the base CPP and the additional CPP. We recognize the additional reliance upon investment income for the additional CPP due to its fully funded nature and therefore a need for a more conservative asset mix for the additional CPP. We will be working closely with the chief actuary, Finance Canada, and provincial governments to ensure that we are meeting the intent of the legislation.

To conclude, in order to successfully achieve our mandate for Canadians, our competitiveness is predicated on capabilities to buy assets that will create enduring value-building growth. It is a deep privilege to serve, and we believe we are on track. Public confidence is critical, and we must continue to work hard to earn that trust every day. We submit that Canadians have reason to be confident as the hard work continues.

My colleagues and I will be pleased to answer your questions.

Thank you, Mr. Chair.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Yes, my colleague is right, Madam Speaker. I thank him.

This year, it is going to cost an extra $3.4 billion and next year it will cost an extra $4.3 billion. What a farce, to put it mildly.

All of a sudden, these people realized that they forgot to index the program, and they are shocked. They forgot one small detail, however: if the program isn't indexed, people will have less money in their pockets than they did under the Conservative government. The worst part about it is that it was not even included in their platform.

I do not want to lecture anyone, but the facts speak for themselves. When managing their personal budgets, would any executives think that their groceries would cost the same in five years as they do now? No, and I do not think so either.

Are there any Canadians who believe that there is no indexing or inflation? No, there are not, aside from these fine people who are before us today. Their management approach is hard on the Canadian economy. It is us and our children who will have to pay for this bad management. Even though we are dealing with basics, the ABC's or one plus one equals two, the Liberals forgot to index.

Thank goodness for our Senate colleague, the hon. Larry Smith. I would like to pay tribute to him. I would add that he is a Conservative senator. This is a small detail, but I do not forget details. The senator asked the parliamentary budget officer some very specific questions and, as a result, last May the parliamentary budget officer showed that the Liberals had forgotten to index the program and that, if it were indexed, it would cost twice as much, which is no laughing matter.

When the parliamentary budget officer announced that the Liberals had forgotten to index the program, the government came up with an indexing measure on the fly to ensure that this program will cost $42.4 billion in total, and that number is from the report of the parliamentary budget officer. The Liberals only made a small mistake.

I know that I cannot pull out documents here. However, if I could, members would clearly see the inflationary curve that the government forgot about and which means that Canadians will have to pay tens of thousands of dollars more.

I have listened to the fine speeches by government members who have said that they are thinking of the children and families, that they want to help the poorest among us and do this in a balanced way. No, the Liberals completely forgot about indexation and inflation and, even worse, they are going to make our grandchildren pay for that. That is the irony of the situation.

The members over there gloat about their lofty principles and say they want to help families and children. Of course they want to help the children: they want them to pay the bill when it is their turn to work. That is neither responsible nor realistic. That is not the right approach in our opinion.

That is why when we were in power, when we were implementing these programs, we were also balancing the budget. That is the realistic and responsible way to effect change.

About their tax changes, those guys make such a big deal about leaving more money in people's pockets and cutting taxes. Hang on just a second. Once again, thanks to the hon. Larry Smith, the parliamentary budget officer meticulously analyzed the new tax measures. On page 1, he says, “PBO estimates this amount to be $1.8 billion in 2016”. That is the additional amount the government has to pay. In other words, a measure that was supposed to be revenue-neutral is going to cost $1.8 billion.

They talk about how we need to think of the poorest members of society, but this does not make sense. The new tax brackets mean that there will be no impact whatsoever for people earning $45,000 or less. I would like to remind the House that the average salary in this country is $32,000, so this will change nothing for more than half of all Canadians.

Who is really going to benefit from the new Liberal tax changes? Those who earn between $140,000 and $199,999. I will acknowledge my conflict of interest up front, because I, like all members of the House of Commons, am in that tax bracket.

Where is the supposed sense of fairness and generosity towards the most vulnerable among us? It does not exist in this new change. Sixty-five per cent of Canadians will see no change. It is going to cost Canadians $1.8 billion more, and those who will benefit the most are those who earn between $140,000 and $200,000. It completely flies in the face of what they are claiming. The facts are there, and it is not the nasty Conservatives who are saying this, but the parliamentary budget officer, who was responding to a question from Senator Larry Smith. It is important to know this, and to inform and remind Canadians.

We already had an opportunity to talk about the changes the government is proposing to the Canada pension plan through Bill C-26. Basically, the reality is that the government wants to increase taxes on workers from 9.9% to 11.9%, which is a 2% increase. In concrete terms, this means $1,000 less in the pockets of each Canadian worker, and for businesses, $1,000 more that every company has to pay for each employee. Overall, it means $2,000 for every worker.

Every Canadian who gets up in the morning and goes to work will have $1,000 less, and it is going to take 40 years before it produces any results.

What is the actual impact of this measure on the economy? If we look at employment, GDP, private investment, disposable income, and private savings, all these economic indicators of real growth have been downgraded. At committee hearings, I posed questions to representatives of the Canadian Gas Association, Canadian Manufacturers & Exporters, the Canadian Association of Petroleum Producers, the Canadian Energy Pipeline Association, and even the C.D. Howe Institute. They all said that the proposed changes to the Canada pension plan would negatively impact the Canadian economy and that it could take at least 40 years before there would even be a semblance of balance. That is bad for the economy and it is not the way to go.

We moved forward with our proposal and created the TFSA, a savings plan. We believe that instead of picking people's pockets, the government should give people the tools they need so they can choose how to best save. That approach makes good economic sense. That is great vision. There is a difference between our visions: the Liberal government takes money from people's pockets, whereas the Conservative government lets people choose, and provides the tools so that both businesses and individuals can contribute to economic growth.

The government has totally lost control of public spending. I could be here until Monday talking about all of the mistakes it has made, but I will have to stop because I only have about three or four minutes left. Day after day, this government keeps getting caught with its hand in the cookie jar because of its out-of-control spending. Let us remember the minister who paid $7,000 for a photographer in Paris. I have jokingly said, and I will say it again this morning, that she could have followed the Prime Minister's lead when it comes to photography since he is quite adept at taking selfies and his method does not cost a cent.

Members will also recall that the Minister of Health gave her Liberal friend a contract to drive her around in a limousine. When she was caught red-handed, her friend changed the name of the company to indicate that it provided car services rather than limousine services. The minister apologized and promised to repay the costs, but she should not have to be caught to acknowledge that she made a poor decision and that she should repay the money. Members must make wise choices at all times. I could go on like this for three days, but the point that I am trying to make is that the Liberals have lost control of the public purse. They have also completely lost control of public spending. They were elected on a platform that included a $10-billion deficit, but here we are saddled with a $34-billion deficit, and the Prime Minister is saying that he does not know what is going to happen. It makes no sense.

Canada Pension Plan

[Larry Maguire, Conservative, Brandon—Souris, MB]

Mr. Speaker, it is my privilege to stand to speak to Bill C-26 in the House today. It has been referred to as the Canada pension plan tax hike bill brought on by the Liberals, and that is certainly what it is.

I want to welcome back all of my colleagues after Thanksgiving. I hope they had a good break and everyone enjoyed it. I know there are many happy Conservatives giving thanks in Alberta today and I would like to announce my support for Mr. Motz as he will be coming from the Medicine Hat—Cardston—Warner constituency to join us in the House very shortly.

One of my colleagues said today that the numbers to remember were 70 for the Conservatives and 26 for the carbon tax. I only go there because my colleague from Richmond Centre indicated that the carbon tax is what would kill seniors. However, that is only one thing.

Forcing tax increases on people, such as Bill C-26 would do, is not very democratic, with the government saying it is going to help seniors when, clearly, the bill would not help them for 40 years down the road. Even my colleague from Winnipeg indicated earlier that it might be his children who would benefit from this, and that is absolutely true. My grandchildren would probably benefit from it a bit, 40 years down the road, and none of them are even 20 years old yet.

That is the kind of rhetoric that comes out of bills like this that are not well thought out. It would be a tax on the individuals who are going to put up this money, and because it would be such a long time before they would ever get a payback on it, it would be decades after they retire before they would get back what they put it into it themselves.

I want to go back to what my colleague from Chilliwack—Hope said today. When people put these funds into the account, it would be a long time before they would see any benefit. They would be putting their money into a plan that, if they die early, an unfortunate circumstance, the money they have put away for all of these years would not accrue to them. It would not go to their families upon their death like in a normal pension plan or their own private savings.

I want to make it very clear that I support the public pension plan, as was questioned earlier by my colleague from Winnipeg North. We have both debated a number of these kinds of bills in the Manitoba legislature when we were both there, but this is not the way to enhance the ability of seniors to have more money in their retirement years. If it is put in place to help those who need it today, then there are many other ways of doing that to make it easier for seniors to access those funds in the near future.

What scale of support would this provide? The tax itself could end up being $2,200 a year. That would be the increased premiums people would pay. Of course, $1,100 of that would be paid by the individual and $1,100 paid by the employer. Having been an employer and knowing how the system works, it is a matching fund. I do not have a problem with that, but what it would do is two things. It would not provide the benefit right away that the government may have been targeting and it would certainly, as my colleague just finished saying, reduce people's ability to put funds into their own private pension plans, if they were able to. It would decrease the amount of money they would get back in the near term. I think the number was that it would reduce it by 7%.

It would also make it tougher for businesses to survive. This is not just a Conservative number. There was a study done. If Liberals do not believe it, they should look at Finance Canada. It is the one saying that higher CPP premiums will hurt the economy, as was also just pointed out.

According to the Canadian Federation of Independent Business a full 70% of businesses in Canada today have indicated that they disagree with the notion that this would be just a modest little tax increase as the Liberals are saying. Actually, the Liberals do not use the word “tax”. The only one who uses that word is the environment minister on carbon.

There is a correlation here between the bills that the government is bringing forward. The government is dropping a carbon tax, which could be 11.5¢, on the same seniors whom it wants to put more money into their pension plans. It looks to me like everybody is paying and the government is taking. That is a concern.

It is ironic that the Liberal government is mandating a tax today on individuals to pay more for a benefit that would only be achievable in 40 years, when it cannot even balance its own budget today. Bigger debt hurts seniors more as well. It particularly hurts the very young who will have to pay all of this back in the future. It is a bit ironic for the Liberals to say that there will be a mandated tax and a benefit, but anyone over the age of 40 today would probably not see that benefit unless he or she lives to be 100 years old.

There are many other ways of helping seniors in the more immediate term. We did it by increasing the guaranteed income supplement, the GIS, when we were in government. The Harper government made the largest increase in the GIS in 25 years. The Liberals liked the idea because they implemented a small increase in that in their very first budget.

The Liberals also did away with the increase in the tax-free savings accounts that would have gone up to the $10,000 mark. This would have allowed many seniors to save. It may be a surprise to many Liberal members across the floor but the number of seniors who were using the TFSA was in the neighbourhood of 60%. That is a pretty clear indication that those people were doing what the present government is forcing them to do, which is saving for their own retirements. They were putting this money away so that they could use it in the future.

There are also many other ways to help seniors, whether it is through an increase in the basic personal exemption, or whether it is through a decrease in personal income tax. Those are a number of things that could be done, although the government is going the other way. It has increased taxes on small businesses. They certainly are not going to be at the level that we had announced in our election campaign. When a government is simply taxing these folks and saying it is going to be good for them, when clearly it is not, then it is not a clear direction to emulate.

A member asked the other day if we were in favour of the Canada pension plan when it was first put in place back in the sixties. Of course we were, but back then the plan was only to support other pension mechanisms. I would like to quote Judy LaMarsh in referring to the CPP, “It is not intended to provide all the retirement income which many Canadians wish to have. This is a matter of individual choice and, in the government’s view, should properly be left to personal savings and private pension plans.” Judy LaMarsh was the Liberal minister responsible for establishing the Canada pension plan in 1964. Even the Liberals felt that when the plan was set up it was only to be a supplement to the other mechanisms that were there.

I could go on with a number of other quotes, but instead I will say that 70% of employed Canadians oppose expanding the Canada pension plan, if it means a wage freeze. Over one-third of employed Canadians say that proposed increases are unaffordable, and 80% want the government to further consult before making any decisions.

I think it is very clear that there are a number of things that could be improved and could be done to help seniors. The bill does not do it and that is why I will be voting against it.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Mr. Speaker, I want to go back to the premise of the member's question when he was talking about seniors. I know that this is one of the arguments that members opposite have made in terms of how this is going to help the seniors he referenced when he was door-knocking and hearing from seniors. According to Statistics Canada, the percentage of low-income seniors was 29% in 1970. Today, it is 3.7%. That is clearly a significant improvement.

I would venture to guess that is not just because of CPP, but because of the other tools available to seniors. We know that the best way to prevent poverty in old age is to give people the tools they need to save money today and to let them make their own choices based on their means.

We believe that Canadians know how to manage their money, not the government, especially not this government, which is taking money out of their pockets at every turn.

I know the member is aware that there is old age security and the guaranteed income supplement. That exists also to help seniors who do not have a workplace pension. However, because of the long phase-in period for Bill C-26, we know this would do nothing to support our seniors today.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Mr. Speaker, I too am pleased to be participating in this debate on Bill C-26, an act to amend the Canada pension plan, the Canada Pension Plan Investment Board Act, and the Income Tax Act.

First introduced in 1965, the legislation creating the Canada pension plan came into effect in 1966, and was created to ensure that all working Canadians have an opportunity to retire in dignity.

I understand that, as members of Parliament, we have a natural tendency to want to do more for the people we represent. We are tempted to use the incredible financial and regulatory power of the government to do more. With an activist government such as this, there is no problem too small or too complex to be fixed by intervention. We know the Liberal Party believes that the government knows better than Canadians. When we believe that government can and should do everything, there is never a need to say no to increased spending.

As the ancient Chinese philosopher Lao-Tzu said, “Govern a great nation as you would cook a small fish; do not overdo it.” The current government is overdoing it right now.

The reality is that Canada's retirement system is the envy of the world. Canadians are saving more for retirement today than ever before, and poverty among seniors has dropped significantly in recent years. In light of this, I have a few questions.

What should the fundamental role of government be in our country? What percentage of income should Canadians take home at the end of each pay period? Should Canadians be keeping more than 50% of their total income, as a matter of fairness, because they should be deciding how at least 50% of their earnings are spent? What do we believe about the role of government? Do we believe as a country that the individual financial choices that Canadians make are better or worse than those made by government? What percentage of our gross domestic product should be government spending?

According to the 2016 Index of Economic Freedom, government expenditures presently represent 40.7% of GDP in Canada. In comparison, Australia sits at 35.7% and the United States at 38.9%. Therefore, are we better off in Canada than Australia because more of our economy is put through Ottawa? It is obvious that the Liberal government thinks so. However, I certainly do not. To me, limiting government is extremely important, as it has been shown over and over again that once government gets involved in doing something new or doing more of something, competition and choices decrease, which inevitably is a negative for Canadians.

I am proud to be a member of a party that believes that, despite its best intentions, government does not know best. Government should not be forcing Canadians into making decisions that it thinks are best, yet this is exactly what Bill C-26 would do. This bill is about competing visions: a vision of what government can do versus what government should do. This bill is about Canada's finances, and more specifically, the finances of every single Canadian household and every single Canadian business, both big and small.

When government decides that every Canadian must save more, above all through the CPP and not through any other retirement program, and consequently increases premiums on employers and employees, two things happen: first, Canadians have less money in each paycheque to put into an alternative savings vehicle of their choosing; and second, because Canadians are putting more money into the CPP, they feel less inclined to contribute to other retirement savings plans.

As capital is being withdrawn from private sector investment plans, fewer of these would exist, as the demand for them would decrease because retirement contributions would be going to the CPP. This would create an endless feedback loop where increased government intervention would lead to Canadians saving less of their discretionary income for their retirement, which would then lead to government once again looking to top up the CPP through increased contributions, as we have seen in the past. This is an important point, and it is the main reason that I oppose the bill.

Make no mistake, the bill is not some gentle push that will achieve the Prime Minister's stated objectives. The bill would introduce a tax hike. It would be a tax hike because Canadians would not have a choice on whether to pay it. More money would be taken off every single paycheque until retirement. It would be a tax hike because Canadians would not have a choice on how their income would be spent.

The CPP is a mandatory contribution fund. Employees and employers do not have an option to voluntarily participate in the CPP, but are instead required by law to contribute. This distinguishes the CPP from the public pension plans of other countries, such as Britain. Their individuals can opt out of contributing to a central plan in favour other retirement income schemes.

Let us look at how the bill would affect Canadians. The bill would lead to some households paying up to $2,200 more per year. It would be harder for new graduates to pay off their student loans, as more of their income would be going into a pocket they would not be able to touch for 40 years; so rather than pay off the principal of their student loans as quickly as possible, graduates would have to either decide to spend less on day-to-day necessities or spread out the amount of time they take to pay back their student loans. Neither one of these is an appealing choice.

The bill would also make it harder for young people to buy that first home. Everybody who has purchased a house knows that in the first few years of repaying a mortgage, the lion's share of each payment is going to the interest and not the principal of the loan. The bill would reduce the discretionary income that Canadians have to pay down their mortgages more quickly. This would once again force Canadians into a choice: either spend less on items of necessity or take longer to pay down their mortgage. Once again, neither one is an appealing choice.

However, these are the types of choices Canadians would have to make going forward. They would have to make similar choices on whether to invest in a registered education plan, or whether to fly home and visit the family for Christmas, and it would be harder for companies to create jobs and give workers raises.

In conclusion, we know that the Liberal Party of Canada believes the government knows best and that it needs to be a perpetual helping hand to all. “Big Brother” seems hardly adequate to describe the interventionist Liberals' first year in office.

The Liberal government has decided that Canadians are not saving enough for their retirement. I think we can all agree that some folks are perhaps not saving enough, but there are other folks, as we heard in remarks today, who may be saving too much, and then there are folks who are probably saving just the right amount.

People also have vastly different retirement needs, depending on where they live and what their expectations are for their retirement. There are a number of options out there to encourage folks to save, even though a very popular one, the tax-free savings account, was just cut in half.

Getting people to more broadly use these voluntary programs is a good thing that the government should seriously consider. We owe it to our constituents to give them the option on how to save for their retirement. Unfortunately, the government has opted to go the other way.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, I appreciate that New Democrats have acknowledged that Bill C-26 is a good bill. I want to reflect on the fact that provincial jurisdictions from all regions of the country were able to come to an agreement that this legislation is forward thinking. It would provide in a very real and tangible way retirement monies for those who are working today and are going to be in the workforce for a while now.

My question deals with the other aspect. There is a lot of discussion about seniors in poverty. Yes, the overall numbers have gone down and we have seen in the last number of months, with the Minister of Finance making an announcement that we are going to be substantially increasing the GIS, that we will be lifting literally thousands more seniors out of poverty through the guaranteed income supplement.

Today we are talking about the Canada pension plan. There are three fundamental public pension programs, the OAS, GIS, and the CPP. Does the member have any thoughts on other two programs the bill does not deal with?