Mr. Speaker, it is an honour to join this debate.
I have been listening with some degree of incredulity to the arguments coming from the government side and have to start with a quote, which I believe is from William Pitt, who said that “The facts of life have turned out to be Tory.”
Hearing my Liberal friends talk, they say that people are not saving enough and that if we only took more money away from them, put it somewhere else, and then gave it back to them later, that would solve the problem. There is clearly a misunderstanding on the government side about the fact that this money has to come from somewhere and that the cost of that is going to unfold.
The government members talk about a phased-in plan. However, without appreciating whether it is phased-in over two or seven years, as intended, or longer than that, the cost will still be there for individuals and small businesses. We will still very much see that negative impact.
To start, I will just review where we are in this regard.
The core of the bill would increase the amount that individuals and employers have to pay as part of their CPP deductions. This will eventually, but not for current seniors, lead to higher payouts down the line. Therefore, we are not talking about improving the situation for those currently in retirement; but in the long run, we are talking about a system that would require individuals and businesses to pay in more and pay out more in the future.
In terms of the magnitude of this change, the premiums will increase from 9.9% to 11.9% eventually; the maximum level of pensionable earnings will go up from just under $55,000 to $82,700 by the year 2025; and premiums will rise by up to $2,200 per worker, with the amount collected being split between employers and employees. These are very significant numbers. The costs are significant and will have a significant impact on the economy.
We think on this side of the House that it is a bad idea, and I am going to outline in my speech what I see as five principle reasons why this is not a good idea. The arguments are as follows. First, people can save their own money more effectively. Second, that existing savings vehicles that were cut by the government in fact provide the additional incentives and flexibility to be more useful to people involved. Third, I am going to talk about the economic costs of this plan. Fourth, I will talk about better ways to get help for seniors. Finally, if I have time, I am going to talk about the relationship between liberty and virtue as it relates to this policy.
First is the point that people are able to save more money themselves. I raised this point with one of the government members who had talked about how effective the CPP has been, which I would generally agree with, in generating returns. However, what he neglected to respond to is the fact that there are other ways this could have been done. In fact, the government could have explored a voluntary option in which people could choose to contribute more to the CPP and collect more in the future.
Of course, the Liberals could have stuck with, or chosen to enhance, the existing saving vehicles. I will talk more about that in my next point, but the Liberals have chosen not to do that, and I think they have to defend that policy. It is not enough to say that they would like people to have more for retirement. They have to actually defend the policy in terms of why it should be mandatory and not voluntary for the individuals involved.
On this side of the House, we have a general preference for giving individuals as much freedom, liberty, and ability to manage their own resources as possible, for the simple reason that people are generally in the best position to judge what constitutes their own interest, what they are going to need for retirement, what they are going to need in the present, and what kinds of investments will be best for them in the short and long terms. We prefer to believe that individuals are in the best position to judge what is going to be conducive to their own happiness rather than some external actor, in this case the state. The government is less likely to know what is good for me than I am. I think that makes a lot of sense.
This flows from the principle of subsidiarity, that those who are closest to a situation, who are closest to the practice of something, are in the best position to decide what is in their own interest. This is why we favour choice in this case. We favour giving individuals the ability to control their own retirement.
I would note parenthetically that there is some irony in the government's position, in that it clearly is not capable of showing any kind of temperance in the use of public finances, with its deficit that has ballooned beyond all proportion and beyond what it promised in the election, and yet expresses concern that individuals are not saving enough.
This particularly underlines the point that the government and perhaps governments in general are in a less well-placed position to decide about savings for the future than individuals are, and that we should give the power and the ability to individuals to make decisions about their own future.
Second, I would like to discuss existing savings vehicles, because the government has made a choice to cut back on existing savings vehicles and move in the direction of mandatory contributions rather than emphasizing individual choice.
We have in place right now in Canada two primary savings vehicles for individuals: tax-free savings accounts and RRSPs. TFSAs and RRSPs function somewhat differently, of course. With RRSPs an individual saves the tax up front. They pay the tax after they withdraw money from the RRSP at some point in the future, whereas with TFSAs they pay the tax up front, but then they do not pay tax on the interest and they do not pay tax on the money when they withdraw it. These are two different kinds of savings vehicles that may be advantageous to different people in different situations.
Our previous Conservative government introduced tax-free savings accounts and then expanded them. We increased the contribution limit to $10,000 a year. The present government cut back the tax-free savings account. It did not replace it with any other kind of savings vehicle. It reduced the capacity of individuals to be involved in private savings and it has moved in the mandatory direction found in the bill.
The Liberals' argument for cutting back on the tax-free savings account was that only rich people have resources to save. Here is the reality: over 65% of tax-free savings account holders make under $60,000 a year. In fact, almost half of TFSA holders make less than $40,000 per year, and over half of those who max out their tax-free savings account make less than $60,000 per year.
Based on the data we have, it seems that TFSAs are in fact a preferred savings vehicle for those with modest incomes. When we recognize the different mechanics of TFSAs and RRSPs, it is pretty clear why that is, because RRSPs allow us to save on taxes in advance but pay them afterwards. Those who have very high incomes but project that will have relatively lower incomes in the future are more likely to use RRSPs, whereas if an individual expects to have a similar income at their point of retirement or at the point at which they are withdrawing from their TFSA, then they are more likely to get the benefit from a TFSA.
If an individual has a very large income up front, because of the income differential between what they are earning in the present and what they believe they will earn in the future, those with higher incomes are more likely to use RRSPs, relatively speaking. Again, what is in an individual's interest will depend very much on personal circumstances and the variety of different factors that inform their tax situation.
Generally the numbers suggest that TFSAs are not a savings vehicle exclusive to the rich. In fact, they are more likely to be used by those with of modest or lower incomes. That is an important point.
There are a variety of ways the government could consider further expanding the use of voluntary savings vehicles. It could go back to the original amount, the $10,000 a year that we had in place at the time of the election.
I recently met with the Canadian Real Estate Association, which I think has a good proposal for expanding the home buyers plan. A lot of people could withdraw more money from their RRSPs to make an initial investment in buying a home. These kinds of changes to these voluntary savings plans could encourage and increase their use.
We have these existing savings vehicles that I think work very well and create good economic incentives and opportunities for people to make these sorts of investments, and yet the government has made a particular choice to move away from these vehicles, to cut the ability of individuals to invest in them, and has instead moved in this mandatory direction. We think that does not show a proper appreciation for the value of individual liberty and freedom with respect to people's own funds. It also misses the practical opportunities that come with these existing savings vehicles that are working very well.
We favour the incentives of voluntary opportunities that come with things like TFSAs and RRSPs, and we see the value in continuing their use and expanding their effectiveness.
Third, I would like to discuss the specific economic problems that come with the plan that the government has proposed, in which we levy a higher payroll deduction on individuals. I would call it a payroll tax. Some members say it is not a tax because the person will get some of it back in the future. Hopefully, that is true of all taxes, that we enjoy some benefit from all taxes. However, this is money that the government requires be deducted and whether or not we call it a tax, it certainly behaves like a tax in an economic sense insofar as it introduces a certain disincentive.
If I am an employer, with the introduction of this new tax, it will become more expensive for me to hire someone. That will create a marginally greater disincentive to hire that person. In fact, there was a survey done by the Canadian Federation of Independent Business, which has been very vocal on this issue. They represent small business owners. Here is what it found when it did a survey on the ORRP, the precursor within Ontario to the CPP increase. It found that 69% said they would freeze or cut salaries and 53% of businesses indicated they would have to reduce positions to address the increased costs of hiring. That is a really significant impact. More people will likely be unemployed and people will have their wages cut.
I would ask the members of the government, is it worth it? When we have the alternative of voluntary savings, there is no disincentive to employers or individuals working at their voluntary savings, which they control themselves, but that disincentive does exist with the mandatory savings. So, we are getting nothing instead of something.
I want to read a quote specifically from the president of the Canadian Federation of Independent Business about this plan. He said:
It is tremendously disappointing to see that finance ministers are putting Canadian wages, hours and jobs in jeopardy and willfully moving to make an already shaky economy even worse.
That is what the Canadian Federation of Independent Business is hearing from its members. That is what it is hearing the impact of this change would be.
The members across the way need to think about the fact there are better alternatives in place with voluntary savings, and that the plan they are proposing will have real substantial costs for business.
My fourth point is that there are better ways to help our seniors.
When we were in government, we pursued tax reductions to make life more affordable for seniors. We said, instead of the government taking more of their money and making decisions about their future, we should be giving tax reductions back to seniors.
Here is what we did when we were in government. We increased the age credit amount by $2,000; we doubled the pension income credit; we introduced pension income splitting; we enhanced and increased funding for the new horizons for seniors program; we launched the Canadian employers for caregivers action plan; we expanded the targeted initiative for older workers; and we undertook measures to protect the seniors who were using financial services.
The government talks about the GIS. Importantly, when we were in government, we increased the amount that the GIS recipients can earn through employment without any reduction in their GIS benefits, increasing the amount from $500 to $3,500. We increased the age limit for the RRSP to RRIF conversation to 71 years of age from 69 years age. We also established the tax-free savings accounts; and we introduced the largest GIS increase in over 25 years, which gave eligible low-income seniors additional benefits of up to $600 for single seniors and $840 for couples.
There are things we can do through the tax system, through tax reductions. However, we can see a difference in philosophy here. The government wants to take control away from seniors and manage more of their money for them. We want to give those resources back to seniors.
The final point I want to make is about the relationship between liberty and virtue, and I think it is an important one, perhaps one of the most under-discussed aspects of this issue.
The government wants to increase state involvement and, therefore, reduce individuals' involvement in retirement planning by expanding the mandatory CPP deduction. However, the underlying objective is replacing private savings with state collection and distribution. This has a negative impact on the development and practice of those virtues that make for a strong society.
As I have argued before, we should generally seek to give to individuals the greatest possible amount of liberty, because individuals can best judge their own interests and are best positioned to be the most responsible managers of their own affairs. At a practical level, individuals generally know their own affairs better than anyone else.
I think there is a deeper and perhaps more profound arguments for liberty, both in general and in this specific case—a more important argument than practical effectiveness.
Liberty, in general, can play a critical role in the development and practice of the virtues. A virtue is a positive quality of character, perhaps the most famous being the four cardinal virtues highlighted by various ancient thinkers: prudence, courage, justice, and temperance. Though there may be disagreement about the origins of these concepts, and though they are rarely explicitly discussed in this place, I think we would all accept their importance. A society characterized by wisdom, courage, justice, and self-control is naturally a better society. It is one in which people have the means to more effectively pursue their own happiness and the happiness of others and one in which strong and good communities can fulfill functions that the government otherwise would have to.
Virtues are like muscles. A person who has never had to exercise self-control, for example, will be less likely to know how to exercise it when a situation arises when it is necessary. The more a virtue muscle is used, the stronger it gets.
I generally doubt the ability of government to make all wise decisions. Even if I had more faith in the wisdom of the state, I would still wish for a society with as much liberty as possible, because a society in which the state removes all possible temptation, occasions for injustice, need for courage, etc., is certainly a worse society, because it is one devoid of the practice of virtue, practise that will always be necessary in one situation or another, practise that is necessary to make perfect.
It is clear from some of the comments made by advocates of an extended pension plan that many of those motivating this change actually want to create a society in which private savings for retirement are not necessary, one in which the practice of putting money aside for the future is not necessary, or at least is less necessary, because the government is doing it for them. This removes one of the most vital ways in which many people learn and practise the virtues of prudence and temperance. The process of denying ourselves things we want in order to save for the future is certainly challenging, but recognizing the need for saving and learning to do it helps one become a better person: more wise, more temperate, and more self-controlled. The qualities of character or virtue one learns by saving money are important and useful. They help us develop prudence and temperance in other areas of life.
Any government policy that purports to remove the need for people to develop certain virtues, I would argue, is deeply injurious to the social good. By robbing people of the means to save through this payroll tax, and by communicating to people that they no longer need to save, the current government would take away tools that I see as vital for the creation of a good society.
I do not want people to have savings decisions made for them. I want people to be able to make decisions to save on their own; yes, to receive some support to do so, to receive the agency, and to receive support if they are not able to or choose not to but also to receive the incentives and the information to make prudent decisions with respect to their own money and to live, by the way, in an economy that allows them the opportunity to live well into retirement if they do so.
I do not think we are yet at a point where everyone has the opportunity or the ability to save as much as he or she needs to pursue a good retirement. That is why we need a stronger economy. That is why we need to continue to create opportunities for small business. That is why the tax-cut changes we made that make life more affordable for seniors are very important. Those things are critical for helping all seniors.
I will say this, as well. An economic system with more liberty more properly reflects the dignity of individuals, because individuals are capable of making prudent decisions about their own financial future and should be given the ability by government to do so. They should not have that pulled away from them.
I will say to the government that perhaps instead of removing space for the individual practise of virtue, the government can apply prudence and temperance in its own financial management. Indeed, the hallmark of a good society is one in which the government is more focused on practising the virtues itself than on micromanaging the lives of others. Again, a good society requires virtue, and liberty provides critical opportunities for the development and practice of virtue.
Just to review, here are the points I have made today.
First, I have made the point that people can save money for themselves. It is perverse to hear the Liberals say, “People are not saving enough for retirement, so we will take more of their money away and then give it back to them later”. What they should be doing instead is looking for ways to give people back more of their own money, and indeed, giving them the incentives and the opportunities to save more of their own resources.
Second, I talked about the existing savings vehicles that are in place and that were cut by the current Liberal government. Those include existing savings vehicles like RRSPs and especially tax-free savings accounts, which we saw cut back on, which are used effectively. The government should be looking for ways of expanding them. Again, I mentioned a proposal for the expansion of the home buyers' plan. We can use those existing savings vehicles to very good effect.
Third, I talked about the economic problems associated with the government's proposal. In fact, what they are talking about is going to cost jobs, hurt wages, and hurt small business. It will have a negative impact on the Canadian economy overall.
I talked about there being better ways to help seniors by cutting taxes.
Finally, I talked about how having a voluntary, as opposed to mandatory, system of savings is positive from the perspective of creating a good and virtuous society.
I look forward to questions.
