Finance Committee on Feb. 8th, 2007

[The Chair, Conservative, Brian Pallister]

Nice job, Mr. Del Mastro.

If I could interject for a second, Dan, it would seem to me that a lot of the families you're talking about helping here aren't using the RESP now. I have to ask. If you're given the choice between this model and that, then what about those who are using RESPs now? Why would they continue to use the RESP program that's there now if they could tax-deduct their contributions? Isn't there going to be an erosive effect on the existing RESP contributions, and have you done any projections or calculations on that at all?

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

Brian, Mr. Lewis is in that business and he can tell you what the shortcomings are. In my view, though, 32% after several years isn't good enough. I think we would all agree that there's a need for something to catch more, to create an opportunity for students to get access to higher education through existing means.

There are a lot of Canadians, middle-income families, in all of our ridings who are paying taxes and who would love an opportunity. We understand the rationale, but in terms of costing this, where could we go from 32%? I suspect you would get the 32% and perhaps even double that number and get a lot closer to the 90% to 100% that we need, including complementary programs for poor or lower-income students.

[The Chair, Conservative, Brian Pallister]

Is your bill proposing a top-up, such as is available now for regular RESP contributions, or simply just replacing—

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

It's an identical system. It does not take into account the top-up. If, however, there was concern about the revenue being used currently to encourage people—a stick and carrot, as it were—after tax, the committee could make a decision as to whether or not you need to continue doing this, given that most people who currently are in the system would continue in the new system as proposed by this bill.

[The Chair, Conservative, Brian Pallister]

Does your bill propose anything on withdrawals? My eldest, who is 15, is getting toward university now. Is there any stipulation as to the timing of the withdrawal? I have two plans. I have the regular RESP, and I have the one that I've contributed to and tax-deducted. Can I withdraw them as I choose?

Clearly, there are two different plans here. One is an RESP that comes out in my child's name, and the other is additional income for me. I'd probably like to defer the additional income if I'm still taxable and withdraw the RESP money first. Is there any reference to that in your bill at all in terms of the timing of withdrawal requirements?

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

No, but I think it's clear, Mr. Pallister, that you would have a situation in which only those who begin now would actually be able to save. The others would use the existing program up to the amounts of limits in terms of RESPs or RRSPs.

The bill basically would allow the same amount of maximum deduction, based on the maximum contributions that currently exist. It does not take into consideration the possibility of having two programs at the same time.

[The Chair, Conservative, Brian Pallister]

So that's a detail question for later.

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

It is a detail. I expect the committee to be able to look at that, but in concert with your question, Chair, I think it's important to recognize the amount of money being put out currently. If I'm to hear Finance correctly, it's exactly the same amount that would be forgone, as opposed to revenue going out. They're almost within $10 million of each other, which was a bit of a surprise to me.

[The Chair, Conservative, Brian Pallister]

That being said, have you considered the fact that because the exact maximum contribution amount remains the same in this proposal, and because you're contributing and tax-deducting money under your plan—money that would ultimately be taxable—there would ultimately be less money available for education after tax than would be the case if you contribute after-tax money to your child? Do you follow the logic of that?

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

Chair, we're really talking about the contributor's tax status at the time of the withdrawal. The tax status is dependent on the student. As I said earlier, I don't know of many students who make a lot of money. Therefore, the impact from a tax perspective—I don't want to underestimate it—would be negligible relative to what the contributor could afford.

[The Chair, Conservative, Brian Pallister]

I need clarification again, then, Dan. I was of the understanding that you said earlier, in response to my question, that under this proposal the money would be taxable in the hands of the contributor, not the student. Are you saying now that the money would be--

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

The student who takes the amount at the end, who removes the amount as part of the payment, as a result of contributions made over a period of time.

[The Chair, Conservative, Brian Pallister]

So it's the same model as the current RESP. The money would come out in the hands of the students but be tax deductible.

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

Correct. If you want to change it, that's up to you.

[The Chair, Conservative, Brian Pallister]

Okay. Thank you.

Madam Wasylycia-Leis.

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

Thank you, Mr. Chairperson.

I'd like to begin by asking the Finance officials if they could give us any estimates on the costs of this proposal.

[Baxter Williams]

Thank you for giving me the opportunity to clarify our costs.

I just want to point out that the costs we provide would be in addition to the current costs of the program. We would assume those current costs would remain in place, the $600 million. The total costs would be closer to just over $1.1 billion in total.

In the current program the majority of costs are associated with the CESG contribution, and the bill does not contemplate eliminating those contributions.

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

So when you calculate the current costs based on the way the RESP program runs now, and then taking into account this legislative proposal, you're looking at over $1 billion annually.

[Baxter Williams]

Over $1 billion, that's correct.

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

So it is a significant cost item, and in that context I think we have to look at it seriously, as finance committee members.

The question I always ask is whether this gives us the best bang for our buck, given the situation facing students today. I think we heard from the students outdoors yesterday--the many who clamoured here--that this is not the appropriate way to go. They are concerned about the fact that they are paying tuition that keeps going up in many province; it's not fixed, as it has been in Manitoba. This benefit gives a tax write-off to parents as long as 17 years before tuition is due. While it may benefit some families to some extent, it is by no means an excuse or a substitute for student assistance.

So I think we have to be clear, if we support this at all, that it is not a substantive alternative to the dire needs of students today. In fact, we know that some of the major students groups would have said outdoors yesterday, if they'd been able to bear the cold.... La Fédération étudiante universitaire du Québec has said that the federal government must completely review the national registered education savings plan and the Canada education savings grant, which amount to $225 million and almost $500 million respectively.

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

While I don't want to just be negative about your proposal, Dan McTeague, I do think that as parliamentarians we have to be very responsible and look at what we're trying to accomplish and where we could be most effective. It seems to me that there's no point in putting a band-aid on a band-aid. In fact, while this might benefit a few more families, get beyond the reach of the bulk of families who now access it because they earn more than $80,000 a year, and go down a bit further into some middle-income families, it's not going to do much for low-income families that don't have the money to begin with. It's not going to do much for those students who are trying to figure out a way to scrape together the money to go to school and cover all their costs.

I have one other concern. It has been reported at many of our meetings in the past that the Ontario Securities Commission has been critical of this plan and others like it because of sometimes dodgy sales practices, early-redemption penalties, and loose portrayal of investment returns. In this climate, when we are dealing with so many contentious issues on that front, I think we have to be pretty vigilant, as parliamentarians, about what we agree to.

I'm not suggesting, Peter Lewis, that you're dodgy, by any stretch of the imagination. I'm simply making the generalization that the Ontario Securities Commission has made. I know that if we have a choice, when push comes to shove it would make much more sense to take the $1.6 billion that's going into this program and put it directly into student aid. A lot more students would be able to access the education that Dan McTeaguesays is so necessary for the future of this country.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam Wasylycia-Leis. Speaking of “push comes to shove”, we'll have to push on now.

There really wasn't a question there, Dan, so we're going to continue.

I want to allow a bit more time for questions to accommodate the people who are on the list here. So with the committee's approval, we'll give just another three questions at three minutes each.

We'll start with Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair. I'm going to split my time with Mr. McKay.

I have a quick question for Dan. Mr. Lewis just mentioned the Canada learning bond. There hasn't been a big uptake. Is this going to affect the Canada learning bond at all, in your opinion?

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

Not at all.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Is there going to be a bigger uptake on the Canada learning bond?

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

No. It has nothing to do with this. But let's understand what average tuition fees are going to be in 10 to 15 years if we don't act. I understand and appreciate Madam Wasylycia-Leis' comments. But the reality is that average tuition in Ontario will go from $4,600 to $9,660. Those tuition rates are untenable. There is no student who will be able to afford that unless they have wealthy families. We agree on this. But the only way we're going to give more Canadians the opportunity to fend off these large increases in tuition fees is by using a system that works right now, not to the extent it can be. Make it before tax and you're going to catch a lot more people.

As for those who are not capable of paying, clearly government instruments, other programs, can be worked beyond the issue of tax credits to help them directly.