Finance Committee on April 15th, 2010

[Judy Cameron]

We had absolutely no role in Nortel, because the employees of Nortel are subject to provincial regulation, and the pension plans of Nortel are therefore subject to provincial oversight.

[Ted Menzies, Conservative, Macleod, AB]

Is it under provincial jurisdiction regulations, then?

[Judy Cameron]

Yes, it is.

[Ted Menzies, Conservative, Macleod, AB]

Okay, thank you.

Once it goes beyond that, we realize the challenges.

Mr. Lee, we're hearing a lot from those who want to go pretty fast. They've got a magic solution and they want us to fix it today. I think we share that concern with a lot of the provincial ministers, although they are not all finance ministers; some of them are actually pension ministers.

When we came out of the session in Whitehorse, six provinces said they were going ahead with consultations. We've been criticized federally for actually listening to Canadians, and I think it has been demonstrated here today and other days that we need to do that.

Ted Morton is our new finance minister in Alberta, and I'll quote him. Ted Morton argued for an incremental approach. His suggestions are a major shift from Alberta's previous stand that pension reform is urgent and that a voluntary supplement to the Canada Pension Plan is probably the best approach. Morton also rejected proposals for a mandatory expansion of the Canada Pension Plan as a way to help retired people make ends meet. He said a bulked-up CPP would only exacerbate the problems of today's system and foist a bigger burden on young people to support the growing number of seniors. When he said that, Ontario's finance minister, Dwight Duncan, said he always has urged a cautious approach to pension reform, and now Alberta is actually singing the same tune.

Would you agree that such an approach is prudent? As the finance minister said, “Do no harm”. We've got a good system.

[Prof. Ian Lee]

Yes, I agree completely.

In the last several months I've been to some academic conferences, seminars, discussions on pension, and it's quite astonished me. That's why I led with the slide from the OECD. When you listen to people in the academic community, and I suppose some of the public sector unions, you would think there's an apocalyptic crisis in Canada with pensions. Then you look at the data. I've pushed this with scholars and asked where the data is that shows the crisis. Because our elders, 65 and older, are the third wealthiest on the planet earth. What are we trying to do? Make them the wealthiest in the world?

So I think we should be going much more slowly and much more prudentially than rushing into it and going for a so-called big CPP mandatory pension that's going to drive up the premiums and reduce discretionary income of Canadians. This will fall especially on young Canadians, on my son and daughter, and militate against their buying a home. Young people don't sit around at 25 saying they can hardly wait to open their RRSP to collect 45 years from now. They want to buy a home. That is their value. It's a very strong value in Canadian society.

[Ted Menzies, Conservative, Macleod, AB]

Home or business.

[Prof. Ian Lee]

Exactly. So I hope that you as members of Parliament proceed cautiously.

[The Chair, Conservative, James Rajotte]

Okay, you're out of time. Thank you, Mr. Menzies.

We'll now go to Mr. Marston, please.

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

Thank you.

I'm the raving socialist who proposed the preferred status bill, so I thought I'd get that on the table right away.

I'd like to ask a question, and feel free not to answer. Is there anybody among our panellists here today who earns less than $50,000 a year?

The reason I ask that is we're here for retirement income security. A quarter of a million Canadians today are living below the poverty line. I went to 24 communities--and Ted Menzies has heard a lot of these stories as well--where women are eating cat food to get protein. I don't mean to denigrate anybody here, and I greatly respect the people at this table for the expertise you bring, but I want to put those things in context.

Ms. Di Vito, I agree with you on a couple of points. People purchase their homes to live in. If it were the way Mr. Lee has described, I would have a lot less heartache in my office, because I have people coming in asking how they can keep their homes, and they really want to do that.

One important point that you raised was the deferred income concept. The pensions people pay into are their wages they're putting aside. The discussion has got to the point where somehow that's a company asset. Well, damn, that's their money.

Sorry, I shouldn't get too carried away.

Ms. Swift, it will surprise you, but I agree with you too that the backbone of this country is small and medium-sized business. I don't quibble with you on that. But when we talk about the CPP, one point you did make was that the premiums would double. With the proposal that's come from our party--and I don't know which one you've been looking at--the premiums today are at 4% or 5% for employer plus employee, and we're talking about adding 2.5% to each one of those, which is 14%, just to try to put it where it is.

This is one of those days when I've made a lot of notes because I am really interested in the information you're bringing to us.

Ms. Puffer talked about not having a study that could look at what would happen with preferred status. Are you aware that this week the Australian government released a report that said the impact on investment costs there is negligible? It was released Tuesday of this week, so it might be one worth taking a look at. When we started looking at this ourselves, we found there was very little research in areas like this we could turn to. That's why we value the input you're giving us here today.

Now back to Ms. Swift. Robert Brown, a former head of Price Waterhouse, came out recently in favour of an expansion of CPP. He was talking about a 35% increase. Obviously that wouldn't suit me, but I'm trying to find real-world solutions to this, as I think everybody is. We have the public system. We have the private system. We have some investment people are able to do. As I say, 63% of Canadians can't put aside for pension. So going back to the public side, to build a floor where people will have a chance at dignity, those perhaps even from the business community who can't get beyond that, how far would you be willing to go in expansion of the CPP?

[Catherine Swift]

That's exactly why we're doing the survey we mentioned today, because we also know—and that was in some of our earlier data—our members value CPP as a program. Indeed, we worked with Paul Martin back in the 1990s to educate our members. These pension issues are complicated. I'm sure you've all become aware of that in the last little while, and you have to come up the curve.

We'll keep you posted. Again, there is no silver bullet here. I don't think there is any silver bullet. I don't think CPP or any of the things we're talking about are silver bullets. I think it is a combination. I would certainly agree with the notion of going cautiously. Let's not forget the crisis our CPP got into in the mid-1990s. There were a lot of reasons for it, but one of the key reasons was that Pierre Trudeau's government in the 1970s ratcheted up benefits. At that time there were a lot of us baby boomers, and we had way more people paying into the system than taking out of it, so it took 25 years for the CPP to go into crisis. There were also some other reasons, such as provinces borrowing the money at sub-prime rates, and so on. The good news about that was we did pretty much fix the CPP in its current structure.

The caution is that often these pension issues don't come to roost for decades down the road, and this is what is scary. There are a lot of problems that have been mentioned by others: low interest rates, markets crashing, and so on. Those markets will come back, but again, timing is everything. Thirty years from now, when we are probably going to be dead, this might be turned totally on its head. This is what has to be factored into it.

It's tough in politics to have long-term thinking, but, boy, this is one issue where I would really recommend it.

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

First of all, I agree with you on long-term thinking. The 63% of people who have nothing started today in 40 years' time are going to be in another part of our system in one form or another if we don't take solid action today. That's why we're trying to look at it. That's why we're talking about income security in the future. So I absolutely agree with you. For those people, we have to find an answer today to build it for 40 years. When we talk about doubling CPP, nobody means next week. We're talking about 40 years down the road, if it is properly funded. That is a crucial view, that we all have to step back.

There were a couple of points made—Mr. Lee made one of them, and I'm not sure who else—about the public sector plans and how wealthy they are. Let's not start a race to the bottom. Let's start bringing other people up. Raise people up so they can contribute more into the economy of this country.

[Prof. Ian Lee]

You want me to respond, I gather.

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

If you wish.

[Prof. Ian Lee]

I don't see retiring--I think “freedom 55” is a fraud. We are living to 80 and 85. My mother passed away last fall at 93, living in her own home. There are a lot of people living. We can't retire at 55 and be fully sustained.

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

We talked about a national pension summit. One of the reasons for the national pension summit is to put everything on the table and to see if there is a better way. Is there a national plan? Is there a better way?

[Prof. Ian Lee]

Can I correct you on one thing, Mr. Marston?

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

Sure.

[Prof. Ian Lee]

You were speaking about poverty. You were talking about young people or middle-aged people. Yes, but when they turn 65 that's why we created the old age pension and the GIS. They are not poor, because the statistics are showing it.

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

OAS and GIS pay $1,162 a month, sir.

[Prof. Ian Lee]

I showed you the OECD slide.

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

Just a second. Just hear me. It pays $1,162 a month. In Toronto, Montreal, or Vancouver try living on that. Tell me how well off they are. Most of them--a quarter of a million of them--are women who stayed home and raised their kids and didn't get into CPP--

[Prof. Ian Lee]

We have the second-lowest level of poverty in the world.

[The Chair, Conservative, James Rajotte]

Mr. Lee and Mr. Marston, we're just out of time, and Ms. Swift did want to comment.

Do you have a very brief comment?

[Catherine Swift]

I just want to mention the concept of the so-called race to the bottom, which I've certainly heard more times than I can count. It would be very nice if business could afford that, but they have to compete. The reason governments have higher wages, salaries, benefits, parental leave, and more holidays, and on and on is that they're not competing in a market. People and unions always want more, but the pie is only so big, so the more one sector sucks out, whatever that is, the less there's going to be available for the others, and businesses have to compete.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Marston.

Thank you, Ms. Swift.

We'll go to Ms. Hall Findlay, for a five-minute round, please.