Finance Committee on Nov. 18th, 2013

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

I must thank my colleague Mr. Keddy for having increased the self-esteem of every actuary in the country, by talking about the employment insurance account balance sheet. I am sure they will appreciate this enormously.

To follow up on Ms. Nash's questions, I would like to talk about the problem related to the increase in premiums, a regressive measure taken by the government. That increase is a greater burden on the middle class, as well as on small and medium businesses.

Did you carry out a study on the impact of the increase in those premiums after the old fund was closed?

[François Masse]

Following the closure of the old fund, the premiums were set so as to balance the fund over time. To achieve that, the premiums are set on an annual basis, with the objective of balancing the fund so as to ensure that there will be no net impact.

When were the premiums increased, when were they decreased? These decisions vary from year to year. I have a yearly breakdown that I could send you if you wish.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

We know that the old fund was closed in a very bad context. It was a particularly difficult period regarding employment insurance benefits that were supposed to be paid. If the old fund had not been closed, would we have seen differences in the contributions collected from workers and enterprises?

I will reiterate that the maximum insurable earnings for an employee are $48,600, and the employer must pay an amount that is equivalent to 1.4 times the employee's contribution. Were any studies done on the impact maintaining the old fund might have had on contribution levels?

[François Masse]

That would be a hypothetical answer. In addition, I can confirm that in 2009, there was no increase as compared to 2008. It was $1.73 per $100 of insurable earnings. It was maintained at $1.73 in 2009-2010. Afterwards, it increased to $1.78 in 2011, to $1.83 in 2012 and to $1.88 in 2013-2014, which is in compliance with the current policy of ensuring that the fund stays balanced.

In fact, during the recession, the decision was made to keep the level of contributions lower than what would have been necessary to balance the fund, because of the difficult economic situation. So at that time, we did not bring in any increases. Since the recovery has begun, the rates were increased slowly in order to bring the fund back into balance.

The government's current decision is to maintain a freeze on the levels in order to avoid the increase which had been planned in the 2013 budget.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Let's go back to my first question. Has there been a study on the impact of these increased contributions on small and medium businesses?

[François Masse]

Personally, I have no information indicating that a study was done on that particular aspect.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Can you tell me if the government wanted to measure that impact?

[François Masse]

I am sorry, but I cannot comment on the advice and analyses that are provided to the government.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much.

I yield the floor to Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

So you are confirming that the contributions are set so as to balance the current fund. This means that the $57 billion that was invested as contributions by employers and employees since the beginning of the fund have simply been ignored.

I am trying to understand how that amount can simply be ignored and how you can act as though it no longer exists. The Supreme Court decision regarding the $57 billion fund stated that the government could take that amount on condition that it continue to grant benefits normally and ensure that the program continue to function.

Moreover, the contributions are determined by the amounts accumulated in a fund created in 2009. The $57 billion is a notional amount, but real people contributed to it. However, it is as though it no longer exists for the purposes of the government's decisions. Is that true?

[François Masse]

It is impossible for me to confirm what the policy was with regard to the fund prior to 2009. I can tell you that from the moment the new Employment Insurance Operating Account was created in 2009, from its inception the clear objective was to ensure that it would be balanced, and that its balance would be zero. Until now, the period was to be one year, but as of 2017, it was announced that there would be a seven-year period, following consultations where we were asked to provide a predictable and stable method.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You are telling me that the decisions concerning the employment insurance program are taken independently of the $57 billion amount that existed previously. The decisions are thus taken solely in relation to a fund that started at zero.

[François Masse]

Indeed, in 2009, the stated policy was that as of that moment, we would look toward the future. That is how the fund was to remain in balance. It was a policy decision.

[The Chair, Conservative, James Rajotte]

Mr. Duffy, do you want to comment on that?

[Michael Duffy]

One thing I could add is that the spending on the EI program is independent of the balance in the account. It's a statutory program, so benefits are paid on the basis of entitlement. If people qualify, they are able to get an entitlement, and benefits are paid on that basis. The government guarantees that everybody will get their benefits irrespective of the balance in the account. The account is a notional account for purposes of informing the rate-setting process. With the new rate-setting process that came into place in 2009-10, the new account was put in place to start things anew. But the balance in the account does not have an effect on benefits paid, because it's a statutory program.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Saxton now.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair.

My first question is in regard to measures relating to indirect foreign investment by financial institutions. With the proposed changes, Canadian financial institutions would not be permitted to indirectly acquire control of, or indirectly acquire or increase a substantial investment in, a regulated foreign entity operating primarily outside of Canada that is engaged in the business of banking, insurance, cooperative credit, fiduciary services, or dealing in securities.

Can you explain the rationale behind this proposed amendment?

[Michael Duffy]

I'm afraid this is outside the scope of our expertise.

[Andrew Saxton, Conservative, North Vancouver, BC]

Is this not part of part 3?

[Michael Duffy]

I think it's a different division.

[Andrew Saxton, Conservative, North Vancouver, BC]

Is it? Okay, I'll come back to that at a later time.

What about the Canada Pension Plan Investment Board Act? Are the proposed amendments not part of your scope either?

[Michael Duffy]

No.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay, I have some more.

What about the Financial Administration Act when it comes to the central clearing of over-the-counter derivative transactions? This is not part of yours, either? Geez, I'm striking out here.

Is Dominion Coal Blocks also not part of yours?

[Michael Duffy]

No, it has to have EI in it.

[Andrew Saxton, Conservative, North Vancouver, BC]

Okay, we'll have to save that. Perhaps my colleague Dave would like to ask a question.