Human Resources Committee on May 1st, 2008

[Lynne Yelich, Conservative, Blackstrap, SK]

So it's fair to say it would be more transparent.

Mr. Brown will now share my time.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you, Mr. Chair, and thanks to the witnesses.

Mr. Savage spoke about the arm's-length nature of CEIFB. What are the benefits of having such a prudent non-partisan arm's-length crown corporation, in your view?

[Louis Beauséjour]

Again, the advantage would be to ensure decision-making regarding the rate-setting and that the EI premiums are exclusively used for EI purposes. I would also mention the fact that there would be a separate account where funds can be held and invested outside the consolidated revenue fund, which will ensure that all the money will be used for the purpose of what they--

[Gord Brown, Conservative, Leeds—Grenville, ON]

So you're quite comfortable that this will be a good reflection of the amount of money that gets paid in by workers and by employers, so that it will better reflect over the longer term the amount of money that should be.... We all know that this $54 billion is now there and was spent in a number of ways, including debt reduction, so it's not as if $54 billion is just sitting in an account.

So you're quite comfortable, going forward, that this is really the right way to go in terms of reflecting the right rates so that it's not an unnecessary tax on jobs.

[Louis Beauséjour]

Exactly. I think we are comfortable that it would be a way to ensure that the contributions will be used only for EI.

[Yves Giroux]

If I may, I'd like to add to that. It's very difficult to predict very accurately the precise rate in October or November that will be sufficient to cover all of the benefits for an entire year, from January to December. So while I'm confident in the capacity of my colleagues to predict, or the actuaries to predict, the economic conditions 12 or 14 months down the road, it's almost impossible to be bang on, to the cent.

So having an independent crown corporation that maintains a cash reserve and that has the capacity to take into account the surplus of the previous years in setting the rate going forward ensures that premium rate payers will, over time, pay exactly the amount that is necessary to cover the cost of the EI program--no more, no less. I think that's the great improvement in the creation of the CEIFB over the previous system.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Yes, as one who comes from a business background--from a company that employs over a hundred people--I know that whenever we created new jobs we didn't only look at the amount of money that it costs to pay the employee, but we also looked at the cost of the additional moneys we had to pay out to the government. And it did have an impact on the number of people who could be employed, because it was a large deterrent to creating jobs. I'm quite comfortable now that, going forward, the amount of money the employer is going to pay will in fact reflect that. So I appreciate that.

[The Chair, Conservative, Dean Allison]

You can ask a quick question, if you want. You have about 20 seconds.

[Lynne Yelich, Conservative, Blackstrap, SK]

I thought you made an interesting point about the calendar year, which sort of confuses figures as well. This will create a little more understanding of surpluses or deficits, because it will be their own calendar year and they won't be working with another calendar year.

Did I read that or understand that right, that that confuses things more? When Mr. Savage asked about this so-called surplus that year, it really wasn't accurate, because the EI runs in a different calendar year. Is that fair to say?

The other thing I thought was really interesting is that it doesn't matter, the CRF will always back it up if there is.... We don't have to worry. I think that is a concern, that this $2 billion is there, and once it has gone, the poor employees will not have the benefits there. But it's up to the board, and the board will decide if the benefits are.... Parliament will decide if benefits are expanded, and of course Revenue Canada will always cover it. Am I right?

Would you like to reiterate?

[Yves Giroux]

The federal crown will be there to cover any shortfall should the $2 billion be exhausted. Whatever needs to be paid will be paid. This is a statutory program.

[The Chair, Conservative, Dean Allison]

Thanks.

I have a quick question before we move over to Ms. Sgro. Is there any reason for a seven-member board? I realize crown corporations can be composed of large numbers, but will they be full-time or part-time directors? Was there any particular reason for that?

[Sherry Harrison]

I'll answer that one. The seven-member board was deemed appropriate in light of the very focused mandate of this particular board in relationship to some of the other boards you may be familiar with. It will be run by a board of directors, on a part-time basis, with the necessary skills and experience to carry out the organization's mandate.

[The Chair, Conservative, Dean Allison]

Thanks.

I'll go to Ms. Sgro for five minutes, as we start our second round.

[Judy Sgro, Liberal, York West, ON]

Thank you very much. We're glad to have you here to help us understand a bit better.

What is the total operational budget going to be?

[Sherry Harrison]

The legislation does not specify a budget. One of the first requirements of the board of directors will be to establish a corporate plan and a budget for consideration by the Treasury Board, and then it will be tabled in Parliament.

[Judy Sgro, Liberal, York West, ON]

You must have some idea of the anticipated administrative costs to operate this crown corporation.

[Sherry Harrison]

We expect it to be a very small, focused organization in light of the mandate, but I am not aware of a dollar value assigned for a budget.

[Judy Sgro, Liberal, York West, ON]

I'm very leery. I understand there's all this complaining about all of this money that people are paying, but from my perspective, it all goes back into funding HRDC and the employment insurance programs and programs that Canadians need.

Convince me why Canada needs another crown corporation to oversee this. The rates have already been dropped, but so have the benefits. How are Canadians going to be better off as a result of establishing this crown corporation?

[Louis Beauséjour]

It's all related to the fact that we've made a contribution that is on the plans of the government to ensure that the decision-making regarding the rate-setting would be independent of the government, and to ensure that the premiums are exclusively used for EI purposes going forward. That's really why it was thought that creating a crown corporation was the way forward.

[Sherry Harrison]

If I may also add to this, the legislation provides that the board may invest the reserve until it is required to pay for benefits. So it's anticipated that the operating costs of the board would be more than covered by any investments they might generate against the reserve.

[Judy Sgro, Liberal, York West, ON]

I'm still not convinced. No one has convinced me. Maybe I should have been asking the minister, but we didn't have enough time.

I'm very open. We've been hearing for the last seven or eight years since I've been a member of Parliament all about this issue about the EI, the EI, and the EI, and this big fund we have that goes right back into dealing with everything that's needed for the running of the country.

How is setting it aside as a crown corporation going to make it better? How is it going to improve the service to Canadians? Is it going to be dealing with the amount of money Canadians are receiving when they need it? Are you going to have the ability to decide whether you're going to increase it to 75% from a benefit perspective? How are Canadians going to be better off as a result of this?

I'm very open. It's not a partisan issue. I'm interested to know how Canadians are going to be better off as a result of establishing another crown corporation.

[Yves Giroux]

If I may, Canadians will be better off in the sense that Canadians are premium payers—at least those who contribute to the EI program—and they will have the certainty that if there is a surplus, it will be returned to them as premium payers through lower premiums, if there is such a thing as a surplus going forward.

With respect to the benefit rate, it will still be for the government to decide the rate of benefits, or any changes to benefits. So the crown corporation will not change the benefits; it will only have the power to set the rate. If there's a surplus, Canadians can have assurances from the moment Bill C-50receives royal assent onwards that the premiums they pay to the EI program will not be used for other purposes, towards reducing the debt for example. It will be used solely to pay for EI benefits, and if there's a surplus, it will be returned through lower premiums.

That's the big benefit to Canadians, in my opinion.

[Judy Sgro, Liberal, York West, ON]

We're clearly going into an economic downturn. No one knows if it's short-term or long-term. There will be, under these circumstances, a lot more people who are required to draw on employment insurance to assist them in this time that's ahead of us. If you have lowered the premiums, which the government could do at any time it wanted prior to having a crown corporation, how are you going to deal with that? Let's say the premiums are where they are now, and you suddenly have a huge spike over the next two years of people needing assistance. How are you going to respond to that?

[The Chair, Conservative, Dean Allison]

That's all the time we have. I want you to answer the question. We're out of time, but I'd like the witnesses to answer the question, if they could.

[Yves Giroux]

Should the chief actuary estimate that a premium rate increase is necessary due to changing economic circumstances, the rate will very likely have to go up. The legislation sets boundaries by which the premium rate can go up. There's a limit above which the premium rate cannot go. The CEIFB cannot set the rate to increase by more than 15¢ per year. That's my understanding. So should the chief actuary, this board of the CEIFB, estimate that a premium rate increase is necessary due to changing economic circumstances, the rate will have to go up by an amount that is up to 15¢ per year. So that's how it would be dealt with, should there be an economic downturn severe enough to warrant an increase in the premium rate-setting.