Human Resources Committee on May 1st, 2008

[The Chair, Conservative, Dean Allison]

Thank you, Ms. Sgro. That's all the time we have.

We're going to move to Mr. Lake now, for five minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

To start, I'd like to get a little bit of historical context here, if I could. Can you tell me when this was originally accumulated? I think it's called a notional surplus. Maybe give a little bit of a timeframe.

[Yves Giroux]

It started accumulating after the recession of the early 1990s. I don't have the precise figure. I was prepared to speak to Bill C-50 more than the historical background with respect to the notional surplus, but it went back to the early 1990s.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

So roughly it would be fair to say right around 1993-ish, somewhere in that range.

[Yves Giroux]

Probably around that time.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

What was the $54 billion spent on? Obviously it wasn't spent on EI. What was that money spent on?

[Yves Giroux]

It was spent on general government expenditures, so there's no way of saying where exactly it was spent. It was consolidated with the CRF—the consolidated revenue fund—so it was spent on general government activities. So I could not say one area.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

The gun registry—who knows?—the Liberal campaigns, things like that.

[An hon. member]

Health care.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm wondering if you can explain the rationale that would allow this, in terms of the history there, because it doesn't seem to make sense. Mr. Lessard was making this point, that it doesn't seem to make sense that we would collect money from employers and employees and then use it to fund the gun registry—that doesn't make a whole lot of sense—or anything else that the government does, after telling them that it was for an EI program. What was the rationale that allowed it to be spent on something else?

[Yves Giroux]

Well, given that the AG, in the mid-1980s, suggested very strongly that the government consolidate EI expenditures and EI premium revenue collections within the CRF, the moment you had a surplus it had to go towards debt reduction if there was an overall government surplus.

As I explained previously, even if we have the best experts in the country, it's very difficult to very accurately predict what the precise EI premium rate should be when you are in October of, for example, 1994. Expecting to be exactly on target for the whole of 1995 is extremely difficult. Actuaries, by nature, tend to be very prudent. That's why we have pension plans that are solvent, generally speaking, and that's why we have insurance that is solvent, because actuaries are prudent, so there is money left in the bank. And they tend to be prudent, as well, when explaining or suggesting what their premium rate should be. That, in retrospect, led to surpluses over a number of years. These surpluses, due to the nature of the recommendations of the AG in 1986, had to be consolidated into the overall government fiscal framework.

The government back then was running overall surpluses, and yet again, according to the AG's recommendations, these automatically have to go towards debt reduction. So that's what led to this situation.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

When Mr. Savage was talking, he talked about how the bill makes him nervous and he asked if it didn't make more sense to transfer a larger amount of money. He talked about the government wanting to make a grab of something.

Now, I would suggest that what we're trying to do in this case is actually to do the exact opposite, to stop that. I think we've seen that the Liberal government previously grabbed $54 billion of EI funds and spent it in a whole bunch of different widespread priorities.

It seems to me that these changes are to say that from here on in, we want EI money to be spent on EI and nothing else. Is that accurate?

[Yves Giroux]

To the best of my knowledge, that's totally accurate. If there were to be a surplus after Bill C-50 receives royal assent, if it does, I can't see any way a surplus in the EI program would be used for any other purpose but for paying the benefits first and reducing the premiums. I don't see any other way.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Okay.

I would like to get a handle on the cashflow here under the new agreement. Again, I think Mr. Lessard may have been talking about this a bit. The $2 billion is basically a cash account almost, just an operating fund, in a sense. So if you run a surplus or a deficit within the account in a given year, how soon will it catch up? The idea is that it will always balance out, but how soon would it balance out? For example, if it ran a surplus and collected $2 billion more one year, how soon would that money return to the payers?

[The Chair, Conservative, Dean Allison]

Once again, you've finished your time, but I'd like an answer to the question.

[Yves Giroux]

There are limits to the possible swings in the EI premium rate that are set out in the proposed legislation. How soon that would have to be repaid depends on two things: on the extent of the repayment that would be required; and then on the room that would be left once economic conditions are taken into account--so the room that would be left, the 15¢. If, for example, the premium rate is estimated to need to increase by 10¢, that leaves 5¢. Depending on the size of the repayment that was required, then that would affect the length of repayment.

Maybe my colleagues from HRSDC want to add to that.

[Louis Beauséjour]

I just want to clarify the question. Is this related to the accounting? Is it a question relating to whether the transfer will happen every month or whether it will be done at the end of the year? Is that the kind of question you wanted to get at?

[The Chair, Conservative, Dean Allison]

I'm just going to ask them to come back maybe in next round and pick it up with more clarification.

Mr. Lessard, sir, you have five minutes.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, Mr. Chairman.

I must say that you have a weird argument to defend. One day, I attended the hearing for a case of an employee who had been charged with the crime of stealing money from his employer. This employee alleged, before the court, that he had made good use of the money since he had invested it in the education of his children. The judge heard the case, but concluded that this constituted theft all the same. I would imagine that this is the same thing here. We are talking about misuse here.

I do understand your answers, this morning. This is the way that the legislation has been written and you do not have any choice. You want to implement a mechanism to ensure that the fund is managed appropriately and independently from the Consolidated Revenue Fund. You are saying that the fund will no longer be dependent on the government. The problem does not lie in the way that it was managed, but rather in the way that the money was used. It seems to me that we are witnessing the same scenario for the following reasons. First of all, I do not understand why we did not turn this over to the premium management board, for example. This board exists, has already been mandated—and it is keeping this mandate—of looking after the administration to ensure that premiums are in keeping with the regulations. Do we agree on that?

However, the board is now responsible for administering premiums. What does the board have to do with that? The minister stated clearly, and you did so yourself this morning: we have to manage the fund to ensure that there are adequate premiums so that we can fulfill our responsibilities to the unemployed. This decision was made by the minister. It's surprising to note, however, that this management applies only, with respect to lower premiums, when there are surpluses. The minister said this in a speech, and I quote:

The board will also be responsible for managing a new bank account, independent from that reserved for the government's general revenues, whereby any surplus in employment insurance premiums for a given year will be kept and invested so that premium rates will be reduced for the following years. The Government of Canada made a commitment to provide $2 billion in order to create a real cash reserve, which will be administered by the board. Naturally, the Government of Canada and the Employment Insurance Commission of Canada will continue to be fully responsible to carrying out the program and making employment insurance payments, and they will continue to define eligibility and benefit levels.

How can we not conclude that, from now on, the plan will not be improved?

[Louis Beauséjour]

In fact, the legislation does not deal with the future. The government keeps its power to determine the adequate level of future benefits. If the government decided to change it for any reason, it would be obliged to inform the board about it beforehand, so that the board can keep up with the changes as it determines future contribution rates.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

This would mean that any surplus in the fund, whether it be a carry over from past surpluses, or a new surplus, can only be used to lower the contribution rates. It is written here and you are repeating it this morning.

[Yves Giroux]

Hypothetically, we could say that if the government anticipated a large surplus in the employment insurance fund, it could choose to increase the benefits and to inform the board, which,in turn, should take it into account when setting the premium rates.

For instance, if the government anticipated an enormous surplus, the government could decided, in September or in October, to improve the benefits. This is purely hypothetical. The board would be informed of it and it would set its premium rate in accordance with that. Given the large size of the surplus, it would probably not deem it necessary to raise the premium rate. It will probably prefer to spend some of the anticipated surplus.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

My question is for Mr. Giroux or for anyone else among you.

Among the seven directors, how many of them are full-time?

[Yves Giroux]

This is a question for Ms. Harrison. No one has been appointed yet, because the bill has not yet received royal assent.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

You should know that because the people who will be appointed will ask you the same question. They will ask you whether or not they will be hired on a full-time basis.