Human Resources Committee on May 6th, 2008

[Michael Atkinson]

I'm talking about a new program. This is my concern: the fact that if you have a reserve that gets extremely high, some program will come along and somebody will say, “We can fund it there. It won't affect the fiscal situation. Let's throw it on the backs of employers and employees.” At least the question is now asked if it should be funded under EI.

[The Chair, Conservative, Dean Allison]

Thank you very much.

That's all the time we have. We're over time.

We're going to move to Mr. Lake. Sir, you have five minutes.

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

I want to start my time by clarifying some things.

First of all, this bill has.... What it's not is anything to do with setting benefits or programs in EI or changing the EI program in terms of those things. All it is designed to do is, given the benefits and programs that are decided on by the government of the day, to say that we're going to be accountable and transparent in terms of the amount of money we're collecting as a government to put toward those programs, making sure those amounts are in balance.

I'd like to clarify something regarding the reserve, because I think there's some confusion about this reserve fund. The EI chief actuary has done extensive study, obviously, to come up with the $2 billion amount for the reserve. In terms of the one-year looking forward, it refers more to the rate-setting than to how it's going to be paid back. I think that needs to be clarified. If there's a surplus or if there's a deficit, whatever that deficit or surplus, adjustments are going to be made--and we heard this from the officials the other day--according to mathematical formulas that will bring the account back into balance in a systematic way.

The reality is...and I think Mr. Murphy used the words, “We really don't want to see this $54 billion disappear into oblivion”. That's the quote that you used. The fact is that $54 billion has already disappeared into oblivion. It's gone. It has already been spent. And you and I would agree wholeheartedly that is absolutely wrong. It should never have happened.

That money was collected--$31.5 billion from employers and $22.5 billion from employees--over the last 15 years. And now that money is gone. What these changes are designed to do is to ensure that never happens again. I just want to clarify that.

I guess my first question.... Mr. Murphy, you had your hand up, so you want to say something. I'll just ask you on behalf of, let's say, the employees you represent, how important is it that we correct a system that took $22.5 billion from employees and gave it to the government to spend on other random priorities, like the gun registry, for example?

[The Chair, Conservative, Dean Allison]

Mr. Murphy.

[Cliff Murphy]

I've said here before that this is a good idea, especially if it's trusteed jointly by labour and industry, the people who are paying into it. I know that with our pension funds, if we don't invest things properly as trustees, maybe our houses will be up for grabs. So maybe that kind of trustee system would put a sober second thought into the trustees' minds, if their personal homes were to be involved.

I don't agree that the $54 billion has totally disappeared. I think the money put there by employees and employers has gone to pay down some of the debt and reduce the deficit.

You talked about the actuaries coming up with $2 billion, but I think the former actuary for the commission suggested it was $12 billion to $15 billion. So there's a difference of opinion there. In my opinion, the $15 billion is a good thing, as the actuaries here today are qualified to suggest. So if there is a shortfall, employers and employees should not have to pay for it. Some of the money that was used to pay down the debt should come back to the plan to backstop it in case of an emergency economic situation.

I think, going forward, if the money comes in and the plan is solid and self-sustaining, it's a good thing.

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

But just to clarify this, if you were to take the money that was used to pay off the debt and put it back into a fund, you would in effect be increasing the debt again to put money into the reserve.

The way the system is set up right now, the government has said that any deficit would be covered by a loan from the consolidated revenue fund and would be paid back. According to the officials who were here at the last meeting, that would be over time, not within a year. I say this just to clarify some things, because we asked the same questions, as we had similar concerns to you.

If we follow the rules of having a maximum increase of 15¢ per year, and everything else already in place, rest assured that these formulas, over time, would bring things back into balance. Sometimes, depending on the severity of a situation in a negative circumstance of a deficit, it could take some years to bring it back into balance, but overall it would come into balance. In the long term, the main point is that no money would be spent on EI or saved up from EI that didn't come from employers and employees in the first place.

Mr. Murphy actually made another comment. I just want to use one second of my time to address it. It was interesting when you referred to companies in Alberta paying the costs of moving employees, as opposed to the old way, which was that it came out of EI funds, apparently. I guess I would ask the question, why would it be wrong in your view that a company from Alberta would pay for someone to move, rather than employees in Nova Scotia, for example, who pay through EI dollars under the old system? It seems to me more rational that the company in Alberta would actually pay the cost of moving the employee, rather than a company somewhere else.

[The Chair, Conservative, Dean Allison]

That's all the time we have, but it was addressed to Mr. Murphy. A quick response, please.

Then, Mr. Atkinson, a quick response as well.

[Cliff Murphy]

I would say the quick response to that is that the employers and the employees have already put the money into an account from which they thought some of this stuff would be taken care of.

[The Chair, Conservative, Dean Allison]

Just a quick response.

[Michael Atkinson]

Just covering the employees' costs was intended to get them off EI, which would entail savings. The problem with the previous measures was that they were only for permanent relocation, but an industry like ours is temporary. That's what I believe you are now recommending through the employability study.

[The Chair, Conservative, Dean Allison]

I think, very clearly, what we heard from that study as well is that we didn't want to be taking employees from eastern Canada without any hope of their returning, or displacing workers from any other place. We wanted them to be able to return. So that's a good point.

We're going to move to Mr. Lessard, for five minutes, sir.

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

Thank you, Mr. Chairman.

I want to come back to the misappropriation of these funds. If employers were to use employees' insurance or pension funds for other purposes, without their consent, they would be found guilty of embezzlement. If they were to say that they used the money to develop their company—which is a good thing in itself—and that this would be beneficial to employees, the fact would remain that they had used the money for purposes other than those for which it was intended. The committee is being given the impression that this happened because of a breakdown in communications. That is not so. This money was misappropriated. We must keep that in mind.

We have to look at things in the proper context. No one here is claiming that an individual, a member of Parliament, a minister or a prime minister put this money into their pocket, but it was used for different purposes. Now there is an attempt to make this legal, but that does not make it legitimate. Morally speaking, I think people have been robbed.

When we hear here that the government contributed to the fund in the past when it had a deficit, it should also be mentioned that the fund always paid the government back. So much so that the premium rate for employees at one point was $3.10, and that of employers was $4.40 per $100, which is hardly insignificant. Every time the government advanced money to the fund, employees and employers paid it back. The government did advance the funds. Why should this not work the other way around? Wage earners and employers advanced the funds to the government because there was a deficit in the fund. This is how you have to look at it. Morally, we are starting to talk about these things the way we should. Every time I hear someone trying to justify this diversion of funds or this misappropriation, I think it is quite inappropriate. This argument does nothing for the credibility of those who make it.

I also appreciated Mr. Kelly-Gagnon's comment that employers in Quebec have experienced administrators. The same is true of employees, because they sought out competent resources to assist them. The FTQ's Solidarity Fund and the CSN's Fondaction are examples of this. The joint administration of the CSST is not a bad example either. Sometimes the parties get into a bit of a tiff, but that is part of the game.

We are on the same wavelength, except as regards your initial comments. I think this money belongs to the workers and to employers, and that it must be put back into the fund. The next question would be to determine how these funds would be used, particularly since the surplus was achieved by reducing access to employment insurance. I'm thinking about fishers, for example. How many people were not eligible for the program? There were always these special programs or pilot projects put in place. Why were they setting up pilot projects, when we already had a genuine program? There is also the issue of features unique to the various regions.

My question has to do with the way the fund is managed. First, is the representation of employers and employees on the board fair? I would also like to know whether the appointment process is appropriate.

[The Chair, Conservative, Dean Allison]

Mr. Gagnon.

[Michel Kelly-Gagnon]

I would like to make one final comment about the surpluses. I understand that the Supreme Court of Canada will have to make a ruling on that issue quite soon. So we should refer to the Supreme Court, and see what its decision will be. In any case, I will be watching this judgment with a great deal of interest.

Parity on the board of directors could be a desirable model. However, some aspects could be improved. For example, the president of some parity organizations, who is an official appointed by the government, is also the chair of the board; this individual has two responsibilities. That is how it works at the CSST. Modern governance models suggest that it is preferable to have different people in the position of president and chair of the board of directors.

In other words, the models used in Quebec could be copied, but we could perhaps improve on them, as I have just described.

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

Thank you, Mr. Kelly-Gagnon.

[The Chair, Conservative, Dean Allison]

That's all the time we have, but go ahead with the response.

[Bruno Gagnon]

My expertise is more in the financial area than in the administrative area. You spoke about misappropriation of funds. This word has significant implications.

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

[Editor's Note: Inaudible]

[Bruno Gagnon]

Yes, absolutely.

You have to see this from two sides. At one point, the government decided to impose higher premiums than what was required, as suggested by the chief actuary. As a result, we have a "balloon" of over $54 billion.

We need to consider two things: the money we would need to stabilize the system in the long term, and the additional money being paid by employers and employees. That amount is seen as a payroll tax, even a regressive tax, because the premiums collected from workers and employees only apply to the first $40,000 of income. That's a problem.

The $54 billion, therefore, contain these two things, in my opinion. I think we should view them differently and rethink the whole system.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We are now going to move to Mr. Dhaliwal and Ms. Sgro, who are going to share their time.

You have five minutes.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

First of all, I was hearing on the other side that the Conservatives were talking about this money going into the black hole. In fact, I want to remind these honourable members that when Brian Mulroney, who turned out to be a mentor to this government, left this country in the woes of bankruptcy, we brought that out. In fact, the $54 billion that they're saying went into the black hole went into paying for programs for the ones who needed it the most.

Now, my concern is about the accountability of this minister when they're setting up this crown corporation and putting only $2 billion as a reserve. If I look at the accountability and transparency, we can go head on. We all know that the accountability and transparency, issue by issue, is going down the drain.

I am also concerned. On one side, Mr. Gagnon is saying it's $15 billion that they are looking for, and the government is saying $2 billion. I have a concern there. In those bad times the money is wiped out and then we just don't want to be accountable for that.

Would you like to comment on that particular situation?

[Bruno Gagnon]

Sure.

Basically what we're saying is that if we had this $15 billion actual reserve, what would happen in an economic downturn or in a recession is that we would be using this $15 billion to keep the premium rate at a stable level as much as possible. Normally $15 billion should be enough to go through a recession. At the end of the recession, the $15 billion reserve would probably have gone down to close to nothing. Then over the next expansion part of the cycle, we would rebuild the $15 billion reserve, and we would make sure that it never exceeds $15 billion, because we would allow the chief actuary to consider the interest earned on that reserve in setting the next year's premium rate.

Actually, you would have a fund that would vary between zero and $15 billion.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

I am also concerned about the investments, if the investments go bad as well. The markets might turn bad. How do you feel these funds or these investments should be handled?

[Bruno Gagnon]

Hopefully you won't need the $15 billion in a single year. So it should be probably invested in some form of diversified portfolio, with a component of very safe, fixed-return assets, like Government of Canada one- to three-year bonds, for example, for at least part of it. Another part could be invested in T-bills and another part could be invested in things that would probably bring a little more income. It would be diversified, basically.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

On the other hand, B.C. will be looking for 350,000 people in the next 10 years, but certainly we would welcome the people from Atlantic Canada, because they are wonderful people. At the same time, there are people who don't want to leave their families, who don't want to leave their homes, and what not.

The way we are saying that we don't need that money...in fact, I should be looking the other way around, to give those people the sense of security. We should have those funds there.

Mr. Hanson and Mr. Murphy, do you want to comment on that?