Mr. Speaker, I am pleased to rise today in response to the member's Motion No. M-291 and make some comments about the financing of post-secondary education using an income contingent repayment plan. I would like to offer some comments on investment in post-secondary education.
All of us recognize that the income contingent repayment principle is intended to facilitate investment by individuals in their own future. It therefore offers a way for public policy to foster what the social security reform discussion paper calls mutual responsibility, governments helping people to help themselves.
Canadians collectively make a greater investment in learning than practically anyone else in the world. Few industrialized countries spend more of their gross domestic product on education than we do. No country spends more than the 2.6 per cent of GDP that we spend every year on post-secondary education. This represents $16 billion per year, nearly 80 per cent of which comes from taxpayers through federal and provincial support.
Indeed our public investment in post-secondary education is also the highest in the OECD countries measured in relation to our overall economic activity. The result is some of the best and most accessible post-secondary education in the world.
We have in relative terms more adults with post-secondary qualifications than many other countries and we have more people enrolled at any given time. There are currently nearly one million full time post-secondary students in Canada, about 70 per cent in universities and the rest in colleges and institutes of technology. Because of its shorter duration programs the college level actually produces more graduates than the university sector. Both of course make equally essential contributions to individual opportunity and national development.
In addition to the full time students there are also hundreds of thousands of students enrolled in part time programs. Still more take short courses, specialized training and other learning opportunities. Indeed, one in every four adult Canadians is engaged in a learning activity in any given year, an increase of
about 20 per cent during the last decade. Canadians understand the importance of investing both time and money, public and private, in learning to adapt to new challenges and opportunities.
A recent survey by EKOS Associates showed that some 25 per cent of the adult workforce are keen to improve their qualifications and move up to better jobs through their own efforts. These so-called bootstrappers are prepared to work hard at self improvement and self investment. They typically have adult responsibilities, modest incomes and limited opportunities for learning on the job. Their learning needs are widely divergent and may range from literacy training to advanced education or technical training.
Despite our record in creating across Canada an excellent and accessible post-secondary education system, many of these people still have great difficulty in finding the optimum combination of time and money in order that they can participate. There are no easy solutions but we need to ask ourselves how we can improve this situation.
The social security reform discussion paper therefore raises two basic questions about federal investment in post-secondary education. How can we help to ensure long term stable and sustainable support for post-secondary education in a context of increasing financial restraints by all governments? How can we at the same time not only maintain our accomplishments in making post-secondary education accessible but broaden and expand that access to more people?
The social security paper outlines two options for future federal support of post-secondary education. Under the first option the current established program funding for post-secondary education transfer arrangements would be maintained. The total amount would be fixed at the 1993-94 level in keeping with the government's restraint on transfers announced in the 1994 budget. With total entitlements thus restrained but the tax portion of the transfers growing with the economy, the cash transfer portion would decline correspondingly.
In 1996-97, the first year of any new arrangements, tax transfers are projected to be about $4 billion and cash to be about $2 billion for a total of just over $6 billion. While this total remains fixed, the tax portion is projected to reach $5 billion by the year 2001, meaning that the cash will be automatically reduced to about $1 billion at that point.
Finally, about 10 years after the new arrangement starts the value of the tax transfer would exceed $6 billion and the cash transfer would be virtually zero. The federal government would no longer provide cash support to provinces for post-secondary education.
We think there is a better way to invest the available cash. Instead of just letting it dwindle away to nothing, the green paper suggests using it to create a new $2 billion per year loan scheme on income contingent repayment principles. This would help students to meet the rising cost of tuition and thereby contribute an increasing portion of the cost of post-secondary education. It would thus help to ensure both the availability of high quality relevant opportunities for higher education and career training, but also their affordability.
The ICR principle as other hon. members have pointed out can ensure that an individual's payments on student loans do not become unmanageable. In a sense the income contingent repayment plan means sharing the risk between government and the individual, guaranteeing that payments will adjust automatically to income and therefore to ability to pay.
This second option would provide support to the post-secondary education system in two ways: first through a permanent and growing endowment of tax points that provinces can use to help finance their grants to colleges and universities, and second through loans that enable students to contribute to their own education.
Over the 10 year period beginning in 1996-97 the first option of the continuing current arrangements would provide a total of just over $60 billion to the post-secondary system. By contrast the second option would provide around $70 billion in tax transfers and loans over the same period. That is a difference of $10 billion in favour of the alternative approach.
This approach depends on the creation of a new student loan system that would ensure affordable payments for borrowers as well as simple and efficient means of repayment that would avoid problems of default. The scheme must be both fair and efficient.
The income contingent repayment approach properly designed could offer an answer to this need. The government is consulting interested groups about the specifics of design and welcomes their input to the process.
The options in the green paper for enhancing our national investment in post-secondary education are proposals, not decisions. The government is looking forward to reviewing these ideas in light of the many valuable comments and alternative proposals now being put forward. Not the least of these will be the suggestions of members of this House offered through the current debate.