Mr. Speaker, I am almost embarrassed to rise after the speech of the member for Glengarry-Prescott-Russell.
His comments clearly indicate the kinds of problems we have. Reform Party members, I will remind members, took pay cuts over the last year. Other members of Parliament did not do that. Members of the Reform Party have committed to opt out of the MP pension plan. We anticipate that very few other members of Parliament will do that. There will be a few honourable people on the other side.
Perhaps one of the reasons Reform Party members are willing to do these things is that unlike the previous speaker and many others on the other side, Reform Party members had no trouble before they were here and will have no trouble after they are here finding other employment and making a decent living.
In any case, let me address the bill before us today, Bill C-85, an act to amend the Members of Parliament Retiring Allowances Act, which is of course the MP pension. These amendments have been a long time in coming. For 18 months this government has been promising changes. Finally we see the marginal changes that we see now.
The Reform Party has long called for changes to the overly generous pensions for MPs. Last November 22, I and many of my colleagues spoke in support of the motion of the hon. member for Beaver River, asking the government to replace the current members of Parliament retirement allowance with a plan reflecting the current norms for private sector pensions. This was rejected by both the Liberals and the separatists. Clearly, the Liberals' new proposal, the freedom 55 plan, does not accomplish this.
Before I speak to some of the specifics of this bill in the few minutes I have, I would like to make it clear that I personally would support a fair pension plan. My wife and I just purchased our first home and we are planning for our future, but I could not go home and look my wife or my constituents in the eye if I opted into a plan like the one offered in Bill C-85. Instead, I will put my own money into an RRSP, just like millions of other Canadians, and hopefully the government will not see fit to cut those again, as it has in the past.
Let us take a look at how this plan evolved from the plan introduced by Prime Minister Louis St. Laurent in 1952 to the monstrosity that is proposed today. According to Mr. St. Laurent, the original plan was "to be actuarially sound and a matter that would operate without any further charge on the public funds than the matching of contribution to be made by all members of Parliament".
Mr. St. Laurent indicated that the plan was never really intended at the time to be a pension per se. According to Mr. St. Laurent, it was to provide for members in their later years and to reward them for their public service.
At that time members contributed 6 per cent of what was an annual $4,000 salary in return for an allowance equal to only 4.5 per cent of their indemnity if they retired after serving more than two Parliaments.
In 1963 the Members of Parliament Retiring Allowances Act was amended to require members to contribute 6 per cent of their $12,000 indemnity per annum. Rather than the flat percentage allowance, benefits were increased to 2.5 per cent of the member's annual indemnity up to a maximum of 75 per cent.
In 1965 additional provisions were made for a retirement allowance plan to allow senators to participate at a 3 per cent benefit accrual rate. Members will recall that at that time the term for senators was changed from life to age 75, so for the first time there was provision for retirement in the Senate.
It was really in 1981 that the changes to the benefit rate for MPs began to make this plan the obscene one we have today.
This was when the benefit accrual rate was increased to 5 per cent and the generous inflation protection, the full inflation protection we now have, was implemented.
We can see from the report on the administration of the Members of Parliament Retiring Allowances Act for 1983 that while it varied from year to year, the plan kept up the appearance of a one-to-one member-to-government contribution ratio from 1952 all the way to 1992. However, as we know, this was an illusion due to accounting practices, and it vanished in 1991-92 with the $158 million top-up that was needed to the plan. This actuarial adjustment credit was needed to comply with legislative changes in Bill C-55 at the time requiring that adequate contributions be credited to meet the costs of pension obligations as they accrue.
With this top up, the cost of the plan to taxpayers in the form of interest on the plan was also increased. Many people do not know that the government does in fact pay a generous rate of interest on this account, which is of course a cost to the taxpayers but which is not included in the total cost the government admits is involved in this plan.
With the top up in 1992, the unrecognized cost was $3.4 million. It has gradually escalated to $20.4 million in 1992-93 and then to $23 million in 1993-94. It is also interesting to note that the rate at which the government pays interest into the MP pension plan, about 10 per cent, while not an unreasonable rate, is considerably higher than the 4 per cent it will pay when it returns contributions to members who choose to opt out or who do not meet the six-year vesting period.
Bill C-55 also caused the division of the members' pension plan into two parts to achieve compliance with changes to the Income Tax Act regarding the rules for registered pension plans. Now we have one portion that conforms with rules for registration and the other a "retirement compensation arrangement" that does not. This portion has much higher associated costs for the plan because of the refundable tax paid on it. Bill C-85 does not correct this.
Clearly the 1952 idea of providing politicians with a financial buffer to compensate them for periods of employment uncertainty is contrary to the reality our constituents now face. In the 1990s the concept of job security has all but disappeared, not just for Canadians in the broad workforce but even for Canadians in the most traditionally secure areas of the public sector.
Similarly unacceptable is the argument that MPs are underpaid and thus must get bigger retirement benefits. If the government feels MPs are underpaid, then the government should address that issue in a transparent manner, not through the backward route of an overly generous pension plan. The Reform Party's position on this is clear: there should be no increase in MP salaries or office budgets until this country's budget is balanced.
As many private sector employers and some of the provincial legislatures have obviously realized, this type of plan, a defined benefit plan, is very costly to employers and the costs are difficult to accurately predict. There is no real relationship between how much a member contributes to the plan and the benefits a member receives.
Several provincial governments have recently taken drastic measures to scale back or to eliminate traditional pension benefits for politicians. Prince Edward Island rolled back pension benefits and then wound up the plan completely. Similarly, the Alberta government lowered the benefits for some of the recipients already collecting their pensions and then ended the plan for future MLAs.
It is interesting to note that the benefit accrual rate for Alberta MLAs prior to this roll back was 4 per cent, the rate now being proposed by the government. A study had found that the net value of one year's worth of pension accrual for an MLA was $28,733 under that plan, compared to an equivalent $9,034 in the private sector. For the federal plan we are presently under and under which many members of the House will still collect benefits, this number was $42,741 a year.
The Manitoba legislature will implement reforms far in excess of those proposed by this government following the next election. Their pension plan arrangement will be replaced by an RRSP savings plan arrangement where taxpayers only have to match each member's contribution.
Even here in Ontario the provincial Liberals in their "son of red book" promised that if they are elected they will scrap the Ontario legislative pension plan and replace it with a group RRSP, exactly what the Reform Party proposes. We saw it in 1993 and we are seeing now in Ontario how different Liberals are when they are running for election as compared to when they are actually sitting in a Parliament.