Madam Speaker, I am very pleased to address the House at third reading of Bill C-85, an act to amend the Members of Parliament Retiring Allowances Act.
The issue of MPs' pensions is, of course, of interest to all members of this House and to Canadians in general.
This is an issue that demands leadership. However, in showing leadership, the government and members must carefully consider all aspects of MPs' and senators' remuneration.
The issue itself is complex and contentious, a fact that makes it hard to address in a partial or even a general manner. That said, during its election campaign our government made certain promises it intended to keep once it came to power. The red book emphasized two aspects in particular of the MPs' pension scheme that were to be the subject of reform.
I shall take the liberty of quoting directly an excerpt from page 92 of the red book: "The pension regime of members of Parliament has been the focus of considerable controversy. -We believe that reform is necessary".
Our government has now taken action. The changes we planned to the MPs' pension scheme will be made when Bill C-85 is passed. The red book stated, and I quote: "A Liberal government will reform the pension plan of members of Parliament to end "double-dipping". MPs should not be able to leave office and receive a pension from the federal government if they accept a new full-paying job from the federal government. In addition, we will review the question of the minimum age at which pensions will begin to be paid". The Liberal government had made a commitment to keeping those promises.
However, the government has gone further. It will put into place a number of additional changes that will enhance the needed reform of MP pensions, changes that will provide for former members who have become disabled, equitable support for common law spouses, the option for members of this Parliament to determine their continued participation in this plan, which is a direct result of the request put to the Prime Minister on January 21, 1994 by the Reform House leader on behalf of his party.
Furthermore, a direct savings of millions of dollars due to a 20 per cent reduction in benefits to all MPs will be realized.
Let me be clear. This government consulted; this government listened; this government acted. Here are the facts: double-dipping eliminated; minimum age set at 55 years; optional participation offered to MPs in this Parliament; and $3.3 million saved for the government-in other words, 33 per cent lower costs to Canadian taxpayers.
On February 22, 1995, immediately before the Minister of Finance tabled the Budget that would strike a mighty blow to the deficit, the President of the Treasury Board announced that our government intended to reform the MP's pension scheme. He also tabled Bill C-85 on April 28, 1995, and spoke when that bill was tabled for second reading on May 4, 1995. The President of the Treasury Board also testified before the Standing Committee on Procedure and House Affairs on May 30, 1995. As well, I was given the opportunity of speaking to you when this bill was tabled for third reading.
This debate, which has continued for eight months, has also included a full day of consideration by the House of a motion made on this matter on Opposition Day and, of course, the appearance of expert witnesses before the Standing Committee. Over 20 hours of debate-and I must say it was often tough debate-have been devoted to this bill thus far.
The official opposition has presented some interesting and quite often constructive ideas on this issue, which is a thorny and difficult one.
The third party is engaged in often rancorous debate and highlighted a number of issues that are of importance, particularly the issue of salaries. Because we are in an area of fiscal restraint it is vital to note that Bill C-85 only deals with pensions. We will not and cannot act to raise the salaries and other benefits of members of Parliament at this time.
We will respect the legislated salary freeze on employees and continue to demonstrate leadership in putting Canada's fiscal house in order.
Members of the standing committee heard testimony from expert witnesses, including a taxpayers' group, that had the same theme. The issue surrounding the greater issue of compensation must be addressed, pensions must be reduced and salaries increased.
This was also the viewpoint expressed by the pension experts from the private pension consulting firm, Sobeco, Ernst & Young. It was the same as that of Professor C.E.S. Franks of Queen's University, a member of the Lapointe commission. It was the testimony of a former member of Parliament and actuary, Paul McCrossan. It was supported by Robert Fleming, a former administrator of the Ontario legislature. It was even put forward by the very group that puts hundreds of little plastic animals on the lawn of the House.
This total compensation approach is supported by the government in principle. However, as I mentioned at the outset, in practice we must carefully consider all elements of compensation. Salaries cannot and will not be increased.
At the risk of repeating myself, I will again state that the government has demonstrated leadership by reducing pensions for MPs, by going beyond what it had promised. This will have the net effect of reducing total compensation. Unfortunately this is the reality Parliament must face in today's economic climate.
I would now like to focus on the major elements of Bill C-85, and perhaps to correct some of the errors of interpretation that have crept in. I certainly would not want the honourable members on the other side of the chamber to voice their views about the bill without having accurate information.
Bill C-85 restricts double dipping. It will apply to any future appointment, to any renewal of an appointment, and to any contract signed after the date on which the bill obtains royal assent.
Former senators will be subject to this restriction in the same way as former members of this House. The clause on double dipping in Bill C-85 provides that any former member who is receiving a pension will be required to notify the appropriate minister when he starts to hold federal employment or enters into a federal service contract.
The notification will have to be made within 60 days after the date of the appointment or the signing of the contract, and the member will have to report how much he is earning or expecting to earn. Every year he will have to report all sums of money received from the federal government as long as he holds the employment or continues to execute the contract.
Any member whose earnings exceed or are expected to exceed $5,000 annually would have their pensions abated dollar for dollar by the amount of their remuneration. For example, if a member receives $30,000 in pension and earns $45,000 in a federal position, his or her pension will be totally suspended. If the member earns $25,000 he or she would receive $5,000 of their pension. That is because they earned a $30,000 salary.
I am taking the time to illustrate these examples because it is important to note that only federal parliamentary pensions and federal salaries comprise the double dipping provision.
The second component of Bill C-85 I would like to address is the red book commitment of the minimum age. Age 55 will be the minimum age at which former MPs and senators can collect a pension. This government agrees with the age 55 recommendation put forward by the Lapointe commission in the report entitled: "Democratic Ideals and Financial Realities".
Madam Speaker, the third point I would like to raise is that of optional participation.
As I mentioned earlier, within days of entering Parliament, the Reform Party House leader stood before this House and asked the Prime Minister if the government intended to continue to force MPs to participate in the MP pension plan. The Prime Minister's response was to the point: If members do not want to contribute to the pension plan, then administrative arrangements would be made to ensure they would not be part of the plan. Bill C-85 explicitly responds to the Prime Minister's promise to the Reform Party. Members will be provided with the option to choose whether or not they wish to continue to participate in this pension plan.
Madam Speaker, there are people shouting over there because they do not like to hear the truth. They prefer exaggeration so that they can make a little political hay. That is what they do when they have problems with the electorate.
I am confident members of the Reform Party will recognize this change adequately reflects what their party has sought. However, I would urge all members including those of the government and the official opposition to carefully consider their personal and family retirement needs prior to making this decision. Political motivation and party discipline should not play a part in this important choice.
This government has a clear view that retirement savings should be supported as they are through the income tax system in providing benefits through RRSPs or registered pension plans by employers providing for the legitimate retirement needs of their employees. The Government of Canada provides pensions for its public servants, the military, the RCMP and we should certainly provide pensions for our parliamentarians.
I would like to put forward some figures which were first presented to the standing committee. I understand they were useful to the committee members for the analysis of this proposed legislation. According to the Statistics Canada 1992 publication "Pension Plans in Canada" only 9 per cent of people who are in employment related pension plans are in plans that match contributions or are similar to RRSP type plans. The remaining 91 per cent are in defined benefit plans which provide a set formula to determine benefits. This type of plan provides better certainty and security for employees and planning for retirement because their ultimate benefits can be anticipated without being subject to the prevailing interest rates at the time the annuity becomes payable.
My colleagues in the opposition are taking great risks. If they continue to make noise, my voice can be much louder than theirs.
Madam Speaker, the Statistics Canada publication I just mentioned reveals that in general, in the context of these defined benefit plans, private sector employers contribute about 60 per cent of the costs while in the public sector the employer's proportion is 60 per cent.
Naturally enough, in the case of special plans, the share of the costs assumed by the employer is considerably higher. For instance, in the case of the Canadian Forces the employer's contribution is $2.70 for every dollar contributed by an employee.
I have taken the time to state these facts because I think it is important that we have enough knowledge about private or employer-sponsored pension plans in Canada generally, if we want to evaluate this particular pension plan logically and rationally.
The final element I want to discuss is the question of pension accrual or pension benefit rate. Bill C-85 reduces the benefit rate for members' pensions from 5 per cent to 4 per cent of their annual salary per year of service. This is equivalent to a 20 per cent reduction.
Combined with the introduction of a minimum age, this reduction will make it possible to reduce by 33 per cent the amount the taxpayer contributes to the members' pension plan. This is a significant saving, in line with our government's deficit reduction strategy.
Clearly the government has gone even further than it promised it would in reforming members' retiring allowances. We have markedly reduced the costs that the Canadian taxpayer has to pay.
In addition to outlining the important elements of Bill C-85 I would like to address one concern that I have in effectively communicating the impact of pensions. Private interest groups and members of this House have put forward what I would call, and I want to underline it, misleading information of potential payments to MPs. It is not just government MPs that have been mentioned. The exorbitant amounts reportedly to be paid to young cabinet ministers and long serving MPs are based on misleading and incorrect assumptions.
For example, the 5 per cent inflation assumption is certainly out of whack with what the Department of Finance calculates, which is a standard of 1.5 per cent. Even Reform will understand that there is a difference between 1.5 per cent and 5 per cent.
Additionally to state that a pension figure is based on an MP retiring today and collecting a pension immediately until age 75 fails to recognize the effects of Bill C-85. They fail to recognize it because it is convenient to them. Particular attention should be paid to clause 11 of the bill which will introduce the minimum age of 55. The assumptions also ignore the ministers and MPs are not retiring today. In fact they are making active contributions to the Canadian political landscape and will continue to do so for many years.
It might be useful by way of example to demonstrate the nefarious effects of such outrageous and incorrect assumptions. The price of a $2 loaf of bread considered in future dollars would cost according to these assumptions which include compounding and high inflation $3.20 in 10 years and after 20 years about $5.30. That is the kind of gimmickry we are engaged in. Simply put, these comparisons do not accurately reflect what a former member may receive in pension. They are extremely inaccurate and misleading.
In conclusion, Bill C-85 is an accurate response to the concerns expressed by Canadian taxpayers. They have asked for reduced contribution on the part of government. Bill C-85 delivers a 33 per cent cut in that contribution. Electors have asked that we fulfil our stated commitments in the red book. Bill C-85 does that and goes further.
Our public servants, the members of the Canadian forces and other employees affected by the wage freeze are expecting us to respect the same rules as they do.