Debates of Oct. 6th, 1997

Canada Pension Plan Investment Board Act

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, if I understand the member's question, he is concerned about the accountability of that plan. I note, in reading the legislation, that there is a whole process, a board of directors as a corporation which falls under our general corporation provisions and the duties of directors to that corporation. I noticed that there is definitely a requirement of external auditors so that the external people will basically review the operations of that and report directly not only to government but to the people generally.

It is not a closed shop. We do not have a bunch of people holding on to this money in a back room somewhere. The bottom line is the people who are going to be the beneficiaries of that plan will be able to see how their money is invested and will be part of the process not only directly through the public forum but also through their members and the fact that this is answerable directly or indirectly through the political process through the appointment of the board and so on.

It is not something the government wants to get involved in on a daily basis, but there is going to be constant visibility of the mandate of this board. I think basically that is what people are asking for.

In the old system we did not know. We were not very sure where that money was going. We had the idea that it was going back to the provinces and so forth, but nobody ever saw a financial statement actually showing clearly where the float of the Canada pension plan money was at any one time. I think this is very much progress and an improvement.

[Dick Harris, Reform, Prince George—Bulkley Valley, BC]

Mr. Speaker, the Liberals are saying to the Canadian people forget about the 30-plus years of gross mismanagement of the current Canada pension plan, which is shared by the Tory government, incidentally.

They are saying forget about the way they have mishandled the pension contributions of working Canadians to the point that now seniors who are existing on the Canada pension plan are so far below the poverty line with the pittance they get from Canada pension that they cannot even see the poverty line it is so far above them.

This government is prepared to say to the Canadian people forget all that, trust it, this time it is going to get it right. “To give an idea of our plan, we are now going to charge double for premiums or 77 percent more, but listen to us, Canadian people, we are going to charge double but we are going to manage it so well that when you retire we will pay you less than what you would get today if you retired”.

That is Liberal economics. I cannot imagine how this government, with the record of mismanagement it has had, can look Canadians in the eye, particularly young Canadians who are entering the job force, and say “trust us with your money, pay more, get less”. That is the Liberal way. “Trust us. Give us a chance”. How can they do that?

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, mismanagement? The first time we have not had to go to the capital markets to finance the operation of the government in 27 years is not mismanagement. It is good management.

It was interesting to listen to the member. One of his colleagues and said those people who are getting Canada pension are getting 200 percent return on their money. Then the member says it is a mere pittance, we should give them more.

I did not know that was the policy of the Reform Party, to increase Canada pension plan benefits. I did not see that on any of its platform documents. I have not seen that anywhere.

I really have to commend it for recognizing that many seniors are living well under the poverty line and that we should be taking some notice of how to deal with that.

I congratulate the member for realizing the importance of possibly increasing some of our social spending in those areas.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, this will be my first speech in this new Parliament. Of course, I would like to start by thanking the voters in Mercier for having put their trust in me again. In return, I promise I will protect their interests with all I have got, candidly and perhaps a little impetuously at times, as I did today.

At second reading, the Bloc Quebecois supports most of the bill before us and does so for several reasons. To help our listeners understand where the Bloc Quebecois' support comes from, let us review a bit of history.

It is with some sadness that non-Quebeckers realize today that the Government of Canada and every province except Quebec should have taken Quebec's lead in 1964-65 when it established the Caisse de dépôt et de placement.

I will take a moment to describe the Caisse de dépôt et placement, in whose likeness, although only partially, the Canada pension plan investment board will be established. I say only partially because, when I read the terms of reference of the board in the bill and compare it with those of Quebec, I can see that the difference is fairly significant.

This gives me, the Bloc members and all members from Quebec here an opportunity to appreciate the extent of the vision of the political leaders, those who were working with them at the time—and I would mention Jacques Parizeau at the top of the list—in giving Quebec an instrument that ensured the people of Quebec the best return on their pensions and that provided for economic growth. It is this second element, economic development and growth to ensure better revenues, that is lacking in the case of the investment board.

However, I am going to limit my remarks to Quebec's Caisse de dépôt et placement. I will do so by quoting someone who was a Liberal and a federalist in Quebec's history, but he played a part in recovering Quebec's powers—and this person is Jean Lesage—his is one of a number of names associated with Quebec's development.

A few years after leaving office, Jean Lesage was asked what his most important contribution to Quebec had been. He replied “The Caisse de dépôt et placement”. Mr. Lesage said, on June 9, 1965:

The Caisse de dépôt et placement will become the most important and powerful financial instrument ever in Quebec.

Originally funded with deposits from the Régie des rentes, the Caisse should reach assets of $2.6 billion by 1976 and of over $4 billion 20 years from now.

I should immediately tell you about the current value of these assets, and I will do it again, because it is an impressive figure. Mr. Scraire, the current president and chief executive officer of the Caisse, wrote in his most recent report that the Caisse's current assets exceed $62 billion.

At the time, Mr. Lesage saw the Caisse as the most important and powerful financial instrument. He said:

In short, a considerable portion of Quebeckers' savings will be invested by a government organization. Under the circumstances, the organization must be geared to serve as effectively as possible the interests of those who will deposit part of their income in it. In this regard, the interests of Quebeckers are many. There is no question that we must provide deposits with the security expected from an adequately managed organization. We must, in particular, protect the accumulated moneys against the erosion caused by the price increase which, for many years, Canada, like the other countries of the world, has been unable to avoid. The Caisse de dépôt will thus provide an opportunity to invest a sizeable portion of assets in securities other than those of a fixed value.

That has been strength of the Caisse de dépôt et placement. While Canada concentrated on security, at the Caisse, they wanted to diversify investments and also contribute to the development of Quebec.

As Mr. Lesage said:

The interests of Quebeckers go beyond the security of the money they set aside for their retirement. Such considerable assets should be used to stimulate the development of the public and private sectors, so that Quebec's social and economic objectives can be achieved quickly and effectively.

Briefly, the Caisse should not be considered only as an investment fund like any other, like RRSP's, for instance, but as an instrument for growth, a lever that is more powerful than anything we have had in this province until now.

And this is still according to Jean Lesage, in 1965. It is interesting to hear what he had to say about the management of the Caisse. He said:

It cannot substitute for the government in any way whatsoever. It should concentrate on managing the investment resources Quebec needs for the greater effectiveness of government policy and that of the private sector.

In other words, its independence must be clear cut. On the other hand, the operations of the Caisse must be co-ordinated with the general economic policy of the government. Lesage felt that this co-ordination should normally take place through the board of directors.

He was very clear about it:

The Caisse was not designed to accumulate profits for its own sake but sooner or later would have to distribute those profits to its contributors.

The point of having a common investment policy was to attempt, with the help of the best people in the field, whose integrity was absolute, to maximize the rate of return on the public's investment and achieve a better balance between safe and high yield investments.

There probably was a lengthy debate, but I am sure that today, some people would prefer to have more than 40 percent of their assets in stocks. The Caisse has been very effective with this kind of investment, but its purpose has always been to strike a balance between security and maximizing the rate of return.

When the Caisse is involved in business financing, its purpose is not to take control of businesses or buy them outright. Later on we will see very briefly, through excerpts from Mr. Scraire's report, that this was not the case, although the Caisse did play an important role in a number of businesses in Quebec.

Since I do not have much time, Mr. Lesage concluded his historic speech, saying:

The Government of Quebec has developed such a set of tools over the past four years. By nationalizing private electric companies, we can not only have a more direct impact on energy prices in many parts of the province but also establish a crown corporation whose influence on industrial development is already remarkable.

The General Investment Corporation has been assigned the formidable task of transforming certain industrial sectors in Quebec. SIDBEC should normally pull along in its wake a series of secondary industries, which had been growing slowly, if at all in Quebec.

SOQIP, the mining exploration company, will foster more systematic exploration and development of subsurface resources. Finally, other tools have been announced.

The Caisse de dépôt et placement does not have as specialized a role as the organizations I just mentioned. It will, however, incorporate several specific economic policies and help fund the growth that should normally be experienced within a few years in several areas of our economy. The Caisse is expected to play a diversified and necessary role.

And the very last paragraph:

These instruments will now make it possible to develop a badly needed general economic policy.

This 1965 speech should be read over and over in Quebec, as it enables us to draw several conclusions, two of which I would like to go over for the benefit of the House.

In 1965, the premier of Quebec—and I could also quote from other speeches by then natural resources minister René Lévesque—and Quebec leaders believed, on the basis of what they had just negotiated in Ottawa, that they had control over their economic development.

After 1965, and even more so after 1968, when Pierre Elliott Trudeau became Prime Minister of Canada, Quebec could no longer get its powers back. In this vein, I think I can say, without any chance of being mistaken, that it was a good thing Quebec's National Assembly passed the legislation creating the Caisse de dépôt in 1965, because otherwise this powerful instrument, which was necessary for all the others in an unfavourable Canadian context, would never have seen the light of day. And I hate to think what Quebec would be like now.

Mr. Lesage's polite remarks about the Caisse's role are summed up a bit more bluntly by Mr. Parizeau in a book of memoirs. Mr. Parizeau, who was the architect and, some even say, the writer of the speech I just read, said that this large reserve of capital made it possible for the Government of Quebec to bypass St. James Street—let us be plain—because in the time of Jean Lesage, before the Caisse de dépôt, when the Government of Quebec wanted to pass a social policy, it had to convince the big boys in the financial district on St. James Street, who did not, I can assure you, speak French and who had no time for the future of Quebec and of Quebeckers.

So, for the first time, the Caisse de dépôt gave the Government of Quebec, of whatever stripe, freedom from the control of the big financiers.

Furthermore, the Caisse de dépôt became the sine qua non for progress in two areas of major importance: the development of businesses indigenous to Quebec, that is created and developed by Quebeckers, and the affirmation of the government's real power with respect to the central government, big financiers, and the financial community, real power resulting from its own finances.

As of June 30, 1997, the assets of the Caisse de dépôt et placement du Québec are worth $62.4 billion. The return on its investments in Quebec businesses has reached the astonishing level of 41.2 percent, thus adding to the assets of its contributors.

During the five past years, Quebec stocks held by the Caisse have yielded 3 percent more than the total Canadian stock index, that is, 19.3 percent, and this has helped the Caisse not only to guarantee the security of its assets, but also to maximize the return on investments made to provide pensions for the workers who contributed.

Several types of businesses in Quebec have made remarkable progress in recent months. I think the Quebec business landscape would not have looked the same, if we consider investments made by the Caisse in Canam Manac, Québécor, Biochem Pharma, Groupe Vidéotron and Bombardier. This is also true of small businesses like, for instance, a business incubator on the South Shore.

I will once again quote Mr. Scraire:

Ever since its incorporation act was adopted by the Lesage government in 1965, the Caisse has invested the money of its contributors wisely and at the same time financed infrastructure projects in every region in Quebec. Furthermore, it provided more than 500 businesses with the capital they needed for growth and expansion in new markets. The Caisse is also a prudent investor, active on all markets throughout the world.

We are against the Reform Party's amendment simply because, in Quebec, we feel that although the Caisse has had a better rate of return than has been the case in Canada, it is urgent to invest in strengthening the Caisse to ensure that young people will also be able to enjoy its beneficial impact on the economy and look forward to a measure of security when they retire.

This is an urgent matter. Those who argue in favour of closing the generation gap will have to hurry up and, as we intend to do in committee, take a critical look at the provisions of this bill and try to improve it. The strength of the system in Quebec is at stake—we already have a bill on second reading to that effect in Quebec—and for Quebec and Canada this is about closing the generation gap.

[Pierre De Savoye, Bloc, Portneuf, QC]

Mr. Speaker, I listened carefully to the remarks of our colleague for Mercier.

What excited me is the fact that a decision was made in Quebec 32 years ago to develop a major financial tool, the Caisse de dépôt et placement, not only to provide good return on the investments of workers, but also to promote the development of the Quebec nation.

In reading the bill introduced by the Minister of Finance with its investment board, which is limited to obtaining a good return on investment, I believe the Minister of Finance is proposing a national mutual fund whose sole objective is to act like any other mutual fund.

I am a Quebecker and proud of the Caisse de dépôt et placement and of its role. I find it sad that Canadians too cannot feel this pride over their own powerful financial institution that fulfils Canada's mission, like the one we have in Quebec that fulfils Quebec's mission.

I would ask my colleague for more details on the subject, because it supports the concerns she expressed a few minutes ago.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, I thank the member for Portneuf for his question.

The objects, as stated in clause 5, are as follows:

b) to invest its assets with a view to achieving a maximum rate of return, without undue risk of loss, having regard to the factors that may affect the funding—

I wondered how that could be. I thought just now that this Canadian fund will be a powerful instrument of centralization and that, if the objective was comparable to Quebec's objective, the provinces—certain provinces—who, at this time, are showing an interest in taking charge of their own development, and who do not trust the central government, or not completely, could worry that this powerful central instrument is not to their benefit.

At the same time, I thought that, in any event, this is going to be a centralizing tool. Once again, I say “Thank goodness Quebec was able to acquire, in 1965, this tool which made it possible, despite other hostile factors, to bring about significant development of Quebec”. Back then, Quebec did have all these businesses, with important businesses, even in certain cases multinationals, controlled and owned by Quebeckers. It is generally known that businesses in Quebec, in Canada and in North America were foreign owned.

[Gary Pillitteri, Liberal, Niagara Falls, ON]

Mr. Speaker, I welcome the opportunity to participate in today's debate on Bill C-2, the Canada Pension Plan Investment Board Act.

I would like to congratulate you, Mr. Speaker, on your appointment and to thank my constituents for the trust they put in me by re-electing me as their federal representative.

My remarks today will focus on a very important element of the legislation at hand, a new investment for the Canada pension plan.

This policy is critical to the sustainability of the CPP reforms. It enjoys the support of all the provinces and all the pensions experts. Even more important was the overwhelming support of Canadians during the public consultation on the CPP.

A number of key themes emerged from these consultations, which included 33 sessions in 18 cities across every province and territory.

What did we learn? We learned that Canadians wanted to preserve the CPP. They wanted to reduce its cost, to straighten its finances and to improve its investment practices. All of these themes are mutually sustaining. A better investment policy is vital to preserving the CPP.

Ordinary Canadians and experts alike have made it clear that a better investment policy for CPP would be one similar to that of private and public pension plans. CPP funds would have to be invested in the best interests of plan members, with a proper balance between returns and risks. This would call for an effective government structure to be put into place in order to ensure sound fund management with the right measures of independence and accountability.

The consensus in favour of this principle was clear. In October 1996 we saw the federal and provincial finance ministers adopt them as guiding principles for the new investment policy.

These principles will be turned into concrete reality by the legislation before us today.

The legislation proposes that in future CPP funds will be carefully invested into a diversified portfolio of securities in the best interests of plan members, like other pension funds. In turn, the fund will be managed by qualified investment professionals at arm's length from government by a board of 12 directors, the CPP investment board.

To ensure independence of the board, the legislation prohibits government employees from serving as directors and it requires that the board include a core of directors with financial investment expertise.

Bill C-2 includes a conflict of interest provision for directors and officers of the board even more stringent than those under existing Canadian corporate law.

The question now is why this new investment policy is necessary. Why not continue with the existing policy?

At present the CPP has a fund equal to about two years' worth of benefits. Funds needed immediately to pay benefits are loaned to the provinces at the federal government's long term bond rate, which is slightly below the provinces' own cost of borrowing from financial markets.

As it happens, this policy has given good returns until now. That is because much of the money was locked in at favourable rates in the eighties. However, with the current financial environment such a policy cannot be expected to deliver the best investment performance over the long term.

Canada's chief actuary, responsible for evaluating the financial position of CPP, estimates that the old policy could be expected to yield a real rate of return, that is the rate of return minus the rate of inflation, to about 2.5 percent annually.

Under the new policy the chief actuary considers the long term annual real return of about 3.8 percent to be realistic.

Clearly there is a lot at stake in the investment of the CPP fund. This is why a great deal of care has been given to the vital matter of fund governance in the drafting of this bill. A CPP investment board will set broad investment policies and oversee the progress of the fund but will hire qualified investment professionals to manage the investments on hand on a day to day basis.

In setting investment policy the board will be subject to fundamentally the same rules as other trustees of pension funds. Most of the investment regulations under the Pension Benefit Standard Act will be applied to the board and the foreign property rule limit for pension funds will be strictly respected.

The federal-provincial CPP agreement of February 1977 does specify a couple of further parameters for the new investment policy. For the first three years the board's domestic equity investment will be selected passively, meaning that the board will mirror one of the more broad market indexes instead of picking individual securities.

A fund that invests in this way tends to reflect the composition and the average return of the market as a whole. This requirement is meant to help ensure that the CPP fund's entry into the equity market proceeds smoothly. This investment approach is a common practice among Canada investment funds. It still allows for significant investment discretion with respect to allocation. For example, the passive equity requirements will be re-evaluated at the first triennial CPP review.

Also under the new investment policy provinces will continue to have access to some CPP funds. However, the practice of provinces paying interest on a new CPP loan below the cost of the old market borrowing will come to an end. From now on when provinces borrow from the CPP they will pay the same rate of interest as they do on the market. As a traditional measure provinces will have the option of rolling over their existing borrowing at maturity, at market rates, for almost 20 years.

For the first three years provinces will have access to half of the new CPP funds that the board chooses to invest in bonds at market rates. After these three periods, to ensure that the fund's investment in provincial securities is in keeping with market practices, new CPP funds offered to the provinces at market rates will be in line with the proportion of provincial bonds held by pensions funds in general.

Having spoken about the CPP fund's proposed investment practice, I would like to take a moment to reassure anyone who has wondered about the impact of the new fund on Canadian capital markets.

I mentioned that the policy of passive investment in domestic equity will help smooth market entry for the fund. There are additional reasons to be confident that entry of the new fund will not disrupt capital markets. Canada's capital markets are mature, well developed and growing. Moreover, the new investment fund will grow gradually in its first few years. Even after 10 years the size of the CPP fund would only be comparable to that of the Caisse de dépot and the Ontario teachers pension fund.

It should also be remembered the the CPP will be reviewed every three years. Hence there will be ample opportunity to evaluate the fund's impact on markets and to make any necessary adjustments.

Ensuring the independence of the CPP investment board is a very important aspect of today's bill. However, just as important are the provisions designed to ensure that the board remains accountable not just to the federal and provincial governments but to the Canadian public.

The investment board will keep Canadians well informed of its policies, operations and investment results in the following ways: making its investment policies, standards and procedures public, releasing quarterly financial statements, publishing an annual report, and holding regular meetings in each province to allow for public discussion and input.

In addition, the ministers of finance and human resources development will prepare an annual report on the CPP which will include the financial statements of the CPP investment board as well as the report of the auditor general on those statements. This report will be sent to the provincial finance ministers and will also be tabled in Parliament.

In conclusion, the effect of the new policy I have outlined will be to treat the CPP as a true pension plan. This is not just my view but that of experts in the pension field. One of the most distinguished of them has written that a move to a market oriented, diversified investment policy would enhance intergenerational fairness, increase public confidence in CPP finances and also increase the CPP fund's prospective rate of return which in turn would reduce the long term cost of the plan.

In short, the legislation before us will address a range of crucial objectives for ensuring that Canadians will be able to look toward their retirement years with greater confidence and security.

[The Deputy Speaker]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Tobique—Mactaquac, government expenditure; the hon. member for Sackville—Eastern Shore, fisheries; the hon. member for Calgary SouthWest, foreign affairs; the hon. member for Red Deer, foreign affairs; the hon. member for Edmonton North, foreign affairs.

[Rob Anders, Reform, Calgary West, AB]

Mr. Speaker, I hear a lot of talk in the House today about wanting an actuarially sound plan.

I know of a plan that is actuarially sound. I heard about one tier, two tier and three tier. The fourth tier they forgot to mention was the MP pension plan. There were members across the way, people who used to be members, who are collecting $3.4 million. There are people across the way who are eligible to collect $2.8 million. There are people in the Conservative Party who are eligible to collect $4.3 million.

If they are talking about something that is actuarially sound why do they not comment in terms of this pension, the one that we are going to be paying double into, 9.9 percent of our income? MPs pay only 9.5 percent of their income and yet they can collect millions. Canadians can only expect $8,800 a year for maximum contributions under the CPP. Why do they not comment on that?

[Gary Pillitteri, Liberal, Niagara Falls, ON]

Mr. Speaker, I would like to comment and make some response on the present plan we want to bring in. Had we not brought in these measures within this pension plan it would have gone up to 14.3 percent. This is almost the same as they are proposing to have as their super RRSPs. I think Canadians have confidence in the government. Canadians want to be sure that when they retire there will be a pension plan there for them. Canadians want to be sure that the future is more secure.

The hon. member was talking about the MP pension plan. I think he has just been elected. I wonder if he knows the policies of his own party. As a matter of fact, there was a member here in the last Parliament who wanted to increase the pay of members of Parliament to $150,000. I think he should be asking his own party some of those questions.

We have put proposals in the House that address the issues of today and not of yesterday. When he asks about pensions I hope he will stay here long enough to see the measly pension we will receive. I hope he can stay in the House in order to qualify for it.

[Ronald J. Duhamel, Liberal, Secretary of State (Science]

Mr. Speaker, I listened with attention to my colleague's remarks and there are two points I want to raise with him.

Would he please share with the House once again the expert's view on pension plans. I would much prefer that rather than the rhetoric from the opposition whose only purpose is to try to ridicule and diminish something to which a lot of people have given a great deal of thought. They are people with a whole lot of background. They are people with a great deal of expertise and people who know what they are talking about. Perhaps my colleague could mention that. I would like to contrast that response to that which I have just heard, which was pompous.

[Gary Pillitteri, Liberal, Niagara Falls, ON]

Mr. Speaker, I thank my hon. friend for the question.

What I am hearing across the floor is funny. It is always the same rhetoric for the haves. Let us remember the Canadians who were not able to accumulate savings, the Canadians who were not able to take care of themselves. This gives them that opportunity. I fear to ask him what would happen to the people who did not accumulate savings for their own pensions, how they would be when their retirement age comes?

The government plan is to assure that every Canadian regardless of his pocket book, when he or she retires, will have the opportunity to live with dignity and not to live in poverty as the hon. member from across the floor would have it. Every Canadian should live in dignity for the long hours and days they have worked. They should be able to know that some security is there for their old age.

There is an additional reason for us to do this expeditiously. The federal and provincial governments are joint custodians of the CPP. The proposed new rules will need the approval of at least two-thirds of the provinces representing at least two-thirds of the population before they can come into effect. We have to give the provinces the time to do this. They could come into effect within a year.

What we are asking with this policy, with this bill, is not only that the federal government be the custodian but also the provinces. They have to agree. We are not asking, as is claimed across the floor, that we should let those who have live in comfort at the expense of those who have not as much. Later on in life some of us might need to have a government that will protect us. It will not be a pension plan that is exuberant but a pension plan that is realistic.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I am very happy to have an opportunity to say a few words on Bill C-2, an act to establish the Canada pension plan investment board and to amend the Canada pension plan and the Old Age Security Act and to make consequential amendments to other acts.

That is quite a mouthful but it is important that the people who are watching Parliament recognize that we are speaking to Bill C-2, about the Canada pension plan. The soon to come new seniors' benefit package, which has major implications for future retirees, will come at a later date but today we are talking about amendments that the government is suggesting to the Canada pension plan.

To put my comments in context I have two sons in their twenties. When I chat with them and their friends I hear that they are concerned about the future and whether there will be pension plan for them. It is fair to say that for a large number, in spite of the rhetoric and the promises that they hear, they are of the mind that there probably will not be a pension plan for them.

When we talk to seniors they are concerned about the future. I think it is fair to say that there will be a Canada pension plan in the future and those people who say that there will not be are simply fearmongerers. They are trying to appeal to people who feel vulnerable at the moment. But what we are doing today as a result of these proposals is to do whatever is necessary to ensure that the Canada pension plan continues into the future and that people in the following generation will be assured of a Canada pension.

That does not say that life is going to be great for people. Already we know that if people rely on the Canada pension plan and old age security as their sole income in their retirement years, that is a very modest income. As a matter of fact it is fair to point out that thanks to the public pension plan of Canada that the number of seniors living in poverty has decreased over the last number of years and I think it is fair to say thank you to the Canada pension plan, thank you to our pension plans generally.

But it is with a great deal of sadness that we have to admit that one out of every five elderly people in our country live in poverty. One out of every five people who built this country are living in poverty. I suspect that as active members of Parliament we are in touch regularly with seniors who are having a difficult time getting by, who are have a tough time making it on the meagre pensions that they receive.

I want to ask right from the start, are these changes to the Canada pension plan going to result in more money for Canada's seniors dependent on CPP? I am reluctant to say it but the answer is no, that people will actually receive fewer benefits in the future.

When we look at the various benefits that are attached to the CPP people can expect over the next number of years to have about a 10 percent reduction in the level of benefits. That is going to impose incredible hardship on a lot of people.

The cost of living increases every year, although modestly, and for retirees who are in trouble today financially, things are going to be worse actually in the future. That is what this legislation says. It is a modest reduction but nevertheless a reduction.

I want to go back and talk a bit about the Canada pension plan and how we got into this situation. It was established in 1966 to provide all members of the paid labour force and their families with a base on which to build their retirement income as well as benefits in the event of serious disability or death.

Again, let us just pose a question rhetorically, will people receiving death benefits get a better deal in the future? With this legislation the answer unfortunately is no. Will people with a disability get a better deal in the future? The answer to that as a result of this legislation is also no. The legislation makes it more difficult for people suffering from a serious disability to apply for and receive Canada pension plan benefits.

Is this something that we actually want to do as members of Parliament? If someone is experiencing a serious disability and is unable to work, do we really want to make it more difficult for them to receive benefits? And fewer benefits at that. There seems to be something wrong with some of the basic logic.

We also have to acknowledge the fact that one out of five seniors is living in poverty. We would like to see an increase in the CPP, but in fact with this legislation we will see a marginal decrease.

We have to ask ourselves what kind of a country we have that does not care well for its elderly. I forget who it was that said a few years ago that you can tell an awful lot about a society when you see how it cares for its children and its elderly. There are 1.4 million children living in poverty. One out of five seniors is living in poverty. We have a long way to go. I regret to say that this legislation will not improve the situation significantly.

Why was this legislation required? When it was set up back in 1966 the economy was different. There were some assumptions built into the benefit levels and the premium levels. Things have changed. We were informed, accurately so, that this plan could not continue as it is without getting into serious financial difficulty. I do not think there is a single Canadian who would argue against that. Canadians were calling on the government to change the system. They do not want to do away with the system, as some would suggest. However, we have to make the necessary changes to ensure that the Canada pension plan is there in perpetuity. To be fair, this is an effort by the government to do just that. Whether it accomplishes that is another question.

There are some good points and I want to identify them before I get into some of the concerns which New Democrats have. One is the fact that transparency will be built into the system. That is a positive feature of the legislation. Another is the fact that Parliament will have an opportunity to review the system's effectiveness on a regular basis. That is also positive. Also, seniors will receive on an annual basis a statement on the state of health of the Canada pension plan. That will be helpful. The fact that it does not touch existing seniors' packages is also helpful. People who are retired today will not have to be concerned about some of the matters we will be raising in the next few minutes because they will be exempt.

Yes, there are positive features to the legislation. Perhaps most importantly, it makes a serious effort to ensure the viability of the Canada pension plan. For that we must all be pleased.

What are some of the concerns? Of course we will address these concerns when the legislation is considered in committee.

One of the concerns we have is that it would appear that this may have a very detrimental impact on job creation in the country. If we take $750 annually in additional payments out of each person's pocket, that removes a lot of disposable income from our citizens. When $700-plus is taken for every employee in a firm, that takes a lot of money from that firm. It will take a lot of dollars out of Canadian communities.

I did a calculation for one of the communities I represent, the city of Kamloops. The amount of money which will be taken out of the local Kamloops' economy as a result of individual contributions and company contributions which match them will add up to approximately $80 million annually. That money will be plucked out of that one small local economy. It will not be there to circulate time and again between businesses and so on. That will make a very major dent into the employment situation in that community.

If we take that right across the country into every community, large and small, what will that do to those seeking employment today? Will it give them a better chance? The answer is no. What about those who are in insecure job positions today? Will this give them some confidence? The answer is no.

Will it give consumers more confidence to go out and purchase goods and services? The answer is no.

This has to be a concern. Do we know what we are doing when we pluck that kind of money out of a local economy, about $80 million annually out of Kamloops, B.C., once the program is fully into place?

As a result of the impact particularly on small and medium size businesses where I think it is fair to say times are not great for many, an increasing amount of underground economy will be encouraged. Employers will be more inclined to hire people on a contract basis so that they do not have to make contributions to the Canada pension plan.

I am not talking about only small or medium size. Some of the larger businesses in this city that hire thousands of people use that approach already. Many of their employees are now on a contract basis to enable them to escape payroll tax. It is a payroll tax by any definition.

I remember being in the House a few years ago when the Conservatives brought in five or six increases to the Canada pension plan. Every time the Liberals in opposition would rise in a howl about the increase in payroll tax.

Now the sides have flipped a bit and the Liberals are suggesting it is not necessarily a payroll tax. It looks like a payroll tax, tastes like one, smells like one, and probably is one. I think it is fair to say this is a major payroll tax increase. What impact will it have on the ability of the country to produce jobs?

Another concern we have as New Democrats is that changing the way the fund is invested from providing funds to provinces into an investment fund will have an impact on some of the poorer provinces of the country.

If some of the more wealthy provinces were not able to get lower rates from the Canada pension plan, they will go on to the regular bond markets. The poorer provinces will have to pay more for the money they borrow, which again will pose a hardship on certain provinces of the country.

We can look at the fund. We can debate its merits and the way it is constructed. The 12 person management board will manage funds in a very diversified portfolio of stocks and bonds including provincial bonds and so on. The anticipated cost will be about $500 million.

If we are to be providing a fund perhaps as high as $126 billion in six years, that fund generated by the citizens of Canada ought to go into helping those firms that will create jobs.

If the fund is invested in the safest bet it will probably buy a lot of bank stock. Will it actually help the Canadian economy by having the fund hold bank stocks?

We can look at the Quebec government plan. It has a very clear directive to the Quebec pension plan to invest moneys that will create jobs in the province of Quebec.

This seems to be a very honourable motive. If we as parliamentarians are to use $126 billion of taxpayers' money in a fund, it would not be inappropriate for us to say we want the funds invested in secure areas. After all it is a pension fund. It should invest in areas that will result in some additions to the economy in terms of new jobs, new research, various affirmative action programs or programs to assist young entrepreneurs or young people to enter the job market.

A very clear direction should be given from the Parliament of Canada that we want the fund invested in useful ways as opposed to a fund that will perhaps buy bank stocks which will have marginal impact on assisting the Canadian economy generally. That is another concern.

What does the fact that these premiums will increase about 73 percent over the next six years mean in terms of disposable income for people?

We are not convinced that a 73 percent increase is necessary. When members look back at the reports on which the present legislation is based, they will see that the government assumed the worst case economic scenario in terms of worst case interest rates, worst case inflation rates, worst case economic growth, worst case unemployment levels and so on.

I am not suggesting we should take the glorious side, but when making projections over a 20 year period it is fair to say that we should not always take the most pessimistic scale. We should take the medium scale or a scale that will be reasonable over that length of time. Then the increase in premiums could be significantly lower.

We have some serious concerns about the legislation. I emphasize the impact on those who are disabled. It will make it more difficult for people with serious disabilities to qualify for the Canada pension. Is this really the kind of legislation we want to introduce?

I suspect that most members of Parliament working in their constituencies inevitably spend a good deal of time with people who are having difficulty qualifying for Canada pension disability. We go to bat for people and help make their cases. Almost universally they are rejected the first time they apply. Then they try again. Many months go past with people living in a marginal fashion and then being either granted or denied Canada pension disability. The legislation will result in making the process even more difficult for people and the benefits less.

Is that really what we want to do? I think not. If people are taken out of the workforce through no fault of their own, either as a result of disease or an accident, and cannot provide for their family, will we as serious, caring, compassionate people make it tougher for them to qualify under the Canada pension disability program? This legislation says we will.

I do not know if we appreciate what a person receiving Canada pension plan disability would get. It is less than $9,000 a year. I would like to see anybody raise a family on $9,000 a year. The legislation will make it more difficult for people to access it and they will receive even fewer benefits.

Obviously I could talk about a number of other items. We will have an opportunity to raise these concerns in committee.

In closing, Canada is distinguished from many other country by the way we treat each other, the way we care for each other. It is fair to say that as a result of the old age security program and other pension plans like the Canada pension plan we can take pride in that fact major steps in the past have ensured that Canada's elderly are able to live out their lives in dignity.

With the changes being proposed, will that be the case in the future? I think of my previous colleague, Stanley Knowles, and many others who have worked hard to ensure that the standard of our plans in support of seniors continue to increase and improve. I wonder if this regressive step is appropriate for the government and parliament to take at this time. I obviously think not.

Next weekend I will be sitting down with my dad who is in his late 90s and my mother who is in her late 80s. They are probably listening to me speak today. I will have to tell them that we are looking at legislation that will result in diminishing their pensions. I know how they will respond. They are very generous people who live a very modest lifestyle. They will scratch their heads and wonder if we have gone crazy. Why on earth would we as a parliament want to make the lives of seniors more difficult in the future?

We live in the richest country in the world. It seems to me that all our seniors ought to be able to live out their lives in dignity. The fact that one out of five seniors lives in poverty is immoral and we ought to change that.

I urge members to gives some thought to the concerns my colleagues and I will be raising. Let us change the Canada pension plan to make it a plan for the future that will enable people to live out their lives in dignity. For goodness' sake, let us not amend the plan so that the lives of seniors will actually be made worse in the future.

[Murray Calder, Liberal, Dufferin—Peel—Wellington—Grey, ON]

Mr. Speaker, I listened with interest to the member for Kamloops. Over the last four years I have known him to be a member of Parliament who really cares.

I was happy to hear that he agrees with certain parts of the CPP. Of course there are parts that he does not agree with. When we take the bill to committee we will tinker around to see if we can make it agreeable to everybody.

I would like to question the member on his thought about the increase in CPP causing unemployment. That could be a concern. I have raised the issue of CPP disability before. I raised it with a member of the Reform Party as well.

Currently 300,000 Canadians are receiving CPP disability. Another 50,000 in Quebec are receiving QPP disability. For 1997 that will amount to $10,597 a year or $833.17 a month.

If CPP does not exist in the same way, what would an insurance policy cost to replace those benefits? The whole workforce would have to become involved in it. If they did not have an insurance policy they would not have coverage.

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I listened to the member's preamble, with all due respect, but I do not quite understand the question. Could he repeat it?

[Murray Calder, Liberal, Dufferin—Peel—Wellington—Grey, ON]

Mr. Speaker, if we change CPP, one of the changes could be the disability benefit part. If it is to be replaced it would have to be with an insurance policy.

Would the cost of that insurance put jobs in jeopardy? I do not think we could get it as cheaply as we are paying out for the same benefits?

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I do not know what it would cost to provide disability insurance under a private plan. I really could not say. I would have to look at the actuarial tables and attachments.

If we as members of Parliament think that by increasing premiums to individuals and businesses to the tune of $700 annually will not have a major detrimental impact on a lot of the local communities in the country, we are dreaming in Technicolor.

[Dick Harris, Reform, Prince George—Bulkley Valley, BC]

Mr. Speaker, I thank the member for Kamloops for backing up so many of the concerns of the Reform Party. We have been saying for months that the CPP increase was simply an increase in payroll taxes. The member for Kamloops just confirmed that, and we appreciate it.

We also talked about and will continue to talk about the detrimental effect this tax hike will have on jobs. The member for Kamloops agrees. He knows very well that taxes kill jobs. We thank him for that.

He also talked about people having much less disposable income and not having as much money to spend in their communities. We thank him for that. Perhaps we should invite him over to sit with us. He sounds so much like a Reformer that I had to look twice to see who was doing the talking.

He did voice some concerns. The Reform Party has come up with a very credible alternative to the government proposal. As mentioned by the member for Calgary—Nose Hill, it has been submitted to think-tanks and the C. D. Howe Institute. They have all said the numbers work.

Precisely what alternative plan, if any, has the NDP Party created that it can offer as a viable and rational alternative to the disaster the Liberal Party has come up with? What specifically? Is there a plan? Does the NDP have a plan or is it just simply criticizing, hoping to come up with one as soon as it can?

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, I first want to indicate to my hon. friend that the super RRSP solution is in our judgment not the answer. Somehow there is the implication that the super RRSP would not be a cost to the Canadian taxpayer. It would be a huge cost. Even the present RRSP system is costing $18 billion a year in terms of lost revenue to the federal government.

To answer my friend specifically, if he listened carefully he would have heard me say that the assumptions on which Bill C-2 is based were based on a model that we believe is incorrect. We feel it is inappropriate that Reform based its recommendations on what we feel is a worst case economic scenario over the next 20 years. A much more modest set of changes along these lines would be acceptable.

We believe in the public pension plan system. My friend would know that while his plan was based on an example in Chile, we are suggesting what almost every European country that has gone through this process has adopted. It is fair to say that the lifestyle in Europe is somewhat superior to the lifestyle in Chile without saying anything negative in particular about that country.

We believe in a public pension plan. We believe that the Canada pension plan has worked well until recently. The changing economic times require some changes. I have yet to find a single Canadian who says they are not prepared to provide more premiums if they are guaranteed a pension when they retire. Let's face it, the modest increases over the years have not kept up with the realities of the economy and the growth in the pension fund, but I find Canadians by and large quite accepting of this notion.

We believe the government has gone excessively too far. That is why I say that we have a number of concerns we want to see addressed in committee. We want to see the bill come back to the House after committee with a set of changes much more in tune with the economic reality of the future of the country.

[Pierre De Savoye, Bloc, Portneuf, QC]

Mr. Speaker, the modifications that are proposed to the CPP will of course shrink a certain number of benefits. Happily this is not so with the Quebec pension plan.

My concern is with the Canadian pension plan super mutual fund that the government will put in place to manage those moneys. Our colleague from Kamloops rightly mentioned that taking $80 million out of Kamloops will certainly affect the local economy. The only way that jobs will not be lost is to reinject that money in that area through this kind of mutual fund. If they funnel the money to Toronto we will be in a lot of trouble throughout Canada, Quebec being a special case because we have our own organization there.

How does our colleague react to that? Is he afraid Toronto will get it all?

[Nelson Riis, NDP, Kamloops, BC]

Mr. Speaker, when you look at the way the federal government normally does its business, yes that is a fear in terms of patronage allotment of funding.

The reality is we have to be more confident in the ability of the management team that will be there. That is why I believe it requires very clear directives from Parliament in terms of how these funds are to be used. I would think they should be directed to those areas of Canada that have experienced particular difficulties, in the smaller communities and the more rural areas, the more remote areas and so on.

I say with a great deal of satisfaction that we can look as an example to how the province of Quebec has used its investments with very clear direction to its management board as to how these funds ought to be utilized to the best benefit of Quebec business again with job creation as a major function of these investments.

If we were to do that then a great deal of the $80 million that is being extracted from a community like Kamloops will be reinjected to assist local businesses and create the jobs that probably would have been lost by that removal of funds.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I am pleased to participate in the debate on Bill C-2. I would like to speak to my constituents and to Canadians about the Canada pension plan.

Many Canadians are concerned about the Canada pension plan. They are concerned about its features, about its security. Sometimes they get confused about how it relates to employment insurance, old age security, the GIS, RRSPs, RIFs and all of the other financial instruments that seem to be part of our daily dialogue in this House.

They also hear things like the plan is bankrupt or it will not be there for them when they get to retirement age. These things are not true.

I want to start my comments to this House by assuring all seniors in Canada who are currently receiving benefits under the CPP system, whether they are survivor benefits or disability benefits or whether they have reached retirement age and are collecting benefits, that under the proposals before the House those benefits will remain unchanged. They will continue to be fully indexed and will continue to be there for them so that they can enjoy the security and dignity of their retirement.

I want to clarify a few of the facts about the Canada pension plan system. I have this concern that Canadians do not know enough about our Canada pension plan system, the very basics of what it is all about. I want to review a bit of the background, a bit of the history, so they can have that level of confidence improved.

The Canada pension plan which came in in 1966 has as its hallmark the fact that it is a universal program. It is not an income redistribution program. It is not like the OAS or the GIS which are available based on your level of income. The CPP is available for participation by all working Canadians from the ages of 18 right up to 70. It is a plan that requires contributions by an employer and an employee on a matched basis, and the self-employed individual pays the full amount.

Canadians should also know that the Canada pension plan system is a joint responsibility between the federal government, the ten provinces and our two territories. Anything that happens in CPP requires the approval of two-thirds of the provinces, representing two-thirds of the population. Canadians should be assured that the best interests of all Canadians in all regions are being taken care of as we move forward to renew the Canada pension plan system.

When the plan came in back in 1966 it had to respond to the realities of the day. Who was retiring in the mid-sixties? It was Canadians who came through the depression of the thirties, through the war in the forties. These are Canadians who had a totally different dimension of Canadian life during what we would consider as their prime working years. It meant they did not have the kind of savings they otherwise would like to have had for retirement, and they had very little. As a consequence of the plan's being set up in a way that would allow benefits to reach full pension entitlement by 1975, it was accelerated. Because of that acceleration and because there were so few people working and making contributions there was no possibility of fully funding the plan. There was no possibility of asking Canadians to immediately put in dollars they needed for food and for basic subsistence.

The plan first paid out in 1967 to those who were 68 years old, and the first pension paid to a 65 year old occurred in 1970.

The Canada pension plan system is not just a pension. Possibly it is misnamed. Everyone knows that on reaching retirement, and you do have the option to retire early, currently you can get a pension of about $8,842.

There is also the ability to retire early, up to age 60, and receive a reduced pension of 5 percent for each year of reduction. A person can increase their pension entitlement by 5 percent each year if they defer their pension to age 70. There is some flexibility.

A very important tax planning point for all Canadians is that one spouse can split up to 50 percent of their Canada pension plan benefits with their spouse. That is very important if the other spouse stayed at home to manage the family home and care for preschool children and, therefore, does not have a sufficient number of working years. Possibly they did not work. It allows the income to be split. It is an important opportunity for Canadians to consider whether the income splitting of their pensions will reduce the tax burden on the family.

In addition to the pension portions there are important insurance components of the CPP. There is a survivors benefit. If a spouse passes away there is a continuing benefit to the surviving spouse even if they are under 65 years of age. There is also a benefit to the surviving children of $2,000 a year up to age 18 and up to age 25 if they are students.

One of the most important components of the Canada pension plan system is the disability feature. It means that Canadians who are in the unfortunate situation of having had a stroke or who are otherwise unable to earn an income can receive a disability benefit from the Canada pension plan. They will receive the disability benefit until they reach age 65, at which time they will commence collecting the normal pension payment.

This plan is secure, it is indexed and Canadians should know that it is not just a pension. We do not have to look simply at the money we put in and the pension we will get out. The plan is much more than simply a pension. It is an insurance program. It is there to protect Canadians.

Many of my colleagues have talked about the funding as being pay as you go. That is basically because in the start-up period that is exactly what was appropriate for that time.

Members have also noted that we have two years' worth of benefits. There is some $40 billion of Canada pension plan contributions invested in provincial bonds at a federal rate. Members might be interested to know that in 1996 those bonds generated a return of 11 percent. That is not nominal.

A lot of the discussions we have had today have been around the investment board. Canadians should understand that we are talking about getting into a more diversified portfolio of investments so there is a possibility to earn even higher rates of return. The more income the fund generates within itself, the more dollars are available to keep the costs to the employee and employer down.

There is another issue which I wanted to touch on briefly and that is the issue of the unfunded liability. Because of the way the plan was structured, there is no money waiting to pay the benefits. In fact about 30 years of benefits would have to be in place, which is a very substantial amount of money, and that cannot happen very quickly. The compromise is to move to fuller funding than we have today.

I wanted to talk a bit about the problems. The chief actuary in this plan requires a 25 year schedule of rates which employees will pay. The chief actuary has basically advised Canadians that although we pay at a rate of 5.85 percent, which is split equally between the employer and the employee, this rate will have to increase to 10.1 percent by about the year 2015, and by 2030 it will have to be raised to 14.2 percent. Those are the mathematics which are in place now.

All members would agree that the 14.2 percent is much too high a burden to ask current workers to pay to fund their future pension entitlements. Fairness and equity are important issues and important challenges.

If we were to make comparisons we would note that Sweden has a 21 percent contribution rate. France has a 19.8 percent contribution rate. Admittedly they do not have old age security or the GIS. However, we can see that if there is a need to provide benefits and we have not planned that rates can go very high.

Canadians should understand the important thing is to determine how we can modify and how we can massage the current Canada pension plan system so that benefits will be there for each and every generation to come on a fair and equitable basis. We do not want to pit seniors against youth and women against men or social groups who want all kinds of benefits which they feel they are entitled to.

We are not here to pit Canadians against each other because of the difference in their age or the difference in their income level. It is a universal program. It is there for all Canadians.

I will give an example. A gentleman whom I know very well, Mr. Phil Connell, who lives in my city of Mississauga appeared before the public hearings on this CPP review. Mr. Connell said that his contributions to the Canada pension plan up until he retired some seven years accumulated to about $9,300. He said “Yes, I get the employer's share which makes it $18,000 and that $18,000 was earning some income”. Mr. Connell also told the panel that his seven years of benefits from the CPP were $54,287, about five times more than he put in. He called it scandalous.

We understand very well that as the plan grows, matures and things change that we do have to deal with that. I repeat, Canadians, our current retirees, have to be assured that their benefits will not be affected by what we are doing in this place. They are going to continue at the current levels and they are going to continue to be indexed and they are going to continue to be there to protect them.

There are some factors which have changed which we have to take into account as we make these changes. First, Canadians are living longer than they did in the past. In fact we are living 3.1 years longer in retirement. In addition, it is expected that by the year 2030 we are going to live a further 1.4 years. In total, Canadians will live about four and a half years longer in retirement than current retirees.

Obviously because of medical technology and so on, it means that Canadians as a whole are healthier and we are going to live longer. That means retirement pensions are going to be drawn for longer periods of time. It means that it is a higher burden on the Canada pension plan system to deal with it.

The baby boomers are coming. Everyone knows that. There are going to be more seniors. In fact today we have five workers for every pensioner. By the time we get to the peak we will only have three workers taking care of one pensioner. We see that these are natural things that have nothing to do with anybody's whim or whimsy. It just happens to be the demographics of Canada.

The Canada pension plan was planned to have a rate of somewhere around 5.5 percent but we have had changes. The low birth rates that we have had in Canada and people living longer have added another 2.6 percent. We also have had slower growth in our worker output, lower interest rates in the sixties and even though it has risen in the seventies and eighties to around 6 percent it was very low in the early years. That has added an additional burden of about 2.2 percent. We have also enriched benefits for Canadians by indexing the Canada pension plan in 1975 and also providing survivor benefits in 1975.

Who could deny the disability benefits that are applicable? There are more claimants now and the claimants are for longer periods of time than ever was anticipated. That has also added about 1.5 percent. All of these things have contributed to put pressure on the Canada pension plan system so that now is the time for us to deal with it.

Parliamentarians are not deciding what we should do and why. There were public consultations and they happen every five years. There were some 33 sessions of public consultations between April 15 and June 10 right across Canada.

People had all kinds of very interesting input. I would like to highlight for members what the results of those consultations were. First, the consensus was that the CPP system was worth saving. That is very important.

Second, they said that the CPP should remain as a program that is not for redistribution of income but rather universal and available to all. Therefore, it is not going to be income tested.

Third, they said that it has to be fair across the generations and between men and women.

Fourth, they said that it had to be affordable and sustainable for those future generations.

Fifth, they asked that the administration be tightened up to make sure that it is efficient and that the 1 percent cost of administration is kept at that level or lower.

Sixth, they do not want ancillary benefits to jeopardize the principal benefit, being the pension income.

Seventh, they recommended that any future enhancements or enrichments of the CPP program must be fully funded.

These are just some of the results of the cross Canada consultations that took place involving the federal government, the provincial governments and the territories. These are the results of consultations with Canadians.

What is before the House are important recommendations for improvements and changes to the plan to make sure that it is fair and equitable among generations, that it is sustainable and that we do the right thing.

The amendments to the act do not affect all present retirees as well as those on disability or who have survivor benefits. Their pensions will remain indexed. The ages for retirement will remain unchanged, despite the fact that there were rumours of the retirement age rising two, three, four or five years. There is no change in retirement age.

We are going to move to a fuller funding. It will not be fully funded but there will be more funding than we have had in the past. Instead of just two years of reserve, there will be up to five years.

We are also going to create the investment board. That means that we will have professionals who are going to manage that fund to make sure we get a competitive return with other investors in the marketplace.

The contributions will rise over the next six years to 9.9 percent. It will be on a gradual basis, not in one shot. It will be on a gradual basis because that is the Canadian way. We want Canadians to have a chance.

Again, I want to assure all seniors who have always been the targets of the unscrupulous and those who would take advantage of seniors because they may not understand what is happening. I want them to know, on behalf of all parliamentarians here, that based on the consultations we have had across Canada we are here to act on behalf of the best interests of all seniors, of all youth and everyone in between.

[Jean Dubé, Progressive Conservative, Madawaska—Restigouche, NB]

Mr. Speaker, I will be sharing my time with the hon. member for Markham.

Mr. Speaker, when the Minister of Finance tabled his bill to amend the Canada pension plan last February, he claimed to have guaranteed the future of the three pillars of our retirement income system. Those three pillars are the Canada pension plan, old age security and the guaranteed income supplement, and the fiscal support mechanisms for retirement savings, such as the registered pension plans and RRSP's.

The government has indeed proceeded with some major changes to our retirement income system, but like most of the things it did in the course of its first mandate, these changes are full of inequity, lack vision and are an unprecedented attack on those people who most deserve help from the government.

Regarding old age security and the guaranteed income supplement, the government announced in its 1996 budget that it would replace these two measures by a single seniors benefit. The government made a commitment at the time to introduce a bill and start public consultations on the new benefit in the fall of 1996. A year later, still no bill, still no consultation on legislation that will affect many Canadians.

The government did not want to proceed with thorough public scrutiny of the seniors benefit before the election. What was it afraid of? It was afraid that the truth would be revealed and Canadians would realize that with the new seniors benefit, single seniors with an income exceeding $31,000 would be disadvantaged, as would couples with a combined income of $26,000.

He was also afraid we would discover that recovery of 20 percent of the benefits combined with the current rate of taxation would result in a real rate of taxation of 60 percent for middle income seniors. Nobody would want to save anymore for their retirement anymore.

In terms of tax breaks for retirement savings, the Liberals received $300 million in new taxes from seniors by deciding that the old age tax credit would be included in income. Furthermore, the 1996 budget requires Canadians to convert their RRSP in the year they reach 69, whereas in the past they could wait to do so until they were 71.

They also twice cancelled planned increases to RRSP contribution ceilings. The government has also considered more than once the possibility of taxing RRSPs. Canadians have no choice but to take other measures to ensure long term retirement income before the end of their active life. An ever growing number of Canadians have already understood and are contributing to registered retirement savings plans.

However, because of the regulations governing RRSPs, they are unable to get the best return on the market for their money. Restrictions on foreign holdings prevent them from creating a portfolio varied enough to reduce financial risk.

Now the government is asking us to approve the principles of these changes to the Canada pension plan. Although everyone agrees on the need for reform of our pensions, the government's approach contains some very disquieting elements.

According to the Minister of Finance, the current CPP contribution plan should be changed in response to the concerns of the plan's chief actuary.

This means that Canadians will have to pay $11 billion more a year in CPP premiums without the benefit of other tax cuts to offset this hike. In fact, this was such a contentious issue during negotiations with the provinces that the agreement, which was supposed to be reached in 1996, was only announced in 1997 by the Minister of Finance and the Minister of Human Resources Development.

Ottawa's refusal to bring down EI premiums at the same time as CPP rates go up had been the biggest barrier to an agreement. Self-employed Canadians will be hard hit by this accelerated hike in premiums as they have to bear the burden of the combined employer-employee tax rate. This means they will have to pay $3,270 a year in 2003, thus removing financial incentives.

Self-employed individuals should be provided with greater tax assistance on what normally would be the employer share of contributions. Premium increases also place a greater burden on the working poor which include women and young people.

Nowadays, there are five people of job age for every retired person. In twenty years or so, this will have changed to four workers for every retired person and, when today's young people retire forty years from now, the proportion will be three for every one.

Future generations will bear the cost of the changes, because they will have to pay higher premiums, while receiving lower benefits. The cost of changes will not be borne equally by the different generations, and this should be unacceptable to a government that says it is concerned about the future of young people. Many of them have no faith in a public pension plan and who could really blame them?

The Liberal government promised that retired people and those over 65 on December 31, 1997 would not be affected by the change. The government also promised that those now receiving disability benefits would not be affected by the measures.

When we know that 4,000 people are now waiting for their application for disability benefits to be heard by the CPP appeal tribunal, we are entitled to wonder whether the government is not trying to drag out the process so that people will receive reduced benefits under the new rules.

This may well not be the government's intention, but we must point out that it is unacceptable that those waiting for disability benefits must wait up to four years for a settlement.

This mismanagement does nothing to give the public faith in the ability of the present government to administer the CPP. This lack of faith now extends to the government's proposal to modify substantially the structure, financing and investment of the CPP.

You will forgive me for not believing what the government says about the benefits of reform. I do not question that it is sincere in wanting to rectify the problems facing the CPP. I just question its methods.

I urge the government to review the impact these changes will have on the most disadvantaged and to take action to ensure that the cost of restoring the viability of our pension plan is borne equally by all Canadians.

[Rob Anders, Reform, Calgary West, AB]

Mr. Speaker, this problem in terms of the baby boom generation coming up and creating a bulge in the Canada pension plan is something that has not been hidden from anyone. It is something which has been obvious for years. The whole idea of the baby boom population burst has been talked about for at least a decade, certainly within my frame of reference.

However, the party across the way and the government have both been responsible for the boondoggle that has happened with regard to the CPP. The way they set it up was intrinsically flawed. It was set up as a pay as you go system rather than somebody's individual earnings and payments going into the plan to look after them in their retirement. It is a pyramid scheme.

When they were in government did they not realize this was coming to fruition? Did they not see these things?

[Jean Dubé, Progressive Conservative, Madawaska—Restigouche, NB]

Mr. Speaker, if we had been given a chance, I think we could have changed it in a positive way. Our party believes there is a need for change in the system, but it is how the changes will be made and how they will affect Canadians, low income earners, youth a women.

We heard the government a while ago say that there was no problem because there was a lot of money in the fund. We have heard it say no problem before. We heard it with the last referendum in Quebec. We heard it with the EI, that there was no problem.

In my riding in New Brunswick I have seen what the EI reform did to the citizens there. It was detrimental. We want to make sure that the government listens to what Canadians have to say and make sure that Canadians are consulted. There are problems in the way the plan is being presented. Believe me, if it does not listen it will have a problem.

I am saying to the government today to make sure that consultations continue.