Debates of Oct. 7th, 1997

Canada Pension Plan Investment Board Act

[The Acting Speaker (Mr. McClelland)]

Excuse me, hon. members, if we could keep it down in the House while other members are speaking.

[Jerry Pickard, Liberal, Kent—Essex, ON]

Mr. Speaker, that was very kind of you. The folks across the way could listen and learn a bit about the CPP legislation. Then they would understand. There is a very good colleague across the way who happens to be a parliamentary secretary who is helping them understand some of the finer details and we very much appreciate that.

In the review of what I talked about yesterday it is critical to understand that the legislation which started 30 years ago needed some upgrading to be brought into the reality of today's society. Certainly when the chief actuary reported that there was a tremendous imbalance in the relationship between the contributions on the one hand and the payouts on the other hand and that it would not be a long sustainable plan, the finance minister took it upon himself to make certain corrections were made.

As I pointed out, the minister did not move along in this in some way in that he did not hide the fact that this plan needed revision. He went about it in a very open clear obvious way. He did consultations with all provincial and territorial governments in trying to examine the direction we should go. He talked to professional actuaries across the country, insurance experts. He talked to social planners, seniors, youth and the disabled to make certain that all the elements of society that are affected by the Canada pension plan were taken into account.

The consultations took a very long period of time. The answer that came back from Canadians was to keep the CPP and to make changes if necessary. The message was that the CPP is a very vital part of Canadian society, a very foundation under which we operate and one that needs to be maintained.

I also pointed out that there were some distortions when talking about the CPP. Many colleagues across the way have suggested that it is a tax grab. Quite the contrary. This is a savings plan, an investment fund that will be managed by an independent body. Any profits that come to the management of that independent body will go back into the fund. No dollars will go into general revenue. It is an independent fund that will be managed separately.

CPP contributions are tax deductible and therefore a tax deductible process that is put in place for the future of Canadians, for seniors of today. When we look at it, there is no question that it is a very vital program.

Anyone who says it is a tax grab is saying “Don't put any more money into it”. If that is the case, the reality is that if no more money goes in, payments do not go out. In reality what they are saying is no CPP for low income seniors in the future. That is a shame because that is removing the vital foundation under which this country operates which is to look after the seniors of this land. To say “Don't put money into the CPP” is to say “Low income seniors, we don't care about you”. I have a tremendous concern about that.

The basic features remain the same today as they were before. What we were told as well through these consultation processes that I pointed out yesterday was to go very easy. We were told not to go at this process very rapidly to alienate, hurt or upset any group in society. The plan was put in place so that changes would occur over a seven year period. Those adjustments would not be put in immediately. They would be spread over a seven year period and therefore it would not be a catastrophe or a blow to any group in our society.

Thus I have arrived at the point where I finished last night and I am continuing today. The impact of the changes will be shared among retirees, future survivors of retirees and recipients of disability benefits.

As noted earlier, one currently in receipt of a retirement pension under the CPP will not see that pension change. Let me state that again because that is something everyone in this House and everyone in society should be aware of. If you are in receipt of a CPP pension today, that will not change. All of those people who have pensions now can look forward to that same pension over the years without change.

However retirement pensions for future beneficiaries would change since the calculation would be based on five year maximum earnings instead of the current three. As an example of that impact of the proposed change, the maximum monthly pension based on the year's figures would drop from $736 to $724. That proposed change means a $12 a month change in benefits. That is a minimal change. It has been designed to be minimal, not to upset or destroy the balance but to make it affordable and make those changes minimal.

There are also changes proposed in the disability benefits of the CPP. As of now, to qualify for a disability pension an applicant must have contributed to the CPP in two of the last three years, or five of the last ten years. The bill proposes to change that requirement so that to be eligible for the benefit you must contribute in four of the last six years.

Changes are also proposed to the formula which will be used to calculate the disability levels. Under these proposals, pensionable earnings would be based on the applicant's maximum pensionable earnings at the time of disability.

I see I have a short time left to finish and there are a couple of points I would like to underline. We found ourselves in a position from the actuarial studies that stated that changes had to occur in the plan. We have tried to make those changes as easy and spread over a longer period of time as possible. We believe it is very vital that all seniors have pensionable earnings. We believe that seniors must be protected with the Canada pension plan and it has to be put in place to be sustainable.

Anybody who says you cannot increase the rates is saying you cannot pay benefits to seniors in the future. That is the reality. It is either pay into the plan and pay the benefits, or do not pay into the plan and cut the whole CPP.

What I am hearing from the right wing side of the House, from the Reform Party, from the Conservative Party, is they do not want seniors to have the Canada pension plan any longer. That is the reality if they are saying not to renew it or not to do what needs to be done to improve the plan.

Liberals strongly believe this fundamental foundation in security has served Canada well and will in the future.

[Jean-Paul Marchand, Bloc, Québec East, QC]

Mr. Speaker, I was particularly impressed with the comments from the MP for Kent—Essex saying that the pension plan is not a tax grab by the government, that the funds that would be put into the pension fund would not be used for purposes other than pensions.

I submit to the MP for Kent—Essex that the government increased UI premiums and instead of using this money to help the unemployed, it used it to reduce the deficit. This was a misuse of that money.

What about the GST, the famous tax that was supposed to be abolished by the government? The GST was never abolished as far as I know. I ask the MP from Kent—Essex if the government can be trusted not to use funds in the pension fund for purposes other than the pension plan.

[Jerry Pickard, Liberal, Kent—Essex, ON]

Mr. Speaker, I appreciate the question from my colleague. I am surprised because he was sitting in the House when the Liberal government was elected in 1993.

The member referred to the unemployment fund. The first measure that the government undertook in 1993 was to stop an increase scheduled by the Tory government before we were elected. Then under three subsequent budgets we reduced the EI contributions, once, twice, three times. We reduced them in every succeeding budget. For the member to suggest that we increased them, I wonder where he has been for the last three and a half years. Certainly he has not been studying the legislation.

I would like to continue on that point which he opened the door for and reiterate very firmly so all Canadians understand, that we will have a fund. It will be a tax deductible contribution by Canadians. It will pay for the CPP benefit. It will be administered by a separate body. Not one penny of contributions will go to the general revenue fund. They will go to the CPP fund and will be used to pay for benefits down the line.

It is important for Canadians to understand that there were changes made in the 1989 legislation that allowed more people to qualify for CPP and increased the flat rate. We actually increased the rates that people could receive under the CPP and we set up the plan for more people to qualify. As a result it affected the bottom line of the fund historically. That is one of the reasons that it is not able to pay for the costs in the future.

These minor alterations will set that balance straight and maintain an appropriate balance so all seniors will be allowed to receive CPP.

[Jim Gouk, Reform, West Kootenay—Okanagan, BC]

Mr. Speaker, I find this very interesting. I rise to make a comment on the hon. member's speech. He called a 74% increase in payroll taxes a minor adjustment. If that is a minor adjustment, I would like to hear the hon. member's definition of a substantial increase.

I want to comment on his remark that the Reform wants to get rid of pensions for seniors. A plan comes in. Everyone is told a pension will be there for them and that there will be no increases. Now we are facing a Liberal solution: throw money at it.

We have promised in writing that seniors in our plan will be guaranteed the pension they are already receiving. They will get everything they have a right to expect from the plan. We will offer it to people earlier and get it out of the hands of a government that has totally lost control of the plan.

We are not talking about some adjustments in 1989 that have jeopardized the cashflow of the plan. We are talking about a plan that is almost $600 billion underfunded. That did not start in 1989.

Does the hon. member wish to clarify his comment that this is a minor adjustment? Does he wish to reconsider his position? He ought to know it is incorrect to say the Reform is out to take away anyone's pension.

[Jerry Pickard, Liberal, Kent—Essex, ON]

Mr. Speaker, the obvious reality is that people are paying into the plan. We have separate management of the plan by financial experts. They are experts in insurance policies. They are experts in social planning. They are experts in disability payments. They are experts in all areas CPP covers. They tell us the contributions—and we see it in the actuarial numbers—have not and will not pay for the retirements of the future.

We did not take this role on to stand back and not deal with it until we are at a critical stage. Paul Martin had the foresight to take the issue on immediately—

[The Acting Speaker (Mr. McClelland)]

The Chair is almost certain the hon. member was referring to the Minister of Finance. Is that correct?

[Jerry Pickard, Liberal, Kent—Essex, ON]

Yes, Mr. Speaker. The hon. Minister of Finance had the foresight to move the issue forward and resolve the problem 20 years in advance.

On the other hand the Tories avoided solutions. They did not tackle the issue. We must make sure contributions match the payouts over any period of time. It is a closed fund. The only way it becomes sustainable is to make certain that contributions and payouts balance. If we cannot increase the contributions we cannot make the payouts. That is obvious. As soon as we cut the contributions we cut the payouts.

What is being proposed in the RRSP scenario is that those who have a lot of money to pay into RRSPs will be the benefactors of a pension in the future. Those who do not have the funds, those poor Canadians, are the ones who will end up without pensions. The rich get more and the poor get poorer. That is story being put forward by colleagues across from me today.

[The Acting Speaker (Mr. McClelland)]

The hon. member's time has expired for this segment.

Before recognizing the next hon. member, for the benefit of hon. members who are new to the House, including those who are new to the Chair, I would like to explain the use of the word you.

If the word you is being used as a general term and not aimed at a specific individual, this Chair thinks it is okay. If we use the word you and we are referring to another hon. member, it would be better if we referred to each other through the Chair. This is the interpretation this Chair has taken from the Speaker.

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, I am pleased to rise to debate Bill C-2, an act to amend the Canada pension plan. Some members of my generation think it should be renamed the Canada Ponzi plan.

The pension plan was devised over 30 years ago by a Liberal government with a noble objective, one which all members then and now can agree on. The objective was to provide retirement security to all Canadians and to reduce poverty among seniors.

To a certain extent Canada's retirement income system for seniors has been successful in alleviating poverty among seniors and generally improving the living standards of Canadians. As a young Canadian I would like to be on record as supporting a strong, fully funded retirement income system which ensures that no Canadians fall between the cracks in their older years when they are without earned income and sometimes without support from their families.

This is one thing we can all agree on. It is unfortunate the hon. member who spoke before me found it necessary to engage in overblown, overheated partisan demagogic rhetoric. He suggested that my Reform colleagues and I supported a diminishment of benefits for seniors simply because at the same time we support generational equity.

It is an important first principle that all parties debating the bill support income security for seniors and for all Canadians as a primary objective.

The basic framework of the bill and the plan which it amends is as fundamentally flawed as it was 30 years ago when it was first introduced in this place at a time when the most wildly optimistic demographic projections still foresaw that a pay as you go scheme was unsustainable.

The experts knew it then. They have known it every since. Call after call for responsibility to ensure that we did not rack up a massive unfunded liability, a massive taxpayer IOU, was not heeded by successive Liberal and Tory governments. They put short term political considerations ahead of long term human considerations. They should be eternally shameful for failing to act.

They have created a scenario where the pension fund now has a $580 billion unfunded liability, an amount that almost exceeds the federal debt. This brings the total indebtedness and liability of younger Canadians to well over $1 trillion.

When we add to that the debts and unfunded liabilities of provincial governments, local governments and other pension plans for public servants, we find my generation will be inheriting over $2 trillion in public indebtedness and liabilities. This is a result of successive decisions made by this parliament and provincial parliaments. That is something for which those who sit on the front bench of government, none of whom represent people of my generation, should apologize to my generation.

People of my age will forever have to work harder and longer to get less, keep less and earn less. They will be paying higher taxes, higher income taxes, higher payroll taxes and higher sales taxes, to fund the debts and liabilities incurred by the government and by the Progressive Conservative Party when it was in power. The bill speaks to that and the member for Saint John denies it.

The fact is, whether or not they like it, the Tories made the decision to do nothing. They made the decision not to act. They made the decision to let the unfunded liability rack up to the point where it is now at $580 billion.

Now the government comes to us and presents itself as the saviour of the Canada pension plan. Finally it says it is time for somebody to take up the clarion call and reform the Canada pension plan.

The government is 30 years too late and $580 billion short. It should have structured the plan the right way 30 years ago when it was known that the demographic pyramid would change.

When the plan was designed it was assumed there would be six taxpaying workers to every dependent retiree. We now know that within 20 years the ratio will be two taxpaying workers to every dependent retiree, a ratio which is not sustainable for a defined benefit pension scheme like this one.

We do not need a Ph.D. in mathematics. We need to look at the actuarial report of the Canada pension plan which year after year reports a tragic record of red ink into which the government has decided to steep my generation.

I find it particularly galling that the government spends so much time congratulating itself on its moral courage in deciding to raise payroll taxes by 73%.

This will kill tens of thousands of jobs and reduce hope, growth and opportunity for younger Canadians and future generations. The government is busy congratulating itself. At the same time it is busy stealing from the taxpayers of the country to fund its MP pension plan. It is prepared to impose a 10% payroll tax on all Canadians so they can get a whopping pension of $8,800—

[Larry McCormick, Liberal, Hastings—Frontenac—Lennox And Addington, ON]

Mr. Speaker, I rise on a point of order. When an hon. member accuses us of stealing I would ask you to consider it. It is not right. It is not fair. It does not create an atmosphere which is conducive to the good governance of the House.

[The Acting Speaker (Mr. McClelland)]

The Chair heard the member for Calgary Southeast refer to stealing in an abstract manner. It was not directed at an individual. The Chair also recognizes the sensitivity and would ask the hon. member for Calgary Southeast to ensure that when that kind of word is used it is very clearly put in the context of the abstract.

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, I did not mean to impugn the integrity of any member of the House. I meant to impugn the decisions made by successive governments and parliaments that decided to use the coercive power of the state to take money from people, without giving them a choice, to fund their retirement funds.

Maybe I cannot use that word in the House, but I know the words people on Main Street use to describe the MP pension plan. They are a lot worse than the word I just used.

The government and its friends in all the other parties want to raise the CPP payroll tax to 10% to give Canadians an enormously generous pension of $8,800 a year. Is that not something? They are prepared to pay a lesser premium to the MP pension fund to get millions of dollars in unfunded, lifetime pension benefits.

This double standard is a scandal which every Canadian knows about. Members can heckle me from the other side of the House as much as they like, but they know their constituents are fed up with that double standard, and I will take a stand against it every chance I get in the House.

What the government proposes to do, among other things, is to raise the CPP premium, as it is called, from the current rate of 5.6%. It started at 3.5%. I understand that when the father of the Minister of Finance first introduced this concept, it was suggested that the premium rate would stay at 3.5% in perpetuity.

They guaranteed Canadians that at the time. Of course they were wrong. I will not say they lied. I will assume the best intentions. Since then, the rates have creeped up to 5.6% and now in Bill C-2, they propose to move those rates to 9.9% by the year 2003 so that individual premiums will increase from $945 a year to $1,645 a year, a 73% increase. That means payments of over $3,200 a year for a self-employed person, the kind of person who is trying to run a small business, to create jobs, the kind of jobs the government does not know how to create.

What is that going to do, that $10 billion tax grab, the largest single tax increase in Canadian history? Is it going to create any jobs? That is a question I ask members opposite. I believe they ran, quite honestly and sincerely, in the last two federal elections on a commitment to increase employment, particularly for younger Canadians.

I heard the Prime Minister speak quite movingly in his remarks on the Speech from the Throne on the importance of increasing economic hope and opportunity and jobs for young Canadians. I was very impressed by the sincerity and emotion expressed in his speech but actions are the true measurement of sincerity, not just words.

The government proposes in Bill C-2 to take away jobs from younger Canadians, take away opportunities from small businessmen who are struggling to create real employment and growth in our economy. They propose to do that through the single largest payroll tax grab in our history.

What about the question of generational equity? What do they say about that? What we know is that the first retirees, the first beneficiaries of the Canada pension plan, will have received $11 in benefits for every dollar in premiums that they paid into the plan.

Who can argue with that? It is nice that we were able to manufacture money to increase the living standard of retired Canadians. The problem is that somebody has to pay the bill, and that falls on us here today.

Younger Canadians, those of the generation after me, will receive some 57¢ in benefits for every dollar they pay into the plan that the government is proposing. Is that equity?

The Liberal Party of Canada always prides itself on being the party of equity. It claims to be the party of fairness. Where is the fairness in taking from one generation without its consent to subsidize benefits for another generation? Where is the fairness in that?

They talk about supporting young Canadians. This is a government that does not have a single member under the age of 30 but has the temerity to stand up and say that. I appeared before two of the panels that the federal government held on reform of the Canada pension plan.

There were very few representatives of the younger generation of Canadians welcomed at those panels. Why? They were too busy working. They did not have time, like the tax-funded special interest group friends of the government to come before those hearings and to ask for more money from their grandchildren and great grandchildren.

I say shame for not giving younger Canadians a voice on this. We do have younger Canadians. They are looking at one of them right here who is going to have to pay part of these bills.

One of the other things the Liberals propose in these amendments is to create a publicly managed investment fund of over $200 billion. Just imagine that, a bunch of politicians and government appointed patronage hacks controlling the largest investment fund in Canadian history. As far as the eye can see is pork when they talk about that kind of investment board. Where are the controls? A board entirely appointed through cabinet appointments, just like those very noteworthy appointments to the appeals board, to the parole board, to the immigration refugee board—

[An hon. member]

—like to the Senate.

[Jason Kenney, Reform, Calgary Southeast, AB]

Thank you very much. That is just what we need, a bunch of senators managing $200 billion public dollars.

The Department of Finance has produced several studies and reports. The Bank of Canada, the World Bank, the International Monetary Fund, and virtually every credible economic think tank in Canada will confirm that payroll taxes kill jobs. The biggest killer of jobs in terms of taxation are higher payroll taxes.

We are now in the 78th straight month of unemployment at over 9%, with 17% youth unemployment that reaches 25% in some regions of the country. Families have been undergoing diminished disposable income for the past 15 years. Even though they are working harder, they are coming home with less. What does the government want to do? It wants to raise those taxes even higher and go against all of the conventional economic wisdom which says that will reduce job growth and mean fewer opportunities for Canadians to get a leg up in the tough new 21st century economy.

There is an option. Yes, we do have an unfunded liability and the country has to make some difficult decisions on how to deal with that unfunded liability. There are no easy choices. As I said at the outset, this party and I think all reasonable Canadians are committed to fully respecting and honouring the commitments that have been made to Canadians concerning their pension benefits. We are committed to that, but it will cost money to honour those obligations.

However, there is a way to fully fund those benefits while at the same time giving younger Canadians better pensions and better retirement security. That is to look at some of the reforms that have been proposed by very respectable mainstream organizations. The C.D Howe Institute has produced several papers proposing the conversion of the defined benefit Canada pension plan Ponzi scheme into a mandatory private retirement savings vehicle, a proposal which has been seconded by the World Bank, an organization which is in part funded and supported by the government, as well as many other think tanks around the world.

Governments around the world are coming to grips with the same problem that Canada is now encountering. Last summer I attended a conference in Budapest attended by economists from welfare state countries around the world. They talked about how to convert these defined benefit pension plans into pensions that are fully funded, mandatory private retirement savings vehicles.

Reform has offered such an alternative and I wish members opposite would take this idea seriously. If young Canadians were allowed to make a payroll contribution to a private investment vehicle and got a modest rate of return of 6% a year, they would end up with an annuity of over $250,000, producing an annual retirement income of nearly $24,000 a year, a far sight better than the measly $8,800 offered by the government. Better pensions at lower cost seem to make too much sense for the Liberals opposite.

I would like to close my remarks by saying that the House has a unique opportunity to really grasp the future. Members should think about the impact that this will have on their grandchildren and the taxes they will be forced to pay. Members should forget about their own interests for a moment if it is possible. Maybe they would give up their MP pension plan if they really started doing that. Members should forget about their own benefits for a moment and think about their grandchildren. If they do that, I have enough faith in the sincerity and good sense of members opposite that they will embrace a real alternative for Canada and for its future by embracing a private mandatory retirement savings plan, as we have proposed.

[Brenda Chamberlain, Liberal, Guelph—Wellington, ON]

Mr. Speaker, I have listened very closely to my hon. colleague. Unfortunately the Reform people continue to speak negatively and with fear.

I want to quote from my hon. colleague's speech. He said “Actions are the measure of sincerity and not just words.” That is very interesting coming from a party whose leader is now living in Stornoway where he promised he would never live, but that he would turn it into a bingo hall rather than live there.

[Some hon. members]

Shame.

[Brenda Chamberlain, Liberal, Guelph—Wellington, ON]

This also comes from a party with a leader who drives around with a chauffeur and a car that he said he would never drive around in.

This comes from a leader of a party who received $31,000 tax free for suits. What kind of suits could you possibly wear for $31,000 a year? I ask that question.

The leader of the opposition has changed his looks. He would never, ever change himself. He has changed his hair, he has changed his teeth and he has changed his voice.

In his speech my hon. colleague said “we have to believe, we have to trust”. The people of Canada elected a Liberal government this time because they believed that we would attempt to change the pension plan—

[The Speaker]

I do not know if that was a question or a comment or an answer or all of the above. Was she asking for a comment from you?

[Jason Kenney, Reform, Calgary Southeast, AB]

Yes.

[The Speaker]

So now you have a chance to go at her. You have about a minute.

[Jason Kenney, Reform, Calgary Southeast, AB]

Mr. Speaker, it was not a question, it was not a comment, it was an irrational rant by a member who is embarrassed by the moral leadership of the hon. leader of the opposition who took the challenge and gave up his pension last year. Why does that member not meet the same challenge?

All I can do is quote one of my constituents. I have received more mail on this than on any other issue so far in this Parliament. People have been saying that there is a need for real reform of this pension plan. For instance, Mrs. Brad Skeet from my riding writes “I am a hardworking, tax-paying citizen in your constituency. I heard that the federal government is going to raise the pension contributions again. I must strongly protest this action—the CPP is something that my husband and I do not even count on for supporting us in our retirement. We have struggled to put aside the money we can to invest in our future years”.

Those are the kinds of sentiments I am hearing from Canadians instead of the superficial partisan political rhetoric that we just heard from the member opposite. What about talking to young Canadians who are concerned about their future? That would be responsible.

[The Speaker]

As much as I know we are enjoying the debate going back and forth there will be about six minutes for questions and comments when we come back to this debate. As it is almost 2 p.m. I have two things to do.

Report Of The Auditor General Of Canada

[The Speaker]

I have the honour to table the report of the Auditor General of Canada to the House of Commons, Volume 1, dated April and October 1997.

Pursuant to Standing Order 108(3)(d), this document is deemed to have been permanently referred to the Standing Committee on Public Accounts.

Because it is almost two o'clock we will now proceed to statements by members.

Homecoming '98

[Carmen Provenzano, Liberal, Sault Ste. Marie, ON]

Mr. Speaker, I rise to tell hon. members about an exciting event that will take place in my riding of Sault Ste. Marie next year.

Homecoming '98, an 11-day celebration of Saultites and their city, promises to be the biggest party Sault Ste. Marie has ever seen. From July 9 to July 19 residents and visitors will be treated to more than 150 events and activities.

Each day will have a specific theme, such as July 11, youth day, and July 14, heritage day. Homecoming '98 will give the local economy a significant boost, but just as important, it will instil a renewed sense of civic pride in all Saultites past and present. High profile homecomers will include astronaut Roberta Bondar, artist Ken Danby and writer Morley Torgov.

I invite all members to add their names to this list and to join us in Sault Ste. Marie for what promises to be a truly unforgettable event.