Mr. Speaker, the first motion has to do with what some have called a retroactive change. It is important for members to know the dimensions of the change.
Currently an employee pays 2.925% on their insurable earnings. The proposal in Bill C-2 would increase that to a full 3%. In terms of dollars an employee earning $20,000 a year would be required to pay another $12.71. It is important to keep the dimensions of the change in focus. For example, if an employee were making $35,000, the ceiling for insurable earnings, the increase would be marginally over $17. To keep it in perspective it is important to know the numbers.
The hon. member for Calgary—Nose Hill raised the issue with regard to this change and the difficulty it may cause. All members should know the increase that took effect in 1997 was part of the consultation process. It was a change that was discussed. It was also approved by the federal government and two-thirds of the provinces representing two-thirds of the population. This change was seen as an important starting point with regard to providing fuller funding for the CPP.
The intent of Motion No. 10 was to delete that requirement. It is important for Canadians to understand that if the change is not made in 1997 the amount to be paid to get up to the full funding rate would have to increase. It is a matter of a nominal change in 1997.
For that reason, although there may be a case where temporary workers require adjustments, those businesses had consultations with the finance department as early as last spring and were advised of the change. This is not a surprise to business at all.
The second motion in this group has to do with preventing the new CPP contribution rates from coming into effect unless the increases are offset by EI premium reductions. In this area a lot of comments have been made by members which require clarification.
With respect to the EI surplus, it tends to connote that $12 billion will be sitting in some account somewhere, a surplus that is available to be spent for EI benefits or programs. That is not the case. There is a notional account, an EI account, which keeps track of the premiums received and the benefits paid out but as a requirement or a recommendation that was accepted by the government from the auditor general the EI premiums are included in operating revenues, in the general revenue account.
One would only have to ask what to do if there were a deficit in this notional account. How would that be handled? I think that is a very important question to understand. If in an economic downturn the benefits paid out exceeded the premium base of the reserve there would have to be some cross-subsidization or some underpinning by other government revenues to be able to continue to fund and pay out benefits.
I understand that the EI fund actually was in a substantial deficit position in the last downturn of the economy in about the same magnitude as the surplus is now. The amount of the surplus that is being referred to is not really out of line.
I think the Minister of Human Resources Development's announcing a $1.4 billion cut in EI premiums, from $2.90 down to $2.70 per $100, is an indication that when it is sustainable and when it can be delivered and can be counted on by business there will be reductions in the EI rate as long as it is clear that those reductions in the EI premium can be sustained.
Much of the discussion on this motion also has to do with some of the funding requirements of the CPP by taking some this notional surplus. As I explained, since there is no $12 billion surplus that will be sitting in some account somewhere to use for whatever purposes we want, actually what we are talking about is the size of the deficit.
If we were to take funds out of the notional EI account we in fact are taking moneys out of the revenues of the government and therefore increasing the deficit. I suggest that also is inconsistent with an important position of Canadians that we have to get our fiscal house in order. We have to deal with the deficit. Also, what the finance committee has heard time and time again across the country through its exhaustive prebudget consultations is that Canada must continue to deal with the national debt.
The debt, the deficit, it does not matter what we call it, the fact is we have a mortgage which we must continue to pay down on an orderly basis to have our house in order. It is the reason why we have low interest rates. It is the reason why we have one of the strongest records of economic performance and the strongest projected economic growth in the G-7. It is because we have been getting our fiscal house in order.
Members should be very careful about suggesting that somehow there is $12 billion floating around that we could somehow use.
Another very subtle point but I think salient in this regard is that one of the principles that came out from the consultations, agreed on by consensus of the witnesses and by the federal government, the provinces and the territories, is that today's seniors will be insulated from the changes to be made to the Canada pension plan in order to make it sustainable for generations to come.
If we were to somehow take moneys out of the general revenue of the government and increase the deficit what we are basically doing is asking today's seniors to pay something with regard to the CPP changes. We are asking today's seniors, who already have their pensions fixed, who already have their retirement income in place and who have absolutely no major source of other opportunity, to change their current retirement situation.
Members must remember that seniors do pay taxes. Because they retire does not mean they have opted out somehow. They continue to pay taxes on their pension income and on other investment income and other transfers from various sources. They are taxpayers. To the extent that we take money out of general revenues and increase the deficit or reduce spending on some other areas or have to increase taxes, which I doubt will happen, it would therefore be asking seniors to bear some of the burden of the changes in the CPP.
I think it is important to also emphasize this aspect of insulating today's beneficiaries under the CPP from having to pay for some of the portion of funding future benefits of today's workers.
It has to do with the fact that they came through two wars and the depression of the 1930s and 1940s. Their working careers were smaller than we have enjoyed today. Their opportunities to build up a nest egg for their retirement were restricted.
In the real world there is a process of arbitrage and fairness and equity. The CPP was built on that process of fairness and equity and today's seniors will be protected by these changes.
In conclusion, they must be assured that they will not be negatively impacted by the changes being proposed under Bill C-2.