House of Commons Hansard #44 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was cpp.
Canada Pension Plan Investment Board ActGovernment Orders
The Acting Speaker (Mr. McClelland)
The hon. member for Sherbrooke is a practised, very capable, very confident and very experienced parliamentarian and will certainly keep the remarks to the point and to the debate at hand.
Jean Charest Progressive Conservative Sherbrooke, QC
Mr. Speaker, the first point of divergence we have with this legislation the government is putting forward is that there should be offsetting tax reductions to avoid $11 billion being literally sucked out of our economy for the purpose of sustaining this fund, when in fact there should be a reduction in payroll taxes to allow jobs to be created.
Let me add a very important element which we need to keep in mind in regard to these payroll taxes. These are the most damaging taxes with regard to employment, in particular for the most vulnerable in our society: women, lower-income Canadians and young Canadians. They are the ones who are the most affected when we increase payroll taxes in our economy, whether it is through CPP or whether it is through EI.
Another change that we would like to see happening, that we propose, is the change in the yearly basic exemption. The government is freezing that exemption at $3,500 and again by doing that is targeting the most vulnerable people in our society. Who are the people that this freeze affects the most? Part-time workers, students, women, low-income earners. These are the people who will be the most affected by this freeze.
We wanted to be constructive in committee. The member for Markham tried and we certainly felt as a political party, contrary to others, that we should propose some amendments, make some suggestions.
In that respect we proposed a revision of this exemption 10 years after the legislation would have been enacted. Did the government listen to this suggestion? The answer is “no”. There is a very constructive change that could have allowed low-income Canadians a break rather than being left out in the cold by this government.
The other change I mentioned was with regard to payroll taxes. I want to speak specifically to the suggestion that we made through an amendment. We suggested to the government that it could offset in the next three years the increase in CPP premiums with reductions in EI premiums. It could have included that in the legislation to guarantee Canadians that they would not be hurt by these changes.
The member for Markham, our critic, made that suggestion. He did it in good faith. Yet, the government turned it down. At the same time, what do we learn from the chief actuary of the employment insurance fund of Canada? The fund could very well sustain itself with a premium level of $2 instead of $2.70. The government is actually using the employment insurance fund again to reduce its deficit, to try to balance its books. On whose backs is it doing it? On the backs of the unemployed at a time when we have unemployment above 9%. Again, this was rejected.
We presented another amendment that would have forced the government to return to Parliament, to the House of Commons, if premiums went to 10.25%. They are now scheduled to go to 9.9%. Did it listen to that? Is debate something that it wants? No. The answer again was “no”.
Another change that our party proposed to try to add to this legislation was to get rid of the foreign investment rule. Canada in the global equity market represents about 3% of that market. Yet, the Government of Canada, the Liberal government still thinks it knows best and it imposes a foreign investment rule of 20%. More money keeps pouring into the equity markets. Whose money is this, by the way? It is the Canadian taxpayers' money. They should be allowed to get the best benefit from that investment. They should be allowed to have access to the best investors so that this money can grow so that their retirement money can actually benefit them.
To tell you how embarrassed the government is, I even see Liberal members on the other side nodding. They want to nod. They are embarrassed by this, and they should be.
Stan Keyes Liberal Hamilton West, ON
They are nodding off.
Jean Charest Progressive Conservative Sherbrooke, QC
The member from Hamilton recognizes that they are sleeping again. I concur with his view. They are nodding off. Nodding off actually explains why they stick to this rule on foreign investment for no good reason.
Think of what is going to happen in a very short period of time. This fund will have close to a hundred billion dollars in it to be invested in Canada's marketplace. How are we to expect a return on this investment if the investors are not allowed to invest where they can get the most on that return?
That is one of the changes we propose. There are also very important changes with regard to accountability and transparency.
As regards transparency, there are some very important issues. These issues are not new, since the Caisse de dépôt et placement du Québec has had to deal with them for quite a while. Year after year, the Quebec auditor general complains about not being allowed to audit the accounts.
André Harvey Progressive Conservative Chicoutimi, QC
So it is not the perfect example.
Jean Charest Progressive Conservative Sherbrooke, QC
One might have expected that the government, which wanted to borrow a good idea from Quebec by taking the structures of the Caisse de dépôt et placement as a model, would also have paid attention to the Quebec auditor general, who is complaining about it.
No, instead they seem to have got it backward. They told themselves “Hey, in Quebec, it looks like the Caisse de dépôt et placement was able to hide behind that screen. Let us follow that lead and hide behind the same screen”. While the normal thing to do would have been to designate the auditor general as the auditor of the new board of directors responsible for investing funds, they did not do so.
In fairness to the government, I must say that it opened a door by providing that the auditor general may conduct an audit. Granted, it has come some way on this issue, but the responsibility should have been assigned directly to the auditor general so that he could look after the financial auditing.
The same goes for the Access to Information Act. Whenever we raise this issue, we are told “But there are investment decisions to make.” Let us be clear. The Access to Information Act itself provides for exceptions that would easily allow the board to protect itself against the disclosure of sensitive information while making the operation of the fund transparent.
This is not a secondary issue. I submit to the House that, to enhance credibility, to ensure that those in charge of administering the fund enjoy credibility with the Canadian public, it is important, very important indeed to make this fund transparent.
My conclusion is somewhat bleak. Personally, I wish the government had listened more carefully to what we had to say. We clearly stated our positions during the election campaign. It is in black and white in our election platform. I can even tell you on what page: pages 19 through to 22, for those who are interested.
What does it provide for? To increase rates, yes, but to reduce taxes and employment insurance premiums accordingly so that income tax does not increase. Second, to create an investment fund at arm's length from the government similar to those found elsewhere. Take for instance the Ontario teachers' pension fund, which is a model to follow and from which a few ideas could be borrowed.
Among the things that we suggested in our platform, as I said, can be read on pages 19, 20, 21 and 22. It is there in black and white, numbers included, everything from A to Z on our position. To increase premiums, offset them with tax reductions for employment insurance and tax reductions. Create an independent board for investment, independent in the true sense. Make it transparent. Most of all, do not create a new $11 billion tax grab from Canadians that is going to kill jobs in our economy because this government has lost sight of the fact that 9.1% of Canadians are unemployed, a large number of whom are young Canadians suffering in this labour market. It is about time that we also give them a break.
Canada Pension Plan Investment Board ActGovernment Orders
The Acting Speaker (Mr. McClelland)
I see that there are a number of questions and comments. I would ask hon. members to keep their questions and responses short.
John Cannis Liberal Scarborough Centre, ON
Mr. Speaker, I will be brief.
I listened very carefully to the member for Sherbrooke. I was puzzled because he was a member of the cabinet under the Mulroney government and he has the audacity to stand in the House and talk about EI premium reductions. I am confused because sometimes he refers to them as premiums and sometimes as taxes.
I would like to ask him what decrease they made during their mandate when he was a cabinet minister, contrary to when this government took office in 1993 and reduced the EI premiums to the tune of $1.4 billion.
He talks about unemployment today being at 9.1% when under the Conservative administration it was almost 11.5%. However, we have created over a million jobs. He also talks about making the system sustainable.
He calls the EI contributions taxes, but I call them premiums. However, they kept raising the premiums because there was no reserve to fall back on in difficult times when there was high unemployment.
He talked about offsetting them with payroll deductions. He talked about them in terms of deductions, in terms of payroll taxes. He talks about sustainability. We are looking toward an era of sustainability.
He talked about an independent investment fund. That has already been put in place. I do not know where the member has been. I know he is in the House today. He is often in the House. We have already brought forward an independent investment fund.
I am more confused when he talks about an $11 billion tax bite. That is just not true. I say to the member, through you, Mr. Speaker, that is being intellectually dishonest because this is money put aside for pensions for the future.
Jean Charest Progressive Conservative Sherbrooke, QC
Mr. Speaker, I am not surprised that the member for Scarborough Centre would be confused. He should be. I want to use his own words. He says he is confused. How else could he be confused?
Like the member for Mount Royal, they ran in 1993 on a red book that said that they were opposed to free trade and now we implemented free trade.
Canada Pension Plan Investment Board ActGovernment Orders
An hon. member
Against the GST.
Jean Charest Progressive Conservative Sherbrooke, QC
This is the same member for Scarborough Centre if I understand correctly, like the member for Mount Royal, who said they were opposed to the GST.
Jean Charest Progressive Conservative Sherbrooke, QC
The member is shaking his head. Is he for or against the GST? Of course, his prime minister said they had created the GST, right?
Is the member confused? Yes, he should be confused. Is he thoroughly confused? Yes, he is thoroughly confused, and I can see why. This is the same group of parliamentarians who fought tooth and nail any idea of deficit and debt reduction and now this has become the new mantra.
As we say in French, if there is one thing that we can say about this Liberal government—and my colleague, the hon. member for Chicoutimi, is well aware of this—it is that they have been very consistent in acting on our ideas, not their own but our ideas.
The hon. member is confused. Let me enlighten him. He said we increased employment insurance premiums—
When the member for Scarborough Centre said we increased employment insurance premiums, what he forgets to add is that we did it also in a period of recession when there was a need for money in the fund.
The difference with this government is that it is creating unnecessarily a $12 billion to $13 billion surplus for the purpose of paying down the deficit for which this fund was never created.
Stan Keyes Liberal Hamilton West, ON
Mr. Speaker, I can hardly contain my enthusiasm to go after the hon. leader of the Conservative Party.
There is no confusion on the part of this hon. member because I sat on that side of the House from 1988 to 1993 in opposition when this hon. member of the Conservative Party sat on this side of the House, first as secretary of state for fitness and amateur sport and then he moved on—I will not say how. I do not want to get into that today—to become the minister of the environment. That was six months later.
That member sat at a cabinet table, a Conservative cabinet table with his good friend, Brian, at the helm. That hon. member watched as EI premiums went up to $3.20 on their way to $3.30. This hon. member has the unmitigated gall to stand in his place and start accusing this government when that member was in in the best of times, from 1984 to 1993. He sat in this House when the economy was booming, when people were working.
He had the opportunity to do something about the deficit, about the debt, about EI, about CPP and he did nothing, not a damn thing.
Canada Pension Plan Investment Board ActGovernment Orders
The Acting Speaker (Mr. McClelland)
I would ask all hon. members to address their comments, even their vociferous comments to each other, through the Chair and we will try to get through the day.
Jean Charest Progressive Conservative Sherbrooke, QC
Mr. Speaker, I do not think there is any amount of huffing and puffing coming from the hon. member that will change the tax.
As I was saying a little earlier, if there is some confusion in his mind on where they stood, there rightfully should be some. This is the same member who in 1993 guaranteed Canadians health care. He stood in his place and voted for a 35%—
Jean Charest Progressive Conservative Sherbrooke, QC
He denounced NAFTA and the FTA and then he went on to implement that.
Personal taxes and income taxes have gone up under the government relative to the GDP. There are more poor children in Canada today than since this member was elected as a member of the government in 1993. That is his record. At one point I hope he will grow up and face his responsibilities and stop blaming others and stop saying—
Canada Pension Plan Investment Board ActGovernment Orders
The Acting Speaker (Mr. McClelland)
The hon. member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques.
Paul Crête Bloc Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC
Mr. Speaker, in the debate on the Investment Board, it should be remembered that we are faced with this issue because of the inaction of previous governments. I would like the leader of the Conservative Party to explain briefly to us why today, in 1997, we are considering such a bill, when we knew 10 or 15 years ago that there were major problems.
From 1984 to 1993, there was a Conservative government. During those years, the Conservatives' approach was to maximize economic development, or at least to implement measures to do so. Consider, for example, the idea of an investment board. Why did the Conservative Party not come up with this idea in 1985, 1986, 1987, say at the end of the first mandate, having had time to become acquainted with the issues? Today, we are faced with a situation where future generations will pay for 15 years of inaction. We are doing our utmost to avoid being unfair to the younger generations, but there will nevertheless be an intergenerational equity problem.
It seems to me that the reason for this is that action was not taken quickly enough in the past, with the Canada pension plan, to create a body that would ensure that there is enough money in the fund to provide for the future.
Jean Charest Progressive Conservative Sherbrooke, QC
Mr. Speaker, first, I would like to thank the hon. member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques for his question, which is a good question, an honest question. In fact, I asked myself the same question, I talked about it with colleagues, and this is what I can tell him.
First of all, amending the Canada pension plan legislation requires the approval of a number of provincial governments. You are no doubt aware that this, fortunately, cannot be done unilaterally by the federal government. It requires the agreement of two-thirds of the provinces representing at least two-thirds of the Canadian population, which explains why the federal government has limited scope for action in making such amendments.
We discussed such changes with the provincial governments as openly as we could. I must admit to the member today that we did not succeed in convincing them of the need we saw to bring about a number of changes.
However, and I want to add this so that it is clear to him and also because the other members will be interested to know this, they were determined to stop going around in circles. How could they break this logjam? Since they could not arrive at an agreement, they included in the last series of statutory amendments a clause providing for an automatic increase in contributions, so that the provincial governments were faced with an alternative that was even less attractive than a potential agreement. And then there was a change of government.
What I am telling my colleague for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques is that, if there is an agreement today, it will be due in large part to the fact that, as we expected a deadlock, we included in the bill a provision for a mechanism that was going to force the parties—
Canada Pension Plan Investment Board ActGovernment Orders
The Acting Speaker (Mr. McClelland)
I am sorry, but the hon. member has run out of time. Resuming debate. The hon. member for Mississauga South.
Paul Szabo Liberal Mississauga South, ON
Mr. Speaker, I am pleased to speak on Bill C-2 to establish the Canada pension plan investment board and to make other amendments to the Canada Pension Plan Act.
It is important to get some principles down very quickly for members so that we can put the bill in its context. Members will know that the Canada pension plan came in 1966 in response to a very serious need to address our retirees in Canada.
The plan came in in 1966 and seniors who were retiring, who had come through two wars as well as the depressions of the thirties and the forties, were faced with real poverty. It was important that Canadians made the decision that it was time for us to have a universal pension plan that could help Canadians enjoy the dignity of their retirement.
The current seniors who first came into the plan did not contribute very much to the Canada pension plan but they started to receive benefits a year later. Full benefits were received by pensioners as early as 1970. That raises the issue of who is paying for those benefits. The important issue was that we had to provide retirement benefits for our seniors. Therefore the plan was established on a pay as you go basis.
That means today's workers are paying premiums into a plan. The accumulated premiums are then used to fund and to pay benefits to today's seniors. Members will know that today's seniors paid no more than $10,000 in total into the Canada pension plan. Yet the annual benefits today from the plan are some $8,800 per year. It is a very generous plan. It is so generous that the chief actuary indicated in his report that we can no longer sustain that level of benefits with the current premium structure. This is not a mistake. It is simply a function of the changes that were made.
Members should be aware that important changes were made. When the plan was first introduced it was a clear pension plan. Since that time there have been some very significant and important changes for the benefit of all Canadians. The survivor's benefit was introduced. It is a very important income component for retirees who have lost a spouse. It targets the needs of single women in retirement. It is a very important factor in dealing with seniors, in particular with women who live a little longer according to the mortality tables, that we care for them. That is why gender analysis was necessary in the preparation of this and other legislation, to ensure that we are caring for our seniors and those in most need, in this case senior women in particular.
The disability element of the Canada pension plan was brought in to ensure that Canadians who were unable to work because of disabilities would not fall through the cracks, that they would have benefits that were just as rich as the retirement benefit. This would make sure they had the assistance they need in their time of need.
When the Canada pension plan was conceived, it was contemplated that the premium rates in the original Canada pension plan would be in the range of about 5.5%. Today the rate is 5.85%. When the disability and survivor benefits were introduced no changes were made to increase the premiums. The benefits received by Canadian beneficiaries rose substantially whereas the premiums did not track those increased benefits.
We must also take into account the aging of our society. When the plan started there were eight workers for every one retiree. Today there are five workers for every one retiree. With the baby boom generation moving through the system it is projected that we will have three workers for every retiree.
I want to confirm with the Chair that I am splitting my time with the Parliamentary Secretary to Minister of Human Resources Development.
Bill C-2 is unique in the sense that it is not a bill that has come forward as a result of a party platform or some initiative of the government. Its uniqueness lies in what resulted from the mandatory consultations with the provinces and the territories, which are jointly responsible for the Canada pension plan system, and in what resulted from the exhaustive cross-Canada consultations with Canadians and groups representing every vested interest group across the country.
Certain principles were laid down to guide the enactment of Bill C-2. One of the most important has to do with the principle of intergenerational equity. One of the most important elements has to do with whether today's seniors who are receiving a substantial benefit, much more substantial than future seniors would ever receive, should be responsible for dealing with any portion of the accrued benefits sitting with the Canada pension plan today.
I want Canadians and all members to know that with consultations with Canadians and the consensus of the provinces the decision was taken that Bill C-2 should not impact today's beneficiaries under the CPP plan. That means that today's pensioners as a result of Bill C-2 will not be impacted by the changes being contemplated by the House.
It means that today's Canadians receiving disability or survivor benefits, regardless of age, will not be impacted by the changes contemplated by Bill C-2. That is a very important principle and it is a very important message so that we do not alarm current seniors as to whether there is any impact on their retirement income.
The decision made in consultation with Canadians and with the approval of two-thirds of the provinces representing two-thirds of the population of the country was that the planned increase to 10.1% in the year 2010 which would keep the Canada pension plan sustainable was not a sufficient approach to dealing with the realities of the day.
The decision was taken that rather than waiting until the year 2010 to increase the premiums, the increases should start in 1998. Today's rate is 5.85%. In consultations with Canadians they wanted the Canada pension plan to remain, they wanted it to be there for their retirement, that we should start making those increases in the premiums today, not in the year 2010.
If we take those increases today and introduce them gradually over the next six years up to 9.9%, that would mean that we would be spreading the burden more equitably across the generations, excluding today's seniors. That is fair. It is equitable and it is the right thing to do. I think that is our job, to do the right thing.
The 9.9% is very important to understand. It is called a steady state rate. It is the premiums rate that has to be charged on insurable earnings that will ensure that the plan is sustainable, indexed, secure and available.
But it is not just a pension plan. I believe the Canada pension plan is misnamed. It should be the Canada pension and insurance plan because we do have survivor benefits, we do have death benefits, we do have other insurance components. The 9.9% is made up of four elements: 4.3% is the cost associated with providing pensions; 1.7% is the cost associated with the insurance benefits, the survivor, disability and death benefits; .1% is for the administration of the plan; 3.8% is the collective sharing of the accrued benefits all remaining and future workers will pay to ensure that current seniors continue to receive their benefits and that this plan remains on a sustainable basis.
Every day during prayers the Speaker reads out a line that we hope that we will be here to make good legislation and wise decisions. In my view Bill C-2 meets those criteria.
Diane Ablonczy Reform Calgary Nose Hill, AB
Madam Speaker, the member who just spoke was privileged, as I was, to be in committee to listen to the evidence and the experts so that we could evaluate and judge this legislation well.
One of the things we heard from the chief actuary of the fund and from others is there are of course no guarantees at all that the contribution rate of 9.9% will not continue to rise.
First, I would ask the member what he says to Canadians who are very concerned about this escalating and almost sure to continue escalating mandatory contribution which many Canadians find to be a real hardship.
I read some letters today in my speech. I wish I could have read more. I received 4,000 of them, but I had to pick and choose. Those letters contained heartfelt pleas from young, struggling, single parents, parents of young children as well as a young couple who are living in their truck. They all said that they cannot afford these continued costs.
What does the hon. member say to these Canadians? Can we afford to continue to pay more and more for less and less?
The chief actuary and other witnesses confirmed that although people are making very substantial contributions to the CPP, they will only receive a 1.8% return on their investment over their lifetime.
Canadians are struggling. They are being mandated to pay a very substantial amount of money every year into this plan and they will receive far less than the value of their contributions. How does the member justify this to Canadians? How can he look Canadians in the eye and say “Pay this. You are not going to get much back, but we are going to make you pay it anyway”? What does he have to say to Canadians who are struggling?
Paul Szabo Liberal Mississauga South, ON
Madam Speaker, that is the heart of the reason why I feel that the Reform Party has not done a service to the House by suggesting such nonsense.
The fact remains that under the prescribed rates in Bill C-2, Canadians will not receive less than they put in.
The member has failed to mention that the 1.8% return to which she has referred is the real rate of return. It is the return which one would get after allowing for inflation. She knows very well that the inflation assumption in Bill C-2 and in the actuary's report was 3.5%. That means that Canadians will receive a return of over 5%. In fact, it will be 5.3%.
The parliamentary secretary said it correctly. A worker who starts today and pays through their lifetime at the prescribed rates will receive $1.80 for every $1 put in.
The other fact which the member failed to recognize is that under the Income Tax Act, Canada pension plan premiums paid are eligible for a non-refundable income tax credit. In Canada, on average, that means there is a 26% reduction in taxes payable as a result of having paid Canada pension plan premiums. That means that each and every one of her calculations are in error because she has failed to recognize the real calculations in income tax returns. She has misled Canadians. She has put on the table fearmongering.
I flatly reject the premise of the Reform Party that moving to an RRSP system would be better because it totally ignores two things. Number one, it ignores the current accrued benefits which today's workers receive. Number two, it ignores the fact that the pensioners have insurance benefits as well. She gives no credit whatsoever to survivor benefits, to the death benefit, to disability benefits or to children's benefits. That is the reason they can put these terrible numbers on the floor in an effort to scare Canadians.
Canadians should have nothing to do with the Reform Party.