Madam Speaker, today we are at third and final reading of Bill C-2, a bill to amend the Canada pension plan. I emphasize the importance to Canadians of the legislation. It will affect millions of them throughout their working lives and into retirement. It directly touches over 13 million Canadians today, millions more who have yet to enter the workforce, and even millions yet unborn.
We as parliamentarians have a tremendous responsibility when we look at such far reaching legislation. Unfortunately the Liberal dictatorship of today has allocated scant hours to debate a bill that will affect millions of Canadians and their futures.
Retirement security is a key concern of all Canadians. Yet the Liberal government is making it more and more difficult for Canadians to have a secure retirement. Changes to seniors programs like the OAS program will put $7 billion to $8 billion in the pocket of the government and take it away from retirement security for Canadians. RRSPs are continually being cut back by the government. The level of CPP contributions has been frozen. The finance minister is now taxing RRSPs a full two years earlier than in the past. How are Canadians supposed to save for retirement with these shenanigans by the Liberals?
Once a person retires and is able to salvage a little income from these Liberal measures then taxes keep rising. People on fixed incomes are hit the hardest by this sort of thing. We are in a very serious situation today in terms of retirement due to Liberal measures like the bill.
We need to look closely at the bill to see exactly what it delivers to Canadians and what it does not. I believe Canadians care about four things when it comes to measures that affect them, their money and their future. They care about fairness. They want a scheme that is fair. They want value for their money. They want real security. They want things to be done with integrity.
The Liberals know how much these words mean to Canadians and that is why they use them repeatedly. The words were used over and over in the speech of the parliamentary secretary. What is the reality behind this Liberal rhetoric?
First let us talk about fairness. The Liberals use this word a lot when talking about the bill but here is the reality. Due to shockingly disastrous mismanagement by past Liberal and Tory governments the Canada pension plan has an incredible $600 billion unfunded liability. That is the reality. That is where we are today yet these people are asking us to trust them to do the right thing. For the last 30 years they have put us almost $600 billion in the hole.
The Liberals say there is no problem, that they will lay the burden on our kids, make them pay nearly twice as much and give them less in benefits. What could be simpler? However it does not fit with any definition of fairness I have ever heard. One of our members called it legalized mugging. That about sums it up.
The young people of our country have already inherited a $600 billion national debt. It has been shoved on their credit card. They face increased health and other costs due to the aging population. Is it fair to put the second CPP national debt largely on their shoulders? Most Canadians would agree the answer is no.
Interestingly enough—and this has not escaped Liberal notice—this is the same group of Canadians which is least likely to be old enough to be politically active. They are not yet old enough to vote in many cases or they have not yet been born. What this amounts to is taxation without representation. Is that fair? Only for a Liberal.
Low income Canadians are forced to pay a larger proportion of their income into the scheme than those with higher incomes. Therefore the burden of the unfunded liability will fall most heavily on lower income Canadians. It is no wonder there is a problem with child poverty. The Liberals make families poor and then ask to be elected so they can fight child poverty. Go figure. Only a Liberal could find fairness in forcing those least able to pay, to pay the most.
The new CPP scheme is unfair in at least three major ways. It places the burden of past mismanagement on those already disproportionately burdened. It places the burden of past mismanagement on those least able to object. It places the burden of past mismanagement on those least able to pay.
I have a letter written by grandparents which reads in part:
While we appreciate something has to be done about the shortfall looming ahead, we don't think this is the answer. I have always believed that we should have been able to invest our own contributions for a much greater return, perhaps as high as fourfold estimated by some.
While I am already collecting my CPP payments, and Jeanne will be in about two years, between us we have seven children, 16 grandchildren and one great-grandchild expected next week.
We have great concerns as to the potential impact this Liberal tax grab will have on them.
Furthermore, this legislation is being pushed through the House by the Liberal majority without proper and sufficient democratic debate before the Canadian people. Shame on them.
That letter is from Canadian citizens. Sadly these changes fail the test of fairness.
Let us turn to the question of value. Canadians have a heritage of thrift and of getting value for their money. They are prudent people. How wisely and well does this plan give us value for hard earned dollars contributed? In a nutshell this Liberal scheme extracts massive amounts of dollars from the young and then pays a return that is far less than the real value of their contributions.
Self-employment is the fastest growing sector in our labour market. A self-employed person entering the labour force today and earning the average industrial wage will pay over $3,200 a year into the CPP. These contributions, paid until age 65, will total between $1.6 million and $2 million over a working lifetime. Let us split the difference and say that it is $1.8 million. That assumes an inflation rate averaging about 3.5% and a very modest real return on investment of between 3% and 4%.
Assuming that this person will then draw the full CPP for 20 years, he or she would collect in total just over $900,000.
Let us review that. It cost $1.8 million and the return was $900,000. A good deal for whom, the contributor? No. For the government trying to cover its tracks? Yes, and that is the whole point of the scheme. It is little more than legalized theft from today's young.
The chief actuary for the CPP and others have looked at the investment return to contributors in another way. They have calculated the rate of return per year on the value of the contributions. The chief actuary, in his 16th report in September, showed that the return to the youngest contributors to the plan would be 1.8%. Can anyone imagine this? That is about one-half of the real rate of return offered by Canada savings bonds and about one-third of the real rate of return one could expect from long term, high quality corporate bonds.
Members opposite would have us believe this is a fair deal, that this investment represents good value for young Canadians. A graph shows that the value of these contributions for young Canadians goes beyond the break even line in about 2011, a few years from now. Yet the Liberals would have us believe that this is good value for our money. I do not think so and I do not think our young people think so.
Members opposite need to get it through their heads that this is not value for money and it will not take Canadians very long to figure that out. The impact of the bill must also strike Canadians as mean spirited and unfair in another way.
What we have is regulation that leads to disguised or hidden tax increases. Nickels and dimes to start with but eventually totalling millions and then billions. A leading social policy analyst calls it taxation by stealth. The CPP bill is a good example.
The Liberals inserted a sentence of 14 words which reads:
For each year after 1997 the amount of a year's basic exemption is $3,500.
This $3,500 exemption used to be tied to inflation and it would rise as inflation rose. No more. It will be $3,500 period. Instantly we have a small payroll tax increase on small businesses and workers in Canada without media or public recognition, let alone any debate on the increase.
Freezing the year's basic exemption at $3,500 means that each year the value of this deduction decreases by the amount of inflation. Perhaps it is only 2% or 3% a year, but over time the value of the deduction is seriously eroded. As a consequence, the amount of earnings subject to CPP increases slightly each year. Everyone, workers and employers, pay extra dollars each year in addition to the premium increases for the same pension benefit.
The burden is heaviest on those with the lowest incomes because the exempted amount accounts for less and less in real value every year. They steadily pay more of an already small income and this hits them harder than if the exemption protected a larger percentage of their total earnings. They need that protection which is why the exemption was put there in the first place. The Liberals are allowing it to be stealthfully eroded away. No wonder families are getting poorer all the time. No wonder there is growing concern about child poverty.
What is so repugnant is that the same Liberals who loudly protest that child poverty is their highest priority are creating the very poverty they claim to be so concerned about. They say they will cure child poverty. It is like hiring a mugger to get out of debt.
Another interesting letter states:
We are two young, hard working people struggling to make ends meet. One of us works two eight-hour jobs full time just so we can catch up to our bills and maybe get an apartment before December. We are living in a truck.
We are not irresponsible. We just got suddenly relocated and brought a lot of responsibilities with us, but it is hard to catch up for those of us who are counting every penny. This would kill us. If we end up giving more money to the government it will inevitably destroy us. Besides, we would rather manage our money in our own way and in our own name than dump it into some mysterious fund that may not exist when we retire.
This is what young Canadians are saying.
If there is value in this plan, it is certainly not going to workers and businesses which pay most of the freight. If this scheme is clearly unfair and does not provide good value for money investment, does it at least have the virtue of providing security? Will the dollars being extracted from us be worth it in the end because they will go toward the good cause of guaranteeing every Canadian an $8,700 a year pension after they retire?
Will the fact that some investors will get a low return be justified because government management pools the risk and no one has to worry about not getting the $8,700 a year? It will be there for sure. No worries, count on it. Is that the situation?
First of all, the future security of this Liberal CPP scheme rests on the assumptions that the young will willingly continue to pay into the plan when they know that less than half the real value of their substantial investment will be returned to them personally.
Do we honestly believe our children and grandchildren will, let alone should, make a large investment out of their earnings and accept a small return so that the rest can be used to pay for promises made to those who came before them, promises not backed up by the money to make good on them?
The security of our expected CPP benefit rests largely on our belief that younger generations will willingly shoulder the lion's share of what amounts to a second national debt once they are old enough to take political power. I suggest we think long and hard about the likelihood of that happening.
The future security of this Liberal CPP scheme rests on the reliability of the assumptions that led to its construction. The government assumes that 9.9% in contribution rates over the next century will deliver the promised benefits. How reliable are those assumptions? Are they any more reliable than the assumption in 1967 that contribution rates would never have to rise above 5.5%? That is what we were told at that time.
Now, in less than a generation, our contribution rate has soared to nearly twice that and the benefits we were promised then have already been cut back. Benefits are being cut in this bill by Liberals who, in the same breath, are trying to maintain that promises of government are reliable while they are demonstrating that they clearly are not. This very bill is exhibit A of the fact that the CPP is not a sure thing. It reneges on the promises that were made to us when we started working and paying 30 years ago. Now we are suddenly told we will get less. Who can honestly believe this will be the last time the Liberals will say oops, we cannot give you quite as much as we said we would? Just like they said oops, we cannot get rid of the GST like we said we would.
The fact is the CPP is not a pension plan. It is a political promise backed up by only government's ability to tax from citizens the funds needed to pay for the promises. Political promises change with changes in power. They change with changing reality. They change with circumstances and with shifts in voter support.
No one disputes that political promises are not something to go to the bank with and they are certainly not something to retire on.
I have a letter from a family that says this: “We are a young family who are struggling to make it from month to month. Losing more of our earnings through an increase in CPP is only going to make it more difficult for us to meet our financial responsibilities which include repaying student loans and raising two preschool children.
“We have worked very hard to ensure that we are responsible for our decisions by paying our student loans off at a faster rate and raising our children the best we can. Things like owning our own home, contributing to an education fund for our children or taking family vacations once seemed to be attainable, but they are fast becoming more a dream than a reality.
“Young Canadians like myself are angry that we are being told to pay for our government's poor financial planning, especially when we have no hope of receiving anything from the CPP in our senior years. Governing one of the greatest countries in the world does not excuse nor give licence to making faulty decisions that adversely affect our country's citizens. Our politicians may not notice the increased CPP deduction on their paycheque, but my family certain will”.
That is how real Canadians feel about how secure this plan is.
Third, the future security of the Liberal CPP scheme rests on the assumption that the new billions of dollars that the Liberals are going to extract from Canadians with this bill will be managed to earn the best possible rate of return. Once again, the Liberals have set up in this bill a huge fund which will extract billions of dollars of our CPP contributions into it.
Who is going to manage all this loot? It is going to be 12 hand picked Liberal appointees. Once again the Liberals try to fool us by saying all the right words. It will be arm's length. It will be transparent. There will be prudent management. But the reality makes their feel good rhetoric ring hollow.
The reality is that the Liberals voted down every amendment brought forward by the opposition parties that would really make the fund management even moderately arm's length from political interference. One of the measures turned down would have the minister taking advice from an advisory committee on who would sit on it. That was turned down. The auditor is going to be appointed from year to year. There was an amendment to make that appointment for a longer period of time. That was turned down.
There was an amendment that the chairperson be elected by the majority of the members of the board. That was turned down. It will be the minister's hand picked appointee. I could go on and on. There were so many amendments brought forward that the Liberal majority just went thumbs down on.
In fact, only significant pressure even made the Liberals acknowledge that Canadians' own auditor general should have unrestricted access to fund information. Of course regular Canadians are out of luck. The fund's operations are not even subject to access to information.
Yet this fund will soon have a massive proportion of Canada's total equity pool. The implications are staggering for its impact on the total economic structure of our country. But we have 12 hand picked Liberal appointees who will wield enormous influence in our economy. The government says it will be happy if the fund earns a real rate of return of 3.8%. The potential for unfair and unintended uses of such economic clout are staggering.
In fact even before the bill passes other parties in this House are already arguing that the fund should be open to be used for political objectives. We can imagine how such pressures will mount once the fund actually contains all those lovely billions of dollars. Our retirement dollars will draw political and social engineers like a loadstone.
Canadians are by nature not risk takers. They prefer stability and security. I am sure members opposite are wanting to hear what I have to say and so I would appreciate it if they would keep their remarks for later.
Canadians by nature are not risk takers. They prefer stability and security. Yet what the Liberals are giving us in their new CPP scheme is risk and more risk. There is a risk that our children will refuse to bear so much cost for so little benefit. There is the risk that government assumptions and projections will, as usual, prove to be unreliable after only a few years.
In fact, after only two months the projected amount in the fund had to be revised downward by $41 billion. That is just how badly the assumptions are off already.
There is the risk that political considerations will compromise the returns needed to pay the promised pensions. There is the risk that further future political decisions will change what the plan last promised.
There is no security for Canadians in this scheme. Canadians recognize that. Here is a letter from a Canadian that says: “I am completely opposed to increases in CPP contributions, especially in consideration of the low level of faith I have in our past, present and future governments to manage and return the increased revenue properly. The monthly CPP `contribution' my family makes exceeds the cost of my son's education. Quite frankly, I would rather invest my earned income in his future since it is a virtual guarantee my country will not”. That is how real Canadians feel.
Does this plan deliver integrity? Is it based on honesty? Is it sound and well considered? The Liberals promised to restore integrity to government. Does this bill with the single most profound implications for the retirement security of retired, working and future generations of Canadians meet the test of integrity?
First, how can we say a piece of legislation delivers integrity when it is so cavalier about the interests of the young and the politically powerless? Is that not exploitation of the defenceless? Will Liberals be able to look their children and grandchildren in the eye 10 or 20 years from now and say we did what was right and good for you, we acted in your best interests? How will they defend forcing young workers to pay more for less?
Second, not all Liberals can be blind to the fact that the time bomb is still ticking. The cracks are being papered over for a few more years but the long term funding crisis has not been solved.
Where is the integrity there? The Liberals have not been honest on the issue of transparency and accountability. For all their nice words, they voted down measure after measure that would have made it so.
This plan incorporates the Liberal policy of taxation by stealth. Threshold exemption levels desperately needed by poor working families to meet their children's needs year by year are less protected as inflation creeps up.
Year by year the average industrial wage rises, capturing more CPP taxes from businesses and workers. These effective increases will never be debated or discussed and this bill says that future additional premium increases—it already acknowledges there will have to be some over 9.9%—can simply be mandated with no further legislation or debate. King John never had it so good.
A Canadian from Edmonton writes: “I am one of thousands of single mothers who are desperately trying to be self-sufficient and support myself and my daughter on my own without the aid of welfare or other government agencies. I am frustrated beyond words that the government wants to take more of my hard earned money away from the mouth of my child when I have come to the realization that by the time I reach the age to collect, there will be nothing.
“I hope the government is ready to reap the consequences that this will cause. I just may find it more beneficial and in my best interests to quit working and collect welfare because it may be the only way I can make money”.
This is an important debate and one that will be reopened every two or three years as required by legislation and as those exploited by this scheme gain political awareness and power.
It is important therefore to put a couple more points on the record. The government never considered other options or arrangements to complement or replace the CPP. It set out in its consultations to sustain the CPP in essentially the same form.
It asked Canadians to a series of limited consultations, a few general questions concerning contribution rates, changes to benefits and the investment of CPP funds. It did not ask questions that would invite consideration of other alternatives such as a defined contribution, individually owned and privately managed accounts.
It did not study or explore developments in the many countries in the world that have experienced the same difficulty we are in the pay as you go schemes and have moved to mandatory privately managed accounts. Examples are Australia, Great Britain, New Zealand, Chile, Mexico, Hungary and some 15 others.
The government did not want to consider other options. It did not want the standing committee to invite experts from outside Canada to testify about other options. Notably, the committee refused to invite the world expert on pension reform, Dr. Jose Pinera, born in Chile and educated at Harvard.
The committee developed some theory about human rights abuses despite much evidence in support of Dr. Pinera and his worldwide reputation.
At the same time, and this is Liberal hypocrisy for you, only four blocks away, a senior official from the department of finance in Chile and a good friend of Dr. Pinera was delivering a seminar on pensions. This gentleman along with two experts from Mexico was speaking on “Pension systems in crisis: What can we learn from Latin America?” Of course the Liberal committee did not want to learn anything.
When it comes to our pension reform, our international development research centre that sponsored that seminar is more creative and more open to new ideas and shows more common sense than does our finance department or the government members of the committee.
The point is just be open. If the government is unwilling to go beyond the Canadian border for advice, just say so, but do not smear the reputation of an international scholar to hide its intent.
The hypocrisy becomes even more flagrant and exposed when within a month our Prime Minister is rolling out the red carpet and wining and dining the Chinese president who is internationally labelled as responsible for massive human rights abuses in his country.
The government has not considered any other means of financing the CPP debt other than dumping the burden on the backs of young Canadians. The government must realize that a portion of this unfunded liability should be spread across all members of society. Take a few billion of the fiscal dividend for the next 40 or 50 years and see what could be done to lighten the burden on the young, the low income worker and small businesses. But no, the Liberals have big plans for the fiscal dividend. They want to buy some votes with it. They do not really care about using it for good purposes.
When the minister has been challenged about the flaws in his thinking and in the plan, he reacts with feigned outrage and extravagant fabrications. He sets up straw men and then beats away to the cheers of his backbench cronies.
He claims for example that income taxes would rise 25% should he provide support to the CPP unfunded liability. What balderdash. Net personal income taxes this year are likely to approach $70 billion and 25% of that is $17.5 billion. But the CPP premiums this year are already bringing in $14 billion. This is an example of one of the finance minister's fabrications.
Government has a duty to Canadians to look at saving and changing the CPP in more rational and secure ways to deliver better value for Canadians. It needs to give real security to Canadians. It needs to encourage thrift rather than penalize it. It needs to expand opportunities for Canadians especially those of modest means to save, rather than taxing away every spare nickel.
The government needs to ensure that public pensions move toward being a real funded asset, safe from political changes or mismanagement. It needs to make sure that there is a real safety net for needy seniors when personal resources are absent. It needs to give tax relief and safety from its continual tax increases which erode the fixed income of people who are retired. It needs to be committed to smaller, more efficient government that spends and taxes less. Instead the Liberals fight to see who can spend the most.
There needs to be liability for unfunded benefits right across society, not mostly loaded on the backs of our young. The government needs to lighten the burden on the business sector and on job producers so that people can earn incomes and can save for their retirement. It needs to give real value and allow younger Canadians to opt out of a bad plan into mandatory pension investment accounts that would deliver a fully funded individually owned pension with better investment returns and higher more secure benefits.
Other countries are doing this but not in Canada. We have to be stuck with some vague political promise from the government because only it can manage our money for us. What nonsense. We need management of a fund which is much less vulnerable to political interference. We just cannot put future generations in the position of having to pay a lot for a little or further eroding the retirement security of older Canadians.
We urge government members to make courageous spending and allocation choices now instead of fighting over some of their pet programs. Make choices now with the money we have to clean up this mess, rather than just transferring it onto our children. The government needs to take every reasonable step to make this fund management fully accountable and untainted by political interference. It needs to stop the tactic of attributing monster scenarios to the opposition and work constructively, all of us together, in the best interests of Canadians with measures we can all have confidence in.
A talk show host who is well respected in Alberta, Dave Rutherford of QR-77 in Calgary, asked Canadians to let him and the opposition in this country know what they thought about these changes to the CPP. Four thousand faxes were sent in over a period of a few weeks. I would like to have the consent of the House to table these so that all members can look through them and see what real Canadians feel about the measures that are being proposed today.