Madam Speaker, I am pleased to speak today on third reading of Bill C-2, the legislation that will secure the Canada pension plan for Canadians now and in the future.
One of the most important social policy initiatives ever undertaken in this country, the Canada pension plan has been a key part of the retirement plans of every Canadians since 1966. It has also helped our most vulnerable citizens, the disabled, the widowed and the orphaned. That being said, the Canada pension plan is now under growing pressure and needs to be changed before it is too late.
The fact is that when the CPP was created, there were eight working age people in Canada for every retired person. Today there are five. In 30 years there will only be three.
The current 5.85% legislated CPP contribution rate was scheduled to rise to 10.1% by 2016. If nothing is done, CPP contribution rates will have to increase to over 14% to cover escalating costs. That is a 140% increase for future generations and certainly that would be an unacceptable fate for our children and our grandchildren.
It does not have to be that way if we act today to address the problems that we anticipate for tomorrow. As joint stewards of the Canada pension plan, the federal government and the provinces agreed last February to restore the financial sustainability of the Canada pension plan and in fact to make it fairer and more affordable for future generations.
Bill C-2 incorporates the changes proposed in that agreement and also reflects the views expressed by Canadians during last year's cross country public consultations. Some have said that these changes are being rushed but allow me to set the record straight. It is the continuing delay that threatens the CPP and in fact it is the delay in facing up to the very real challenges confronting the Canada pension plan.
In February 1995 the government tabled the fifteenth actuarial report on the Canada pension plan which showed as I just mentioned that if changes were not made to the Canada pension plan the fund would be exhausted by 2015 and the contribution rate would have to jump to over 14%.
In 1996 the federal government and the provinces released a paper on the problems facing the Canada pension plan. They held consultations with Canadians in every province and territory and released a report on those consultations.
In February 1997 we reached a landmark agreement with the provinces. There were then two draft bills released and in fact it is beyond me how anyone can say that we are rushing the Canada pension plan reforms. Clearly we have ensured that the problems that face the Canada pension plan as we move into the next millennium are being addressed and they are being addressed in consultation with all Canadians.
What I do know is that Canadians were legitimately concerned that their Canada pension plan would not be there for them when they retire. They told the federal and provincial governments to act now. They told us that they want to be able to count on their Canada pension plan now and in the future and they want it fixed, not privatized and not scrapped.
They also told us to do this in a way that does not pass on an insupportable cost burden to younger generations and they clearly told us to preserve the CPP by strengthening its financing, improving its investment practices and moderating the growing cost of benefits.
Canadians want and need the Canada pension plan but they want changes as well. We have listened and I believe that is what in fact Bill C-2 is all about.
The Canada pension plan's pay as you go financing may have been fair and appropriate back in 1966 but not in today's or in tomorrow's world. Building up a larger fund, fuller funding and earning a higher rate of return through investment in the market is now necessary to help to pay for the rapidly growing costs that will occur once baby boomers begin to retire.
Accordingly, the Canada pension plan will move from a pay as you go financing with a small contingency reserve to fuller funding to build a substantially larger reserve. Fuller funding means that the fund will grow substantially for about two years of benefits to about four or five years over the next two decades.
Until 2003, CPP contribution rates will increase in steps to 9.9% of contributory earnings and then remain steady. This steady stated rate is expected to be enough to sustain the Canada pension plan with no further increases.
During the consultations on CPP, ordinary Canadians and pension experts alike told us to improve the way CPP funds are invested and to secure the best possible return for contributors and beneficiaries.
Under the proposed new investment policy, instead of being loaned to provinces at preferential rates as they are now, Canada pension plan funds will be prudently invested in a diversified portfolio of securities in the best interests of plan members, like other pension funds.
An independent CPP investment board composed of 12 directors from a range of backgrounds will oversee investment policy for the fund. The board will in turn hire qualified investment professionals to manage the day to day investment decisions at arm's length from governments. The board will operate under broadly the same rules as other private and public sector pension funds and that means responding to market conditions, adopting investment policies and hiring qualified investment professionals.
At the same time, the board will be accountable, accountable to plan members, accountable to government and accountable to Canadians generally. I am pleased to report that the experts in pension fund management who testified before the finance committee agreed that Bill C-2's accountability provisions are in fact stringent and leading edge.
The same experts told us that the key to good investment practices and results is good management structures and that these provisions are in Bill C-2 and are extremely sound.
While this bill was before the House finance committee, a number of committee members were particularly eager to ensure that the accountability provisions of the bill were as stringent as possible. Once again, expert witnesses confirmed that the legislation was very rigorous in this area.
Moreover, two amendments for which there was support in committee were made at report stage to clarify the accountability of the board. The first one clarifies the auditor general's access to any information he considers necessary from the investment board to audit the consolidated financial statements of the Canada pension plan.
The other amendment requires that a special examination of the Canada pension plan investment board be conducted at least once every six years.
Through Bill C-2, stewardship of the Canada pension plan is also improved and its public accountability strengthened. Canadians will receive regular statements about their pensions. Federal-provincial reviews will take place every three years instead of every five years. Annual reports will be published on the fund and tabled in Parliament and regular public meetings will be held in each province.
Through consultations with Canadians, some modest changes to benefits will accompany these financing and investment policy changes, but let us be clear, some benefits will not change as well.
For example, anyone currently receiving Canada pension plan retirement pensions or disability or survivor benefits will not have their benefits affected in any way. All benefits will remain fully indexed to inflation, except the one-time death benefit. The ages of retirement will remain unchanged.
The changes that are being proposed are moderate and balanced. Indeed their impact on vulnerable Canadians has been minimized and no one group has been singled out or forced to shoulder an undue burden.
During the public consultations on the CPP, Canadians told their governments to go easy on changes to benefits. Again, we have listened.
The changes to the Canada pension plan keep the contribution rate from rising to the 14.2% it would have reached had we not acted.
Seventy-five per cent of the changes that will ensure the sustainability of the CPP are on the financing side and only 25% are on the benefit side. Once again, this reflects what Canadians told their governments during the public consultations.
Let me take a few moments to refute some of the myths being spread by members of the other side of this House and by some special interest groups.
Critics claim that youth gets a raw deal from these changes. Some have actually stated that young Canadians will contribute one dollar for every fifty cents they will collect. Let us be absolutely clear. Nothing could be farther from the truth. All Canada pension plan contributors, both present and future, will receive more from the Canada pension plan than they pay in.
Young people can expect to receive $1.80 for every dollar of contributions. The return can only be higher if governments were prepared to renege on the existing commitments to seniors already receiving pensions and to working Canadians expecting pensions when they retire. We will not turn our backs on these Canadians. We will not renege on these commitments.
Some hon. members have also stated that CPP contributions will increase by 73% and charge that this is the biggest tax grab in history. CPP contributions are not taxes and Bill C-2 is not a tax grab. CPP contributions are savings toward pensions. They go into a separate fund, not into government coffers, and will be invested like other pension plans.
Let us get the facts straight. Contributions will increase over the next six years to 9.9%. However, that is also the end of the increases. What the critics never mention when they criticize the increase to 9.9% is that the CPP contribution rates are already scheduled to reach 10.1% in the year 2016 and without the changes that we are proposing, the Canada pension plan would soar to 14.2% in the year 2030.
Is that what the hon. members of the opposition parties prefer, a 140% increase? It is certainly not what the government prefers. It is certainly not what Canadians have said during the consultation period. In fact, it is certainly not what is contained in Bill C-2.
Other members argue, and the hon. member from the Conservative Party continues to argue this, that the higher CPP contributions should be offset by EI premium rate reductions. I know that it takes some time to communicate and understand these facts for some hon. members.
Let me again state quite clearly that the EI program and the Canada pension plan are totally separate programs serving different purposes. Furthermore, the government has already announced EI rate reductions for 1998 that more than offset the Canada pension plan increases. We are committed to bringing down the EI rate further just as soon as we can afford to do so.
Then there are groups that contend that not only will these changes take $157 billion out of the economy but that each 1% increase in payroll taxes will mean the loss of up to 176,000 jobs. Quite clearly the allegations are wrong and I want to take this opportunity to ensure that the record states very clearly that these allegations are wrong.
I reiterate that higher CPP contributions are not payroll taxes. Canadians have viewed and will continue to view their CPP contributions as retirement savings. They can see, as members on this side of the House can see, through the transparent rhetoric of these special interest groups. The reforms that we are proposing will generate important and lasting benefits for Canadians.
Let me continue with the myths. Some hon. members continue to talk about better returns through privatized pensions. These members owe it to Canadians to explain exactly what they would do with the CPP's outstanding obligations to Canadians. There is no question that registered retirement savings plans are important and that is why they are one of the three pillars in the retirement system of Canada. But they cannot replace public pensions.
Canadians told governments during the public consultations that they want the security provided by the CPP as a public plan. They do not want all their retirement savings dependent on their ability to second guess the fluctuations of the stock market. And I am sure that members opposite have been watching the fluctuations in the stock market lately and I am sure that the recent events have reinforced the priority that Canadians give to security even though it has not reinforced anything from members opposite.
Let us look at the costs. The cost to contributors for the Canada pension plan benefits will be 6.1%. Could mandatory RRSPs really provide equivalent or better benefits at lower costs than the CPP? The answer is no. With the new investment policy the Canada pension plan fund will earn as good returns as anyone investing privately could expect to earn. Furthermore, the CPP has the added advantage of having the government stand behind the benefits.
The administrative costs of the CPP and the cost of investing the pool of CPP funds will be considerably lower than the cost associated with administering millions of individual plans. We had expert after expert come before the committee who continued to say and reinforce the point that the administrative costs associated with mandatory RRSPs and administering millions of individual accounts was far greater than the administrative costs of the Canada pension plan.
In addition, the CPP protects families when an income earner becomes disabled or dies, and it protects the pensions of parents who take time out of the workforce to care for young children. So when we add it all up the fact is a reformed CPP will cost less than a retirement saving done exclusively through a mandatory program of RRSPs, at least one percentage point less.
Let me turn to the extra cost of paying for the burden of the $600 billion unfunded liability. Members opposite have talked about scrapping the CPP and moving to mandatory RRSPs, but they have never clearly explained how they would do that. Let those who would scrap the CPP explain to Canadians whether they are going to renege on the promises to Canadians who are now retired. Let those who are still working and counting on receiving CPP when they retire have the security that is provided in Bill C-2, ensuring that the public pension plan is there for them.
Mandatory RRSPs do not do that. Reneging on the Canada pension plan liability does not do that. That is what members opposite want.
Let those who would scrap the CPP explain how they will deal with Canada pension plan's $600 billion in outstanding obligations. Are they going to deal with this within the CPP? If not, how will they raise the revenues or make spending cuts to pay for these obligations? It is time for them to stop their fiction and fantasy. It is time for them to come clean with Canadians and give Canadians the straight goods.
The problems facing our pension system are not unique to Canada. Many countries are making changes so their pension systems will also be sustainable. Some have recommended moving toward increased funding of public plans, which is exactly what we are doing with Bill C-2.
The legislation will make Canada one of the first, if not the first, major industrialized countries to ensure sustainability of the public pension system in the next century. It is forward looking and above all it is fair. I urge hon. members to give their full support to the bill.
Generations of Canadians, our children and our grandchildren, need our leadership today to protect their interests tomorrow. Bill C-2 does that. It does that after consultations with Canadians.
The Standing Committee on Finance is continuing the consultations with experts and other groups that come before the committee. They have overwhelmingly supported Bill C-2 in its balanced approach. Bill C-2 will continue to monitor the Canada pension plan. Bill C-2 will continue to provide Canadians with the security they expect and deserve from their Canada pension plan.
I ask members not to continue with their rhetoric but to deliver the facts to Canadians and ensure the bill passes third reading and becomes legislation so that Canadians have the peace of mind they deserve.