Mr. Speaker, I welcome the opportunity to reply to and passionately oppose the Reform motion before the House.
The motion clearly stakes out the opposition position that it interprets the changes to the Canada pension plan as business bashing and fiscal foolishness. That position is based on partisan politics, not fact or logic.
Let me be blunt. We had to make some tough decisions about the CPP. The changes are not painless or pleasant, but that happens when we try to fix something that should have been reformed years ago, in fact decades ago. These changes are not based on decisions made in isolation and imposed without consultation.
One of the many realities ignored by the opposition motion is that these are reforms agreed upon by the federal government and eight provinces representing the significant majority of Canadians. These are reforms based on a year long process of public consultation and intense discussion and negotiation between the two levels of government. Most of all, these are changes to the CPP with an overriding and concrete goal: to preserve and secure one of the key pillars of our national pension system.
The third party can play games with phoney mathematics and hidden agendas, but the federal and provincial governments had to address a real problem and find a workable solution. That is what we have done, to the benefit of Canadians today and for generations to come.
Let me remind the House that the Canada pension plan affects all working Canadians and their families. It is the compulsory earnings based plan that forms one pillar of Canada's public pension system. The proposed changes are a strong and balanced package of reforms that will ensure the Canada pension plan is there for Canadians today and in the future. There for Canadians means not just for workers when they retire but equally to help Canadian workers and their families should they become disabled or die.
This is something the third party ignores in its public proposals. The fact is that about 30 per cent of CPP benefits go to disabled persons and for survivors' benefits, but for the Reform Party these Canadians do not seem to exist.
That is why I find the assumptions underlying today's motion by the Reform Party so disgraceful. These assumptions shamelessly dismiss contributions paid by workers and their employers as little more than common payroll taxes. They completely ignore the real issue, which is that CPP contributions guarantee every Canadian worker a pension. In this sense, CPP contributions constitute an investment, ensuring workers a secure retirement and adequate benefits both for disabled workers and families of deceased contributors.
CPP contributions will not swell the government's coffers and the government cannot use this money for its expenditures. On the contrary, contributions go into a separate fund used to pay pension, disability and survivor benefits. Under the proposed amendments to the Canada Pension Plan, money collected in future will be invested so as to obtain a greater return for contributors. Not only
will Canadians get back all the money they contributed but, in addition, they will see increases in their pensions and other benefits.
These are not just empty words. Allow me to remind the House that the tax system treats CPP contributions as pension benefits. In the calculation of income tax payable, contributions qualify as tax credits for workers and tax deductions for employers.
Unlike the situation that arises when taxes are increased, increases in CPP contributions result in decreased tax revenue and a tangible drop in government revenue.
Today's motion prefers to ignore these facts. It is the type of self-serving argument and attitude that prefers to drive wedges between Canadians, between generations, between regions, rather than build for a fair and shared future. It is a motion that suggests we are imposing harsh hikes in CPP contributions and that ignores the much heavier increases that would otherwise have had to take place. It does so because it is a motion that ignores the very real problems we have had to address with the CPP.
The plan's chief actuary reported that the plan was simply not financially sustainable under the current contribution schedule. This is why firm, forward looking action had to be taken. The only fair way to deal with the problems facing the CPP is to increase contributions now so that Canadians can begin to pay enough to cover the costs of their own pensions plus a fair and uniform portion of the unfunded liability that has built up over the past 30 years.
There is no mystery about the problem. Basically the costs of CPP benefits have grown faster than originally expected when the plan was first instituted in 1966 and will escalate dramatically when the baby boom generation reaches age 65 around 2011.
I remind the House that under the existing legislation, as a matter of statute, contribution rates were already scheduled to rise to more than 10.1 per cent in 2016. In other words they were to virtually double. Even then the chief actuary of the plan has shown that without changes the CPP fund would still run out of money in less than 20 years. Without additional changes, contribution rates would have to increase from that 10.1 per cent to over 14 per cent of pensionable earnings to cover escalating costs.
It is essential to recognize that by acting now to fix the CPP we are limiting contribution rates to a maximum of 9.9 per cent. Then they can be frozen and remain steady thereafter while providing the same benefits.
The increase in CPP contribution rates that we announced is not the first in a series of increases. I repeat, the contribution rate of 9.9 per cent to be borne equally by workers and employers is a maximum that should never be exceeded. The rates will not increase again. This increase is lower than the 10.1 per cent already projected under the existing legislation, and is well below the 14.2 per cent that would have been required if we had not acted now.
It is true that the contribution rate in 2003 will be about 40 per cent higher than the rate foreseen under the existing legislation, but, at the same time, thanks to the amendments we are proposing, the contribution rate in 2030 will be much lower than projected. It will in fact be approximately 30 per cent.
This means that future generations, our children and grandchildren, will not be weighed down by an incredible financial burden. It also means that people in their middle years whose contributions had been less than the amount required to pay future benefits will now pay contributions that are more equitable in that respect. Younger Canadian workers and young people entering the labour force will pay contributions that are not as high as previously planned. Also in the interests of fairness.
What about present CPP beneficiaries? Why are these people not affected? There is no doubt that many are drawing pensions that are far more generous than they would be on the basis of the contributions they paid. That is true, but it is not their fault. If anyone is to blame, it is the plan itself which was not adjusted in the past as it should have been, because previous governments did not have the political will to make these decisions.
That is why our proposal is accompanied by measures to make the Canada pension plan more accountable and provides for more frequent review. Furthermore, any new initiatives under the plan must have full financing before they can go ahead. However, it would not be fair to make our seniors, who made their retirement plans of the basis on the existing plan, pay their costs retroactively. We signed a contract with our seniors and for the sake of fairness, we must honour that contract.
As you can see, the proposed changes to the Canada pension plan are not an affront to business or the taxpayer. They do not involve an additional tax or some new trick in our tax system. In fact, these are prudent and basic measures that are entirely in line with our record for sound management of public moneys and reflect our commitment to be fair in every respect.
If we had failed to make the difficult decisions that were necessary, younger generations would have had to pay twice as much as they will now, without receiving a penny more in benefits. This would have been neither fair nor affordable, and indeed it
would have been excessively costly. To put such a burden on future contributors would, in all probability, have led to the collapse of the plan. We could not afford to let this happen.
Acting now will ensure the Canada pension plan is on a secure and stable financial footing for the foreseeable future. As I said before, the CPP changes were not decided in isolation. They reflect a truly national consensus based on public consultations and a decision making process that involved the provinces as full partners.
Believe me, no government at any level likes to ask its people to pay more for the same services. But it is a price many Canadians have told governments they are willing to pay in order to preserve the plan they believe in and want to be able to depend on. They told us so during the public consultations which were held in every province and territory last spring as part of the federal-provincial review of the plan. Canadians clearly said that they valued the CPP. They told us they wanted it fixed, not scrapped.
During the review, we and the provinces examined a number of options and heard opinions from both ends of the spectrum. We considered many alternatives, but narrowed our choices to those which would ensure that no one's benefits were jeopardized; not those of today's beneficiaries, nor those of future generations. We listened when Canadians everywhere said the Canada pension plan is important to them. They want it preserved, and preserved in a way that does not pass on an unfair burden to younger generations. It is worth remembering that the debate currently taking place is not about choosing to increase contribution rates. It is about choosing to preserve the Canada pension plan.
Canadians asked their governments to make the CPP sustainable by strengthening its financing, improving the funds' investment practices and reducing costs. The changes proposed do exactly that.
Before concluding, let me briefly talk of another element of today's motion, an example of the political game playing that demonstrates the desperation of the third party. Reform members have attempted to create a link between the proposed Canada pension plan changes and the current pension arrangements for MPs. This is not just a comparison of apples and oranges. It is more in the realm of sour grapes.
I need not remind you, Mr. Speaker, that many Canadians belong to a pension plan, not only members of Parliament. For any pension plan member, pension income represents deferred compensation and thus an earned benefit. We must also remember that the terms of the MP's plan were designed to take into account an MP's unpredictable career pattern-as I think most Reform members will see within the next few months-lack of job security and the fact that many members take a substantial salary cut in undertaking parliamentary service. The MP's pension plan, like other employer sponsored pension plans, provides a pension arrangement for a targeted plan member population and therefore is adapted to their needs.
For the record, MP's pension contributions are higher than the norm for employer sponsored pension plans and are significantly higher than the contributions required under the Canada pension plan. I should also note that under the MP's plan members of the House of Commons contribute 9 per cent of all salaries. By comparison, in 1997, employee contributions under the CPP will be equal to 3 per cent of pensionable earnings. This rate is projected to increase to 4.45 per cent over the next six years.
I would also like to remind the House that in July 1995 and in the context of a freeze on parliamentary salaries, the government amended the Members of Parliament Retiring Allowances Act. Under the new arrangements age 55 has become the minimum pensionable age. As well, benefits for MPs in respect of service on or after July 13, 1995 have been reduced by 20 per cent. Also, the practice of double dipping has been curtailed within the federal public sector, which is the only sector over which the federal government has jurisdiction.
These changes went beyond the government's red book commitment to reform MP's pensions and have significantly reduced the related costs to taxpayers. In fact, savings over the past year have been in excess of $3 million. Also, as with any pension plan, the MP's plan is regularly examined with a view to balancing the needs of retiring MPs and the related costs.
The real issue, of course, is not a comparison between the CPP and the MP's plan. This is just electoral grandstanding. What today's motion tries to dismiss and discredit is the very real and historic reforms that the provincial and federal governments are bringing to the national workers' pension plan, reforms that will affect many millions of Canadians today and in years to come. By our work, these Canadians can plan for their retirement in greater security without having to wonder if the CPP will be there for them. It will because we have acted. This is the type of action that sustains our great country and that Canadians expect and demand of a government committed to their future.
I am proud of what we have done and confident that the vast majority of Canadians see it as the major achievement it is, one firmly and fully committed to their best interests.