Madam Speaker, I will continue quoting from the letter nonetheless:
I have always been proud to work in the public service.
Personally, I think this pride has definitely taken a beating recently. I will go on reading this letter, which was written by a Quebecker whom I will not name, because I did not have the time to contact him to ask for permission.
It is not always easy because, as is now the case, the public service is the target of ambitious but petty politicians, such as—
He then gives the name of the President of the Treasury Board, which I obviously will not read. The letter goes on:
Our salaries have been frozen and the government has passed arbitrary back-to-work legislation instead of negotiating fairly.
What does the writer conclude?
We are still the victims of political ambition.
And he goes on to say:
The Minister of Finance wants to become Prime Minister.
It is no longer any big secret that the Minister of Finance wants his boss's job. The writer then says the following about the Minister of Finance:
He has his eye on the pension plan surplus, which he sees as easy money for lowering the national debt. He wants to make a name for himself as the one who lowered the debt.
The government should listen to this message. It is an impassioned plea from a public servant who is fed up with the government's offhandedness.
It is unfair for the government to put its hands on the public service pension plans in order to reduce the debt.
We cannot do otherwise than to agree with this. The author of this letter adds:
Unless it also proposes to do the same to the surpluses in a number of private plans.
I wonder: is this prophetic? We shall see.
In the meantime, I would ask you to listen to the way the author ends his letter—and he has taken the trouble to underline these words, which goes to show how important he felt that his message was:
Tell these arrogant characters to keep their hands off my pension fund.
I will repeat this message, so that everyone will understand it clearly:
Tell these arrogant characters to keep their hands off my pension fund.
It is clear. I want this Quebec public servant to know that he is not the only one opposed to the government's attempt to get its hands on his pension fund. We are vehemently opposed to a number of the reforms proposed by the government in Bill C-78.
This bill is supposedly designed to ensure the long-term viability of the public sector pension funds. This is an in-depth reform of the administration of these funds as we now know it. The bill is going to modify the way plans established under the Public Service Superannuation Act, the Royal Canadian Mounted Police Pension Act and the Canadian Forces Superannuation Act operate.
The focal point of the legislation is the creation of the Public Sector Pension Investment Board to be responsible for administering the pension funds, which will in future be partially invested in the stock market. The government is announcing that the bill is improving the financial management of pension funds and employees' and retirees' benefits.
Obviously, blinded by its own all too obvious arrogance, this government was not going to reveal all the unfortunate consequences of this bill to us. Should everything in this bill be pitched? No. It even contains some good ideas and some good initiatives.
The bill in fact contains some things that will improve the situation of workers in the federal government. Former employees, now retired, will also enjoy certain benefits.
The first improvement is in the number of years of service used in calculating the basic benefits a retiring public servant is entitled to. At the moment, basic benefits are calculated on the salary of the six best years of uninterrupted service. The calculation will now be based on five years, rather than six.
I would also point out the change in the formula for calculating the public servant's pension benefit to shrink the amount of the pension benefit reduction when he reaches age 65 and receives as well his Quebec or Canada pension.
The main positive change involves the investment of contributions in public markets. For a long time now, a number of stakeholders, including employers' organizations, have been suggesting that pension funds be invested on the stock market. That is already being done in a number of countries, and the return on this sort of investment is higher than if the money had remained in government coffers.
In 1994, the Auditor General of Canada examined the connection between the management of our debt and employees' pension plans. In his report, he pointed out the following:
Financial managers, actuaries and government officials generally agree that, in the long term, a diversified market security portfolio generates higher rates of return than the interest credited to pension accounts.
The auditor general even retained the services of consulting actuaries to compare the theoretical return on investment of the pension fund on the markets to the investment strategy in notional bonds, which was adopted for pension plans during a 31 year period, from 1959 to 1990.
These consulting actuaries came to the conclusion that a market investment strategy would have generated higher annual rates of return, by 1.5% to 2.3%.
That component of the reform should ensure a higher return than the existing rate for the public service pension plan. This is a step in the right direction, since the bill will ensure a return that will more closely match that of private pension plans. There will be an independent fund with real money in it.
But—and there is always a but—this is by no means the perfect solution. Some provisions of the bill must absolutely be amended to avoid future disputes between the government and its employees.
First, there is the appointment of the directors of the board. The President of the Treasury Board will appoint eight people who will form a selection committee. These eight people will provide a list of names to the President of the Treasury Board, who will recommend 12 of these people to the governor in council who, in turn, will appoint them directors of the board.
The problem is that while the bill provides that the employees' representative is appointed to the selection committee, there is no requirement for the President of the Treasury Board to then recommend that person for the position of director.
Let us see who the other members of the committee are. There is a chairperson appointed by the minister after consultation with a few other ministers concerned, specifically the Minister of National Defence and the Solicitor General of Canada. All signs are that this chairperson will be a friend of the Liberal Party and not an employee.
As for the other directors, it is more of the same, because there is only one public servant on the nominating committee. The government will not saddle itself with such a person on its board of directors if it does not have to.
I would suggest that the government follow the example of the Caisse de dépôt et placement du Québec. In addition to the director general of the Caisse and the president of the Régie des rentes du Québec, the Caisse's incorporating statute provides for nine other individuals to sit on the board of directors. Of these, two must be public servants or directors of a government body, another must be a representative of an employee association, and another must be a director of a co-operative.
Clearly, the composition of this board of directors is much more representative of the various stakeholders in the business world than what the federal government is paving the way for with Bill C-78.
One of the shortcomings of this bill is the lack of predictable representation of beneficiaries of the pension plans operated by the future fund.
Another shortcoming has to do with the use of any future fund surpluses. Bill C-78 amends the Public Service Superannuation Act by adding, among others, clause 44.4, which will leave the government free to take three possible courses of action in the event of a surplus.
First, it will be able to reduce employee contributions for the period that the minister determines. Second, it will be able to reduce Treasury Board contributions in the same manner. Finally, the surplus amount the Treasury Board determines may be paid out of the Public Service Pension Fund and into the Consolidated Revenue Fund, still on the minister's recommendation. Our fear is that this way of operating will turn the future fund into another cash cow for the federal government.
I am not in any way imputing motives to the government, for it has already stated its intention to get its hands on the surpluses in the public service pension plans. Public servants are continually calling for the government “not to be allowed to get its hands on our surplus”, while the Treasury Board is busy manoeuvring in order to be able to do just that.
These surpluses are estimated at more than $30 billion. As at March 31, 1998, in other words more than one year ago, the public service pension plan reported a surplus of $14.9 billion, the RCMP's plan $2.4 billion, and the Armed Forces' plan $12.9 billion, for a total of $30.2 billion.
This is a lot of money, and obviously it could repay part of the debt, or fund phase II of the millennium scholarship program. Obviously, getting its hands on such a sum would—as my correspondent whom I have just quoted pointed out—allow it to score a lot of points politically.
But the government is wrong. The minister responsible for the public service is wrong. By getting its hands on its employees' superannuation funds, the government is trying to score points politically. This approach did not succeed when it got its hands on the employment insurance fund.
It is immoral for the government, which happens also to be the legislator, to take advantage of the fact that there are no legislative provisions relating to the present surplus to dip its fingers into it.
At the present time, there are 275,000 people paying into the fund, 160,000 government retirees, and 52,000 surviving spouses, who are watching the government meddle with their pension funds. It is true that there is a legislative vacuum when it comes to handling the present surplus. The legislation to remedy that lack ought to call for part of the surplus to go back to the employees and the pensioners.
The government recently tried to justify its argument that any surplus belongs to it, because it is the one guaranteeing that public servants will get a pension. Indeed, the President of the Treasury Board recently explained that, since the government has had to shell out money in the past to ensure that public servants would have a pension when there was a deficit in the fund, it is only normal that the government should get any surplus. This is absolutely not true.
The normal thing to do would have been to lower employees' contributions, particularly when it was realized that a huge surplus was accumulating.
The argument used by the President of the Treasury Board is also indicative of inadequate management by this government. Indeed, there is every reason to think that if, a few years ago, the government had set up a real retirement fund and had invested the money on the market, there would have been no deficit, or hardly any.
In fact, the Auditor General of Canada came to that conclusion in one of its reports released in 1994. He wrote, and I quote:
The higher rates of return that the pension accounts could have earned, had a market investment strategy been followed over the long term, could have substantially reduced or totally eliminated these actuarial deficits.
Consequently, the deficit and debt accumulation could have been lower if a market investment strategy for the pension accounts had been followed from the start.
Many employees have been asking for a long time that their superannuation fund be invested on the stock market, something that the government has so far refused to do. Now, these employees are being relieved of their fund.
The government should be careful, because it is sending two negative messages to society. First, it is telling the public that it does not believe in fairness. In this particular case, fairness requires that part of the current surplus be applied to the pensions of current retirees.
The President of the Treasury Board is certainly aware—but are the other members of his government?—that the average annual pension benefits paid to former government employees is $9,680. These pensioners will not get rich on that kind of money.
In addition, the government is telling other employers that it is alright to use the money in their employees' pension funds. For instance, a municipality might have a road to build but not have enough money to finance the project. What could it do? it could use its employees' pension fund. A company might wish to eliminate a recent deficit. What could it do? It could dip into its employees' pension fund. The federal government is setting a dangerous precedent that may affect labour relations in Quebec and in Canada.
Starting today, the government must follow the example set by one of its own backbenchers, the member for Thunder Bay—Atitokan, who wrote in The Chronicle Journal as recently as March 29 that the government was again going to meet with public service employee representatives on the issue of pension fund surpluses in order to come up with an agreement acceptable to both parties. The member concluded his letter with the statement that he was confident that such an agreement would be worked out.
There is no doubt that the member for Thunder Bay—Atitokan, like many others in his party who dare not express their views for fear of being sidelined, will lose their trust in this government that refuses to negotiate with its employees, the most basic form of civic-mindedness.
So as not to lose the often too-blind trust of its party members, and the slowly but surely declining trust of the public, the government must scrap the provisions in its bill that allow the unilateral diversion of $30 billion in surplus pension funds.
In addition to helping those who are now retired, future negotiations between the government and public service employees would lead to the conclusion that it is a good idea to transfer the present pension fund surplus into the retirement fund this bill sets out to create. The new fund would thus have start-up capital. This is the only way of ensuring the fund's viability vis-à-vis the many challenges it will have to face.
One of these challenges is the imminent retirement of the many baby boomers. The pension fund will be hard put to keep up. We must, however, remember that the current hiring rate in the public service is fairly low and that, accordingly, fewer workers will be paying into the fund.
The future fund must have a reserve of its own, in order to provide for a possible and probable need for money. Transferring the current surplus would seem appropriate to fill this role. The surplus will serve as well to cover unavoidable losses from investments in the stock market.
We will recall that a number of investment firms suffered in the recent Asian crash, primarily those whose portfolios were not sufficiently diversified. Even the auditor general's report for 1994 shows that, according to his findings, in certain periods—from 1970 to 1974 and from 1985 to 1990—a market investment strategy might not have produced the best results. It would have been useful to have a little room to manoeuvre, a bit of a surplus.
For these various reasons, I hope the government will return to bargaining with its employees rather than try to have this bill passed. It only partly resolves the current problems of managing a pension fund. Accordingly, the government can make off with the money, no doubt causing increased tensions between the government and its employees.
“Tell these arrogant individuals not to touch my retirement money”, said the letter I read earlier.
So, I am passing the message along to the President of the Treasury Board: “Do not unilaterally take over the surplus in the pension fund. Instead, put your bill on the back burner, while you reach an agreement with your employees on how to use the surplus. And, most importantly, stop governing autocratically”.