Mr. Speaker, I am pleased to speak to Bill C-78. I would like to focus, in particular, on the issue of the debt and talk about the financial implications of this bill.
In successive budgets the federal government has balanced the federal books and has made a commitment to bring down our national debt.
Bill C-78 represents another stepping stone toward that goal. Bill C-78 will allow the federal Treasury Board to deal with existing surplus in the superannuation accounts of the Public Service Superannuation Act, the Canadian Forces Superannuation Act and the Royal Canadian Mounted Police Superannuation Act.
Funds from these pension plans will be directed at paying down Canada's $583 billion debt. The pension plan now has a balance of $119 billion from years of contributions and interest payments. The federal governments actuaries, however, estimate that only $94 billion is needed to pay the pension benefits of all existing and retired public servants.
In the public accounts of 1996-97 the Auditor General of Canada pointed out that the accounting for employee pensions should be carefully re-examined and changed. This is exactly what Bill C-78 addresses.
Canada's current economic success is due to sound economic and fiscal policies and the hard work and sacrifice of Canadians. In just four years we have eliminated a budgetary deficit which stood at $42 billion in 1993-94. In fact our first surplus in 28 years of $3.5 billion was recorded in 1997-98 and went to pay down the debt.
In the last federal budget the government put forward its debt repayment plan to address our national debt. The government will continue to present two year fiscal plans based on prudent economic planning assumptions. The first fiscal plan will continue to include a contingency reserve as a buffer against unexpected financial pressures. The current plan contains a contingency reserve of $3 billion a year. When the contingency reserve is not needed, such as last year, it will go directly to paying down the public debt.
In addition to the federal budgets of the government, legislation such as Bill C-78 would go to bringing down our national debt further. I am surprised that the Reform Party does not support the bill. I would have thought that a party so ardent about pinching pennies would stand up against the chance to put a solid concrete contribution of $30 billion toward reducing our national debt. I would like to know where the consistency is in terms of its policies on this issue.
There is support for the bill. The Edmonton Journal wrote the following about Bill C-78:
—the government is looking for money to pay down Canada's gigantic national debt—a worthy cause, if ever there was one.
The Toronto Star wrote:
By claiming the surplus, Ottawa can thus produce a painless $30 billion reduction in its debt. With reduction in the debt, of course, goes a reduction in interest payments, leaving Ottawa more money to spend on other things.
The Montreal Gazette stated the federal approach to dealing with the pension surplus was not only sound fiscal management but also a perfectly defensible use of the pension surplus.
Malcolm Hamilton, a pension specialist at William M. Mercer, said that time was ripe for the government to privatize the pension fund. With the deficit under control, he said, the government no longer needed to borrow from the plan. Mr. Hamilton argued that the government had public opinion on its side to use the surplus to pay down the debt. Public servants pay high premiums for their pension, 7.5% of their salaries, but they also have one of the best pension plans in the country.
Even Mr. Rex Guy, national president of the Federal Superannuates National Association, stated:
Any surplus must be shared equitably by the employer (the taxpayers), employees, and pensioners. FSNA believes that forcing a decision at the Supreme Court level on “ownership” of the surplus would inevitably lead the discussion away from the question of fairness and equity. FSNA has consulted independent professional and legal experts in the pension field and has been advised that, on the basis of current legal jurisprudence, the employer can decide how to dispose of the surplus.
Mr. Guy as well as many others have raised concerns to the effect that Bill C-78 might lead to shortfalls in the pension plan. There are provisions in the bill to address these concerns.
Bill C-78 proposals will allow for the establishment of an appropriate reserve to smooth any adverse effects in future actuarial assumptions. This is the same amount that is currently provided under the Income Tax Act for other employers, up to 10% of the pension liabilities.
Further, the legislation does not require surpluses to be withdrawn all at once. Rather they can be debited over a period of up to 15 years.
The federal government has always been committed to the pension plan. The current superannuation account was established by law to assure the employees that the government recognized its obligation to pay their pensions. If any shortfall or deficit exists between the amounts in the pension account, the government must make additional contributions to cover that shortfall. It has done so on many occasions in the past. The government has always assumed 100% responsibility for any funding deficits, that is all the risk that arose in the federal public service pension plan.
On the question of whether the government is setting a dangerous precedent by taking the surplus and applying it, clearly there are few plans primarily in the public sector where both surpluses and deficits are shared by the employer and the employees. Entitlement to surpluses excluding withdrawals is actually based on specific provisions in the pension plan text. Again Bill C-78 is adding such a provision to the public sector plan.
Bill C-78 represents the government's commitment to putting our fiscal books in order while protecting the pension plan. It represents a strong commitment to taking Canada out of debt. By passing the bill we can take one more step toward a healthier fiscally sound future and, as the Toronto Star so rightly pointed out, reduce our debt and interest payments which in turn would allow us to focus on other Canadian priorities: health care funding, more money for children's benefits, for seniors programs, and for an overall better quality of life for all Canadians.
We are not taking money away from Canadians. We are actually judiciously addressing our financial and fiscal responsibilities. We are making sure that all those involved in the pension plan, both those who are currently working and those who are retired, will get every cent. As has been pointed out in the House, the plan is even being enhanced.
Again I urge my colleagues on all sides of the House to consider this point very carefully when they vote later this evening.