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House of Commons Hansard #13 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was board.

Topics

Canada Pension PlanGovernment Orders

4:55 p.m.

An hon. member

Close to the Minister of Finance.

Canada Pension PlanGovernment Orders

4:55 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

He does have a close relationship with the Minister of Finance, that is true, so maybe that is enough to qualify a person for that 12-person board. That is the reason they chose 12 people: that was how many Liberal political hacks were out of work at the time and needed patronage appointments. This is why we are critical.

We have $53 billion there, which is soon to be $120 billion. Can members imagine the responsibility of investing $120 billion to $150 billion on behalf of working Canadians? It is a staggering duty and obligation. It takes a great deal of finesse and experience not to squander and lose it, like these guys have been losing it on the stock market, and as I have said, doubling their salaries in the meantime. The CEO's salary doubled even though they lost $1.5 billion the first year out. Somebody said to them, here is $11 billion, do not lose it, and they went and lost it. So we rewarded that by doubling his salary and doubling his performance bonus. It is like taking a cow to the market and trading it for three beans, none of which sprout. There is nothing to be rewarded here.

We have serious reservations about this. Personally I am furious about it. I sat as a trustee on a union pension fund. I know a bit about this kind of thing, and I also know about some of the ethical guidelines that we built into our trust documents because we chose not to invest in the tobacco industry, for instance. I do not care what the rate of return is at R.J. Reynolds. I do not think Canadians want their pension fund invested in the tobacco industry, because (a) it would be offshore, helping an industry in the United States, and (b) it is something that we ideologically do not support. But we will not have that opportunity.

There is another thing. This 12-person board, the one that is hemorrhaging money and bleeding like a cut vein, only has to report back to Canadians once every two years. Has anyone ever heard of a board of directors that does not have to come back to their shareholders except for once every two years?

Canada Pension PlanGovernment Orders

4:55 p.m.

An hon. member

Yes, the Canadian Wheat Board.

Canada Pension PlanGovernment Orders

4:55 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

I do not know why I am being heckled by the Canadian Alliance. They are not even heckling on topic. It is really quite bizarre.

When the board does report back once every two years, there are not even the same rights that shareholders have at meetings. At least at a shareholders' meeting the shareholders can move a motion, an amendment or a resolution and maybe give direction to the board as to how they would like it to conduct itself.

We do not have that privilege. We do not have that right. We will be told how it did and did not do. I suppose the board will allow us to speak at the mikes and say a few things, but there is certainly nothing binding about those meetings. It is completely undemocratic. It has nothing to do with good corporate governance. It encompasses none of the basic tenets of good governance, which is now gaining a certain popularity throughout the investment world.

These are some of our serious concerns about Bill C-3. I would add that the fund controlled by the Canada Pension Plan Investment Board will become so massive that it will be impossible to invest that amount of money throughout Canada, even the 70% that will be invested in Canada, without political implications. Some of the decisions made by this 12-person political patronage board will surely be driven by some regional political or sectoral political influence. We cannot move that amount of money around Canada without causing a wave, a ripple effect. This is billions and billions of dollars. What if it were decided that an area needed some political tweaking, perhaps, a little more economic activity? Instead of the government spending some money there in economic development, it could simply direct its political patronage employees, and I will say could, to invest a whole bunch of money in that particular region, sector or industry sector. These are all worries that are very valid and very real. I am not saying that this will happen. I am saying it could happen without the proper guidelines and controls built into the system. None of that do we see in Bill C-3.

This bill started out as Bill C-58. We had a similar debate when it was introduced. I believe it was introduced last spring and had second reading on June 21 before Parliament prorogued. We had these same debates and frankly we were optimistic because we thought we had made a sufficient number of points. We thought that when Bill C-58 was reintroduced and tabled as Bill C-3 some of those concerns would have been addressed, the very least of which is the ethical guidelines. The government chose not to avail itself of the window of opportunity to give us some satisfaction on these issues.

On the issue of ethical guidelines, we do not even have to compromise profits. As many members here will attest, for instance, some of the ethical mutual funds perform better than the general mutual funds. I would argue that ethical investment funds can perform at least as well and in many cases better.

In terms of foreign investment, if I may I will restate the argument that we do not want our pension plan invested offshore. We want it to do the maximum amount of good in terms of secondary benefits in this country. Again, the experience to date has been, ideology aside, that those offshore investments of the Canada pension plan investment fund have lost 3%. They are minus 3%. They are showing a negative. In the investments made locally, other than stock market investments, which have been disastrous, there has been an average gain of 13%. Investing domestically has actually performed better than investing internationally, so we really do not need any more arguments.

First, we can be ethical and show a better rate of return. Second, we can be domestic and show a better rate of return. Third, we could be a lot more transparent and introduce a code of good corporate governance at least in terms of the structure of the 12-person investment board. Last, we could have a board that would be accountable to the Canadian people in a structure that at least would report back more than once every two years, something that I think is almost comical. There also should be some give and take, some mechanism or vehicle by which the Canadian people could make their wishes known and which would be binding on the board in terms of giving direction, through some kind of motion, plebiscite, vote or process. We have none of that.

No one tried very hard with respect to Bill C-3 to meet any of the concerns that we raised last spring with Bill C-58 and which we now see again before us in the same type of document. We in the NDP are disappointed, and as might be expected our caucus will vote against Bill C-3 based on the items I cited and many others.

Canada Pension PlanGovernment Orders

5:05 p.m.

Mississauga South Ontario

Liberal

Paul Szabo LiberalParliamentary Secretary to the Minister of Public Works and Government Services

Madam Speaker, Bill C-3 would basically carry on with the work that was done in a prior Parliament under Bill C-2 establishing the Canada Pension Plan Investment Board. Some of the points the member has raised were discussed and considered when we went through that process.

One of the principles that was discussed was whether the Canada Pension Plan Investment Board should be an instrument of policy. By that I mean whether it should be an instrument used to promote social or fiscal policy or other objectives that Parliament might have such as ethical investment which the member mentioned. Should we have any investments in tobacco companies because tobacco is bad? We want to clean our environment therefore should we not be supporting those areas?

Those are all very important goals that we try to work on. However considering the size of the pool of funds available to the investment board it is clear that there is a high risk that those investments, if strategically placed, could have a significant disruptive effective on the marketplace.

The decision was taken back then that the Canada Pension Plan Investment Board and its investment funds would not be utilized as a policy tool. In fact, we would have investments. Our objective was to maximize the return on investments comparable to what other investors receive in the marketplace and that investments would be made in the broad cross section in Canadian markets as well as having a balanced debt and equity, and to afford up to 30% of those investments offshore as under the RRSP program. That is where Parliament made that decision.

This particular bill is not bringing that subject back up again although the member again raised the concern that we would like to do those things. Upon reflection, I am sure the member would agree that it would be a dangerous thing to take the money of participants in the Canada pension plan and use it to somehow steer social or public policy considering that such a large amount of money is intended to provide pension benefits for retirees, death benefits for spouses and children, survivor benefits and disability benefits which are substantial. The member may want to comment on those points.

He may want to comment on the fact that the Canada pension plan system was under some question about whether or not it was viable over the long-term. He may also want to comment on the fact that the changes made in Bill C-2 were necessary to ensure the long-term sustainability of the Canada pension plan system.

Notwithstanding the member's noble intent to advance social and public policy, I think he would concede that it is in conflict with the premise of ensuring that the Canada Pension Plan Investment Board optimize the return for pensioners to ensure that the cost of operating the plan is as fair and reasonable as possible. At the same time it should be maintaining the benefit levels of all of those benefits, whether they be pension benefits, survivor benefits, death benefits or disability benefits. We must ensure that they remain at levels which would allow our seniors to get the benefits.

Canada Pension PlanGovernment Orders

5:10 p.m.

NDP

Pat Martin NDP Winnipeg Centre, MB

Madam Speaker, if the hon. parliamentary secretary is really interested in my views, he would not have used nine and a half minutes of the ten minutes allotted to questions and comments to ask the question. However, I will answer some of the things he raised.

In terms of ethical investment, I was not recommending we get into some kind of social engineering. I was not even directly recommending that we use the fund in any specific way to achieve secondary goals. I was raising the point that we do not want to encourage bad behaviour in terms of investing in negative things that some of us have strongly held views about such as off-shore sweat shops in some free economic trade zone.

Some of the funds that we might invest in that show an attractive rate of return could be in things that we would not tolerate on our own shores. Given the off-shore permission now of 30%, that is even more of a factor. That could happen without ethical guidelines. I do not think Canadians would like it if they knew it was happening. Specifically, the spokesperson for the CPPIB says that our legislation specifically prohibits us from engaging in any investment activities other than maximizing investment returns. This is exactly what the parliamentary secretary said, that the only criteria, the only objective, is the maximum rate of return.

That is a crude, outdated and obsolete view on investment these days because even as a trustee of a union pension fund many years ago, we started to take into consideration that there is more than one bottom line. Obviously we must get a reasonable rate of return and hopefully the maximum rate of return. However, we do not have to compromise that to have an ethical investor. That is what the empirical evidence shows, that sometimes the ethical investment funds outperform. Plus, if we did use any of those funds in our Canada pension plan fund for secondary goals, we would be limited in some plans to 10% of the actuarial surplus.

In other words, we do not gamble the actual body of the equity in the fund. The limit is 10% of the surplus that we can participate in those side issues. We should not be rolling the dice with the whole shebang on the stock market and losing billions of dollars, which we are. The status quo is also not very good. No one would say that it is good to lose $1.5 billion per quarter. The only justification is that the CEO says that we did not lose as much as some other people because the stock markets have been bad lately. I am saying maybe we should not be there at all. Maybe the jury is not in as to whether we should be rolling the dice with the future of retirement funds of Canadians.

Canada Pension PlanGovernment Orders

5:15 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, it is a pleasure to speak on this bill. One of the greatest policy challenges for the 21st century will be the impact of our aging population on our social programs, be they health, pharmacare, housing or seniors' housing. All of these programs will be torn asunder by a massive population bubble that will move into that retired age group and put an unsustainable demand upon the social programs. We will simply not have the people working and the tax base to pay for all that we ask.

Indeed not only is it the biggest challenge in the 21st century in terms of domestic policy, but it also is perhaps the most neglected issue because in the House the intergenerational transfer of wealth and the impact of our aging population on our social programs is virtually neglected. That is what I will talk about today specifically with reference to our pension plans, and the CPP in particular.

If one looks at our aging population, the population over the age of 65 will double over the next 20 years. That is combined with a reproduction rate that is below replacement levels. The replacement level is 2.1 children per woman and now we are down to 1.4. We can see that not only is our population declining in the workforce, but we also have a massive increase in population over the age of 65.

This will put that unsustainable demand on our pension system. What choices do we have? Option one is to increase the amount of payments people make through their payroll taxes into a fund to pay for retirees, but there is a finite limit to that. Right now workers pay 10% of their income into that fund. The estimation is that we must pay about 20% into that fund to sustain our retirees in the future. Whereas today we have one person out of every four over the age of 65, in the year 2030 one out of every two will be over the age of 65. That is a massive number of people.

That is combined with the fact that we are living longer. What is interesting is that the age of retirement was actually put together in the 1880s by Otto von Bismarck in Germany. At that time he deemed that 65 would be the age of retirement. Yet at that time the age of a person's life expectancy was 55. Therefore, he did not expect many people to retire to be able to access the German pension fund. In 1966 we blindly took it upon ourselves to determine that age 65 would be the age of retirement when people could receive their CPP pension plans.

The other fact is that we are living longer. In the year 2030 it is estimated that our longevity will be expected to be 90. One can imagine that not only will there be a larger pool of people in their retirement years extracting money from our pension plan, but we will also be extracting money for a longer period of time, on average at least 25 years after the age of 65. That is truly a massive and unsustainable amount of impact upon these pension plans.

The Association of Canadian Pension Management said in January 2000:

The combined forces of the retirement of the Boomer Generation, rising life expectancies, and falling birth rates will seriously strain, and could possibly rupture our retirement and healthcare systems in the next 30 years.

It also said in January 2000, and this is prophetic:

If we do not change the rules of the game, the OECD estimates Canada’s public spending on pensions and healthcare would rise from 13% of GDP in 1995 to 23% in 2030.

How will we pay for education, highways, welfare, this House and the myriad of other social programs and issues that government is asked to pay for? We tend to forget that there is only one payer in the system, and that is the beleaguered taxpayer out there who is already overtaxed. For those who would say that we must raise taxes to meet these increased social demands, I would suggest this is what happens.

It has been proven in Canada that when we raise taxes, it puts a constricting effect upon our economy, the very economy that we rely upon for jobs and to produce the tax base to pay for health care, pensions and other programs. Raising taxes will put a damper on our economy and have the deleterious effect of a negative impact to our tax base by shrinking it. Therefore this is not an option.

What can we do? First, the government needs to do is rationalize our CPP. It should lower the rates right now so we can get our economy moving. Payroll taxes right now are running a significant surplus, which is a removal of wealth from the existing workers of today. Let them have that money, let the private sector have the money and let the companies have the money so they can reinvest in our economy which will make our economy competitive with other around the world.

Second, the government needs to rationalize our pension system. The OAS, which is the old age security, and the guaranteed income supplement are two other issues that need to be rationalized.

We pay a very large sum of money, or roughly $18.7 billion a year, the for old age security. I would submit to the House that we need to do the following. People who are making over $60,000 should not receive OAS. The OAS needs to be targeted toward those who are making less than $60,000 a year. The savings from that can be plowed into the guaranteed income supplement so that those seniors who are significantly impoverished, and there are a lot of them, will have more money on which to live.

I draw the attention of the House to this. What does an impoverished, poverty line senior make today under the GIS? A senior living below the poverty will receive the monthly maximum of $436.65 for old age security. That combined with the GIS, the guaranteed income supplement, brings that to a maximum of $774 a month. How can somebody who has aged, who is retired, who has put their back into this country, some of whom have fought in wars, survive on $774 a month?

We need to do is this. Somebody who is making a rather large sum of money, over $100,000 a year, should not receive OAS. Why not use the OAS savings then to supplement the guaranteed income supplement for those seniors living below the poverty line? That way those seniors will have the money on which to survive. In effect, what we are doing is targeting our pension programs, our social programs, to those who need them, which then make them truly a safety net for those who cannot make it.

If we do not do that, we will have a legion of seniors in the future who live below the poverty line and who cannot afford the medications they require because medications are being delisted and not covered by pharmacare due to the cash crunch in which the governments find themselves. They will not have the money to pay for adequate housing. As a result, they will fall through the cracks and they will suffer. That is not the objective of a reasonable, rational social program.

The government needs to rationalize the OAS and GIS. It should take the OAS away from those who are making more than $100,000 a year although some of it is indeed clawed back today. There should be a graded scale for individuals making between $60,000 and $100,000 a year. If we claw that back a little more aggressively that money can go to those seniors who live below the poverty line so they will have enough money to put food on their tables, a roof over their heads, clothes on their backs and can afford the basics of life, including medications that they will need to use in their senior years.

Personally, the other thing we need to do is change the retirement age. We should abolish the mandatory retirement age of 65. If we do this, it will serve two functions. If someone wants to retire at 65 and take their CPP, they can. However why not provide a situation where between the ages of 65 and 70 individuals can accept 50% of their CPP and earn an income up to $30,000 a year without any negative effect on their CPP?

This would save and reduce the demand on our CPP, keep youthful, vigorous seniors in the workforce, if they choose to, given them an incentive to stay there and they will still be paying taxes. This would have several benefits. Not only would it benefit our economy by allowing these people to stay in the workforce and use their expertise to support our economy, but there also would be less demand on our CPP. In my view this would be innovative. In fact, in a court case, the Supreme Court said that abolishing the mandatory retirement age of 65 would not be a transgression of our Constitution. I think section 1 actually allows us to do that.

If I can quote again the Canadian Pension Management Group, it said:

We need to move from a system which currently provides incentives for people to retire early, to one which provides incentives for people to stay in the work force as long as they are willing and able to do productive work.

That is something at which the government should look. It should abolish the mandatory age of retirement of 65. If people want to retire at 65 and accept their full CPP, they can. However give people the option of having a partial CPP payment between 65 and 70, while allowing them to work and earn an income. That would go a long way in taking the pressure off our pension plan.

The third issue is the RRSPs. We need to increase the foreign content amount from 30% to 50% and allow people to invest 25% of their gross income up to $20,000. This would go a long way in helping people provide for themselves. If we do that, we can lessen the demands on our pension system. At the same we should allow people over the age of 65 to redeem their RRSPs tax free up to $20,000 a year.

I say that because people making less than $20,000 a year should not be taxed. It is impossible to live on less than $20,000. Why should anybody be taxed for making less than $20,000 a year? That is theft from the poor as far as I am concerned.

If the government truly wants to give people a chance to provide for themselves, if it wants the poor to have more money in their pocket, then do not tax them if they are making less than $20,000 a year. What the government could do, which would be innovative, is increase the basic individual allowance from what I think it is about $12,500 to $20,000. That would remove the poor off the tax rolls, which indeed would be very innovative.

To quote the Canadian Pension Management Group again concerning RRSPs, it said:

Because these global markets offer the best opportunities to diversify longer term risks, the globalization of Canadian retirement savings should be seen as a positive, not a negative, development for the ‘financial wellness’ of Canadians.

In essence, give people the tools and the ability to provide for themselves.

In summary, whether we talk about pensions, health care or any of the social programs that we have and enjoy, the government is simply not dealing with the impact of a massive baby boomer bubble that will put unsustainable demands on our social programs.

Our social programs will rupture in the next 10 to 15 years unless we plan now. This is cannot be dealt with in the year 2015. It is something that has to be dealt with now, so we can institute the plans and measures that will allow us to have a graded series of responses to prepare for this cataclysmic event on our social programs.

Speaking from the point of view of being in the health care system, we see this in the emergency department in hospitals and in offices. Our aging population will have massive demands upon our health care system. Some would suggest that because we are living longer and are healthier that this will have no appreciable effect on our health care system. They are absolutely dead wrong and here is why. Yes, we are living longer and we are healthier, but we also will need more joint replacements, angiograms, angioplasties and a whole host of treatments and medicines.

We are also not taking into consideration the impact of the dementias on our health care system. Dementias, whether Alzheimer's or multi-infarct dementia, and other neurological disorders will have a massive effect on our health care system in terms of housing and medical care, and we are utterly ill-prepared to deal with this situation.

I would only impress upon the health care minister for her to work with her provincial counterparts to plan a national strategy to deal with the neurological disorders of the aged, including the dementias and depression which the World Health Organization said would be the second leading cause of morbidity in the next 10 to 15 years. We again are completely and utterly ill-prepared to deal with the impact of this on our health care system.

This includes our pharmacare system. Because of the impact of increasing demand and a lack of resources, governments are forced to ration. That is a polite way of saying that they are withholding essential treatment from sick individuals in an effort to meet their budgets. Who actually is deprived of health care? It is the poor and the middle class, not the rich because they will either pay for it or go south of the border to buy the care they require.

Our health care system in its current form is depriving the poor and middle class of health care, not the rich. I say this right now in view of the fact that the Kirby commission report is coming out this week and the Romanow commission report will be coming out next month.

Ex-premier Romanow has said very clearly that the issue of private services will not be on the board with respect to his final report. I can only impress upon Mr. Romanow that this is short-sighted and highly destructive to the longevity and sustainability of our public system. Private services performed properly in a parallel fashion will save our public system by removing demand without removing resources. I say that personally, not as a party issue.

I say to Mr. Romanow that we should keep all our options open, remove the dogma from the issue and deal with the facts and solutions that work to save our public health care system so that all Canadians, particularly the poor and middle class, who are having their health care withheld, rationed or deprived today will not have to endure that in the future.

I just hope the government will work with members from all political parties and with its provincial counterparts. It should bring its provincial counterparts to the table and tell them to throw their dogmas out the window, that the challenge is here from the people of our country to have sustainable social programs and that there is a duty and a moral obligation to fix these problems in a sustainable fashion. I hope the Prime Minister takes his leadership role in the few months he has left, makes that final gesture and builds the legacy that he is seeking.

Canada Pension PlanGovernment Orders

5:35 p.m.

Liberal

Larry Bagnell Liberal Yukon, YT

Madam Speaker, I have two questions for the hon. member for Esquimalt—Juan de Fuca. As always, I appreciate his thoughtful intervention.

The member recently proposed that to attract rural doctors there could be an advance payment of their tuition. He proposed that as a new and exciting idea but I recently met with the Yukon Medical Association and it is ahead of all of us on that. It already has that.

My first question relates to the comments the member made about pharmacare and the cost of the drug system. I am quite keen on making sure that drug patents do not go beyond the 20 year limit through any mechanism and I wonder if the member supports that.

My second question relates to his comments on the OAS and the pension plan. He made a thoughtful suggestion for improving the contribution to low income earners on the OAS whereby the OAS itself would be capped at $60,000 or $70,000 and then all those savings would be put, I assume in a revenue neutral fashion, into the supplement.

I am curious. Does the Alliance Party have that in its platform? Does it agree with that position?

Canada Pension PlanGovernment Orders

5:35 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, I was speaking personally in my speech and not behalf of my party. We have a plan on pensions, which we have actually put forth in the past, and I think it is quite innovative. It is called super RRSPs and they go beyond the current system.

I just want to preface what my friend has said on thee issue of the medical manpower crisis and how Yukon has handled it. Yukon has been able to fund a certain number of students to become doctors, nurses and technicians in return for an equal number of years of service in a rural setting. I hope he will ask his colleagues in Yukon to show the rest of the country how that works because it does work there and it will work everywhere else.

The second issue is pharmacare. The 20 year patent stays. We support the 20 year patent. We also support the closure of loopholes that enable some drug companies to extend their patent beyond 20 years. The pharmaceutical companies have said very clearly that they want the same patent protection that exists in the rest of the world, which is 20 years for the most part. We support that and the government should be supporting that. In fact, it should work with us to close those loopholes to make it a firm 20 years.

On the OAS solution, it was a solution that I was simply offering for the government to consider, pouring the OAS savings between $60,000 and $100,000 income earners into those who are making less than $20,000.

Canada Pension PlanGovernment Orders

5:35 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, again I listened very carefully to the member but a question arises out of the previous question. He mentioned the Alliance position, formerly known as the Reform Party, in the 1997 election. It was laid out in its platform when it called for replacement of the CPP with what it called the super RRSPs. He did mention that but he did not talk about the year 2000 election and the party's position at that time.

In fact, just to remind the hon. member, his party did not have a position. It was nowhere to be found in the Canadian Alliance platform leading into that election. In fact, one of its members, the hon. member for Elk Island, got into a lot of trouble with his party leader at the time because of the position he staked out independently of the party. Perhaps he could comment on that.

I also want to remind him of a letter that was sent to Alberta Premier Ralph Klein by today's leader of the Canadian Alliance. This was published in the National Post on January 21, 2001. In that letter, the leader of the party and five of his cronies called for Alberta to withdraw from the Canada pension plan and set up its own plan. That was the position of his leader as late as January 21, 2001. My question would be, is that still the position of his leader, and has his leader mentioned that he still holds that position now as leader of the party?

Canada Pension PlanGovernment Orders

5:40 p.m.

The Acting Speaker (Ms. Bakopanos)

Before I give the floor to hon. member I would like to caution members in the use of certain words in the House. I am not sure that cronies is a parliamentary word, but we will let the hon. member answer.

Canada Pension PlanGovernment Orders

5:40 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, I suggest the member ask the Leader of the Opposition that himself.

I want to remind the member and the House that when our party was elected in 1993 as the Reform Party, it was the only political party in the House to offer constructive solutions to save Canada's pension plan. We were the only party that brought the issue forward and warned that in the future our country would slam into a brick wall when it came to our pensions. We did our best to offer constructive solutions to save our pension plan because nobody else was doing that.

For heaven's sake, the member should understand that at least we, in the Alliance now, and then when it was the Reform Party, are trying our best to offer constructive solutions to save our pension fund. If we did one thing, we at least put on the board that we cannot dawdle on our pension plans and allow our impoverished seniors to suffer.

If the member and his party have more constructive solutions they should bring them to the House so we can battle them out. The best solutions can actually then come to the top for the benefit of the people.

Canada Pension PlanGovernment Orders

5:40 p.m.

Liberal

Murray Calder Liberal Dufferin—Peel—Wellington—Grey, ON

Madam Speaker, the member across the way gave a very interesting speech. I have always looked at the Canada pension plan as a three legged stool. We have one leg, which is CPP and CPP disability. The second leg is OAS-GIS. The final leg is the RRSP.

Right now only about 34% of the population utilizes the RRSP program of which one can shelter the interest that is made on that through a cumulative process and it is not taxed until it is finally taken out.

I wonder if the member could enlighten us as to how we could encourage the population of Canada to increase that 34% utilization of the RRSP plan.

Canada Pension PlanGovernment Orders

5:40 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, one of the ways is to lower the overall tax rate. The principle is to enable people to provide for themselves and for those who cannot provide for themselves we should have a social program and a pension system that will provide through the tax system for those who are most impoverished. That is the principle of any safety net and I think that is the original intent.

One of the problems we have is that the amount allowed for those individuals who can contribute is less than what it ought to be. There is no harm in increasing the maximum amount that one can contribute to $20,000 a year, which is what we should do. We should also increase the foreign content up to 50%. That is generally recognized as constructive in enabling people to provide for themselves.

Therefore it is a twofold approach. For those who can invest, allow them to do that. We should also educate people on the importance of being able to provide for themselves and on how much money they will require when they retire. I know my hon. colleague knows full well that many people today do not understand the amount of money they require in order to retire.

I know the banks have a very innovative program for educating high school students on basic money management and the importance of saving. I think that kind of program should be encouraged across the country so that teenagers can have good, sound economic advice and management on what their future economic needs will be, which we were not taught at all when we were in high school. If we were to do that people would put money into an RRSP for their retirement.

We must rationalize the OAS to provide for those seniors who right now are living below the poverty line and who truly endure lives of quiet suffering, which should not really happen in our country at all.

Canada Pension PlanGovernment Orders

5:45 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, I just have a few comments. I probably will not take the entire 20 minutes because I know there are other members who would like to speak.

In answer to the member for Esquimalt—Juan de Fuca, the Progressive Conservative Party position on the CPP is simply this: We recognize it as a fundamental part of Canada's social safety net. We support that plan and we want to ensure the continuity of that plan. When we talk about the continuity and security of the plan, that simply means we want it to be around for future generations.

Madam Speaker, if your memory serves you well, you will remember that the idea of a Canada pension plan first surfaced during the Diefenbaker days. To give the Liberal government at the time, in 1966, full credit, it was the Liberals who took that idea and moulded it into the Canada pension plan that we have today.

I really do get uncomfortable when I hear the Canadian Alliance members talk about those super RRSPs. They seem to forget about the other aspect of the Canada pension plan that a lot of our citizens depend on. It is not just the retirement side of it. If our earnings were high enough, we could receive, I believe, up $9,345 per year when we retire depending on how long we had contributed to the plan and on our employment earnings over the period of our work life. I am sure, Madam Speaker, you will probably be up in that upper range when you retire. The same would apply to the Quebec pension plan. The two plans are somewhat modelled after each other.

However I think some members forget about the people with disabilities who depend on that plan for income, widows, widowers and orphans as well. I do not think we can lose sight of that. It is the responsibility of government to create plans that can support people who need the support of the citizens because we are in this as a collective group, citizens of a country that is perceived as being one of the most generous countries in the world. It is up to us to put the proper mechanisms in place so that plan will be around for future generations. Some of what I see I am not completely comfortable with.

We are not against putting that fund into equity markets. Many of the surplus dollars in that fund over the years were simply lent out to the provinces in bond form and those bonds did not really pay a very good rate back to the Government of Canada. It was almost, in a sense, free money for the provinces, although they paid sort of a marginal rate of interest on those secured bonds. I think there is about $40 billion left out there on those long term bonds that continue to be administered by the Canada Pension Plan Investment Board.

Where some of us have a problem is on the simple fact that the investment board has not performed well over the last number of years since its first inception back in 1977 when the last round of changes occurred in the Canada pension plan. That board was set up with what we would expect is a level of expertise in determining where the moneys would be invested and where they would not be invested. Some of the suggestions that we have heard in the House have been that the level of transparency, or how that board was created might be a better way to express it, probably is not consistent with good governance.

In other words, it politicized the make up of the board. The board consisted somewhere around 11 members. There is no question that some of the people on that board do not have that level of expertise that we would expect to manage a fund like the Canada pension plan. What we are doing essentially is throwing money into the marketplace and hoping we will get a better rate of return on that money than we did when we simply lent it out to the provinces at a minimal rate of interest.

I guess most of us are involved in the marketplace, in the equity markets. I was in that business before I was elected to the House of Commons. In any investment there are good days and bad days and we have to take our lumps. They often say there are only two things that drive the market, fear and greed. I guess the greed aspect of it is where the NDP might have some legitimate concerns because to throw money into the marketplace hoping to maximize profits, but there is always a degree of risk in doing that.

I wish to point out some exaggerated examples of that level of risk in the last number of months. We only have to look at the Toronto Stock Exchange, the level where it is today and where it was four or five years ago, or even two years ago, or the New York Stock Exchange which is in a sort of a free fall itself. It is up one day, down the next and some days losing 3% or 4% of its value.

I can remember when I was in the investment business on October 17, 1987, we called it “black Monday” or maybe “black Tuesday”. It was a black day in the investment world when the Toronto Stock Exchange lost 17% of its value in one day. Those are some of the concerns that have been expressed by some of the members. When we go into the marketplace, we are going in with the expectation that we will do better than we would if we just simply left the money in a bond or a savings account, in this case lending it out to the provinces.

However, the markets have taken a big hit in recent months and there is no question that the hit in the marketplace has hit every Canadian because every working Canadian contributes into that fund. In other words, it is our money out there in the marketplace. The question is how much risk is this money exposed to? Those are legitimate questions.

The question would be: When do we get into the market? I am no different than most investors and most investors would tend to buy in probably too high and we sell out a little earlier than we should on the basis of fear. There is the idea that none of us want to take a bath at the marketplace but unfortunately, we cannot time these ups and downs in the marketplace. I am not against putting it out there in the marketplace, do not get me wrong, but we have to be vigilant.

Going back again to the make up of that board, we must have the best people on that board. When the returns for that fund come in at the end of this fiscal year, and I think the year end for the fund is some time in December. I am sure the parliamentary secretary can correct me if I am wrong but I do not think we are expecting a huge return. My guess would be that it will probably be in a deficit position. Last year's rate of return, if I am correct, was somewhere around 6.2%. That is not bad, but not really good either, so the question will be, where will it go this year?

The other aspect in relation to the board is that we must take another look at how those appointments are made, how much thought the Government of Canada puts into them, and who makes up that board. We do not want to leave Canadians exposed to the dictates of a particular board when they do not have a lot of confidence in the make up of the board. We stand to lose a lot of money if it makes the wrong moves at the wrong time in the marketplace.

A CPP actuary said that the changes to Bill C-3 would increase returns on the Canada pension plan assets by $75 billion over 50 years. The actuary said that this reflects both the higher returns of a more diversified portfolio and a reduction in the amount of money that earns lower returns as part of a cash reserve.

That $75 billion could be a little more optimistic than most realists would accept. When a fund loses money, which I suppose we will be in a position to know about a little later on, it is really a lot more difficult to bring it back, because the principal investment is reduced and the return on a diminished principal makes it much harder to gain back 5% than if we lost 5% on a higher capital account. Those are some of the things we must be concerned about. Actuaries earn their living by planning as best they can with an awful lot of unknowns out there. We must be concerned about it.

On the question of foreign content, our party's position was staked out prior to the 1997 election. The Conservative senators had a few comments to make on that. One of the issues they brought to the floor of the Senate on the bill at that time was the foreign content rule. I am not saying I am objecting to our party's position on that, but I am a little bit uncomfortable with the foreign content rule. In other words, raising the foreign content level in RRSPs. I am saying that for a number of reasons. With the Canada pension plan, the confidence that we should have in the Canadian market should be the driving force in terms of our considerations.

Perhaps the parliamentary secretary would have a little bit to say about that. He is at least one chartered accountant and financial planner in the Chamber here tonight. Maybe we should have a little more clarification in this area. A lot of us are uncomfortable with putting a lot of our own RRSP money into foreign markets. Most of the foreign markets, as hon. members know, are simply U.S. markets and some of those markets have been hit harder than the Canadian market in recent months.

It almost defies what we are here for because we are policy makers. The government goes on at great length talking about how we have been cushioned from recession and how we are in a much better position than the Americans in terms of an economic downturn. Basically the government itself has more confidence in the Canadian market, over which it has some control, than in foreign markets. The government has to make a connection with the Canadian public, because it is not me it has to convince; it is the greater public, which has an inherent interest in the Canada pension plan.

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6 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, I was a bit dismayed at my colleague's comment about preventing and inhibiting foreign content or limiting foreign content in our RRSPs. That flies in the face of the opinion of most experts involved in the pension system. Why does he think that the federal government should play Big Brother to individuals choosing to take care of their own retirement plans by investing internationally?

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6 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, I do not want the member to think that I am against foreign content. There are just some parts of it that I am uncomfortable with. Philosophically, if one were getting a tax break to contribute to an RRSP one would think that some of that money that is generated by Big Brother, as he calls it, should probably go back to Canadian companies. That is a personal observation but I am not philosophically opposed to foreign content.

However there is one question I would ask the same member. I think it is the last party in the House that should be on its hind legs talking about pension plans and the largess of government and the generosity of governments. This is the same party that consistently ran and fought against members of Parliament getting pensions. This is the same individual who did a complete flip-flop at least twice and possibly three times on members' pension plans, which do have a connection to the Canada pension plan.

Basically, on the members' pension plan, this particular member swallowed himself whole at least twice because his party members campaigned and fought the 1993 election on the promise that they would never dip into the pork barrel of members' pensions. They ran against it and got elected because they ran as angry Canadians against the generosity of the federal government when it came to members of Parliament.

On that basis alone the member should sit in his seat tonight and simply listen. He has no credibility on pension plans because there is a connection between the generosity of the Canada pension plan and the perceived generosity of members' pension plans which he completely flip-flopped on, as did his previous leaders, all three of them.

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6 p.m.

The Acting Speaker (Ms. Bakopanos)

We have seven minutes and we have three members, so let us keep it short and we can all get our questions in. The hon. member for Kootenay—Boundary—Okanagan.

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6 p.m.

Canadian Alliance

Jim Gouk Canadian Alliance Kootenay—Boundary—Okanagan, BC

Madam Speaker, I listened with interest to the Conservative speaker because I am always waiting to see if his party has something good to add to the discussion. However, I must question anything he said because by his last intervention alone he showed that he does not know his facts when he suggested that the hon. member who questioned him had flip-flopped after running on the fact that we did not believe in the MPs' pension. We never said that MPs should not have pensions. We said that they should be more in line, and there have been a lot of changes.

If he can make that kind of mistake with the intervention that he made in answering the member for Esquimalt—Juan de Fuca then I must question the validity of all the things he said standing in this place today.

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6 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, how do I respond to something like that because it is on the public record? Members from that party went doorstep to doorstep, aside from their policy positions, knocking on doors promising they would not be part of the pension plan. What did they do? It resulted in getting a lot of them elected to this House only to figure out that they made a huge mistake, that they had families and wives, and some of the benefits that would accrue to their families if something happened to them would obviously be lost. They concluded that it was the wrong thing to do.

To deny that for themselves would be denying their widows or their children and families that they leave behind. Hopefully nothing would happen to any of them but I am saying that as a policy position. They did a complete flip-flop on that.

If the member had been listening carefully I outlined that our position is simply that we support the Canada pension plan and always have. We have always supported modernizing it to meet the changing demographics of Canada. The member for Esquimalt—Juan de Fuca was absolutely correct, the changing demographics is something that we must be cognizant of. We must change pension plans to reflect the very small growth in the Canadian population and the fact that there will be more Canadians retired when these baby boomers retire. In terms of Canadians working versus those retired, these plans will simply collapse under their own weight.

We have staked out a pretty fair position on this, one that is supported by most Canadians. I go back to that sort of generosity of Canada itself. It is recognized as one of the best countries in the world with social programs for people who really need them. I am not ashamed of that and I will continue to support programs that support the individuals who make up this great country of ours.

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6:05 p.m.

Canadian Alliance

Keith Martin Canadian Alliance Esquimalt—Juan de Fuca, BC

Madam Speaker, the member obviously does not know one orifice from a hole in the ground. I will refer him to the facts about the MP pension plan.

He was not here in 1993 when we were first elected. The then reform party was the only party, including the member's party which only had two members, to talk about the MP pension plan. We forced the government to bring the MP pension plan which was more lucrative than any other pension plan in this country into line with the pension plans of senior bureaucrats in the public service.

Members of my party opted out of the MP pension plan the first time there was an option to do so. The second time, when many of us were eligible for the pension plan after having served six years, the Prime Minister gave members who had opted out the option of opting out again. As I have already indicated, my party was the only political party whose members opted out the first time around and chose to opt out again. We opted out again while we were eligible to do so.

The third time around the Prime Minister forced all MPs in the House back into the pension plan whether they liked it or not.

Those are the facts. My party was the only party who had MPs who had opted out not once, but twice, even though we were eligible for the plan. No members in his party did that.

The public should know that it was the Canadian Alliance Party, the reform party back then, that forced the government to come up with an MP pension plan that was in line with one in the public service. That is something we are proud of, and the public should know we did that.

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6:05 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, the member has a very short memory and a distorted one at that.

There is only one member in the House who can stand up and say that he refused to be part of the pension plan. That member is the hon. member for Calgary Centre, the leader of the Progressive Conservative Party. He could have taken part in the plan but he did not. The leader of the Progressive Conservative Party chose not to be part of the new pay package or the pension plan.

The fact of the matter is and no matter how those members try to crawl around this issue under the cover of darkness, the member's pension will be more, not less, than it would have been--

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6:05 p.m.

Canadian Alliance

Dick Harris Canadian Alliance Prince George—Bulkley Valley, BC

Madam Speaker, I rise on a point of order. I am sure other members are finding it abundantly painful that the member is not addressing the subject at hand which is the amendments to the Canada pension plan. That is what we are here to do. We are here to do parliamentary work. I would suggest that the member respect the voters who are looking for some real and constructive changes.

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6:10 p.m.

The Acting Speaker (Ms. Bakopanos)

That is a matter of debate.

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6:10 p.m.

Progressive Conservative

Greg Thompson Progressive Conservative New Brunswick Southwest, NB

Madam Speaker, I thank you for that intervention. You are absolutely right. Those members do not like debate when it comes down to intellectual honesty.

I was responding to a question on the members' pension plan raised by a member of his party. He should talk to that member. He asked the question and I am simply being polite enough to answer it but members of the Canadian Alliance do not want to hear the truth.

The truth is their pension plans are more generous than when they entered the House in 1993 and denied the old plan. Their trickery worked. The Prime Minister in his generosity, if we want to say that, went back to the drawing board a couple of times for those people. Every one of them is in the pension plan which is much more generous than the old plan. They completely swallowed themselves whole on it. There is only one member in the House of Commons, the leader of our party, who refused to be part of the new plan, much to his credit.

The truth is that when people run to get elected on an issue, they should at least have the backbone to stand up and take that position back to their constituents and into the next election. The truth is they swallowed themselves whole on that. They completely flip-flopped on their position.