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.