House of Commons Hansard #50 of the 37th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was retirement.


Canada Pension PlanGovernment Orders

January 31st, 2003 / 10:05 a.m.

Glengarry—Prescott—Russell Ontario


Don Boudria Liberalfor the Minister of Finance

moved that Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be read the third time and passed.

Canada Pension PlanGovernment Orders

10:05 a.m.

Oak Ridges Ontario


Bryon Wilfert LiberalParliamentary Secretary to the Minister of Finance

Mr. Speaker, I welcome the opportunity to speak today at third reading of Bill C-3, which amends the Canada Pension Plan and the Canada Pension Plan Investment Board Act.

As hon. members are aware, this legislation completes the reforms to the Canada pension plan which the federal and provincial governments, as joint stewards of the plan, initiated back in 1997. Those changes were necessary because of the warnings in the early 1990s from the Chief Actuary of Canada that the sustainability of the Canada pension plan was at risk.

Governments heeded the warning and overhauled the system. Reforms included bringing forward scheduled increases in CPP contribution rates, building up a larger asset pool before baby boomers retire and investing it in the markets at arm's length from government for the best possible rates of return, and slowing the growing cost of benefits through administrative and expenditure measures.

By transferring all the CPP assets remaining with the federal government to the Canada Pension Plan Investment Board, Bill C-3 represents the final steps in CPP reform. Hon. members will recall that a key element of CPP reform was a new market investment policy for the plan, which the CPP Investment Board was established to implement. Clearly the need existed for this independent organization.

Prior to 1999 when the CPPIB began operation, the investment policy in place for the CPP required that funds not immediately needed to pay benefits be invested in provincial government bonds at the federal government's interest rate. That policy resulted in an undiversified portfolio of securities and an interest rate subsidy to the provinces.

As members know, the CPPIB is now responsible for the development of the CPP's market investment policy. Since 1999, funds not immediately required to pay benefits and expenses are transferred to the board and prudently invested in a diversified portfolio of market securities in the best interests of contributors and beneficiaries.

The CPPIB prudently manages billions of dollars of retirement funds belonging to Canadians to the highest professional standards and at arm's length from government, with highly qualified, professional managers making investment decisions. In addition, the board is fully accountable to CPP members and governments.

I also want to mention that the CPPIB functions under rules similar to those that govern other public sector pension plans in Canada. Its market investment policy is consistent with the investment policies of plans like the Ontario Teachers' Pension Plan and the Ontario Municipal Employees Retirement System, OMERS. The CPPIB is also subject to the foreign property rule.

Until now, not all CPP assets have been managed by the CPPIB. Certain assets have remained with the federal government. These assets include an operating reserve of about $6 billion and a large portfolio of mostly provincial government bonds valued at about $32 billion. Under Bill C-3 these remaining assets would be transferred to the CPPIB over a three year period.

This means that all CPP assets will be managed and invested in the market by one independent professional investment board, a move that essentially completes the process of reforming the CPP that was initiated in 1997 by the federal and provincial governments. Let me briefly review the benefits that will ensue with the passage of this legislation.

First, consolidating all assets under the management of one organization will allow the CPPIB to develop a more coherent investment policy for all CPP assets in order to enhance rates of return and better manage risks on the total portfolio, thereby helping to ensure the sustainability of the Canada pension plan. This will put the CPP on the same footing as other public sector pension plans, providing the CPPIB's investment managers with the flexibility to determine the best asset mix and investment strategies for the CPP.

Second, phasing in the transfer of the remaining assets over three years will help to ensure that the transfer is absorbed smoothly by capital markets, the CPPIB and provincial borrowing programs.

The CPPIB is responsible for establishing and fully disclosing its investment policies and for investing CPP assets while properly minimizing risk. With the transfer of the remaining assets to the CPPIB, Canadians can feel secure that prudent, sound investment diversification, as well as increased performance, will result for the entire CPP asset portfolio.

In considering this legislation, I encourage hon. members to keep in mind that the Chief Actuary of Canada has indicated that the CPP assets fully invested in the marketplace are expected to earn a greater return and thereby grow more rapidly. In his three actuarial reports since 1997, the Chief Actuary has confirmed the long term viability and financial sustainability of the CPP. According to the last actuarial report, investing the transferred CPP assets in the marketplace will produce a benefit of about $85 billion over the next 50 years for the Canada pension plan.

As I indicated earlier, it was the Chief Actuary who first brought to the government's attention in the early 1990s the fact that CPP assets, the equivalent of two years of benefits, would be depleted by 2015 and that the contribution rates would have to increase to more than 14% by 2030 if nothing was done. At that time the Canada pension plan had worked well for 30 years, but its sustainability was becoming a concern.

As a result, following coast to coast consultations with Canadians, the federal and provincial governments in 1997 adopted a balanced approach to CPP reform so that the plan could meet the demand of the coming years when the baby boomers would be retiring. As I mentioned, those reforms included an increase in CPP contribution rates, a buildup of a larger asset pool while baby boomers were still in the workplace, its investment in the markets at arm's length from government for the best possible rates of return, and administrative and expenditure measures to slow the growing costs of benefits.

All together, those measures ensured that a contribution rate of 9.9% could be expected to maintain the sustainability of the plan indefinitely, and now, through Bill C-3, with the transfer of the remaining assets to the independent professional CPP investment board, the 1997 reform of CPP investment policy will be completed.

I would like to remind the House that Canadians told their governments during the 1997 public consultations to fix the CPP and fix it right. Canadians also told their governments to preserve the CPP by strengthening the financing, improving the investment practices and moderating the growing costs of benefits. Governments met this challenge. Now, through the measures in Bill C-3, Canada's retirement income system will be even more secure for all Canadians.

Together with the 1997 CPP reforms, the measures in the bill will ensure that the Canada pension plan will remain on sound financial footing for generations to come. I urge all hon. members to give speedy passage to this legislation.

Canada Pension PlanGovernment Orders

10:15 a.m.

Canadian Alliance

James Rajotte Canadian Alliance Edmonton Southwest, AB

Mr. Speaker, I believe I have 40 minutes for my speech and I will not be splitting my time with anyone, so you will have the pleasure of listening to me for up to 40 minutes.

Later I will address some of the comments made by the parliamentary secretary, but first I want to detail what Bill C-3 is supposed to do. I want to talk about some of the history of the Canada pension plan just to give members some background and then I want to propose alternatives or state where the Canadian Alliance stands on the bill.

Bill C-3 is an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. It will transfer the management of the cash operating balance and the bond portfolio, which is about $40 billion, to the CPP investment board. Specifically this will permit all amounts held to the credit of the Canada pension plan account to be transferred to the Canada Pension Plan Investment Board by repealing the requirement to maintain in the account a three month operating balance.

Second, it will establish a means by which the investment board may be required to transfer funds to the government to the credit of the Canada pension plan account so that the immediate obligations of the account can be met.

Third, it will transfer to the investment board over a three year period, 1/36 per month, the right, title or interest in each security held by the Minister of Finance and establish the conditions on which the securities may be redeemed or replaced.

Fourth, it will provide a 30% foreign property limit. The Income Tax Act applies to the investment board and its subsidiaries on a consolidated basis, to provide that the investment board will be considered to hold the property of its subsidiaries for the purpose of applying the foreign property limit. Of course at second reading our party proposed an amendment to expand this to allow at least a small way for Canadians to access capital markets to further increase their retirement savings. They themselves then would be more independent at a stage in life when they want to enjoy the full benefits of life rather than being dependent on government assistance.

Fifth, the bill will make housekeeping amendments to the investment board's reporting requirements.

I have some observations and a little history. The CPP investment board was incorporated by an act of Parliament in 1997. It was set up as an arm's length crown corporation and was charged with ensuring the soundness and sustainability of the nation's pension plan.

The assets were planned to be transferred over this three year period to ensure a smooth transition for capital markets, provincial borrowing programs and the CPP investment board itself.

By investing CPP cash not needed to pay current pensions, the board's aim is to enable higher returns in the stock and bond markets over the long term. The CPP investment board currently manages about $14 billion, mostly in equities, for the pension plan. The assets to be transferred include the CPP bond portfolio, made up mostly of provincial government bonds, and a three month cash operating balance. The Department of Finance is currently managing this money.

The CPP investment board made $360 million in fiscal year 2001-02 but lost $845 million in the previous year. About two-thirds of the board's money is invested in indexed stocks tied to the S&P/TSX composite while some is allocated to U.S. and international stock indexes. Including returns from the CPP bond portion, the entire pension plan made $2.3 billion in fiscal year 2001-02.

The federal government's chief actuary estimated that the proposed changes would increase returns on CPP assets by about $75 billion over 50 years. Of course in that estimate we have to take into account the serious decline in the stock market over the last three years, which certainly affects the specific prediction that the chief actuary made.

At this point I want to basically give an overview of Bill C-3 and also speak about the Canadian Alliance position and what we in the official opposition would do if we were in government.

The main thrust of the bill is to transfer all the amounts held in the Department of Finance within the Canada pension plan account, including the bond portfolio which is worth about $40 billion to the CPP Investment Board over a three year period. It would establish a means for the transfer of assets between the Department of Finance and the CPP Investment Board so that immediate payout obligations of the plan could be met. The legislation also spells out how the provincial securities currently held on the account may be redeemed or replaced.

As I mentioned earlier, it applies the 30% foreign property limit. We were quite disappointed that the government did not consider increasing that limit so that it would allow Canadians to access more foreign content within the CPP investment as it should within RRSP accounts as well.

To give a brief history of the Canada pension plan, the government is representing this as a housekeeping bill, but it deals with one of the main pension programs which Canadians receive and it is incumbent upon us to give a history before we vote on this at third reading.

The Canada pension plan was devised over 36 years ago as a mandatory plan on a “pay-as-you-go” basis and would be transferred from generation to generation. There is no account in my name or someone else's name and it is not tied to a social insurance number that would then be invested as a nest egg for retirement. The people who are currently working are paying for those who have retired. When this was started, people who were retired at the time started receiving the benefits but they had not gone through the system in that way. That was one problem.

The actuary at the time advised the Liberal government that this would be problematic, particularly as a demographic shift would occur in which the population growth would not be as much as it was in the post-war period. The government was advised that it would encounter some real financial crunches. Unfortunately, the government at the time disregarded that advice. It shadowed the future in which later on the finance minister completely disregarded the advice of the chief actuary in the mid-1990s and fired the actuary when the person gave advice contrary to what the government wanted.

In 1966 Canadians were told that their payroll deductions required to fund the Canada pension plan would never go above 5.5%. This is important to note because the present government is guaranteeing it will not go above the 10% level. Obviously the 1966 guarantee was untrue. The actuary at the time warned that percentage would not be sustainable over the long term, particularly with the fact that the population was not growing at its previous level.

The government of the day has told Canadians that it will not increase it past a certain percentage, but how can Canadians be expected to believe the government will hold it at a certain percentage when it clearly has not done so in the past?

When it was designed by the government at the time, it was assumed that there would be six tax paying workers for every dependant retiree. That was true when it was set up, although even at the time the actuary pointed out that with the demographic shift this would not happen in perpetuity. The government unfortunately did not set up a system whereby it was invested in people's names in an account and set aside over a 20 or 30 year period so it would be there as a nest egg when they retired. Unfortunately it was a situation where the government counted on this in perpetuity growth in the population that would fund the Canada pension plan. This was unrealistic at the time and the government should have realized that.

By 1993 contributions and interest could not produce the revenue required to cover the benefits paid out. The crunch started by the early 1990s. In 1996 the Canada pension plan was in a great deal of trouble. Over 10 million Canadians were paying $11 billion into the plan but three million people were being paid about $17 billion in benefits. Even though we had a ratio where 10 million Canadians were working and paying into the plan and only 3 million were receiving benefits, we still had a fiscal situation where the amount being paid out in benefits was above the amount being paid in. As we go into the future imagine the stress and the pressures that will be put on the Canada pension plan when the population does not grow at the expected level and when more people retire, particularly the baby boomers.

At that time, the $6 billion difference had to be made up out of general tax revenue so clearly it was not sustainable. The Canada pension plan's chief actuary warned that without changes the plan would be in very deep trouble, particularly when the baby boomer generation began to reach the age of 65, about the year 2012 which is not that far off.

By 1977 the Canada pension plan's assets had fallen to $35.5 billion. During the fall of that year, the Liberal government introduced Bill C-2, which was designed to save the Canada pension plan by the only way it knew how. It increased the cost to taxpayers and took more money from Canadian taxpayers rather than introduce some real fundamental reform to change the system.

Starting in 1998, Canadians saw their take home pay shrink as contribution rates for both employees and employers were jacked up in a series of increases to Canada pension plan premiums. CPP premiums went from 5.6% of the average industrial wage to 9.9% in five years. This is a staggering 73% increase and the biggest tax grab in Canadian history.

The government and the Minister of Finance love standing and saying that they have introduced a $100 billion tax cut, which is completely untrue because they neglect to mention the Canada pension plan tax increase. They also neglect to mention the EI surplus which they have been hiding and using for general revenues. The fact that they stand and talk about this $100 billion tax decrease is just simply untrue.

In 1995 the chief actuary of Canada noted that contribution rates would have to nearly triple, from 5.6% to 14.2%, over the next 30 years simply to ensure benefits could be paid for the indefinite future.

This is an important point because the contribution rate is now up around 10%. The government says, as it said before with the 5.6% level, that it will never go above that. This is not what the chief actuary said in 1995. This person stated that it would need to go to 14.2% over the next 30 years to deal with the retirement of the baby boom generation. The result is that employers and the self-employed are feeling the brunt of this Liberal tax cut.

The Canadian Federation of Independent Business has been conducting letter writing campaigns, both on this and on the employment insurance account. What it is notes is that while employers have received a 7¢ reduction in their employment insurance premiums, the Canada pension plan premiums have gone up by 40¢, and they are said to increase another 25¢ in 2003.

That may not sound like a lot but for small businesses with very small margins, increases like this for each worker are very substantial and certainly cause a lot of businesses to really look for ways to cuts costs. The most obvious way they can cut costs, unfortunately, is through labour. If the costs of labour for small businesses, a coffee shop or whatever, increases, the only way they can really deal with that in the immediate term is to cut labour, which means laying people off. The CPP premium increase is not only a tax grab, it is a job killer as well. Everything the employers have gained back in their small employment increases has been eaten up and more by the Canada pension plan increases.

The worst injustice of the Canada pension plan in general, is the intergenerational unfairness. This is a point I want to return to a number of times in my speech.

Every Canadian worker born after 1980 will see their Canada pension plan investment offer them a 2% return on investment for their retirement. This is unbelievable and unacceptable. However for those who retired in 1995, a different generation, they will receive a 9% return on their investment which is a greater return. However, if one looks at the long term investments over a 20 or 30 year period, this is obviously unacceptable as well.

Economist David Foot has suggested that the federal government should raise the retirement age by two or three years so that boomers can contribute to the CPP longer, thereby creating a bigger pool to invest and from which to draw. It would not have to raise premiums or cut benefits. It is something the government obviously has considered but not acted upon.

Another consideration is that the government could bring in more flexible workplace policies to address some of the problems which I talked about earlier, where employers faced with increased CPP premiums unfortunately have to lay off workers.

A lot of Canadians who are approaching retirement or who have retired have said that if we bring in more flexible workplace policies, older workers nearing retirement could work part time and still make full pension contributions to maintain revenues in the pension fund while creating employment for younger workers. This would also mean that they would still contribute and would draw upon that for a longer period because it would be more sustainable.

Economist David Foot, in describing the 1997 reforms, said, “They do not recognize the profound demographic changes that have taken place since the program was launched”. That is indisputable. The fact is the government has not recognized this pay as we go plan setup where we had a huge population explosion after the second world war with a relative decline after that. It has not recognize that a demographic shift would cause some serious constraints on the Canada pension plan.

The Canada pension plan will take just under 10% of income to receive 25% after age 65. The average annual payout is $5,500 a year. That figure is something we should all consider, because the government loves to say that it is providing for Canadians in their retirement. The average annual payout is $5,500 a year. Obviously a Canadian cannot live on that so for the government to say that it is providing for Canadians in their retirement through this plan is simply farcical.

Another figure we should keep in mind is the number of seniors in Canada will double to 22% of the population by the year 2031. This will place a heavy burden on workers who have to support these pension and health programs. It is important to note that the demographic shift causes a lot of other pressures as well, particularly in health care. As we age we require more and more of the health care. That is just simply logical. Canadians are rightly concerned about where the tax revenues will come from to pay for our social services. Instead of dealing with these problems, unfortunately the government has pushed these off by introducing marginal changes, as it has done with this bill.

Members of the Canadian Alliance do not believe that our future security lies in the wages of a shrinking workforce. It lies in the vast productivity and production capacity of a full economy. We value retirement security as a vital element of independence. The government's goal should be to ensure that as many Canadians as possible are independent in their retirement years, that they can afford to have a good standard of living, that they can afford to take a relative amount of trips when they need to and that they have the quality of life they deserve.

Our policy platform states that we will honour obligations to retired Canadians and those close to retirement under the current state run programs. We will also maintain support for low income seniors.

We believe that future retirees deserve a greater choice. People in my generation who are extremely frustrated with the Canada pension plan deserve a greater choice and a greater opportunity to increase their retirement savings. We should have a choice between a government managed pension plan and a mandatory personal plan. Giving Canadians greater control of their own affairs and retirement plans would eliminate the foreign investment restriction for retirement investments, thereby allowing access to greater capital and investment opportunities. We would devise options allowing individuals greater opportunities to save for themselves as the current system failed its original objective from 1966.

This is an important point because friends my age in their early thirties see the RRSP contribution limit each year. A lot of people in the 55 to 65 age group do not have a lot of money put away. Let me use for an example dentists who own their own dentistry business. They have taken quite a while to pay off debts they incurred when they started out after graduating from dental school. By the time they reach 55 they do not have a lot of money put away because they spent the first 15 or 20 years in their business paying off their debts. At the age where they are making profits or their earlier investments have paid off, they would like the opportunity to put some money into their RRSP. With the present contribution limit it is simply impossible for them to put enough away so that they are fiscally secure when they retire in 5, 10 or 15 years. I hope the Minister of Finance will look at raising the contribution limit for RRSPs in the next budget.

I was talking to a friend recently who said the forms the government sends out indicating the amount an individual can put into an RRSP is a joke. She indicated that the government takes so much from her in taxes that she does not have anything left at the end of the year to invest in an RRSP. The contribution limit is a slap in the face because the government takes so much in taxes. Canadians are taxed at the highest marginal rate of $60,000 per year, and that is an absolute joke.

Canadians who get out of university usually have a high debt load. If they are lucky they may get a job making $30,000 or $35,000 a year. They have to pay down their loans and pay taxes while trying to establish themselves at the same time. Paying high taxes simply creates a crunch on them that is unfair. The government should create opportunities so that these people can pay down their student loans and pay less tax so they can start establishing themselves. For those individuals who are far-sighted they could then start putting away even at that age for their retirement.

Bill C-3 is a step in the government's planned development of the public pension plan in this country. It is managed at arm's-length by a crown corporation. As the Canadian Alliance noted at second reading, the bill is more than a housekeeping bill. The government says it has only presented some minor changes, but we regard them as much more.

We are opposed to the solution proposed by the government. Canadian workers and employers would be bilked out of billions of dollars to pay for a plan that is unquestionably unfair to Canadians of all generations, but particularly to the younger generations in our society.

The Canada pension plan began floundering in the 1990s. In 1996, 30 years after its inception, the plan was going bust. It was fulfilling the prediction of the original actuary who said that this pay as we go plan was unsustainable in the long term. This created a situation where the benefits exceeded the amount going in by about $6 billion. This had to be made up out of general tax revenues.

The Liberal solution was to take more money from the Canadian public. It was similar to health care. Instead of addressing some overall issues and proposing fundamental reforms, it resorted to taking money from the Canadian taxpayer. This is something the government is doing now with the new elections bill. Instead of addressing genuine concerns about the ties between businesses, unions and government, what does the government do? It asks the taxpayer to pay for everything. It wants taxpayers to pay for everything in the elections bill, despite the fact that they may or may not support a particular party. Taxpayers now would have to support every political party that attained a certain number of seats in the last election.

I will go back to the CPP premiums. Beginning in 1998 the CPP premiums were jacked up from 5.6% of the average industrial wage to 9.9%. As I mentioned earlier, the government promised it would never go past this 5%. The government said this promise could be carved in stone. It is now up to 9.9%. The chief actuary at the time said it would have to go to 14.2% over the next 30 years.

Now the promise was that the premiums would never go above 10%, yet the chief actuary said they would go over 14%. Unfortunately we do not receive his advice any more because he was summarily dismissed once the finance minister realized that he did not like his advice. This is a tradition that we see all too often with this Parliament.

It is interesting that people such as the Auditor General who have independence and are able to observe the government and how Parliament operates, are the ones who are bringing to light, as is the case with the firearms registry, the actual substance the opposition has been stating for years. We need objective and independent analysts such as the chief actuary to help us.

When the finance minister fired this person simply for giving advice that the finance minister did not want I think that was a serious breach of independence that Parliament should have addressed. Unfortunately, the government simply let it happen and did nothing.

The worst injustice by the government and its Canada pension plan hike of 73% is the intergenerational unfairness. The government simply has not addressed this and it does not want to address this. In the last election campaign the Liberals simply engaged in scare tactics about this, rather than address the actual problems with the Canada pension plan.

What is meant by intergenerational unfairness? Every Canadian worker born after 1980 would see his or her Canada pension plan investment offer a 2% return on investment for the retirement years. That amount might as well be stuck in a mattress. It is pathetic that we would allow younger Canadians, such as the pages here before me, to receive 2%. Imagine that over a 30 year period there would be a 2% return on the investment. That is completely unfair and it should be changed.

Canada Pension PlanGovernment Orders

10:40 a.m.

An hon. member

It does not even cover the rate of inflation.

Canada Pension PlanGovernment Orders

10:40 a.m.

Canadian Alliance

James Rajotte Canadian Alliance Edmonton Southwest, AB

It does not even cover the rate of inflation as my colleague has just said.

However, a different generation that retired in 1995 would receive a 9% return on their investment.

We are not saying one generation should receive less. What we are saying is to have some intergenerational fairness by proposing some genuine reforms to the system.

Despite the painful and expensive Liberal solution, the Canada pension plan's unfunded liability is hovering around a half a trillion dollars and is continuing to grow at 6% a year. Since the CPP investment board first invested funds in 1999 the board has delivered roughly 2.6% annualized performance, which is slightly better than the TSE over the same period. It is not enough to make up for the ever growing unfunded liability.

I am always perplexed as to why the government feels that the government and the wise men that it sets up in this board can investment the money in private markets, and yet Canadians such as ourselves do not have the wisdom to act in our own best interest to invest the money in a mandatory personal retirement account.

This could be a retirement account where the government could say to Canadians that they have to set aside a certain percentage of their income in a pension plan to ensure that they have something as a nest egg, as is done in the system in Australia.

In Australia there is one system where Australians have three options. Australians can choose to take the fully government directed plan where it is safe, secure and conservative because it is invested in government bonds. They get a minimal rate of return over a 20 year or 30 year period. They know that there is something there at the end, but then a second group can say it wants to invest a little more in equities or private markets. They have more of a mixed portfolio. In the third group, even though they still have to invest a certain amount in government bonds, there is more risk and they know that their rate of return will vary. Over time it will generally be much better, but it is not as conservative.

This gives the options to Australians that says they have to put aside a certain amount each year to invest in a nest egg. Instead of it being a pay as we go system, it is a system where it is actually invested in a person's name as a nest egg, but it is actually in one of three accounts.

In Canada we say to Canadians that they do not have the wisdom to invest themselves, that they are not concerned about retirement so the government has to take on the role for them. It is simply a patronizing attitude that many Canadians find offensive because they themselves take much more concern over their own retirement and the future of their children than the government does. It is just simply obvious.

Getting back to the ever growing unfunded liability in the Canada pension plan, this explains why in 1995 the Chief Actuary of Canada stated that contribution rates would have to nearly triple, from 5.6% to 14.2% over the next 30 years, simply to ensure the benefits could be paid for the immediate and indefinite future. Of course, we know what happened to him. He was simply fired. The messenger was fired because someone did not like the message.

By 2021 it is expected that the Canada pension plan payouts would exceed contributions again. After that, investment income would be needed to pay for benefits. At that time we can expect the percentage that Canadians would be asked to put into the Canada pension plan, I should not say asked because it would be demanded, would be increased again.

I now want to turn to some specific clauses within Bill C-3 and offer our critique of the clauses. Clause 15 applies to foreign property limits in the Income Tax Act to the CPP Investment Board.

During clause by clause consideration of the legislation, the director of finance, markets division, of the finance department's financial sector policy branch, Bill Mitchell, admitted to members of the finance committee that no particular study was done by the department to determine what the negative impact of this restriction would be on the long term performance of the CPP investment fund.

It is known to be a bad thing for private companies to invest the assets of their pension plans in their own securities and it can be argued that it is the same thing for governments. CPP Investment Board President John MacNaughton has said that all large investors face the challenge of having to manage within the capacity of the Canadian market. The Canadian market is small relative to the amount of capital in the country and it is small relative to world markets. Canada only represents 2.2% of global capital markets yet on the investment side we are much bigger than that.

As the CPP holdings get larger with regard to the opportunities available to invest in Canada, the limit is going to matter for other reasons as well. Baby boomers will begin retiring in 2012. By that time the CPP fund would have an excess of $140 billion. That would make it the largest investor in Canada, and among the largest in the world.

The CPP currently accounts for only 1% of the Toronto Stock Exchange's market capitalization. It could be as high as 10% by 2012 which is a dangerously high number for a single investor in a single market. There are concerns that public money would be competing with private money for the best investments. As time goes on the problem is only going to get worse. Every year the CPP will be piling in $16 billion to $18 billion in new money. It will own the market and this is a concern.

At the time that Bill C-3 was introduced I recall Andrew Coyne raising concerns about the undue influence that the CPP Investment Board, because of its size, would have within the private market.

This is something we should look at seriously. We in the Canadian Alliance feel that the bill is not a simple housekeeping bill. It is a bill that we should actually use to address some of these concerns. The concern obviously is that the government could then move money and unduly influence where the market goes in Canada. That simply is something we should not want and should seek to prevent.

The fact is that bigger is not always better. As an illiquid large investor, the CPP Investment Board will be unable to trade freely and smaller funds will delight in playing off the Canada Pension Plan Investment Board positions, which will only serve to the detriment of Canadians.

Ironically, the rise of the CPP Investment Board may entrench that 30% foreign property rule because when it is raised, Canadian markets could stumble badly if the Canada Pension Plan Investment Board tried to sell even a percentage of its immense holdings. The longer the government waits, the larger and more significant the fund will be to the Canadian investment climate.

I want to return to the issue of younger Canadians and the notion of intergenerational fairness. We in the Canadian Alliance feel that the Canada pension plan, as it is, is not fair to younger Canadians. We have a serious problem with the Liberal approach and its solution to the Canada pension plan and to its unfunded liability.

The chief actuary says that for every Canadian worker born after 1980 their CPP investment will offer them this 2% real return that I have been talking about. We have a situation where those Canadians born after 1980, and even before that, will be receiving a pathetic return on their investment. Even when they retire their maximum benefits are only $9,000. By the time Canadians who were born in 1980 reach retirement age, to be receiving $9,000, or even at that stage $12,000, is simply pathetic and will not enable them to secure a safe retirement.

According to the Canadian Taxpayers Federation, if young adults entering the workforce today invested their CPP contributions in a mandatory plan, they would have, at the very least, a $1 million nest egg by 2036. Does it not sound better to have a $1 million nest egg instead of the $9,000 or $12,000, whatever it will be, each year? The present value of the benefit package for the CPP will be worth about $570,000. Clearly there is a better solution available to younger people if we had a mandatory pension plan which was not a pay as you go plan.

The CPP basically is a transfer of resources from younger to older generations. As the population ages, the transfer will have to increase because there will be more older people in relation to younger working people. The problem is compounded because people are living longer. Today pension eligibility is age 65 and life expectancy is age 79, so the average Canadian can expect to collect CPP for 14 years. Life expectancy is likely to continue to rise due to medical advances, which is a good thing.

Many younger Canadians feel that they are paying into a system of pensions, health care and massive public debt, and they are not sure that they will get many benefits back. There is a possibility of a real ugly generational war within the next couple of decades. As Thomas Courchene at Queen's University has said, “We older Canadians, many of us tenured, are revealing ourselves to be a very selfish lot by turning the tables on generation X , a cohort with nowhere near the employment or income prospects that we enjoyed when we were young”.

However, Canadians are not doing this. Older Canadians themselves are extremely concerned about the futures of their children and grandchildren. It is the government that has done this. It is the government that has created a schism between generations.

Another issue with which the Canadian Alliance takes issue is the CPP Investment Board's vulnerability to political pressure and interference. It already has been suggested that CPP investments should be required to adhere to so-called Liberal societal values. There are calls that CPP should only be allowed to invest in certain companies that increase employment, that are environmentally friendly, that comply to employment equity and bilingual federal regulations, et cetera, the priorities determined of course by the board and by the government.

If the purpose of the board is to provide the best pensions we can manage for the price we are paying, these kinds of demands for social strings to be attached must be rejected outright.

It is not sensible to take a fund like the CPP and use it for industrial or social policies. That is because once the principle that other criteria will come into play has been established there is no obvious place to stop. The overall record of these types of public funds around the world is terrible.

The Canadian Alliance also takes issue at how individuals are appointed to the CPP Investment Board. I would like to stress of course that the people who are currently on the board seem quite up to the job in our perspective and we certainly have a high regard for them in a personal way.

Nevertheless, they are and will be in the future, and we always have to imagine what will happen in the future, appointed by governor in council on the recommendation of the Minister of Finance. The minister appoints them after receiving advice from provincial committees but he is under no obligation to follow this advice.

What protection does Bill C-3 offer members of the CPP to ensure that it does not go down the similar path of moving away from professional investors to those who are professional bureaucrats with a primary political focus? There is none.

In conclusion, we in the Canadian Alliance hope the government will come to its senses on this bill. We hope Parliament will reject the bill and send it back for much needed amendment and will look at some serious reform of the Canada pension plan so that younger Canadians will have a genuine opportunity to have their retirement secure and to have the good life that all Canadians enjoy.

I would like to propose an amendment, seconded by the member for Athabasca. I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:

Bill C-3, an act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act, be not now read a third time but be referred back to the Standing Committee on Finance for the purpose of reconsidering Clause 15 with the view to change section 15 of the act to remove the cap on the percentage of Canada pension plan money that might be invested outside of Canada.

Canada Pension PlanGovernment Orders

10:55 a.m.

The Deputy Speaker

I will deal with that matter immediately following question period. In the meantime, I wish to proceed to statements by members.

LiteracyStatements by Members

10:55 a.m.


John Maloney Liberal Erie—Lincoln, ON

Mr. Speaker, Canada has a serious literacy problem: 22% of Canadian adults do not read well and another 26% do not have the literacy skills necessary to contribute to the economic and social development of their communities. Less than 10% of all Canadians who could benefit from literacy programs are being helped.

Addressing literacy barriers is key to dealing with the most pressing issues of our time. Jobs in the economy, innovation, child poverty, health, crime prevention, immigration settlement, community development, social cohesion and inclusion; literacy has implications for all of these.

The development of a larger and more skilled workforce is crucial to Canada's future economic success, a success that can only be met through education and training.

Canada is one of the only industrialized countries without a national strategy for adult literacy. A national literacy strategy can only be created if all levels of government and the private sector co-operate for this common goal.

Literacy investments are crucial in creating a culture that values lifelong learning. Let us all work together to promote literacy and the continuing education of all Canadians.

HealthStatements by Members

10:55 a.m.

Canadian Alliance

Rob Merrifield Canadian Alliance Yellowhead, AB

Mr. Speaker, next week the premiers and the Prime Minister will sit down to hammer out an accord on health care. This meeting will be critical to the future of Canadians' most cherished social program.

One would expect that Ottawa would be waiting to hear from the provinces, which actually run the health care system, before it deals with the provinces' top priorities. However, that is not the case.

Instead, the Prime Minister has leaked his own draft accord, trying to call the shots with a fraction of the money. Canada needs improved outcomes for its health care system, not sleight of hand.

Since the former finance minister cut billions of dollars out of health care, provinces have been reinvesting and reinvigorating our health care system while Ottawa's contribution has only continued to diminish. Now that Ottawa is ready to inject additional dollars, it should be working with and not dictating to the provinces. Unfortunately, the federal government seems unwilling--

HealthStatements by Members

11 a.m.

The Deputy Speaker

The hon. member for Oak Ridges.

Louis St. LaurentStatements by Members

11 a.m.


Bryon Wilfert Liberal Oak Ridges, ON

Mr. Speaker, February 1 marks the 119th birthday of Louis St. Laurent, a prime minister who presided over both a significant economic expansion of Canada, but also one of the most important legislative periods in our history.

Nicknamed Uncle Louis, his government record caused the Liberals to be re-elected in 1949 and 1953 with overwhelming majorities. When Prime Minister Mackenzie King approached him in 1941 to become minister of justice, he had no political experience but responded out of a sense of duty.

Canadians can reflect on his period in office as being productive and significant for Canada on the international stage.

At home he presided over the enactment of hospital insurance, the entrance of Newfoundland into Confederation, the Massey Commission on the Arts, the establishment of the National Library and the construction of the St. Lawrence Seaway, to name a few.

Internationally, Canada sent troops to fight for the United Nations in Korea and garrison troops in Europe. He was a strong advocate of the UN. He left a legacy of building a strong Canada both at home and abroad, lessons we can benefit from today.

Canadians need to become more cognizant of their history and to celebrate the achievements of individuals who made a difference--

Louis St. LaurentStatements by Members

11 a.m.

The Deputy Speaker

The hon. member for Abitibi—Baie-James—Nunavik.

Centre hospitalier des Vallées de l'Outaouais--Hôpital de HullStatements by Members

11 a.m.


Guy St-Julien Liberal Abitibi—Baie-James—Nunavik, QC

Mr. Speaker, even supposing an optimistic scenario in which Ottawa does provide additional funding, it would still hardly be possible to reduce the waiting lists and overcome the staffing and equipment shortages at the Centre hospitalier des Vallées de l'Outaouais--Hôpital de Hull unless the Government of Quebec also makes a firm commitment to invest.

The Government of Quebec promised to solve the pay equity issue involving nursing and all professional staff before December 31, 2002 at the Centre hospitalier des Vallées de l'Outaouais--Hôpital de Hull. However, to this day nothing has yet been resolved.

One only has to spend time at this hospital to see that it is lacking in nurses, attendants, the latest technology and emergency room space.

Despite all of these problems, doctors, nurses and hospital staff work relentlessly to provide patients with the best quality care.

Bill McNeilStatements by Members

11 a.m.


Mac Harb Liberal Ottawa Centre, ON

Mr. Speaker, I would like to pay a special tribute to former CBC Radio broadcaster Bill McNeil, who died Wednesday, January 29, at the age of 78.

Mr. McNeil spent 42 years at CBC before retiring in 1995. He was best known for hosting the shows Fresh Air and Voice of the Pioneer . He also authored six books, including Signing On: The Birth of Radio and Mr. Canada: John Fisher . Fresh Air drew up to a million listeners each Saturday and Sunday morning.

Mr. McNeil's show became a success because it stirred the memory pot. People had a chance to talk about their youth, the depression years and homesteading in the west. It reflected a generation that experienced great changes, from the horse and buggy to the rocketship and man walking on the moon.

Undoubtedly, McNeil's gentle, resonant voice and quiet manner put both the subject and the listener at ease and succeeded in making Fresh Air “an oasis in a mad world”. He hosted his final Fresh Air broadcast after 24 years in May 1992.

On behalf of all citizens and my colleagues in the House, I would like to express my sincere condolences to the family and friends of Mr. McNeil.

Richard HealyStatements by Members

11 a.m.

Canadian Alliance

Peter Goldring Canadian Alliance Edmonton Centre-East, AB

Mr. Speaker, Richard Healy, a former member of Canada's armed forces, passed away this week at the age of 62.

Richard volunteered in my office to help raise funds for Canadian World War II veterans of the Battle of Ortona. These veterans wished to hold a Christmas memorial dinner with German war veterans 55 years after the battle known as the “Stalingrad of Italy”. Veterans Affairs refused to support this event.

With Richard's assistance and the many others who helped, over $200,000 was raised. The Christmas dinner was held in 1998 and a life-size bronze monument to the battle, called the Price of Peace, stands in Ortona, Italy, all paid for by individual citizen donors.

Richard Healy was a quiet and kind person with a commitment to justice for our veterans. A life is ultimately measured and valued by its good deeds. In that respect, Richard Healy's life was very rich. He will be missed by many here on Parliament Hill.

World Junior Hockey ChampionshipsStatements by Members

11:05 a.m.


Nancy Karetak-Lindell Liberal Nunavut, NU

Mr. Speaker, over the Christmas holidays the majority of Canadians were riveted to their TV sets as our junior men's hockey team dominated the round robin series and advanced to the final game versus the Russian federation.

Throughout the tournament these young men played with passion, dignity and pride while representing their country.

I am very proud Nunavut was represented on Team Canada by our own young star, Jordin Tootoo. Everyone in Nunavut was honoured by his contribution to the national team and for bringing international attention to our new territory. We especially liked all the posters written for him.

I thank all the great fans and sponsors who gave their support to the Canadian junior men's hockey team. Congratulations.

Member for LaSalle—ÉmardStatements by Members

11:05 a.m.


Odina Desrochers Bloc Lotbinière—L'Érable, QC

Mr. Speaker, the member for LaSalle—Émard's statement that Canadians would not support funding the Bloc Quebecois really conceals his concern about funding for federal political parties drying up.

As Minister of Finance, he was quick to make cuts to the EI program and health and education transfers in order to focus on paying down the debt and easing taxes for the rich. As well, during his tenure, the use of tax havens by Canadians grew fivefold.

In six months of campaigning for the leadership of the Liberal Party of Canada, the member for LaSalle—Émard has already raised more than $2 million. Quebeckers and Canadians are justified in wondering if the member for LaSalle—Émard has not left himself open to influence.

The only way to dispel this situation is to pass legislation providing for public financing of political parties, as was done in Quebec. In 1994, my colleague from Bas-Richelieu—Nicolet—Bécancour moved a motion to that effect in the House of Commons. The member for LaSalle—Émard voted against it.

Citizens' Advisory CommitteesStatements by Members

11:05 a.m.


Marlene Jennings Liberal Notre-Dame-de-Grâce—Lachine, QC

Mr. Speaker, last week Correctional Service Canada was pleased to join with communities across the country to celebrate Citizens' Advisory Committees Awareness Week.

Across Canada more than 80 citizens' advisory committees comprised of over 500 individuals showed fellow Canadians what they do to contribute to the safety of our communities. Canadians attended open houses, visited information displays and participated in discussions about the corrections process.

We would like to thank the Canadians who took the time last week to learn more about our corrections system and the Canadians who work throughout the year as members of citizens' advisory committees.

I congratulate the Solicitor General for his support of Citizens' Advisory Committees Awareness Week. I encourage all MPs to join me in recognizing and congratulating the Canadians who make them work.

JusticeStatements by Members

11:05 a.m.

Canadian Alliance

Gurmant Grewal Canadian Alliance Surrey Central, BC

Mr. Speaker, Mrs. Bhullar, a constituent of Surrey Central and a Canadian citizen, is pleading for justice for her husband.

Proud of our Canadian values, when we travel abroad we promote respect for human rights and justice.

However, injustice can happen anywhere. People have been wrongfully convicted and executed in the U.S. In Canada, Mr. David Milgaard was wrongly convicted and sentenced but later was proven innocent after spending many years in jail.

Professor Davinderpal Singh Bhullar has been sentenced to death in a controversial trial based on a confession extracted under duress and a death threat.

Even the presiding and dissenting judge has stated that Mr. Bhullar could not conspire to murder someone since no one else is charged in this case. No one can conspire with oneself. None of the 133 witnesses identified Mr. Bhullar as a culprit. Even the German government has revised its decision and accepted him as a political refugee.

I call on the Canadian government to use its diplomatic means to urge Indian authorities for amnesty or for a fair retrial.

Valentines for VeteransStatements by Members

11:05 a.m.


Ivan Grose Liberal Oshawa, ON

Mr. Speaker, seven years ago newspaper columnist Ann Landers initiated a program called Valentines for Vets, encouraging her readers to send a message of gratitude to veterans. Sadly, Ms. Landers has passed away but Veterans Affairs Canada is continuing to invite Canadians to create special valentines for our Canadian veterans.

Valentines can be sent to the department's head office in Charlottetown where they will be sorted and mailed to veterans in health care facilities across the country in time for Valentine's Day. Last year more than 2,000 valentines were distributed.

We know that these special greetings are warmly received by our veterans. As our veterans are aging, let us this year make an extra effort to send our heartfelt thanks to those who put their dreams on hold to defend our values and way of life.

I encourage all Canadians to refer to the Veterans Affairs Canada website for more information on this wonderful campaign. The address is

FisheriesStatements by Members

11:10 a.m.


Peter Stoffer NDP Sackville—Musquodoboit Valley—Eastern Shore, NS

Mr. Speaker, before I give my statement, I would like to welcome to Ottawa the great students and chaperones from Upper Musquodoboit, Nova Scotia who are here on a fact-finding mission. We congratulate them.

I would like to draw to the attention of the House and the Minister of Fisheries and Oceans the tragic decision he has made in terms of allowing draggers into a very sensitive fishing area off what is called the Cape Breton or Sydney bight near the gulf in Nova Scotia. To lift the moratorium and to allow draggers in that sensitive fishing area is an unmitigated disaster with unconscionable results.

Also, come April 1, the minister will have to make a decision about the hook and line fishery off 3Ps. Officials say we do not have the scientific evidence that these stocks are one and the same but by cutting the science budget so much, they do not have the evidence or they have to operate on a precautionary principle.

I advise the minister to stop that terrible way of fishing off the Sydney bight, as we speak, and allow the hook and line fishery to continue on in the spring season.

Child PornographyStatements by Members

11:10 a.m.

Canadian Alliance

Ken Epp Canadian Alliance Elk Island, AB

Mr. Speaker, it is unbelievable that the government cannot find some way to protect our children from sexual predators. Instead of changing the law, the Liberal government is content to just make excuses.

Why can the Liberals not understand that as long as the age of consent is down at 14 years, there will be ongoing abuse of our children? Why can they not understand that it must be the older person who must be held accountable? Why can they not understand that the purpose of the law must be to protect our children and to restrain those who would exploit these youngsters for their own perverted pleasure or for money? Why can they not understand that adult abuse of children happens because they are allowing it?

It just does not make sense. Our children are precious and must be protected.

If the Liberals will not protect them, it is time Canadians turfed the Liberals and put in a party that puts children's protection ahead of the presumed rights of perverts. It is time to change--

Child PornographyStatements by Members

11:10 a.m.

The Deputy Speaker

The hon. member for Laurentides.

Winter FestivalsStatements by Members

11:10 a.m.


Monique Guay Bloc Laurentides, QC

Mr. Speaker, winter does not just bring cold weather, it brings a flurry of activities all in white.

Festivals, winterludes and ice carnivals are being held in cities and towns throughout Quebec.

One of the best known internationally is, without a doubt, Quebec's Winter Carnival, the 49th edition of which opens tonight.

In the riding of Laurentides, people will also pay tribute to Quebec's winter traditions by presenting various wonderful carnival activities aimed at pleasing both young and old.

Let us take the time to admire our talented sculptors and encourage our athletes whose performances will take our breath away. Let us also take this opportunity to have fun outdoors with family and friends.

Bravo to the thousands of volunteers throughout Quebec whose extraordinary creativity and daring will wow visitors.

I invite you all to come and participate in the winter festivals in the beautiful riding of Laurentides, which I represent.

Chinese New YearStatements by Members

11:10 a.m.


Carole-Marie Allard Liberal Laval East, QC

Mr. Speaker, tomorrow, February 1, is Chinese New Year.

In Chinese society, legends and stories revolve around 12 animals. Today, some people put stock in the virtues attributed to these animals.

2003 is the Year of the Goat. According to the Chinese zodiac, the year of the goat will bring harmony and humanity throughout the world. Honesty and compassion will make a strong comeback.

Chinese New Year is an invitation to celebrate. I would like to take this opportunity today to wish a wonderful year and joyous celebrations to the Chinese community.

Firearms RegistryStatements by Members

11:10 a.m.

Progressive Conservative

Norman E. Doyle Progressive Conservative St. John's East, NL

Mr. Speaker, the federal government's gun registry has cost more than $1 billion so far. Many Canadians feel this money has been simply wasted. As $1 billion is a lot of money, let us look at it in context.

In Newfoundland and Labrador approximately 190,000 households pay an average of $8,400 a year in income tax. That means that the $1 billion wasted so far on the gun registry is enough to completely eliminate the yearly income tax burden from 125,000 average households. Put another way, the government has taken the yearly income tax payments from 125,000 families and completely wasted the money.

Given the choice of a gun registry or 125,000 tax-free families, I have no doubt what my constituents would choose.