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.

Topics

Question No. 91Routine Proceedings

12:15 p.m.

Victoria B.C.

Liberal

David Anderson LiberalMinister of the Environment

The Antarctic is an environmentally critical region for Canada and the world. It is an important home to birds, seals, plants and serves as a global indicator of climate change.

Canadians are active in the Antarctic. We are conducting research on the Antarctic environment, active in tourism, and our technology is widely applied in the region.

Canada is a signatory to the Protocol on Environmental Protection under the Antarctic Treaty, the Madrid Protocol, designed to protect the fragile Antarctic environment.

Ratification of this Protocol is a priority for this Government.

It is of particular importance to the Minister of the Environment and the Ministers of Foreign Affairs, Justice, Fisheries and Oceans, Natural Resources Canada and Transport.

Officials from these departments, including legal counsel and policy analysts, are working on the legal and other mechanisms required for ratification.

It is the minister’s goal to achieve ratification within the year. Background In 1991, Canada signed the Protocol on Environmental Protection under the Antarctic Treaty, commonly referred to as the Madrid Protocol. This protocol is designed to protect the fragile Antarctic environment. Under the protocol, countries agree to exercise strict control over the activities of their nationals in Antarctica, and to conform with agreed rules of operation to prevent pollution and environmental degradation.

A federal process leading to the ratification of the Madrid Protocol was launched in the fall of 2002. Environment Canada and DFAIT are leading the process in conjunction with an interdepartmental committee that includes Justice, DFO, CEAA, TC, PCO and NRCan.

  • DFAIT: Department of Foreign Affairs and International Trade

DFO: Department of Fisheries and Oceans

CEAA: Canadian Environmental Assessment Agency

TC: Transport Canada

PCO: Privy Council Office

NRCan: Natural Resources Canada

Questions Passed as Orders for ReturnsRoutine Proceedings

12:15 p.m.

Halifax West Nova Scotia

Liberal

Geoff Regan LiberalParliamentary Secretary to the Leader of the Government in the House of Commons

Mr. Speaker, if Questions Nos. 59, 60, 61 and 62 could be made orders for return, the returns would be tabled immediately.

Questions Passed as Orders for ReturnsRoutine Proceedings

12:15 p.m.

The Deputy Speaker

Is that agreed?

Questions Passed as Orders for ReturnsRoutine Proceedings

12:15 p.m.

Some hon. members

Agreed.

Question No. 59Routine Proceedings

12:15 p.m.

Canadian Alliance

Lynne Yelich Canadian Alliance Blackstrap, SK

For the fiscal years 1993/94, 1994/95, 1995/96, 1996/97, 1997/98, 1998/99, 1999/2000 and 2000/2001, from all departments and agencies of the government, including crown corporations and quasi/non-governmental agencies funded by the government, and not including research and student-related grants and loans, what is the list of grants, loans, contributions and contracts awarded in the constituency of Westmount—Ville-Marie, including the name and address of the recipient, whether or not it was competitively awarded, the date, the amount and the type of funding, and if repayable, whether or not it has been repaid?

Return tabled.

Question No. 60Routine Proceedings

12:15 p.m.

Canadian Alliance

Rob Anders Canadian Alliance Calgary West, AB

For the fiscal years 1993/94, 1994/95, 1995/96, 1996/97, 1997/98, 1998/99, 1999/2000 and 2000/2001, from all departments and agencies of the government, including crown corporations and quasi/non-governmental agencies funded by the government, and not including research and student-related grants and loans, what is the list of grants, loans, contributions and contracts awarded in the constituency of Toronto Centre—Rosedale, including the name and address of the recipient, whether or not it was competitively awarded, the date, the amount and the type of funding, and if repayable, whether or not it has been repaid?

Return tabled.

Question No. 61Routine Proceedings

12:15 p.m.

Canadian Alliance

Gerry Ritz Canadian Alliance Battlefords—Lloydminster, SK

For the fiscal years 1993/94, 1994/95, 1995/96, 1996/97, 1997/98, 1998/99, 1999/2000 and 2000/2001, from all departments and agencies of the government, including crown corporations and quasi/non-governmental agencies funded by the government, and not including research and student-related grants and loans, what is the list of grants, loans, contributions and contracts awarded in the constituency of Hamilton East, including the name and address of the recipient, whether or not it was competitively awarded, the date, the amount and the type of funding, and if repayable, whether or not it has been repaid?

Return tabled.

Question No. 62Routine Proceedings

12:15 p.m.

Canadian Alliance

James Lunney Canadian Alliance Nanaimo—Alberni, BC

For the fiscal years 1993/94, 1994/95, 1995/96, 1996/97, 1997/98, 1998/99, 1999/2000 and 2000/2001, from all departments and agencies of the government, including crown corporations and quasi/non-governmental agencies funded by the government, and not including research and student-related grants and loans, what is the list of grants, loans, contributions and contracts awarded in the constituency of Vancouver South—Burnaby, including the name and address of the recipient, whether or not it was competitively awarded, the date, the amount and the type of funding, and if repayable, whether or not it has been repaid?

Return tabled.

Question No. 62Routine Proceedings

12:15 p.m.

Liberal

Geoff Regan Liberal Halifax West, NS

Mr. Speaker, I ask that the remaining questions be allowed to stand.

Question No. 62Routine Proceedings

12:15 p.m.

The Deputy Speaker

Is that agreed?

Question No. 62Routine Proceedings

12:15 p.m.

Some hon. members

Agreed.

The House resumed consideration of the motion 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, and of the amendment.

Canada Pension PlanGovernment Orders

12:15 p.m.

The Deputy Speaker

Just at the conclusion of the debate prior to question period there was an amendment proposed by the hon. member for Edmonton Southwest and, upon review, it is receivable.

Canada Pension PlanGovernment Orders

12:15 p.m.

NDP

Dick Proctor NDP Palliser, SK

Mr. Speaker, I am pleased to take part in this debate today on the Canada Pension Plan Investment Board. I appreciate that we are speaking to the Alliance amendment that was moved just before we went to question period. We in this caucus would not be supporting that. We could support it except for the last couple of phrases, because we do not agree with the direction the Canada Pension Plan Investment Board is taking.

As I listened to the debate earlier today and the leadoff speaker, the parliamentary secretary, it seemed to me that if I could synthesize what he was trying to tell the House in terms of why the government is moving forward, there are about five points.

The first is to permit all amounts held to the credit of the Canada pension plan account to be transferred to this relatively new CPP Investment Board by repealing the requirement to maintain in the account a three month operating balance.

Second is to establish a means by which the investment board may be required to transfer funds to the government to the credit of this plan account so that the immediate obligations of the account can be met.

Third is to transfer to the investment board over a three year period 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 is to provide that the foreign property limit in the Income Tax Act applies to the investment board and its subsidiaries on a consolidated basis and to provide that the investment board will be considered to hold the property of its subsidiaries for the purpose of applying this foreign property limit.

The final point is to make housekeeping amendments to the investment board's reporting requirements and procedures.

The NDP position on this, and we will get into this in some detail, is that all pension trust documents must require a joint trusteeship, that all pension moneys are, after all, the deferred wages of the employees, that any pension surplus should be used only to improve benefits and that as deferred wages the funds have to be invested carefully, safely and wisely so as to show the greatest return for the beneficiaries of the plan within the investment guidelines as set out in the trust documents.

The New Democratic Party comes at pension plans with a great deal of history over many years, beginning with J.S. Woodsworth, the leader of the Canadian Co-operative Federation, the precursor of the New Democratic Party, followed by M.J. Coldwell as our leader, Tommy Douglas, and of course Stanley Knowles, the longtime member for Winnipeg North Centre. Our party has fought consistently over more than half a century for public pension plans so that our senior citizens, after a lifetime of work and service to their communities and their country, have the ability to retire with some dignity. People like Woodsworth and Douglas fought for these plans when a cradle to grave social program did not have all the negative connotations that we hear about in this day and age.

When the CPP plan first came into effect in 1966, my father was in mid-fifties. He recognized that he would be a beneficiary, that he would be able to draw that pension plan in another nine years at retirement age. He held different jobs in his life, but at that time he was farming and did not work for an organization or a company where he had a pension plan of any kind.

As it turned out, he was killed in an industrial accident and never had an opportunity to cash in on a pension plan, but I can say that he was very pleased in 1966 when the government came forward with a Canada pension plan that he would have been entitled to. As I say this, I recall that of course my mother would have been entitled to some of those benefits down the road as a survivor of my father's passing.

Just when we thought we had won these kinds of public pension plans and had some security and dignity for senior citizens, along comes the Reform Party, now the Canadian Alliance, and says we do not need public pension plans, let us tear the whole thing down.

Canada Pension PlanGovernment Orders

12:20 p.m.

Canadian Alliance

Ken Epp Canadian Alliance Elk Island, AB

We never said that.

Canada Pension PlanGovernment Orders

12:20 p.m.

NDP

Dick Proctor NDP Palliser, SK

Oh yes, you have.

The Canadian Alliance says not to trust the public to be able to invest in these plans, let us give it over to the private sector, to private interests.

The government, for its part, says that is just right wing rhetoric which everyone should ignore, but then it quietly goes off and slowly but surely implements these kinds of half-baked ideas that are coming out.

I think the jury is still very much out on the CPP investment board. It talks about an arm's length relationship and we respond by saying if it is at arm's length it is very soon going to be out of reach entirely.

What is forgotten is that the money from the pension plans comes from both employees and employers. We know that the employers are well represented on the CPP investment board, but we ask respectfully where the heck are the employees in all of this? Where are they represented? Where are their interests represented in what the CPP investment board is doing with these public funds?

The board was created in 1997 to invest a portion of public pension money into equities, but now the legislation that we have before us is to move all pension plan assets immediately to the board. I know that seniors are very concerned about what is going on with this proposal.

The chief actuary, according to the Alliance member who spoke before question period, warned some time ago that the CPP fund was out of control and we were going to hit a huge bulge in about 2031 if action was not taken. For his warnings he was fired from the position. I would counter by looking at the investments of the CPP investment board. I wonder if it is not going to get a whole lot worse, because based on recent returns it is not exactly managing and investing the money very wisely, which I will get into shortly.

The Alliance member asks about the younger worker. The return has been only 2% for the worker that has come into the workforce since the 1980s. Our reply to this is that there is no recognition in that argument of the intergenerational transfer, the fact that we have built schools for post-secondary education and we have done a lot of other things. Together there is a recognition in our country that people grow up, go to school, get their education and enter the workforce, and then when they have completed their life's work they have an opportunity to retire with some dignity. This whole shift out of public pensions and into private pension plans fails to recognize those kinds of realities and I think it is extremely important that they be recognized.

I also want to note in passing that there is no spokesperson in this debate for the Bloc Québécois. There is a very genuine reason why it is not participating in the debate. Quebec has its own pension plan. At the time the CPP plan came in, Quebec had its own plan. It has not gone down this highly questionable road in terms of its pension money, so I assume the Bloc feels there is no need to participate in the debate.

I mentioned that the CPP investment board has not been doing very well. Let us accept at the outset that investments over the last year or so have not been good. It has been a bear market, as others would say, and a lot of investments in mutual funds and others have had poor or negative returns.

However, just for the record, it is important to point out that over the first six months of last year the Canada Pension Plan Investment Board managed to lose $4 billion of people's pension funds. That is a fairly significant loss. It represents just over 20% of the equity in that fund, which disappeared in the first six months of last year. The $2.5 billion that it lost in the second quarter of last year was by far the largest loss since the investment fund began in 1999. The $4 billion overall that it lost was double the $1.7 billion that it lost the year before. This is hardly a success story so far.

Despite that, Mr. MacNaughton, the CPP Investment Board president and CEO says that all is well, no need to worry, that over the long run these things are just little blips in the system and this will not hurt the pension plan of Canadians.

Canada Pension PlanGovernment Orders

12:25 p.m.

Progressive Conservative

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

They doubled his bonus.

Canada Pension PlanGovernment Orders

12:25 p.m.

NDP

Dick Proctor NDP Palliser, SK

Yes, that is right, they did double his bonus for his assertion that all was well.

The strategy to diversify from government bonds to other assets is the right one, according to Mr. MacNaughton. What he fails to say, and what the Alliance fails to say, is that it has been government bonds over the last couple of years that have helped offset some of the large losses that have occurred on the equity side of the portfolio, because the bulk of the money has been transferred into index funds, Standard & Poor and the Toronto stock exchange, and some have been allocated to the United States and the international stock indices. The equity portfolio in the CPP Investment Board fund was at $16.9 billion on September 30 of last year. That is a very large amount of money. The 20%, the $4 billion it lost, is based upon that.

If we look at this in personal terms, the fund is designed for a cash-rich investor, in this case very rich because we are investing between $6 billion and $8 billion a year in new funds. Of course the CPP argument is that with the market downturn this is a good time to invest even more money.

I want to contrast what the CPP investment board has been doing with what Quebec has been founded on since 1966 and what the Canada pension plan used to be founded on. Particularly for Quebec, less so for the Canada pension plan, there were three or four key principles. One of them was that the money from Quebec's public pension plan was going to be invested in Quebec firms, in small and medium-sized firms with less than $50 million in operating capital. This was to create, maintain and protect jobs in la belle province. It was also designed to promote the training of workers in economic matters and increase the influence on Quebec's economic development. A third goal was to promote training and to stimulate the Quebec economy.

The result has been very significant in that province. Quebec went from a region with limited sources of venture capital to one that now gathers the largest share of overall venture capital in our country. Something in excess of 52% of venture capital is directed to the Province of Quebec, largely as a result of these restrictions and stipulations on how moneys from the Quebec pension plan can be secured and invested for a better return for the people who are actually living in that province.

Canada Pension PlanGovernment Orders

12:25 p.m.

An hon. member

It's common sense.

Canada Pension PlanGovernment Orders

12:25 p.m.

NDP

Dick Proctor NDP Palliser, SK

It is common sense, and there is a clause in the regulations that states it has to invest in the domestic economy within the Province of Quebec. That seems to us a sine qua non, something that we need to do in our provinces and country.

It is ironic that in the House of Commons we discuss the Kyoto protocol and talk about cleaning up the environment and reducing gases yet the pension moneys we talk about that could be invested in doing some of that good work are perhaps being invested in more high risk operations that are completely outside our economy and our country. They are being invested internationally.

On that point, in Moose Jaw, Saskatchewan last summer we had the finale of a Canada-Saskatchewan infrastructure program to reduce pollution and retrofit older buildings. This is something my colleague from Winnipeg knows about very well and has talked about it often in the House. It was a fairly modest program of $600,000.

A half a dozen buildings were retrofitted in Moose Jaw. We were told in the aftermath of the program by the contractors who did the work that the estimated savings in terms of heating and cooling the six buildings would amount to more than $200,000 per year. This means that in three years, as the member from Winnipeg has said in the House many times, the entire bill of $600,000 would be paid off.

The retrofit done on the six buildings probably has a shelf life of at least half a century. There will be very good returns over a long period of time. It is a job creator.

It seems to me that it is nothing but good news, those sorts of stories. For the life of me I cannot imagine why we are not taking more of those initiatives with our pension plan to make sure there is a good return, that we are cleaning up the environment and leaving a smaller imprint for our future generations.

Instead of following the model that appears to have worked so well in Quebec, the people who do not like what has happened or who are concerned or have persuaded others that the Canada pension plan is just not viable, just not sustainable over the long term, will have us perhaps invest the money who knows where because there is no public accounting of it. It could be invested in all kinds of pitfalls like Bre-X, Talisman, WorldCom and Enron.

There is no reason they would not invest in tobacco companies if it looked like they would have a good return, or invest in the third world and to heck with environmental concerns or whether or not the workers there are paid a reasonable wage. Let us not have an ethical stream; for heaven's sake, we would not want to do anything like that.

I listened to the member from Edmonton who represented the Alliance position on this issue. He was concerned about the RRSPs. He said that one of the ways we could pay less attention to public pension plans would be to elevate the amount of money that could be contributed into an RRSP. The amount now is capped at $13,500. There are persistent rumours it is going to be recommended that it go up to $19,000 per year and it could come in as soon as the budget next month.

We have a lot of difficulty with raising the RRSP limits because of the fact that the vast majority of Canadians do not even come close to making their $13,500 limit now. It is just not fair in any sense of the word. Raising the limit to $19,000 from $13,500 was one of a lot of recommendations. It is not fair. It is not right.

We have just come through a $100 billion tax cut in the past five years. The vast majority of that money has gone to the people who are in the top 1% of our tax brackets. Certainly it will exacerbate that. It does nothing more than provide a tax break for the thin upper crust of this country as it is measured by income and has absolutely nothing to do with building a stash of money to fund a life of ease when a person's working days are through.

The current RRSP contribution limit is 18% of earned income to a maximum of $13,500 minus any pension adjustment that an individual has. The limit is already scheduled to rise to $14,500 next year; it is indexed to go up, but there are those who want to up it another $5,000 above that. We cannot speak strongly enough in opposition to this. It is not fair to the people at the lower end. It is not fair to our tax system, which is increasingly disparate in terms of the growing gap between the rich and the poor. We would turn thumbs down on any notion of increasing the RRSP limits.

We need to talk about the business of why public pension plans seem to be under such vigorous attack and it is not just in Canada. Certainly worldwide there have been fights and battles about the way we consider funding our pension plans.

Critics warn, and we have heard it today, about the demographic time bomb waiting to explode and an age war over pension plans and pensions as the baby boom generation begins to retire over the next several years. Because the population is aging, we are told there will be fewer people of working age to support those who have retired and become dependent and that younger people will resent paying the cost of supporting the growing numbers of the older generation. At least that is the argument from the right wing. The answer according to some people is to eliminate the public pension programs like the CPP and force people to contribute to their own personal savings plans instead.

The fact is that public spending on income security for seniors in Canada is modest by any international standard and is expected to peak at levels well below those anticipated by other western countries in this century. Public pensions have reduced poverty and inequality among seniors in Canada. That is a truism and is very important to restate.

While the percentage of older people in the population is indeed increasing, the percentage of young people has been dropping. However by 2031, when the so-called demographic time bomb is supposed to explode, the total dependency ratio in Canada, the ratio of the young and the old, will still be lower than it was in 1951. In addition to that, as seniors form an increasing percentage of the population, they will account for an increasing percentage of all taxpayers.

The boomers, who have been described as the trillion dollar generation, will be much better off in retirement than today's generation of seniors. They will also pay an increasing share of the amounts collected by various levels of government in different kinds of taxes and user fees that will help pay for services to the elderly, such as pensions, health care and long term care. In other words, higher total amounts paid in taxes by seniors themselves will finance a significant part of the cost of the programs that older generations require.

Recent Canadian studies have also demonstrated that with relatively modest economic growth over the next few decades, Canada will be well able to afford its aging population, even taking into account increased public spending on health care and pensions as our population ages. The OECD says that if public spending on the old in Canada is to maintain its share of gross domestic product as our population ages, the average annual growth required between 1980 and 2040 is only 1.05%, just over 1%.

What is the panic? Why the panic? The answer is that there were a number of economists who received such prominence and notoriety in the United States and worldwide in the 1980s, the so-called Chicago boys, who pushed people into this notion that if it was public, it must be bad and let us privatize everything.

One of the good examples of what transpired was in Chile in South America when the Chilean economy was pushed down this free enterprise road under Pinochet with deregulation and privatization of public institutions and pro-market policies. Virtually overnight and with no fanfare, no public announcement, Chile replaced its public pension plan with a forced savings scheme that was the darling of the right wing economists and right wing governments and think-tanks around the world. It was held up by the World Bank as a model for other governments to follow.

Here the Reform Party advocated the abolition of the Canada pension plan and its replacement with a mandatory savings scheme of super RRSPs based largely on the Chilean model. Chile's system of mandatory private savings accounts can hardly be called a pension scheme since there is no risk pooling whatsoever, which is a fundamental characteristic of a true pension plan.

The entire risk of providing for retirement in Chile is borne by individuals. Workers must contribute 10% of their monthly earnings into an account with a private investment fund to cover old age pensions and an additional 3% of earnings to cover disability and survivor pension benefits. There is also a mandatory health insurance premium, which is 7% of earnings. In other words, total mandatory contributions to the private funds in Chile, most of which are run by foreign financial institutions I might add, amount to some 20% of earnings and there are no, I repeat no, matching employer contributions.

Experts who have looked at Chile's mandatory private savings scheme have raised serious concerns, including the high cost, the low coverage, the large number of vulnerable workers who are excluded, the inadequate benefits provided by the scheme and the systemic bias against women. Low income workers cannot afford the high contributions and many are in default.

It has been estimated that for the average worker, the fees, commissions and other charges consume well over one-third of contributions. By way of comparison, the cost of running the CPP, at least the cost before the recent reforms, is 1.8% of the contribution revenue. It is clearly a very manageable number.

People who are advocating this privatization have used tactics that are strikingly similar to the kinds of strategies being used by privatization advocates both in the United States and in countries like Chile. The key to having radical changes adopted, of course, is to create a crisis mentality. If people can be convinced that our public pension program is in crisis, they will be much more amenable to making major changes.

Corporate funded think-tanks and right wing commentators have put forward a number of different schemes to privatize the CPP by converting it to a system of mandatory individual savings accounts or by allowing people to opt out of the plan and have their mandatory contributions directed to their individual savings accounts. While initially most proposals seem to favour the Chilean model, in recent years we have seen other countries such as Britain opting out.

The Reform Party, in a 1998 booklet on pension reform, asserted that privatization based on individual accounts was working successfully in other countries, Chile and Australia. A closer look at these countries revealed that is not the case at all.

The Alberta government, under a treasurer who is now a member of this House, threatened to take Alberta out of CPP a few years ago unless federal and provincial finance ministers agreed to adopt several Alberta proposals, one of which was to allow individuals to opt out of the CPP plan and have some part of their contributions directed to their individual accounts. Opting out raises the same kinds of concerns as complete abolition of the Canada pension plan.

First, there would be a huge transition cost because some way would need to be found to pay for the accumulated benefits of people who have chosen to opt out of the plan.

Second, vulnerable workers would be pressured to opt out even though it may not be in their best interests to do that.

Third, the high cost of individual accounts would reduce the proportion of contributions available to generate a pension probably leaving that individual without adequate pension at retirement and therefore increasing the number of people who would have to rely on a minimum government guarantee through old age security or the guaranteed income supplement.

Opting out could seriously undermine the viability of the public plan itself. It is not much different than a publicly funded health care plan and when the private aspect of it is introduced, we risk ruining the entire system. It is no different with pensions as it is with health care. Based on other experiences, those most likely to opt out would be, surprise, higher income workers with secure jobs. If contributions from these workers were diverted to their private accounts, taken out of the public accounts, then there is less revenue to pay the people at the bottom of the system and there will be less money available for their retirement years. That is what we are getting at when we talk about intergenerational transfer and helping those who need some assistance.

Privatization through individual accounts or opting out would introduce inequalities. The Alberta proposal to withdraw surplus funds from the plan and allow individuals to invest in it privately for their own benefit would also contravene the principle of pooling risks through social insurance. It would weaken public policy levers that could be used to redistribute income and reduce inequalities.

Recent Canadian studies indicate the important contribution made by the public pension program, particularly the Canada pension, to reduce poverty and inequality among seniors. Reducing the role of government to one of simply providing social assistance for those most in need while encouraging marketplace solutions for income security and maintenance, will lead to an increase in rates of poverty and inequality among future generations of Canadian seniors.

Those are a few of the concerns that we have about pension plans and the CPP Investment Board. We are not at all persuaded that what has happened here in recent years is working to the benefit of our seniors or those who will be seniors in the next relatively short number of years.

We are very much opposed to the proposals to extend the grasp of the CPP Investment Board. We are opposed to it for entirely different reasons than our friends in the Canadian Alliance. The NDP believes in public pensions and we think a model based on what has transpired in Quebec over the last 36 or 37 years would work extremely well in the rest of Canada.

Canada Pension PlanGovernment Orders

January 31st, 2003 / 12:50 p.m.

Progressive Conservative

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

Mr. Speaker, I am pleased to say a few words to on Bill C-3, the Canada pension plan. At the outset, there is really nothing major in the bill that would necessitate our opposing it. Progressive Conservatives will be supporting the bill. I am delivering these remarks today on behalf of my colleague, the member for Kings—Hants, who is unable to be here. He is on Her Majesty's business elsewhere.

The purpose of the bill is to consolidate management of all CPP investments under the Canada Pension Plan Investment Board. It will no longer require the CPP to hold a cash reserve equal to three months of benefits and the bill will also make various technical amendments. As I said at the beginning, I do not believe that there is anything major in the bill that would prevent us from voting for it.

The Canada pension plan is an important cornerstone of the future retirement savings plans of most or all Canadians and certainly is one that is supported broadly by a range of Canadians. Canadians support not only the notion of a secure government pension plan but also one that maximizes their retirement income.

Generally, Canada's system of retirement savings has three main pillars. The first is universal old age security and the low income supplement. Second are the earnings based Canada and Quebec pension plans. Third are the private retirement savings and pension plans.

The Diefenbaker government initiated the work leading up to the 1966 introduction of the CPP. Progressive Conservatives have traditionally viewed the CPP as a fundamental part of Canada's social safety net, an obligation that government must honour.

More than 2.8 million Canadians outside Quebec receive retirement benefits of up to $9,345 a year depending upon how long they contributed, and their employment earnings. Special benefits are also provided for persons with disabilities, widows, widowers and orphans. The Quebec pension plan is quite similar in that regard.

For three decades, the CPP was a “pay-as-you-go” plan. Premiums only provided a fund equal to two years of benefit. By 1997 there were only $40 billion in the fund, while the cost of promised future benefits totalled $600 billion. Without changes, premiums would rise to 14.2% of pensionable earnings by 2030.

In 1997 Ottawa and the provinces agreed to two major changes to the CPP. The first was to increase premiums more rapidly than previously planned, but they were kept at 9.9% in 2003, which was the equivalent of $4.95 for employees and $4.95 for employers. That equalled an $11 billion increase in annual premium revenues. The plan is sustainable over the long run at next year's rate and all Canadians will receive the benefits they have been promised. That of course is a very good thing.

Second, changes were made to the way benefits were calculated reducing slightly the pensions of new beneficiaries, reducing the death benefit and making it much harder to get disability benefits.

Third, new funds flowing into the CPP funds will be invested in the marketplace and managed by an arm's length agency, the CPP Investment Board. Previously funds not immediately needed to pay benefits were loaned to the provinces at the rate paid by the federal government on its long term bonds.

Under current numbers, contributions to the plan will exceed benefits until 2021. At that point some investment income will be used for some CPP benefits. By 2010, CPP assets will equal $142 billion. By 2050, they will approach $1.6 trillion. Therefore, by the turn of this decade the CPP will be by far the largest investment vehicle in Canada.

The CPP actuary says that the changes in the bill will increase returns on CPP assets by $75 billion over 50 years. 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 the cash reserve.

This movement of the Canada pension plan beneficiary pool toward capital market is one that will in the long term benefit Canadians and improve their retirement incomes. Notwithstanding what has happened in the last year or two in the capital markets, by and large the return last year on the Canada pension plan, compared to most mutual funds and investment portfolios in the last year, was actually fairly good.

Relatively good changes in accountability structures are made to the board's governance provisions with this bill. The CPP investment board's governance model is built on two fundamental principles. First, the investment professionals must be able to make their decisions without political interference. That could only be a good thing. Second, there must be full accountability and reporting to Parliament, the provinces and the people of Canada. That could only be a good thing as well.

The legislation seems to be carefully crafted to effect accountability while ensuring a certain level of independence. Whether it actually plays out that way will be seen as years go by. Time will tell. However, it is a very good start in the right direction.

For example, the legislation requires the board to have a sufficient number of directors with proven financial ability or relevant work experience. Why the standard would be anything lower really is not an issue. In fact, that should be the minimum prerequisite.

How the directors are appointed is a departure from the traditional practice for crown corporations. A committee appointed by federal and provincial finance ministers nominates candidates and the federal minister selects candidates from the committee's nomination list, in consultation with the provinces. However, at the end of the day the appointments will come by way of a final recommendation from the finance minister, only to be rubber stamped by an order in council. That may or may not produce the very best people. Let us hope it does.

The bill is a step in the right direction and as a result future boards will consist of professionals with accounting, actuarial, economic and investment credentials. They will be experienced in the private and the public sector and will bring to the board table informed opinions on public and private sector governance.

There are other legislative measures to ensure transparency and accountability. The board will also appoint external and internal auditors who will report directly to the audit committee of the board. Despite these powers, government can check on what is being done with the public's money. Indeed, the federal finance minister is required to authorize a special examination of the CPP investment board's books, records, systems and practices every six years. Perhaps there might have been some utility in the suggestion of performing examinations much more frequently.

Our political and public accountability is especially important at a time when some Canadians might be worrying about equity markets.

The Canada pension plan has to be invested for the long term. Good portfolio management expertise will prevail with the right quality of people at the management level. That is one of the reasons why it is so important that the board of the Canada pension plan be chosen very carefully. They are doing very important work.

We have had and continue to have significant concerns about the way the government makes orders in council appointments. The correlation between Liberal Party contributions and an appearance in the board's order in council appointments is somewhat unsettling to say the least.

The degree to which this level of partisanship can threaten the potential quality of a board is very important.

When we are talking about the future retirement incomes of Canadians, it is absolutely essential that the individuals on these boards be beyond reproach and that they be chosen by absolutely no partisan influences. I hope the two latest appointments, Germain Gibara and Ronald Smith, do their jobs exceptionally well as Canadians expect them to do. Hopefully there is no reason to believe that they will not do a very good job.

Furthermore, the government has to take a look at other ways to address Canadian retirement planning right now. We are just a few years away from seeing a significant reduction in the number of Canadians who are actually working and paying taxes, along with a significant increase in the number of people who will be drawing pensions.

Therefore, the government should heed the finance committee's report and the Progressive Conservative's dissenting report, both calling for an increase in the RRSP contribution limit. That is one way in which we can defer taxes to the future as people withdraw from these RRSPs. Also, the increase in RRSP contribution limits would give Canadians an opportunity to shelter more income today than they would otherwise be able to do.

While Bill C-3 does address some much needed governance, housekeeping, administrative and technical issues, the bill does not turn its attention to any substantive change in pension policy that would actually help alleviate some of the financial pressures currently being experienced by many of our elderly, one of our most vulnerable groups in society.

In addition to addressing the structure of the CPP, the government might have done well to address some policy questions concerning seniors and how their GSI, guaranteed income supplement income, private savings and CPP are currently being administered under the all the present federal schemes. I know our party would want to make sure that the elderly in Canada do not suffer due to rigid policies and misguided principles or bureaucratic holdups.

Speaking of the guaranteed income supplement, it was just today that I had a call from a senior in the St. John's area who was appalled at a story coming out of Quebec about a senior who did not know that in order to actually receive the GIS, the guaranteed income supplement, that one actually had to apply for it. I think it was in today's Globe and Mail and the Ottawa Citizen . In other words, it is not automatically sent unless one applies.

When a senior finally does apply, the mother of all injustices kicks in. If the person qualified, say three or four years ago, Ottawa will only retroactively pay for one year, even though the person might have qualified for the benefit three or four years ago but did not know about it and therefore did not apply.

A parliamentary committee has discovered that about 380,000 people are eligible for the guaranteed income supplement but that they do not receive it because they did not apply for it. That is heart-rendering. The most needy in our society would certainly have to be people who are eligible for the guaranteed income supplement but 380,000 of them did not apply for it, saving the Government of Canada $3 billion.

As I said, once they apply, the mother of all injustice kicks in, in that Ottawa will only pay them retroactively for one year even though they might have qualified for the supplement three or four years ago.

These are very important points. We support Bill C-3. Hopefully the government will pay a little bit of attention to the last issue I raised about the guaranteed income supplement because seniors are the most vulnerable in our society and they need a co-operative federal government, a government that will look at the policy and say that it needs to be adjusted and changed because it is costing the seniors of our society dearly.

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1:05 p.m.

Canadian Alliance

Dave Chatters Canadian Alliance Athabasca, AB

Mr. Speaker, I listened carefully to the member's comments and certainly would not argue with any of those criticisms of the bill and what the government is proposing to do with the program.

However I would like to remind the member that the chief actuary of the CPP, long before the government took action, had been a voice in the dark telling us that the CPP was not sustainable. For years private sector actuaries were saying the same thing.

In fact, during the years of the Mulroney Progressive Conservative government I wrote a letter to my member of Parliament, then a Progressive Conservative member of Parliament, pointing out those things to him and pleading for his government do something to make that plan actuarially sound for myself, my children and my grandchildren.

I would like to ask the member if the Progressive Conservative Party, when it was in government, examined the issue of the unsustainability of the Canada pension plan and, if it did, why did it not do something to fix it and to address the criticisms that he is making of the current government in the way it fixed the plan. Why did the Conservatives not do it right when they had the chance?

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1:05 p.m.

Progressive Conservative

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

Mr. Speaker, as far as I am aware, the government of that day did have a very close look at fixing the plan and made some recommendations to the parliamentary committee on finance to have a look at it.

However, it was not fixed but hopefully the Liberal government was able to look the recommendations that we made at the time and was able come to the conclusion that something needed to be done.

We all support a good, sound Canada pension plan. It is very important that Canadians have that. Under the current numbers, contributions to the plan will exceed benefits by 2021. I give the former Minister of Finance and the government full marks for doing a good job on fixing the plan. By 2010 the CPP assets will equal $142 billion and by 2050 they will approach $1.6 trillion.

We all have to be very vigilant to make sure the plan remains very sound because we do have an aging population who will be looking for the benefits under this plan by even greater numbers in the future.

However, as I said a moment ago, we have always been concerned. No matter what political party has been in power, we have always been very concerned about making sure that the CPP remains sound and viable for seniors and those of us who will be drawing from it in the future.

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1:10 p.m.

Canadian Alliance

John Duncan Canadian Alliance Vancouver Island North, BC

Mr. Speaker, while listening to the speech by the NDP member for Palliser earlier, I was getting more and more concerned when he was depicting the entire legislation in terms of where the Canadian Alliance and, before the Canadian Alliance, where the Reform Party stood in terms of pensions, and of course misrepresenting considerable things.

I thought the exercise of opposition in the House of Commons was to hold the government to account and to deal with legislation put forward by the government, not to create or exacerbate divisions between the opposition parties.

I found most of what was said by the member for Palliser to be essentially irrelevant to the debate and counterproductive.

I would like to be irrelevant to the debate for a moment just to point out some things that the same member for Palliser recently said in the House of Commons that were basically contrary to where people are coming from.

I will quote briefly:

--in response to the member's specific questions, the position that I take, and I believe would be shared by a majority if not all of my caucus colleagues, is that if it has not specifically hurt a minor in the production of it, if it is created by people's visual imaginations and if the main purpose of it is not simply about pornography and sexual exploitation, then under the laws people do have a right to their own imaginations and thoughts, however perverse the member might think they are.

I want to hold that member accountable for a defence of child pornography in this place which I find indefensible. If he wants to carry out what I consider to be uncharacteristic descriptions of the Canadian Alliance, then I will ask him to be accountable for his actions in this place.

It is really my job today to talk about Bill C-3, which is a step in the government's attempt to put all the CPP assets under a single entity called the Canada Pension Plan Investment Board. We have had quite a bit to say about this board over time. I have heard the NDP member for Palliser and I have heard Liberal members say how wonderful it is that the Canada Pension Plan Investment Board will copy or emulate the Caisse de dépôt et placement du Québec.

I think this is clearly a backward step and one that we should all be very concerned about. We will end up with a very large, in a Canadian context, government run investment fund with the money and the mandate to essentially, within our small economy, take a controlling stake in private firms, to hire and fire directors, to block takeovers and to tilt the scales in capital markets.

All of this can be done at the whim of the government who is responsible for the appointees to this board. We are entirely captive of the goodwill of those government appointees to the board to put priority on the shareholders, the Canadian public, who are the eventual recipients of the Canada pension plan, as opposed to their political masters.

We know from recent history that the Caisse de dépôt et de placement in the province of Quebec has been used consistently for political initiatives. It was, for example, heavily used in the lead up to the last referendum when the Parti Québécois wanted to ensure that it had a two year period after the referendum before it had to go to the markets for money. That was all put in place ahead of time on the basis that if it won the first couple of years could have been a real difficult time.

It put the aspirations and needs of its separatist movement ahead of the aspirations and needs of either current or future pension recipients. We know that the former minister of finance, the member for LaSalle—Émard, would love to designate the Canada Pension Plan Investment Board direction to be utilized for all kinds of social policy and economic regional development initiatives as opposed to allowing that board the freedom and independence to seek the maximum rate of return for its shareholders.

This is part of a pattern that is consistently demonstrated by the Liberal government in most initiatives that it takes. There is in every case an attempt to utilize the board or the institution or the crown corporation in a way that would benefit the Liberal Party of Canada and its attempt to retain control in this place in the national governance of the country.

I find this very problematic. Although we are heartened by some of the comments from the people who have actually been appointed to the board, that is not good enough. We are not talking about good intentions here. We are talking about the inevitable reality of poorly designed legislation that would allow the entire exercise to come under the political control of the minister responsible for the board .

We can talk about some of the details of performance that would demonstrate quite clearly what kind of problems we could get into with rates of return when we attempt to emulate something like the Quebec model.

The Chief Actuary of Canada reported that from 1966 to 1995 the average real yield after inflation on the Quebec pension plan account, which was invested as it would be under what is envisioned by this bill, was under 4%. If we compare that with the average of the largest private managed funds in Canada, it came in at just under 5%.

If we were to take the huge amounts of investment capital that would be invested by the Canada pension plan and compound that over several decades, like the example I gave from 1966 to 1995, that would be a huge differential. We are forgoing that money by allowing this kind of scheme to be the operative scheme for the Canada pension plan.

When the former finance minister, the member for LaSalle--Émard, put these pension plan proposals forward, he projected a rate of return of his Canada pension plan after inflation to be 3.8%, even less than what was being achieved by the Quebec pension plan. Why would the former minister be targeting that kind of a rate of return unless he had strong designs on using it for political purposes and knew that it would reduce the rate of return? What kind of a message does that send about how caring our government is about the future incomes of our seniors? Even if those motivations were not there the inevitable result of this kind of legislation eventually would be that we would end up with that kind of a consequence.

A big problem with the current arrangement of the legislation is that the moneys that the Canada Pension Plan Investment Board invests would have to follow the same rules as an organization that we as individuals are stuck with in terms of investing in RRSPs, that is, dealing with Canadian content and how much we are allowed to invest outside of Canada. Canada has about 2% of the world's capital market. What that means is that a large pool of money is funnelled into a very small capitalization. This increases the risk for Canadians and for Canadian pensioners.

I believe that we need to free the Canada Pension Plan Investment Board and individual Canadians from these restrictive Canadian content rules.

The Canada Pension Plan Investment Board would look at $100 billion tied up in the stock market potentially as a large investment indeed. To demonstrate how insignificant Canada's capital markets are, when we look at that number, it is instructive to realize that yesterday's announcement of AOL Time Warner's loss for last year came in at $100 billion in the U.S. Here is one company that lost approximately the asset base of the Canada pension plan.

The other aspect that could show up is that in a very down market, we could end up with a large captive drop in the market of anywhere from 30% to 40%. That is why we need to spread the risk. That is why we need to get beyond these restrictive Canadian content rules that are tying up too much of the capital base into a small market.

We did have a crisis in the Canada pension plan during the tenure of the former finance minister, the member for LaSalle--Émard. What happened then? We watched the payroll burden for Canada pension plan contributions increase. That is a job killer; it is hard on employers and employees. There was a reduction of about 5% in the CPP rates to seniors. Those were not happy measures and were counterproductive. If we had that once before, we are potentially looking at a situation under this legislation that would be exacerbated, in other words, actually made worse.

What could we to look at? We could look at, for example, a year of investment where the Canada pension plan would be invested in a passive fund as opposed to the active engagement of choosing a capital mix. This could be done by contrasting the Quebec pension plan with a passive investment, and guess what? The passive investment plan in the example of the first year of operation did twice as well as the Quebec pension plan.

I find it puzzling to hear so much support coming from the government and the NDP in terms of them saying this is an enlightened measure when what it is sure to do is reduce pensions for seniors and put us in peril of political manipulation of the entire pension assets of this country. I find this totally unacceptable. We need a better context than what the government is providing for our pension assets.

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1:30 p.m.

The Deputy Speaker

It being 1:30 p.m. the House will now proceed to the consideration of private members' business as listed on today's Order Paper.