Mr. Speaker, I am pleased to join in the debate on Bill C-280 concerning the Employment Insurance Act. I genuinely thank the member for Manicouagan for raising these important issues. It is important that we debate such things publicly from time to time.
I also thank the standing committee for its fine work on its ninth report in consideration of this bill. While the Government of Canada cannot agree with the key directions of the bill, we greatly appreciate the work of the committee. I personally thank the member for Madawaska--Restigouche for his passionate support of the unemployed and for unemployment programs, and for the advice which he has given me and other members of the committee during this process.
Bill C-280 proposes fundamental amendments to the EI Act. It is important to revisit the reasons for the present structure of that act. This historical context will, I believe, illustrate the importance, complexity and challenges presented by the proposals contained in Bill C-280.
Let me begin with the employment insurance account.
Both Bill C-280 and the committee's ninth report suggest alternative methods of accounting but I believe it is important to appreciate why the EI account is reported within the consolidated revenue fund and not, as the bill proposes, separate from the accounts of Canada.
In the 1980s the auditor general of that time expressed concerns about fragmented reporting of government activities. To rectify this situation, the auditor general was of the opinion that EI premiums paid by employers and employees were federal revenues and that given the government's control over EI policy and programs, they should be included in reported Government of Canada revenues, not in a separate account. On the advice of the auditor general, in 1986 the EI account was fully integrated into the government's general finances. This practice follows appropriate accounting methods consistent with the standards of the Canadian Institute of Chartered Accountants. This reasoning still holds true.
It is important to note, however, that because the EI account has been consolidated with the other accounts of Canada, in reality it is not an actual account containing cash but rather an accounting method that keeps track of both premiums and benefits.
Bill C-280 would have significant financial and policy implications for the way in which the federal government finances and governs the EI program. A cash-based account, outside of the control of the government, would represent a significant fiscal liability to the government and the taxpayers of Canada, and potentially the first step in loss of policy control.
The government realizes the importance of keeping EI in tune with Canadians. That is precisely why in budget 2003 we committed to undertake a review of the premium setting process and launched public consultations. We promised that the new process would be based on the following principles: first, that premium rates should be set transparently; second, premium rates should be set on the basis of independent advice; third, expected premium revenues should correspond to expected program costs; fourth, premium rate setting should mitigate the impact on business cycles; and lastly, that premium rates should be relatively stable over time.
Consultations were held with a variety of stakeholders. We heard from business, labour, economists, technical experts, the EI commissioners for workers and employers, and individual members of the public. In budget 2005, the Government of Canada introduced a new permanent rate setting mechanism that meets all the five principles that I have outlined and takes into consideration the views of stakeholders and the views of the standing committee which studied this. By the way, this new regime already exists.
Beginning with the 2006 rate, the EI Commission has the legislative authority to set the rate itself. It will be able to obtain, as needed, the services of those with specialized knowledge in rate setting matters. In other words, it can go outside a government. And it will hold consultations on the premium rate prior to setting it. Gone will be the requirement for the Government of Canada to approve this rate.
This new approach to rate setting is based on the principle that the premium rate for a year should generate just enough revenue to cover expected payments during that year.
I think it is important to raise this here and speak to the motion proposed by the member for Manicouagan. The motion outlines a premium rate setting process that is identical to the one originally proposed. The only difference is that it removes the role of the Chief Actuary from the rate setting process. The motion in no way has a substantive effect on the problematic aspects of the bill ruled upon, Mr. Speaker, by you, and your ruling on the fact that the a royal recommendation was needed for the original bill as it was phrased.
Perhaps, given the ramifications suggested in the motion, it is important at this time to clearly articulate the key function played by the Chief Actuary in the new rate setting mechanism this government introduced in the budget 2005.
Under the new mechanism, the EI Chief Actuary annually calculates on a forward looking basis the estimated break-even rate for the coming year based on economic variables supplied by the Minister of Finance. The Chief Actuary then provides a report of this break-even rate calculation to the EI Commission by October 14 each year.
Clearly, the role of the Chief Actuary is a critical component of the new rate setting process, as he provides independent expert advice to the commission concerning the break-even premium rate. The Chief Actuary's report is a key factor the commission must consider in its decision on the rate. It is the only mechanism that factors in important economic variables. Further, the Chief Actuary's report provides the basis to ensure that the premium rate will generate just enough revenue to cover expected payments during the year.
It is important to recognize the important function the Chief Actuary adds to the transparency of the rate setting process. It is his report, providing details of the calculation of the break-even rate, that is made public and provides the basis for the commission's consultations with all stakeholders.
I appreciate the House taking the time to listen to this description of the role of the Chief Actuary. It is important because it explains why this government would not support a rate setting process that does not provide for sound actuarial advice as a fundamental component of the EI rate setting.
These new measures that I have outlined address issues both in Bill C-280 and the standing committee's reports by increasing the independence of the EI Commission in the EI rate setting and strengthening, and this is most important, the transparency of the entire process.
It is important to add that over the past 11 years premium rates have steadily gone down while benefits to Canadians have been enriched. With the 2005 rate for employees at $1.95 and $2.73 for employers per $100 of insurable earnings, consecutive rate reductions mean that employers and employees will pay $10 billion less in premiums than they did under the 1994 regime.
I appreciate the contributions of the hon. members and of the standing committee to the debates on the EI Act. I also welcome this opportunity to share ideas but for the reasons that I have outlined, the government cannot support Bill C-280.