Debates of Sept. 29th, 2005

Wage Earner Protection Program Act

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, it is my pleasure to address Bill C-55, an act to establish the wage earner protection program act and also to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and make consequential amendments to other acts.

This is very complicated but important legislation. I am pleased to say that my Conservative colleagues have shown a great interest in the bill. A number of them will be speaking to the various aspects of it and the amendments. We will be proposing amendments at committee stage on this bill which we think will improve the bill.

It is appropriate, and the minister mentioned this, that we should recognize the member for Winnipeg Centre who raised this issue in a private member's bill. It should be noted that he brought the issue to Parliament's attention. Our party certainly appreciated his efforts in this area. We did have some disagreements, but our response, I thought, was very responsible.

We formed an internal committee under the leadership of our labour critic to try to formulate our party position on the issue even prior to the government bill being introduced. We wanted to be ready as a party to debate this issue substantively. Today I would like to offer our party's position on this legislation, but obviously other Conservative members will expand the comments in other areas.

Our view is that Bill C-55 is a good first step. We recognize that both the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act need to be amended.

It is a sad fact that every week dozens of companies and individuals declare bankruptcy in this country. We need to make sure that we amend our bankruptcy legislation so that it is clear and workable. Some 11,000 businesses and 100,000 individuals use the Bankruptcy and Insolvency Act on an annual basis. Therefore, I support making changes to both acts.

One particular proposal I support is that bankrupt individuals with more than $200,000 in personal income tax debt representing 75% or more of their total unsecured liabilities will not be eligible for an automatic discharge.

I am also pleased that we are trying to bring our bankruptcy laws in line with international insolvency laws. That being said, there are some problems with Bill C-55 that we will be seeking to remedy at committee. I have made some efforts to be in touch with various associations, organizations, labour groups and people in the private sector who are anxious to make representations on the bill. Hopefully they will all be able to do so at committee.

We will seek to clarify some issues because the legislation is rather complicated, particularly on the bankruptcy side.

The first issue I want to touch upon is wage earner protection. I want to be clear that prior to this legislation our party fully supported, as we do now, the payment of unpaid wages in a quick manner.

Bill C-55 will compensate individuals for amounts earned but not paid during the six months preceding the bankruptcy or receivership of their employer. The wage earner protection program will be funded by the consolidated revenue fund, which is essentially the taxpayers of Canada. Payments of up to $3,000 will be made to employees. I support the expedited payments to workers who are caught in bankruptcy proceedings. It is an appropriate amount of income to be paid in these situations.

Our party does have some concerns with the proposed change in the rank of creditors. Though it may sound strange, good national and provincial bankruptcy and insolvency laws improve the investment environment. Investors gain confidence knowing that should something go wrong, a stable system is in place to protect what is left of their assets.

With that in mind, wages are currently paid fifth after secured creditors and other preferred creditors. I am concerned that elevating wages above secured creditors may lead to increased financing costs for small business owners and therefore fewer investments. While I support the wage earner protection program, I do not believe that the rank should be changed from fifth to third or to a limited superpriority status. I want to be clear on this. We are not opposing payments to the workers. That should be done and it is something that our party supports.

Our party is concerned that once the government pays the worker, the government then takes a position and its position as a creditor is what has changed from fifth to third. Our concern is that this may impact the investment climate, particularly for small and medium size businesses that are attempting to access capital. I believe my colleague from Edmonton addressed that in a question to the minister.

We look forward to input from the Canadian Federation for Independent Business. I know it is concerned about this specific issue. In an attempt to address an imbalance in a system for workers for a small amount of income, we should not in remedying that injustice cause an injustice to small business owners who are creating an awful lot of jobs across this country.

We think it could be left in fifth place where it is currently. To be clear, the worker would be paid but the government would take fifth place and therefore not upset the investment climate for small and medium size businesses. My colleague from Souris—Moose Mountain will be addressing the wage earner protection program in his speech in great detail.

What I want to touch on next is the whole issue of RRSPs. Under the current laws if people go bankrupt, the trustee will seize their RRSPs. Bill C-55 will make RRSPs exempt from seizure with a few exceptions. For instance, contributions made in the 12 months prior to bankruptcy will not be exempt.

RRSPs have become a contentious issue. For example, the province of Saskatchewan exempts RRSPs entirely in bankruptcy proceedings. One of the issues we will need to address at the committee stage is whether or not there should be a cap on the dollar value of the RRSP. While pension plans can safely accumulate, RRSPs are still partly vulnerable and self-employed individuals could lose their investments and security upon bankruptcy.

This is something that was called for by investors and self-employed people who use RRSPs to build up their nest egg for retirement. We think it is a reasonable change to make, such that if people in their 40s or 50s have to declare bankruptcy, their entire nest egg will not be taken from them at that stage. Obviously the exception of the 12 months prior is to prevent someone from loading up his or her RRSP in the last few months and then declaring bankruptcy. This is a good change, especially for entrepreneurs who rely very heavily on RRSPs for their retirement years.

In addition, the bill is silent on registered education savings plans. This is an issue on which the Senate committee on banking made a recommendation in 2003 in its comprehensive report regarding bankruptcy and insolvency. I was remiss in not complimenting the report and the senators who worked on it, as well as the member from Winnipeg. The report was certainly instrumental in bringing forward a lot of the changes to the bankruptcy laws. The Conservative senators who worked on it did an absolutely outstanding job, in my view.

In addition, Bill C-55 makes changes to the treatment of student loans. Currently student loans are not discharged in a bankruptcy unless 10 years has passed since the applicant was a student. Bill C-55 reduces the period from 10 years to 7 years. In other words, the student loans of a person who goes bankrupt after having ceased being a full time or part time student for seven years will be automatically discharged. The Senate banking committee report which I referred to earlier recommended that there only be a five year wait before the discharge of student loans. I know the New Democratic Party would prefer the time period of two years.

The second issue regarding student loans is hardship. There is a provision to allow for the discharge of a student loan due to hardship. Bill C-55 allows a bankrupt person to apply to the court to obtain a discharge on the grounds of hardship five years after the person has ceased to be a full time or part time student. Five years in this case may be too long if we add in the additional issue of hardship, but that is certainly something the industry committee can look at more closely. It is a reality that all post-secondary education costs have risen since the Liberals have been in office.

While many individuals successfully finance their education and repay all their student loans on time, some Canadians are burdened by student loans to the point where they have difficulty providing for the basic necessities of life. Therefore, I think the so-called hardship clause should be examined in detail at committee.

Another issue that Bill C-55 raises is that of income trusts. This has become a very topical issue recently with the Minister of Finance, quite frankly in my view, making an absolutely unprecedented interference in the marketplace, in our investment community. This is disrupting the retirement nest eggs of thousands and thousands of Canadians. It is affecting the investment climate in perhaps the most negative way in recent years. I just cannot believe a finance minister would act so imprudently. It is an absolute disgrace.

We in the Conservative Party under our finance critic, the member for Medicine Hat, have argued that we need certainty in our investment community. We should also realize, though, that it is mainly middle class Canadians who have a lot of their retirement funds tied up in the stock markets. To cause markets to decline precipitously overnight because of the imprudent actions of the finance minister is unconscionable. I hope that decision will be reversed, but unfortunately, I do not think it will be unless there is a change of government.

The whole issue of income trusts is raised in the bill. My colleague, the member for Kelowna—Lake Country, the vice-chair of the Standing Committee on Industry will be addressing the whole issue of income trusts in his speech, how they are affected by the bill and what should be done. I do not know whether the government is intending to change how it will address income trusts with the recent actions by the finance minister, but that is something the government should address.

I want to conclude by saying that consumer insolvency has increased on average by 12.8% per year since 1968. Business bankruptcies are decreasing, which is good news. We do like the parts of the bill particularly that amend the bankruptcy legislation, which encourage restructuring of viable but financially troubled companies. Obviously, we would like to see it worked out rather than going to bankruptcy, if it is at all possible. A lot of the recommendations made to address the Bankruptcy Act that were in the Senate report in our view would lead to less regulation, less interference and would make it more efficient. Those initiatives that address that part of the act we certainly support.

We also recognize that we need better protection for wages. We are fully prepared to support that, but we obviously want the issue of where the government ties in, in terms of the creditors issue to be addressed at committee.

We do support the principles in the bill. We will be supporting the bill at second reading. At committee we will be asking all sorts of witnesses to come forward with their thoughts on the bill. We will be proposing some amendments. We hope other parties will approach the bill in the same reasonable, prudent manner that we have, and in the end we can address all of these issues in a very responsible manner.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Madam Speaker, the member made some interesting comments about our tax system and the incentives to encourage businesses in our country to reinvest in their communities and themselves to create greater profitability and productivity.

The member mentioned income trusts and the incursion by the government into them. This is a system that is seen as bad public policy and it is not allowed in the U.S.

I would be curious to know the reasons why the member says this. I look at the case of northwestern British Columbia where, despite this government's lack of will when dealing with softwood lumber and despite sound government policy when it comes to our forestry sector, the major companies in the last four fiscal quarters have made record profits. These companies have never made as much profit before as in this past year. This is wonderful for my constituents in these communities.

If those companies were to then set up an income trust, which some of them are considering, they would no longer have to pay taxes on the profits they make. The profits would be immediately passed along to their shareholders as dividends, which they may or may not pay taxes on depending on their tax status.

Why does the member feel this is sound government policy, to continue to allow companies that achieve profitability to evade taxes? These companies are not reinvesting that profit into taxes which we all believe is important to keep the institutions of government running.

It seems to me at a surface level to be one of the largest tax evasion schemes the country has ever faced. I would appreciate it if the member would explain his party's position on income trusts.

This scheme also incurs a disincentive for those companies to reinvest in themselves. In their reinvestment phase, they would then have to declare that money as profit and they would be taxed on it. This is a scheme that is being used by some companies. Perhaps it will be prevented if the government has any foresight at all.

These companies are being given the opportunity to avoid those taxes by becoming an income trust. Therefore, they are providing a disincentive for that investment in productivity which we require if we are to compete on the global stage. Would the member clarify why he is in support of such a scheme?

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, my colleague's question gives me the opportunity to explain. I know it is not related specifically to Bill C-55, but it is related to income trusts.

The member mentioned that the United States does not have income trusts. That is true. However, it also do not have double taxation on dividends. If double taxation of dividends were not done in Canada, then we would not need income trusts. Income trusts allow the company to pass on the profits to their investors. People say that is evading taxes. What it does is pass on profits to the investors and thereby companies do not pay the double taxation to the government.

It is interesting, but it is a fundamental difference between the New Democratic Party and the Conservative Party. If we look at productivity and competitiveness, I do not believe the path to productivity and competitiveness is by double taxing those people who are taking their hard earned dollars and investing it in companies in Canada. That is what investors are doing.

By double taxing companies, we are not increasing our productivity and competitiveness. We are in fact lessening our productivity and competitiveness by giving more resources to the government, by double taxing those people who are taking their own hard earned capital to invest in our companies in Canada. That is exactly the wrong path to go down.

If the finance minister wants to come forward and say that the government will stop double taxing investors who take their hard earned money and put it into companies in Canada, we in the Conservative Party would probably say that we should look at that. That is what the United States does and maybe that would be even a better way to go than the income trust angle.

If we want jobs to be created, whether it is in northwestern British Columbia, on the east coast or anywhere else in Canada, we need Canadians to use their excess capital to invest in companies here.

Our biggest problem in Canada with productivity and competitiveness today is a lack of access to capital by small and medium size companies. If we go to any research institution in any field across the country, talk to the head of the NRC, the ARC or whomever else, they will say that our number one issue in Canada is productivity and competitiveness.

The forestry sector has been hit by unfair trade practices by our colleagues. It has had to put up $5 million in duties. This sector has actually made profits because it has responded by becoming more efficient and more competitive. The forestry sector has not done this by evading taxes. I think, frankly, it has been by trying not to pay double taxation to the government and passing on some gains to investors. The investors can then use the surplus money to reinvest back into the communities across the country.

[Robert Vincent, Bloc, Shefford, QC]

Madam Speaker, in my opinion, Bill C-55 is a good bill that the unions and the workers have been awaiting impatiently for years. However, there is a problem with this bill. There is something missing and it needs to be pointed out. The minister said that the workers had vehicles and mortgages and that they needed these funds to pay for all that. So allowing them restitution of $3,000 in the event their employer declares bankruptcy would be a good thing.

There is another important aspect, and the member mentioned it earlier. He said that business owners were being treated unfairly. But so are the workers. Let me explain.

Collective agreements always contain a clause on severance pay in the event a business closes. Workers pay for this directly through payroll deductions. A collective agreement is the result of bargaining. A percentage of the envelope that the employer could give the workers as wages and wage increases is transferred into a severance pay fund. As a result, workers receive one week's salary per year of service.

This is not fair to workers. My question is for the member. Why are workers not able to recover all their money if a company declares bankruptcy? Why should workers have to pay the price for the bankruptcy by losing the money set aside in the event the company closed?

A worker with 20 years' seniority is entitled to 20 weeks' salary from the employer. This 20-week period allows workers to pay their bills until they find another job. Under this bill, yes, workers can recover part of their salary. However, there is a two-week waiting period for EI and, quite often, older workers are the ones affected. I will come back to this point.

With this bill, we should consider unionized workers who are entitled to this severance pay. They paid for it with their own money, directly from the increases they would have earned if they had not agreed to wage deferrals.

Should we put something directly in Bill C-55 so that these workers can recover their investment?

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, I will do my best to address the question. Perhaps I misheard my hon. colleague, but I thought he said that under the bill up to $3,000 would be paid by the employer. Up to $3,000 actually is paid out of the wage earner protection program which would be paid out of government funds. Instead of the employees having to take their places in line to try to get their money from the company or from the creditors, they will be replaced in the line by the government. I do not know if my hon. colleague was confused on that issue.

In terms of the injustices, that is exactly what the bill is intended to address. The employee will not have to wait in line for months and months to get those unpaid wages addressed. As stated in the bill, they will be addressed very quickly, paid for out of the program by the government. It should tide the person over, whether it is finding a new job or accessing employment insurance if that is the only route available.

I am sorry if I did not quite completely understand the question, but I think the bill is very much intended to address the injustice that the hon. member mentioned.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, the Bloc Québécois has been working together for a long time with the steelworkers' union, among others, on proposals to amend the Bankruptcy and Insolvency Act to ensure that employee wages and pension funds are the first debts in line to be reimbursed when companies go bankrupt. Why? Because the current situation is badly flawed.

Under the current legislation in Canada, employees who work all their lives for the same company can find themselves left with nothing if it goes bankrupt. Employees lose not only their wages for hours they actually worked but also all their contributions to the company pension plan. When the Bloc Québécois found this out, it decided to hound the government to ensure that the flaws in the current legislation were corrected and wages better protected.

In October 2003, for example, the Bloc Québécois voted in favour of a motion brought before the House by the NDP. This motion asked the government to amend the Bankruptcy and Insolvency Act to ensure that the wages and pension funds due to employees are the first debts in line to be repaid in case of bankruptcy. Unfortunately, the Liberal Party voted against this motion at that time and it was therefore defeated.

When on November 15, 2004 an NDP member introduced a bill to protect wages, which was similar to the government's current Bill C-55, the Bloc was an enthusiastic supporter. My colleague from Shefford even said in this House that if the NDP had not introduced such a bill, the Bloc would have. This is indicative of the Bloc's affinity for a bill like this, Bill C-55, which it finds satisfactory. I would not go so far as to say that it finds it fully satisfactory, but it considers it a step in the right direction. It is a little step, to be sure, but still in the right direction.

In our view, another milestone has been reached in the direction of respect for working people and their dignity. The social justice principles recognized and upheld here require employees to be paid for all the hours that they have worked. Workers' wages are the only income that they have, in contrast to big corporations and bankers, for example, who have mortgages with companies that go bankrupt. Workers' pension funds are sacred. People do not work their whole lives to be left as destitute as if they had not worked hard all that time. It does not make any sense.

The new wage protection mechanism is interesting, because, as we know, Bill C-55 creates the wage earner protection program. Under this program, the federal government assumes up to $3,000 of wages owed to workers if their employer goes bankrupt. Payments made under this program are taxable and are subject to any applicable deductions.This means that, regardless of what assets the employer has, workers will be able to receive most, if not all, of their unpaid wages.

The Minister of Industry feels that this amount of $3,000 would cover 97% of unpaid wage claims, but it remains to be seen what will happen with the remaining 3%. The same thing goes for the precedents the minister has referred to.

On the other hand, workers receiving payment under the WEPP will have to transfer to the federal government their right of claim under the Bankruptcy and Insolvency Act for an amount equivalent to the benefit they have received. The government will then seek to recover the amount paid out to the workers.

This appears to be an acceptable mechanism, and we are told there are precedents for it. We will need to see what those are. The minister was not very forthcoming about them just now. We need to see how this has worked in Australia and the United Kingdom, whether workers have indeed recovered what was owed to them, and whether indeed 97% of workers recovered all that was owed to them.

The government estimates the annual cost of the program at $32 million annually, a maximum of $50 million in particularly bad years with a lot of bankruptcies. This will mean more money paid out to workers, but since the federal government will be able to recover a portion of what it has paid out by virtue of having become the holder of the right of claim, it will be compensated in part for these payments.

With Bill C-55, the federal government would create a priority higher than guaranteed creditors for workers' claims of unpaid wages and vacation pay. Their claims would take precedence over current assets such as cash, up to the not insignificant amount of $2,000.

As was said earlier, the advantage is that workers will receive their money a lot faster than they would under the existing order in which creditors are paid. They would no longer have to wait for months and years; it would most likely be a matter of weeks. If this program does not run into the same kind of trouble as the gun control program, workers will be paid faster.

However, it seems that 3% of workers will not recover all the money owed to them. We will have to see to what extent this is indeed the case and what we can do to help these workers.

Members understand that since workers will have assigned their right to claim to the federal government, it will become the preferred creditor.

Let us look now at the pension protection scheme. Bill C-55 introduces a mechanism to protect the workers' pension plans.

Under Bill C-55, a court would be able to authorize a proposal for bankruptcy or for an arrangement only when proof has been made. This means that employee and employer contributions to the pension plan that had not been paid at the time of bankruptcy or receivership have been paid or that the court is satisfied that the contributions will be paid under the arrangement, or that the involved parties made an agreement.

In addition, regular pension contributions by employees and their employers that had not been not paid when bankruptcy or receivership was declared will have priority over secured creditors in cases where the employer could not avoid bankruptcy and liquidation of its assets.

This will not solve everything. Nonetheless, as mentioned earlier, it is small step in the right direction.

There also are retirees whose income will decrease, while others will lose almost all their income. Again, this will improve the situation slightly. What is more, it establishes the principle that workers must receive the benefits from the retirement fund they contributed to over the years.

I see that my time is running out. I want to speak specifically about student loan bankruptcy. Bill C-55 proposes amending the rules for student bankruptcy. Currently, the Bankruptcy Act stipulates that a person filing for bankruptcy cannot be discharged from a student loan if that person is still at school or finished school less than 10 years earlier.

Under Bill C-55, a person can be discharged from student loans, through bankruptcy, seven years after finishing school instead of ten. The bill also allows a court to discharge a bankrupt from student loans if that person stopped going to school five years prior and has excessive financial difficulties.

I must say that the Bloc Québécois has been long committed, but only formally in the 2004 election campaign, to abolishing the period during which a student cannot be discharged, through bankruptcy, of his or her student loans. To that end, the Bloc Québécois supported Bill C-236, introduced by the NDP, which proposed reducing the period to two years. Any change that leans toward abolishing this waiting period will get the Bloc's approval.

Allow us to say that this discrimination against former students is based on the prejudices some people have toward those who declare bankruptcy. Such prejudices includes thinking it is easy to declare bankruptcy, when it is common knowledge that a judge has to decide on the matter and deny any outrageous claims. Another prejudice suggests that students are more inclined than other social groups to try to get out of commitments like debt. However, there are no studies to prove that.

Basically, the change from ten to seven years is arbitrary. Why not six or two years, or nothing at all? You can expect the Bloc Québécois to propose an amendment to this section during study in committee.

Finally, this bill is far from perfect. In fact, as I said, it is a small step in the right direction. The Bloc Québécois is in favour of the principle of BIll C-55, even though it is fully aware that employees usually have no means of protecting themselves when the employer is in a precarious financial situation.

Employees do not have the same capacity as financial institutions to absorb a loss of income for hours worked. Their salary is their only source of income, unlike the banks and the mortgage creditors.

It is difficult for an employee to assess the risks of working for a given company. When an employer is in financial difficulty, its best staff members may decide to leave the firm to avoid losing income, thus further limiting the employer's ability to deal with the problem.

The Bloc Québécois is formally committed to correcting the current situation, which is inadequate. It is pleased to see the federal government recognizing that major changes to the Bankruptcy and Insolvency Act are necessary to ensure better protection for wages and pension funds.

However, while it shares workers' enthusiasm about the introduction of Bill C-55, the Bloc Québécois notes that many future improvements will be required to respond to the lack of protection for workers' salaries, severance pay, vacation pay and pension funds.

The bill also addresses a number of separate subjects, such as student bankruptcy. An amendment will be submitted in committee. The Bloc Québécois has committed to abolishing the waiting period during which students cannot be discharged from their debt by bankruptcy, and we will be reviewing this in committee.

And so, these are the topics Bloc Québécois intends to bring up for discussion when this bill is studied in committee.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Madam Speaker, I want to thank my colleague from the Bloc for speaking in favour of some portions of this bill before the House.

The question I had for the member was specific to the student loan provisions and the discharge of student debt. I would like the member to clarify the Bloc's position on this. As we well know, student debt has skyrocketed over the last 10 to 15 years in Canada. In the province that I come from, students not only face very high tuition fees, but the cost of living in cities like Vancouver is extremely high. Students come out of a four year education with a debt load that prevents them from often participating fully in their community.

I would like the member to clarify her position around what she sees as reasonable in terms of discharging bankruptcy for student loans. I am not clear if she was saying there should be no waiting period or if there should be some sort of timeframe in there.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, the amendment that the Bloc Québécois will put forward in committee aims essentially at abolishing the specified time period so people can discharge their student loans in the same way as any other debt.

The rationale for imposing this time period is not based on any studies that may have been done. It is based essentially on prejudice because some people think that bankruptcy is easy, even though we all know that a judge must render a decision on that. There are also other types of prejudice against students, or should I say former students. Indeed, after ten years they are no longer students, having been out of school for quite some time. Some believe that former students are more inclined to go bankrupt than people belonging to other social groups and that it is an easy way for them to free themselves from their student loans.

Nobody wants to do that. Bankruptcy is a difficult and very emotional process for those who go through it. It is not true that a former student will not hesitate to go bankrupt just to get rid of his or her student loans.

This is why we believe that the change from ten years to seven years is arbitrary. Why not six years? Or two? Or nothing? It is in that context that the Bloc will be proposing an amendment in committee.

[Gérard Asselin, Bloc, Manicouagan, QC]

Madam Speaker, first, I want to congratulate my colleague, the member for Saint-Bruno—Saint-Hubert, who is the Bloc Québécois labour critic. She gave an excellent speech. She has also done a great deal of research and hard work.

I think that her speech was a good reflection of the representations made to her by various labour organizations. The representatives of these labour organizations have been meeting with the Bloc Québécois members and parliamentarians so that bills such as this one can be debated in the House. Consequently, parliamentarians can work for and on behalf of not only Quebeckers, but all workers who pay EI premiums, earn wages and often have invested a great deal of money in pension funds.

When a company or business goes bankrupt, numerous challenges must be faced. Often, many workers not only lose their money and their pensions funds, but sometimes they are not eligible for EI. When new entrants to the labour market work for a company that declares bankruptcy, and they do not have the required number of weeks or hours of insurable employment, they fail to qualify for EI.

Another problem, when a company goes bankrupt and not enough notice is given, is that it is difficult to return certain workers to the labour force. Older workers are a case in point.

That is why, together with Human Resources Canada, the Bloc Québécois is trying to improve the employment insurance program through the POWA, the program for older worker adjustment. It is not easy to place individuals who worked for 25 or 30 years for a company that goes bankrupt.

It is tough for those people who find themselves without a job overnight, or those who had invested large amounts to secure their retirement. Unfortunately, many have all their eggs in the same basket and, when the company goes bankrupt, they lose everything. Very often, this causes insecurity in the family, due to their age and their chances of re-entering the labour market.

The financial institutions are often the first to get their money. They pay themselves first in the event of a bankruptcy. Then, the governments claim what they are owed and, finally, the suppliers. Often all the money set aside for the employee retirement fund is used up.

I have a question for my hon. colleague from Saint-Bruno—Saint-Hubert. Can we give workers the assurance that, with this bill, they can be sure to be among the first, even before governments and financial institutions, to get their money? Will they also be able to rely on a program, which could be developed with Human Resources Canada, to help them re-enter the labour force? Either training could be provided or older workers could have access to a program providing them with financial assistance until they return to work.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, I will start by thanking my colleague from Manicouagan for his excellent question and its excellent link with POWA, the program for older worker adjustment.

Even if Bill C-55 provides a wage earner protection program, we do not yet know what will come of it. The minister has referred to precedents established in the United Kingdom and Australia. It will be necessary to go there and see for ourselves how it works in practice here, eventually, and whether workers do indeed get what they are owed.

There will still, however, be the problem of one segment of the working population: the ones aged 50 or 55 whose employer goes bankrupt and who will never get back what is owing to them and will never be able to bridge the time between their last pay cheque and their first pension cheque. These older workers need help. Some need retraining, but most need financial assistance to make it until pension age.

The connection made by my colleague from Manicouagan is a very interesting one. If it were possible, that could be part of Bill C-55. For the moment, this good bill needs complementing with POWA for older workers.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I am grateful for the points brought forward by my colleague from the Bloc. In her opening comments she said that we were critical that Bill C-55 did nothing to protect workers' pensions in the event of a bankruptcy. In other words, if there were a massive shortfall in a pension of $20 million or $30 million, the employees of that bankrupt company would still be without their pensions at the end of the day. Could she elaborate on that point?

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, I am sorry, but I do not think I got what my NDP colleague was asking. I did not grasp his question very well. Could I ask him to repeat it? I am sorry, but I did not hear his question.

[The Acting Speaker (Hon. Jean Augustine)]

The hon. member for Winnipeg Centre will get another opportunity to expand. At this point in time the clock has run out on the member for Saint-Bruno--Saint-Hubert. Resuming debate, the hon. member for Winnipeg Centre.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, the point I was making I will make within the context of my speech. As much as we welcome the introduction of Bill C-55 and as much as we are pleased to be dealing with the important issue of benefits for employees who are the victims of a bankruptcy, we are critical in that the bill would do nothing to protect those employees who may lose their pensions altogether in a bankruptcy. In other words, if there is a $50 million shortfall in the pension plan when the company goes bankrupt, nothing in the bill guarantees the pensions of those workers. That was the point I was making to my colleague from the Bloc.

I will comment on the bill in some systematic order because there are four key elements to it. I disagree with my colleague from the Conservative Party. This is not a complicated bill. It is quite straightforward. It finds its origins in the principle that in the event of a bankruptcy the rights of workers should be paramount, they should be first, not dead last in order of priority as per the existing bankruptcy laws.

I would ask if there might be unanimous consent in the House to allow me to split my time with colleague from Hamilton Centre.

[The Acting Speaker (Hon. Jean Augustine)]

Does the hon. member have unanimous consent to split his time?

[Some hon. members]

Agreed.

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, the current bankruptcy laws were clearly written by the monied class. Big money has controlled things in Ottawa for so long that it is no surprise that all the laws are structured in such a way as to look after the interests of big money. That is the case in the current bankruptcy laws. Employees, workers, have been left hung out to dry in the event of bankruptcies in alarming numbers.

There are approximately 10,000 commercial bankruptcies per year in Canada, with over 100,000 employees owed back wages, benefits and pension contributions. It is a huge problem. Some of the estimates are as much as $2 billion per year are owed to employees due to bankruptcies. Imagine the impact of that.

The government finally has listened to the years of pleas from members of various parties to do something about this. I personally had a private member's bill that called upon the government to address the issue of bankruptcy.

One of the key elements in Bill C-55 is the wage earner protection program. For the record and history books, this is the manifestation of a commitment negotiated with the government by the NDP in Bill C-48, or what we call the NDP/Liberal budget of 2005. The Liberal government is living up to the commitment made at the bargaining table with our leader, the member for Toronto—Danforth. We find ourselves with the wage earner program.

Under this proposal, an employee can seek restitution for up to $3,000 for back wages left owing. The government would then seek compensation from the trustee of the bankruptcy, wait in line and be reimbursed. It proposes as much as $2,000. It is an idea that we can agree to in concept. My colleague from Hamilton Centre may be able to expand on it. This was an NDP idea that was put in place in the province of Ontario by the NDP government in the early 1990's.

My problem with it is the figure is too low. We do not believe a $3,000 compensation would compensate as many affected workers as the Minister of Labour would have us believe. Partly, it should not just be back wages and holiday pay. It should also include severance pay or termination pay which may be included in a person's terms and conditions of employment. It also should include commissions for salespeople who may work in retail sales who get their commissions at the end of every month. That could amount to many thousands of dollars.

We believe that threshold limit of $3,000 is not adequate and that the employees should be able to seek compensation for wages, holiday pay, termination pay, severance pay and commission for salespeople.

We also are critical that there is a three month exemption. If someone has worked for the company for less than three months, that employee is not eligible for this program. I do not see the logic in that. In fact someone who has only worked for less than three months is more vulnerable than a person who has 20 years of service if there are two weeks back wages owing. That person may have been catching up on their personal finances. We are critical of both those issues and will be moving amendments to that effect.

The second element of the bill has to do with student loans. My colleague from the Bloc has pretty much reflected our criticisms of the proposed amendment to the student loan provisions. Let us be clear. The 10 year limit that students have to wait before they can declare personal bankruptcy is like a life sentence. This is crazy. Why should they be treated any differently than any other Canadian?

This came into effect only when the Government of Canada off-loaded the student loan system to the banks. When it privatized and contracted out the student loan program, the banks, in assuming the responsibility, demanded that they did not want kids to get out from under their debt for 10 years. That is baloney. The NDP supports the idea, especially in the cases of hardship, that the discharge in the event of student loan debt should be no different from ordinary Canadians. We will be negotiating that down with the ruling party.

One of the most important terms of this new bill is the Companies' Creditors Arrangement Act amendments. Under the current rules, and we have checked this out and had it confirmed recently, a judge may unilaterally and arbitrarily alter the terms and conditions of a collective agreement of the employees. When a company goes under the CCAA and is seeking to avoid bankruptcy, a judge may alter the creditors' arrangements or collective agreements unilaterally. This is fundamentally wrong. We cannot and will not abide by that.

The amendment put forward by the federal government states that a judge may intervene to the point that he or she may direct the parties, labour and management, to sit down at the bargaining table and try to negotiate amendments to the collective agreement, but the judge may not unilaterally impose changes to the collective agreement. This is a step forward, providing we can be abundantly sure that the default position will be the status quo. In other words, if the two parties at the bargaining table reach an impasse, the default position will be to revert back to the collective agreement which will stand in full force and effect as it is. Providing that is the understanding, we will support element three of the bill.

The final element of the bill we also support, and I will leave more details of this to my colleague from Hamilton Centre. It deals with personal bankruptcies, in this case for very wealthy people making $200,000 a year or more, which very few do. Usually only heads of crown corporations like David Dingwall make more than $200,000 a year. They would not be allowed to have their taxes discharged in the event of bankruptcy for a period of five years, during which time they would have to try to negotiate a payback period. In other words, the people of Canada have a chance to be made whole if these high income earners try to welsh out on the back taxes they owe to Canada.

I believe this traces its origins back to the Radwanski scandal. George Radwanski, the former privacy commissioner, owed $650,000 in back taxes and it was forgiven 24 hours before he started his job as a $230,000 a year privacy commissioner. There was no payback whatsoever to Canadians. That could not happen under the provisions of this new bill. He would have had to sit down and negotiate a five year payback period. In that scenario, making $230,000 a year as a privacy commissioner, he could have paid back $100,000 a year to the people of Canada and still earned a good salary as privacy commissioner. I support element four of Bill C-55.

We will support Bill C-55 because it is better than the status quo. It gives some relief to wage earners who are affected by bankruptcy. There are some good elements to it. We will be fighting for amendments at committee.

[Gérard Asselin, Bloc, Manicouagan, QC]

Madam Speaker, I would like to fully understand Bill C-55. I want to be sure that the workers in a company are well protected.

There are workers who have been employed by a company and have contributed to it for years. They made a choice during collective agreement negotiations to earn a bit less in wages in order to put a bit more money into their retirement fund. These people made a choice in the present but for the future. I would like to be sure that Bill C-55 does a good job of protecting these workers.

If someone invests in a pension fund for years, it should be exclusive to that person. It is obvious that if the employees' and employer's retirement fund is in the form of a consolidated fund within the company, if the company should ever go bankrupt, everything goes down.

It should be said that the government itself is hardly setting an example with employment insurance. It appropriates the insurance paid by employees and employers and puts the surpluses into a consolidated fund that it uses for its own purposes and to make itself look like a good manager. It is not setting a good example for companies.

Companies should establish a separate fund, reserved and untouchable, into which the employees' contributions to their pension fund would be paid as well as the employer's.

We never hope that a company goes bankrupt, but unfortunately this happens sometimes when assets and liabilities get out of line and the company finds itself with its back to the wall. It has no other choice than to declare bankruptcy. When this happens, the retirement fund that employees have negotiated should be untouchable. The employer's and employees' contributions should be fully reimbursed immediately when a company goes bankrupt. Employees can then reinvest this money in a particular fund of their choosing, for example an RRSP.

The current situation is unacceptable, in my view, for employees who made a choice when their collective agreements were being negotiated to sacrifice some of their wages in order to put the money into their retirement fund. It is unfortunate that when a company goes bankrupt, people can lose everything and find themselves on the verge of bankruptcy, just like the company.

Does the member agree with me that Bill C-55 should force companies to refrain from meddling with retirement funds and ensure that these funds are reserved exclusively for the people who contributed to them?

[Pat Martin, NDP, Winnipeg Centre, MB]

Madam Speaker, I thank my colleague from the Bloc for making a very critical point. This bill would not protect pensions in Canada.

The NDP's original position was that a bill should come forward that does in fact protect pension shortfalls. This is not it. There will have to be another piece of legislation sometime soon.

I can speak briefly to one recent example in the Province of New Brunswick. The Nackawic mill recently went bankrupt. The employer had been dipping into the company pension plan for the last year. In other words, it was keeping the company running by the company pension plan; it was spending it. When the company finally went bankrupt, the pension plan was reduced by $30 million. There are employees at that mill now with 25 years' service and not one penny of pension. The only pension is for those with 25 years plus. It is a terrible, tragic issue.

There are enough assets in the bankrupt company that it could have reimbursed that pension plan, but the employees rank at the bottom of the list, not top of the list. In fact, the CEO of that company structured it in such a way that he, personally, is at the top of the list. He will be made whole; the employees will have nothing.

Clearly, this bill would not resolve issues where the company has been robbing from the employees' pension plan. There should be legislation not allowing employers to dip into pension plans because those are the employees' wages deferred and being held in trust for their exclusive use. It is not the company's money and should never be. However, this bill falls short on that.

[David Christopherson, NDP, Hamilton Centre, ON]

Madam Speaker, I want to thank my colleague from Winnipeg Centre for the leadership he has shown on this issue and on Bill C-281, the workers first bill, which does actually speak to the issue of protecting pensions in a real and meaningful way.

I want to break out a couple of the pieces that my colleague has already raised and dissect them a little more. First, I would like to join with my colleague in setting the record straight. I was reading yesterday's Hansard where the minister said in his opening comments, referring to Bill C-55 and wage protection, “This type of program is not radical or new, but it is for our country”.

On a technicality, on a federal basis it is, but within our nation, within the country, my friend from Winnipeg Centre is absolutely right. The Bob Rae government, the first NDP government in Ontario, brought in as its very first bill an employee wage protection plan that did exactly what Bill C-55 speaks about. In fact, it went a little further. Let us understand that the NDP has a track record of taking commitments on these issues, putting them into legislation and making them real, and doing it long before other parties in this place have seen it as a priority and enacted it.

What is important in this story, though, in addition to setting the record straight as to whether or not this is ground breaking legislation, is to understand that in the Province of Ontario right now, as a I stand in this place, that law has gone. That protection for workers has gone. That law was ripped out and that protection does not exist in Ontario right now. Why? Because the Conservative government of Mike Harris eliminated it and took away those rights. Let us understand that when it comes to workers' rights, really, at the end of the day, we are either with them or we are against them. It is clear where Harris was and where the NDP and Bob Rae were. It is good that this is happening. Parts of the bill are important and do provide protection, but it is far from ground breaking in the context of Canada as a nation.

Again, the bill has some good elements in it. There is no question about that. It needs serious work in committee and we are hoping we will get the commitment from all the other parties. Certainly, today, it sounds like our colleagues in the Bloc are prepared to roll up their sleeves and make the amendments necessary to give effect to what Bill C-55 purports to do, but without that work, the bill will fall short. However, we will support it. There are some good things in the bill and we will make it better, but it does not protect pensions.

I am emphasizing the comments of my colleague from Winnipeg Centre that it does not protect pensions. It will take Bill C-281, the workers first bill or one like it to do that. Let us remember that in the case of a bankruptcy, again articulated by my friend, under the currently law, if our pensions are not totally funded, we are at the bottom of the list. The banks, the creditors and the government come first. Workers are at the bottom.

It is interesting that the minister said in his comments yesterday: “--protection of workers whose employers undergo restructuring and become bankrupt. I am very passionate about this topic”. Great. Let us see some passion behind Bill C-281 and make some real changes that provide real protection for workers. That is the kind of passion we want to see from the Minister of Labour.

In the last couple of moments I want to deal with section 33. My colleague has talked about that. The minister made some reference to it where he said:

Canadian workers suffer lost wages, reduced pension benefits and uncertainty that their collective agreements may be unilaterally changed by a court.

The working assumption right now is that federal judges do have the power. That is the current wording. That is somewhat unclear and the first thing that the committee has to do is establish whether or not judges currently have that power. If that takes us into some legal battle, so be it. However, we cannot adequately deal with section 33 until there is an absolute determination as to whether or not, under existing legislation in its entirety, a judge is allowed the power to step in, in the case of bankruptcies and restructuring, and unilaterally order that collective agreements be changed. Let me say parenthetically that they are never changed to the benefit of workers, they are always changed to reduce the benefits that are in those collective agreements. That is the worry.

If they do have that power now, then subsections 33(1) and 33(2) take us two-thirds of the way, but there needs to be another amendment, an amendment that we would call the local 1005 steelworkers amendment. In the question and answer part of the package the minister released, there is the kind of protection that my friend from Winnipeg Centre spoke of. It says that a judge, upon application of the employer, can give a court order that negotiations can begin and it forces the two parties to sit down.

In the context of judges having unilateral power, if that is now curtailed to only direct an order that there be a negotiation at a table, then that is a good thing because it would then be more restrictive. It is taking away the authority and putting it into bargaining. What is missing is what is included in the questions and answers. It is missing in the legislation and it asks, what happens if they cannot agree to any concessions?

The questions and answers part of the package put out by the minister said that the agreement would then stand pat as it is. Every word, every comma and the expiry date, and that package, the collective agreement as it was, then goes in as part of the proposal that is put forward to the creditors as to whether or not that is acceptable. It may help the proposal float. It may sink it but nonetheless in law it would establish that judges will not unilaterally change it and that one cannot be forced to make changes at the bargaining table.

The employer representatives begin by saying their niceties, then the other side looks at them and says, we have no interest in changing anything in our collective agreement right now and we will meet you at the end of the expiry date and until then we do not need to talk about this collective agreement in terms of amendments any further. Period. End of meeting. The contract would stay in place. The powers of the federal judges would have been curtailed and the labour movement would have maintained the rights that it currently has to collectively bargain on behalf of its employees without a judge or anybody else unilaterally changing that.

If it is determined, however, that judges do not have that power right now and that it becomes the accepted interpretation by all, that they do not have it, then we want section 33 out of there because it means that we are now, through Bill C-55, giving judges the power to intervene in the collective bargaining process in a way that they currently do not have the power to do. We are not interested in amending section 33 with a new subsection 33(3) in that case. We want and will demand that the entire section 33 be removed. Make no mistake. This issue will be a major determinant as to whether or not the bill meets the test.

I have not heard from the minister. The minister said in his language that there is uncertainty. There is and that is why we want the uncertainty removed. It should be replaced by clarity, so that we know if judges have that power or not. Depending on the definitive answer to that, what will happen with section 33 will then make itself apparent in a way to which I have already spoken.

Bill C-55, as imperfect as it is, contains some benefits and is here for two reasons. One of them is not because the Liberals care that much about workers. The other is because the NDP through the member for Winnipeg Centre introduced Bill C-281 in terms of protecting pensions and putting them at the top of the creditors list, and the government was on the dime. It was on the spot and it had to do something.

To date, the government has not told us it is prepared to make that legislative change, although on the campaign trail the Liberals were all full of protection for workers and pensions. It was so motherhood and apple pie one would be shocked to believe it had not already become the law.

The second reason Bill C-55 is here is that it was ordered and demanded in the NDP budget amendment Bill C-48.

Those are the reasons it is here. The NDP drove this bill to be here. We will work with colleagues in the House to make this bill as good as it should be. We will continue to fight for Bill C-281. That is not going off the radar screen just because Bill C-55 is here. Those pensions will be protected.

[Alan Tonks, Liberal, York South—Weston, ON]

Madam Speaker, I have a huge amount of respect for the member, in particular his experience at the provincial level. The subject matter in terms of the protection of pensions in bankruptcy and so on is extremely important. I congratulate the member for his intense presentation on that.

My question has to do with jurisdiction. I understand how the architecture of Bill C-55 concentrates on the issue of pension protection in bankruptcy, but in terms of the regulators and regulations there is as much a provincial role with respect to this issue. I wonder if there is a two-pronged response that could be made in addition to the contents of this bill.

Could the member please elaborate on what additional initiatives should be taken with respect to provincial jurisdiction? I know he has a great deal of background in that particular area.

[David Christopherson, NDP, Hamilton Centre, ON]

Madam Speaker, there is a duality of responsibility. The reason the pension protection which normally is regulated at the provincial level ends up here is that the bankruptcy legislation is federal. Oftentimes the provinces say, “We do not need to do anything with the pensions beyond just monitoring, regulating, making sure the payments are being made and providing an accounting of accounts, et cetera. The real legislation has to be changed at the federal level, the bankruptcy level”.

Quite frankly, the labour movement and workers have been chasing their tails and have been sent around in a spin. That is why we are creating a beachhead on this issue and saying that once and for all, in the case of a bankruptcy, let us make sure that pensions are the top priority. It is that straight up.

Relating to that, and this is important because I know it is easy to mislead folks on this one, in Ontario the Bob Rae government brought in a bill that was known as too big to fail, meaning that the super large corporations like General Motors and Algoma are not going to fail, and upon application would be allowed to defer some pension payments.

I am glad I have a chance to clarify this between federal and provincial. Under that legislation a corporation had to make an actual written proposal. Within that proposal it had to show how much money it was going to defer, how long it was going to take to catch up and by what date will it not only have kept current accounts going in the latter years of the plan but by what date will it give an absolute 100% catch-up on that. It was meant to be an interim measure.

When we were in government a couple of proposals were put in front of us under our structural legislation and we approved them. To the best of my knowledge every one of those proposals did exactly what they purported to do, which was to provide a little cash flow in the short term but over the medium term the money was entirely paid back and those funds are now where they should be.

What happened in the case of Stelco, which unfortunately is the poster child for people getting screwed out of their pensions, was that a proposal was made by Stelco after the Rae government had been defeated and Mike Harris had taken over. Mike Harris approved the Stelco plan and there was nothing in it about when the money would be paid back. There was no time period for catch-up. There was nothing. It was merely Stelco asking if it could avoid paying its pension payments for a while under a certain clause and the Mike Harris government very nicely rubber stamped it and said yes. A few years later, bingo, we are into this jackpot.

The Conservatives to this day still blame Bob Rae for bringing in the structural legislation. That legislation did what it was supposed to do. It was the government of the day that did not do its job to protect those pensions and workers. That is why we are here today, to fix at the federal level what cannot be fixed at the provincial level.

[Jerry Pickard, Liberal, Parliamentary Secretary to the Minister of Industry]

Madam Speaker, it is my honour and privilege to speak to the second reading of Bill C-55, an act to establish the wage earner protection program act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other acts.

The passage of the bill will have real effects on the economy and on individual Canadians. It will affect entrepreneurs, large and small creditors, lending institutions, consumers, workers and students. Approximately 100,000 personal bankruptcies and 10,000 business bankruptcies occur each year, affecting more than $11 billion of debts and redeployment of $4.5 billion of assets.

Bill C-55 will ensure the Canadian insolvency system meets the needs of the Canadian marketplace as well as contributes to the socio-economic objectives of helping Canadians in financial distress.

Canada's insolvency system centres around two main statutes, the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act.

Allow me to explain briefly what each statute does and how they interconnect. The Bankruptcy and Insolvency Act, or BIA, provides the legislative basis for dealing with both personal and commercial insolvency issues. Under the BIA there are two options available. When an individual or company declares bankruptcy, the act provides for the liquidation of bankrupt assets by the trustee and the distribution of proceeds in a fair and orderly way to the creditors.

Alternatively, the act provides a means for persons or companies to avoid bankruptcy by negotiating a settlement with their creditors. It is called the proposal. Under the act the use of proposals has grown considerably in recent years and they now account for 15% of all filings by individuals and 25% of corporate filings under the BIA.

The Companies' Creditors Arrangement Act, or CCAA, applies only to corporate insolvencies involving debts over $5 million. Its purpose is to establish a framework to govern the restructuring of companies. The CCAA provides for a court driven process whereby a company obtains a court order to prevent its creditors from taking action against negotiating an arrangement with its creditors. The use of the CCAA has greatly expanded over the past decade, and most restructuring of large insolvent companies is now handled under the CCAA.

There is a broad consensus among stakeholders that reforms to the insolvency legislation are needed. Bill C-55 has four primary objectives.

First, as the Minister of Labour and Housing has outlined, Bill C-55 greatly enhances the protection of workers where their employer goes bankrupt or undergoes a restructuring process.

Second, it seeks to further encourage restructuring as an alternative to bankruptcy. Restructuring produces better results for creditors, saves jobs and enhances competitiveness.

Third, the bill is intended to make the bankruptcy system fairer and to reduce the scope for abuse. Bankruptcy law is about sharing the burden. Hence it is essential that we consider fair and equitable agreements by all parties.

Fourth, the administration of the system will be improved as many provisions in both the BIA and CCAA need to be clarified and modernized in order to ensure a more effective and predictable insolvency system.

Let me offer specific examples on how Bill C-55 is going to improve our insolvency system. To foster the use of reorganization as an alternative to bankruptcy, the CCAA will be substantially rewritten providing guidance and certainty where none previously existed and codifying existing practice while still preserving the flexibility that has made the CCAA such a successful restructuring vehicle.

Several new rules will ensure greater transparency in the process and a better ability for the active parties to defend their interests. This includes rules on interim financing; the termination of assets of contracts; governance arrangements of the debtor company, including the role of the monitor who will need to be the trustee; the sales of assets outside the ordinary course of business; and the application of regulatory measures.

Finally, this bill will greatly improve the administration of Canada's insolvency system through a number of changes affecting the role and power of trustees, including when they act as monitors in CCAA cases and as receivers on behalf of secured creditors. The supervisory role of the Office of the Superintendent of Bankruptcy is clarified and also includes the establishment of a central registry for the CCAA cases.

It is widely accepted that insolvency rules that govern personal insolvency play an important socio-economic role. They permit honest but unfortunate individuals who experience significant financial difficulty to discharge their debts, obtain a fresh start and thereby have the best possible chance to restore their financial situation.

At the same time, a well functioning insolvency system strikes the appropriate balance among competing interests in circumstances in which by definition there is not enough money to go around. Accordingly, it is important that the system be designed in such a way that it functions effectively and efficiently and provides the right incentives so that it deters potential abuses.

Bill C-55 accomplishes these objectives. It does so through tailored improvements to the Bankruptcy and Insolvency Act. By way of background, the proposed changes to the Bankruptcy and Insolvency Act which impact on individuals were extensively examined by the personal insolvency task force, the PITF, during the period of 2000 to 2002. The PITF was an independent panel established by the Office of the Superintendent of Bankruptcy with membership from all principal stakeholder groups, including creditors, trustees, consumer credit counsellors, lawyers, judiciary and academics.

The PITF released its report in August 2002. The report served as the main point of reference for representations that were made before the Senate Standing Committee on Banking, Trade and Commerce, which conducted its own review of Canada's insolvency legislation in 2003. That is to say that the consumer insolvency issues addressed in Bill C-55 have been the subject matter of extensive debate and consideration by both the PITF and the Senate committee.

In the area of consumer bankruptcy, one of the key challenges is the growing number of cases. Consumer bankruptcies have significantly increased over the past decades, from 1,500 in 1967 to some 84,500 cases last year. The number of insolvencies is tied to many factors, including challenges in consumer lending practices, higher levels of personal indebtedness, and a more tolerant attitude toward bankruptcy.

Since 1998, however, the annual average growth in consumer bankruptcies has decreased to approximately 2% per year, compared to 12% for the preceding three decades.

During the same period, the number of consumer proposals has more than doubled and now represent approximately 16% of all filings. This reform will continue to encourage the use of consumer proposals which offer the debtor an alternative to bankruptcy and typically result in higher recovery by creditors. For instance, the threshold for a consumer proposal has been increased from $75,000 to $250,000, thereby allowing more individuals to choose to make a proposal rather than file for bankruptcy.

Among the significant changes introduced to the consumer insolvency system by Bill C-55 is a provision to curb the potential for strategic behaviour by individuals seeking to extinguish large income tax debts. The bill eliminates the eligibility for automatic discharge for those debtors with personal income tax debts exceeding $200,000, where it represents 75% or more of unsecured debts. Instead, these individuals have to seek a court order for discharge and the court would be able to fix conditions relating to the discharge.

In keeping with the principle that those individuals filing for bankruptcy who have the financial means to repay a portion of their debts ought to do so, Bill C-55 provides for amendments to existing surplus income provisions. Under the proposed regime, first time bankrupts with surplus incomes will be required to pay a portion of their surplus income to their creditors for a period of 21 months, an increase of approximately 12 months to the present situation.

Reform of consumer insolvency provisions is also aimed at making the current system fairer for individuals. This includes the elimination of inequitable treatment of retirement savings plans and improved treatment of student loans and bankruptcies.

Under the existing laws, some retirement savings plans, namely, those associated with life insurance policies and registered pension plans, are generally exempt from seizure in the bankruptcy. Other types of registered retirement savings plans, on the other hand, such as those held by banks, brokerages or in self-directed funds, are generally not exempt from seizure in bankruptcy. The difference in treatment of various retirement savings plans seems to conflict with the public policy goal of encouraging Canadians generally to save for retirement.

Under Bill C-55, the registered retirement savings plans, regardless of whether the savings are a part of the employer sponsored pension plan or whether they are held in a life insurance savings plan, will enjoy the same protection from seizure and bankruptcy.

The bill contemplates that certain requirements must be met in order to ensure the public policy goal is fulfilled and to avoid the incentive for strategic behaviour. Specifically, contributions made within 12 months of bankruptcy and the amounts in excess of the cap would be available to creditors. Furthermore, there is a requirement that the savings be locked in until retirement.

In respect to student loans, the bill proposes that the waiting period before which a student loan debt may be discharged in bankruptcy will be reduced from 10 years to seven years. Furthermore, the bill would reduce the period before which the application may be made to the court to have a student loan debt discharged on the basis of undue financial hardship. That would be reduced from 10 years to five years.

One of the functions of bankruptcy law is to define which parts of the bankrupt property are available to be divided among creditors and which parts will remain under their control. In recent years a series of court decisions has cast doubt on traditional interpretations of which parts of the bankrupt property are available to creditors. The decisions reveal ambiguities in the wording and legislation. These are clarified through changes by the proposed bill.

In addition, proposed changes to provisions which address the way in which the Canadian insolvency system is administered are designated to improve the integrity of the system as a whole. A number of the procedural changes to the consumer insolvency provisions will enable the process to be streamlined along the lines recommended by the PITF. It is anticipated that these changes will result in a system which is better able to respond to the needs of individual debtors and their creditors.

In the Speech from the Throne, as well as the budget, the government clearly staked out its commitment to encourage entrepreneurship and risk taking. It has committed itself to creating a society and a business climate where educated and skilled people want to live and work, as well as a country that is the best place to do business while providing effective safety nets for individuals in financial difficulty.

Bill C-55 is a significant step to ensure that we respect Canada's insolvency laws, that the framework is right, that the rules are fair and equitable and that the regulatory structure is smart and responds to the needs of the marketplace. I am confident that the measures proposed in this bill will have broad support among Canadians. I urge all members of the House to support this important legislation.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Madam Speaker, I have a quick question for the member. He talked at great length about alleviating the pressure upon students, particularly those who find themselves in the unfortunate circumstance of having to declare bankruptcy.

We have this extraordinary situation in Canada whereby students enter a rarefied class not accessed by anybody else in the country who declares bankruptcy, that of being unable to move beyond that situation for a period of 10 years, which I find deplorable. It is not a class that anyone would want to be in.

There is a point that causes me some confusion. I was at a University of Ottawa gathering last night. Fifty or so students got together to talk about politics and it was a very interesting exchange. There is one thing they find frustrating when they hear the government talk about its commitment to students and its appreciation of the great energy, effort and contribution that students make to our society and our economy as a whole. Why has that same government witnessed over the past 10 years an average increase of $1,000 every year in the average debt that students are leaving university and college with?

On the one hand the students hear the words, the rhetoric and the ideas about supporting our students, yet on the other hand they are watching their fellow students and themselves accumulate more and more debt, thereby in effect hamstringing their ability to enter successfully into the marketplace and to take further risks and challenges such as opening new businesses.

If they have not already completely lost faith, they have started to lose faith with the words on the one hand and the reality they are facing on the other. That reality is one of increased tuition costs and what I would suggest is a dramatic rise in the amount of debt burden students are leaving post-secondary education with, a burden that is encumbering their ability to take out further loans to buy a car or purchase a house and those types of considerations.

Having gone through school and having acquired student loans, I can speak from personal experience. As for the idea of paying back those banks in the future in good faith because the loans were taken out, it is difficult to hear the suggestion that I should be taking on further debt in acquiring a house and cars, thereby stimulating the economy, or in opening my own business. I eventually was able to open my own business, but only after a lag period, which was unfortunate.

From what the hon. member said today, how can I take the message back to those students and say that we must believe beyond the rhetoric and that this government is actually interested in lowering the debt burden? Let us talk about prior to the students actually having to declare bankruptcy. How can I take back that message about lowering the debt burden that students in Canada are leaving with while under the auspices of his government in the last 10 years we have watched a dramatic rise in the debt our students are having to carry?

[Jerry Pickard, Liberal, Chatham-Kent—Essex, ON]

Madam Speaker, the hon. member's question is very significant. When we stop and think about student debt increasing, that is a reality, and certainly I do not think anybody here believes that government should control the costs of education outright totally, but I do believe that the costs of education have substantially gone up over the last 20 years.

When I went to school, certainly we had student debt and we had to pay for bills that we accumulated as students. Some of us were fortunate enough to have summer jobs and earn enough money to pay off the debts and some families were able to help students go through school, but it has always been the case that a student is at the lower end of income in our society.

I think the fact is that each year of school in the main adds a tremendous amount to students' incomes. As they become better educated and better able to enter the workforce, their potential for making dollars is extremely high compared to that of a lot of other Canadians who do not have the opportunity to go to school.

I think it is critical to understand what we as a government have control over. What we are talking about in this bill today is the aspect of the Insolvency Act and how it affects students who find it difficult after they have graduated, for whatever reason. Possibly they could not get a job in the field for which they had been trained or possibly other things intervened. Possibly circumstances in their lives made it impossible for them to make the money to pay back the loans. As a result, there are a lot of filings by students through the Bankruptcy Act.

What we as a government are looking at very carefully is where that maximum is: the number of years that a student has tried to pay back the loan and the ability of that student to pay back the loan. All the information comes together to give the direction that the student cannot afford to pay the loan back. There is a seven year time period in which we are going to allow the student to file bankruptcy at an earlier stage in order to dispense that debt, but in fact that is not the major portion of people who go to school. People graduate and are able to pay off those debts.

I remember one person who spoke with me when I was quite young; it was suggested that sometimes our society may be a little upside down. Young students should get paid high wages and as we get older the wages would be reduced somewhat. Then their houses would be paid for, their new family would be covered and their kids' education paid for and all of that. It was suggested that maybe when we start out our incomes should be higher and then go down. That goes counter to what our society does and the value placed upon it.

We have to remember, though, that those students who graduate do have the potential of earning a great number of dollars in our society. The better educated have the benefits and ability to make higher payments and are able to pay back those student loans. Where it becomes a crisis situation for students is what we are trying to ease this by this legislation. Quite frankly, I think that will be helpful to the students.