I am glad to hear that the member opposite agrees with me.
Budget 2006 discards the previous $3,000 partial exemption and proposes to make all scholarships and bursaries received by students enrolled in post-secondary studies completely exempt from tax.
Budget 2006 also proposes to improve access to student loans by reducing the parental contribution required for students from middle income families for the purpose of student loans. It is estimated that this change will enable 30,000 students to gain access to assistance and 25,000 to have access to increased loans.
The government will also provide a one-time payment of $1 billion into the post-secondary education infrastructure trust, providing that the 2005-06 surplus is in excess of $2 billion. The trust will support critical and urgent infrastructure and equipment in colleges and universities.
Budget 2006 also included funding for research and development and measures in support of apprenticeships and trades.
Let me turn to the assistance that is already provided for education saving. RESPs are given preferential tax treatment to help parents save for their children's post-secondary education. Up to $4,000 can be contributed to an RESP in a year for each beneficiary to a lifetime maximum of $42,000 per beneficiary. Funds invested in the plan grow tax free until they are withdrawn. Contributions are not deductible, but can be withdrawn tax free. Investment income earned in the plan is taxed in the hands of the students when withdrawn for post-secondary education. In short, the tax benefits in an RESP come from two sources: the deferral of the tax would be investment income and the fact that this income is taxed at a low rate because students generally pay little or no tax.
In addition to the tax preferences I just described, RESP savings qualify for the Canada education savings grant, or CESG, which makes saving in an RESP even more attractive. Under this program, which is aimed at encouraging saving for post-secondary education, the government provides a 20% grant on the first $2,000 in RESP savings for each beneficiary in a year.
To illustrate how this works, assume a parent contributes $2,000 to an RESP for his or her child, the contribution would earn $400 in CESG and the income on both the contribution and the CESG would grow tax free until the funds were withdrawn to cover the cost of the child attending college or university.
Further, because it is more difficult for low and middle income families to save for a child's post-secondary education, the Canada education savings grant provides a higher grant rate on the first $500 in contributions by these families. Depending on family income, the grant rate could be as high as 40%.
In addition, since 2004, the Canada learning bond kick-starts education savings for children born after 2003 and who are in families entitled to the national child benefit supplement. Up to $2,000 in total Canada learning bond grants could be paid in a child's RESP by age 16. These measures were adopted with our support.
In fact, the current RESP limit, saving $2,000 annually into a child's RESP, means that almost $75,000 could be available for that child's post-secondary education by age 18, and about $95,000 would be available if the parent contributed $4,000 annually until the $42,000 lifetime limit was reached.
The combination of the generous tax treatment of the RESP and the CESG that tops up private savings has provided powerful incentives for parents to save for their children's post-secondary education. At the of 2005, these plans held almost $18 billion in savings for future post-secondary education, seven times their value nine years ago.
Since 1998, $2.7 billion in Canada's education saving grants have provided for over 2.2 million children. Over $440 million in grants was paid into RESPs under the program in 2005. In addition, the tax deferral provided by RESPs represents about $130 million per year in forgone revenue for the Government of Canada and about half that amount to the provinces.
In total, the Government of Canada devotes over $570 million annually to tax relief and grants to help parents save for their children's post-secondary education. I believe nobody would dispute that the current RESP regime has been extremely successful at promoting savings for post-secondary education.
Let us consider the impact of the measures under Bill C-253.
First, the bill proposes to provide a deduction for contributions to RESPs made in 2006 and future tax years, with contributions withdrawn being taxed in the contributors hands rather than tax free as is currently the case.
Second, contribution limits would be raised to be the same as those applying for registered retirement savings plans, or RRSPs, that is 18% of the earned income up to $18,000 for 2006.
The bill is supposed to encourage parents to save more for their children's post-secondary education, but I suggest that the measure proposed in the bill would be ineffective and would be expensive.
For these reasons and many others, I am unable to support the bill and invite my colleagues to do the same.