House of Commons Hansard #98 of the 39th Parliament, 2nd Session. (The original version is on Parliament's site.) The word of the day was prices.
Joe Comartin NDP Windsor—Tecumseh, ON
Mr. Speaker, I will try to be quick.
The answer to his question is basically no. What we are much more concerned about, and we have seen this on other occasions, is that we will give incentives to encourage the producers to use food when in fact that is not really what they want to do. That is the concern we have about this legislation.
Canadian Environmental Protection Act, 1999Government Orders
The Acting Speaker Royal Galipeau
Resuming debate, the hon. member for Yukon. The hon. member for Yukon has 20 minutes, but only 10 minutes today.
Larry Bagnell Liberal Yukon, YT
Mr. Speaker, I will not be able to get in all the points I wanted to make on Bill C-33, but I will make a couple of salient points that I hope will be helpful today and get them on the record about one urgent crisis in the world that is related to this food shortage.
First, the main concerns about the bill throughout the debate have been related to using agricultural land for fuel and taking away land that could be used for food products, especially at a time when we have a food crisis in the world and prices are dramatically rising.
I would like to explain to people a little about what the bill is and what it is not. This bill in itself is not going to change anything. It is not going to mean that our gas tanks are going to be full of ethanol or that it will be taking farms away and so on. This bill is more of a housekeeping bill which allows the government to regulate what is in fuels, the percentage for export and these types of rules.
Until the government does that the people who have concerns about this do not really have to have those concerns. The concerns come from what type of regulations the government makes once this bill is in place and a number of members have spoken about wanting to be involved in that debate.
The mix of these types of fuels and the mix of what is in gasoline comes after in regulations that this bill will allow governments under which to operate. In general, it makes government more efficient in a sense that it does not have to come to Parliament for every little change in the regulations. It can alter the construct of the fuels. Members have mentioned the elements of that construct which will come when those regulations are made.
People do not totally understand that the bill is simply giving the government the power to make regulations, and the regulations themselves are not being made when the bill is passed.
As has been said by all the other members who have spoken, I share their concerns about taking good farm land and using it for fuel when there are rising prices, although there are many causes for that. Those concerns have been sent to me by a number of people, although I do not have enough time to read all of them, which I will perhaps in my last 10 minutes in a future debate.
Other than items that can be used for food, there are other ways of making ethanol and biodiesels presently available or under development. We will be able to make them from straw, chaff, animal waste, and things like corn husks. Cellulose ethanol can be made from tree waste, bark, sawdust, and switch grass. In fact, even some of the food products, after they are used for ethanol, can be used for feed stocks by putting them back into the agriculture industry.
Therefore, there are ways of reducing greenhouse gases by simply using waste products and not using good food products in the future. I think that is the direction most people are supporting, particularly those who are talking about ethanol in this debate.
As I said earlier, the cost of food is skyrocketing in the world and I will talk about the many causes of that, ethanol only being one. There is also speculation, droughts, a huge increase in world demand, increases in oil prices and so on. I will go through those later if there is time left.
Another member mentioned earlier the problem with rice. There is a huge increase in the price of rice which has risen three times. It has caused a crisis in the refugee camps in Burma and for the Burmese people in Thailand.
Due to the cost of rice having gone up three times, the Thai-Burma Border Consortium executive director Jack Dunford, who deals with this and provides the money from 14 countries, of which Canada is one, is $7.5 million short.
In about two weeks there will be a crisis. The people who normally get 2,100 calories a day from various foods, which is the internationally accepted standard for survival, will only get 944 calories if something is not done, and they will not get five or six types of food. All they will be receiving is rice. We can imagine getting rice every day for every meal and only getting half enough. This will be a disastrous crisis for 150,000 people. It has unfortunately been overlooked. We have asked a number of times that the Canadian government increase its aid by $1 million a year.
That will not cover the $7.5 million, but with Canada's credibility those other 14 countries may increase their amounts and save 150,000 people who are trapped in refugee camps in Thailand.
When Dr. Sein Win, the prime minister in exile, was here a couple of weeks ago he mentioned this to Mr. Harper and Inter Pares, the Canadian NGO that delivers this money--
Canadian Environmental Protection Act, 1999Government Orders
The Acting Speaker Royal Galipeau
The hon. member for Yukon is experienced in this House and knows not to refer to other members by their names.
Larry Bagnell Liberal Yukon, YT
Mr. Speaker, Dr. Sein Win, the prime minister of Burma in exile, has talked to the Prime Minister of Canada and also Inter Pares, the NGO that delivers this aid to TBBC, and he has talked to CIDA about this.
I am imploring the government to make this money available so that children, women who are pregnant and lactating, and elderly people are not cut down to half a day's rice ration when all their other foods are cut off.
Canada has been supporting this since 1997. This could mean starvation for these people, especially when we hear that some of Burma's rice basket has been destroyed by the storms. However, instead of feeding the people on the verge of starvation, there are rumours that Burma could be exporting rice. No other country in the world now, except Thailand, is exporting rice.
The scarcity of food means that food prices go up. Ethanol from food production, not the other types I talked about, is therefore only one of the problems.
Certain parts of the world are having problems. Biofuel critics from as far away as Ethiopia, Mali, the Philippines and Paraguay warn Canadian lawmakers that western thirst for green fuels is costing human lives and that indigenous people in northern Argentina are dying of malnutrition as they lose their land to agriculture expansion.
In the United States oil prices have also contributed to the high cost of food. International speculation and drought in various parts of the world, including India and China, with their huge demand for both meat and grain products, all cause these huge price increases that are causing the world crisis.
In the United States there is a record amount of ethanol produced from corn, but there is also a record amount of corn being produced, so the production of both the food and the ethanol is going up.
All the bill would do is give the government the authority to make regulations. We have to be very careful to take into consideration the concerns of constituents who have written to all of us, not at this particular stage but at the stage where regulations are made.
The regulations have to go through the Canada Gazette twice. Our party will certainly be vigilant to ensure that when regulations are put in, they make sense, and cutting down greenhouse gases and providing sufficient agricultural production for the world are kept in a safe and fair balance.
Canadian Environmental Protection Act, 1999Government Orders
The Acting Speaker Royal Galipeau
When we return to the study of Bill C-33, there will be 10 minutes left for the hon. member for Yukon.
The House resumed from May 16 consideration of the motion that Bill C-34, An Act to give effect to the Tsawwassen First Nation Final Agreement and to make consequential amendments to other Acts, be read the second time and referred to committee.
Tsawwassen First Nation Final Agreement ActGovernment Orders
The Acting Speaker Royal Galipeau
It being 6:30 p.m., the House will now proceed to the taking of the deferred recorded division on the motion at second reading of Bill C-34.
Call in the members.
Tsawwassen First Nation Final Agreement ActGovernment Orders
The Acting Speaker Andrew Scheer
I declare the motion carried. Accordingly, the bill stands referred to the Standing Committee on Aboriginal Affairs and Northern Development.
(Bill read the second time and referred to a committee)
It being 6:59 p.m., the House will now proceed to the consideration of private members' business as listed on today's order paper.
The House resumed from May 2 consideration of the motion that Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income), be read the second time and referred to a committee.
Income Tax ActPrivate Members' Business
The Acting Speaker Andrew Scheer
Order, please. The hon. member for Kitchener--Conestoga has eight minutes left in his remarks. I will ask for a little order so members can hear the hon. member. If members need to carry on conversations, please go outside of the House.
Harold Albrecht Conservative Kitchener—Conestoga, ON
Mr. Speaker, I thank the House for the opportunity to resume my comments on Bill C-445. As I indicated earlier, we do not support this proposal as it is fundamentally flawed.
First and foremost, the largest issue with Bill C-445 is the exorbitant cost which would be fiscally irresponsible and threaten Canada's fiscal health.
A key pillar of Canada's pension system is tax deferred retirement savings, including registered pension plans and RRSPs. These plans provide Canadians with incentives to save for retirement and help bridge the gap between public pension benefits and retirement income goals.
I believe we all acknowledge that the best way to ensure that promised pension benefits are secure is healthy plans with good supervision. At the federal level, pension plans are regulated under the Pension Benefits Standards Act, or PBSA, and are supervised by the Office of the Superintendent of Financial Institutions. The superintendent's mandate is to protect the rights and interests of plan beneficiaries. Moreover, the PBSA sets requirements related to the funding and administration of pension plans.
For example, it requires that plan assets be kept separate from those of the plan sponsor. In the case of defined benefit plans, actuarial valuations of the plan's liabilities must be regularly conducted. If there is a funding deficiency, the sponsor is required to remit to the pension fund, over a certain period of time, amounts by which the estimated liabilities exceed plan assets.
It also provides that contributions owing but not yet remitted to the pension plan are subject to a deemed trust. This means that these amounts are considered separate from the employer's estate in bankruptcy proceedings. Recent changes to federal bankruptcy legislation granted a super priority to employer and employee contributions not yet remitted.
In addition, after widespread consultations on benefit security and the viability of defined benefit pension plans under federal regulation, our Conservative government has brought forward measures to ensure Canada's regulatory framework continues to be responsive to the needs and circumstances of pension plan sponsors.
In budget 2006, we provided funding relief for federally regulated defined benefit pension plans by introducing several temporary measures. These included: allowing solvency payment schedules to be consolidated in order to smooth solvency payment obligations; extending the period of making solvency funding payments to 10 years from 5 years, subject to a condition of buy-in by plan members and retirees; and, extending the solvency funding payment period to 10 years through the use of letters of credit.
Such changes will help re-establish funding for federally regulated defined benefit pension plans in an orderly fashion, while providing safeguards for promised pension benefits. What is more, we will continue to work to ensure the retirement income system is responsive to the needs of workers, pensioners and seniors in a way that is consistent with sound pension and tax policy principles.
Regrettably, the proposal currently being debated would not support the basic objectives of the pension and retirement saving system nor the tax system.
Bill C-445 recommends a government backed guarantee for pension benefits through the introduction of a refundable tax credit for pension income shortfalls, a proposal that would not be good pension or economic policy and would not be fair to the taxpayers of this country.
To begin, such a guarantee could provide a disincentive for employers to properly manage their pension plans to control financing risks. The fact that plan sponsors would not be required to contribute anything whatsoever to cover the cost of the refundable credit would exacerbate this affect.
Providing any kind of guarantee or compensation for pension benefits, whether through the tax system or otherwise, is potentially costly for taxpayers. In addition, it raises issues of fairness given the costs would be borne by all taxpayers while benefiting only a minority of those participating in pension plans.
As well, Bill C-445 would place on the federal government the responsibility for providing compensation in respect of all, and I underline all, pension plans that reduce pension benefits. Placing such an onus on the federal government for such compensation, which is estimated to be in the vicinity of $10 billion dollars, would not be justified.
Before concluding my remarks, I would like to briefly touch on some of the measures our Conservative government has taken to support seniors, specifically through the tax system. I am speaking of measures like passing legislation that will allow, for the very first time in Canadian history, pension income splitting for seniors and pensioners, a significant major change that will benefit seniors.
As Jamie Golombek, a well known taxation and estate planning specialist recently declared, “Pension splitting is probably one of the biggest tax changes in decades, in terms of the amount of tax savings this can mean for pensioners”.
We have done much more, though. We are fully exempting the first $3,500, up from the current maximum exemption of $500 of earned income from the guaranteed income supplement calculation, to extend further benefits to seniors. We are giving older workers the choice to stay in the labour market by permitting phased retirement. We are increasing the age limit to 71 for converting an RRSP to strengthen incentives for older Canadians to work and save.
We are doubling the amount of pension income eligible for the pension income credit. This measure alone will benefit nearly 2.7 million pensioners. We are enhancing the flexibility to withdraw funds from life income funds, also known as locked in pensions, to ensure that holders of such funds have the necessary flexibility to manage their retirement savings according to their own circumstances.
Measures like these I have mentioned are just part of the reasons that seniors and seniors' organizations right across Canada have applauded our Conservative government's initiatives like our recent federal budget, a budget which the former Canadian Association of Retired Persons commended, “for listening to many of its recommendations over the years and taking steps in the right direction”.
The Federal Superannuates National Association, a major organization representing 155,000 federal pension members, also welcomed budget 2008 because it addressed “a number of concerns of seniors. FSNA is particularly supportive of the 2008 budget measures aimed at low-income seniors”.
To recap, I urge members not to support Bill C-445. It would not be the best way to promote the security of pension benefits. Rather it would create undesirable economic incentives for pension plan sponsors and be an improper use of the tax system, not to mention costly and unfair in its application.
John McCallum Liberal Markham—Unionville, ON
Mr. Speaker, I am pleased to rise here today to debate Bill C-445, An Act to amend the Income Tax Act (tax credit for loss of retirement income).
First, the bill is certainly worthy of study. It would provide a refundable tax credit to retirees whose pension funds had shrunk to the point that they would be unable to pay out what was promised to the retirees. The credit would be worth 22% of the amount lost from the pension fund payouts. For example, if their pension plans were reduced from $35,000 a year to $28,000, they would get a tax credit worth 22% of the $7,000 reduction. In other words, just over $1,500 would be their tax exempt amount.
There are few things that could be more nerve racking for people than being of retirement age and finding out that their pension plan would be unable to pay what they had expected that it would. What can they do at this point? If they are 70 years old, do they go back to work? For many Canadians this is not a realistic option. Instead, what they do is they lower their standard of living. They do not buy their grand kids the birthday presents they really wanted to give them. They move to a smaller home. They do not take vacations. They eat less food. In short, they take all the dreams they have had for their retirement years and make them all a little smaller.
Many seniors experience just this nightmare scenario when, in October 2006, the Prime Minister broke his solemn election promise not to tax income trusts. Many seniors relied on their regular, often monthly distributions from income trusts to help supplement their retirement income and lifestyle. Knowing this, the Prime Minister looked right into their eyes during the last election and promised that a Conservative government would never endanger that retirement income by taxing income trusts. Once he had their votes, however, the Prime Minister's interest in protecting the savings and investments of seniors disappeared.
On Halloween of 2006, he hiked taxes on income trusts by an astounding 31.5%. The resulting market losses over the next two days left the investment portfolios of Canadians $25 billion smaller. Since then, some seniors have had to adjust. They have been unable to enjoy the lifestyle for which they had worked and saved a lifetime.
As one analyst put it in the Saskatoon StarPhoenix:
It's a huge impact for seniors....If you worked 40 years to create that nest egg and in a short time you lose one-quarter of that wealth, it's like going back to work for 10 more years.
That is the government's record on seniors and retirement savings. I hope any member of the House who told a single voter that they would never tax income trusts knows just how much pain and how many sleepless nights they have caused in many households across the country.
As I mentioned earlier, there is a principle contained in Bill C-445 that I think we should all appreciate, helping to ensure that seniors have the support and income they need to retire with dignity. That is why I feel this bill merits further study.
That being said, I also have some concerns as to whether the bill's scope will be limited to the intent that the member for Richmond—Arthabaska has in mind. I have heard some concerns raised, due to the wording of the bill, that the tax credit might be available to almost every retired person who enjoys a defined benefit pension plan. They would do so regardless of whether their own pension plan had recently reduced the benefits that were promised to them under the terms of the plan. There is also a large matter of fairness that must be considered as we consider the bill.
Many millions of Canadians do not have the benefit of being part of a defined contribution pension plan. It is these people with no pension of their own whose tax money will act as a guarantee for the pension incomes of people who do in fact belong to such plans.
A third concern, as the bill now stands, is if it could create a disincentive for people or a company to contribute to their defined benefit pension plan. Why pay the full amount if the government will back up a portion of the plan? I imagine that this certainly is not the intent of the member for Richmond—Arthabaska. He is of course trying to help those who have honestly contributed to their own plan. Nevertheless, I could see some less scrupulous individuals or companies take advantage of these new measures. This will need to be examined in committee
As I mentioned earlier in my speech, there are few things more nerve-racking than having a pension reduced, especially in the years when it is impossible to return to the workforce to supplement that lost income. For that reason, I believe the bill merits further study. We should send it to the finance committee where members can determine if this is the best way to go about helping retired individuals whose pension benefits are reduced.
As I have also indicated, however, the bill raises many questions in my mind. I am not convinced that its scope will be limited to what is intended by its sponsor. I hope these concerns can be alleviated during further study of the bill and if amendments are required to improve the bill, I hope the sponsoring member would be amenable to accepting them.
Chris Charlton NDP Hamilton Mountain, ON
Mr. Speaker, I am delighted to participate in tonight's debate on Bill C-445 as the NDP critic for seniors and pensions.
Let me begin by thanking the member for Richmond—Arthabaska for bringing this bill forward. For those who may have just tuned into the debate, let me just take a moment to remind television viewers of what we are debating.
Bill C-445 would grant a refundable tax credit equal to 22% of the reduction in pension benefits experienced by beneficiaries of registered pension plans, other than trusts, who suffer a loss of pension benefits, normally when their pension plans are wound up in whole or in part. It applies both to defined benefit plans and defined contribution plans.
Without the legalese, what that essentially means is that if a retiree's pension income drops from $30,000 to $20,000, let us say, he or she would receive 22% of the $8,000 lost, which would be a non-taxable amount of $1,760.
This bill is very timely. It allows us to discuss pension protection and retirement security on the cusp of a demographic trend that will see almost one-quarter of Canada's population over the age of 65 by 2041.
For some, as the comments made by the Conservative MPs in this debate have made clear, our aging society presents a policy challenge that focuses solely on the need for cost containment, but for more progressive voices it represents an opportunity to re-examine the growing gap between the rich and the rest of us and to make decisions that protect the public interest instead of the interests of the wealthy few.
At a time when more wealth is being created in this country than at any other time in our history, people in Canada are working longer and harder not to get ahead but simply to keep up. In fact, average Canadians today are squeezing 200 more hours of work out of each year than they did just nine years ago.
While a few people at the top are enjoying the benefits of the current economy, everyone else is not. Sure, we have seen the windfall salaries and extraordinary bonuses of CEOs, but wages for everyone else are essentially stagnant or falling. The middle class and its retirees are falling farther and farther behind.
One of the reasons, of course, is tied to what is happening in the economy. In the manufacturing sector alone, our economy has lost over 350,000 jobs since 2002. The forestry sector is similarly being devastated, yet despite repeated calls by NDP members in this House, the government is refusing even to acknowledge the need for creating a national jobs strategy.
It is absolutely essential that the government sit down with leaders from both the labour movement and business to develop a plan to maintain and build both the manufacturing and resource sectors of our economy. Not only are these jobs crucial for sustaining families, but we know empirically that the highest levels of pension coverage are associated with union membership in those jobs.
About 80% of union members belong to workplace pension plans compared to just under 30% of non-union members. With the overall percentage of people who belong to workplace pensions on a continual decline, it is imperative that we continue to fight for unionized jobs and maintain the struggle at the bargaining table for defined benefit plans. It is the only way to ensure predictable retirement incomes for workers.
What is happening now is not sustainable. I am from Hamilton, so I have witnessed at first hand the economic insecurity faced by industrial workers. Every time a plant closes its doors, the pensions and benefits of its workers are threatened. Anyone in this House who has followed the CCAA proceedings at Stelco will know what I am talking about. Sadly, that is but one of many local examples where restructuring or plant closure has created pension uncertainty for workers.
It is time for the government to acknowledge that pensions are deferred wages. They are not bonuses paid to workers at the end of their working lives. They are part of an agreed upon compensation package for hours worked. That is why I was proud to introduce Bill C-270, the workers first bill, in the House of Commons as my very first legislative initiative upon being elected.
As members here will know, Bill C-270 will ensure that workers' wages, pensions and benefits receive super-priority in cases of commercial bankruptcy. If we really want to ensure that workers can retire with dignity and respect, then we must ensure they have an adequate retirement income. Bill C-270 and a federal, employer-funded system of pension insurance are essential to achieving that goal.
At the root of that bill, of course, is the vision that workers must receive the pensions they have earned. That is what is at stake in Bill C-445 as well. For that reason alone, it deserves the support of all members in this House at second reading.
Yes, there are some areas that merit further examination, but the BQ members who have participated in the debate thus far have acknowledged that and have expressed their willingness to explore those issues further at the committee stage. For example, public data detailing the number of pension plan beneficiaries who would be eligible to claim the tax credit proposed in Bill C-445 are not available.
We do know that in 2003 there were approximately three million members of private sector registered pension plans, of which 73% were members of defined benefit plans. However, at present, no one collects data that would assist us in determining the number of pension plan beneficiaries who may be eligible for this type of tax credit.
Therefore, for the government members to suggest that the cost of Bill C-445 is $10 billion is pure conjecture. I would welcome the opportunity in committee to have them share their detailed financial analysis. I suspect that at the moment they would have no such document they could table.
Conversely, the BQ members concede that the bill may impact more than Jeffrey Mine and Atlas Steel in Quebec and the St. Anne Nackawic Pulp Co. in New Brunswick. So be it. Let us send this bill to committee and do the research, but let us not throw out the baby with the bathwater.
This bill simply wants to provide some fairness: fairness for pensioners who find that their retirement benefits are reduced through no fault of their own. That is a laudable goal and ought to be supported by all members of the House.
Yes, this bill represents but one option for providing fairness for retirees. Maybe there are others that would achieve the same goal differently. If there are, let us talk about them at committee.
I believe the members of the BQ are sincere in their objective, which would suggest that they may be flexible on the means for achieving their goal. I, for one, welcome the opportunity to explore any option, including Bill C-445, that would give workers the ability to retire with the dignity and respect they deserve.
What is paramount is that we as policy makers recognize the five keys to solid pensions. First, workers must get the pension that they earned. Second, it should be a given that all workers deserve decent pension coverage. Third, there must be respect for both today's and tomorrow's retirees. Fourth, pension money must work for, not against, workers. Finally, as I said at the outset, we must develop a national good jobs strategy so that a dignified retirement is possible.
If we can all agree on these five principles, then I think the work that we do in committee on Bill C-445 would indeed move the yardsticks in the right direction. Despite the fact that the comments made by the Conservative members thus far in this debate and the equivocation that has been articulated by the Liberal members may call into question their commitment to the rights of workers and retirees in this country, I would like to remind them of a vote that they all cast in this very chamber not that long ago.
I had the privilege of introducing the seniors charter in the House of Commons on behalf of the NDP caucus. That charter, as members will recall, created a road map for ensuring that seniors can retire with the dignity and respect they deserve. One of the enumerated rights in that charter was the right of income security for seniors.
It was passed in the House by a vote of 231 to 52. Obviously we in the NDP voted for it unanimously, but so did all of the Conservative and Liberal MPs. Ironically, it was only the BQ that was opposed.
I call on my Conservative and Liberal colleagues to now walk the talk. If their support of the charter really meant a commitment to its principles, then their vote on Bill C-445 will be the proof in the pudding.
The charter clearly stated that seniors have the right to “income security, through protected pensions and indexed public income support that provides a reasonable state of economic welfare”. Those members voted for the charter, so they must now vote for Bill C-445 and send it to committee. The principles in each are the same.
I cannot wait for the vote because workers and retirees will then finally see who takes the principled position.
Yves Lessard Bloc Chambly—Borduas, QC
Mr. Speaker, let us get things straight. First, I would like to remind hon. members that the bill my NDP colleague was referring to interferes in the jurisdictions of the provinces and Quebec. That is why we opposed the bill she was referring to.
Nonetheless, we are pleased that the NDP and the Liberals are voting in favour of studying the bill at second reading stage. The problem is when we get to third reading. I will come back to that later.
First I think we should congratulate and thank the hon. member for Richmond—Arthabaska, for taking this initiative, as well as the hon. member for Bas-Richelieu—Nicolet—Bécancour. They both have done remarkable work. They worked with me on the research that led to this bill.
This was all initiated by the workers themselves, the representatives of former workers who have been and still are affected by this situation and with whom we sympathize, of course. I am talking about those from Atlas Steel in Sorel and the Jeffrey Mine in Asbestos. These people have had the misfortune of seeing their pensions cut significantly. The cuts range from 28%, at Atlas Steel, up to 58%. Imagine, Mr. Speaker, being told on the day you retire that your pension is being cut by 58%. That is what has happened to those workers.
The bill before us amends the Income Tax Act (tax credit for loss of retirement income). We have got this far thanks to the leaders of the groups affected. I am referring to Pierre St-Michel from Atlas Steel, Gaston Fréchette from Jeffrey Mine, and their colleagues from their pension fund executive committee. These people have not only thought about their own situation but also about measures that could be introduced that do not compromise the other workers, that do not compromise the state as such and do not compromise the treasury. We will see this later.
The purpose of this bill is to compensate retirees who suffer pension losses because of their former employer's bankruptcy. The compensation would take the form of a tax credit equivalent to 22% of the loss. Why 22%? Because that is the federal marginal tax rate that applies to middle class people with income between $36,000 and $72,000 per year. That is the taxable base.
This compensation for retirees will also be available to surviving spouses. I am pointing this out for the benefit of those just joining us so that we all know what is at issue in this debate.
Contrary to the utterly false claims of the Conservatives, this bill does not apply to very many people. We found two very specific cases involving those who initiated this measure and possibly one case in New Brunswick mentioned by my NDP colleague earlier.
The people I am referring to—I mentioned them earlier—live in Asbestos and Sorel. What happened to them? There are two types of pension plans: defined benefit pension plans, where the retirement fund goes into deficit when the employer ceases operations, and defined contribution plans, where a business in trouble may give itself a contribution holiday, resulting in the same outcome.
Today, this would no longer be possible, at least in Quebec, because pension funds are now governed by a law requiring that contributions and cash flow always be sufficient to meet the obligations of the fund.
Let us look at an example of how the bill would apply. If a retiree were entitled to a pension of $20,000—which is not very much, but a typical pension for most retirees—but received only $12,000, he would lose $8,000 because the pension fund could not longer pay benefits. If he took advantage of the 22% tax credit on the $8,000 loss, he would receive $1,700 a year. That is not much. A surviving spouse would receive a tax credit of $880 for the year.
This tax credit is refundable so that it applies to all those who suffer because the fund did not have enough money to pay benefits, including people who do not pay tax because their income is too low.
This is a very generous formula that benefits everyone who contributed to the plan. Most of the people who contributed would have benefited from a 22% non-refundable tax credit, but it would have done nothing for people who do not pay tax. This is therefore a generous approach that reflects well on the people who proposed it.
Earlier, I said that this was an inexpensive measure. In fact, it would cost $3 million to $5 million a year, including $1.7 million for Quebec. In the worst-case scenario, if there were measures that applied in certain places, it would cost $5 million. That is the actual cost.
The Conservatives put forward two arguments that I wish to refute right away. First, they argued that Canada may not have a role to play in pension funds. In fact, Canada formulated a request in 1951, which it reiterated in 1964, and that request resulted in a constitutional change giving the Canadian government the right to legislate all forms of seniors' pensions, as long as it did not encroach on provincial laws that took precedence. That obligation was created.
The Canadian government is also responsible for determining the interest rate that applies with respect to financial policy under Ottawa's jurisdiction. As such, a low interest rate puts pressure on funds.
Their second argument had to do with the cost of this measure. The $10 billion figure is utter nonsense. This morning, a Liberal member apologized for mistakenly misleading the House. Now, the Conservatives are deliberately misleading the House. That is very serious. It is wrong to suggest that this measure would cost $10 billion. These people are not credible. If they did their jobs, like they are supposed to, they would see that it will cost between $3 million and $6 million.
We invite our Conservative colleagues from Quebec to vote with us, though they have systematically voted against the program for older worker adjustment, against the guaranteed income supplement, against help for the forestry and manufacturing sectors, and against the application of the Charter of the French Language for federal workers.
In all of those cases, they voted against workers. Now that they have an opportunity to help the—
Income Tax ActPrivate Members' Business
The Acting Speaker Royal Galipeau
It is with great regret that I must interrupt the hon. member, but I did signal him, twice, in fact.
The hon. member for Niagara West—Glanbrook.
Dean Allison Conservative Niagara West—Glanbrook, ON
Mr. Speaker, thank you for the opportunity to speak in opposition to this bill sponsored by the member for Richmond—Arthabaska. While the bill touches on a matter of importance to all Canadians' retirement income, it does so in a manner that is inconsistent with sound pension and tax policy. We have been hearing many concerns from seniors lately, especially those on fixed income, about talk among the official opposition to make them pay new taxes, taxes that could make it more expensive for them to buy food, heat their homes, visit their grandkids, and so much more.
Bill C-445 attempts to address another concern of seniors, shortfalls in pension income. However, as I mentioned earlier, this bill does so in such a way that it raises serious issues with respect to pension and tax policy while disregarding the fact that our retirement income system remains sound and effective.
Canada's retirement income system is based on three pillars. The old age security, OAS, and the guaranteed income supplement, GIS, programs provide a basic minimum income guarantee for seniors. The Canada and Quebec pension plans, CPP and QPP, ensure a basic level of earnings replacement in retirement for all working Canadians.
The system of tax deferred savings in registered pension plans and RRSPs encourages and assists Canadians to save for retirement to supplement their public pensions. It has been recognized that Canada's retirement income system has helped reduce the incidence of low income among seniors and it ensures that Canadians achieve an adequate retirement income to maintain their living standards.
While most acknowledge our retirement income system is effective, sustainable and sound, our Conservative government has worked to improve it even further. Budget 2006 doubled the amount of eligible income that can be claimed under the pension income tax credit to $2,000. This is the first time the credit amount has been increased since it was introduced in 1975.
Budget 2006 also provided funding relief for federally regulated defined benefit pension plans by introducing several changes that will help re-establish funding for federally regulated defined benefit pension plans in an orderly fashion, while providing safeguards for promised pension benefits. To improve work and savings incentives, budget 2007 increased the maximum age from 69 to 71, by which Canadians must convert their RRSPs to registered retirement income funds, RRIFs, and begin receiving pension payments.
As well, budget 2007 announced tax changes to permit employers to offer more flexible phased retirement programs in order to retain older experienced workers and ease succession planning pressures. Budget 2007 also confirmed the tax fairness plan announced in the fall of 2006 which increased the age credit amount by $1,000 and permitted pension income splitting.
We continued to make improvements for seniors in budget 2008. In particular, this year's budget proposes to invest $60 million per year to ensure that low income seniors who work can realize greater benefits from their employment earnings through an increase in the guaranteed income supplement, GIS, exemption to $3,500 of employment earnings. This means that those who earn up to $3,500 per year from employment, the average amount earned by GIS recipients, will have their earnings fully exempted without any reduction in GIS benefits. This encourages labour market participation and provides support for low income seniors.
This is something we heard as we were looking at the employability study. As we went across the country, we heard from seniors that they would like the opportunity to still participate in the labour market, but they do not want that income to be clawed back. Once again, this shows that this Conservative government has been listening to what seniors are looking for. This will enable them to work longer and not have all their income clawed back.
In addition, budget 2008 proposed a number of provisions to significantly enhance the flexibility for holders of federally regulated life income funds, LIFs, to withdraw funds from those plans. These provisions will ensure that LIF holders will have the flexibility they need to manage their retirement savings according to their circumstances, better reflecting the wide range of choices available to seniors today.
Budget 2008 also announced the introduction of the tax-free savings account, the TFSA, a benefit to all Canadians, especially our seniors. The TFSA will provide an additional general purpose savings vehicle to complement existing registered savings plans. It will be a flexible savings account to allow Canadians to earn tax-free investment income to more easily meet their lifetime savings needs.
For seniors, one of the key features of the TFSA is that neither investment income earned in a TFSA nor withdrawals will affect the person's eligibility for federal income tested benefits and credits, such as OAS and GIS benefits. The TFSA will also provide seniors with a savings vehicle to meet any ongoing savings needs. Little wonder when commenting on budget 2008 the Canadian Association of Retired Persons thanked our government for “listening to many of its recommendations over the years and taking steps in the right direction”.
Canadians can see that the government has worked to ensure that the retirement income system is responsive to the needs of savers, pensioners and seniors.
This brings me to the matter at hand, Bill C-445. This bill would be extremely costly. In fact, according to the Department of Finance, it would cost about $10 billion, as the bill would effectively provide a refundable credit on the full amount of registered pension plan benefits received by most retirees. Clearly, it would not be feasible to support such a costly measure.
Moreover, not only would the measure represent an unjustifiable transfer of resources from all taxpayers to those receiving pension benefits, it would undo the hard-earned results of responsible fiscal management and put at risk the sustainability of the tax relief and investments that this government has introduced. For this reason alone, the bill should not be supported.
More than that, to adopt the measures proposed in this bill would not be good pension or economic policy and certainly would not be fair to the taxpayers of this country.
This bill would place on the Government of Canada's shoulders the responsibility for providing compensation in respect of all pension plans that reduced pension benefits. However, the Government of Canada is responsible for pension benefit standards for plans sponsored by federally regulated employers only. Since provinces are responsible for the protection of pension benefits for plans sponsored by provincially regulated employers, the onus placed on the Government of Canada for such compensation would be unjustified.
The best way of ensuring that promised pension benefits are secure is to have healthy plans with good supervision. At the federal level, pension plans are regulated under the Pension Benefits Standards Act, 1985 and are supervised by the Office of the Superintendent of Financial Institutions. The superintendent's mandate is to protect the rights and interests of plan beneficiaries. The PBSA sets forth a number of requirements in respect of the funding and administration of pension plans.
Providing any kind of guarantee or compensation for pension benefits, whether through the tax system or otherwise, is potentially costly for taxpayers. In addition, as I mentioned earlier, it raises issues of fairness, given that the costs would be borne by all taxpayers, while the benefits would accrue only to a minority of those participating in pension plans.
In short, a refundable tax credit in respect of shortfalls of pension income would not be the best way to promote the security of pension benefits. It would create undesirable economic incentives for pension plan sponsors and would be an improper use of our tax system. It would also be potentially costly and unfair in its application. Therefore, I urge members not to support this bill.
Paul Szabo Liberal Mississauga South, ON
Mr. Speaker, having listened to the debate, I want to add a few comments.
It is an interesting bill that would provide a tax credit to a taxpayer in respect of whom an employer or employee has failed to make the contributions required to be made under a registered pension plan. The issue is that there have been cases, and I know members of the Bloc have raised some, where this occurs. The intent of the bill, as I see it, is to mitigate the loss of benefit to a retiree.
In terms of the benefit issue, this is one approach. However, when we have private members' items, the issue is to look at the intent and principle of the bill and then determine whether the mechanics can be changed. I find this bill to be an appropriate instrument to consider whether the existing laws of Canada provide reasonable protection for employees whose retirement income situation has been dealt a blow through no fault of their own and maybe through the negligence of others.
It is not clear to me at this time whether the issue has to do with negligence on behalf of any other party, whether funding and payments need to be made, whether there is an unfunded liability, what happens if there is a surplus or what happens in subsequent years when the investments may change.
I have heard members suggest that this is a very expensive proposition. We know from experience that we can craft any kind of an argument that would take the worst possible scenario and say that this is the amount of dollars that would occur in this particular case and therefore the cost is several billions of dollars, which is not affordable and so we should not do it. That kind of argument does not help the situation because we need to know where the problem is and what we can do under a legislative framework to ensure the benefits would not be totally lost to a prospective employee.
I want to give an example of how we can play with the numbers. One member talked about some things the government has done for seniors and said that we could forget this one because we now have pension income splitting. Now that we have come through the first tax year, under which pension income splitting is applicable, one of the things that has happened is that Canadians who thought they were eligible for this found out that they do not get a benefit.
As a matter of fact, only about 14% of retired seniors have registered pension plan benefits. If we take away all of those who do not have a spouse with whom they could split, that reduces the number of eligible pensioners. If we take out all those who receive a pension but at the lowest tax rate, splitting it, obviously, would not have any benefit.
The economic analysis shows that, after all is said and done, only between 2% and 4% of seniors will actually benefit from this, particularly the highest income seniors. The intent of trying to help low and modest income Canadian seniors by allowing them to split their income is, in fact, not the case. Only a very narrow band of people benefit, which are those who have a significant level of income.
As we can see, there is much to be discussed in this bill. I do not think it should be summarily dismissed as a costly exercise that would have no potential merit or benefit to Canadians in this particular situation.
This bill warrants being passed at second reading and going to committee where we can hear from expert witnesses, hear about the real examples and hear about the real numbers, whether it is $1.3 billion as opposed to $10 million. We have heard such a range here that someone may have put some facts on the table or proposed that certain facts were the case when they are not.
Taking a bill to committee says that in principle this is a matter we should look at. Amendments can be made at the committee stage and further amendments can be made at report stage. If we still do not get it right, at the third reading stage a motion can be moved to revert back to the committee to fix it yet again.
I think we have a lot of opportunities. I do not think this is a situation where we should summarily dismiss a bill because the numbers just do not seem to satisfy some members, for whatever reason. It could very well be that this is just a darn good idea and maybe the government members simply do not like to have anybody else have any ideas that are worth looking into.
I think we will find that the majority of members in this place will be supporting this bill to go to committee so we can find out the facts, develop the arguments, have an opportunity to hear from the expert witnesses, have our questions answered and, if appropriate, amendments can be considered. That is an appropriate way to deal with this bill and I will be supporting it.
Income Tax ActPrivate Members' Business
The Acting Speaker Andrew Scheer
Since no other members wish to speak, I recognize the hon. member for Richmond—Arthabaska, who has a five minute right of reply.
André Bellavance Bloc Richmond—Arthabaska, QC
Mr. Speaker, five minutes is a very short time, so I will get right to the point. I would, however, like to thank a few people. First, I thank all the members who participated in the debate. In a democracy it is important to make progress on such issues. I would especially like to thank the hon. members for Bas-Richelieu—Nicolet—Bécancour and Chambly—Borduas. Not only did they take part in the debate, but they also helped draft Bill C-445.
I would also like to thank the Liberal and NDP members who showed common sense, as clearly mentioned by the member who just spoke. They want to see some progress on this issue and refer the bill to committee.
I informed the people of my riding any time amendments were made to the bill. I do not understand the Conservatives' arguments to the effect that it could cost $10 billion. However, if someone provides some evidence of that and if we need to amend or change the bill somewhat in order for it to maintain its substance without costing a fortune, clearly, we would be open to that. I made a commitment to the people of my riding and my colleague from Bas-Richelieu—Nicolet—Bécancour will do the same in his riding. We promised to talk to them and discuss things with them to see if people agree with any proposed amendments. For our part, we are remaining open, as are the Liberals and the NDP, but the Conservative government remains completely uncompromising. It is appalling.
I will continue with my thanks, to keep things on a positive note. Indeed, I am delighted by my colleagues' decision to pass this bill to the next step. That is what matters. We will not give up and we will continue to try to make the Conservatives come to their senses.
I would like to thank those who often go unmentioned and who work in the shadows, our researchers. All of the parties have research services, and in our case Marc-André Roche did an extraordinary job helping us create this bill and making it what it is today—an excellent bill that will help retirees who were shortchanged. Obviously, the House of Commons' law clerks and the people at the Library of Parliament helped as well. We do not often thank them. We do not often talk about them, but we should. As for Marc-André, he is sometimes a night owl. He works at night, and I am convinced that there were times when he was working at three or four in the morning for the workers of Asbestos and Sorel. That deserves a round of applause.
We mentioned their work earlier. The member for Chambly—Borduas spoke about it, but I must do the same. I am talking about the members of the Jeffrey Mine retirees subcommittee in Asbestos and Gaston Fréchette, their president. This man has done an extraordinary job calling all of the members of parliament, signing letters and ensuring that they had the most support possible. Just recently, I was in Asbestos to talk to the Jeffrey mine retirees about everything that has happened to date and where we are in terms of the bill. Once again, there were 120 people in the room to hear what I had to say. Mr. Fréchette had done his job of inviting them; he keeps them incredibly well informed. The Atlas Stainless Steels retirees in Sorel also worked to help develop this bill.
I want to remind members what Bill C-445 is all about. It has to do with a tax credit for loss of retirement income. It would provide a refundable tax credit to a taxpayer in respect of whom an employer and the employees failed to make the contributions required to be made to a registered pension plan. That is what happened with the retirees in Sorel and Asbestos. For example, a retiree whose income drops from $30,000 to $22,000 would receive 22% of the $8,000 lost, which would be a non-taxable amount of $1,760 per year. That is not a fortune.
I often use this example because it can be an average of what people lost. It is worth repeating so that we understand that it does not solve everything, but it would at least partially rectify an injustice.
I see that I have only one minute left. This is the first time I have ever made such a short speech in the House.
I can say and repeat to my constituents, to the people of Sorel, that we will not give up on them. I am calling on the Conservative members from Quebec in particular. Mr. Fréchette personally called the Conservative members from Quebec to ask them to support this bill. When you speak out against the Bloc Québécois, you often say that you have an influence in the government and that you can make things happen. Prove it. Make things happen for the retirees of Asbestos and Sorel. We must ensure that the government, that the Conservatives, listen to these people for once. Then, we will be able to say that you have an influence and that you have done something for the retirees.
Until then, unfortunately, the opposite will be true. You still have time. The vote has not happened yet. We are counting on you to have an influence and live up to your claims.
Income Tax ActPrivate Members' Business
The Acting Speaker Andrew Scheer
I would just remind the hon. member to address his comments through the Chair and not directly at his colleagues.
Is the House ready for the question?
Income Tax ActPrivate Members' Business
The Acting Speaker Andrew Scheer
The question is on the motion. Is it the pleasure of the House to adopt the motion?