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—