House of Commons Hansard #95 of the 42nd Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was seniors.
Bill Morneau LiberalMinister of Finance
Madam Speaker, pursuant to Standing Order 83(1), I wish to table a notice of ways and means motion to implement certain provisions of the budget tabled in Parliament on March 22, 2016, and other measures.
Pursuant to Standing Order 83(2), I ask that an order of the day be designated for consideration of the motion.
Bill Morneau LiberalMinister of Finance
moved that Bill C-26, An Act to amend the Canada Pension Plan, the Canada Pension Plan Investment Board Act and the Income Tax Act, be read the second time and referred to a committee.
Madam Speaker, as hon. members know, a stronger Canada pension plan was a key part of the promise we made to Canadians when we promised to help the middle class and those working hard to join it.
On June 20 in Vancouver, we delivered. Canada's governments agreed to enhance the Canada pension plan to give Canadians a more generous public pension that will help them retire in dignity. I would like to think that we showed everyone just how well our country can work when our governments work together, even in the face of tough challenges. We worked through our differences, never wavering on our commitment to the people we serve. In doing so, we proved that collaboration around the federal-provincial-territorial tables can deliver results.
I would like to thank each and every one of my provincial and territorial counterparts for the hard work, diligence, foresight, and principled co-operation they displayed in reaching this historic agreement on behalf of Canadians.
Now that all nine CPP-participating provinces have fully confirmed their support for implementing the Vancouver agreement, we have the obligation to carefully consider the legislation before us today, which will help make this agreement a reality. We must do so with the full understanding of what is at stake: no less than the opportunity to provide future generations of Canadians with a more generous public pension in their retirement years.
A secure and dignified retirement is certainly a top priority for hard-working Canadians. We know that middle-class Canadians are working harder than ever, and many of them are worried about not having saved enough by the time they retire.
The more time we spend knocking on doors, holding forums, and talking to people in the course of our work, the clearer that becomes. We also know that young Canadians in particular, few of whom can expect to have jobs that offer a workplace pension plan, find it challenging to save enough money for retirement.
Toronto high school students aired these concerns during an open forum with me earlier this month. Their concerns are legitimate. In-depth studies by the Department of Finance and provincial governments show that one-quarter of families approaching retirement, 1.1 million families, expect their standard of living to drop significantly in retirement.
Middle-class families without workplace pension plans are at higher risk of not saving enough for retirement. One-third of those families are at risk.
Canada's finance ministers agreed with this conclusion in working towards our agreed upon enhancement to the CPP. We have developed a carefully targeted approach, which is reflected in the legislation we have before us today. Taken together, it is a comprehensive package that will increase CPP benefits while striking an appropriate balance between short-term economic considerations and longer-term gains.
What does a stronger CPP mean for Canadians?
First and foremost, it means there will be more money from the CPP waiting for Canadians when they retire. This means that they will be able to focus on the things that matter, like spending time with their family rather than worrying about making ends meet.
Once fully in place, the CPP enhancement will increase the maximum CPP retirement benefit by about 50%. The current maximum benefit is $13,110. In today's dollar terms, the enhanced CPP represents an increase of nearly $7,000, to a maximum benefit of nearly $20,000.
The enhancement we agreed upon does two things to make this happen for contributors. First, it will increase the share of annual earnings received during retirement, from one-quarter to one-third. This means that an individual making $50,000 a year in today's dollars over their working life will receive about $16,000 per year in retirement, instead of roughly $12,000 today. Second, it will increase by 14% the maximum income range covered by the CPP so that those who earn more will receive more in retirement.
The positive impact of these changes will be significant. They will meaningfully reduce the share of families at risk of not saving enough for retirement, as well as the degree of under-saving. The Department of Finance has estimated that strengthening the CPP will reduce the share of families at risk of not having adequate retirement savings by about one-quarter, from 24% to 18%, when considering income from the three pillars of the retirement income system and savings from other financial and non-financial assets.
A stronger CPP is also the right tool at the right time to improve the retirement income security of younger workers. It is an opportunity for today's hard-working Canadians to give their children, their grandchildren, and future generations a more secure retirement.
The Department of Finance has concluded that retiring in comfort will be even more a challenge for these future generations. That is, in part, because they are expected to live longer than previous generations. Also, if current trends continue, younger Canadians will be less likely than previous generations to work in jobs with retirement benefits that are paid for by their employers, and if the current low interest rate environment persists, their savings may also grow more slowly than previous generations.
In the face of these challenges, our government decided to do what Canadians do best when faced with a problem: we worked together. We worked with the provinces and territories and agreed to strengthen the Canada pension plan so that there will be more money waiting for future generations of Canadians when they retire.
However, that is not all. The legislation we are debating today also includes enrichments to CPP disability and survivor benefits. For most Canadians, all of these increased CPP benefits will come from only a 1% increase in contribution rates.
We are making sure to give individuals and their employers plenty of time to adjust to the modest increase, making sure that it is small, gradual, and starting in 2019. For example, an individual with earnings of $54,900 will contribute about $6 more a month in 2019. By the end of the seven-year phase-in period, contributions for that individual would be about $43 more per month. Furthermore, because new employees' CPP contributions will be tax deductible, as opposed to being eligible for a tax credit, Canadians will not experience an increase in tax with registered retirement savings plan or employee pension plan contributions, which are deductible and are reduced in response to this increase in CPP contributions.
Today's legislation, as agreed upon with the provinces, will also ensure that low-income Canadians are not financially burdened as a result of the extra contributions. It will do so by enhancing the working income tax benefit to roughly offset incremental CPP contributions, leaving eligible low-income Canadians with little to no change in disposal income while still securing higher retirement income for them. Taken together, these tax measures will account for $970 million in federal fiscal support in 2021-22.
Under the circumstances, it is clear that an enhanced Canada pension plan will help all Canadians, which will in turn help Canada's economy as a whole. With higher retirement benefits flowing from an enhanced CPP, retirees will have more money to spend on things such as healthy food, transportation, and housing costs. The knock-on effect of that? New jobs and a stronger middle class.
As I noted earlier, the Department of Finance undertook extensive research on the impact of a strengthened CPP. This analysis included a rigorous study of the potential economic impacts of the various enhancement scenarios being discussed with the provinces.
Our research found that over the long term, greater CPP benefits will boost demand and increase savings overall. This will boost economic output and make more money available for investment. As a result, it is estimated that gross domestic product will increase by between 0.05% to 0.09% over the long term. Employment levels are also projected to be permanently higher, by about 0.03% to 0.06%, equivalent to about 6,000 to 11,000 jobs based on 2015 levels of employment.
We can see from all of these facts that a stronger CPP would be good for Canadians and good for the overall economy. This should come as no surprise, since the CPP is a good and solid program. For over 50 years, the CPP has been helping to ensure that all workers in Canada have a minimum level of financial security in retirement. The most recent statistics tell us that 5.2 million people in Canada received $37.3 billion in benefits from the CPP.
According to a report by the Conference Board of Canada, poverty rates among Canadian seniors have fallen by 25% over the past four decades, dropping from 36.9% in 1976 to 12.3% in 2010. The Conference Board of Canada concluded that this significant reduction can be largely attributed to the implementation of the CPP and, in Quebec, the QPP.
The CPP Investment Board is similarly well-regarded around the world for its impressive record of investment performance and management excellence. The CPPIB operates at arm's-length from governments, with a mandate to invest CPP funds in the best interests of plan members. It has been acclaimed by international bodies such as the World Bank as the model of an independent, transparent, and accountable public pension fund management organization.
As the manager of a large fund program with millions of contributors, the CPP Investment Board is able to take advantage of economies of scale to deliver strong net returns. Over the past 10 years, the CPPIB has delivered a 10-year average nominal rate of return of 6.8% on existing CPP assets. This is above the 6.1% nominal rate of return identified by the chief actuary of Canada as necessary to ensure the sustainability of the Canada Pension Plan.
With this rock solid investment structure as its foundation, the CPP provides a safe, secure, and predictable benefit, which means that Canadians can worry less about outliving their savings or having their savings impacted by significant market downturns. The recently released 27th actuarial report on the Canada pension plan concludes that the existing CPP is on a sustainable financial footing, at its current contribution rate of 9.9%, for at least the next 75 years.
Bill C-26 would make amendments to the Canada Pension Plan Investment Board Act to make the CPPIB the manager of the improved CPP. Now that Bill C-26 is before us for consideration in Parliament, the chief actuary will conduct an actuarial assessment of the enhancement to ensure that it is on a sustainable, long-term financial footing.
CPP benefits are also fully indexed to prices, which reduces the risk that inflation will gradually erode the purchasing power of retirement savings. As well, the CPP is a good fit for Canada's changing job market. It helps to fill the gap left by declining workplace pension coverage and it is portable across jobs and provinces, which promotes labour mobility and reflects how Canadians currently live, work, and retire. With the automatic collection of contributions for all workers, the CPP is a simple way to save for retirement. It also provides important income support through disability, death, survivor, children's, and post-retirement benefits for eligible contributors and their families.
By supporting today's legislation, parliamentarians will not only be boosting how much each Canadian will get from his or her CPP pension in the future, we will be making a great program even greater. With 75% of Canadians in support of a stronger CPP, members will be acting on one of the highest priorities of Canadians.
I am honoured to have been able to work with our provincial and territorial partners to make an enhanced Canada pension plan a reality for Canadians. I encourage my colleagues to share in this success by supporting Bill C-26.
Karen Vecchio Conservative Elgin—Middlesex—London, ON
Madam Speaker, I would like to thank the Minister of Finance for his informative speech, but I have a few questions for him. It is directed by conversations we have had with the CFIB and the president of the CFIB, Dan Kelly. I want to read a couple of his quotes. I know that prior to politics, the minister had dealings with investments, so I just want to ask him these things. I am going to read two quotes today. If the minister could respond, that would be fantastic.
The first quote is this:
It is tremendously disappointing to see that finance ministers are putting Canadian wages, hours and jobs in jeopardy and willfully moving to make an already shaky economy even worse. Despite all the talk, it appears that jobs and the economy are not particularly high priorities for the governments that have signed off on this deal.
That was from the president of the CFIB, Dan Kelly.
Second, he noted:
Two thirds of small firms say they will have to freeze or cut salaries and over a third say they will have to reduce hours or jobs in their business in response to a CPP/QPP hike.
I wonder if the Minister of Finance could speak about these things, because I know that the CFIB was not at the table when the government was consulting small businesses, and small businesses are part of the middle class. In my community of Elgin—Middlesex—London, those small businesses are owned by the middle class.
Bill Morneau Liberal Toronto Centre, ON
Madam Speaker, I would like to provide some background on both the process that led us to the conclusion that we should work together to enhance the Canada pension plan and the impact we expect it will have on Canadians and our economy.
First is the process. We were very clear with Canadians in our election platform that we wanted to work to enhance the Canada pension plan, because we recognized that so many Canadians were finding themselves with less of an opportunity for a pension down the road because of declining pension plan participation. That led us to present that to Canadians. We then presented that to our provincial counterparts and talked about that decision and got consensus that we all were seeing the same thing: a real challenge in future opportunities for Canadians to retire in dignity.
What we came up with was an approach that was very gradual but that would lead to significant impacts over the long term. The gradual nature of that approach, starting in 2019 and going out to 2025, means that for both individuals and businesses, there is an opportunity to move very gradually and have a modest impact.
More importantly, we then did research to show that, in fact, the long-term economic impact will be positive for the economy and positive for employment. That was the research that led us to say that this is the right thing to do.
Scott Duvall NDP Hamilton Mountain, ON
Madam Speaker, I thank the minister for the work he has done on this CPP bill. One of the things we heard from residents across Canada during the election was that they wanted enhancements to the CPP, and they needed something drastic to happen now. However, this does not actually do anything for anyone by maximizing it for the next 40 years. What are we doing about the current pensioners who are collecting CPP now or the people on the cusp of retiring in the next 10 years?
Bill Morneau Liberal Toronto Centre, ON
Madam Speaker, I recognize that, as he did. We spoke to many Canadians who were concerned about their retirement outcomes. That led us to do a number of things that we think are going to have a positive impact.
First and foremost, we recognize that many seniors who are single are living in difficult situations. We took that into account when we decided to increase the guaranteed income supplement by 10%, impacting those single seniors by up to $947 and having a very positive impact on outcomes for a challenged group.
Then we looked at how we could deal with the Canada pension plan in a way that recognized some key principles. We wanted to recognize that the impact of a change to pension plans is a long-term, secular one, with declining participation, so we should be thinking about this issue in a long-term way to ensure that we help people who are going to be in a more difficult situation in the future. That long-term approach will also enable us to fully fund this advantage, which we feel is fiscally responsible.
We recognize that it will help people who are in the workforce today to save enough for the future and to do it in a responsible way that helps us have a better economic outcome for the economy and a better outcome for them over the long term.
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
Madam Speaker, the death benefit is currently a maximum of around $2,500, which is hardly enough to pay for a funeral and wrap up the affairs of our most precious. I was wondering if the Minister of Finance could inform us about the negotiations that have been occurring on increasing the amount of the Canada death benefit, which was advocated by the Premier of Manitoba.
Bill Morneau Liberal Toronto Centre, ON
Madam Speaker, we had a very good discussion with the provinces as we came to the conclusion that we wanted to enhance the Canada pension plan. We had a number of issues brought up. As the member notes, the Province of Manitoba brought up the idea that we should consider other enhancements to the Canada pension plan. In response to that, together we agreed that as the provinces and the federal government, the participating members of the Canada pension plan, do on a triennial basis, we will this December look at potential changes to the Canada pension plan.
We are currently doing research on the impact of those prospective changes on individuals and on the fiscal impact, the financial costs. As we do that, we will bring that information forward to the provincial finance ministers in December and have a discussion about the merits of additional changes.
Erin O'Toole Conservative Durham, ON
Madam Speaker, what concerns me most about the government is that on fiscal and economic policy affecting all Canadians, it says one thing one day and then takes a totally opposite view the next.
The Prime Minister opposed deficits, then it turned into a $10-billion deficit, and now we have a $30-billion deficit. The Minister of Finance is the same. Before he ran, when he was a pension executive in Toronto, he wrote a book called The Real Retirement that said that retirees were much better off than most experts were saying, but today he says that people cannot retire in dignity. In his book, he said that it makes little sense to incent early retirement, yet he then rolled back old age security modernization. Today he talks about this being the right time and says there will actually be job gains. That contradicts what his own department is saying, which is that there will be job losses as a result of these reforms.
On a morning when Bombardier has just announced 2,000 layoffs, amid an economic crisis in Alberta, the flight of capital, and the imposition of a carbon tax that will make manufacturing uncompetitive in Ontario, why is the government implementing yet another barrier to job creation in Canada?
Bill Morneau Liberal Toronto Centre, ON
Madam Speaker, I am happy to answer that question. I am pleased to hear that the hon. member has taken the time to not only purchase but to read my book, which is excellent. I would encourage him to read all the chapters in the book, because he will find that my co-author and I identified some significant challenges facing current Canadians, challenges around future rates of return, challenges around declining pension plan coverage, challenges that will make it more difficult for people to save for retirement over the long term. It was exactly those challenges that we considered as we moved forward to enhance the Canada pension plan, in a long-term, fiscally responsible way, to help Canadians save for retirement. That is exactly what we have done.
Again, I would encourage the hon. member to read the entire Department of Finance report. He would see that over the long term, what we show is that there will be economic advantages for our economy and growth in jobs. We are thinking about the long term as we work on behalf of Canadian families.
Canada Pension PlanGovernment Orders
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, I thank the minister for his speech. I would appreciate that book signed by you. I read your book, and I believe that—
Canada Pension PlanGovernment Orders
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, we believe that with this CPP tax hike, Canadians are taking huge risks, and many risks. First, they do not know what they are getting themselves into or what the government is getting them into. They cannot tolerate the extra risk at this difficult economic time, and they do not know if the program is properly priced and accounted for. They also do not know if the returns are worth it.
Where is the guarantee to Canadians that taking this risk will work for them and will be something they will not regret down the road?
Canada Pension PlanGovernment Orders
The Assistant Deputy Speaker Carol Hughes
I want to remind the member that it was resuming debate, so it was part of his speech, and therefore he is into his speech already.
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, thank you very much.
First, I would like to seek the consent of the House to share my time with the member for Mégantic—L'Érable.
Canada Pension PlanGovernment Orders
The Assistant Deputy Speaker Carol Hughes
Does the hon. member have unanimous consent to share his time?
Canada Pension PlanGovernment Orders
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, apparently the government distrusts the ability of Canadians to plan for their own retirement. There is no other reason for this ill-conceived tax hike that the members opposite like to pretend is not a tax on Canadians.
When the Canada pension plan was first introduced in 1965, it was intended to assist those Canadians who were not already part of workplace pension plans. The government apparently felt that such a plan was necessary to assist Canadians in their retirement planning.
The world has changed since then, but the Liberals still believe that we are living in 1965. They still believe that it is the role of the government to tell people what they can do with their money. They still believe that Canadians are not capable of determining for themselves what they will need financially when they retire and of preparing for retirement on their own.
As a result, we have this bill, Bill C-26, which will take money from the pockets of hard-working Canadians who have been given no choice in the matter. The benefits of this tax hike, if any, and do not be fooled when they tell us that it is not a tax hike, by the way, will happen at some point in the far future. These changes do nothing to help today's seniors who may be struggling to make ends meet.
Why do I say that this is a tax hike when the government says it is not? As the cliché goes, if it walks like a duck and quacks like a duck, then it is a duck. If the government taxes money from us and gives nothing in return, that is a tax.
The Canada pension plan receives money from two sources: employers and employees. They make equal payments into the fund, but at the end, only one of them receives a pension from those payments, and that is employees. For the employer, CPP is just one of many costs of doing business. The government, with these changes, is increasing the tax load on employers while pretending that it is not a tax.
I was a small businessman before the people of Edmonton Manning gave me their trust as their representative in Ottawa. I know what it means to be an employer and to have to pay my employees. I know first hand how much government red tape is involved in running a business. Liberals can call this increase in CPP whatever they like, but business owners know the truth. This is a tax grab. The Liberals can put all the lipstick on this pig they like, but at the end of the day, they are telling business owners to pay more money, with absolutely nothing in return.
The return for the country is something different. When business owners are faced with an increase in costs, adjustments have to be made somewhere else. The government is mandating this increase in taxes, for nebulous benefits at some point in the future, but business owners have to deal with this tax now. As I see it, they are faced with two choices in this situation. With this increase in costs imposed on them by the government, they will have to find other areas to cut back. One way would be to freeze or even cut wages so that the employers' tax burden does not increase. How this helps employees I do not know.
The alternative is that they will freeze hiring or even lay off employees. Personnel costs are a big part of doing business, and it does not make sense that the government would increase this burden on business owners. This extra tax is putting thousands of Canadian jobs at risk.
In 2015, the Canadian Federation of Independent Business looked at a similar CPP hike scenario. They found that it would eliminate 110,000 jobs and permanently lower wages by nearly 1%. It is not alone in predicting the negative consequence of an increase in CPP premiums. The Fraser Institute found that a 1% point increase in the CPP contribution rate reduces private savings by 0.9 points. That does not provide much benefit.
What does this tax mean for working Canadians? The government tells us that we should be happy, that there will be more money for us when we retire.
It assumes that Canadians are not using savings vehicles, such as the registered retirement savings plan or the tax-free savings account. That is perhaps why the Liberals reduced the TFSA contribution levels set by the previous Conservative government.
When these changes are introduced, Canadians will take home less pay every week. The government wants us to think that it is not much, that we will never notice it, but every penny less in a person's pocket makes a difference to that person.
What would the effects of this tax be as people see their pay reduced? With less money coming in, it would take that much longer for new graduates to pay off their student loans. That, in turn, would delay their ability to buy their first house. That would have an impact on the economy that perhaps the government has not thought enough about. Conservatives want to encourage Canadians to save, but by reducing their pay, we would take the opportunity away from them.
Through this tax increase, Liberals are saying they do not trust Canadians to be smart enough in how they spend their own money, so they will do it for them. Canadians have already shown that they know how to handle their own money. They do not need the government to do it for them.
We already have a retirement system that is the envy of the world. Canadians are saving more today for retirement than ever before, without this tax grab. Poverty among seniors has dropped significantly in recent years. According to Statistics Canada, the share of Canadian seniors living on low income has dropped from 29% in 1970, when the CPP was in its infancy, to 3.7% today. It is among the lowest in the world. Conservatives believe that Canadians should be able to manage their own money. It is not the role of government to do so.
Furthermore, Liberal promises on financial matters are somewhat suspect. It was only a year ago that the Prime Minister was promising to hold the budget deficit at $10 billion. We all know how quickly that promise was broken. How can the government expect Canadians to believe anything it says about CPP benefits in 2050? If the government were truly serious about helping Canadians to save for their retirement, it would reinstate the TFSA contribution levels set by the Conservative government. Treat Canadians like adults and let them choose how to save for their retirement.
It appears as if the government has decided that the CPP should be the only method of retirement savings that Canadians use, but that was never the intention. In 1964, the Liberal minister responsible for introducing the Canada pension plan said that CPP “is not intended to provide all the retirement income which many Canadians wish to have. This is a matter of individual choice and, in the government’s view, should properly be left to personal savings and private pension plans." That was a good idea then, and it is a good idea now. It is time for the government to show Canadians the respect they deserve. For the good of Canada, it should abandon this bill.
John Oliver Liberal Oakville, ON
Madam Speaker, this is a big issue in Oakville. I knocked on doors, met with people in Oakville, and heard many concerns raised about whether people will have sufficient funds to retire on. I heard about trouble with savings due to some of the low-quality, poorer jobs that people are experiencing right now across Canada. I also heard a concern about private plans moving to defined contribution and the risk of investment, and the individual discipline to put the money into retirement instead of with the plan.
Can the member reflect on the benefits of a defined benefit plan versus the defined contribution, which is a significant advantage of the Canada pension plan?
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, if we are going to call this a business case, a lot of risks are being taken. Those risks are not the choice of Canadians but would be imposed by the government on the Canadian people. It is very hard to measure when there are really no benchmarks.
A lot of what the minister said earlier did not make sense. Is he calling growth artificial inflation, in terms of making more money by taxing people and considering that growth? Canadians are taking a lot of risks. If this is a business case, it is a failure. We have to look at it very carefully, consult more, and allow Canadians to have more input, so it can be safe and sound and work for Canadians.
Scott Duvall NDP Hamilton Mountain, ON
Madam Speaker, what has happened is that there is a pension gap and a crisis of Canadians being able to save less for their retirement, which was worsened considerably under the Stephen Harper government.
Can my colleague explain to this House what lessons his party has learned from these failures?
Ziad Aboultaif Conservative Edmonton Manning, AB
Madam Speaker, I am very surprised that the hon. member is talking about failures.
When we introduced the TFSA, that was a pleasure for every Canadian. We have heard that from Canadians. We have done lots in that fashion to make sure that Canadians save more and are more secure.
I am not sure what the member is referring to as failures.
Marilyn Gladu Conservative Sarnia—Lambton, ON
Madam Speaker, I was alarmed to see that Finance Canada did an analysis of this proposed CPP premium increase that said it will hurt the economy. It will reduce jobs, reduce GDP, reduce business investment, reduce disposable income, and reduce private savings.
With all of these negative impacts that are going to happen over the next eight years and no benefit for anybody for 40 years, I wonder if the member could comment on what he thinks about this plan.