Mr. Speaker, I am also pleased to participate in the discussion on Bill C-85, a bill which lives up to our red book commitments and goes beyond.
The bill makes important reforms to MP pension arrangements and has the effect of lowering the costs to taxpayers of the plan by some 33 per cent. The bill proposes a package of what are essentially cutbacks to one element of parliamentarians' compensation, our pension plan. Because the other elements of our package remain frozen they could not be used for any offsetting adjustments.
Members today are being asked to accept a pensionable age of 55 and a 20 per cent reduction in our pension formula for our future service. I believe this is a fair bargain. I hope members will join me in supporting the bill.
The changes to the pension arrangements contained in Bill C-85 are being proposed after somewhat long and careful study. Part of this was carried out through the review process set up under the Parliament of Canada Act. Under this act a commission is required to be established after each federal election to review the adequacy of MP compensation and allowances.
The most recent commission established in January 1994 was headed by the Hon. Charles Lapointe and made its report in July 1994. Even before the Lapointe commission report, however, a special study of parliamentarians' compensation had already been commissioned by the prior government. This study was carried out by Sobeco, Ernst & Young, a reputable Montreal consulting firm. Its report was tabled in Parliament in February 1994 and was then referred to the Lapointe commission for review.
Sobeco, Ernst & Young examined several elements, including the questioning of the basic principles governing parliamentarians' pensions. They also suggested a number of discussion topics, such as tying sessional indemnities to parliamentarians' private income and rates of pay to their performance.
The government welcomes these two reports on the whole issue of parliamentarians' compensation and allowances. As part of this study, not only were extensive consultations carried out with citizen groups, business associations, compensation experts and other stakeholders, but present and former members were also consulted. Throughout the process, the objective was to come up with a series of changes which would be fair and, while alleviating taxpayers' concerns, would continue to meet the needs of members.
Let me first quote a few of the recommendations contained in the independent report presented by Sobeco, Ernst & Young, which reviewed the entire parliamentarian compensation scheme.
This study looked at each aspect of our compensation package, from sessional indemnities through pensions, insurance, health benefits and travel. A value was assigned to each component which in turn allowed the consultants to value the total package. The components and package were then compared with the compensation packages provided in other Canadian jurisdictions, public and private, and in selected international jurisdictions. When total compensation is taken into account and compared to similar occupations in private and public sectors, the study noted that MPs' compensation exceeds that of managers in all companies but as was pointed out it is still less than executives.
Both the general feelings and the formal comparisons arising from the study support the position that parliamentarians' basic salaries are relatively modest but our pension arrangements are overall too generous.
The study recommended a realignment of our expense allowance to include an accommodation allowance and an accountable expense portion. It recommended minor changes to the travel benefits, insurance benefits and career transition provisions. At the same time it recommended that the pension plan be scaled back essentially to levels more commonly found in the private sector. The study also recommended increasing the salary of an MP from the current $64,400 to $88,500.
Mr. Speaker, it is important to note that the consultants recognized however that it may not be the right time, in the present situation, to vote the salary increases they were recommending. At any rate, they indicated that the proposed decrease in the retirement plan, if approved, would necessitate an increase in wages so that the overall compensation level would remain the same.
A true pension plan must have a retirement pension goal guaranteeing a revenue replacement target at retirement which does not depend on investment return over the accumulation period, salary increases or in some cases, age of retirement. Such an objective may be reached only through a defined benefit plan because employer's contributions can be applied to level the fluctuations in retirement pensions resulting from variations in investment returns over the years.
The consultants' bottom line recommendation on this issue is that if the Canadian public's concerns were that pension costs were too high, the solution should be to reduce the cost by reducing benefits rather than to replace the plan with a retirement savings plan which had no clear income replacement goals.
As the hon. members probably noticed when they read Bill C-85, this is the solution advocated by the Treasury Board president. The measures contained in this bill will help reduce costs to taxpayers substantially.
Sobeco, Ernst & Young also made recommendations on double dipping. As the hon. members know, the bill before us provides for major restrictions in that regard.
The pension payable to former members who receive, in respect of a federal position, a salary or fee paid through the CRF or appropriations will be reduced or cancelled if they earn more than $5,000 per year from that job.
As my final comment on the Sobeco, Ernst & Young report, I would like to read what the consultants considered an important goal in setting parliamentarians' compensation: "MPs' compensation should contribute to making members proud to serve their country and convinced that their financial reward for doing so is fair and to making Canadians in turn satisfied with the levels paid to their representatives". I think all members can endorse this goal.
As I indicated earlier, the Sobeco, Ernst & Young report was subsequently referred to the Lapointe commission. Traditionally that commission has not looked at issues such as pension benefits. Nevertheless, it did so on this occasion. The Lapointe commission made recommendations in two main areas, first, the area of MPs' and senators' compensation and second, in the matter of the public's attitude about parliamentarians' compensation overall.
Like the Sobeco study before it, the author noted that there was a great deal of misunderstanding and lack of knowledge about the compensation paid to parliamentarians. Like Sobeco, the Lapointe commission also recommended an increase in sessional indemnities to take effect as soon as the salary freeze is lifted in 1997.
The commission recommended replacement of our tax free allowances with fully accountable capped expense accounts. As hon. members know, the bill before us adopts the recommendation of the Lapointe commission and sets age 55 as the pensionable age under the Members of Parliament Retiring Allowances Act. The Lapointe commission agreed with Sobeco that incidents of double dipping would be greatly reduced through imposition of a pensionable age and that no additional measures
were needed. However, our government does not agree. That is why Bill C-85 has a provision which eliminates double dipping.
These studies should be a great source of inspiration. They identify all the factors to consider and the areas where adjustments are required. However, the fact that fiscal restraint is still the order of the day gives the President of the Treasury Board little leeway in making changes to the members' compensation scheme. Not only would a decrease in our retirement benefits be unfair to us if it were not offset by some adjustment, but it would make public office much less attractive in the future.
On this side of the House we believe that the proposed reduction in our future benefits of 20 per cent and the reduction of taxpayers' costs by one-third have gone a considerable way to reforming our pension plan in a period when the government is committed to maintaining the wage freeze for parliamentarians.
The Lapointe commission's final pension recommendation concerned the contribution rate to the pension plan which it recommended should be reviewed. Bill C-85 recognizes that members' pension benefits will be reduced in the future and sets a revised member contribution rate of 9 per cent of session indemnities and additional salary if applicable.
In conclusion, it is clear that Bill C-85 meets many of the objectives outlined in the Lapointe commission report. We could have gone further but I believe we have met our red book commitments and gone beyond them. Maybe it is not to the satisfaction of everyone, but we have accepted much of the advice of many who have spoken on the reform of MP pensions. This bill is proof positive that we have kept our promises.
