moved:
That, this House urge the government to recognize that the present social programs are failing and to investigate more secure options such as the Registered Personal Security Plan (RPSP), a system of personalized, tax-sheltered, RRSP-like savings accounts to which Canadians could contribute funds to be drawn during periods of unemployment, for personal upgrading/retraining and for retirement income.
Mr. Speaker, It is a tremendous honour and privilege for me today to introduce to the House and to the Canadian public an innovative new concept which the Reform Party believes will help preserve long term personal security for Canadians.
With so much talk lately of cutbacks and change to social programs, citizens are naturally concerned that this will threaten the benefits they have been promised. Although the welfare state is crumbling, Reformers believe that we can work together to build a better and stronger way to provide for ourselves during times such as unemployment and retirement.
Today we place before the House a motion which addresses this vitally important issue of how best to preserve and protect the personal security of Canadians:
That, this House urge the government to recognize that the present social programs are failing and to investigate more secure options such as the Registered Personal Security Plan (RPSP), a system of personalized, tax-sheltered, RRSP-like savings accounts to which Canadians could contribute funds to be drawn during periods of unemployment, for personal upgrading/retraining and for retirement income.
The Reform Party unveiled its registered personal security plan proposal in our taxpayers budget which we released on February 21 of this year. This was as a direct result of a resolution passed by Reform members at our October 1994 assembly:
Resolved that the Reform Party investigate the feasibility of replacing the compulsory, government operated, privately funded taxpayer subsidized unemployment insurance program with a voluntary, personally financed, privately administered, government regulated registered unemployment savings plan.
Since then we have begun the process of discussion and consultation necessary to examine and test the idea both with experts and in the public arena. Through that process we will expand and refine our proposal and determine whether there is support for moving toward this entirely new way of meeting our personal security needs.
The first question Canadians watching this debate will ask is: what is an RPSP or registered personal security plan? Simply put, an RPSP gives us instead of government ownership and control of the moneys we pay into UI and CPP.
The second question Canadians might ask is: why do we need to change; what is the problem with the unemployment insurance program and the Canada pension plan we have now? I suspect that a lot of Canadians have already figured out the answer to this question.
They have seen the report that the CPP fund will run out of money in 20 years. They heard the finance minister in his budget promising a paper on the changes required in the public pension system to ensure its affordability. They know this means something is deeply wrong. It is the same sinking feeling they get when the doctor says: "We need to do a few more tests".
The finance minister also cut unemployment benefits. Of course this was all carefully worded by Liberal spin doctors. The cuts were styled as "unemployment insurance reform" which "will reduce the overall size of the unemployment insurance program by a minimum of 10 per cent".
In spite of this 10 per cent reduction in benefits, Canadian workers will still hand over the same amount of money to the government. The Liberal spin doctors dress this up by promising no increase in premium rates. One would hope not, considering the benefits are being cut.
It would have been more honest for the finance minister to come right out and say that benefits would be cut by 10 per cent or more. In spite of the coy wording, Canadians figured out that they are getting a smaller benefit for the same money. They
worry that it will shrink a lot more as the government sinks deeper into debt.
Over the past 30 years Canadians have been promised that government will meet the lion's share of their most important security needs, but there is increasing evidence that these promises cannot and will not be kept. Our compulsory contributions to government programs have not guaranteed us anything. We are living on borrowed money and mortgaging our children's future to pay for government programs that are simply not working. We would all like to hope that these problems will somehow disappear but in our hearts we know they will not.
Government pension plans as currently constituted do not enhance social security. They pour it down the drain. The government as a pension manager is like an alchemist who can only change gold into lead.
There is something else to consider. Even if we were not losing programs, there are harmful social consequences from encouraging people to depend on government for their personal security. Canadians have a proud tradition of self-reliance, caring for our families and helping those less fortunate.
Many of our citizens have a strong desire to take back control of their resources, their futures and their own welfare. They are willing to be self-reliant and to show compassion for the needy. All they ask is that they be able to keep more of what they earn and that government exercise careful stewardship of necessary tax dollars.
If we move from failing social programs to a new plan, what will be the benefit? The greatest benefit is that your money will go into your own registered personal security plan, RPSP. The money is yours. The interest or profit from the investment of that money is yours. If you die, your loved ones get it. It is your property and your ownership of it does not depend on the management skills or financial health of government.
CPP and UIC turn taxes that are too high into benefits that are too small. The RPSP turns taxes into productive investments and productive investments back into social security. In addition, there are tremendous financial advantages to this type of plan.
Assume that an employee contributes five per cent to an RPSP account monthly, matched by five per cent from his employer. This is about the same amount as the present combined CPP and UI contributions. The employee works from age 20 to age 65. Also assume a moderate investment return of 8 per cent interest compounded quarterly.
A worker earning only $1,000 per month or only $12,000 per year would retire on $3,432 per month before tax for the rest of his life and would leave an inheritance of $514,812 for his family or other beneficiaries. This is someone who earns only $1,000 per month. No doubt this will be astonishing to many people because they have not realized how much more they could receive under an RPSP fund than under the government CPP and UI programs.
Let us look at what an average Canadian wage earner could expect from an RPSP. Someone earning $30,000 or $2,500 per month would retire on $8,580 per month before tax and would leave an inheritance of $1,287,031. Nothing like getting a huge raise when you retire.
The Reform Party will be providing Canadians with tables of such returns for different levels of income which demonstrate why they deserve a whole new system to ensure personal security.
Canada lags behind other countries when it comes to moving toward more rewarding and effective measures in this all important area.
A system similar to the RPSP plan was successfully implemented in the United Kingdom in 1978. Current pensioners were made secure at existing levels of benefits, while future pensioners were given a chance to move into the more attractive retirement option.
Britain's long term pension liability was reduced by more than 30 per cent in the first three years alone of the opting out plan's operation. This guaranteed that future taxpayers will not be overburdened as British baby boomers began to retire.
Chile successfully privatized its pension system more than 15 years ago, in 1981. Like Canada, an increasing number of Chileans were retired compared to citizens still in the workforce. The level of seniors' benefits was exceeding the level of contributions and, like Canada's CPP, Chile's pension plan was a pay as you go scheme.
Because the scheme was broke, Chile moved to a mandatory savings plan requiring employees to place a minimum of 10 per cent of their taxable income into tax sheltered individual retirement accounts managed by competing private sector financial managers.
The results have been remarkable. Private savings in Chile rose from 2.8 per cent of GDP in 1980 to 14.3 per cent in 1991. Very importantly, they have provided investment capital which has been pivotal in the near-miraculous financial renewal of Chile's economy.
I believe that the experiences of the U.K. and Chile provide evidence that there would be tremendous advantages to our own country in looking for similar, innovative solutions to some of the worrisome uncertainties about our own personal security which we see looming on the horizon.
These are some further benefits we see to moving our UI and CPP contributions into our own personal RPSPs. First, working Canadians would be gradually relieved of the burden of paying
government pensions to those who are retired. As our population ages there will be far fewer working Canadians shouldering the cost of the benefit seniors have been promised.
In just 20 years the number of seniors will have increased by 40 per cent. At that time working Canadians will be trying to ensure their own personal security, pay staggering yearly interest rates on the debt we have run up, will still have our debt hanging around their necks like a millstone and, in addition, will be asked to pay our seniors' benefits since nothing has been saved up for that purpose.
Not only do we have an obligation to relive them of that burden to the greatest extent possible, we should ask ourselves whether it is fair that they should be asked to carry such an onerous and unfair load on our behalf. We would be wise to see this coming and fix the problem while we still can.
Second, RPSPs would provide Canadians with much greater retirement income than do the present plans. For example, a Canadian born in 1960 would receive only $2.60 for every dollar paid into CPP. For a Canadian born in 1980 the return drops dramatically to only 80 cents per dollar paid in, a dead loss.
By contrast, moneys invested in an RPSP at even 5 per cent interest would yield an average lifetime return of $3 for every dollar invested. CPP is misnamed. It is not a pension plan but a tax to redistribute income from workers to retirees. If it were a true pension plan, properly invested, it would not be in trouble, it would be rich.
Third, rolling UI premiums into RPSPs would provide substantially more security to the unemployed while also creating an incentive to remain employed. Canadians would have far greater control over their own unemployment income. They would have the security of knowing that their premiums are a long term, personal investment even if they are never unemployed.
The Canadian Institute of Actuaries has shown that after only eight years, UI contributions administered through an RPSP would provide the same level of benefits as the maximum under the current UI program. Of course in subsequent years the rate of growth in the RPSP rapidly out performs the return from premiums paid into the current UI program. In addition, workers would have the enormous satisfaction of control and responsibility for personal well-being.
Fourth, seniors could continue to earn income without having their retirement benefits clawed back as happens today with OAS.
Fifth, RPSPs would benefit the poor. Because UI and CPP contributions are taken off the top of their pay cheques low income Canadians do not have anything left to put into personal savings. Under the Reform RPSP, payroll deductions from CPP and UI would gradually be transformed into automatic payments into each individual's RPSP. This means that many working class Canadians would be able to own a personal security account for the first time ever.
Sixth, moving into RPSPs would generate an enormous pool of capital for productive investment in our country, resulting in a host of new employment opportunities. This would create far more jobs than government spending ever could. Although RPSP managers should be able to invest in government bonds at their own discretion, we would recommend that RPSP moneys should not be accessible by government.
Seventh, these personal security funds would be owned outright by Canadians as their personal property. They would not be vulnerable to government mismanagement or squandering. Prudent regulations would ensure sound investments managed by reputable firms. People do not want their retirement savings put into fur-bearing trout farms.
Eighth, RPSPs would allow and encourage Canadians to free themselves from disabling and uncertain dependence on government and government bureaucracy. A return to the ethic of self-reliance would enrich the spirit and vigour of citizens and the country as a whole.
We have begun the work of researching details which need to be addressed. We want to make the transition from the current unsustainable programs to personal RPSPs in a way which protects those already receiving benefits under the old plans. To achieve that we anticipate a long phase in period. We will decide whether any changes to the tax system are needed to move to RPSPs and we will demonstrate how a new direction in personal security will also benefit the poor in society.
Also to be explored is whether the RPSP should be expanded to provide a savings component to fund education and training and other security needs.
As the Reform Party continues to expand this new personal security concept, it will consult with a broad cross section of knowledgeable Canadians, including tax experts, actuaries, investment managers and technical researchers. It will also find a variety of ways to provide information to Canadians to encourage discussion and ensure an informed debate and decision at the end of the process.
This will include surveying citizens on what they need and want; holding open public meetings to present the concept and hear from Canadians; and creating a concrete proposal summarizing all the research and consultation, which Canadians will be able to judge.
In our view it is critical that we move now to carefully examine the issue of our personal security and options for the future. With every passing year the transition to a better and more workable solution becomes more difficult. This is because our population is aging rapidly. In addition, as our debt balloons and interest payments consume more and more of the national
wealth every year, we lose needed financial flexibility to protect Canadians who already have retired or are nearing retirement.
The World Bank has also pointed out the urgent need to face the imminent problems of our old age security system. Just a few months ago in its report "Averting the Old Age Crisis" the World Bank urged countries with rapidly aging populations and costly welfare state social programs to shift to greater self-reliance and individual initiatives to meet personal security needs.
It is abundantly clear that all Canadians and especially their elected leaders and representatives need to take thoughtful and vigorous action to protect our future personal security and they must do so now. We are dismayed to see the Liberal government bitterly divided on where to take the country when it comes to this important issue. It has utterly failed to bring forward promised proposals for change.
It is disturbingly clear that the people in charge have absolutely no vision for constructive change to a crumbling social system. Canadians desperately need such a vision. They need hope that there is a way to deal with the disaster they see looming ahead and which they know will rob them of the security and protection that every single individual needs and expects.
It is for this reason that the Reform Party is doing everything it can to fill that need for our citizens. This is why it has come forward to introduce a proposal which it believes will provide a positive and beneficial solution to give hope to Canadians on this critical issue.
The experience of other countries in the world, the recommendations of experts and analysts and just plain common sense all lead to the conclusion that a dollar left in the hands of a mother, a father, a family, a student, a senior, a caring and compassionate Canadian is more productive and will provide far greater personal security than a dollar left to be managed by the federal government. Let us get on with the job.
I appeal to Canadians everywhere to examine the emerging concept of the registered personal security plan. Work together with us to shape its direction and determine its details. Do everything you can to ensure that your elected representatives support more workable and effective ways for you to manage your hard earned dollars, to provide needed security for yourself and your family.
I say to Canadians, it is your money, it is your country, it is your future. Reformers believe that registered personal security plans ought to be a part of that future but the status quo will never change unless we work together to make it happen.
I ask for your support as we move to find better alternatives for Canadians in the 21st century.
