GOVERNMENT ORDERS

SUPPLY

ALLOTTED DAY-CPP PREMIUMS

That this House condemn the government for requiring Canadians to pay over 70 per cent more in CPP premiums, thus increasing payroll taxes that are a cancer on job creation, while refusing to eliminate the huge subsidy that those same Canadians must pay to maintain the gold-plated MP pension plan.

The plan was established in 1966 under the Liberal government of Lester B. Pearson. The plan was originally established as a pay as you go plan. It has been described critically by Bill Robson of the C.D. Howe Institute as a pyramid type scheme in which income for early investors is provided not from investment in real assets but from the capital of later investors.

During its 31 years of existence the CPP has never been administered by anyone other than Liberal and Tory administrations. Over the years various observers have pointed out that the CPP was headed for trouble and that it would require a significant increase in contributions to deliver the benefits promised, particularly to the aging baby boom generation.

Successive governments ignored this problem and the situation was allowed to deteriorate to the point where drastic action was required. On February 14, four days before the federal budget was brought down, the finance minister therefore announced that Canada pension plan premiums would be increased from 5.8 per cent of earnings to 9.9 per cent of earnings over six years, a whopping 73 per cent increase in payroll taxes, the greatest single increase in payroll taxes in the history of the country.

He also announced that despite the increase in premiums there would be no increase in benefits. Thus the average worker will end up paying a total of $1,635 per year matched by another $1,635 from the employer. Self-employed people will pay both shares just to receive a pension of less than $9,000 per year, in 1997 dollars.

What was most conspicuous about the government's announcement was what it did not contain. First, there was no acknowledgement of the mismanagement by both Liberal and Tory administrations which allowed the CPP to get into this situation in the first place. As has been pointed out, if the CPP had been a private plan and had been mismanaged in this way, its managers would now be making licence plates in some penitentiary.

Second, there is no honest assessment of the negative impacts of the 70 per cent hike in payroll taxes, in particular the negative impacts on jobs, even though the finance minister on previous occasions has acknowledged that payroll taxes are a cancer on jobs.

Third, there is no serious assessment of alternative approaches to securing retirement income for Canadians at a lower cost such as those proposed by the Reform Party of Canada. What the government has neglected to do, my colleagues and I now propose to do in this debate, starting with an assessment of the negative job impact of a 70 per cent increase in CPP premiums. We want the finance minister to frankly admit, first of all, that the 70 per cent hike in CPP premiums is a payroll tax hike and to table in the House his department's assessment of how many jobs this payroll tax hike will kill so that we can propose counter measures.

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In his presentation to the finance committee on October 17, 1994, the finance minister clearly referred to CPP and QPP contributions as payroll taxes and acknowledged their negative impact on jobs. But now that he has had to increase them, the finance minister is living in denial and says exactly the opposite. He now says that CPP premiums are not a payroll tax.

The finance minister refuses to acknowledge, for example, the position of the Minister of Industry, who ought to know about such things, and who said in the House as far back as 1991: ``When you look at the burden of payroll taxes on small firms you have to include, of course, the Canada pension plan employer contributions. The combination of all these payroll taxes imposes an onerous burden, especially on small and medium sized businesses''.

Perhaps most importantly, the finance minister is flatly contradicting the published views of the forecasting division of his department. I refer to a paper by Mr. Joe Italiano of that division published on April 25, 1995, entitled ``Growth in CPP and QPP

contributions: Implications for employment and participation''. In that paper Mr. Italiano clearly defines compulsory CPP and QPP contributions as payroll taxes. He also studied the employment impact of the Tory increases in these payroll taxes from 1986 to 1993 and showed how they had killed 26,000 jobs.

We therefore call on the finance minister to frankly and honestly admit that the 70 per cent hike in CPP premiums is a payroll tax hike of unprecedented proportions and to table in the House his department's assessments, and we know that they run these assessments, of how many jobs this payroll tax hike will kill so that we can propose counter measures.

In criticizing the government's ill-conceived approach to rescuing CPP, Reformers are not saying that nothing should be done, far from it. But what we propose in our fresh start platform is a more comprehensive reform than what the government proposes.

Our fresh start proposals to secure retirement income for Canadians are a combination of Canada pension plan reform, of expanding the RRSP system and of providing tax relief for lower and middle income seniors. Our proposals-we will argue this during the election campaign-deliver more retirement income per dollar invested than anything that the government has proposed to date.

I hope that MPs will ask me about this superior alternative in our question and answer time because it is worth the House considering.

Finally, I want to conclude with some observations on the government's moral authority to lead pension reform. To gain the trust of Canadian seniors, Canadian youth and the aging baby boomers, the government must be seen to be acting fairly and ethically on the issue of pension reform.

The Liberal government abandoned its responsibility to act fairly and ethically on this issue when it adopted, as its first pension reform priority, not the improvement of CPP, not the improvement of pensions for the Canadian people, but when it adopted as its first and highest pension priority the provision of the gold plated pensions for its own MPs and other MPs willing to receive them.

What does the average Canadian worker get at age 65 after contributing to CPP at 9.9 per cent of earnings? A lousy $9,000 a year. But what do Liberal, Tory, NDP and Bloc MPs get who accepted the gold plated MP pension plan at age 55? If they live to age 75, pension benefits amounting to: for the Conservative member for Sherbrooke, $4.3 million; for the Liberal member for Cape Breton-East Richmond, $3.9 million; and the NDP member for Winnipeg Transcona, $2.7 million. And the list goes on and on.

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When it comes to issues of integrity, a moral authority to lead, we have observed that the government has a blind spot and perhaps a fatal blind spot.

On February 5 I asked both the Prime Minister in the House and later in the day his ethics counsellor in committee whether they did not see an ethical dimension, an integrity dimension, issues of right and wrong with respect to the political interference with the Somalia inquiry, the stonewalling of the Krever inquiry, the use of the justice department to go on a political witch hunt and the Prime Minister's broken GST promise.

The Prime Minister professed not to understand what I was talking about but the answer of his ethics counsellor was more revealing. I was asking about ethical matters, matters of public trust and integrity and right and wrong. On February 5, 1997 at the Special Joint Committee on A Code of Conduct he said: ``I think you are speaking about policy questions, questions in which there is a difference between opposition parties and that of the government. It is the essence of our democratic system. I do not believe I can go and take your question''-questions about the ethics of those situations-``any further than that''.

In other words, political interference and cover-up in the investigation of a murder, stonewalling an inquiry into tainted blood from which Canadians died, misuse of the powers of the justice department, breaking a key campaign promise and denying you broke it-I would add to that list giving yourself a gold plated pension while giving Canadians tin plated pensions-by the ethics of the Prime Minister and his ethics counsellor are simply differences of opinion on policy matters, not matters of trust or integrity or right and wrong.

If these are the ethical standards of the government, I believe it will never be trusted by Canadians to bring fairness and integrity to the pension issue. By its own actions and blindness it has forfeited that right to others.

To conclude, I am reminded of a study on integrity and 19th century British politics by the historian D.C. Somervell. He focused his study on two British statesmen, William Gladstone, the moralist who if he did not see right and wrong in an issue was uninterested in it, and Benjamin Disraeli, the pragmatist at the other end of the scale who never saw right or wrong in any issue, only differences of opinion.

What was Somervell's conclusion? He concluded that while it is an error to discover moral issues where none are in fact at stake, it is a greater error to be blind to them when moral issues really arise.

When the government put the old age security of MPs ahead of the old age security of Canadians, it committed that greater error, which is why I urge hon. members to support the motion before the House.

Hon. Charles Caccia (Davenport, Lib.): Mr. Speaker, it is worthwhile noting that while given 20 minutes to speak on this subject matter, the member for Calgary Southwest devoted barely half of his speech to the subject matter on the Order Paper which reads in part: ``This House condemn the government for requiring

Canadians to pay over 70 per cent more in CPP premiums-,'' and so on.

It is a fully misleading statement. The fact that the hon. member would devote half of his time speaking about tainted blood, misuse of justice, integrity of government, ethical standards rather than addressing the subject matter of the Canada pension plan demonstrates how thin and how poorly researched his subject and his speech are by the people who prepared it for him.

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Obviously the member from Calgary does not know his subject and the people who prepared his speech for him today ran out of steam in dealing with it, so much so that he had to fill up the time available to him with other subjects which are not contemplated in the motion.

The member from Calgary is trying to mislead Canadians by convincing them that there is a 70 per cent hike in the Canada pension plan contributions. I would like to ask the member for Calgary Southwest whether he would use his ability to go through the proposal that has been approved by the 10 provinces and the Government of Canada and verify for himself that the 70 per cent figure is totally wrong. The reality is that the increase for the employee goes from 2.9 per cent of pensionable earnings in this year to 3.5 per cent in 1999 and gradually to 4.9 per cent by the year 2003.

Mr. Manning: Mr. Speaker, I will answer the hon. member's points by making three of my own. First, in not using all the time allocated to me, I am of the belief that if you want to practice economy in government it starts with economy of speech.

Second, I found the member's comments interesting because they illustrate the last point I was trying to make. The member obviously sees no connection between getting the moral authority from people to reform pensions and the fact that the government lost that moral authority when it gave its party the MP pension. The very fact that the member sees no connection between that issue and the MP pension precisely illustrates the blind spot of the government.

With respect to his substantive point, Reform has gone through the proposals that the minister and the provinces agreed to with respect to the reform of CPP. It is our conviction that the CPP cannot be fixed simply by working on it. We have to look more broadly at all the contributing factors to retirement income. That is why our proposal includes the following elements which I will take just a couple of minutes to explain.

First, a guarantee that existing seniors, every Canadian aged 60 and above, will receive all the benefits promised to them by CPP.

Second, a proposal to shift younger Canadians on to an expanded RRSP system, mandatory, tax sheltered retirement savings accounts like RRSPs and these deliver, of course, greater pension benefits per dollar invested than anything that has ever been proposed for CPP.

Third, for older workers not young enough to accumulate an adequate retirement income by expanded RRSPs alone, we propose a transition combination of CPP and expanded RRSPs to ensure pension benefits at least on a par with CPP if not better.

Finally, through our fresh start tax relief proposals, we propose to lift 1.2 million Canadians, including 300,000 seniors, off the federal income tax rolls altogether, thus improving their retirement income.

If one takes the collection of those things, the modified CPP, the expanded RRSPs and the tax relief afforded to seniors, our argument is that the package delivers greater retirement income per dollar than anything we have seen from the finance minister or from the government.

Mr. Harold Culbert (Carleton-Charlotte, Lib.): Mr. Speaker, hopefully I will be brief and the leader of the Reform Party will be brief in his answer.

I listened very carefully to the presentation this afternoon. My understanding is, along with some other things, he wants to expand the RRSP system.

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I would like to pose a question to the leader of the Reform Party stemming from his presentation this afternoon. Does he realize and is he considering in his Reform program, the fresh start program, that the CPP which came into being in 1966 actually has several aspects? It includes not only the retirement benefit plan but a disability option, a death benefit, and a benefit for spouses and children in the unfortunate or untimely death of the contributor. Are these not important aspects to the Reform Party?

I note with regard to his comments that in comparison the members' pension program was changed a year and a half ago. There are three important aspects of that program. The minimum retirement age was reduced to age 55 or increased to age 55. There had never been an age limit before. The reduction in benefits of over 20 per cent saved over $3 million in one year alone. It also eliminated double dipping which is something the Reform Party could check its members on.

Mr. Manning: Mr. Speaker, I am delighted to hear these members defend the MP pension plan. I invite the hon. member to join me in any place in the country. We will round up 1,000 people. The hon. member can defend the MP pension plan and I will argue against it. At the end of the day I do not think there will be much question about where the Canadian public stands.

With respect to the member's substantive question at the beginning, when I say we propose to guarantee the CPP benefits to the existing generation of seniors and make provisions for others, we

intend to guarantee the entire range of benefits. We are not just speaking about retirement income.

With respect to survivor benefits, under this expanded RRSP program we propose a substantial improvement over CPP. We propose to improve the retirement incomes of surviving spouses, particularly elderly widows, by proposing that 100 per cent of the funds of a deceased individual's RRSP would be transferable to a surviving spouse tax free. Nobody would have to go hat in hand. That is a far superior survivor benefit to that offered by CPP.

Mr. Julian Reed (Halton-Peel, Lib.): Mr. Speaker, first, I point out to my hon. friend across the way in terms of members' pensions that 400 of the 600 living ex-members of the House get no pension whatsoever.

Second, I have a young constituent who was permanently disabled at the age of about 31. If it was not for the CPP disability clause he would have nothing. He has no family. He has no other means of support.

Mr. Manning: Mr. Speaker, I repeat. We made clear that we are continuing to support the benefits of the CPP program to the existing generation of seniors. Therefore the member is going down the wrong path by implying that we will cut that.

Mr. Chuck Strahl (Fraser Valley East, Ref.): Mr. Speaker, I rise on a point of order. In his intervention the member for Davenport on two or three occasions used the word mislead with reference to the Reform Party and to the Leader of the Reform Party.

At citation 49 of Beauchesne's that is considered unparliamentary language. I wonder why, Mr. Speaker, you allowed him to use that phrase not once but repeatedly.

The Deputy Speaker: The point was not raised at the time. There did not appear to be an uproar in the House. As I am sure hon. members realize, unless there is an uproar in the House almost immediately no word as such becomes unparliamentary, except the one word we all know.

If the hon. member wishes, I will look at the blues and come back if necessary. The normal test is that people get very excited when such a word is used. I hate to tell the member that is the case.

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Hon. Marcel Massé (President of the Treasury Board and Minister responsible for Infrastructure, Lib.): Mr. Speaker, I welcome the opportunity to reply to and passionately oppose the Reform motion before the House.

The motion clearly stakes out the opposition position that it interprets the changes to the Canada pension plan as business bashing and fiscal foolishness. That position is based on partisan politics, not fact or logic.

Let me be blunt. We had to make some tough decisions about the CPP. The changes are not painless or pleasant, but that happens when we try to fix something that should have been reformed years ago, in fact decades ago. These changes are not based on decisions made in isolation and imposed without consultation.

One of the many realities ignored by the opposition motion is that these are reforms agreed upon by the federal government and eight provinces representing the significant majority of Canadians. These are reforms based on a year long process of public consultation and intense discussion and negotiation between the two levels of government. Most of all, these are changes to the CPP with an overriding and concrete goal: to preserve and secure one of the key pillars of our national pension system.

The third party can play games with phoney mathematics and hidden agendas, but the federal and provincial governments had to address a real problem and find a workable solution. That is what we have done, to the benefit of Canadians today and for generations to come.

Let me remind the House that the Canada pension plan affects all working Canadians and their families. It is the compulsory earnings based plan that forms one pillar of Canada's public pension system. The proposed changes are a strong and balanced package of reforms that will ensure the Canada pension plan is there for Canadians today and in the future. There for Canadians means not just for workers when they retire but equally to help Canadian workers and their families should they become disabled or die.

This is something the third party ignores in its public proposals. The fact is that about 30 per cent of CPP benefits go to disabled persons and for survivors' benefits, but for the Reform Party these Canadians do not seem to exist.

[Translation]

That is why I find the assumptions underlying today's motion by the Reform Party so disgraceful. These assumptions shamelessly dismiss contributions paid by workers and their employers as little more than common payroll taxes. They completely ignore the real issue, which is that CPP contributions guarantee every Canadian worker a pension. In this sense, CPP contributions constitute an investment, ensuring workers a secure retirement and adequate benefits both for disabled workers and families of deceased contributors.

CPP contributions will not swell the government's coffers and the government cannot use this money for its expenditures. On the contrary, contributions go into a separate fund used to pay pension, disability and survivor benefits. Under the proposed amendments to the Canada Pension Plan, money collected in future will be invested so as to obtain a greater return for contributors. Not only

will Canadians get back all the money they contributed but, in addition, they will see increases in their pensions and other benefits.

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These are not just empty words. Allow me to remind the House that the tax system treats CPP contributions as pension benefits. In the calculation of income tax payable, contributions qualify as tax credits for workers and tax deductions for employers.

Unlike the situation that arises when taxes are increased, increases in CPP contributions result in decreased tax revenue and a tangible drop in government revenue.

[English]

Today's motion prefers to ignore these facts. It is the type of self-serving argument and attitude that prefers to drive wedges between Canadians, between generations, between regions, rather than build for a fair and shared future. It is a motion that suggests we are imposing harsh hikes in CPP contributions and that ignores the much heavier increases that would otherwise have had to take place. It does so because it is a motion that ignores the very real problems we have had to address with the CPP.

The plan's chief actuary reported that the plan was simply not financially sustainable under the current contribution schedule. This is why firm, forward looking action had to be taken. The only fair way to deal with the problems facing the CPP is to increase contributions now so that Canadians can begin to pay enough to cover the costs of their own pensions plus a fair and uniform portion of the unfunded liability that has built up over the past 30 years.

There is no mystery about the problem. Basically the costs of CPP benefits have grown faster than originally expected when the plan was first instituted in 1966 and will escalate dramatically when the baby boom generation reaches age 65 around 2011.

I remind the House that under the existing legislation, as a matter of statute, contribution rates were already scheduled to rise to more than 10.1 per cent in 2016. In other words they were to virtually double. Even then the chief actuary of the plan has shown that without changes the CPP fund would still run out of money in less than 20 years. Without additional changes, contribution rates would have to increase from that 10.1 per cent to over 14 per cent of pensionable earnings to cover escalating costs.

It is essential to recognize that by acting now to fix the CPP we are limiting contribution rates to a maximum of 9.9 per cent. Then they can be frozen and remain steady thereafter while providing the same benefits.

[Translation]

The increase in CPP contribution rates that we announced is not the first in a series of increases. I repeat, the contribution rate of 9.9 per cent to be borne equally by workers and employers is a maximum that should never be exceeded. The rates will not increase again. This increase is lower than the 10.1 per cent already projected under the existing legislation, and is well below the 14.2 per cent that would have been required if we had not acted now.

It is true that the contribution rate in 2003 will be about 40 per cent higher than the rate foreseen under the existing legislation, but, at the same time, thanks to the amendments we are proposing, the contribution rate in 2030 will be much lower than projected. It will in fact be approximately 30 per cent.

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This means that future generations, our children and grandchildren, will not be weighed down by an incredible financial burden. It also means that people in their middle years whose contributions had been less than the amount required to pay future benefits will now pay contributions that are more equitable in that respect. Younger Canadian workers and young people entering the labour force will pay contributions that are not as high as previously planned. Also in the interests of fairness.

What about present CPP beneficiaries? Why are these people not affected? There is no doubt that many are drawing pensions that are far more generous than they would be on the basis of the contributions they paid. That is true, but it is not their fault. If anyone is to blame, it is the plan itself which was not adjusted in the past as it should have been, because previous governments did not have the political will to make these decisions.

That is why our proposal is accompanied by measures to make the Canada pension plan more accountable and provides for more frequent review. Furthermore, any new initiatives under the plan must have full financing before they can go ahead. However, it would not be fair to make our seniors, who made their retirement plans of the basis on the existing plan, pay their costs retroactively. We signed a contract with our seniors and for the sake of fairness, we must honour that contract.

As you can see, the proposed changes to the Canada pension plan are not an affront to business or the taxpayer. They do not involve an additional tax or some new trick in our tax system. In fact, these are prudent and basic measures that are entirely in line with our record for sound management of public moneys and reflect our commitment to be fair in every respect.

If we had failed to make the difficult decisions that were necessary, younger generations would have had to pay twice as much as they will now, without receiving a penny more in benefits. This would have been neither fair nor affordable, and indeed it

would have been excessively costly. To put such a burden on future contributors would, in all probability, have led to the collapse of the plan. We could not afford to let this happen.

[English]

Acting now will ensure the Canada pension plan is on a secure and stable financial footing for the foreseeable future. As I said before, the CPP changes were not decided in isolation. They reflect a truly national consensus based on public consultations and a decision making process that involved the provinces as full partners.

Believe me, no government at any level likes to ask its people to pay more for the same services. But it is a price many Canadians have told governments they are willing to pay in order to preserve the plan they believe in and want to be able to depend on. They told us so during the public consultations which were held in every province and territory last spring as part of the federal-provincial review of the plan. Canadians clearly said that they valued the CPP. They told us they wanted it fixed, not scrapped.

During the review, we and the provinces examined a number of options and heard opinions from both ends of the spectrum. We considered many alternatives, but narrowed our choices to those which would ensure that no one's benefits were jeopardized; not those of today's beneficiaries, nor those of future generations. We listened when Canadians everywhere said the Canada pension plan is important to them. They want it preserved, and preserved in a way that does not pass on an unfair burden to younger generations. It is worth remembering that the debate currently taking place is not about choosing to increase contribution rates. It is about choosing to preserve the Canada pension plan.

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Canadians asked their governments to make the CPP sustainable by strengthening its financing, improving the funds' investment practices and reducing costs. The changes proposed do exactly that.

Before concluding, let me briefly talk of another element of today's motion, an example of the political game playing that demonstrates the desperation of the third party. Reform members have attempted to create a link between the proposed Canada pension plan changes and the current pension arrangements for MPs. This is not just a comparison of apples and oranges. It is more in the realm of sour grapes.

I need not remind you, Mr. Speaker, that many Canadians belong to a pension plan, not only members of Parliament. For any pension plan member, pension income represents deferred compensation and thus an earned benefit. We must also remember that the terms of the MP's plan were designed to take into account an MP's unpredictable career pattern-as I think most Reform members will see within the next few months-lack of job security and the fact that many members take a substantial salary cut in undertaking parliamentary service. The MP's pension plan, like other employer sponsored pension plans, provides a pension arrangement for a targeted plan member population and therefore is adapted to their needs.

For the record, MP's pension contributions are higher than the norm for employer sponsored pension plans and are significantly higher than the contributions required under the Canada pension plan. I should also note that under the MP's plan members of the House of Commons contribute 9 per cent of all salaries. By comparison, in 1997, employee contributions under the CPP will be equal to 3 per cent of pensionable earnings. This rate is projected to increase to 4.45 per cent over the next six years.

I would also like to remind the House that in July 1995 and in the context of a freeze on parliamentary salaries, the government amended the Members of Parliament Retiring Allowances Act. Under the new arrangements age 55 has become the minimum pensionable age. As well, benefits for MPs in respect of service on or after July 13, 1995 have been reduced by 20 per cent. Also, the practice of double dipping has been curtailed within the federal public sector, which is the only sector over which the federal government has jurisdiction.

These changes went beyond the government's red book commitment to reform MP's pensions and have significantly reduced the related costs to taxpayers. In fact, savings over the past year have been in excess of $3 million. Also, as with any pension plan, the MP's plan is regularly examined with a view to balancing the needs of retiring MPs and the related costs.

The real issue, of course, is not a comparison between the CPP and the MP's plan. This is just electoral grandstanding. What today's motion tries to dismiss and discredit is the very real and historic reforms that the provincial and federal governments are bringing to the national workers' pension plan, reforms that will affect many millions of Canadians today and in years to come. By our work, these Canadians can plan for their retirement in greater security without having to wonder if the CPP will be there for them. It will because we have acted. This is the type of action that sustains our great country and that Canadians expect and demand of a government committed to their future.

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I am proud of what we have done and confident that the vast majority of Canadians see it as the major achievement it is, one firmly and fully committed to their best interests.

Mr. Ian McClelland (Edmonton Southwest, Ref.): Mr. Speaker, with great respect, as far as the comments of the President of the Treasury Board regarding the MP pension plan and its equity vis-à-vis other Canadians' pension plans are concerned, Canadians know full well that members of Parliament through their pension

plan got the gold mine and Canadians got the shaft. Of that there is no doubt. People know it and they know it for what it is.

In his comments the President of the Treasury Board pointed out that the provinces went along with the changes to the Canada pension plan. They went along with it obviously because they have been partners in this rip-off of Canadians for 30 years.

What the President of the Treasury Board did not say was that one of the features of this renewed Canada pension plan at 9.9 per cent of earnings is that the provinces will have the privilege of rolling over their debt for another 20 years. Therefore, this plan is not going to start getting better right away. They are going to postpone making it healthy or healthier for another 20 years.

My question relates to the equity of the CPP. The President of the Treasury Board indicated during his comments that Canadians need to be fair in sharing the future. It is incumbent on the President of the Treasury Board, in representing the Liberal Party of Canada, which has been in power for at least 20 of the 30 odd years that this plan has been in force, to account for the mismanagement of the plan that got us into this mess in the first place.

Actuaries and demographers did not just wake up overnight. The plan was flawed right from the beginning, but the Liberals did not have the strength to keep their hands off the honey pot. What politician does? The changes to this plan have not made it safe from the honey pot.

Based on the average industrial wage of $36,000, if a young Canadian were to place 3 per cent of earnings over the lifespan of their work into an investment vehicle that has a return of a typical average over the last 40 years, would that Canadian have more money from a 3 per cent investment than they would for their almost 10 per cent investment in the Canada pension plan?

Mr. Massé: Mr. Speaker, I would first like to underline that the important and real question being discussed is the reforms that have been made to the Canada pension plan. I understand that the third party, knowing that it has no real arguments about the reforms made and that it should instead congratulate us, has come to the conclusion that it should try some other subject in order to try and get some interest generated.

It is clear now that after days and days of the third party trying to find fault with the reforms to the CPP, public opinion is saying that the reforms are necessary. They are saying that the reforms introduced by the government are excellent and taken in co-operation and partnership with eight of the provinces and a large majority of the Canadian population. They fit the bill, remove the imperfections and now ensure that all Canadians will have access to a proper pension plan that is now properly funded. That is what is important.

However, we also have to take into consideration that some of the colleagues of the hon. gentleman have proposed other plans for MPs. One of these is to double the salaries of MPs. What is the best route to follow?

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Mr. Jim Silye (Calgary Centre, Ref.): Mr. Speaker, I am glad I am in the House today. This gentleman keeps referring to salary and I was speaking about compensation when we were debated the bill in the first place.

I think a member of Parliament deserves proper compensation, but it should be above board where it is visible, taxable and clear. When I threw a number out as to what an MP should receive it included taking care of all travel expenses.

An hon. member: No.

Mr. Silye: Yes, it did. Go back and look at the speech.

It included a suggestion that MPs look after their own pensions, which is no better than the private sector. Five per cent of that money should go into a pension if they choose to and five per cent matched by the government. It should be no better than the private sector. That is the pension portion of my compensation package for MPs. The Liberals can twist and bend all they want. If it is a choice it would be an investment.

The finance minister and this minister argue that the CPP increase to 10 per cent is an investment. If it is compulsory by the government it is a tax. If the rate is set by the government it is a tax. In opposition they called it a payroll tax. Now they are calling it an investment.

The government is very hypocritical. I question its logic on raising the CPP. There are concerns with the CPP. People are worried that money will not be there for them, but the logic is that the fund is $39 billion now. The deficit annually is about $1 billion and could go to $2 billion in any given year so the premium has to be raised.

Why did they overreact? Why did they not just raise the premium to 7 per cent? At the same time, because payroll taxes cost jobs, why did they not lower the unemployment insurance premium from the high lofty numbers? That fund has a fat $5 billion sitting in it which is soon to grow to $10 billion. They should lower the unemployment insurance premium, raise this other one if it is in jeopardy and keep the same two-year fund that is required instead of increasing it to five.

They have overreacted. They have increased the taxes too much. It is too great a burden on the economy to increase the taxes by that much. By not reducing the unemployment fund which they are

using to lower the deficit they will actually kill jobs. Their strategy of creating jobs is sadly lacking.

[Translation]

Mr. Massé: Mr. Speaker, I have great respect for my hon. colleague, who has just mentioned certain facts that unfortunately do not correspond to reality. I would like to remind him what he said in April 1995 during the debate on Bill C-85. He said:

[English]

We should get fair compensation, fair remuneration. It is at the senior executive level. Pay us $150,000 a year and we will look after our own pensions.

Not all Reform MPs opted out of their pensions, notwithstanding what they said. We have excluded double dipping. I must say a number of Reform MPs from Kootenay West, Nanaimo-Cowichan, Saanich-Gulf Islands and Lethbridge-

Mr. Culbert: Are they double dippers?

Mr. Massé: They are collecting pensions while collecting their salaries as MPs.

Mr. Culbert: Never.

Mr. Massé: I am shocked. I cannot believe that people who are arguing against double dipping which we have removed from the act are still unfortunately continuing these practices.

I understand why the Reform Party opts out of MPs pensions. It is because they have no chance of ever collecting.

The Deputy Speaker: When there are members from another party wishing to question a member the Speaker normally goes to the other side.

Mr. Ian McClelland (Edmonton Southwest, Ref.): Mr. Speaker, I would like to bring the President of the Treasury Board back to the fiduciary responsibility of the government to handle citizen's money in the best possible manner. I draw his attention the Quebec pension plan, the disability payments and the way in which the Quebec pension plan has been administered vis-à-vis the Canada pension plan.

Would the minister advise the House and Canadians generally why under the Quebec pension plan for disability take-up between 1986 and 1994 there was a 2 per cent increase while at the same time in the Canada pension plan there was a 92 per cent increase?

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Would the minister also tell the House why in 1976 when there were 55,000 people involved in the Canada pension plan 1,219 people came off disability, but in 1995 with 300,000 people on disability only 2,000 people came off disability? Is this the minister's indication of sound management?

Mr. Massé: Mr. Speaker, unfortunately a practice the third party uses is to try to confuse people with figures and with questions unrelated to the main subject.

What is really important is that we have made a reform that Canadians want. We have made it with the support of eight provinces representing the vast majority of Canadians. We have made it after public consultations that permitted all Canadians to express their points of view. We have finally reformed the Canada pension plan. We have made sure that young people like those who are in the gallery will be able to collect these pensions when the time comes.

That is what good government is about.

[Translation]

Mr. Paul Crête (Kamouraska-Rivière-du-Loup, BQ): Mr. Speaker, before discussing the pertinence of the Reform Party motion, it might be worthwhile to point out that the Canada Pension Plan does not apply in Quebec, which has a parallel plan, the Régime des rentes du Québec. It compares very favourably with the Canada Pension Plan. Moreover, the current recommendations by the federal government take into account the way the Quebec plan has been administered, and the way it ought to be administered in future.

The Reform Party motion makes what seems to be a rather demagogic association between the Canada Pension Plan and the MP pension plan. If we must debate the matter of the MPs' pensions, fine, but these are two very different matters. What needs to be done in connection with the Canada Pension Plan is to assess whether the recommendations made by the government that are to be implemented are indeed necessary, pertinent and essential.

This pension plan has not been modified for some years, and today it differs greatly from what it was like initially. For one thing, the modifications to the plan must reflect our changing demo../graphics.

Care must also be taken to ensure equity in the way the pension fund operates. At the moment, the plan covers the entire baby boom generation, those between 35 and 50 years old, like myself, and if nothing is done to change the plan, they will benefit from a far better plan than the one they have contributed to. Corrections are necessary. The people who are between 35 and 50 and who will be retiring in 10, 15 or 20 years will have to have contributed enough and we have to ensure, through increased contributions, that this is indeed the case.

On the other hand, an aspect of the government's position should perhaps be corrected and it will be perhaps at the stage bills are considered. We could have contemplated a significant reduction in unemployment insurance premiums and permitted a quicker short term increase in Canada pension plan contributions. As the result, today's young people would not have to bear the burden of the need to refloat the plan for so long.

Any reduction in unemployment insurance premiums would allow for an equivalent increase in Canada pension plan contributions. This approach would not create a negative impact on the total payroll or on payroll taxes, which can, as we know, have an effect on jobs. This morning, I read that a study by the Department of Finance estimates the cost at 26,000 jobs. There is a whole question of balance and common sense involved here. Demagoguery must be avoided.

Such a pension plan must provide for intergenerational continuity, that is, over time, as people contribute, each generation must pay its fair share to avoid having the younger generation paying excessively for the older one.

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As you know, it is now much harder than in the past to join the labour force, to find a steady and well paid job. A number of considerations must be taken into account and, in my opinion, one way to make the system more equitable and to ensure that every age group contributes its fair share would have been to make up, in part or in whole, for the increase in CPP contributions by significantly reducing UI premiums.

We must also determine whether the rate of return of this fund, the Canada Pension Plan, is adequate. The government's proposal seems to be a step in the right direction, because it is patterned on the model developed in Quebec, where the fund is invested in options involving various degrees of risk, making for an diversified portfolio and an attractive rate of return.

By contrast, the Canada Pension Plan has been used to provide financial assistance to the provinces, which may be a good thing, but the plan's rate of return is totally unsatisfactory and partly explains why we currently have an inadequate reserve and why contributions must now be increased.

With a better rate of return, like that of the Régie des rentes du Québec, the increase in contributions might have been lower, although the demo../graphics would still have had to be taken into account. So, one cannot say that, from that perspective, the government did something that was inadequate or inappropriate.

The Régie des rentes du Québec is an example which shows that, when Quebecers have control over their money, their investments and the management of their finances, they can do as well, if not better, than anyone else in Canada, North America or the world.

Quebec's expertise is such that several of the amendments being proposed by the federal government are already implemented in the Quebec plan, or are the result of suggestions made during the consultations with Quebec regarding its Régime des rentes.

It must be remembered that, in the 1960s, the Government of Quebec, which was then headed by Jean Lesage, had a certain expertise in economics. Experts like Jacques Parizeau and Bernard Landry were there at the time to advise the government. All these people helped develop a system whereby Quebec was able to accumulate a fairly large amount of money and, more importantly, a system Quebecers can now be proud of, in spite of a few minor flaws. With this system, a number of Quebecers start receiving a pension at a time when they are not yet eligible for an old age pension, so that Quebecers in general, at the exception of women at home unfortunately, receive directly a decent pension.

Quebec does have a reason to be proud. This is one system that can be held up as a model, and it is not the only one. The Caisse de dépôt et de placement, which manages these pension funds, and the Fonds de solidarité des travailleurs are other examples of various economic initiatives taken by Quebec that enable us to manage our money in a reasonable fashion.

These remarks are an indication that, were the Reform motion votable, the Bloc Quebecois would be voting against it. It says in part ``that this House condemn the government for requiring Canadians to pay over 70 percent more in CPP premiums''. Let us look at the reasons for this increase. Can we afford to ignore the problem and not to bail out this program, if this means the program will run out of money 10, 15 or 20 years from now?

(1645)

I think this would be one way to go for Canadians affected by the plan because, as I mentioned at the start of my speech, Quebec is not covered by the CPP. It has its own plan, the Quebec pension plan. I think that, if the amount in the CPP dropped and was not replenished, Canadians would think that their government had acted irresponsibly and for this reason the measures tabled must be considered.

When people say it increases the impact on payroll taxes, and I mentioned this earlier, yes, it is true that it will have an effect. Care must be taken to ensure that this effect is minimal. My proposal to decrease UI premiums by a corresponding amount is perhaps something that could be considered and included as an amendment to the initial government proposal, so that the negative effects of the plan on employment could be kept to a minimum.

Comparing it to the MPs' pension plan begins to sound more like grandstanding, in my view. There is not necessarily any connection between the two. I think the CPP has to be looked at separately and care taken to ensure that it is an effective plan. In this regard, there are a number of points to consider.

Let us look, for example, at the proposed measures. They say that none of those now in receipt of survivors' and disability benefits or both, nor those aged 65 and older as of December 31, 1997 will be affected by the proposed changes. This is to protect the elderly. Is it being done with an eye to the upcoming federal election? The government may have had this in mind, but at least it

ensures some security for seniors and does not change the plan to which they contributed. I think this is acceptable.

In addition, they say that all CPP benefits will continue to be fully indexed to inflation. This is good news, because the federal government is following in the steps of the Quebec pension plan. The same is true for age of retirement. Whether it is the usual age, earlier or later, things will remain unchanged. Here again, they have followed the lead of the Quebec pension plan.

There is another similarity with Quebec. The fund now consists of two years of benefits owing. They want to increase this to a reserve of five years. That seems reasonable to us. Contribution or premium levels will also rise over the next six years, to 9.9 per cent in 2003, after which they will remain stable. This insures the viability of the plan. Certainly, it is never a big thrill to have to pay into a plan, but when people see the advantages it can have for them in future, in Quebec at any rate, this is something on which there is going to be a consensus, I believe, and something which people are quite prepared to live with.

There is, however, one aspect that is bad news and ought to be looked at by the government. It ought to try to find a new approach to this aspect, which is the new way of calculating to be applied to the combined pensions of people receiving both disability and survivor's benefits, or retirement and survivor's benefits. This is very bad news indeed, and I invite the government to examine it closely. This situation here is more or less the same as with the American pensions at the moment.

I will give you the example of a lady who receives a survivor's benefit because her husband is deceased. She becomes disabled, and is eligible for disability benefits. Under the present plan, this lady receives two full benefits, which is understandable, since a person who is experiencing such difficult circumstances does not deserve to have them made more difficult economically. Yet the new rules will place a ceiling on the amount this person can receive. That could mean receiving benefits of $800 a month, instead of $1,200.

I think this is a point on which we ought to do battle, in order to ensure that such an unfair situation is not created by the bill. It is unfair to penalize people who are victims of such misfortune in this way. If a person has lost his or her spouse, and then becomes disabled as well, I believe that he or she is entitled to a minimum of financial security, and cutting that person's income is not the way to go, in our view.

We are also told that eligibility for disability benefits will require greater participation in the work force. The person will need to have contributed for four of the six years preceding application for benefits.

(1650)

In Quebec the plan is a little more generous: its requirements are for two of the last three years or five of the last ten. I think we will have to wait and see what the witnesses who appear before the finance committee will have to say about the consequences of this measure. It would seem to eliminate a number of contributors who will get nothing in return for what they paid. We must look into this.

For instance, someone who paid contributions for three years of the last six before his application for benefits is not eligible, which means he paid contributions but is not eligible for the plan's benefits. I think that is intolerable, and the same applies to the employment insurance reform the Liberals introduced.

This reform means that people who regularly pay their employment insurance premiums, especially those entering the labour market who have worked less than 910 hours, these people, after paying 600, 700 or 800 hours worth of employment insurance premiums will not be eligible for employment insurance.

This is intolerable, and I think that as far as the Canada pension plan is concerned, the government would do well to avoid making the same mistake.

A good thing about the Canada pension plan is the fact that Canadians will receive an annual statement of their Canada pension plan account. I think this is a way to make people responsible. They can see how much money they put in, they can plan for their retirement and ask how much they will get in benefits, how many years they still have to contribute and what impact this will have on their budget. I think this kind of specific information will be very useful to the various users of the plan.

It seems there will also be a federal-provincial review every three years instead of every five. This is a good thing. In fact, the Quebec government agrees. It means we will be able to keep a close watch on how the plan evolves and make adjustments as problems arise.

What we learn from the history of these funds-the Quebec pension plan and the Canada pension plan-over the past 20 years, is that from year to year, from one government to the next, there has been a tendency to postpone any decision making. Today, we are forced to accept a major increase in premiums. If there had been the same obligation in the past to review the plan every three years, we might have had a chance to make adjustments more regularly and it might not have been necessary to make such drastic changes. I think it would be useful to be able to operate this way.

The Reform Party's motion may have its merits as an attention getter, but it should be examined in greater detail. This is not about minor details. We are talking about some very important issues, about a pension plan that has existed for many years and will have a future for many more decades, about important decisions, and to

associate this directly with the way members of Parliament are treated smacks of grandstanding, in my opinion.

We need to turn a critical eye on the Canada pension plan. Among other things, we must ensure that performance is improved and that, if performance is improved and if the funds created perform well, the plan contributors benefit.

In this regard, even though the minister assured us earlier that this plan accrued separately, we cannot have a surplus of billions and billions of dollars accumulating as in the unemployment insurance fund. We will end up with $12 billion, $18 billion or $20 billion in an insurance plan where people contribute and employers and employees have no control over the surplus. What happens to the surplus? Will premiums be reduced?

The same thing must not happen in this plan, if its economic situation is improved.

In conclusion, the Canadian retirement income system has three pillars: the Canada pension plan, the old age security and the guaranteed income supplement. We have no strong reason for opposing the proposed reform, on the contrary, except for the points I mentioned earlier, including the benefits for persons on disability and survivors. It must complement the other pillars, like the guaranteed income supplement and the tax incentives for retirement savings.

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A person earning $100,000 and paying into an RRSP will save $313 in federal tax, whereas a person earning $30,000 will receive $175, which we do not consider much of an incentive. We proposed a standard tax credit of $268.

In conclusion, the motion is not votable, but we do not think it is acceptable as it stands. If there had been a vote, the Bloc would have voted against the motion, because it lacks the sense of responsibility needed in the development of a plan like the Canada pension plan.

[English]

Mr. Paul Szabo (Mississauga South, Lib.): Mr. Speaker, I would like the opinion of the member. He twigged something for me when he made a statement about ensuring that various groups do their fair share in contributing to a plan.

I read one statistic in the Financial Post which indicated that today's pensioners are receiving $8 benefit for every $1 they put into the plan. Clearly this raises questions about what is fair and for whom. I will leave that very simple question and ask the member if he could put it in the context of his speech.

[Translation]

Mr. Crête: Mr. Speaker, with a pension plan such as the one before us, in order to see if it is fair we must consider two main criteria, one of which is fairness, based on the type of people who benefit from that plan, because all kinds of situations must be anticipated. Some people will receive their pension benefit simply because they have reached pensionable age, while others will receive benefits because they are in a particular situation, including people with disabilities and surviving spouses.

For example, when one member of a couple dies and the surviving member keeps the house, the costs involved are the same as before, even though there is only one occupant. So, there is an issue of fairness that must be taken into account, based on the social values of a country such as Canada, in Quebec or any other province.

The other criterion regarding the fairness in the rate of return is whether or not the plan grew adequately. If people contributed to the plan, but the government did not manage to get optimum benefits from such contributions, it will not be in a position to pay an adequate amount. This is why sending statements to each contributor to the plan, so they know what is going on, and receiving progress reports on efficiency and profitability are part of the assessment process of the rate of return. The $1 to $8 ratio does not automatically mean the gain is satisfactory.

It may be that better management of the plan would have resulted in $10 being paid to the member, instead of $8. Or was $8 the maximum achievable? We must look at these factors.

Fairness and efficiency are definitely the two criteria that must be taken into account when determining whether the plan is satisfactory.

A major consideration for 1997, and for future years, is the issue of intergenerational fairness, of fairness of treatment between young people and older people. This issue involves many aspects. I discussed it with the hon. member for Témiscamingue, who is lucky enough to be part of the first group, the young people. He told me that, as things stand, a 25 year-old person will have to contribute during all his productive years at a rather high rate. That person will always pay a rather significant amount. However, if the government had reduced UI premium rates, while rapidly increasing contributions to the Canada pension plan, people who currently contribute to the plan, but who are 40, 45, 50 or 55 years old, would have shouldered a greater burden, because they would have contributed more than young people.

So, these considerations must be looked into. We must not forget that those who already receive benefits under the plan will not be adversely affected. They are entitled to the plan, and this is fine. However, we could do more for young people.

(1700)

[English]

Mr. Ian McClelland (Edmonton Southwest, Ref.): Mr. Speaker, I am always touched by the irony when members of the Bloc stand up in the House of Commons and defend the right to take a pension from Canada, ``but by the way we want to take the province of Quebec out of Canada''. It may escape members of the Bloc but I assure you, Mr. Speaker, it does not escape the people where I come from.

The point I want to make to my colleague from the Bloc is that in order to have the moral authority to ask other Canadians to tighten their belts, we as Members of Parliament must first tighten ours. We are asking Canadians to pay twice as much for less. Yet we think it is quite all right for us to go along merrily as we have in the past.

My question relates to the different vision that we have of Canada. This does not make one right or another one wrong. It is just different; the collective nature of Quebec and the fact that Canada pension plan premium increases have not struck a resonant chord in Quebec. I would ask my colleague to think about the 45 per cent of Canadian businesses, as reported by the Canadian Federation of Independent Businesses, that say payroll taxes are a major disincentive to hiring. Unemployment, particularly among young people, in Quebec is a disaster. What affect will this payroll tax increase have on employment in Quebec?

[Translation]

Mr. Crête: Mr. Speaker, I must say I have no problem with members of the Bloc Quebecois receiving a pension from Canada, because I was elected by the people, by 54 per cent of the voters in my riding. They voted for me thinking that sending me here was the best way to have a voice in the Parliament of Canada.

As far as I know, Quebec is a part of Canada and I have an employer in Canada. The plan does allow members who wish to do so to opt out of the plan. This is an optional plan. Therefore, I do not think this should be challenged.

My first allegiance is to those who elected me, who chose to be represented by a member of the Bloc Quebecois. The fact that 53 or 54 of us were elected to this place seems to indicate that things are not all going well in Canada. I think that it will be up to the people to tell us, in the next election, whether they are still happy with the job we are doing here. Everything is out in the open, and they will decide accordingly.

To answer the second part of the question, about unemployment, I would like to point out to the hon. member that, in my remarks, I suggested that UI premiums could be reduced very quickly and this reduction compensated in whole or in part by an increase in CPP premiums. In Quebec, choices will have to be made in that regard and there is a need to be able to assess the actual impact of such a measure, whether it will be 1 per cent, 2 per cent or 3 per cent.

In both Quebec and Canada, one thing is sure: when people grow older, they want to know that they will have a decent pension and so will the younger generations. Younger people too want to be able to count on getting a pension. A balance will be struck through appropriate consultation. More work remains to be done, and I do not think it would be appropriate, at this time, to condemn the proposed changes. Close scrutiny is required to ensure the plan is the best it can be, so that 15 or 20 years down the road, we can look back and say that the governments acted responsibly on this issue.

The Deputy Chairman: Before turning the floor over to the member for Edmonton Southwest, it is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are: the hon. member for South Shore, the economy of Atlantic Canada; the hon. member for St-Boniface, the CBC; the hon. member for Lambton-Middlesex, the Pest Management Regulatory Agency.

[English]

Mr. Ian McClelland (Edmonton Southwest, Ref.): Mr. Speaker, this is a particularly important debate for all Canadians, particularly younger Canadians. During the course of the debate, I hope I will be able to make five points. The first point would be that the Canada pension plan, even as it has been restructured, which admittedly is better than it was, is a poor investment for all contributors but it is particularly poor for younger Canadians.

(1705)

I would also like to make the point that payroll taxes are, in the words of the current Minister of Finance, a cancer on job creation. They are a cancer on job creation to the most vulnerable people in our society, the last hired and the first fired. It is a cumulative effect of payroll taxes. I do not care what name we use to disguise it, if it is a contribution or a mandatory payroll deduction it is a tax and it is a cancer on job creation. It is something that we, as members of Parliament in this legislature and all legislatures across the country, have to mitigate. It is our responsibility.

I would also like to make the point that the plan continues to be irresponsible. It continues to be a pay as you go plan. It is a defined benefit plan that defines the benefit that contributors will receive but the benefit does not have a direct relationship to the amount that is paid into it.

I would also like to make the point that unless the contributions to the Canada pension plan receive a substantially higher return, and in view of the changes to pension planning for all seniors brought about by the change to the seniors benefit, the change to OAS and GIS, old age security and the guaranteed annual income

supplement, which will now be the seniors benefit, virtually everyone will see half of their Canada pension plan taxed back.

In the year 2001 when the seniors benefit takes effect all single seniors in our country turning age 65 will receive $11,420 per year tax free. However, any additional income, including pension income and the Canada pension plan, will be taxed back at 50 per cent. That means that unless pension income over the working life of the taxpayer generates a much better return on investment, it is going to be virtually totally taxed back anyway.

The last point I want to make is there is a direct relationship between the pension plan for members of Parliament and the Canada pension plan and the increases to the Canada pension plan.

I thought long and hard before I opted out of the MP pension plan. It is a very lucrative pension plan. My being here is going to cost me and my family down the road. However, I thought we as members of Parliament were in a particularly difficult time. We all knew it and everybody in the country knew it. It was only way that we could have the moral authority to say to Canadians that it is necessary for all of us, every single Canadian, young and old, to make a sacrifice because we must leave our country in better shape for our grandchildren than we found it.

The only way that we could have the moral authority to do that would be to be the first people to take a hit. We had to demonstrate that we were not going to ask people to do as we say. We were going to demonstrate that we would ask people to do what we have done and to show leadership. That is what this is all about. It is not a question of being holier than thou and wearing a hair shirt. It is a question of having the moral authority to ask Canadians to tighten their belts because we have a responsibility in our generation to leave our country in better shape for our grandchildren than we found it.

When our children and grandchildren have the opportunity to pay a Canada pension plan tax of 10 per cent of their income, they will at the same time, as we all know, also have the opportunity to pay taxes to support a $600 billion national debt.

(1710 )

This is the legacy that we leave our children and our grandchildren. We leave an unfunded tax liability on the Canada pension plan of $600 billion, and the very generations of Canadians that put that responsibility on the shoulders of their children and grandchildren are also leaving future generations of Canadians with a $600 billion debt.

Unemployment in our country is at historic high levels. We have had the highest sustained levels of unemployment since the depression. At the same time we are greatly increasing payroll taxes. Payroll taxes, by every objective standard and by every commentator, are acknowledged to be killers of jobs and employment.

If we were to collapse the Canada pension plan today, current and future taxpayers would still have to pay approximately $600 billion in accrued pension benefits which we are liable for that have not yet been paid. That unfunded liability is equivalent to our $600 billion national debt. It is something that parliamentarians for the past 30 years have been very uncomfortable in addressing. Instead, we have increased the contribution rate to build up a fund over five years instead of two, while maintaining a pay as you go dimension to the plan. Pay as you go means that each succeeding generation will pay the benefits of the generation which preceded it.

Somewhere down the line, at some time, someone is going to have to make good on these pension promises.

We overlook the fact that in Canada, if the pension plan were to collapse tomorrow, annual premiums would still be required to pay for the $600 billion of accrued benefits. When we view a proposed 6 per cent premium in 1997, 6.4 per cent in 1998, 7 per cent in 1999 and 9.9 per cent in 2003, we should be aware that the promise that premiums will be frozen at 9.9 per cent must be considered suspect. After all, if full funding of the benefits of a completely collapsed plan would cost 8 per cent or 7 per cent annually, how can 9.9 per cent be viewed as stable when the unfunded liabilities will continue to increase?

During question period over the last couple of weeks I have put that question directly to cabinet ministers. Of course the question has not been answered. I have asked cabinet ministers when the CPP premiums hit 9.9 per cent, will the government guarantee that there will be no further increases in pension plan premiums or decreases in benefits. The reason that question was not answered is they cannot answer it. They have no idea. I suspect, however, that we will see that happen.

When the plan started in the mid-sixties the contribution rate was 3.5 per cent. Then it went to 5.65 per cent and it will go to 9.9 per cent. Therefore it is reasonable to assume that rates will continue to increase.

Also at issue is the timing of the increase. Is our economy sufficiently healthy that employers will be able to pay the increased premium of $1,300 and continue to increase employment? At the same time, the employment insurance fund has a great surplus. This is the link between the payroll taxes of employment insurance and the Canada pension plan premiums that kept Ontario out of the mix for so long.

(1715 )

I know the government says Ontario came on board because it managed to wrestle from the government a 10 cent decrease in unemployment insurance premiums for a corresponding $4 increase in Canada pension plan premiums. I doubt very much whether that is a victory people will hear the Ontario government crowing about very long.

I point out once again that this is being done at a time when one in 10 Canadians are unemployed, when many are under employed and 17 per cent of young Canadians are unemployed. They are the people who will be hurt most.

Whether people call the increase in the Canada pension plan premiums a tax or a pension contribution, it is still a compulsory cost to the employer which raises the cost of creating a job.

The government insists that the 9.9 per cent tax is not a tax but an investment. Therefore, the government believes it is not reasonable to speak of the disastrous effects the Canada pension plan rate increase will have on employment. I submit that it is a false argument.

Unless we, as members of Parliament from all sides, are able to look at the problems that face the country honestly, unless we are able to deal with things as they are and not as we would wish them to be, how can we ever make them right? How can we possibly fool ourselves into thinking that a mandatory deduction that must be taken and paid by every working Canadian is not a tax?

Only two people in the whole country believe it is not a tax. Unfortunately, those two people are the Prime Minister and the Minister of Finance. Perhaps the Parliamentary Secretary to the Minister of Finance who has worked so hard at putting the changes to this Canada pension plan together, does not believe it is a tax either. I hope history will judge him fairly and with considerable compassion.

Mr. Benoit: He will need the compassion.

Mr. McClelland: He will need it. Much of the political and social disagreement concerning the Canada pension plan could be addressed through creating options. This is the area where the Liberal government has let us down. The government has the responsibility of leadership, not just patching over the cracks.

If it took over 30 years to get where we are on this road with the Canada pension plan, with the $600 billion deficiency, why in the name of heaven would we spend another day going down that road? Why would we want to patch over a plan that was flawed right from the beginning? People knew it was flawed. Why would we not use our best efforts to make this plan work much better for succeeding generations? That has to be the elemental question. Why put a band-aid on it? Why not do what needs to be done to fix it properly?

I mentioned earlier in questions and comments to other speakers that the Canada pension plan became a honey pot of money and entitlement that politicians found irresistible, rather like flies to honey.

The disability take up on the Canada pension plan has been surprisingly high over recent years. That is not terribly surprising because the take up rate on Canada pension plan disability has a direct correlation to the job market. When jobs are scarce people do what they have to do to survive.

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One of the things that people have done, and that is why the take up rate on the disability side of the Canada pension plan is so high, has been to use it to provide an alternate source of income. Once this availability was established, government cannot turn on a dime and tell people it is sorry but the plan is no longer available.

Since the auditor general's report identified this as a particularly difficult problem for the Canada pension plan, the policing of the disability entitlement has been much more severe. As I mentioned earlier, over a 10-year period the Canada pension plan had a 92 per cent increase compared with the Quebec pension plan which had only a 2 per cent increase.

The disability community, persons who have long term, systemic disability, did not want the Canada pension plan disability tampered with because, quite rightly, it said that it has problems enough protecting itself from the ravages of the cuts to the Canada health and social transfer. To the credit of the government, the report on persons with disabilities by the member from Fredericton addresses some of the concerns very well.

There is a very real difference between Canadians who are in systemic, long term disability into which they are born or have suffered a tragic accident and people who take up disability because it is part of the pension plan privileges. We have combined the two. In hearings with persons with disabilities they would prefer not to be combined but they do not want to rock the boat now.

In my view, it is our responsibility to protect persons with disabilities. That is part of our common wealth. That is part of our responsibility one to another. That is how through our own independence our interdependence is strengthened. However, the two should not be confused. Insurance is insurance. The Canada pension plan is a pension plan. By allowing the Canada pension plan to become something that it was never designed to be puts increasing stress on its ability to fund what it was supposed to do in the first place, which is to be a pension plan.

If, as a society, we need to look at funding persons with disabilities, then let us also deal with that honestly. Let us put it on the table and see how it can best be done economically and ensure that people who must take up the provisions of disability insurance get into and out of the program.

That has been duplicated already because every province has a workers' compensation board. The provincial and federal governments need to work together to ensure that every single citizen gets the best return on the common investment. However, they should not trickle down responsibilities from one order of government to another. Citizens should not have to shop to see where they can get support. They should not have to make a disability premium payment to an insurance company only to find that the insurance company will not pay until after they have been able to collect from the federal program.

I anticipate some well thought and well founded questions from members opposite. I hope that when they ask the questions they will keep in mind that this is a particularly poor return on investment for young Canadians who must bear the burden of the debt that they will inherit also.

I would ask members opposite to get their calculators out and tell Canadians what return would come on a 40-year investment of $1,000 per year at an average rate of return of the equity markets in Canada and tell me that is not better than the CPP deal.

(1725 )

Mr. David Walker (Winnipeg North Centre, Lib.): Madam Speaker, it gives me great pleasure to join this debate. I have never seen an opposition party so willing to open up its weakest flank by declaring a day to debate an idea that does not actually exist. That is one of the great travesties in this debate.

This is a very serious debate. Members are very concerned about it. One of the core issues facing our society is that of economic insecurity. The eight provincial governments and the federal government have finally answered the question of economic security in the Canada pension plan. It is a great achievement. Only three political leaders in the country would not join in: the premier of Saskatchewan, the premier of British Columbia and the leader of the third party. What a group of scoundrels. None of them are willing to live up to his responsibilities. What do they have in common? Their unwillingness to deal with the arithmetic reality that is involved in the reform of the Canada pension plan.

People have begged us from the outset to please do something about this plan.

Mr. Epp: Starting in 1966 they did.

Mr. Walker: Yes. Guess who was the proudest defender of the plan? Guess who wrote to the famous John Kroeker, who the member brought up in the House of Commons yesterday, to say this is the best thing for Canadians? Ernest Manning wrote a private letter to him which said that this plan should be defended by Canadians, that this is the best way to protect workers in a modern society. It was the father of the member's leader. He should go back to his papers to find out where he was in 1965-66. The member should do his research and he will understand how this plan works. He should start telling Canadians that at 7 per cent, what will happen to that $600 billion if we do not have a Canada pension plan. What will they do, raise income tax? Will they put their hands over their eyes? What will happen to that?

Canadians will have money for their Canada pension plan by keeping their contributions down to 9.9 per cent, by sharing the cost between the employers and the employees. Do Reformers mention employer contributions in their superfund? Of course they do not. The great travesty in this whole thing is that the workers pay the 10 per cent plus they pay 7 per cent for the outstanding obligation. For 17 per cent, what do they get? A high risk mutual fund run by the Reform Party. Is the member crazy? Is he nuts? I would like to hear a response.

Mr. McClelland: Madam Speaker, allowances must be made for the hon. member opposite because he has had this file for the past year and surely must be weary of it. You can tell because of the cobbled together package he has brought to Canadians.

The member opposite makes great political capital of the fact that the provincial premiers have joined them. Jesse James and his gang have come together to rob taxpayers by foisting this despicable, expensive program on the younger generation of Canadians. It is a darn good thing the Liberals foisted off the gun control first because there is no defence against the Liberals when they come charging up and start putting their hands in your pockets, you know they will go deep and it will hurt.

The government has known for 30 years that the Canada pension plan would not work. Circumstances finally forced it to cobble together the unholy alliance with the provincial governments to continue the funding for another 20 years of moneys at the long bond rate, which is what it came to us with. The government members should be hanging their heads in well deserved shame.

The Acting Speaker (Mrs. Ringuette-Maltais): It being5.30 p.m., it is my duty to inform the House that proceedings on the motion have expired. The House will now proceed to the consideration of Private Members' Business as listed on today's Order Paper.