CPP reform good for seniors, economy in long run: Finance Canada

Harper cabinet ministers had claimed pension changes could cost thousands of jobs, but that analysis deeply flawed, economist says

By Peter O'Neil, Vancouver Sun

OTTAWA - The B.C. government should support efforts to improve Canada Pension  Plan benefits in light of federal documents showing that would boost Canada’s  economy in the long run, a pension expert said Friday.

The Harper government insisted at a conference in December that a CPP premium  hike for workers and employers to pay for higher benefits would be a job-killer.  It cited internal Finance Department research suggesting two proposals – one  from the federal New Democrats, the other from the Prince Edward Island  government – would kill between 17,000 and 70,000 jobs.

But Finance Department documents made public this week show that department  officials weren’t nearly as negative as their political masters, then-finance  minister Jim Flaherty and the minister of state for finance, Kevin Sorenson.

B.C. Finance Minister Mike de Jong, while less hard-line than his federal  counterparts, had backed Ottawa’s position that it was too risky to introduce  higher premiums in a period of economic uncertainty.

“Now is not the time,” de Jong said after the federal-provincial meeting in  December.

One briefing note circulating in the days before the conference, at a time  when two journalists were pestering the department to justify its grim forecast  of major job losses, actually offered a rosy long-term forecast.

“In the long run, expanding the CPP would bring economic benefits,” stated  the Dec. 10 briefing note that was obtained and made public this week by the  Canadian Labour Congress.

“Higher savings will lead to higher income in the future and higher  consumption possibilities for seniors.”

The department briefing notes also said that if CPP reform “is implemented at  a time of robust economic growth, as was the case during the late 1990s … the  (short-term negative) impact would be outweighed by the underlying strength of  the economy.”

A B.C. expert on pensions and payroll taxes said the provincial government  should join provinces Ontario and Prince Edward Island in aggressively pushing  Ottawa to back a CPP overhaul.

“Now that we know that the federal finance department itself recognizes the  long-term benefits of expanding the CPP, the B.C. government should band with  the other provinces to renew the push for an expanded CPP despite the opposition  from the small business lobby,” said economist Rhys Kesselman, who holds the  Canada Research Chair in Public Finance at Simon Fraser University’s School of  Public Policy.

Kesselman said the federal government’s calculation of huge job losses caused  by higher premiums was deeply flawed.

The various proposals on the table would have given companies several years’ notice before they were to be implemented, and they would be phased in over  several more years, according to Kesselman.

One of them, PEI’s, would increase annual contributions that are split  equally between employees and employers from $2,356.20 to $4,681.20.

The proposal, to be implemented gradually over three years starting in 2016,  would boost the maximum benefit to $23,400 from $12,150.

Yet the Finance Department’s calculations, used as a basis for warning of job  losses, were based on the assumption that the higher premiums would be imposed  without warning and within a single year.

“Finance Canada used the most unrealistic assumptions to generate forecasts  of significant job losses,” Kesselman told The Vancouver Sun.

A spokeswoman for Sorenson defended the government’s position in December,  saying Ottawa has “always been very clear. Given the fragility of the current  economy, now is not the time for increased costs on business which would deter  business investment, decrease wages, and kill jobs.”

The B.C. Finance Ministry said in a statement that Victoria recognizes the  need for both Ottawa and the provinces to deal with “the under-savings problem” as Canadians who won’t have enough retirement income.

The statement endorsed a “modest” CPP expansion – but only “when economic  conditions permit.”

New Democrat MP and pension spokesman Murray Rankin said the internal  documents show the government “withheld critical information” from  Canadians.

“It is a very disturbing situation when the government withholds and misuses  information in an attempt to mislead the public, particularly on an issue as important as retirement security.”

One of the journalists who asked the Finance Department in December to  provide data to back up Sorenson’s claims blogged about the matter this  week.

John Geddes, Maclean’s magazine’s Ottawa bureau chief and a respected public  policy writer, zeroed in on the Dec. 10 reference in the internal document  citing positive long-term benefits.

“Nothing like that positive message, nothing approaching it, was hinted at in  the answers I got that very week from the finance department,” Geddes wrote.


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