NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 27, 1999

• 1533

[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Colleagues, it's my pleasure to call to order this Tuesday, April 27, 1999 meeting of the Standing Committee on Natural Resources and Government Operations.

We're pleased to have with us today the Honourable Marcel Massé, President of the Treasury Board. He is here to kick off our study and review of Bill C-78, the Public Sector Pension Investment Board Act.

Welcome, Minister. If you have a couple of officials with you, as you need to, you will no doubt ask for their input.

I do have a short question from you, John. Do you want to wait until it's your turn to ask questions?

Mr. John Williams (St. Albert, Ref.): No, I would like to ask the question—

The Chairman: Just indulge us for a moment.

Mr. John Williams: Thank you, Mr. Chairman. The question I have is the fact that we didn't even receive notification of this meeting until this morning. As you know, the government introduced closure on this bill last week. We voted on it last night after fewer than two days of debate in the House, and here we have it in committee this afternoon with the minister here. While the minister has had a chance to look at this bill for a long time, we haven't.

The Chairman: Okay. Is it a point of order?

Mr. John Williams: My point of order is that I think this meeting should be deferred so we can have time to look at this bill and analyse it properly, because we haven't had it because of closure in the House.

The Chairman: Okay.

Mr. John Williams: So I would move that the meeting be adjourned until we have time to look at the bill.

The Chairman: If I may, with great respect, John, respond to your point of order, the committee last week was informed that we would likely receive Bill C-78 this week. You can check with your colleagues on that. That aside, the notice was in order and in time, although it wasn't as much as we can usually provide to members. But it was certainly in order and in time. So unless the committee unanimously wishes to disagree with me, I think we will proceed. Okay, John?

• 1535

Mr. John Williams: That's your ruling?

The Chairman: That's my ruling. Thank you, John.

Thank you, Mr. Minister. We'll invite you to commence your comments.

The Honourable Marcel Massé (President of the Treasury Board and Minister responsible for Infrastructure): Thank you very much, Mr. Chairman and members of the committee. I am very pleased to be here for a very important bill.

I have with me Alain Jolicoeur, who is our head of human resources and main negotiator—a very important piece in the machinery of Treasury Board, and somebody who knows almost all the answers—and Sharon Hamilton, who knows all the answers. She's been there for a very, very long while, and whenever I have a question about pensions I know where to call.

Bill C-78 is important because it is the means by which the federal government will ensure that its employees continue far into the future to have pension plans that rank among the very best in the world. When all is said and done, the long-term sustainability of the public service pension plans is the very heart and soul of this bill.

Of all the proposals of Bill C-78, that of surplus management has so far got most of the attention. Much of the attention has missed the mark, I'm afraid. I would like to use a few minutes to try to clarify the government's position on that subject in particular.

The simple indisputable fact is that the surpluses showing in the public service superannuation accounts need to be managed. They have reached the enormous total of some $30 billion, and frankly, it's high time something was done about them. Other pension plans incorporate ways and means for managing surpluses once they reach a certain size, and that is basically what the federal government intends for the public service plans. At present, the legislation does not address the matter of surpluses in any way.

The government has not done anything about the problem up to now simply because we were hoping to make the solution part of a new pension plan government structure based on joint management. We were hoping to introduce, as part of the pension amendment package, a proposal for joint management whereby both the employer and the employees would share not only the responsibilities and risks of the public service pension plans, but also any future surpluses that may arise in the new pension funds. We nurtured this hope through consultation over several years.

[Translation]

Eventually, our hopes were dashed, temporarily at least, last December when the unions withdrew their original support for the pension amendment package as a whole over the single issue of sharing the existing surpluses. This is not to say that we have given up hope. We have had to leave joint management out of the present package because it would not be right to involve the employees in managing their own plans without their explicit consent.

But the unions remain in favour of joint management, or so they say, and I can assure you that the government remains highly in favour. We are leaving the door open for further discussions, the sooner the better, as far as I'm concerned. Whenever the unions are ready to discuss the sharing of risks and surpluses in the future, the government is eager to sit down at the table.

[English]

For the government, sharing surpluses goes hand in hand with sharing risks. The employees have not shared the financial risks of the past, and therefore are not entitled to share the surpluses that have accumulated in the past. If they eventually agree to sharing future risks, then of course they will have every right to share any surpluses that may arise in the future. Meanwhile, the government intends to credit the existing surpluses to the greater benefit of those who have indeed shouldered all the risk of the public service pension plans up to now—the taxpayers of Canada.

• 1540

The surpluses in the public service superannuation accounts do not belong to the employees. Employees already get exactly what they paid for from their pension plans, and that is their defined and promised pensions.

[Translation]

The surpluses belong to the people who put them there, that is all Canadians who, with their tax dollars, have paid not only the majority of pension plan costs, but also some $13 billion in extra contributions over the years to cover account deficits, in keeping with the assumption of total risk. As for the notion that the surpluses should simply be left in the accounts as a reserve, that is absurd.

Bill C-78's proposals already provide for an appropriate reserve to smooth any adverse effects in future actuarial assumptions. It will be the same amount that is currently provided under the Income Tax Act for other employers: 10% of pension liabilities. That amount will be quite sufficient. You do not need a reserve of $30 billion.

I think that the reaction to this one aspect of Bill C-78 has tended to obscure its true breadth, depth and balance.

[English]

During your deliberations, you will be considering many other proposals: benefit improvements, the new pension investment board, and the new method for setting contribution rates, to name a few. The provisions for managing account surpluses are only one of its many aspects, which together form an integral whole.

The legislation before you covers a lot of ground, and I'm confident that once you, the members of the committee, have thoroughly covered the same ground, you will be persuaded not only of the basic soundness and necessity of Bill C-78, but also of its overall balance and its fairness to all concerned. I will leave it at that for now and let you get on with your important work.

[Translation]

I am now ready to answer your questions. Thank you, Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Minister.

We'll start questions with you, John.

To those shall we say relative newcomers, I try to give everybody about ten minutes, give or take a minute, in the first round, and we try to keep it in balance with the party representation in the House. So we'll start with John, then I think we have Marlene and probably Yvan after that.

Okay, John.

Mr. John Williams: Thank you, Mr. Chairman, and good afternoon, Mr. Minister.

I note that you mentioned the risk is not shared, but you finished your comments by saying that the contribution rates will change, which I think is a euphemism or code for more payments by the employees. Obviously, the employees must therefore be accepting part of the risk in the funding of the plan. I recognize your point that the government put in $13 billion back in 1987, I think it was, but you are taking out the entire surplus by the looks of it, including, therefore, some of the money contributed by the employees. How can you justify that?

Mr. Marcel Massé: By the fact that you have basically two types of pension plans. You have those in which the employers and the employees share the risks and the benefits, and agree on a certain level of benefits. Let's say the sharing percentages are 60%-40%, which they are for the majority of public sector pension plans, then whatever happens in the pension plans belongs to those who pay for it. If there is a surplus, part of it may be redistributed as a holiday of contributions or something like that.

Then you have in law what is called, I believe, the “defined-benefit plans”, and these define a certain rate of contribution, let's say in this case 7.5% of salaries, and they define benefits. In these plans, what is guaranteed by law are the benefits, whatever happens in the pension plan. And whatever happens in the pension plan means exactly that. It means that if you have deficits, the government pays for it. For instance, when the plans were indexed and the liabilities suddenly increased by $8 billion, nobody, certainly not any members of the unions, nor the government, argued that a cent of that was due by the employees. This was an increase in liabilities, and it was paid by the government, because what the government gave by law was the defined benefits.

• 1545

So not a cent of the surpluses belongs to the public servants, in the same way that not a cent of the deficits had to be paid by the public servants. In this case, there's no link between the size of the surplus, the size of the deficit, and what happens. It's the taxpayers of Canada who assumed all the risk, and the surplus all comes to the taxpayers of Canada.

Mr. John Williams: And you increased the premiums, I think it was in the seventies, from 6.5% to 7.5%, because obviously the employees were not paying enough and had to share a larger part of the risk. I think your argument is fairly thin, to say that while the pot contains sources of money from three sources, the employees, the employer, and the return on the investments in the fund, all the excess belongs to you and to nobody else.

The other question I wanted to ask you about is your comment about the 10% being sufficient, the 10% reserve that Revenue Canada says is allowable under the Income Tax Act. I think we're dealing with the only very large fund that has a fully indexed benefit. And as you just mentioned a few minutes ago, back in the days of high inflation the actuarial assessment required a very large pot of money to meet the potential obligation. Now that inflation is much lower, this is why we have a surplus today. But who's to know that we may return to days of high inflation, and if we do return to days of high inflation, by your own words, we the taxpayers are on the hook for every last nickel of the benefits. So why are you taking the money today, when you may have to put it back another day if inflation returns?

Mr. Marcel Massé: Because the experts in that field are quite clear—including the Auditor General, by the way—that this surplus and the way it's been calculated and so on is clearly surplus to any foreseeable need in the pension plan. And the Auditor General has in fact been writing in his reports year after year—I've read the reports from every year since 1994—telling the government that this surplus is not justified and that the surplus in fact overstates the debt position of the government and that it should be reduced. For the public accounts, it should be reduced until it is eliminated. In this game, I guess you follow what the experts like the Auditor General ask you to do.

Mr. John Williams: It's the first time I've seen you following the Auditor General in a slavish type of manner, Mr. Minister. I think of the altercation the Deputy Minister of Finance and your own secretary had with the Auditor General about a year ago on a different issue. So it doesn't wash with me that you're following the Auditor General's recommendation. It's only when it suits the government's policy.

Mr. Marcel Massé: In this case, Mr. Chairman, we agree with him.

Mr. John Williams: But the point I'm trying to say is that the actuaries today, in a low inflationary environment, have a different set of underlying assumptions about the long-term cost of the plan, which was quite different from some years ago. Back in just 1991 the plan didn't have this surplus at all, because that was an inflationary time; we were coming to the end of it, but it was still an inflationary time. So the fluctuations of the actuarial assessments and evaluation of the fund can change dramatically, with or without changes to contributions and so on, and the taxpayers are on the hook. My point is that you are taking this money from the plan today with the full knowledge that you may have to put it back at a later time. What's the rationale for it?

Mr. Marcel Massé: Mr. Chairman, the best advice we can get is that this surplus money is not necessary. The Auditor General has argued year after year after year that it misstated the state of the accounts and therefore should be changed. The main reason is not only that inflation was low, but the fact that salaries were frozen for six years and therefore the expected final salary involved in the pensions was decreased considerably. But if assumptions changed, obviously we'd adapt to it. The best available advice we now get is quite clearly that the surplus is far too great for our needs and should be reabsorbed in the public accounts, and that's what we're doing.

• 1550

Mr. John Williams: So what you're saying there, Mr. Minister, is that the people who retired at the end of the wage freeze not only suffered the wage freeze, but are now going to suffer for the rest of their lives by reduced pension because the wage freeze reduced the pension and that is going to carry on for the rest of their lives. Is there any idea, any intention, of compensating them for that?

Mr. Marcel Massé: Mr. Chairman, that obviously has nothing to do with the surplus, which is an accounting issue. The fact that salaries are higher or lower over a certain period obviously affects the ultimate pension that is being paid to employees, and that depends on the state of the market, on government policy, and so on. The fact that people have a certain pension is the result of the average salary. Now, if the bill is approved, their best five years is the deal that has been struck. It is the deal that is in the law. These are the defined benefits. And compared to private sector plans, I think you will agree that this is a generous plan.

Mr. John Williams: Most definitely a generous plan, but if you run up another surplus after you help yourself to this one, are you going to contemplate a reduction in contributions by the employees? Because, by definition, they would be contributing to that surplus, as they contributed to this one, therefore they are not sharing in the risk but paying right into the government coffers by the fact that as they over-contribute, you're taking it out.

Mr. Marcel Massé: The rates we would like to see installed in the future of sharing for the benefits that are paid out is, once again, about 60-40. At present it's 70-30 and it's moving toward 80% to be paid by the government, which is too much. If there is not joint management, the same principle applies, which is that if the government takes all the risk for future surpluses it also gets not only to pay all the deficits, but to get all the surpluses. That's the logic of it. If, however, we move to joint management, as we hope we will, then in that case there will be sharing of the deficits and the surpluses with the employees.

Mr. John Williams: But part of this $30 billion surplus does contain contributions by employees, and therefore I'm at a loss to understand how you feel they haven't contributed a penny toward that $30 billion. They certainly contributed to the $94 billion that will be left. So why didn't they contribute to the $30 billion too?

Mr. Marcel Massé: Again, when the government passed the previous law what was promised to employees was a defined benefit system. And it's a system in which the benefits were defined. If the contributions of the employees, at 7.5% of salary, were not enough, the government absorbed the difference. That's why they are, at present, at 70-30. So in a system like this, what is guaranteed by law are the benefits the employees get. If we continue with a system like this, we will continue the same sharing of risks and therefore deficits and surpluses. And what the employees contribute in this is a fixed proportion of their salary, which translates into defined benefits.

The Chairman: Thank you.

Marlene Jennings, then, Yvan, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Mr. Massé, I would like to ask you a few questions. If I understand the arguments being made by the government and by legal, actuarial and accounting experts, the surpluses should be turned over to Canadian taxpayers because they are the ones that have guaranteed and covered any deficits that the pension plans may have incurred or did incur in past years. Is that correct?

Mr. Marcel Massé: Yes.

Ms. Marlene Jennings: Are there other similar pension plans here in Canada, or elsewhere in the world, in industrialized countries or Western countries, where the deficits are guaranteed by the taxpayers and the surpluses paid to the employees?

[English]

The Chairman: Sharon.

• 1555

Ms. Sharon Hamilton (Assistant Secretary, Pensions Division, Treasury Board Secretariat): Yes, there certainly are pension plans where it is clearly laid out that the employees' obligation to the plan is whatever the employee contribution rate is, and the employer is responsible for the remaining cost, including any deficits. Many of those plans do have a specific statement as to the employer's right to dispose of surplus as he or she sees fit.

[Translation]

Ms. Marlene Jennings: The unions say that their members have the right to this surplus, although you explained to us that if the pension plan incurs a deficit, the employees have no obligation to cover even one cent of that deficit. That is why you maintain that all of the surplus should be turned over to the Canadian taxpayers. Are there any pension plans in which the employer guarantees all the deficits, while the employees that contribute to it do not have to guarantee any part of the deficit and yet are entitled to the surplus?

[English]

Mr. Marcel Massé: The question, Sharon, is whether the following statement is true: There exists no plan that you know where employers pay all the deficits and still share the surplus with employees.

Ms. Sharon Hamilton: I'm not aware of one, but I don't know all pension plans.

[Translation]

Ms. Marlene Jennings: Do other G-7 countries, such as England, France and Germany, have this type of pension plan?

[English]

Ms. Sharon Hamilton: I'm certainly not an expert on employer-sponsored pension plans in other countries, because they operate in a very different tax environment and regulatory environment. So I wouldn't want to make a statement.

[Translation]

Ms. Marlene Jennings: Here in Canada, at the various levels of government and in the private sector, are there pension plans in which the employer guarantees the deficit and is required to share the surplus with the employees?

[English]

Ms. Sharon Hamilton: I'm not aware of one. There may be one, but it would be something that employer had agreed to do.

[Translation]

Ms. Marlene Jennings: Mr. Minister, you have said that the experts believe that the surplus should be absorbed within 15 years. Why not five years or two?

[English]

Ms. Sharon Hamilton: Fifteen years is the maximum period over which an actuarial deficit must be covered by the government. So this is a parallel provision of the maximum period over which a surplus must be dealt with by the government. The actual period can be determined depending on the circumstances and depending on whether or not the surpluses are growing or shrinking over time.

[Translation]

Ms. Marlene Jennings: According to the legislation or the actuarial rules, 15 years is the maximum period over which a surplus can be covered. You have chosen to go with 15 years. Why not 10 years or 5 years?

I would have thought that by eliminating the surplus, we would be reducing the national debt, since that obligation shows up in the books. Although it is shown as a debt, it is actually a surplus. The amount of our obligations is much less than what the actuaries have calculated, and that is why the books indicate a debt. If our national debt was actually decreased by $31 billion, we would pay less interest and our country would be in better economic health.

[English]

Ms. Sharon Hamilton: Essentially because of the Auditor General's recommendations that were adopted, the most recent of which was adopted in in 1997-1998, I believe, the surpluses are no longer, in effect, being treated as debt on which debt servicing costs are accruing.

• 1600

Although the credits are still being made to the superannuation accounts in accordance with the superannuation law, under the accounting requirements that the government observes on the recommendation of the Auditor General, the interest credits on those surpluses are being effectively amortized for public accounts purposes as they are being made. So effectively it is no longer interest-bearing debt, in effect, in terms of—

[Translation]

Ms. Marlene Jennings: You are telling me that this obligation currently has no impact on the interest rates that Canada has to pay on foreign borrowing. If I have a personal debt of $100,000 and I am looking for a 50,000-dollar loan, the lending institution will surely take into account the size of my debt in setting the interest rate for my loan.

[English]

Ms. Sharon Hamilton: Yes.

[Translation]

Ms. Marlene Jennings: You are saying that we do not have to pay any more interest to amortize this debt, but when we ask other countries for loans, do they understand that this obligation is no longer part of our national debt and that, although it shows up in the books, it is not actually debt? In calculating the interest rate on loans to Canada, are they aware that this does not constitute debt?

[English]

Ms. Sharon Hamilton: I'm certainly not an expert on the establishment of market rates for Canadian debt instruments, but I would point out that all of the accounting treatments and all of the pension obligations of the federal government are fully disclosed in our public accounts, so I'm sure that any lending institution that was looking seriously at the federal government's financial situation would be very clear to them exactly what our obligations were.

[Translation]

Ms. Marlene Jennings: I am not sure that you are right, Ms. Hamilton. I have heard that, although we respect our future commitments concerning the pension plans of our public service in estimating our national debt, other countries, which are our main competitors, do not have the same accounting system. Our national debt is thus lower than what is shown in the books. If we used a different accounting system, our national debt would seem to be lower and Canada would benefit from better interest rates internationally.

[English]

The Chairman: Marlene, we'll let Ms. Hamilton answer and then we'll get on. Thank you.

Ms. Sharon Hamilton: I know that is and has been an issue, but my understanding—and again, I'm definitely not an expert on debt and national account comparisons—is that we do now present our national accounts on a basis that allows us to be presenting our situation in a way that is comparable to other countries in terms of their national accounts. But at the same time, we do fully recognize and fully disclose what our obligations are for future pension entitlements of our employees.

The Chairman: Thank you, Marlene and Ms. Hamilton.

Yvan, please.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Welcome, Mr. Minister. I am always pleased to meet with you and ask you questions. I would like to ask you several questions today about the bill that you have tabled. I would first, however, like to make a comment about pension plan deficits.

• 1605

Normally, when a pension plan is well run by expert administrators and supported by good actuarial analyses, there should be no reason for a deficit, since decisions are made to reflect the economic climate year after year and premiums are adjusted. Those responsible study the balance sheet and look ahead. Adjustments are made on an on going basis. In that regard, the decision to create the Public Sector Pension Investment Board is an excellent one. I would invite you to look at the speech I made yesterday. Of course, that excellent decision was cancelled out by other, bad decisions, such as the rejection of the idea of joint management.

Why in your bill did you not think for two minutes of implementing your committee's recommendations on joint management of pension funds, with equal representation from contributors and the government? It seems to me that your bill would have been received much more favourably and that the excellent idea of creating the Public Sector Pension Investment Board, which we in Quebec have had for over 30 years in the form of the Caisse de dépôt et placement du Québec, would not have been offset by this bad decision.

Mr. Marcel Massé: The main aim of the bill you are considering is in fact to reform the way in which pensions are administered. As long as we maintained a system that guaranteed only certain benefits for employees, it was perceived as a sort of pay-as-you-go system. As a result, the actuaries kept the account, but no money was actually invested, except, obviously, in government bonds. There was no need to do more than that.

As soon as we try to maximize the plan's performance by privatizing it, and that's allowing investment in outside markets, the plan must clearly be put on a professional footing, which is what this bill does.

Mr. Yvan Loubier: That is true, but I want to ask you once again why you did not immediately consider equal representation from the contributors and the government.

Mr. Marcel Massé: I am getting to that question.

As I have already said, I believe that the best administration in the longer term will be joint administration including participation by retired employees, current contributors and, of course, the employer. I have no problem with that principle. That is what we proposed to the unions.

But clearly, for their own reasons—for political reasons, to a certain extent—the unions decided that they did not want to share the risks involved in managing the plan now. And we could not undertake joint administration alone.

Mr. Yvan Loubier: Mr. Minister, I met with representatives from the unions, from the RCMP—

Mr. Marcel Massé: We therefore had to put in the bill that we alone will be responsible for administering the plans. However, as I mentioned in my opening remarks, if the unions are prepared to support joint administration and share the risks, I will be quite willing to introduce amendments to the bill and implement them.

Mr. Yvan Loubier: I have another question on the same topic. You said that, for now at least, you have set aside the possibility of joint management. After hearing from witnesses, including members of the RCMP and from the unions affected by this bill, I am convinced that the reason that you have temporarily rejected joint management is that you can use the present surplus of $30 billion anyway you want, without having to account for it to anyone.

I would like to come back to your argument to the effect that the government has assumed all the risks and the deficits in the past. I would really like you to table a document with the committee indicating what you had to do to eliminate those deficits. Since the beginning of this debate, we have been hearing about an amount of $5 billion, and yesterday you yourself referred to an amount of $10 billion. You have a new figure of $13 billion for us today. Fortunately, the debate is not going to go on for two more months, or we might be up to $30 billion!

First of all, I would like to know the real amount of the deficit you absorbed. Second, if the figure is $13 billion, as you mentioned, and if there is a surplus of $30 billion right now, that would mean that there is $17 billion left over once any deficit in the past is accounted for. Half of that $17 billion belongs to those who have contributed to the pension plan, that is, $8.5 billion. I would like your comments on that.

• 1610

Mr. Marcel Massé: In response to your first question, on the amount of the deficit, the government absorbed $13 billion.

Mr. Yvan Loubier: Did the amount change overnight? You told us $10 billion yesterday.

Mr. Marcel Massé: No, I have always said $13 billion. I talked about the additional cumulative deficit because of indexation; it is just over $8 billion. If you want the figures, we can get them for you. That is the actuaries' job.

Secondly, the argument that we have paid a $13-billion deficit and that we must share the difference between that amount and the $13-billion surplus doesn't hold water, because it is a question of principle: he or she who bears the risks absorbs the deficits and the surpluses.

I'm going to give you an example to illustrate this question of principle. If, instead of having a $13-billion deficit and a $30-billion surplus, we had had a $30-billion deficit and a $13-billion surplus, do you think that the unions or the employees would have offered to pay any part of the total deficit? No. They would have said that the issue was very clear from a legal perspective: employees are entitled to the benefits set out in the Act, and the government's position with respect to the surplus or the deficit does not concern them.

Because the employees are not sharing any of the risk, they are not sharing any of the surplus either. Regardless of the surplus or the deficit, taxpayers are the ones who would have borne the outcome either way.

Mr. Yvan Loubier: Mr. Minister, there is a lot of talk about the current $30 billion surplus and the future. What does the future hold for the Public Service Investment Board? There is no longer any reason for having deficits like the ones that accumulated in the past and that you were forced to absorb. From that perspective, would it not be a good idea, first of all, not to rule out joint management, and secondly, to emulate what is done in Quebec, where the two management committees of the two pension funds work in close co-operation with the Quebec government's Commission administrative des régimes de pension and the Caisse de dépôt et placement du Québec?

Yesterday, you only told us part of the truth when you said that a precedent had been created by a tribunal, which had ruled that the surplus belonged to the government. Those procedures were undertaken by the Quebec Liberal government, but since then, the two pension plan management committees, the Commission administrative and the Caisse de dépôt et placement du Québec have managed the plan together.

It is truly collegial management. There are two committees with equal numbers of unionized contributors and representatives of management. When there are surpluses, even with the precedent set by the tribunals as a result of the procedures undertaken by the Liberal government in Quebec, how the surplus is used is negotiated, and there are true negotiations. They can lead, for example, to premium relief or improved survivor benefits, as surviving spouses are often left out of pension plans.

I have too much respect for you to think that this is ill will on your part, but with your friendly disposition, why didn't you immediately think about a more collegial and democratic plan that would leave us less inclined to think about abuses of power given there is a surplus of $30 billion?

[English]

The Chairman: Thank you. We'll get the answer and then we'll move on and come back later.

[Translation]

Mr. Marcel Massé: Mr. Chairman, for years now we have been negotiating with unions in an attempt to obtain exactly what my honourable colleague is talking about.

I indicated that my preference, in terms of principle, was joint management. The unions, much to my dismay, did not agree to join a plan in which they would share the risks.

• 1615

If a plan is jointly managed, and the split is 60-40, for example, the surplus must also be shared. If there is a surplus because the rate of return in the private sector is higher and you can reduce premiums or implement premium relief, that is what you do. However, since the unions refused to share the risks, and consequently, to conclude the negotiations, that is not an option.

Is joint management the best choice? Yes. If we had joint management and the risks were shared, would the employers and the employees share both the deficits and the surpluses? Yes. If a jointly managed plan yielded a surplus, could the employees and the employers benefit from premium relief? Yes. I hope that is what will happen in the future, once the unions have indicated that they are prepared to do so.

[English]

The Chairman: Thank you. We can come back, Yvan.

We'll move on to Ben Serré, Jim Abbott, and then Roy, Pat, and Scott.

[Translation]

Mr. Ben Serré (Timiskaming—Cochrane, Lib.): Welcome, Mr. Minister. I will make a comment, and then you can tell me what you think about it.

If I understand the bill correctly, the logic behind it is so clear that I cannot understand why members are challenging it, especially members of the Reform Party, who are the great defenders of taxpayers in Canada.

I'm going to make a little analogy, or a proposal to the members of other parties to see if they would accept it. Mr. Minister, I would like you to tell me if my analysis of the pension fund as it currently exists is accurate. If it is not, I must have completely missed the boat.

I would ask members if they would be prepared to set up a 10,000-dollar investment fund, where you would contribute $7,000 and I would contribute, $3,000. You guarantee me a 10% annual rate of return. During the first year, the fund does not yield 10%, but 5%, and so there is a 500-dollar shortfall; you put $500 in the fund. The next year, it yields 10% and no one does anything. The following year the fund performs well and yields 25%; thank you very much, I keep it.

That is more or less how the fund is currently operating, and I think that that is the logic behind this bill. In all investments, whether it be a pension plan or something else, the people who take the risks are entitled to the surpluses.

The Minister could perhaps respond to that. If taxpayers contributed $13 billion, why wasn't the amount taken back as soon as the surplus occurred? Perhaps that was not allowed under the Act. But the logic is crystal clear: the one who takes the risks is entitled to the surpluses. It's one or the other, and like we say in French, on ne peut pas avoir le beurre et l'argent du beurre.

If the unions were prepared to share the risks, the government would not hesitate in sharing the surpluses.

Mr. Marcel Massé: I think my colleagues' comments are very relevant. The opposition parties should have seen the logic behind the system that was being presented right from the outset.

Voices: Oh, oh!

Mr. Ben Serré: ...[Editor's Note: Inaudible]...the percentage. That is what I was trying to do.

[English]

The Chairman: Ben, are you finished?

[Translation]

Mr. Benoît Serré: Yes, thank you.

[English]

The Chairman: We have Jim Abbott and then Roy.

Mr. Jim Abbott (Kootenay—Columbia, Ref.): Thank you.

Mr. Minister, of the three witnesses, you're probably the most qualified to help me understand something about what is going on behind this bill. We've had the bill in our hands, as I understand it, for approximately ten days. It's a very comprehensive bill.

As I recall, we had somewhere in the vicinity of four hours of debate in the House of Commons before you guillotined it. The very next day, within less than 24 hours, we find ourselves here in committee. I wonder what's going on. Could you help us understand that?

• 1620

Mr. Marcel Massé: I remember the day of the second reading there was a motion, I believe by your party, to create a delay of six months before looking at it. If your party can increase the amount of time, elastically, to fit your desires, why can you not produce time to fit the need?

This bill was discussed with the union for months and months. On the day of the second reading, I also remember there was a motion—if I'm not mistaken, it was also by your party—to discuss a report that had nothing to do with that bill. That did not seem to us to indicate you were really either pressed for time or really wanted to get to the substance of the bill. We may have misinterpreted your genuine desire to study it fully, but certainly these dilatory tactics on the day of the second reading didn't seem to indicate to us you needed more time.

Mr. Jim Abbott: Mr. Minister, it's rather interesting. We could carry on this charade or mind game. In the short time I've had the privilege of representing the people of Kootenay—Columbia, I've come to realize, as a member of Parliament, that there are some useful functions in the House of Commons and certainly here in committee.

The passing of legislation at the second reading is to pass it as a matter of principle. It seems to me that within a period of time—eight, ten, or twelve hours of debate—matters concerning the issue of principle, which could be then directed to this committee, would be of interest.

Unfortunately, there are no people here that I'm aware of who were with me when we considered Bill C-32, the Copyright Act, in the last Parliament. Mr. Ianno will probably recall that we went for a period of time with that copyright legislation—at least two months—where, on a totally non-partisan basis, we were improving the legislation, in my humble judgment. I have seen that committees can work and legislation can be improved.

Therefore, because I have seen it with my own eyes and I have such respect for the ability of a committee, on a non-partisan basis, without interference—as it happened, in this case there was interference from the heritage minister, who shut it off at the tag end—from the government, a committee being master of its own destiny has the ability, on a non-partisan basis, to improve legislation.

I wonder if we could have your commitment, as minister responsible for this bill, that this committee will be given as much time as is deemed necessary by the committee, particularly by the opposition members. We have a suspicion, and maybe it's an ill-founded suspicion, that sometimes a minister may speak to a parliamentary secretary or even a committee chair and suggest maybe things could be moved along quickly, which is why I'm asking for the dominance of input from the opposition side.

May we have your undertaking that we in this committee will be given whatever time is necessary to go over this bill and get a sufficient number of witnesses who will be able to speak to this bill, so we can work on improving your very valuable legislation?

Mr. Marcel Massé: I certainly believe, Mr. Chairman, in a system that allows sufficient time to look at legislation. What constitutes sufficient has been a matter of discussion in parliaments for years and years. The amount of time is sometimes limited for matters that are judged to be in the interest of Canadians, obviously by the authorities that be. I would not want to interfere with that process, which obviously has been done with wisdom in the past in very many cases.

I would certainly fully agree with the principle that we need to have sufficient time to look at the legislation and understand what is there. At the same time, we have to be able to expedite legislation so it is adopted in a judicious manner after sufficient examination, to guarantee that the rights of Canadians are properly implemented.

• 1625

Mr. Jim Abbott: There is a second range of questions I'm a little concerned about, in taking a look at this legislation. I happen to be aware of two women who have lived together for an extended period of time. As a matter of fact, they were together in missionary work in Colombia and went back and forth a number of times. They have lived together for 35 years. They have a very long-lasting, loving relationship, but they would not be engaged in what is loosely defined as conjugal activity.

Under this act, you would say that as long as people were involved in some form of conjugal activity, the survivor would have access to the benefit, but those who chose not to, for whatever reason, would not. Does that sound fair? Is that a good representation of the government's position?

Mr. Marcel Massé: In fact it's a very enlightened position to argue that relationships of dependence of that type, especially long-term relationships, should be entitled to a number of benefits. I happen to share that view. It is not yet implemented through legislation. As you know, there are a lot of studies on this, and in a few years from now that may actually be the situation.

What we tried to do in this legislation about conjugal relationships was implement the law as it has been made explicit in court judgments, in particular, Rosenberg. We have tried not to deal with other situations that are still contentious, in particular those involving marriage or the definition of spouse itself. But in using the words “conjugal relationship”, we have incorporated homogeneous—compared to heterogeneous—common-law relationships, because these have been interpreted in law by the courts.

Mr. Jim Abbott: I would suggest to you there are two problems. One, where Prime Minister Trudeau wanted to get the government out of the bedrooms of the nation, this definition is going to put the government back into the bedrooms of the nation, in defining whether people are physically involved with each other or not for purposes of benefits. I think that's really regrettable.

The second thing I would suggest to you is because conjugal is so undefined, as I read the little research we've had time to do on this bill, and there is lack of a definition, it seems to me the government is turning this over, ultimately, to the Supreme Court for definition because the government has not seen fit to exercise sufficient—if you'll excuse me for saying it—courage in attacking this issue head on. In other words, you've abdicated your responsibility.

Mr. Marcel Massé: In this case we're dealing with pensions, and my purpose was to stick to pensions. However, a number of months ago the so-called Rosenberg decision indicated that conjugal relationships, defined as heterogeneous common-law relationships, should be extended to same-sex. We're applying exactly that definition in the law, not extending it further and dealing with the more general problem my honourable colleague is mentioning.

Mr. Jim Abbott: Thank you.

The Chairman: Thank you very much there, Jim.

Roy.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

Mr. Massé, Ms. Hamilton, and Mr. Jolicoeur, I have two areas maybe you could help me out with. With respect to the pension investment board, I thought I heard my colleague Mr. Loubier talk about concerns about under-representation from rank-and-file members of the unions. As I understand it, the pension investment board will be comprised of a membership that comes from recommendations from the Public Service Superannuation Act advisory committee, the RCMP pension advisory committee, the Canadian Forces pension advisory committee, etc., and these advisory committees have a strong base within the grassroots of these organizations. Is that correct, or have I missed something?

• 1630

Ms. Sharon Hamilton: Yes, that is correct. The committee with which we have the most direct experience, of course, is the one for the Public Service Superannuation Act. That committee has been in existence for many decades. It has operated very effectively, I think, in exploring issues of concern to public servants, and it has been a forum where union and employer representatives and a pensioner representative have worked together to develop recommendations around pension issues that are of concern to public servants.

Mr. Roy Cullen: Are the RCMP pension advisory committee and the Canadian Forces advisory committee similar in some shape or form to the Public Service Superannuation Act advisory committee? Do they use a similar model?

Ms. Sharon Hamilton: They have the same role in relation to the ministers responsible for those plans. That's right.

Mr. Roy Cullen: Okay. Thank you.

I'm a CA. I haven't practised for a year, so I get hung up on some of these accounting treatments. It took me ages to get the notional surplus clear in my mind. By the way, if you wish to come back to the committee with answers, that's fine, because I know you're not accounting gurus.

The $30 billion surplus will be amortized over 15 years. Now, that's $2 billion a year. That presumably won't come into the annual revenues of the government. It will be some notional surplus transfer from the superannuation fund to the surplus of the public accounts of Canada. It won't come in $2 billion bites annually to help solve our annual budgetary requirements. I know that's wishful thinking. Maybe you could clarify that end of it for me.

Ms. Sharon Hamilton: Because it is an internal account, it doesn't constitute revenue to government. It's not new revenue. It's an account setting out the statement of the government's obligations in respect of its employee pensions. I don't know how recently you've looked at the standards set out by the Canadian Institute of Chartered Accountants, but under the standards that apply to public sector accounting, we already have been effectively amortising back to the credit of the government the surplus amounts in the pension accounts. So those are already being reflected in the overall fiscal situation of the government.

I know I'm sounding like an accountant—

Mr. Roy Cullen: That's okay.

Some hon. members: Oh, oh.

Ms. Sharon Hamilton: —but I assure you that I am not one.

Mr. Roy Cullen: Don't deny it too strongly.

Ms. Sharon Hamilton: The actual reconciling of the balances in the superannuation accounts with the actual obligations the government has for employee pensions will not change the overall public accounts picture the government presents.

Mr. Roy Cullen: So it'll be a sort of notional move from the superannuation account to the consolidated surplus of the government in the public accounts.

Ms. Sharon Hamilton: It'll effectively be reflected through the mechanism of the provision for valuation account that is in the public accounts. It will be a case of making the numbers in the balances of the superannuation accounts in line with the amounts recognized in the public accounts.

Mr. Roy Cullen: Thank you.

The Chairman: Thank you, Roy.

Next is Pat Martin, followed by Scott.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you very much, Mr. Chair.

Mr. Minister, the first comment you made, which I wrote down, was that surpluses do not belong to the employees. Actually, your chief assistant, Mr. Alain Jolicoeur, who you brought with you, said it even more strongly: “Employees and retirees have no proprietary interest to the surplus of the superannuation plan”. So we're coming from 180-degree opposite poles in that regard. I can tell you that it's one of the basic tenets of the trade union movement that all pension contributions are part of the wage package, and therefore all pension surpluses are actually the property of the employees. We're coming from completely opposite ends of the spectrum, and that may be part of the problem we're having coming to an agreement on this.

• 1635

You can laugh if you want. There are 670,00 people involved here.

A voice: What about the risk?

Mr. Pat Martin: Let me deal with that, then. Actually, I didn't come here to argue with you. I came here to talk to the minister, to tell you the truth.

The fact is that when you pay somebody $10 an hour and $1 an hour pension contribution, you're paying that person $11 an hour. Your cost is $11 an hour, and you write that all off. If you're in the private sector, the employer gets a tax write-off for all of the pension contributions, etc.

But the real evidence that in the public service this is treated as wages and is income is that it shows up at the bargaining table, Mr. Minister. At the negotiating table they say yes, we're not paying you very much these days, but look at the great pension you have. It's considered part of the workers' wage package, and it's used against them at the bargaining table.

The other evidence that it's considered as wages is that in the federally regulated sector that falls under the Canada Labour Code, if the trust document is silent on what to do with the pension surpluses, the employees have to vote with a two-thirds majority for the employer to even touch their pension surplus. Obviously, the courts and that legislation agree that any surplus in the pension plan belongs to the employees. Otherwise, why would you have to vote in order to give any of it away?

So we're coming from opposite ends of the spectrum. It isn't a joke, and it's not funny.

Mr. Chairman, we contend, certainly, that the wage freeze had more to do with the surplus than any other actuarial anomaly. We have to be accurate that this surplus is an overestimation of the liability, and I will accept that. It's not a pool of money. It's an overestimation in liability. But that actuarial work was done in 1990 or 1991, I believe it was, and then the wage freeze started for six years. I think that's where a lot of it lies, and it's that lost income that caused the pension surplus, which is another argument that the proceeds should go to the employees.

I do have questions.

Marlene Jennings asked about other unions. With regard to other examples, the United Food and Commercial Workers Union is the largest private sector union, and it has a 100% employer contribution. The employees don't pay a nickel into it, but there's a jointly trusteed board.

I suppose we could ask the International Foundation of Employee Benefit Plans for more examples. Other examples are the steelworkers, which involves a 100% employer contribution with a jointly trusteed plan, and the iron workers.

There's CUPE and Ontario Hydro, which resulted in a court case. When Ontario Hydro wanted to scoop the surplus out of the pension plan, CUPE, to their credit, balked and wound up in court. The result was that the employees had to vote to allow the employer to touch their pension surplus, and it resulted in a shared thing and in a very mature relationship. The employer got to keep some. The employees had their contributions reduced, and they had their benefits increased. So everybody got a bit of it, in recognition that at least there's some proprietary interest in the surplus for the employees.

Now, I'm not going to waste my whole time making a speech I would have liked to have made in the House if debate hadn't ended, but debate did end. You've been asked by others if you will ensure that there's adequate time for us to really wrestle with these issues and for the 670,000 Canadians who are directly affected to come and make representation to this committee on a national touring task force. I'd like to quickly ask you that question, and then I have one other quick question. Will you allow adequate time to tour the country?

Mr. Marcel Massé: Mr. Chairman, I'd like to ask Alain to answer a number of the technical aspects, and then I may comment generally.

Mr. Alain Jolicoeur (Chief Human Resources Officer, Treasury Board Secretariat): First, with regard to your point about the pension being part of the total compensation in the collective bargaining universe, it is true in many instances, but it is not true in this instance because it's—

Mr. Pat Martin: I know that. It doesn't arrive at the bargaining table in the public sector, but it's used against them by the negotiators on the employer's side. When they left it out of the bargaining package, the deal—the promise by Walter Gordon, at that time—was that this government would never unilaterally alter the terms and conditions of the pension plan. If you promised to keep it out of the bargaining process, this government would never, ever do that. So the agreement was okay, we'll leave it out of it.

• 1640

Mr. Alain Jolicoeur: The basis of the pension promise in that context is that the benefits are guaranteed by the government, and this has not been altered, except that it has improved after discussion with the union, after consultation. But the benefits are guaranteed and they remain guaranteed.

The conditions for the employee to have a right to the existing actuarial surplus would be that they have a real fund and a real surplus. We need both, and we don't have either. It would have to be a trust, which it isn't. So none of the conditions are met. Therefore, there is no question. It's a black-and-white question, and it's a point that has been recognized by some of those stakeholders before, that there is absolutely no legal right to the existing actuarial surplus.

Mr. Marcel Massé: Mr. Chairman, if I may just—

Mr. Pat Martin: I'm concerned I'm going to run out of time. I do have one more. How much time do I have?

The Chairman: You have about three minutes left.

Mr. Pat Martin: Well, if you have a comment, Mr. Minister....

Mr. Marcel Massé: I'll answer your last question and add my comment.

Mr. Pat Martin: Could I get an answer to the last question I posed, which is whether you will ensure there are nation-wide extended touring committee hearings so that all interested parties can have an opportunity to voice their concerns, seeing as we, as their elected representatives, have been denied the opportunity in the House? Would you answer that question?

Mr. Marcel Massé: Mr. Chairman, I will—

Ms. Marlene Jennings: On a point of order, I believe the question is out of order, because it's the committee that decides whether or not it will travel and—

Mr. Pat Martin: There are more of you on that side than there are on this side.

Ms. Marlene Jennings: No, no, but it is the committee—

Mr. Pat Martin: It's the Liberal Party—

Ms. Marlene Jennings: The minister—

The Chairman: Order, order.

Ms. Marlene Jennings: If my understanding of the procedure is correct, the minister can wish whatever he wishes to wish, in terms of extensive or not extensive public hearings across Canada to be held by this committee. This committee is the ultimate arbiter of whether or not we decide public hearings are necessary, to what extent they're necessary, and where we want to hold them.

The Chairman: I don't know if that's a point of order. Nonetheless, the minister may or may not wish to express an opinion on what his wishes are. But you're right, it's the committee's ultimate decision.

Let's let the minister, if he wishes to comment on that, do so.

Mr. Marcel Massé: Mr. Chairman, I was not going to comment on that question. I was just going to indicate my views on two points. The first one has already been answered, at least in part. That was whether it is part of wages. In the case of the public sector pension plans, it is clearly not part of wages. The plan, as Alain just mentioned, is not negotiable. It's not part of negotiations. I'm a former civil servant. I know how I considered it for 26 years. This was a guaranteed benefit that was part of the total benefits I got from my job. And it was not negotiated. It was guaranteed to me. The benefits were guaranteed by law, and that was the only thing I was interested in, that I knew what kinds of benefits I was getting. That was the end of it.

The next issue is whether this is a trust, whether the unions have anything to do with it, and so on. I would indicate that the legal situation is quite clear. The surplus, legally, does not belong to the unions. The unions have no right to vote for it. They can obviously express their views, as indeed the unions and the various associations do.

• 1645

I will read you something that is part of the Internet message of the Federal Superannuates National Association:

FSNA's position in relation to the surpluses has always been clear and consistent. Any surplus must be shared equitably by the employer (the taxpayers), employees, and pensioners. ... FSNA believes that forcing a decision...on “ownership” of the surplus would inevitably lead the discussion away from a question of fairness and equity.

It will become a question of legal status and then.... And that's in their own Internet site; I didn't put that there.

The Federal Superannuates National Association does not believe it has any legal grounds to pursue a court case and that the legal decision would not be in their favour, since the legal advice provided to FSNA by independent experts in the pension field has been that the employer can decide on the disposition of the surplus.

Not only are our experts quite clear—that couldn't be clearer—but we're quite clear about it. As I mentioned, if the deficit had been $30 billion and the surplus $13 billion, there would never have been a question of the employees or the union contributing a cent to the deficit.

Mr. Pat Martin: Since I lost a minute to the point of order, could I have one—

The Chairman: Twenty seconds to you, and then we're going to move on.

Mr. Pat Martin: Mr. Minister, you didn't ask about the touring, the task of the committee, if you would recommend to this committee that they go on the road. We've just learned that the Senate was given notice today that they'll be dealing with Bill C-78 the week of May 10. Is it or is it not your intention to at least recommend that this committee hold comprehensive extended committee hearings to make up for the loss of opportunity in the House? If it is your intention, what are you going to do about the scheduling in the Senate for May 10, 1999?

Ms. Marlene Jennings: I have a point of order, Mr. Chair. It's the same issue. This committee is master of its fate, and with all due respect to the minister, I don't think this committee has any reason to ask for the minister's view on whether or not hearings are required by this committee for review of this legislation.

You've already deemed that it is a point of order, and I think the question is out of order.

The Chairman: I wasn't sure if it was a point of order.

Ms. Marlene Jennings: Is this committee master of its fate?

The Chairman: Let's have order over here. Whether the Senate has or has not scheduled anything doesn't matter to us. But I—

Mr. Pat Martin: It's certainly relevant, because one of the key questions from three of the opposition parties is how long we are going to be able to talk about this now that it's been struck down from the House. Obviously the Liberal-dominated Senate has booked time for May 10.

The Chairman: Let's proceed. Scott, you're up next.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman.

Thank you, Minister Massé, for appearing before us today. You've had a very distinguished career in public service as a bureaucrat and as a minister. How many years were you a senior bureaucrat?

Mr. Marcel Massé: Twenty-six.

Mr. Scott Brison: How many as a minister?

Mr. Marcel Massé: Six.

Mr. Scott Brison: Were you ever a private member?

Mr. Marcel Massé: Do you mean did I go from senior bureaucrat to minister?

Mr. Scott Brison: No, no, but did you spend some time as a private member prior to becoming...in the backbench, but as a private member?

Mr. Marcel Massé: No. I was elected in 1993, and the party had a majority in 1993.

Mr. Scott Brison: Yes, that was a very memorable election—not a high point in Canadian democracy, I mean. I think that explains a great deal. The fact is there has been a secular decline in the role of the members of Parliament, or the role of Parliament, in fact, in debating and developing public policy over the past 30 years. I see this as a disturbing trend and one that needs to be arrested.

• 1650

This is a very important piece of legislation, with significant impact on the lives of 600,000 public servants or superannuates. We are not being given enough time in the House of Commons and within the committees to address it.

With all due respect, I feel that your background as a senior bureaucrat and then as a minister has affected your view, or perhaps, I would argue, your contemptuous view, of the individual members of Parliament.

The Chairman: I beg your pardon. I was talking to the clerk about the last issue—which I resolved in my favour, by the way. So if we can just replay the tape on this last issue....

Mr. Scott Brison: I'm suggesting that the minister has no intention of allowing for continued debate, legitimate debate, either in Parliament or in the committee, on this very important piece of legislation. I think part of that is with respect to his experience and background as a senior bureaucrat and as a member.

The Chairman: Let me just say, Scott—

Ms. Marlene Jennings: Mr. Chair, on a point of privilege, I think the member has just insulted me and the other members around this table by saying that we do not have any free will.

I find it very interesting that when votes are held in the House and members on both sides of the House vote in a different way from their party leaders, all of a sudden we have free will. But if we vote in the same way as our party leaders, we no longer have any free will.

That's an insult. This committee is master of its fate.

The Chairman: Excuse me, Marlene. As to whether it's a point of privilege, allow me to think about that, but on the point that Scott is raising, I think there's a dividing line here that should be clear.

Indeed, as Marlene and all of us would agree, the committee decides its fate. That doesn't mean to say that the minister may or may not have an opinion, which he may or may not wish to share. If he chooses not to share it, that's fine; if he chooses so, fine. That doesn't mean the committee agrees or disagrees with him.

Mr. Massé, I think I heard that you want to comment.

Mr. Marcel Massé: Am I also allowed to dig into the past and the jobs of any of the members here and make a psychological assessment as to why they're asking questions?

The Chairman: Just a second.

Ms. Carolyn Parrish (Mississauga Centre, Lib.): Mr. Chair, on a point of privilege, what you missed when you were in conversation was the fact that the member said this minister held backbenchers in contempt. If he doesn't withdraw that statement, I'm leaving. This is a disgusting lack of respect for a cabinet minister and a fellow member of Parliament.

The Chairman: Not having heard—

Ms. Carolyn Parrish: That is obnoxious, and I won't sit here and listen to it. I'm surprised no one has said anything about it.

The Chairman: I'll have to—

Ms. Carolyn Parrish: Mr. Massé does not come here to be insulted; he comes here to be questioned on the legislation. I want some order.

Mr. Scott Brison: Mr. Chairman, if I may....

The Chairman: Just a moment.

On what was said, I apologize; I was consulting with the clerk. I'll do what the Speaker of the House always does: I'll look at the blues. Thank you for that.

Mr. Scott Brison: Further to my comment, I would suggest that there is a systemic abuse of power by the government, and particularly by the cabinet, that does not reflect properly the role of Parliament in the development of public policy. I have said that in the House of Commons, and I stand by those comments.

Within this legislation—

The Chairman: Scott, that said, we're on Bill C-78, so I'd advise you to keep on that.

Mr. Scott Brison: In the past, parliamentary approval has been required for any changes in contribution rates relative to the superannuation plans. This legislation would change that, such that the President of the Treasury Board, without parliamentary approval, could make changes to the contribution rates.

Why is it necessary to further reduce the role of Parliament in the approval necessary to make any changes in the contribution rate? Why is that change, that further reduction in the role of Parliament in the development of public policy, necessary?

Mr. Alain Jolicoeur: What is in the legislation is the ability for the Treasury Board to adjust the rate, if need be, but limited to the traditional 60-40 contribution between employer and employee. So it cannot go beyond what was originally set in terms of their contribution.

• 1655

Mr. Scott Brison: But is it accurate to say that in the past, parliamentary approval was necessary to make changes to the contribution rate?

Mr. Alain Jolicoeur: The contributions were fixed in the legislation. What has unfortunately changed is because of the change in CPP and the fact that the formula was set in the legislation, the employees have actually had a reduction in their contribution, moving from the traditional 40% down to around 30%. So what is being done with the legislation is to create the possibility of going back to the original arrangement, if need be. But since the new plan would be invested, there may not be a need to go back to that.

Mr. Scott Brison: My question is for the minister. Why is it necessary to further reduce the role of Parliament in this manner and of course create the commensurate increase in power of the President of the Treasury Board?

Mr. Marcel Massé: I believe there is no reduction in the role of Parliament. In fact Bill C-78 will fix the ceilings in terms of increases.

The reason it will permit Treasury Board ministers, as a cabinet committee, to set in some cases what may be slightly lower rates, but no higher rates, is because if the investments that are made in the private sector have a rate of return that is higher, and if we stick to the 60-40—60% for the employer, 40% for the employees—that is in the legislation, there may be an ability to reduce the rates if the results of the plan's investments are better than they are in the public sector.

The Chairman: You have another minute, Scott, and then we're going to move on.

Mr. Scott Brison: On a practical matter relative to the legislation and the investment in equities or external markets, what percentage of the fund would be invested in equities markets?

Ms. Sharon Hamilton: Do you mean in equities as a class of investment?

Mr. Scott Brison: Yes, that's right.

Ms. Sharon Hamilton: I don't think there is a specified limit in the proposed legislation.

Mr. Scott Brison: My concern is with the foreign content limitation and the fact that we have 1.5% of the global equities markets in Canada, and effectively we're forcing 80% of these surpluses to be invested within those funds, as opposed to seeking geographic diversification.

What is the government's rationale in denying pension growth or limiting or reducing pension growth by an estimated 2.2% because of the foreign content limitation, ultimately reducing the growth in the funds and the potential retirement incomes or benefits by about 3% to 4%?

The Chairman: Thank you, Scott.

Ms. Sharon Hamilton: Basically, it is the Minister of Finance's legislation, the Pension Benefits Standards Act, that sets out the maximums.

The Chairman: Thank you, colleagues.

We have some brief concluding questions. Normally we have ministers for about an hour and a half, and we're going to be hitting that point very shortly. If the minister is okay for a few more minutes, we'll have a few minutes from Yvan, and then a couple more minutes over here.

Yvan, please.

[Translation]

Mr. Yvan Loubier: I am appealing to the members' sensitivity, to the Minister's competency, and to his vast experience as a government administrator.

Mr. Minister, you stated earlier on that the unions had rejected joint management. Is it not because at the same time that you proposed a joint management, you suggested they give up their right to have a say in how part of the current surplus that has accumulated is managed?

• 1700

Mr. Marcel Massé: That was part of the negotiations. What you are saying is true, but I will add that during the negotiations, we offered them not only joint management for the future, with sharing of the risks and consequently the surpluses, but also an improved dental plan for employees who have retired and a reduction from six to five years for the period over which salaries are calculated, which, in passing, is an advantage that represents more than $3 billion.

During the negotiations, we also offered them several benefits, and we clearly indicated our position that I outlined before the committee this morning on how the surplus would be used.

Mr. Yvan Loubier: If the unions and the members of the RCMP said tomorrow morning that they were prepared to take on the risks and immediately implement joint management committees with equal representation, provided that from the outset these committees have a say in how the accumulated surplus of $30 billion is managed, would you agree to amending your bill to take into account joint management not only for the future, but starting today, with the current results?

Mr. Marcel Massé: Look, it is very difficult to negotiate here at this table....

Mr. Yvan Loubier: I am not asking you to negotiate, but you said earlier on that you offered to share the risks with the unions. That was your main argument. If you say that you are prepared to share the risks and to implement collegial management with equal representation, not only for the future but based on the current situation, would you accept to amend the bill?

Mr. Marcel Massé: No.

Mr. Yvan Loubier: So it is not only a question of sharing the risks; it is also a question of having a say on part of the surplus.

Mr. Marcel Massé: Excuse me. In the past, the federal government bore all the risks. If we accept to share the risks and the surpluses for the future—

Mr. Yvan Loubier: Precisely, I would like to go back to that briefly, Mr. Minister.

Mr. Marcel Massé: —we must accept the same principle for the past, mustn't we?

Mr. Yvan Loubier: Earlier on, you talked about the Pension Investment Association of Canada. I would like you to repeat your short quote. You said that the Association maintained that the interests of all the parties must be taken into account when talking about surpluses, and you mentioned employers, taxpayers and employees in the case of pension plans. If we take into account the fact that the employers' contribution to the plan is 60%, that taxpayers have absorbed $13 billion in deficits in the past and that employees contribute 40%, there are still several billion dollars left, and contributors should normally have a say in that. So a joint committee should be set up immediately so that part of the decision is made by the contributors, i.e. representatives of public service employees. Perhaps I misunderstood the quote, but I thought I'd understood it well.

Mr. Marcel Massé: Once again, Mr. Chairman, I think that the logic behind my honourable colleague's argument is flawed. Just because there was an accumulated deficit of $13 billion and an accumulated surplus of $30 billion does not in any way, shape, or form mean, logically, that part of it must go to the employees. Using the same example, if the deficits had been $30 billion and the surplus $13 billion, no one would have claimed that the outstanding part of the deficit should have been paid by the employees. The Act stated and still states, even more clearly, that some employee benefits are guaranteed and that taxpayers are responsible and entitled both to the deficit and the surplus. Logically speaking, there is absolutely no problem with that.

Mr. Yvan Loubier: That is your point of view.

[English]

The Chairman: Thank you very much, Yvan and Mr. Minister.

Eric Lowther, please.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Mr. Chairman.

I echo some of the comments I heard made that the minister is one of the more competent ministers in the Liberal cabinet. I haven't seen anything to disprove that to me. This is one of reasons I was a bit surprised that for outside of marriage this bill proposes that the establishment of a relationship that is of a conjugal nature is one of the key criteria for determining who is a survivor. Yet this term of “a conjugal nature” is I believe a fairly new legal term and there's no definition anywhere in the bill of what it means. So I thought to consult maybe the Canadian Black's dictionary, which says that to conjugate means sexual activity.

• 1705

I thought about that, and I wondered, since these are pensioners we're talking about, and we're having the courts determine this.... I'm not there yet, but I've heard that sexual activity tends to tail off as you get to pensionable age.

Voices: Oh, oh.

Mr. Eric Lowther: So would they actually be eligible now, if the key criterion here is to conjugate, and it's dependent upon a survivor benefit and we're talking about pensioners? That's one question. Then sexual activity, what is that? I suppose we could ask Mr. Clinton what is sexual activity and we'd get probably a different interpretation from the court.

The Chairman: Keep it domestic, please.

Mr. Eric Lowther: Very good. Thank you, Mr. Chairman. I'd sure like to.

A voice: Domestic, is that the bedroom?

Mr. Eric Lowther: In fact I think it points out the whole interesting approach the minister has taken to this particular issue. I don't know how he will know, or anyone will know, what a person's private intimacies are and why the government should be using that as a criterion. Couldn't anyone claim this? Who would know, and what would the costs of that be? There are lots of questions. It really seems to be inconsistent.

The Chairman: Thank you, Eric.

Mr. Marcel Massé: Mr. Chairman, this I think is a good point, and I've noted it myself. I've even discussed it with a few members of Parliament. And of course after that I asked the lawyers in our department, who consulted with those of the justice department, and their view was that the legal meaning of “conjugal” in this case means an extension of a heterogeneous common-law relationship to a same-sex common-law relationship.

What I would indicate is that in the law, what I tried to do was to reflect the situation as in fact stated by the courts—in other words, the law as it presently exists. I didn't want to touch the question of marriage, which of course is linked with conjugal and sex and so on, because it is not my intention, and I think I don't have it in that bill, to either state or make any new law. I wanted to stay away from this. All I wanted to do was to extend the privileges of survivor, as defined in the act for survivor to pension rights, to same-sex common-law relationships. Our lawyers tell me that the proper legal way to do exactly what I was trying to do, which is to reflect the law as is and not touch or open any new subjects, is to use these words.

The Chairman: The last word to John Williams, please.

Mr. John Williams: Thank you, Mr. Chairman.

My question is to the minister. As you indicate, the bill allows you to increase the employee share of the contributions up to 40%. As that happens, does it mean that the employer's share is going to down, or are you going to put more money into the plan?

Mr. Marcel Massé: It means the percentage we are aiming at once we have put the new plan into place is a plan that will re-establish what is the relationship in most of the public sector pension plans, which is that 60% of the costs and benefits are borne by the employer and 40% by the employees.

Mr. John Williams: But my point is that since the plan is overfunded today, and there would be more money, that 100% that's going in has been more than sufficient. As the employee share goes up, does that mean you're going to reduce the employer's share accordingly? Are you going to put more money in the plan?

Ms. Sharon Hamilton: Obviously we will want to reassess the cost of the plan once we move to the new market-invested fund, because that may well affect our long-term expectations in terms of rate of return for the fund. But obviously if we're moving from the 70-30 basis we're at now, then the 60-40 basis would suggest that, all other things being equal, the employer current service contribution rate would be reduced.

• 1710

Mr. John Williams: You made the statement that depending on the market return and so on, the amount of contribution will have to vary, and the employee paying part of that varying contribution is now starting to absorb some of the risk.

Ms. Sharon Hamilton: But the contribution rate doesn't vary on a fluctuating kind of basis. You tend to set your required contribution rate for your pension plan based on a very long time horizon and to employ—

Mr. John Williams: Including rate of return—

Ms. Sharon Hamilton: Including rate of return—

Mr. John Williams: —which is absorbing part of this.

Ms. Sharon Hamilton: —and including anticipated inflation and salary increases as well.

The Chairman: Thank you, John.

On behalf of all members, I'd like to thank you, Mr. Minister, Mr. Jolicoeur, and Ms. Hamilton, for appearing today.

I want to remind members that you have received notice of a meeting tomorrow at 3.30 p.m. in Room 308 of the West Block. The Federal Superannuates National Association will be appearing. So watch for that.

So with that—

Mr. John Williams: Mr. Chairman, just before you adjourn, I have a point I want to bring up.

The Chairman: We can probably excuse the minister, then. Thank you, Mr. Minister.

We'll go to John and then Pat.

Mr. John Williams: Prior to the meeting tomorrow, Mr. Chairman, I think, as other members have indicated, we need to hear from a few witnesses. For example, we're going to be putting $100 billion into the capital markets over the next number of years, and we should be hearing from the investment community. We have the issue of the actuarial surplus, how big is enough and so on, so we should be hearing from the actuarial community, I think. We have some significant changes to the definition of “survivors”, so we should be hearing from organizations that have interests in that area, and so on.

Therefore, Mr. Chairman, I have a number of witnesses I would like to have called, and I'm wondering when I can—

The Chairman: You should give those to the clerk as we speak.

Mr. John Williams: Okay. Will that mean—

The Chairman: Pat, was your point also about witnesses?

Mr. Pat Martin: Is this the only opportunity for us to put witnesses' names forward, Mr. Chairman?

The Chairman: No, just get them to the clerk as soon as you can.

Mr. John Williams: What is the procedure from that point on, Mr. Chairman? Is the clerk going to call them all in?

The Chairman: Not necessarily.

Mr. John Williams: So on what basis do we determine who's coming?

The Chairman: We can discuss the names we have by tomorrow after our meeting with the superannuates organization.

Mr. John Williams: So I'll give these to the clerk, and we'll talk about it at committee tomorrow.

The Chairman: Yes, we'll do it after the witnesses appear.

Mr. John Williams: Okay.

The Chairman: Thank you, colleagues.

Mr. Pat Martin: Mr. Chairman, I would like to move that we call back the minister at some point prior to the conclusion of this committee dealing with this bill.

The Chairman: Let's take that as a notice of motion, and we can possibly deal with that as well tomorrow afternoon. To be fair to you, Pat, I know that you didn't get enough notice of the meeting to be able to give notice of the motion, so we will undertake to try to put that up for discussion tomorrow.

Mr. Pat Martin: That sounds reasonable. Thank you.

The Chairman: With that, we're adjourned.