How going it alone helped Ontario get CPP deal

A historic compromise is taking shape on the eve of closed doors talks in Vancouver this weekend on an expanded CPP.

Thestar.com
June 18, 2016
By Martin Regg Cohn

Premier Kathleen Wynne says she will sacrifice the lynchpin of her last election mandate - the Ontario pension plan she once promised voters - to seal a CPP deal with the rest of Canada if they agree to move quickly and robustly.

That means getting an improved Canada Pension Plan in place by the beginning of 2018 - no more endless delays - even if that means agreeing to phase it in more slowly, with more modest increases, than Ontario had first planned.

A historic compromise is taking shape on the eve of closed doors talks in Vancouver this weekend on an expanded CPP that has eluded the country’s political leadership since 2008. We won’t know until Monday whether Wynne gets her way.

Either way, it’s a win for pension reform.

If talks collapse, Wynne’s ambitious Ontario Retirement Pension Plan (ORPP), which roughly doubles today’s paltry CPP (now limited to $13,110 a year) will take effect in 2018 as scheduled - boosting retirement security for many Ontarians.

Alternatively, if nationwide negotiations succeed thanks largely to the premier’s tight timeline, the country could be on the cusp of a long overdue, pan-Canadian pension overhaul. Albeit watered down to roughly two-thirds of what the ORPP offers, a compromise deal would still be a victory after the setbacks and stalling tactics of recent years that left CPP payouts lagging the industrialized world, a half-century after its inception.

That the federal and provincial finance ministers are hewing, grudgingly, to Ontario’s negotiating deadline attests to Wynne’s high stakes pension politics.

“We’ve got every government across the country and the federal government talking about this - we need to address it and we need to address it now,” Wynne said in an interview Friday.

“It’s a very hopeful moment for the country.”

It’s a moment that has been nearly a decade in the making, at a time when traditional private sector workplace (defined benefit) plans are disappearing as companies opt out of the risk and liability of backstopping their own employees’ retirements.

Now, with Justin Trudeau’s Liberals scrambling to fulfil their own 2015 campaign promise for pension improvements, a more robust compromise is in the air - bigger and better than previous efforts. Much of the credit will go to Ontario’s gambit, leveraging its own ORPP to force the hand of other provinces.

“In the end if we get a CPP enhancement it will be at least in part because we’ve been willing in Ontario to move ahead on this,” Wynne argues.

She’s not alone in her view. Canadian Labour Congress president Hassan Yussuff, who has lobbied tirelessly for a doubling of the CPP since 2008, credits Wynne for keeping pension reform on the agenda after the federal Tories tried to extinguish it.

“Kathleen Wynne should be given a lot of credit for her leadership but more importantly she should also be praised for showing some ability to compromise,” he told me.

Changes to the CPP require the support of Ottawa and seven provinces representing two-thirds of the country, which means Quebec, Ontario, Alberta and B.C. are crucial players in the mix. For nearly two years, Yussuff says, Ontario was the CLC’s only serious ally as most other provinces lost enthusiasm for the project, blaming economic volatility or citing electoral uncertainty.

The dramatic developments of the past month - after years of stasis and inertia - are also due to intense pressure placed on other provinces by federal Finance Minister Bill Morneau, and the unspoken promise of other sweeteners and inducements from Ottawa. Morneau previously served as an adviser to Wynne on an ORPP technical panel, and ran his own pension consulting firm before entering politics last year. At a three-hour supper in the nation’s capital earlier this month, he made common cause with his Ontario counterpart, Charles Sousa.

An unexpected dynamic - for which Wynne also gets unintended credit - has been the willingness of business interests to grudgingly support an expanded CPP, if only to avoid the more onerous obligations of Ontario’s planned pension. The advantage of a CPP enhancement (always Ontario’s first choice) is more seamless integration with existing private sector plans, portability across provinces, and greater efficiencies with national scale.

If the deal comes together, it will also take enormous pressure off Ontario’s pension bureaucracy, expanding at breakneck speed to make the ORPP operational. For a provincial Liberal government bogged down in boondoggles, whose political brain trust is better at conception than execution, this reduces the real risk of failure and the apprehensions of doubters.

If Wynne can take political credit for ratcheting up the pressure on pension reform, without having to bear the burden of increased risk, it will allow her to declare victory while making a graceful exit from the pension stage. But if federal and provincial finance ministers emerge from Vancouver without a real deal in principle, or the prospect of a pension agreement anytime soon, Ontario will be right back where it started.

With a lot of unfinished business to deliver before the next provincial election.