Trudeau government wimps out on Canada Pension Plan reform

Finance Minister Bill Morneau isn’t even bothering to make empty promises about this central Liberal campaign issue.

Thestar.com
Dec. 23, 2015
By Thomas Walkom

Since coming to power, Prime Minister Justin Trudeau’s new Liberal government has taken strikingly bold positions.

It has promised a radically different relationship with Canada’s first nations. It has thumbed its nose at balanced-budget orthodoxy.

It has vowed to fight climate change without nettling the provinces and pledged to fight the Islamic State without engaging in combat.

It has defied both the polls and its critics to welcome thousands of Syrian refugees.

But when it comes to their campaign promise to beef up the Canada Pension Plan, the Trudeau Liberals have wimped out.

They are not doing anything. They are not even bothering to make empty promises about doing anything.
After hosting a federal-provincial meeting this week that dealt with the CPP, all Finance Minister Bill Morneau could provide was a promise to study the issue further and meet again.

It was hardly an example of the federal leadership that Trudeau had promised during the election campaign.

Introduced in 1965, the Canada Pension Plan is a forced savings scheme that serves as the backbone of the country’s retirement system.

Technically, employers and employees split the costs of the CPP. But in the long run, workers bear most of the burden - in the form of wages that are lower than they otherwise would have been.

What these workers get in return is a guaranteed annual retirement pension tied to the rate of inflation.

It’s not a big pension. In 2015, the maximum annual payout was only $12,780. But the idea behind the CPP was that this - combined with workplace pensions and private savings - would provide for a comfortable retirement.

Since then, workplace pension plans have become a rarity as employers strive to cut costs. Moreover, individuals aren’t saving enough on their own.

All of this has put more pressure on Canada’s federal and provincial governments to boost the CPP.

At any given time, most governments think the CPP should be enriched. Even Stephen Harper’s Conservatives were, at one point, committed to increasing CPP premiums and benefits.

Governments reckon, correctly, that if people aren’t required to save enough during their working years, they are more likely to become a burden on public finances when retired.

But small-business employers hate having to pay any kind of payroll tax. Back in 2010, that was enough to turn the Conservative federal government away from reform.

As well, provincial governments get nervous about raising payroll taxes - particularly during the run-up to elections.

At one point, both Quebec and Alberta were opposed to CPP reform - which was enough to kill the idea (amendments require the agreement of Ottawa and seven provinces representing two-thirds of Canada’s population).

By 2013, enough provinces were on side to get something done. But the Harper Conservatives remained opposed.

That’s when Ontario Premier Kathleen Wynne announced plans to set up a supplementary provincial pension scheme in her province. She said she’d scrap those plans if a new government in Ottawa could be convinced to expand the CPP proper.

Her federal Liberal cousins promised to be such a government.

Last June, they issued a statement under the name of then seniors critic John McCallum arguing that the CPP “simply isn’t enough,” and that the Liberals would increase benefits gradually to improve it.

“Clearly, the time is right,” said McCallum, now immigration minister. “All that is missing is federal leadership.”

Alas, that federal leadership is still missing.

Currently, only Saskatchewan and British Columbia seem adamantly opposed to boosting CPP premiums and benefits. If Ottawa wanted to do something, enough other provinces are on side to satisfy the requirements of law.

As well, Morneau could easily mollify those worried about increasing payroll taxes during hard times.

As it is, the law requires a minimum three-year waiting period before implementing any legislated reforms to the CPP. This waiting period could be longer.

In a book called The Real Retirement that Morneau co-authored in 2013, the millionaire finance minister writes that there is no retirement crisis in Canada, that the elderly may work past 65 if their pensions are skimpy and that most seniors can live perfectly well on 50 per cent of their pre-retirement income.

This may explain his laissez faire approach to the CPP. But it isn’t exactly what his party and leader campaigned on.