Provinces say Flaherty is blocking CPP improvement plans

By Special to MoneySense on December 17, 2013
Estimated reading time: 4 minutes

The federal ministers says Ottawa is the only voice against proceeding to consultations and study

A federal-provincial meeting on Canada Pension Plan reform broke up in recriminations Monday after several provincial ministers accused Finance Minister Jim Flaherty of blocking efforts to enrich the plan — or even agreeing to further study. Ontario Finance Minister Charles Sousa, who had previously threatened to go it alone, said Flaherty and Minister of State for Finance Kevin Sorenson left him no choice with their intransigence. The federal ministers told reporters after the meeting there had been no consensus, but Sousa and ministers from Prince Edward Island, Quebec and British Columbia all said Ottawa was the only voice against proceeding to consultations and study. “I’m very disappointed that they used stall tactics in order to ensure that CPP enhancement wasn’t even considered at this point in time,” a visibly angry Sousa said. “It shows to me that unilateral decisions are being made without consultations with the provinces. Ontario will go it alone, we will look at alternatives as we must to protect the interests of our citizens.” Sousa also accused Ottawa of cutting $640 million in transfer payments to Queen’s Park in order to try to balance the budget on “the backs of Ontarians.” P.E.I. Finance Minister Wes Sheridan, who has championed a specific proposal to enrich the pension plan, also made no attempt to hide his emotions, saying he needs 24 hours to consider his options — and suggesting he may join Ontario. “At this point we need to reconsider where we go from here. A made-in-Ontario solution may involve every province of Canada,” he said. For B.C.’s Michael de Jong, the day’s outcome meant that the concept of CPP enhancement was over in the federal-provincial forum, although provinces may continue discussions on their own. CPP reform requires approval of seven provinces representing two-thirds of the population, as well as a green light from Ottawa. While there have been several options floated, most involve a three-to-10 year phase-in period where premiums are raised to pay for a boost in benefits down the road, with the idea that young Canadians today will be ensured an adequate standard of living when they retire. Currently, employees and employers split the 9.9 per cent contribution rate on pensionable earnings up to $51,100. That pays out to a maximum benefit of $12,150 a year, although the average payment to current retirees is about $7,200. There were few signs of the bitter infighting described by several provinces when Flaherty and Sorenson initially took the podium, before their provincial counterparts. Flaherty, in a hoarse voice that he attributed to a cold, calmly explained that there had been discussions but no consensus on proceeding, suggesting the idea might be taken up “two years from now, three years, five years, six years.” The federal position is that any hike in CPP premiums amounts to a payroll tax that would result in fewer jobs, as well as taking money out of workers’ pockets. “We might have been able to do something, but one of the things I don’t believe in is governments making commitments far down the road. … We might not even be the government (then),” Flaherty said. He made no mention of changes he made to health transfers and old age security that take effect in the future, after the next federal election, and in the case of OAS, in 2022. Provincial ministers, however, dismissed the federal reasoning, saying no one had proposed raising CPP premiums now, but to do so only when the economy had fully recovered. Liberal critic MP John McCallum said the government’s refusal to even study options for pension enhancement showed an ideological bias on the part of the prime minister, noting that Flaherty once appeared to back the idea. “It’s becoming increasingly obvious that Stephen Harper does not like the Canada Pension Plan,” he said, adding that the prime minister had made disparaging remarks about the CPP in the past. Canadian Federation of Independent Business president Dan Kelly said provinces should let the new voluntary pooled registered pension plans, which allow employees to contribute in the workplace, a chance to work before pressing ahead with CPP enhancement, or going ahead with provincial plans. But Susan Eng of the Canadian Association of Retired Persons lamented that the ministers had missed an once in a generation opportunity, saying “this will be an election issue” in 2015. “It would have been possible for them to give a conditional ‘yes’ based on objectively measurable conditions but instead just provided a hard ‘no’ despite the best advice of pensions experts, bank executives and even employers who do provide workplace pensions,” she said in a statement. Responding to Ontario’s claim of losing out in transfer payments, a spokesman for Flaherty said the sums went down for the province because its economy did better. —Canadian Press