EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 30, 1995

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[English]

The Chairman: Order, please.

What I would suggest for hearing the witnesses today, since we've agreed to time limits on the witnesses, is that we go with 10 minutes for the first questioner from each party and then five minutes thereafter through the members of the committee. If that's agreeable to members, with some flexibility, that's the general aim.

Could I also ask members to please indicate that they wish to ask questions of the witness so that I can make list? Otherwise, it's difficult to follow, and I don't want to upset members by not having on them on the list if we run out of time.

Could I also suggest that during the question period while we have witnesses here, members seek to use that time to elicit information from the witnesses rather than to make speeches, if that's agreeable?

Mr. Silye (Calgary Centre): I have a question, Mr. Chairman. I wonder why you are changing the procedure that we've always used in this committee? You've never done this before.

Second, if you're going to stick to the ten minutes and five minutes, could you explain whether or not all three of us are going to have a chance, as standing committee members, to ask ten minutes' worth of questions and go back and forth until we're finished asking the questions we'd like to ask of the President of the Treasury Board?

The Chairman: At the last meeting, Mr. Silye, we agreed to an hour and a half for the minister and an hour for each witness. I'm simply trying to allocate the time equitably among the members who wish to ask questions.

If there are few members who wish to ask questions, you'll get more than one round and you'll get more than ten minutes. However, if a lot of members wish to ask questions, then obviously members are going to be more restricted than usual. I'm only suggesting it as a fair way of allocating the time available.

Mr. Silye: Why can't we ask the minister to come back if we don't finish questioning him in an hour and a half?

The Chairman: That's in the hands of the committee. The committee can make any decision it wishes in regard to how it wishes to proceed.

Mr. Eggleton, welcome to the committee. We look forward to your comments, sir.

Hon. Arthur C. Eggleton (President of the Treasury Board): Thank you very much, Mr. Chairman and members of the committee. Good morning. I'm here to present Bill C-85, an act to amend the Members of Parliament Retiring Allowances Act.

There's already been an extensive debate, as we all know, on the content of this legislation, so I'll confine my remarks to a few comments on matters arising in the debate and a very quick overview of the content of this proposed legislation, with brief explanations and clarifications where this might be of assistance to you.

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[Translation]

I will, of course, be happy to answer any questions you may have.

[English]

My officials with me here are also available to answer technical questions. I should introduce them. From the Pensions Division of Treasury Board, they are Sharon Hamilton, executive director; Bryce Peacock, director of financial analysis - he's the numbers man - and Joan Arnold, legislation officer.

During second reading debate, we heard a number of members allude to the need for a fair compensation package for members of Parliament. There were suggestions that the pension plan, even with the significant changes proposed here, remained overly generous and should be cut further.

Many of those who suggested this also suggested, however, that an increase in salary should be considered to maintain an overall fair compensation package. That's a position that was put forward in the Sobeco Ernst & Young report that dealt with that question of total compensation. The government does not feel that an offsetting increase in pay is acceptable at this time of frozen salaries, wages and increments which is being put across the entire federal public service.

During the second reading debate, there were also frequent proposals that this pension plan should be revised to provide for pensions on a basis described as comparable to the norm in the private sector. This was described as a pension plan to which employees and employers contribute matching amounts - at least, that was one formula - to accumulate a cash amount which is then used to purchase an annuity at the time of retirement.

According to Statistics Canada's 1992 publication entitled Pension Plans in Canada, only 5% of people who are in employment-related pension plans are in plans of the type I just described. The remaining 95% - that's 95% - are in defined benefit plans that provide a set formula to determine the benefits. This provides better certainty and better security for these employees in planning for retirement because their ultimate benefits can be anticipated. They know what their income levels are going to be without being subject to whatever happens to be the prevailing interest rates and the prevailing economic conditions at the time an annuity becomes payable.

That same Statistics Canada survey indicated that overall in these defined benefit plans, employers contribute about 70% of plan costs in the private sector versus 60% by employers in the public sector.

For special purpose plans, of course, the employer share of the costs is considerably higher. For example, in the Canadian Armed Forces, there is a ration of $2.70 for the employer for each $1 contributed by employees.

Attention has also been drawn to the indexing feature of MPs' plans. I would simply observe that again, according to Statistics Canada, about 44% of pension plan members in Canada have some form of automatic indexing. It's a feature that is found most frequently in, of course, the public sector.

Other surveys have indicated that most private sector plan pensioners receive ad hoc increases at about 40% to 50% of the CPI. So if they don't have the automatic indexing, a lot of them are later getting it in this form of additional allocation.

I've taken the time to quote these facts because I think it is important to have a fair understanding - and there are a lot of misunderstandings, as is quite obvious from those statistics - of the general private or employment-related pension situation in Canada if we are to assess this pension plan in a reasonable way.

In terms of the members of Parliament plan, I've said that the change proposed in Bill C-85 will amount to a reduction in the cost of the plan of 33% of pensionable payroll. This is based on the reduction in the estimated contribution required to be made by the government in 1995, from a total $10.8 million to a total of $7.5 million.

As a result of the proposed amendments in the bill, it is anticipated that the estimated combined total of the contribution required to be made by the government in 1995 for the Senate and the House of Commons will be reduced from $10.8 million to $7.5 million - a savings of $3.3 million.

[Translation]

Mr. Chairman, Bill C-85 is a response to the concerns voiced by Canadians and more than meets commitments promised by this government before it took office.

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[English]

The bill also responds to the demands by some members that they be allowed to opt out of participation altogether. In general, through the tax system and other measures, this government and its predecessors have indicated a strong belief in, and support for, employer-sponsored pension coverage. As part of their compensation plans, whether they're in the public or private sector, we want to encourage people to provide for their retirement.

Nonetheless, Bill C-85 is going to allow members of this Parliament, who have made it an issue, the opportunity to refuse the option to continue their participation. It'll be a personal choice. Where a member does not choose to continue participation, his or her contributions made in this Parliament will be refunded. For those who had service in previous Parliaments but who would not yet be entitled to a pension at the beginning of this Parliament because they had not been a member for six years - in other words, they hadn't been vested - all of their contributions will be refunded.

[Translation]

All current members will have to so indicate if they wish to continue to anticipate.

[English]

In response to public concern, Bill C-85 introduces a minimum pensionable age of 55. Members who leave Parliament after this bill comes into effect will not be able to receive pension benefits for service earned after the date of royal assent of this bill until that member reaches age 55.

This will eventually mean that the instances of double-dipping that most concern the public will be greatly reduced - that is, the cases where relatively young former members who are in receipt of an MP's pension are again employed in the federal sector. In fact, the Sobeco, Ernst & Young report suggested that a minimum pensionable age would be a sufficient control on double-dipping.

Nonetheless, we recognize that the public is very sensitive to this issue. Accordingly, Bill C-85 introduces strong, direct controls, which will see abatement of pension where a former MP of any age is receiving remuneration in excess of a nominal $5,000 per year in respect to virtually any employment in the federal sector, whether as an employee in the public service, a federal crown corporation or agency, or a personal services contract. We're looking to target money coming out of the Consolidated Revenue Fund in this particular portion of Bill C-85. Members will be required to report any such earnings and accept a reduced pension or no pension, as the case may be, with respect to the periods of time that those appointments are in effect.

The other major feature of Bill C-85 that affects all present and future members of the House of Commons is the reduced accrual rate. Instead of earning a pension of 5% of average sessional indemnity for each year of pensionable service, members will earn 4% in future. This represents a 20% reduction in the level of benefits payable under the plan; that's a significant cutback in the total compensation level.

Accompanying this reduction, the bill provides for a 2% reduction in the rate contributed by members from 11% to 9% in future. This is important to point out - this is a contribution rate that is almost double that of most private sector pension plans. I think what needs to be pointed out here is that members of Parliament are paying a lot more into the plan than is the norm. They also pay for the feature of indexing.

One final policy initiative is the introduction of the availability of survivor benefits for a person who was the common-law spouse of a member while that person was serving as a member and who continues to be the member's spouse until death. Such survivor pensions have been available under the pension plans for the public service and others for many years, so they are provided under this plan. Where a member is survived by both a legal and a common-law spouse, a formula provides for apportionment of benefits between the two.

Mr. Chairman, in closing, I ask you to consider carefully the content and provisions of Bill C-85, representing, I believe, a very significant response to the concerns of Canadians. These are the matters we raised in the election campaign and put in the red book, and this bill goes beyond those commitments. They respond to the concerns of Canadians while maintaining a reasonable overall compensation package for what is an important job in this country.

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Thank you very much, Mr. Chairman.

The Chairman: Thank you, Mr. Eggleton.

Mr. Boudria (Glengarry - Prescott - Russell): Mr. Minister, what you're telling us on page 3 of your brief, then, is that employees in the private sector contribute 30% to a normal plan and in the public sector employees contribute approximately 40%. Where then does this myth come from that the pension plans are all based on 50-50 employer-employee contributions?

Mr. Eggleton: Well, it comes from those who either just don't understand what the realities are out there or don't want to understand what the realities are. But as you've correctly pointed out, this is even below the norm in terms of employer-employee contribution levels from the private sector.

Mr. Boudria: That's interesting. On page 4 of your speech you refer in the second last paragraph to those who had service in previous Parliaments but who would not yet be entitled to a pension at the beginning of this Parliament, and because they had not been a member for six years all of their contributions would be refunded. What is the current rate of interest for refunding those? Do you know, Minister?

Mr. Eggleton: It's 4%. That's what is allowed in the legislation.

Mr. Boudria: So if an MP is here for only one term, he or she goes home with his or her investment and 4% interest?

Mr. Eggleton: Yes. They can put it into an RRSP or some other pension vehicle that is tax sheltered or they can take it as income.

Mr. Boudria: And they pay income tax on it?

Mr. Eggleton: Yes, the income tax laws apply.

Mr. Boudria: The question is this, then. That 4% interest, which varies depending on just where we are in the grand scheme of things, is somewhere between one-third to one-half of what interest on any kind of an investment vehicle would normally offer. If you have money in five-year GICs or RRSPs, based on the last seven or eight years, according to a the study done by the Library of Parliament for me some time ago, it averages somewhere around 10%. In fact, not only is there the investment that you referred to, but there is also a form of subsidy made by the person contributing that premium and only getting back one-third to one-half of his interest on it if and when he or she leaves. Is that not correct?

Mr. Eggleton: In a sense, yes.

Mr. Boudria: On page 5 you refer to double-dippers, and I've raised this in speeches in the House before.

We're going to have a provision whereby if someone receives $5,000 from a federal government income, a salaried income or remuneration of some sort - and I gather this doesn't include OAS or things like that - that person would see a clawback for amounts greater than that. But the question is, what happens to the reverse dippers?

Just to give you a hypothetical situation, say you had a general or a colonel or hypothetically an air traffic controller who is on pension, and this hypothetical person was elected to Parliament. Does this clawback apply in their case, and if not why not?

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Mr. Eggleton: No, it doesn't apply in this case. This is intended to deal with the federal public purse, those who receive money from the Consolidated Revenue Fund of the federal Crown.

Mr. Boudria: I'm only referring to federal pensioners here. I'm not referring to someone who would have hypothetically been a member of the legislature of Alberta.

Mr. Eggleton: Sorry, I guess I had that one in mind. It does not operate in reverse. This only deals with members of Parliament who leave this Parliament, voluntarily or otherwise, and then receive an appointment that involves money coming from the federal Crown.

Mr. Boudria: It doesn't apply to someone who's, say, a general, hypothetically of course.

Mr. Eggleton: No. This bill deals with the Members of Parliament Retiring Allowances Act. It doesn't deal with other pension plans they are under, which they do receive money from in addition to receiving their remuneration as members of Parliament.

I'm sorry, I forgot the first part of your question.

Mr. Boudria: I was making the case that it applies to double-dippers in one direction, but if they receive the double-dip first it doesn't work.

Mr. Eggleton: No it doesn't, unless of course they want to voluntarily put aside that pension while they're serving as members of Parliament. That would be entirely up to them.

As you know, even though this bill is not yet in effect, until now when government appointments have been made on the initiative of the Prime Minister, there has been a voluntary compliance. So in terms of government appointments, this double-dipping provision is already in effect and has been for the entire term of this government.

There is no provision in this bill that covers the reverse double-dippers you refer to, but they are free to voluntarily reconcile this matter if they so wish.

Mr. Boudria: Are there are reverse dippers right now giving their pensions back, to your knowledge?

Mr. Eggleton: I'm not aware of any.

The Chairman: Mr. Plamondon.

[Translation]

Mr. Plamondon (Richelieu): Mr. Minister, I would like to pursue on the matter of double-dipping raised by Mr. Boudria.

I am surprised to learn that your bill provides that in the case of those now serving as members who are entitled to a pension, their pension will be adjusted to the new rate as soon as royal assent is given to the bill.

Why then, in a case of double-dipping, such as the Canadian Ambassador in France, Mr. Benoit Bouchard, when royal assent is given, will his remuneration not immediately be readjusted as it will be for members of Parliament instead of waiting for a renewal or of maintaining the two pensions because of entitlements?

[English]

Mr. Eggleton: I think the answer to that relates to common practice and the feeling of what is fair and reasonable with respect to pension provisions and earned pensions.

In this bill we have not gone back into the past in terms of what has already been earned, other than the provision for this Parliament for opting out. In other words, up to the date of royal assent whatever has been earned is preserved. So people who came in under the old rules or the existing rules will have the certainty of that in terms of planning for their futures.

The same applies to the double-dipping provision. Those who received an appointment under the provisions they understood to exist at the time will not face that being changed on them unilaterally. However, when their reappointments come up that matter will be addressed. As I already pointed out a few moments ago, at the initiative of the Prime Minister it has already been addressed with respect to appointments that have been made in this Parliament.

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It goes to the fundamental matter of retroactivity, which is not a common thing to do in terms of pension provisions. The common thing is to start from a new base with a revised plan. That is what we propose to do here, and that applies to the double-dipping provisions as well.

[Translation]

Mr. Plamondon: I beg to disagree, Mr. Minister.

When I was elected, I was offered a pension plan which has since been changed. I approve the changes you want to bring about regarding the minimum age and the government contribution. My contract as a member of Parliament is being changed along the way, but why do you not also change the contract of the friends of the previous government who were given cushy jobs? This is what bothers me.

I would like you to apply the provisions on double dipping to these people immediately just as they will apply to the pensions of members of Parliament after royal assent. They have benefited from these entitlements for years. They should now stop benefiting from them immediately and live on their salary, whether or not they decide to remain, minus their pension. This is my opinion. You might not agree, but we could debate the issue in the House.

Second, do you not find that this bill is also unfair to members of the House of Commons in Ottawa as compared to provincial members of Parliament? For instance, Mr. Gauthier, who was a member of Parliament, was appointed senator and does not receive a pension as a former member of Parliament. In the case of Ms Bacon from Quebec and Mr. Simard from New Brunswick, they receive a $45,000 pension as former provincial ministers. They keep this pension and still sit in the Senate.

Is that not a risk since your bill does not legislate for all cases? It is quite unusual for a member of the Bloc Québécois to ask for centralization, but we should give more thought to the issue of provincial ministers and members of a legislative assembly. Otherwise, it will be more profitable for someone who wants to have a career on the international scene after politics to sit in provincial legislatures as they can then be appointed without being penalized by losing their pension. It seems to me that this issue should be seriously addressed. Have you thought about that?

[English]

Mr. Eggleton: With respect to the first question about making a change in mid-course, I suppose the option to doing that is to not make any change in this Parliament but make it effective with the next Parliament. That would cover the concern you have raised of coming in under one understanding of what your contract was vis-à-vis what we're now proposing to put into effect upon royal assent, which presumably would come sometime within the next few months.

I think we have given due notice. The government and the people who ran for my party gave due notice in the red book in the election campaign that we felt these changes were necessary. We were doing it in response to what Canadians wanted. Canadians were concerned about people retiring at a young age with a healthy pension, and they felt there should be some minimum age. They were concerned about people going on, getting jobs and being paid from the public purse when they were still collecting from pension plans.

In the course of the election campaign we said we would bring a bill into Parliament to deal with this matter at the earliest opportunity, and that's exactly what we've done. We're fulfilling our promise in this regard and we're even going beyond it in terms of reducing the accrual rate or the benefit that will ultimately be received by members of Parliament. So I think it's an appropriate measure to take.

We have said, however, that we would not claw back what has already been earned, as is normal in both the public and private sectors. It will be maintained, but everybody from the point of royal assent will be on a new plan. There will be one plan, not two.

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With respect to unfairness vis-à-vis members of provincial legislatures and the national assembly, we've certainly looked at the different pension provisions. It's a changeable situation, as we find out from Alberta, for example. Even in the current election campaign in Ontario, they're talking about different formulas. So it's not something that's exactly stable; it's forever changing.

I can't imagine that you would want us to pass a provision that would in effect override or in some way control the authority of the legislatures or the national assembly to set their own pension provisions. That certainly is their right and the obligation given their own members, and their own members' decision on what they think is fair and reasonable.

We certainly take all the information into consideration. That certainly is part of our data bank as we've come to this conclusion, as I know it was in the case of Sobeco Ernst & Young consulting group, who looked at not only what was being done by the provinces but what was also being done internationally. So all of that has been taken into consideration.

No doubt there are going to be differences, but that's part of the authorities under the parliamentary system that our provinces have.

[Translation]

Mr. Plamondon: I have one last question. Mr. Minister, it seems to me that, if you are appointed minister or parliamentary secretary, your pension will be higher than that of other members of Parliament, not necessarily because of your salary, but because of the extra years which will be added. For instance, if you are a minister for one year, you will be considered as having sat one year plus 72% of the previous year, which gives 1.72 year, I think. For parliamentary secretaries, it is 1.16 year and, for the Speaker of the Senate, 1.48 year.

Is that not somewhat unfair? Is that really the case? This is what I wonder and your officials could perhaps give us an answer. This is called the supplementary salary allowance. Could this not be corrected so that one year equals one year?

[English]

Ms Sharon Hamilton (Executive Director, Pensions Division, Treasury Board): It's a design feature of the pension plan that the additional contributions that are made in respect of additional salaries...rather than using the additional salaries in the calculation of the pension, the additional contributions are converted into additional service, which is then used against the normal MP's indemnity to calculate the pension.

It's simply a technical trick so that we have the effect of including in the calculation of the ultimate pension the periods that were served as a minister, giving additional pension for those periods because additional salary was earned and additional contributions were made. Instead of using the salaries in the average salary calculation, we convert the ministerial service into additional service and use the normal average salary that applies to everyone.

The result is that you end up with the same benefit result as you would have had had you done the calculation using different average salaries for the periods that an individual was a minister versus the periods when they were an ordinary member.

[Translation]

Mr. Plamondon: This means that, if the honourable minister was a member for five years and was defeated after five years, his pension plan would give him an entitlement of eight years and he would therefore be entitled to a pension. Is that correct?

[English]

Ms Hamilton: No, you still have to serve six years as a member of Parliament before you can qualify.

[Translation]

Mr. Plamondon: But he would have eight years of service.

[English]

Ms Hamilton: You may end up with eight years of pensionable service, but you have to have been a member for six years in calendar time.

[Translation]

Mr. Plamondon: Mr. Mulroney sat for nine years and now receives a pension which is about the equivalent of 15 years of service. It is the same for Mr. Trudeau. Twelve years would give him about 24 years of pension. Am I right?

[English]

Ms Hamilton: They have additional pensions because they earned higher salaries.

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In a more ordinary pension plan where people have a normal salary progression, you would count their actuarial time and use their actuarial salaries earned. In a pension plan where you may have very great discrepancies in the salary progression because people may be ministers in the government and then they may be ordinary members, then you get peaks and valleys in their salary calculation. So it is simply a way to average out the variations there may be in the salary progression over their career as members of Parliament. We do it through the service calculation instead of the salary calculation; the result is the same.

Mr. Harper (Calgary West): Thank you, Mr. Minister, for your presentation. Also, I should thank all the people who have shown up today. It's quite an interesting attendance for an issue about which we're assured by government members the public is not interested.

Mr. Minister, have you caused or asked the chief actuary of the Office of the Superintendent of Financial Institutions to conduct an actuarial review of the plan proposed in Bill C-85?

Mr. Eggleton: Let me first of all respond to your preamble. This is a bill and this is an issue in which the government is interested. The government in fact has initiated this change. It initiated this change as a result of what it was hearing during the election campaign and what indeed it promised to do, which was to bring in reforms to the MP pension arrangement. We are fulfilling that promise and we're even going beyond that. So it's not correct to say that we're not interested in the matter.

On this specific question about the chief actuary of the Office of the Superintendent of Financial Institutions, no. But there has been an actuarial examination. Perhaps Mr. Peacock could further respond to that.

Mr. Bryce Peacock (Director, Financial Analysis, Pensions Division of Treasury Board): Well, the actuary did estimates of the effect of the changes in the plan. Then there will be an actuarial report being conducted on the plan effective March 31, 1994.

Mr. Harper: Just as a rebuttal to your rebuttal, I appreciate that you consider this important. You may just want to brief government members on the committee on that fact, judging from the comments made at our last meeting.

About the response that the chief actuary has given you some figures, you're probably aware of the provisions of the Public Pensions Reporting Act, section 4. It says that where an amendment is made to a pension plan referred to in paragraph (3)(i) including member of Parliament retirement allowances, and the amendment affects the costs of benefits or creates an initial unfunded liability, the minister shall cause the chief actuary to conduct an actuarial review of the plan as of the effective date of the amendment. Does this not in fact require the government to table a review by the chief actuary of this during this committee hearing and during this process of a parliamentary review of proposed legislation?

Mr. Peacock: No, not in our interpretation of the bill. There will be an actuarial... [Inaudible]. It was a mistake when I said in 1994. In March 1995 there will be an actuarial report on the plan.

Mr. Harper: I should say that's not our interpretation. I have reviewed the Hansard record at the time this bill was adopted. I notice that Senator Gauthier at the time said the purpose of this act was to have precisely this kind of information at our disposal during the parliamentary review of these types of proposals. We'll pursue this issue.

I will just point out that if there is a legal problem here and you're not prepared to table a report by the chief actuary, we could run into the same kinds of difficulties we've had with previous legislation, Bill C-22 or legislation that has come through this committee; Bills C-18 and C-69, where we and people in the other place have found some difficulties with the government's fulfilling of its obligations.

I just make the point that we'll be pursuing that later.

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Mr. Eggleton: We certainly intend to fulfil our legal obligations.

Mr. Peacock: And the costs have been provided; the plan numbers on the effect of these changes, I believe. That's all interpreting.

Mr. Eggleton: Yes.

Mr. Harper: It does say a full actuarial review.

Cost of the plan: the numbers you have provided us indicate that this has reduced the government end writ small the cost as a percentage of pensionable payroll from 49% to about 33%. I want to dwell for a second on the figure of 49%, because when I was in contact with your office about a year ago, we had been told the cost of the present plan as a percentage of payroll was about 63%. Since then the estimates have been lowered and of course the government contribution was lowered in the past year.

Could you or your officials briefly explain why that's the case? Why, without these amendments, has the cost of the MP pension plan fallen over the past year?

Mr. Peacock: That 63% may have included employee contributions. The 39% is government contributions only.

The effect of the 1993 election lowered the cost of the plan substantially because a lot of new members came in. That's the basic explanation. There were a lot of new members coming in who may or may not end up with six years of service, rather than as in the past Parliament where you had a lot of members who were automatically going to meet six-year requirement. With the last re-election of the Conservative government, 88 met the requirement.

Mr. Harper: The actuarial answer would be with the higher than expected turnover of first-term members, the long-term costs of the plan would be lower than anticipated.

Mr. Peacock: That's right. It's a reflection of the new parliament.

Mr. Harper: I say this for public information, for members of the public who think this plan is excessively generous and who can't appear before this committee and influence this particular process. Their way of protecting their financial liability under this plan in the next election would be to turn out as many first-term members as possible in order to lower the long-term costs of the plan. Does that follow from that analogy?

Mr. Eggleton: Now that you mention that....We actually have some people in mind.

Mr. Harper: In fact, Mr. Eggleton, since Reform MPs won't be creating any cost for the public as a consequence of opting out, that won't be a problem. But is my analysis correct in the case of those who opt in?

Mr. Eggleton: Let's put something in context here. It's important for Canadians, whether they're in the private or the public sector, to provide for their retirement. If they don't, they could become a burden on the public purse in other ways. That's what we are talking about doing here, and doing it in a reasonable way.

I think you in your party ought to have a second look at what you're forcing your members to do. I hope your whip is going to say, all those in favour except for those who would do otherwise, when it comes to this, because so far I don't see that happening.

What about your families? You have a lot of things to consider in your retirement allowance. This government wants to encourage Canadians to look at their retirement years and what they require. As it turns out, most of the money contributed into the pension plan by MPs is not drawn on, because most never get to that qualifying period.

I think what Canadians want is the best possible people in their Parliament. They don't want to say let's automatically throw them out so they don't qualify for a pension, when already more than half of them don't ever qualify for a pension just in the course of natural events called elections.

I don't think that's a reasonable thing to say. Let's encourage Canadians and members of Parliament to provide for their retirement. Let's do it in a reasonable fashion.

We believe we are doing it in a reasonable fashion. We're cutting the costs of this plan to the taxpayer by some 33%. That is a major contribution in getting our deficit and debt under control by cutting of government expenditures.

On top of that, members of Parliament have had salaries frozen for the last six years. As your whip points out, the compensation level is in need of some revision, except for the fact that we've frozen the salaries of our employees, so we can hardly be putting ourselves forward now to get a salary increase.

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So let's put this all in context. I think it's fair to say people should provide for their own retirement, and that includes members of your party.

Mr. Harper: We can put it in context, Mr. Minister. The context is that a large percentage of Canadians have had no increase in their salaries over the past six years, and a large number of them who had been working six years ago are not working today. That's the real context.

I'd also point out - as we've said many times, and you know this - that if you want to bring in an bill that reflects the general rates of benefit in the private sector, we would be happy to opt into that.

I have said myself on many occasions that I think it's perfectly reasonable that members of Parliament should get reasonable pensions. If you bring that in, I'm sure you'll find cooperation from this side. I think it's unfortunate that this has become an issue where we're going to end up attacking each other on an ongoing basis. I think it would be much better to try to come to an all-party agreement on something reasonable. Frankly, I think in spite of your rhetoric you believe that yourself. As a first-term member, I think you know that.

In any case, in your own presentation, you -

The Chairman: One more question.

Mr. Harper: Well, I'll ask one question. I have others I want to ask because in the minister's presentation he tried to make the argument that this pension is quite comparable to private sector or public sector plans. I'd like to ask a few questions along those lines, but let me start with one.

The defined benefit rate here: 5% per year of service is being lowered to 4% under this bill. What percentage of first, private sector workers, and secondly, public sector workers - maybe Mr. Peacock can answer - have a benefit rate of 4% per year of service?

Mr. Peacock: None -

Mr. Harper: Thank you.

Mr. Peacock: - except perhaps in the executive level.

Mr. Eggleton: I think it's reasonable to point out here that there is a quid pro quo for that, because members of Parliament pay a lot.

You talk about what the norm or average is in the private sector. Okay, perhaps a 4% or 5% accrual isn't. But a 5% payment into the plan by an individual employee is a normal situation. This is 9%. It's almost double. In fact, under the old provisions, it was more than that. It was an 11% contribution. So one has to take into consideration that an additional contribution is being made by members of Parliament.

Mr. Harper: How often is the employer paying three and a half times that? What percentage of the time in the private sector and in the public sector is the employer then paying three and a half times that?

Mr. Eggleton: But it's all relative, as I'm saying. I'm saying what's happening here is that we have a pension plan that has provisions different from those of the private sector, yes. But it also has a greater degree of contribution from the employees affected here.

I'm sure if people in the private sector were paying 9%, they would be expecting levels of pension at least as high, if not higher. In fact, the statistic I gave earlier from the Statistics Canada study indicates that very much to be the case. They would expect a higher benefit from paying a 9% -

Mr. Harper: Whether they're paying 9% or less, how often -

The Chairman: Order. Mr. Harper, your time has expired. - Mr. Silye.

Mr. Silye: I have nine questions to ask, and I hope to ask all nine. If we don't get through this - and you can see the number of questions Mr. Harper still has unfinished - I would request, with Mr. Eggleton's permission, that he be willing to come back and answer some of our questions. I'd like that to be one of the things you consider before this meeting is over.

The Chairman: I'd urge you to get going instead of taking time with speeches, Mr. Silye.

Mr. Silye: I just made a suggestion to you, Mr. Chairman. You're sure using a heavy arm that you've never used before.

Mr. Eggleton, thank you for your appearance.

You say that Bill C-85 is a response to the concerns voiced by Canadians. You've covered some with Mr. Harper in response to those critics who claim that this is still too generous.

You must recognize that what makes it appear too generous is the double standard. What's out there in the private sector, which Mr. Peacock referred to, and what is now being passed along to an MP, where the accrual rate is 4%...yes, you've reduced it. But the private sector is 1.5%. It's a 75% maximum of your salary; in the private sector, 70%.

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The contribution by the government is higher than 1:1 matching. If MPs can put in 9%, why shouldn't the government just match it dollar for dollar?

Private-sector people aren't allowed to put in the higher amount MPs are. It's indexed for inflation in such a generous way.

These are all things that are making the private sector annoyed with how you're overcompensating MPs on pensions, or it appears that way. For instance, based on this pension plan, it takes nineteen years now to get to a maximum benefit of 75%. In the private sector, it takes 35 to 40 years. How do you justify this pension plan to those critics who say it's still too generous?

Mr. Eggleton: I could give the same set of remarks I made when I started this morning.

Let me add a couple of things. One is a repeat of what I said just a moment ago. When you start dealing with these numbers of what you, at least, perceive to be the norm in the private sector - I might add that there are a lot of variations in the private sector - versus what MPs get.... You can point to the 1.5% versus the 4%, for example; and again I'd point to the 5% versus the 9%. Thew 5% is the norm for the private sector. MPs pay a higher amount.

Why do MPs pay a higher amount? I think MPs pay a higher amount because they recognize this is not a long-term career. It may turn out that way for some, but it doesn't turn out that way for most. I think the evidence is quite clear. More than half of the people who come here don't get to the six-year vesting period for this plan.

You can say there's a lot of insecurity in the private sector too in terms of jobs these days, but I think those statistics indicate quite clearly the law of averages is such that most people here aren't going to collect a pension at all. That's what we're learning from what's gone on before.

Yet people are giving up some of the best earning years of their lives - and I am not talking about anyone specific in this Parliament; I am talking generally - where they could be maintaining a greater degree of security, or at least having a better chance at it; nothing is sure in life any more. A lot of people give up positions that are definitely headed towards a pension plan that will help provide for their retirement years. Yet they're willing to give it up to come here to serve the people of Canada. I think that's a noble calling, and I think the Canadian public would want us to be able to continue to attract people from all walks of life, people who don't have to be concerned they are sacrificing themselves and their families by putting in these years of service.

Members of Parliament have decided that the long-term security provided through a reasonable pension provision is more important to them than the short-term compensation, which becomes less for them, in most cases; and they're willing to pay more money to get that. To get that kind of provision for the future, they're willing to pay almost double what people pay in the private sector.

It's not necessarily easy for a lot of members of Parliament - and this includes people in your party as well as in any other - to resume the careers they once had after they've been out of them for a number of years and have participated in a very partisan forum. That's a totally non-partisan comment.

When you look at the compensation package of members of Parliament...you've said it should be higher. Bill C-85 doesn't provide for a raising of the compensation package. It provides for a lowering of the compensation package. But you've said it should be higher. You've said you felt the salaries should be higher and pensions lower. Past members, and many members I've talked with, as I said a moment ago, feel those pension provisions are important for the retirement years ahead of them. So it is as it is.

Should there be further corrections in the amount put into the pensions versus the amount put into salaries? The Sobeco Ernst & Young report suggested the pension plan should be lowered and salaries increased.

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I spoke to that in my earlier remarks, indicating that this is not the time to be doing that. I don't think the public would tolerate salary increases here, and I don't think we could do that, given the fact that we've frozen our employees five out of the last six years. So we continue to be frozen, as we have been for the last six years.

That may be something that's doable. It has a very good argument, and you've advanced that argument; but now is not the time to be doing that. So when you look at this in terms of the total compensation package, we're actually lowering it.

Mr. Silye: Mr. Eggleton, obviously you referred to this as being part of overall compensation in your presentation today. A pension is part compensation, especially considering how generous the magic contributions are. This pension plan is in conjunction with or as a supplement to what an MP receives in remuneration or compensation. Obviously you've factored that in in considering how to package this pension plan.

In your evaluation, did you arrive at a value of what an MP is receiving in compensation? Excluding the pension plan, in your estimation, what is it that a first-term MP - forget cabinet ministers and extra work for extra pay...in your estimation, what would you say if somebody asked you, what does an MP get paid, Mr. Eggleton? What would you answer?

Mr. Eggleton: That was not part of what this bill is about, or the mandate. Very quickly, we came to the conclusion that we would not deal with this matter of salaries at this time.

Sobeco Ernst & Young suggested I believe $84,000 or $85,000. You suggested $150,000 as a possibility, but we have put that aside entirely. Now is not the time to be talking about salary increases for members of Parliament. The result of our bill, therefore, since we are lowering the accrual rate and putting in the minimum age and ending double-dipping, means a 33% reduction in compensation level.

Mr. Silye: Why not now, Mr. Eggleton? Why not defer this bill and let it just die on the order paper, hire somebody who is at arm's length, an independent body whose mandate is to bring forward a transparent, taxable salary which includes expenses, a provision for a one-to-one pension plan no better than in the private sector, vested right away, because an MP is here usually for at least three to four years, and then restore some integrity to this whole business of MPs' compensation?

Instead of hiding behind comments like, now is not the time, and salaries have been frozen, why not come clean with the Canadian public and just have it out once and for all in this parliament, in this term, so that everybody's happy with it - the public, the politicians - and be done with it? Why continue this façade and this game that's been going on for years? You're a rookie. I'm a rookie. Why don't we change it and fix it; fix it right?

Mr. Eggleton: Mr. Chairman, the remarks of the hon. member are going in two opposite directions at the same time here. His party has been after me and after the government for some time to bring this bill in. I can remember many questions: when is it coming, when is it coming?

Now he's saying why not let it die; why not just put it aside? He also says why not study further?

This has been studied enough. We already have an arm's-length study, the Sobeco Ernst & Young, and it deals with the question of salary that you want to deal with; not to the extent that you suggest it be increased, but it deals with the salary. We clearly indicated in the election campaign we would deal with these issues.

Certainly what we were hearing from the public was to deal with the issues of double-dipping and the minimum age. We have dealt with them and we have gone beyond that in dealing with the accrual rate. That doesn't preclude other things being done in future with this whole compensation package. But I think we should get on with this bill and do what we hear the public wanted us to do.

The Chairman: Mr. McWhinney.

Mr. McWhinney (Vancouver Quadra): Mr. Minister, thank you for coming along, and thank you for responding to some suggestions I have made over the past few months on behalf of my constituents which I think are incorporated into your plan.

I have a couple of questions here. One relates to the qualifying years of service; the six years. There's a very well known case of somebody who served five years and held the highest office in the land and is not entitled to a pension.

You will be aware that the majority of public and quasi-public pension plans in Canada, and in the United States incidentally, provide for pensions based on actual years of service. Would there be any actuarial problem in including cases such as the one I've mentioned?

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It might be. I gather the accumulated sum is $53,000. It might mean a pension of $5,000 a year. Would there be any problem incorporating that into a plan, or even situations of one year of service, which most quasi-public pension schemes provide? Then I guess it would be a $2,000-a-year pension or $1,000.

Is there any problem actuarially with a situation of that sort? Was it considered?

Mr. Eggleton: Every additional benefit that is put in, every additional qualification that involves ultimately an additional pay-out, would involve some additional contribution to ensure the actuarial solvency of the plan. I understand the case that you're talking about. That and other cases of its kind always bring us to the question of where you draw the line? There are always going to be people close to the line.

It was our feeling that the 6-year vesting should remain as a period. We talk about what the norm is in the private sector. Nobody's pointed out, to this point, that it's two years in the private sector for vesting.

There's a confusion between vesting and pay-outs. Pay-outs are no longer going to be possible before age 55 for what is accrued after royal assent and the vesting is going to remain six years. But in the private sector you need only two years to vest in the pension plan. So let's point that out. There are things that are different from the private sector on both sides of the equation, and that happens to be one of them.

At this point there was a feeling that we should address specifically the issues we said we would do in the election campaign. Because there was a lot of concern about the amount and the benefit from the plan, we also went the additional mile on the accrual rate.

Should we go further in terms of the kinds of circumstances? I'd certainly be happy to take that under advisement, but that's not what our feeling is, that we should proceed with it at this time. Perhaps at a later stage, when we get into a more in-depth examination of compensation, as has been noted, at some time in future, that could be considered, but at this point our proposal deals with the vesting at the 6-year point continuing.

Mr. McWhinney: .[Inaudible]...did you examine the issue of portability, which again is commonplace in the private and quasi-public sector; that's to say, integration of the parliamentary pension scheme, whatever it might be, with the private schemes? As I say, apparently it is not an actuarial difficulty in the private and quasi-public sector.

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Mr. Eggleton: The Prime Minister first, in response to a question from...I don't know who it was of your party, said over a year ago now that this kind of provision would be there. So there's obviously been enough time to consider the ramifications of it. But since the act is not yet in effect, it's only fair to wait until that proclamation is made and then to provide people with the formal 60-day period.

Miss Grey (Beaver River): I appreciate that. That is enough for us.

When you said our whip is making decisions for our caucus...we had a vote in our caucus. Every person voted on their own to opt out of that, with the hope that we would be able to prepare for our retirement more ourselves, rather than asking the Canadian taxpayers to do that for us. The idea wasn't this particular 60-day window for us. It's for future members of Parliament.

Secondly, for those who do opt out of this, will there be the regular severance package is afforded to MPs; that is, half their year's salary? You don't qualify for the severance package if you take the pension. If you do not take the pension, then will members get that half-year's salary?

Mr. Eggleton: First of all on your preamble comment, you talk about the Canadian taxpayers. Even the proposal I've heard this morning, and I've heard previously from members of your party...a one-on-one basis would involve a contribution from the Canadian taxpayer. So it's not as if we're going to no contribution towards pension plans from the Canadian taxpayer, even with your party's proposals.

About severance, provisions would apply as they are, which means severance applies if there's no pension payable, but so as to allow for a member to be able to adjust back into the private sector, which, as I say, happens in the majority of cases, since most do not qualify for a pension, not reaching the 6-year vesting. So that continues to be the case, as well as the fact that somebody who does go out, who does have a pension provision, would not get the severance pay.

Miss Grey: Thank you.

I just wanted to ask about what some of your views are about the hearing of witnesses on this day. When we met on May 18, just before the recess, we had a discussion about who and who would not come as witnesses. Did you have any input into that or suggestions to your members on the committee about who you would like to see come, or was that just something where you weren't involved in the process?

Mr. Eggleton: No, I was not involved in the process. That's your committee, and I respect your committee's decision and the chair of your committee's decision on that. I'm a guest here.

Miss Grey: Okay, so are we.

Just before I go on to that and the questioning of witnesses, where you talked about the fact that I had said something that perhaps was discrepant, that taxpayers are paying into the pension plan...if they're paying in $1 in employer contribution to $1 in employee contribution, I think the Canadian taxpayers wouldn't have much problem with that. It's these horrendous amounts of, previously, $6 to $1, now going down to $3.61 to $1, that I think is what makes it frustrating.

Let me ask briefly about the the Sobeco Ernst & Young report you referred to earlier. They requested a submission on this whole issue from the National Citizens Coalition and other groups. It was in their report. I'm just wondering how you would feel about this?

I'll just take you back, because I mentioned earlier to the committee the Hansard report from May 18, when we met here about the questioning of witnesses. I just want to bring up and get on the record that Mr. Boudria said, I have no great interest in listening to Mr. Summerville; it's not a citizens' coalition; it is not an interest group; it is a business.

Then, further to that, Mrs. Parrish said, first of all, I think you're quite qualified - Mr. Harper is quite qualified - to bring Mr. Summerville's ideas to this table. If we are going to get into the indignity of being browbeaten by people who represent very extreme views, then I agree with Mr. Plamondon. She went on to say, we cannot subject ourselves to the haranguing of someone like Mr. Summerville, who uses terms like ``pigs'' and ``trough''.

Mr. Minister, this is a lightning-rod for this issue, of course, out in the rest of the country, one that people are feeling frustrated with.

As I sat in that meeting as a guest also, because I'm not normally on this committee...when we are hearing things such as this from government members, how are you going to go out and sell a pension plan like this, which is overly generous? I don't think there is any way you can get around that, regardless of when your assistant here talked about normal, more ordinary pension plans in the rest of the country, as she mentioned earlier.

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When we see stuff like this happening, how can we, as members of Parliament, go out and say well, I'm sorry, these people are not allowed to come to the committee, they were voted out and the Canadian Taxpayers' Federation was not allowed to come to this committee because they represent extreme views or because members don't like to be harangued?

An hon. member: MPs weren't allowed.

Miss Grey: MPs weren't allowed. You're the only MP who's going to be here representing members of Parliament. They were all totally blocked out. This is frustrating to the Canadian public, here today watching, and to the press, which is trying to make some kind of sense out of this.

Sobeco Ernst & Young is a terrific group, which has done a terrific amount of work on this, and it has requested a submission from the National Citizens' Coalition and other groups. Could you explain to me why, when we see this kind of stuff, we are allowing this to happen? How are you going to go out and sell it when you're appearing here before the committee, but those who have different views from the government here are squashed right out of it?

Mr. Eggleton: I'll answer the question. I think I've responded before. I don't at all agree with all the preambles. I think you'll find members of all parties have wanted to have the input of Canadians and have in fact heard from Canadians about this for some time. We heard about it in the last election campaign. We've heard about it in between. We all represent constituencies, and we've heard from our constituents on this subject.

You're having hearings here today. This is not the first, the last, or the only opportunity for people to be heard on this subject. You also have the opportunity to pose whatever questions you want to Sobeco Ernst & Young, because they're on your agenda to appear today as well.

As I've indicated before, I don't agree that the pension plan is overly generous. You're looking at some statistics, some part of the information about the pension plan, and not at the whole picture. I think you have to look at the whole picture, not just in terms of the pension plan but in terms of the fact that members pay more than the norm and have a longer vesting period.

Let's look at those things. I say those things specifically to make sure there is some balance to the consideration of the pension plan alone.

Let's look at the total compensation package. The total compensation package is going down. It's been frozen in terms of salary for six years. I don't think you can isolate the pension arrangement. You have to look at the total compensation package. We can't deal with the salary increases now, but there has to be a reasonable compensation level. Unfortunately, because of our economic circumstances and our fiscal restraint program, which is necessary to get our fiscal house in order, we have to lower the pension plan by about 33%, for the taxpayers' contribution to it.

I think the government is taking a reasonable route. I don't agree with all the assumptions you've made, quite incorrectly, I think, nor with the assumptions about listening to the public. I know my colleagues, some of whom you've quoted, can respond for themselves, and I know they've heard from the public in no uncertain terms and in many different respects on this issue, and would want to hear from them.

The Chairman: Mrs. Parrish.

Mrs. Parrish (Mississauga West): I'm going to try to get through five questions quickly, Mr. Eggleton, so I'm expecting the same answers I get from my husband - just yes or no. Mostly I get no.

Personally, in all humility, as an MP for a year and a half, I think we're leading the public down the garden path by calling this a pension plan. Is it not called the retirement allowance benefit plan? Is there a difference?

Mr. Eggleton: Certainly there is in the terminology, and perhaps in the legal framework. I think most people think we're talking about pension plans. I will ask Sharon Hamilton to talk about those distinctions.

Mrs. Parrish: Sharon, let me guide your answer.

A government retirement allowance benefit plan does not mean we put in equal payments. My husband puts in so much a year and his company matches it. What we're actually putting in from the public purse is enough money to fulfil the obligations of people who've retired in the past. Is that not true? And does that not make it different?

Ms Hamilton: Actually, there are many different kinds of retirement savings arrangements that are described as pension plans, and this happens to be one form. The form you described is another type of pension plan. The phrase ``pension plan'' is a kind of generic term that describes the various sorts of savings schemes -

Mrs. Parrish: I'm trying to get at the money the government puts in every year. Mr. Eggleton has just said he's reduced it by 33%. The money that goes in every year isn't a matching fund for people who are currently MPs and who are currently paying into it. It's an amount of money required to fulfil previous obligations. Is that not true? What is it?

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Ms Hamilton: No. The retiring allowances scheme for members is run on what's called a fully funded basis, which means the revenues accruing in the plan each year are sufficient to pay for the ultimate benefits that have been accrued in respect of that year by current members of the plan.

Mrs. Parrish: Then the reduction from $10.8 million down to $7.5 million is going to be a reduction that's going to be maintained for many years in the future until this plan has changed again.

Ms Hamilton: The costs do fluctuate, for various reasons. One is because of the changes in the economic assumptions about the future. Also, if there's an election and the character of the population of the pension plan changes significantly, the costs may change significantly. But basically, and in theory, the costs have been permanently reduced because the benefit program has been permanently reduced.

Mrs. Parrish: To put in in terms that I can understand, we spend $10 million a year on MPs' travel. Forty or fifty per cent of the MPs, particularly from out west, travel business class. I've been trying really hard to reduce it by $3 million and I haven't been able to do it. Congratulations, Mr. Eggleton. You've reduced an equivalent amount in one fell swoop.

Rates in the private sector are based on what an average input is. My husband's been putting into his pension for 25 years. What are those rates based on? What is the average expected input?

Ms Hamilton: It depends, first of all, on the design of the plan. It also depends if in some cases the pension plan is part of the negotiated....

Mrs. Parrish: Would six years be an average for the participant to put in a pension plan and expect a reasonable output?

Ms Hamilton: Do you mean in order to receive a benefit? I think, as the minister has mentioned, for most plans now two years is the normal vesting.

Mrs. Parrish: That's not the question I asked you. If I were a teacher, which I was, and I put six years' worth of contributions my pension, would that be an average expectation, to get a $20,000 or $30,000 output for the rest of my life?

Ms Hamilton: Probably not. In the case of teachers, your benefit accrual rate would have been, and quite frequently is, 2%.

Mrs. Parrish: Okay. Had I stayed in teaching I assume I would have become a principal, although I was always considered terribly outspoken, so maybe not. Had I retired after 25 years in teaching as a principal I would have received a $50,000 one-time gift, and $50,000 a year for the rest of my life. So I've obviously entered the wrong business.

Do you plan future reductions for this pension plan, Mr. Eggleton?

Mr. Eggleton: I think where we go next on this would be to look at the total compensation package in light of the Sobeco Ernst & Young report. I don't see us doing that until we're in a position to deal with the question of salaries.

I think some of the concerns raised by Mr. McWhinney could also be dealt with in that context, but I think that's something for further examination somewhere down the line. At this point in time, these are the provisions we're putting forward to meet our red book commitments.

The Chairman: Mrs. Parrish, your five minutes are finished.

Mrs. Catterall, you are next.

Mrs. Catterall (Ottawa West): I want to go back to Mr. Harper and say I have a different message for my constituents. I say the longer you keep electing me, the less pension I'll collect, so please keep on doing it. I don't mind being poor when I retire.

Mr. Harper: My predecessor said re-elect him, or you'll be paying two salaries. That was his argument.

Mrs. Catterall: I'm also trying to make some sense out of this for people who are trying to report some facts instead of some rhetoric.

Of course, one of the problems with MPs' pensions is that this is a unique job in many ways, and it's hard to find comparatives. Generally, I think one looks at junior executive or higher, depending on the responsibilities a member of Parliament has. I don't know if Treasury Board has done any comparison with executive pension plans. Have you?

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Ms Hamilton: We don't have any direct comparisons we've made. Over the years we've acquired various bits of information about executive pension arrangements. There isn't any public source of information on senior executive pension arrangements, so there's not a great deal of data.

Mrs. Catterall: Let me go then to the comparisons we can make. What's the rate of accrual on pensions for senior military officers and executives in the public service?

Ms Hamilton: The Public Service Superannuation Act provides a 2% accrual rate with an integration factor with the Canada Pension Plan, so there's a reduction of benefits in relation to that salary on which CPP benefits are earned. The Canadian Forces Superannuation Act has that same formula.

Mrs. Catterall: And for senior executives and senior officers?

Ms Hamilton: It's the same formula.

Mrs. Catterall: I understood that benefits were accrued at 4% a year, not 2%.

Ms Hamilton: Not for executive ranks. For senior executives and most senior Governor in Council appointees the PSSA is the retirement vehicle.

Mrs. Catterall: Then who does accumulate at 4%?

Ms Hamilton: For the deputy ministers of the major departments an additional pension arrangement is provided outside of the superannuation plan.

Mrs. Catterall: Is that at 4%? Is that also the case for senior military officers, that some of their pensions accumulate at 4%?

Ms Hamilton: No, they do not.

Mrs. Catterall: Do deputy ministers, for instance, contribute more to have that higher accumulation rate?

Ms Hamilton: No, there is no contribution. When we say 4%, again, it's not really 4%, because it is integrated with the Canada Pension Plan.

Mrs. Catterall: As ours is.

Ms Hamilton: For members of Parliament it's not integrated, it's a stacked plan.

Mrs. Catterall: Let me ask about contributions. When you calculate that it's matched at 3.5%, does that include the interest allocated to the plan?

Ms Hamilton: The government's share of the contribution?

Mrs. Catterall: Yes.

Ms Hamilton: No, that is the straight ``employer'' contribution.

Mrs. Catterall: The fact is that there is no fund. Am I correct in that? So the government doesn't in fact put in any money every year. It does pay out the benefits, but it doesn't put any money into a fund.

Ms Hamilton: There is an account in the accounts of Canada which represents the full liabilities of the Government of Canada toward current and former members of Parliament in respect of their pensions, as there is an account for the public service.

Mrs. Catterall: But there is no real money in an account?

Ms Hamilton: Well, it's a liability account, in the same way as...so it's part of the debt -

Mrs. Catterall: So it's a paper account, it's not a money account.

Ms Hamilton: It's a part of debt, as is all other government debt.

Mrs. Catterall: So no real money is paid into that account by the government on a yearly basis, but real money is paid by the contributors to the plan, and it goes into general revenues. Right?

Ms Hamilton: The employees' pay cheques are reduced by the amount that is being credited to the superannuation account on their behalf. The government contribution to the account made each year is in fact shown as an expenditure. So it is in fact an expenditure of the government.

Mrs. Catterall: Yes, I understand that. But it's not real money put aside anywhere to earn real interest.

Ms Hamilton: It's not cash. Is that what you mean? It's not cash raised and then -

Mrs. Catterall: Yes.

I guess what I'm getting at is that the benefits are paid out but the government doesn't actually put any money into an account anywhere except for what it pays out in benefits, and that includes the actuarial adjustment that was made a few years ago; and it's a fairly substantial amount. In other words, as the contributions are coming in from members of Parliament, that's real money the government is saving and has available for its use in other ways.

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Ms Hamilton: Not really, because the government is showing that it has paid that money to employees as salaries and that part of it, rather than being put into the employee's hands and therefore convertible to cash, has been put aside in the superannuation account. As well, the government has made a contribution as an employer to the superannuation account, and that is a real budgetary expenditure. When the accounts are done annually, the government shows it has spent that money. So it is in fact acknowledging that expenditure on its current basis.

The Chairman: If Mrs. Catterall can take the chair, the committee could continue to sit with a reduced quorum for 20 minutes to accommodate those members who wish to ask questions. Is that agreeable?

Some hon. members: Agreed.

Mr. Boudria: The only thing, Mr. Chairman, is we're going to be operating on a reduced or mini-quorum. We may have to get members in the House to cause the House to sit. Because these are all House officers here, we had agreed to adjourn for half an hour.

The Chairman: That's right.

Mr. Boudria: We might have to vacate members in order to get the House going.

The Chairman: Agreed? Three parties are required.

So we need you here, I'm afraid, Mr. Finlay.

[Translation]

In the second round, each member will have three minutes, starting with Mr. Picard and Mr. Solomon, if the committee...

[English]

Mr. Silye: Mr. Chairman, why not invite the minister to come back at our next meeting for possibly a half hour or an hour?

The Chairman: We have 20 minutes.

Mr. Silye: Mr. Chairman, that might not be enough.

The Chairman: Well, it might not be enough. But I think we should try it and decide if we're going to do something else later. I'm only offering this now in an effort to accommodate members who wish to ask questions, particularly Mr. Solomon, who's not a member but who is an associate member, if that's agreeable.

[Translation]

Mr. Plamondon: On a point of order, Mr. Chairman.

The Chairman: Yes.

Mr. Plamondon: I want to make sure that we operate as we do in all committees, by giving the usual 10 minutes to the official opposition, 10 minutes to the other party and 10 minutes to the government. And then, five minutes for all members.

The Chairman: Yes.

Mr. Plamondon: In the second round, we start again in the same order, with the official opposition, the party... If all members have started.

The Chairman: But we are not yet there. I only referred to the list of members who have indicated that they want to speak. So, if you want to ask other questions, you are on the list, Mr. Plamondon.

[English]

Mr. Silye: But what about his question about a second round -

The Chairman: Well, we haven't got there yet.

Mr. Silye: - and his suggestion of going for 10 minutes, 10 minutes, 10 minutes, the same way as you did in the first one?

The Chairman: I think we'll just leave it at 5 minutes and keep going. If members are willing to sit for 20 minutes, we'll resume.

An hon. member: Okay.

The Vice-Chairman (Mrs. Catterall): Mr. Pickard.

Mr. Pickard (Essex - Kent): I found the Reform Party whip's comments, Mr. Silye, very interesting. We all know he has proposed that we reduce the pension plan to the norm in the public at 2%. I might say it's a very admirable suggestion. I certainly understand where Mr. Silye's coming from, particularly when he discusses these hidden allowances that members of Parliament also receive.

We have a $64,000 salary, a $21,000 tax-free benefit, and a $6,000 housing benefit, which he would propose to roll right into the regular salary. Five minutes ago I think you came up with a figure of $140,000 as what we're earning now, and you'd like to go to $150,000.

Well, I would like to take that scenario of $150,000 at 2% in a base and compare that with $64,000 at a 4% base and see which one costs more money. If we take the Reform Party suggestion of $150,000 at 2%, that gives $3,000 per year straight out. Our 4% proposal is $2,560.

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If we take take the Reform party's comment, there's no time to qualify. Therefore every member of Parliament would receive a pension, not half the members of Parliament.

If we take them after six years of pensionable service where we require people to qualify, under the Reform package that is being suggested here at 2%, you would get $18,000 a year. If you take the package the minister is putting forward, it would be $15,360.

After 35 years - this is the really neat one - you'd get, as it is suggested is the norm in the public, 70% of $150,000, which is $105,000.

An hon. member: It sounds like a real deal.

Mr. Pickard: Now, if you take the minister's package, the maximum dollars that are possible after 35 years are $46,000. That's a difference of $60,000.

Really, you people are familiar with actuarial numbers. You know how the system works. You know how this twist of throwing a huge salary out front would affect the pension plan. Can you give me comments...that the figures I'm giving you would actually cost the Canadian government a heck of a lot more money under what they are saying than what is being proposed here?

They think ours is a gold-plated pension plan. They're suggesting platinum for everybody. I don't see it any other way.

Could you comment, Mr. Minister? Let's bring the figures where they really are in what they're saying. Let's be honest about it.

Mr. Eggleton: Based on the assumption that the 2% accrual rate allowed under the Income Tax Act is applied to the full salary, you're quite right. If it's a $150,000 salary, at the 2% accrual rate you are looking at a higher amount provided in pension than it is under the plan I put here today.

I heard you say $144,000. But even if you take that, it's still more.

Mr. Silye: Matching one to one, 5% on $144,000; and then subtract all those other hidden perks and benefits.

Mr. Eggleton: I don't know if this is being dressed up, but certainly from what I've read in the -

Mr. Silye: This is actual.

Mr. Pickard: Mr. Silye, you can comment later if you have another question. But I'm asking for a comment on my question. I don't think he needs to dicker with you.

The Vice-Chairman (Mrs. Catterall): Mr. Pickard has the floor.

Mr. Eggleton: I can only base the comments on what I read in Hansard and on these basic assumptions about the Income Tax Act provisions, etc., and based on those you're absolutely right. This is not as rich a pension plan - or as rich a compensation plan; either way - as the one put forward by the whip of the Reform Party.

Mr. Pickard: I would like to take this one step further. Let's say, just for the sake of argument, we take the pension plan out, the 2% plan, and we convert it to RRSPs, where the tax is written off on a $150,000 salary. You wouldn't even need a pension plan to retire, and you'd have a lot more money in the bank, because you could write your taxable credits off and build your RRSPs pretty rapidly under the system they're putting forward and do very well - with higher contributions, mind you, on RRSPs; but the RRSP pre-contribution would go up enormously, so the retirement package would be far, far higher than what's proposed here, by a mile.

Mr. Eggleton: I don't disagree with that. Regardless of the vehicle that's used...RRSPs are just a kind of defined benefits plan, which most people have, by the way, as I indicated. In the private and public sector, 95% of Canadians have a defined plan in the same structure as this one - maybe not with the same provisions, of course. They're all different. But certainly most have this type of plan. So it's all going to depend on what the contribution levels are. Certainly on the calculations with the assumptions you've made, I'd have to agree with you.

Mr. Pickard: I think we're talking about a party that is doing a political fight unfairly and that is bringing forward statistics... If we were to cover those - and I think this is so clear - we would be paying tremendous amounts more money out of the pockets of the taxpayers by what they've said.

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I guess sitting here with this group I am concerned about my taxpayers just as much as everybody else. But they're riding a train, and they're only 300 people going into a pension plan, and we'll shoot stones at it; but they've all called for increases. Even the leader of the party gets extra benefits because he can't live on the salary MPs and others live on. That is public information as well.

So I guess in looking at it I see it as a very political play by this group trying to discredit a system wrongly. Costing-wise, their proposals are far higher.

Mr. Eggleton: He hit the nail on the head about the pockets of the taxpayers. That's what this is all about. At the end of the day you can put all sorts of numbers out there about whether you think the accrual rate is more generous than it should be, the vesting period in the public versus the private sector, the degree of indexing versus how many get special allowances on a periodic basis, ad hoc basis. You can do all of this stuff, but at the end of the day what the Canadian taxpayers are concerned about is how much it is costing them.

The proposition in Bill C-85 will cost the taxpayers less than what they are paying now. It will cost them less by over $3 million. It will cost them less by some 33%.

What is being proposed and what has been in the propositions I've heard from the whip of the Reform Party is quite clearly an increase in the cost to the taxpayers. There is absolutely no doubt about it. It's an increase of cost to the taxpayers, and what is being proposed by the government. That - you've hit the nail on the head - is the bottom line: what comes out of the pocket of the taxpayers.

Mr. Solomon (Regina - Lumsden): In the 1970s, Mr. Minister, there was a series of federal-provincial conferences on pension reform. The outcome of those conferences was that it was perceived as in the public interest that the defined pension benefit plans be altered into defined contribution plans, for three major reasons, and other reasons as well. First, the defined benefits were unfunded liabilities. Secondly, there was no portability, or a lack of portability, from job to job or province to province. Thirdly, because there was a five- or six-year qualifying period for some of the pension plans, many people didn't qualify for any pensions, or got their refunds and kept them.

So it was the wisdom of the day to change the plans. There was a consensus, at least. There weren't rigid legislated recommendations, but there was a consensus that governments address this issue in the 1970s. The Government of Saskatchewan under Allan Blakeney and the NDP in 1977, subsequent to these conferences, changed their defined benefit plan for the Public Service in 1977. In 1979 they took the leadership for their elected officials and changed the plan to a money-purchase for their MLAs.

This has proven to be a very fair system for the taxpayers, not as rich for the people who are receiving their pensions and who are elected, because their terms are shorter than those of career civil servants, but the career civil servants would do probably as well, if not better, under that plan, which costs less for taxpayers. This kind of a plan is endorsed by many associations in Canada, the Saskatchewan Taxpayers Association, the Canadian Taxpayers Federation, and even the National Citizens Coalition, as being equitable and fair and not being too rich for those who receive them.

Even though we've done these things in Saskatchewan, there's still about a $3 billion unfunded liability for those people who were on the old plan prior to 1977 at the public service level. That's a very startling number, because if we hadn't changed the pension plan at that time, it probably would have been $6 billion or $7 billion. We don't know that, but it could have been substantially higher.

The point I'm getting at, I guess, is that I think the recommendations you put forward before the committee in this bill are commendable in the sense that they are reducing the cost to taxpayers substantially. They are making qualifications to receive the pension much more difficult. Therefore fewer will qualify. But as a member of the opposition, my role is not just to endorse and embrace those changes as being the best but perhaps to make recommendations to make them better.

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What I do today is remind the minister that I had introduced a private member's bill in September, calling upon Parliament to have a money-purchase plan for MPs.

My first question to you is why has the government not considered...or if you did consider, why didn't you choose to change the MPs' plan from the defined benefit to the defined contribution or money-purchase plan, which has been very successful and endorsed by taxpayers in other provinces, such as Saskatchewan?

Mr. Eggleton: I think, as I indicated earlier, there was that, there were other issues that were raised about other provisions in the plan, indeed, going back to this Sobeco Ernst & Young report; not only the plan for retiring allowances but also the whole compensation package. Eventually more can be done, and should be done, to address those issues.

But it was the feeling of the government at this point that one of the major parts of the recommendations could not be addressed, and that was the matter of increased salary levels, offset by reductions in the pension level. The feeling was that we should await another opportunity and time, when we can address a more comprehensive package. I don't have any timetable - I want to make that very clear - for dealing with those other issues.

But at this time we wanted to deal with the very clear issues that were being raised by the public, the very clear concerns about the age some members were leaving at and the principle of MPs going out and collecting a salary and a pension at the same time. We have addressed those issues.

We've also, of course, had to recognize that we're in a time of fiscal restraint. Therefore we have brought in the accrual rate reduction, to address that issue also, and to have the MP compensation package, particularly this pension scheme, contribute to bringing down the deficit by reducing the compensation and reducing the taxpayers' contribution.

So that is the scope of Bill C-85. It doesn't rule out other possibilities, in other periods, for other reform. We felt restrained from getting into the whole area of a more comprehensive examination of the compensation package, in view of the salary freeze that our employees are already under.

Mr. Harper: I want to continue where I left off when asking about the comparison between this pension and certain arrangements in the private sector. Before I do, let me make a couple of comments.

I think valuable things have been pointed out. Dr. McWhinney had pointed it out previously. There are some minor aspects of the plan that are less generous than in the private sector. I think Dr. McWhinney has suggested in the House - he made some very reasonable suggestions - that the way to deal with this problem of MP compensation is not to make certain features of a pension plan excessively generous; it's really to increase portability of the plan inside and outside the House of Commons. But, in any case, that wasn't done. As I say, the most critical features of this plan are certainly much more generous than in the private sector.

I'll add that if we don't get good amendments in this committee, we will introduce some in the House. Those will decrease the generosity of certain elements of the package, while not increasing any others; not increasing pay in any way. We'll see how Mr. Pickard and others, who stay up at night worrying about the taxpayer, vote when those proposals come to a vote.

Maybe Mr. Peacock can answer this: What percentage of private-sector workers and public-sector workers would be entitled to full pension benefits at age 55?

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Mr. Eggleton: Just before Mr. Peacock answers that question, I have to address this question of the preamble, because it's very seriously flawed when it starts to put some of the provisions as minor and some of them as a critical feature, as the member notes - he, of course, deciding what are the critical features and what are the minor provisions.

He says that the vesting, for example, the six years, while in the private sector it's two years, is just a minor feature. When the six years results in the elimination of the pay-out of any pension to the majority of the people who come here and serve and pay into the plan, then that's not a minor provision at all. That's a very major issue, and it's one that is definitely out of sync with what happens in the private sector.

So I cannot agree; and that's just one example of this whole question of minor provisions versus critical features. There are others.

So I can't agree. I think the argument is very seriously flawed.

Mr. Peacock, do you have some answer on the age-55 question?

Mr. Peacock: I don't have any percentages off the top of my head. But normally to get your full pension at 55 you would have longer service. Under the tax provisions you can go to an 80 formula, for example. So at age 55, with 25 years of service, you could get a full pension. You could get full pension at age 50 with 30 years of service.

I don't have the figures off the top of my head.

Mr. Harper: These would be small percentages of the workforce, would you agree?

Mr. Peacock: I don't think it would be too small. Again, it's for longer-service people. Certainly it is common in the public sector.

Mr. Harper: We can debate minor versus major, so let's look at the big picture. The government is going to have to put in 33% of payroll annually to fund this. That's the total cost. We can debate minor versus major. We know that people at the low end of this pension get nothing, and people at the high end get a lot, but on average it is 33%. How does that compare to private-sector and public-sector plans?

Mr. Peacock: The contributions or expenditures on pensions aren't readily available. Historically, back when we had the pay research bureau, it was probably in the area of 5% to 7%.

Mr. Harper: So we are in the top 5%.

Mr. Peacock: It would probably go as high as 9%, for example, for the Ontario teachers. But on average it was maybe 5% to 7% of payroll for private- and public-sector plans.

Mr. Harper: Maybe you're not understanding my question. What percentage of employers are paying 33% of payroll towards their pension plan?

Nobody except the House of Commons.

Mr. Peacock: Compared with a private-sector or public-sector employer, probably not.

Mr. Harper: Nobody else in the country. Is there anybody else you're aware of?

Mr. Peacock: For all the employees as a whole.... For executives they may easily be doing that. But again, that information isn't public.

Mr. Harper: How common is full indexation? Public sector, fairly common; private sector, not very common?

Mr. Peacock: Full indexation is not common in the private sector, no.

Mr. Harper: Almost non-existent?

Mr. Peacock: Yes. I would say a very low percentage for automatic full indexing. As the minister mentioned earlier, it's a lot of ad hoc increases.

Mr. Eggleton: Again, you can't discount that. I've seen and experienced that. That does add up to a lot of money. It is far better to have planned to keep the pension plan at a pay-out rate that is going to make sense in accordance with the economy and the inflation that has been absorbed in the period between when the pension is earned and when it is paid out. It makes sense to provide for that. In fact, MPs pay an additional amount of money to provide for that. It's a good planning instrument, instead of the instrument that...people, after a great number of years and a great amount of inflation suddenly find themselves being able to buy for an awful lot less. Then there is pressure put on the employer to provide for additional money to try to catch up.

These big ad hoc catch-ups are doing the same thing, but they're not very well planned. This makes a lot of sense, and there should be more of it in the private sector as well. They end up paying out, but I'm telling you they pay out -

Mr. Harper: Not 100%.

Mr. Eggleton: They pay out a lot of money. But you don't have that information specifically.

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I can tell you, from what we have been able to find out about this, there is a substantial amount of ad hoc pay-outs. It's better to plan.

Mr. Harper: Maybe to plan at a lower rate than full benefit, full indexation. Maybe that's the solution.

In any case, you keep saying MPs pay into this. MPs pay the 9%, but even with 9% the employer is paying 3.5 times what the employee is contributing. In how many private-sector and public-sector pension plans is the employer paying 3.5 times or more of the employee's contribution?

Mr. Eggleton: Again, you're being selective.

Mr. Harper: What percentage?

Mr. Eggleton: You're being selective in your statistical analysis of this, and I think that's very fundamentally flawed. You have to look at the contribution rates as well. You have to -

Mr. Harper: I just did.

Mr. Eggleton: - look at all factors, but you're particularly zeroing in on what you want to zero in on and not the total picture.

The total picture is not only the plan itself, which you're not looking at in a total context, but it's the compensation package as well that you have to look at. MPs choose to have less in the way of salary, or annual remuneration, and more to provide for their retirement. The compensation package is below what we've heard the whip of your party say a compensation package should be.

Mr. Harper: You told me, Mr. Silye, you hadn't evaluated the compensation package as part of this.... [Inaudible]

The Chairman: Order, please.

Mr. Eggleton: It's quite clear to me that $150,000 or $144,000 is more than $64,000 by anybody's standard.

The Chairman: Order.

[Translation]

Mr. Plamondon, you have five minutes to ask your questions. Those will be the last questions.

Mr. Plamondon: My question also deals with MPs' pensions compared with ministers and parliamentary secretaries' pensions. The official who is with you may be in a position to answer my question.

I repeat what I said earlier: the MP who sits for one year accumulates one year of pension. The minister that sits for one year accumulates 1.72 year that is almost one year and three quarters for his pension fund. For his part, the parliamentary secretary accumulates 1.16 year. Finally, the Speaker of the Senate accumulates 1.48 year.

Do you intend to correct that situation so that you do not further favour those who, already, as ministers, get a higher salary, have a chauffeur and other allowances? All of a sudden, when they retire, they have even more benefits than the back benchers. To me this is an abuse, the more so when I am told that at the level of the Prime Minister, the ministers and the parliamentary secretaries, no limitation is provided, they can go over 75% of the pension, contrary to the MPs.

For instance, a minister that sat for nine years in the last PC government is entitled not to 45% of his pension, but to 77% since his years of tenure must be multiplied by 1.72. Is it true? Is my interpretation correct?

It means that Mr. Trudeau who was here for 16 years is entitled to 131% of his salary as pension. As for Mr. Mulroney, he's entitled to a bit more than 100% of this salary as pension. A minister who would have been around for 20 years would be entitled as a pension equivalent to 175% of his salary. Is this your 1.72? Don't you think it should be corrected?

[English]

Mr. Eggleton: I'm going to let Sharon Hamilton deal with the more technical aspects of this thing. But as she said before, the calculations are based on the remuneration; although to get to a full 75% one has to be here 19 years. You have to be here an awful long time. There are not too many of them who qualify like that. We don't want to take just the extreme cases, which are few and far between.

Mr. Plamondon: Not the ministers. How many years for the members?

Ms Hamilton: To go back to the explanation before, when you're a member of a pension plan that is based on your salary and you're normally contributing on all of your salary that you're receiving for the work that you're doing, ultimately you will receive a pension based on those salaries in a salary-based pension plan of this type.

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In the case of members of Parliament, because they do not have what is a normal salary progression expectation throughout their careers.... Normally you begin working with an employer. Then you get promotions and salary increases and your salary gradually goes up. For example, when you're a member of Parliament your salary may be at one level during one Parliament. It may be at a significantly lower level in the next Parliament if you're not longer earning additional salaries for performing additional duties. So you don't have this normal progression.

The purpose of the calculation formula in the statute is to allow those members who've had a significant period and have during part of the time earned additional salaries to receive additional pension becaue of those additional salaries. In order to do that, rather than doing a different average salary calculation for the period when they were a minister, to calculate their pension for that period and then do another average salary calculation for the period during which they were a regular member, we use that average salary as a member of Parliament, then into the service side of the equation we add an additional period of service, which is the result of converting their contributions on extra salaries into service. It's to provide additional pension for the period during which additional compensation was earned for additional duties.

Mr. Plamondon: That means if a member is here for nine years, with the actuarial regime he will receive nine years multiplied by five. That means 45%. If he's a minister during nine years he will receive nine multiplied by 1.72 multiplied out by five years. That will mean 77%, will it not?

Ms Hamilton: He will, but the average salary you're using in the calculation is the salary of a regular member, not the salary of a minister.

Mr. Plamondon: Suppose he's a minister for nine years only, such as Benoît Bouchard or Pierre Cadieux.

[Translation]

Since for a minister, a year equals 1.72, those nine years, in that case, must be multiplied by 1.72 which means exactly 15.48 years. It is then multiplied by five which means 77.40% of his salary. Therefore, he sat for nine years and he will receive a higher pension than a backbencher who sat 15 years. I want to know if the minister intends to correct that situation so that for an MP as for a minister, one year is one year?

[English]

One year is one year for everybody.

Ms Hamilton: It's what salary you're using to calculate the pension. If I'm saying that this individual had only the basic member's salary -

Mr. Plamondon: I speak about the percentage, not about the money.

The Chairman: But the percentage is the same. It's what they're calculated on that's different.

Ms Hamilton: If the average salary for all members who are leaving at a particular time were $60,000 and a minister's average salary were $90,000, if I convert the minister's salary to extra service and calculate it against the $60,000 instead of calculating it against the $90,000, I would get the same result. So it's -

Mr. Plamondon: No.

The Chairman: Obviously we have a disagreement. Perhaps you could talk a little later and settle it. Our time has expired. I think the minister's in a bit of a scramble here to get away and our time has expired. I think we can get an example of that sent. Maybe that will clarify the point. Let's leave it at that for now.

I'll declare the sitting suspended for a couple of minutes while we change witnesses.

Is the minister willing to come back if the committee requests?

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Mr. Eggleton: It's up to the committee. I stayed an extra half hour and I noticed some of the questions, particularly for the Reform Party, were getting repetitive at the end.

The Chairman: Thank you.

I declare the sitting suspended.

Pause

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[Translation]

The Chairman: We have with us today Mr. Philippe Martel and Mr. Yvan Pouliot, from Sobeco Ernst & Young, who are the co-authors of the Report submitted to the president of Treasury Board ``Parliamentarians Compensation'' - 1994.

You have the floor, gentlemen. Would you like to say something before the questions?

Mr. Philippe Martel (Co-Author of the Report Submitted to the president of Treasury Board ``Parliamentarians Compensation'' - 1994, Sobeco Ernst & Young): We had thought of perhaps making a brief introduction to describe our respective roles. My colleague, Yvan Pouliot, is an actuary by profession; he was the chief architect of our recommendations on the pension plan. As for myself, I am an associate at Sobeco Ernst & Young, in charge of remuneration practices. I was the one in charge of the study.

Let us first tell you about our mandate and our approach. We looked at the aggregate remuneration for members of Parliament, not only the pension plan. Those of you who are familiar with the study may have noted that it deals with the various allowances as well as the pension plan and basic pay. A comprehensive approach was certainly important to us. We also tried to take a somewhat strategic view, that is, we tried to understand a member of Parliament's job and base our recommendations on that.

In summary - as the minister and some colleagues here noted - our recommendation was to suggest that members of Parliament's salaries be increased to $88,000 from $64,000 and that their pension be reduced, which my colleague can tell you about.

Our recommendation would, in fact, translate into a 6% increase in total compensation. Being fully aware of the economic situation in Canada and within the government, we suggested that if there were to be a freeze, there would be a freeze on the total compensation, which could nonetheless allow for an increase in base salary.

I will now give the floor to my colleague, Yvan, who can talk to you more specifically about the pension plan.

Mr. Yvan Pouliot (Co-Author of the Report submitted to the president of Treasury Board ``Parliamentarians Compensation'' - 1994, Sobeco Ernst & Young): For our study of the pension plan, we decided to look at the purpose and goals of the pension plan, rather than focus on the existing scheme.

Traditionally, an individual earns a pension throughout an entire career. In other words, people save throughout their careers to have a reasonable pension upon retirement. An individual's career lasts between 35 and 40 years, so, in most pension plans, an individual will earn the pension at a rate of 1.5 to 2% of the salary, which means that after 40 years of work, at a rate of 1.5%, the worker would get 70% upon retirement; after 35 years of service, at 2%, again, 70%. So, the pension is earned throughout the career.

Whether a person has one, two or three jobs is irrelevant; it is a continual process. So, we viewed the time a member of Parliament was in office as a period of employment like any other. Elected officials had to build up their pensions while they were working before. And if they stopped being an elected official at a relatively young age, they can continue to work towards their pension afterwards.

That is why we recommended that the pension rate granted for the period a member is in office be the same annual rate per year of service as the best pension plans, namely 2%. For instance, if I work in the private sector for 10 years, I accumulate 20%. If I work for the public sector for 10 years, I still accumulate 20%. If I work another 10 years in the private sector, I accumulate another 20%, for a total of 60%.

We based our formula on the assumption a member of Parliament would work as such for 15 years. It takes 35 or 40 years for private sector or public sector employees to build up a pension. So, our main recommendation was to lower the pension rate to 2% so that it could be part of the superannuation at the other end.

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Among the other recommendations, we suggested not paying pensions at a very young age, to start doing so at 60, possibly at 55, but with a penalty, and that indexing be reduced to that amount over the 3% rate of inflation, because many people claim all retirees can absorb the 3% inflation rate because of their advanced age and lower expenses. In fact, you may recall that at one point that had been suggested for the old age security.

The other proposal was to reduce the contribution to the standard rate of 5% and to provide for immediate vesting so that members who are in office for two or five years can at least add that small amount to the aggregate pension earned throughout his or her career. If a member sits for two or five years, he or she will receive credit for that time.

Finally, on the question of portability, if, after two, five or ten years a member chooses to transfer the value of his credits to another pension plan, he can do so. Those credits, which were promised by the government are portable and do not involve any cost.

The Chairman: Thank you. Mr. Plamondon, do you have any questions?

Mr. Plamondon: No, I would prefer to wait. Mr. Silye.

M. Silve.

[English]

Mr. Silye: Thank you, gentlemen, for appearing here today.

As you would think I would, I have gone through your report quite extensively, and it was based on a lot of your recommendations that I suggested in the House during debate that we actually address this pension plan, because it is too obscene. It is too gold plated and far too generous. In its present form it still is.

But that having been said, obviously you have to look at how you attract quality candidates...all those things that were said earlier. I know you heard the minister say those things.

Basically, I'd like to go through some of your recommendations and see if you, as experts in the field, feel some of these portions of the pension plan are still too generous or if you have opinions otherwise.

I do not believe MPs should get tax-free benefits. I notice in your report you say the same thing about transparency. You suggest transparency, and I agree with that concept. It's getting rid of all the tax-free benefits of MPs which gets you to the high number. If everything we receive were taxable, if the truth were known, at whatever amount...it's probably costing the taxpayers a heck of a lot more money than they realize.

As I go through these, tell me what you think of them. In this angle of transparency, combined with what you recommended in the pension plan, the differences that still exist are these.

First, you suggest that indexing should be that amount over the 3% rate of inflation. This plan calls for full indexing, so whether it's 1.5%, 2%, whatever, they still index it for that.

Second, for the accrual rate you recommend 2%. The plan is still 4%.

Third, you recommend a 5% contribution rate. This bill has it at 9%.

Obviously the minister just used some of it because you had a balanced recommendation for overall compensation.

You suggest, and you point out in your recommendations to the minister, that if they adopted these measures, which are similar to what we in the Reform Party are recommending, the compensation value of the plans would change from 44% of remuneration to 12% for the members of the House. Obviously that would be a saving to the taxpayers.

I would think when you speak of a 5% contribution rate for parliamentarians, you also mean a matching amount by the government, or funded as is. Clarify that for me, please.

Mr. Pouliot: I'll start with the last two comments, about accrual rate and contributions.

Naturally there has to be a kind of relationship between accrual rate and contribution by the participants if you try to share the cost in the normal way. We suggest an accrual rate of 2% and a contribution of 5%. If we had suggested an accrual rate of 4%, we might have suggested a contribution of 10% also, because I think you look at the total cost of the plan and then you decide how you share it between the employee and the employer. Some employers pay the full cost, some others share half and half, and some others don't pay even half the cost. This is how you get those funny averages in total.

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But those things go together. So the contribution of 5% was not necessarily a half-and-half contribution. That was more like a usual contribution for a 2% plan, where the cost to the employer might be somewhat higher. But not six times higher.

As to the inflation adjustment, I touched on that in my introductory remarks. There is a good case for having indexation at less than inflation for retirees because of their reduced cost of living. At one stage, when they retire, they don't have to go to the office every day. At one stage they sell their car because they can't drive any more. There are all kinds of things. People also say that inflation for retirees is not the cost of living that is calculated by Statistics Canada, because it's based on a basket of goods for a family of two plus two kids or something like that. So we don't really know what inflation is for retirees.

There's a good case for saying that when inflation is less than 3%, retirees do not reduce their savings. They still save for their old age. What is important is to protect them against bad inflation, such as the 10% we had, or 12%. Then they would get an increase of 9% or an increase of 8%, or whatever it is. But the first 3% could be taken care of by the retirees. As I said in my remarks, it was even proposed for the Old Age Security pension at one stage. So that's not new.

Mr. Silye: I have two more points. Would you confirm for me that on an annual salary basis, you place a value of $28,400 for the pension plan in your evaluation of total compensation paid to members?

Mr. Pouliot: Yes.

Mr. Silye: Also, in your report you go into detail about some of the benefits MPs get. You touch upon the 64 point system, which is intended to get an MP back and forth from their city to the head office - which is here. But within that 64 point system, you point out, in your argument anyway, in your paragraphs, that there is a compensation value. Some members are allowed to use up to six trips without justification in terms of work for the Hill. They can take their family, dependent children, spouse, anywhere in Canada. That has a compensation value. You use a range between $4,000 and $12,000. In your package you put $4,000 instead of the $12,000.

In another area you argued that the expense allowance of $21,000, non-taxable...in some cases you would look at that and gross that up to have it a taxable amount if it were transparent. You used that to support your transparency argument. Yet when you did your total compensation chart, you put zero value to that part of it, when you know there are a lot of members who live close to Ottawa, who get the $21,000, and who do not use it. In your report you said 40% of members do use it up, but 60% don't, yet you put a zero value here. Why would you put a zero value on it when there is a value? Why did you use the low number of $4,000 instead of $12,000?

You did confirm that $28,000 annual value of the pension plan to me, if the person gets elected again.

Mr. Martel: You're right in saying that there is potential value in the plane allowance, or the point system. We have estimated the value of that benefit would be in the range of a $4,000 salary equivalent.

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It could have been $12,000. If an MP does indeed make full use of those benefits that are for his children or spouse, for private reasons other than travelling to and from Ottawa, there is a potential compensation value of $12,000.

Now, we tend to believe this benefit is quite justified. If an MP does expect his wife or his children to come to Ottawa, part of that benefit is not compensation.

So our call was that a third might be considered as compensation. We have recommended that the program be redesigned so that there would not be any compensation value. Everybody would understand that expenses are not to be related in any way to compensation. Basically, our recommendation regarding any allowances was that there should be no doubt in anybody's mind that reimbursing an expense is not related to salary in any way.

Let me turn to the $21,000 allowance. After having surveyed many present and past MPs, we found that for most of them it has no compensation value. It's strictly reimbursement for what they incur as living expenses in Ottawa where they have a second residence. Nevertheless, in our report we did say that for some of them - maybe 30% - there was indeed a compensation value to the allowance if an MP was not spending the full $21,000 amount.

In general, our assessment indicates there is no compensation value, but for some members there is some compensation value for this benefit. Again we have recommended that there be a change in the system so everybody in this country understands that this allowance is a justified reimbursement for expenses and that there is no compensation value. In general, of course, we think there is still no compensation value.

The Chairman: Mr. Duhamel, please.

Mr. Duhamel (St. Boniface): Thank you, Mr. Chairman, and bonjour, messieurs.

I actually have three or four questions I'd like to raise immediately and give you an opportunity to respond to them.

For the purposes of this discussion let's assume for the moment that the total remuneration package of the member of Parliament was $150,000 a year. Let's assume as well that this falls within the norms one generally finds in the public sector today: the 2% rate per year, etc. I want to know whether or not that salary with those norms would cost the taxpayer more overall than what's currently being proposed by government. That's the first question.

I have a second point. There have been a number of comments indicating that roughly half - and you might be able to give a specific figure - of the people who come as MPs never collect pensions. I want to know another figure. What is the number of MPs who come here and walk away with a maximum pension? There's a suggestion that this is large. I don't believe it is. I'd like to know.

I have another question that's important to me. There has been a suggestion - and perhaps it's not intended that way - that somehow if we were registered in an RRSP program, it would not utilize taxpayers' dollars. My understanding is that this is completely false. I'd like to know whether I'm right or wrong.

Finally I am told that as part of the exercise we should be looking as well at international and national comparisons. If one were to look at countries like France, England, Italy, Germany and others, as well as provincial/territorial plans, how would we compare them with respect to age of eligibility? I know it varies and it may be difficult, but do the best you can.

Are there some people out there in those countries or within Canada today whose age of eligibility for pension plans - after having been elected - is equal to or better than what is being proposed here? Are the years of service and the accrual rate equal or better? How do we compare on indexing? Those are my questions, Mr. Chairman.

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Mr. Pouliot: That's a long question.

On this matter of the $150,000 salary, naturally we said in our report that the total compensation of a member of the House is $104,000. It seems to me that if you pay $150,000 to a member of the House, it's going to cost more. It's $50,000 more, so why go into that? I think everybody knows that.

Mr. Duhamel: What about just on salary...on pension as well?

Mr. Pouliot: Oh, yes.

Mr. Duhamel: Okay. Well, that's very important because -

Mr. Pouliot: On the pension it's very small. A 4% rate on a $60,000 pension is the same as a 2% rate on a $120,000 pension.

Mr. Duhamel: So on $150,000 it would be even more?

Mr. Pouliot: Yes.

Mr. Duhamel: Okay, fine. The next question....

Mr. Pouliot: We didn't go into your statistics concerning those who do not collect a pension or those who collect a full pension. We went into the theoretical aspects of the pension plan or remuneration. We didn't crunch numbers. The civil servants here certainly have those numbers, but we have nothing on that.

Mr. Duhamel: I will get them then.

Mr. Pouliot: I have heard and read all kinds of things about the RRSP program. It seems to me that people confuse the RRSP with 50:50 cost sharing. You can have 50:50 cost sharing in any type of pension plan. In an RRSP you can have any cost sharing. You talk about a dollar for a dollar, but it can be a dollar for fifty cents or a dollar for two dollars. There's no rule on that.

The RRSP is a different approach to building a pension. As the minister said, it's an approach where you don't know what kind of pension you'll get at the end. If interest rates are high when you retire, you get a good pension. If interest rates are low when you retire, you have a low pension. Amounts of pension by year of retirement go like that. So to my mind, as a pension actuary, it is retirement for savings, but it is not a pension plan.

It is the same if you say you'll put all your savings in your house. You might be able to sell it for three times what it was worth, or you might be able to sell it at half the price. That's about that.

Mr. Duhamel: I conclude on that. Are you saying, sir, that an RRSP approach could actually be more or less costly than what's being proposed? Is that what you're saying?

Mr. Pouliot: It depends on the amount.

Mr. Duhamel: It's in terms of taxpayers' dollars.

Mr. Pouliot: It depends on what amount goes in. If as a member of the House you paid the same amount as you were paying in the current plan, you would get the same tax relief. You have an employer who doesn't pay tax, so what is the difference?

Mr. Martel: Your last question related to international comparisons.

Mr. Duhamel: International and provincial/territorial -

Mr. Martel: I don't think we can go into the specifics, but I have a table in our report that might help to give you some insight on that.

Mr. Pouliot: In our report we said that the cost of a pension plan for a member of the House was 44.1%. In comparison with other countries, our cost was 53% of what it is in Australia. The way we worked it out is not what it costs in Australia. It is what it would cost if the plan for a member of the House in Australia were applicable to Canada. It's the cost if members of the House had that plan.

In the United Kingdom the cost would be 17%. That means it's much less. In Belgium it is 54%; in Sweden it's 16%; in France it's 34%; and in the United States it's 15%.

When you talk about the generosity of plans, the United Kingdom, Sweden and the United States are certainly not more generous than what is proposed now. Those are not the American costs for the United States; it's what the plan would cost here.

We also have a comparison by provinces in the same report.

We compared it with Ontario, Quebec and B.C., again starting with 44% at the federal level. In terms of costs Ontario is at 46%, Quebec is at 32% and B.C. is at 45%.

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So, to answer your question, the planned modifications you are proposing would reduce the value of the federal plan to a lower level than the plans in Ontario and B.C., down to about the level of the Quebec plan.

Mr. Duhamel: If I still have time, I would like a clarification. I take it you have no data with respect to age of eligibility. My understanding was that a number of provinces and territories had ages of eligibility that were 55 years or less. I could be wrong. It was the same with years of service, with less than the current 6 years before getting a pension.

With regard to the accrual rate, I don't have any figures.

With respect to indexing, my understanding was that internationally and indeed within Canada there were significant indexing provisions and any number of plans. I want to try to discover whether or not there is some comparability in relation to those particular points of reference. Is the federal plan standing by itself on any number of those measures? My understanding is that it's not, and that's why I'm raising the point.

Mr. Pouliot: We have a lot of that in our report, but the thing is to find it.

Let's talk about eligibility for a pension. In Australia it's 12 years of service or age 60. In Belgium it's when you leave the parliament, and it's the same in France. In Sweden it's 6 years. In the United Kingdom it's when you leave, and in the United States it's after 5 years.

The unreduced pension in France is only at age 55. If you leave before you are 55, you get a reduced pension. In the United Kingdom, where the age is very high, it is age plus service equals 80. So if you leave at 40, you would have to have 40 years of service, which is quite difficult. Otherwise you get a reduced pension on an equivalent actuarial value, so it means the cost is the same as if you worked to gain your pension at age 60 or 65. This is all in appendix IV of our report.

Mr. Martel: The bottom line is both the present system and the proposed revision. There are more generous plans in certain countries and there are less generous plans than both the present and proposed pension plans.

Mr. Duhamel: What about the provincial and territorial -

The Chairman: No, no.

Mr. Duhamel: - [Inaudible]...point?

The Chairman: I'm afraid you -

Mr. Duhamel: I have to complete it.

The Chairman: Ten minutes are gone. I think we'll move to Monsieur Plamondon.

Mr. Duhamel: Do you know the answer to that last question?

The Chairman: Well, someone else may ask that important question.

Mr. Plamondon.

[Translation]

Mr. Plamondon: First, is this Bill C-85 that has been tabled, in accordance with your report's philsophy, and secondly, is it possible to review members pension plans without reviewing their compensation?

Mr. Martel: Obviously, in our report we used a total compensation approach. In the detailed analysis of every compensation program for members and senators, we saw that each one of these programs has obviously been designed independently of the others.

Our mandate was to look at the whole thing in a global and strategic perspective, which is exactly what we did. Our conclusions lead us to propose an in-depth reform of all the dimensions of the compensation plan for members and senators.

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Obviously, as outside experts, we would not be fully satisfied with a pension plan reform that does not include changes to the severance pay program and which does not establish some cohesion between the various components of the pay package.

We agree with the general direction of the bill regarding the reduction in the value of the pension plan. Moreover, the fact that were just examining the pension plan today leaves us unsatisfied with regard to me of the basic recommendations of our report, namely, an in-depth reform of the compensation package including an increase in MP's basic pay.

Mr. Plamondon: If the minister had implemented your report to the letter, how much taxpayers money could he have saved, compared to what he claims to have saved? He says he's saved 33% of the cost of the pension plan. If he had applied your recommendations regarding salaries and pensions, would he have saved more? Do you have an approximate idea?

Mr. Nantel: From our standpoint, our recommendations did not include any reduction in compensation costs. On the contrary, our recommendations would have led to an initial increase in the total compensation of members of Parliament of the order of about 6%.

Notwithstanding the government's fiscal situation, which certainly has to be factored in any well thought-out decision, as outside consultants, we recommended that there be an increase of the order of 6% in member's compensation envelope which means that if the minister tabled a bill that would reduce the cost of compensation by about 5 or 6%, or $3 million, it would obviously go against our recommendations.

I wish to reiterate that our recommendations are based on the fact that we think that Canadian members of Parliament are underpaid.

Mr. Plamondon: I'm somewhat surprised by your recommendation regarding age 60, if I compare this to the standards of Canadian provinces: 50 years of age in Nova Scotia, at least 50 or a total of 65 years in Quebec, 55 years in Ontario, the North West Territories, the Yukon, British Columbia and Saskatchewan, age and years of service equal to 60 years in Newfoundland, which in theory would enable someone to retire at 40 or 45 years old. How and why did you set retirement age at 60 years rather than 55?

Mr. Pouliot: That goes back to what I said earlier. According to our approach, a pension plan must be established over a certain period of time. In the private sector, people generally retire at 65 years of age. Some more privileged people can sometimes retire at 60 years old.

Since the pension plan for members of Parliament depends in part on the accumulation of a total pension, why should it be payable at age 55 or at any other age if it was established according to the criterion of 65 years, either before or after the member was elected?

No one can afford to establish a pension plan that can be cashed in at 55 years of age.

Mr. Plamondon: Let's compare this, as an example, with my personal situation before I became an MP. I was a teacher and a businessman. I would have obtained my teacher's pension at age 55. As a businessman, I could easily build up a pension fund that would have allowed me to stop working at 50 or 55 years of age. With my three companies, my career plan allowed me to liquidate everything at age 53 and have a pension fund that was much more generous than what I'm offered here.

However, if I'd only been a teacher, I could have left my job at 55 years old with a full pension equivalent to 70% of my salary. In the public and parapublic sectors, 55 applies in a very large number of cases.

It seems to me that there's one element you didn't take into consideration: the average tenure of a member of Parliament is very short.

Before 1984, the probability was 5.5 years. Right now, it's a little longer, because we've had majority governments three times in a row.

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And yet, in your report, you clearly state that over 50% of Members of Parliament experience very difficult situations after they cease being members. It's difficult for them to reposition themselves precisely because the fact of having been an MP, far from helping them find another job, hurts them. This is the opposite of the case of a minister whose experience in Cabinet will be helpful.

In the case of backbenchers, their past is detrimental. You say so in your report. You talk about the financial difficulties experienced by Members of Parliament. Most of them need a year to find another job, if their previous job had not been guaranteed for them through a leave without pay arrangement, for example.

So, despite this aspect that you discussed, you seem quite insensitive to it when you establish the age of retirement in your recommendation.

Mr. Pouliot: Our report contains a recommendation regarding a severance pay package that would be much larger than what exists currently. You yourself mentioned that one needs a year to find another job. The proposed severance pay would cover at least a year. That's the real need in our opinion rather than a pension that pays a yearly amount that's rather minimal. After only six years, it may represent only 30% of the salary, that is $18,000 a year for the rest of the member's life. A person in that situation has far more need of $60,000 for the first year rather than $18,000 for the rest of his or her life.

Mr. Martel: With your permission, I would add that in examining the structure of the current pension plan, we see that it was designed exactly for the reasons that you've set out, as a safety net in case of termination.

However, our view is that a pension plan is not a safety net. A pension should prepare people for retirement. The mechanism through which we must secure the career transition of a Member of Parliament or a senator is through severance pay, which uses the employer's money much more judiciously. It's much less expensive for an employer to give a severance pay package that covers a year than to give a life-long retirement package at $20,000 a year which does not meet the person's needs.

You will also note that our report states the following: When a Member of Parliament finds a new job after one year, he's much better off than when he was an MP. That's the proof that he does not need this pension plan once he's found a job. The Member of Parliament in this difficult situation during the one year that follows his departure from Parliament. That's when he needs financial assistance from his employer, not in the form of a pension plan, but in the the form of a generous severance, though not more generous than what can be found elsewhere.

As Yvan stated, our recommendation provides for a severance package of up to one year's pay and eliminates severance pay in the case of those who can resume their former employment, because we feel that would be too generous.

In our opinion, pension plan, severance pay and basic pay are a set that must be examined from an overall perspective.

Mr. Plamondon: I will close with the following question: Would the severance package to which you're referring be paid whether or not the person has found a job?

Mr. Martel: No. That's precisely it. We've seen that some 20% of Members of Parliament have an implicit or explicit agreement with their former employer. We're saying that the person who returns to his former job should not have a severance package. They would not be eligible.

A severance package is a kind of insurance. We're saying that it should be paid only to those who need it. Therefore, someone who finds a job after three weeks, or after one or two months, would not get the severance pay. That's not the point of the exercise. Otherwise, it would be too generous, and that would be throwing our money out the window as an employer.

Mr. Plamondon: Thank you.

The Chairman: Thank you, Mr. Plamondon. Mrs. Parrish now has the floor.

[English]

Mrs. Parrish: Thank you very much.

I read your report with great interest. One of the things you commented on was the very low esteem in which politicians generally have been held over the last 15 years all over the country. Unfortunately, the type of harangue we're going through now doesn't do much to improve that.

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You talked about an RRSP-based plan. Your colleague mentioned that it's very vulnerable to interest rates on a year-to-year basis.

I have another concern with an RRSP plan, and I'd like you to comment on it. I think it produces a discrepancy or two different classes of MPs: those who can afford to put $13,500 a year into an RRSP plan, and those who are barely struggling to pay their mortgages and make up for long election campaigns. I am in this category. Does this not create two classes of MPs: those who can plan well for their retirement and those who cannot because of more limited circumstances when they get here?

Mr. Pouliot: It could be that way if there was no pension plan and you were told to go out and buy an RRSP. But if a kind of employer-employee RRSP is proposed, where you have to put in your 9% or whatever figure and the government also pays 9%, then the problem you raise is not there, because you don't have the choice. If you were to cancel any pension plan, then you would have that problem.

Mrs. Parrish: In some of the provincial legislatures, they're talking about total RRSP contributions, and it's up to the individual politician. Is this not also vulnerable to the Minister of Finance, who may decide at a whim - and I have no inside information - to lower the limits from $13,500 to $7,000 next year?

Mr. Pouliot: Perhaps it is, but that is not the real risk. The real risk is that if it is a free RRSP, you're free to put in some money or not. A lot of people will not put in any money, or will put in money and then withdraw it to buy a house or car, or do anything like that. I don't remember the amount of withdrawals each year, but the amount of money withdrawn each year is fantastic.

In a pension plan there has to be some compulsory element; otherwise there's no use having a pension plan.

Mrs. Parrish: If it is strictly our own decision to put money into an RRSP or not, does it lead to situations where you will have people who are destitute at the end because they've made those choices?

Correct me if I'm wrong, but when you talk in your report about low salaries and high pensions, I think you're saying that we're not paid quite enough right now. Therefore the government portion going into our salaries is rich; the pension pay-out is not necessarily rich.

It seems people are making the assumption that this is to placate us for having low salaries; therefore they're giving us rich pensions.

Again this is not a product of what we've just been talking about. Since the salaries are not generous we have no option but to enrich our pensions ourselves. Therefore the government has to provide for us.

It's not that the salaries are too low and therefore they're giving us big, fat pensions for 20 years. Is it not more accurate to state that the salaries are low, we cannot put in those augmentation payments and therefore the government has to put in more?

Mr. Pouliot: Paying 40% of your salary into a pension is still paying it. It's a cost; the cost is still there. As somebody said previously, the fact that the government has no fund doesn't change the cost. If your salaries were increased by 44% and you had no pension plan, it would still be the same cost to the government. So there are other political reasons for low salaries, but I won't get into that.

Mrs. Parrish: If RRSPs became part of this whole pension plan, as they are in some of the provincial governments, would we not be vulnerable to the accusation of keeping the RRSP limits high for the entire country so we could keep our own pension plans high? You wouldn't be that evil; others would.

Lastly I'll comment on transparency and accountability. By the way, I agree with Mr. Silye that there should be more transparency. I think the whole concept of tax-free allowances is one way of tricking the public or otherwise hiding behind all these various little categories.

I think the public wants to see that a trustee gets paid so much a year, a councillor so much, a local member of a provincial parliament so much, and we get paid so much a year.

A councillor in the city of Toronto, for example, is paid $63,856 a year -

An hon. member: Wow!

Mrs. Parrish: - and one-third is tax-free. They make it to stay home with their children and their families.

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They also get a $17,025, non-taxable allowance for expenses and they get unlimited mileage. In my limited estimation, since we don't get a tax-free portion on our $64,000, a local city councillor who never leaves home gets paid more than I do. There is no way the public can compare those two salaries.

The Chairman: Mrs. Parrish, please put your question.

Mrs. Parrish: When you're reviewing MPs' salaries, if you look at the whole idea of politicians, has it ever entered your head to get rid of all those tax-free benefits and recommend that everybody pay up-front and have one rate of pay?

Mr. Martel: Our position is that we should totally avoid the concept of a tax-free benefit. We have said, if it's salary, it's taxable. If it's a justified expense, it's just like my being here today; it is reimbursed. If I go to other clients, my employer reimburses that.

The concept we have proposed is exactly the same. There should be no confusion on whether this $21,000 is salary or not. In our opinion, it is not; however, it is for some because it is wrongly designed. Some minor adjustments would make it clear that your salary as an MP is $64,000, and that's it.

There might be some confusion right now about whether it's $100,000 or $64,000. I think this is wrong because our opinion, justified by the different surveys we conducted and the controls we made, was that for most of the people this tax-free allowance is indeed used to come to live in Ottawa. Those are expenses that ought not to be considered as salary.

Mrs. Parrish: Thank you.

The Chairman: Mr. Harper.

[Translation]

Mr. Harper: Thank you Mr. Chairman.

Thank you Mr. Pouliot and Martel, to be here with us today.

[English]

I would like to ask a couple of questions. First I want to say I appreciated your report. I didn't agree with everything or with the methodology, but I thought it was very thoughtful.

Let me say something about pensions. We'll be really clear and go past that quickly, so nobody's confused by the questioning. What you propose for the pension arrangement in your plan is considerably less generous than what is proposed in Bill C-85. That's correct. If we had a 9% government contribution to a private purchase-type arrangement off of current salary, that would also be considerably less generous than what is in Bill C-85. Is that correct?

As part of your study you had requested the views of the National Citizens' Coalition, the Canadian Taxpayers Federation, and some other associations. Why did you request their input?

Mr. Martel: At that time it was thought that these people had made many representations to government. We were asked to visit and do interviews. Basically that's the reason.

Mr. Harper: Did they make any useful contribution when you visited them?

Mr. Pouliot: I think we only got one written opinion that we commented on somewhere in this report. I couldn't give you the page, but this was done at the end of 1993, so I don't remember clearly. It was useful at least to know what they thought.

Mr. Harper: I gather you also did focus groups and some questionnaires with members of the public.

Mr. Martel: No, we did them with MPs and past MPs, but not with the public.

Mr. Harper: The focus group testing was with MPs. So you didn't request public input.

I had difficulty with the compensation parts. You concluded that members should be paid a certain amount, based largely on their own input and the input of former members, based on how they evaluated their jobs and how you evaluated equivalence in the private and public sectors. For example, one of the factors was hours. You made some statement that in your estimation, the average MP worked how many hours a week or month?

Mr. Martel: I can't remember, but it was about 60 or 70 hours a week.

Mr. Harper: That's 60 or 70 hours. You recommended considerable additional salary for ministers. Does this mean ministers are working additional time beyond the 60 and 70 hours? Are they still putting in 60 and 70 hours as MPs?

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Mr. Martel: We didn't get into the specifics. All we knew was that when we did survey the MPs and asked how many hours they spend, whether the House is in session or not, the hours seemed very long. Now, I didn't make a breakdown of ministers' time within the MPs group. In that study ministers were basically considered as MPs. So I don't have -

Mr. Harper: So you didn't try to evaluate the efficacy or necessity of those kinds of hours?

I have a difficulty. Let me just give you an anecdote, quoting my father. When Kim Campbell was running for the Conservative leadership and we had all those problems at Defence and in Somalia, there was a lot of criticism. She didn't seem up to speed and the comment was made, she isn't doing her job. She should get off the leadership trail and get back to the minister's office.

She said, I'm doing my job. My father's comment to me at the time was, well, it obviously must not be a full-time job.

That's what I wonder. How can somebody say they're working 60 to 70 hours as an MP, then they're a minister claiming to work additional hours on top of that, then they're claiming their travel and claiming they're running for a leadership or something else?

I'm not trying to be overly critical of your report, because I think much of it was good, but those kinds of things need to be looked into a little more carefully. Maybe we need some on-the-spot evaluation of what people are doing exactly and the value of that.

Mr. Martel: Those are questions that are being addressed, whether we do such a review at the Bank of Montreal or wherever. We seek to have a totally accurate estimation and analysis of who's doing what and whether it's called for.

When we compare the number of hours reported by ex-MPs who used to be here 15 or 20 years ago, with the assessment made by present members, maybe yourselves, on how many hours they did spend on their work, it's funny because it is a perfect match. That gives me a sense that the figure might be right as far as the number of hours worked by MPs.

The Chairman: One more brief question, Mr. Harper.

Mr. Harper: Sure. When you did international comparisons of pensions or other things - and we take from your testimony that it varies wildly; there's actually enormous variation - did you make any attempt to evaluate why that would be? Are these arbitrary numbers, are they cultural factors that have something to do with the role of a legislator in those countries, or were you just simply making a statistical comparison?

Mr. Pouliot: We know why, for example, that the pension plan in a certain country is much less generous than what it is here, but we don't know the background behind it. We didn't go into how they got to that point. We just took what the plan was and analyzed what it would cost here if we had that plan.

The Chairman: Mr. Pickard, do you have...one or two questions only?

Mr. Pickard: Yes I do. Thank you, Mr. Chairman. I hope I have a little bit of time with this. The way I really see it is that we have to look at everything in perspective.

I think you have done an excellent job with your report. I have gone through that report and thought your recommendations were very good.

Without question there are some things that may be a little bit out of kilter. In one area, as you suggested, maybe the travel allowance of $21,000 should be altered by $8,000.

There could be many changes, but in your whole assessment you came to the conclusion that members of Parliament are slightly undercompensated globally. That takes into account all benefits, salaries and whatever other factors fit into the jobs. Looking at that, you recommended a 6% increase, which is an increase the taxpayers have to absorb.

Now, in a perfect world there would be no question that would be easy to do, but quite frankly we don't have a perfect world. We're far from a perfect world. We have people working for the federal government who have not seen a pay increase in five years. We have MPs who have not seen a pay increase in five years.

We have a system that would totally not accept a global change, particularly a global change where there is a 6% increase for members of Parliament. Whether or not that's fair, it's unacceptable, and there is a matter of what's acceptable and what's not acceptable, and there's a fairness element.

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Mr. McWhinney: Question?

Mr. Pickard: I'm sorry, I don't think you should interrupt. I think I have five minutes -

Mr. McWhinney: I feel I should. This is a question on the theory.

Mr. Pickard: There is a point.

Mr. McWhinney: Point of order.

The Chairman: There are a lot of members who would like to ask, I'm sure, and I urge members to use the time available to ask questions rather than make comments. We'll have our chance later, so I'd urge members to ask questions.

Mr. Pickard: I think the point that I'm making on the question is a very important one for every member of Parliament and every Canadian taxpayer. We have to look at a system of fairness.

Without question, the proposals the minister is bringing in at this time further erode what you would recommend as fair. I'm not sure what that $3 million change in government costs is to members of Parliament, but it's clear to me that if you have a global number, this is quite an erosion in the gross amount the government is paying toward MPs.

Let's say your recommendation is 6%, a reduction of another 6%. At this point we are only dealing with pensions. It would be very unfair to look at this as a fair move if we run things back to 2% without making the other adjustments you have suggested in your report.

I'm assuming then that the minister's direction as expressed in campaign promises, and the minister's direction as expressed in compensation to members of Parliament have the taxpayer in mind more than an independent study would, and it really says that we are moving in a direction of lower costs to the taxpayer. I think that's a very important point, and I'd like your comments on that.

Mr. Pouliot: The only thing I can say is that it was not part of our mandate. That's the government's problem. That's not the consultant's problem. We were asked to determine what the compensation of MPs should be, considering what people in the outside world have as compensation. This is how we got to the $88,000, for example.

But if for some other reasons you feel that this is too much, there is nothing we can do. That's your decision.

The Chairman: Thank you very much. I think that concludes the time for the presentation and questions of these witnesses. I want to thank you both for attending today, and I appreciate the answers you've given to the committee.

A witness: Thank you.

The Chairman: Our next witness is Robert Fleming from Robert Fleming International Research Inc.

Mr. Fleming, if you would like to take a seat at the table, we could proceed with your presentation. I notice that you have distributed a document to members of the committee. I want to welcome you, sir, and thank you for coming. If you wish to make opening remarks, the floor is yours.

Mr. Robert J. Fleming (President, Robert Fleming International Research Inc. and Editor of the Publication, Canadian Legislatures): Thank you very much for inviting me to come before you. It wasn't my idea: it was somebody else's. So I'm not representing any interest group. I suppose I'm simply representing my own experience over a period of 16 years of examining the state of administration of Canada's legislatures, including the Senate and the House of Commons. I produce a book, which is known as Canadian Legislatures, and have done so since 1979.

I don't know whether I should quickly read my statement, or perhaps not - I don't know - but maybe I'll start on it. I would like to say, however, that it is almost impossible for a private individual, even one who is as knowledgeable as I am about the House of Commons and the system in general, to get information in order to make informed recommendations. There may be mistakes in the paper that was given to you, but it's based on the fact that in two telephone calls to the House of Commons, I was told that the whole question of members' years of service and age was a matter of privilege.

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For the record, I would like to say that that is utter nonsense. However, as a result, I had to research with my own staff the complete list of 295 members, their ages and years of service. I just place that on the record. One of the people I called was a staff member in the Clerk's office.

The government and various other bodies have gone to enormous lengths to attempt to explain the retiring allowance system that is now in place for MPs and the proposed changes that would be brought about through the passage of Bill C-85. The system, however, has become so complicated over the years that it is almost impossible for most inside or outside government to understand.

It is a challenge to attempt to assess the proposals set forth in Bill C-85. At best they appear to be a patchwork quilt aimed at trying to offer some comfort to those members of the public, the media and the House of Commons itself who are demanding that the retiring allowance plan for MPs and senators be brought into line with what is generally considered to be acceptable pension arrangements in 1995.

A close examination of MPs' years of service and election results over the past decade shows that the federal political arena is in a great state of flux. Parliament is a hazardous, tenuous place to work, but so is Main Street, Canada.

A minimum of 6 years service is required for an MP to qualify to receive a pension. Our analysis indicates that out of a total of 295 sitting members, 95 qualify this year. The group consists of 81 Liberals, 7 NDP, 4 Bloc Québécois, 1 Progressive Conservative, 1 Reform and 1 independent member.

The fact that 81 qualifying members are Liberals and only 14 belong to other parties suggests that the government should tread warily and wisely in advancing legislation. This is an area that has become a political minefield right across Canada.

Twenty-one of the 95 MPs who qualify for a retiring allowance have served for periods longer than 15 years. Should any of these members decide to retire, they will receive a maximum unreduced pension based on 75% of the average of their best consecutive 6 years of earnings. They will receive this immediately.

The proposed legislation contained in Bill C-85 requires that members of the House Commons or Senate must in the future be at least 55 years of age in order to accept the retiring allowance. According to our calculations, only 10 out of the 21 members now qualifying for a pension would meet that criterion. However, they and all other MPs who qualify to receive the retiring allowance are grandfathered. In their case, the 55 years of age requirement only applies to that portion of income earned in the years following royal assent of the bill.

The ages of the 21 MPs who qualify for the maximum retiring allowance range from 40 for the Honourable Brian Tobin to 65 for the Honourable Charles Caccia. Mr. Tobin has been in the House for 15 years; Mr. Caccia, according to our calculation, has been here for 27 years. Mr. Tobin qualifies to receive a maximum retiring allowance of approximately $60,000 to $65,000 based on his age and years of service should he retire today.

The top end of the scale is the Prime Minister who qualifies for an immediate retirement allowance of approximately $100,000 based on his remuneration as an MP, former Leader of the Opposition and Prime Minister. I believe there is some type of extra emolument; the figure of $45,000 rattles around in my head.

The proposal under Bill C-85 that retirement allowances not be paid to MPs before the age of 55 is a step forward in terms of saving money. However, this legislation establishes a 2-tier system that allows approximately 30 members elected before 1987 to retain most, if not all, of their current pension benefits.

It would not stand in the way of significant numbers of MPs retiring and receiving immediate pensions, rather than having to wait until the age of 55. On the other hand, recently elected MPs and MPs elected in the future will have to make substantial sacrifices. The fairness of this is questionable.

Lowering the accrual rate from 5% per annum to 4% as proposed in the bill would mean that a member who retires after the minimum of 6 years of service would receive a pension of 24% of the average annual salary or indemnity of $64,400, translating into a retirement allowance of $15,450.

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This is still twice as high as any pension plan provision on Main Street, Canada. I gather, however, from an interview with the media outside, that the people in Finance said there were pension plans as good, or words to that effect.

If the 4% accrual rate was lowered to 3%, the member would receive a pension of 18% or $11,600 annually, which is still considerably ahead of the best benefits accorded to that declining group in the ordinary working population covered by pension plans.

Unlike some provinces, such as Alberta, Saskatchewan, Manitoba, New Brunswick and Price Edward Island - the first three of which I'm ready to talk about in particular - where fairly drastic efforts are being made to simplify and overhaul pension arrangements for members, the provisions of Bill C-85 as now constituted will do little to convince Main Street, Canada that the government of Canada is serious about making changes to the Members of Parliament Retirement Allowances Act that reflect the concerns of the Canadian public.

The justification by many MPs for what is by any standard a ``rich'' pension plan is that it balances off their pay, which has only moved to $64,400 in 1995 from $46,400 in 1982. One can appreciate this thinking. I certainly can.

However, the fact is that the question of a fairer and proper way of handling the retirement allowances for members cannot be resolved without first getting to the root of the compensation problem in its entirety. What is needed is a thorough examination by an outside body of the whole structure of members' remuneration, benefits and allowances in place today, with a view to making changes that are fair and right for the member and are understandable and acceptable to those who elected him or her to office.

These important issues should be looked at outside the political arena by a representative group of competent individuals, including several who have served in Parliament. I note that this process is already taking place in some of the provinces, the most recent one being Saskatchewan.

As an aside, I personally believe that if outsiders were to examine the state of your compensation package, you probably would come off with a much better deal than what you have now, and you would enjoy the confidence of the Canadian taxpayers.

Thank you very much, Mr. Chairman.

The Chairman: Thank you very much, Mr. Fleming.

[Translation]

We will start the first round of questions with Mr. Plamondon, please.

Mr. Plamondon: Thank you Mr. Fleming. You have stated several principles and presented a criticism of the Bill C-85. In your study of the different provincial plans, do you feel that the bill can be compared to the plans in place for example in Ontario, in Quebec, in Nova Scotia and Newfoundland, or does Bill C-85 not ensure that the pension fund of the federal members will be similar to the pension funds of provincial members in those provinces?

[English]

Mr. Fleming: I'm interested that you've chosen the provinces where changes are not taking place. Certainly one of them is Ontario where I served as chief administrator of the legislature for many years.

The fact of the matter is that Canadians must realize it is those other provinces, namely, Alberta, Saskatchewan and Manitoba and to some degree - although there seems to be confusion - New Brunswick and P.E.I. that are now in the vanguard of leading a complete restructuring of the way members' compensation, allowances and benefits are handled.

I therefore think that if the House of Commons is to be in a leadership position, which I firmly believe that it must be in Canada, then you have to look at broader, sweeping changes than those represented in this present bill.

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There are some points to make. In the province of Ontario members may not pay toward their pensions on their tax-free allowances. They are limited to contributing toward their pensions, based strictly on their indemnities. In most of the other jurisdictions, up until now, members were permitted to pay toward their pensions, based on the combination of their indemnities plus their tax-free allowances.

I should say that this indicates a very interesting situation in Canada, and again this is an aside. The fact that seven provinces have permitted members to contribute based on their tax-free allowances as well as their indemnities, and those members have done so, indicates that the tax-free allowance has in fact been treated as salary by many members of provincial Houses.

Now, I know that that is not the case here, but I think it's extremely difficult to compare, because you're almost comparing apples and oranges in all these things. Again, I go back to the leadership point.

[Translation]

Mr. Plamondon: If you had to make a recommendation to the Minister on a bill concerning pension plans, what would be the changes that you would ask for as a matter of priority?

[English]

Mr. Fleming: The first thing that might come as a surprise to you is that I'm somewhat supportive of Bill C-85, because it does take certain steps such as the 55-years-of-age requirement and the lowering of the accrual rate to 4%.

Frankly, however, you stepped backwards by absolving so many longer-serving members from having to really take the bite in any way. Now, this is not the case in some of the provinces where change is taking place, because those members who have served for some time are required to take a bite.

An example would be Saskatchewan where there are about 8 members who have been entitled to receive up to 100% of their average indemnity. Now, on retirement, they're going to be limited to accepting 70% of their final salary.

So I think we have to look at things in those terms.

[Translation]

Mr. Plamondon: Thank you.

The Chairman: Thank you, Mr. Plamondon. Mr. Harper.

[English]

Mr. Harper: Thank you very much, Mr. Chairman and Mr. Fleming.

I want to just follow up on that point. You observe correctly that the bill introduces a two-tier plan. Just to clarify what you've said on that, do you believe it would be fairer to introduce retrospective changes than to introduce a two-tiered plan?

Mr. Fleming: I really don't know. What I was attempting to say earlier, and should have said, is that I'm not sure that even introducing this bill - even though it is doing some good in looking at the whole scheme of things for the Parliament of Canada - is really doing any good. Somewhere along the line you cannot get away from the fact that you have to get people out there to look at this whole thing. Frankly this bill as now constituted could even be a block.

Having been around legislative circles for a few years.... It takes an enormous amount of time, as you know, to get an act in place, and it takes a heck of a lot of time to get it out of place. I'm convinced that whereas this particular act may serve the purposes of the government - and I have to say again that you're looking at a very high percentage of Liberal members who, in a sense, will be the winners under this plan - the act itself, nevertheless, confuses the situation.

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But you have to take the whole ball of wax and get it out there. I'm speaking quite informally, as a friend of Parliament, a friend of some of the people around this table, and as a person who is not representing any party as such in any way. I have no axe to grind; I'm looking at fairness.

But I think it has got to the point - and this is true with every legislature in Canada - where you have to address the fundamental problem of all these pockets that are around, which Sobeco Ernst & Young was addressing, and tackle that. The whole thing has been totally overcomplicated. Frankly I think members of the House deserve to be paid more, but only on the basis of first examining - as has been done - the true value of all these other issues.

Take Manitoba, for instance. They have been at the same salary level for 5 years, and they have now had a salary increase from $27,967 to $56,500. However, as you probably know, they have withdrawn the $13,982 expenses allowance. I might also say that I'm informed that the highest pension paid by Manitoba to a former member is in fact $30,000.

At the same time the old pension plan was grandfathered until April 24, 1995. After that time members and new members contribute to an RRSP and are matched by the government up to 7%. So for any new members coming in there is only an RRSP.

However, they are now enjoying $56,500 rather than the former arrangement. I asked the clerk about this and the answer was that it went through. There was no difficulty. The public understood and felt we were being absolutely objective.

By the way, they had an outside commission that examined all these issues, several years ago, and the government accepted their recommendations holus-bolus.

Again I say that the indemnity must be increased. The government is going to have to face taking flak at some point, and it should do that.

An equivalent occurred when I arrived as administrator of the Ontario legislature in 1974. I said the place needed a new roof, and we could have put a new roof on the place for $1.5 million.

They waited approximately 18 years - as Mr. Boudria would acknowledge - dilly-dallied, and it cost them $24 million to put the new roof on later. The whole building needed renovating, but the Progressive Conservative Party and the Liberals wouldn't bite the bullet, and so it wasn't done. The NDP did do it, and now the building has been restored.

So I honestly think that if you're trying to build the future system of parliamentary government in Canada - I don't know whether Dr. McWhinney would agree with this - at this particular point, in 1995, you have to look at major changes right through the whole structure.

I'm sorry for talking so much, but this area -

Mr. Harper: It's very informative.

Let me make a couple of comments and observations and you can give me your reaction. We're either told over and over again or there are analyses to the effect that the reason MPs' pension allowances are so generous is that the indemnities are in fact too low, either by historical standards, in comparison to recent increases or whatever. We're also that MPs require these very generous pensions because of the insecurity of employment and the high possibility of being turned out.

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Yet when I look at the MP pension plan, it doesn't actually seem designed to adjust for that, or to explain those things. The MPs at the front end of their careers, who are the most likely to be turfed out, are the ones who don't qualify for the plan. The people who get the biggest benefits are people who have been here very long, often near retirement age; and cabinet ministers, people, particularly if they've reached cabinet, who will be eligible for all kinds of directorships and alternative employment after their political careers.

Is this theory correct, or does what I'm saying make sense? When you hear this explanation for the pension plan, when you look at the pension plan, it doesn't respond to those kinds of needs whatsoever.

Mr. Fleming: It's very difficult to say. As some people know, I sat in the chair at Queen's Park for 13 years, attempting to look at these issues. I sat as Secretary of the Board of Internal Economy, so I was privy to everything that was going on.

All I can tell you is that at one point members' salaries were increasing pretty rapidly at a considerable percentage, but, of course, so were the salaries of civil servants. There were incredible increases up to, say, 10% or 11% a year, but then came the time when things were clamped down.

I think there was an insidious move - and I say this as somebody from outside the legislatures - to somehow or other reduce the qualifying period for full pension from 20 years down to 15. I think this was done - and I can understand it - simply because of the fact that people felt that, darn it, if we can't get an adequate salary, then at least we can somehow receive an adequate pension. So the figure went down to 15.

This tended to take place all over the place in Canada. As a result something developed that was totally out of whack. So I agree with you. At the moment what's happened is that you have salaries for legislators in Canada that are below what they should be.

I really take issue with this whole question of comparing members of Parliament with doctors, lawyers, construction managers, teachers, governors - God knows what else - because you are a special type of person. You have a special task in Canada and you have to be able to carry it out.

You have to have the support of the Canadian people. In looking at compensation, you can't be fitted into a civil service or corporate classification system. That would be ridiculous.

I was approached by the senior vice-president of a very large corporation some years ago who said to me, Bob, why the hell can't you give these guys a job description. Frankly it would be totally impossible to do that for members of Parliament or legislatures. I think you deserve better. Therefore I think we have to find a way and you have to find a way of trusting people other than your compatriots to think for your good. There are people around who will do that.

Let me again turn to your question. So what's happened is that we have lower salaries, benefits that are way too generous, and the Canadian public is getting very upset.

The Chairman: It's 11 minutes now, so I'll move on to Mrs. Parrish.

Mrs. Parrish: Thank you very much. Actually I very much enjoyed working with you.

When you talk about those comparisons, do you think they might be valid because of the type of careers people leave to come here? Do you think perhaps there's some validity in drawing those comparisons, because the ordinary working man on the street doesn't have the wherewithal to get elected any more, to win big nominations and be able to leave a career and come here?

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Do you not believe there is some validity, because if you do a survey of the people who are here, they come from those walks of life?

Mr. Fleming: Sorry, that is validity for what?

Mrs. Parrish: For doing a comparison with doctors, lawyers and civil servants when you're looking at -

Mr. Fleming: I think there is, but I would hate to think that members of the Parliament of Canada...or the public would somehow get to the point where they were trying to equate your work with that of somebody they can understand. Frankly nobody, except those who have served in an institution such as this, can understand your work.

Unfortunately you are your worst enemies because you are seen to be protecting your world. After two years those of you who enter this world tend to lose the common sense of the world you left. Nevertheless, there have to be people thinking about the welfare of those who've been elected in Canada.

Mrs. Parrish: Mr. Fleming, I haven't been here quite two years, so hopefully I have a bit of common sense left.

Mr. Fleming: I think you do, judging from your questions.

Mrs. Parrish: I'm looking back at the one part of your report.

Some hon. members: Oh, oh!

Mrs. Parrish: No. You're judging from my comments at the beginning where I said I enjoyed your comments.

That's how we win over the bureaucrats all the time.

If you look at the paragraph where you talk about lowering the accrual rate from 5% to 4%, it's very personal to me.

I spent 2 3-year periods in local government with no pension. I spent 3 years winning the biggest nomination in the history of Canadian politics, and I will have spent 6 years here to acquire $15,450 a year. Now, with Mr. Eggleton's new plan, that's a reduction from $19,320, which is really nothing to write home about either.

Had I stayed - and remember, that for women our most productive years are when we're no longer changing diapers and doing all those horrible things I did for awhile -

Mr. Fleming: I don't see any difference between women and men.

Mrs. Parrish: There is a difference. In reality there's a difference. We do have a different -

Mr. Fleming: Not in my world.

Mrs. Parrish: - map for turning of age; we do have a difference.

So when you look at that sort of pension plan, had I stayed in a nice, safe career - and I keep using teaching as an example - with that much service I probably could have retired with about $30,000. How do you address that, because you seem to think this 4% doesn't go far enough?

Mr. Fleming: No, I didn't say that. I simply said that 3% would yield less. All I'm saying is that a group over here has to look at the whole situation. People like yourself, have to look at coming into the House of Commons as an elected member as being a privilege, a service to the Canadian people.

It has enhanced your reputation. It may enhance your future considerably, and there are many factors members around this table have to take into consideration other than monetary ones.

I didn't come before this committee because I was being paid to come here. It's cost me a lot of money to come here, including a complete rewriting of my notes starting at 8 last night and going through till 10 this morning. So we all have to contribute in some way.

Mrs. Parrish: Do you know, Mr. Fleming, that the reporters don't write this down, but I'd be here without a pension. I would be here if I were not paid. I consider it a rare privilege to be one of 295 people in this country who get to be here.

An hon. member: No, I'm not.

Some hon. members: Oh, oh!

An hon. member: Thank God!

Mr. Fleming: You should get a fair pension, but unfortunately we cannot look at your situation in isolation.

Mrs. Parrish: Thank goodness there are those who protect me from myself, because I do have family responsibilities.

Mr. Fleming: Well, I'm sure Don Boudria does.

Mrs. Parrish: And you want common people to come here, do you not? If we were all multimillionaires and professional athletes, well installed before we got here, you would not have a representative parliament, would you?

Mr. Fleming: No...[Inaudible]

Mrs. Parrish: So we have to have some sort of pension plan, whether we want it or not.

Mr. Fleming: That's the other point, but while I think the Parliament of Canada has to have a pension plan, this RRSP proposal tends to demean your positions, and I think it's ridiculous.

Mrs. Parrish: Thank you, Mr. Fleming.

The Chairman: That's it; thank you.

Mrs. Parrish: [Inaudible]...before you cut me off.

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The Chairman: You did, and well before. Thank you, Mrs. Parrish. You had ten minutes; that's nice. We'll save more time for other members later.

Miss Grey: Thank you very much, Mr. Fleming. I appreciated your comments. I have all kinds of things to ask you, but I think I'll try to limit my questions to a couple of things you have talked about.

The pension plan is too rich, or it seemed to be too rich. Whether we're talking about economics or politics, those two are obviously intertwined. I think what you're leaning towards is the political impact this has on Canadians, who are watching this whole thing and paying the bill, of course.

Mr. Fleming: Saving $3 million or $10 million is peanuts to the Government of Canada, so there's no point trying to convince people on that basis.

Miss Grey: As to this business of how it looks to people, you say who cares about $3 million when we're $500 billion in debt? That, of course, is the question.

You said no one in the country has a problem with a fair pension plan. Could you say about this particular bill, Bill C-85, that everyone who was in before 1988 is in that program to stay? Those of us who were elected in 1988 or beyond have the option to opt out; there's a sixty-day window after royal assent to the bill.

Could you explain to me how you feel about the fact that we, as members of Parliament, have to either take the whole thing or opt out? You're either totally in or you're totally out and you don't even get a dollar-per-dollar contribution, employer to employee rates. You take it all or basically you lose it all. There is no ``fair pension'' in this.

Mr. Fleming: I really can't answer that. That's one of the reasons I have extreme hesitation in seeing this bill pushed forward. I think it confuses the issue.

It's a little like the national debt. Those of us around this table have been pretty much responsible for creating it, and we have to think for those following us. The problem here is that in the House of Commons, older members - or longer-serving members I should say - are definitely going to benefit from this, but are they really thinking in terms of the newly elected members and what this is going to do to their future? I just don't know the answer to opting out or not.

Miss Grey: Do you think people who were elected pre-1988 should be given the option to opt out as well as those of us who were voted in after 1988?

Mr. Fleming: Looking at my figures, I have to ask myself who would want to opt out of this particular pension plan. We have to look at our figures. I think you and the independent member might be the only ones who really do want to opt out.

Miss Grey: Granted, and I think it's not so much a matter of whether you want to opt out. I am just as concerned about my future and my retirement as my colleagues are.

The question is you almost feel you have to opt out because of the political logistics. The Canadian public is simply not going to buy this thing. So I think if the opt-out clause was given, it should have been given to everybody.

Mr. Fleming: Yes. I'm not an actuary, as Don Boudria knows, but I do think it's something that probably should have been considered.

Miss Grey: As you look at it, as an outsider and an expert to some degree in this area, does this opt-out clause look like a political tool being aimed at a particular group of people who have said they would opt out, in other words the Reformers? Is that what it looks like to you?

Mr. Fleming: To be quite candid, though I admire the work you're doing, when I read about it, I have to ask myself why Miss Grey is opting out. What's the purpose in all this? Is this really right for her in the future?

I have to say yes, there definitely is a mix between the political issues and the economic issues, but you also have to look at it in terms of every other pension plan in Canada. Once you're locked in, you really can't get out. Then again, this is not a traditional pension plan, no matter how much you want to dress it up and look at all these different pockets and percentages people are paying into it.

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Miss Grey: Laws are laws in the country, and if you are paying into a pension plan, as I am, once you are locked in - and six years is the vested time for us - you can't get out. The president of the Treasury Board's assistant was here this morning, and when I said ``That's the way the law is; how can you just change that?'', he said ``Well, the Prime Minister is changing the law.'' In other words, what we are seeing in the legislation -

Mr. Fleming: I'm not sure about this. Last night I was talking to a civil servant who's afraid of losing his job. He's 37 years old and has worked for the government for 14 years. He told me if he wants to, he can opt out. This was news to me.

Miss Grey: I took it in good faith when I was told by the president of the Treasury Board's staff that I am able to opt out, but this goes beyond every kind of insurance pension scheme I've ever seen. It tells me something new about what I always thought about vesting, which wasn't a whole lot. I am a member of the Alberta Teachers' Association, and my benefits were locked in when I came to Parliament in 1989. They said ``Sorry, you don't have any option here; they're locked in.''

Mr. Fleming: You have to look at this in terms of the fact that for years, if you were an Ontario government employee - and I don't know about the federal government - you were locked in for ten years and couldn't get out.

That has changed now, and many of those things have gone by the boards. You can have an RRSP and transfer it somewhere else. In the old days you couldn't transfer anything anywhere except between the federal government and provincial governments, and I think the universities and municipalities.

Miss Grey: I appreciate that. I wanted you to comment very briefly on the Alberta scenario and the fact that Ralph Klein cancelled that pension plan. Was that political or economic, in your estimation?

Mr. Fleming: It's a combination of both things, but let's face it, ladies and gentlemen, we're at a stage in Canada where you have to send the right smoke signals to the people. Therefore it's a combination of how much money is going to be saved - and we're obviously in desperate times - and what's fair and right. If we were all sitting in the state of California, there wouldn't be any pension plans for anybody who was a member after 1988 or 1989, I believe. That was wiped out altogether.

Believe me, there is trend everywhere to scrap pension plans and introduce RRSPs and other things, but I don't see that as the alternative here. Yes, your pension plan is still too rich and no, you are not going to resolve it yourselves; you're going to complicate it, as you already have for years. You have to get it into the hands of an outside body.

I don't know how many times one has to say that, but I think maybe it's getting across because this is happening in Nova Scotia, Manitoba, B.C. and other provinces. It's not happening in Ontario. Frankly Ontario, next to Ottawa, should be taking a lead, and it's not.

Mr. Boudria: First of all I want to welcome our witness this morning. He and I go back a long way. I'm sorry he couldn't get the information he required. It's not right, because from what he has explained to us about what he was looking for, it is generally available by scrutiny of the Canadian Parliamentary Guide and a few other documents.

Mr. Fleming: That's exactly what I did all weekend.

Mr. Boudria: But if it's available in that kind of format, surely a summary of it should have been made available to you for totally logical reasons. Again, I'm sorry that wasn't done.

I want to ask you a few questions, Mr. Fleming, on the issue of the benefits. There are misconceptions about their relative size.

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Others today have talked about an RRSP proposition. I couldn't get on in that particular round, but I want to make the following proposition to you and get you to react, if possible.

I, like others, have been subjected to these allegations about just how generous this pension is and so on. There's no doubt it is generous, but the premiums are also pretty heavy. I had the Library of Parliament do a study of my own case. I have a copy of it here, which I'm willing to share with other colleagues.

The study shows what I would own today if I had taken my premiums and put them into an RRSP and they had been matched by an equal employer premium. They asked me what kind of interest rate I wanted this to bear. I told them to just take the five-year GIC rate; nothing fancy, no mutual fund. So they calculated the interest for the overall period and came to an average interest of 11%, because you remember it went as high as about 14% and now it's much lower, of course. They calculated all my premiums plus compounded interest and told me I had contributed $136,988. If you add a matching employer contribution, that gives us exactly twice that much, or $272,000.

Again based on that same average interest, that would bring me a yield of something like $27,000 right now, if I were getting the interest on it. Without touching the capital or being subjected to any kind of abuse at all, I'd have that kind of interest. I could probably still earn an income and never be accused of double-dipping or anything like that.

If I were to leave now, my pension as an MP would be $30,000. The difference between the two is $3,000. It's not $16 million or some such nonsense that people who draw little pigs put in the newspaper, but $3,000 a year. Doesn't some of this have to be put in perspective?

As I said, I didn't do this. It was done by very credible people who work for us in the economic division of the research branch of the Library of Parliament.

Mr. Fleming: How many years of service have you had - eleven?

Mr. Boudria: Thirteen.

Mr. Fleming: But you have other posts.

Mr. Boudria: That's just lately. I haven't had any all this time. I do have a position now, but that's only in the last couple months.

Mr. Fleming: You have a position now that will build into this and you're going to gain, because as far as I can see, you're very close to getting a full pension. A bit is going to be snipped off by reason of Bill C-85, but you're really not going to suffer. Frankly, if you had $272,000 in 1995, you should probably be more worried about it shrinking and not getting $27,000 a year.

Mr. Boudria: GICs seldom shrink. Maybe they don't grow as fast as they used to, but they seldom shrink.

Mr. Fleming: If you could lock it in there....

I still think by and large you have to consider the fact that to get your $30,000 a year, the Government of Canada, in addition to what it puts in for you, also had to put in a very large amount of money to make the $30,000 possible.

Mr. Boudria: No, it's an equal contribution.

Mr. Fleming: I realize you said ``equal contribution'', but there's a whole bunch of bucks being put into the Don Boudria account by the Government of Canada to top up the whole thing to enable you to receive your $30,000.

Mr. Boudria: Let me challenge that by saying the minute I go beyond fifteen years, assuming there was no Bill C-85 before us today, the pension ceases to grow unless you achieve age sixty, at which point the inflation factor kicks in. Beyond that, for every year you stay, you're essentially working as an MP for 25% or 30% of your salary. You would get the rest anyway if you weren't there.

Mr. Fleming: If you were a wise businessman, you'd leave at that point. I'm sure you'll win the next election, so you'll have a choice.

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Mr. Boudria: Well, thank you.

The reason I bring all this up, of course, is hopefully to demonstrate that some of these numbers that are advocated are taken in isolation and are compared against things, and I'm not sure they're always fair.

Mr. Fleming: You're raising a question that is concerning me. These guys come in here from Sobeco Ernst & Young and we have all these marvellous reports. As I said in my small statement, this is so confusing to people. It's terribly confusing. The basic issues have been obfuscated by all these bits and pieces and technical things, and what's right and what's wrong.

Mr. Boudria: Thank you.

Mr. Silye: Mr. Fleming, I was quite interested to hear you say earlier that the indemnity is too low, the benefits are too high and this pension plan is still too rich and still too generous. That happens to be my point of view as well.

I know that we, as politicians, receive a taxable salary. We also receive a tax-free allowance and tax-free benefits. Then on top of that, if we get re-elected, we get this pension. If we don't get re-elected, we don't get the pension, but there's a severance package available.

The reason all of us have chosen to opt out is it is too generous. If we say it's too generous, then you have no choice but to say this isn't good enough; this isn't what the Canadian public wants. That's just to answer your curiosity as to why we're opting out. This government insists, and continues to confuse things and to justify it on the basis of all the arguments we heard this morning.

I also agree with your suggestion that this could be cured and solved if we had an arm's-length, independent body decide on the House's behalf. But that's not going to happen, because the minister and the government said it's just not the time to do it. So this confusion will continue forever.

You say the indemnity is too low and the benefits are too high, and this pension is too rich and too generous. What would you recommend be done on the pension portion to restore some integrity and get the Canadian public believing that what the MPs and the government are doing is sane and sensible?

Mr. Fleming: This may sound a bit ridiculous, but perhaps some of those who have qualified or will be qualifying for full pension should be asked to back off and maybe accept some kind of cut. In the case of Saskatchewan, they have succeeded in getting seven to eight MPs who were covered by their plans before 1979 to actually accept 70% of the indemnity rather than 100% of the indemnity.

I don't know what the ins and outs of it are. Again, it goes back to Deborah Grey's question of what to do about the newer members coming in. But I think there would be some possible way that the longer-serving members could in fact, under some type of legislation, be somewhat curbed in their benefits, because after all, they're going to walk out of this place - as we used to call it, Queen's Park - with x numbers of bucks every single year, regardless of whether they're aged forty or fifty or what. I think that might be done.

I'm all for advance, and if this particular bill is going to go through, then the age 55 thing is certainly good. Of the U.S. state legislatures, there are only one or two that do 55; the majority do sixty. But it's probably good.

I don't know whether there's a requirement that there be an actuarial reduction for those who retire at younger than 55 - Well, no, that wouldn't work, but there should be some way of possibly controlling this. The 4% and age 55 combined are okay.

My main concern is I don't feel it deals with the whole issue. As I observed from the previous speakers - and I'm afraid I couldn't be here earlier - somehow you can't separate the salary, the allowances and that whole business, from the pension. What this act is trying to do is - I hate to use the term - window-dress the situation, to dress it up for the people of Canada when it doesn't really tackle the fundamental problem.

.1230

I don't want to be irreverent in front of a committee that is chaired by my own member from Kingston, but that is nevertheless -

By the way, the Kingston Whig-Standard did run an editorial on this on Saturday - not prompted by me - which he has probably seen.

Mr. Duhamel: Thank you for being here, sir.

I wanted to make two quick comments and perhaps get your reaction. This centres on the point you've raised that we are not helping each other in this particular exercise.

Here are some figures I have. For example, currently there are 432 members of Parliament who are receiving pensions. Since 1980, slightly over 50% of those who were elected are receiving pensions. Actually, fewer than 50% - 48% - receive pensions of $30,000 or less. Interestingly enough, if one looks at the age of MPs today, 12.9% - fewer than 13% - are 54 years of age or under. Therefore, even if the current plan were going to continue, there would not be a whole lot who would be receiving pensions at an early age.

The point I want to raise with regard to this is these statistics are not generally known. It would seem to me this shows that even though the plan is generous, there is not a whole lot of people receiving a whole lot of money from it, overall. That's one point.

The other point is some people have said Canadians are upset with regard to what's going on right now with MP pension plans. I believe you suggested it's perhaps the system that's not appropriate, with third-party judgment, etc. But is it, as well, what we're doing to each other? Are we really looking at this today with an analytical, objective mind, or is politics the priority as opposed to trying to address the basic question?

Mr. Fleming: You introduced a bill some time ago that a lot of people spoke to. A great many of the Bloc Québécois people spoke to it. Very few Liberals did.

As far as I can see, the Liberals - the Government of Canada - essentially operating with the advice of actuarial consultants and God knows who else and making their own decisions, have seen fit to put forward these points in it. You appear to be determined that this wheelbarrow you have loaded up is going to go through and dump its cargo, namely the passing of the act, and nothing is going to stop it.

As an ordinary citizen of Canada, albeit one who knows the system inside out - and I'm not talking hot air - who am I to question what you want to do?

But that raises a question. To phone me about five or six days ago and propose that you're going to invite x number of people to come before this committee and there are certain people you're not going to invite, off the record - this one's on the record here, and I can understand, perhaps, why....

Although I know it's the tradition of Parliament, of course, that there has to be a second reading and then it goes to a committee, nevertheless, at this particular stage of the game, it's an extraordinary way of conducting business. It's also at the very end of a session.

I can only assume that the representative majority is going to push it through.

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All I'm saying is I don't think you're listening to some of these issues. I think it's going to go through, but regardless of what the president of the Treasury Board or anyone else says, you are flying in the face of public opinion if you don't put this into the hands of the broader community to debate and examine.

I'm not talking about the traditional form of commission conducted as this forum is. I'm talking about a way for sensible people who are fair and knowledgeable parliamentarians and actuaries to get together to look at the whole picture and figure out what should be done.

Again, I believe if you permit this at some point pretty darn soon, before it gets out of hand, it would have incredible results. You'd probably come out smelling like roses and with much better benefits.

I've talked to very sensible, reasonable Canadians about this, who I think have their heads screwed on. They're not the sorts of people who are going to jump to conclusions, but they definitely feel you are holding your own counsel and pushing your own show ahead. It's going to be to the detriment of the Liberal Party of Canada, the Government of Canada, and it's definitely going to be to the detriment of the people of Canada. I think this has to be taken into account.

Again, as somewhat of a political scientist, I observe that the Liberal Party of Canada has had a marvellous go at it as the government since October 1993, but I think it risks becoming unravelled if this kind of situation isn't dealt with in a totally and utterly open manner. This applies to everything concerning the administration of the House of Commons.

I find it just shocking that, as an individual citizen who knows how to make phone calls to people in government, I was shunted by two - I think it was actually three - different people telling me this was privileged information.

The Chairman: We've run out of time. You've had more than five minutes and we've completed the time here.

I want to thank you, Mr. Fleming, for your attendance this morning. We appreciate the fact that you've taken a lot of time to prepare and be here.

Mr. Fleming: It's my pleasure.

The Chairman: I'm sure we'll see you another time.

Our next witness is Professor Franks, one of the commissioners on the Commission to Review Allowances of Members of Parliament in 1994.

Professor Franks, if you'd like to come and take a seat at the table, that would be great. I understand you have an opening statement. We'd be pleased to hear from you. The floor is yours, sir.

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Professor C.E.S. Franks (Commissioner, 1994 Commission to Review Allowances of Members of Parliament): Thank you, Mr. Chairman. I was expecting to have with me my two colleagues on the commission, Mr. Lapointe and Jean Pigott, but for some reason they're not here. I feel a bit inadequate,

[Translation]

especially because my French is not quite good enough for me to talk about the pension of Members of Parliament. I hope you will all forgive me for I speak English.

[English]

In the commission, we looked at the issue of pensions in the context of the total remuneration package for MPs. My remarks are going to be addressed primarily to the total remuneration package.

Afterwards, if anybody wants, I'm prepared to explain so far as I can how we reached the recommendations we did. I must say to begin with that I felt our study of pensions was not done in enough depth to give a confident, actuarial comment on what the consequences of various choices were. We really approached it as a Band-Aid rather than as a comprehensive solution.

If MPs' pensions are looked at solely in comparison with the pensions and pension schemes of other professionals, then the pensions of parliamentarians seem excessive, and that's the comparison normally made.

When these present proposals for reform of the pensions of members of Parliament were first made public, the media were filled with reports comparing the pension an MP would make after fifteen or twenty years of service to what a school teacher or civil servant would receive after the same period. Not surprisingly, by comparison, the MPs' pensions looked very advantageous.

What these reports and experts failed to note is that less than 10% of MPs serve in the House for fifteen years or more and that after most elections - 1993 was an exception - the majority of ex-MPs have served too short a time, less than the required six years, to receive any parliamentary pension whatsoever. In fact, a great many ex-members not only do not have a pension, but have a difficult time finding employment and re-establishing themselves after serving as a member.

I do not know how long the average school teacher or employee of a large company remains in service and in the organization's pension plan. In the civil service the average length of employment is more than twenty years.

The average public servant can not only be assured of a good pension at age 55 to 65, depending on years of service, but also has that pension guaranteed for life and indexed for inflation. I doubt the plans for school teachers and most other professionals are much less generous, or that more than half of the professional employees in most organizations do not normally remain in service long enough to receive even the minimum pension.

Public discussion of MPs' salaries and pensions is filled with and all too frequently based on misperceptions and arguments based on the few extreme exceptions. Under the present scheme a very few MPs who entered Parliament at an early age - and only a very few, if they're lucky - retire from the House to receive large pensions when they're still comparatively young. But the vast majority of ex-MPs do not get these generous pensions. To repeat, after most elections, the majority of ex-MPs receive no pensions whatsoever.

The issue of MPs' pensions should more appropriately be considered in the context of the overall remuneration of elected representatives. Members of Parliament are significantly less well paid than other Canadian professionals. An international comparison proved Canadian MPs to be among the lowest paid of legislators.

If other factors are taken into account, such as the length of sessions, the opportunity for other income-generating activities, the likelihood of serving long enough to make a career as a politician and to earn a pension sufficient for support in old age, or such practices as the French community mondaine, then Canadian elected representatives are even worse off than those of other countries.

This low remuneration has an effect on representation in Canada. A higher proportion of Canadian MPs choose voluntarily to retire from the House and not to run in an election - close to 20% in each election - than leave by any means - death, defeat or desire - in Britain, the United States or the continental countries. There's something deeply dissatisfying in the work world of the Canadian member of Parliament to create such a rapid turnover and desire to leave.

Pensions and the total remuneration package are, of course, not the only aspects of the job of the parliamentarian that create the turnover, but they are certainly important contributing factors.

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It might be argued that this turnover does not matter and that a steady influx of new members is a good thing to the House. But what happens in Canada goes far beyond it being a good thing. Comparative studies of legislatures and the legislative process have shown that a necessary requirement and precondition for a strong legislature, independent and effective representatives, and strong legislative committees, is a body of experienced, long-term members who make a career of service in the legislature. Long service allows them to develop the influence, knowledge and power that only come with years of service and experience in the job.

The Canadian Parliament does not have this sort of long-serving member. The Canadian Parliament is correspondingly weakened in its ability to hold government accountable, its efforts to obtain redress of grievance for citizens, and its debate and investigation of important issues. So also is the capacity of Canada's political leadership to renew itself.

Canada's competitors in the global economy have an abundance of long-serving, knowledgeable, experienced, elected representatives; that's what gives strength to their politics and legislatures. In Canada the cult of the amateur prevails. In the modern world of business, as in sports, amateurs cannot compete equally with professionals. If Canada wants to compete in the global economy, it must not field a team of amateur politicians any more than Canada can field a team of amateur hockey players and hope to win the Olympics. If Canada wants to move beyond amateurism in politics, it must treat its politicians as respected professionals, not as the targets of every discontented group trying to find a messenger to shoot and a scapegoat to berate.

Pay, pensions, the entire remuneration package, need to be treated with more seriousness than is normally allotted to them. They need to be regarded as the fair and appropriate rewards of professionals doing a vital job for the well-being of Canada and Canadians. Public and parliamentary discussion of remuneration all too rarely is as serious or as informed as the issue deserves.

Thank you, Mr. Chairman.

The Chairman: Thank you very much, Mr. Franks.

[Translation]

For the first questions, Mr. Plamondon has the floor.

Mr. Plamondon: The recommendations presented by your Commission to review Allowances of Members of Parliament, are in a report very adroitly entitled: ``Democratic Ideals and Financial Realities''. Given that you've made some 50 recommendations, do you think Bill C-85 is satisfactory?

[English]

Prof. Franks: The main recommendation we made on pensions was age 55, and that appears in the recommendations in the legislation. To that extent, yes.

What we did not address was the broader issues of how much should be contributed on either side and what the exact pension should be. We were very tentative in our recommendations, apart from the age 55. In that sense, I don't see anything in the bill that strongly goes against anything we recommended.

[Translation]

Mr. Plamondon: In your report, you have talked about double-dipping. You have mentioned it without making any precise recommendations on that subject. The government recommends against double-dipping in its legislation. Do you think that this Act should come into force immediately after receiving Royal Assent? And that changes in the pension allowance of Members of Parliament should come into force immediately after Royal Assent, and that vested rights should be maintained till then?

Do you think those who receive a salary and a pension should also start to deduct the pension from their salary once Royal Assent has been given to the Act or should they keep their privileges? The majority of the people who would be concerned by that change, would be people who have been appointed by a Conservative or a Liberal government for political reasons. Then, don't you think we should start immediately and specify that double-dipping should cease at the time Royal Assent is given to the Act?

[English]

Prof. Franks: To the best of my memory, we never discussed that in the commission.

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We did discuss double dipping itself. On that we said, amongst ourselves, that there is an equity principle involved here; that is, if you're going to eliminate double dipping for one class of servants of the Crown, MPs or public servants, whatever you want to call them, then it should be spread generally.

We ran into the problem, which has also been discussed in Parliament, of a retired army officer or a retired public servant who runs for Parliament and gets a job that has a pension from the Crown, the problem of somebody who has a pension from the Crown in right of a province and then joins the federal legislature, or somebody, for that matter, who has a private pension. We couldn't come up with something we felt was equitable on that. That left us with this problem: why should we pick on members of Parliament as the only group in Canada to whom double dipping is prevented? We couldn't come up with a comfortable answer on that.

We realized in working on this that it's a very politically loaded issue and that it's something that should be dealt with by Parliament itself. But we could find no grounds in the principles of equity, or just compensation, or treating different groups fairly, to come up with any useful answer that satisfied us.

On the question of when it should come into effect, as I say, we had absolutely no discussion of that as far as I know. So I can't give you an answer. I feel that's the kind of decision that a government has to make ultimately and then defend its decision in public.

[Translation]

Mr. Plamondon: It means that, according to you, including in the bill a clause forbidding double dipping would be, more unfair than fair to Members who sit in Parliament, in the sense that these people will be hit harder than others who were in the army or worked for a provincial or municipal government. I give you, for example, the case of former Mayor Drapeau who works for Unesco on behalf of the Canadian government. He receives a very good pension from the City of Montreal and he would not be affected.

I am wondering myself. I am in favour of abolishing double dipping, but if we do, it seems to me that it should apply to everybody, not only one category of people.

[English]

Prof. Franks: On the issue of why pick on MPs in particular, the answer I think is very obvious. MPs' salaries are far more visible than those of other people and there's been fairly active intervention by interest groups in Canada into discussing remuneration of MPs, whereas there hasn't been for judges, the public service, military officers, ex-mayors of Montreal, doctors, lawyers, or anybody else.

What we found in our study - and I think this is in our report - is the public perception of MPs' pay is that they are paid much more highly than they actually are, particularly in comparison with other professionals like doctors and judges. Very few people are aware that in fact an MP's basic salary is that of a major in the army or of a senior school teacher, that it's not one of the extremely high salaries.

In my own private discussions I've found that the most astonishing thing about the public's perception of an MP's pension is that they simply don't know the facts. I suppose that comes with the office. If you live in a goldfish bowl you have to be watched. Parliament's the biggest goldfish bowl in Canada.

[Translation]

Mr. Plamondon: Thank you.

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The Chairman: Thank you, Mr. Plamondon. Now Mr. Harper, please.

[English]

Mr. Harper: Thank you, Professor Franks.

In the judgment of your report, you indicate MPs are basically being underpaid. What kind of recommendation did you make as a bottom line in terms of total compensation?

Prof. Franks: My memory for figures is very bad, so forgive me if I'm wrong here. We wound up with the one statement that the press picked on - and I think of Mr. Silye when I mention this - that in an ideal world an MP would be paid more than $100,000. So we wound up recommending something less than that. I think it was $86,000.

Let me try to explain something, with peace to other people around the table. My own thinking and the general thinking of the commission was more in line with Mr. Silye's than it was with the present system. We felt that what is salary should be recognized as salary and what are expenses should be recognized as expenses for MPs. We recognized that MPs from different ridings have different expenses. The bigger your riding and the farther away it is, the more likely you have problems of getting around the riding to see people - and the costs associated with that. There is also the problem of having two residences, one in Ottawa and one at home, and the associated difficulties.

We recommended a drastic reduction in the non-accountable expense allowances and leaving some. We felt that MPs, as most professionals, need some discretionary pocket money to work on in their business. We felt that the bulk of the expense allowances should be accountable and accounted for - transparent. In other words, all the expenses of an MP, with very minor exceptions, should be listed, as any other professional does, and should be available to the public.

Arguing that way suggests that the salary needs to be recognized as salary and commensurate with what somebody in that kind of position gets, and the expenses are paid as expenses. What we did on the salary was I believe a fairly imaginative effort that I haven't ever seen done before.

We tried to analyse an MP's job in terms of components, such as office manager, legislator and policy adviser, etc. We worked out what people in those categories, as professionals in Canada, are paid, and then we proportioned out an MP's time in that forum. That's where we came up with a figure, which, if you added it all together, you'd probably hit over $100,000. But if you want to argue for something that might possibly be accepted, we had to recognize it was a lot less and we went for less. That was our way of rationalizing it.

So we were moving in the direction of a salary that is a recognition of the responsibilities and tasks of an MP, eliminating the efforts to disguise salaries as expense allowances - if that's what they are - and to making the expenses fully accountable as a normal professional would.

Mr. Harper: In the end, the basic methodology was with comparisons of activity components as opposed to what's indicated.... You don't say this but in your brief you seemed to indicate it was on an international -

Prof. Franks: I simply mentioned that in my brief. I didn't want to repeat what was in the commission report. I assumed that fellow commissioners would be here to defend that.

What I did want to emphasize was that in my view we're in a peculiar position in Canada of having, in every way that I've found to measure, the most amateur legislature in the western countries. I think that has an impact on Canada that is not good. One of the causes of it is the remuneration levels. I'm not trying to say it's the major cause, but it's a factor. I don't think the politicians are going to get the respect they deserve until they get the pay they deserve.

Mr. Harper: The public will probably see it the other way around; you deserve amateurism with lower pay.

You heard this question earlier, because I asked Mr. Fleming this. I'd just like your comments.

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In your own paper you repeat many of the standard arguments we've heard. I'll go through this question again. That is, these pensions exist because MPs are paid salaries that are too low. They exist because MPs have this tremendous job insecurity and difficulty re-adapting to the workforce on short notice, etc.

As I say once again, if you look at the structure of the pension plan, it isn't designed to address those needs at all. The people who are at the front end of their careers are not eligible to receive the pension. Those who get the biggest pensions have been here the longest. They're often older. They're almost certainly cabinet ministers. They have excellent job prospects outside of cabinet and government. Many of them go on to make a lot more money. How does the pension plan square with this rationalization for the pension plan?

Prof. Franks: In the bad old days - going back 20-plus years or so - there were an awful lot of members of Parliament who left without pensions. In those times they didn't have an allowance for members who left without pensions, or a resettlement allowance, or whatever it's called. There were actually members of Parliament, when they lost their seats, who didn't have enough money to fly back home. In fact I know of at least one member whose caucus had to pass the hat around to get enough money to fly her back to the west coast. The pension scheme, plus the other changes in allowances and expenses, was intended to ameliorate this transition.

I share your view that it does not resolve the problem of MPs who have served too short a time to get a pension. What has been done there is that various allowances have been established to ease that transition. In our report we recommended these allowances be enhanced and that all members of Parliament, whether they were eligible for pensions or not, should get them. These are the kinds of severance allowances that are similar to those people get in business or other places when they leave a job early.

There are imperfections in the pension scheme. My own view, which is not shared by most of the Canadian public, is the actual financial impact of these pension imperfections is not huge. The major problem is to ensure we get the best possible representation in the Canadian Parliament and that they get a fair salary.

One other thought, just to go back to a sports analogy.... My understanding is that when this pension plan was put into place, the only profession they could find that had comparable high-risk careers was the National Football League in the United States. To some extent the original pension scheme was modelled on the National Football League pension scheme in the States. That ties in with my view that politics is a contact sport, but I don't know how much more useful the analogy is.

Mr. Harper: You made some comments on the double dipping, and I don't actually disagree. As we've discussed double dipping, the definition of double dipping has kept expanding. If you look at the way some people in the House would define double dipping, it includes a huge percentage of the population over age 60.

To look at what the problem actually is - before we get into the clause-by-clause in the bill - it seems to me that the real concern with double dipping was very specific originally. It was first of all conditioned by the fact that MPs could get a pension at an accessibly young age. So you had somebody getting a pension at age 40 or 50 and having another job.

Secondly, the second government job they got was not a matter of winning a public service competition. This was a blatant patronage appointment. Somebody would serve and then they'd get a second job appointed by the same government, even after they were defeated in some cases. It seems to me the instances of double dipping people are concerned about - even within the federal public service - are actually of quite a restrictive nature.

Prof. Franks: Permit me to talk on that in my personal capacity, but not as a member of the commission.

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One of my concerns, about which I've written a fair amount, is that political parties, either at the federal or provincial levels, or in joint cooperation between the two, do often use post-parliamentary positions as a reward for good behaviour.

Prime Minister Trudeau appointed enough of his caucus to patronage positions in 1984 to change his government from a majority to a minority before the election. I've always considered that one of these stunning facts that's never really settled into the Canadian consciousness. It's not the behaviour of a government that expects to maintain its parliamentary representation into the next Parliament.

I would like to see a system in which the rewards given to MPs, either by society or by Parliament itself, are sufficient so that post-parliamentary patronage is less of an influence on members of Parliament, or less of a potential influence.

In that sense, I could see an argument for double dipping being eliminated for parliamentarians, but not for other parts of the public where it could be justified. This is not a standard argument given for eliminating double dipping. If I were looking at double dipping more broadly, I think the cases Mr. Plamondon raised are major issues. I know of many civil servants who retire at the age of 55 - and they're professionals - who then have a consulting contractual relationship through a small company or something with government. They probably wind up earning more than they did before. There are all these sorts of problems that need to be dealt with.

I repeat that the reason why we worry about it in Parliament generally is that Parliament is the most visible instance of it. My main concern about it is not the drain on the taxpayer's dollar, but the effect it has on the behaviour of members of Parliament and on the expectations of members.

Mrs. Catterall: It's refreshing to see some return to a sense that this is an important job to the nation and to the world, not only to us as members of Parliament. I have had the impression as I've listened to this debate that somehow members of Parliament are here for one reason, and that's to feather their nests and line their pockets.

Frankly, the evidence is quite the contrary. Our previous witness spoke about a number of members of Parliament who are eligible for a full pension now, and have been in some cases. If I follow the line of argument I've heard so often from the other side of the House, then one would say the minute they're eligible for this great big trough full of slop, they would beat it out of here and grab their dollars and run.

It makes me wonder why someone like Mr. Caccia, who qualified over twelve years ago for a full pension, has continued to run for an additional twelve years, making the kind of contribution you talk about to the growth of an experienced, competent body of legislators for this country. He has willingly given up half a million dollars, and that's not even adding the interest that money would have earned over those years, which would have more than doubled it in the period of time we're talking about.

We have a current minister of the Crown who now qualifies for a full pension after being here for fifteen years. That would be over $50,000 a year. And yet, I suspect Brian Tobin is going to run for Parliament again, instead of absconding with this money and going off and making himself a great, fat salary somewhere else on top of his pension.

In my years of observing, members of Parliament have continued to do that, and have served beyond any financial advantage to themselves, often to their financial disadvantage. I've given us only two examples today. It's good to hear you put forward another point of view this morning.

Some on the other side of the table may want to take up some explanation as to the state of mind of people who continue to serve in their Parliament even though it's no longer to their economic advantage to do so. These are only two examples of many I could have chosen.

.1310

Let me go to some of the issues around the pension itself and what your commission may have looked at.

There seems to be some misperception here that we're increasing the value of pensions through this legislation instead of reducing them. Nonetheless, we are reducing them.

There's been talk about making MPs' pensions comparable to others. It's very difficult to find a comparable situation. Putting that aside, if we were to look at them as comparable, that would mean they would also have the same portability as private pension plans.

A member like Miss Grey, for instance, would be able to combine her years of service in a teacher's pension plan with the years of service in her MP's pension plan. That's what the majority of Canadians who've served in pension plans are able to do. Had Miss Grey moved into the public service at a comparable salary, she would be able to bring those years of service as an MP and add them to years of service.

Did your commission consider at all whether that should be a factor in MPs' pensions?

Prof. Franks: Yes and no.

Mrs. Catterall: Did you say yes and no?

Prof. Franks: We looked at it and said we really didn't have the time to come up with an answer. Again, reverting to myself, not as a commissioner but as somebody concerned about this, if it's agreed the total remuneration package needs looking at, then pensions become part of it rather than being looked at in isolation the way they are here.

In that sense, my inclination would be to argue that the pension schemes for MPs should be comparable to those of other short-term professionals. That would mean, very simply, that you buy an RRSP with matching contributions - or more or less, I'm not going to say which - by the House of Commons. Then that RRSP is fully vested in the member and is portable, as RRSPs are. I think that solves the problem, but then it has to be put in all these other contexts, because every time people now look at MPs' pay they include an imputed value for pensions. As I say, it's merely an imputed value.

In response to your earlier, lengthy non-question, I have never found an MP who was looking forward to retiring because he or she was eligible for a pension. On the other hand, I have found many MPs who look forward to staying in the House because they have the comfort of knowing the pension plan will support them after they've been trying to bring up a family on a very low income. If that's any help to you, we too in our commission found that quite often with members we talked to or who wrote to us.

Mrs. Catterall: I think I heard you say you didn't necessarily look at the cost to the taxpayers of the various things you were proposing. I don't know if you looked at the actual disbursements and contributions for the pension.

I want to distribute this for the information of committee members. Mr. Chair, this is a quote from the annual report of the MPs' retiring allowances account, and our witness might have some comments on it. This contains an annual summary of members' contributions, government contributions and interest earned on that amount. It compares that to total disbursements out of the plan. It goes back to 1952 when the plan started.

In every single one of those years the disbursement out of the account was less than the receipts into the account. I'd like this committee to ask for some clarification from Treasury Board on where this 3.5:1 or this 6:1 that the National Citizens' Coalition continues to use in advertising comes from.

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Let me also say that in virtually every one of those years, the members' contributions exceeded the government contributions. The only exception to that was when for some reason the government of the day decided in 1992 that this needed to be on an actuarially sound basis, although for 40 years the contributions and income had more than paid for the disbursements. Suddenly we decided that we needed to have it on an actuarially sound basis to pay for every member of Parliament who might potentially retire any time in the next century.

So that has changed somewhat since then, Mr. Chair, because that has changed the obligations of the government.

But I really would like an explanation from Treasury Board as to that 3.5:1 figure they gave us, given the history.

The Chairman: Mrs. Catterall, that's very well and good, but I think you're asking it at the wrong time.

Mrs. Catterall: I'm probably asking it at the wrong time, but the committee may ask questions of officials through other means than by -

Mr. Hermanson (Kindersley - Lloydminster): I don't know how the National Citizens' Coalition gets its numbers. Why don't you invite them here to tell you?

The Chairman: The witnesses we have here are the ones to whom the questions are to be directed. The witness may wish to -

Mrs. Catterall: If the witness wishes to comment -

The Chairman: He may wish to comment and he's free to do so. Otherwise I think you're wondering aloud, with great respect, Mrs. Catterall.

Miss Grey: We want those figures from Treasury Board.

Prof. Franks: Mr. Chairman, the reason we didn't go more deeply into pensions is that analyses of the costs and benefits of a pension scheme are very complex mathematical analyses. They're based not only on complex mathematics, but also on assumptions about the lifetime of people and umpteen other things. The people who are qualified to do that are professional actuaries. Not only did we not have the time to do it, but our budget did not permit it being done.

Almost every pension scheme in the world right now looks as though it's a money-maker if you go on a cash basis year by year.

The main problem that concerns companies and governments with the unfunded liabilities is the future liabilities, as the population increases. Of course, that is again based on assumption: how many people are working, what they're getting paid, what the pension will be, inflation, the growth of investments, and everything else. Whatever you get told about those things, there's a band of error on those projections. In many of these things, although people don't want to admit it, the error bands are big enough that what you're looking at 20 years down the line is mush; it's not clear.

But my own impression, looking at MPs' pensions, is that somewhere along the line there's going to be more paid out than is coming in. When that happens, I don't know - The advantage of going to the RRSP approach and the buying in is that you absolutely don't have to worry about that.

The Chairman: Thank you very much.

Mr. Silye, you have been very patient.

Mr. Silye: Thank you, Mr. Chairman.

Mr. Franks, I have two issues I would like you to comment on.

One is the contradiction between the final comment in the final paragraph of today's submission and what you say in your report. That is, in your commentary today you said the entire remuneration package has to be treated more seriously. What you were hinting at is that a lot of times this discussion or debate never gets the proper attention the issue deserves. You witnessed that here too.

We're limited to just one day of witnesses. We're limited to one hour, to five minutes. The government is not taking it seriously. They just want to gloss over it. So you've confirmed that.

The minister was here. I don't know if you were here when the minister was here.

I had recommended that an arm's-length, independent group do an overview and come up with something that restores integrity to politicians, but this is not the time. This is what is adding to the self-serving nature of Bill C-85, and the government just doesn't get it.

Yet in your report, you then say that MPs' compensation should be $86,000 per year, with provision sufficient to cover expenses. However, it's not prudent to recommend a 25% raise and indemnities at this time. This would increase public hostility toward government and politicians. Therefore, you go through a whole harangue yourself. On the one hand, you're recommending an open and above-board review; let's do it. Then you're saying, yes, but we better not recommend a raise because that's going to increase the hostilities. I'd like your comment on that one.

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Secondly, your comment in your submission today that politicians...we need veterans here, you can't have rookies, and the more experience one has the better politician one becomes. I think there are a lot of counter-arguments to that.

So my question to you is, would not a two-term member - two term being 8 to 10 years - offer as much to this country versus somebody who is going to stay for 16 years, 25 years, or 15 or more years?

So I would like you to comment on those two areas.

Prof. Franks: They're both very good questions, Mr. Silye. As we've said before, there's a lot to be said on both sides of each of them.

On the first, you must appreciate that a commission report is a report of a commission. That's fine; that's what we agreed on. I wish my fellow commissioners, as well as myself, were here to explain the answer.

What we tried to do is reconcile what we thought should happen with what we thought was politically possible. Now perhaps we should not have gone through that exercise and we should have just described the ideal. But we chose to describe what we thought was reasonable as well and what we would like to see Parliament do immediately. We recognized in the report that there was a gap between what we thought MPs should get and what we were recommending. That's stated in there. So that explains number one.

Your second question was on long-term MPs. I realized in writing my remark that the opposition parties would, by and large, not be wildly sympathetic with this argument for long-term MPs, because with rare exceptions they are new to Parliament. I also recognized that, in North America in particular, there's a strong movement afoot to limit terms.

The context for limiting terms in the United States is that 95%-plus of members of Congress run for re-election, and of those who run for re-election - the last election being an exception - there are normally less than 2% or 3% who get defeated. So once you're in, you're basically there. The Senate is even more secure. The last election is the exception to that. That means that a member of the American Congress - we'll ignore the state level, which also factors into this - bearing in mind service in the two Houses of Congress, has a reasonable career expectancy there of 20-plus years.

The reasonable career expectancy for a Canadian member of Parliament is under five years. I'm sure this will not make you tremble in your boots because I'm sure you're aware of it. That's for service in Parliament.

When we look at these things we have to look at them in the context where they're actually happening.

I could see an argument in the United States for limiting members of Congress and senators and so on because there's a problem of stasis in representation there, which you've quite accurately described in your remarks.

The problem in the Canadian federal House of Commons is the opposite. There is such rapid turnover that there is a lack of continuity, a lack of experience. It also creates a lack of autonomy in members.

I can't remember whether you were here when we were discussing free vote, but one of the things that contributes to the autonomy of a member and the capacity to defy party leadership is being secure in their seats. They don't have to worry about party leadership to keep coming back, and they know the electors will support them. There are precious few Canadian MPs who have that confidence. Most times it's under 20%. I think it's even less than this at this point. In the United States or in Britain, the safe seats equal about 80%.

When I emphasized continuity in Canada, it's because of a lack of it. If I was criticizing the United States Congress, I would probably take a different point.

I hope that answers your question.

Mr. Silye: One more question. Do you agree with tax-free benefits? Your report does not address all the tax-free benefits MPs get.

Prof. Franks: Every profession has tax-free benefits.

Mr. Silye: Every profession has tax-free benefits?

Prof. Franks: Oh sure.

Mr. Silye: Could you elaborate on that, please?

Prof. Franks: As a professor I can get into getting research grants. They are tax free. They support a lot of the work I do, which is also very enjoyable. Doctors go to conventions all over the world to learn the intricacies of the profession in Tahiti and Finland and other places.

Mr. Silye: Do you have a life insurance policy paid for tax free?

Prof. Franks: I have a life insurance policy paid for.

Mr. Silye: Do you have to pay a taxable benefit on it?

Prof. Franks: This is fairly common in industry to have a life insurance policy.

Mr. Silye: Do you pay the premium?

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Prof. Franks: I pay the premium.

Mr. Silye: We don't pay the premium here. You know that; you studied the compensation.

Prof. Franks: I will repeat what I said earlier. When I look at the total compensation package, I don't see that MPs are overpaid. That having been said, I'm going to answer your question directly.

You will appreciate, as I'm sure you do, that pay and allowances for MPs come from two different legislative pockets.

Pocket number one is those mandated by statutes, including the Parliament of Canada Act and this act. As I understand it, it's an amendment to another statute. I can't remember which one at this point. But those statutory ones, once they're passed, are laid down. They're engraved in stone unless something happens.

The other package is the annual estimates of Parliament, which are passed simply as a budget estimate and can be changed as a budget estimate.

A fair number of the allowances, including the $6,000 residence allowance you get, the travel allowances - and I'm not sure about the pensions, but I assume they would come in this too - are in the annual budgets. The reason the annual budgets get loaded up this way is the governments and Parliament, with some good reason, are scared to death to touch the statutes because of the kind of public reaction they get. If I were revising it, I wouldn't want to have those two packages trying to do the same thing in competing manners.

I will add this, though. One of the things that came in loud and clear from the research reports from our commission was there is absolutely no way to increase the salaries or the allowances of legislators in any country without running into hostile public opinion. The one country that is most effective about increasing them, because they don't care much at all about public opinion of that sort, is the United States Congress.

Mr. Pickard: Thank you for coming, Mr. Franks.

I am very interested in your viewpoint from the political stage. I feel this has not been as much an economic argument as a political argument. As you have pointed out well, the electorate is very cynical about politicians and about what is happening in the political circle.

In your report, you did make it very clear:

Regardless of our findings, we do not feel that it is prudent for the salaries of members of Parliament to be raised to $86,000.

You did make a very specific recommendation, though:

On the first day of the next Parliament, salaries be increased to $86,000.

I'm not sure if that is to offset a wave of protest before an election. That's a political scheme. But what I find in this whole process at this point in time, where the recommendation comes down clearly, is you cannot alter the salary. However, there is a commitment by the minister to deal with the pension plan. I wouldn't say this is a final dealing with the pension plan. Everything is fluid and moves along to a certain end.

The minister has obviously taken your viewpoint that it would be totally imprudent at this particular time to deal with salaries and other benefits - tax-free allowances and all that go with that.

Every witness who has come before us today has said that members of Parliament are underpaid - every witness to a note.

You support the Sobeco Ernst & Young report.

A voice: So did Mr. Silye.

Mr. Pickard: Yes, even the Reformers do.

But a political game is being played with this whole debate, in my opinion, and that political game is pension plans should be changed because they are too extravagant.

But in order for fairness to prevail, would you not suggest the minister has in fact reduced the remuneration of members of Parliament by the moves he has made here and tried to bring in some corrective measures, which by the way I think you suggested? He could have gone further, but by going further, would he be fair, not only to the taxpaying public but to the people who have been elected? Would it be fair to go further at this time when you can only deal with pensions, not with salary? Over the long haul, should there be a scheme devised and utilized, such as you suggest, to deal with the whole package down the line?

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The problem is politically right now should we be playing this? This is not an issue of finance; it's an issue of politics and everybody in this room knows it. People lined up over there are lined up with Reform buttons and so on. It's an issue of politics. Reasons that are stated on both sides here are very much political and not looking at the financial aspect.

I would suggest, Deborah, that I think your point about reasonable financial interest is important. I have no question about that, but where do we end if this whole thing goes?

I think the reason the opt-out clause, another political issue as far as I am concerned...Reform asked to be out. They were given the option to do what they asked to be able to do.

Prof. Franks: That's a real package of questions. I can suggest two different ways of handling pay. Let's say we assume that expenses cover expenses and that we're not playing games with them. Let's forget about pensions because we'll assume that their RRSPs purchased them and so we've solved that problem.

I can see two ways to resolve the pay problem, neither of which, it seems to me, the Government of Canada is willing to adopt, and perhaps for good reasons.

One would be to set up independent commissions of fair, like-minded people like myself and our recommendations would be binding; they're not debatable and what we recommend happens. My understanding is that's how Manitoba has moved. I might be wrong on that, but I think it's correct.

A second way would be to link the pay of members of Parliament with some other professions or jobs. One effort was made by a previous commission to mine to suggest that it should be in relation to the average wage paid in Canada. Another way to do it would be to link it to the pay of junior federal judges in Canada, which would be a whopping increase for you, whether the public realizes it or not. A second one - say, you took the median level of the senior level of the senior service, the most senior executive levels, the deputies and assistant deputy ministers, and just said the pay is set at the median of that.

An hon. member: Like their pensions.

Prof Franks: Well, you'd have to stay that long too to get the pension. That's part of the package that doesn't happen for members of Parliament.

I can see either of those resolving the problem of each government and each Parliament having to make a decision. What it doesn't resolve is the goldfish bowl problem. I repeat, from our research studies there is no way to increase the pay of members of Parliament or to even alter pensions, as is happening now, without it raising an enormous amount of hostility. That's true in every single country that we looked at, except the United States, as I say, which seems to get away with huge pay and not much public discussion.

Mr. Harper: I have just a couple of follow-ups. One was the comment you just made. There are several instances here where obviously I don't agree with the thrust of your testimony and I think you're pulling out these arguments as if they're obvious and sometimes there's a completely different explanation possible.

Let me just take the last one, that there has been comparatively little outcry in the United States about the high salaries and pay increases as opposed to other countries. One reason may be that it's a low turnover and they're insulated, but they do after all have elections. Maybe the difference is that American legislators continue to be real legislators in the classical sense and that in other systems, parliamentary systems, the executive and the parties have become so dominant that the average legislator is simply not important and not viewed by the public as worth a high salary that you would pay a U.S. congressman.

Prof. Franks: American congressmen are not the highest paid legislators in the world. Singapore would hit the top of the pack. France is not far behind. When I talk about the cumul des mandats, a very high proportion of the French legislatures - over a third of them, perhaps over half - hold a position in another level of government, and when you add it together there are people who get....

Mr. Boudria: As many as four.

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Prof. Franks: Well you can get $70,000 for being a local mayor, plus a car and driver, which your wife uses. You're on the regional council, so you get $70,000 a year, plus a car and driver, which your children use, and then you get $70,000 for being a member of the National Assembly, plus a car and driver, which you use. That's not unusual.

Mr. Harper: But the explanation there is systemic rather than something to do with the -

Prof. Franks: I wouldn't want to say that the reason the American legislators get it is because they're worth it and others aren't.

Mr. Harper: I realize that you wouldn't want to say that, but I'm just saying there are other fairly obvious possible explanations.

I have a second very brief question. You've said, and it's a fair comment, that the public doesn't always understand the facts of these issues, and sometimes the opinion of the public, or for that matter members, may be conditioned on misunderstanding.

Wouldn't it better to open up a process like this, or any kind of salary process, to public input and public debate? There's always the assumption in some circles that if we do that it's going to come down to the lowest common denominator. The people who believe MPs should be paid so many hockey pucks a year will get their way. But isn't the reality more likely that you will raise the information and debate in the public, you'll get a much better appreciation at that level, and that politicians and their entourages will also have to accept the fact that maybe their self-evaluation is a bit high?

Prof. Franks: Would you agree, if we did that, that it should include civil servants, judges, military officers, and all employees of the Crown, or is it just members of Parliament that are going to be -

Mr. Harper: I hadn't thought about the issue; I'm only talking here about the issue of elected members.

Prof. Franks: I see.

The country that I know of that goes farthest in that direction is Sweden, and there the list of people whose salaries are set by the government and made public extends from the Prime Minister at one end down through bishops, clergymen, postmen, prison guards, etc., every single employee of government or government-related employment. It's fixed at about 100 categories and includes legislators and so on. When Swedish legislators come out low in comparison with Canada, they're low in comparison with every other country, but they're comparable to the level of ambassadors or judges in Sweden. They're all set in relation, one to the other. As I say, that is the only country I know of that has gone this route fully.

They say we need a national pay scale. There are a lot of arguments against that because we live in a free-market society. Again, the problem, as I see it, is an equity one. If you pick on one group, why don't you pick on everybody who works for government?

Mr. Harper: I think in many cases we hear that we're public officials who are charged with setting our own salaries and there is obviously an awkwardness in that.

Prof. Franks: The other way of doing it is for you to set your own salary and then say, we're responsible for this decision and if you don't like us, throw us out in the next election, and I bet that's your fondest wish. Perhaps that is the process we should follow.

The Chairman: It seems to be what we're doing.

Thank you very much, Professor Franks. That concludes the morning testimony. The sitting of the committee is suspended until 3:30 p.m.

Mr. Silye: Mr. Chairman, I have a point of order. This committee received a letter from the Canadian Taxpayers Federation, asking to be allowed to make a short presentation to this committee on the issue of MPs' pensions. Mr. Kenney is here in the room now and I'd like to move, seconded by Mr. Harper, that he be heard, for the purpose of making a short presentation, either now or after the last witness, who is scheduled to appear at 4:30 p.m.

The Chairman: What's the wish of the committee on this?

Mr. Boudria: Let's hear him now. Of course, we have to adjourn at 2 p.m. for Question Period.

Mr. Silye: I have a copy of his submission, so I think he could do that.

Motion agreed to

Mr. Jason T. Kenney (Executive Director, Canadian Taxpayers Federation): I do have some copies of our submission, but I don't think I have enough for everybody here.

The Chairman: They can be distributed.

The floor is yours, Mr. Kenney.

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Mr. Pickard: Mr. Chair, could you tell us who Mr. Kenney is?

The Chairman: Mr. Kenney can do that himself as he starts his presentation. Thank you, Mr. Pickard.

Mr. Kenney: Thank you very much. I appreciate the opportunity. My name is Jason Kenney. I'm executive director of the Canadian Taxpayers Federation.

We are an 84,000-member, non-partisan, non-profit advocacy organization. Our mandate is to promote the responsible and efficient use of tax dollars to promote democratic reforms and to encourage taxpayers to become more involved in the political process.

We've had an ongoing interest in the issue of MP compensation and the MP pension plan and, more specifically, an ongoing interest in provincial legislators' pension plans. For that reason we asked to appear before the committee.

We were concerned earlier that the committee decided not to hear us but glad that you've given us this opportunity. I will try to keep my verbal remarks very brief and hope that our written submission provides you with more detailed recommendations.

Of course, you're dealing with Bill C-85 and I'll try to restrict my remarks to that. Our submission is focused on that bill, although of course there are larger issues of MP compensation involved here.

Let me just say at the outset that we certainly feel, and our members certainly feel, that the status quo pension plan is completely unreasonable in the level of benefits it provides for two particular reasons.

Because parliamentarians alone among Canadians have the ability to legislate for themselves benefits paid for by taxpayers, benefits paid for through funds taken from taxpayers through the authority of government, this is a unique power that only legislators have. For instance, when I heard the previous witness say that other people might be able to participate in double dipping and what's different about members of Parliament, I think the critical difference of course is that legislators have if not a real at least a perceived conflict of interest when it comes to establishing their own remuneration.

The current costs of the MP pension plan in our view are completely unjustifiable. I heard one member question whether or not the plan was actually properly funded.

I think it's quite clear that all the actuarial evidence suggests that for every $1 contributed by members of Parliament, there is approximately $5.80 contributed by the government through taxpayers to both the registered and non-registered portion of the plan.

We feel very strongly that there is need for fundamental reform and that there is need for a basic, adequate level of retirement benefit for members of Parliament. We do not suggest, as I've heard from some members here and in the past, that there should be no retirement benefit for members of Parliament, nor do we suggest that MPs and their provincial counterparts should be paid less than their market value in total compensation.

We do suggest that there should be a single standard in the form that compensation takes. This applies not only to pensions and retirement benefits but also to such things as the tax-free expense allowance. Of course, members of Parliament, MLAs and MPPs are alone among Canadians in being able to exempt up to one-third of their income from taxation. That again is a double standard.

The current plan, with the 5% benefit accrual rate and the various other features, the vesting requirements and so forth, far and away exceeds the maximum benefits allowed for by registered pension plans under the Canada Income Tax Act. We don't think the reforms under Bill C-85 come anywhere near solving that problem.

The problem in the plan is not simply the level of benefits but the structure of the plan. The fact that under C-85 the benefit accrual rate will be reduced in the future from 5% to 4% still creates a benefit rate twice as high as the best defined benefit plans in not only the public but the private sector. It's our estimate that after the C-85 changes have been made, the taxpayer contribution rate will be $4.76 for every $1 contributed by members. Again, we think this is maintaining a completely unreasonable standard.

To put forward our recommendation very simply, we believe Parliament should recognize the new wave of reform when it comes to politicians' retirement benefits that's sweeping Canada right now.

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Bill C-85 suggests that this government and this Parliament are completely out of touch, not with the views of some extreme interest groups but with the views of the vast majority of your constituents and indeed with the views of a growing number of your colleagues at the provincial level.

We have been intricately involved in efforts to reform legislators' pensions in all four western provinces and Ontario. As you probably know, the Liberal Party, for instance, in Ontario, in Manitoba, in Saskatchewan, in Alberta and in British Columbia has supported conversion of what were formerly defined benefit or in Ontario and in British Columbia are still 4% benefit accrual rate plans to self-funding defined contribution RRSP plans. Of course, the governments in Saskatchewan and Manitoba have already effected those changes. The government in Alberta eliminated the plan altogether, and both major opposition parties in Ontario and British Columbia promised to convert their defined benefit plans to self-funding, dollar-for-dollar defined contribution plans after their respective elections.

That's precisely the kind of reform we recommend for this Parliament, the adoption of a plan that would provide a reasonable level of retirement benefits for all parliamentarians, which would not create the double standard, which would cease to create this tremendous cynicism that has developed toward our political institutions.

Groups like ours - and let me make this perfectly clear because I think there may be some misunderstanding about this - do not exist to create or foment public cynicism toward our public institutions. Quite the contrary. By maintaining a plan like this, every member of Parliament who decides to vote for C-85, in our view, is deciding to continue to exacerbate public cynicism towards legislators, toward our parliamentarians and toward our parliamentary institutions.

In our written submission, we have provided a brief review of the reforms being undertaken in various provinces, including Prince Edward Island. The model we propose is the superannuation plan adopted by the Government of Saskatchewan in 1979, a New Democratic government, which has worked very well for legislators there. If you speak to retired members of the Saskatchewan legislature, you will find that they find these retirement benefits perfectly adequate.

We suggest conversion of the current MP pension plan from its current form to a defined contribution self-funding plan, which would preclude the possibility of unfunded liabilities, which would eliminate the possibility of such obvious aberrations as double dipping, and which would solve the tremendous political problem that all members of Parliament face with respect to this issue.

Thank you again for the opportunity to make these brief remarks. I'd be happy to entertain any questions.

Mr. Harper: Thank you, Mr. Kenney. In particular I want to thank you for one comment that I didn't have a chance to make earlier. It had been suggested by a member, because we created a bookkeeping entry to create a fund for MP pensions and then borrowed the money to fill it, that somehow that wasn't real money. I think, coming from a longer-term member, that helps explain how we got $500 billion in debt in this country.

I'd just like you to elaborate your comments on the plans in other provinces. These plans, which have been brought in or are being proposed by Liberal Parties in Ontario and British Columbia...what kind of government contribution do they involve?

Mr. Kenney: In those two provinces, of course, Ontario and British Columbia, both major opposition parties have proposed RRSP plans wherein the government would contribute 9% of the taxable salary - not the tax-free expense allowance portion but the taxable salary - of MLAs and MPPs, and that 9% would be matched by the legislators' contribution; in other words, a contribution to the maximum allowed for defined contribution plans and/or RRSPs.

Mr. Harper: At the same time, have they been advocating or implementing pay increases?

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Mr. Kenney: No, and certainly not the opposition in those provinces that I'm aware of. Of course, in Alberta the pension plan was eliminated outright concommitant with a 5% reduction in salary, which has also been adopted in Saskatchewan and, if I'm not mistaken, in British Columbia as well. So we actually see in a couple of provinces where there's been substantial pension reform, a reduction in the salaries.

Of course, that is not something our organization suggests is appropriate in the long term. We understand that legislators need to be fairly compensated, but in tough fiscal and economic times it's not simply a political problem; it's an economic problem for members of Parliament to be seen not to participate in the kind of fiscal sacrifice that they ask the taxpayers and their constituents to participate in.

Mr. Harper: In terms of your proposal, which is similar to ours - 9% matching RRSP arrangement - suppose MPs were able to reach some kind of consensus on something that was about that level, 18%, but not necessarily defined contribution. Instead it was some kind of defined benefit plan that was approximately equivalent, 2%, etc. Would that kind of thing be acceptable in your view, or is the defined benefit concept totally unacceptable?

Mr. Kenney: A standard registered defined benefit plan limited to 2% of benefit accrual rate, limited to the Income Tax Act requirements in terms of vesting age and so forth, would certainly be preferable to the status quo, but in our view, generally speaking, there is a much larger problem facing governments in Canada with respect to the unfunded liabilities of defined benefit public sector pension plans. We think the problem is in the structure of those plans. They create an artificial level of benefits, which is not necessarily supportable given present and future contributions.

We think the Parliament of Canada should set a high standard by eliminating the possibility of running unfunded liabilities, by converting to a defined contribution plan or an RRSP matching contribution plan. So we would welcome a more modest defined benefit plan, but we think the real standard for reform of the pension plan would be to convert it to a self-funding plan, which precludes unfunded liabilities.

Mr. Duhamel: Thank you for your presentation. Two questions, quickly.

You've indicated that the accrual rate, still with the proposed legislation, is twice as much as what one would normally find. Is it not true as well, whether it be 4%, 3% or 2%, that the significant point of the accrual rate is what it's related to, that is the salary that it's linked to?

Basically, if a member of Parliament's salary is $64,400 a year, $128,800 a year if it were at that rate - some people have suggested it should be more - a 2% accrual rate would be exactly the same, would it not, in my example?

The other one is about some figures I have, and we seem to be in disagreement here. The government will be contributing $3.60 for every $1 by members of the House. That is what I have in my particular notes from Treasury Board as opposed to your figures. There's quite a wide discrepancy with this proposed legislation.

I'm wondering how confident you are in your figure versus mine. I don't want to get into a debate. It's just that I expect this to be accurate.

Very quickly, the other points that are related.... Statistics Canada information indicates that private sector employers pay for about 70% of plan costs and members 30%, or a ratio of 2.3:1, largely because of a prevalence in non-contributory plans. In the public sector it is about 60% employer and 40% by employees. For the Canadian Forces the current ratio is $2.70 by government for $1 by plan members and the RCMP is $2.10 to $1. Do you have any particular difficulties with these figures? Secondly, would it be your wish that all of these plans and any others go back and go down to 1:1? Is it just the members of Parliament, or are you looking at the whole?

Mr. Kenney: We're certainly not here to get into the question of fundamental public sector pension reform, but we would prefer to see public sector pensions generally move toward a more actuarially sound basis. That would mean eventually phasing out defined benefit plans when they promise a level of benefit that can't be matched by contributions. They pass on a huge liability to future employees and to future taxpayers.

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So with respect to the percentages of contributions made in various different sectors of the economy, of course those ratios do not take into account the vast number of Canadians who do not have any form of pension plan and whose only retirement saving is what they're able to contribute individually to their retirement through an RRSP.

Mr. Duhamel: Which is not free of government support.

Mr. Kenney: Well, I wouldn't get into a theoretical discussion about whether a tax expenditure is government spending or not. I happen to think it's not.

Mr. Duhamel: I just want to make sure, because if I buy an RRSP and I get an income deduction on it, and the government does not collect tax on that nor is it able to spend it in future years, you're saying that's not government support. I just don't understand your point.

Mr. Kenney: No. I think it's a reasonable tax advantage. I don't think it's an entitlement. It's not a transfer payment and in that respect I wouldn't call it government support.

The point I make is that for those contributing to their own retirement through an RRSP vehicle or other savings, their contribution rate is 100%. Again, I simply refer you to the growing trend among provincial legislatures in Canada. You can't ignore this. Within a year, seven of the ten provincial legislatures will either have no pension plan or they will have a dollar-for-dollar defined contribution plan. That's a political and a legal reality that members of Parliament are going to be measured against.

Mr. Duhamel: The armed forces, the RCMP and the public service then....

Mr. Kenney: Well, again, what many members of Parliament have argued is that the parliamentary pension plan is a sort of surreptitious way of providing the proper level of compensation for parliamentarians. Parliamentarians aren't willing to be completely accountable, visible and transparent in paying themselves $150,000.

Mr. Duhamel: You like $150,000 at 2% overall, do you?

Mr. Kenney: Whatever it might be. I don't advocate that, but the point is that the argument made is that people who work in the RCMP or the military, for instance...their pensions and their total compensation is more reasonable. Our view is that the -

Mr. Duhamel: Are you referring to the privates or the officers when you say their compensation is more reasonable?

Mr. Kenney: I don't come here pretending to be an expert on military compensation, so I don't have a clue what a private or an officer is paid. What I do understand is an unfunded liability. It's a liability to taxpayers, which requires them to finance pensions that participants are not fully funding. I think there is both a fiscal and a moral problem with that.

Mr. Boudria: The RRSP that you advocated - and I know this is a kind of second option in your presentation. Your preferred one is what you described in another province. But the RRSP you're advocating would be one in which there would be a so-called employer contribution, because technically, of course, the House isn't our employer. When I say ``so-called'', I don't say it in a disparaging way; only to describe the alleged employer. Is that what you're advocating?

Mr. Kenney: Yes, and matching.

Mr. Boudria: And matching dollar for dollar.

Mr. Kenney: Right.

Mr. Boudria: I don't know if you were here when a previous witness was here this morning. I asked that an analysis be made by the Library of Parliament of my own particular case. It works roughly like this, just to summarize it briefly. If I had had such a program in my own case, and I started to contribute in 1984, based on the five-year GIC rate, which is probably the most conservative way you could invest anything, I would have $136,988 of my own contributions. If you double that, assuming an equal employer contribution, which is what you're saying, I would have $273,976 in the bank right now in my RRSP account, which would bring me right now, just in interest, about $27,000 a year if I were to retire.

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My pension as an MP, if I were to retire today, would be $30,000. So it's $27,000 versus $30,000. Where do we get off with these figures that the pension plan is so horribly more generous than anything else ever conceived in the galaxy when we're talking about a difference of less than 10%?

Mr. Kenney: Well, the figures you quote, Mr. Boudria, are in reference to first-year benefits, of course. If you were to contribute with matching employer contributions into an annuity, there would be a stock of equity in that annuity that you would draw down over time. You couldn't afford to start drawing down benefits at 40 or 45 years of age, as some defeated or retired members of Parliament are able to do, because the defined benefit plan allows them to draw down benefits until death, and then spousal benefits. And they're indexed, which is not permitted in the.... Well, it's not financially possible by drawing down benefits from an annuity.

Mr. Boudria: But I'm assuming no draw-down from the original capital; I'm only assuming interest for my calculation. If I add that to it, there is probably no difference at all.

A voice: [Inaudible]

Mr. Boudria: It wasn't made by me.

Mr. Duhamel: Who did it, Mr. Boudria?

Mr. Boudria: The research branch of the Library of Parliament. I'll table copies of it with this committee this afternoon.

Mr. Kenney: The point is that a defined benefit plan, particularly an indexed plan, protects participants against the vagaries of the market, including inflation and so forth. When you have an annuity, to a certain extent you're susceptible to the realities of the market, and you are not if you have a defined benefit plan. If inflation goes to 20%, you're protected.

Mr. Boudria: That may be so, but if the interest rate goes to 20%, the five-year GIC rate, if you had it invested, would also go up. The money you have invested grows at a quicker rate.

The point I'm making is that there's an allegation in your presentation that our plan is considerably more generous than what you could devise. I'm challenging you by saying that studies, at least one that was done for me as an individual, mind you - and I know you don't have the benefit of having it in front of you, but you may have heard it earlier this morning - demonstrate that it's almost the same. So it's not five times greater or six times greater. There's a 10% difference if I assume I don't even draw down from the original capital, only if I spend the interest.

Mr. Kenney: We would happily review that study, Mr. Boudria, but I would suggest to you that if that is the case, then what's the problem? Why not get rid of this terrible political problem and just adopt that kind of a plan? You've got the same kinds of benefits coming to you anyway if that's what you're alleging.

Mr. Boudria: Let me challenge you. If you say there is no problem, why are you protesting the problem that may not exist?

Mr. Kenney: Because I haven't seen your numbers, Mr. Boudria.

Mr. Boudria: Thank you.

Mr. Kenney: The bottom line is that a defined contribution plan precludes unfunded liabilities, unlike a defined benefit plan.

Mrs. Parrish: I'm grateful to you, Mr. Kenney. If we in fact went into your RRSP, the total contributions both by us and the matching contribution by the government couldn't exceed $13,500 a year. If we adopted that plan, would you not next be screaming that we're artificially keeping the donations high every year for the whole country so that we keep our own high?

Mr. Kenney: No. In fact, we're at the forefront of demanding the scheduled increases in matching our RRSP contributions.

Mrs. Parrish: We closed them this year and if they're going to be dropped next year to $6,000, how would your plan work?

Mr. Kenney: It would work the same for MPs as for every other Canadian affected by that change. That's the point. You live by the rules you make for other Canadians.

Mr. Duhamel: Not the poor Canadians.

The Chairman: That concludes the time we have this morning. We'll be back at 3:30 p.m. I declare the sitting suspended until that time.

AFTERNOON SITTING

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[Translation]

The Chairman: The Committee is continuing its study of Bill C-85, an Act to amend the Members' of Parliament Retiring Allowances Act and to provide for the continuation of a certain provision.

[English]

Mr. Paul McCrossan, who is an actuary, is with us this afternoon. Mr. McCrossan, thank you for coming.

Mr. Paul McCrossan (Actuary, Eckler Partners): Thank you, Mr. Chairman. I have a short, prepaid statement, which I believe has been translated and distributed, and some exhibits you might care to read, either at your leisure or afterwards.

I'd like to thank hon. members for inviting me to testify today before the committee on procedure and house affairs concerning Bill C-85.

As a former member, it's always a pleasure to return to Parliament. It's doubly a pleasure today because of the opportunity to renew acquaintances with your committee clerk, Madam Carrière, with whom I had the privilege of working closely in the finance committee in both the 33rd and 34th Parliaments.

I brought with me today two handouts and some charts. The first handout is from an article in Benefits Canada, being printed today, and I do have tear-off copies here of the real thing rather than the xerox copy you have. It offers an insider's view as to how the MPs' current retiring allowance benefit came into being.

You'll note that it contains considerable information that could be classified as caucus secrets. To the best of my knowledge, the story of how the MPs' current pension plan came into being has never been told publicly. Also to the best of my knowledge, I've never before violated caucus secrecy, but I did decide to do so in this case because of this bill before the committee, because I regard the potential negative fallout from this bill to you as members and to Parliament as serious.

The second handout is a draft of a follow-up article I've written for Benefits Canada for next month's issue, which discusses how I believe MPs' compensation should be restructured. You'll see it has four central recommendations. First, MPs' pensions should be scaled back to an accrual of 2% of final three-year average salary payable from age 60, as is permitted in the private sector.

I would just point out that both the 2% and the age 60 are actually taken from the Income Tax Act. They are the requirements in the Income Tax Act for a valid pension plan.

The pension should vest after two years, as is required under federal legislation by the Pension Benefits Standards Act, and member contributions should be reduced from the current levels. Market rates of interest should be paid on refunded contributions, as required under the PBSA, rather than the current 4%.

Second, all MPs not eligible for parliamentary pension at age 60 should receive a lump sum on leaving the House of three months' severance and should be eligible for long-term severance support of up to 1.5 months per year of service as an MP for up to two years, or until they find employment or commence receiving pension income.

Those of you who've read the recent parliamentary report will know of the significant dislocation of members who were defeated in the last election.

Third, the MPs' expense and travel allowances should be made fully or largely receiptable. My own experience is that the two largest job-related expenses for most MPs relate to the cost of travel to and from Ottawa and the cost of maintaining a second residence in Ottawa. I'd suggest a receiptable allowance of at least $15,000 be set aside for these expenses, and if some additional non-receiptable allowance continues it should probably be capped at about $10,000.

Fourth, MPs' salaries should be much higher than currently. The actual level should reflect the reduced pension and the new severance package proposed above.

As you can see, I believe that compensation for MPs should be brought into line with modern private sector practise. You'll notice the approach I've recommended parallels very closely that recommended by my actuarial colleagues from Sobeco this morning. It also parallels many of the directions recommended by the parliamentary commissioners. I hasten to state I wrote the article before I read their reports and that my proposals are largely based on work I did in 1987 to develop a rational compensation plan for MPs.

Today you have before you Bill C-85, and I understand you've agreed to limit witnesses to one day before clause-by-clause consideration commences. Actually the bill that brought in the parliamentary allowances was passed in one day through all stages, through committee of the whole of the House, without the members even having a written bill to comment on.

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If you go back and look at Hansard, you'll see that members were debating these allowances without a bill to look at. You know how House orders are distributed and done sometimes.

I'd like to urge the committee, following hearing the witnesses today, to meet in camera to discuss your reaction to today's hearings before you proceed to clause-by-clause consideration. I'd also particularly urge the government members of this committee to meet with their caucus colleagues, particularly the Minister of Finance, before clause-by-clause begins.

Let me go through my rationale step by step. My conclusion is that this bill is bad for you as members, bad for Parliament as an institution, and bad for Canada, because having acted on this bill you'll hamstring this Parliament in dealing effectively with the most urgent challenges it faces, namely redesigning Canada's national retirement income and medical care systems to reflect the financial realities of Canada as well as Canada's rapidly aging population.

Let me examine these assertions one at a time. With respect to members of Parliament, this bill is poor public policy for you as current members and for future members. It does nothing to develop a sensible compensation package for members and may actually impede redesign. I say impede redesign because it does two things. It entrenches your benefits at a level higher than those available to general taxpayers. At the same time, it reduces the cost of your compensation package. So when you come to redo a proper compensation package, you'll be left with having then to increase it from the level you've reduced it to, and it's going to make it much more difficult to do it in two steps rather than one.

It reduces compensation for future service but leaves your benefits substantially above private sector, and indeed public sector, permissible levels. It's my opinion that as long as your pension benefits exceed the levels available to taxpayers, there will be a strong public opinion to the effect that MPs are overpaid.

As documented in my second article, in the fourteen years since this current plan was adopted in 1981, MPs' salaries have been curtailed in seven years by governments responding to these perceptions as they introduced restraint programs.

The question was asked several times this morning, do we have high benefits in exchange for low salaries. I think you can make a case that the opposite's true, that since 1981 the salaries have been curtailed because of the high benefits, and you can track it through stage by stage, as I have in the second paper.

In passing this bill, you effectively cut MPs' total compensation without relieving the political pressure. I believe the same dynamic applies to continuing the tax-free non-receiptable expense and travel allowance.

More and more, the public's attitude to politicians is they're all crooks. Some of this has to do with actual scandals, but in my view the underlying cause is a view that politicians set one set of rules for themselves and another for the general public. In my view, the so-called ``excessive pension benefits and non-receiptable tax-free expense allowances'' are used by the media to reinforce these public perceptions.

You and I know that the overwhelming majority of politicians of all parties are here to serve what they believe are the best interests of the country. You and I know that distressingly high and increasing numbers of Canadians view you and your ilk as crooks.

I believe that legislating preferred treatment for yourselves, even if it's reduced preferred treatment, as is proposed under this bill, even though your total compensation will be reduced, will continue to foster cynicism and to make you targets.

Let me deal with this at a national level. It should be obvious to all of you that age shifts that will occur in Canada, combined with our current financial problems, mean that it is increasingly unlikely that taxes can be raised to fund the current level of benefit commitments to old age security, the guaranteed income supplement, the CPP, QPP and medicare.

In his last budget, the finance minister indicated that he'd be meeting with his provincial counterparts in the fall to discuss redesigning the plans mentioned above, following the release of his aging paper.

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I put it to you that if one of the last acts of Parliament before the summer recess is to pass legislation entrenching pension benefits for MPs at levels well beyond those possible to the citizenry, and if one of the first acts of Parliament in the fall is to commence a program to convince provincial governments and that same citizenry that existing basic public retirement and medical care benefits can no longer be afforded, I believe Parliament will have lost the moral authority to proceed as the country needs.

I have put some charts in the graph as to why this crisis is coming. It's not part of this presentation, but they're there for your information.

In summary, a Parliament with integrity needs to act this year to redesign our national social programs rather than let a future financial crisis arise that will see the promised benefits reneged on.

I urge the government members of this committee to talk to their own finance minister to assess the risks that I've outlined above, both to him and to the restructuring and the benefits that Canada needs that could come from having this bill passed.

If you allow a bill entrenching MPs' pensions at a level unavailable to the citizenry when reductions in national public benefits are about to be proposed, you may be faced with immense public outrage for protecting your privileged position just before you skewer Canadians. In that case, you deserve the public's contempt.

[Translation]

The Chairman: Mr. Plamondon, do you have questions.

Mr. Plamondon: Thank you, Paul. I am very pleased to see you again, after having sat with you on the Finance Committee. It was in 1984 I believe, as well as in 1988. We were both members of the Finance Committee.

After having heard your report, I must say that I find it somewhat philosophical. I do not know if the same holds in all ridings. I have been in politics for 11 years and I never have met anyone in my riding who brought up the issue of my pension benefits or my salary. The issue has never come up in 11 years. No one has complained or commented that I was overpaid, etc. This is certainly not widespread, at least in my riding.

I recall when the Conservative government, in 1985 or 1986, decided to set an example. In one budget, they announced that the Prime Minister's salary would be reduced by 15%, and that of ministers' by 10%, while that of members would drop by $1,000 per year. We were all proud to announce the Conservative budget in our ridings. However, not one single person I met was aware of these cutbacks. No one discussed them with me, not even the press.

Therefore, Paul, when you contend that there is a negative perception on the part of the public with regard to our credibility and that our credibility will be reduced unless we completely rethink our pension plan, I have my doubts.

You also say in your document that we should be well paid, that we should have a reasonable compensation, including the non-taxable portion of that compensation. I can see the headlines tomorrow. «MPs vote their salary to $90,000 or $95,000, but they cut their pension entitlement to 2% instead of 5%». I will certainly not want to walk around my riding after that kind of headline. The situation would be far worse in terms of people perceptions, of my credibility and in terms of any negative comments I would be hearing about members of Parliament.

This is why I must say that, although I appreciate your document, I do find it somewhat philosophical. The moans and groans of the dissatisfied and the disgruntled will never be quelled by any document, however grand the ideas contained in it. They will always be a minority in any province of Canada, I suppose. It is a reality we have to live with.

I would also have wished for a better bill. However I believe that this bill is a step in the right direction. It may have to be modified on a regular basis, every two or three years. For the time being, we are correcting the main irritant, which was the 55 year age limit. The second irritant, from the public's point of view, was the double dipping feature. That irritates a lot of people. As for the rest, the fact of having retirement income just as any other worker would seem normal.

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Is the pension plan overly generous or is not? Some changes may well be necessary, such as those you have suggested, but I do not agree with the idea of dropping everything to save our credibility. I simply do not subscribe to it.

[English]

Mr. McCrossan: Thank you, Mr. Plamondon.

I'll try to cover the issues you raised one at a time. You raise the issue that not a single constituent in Quebec has raised MPs' pension plans with you. I accept that.

One of the things I found interesting in the parliamentary commissioner's study of MPs and their incomes and their perceptions of the public was that the level of satisfaction among the Quebec electorate appears to be considerably higher than in any other province. They did provide a graph, which I'm sure I could find if I had to, of satisfaction levels with MPs' representation by province. It indicated that as you moved essentially from east to west across the country, the level of dissatisfaction increased.

Certainly, I believe the MPs' pension issue has become a considerable focus of discontent in the press and indeed among the populace in English Canada. I can't assert that there's a big difference because I don't watch Le Téléjournal à Radio-Canada as much as I used to. Nevertheless, it seems to me that what the parliamentary commissions are saying corresponds to your own observations.

When you say if you corrected the thing with a higher salary you would have a hard time explaining it, I think a couple of the witnesses this morning suggested, and indeed cited, the case of Manitoba, where an independent commission, in effect taking it out of the members' hands, did raise the salary substantially and kept the same total compensation package. This, I believe, is the right level of objective. It was able to do so without any public outcry because people understood that it was out of the hands of the self-interested members of Parliament, and a sensible compensation system was set up.

I understand. I heard the minister say this morning that there's a reluctance to increase salaries. Well, this is part of compensation. It's a bit of a shell game. I understand why it's difficult to increase salaries. I understand why governments avoid it: for public relations purposes. Even the members shy away from it. But I would argue that this committee particularly has an obligation to Parliament to ensure that appropriate compensation systems are set up that are going to bring in the right level of people and that are going to provide for reasonable compensation.

Now, several questions were asked by Mr. Boudria, and I think the members themselves don't understand how this compensation works. Can I just give you a two-minute explanation of how this system works?

Between the time you enter Parliament and the time you reach six years of service, in effect you get zero. This was pointed out today very forcefully. About half the members end up getting zero. At the moment you hit your sixth anniversary, the government in effect has a liability equal to the total salaries you've been paid in the first six years. The amount of money that's required to fund this pension system is equal to 100% of the salaries you've been paid in the sixth year, if you make it through to the sixth year.

In each year that you serve after that, between six and fifteen, the government is incurring liabilities equal to 100% of the salaries of MPs for each of those years, provided you're under 65.

If you continue to serve past year fifteen, in fact the obligations drop off, or if you serve past age 65 the obligations drop off. So what you have is a plan that costs 60% on average, but there's no such thing as an average MP. You either get the benefits or you don't get the benefits. That 60%, as pointed out by the actuaries, is the average of a lot of zeroes, a lot of 100 percents, and then declining numbers of percentages for MPs who serve past age 65 or who serve past 15 years.

That's the practical effect of this plan. It creates severe financial hardship on the MPs who are in on their first term and don't have enough cash to live on and to meet the expenses. It's a bit of a lottery.

If you manage to get past that six-year point, bang, you just retroactively have your salary that you earned in your first six years doubled and set up as a government liability. That's the way it works.

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[Translation]

Mr. Plamondon: You seem to be forgetting something in your calculations. In 1981 or 1982, when they did that complete overhaul of the pension plan through a committee which was chaired, I think, by Mr. Comtois, the members pension fund, which did not belong to the State, had millions of dollars in it. This was because hardly any member was receiving pension benefits. The government decided at that time to put those millions in the Consolidated Revenue Fund and to pay the pension benefits itself in the future through its contributions and those of members.

That reform is now costing money to the government, some $10 million a year. Had the monies which were there at the time been invested and managed not by the government but by the pension fund, taking into account the 18, 19 and 20% interest rates of 1982 to 1984, the amounts in the reserve would no doubt easily cover the $10 million which have to be paid out this year.

In 1981, it was a paying proposition for the government to take over the pension funds. Today, it is no longer the case. But when you consider the amounts involved in 1981, I am not sure that the government is carrying such a heavy burden for its share of pension costs.

We do agree, however, that in a period of budget cuts, everyone must pay. A 33% drop is a step in the right direction. However, we could possibly have done more.

[English]

Mr. McCrossan: Mr. Plamondon, I think you're mistaken, and it is documentable. I mentioned that the bill was presented in 1981 without any cost estimates.

In the article for Benefits Canada I indicated that cost estimates were made after the fact and the bill increased liabilities by $93 million. That was in effect the unfunded liability created for MPs' pensions.

By the time we got to 1985 that liability had reached $135 million. It continued to increase until 1993.

An hon. member: It was 1981.

Mr. McCrossan: No, 1981 was when the plan was brought in.

What you're confusing, and it's a legitimate confusion, is that you were looking at statements of the assets of the plan; that is, comparing income and outgo. As a member of Parliament I used to receive those statements. What they basically did is looked at MPs' contributions in compared to benefits to old MPs out. So it was basically running as a cash account. It did indicate that there were some $30 million plus of assets. What it didn't indicate was that there were $120 million of liabilities. There was in fact a $90 million deficit.

This was not unscrupulous behaviour by the government of the day. They really didn't know. I'm not saying anything about Yvon Pinard.

I can tell you that the MPs of all parties in 1983 tried to find out these figures. Doug Frith, a Liberal member at the time was the chairman of a pension committee, and he tried to find out what the state was and he couldn't.

Earlier in the day the Public Pensions Reporting Act was cited, which gives you the figures you looked at today. That was the act I brought in in 1987. That act received all-party support, including support from the Liberal Party with Jean Robert Gauthier, now in the Senate.

It received public support because the government members of the day were just as frustrated as the opposition members. They couldn't get any figures out about their own plan - almost like what was referred to this morning, that even the age and years of service of MPs was a state secret.

So we passed an act in 1987 with all-party support saying this should not happen again. Members of Parliament should be given the figures and the consequences of any legislation affecting this plan, old age security, the Canada Pension Plan, GIS, public service superannuation, the armed forces and so on.

For better or worse, the government, up until 1981, didn't have the figures. It worked on a cash basis. It was only in 1982-83 that they actually set about calculating the cost of something that they introduced a couple of years earlier.

Mr. Plamondon: Thank you.

[Translation]

The Chairman: Thank you, Mr. Plamondon. Mr. Duhamel, you have the floor.

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[English]

Mr. Duhamel: Thank you very much for your presentation.

I have three questions and I would like to put them out there. That way I can get them all out within my period of time and give you an opportunity to respond.

You have perhaps heard some of the comments that have been made and some of the proposals that have been floating about. My concern is that there is a suggestion that that which is being done by government, and recognizing that government could have gone further, is going to cost more than some of the proposals that have been floated out.

I'm somewhat offended by that, because clearly if one has a 4% accrual rate, or 5%, or 3% - whatever it happens to be - an accrual rate, to be significant in terms of cost to the taxpayer, has to be related to overall remuneration. I would like you to explain that a bit.

The second point I want you to explain briefly, please, because I know you have a lot of expertise in this area, is the money purchase plan or the RRSP. There appears to be a suggestion - I don't think it's une mauvaise intention de la part de qui que ce soit - that this is free: I pay and the state doesn't pay, or the taxpayer doesn't pay. I don't know a whole lot about pension plans so I could be wrong, but it is my understanding that they cost the taxpayer money as well in any number of ways.

Perhaps you could explain the money purchase plan in juxtaposition to the defined benefit plan, because in the former I think it's difficult to know what you're going to get at the end of the line, and in the latter in a sense you're paying for what you've negotiated will be the output or what the pension plan will be.

Finally, sir, I noted this morning that a number of people have suggested that we ought to have plans where the government puts up a $1 and the employee puts up a $1.

I note that in Canada today - and I doubt they have them all - with the proposed changes by government, it will now be $3.60 apparently by government for every $1 by member of the House. For the private sector employers I am told they support 70% of plan costs overall and members, 30%, or a ratio of 2.3:1, and that's largely because of the prevalence of non-contributory plans. In the public sector it's about 60% employer and 40% by employees. For the Canadian forces it's about $2.70 by government for $1 by plan members. In the RCMP the ratio is $2.10 to $1.

The reason why I raise the latter...assuming for a moment that it would be wise to go to $1-$1 for members of Parliament eventually over time, would this be the beginning of doing the same in those other areas? In other words, are people proposing this dollar for dollar, not primarily aimed necessarily at MPs but perhaps because of what is out there in terms of government contributions versus employees?

Mr. McCrossan: The answer to your first question, I think, is that this bill obviously will cost the taxpayers less than the current compensation package. It clearly reduces the compensation, and I think the minister's estimates are reasonable.

You didn't ask me to contrast them with other proposals and maybe in a supplementary question you might want to do that.

Mr. Duhamel: You can do that. But I did also ask whether or not that which the government is doing is no more expensive than some of the other proposals that are floating about. For example, the $150,000 salary a year, 2% accrual rate...I think that is very important to put on the record.

Mr. McCrossan: Let me just deal with the $150,000 a year with the 2% accrual rate. A registered pension plan cannot accrue benefits for a salary of greater than $86,600.

In other words, if you're in the private sector, if you're an ordinary taxpayer and you set up a system under the Income Tax Act, you cannot provide benefits for any salary over $86,600 unless you exempted yourself from other income tax legislation, which of course you can do.

Mr. Duhamel: So a hospital administrator, a superintendent of schools, for example, chiefs of police and others who may be earning more than $86,000 only pay 2% on $86,000? Is that what I'm hearing?

Mr. McCrossan: They typically get a 2% benefit on income up to $86,000. Then they can set up what's called a retirement compensation account for amounts over the 2% on $86,000, but there are fairly significant tax disincentives to all organizations to do so - that is, all organizations other than the federal government.

The federal government pays a tax penalty. It sort of comes out of the right pocket into the left pocket. You're the only employer in the country who would not find it uneconomical to do so, and most private sector plans don't exceed the $86,000 limit.

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With respect to the link between defined benefit plans and money purchase plans, I actually was involved in writing that section of the 1985 budget. The link is based on this $86,600 that I mentioned. Over a working lifetime, 18% of payroll will generate a 2% final average plan that's indexed, with a retirement age of 62. So when the government set this up, first in the Lalonde budget in 1984 and then in the 1985 Wilson budget, it established this equivalence between the 18% and the 2% pension on $86,600. Under average investment conditions, if you're an historically average investor, it doesn't matter which you have, if you have it over your lifetime. If you're younger it's better to be in the money purchase plan. If you're older it's better to be in the defined benefits plan because the one has level costs each year and the other has increasing costs that average to the level. The crossover point is roughly age 45. If you're younger than 45 the money purchase plan, the 18%, is better. If you're over 45 the 18% doesn't fund a 2% final pension. That's why the two are linked together.

With the dollar-for-dollar contribution, I regard this as a complete red herring. The history of equal contributions by employees and employers is generated largely from the public sector in Canada; that is, teachers, provincial employees and federal employees. It's not the pattern out there in the private sector at all. I can't go back into history that much, but I suspect the reason for having matching contributions was to impress upon the employees that if they asked for something, they had to pay for it, and they had to pay their share. Historically, I think that's where it came out. It was also income tax driven. There were income tax efficiences to having those sorts of plans. Those sorts of plans are not common in the private sector right now, and most executive compensation plans now would have a minimal or no employee contribution. It's not tax efficient to do so.

Mr. Duhamel: Minimal or no employee contribution.

Mr. McCrossan: Absolutely. There's no reason for you to pay anything in terms of payroll deduction as long as what you don't pay is taken into the total compensation arrangements. For example, I have a 2%, age 60, final average pension from my employer. I don't pay anything; my employer pays it. I pay it through other remuneration. It's not terribly tax efficient to do so now. There was a time when it was. I think there's a history between these matching contributions, but a modern benefit designer wouldn't link employee contributions with employer contributions in any way.

Going back to this plan, up until 1993 the plan said the members shall contribute 11%, the government shall contribute 11%, and the benefits shall be thus and so. Well, of course, what was missing was the extra 40% to pay for the benefits. In 1993 they came along and made up the difference, which was - I've forgotten now - in the order of $200 million by that time for all the shortfall over all the years. The matching contribution principle that was involved in the MPs' pension plan from the year dot until 1993 was just a fiction. Indeed, even now that's the way it's done. You contribute 11%, the government contributes 11%, and then at the end of the year the government piles in all the money to make up the difference.

Mr. Duhamel: So what you're saying is that these ratios that have been established, $3.50 to $1 or $2.70 -

Mr. McCrossan: They don't mean anything.

Mr. Duhamel: They don't mean anything. Do they cost the taxpayer more money?

Mr. McCrossan: No, as long as the total compensation is worked out. When you look at the Sobeco report, for example, they in effect charged in their compensation recommendations for reducing your contributions from 11% to 5%. If they'd moved it from 11% to 9% they would have had a lesser charge. If they'd moved it from 11% to 0% they would have had a greater charge. The important thing is the total contribution, not the packages. People do what is tax efficient.

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Mr. Duhamel: So what's the solution here?

Mr. McCrossan: I recommended in the second article exactly what your last witness recommended, that it appears Parliament is incapable of designing its own plan.

Mr. Duhamel: Why?

Mr. McCrossan: Because of the political bickering you saw right here this morning.

Mr. Duhamel: Could you go into that a bit more deeply?

The Chairman: You're running out of time, so if you'd stop asking questions we might get to the end of the answer. I know you had a series of questions and you did very well at the beginning in this case, but constantly interrupting the witness and his answers is prolonging this, and we're over the ten minutes.

In fairness to the other members, if you'd finish that answer, Mr. McCrossan, we'll move on to the next questioner.

Mr. McCrossan: I think if I can draw a parallel, it has to do with the same thing as setting election boundaries.

I think people accept judicial commissions to set election boundaries, and even though we all know members of Parliament can influence the process, they understand that there is very limited flexibility.

Compare that to the States where you have gerrymandering as constituencies are drawn with wiggly lines all over the place because the members look after their self-interest. I think that's the comparison.

I think the public will accept something independent setting a proper remuneration package, and you should get out of the business of making politics of it.

Mr. Harper: Thank you, Mr. McCrossan, for coming and sharing your views with us. I think your presentation was extremely well thought out, and it's excellent advice for all members, particularly for government members.

A little later I'm going to get into the benefit pattern of the pension, but what I think is extremely interesting about this bill - and you've identified why it's bad and the links it's going to have to other issues - and what is perhaps missing is the distribution of the benefits and costs here.

Ultimately it will be first-term government back-benchers who are asked to pass this bill. They are the ones who will get absolutely no benefit out of it. They are ones who have the highest costs involved, the biggest risks. What's most fascinating about it all is that it was the same kind of dynamic you've probably seen in the past, where somebody got up in caucus and said, ``On top of that, let's add an opt-out; we'll really get the Reform MPs on this one''. Of course what they forgot to tell them is that it's getting all first-term MPs. They're ultimately going to be judged on that particular hook.

I'm curious as to the process here. Were you ever approached by the government or any representative, as a former parliamentarian and as someone who is an actuary and an expert, for your views in the development of this legislation or in the development of the reports prior to the tabling of this legislation?

Mr. McCrossan: I wasn't approached by the government. I did participate in the parliamentary commissioner's survey.

Mr. Harper: I wanted to move on to the act you made some passing reference to, the Public Pensions Reporting Act. You were here this morning when I asked some questions about that. This act, I gather, was your private member's bill.

Mr. McCrossan: Yes.

Mr. Harper: The whole purpose was to provide actuarial reviews in the development of pension legislation, and it included a number of acts, including in paragraph 3(1)(b), the Members of Parliament Retiring Allowances Act.

In section 4, ``Where plan is amended'', it says:

Where an amendment is made to a pension plan referred to in subsection 3(1) and the amendment affects the costs, the benefits, and creates an initial unfunded liability, the Minister shall cause the Chief Actuary to conduct an actuarial review of the plan as of the effective date of the amendment.

Was the intention of that bill that there would be a review of this legislation by the chief actuary at some stage of this legislative process?

Mr. McCrossan: Yes, it was, and there's precedent in Hansard to demonstrate so, not only from the House debate, but in the last Parliament the government put forth changes to the Canada Pension Plan. It was pointed out in committee that the members did not have an actuarial study completed under the Public Pensions Reporting Act with which to examine the impact of the change in the CPP.

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The government chief actuary was called upon in very short order to table the report. In fact, he had it prepared. It was brought before the committee citing the act. I don't think you necessarily need the full valuation. My understanding is that the work is so well advanced that the figures are available for you to inspect anyway. Indeed, in preparing for this meeting it was arranged through the Treasury Board that some of the results would be made available to me so I could think about them in preparing my comments.

If what you are suggesting and requesting is that you need a fully signed actuarial valuation, it would probably take months to get one. That involves a level of professional rigour that takes a lot of time. If you are asking whether you can get facts on which to make judgments from preliminary work, they're available now.

Mr. Harper: So you felt the material at your disposal satisfied the criteria laid out in the act.

Mr. McCrossan: Yes. The act calls for a full actuarial valuation. As members of Parliament, I think you have to be practical. If you want information, you can get information. The whole purpose of the bill was that you shouldn't be asked to act blindly, that you as members of Parliament should be able to have equal access to the same information the government has in making the proposals it puts in front of you.

Mr. Harper: I asked a question this morning, and you were here for it. Maybe you can shed some light on it from your days as an MP.

As I said before, the explanation we are constantly given for the MP pension plan is that it makes up for low salaries and compensates for the high degree of insecurity that MPs experience. As I have pointed out a number of times, if you look at the structure of the pension plan, those are not really the people who are targeted by the benefit structure of it. Do you share that view? Could you shed some light on why that is?

Mr. McCrossan: I can give you my impressions from having done the work in 1986 and 1987. At the end of a long, prestigious career, becoming a member of Parliament used to be the pinnacle of that career, so there were far more older members than there were younger members. The immediate pay-out of pensions that's provided for under the current regime makes a lot of sense if you're elected at the age of 55 and serve the public for ten years until the age of 65. Who really thought about it?

They didn't think in the past, and it wasn't all that common, to have the 21-year-old or 22-year-old member elected who serves for five, ten or fifteen years. So the mental model that underlies the design of this plan really is for someone coming in at the end of his or her career, giving his or her last years to society and being rewarded for it. I don't think it was to make up for low salaries, but I think when you look at the effect of this, you'll see it's had the opposite effect. It's had the effect of keeping salaries down. It's become a flashpoint.

Mr. Harper: I wasn't clear on your comment about the defined benefit versus the money purchase or defined contribution programs. Could you elaborate? Would you advocate that we move away entirely from a defined benefit plan? In your presentation you seem to suggest modifications along that line. Or is that merely the second-best option?

Mr. McCrossan: No, I would definitely not advocate going away from a defined benefit plan. These things run in cycles.

From 1930 to 1955, the overwhelming majority of private sector plans were defined contributions. That's because the cost was known. You had come through the hard years of the depression and employers wanted to know the costs.

From the middle 1950s through to 1970, there was a tremendous shift from these defined benefit plans to defined contribution plans because with the outbreak of inflation people wanted to know the benefits they were going to receive.

Then in the 1970s, interest returns on defined contribution plans were very bad. The 1970s were terrible years for pension investments. Pension practitioners were worried. The principal problem of pension practitioners was deficits in pension plans.

Since the 1981 Volcker squeeze, the real return on assets has been just great. So defined contribution plans have looked superior from 1981 to 1994 because real interest rates and real returns on pension plans have been good.

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You don't design a compensation package around an abnormal economic time. The years 1981 to 1994 are just as abnormal as the years of the Great Depression were, only in the other sense in terms of investment yields. I'd argue that it is not in the interests of the members to move toward defined contribution plans. It's in the interest of pensioners in general to have an idea of having some level of income replacement in retirement.

Mr. Harper: What about the issue of indexation in defined benefit plans?

Mr. McCrossan: I don't think it matters whether it's in or out in the compensation package as long as you charge properly for it. Personally, I advocate full indexing. I have it in my own plan. I've sold it to employers. It's expensive. I think people who can afford it should have it.

If you're designing a total compensation package, as Sobeco did this morning...they suggested indexing at something less than 3% over the cost of living. That costs less in their calculation. In effect, they gave credit in salary for taking a less generous benefit. Look at the whole thing as a package and decide what benefits you want. If you want full indexing, fine. You just have to accept less pay to have it.

Mr. Harper: In your presentation, you advocate an annual accrual rate of 2% in the final three years, payable from age 60. Full indexation will add to that. In your view, what's the contribution required by that?

Mr. McCrossan: It's probably 18% to 20% of pay.

Mr. Harper: It would be up around the maximum.

Mr. McCrossan: Yes. It depends on the age distribution of members of Parliament, but I would guess that sort of benefit would be worth 18% to 20% as opposed to the current 60%. It doesn't really matter how it's paid for, whether it's paid for 10:10 or 9:9 or 18:0, as long as the total compensation package is reasonable. Who cares who's paying as long as the total is right?

Mr. Harper: In a sense, the same person is always paying.

Mr. McCrossan: That's right.

Mrs. Parrish: I'd like to thank the witness. He's proven two things to me. The first is that there is life after Parliament. He's gainfully employed. The second is that parliamentarians never really go away. They can come back and stir up the pot if they didn't quite finish their business. I'm appreciative of your attendance.

I want to put something on the record for the members opposite. On Friday, January 21, 1994, Mr. Elwin Hermanson asked a question in the House:

In December, our leader, the hon. member from Calgary Southwest, wrote to the Prime Minister asking him to change the plan so that Reform Party MPs or any member of this House could opt out.

Mr. Boudria: No!

Mrs. Parrish: Yes.

Further, he said:

We would like to know if the government intends to continue to force MPs to participate in the MPs' pension plan.

The Prime Minister of the country replied:

If the hon. member does not want to contribute we can make administrative arrangements to make sure he is not contributing.

I'm getting a little tired of hearing that we're getting people to opt out. I want that on the record. They asked for it. They got it. May they never get what they really ask for, because sometimes they don't want it.

Mr. McCrossan, do you suggest that 50% of MPs actually never collect the benefit?

Mr. McCrossan: That's right.

Mrs. Parrish: It costs them about $30,000 over four years to opt in.

Mr. McCrossan: Yes.

Mrs. Parrish: For those who won very shaky ridings, or for those who put on their shining armour, leaped on a white horse, and came up to save the world and figure they're not doing it, or for those who get bored easily, it would probably be very beneficial for them to opt out, take their $30,000 and invest it in RRSPs. Is that correct?

Mr. McCrossan: That's right. It'd be a good business decision.

Mrs. Parrish: It'd be a good business decision. Thank you.

Mr. Boudria: Those who don't expect to be re-elected would fall into that category.

Mrs. Parrish: I had that one.

How much does the average garden variety Canadian put into RRSPs? We're not talking about doctors and lawyers. You're an actuary, so you probably have these little numbers rolling right out of your fingertips.

Mr. McCrossan: The finance department studies that are out in draft indicate there's no such thing as an average Canadian. It depends very much on age. If they are in their twenties, about 5% to 10% contribute. If they're in their sixties, about 95% contribute. If they're below the average income, the rate of contribution is quite low. If they've got three times the average income, the rate of contribution is quite high.

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Mrs. Parrish: If you were, let's say, a policeman, or a fireman, or -

Mr. McCrossan: The answer for a policeman is relatively easy. The answer is zero because their pensions are maximum already.

Mrs. Parrish: Generally speaking, our numbers tell us that most Canadians have a sum total of $10,000 in RRSPs in a lifetime, and they don't put more than $2,000 or $3,000 a year away in a good year. Is that accurate?

Mr. McCrossan: I think the average is really deceptive. When the government brought in the homeowner's plan a few years ago, which Finance Minister Martin reinforced, it was surprising how many people were out there to take advantage of it. I think around 1.5 million had quite large deposits. If you're saying there are 15,000 adults out there, what's the average, it's just a mix of so many people and so many circumstances.

Mrs. Parrish: May I interrupt and ask a different question then?

Mr. McCrossan: Yes.

Mrs. Parrish: If you are very wealthy and you're earning $130,000 a year, you can put $13,500 into RRSPs this year. If you're making ends meet, you just bought a new house, you have one baby and only one salary coming in, you're not putting any money in RRSPs.

Mr. McCrossan: Could be.

Mrs. Parrish: If you're just of my choice, a regular Canadian, you're lucky if you can put $2,500 away each year.

Mr. McCrossan: A regular Canadian....

Mrs. Parrish: I wish you would just say yes, so I can ask my next question.

Let's say it's $5,000.

Mr. McCrossan: I'll try to keep it very brief.

The Canada Pension Plan and the old age security provide about 45% of the average industrial wage and benefits for someone earning the average industrial wage. Somebody earning the average industrial wage doesn't need to save a lot to get up to 70% replacement. Somebody earning half the average industrial wage has an immense amount and a very high proportion of their pre-retirement savings provided by government plans, so there is virtually no incentive for them to save. Somebody earning double the average industrial wage has every incentive to save a lot and they do. People save to try to preserve the standard of living they had before retirement, taking into account government benefits. People are pretty intelligent at trading off current dollars for future dollars.

Mrs. Parrish: Except for MPs - some.

The Chairman: One more brief question.

Mrs. Parrish: One more brief question, and this is actually more a comment than a question.

You're talking about the fact that this is a controversial issue, and Mr. Plamondon says it's not a big issue in Quebec. I just did a household survey in my area and I got 400 back. Voluntarily, without mentioning MPs' pensions, more than 50 commented on it. I sent a letter to each one of those 50 explaining the new set-up, and I asked them to please call if they had any further questions or objections. Do you know how many I got? One.

The problem with this plan is we're not explaining it well enough. The problem with this plan is people are using it as a political platform, and the problem with this plan is it's a very sensible change, it's a step in the right direction, and we're not getting any credit for it from anybody.

Mr. McCrossan: I suggest that you may not get any credit for it. This is a political response. Also the press, for better or worse, have misrepresented the current plan very significantly.

I think I mentioned the rule of...I guess I didn't mention it. Every dollar you receive in annual income, if you're married and under the age of 60 or 65, requires $20 in reserve. That 20:1 ratio is pretty constant. After the last election you saw illustrations of Carole Jacques, for example, and other younger MPs, Perrin Beatty, and these articles said they were going to receive millions and millions of benefits. Those projections all assumed they lived a normal life expectancy, with future inflation. In my view, they were completely misleading.

The benefits were large enough. If you want to look at the actual economic value, just multiply the annual pension by 20 and you get a very good idea of the amount of cash that the MP is actually entitled to. The processes they've been doing lead to numbers 5 to 10 times as high.

So there has been a lot of overstatement on both sides. MPs and politicians have not been very good at explaining themselves.

Mrs. Parrish: Thank you.

Mr. Silye: Mr. McCrossan, I wasn't here for your presentation, but I was able to read it through while I was listening to some other comments. I do appreciate the input that you give. It seems to me that you're one of a few people who want to solve the entire problem and not just bits and pieces of it. I appreciate some of your recommendations.

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One of the things I want to point out to you is that both parties, Liberal and Reform, campaigned against the existing gold-plated pension plan. We were the first to do it. We came out opposed to it for a long time, even in the prior election, and we wanted the MP pension plan changed.

The Liberals said in their red book that they would change it too. After we heard rumours of what they were going to do, we came here and said, let's change the pension plan. Let's have a proper pension plan, let's have a proper remuneration for MPs, and let's get the Canadian taxpayers satisfied with a plan that's three or four times better than the private sector.

The Liberals have introduced Bill C-85. I don't believe it goes far enough. I believe it is still too generous. Because we believe that, and because we can't have a proper pension plan brought in, we've asked to opt out. That is going to be in our favour because we at least are showing some integrity that we believe in what we say.

I agree with a lot of your recommendations. One of the things you do point out is that until somebody puts together a package that looks at everything rather than just bits and pieces, with different governments coming in and attacking pensions at one time and indemnities at another time and tax-free benefits at another time, we're never going to solve this problem. That's what we should be doing, but the minister says we can't do it, it's not the time to talk about it, it's deteriorating into them versus us. To me, quite frankly, it's pretty useless. It's going nowhere, unless somebody has the guts - I can say guts in committee, can't I - to say what the problems are and not play politics with it. We're not going to get a solution if this continues.

In reading your information, it seems to me that in 1985 somebody in the Conservative government had the same idea. They felt that maybe they should bring a pension plan in, down to the private sector levels. You were part of that. Could you tell me why that didn't happen?

Mr. McCrossan: I outlined it in the article.

Mr. Silye: I read through it, and that's what prompted the question. There are some gaps in there. You kind of jump from act three to act four.

Mr. McCrossan: When the 1985 budget was brought in, it had a commitment, now that the studies were available to the government, to bring the costs of the MPs' pensions down to the private sector level. About a third, I think, of the 1985 budget was pension legislation, involving changes to the Canada Pension Plan, the Pension Benefits Standards Act and so on. About one bill a year was brought in over what turned out to be a six-year period, so it didn't finish until 1990, I think.

The MPs' pension plan wasn't a high priority item. They were bringing in items one at a time. As I indicated in the article, it was discussed. It was brought up by the finance minister in the last caucus meeting before the 1988 election. I've described it in the article as a riot breaking out.

I described earlier the distribution of benefits between members with less than 6 years and members between 6 and 15. It's fair to say that the principal members standing up and shouting down the finance minister for change were members who had between 6 and 15 years' service who recognized that they were in fact getting a benefit that was equal to 100% of salary. Maybe one of us is still left in the House right now who could attest to this.

I certainly read about spirited discussions outside the Liberal caucus. I don't know how spirited they were and I'm not asking members to violate their caucus secrecy. I did this with considerable reluctance. The point is there are big winners and big losers when you come out with a rational scheme. Those who perceive quite correctly the real value of the benefit will fight like hell to keep it. That's what happened in 1988.

Mr. Silye: The same thing that happened in 1985 is happening right now in the Liberal caucus.

The Chairman: Order.

Mr. McCrossan: I wouldn't ask your Liberal colleagues to say.

The Chairman: We won't get into that. Order.

The time for questions to the witness has expired. Mr. McCrossan, I want to -

Mr. Silye: Was my five minutes the same as Mrs. Parrish's?

The Chairman: Yes, it was. You had a two-and-a-half-minute introductory statement, Mr. Silye.

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Mr. Silye: Mrs. Parrish had three and a half minutes?

The Chairman: She was slow too, but I timed yours.

I want to thank you for coming. I appreciate the information you have provided the committee and we thank you for the written brief you've submitted. We're ready to move to the next witness. I appreciate your efforts sir.

Our next witness this afternoon is Mr. Brian Corbishley, a managing partner of KPMG Management Consulting.

Mr. Corbishley, I want to thank you for taking the time to come to Ottawa today. I think you've travelled all the way from Calgary. We appreciate that very much. The floor is yours, sir. I believe you have an opening statement.

Mr. Brian Corbishley (Managing Partner, KPMG Management Consultant): Yes, I do, Mr. Chairman. Thank you very much for inviting me here today. I'd like to start with just a brief statement of my qualifications to speak on this topic.

I've been in charge of our management consulting practice in Calgary for the past 14 years, and prior to that I was an assistant Auditor General of Canada, so I'm a little familiar with these proceedings.

A major part of my practice is in compensation consulting. What I have to say today is based on work that we did for the Government of Alberta over the last couple of years on MLAs' compensation. In doing that work, we looked at the compensation of MPs as well as MLAs across the country. So I am familiar with the methods of remuneration of members of this House.

As I understand it, Mr. Chairman, the bill you have before you would amend the MPs' pension plan in two main ways. First, it would reduce the pension entitlement from 5% to 4% per year of service. Secondly, it would establish a minimum age of 55 at which members can start receiving their pension.

The other main provisions of the plan would not change. These include indexing of the pension for inflation at age 60 retroactively, and a maximum pension of 75% of the average of the best six years' earnings.

When we look at the various aspects of compensation, including pensions, to see if they are fair and competitive, we compare them to other organizations. I have to say, Mr. Chairman, that the proposed pension plan, in my calculation, is about seven times more generous than a typical public sector plan and four times more generous than a typical private sector plan. Let me explain why.

First, the pension benefit, the 4% per year of service, as many witnesses have already said, is about double that available in the public and private sectors.

Secondly, in other sectors you can typically retire and receive a pension when your age plus years of service equals 85. So a 55-year-old person needs 30 years of service to get a pension rather than 19. Prior to that the pension is normally reduced by two or three percentage points per year of early retirement.

Thirdly, your plan is indexed against inflation. In the public sector, pensions tend to be indexed on average by about two-thirds of inflation. It's quite rare in the private sector to have indexing and then only during retirement.

Finally, the maximum pension for MPs is 75% of the best six years' earnings. For others, it is 70% typically, but it takes 35 years to earn it compared to 19.

All these different elements of pension plans make it very difficult to compare apples to apples, so what we do is combine all the elements into a single measure. That measure is the value of the pension earned in one year of service from the employer's contributions. So it would not include the MP's contributions. The reasons for excluding the employee's contributions, as the previous speaker mentioned, is that in the private sector it's quite uncommon for employees to contribute to pension plans.

I'm going to quote some numbers to you based on a member who is 49 years old, has 9 years of service, and has a 50% chance of winning in the next election. I don't know if that fits anyone here, but these were the parameters we used for the Alberta study. They may not represent the average MP, but they're probably close enough to illustrate my point.

The value of the pension earned from the employer's contribution, the government's contribution, in one year of service for this so-called typical member is about $43,000 in one year under the current plan.

In other words, more or less, if you set aside $43,000 a year, invest it, and do this for each year of service, it will pay for the pension. This amount will be reduced to about $34,000 under the proposed plan.

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In the public sector, we found in the work we did in Alberta, a person of the same age, earning the same income, would earn about $5,000 in one year compared to $34,000 or $43,000. In the private sector the amount is about $9,000.

Basically speaking, a pension is a form of deferred income. In effect, you could achieve the same result by paying this member an additional $34,000 a year, requiring him or her to invest it and their own 9% contribution for their retirement.

Of course since the RRSP limit for MPs would be around $12,000, this would be equivalent to perhaps $60,000 before tax. In other words, the pension earned in a year from the employer's contribution is worth about the same as the indemnity, which is another way of saying what the previous witness was saying.

So we asked ourselves, what can justify an enhanced pension? The main argument seems to be that members are being compensated for interruptions in their careers. I don't believe this is a valid argument for the following reasons.

We obtained data from Statistics Canada that show that the average length of stay with an employer these days is now only seven years, not much different from the average tenure of an MP. So length of service per se might have been a good reason at one time but it certainly is no longer.

Some, but by no means all, people who change jobs and even change employers do stay in the same profession, whereas MPs usually do not. Therefore, I think it makes some sense to compensate MPs for career interruption, but not by paying a much higher pension for 25 or more years. The appropriate way is to pay a severance or a re-establishment allowance.

In the private sector, typical severance payments for involuntary termination, which is the technical term for losing an election, are one month per year of service up to a maximum, which is often twelve months. Such an allowance could tide MPs over until they found alternative employment and perhaps provide for professional upgrading as well.

As I understand it, members who are not re-elected can get some help now in their career transition, up to about $18,000 for resettlement expenses, including financial and re-employment counselling, but there's no severance component to that.

If the objective is to achieve fair and equitable compensation for MPs, the pension component - in my view, and I think, as I gather, in the view of many other witnesses - should be considered in conjunction with all the other components of compensation.

There should be a chart attached at the back of my comments. The chart is a comparison of the total compensation of MPs to jobs in the private and public sectors that are of comparable value in terms of factors such as knowledge, skill, effort, responsibility, and working conditions, the same factors that are used in studies of pay equity.

As I've said, pensions are a form of deferred income. If you add the value of the pension earned in one year to the indemnity and the tax-free allowance, you have the total annual compensation of MPs, which then can be compared to other sectors. From the chart you can see that MPs' indemnities are relatively low, but when you add the pension, the total compensation of MPs is relatively high compared to other sectors.

How did this situation arise? The compensation system for MPs and most MLAs in Canada was developed when being an MP was a part-time job. The indemnity compensated for loss of income during the small amounts of time spent on House and constituency duties. That's way it's called an indemnity. The tax-free allowance reimbursed members for the expense of travelling to and living in Ottawa.

The job of an MP is now full-time, if not more so. It's impossible to maintain another source of income. The indemnity is now in effect a salary, but instead of adjusting the salary accordingly, successive Parliaments have continually capped it.

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Other provisions covering at least part of the travel and accommodation exist now, and the tax-free allowance is becoming as much part of compensation as an expense recovery. For these historical reasons, the impression has being created that in order to compensate members for the inadequate salary, an affluent pension scheme has been adopted. These historical anomalies were then perpetuated for political reasons. Increasing salaries attracted attention; pensions, until now, did not. It was considered politically acceptable and appears still to be so.

Salaries are frozen for seven years and the proposed reduced pension is still four to seven times greater than other Canadians can earn. In my view the total compensation system needs to be addressed in light of the job of the MP today.

It is the pension plan that has made double dipping an issue. It seems to add insult to injury. If the pension were in line with other sectors and only paid at 60 or 65, then double dipping would not be unreasonable. In other sectors people can retire after a full career, collect a pension, then continue in other employment.

In summary, I believe that one component of compensation, in this case pensions, should not be treated separately from the rest. A system of compensation that Canadians could consider fair in relation to their own circumstances would establish a competitive level of indemnity equivalent to the salaries paid in other sectors, would abolish the tax-free allowance and pay for reasonable expenses against receipts, and would pay a suitable severance amount to MPs who lose their seats in elections to help them re-establish their careers. These measures would then allow you to adopt a pension plan comparable to other sectors, still reflecting the uniqueness of the role of an MP.

Thank you.

The Chairman: Thank you.

[Translation]

Mr. Plamondon: I only have one question. Why is double dipping more acceptable at 60 than at 55?

[English]

Do you understand my question?

Mr. Corbishley: Yes.

Mr. Plamondon: Why is double dipping more acceptable at 65 than at 55?

Mr. Corbishley: Perhaps I didn't express myself the way I intended to. What I was trying to say is that double dipping is acceptable if you have a reasonable pension accrual.

If the amount of pension that you earn during your years of service is reasonable and comparable, and say you worked for 10 years in one position and earned one-third of a reasonable pension, then ten years in another position and earned another third of your pension, and ten years in a third, so that over your whole career you have three different positions, one of which was an MP, you wouldn't be able to earn a full pension unless you had other employment. Why couldn't that employment be with the federal government or on a federal contract?

The problem with double dipping is that the pension is sufficient to live on without having another career after ceasing to be an MP.

[Translation]

Mr. Plamondon: You are saying that the pension is sufficient. In the statistics that I have here, on the number of members who get a pension, 77% are more than 60 years of age. Only 16% are between the ages of 50 and 60. Only 5% are less than 45. No, it is not even 1%.

So I do not understand how they could have two jobs in order to get a pension, if they get their MP's pension at the age of 60 in 77% of all cases. I think that the public perception is...

It is wise to question the pension scheme, but this does reflect the reality. You are talking about a number of people who get extravagant sums of money. Yet, 75% of those who get a pension receive less than $35,000. You cannot live on $35,000, at least not in my area.

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[English]

Mr. Corbishley: I think the point, though, is that the amount of pension earned per year of service is so much larger than it is in any other sector. If you had a pension that was equivalent to another sector, say the kind that is being proposed - 2% per year of service and so on - then it would not be as unreasonable to then obtain alternative employment, which might be with a federal agency. It seems much more unreasonable because of the amount of the pension earned.

[Translation]

Mr. Plamondon: Do you agree that we could however correct rapidly this bill by implementing the provision on double-dipping immediately after the royal assent, instead of implementing it only for those who will be appointed in the future or for those whose mandate will be renewed or who already have jobs? What do you think?

[English]

Mr. Corbishley: If it is your wish to implement double-dipping, then I would assume that the sooner the better. I can't see why you would want to delay it.

[Translation]

Mr. Plamondon: In the bill, this applies strictly to those who will be appointed after the bill receives royal assent, or for those who already have jobs, if their mandate is renewed. So, since we are changing MPs' pensions half way through, why could we not also change the pensions of those who are currently benefitting from double-dipping?

I'll give you a specific example: Benoit Bouchard is our ambassador in France. He is getting $150,000 a year as well as a pension as a former minister. So, as soon as the bill receives royal assent, his pension should be deducted from his salary. However, if we appoint another ambassador in one month from now, we will have to deduct his pension from his salary. Under the current bill, you can keep your privileges for the rest of your life, because an ambassador is appointed for life, whereas there are people who are appointed for five years. It's only if you renew the mandate in five years that the provisions regarding double-dipping will be implemented. So, in that regard, that would be a way to correct the situation quickly. The 55-year provision included in the bill is already a step forward. If we were to implement immediately the provisions regarding double-dipping, that would be another step forward, and we perhaps then could think in terms of percentages. I don't know if I am wrong.

[English]

Mr. Corbishley: I think you have three situations. You have people who are former members of Parliament who are currently employed on a federal contract of some kind. You have current MPs who may in the future have federal contracts. You also have future MPs, elected at the next election.

Certainly with people who currently have such jobs there is a contractual obligation with them. There is always the question of the agreements or contracts that have been made that are obligations. It's just like retroactively changing the pension. You really shouldn't do it because it's an obligation that has been undertaken up until this point in time.

So my view would be that you would not change it for people who currently are on contract. If a contract came to an end and there was the question of whether or not it was renewed, you might change it at that point.

With current MPs, that's a little more difficult. I think probably I would say it should be implemented. Double-dipping should not be permitted for current MPs as well as at the next election, because there's not a contractual obligation, as such, in place for them at this point.

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Mr. Silye: Thank you for your presentation, Mr. Corbishley. It basically supports our contention that this plan under Bill C-85 is extremely generous, is still too generous, and is better than what's in either the public sector or in the private sector. I will leave the members opposite to digest all the statistics and the numbers.

Based on your capacity as an expert witness on issues like pensions and compensation, I would just like to go through a scenario here with you to determine whether or not these criteria are acceptable to you, and then I will ask you about a recommendation and if you agree with the recommendation.

Basically through the Sobeco Ernst & Young testimony today we have learned that the value of the pension plan on an annualized salary basis is worth about $28,000. Now, your numbers, depending on how you look at it, vary. I know it's a very complicated issue, but let's just use $28,000 for the value of the pension plan.

As well, MPs receive a taxable salary of $64,400; that I think everybody agrees with. They also receive two forms of tax-free allowances: the $21,300 expense allowance that everybody gets; and a tax-free travel status allowance of $6,000 just for those members outside of 100 kilometres from this place. So those are tax-free amounts of $27,300.

Then you have tax-free benefits as well. There are lots. I won't go into the real hidden stuff, the nitty-gritty stuff, but just the stuff that's been in these reports that every member has a chance to read so that I stay at a level that is not tacky.

The items mentioned in all these reports are the free health and dental benefits that MPs get. I'd value that at, say, $1,000. It could be higher. But that's what staffers here basically have to pay tax on. The free parking we get anywhere, at airports, here or at the office, if the private sector has to pay for it is valued at $150 a month, or a $1,200 value. Free life insurance, which includes my spouse and dependent children, Sobeco Ernst & Young values at $4,400. A free VIA Rail pass they value in compensation; it depends upon the usage. A lot of people don't use it. They just put down $500 for that. Free family travel is valued at between $4,000 and $12,000. Some members use it. Some members don't use it.

That totals a minimum tax-free benefit package to MPs of about $11,000.

If you take the tax-free amounts, the $11,000 and the $27,000, let's just compare that with a transparent, taxable salary to see what MPs are currently receiving. If you agree with this logic, I would gross up the tax-free amounts to net the same amount to MPs that they're getting now so that we're comparing apples with apples.

You gross up the $27,300 and you get $54,600. If you gross up the $11,000 - I'm just using the minimum amount for the tax-free benefits of $11,000, not the $17,000 for some members - that comes to $22,000. So if you add up the $28,000, the $64,400, the $54,600, the $22,000, you get $169,000.

If we wanted to give the MPs today the same compensation they're receiving with the pension, the tax-free allowances, the tax-free travel status, the tax-free benefits - and I haven't included all the benefits; I'm sure there are a few other things I could throw in there, but I don't want to be tacky - and if we were then to roll that into a transparent, taxable salary, it would be $169,000, wouldn't it?

Would you agree with that?

Mr. Corbishley: If you were to roll this in, yes. I think a portion of those items that you mentioned probably could be grossed up, but I'm not sure that they all could.

Mr. Silye: Okay, so not all of them. But my point is that the compensation, whether you include or exclude the pension package that we think is too high...and the argument being put forth today by the government in the government legislation is that perhaps salaries are too low, indemnities are too low, hours are too long, re-election is uncertain, but for those who do get it, this rewards them.

So the excuse of justifying this still-too-generous, still-gold-plated pension plan is the fact that we're not getting enough elsewhere.

What I'm trying to show is that they are getting it. They're getting it in ways that the public doesn't understand. They're getting it in ways that confuse the public.

.1700

This is where I get to my recommendation. This is what I'm leading up to. I wanted to take my time to get here.

As a party, we came here against that pension plan, and we recommended changes to it. We offered some suggestions and some changes to it in debate. We had our own special supply day on it. We've been pushing this for a year.

We feel that somebody should form an independent group. I feel that your firm, Sobeco Ernst & Young, and some other witnesses here could get together and be the arm's length group the Canadian public would trust. We would have to accept it. There was a recommendation today that this be accepted; it's not debatable. This is what you get. If you like it, you apply for the job. If you don't like it, tough.

If this was recommended, do you not believe that by doing something like that we would restore some integrity to politicians, that the issue of the timing of talking compensation wouldn't be as touchy a subject with the Canadian public because the MPs are not doing it? It can't be construed as self-serving. The Liberals wouldn't get criticized no matter what was recommended and they accepted it as government. They would then also be left whole. Would this not restore some integrity and some honesty in the system? Would this be a way of solving this current problem?

Mr. Corbishley: I certainly agree that the current system is very confusing and does confuse the public. I think if it were displayed this way, for example, it might be quite shocking to the public to find out what the totals...or the way you described it, whether or not all those items could be grossed up.

With the Government of Alberta, we did look into what other provinces were doing in terms of how the decisions were made and we did recommend they have some form of independent commission. But you already have that here, too. You have the Lapointe commission.

If all members could agree that, yes, you will abide by some independent, well-qualified body, then it probably would work. But in the end, you are always the ultimate authority. You will always have to decide, yes or no, whether you accept the recommendations of that particular body.

I think certainly it would clear the air an awful lot and would probably restore a measure of integrity to this issue if you could all agree on that.

Mr. Silye: The analysis you did was on this particular pension package. Is that correct? You analyzed the 4% accrual, age 55 - not the previous pension plan.

Mr. Corbishley: Actually, I did both.

Mr. Silye: But when you say that this proposed plan in Bill C-85 is about - as you say, it is complicated and confusing - seven times more generous than a typical public sector plan and four times more generous than a typical private sector plan, do you firmly believe that? There was some testimony today saying that it is only twice as good or three times as good. So far today you're actually the one who has given it the highest rating, the most gold plate.

Mr. Corbishley: You mentioned the $28,000 that Sobeco Ernst & Young talked about. I would assume they've looked at the age distribution, the length of service and so on, and come up with an average. Mine was based on selecting one. It was actually the average for the Alberta legislature at the time we did it - the 49-year-old with 9 years of service and so on. So my number came to $34,000. Theirs comes to $28,000. So that's the explanation of that difference.

Rather than assuming their number is more accurate than mine, we're taking about four and a half times the public sector plan and three times the private sector plan.

Mr. Silye: If we then use your figure - going back to the analysis I tried to go through and gross up - and if we don't even gross up, if we use the tax-free benefits based on the values of them on an annual basis of $11,000, don't gross it up, the $64,000 salary, using your number of $34,000 for pension value and $27,000 for the tax-free expense allowance, and again, don't gross it up, that comes to $136,000.

.1705

If we wanted to then take out from under the table all these three different components, all these separate envelopes of compensation and reimbursement of expense or whatever and wanted to make it transparent, taxable and wanted to show the Canadian public exactly what an MP is being paid, wouldn't you gross up some of those? At $21,000, wouldn't you?

Mr. Corbishley: I'm not sure whether you'd gross it up. I don't know in detail what proportion of that expense allowance is in fact used for expenses.

I would prefer abolishing it and having receipted expenses. I don't know whether the expenses of the average member amount to that, or exceed that. I don't know whether that was looked at. Perhaps Sobeco Ernst & Young looked at it.

Mr. Silye: Somewhere between what we've discussed here right now, if we're talking in overall compensation, do you feel MPs are getting between $140,000 and $170,000?

Mr. Corbishley: If you're looking at total compensation. You can't include legitimate expenses in compensation.

Mr. Silye: No. So the $6,000 wouldn't count.

Mr. Corbishley: The number I came up here is $120,000.

Mrs. Parrish: I can't resist a comment. I dearly regret - much as he's charming and I enjoy his company - Mr. Silye's outburst in the House. He's now spent hours trying to justify that $150,000.

I think you did it today, okay? Can we drop it?

It was very interesting for me to come in contact with KPMG in one of its various permutations and combinations. I've had dealings with them before. You keep changing the combinations at the management firm.

I have a loaded question. When I was chairman of the appeal board we hired your firm on two separate occasions. Once, in a request for proposals, we wanted you to come in with a plan for the secretaries with a system that was cheap, economical and saleable - and you did.

The second time you were hired by the superintendents to come in with a package that was inflated, exotic, Cadillac, gold-plated and justifiable - and you did.

Is it true that the request you're given pretty well gives you direction as to the report the company that purchases your services wants to hear?

Mr. Corbishley: No.

Mrs. Parrish: Absolutely not?

When Mr. Klein availed himself of your services or your advice - I don't don't mean you personally, I mean your firm - the end result was that they came out with no pension plan in Alberta. Upon hiring you - and please don't take this personally, I mean your firm - was Mr. Klein's avowed intent that you would come up with an answer indicating no pension plan was required?

Mr. Corbishley: In the first place, it wasn't Mr. Klein who hired us. It was the member services committee.

Mrs. Parrish: Close enough.

Mr. Corbishley: Secondly, we did not recommend that the pensions be abolished.

Mrs. Parrish: What did you recommend?

Mr. Corbishley: We recommended to reduce pensions along the lines that had been recommended by several witnesses I've heard.

Mrs. Parrish: What do you think about the total idea of banning a pension plan and going to straight RRSPs?

Mr. Corbishley: We did two different assignments. In the first one, we recommended a reduced defined benefit plan. That recommendation was obviously not accepted, so we did make a recommendation that was not the one the client was looking for.

Mrs. Parrish: No - but you did come back to try again.

Mr. Corbishley: Then we were asked to update that study after the pension had been abolished, which we didn't recommend. There were some other recommendations. We also recommended abolishing the tax-free allowance, and that wasn't done. We recommended increasing the indemnity. That wasn't done.

Mrs. Parrish: In your professional capacity here today, if after one or two more tough budgets the Minister of Finance decides to cap RRSP contributions at $7,500 for everyone across Canada, would Mr. Klein's MLAs be in very good shape at the end of their next term?

.1710

Mr. Corbishley: Right now they have no provision whatsoever for retirement.

Mrs. Parrish: But they can put their own money into RRSPs, up to $13,500 a year.

Mr. Corbishley: Yes, just like anyone else.

Mrs. Parrish: Let me ask the question again: If it were capped by the Minister of Finance at $7,500, would they be in dire straits?

Mr. Corbishley: They would be no worse off than anyone else.

Mrs. Parrish: Wonderful.

On page 3, you say:

What can justify such enhanced pensions? The main argument seems to be that members are being compensated for interruptions to their careers. I do not believe this is a valid argument for the following reasons.

Statistics Canada data show the average length of stay with an employer is now only 7 years, not much different from the average tenure of an MP.

Obviously you understand, and we all understand, that if you are a teacher you move from board to board; if you are a management consultant, you can move from one company to another. You're doing the same thing. You're probably increasing in stature. You have a reputation that follows you.

What do you think the employability is going to be of an NDP cabinet minister, in his chosen field, in Ontario after June 8?

Some hon. members: Oh, oh.

Mrs. Parrish: I'm really not being sarcastic. I think it's a serious concern.

Mr. Corbishley: Immediately following that paragraph, I did say ``By no means all of these people stay in the same profession, whereas MPs usually do not''. Therefore, I think there is an argument for some form of compensation for that career interruption, but not extend it out over 25 to 30 years, the way the pension appears to do it.

Mrs. Parrish: The way I'm going, I'll never make it another 25 years on this Earth.

The other comment you made was that in the private sector, employers don't contribute to pension plans. You said you don't, and Mr. McCrossan said the same thing. But in fact when you talk about a total compensation package, you're getting $4,000, $5,000 or $6,000 a year less on your salary because your employer is taking care of that messy business of pension.

Mr. Corbishley: If you look at it from a total compensation point of view, I think, again, as the previous witness said, it doesn't make any difference.

Mrs. Parrish: You talked about the difficulties of pay increases for politicians. There is a reality called politics. Do you not feel that's a brick wall we're all up against right now, that this is not something that's a whim on our part?

Mr. Corbishley: You're the experts on politics; I am not.

Mrs. Parrish: You're doing very well on politics today.

Miss Grey: Thank you very much for coming this afternoon. It's good to hear all this.

I have just a comment at the beginning. This sounds like the death throes of people who are just trying to hang on like grim death to something that they know sooner or later is going to be ripped away from them. I think this study probably exemplifies it best of any that we've seen today.

My question to government members, and I'll address this to you as well, is what part of ``generous'' do you people not understand? When it's been shown by probably one of the most reputable firms in this country that no matter how you slice it, seven times higher or four times higher or three times higher, whatever number you want, you cannot justify this to anybody.

Sir, I make representation to you, first of all, on the fact that you're an expert on this - and I appreciate that, because I'm not; I don't think any of us in this room is an expert on this - and secondly, because you're a taxpayer, as we are. I want to know, aside from the fact that your expert opinion on this is that you cannot stomach Bill C-85 - you feel that way as an expert - how you feel as a taxpayer about this. Can you stomach this, yes or no?

Mr. Silye: You're not in politics, now.

Mr. Corbishley: My main problem with the bill is not the amount of the pension per se; it's dealing with the pension independent of everything else.

Again, I imagine you have the evidence already before you. If you look at the total compensation package and compare it with other sectors, as I tried to do here, then you find that the total compensation is out of line, never mind just the pension.

This again is based on the Alberta study. As I said, the numbers are approximate and may not be completely transferable, and I don't have all the information to come up with something equivalent for members of Parliament, but I suspect it's not all that far out.

.1715

Miss Grey: Secondly, this chart draws it out pretty clearly. I'm a visual learner. When I see this, it all makes a great deal of sense. I think any Canadian in any town hall meeting any member here would have...that's makes it pretty clear.

When I see a government that is obsessed right now with a particular bill in front of the House of Commons on employment equity.... You could never show this to a soul in your constituency and say that you believe in employment equity and here you are on the left-hand side of this chart. You'd never sell it. You wouldn't sell it in my constituency in downtown Lac La Biche; you wouldn't sell it in Halton - Peel; you wouldn't sell it in Saint Boniface. It's as simple as that.

When you look at these numbers and the amount of total compensation, which is out of whack on this thing, when you are looking at a pension plan that is four or seven times more generous than any other person in the country has, my question to you is: How in the world are we going to get out of this when we see the arrogance here on Parliament Hill that I sat through in the last Parliament? How in real terms are you going to get away from the politics of it and say that we need to have a spirit amongst us, and surely we want that here, that somehow we're going to say that we need help to get out of this situation?

So let's not defend it so much. Let's not just hang on to it like the grim death I talked about earlier. How are we going to come out of this best for all of us so that this chart somehow is going to look a whole lot better, and that you aren't going to have to try to sell this kind of obscenity in any riding you represent? You can't do it.

You have proved that here today, very articulately. How can you help us out of this mess?

Mr. Corbishley: Again, as I said, I'm not the expert on the political side.

One way might be the suggestion Mr. Silye made, about having an independent commission. As I said, I don't know if you can collectively agree on that.

You're at the point you are, and the compensation system is the way it is because of a series of political decisions that have been made out of context, without looking at the total picture. You're still in that situation.

I don't know. If I knew the answer now, probably somebody else knew it some years ago.

Miss Grey: Finally, there's this business of opting out. Our friend across the way read the sheet of paper that we had raised this in the House. Yes, we did raise it in the House, and yes, our caucus has voted unanimously to opt out of that.

I don't try to be virtuous about that. I've been called an opportunist by two friends in this room and by the Prime Minister of the country...that I'm opting out of this.

I stand to lose literally hundreds of thousands of dollars, because I'm 42 years old, and I was vested on March 13. Aside from all the jokes and calling me opportunistic, if I were opportunistic I would have kept my mouth totally shut on this and just hoped the whole thing would float through. Then I'd say, ``Gee, isn't a pity; I didn't have any options.''

But because we think this thing is something that is totally unsellable across the country, our caucus has decided to opt out. I'm the one who is going to get nailed on that because I'm the only one who's vested, not my other 51 colleagues.

So for somebody who is brand new to tell me that I'm being opportunistic, or that I'm trying to make a big issue out of this.... I literally stand to lose hundreds of thousands of dollars. The committee heard this morning that I'm not even going to get a severance package on this. So I resent those kinds of comments that make me look like somebody who is out to get some cash. I'm losing a lot of cash on this.

I'm just asking your opinion on what you think of this opt-out clause. Is it sensible? Is it trying to nail a particular group of people, such as the Reformers, who are saying no? Is there any validity to it?

Mr. Corbishley: I'm not an actuary, and I'm not an out-and-out expert on pensions, but I think most pension experts would say a pension is an entitlement that should not be optional. If some employees are going to get it, everybody should.

I personally disagree with that. I think you should have a choice. Along with a lot of things that we don't have much choice in these days, we should have choice. I think an individual should be able to look at a pension plan and say they'd rather provide for their own retirement, or they need the cash now, or whatever, and get away from this paternalistic attitude that the employer has to look after the employees, and treat people as adults. But that's a personal opinion.

.1720

Miss Grey: But you should be able to opt out on day one, not after six years and four months -

Mr. Corbishley: Yes, of course.

Miss Grey: - after you've been tied into the system and you're going to get a 4% return on the money you put in for six and a half years.

Mr. Corbishley: Yes.

Miss Grey: Bingo.

Mr. Boudria: I'm not sure if this is a point of order, but we're going to have to suspend and perhaps ask our witness to stick around for a little bit.

The Chairman: We're finished questioning, if you're finished. I have Mr. Pickard and Mr. Harper.

Mr. Boudria: All right, but we have to suspend for the vote. I understand there is some agreement and the votes can go rather quickly.

I'm just wondering if our witness is available at 6 p.m. so we can resume later.

Mr. Corbishley: Well, I do have a flight to catch.

Mr. Boudria: I just didn't want members not to have had the opportunity to ask questions.

Mr. Harper: My only questions concern what exactly they had recommended in terms of the Alberta compensation, and I can get that from the report.

The Chairman: What time is the flight?

Mr. Corbishley: It's at 7 p.m.

Mr. Pickard: To expedite this, as Mr. Harper was willing to withdraw, then I'll withdraw and resolve the problem. I did want to clear up some of the suggestions about the compensation package. It sounded as though if you have to have a car to do a job, you want that as a -

Mr. Boudria: We still have to suspend for the vote. Are we back at 6 p.m.?

The Chairman: As soon as the vote is finished.

.1722

PAUSE

.1807

The Chairman: We resume our sitting.

Is it the disposition of the committee to proceed with clause-by-clause at this stage?

Mr. Harper: On a point of order, Mr. Chairman, we had submitted two witnesses whom I thought were approved and from whom we haven't heard. One was Mr. Fox-Descent from Manitoba.

The Chairman: The clerk informs me he was unavailable, Mr. Harper.

Mr. Harper: Unavailable between 9 a.m. and 4 p.m. today, or is he deceased?

The Chairman: He was unavailable. I don't know for what period he was unavailable.

Mr. Harper: No attempt was made to schedule him at another time?

The Chairman: Not that I'm aware of. I'll have to await the clerk's return for a more complete report. She was in touch with him.

Mr. Boudria: Who's the other one?

Mr. Harper: I thought we had also submitted witnesses from the P.E.I. commission of inquiry.

The Chairman: I don't think we agreed to that. The only one who could not come who was on the agreed list was Mr. Fox-Descent. That was the information I had from the clerk when we were discussing this.

Mr. Harper: I'd have to see my notes, but certainly that was on our list, and I thought there was no reason not to approve that one. It fit even the criteria of the government.

The Chairman: My recollection of the discussion was that this was like setting pensions for a city council, and it was therefore inappropriate. I remember hearing that remark. But I know you wouldn't have thought that, Mr. Harper.

Was Mr. Fox-Descent asked to appear today?

The Clerk of the Committee: Yes, he was asked to appear today. His secretary phoned me back to say he couldn't make it on May 30.

Mr. Harper: Was he unwilling to attend at any other time?

The Clerk: I didn't ask, because the mandate I had from the committee was to invite him for May 30. They didn't indicate, either, if he was available later on that week.

Mr. Harper: Mr. Chairman, what do you plan to do - clause-by-clause and what other business? Clause-by-clause was not on our afternoon agenda. Is there anything else that has been inadvertently omitted?

The Chairman: Not that I'm aware of. I just assumed that when the members finished hearing the witnesses they'd want to proceed with clause-by-clause study of the bill and wrap up the matter. There seemed little point in prolonging the matter. We had agreed to sit all day on this and finish it. That was my understanding at the last meeting.

Mr. Boudria: What is the delay? We've heard all our witnesses. We were asked to add one spontaneously. We agreed to it. We were asked to keep the minister half an hour longer. We agreed to it. Everything that was asked was done. Is this procrastination; what is it?

The Chairman: I don't sense an unwillingness to proceed. Am I mistaken?

.1810

Mr. Harper: Obviously, if that's the will of the government members it doesn't particularly surprise me. Apparently we've gone through the motions. We brought witnesses out here. We've duly asked them all kinds of questions. I assume we're now prepared to go clause by clause and entirely ignore their testimony.

If that's what the committee wishes to do, I don't agree with that. I'll put that on the record.

The Chairman: What are you suggesting we do - simply postpone this and not proceed with the bill?

Mr. Harper: I would suggest that we could at least wait until the next meeting on Thursday. I still believe we should be open to hearing a couple of the witnesses we haven't heard. If we don't want to do even that, I can't see what would be the problem with waiting until at least Thursday while committee members have some time to digest the testimony and consider their positions, perhaps discuss the matter. But as I say, that's entirely up to the government members.

Mr. Pickard: I believe in our last meeting we agreed on an agenda for this meeting, which included hearing the witnesses and also included doing the clause by clause. Mr. Chairman, you were very clear about all the things we were going to do at this meeting. I found it reasonably clear. I had no question. I was ready to meet until whatever time this evening, and I think we all agreed to that in order to get it through. There are other obligations some of us have. I certainly have a problem with this coming Thursday, and I wouldn't want to see that changed. I've already made a commitment to be with the minister at another place, a different minister, back in my riding.

I think we should proceed with what has been scheduled and set up as of the last meeting.

Mr. Harper: I certainly have no recollection.... In fact, I think it was fairly clear that the Reform members at the last meeting were not agreeing with the procedure being laid out. I'm told by my office that we had checked with the clerk's office and with our own House leader's office and had no indication there was going to be clause by clause today. It was not on the afternoon sitting schedule.

Mr. Boudria: I was on schedule when we came in the room this morning.

The Chairman: Nobody is suggesting that we hear any more witnesses. Is that correct, that there's no desire for more evidence in this matter, aside from Mr. Fox-Descent, who was unavailable today?

Mr. Harper: Of course, we have suggested many other witnesses, Mr. Chairman.

The Chairman: Yes, but I see you're not putting those forward now. We seem to have heard a good variety.

Mr. Boudria: We even had one right this day. Incidentally, we heard of these objective witnesses and saw a group of people loading little piglets into a truck about an hour after the thing concluded.

The Chairman: Did you say piglets?

Mr. Boudria: Yes.

Mrs. Catterall: Piglets?

Some hon. members: Oh, oh.

Mr. Boudria: Yes, piglets out on the front lawn.

Mrs. Catterall: You mean plastic pigs.

Mr. Boudria: They were ably aided by some staff working here on Parliament Hill.

Mrs. Parrish: Why do I miss all the good stuff?

Mr. Boudria: So that was the independent testimony we heard.

The Chairman: Well, I'm in the hands of the committee. Do you wish to proceed now with clause by clause? Is that agreed?

Mr. Harper: On a point of order, if we're going to go clause by clause, I assume the committee is going to complete this relatively quickly. I wouldn't want, by staying, to give the impression, because we've been discussion MP pensions all day, that I think proceeding in a farcical manner like this is a particularly useful use of our time or of the taxpayers' money. I will go back to my office and do some more useful work, and you of course are free to approve the bill as you've intended to right from the beginning of today.

Thank you very much.

Mrs. Catterall: Just before Mr. Harper leaves, I would like to ask him whether he intends not to participate, and for what reason. He seems to be making assumptions before the process has even started.

Mr. Harper: I've made assumptions watching the process.

Mrs. Catterall: Pardon?

Mr. Harper: People have a chance to have some meaningful debate in the House.

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Mrs. Catterall: If one withdraws from the debate then of course one can't participate in it.

Mr. Boudria: If I can have a minute, Mr. Chairman - and I suppose Mr. Harper will have to read this from the Minutes of Proceedings and Evidence, because he's no longer in the room - most witnesses that were submitted by all parties were listened to.

[Translation]

The requested witnesses have been heard. I recall that Mr. Plamondon requested that we hear from experts and we heard from them. The Reform Party asked to hear from several witnesses and most of them have been heard. Even today, we heard from someone who, a few minutes after his appearance, was loading little plastic pigs into a truck before the Parliament Building. We have added people to the list, we have extended the time limit, the minister spoke to us for a longer time than usual, all this to accommodate the same member of Parliament. Now, he has decided to leave the committee because he doesn't want to participate in what he has labelled a farce. In my opinion, this means that the committee will not vote as he would like to see us vote and he doesn't want to be present. Meanwhile.

The Chairman: We still have...

Mr. Boudria: Yes, I have concluded my intervention.

The Chairman: The committee is ready to begin.

Shall clause 1 carry?

Clauses 1 to 3 inclusive agreed to

[English]

Clauses 4 to 6 inclusive agreed to

[Translation]

Clauses 7 to 9 inclusive agreed to

[English]

Clauses 10 to 14 inclusive agreed to

[Translation]

Clauses 15 to 19 inclusive agreed to

[English]

On clause 20

[Translation]

Mr. Plamondon: Mr. Chairman, I would like to propose an amendment to clause 20. I will explain the reasons for this amendment to the other participants. This is the amendment that pertains to double dipping, that is, drawing a salary and a pension. Our amendment states that once royal assent has been given, the people in office would no longer be entitled to double dipping in the same way as the members of Parliament who change pensions, their salaries would change during the course of their term.

The amendment to clause 20 reads as follows: That clause 20 be amended by striking out lines 41 to 49 on page 21 and lines 1 to 18 on page 22 and substituting the following: ``payment to a former member of an allowance or other benefit referred to in subsection 3 is suspended in respect of any period during which the former member holds a federal position or is a party to a federal service contract''.

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Mr. Boudria: The problem that I see with this amendment, at first glance, is as follows.

I agree with Mr. Plamondon as far as double dippers are concerned. However, the fact remains that the following problem can occur: Let us suppose that a former member of Parliament - for the purposes of this discussion - , who comes from Newfoundland, left with a pension of $15,000 per year, x number of years ago. Today, he earns $10,000 per year and is employed by the federal government to care for the dock in his riding. He is not an employee, wharfingers are political appointments.

This person, therefore, will no longer be entitled to that. I would guess that someone new would decide not to take the position because he would have to deduct it. However, when someone has perhaps been doing the job for years, that is where the difficulty arises.

There is some protection, for example, provided in the system. Some of these positions are granted for a given period of time. Take the example of an ambassador, or several other...

Mr. Plamondon: There is no specific time limit.

Mr. Boudria: There is no time limit...

Mr. Plamondon: An ambassador is not under contract and we can remove him when we want to.

Mr. Boudria: All right, however, he does not remain in this position for a long time and when he comes back to Canada, he is reassigned elsewhere. This becomes a new appointment and I think this is where the new rule applies. Particularly since, for instance, when someone is appointed to the Pension Board it is for a three or five-year term, when his term is renewed - and this is what happened to Mr. Ian Deans - , the Prime Minister required, as a prerequisite, that he give up his pension in order to have his appointment renewed. Perhaps this wasn't Mr. Deans, perhaps it was Mr. Broadbent, or perhaps even both of them.

Mr. Plamondon: Broadbent and Perrin Beatty refused to draw a pension, but this was done on a voluntary basis.

Mr. Boudria: Yes, this was done on a voluntary basis, because the bill wasn't there. However, with the bill, a person will have to accept the loss of the pension in order to have his term renewed, or he simply will not be given the position. This is contained in the bill before us.

Hence, there is additional protection built in at this level, when terms are over. This would take care of some of the things raised by Mr. Plamondon.

However, I would like to take this further, for the reason that I just gave. If someone has been part of the government apparatus for 15 years, if someone holds a position somewhere, this person will be cut off overnight, and perhaps, in certain cases, laid off with the adoption of this amendment and this is what concerns me.

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Mr. Plamondon: I must confess that I don't understand what you've said at all. I came up with the idea and I asked my researcher to put my thoughts into legal language or into the type of language that normally should be found in a bill, to draft it in both official languages and to give it to me. I understand what I want, that the provisions pertaining to double dipping apply immediately, but it appears that this is how it has to be drafted. Perhaps it has been poorly drafted, we could vote on the issue.

I sense that there is some reluctance here; I don't want to discuss the issue for two hours. If we are in agreement on the principle, we will come up with how we want to say it. If we do not agree, I will propose it, it will be defeated, and that's that.

Mr. Boudria: Mr. Chairman, I'm wondering if there isn't a solution for Mr. Plamondon. I want to attract his attention, right now he's consulting his staff.

Mr. Plamondon: I'm going to withdraw my...

The Chairman: Mr. Ducharme is here as a legal advisor, perhaps he could help us.

Mr. Philippe Ducharme (Legal Advisor): The provision stipulates that there will be a simple suspension of the benefits and the allowances rather than a reduction of that which is provided for under paragraph 5 where a person makes more than $5,000, in the future, obviously.

Mr. Boudria: Mr. Chairman, if we defeat Mr. Plamondon's amendment, he will no longer be able to propose it at the report stage. I'm wondering whether or not he would consider withdrawing it, if it has been poorly drafted, and then he will not lose an opportunity to propose it.

Mr. Plamondon: I will withdraw my amendment, I will table it at report stage, in the House.

The Chairman: Do we have unanimous consent so that he can withdraw the amendment? Okay.

The amendment is withdrawn.

[English]

Clauses 20 to 28 inclusive agreed to

The Chairman: Shall the title carry?

Some hon. members: Agreed.

The Chairman: Shall the bill carry?

Some hon members: Agreed.

[Translation]

The Chairman: Shall I report Bill C-85 to the House?

Some hon. members: Agreed.

The Chairman: All right.

[English]

Thank you very much. That concludes the business for today.

I should make an announcement for members. You will all have received a great bundle of documents from the Chief Electoral Officer constituting a revision or an adaptation of the Canada
Elections Act for the purposes of the Referendum Act by making the provisions in the Canada Elections Act regulations under the Referendum Act. This is a joyous reading designed to put you to sleep.

However, the committee has the matter of these regulations referred to it for review and we have a two-week period in which to review the regulations. Might I suggest that members take advantage of the next short time to read this pile of material?

If you wish to have a meeting on the bundle, we could arrange one. If there is no objection to the matter, I don't think we need to meet, and I'm going on the basis of past practice in respect to this. This is the second time this bundle of joy has appeared on the doorstep of this committee, once in the last Parliament and once now.

The last time, we had a few telephone calls, decided some comments were appropriate, had those drafted, and then sent them off to the Chief Electoral Officer, as we're entitled to do.

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Perhaps James would like to read them. There's no question they would provide entertaining reading for him.

So is it agreed that James do it? If anybody finds any problems, or if James does, we'll have a meeting to decide what communication to pass on to the Chief Electoral Officer.

I don't think it's necessary to call him in and hear evidence on this. The Senate is doing a detailed study. It has hired counsel, I'm told, to study it. So that's great.

We'll adjourn to the call of the chair.