Flaherty firm on changes to old age pension
Harper gov’t will stay course with OAS
OTTAWA — Finance Minister Jim Flaherty signalled Thursday the Conservative government will not back down from its controversial plan to scale back the future costs of the old age pension system.
Flaherty, who was in the midst of an official visit to Israel, told journalists in a conference call that changes to the government-financed pension system must occur to ensure it does not become unaffordable in coming years.
“Actions need to be taken to ensure long-term sustainability,” he said. “This is not an issue that can be ignored, unless we want to put at risk the fiscal track for the country, which would be a mistake.
“So looking at the long-term best interests of Canadian budgeting, we need to take action to ensure that when necessary the measures will be in place to ensure long-term sustainability.”
The finance minister, who is in the midst of preparing the mostanticipated budget in years, refused to provide details about what this fiscal blueprint will contain.
He appeared to suggest that changes to the pension system will not affect how the government spends budgeted funds this year — not surprising since both he and Prime Minister Stephen Harper have promised that cutbacks to the pension system won’t affect current seniors and those near retirement.
“This is not this year’s issue, in the sense that our fiscal track this year will be affected by whatever actions are taken to ensure long-term sustainability. The issue is about long-term sustainability. That is clear.”
The pension issue emerged as a political bombshell a week ago when Harper used a speech in Davos, Switzerland to reveal his intention to slash the cost of the public pension scheme sometime in the future in order to keep it sustainable.
Opposition parties have blasted the government for manufacturing a false crisis about the future sustainability of the pension system. That criticism was reiterated in a special debate in the Commons Thursday, where MPS debated an NDP motion which rejected a supposed plan by the government to reduce the deficit “on the backs of Canada’s seniors.”
Harper and Flaherty have not revealed the specifics of what they are planning, but it is believed the government is considering raising the age eligibility requirement for the Old Age Security (OAS) to 67 years from 65 at some point in future years.
The government says the cost of the OAS system, without reforms, will soar to $108 billion in 2030 from $36.5 billion in 2010.
Critics and experts have said that, in fact, when viewed as a ratio of Canada’s GDP, the increase in pension costs won’t be so stark and the system will be affordable.
But Flaherty dismissed the suggestion Thursday that the growing costs of the pension system will be affordable.
“Actually, the research that we have — both within and outside of government — has shown us for some time that the demographic challenge will bring substantial fiscal pressure on the long-term sustainability of these programs.”
Flaherty refused to say if he is considering raising the OAS ageeligibility requirement to 67, saying only there are “a number of options with respect to retirement income issues that need to be addressed.”
“We look at these programs, we look at the longer term, we look at the demographic numbers, which are clear. We look at the predictions by the experts and by finance, with respect to costs going forward. And we need to take action to ensure that the fiscal plan can afford to make sure that we do not lose any of these programs because they become unaffordable.”
Flaherty said the rising cost of the pension system is not a new issue
“It’s been well known in Canada for some time now that we are an aging population. This is an issue not only for Canada, but for most of the western economies with aging populations.”