Horner says economy must recover before CPP reforms
‘Probably not a good time’ for changes
Canada needs a full economic recovery before an expansion of the Canada Pension Plan or a national debate about overhauling the federal equalization program, Alberta Finance Minister Doug Horner said Monday.
Federal Finance Minister Jim Flaherty met with his provincial and territorial counterparts in Meech Lake on Monday and announced there was no consensus on changes to CPP. But in a move seen as a positive sign for reform, Flaherty said officials would report back in June with options for reforming the public pension program when the economy improves.
Alberta has been seen as one of the major obstacles to increasing employer contributions to the program — helping to derail a call to enrich the program from most other provinces two years ago.
But in an interview from Ottawa, Horner that Alberta is willing to listen to other provinces.
Alberta’s support will likely hinge on the contents of the June report, which will include work on defining what would constitute a “modest increase” to the program, as well as what “economic triggers” — such as real GDP and the unemployment rate — would prompt the reforms to begin.
“Now is probably not a good time to be doing something like that given the volatile nature of the economy,” said Horner.
“All of us are concerned that we do this at the right time. How do you determine the time? Well, you want the economy to be coming back. You want it to be a lot stronger.”
Changes to CPP require the agreement of two-thirds of the provinces with two-thirds of the country’s population, although Flaherty has sought unanimity on the issue in the past.
Flaherty said the provincial and federal governments will see how the economy is performing in the summer and then determine whether to enrich the CPP. He acknowledged that meeting the twothirds rule for proceeding could be accomplished by June.
A number of provinces are urging the federal government to modestly and gradually increase CPP contributions in the coming years to help Canadians better save for retirement. An enriched CPP would complement the new Pooled Registered Pension Plans — a private-sector pension option to boost retirement savings — that is endorsed by the Harper government.
The federal government and a handful of provinces are worried that increasing CPP contributions at the current time would slap an additional financial burden on employers during a fragile economic time, and could threaten their ability to hire workers.
While Quebec had joined with Alberta in the past in opposing pension changes, the new Parti Quebecois government says it’s now open to enhancing CPP contributions, although by how much remains an open question.
Ontario Finance Minister Dwight Duncan said agreeing to establish definitions on a modest enhancement and economic triggers is “an important step forward” and one he didn’t think ministers would agree to Monday.
“It’s still a little too slow for my taste,” said Duncan.
An increasing number of Canadians aren’t saving enough for retirement, he said, and CPP only pays a maximum of roughly $12,000 per year as it currently stands. “That’s a recipe for real danger if we’re not careful,” he added.
But Horner said a greater concern is economic turmoil in the United States, Europe and Asia and its potential effect on Canada.
Alberta has warned its projected $886-million deficit could more than triple this year because of lower-thanexpected oil and gas prices. The PC government maintains the biggest problem is the differential between heavy and light oil prices because of Alberta’s lack of access to world markets.
The finance ministers were briefed by Bank of Canada governor Mark Carney on Monday, and Horner said Carney’s message made him even more concerned about the impact of the price difference.
“We’ve got another year of fairly difficult times for us in Alberta because of the differential and because of market access and because of pricing. But one of his comments was that he felt commodity pricing would be strong in the future, that these numbers would be elevated ... but we’re talking about a year or two out, not next year.”
Federal and provincial governments also agreed to minor technical adjustments — but no major policy changes — to the $15.4-billion equalization program, which transfers federal dollars to poorer provinces to help them pay for programs and services.
Alberta — a “have” province that receives no equalization — has been quietly pushing for changes to the program, which it says is unduly generous to other provinces at Alberta’s expense.
The equalization formula comes open for renewal again in 2014, but Horner said he senses little appetite from Flaherty for an imminent discussion of the program.
“I think everybody is concerned about the immediate and short-term threats that are on the horizon,” he said.