Harper, Flaherty fail Canadians on pensions

Lana Payne
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It’s a wonder federal Finance Minister Jim Flaherty didn’t get whiplash from his sudden turnaround with respect to expanding Canada’s public pension system.

In May, after considerable pressure by the country’s labour movement and other progressive forces, Flaherty and the provincial finance ministers, with the exception of Alberta, agreed to move ahead with expanding the Canada Pension Plan (CPP), considered one of the most solid public pensions systems in the industrialized world.

Then just hours before heading into the meeting of finance ministers before Christmas, Flaherty informed Canadians and his colleagues that his government was abandoning the CPP expansion in favour of a private option known as pooled RRSPs.

This upset many of the provinces that had supported a higher CPP replacement rate.

The new federal proposal will be good for banking and financial sector profits, but not so good for Canadians worried about a secure retirement.

Make no mistake this was, and is, a huge, public policy flip-flop. By siding with the powerful and influential financial sector, Flaherty has abandoned what is actually in the best interests of Canadians.

He clearly failed to convince his boss, Prime Minister Stephen Harper, of the political benefits of an improved public pension system.

The prime minister has never been a fan of collective solutions and it appears he is not in favour of a collective solution to retirement security for Canadians. It was a stretch to imagine him agreeing to such a proposal, but after his finance minister floated the plan and got the majority of the provinces to agree, you’d think Stephen Harper was at least on side.

Instead, in a complete reversal, the federal government decided that the financial institutions needed even more profits and that Canada’s mostly fend-for-yourself retirement system would continue. It wasn’t just banks, insurance companies and the financial sector against the expansion of CPP.

The Canadian Federation of Independent Business (CFIB) also cried foul as did Alberta’s government. This, of course, was not surprising given the CFIB’s anti-everything approach to public policy unless it involves tax cuts for business.

And while the federal Conservatives desert Canadians, the official Liberal opposition, under their current leader, is asleep at the switch.

Prime issue

As Scott Reid, a former advisor to Prime Minister Paul Martin, wrote in a recent CBC blog, this is an issue “tailor-made for the opposition. It offers a crisp cleavage with the government that, properly communicated, can lend the Liberals and their leader some desperately needed definition. It presents a fight on a point of principle. On a policy that matters to Canadians. And on ground that positions Liberals with the majority of public opinion.”

And yet the Liberals have been wishy-washy on expanding CPP, preferring a voluntary savings approach not unlike the Conservatives. This is another political blunder by the Official Opposition who now appear fearful of going up against the powerful financial sector and of offending the tea-party tendencies of the CFIB.

The Canada Pension Plan, unlike RRSPs, is not subsidized by the public purse. Instead it is funded through premiums paid for by employees and their employers — 93 per cent of working Canadians contribute. Yet RRSPs cost the government billions and billions of dollars annually in lost tax revenue. Basically, all Canadian taxpayers subsidize huge profits to the Canadian financial sector even though only 30 per cent of Canadians contribute to RRSPs in any given year — and most of those contributions are made by wealthy Canadians.

Douglas Peters, a former chief economist at Toronto Dominion and former secretary of state under Prime Minister Jean Chretien, has said that expanding CPP is the best option. CPP is the best investment for Canadians with the greatest return and the lowest risk, he noted in a recent Toronto Star article.

“Higher RRSP contributions would mean a tax-expenditure or a subsidy to savers. But such a subsidy would be paid for by the general taxpayer and the largest benefits would go to those in the highest income tax brackets,” says Peters, who notes that the private option is the equivalent of the poor subsidizing the rich so the rich can have larger pensions when they retire.

In a clear statement of where the federal Liberals should be, Peters notes that “increased RRSP contributions will make the financial institutions better off, while an increase in CPP contributions will make Canadian pensioners better off.”

Harper and Flaherty are hoping that the call and pressure for an expanded CPP will lose momentum; that the urgency to deal with retirement security will lessen the more time passes since the stock market disaster of 2008-09 when Canadians lost billions in savings.

Some 11 million working Canadians, or about 65 per cent, have no workplace pension plan.

The private sector has failed and failed miserably at delivering retirement security for Canadians and now the Harper Conservatives, by shelving the expansion of CPP, have proven they are content with this failure.

Lana Payne is president of the

Newfoundland and Labrador Federation of Labour. She can be reached by email at lanapayne@nl.rogers.com.

Her column returns Jan. 15.

Organizations: Harper Conservatives, CFIB, CPP.The Canadian Federation of Independent Business CBC CFIB.The Canada Pension Plan Toronto Dominion Toronto Star Newfoundland and Labrador Federation of Labour

Geographic location: Canada, Alberta

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Recent comments

  • pierre auger
    November 24, 2013 - 12:58

    Harper and Flaherty lied again to seniors It was proposed last year that it made sense to have small increase in workers and companies so seniors could have gradual increases to be able to live not exist Hydro heating all costs goes up and no increase in pensions Its time for seniors and others about to receive pensions to get together and go to Ottawa and tell harper to stop enriching insurance cos banks and invest our money in our own cpp plan at no cost to workers and future pensioners

    January 01, 2011 - 07:21

    What a great article!!! The Liberals sould wake up and jump on policies that can garner them more votes, but no , again, asleep at the wheel !! The private business sector has indeed failed miserably, at securing reasonable retirement income for their dedicated employees, but then again - GREED, unfortunately, will allways be their reason for not doing so. Pretty hard to invest into RRSP'S when your living paycheck to paycheck , but that is something the Harper Gov. and now the Liberal opposition,can't quite grasp. Keep the great articles coming Lana, I certainly enjoy reading them !!

  • Allan Moulton
    December 31, 2010 - 12:04

    Yes.. led down the garden path once again by mr. Harper and the Conservatives and as stated in the article.. The liberal oposition asleep at the switch.. Really so unfortunate especially for all of us with no workplace pensions, we all thought that with the support of the provinces, the Harper government would move forward with some form of the proposed increase to the canada pension plan. This comes as a major disapointment to all of us and i hope all 65% of us don't forget this when the next Federal Election rolls around. Great Article As Usual !!!!!!!

  • Wildrose
    December 31, 2010 - 08:35

    I don't know much about RSSPs or CPPs or all that financial stuff, but I'll be voing conservative because I don't want to register my gun and I don't like the idea of the rich paying taxes.