Rare consensus of provinces, territories fails to sway decision of federal minister
Jim Flaherty and Wes Sheridan
A national campaign by P.E.I. Finance Minister Wes Sheridan to boost the Canada Pension Plan by raising premiums has apparently ended in defeat. It was a surprising outcome since Mr. Sheridan had somehow managed to get a consensus among the provinces and territories, a difficult task at the best of times. It was even more surprising that federal Finance Minister Jim Flaherty said Ottawa was not interested in any plan to enhance the CPP if it involved raising premiums for Canadians.
It wasn’t just that Mr. Flaherty nixed a plan to raise contributions; he was even cool to the suggestion to explore the idea. The rebuke came Monday following a meeting with federal and provincial finance ministers at Meech Lake. Mr. Sheridan said the premiers proposed that an independent third party continue to look at CPP and get a full understanding of what the impact would be on families, business and all Canadians. It seems like a sensible idea but Ottawa said it doesn’t agree with a CPP enhancement and it doesn’t have any intention of ever doing it, explained a disappointed Mr. Sheridan.
It’s obvious that Ottawa sees a CPP hike for employers and employees as a tax increase and the federal Conservatives have made it their mantra they cut taxes, they don’t raise taxes. A CPP increase would send the wrong message to the all-powerful Conservative base.
Mr. Sheridan says provincial finance ministers are now taking a timeout to determine how best to respond. Without Ottawa on board, it is very difficult for the provinces to act alone, especially smaller provinces like P.E.I. even though Ontario says it is now prepared to go solo with pension improvements.
The provinces’ proposal would boost CPP contributions for both workers and employers, requiring a 3.1 per cent increase in contributions. Increasing the amount of premiums paid into the plan will contribute to an eventual payout and provide Canadians with additional and more secure retirement income.
Provinces agree there is urgency involved but they were willing to push back a phase-in period for two years to co-ordinate with a request from Quebec, just to save their CPP plan. Ottawa had actually indicated several years ago it would support a plan to boost CPP premiums, but that was before the 2008 recession struck. Now, Mr. Flaherty argues the economy is still too fragile to tinker with pensions. He doesn’t want anything to upset his plans to balance the budget in time for the October 2015 federal election. And he especially wants to follow orders from headquarters that no taxes be raised.
The federal government opted to follow a course of action, supported by the Canadian Federation of Independent Business, which warned of job losses, plant closures and higher unemployment if CPP hikes went through. On the other hand was a solid alliance of premiers and territorial leaders. It would seem that Ottawa should pay at least equal attention to elected leaders trying to protect citizens over a business lobby group. But the CFIB is seen as closely allied with the Conservative base. Once again, Ottawa is paying slavish loyalty to this base at all costs.
The federal government had best be careful that the provinces are perceived as more concerned with pensions and protecting ordinary Canadians than the federal government. Ottawa just might get itself boxed into a difficult electoral corner from which it would be hard to escape if a rival provincial plan takes off. It would seem like a very hollow victory if Ottawa can claim it never raised taxes yet throws into jeopardy the retirement income of the average Canadian.