Harper could make better pensions a legacy

TimesColonist.com – business
July 30, 2011.    By Susan Riley, Times Colonist

Prime Minister Stephen Harper shares some of Jean Chrétien’s unpleasant traits: An authoritarian manner, occasional vindictiveness and shamelessness when it comes to patronage.

But both men possess a steely resolve and indifference to criticism that can be enormous political assets. Chrétien proved that when he forced major reform of the Canada Pension Plan on squabbling premiers, his carping opposition, a suspicious media and the usual self-interested lobby groups almost two decades ago – a reform that now looks prescient.

It left the public system stable and secure while other forms of retirement savings have since been buffeted, or undermined, in a capricious economy.

In his instructive 2006 book, The Way it Works: Inside Ottawa, former Chrétien factotum Eddie Goldenberg ascribes the 1997 coup partly to the personal relationships that developed among federal and provincial politicians and officials during Chrétien’s Team Canada trade missions abroad.

Chrétien also liked to tackle ambitious and controversial policy changes away from the bright lights. He famously, and often effectively, lowred expectations and the stakes.

In the pension fight, he asked his gifted finance minister, Paul Martin, and Martin’s deputy, David Dodge, to handle the detailed negotiations. Goldenberg recalls that Martin and Dodge “kept their negotiations with the provinces low-key and off the radar.”

With some unrelated concessions to Ontario, they managed to secure the support of Mike Harris, who was virulently opposed to tax increases on principle – and federal reforms, of course, meant increased CPP premiums for individuals and businesses.

To this day, any reform to the pension system requires the consent of seven provinces representing twothirds of the population, complicated by the fact that Quebec has its own parallel, if similar, regime.

Finance Minister Jim Flaherty, to the surprise of many, endorsed modest increases in contributions to the public system as part of the mix.

Unfortunately, despite the backing of Ontario, he was unable to achieve consensus at a finance ministers’ meeting in P.E.I. last summer and, since then, the issue has languished.

Instead of fixing the CPP, ministers agreed to a pooled registered pension plan (PRPP) for the self-employed and small businesses.

Contributions are not expected to be mandatory and these funds will be managed by private institutions, arguably at greater cost than unionbacked and public pension schemes.

But none of these voluntary vehicles – including Tax Free Savings Accounts, or even the venerable RRSP – helps Canadians who can’t afford to save consistently, or at all.

They are not all improvident, either. They are often forced to work sporadically, for low wages, and, with the decline of employer-supported pension plans, have to rely entirely on what they can save themselves.

The present system, especially RRSPs, disproportionately helps those with good, steady incomes.

Even today’s middle-income earners will be working longer and living far more frugally unless we, as a society, start providing for tomorrow.

A more generously funded public system could cushion the most vulnerable and ease the retirement of the middle class, while offering low overhead, the benefits of shared risk and relatively small increases in individual contributions.

Conservative MP Ted Menzies insisted this week that CPP reforms are not dead. Ontario’s imperilled Liberal government remains onside. Federal New Democrats want a doubling of CPP contributions; the Liberals back a weak, voluntary top-up.

Ranged against them are the naysayers, who conveniently ignore the administrative efficiencies of public pensions. Some claim the economy is too fragile to risk change. Alberta leadership contender Ted Morton complains increased CPP contributions will be paid by young people who will never benefit. (Perhaps seniors should stop funding universities.)

But despite opposition, and the potential election of Tim Hudak, a Harris clone, as premier of Ontario, a determined prime minister, with skill, nerve and public support could at least launch incremental improvements to a vital social program.

Enhanced security for the retired, administered cheaply and fairly, would be an unexpected legacy for Harper – if he wants it. Maybe he should start with a Team Canada package tour abroad.

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