The big winner at Kananaskis: Little Canada

TheGlobeandMail.com – News/Opinions/Opinion
Published Wednesday, Dec. 22, 2010.   Jeffrey Simpson

So it’s off to the Supreme Court in April for another test of Big Canada versus Little Canada, the issue being the creation of a national securities regulator.

Strong countries have one regulator, of course, but in our kingdom of principalities, four provinces – Alberta, Quebec, Manitoba and Saskatchewan – oppose the creation of something national. Their finance ministers made that clear again at this week’s gathering in Kananasksis.

So we will wait for the Supreme Court hearing, in which the interests of the whole country will be pitted against those of some of its constituent parts. Big Canada needs an effective internal economic market, given the ferocity of external competition; Little Canada gazes only at its own navel.

The Alberta-Quebec alliance at the core of the opposition to a national securities regulator also scuttled expansion of the Canada Pension Plan at Kananaskis.

Increasing CPP premiums, and subsequent benefits, had been Finance Minister Jim Flaherty’s preferred option. It was a sensible, low-cost option that would help low-income Canadians by using a vehicle they all know, and in which investments are made by an existing arm’s-length agency (the Canada Pension Plan Investment Board).

Two-thirds of the provinces representing two-thirds of the population are required for CPP changes, and Alberta and Quebec blocked those changes. So Mr. Flaherty retreated to a less desirable voluntary scheme for the self-employed or those who work for a company without a pension plan. This entity would be controlled by the banks and other financial institutions. Any guess why they liked the idea so much?

Let’s remember that Ted Morton, Alberta’s Finance Minister, used to argue that Alberta should withdraw from the CPP and create its own plan. He, with now-Prime Minister Stephen Harper, was also one of the authors of the infamous “firewall” letter that urged Alberta to defend itself against federal incursions and intrusions.

So is anyone surprised that Mr. Morton doesn’t want to use the CPP to protect Canadians’ retirement incomes? He’s got an oft-repeated regional bias against the CPP, an ideological preference for free-market solutions over collective ones, and a view that the savings challenge is limited to particular groups. He says that, given the fragility of our times, it’s not an appropriate moment to raise premiums.

That argument is also being advanced by Quebec, but it’s camouflage for the province’s deeper objections to Ottawa (and other provinces) acting at all. Quebec has its own pension plan, but it still gets voting rights within the CPP. If Quebec’s and Alberta’s objections about timing were serious – that a premium increase would be too economically stressful – then governments could agree that the increase could start in, say, 2013, or when the economy has improved by certain measurable standards.

Curiously, there seems to be an aversion among governments to easing future retirement costs by raising the age of retirement. Australia, France and the United States have already done so, lifting the age for future receipt of public pensions. Other countries are pondering similar moves. In Canada, for reasons one presumes are all about political fear, the issue isn’t even on the table.

It’s an odd kind of blind spot, because the average life expectancy of Canadians has risen 4.3 years since the inception of the CPP in 1966. Since then, premiums and benefits have increased, the investment of the CPP money has been put in the hands of an arm’s-length investment agency, and now debate swirls again around benefits and payouts. We’ve been willing to modify other elements of the CPP, but no one apparently will touch the issue of raising the retirement age.

Predictably, the provinces couldn’t agree at Kananaskis on a securities regulator or pensions, and they couldn’t agree with Ottawa. But they did agree that Ottawa should continue to give them large cheques for health care indexed at 6 per cent (!) after the current funding regime expires in 2013-2014.

Badgering Ottawa for more money is often the only thing on which the principalities can agree. Politically, how can they resist such a temptation?

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