Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 18 - Evidence
OTTAWA, Thursday, June 29, 2000
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-37, to amend the Parliament of Canada Act and the Members of Parliament Retiring Allowances Act, met this date at 11:00 a.m. to give consideration to the bill.
Senator E. Leo Kolber, (Chairman), in the Chair
[English]
The Chairman: Honourable senators, we are studying Bill C-37, to amend the Parliament of Canada Act and the Members of Parliament Retiring Allowances Act. We do expect the Honourable Don Boudria, but we have time constraints.
The Senate sits today at one o'clock and we do not have leave to sit while the Senate is sitting, nor have we asked for it. Since there are a fair number of political and other problems with the bill, at 12:30 p.m. we will have an in camera session. Therefore, if Mr. Boudria shows up at 12:30, I will have to cut him off. I am sorry to do it this way, but there have been many weeks when this could have been done and nothing happened. What will be, will be.
We have with us officials from the Privy Council Office and Treasury Board.
Please proceed.
Mr. Ron Wall, Director, Parliamentary Operations, Legislation and House Planning/Counsel, Privy Council Office: We have a few opening comments to explain some of the technical aspects of the bill. Bill C-37 has two elements. The first concerns severance. The bill corrects a provision related to severance for members of the House of Commons.
The second element provides that all members in the House of Commons will join the parliamentary pension plan. The bill does not make any changes to the principles that underlie parliamentary compensation, nor does it make any changes to Senate compensation provisions.
On the issue of severance, some background may be helpful. In 1995, when the members of Parliament pension legislation was amended to end double-dipping, there was an inadvertent creation of a technical glitch within the legislation which affects over a hundred members the House of Commons who were elected before July 1995, are under age 55, and who would not receive any severance were they to cease being a member of the House of Commons.
We have in the House of Commons, therefore, a situation where there are two classes of members with respect to severance. The first group, consisting of over a hundred members who are under 55, do not get severance because, under the current legislation, if they collect an immediate pension for service before July 1995 they are disallowed from collecting a severance. The second group of members who are under 55, were they to cease being a member and if they have been elected after July 1995, would get a severance provision equal to six months of their salary. On the basic sessional indemnity, that is about $34,000.
[Translation]
Ms Isabelle Mondou, Parliamentary Legislation and Planning, Legal Counsel, Privy Council Office: For example, a member of Parliament who is under the age of 55 and who was elected in 1993 would now be entitled to an immediate annual allowance of $5,600 for the years in which he has served, that is from 1993 to 1995.
Under the present legislation, this member would not receive any severance pay, in other words at the age of 55 his retirement allowance would come into effect for an amount of approximately $21,000 but in the meantime, he would not receive a severance allowance.
On the other hand, a member elected in 1997 also under 55 years of age and retiring after six years of service would receive a severance allowance equal to six months salary, that is approximately $34,000. At the age of 55, of course, he would start drawing a pension of about $17,000. The purpose of Bill C-37 is to rectify this situation by providing severance to all members of Parliament.
To take the concrete example of a member under 55 elected before July 1995 who decides to retire or who is not re-elected and is of course part of the Pension Plan, this member would receive severance equivalent to six months salary upon ceasing to hold office, minus any immediately payable pension.
In the previous case, we mentioned a severance allowance of $34,000, minus the immediately payable pension of $5,600, which would amount to $28,400. For a member elected after July 1995 and therefore not in this ambivalent situation, the six months severance allowance would continue to be paid, that is $34,000.
In both cases, the maximum allowance is $34,000. The pension and allowance may not be drawn concurrently and the total value may not exceed $34,000.
[English]
Mr. Aaron Allen, Manager, Pensions Division, Treasury Board Secretariat: Honourable senators, in other words, the severance and pensions cannot be combined. A member in the first year of ceasing to be a member would be entitled to an amount equal to six months of pay, either severance alone or a combination of severance and pension.
As for the pension provisions themselves, the second part of Bill C-37 amends the Members of Parliament Retiring Allowances Act and provides for all members of the other place to become part of the parliamentary pension plan effective from the day on which Bill C-37 comes into force.
The bill also gives those members an opportunity to buy back, at their option, their past years of service during which they did not participate in the pension plan.
Some honourable senators have asked about the process for buying back this past service. The process is the same as already exists in the act for members who, after a break in parliamentary service, are re-elected and have an opportunity to pick up a former period of parliamentary service. The bill provides a one-year period within which affected members may elect to do a buy-back and their costs may be paid either in a lump sum or in instalments.
These provisions are somewhat technical as the pension plan is quite a technical document. We would be pleased to go through those provisions in more detail should the honourable committee members wish us to do so.
Mr. Chairman, this concludes our comments. We would be pleased to answer any questions members of the committee may have.
[Translation]
Senator Nolin: Ms Mondou, if I understand correctly, this applies only to those under 55 who were not covered between 1993 and 1995.
Ms Mondou: It applies to those who were elected before 1995. Since the plan was changed in 1995, those who were elected before 1995 are partly covered by the former plan, the rules of which apply for the period from 1993 to 1995, and under this system they are entitled to an immediate pension.
However, since the plan was changed in 1995, the new rules apply to those members, and one of the provisions of the Act states that when a pension is being paid, then there is no severance allowance. Because of this rule, they draw a small pension and are immediately excluded from the rules that apply to other members of Parliament elected after 1995, providing for the payment of an eight-month severance allowance.
Senator Nolin: You say that there are about 100 individuals in this category.
Ms Mondou: Yes, who are under 55 years of age and elected before 1995, either 1993 or in 1998 or in a by-election during this period.
[English]
The Chairman: I propose to limit each member to one question on the first round, and then go back around the table.
Senator Stollery: Senator, my question is quite short. I am looking at section 8 of 29-30 Elizabeth II, assented to on July 10, 1981, which amended the Members of Parliament Retiring Allowance Act. Section 8, as I recall, is the basis upon which my 25-year pension is calculated. Would you care to comment on that section? The bill, for your information, was Bill C-83 in 1981. That was the bill that was amended, I gather, in 1995.
Could you tell the committee what the effect of the changes has been to the basic principle of Bill C-83, 1980-81, clause 8?
Mr. Wall: Which section of the MPRAA are you referring to?
Senator Stollery: Section 18.
Mr. Allen: The act would have been amended subsequent to that. The current section 18 refers to withdrawal allowances. I am not sure, senator, what the current section number would be from that 1981 change.
Senator Stollery: Section 18 is fundamental to the entire principle of parliamentary pensions because it sets the contributions to the consolidated revenue fund and sequential changes. Are you unable to report on the changes that have been made since 1981?
Mr. Wall: Section 18 of the MPRAA is simply the withdrawal allowance which I guess is the return of contributions for members who do not have six years of service.
Senator Stollery: That does not apply to the section I am looking at. It says that notwithstanding that subsection, commencing on the date that subsection was to come into force, a member of Parliament of the House of Commons was to contribute to the Consolidated Revenue Fund 10 per cent of the amount payable to him by way of sessional indemnity, and then, as I say, there are sequential changes to the previous regime and they seem to be fundamental to the issue.
Mr. Allen: The current section that deals with contributions under Part I of the Members of Parliament Retiring Allowances Act is section 9, and there is a parallel provision in section 32 in Part II of the act, which provides for contributions by members of the other place at the rate of 9 per cent and senators at the rate of 7 per cent.
Senator Stollery: Could you explain what the effect of these changes has been to members of Parliament, with respect to the time required for members of Parliament to qualify for the maximum pension, the minimum pension, and what the effect has been, in plain English, since the last major opening of this act in 1981?
Mr. Allen: The minimum eligibility period under the act to qualify for a pension is six years of contributions to the pension account. The maximum periods, because of the variance in rates of accrual under the pension plan for members of the House of Commons and senators, differ. The accrual rate for senators is 3 per cent per year of service. The maximum pension is 75 per cent of average sessional indemnity. Therefore, the maximum period of contributions for a senator is 25 years. The maximum period of contribution for a member of the House of Commons is 18 and three-quarters years based on their 4 per cent accrual rate and their consequential higher contributions to the pension account.
The act was substantively revised a couple of times in the 1990s, first to split it into Parts I and II to comply with income tax changes regarding registered pension plans, and second, in 1995, with respect to restrictions on double-dipping and imposing a minimum age for receipt of a pension at age 55, and a reduction in the accrual rate by members of the House of Commons.
Senator Stollery: Chairman, I do not want to take up time. I have another question which, of course, concerns the effect of inflation on the actual pension of members of Parliament, but I will turn it over to someone else.
Senator Kenny: I have a supplementary. Could you advise the committee as to how much the government contributes each year to the Commons pension plan and how much it contributes each year to the Senate pension plan?
Mr. Allen: May we undertake to provide that information to the committee at a later point? I am sorry, I do not have that information at my fingertips.
Senator Kenny: Yes, of course.
[Translation]
Senator Poulin: Ms Mondou, could you tell us the facts about the severance allowance? For how long have members of Parliament been entitled to a severance allowance? What amount did they receive previously compared to the present six months?
[English]
Ms Mondou: I will ask our expert from Treasury Board to answer this question because I am not familiar with the background before 1995.
[Translation]
Mr. Allen: You asked a question about the amount of the severance allowances. It has always been six months.
Senator Poulin: Since what year?
[English]
Can you send the information to the clerk?
Mr. Allen: Certainly.
[Translation]
Ms Mondou: It was before 1995.
Senator Hervieux-Payette: I was there at the time and took advantage of it.
Ms Mondou: We shall look into it and provide you with the information.
[English]
The Chairman: I would ask the gentleman from the Treasury Board to check on something. Senator Kenny says that he has heard that the government's contribution to the Commons' pension plan is $11 million and to the Senate's is $1 million. It sounds bizarre. Could you make a phone call and check that at some point?
Mr. Wall: We can do that.
Senator Kenny: It seems like such an extraordinary discrepancy, perhaps we could clear that up.
The Chairman: Perhaps there is a reason for it. Maybe senators are richer.
Senator Kenny: Or senators pay their way.
Senator Banks: My question is more to members of the committee than it is to the witnesses. I am still new here and I can still hide behind that to mask the naivete of my questions. Yesterday in the chamber there was a considerable discussion which centred upon a question of whether or not a Senate committee had properly done its job and properly exercised the scrutiny that was due a bill, and I cannot help but noting that this bill seems to have moved through the commons in jig time.
Senator Nolin: At the speed of light!
Senator Banks: I would presume that would indicate that there might, perhaps, have been less than glaring scrutiny applied to it. As we have heard, in the legislation that was promulgated which this replaces, there was a technical glitch which seems to have lasted for several years and has taken until now to fix. It seems to me that the possibility, therefore, of a technical glitch might exist here, and that three days in the other place and that one day here is likely not enough for us to be absolutely certain that one does not exist today. Is there some way we can ensure that that is not the case?
The Chairman: To whom are you asking the question?
Senator Banks: To you, chairman, and the committee.
Senator St. Germain: They do not really want time. They just want this expedited.
Senator Banks: That is the end of my question.
Senator Kenny: Would you like a lifeline?
The Chairman: You have put me between a rock and a hard place, but you have made Senator Tkachuk happy, so you have won half the battle.
Senator Banks: Then I apologize to you.
Senator Tkachuk: I could not have said it better myself.
Senator Stollery: As the chairman of the Standing Senate Committee on Foreign Affairs, and responsible for the report to which Senator Banks referred, I completely subscribe to what he said. There were a lot of glitches in Bill C-19, so I presume there could be in this bill as well.
The Chairman: Could we get back to the bill, please?
Senator Nolin: I have some questions for Mr. Allen who is representing the Treasury Board and who is the expert on the second part of the bill. The other two witnesses are more focused on the first part.
Mr. Allen, can you provide some information to me as to how many people are covered by that new change and how it will operate? Is it true that it is automatic, so that, even if you do not want it, you will get it? What about those who left without it? Will they be able to claim it? You can answer those questions in any order you wish, but with details, please.
Mr. Allen: The bill provides that members who are not currently participating in the pension plan will become pension plan members. The decision as to whether to participate in the plan was a personal one and subject to privacy legislation. Therefore, that information is not generally made public unless the particular individuals chose to make it public.
Senator Nolin: I am not asking for their names.
Mr. Allen: I can tell you that approximately 40 are affected and, yes, it is true, they will all become pension plan contributors from the date this bill receives Royal Assent. The optional aspect is with respect to whether or not to pick up the past period of service.
Insofar as former members who may have previously not been in the plan and who are no longer currently sitting as members of Parliament, they would have no opportunity to bring that service to their credit now under the members of Parliament plan. However, if at some future point in time, they are elected to Parliament, at that point, as with anyone else who has former parliamentary service, they would be eligible to elect to pay for that former period.
Senator Nolin: Is that the first time in the history of this system that participation is optional? Are we now trying to cover that up?
Mr. Allen: The first time optional participation was a factor with this plan was under the 1995 amendments. That was the initial opportunity for permitting members to opt into the plan. In 1998, those members who had not opted in were given another opportunity to opt in, and now they are being brought back into the plan so that the historical approach of compulsory participation in the plan by all members is back in force.
Senator St. Germain: I read something about a $50,000 fee for opting back in. Is that a flat fee, regardless of the number of years of service, or is it prorated?
Mr. Allen: That fee is dependent upon the number of years. That $50,000 estimate was an approximation of the cost for someone who is reinstating prior service from 1993 to 2000.
Senator St. Germain: Was that figure arrived at based on the members of the Reform Party opting out?
Mr. Allen: The 1995 option related to service from 1993 forward, from the date of the 35th Parliament, so, yes, it is.
Senator Stollery: I apologize for going back to Bill C-83. I do so because I voted for it, as did the Prime Minister, and everyone who was a member of Parliament at that time. I am drawn inexorably back to what happened.
As you are probably aware, Bill C-83 amended the Senate and the House of Commons Act, the Salaries Act, the Parliamentary Secretaries Act and the Members of Parliament Retiring Allowances Act. The key part of the bill was, as I said in the chamber yesterday, to try to resolve the problems that arose in the 1970s with rapid inflation and members of Parliament having to increase their salaries for obvious reasons. Bill C-83 was an attempt to deal with that without them having to appear to be giving themselves a raise when, in fact, often they were just trying to maintain their level of income, as anyone does when we indexed many of the various federal pensions.
I am sure you are aware of the formula agreed upon in 1981. Do you have any idea what the difference would be today between the maximum pension of an MP who has 15 or 18 years or service -- I am not sure of the exact number of years because it has changed -- if the old formula had been maintained, the formula that was agreed upon by Parliament in 1981?
Mr. Allen: I am not sure I follow your question, senator.
Senator Stollery: There was a formula for increasing sessional indemnities for members of Parliament, which is the base for the pension contributions. Thus, when the formula was put aside at some point, the base upon which the contributions were calculated became relatively lower and the pension also became relatively lower. As the base stayed the same, inflation caused the pension payments to be lower in terms of purchasing power. Does that make sense?
Mr. Allen: Yes, because the pension is a function of the remuneration that is paid.
Senator Stollery: Could you tell the committee what the pension would have been if the formula that Parliament agreed to had been maintained, and compare that with the actual pension, taking the maximum pension, rather than going through it from the six years to whatever the maximum is? That would be unrealistic, I think. Could you do that? Could you tell the committee what has actually taken place over all of these years to the pension of members of Parliament? We are talking about pensions at the moment.
Mr. Allen: I am not able to do that off hand. I am at a bit of a disadvantage in that I do not work with the Parliament of Canada Act under which sessional indemnity is established and the indexing formula to which you refer was provided. I would have to inform myself as to what that indexing provision was and do a mathematical calculation to determine what the sessional indemnity would be, had that formula not changed, and then translate that into the hypothetical pension calculation. It certainly can be done. It would be a matter of obtaining the information and doing the necessary calculations.
Senator Stollery: That would be important information to have. I do not see how we can proceed with the bill without having what seems to me to be basic information about what, in effect, has happened to pensions. These are reasonable questions which should be answered before this bill goes any further.
Senator St. Germain: I thank the witnesses for appearing here this morning. The first question I have concerns senators, as members of Parliament. Is there anything that applies to senators in this legislation?
Mr. Wall: No. The act covers members of Parliament, but it affects members of the House of Commons insofar as they have opted out of the pension plan or they would not be able to receive a severance allowance.
Senator St. Germain: What is the actual severance package? You may have gone through that before I came in, and I apologize if you have done so, but what amount would a member actually get? In relation to that, clause 1(3), which amends section 70(10), states that:
For the purposes of subsections (6) and (8), a member is deemed to have been a member for a year if the member was a member for six months or more in any twelve month period.
Does this apply to severance and to the pension?
Mr. Wall: I will answer the first question and let Mr. Allen answer the second. With respect to what is severance, it is six months of a member's salary, which includes the sessional indemnity. In that case, it is about $34,000, which is about half of a member of the house's sessional indemnity, plus any additional severance or any additional salary benefits that the member might have been receiving as a parliamentary secretary or jobs like that. I think it is half a year's salary.
Senator St. Germain: That is the package?
Mr. Wall: Yes.
Senator St. Germain: It is a half a year's salary for what -- the entire package?
Mr. Wall: Right.
Senator St. Germain: Why would you have this clause in here that relates to six months? If it is a package, it is a package. On page 2, subclause (3), states:
Subsection 70(10) of the Act is replaced by the following:
(10) For the purposes of subsections (6) and (8), a member is deemed to have been a member for a year...
If it is a lump sum package of half a year, why would this new section apply? This indicates that the length of time would have to be a factor in the severance package.
Mr. Wall: I will need to provide some background on this. In 1998, we introduced an additional severance package for members who were not part of the parliamentary pension system. That allowance is equal to one month's salary per year of service up to a maximum of 12 months. Subclause (3) on page 2 maintains that principle of supplementary severance for members who opted out of the pension plan and become members of the pension plan effective the date that the plan enters into force. However, if they choose not to opt back in for the previous service, they will still get supplementary severance. This subclause preserves the principle that Parliament passed in 1998 of supplementary severance for members who are not part of the parliamentary pension plan.
Senator Stollery: Mr. Chairman, I do not want to take up the time of the members of the committee, but I must say, following on Senator St. Germain's questions, that it really does affect senators in the negative sense. It has affected senators in the negative sense ever since the formula was dispensed with in the sense that the senators are not included. Contrary to what some may say, we are affected, and we have been affected for quite a long time.
I wanted to bring something to the attention of our witnesses, and possibly they will have something to say about it. Currently we have an indexing formula, and that may be 2 per cent. Does that expire with this Parliament?
Mr. Wall: That is correct. In 1998, following the tabling of the Blais commission report in Parliament, the government introduced legislation that was passed by the House and the Senate to provide a 2 per cent per year increase in the sessional indemnity for the life of this Parliament.
As I understand it, the principle that lay behind that was that this Parliament should address allowances for this Parliament and that it would be up to the next Parliament to address the sessional indemnity and other matters.
Senator Stollery: Of course, that is not what we are doing. The pension bill with which we are dealing here does not just affect the pensions of this Parliament; it affects members of future Parliaments as well. Is that not correct?
Mr. Wall: That is correct, but there are two issues at play in the question you are presenting. One is the issue of the indexation of the sessional indemnity, and the other is the matter of pension coverage. The pension coverage would live on beyond this Parliament for contributions made during this Parliament.
Senator Stollery: I believe that Bill C-83 was based on the recommendations of the McIsaac commission, if I am not mistaken. When this Parliament ends, the pensions of Members of Parliament, including senators and members of the House of Commons, will go down at a compounded rate equal to the cost of living because the formula of 2 per cent will end unless it is dealt with. There is nothing this Parliament could say that would be binding on the next elected Parliament. Effectively, if we proceed in this manner, these pensions about which we are speaking and everything else will decrease at a compound rate. It would be reasonable to say that we are in a time of increasing inflation.
With respect to our witnesses, I understand the narrow perspective that they have to take, but it seems to me that these are very real questions that have been asked for years. As I have said before, the only time in my 28 years in both the House of Commons and the Senate that it was addressed in a proper way was in the course of dealing with the bill that I voted for and that my colleague voted for in 1981, and the formula was put aside. I feel that it is not a narrow question. I opposed, in our own caucus, changing the pension scheme when they did it a few years ago, so I do not object to that, but I think it is a larger issue. Now that we are dealing with the subject, perhaps the Senate and the House of Commons Act should be reopened. This is as good a time as any to deal with this whole subject in a proper way.
Senator St. Germain: With due respect to the witnesses, what really concerns me is that the House of Commons -- and I was a member of the House of Commons -- seem to be marginalizing the importance of the Senate and ignoring the fact that, historically, everything moved in unison. When any benefits accrued to one side, they generally accrued to the other. I see them ignoring the Constitution and doing through the back door what they should be doing through the front door. That includes dealing with expenses, living allowances, pensions, and the whole nine yards. This is not direct at our witnesses. It is more of an observation that I am making. I have served in both places. I sat on the Board of Internal Economy when it was set up in the other place. As well, I am not happy with the way these bills arrive at the very last second so that, for reasons of political expedience, we are expected to just ram them through, as Senator Banks so adeptly pointed out.
In any event, I gather this will have no impact on our side of the ledger. I guess it is a question as to whether or not the government wants to pass this in its present state. If they do, I am sure they will.
Senator Nolin: If a member of the House of Commons is older than 55, is he entitled to a severance package?
[Translation]
Ms Mondou: He is entitled to a pension after sitting as a member of Parliament for a period of six years.
Senator Nolin: What about a member over 55 with only four years service, would he not receive any severance allowance?
Ms Mondou: He is paid a severance allowance if he is not entitled to a pension. It's one or the other. If he has at least six years service, he will be entitled to a pension. With under six years service, he will be paid a severance allowance.
Senator Nolin: It is not limited solely to members under 55. All members are entitled to this severance allowance, are they not?
Ms Mondou: You are quite right but this bill deals only with members who are under the age of 55. The allowance provided for in this bill relates only to people elected before 1995. However, the present legislation already provides for a severance allowance for people over 55 who do not have six years of service.
Senator Nolin: For the information of my colleagues, is a senator with under six years of service entitled to a severance allowance?
Ms Mondou: No.
Senator Nolin: Regardless of age?
Ms Mondou: Yes.
[English]
The Chairman: Honourable senators, we will bring this part of the meeting to a halt and welcome Minister Boudria.
Please proceed.
Hon. Don Boudria, Leader of the Government in the House of Commons: Honourable senators, thank you for the invitation to appear before your committee this morning. I received the invitation while I was in St-Jean, Quebec, announcing a Canada-wide youth exchange program. I hurried back on the plane, which was made available to me so that I could join you this morning.
Also, as this may be the only opportunity I have to do so, I would thank all honourable senators for the passage of Bill C-2, the Canada Elections Act, which received Royal Assent recently. I thanked some senators individually, but this is an excellent occasion to repeat my words of thanks.
I want to speak to you particularly this morning on the importance of adopting Bill C-37 as soon as possible. I recognize that it is the decision of honourable senators to dispose of it, but I would make a plea that the bill be adopted as soon as possible.
I want to emphasize, first of all, that the bill was developed in consultation with all parties represented in the House of Commons. Unanimous consent was sought and given for the bill to be presented to the House in a manner with which you would be familiar. In other words, it was presented and disposed of at second reading all in a special house order that was unanimously agreed to in one day at second reading. The Committee of the Whole agreed to third reading on the second day. That was also agreed unanimously. Honourable senators are familiar with that. The point I am making is that this is not in any way a partisan effort. It is an effort confirmed by a broad consensus of members of the House of Commons.
This bill, of course, does not give additional benefits. It does not create a new benefit that would not otherwise be available to members of the House of Commons. It is really to correct two matters.
The first matter I will bring to your attention is what I would call an unfair provision whereby some members of the House of Commons have a severance and others, accidentally, do not. That creates a rather unusual situation. Take for example an MP who was elected in a by-election in 1995. If that MP were defeated, he or she would receive a pension of $1,400 per year. However, because they receive that $1,400-a-year pension, if they are under 55, that means that the MP is ineligible for a severance: Under the rather unusual rules of the House of Commons, which are different than the rules of provincial legislatures, any pension granted makes the MP ineligible for a severance.
Historically, anyone who had served six years in the House of Commons received a pension on leaving. One's age did not matter. If no pension was given, a severance payment was made instead. A few years ago we amended our legislation but, I suppose, no one thought of the curious situation of an MP who would be eligible for a pension at age 55 but is defeated before age 55 and gets nothing. The solution is before us today. Unless we pass this bill, if someone who has been a member of Parliament since 1993 and is under age 55 is defeated, they will get a tiny pension and they will receive no severance. In the extreme case of the 1995 group -- and there are only a few of them -- the members would receive $1,400 a year and no severance. Meanwhile, of course, members who were elected prior to or since that time would receive a severance. It is a very curious thing and it was never meant to be that way. It is clearly a mistake that needs to be repaired.
The second portion of the bill would enable MPs who opted out of the pension plan some years ago to return to the pension plan. The formula under which they would return is the same as that for a member of the House who served one term, ceased to be a member, say through election defeat, and then came back some years later. They can choose to buy their back-service. MPs who opted out can do the exact same thing. In other words, if they start to contribute right now, they can elect to buy their back-service under the same terms as anyone who was previously a member and returned after winning a by-election or by other means. The same rate of interest would apply for a previously defeated MP who came back. They would have the exact same amount of time in order to make their decision to join in. The bill creates an equilibrium in that regard. The same rules would apply.
Those are the two main portions of the bill that I wanted to describe to you this morning. As I said, nothing in this bill creates new benefits. This is not inventing a new program for members of the House. It does not do anything like that. Those are all things that exist right now for everyone. One is a technical glitch that occurred and created what could be a misery for a number of people should they cease to be members very soon, whether it is this fall or next spring, whenever the next election occurs.
I am not affected by this. As most of you know, I have been around an awfully long time. I am grandfathered for virtually everything that exists around here because of the amount of time that I have served, but I do know that some members on all sides of the House of Commons are affected by this. It would be appreciated if the Senate could support us, the members on all sides of the House, to correct what is wrong here in order to make it just and right. That is my plea to honourable senators this morning.
Senator Tkachuk: Minister, you mentioned the consent of the members of the House of Commons for passage of this bill. Who precisely voted for this bill? What political parties supported the bill?
Senator Boudreau: Mr. Chairman, the names of the members who voted for it and against it are recorded. As far as I know, all Liberal MPs supported it. In the official opposition, some voted for and some voted against. In all parties, unanimous consent was given to the procedure to bring it. The New Democrats largely voted for it; there may have been one or two exceptions. I am going only by memory here, honourable senators. It is a bit unusual to try to remember that. You are probably asking me if any Conservative members of the House voted for it. I do not know if any of them did. By the way, the Bloc members also voted unanimously, except one. One of their members voted against.
Senator Tkachuk: You mention that you are not putting in new benefits. Are you expanding the existing benefits? Is that not the same as new benefits? You are increasing the number of people who qualify for the benefits that exist, are you not?
Mr. Boudria: No, honourable senators, I do not believe I am doing that.
Senator Tkachuk: Then why do you need the bill?
Mr. Boudria: I will go back a bit here. I am sorry if I did not explain it correctly. It has nothing to do with expanding the benefits. No class of people here receives more money. No class of people receives an advantage to which they are not entitled. Every member of the House of Commons is entitled to and was assumed to have identical benefits to other members of the House of Commons. Some members have been disqualified because of a technical glitch. If you want to interpret the rectification of a mistake that has qualified people as inventing new benefits, then perhaps it is, if we use that definition. I do not think it is a definition that most of us would normally associate with new benefits. In other words, I am not giving anyone a pay raise. That is not contemplated. I am not saying that from here on in members of the House will have a pension that is higher than what they would have received yesterday as a group of people. It does not propose to do any of that.
If one were to ask me whether I think that the salaries of members of both Houses of Parliament are insufficient as they are, I would probably say that members of both should get a raise. However, that is another matter and one that is normally addressed, in terms of improving benefits in a general way and so on, in the commission that follows an election. In the past we had the Blais commission report, which was followed by a number of initiatives with which you will be familiar. This does not do anything like that.
Senator Tkachuk: Let me rephrase, then. When did this technical glitch occur?
Mr. Boudria: In 1995.
Senator Tkachuk: How many members were affected by this technical glitch?
Mr. Boudria: I believe 102 members.
Senator Tkachuk: One third of the members of the House of Commons?
Mr. Boudria: That is correct. I can give you better figures here. It has a minor effect on the class of 1988. Some 17 members are under 55. Of course, things being what they are, we all get older, and, eventually, when someone reaches age 55, the problem ceases to exist. As of a few months ago, there were 17 of the class of 1988, and it has a minor effect on them. Of the class of 1993, there are some 81 people who were affected as of the time we put this document together a couple of months ago. As I have said, when one gets to be 55 the problem disappears.
Of course, a couple of people were elected in by-elections here and there. For instance, one member was elected in 1990, two members were elected in by-elections in 1994, I believe, two in 1995, and there are various degrees of how people are affected. Obviously, the worst-case scenario is someone who is today under 55 and would have been elected in 1995. That is by far the worst-case scenario.
Senator Tkachuk: The technical glitch of which you speak that affected one third of the members of the House of Commons all of a sudden became an issue to be dealt with. How did the process start?
Mr. Boudria: Are you asking what triggered the process?
Senator Tkachuk: The election triggers the compensation and other issues. What triggered this?
Mr. Boudria: As far as I know, honourable senators, it was triggered by a reporter in southwestern Ontario who discovered this about three or four months ago and brought it to the attention of members of Parliament. It was brought to my attention and I checked it out initially with officers of the House. They informed me that this was not true. I insisted that they verify the information further, which they did, and then they had to agree with me that, in fact, the reporter was right. This did have the undesired effect to which the reporter had alluded.
Senator Tkachuk: Is this regarding severance or is it regarding pensions?
Mr. Boudria: The glitch is on the severance side. The other one is not a glitch. Of course, it is something that, in the spirit of fairness, should be corrected too. It is not a technical breach that no one knew would occur. That is obviously the severance part, which is the part that I am describing here.
In any case, to continue what I was just describing, after several verifications it became obvious that in fact this was the case. Because people had made these contributions under the old pension system and the new pension system, the contributions under the old system rendered them invalid for receiving severance, because, under the old system, if you received one you did not get the other.
Senator Tkachuk: Could you have fixed the severance problem without the pension problem?
Mr. Boudria: I suppose we could have put whatever we wanted in the legislation.
Senator Tkachuk: What started the process for the pensions?
Mr. Boudria: If I can give you the merits of the pension initiative, it is true that the people will be eligible for a pension when they had previously, by their own decision, decided to opt out. At the same time, it is equally true that from here on in, if this bill is approved as is, everyone would be forced to pay premiums. In other words, if this bill receives Royal Assent, starting that day, everyone who sits in the House would start to pay premiums, even those who voted against the bill, even those who decided not to retroactively buy back their time, which, of course, they are entitled to do, but they must pay interest on purchasing it all back, et cetera. Starting today or tomorrow or whenever Royal Assent occurs, they would from here on in pay the premiums, because right now there is a group of people who do not pay premiums to the pension plan.
I, for one, believe that in any kind of collective agreement or collective benefit, whether it is a pension plan, group insurance, medical premiums or so on, everyone should pay the premiums. We have a situation right now where some people do not. They would all pay.
The Chairman: Mr. Boudria, if this bill is not passed, who is hurt?
Mr. Boudria: Honourable senators, I have not made this bill a partisan issue at all and I will not.
The Chairman: I am not making it a partisan issue, I am just asking if someone goes without.
Mr. Boudria: Ultimately, I would argue it is the families of anyone who ceases to be a member whenever the election is called. I am very much a believer and a defender of the great institution that is Parliament, both Houses. Members of this committee will know that from my defence of the Estimates of the Senate and otherwise. If we make Parliament unattractive to people who want to serve their country, we are doing no one, on a partisan or a non-partisan basis, a favour. We are doing the institution a disfavour. That is one of the reasons I have supported this bill, even though I have absolutely nothing to gain from it in a personal sense at all and even though the great majority of people who will benefit the most from it do not sit on my side of the House.
Senator St. Germain: Thank you for appearing before us, minister. We go back a long way, and it is nice to see you again.
Mr. Boudria: We were almost seatmates.
Senator St. Germain: Is there still a six-year requirement in place before one can receive a pension?
Mr. Boudria: Yes.
Senator St. Germain: Will everyone who loses an election receive severance?
Mr. Boudria: No.
Senator St. Germain: Where is the cut-off, then?
Mr. Boudria: Let me give you an example to illustrate. Let us say that after having served a particular amount of time a member who was not a member of a pension plan is defeated. They would receive a severance of $30,000 a year. Let us say they do have a pension plan of $6,000; then they would receive the $30,000 minus the $6,000. In effect, they would receive a severance of $24,000. In other words, you are never better off.
I was very careful in the drafting of the legislation to see that we did not end up correcting a mistake while creating an unfairness on the other side. That was of utmost concern to me. The threshold is whatever one would have had as a maximum severance. The pension amount is deducted from it.
Senator St. Germain: My next question is more of a comment, minister. I have served in both places. I sat on the original Board of Internal Economy. I said before you arrived that I am concerned about the House of Commons marginalizing the importance of the Senate. Traditionally, whenever legislation dealing with benefits was passed, benefits accrued simultaneously to both Houses. Having served in both Houses, I do not believe that we should be ignoring what is constitutionally enshrined. We should not be doing to each other through the back door what we should be doing through the front door. I have a major concern about this. In terms of expense allowances and living allowances, it probably costs me more since I live in British Columbia than it costs MPs who live in Ontario.
What concerns me the most is that you brought forward this legislation, yet some of the people who opted out of the program came here and demeaned the position of member of Parliament and some of the benefits that accrued to many of us. We are now being asked to pass legislation that allows them to opt back in. I know how hard members of Parliament work. I have seen the members of Parliament from the West virtually deteriorate, and their families are important to them, which is the only reason I think this legislation should get the consideration that it is getting. It is not for those who opted out and demeaned the positions that all of us have held, including you and me and others. The fact is that this is what their families deserve. I know the price those families have paid. That is more of a comment, minister. If you wish to comment as well, I should like to hear your views.
Mr. Boudria: I am sure you are correct, senator, when you say that some have demeaned the role that all of us play. If I can say something in my personal defence, I do not think I am one of them.
Senator St. Germain: I agree with that.
Mr. Boudria: In terms of defending the benefits, I was one of the advocates, as many of you know, of the housing allowance for senators. If are you asking me if I think it should be the same amount, obviously it should. If you pay rent in Ottawa, no one says, "I will give you a 20 per cent discount because you are a senator rather than a member of the House of Commons." The rent is the same price. Yours is a very valid point. You know of my historical and continued support for all this.
Senator, you said this measure will allow people back in to the pension plan. In a way it does, but remember it forces everyone to pay the premiums starting now and allows them to buy back the retroactive part. However, they will be paying full premiums under the same conditions as someone who was previously defeated and who comes back a second time. They are not given a break in terms of buying back retroactively with no interest, or by buying back retroactively with advantageous conditions that a previously defeated and returning candidate would not have. They are the same benefits with the same buy-back conditions, premiums, interest and everything else.
Senator Roberge: What is the deadline for them to opt back in?
Mr. Boudria: Do you mean to buy back?
Senator Roberge: Yes.
Mr. Boudria: It is one year to opt in and buy back their back time. In terms of being opted in from here on in, that is automatic on the passage of this bill. It is only the retroactivity part that has an opting-in provision. The here-on-in part, if I can call it that, is automatic whether they voted for it, agreed to it or not. They all pay premiums from here on in.
Senator Tkachuk: Minister, as you know, there are some concerns in this committee not with the subject or the principle of the bill itself but with the fact that we are here on a Thursday morning when the Senate will be adjourning for the summer later today and having to deal with this bill in a couple of hours. One of the senators tried to get to this question earlier on. Senators from both sides share this concern. Will there be a problem if this bill is dealt with now or if it is dealt with in the fall when we come back, which is two and a half months away?
Mr. Boudria: That is a very important question, Mr. Chairman. Unfortunately, it is almost the same as asking me if there will be an election before this bill receives Royal Assent in the fall, should that be the case. I wish I knew, but I really do not. If an election were to be called before this bill receives Royal Assent, that obviously would create a very big problem for many of our colleagues in Parliament. Whether we support them or not on an individual basis, it is a huge problem for them and their families.
If there were not an election for one year, then I am sure that it could be done later, except that it would mean more time to buy back and lower premiums paid now. However, that is but a small detail.
Senator Tkachuk: The election is the only problem; is that what you are saying?
Mr. Boudria: Yes, because of the severance; and severance is triggered only by an election.
Senator Tkachuk: But you guys get to call it.
Mr. Boudria: In a very indirect way. Honourable senators, you must remember that members of Parliament collectively and individually, except for one of them, certainly have a very small role to play in that regard.
Senator Stollery: Mr. Chairman, I will not refer to the Debates of the Senate of July 10, 1981. It is interesting how these things always appear at the end of a session. When we dealt with Bill C-83, it was, of course, on July 10, 1981, which was at the last moment.
I want to assure the minister that when MPs damaged their pension a few years ago, I thought it was a bad idea. I have a 25-year pension. I was elected first in 1972. I went through three salary increases in the Senate. I know exactly what happens to these so-called commissions. I am not blaming the minister, because they certainly predate him. I am looking at the report from the MacIsaac-Balcer commission, which was disregarded because it was too generous to members of Parliament. That was back in 1980-81. I do not have any quarrel with the issue of MPs having been very unwise, but I do recall the situation of my great friend, Senator Jacques Hébert, who, after many years of great service to this country, receives not much of a pension.
Like you, minister, I do not really have a personal interest, but this is a good time to look at the fact that the 2 per cent formula ends with this Parliament and, therefore, members' pensions will compound down. In my view, this is an excellent time to look also at some other problems. That is not a personal question to the minister.
Mr. Boudria: May I have one minute to respond? The Blais commission report did not recommend any increase. I am probably the only Government House Leader in recent years who actually went beyond what the commission reported. Everyone used to say, "This is too generous. We will only take a portion thereof." I actually did it anyway. It may have been a small amount, but I did it anyway, notwithstanding the recommendation that said not to. I have a few scars from doing that, but I did it anyway, even though it was in a minor way.
Maybe it is a good time to say on the public record that whoever the Government House Leader is after the next election, whether it is me or someone else, we will have to look at some things that are missing. For instance, why is there not such a thing as disability insurance in the event that someone is unable to serve? Perhaps premiums could be attached to it or otherwise -- whatever the next commission decides.
Having a formula like the one I put in place, although perhaps with a higher percentage, will keep members of the House and of the Senate from disagreeing with each other as to who will cut down from the increase that is proposed. You establish it in a once-and-for-all way so that it triggers automatically in the future. I do not know if honourable senators have noticed, but over the last three years, since I put in the 2 per cent a year increase, we have no longer had the orgy of fun from people who make mincemeat out of us every time the new salary increase triggers. There was a small mention in the media the first year. Last year, no one even raised it publicly. It was a way of ensuring that people perhaps had less fun than they otherwise would have had walking up and down our spines. It was a good thing to do to adjust it that way. Perhaps if there is a lesson to be learned, it is to put some kind of a formula in place that would help us in the future.
Senator Nolin: As long as the base case is the same, I agree.
Mr. Boudria: Of course, none of this is in this bill. We are talking about amendments to the act, not amendments to the bill in order to do this, because those provisions are not in the present bill. At least, in the other House you cannot amend a bill by providing amendments to the act. You have to amend the bill in a way that amends only the bill itself.
I am prepared to support initiatives to assist members of both Houses in the future, as I believe I have in the past, Mr. Chairman.
One last plea: I would invite, respectfully, of course, honourable senators to adopt the bill that is before you. It is a good bill. It is only meant to correct things that are wrong, even though there are many more things that are wrong, which I am the first to recognize.
The Chairman: Thank you for appearing.
Honourable senators, we cannot go in camera. I suggest we go clause by clause, in which case it must be public. Is it agreed, honourable senators, that the committee move to clause-by-clause consideration of Bill C-37?
Senator Tkachuk: We should make it clear from our side that we wanted to see further study of this and that it would not be dealt with so quickly. We have a number of people, including Walter Robinson of the Canadian Taxpayers Association, and I am sure there are many other groups who would like to appear before us on this bill, which is important to us. I want to make our objections clear and to state that we are not happy about the fact that we will be doing clause by clause today.
The Chairman: I appreciate that.
Is it agreed, honourable senators, that the committee move to clause-by-clause consideration of Bill C-37? All in favour?
Some Hon. Senators: Agreed.
The Chairman: All against?
Some Hon. Senators: Opposed.
The Chairman: It carries.
Shall the title stand postponed? All in favour? All against?
Senator Tkachuk: We are going to vote on division, so if you want you can dispense and vote the bill in on division.
Senator Nolin: I have one remark on clause 1. I think there are some numbers that do not add up. If you want to vote for it, it is up to you. The minister told us that there are 17 members of the House of Commons who will be affected by this administrative glitch. It does not add up. The way it works is that the members of the House of Commons are getting that 50 per cent of pension.
The Chairman: Excuse me. I thought he said 102 people.
Senator Nolin: Seventeen of the 102 are from the class of 1988, he said. That is 12 years ago. After ten years in the House of Commons, a member of the House of Commons is getting 50 per cent of pension. Already, all of those elected in 1988 who are still there will have more than 50 per cent of their pension, so they are not eligible for the so-called severance. Right there, we need more explanation. We need to understand that. We are told that there are 17 members of the House of Commons who will be affected by clause 1. I am just giving you what I know. It is a minus; it is 50 per cent -- six months of salary. That is 50 per cent of one year, or the severance, the maximum being $34,000. Right there we have a problem.
Senator Kelleher: Clearly a technical glitch.
Senator Nolin: None of the class of 1988 is eligible or being affected by clause 1.
The Chairman: I will undertake to get you an answer.
Senator Nolin: Before this afternoon.
Senator Tkachuk: Because that question came up, maybe we should do clause by clause. Senator Nolin made an important point. I am sure there will be others, so let us do that.
The Chairman: Okay. Shall clauses 1 to 8 carry?
Senator Poulin: I so move.
Senator Tkachuk: On division.
The Chairman: Shall the title carry?
Senator Poulin: I so move.
Senator Tkachuk: On division.
The Chairman: Shall the bill carry?
Senator Poulin: I so move.
The Chairman: Is it agreed that I report this bill to the Senate? I am sorry, I have to repeat that.
Is it agreed that I report this bill to the Senate without amendments?
Senator Nolin: On division.
The Chairman: You understand, of course, that when it gets reported, someone will move -- I guess myself, I do not know -- to take it to third reading, at which point they will ask for unanimous consent. You will have to decide what you want to do.
Senator Oliver: The independents as well.
The Chairman: Everyone in the room.
Senator Nolin: Even Marcel.
The Chairman: Gentlemen, thank you for your time.
The committee adjourned.