Proceedings of the Standing Senate Committee on
National Finance
Issue 19 - Evidence - May 16, 2012 - Evening meeting
OTTAWA, Wednesday, May 16, 2012
The Standing Senate Committee on National Finance met this day at 6:30 p.m. to study the subject matter of all of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures, introduced in the House of Commons on April 26, 2012.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Tonight we are resuming our study of the subject matter of Bill C-38, An Act to implement certain provisions of the budget tabled in Parliament on March 29, 2012 and other measures.
[English]
Honourable senators, this is the sixth meeting on the subject of Bill C-38, and I suspect our witnesses have sat through three or four of them waiting for the opportunity to tell us about their portion. It covers many different areas of the budget as well as certain other measures, as indicated in the title of the bill.
We are progressing nicely through the study and are pleased to have departmental officials before us who are experts in various parts of the bill. At this time, we are dealing with the food and drug portions of the bill, which is Division 19, at page 291 and following.
I am pleased to welcome Joanne Garrah, Samuel Godefroy and Lisa Lange.
Joanne Garrah, Associate Director, Office of Legislative and Regulatory Modernization, Health Canada: As you mentioned, we are here this evening to give an overview and a clause-by-clause walk-through of Division 19, Part 4 which relates to clauses 412 through 419 involving amendments to the Food and Drugs Act.
The bill primarily sets out two policy structures. One is for streamlining the process for assigning or removing prescription status for drugs. The second structure is for streamlining the process for regulating foods, primarily related to health claims for foods and for substances that are on or in foods such as food additives, food contaminants, vitamins, minerals and nutrients.
To facilitate the clause-by-clause walk-through I will speak to the two structures separately. I will speak first to the changes related to the prescription drug list.
I will start with clause 413, which is where you see the main structure relating to a process for assigning or removing prescription drug status. This structure contains two main elements. The first is that it gives an authority for the minister to establish a list of prescription drugs, and that list would be incorporated by reference to the regulations. The authority for creating the list would be subject to the regulations, and those regulations would set out the criteria for assigning prescription status, the process for notification, as well as the consultation process for changes to the list.
Those provisions are supported; the regulation-making authority is provided under clause 414. I will also note that under the provision related to incorporation by reference, there is an obligation on the minister to make that list publicly available. It will be subject to all the normal processes and checks and balances for good rule-making practices to ensure that the process is transparent and that the information is publicly available.
The Chair: Would you interpret that to mean any amendments that are made as well? Since the amendments are automatically applicable, the list as amended should be also available.
Ms. Garrah: That is correct. That will be a list that is maintained at the ministry, and as it changes it will be made publicly available.
As I mentioned, the second structure outlined in the proposals relates to streamlining the process for regulating foods, specifically the substances that are in or on food or substances that are added to food, such as food additives. It also relates to health claims.
This structure is very similar to the one for the prescription drugs. You will see that there are essentially two elements to that, referring now to clauses 416 and beyond. Under clause 416, you see an authority for the minister to issue marketing authorizations that will permit, by exemption, the use of substances in or on foods, and it will also permit some health claims. It also gives an authority to set conditions on those exemptions. If there is a marketing authorization issued by the minister, it also includes an authority for her to set conditions on that such as limit — maximum or minimum allowable limits — for substances that are added to foods.
The authority under clause 416 also includes an authority to incorporate, by reference, documents or lists to a regulation made under the act or to a marketing authorization. As with the provisions relating to prescription drugs, there is also an obligation on the minister to make documents that are incorporated by reference publicly available.
In terms of the incorporation by reference, there are a couple of examples I can speak to. The incorporation by reference authority could be used to incorporate documents that are developed by the government, such as lists. An example that I could give would be a list of contaminants, such as setting limits for the amount of allowable heavy metals in fish for consumption.
The other example would be that it could be used to incorporate public guidelines or standards, such as codices or documents that are developed internationally and are well-accepted standards that would usually be fairly technical in their content.
Those are the main elements of the structure. The marketing authorizations would also be subject to GIC regulations, which would set out criteria and a process for submitting applications for marketing authorizations.
The remaining provisions that are found in Division 19 relate to transitional provisions to support either the coming-into-force or the implementation of these authorities. The provision for marketing authorizations, or the authority that would be granted for marketing authorizations, is a replacement of an existing authority, under the Food and Drugs Act, that is limited to a temporary marketing authorization. The transitional provisions that are found in clause 417 speak to the transition of those existing interim marketing authorizations. They would either be cancelled, or, if marketing authorizations are in place that have the same effect as interim marketing authorizations, they would be replaced, in effect.
The last provisions that are there, clauses 418 and 419, are consequential amendments and the coming-into-force provisions.
The Chair: Ms. Garrah, I am still concerned about amendments to documents incorporated by reference. I think it is extremely important that, if there are amendments to documents, those amended documents are available so that people can understand the law. I can understand incorporating a document by reference and saying it is not subject to certain regulatory tests, but have you had any concern about this? Is this wording in proposed sections 30.5 and 29.2, which is similar wording, one for prescription and one for additives, used in any other statute that you are aware of? Is this common language?
Ms. Garrah: The language for incorporation by reference?
The Chair: Yes, with the amendments. It says, ``regardless of its source, either as it exists on a particular date or as it is amended from time to time.'' There is a list out there. You say that is incorporated, and it could get amended many times along the way.
Ms. Garrah: Yes. We could follow up with the committee to provide examples of other texts used in other pieces of legislation, if that is helpful. However, it is my understanding that this is fairly standard text to refer to a mechanism to allow for the incorporation of reference of documents and as those documents are amended.
The Chair: I am not arguing about the incorporation of the documents, understand. It is about the amendments, to make sure that the public is properly protected by knowing what the amendments are because they are regulations that apply to them.
Ms. Garrah: Yes.
The Chair: If there was any court interpretation on that, that would be helpful. Thank you.
Senator Eaton: On the Agriculture Committee, one of the things we have been dealing with is innovation and the length of time it takes to get a new food product to market. Will this speed up the whole process? How long does it take now? It takes a couple of years, does it not, to get a new product authorized to market?
Ms. Garrah: I will start by responding fairly generally, and then I will refer to my colleague to provide some specific examples of the efficiencies that would be gained.
You are correct in understanding that the current process for these lists right now is that they are maintained in regulation in tables. Each time a change is made to those tables, either to add a food or to change a limit related to a food additive or another substance, it requires a regulatory process. There is a scientific review, which sets out the decision in terms of safety, and then that is followed by a regulatory process.
The proposals that are in the bill at this time would seek to preserve the scientific process that is in place, so the scientific review that is made to assess the safety of the substance added to food would remain in place. The efficiency would be gained by not having the regulatory process, which can take many months. We have several examples where that would be extended over many years.
Samuel Godefroy, Director General, Food Directorate, Health Products and Food Branch, Health Canada: There are a few examples to show the efficiencies that we aim to gain. When our scientists at Health Canada assess a food additive, they generally take the same amount of time, given the same level of expertise, as other international jurisdictions in coming out with the decision on whether the additive is safe and setting out the conditions of use.
What makes the process very long and essentially creates inefficiencies and impediments to innovation is the process that follows that safety and efficacy assessment. This is what this proposal is attempting to do, through the development of this ministerial regulation power under the marketing authorization, as well as the incorporation by reference in these marketing authorizations. That will follow all the requirements of rule making. There will be the same rigorous scientific process, the same requirements of consultation and engagement of stakeholders and the same requirements of notification of international partners, but it will, for example, reduce the time that it would take after the safety decision is completed from 41 months to as little as 6 months to get a safe product to market.
Senator Eaton: The 41 months remains?
Mr. Godefroy: The 41 months is actually the current process that we would like to shorten.
Senator Eaton: That is three years and some.
Mr. Godefroy: It is over three years.
Senator Eaton: Yes. A producer can look at four years now?
Mr. Godefroy: With the current processes, it could be as long as three years or even longer simply because of the nature of the regulations. It is very important to mention to the honourable senators that the way food additives are regulated, for example, dates back to 1964. It is probably one of the oldest regulations made under the Food and Drugs Act. As a result of that, when there is a need to amend, for example, the additives that are listed in the regulations, there are multiple consequential amendments that result in very complex drafting and very complex changes that are resource-consuming but that do not add value in terms of safety or efficacy or enabling access.
Senator Eaton: Do you ever work with universities? If a university has developed a food product, that does not shorten the regulatory time it has to go through?
Ms. Garrah: That is correct. There is a scientific review, and the scientific review would remain in place. What these provisions relate to is what normally occurs after that, which is the current requirement that amending those tables that exist in regulation, because they are GIC regulations, requires a full regulatory package. That means that it has to meet a cabinet date and to go through all of those steps. This would seek to preserve the scientific review, but it would relieve it from the requirement to file it as a regulatory package.
[Translation]
Senator Hervieux-Payette: I am going to call on your Sherlock Holmes skills and ask you to explain to me how a nutritional supplement that has for the past eight years been freely available over the counter in Europe, the United States, Mexico, Barbados, and I am forgetting a few countries, has by some miracle now become a prescription drug in Canada.
For eight years then I have been illegally importing this nutritional supplement for my health. In fact, this development is good because the supplement is now covered by my health insurance plan. However, it seems to me aberrant that for eight years OECD member-countries have been making this supplement available, whereas now in Canada, in our great wisdom, the agency is making it available legally, but on prescription only. Explain to me how this has happened, please.
[English]
Ms. Garrah: It is difficult for me to respond specifically to the example that you have provided, but I can speak to the process for assigning prescription status to products.
Much like the food provisions and the overview that we gave for the marketing authorization provisions for food, the process for assigning prescription drug status is very similar in that there is a scientific review made of a submission, and part of that assessment determines whether or not it is appropriate that a product should be sold by prescription only. That assessment of whether a product should be sold by prescription is made based on a set of criteria. It is a set of scientific criteria that have been well-established for a number of years and are publicly available.
That assessment is made, and if it is determined that it is appropriate that a product be sold by prescription, which is basically an assessment of whether that product should be sold with the oversight of some form of learned intermediary, whether a physician or a pharmacist, once that assessment is made, currently that is then followed by a regulatory process, which involves the amending of an existing schedule to the regulations.
The process that is proposed through these provisions in the bill would not seek to change that in any way. The criteria for determining whether or not something should have prescription status would not change. The only thing that is proposed to change through this is whether there would be a requirement for a full regulatory package subsequent to that.
[Translation]
Senator Hervieux-Payette: I know that a pharmaceutical company or a food producer who wants to obtain your authorization has to pay certain fees. How do you set those fees? Will the changes affect them?
You receive higher fees for food products than for drugs, but the fact remains that the agency receives certain sums from the industrial and commercial sectors. I want to know if you are running a deficit or a profit.
Mr. Godefroy: I am going to answer with regard to food products. In fact, studies and assessments regarding food are not subject to cost recovery. They are done free of charge and this is a service that is offered to industry, of course, but essentially it is not a strictly industrial service, it is done to protect the health of Canadians and so as to permit only the authorization of substances that are judged safe for the health of Canadians and can then be added to the food products list.
As for therapeutic products, there is cost recovery in that case, and this was brought in in a piece of legislation that was passed previously. My colleague may have some further comments on that.
[English]
Ms. Garrah: If it is helpful, I can speak to that. There are user fees, so there are fees that are cost-recovered on the drug side of things. There are a couple of different steps to that process.
There is a requirement under the User Fees Act that there be a proposal to Parliament if any new fees are imposed or if any significant changes are made to fees. The clauses in this proposal are not seeking to change any of the fees that are currently in place to support cost recovery in relation to drugs.
Senator Hervieux-Payette: Dealing just with prescription drugs, does the cost recovery cover costs the agency charges?
Ms. Garrah: For that question, I would say we would follow up with that for you. It is not a 100 per cent cost recovery. The costing model is a percentage value, and we can follow up and provide more information for you on the values of the two.
[Translation]
Senator Ringuette: Will these changes mean that the minister will be able to act quickly to reduce the salt content in food?
Mr. Godefroy: The proposed changes will have no effect on scientific and technical evaluation processes to assess the safety and wholesomeness of food. What these changes aim to do, basically, is to accelerate and make more effective the process that follows the scientific and technical decision that the scientists of Health Canada have made.
Also, this applies to certain particular areas, that is to say that there are limits to the application of these amendments; they essentially concern substances that are generally added to food or are present in food, so these changes would allow their limits to be determined, for instance, as well as the conditions under which they can be accepted.
The salt issue is much more a matter of scientific assessment; then we will have to see the result of the risk assessment study in order to decide subsequently on the most appropriate instruments to contribute to reducing the salt content in the diet of Canadians.
Senator Ringuette: This is probably the only health organization in the world that has not yet acknowledged the adverse effect of salt in people's diet. You are amending legislation to facilitate the process, but I hope that the whole issue of salt will be a priority for your department because I think that this is a priority health issue for Canadians.
[English]
The Minister of Health will not be appearing before us, but just in case, I have a few questions that I would ask you relay to the department. Please provide the responses to the clerk.
How many employees in your department received a notice letter of layoff, by province and by classification? How many of these letters went to EXs and DMs? How many staffers in your department are not under the Public Service Employment Act? Under what classification do they fall? What is the cost in your department for program management? What is the total of salary expenses, bonuses, et cetera, for the management level of your department and programs? To save time and to save questions from senators on the other side of this committee, could you add to that as a percentage of the total?
Senator Buth: Thank you to Senator Ringuette for including that additional piece on the list of her questions.
Thank you very much for being here this evening. Can you comment on the proposed process that you have in here compared to the process in the U.S. or the U.K.?
Ms. Garrah: Did you want that for both sets of authorities, both the food and the prescription drug side of things, or was it specific to one?
Senator Buth: I am interested in the food side.
Mr. Godefroy: In fact, the changes that are proposed now will bring us more in alignment with other international jurisdictions, specifically with the United States. In the United States, changes to the approval of food additives, for example, are under the authority of the Health and Human Services Secretary. Making these changes and introducing these ministerial regulations will bring new authority to the Minister of Health to set those marketing authorizations as well as to incorporate these lists by reference.
In the United Kingdom, the system is a little different, given that it is part of the European Union. Therefore, the decisions associated with the addition of substances are subject to European regulations or directives. There is a same level of alignment despite the difference in jurisdictions given that those recommendations and decisions are made at the executive level of the European Commission.
Senator Buth: This has been something that many constituents that I know have been asking for, for a long time, because of the delays in bringing new products to market and our competitiveness with other countries. I am pleased to see this. Thank you.
I want to clarify that this does not compromise safety in any way. You have not changed the science review process, have you?
Ms. Garrah: Thank you for the question. It is a very important point to make. We have tried to emphasize that for both structures there is a scientific process and a regulatory process. The proposals that are included within this seek to make no change to the scientific process and to not compromise safety and the measures in place at this time.
Senator L. Smith: Will there be a cost savings, and if so, how much?
Ms. Garrah: I can speak separately to both processes, and will refer to my colleague separately for that.
Lisa Lange, Acting Director, Bureau of Policy, Science and International Programs, Health Canada: On the drug side, there is a cost related to the deficit reduction going forward for 2014-15 of approximately $390,000 per year. That is basically the cost of the staff that has currently been doing the regulatory changes, which will no longer be required, as well as some small operating costs.
Mr. Godefroy: On the food side, there are some estimated cost savings. Given that the number of submissions is actually more limited in foods, those savings are not accounted for as part of the deficit reduction action plan; and we are still estimating those. The biggest savings would be for industry as it would diminish the wait time to get access to market once the scientific decisions have been made. For example, it would reduce the 41-month period that it may take from the time the scientific recommendation is made to enabling the access to market for a safe substance. That period will be reduced considerably; therefore, cost savings would be mostly to innovation in the food and agri-food sector.
Senator L. Smith: Was your original objective to reduce time, or to be aligned with other countries, or to be more efficient? What was your major objective?
Mr. Godefroy: I would say that it was a combination of the three.
Senator Peterson: Does your department deal with the content labelling of food products?
Mr. Godefroy: Yes.
Senator Peterson: Does this bill allow for the removal of that?
Mr. Godefroy: No. Essentially, these proposals do not touch the conditions of labelling. For example, marketing authorizations are mostly related to substance added to or on food. Potentially, some conditions may be set for substances related to labelling, but only in the context of those substances. These proposed changes do not have any impact on the authorities related to mandatory labelling provisions that are driven by health considerations, for example, such as nutrition labelling. Those will still be subject to the requirements of Governor-in-Council regulations should these need to be made or changed.
Senator Peterson: Anyone with hypertension or a peanut allergy will not have to worry because the information will be on the products.
Ms. Garrah: The proposals included here do not seek to make any changes to the current mandatory labelling requirements. Any labelling requirements in place with respect to allergens, as your example, would remain in place and would not be changed by these proposals.
Senator Runciman: Can provinces with drug benefit plans — drug formularies — put a drug on their formulary without it being on this list from the federal government? How does that process work?
Ms. Garrah: There are two separate processes. The process at the federal level assigns whether something is required to be sold by prescription. It basically sets out in accordance with a set of scientific criteria whether a product can be sold or is required to be sold with the involvement of a health professional; and those health professionals are regulated by provincial bodies. The formulary process that would occur at a provincial level relates primarily to cost coverage for medications and whether being added to the formulary will support cost coverage at a provincial level. Those processes are quite separate.
Senator Runciman: You are responsible for the scientists who conduct the studies on the safety of the drugs.
Ms. Garrah: Yes.
Senator Runciman: Is there a duplication or separate process at the provincial level whereby they go through the same exercise?
Ms. Garrah: There is a process of assessing from a cost-benefit perspective the decision of whether something will be covered on a formulary. The safety assessment is primarily done at a federal level. That assesses how a product should be sold in Canada and whether it requires oversight by a medical professional; and it is regulated at a provincial level. I cannot speak in detail to the assessment done at a provincial level. There have been discussions as to whether efficiencies can be gained through communications and collaborative efforts between the two, but in terms of what they cover, I would leave that to the provinces to speak to.
Senator Runciman: I recall commentary about why the provincial level would not simply accept the federal list rather than go through the exercise provincially. For whatever reasons, that has not happened.
I was a little confused about page 292 at the top under ``Defence.'' Proposed section 29.2(3) states:
A person is not liable to be found guilty of an offence for any contravention in respect of which the list that is incorporated by reference in the regulation is relevant unless, at the time of the alleged contravention, the list was accessible as required by subsection (2) or it was otherwise accessible to the person.
Could you translate that into language that we all understand?
Ms. Garrah: I will try to speak to that. The provision is speaking to principles of good law-making, which is that someone cannot be responsible for something that they cannot be aware of. There is an obligation within the provisions that the list be publicly accessible. This is simply a requirement that someone cannot be held accountable for not complying with it if the list, as stated, was not, in fact, publicly available at that time.
Senator Runciman: This is about food products, but not necessarily connected to the budget. We have had a few questions about labelling. With respect to genetically modified food products, is there some indication? It is a political decision. It is one that I was just made aware of. At the moment it is not part of the process.
Ms. Garrah: The proposals included under Division 19, as mentioned with the question earlier, do not envisage or propose any changes related to labelling.
They are simply seeking to adjust the process to preserve it to the scientific decision — and the review process that supports that — and to change the requirement for there to be a regulatory package to support. Any current requirements in place for labelling are not changing with these proposals.
The Chair: Is this term ``marketing authorization'' a defined term, other than its use in the section?
Ms. Garrah: It is a good question, and to my knowledge it is not a defined term, but it is a term that currently exists now within the Food and Drugs Act under the interim —
The Chair: Can you let us know if it is defined? I do not have the full act, but that would be helpful to know.
I still have a number of senators who are interested in asking questions. You are the first group after our break.
Senator Gerstein: Every so often one hears of a wonder drug that comes on the international market. The question I have for you is this: Is there any ability in Canada to fast track a potential new prescription drug if there is scientific evidence in other countries? In other words, if the FDA approves something in the United States, how does that impact something's being approved in Canada?
Ms. Garrah: As I mentioned at the beginning during my clause-by-clause overview, there is a scientific process that supports the assessment of drugs in Canada. A manufacturer has an obligation to file a submission and then there is a review process that supports that. There are various different requirements and mechanisms as part of that review; there are expedited review processes, but those things are not changing within these proposals. This is only seeking to change the mechanism for listing and requiring something to be sold by prescription so that it could be listed through an administrative list incorporated by reference. It does not relate to the scientific process that would be used in your example to expedite the review of a product.
Senator Gerstein: Recognizing it is not in this, is there an ability to expedite approval in Canada?
Ms. Garrah: Yes, there is. There are different review processes in Canada and different requirements to support those processes. I am not prepared to speak to those today. If it is something the committee desires we could follow up.
Senator Callbeck: I have a brief question on the costs. You are streamlining the regulatory process for prescription drugs and you said you felt the cost savings would be $390,000 a year. What percentage is that of the total cost? Are you saving 1 per cent or 5 per cent or what?
Ms. Garrah: I am not sure we will be able to provide those numbers to you. I will refer to my colleague to see if she can speak to that, and if not, we will follow up.
Ms. Lange: I cannot give you a percentage on that. I can tell you the number of individuals that would be. I am not sure if that would be of help. There are roughly 570 people employed by the organization that does the prescription drug registration, and this is four individuals. That would give you a sense.
Senator Callbeck: This is what?
Ms. Lange: This would be four individuals have been affected through the process, who are currently doing the regulatory amendment work. It is four out of about 570, but we could give you proper stats if you would like.
Senator Callbeck: Yes. After a drug is determined safe by the department of health, what does it cost to get that drug through the regulatory process and onto the list?
Ms. Garrah: The cost to the department or —
Senator Callbeck: The company. The company has to pay it, do they not? You said there was a portion or a formula?
Ms. Garrah: Yes, the review of products to be sold in Canada, the review of drugs is a cost-recovered process. As we committed to earlier, it is not a 100 per cent cost recovery and we can follow up to get more details on the percentage split of what is cost-recovered under industry and what value falls to the government.
In terms of value for the regulatory process, I could not provide to you a specific value today. We could follow up. However, it would be helpful if you could be more specific in your question as to what numbers you are looking for.
Senator Callbeck: As I understand, it has to go through a process where Health Canada determines that it is safe. That process is not being affected by this legislation. It is the regulatory part. My question is on the regulatory part. In order to get that drug onto the prescription list, does the manufacturer not have to pay for that? If so, is it roughly $1,000 or $10,000 or what?
Ms. Lange: As my colleague mentioned, we do have a cost recovery regime in place. There are certain costs companies have to submit — certain fees — to review the product. After reviewing the product if it is found safe and efficacious and of sufficient quality — and if we have deemed it meets the criteria to be a prescription drug — we have to start the amendment. At that point, we have made a decision. We issue a notice of compliance to the companies and they are able to start selling their drug. They start selling their drug and then a regulatory process kicks in, at which point we have to do the amendment. They are not charged for that regulatory process; it is a service that is not cost- recovered.
Senator Callbeck: They start selling the drug as soon as you determine it is safe. They do not have to wait to go through this whole process that you are talking about that takes, what, 41 months?
Ms. Lange: That is on the food side. On the drug side it is slightly shorter. It is somewhere between 14 and 20 months. Again, that is because we are going through a parliamentary process.
Senator Callbeck: Is that after it is found safe?
Ms. Lange: Correct.
Senator Callbeck: During that time the company is selling the drug?
Ms. Lange: Correct. This process is ongoing at the same time that the product is currently on the market. This really is about an efficiency gain. We have already got the product on the market, it is safe for Canadians to use it, and we are doing a separate process because we have the regulatory requirement to add them on to this list of prescription drugs. We are trying to bridge the gap between the two and have an administrative list of prescription drugs that would add that new ingredients for products to the list and then it would on the website; that should happen in relatively short order after the product goes on the market.
[Translation]
Senator Hervieux-Payette: Firstly, why do you not require that all of the products made by various companies, the different sizes, starting with the 100 grams, be well identified so that citizens can calculate the cost of the product?
Secondly, do your regulations require that kosher and halal food products be identified as such on labels?
To my knowledge, we often see labels identifying products as kosher but we do not see this for halal food products. Could these questions be examined and be integrated into your regulation?
Mr. Godefroy: Thank you for the question. I would like to specify that these issues have not at all been taken into account in the suggestions made here except as reference points. The labelling of food, and more particularly nutritional labelling, must meet a certain number of criteria according to which certain information is required on the food products. There are certain conditions, in particular the reference portion, which must be included on the label and not the nutritional information box.
These reference portions cannot be generalized and boiled down to simply one element, for instance 100 grams, as you pointed out. But in fact, they are subject to certain recommendations, with regard to the reference portions, which can be used by industry so as to declare the nutrients as required by the regulation.
These reference portions are in fact listed in a schedule to the Food and Drug Regulations, schedule M, where these recommendations are set out. One of the reasons why we cannot generalize to 100 grams is because there are sometimes differences in the density of the product, in the number, if you will. Sometimes these products can vary according to the number of units, for instance where biscuits are concerned.
In fact, there are recommendations that see to it that the consumer has access to the most comprehensible and usable information possible, so that comparisons can indeed be made between the various products.
The Chair: Mr. Godefroy, we don't have much time, and the question has nothing to do with Bill C-38.
Senator Hervieux-Payette: And what of kosher and halal products?
Mr. Godefroy: These are not health-related labelling criteria, and so they are not subject to the regulations under the authority of the Minister of Health.
The Chair: Thank you for your reply and your understanding.
[English]
On behalf of the Standing Senate Committee on National Finance, I would like to thank you very much for being here. You were asked a number of questions from senators, but you were able to handle them very nicely for us. Those you have undertaken to answer, we look forward to receiving your response.
Colleagues, I remind you we have a long way to go on this bill, and we should be trying to keep our questions to the items in the bill. It is not a general inquiry into a department.
We will now go on to the next division, which is Division 20. It appears at page 295, and it deals with the Government Employees Compensation Act. We have from HRSDC, Mr. Child.
Alwyn Child, Director General, Program Development and Guidance Directorate, Human Resources and Skills Development Canada: Thank you, Mr. Chair.
The Chair: Mr. Child, do you have in front of you the bill?
Mr. Child: I do.
The Chair: Could you look at Division 20 on page 295, look at clause 420 and tell me why it appears in English on both the French and English side?
Mr. Child: That was my question initially. This is an old piece of legislation that goes back to 1918. French at that time was immaculate and English was not. The reason it appears that way is because the French was not touched, only the English, and a number of housekeeping bits were changed. Rather than listing at B, for example, a number of departments, it simply includes ``boards, commissions, agencies.'' That is what it said before. It now simply says ``other body.'' ``Other body'' encapsulates all of commissions, boards, et cetera. The French included that, but the English did not. The English listed commissions, boards, agencies, et cetera. It is just drafting.
The Chair: Okay. Thank you. If you could explain to us the other sections, we would be pleased to hear from you.
Mr. Child: The act itself provides benefits to employees if they are injured at work. However, if the injury sustained is attributable to a third party, the act as it is written now provides that the employee either file a claim under the Government Employees Compensation Act or sue the third party.
The change we are bringing about is to allow a corporation or ``other body,'' as it is now called, to be subrogated with that employee's claim, and that company would be able to sue the third party. A typical example would be Canada Post, where there is a dog bite when someone is delivering the mail. That person can agree to file a claim under the Government Employees Compensation Act or sue the homeowner themselves.
In this case, rather than the government being subrogated with the claim, it would be Canada Post, who would then sue the third party if the employee chooses to accept the compensation. That is essentially the change that occurs.
There are a number of housekeeping items. A lot has to do with cleaning the act up to make it gender-neutral. As I said, it goes back to 1918. There is a new clause at 9(2) that talks about the election made by the employee or their dependants being final. Again, this is housekeeping. That did not previously exist, but in effect, that is what happens; you either accept the money under the compensation act or you sue.
The Chair: The election would be at the front end to determine who is going to handle the lawsuit for you. It is not when you accept the money; it is when you start. Is that correct?
Mr. Child: Exactly, when you start. Apart from that, other changes of any substance — most of it is housekeeping, as I said.
Proposed section 13 simply provides that if the election is made before the change, if the bill goes through, what you elect at that point would bind you after the change in the legislation. It is essentially all housekeeping, and the same for propsed section 14. Of course, the very last clause essentially simply says the changes come into effect when the bill receives Governor-in-Council approval.
The Chair: Are you content there are no other clauses here that deal with anything else other than what you have told us?
Mr. Child: That is right.
The Chair: Thank you.
Senator Ringuette: I am surprised that this legislation is not under Treasury Board.
Mr. Child: No. Again, it dates back to 1918. I do not know if you recall, but way back then, the Labour Code was one of the very first pieces of legislation passed by the house, and this was attached to it. That is the way it has stayed since then.
Senator Ringuette: Well, Mr. Child, you are the first person to appear before us representing Human Resources and Skills Development Canada. Therefore, you are the lucky winner of the following questions.
The Chair: Are you sure you have not asked these questions of HRSDC before?
Senator Ringuette: No, I have not.
Here are the following questions:
How many employees in your department received a notice letter of layoff, by province and by classification? How many of them were for EXs and DMs? How many staffers in your department are not under the Public Service Employment Act? Under what classifications do they fall?
What is the cost in your department for program management? What is the total for salary, expenses, bonuses, et cetera, for the management level of your department and programs? Could you provide all of the above as a percentage of the total?
Mr. Child: Thank you.
Senator Callbeck: I have a brief question. I am wondering why you are bringing this in at this time. Is there any particular reason?
Mr. Child: Not that I am aware of. I think there were some costs savings to be had in that the total cost for subrogated claims runs at about $260,000, and 60 per cent of those are for Canada Post. We believe they are interested in having the claim subrogated themselves, and they would choose whether or not they would sue or simply just not go against a third party. Instead, currently we do it, so there is administrative work associated with that and, of course, legal fees as well.
Senator Callbeck: Thank you.
The Chair: Mr. Child, thank you very much. We appreciate your bringing this interesting division to our attention.
Moving to Division 21, page 299. We are close to the end of the 200s here. We just have 125 pages to go.
Ms. Nicholson, are you able to help us with Division 21, which appears at page 299?
Annette Nicholson, Corporate Secretary and General Counsel, International Development Research Centre, Foreign Affairs and International Trade Canada: Thank you, yes. I am Corporate Secretary and General Council with the International Development Research Centre. I am not with the Department of Foreign Affairs and International Trade, so I would not be in a position to answer any questions on the department.
This item is part of IDRC's cost savings by reducing the maximum number of members of the board of governors from 18 to 14. There are follow-on amendments to quorum and the size of the executive committee. There are a few little housekeeping amendments to clean up some of the English language. However, there are no transition costs associated with the reduction of the size of the board, as attrition has resulted in the necessary vacancies.
If you would like, I could take you through the number of reductions.
The Chair: There are only a few clauses and I have a fear that we will miss something if we do not look at each one. We will be asked to vote on each, so we would like your help.
Ms. Nicholson: No problem.
The Chair: You can go through them quickly; just tell us what is there. Why is it reduced to 14 from 18? Is that a good governance practice, or you just did not want to fill the vacancies?
Ms. Nicholson: The motivation was to reduce costs. Also it is, indeed, good governance practice to bring the board in line with the size of a normal board. These days that is somewhere between 9 and 15, so we will be at 14. That is large enough to accommodate the representation that we require from both the international and Canadian governors but also small enough to fit within the size of a normal board.
In terms of the actual changes, clause 427 amends section 3 of the act, reducing the size of the board by four governors.
Clause 428, or proposed section 8, just cleans up some the language to make it gender neutral.
Clause 429 amends section 10 and that deals with numbers again to reflect the balance. There is a majority of Canadians, but this keeps it fairly close so that we have good international representation. We also need to ensure we have skills representations, so we are looking for certain skills on our board.
Also, there are some gender issues from section 10 that are cleaned up in clause 429. Then the size of the executive committee was also reduced to bring it in line with the reduced size of the board. That is in clause 430, which amends section 11.
The Chair: I am sorry you missed part of clause 429 where it deals with subsection 10(3).
Ms. Nicholson: It is not changed at all, except it changes the language in the French to make it coincide with the English. It was saying the same thing but in a different way before.
The Chair: Two of the governors can be from the House of Commons or the Senate.
Ms. Nicholson: Yes, and I do not know the last time that was the case. It is not the case today.
The Chair: Nice to know we are not excluded. Thank you.
Ms. Nicholson: Subclause 430(2) changes the quorum of the executive committee; it is reduced to three because we have reduced the size of the committee to five.
The last item is clause 431, which changes the quorum for the board as a whole. It remains at seven, but the double majority, which is the Canadian majority, sits at four.
The Chair: Okay. Thank you. This was all for cost streamlining, which is the term of year, I think, and cost savings, right?
Ms. Nicholson: Correct.
Senator Callbeck: Could you tell us a bit about the International Development Research Centre? What is your mandate? What exactly do you do?
Ms. Nicholson: The International Development Research Centre was established in 1970. It is part of Canada's official development assistance, and we fund research for development primarily in the developing world. There is the actual research that goes on. Also, as part of our mandate, there is capacity building for researchers and scientists in the developing world.
Senator Callbeck: What is your budget?
Ms. Nicholson: About 80 per cent of our budget is provided by Parliament; the rest comes from partnerships that we enter into with other bodies such as foundations and the Department for International Development in the United Kingdom. The portion that comes from Parliament is about $270 million.
Senator Callbeck: You are reducing the governors. How are they chosen; what are the criteria?
Ms. Nicholson: They are appointed by the Governor-in-Council. We make recommendations to the minister, and there are certain qualifications. In other words, we have to have a certain minimum number of Canadians. In terms of skills, we are looking for a mix, as you would on any board; you want people with financial management skills, people who understand the subject matter of the corporation — in our case, development and research.
We have a broad range of skills. We maintain a skills matrix so that we see can see what skills we are missing when we have a vacancy, and that will influence the recommendation that we make to the minister.
Senator Callbeck: You mentioned it is important to have good international representation. What countries are represented on the board now?
Ms. Nicholson: It varies depending on who meets the skills. At the moment, we have someone from Egypt, China, Jamaica, the United States, India and I think we have an Englishman who is living in Switzerland at the moment.
Senator Callbeck: What is the term — three years?
Ms. Nicholson: It is up to four, except for the chairperson and the president. Their terms are up to five years.
Senator Callbeck: That is fine.
Senator Nancy Ruth: I cannot believe you are fiddling with changing language and still using phrases like ``chairperson.'' The word is ``chair.'' If you do not know why, I will tell you. In the Library of Alexandria, people came and sat at the foot of the chair where the educated professor was sitting. In the next budget, could you change it to ``chair'' instead of ``chairperson''?
Ms. Nicholson: I would be delighted to, if I have any influence over it, which unfortunately I do not.
Senator Nancy Ruth: This is ridiculous.
The Chair: Thank you very much. We appreciate your help in bringing this to our attention.
The Canada Labour Code has been sent to another committee. That is at page 300. Therefore, we will flip over a couple of pages. Division 23 is Fair Wages and Hours of Labour Act. It is at page 305. Mr. Giles is here. Are you with HRSDC Labour?
Anthony Giles, Director General, Strategic Policy, Analysis and Workplace Information Directorate, Human Resources and Skills Development Canada: I am, indeed.
The Chair: Do you know about Division 23 that is entitled Fair Wages and Hours of Labour Act?
Mr. Giles: Yes, and I would be delighted to take you through the four or five clauses that make up this division.
Clause 441 simply proposes to repeal the Fair Wages and Hours of Labour Act. Clause 442 is a transitional provision that ensures that any contract in existence at the time of the repeal will continue to be in effect. Any obligations undertaken up until repeal will be continued, and any complaints that need to be made will be handled.
Clause 443 is a consequential amendment. In 1958 the Campobello-Lubec Bridge Act was enacted. It contained a small provision saying that Canadian labour working on the construction of that bridge were subject to the Fair Wages and Hours of Labour Act. This is a consequential amendment to remove that provision. I do not know the history of that bridge but I assume it was finely built if the act was repealed.
The Chair: It is working well. I would invite you down some time.
Mr. Giles: That is another reason to eliminate that provision then.
Clause 444 is simply the coming-into-force provision.
The Chair: Honourable senators might be interested in knowing why it is not necessary to have the Fair Wages and Hours of Labour Act. What was the fundamental purpose of the legislation?
Mr. Giles: The fundamental purpose of the original legislation was to establish that, for federal government contracts for construction, remodeling, demolition and so on, workers on those contracts would be paid what was defined in the act as ``fair wages.'' ``Fair wages'' were further defined as the ``normal wage for a qualified employee in the particular region where the work was taking place.''
Originally, the act was passed in 1935 in the midst of the Great Depression, at a time when provincial legislation on employment standards, occupational health and safety and so on was in its infancy and not considered strong enough protection. The federal government decided that for at least those contracts, it would establish this fair-wage threshold.
Over the years, of course, provincial legislation has developed in all those areas to the point where the construction industry is well regulated across the country and in the territories. Therefore, the thinking is that there is no longer a need for this duplicate protective legislation. The provincial legislation in place is more than adequate to protect minimum wages and so on in construction.
The second motivation is that because the FWHL act imposed certain requirements on construction firms that were bidding for federal contracts, this would lighten the paper load and, therefore, reduce some red tape at the same time.
Senator Ringuette: With regard to federally regulated entities, what will replace the Fair Wages and Hours of Labour Act?
Mr. Giles: Federally regulated entities involved in construction would be covered by Part III of the Canada Labour Code, which sets out all the minimum conditions of employment. There is a federal act in place that covers them.
Senator Ringuette: I do not understand why we are suddenly repealing this act. Certainly, I will get a copy of this act to see what protection we are removing from employees, especially if you say that it is a burden for contractors bidding on federal contracts. I would like you to expand on those burdens. Give us some examples of the burdens on bidders for federal contracts.
Mr. Giles: The principle burden on a contractor developing a bid for a federal contract is taking the time to do the research to determine the existing wage schedule for that region and for each occupation that they are proposing to hire construction workers, and translate that into their bid documents. If they succeed in winning the construction bid from the federal government, then they have to monitor and ensure that if those wage schedules change, for example, they change their pay scales.
Senator Ringuette: Is there a problem if the regulations change for pay scales with a contractor adjusting the pay scale?
Mr. Giles: According to most of the construction industry, yes, it is regarded as an unnecessary burden. As I said, provincial legislation, as it has developed to the modern day, covers minimum wages in construction.
Senator Ringuette: We are not looking at only minimum wage in construction. The provinces regulate a minimum wage — period. This has nothing to do with the construction industry.
Mr. Giles: You are quite right for some provinces. Other provinces have specific regulations for construction wages. In Quebec, for example, they are regulated separately from their general minimum wage.
Senator Ringuette: Certainly, I want to get more information. Would you happen to have a copy of the act that these clauses repeal?
Mr. Giles: Not with me, no.
Senator Ringuette: Could you send me a copy, please?
Mr. Giles: Sure.
The Chair: Mr. Giles I note you will be back here on Division 52, Wage Earner Protection Program. Has that anything to do with or in any way related to this legislation?
Mr. Giles: Not in the least; and I will be back for Division 39 as well; and it is not related.
The Chair: Thank you for your understanding and help in this matter. We will see you later.
We are at page 306, Division 24, amendments to the Old Age Security Act.
The Chair: Mr. La Salle, please proceed.
[Translation]
Dominique La Salle, Director General, Seniors and Pensions Policy Secretariat, Human Resources and Skills Development Canada: Mr. Chairman, it is an honour to appear before you tonight. I am accompanied by a few colleagues. Ms. Nathalie Martel, Director, Old Age Security Policy.
[English]
Ms. Annette Vermaeten is Director of the OAS Task Force; and Mr. Bruno Rodrigue is Chief of Income Security at Finance Canada.
I will begin with a quick overview of the provision under Division 24. Part 4 of Bill C-38, specifically clauses 445 to 467 of the bill, amends sections of the Old Age Security Act.
They include three initiatives. The first one is the increase in the age of OAS eligibility. Starting in April 2023, the age of eligibility of the OAS pension is proposed to be gradually increased by two years from 65 to 67. In addition, the eligibility age for the allowances is proposed to increase from 60 to 64 and move to 62 to 66 at the same time.
This age increase is being proposed with many years of advance notice to provide adequate time for Canadians to adjust. First, there is an 11-year notification period from now until April 2023, which will be followed by a six-year phase-in from April 2023 to January 2029. The eligibility age will be increased one month every three months, thus on a quarterly basis.
The change to the age of eligibility for the OAS program will not affect current seniors. Anyone aged 54 or older as of March 31, 2012 will not be impacted by the age increase.
In addition, the government has announced that it would adjust programs under federal jurisdiction — some programs use age 65 to trigger some benefits — which are found in some programs and for First Nations and veterans. The government will also work with provinces and territories to fill the gap that would appear in the case of CPP disability benefits and survivor's pension.
The government also committed to compensate provinces and territories for any net additional cost they may face resulting from the increase in the age of eligibility for OAS benefits.
The second provision is the voluntary deferral.
The Chair: Is the promise the government made to the provinces in here?
Mr. La Salle: No, this is not in the bill. It was a commitment of the government in the budget speech.
The Chair: I could not find it. Okay.
Mr. La Salle: Starting in July 2013, a voluntary deferral for the OAS pension is proposed to be introduced. This will provide eligible Canadians the option to defer take-up of their OAS pensions by up to five years past the age of eligibility and subsequently receive a higher actuarially adjusted pension for waiting longer. The voluntary deferral of the OAS pension will be available between the ages of 65 and 70 until the age of eligibility is increased. The deferral period will be gradually increased to reach age 67 to 72 in parallel with the proposed age increase and the increase in the age of eligibility.
The actuarial adjustment for the OAS benefit is 0.6 per cent per month, thus 7.2 per cent for a full year of deferral. Over five years, the maximum increase to the OAS benefit would be 36 per cent, which would be paid to recipients for the rest of their lives and be fully indexed to the Consumer Price Index, as are all the OAS benefits.
Finally, the third initiative is proactive enrollment. This initiative will allow the minister to waive the requirement for an application, thus allowing for the introduction of automatic enrollment of seniors where the department has sufficient information to satisfy its integrity requirement. Where the available information is not deemed sufficient to auto enroll, the available information will be used to pre-populate forms and streamline the application process for seniors. This initiative will be rolled out over a period beginning in 2013 to 2016.
The Chair: Does that include supplementary benefit?
Mr. La Salle: Like GIS? Eventually, yes. Not in the first wave.
The Chair: Senator Callbeck has asked several questions on that issue along the way, so she would be interested in knowing.
Senator Eaton: Thank you very much for being here. What is the percentage of Canadians who now voluntarily defer their Old Age Security — their pension — when they turn 65 to the age of 70?
Mr. La Salle: Those people would simply not be applying for the benefit at this juncture. I do not have that information.
Nathalie Martel, Director, Old Age Security Policy, Human Resources and Skills Development Canada: You mean how many people we expect will choose this?
Senator Eaton: No, how many people now defer receiving their pension? When I was 65, I deferred receiving my pension. Are there many Canadians who do that now?
Ms. Martel: Right now it is only advantageous to defer the take-up of your pension if you do not have 40 years of residence in Canada. In order to receive the full pension, you have to have lived here at least 40 years after the age of 18. Once they reach 65, some people do not have 40 years of residence. They can choose to take the pension right away, but they will receive a partial pension. For example, if they have been in Canada for 35 years, they will receive thirty- five fortieths of the pension. However, some people may choose to wait until they reach the 40 years in order to get the full pension.
Senator Eaton: You do not have people like me who just said, ``I am working so I will not take it?'' I do not receive a Canada pension and I am 67.
Ms. Martel: You are talking about the Canada Pension Plan.
Senator Eaton: I am sorry, I apologize.
The Chair: Mr. La Salle, you explained the overview very nicely for us. If you could go through sections 46 onward and tell us quickly, that achieves the point we have already explained to you.
Ms. Martel: There are 23 clauses and I suggest we skip the clauses that are just very small technical amendments and go to the most important ones.
I would go directly to clause 447, which provides the tables that explain the transition period for the increase in the age of eligibility.
On clause 448, I am skipping the very technical ones —
The Chair: We are following you in the bill.
Ms. Martel: You want the page number?
The Chair: No, I have it on page 311. We know where it is.
[Translation]
Ms. Martel: I do not have the final version. It is 311? Perfect. Which clause?
The Chair: Clause 448.
Ms. Martel: Clause 448, the following pages.
[English]
It is all about proactive enrollment, but for the pension.
Senator Buth: Where are we?
The Chair: At clause 448 on page 311, and Ms. Martel is explaining what these clauses are achieving.
Ms. Martel: It is proactive enrollment for the pension. Section 4.1 allows the minister to presume that the individual meets the eligibility criteria, i.e., the residence and legal status requirements without documentary evidence. Subsection 5(4) allows the minister to waive the requirement to apply. The next subsection states that the minister must let you know that you will be waived. If you will be auto enrolled, the minister will send you a letter. The minister must tell you.
The next subsection on page 312 —
The Chair: You are at the top of page 312. You skipped clause 449. You are in clause 450 now.
Ms. Martel, you are using the numbers of the act and we do not have the full act in front of us. I would like you to use the numbers of Bill C-38, as opposed to the Old Age Security legislation.
Ms. Martel: It is clause 450.
Clause 450 allows the minister to presume that the client meets the eligibility requirements. It allows the minister to waive the requirement to apply. It obliges the minister to let you know that your application will be waived. Then, it forces the client to correct any inaccuracies. It also allows the client to choose not to be auto-enrolled if the person chooses to defer the pension to a later date and receive a higher pension later. Lastly, clause 450 says that the minister can change her mind and request a written application.
Clause 451, still on page 312, is about pension deferral. It says that the actuarial factor for full pension is 0.6 per cent per month. Each month that the person defers receipt of their pension, the pension is increased by 0.6 per cent.
Senator Eaton: Mr. Chair, can I ask my questions to do with pensions when she is finished?
The Chair: With the Canada Pension Plan? This is not the Canada Pension Plan.
Senator Eaton: Oh. Okay.
Ms. Martel: I am still under clause 451. The 0.6 per cent per month actuarial factor applies to the partial pension as well. By default, the minister will give whatever is best for the client. For example, for a partial pensioner who chooses to defer the receipt of their pension, they will either get an additional year of residence or the actuarial increase, depending on what is most advantageous for them.
Lastly, clause 451 provides the limitations of the deferred pension. For example, it will not start before July 1, 2013. The person cannot defer past the age of 70. Later, that will be age 72. Also, the person cannot accrue additional benefits while their pension is suspended, for example, if they are incarcerated.
I will go to clause 453, which is on page 313.
Mr. La Salle: Chair, could I just interrupt for a second? I think I understand the point that Senator Eaton wants to clarify.
The Chair: Would you hold that? We will go through clause by clause, and then I will go into a question period. I guarantee that Senator Eaton will be at the top of my list.
Thank you.
Ms. Martel: Clause 453, on page 313, allows a person to, if the person was automatically enrolled for their pension, cancel this automatic enrollment if the person chooses to change their mind and defer their pension. As long as the person repays all of the benefits within a certain period of time, the person can cancel. We will presume that the person just never applied.
Clause 454, on page 314, is repeating the same thing about proactive enrollment but for the GIS. I will go fast. Unless you are auto-enrolled, you still need to apply. The minister can waive the application for the GIS if she has sufficient information to auto-enrol you for the GIS. If you are auto-enrolled for the GIS, the minister must notify you. You have to correct any inaccuracies. You are allowed to decline auto-enrollment for the GIS. Again, the minister can change her mind and request an application.
Senator Peterson: Mr. Chair, what is this auto-enroll stuff?
The Chair: I will put you on the list right after Senator Eaton.
Senator Peterson: She keeps saying it, and it would be nice to know before the end. I will forget my question.
The Chair: Ms. Martel, as you are explaining things, if you are able to say what auto-enrollment is, that would be helpful. Keep explaining the clause by clause to us.
Ms. Martel: I will skip the technical ones. Clause 456, page 315, states that, for those auto-enrolled for the GIS, the spouses, in the case of couples, must be notified separately for privacy reasons. We are giving income information, so we have to protect the privacy information of each spouse. That is what clause 456 does.
Clause 457 is a very technical amendment to add a reference to automatic enrollment. Clause 458 allows someone to stop receiving the GIS if they choose to. If they, for some reason, do not want to receive the GIS any more, this amendment allows them to choose to do that. This clause also allows someone to cancel their GIS benefits. However, if they choose to cancel, they must repay all of the benefits they received, within a certain time period.
Clause 459 — I am now on the page 317 — is, again, all about proactive enrollment, but this time it is about the allowances, the regular allowance and the allowance for the survivor a bit later. I will sound very repetitive. Again, clause 459 allows the minister to presume that the person meets all the eligibility criteria without any documentary evidence. It also says that, unless you are auto-enrolled, you must apply for the benefit. It allows the minister to waive the requirement to apply for the allowance. Also, the minister must let you know that you will be auto-enrolled. You must correct any inaccuracies, and you can choose not to be auto-enrolled. Also, the minister can change her mind and request an application.
Clause 460, on page 318, is exactly the same thing for the allowance for the survivor. It allows the minister to presume that all the eligibility requirements are met without any documentary evidence. Unless you are auto-enrolled, you must apply for the benefit. It allows the minister to waive the requirement to apply.
The Chair: When you say it is exactly the same, that is sufficient.
Ms. Martel: Clause 461 is a technical amendment to the French translation.
Clause 462 is again about proactive enrollment. Unless you are auto-enrolled, a minister must consider your application quickly. This is a provision that already exists, but we added ``unless you are auto-enrolled.''
Clause 463, on page 320, allows someone to cease receiving the allowance or the allowance for the survivor, just like for the GIS and pension. It also allows someone to cancel the allowance or allowance for the survivor, but in this case they must repay.
Clause 464, on the bottom of page 320, is about streamlined applications. This is why the initiative is called ``proactive enrollment'' because it includes both automatic enrollment and streamlined applications. Clause 464 allows the minister to collect information on someone in order to facilitate their application. In other words, for those people that we will not have sufficient information to automatically enroll them, we will at least use this information to facilitate their application.
Clause 465, on page 321, is about information sharing. It allows us to obtain more information from the Canada Revenue Agency, as well as Citizenship and Immigration Canada, in order to get information from the clients to be able to automatically enroll them for the benefits.
Clause 466, on page 321, is about penalties. It says we can impose penalties on someone who knowingly does not correct inaccuracies.
Lastly, clause 467, on page 322, is the coming into force clause. For the age clauses and the information sharing related clauses, they will come into effect on Royal Assent. For the clauses on the deferred pension, they will come into effect on July 1, 2013. All remaining clauses on proactive enrollment will come into effect through Orders-in-Council.
[Translation]
The Chair: Thank you very much. Mr. La Salle, I believe you have an answer to Senator Eaton's question.
[English]
Mr. La Salle: Senator Eaton, I think you were referring to CPP. CPP allows people to choose the time at which they receive their benefit. A very small minority, about 4 per cent, currently choose not to collect at age 65 and defer thereafter.
Senator Eaton: For how long?
Mr. La Salle: I do not have the answer to that. A lot of people take their pension at age 60, about 30 per cent. Then another large chunk take it at age 65, maybe 20 to 25 per cent, sometime between age 60 and 65. After age 65, it is 4 per cent.
The Chair: Does that have anything to do with these amendments?
Mr. La Salle: A little bit, because with the deferred benefit for OAS, we will allow people to defer receipt of their pension and have it actuarially adjusted, which is the case with CPP as well.
Senator Eaton: Do you have statistics on how long Canadians are working on average now? Are they retiring at age 60 or 65, or are they working until age 70? Do we know how long people are working? We are moving the age up to 67, and I want to try and determine how pertinent it is if people are still working until they are age 70 and if we are living until we are age 80. I know they are allowed, but how many people do?
Annette Vermaeten, Director, Task Force — Special Projects, Human Resources and Skills Development Canada: The retirement age has been changing over time. Back in the 1970s, people retired at about age 65 on average, and then it declined over a number of years.
In the late 1990s, it was at about age 60, and it has been slowly increasing up until now. It is at about 62-and-a-half years of age. The information does not take into account recent trends that have been happening in retirement. Older individuals have been delaying their retirement, and some of the statistics do not reflect that yet. Generally speaking, the retirement age has been increasing.
Senator Eaton: If the trends keep going, by the time the OAS becomes applicable and changed to the age of 67, people might be working that much longer anyway.
Senator Peterson: I presume the clawback provisions still exist. If you did not apply for the OAS until you are 75 or 78 years of age, would you automatically get that 65 to 70 increase? Is it factored up?
Mr. La Salle: I just want to be sure that I understand the question.
Once the proposal in this legislation is accepted, then one will be able to defer the OAS benefit for up to five years to the maximum of age 70. Eventually, in 11 years, the age of eligibility will move gradually over a period of six years, from age 65 to 67. During those years of transition, the cap, if you like, the age of the deferral, which is 70, will increase to 72. It has no relationship with the tax recovery provision. There are no linkages between the initiative that is there and the provision of the Income Tax Act that claws back some of the OAS benefit depending on your revenue.
Senator Peterson: You are not penalized because you do not apply for it? It is because you do not qualify?
Mr. La Salle: No, it does not matter. It works completely separately.
Senator Peterson: You said you will compensate the provinces for that?
Mr. La Salle: Yes.
Senator Peterson: Do you know how much that will be?
Mr. La Salle: That will not happen for many years.
Senator Peterson: It is way down the road when this all kicks in?
Mr. La Salle: Exactly.
Senator Callbeck: Thank you for coming this evening and for your explanations.
Certainly there are many people — the Parliamentary Budget Officer is one — that say the system we have now is sustainable. The government has said it is not sustainable in its current form and so brought in the changes, which you have just outlined, to take effect in 2023, when the eligibility age for OAS goes from age 65 to 67.
Could you provide us with figures that would indicate that the OAS in its current form is not sustainable? There must be figures. The government has made this decision, but it is very confusing because so many people are saying that it is sustainable. If it is not, we should be able to see some facts and figures that tell us it is not.
Mr. La Salle: The long-term cost of the OAS program is provided by the Chief Actuary in the reports that he does. He does a regular report every three years, just like he does for the CPP, as a matter of fact. There is a separate report for the OAS. His last report was on the basis of December 31, 2009. It is the ninth report and, by law, the Chief Actuary has to produce a new report when changes are made to the program. That sort of long-term projection will be included in his next report.
Senator Callbeck: There must be figures available now. The government has made the decision; it is in this piece of legislation we have before us. Yet there is such confusion out there in the public. Why can we not see some figures and some facts that tell us that this system is not sustainable?
Mr. La Salle: The numbers that are available are those that are in the ninth report, which show that the expenditure would increase from $38 billion currently to about $108 billion in 2023.
Senator Callbeck: Have you looked at the figures of the Parliamentary Budget Officer?
Mr. La Salle: I read the article, yes.
Senator Callbeck: Where does he disagree with the government? Where is the discrepancy here?
Mr. La Salle: The figures we use are those of the Chief Actuary. He reports.
Senator Callbeck: On another question, you say that you do not have any calculations for the provinces as to how much this will cost the provinces; you have none at all?
Mr. La Salle: No, we do not.
Bruno Rodrigue, Chief, Income Security, Department of Finance Canada: We are here to comment on the content of the bill. It is difficult for us to provide comments on the content of the briefing material provided to the Minister of Finance, the Prime Minister and the Minister of HRSD in the context of the budget.
Senator Callbeck: I wish you to comment on proactive enrollment. How exactly will that work?
Mr. La Salle: With pleasure. We talk about proactive enrollment because of the two aspects to it. There is the automatic enrollment where we have enough data and enough knowledge about the individual that it satisfies our quite rigorous criteria. This is a life-time benefit we provide. We want to ensure we are giving it to people who are truly entitled, who have spent 40 years in Canada and deserve the full benefit, certainly in the first phase.
In the first phase of the rollout for the automatic enrollment, we will automatically enroll people who have 40 years of contribution to CPP; in other words, there is an ongoing relationship with these people. Not only that, but it is with those who are in actual receipt of CPP.
We are trying this new initiative. The bar will be very high: forty years of contribution to CPP and being in receipt of a CPP pension. If you have those and you turn 65, we will — to use the language of Service Canada — put you in pay. You will start receiving your OAS pension.
Senator Callbeck: How will you know that you do not have to apply?
Mr. La Salle: Six months, I believe, before you turn 65 you will receive a letter saying, ``Here is the information we have on you.'' We have to actually contact them because Canadians will now have an opportunity to defer to say, ``No, do not auto enrol me. I want to defer. I am working or I would rather have a larger benefit later on, fully indexed for life.'' We will notify Canadians that are about to turn 65 that we have the information. If they do not do anything, they will start receiving an OAS pension.
Where we do not have sufficient information to meet those high standards, we will nevertheless recycle this information to pre-populate an application. Is that bad English? We will use the information to fill out the form we have for you. Excuse my English. ``Pre-populate'' sounds like giving birth to data.
We will pre-fill the form with the available information. We refer to that as streamline application. So we have automatic enrollment and streamline application. It is a continuum, if you like, and we call the overall initiative proactive enrollment.
The first phase will just be OAS. As we move along, we will include GIS. GIS, as my colleague noted, is based on family income. We need to have consent. We have to develop a way to get the consent of the partner or spouse before we can establish that amount. Finally, another phase will be for people who have less than 40 years of residence in Canada and for that we need some data exchange with Citizenship and Immigration Canada.
Senator Callbeck: Regarding the allowance, that is 60 to 64; that is going to 62 to 66. What about applying for that; is there any change there?
Ms. Martel: It is the same thing. Once the automatic enrollment initiative is well in place toward the last phases, for those people for whom we have sufficient information to automatically enroll them for the allowances, we will. However, for the other people for whom we do not have sufficient data on them, they will have to continue to apply to check their eligibility status.
Senator Callbeck: What would ``sufficient information'' be for an allowance?
Ms. Martel: For the allowance, we need to ensure that the person is legal resident of Canada, we need to know the age of the person, and we need to ensure that the person has been in Canada for at least 10 years. Ten years is the residence requirement for the allowances. We need to know the marital status of the person. For the regular allowance, we need to know that this person is married or is the common law partner of a GIS recipient. For the allowance for the survivor, we need to know that this person is a survivor — is a widow or widower — and never re-entered into a relationship after the death of their spouse or common law partner. We also need to know their income to ensure their income is low enough to qualify for the allowances.
We need a lot of information to ensure we need to automatically put the person in pay.
Senator Nancy Ruth: This came to me and I am not sure you have dealt with, but this is about poor older women now in this decade.
The government allowed for pension splitting, and many of the women where those pensions were split actually had very little income — if no income — and we do not know the facts whether women get any of that money. It may be that the guys just take it all anyhow; it is just a tax deal.
Therefore, some of those women might be eligible for OAS and GIS if they had not made this agreement on pension splitting. Was this ever considered in making your regulations?
Ms. Martel: Pension income splitting is for tax purposes. You have a couple and suppose he had has $30,000 of total income and she has zero. He will virtually give her $15,000. For tax purposes, they are both taxed on $15,000 each, and it will reduce their total tax burden.
For GIS purposes, or for the calculation of the allowances, income splitting does not matter because the benefit is calculated on the combined income of both spouses. It does not matter how the income is allocated between the two.
Senator Nancy Ruth: You have three ministries sharing information here amongst each other. That frightened me a bit. I want to know what the Privacy Commissioner has said about that. I also want to know what the principle of confidentiality of tax stood in this information-sharing. In principle, this is probably a good thing. I have a couple of friends in their sixties who are now getting Alzheimer's and have not applied when they should have applied and forgot to do it, so auto-enrolment may be good for a number of reasons.
However, I am concerned about everyone knowing everyone's business and what the Privacy Commissioner said about that.
Mr. La Salle: Once the bill was tabled, as soon as it was tabled, we met with the Privacy Commissioner and her staff and we started engaging. They will be looking at our privacy impact analysis that we have to develop and we will work with them very closely to ensure that in fact we reap the benefit of this initiative without risk to privacy.
Senator Nancy Ruth: You do not know yet.
Mr. La Salle: We do not know yet, senator.
Senator Nancy Ruth: This is about confidentiality of tax.
Mr. La Salle: Absolutely.
Senator Ringuette: What is the saving to government from raising the OAS from 65 to 67?
Mr. La Salle: This will be part of the next report of the Chief Actuary of Canada.
Senator Ringuette: In order to propose such a piece of legislation, such a drastic change, to Parliament, you owe it to Parliament to tell them the projected savings of this measure.
Mr. La Salle: An act called the Public Pensions Reporting Act obliges the Chief Actuary to factor in changes made to the program into a report. For example, when the top-up to the GIS was announced and legislated in 2011, a report was issued, et cetera, so the next report of the Chief Actuary will factor in these changes.
Senator Ringuette: Sir, you just said that you were basing your assessment on the Parliamentary Budget Officer that is contrary to the chief actuarial report that dates back two years. In order to be correct to parliamentarians who have to study this bill and the effect of this bill, please provide us with an estimate of the savings to government of moving OAS from 65 to 67.
Mr. La Salle: That is the responsibility of the Chief Actuary.
Senator Ringuette: Chair, I hope we will have the Chief Actuary before us, and the PBO also.
The Chair: We will make note of that request.
Senator Ringuette: In the last three years, let us say, what has been the index of the OAS on average?
Mr. La Salle: You are talking about the Consumer Price Index? I am told it is about 3 per cent a year.
Senator Ringuette: It is about 3 per cent.
Mr. La Salle: It is based on the Statistics Canada Consumer Price Index that is published on a regular basis.
Senator Ringuette: In the proposed legislation, will OAS be indexed?
Mr. La Salle: Sure. It is the same provision. The provision is unchanged, both OAS and GIS.
Senator Ringuette: Can you tell me why the accrued interest rate for a person who decides to defer OAS is 7.2 per cent a year? I have here in front of me for the last three years, for instance, the Government of Canada bond issue. On average, for the last three years, it is 2.23 per cent. There is no logic at all, and I will explain this. First, the Government of Canada issues bonds and collects 2.23 per cent interest. Then you say that you will give 7.2 per cent interest to people who want to defer their OAS. Two years ago the same committee was asked to review and Parliament was asked to review changes to CPP because at the time we were told that statistics indicated that the average Canadian wanted to retire earlier than age 65. Therefore, we amended the CPP act to allow Canadians to start retiring and collecting their CPP at age 60.
In the last two years, tell me what has happened that has been so different in regard to Canadians wanting to retire at 60, based on your arguments of two years ago, for CPP, and now suddenly Canadians will have to retire at 67?
Mr. La Salle: That is a good question. The reason for the difference in rate is that if you leave your money with CPP it is invested by the CPP Investment Board, which not only invests in debt instruments but also is active in equity and private investments, real estate, et cetera, so the long-term return of the CPPIB is greater. That is why the actuarial factor is higher in the case of CPP.
It is the Chief Actuary that determines these rates. What is used I believe is the 10-year bond rate over a long period of time and that is how this is determined. In other words, if you choose to defer receiving your OAS benefit, that money stays with the government. What the government does with it is that it presumably does not have to borrow long-term as much money. That is the return you are getting.
Senator Ringuette: The return here on bonds is 2.23.
Mr. La Salle: That depends.
Senator Ringuette: It does not make any sense.
Mr. La Salle: That is a six-month bond maybe.
Senator Ringuette: I can understand that there is a certain board that invests the CPP fund, but there is no OAS fund.
Mr. La Salle: That is right. It is CRS.
The Chair: That was excellent. Everyone is worn out. That was short and snappy. Thank you very much and I thank all of you for staying to help us with this. This is a very important subject for the public to get its mind around. I hope that our session here today has helped clear up some of that confusion.
(The committee adjourned.)