CANADA

The power of seniors

Ottawa treads cautiously on pension reform

WARREN CARAGATA July 10 1995
CANADA

The power of seniors

Ottawa treads cautiously on pension reform

WARREN CARAGATA July 10 1995

The power of seniors

CANADA

Ottawa treads cautiously on pension reform

Solange Denis is not very scary. At four feet, four inches, with a bob of white hair, the 72-year-old Ottawa pensioner does not look like she could push anyone offside. But a decade ago, Denis became a potent symbol of grey power when she confronted then-Prime Minister Brian Mulroney on Parliament Hill and forced the Tory government to abandon plans to limit inflation protection for old age pensions. “You lied to us,” she bluntly told Mulroney, in reference to his pre-election pledge to protect social programs as a sacred trust. “You made us vote for you, then, goodbye Charlie Brown.” Now, as the federal Liberals prepare to tackle pension reform, Denis has once again become a symbol, this time of the potential political risks of tampering with benefits to senior citizens. “Everybody,” said one Liberal insider last week, “remembers Solange Denis.” But in political terms, 10 years is almost forever, and things have changed. Denis still frets about threats to her pension, but now she also worries about the deficit—and says that seniors are ready to do their part to bring it under control. “Everybody I talk to, they worry about the debt, the deficit,” she says.

Tackling the touchy issue of pension reform was a prime concern for the Liberals last week as the cabinet held a special twoday meeting to plot the government’s course over the second half of the year. Ministers also discussed proposals to overhaul the $14.3billion unemployment insurance system, more cuts in government spending and Quebec’s plans for a referendum this fall. But

nothing requires more political delicacy than redoing the system of benefits for senior citizens without arousing a storm of protest from a lobby that government strategists consider well-organized and articulate. “Nothing scares a politician more than a senior citizen,” said one Liberal strategist last week.

With that in mind, the government so far has proceeded with caution, first by splitting off old age security from Human Resources Minister Lloyd Axworthy’s social policy review, which examined changes to UI and welfare.

“It is interesting how much more carefully the government has approached this compared with unemployment insurance,” says Keith Banting, a social policy expert at Queen’s University in Kingston. “The political risk of attacking the elderly is much greater than attacking UI beneficiaries or welfare beneficiaries.” In fact, Banting says that except for the national unity issue, “I don’t see anything else on the agenda which could do as much political damage.”

Not much is yet settled about the changes that Ottawa will propose for old age pensions. But the government is considering a plan that would combine all benefits—including old age security (OAS) and the guaranteed income supplement (GIS), which goes to low-income pensioners—into one income tested program known as the Super-GIS. Income tests will be based on family rather than on individual income, as is the case

now. The effect of that would be to reduce the numbers of those eligible for assistance. In essence, the proposal would abolish one of Canada’s first, and now few remaining, universal social programs. OAS now pays $392.41 a month and GIS pays a maximum of $466.33 to those pensioners earning, in the case of single people, less than $11,208 a year. The two programs, plus spouse’s allowances, will cost the federal treasury $21.2 billion this year and $21.7 billion next—making them the largest single component of government spending other than interest payments on the debt.

By the year 2030, the federal government forecasts that seniors will make up 23 per cent of the population, compared with the current 12 per cent. Another idea being considered to restrain the growth in pension spending would be raising the retirement age to 67 from 65. The point of reforming the system, Finance Minister Paul Martin told reporters last week, is to make the pension system not only fair, but “sustainable,” which is another way of saying that pension costs are becoming too expensive. As one government official put it last week: “If you can’t get a handle on the pension system, you’ll never get a handle on the deficit.”

But government advisers say privately that there are no large immediate savings to be won from pension reform. The OAS, which is taxable and clawed back entirely from those with annual incomes above $84,195, would be abolished. But most of the money would go to low-income seniors—in line with the promise in the government’s February budget of “undiminished protection for all seniors who are less well-off.” One of the options being considered is to take pension benefits away from Canadian households with incomes above $60,000. But that would save only $1.15 billion last year. Greater savings would require hitting those earning less than $60,000. But even if the cuts are not severe, the “constant nibbling” at benefits is upsetting seniors, says Claude Edwards, president of the Coalition of Seniors for Social Equity, representing people receiving public service pensions. “We entered into these things in good faith, and now we’re not sure just what we can count on. That’s the most distressing part, the insecurity.” In her small apartment, decorated with pictures of her late husband, Viateur, Solange Denis worries not just about the deficit but also how to make ends meet. Still, she says the wealthy should bear the greatest share of the burden. She is a Liberal, she says, and she has taken Prime Minister Jean Chrétien at his word during the last election campaign that “a country like Canada can afford dignity for every citizen and for every senior.” If Chrétien goes back on that word, she says, she will fight again. And that is a warning government would ignore at its peril.

WARREN CARAGATA in Ottawa