CANADA

‘A CUT ABOVE’

A CAMPAIGN TO REDUCE THE LARGE PENSIONS FOR MPs GETS LITTLE SUPPORT IN THE COMMONS

Anthony Wilson-Smith May 17 1993
CANADA

‘A CUT ABOVE’

A CAMPAIGN TO REDUCE THE LARGE PENSIONS FOR MPs GETS LITTLE SUPPORT IN THE COMMONS

Anthony Wilson-Smith May 17 1993

‘A CUT ABOVE’

CANADA

A CAMPAIGN TO REDUCE THE LARGE PENSIONS FOR MPs GETS LITTLE SUPPORT IN THE COMMONS

For almost a year, Alan Redway’s lonely struggle has met with silence and derision from his colleagues in the House of Commons. It all began back in June, 1992,

when Redway, the 58-year-old Conservative MP for Don Valley East in Toronto, proposed a series of amendments to the parliamentary pension plan. Redway suggested that benefits should be paid out only after qualifying members tum 60, rather than as soon as they leave office. He also urged his fellow MPs to outlaw “double dipping”—by which former legislators named to government bodies continue to draw their full pensions in addition to their new salaries. Those measures, Redway said in an interview, “are the least we can do to demonstrate to our constituents that we do not consider ourselves a cut above everyone else.”

So far, at least, the steps that Redway regards as a bare minimum have been too much for most of his colleagues to consider. But it may only be a matter of time before defenders of the parliamentary pension plan are forced to give ground to their critics. In Alberta last month, Premier Ralph Klein announced plans to abolish pensions for members of the provincial legislature who were elected for the first time after 1988. In so doing, Klein threw down the gauntlet to politicians elsewhere, saying that voters in other jurisdictions would ask why their representatives cannot do the same thing. Soon after,

Ontario Premier Bob Rae promised to review his province’s program. And last week, Treasury Board President Gilles Loiselle repeated a year-old pledge to review the House of Commons pension plan, which the Canadian Institute of Actuaries estimates to be 2 'A times more generous than a typical private-sector pension.

Apart from Redway, a handful of MPs have publicly and regularly called for reforms to the the existing program. They include New Democratic Party Leader Audrey McLaughlin, Liberal MP David Kilgour, Reform party MP Deborah Grey and Tory backbencher and leadership candidate Patrick Boyer. But most MPs, who qualify for the plan if they serve a minimum of six years in the Commons, evidently see little need for change. Currently, MPs contribute 10 per cent of their salaries to the plan, with a

matching contribution from the federal treasury. If they serve less than six years they are fully reimbursed for their personal contributions—and, if defeated in an election, receive a severance package equal to six months’ salary. Once they qualify, MPs are entitled to annual benefits equal to 30 per cent of their average salary over their bestpaid she years. The amount increases by five percentage points with each additional year of service, to a maximum of 75 per cent after 15 years. That means, for example, that Indian and Northern Affairs Minister Thomas Siddon, with 15 years’ experience, would receive a pension of more than $61,000 annually.

Double-dipping offers another way for retired politicians to supplement their income. Although most MPs claim to abhor the practice, it continues unabated. Among those who benefit: former NDP leader Ed Broadbent, who collects between $109,000 and $132,000 as president of the federally funded International Centre for Human Rights and Democratic Development—and another $45,000 in pension benefits. To do as well as a 15-year veteran of the Commons, a civil servant would have to contribute to a pension plan for 30 years. Even then, the individual would not be allowed to collect until age 60. That disparity “puts an elected politician out of touch with the concerns of average Canadians,” says Robert Fleming, a Toronto-based public policy consultant and former chief administrator of the Ontario legislature.

Canadian politicians are in an enviable position compared to legislators in other countries. In Great Britain, for example, retired MPs receive a maximum of 66 per cent of their salaries, and cannot collect until age 65. By contrast, a Canadian former MP with

15 years’ experience as a backbencher would receive $48,000 annually regardless of age.

Rae’s promise last week to review the Ontario legislature’s pension plan was prompted in part by the revelation that former Liberal cabinet minister Remo Mancini, who is 41, will receive an indexed pension beginning at $48,000 annually when he quits politics at the end of May. Under the province’s rules, a politician’s age and years of experience must add up to at least 55 in order to qualify for a pension. That means that a 40-year-old member, retiring after 15 years’ service, would qualify at once for a pension. Despite the debate in Ontario, no immediate change to the law is likely. Other than Conservative leader Michael Harris, there are few supporters among the province’s three political parties for immediate or substantial change.

In Alberta, Klein’s proposed pension changes have met with a fire storm of criticism. The premier himself said that his wife “broke down and cried” when she realized that he would not be entitled to a pension under the proposed legislation. Klein’s proposed changes, however, are less extensive than they might first appear. Those who were elected to the legislature before 1989— the year that Klein himself first won a seat—will continue to benefit from the country’s most generous provincial pension plan. In its current form, the plan has existed since 1989, when Alberta MLAs voted themselves 30-per-cent pay increases and, consequently, 40-per-cent increases in their pension benefits. Under the plan, MLAs with 20 years’ experience receive almost $46,000 in benefits annually upon retirement—and cabinet ministers significantly more than that. One MLA, former treasurer Dick Johnston, could make more from his pension of about $73,000 than the $57,000 he currently makes in salary and nontaxable allowance as an MLA.

As well, former cabinet ministers now serving as backbenchers are allowed to receive extra pension benefits while still sitting in the legislature. A study conducted in January by the Association of Alberta Taxpayers concluded that the 16 former ministers now sitting on the back benches receive combined pension benefits of more than $230,000 a year—or almost $15,000 each— in addition to their salaries. Under Klein’s proposed legislation, benefits to those still qualifying for pensions will change by as little as five per cent.

Because of that, some critics say that Klein’s proposed changes are haphazard and unfair. If the law passes as expected, it will barely affect benefits for some MLAs while eliminating them completely for others. Said Fleming: “I do not believe that the average person thinks politicians should get fewer benefits than themselves. They just do not want them to get more.”

Fleming and some other observers also suggest that politicians have given themselves artificially high pension plans as compensation for salaries that are lower than they should be. Said Fleming: “There is such an outcry when politicians raise their salaries that they tend to leave salaries alone and seek less-obvious ways of augmenting their pay package.” Former MP Paul McCrossan, past president of the Canadian Institute of Actuaries, agrees that MPs are “over-pensioned but underpaid.” Said McCrossan: “The average MP makes about the same as the most qualified public school teacher in Toronto—but MPs have far more responsibility.” Because of that, McCrossan said, he recommends increasing

salaries, reducing pensions and setting 60 as the minimum age for collecting benefits.

In an election year, when many members will likely retire or be defeated, the pensions

debate becomes particularly urgent. The National Citizens’ Coalition, a right-of-centre lobby group, concluded last fall that 172 of the 295 MPs had the necessary six years’ service to qualify for benefits. If all of them chose to start collecting pension benefits immediately and lived to 75 years of age, they would receive a total of $261 million. The potential payouts are particularly high for parliamentarians who took office at an early age. Former Bloc Québécois MP Jean Lapierre, 37, quit the Commons last year after 13 years service. Now a radio talk-show host in Montreal, he receives a pension of almost $40,000 annually—even without indexing that would amount to more that $1.5 million if he lives to 75.

At the same time, some critics argue that the issue of who sets the range for such benefits matters as much as the total benefits themselves. The NDP’s McLaughlin—who concedes that her stand has been unpopular in her own caucus—has repeatedly urged the government to establish an independent committee drawn from outside the House of Commons to set MPs’ salaries and benefits. That approach, said Fleming, “is the only appropriate response if elected members are to convince average Canadians that they are serious about reforming their own houses.” But, judging by the reluctance of most elected officials to tackle the issue, taxpayers will have a long wait.

ANTHONY WILSON-SMITH with

NANCY WOOD

LUKE FISHER

JOHN HOWSE