Finance ministers meet to talk about pension reform, but likely not implement

OTTAWA – Canada’s fragile economy, deficits and pension reform — and possibly smoothing over ruffled feathers — top the list of issues confronting federal and provincial finance ministers meeting in Ottawa today and Monday.

The last time the ministers got together a year ago, Finance Minister Jim Flaherty angered many of his provincial counterparts by announcing he was unilaterally imposing cuts to future health transfers.

This time the minister says he is making no substantive changes to any of the federal programs, although some disgruntled provinces are likely to ask for a better shake.

The most contentious issue will likely be pension reform — the key topic two years back — with Ontario again pushing for an expansion of the Canada Pension Plan.

Ottawa is expected to place several plans on the table for discussion, but not for implementation.

On Friday, Flaherty told reporters the economy should be the top priority and that it is too weak to contemplate boosting CPP benefits at this time because employers would have to pay higher premiums.

“This is not the time to put another burden on employers and dampen employment prospects of Canadians,” he said, adding that such a proposal would make much more sense once the economy has recovered fully.

That’s also the view of Saskatchewan Finance Minister Ken Krawetz, who said while he might support modest tweaks, any “radical changes” to CPP are out of the question.

Two years ago, when enriching CPP was under active consideration, the weak economy and the opposition of Alberta and Quebec were cited by Ottawa for withdrawing its support for the idea.

In its place, Ottawa proposed a voluntary program whereby employees in small and medium firms can voluntarily pool savings — although employers are not obliged to contribute.

Federal legislation for the so-called Registered Pooled Pension Plan concept was officially enacted Friday, but it still requires the provinces to put it into practice.

A spokesperson for Finance Minister Dwight Duncan says Ontario will not implement the pooled plans unless there is also “enhancement” of the CPP.

New Democrats and the Canadian Labour Congress have proposed doubling what CPP would pay out over a seven-year period to $1,868 a month.

Flaherty said he would not act unless the decision is unanimous, even though technically he only needs two-thirds of provinces representing two-thirds of Canada’s population to be on side.

The federal minister also indicated that he will be discussing the fragility of the U.S. economy, and how Canadian governments will need to work together if the “fiscal cliff” fears materialize, and the combination of tax hikes and spending cuts in the United States drives not just the U.S. but also Canada into a recession.

In an interview Sunday with CTV’s Question Period, Flaherty he has high hopes that American leaders will sidestep the cliff with a short-term temporary fix, buying some time to find a permanent solution.

“I hope that January, February, they’ll sort it out…..There has been some progress. So I’m hopeful that they’ll at least patch it, for the new year, and then move on to a genuine solution for the long term,” Flaherty said.

He said he will be speaking with the provincial ministers about what they could do together, just in case.

“The federation does tend to pull together — particularly the finance ministers because we all deal with the numbers — when times get tough. I’m not anticipating the need to do this. I’m hoping the Americans will see the light.”

On domestic issues, however, there is unlikely to be much harmony in the way the governments view equalization and transfer payments.

While Flaherty said there would only be technical changes to equalization and transfers, some of the provinces still want that topic on the table.

A spokesman for Quebec’s finance minister, Nicolas Marceau, said the province’s key objective is ensuring it gets its fair share of transfer payments.

Ontario has also long maintained that it is getting short-changed.

Last week, the Ontario Chamber of Commerce called on Duncan to get his “elbows out” and demand better treatment, arguing that in the last decade or so, Ontario contributed $20 billion more to the employment insurance program alone than its residents received in return.

“The bottom line is we pay $12.3 billion (annually) into the federation (more) than we take out of it, that’s the bottom line,” said Allan O’Dette, the chamber’s president.

Flaherty says his top priority is to ensure that all governments stay on track toward eliminating deficits. He noted that Ontario and Quebec still have massive budget deficit problems, and that British Columbia’s debt rating was recently downgraded from stable to negative by Moody’s.

“This is not a lecturing thing from the federal government. This is saying we are all in this together,” he said.

“If one of our provincial governments were to get into serious interest rate increases because of downgrading … obviously the place to go is to the federal government for assistance.”

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