Why Jim Flaherty is turning his back on CPP reform

Wes Sheridan is still surprised. No, make that perplexed. You can hear it in the PEI finance minister's voice on the day after the federal government's abrupt decision to shelve all the work that's been done on CPP reform.

"We had full consensus from 10 provinces and three territories to continue work on enhancing the Canadian Pension Plan, and the feds just shut it down,'' Sheridan said Tuesday. ''That's never happened in the past.''

Never might be a stretch. But it has taken a few years — seven in fact — for federal-provincial relations to revert back to the barely concealed hostility Canadians had come to expect whenever the two levels of government met.

Just three years ago Jim Flaherty agreed to consider a modest, mandatory increase in CPP premiums to pay for higher retirement benefits in the future. Federal-provincial officials have been working out the exact details ever since.

To do nothing, Flaherty said back then, condemned some Canadians to a retirement without enough money to take care of themselves.

This week, however, a different story altogether from the federal finance minister after meeting again with his provincial counterparts.

He spoke about having had "frank discussions'' on CPP reform. Which everyone familiar with Ottawa-speak knows means no progress or agreement, let alone any consensus.

Flaherty's no longer taking the proactive approach he preached back in 2010.  His official position on CPP reform after Monday's one hour discussion is: Not now, perhaps not ever. Years  anyway. Don't ask.

Down the road

As Flaherty elaborated later to reporters, "one of the things I don't believe in is governments making commitments far down the road for things that are, well we might not even be the government, or they might not be the government.''

Of course, he isn't at all averse to tying the hands of future governments when it comes to, say, introducing legislation, as he did this fall, to force Ottawa to balance budgets ''in normal economic times.''

But balancing budgets is a good, Conservative mantra, worth repeating even in the midst of a string of Conservative deficits.

Raising CPP premiums, on the other hand, is seen by the feds as increasing payroll taxes paid by employees and employers alike, at a time when Flaherty says the economic recovery remains fragile.

He didn't add that tax hikes are totally un-Conservative. But he no doubt had in mind the opposition of groups such as the Canadian Federation of Independent Business, which just released a poll that suggested most small business owners, and most Canadians, oppose increased payroll taxes.

"Instead, they believe that government should control spending and reduce taxes to allow more savings,'' the CFIB said in a news release.

A 'bazooka approach'

"We believe CPP payroll taxes can hurt the economy,'' Flaherty's junior finance minister, Kevin Sorenson, dutifully told reporters after the fed-prov meeting.

"That is why all government must focus on encouraging job growth, and getting their fiscal houses in order.''

But Wes Sheridan just laughs when asked about the CFIB's apparent influence over Sorenson's comments. He's not biting.

Sheridan says he and other provincial finance ministers are determined to keep working, without the federal government, on a plan that would see all thirteen provinces and territories agree to hike CPP premiums for higher benefits down the road.

"We're talking about a generation of young people in their twenties, thirties and forties, going into the workplace with part-time jobs, no benefits and limited savings ability. If we don't act we'll have a generation of Canadians who will not be able to retire in dignity.''

A bazooka-approach, Flaherty called that on Monday. Better, he said, to look at a targeted plan to help the minority of Canadians who are not saving enough.

For him, that means encouraging Canadians to put more money into pooled retirement plans, or tax-free savings accounts — both of them voluntary savings schemes that involve no contributions from government or employers.

Ontario's finance minister, Charles Sousa, says none of the provinces is arguing one over the other. His province is planning to bring in a pooled retirement savings plan, but he also wants to see the CPP improved as a mainstay in protecting future incomes.

The advantage of the CPP is that it is well run, costs little to administer, and is available right across the country.

Even Quebec's Parti Quebecois government, normally resistant to any show of unanimity with English-speaking Canada, is on board.

As for PEI's Sheridan, he pauses for a moment, just to underscore what's at stake if CPP benefits aren't enhanced.

"Provinces are responsible for social services, so we're going to pay either way if the next generation of retirees doesn't have enough to live on,'' he says.

That could be another subject for "frank discussion'' when the next generation of federal-provincial leaders meet to pick up the pieces.