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Supporting Democracy = Pension Hypocrisy

Author: Walter Robinson 1998/02/04
The Blais Commission (Blais) has delivered its long awaited report on pay scales for MPs and Senators. Too bad they didn't follow the simple roadmap to success that we laid before them.

Specifically, the CTF recommended: an end to tax-free allowances for MPs and a consequent top up to a fully taxable salary; abolition of the gold-plated pension plan and replacing it with a self-funding voluntary group RRSP; and changes to the political process by which compensation issues are decided.

Instead, Blais chooses to bury some good ideas on MP salaries and ending tax-free allowances with indefensible ideas on salaries for Cabinet Ministers and MP pensions.

In its report entitled Supporting Democracy, the three-person Blais Commission offers fourteen interesting recommendations.

We agree with the recommendation to abolish tax-free allowances for MPs. To compensate for this, an MPs salary becomes fully transparent and taxable. This salary will tally about $106,000 but it does not constitute a raise. Instead, Canadians now have a true idea of what their MPs are actually paid.

Yet, Blais' other recommendations are destined for the parliamentary shredder. For example, Blais recommends that Cabinet Ministers should make as much as the Deputy Ministers who report to them.

This is idea is ludicrous. If adopted, Ministers will have a base salary of 100K plus an indemnity of 46K. And should a Minister be so fortunate to work with a seasoned Deputy Minister (DM) at the top end of the pay scale, approximately 170K, then he/she will receive an additional 25 or 30K.

There is a vast difference between a DM that manages a department and a Minister who provides political oversight. These jobs require two unique and different skill-sets. If we are to walk this road of tying Cabinet Minister's salaries to the bureaucracy, then their pay must be a function of the department's ability to meet pre-determined budgetary, operational and service benchmarks.

Finally, Blais really drops the ball on pension reform. Currently, taxpayers contribute $3.61 for every buck an MP contributes to the plan. And each year we pay out $15 million in pensions to former MPs.

Blais tries to cloud this issue by recommending decreases in the accrual rate from 4% to 2.5% and the contribution rates from 9% to 5.5%. But let's look at the numbers.

A backbench MP elected in 1993 who sits for six years will be entitled to a base pension of $15,456 per year. Pension amounts are calculated by averaging the best six years in office and multiplying by the accrual rate (4%) and then by the number of years of service. Under the Blais commission scenario, this same backbench MP will receive a base of pension $15,900 using the accrual rate of 2.5%. This pension is inflation protected and can be drawn upon at age 55.

MPs currently contribute 9% of their $64,400 salary to the pension plan or $5,796 per year. Blais recommends a reduction to 5.5%. But this 5.5% rate is calculated on the basis of the new salary of $106,000: $5,830 per year. And you and I are still pay $3.61 for every buck an MP kicks in.

So the gold-plated plan is now silver-plated with lots of gold trim. But if MPs find this too rich for their blood, Blais recommends that they can opt out and join a self-funding group RRSP instead. So instead of pension reform, we have a veritable pension buffet. The rich plan has got to go!

The report's title should be changed from Supporting Democracy to Pension Hypocrisy. It won't wash with Canadian taxpayers.

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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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