October 25, 1951

PC

John George Diefenbaker

Progressive Conservative

Mr. J. G. Diefenbaker (Lake Centre):

could not hear the latter words of the statement the minister just made, and for that reason the question I am about to ask may have been answered. Is it expected that legislation will be submitted to parliament at this session to permit increases in the salaries of the members of the Royal Canadian Mounted Police?

Topic:   ROYAL CANADIAN MOUNTED POLICE
Subtopic:   QUESTION AS TO INCREASE IN SALARY
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LIB

Stuart Sinclair Garson (Solicitor General of Canada; Minister of Justice and Attorney General of Canada)

Liberal

Mr. Garson:

Obviously the hon. member did not hear my answer because the point I was making was that these matters are ordinarily considered by the mounted police themselves before they reach the minister. When they reach the minister they are submitted to the cabinet, and it is not until they are considered by the cabinet that a decision is made.

Topic:   ROYAL CANADIAN MOUNTED POLICE
Subtopic:   QUESTION AS TO INCREASE IN SALARY
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PC

John George Diefenbaker

Progressive Conservative

Mr. Diefenbaker:

It was reported in the press.

Topic:   ROYAL CANADIAN MOUNTED POLICE
Subtopic:   QUESTION AS TO INCREASE IN SALARY
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LIB

Stuart Sinclair Garson (Solicitor General of Canada; Minister of Justice and Attorney General of Canada)

Liberal

Mr. Garson:

Yes, it was reported in the press but this communication had not been sent to me as yet, and that is the reason I delayed until today the answering of the question the hon. gentleman asked me yesterday.

Topic:   ROYAL CANADIAN MOUNTED POLICE
Subtopic:   QUESTION AS TO INCREASE IN SALARY
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TRANS-CANADA AIR LINES QUESTION AS TO NEW CIVIL AIRPORT AT HALIFAX


On the orders of the day:


LIB

Samuel Rosborough Balcom

Liberal

Mr. S. R. Balcom (Halifax):

I should like to direct a question to the Minister of Transport. Has Trans-Canada Air Lines given high priority to the establishment of an airport at Halifax, and has the Department of Transport approved this project? Are steps being taken to meet this requirement?

Topic:   TRANS-CANADA AIR LINES QUESTION AS TO NEW CIVIL AIRPORT AT HALIFAX
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LIB

Lionel Chevrier (Minister of Transport)

Liberal

Hon. Lionel Chevrier (Minister of Transport):

The hon. member was kind enough to send me notice of his question. The answer to the first part is yes. Both my officials and Trans-Canada Air Lines recognize the desirability of proceeding with a new civil airport at Halifax. Plans to this end are in hand, but the date of construction will depend on budgetary considerations and particularly defence priorities.

Topic:   TRANS-CANADA AIR LINES QUESTION AS TO NEW CIVIL AIRPORT AT HALIFAX
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OLD AGE SECURITY TO PROVIDE FOR PENSIONS, WITHOUT MEANS TEST, AT AGE 70

LIB

Paul Joseph James Martin (Minister of National Health and Welfare)

Liberal

Hon. Paul Martin (Minister of National Health and Welfare) moved

that the house go into committee to consider the following resolution:

That it is expedient to introduce a measure to provide for the payment of pensions, without a means test, of forty dollars a month to persons who have attained the age of 70 years and have appropriate residence qualifications, and to establish a fund made up of special contributions levied for that purpose.

Topic:   OLD AGE SECURITY TO PROVIDE FOR PENSIONS, WITHOUT MEANS TEST, AT AGE 70
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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Is the minister not going to make a statement at this juncture?

Topic:   OLD AGE SECURITY TO PROVIDE FOR PENSIONS, WITHOUT MEANS TEST, AT AGE 70
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LIB

Paul Joseph James Martin (Minister of National Health and Welfare)

Liberal

Mr. Martin:

This resolution which I am now proposing and which will be warmly welcomed demonstrates our adherence to the principles of social justice.

It is put forward at a time when the weight of national and international responsibilities for joining in firm measures to preserve our way of life lies heavily upon our people.

This measure marks our resolute determination to give new meaning and value to cherished concepts and to press forward towards our ideals of social betterment.

fMr. Bryce.]

It will expedite matters and facilitate discussion if, at this stage, hon. members are acquainted with the main outlines of the government's proposals.

The legislation which will be introduced following adoption of this resolution represents the culmination of a quarter-century of public concern and governmental action and planning with respect to the needs of our senior citizens.

Exactly 25 years ago the first attempt in our country's history to enact old age pension legislation was rejected in the other place, after receiving the approval of this house.

Twenty-four years ago last month, in September, 1927, the first old age pension cheque was issued in the province of British Columbia following the reintroduction and passage of the federal legislation which had been rejected in the previous year.

It is a far cry from those days to the present. The quarter-century that has elapsed since then has taken us through a great economic depression, a second world war, and, following that, years of unremitting international tension.

This same quarter-century has witnessed the birth, growth and development of a comprehensive social security program for all Canadians-the Unemployment Insurance Act, the Family Allowances Act, the veterans' charter, the national health program, and other additions and extensions to the health and welfare services provided at public expense by and for the people of Canada.

The reason for all these developments is not far to seek. They have been the inevitable response to a growing awareness of social need among our people, to an increasing acceptance of the principles of social justice, and to an enlarging sense of social responsibility on the part of Canadians in common with like-minded people in other democratic countries throughout the world.

Each of the measures to which I have referred reflects parliament's awareness of this attitude, as manifested in the formulation of legislation responsibly conceived and designed to meet the social needs of the times in which we live.

In all that we have thus far accomplished, we can take a justifiable measure of pride.

But I can say with confidence that of all the social legislation which this parliament has passed the measure which is envisaged in the resolution before us today is the one in which in future years we will take the greatest pride.

Old Age Security

It represents, I believe, the most constructive approach to the problem of social need amongst our senior citizens that this or any other country has yet devised.

At the same time, I believe that the house will agree, when the legislation is placed before it for consideration, that it represents a practical and responsible approach to this problem.

To these criteria we must attach the greatest importance; for in all our efforts to achieve social justice through such measures as this, there is one thing that we must never forget. There is no magic formula for social security. It can be provided only through work. It cannot be too strongly emphasized that social security has to be paid for out of production. It is the people themselves who -through their hard work-provide governments with the financial resources to maintain these social services.

The weight of each new sociai measure must be considered in relationship to the need for it and to the capacity of Canadian income earners to carry this added responsibility. To overburden our working force endangers the stability of our economy- which provides the primary basic security that individual social measures can only serve to reinforce.

Social security is not an end in itself- neither is it a dead-end. While each social measure takes from production, it gives something back. Since it invests some of the wealth of the nation in its own citizens, a responsible, sensible program of social security can help to raise their levels of health and standards of living, and-most important of all-to maintain their faith in our society and in its integrity.

It is my firm belief that the new old age security legislation foreshadowed by this resolution takes fully into account these considerations.

Certainly no legislation has ever been more carefully or fully considered in advance of its presentation.

No social problem has ever been examined more carefully or objectively than this problem of old age security was examined by the all-party parliamentary committee established to study it in 1950.

I do not need to remind the house of our indebtedness to the members of that committee, and in particular to the co-chairmen, the hon. member for Montmagny-L'Islet (Mr. Lesage) and Senator King, for the careful and conscientious study which they gave to this important problem. The objectivity and impartiality of their work and of their findings was in the highest traditions of a democratic parliament. It must be a matter

Old Age Security

oi great satisfaction to Senator King, sitting in the gallery today, to recall that as Acting Minister of Labour he had the honour of introducing the original Old Age Pensions Act in 1926.

No measure of social welfare has ever been given more widespread and unanimous approval in advance of its actual passage than this measure which, even before its formal presentation to the house, has received unanimous support and endorsation from all parties in the house and from all ten of the provincial governments.

That this is so is not, of course, due to mere chance. The government's objectives in the field of old age security were made known as long ago as 1945 through the proposals which it then made to the provinces with respect to fiscal and social security matters.

The legislative proposals which will be brought forward following approval of this resolution are, in essence, the same proposals on old age security which the federal government advanced at that time. The concept of a universal old age pension, free of means test, which was first advanced in 1945, was then regarded as bold and original. Many persons, some governments included, were not yet ready to accept a proposal which broke so sharply with the traditional means test approach of the past.

At that time, family allowances, the first and hitherto the greatest of these new programs, based on similar principles, had not yet been fully accepted by all political parties, nor even by all sections of the general public.

There were those who said that the government, in its thinking on social questions, was getting too far ahead of the thinking of the people: that the people were not ready for these new and sweeping universal programs.

Since 1945, the widest possible opportunity has been given to study the proposal for universal pensions without a means test which the federal government at that time offered to the provinces.

The parliamentary committee of 1950, with all parties represented, examined every possible plan and alternative.

The fact that after an exhaustive study all parties, and subsequently all provincial governments, unanimously rallied to the support of the universal means-test-free pension plan originally offered by the federal government in 1945 is, I believe, the surest and

soundest endorsement that any legislative proposal could hope to have.

There is equally no doubt that our future experience with the plan on which we now propose to embark will fully confirm the soundness of the collective judgment of all parties and all governments who have thus accepted and endorsed the universal means-test-free pension plan, first proposed by the government in 1945.

The understandable satisfaction that all of us feel regarding the advent of this new program should not, however, cause us to ignore or underestimate the immeasurable contribution made to the well-being of our aged citizens during this past quarter-century by the legislation now on our statute books, which will be replaced by the new Old Age Security Act.

From its beginning, the present Old Age Pensions Act, now in its twenty-fifth year of operation, has been based on the principle of federal-provincial partnership and co-operation, in conformity with our constitutional relationship since 1867. In the Old Age Pensions Act of 1927, this historic alignment of constitutional powers was fully respected by the federal parliament.

The partnership that grows out of our constitutional position has meant that all our governments have become experienced in old age security during the years they have worked together to provide it. We have made a series of amendments to the original legislation, particularly those of 1931, 1937, 1947 and 1949, which have greatly extended both the benefits and the coverage of this important measure for the security of our people.

Through these legislative changes, we have endeavoured to keep pace with progress in our time. In large measure we have been successful in our joint endeavours. The report of the parliamentary committee clearly demonstrated that our present old age pension provisions compare favourably with similar provisions in other countries.

The record of achievement in this field warrants mention of the main accomplishments, because of what I shall have to say later:

(1) Over the past 25 years, more than

800,000 Canadians have benefited under the Old Age Pensions Act.

(2) By the time the act is repealed at the end of this year, joint federal and provincial expenditures for old age pensions in Canada will have reached the total of $1,136 million.

(3) Total federal expenditures on old age pensions will at year's end exceed $836 million, while total provincial expenditures will approximate $300 million.

(4) In 20 years, the number of pensioners has increased more than fivefold-from

63.000 in September, 1931, to more than

320.000 at the end of September, 1951.

(5) The annual rate of expenditure under the Old Age Pensions Act has more than trebled in the last 7 years-from $45 million in 1943-44 to $137 million in 1950-51, federal and provincial expenditures combined.

(6) For the calendar year 1951, the last year in which the Old Age Pensions Act will be in operation, federal and provincial expenditures will amount to more than $141 million.

It is apparent, therefore, that even within the framework of the existing act, much has been done to give an increasing measure of security at least equal to that provided by other countries for their people.

Nevertheless, in recent years the government has become increasingly concerned with two aspects of our present program:

(1) First, the burden of old age pensions on general revenues of provincial and federal governments has shown a steady and, in recent years, a rapid increase. This increase could be counted on-even if our pensions program were not made more liberal-to continue indefinitely, as our aged population is rapidly increasing.

<2) Secondly, there has been a growing feeling that there are inadequacies in our present program. Inevitably, it places a penalty on thrift.

The belief has been growing that some other system should be found, embodying the principle of special contributions into a fund created especially for the purpose, that would ensure for our aged people in their later years a measure of social protection consistent with dignity and self-respect, and without invidious distinction or discrimination.

Under the present system, those who save for their old age or who benefit in some degree from industrial or other pension plans are in part or wholly excluded by the means test from receiving benefits through old age pensions. At the same time, in addition to those who have been unable-for one reason or another-to save or to continue to earn their living, others who receive full benefit have expended little effort to provide for their later years.

Under a plan involving the feature of contributions, the people as a whole are able to contribute into a special fund established for the purpose, out of which their pensions will be provided. It was pointed out in the 1945 proposals that the means test should be eliminated after reaching 70, as it is regarded as unsuitable for the oldest group in the community-over 80 per cent of whom are not in fact capable of supporting themselves in useful remunerative work.

Old Age Security

I should like to quote the following extract from the proposals, page 38:

Payment of pensions as of right to people of this age offers the best kind of economic security. It removes the fear of destitution much more certainly than any other method, and relieves old people of the necessity of seeking work, or of endeavouring to keep on working in unfavourable circumstances and beyond the age at which they should be able to retire, without dependence on charity or burdening the family.

In addition to providing a minimum subsistence for those with no other resources, this system would enable other persons with moderate private savings to retire from active work sooner, or in more comfort, than would otherwise be possible.

The proposals formulated by the federal government in 1945 with respect to old age security clearly indicated the objectives it had in mind and the results it desired to attain. They pointed, too, in the direction of the kind of program envisaged for the future.

As my colleagues and I have so frequently emphasized in the years since 1945, the broad social objectives then outlined by the federal government have constantly remained in the forefront of its thinking and planning.

The proof that this is so is seen in the fact that there is a very close resemblance between the old age security proposals set forth by the federal government in 1945 and those which we have embodied in the Old Age Assistance Act and the Blind Persons Act already passed at the last session, and in the Old Age Security Act which will follow upon approval of this resolution.

I should like now, Mr. Speaker, to outline the main features of the legislation which this resolution proposes to place before the house for consideration, and at the same time, in view of the important financial commitment, to give to hon. members some indication as to the reasons underlying the proposed new program, and the results which may be expected to flow from it when it is fully in operation.

We have come to the conclusion, after the most careful study of all phases of the problem, that the so-called "universal pay-as-you-go" system of old age security, financed by special contributions into a fund established especially for the purpose, is the system most likely to meet the needs of our aged population 70 years and over, both now and in the future.

This is likewise the conclusion unanimously endorsed by the parliamentary committee in its report to parliament made in June 1950, and indicated in paragraph 51 of the committee's report at page 108:

51. All things considered, therefore, the committee is of the opinion that the most suitable old age security plan for Canada under present circumstances consists of a twofold program, as follows:

Old Age Security

(a) A universal pay-as-you-go program applicable to all persons 70 years of age and over, based on the contributory principle and administered by the federal government. The benefit should be a flat, uniform amount of $40 a month for all eligible persons, and eligibility should be based solely on age and a suitable residence qualification.

(b) For the age group 65 and over not eligible for the universal benefit, old age assistance at the rate of $40 a month should be available, subject to an eligibility test in some respects similar to that which exists under the present old age assistance program, but modified to take account of the different characteristics of the age group to which this test is to apply, and adjusted in such a way as to recognize to a greater extent than at present the desirability of encouraging recipients to earn supplemental income.

The second of these recommendations has, of course, already been implemented through the passage of the Old Age Assistance Act which will provide benefits to an estimated

145,000 needy persons between the ages of 65 and 69. The first, which is the major recommendation and the keystone to the entire plan, will be implemented in its entirety with the passage of the legislation forecast by this present resolution.

Consistent with the parliamentary committee's recommendations, the legislation to be introduced provides:

(1) that the age of eligibility for universal benefit is to be 70 years of age;

(2) that the only other requirement is that of a reasonable residence period in Canada. Applicants will be required to show that they have resided in Canada for 20 years continuously immediately prior to making application for pension. Alternatively, they will be able to qualify if they can show that they have lived in Canada prior to the last 20 years for periods of time at least double the periods of their absences from Canada during the last 20 years. This latter group of applicants will also be required to show some recency of attachment to Canada, to the extent of one year's residence in the country immediately prior to the date of application. Except for this last-mentioned provision, which is similar to that contained in the Family Allowances Act, and which is intended to discourage former residents of Canada from returning solely for the purpose of receiving the pension, hon. members will recognize that the residence requirements are identical with those provided in the Old Age Pensions Act at the present time and the new Old Age Assistance Act, and in line with the views expressed by the parliamentary committee in paragraph 69 of its report;

(3) benefits will be payable to aged Indians and Eskimos on exactly the same basis as to other persons-namely, on proof of age and residence;

(4) retired employees of industrial or commercial corporations, of municipal, provincial and federal governments, retired missionaries, members of the clergy and of the religious orders will all be included;

(5) disability pensioners and recipients of war veterans allowances will be eligible to apply, subject to the same conditions and on the same basis as the other groups that I have mentioned.

I have mentioned these groups in particular because there appears to be some uncertainty in certain quarters as to whether these special categories of persons will be eligible for the universal old age pension on the same basis as the rest of our aged population. Some of them have withheld their applications in the belief that they are not to be included in the new scheme. I would urge such persons to apply without delay, in order to ensure prompt payment of any benefit to which they may be entitled beginning January 1952.

(6) The benefit to be paid will be at a flat uniform rate for all, of $40 a month, as recommended in the committee's report;

(7) benefits will in all cases be provided as a matter of right, without any form of means test. There will be no provisions of any kind for subsequent recovery out of the estate of a deceased pensioner, nor for any liens to be placed against his property.

The omission of any provision for liens or for recoveries from estates is consistent with the policy adopted when the Old Age Assistance and Blind Persons acts were passed at the last session of parliament. It is in conformity, too, with our conception of this new program as one supported in significant measure by personal contributions.

I might point out in this connection that even under the existing Old Age Pensions Act the federal government has never at any time required the filing of liens against the property of a pensioner.

Some provinces have followed the practice in the past of filing liens against the property of an old age pensioner in order to secure their subsequent claims against his estate. This has been done under the authority of the provincial legislation; it has never been a requirement of the federal law;

(8) the program will be administered exclusively by the federal government and will be its exclusive financial responsibility. The provinces will not be required to finance any part of the costs involved, nor to bear any portion of the administrative expense or responsibility;

(9) the estimated costs to the federal government in the first year of operation of the Old

Age Security Act will amount to $343 million, with the number of beneficiaries rising from 700,000 in January 1952 to 730,000 in December of the same year. In addition to this, the federal share of old age assistance payments to 145,000 persons aged 65 to 69 will amount to $32 million in 1952, and the federal share of allowances to 8,000 blind persons will amount to $3 million.

In other words, total federal expenditures in 1952 under these three enactments, replacing the existing Old Age Pensions Act, will amount to $378 million, as compared to an estimated $106 million for old age and blind pensions in the current calendar year.

Provincial costs, on the other hand, which will amount this year to $35 million or more, are expected to diminish slightly to $33 million in the calendar year 1952-$32 million for old age assistance, $1 million for the blind.

(10) the program will be financed on a "pay-as-you-go" basis; that is to say, sufficient funds will be provided each year by special contributions and earmarked taxes, as recommended by the committee, to pay the cost of pensions for that year. A special fund will be established, to be known as the old age security fund, out of \vhich the pension payments will be made.

The government believes, after careful study of the various alternative plans in other countries, that in adopting a program of the kind which I have outlined, we will be providing for our people a simple, clear-cut and equitable plan for old age security which will not be surpassed by that of any jurisdiction I know of.

These alternative plans have all been given the most intensive study, both by the parliamentary committee and by the government itself.

Some of them, like the United States and Swiss programs, adhere somewhat more closely to the pattern of commercial insurance, based on modified actuarial principles and limiting benefits solely to those persons who have made the required contributions.

Such systems fall far short of universal coverage to which we attach the highest importance and on which the parliamentary committee placed the greatest emphasis; while suited to the needs of the industrial wage earner, they exclude inevitably large sections of the population, particularly the farmers and other groups of self-employed. Even for the industrial wage earner, such systems take many years to mature and benefits in the first ten years or more are nominal in amount. The result is that side by side with such schemes a large continuing program of means-test pensions is and must be maintained for

Old Age Security

many years to cover the needs of those who cannot be brought under the scheme, and to supplement the benefits of those who do come under it.

Let me repeat. Where such a system operates, two programs exist indefinitely side by side:

(a) a system of insurance benefits, paid as of right only, to those who have made the required contributions; and

(b) a system of old age assistance, based on a "means test" for those who cannot so qualify.

The universal pay-as-you-go system which the government is now proposing makes no invidious distinction-as such systems in effect in some other countries do-between those who have made a stipulated number of contributions over a period of years and those who have not.

It should be noted, too, that in many of the countries where such systems are in existence-notably the United States-the entire costs of the program, apart from actual administrative expenses, are borne by contributions levied on the employers and the employees. In contrast to this, the program here proposed calls for a substantial contribution to be made through earmarking directly into the fund certain existing tax revenues.

Certain other countries whose systems we have examined establish their old age security fund on the basis of an actuarial reserve, instead of financing on a pay-as-you-go basis. We do not believe that this is necessary, or that it accomplishes any useful purpose. The cost of pensions in the final analysis, whether financed on an actuarial reserve basis or not, must be met, in terms of the food, clothing, shelter and health care which these pensions buy, out of the current production of the country. This leads inevitably to the conclusion, particularly with reference to any pensions program that is universal in its scope, that the simplest, most direct way of reflecting and of meeting these costs is to pay them annually out of current production.

I am satisfied that the house will find, on examining our proposed new program, that on the score of universality, general coverage of persons benefited, general adequacy of benefit, absence of a means test, simplicity of administration and frank recognition of the cost of old age security as a charge upon the nation's current production, the new plan here proposed stands in the very forefront of all comparable programs throughout the world today.

I am equally certain that it will prove to be the program best suited to the needs of

Topic:   OLD AGE SECURITY TO PROVIDE FOR PENSIONS, WITHOUT MEANS TEST, AT AGE 70
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J34 HOUSE OF COMMONS


Old Age Security our own Canadian people-and this, when all is said and done, is the truest test of what we are here attempting to accomplish for our people. What, then, will be the results of the new program when it comes into operation, in January, 1952, after approval by this parliament? 1. It will abolish the means test for some 320.000 persons presently in receipt of old age pension on a means test basis. 2. In addition to this, some 380,000 individuals not presently in receipt of pension will benefit for the first time under the provisions of this new legislation, making a total of 700.000 persons in all to benefit from the provisions of the Old Age Security Act in the first year of its operation. 3. When, to this total of 700,000 persons 70 years of age and over, we add 145,000 persons who will benefit under the provisions of the Old Age Assistance Act passed in June of this year and 8,000 persons'under the Blind Persons Act passed at the same time, we find that no less than 853,000 aged and blind individuals in Canada will be covered by the legislative program being implemented this year to replace the existing Old Age Pensions Act. 4. The benefits under this new legislation will provide an invaluable foundation on which hundreds of thousands of Canadians can build for themselves their own retirement security programs. This will be done in many ways: through commercial or government annuities, through the establishment or adjustment of industrial pension plans, and through a wide variety of other personal savings programs. I am sure that as this new program comes to be integrated into the existing pattern of retirement provisions provided by individuals, by employers and in other ways, it will be recognized for what it is intended to be-not as a total retirement security scheme in itself, replacing and supplanting all others, but as the core, the keystone of a national savings and retirement plan, around which each individual in this country will be encouraged to build his own retirement security program in a manner and to an extent peculiarly suited to his own needs. My colleague, the Minister of Labour (Mr. Gregg), will shortly be revealing to this house the manner in which it is proposed to modify the government annuity scheme so as to fit into this new pattern. Through amendments which will be introduced to the Government Annuities Act, facilities will be offered to permit individuals or groups purchasing government annuities to integrate their annuity purchase plans with their old age pensions in such a way as to provide a substantially higher monthly amount on retirement than has hitherto been possible. Let me take as an example the case of an individual who has purchased a government annuity providing $50 monthly beginning at 65. On reaching his 65th birthday, such an individual will receive a monthly payment of $50 from his annuity alone, altogether apart from any other income or resources he may possess. If he has no other income or resources, he may be eligible for additional assistance under the Old Age Assistance Act, amounting to $10 monthly in the case of a single person, or the full $40 if he is a married person. But this will, of course, depend on his undergoing a test of need. I think I am answering in part the questions put to me by the hon. member for Rosedale (Mr. Henry). At the end of five years, on reaching his 70th birthday, the annuitant will find his monthly annuity of $50 augmented by the $40 monthly benefit to which he will then become entitled as of right under the Old Age Security Act. His assured income will then be $90 monthly and he will be able to count on this continuing for the rest of his life. It will be clear from what I have said that an individual in the position I have described will have considerably less in the way of assured income from his annuity during the first five years of his retirement than he will have from the annuity and pension combined when he has reached 70. Many persons on finding themselves in these circumstances would naturally prefer to rearrange their personal retirement program so as to provide for themselves at no additional cost a higher, uniform amount from 65 years onward. This is exactly what the amendments to the Government Annuities Act will make possible. Provision will be made for the purchase of a new type of annuity, to be known as "term annuities", in addition to the life annuities presently purchasable. These will be made available both to individuals and to groups, so that employee pension plans as well as individual programs can be rearranged along the lines I have suggested. An individual will shortly be able to purchase, for example, a 5-year term annuity of, let us say, $40 monthly beginning at 65 and continuing until his 70th birthday when he will be eligible for a pension in the same amount under the Old Age Security Act. At the same time, he will be able to purchase a life annuity of, say, $35 monthly, beginning at age 65 and continuing throughout his lifetime. The figures I use are merely illustrative of what might be done: the amount of the term and life annuities could, of course, be lower or higher and could commence at an earlier or later age if so desired. The combination of a term annuity and a life annuity which I have used by way of illustration will cost approximately the same as the present cost of a life annuity of $50 monthly at 65. The result will be that through the combination of these term and life annuities with the old age pension payable at 70 the individual who wishes to do so may provide for himself a uniform monthly benefit of $75 from 65 years of age onward, instead of having to content himself with $50 in the initial period from 65 to 70, and then finding his monthly income after 70 increased to $90. I may say that industry and labour have shown great interest in this question of the proper integration of their present plans with the new old age security legislation. Already the departments of National Health and Welfare and of Labour have had numerous inquiries concerning them. I believe that a number of life insurance companies are also considering an adjustment of their annuity plans to achieve results similar to these which will be achieved through the proposed amendments to the Government Annuities Act which I have mentioned. These examples I have given are illustrative of what I mean when I say that the result of this new program will be to encourage individuals, either alone or in concert with their employers, to build upon this basic provision offered through governmental action a retirement program suited to their individual needs. The sum total of these individual efforts will, I am sure, yield significant results in terms of the encouragement given to national thrift and national saving. The house will recall that in anticipation of this present legislation, authority was given in June of this year to proceed with an advance registration, in order to ensure prompt payment of pensions with the commencement of the new year. From questions which have been asked from certain quarters of the house, hon, members will, I know, be anxious to hear what progress has been made towards achieving our objective in the three months since we last met. Remember there are three months still to go. Arrangements have already been completed to take over, without interruption, 94699-25 Old Age Security from provincial old age pension rolls approximately 320,000 persons who are now in receipt of means test pensions. For these, no new application will be necessary. Special provision is made in the new legislation to cover this automatic transfer, and administrative arrangements have already been completed to ensure the smoothest possible transfer of these present pensioners to the new federal rolls in January next. The balance, numbering approximately 380,000 persons 70 years of age and over, are not presently in receipt of old age pension. For these, a new and simple application form has been made available through all post offices. Already, as of October 24, 284,239 applications have been received from this group in our 10 regional offices, and applications are continuing to flow in at the rate of 9,000 weekly. If this rate continues, and we expect it will, we can count on having almost complete registration by the end of the year. To sum up, as of yesterday, we were in a position to put into pay immediately approximately 494,000 claims out of an anticipated 700,000. We are now approving 15,000 to 20,000 applications weekly, about twice the rate of new applications now being received. At this rate we are rapidly catching up on the backlog of applications now in our hands and should be in a position to dispose of all of these which do not present particular difficulties by the end of the year. Instead of there being confusion, the officers of the treasury and of the Department of National Health and Welfare deserve from me today, as one of the ministers concerned, a special word of tribute for the work they have done. The work has taken many long hours of overtime during these past few months, particularly in the summertime, to accomplish this enormous administrative task. The work has been undertaken by the employees of our 10 regional family allowances offices with a very modest addition to existing staff. The additional personnel required on a continuing basis totals only 123 persons spread over our 10 regional offices. Only one additional person has been added to the headquarters staff here in Ottawa. The figures which I have mentioned regarding the volume of expenditure and the number of persons who will benefit give evidence as to the comprehensive nature of the program which the government is proposing for the greater security and well-being of our aged people. Mere statistics, however, are totally



Old Age Security [DOT] incapable of portraying the real scope of this program in terms of its social and human implications. If we are to gain a true impression of what we are accomplishing with this measure, we must look behind these statistics and remember that they comprise not just a vast army of unknown persons but a true cross-section of our Canadian people. These people are our own neighbours, relatives and friends, retired school teachers, missionaries, clergymen, factory workers, railway workers, farmers, fishermen, civil servants, retired members of our police and fire departments, office workers, clerks, housewives and so on, all of them persons who have made their contribution to the building up of this country and who have made it possible to achieve the greatness which is recognized as Canada s in the world today. The cost of this new program, measured in terms of the nation's economy, will be a large one. For 700,000 aged persons, 70 years of age and over, we will be providing as much in the way of retirement security as we are now providing through family allowances for 4,500,000 of our nation's children. This is a heavy financial burden on all the productive forces of this country. I should say, with reference to the important question of how this cost is to be met and the methods to be adopted for financing of the program, that, as it will be recalled, the parliamentary committee offered certain helpful observations on this question but made no specific recommendation. As the committee stated in paragraph 67 of its report, it did not consider that it was part of its responsibility to do more than to indicate possible forms of contribution. "The raising of revenues", it went on to say, "is a technical problem which bears a close relation to fiscal policy in general". I will leave it to my colleague, the Minister of Finance (Mr. Abbott), who will follow me, to outline the details of the methods to be adopted in financing this new program. I have said that this is a heavy financial burden on all the productive forces of the country. It may be said: Why then are we bringing in this new legislation? I think I may summarize what all of us feel is basically the reason. Today, our way of life hangs in the balance as never before. We are disturbed by a challenge flung at us by the proponents of an alien and heartless system who claim that only by that system can economic and social justice be assured to the great masses of the people of the world. This present measure, together with others of its kind, is part of our answer in Canada to that challenge. It cannot, of course, be our only answer. We must continue, as we are now doing, to work for peace and to strengthen our defences so that, if necessary, we can defend our way of life by force of arms against attacks which could be launched upon us. In the long run, however, it may well be that this kind of measure will demonstrate the capacity of the free world, and of us as a free people, to provide security with opportunity for our people within the framework of individual and political freedom. This is indeed the true testing point of social democracy as we know it in the free world today. The preparations we are now making to maintain and strengthen our national defences, the sacrifices we are asking of our people for this purpose, the measures we are proposing to buttress our social democracy here at home, all these have the same objective, the same end in view. Our objective is to build for our people a secure and free way of life which will enable them to live with their neighbours in peace and enjoy the fruits of their own industry. The security which we will be providing for our aged people through this measure is consistent with this great objective, for through it we are providing security with, and not at the expense of, freedom.


LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Hon. Douglas Abbott (Minister of Finance):

My colleague, the Minister of National Health and Welfare (Mr. Martin), has indicated to the house the main features of the government's plan for old age security. He has had the pleasant duty of outlining the manner in which pensions of $40 a month for persons 70 years of age and over will become a reality in Canada next January. I, Mr. Speaker, am left with the somewhat less agreeable task of having to talk now about how the cost will be met.

While none of us, I think, would want to do less for our people in making provision against need in old age, yet at the same time we cannot escape squarely facing the fact that the burden of this duty we are voluntarily assuming is not a light one. Let no one be under any misapprehension about this. As the Minister of National Health and Welfare pointed out, the cost is heavy. There is no magic in government finance. A dollar paid out to one person must first of all be taken away from another. Unfortunately the logic of this simple proposition has never been successfully refuted.

The plan for federal old age pensions just outlined by my colleague will cost, it has been estimated, $342 million annually, but in the first year we believe that for various reasons the cost will fall somewhat short of that amount. For my present purposes I am assuming that for the first complete fiscal year

oi the plan, namely, 1952-53, the cost will not exceed $330 million. Of course, as has been pointed out, we are at present contributing substantially to the cost of provincial pensions now being paid on a means test basis to persons over 70. This year that contribution will be about $110 million; next year it would have been about $117 million. Accordingly, the figure of approximately $342 million which I just gave as the total cost of the new federal pension for next fiscal year does not mean that this much new money has to be raised. The additional cost to the federal treasury in paying pensions direct to those over 70 will amount to about $225 million a year with full participation, and we estimate about $213 million next year. However, as the house is aware, the federal government has offered to pay to the provinces one-half the cost of their means test pensions to persons in the 65-69 age group. This might cost the federal treasury $35 to $40 million a year. Thus, the over-all additional cost to the federal treasury of the new system will be around $250 million next year, and under the new arrangement the federal government will be paying out for old age pensions and assistance together a total of about $365 million a year or $1 million every day of the year.

The legislation to be introduced will establish, as my colleague has indicated, a special fund to be called the old age security fund. Pensions will be charged to this fund and the revenue from certain taxes will be credited to it. The taxes in question will be specifically levied in the old age security legislation rather than in the ordinary revenue acts which authorize the raising of funds for general governmental purposes.

Perhaps it would be useful in order to avoid any possible misunderstanding if a few words were said about the basic principles on which the Canadian plan as set up will operate. It has been described as a universal pay-as-you-go system as distinct from old age assistance such as we now have, or from a system of old age insurance such as has been adopted by some other countries. The plan here proposed has also been described as a contributory system in the very real sense that certain special taxes are to be imposed and earmarked to support the fund. This is in contrast with an arrangement under which pensions would constitute a general charge on ordinary government revenue. It was never contemplated, of course, that there would be a separate account set up for each individual as under an insurance scheme. Rather, the system recommended is individual contributions to a general fund to be used for those who live to qualify for a pension.

94699-25 a

Old Age Security

This arrangement is, I think, sensible and practicable, and carries out the ideas of the various organizations which made representations to the joint parliamentary committee. On page 69 of the report, the committee made this statement:

The use of specific earmarked contributions for old age security purposes was supported by all organizations discussing possible revenue sources. It was repeatedly emphasized that all Canadians should have a direct and conscious financial responsibility in the provision of old age income security, and should be made aware of their responsibility to meet the costs through an earmarked device. Most of these organizations would utilize general revenue in conjunction with these earmarked taxes.

The establishment of a special fund isolates clearly and definitely the cost to the country of providing old age security and, with the supporting taxes levied in the statute under which the pensions are paid, it becomes abundantly clear to everybody that the government has no income of its own but can only pay out with one hand such money as it takes in with the other hand by taxation. It is made very obvious that the contributory principle is being followed.

Having determined the general principles on which the fund should operate, the next major question to decide was what form of taxes should be used to provide revenue for the fund. Needless to say, this was no easy problem. AH the various plans suggested to the joint parliamentary committee were thoroughly examined and the merits of each were carefully explored.

Perhaps the most frequently mentioned plan was one which involved a payroll tax. To be fair, a payroll tax should, of course, fall on every employer in the country, large and small, and regardless of the nature of their activities. In many directions it seems utterly impracticable to secure complete coverage. I need only mention provincial and municipal governments, hospitals, school boards, universities, churches, charitable organizations, etc., to illustrate the sort of difficult problems which would be encountered under a payroll tax, and the resulting hardship that could fall on some of these groups. Exemptions for particular groups would inevitably lead to hard feelings and dissatisfaction, and rightly so.

Such a tax would also, I think, be fundamentally unsound for Canada in that it would increase production costs for our exporters. This should be guarded against in the interests of our trading position. New government machinery would have had to be set up to administer a new tax of this sort. This would be expensive and would put a further strain on our manpower resources. All in all it seemed quite clear

Old Age Security

that the idea of a payroll tax, while having some desirable features, would have to be discarded on other grounds.

I shall not burden the house with the results of considering various other miscellaneous kinds of taxes. It will be sufficient to say that in the final result, after surveying the whole field, it seemed most sensible to utilize the main taxes which at present support our revenue systems, namely, sales tax, individual income tax and corporate tax.

It is proposed that the old age security act will impose these three kinds of taxes and they will be levied on what for convenience I might describe as the 2-2-2 formula. This means a 2 per cent sales tax, a 2 per cent personal income tax and a 2 per cent tax on corporate profits. I shall comment briefly on each of these items.

The 2 per cent sales tax levied in the oldf age security act will not be in addition to the present 10 per cent sales tax. Concurrently with the enactment of this tax in the old age security act, effective January 1, 1952, provision will be made for a reduction from 10 per cent to 8 per cent in the rate under the Excise Tax Act. In effect, a 2 per cent sales tax is being transferred from one act to another with no change in the over-all rate. I estimate the revenue from this source should amount to about $145 million next year.

The sales tax more nearly approaches the ideal levy for financing social security than any other tax in our system. Where under social security provisions the benefits are to be universal it is only right that contributions to the fund should likewise be universal. Income tax, incidentally, reaches, I believe, only about half of our working population. It seems clear that all should take at least some part, however small, in making provision against need.

Contrary to much that has been said in this house and elsewhere about our sales tax, it does not discriminate against low income groups. The figures which I placed before the house last spring show that in the lower ranges of income the tax is progressive rather than regressive. What is frequently overlooked is that practically all foods are exempt from sales tax, all fuel is exempt, building materials are exempt, and through wide income ranges not more than one-third of consumer expenditure is on goods subject to sales tax. I apologize, Mr. Speaker, for having to repeat these truths and I do so only because of confusion that still seems to be prevalent in the minds of many who quite unfairly, I think, continue to criticize the use of this tax for general revenue purposes.

For purposes of financing social security, there is even less basis for the sort of objections that have been made. Taxation for social security finds justification in the benefit principle of taxation. All pensioners, rich and poor, receive equal benefits. From this it could quite reasonably be argued that all should make equal contribution towards the fund, but such a system might be regarded as harsh and impracticable. Under the sales tax method of financing, the burden through a wide income range will be roughly proportional. For example, the $6,000 a year man will be contributing by means of sales tax about three times as much toward his $40 a month pension as the man with the $2,000 a year income. The $10,000 a year, man will similarly be paying about ten times as much for his pension as the $1,000 a year man. In the light of these facts, I suggest that any argument about unfairness of using sales tax for financing old age pensions is not very impressive.

The proposed personal income tax will be in addition to the tax at present in force. A special levy of 2 per cent on taxable income will be imposed with a ceiling of $60 on the amount of the tax. That is to say, the social security tax will be 2 per cent of taxable income or $60 a year, whichever is the lesser. The intention is to have a separate item on the income tax form identifying this special tax. This will not come into force until _ July 1, 1952. For the first year as a whole, then, the tax will be only 1 per cent with a limit of $30. The change in the withholding rate by employers will be on the basis of a 2 per cent tax commencing in the middle of the year.

I might explain why the coming into force of this tax has been delayed by six months. In my budget last spring, I resorted to the use of surcharges in the income tax field. This was a temporary device to bridge a period of extreme uncertainty in the international situation. It was hoped that by next spring we should have a clearer view of the prospects. Accordingly, I stated that my tax proposals of last spring were to be regarded as an interim policy for the period of the current- year. I then said, and I quote:

If our optimistic hopes are realized, it will be easy to reduce these surcharges or to drop them entirely, but I want to add that if it becomes clear that we are in for a long pull at these high levels of expenditure, some major changes in the existing tax structure may have to be devised.

My present intention in my next budget is to discard the device of the surcharge and to embody direct in the income tax structure such a level of taxation as appears to be necessary in the light of the situation next spring. Whatever seems necessary at that time will constitute the new rate structure.

It is no secret, of course, that current revenues are exceeding somewhat my expectations of last spring due to a higher level of national income and production than anticipated. However, I shall look at the picture next spring in the light of expenditures for the year and shall decide at that time what to recommend. Certainly I make no predictions now as to what the budget of next spring will have in store for us. The present point is that there will be at least a technical revision of the income tax rate structure in the process of removing the surcharge as such, and in order to avoid having to require employers to change their tax withholding tables twice in a six months' period with all the inconvenience and confusion to which that would give rise, it seemed preferable to postpone the coming into force of the 2 per cent social security tax so that the one revision of the tax withholding tables could give effect to both changes at the same time. The point I should make quite clear is that whatever happens to the ordinary income tax-whether it is abolished completely, cut in half, or doubled-there will be in existence a 2 per cent special tax for old age security. The same thing, of course, applies to the 2 per cent sales tax and the 2 per cent tax on corporate profits. On a full year basis, this 2 per cent additional on taxable income of individuals should yield approximately $95 million.

The third item of revenue in the old age security legislation will be an additional 2 per cent on corporate profits effective January 1, 1952. It is expected that this tax will produce approximately $65 million in a full year.

At present the tax on corporations is 15 per cent on the first $10,000 of profit and 38 per cent on the excess with a 20 per cent surcharge on the 38 per cent rate only, making the effective rate of 45-6 per cent on profits over $10,000. The additional 2 per cent will bring the rates to 17 per cent on the first $10,000 and 47-6 per cent on profits above $10,000. In addition to the federal tax there are corporate income taxes of 5 per cent in the eight provinces with which we have tax agreements, and taxes of 7 per cent in Ontario and Quebec.

I have made no secret of my concern over a system of taxation under which more than half of company profits are taken away by governments. The effects on incentive and efficiency can be extremely dangerous at a time when maximum output and economy in operations is so important as it is today. As in the personal income tax field, my intention is to recommend the repeal of the surcharge, as such, on corporations in my next budget

Old Age Security

and I shall decide, in the light of circumstances at that time, what rate structure to recommend for the calendar year 1952.

The tax program which I have just outlined for supporting the old age security fund is broadly based and is, I think, a fair one. Moreover, efficient administrative machinery for collection already exists. Taken together, these taxes form a pattern which is sound and as nearly equitable as possible.

Earlier in this statement, I mentioned that the new federal pensions would involve an expenditure next year of the order of $330 million. lit might even be as low as $320 million. The three taxes supporting the fund can be expected to produce an annual flow of revenue of, say, $300-$310 million. Accepting these figures as tentative and approximate, the fund may show a small deficit for the first full year. -

As payment of the new federal pensions will begin in January, 1952, I estimate that outlays in the current fiscal year-that is for the year ending March 31, 1952-will be about $80 million. Receipts from the 2 per cent tax on sales may amount to $30 million. I should not expect that there will be any appreciable collections of the 2 per cent tax on corporations during that three month period, and, as the 2 per cent personal income tax is not effective until July 1, there will, of course, be no receipts from this source in this fiscal year. Consequently, disbursements out of the old age security fund during the current fiscal year may exceed receipts by as much as $50 million at March 31, 1952. Moreover, because of the time-lags which I have referred to, the full yield of the three old age security taxes will not be reflected in 1952-53, and the fund may show a larger deficit at March 31, 1953.

To meet such a deficit, there is a special provision in the proposed legislation whereby the Minister of Finance may make temporary loans or advances so that pensions chargeable to the old age security fund may be paid. However, he is also required to review annually the state of the fund, and, if he is of the opinion that the receipts are or will be insufficient to pay the charges thereon, including the repayment of any temporary loans, to indicate what measures he recommends for increasing the revenues.

At budget time next spring, I hope it will be possible to assess the picture more accurately to ascertain whether the current inflow of receipts will be sufficient to cover current charges, and to consider whether anything special should be done to provide for the deficit which will have developed during the

Old Age Security

early months of the fund's operation when the full yield of the old age security taxes was not yet available.

The purpose of the provisions to which I have just referred is to ensure that the fund, at least after the first few months, will be self-sustaining and that the revenue sources are sufficient to ensure an adequate flow of income to meet the pension payments and the repayment of loans. This is the basic principle on which it is proposed to operate the fund.

Topic:   J34 HOUSE OF COMMONS
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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Donald M. Fleming (Eglinton):

Mr. Speaker, in some of its most important sessions parliament does its work in an atmosphere of high controversy. On other occasions parliament does some of its best work in an atmosphere of unanimity. Whatever may be said about the speech which has been made by the Minister of Finance (Mr. Abbott), one may say without reservation that this is an occasion when parliament will address itself to the accomplishment of a high aim in a spirit of unanimity. We of the official opposition hail the introduction of the measure which has been outlined in the resolution now under discussion. We are glad to see that action may now be taken by parliament in the direction indicated in that resolution. In it we see an achievement of all parties in the house. We see this as an occasion when all parties have addressed themselves to great national responsibilities, with the highest sense of responsibility as political parties serving the common weal. And there is a great sense of satisfaction, I am sure, in all parties in this house today that we are now to be permitted to take a long step forward toward the goal that all parties in this house have subscribed to.

This spirit of unanimity, as we approach this goal, is unquestionably the fruit of cooperation on the part of all parties in this house. That spirit of co-operation was abundantly manifested in the committee of both houses of parliament which sat, laboriously, in the 1950 session of parliament; and the extent to which the government, in the resolution now under discussion, has adopted almost in their entirety the recommendations of the committee is I think the highest possible tribute which the government and the house could pay to the efforts of those who sat on that important committee.

I should like to associate myself entirely with the tribute paid by the Minister of National Health and Welfare (Mr. Martin) to the joint chairmen of the committee, Senator King and the hon. member for Montmagny-L'lslet (Mr. Lesage). I should like to say that all members in that committee showed

a most commendable spirit of co-operation. It is not very often that committees of parliament are able to leave aside partisan considerations when they address themselves to their tasks in committee or in the house; but I think to a most extraordinary degree all parties represented in that committee-that includes all parties in this house-did put aside partisan considerations as they addressed themselves to their task in that committee. Therefore I think it may be said that we have expedited the arrival of this occasion when security for our senior citizens is about to be translated into fact, and in addition that we have contributed greatly to devising the best possible scheme of security for our senior citizens.

My remarks today, sir, will be directed particularly toward those of the Minister of National Health and Welfare, because the Minister of Finance (Mr. Abbott) has in fact made something of a budget speech. It will not be expected of me, any more than it would be expected of the financial critic for the opposition, in following the Minister of Finance in a budget speech, to make detailed comments upon the budgetary proposals of the Minister of Finance. They will be considered in the light of the measure when it is available to hon. members, when its contents are known and when there has been sufficient opportunity to weigh the remarks of the Minister of Finance in relation to the various forms of tax which he considered, and the merits and demerits of the proposals which he has made to the house today.

Sir, the resolution has about it several principal features: in the first place, the abolition of the means test. That, sir, is unquestionably the leading feature of this bill. Universality of benefits would be impossible without the abolition of the means test. That means test has been under attack, almost unrelieved attack, for years. Its shortcomings have become manifest, more manifest as time has passed. I am sure that all hon. members will be glad of an opportunity of eliminating for all time the means test in connection with the payment of pensions to our citizens 70 years of age and over. When the other measure, the Old Age Assistance Act, providing for the payment of assistance to needy citizens between the ages 65 and 69 was under debate last June, some of us did naturally express our concern about the questionable logic of the abolition of the means test for those 70 years of age and over, and the retention of the means test as to those between the ages 65 and 69. In that case logic has to yield to the financial pressures, the necessity of keeping those expenditures within our

possible -capacity at the present time to pay; but there can be no question whatever that a sound step is being taken today in the abolition of the means test. The committee was absolutely unanimous in that recommendation with respect to those 70 years of age and over. The means test unquestionably has had, over a lengthy period, the effect of penalizing thrift. It has been the occasion of unwarrantable intrusions on the part of officials into the private affairs of citizens. It has penalized those who have either enjoyed, or have sought to establish, industrial pensions; and the extent to which industrial pensions have been increased in recent years, the whole scope of that -step forward in industrial relations, has created pressures on the means test which have become intolerable. And, sir, it was essential that payments as of grace, handouts, as they were often regarded, should be replaced by payments earned by the recipients and received by them as of right. That was a fundamental purpose of the highest importance in the recommendations of the committee which are receiving fulfilment today.

Let me set at rest at once any thought that the receipt of this pension of $40 a month by anyone is going to have the effect of discouraging people from contributing their labour to the general labour force of this country; far from it. The abolition of the means test will now assure that there will be no labour withheld at any time in our history when we need the maximum assistance from all capable of contributing anything to the labour force of this country. It will assure that any contribution that anyone can make will not be withheld because of the application of the means test. Witness after witness appearing before that committee emphasized the importance of providing inducements to people to go on, as long as their physical and mental capacities would permit, to make their contribution to the sum total of the productive capacity and effort of this country. The abolition of the means test itself is going to make a contribution of very great importance, it seems to me, not simply on the economic side, but also on the sociological side toward the achievement of that commendable goal.

Some of us had criticism to offer last June about that feature of the means test as to the assistance payable to those between 65 and 69. It is the application of the means test, Mr. Speaker; it is not the payment of assistance, which has had the effect of discouraging contribution to the productive capacity of the country on the part of recipients.

So much for the means test; there will, I know, be complete unanimity on that point.

Old Age Security

Now, sir, the next feature of the resolution is the sum involved, namely $40 a month. The committee again was unanimous in that recommendation. There were one or two organizations that recommended the sum of $30 a month. I am glad to say that the committee was unanimous in recommending $40. But in recommending the universal payment of $40 a month, Mr. Speaker, let us not overlook one or two hard facts. The first is this, that the upward march of prices in this country, even in the sixteen months since the committee wrote this report, has had the effect of reducing the $40 a month by a substantial amount. And if we think that we are being unduly generous let us just remember this, that when the payment of $20 a month was introduced a quarter of a century ago the $20 paid then had almost the equivalent purchasing power at that time that the $40 per month will have today. And if you apply that ugly cost of living index you will see that the $40 today is worth about $21, in terms of the purchasing power of the pension when it was first paid a quarter of a century ago.

There are today, in addition to the payments of $40 a month under a means test, benefits provided in the form of medical and dental assistance. Some of us on the committee were much concerned-and we showed our concern in the debate last June on the Old Age Assistance Act, when parliament was legislating for a flat payment of $40 a month which would replace the present joint dominion and provincial payments-that there might be a question as to the continuance of the provisions made for medical and dental care. I cannot speak for all the provinces, but I am most happy that in my own province of Ontario the provincial government has stepped into this field and has announced-in fact it has already implemented its announcement by legislation passed at the recent session of the legislature-that it will continue at its own expense to make medical and dental care available to all needy persons requiring it over 70 years of age, and in the group from 65 to 69 who receive the benefit of old age assistance under the means test. They too will receive the full benefit of medical and dental care. The scope of that medical and dental care is in the course of being enlarged. I know many of the provinces have their own financial difficulties; but in the interests of our senior citizens I do respectfully express the hope that it may be possible for all the provinces of Canada to make similar provision for needy elderly citizens.

The next feature of the resolution refers to persons of 70 years of age who have appropriate residence qualifications. I am sure I

Old Age Security

need offer no comment upon that portion of the resolution, because the Minister of National Health and Welfare has indicated that the recommendation of the committee in that regard is being implemented.

Next, the resolution contemplates the establishment of a fund made up of special contributions levied for that purpose. The universal feature of the present scheme deserves in that regard, I suggest, some special comment. It should not be thought that the committee did not give the most serious consideration to the alternatives offered to it. Those alternatives were, first, a program of old age assistance and, secondly, an insurance system. The third alternative was the one adopted, namely the universal pay-as-you-go system. The extensive review of the advantages and disadvantages of the other two alternatives in the committee's report indicates how exhaustively the committee did consider them before it arrived unanimously at the decision to recommend the universal pay-as-you-go system.

There are those outside the house who have expressed some regret that the orthodox contributory system on the insurance basis has not been introduced. They point to the system which has prevailed in the United Kingdom as probably the leading precedent. Undoubtedly great benefit is to be associated with the idea of bringing home to every individual the fact that the benefit he receives upon attaining the necessary age has cost money, that he has had to pay his share toward it, and has earned it as of right, Any weakening of that principle is something the committee viewed with some measure of apprehension. Nevertheless, in the final analysis, if I correctly understand the feelings of the committee as expressed in the course of our lengthy discussions, the factor which led the committee to reject the insurance system was that necessarily it would have been incomplete in its operation in our country, that it could not possibly have extended to even half of those to whom the universal system will extend, and that it would have become absolutely necessary to provide for others, no doubt in substantial numbers, by a continuation of the assistance program. That, in turn, would inevitably have involved the continuance of the means test.

The committee, in the face of this and other considerations, arrived-and I think soundly-at the decision to recommend the universal pay-as-you-go system. It has the advantage of simplicity from the administrative point of view. That, sir, is one of the features about the present proposal that I suggest is entitled to the highest measure of commendation. The system has not in it

any quirks or kinks that are going to involve difficulties in the course of administration. Nothing could be simpler from the administrative point of view than the system now proposed, and recommended last year by the committee. My personal view is that this is a factor which should be regarded as one of high importance.

The final feature of the resolution deserving of special comment at this time is the fact that the fund is to be made up of special contributions levied for that purpose. Nothing could be more sound than that a fund should be created for this purpose which should be divorced and detached from the consolidated revenue fund. It would have been deplorable if the Minister of Finance had not proposed the establishment of a separate fund for this .purpose, one detached from the consolidated revenue fund. For if payments for that purpose had simply been merged with all other receipts in the consolidated revenue fund, and payments out of it had simply come from that common fund, I think there would have been a loss of a sense of responsibility, and of the value that will inevitably be gained by the realization that these measures of social security, no matter how commendable, must be paid for.

Hon. members will perhaps envy the opportunity given the Minister of National Health and Welfare today, and perhaps find it in their hearts to feel sympathy for the Minister of Finance in the task allotted to him. It may be that the opportunities offered the two ministers today were not equal. Nevertheless I am sure all members of the house, in their responsibility, recognize with respect to this important measure of social security, as with respect to all other measures of social security, that they cost money, that there is no magic source of money, that they must be paid for, and that in the last analysis there is only one source of payment, and that is the pockets of the people.

On the matter of universality there is one feature that I think should have been worthy of treatment by the Minister of National Health and Welfare. I refer to those who do not need the $40 per month, those persons who are well-to-do. It may be that we have not heard the whole story of this from the Minister of Finance (Mr. Abbott), but I think the subject should have been dealt with today. I wish the Minister of National Health and Welfare had dealt with that point because it has provoked editorial and other comment in this country.

There are those who have said, Why have a universal pension to include those who do not need it? Unquestionably there are people

in this country 70 years of age and over who do not need this pension. After reviewing this particular aspect of the problem with great care the committee arrived at the conclusion that there should be no departure from the universal principle. To illustrate how much this point did bother some of the members, one senator asked at one stage why we should provide payments to those who did not need them. I recall about two years ago when the Prime Minister (Mr. St. Laurent) was asked in this house about the possibility of universal payments or payments with a greatly reduced or liberalized means test, he asked for himself why the country should pay him a pension in his circumstances when he had reached 70 years of age.

These are serious questions and I think the minister should have dealt with them in his speech this afternoon. I can give reasons why the committee recommended universal payments. First, it was felt that in the case of those who did not need the payments it would be a simple matter for the Minister of Finance if he so chose to draw them back in the way of taxes. In the second place, it was thought that the administrative problem would be considerable. It does not matter what figure you choose as the breaking point between those who will receive and those who will not; you are applying a means test. It may be that it would be an infinitely more generous means test than that which had prevailed hitherto, but nevertheless it would involve the application of such a test. That in turn would have brought with it almost all the objectionable features of the present administration of the means test. It would mean that you would be penalizing thrift in many cases while making payments in other cases to those who had not generally practised equal thrift. It would have meant more intrusions on the part of officials into the affairs of individuals. For these and other very good reasons, not least of all being the administrative difficulty of enforcing such a test as compared with the administrative ease with which money could be taken back in taxes from those who did not need it, the committee arrived, I think soundly, at the conclusion that the simplest and most effective system was the universal system.

I think I have said all I need to say about the importance of a separate fund. I should like to stress the importance of earmarking contributions by placing them in a special fund created for the purpose. That is the sound principle which some of us asked should be recognized long before this with respect to such measures of social security as have been implemented by this parliament in years gone by. It is a principle that is inherently

Old Age Security

sound. We should know the precise cost of all these measures of social security because in the last analysis the people must be the judges of whether they are receiving value in respect of the expenditures made. You cannot expect the people to exercise the right that is their due of making clear-cut decisions on these matters unless you adhere to the principle of earmarking funds and putting them in a special account for this purpose.

The pay-as-you-go feature is sound. One of the advantages of the universal system is that it does not involve adherence to the insurance principle. Had we inaugurated a system involving the insurance principle it would have been necessary to make provision for the accrued liability of persons who would be entering upon such a system at an age approaching retirement when they would not have before them the span of years that would permit them to make sufficient contributions into such an insurance fund to earn the benefits to which they would be entitled from the fund. Some countries that have applied the insurance principle have been faced with this problem and have gone out of their way to establish large funds for the purpose. We were told that in Switzerland the fund in some respects approaches the size of the national debt. One of the advantages of the system recommended by the committee and about to be implemented is that it is possible to establish and adhere to a pay-as-you-go principle. That is a principle of unquestioned soundness.

Things have been said by some of those who have spoken on this subject that will occasion questions to the minister. For instance, the minister gave the house assurance this afternoon that there would be no infringement by reason of the payment of $40 per month upon the benefits now paid under the War Veterans Allowance Act. I think the house will want further information in regard to that point. We have not forgotten that when the Old Age Assistance Act was before the house last June we were told that the effect of section 3 (2) (b) was that benefits received under the War Veterans Allowance Act would be counted as income in the case of persons between the ages of 65 and 69 years and in that way pro tanto would reduce the benefit that a veteran might receive under the Old Age Assistance Act. We want a clearer statement from the minister with respect to the present measure.

We know quite well that the benefits received under the War Veterans Allowance Act will not be counted with respect to this universal payment of $40 per month, but we want a converse assurance that the receipt by any person 70 years of age and over of

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Old Age Security

$40 per month under the measure now being introduced will not disqualify him from receiving benefits under the War Veterans Allowance Act. In particular we will want assurance that no benefits received under such features as the recently-inaugurated unemployability supplement or other measures that are to be introduced shortly to amend this act, according to the announcement made last Friday by the Minister of Veterans Affairs (Mr. Lapointe), will be made the occasion for denial to war veterans because they may be qualifying for the $40 per month under the present measure.

I am sure hon. members listened with interest to what the Minister of National Health and Welfare (Mr. Martin) had to say this afternoon with reference to the enlargement of the annuities available under the annuities act. The annuities act came under review by the committee on old age security to some extent, and while we will naturally wish to see in detail the amendments proposed by the government and, we are told, soon to be introduced by the Minister of Labour (Mr. Gregg), and while we shall wish more information with regard to them, I think all members of the house will have recognized long before this that the maximum annuity available under the present act has been greatly reduced in purchasing power and value by reason of the mounting level of prices, and that some measure is needed by way of amendment to the act to cope with that reduction.

The minister had something to say this afternoon concerning the progress made with registration on the part of applicants for the $40 per month to be paid as from January 1. I am sure all hon. members are glad to hear that as many as 277,000 applications have been received from those who are not already in receipt of assistance under the dominion-provincial scheme now in effect. Hon. members will have noted, I am sure, that the minister did not give the exact figure of those who have been successful thus far compared with the number that may be held in abeyance for further proof. If we analyse the figures he did give us we will have concluded that of the 277,000 applications received only about one-half have thus far been approved.

The minister says that approximately 15,000 to 20,000 weekly are being approved. I think all hon. members will want to see approval granted as quickly as possible in order to relieve the uncertainty that has been created for many applicants not simply by reason of the proofs required in their own cases but by the knowledge that has gone abroad of the extent to which rigid requirements of proof

are being applied and enforced. I bring to the minister's attention once more, as I sought to do yesterday, the necessity for a much more reasonable, sympathetic and understanding approach to the problem that many applicants are facing today in seeking to meet the very high standards of proof of age that are being required of them by the Department of National Health and Welfare. I ask the minister in all seriousness if it is fair and reasonable to expect members of the same family in widely scattered parts-

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LIB

Paul Joseph James Martin (Minister of National Health and Welfare)

Liberal

Mr. Marlin:

May I answer that right now? I was not in the house when my hon. friend brought up that question. He spoke about one bible being required to be sent in four different times. I should like to have that case. I have checked on it and I can find no instance of it. In no circumstances would we expect applicants who are covered by the same bible to send it in more than once.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

I hope the minister will communicate that information to his local offices-

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LIB

Paul Joseph James Martin (Minister of National Health and Welfare)

Liberal

Mr. Marlin:

May I have the name of that case?

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October 25, 1951