November 1, 1951

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 Marlin (Minister of National Health and Welfare) moved

the second reading of Bill No. 13, to provide for old age security.

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. Donald M. Fleming (Eglinton):

I am

sure, Mr. Speaker, it will be quite obvious, from the remarks that were made in the resolution stage of this matter on October 25, that the house will be glad to give unanimous endorsation to the principle of this bill. This measure represents an achievement in which all parties in the house have shared honourably. Indeed, it could be called the fruit of a coalition of aim and effort on the part of all parties in this house, an effort in which parties have risen above partisan considerations to bring about the fulfilment of a great national purpose.

I am equally sure that no further comment is required on the features of the pension payable under this legislation, after the full discussion that was held on the resolution on October 25. There are, however, two subjects which came to the fore during that debate which will have to engage the attention of the government and the house further. The first, Mr. Speaker, is in regard to the matter of proof of age. I know the house was glad to hear from the Minister of National Health and Welfare (Mr. Martin) that a substantial

Old Age Security

number of applications are being processed week by week. We do repeat the warning imparted last week against too strict an enforcement of exacting standards of proof. We are glad to see that the bill itself contains a provision enabling the minister to have access to the files of the dominion bureau of statistics in the case of census records taken more than 30 years ago. We ask the minister not to wait until the first of January next to make use of that provision, but to put it into effect at once in order to give every reasonable assistance to those to whom adequate records of birth are not available.

The second point relates principally to the effect of this legislation on veterans allowances. I urge again that the effect of this measure on the benefits payable under the War Veterans Allowance Act should have the early consideration of a parliamentary committee. That matter should not be suspended until the 1952 session of this house, because it is of urgent importance to many veterans. I believe that if every individual member in this house were asked directly if he wished the enactment of this measure to deprive any veteran of any benefit he now receives under any other legislation, the answer would be an emphatic no. It is quite obvious that this measure as such does not purport to affect the rights of veterans under other legislation. Our concern is as to the effect of other legislation in the light of the enactment of this measure.

We had the assurance of the Minister of National Health and Welfare last Thursday that the veteran in receipt of an allowance or pension will be in the same position under this measure as any other person of age 70. But that is not the point. It is the converse proposition that is left in doubt. Today's press carries reports of a statement issued yesterday by the Minister of Veterans Affairs (Mr. Lapointe). It was that report which prompted the question I asked a few minutes ago on the orders of the day. It now appears that no further statement has been issued by the minister. There is nothing that the government has to add, by way of an announcement on policy, to what was said in this house on October 25. I conclude what I have to say on this subject, Mr. Speaker, with this observation. What the house heard on that occasion is not satisfactory. The house will, in justice to those who are now in receipt of benefits under the War Veterans Allowance Act, wish to be assured by solemn legislative provision that the payment of pensions under the old age security act to veterans 70 years of age and over will take nothing whatever from the benefits that the veterans are receiving under other legislation.

When the resolution was under discussion a week ago, I reserved any comments I might wish to make with regard to the financial aspects of the measure. It was not appropriate that, following the speech made by the Minister of Finance (Mr. Abbott) on that occasion, one should have been expected to make any detailed comment upon what were, after all, the equivalent of budgetary proposals. There would be more freedom on this occasion if the procedure suggested by the member for Lake Centre (Mr. Diefenbaker) had been followed, namely, that the Minister of Finance introduce resolutions which, in turn, would have been referred to the committee of ways and means. We might then have had a bill to amend the Excise Act, and a bill to amend the Income Tax Act. In the rather confining way in which the matter of the financing of the old age pension now comes before the house I should like to offer some brief comments.

First of all, the cost estimated under a full year is $343 million. This figure is slightly in excess of the estimate made by the committee on old age security in 1950. We shall not find it hard to believe the Minister of Finance when he said that in devising proposals for meeting the cost he found it "no easy problem."

I remind you, sir, that the committee on old age security did not make any recommendations concerning the methods by which the cost of the pension should be met. On the contrary the committee, and I think very wisely, reserved itself on that subject. Paragraph 67 of the recommendations of the committee reads as follows:

The committee, however, did not consider that it was part of its responsibility to do more than indicate possible forms of contribution. The raising of revenues is a technical problem which bears a close relation to fiscal policy in general, and the committee did not feel that it should suggest more than the main outlines and principles to be followed.

In referring to paragraph 66 of the recommendations of the committee in which an example was given by the committee as to possible ways of financing the cost of this measure, hon. members should read that paragraph in the light of paragraph 67 which I have just mentioned. When the Prime Minister (Mr. St. Laurent) made his announcement in the house on June 4, as reported at page 3665 of Hansard, I think he recognized that the committee had taken a wise course in refraining from making any recommendation as to the way in which the cost of the pensions should be met.

The scheme of pensions which has been selected, in keeping with the recommendation of the committee, is a universal pension. This

selection in itself precludes the levying of individual contributions with separate accounts to be kept for each contributor, on the insurance principle. Because the benefits are to be equal, it precludes any complete recognition of any suggestion of equalizing or of directly relating to each other contributions and benefits. It is not strictly proper to call this a contributory scheme; certainly not in the orthodox sense of the word. The nearest approach that can be made to the preservation of the contributory feature in the universal scheme is to earmark taxes, or contributions in the form of taxes, to a special fund. The committee, in paragraph 64, sought to preserve, as far as is possible in a scheme of this kind, the contributory principle. Paragraph 64 of the recommendations of the committee reads as follows:

The committee is In favour of the contributory principle, not only because of the importance of this in raising total moneys required, but also because of the importance of establishing a close association in the mind of the individual between his contribution to the cost and the ultimate benefit he is to receive.

In the light of these principles and in the light of the nature of the pension scheme I suppose it is fair to say that there are two purposes or overriding considerations which should guide the house in its review of the proposals as to financing the cost of the measure. In the first place, we want to see the cost distributed equitably. In the second place, I think that the house will desire to preserve-as the committee recommended in paragraph 64 which I have just read-the consciousness on the part of the individual of the association between the contribution he is making to the cost and the benefit he is to receive. It is on that basis that rest our ideas, our beliefs in the house, that we are departing as far as we can from the idea of any handout, any payment as of grace, and are seeking to supplant that type of payment with a payment which will be received by the pensioner as of right.

In examining the 2-2-2 formula proposed by the minister, one notices at once, of course, that he has recommended that the entire cost of the $40 a month pension for those 70 years of age and over is to be borne out of the special fund to be created by earmarking taxes. In the example given by the committee in paragraph 66 of its report there was a suggestion that a sum equivalent to the amount now payable out of the consolidated revenue fund-which is, in round figures, $100 million a year- might continue to come out of the consofi-dated revenue fund as such. I think the house will be glad to see that the minister, in his proposals, has recommended that the 94699-39

Old Age Security

entire cost, without deduction of that $100 milhon, is to come out of the special old age security fund.

The minister proposes that this coming year there should be collected, under his 2-2-2 formula, a total of $305 miRion: $145 miRion by the 2 per cent sales tax; $95 million by an additional 2 per cent tax on personal income; and $65 miRion by an additional 2 per cent tax on corporation income. So far as the last of the three taxes is concerned, I suppose that in the case of corporations which are enjoying the benefit of a sellers' market, it will be possible for them to pass on that cost to consumers. In other circumstances that tax will be borne by the shareholders.

In the case of the income tax, we have noted the statement made by the Minister of Finance (Mr. Abbott) that the income tax is paid today by about one-half of the working population. There is no suggestion in this house, I am sure, in the tight of the high cost of living prevailing today, of lowering exemptions to cover any extended contribution by way of income tax.

In coming to the sales tax, one observes that the minister contemplates that, out of a total of $305 miRion to be collected next year, $145 miRion shall be payable by way of the 2 per cent sales tax. In that way the Minister of Finance is proposing to collect 47.5 per cent of the total amount out of the sales tax. If inflation continues, that amount could well increase to one-half of the total amount. It would be well for the house to have that fact in mind, therefore, namely that the minister is looking to the sales tax to meet about one-half of the cost of financing the old age security measure.

His estimate of the revenue to be derived from a 2 per cent addition to the sales tax has increased substantially from the estimate which he gave to the house last spring in his budget speech. At that time he estimated that the 2 per cent addition to the sales tax would yield to the treasury $125 miRion in a full year. His estimate of the yield from the same percentage of taxes has now been increased to $145 miRion. We recognize, of course, that the minister, in suggesting a 2 per cent sales tax, is in effect transferring 2 per cent out of the present 10 per cent sales tax to the new old age security special fund. Certainly it is a matter of relief, I am sure, to members of the house that the minister has not proposed any addition to the present total of the sales tax.

We must not underestimate the difficulties faced by the Minister of Finance in meeting

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this cost, and we must recognize that the cost of the old age security measure must be paid, that these measures cost money and there is only one source from which the revenue can came, namely the pockets of the taxpayers. Recognizing all that, one must indicate again, as one did last spring, that the sales tax is a hidden tax. The consumer does not realize what proportion of the price of the goods he buys goes to meet the sales tax; and in that respect the sales tax does not create any consciousness on the part of the buyer in a direct sense, that kind of consciousness that the committee referred to in paragraph 64 of its report.

We must recognize as well that it is a costly tax to the consumer because it pyramids as the result of mark-ups as the goods pass from hand to hand, from manufacturer or producer, who pays the tax in the first instance, to the wholesaler, from the wholesaler to the retailer, from the retailer to the consumer, and that a 2 per cent sales tax in this way levied on the manufacturer or producer will probably cost the consumer not 2 per cent but closer to 4 per cent on the. cost of the goods that he has to buy.

We have noted what the Minister of Finance (Mr. Abbott) had to say in arguing as he did that this tax works out proportionately on all sections of the population. I am not going to enter into that discussion today. I have noted, however, the argument that the Minister of Finance did put forward in commending his proposals in this regard to the house.

I think all hon. members would have hoped that if a consumption tax were to be selected by the minister as one of the sources of revenue designed to help meet the cost of this pension, the minister might have devised some kind of consumption tax that might not have had these features about it which hon. members will recognize, I think, as disadvantages in the sales tax. For instance, it might have been possible for him to work out a proposal that would make the amount of the tax payable by the consumer known to him, and might have been cheaper in collection by being levied at the end of the chain of sales rather -than at the beginning. However, Mr. Speaker, I am sure we are all aware of the fact that the experience of the federal government has been difficult in the field of the collection of a retail tax. There was some slight experience with that during the war.

Hon. members I know are aware of the fact that machinery does not exist at the moment for the collection of a federal retail tax, and machinery, as the Minister of Finance has told us, is available for the collection of the sales tax. The proposals

he has made will not involve any addition to or interference with the present scheme of the collection of taxes.

One will also have to bear in mind, in commenting on these matters, that there are several provinces which themselves are -collecting a retail sales tax. No doubt that also entered into the conclusions the minister embodied in the -proposals he supported in the house.

Sir, there is one further matter that I think deserves comment at this moment. In his statement last Thursday the Minister of Finance indicated that, having regard to the figures of cost he submitted to the house and the figures of anticipated revenue from the application of the 2-2-2 formula, he anticipates a deficit in the old age security fund of $50 million during the first year of operation.

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

Gordon Knapman Fraser

Progressive Conservative

Mr. Fraser:

Calendar year.

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:

The first calendar year. In

the case of the fund that would be the year 1952. I consider that the government ought to be more specific in the information given to the house with regard to this estimated deficit. We are subscribing as a house, I take it, to the principle of a pay-as-you-go measure, a pay-as-you-go universal scheme, and we do not wish to see the fund hamstrung the first year of operation, if we can avoid it, by any $50 million deficit, which presumably will have to be made up as time goes on by levying more than is actually required to meet the cost of the current pensions.

Finally, sir, let us be realistic, let us be fair. In this measure we are committing Canada not just for one year, but I am sure permanently, to an additional tax burden. In place of a burden on the federal treasury that will this year amount to approximately $106 million, we are proposing that that load on the treasury be increased next year to $343 million; and we know in doing so that, with the increasing number of Canadian citizens 70 years of age and over, that amount is bound to increase year by year. There may be some who in the face of this step in creating a permanent increase in the national overhead cost of government will have misgivings. Sir, it may be that those who entertain those misgivings-and I am not one of them-will do so without adequate realization of the benefits that are going to flow directly from this measure. But to the attention of such, one would like to draw two factors which, it seems to me, are a necessary, effective and complete answer to those who might otherwise entertain concern about the permanent increase in the national overhead

cost of government. The first is this: with the development of Canada's resources, her great and almost unlimited resources, by the application of the energies of a vigorous and intelligent people we may look with confidence to a future in which an expanding national production, and an expanding national income will be able to absorb this measure of increase in the cost of government.

In the second place, sir, let us not overlook the fact that the abolition of the means test and the provision of this universal pension are going to make it more attractive for people of advancing years to apply their physical and mental energies to swell the productive effort and capacity of this country.

There are several paragraphs in the committee's recommendations in this regard which I think are deserving of special mention. On page 101 of the committee's report there are three paragraphs under the general topic "Later years of retirement." These follow paragraphs in which attention is honestly drawn to the fact that the numbers and proportion of our population in the age group 70 years of age and over are going to increase. The committee said in clauses 3 and 4 of its recommendations:

3. The committee has also in its deliberations been faced with the fact that regardless of the age which may be selected as normal for retirement, the magnitude of the problem and the numbers of persons in the population above the selected age do not remain static. Due to improved health services and the consequent increase in the longevity of our population, along with other factors, our aged population is growing from year to year.

4. In 1931 the average life expectancy for newborn males was 60 years and for females 62 T years. The total population of Canada over the age of 65 was 576,000, representing one in every eighteen of the total population. Since then the average life expectancy of new-born males and females has risen to 65-18 years and 69-05 years respectively (1947 figures). Combined with increased longevity was a decline in the birth rate, since reversed, which has contributed to a higher proportion of population in the advanced age brackets. The total of persons 65 or over in 1951 will number approximately 1,101,400 or one in every thirteen of our population. This trend towards an ageing population may reasonably be expected to continue through the decades ahead. It is estimated that in 1961 the population 65 and over will approximate 1,372,500, and in 1971 it will rise to 1,630,000.

Then the committee went on to say:

6. As large numbers of persons reach what may, under present circumstances, be considered the normal ages of retirement, and as they find themselves in better health, it may be expected that they will show increasing reluctance to accept the inevitability of retirement at such ages. It is in the interests of the individuals themselves and of the country as a whole that we should rethink our attitude towards continued gainful occupation of these older age groups.

7. The committee believes that increasing emphasis should be placed on efforts to remove from people's minds the idea that there is any set or

Old Age Security

accepted age for retirement. Each individual in the nation's population should be encouraged to continue as long as possible in gainful employment.

8. Not only is this a matter of importance to individuals themselves in terms of their health and mental outlook, but it is of even greater importance to the over-all economy of the country. Surely a country like Canada, with a wealth of natural resources still in large part undeveloped, is justified in having profound faith in its economic future. If we are to develop these resources adequately, we shall need to retain in active undertakings the largest possible number of our nation's population. The committee believes that, in the years ahead, our economic progress and prosperity will depend in significant measure on the success of efforts made to utilize to the fullest possible advantage the mature skills of these older workers.

That last fact was emphasized in some excellent presentations made to the committee by various groups, including employer groups, who stressed the value to industry of older men whose skills are great and who under the current pattern of industrial pensions are being retired. It will now become possible, without depriving any of these workers of their rights under industrial pensions, for them to enjoy the benefits provided by this present measure. That will be a great step forward and the therapeutic effects of encouraging people in advancing years to feel that they are useful to society, that they still have a place of usefulness in the Canadian economy, will be of benefit to our ageing population far beyond the capacity of any of us in this house to measure adequately, let alone to exaggerate.

Especially at a time like this every effort should be bent to increasing the total productive capacity of the country. The means test did a great deal to discourage people seventy years of age and over from continuing to contribute their skills to the national productive capacity, and the abolition of that means test is a great step forward and one that I am sure will be hailed by all members of the house in acclaiming this new type of pension on a universal basis.

We can help to counteract the ageing trend of our population by encouraging the expansion of our population of working age through immigration. We can help to contribute to the capacity of the country to carry the financial weight of measures of this kind by pursuing, in this house and throughout the country, policies which will contribute most effectively to the development of the great natural resources of this country by an aggressive, intelligent and industrious Canadian people.

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

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Stanley Knowles (Winnipeg North Centre):

Mr. Speaker, when the resolution, preceding this bill was introduced on Thursday of last week we were given an explanation of what was to be in the bill, an explanation which was in two parts. On the

Old Age Security

one hand, the Minister of National Health and Welfare (Mr. Martin) made it clear that with regard to the benefits of the new old age security legislation the intention was to carry out the recommendations of last year's committee on old age security. On the other hand, the Minister of Finance (Mr. Abbott) gave us the government's proposals with respect to the financing of this plan. As has already been pointed out, that side of the program represented a decision taken by the government itself.

As I have reviewed the debate that took place last Thursday I have realized that the points at issue in connection with this matter have been pretty thoroughly discussed. My own feeling, after having given the matter a further week's thought, is that the two main objections which I registered a week ago should be drawn once again to the attention of the house and the government. Like the hon. member who preceded me, and I am sure all hon. members, I welcome with the greatest pleasure and enthusiasm this important measure. It represents a step that some of us have long wanted to see taken, in that it removes the means test from the old age pension, at least for those 70 years of age and over.

Nevertheless I feel that our responsibility to the people of Canada is such that we cannot content ourselves with boasting of what we are doing. Rather we should examine the legislation before us and point out any weaknesses or flaws that we may see, in the hope that they may be corrected as this bill goes through the house or, failing that, that they may be corrected by amendments to the legislation at the earliest possible opportunity.

As I indicated a week ago today, the flaw which stands out most prominently in this bill is the fact that the government has failed to increase the amount of the pension beyond the $40 figure which has been the amount of the means test pension since 1949 and which the minister pointed out was included in the report of the committee. All of us are fully aware of what has happened to the cost of living since the committee made its report in June, 1950. That increase makes absolutely imperative an increase at this time in the amount of the pension.

As I pointed out at the previous stage, $40 today in terms of the value of the dollar in 1949 when the pension was first brought up to $40 is now only $33 in relation to the general .cost of living index, and only $31.62 in relation to the food index. Similarly, when one looks at the value of the dollar on the 1935-39 basis, $40 today is worth only $21.07 on the general index, and only $15.92 in relation to food. I single food out for

the obvious reason that that is the expenditure which our old people have to deal with in the first instance, and it forms a very large part of their cost of living.

I want to say that I feel there are two things that are tragic about this $40 figure. On the one hand I think it is most unfortunate that that is all that is being provided at the present time when certainly for great numbers of our older people a larger sum is needed. I think in particular of the more than 200,000 old age pensioners who are already drawing the full $40 under the previous legislation, the old age pension with a means test. For them there is no improvement in their position whatsoever as the result of this legislation as it stands. Their need for some improvement is demonstrated by the fact that they have already met the existing means test. In other words, such other income as any of them might have is so little-and in most cases it is none at all -that they are clearly in need of more than this amount in order to keep going at all. I feel that we should consider the plight of that group of people, and that something should be done for them now.

It is no solution to their problem, no solution to the old age pension problem as a whole and the whole question of social security, for anyone to suggest going back to the means test principle even for a supplement for these people. To submit them to another means test would be unthinkable. As I see it, the only answer to their problem is an increase in the amount of the pension and a proper taxation system to see to it that any such increase that accrues to millionaires who do not need it comes back into the general revenues of the country. On that basis I urge most strongly that this house press upon the government during the course of this debate, and particularly when we get into committee of the whole on the bill, that consideration be given to increasing the $40 figure provided in the legislation.

As I said the other day, if one looks merely at the rise in the cost of living that has taken place since 1949 the amount of the pension should be very close to $50 a month. Even that in my view would not be enough. I am thinking not in terms of the distant future; I am thinking in terms of ordinary decency, justice and fair play today; and on that basis I feel the amount ought to be $60. I insist that the house should bring this fact very forcibly to the attention of the government during the course of the debate.

As I see it, the other tragedy about the $40 figure in the bill is that the government has already set up its defences against any campaign for an increase in the amount at a

later stage. We have, for example, the statement made by the Prime Minister (Mr. St. Laurent) on February 20, 1950, even before last year's committee was set up, to the effect that he hoped that any old age pension plan would be on the kind of contributory basis that would make it clear that if any section of the community wanted an increase in the pension there would have to be a corresponding increase in the taxes collected directly for that pension. Now we have the Minister of Finance (Mr. Abbott) not only setting up a special fund but writing into the legislation the necessity of the Minister of Finance reporting to the house each year on the state of the fund, drawing attention to any deficit that may obtain and making recommendations to the house as to what additional taxes should be imposed in order to meet the deficit. In other words, in the language of the Canadian Tax Foundation, which has already been sending out some literature on the new old age pension plan, the Minister of Finance is setting up defences, setting up ways and means of blocking what these tax foundation people call extravagant demands for increases.

Not only have we defences set up in the legislation itself but we have statements such as the one that was made yesterday by the hon. member for Vancouver South (Mr. Laing) who said he deplored the evidence of the fact that pleas would be made in various parts of the house, and perhaps throughout the country at the next election, for an increase in the amount of the pension. He even went so far as to say that if different parties were bidding higher amounts for the pension that would be bad for the people of Canada. I do not agree. It seems to me that what is really bad for the people of Canada is to suggest that the $40 figure is in any way frozen, in any way a figure that must last for all time. Surely members of the house will recognize that we do not live in a static world or a static economy. Things move on, things progress, and as we increase our productive capacity, as we increase the standard of living that is made possible by steadily improving technological developments, surely we ought to give a proper portion of that improvement to those who have contributed to this possibility during the years prior to the age of retirement.

In my view it is an integral part of the whole idea of old age security, and it is particularly germane to the universal pay-as-you-go concept which the committee has brought back to the house, that social security is not something static, but rather that it moves on, that there are increases that must

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be made in old age security commensurate with the changes and the improvements that are made in our economy as a whole. Therefore I say to the hon. member for Vancouver South, and to others who suggest that we should be satisfied with this $40 figure, that we are not satisfied, and appeals will be made by us to parliament, to the government and to the country for an increase in the amount of the pension.

As I have already said, I think that such an increase should be made before the bill finally passes parliament at this time. If the government does not see fit to agree to that request we will certainly continue fighting for it as time goes on. Some members of last year's committee may say that we should have argued this way with respect to this phase of the matter when the committee was meeting last year. They will remember that in the committee we were not satisfied with the $40 figure but we were prepared to accept it at that time because of the great importance that we attached to getting rid of the means test and to getting a pension started at an earlier age, namely, the age of 65. But since June, 1950, there has been a staggering increase in the cost of living which alters the whole picture. I say that to carry out the intent, spirit and heart of the recommendation made by the committee for a universal plan on a pay-as-you-go basis, a plan which takes a portion of the wealth that is produced currently and gives it to old age security, there should be an increase in the amount of the pension right now.

Not only have we defences set against any demand for an increase as I have already indicated, the statement made by the Prime Minister, the statement made yesterday by the hon. member for Vancouver South and statements by others, but even in the very good suggestion that something is to be done to amend the annuities act so as to integrate government annuities with old age pensions I see an attempt to set up a barrier against any move to try to get the amount of the old age pension increased. That is an admission that the $40 provided by this legislation is not sufficient. But it also is a suggestion to the Canadian people that one way to obtain an increase in the amount they are to enjoy is to purchase government annuities. I welcome changes in the Government Annuities Act which have been forecast, but I suggest that they do not deal sufficiently with this problem of old age security, in terms of the needs of our people as a whole.

That sort of solution will help only a limited few. The heart of our committee's report was that we wanted to have established a plan that would meet to some extent-to a

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and gets what he pays for. The rich do not pay for more than they get back; the poor pay for all they will get. That is the benefit idea.

The Minister of National Health and Welfare pointed out at page 383 of Hansard that any program based upon the insurance or benefit principle has some very definite shortcomings. He concluded that part of his remarks by saying this:

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.

What the Minister of National Health and Welfare was telling us there was something we learned in last year's committee, namely that if any country tries to base its old age security merely on the benefit or insurance principle, it is impossible to provide enough old age security for the great masses of the people and to avoid the necessity of supplementing it with a means test program. Our committee said, "We do not want that". I believe the government does not want it, and I am sure the people of Canada do not want it. I agree wholeheartedly with the emphasis used by the Minister of National Health and Welfare in that connection. I could quote other places where he made similar remarks to spell out the same idea, and they are taken clearly and faithfully from the ideas of last year's committee.

On the other hand I find the Minister of Finance rises in the debate immediately after the Minister of National Health and Welfare and tells us this, as it is recorded at page 388 of Hansard:

, 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 . . .

Let me say I am cutting off in the middle of a sentence, the rest of which is to the effect thait if we did go to that extreme it would seem harsh and impracticable. My point is that the Minister of Finance, despite the views of the committee and despite the statement of the Minister of National Health and Welfare, says that so far as he is concerned he thinks there is an argument to be made for the benefit principle by requiring that, since everyone is getting the same pension at 70, he should make the same contribution across the years. On page 415 of Hansard the Minister of Finance expressed the same idea when he said:

It should be based on the benefit principle of taxation and in strict logic everyone should make the same contribution.

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You see, these ideas keep coming out from the Minister of Finance. They reveal the way he thinks about these things. On that same page he said:

But on the principle that it is fair and just that everyone should get equal payment then contributions should be made on the benefit principle.

The committee rejected the benefit principle, and so did the Minister of National Health and Welfare. The Minister of National Health and Welfare stated, as did the committee, that if you go in for the insurance or benefit principle the day will be reached when you will have to supplement that scheme with a means test program.

May I interject for a moment to give you my own analysis of why the day comes when you have to bring in a means test program to supplement the universal plan if it is on the benefit or insurance principle. The fact is that if you require that the rich shall not pay for more than they are going to get and therefore make the poor pay for all that they are going to get, you have to keep the amount of the pension low enough to keep it within the means of the poor. The result is that it is only a matter of time until that pension is inadequate for everybody, except those who have private means. It is because that situation develops that it is necessary to bring in a means test program to supplement any scheme based on the insurance or benefit principle.

I have a great deal of pride, Mr. Speaker, in last year's committee's report. I believe it is one of the finest documents in the social field that was ever presented to this parliament. I have a particularly keen interest in it, and I want to see the principles enunciated therein carried through. I listened with interest to the speech made last week by the Minister of National Health and Welfare. Apart from the little boasting he threw in, which we all recognize he likes to do, he was right on the beam in enunciating those principles. Then the Minister of Finance comes along and reveals that he would like to keep this as a benefit plan. He would like to keep it on the insurance principle. The plain fact of the matter is that he has pulled it as close to the insurance principle as he could, in the face of the clear-cut recommendations of last year's committee and in the face of the views of the Minister of National Health and Welfare.

As a matter of fact, as I said a moment ago, I see inconsistencies in some of the things the Minister of Finance himself said. On page 388 of Hansard he said:

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

Old Age Security

most sensible to utilize the main taxes which at present support our revenue systems, namely, sales tax, individual income tax and corporate tax.

So far so good. The Minister of Finance was there saying that we are going to finance old age security on the same tax basis as we finance other government responsibilities and1 obligations. But then we go a little bit further and we find he vitiates the accepted principle of government taxation by putting in the income tax a maximum of $60 per year which does not appear anywhere else in any system of government taxation.

That reminds me, Mr. Speaker, of the fact that in last 'year's committee this whole question was discussed. I admit it was not discussed at length, but it did come before us on Wednesday, May 24, 1950. In that connection I have in my hand a copy of the minutes of proceedings and evidence for that day. The witness was Mr. Mitchell Sharp, who was then director of the economic policy division of the Department of Finance. Mr. Sharp presented to the committee a number of tables showing how the various kinds of taxation would raise money, and indicating the amounts to be realized by various schemes of taxation.

One of these sets of tables gave us the amount to be raised by a certain tax rate if there were no maximum; then if there were a $25 maximum; and then if there were a $50 maximum. I find that this question of whether or not there should be a maximum was discussed by only three members of the committee, all of whom are in the house at the present time. They were the member for Spadina (Mr. Croll), the member for Eglinton (Mr. Fleming) and myself. It will not be any surprise to the house when I say that I opposed the idea, and made it quite clear that I was scandalized at the thought of a maximum being set on the amount to be paid by the wealthy and by those in the upper income brackets.

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LIB

Jean Lesage (Parliamentary Assistant to the Secretary of State for External Affairs)

Liberal

Mr. Lesage:

You were the only one who was scandalized.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

Let us see about that. The member for Eglinton did not say very much on this point but it is quite clear, from what appears on page 967 of the committee evidence, what was in his mind. It reads:

By Mr. Fleming:

Q. On table 7, Mr. Sharp, you have given us a maximum of $50 and a maximum of $25. What period would that cover? A. That is in a year.

Q. $50 in a year as a maximum? A. Yes.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Was it in that tone of voice?

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

The member for Eglinton (Mr. Fleming) wants to know if it was in that tone of voice. I ask him to note his next

question and see if it does not suggest that it was in that tone of voice.

Q. Have you got calculations for a higher maximum contribution?

In other words, the member for Eglinton

was-

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

Looking for information.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

No, he was amazed at the suggestion that a tax of this kind would have a maximum of $50. The maximum in the bill is a little higher, since it is $60, but the principle of a maximum is still there.

The member for Spadina (Mr. Croll) had something to say about it as well. It is difficult to put his remarks together because they occur at three different places. On pages 963, 964 and 965 of the minutes of evidence he does say quite clearly that he does not like this idea of a maximum. I shall point out in a moment that the member for Spadina went even further. Just to put something on the record to show what he thought, this is found on page 965:

Then we should not be far wrong, it seems to me, if we followed the same principle with respect to social security. We would be following pretty well the laid-down principle of any governmental taxation?

Mixed into this discussion as to whether or not there should be a ceiling on the amount paid was a discussion as to whether we should adopt proportional taxation or graduated taxation. Proportional taxation is the kind the Minister of Finance has introduced, except that he has truncated it, namely 2 per cent across the board. Graduated taxation is the kind where the percentage rates go up as you get into the upper brackets. The member for Spadina very clearly joined me in saying that for social security we should follow the same principles that are applied in general taxation, namely, the graduated idea rather than the proportional idea. The member for Eglinton did not take too much part in that phase of the discussion. I have already indicated that he expressed amazement at the suggestion there should be a maximum. That is about all there is in the record of the old age security committee by way of a parliamentary discussion of this question. There were three different political parties speaking, none of whom liked the idea of a maximum on the amount to be paid by the wealthy.

The member for Spadina and I were both quite clear that we wanted graduated taxation rather than proportional. Who won: the members of parliament, speaking for the people on an important committee, or the Department of Finance? Look at the bill. The Department of Finance won hands down.

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PC

Donald Methuen Fleming

Progressive Conservative

Mr. Fleming:

They always win.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

Not only did they reject our contention that it should be graduated taxation, but they even cut proportional taxation off at $3,000 taxable income. I am glad to see the hon. member for Spadina (Mr. Croll) nodding his head in approval of the way in which I am quoting him, and I hope that he will get into this debate at the appropriate opportunity and confirm the position that he took last year. 1 think he was absolutely sound when he said, as I have already quoted him, that we should not be far wrong, it seems to me-and these are the words of the hon. member for Spadina-if we followed the same principle with respect to social security. We would be following pretty well the laid-down principle of any government taxation.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

In that case why not pay it right out of taxation, as the Minister of Finance (Mr. Abbott) remarked?

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

As a matter of fact, I have no objection to that idea.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

The logic would be right.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

Perfectly right. The point is that the Minister of Finance is trying to get as far away as he can from the idea that the hon. member for Coast-Capilano (Mr. Sinclair) has now attributed to me, which I think is a fairly good principle. He is trying to get as close as he can to the benefit idea, to the insurance principle.

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LIB

James Sinclair (Parliamentary Assistant to the Minister of Finance)

Liberal

Mr. Sinclair:

Hear, hear.

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CCF

Stanley Howard Knowles (Whip of the Co-operative Commonwealth Federation)

Co-operative Commonwealth Federation (C.C.F.)

Mr. Knowles:

The hon. member says

"hear, hear". The Minister of National Health and Welfare (Mr. Martin) has already pointed out that if you follow the insurance plan or the benefit plan, it becomes necessary to supplement it with a means test plan. I will admit readily that this is not clearly the insurance or the benefit kind of plan such as they have had in the United States and which the Minister of National Health and Welfare was talking about, but it approaches it. Oh, don't shake your heads over there.

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November 1, 1951