Watchdog says public pensions don't face crisis

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Kevin Page

OTTAWA -- Canada is not facing a crisis over public pensions, the country's budget watchdog concludes in a report that appears to undermine the Harper government's claim the system is unsustainable.

The analysis from Parliamentary Budget Officer Kevin Page set off a storm in the Commons on Wednesday, with opposition parties accusing government ministers of fear-mongering and waging a war on poor seniors.

An agitated Finance Minister Jim Flaherty called Page "unbelievable, unreliable, incredible" in a short scrum with reporters after question period, but did not contradict the PBO's numbers.

And in the Commons, Human Resources Minister Diane Finley evoked the crisis in Europe -- where she said public pensions drain as much as 15 per cent of gross domestic product -- as what could happen in Canada.

Opposition critics responded it was the government that lacked credibility on the issue, alleging it had concocted a "crisis" where none existed in order to push its ideological agenda.

"Ideologically, they don't believe in a public pension system," said the NDP's Peter Julian.

Liberal Leader Bob Rae warned the government Canadians have long memories and will have an option to stop the proposed cutbacks to old age security in the next election.

"This government cannot control what happens to public expenditures beyond 2015 with respect to OAS," he said. "Canadians should not think they have no choice in the 2015 election."

The proposal to rein in spending on OAS was first announced by Prime Minister Stephen Harper in a speech in Davos, Switzerland, last month.

Ministers said one option would be to raise the age of eligibility for OAS -- which pays seniors an average of about $500 a month -- to 67 from the current 65. Page said the government may have other reasons for making the changes, but inability to pay for the benefits is not an issue, either in the short term or long term. In fact, not only is the OAS sustainable, but Ottawa has room to sweeten benefits.

"PBO's updated long-term debt-to-GDP (gross domestic product) show that the federal fiscal structure is sustainable even under the baseline assumption that there is some additional enrichment to elderly benefit payments," the report states.

"This indicates that... the federal government could reduce revenue, increase program spending or some combination of both... while maintaining fiscal sustainability."

Page's report breaks no new ground on the costs of OAS, or other government-financed income supports, such as the Guaranteed Income Supplement that goes only to poor seniors.

Nor does it deny that 20 years from now, the number of Canadians receiving these benefits will double as the bulging baby-boomer cohort moves through retirement years.

The PBO also agrees with the government costs are slated to rise from the current $36 billion to about $108 billion in 2030 once inflation is factored in.

In fact, Page believes Ottawa will want to sweeten benefits so seniors don't fall behind other segments of the population, meaning the costs would peak at about $142 billion by the mid-2030s.

For weeks, Harper's ministers have described this scenario as a "crisis" and an "unsustainable" run-up in costs.

But Page said looking at the problem in terms of ballooning costs misses the fact the economy will also expand during that period, as will Ottawa's coffers.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition February 9, 2012 A9