Finley to make the case for Old Age Security overhaul

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The Conservative government plans to broaden its case for changing Old Age Security by emphasizing the higher price younger Canadians will pay to support government programs unless Ottawa moves now to bring down costs.

In her first extensive speech on the topic of demographics since the furor over pensions erupted last month, Human Resources Minister Diane Finley is expected to confirm on Tuesday that the details of proposed changes to OAS – which could include delaying qualification for benefits until the age of 67 – will be revealed in the forthcoming 2012 budget.

But after coming under fire for weeks over her claims that the OAS program is unsustainable, the minister is expected to make the case that the government's larger concern is the growing cost of government programs as a whole over the coming decades when the relative number of taxpayers available to cover these costs will shrink by half.

In the quiet of a Parliamentary break week, Ms. Finley will deliver a speech Tuesday on demographics to the Canadian Club at Toronto's Fairmont Royal York Hotel. Parts of the speech are expected to be aimed at young Canadians, with a theme focused on generational fairness and the consequences young Canadians will face if Ottawa chooses not to make hard decisions now.

Pension expert Keith Ambachtsheer, of the Rotman International Centre for Pension Management, said a move away from sound bites on OAS and toward a broader message of fair costs for future generations would be welcome. He said that while OAS may not be facing a crisis on its own, Ottawa does face large demographic changes that cannot be ignored.

In isolation, the rising cost of OAS is sustainable, he said, echoing the view of other experts, including economists and the Parliamentary Budget Officer. But Ottawa and other governments also face health-care costs that will rise even faster.

"It's the totality, the cumulative effect," he said, adding that the cost of MP and public-sector pensions must also be part of the reforms.

"I think there's a serious equity argument that I can legitimately make [which]is that we can't just willy nilly put the burden on a relatively smaller cohort that's going to be 'the work force' 20 years from now and say: 'Well, you know, that was the deal back then, so too bad. We don't care that there's less of you than there is of us,' " he said. "You just can't do that."

The challenge in all this is the lack of clear, widely agreed-upon facts. The federal actuarial reports on the OAS program provide a few. The ratio of the number of people aged 20 to 64 to those aged 65 and over will fall from about 4.4:1 in 2010 to 2.2:1 in 2050. The number of people receiving basic federal pensions will almost double over the next 20 years, from 4.7 million in 2010 to 9.3 million by 2030.

But the actuary reports the government points to do not weigh on the policy question of whether these changes are affordable.

Parliamentary Budget Officer Kevin Page had been warning the government to address the demographic challenges, but his latest reports claim that existing programs are now sustainable over the long-term because of Ottawa's decision to tie long-term increases in provincial health transfers to economic growth.

The Conservatives ramped up their attacks on Mr. Page in response, but have not provided their own long-term estimates.

In a letter to MPs last week, Mr. Page defended the PBO's work and urged the government to fulfill a promise from the 2007 budget to publish a "comprehensive fiscal sustainability and intergenerational report."

NDP MP and pension critic Wayne Marston said the government needs to release its own estimates if it is going to challenge the PBO's work.

Mr. Marston's doing his own travelling during the break week to hear from Canadians on OAS changes. He said the government's warnings about future government revenue seem to assume the economy will remain sluggish for years.

"We're in a downturn now, but we won't be there forever. There'll be some growth," he said. "That's why we're telling people there is no crisis."