Quebec's support gives Ottawa a key ally in pension debate

Now is not the time to make once-in-a-generation changes to the Canada Pension Plan, says Quebec's Finance Minister, a declaration that gives Ottawa a key new ally after its decision to reject CPP enhancements.

On the eve of a pivotal meeting of Canada's finance ministers at a Rocky Mountain resort, the provinces spent much of Sunday staking out their positions on whether to approve an expansion of one of the pillars of the nation's social safety net. The majority insist hiking the Canada Pension Plan's premiums and benefits is the best way to ensure Canadians save enough for retirement.

What's at stake Monday is whether Canadians should be forced to save more or simply be encouraged through new incentives. Federal Finance Minister Jim Flaherty on Sunday said changing the CPP requires the support of two-thirds of the provinces representing two-thirds of the population, and that support simply isn't there.

"I think we're all agreed that we should continue our work on the CPP and amending the CPP. This is not the time to proceed with implementation," he said.

The economic downturn highlighted the risks Canadians face in saving for retirement, prompting two years of extensive studies that found millions of people lack a company pension and are not putting enough money away.

"This is not the year to add on to the burden of employees," Quebec Finance Minister Raymond Bachand told The Globe and Mail in Calgary on Sunday, pointing to the continuing fragility of the Canadian economy. "These are the kinds of changes that you do once in a generation."

Mr. Flaherty surprised his colleagues on Thursday when he suddenly abandoned an idea that he had personally championed just six months earlier: that mandatory hikes to CPP premiums are needed to tackle a looming savings problem on the horizon.

Instead, he proposed a voluntary private sector option called a Pooled Retirement Savings Plan aimed at workers who do not have a company pension. The Harper government has the ability to launch such a program on its own, but Mr. Flaherty said legislative changes would be required at the provincial level.

While he expects the plan to prove popular with small business owners and the self-employed, critics say such voluntary savings measures have already proven to be inadequate.

The Harper government's reversal incensed labour groups and prompted one union leader to occupy Mr. Flaherty's constituency office Friday in protest.

Only Alberta came out immediately in favour of Ottawa's new position, but now Quebec and Saskatchewan are on side as well.

Though different in scope, both Quebec and Saskatchewan have their own pension programs, which is playing in to their opposition to new mandatory CPP requirements.

Six other provinces issued a joint statement just as ministers arrived in Kananaskis, Alta., for a dinner with Mr. Flaherty on Sunday, calling on the Harper government to do both: support the original CPP proposal in addition to the new private-sector savings vehicle.

"The letter from the six provinces just confirms what I said on Thursday," Mr. Flaherty said. "That is, there is no consensus on this issue."

The debate over pensions is set to dominate a meeting where other contentious topics will be on the table, including a proposed single securities regulator, health care spending and the state of the economy.

Mr. Flaherty said the rules governing CPP require a review of the plan in 2012 and suggested that might be a better time to look at possible changes.

Nova Scotia Finance Minister Graham Steele said he finds it surprising that the federal government is presenting the private-sector option as an alternative to enhancing the CPP.

"No one has suggested that you have to pick one or the other," he said. "It is simply perplexing and disappointing to hear the discussion being framed that way."

The Provinces of Prince Edward Island, Nova Scotia, New Brunswick, Manitoba, Ontario and British Columbia signed the joint statement.

PEI Finance Minister Wesley Sheridan said it is imperative for the ministers to show Canadians some leadership on the pension front by emerging from the meeting with positive action. "We can't drop this ball."

Mr. Flaherty said Monday's meeting will be a success if it focuses on working out the technical and legal changes required for a national pooled pension plan.

Finding consensus on any item on the agenda Monday will be a challenge as the provinces divide on varying lines depending on the topic.

"It's a little bit difficult, a little bit like herding cats," said Mr. Sheridan. "There's different allegiances, and so it's going to be very interesting."