Division 17, amendments to the Federal-Provincial Fiscal Arrangements Act and the Canada Health Act, will do three things through clauses 390 to 410. First, it will allow for additional fiscal equalization payments to be paid to the provinces in 2012-13, pursuant to clause 390. Secondly, the amendments legislate the elements of major transfer renewal announced at the finance ministers meeting in December 2011. Announced on page 191 of the budget, this is dealt with in five clauses: 393 through to 395, 397, and 399. And the remaining clauses make consequential and housekeeping amendments to the Federal-Provincial Fiscal Arrangements Act and the Canada Health Act.
What I would propose is reviewing the amendments clause by clause, beginning with the transfer protection and the implementation—the announcement on major transfer renewal—and concluding with the group of 15 amendments that are consequential.
I'll begin with clause 390. This is the protection of payments against declines in major transfers. This section is being modified to set out additional transfer protection payments that will be paid to the provinces in 2012-13. These protection payments take the form of additional equalization payments. They're designed to ensure that no province receives less in 2012-13 through the combined equalization of the Canada health transfer and the Canada social transfer than it did in 2011-12.
The protection yields, as set out in the bill, an additional $362,127,000 to Quebec; $13,471,000 to Nova Scotia; $102,767,000 to New Brunswick; and $201,295,000 to Manitoba.
I'll now turn to clause 393. This is the clause that will set the growth rate for the Canada health transfer. Paragraph 24.1(1)(a) of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the total Canada health transfer cash contribution. The cash contribution refers to the total amount of Canada health transfer cash paid in a year to all provinces and territories.
As announced in December 2011 and confirmed in budget 2012, the amendment extends the calculation of the total Canada health transfer cash contribution beyond 2014, in two stages. In the first stage, the 6% annual growth is extended by changing the date in subparagraph 124.1(1)(a)(iv) that reads “March 31, 2014” to read “March 31, 2017”.
Then new proposed subparagraph 24.1(1)(a)(v) provides that starting in 2017-18, annual growth will be aligned with the three-year moving average of gross domestic product growth. This will be estimated for the fiscal year for which the payment is to be made and the two prior fiscal years, with a minimum annual growth rate of 3%, as announced. The average gross domestic product growth approach will be the same as is used in equalization.
Clauses 394 and 395 together describe the equal per capita transition for the Canada health transfer.
I'll begin with clause 394. Subsection 24.2(1) of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the provincial shares of the Canada health transfer cash contribution. Provincial shares refers to the allocation of the total cash among provinces and territories.
The amendment limits the inclusion of the tax transfers and the provincial shares calculation to the period ending in 2014. So where the paragraph that set out the calculation of the tax and cash used to say “in that paragraph” to refer to the tax and cash calculation, it now provides for the dates between “April 1, 2004 and ending on March 31, 2014”. The effect of this amendment is to prepare the way to move the Canada health transfer to an equal per capita cash allocation, beginning in 2014-15, as was originally announced in budget 2007, committed to in legislation in 2007 in current section 24.21 of this act, and reconfirmed in budget 2012.
In companion clause 395, section 24.21 of the Federal-Provincial Fiscal Arrangements Act sets out the calculation of the provincial shares of the Canada health transfer for the fiscal years 2014-15 and beyond. The amendment replaces the commitment to equal per capita cash beginning in 2014-15, found in section 24.21, with the actual equal per capita cash calculation.
Clause 397 deals with the growth rate of the Canada social transfer. Paragraph 24.4(1)(a) of the Federal-Provincial Fiscal Arrangement Act sets out the calculation of the cash contribution for the Canadian social transfer.
The amendment simply removes the existing end date to the 3% growth rate, which previously read March 31, 2014, to make it indefinite, as announced in December 2011 and confirmed in budget 2012.
Clause 399 is the CHT transition protection. Section 24.701 sets out the authority for and the calculation of transition protection payments. The amendment adds a new subsection, 24.701(1.1), to set out the calculation of payments to protect provinces against the decline in the Canada health transfer cash allocations from their 2013-14 levels. This is the protection for the transition to an equal per capita cash allocation in 2014-15, as confirmed in budget 2012. For the purpose of determining protection amounts to provide to provinces and territories, the clause sets the protection floor to the second official estimate of the 2013-14 provincial-territorial allocations of the Canada health transfer. This estimate is to be calculated in September or October of 2013. It is the last official estimate for the 2013-14 payments before the first official estimate for the 2014-15 allocations and protection payments is calculated in December 2013.
So the idea is that this is the last known amount for the Canada health transfer amount paid to any province or territory prior to entering into the equal per capita cash arrangement. This way you know prior to entering into it what that floor protection is going to be. This provides for a stable and predictable floor protection to provinces and territories.
The various consequential housekeeping amendments to the rest of the Federal-Provincial Fiscal Arrangements Act and the Canada Health Act, I'm going to deal with in thematic bundles, the ones that fit together. I'm going to start with clauses 391, 404, and 406. The reason I'm identifying these is that they are the clauses that repeal the spent provisions referring to the Canada health and social transfer. The Canada health and social transfer—known as the CHST—was replaced by the separate Canada health transfer and the Canada social transfer in 2004-05. All the payments from the Canada health and social transfer have now been finalized so this provision may now be repealed.
Clause 391 refers to part V, which set out the purposes, calculations, and payment mechanisms for the Canada health and social transfer. It is being repealed.
For clause 404, we go first to section 25.7, which sets out how references in other acts would be made to the Canada health and social transfer and how they're to be read. The amendment changes the rules so that those references today are read as references to the Canada health transfer and the Canada social transfer.
Clause 406 sets out regulation-making powers under the Federal-Provincial Fiscal Arrangements Act. There is a reference to part V, the Canada health and social transfer, so it is being removed.
The second bundle of related clauses are clauses 407, 408, 409, and 410. This bundle of clauses corrects references to the Canada health and social transfer in the Canada Health Act. I want to be clear that nothing about the operation of the Canada Health Act is changing—we're merely updating the references within the Canada Health Act to the appropriate transfer.
Clause 407 refers to section 2 of the Canada Health Act. This is the section that provides definitions. In the definition of a cash contribution, there's reference to the Canada health and social transfer. This is being amended to refer to the Canada health transfer. Further, there are references to sections of the Federal-Provincial Fiscal Arrangements Act. These reference sections that refer to the Canada health and social transfer. They are being amended to refer to the relevant provisions of the Canada health transfer in sections 24.2 and 24.21 of the Federal-Provincial Fiscal Arrangements Act.
I'll deal with 408, 409, and 410 very quickly. It's the same sort of thing. These amendments change references in sections 5, 13, and 22 of the Canada Health Act. All references to Canada health and social transfer now read Canada health transfer.
The third bundle of related clauses has to do with clauses 392, 398, and 400. These are repealing spent provisions references to the health reform transfer and the early learning and child care transfer.
Clause 392 is a header, so it's the heading of part V.1 of the Federal-Provincial Fiscal Arrangements Act, and contains reference to the health reform transfer and the early learning and child care transfer. They're simply being removed.
In clause 398, the old section 24.6 of the Federal-Provincial Fiscal Arrangements Act set out the purpose and calculations of the health reform transfer, and this is being repealed.
Clause 400 refers to section 24.71 of the Federal-Provincial Fiscal Arrangements Act, and it sets out the purpose and calculations of the early learning and child care transfer, which is also being repealed.
The fourth bundle of clauses—clauses 396, 401, 402, and 403—all refer to the eligibility requirements for the Canada health transfer and the Canada social transfers. I'm talking about the conditionality or the withholding that can be applied. I'm actually going to deal with clause 396 last, and hopefully you'll see why.
Clauses 401, 402, and 403 make reference to sections 24.9 through to 25.5 of the Federal-Provincial Fiscal Arrangements Act. Clauses 401 and 402 remove a reference to section 24.63, which is referring to the health reform transfer, which, as previously described, is being repealed.
Clauses 401, 402, and 403 all add references to section 24.51. The reason we do this is that this is the clause that defines the Canada social transfer allocation for the years after 2006-07, and we're adding that to every occurrence of section 24.5, which defined the Canada social transfer allocation for the years up to 2006-07. So all we're ensuring is that we have covered all the allocations through time, and the withholding provisions apply appropriately.
Clause 401 is the same sort of idea, except for the Canada health transfer, so we are adding references to section 24.21, which defines the Canada health transfer allocation for the years after 2014-15, to every occurrence of section 24.2, which defined it before 2014-15. So, again, that is making sure that the withholding provisions apply to all allocations through time.
Subclause 402.(2) repeals subsection 25.1(2). Here is just a bit of backup. Sections 25.1 and 25.3 pertain to the prohibition of a minimum residency period for social assistance. This should be only linked to the Canada social transfer and not the Canada health transfer, so we're straightening that. Subsection 25.1(2) describes the exception to the minimum residency requirement for provincial health plans. Because we are ensuring that minimum residency requirement applies as withholding condition only against the Canada social transfer, and that all the five principles of the Canada Health Act and extra-billing and user fees apply only to the Canada health transfer, with this provision that referred to the minimum residency requirement and then set out an exception for provincial health insurance plans, because we have divided it and set the withholding to the appropriate transfer, we don't have to be worried about a conjunction of the two. So we don't have to worry about, for greater certainty, ensuring that there's no catching in the Canada social transfer of something that was intended and provided for in the Canada Health Act. So all we're doing is removing an extraneous 25.1(2).
The reason, therefore, that I'm doing clause 396 at the end is that, for drafting purposes--this is all this is--once you've removed.... If you have subsections 25.1(1) and 25.1(2), if you remove subsection 25.1(2), you don't need the subsections, so we just replace it with a section 25.1. It's just straightforward, technical.
The final clause, alternative payments for standing programs, is another clause about which I want to, at the outset, make very clear that nothing is changing. What we are doing is clarifying the legislation to ensure that it actually parallels current practice.
So part VI of the Federal-Provincial Fiscal Arrangements Act, sections 26 through 30, pertain to the alternative payments for standing programs, which represents a recovery from Quebec of a tax point transfer that was instituted in the 1960s. These amendments don't change the calculation.
The existing section 28 sets out an adjustment methodology that compares the value of the additional tax abatement of 13.5% to Quebec and the value of the contribution for social programs under part V of the Federal-Provincial Fiscal Arrangements Act, which is repealed. It authorizes payment to or recovery from a province for the difference. We are amending this section to confirm that the province is to receive payments for the Canada health transfer, the Canada social transfer, and other social programs and to clarify that the amount of the additional tax abatement must be recovered from the province from any payment under the act. So we pay and we net out the value of the tax abatement.
The existing section 29 states that the Government of Canada has no obligation, except as provided in this part, to finance social programs under part V of the act. We're repealing this to confirm that the amounts for the Canada health transfer and the Canada social transfer and other social programs shall be paid, which we do. This reflects what actually happens.
Proposed sections 29 and 29.1 are being added because we made the change earlier to provide that we're making a payment and then a recovery against it. This is where we introduce the two clauses that allow for under- and over-recoveries.
Section 30 authorizes amounts payable under the part to be paid by the minister out of the consolidated revenue fund. It modifies the section to refer to the whole of part VI, instead of referring only to section 28, which it did before.
That concludes my overview of the contents of this division. I'd be pleased to take questions.
My name is Dominique La Salle—
I am Director General of Seniors and Pensions at HRSD.
We are honoured to be with you this evening. I am here with some colleagues, Nathalie Martel, who is Director of Old Age Security Policy,
Ms. Annette Vermaeten, who is the director of the OAS task force; and Mr. Bruno Rodrigue, who is the chief of income security at the Department of Finance.
I will begin with a quick overview of the provisions under division 24, part IV, of Bill , specifically clauses 445 to 467 of the bill, which amend sections of the Old Age Security Act.
This concerns three initiatives.
The first concerns the increase in the age of eligibility for Old Age Security.
Starting in April 2023 the age of eligibility for the OAS pension is proposed to be gradually increased by two years, from age 65 to age 67. In addition, the eligibility age for the allowances would be increased from age 60 to age 64, and be moved to age 62 to age 66 in parallel.
This age increase is being proposed with many years of advance notice to provide adequate time for Canadians to adjust. The change is preceded by an 11-year notification period, from now until April 2023. The actual change in the age of eligibility will then be phased in over a period of six years, from April 2023 to January 2029. The eligibility age will be increased by one month every three month—thus on a quarterly basis.
The change to the age of eligibility for the OAS program will not affect current seniors. Anyone aged 54 or older as of March 31, 2012, will not be impacted by the age increase. The government has announced that it would adjust programs under federal jurisdiction, since some programs use age 65 as a trigger for benefits. Such programs exist at Aboriginal and Northern Affairs Canada and at Veterans Affairs.
The government will also work with provinces and territories to fill the gap that this change would create for the Canada pension plan disability benefits and survivors' pensions. Finally, the government has committed to compensating provinces and territories for any net additional costs they may face resulting from the increase in the age of eligibility for OAS benefits.
The second initiative is voluntary deferral for Old Age Security pensions.
Starting in July 2013, a voluntary deferral for OAS pensions is proposed for introduction. This will provide eligible Canadians the option of deferring their take-up of their OAS pensions by up to five years past the age of eligibility, and for them to subsequently receive a higher actuarially adjusted pension. The voluntary deferral of the OAS pension will be available between the ages of 65 and 70, until the age of eligibility is increased, at which point it will start moving and gradually reach age 67 to 72 in parallel with the increase. The actuarial adjustment to the OAS benefit will be 0.6% per month, or 7.2% for a full year of deferral. Over five years, the maximum increase to the OAS benefit would be 36%, which would be paid to recipients for the rest of their lives and be fully indexed to the consumer price index, as are all OAS benefits.
Lastly, the third initiative concerns what is called proactive enrolment.
This initiative will allow the Minister of HRSDC to waive the requirement for an application, thus allowing for the introduction of automatic enrolment of seniors where the department has sufficient information to satisfy its integrity requirement. Where the available information is not deemed sufficient to automatically enrol a senior, the available information will be used to pre-fill the application form. We refer to this as a streamlined application process, which will make it easier for seniors to apply for the OAS benefit. This initiative will be implemented over a period of four years, beginning in 2013, and be fully in place in 2016.
Mr. Chair, that concludes my introduction.
If you wish, my colleague Ms. Martel can briefly explain the most important sections, the most important clauses.
or the more salient clauses involved.