PACC Committee Report

THE GOVERNMENT OF CANADA’S RESPONSE TO THE SECOND REPORT OF THE STANDING COMMITTEE ON PUBLIC ACCOUNTS: “CHAPTER 13 — OTHER AUDIT OBSERVATIONS: CLARITY AND IMPROVED TRANSPARENCY NEEDED TO DEMONSTRATE COMPLIANCE WITH THE EMPLOYMENT INSURANCE ACT IN SETTING PREMIUM RATES”

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GOVERNMENT RESPONSE TO THE SECOND REPORT OF

THE STANDING COMMITTEE ON PUBLIC ACCOUNTS

 

RECOMMENDATION 1

 

That the Government clarify and disclose to Parliament and the Public Accounts Committee all the relevant factors used in setting the Employment Insurance premium rates, particularly with regard to determining the nature of the Employment Insurance Account balance and deciding on its disposition.  That the Government table the relevant information to Parliament and the Committee no later than March 31, 2003.

 

GOVERNMENT RESPONSE:

 

The key factor in setting the premium rates for 2002 and 2003 was the outlook for economic growth in 2002 and 2003.  For budget planning purposes, the Department of Finance uses the average of private sector economic forecasts for key economic variables, such as real gross domestic product, inflation, employment, unemployment rate and interest rates.  In addition, it meets with its private sector economic advisory group, consisting of the chief economists of Canada’s chartered banks, to obtain their advice on the appropriateness of these forecasts.

 

Consultations were also undertaken with Human Resources Development Canada.  Although there was no formal requirement for a report by the Chief Actuary, given the provisions of Bill C-2, the Chief Actuary did prepare in the fall of 2001 and 2002 documents entitled “Outlook for EI Premium Rates”, which contained forecasts for 2002 and 2003.  These documents are available on the HRDC website.  These were considered in setting the premium rates for 2002 and 2003, respectively.

 

The recommendations of the 1999 report from the House Standing Committee on Finance were also considered.  They recommended that rates continue to be reduced so as to gradually reach the break-even rate.

 

The Ministers of Finance and Human Resources Development recommended to the Governor-in-council that a reduction in the EI premium rate from $2.25 to $2.20 for 2002 and to $2.10 for 2003 were most appropriate.

 

RECOMMENDATION 2

That during the review of the Employment Insurance premium-setting process, the Government take all necessary steps to include consultations with employee and employer groups, along with the Canada Employment Insurance Commission and the Chief Actuary of Human Resources Development Canada and all other relevant stakeholders.

 

GOVERNMENT RESPONSE:

 

In the 2003 Budget, the Government announced that the Department of Finance, in co-operation with Human Resources Development Canada, will provide Canadians with an opportunity to present their views on the rate setting process. Interested parties can provide submissions to the Government until June 30, 2003, either by mail or through the Human Resources Development and Finance Canada websites.  In addition, senior officials of both departments will be meeting with key stakeholders, including the Commissioners of the Canada Employment Insurance Commission and the Chief Actuary of Insurance HRDC.

 

RECOMMENDATION 3

 

That the Government prepare a status report on these consultations, summarizing each participant’s position, contribution and conclusions to the review of the employment insurance rate-setting process, and table the document to Parliament and the Public Accounts committee when the review is complete.

 

GOVERNMENT RESPONSE:

 

The Government will prepare and make available a summary of the major recommendations applicable to the rate-setting process received during the consultation process.  The Government will make available submissions from those individuals who indicate their approval to make their submissions public.

 

RECOMMENDATION 4

 

That the Government formally reinstate the requirement that the Chief Actuary of Human Resources Development Canada prepare and produce full and complete actuarial reports for the EI program for 2002 and 2003.  That these reports be made available in a timely fashion to all stakeholders and the public on the Human Resources Development Canada website.

 

GOVERNMENT RESPONSE:

 

With the passage of Bill C-2 in May 2001, the EI Commission’s formal role in the rate-setting process was suspended.  There was therefore no formal requirement for a report by the Chief Actuary.  However, the Chief Actuary did prepare outlook documents for 2001 and 2002 entitled “Outlook for EI premium rates” to update the Commission and assist the private sector commissioners in their informal consultations on EI premium rates.  These reports contained a review of the status of the EI Account, forecasts for 2002 and 2003, as well as an analysis of the sensitivity of program costs and premium rates to different assumptions.  These reports are available on the Human Resources Development Canada website.  Human Resources Development Canada’s Reports on Plans and Priorities and its Departmental Performance Reports, tabled annually in Parliament, also contain detailed information on the status of the EI Account.

 

In the Budget, the Government indicated that the premium rates should be set on the basis of independent expert advice.  It will await the outcome of its consultations on the employment insurance rate-setting process before determining the role of the Chief Actuary in the new rate-setting process.

 

RECOMMENDATION 5

 

That the Government consider legislative amendments that would require the Chief Actuary of Human Resources Development Canada to produce, on an annual basis, actuarial reports on the EI program.  That these reports be made available in a timely fashion to all stakeholders and the public on the Human Resources Development Canada website.

 

GOVERNMENT RESPONSE:

 

The Government will await the outcome of its consultations on the employment insurance rate-setting process before determining the role of the Chief Actuary in the new rate-setting process.