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Sunday, November 02, 2003

You know something is up when 200 people brave icy streets and minus-11C weather to attend a political meeting on a Thursday night.

That's what happened last week in Calgary when a roomful of people gathered to hear Citizens Centre founder Link Byfield deliver a pitch for what he's calling the Alberta Agenda. This little centre has been stirring the pot across the province since the middle of the month, with events in Medicine Hat, Grande Prairie, Lethbridge and Red Deer, each attracting 100 plus attendees. (Two more events are planned for Lloydminster Nov. 4 and Edmonton Nov. 6).

Byfield is trying to convince Albertans to lobby their MLAs to opt out of the Canada Pension Plan and establish our own made-in-Alberta alternative.

The numbers tell the story: An analysis conducted by C.D. Howe scholar Bill Robson for Alberta Finance in 1999 showed Albertans were paying $3.2 billion a year into the plan and only getting back $2.1 billion in benefits. Today, we send about $4 billion in CPP premiums out east, and one-third of these contributions evaporate into the Ottawa abyss. The more our economy grows, the worse off Alberta taxpayers are.

So, with Alberta's younger population, larger workforce and higher incomes, this province could develop its own pension plan -- one that's vastly more affordable.

Under the worst-case scenario, even if provincial administrative costs skyrocketed, premiums could be reduced from 9.9 per cent under the federal plan to 9.1 per cent under an Alberta plan, without reducing benefits. In the best-case scenario, the APP premiums could be lowered to 7.8 per cent. (Robson will update these calculations in the next issue of Fraser Forum, and the results are apparently even better.) No matter which way you cut it, it amounts to annual tax savings of at least $500 per household per year.

Critics complain that an Alberta pension plan would create a duplicate layer of bureaucracy, but so what? The Human Resources Development Canada and gun registry boondoggles are proof that Ottawa is not a place where efficiency reigns. Albertans' "reward" for Ottawa's so-called efficiency is to pay billions more than we should. Ottawa's pay-as-you-go management brought the pension plan to the brink of collapse, and it was only able to correct the mistake with massive tax hikes and reduced benefits.

Alberta might not do a better job of managing its own pension fund, but it couldn't do any worse. Besides, there are benefits to competition.

The Canada Pension Plan is now set up to invest a portion of the surplus premiums, and it has accumulated $55 billion in assets. By 2010, it will have $142 billion, and be the single largest pension fund in the country; by 2050, it will grow to $1.6 trillion. The notion that a cadre of Ottawa bureaucrats will have that much control over Canadian pension assets should be unsettling.

Although the current CEO of the CPP Investment Board, John MacNaughton, is a capable manager properly focused on profit maximization, and the structure of the board has been insulated from political manipulation, that can change overnight. What if there is a less scrupulous CEO in charge of the fund, or the government decides to invest only in companies that meet the guidelines established in a "social charter," or the investment strategy becomes twisted for regional development goals or geographic "fairness"? As the fund gets larger, so will the potential for abuse.

One more looming problem is the CPP board doesn't use all the financial instruments at its disposal to increase its foreign content beyond the 30-per-cent limit. That means 70 per cent of its holdings are invested in the Canadian market, which makes up just two per cent of the global market. That is nowhere near enough diversification.

So, whatever cost Alberta incurs in setting up its own pension plan, it will be more than offset by lower premiums, greater control over the investment strategy and a better quality investment plan.

The Alberta Tories have shielded consumers from rising electricity prices, gas hikes and insurance premiums, all in the name of protecting them. In the case of pensions, not only does the Alberta government have the constitutional authority to take back this responsibility, it has the obligation to do so.