Hon. Ted Menzies (for the Minister of Finance)
moved that the bill be read the third time and passed.
He said: Mr. Speaker, it is my honour to be able to continue moving this bill through the House and that we are able to stand to speak to this at third reading today. The act is the financial literacy leader act. It is a very important piece of legislation, as it is a key part of efforts to improve financial literacy in Canada.
Before beginning my remarks here today, I would like to thank all of my colleagues at the House of Commons Standing Committee on Finance for their timely study of this legislation earlier this fall. In particular, I would like to recognize the work of the chair of the finance committee, the member for Edmonton—Leduc, not only for his continued leadership on the committee, but also for his serious commitment to improving Canadians' financial literacy. I know he is hard at work in committee right now.
He has been a very strong advocate, not only for this legislation, but for a number of key financial literacy initiatives, including his own recent private member's motion, Motion No. 269, a motion that called for the implementation of a task force on financial literacy.
There is no question that improving financial literacy is an important objective. It is one that I hope all parliamentarians would share. It is an objective that is increasingly seen as growing in international consensus.
In the words of a joint statement by the finance ministers of the Asia-Pacific Economic Cooperation forum earlier this year:
|| Financial literacy has become a life skill that is essential for every economy to foster safe and sound, efficient, transparent and inclusive financial systems.
Indeed, in a marketplace with an ever-growing number of complex financial products and services, it is more important than ever that consumers have the skills needed to make informed decisions.
As Annamaria Lusardi, a Dartmouth College economics professor, noted:
|| Given the complexity of current financial instruments and the financial decisions required in everyday life, from comparing credit card offerings, to choosing methods of payments, to deciding how much to save, where to invest, and how to get the best loan, individuals need to know how to read and write financially.
Fortunately, here in Canada, there has been a good deal of progress made in this area.
The Financial Consumer Agency of Canada, or as we refer to it, the FCAC, is the government's lead agency on financial education and literacy. It has introduced a number of positive initiatives in recent years. For example, the FCAC has developed innovative tools to help Canadians, such as a mortgage calculator that quickly determines an individual's mortgage payment and the potential savings that result from early payments on that mortgage.
It has also created innovative online information to help consumers shop for the most suitable credit card, as well as banking packages that actually meet their needs.
Most recently, due to the work of FCAC, Canadians can now benefit from an objective, reliable and free resource to help them make sense of the everyday financial questions they face. That is referred to as “Your Financial Toolkit”. It is available to everyone, for free, online at the FCAC website. I would encourage anyone who is interested to go to that website to see this financial toolkit. It is another way that Canadians can acquire this life skill that is so critical in today's economy.
In simple, non-technical language, “Your Financial Toolkit” covers the basic financial topics that most Canadians have to deal with every day, from banking, budgeting and saving, to personal debt management, fraud protection, as well as retirement planning. It also provides Canadians with an opportunity to practise new financial skills and apply the information to their own personal situation.
I should note that reviews for “Your Financial Toolkit” have been overwhelming positive. The well-known personal finance journalist Alison Griffiths has noted:
||...I'm happy to report there is something there for everyone.
Our Conservative government strongly supports the good work by the FCAC, and we have provided it with more resources to build on those successes. That is why, for example, our government announced $3 million in new funding each and every year. That is in addition to the $2 million in annual funding already provided to FCAC for financial literacy initiatives. This commitment clearly demonstrates how vital our government believes that improving financial literacy is for Canadians, both at the local level and right across the country.
Thanks to our increased support for FCAC, we have seen our agenda for stronger financial literacy in Canada actually moving forward. However, that is only one part of our efforts. We have even gone further, expanding beyond and building on what already exists, starting with the task force for financial literacy that was established in June 2009. It was tasked with making recommendations to create a national strategy to improve financial literacy in Canada. It was comprised of 13 members drawn from the business side, educational sector, community organizations as well as academia.
The task force was created and given a mandate to talk to Canadians directly and get their opinions at the grassroots level, not to impose a top-down strategy. As a result, the task force travelled extensively all across Canada. In its travels, members heard about excellent creative examples of financial literacy education at the local and provincial levels. They heard examples of individual successes that would help inform a comprehensive national plan.
The task force delivered its final report “Canadians and Their Money: Building a brighter financial future”. It was handed to us in February 2011. It outlined 30 recommendations to improve the financial literacy of Canadians, aimed at various levels of government and stakeholders as well. I encourage all Canadians to visit its website at financialliteracyincanada.com to read that report and learn more about the work of the task force, especially those who contributed to it.
Since its release over a year ago, I am very pleased to say that the work of the task force was widely praised by a vast array of organizations, and commentators as well. For example, Social and Enterprise Development Innovations, a charitable non-profit organization that aims to expand economic opportunities for low-income Canadians, strongly endorsed the report, especially for its tireless work in consulting widely in every region of the country. In the words of Laura Watt, the president and CEO of that organization:
|| [Social and Enterprise Development Innovations commends] the federal government for recognizing the critical importance of financial literacy. We also commend the diligent and thorough work of the task force members, who engaged Canadians in every province and territory in building a much-needed national strategy on financial literacy.
Also, the Canadian Institute of Chartered Accountants spoke favourably about the task force report. It said:
|| The recommendations provide a concrete foundation from which to develop a national strategy.
Following the success of the task force's consultations and report, today's legislation starts the process of its implementation by acting on its number one recommendation. That is, establishing a dedicated leader within the government on these issues.
Specifically, it proposes to amend the Financial Consumer Agency of Canada Act to provide the framework for the appointment of a financial literacy leader. The proposed amendments also set out the duties, powers and functions of the financial literacy leader, enabling either him or her to carry out activities in support of this goal and establishing his or her terms of employment. This individual would be responsible for collaborating and coordinating his or her activities with public interest groups across Canada to contribute and support initiatives that will strengthen Canadians' financial literacy.
It would also continue the process achieved by the FCAC in its work on the national strategy for financial literacy. While the financial literacy leader will be essential to our government's financial literacy efforts, it is just one example of how the government continues to ensure that all Canadian consumers have the knowledge as well as the tools they require to save their money wisely while investing in their future in an increasingly complex financial marketplace.
Today's complex financial world demands improved financial literacy regardless of people's incomes or the types of jobs they do. Just consider a few of these real-life examples, such as: workers setting up a bank account and trying to determine the best way to reach their savings goals; families trying to make ends meet while saving for their first home; investors who may not be aware of the risks and returns of a specific investment or the true value of compound interest; seniors who, in a world of Internet banking and automated teller machines, are susceptible to financial scams and frauds; new Canadians unfamiliar with their rights to basic banking services; aboriginal Canadians living in a remote northern community who may face difficulties keeping up with new savings vehicles offered by government.
That is where financial education comes in. People who become more knowledgeable about financial matters are better able to obtain and benefit from those financial services. We know that financial literacy is the foundation of saving and investing, as well as the responsible use of credit. For example, when it comes to buying a house, being financially literate means understanding the true cost of borrowing. It means knowing that the first years of mortgage payments go toward servicing the debt, not actually paying down principal. Most importantly, it means knowing what questions to ask, such as what kind of mortgage people can get, what their repayment options are, what the fees and taxes are, how they can lower their payments and, above all, if they can really afford it.
Nowhere is the need for improved financial literacy more pressing than among Canada's youth. A recent study on youth financial literacy prepared for FCAC highlighted the cost of omitting basic financial literacy from a student's curriculum. According to the study of young Canadians aged 18 to 29, only one in four reported having received any education or training on personal finances, with most of this instruction occurring only at a post-secondary level. The study also demonstrated that this same demographic of young Canadians had a strong interest in financial education, especially when it comes to personal budgeting. Two-thirds make a monthly budget, although most do not always stick to it, unfortunately; and more than 7 in 10 put money aside for the future, although only half of them do so on a regular basis.
Young Canadians desiring to improve their money management should be an encouraging sign, particularly since young people now have more exposure to financial transactions than any generation before them. According to the same FCAC study, more than 8 in 10 young Canadians have a chequing account and almost as many, 72%, have a credit card.
We know that financial literacy education can be effective and that initiatives like the one being considered today can help ensure that Canada's youth get the tools and knowledge they need. Whether it is our country's teenagers or elderly, increased financial literacy leads to better consumer choices, a larger and more dynamic market for financial services, as well as greater involvement in our country's thriving banking sector. Its absence can put Canadians and, indeed, our economy at a competitive disadvantage, making Canadians pay more for necessary basic banking transactions, or perhaps short-term credit. Clearly, this is something that we all want to avoid and I am proud to have taken this aggressive action to date.
Improving Canadians' financial literacy is not an easy goal. It is an ongoing commitment that will require support from partners across the educational and financial sectors.
Making Canadians as financially knowledgeable as they can possibly be demands a long-term national approach and a collective commitment, one that is exemplified by the creation of a financial literacy leader, a position that today's act proposes to create. The groups actively involved in the delivery of these kinds of programs, like ABC Life Literacy, understand the importance of this position. As the latter testified at the finance committee:
|| A financial literacy leader, a national leader who helps us strengthen the financial literacy of Canadians, has the potential to help Canadians in this regard. Financial literacy is part of the spectrum of essential skills all Canadians need to thrive.
To build on the legacy of our parents and grandparents who spent only when they could afford it, we must work to ensure that our children and grandchildren fully understand the risks and the rewards of the vast array of financial products and services now available to them today. It is just common sense that our prosperity depends on markets and financial services being accessible to everyone.
This is something that our government has long understood and we have worked hard to implement initiatives to level the playing field for everyone. I can only hope that after careful study at the finance committee and with the opportunity to gain a greater understanding of the important measures contained in today's act, all members of the House will get behind the financial literacy leader and improve financial literacy for everyone.
We have had nearly a year to debate and examine this legislation, so let us get on with passing it. I therefore urge all members of the House to vote in favour of today's act, which will help all Canadians keep more of their hard-earned money, not give it to the banks as a result of a wrong and inappropriate product or service being offered and utilized.
Mr. Glenn Thibeault (Sudbury, NDP):
Mr. Speaker, I am pleased to rise today to present the NDP's position on Bill C-28, which would create a financial literacy leader with the aim of improving financial literacy in Canada.
Let me start by saying that, obviously, an understanding of financial literacy is a good thing. Understanding how much the difference between a 5% and 5.5% APR will cost over the lifetime of a loan, how long it will take to pay off a credit card if only minimum payments are made each month, how much needs to be saved each month for school or for a car or to put money away for a down payment on a house, or for retirement, having this knowledge is clearly a benefit.
How do we get to the end point? As I said at committee, it is a little like golf. Some people hook. Others slice, but at the end of the day they are all trying to put the ball into the hole. Therefore, the question we must ask ourselves is: How well does the bill achieve its desired ends?
Unfortunately the bill, while a very small step, is not going to get us to the end point we all desire. For a start, the terms of reference for this position are extremely vague. While the holder of this post will be required to advance financial literacy, there is no definition of what constitutes financial literacy within the bill nor any attempt to define how we could or should advance it.
Moreover, the original recommendation to create this position was very clear on the need for an advisory council that would include labour, voluntary groups, educators and business stakeholders to direct the work of the financial literacy leader. The bill does not include any such measures to create this advisory council and, as such, there is very little in the way of accountability.
Additionally, there is no proviso in the bill that would ensure that this position is filled by someone who is fluently bilingual in both official languages. To me, and to the NDP, it would seem a necessary condition that someone who is expected to teach and encourage Canadians about financial literacy would be able to communicate in both French and English.
We in the NDP tried to address these problems at committee. We introduced six amendments, all of which were dismissed by the Conservative members of the finance committee. Most surprisingly, some of those nay votes seemed to contradict comments made by the Minister of State (Finance) in committee and here today.
When I asked the minister of state about the fact that bilingualism is not a legislative requirement in the bill, the minister replied that the ability to speak both official languages and to disseminate the information in both official languages will be mandatory. Yet just a week later when I tabled a motion to amend the bill to this effect, the Conservative members voted against the amendment on the grounds that they want to ensure that they can choose the right person.
We in the NDP believe that it is impossible to choose the right person if that person is not bilingual, because bilingualism is necessary to ensure that we are helping improve the financial literacy of all Canadians.
We are therefore left with a dilemma. The stakeholders that we have consulted have told us that the NDP approach is far superior to the bill that we are debating today, but unfortunately, and especially with the current government, the choice we are presented with is all or nothing, no compromise, no improvements. This is what is on the table and we can take it or leave it.
That is exactly what was on display at committee, where the Conservatives refused to accept even a single amendment. This approach is not good for the functioning of parliamentary democracy and it is not good for Canadians.
That is why we in the official opposition are not going to play these ideological games. Canadians want good governance and good public administration, and that is exactly what they will get when they elect their first NDP government in 2015.
That is why we in the NDP will be supporting the bill at third reading, not because we believe it is the big fix the Conservatives claim it is but because, for all its faults, passing the bill is better than the current status quo.
Unlike the Conservatives, we listen to stakeholders regardless of their political affiliations and we listen to their concerns when it comes to policy decisions. These groups have told us that the bill would be a small step in assisting their work and enhancing the financial literacy of Canadians.
Our concerns with the bill have certainly not disappeared. However, my colleagues and I will hold the government to account for all of the commitments that we have heard around their position, and when we form government in 2015, we will be in the position to correct all the problems that the party opposite is all too happy to ignore in order to score political points.
When we look at the bill, we should also look to place it within the broader policy changes that the Conservatives have brought forward in the past six years. For example, Human Resources and Skills Development Canada stats tell us that 26% of Canadians struggle with basic numeracy and 20% struggle with basic literacy. Yet the government that is trying to sell Canadians on financial literacy being the answer to their economic problems is the same one that cut $17.7 million from adult literacy programs in 2006. The Conservative government's approach is to give with one hand while taking away with the other.
It is clear that financial literacy is something that we cannot understand in a vacuum. In fact, during the committee process, my colleague from Quebec raised this issue with the minister of state. He said:
|| You mentioned curriculum. That is very much a key issue. When I was in my third year of high school—which is equivalent to grade 10, I believe—we had what was called an economic education program. It covered things like credit cards and bank accounts, but it also dealt with fundamental issues facing people such as unionization. We looked at everything from a macroeconomic perspective, taking a lot more into account than just financial markets.
|| Instead of strictly limiting the financial literacy discussion to financial markets, pensions and other really specific issues such as credit cards, don't you think we should widen the scope and talk about economic education in general? Taking that approach, we could work with the provinces to help them develop a curriculum component possibly for primary students, but especially for high school students, to educate all young people about the complexities of economics, beyond just the financial dimension.
The minister's response was simple and to the point. The minister said, “I certainly can't disagree with you: that needs to happen”.
When pushed on it, even the government agrees that we need a more comprehensive strategy than the one we have been presented with. Instead, we get a bill that includes recommendation one of the Task Force on Financial Literacy and ignores the other 29. The minister's response to this is that the financial leader has at his or her discretion the option to put in place many of the other 29 recommendations.
We would agree with recommendation one but not with ignoring all the others. What is the point of independent task force reports if the Conservatives simply pick and choose the parts they like? Recommendation two of the task force calls for the creation of an advisory council made up of financial institution members, educators, unions and other stakeholders to ensure that the financial literacy leader is properly guided.
The Conservatives were happy to say that they were introducing the first and most important recommendation, but what they are doing is equivalent to building a house without putting in a proper foundation. It is not enough to say that it could, will or should have been implemented. It should have been implemented side by side with the financial literacy leader legislation. To do otherwise is to say that it is not important to ensure that all voices are heard.
We in the NDP take a different approach, one that listens to a wide variety of voices and ensures that no Canadian gets left behind. We need to make finance more understandable, not just make people better at understanding it. Even for people who do not struggle with numeracy and literacy, finance is not a particularly comprehensible subject. Barrie McKenna, a business columnist for the Globe and Mail, states:
|| Looking to financial literacy to fill the void is like asking ordinary Canadians to be their own brain surgeons and airline pilots. The dizzying array of financial products, mixed with chaotic and increasingly irrational financial markets, makes the job of do-it-yourself financial planning almost impossible – no matter how literate you are. The average credit-card agreement is as intuitive as quantum physics.
We also need to ensure that Canadians are aware that sometimes it may not be in their best interest to take out certain financial products. Encouraging people to take out savings and investment funds creates lucrative fees for banks and brokers. In fact, according to Morningstar, an investment research company, Canadian fees for equity funds are some of the highest in the world, being on average around two and a half times higher than fees in the U.S. for example.
We need to ensure that our financial literacy regime will criticize plans where fund managers take a substantial fee regardless of the performance of the fund, that it will highlight funds like the CPP, regularly outperform private funds and it must communicate to people the need to weigh the inherent dangers of investing in the stock market. Unfortunately, without a definition of “financial literacy” and without an advisory council, we cannot be sure that this will be the case.
We as parliamentarians should also be wary about increasing the quantity of financial literacy available without ensuring its quality. We in the NDP understand that this is a possibility and introduced an amendment to improve the reporting requirements of the financial literacy leader. However, as seems par for the course, the Conservatives ignored the concerns and voted it down. This has two dangerous and interlinked consequences.
First, the model presents the possibility of shifting all blame off banks and onto consumers. At the individual level, people can begin to be blamed for their own uninformed choices and, at the national or even international levels, systemic problems are no longer the fault of banks that will lend beyond their means to individuals who borrow too much. Obviously, individuals do have a responsibility to manage their own finances but banks, hedge funds and other financial institutions have the ability to affect the economy in a much more profound way than individual consumers, and we must not forget that.
Second, what do we do for the people who actually end up worse off due to financial investments that fail? We have to understand that some people will lose their savings when businesses go bust or when the stock market drops. This has been the way the stock market has worked since the first recognizable stock exchange opened in Amsterdam in the 17th century.
What about those people who simply do not have the type of disposable income required to invest in their futures, the people who live paycheque to paycheque, the people who have seen their wages stagnate or fall in real terms since the mid-1990s? The government should recognize that for a very large portion of Canadians a lack of savings is a reflection of the disparity between the rise in the cost of living and the rise in wages over the last 15 years or so.
Encouraging savings is fine for people who have disposable income after they have paid for the essentials but, unfortunately, far too many people taking on debt is not a choice. It is the only way to survive.
An OECD report published in December 2011 pointed out that the trend toward a less progressive tax structure and a more unequal society here in Canada began in the mid-1990s under the then Liberal government and has continued since 2006 under the current government.
As famed Canadian economist, Jim Stanford, noted in his submission to the national task force:
|| Personal savings will never constitute an important source of financial security for the strong majority of Canadians who cannot save, given the paucity of their incomes.
If the government really wanted to give these people an opportunity to build their own savings, then it would regulate bank fees and the level of interest that is charged on credit cards in order to allow people to put a little bit aside each month to ensure that it can help with their savings.
Similarly, if the government wants to ensure that Canadians have adequate savings when they retire, the way forward is not to create a new and inherently risky vehicle for private savings. There are already multiple methods for Canadians to save for their futures, RRSPs and TFSAs spring to mind, if they have the funds available to invest.
These vehicles are already supported and funded by the government. In fact, studies have shown that the highest earning 11% of Canadians contribute more to RRSPs than the bottom 89% of tax filers combined. Because of the tax benefits of these investments in RRSPs, Canadian taxpayers subsidize that contribution by the top 11% of earners to the tune of $7.3 billion in annual net tax expenditures.
The creation of pooled registered pension plans, or PRPPs, therefore, only benefits those who are already able to invest in their retirement. It does nothing for the 30% of Canadian families who lack any form of retirement savings outside of CPP.
Encouraging people to invest in a risky vehicle on the stock market is not real leadership on financial planning. It again simply passes the entire risk and blame for an individual not having adequate retirement savings onto that individual. To make matters worse, the Conservatives have delayed the age at which Canadians are eligible for OAS from 65 to 67. It would make far more sense, if the government is really interested in Canadians' retirement security, in allowing Canadians to properly plan for their retirement, to reverse the changes to the eligibility age for OAS and, just as the NDP leader has done, make a commitment to the NDP plan to expand the guaranteed Canada/Quebec pension plan by phasing in an affordable doubling of benefits.
This plan has been called for by provinces across the country. It would allow Canadians both the ability to plan for their retirement and a guaranteed income to ensure they can retire with dignity. Moreover, the CPP is a much safer investment than market based private funds and consistently outperforms the market. Even business columnists, like the aforementioned Barrie McKenna of The Globe and Mail, pointed out the benefits of such a policy by stating:
|| And Ottawa could beef up the CPP, mandating Canadians sock away more money for retirement, while benefitting from the CPP's low costs.
However, so far, the government, and the Minister of Finance in particular, have not listened to this appeal for a real and proven way of ensuring Canadians can retire with dignity.
The problem is that the government seems to think that encouraging these skills is a suitable substitute for a proper regime of consumer protection, retirement security and a proper strategy for economic growth. The bill embodies the government's strategy, or lack of strategy, in addressing the issues that really matter to working and middle-class Canadians across the country.
I wonder why the creation of the financial literacy leader could not be included in the Financial System Review Act rather than being a stand-alone act? The Conservatives have no problem lumping together pieces of legislation that have no relationship to one another in omnibus budget bills but, apparently, a bill to amend the Financial Consumer Agency of Canada Act could not be included a system review of banking legislation. It appears to me that the only reason these did not go together was because the government hoped it could get some positive media out of this legislation, but who knows?
The NDP believes in real measures to protect consumers, seniors and low-income Canadians. My colleagues on this side of the House in the official opposition will continue to stand up for policies that really help hard-working Canadians. This is a small start, a very small step, and one which we will be supporting to send to the Senate in order to get the funds, which have already been allocated, out to the organizations that really need them.
Mr. Scott Simms (Bonavista—Gander—Grand Falls—Windsor, Lib.):
Mr. Speaker, it is a pleasure to rise today to speak to Bill C-28, An Act to amend the Financial Consumer Agency of Canada Act, or more to the point, let us talk about having a financial literacy leader, or as my hon. colleague pointed out, financial literacy coordinator. It is necessary across all regions in the country for the sake of the troubled times that we have entered into. For that reason alone, having a person in charge of financial literacy is one that is necessary.
We are living in a different world than we used to. My father worked in one mill for over 40 years and he had what is called a defined benefit pension plan. Quite simply, when he retired, he had the same amount of money each and every month apportioned to him and the financial risk was taken on by the company. These types of pension plans are not as prevalent as they used to be.
What is happening is a lot of pension plans are becoming what is called the defined contribution plans, so the company contributes like they did before, but so does the individual contribute. The essential risk of a pension plan now falls on the shoulders of the individual worker or the person investing in that plan. There is a fundamental shift. People have to plan, if they take an annuity, how their asset mix is to be placed, which was done before in a defined benefit plan by the person in charge of the plan itself. Now we have entered a new age when there are a lot of people in that position.
The other aspect is there are a lot of people out there now who are in transient work. I say that for my riding in Newfoundland and Labrador because a lot of people there get work in other jurisdictions, especially when it comes to skilled labour.
In the early nineties, we had a collapse of the cod industry, which was the greatest massive layoff in the history of the province of Newfoundland and Labrador. A lot of government programs were put in place to educate people to give them the skills. Over the years that paid off tremendously. Within my riding, a tremendous amount of people are not at the wharf, not at the factory, not at the plant, but at the airport. They are going to places like Alberta, Saskatchewan, Russia, off the coast of Africa, drilling. They are going to eastern Russia, Kazakhstan, Uzbekistan, parts of the North Sea, Norway. They are going to places that were considered to be unimaginable for so many people in my riding.
What does that mean? How does this equate to financial literacy because they are making very good money to sustain their families? The problem is the pension plans we used to rely on are not portable. These people have to be their own investor. They have to take on all the risk themselves, which is the most important aspect of having financial literacy. Because people are now investors and absorbing the risks, I would like to see more defined benefit plans. Why not? If 308 members of Parliament are eligible for a defined benefit plan, why can others not be? That is not the way it is going. The risk is falling on the particular individual and that is why financial literacy is so important.
Let us look at another aspect. Let us look at our youth today. Let us look at some of the numbers. We are indebted right now at $1.60 for every dollar that we bring in as income. This is not a good statistic, especially for the category of age 18 to 24, because they have actually fallen way behind before they have even started. A lot of that is consumer debt, which is the worst kind because there is no asset to show at the end of the day. Student debt is a big thing, but there is a degree to show for it and a education to get a high paying job. Whether they are mortgages, or automobiles to a lesser extent, or investments in RRSPs, pooled or not, these plans have a certain asset at the end of the day.
The problem is with the consumer debt and the high amount of interest on certain things, like credit cards either from a store or chartered bank, what happen is a lot of this debt will not show an asset at the end of the day and therefore it becomes that much more burdensome to all individuals, especially the young.
How do we get into a situation where we improve financial literacy? There has been a lot of talk about it in the House. The member for Edmonton—Leduc brought it up in the House during the past number of years and also had a motion passed in the House some time ago, which lends to the type of legislation we are debating today. I certainly commend him for that.
Because we are the national legislature, the federal institution, when it comes to the term “education”, according to our Constitution, it falls within the jurisdiction of the provinces. However, the federal government has a role to help coordinate some kind of educational program for the young people across the country. It is not just isolated to them, but certainly for high school students this could be an open window into the minds of our young as to how this will cripple their ability to financially support themselves and their families in the future.
Bill C-28 is a small step in that direction. As we talk here in third reading and send it to the Senate, it is a step in that direction.
We talked about the task force. My colleague, the member for Sudbury, talked quite a bit about the task force itself, the financial literacy task force with 30 recommendations, the vast majority of which are bona fide recommendations. Number one of which would be to have that coordinator, the financial literacy leader, which is most important.
If we look at the background of this, over the past little while we have talked about it a lot and now I would like to see more action given to a national financial literacy strategy, if I may be so bold as to call it that. We will make small steps along the way, and this is one of those steps that is necessary.
It is designed to create the position of a financial literacy leader and enforces the consumer provisions applicable to federal financial institutions. It is all coached within the Financial Consumer Agency of Canada. This is the particular agency that provides a lot of this information. I would like to see it be more proactive in its education. Nevertheless, it does have ability and the resources and now because of the bill, it will get more resources to make that possible, certainly under the guise of the financial literacy leader.
The legislative summary is from the Library of Parliament, and I would like to congratulate the library for the wonderful work it does.
The FCAC, the Financial Consumer Agency of Canada, monitors the financial services sector self-regulatory measures designed to protect consumers and small businesses. Again, we are in the situation where those who do not have the benefit of being a large company cannot really provide a lot of resources to looking after a lot of this material. What the government ends up doing is taking on that responsibility to provide a source of information for individuals and smaller businesses unable to afford to get the right advice, or a substantial amount of advice, to make that decision.
It also promotes consumer awareness and understanding of the financial services sector and responds to selected consumer inquiries. One point about that is very important, and that is the financial adviser. There are thousands and thousands of financial advisers across the country. I always like to recommend to people that they see a financial adviser especially those who have a skilled trade and find themselves working for a particular company for a short period of time, then another one and another one.
People are working for a 40-year span of their lives. Nowadays the idea of working for one company for over 40 years is a very rare thing. It happened many years ago for my family in a small town with a big plant, but now these situations do not happen as regularly as they used to. I would suggest people see financial advisers because they are the ones that take on the risk.
They could be pipefitters, electricians or carpenters. They are not necessarily financial experts. Many of them do not want to be. However, there is certainly a level of financial literacy that has to be attained in order for these people to support themselves as they move on from work, or if something happens to them and they have no choice but to leave the workforce because of a long-term disability or something of that nature.
It is certainly incumbent upon us to take the risk, but it is also incumbent upon us to learn about the financial tools out there to help us and to see what is available to us in order to plan over the long term.
The government has a large role, both provincial and federal, to ensure that financial literacy is a key learning tool for many of our young people and certainly for middle-aged people who have not even started to think about retirement.
I mentioned earlier the people who do not have access to a portable pension. The largest portable pension is the CPP, but whether it is the combination of the Canada pension plan and old age security coming together, it does not replace the income we had while we were working. It is a very low percentage. Therefore, for people who invest on their own, that would probably become the majority of their income as they enter into retirement years or if they face something like a long-term disability.
I have talked quite a bit about pensions, which I think is the ultimate example of financial literacy. This is important because we now have a substantial amount of people retiring. I am basically talking about the baby boomer age group, as we affectionately call it.
The 2011 federal budget announced $3 million annually to undertake financial literacy initiatives. This amount was in addition to what was provided to the FCAC, which is a $2 million fund. When we talk about the financial literacy leader, the terms of the provision are clauses 3, 5 and 7 of the bill.
The objective of the leader is to provide national leadership in strengthening financial literacy. Whether we call the person a financial literacy leader or coordinator is a question of semantics, but we get the idea that the person has to take a very large role in the lives of others. They have to coordinate across many sectors, federal and provincial, French and English, as well as first nations.
This is a huge task for this person and one that is worthy. Obviously any task that is asked by Parliament and by government is worthy, but this one also has to be contemplated and well-financed, which is why the $3 million is key here as the additional budgetary amount. In looking at this in depth, the powers, duties and functions of this particular person are also key to ensuring success is there.
I mentioned earlier that this is a small step toward improving financial literacy in this country. There is no doubt about that, but let us take a look at the financial literacy leader in this particular situation. The Commissioner of the FCAC may impose an assessment on any financial institution in order to recover some or all of the expenses associated with initiatives designed to strengthen the financial literacy of Canadians. It is putting some of that burden onto the financial sector, which is a great idea.
As is the case for Her Majesty, the Minister of Finance, and the commissioner, deputy commissioners, officers and employees of the FCAC, no action may be taken against the financial literacy leader for anything he or she does or omits to do in good faith in administering or discharging the powers or duties of the position of financial literacy leader. This is also a very important aspect. It allows this person to function in the way a person should function whose goal is to increase the amount of financial literacy across this country. We would not want to see this person chained into a position where they find themselves being suffocated, for lack of a better word, by rules and regulations and by their own machinery. It allows this person to go above and beyond the call of duty if that person chooses to do so.
The bill says the financial literacy leader will report to Parliament, and there is also a clause about civil proceedings.
The final point from the Library of Parliament is that financial literacy is frequently a topic of interest to parliamentarians, which it has been for quite some time. I mentioned my hon. colleague from Edmonton—Leduc. The issue has been discussed in parliamentary committee reports. We also heard from the member for Sudbury, who talked about six possible amendments. These were not accepted, but nonetheless, the discussion was there and I think some of them are quite noteworthy and noble in their cause.
We talked about the 30 recommendations from the task force. One of the recommendations my colleague from Sudbury brought up was about the advisory council, which I think is a positive step in the right direction as well.
What we see here are many facets of the industry, including those who are workers, such as the people I meet every weekend when I am at the airport and they are on their way to whatever job it is they have in the oil and gas sector. These are people who belong to building trades associations, or unions for that matter. They certainly do have quite a bit of input in how we can improve financial literacy.
Also, the issue has been mentioned in the House of Commons, including in the context of the private member's motion, Motion No. 269, by the member for Edmonton—Leduc, who is also the chair of the House of Commons Standing Committee on Finance. The conversation we had centred around the importance of financial literacy and how we have moved ahead into what I would deem is a brave new world for all citizens who work in this country.
As I mentioned before, there is the Canada pension plan and old age security. If people do not have the CPP, they are most likely eligible for the guaranteed income supplement. These measures do not displace the income that people earned, and certainly not if people work in the oil and gas sector where wages are so high and all of a sudden they find themselves out of work, through no fault of their own, such with a long-term disability.
Financial planning at the earliest age and financial literacy plays a very important role for many years to come. It someone gets injured on the job at the age of 25 to 30, think about how many years he or she has to recover based on his or her investments in a very short period of time. This is where financial literacy becomes that much more important. We get calls at our office every day about this.
This particular legislation, Bill C-28, required a ways and means motion as it would give the Commissioner of the Financial Consumer Agency of Canada the authority to impose a financial levy against any financial institution, as I mentioned, in order to pay for expenses related to financial literacy initiatives. During the committee study, officials also told finance committee that the government would increase the annual budget for the FCAC from $2 million to $5 million.
A significant contributor to rising household debt, which we talked about some time ago, was mortgages. One of the things I think was necessary was reducing the mortgages with 40-year amortization down to about 25 years. I think it was necessary because zero-down, 40-year mortgages were causing more problems than not. We found ourselves in a situation similar to that in the United States, where they had sub-par loans that caused ripples around the world that have lasted for years. That was not the only thing but certainly that was the genesis of it, the spark. That is one part of it that had to come down.
We are taking measures in addition to this that help financial literacy and certainly help the average consumer cope.
The danger in having zero-down, 40-year amortization mortgages is that, as we have seen, it is way too much risk to take on. We end up elevating ourselves to the statistic I read earlier, which is $1.63 in debt for every dollar that we bring in. Nations in the world are in the same ratio. In Europe right now, nations that we considered financially sound are no longer as sound.
In looking at this, I would say that many of the questions that we had asked prior to third reading were addressed in committee.
The financial literacy leader will not have his or her own office. Instead, he or she will operate out of the office of the FCAC. That was one of the questions we brought up.
There are no plans to use Bill C-28 to levy an assessment on banks to pay for financial literacy. It should be noted the FCAC already had the power to levy assessments against banks under legislation brought forward when the FCAC was created.
There was also, of course, the question about the anticipated cost, the extra $3 million for this particular individual.
Again, I would agree with my colleague that the advisory council should also be a second part to this. I am certainly willing to say yes to this, as a precursor to that step in the future.
I will go back to what I talked about in the beginning. This is a brave new world. It is one that compels our children to be that much more financially literate, to the point where this is a step in the right direction.
Ms. Annick Papillon (Québec, NDP):
Mr. Speaker, as the deputy critic for consumer protection, it is my great pleasure to speak today on a subject of great importance: financial literacy. There is no better time to talk about this issue because November, which starts tomorrow, is financial literacy month in Canada.
I know that “financial literacy” is not a hook for everyone, but it really matters to Canadians in their daily lives.
Bill C-28 would create a financial literacy leader in Canada. That is an interesting idea, but the bill before us today is pretty much an empty shell because it does not include the kind of meaningful political directions we were hoping to see. Nor does it include a definition of financial literacy, accountability mechanisms or concrete measures to increase financial literacy in Canada. That is a real shame.
Having read the bill, I have a number of questions. For example, what is the Minister of Finance's definition of financial literacy? No doubt they will say that financial literacy is having the knowledge, skills and self-confidence to make responsible financial decisions. However, such a simplistic definition gets in the way of creating a real strategy to address this complicated issue. We need a strategy for the medium and long terms. This bill does not come through.
Who is responsible for helping Canadians improve their financial literacy? A number of interveners have recommended ways to improve Canadians' financial knowledge. For example, the banks have created a number of initiatives to help Canadians learn more about this issue. Unfortunately, those same banks are responsible for the problem. Messages promoting healthy financial habits are too easily eclipsed by financial industry advertising about easy credit.
At a time when the number of financial products is growing faster than the need for them—there is no denying that this is true—it is extremely important to be well informed about financial matters. Financial concepts are often complicated and can be confusing for the consumer after a while or when the time comes to evaluate whether or not a product is suitable. Information provided to the client must be clearer in terms of content and presentation.
Ken Georgetti, president of the Canadian Labour Congress, summarized the situation very well: “Canadians need better government policy rather than lectures on how to save money.” The government is ignoring the harmful conduct of financial institutions.
As the main source of this difficult to understand information, the financial industry must improve the clarity of its communications. That was one of the recommendations made by the Task Force on Financial Literacy that is not in the bill.
The task force report to the minister states:
|| Canadians need financial information and advice that is relevant, understandable and engaging, and we believe governments and financial services providers have a responsibility to ensure that their communications meet these criteria.
Improving financial skills must be a lifelong endeavour. According to the task force experts, students should receive basic financial education. We cannot talk about financial literacy without deploring the lack of resources for youth. We are talking about elementary and secondary school students. It is a loss that economics is no longer taught in Quebec's secondary schools, because it is at that age that young people begin making many financial decisions.
Earlier, I heard the member for Burlington say that this should be taught in university. Personally, I believe that it should be taught at a younger age. It should already be part of their education. This reminds us that it is important that we accept this responsibility and take action now.
Many of these young people have started working and are continually exposed to consumerism and credit, without always having the tools they need to really understand the choices available to them. I will not talk about the fine print at the bottom of the page since it is not always easy to understand the preconditions and other similar elements.
James Clancy, president of the National Union of Public and General Employees, expressed an opinion in this regard that I share. He said that educating the public about finances, even at a young age, is good. Giving them a fighting chance to keep some savings in their bank accounts—through reduced banking fees, lower credit card interest rates or regulating industries—would be impressive. The government should focus on making serious changes to ease the burden on families and communities, and that is exactly what the NDP is proposing.
Canada's Task Force on Financial Literacy made 30 recommendations, one of which involved the creation of a financial literacy leader position. This bill does not take into consideration the other 29 recommendations.
The Conservatives do not seem to want to seriously tackle this problem since, if they did, they would have added some of the task force's other recommendations to this bill, including the creation of an advisory board that would include groups of workers and volunteers, as well as educators—in short, people who have expertise on the ground, the people the Conservatives should be listening to but ignore in many instances.
I would like to talk about another phenomenon related to financial literacy and that is the indebtedness of retirees. This seems to be a growing phenomenon.
Option consommateurs, an organization that I met with recently and that I commend, is currently conducting an awareness campaign to encourage Canadians to increase their knowledge of personal finance. The organization has noted that, unfortunately, more and more retirees are finding themselves in a precarious financial situation because they do not have enough savings for their retirement. What is more, this situation is only going to get worse when the age of eligibility for old age security increases from 65 to 67, another one of the Conservatives' bad decisions, another decision that is going to cause harm.
The NDP has a real plan to solve the problem of financial security for Canadian retirees. We are going to strengthen the guaranteed pension plans in Canada and Quebec, thereby giving Canadians an acceptable level of guaranteed income during retirement.
Furthermore, why not start up a national dialogue on the reasons why the houses we live in should be treated not as investments, but simply as roofs that all Canadians should be able to have over their heads? Retirees are not the only ones whose financial situation is deteriorating. A few days ago, Statistics Canada increased its estimate of the household debt ratio. This rate is now at 160% of disposable income. This higher level of debt makes individuals more vulnerable to economic shocks. So why is the financial burden on households increasing? The reason is easier access to credit, as well as the fact that the cost of living is increasing but wages are stagnating. This is the result of this government's ineffective economic policies.
Once again, and we have seen this many times, this government would rather lower the corporate tax rate, claiming that that will create jobs, instead of giving a tax credit to businesses that create jobs. That is what the Conservative government does.
If this government cares about protecting consumers, it should implement regulations on credit cards, so we can impose a cap on interest rates and eliminate the excessive fees paid by consumers.
Considering the lack of enthusiasm for financial literacy shown in recent years—or even decades—by the Minister of Finance and his colleagues, they need help, and a financial literacy leader position could help Canada at least take a small step in the right direction. We will continue to push the government to go further, because even though it has made a step in the right direction today, there is still a long way to go.
The NDP proposed some amendments in committee, in order to address some flaws in the bill, such as adding a bilingualism requirement and adding provisions that clearly define the meaning of financial literacy and require more accountability from the financial literacy leader. However, the Conservatives rejected all of our suggestions. They flat out rejected the six amendments proposed by the NDP.
We are very concerned about the fact that there is no explicit requirement that the incumbent of this position be bilingual. We think that if someone is responsible for improving financial literacy across Canada, he or she should be able to communicate in French and English.
As my hon. colleague from Sudbury said earlier, the NDP believes it is possible to find a financial literacy leader who is competent, highly qualified and bilingual. He thinks that can be done for other positions too, such as government officers.
We would not be shooting ourselves in the foot if we hired highly qualified, bilingual people. On the contrary, we would be showing the whole world that we are proud of our two official languages: English and French.
That is clearly an advantage in undertaking dialogue with other countries, particularly on these issues. Speaking two languages is an advantage. It would be good for the government to understand that and take it to heart as my party and I have done.
In conclusion, Canada would be better off if Canadians improved their knowledge of the economy and made responsible financial decisions. To make that happen, we need a strategy that calls for a concerted effort on the part of clients, schools and various organizations, including those in the industry. That is why we need an advisory council made up of union and financial institution representatives and educators. That is worth repeating.
I would like to share some information. A Conservative member told me that one of my strengths is being able to cite experts in the field. I will indulge him by citing a few experts who support what we are proposing.
According to Barrie McKenna, a business columnist for the Globe and Mail, waiting for financial literacy to fill the void is like asking ordinary Canadians to be their own brain surgeons and airline pilots. The dizzying array of financial products, mixed with chaotic and increasingly irrational financial markets, makes the job of do-it-yourself financial planning almost impossible, no matter how literate you are. The average credit card agreement is as intuitive as quantum physics. Canadians are constantly bombarded with pitches to take on more debt, whether it is right for them or not. They are often blindly steered toward high-fee products and complex financial instruments. The accompanying disclosure statements are written by, and for, lawyers. There is a sounder and no doubt less costly path, but it does not suit the financial services industry or many business groups.
He goes on to say that Ottawa could mandate plain-English disclosure. Working with the provinces, the government could enhance regulation of industry sales incentives and defined-contribution pensions. Ottawa could strengthen the CPP, forcing Canadians to save more money for retirement, while benefiting from the CPP's low administrative costs.
Of course I agree with some of what he says. However, I cannot stress bilingualism enough in this area, as that is what is important. Mr. McKenna clearly highlighted the importance of understanding that, at present, consumers are bombarded by financial products. We must all do our part in order to make financial information easier to understand.
Thirty per cent of Canadian families do not have retirement savings outside of the Canada pension plan. Twenty-five per cent of Canadians have accumulated more debt in the past year. Never before has Canadian household debt been so high. Now more than ever the government must implement policies to help people and families in debt. That is important.
Financial literacy is an important aspect of the consumer protection framework. As I said earlier, this bill does not go far enough. The fact that many Canadians do not have any savings and the rise in consumer debt are symptoms of the discrepancy between the rise in the cost of living and salaries, rather than financial illiteracy. Too many Canadians live paycheque to paycheque. This situation proves that the government is not taking a leadership role and that it is incapable of addressing issues that are truly important to Canadians. The government has never implemented strict laws and regulations to protect consumers. And this bill falls far short of providing real help to consumers.
We believe that the best way to support consumers is to establish a single window consumer protection department or agency that would handle all consumer issues. If the government really wants to protect consumers, then it should move forward with credit card regulations and implement regulations that would cap interest rates and eliminate excessive fees paid by consumers.
In closing, I would like to briefly talk about retirement. Many retirees have more and more debt. The population is aging and many people are worried about what we will do for them. The NDP has an effective plan for financial security in retirement. We would strengthen the Canada and Quebec guaranteed pension plans by gradually doubling benefits in an affordable manner to a maximum of $1,920 a month—this is not a gold rush—thereby providing Canadians with an adequate level of guaranteed income during their retirement.
Mr. Kennedy Stewart (Burnaby—Douglas, NDP):
Mr. Speaker, I am happy to rise this evening and speak to Bill C-28, An Act to amend the Financial Consumer Agency of Canada Act.
I do support this bill, although with some reservations, which I will speak to. My main concerns are the lack of an advisory council and the lack of inclusiveness. I do think this bill could have been more inclusive. I hope that when the government reviews this piece of legislation, it makes that a primary concern.
In listening to the debate this afternoon, I have wondered about the percentage of our economic trouble that is caused by low financial literacy. If we recount the state we are in at the moment, we have quite low economic growth. Our growth rate has just been reported and downgraded to 1.6%. We have been through a major recession. If we look across the water to Europe, the United Kingdom has been through a double-dip recession. There is all kinds of trouble in Greece and other countries. The United States has been struggling, although there are some signs of a little bit of a pickup there.
What is the cause of the problem? We know that what happened in 2008 was mainly the result of economic turmoil in the United States, where consumers became too indebted and bought into some bad mortgages. The financial institutions in the United States had invented financial tools that enabled mortgages to be bundled and packaged, and sold from institution to institution. Most institutions had no idea what they were buying but just thought it was a great deal. Earnings went up and up with apparently little or no risk. The economy, under the Bush regime, just continued on until we had a crash.
The investors who bought all of these bundled mortgages realized that the mortgages were flawed and faulty, and there was a crash. Fannie Mae and Freddie Mac and other institutions went under. If we think about that collapse, it not only happened in the United States but went right around the world as well. There was a big increase in unemployment. I read an interesting book written by Gordon Brown on this topic, talking about how global leaders acted very quickly to try to stem a depression, which I think was a real possibility. We are still feeling the effects today.
When I think about this I wonder how much of it was caused by a lack of financial literacy. I would say that very little was. It was really about the large financial institutions that were playing fast and loose with the rules, fooling each other as much as they could to make large profits.
While I see the inherent value of these changes, I do think there is a much larger picture to be taken into account here. I would also say that these things are very unpredictable. In 2008, we had the Minister of Finance on the other side of the House saying that there were no problems with the economy, and all of a sudden we lapsed into a recession.
I would suggest that it is actually the government that needs to sharpen its pencil and take more account of these things, for example, by listening more closely to the Parliamentary Budgetary Officer.
I am disappointed that there was no effort to include an advisory committee in this act. I hope that the government reviews this, perhaps a year into the implementation of the act. The advisory committee would not only bring more eyes to look at this but would also be more inclusive.
I will conclude by talking about the value of inclusion. For example, if labour unions were brought more onboard in this bill, they could go to their memberships and spread the word not only about this new institution but also help increase financial literacy among their members. I really would advise the government to take that into account.