After the Yes side came within a hair’s breadth of winning the 1995 Quebec referendum, the chastened federal Liberal government of the day asked the Supreme Court in a reference case whether Quebec could unilaterally separate from Canada, or whether the rest of the country, Parliament included, might have some say in it.
The court’s answer was game-changing. It said Quebec could not secede unilaterally under either Canadian or international law, but that Canada would be duty-bound to enter into negotiations with the Quebec government if a clear majority in the province expressed a desire to leave in a referendum.
The court also said Parliament could determine whether the yes or no question on the referendum ballot clearly laid out the stakes for Quebeckers. The result was the aptly named Clarity Act that codified the Supreme Court ruling.
Ottawa needs to take a similar clarifying approach with any move by the United Conservative Party government of Alberta to hold a referendum on whether the province should pull out of the Canada Pension Plan.
Although Quebec has never been a part of the CPP, the pension plan is nonetheless a national institution, as well as a critical income source for older Canadians. It is wrong to think that Alberta could pull out of it without affecting the entire country. For one, any pension plan benefits from having the largest possible pool of employer and employee contributors to draw on, allowing it to create economies of scale in its operations and reduce investment risk through diversification. Taking Alberta out of the equation would shrink the pool considerably, and could change the level of contributions in other provinces.
Even riskier would be the success of Alberta’s claim that it is owed more than half of the funds held by CPP Investments, the arm’s-length board that manages the pension fund on behalf of beneficiaries and contributors.
The fund held $575-billion on June 30; just last week, Alberta Premier Danielle Smith stood by a report her government commissioned that said the province would be due $334-billion if it left the national plan, the amount being equivalent to 53 per cent of the fund’s projected holdings in 2027. She even invoked the possibility of going to court to defend that position.
To see 15 per cent of the fund’s contributors, Alberta’s population as a percentage of the total, walk away with more than half the money would be a disaster for the rest of the country.
Alberta’s claim on the majority of the fund is being widely challenged; CPP pointed out Albertans account for 16 per cent of historical contributions, which suggests a payout of roughly $100-billion. But Alberta’s number has spooked the premiers of other provinces, including the two biggest – Ontario and British Columbia – which together account for 65 per cent of the Canadian population that relies on the CPP.
Last week, Ontario Finance Minister Peter Bethlenfalvy, clearly concerned, asked for and got a meeting with federal Finance Minister Chrystia Freeland and their provincial and territorial counterparts, Alberta included. The meeting is on Friday.
All this uncertainty is bad. There are no precedents to refer to for a province pulling out of the CPP. Which is why, rather than allowing one province to create nationwide anxiety, it would be far better for Ottawa to lay down some much-needed rules.
The Canada Pension Plan Act allows for a province to unilaterally set up its own plan if it gives Ottawa three years’ notice, passes legislation to that effect within a year after that, and satisfies the federal government that its plan will be comparable to the CPP. But there is nothing in the law setting out what “comparable” means, and there is no fixed formula for how much of the existing CPP fund would be transferable to the exiting province.
Ottawa can and should fix those issues by amending the act accordingly, after securing the consent of two-thirds of provinces representing two-thirds of the population. At a guess, it won’t be that hard to convince the other provinces that Alberta should not be allowed to gut the CPP.
Doing all this would make it clear to Albertans what they were actually voting for in a referendum. Even if that never came to pass, it would still be a responsible move by Ottawa to bring some clarity to a very murky situation.