01/26/2012 08:31 EST | Updated 03/27/2012 05:12 EDT

Harper At Davos: Ottawa Poised To Transform Immigration, Pensions, Research


DAVOS, Switzerland - Ottawa will transform the country's pension system to curtail government costs, but details won't come until the budget, Prime Minister Stephen Harper said Thursday.

In a major speech to global movers and shakers at the World Economic Forum, Harper also signalled looming reforms in immigration as well as research and development — all in the name of ensuring Canada's economy is on a strong footing.

The idea, he said, is to position Canada as a more competitive force in the global economy and to confront the pressures of an aging population.

"In the months to come, our government will undertake major transformations to position Canada for growth over the next generation," Harper said in an address to several dozen of the 2,600 forum delegates.

Despite the immediate audience, the speech was aimed as much at voters back home as it was at international business and political leaders.

The prime minister also reiterated a commitment to streamline environmental approvals for major energy projects and said he would press ahead with developing ways to export energy to Asia.

He chided wealthy countries for being too complacent about ringing up debt that they can't afford, taking their riches for granted and imperilling the entire global economy.

"I ask whether the creation of economic growth, and therefore jobs, really is the No. 1 policy priority for everyone," he said.

"Or is it the case that in the developed world, too many of us have, in fact, become complacent about our prosperity, taking our wealth as a given, assuming it is somehow the natural order of things?"

Harper said his government has worked to keep financial disorder out of Canada and is stepping up efforts to set the country on the right track for coming decades.

"We will do more, much more," he said.

"Under our government, Canada will make the transformations necessary to sustain economic growth, job creation and prosperity now and for the next generation."

While officials said details on some of the initiatives will come in the spring budget, Harper did shed some light on his plans.

On pensions, the government will move to ensure that demands on the Old Age Security benefit don't bankrupt the system.

"Our demographics also constitute a threat to the social programs and services that Canadians cherish," he said. The Canada Pension Plan "does not need to be changed" because it is fully funded, but officials point to an OAS bill that will soar as the population ages.

Current recipients of CPP and OAS won't be affected by the changes, Harper added.

OAS is a cornerstone of the retirement security system and, together with the Guaranteed Income Supplement, has been the main reason poverty among seniors in Canada is so low.

But since the population is aging and the number of taxpayers is dwindling, the program is seen as unsustainable in its current form.

Officials noted that the cost of OAS is pegged to rise to $108 billion a year in 2030 from $36 billion in 2010. That's because the number of Canadians over 65 will rise to 9.3 million in 2030 from 4.7 million in 2010.

The government has been contemplating changes to the retirement security system for years. One option could be to raise the age at which people can claim benefits.

Or, Ottawa could try to shift some OAS recipients to the self-financing CPP system by creating new options for them.

Andrew Jackson, social and economic policy director for the Canadian Labour Congress, said the government might be considering partial de-indexing of OAS benefits, which are currently indexed to inflation. Or it might lower the income threshold at which the government begins clawing back benefits, currently about $50,000.

Any cuts to benefits will be controversial, since many older Canadians took a hit on their retirement savings during the recent financial market turmoil.

Plus, more and more companies are slashing pension benefits or turning to defined contribution agreements that favour corporations — again weakening the retirement savings of Canadians and making them more dependent on government.

Ted Menzies, parliamentary secretary to Finance Minister Jim Flaherty, said everything is on the table in examining both the public and private retirement systems.

"We're looking at the whole thing as a package and there will be some recommendations," Menzies said in an interview.

He added that the "overall, long-term sustainability of all our retirement systems ... has to be primary."

On immigration, Harper said the needs of the Canadian work force will drive reforms.

"We will ensure that, while we respect our humanitarian obligations and family-reunification objectives, we make our economic and labour force needs the central goal of our immigration efforts in the future," he said.

Immigration Minister Jason Kenney has already made several fundamental changes to encourage economic immigrants. Harper's officials would add no details about additional reforms.

Jackson of the CLC said the point system used to grade applicants is weighted toward education qualifications, which skilled labourers often lack. He said he suspects the government will change the system to emphasize skills needed to fill gaps in the labour force.

On investment, Harper said Ottawa will soon act on the recommendations in a recent task force report on how to simplify and improve programs to encourage research and development.

There are problems with the current tax-incentive system, he said in a question-and-answer period.

"We haven't seen the kind of private-sector results and the results in commercialization that we've been seeking."

The government does not support all the recommendations, but it agrees with the goals, Harper said.

"Canada's choice will be, with clarity and urgency, to seize and to master our future, to be a model of confidence, growth and prosperity in the 21st century," Harper said.

— With files from Joan Bryden and Jennifer Ditchburn in Ottawa