Inside Stephen Harper’s wallet

During his 10 years on Parliament Hill, Pierre Pettigrew drew admiring stares for his elegant suits and swooping salt-and-pepper coiffure. But the Liberal politician didn’t just look like a million bucks. He also earned a million bucks. Actually, he did even better than that. As a cabinet minister between 1996 and 2006, he collected paycheques totalling more than $1.5 million.

Even after he lost his seat in the 2006 election, the money kept flowing in. Like all fired MPs, Pettigrew qualified for a severance package, estimated to be worth $49,000 by the Canadian Taxpayers Federation. And that was just the down payment on a plush future. Three months after leaving Parliament, he celebrated his 55th birthday and could start collecting a parliamentary pension worth $76,000 a year. While it’s difficult to put an exact dollar figure on Pettigrew’s pension, it’s roughly equivalent to what a person of similar age could buy in the form of an annuity for $1.6-million.

Pettigrew’s total take from a decade in public service? Between salary, pension and benefits, the equivalent of at least $3 million.

He did absolutely nothing wrong to get that money. From all accounts, Pettigrew was hard-working, competent and scrupulously honest. He merely collected the standard pay and perks that our federal leaders have voted for themselves.

He serves as an example of what a politician can earn from a parliamentary career of reasonable, but not marathon, length. The total payoff, it turns out, is in the millions.

Surprised? Few Canadians know how well-paid our politicians are. There is a good reason for that ignorance: no one in power has a vested interest in publicizing how much they take home. Unlike politicians in the U.S. or Britain, our elected officials don’t have to publicize details of their expense accounts. Unlike U.S. senators or congressional representatives, they aren’t required to publicly disclose their approximate net worth or their sources of income. In researching this article, MoneySense asked Stephen Harper, Michael Ignatieff and Jack Layton to provide us with a breakdown of how much they’re worth. Each of them declined.

Trying to research politicians’ compensation through official sources is time consuming. We spent weeks sorting through government documents to comprehend the various components of an MP’s compensation. The list begins with a six-figure salary, of course. Then there are expense accounts and a myriad of perks, such as free trips all over the world. Finally, there is the pension, a largely ignored payoff that can be worth seven figures by itself.

No matter how you add up this grab bag of goodies, it’s clear that our leaders in Ottawa have done a lot better over the past few years than the average taxpayer has. A decade ago our politicians earned salaries that were much in line with what middle-class workers take home. They now enjoy compensation packages that few of us can match. To get a sense of the widening gap between your wallet and Stephen Harper’s, join us as we take a guided tour into the personal finances of our highest elected officials.

Let’s begin on election night. If you’re a first-time candidate for Parliament, this is the evening that can change your life. Victory means that you will enter the House of Commons and help to shape the national debate. If you’re like most first-time candidates, victory also means that you will take a big jump up the income ladder.

“I don’t think it’s much of a stretch to say that most MPs are doing better in office than they would in their careers in private life,” says Duff Conacher, co-ordinator at Democracy Watch, a government watchdog in Ottawa. Contrary to popular opinion, most MPs are not rich corporate lawyers. They’re not wealthy executives or doctors either. Many were mid-level managers and consultants. The single most common background among our current crop of parliamentarians is the classroom. A surprising 52 MPs taught in public schools, colleges and universities. Another 21 were farmers. A dozen were journalists; nearly as many worked for unions. Then there are more unusual cases. John Cummins, a Conservative MP from British Columbia, spent over 20 years as a commercial fisherman. Malcolm Allen, a New Democrat from Ontario, was an electrician.

For most MPs, election to Parliament has meant a very nice raise. Every MP earns at least $157,731 a year. The paycheque doesn’t vary by how long you’ve occupied your seat, or by your attendance in the Commons, or by your productivity. Each MP gets the same raise every year. The increase is based on the average hikes in pay negotiated by unions in the private sector. This year the raise was supposed to be 3.3%. But with the global economy imploding and the budget sinking back into deficit, MPs decided to cut their raise to 1.5%, or about an extra $2,000 a year per elected official.

MPs boost their income if they become party whip or caucus chairman. You get an especially large bump if you’re appointed to cabinet, where each minister is paid $233,000 a year. Of course, the best-paying job of all is prime minister. Stephen Harper will earn $315,462 this year, double what backbenchers make.

It’s fair to point out — and politicians do — that our MPs, cabinet ministers and even prime minister make far less than many CEOs or even Bay Street lawyers. On the other hand, the lowliest MP earns about four times what an average Canadian takes home.

This was not always the case. Just nine years ago the base pay for an MP was $68,200, pretty much in line with what a high school teacher or police officer might earn. Since then MPs’ salaries have more than doubled. They now sit in the top 2% of income earners, on a par, if not ahead, of most physicians, lawyers and dentists.

Our elected officials defend their apparent grab for cash. They point out that MPs used to enjoy a tax-free allowance of $22,500 a year. In 2001, Parliament scrapped that allowance. To offset it, MPs boosted their salaries, from $68,200 a year to $131,400.

So, all right: the surge in politicians’ incomes over the past decade isn’t quite as bad as it appears at first glance. But however you do the math on the allowance-for-pay swap, it appears that MPs wound up getting a nice raise. And, under the new arrangement, they’re still able to stick many of the costs of office onto the taxpayer’s tab. For instance, MPs who aren’t from the Ottawa region can expense rent and utilities on their accommodations in Ottawa, as well as meals, up to $25,468 a year. Add in free train travel, as well as up to 64 free round-trip air tickets a year from their riding to Ottawa, and our elected officials are doing just fine, thank you.

But the best perk of all comes when they leave office. MPs’ pensions have often been described as “gold-plated.” A more apt description is solid platinum with diamonds on top.

To qualify for a pension, you have to serve as a member of Parliament for a mere six years. A backbencher with six years on the job who retired at the end of this year would receive an annual pension of $27,213 once he or she turns 55. Once you hit the six-year mark, your pension rises at dizzying speed. If the MP sticks around for another four years, his or her pension hits $45,355 a year. For you or me to receive an equivalent payout in retirement we would have to put $80,000 into our RRSPs each year for 10 years.

Thanks to their king-sized pensions, veteran MPs have little to worry about. The average MP who is eligible to collect a parliamentary pension takes in a very comfortable $49,985 a year. In fact, there are 70 ex-MPs who each collect more than $70,000 a year. “That’s more than a lot of people in Canada make working for a living,” fumes Kevin Gaudet, federal director of the Canadian Taxpayers Federation. Gaudet points out that MPs contribute only a fraction of the cost of their own pensions; most of their retirement deal is paid for by taxpayers like you and me. We contribute $3.65 for every $1 the politicians put into their own pension pot.

Over time, MPs’ pensions turn into million-dollar paydays. The National Citizens Coalition estimates that Bill Blaikie, a 58-year-old NDPer who spent 29 years in the House before quitting politics last year, will receive a total payout of more than $2.6 million by the time he turns 75. Monte Solberg, a Conservative cabinet minister, who also quit politics last year after 15 years as an MP, is only 51, so he will have to wait four more years to collect his pension. But once he does, he’ll collect $2.3 million over 20 years.

MPs’ pensions represent an extraterrestrial level of luxury, unmatched by any deal in the private sector. Not only are payouts lush for only a few years of service, but unlike private pension plans, the payments are backed by the full power of the federal government, so they are completely safe. In addition, the payouts rise in line with inflation once a retired MP hits 60, so our former elected officials have no worries about seeing the buying power of their pensions decline in years to come. The bottom line? If you can make it through six years as an MP, you never have to fret again about the stock market. “When you look at the average person today and how their RRSPs have been kicked around, these guys don’t have that problem,” says Peter Coleman, president of the National Citizens Coalition.

MPs justify their pay by pointing out the long hours and constant travel their job demands. Parliament sits only 130 days a year on average, but MPs say they enjoy little time off. When the House isn’t in session, they’re typically studying legislation, hosting backyard fundraisers or handling questions from their constituents about everything from immigration problems to unemployment insurance.

“It’s an all-consuming, 24/7 job,” says Candice Hoeppner, a Conservative from Manitoba who was first elected last fall. Hoeppner, 44, used to work as an executive assistant at an investment firm. Now she shuttles between her home in Winkler, Man., and an apartment in Ottawa. Hoeppner can expense the rent on her apartment, which she shares with a roommate. But there’s no chauffeured limousine waiting to drive her to Parliament Hill every morning. She walks to work.

A typical week for Hoeppner starts late Sunday in Winkler. Saying goodbye to her three teenage kids and husband, she drives an hour and a half to the airport in Winnipeg. Then it’s two and a half hours on a plane to Ottawa. Most weekdays she’s on Parliament Hill by 8 a.m. and home by 10 at night. In between it’s a blur of committee meetings, house duty, Question Period, reports to read and phone calls from people in her riding. She also tries to squeeze in a half hour in her office to listen to CDs in French, which she’s trying to learn. On Thursday or Friday, depending on her schedule, it’s back on the plane to Manitoba.

Many MPs follow the same grueling schedule, says Nelson Wiseman, a political science professor at the University of Toronto. “People watch snippets of Question Period on TV and they see a lot of empty seats. They think that’s it.” Wiseman doesn’t believe that MPs are overpaid. Rather, he says, they’re overworked.

He may have a point. In the 2008 election, 33 out of 304 MPs voluntarily stepped down. The high turnover suggests that politicians are not being paid so well that they want to cling to their posts until they die. Cabinet ministers, in particular, can often find better gigs in the private sector. Anne McLellan, deputy prime minister under Paul Martin, is a classic example. She now works at the law firm of Bennett Jones LLP, teaches at the University of Alberta, and sits on three corporate boards.

The transition can be tougher for backbenchers. Joe Jordan, who spent seven years as a Liberal MP from Ontario, was a community college teacher before entering politics and lost his seniority during his time away from teaching. When he was defeated in the 2004 election, he decided to stay in Ottawa and became a lobbyist. But few ex-MPs go that route. Most head back to their ridings, where many find that defeated politicians aren’t popular. “You’re like a fired employee,” says Jordan. “You’ve been kicked to the curb. The party hasn’t got a lot of use for you either. You’re no longer a bum in a chair with a vote in the House of Commons.” Fired MPs don’t leave empty-handed, however. Those too young to get a pension, are handed severance pay that’s equal to half their annual salary.

So are we paying our MPs too much or too little? In terms of similar jobs around the world, a Canadian MP’s salary sits smack in the middle. It’s more than the $100,000 or so that a British MP earns, but less than the roughly $190,000 a year that a U.S. Congressman takes in.

Perhaps the most practical test of whether we’re paying our MPs the right amount is to look at the people the pay attracts. Despite the six-figure salary, an MP’s compensation is not enough to consistently attract the best educated among us — only 66% of MPs have a university degree. Some observers think that we would improve the quality of governance if we gave the people at the very top of the political pyramid a significant hike in pay. Compared to executives in the private sector, cabinet ministers in particular are not making nearly enough, says Sean MacDonald, a professor at the Asper School of Business at the University of Manitoba. “It’s a joke,” says MacDonald, who specializes in compensation issues. “When you look at how vast a government department is, ministers are grossly underpaid.” MacDonald believes we should raise salaries to encourage more top executives to run for office.

On the other hand, the type of person who is likely to make a good MP or cabinet minister is probably not that motivated by money anyhow. Remember Pierre Pettigrew? As generous as his compensation may have seemed to many of us, he says he actually took a cut in pay to enter Parliament. Before his political career, he had been a highly paid international business consultant with the accounting firm Deloitte. He returned to the firm after leaving office, but never made up for the salary he passed up by going into politics. “I left a lot of money on the table by going into Parliament,” he says.

Pettigrew thinks that the obstacle that is stopping private-sector talent from running for office isn’t the lack of a big paycheque. It’s the lack of respect. “Here in Canada, we like government, but we don’t like members of government,” he says. In the U.S. it’s the other way around. “They’re skeptical of government, but they respect the individuals who serve.”

Fair enough. But if our MPs want respect, it’s difficult to understand why they seem so determined to arouse suspicion.

A Parliament that was serious about garnering respect could start by opening up its expense accounts to public scrutiny. KPMG, a private accounting firm, audits the account of each MP, but it is not allowed to release the results to the public. The last time the Auditor General was allowed to look at MPs’ spending was in 1991. If our politicians want to improve their reputations, they should open their books to prove they’ve got nothing to hide. A recent scandal in Britain revealed MPs to be expensing everything from moat cleaning to soft-core porn rentals. In the wake of those revelations, the silence from Canada’s Parliament is deafening.

An even bigger issue is pensions. At a time when many Canadians’ pensions are being whittled away, and the Canada Pension Plan is being fine-tuned to encourage more people to work until 70, it’s difficult to understand how MPs can continue to wallow in a system that gives them ultra-safe, inflation-protected pensions beginning at 55. “How are they going to deal with private-sector pension issues fairly when they have the most lucrative pensions of all?” asks Gaudet at the Canadian Taxpayers Federation.

The biggest issue of all may be how MPs can maintain a sense of solidarity with ordinary Canadians. Over the past decade, MPs have seen their incomes soar and their lush pensions grow, undisturbed by market crashes or economic slowdowns. They should remember that their good fortune has not been shared by most Canadians.

Perhaps we should introduce a direct tie-in between the average person and the average elected official. The link could be something as simple as fixing MPs’ compensation at the level of the median Canadian salary, plus an inflation-adjusted $100,000 a year. Under such a system, the only way for elected officials to win a raise would be for them to improve life for the typical Canadian. That truly would be a pay-for-performance system — and a system that could give politicians the respect they crave.