Flaherty scales back EI premium increase

Finance Minister Jim Flaherty says he will increase employment insurance premiums in January, but not as high as the level recommended by an independent panel.

Flaherty announced Thursdaythat the 2011increase will belimited tofive cents per every $100 of insurable earnings after "listening and consulting" with business owners. The move will save employers and employees $1.2 billion next year from what they would have paid under the planned hike of 15 cents per $100, he said.

"We are setting maximums because of our concern, quite frankly, with the fragility of the economic recovery and our concern that theres a limit to what businesses and employees can bear," Flaherty told reporters in Ottawa.

Flaherty, who was joined at the announcement byrepresentatives of the Canadian Federation of Independent Business and the Canadian Chamber of Commerce,also said the government will launch public consultations on how EI rates are set.

Thefinance ministerfroze EI premiums in his 2009 budget as part of the Conservative government's economic stimulus package, but indicated earlier this month Ottawa has no plans to continue the freeze for the coming fiscal year as Canada's economy emerges from the global recession.

It was recently reported that the Canada Employment Insurance Financing Board, an independent body created by the Tories in 2008 to set premium rates, called for an increase of almost 10 per cent on Jan. 1.

But the Canadian Federation of Independent Business had estimated the projected maximum hikes could cost 170,000 jobs by making hiring more expensive.

Whenquestioned about his decision to go against the panel's rate recommendation, Flaherty said the government has to "strike a balance" and avoid running the risk of "some significant economic harm at a time of fragile recovery."

During Thursday's question period, Liberal Deputy Leader Ralph Goodale hit out at the Conservatives for being the first governmentto increase EI premiumssince Brian Mulroney's Progressive Conservatives.

"They are the ones who threatened to drive them up, and now we're supposed to be grateful that their increase is only part of what they threaten," Goodale told the House.

Prime Minister Stephen Harper replied thatbusiness leaders andworkers haveresponded positively to the move.He also said the Liberals, while in government, were cutting benefits to workers and took $50 billion out of the EI fund to pay for their deficits.