OTTAWA - After years of being labelled a slush fund and tax grab, the Employment Insurance system is being placed under control of an arm's-length agency.
The fund has been the target of complaints by auditors general, business and labour groups.
For years it has run huge paper surpluses which simply disappeared into the general government coffers.
Business groups complained that premiums bore little relationship to what was needed to keep the fund in the black and were, instead, a backdoor tax.
"Businesses say that they are being overcharged,'' said Larry Chapman of the Canadian Institute of Chartered Accountants.
"Anti-poverty groups say it's a tax on the working poor.''
Chapman said the premiums are also seen as hurting jobs.
"Any payroll taxes are bound to be a drag on job creation.''
In the 2007 speech from the throne, the Conservatives -- who condemned the system's phantom surpluses when they were in opposition -- promised changes in the way the fund is managed. Tuesday's budget fleshed that out.
A new Canada Employment Insurance Financing Board will manage the system through a separate account which will invest any surpluses against future needs.
The board with start with $2 billion in seed money.
Starting next year, the agency will set premiums to reflect surpluses or deficits to ensure that the fund breaks even over the course of a traditional business cycle.
The budget documents forecast that EI premiums, which are to drop to $1.73 for every $100 in insurable earnings next January, won't change immediately under the new regime.
The new agency will not be able to raise or lower premiums by more than 15 cents in any year, but the $2 billion fund will serve to tide the system over when unemployment rises and to cut premiums in good times.
