Dan Gardner is the New York Times best-selling author of Risk, Future Babble, Superforecasting (co-authored with Philip E. Tetlock), and How Big Things Get Done (co-authored with Bent Flyvbjerg). His books have been published in 26 countries and 20 languages. Prior to becoming an author, Gardner was an award-winning investigative journalist. More >

The Government Is Right To Pay Severance

The rule of law is like a 1960s-era Jaguar. It looks sleek and shiny in the showroom. Every-one wants it. But, after you buy it and take it for a drive, it breaks down, so you get it fixed, and it breaks down again, and pretty soon it's costing you a fortune and it's such a pain that you wonder if maybe you should sell it or just send the damned thing to a junk-yard.

I'm sure Tony Clement under-stands that feeling.

As president of the Treasury Board, Clement is responsible for paying the public service. And that job has him handling a very hot file these days.

For many decades, civil servants were entitled to severance pay with-out severance: If they quit voluntarily, or retired, the government handed them a substantial cheque just as if they had been laid off. This was odd. Such a valuable perk essentially doesn't exist in the private sector. And it costs the government an estimated $500 million a year.

So the government has decided to get rid of it, a move widely sup-ported because, really, severance pay without severance is pretty much in-defensible. But there's a problem.

The government can't simply wash its hands and walk away. "Severance pay" is a benefit in the employment contracts which the government negotiated, accepted, and signed. It is on the hook.

And then there's the matter of outstanding debt. Current employees are owed a lot of "severance pay." The latest estimates suggest it's in range of $6 billion.

So, for the government to be rid of this system, it had to get the unions to agree to the change, which meant giving them some-thing in exchange. And it had to start sending out big "severance pay" cheques to civil servants who will keep showing up for work as al-ways.

That is what it did. Civil servants got a special 0.75-per-cent wage in-crease over three years as compensation for scrapping the "severance pay" system, while cheques for tens of thousands of dollars each have been landing in mailboxes. It's like Christmas for civil servants. And the taxpayer is Santa Claus.

The reaction was predictable.

"To spend billions of dollars in severance package for people that are not losing their jobs, people that have the best form of job security in the country, that have gold-plated pensions to leave to, just seems nuts," fumed Dan Kelly, head of the Canadian Federation of Independent Business. Of course Kelly agreed that the "severance pay" perk should be taken away from civil servants. Everyone does, apparently. But he and many others just don't think civil servants should be compensated for the loss.

The government should have just told its employees to "forget it," Kelly McParland wrote in the Nation-al Post, even though this would "undoubtedly run into some legal issues."

Ah, yes. "Legal issues." Isn't the rule of law annoying? Sure it sounds great in principle. But this is ridiculous. Couldn't the government just send the damned thing to the junkyard?

It could, actually. With legislation, the government can do pretty much whatever it wants. In this case, all it had to do was pass a bill that changes the contracts without compensation.

Governments occasionally do that sort of thing. Remember the Pearson airport deal?

Shortly before being ousted from power, the Progressive Conservative government signed a contract to have a consortium run Pearson air-port. The Liberals said it was crony-ism and promised to get out of it if elected. They won. But backing out of the contract would have incurred massive penalties, as prescribed in the contract. So the Liberals introduced legislation that scrapped the contract without compensation.

The bill passed the House of Commons. But in the chamber of sober second thought, many senators believed this was a matter of great principle.

The rule of law is the foundation of a modern, free society, they said. If the government can change the law retroactively whenever it wishes it is not truly bound by the laws that bind all others. It is above the law. And government above the law is a frightening thing.

The Senate blocked the legislation. The government ultimately paid up, as required by its contractual obligations.

Yes, there was also politics involved. The Senate was heavily PC at the time. But there really was a fundamental principle at stake, and it was upheld, even though doing so was very expensive and it would have been so much easier to take the principle and the contract to the junkyard.

In scrapping the "severance pay" benefit the Conservative government is doing what previous Liberal and Conservative governments should have done long ago, as even Liberal critic John McCallum graciously agreed in a recent interview. But, just as importantly, the government is doing it the right way: by honouring its contractual obligations and thus, implicitly, honouring the rule of law.

And it's doing that despite the cost and the yowling from people who don't understand or appreciate that an essential principle is at stake.

Of course, that's where my metaphor with the 1960s-era Jaguar breaks down like a 1960s-era Jaguar. The rule of law isn't just cool in the showroom, expensive on the road. It's also of inestimable value, practical value. It's not like a sport car. It's not a luxury. We need it.

Sending it to the junkyard is not, and should never be, an option.