A freeze on employment insurance premiums that has been in effect for two years will end in the coming budget, which means premiums will soon rise, Finance Minister Jim Flaherty says.

Finance Minister Jim Flaherty, seen in April, has said the two-year freeze on EI premiums will soon come to an end. (Mark Blinch/Reuters)

"EI premiums were frozen as part of the Economic Action Plan," Flaherty told reporters in Kitchener on Thursday. "They were frozen as a measure to help Canada come out of recession."

Now that the economy and jobs picture has improved, he said, Ottawa has no plans to continue the freeze for the coming fiscal year, he said.

Flaherty was responding to a news report that said EI premiums could be set to increase by nearly 10 per cent on Jan. 1.

"The situation with EI would remit to the normal situation and the freeze would end," he said.

Flaherty also confirmed Ottawa has no plans to delay a second major change to Canada's employment insurance system, which is on track to be in effect as early as this weekend.

'The situation with EI would remit to the normal situation and the freeze would end.'— Finance Minister Jim Flaherty

Beginning Saturday, Ottawa will cancel a program that granted an additional five weeks of benefits to all workers and up to 20 additional weeks for long-tenured workers.

Both programs were implemented last year in the face of surging joblessness, but Ottawa has decided neither is needed now that the EI system is beginning to return to normalcy.

"We continue to watch EI, we'll be mindful of that," Flaherty said. "But the plan continues to be that we will wind down [the program]."

Timing is wrong

Ontario Premier Dalton McGuinty criticized the federal government's timing. With the economic recovery uncertain and the lack of consumer confidence, this the wrong time to start cutting benefits, he told reporters.

"It's too early for us to roll back benefits for employment insurance, given the state of the recovery," said McGuinty. "I think that's a mistake.

"Given this tremendous and unusual uncertainty, I think we're in a period of prolonged, very slow growth, and that calls for us to maintain that kind of measure to ensure that those people who are having difficulty finding a job have the necessary supports."

The federal government should also put off any plans to raise EI premiums on employers for the same reason, said McGuinty, who also signalled his displeasure with this week's interest rate hike by the Bank of Canada.

"A hike in EI premiums, to my way of thinking, at this point in time — not forever but at this point in time — I think runs counter to what we need to do in order to ensure that people regain more confidence everyday about a growing economy," he said.