2008 Legislative Session: Fourth Session, 38th Parliament

SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

MINUTES AND HANSARD

MINUTES SELECT STANDING COMMITTEE ON FINANCE AND GOVERNMENT SERVICES

Monday, September 15, 2008

10 a.m.

1400 – 1410 (Segal Centre), SFU Harbour Centre

515 West Hastings Street, Vancouver, B.C.

Present: Randy Hawes, MLA (Chair); Bruce Ralston, MLA (Deputy Chair); Robin Austin, MLA; Harry Bloy, MLA; Dave S. Hayer, MLA; John Horgan, MLA; Richard T. Lee, MLA; John Rustad, MLA; Diane Thorne, MLA

Unavoidably Absent: John Yap, MLA

1. As the former Chair, Hon. Bill Bennett, MLA, had resigned from this position, the Deputy Chair called the meeting to order at 10:10 a.m. and called for nominations for the position of Chair.

2. Resolved, that Randy Hawes, MLA, be elected as Chair of the Committee. (Dave Hayer, MLA)

3. The Hon. Colin Hansen, Minister of Finance appeared before the Committee, presented the Budget 2009 Consultation Paper and answered questions.

4. It was moved by John Horgan, MLA: That one or more subcommittees be appointed to hear comments on a range of public policy matters outside of the consultation process. The motion was defeated.

5. The Committee adjourned at 11:16 a.m. to the call of the Chair.

The following electronic version is for informational purposes only.

The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

select standing committee on
Finance and Government Services

Monday, September 15, 2008

Issue No. 71

ISSN 1499-4178

[ Page 1709 ]

MONDAY, SEPTEMBER 15, 2008

The committee met at 10:10 a.m.

[B. Ralston in the chair.]

Election of Chair

B. Ralston (Deputy Chair): I'm Bruce Ralston, the MLA for Surrey-Whalley and the Deputy Chair of the Select Standing Committee on Finance and Government Services. Welcome to our proceedings this morning.

The first item on the agenda is the election of the Chair. I will entertain nominations for that position.

D. Hayer: I will move Randy Hawes for the Chair.

B. Ralston (Deputy Chair): Any further nominations once? Any further nominations twice? Any further nominations a third time? Nominations are closed.

Randy, you'll accept the position as Chair?

R. Hawes: Yes, and thank you for this wonderful honour.

B. Ralston (Deputy Chair): I'll turn the meeting over to you as the Chair.

[R. Hawes in the chair.]

R. Hawes (Chair): Okay, the first item of business that we have is the presentation of the consultation paper by the Minister of Finance, the Hon. Colin Hansen.

Presentation by Minister of Finance

Hon. C. Hansen: Congratulations, Chair, on your difficult election battle here, which you just won.

First of all, I'd like to thank all of the members of the committee for the time and efforts that you'll be putting into this process over the coming weeks. I know that in the past years Ministers of Finance have found the work of this committee very valuable. I know that I can speak for the ministry staff. They find the inputs that come as a result of the work of the committee very valuable as we develop the budget process.

As is required, actually, under the legislation, we will once again be going out with a budget consultation document that will be distributed to all households in British Columbia, soliciting input from average British Columbians as to what their budget priorities would be and what their suggestions would be as we go into that budget process. I hope the feedback that comes from the budget consultation process will also be of benefit to each of you as you deliberate on your eventual report, which will come forward from your work.

I think the budget paper is one of trying to set out for British Columbians some of the progress that we've made as a result of past budgets and also of setting out what some of the opportunities are as we go forward.

If you look at the quarterly financial statements that were released last Friday, what they underscore — for me, certainly — is that some of the tax reductions we have made over the last seven years have stimulated the economy to the point that while we're certainly facing challenges in the economy in British Columbia, we are doing better than Canada as a whole and doing better than most places in North America. We are outperforming the GDP growth in Canada by a healthy margin, even though that projected GDP growth is in fact coming down because of world markets and the world economy.

I think that one of the big challenges we will have as we develop the budget this year is the certainty around revenues over the coming years. As you will know from last Friday's quarterly reports, we have had some unexpected revenues that are going to be flowing to the provincial government this fiscal year and next fiscal year.

Those are revenue sources that we could not have anticipated as we developed Budget 2008 particularly in the area of natural gas revenues, where at the time of the budget we were forecasting natural gas pricing at $5.65 cents a gigajoule over the fiscal year that we're in right now. In the last couple of months we have actually seen the price of natural gas hit just shy of $10 and then come right back down again into the $7 range.

Based on the experts…. These are not numbers that we come up with within the ministry. We actually monitor the world forecasts on natural gas pricing, and we use those numbers as we develop our forecasts. As a result of those worldwide forecasts, which are the same forecasts we used when we put Budget 2008 together, we are now projecting that the average price for natural gas over this fiscal year will be just shy of $2 per gigajoule higher than what we had in Budget 2008.

Every dollar increase in the price of natural gas results in an extra $300 million to the revenues of the province. So just from that source alone we're projecting just under $600 million of extra revenues in this fiscal year. That carries through into next year as well — that we forecast that natural gas prices will be higher.

[1015]

The other area where we have had significant surprise is in corporate income tax revenues. The numbers that we use for the budget come from the federal Department of Finance. They provide us with their best estimates as to what they think the corporate income tax for British Columbia will come in at. We use those numbers in our budget planning.

They have come back to us in the last couple of months and indicated to us that they have significantly underestimated what we should be able to expect in this
[ Page 1710 ]
fiscal and next fiscal year, so that is also adding to the projected surplus that was announced last Friday.

So the challenge that I think we have — and I hope that you will accept the challenge yourselves as you do your deliberations — is that while we see extra revenue in this fiscal and next fiscal, we cannot with any certainty project extra revenues in the out-years.

The challenge for us is that we start looking at increased program spending or tax cuts, tax reductions, that would be annualized. It would be very difficult, for example, to develop a budget for next year that starts spending or absorbing that extra revenue through extra program spending or reductions in revenue in a way that would be hard-wired for years 3 and 4, etc., out, because the projected gap between revenues and expenditures indeed is going to narrow as we get into those out-years.

That is certainly going to be one of our biggest challenges, but I hope that with the circulation of the budget mailer, it will, as in past years, provide good feedback from around the province that will help all of us as we count down to budget 2009.

R. Hawes (Chair): Thank you, Colin. We'll take questions.

J. Horgan: Thank you, Minister, for your brief presentation, not following your predecessor.

I wanted to talk a bit about natural gas revenues and how they relate to the carbon tax. Can you give the committee an indication of the amount of natural gas we export without tax relative to the amount of natural gas we use in the Lower Mainland and across British Columbia, where we're imposing a carbon tax on consumption?

Hon. C. Hansen: I don't have those numbers at my fingertips, but I'll certainly endeavour to get them for you.

J. Horgan: In addition to that, a supplementary question, hon. Chair.

Perhaps you could also add coal exports and the absence of a carbon tax or a pollution tax, as it's being called here.

I think British Columbians, certainly in my constituency…. I would suspect members on the committee are hearing that we are making an enormous amount of revenue from exporting carbon-based energy products without any return to the tax base from carbon tax. It strikes me that if we're exporting to jurisdictions that don't have a carbon tax, we might want to impose an export tax or something similar at source.

Do you have any thoughts on that?

Hon. C. Hansen: I know that through the western climate initiative they're certainly looking at those kinds of issues. I think that as people around the world, experts on climate action agendas…. They are looking at mechanisms by which our own economy, our own producers, our own consumers would not be…. Basically, we would not have any perverse incentives that would be put in place; let's put it that way.

B. Ralston (Deputy Chair): Minister, you talked on Friday at the quarterly. I think you pretty strongly hinted that the ministry and you were considering some kind of tax cuts. I think the way you've shaped it here, it sounds a little bit like a kind of "Ralph bucks" initiative — some kind of cash back in the spring.

Given what's going on in Wall Street and the liquidation of Lehman Brothers and the problems with Merrill Lynch, don't you think it would be more prudent to simply adopt a wait-and-see attitude at this point rather than make those kinds of promises?

Hon. C. Hansen: First of all, I didn't make any promises, and I don't think you should draw any conclusions from my comments on Friday. This year is no different than any other year in that the ministry will be looking at the demands on program spending, both the program spending that is driven by issues such as caseload and also opportunities.

At the same time, this year is not unlike any other year. The ministry will be looking at what we refer to as revenue measures, and we'll look at how we can leave more money in people's pockets.

[1020]

I think you will recall that on Friday I said that I felt there were two words that best described our approach within the Ministry of Finance, and that is one of volatility and one of caution. I think as we look at what is happening in world markets — and today is certainly a good example of that — that we are living in very volatile economic times. I wouldn't say that we want to wait and see. I think it's important that we use the financial resources of the British Columbia public — the taxpayers — in the way that best benefits the province of British Columbia, and we'll do that as we have done in past years.

B. Ralston (Deputy Chair): On the topic of tax cuts, over the summer there has been a very strong campaign advanced by the Leader of the Opposition opposing the carbon tax and calling for that tax to be axed. Are you prepared to consider ending that tax as a possible revenue in the 2009 budget?

Hon. C. Hansen: Well, what I've found…. The word that I have used is "disingenuous," and I'll use that word here. I think that campaign was disingenuous, because what we see is a proposal to replace the carbon tax with a hidden tax. That is not something we would support.
[ Page 1711 ]

We also would have to draw the conclusion from the Leader of the Opposition that if the carbon tax was going to be eliminated, so would the income tax cut that accompanied it. We are a government that actually supports reductions in income tax. We have seen, actually, four significant reductions in personal income tax in the last seven years, and there will be a fifth reduction in income tax that will click in on January 1, 2009. That is part of the revenue-neutrality of the carbon tax.

B. Ralston (Deputy Chair): So I take it that your answer, when it comes to cutting carbon tax, is no. Is that right?

Hon. C. Hansen: We have set out a budget in 2008, and we stand by it.

R. Lee: Thank you, Minister, for the introduction.

My question is on the surplus. We know that there are some capital projects down the road. Are there any studies on advancing those projects ahead of time, using the surplus?

Hon. C. Hansen: Well, I think that is one of the big advantages of the surpluses that we've seen. I think there are lots of people who feel that if you wind up with a budget surplus, it somehow vanishes into thin air, when in fact there are two things that happen as a result of the surpluses that we ran in past years.

One is that we have been able to pay down debt, particularly in the area of operating debt. We saw a significant run-up in taxpayer-supported debt from government operations during the 1990s. We now — as we estimate, probably about the end of June of this year — have taxpayer-supported debt from government operations back down to the level it was in 1991.

The other way that the surplus gets utilized is that it actually frees up room for infrastructure. So as we try to maintain a low debt-to-GDP ratio, which is very important to our credit rating as a province, we see the economy expanding. That actually allows us to borrow money to build the necessary infrastructure, whether it's roads or highways or hospitals or schools, as a result of the expanding economy. As a result of the surpluses that we have at the end of the year, it allows us to use some of that cash surplus to build the infrastructure that we need rather than going out to the markets and borrowing for that infrastructure.

D. Hayer: Thank you very much, Minister. I'm looking at your first graph on page 2 of the consultation paper that you produced. It talks about GDP change, and it goes from the year 2000 to 2007.

When you look at the graph before 2001 or right up to the middle of 2001, British Columbia GDP is lower than Canada. Then after that it seemed to always be staying higher, except that in 2007 both GDPs are going down a little bit, but the British Columbia GDP is still higher.

Do you see us going back to the days before 2001 when the B.C. GDP was down, or do you, looking at your projection, think we'll always stay higher than the Canadian GDP?

[1025]

Hon. C. Hansen: As we look forward, if you wanted to try to forecast five or eight or ten years from now, I think it would be very difficult for any economist to forecast with any degree of certainty what the growth in GDP would be for British Columbia. But I think one of the things that we could say with some certainty is that it will exceed that of Canada as a whole.

The short answer to your question is that we anticipate that British Columbia's GDP growth will exceed that of the rest of Canada for the foreseeable future.

J. Horgan: Just following up, Minister, on the GDP question. When you released the quarterly, I believe the projection going forward was 1.7 percent growth within this fiscal year. Is that correct?

Hon. C. Hansen: That's correct.

J. Horgan: So with that significant reduction in growth projection, wouldn't it have been prudent again, following on the Deputy Chair's comments, in your budget consultation document to advise the public that there has been a significant shift, a significant reduction in the projected growth, that will have consequences for decisions by government and potentially decisions by communities into 2008?

Hon. C. Hansen: Well, if you look on page 3 of the budget consultation paper in the table that's titled "Budget consultation fiscal and economic forecast," when you look at "Available revenues," I think that sort of underscores the fact that we have certainty for our revenues for this fiscal year and for next fiscal year, which shows that we have more revenues than we had originally forecast.

When you look at the 2010-2011 year, that drops off quite considerably. I think that sort of underscores the volatility. So in response to the point you make, exactly what we are doing as a province and as a Ministry of Finance is to ensure that we take a cautious and prudent approach as we go forward. We're certainly not going to be spending revenues that we are not certain will be there for us.

J. Horgan: But Minister, if we were looking at $600 million in windfall revenues from natural gas, where would that fit? I understand that you put the $600 million in going forward, but the previous minister didn't have
[ Page 1712 ]
that in February. So where did the other revenues fall off? Was it in forestry? Was it in personal income tax? What revenue envelopes are reduced?

Hon. C. Hansen: As I mentioned earlier, in terms of the natural gas revenues, we are seeing $567 million in additional revenue that we're forecasting this fiscal. In the area of bonus bids — these are for the drilling rights primarily in northeastern British Columbia — as you know, we've seen record numbers paid. We don't get to spend those dollars. For every dollar that is spent in those bids for drilling rights, we get to spend 1/8 of it in each fiscal year. So the fact that we've had record sales this year increases the amount that we have available in this fiscal, but that actually gets spread out over the coming eight years, just as the bids from the previous eight years are part of the revenues that we can count on this year.

I mentioned the higher corporate income tax. We anticipate that will generate about $383 million of additional revenue. There's a comparable amount next year; I forget exactly the number. But that's only for those two years. We cannot anticipate additional corporate income tax revenues for the out-years.

For the others, in terms of metals and mineral revenues we anticipate an extra $140 million.

So to directly answer your question, what we are seeing where revenues are down…. I think the largest single item is the lower forest revenues, and we budgeted in February for a decline in revenues from the forest sector. In fact, we are taking a much bigger hit than we even anticipated then in our forest sector, with anticipated revenues now $263 million less than we had forecast in the budget that was released in February.

The other areas that we are down…. Other taxation revenues all totalled are about $303 million. I think the largest single item in that category is actually a reduction in what we're anticipating from property transfer tax.

J. Horgan: On property transfer tax. Minister, I know we'll hear from witnesses over the coming number of days, certainly from the real estate boards and others, who will have something to say about the property transfer tax. Can you maybe foreshadow some of the questions that we could ask of those witnesses about the impact of that tax on the retail housing market?

[1030]

Hon. C. Hansen: No. Just to elaborate, when I first became Minister of Finance, I remember one of the very first discussions I had with the deputy minister at the time. I could probably title it "Finance Minister 101," and that's: "Do not engage in or speculate on any discussion around tax changes." I will be a good listener and certainly look forward to input from the committee on any tax measures, but I will refrain from engaging in those discussions.

J. Rustad: I've got a couple of questions following up on some earlier comments. In particular, I want to talk about this whole idea of the wait-and-see approach to tax cuts, if tax cuts are in the cards for the future. Back in the '90s we had a little problem called the mountain pine beetle epidemic, and there was an approach by the government in those days to wait and see. Well, we saw what the response was in terms of the epidemic getting out of hand.

In 2001, when the current government decided to put in a 25 percent tax increase, there were plenty of people that said: "You know what? Perhaps we should hold off because the economy is in a soft patch, and it might not be the right time to do this. Why don't we wait and see?"

I remember looking through, when I was on Public Accounts, watching the revenue projections back four years after that — or not the projections but the actual revenue that came in on income taxes from the income tax cuts. There was a drop-off, yes, from the income coming in on the income tax cuts, but then revenues went up dramatically from there.

I'm wondering: with regards to tax cuts and how that can potentially stimulate the economy, is there a point at which you think tax cuts would…? What level, I guess, do you need in terms of tax cuts to be able to help stimulate the economy, and is there a point where there isn't quite as much bang for the buck in terms of tax reductions?

Hon. C. Hansen: Well, I think if you look at what's transpired in the last seven years, we have seen strong revenues from personal income tax in spite of the fact that we have brought in four significant reductions in personal income tax over that period of time.

If you look at what's happened in the last seven years, we have seen our labour force…. I think in 2001 there were about 1.9 million people working in British Columbia. Since 2001 we have seen a net increase of over 430,000 people working in British Columbia. We've seen unemployment rates hit record lows, and they now are hovering at near-record lows in the province.

I think there's lots of evidence that the stimulus we made to the economy in those years is paying dividends for economic growth in the province in terms of job creation but ultimately in terms of the revenues to government that we need to support the social programs that we all rely on.

In terms of "Is there a threshold?" I think we have to be cognizant of that as we go forward. I think there's lots of evidence that leaving money in people's pockets helps the economy, and that's certainly a philosophy of this government that I plan to continue.

J. Rustad: Thank you. Just following up on that, one of the other issues that seem to be pretty prevalent in our economy today is the challenge of attracting labour. Over the next decade or so we are going to be short about 30,000 people per year.
[ Page 1713 ]

I'm just wondering. In terms of the tax competitiveness with the rest of Canada and North America, we have the lowest taxes at this point. Do you see that as being a benefit? Have you seen additional immigration coming into the province by having those lower taxes, and is that helping to offset some of those challenges in terms of our labour market?

Hon. C. Hansen: Yes it is, and certainly in the first five years that I served as a member of the Legislature, anecdotally there were all kinds of stories, particularly in the technology sector, where we wound up with our young, best and brightest leaving the province because of income tax rates — both personal and corporate income tax rates.

We saw during the second half of the 1990s a net exodus from British Columbia of 50,000 people. Those were primarily in the prime of their working years, looking for job opportunities in other parts of Canada. What we have seen over the last five years is a reversal of that, and we are seeing significant net in-migration from other parts of Canada.

We continue to have strong international migration to British Columbia, and we are now once again seeing strong interprovincial migration to British Columbia. That's, I think, largely in part because of the economic opportunities that are here but also because of the favourable tax rates we have that are indeed competitive with other parts of Canada.

[1035]

I had a discussion not too long ago with a group from the technology sector, and they were talking about some of the subsidies that companies could get in other parts of Canada. As you know, we have a policy in British Columbia that we're not going to use taxpayers' money to subsidize individual firms in this province. So as they were doing their deliberations as to whether these subsidies were worth going after, I said to them: "Have you actually looked at the total tax hit that your employees are going to take in the province of Quebec as opposed to the province of British Columbia?"

For a worker in about the $70,000-a-year bracket, which many of these technology workers would be making, they would actually be paying $5,000 to $6,000 a year more in taxes, direct and indirect, in the province of Quebec than they would in the province of British Columbia. I think we have created a very favourable environment.

The skills shortage is real. It's going to continue to be a challenge for this province in the years ahead, but I think that the tax structure that we've created in British Columbia will make this a favourable destination.

R. Austin: I'd just like to follow up on a couple of points that John has made. You've spoken about the rosy picture that has taken place since 2001 throughout the province. I guess my question to you, Minister, would be: does it not concern you…? Well, two things. First of all, the percentage of new jobs that have come into the province since 2001.... Does the ministry track how many of those jobs are what I would call sort of family-paying jobs as opposed to low-wage or minimum-wage jobs?

Considering the rosy picture that these graphs display, does the minister worry at all that the economic benefits that this province has seen in the last five or six years…? Does the minister at all worry that this hasn't benefited everybody? It may have benefited a certain portion of society and left a whole bunch behind.

Could the minister make any comments on that?

Hon. C. Hansen: Yes, for sure. First of all, let's look at income tax rates in British Columbia. In terms of percentage reduction in income tax, it's the lower-income groups that have received the biggest benefit of that. Everybody has received significant reductions in personal income tax, but at the lower end of the income scale it's the greatest, leaving more money in people's pockets, particularly those in the lower incomes.

The other is when you start looking at the average wage in British Columbia. I think that in 2001, if my memory serves me right, it was about $16 an hour. Now it's, I believe, about $21 an hour. So we are seeing wage rates in British Columbia going up over that period of time.

The other indicator that we have — I'm sure there are lots of them, but these are just the ones that come to mind right now — is around the number of people earning minimum wage in British Columbia, which has dropped off significantly over that period of time.

R. Austin: Could the minister comment on the number of people who are still earning minimum wage in this province and perhaps tell us how the government expects…? When you consider all the increases in costs to average families in terms of gas prices, hydro, etc., how does the minister feel about people who are still living on minimum wage in this province? I believe there's around a quarter of a million.

When you see the housing crisis and the expenses that take place, particularly in the Lower Mainland, where housing is quite an issue…. Does the minister not think that now, for those people who have lagged behind…? I'm sure the minister would agree that there is a certain percentage of people who have lagged behind in this booming economy. Does the government feel that they could maybe take some of these extra revenues to try and help those people — for example, by raising the minimum wage or allowing the minimum wage to rise up to a level that enables people to raise their children and not be in poverty?

Hon. C. Hansen: I don't have it with me today, but I've seen an analysis in the last little while looking at
[ Page 1714 ]
the demographics of individuals in British Columbia who are earning minimum wage. One of the things that struck me was how large the percentage was of people earning minimum wage who were in fact under the age of 25, living in the residence of their parents.

We have seen over the last seven years a dramatic decline in the youth unemployment rate. I think this is very important for young people — to get their first jobs, get their training. I know the frustration that I heard, certainly when I first became an MLA, from young British Columbians who were saying: "We're trying to apply for jobs, but they want experience. I can't get the experience unless I get my first job." It was that catch-22.

[1040]

Now we've seen unemployment rates…. Whereas in the past they were the highest of any province west of Quebec, now the youth unemployment rate in British Columbia, I believe, is down around the 7 percent to 8 percent range, which would be one of the lowest in all of Canada.

I think when we start talking about minimum wage, we should be focusing in on the needs of individual families. There, when you look at things like the rent subsidy program that the Minister of Housing has brought in…. Those are important programs that actually assist families with low incomes. You look at the elimination of medical services premiums for lower-income families. You look at the elimination of income tax for lower-income families. You look at the changes to the Fair PharmaCare program, which is a significant benefit to lower-income families compared to the program that was in before.

There are tons of supports that have been put in place by this government for low-income families over that period of time.

D. Thorne: I guess following on the same subject matter, low-income families or even medium-income families…. I'm wondering if in light of the extra surplus that we have and all of the indications over the past couple of years and even right down to this morning — the front page of The Vancouver Sun talking about the fact that there are no apartments for rent, particularly in southern British Columbia — the government is going to consider in the new budget putting money into the budget to actually build some affordable housing, particularly for families.

The waiting lists at B.C. Housing are growing every year. Any new housing that's come on stream through government funding is for more special needs or special types of housing, not straight family housing. It's now becoming apparent every single day how there is none — that kind of housing. It's turning into a huge crisis, and it's a totally different problem than the homelessness problem and the needs of the mentally ill or drug addicted. I'm speaking about family housing for not just low-income families but, increasingly, for middle-income families.

I think it's become obvious now to everybody — and I'm assuming, as well, to the government — that rent supplements and SAFER programs and all of the supports that your government has put into place can only be effective if there is indeed housing and rental accommodation that people can rent. As the Housing critic for the opposition, my office is increasingly being inundated with calls from people who can't take advantage of any of those programs.

I'm wondering if we're going to be looking at any of those changes before budget time, especially with the good news about extra surpluses and things like that.

Hon. C. Hansen: First of all, I can't give you a specific answer as to what will or won't be in the budget next February 17. I think that would second-guess the work of you and your colleagues on this committee. We're certainly open to input in that area.

I just want to point out that in the last seven years, we've seen an increase in the housing budget in British Columbia. The housing and shelter budget has increased over 300 percent during that period of time, so we've now got a housing and shelter budget in British Columbia that's over $400 million a year. Since 2001 we have seen an increase in the number of supportive housing units across the province from 1,300 units in 2001 to 4,100 today. So there has been a significant increase.

We have seen the rental subsidy program introduced, which I think is providing immediate assistance to low-income families in the province, not waiting for us to start a process of trying to identify land that could be developed into supportive housing that might be open for occupancy two or three years from now. So that's providing some immediate benefit to some of these families.

[1045]

You look at the purchase of 19 single-room-occupancy hotels in the province that the province has taken over, has renovated and brought up to a standard that's appropriate — again, a very quick way of getting housing into the market that's providing for an immediate need.

On the other hand, we have also been working on that medium-term plan, where we are working with municipalities around the province to say: "You would identify building sites for supportive housing for people with addictions and/or mental illness. If you can fast-track that" — and we've put $10 million into the development cost of those properties to assist municipalities in fast-tracking the zoning and servicing of those properties — "then we will get on with building them." Those are happening.

The unfortunate part is that we're not going to see those buildings open for another two years, but in the meantime there is a lot that's happening across the province. I've got some stats that actually break down, community by community, the total number of units that have been developed and the total numbers that have been completed since 2001.

In Vancouver, for example, which a lot of people focused on, we've seen an additional 1,700 units completed over
[ Page 1715 ]
that period of time. In Surrey we've seen 564 additional new units. In Victoria there are 412 additional new units. I could go through the whole list of communities, because they're all over the province, but there has been a significant increase.

I think, as the member points out, there's still a lot more that needs to be done. In our urban centres, in particular, housing is a big challenge. But I would also caution the committee not to look at a one-size-fits-all, because I think that if you look at smaller communities around the province, there are some real opportunities there where land is much more affordable and housing is affordable. What can we do to ensure that people can be supported with good jobs in those communities as well?

D. Thorne: Thank you, Minister. Can I ask that you table that document, with those statistics in?

Hon. C. Hansen: I will endeavour to do that. It's not my document, so I'd better ask permission of the minister responsible.

D. Thorne: Okay. Well, if you can, that would be great.

It's not to denigrate any work that has been done by the government in those special areas with supported housing, as I said in my first question. I'm talking about a different group of people. I'm talking mainly about middle-income to higher low-income people who cannot afford to get into the housing market and who cannot find rental accommodation and, therefore, cannot take advantage of rent supplement programs and SAFER programs.

This was a forgotten group in the past six or seven years, and I think it would be a good time for us as a committee to listen carefully to what the community is saying on that and to look at some kind of relief for those people. I mean, there could be tax incentives for the building of new rental apartments, working with the federal government to do that as well. There haven't been any new rental buildings built in many, many years, as I know the minister is aware.

I know that the Minister of Housing was hoping to have, I think, about 20,000 people on the rent supplement program a year ago, and we're just over 5,000 now. We may be at 6,000; I don't want to pick numbers like that. But it's a fact that the supplement and those supportive programs are not working for middle-income families and for a lot of families because there is no housing, and we all need to be very cognizant of that. I just wanted to bring that up right off the top.

Hon. C. Hansen: I think that's a great subject, and I would welcome suggestions from the committee in that area. I think that the cost of rental accommodation and the cost of housing generally in British Columbia is very much a product of supply and demand.

When you have too few rental units available in the market, it's going to put upward pressure on the prices of those rentals, which I think we're seeing today. So I would welcome input from the committee in terms of what it is that government could be doing, both federally and provincially. I think we have to recognize that the federal government has an important role to play, as they have done in past decades, to stimulate the supply of rental housing in Canada.

R. Hawes (Chair): Minister, maybe I can just take an opportunity to ask two quick questions. Given your previous comments about the out-years and the fiscal prudence that's necessary with respect to the out-years, I'm looking at, first, the questions that are in the budget consultation paper.

[1050]

Question No. 1 surrounds: which taxes do you want to see reduced next from the carbon tax? Given your comments, the conclusion I'm drawing is that while further tax cuts are something the government wants to hear about, we're talking about tied to the carbon tax rather than a reduction in overall revenue to the government. It would be a preferential response from the public. Is that what you'd be looking for? Would I be correct in that assumption?

Hon. C. Hansen: Well, I would not want anyone to speculate on what kinds of tax changes may or may not be in the budget based on anything I say. I think we're open to suggestions.

If you look at the history of the revenues to the province over the last seven years, there's ample evidence that tax cuts work. They do stimulate the economy. They do help individual British Columbia families meet their needs. Both in the context of the revenue neutrality of the carbon tax as we go forward and also for other revenue measures, we're open to suggestions.

R. Hawes (Chair): Okay, the second part of the question I wanted to ask was on Question 2. We have "committed two-thirds of all new spending in the next three years to health care." The question being asked is: "What choices would you make on other priority investments in 2009?"

I am assuming, given your previous comments about the out-years, that infrastructure-type and capital spending rather than program spending would likely be the thing that you would put the most credence or the most weight on, I guess, rather than creating new programs that, as you said, might be unsustainable down the road.

Hon. C. Hansen: I think we have to look at a balance of all of those. I guess there are four areas. There are issues around one-time spending that doesn't put long-term pressures on government on the expenditure side. There is the annualized or long-term program spending
[ Page 1716 ]
that gets hard-wired into the budget for every year to come. There are the revenue measures that would leave more money in people's pockets, and then there's also debt reduction. If there are surpluses, that gives the opportunity to pay down the debt or to put more money into program spending and still stay within that debt cap, which does not result in a growth in our debt-to-GDP ratio.

Those are all areas that we need to consider in a balance, as we go forward. There's no question that there is huge demand for infrastructure spending around the province, well beyond the financial means of the province, as we go forward. We have to be very cognizant of what our debt-servicing costs are. I'm pleased to report that our debt-servicing charges, our debt-servicing costs, this year will be half a billion dollars less than they were in 2001.

We anticipate our debt-servicing costs this year to be about $2.183 billion, which is not quite $500 million less than it would have been in 2009. That's actually great news. It's partly because our cost of borrowing has come down because our credit rating has gone up. It's partly because interest rates have come down over that period of time. But that's half a billion dollars that we can actually use in terms of program spending, which would not have been there otherwise.

J. Horgan: Minister, you talked about fixed costs, annualized costs in the budget. The core salaries will be a significant component in that. This summer we learned that there's a crisis in senior executive positions within the province of British Columbia, so much so that drastic measures were required — the significant pay increases for senior deputy ministers.

I'm wondering. I haven't seen any, and I know that this committee would benefit from seeing any, of the documentation that was prepared in anticipation of that significantly excessive pay increase. Could you commit to table that material before this consultation is complete so that members will have a better understanding of why we have a crisis and how we're going to avert it in the future?

Hon. C. Hansen: To directly answer your question, I will endeavour to find out from the minister responsible for the Public Service Agency what kinds of materials would be available and to make sure they're available to the committee.

I would like to point out that to the best of my knowledge, no deputy ministers or assistant deputy ministers have received any pay increases in the last two months, or at least since the first of August.

[1055]

What happened in early August was that the salary ranges in which deputies and assistant deputies can be paid were increased. So the maximums that could be paid are now set at a percentage of what their federal counterparts would be paid. To the best of my knowledge, as I say, I don't believe that any of those officials have seen increases.

When you look at the fact that assistant deputy ministers in British Columbia…. The pay scale that they were facing was tenth out of ten provinces. I think that all members of the committee have dealt with many of our senior executive public servants in British Columbia. I think you will probably agree with me that we have some absolutely first-class talent in this province serving the people of British Columbia.

We need to make sure that we can both attract the talent we need for the future and retain the talent that we have now. And when our pay scale was ten out of ten, we certainly weren't going to be able to do that. With the new pay scales, it puts us at about No. 3 in Canada among provinces — actually fourth, I think, if you take the federal government pay scales into account as well.

To answer your question, I will endeavour to find out what materials may be available and to suggest to the Public Service Agency that they make that available to this committee.

J. Horgan: I'd appreciate that. I also echo your comments about the professionalism of the B.C. public service. Perhaps when you're asking the minister responsible for that data, you could also get the inventory of how many of the assistant deputy ministers actually came up through the system — didn't require recruitment but, in fact, were rewarded for good work and commitment to the public service prior to any pay increases.

Hon. C. Hansen: I will pass that along. But I think the other thing that we were seeing was some very talented public servants who have built their careers in the public service, have worked in the B.C. public service from when they were in their early 20s and have now come up through the system, as you've said, only to see those individuals being snatched away by outside of the operations of the ministries serving the government of British Columbia.

I think whether they're people that we have recruited from the outside to come in or they're people that have come up through the public service, we still need to make sure we're paying competitive salaries so that we can retain them and attract the future talent that we need.

J. Rustad: I want to go back to this issue of competitiveness, in particular around fossil fuel and coal. There's been a suggestion that an export tax on fossil fuels might be an interesting way to go. I know that this means rhetoric by members of the opposition around perhaps a billion dollars' worth of taxes to be put on fossil fuels.

During the 1980s we saw Tumbler Ridge basically be created and saw the coal industry in that area go. Then when prices fell down, they were unable to compete, and those coalmines shut down.
[ Page 1717 ]

As chair of northern caucus, I went around throughout northern BC. A couple of messages that I heard, particularly in areas that are tied into the mining industry, were that if it weren't for the coal industry and mining exploration, they would be struggling right now because forestry is going through a rough patch.

Coal, natural gas, oil — they're a global commodity. There is plenty of coal in places like China, Australia, the United States and other places around the world. I understand that we need to be able to be competitive with that. But if there were to be a large export tax put on fossil fuels — such as coal and the coal that we export, and even, to another extent, to the oil and gas that we produce — in your estimation, at what point would we become a higher-cost producer, and companies would then start looking at other jurisdictions to be able to extract the coal and supply the market needs in the world?

It's a very large concern of mine, because in my riding and throughout the Interior, in particular, we're hopeful that we might be able to attract some investment into the Nechako basin for some future oil and gas exploration. I'm concerned that with the suggestion around increasing export tax on these sorts of things, we may become uncompetitive and drive away those kinds of opportunities for exploration. I'm just wondering if you have any numbers or any ideas around that.

Hon. C. Hansen: I don't have any numbers at my disposal right now, but I think certainly if…. Our commodity exports in British Columbia are selling into a highly competitive environment. I think there is some good news on the coal side, because there is a long-term demand for British Columbia coal. Companies are signing those long-term contracts at very favourable prices.

[1100]

I think the other thing when you start looking at the climate action agenda, British Columbia…. Yes, we are exporting fossil fuels, but we're actually exporting some of the cleanest fossil fuels in the world. So to the extent that we can use our exports of natural gas into the United States to replace the burning of oil is helpful in a climate agenda. The extent that we can ensure that there are technologies in place that get the best energy value out of every fossil fuel that's burnt, I think is important.

If you look at the fact that British Columbia is one of the few places in the world that has high-grade metallurgical coal, which is much cleaner burning than soft thermal coal around the world…. Again, the more that metallurgical coal becomes a substitute for thermal coal, it assists in a climate action agenda. I think all of these things are interrelated.

We know that society is going to continue to burn fossil fuels. I think British Columbia can supply some of the cleaner-burning fossil fuels as well as the technologies that ensure that they are as inert on the environment as possible.

So when we start looking at things like technologies around carbon sequestration, which we are finding ways in British Columbia to support and encourage, those are technologies that we can export around the world, to countries like China and other countries that are buying our coal and other commodities.

R. Lee: I look at question No. 3. The government has now reduced its debt from government operation to a debt level not seen since 1991. I recall that in 1991 the accumulated debt was about $11 billion, and now I think it's reduced to probably less than $6 billion.

Are those the figures you have, or can you remind us of the numbers?

Hon. C. Hansen: Well, actually, we are now…. I think in 1991 we were at about $7 billion. If I knew which page to look it up on I could find it, but it's going to take me some time.

Today we now have that government taxpayer-supported debt from government operations back down to that $7 billion level. We saw that number climb during the 1990s. When we formed government in 2001 we inherited a structural deficit, operating deficit, of about $4 billion a year. We made a commitment to eliminate that deficit within three years, and we achieved that goal.

R. Lee: Sorry. I mean 2001, the level of $11 billion.

Hon. C. Hansen: It actually would have been over $12 billion at that point.

R. Lee: Okay. So now it's back down to 18 years ago, also.

Hon. C. Hansen: We're now down to about seven. In fact, if you look at the forecasts, that number will continue to decline in the years to come.

R. Hawes (Chair): Minister, mindful that I think you have another engagement you want to go to at 11 o'clock….

John, you have one question. I don't know if anybody else does.

J. Rustad: Just one last question, then, and it's around the green agenda. One of the things that the government has put forward is the ICE fund, which companies around the province have taken advantage of. Certainly, in the Interior, in the pine beetle area, we look at there being a significant opportunity to utilize forest products for energy.

I'm just wondering what your thoughts are around the ICE fund, the ICE fund continuing. Hopefully, that will be around to be able to help continue to take advantage of those opportunities around utilizing forest products for energy production.
[ Page 1718 ]

Hon. C. Hansen: I think the ICE fund has become a very important tool in stimulating research and development to enable the commercialization of new technologies, particularly around biofuels. We have a tremendous, huge reservoir of fibre, as you know, in the Interior of British Columbia, and certainly biofuel is one of the big opportunities to utilize that fibre well beyond the point at which that fibre can be used for dimensional lumber.

The ICE fund has been a success. As to whether or not there would be any changes to that in the future is something that we would have to wait till the minister deliberates on.

R. Hawes (Chair): With that, thank you very much, Minister. I think we'll adjourn the meeting until 12:15.

Oh, just….

J. Horgan: I thought we were going to other business on the agenda.

R. Hawes (Chair): Okay. That's where we'll go.

[1105]

Formation of Subcommittees

J. Horgan: I have other business. Just a friendly suggestion. You might want to put: "If you don't deserve the hundred, send it back." Maybe on a sticker on the back would be nice.

As I sit here and review our terms of reference and reflect on the absence of a fall session of the Legislature in 2008, it strikes me that that's an opportunity for members of this committee to continue the good work we do in communities.

Perhaps we could extend our activities and our work to look at other issues that have been brought to our attention as members in our constituencies over the summer, whether it be the pay raises that I spoke about, whether it be the impact of the carbon tax on individuals and businesses. It strikes me that we do have the latitude in our terms of reference to extend not so much the budget consultation process but extend our work to better understand what's going on in British Columbia, absent a legislative session.

I would put a motion to that effect, should the committee agree, that this is an opportunity for legislators to talk not just about budget issues but other issues that would affect our revenues and our expenditures in the coming 12 months.

R. Hawes (Chair): Can I…? I'm not quite sure what you're…. The public has the opportunity to come and present any issues that they wish to present, whether they be financial or…. As often happens within the ambit of the presentations that come here, many of them aren't particularly budget-related but are regarding issues that have an impact on people.

I'm not quite sure what you're talking about. Are you talking about asking the public to give us some input, which is what we're doing?

J. Horgan: I'm suggesting, Chair, that historically — this is my third tour of duty on this committee — we've accelerated our activities in the fall to meet targets for tabling our budget consultation conclusions, but also because we've run into a fall session or we were supposed to run into a fall session. That has compressed the work that we do, and it has made it very difficult. You know, we're all going to be pretty tired in a month from now after being in 17 different communities across B.C.

It strikes me that there's still useful work that we could do, perhaps in the capital or in Vancouver, inviting more witnesses to come and speak with us about issues revolving around budget as well as public policy questions that will go unanswered this fall because we don't have a fall session.

We're ten MLAs working across the province. It strikes me that while we're working, there is other useful work we could do.

R. Hawes (Chair): If I could…. We have extended the deadline for input to the 24th of October. That has happened. Legislation demands that we table our report by the 15th of November. We don't have an option for changing that date. The 24th is pushing it, because staff then have to assemble all of the comments that come in for a presentation to the committee so that we can deliberate and come up with the report by the 15th.

You know, if you take a look at the calendar, there is…. Frankly, I don't see opportunities that are going to present themselves for extending further hearings. We already have those said. For example, when we go to Langford on October 2, if there's a demand for it, we will move from Langford back into Victoria into the parliament buildings for hearings that night, which is not on the schedule but we would be prepared to do.

So I'm not quite sure where you thought we could fit that into our schedule, which is already, I think, fairly comprehensive.

J. Horgan: And I agree, Chair, that we do have, with respect to the consultation element of our mandate. But there is an opportunity to appoint one or more subcommittees and refer to such subcommittees any matters referred to the committee.

I would suggest that the impact of the carbon tax on individuals and businesses is something that could be outside of the traditional consultation process that we have tight deadlines for, and it would give the public some sense of comfort that legislators are working through the fall on matters of public policy that are important to them.
[ Page 1719 ]

R. Hawes (Chair): I do understand what you're asking, and I see you have a motion on the floor. Is there…?

[1110]

B. Ralston (Deputy Chair): Just if I could speak in support of the motion. I personally think the Chair should issue an invitation to the head of the public service, Jessica McDonald, to come to the committee and explain why the pay of senior officials deserves to be raised by as much as $100,000 a year.

I think the public would be interested in an explanation. The minister says there are some documents to support that. I think the public, judging from the reaction that I've heard, would want to hear that, and we have the opportunity. We don't have a fall session, so I think that opportunity is open to this committee, and I think we should take it.

J. Rustad: Just speaking to the motion on the floor with regard to trying to extend the opportunities, I think it's actually a good idea to try to extend the opportunities, but I do believe that our schedule is pretty comprehensive. I looked through the meeting schedule, and I know that I've got constituent work that needs to be done. I need to look at those sorts of things as well. This Finance Committee is a significant block of time going straight through to the 24th of November.

Having chaired a number of committees in the past, I know the amount of time it takes for staff to compile that information, and then we still need to do deliberations and get a report out by the 15th. There are a lot more meetings afterwards that we will be going through, in terms of trying to get to a final report.

I appreciate the motion that you brought forward with regards to wanting to extend the opportunity for input. From my own perspective, I hope that the meetings that we have set up will be well attended. I would hope that all the opportunities for input will be full.

I would also very much encourage people to take advantage of the opportunity to write in responses. That's a very good opportunity for e-mails or traditional mail responses, in terms of getting information to the committee that we can consider by the 24th.

I think that period of time that we've got between the 15th of September and the 24th of October is a very long, extensive time. It gives particularly to the public the opportunity to be able to give us that kind of input to the issues that you have raised.

I don't see any opportunity to be able to support this motion, because of the time frame that we have with regard to November 15.

D. Hayer: I haven't seen the motion. I know the member talked about bringing the motion up. I don't know what the wording is, but beside that, I've served on the committee about five or six years. Every time we have gone, by the time we had to have our report ready, the deadline, usually members were saying: "We have this other meeting and different meetings." At that time it was a challenge for the staff to get the report ready in time.

The one thing I have seen ever since I've been here — all the members, or the public that present to the Finance Committee, don't always stick to finance. They always deviate into different topics, which are good to hear.

On the other hand, I'm pretty sure, just like in the past number of years, that the public has gone and presented what their concerns and issues are since 2001. I know they will keep on doing that. I think that's a good thing about the Finance Committee, because it does actually travel to lots of towns and smaller towns all over British Columbia. I really appreciated the work of the Chair and the vice-Chair when they were able to extend our session to make it longer than what we had really planned for.

I look forward to actually hearing from all different groups and individuals, either through e-mail, through fax, in person or in open-mike sessions, as to what their concerns are.

D. Thorne: Well, I support any motion that's as obviously in the public interest as this motion is, because I think it's been clear to all of us for some time now that these are areas of interest to the public that they would like to discuss and have more information on.

I would say that we had intended to be in Victoria the week of October 6. We've left that clear. I agree that we shouldn't extend the length of time of these hearings, because we do have a schedule that we have to keep, but I see no reason why we couldn't have a meeting in Victoria the week of October 6, as most of us have that week clear now. So that would be my suggestion, and I do support the motion.

R. Hawes (Chair): Is there any further…? What I'll do is call the question on the motion, which reads: that one or more subcommittees be appointed to hear comment on a range of public policy matters outside of the consultation process.

[1115]

Motion negatived.

R. Hawes (Chair): I would like to say that with the deadline extended until the 24th of October, the public is invited to make comment on any of the issues that you've discussed, and I'm sure they will. I'm sure they'll take the extended opportunity. Staff on an ongoing basis monitor all of the inputs and will provide ongoing reports to us as to what the inputs that we are receiving look like. This is something that is already, I think, being covered quite well, and the public has lots of opportunity.

J. Rustad: I just want to comment that if the demand for meeting requests is such that in a location such as
[ Page 1720 ]
Victoria there is more demand than we have time available, there is a spot that's open in early October. Perhaps that's something that you could look at. I understand how difficult it is to try to fit things in, but I thought I'd leave that available to the Chair as an option if you wanted to look at that down the road.

R. Hawes (Chair): Okay. At this point, if there's no other business, we will adjourn until 12:15, and at that time we'll hear our first witness. Meeting is adjourned.

The committee adjourned at 11:16 a.m.

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