1977 Legislative Session: 2nd Session, 31st Parliament
HANSARD
The following electronic version is for informational purposes only.
The printed version remains the official version.
(Hansard)
WEDNESDAY, FEBRUARY 16, 1977
Afternoon Sitting
[ Page 985 ]
CONTENTS
Routine proceedings
Oral questions
Management of BCR. Mr. Barber — 985
Burrard Inlet ferry bicycle accommodation. Mr. Gibson — 987
Arsenic content in chickens. Mr. Wallace — 987
Committee of Supply: Ministry of Finance estimates.
On vote 2.
Hon. Mr. Wolfe — 988
Mr. Stupich — 991
Mr. Gibson — 995
Hon. Mr. Wolfe — 1000
Mr. Wallace — 1005
Hon. Mr. Wolfe — 1007
Mr. D'Arcy — 1011
Hon. Mr. Wolfe — 1015
Mr. Barrett — 1016
Hon. Mr. Wolfe — 1019
WEDNESDAY, FEBRUARY 16, 1977
The House met at 2 p.m.
Prayers.
MR. G.H. KERSTER (Coquitlam): In the House today is a group of parent-teacher council members from School District 43, with their president, Mrs. Ona Mae Roy, several teachers and three school trustees — board chairman Gwen Schute and trustees Marg Smith and Bev Le Francois — along with a former Coquitlam alderman, Jack Gilmour. I would ask the House to give this group a warm welcome.
This is not a speech. It is a very brief introduction. Participating in the Crown Zellerbach-sponsored annual visit to Victoria for students are 10 students who have been selected to represent the secondary schools in Coquitlam. Accompanying them are two teachers from Mary Hill Junior Secondary School, Mr. Philip Wright and Mr. Andre la Liberte. Would the House join me in making them welcome?
HON. P.L. McGEER (Minister of Education): It isn't just Coquitlam Day in the Legislature. You'll notice many of the members sporting these very attractive buttons that represent the B.C. Home and School Federation. The executive is here today as are many delegates from different ridings in British Columbia. They are — here for parents' day and I'd like the members to bid them welcome.
HON. D.G. COCKE (New Westminster): On behalf of the official opposition we would also like to extend greetings to the executive and to the members of the Home and School Association who are visiting us. They visited with us this morning and we had a very fine talk with them. I would like particularly to introduce Nancy Puri, president of New Westminster Home and School Association, and 17 members of the New Westminster organization. To them all we extend our greetings.
HON. J.J. HEWITT (Minister of Agriculture): In the gallery today is the constituency secretary for the great riding of Boundary-Similkameen, Mrs. Crystal Drossos. I would ask the House to welcome her.
MR. A.B. MACDONALD (Vancouver East): I want to introduce in the gallery Mr. Soren Kierkegaard, following the glorious victory of the Social Democratic Party in yesterday's elections in social democratic Denmark, a land of high productivity, social equality and individual fulfilment.
MR. C.S. ROGERS (Vancouver South): Mr. Speaker, notwithstanding the remarks of the Minister of Education and the hon. member for New Westminster, I have the pleasure of introducing five ladies who are here today from the constituency of Vancouver South — Mrs. Minishka, Mrs. Carr, Mrs. Lee, Mrs. Berg and Mrs. Greenwell. They're with the parent-teacher group from Sexsmith Community School, which is in the heart of Vancouver South. It's a school where 70 per cent of the students do not have English as their mother tongue. Their efforts on behalf of their students are unbelievably exceptional. I ask the House to make a special welcome for them.
Oral questions.
MANAGEMENT OF BCR
MR. C. BARBER (Victoria): Mr. Speaker, my question concerns the frequent claim by this government that they would never dream of interfering politically in the management of the B.C. Rail.
MR. SPEAKER: Now will you state your question?
MR. BARBER: My question is to the Premier: did the Premier meet with a Mr. Jerry Neben, engineer for the firm of DeLeuw Cather, in the summer of 1976 and discuss with him in his office the morale and administration of B.C. Rail, and, indeed, offer to Mr. Neben a senior management position in the organization of B.C. Rail?
HON. W.R. BENNETT (Premier): Mr. Speaker, I did have a meeting with Mr. Neben, who was a consultant to the B.C. Railway. He was brought to my office to discuss some of the problems of the railway at a time when we were looking for a new directorate. All of your first assumptions are correct — I met with him. The last one is not correct — I didn't offer anyone a position.
MR. BARBER: Mr. Speaker, I understand the Premier to say that he personally did not offer such a position.
Interjections.
MR. BARBER: I want to make sure that I understand the answer, that the Premier personally did not offer the position.
As a supplementary, Mr. Speaker, did the Premier on the same topic and, indeed, in the same meetings meet with a lawyer by the name of Charles Maclean? Did he discuss the administration, the operations and the morale of the B.C. Railway?
HON. MR. BENNETT: Yes, Mr. Speaker. Mr. Neben was introduced to my office through Mr. Maclean.
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MR. BARBER: A further supplementary, Mr. Speaker.
MR. SPEAKER: Proceed.
MR. BARBER: Did you discuss with Mr. Maclean the MEL Paving case, its possible settlement and other details concerning that matter?
HON. MR. BENNETT: Not that I can recall, Mr. Speaker. We discussed the broad aspects of the railway. The introduction of Mr. Neben was made as someone who was advising the railway. The reason he was brought to my office was because of the first-hand knowledge that he had of a lot of the problems that would have to be, solved by the present management and by a future board of directors whom we're interested in appointing to run the railway.
MR. BARBER: A further and final supplementary, Mr. Speaker, on the same topic to the Minister of Economic Development. Did the Minister of Economic Development attend these meetings with the Premier, Mr. Maclean and Mr. Neben? If so, can the minister confirm that a position in senior management in the B.C. Rail was offered to Mr. Jerry Neben?
HON. D.M. PHILLIPS (Minister of Economic Development): In answer to the member's question, yes, I met Mr. Neben in the Premier's office. What was your second question?
MR. G.S. WALLACE (Oak Bay): You've got a short attention span, Don.
MR. BARBER: My second question was whether or not the minister or, I may extend it briefly, anyone acting on his authority offered a position to Mr. Jerry Neben in the senior management of the B.C. Rail.
HON. MR. PHILLIPS: Mr. Speaker, in answer to the member's question, the member knows that during that period of time we were looking for a board of directors and/or a president, and I had many meetings with many people.
MR. D. BARRETT (Leader of the Opposition): Would the Premier inform the House as to whom initiated the meetings with Mr. Neben?
HON. MR. BENNETT: Well, just a moment ago I answered that question when I said he was introduced to my office by Mr. Maclean.
MR. BARRETT: Yes, I appreciate the introduction. My supplementary is: who initiated, who arranged for the meeting? Was it the minister or was it Mr. Maclean?
HON. MR. BENNETT: Yes, as I said, the meeting was arranged by Mr. Maclean.
MR. BARRETT: A supplementary. You said that you were introduced. The whole thing was arranged by Mr. Maclean. Is that what you're saying?
HON. MR. BENNETT: One more time so that we can make it clear to the Leader of the Opposition: Mr. Maclean contacted my office some time after we defeated the last government, and in his concern for the British Columbia Railway, as he was acting for it, he said that in the course of his work on a case for the railway he had engaged experts whom he thought had information that would be helpful to ourselves in our pursuit of new directors and in selecting new management. He felt that we should hold discussions with a number of people he suggested, one of whom was a Mr. Neben. I then said we were interested in discussing the future of the railway.
As we all know here now, and knew then, the railway has had some difficult times. Also, this government was already planning the northern transportation system in which that railway would play a great part. So I asked Mr. Maclean to bring Mr. Neben, and other names that I can't recall offhand, to my office in my capacity as the Premier on behalf of the government of the people of this province to see if we could do something about getting people to make the railway work. As such, Mr. Maclean very kindly set up a meeting with Mr. Neben, and he may have set up meetings with others. All of them were given an opportunity to give this to the Premier's office, and some of them also were in consultation with the minister responsible, who was a director.
From all of these discussions, the railway in September was able to appoint a new independent board of directors, all of whom, I'm sure, we have great confidence in, who have not only brought some stability to the railway but have brought some labour harmony and boosted morale between management and labour. As such, the background of these discussions initiated by Mr. Maclean with Mr. Neben and others was of great value to the government in the type of people we look for to act as directors on the railway.
One of the items we discussed in all the meetings I was at was not only directors but restructuring the management and whether there would be a new president at some time. I'm sure these new directors, from interviews that were held before and interviews that they're holding, eventually will appoint a new president of the B.C. Railway.
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MR. BARRETT: Mr. Speaker, I want to thank the Premier for a very thorough answer.
Supplementary to that, you mentioned all meetings where you were present. Did Mr. Maclean at that meeting, or any meeting, discuss with you the MEL case?
HON. MR. BENNETT: Not that I can recall. I don't remember discussing it with him, but he may have passed his opinion to me.
MR. BARRETT: The Premier has stated to the House that he cannot recall discussing it with Mr. Maclean. Did he discuss it with anyone else at that time?
HON. MR. BENNETT: I think at various times I've discussed all aspects of the railway and our concern for it — the Keen settlement, KRM, and MEL — in my capacity as Premier, but at no time have I ever given any direction on what to do with any of those cases, nor have I involved myself in the settlement of any of those cases, if that is where your question is leading.
MR. BARRETT: That's not where I'm leading; that's where you're answering.
MR. SPEAKER: Order, please.
MR. BARRETT: On a supplementary, Mr. Speaker, in last year's budget an item of $12 million was put in for contingencies related to the BCR. Was that contingency, to the Premier, as a member of the Treasury Board, to include any possible out-of-court settlement on the MEL case?
HON. MR. BENNETT: No.
BURRARD INLET
FERRY BICYCLE ACCOMMODATION
MR. G.F. GIBSON (North Vancouver–Capilano): Mr. Speaker, I have a question for the Minister of Municipal Affairs and Housing. I was happy to read this morning in Norman Hacking's column of the arrival in Vancouver of the two new Burrard Inlet ferries, but I was very startled to see the statement that there is no accommodation for bicycles. That is not in accordance with my understanding of the minister's policy — or what many of us have fought for in this House. I'd like some reassurance from him that bicycles will be permitted to extend the usefulness of this transportation system.
HON. H.A. CURTIS (Minister of Municipal Affairs and Housing): Mr. Speaker, I appreciate the member's interest in, and support of, the service. The ferries did arrive yesterday in Burrard Inlet and we're very happy to have them there and look forward to an early start of the service. With respect to bicycles, as I've indicated to the member in conversations we've had, I am frankly, at this point, fighting the technicians. This is very much a subway-car type of vessel, and it has to be seen to fully appreciate that, with automatic doors, with passengers boarding from one side and leaving from the other with a rapid turn-around.
I've indicated quite clearly and definitely that I want the people responsible for the planning of the service to address themselves to the problems relative to bicycles, and as soon as the service commences, if not before, I hope that the problem can be solved. But it is not without some difficulty in view of the rapid-transit nature of the system.
MR. GIBSON: On a supplementary, Mr. Speaker, I take it from what the minister said that he definitely wants bicycles on those ferries. I would ask if he would welcome representations from possible members of the public who might take bicycles across there to encourage his technicians on their way.
HON. MR. CURTIS: Mr. Speaker, yes, that would be helpful. I also expect that in line with the democratic procedure the elected representative wins the argument in the final analysis.
ARSENIC CONTENT IN CHICKENS
MR. WALLACE: Mr. Speaker, this might be dubbed the "arsenic and old chicken" question.
AN HON. MEMBER: That's terrible!
HON. MR. BENNETT: No wonder you're all alone. (Laughter.)
MR. WALLACE: Well, I wasn't elected to be a comedian anyway.
To serious matters, Mr. Speaker: could I ask the Minister of Agriculture if, as a result of Mr. McAninch, chairman of the broiler board, taking two dead chickens to the provincial lab to be tested for arsenic and the content being 1.3 parts per million, he could confirm that the inter-agency committee of federal and government officials was unaware that the federal government had raised the safety level to two parts per million, and that they then issued a statement or confirmed the fact that people eating these chickens might be subjecting themselves to some danger?
HON. MR. HEWITT: Mr. Speaker, I'm sorry, but the discussion that the hon. member brought up, I wasn't quite sure what his question was. Will you repeat it?
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MR. WALLACE: The inter-agency committee of federal and provincial health and agriculture — people was unaware that the federal government had raised the safe maximum level for arsenic content in chickens from one part per million to two parts per million. But statements have appeared in the press, causing some concern to the public, to the effect that the 1.3 p.p.m. level in chickens, which Super Valu have proceeded to sell despite the legal hassle, would be a danger to the health of those consuming these particular chickens.
Did the interprovincial and federal committee not know that the health regulations by the federal government had been changed?
HON. MR. HEWITT: Mr. Speaker, I'll have to take that question on notice. I don't know whether they were aware of the fact that it had been raised to two parts per million or whether it was still the one part per million. From the information I have and the news reporting, it was one part per million.
MR. WALLACE: A supplementary question: I appreciate the minister's willingness to research that in detail. But could I ask the minister if, in the light of this present controversy, he plans to take any steps to determine whether, in fact, testing and the whole measure of supervision of imported meat — particularly chickens — is adequate to protect the public safety, because this particular arsenic scares people to death and if they eat too much.... (Laughter.)
AN HON. MEMBER: You're getting better, Scotty!
MR. WALLACE: Perhaps I should quit at that point.
HON. MR. HEWITT: Mr. Speaker, the hon. member is quite a comedian today. I would say that both the Ministry of Health and my department would be concerned to ensure that chicken that is safe to consume is the only chicken that is brought into B.C.
Orders of the day.
The House in Committee of Supply; Mr. Schroeder in the chair.
ESTIMATES: MINISTRY OF FINANCE
On vote 2: minister's office, $95,034.
HON. E.M. WOLFE (Minister of Finance): Today we are launching into the first one-seventh of our time period for the Ministry of Finance. I thought that since it's not likely there will be very many questions raised in this period, I might be offered an opportunity to make a comment or two on a number of significant changes that have been made in this ministry, largely in the effort to improve financial recording and control procedures during the past year.
I think the first example of this new policy has been the operation of our Treasury Board. Mr. Chairman, Treasury Board is the main government instrument to effectively control the day-to-day approval of expenditures by government. In the past year Treasury Board has been meeting on a regular basis and giving careful scrutiny on all requests for expenditures. Also, I might say that a group of budget analysts is now being recruited to provide staff and advisory services to Treasury Board and to report to the board on the managerial efficiency of all ministries in the delivery of services and the management of programme analysis of a variety of departments and will also be actively involved in the development of our annual budget.
Now as a result of amendments to the Public Service Act passed last spring, a new special branch of Treasury Board known as the Government Employee Relations Bureau is in operation to keep a closer control on financial implications of union contracts, to advise on job classifications for the government service and to control the number of positions in the service. This new bureau emanated from the Higgins report in a prior period. The new director of the bureau is Mr. Ted Stanley.
The new British Columbia quarterly financial report was also stated as a part of our government's policy to improve government disclosure and accountability. With this publication, residents of British Columbia, similar to those in Ontario, receive the most up-to-date report in all of Canada on their government's finances. This report also includes quarterly up-to-date information on all of the major Crown corporations within the responsibility of the provincial government. I might also say that this document provides an excellent internal discipline to all of our personnel in terms of our yearly progress on a quarterly basis.
Also, Mr. Chairman, a cash manager, Mr. Patrick O'Neill, has been appointed. His sole function in co-ordination with the Crown corporations is to manage the government's overall cash on a daily basis so that we can maximize the proper use of our cash flow with the object of developing the most interest income possible. I would like to just offer a few examples of what Mr. O'Neill has instituted in the way of cash management procedures, for instance, a review of banking and investing procedures, which is still in progress; secondly, he's installing an effective zero-balance banking for government bank accounts; thirdly, implementation of a twice-daily deposit
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system. It isn't too long ago that in many cases within government circles — for instance, government agencies — depositing on a weekly basis was considered satisfactory. Today we are moving in the direction of twice-daily automatic depositing. To mention just one more item, we have established a bond trading account to take advantage of market fluctuations.
Mr. Chairman, also under the heading of my department are the 51 government agencies which are the responsibility of the Ministry of Finance. We have taken steps to familiarize all ministries with the services offered by our government agency offices. Our policy is to establish the original concept of a government agency system throughout the province, and I have advised all departments to use the services of these agencies. We want to encourage every department to make more use of government agents as an economic measure rather than employing separate offices for each department at additional expense.
During the year we have brought in additional research and analytical expertise to co-ordinate activities in cost-sharing and other federal-provincial matters. Mr. Alan Eastwood, John Robertson, Doug Hyndman and, more recently, Mike Butler and Larry Pistell, have been acquisitions within the Finance ministry within the last year or two. This should improve our ability to provide better research and forecasting in the province's interest.
For the first time, all government ministries will now be billed separately for data processing costs and building rental costs. This is being done so a true cost of functions and programmes will be shown against all ministries and functions for better control purposes.
During the past year we have been reviewing the activities of the Purchasing Commission. The former chairman, Mr. Vardy, retired and Mr. Arthur Charlton was appointed chairman on January 20, 1977. I have reason to believe that our Purchasing Commission compares very favourably with those of other provinces in Canada not only in efficiency in making economical purchases but also in giving preference to B.C. Suppliers. And I might mention that during the course of the past year the Purchasing Commission processed some 49,000 purchase orders for a total value of $109 million.
Due to the expiration on March 31 of this year of the present financial arrangements with the federal government for shared-cost programmes, together with my finance staff I have atte Mr. McAninch, chairman of the broiler boardnded some six federal-provincial meetings involving very complicated and technical negotiations with the federal government. Major changes were proposed for the taxation powers of their respective governments that involved vast sums of money. Negotiations with the federal Minister of Finance (Hon. Mr. Macdonald) are still going on to arrive at new terms for financing the established shared-cost programmes.
In this connection, I would like to indicate my appreciation for the tremendous job being done by my deputy, Mr. Bryson, and my associate deputy minister, Hugh Ferguson, who were required to develop a great deal of material in support of these meetings and negotiations.
One outstanding item which is most important — still unresolved as a result of the recent bill introduced by the federal government — is, of course, the finalization of the medical plan in terms of the transfer of the tax points to the provinces. We are still unsatisfied with the prospect that is proposed — that the medical plan payments would be cut off on a cash basis, in that way not recognizing any outstanding medical bills unsubmitted for services already rendered prior to March 31.
MR. WALLACE: As of April 1?
HON. MR. WOLFE: As of April 1. We are advocating to the federal government, and have done so repeatedly since our last meeting in February, that this cutoff by the federal government should take into account the outstanding and unpaid bills at that point.
And finally a word about our control and audit department. I think we have made considerable strides in streamlining the flow of information for more accurate budgeting and in the direction of more up-to-date financial reporting. I know this has placed considerable demand on the acting comptroller-general, Mr. Keith Lightbody, since this ministry and our government have a tremendous appetite for financial information. I certainly appreciate the activities of Mr. Lightbody and his staff for fulfilling this demand.
An example of this improvement is shown in the fact that our current year's budget for 1976-77 gives every indication of being right on target. Our current estimates indicate both revenues and expenditures will be within 1 per cent of original forecast.
These are just a few of the activities of my ministry during this first year in office, and I can assure the hon. members that I will be continuing to try to update and improve wherever possible the financial recording and control procedures of all ministries.
Before taking my seat, Mr. Chairman, I'd like to say just a word or two about the current debate involving the anti-inflation programme. I say these words on behalf of the cabinet committee of this government that has been considering this matter leading up to our signing of an agreement with Ottawa as of last June and has followed the original installation of the anti-inflation programme in October of 1975 until its present moment. I want to
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say at the outset that this government disagrees with the proposition that this programme should be decontrolled or dismantled at an early date.
British Columbia's position on the timing of decontrol this is, removing the wage and price controls reflects both the requirements of the provincial economy and the view of the current economic management needs of Canada. Inflation has hurt the provincial economy by weakening the competitive position of the export sector and by eroding the purchasing power of British Columbia consumers.
The importance of healthy export industries arises from the very substantial amount of income and employment generated by firms selling predominantly in foreign markets. Because British Columbia is more heavily oriented to export markets than Canada as a whole, rapidly inflating costs and prices will tend to result in a proportionately greater loss of employment and income in this province.
As a general matter, this province does not support the kind of massive intervention in the marketplace represented by the anti-inflation programme. However, at the time controls were introduced, there was a clear need for strong actions to bring inflation under control and to break the pervasive expectation among Canadians that double-digit inflation was here to stay. The province has, therefore, supported the anti-inflation programme as a desirable interim measure that, if taken in conjunction with appropriately restrictive fiscal measures, would play a useful role in the fight against inflation.
The debate has now opened on the subject of decontrol — when and how. It is becoming increasingly apparent that the federal government will terminate the controls programme this year, perhaps even as early as July. Although most provinces do not support earlier withdrawal from controls, the government of Ontario has made clear their support for such a move and made available a paper arguing this position.
Mr. Chairman, it is British Columbia's view, however, that the control programme should be retained until the end of 1978. The province's support for the programme in the first place was based on the need for controls to combat double-digit inflation and its impact on our export economy. If prices and wages continue escalating during such a period, there will be a shortfall of demand — particularly for labour — and the result could be substantial unemployment.
By holding down wage and price gains, labour services and goods will be less costly to purchase and fewer jobs will be lost. In addition, British Columbia feels very strongly that the federal government has not yet shown adequate restraint in its own spending. Federal spending in the first nine months of 1976, for example was up 14 per cent over the same period a year earlier. This is hardly restraint. In fact, as the Economic Council of Canada has pointed out:
"It is clear that the federal government has been the principal benefactor from the rising inflation of recent years, through unanticipated transfers of real income from businesses and individuals. It has gained, in real terms, through the built-in progressivity of personal income taxes, through the cost and inventory accounting required in the corporate tax regulations, and through its situation as a net debtor."
Rather than practise restraint or, better yet, reduce taxes to individuals and corporations, the federal government has simply increased its own spending. Indeed, it has increased spending so fast that when its inflated revenues dropped off to more normal levels in 1975 and 1976 it has been necessary to borrow to finance huge spending deficits and this has put severe strains on financial markets in Canada.
British Columbia's position is that controls were an acceptable way of easing the inflationary pressures. There is still some distance to go before the restraint is adequately stringent. The controls, now that they are on, should be maintained until price and wage expectations have moderated to the level set out at the start of the guideline programme. Should controls be lifted now, there is little doubt that a period of catch-up wage demands would quickly follow. In British Columbia, this is a crucial year for wage negotiations and a sharp wage escalation at this time could have extremely serious consequences for unemployment. The province's major industries are already experiencing serious cost-competitive difficulties and are faced with the possibility of further erosion of export market shares.
In short, British Columbia will continue to urge the federal government to maintain controls and publicly commit itself to continue the programme through 1978. These measures are necessary for a successful transition to lower rates of inflation and ultimately increased economic activity in the private sector.
Mr. Chairman, our government says that this intended action of the federal government is premature. It is too soon a turnaround from their indications of some two months ago. We think that they're just halfway through a programme that was well designed in the original instance and has been receiving some modest degree of success. It would be fallacy to discontinue at this stage.
Now I always like to be of service, Mr. Chairman, to my customers. I notice that the opposition in the last two or three days have been running out of adjectives to describe the minister whose estimates are under review. So I intend to offer a list of superlatives and other descriptions to the opposition leaders — for instance, things to call the minister:
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incompetent, irresponsible...
MR. CHAIRMAN: Hon. minister, is this under vote 2?
HON. MR. WOLFE: Yes. ...confused, weak, unavailable, lazy and sick, sick, sick. So I'll offer these to the opposition. You don't need to refer to the term, just to 1, 2, 3, 4, 5.... So with your permission, Mr. Chairman, I'll offer this list of superlatives.
MR. D.D. STUPICH (Nanaimo): Mr. Chairman, I am not sure whether the minister was trying to prove that the last one in particular was particularly appropriate at this time or not. However, while his opening remarks were interesting and were important, I cannot help but think that the members of the Home and School Association, who are in the gallery today — and I would like to join with the other members in welcoming them, particularly the delegation from my own constituency — must have found it pretty heady stuff coming here in the expectation, I would think, that they could have been getting in on something to do with education.
I will associate this with vote 2, Mr. Chairman. In particular, in the three years that the NDP were in government we made a point of having the Minister of Education's estimates under discussion on Home and School Day. I think it's unfortunate from the point of view of these people, who are paying a lot more to travel to Victoria now than they used to when the NDP was in power, that the Minister of Education (Hon. Mr. McGeer) could spare them only 20 minutes.
MR. COCKE: Where is he? He's not here.
MR. STUPICH: Well, he was late arriving and early leaving, but yesterday evening he had time to travel to Nanaimo to address a Social Credit Party membership meeting. He has no time for the people who came here to hear something about home and school and education matters, but he has time to travel to Nanaimo. He has no time to be here today when we might talk, for example, about the MeMath report, and property taxation, and the costs of education, and the fact that B.C. — according to the McMath report — has the most antiquated education financing system in the whole of Canada. That is certainly in line with vote 2, isn't it, Mr. Chairman — education financing, property taxation?
MR. CHAIRMAN: I think that perhaps we ought to clarify a matter immediately, before we get involved.
MR. STUPICH: Is this on my time or yours?
MR. CHAIRMAN: We will hold the time for you, sir.
Perhaps we should clarify immediately the question of relevance under these various votes. It cannot be construed that under the Minister of Finance's vote we can discuss matters which would more properly be discussed under the various ministries, even though finance is involved. I think the hon. member who presently has the floor appreciates this more than anyone else, having been the Finance minister previously.
This is just a little caution, and perhaps I'll try to keep you on track.
MR. STUPICH: I thank you for your assistance, Mr. Chairman. I would just say that there was a property taxation bill introduced in the House this session by the Minister of Finance that has been passed. I think we got as close to a promise as we could possibly get, and as they can possibly give at this time, that there will be a further bill. The understanding, I believe, was that that, too, would be coming from the Minister of Finance. It hasn't come yet, so I think it is proper to discuss at this time the cost of education, the concern of our citizens about the financing of education, and the fact that the MeMath report was handed to the government in August and was not made public until five minutes after the official opposition spokesman on the budget stood up to speak in the budget debate. Now that is a coincidence, I am sure, that that was the time it should be made public.
Nevertheless, Mr. Chairman, I don't really want to get into the details of that. There will be legislation, and I am prepared to wait for that, but I do think that we could have had something more from an education point of view in this particular part of our discussion.
If I could, I will move to the budget and you can help me make sure that we do keep in line, Mr. Chairman. I don't have a copy of the minister's prepared notes to go on, but I know he made some reference to quarterly statements, and he certainly did in the budget speech. If I may quote from the budget speech: "We have brought government spending under control and provided a new level of accountability with the introduction of quarterly financial statements."
Well, Mr. Chairman, they have. We did have the first quarterly statement that was dated June 30 — that's three months, the first quarter. It was released on August 6 — a period of 37 days. I think that's pretty good for the first quarterly statement — the first one ever. I notice — I think it is either in the budget speech or somewhere else — something to the effect that Ontario is the only other province that has this kind of programme of public information. To have produced the very first one in a period of 37
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days I think is commendable.
The second one, Mr. Chairman, dated September 30, was actually printed and made public so it had to be completed I am not sure just how long before that. From my personal experience with the difficulties under which the Queen's Printer operates, I think it would have to have been prepared several days before that. But, Mr. Chairman, that report was made public on October 11 — just 11 full days, including weekends, after the date of the report. A report that was telling us what had happened up to September 30 was printed and made public on October 11. Not only that, but we were told in advance that it was going to be a good one. So even before the figures were in, it was apparently known by some legerdemain that it was going to be a good one.
The third one? Well, today is February 16, so we have gone some 47 days already. We have exceeded the 37 by four. How many more days are we going to go before we get the third quarterly report?
The first report that was offered to us was a pessimistic one, and an honest one too, I think, in its pessimism. It showed some concerns about the rate at which revenue was falling below expectations and the fact that expenditures were a little higher than expectations. That's all reasonable, all well detailed in here. The forecast for the future looked as though we were heading into a budget deficit of something like $130 million to $150 million. I recall the Minister of Finance warning us at the time that unless there was some marked upturn in the economy or a drastic cutback on expenditures — a withdrawal of government services — we were heading for a substantial deficit. He did not want to go that route, so he was hoping for an upturn in the economy or was determined to cut back drastically on government expenditures.
There were some interesting comments that the minister made at the time. One was to the effect that there had been a growth in revenue of 3.5 per cent in the first quarter. The news release that first came out said that at that rate there would be 12 to 14 per cent growth in four quarters. Now that's great mathematics, Mr. Chairman. I notice you smiling, so I don't think I'll go any further into that. I believe the minister, or his speech writers, or somebody or other did some recalculating on that and realized the.... Well, I won't say that liars sometimes figure. I might be called to order if I do. In any case, there was certainly some problem with that growth of 3.5 per cent in three months and multiplying it by four to get 14 per cent.
But there were the other aspects of it. When he admitted that revenues were falling short of expectations, saying that he was counting on a spurt in the economy as one of the possibilities.... He mentioned that as the first one, I believe, in his speech at the time. Gambling that the economy would recover is something perhaps just a little bit irresponsible when we're that far into a fiscal period — gambling that there's going to be recovery to the extent needed to meet a budget deficit of $130 million, as determined as he seemed to be to meet it at that time.
I'm quoting from one particular news story here that says: "What is happening to the economy, however, is not Wolfe's fault. It is a national problem" and this is the interesting part, Mr. Chairman "and here in British Columbia it appears to be worse than in some other parts of the country." That particular columnist was more kindly towards the government than any of the others I've read, because they all said that B.C. was doing worse in comparison to all areas of the country, rather than just some of them. But I went into that material to some extent when I spoke during the budget debate, and I don't intend to go further into it now.
The next thing is the second quarterly report, the one, as I say, where we were told ahead of time and the stage was set. The Premier was going to deliver this.... We weren't told specifically that it would be the second quarterly report, but simply that there would be a state-of-the-province message. By coincidence, I suppose, it was Thanksgiving Day, as was the Prime Minister's speech a year ago — a significant day for this kind of thing.
However, as I pointed out, Mr. Chairman, we knew in advance that it was going to be a good report; we were told to expect a good report. It was prepared some time ahead of October 11. I can't even guess at the length of time, but to have prepared this kind of material, to have it printed up and delivered by October 11, I think, is nothing short of miraculous — not only that, but to have known it was going to be good and not to have explained why it was so good.
How did this situation turn around so much in the second quarter? There's no real explanation of that in these figures. There was no spurt in the economy; there has been no spurt in the B.C. Economy that would justify that much of a change in our economic forecast. To the best of my knowledge, there's been one minister in particular — and to avoid incurring your concern I won't mention him — who boasts about saving money by not spending it on the handicapped.
Interjection.
MR. STUPICH: No, I wasn't going to mention his name. But he has boasted about saving money. Even by saving the amount of money that that particular minister is saving — and he's the only one, to my knowledge, who has said anything about saving money — with no spurt in the economy, how is it that we turned, in a short period of three months, from a projected deficit of $130 million to a
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break-even position?
There were some other interesting things, not so much in the financial report, but in the Premier's remarks. One was the fact that one department was going to spend an extra $120 million. The government has authorized the Department of Highways to embark on a highway programme of an additional $120 million, which will create jobs this winter. Now of course, we didn't really have a winter down here in Victoria, so I suppose they're out on that one. Not only was there no spurt in the economy, no talked-about cutback in expenditures, but he's talking about an additional expenditure of $120 million and still going to break even. If the Minister of Finance can give us any understanding or explanation as to how things turned around in that second three months, I'm sure the House would be very interested in hearing about it.
In the budget speech we have references to the fact that, on the basis of what they know so far this time, the year as a whole would likely break even or there might even be a modest surplus, which is in line with the six-month report. But apparently, Mr. Chairman, the nine-month report — the third quarterly report — is not yet available, or else it's being held back deliberately until we are finished with the estimates of the Minister of Finance. Since we're spending so much longer in getting this one ready, I'm led to believe, for lack of evidence to the contrary, that the Minister of Finance is deliberately withholding the third quarterly report.
That leaves me to ask why. What is there in the budget speech that is not in line with the third quarterly report that he is holding back? Certainly, Mr. Chairman, if the material in the budget speech is in line with the material in the third quarterly report, if one can logically follow from the third quarterly report to the budget speech the projections of revenue and expenditures for the fiscal year we're now in and the one ahead, well then, all the more reason to have that third quarterly report made public. We're already beyond the period that it took to produce the very first one as much beyond the period that it took to produce the second one.
I'll ask the Minister of Finance if he has any other answer other than the one that I've given him. He suggested earlier he would give me some questions. Well, I'm giving him one now. Does he have any answer other than the one I've suggested — and that is that it's being held back deliberately because it will be politically and economically embarrassing for this government to release the third quarterly report?
Interjection.
MR. STUPICH: I don't read these rule books. There are all kinds of experts around here, and, of course, you're one as well. There may be a rule in there that does allow me to move a motion postponing the vote, but I'm not aware of it. The member who raised it may spend the next few minutes looking it up — I think I have something like 13 minutes left of my time — and in the meantime, perhaps, he can move that kind of a vote.
I'd like to comment just a little bit about the remarks in the budget about deficit financing. This government does not subscribe to deficit financing to underwrite its current operations. Of course there is no definition of "current operations." "We are at present paying interest on sizeable borrowings required to compensate for ambitious spending programmes of the past." It's all very interesting. Yes, I'm getting all kinds of suggestions from around the House as to what some of these ambitious borrowing programmes were of the past.
I'd like to know, Mr. Chairman, for example — and I believe this would have to come under the Minister of Finance because it would have to be approved by him — if there have been any borrowings to date by one of the new corporations, B.C. Ferries Corporation.
The Public Buildings Corporation. I know the Minister of Finance has signed an order-in-council approving the borrowing of $25 million, but I believe the order-in-council referred to following a previous authorization. I wonder what borrowing has been approved to date on behalf of the public Buildings Corporation. These are all new things that are coming in — not direct debt but new borrowings.
We've taken some of these items out of public accounts to make it easier to come up with a balanced statement, although I still question how it can possibly be done. The budget for 1976 had, for example, construction of public buildings, $40 million for capital alone in construction of public buildings. There was $20 million for the B.C. Ferries, and there was another fund available for that purpose. Straight out of public accounts — $60 million in the estimates for 1976. Nothing in this year. Well, that makes it $60 million easier, leaving aside inflation, to balance the budget.
Deficit financing. Well, there is a reference in the budget speech. Although we talk on page 6 about not being in favour of deficit financing, on pages 30 and 31 we talk about the extent to which the province is quite prepared to borrow. There is no harm in that. The only harm in it is when the government pretends that it doesn't really happen. On page 31 in particular we notice that the total contingent liability — money for which we as citizens of the province of British Columbia are responsible — is in excess of $5 billion — almost $5,300,000,000. They give an estimate of population as well: 2,406,000 for 1976. At that rate it works out to something in excess of $2,200 per capita. Well, there is nothing wrong with that, Mr. Chairman. But for the Minister of Finance to say that
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we don't believe in borrowing for current operations and then to say we're going to take out of public accounts the B.C. Buildings Corporation, we're going to take out of public accounts B.C. Ferries, we're going to take out of public accounts Hydro, which has been out all along, and then still to pretend that he doesn't believe in deficit financing is — and I used the words earlier — nothing short of economic legerdemain. There are some definitions of that you wouldn't accept as parliamentary language and some that you would, and I'll not worry about that for a moment.
B.C. Ferries is one example we went through to some extent last year, and there are questions on the order paper to try to get some more information about that. I'll be very interested in seeing just what kind of answers we get to that. I do recall that the previous administration paid a substantial amount of the capital cost of B.C. Ferries, only to have the incoming administration sell those ferries, bring the money into current revenue, I presume, and then finance the ferries over a 20-year period.
Mr. Chairman, speaking about debt and the reference in the budget speech to the substantial amounts of money required to finance the expenditures of the past, order-in-council 1221, April 9, 1976, approved the borrowing by treasury bills of $250 million to be paid back, incidentally, by March 31, 1977. Fifty million dollars of that was refinanced by a subsequent order-in-council. I'm interested in knowing just how much was actually borrowed of the $250 million that was approved by order-in-council 1221, April 9, 1976. What was the total amount actually borrowed by selling those treasury bills? How much is still outstanding, either today or at the nearest date available?
I asked earlier about the borrowings of B.C. Ferries Corporation and the British Columbia Buildings Corporation.
I'd like to get into another subject, Mr. Chairman, in the time remaining. That is B.C. Savings and Trust. You may recall, Mr. Chairman, that I raised this question last year. I can quote from Hansard on the matter, and at the time I raised it the Minister of Finance said that he had dealt with it previously. In any case, I asked about the disposition of the B.C. Savings and Trust report. The minister replied at the time, April 27, 1976: "The task force report is tremendously large, about two feet deep." He goes on to say: "I have not read the report. As recently as last week, I read one section of it. I cannot indicate at this stage whether, in fact, we will be prepared to file the report because I don't know what's contained within the report."
Mr. Chairman, I wonder how far the minister has proceeded with his reading of this report. I asked that question last year and this was the answer. I'm asking again: has he proceeded any further with his reading of the report? Last year I asked him whether he had made a copy of this report available to his staff, to read it and review it for him. To the best of my recollection, I received no answer to that question. I ask again: has he passed this report on to any members of his staff for them to have an opportunity to read and review the report and to make recommendations in the B.C. Savings and Trust report?
There is a quotation, to which I would like to refer, in the Vancouver Sun, April 21, 1976, by George Froelich, the business editor. He talked about this same report and he seemed to have some knowledge of it. He seemed to think that it was, or could be, a very useful report. He points out that it was handed to the Finance minister, Evan Wolfe, on January 28, and that it was a very high-powered, very qualified committee that studied and then produced that report. He pointed out that although the government of British Columbia up to this time — that is April 21, 1976 — had apparently evidenced little or no interest in the report, other governments were interested. He goes on to say, and this has not been checked to the best of my knowledge.... I would like to ask the Minister of Finance whether indeed he was approached by the Commonwealth of Massachusetts and asked for some material from this report, whether he has been approached by governments of any other Canadian province or anywhere else, asking for copies, or for materials, or recommendations from this report. Apparently the report was very highly thought of in many circles. I wonder whether any other jurisdictions have asked for copies of that report. I wonder whether the Minister of Finance has made copies of that report available to anyone outside the province of British Columbia.
Mr. Chairman, I listened with interest, as the minister was speaking earlier today, to some of the changes that have been made in the Ministry of Finance. I wonder whether any of the changes that he detailed in his opening remarks that have been made in his department arose out of his reading, or out of his department's reading, of the B.C. Savings and Trust report. In other words, Mr. Chairman, is any use being made of the report in British Columbia, or has the report been made available to anyone else anywhere for their use or their edification?
Mr. Chairman, I'd like to get into a few questions of revenue. The Minister of Finance did say that we're likely going to have a modest surplus. He said that in the budget for the year 1976-77, and the budget for 1977-78 projects a similar situation — break-even or a modest surplus. But when I look at the figures, I wonder what the explanations are for the very low increases in some items in particular. Sales tax, for example, shows an increase of only 4 per cent. Mr. Chairman, I wonder how that can be if
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we're expecting real growth in the economy. In the budget speech, the minister does indicate that he is expecting some real growth — not growth in terms of current dollars but actual real growth — and a 4 per cent increase would not even allow us to keep up with the inflationary rate, let alone anything else.
I did understand from one of the reporters that in answer to this question he replied that the estimate for last year was particularly high. That makes me wonder again if some expenditures are up. We do know that special warrants to the extent of $82.5 million were approved, so we do know that some expenditures are over budget while others are under. We're concerned, from reading the first quarterly report and even the second one, that some revenue items are down. If sales tax is down and if the actual figures for March 31, 1977, will be substantially lower than $710 million, then I think we need some detail or we would certainly like to have some details as to how they can hope to balance the budget for the current fiscal period if revenue is down significantly. And if revenue is not down significantly in that particular area, then how is it that we're projecting a growth of only 4 per cent? Of course, the obvious answer there is that the minister is underestimating revenue from social service tax.
Gasoline tax is a peculiar one too. The estimate for this year is down below what it was last year. We've heard nothing about a change in gasoline tax rates. We read in the budget that vehicular traffic is increasing in the province. There are more cars driving more miles and there is no change in the gasoline tax rate and yet we expect to collect less money. I wonder if the minister has any explanation for that.
Motor-vehicle licence fees and permits are down as well. Logging is down 41 per cent.
And yet, Mr. Chairman, we read that the economy is supposed to be picking up. We read that in the budget; we don't read that in some other circles. But certainly in the budget we're led to believe the economy in B.C. Is improving slightly. We don't read that when we look at the increase in sales tax, perhaps the best barometer of economic activity in the province. But nevertheless we read in the budget that we should be cautiously optimistic. Yet we look at the largest industry in the province and recognize that the projected revenue from that is going to be down 41 per cent. Of course, we're not surprised that mineral revenue is down. There are other items of revenue that are very questionable, but the one that really hits you in the eye so much is the sales tax. And I think that's the one that the minister should give us some information about first.
Mr. Chairman, we've heard a great deal about the financial bungling of the NDP. We've seen different columnists and different economists take us to task. Here's one headline, for example, saying that as bad as the NDP were, they were certainly nowhere near as bad as the current Social Credit administration for the economy of the province of British Columbia. Of course, that's endorsed by those who say that the economy of Canada is showing some recovery everywhere except in the province of British Columbia.
Mr. Chairman, I think I've given him enough questions to start on for the time being. I'm not sure just how he wants to deal with the answers, but that's my opening shot anyway.
MR. GIBSON: Mr. Chairman, I'd gladly defer to the minister if he wants to answer the questions of the member for Nanaimo at this point.
HON. MR. WOLFE: Go ahead.
MR. GIBSON: The minister doesn't want to talk at this point, apparently.
I think I can answer the member for Nanaimo's question as to why the sales tax increase projected for the coming year is so low at only 4 per cent. And I agree with him that it is very low. I think that's very simple, Mr. Member; I think that's because they overestimated last year. I don't think they meant it as an overestimate, but it turned out that way because of the way they managed the economy.
The sales tax, naturally, is something that depends very directly upon consumer spending. So what did this government do last year? They took out of the income stream an extra $200 million for ICBC right away. They raised the sales tax by 2 per cent unexpectedly and took out another $200 million. Then they hit the tourist trade over the head with the ferry rate increase. All of this has been estimated as a knock on the head to consumer spending of something like $500 million. Seven per cent of $500 million is $35 million, and the shortfall in the sales tax is probably going to be something like that, Mr. Member.
The projection 1 made at the time of the budget, if the usual trends continued, was that it was going to be about $685 million revenue. Maybe the minister would be kind enough to give us his projection, because, as the member for Nanaimo said, we really should have those projections, Mr. Chairman, as we're dealing with these estimates. We should have had them for the budget.
MR. CHAIRMAN: Hon. member, may I just interrupt you long enough to suggest that technically a discussion on sales tax — particularly its percentage — would not be in order under this vote? But we are allowing a reference to it as long as it doesn't develop into a full-fledged debate. It is a matter that requires legislation and is ruled out of order by May.
MR. GIBSON: I appreciate that, Mr. Chairman.
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What I'm talking about is the degree to which the minister and his administrative machinery have successfully or not forecast the amount of the sales tax. I'm suggesting that in the budget last year they made their best efforts to forecast the sales tax revenue for that year, but they reckoned without the economic bungling of the other side of the operation. That's what led to the shortfall. And I think that answers the question of the member for Nanaimo. I'll be glad to hear what the minister says when he stands up.
HON. MR. WOLFE: That's not what you said a year ago.
MR. GIBSON: Oh, no, no! Mr. Chairman, I wish he wouldn't get me mad! (Laughter.) You see, a year ago I suggested to that minister that he had underestimated his revenues.
HON. MR. WOLFE: Yes, you did.
MR. GIBSON: And you know what? They came in, he tells us today, right on target. But you know why? Because they bungled the economy so badly. That's right! Had you run the economy correctly, Mr. Minister, and not done that silly thing with the ICBC and not been quite as rough with the sales tax and the B.C. Ferries, things would have looked a lot better. You would have had that extra $100 million that you should have got. This year — we'll see.
I was glad to hear the minister tell us that he's bringing his department into the 20th century in terms of the new people he has and the new systems and so on.
I just want to ask him the question I ask him every year. I want to ask him: within $10 million, how much money do we have in the bank today? It would be a real help to me if you could just shout it across the floor right now.
I don't think the minister knows the answer this year either, Mr. Chairman. Maybe he has to get his computers a little more in line, because I think we should know on any given day, within $10 million or so, how much money we have in the bank, particularly if they're making deposits twice a day now, he says. We should be able to add that up at least once a day.
MR. WALLACE: Does he even know which bank?
MR. COCKE: Bank of Commerce.
MR. GIBSON: I was amused to hear the minister's comments on expenditure by other levels of government when his own expenditures last year went up 12 per cent. He admitted that, of course, in the budget speech. You recall the budget speech last year, Mr. Chairman, when he said that his expenditures were going to go up by, I think he said, either 5.4 or 5.9 — I forget which it was. Lo and behold, when he stands up in the budget speech this year, he blandly says: "Well, expenditures went up by 12.2 per cent." Of course, that's what those of us across the floor were saying last year, but he wasn't prepared to admit it at that time.
You know, when you really add in all the proper numbers about the amounts that were transferred out to the ferry system, the ICBC deficit and so on — when you compare apples and apples — there was a considerable year-over-year increase, just as there is this year, Mr. Chairman. He can't say that there's an expenditure increase of under 6 per cent when he doesn't take into account the fact that he's transferred out the capital spending in the Department of Public Works, for example, where we hear that the Buildings Corporation is going to borrow something like $80 million. That would normally be in the budget. He's transferred it out; and he's comparing apples and oranges again. The real increase in expenditure, as was calculated by one of the members of the press gallery, is something like probably 9 or 10 per cent. You know, we should know that, Mr. Minister. You shouldn't compare apples and oranges. If you're going to put the Department of Public Works' capital expenditures in one year and not the next year, then you should net it out of one year and add it into the other to make that fair comparison. And you know that that item is not there — it's not. It's the same thing with the ferry system, Mr. Chairman, and so on.
Now the minister says he has all these extra people. I wonder if he's yet in a position — and this is a really positive suggestion to him — whereby he has a computer model of the British Columbia economy, as many levels of government do. It's not a Mickey Mouse operation we're running here; it's almost a $4 billion budget and a $20 billion-plus economy. Does he have a computer model of the economy which allows him to ask what I'd call "tax policy" questions? In other words, could he go to this computer and say: "Well, now what would happen if we remove the 7 per cent sales tax from expenditures for the next couple of years on productive plant and equipment? What would happen?"
I happen to think the results would be very good, Mr. Chairman. I do know that the province of Ontario did that for a couple of years and then the Provincial Treasurer brought down his budget in November, looked at the results, found them good and extended them. Why can't we do that kind of thing here? Why don't we have the kind of model of our economy that allows the minister to try out different tax policies? Maybe we do, but if we do, all I know is that I wasn't able to get that information from the department. So if we do have the
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information and an MLA can't get it, that's even worse. I'm asking the minister about that — a model of the economy.
Next I want to ask him if he is going a study into the cost of public service pensions and the long-range effect of inflation on those pensions. There is a great deal of concern being expressed in other jurisdictions in this regard, and I think it ought to be expressed in British Columbia. We have seen projections, Mr. Chairman, that up to 20 per cent of payroll is ultimately going to be required to fund these pensions as the full indexation features mature. If that is really our future here in British Columbia, I think we ought to know. So I'm asking the minister: does he have such a study underway? If not, will he commission one? I put that to him as, I think, a very important suggestion. I'll also say in passing that I think we ought to have as a policy item more complete funding on all of the pensions that have anything to do with the public sector, and particularly the Canada Pension Plan, to the extent that the minister can make that representation to the powers that be in Ottawa.
Next, Mr. Chairman, I want to support the minister on his stand on the Anti-Inflation Board. He is absolutely right on. That AIB programme should not be taken off this year.
AN HON. MEMBER: Hear, hear!
MR. GIBSON: If there is any place in the country where continuing restraint is essential, it is here in British Columbia, because we live by exports. I'm trying to think what the figure was the minister gave in his budget speech, or was it the Premier? I think he said 55 per cent of our goods produced in this province are exported. It's an enormous figure, whatever it is. We have simply got to keep our costs here in British Columbia under control or else we aren't going to have the continuing jobs that we want. I support the minister 100 per cent in his quest to keep that AIB programme on. I'll tell you, Mr. Chairman, there's been too much loose talk about taking it off.
AN HON. MEMBER: Hear, hear!
MR. GIBSON: Because when you start to speculate about things like this, you immediately start to destabilize the whole management-labour bargaining climate in this province or anywhere else that it relates to. I think the people on the management side and the people on the labour side.... Syd Thompson had some very annoyed things to say about that kind of loose talk, and I agree with him 100 per cent. We had a bargaining climate that was going forward reasonably well in this province for this year. I hope we still have, but it has been jeopardized by this talk about taking off the anti-inflation programme. I think that is wrong.
MR. C.A. D'ARCY (Rossland-Trail): Who has been talking about it in B.C.?
MR. GIBSON: It's been national talk, Mr. Member. That's what I'm criticizing.
MR. D'ARCY: The Premier has been talking about it.
MR. GIBSON: No, no, Mr. Member. In fairness to the Premier of B.C., he has not been talking about taking it off. He's been saying it should be kept on.
MR. CHAIRMAN: Let's keep the debate through the Chair, please.
MR. GIBSON: Thank you, Mr. Chairman.
AN HON. MEMBER: Tell them in Ottawa.
MR. GIBSON: We have such an agreeable interchange of opinion going on today in a quiet House I had hoped you wouldn't mind a little aside. I want to say to the minister — and this has nothing to do with the federal anti-inflation programme — that restraint must be maintained in terms of the public service of British Columbia. I noted in the House, in response to a question the other day, if I understood it correctly, he more or less agreed with the characterization by Mr. Fryer of a 24 per cent settlement over 22 months, which my reading says is about 13 per cent per annum, which I personally think to be a little high. But that's not the bad part. The bad part is the way the ordinary public servants in British Columbia are going to look at the senior management plan — the mandarin plan — this 17 per cent per year retroactive settlement back to 1974.
Mr. Chairman, we were asked in this House, as MLAs, to show some leadership in terms of the salary that we took. I voted against it at the time because I thought it was tokenism on the part of the government, but at least that's the way they were going. Now how can they ask the ordinary public servant in this province to accept the relatively smaller increases and compare them against this 17 per cent figure, which has been made retroactive back to 1974, for the mandarins? How can the minister justify that? You have to have some degree of consistency or you can't expect people to go along with you. The restraint has to apply pretty equally, and sometimes it has to be, as the head of the federal anti-inflation programme said, maybe a little bit of rough justice for a year or two. But there has to be that consistency there, and that 17 per cent, as compared to the 13 per cent, for people already in
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the higher income brackets doesn't strike me as being right.
I would like the minister to comment a little bit on the situation related to the revenue guarantee. He went down to Ottawa, of course, and then the Premier went down to Ottawa, and I think they were asking for something like $150 million a year on the revenue guarantee. I think they came back with something a little under half that. But one of the questions that arose was a matter that's reported in a column here in the Globe and Mail on February 8. I didn't see it in any local papers. I may have missed it. It suggested here:
"The federal government has compromised with the provinces by cutting in half the provincial repayment required by the federal-provincial tax-sharing agreements. Under the new agreements worked out in December" — those were the ones at the Premiers' conference — "Ottawa would have turned over 12 months of tax revenue for programmes that ran only in the last nine months of 1977, and until last week Ottawa had demanded a repayment of the three-month difference. This would have meant about $700 million being returned to Ottawa by the provinces, but Finance minister Donald Macdonald told the Commons that the cabinet had agreed to cut the repayment in half."
What I want to know, Mr. Chairman, and what I want to ask the minister: is this the good news I think it is? Does this mean we are going to get $35 million more this year than he thought? Did you hear the quote, Mr. Minister?
HON. MR. WOLFE: Go ahead, say it again.
MR. GIBSON: I was quoting here from a Globe and Mail story that said the federal government was no longer going to require the repayment of the entire three-month differential in the 1977 agreements, but rather only half of that. Am I right in believing that this adds to our revenues by $35 million, either in this fiscal period or in the next one? I am not sure which it would go in. It is a complex subject and I would appreciate it if the minister would tell me how much money that is and where it falls.
I would like him to direct his attention a little to some of the philosophy he espoused in the budget with respect to the question of equalization. He suggested that the proper route to follow in our country was to go about equalization in terms of people rather than governments. I ask him again: will he please say exactly what the levels are on his negative income tax plan? What would be the poverty level? What would be the tax-back rate? Would it be 50 per cent, 66 per cent, 75 per cent? These all make billion-dollar differences in how this plan would work.
Then would he go on to tell me how he sees an elimination of the governmental level of equalization plan affecting national unity in this country? I don't think most British Columbians mind paying equalization to some of the poorer provinces in the east because the theory of those payments is that it enables those provincial governments to maintain government services up to a level that the richer provinces can in terms of schools and health and so on — that kind of thing.
As the minister ought to know, if that system is cut out — which is what he's been advocating — in favour of a negative income tax plan, then those poorer provinces are going to have to considerably raise taxes on individuals and on companies in order to maintain those kinds of services. If they do that, they are going to force individuals and companies out of those poorer provinces into other parts of the country. That's not a proper thing to do, quite apart from the fact it would exacerbate the growth rate problems that British Columbia already has. So I'd just ask him to give a little philosophical thought to that before rearranging Confederation quite so quickly, just as the Premier gratuitously did the other day by amalgamating the Maritime provinces for which they said: "Thank you very much, but no thanks." I think we'd be well advised to solve some of our problems at home first — and the minister has a lot of them here — before giving too much gratuitous advice to other parts of the country.
Now I want to go on and talk a little bit about the auditor-general and, first of all, report to the minister that the committee relating to an auditor-general is working very well, in my opinion. It was established under a good piece of legislation and it's a real committee, since there's that requirement of unanimity — lo and behold — the opinion of every member counts for once. It's a good hard-working committee doing a job. Let's wait for the day when the auditor-general comes on the scene. And what kind of information is he going to have? I suggest, Mr. Chairman, that one thing he should have and one thing that this House should have is what I would call performance measures of activity — not just dollar measures, but performance measures. We're debating now a set of estimates which this minister presents and prepares. I'm suggesting to the minister that when he puts together the estimates next year, he should not simply have dollar figures. He should say, if it's an operation that is, let's say, clearing waterways of weeds, that it's going to clear so many miles of waterways so that the next year we can look at that. If it's an operation that is having to do with, say, reforestation, we could have a performance measurement that says so many thousands of acres are going to be reforested. If it's a vote that has
[ Page 999 ]
something to do with health, let's say, then we should have an objective there that says there are going to be so many patient days looked after by this particular vote. You can't quantify everything but you can put a great deal more measurement of performance on the output on the public service than we traditionally do in this House, and certainly more than we do in this estimates book. These are assuredly the kind of measures that any self-respecting treasury board would want to be developing in terms of assessing governmental efficiency. I think they should be available to this House and I think they should be available to the auditor-general as soon as that person gets on the job.
I want to ask the minister next what, if anything, he did with two representations I made to him last year, requesting that he carry them to the federal government at one of the conferences that he attends? I think that one of the things we all agree we need in British Columbia is investment, preferably investment by British Columbians or by Canadians. One of the unquestioned ways of doing that — and it's an idea that's not new — is the plan advanced by the Investment Dealers Association of Canada and called the Canada Investment Plan. I've spoken to the minister of this before. Through it the investments of ordinary people, up to some limit — I'm not talking about multi tens of thousands of dollars investment by wealthy people but in the small thousands of dollars by ordinary people — in Canadian corporations would receive special tax treatment, such as the kind of tax treatment accorded to the Registered Retirement Savings Plan, for example. So this would be an additional vehicle encouraged by the tax system for capital formation in this country.
That's the first representation I asked him to make. The second was to ask the federal government to do what is only fair on the capital side, which they're already doing on the income side, and that is to provide for the indexation of capital gains in our taxation system. As the minister knows, this is a strong disincentive to investment. It is entirely possible for a person to make an investment which has a value of, let's say, $10,000 today; to see that investment five years hence having appreciated only to the amount of inflation, whatever that may be, say to $20,000; and to sell that investment and be taxed on the $10,000 difference, when really he hasn't made a penny when you take into account the inflation. So without indexation of capital gains, our taxation system, of which we're a part in British Columbia, discriminates against investment. I asked the minister to carry that representation to Ottawa. I would ask if he did so.
I'd like to suggest another piece of research to the minister. There has been a good deal of discussion — from his side of the House and from this side of the House, because we all, or at least many of us, think it would be valuable — of the devaluation of the Canadian dollar and its impact on British Columbia exports. There's no question that — at least on a one-shot basis — this would help our cost structure. I'd like the minister to do some research. I'd like him to estimate the impact of such a devaluation by one cent — or 10 cents or whatever number he sees fit — on the foreign debt obligations of British Columbia public authorities. Some of our foreign obligations are denominated in Canadian dollars and there would b e no impact there. Others, however, are denominated in U.S. or other foreign dollar terms. In that case, if we devalued our Canadian dollar by 10 per cent, then, in effect, we would have to pay 10 per cent more of those cheaper Canadian dollars to redeem our obligations.
I'd like to ask the minister to do a little research on that, not just as it relates to provincial government borrowing through all its agencies, but to municipal and school financing as well. It could be an important impact on devaluation on this province.
Mr. Chairman, I would make one further representation to the minister. He is, in many ways, the custodian of what I would call the financial climate of the province. He very properly argues in his budgets for the necessity of investment and the relationship of a profitable enterprise to investment. I would like him to say some positive public things about the importance of current-value accounting by British Columbia companies.
A study done in 1974 and 1975 by the national firm of Touche-Ross, I believe, for Canada as a whole showed these astonishing figures: the reported net income of corporations in 1974 was $9.2 billion; after making an adjustment of $4 billion for the paper inventory profits of that year and $2.7 billion for the fact that depreciation did not really cover the drop in replacement value that year, the actual profits after accounting for inflation were $2.5 billion — in other words, less than 30 per cent of the report figure. The real profits were only 30 per cent of the nominal profits when adjusted for inflation. In 1975 the reported figure was $8.3 billion and the net figure — the adjusted figure — was $3.1 billion.
So what's happening here, Mr. Chairman, is that not only the public, but in many cases the companies, are being given a completely misleading picture of their financial ability. So we can have the incredible case of a British automobile company that was making profits every year but that, in fact, almost had to go into liquidation. It had to be bailed out by the government because those so-called profits were just these false profits, these inventory paper profits. I think that's an important thing. As I say, I think the minister, in his capacity as spiritual leader of the financial community of British' Columbia, should come out against these false profits.
Mr. Chairman, I think those are all the questions I
[ Page 1000 ]
would put to the minister right now. But I do ask him once again if he could tell us within $10 million how much we have in the bank.
HON. MR. WOLFE: Mr. Chairman, we're accumulating a considerable number of questions rapidly. Before we run out of room, I suppose we should address ourselves to some of them.
Since the member for Nanaimo is still here and he's very interested in this subject.... I appreciate many of the questions he asked. Leading off, he referred to the McMath report and the Assessment Amendment Act, which we passed the other day, and to the fact that there was a subsequent more comprehensive amendment proposed. I can answer that question, Mr. Chairman, through you, by saying that this matter is definitely in the hopper and very actively being pursued. I'm hopeful that a bill will be coming forward in the very near future.
He referred to quarterly reports; I expected that he would refer to quarterly reports. Quite honestly, Mr. Chairman, I had hoped that the third quarterly report would be available by now. I can say that it is very near to being ready. It has been sort of headed off in being available because the nine-month information turned out by the comptroller-general has already been tabled. It was prepared in advance and contains basically the same information as the quarterly report. The only thing that it wouldn't contain, of course, would be the reports of the Crown corporations. Some of those have entered into the fact that there has been some delay in getting this information available. Any event that....
AN HON. MEMBER: The forecasts, though.
HON. MR. WOLFE: As the members know, Mr. Chairman, the nine-month quarterly report was a matter of urgency because of the budget coming down early this year. This information is before the House and contains very current information on our revenue and expenditures for the year.
AN HON. MEMBER: But no forecasts.
HON. MR. WOLFE: He referred to the comments in the first quarterly report as being pessimistic and in the second quarterly report, which was through the period ended September, as suddenly changing.
How did this happen? The fact of the matter is that things have picked up in that period and since in terms of the provincial economy generally and the revenues that we depend upon. I'd like to refer to page 7 in the second quarterly report where we refer to the fact that the improvement was the result — that is, for the second quarter — of a $55.3 million gain in revenues over the original budget forecast and a $52.6 million reduction in expenditures in the same period.
The third item which really contributed to this improvement was the policy developed of the sale and leaseback of the three ferries. In the period mentioned, two of these transactions had been consummated to the total of $31.4 million. So this accounted for the improvement in the anticipated deficit versus the anticipation of breaking even between those two quarters.
I might say that in terms of the budget brought down recently, it might be worthwhile to refer to opinions in the financial community regarding our efforts to balance this budget and our efforts to restrain the growth of expenditures. I'd like to read from an economic report turned out by McLeod, Young, Weir & Co. on January 31 of this year, just quoting in part:
"British Columbia has just released its budgetary position at the end of the third quarter. All of the spring budgets contain measures to raise revenues, and all pledge cuts or restraints in expenditures. In addition, British Columbia and Ontario stress that expenditure restraint will be continued in 1977-78, with total expenditures forecasted to increase by only 5.9 per cent and, in Ontario, 9.6 per cent respectively,
"The estimated budget deficits of the federal and Quebec governments for their fiscal year are much higher than forecasted in the spring, and these increases have flowed through a substantially larger borrowing requirement. The position of British Columbia has substantially improved within the fiscal year."
And further on, Mr. Chairman:
"Regarding the 1976-77 performance in British Columbia, the revenue projections made in the 1976-77 budget were almost exactly on target. The revised estimate of October, 1976, shows that revenues will decline by $36 million over the year, only I per cent below the forecasted value; and at the end of the third quarter, actual budgetary revenues were $2,520,000,000 compared to the budget estimate of $2,569,000,000, a difference of $49 million.
"Also, projected expenditures for the current year of 1976-77 at $3.593 million are actually $21 million below the original budget estimate, less than I per cent forecast error."
I think this has to be viewed as a remarkable achievement.
The member for Nanaimo (Mr. Stupich) referred to deficit financing and our reference in the budget speech to disagreeing with deficit financing. He points out that there are the ferries, the B.C. Buildings Corporation and other Crown corporations which, of course, have substantial borrowings and which are tabled in the budget speech as being contingent
[ Page 1001 ]
liabilities. It is true that these corporations borrow for their operations and derive their revenues to pay off those expenditures, but our policy clearly announced in this government is that we do not advocate deficit financing for current operations. I think we have enough of that already on the books, saddled with the responsibility of repaying, and we disagree with the continuing growth of deficit growth to finance current operations. That's the principle of the statement we are making.
You asked how much the Ferry Corporation has borrowed thus far. The answer is nil. They were just established as of January 1. Their assets have been turned over at no cost or at a dollar. There has been no need for them at this stage to enter into borrowing.
The B.C. Buildings Corporation has an authority to borrow of some $37 million, I believe, altogether. They have currently borrowed in two issues $12 million plus $1.5 million, or a total of $13.5 million.
For the information of the House and to throw some light on the matter of borrowing by other provinces, I'd like to show the results of a comparison across Canada of total debt, direct and indirect — that is, total debt by provinces direct and guaranteed. This is dated March 31, 1975. On a per capita basis, Mr. Chairman, British Columbia shows a debt of $3,803 per capita, compared to Quebec at $8,507 per capita, Ontario at $13, 378....
Mr. Chairman, I'd like to retract the figures I just gave. Those are total dollars. I want to refer to another table in which I would indicate the per capita guaranteed and direct debt. British Columbia, as of March 31, 1975, is $1,556 total debt per capita as compared to Alberta — $1,644; Manitoba — $2,141; Ontario — $1,635; New Brunswick — $1,615 per capita; Nova Scotia — $1,591; Newfoundland — $2,753.
Mr. Chairman, the only two provinces that have a lower debt per capita in all of Canada than British Columbia are Prince Edward Island and Saskatchewan. In other words, with the exception of those two provinces, as of March 31, 1975, we showed the lowest total debt, direct and indirect, per capita in Canada. I think that's a very revealing piece of information.
Reference has also been made to the fact that the ferries have been sold, primarily with the object of removing these expenditures from the budget. The reason, we should point out, Mr. Chairman, that the transaction on the lease-back of the ferries has been put together is that in the process we were able to enjoy an extremely economical and low rate of interest on the lease-back. Something slightly over 7 per cent on the investment represented on those ferries is the annual cost of our lease-rental on those ferries, not taking into consideration the exposure to repayment or repurchase of those ferries at the end of the lease period. So the primary motivation is that nowhere else could we borrow money at something over 7 per cent, and I think it would be foolish for us to ignore the advisability of a transaction of this kind, where we can much more economically lease these vehicles than we could to own them.
The member asks: under our Deficit Repayment Act, what was the amount borrowed in treasury bills? The total amount originally borrowed, Mr. Chairman, was $181 million and, at this stage, there is the sum of S 15 0 million owing. But I would like to advise the House that we do anticipate that further borrowings will be required in the near future. We have a total authority, as you know, up to the $261 million authorized under the Act. This anticipated further borrowing, we believe, will be necessary due to cash-flow requirements and our view of the estimated expenditures in the next two months.
Moving on to the B.C. Savings and Trust report, this is a matter that received a lot of attention during last year's debate on estimates.
MR. STUPICH: Have you read the Gordon report?
HON. MR. WOLFE: Yes. Have I passed it on? Yes. And I want to remind the member that this report was not really accepted until later during the year 1976. We had it on board for some time before we could establish the fact that it was ordered on good authority. We could not establish that any documentation existed anywhere in the ministries authorizing the purchase of it. I believe the fee charged for the production of the report was something more than $145,000.
You asked if we have been approached by other areas outside of British Columbia. I can only recall one instance, which was an approach made indirectly, and it was not considered possible to adhere to that request because there were elements of confidentiality, within the report and our review, that were obtained from other provinces on that understanding.
You ask, has there been any use made of the report? Definitely yes. I mentioned the appointment of a cash management department, and Mr. O'Neill, very early in the year. This was a policy developing prior to the introduction or the use of the report, I can say, because considerable change had been underway. But we did make use of interesting information in that direction.
Now the matter of sales tax. This continues to come up. I believe
the question asked by the member for Nanaimo (Mr. Stupich) was.... He
said it is apparent in the projected forecast for sales taxes at $740
million for the coming year, that this only indicates an increase of 3
to 4 per cent over the current year's original forecast. Actually this
forecast over our projected final sales tax revenues is some 11
[ Page 1002 ]
to 12 per cent.
I might say that I have in front of me a report on retail sales for the province of British Columbia which I think will be of some surprise to the members opposite in terms of the retail sales during the current year, and the possible suggestion that sales taxes had an adverse impact on these sales. For instance, retail sales overall from March to December, 1976 — for the 10-month period through December, starting in March — showed an increase of 12.18 per cent. I could give that by quarters: first quarter, 13.18 per cent; second quarter, 11.39; third quarter — that's September through November — 12.16 per cent; and for the 10-month total, 12.18 per cent. Then turn to retail sales excluding food. These are obtained from Statistics Canada. In the 10-month period, there was an increase of 13.0 per cent. That's retail sales excluding food for the province of British Columbia. Lastly, the retail sales department stores showed a growth for the 10-month period of 10.83 percent — hardly a disastrous turn of events, Mr. Chairman.
I might say that I hesitate to bring up the subject of motor vehicles, but here again is a report on retail sales — motor-vehicle sales, which I think are a barometer of the economy from month to month. The 10-month dollar increase was 17.39 per cent. Once retail sales taxes are adjusted to 5 per cent to provide a true comparison, for the 10 months of the current year, through January, there was a 10-month total increase of 9.1 per cent over the previous year.
[Mr. Veitch in the chair.]
I would have indicated the nine-month total through December which would have been much higher, but which would have been distorted by the postal strike of 1975. But you'll notice how clear and honest and sincere I am by including January so that the adjustment is....
MR. STUPICH: That's not on the list.
HON. MR. WOLFE: No. Okay, I'll give you another page. The 10-month total of sales taxes, adjusted for the 5 per cent, shows an increase of 9.1 per cent.
MR. GIBSON: That's not near as much as you forecast.
HON. MR. WOLFE: No, it isn't, Mr. Member, but it's not that far out.
I'd like to talk about your percentages a little later on, if you'd like to do that, so I'm very glad that you brought that up. That's what I would like to talk about right now. Mr. Member for North Vancouver–Capilano (Mr. Gibson), you know I am going to mention this because I couldn't help but mention that a year ago you were overemphasizing the fact that we had underestimated revenues. You need to be reminded of what you said on April 27 — and I believe you had your hands under your suspenders at the time:
Now, Mr. Chairman, the minister in his budget suggested that it would be 13.7 per cent. I can't believe that he drew that simple line, because if he drew that line, he would find it 16.7 per cent.
I don't know what line he's talking about, Mr. Chairman.
How in the name of all that is simple, Mr. Chairman, can this minister tell us that in a year of economic growth of only 10 per cent, tax revenues grew at 11 per cent — in other words, more than the economic growth — and yet in a year where the economy grew 14 per cent, he's predicting the revenues will grow less, by only 13.7 per cent?
Mr. Chairman, these are the words of the member for North Vancouver–Capilano last April.
Mr. Chairman, I suggest to you that that is nonsense. That's why I suggested in a previous debate that the tax system is going to yield at least $100 million more next year.
Mr. Member, put your money where your mouth is. What do you say now about next year?
MR. GIBSON: Sit down and I'll tell you about it.
HON. MR. WOLFE: We shouldn't pass by the subject of sales taxes, and the difference between forecast figures and the way they actually work out, without mentioning two things. The first is that forecasts take place sometimes 15 to 18 months before the event is completed. We then talk about a year which doesn't conclude until the following March, we forecast in January, and the final figures are not in until perhaps the following June. It's almost impossible to expect forecasts which are exactly right on because there are so many unexpected events which take place in the intervening period. One further point that has been forgotten is that during the period of the current year we had a construction strike of some two months duration which had a very pronounced effect on our revenue from that industry during the period.
Mr. Member, you asked the same question you asked a year ago: "How much cash in the bank?" Mr. Chairman, I could provide this figure any day, but it would be misleading. I have figures on the cash in the bank but at the same time, there might be $50 million in outstanding cheques. The cash includes cash held in trust, so we have to deduct those things very much on an estimated basis.
The second thing that I would refer to is that outstanding cheques on a Monday might be $30 million, and on a Friday they might be $75 million. They vary a great deal with what takes place from one
[ Page 1003 ]
day to the next. Having said that, I'll answer your question. The cash as of Monday, taking away an estimated $30 million only for outstanding cheques, was somewhere between $25 million and $75 million. I have mentioned to you the fact that outstanding cheques can be a considerable variable and that it includes trust funds. The cash flow is the biggest determinant, which our cash management man has to view in terms of the investment of these funds.
One further thing to the member for North Vancouver–Capilano (Mr. Gibson). He's made reference in this debate and in earlier debates to the figures that are thrown around about the increase in expenses over last year. He fails to point out — and I know he realizes this — that in one instance we, might compare the budget of this year and next year, and in another instance we might compare the budget of next year with the actual expenditures of last year. Which way would you rather have it — as apples or oranges? In this year's budget, on page 16, we very clearly said this is only a 5.9 per cent increase over the current year's budget. It is two different things, Mr. Member, to compare the next year's forecasted expenditures, or the budget, with the previous year's budget, or to compare next year's budget with last year's total expenditures.
Interjection.
HON. MR. WOLFE: Well, just read very carefully what we said. We defined it and took great care to make sure we were not trying to mislead anybody, and pointing out that it was budget versus budget.
Interjection.
HON. MR. WOLFE: I suggest, Mr. Member, you don't know what you're talking about.
You then ranged on, Mr. Member, into a series of subjects which I know we both have interest in — the computer model of the economy. I can say that my department is aware of this. We have been working with the Department of Economic Development on this subject. It's a new concept which we are working on and want to develop.
Were we doing anything about a study of the public service pensions and the effect of inflation on these? The answer is yes, we've already had work done by the head of our superannuation department, Mr. Howard Forrest. With regard to that, there are concerns with the effect of inflation on all pension plans.
One thing that we can be thankful for in British Columbia is that our pensions are funded. Not so in the case of Ottawa, Mr. Chairman. Therefore there is a very great concern in the fact that there is going to be a point in time where the inflow of funds to these pension plans is not going to be equal to the interest earnings and so on, and exposure.
Interjection.
HON. MR. WOLFE: That's what I say; there are considerable concerns about all pension plans, not just the public pension plans.
With regard to the Canada Pension Plan, it also is not funded. There was a discussion at the last meeting of ministers in Ottawa and there has been ongoing work developed as a result of this. Papers were presented, One by Ontario would suggest that the Canada Pension Plan should be put on a funded basis. Well, one of the reasons behind this proposal is to provide the tremendous inflow of funds that this would generate as a public body of funds to inject into the economy. The only thing you have to question is that this would put great power in the hands of some public body as to where these funds would go. We're talking about money in the billions.
I think a possible resolution, in our view, of the Canada Pension Plan debate is that it will come to a point in time — what they call critical point one or two — where there will have to be adjustments made in the contributions. But this can only be resolved by a substantial upgrading in the size of contributions that are now prevailing.
I'm glad to hear, Mr. Member, that you agreed with the policy statements regarding the anti-inflation programme. I understand from news reports in the last few days that the federal minister is still making a variety of indications as to when the programme might be discontinued. One day it appears to be 1978 and the next day, 1977. But we will be saying and will continue to say that we want to have the programme continue through its original planned period.
You emphasized that restraint should be kept on in the public sector, and you referred to the recent indication of an increase in the public service compensation with the union of some 24 per cent in 22 months. I'd like to say that when you describe the increases over the term of the current BCGEU contract, it's very easy to come up with two or three different percentage figures. You are laying cost-of-living increases upon other increases, you're changing the hours of work, and so you can come up with a variety of figures. All I have said is that the most recent settlement to resolve the 22-month contract with retroactivity amounted to something like 1.5 to 2 per cent added on at the finish of the period.
Now you referred to the federal-provincial transfer of funds and the conclusion of the shared-cost programmes. You mentioned that it's a very complicated subject. About the only way I could answer your question is that one aspect of the wrap-up of the plan is that the change in tax points is
[ Page 1004 ]
effective January 1, whereas the change of the contract is April 1. So the result of this was that the new tax tables are in effect January 1 and we are therefore overcompensated for three months. The repayment of this three-month over-payment created a substantial burden on the fiscal year to come because it would reflect on our budget in a substantial way.
Now the federal government has just now announced that the amount of this over-payment is some $700 million and they've said, to resolve the whole issue, they'll settle for $350 million. Now this means to British Columbia — instead of having to pay back $90 million, we pay back $45 million. Next year we would pay back $30 million, of which we'll have $20 million in suspense from this year, getting $10 million net next year out of our revenue. In other words, of the $45 million that we're obliged to pay back, two-thirds are required to be paid back in the coming fiscal year and one-third in the following fiscal year; however, against that we offset our demand that they, on the other hand, owe us: for the medical care settlement or cutoff, some $50 million; for a misunderstanding on the revenue guarantee which should take effect January 1, there is a dollar figure attached to that; for the fact that we already had a transfer of points in post-secondary education of 4.13, amounting to $32 million. So we add up the total of those three items of some $90 million. The effect of this, Mr. Member, through you, Mr. Chairman, is that we would gain, under the federal proposal of last week, $45 million, but we lose $90 million unless these other items are resolved. So in our view, there is a net deficit in this proposal of the federal government. As I said, it's complicated, and you said it was complicated and I think if I described it again, it would sound altogether different.
You mentioned negative income tax and, if you like, I could refer to that a little later on because I have some useful information here in which you might be interested. But in the interest of allowing other members to raise further questions, perhaps we could come back to that later.
You mentioned the Canada Investment Plan and the indexation of capital gains. Perhaps we could put those in the same category. So we can leave it at that for now, Mr. Chairman.
MR. GIBSON: Mr. Chairman, first of all I want to thank the minister for being very forthcoming on a number of questions that were raised and I'm particularly grateful that one of the figures he gave here finally allows us to determine where that missing $100 million went. Because as I looked at that budget last year, I said to myself, there is $100 million there and yet, where is it?
Now we find it. We find that the 10-month figures for retail sales tax receipts, adjusted to the old 5 per cent level, would have only been up by 9 per cent. Which means, Mr. Chairman, that the retail sales therefore were only up by 9 per cent — those that are taxed on the retail sales tax. Right?
AN HON. MEMBER: Plus the other 2 per cent.
MR. GIBSON: Oh, yes — that's the revenue. But I'm talking about the underlying base, the actual retail sales. They're up 9 per cent. The taxable retail sales are up 9 per cent. Now what was the forecast in the budget? Look at page 29 of the budget delivered in March, 1976.
HON. MR. WOLFE: Seven hundred and ten.
MR. GIBSON: That was the forecast revenue, but I'm talking about the overall economy. You speak of the expectation of a 14 per cent growth in the economy. Now, Mr. Chairman....
HON. MR. WOLFE: You said that was too low.
MR. GIBSON: No, no, no. I said your revenue figures based on that expectation were too low. So what's obviously happened, Mr. Chairman, is that the minister's forecast for the growth in the economy has not come about.
HON. MR. WOLFE: It's going to be on the record. You'd better be careful.
MR. GIBSON: You were forecasting 14 per cent and yet we see here by your own figures today that taxable retail sales were apparently only up 9 per cent. Right? So there seems to be a shortfall there because retail sales generally increase at the same level as the gross provincial product because there is such a large component of it. That naturally has to happen.
There seems to be a shortfall there — just doing quick arithmetic in my head — something like 4 per cent on retail sales, less than you would expect of them. Further evidence for this, of course, is given by the fact that you had forecast sales tax revenues of $710 million, and it actually looks like it's going to come in something more like $680 million or $685 million. That would seem to be the case because, again, you forecast an increase of 11 to 12 per cent of your retail sales tax estimate this year over the actual receipts that you expect for the current year.
So all of that says to me, Mr. Chairman, that the economy did not perform in the way that the minister thought it was going to. Had it performed in that way, we would have had that extra revenue. Naturally, that's what my forecast was based on and I say again — and I believe — that the reason it did not perform quite that well was because of the tremendous knock on the head the consumer
[ Page 1005 ]
expenditure was given by the actions of this government on the ICBC and on the sales tax and on the ferry system. Of course, in this I'm quoting, I think, just about every economist in this province. If you want to quote a retail sales expert you can just go and talk to Mr. Woodward, head of Woodward's Stores, who said exactly the same, too.
Interjection.
MR. GIBSON: Yes, but department store figures weren't up that much either, were they? They were up, even for the nine-month period, 10 per cent. For the nine-month period they were up 10.8 per cent. You said yourself that that nine-month period was exaggerated because of delays in the postal system the year before. Therefore when you bring in the 10-month period, they'll be up less than that. So it seems pretty clear to me, from the figures the minister has given us today, that the economy didn't grow as much as it ought to have done and I regret that very much. We could have had a surplus, had they run the economy right.
MR. WALLACE: Mr. Chairman, the whole area of finance is so widespread and has so much impact on just about everything we do that I think we should try to perhaps zero in on one or two particular areas. The area that I personally think must be clarified is the recent federal-provincial agreement on cost-sharing of health services and post-secondary education.
First of all, let me say that I join the Liberal leader (Mr. Gibson) in expressing appreciation of the minister's opening comments and his willingness to have a debate on this issue rather than a confrontation such as we had with the Minister of Economic Development (Hon. Mr. Phillips). I hope that the "Wolfe disease" is catching among the cabinet.
What I would like to try and clarify once and for all, Mr. Chairman, is the compromise, I presume you would call it, which was worked out in relation to the revenue guarantee arrangement which the federal government had agreed to when they changed the federal income tax act in 1973, stating that they would reimburse provinces for any loss of revenue resulting from that unilateral federal action. Over a period since 1973, calculations have been made for each province as to what, in fact, they did lose as a result of these federal changes. To the observer reading the newspapers recently as a result of the federal-provincial conference, that appears to really be the main reason that the outcome is so confusing and so difficult to understand. I would like to take a little bit of time, including the use of the federal Hansard, to try and get this final financial agreement pinned down, at least so that I can understand it.
The figures say that there will be a transfer of 12.5 points of federal income tax, I point of corporation tax and $2.5 billion as a cash settlement. I'm saying that quickly. I can quote you chapter and verse from the federal Hansard, if you wish.
HON. MR. WOLFE: What date?
MR. WALLACE: It was December 14, 1976, page 1987 in the federal Hansard. I'm trying to save time, Mr. Minister, through you, Mr. Chairman. We can go back over this.
The cash settlement of $2.5 billion in future, I gather from Mr. Trudeau, would escalate in relation to what he called the "gross national expenditure." That's not a term I'm familiar with. I think I understand what the gross national product is, but he uses the term "gross national expenditure." As it escalates in years to come, that cash settlement will be altered accordingly. But the point I'm trying to lead up to, Mr. Minister, through you, Mr. Chairman, is whether in the long run we as a province will receive progressively less federal money to assist us in paying one of the most rapidly increasing expenditures which provincial governments have very little chance of avoiding — I'm talking about health care costs.
Although I will shortly be quoting the federal Conservative leader, I don't mean this to be any kind of a partisan issue. I want to get the facts and the figures straight.
Prime Minister Trudeau on December 14, 1976; on page 1987 of Hansard, says: "I have some figures, Mr. Speaker. It would suffice if I said that in 1977-78, as a result of the established program me-financing proposal, the provinces next year will receive $221.2 million more than if we were to continue with the present schemes." He goes on and projects figures, but I just want to nail that figure down. He makes the claim that the provinces will be receiving $221.2 million more than from the arrangements existing prior to the conference.
I'll omit a lot of what he says next because he's explaining things that are not quite as relevant to my argument. On page 1976 in the same debate, Mr. Clark says:
I wonder whether the Prime Minister would like to take the opportunity to correct an impression I think he left on the record in his earlier remarks when he suggested there would be a net gain to the provinces of $630 million as a result of the arrangement when, in fact, what happens is that the provinces will be receiving in the neighbourhood of some $270 million less next year than they would have had if the existing arrangements remained in effect.
Mr. Trudeau responds immediately by saying: "Mr. Speaker, I can say unequivocally that the Leader of the Opposition is wrong." We're dealing with
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figures like $680 million or $270 million which, in the context I've just quoted, represents an actual spread of almost a billion dollars. Mr. Trudeau says that the provinces' net benefit will be $630 million better off and the Leader of the Opposition (Mr. Clark) claims they will be $270 million less better off. Now that's a spread of almost a billion dollars. How can the taxpayer in Canada understand a direct across-the-floor discussion between the Prime Minister and the Leader of the Opposition on cost-sharing arrangements where their individual perception of the money they're talking about differs by a billion dollars in one year?
What I would like to know from the Finance minister — and I hope he understands this a lot better than most people I've talked to — is this: when Prime Minister Trudeau stated that next year the provinces will receive more money, was he comparing the money to be received next year to what was received last year minus the revenue guarantee? If he deducted the 1976-77 revenue guarantee before he came up with his conclusion, then of course I can understand why there appears to be this discrepancy.
That's question No. 1. When he claims that the provinces are getting $221 million more, he means more than they received last year minus the revenue guarantee, presumably. That's the only way I can interpret these crazy figures. In other words, in reaching his conclusion that we were getting $221 million more, he was just counting it as though the revenue guarantee didn't exist last year. I really would like clarification on that.
Later on in this same debate, in a rather condescending way, I might say, the Prime Minister of Canada goes on to say on page 1991 of Hansard on December 14:
"On the general subject of revenue guarantee, Mr. Speaker, I did not touch upon it in my opening statement for the very simple reason that we have always stated in this House and outside that the revenue guarantee was for a period of five years. The provinces hoped that this guaranteed programme for five years would be prolonged, and it was in that sense that the provinces were asking for our tax points. There had never been any commitment or indication that we would give that, but naturally the provinces were trying to get it. We took the view that the revenue guarantee was finished, as we have said it would be. The provinces had five years to adapt to the tax reform, and under the system now they are free to modify their taxes and increase rates as they will."
My second question is: is it true to conclude that since, in relation to revenue guarantees, the province asked for four points and got two points, we in fact got half of the revenue guarantee, or the equivalent of half, in the years ahead that we would have been receiving last year and previous years?
I realize these are complicated figures, and after any conference the minister is pressed to interpret exactly what was arranged. But could the minister explain to me, then, that a figure he quoted soon after the conference to the effect that our net loss, or at least the net reduction next year compared to 1976-77, would be of the order of $60 million? I realize that in the weeks following that conference other federal proposals have been made, and the minister has already referred to some of the recalculations that have been done on overpayments. But putting that aside for the moment, the minister appeared to conclude that out of all this complicated horse-trading that went on in Ottawa, we were less well off in federal money in 1977-78 compared to 1976-77 by $60 million.
Now the next question I would like to ask is: is that figure still, in the minister's calculation, a valid and accurate one, or is it more or less? Could he please tell the House which part of the federal-provincial negotiations to bring about the new fiscal arrangements resulted in the reduction by $60 million? We've got Mr. Trudeau standing up in the federal House saying that the provinces are going to be better off by $221 million, and we have our provincial Minister of Finance making the statement that we'll be $60 million short.
Now we're all talking about cost sharing as though it was some kind of rather impersonal shifting around of tax points on a complicated formula: $100 million here, $220 million somewhere else. But what is so basic to all this, Mr. Chairman, is that a large part of this money will be used to provide hospital and other health-care services to the people of British Columbia.
One of the issues which has caused me a great deal of frustration and annoyance over the eight years that I've been in this House has been the stonewalling by this government of any active programme, despite repetitive promises at elections that they would provide both insurance coverage to persons requiring intermediate nursing-home care and a programme of construction of modern facilities. This is one of the commitments. I won't drag out for the nth time some of the Social Credit brochures from the last election, but they're all very readily available.
One of the most repeated reasons why the provincial government of British Columbia, including the last provincial government — the NDP government — refrained from implementing their promises was that there was no federal money. Cost sharing under these complicated formulas we've discussed applied only to acute-care and extended-care facilities. If you happened to need anything between these two, chum, you were just out of luck. You just go into the nursing home and draw on your savings until you're down to $1,500, or whatever the figure is, and then you go on welfare. This has to rank as one of the most unjust and unfair applications of this government's social policies, and
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the previous government's and the government's before that. What I'm saying, Mr. Chairman, is that that last barrier, if I could use that word, to prevent the creation of these urgently needed facilities and that urgently needed kind of care is gone.
That brings me to my next question, Mr. Chairman: could the minister confirm...? Again, I can quote from Mr. Trudeau if you wish, but he makes it pretty clear in that same debate on December 14, 1976, that now the provincial governments can use this federal funding money, on the basis of transferred tax points and the cash settlement which will escalate according to gross national product, virtually without any conditions, provided there is universal accessibility by the patient to the care and portability from province to province. Apart from these two very general and obviously appropriate conditions, can I get it clear once and for all that provincial governments can use this funding in whatever way they choose with regard to hospital and alternative levels of care?
Let me just quote a quick figure: since 1959 the gross national product in Canada has quadrupled but the cost of hospital care has gone up six times. One of the hospital costs, for example, in 1974-75 went up by almost 25 per cent — 23-point-something. Hospital and medicare costs for 1976-77 are expected to cost $7.2 billion; by 1977-78 they're expected to be $8 billion.
While I recognize that the federal government got itself in a box by having an open-ended 50-50 sharing with the provinces, I see the pendulum very rapidly swinging over to the other end of the spectrum whereby, in the next four or five years or maybe even less, the provinces are going to be loaded with the cost of escalating hospital and medicare expenses with a proportionately decreasing fraction of support of the total cost by the federal payments. Because once we've transferred the tax points, the only other element in the agreement where we can negotiate with Ottawa is presumably in the cash settlement, which has been set at $2.5 billion for this year and which will escalate according to the gross national product.
Apart from anything else, I'm not sure how the calculation on the cash settlement will be carried out from year to year. Presumably there's a real risk that there will be inequalities across the country, since all provinces don't share equally in changes in the gross national product.
I would like the minister to answer one or two of these questions. In particular, can I try to get it clear and very clear — that cost sharing as we knew it with the federal government for hospital and medicare has come to an end except for the cash settlement that I've referred to, that in future years the responsibility lies with the provincial government entirely, through tax points, to raise the money to pay for hospitals and medicare? That's question No. 1.
The old 50-50 sharing and all these other arrangements are gone. In future years, if that annual cash settlement works out to the detriment of British Columbia and our hospital and health-care costs continue to escalate above the level of the gross national product, British Columbia alone will have to raise taxes either by further increases in income tax or some other tax in order to maintain the~-level of care and standard of care in our hospitals in this province.
Now I think that's a shattering possibility as a result of the federal-provincial conferences, and one which has not been adequately conveyed to the public of British Columbia. I realize only too well from having tried to develop an understanding of these complicated figures myself how difficult it must be for the layman in British Columbia to understand. I find it very distressing to find that within the federal House itself the debate by the two prime political leaders in Canada should appear to be so totally contradictory. The Prime Minister states that the provinces are getting an extra number of millions of dollars next year, and the Leader of the Opposition produces figures which he claims show very much the opposite.
Now where does the truth lie? I'm quite ready to admit politicians play around with figures and interpret them most often to suit their political ends, but I really wish that on this occasion we could understand what exactly the financial position of British Columbia vis-à-vis hospital and post-secondary education financing will be in 1977-78 compared to 1976-77.
In the minister's opinion, how will British Columbia make out in the years ahead in regard to the cash settlement which is to be calculated according to the gross national product? Thirdly, is it possible — and it may not be at this juncture — for the minister to project into 1977-78 what fraction of the total hospital and medicare costs will be paid by the federal government compared to what we've been accustomed to in years gone by? It has been approximately a 50-50 sharing situation, which had its flaws, and I'm not denying that. But do we have enough figures and information in the new agreements for this minister to project the fraction of the total of these costs we will receive in 1977-78 from Ottawa through the new arrangements?
HON. MR. WOLFE: Mr. Chairman, I think if I don't attempt to answer this question we'll probably find it difficult to come to it later on. I'll try the best I can to answer the member's question. He's concerned by the fact that the federal government has the appearance of discontinuing their cost-sharing programmes, by how this bears on the deal that has
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been made to transfer half tax points and half cash to the provinces to compensate for this, and by how this will bear on the escalating costs of hospital care in future.
Well, I don't think there's any doubt about it that in our view the value of the cash transfer on the base year of 1975-76 and the tax points totalled out will not escalate at the present rate of growth of the cost of these services. Therefore there has been a great deal of concern in the meetings we attended that the formula was not adequate and so on. The final conclusion to satisfy the provinces which are on a lower earning basis than British Columbia was to arrive at the formula of one-half cash and one-half tax points. Some provinces advocated a full transfer of tax points; others wanted all cash, escalating at a basis faster than the gross national expenditure. There were many who urged for a risk, or insurance, against the escalating costs they would experience. They wanted to have a safety factor involved in the future. This was denied by the federal government. So all of those things bore on what is a very complicated solution.
In answer to what you have asked, and how we view the result of it: first of all, we had asked for four transfer points due to revenue guarantee, instead of which we were allowed one tax point and one point equivalent in cash — or, in other words, two points. We lose two points out of our demand which would amount to some $50 million to $60 million in the next year.
MR. WALLACE: That's in place of the revenue guarantee.
HON. MR. WOLFE: That's in place of the revenue guarantee at the value of tax points on 1975-76.
Then you have to add to that our current argument over the overcompensation in January to March in which we say we are being shortchanged by $45 million. So we are talking about $50 million plus $45 million — somewhere between $90 million and $100 million — which we feel the final resolution to the cutoff of January I to March is costing us. Secondly, there's the dispute between the difference in the tax-point transfer.
The province has asked for a levelling up in the difference between the cash value of these and the value of the tax points in a single year. For instance, British Columbia wanted to have a levelling up in a single year. Instead, the federal government agreed to level it up in a three-year period.
I would like to mention in passing that what is soon forgotten in this confusion is the impact of indexation of the federal income tax on provincial revenues. Dealing with that question, the estimated reduction in British Columbia personal income tax revenue in 1977, as a result of the accumulative indexing adjustments since 1974, is, in the one year, $250 million.
MR. WALLACE: In the year 1977.
HON. MR. WOLFE: Yes, 1977. The impact of indexing accumulated over those years, reflected in the reduced tax revenue in 1977, is $250 million. This was a phase of the tax-point argument that has been forgotten in the transfer of tax points — that is, the reducing value of tax points.
This is a matter that is still being debated, and I communicated by letter to the federal minister on February 9. I would be glad to table that letter. I would just like to read it now; it's very brief.
"I regret to hear of your introduction into Parliament of legislation to renew the federal-provincial fiscal arrangements after March 31, 1977, while there are so many unresolved issues.
"For British Columbia, these are: (1) the effective date of the one-point personal income tax transfer and compensation for the revenue guarantee after December 31, 1976; (2) termination of the existing post-secondary-education income tax points for the first quarter of the 1977 taxation year; and (3) the outstanding accounts for medicare services rendered up to March 31.
"At our meeting last week I requested a change in the determination of the provincial personal income tax from a percentage of the basic federal tax to a rate structure on taxable income.
"You indicated there was insufficient time to implement it for the current taxation year but were prepared to consider the proposal for either 1978 or 1979.
"I wish to pursue this matter, and ask that it be included in the agenda for our next meeting."
These three points only set out the argument I tried to illustrate earlier in terms of the confusion over the overcompensation period of January to March.
I want to compliment the member, Mr. Chairman, on his interest and study in this very complicated matter. It is something that a lot of people lose interest in very rapidly, but it is crucial to the future of these programmes and our ability to afford them. I know that is where his real interest must he.
I don't know if he mentioned it earlier, but wrapped up in this is the resolution of the extended-care programmes — what is known as the Lalonde proposal. He might want to have the Minister of Health (Hon. Mr. McClelland) refer to this at a later date because that is under current discussion.
He asked the question specifically: "are these cost-sharing programmes, in effect, discontinued
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insofar as Ottawa is concerned?" And the answer is yes. They have established the cost of them country-wide for base year 1975-76, divided that in half in each province, and said: "That's your cash share. That escalates according to the level of gross national expenditures." And then, of course, the other half is registered in a complicated transfer of tax points. So from then on it becomes the provincial responsibility.
We are saying, in addition, that we think there has been such a transfer of tax points now that we should contemplate in the future that provincial tax be based on taxable income as a standard figure developed on your tax return instead of being based on the federal tax. This, we think, will be less complicated to the taxpayer, and we are hoping that they do consider this in the future. I can't assure you that they are because there were only two or three other provinces that appeared to press for this change.
MR. WALLACE: I very much appreciate the minister's explanation, Mr. Chairman, and I have just one or two quick, follow-up points.
The last one first: the minister mentioned that it would make much more sense if our provincial income tax was calculated on the basis of taxable income rather than a set percentage of federal tax payable. He said there's only one or two other provinces in favour of that. Surely I would assume that provinces like Ontario would be very interested in that also, because they've just closed about 1,000 hospital beds and laid off 2,000 employees in attempting to wrestle with the financing of hospital and health-care costs. I'd like to know, if it's not revealing any confidences, which of the provinces would favour the B.C. position that it is no longer reasonable to go on taking 30.5 — or in this case, it will be 43 now, I suppose — tax points based on what people are paying at the federal level.
I think the minister's argument makes eminent good sense, and I can't imagine why other provinces would be reluctant to make that change which results from the federal indexing of income tax payments. It seems to be another example of the federal government using, a very clever technique to in fact benefit somewhat from continuing inflation. They indexed the federal income tax payments to get away from the fact that they were one of the first beneficiaries of inflation. They didn't have to change tax rates at all. As people earned more and more money, they got into a higher tax bracket and the income tax revenue to the federal government soared.
This indexing was done to get around that problem, but it appears they're not willing to go along with the provinces trying to correct, to their own benefit, some of the consequences of, that and the transfer of an increased number of tax points to the provincial level.
I suppose it would be shameful of me to suggest that we can be completely sure that the federal government will withdraw to the extent of 12.5 points at the federal level. Mr. Trudeau, again in this same speech, which I now almost know by heart — but he says somewhere that they will withdraw.... In fact, it's worth just quoting what Mr. Trudeau said. He said:
"They will receive it on a per-capita basis regardless of what they spend. Half of it will be paid by way of tax points. This will total 13.5 tax points which the provinces" — listen to this — "will now be able to levy painlessly, if I can describe it that way, by the fact that we will make that room by withdrawing to that extent from the present tax field. These tax points will be equalized to the average value in Canada as the equalization calculations are made."
I presume that is taken by the Government of British Columbia to be a complete commitment — that they will indeed withdraw to the extent of 13.5 tax points so that we can increase our provincial tax by that level.
Some of the documentation that I have been studying to try and understand this whole complicated mess made the statement — I think it was an official from Manitoba who was reported as saying this — that the federal government finally, on the last day of the conference, more or less told the provinces to take the agreement whether they liked it or not. Otherwise they would not get the tax points that had been offered. I can't recall the specific source of that quotation, who the Manitoba official was, but I've got the exact words he used. He said: "The provinces were told that if they didn't agree to the cost-sharing agreement, they would not get the tax points."
I would like to know, and I think the people in British Columbia should know, and I don't say this because of the present federal government — I would say this whoever the federal government was or whatever their political stripe — did the conference in fact come to that kind of termination, Mr. Chairman? Did the federal government, after two or three days of negotiation and the government of British Columbia trying to explain some of the difficulties that the minister has articulated in his answer already, in fact tell the provinces: "Well, you can take our new cost-sharing proposal whether you like it or not. Otherwise there will be no transfer of tax points"? It seems to me that was a pretty dictatorial attitude on which to finish a conference, where these arrangements are going to last another five years and where the federal government quite clearly, in relation at least to hospital and medicare costs, was busy trying to unload a higher financial responsibility on the provinces.
I've said before, and I'm ready to admit again, that
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the existing system was not in the best interests of the economical delivery of health-care services. I recognize that where Ottawa was compelled to spend a dollar for every dollar the province spent, it was a rather open-ended arrangement. Since the federal government would not share in intermediate costs, we have seen the most appalling expenditure in the last several years on the most expensive kind of facilities that we don't need, all because of a stupid, inappropriate cost-sharing formula.
So now the federal government comes along and dangles a most attractive carrot under the nose of the provincial Health ministers and Finance ministers by saying: "We'll remove these restrictions as to the ways in which you can use federal money for hospital care."
But in the process of adopting a more sensible cost-sharing arrangement, it's quite clear that they're cutting back on their particular share of the pie. I don't ever want this to be overlooked. I don't care whether it's a Liberal, Conservative or any other kind of government in Ottawa,, I think that the provinces have been betrayed. The commitment that was made in 1958.... The federal government of that day was so committed to ensuring a uniform and high standard of health and hospital care across this country that it ensured that it would participate in a fair and reasonable manner in financing these costs.
The outcome of this conference, according to the figures the minister has given us, makes it quite plain that as the years go by and as the costs in British Columbia escalate at a faster rate than the increase in the gross national product, the British Columbia government, whatever its stripe, is going to be faced with paying a larger and larger percentage of the total overall costs. That being the case — and you mentioned the Minister of Health (Hon. Mr. McClelland) in your comments — I hope most sincerely that the Minister of Health, the cabinet and this government are, on a very urgent and priority basis, diverting their immediate planning in the health-care field to all these alternative levels of care.
I don't wish to intrude on another debate, but it is just nothing almost short of criminal that we should be planning to build more expensive acute-care hospitals when we won't be able to afford to keep them operating. For heaven's sake, let us learn from Ontario already! It would be no political attraction — and the Health minister finished up having a heart attack in the process — to go around closing down hospital beds because we can't afford to support them and because the wrong kind were built in the first place. So this is a desperate need by this government. I'm sure it recognizes that it has been given some pretty sorry news at the federal-provincial cost-sharing conference. Whatever government is in control in this province in the years ahead is going to be paying a lot more than 50 per cent of the total costs of services, of which the actual cost will be rising faster than the cash payment Ottawa is prepared to give to replace the revenue guarantees.
I say this without rancour at the particular federal government we now have, but more in the national context. When we're having such a great discussion about Confederation and the commitment of the federal government to preserve a united Canada, to try and treat all provinces equitably and to meet commitments that have been made in the past.... That commitment started with the very progressive hospitalization legislation in either 1957 or 1958 — I'm not sure of the year. But what is unmistakably clear is that the present federal government is backing away from its commitment and is passing more and more of the financial responsibility to the provinces.
I think that two things inevitably have to happen. The provincial government of the day in this province will have to go on raising taxes to sustain the standard of care to which I think we have become accustomed and which I think in large measure is excellent and must be sustained. The other unpleasant alternative to consider is that we have to lower our sights and accept a lesser level of care and a lesser standard simply because the provincial economy cannot face on its own the level of escalation and costs that will result as a consequence of this new agreement.
It seems to me that this has not been fully translated into layman's language for the voters and taxpayers of British Columbia. If I've over-painted the picture or if my claim is inaccurate, I hope the minister will correct me. All I want to do is get clearly on the record that the provincial government's financial responsibility in providing these very fundamental, basic services of medicare and hospital care will increase in the years ahead starting next year. Furthermore, the most immediate policy that this government must develop is to de-emphasize in the quickest and most effective way institutionalized care of all kinds in British Columbia, and develop, with the money that Ottawa is making available and where there are no holds barred as to how it can be spent in the health field, at the fastest possible rate many of the alternatives that we've discussed in this House for many years.
HON. MR. WOLFE: Mr. Chairman, I think the member states the case very well in terms of the impact of what has been taking place. In large part I agree with him. This concern over the federal government and the cost of programmes that they initiated showed up first in their attempts to cap the growth of the programmes. They introduced capping on post-secondary education and on the medical plan. Then, of course, latterly with the expiry of the current agreement, they've gone heavily in the direction of opting entirely in terms of provincial responsibility.
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I might say that one of the proposals we as British Columbia put forward in the initial talks on this subject during last year was that we advocated continuing the present programmes uncapped. This, I think, would still be, to the provinces, the least costly alternative of them all. But naturally this doesn't satisfy the objectives of the federal government in a problem that they have in terms of locked-in growth in costs. I presume this is what they are trying to correct. They're certainly not introducing these measures in an effort to help us out. I certainly wouldn't suggest that they are.
The alternative is to continue on, perhaps with them continuing to cap programmes — but in effect you're quite correct. They're opting out of programmes that they started and which we're being left to hold the bag on.
You started off talking in terms of taxable income and our proposal that we in the future base the provincial computation of tax on taxable income. I'm glad to hear that you agree with that position. I think we should be clear in saying that this is not an objective to raise any different amount of revenue than under the other basis. That is, if we continue as we are to calculate the provincial tax on your return based on the total federal tax, we simply say that we should instead base the percentage on taxable income and produce the same amount of provincial revenue.
MR. D'ARCY: Mr. Chairman, I would just like to take this opportunity, before I go into my remarks, to welcome three of my constituents from the village of Montrose in the Beaver Valley, people who are active within their community and are here in Victoria as curlers. They're very active municipally as firemen and with the Beaver Valley ambulance service. I'd like the House to welcome Lorne Haas, Mel Moncrief and Jim Vindevoghel.
Mr. Chairman, I have expressed concerns before in this House about the methods the government started using last year and is continuing to use to raise revenue. While I appreciate the fact that the government needs substantial amounts of revenue, the fact is that I consider they are getting it out of the wrong sectors of our community if we are going to see any growth in the British Columbia economy or if we are to maintain the present levels of employment and business that we have today.
Mr. Chairman, I have done some calculating and made some inquiries locally in my riding, relative to debt, particularly as related to B.C. Hydro — not only the colossal debt they have built up over the last few years but particularly in relation to the fact that they don't pay taxes, along with other government corporations, B.C. Railway, and the government itself with the property it owns.
Mr. Chairman, I noted in the local press here that the people of Vernon had sent a petition to one of the ministers — I believe it was the Minister of Energy, Transport and Communications (Hon. Mr. Davis) — complaining about the hike of B.C. Hydro rates in Vernon.
MR. CHAIRMAN: Order, please. Perhaps this debate ought better to take place under the Minister of Energy, Transport and Communications when his votes are called.
MR. D'ARCY: You may take that point of view, Mr. Chairman, but I am talking about provincial revenue. I believe that comes under the Department of Finance.
MR. CHAIRMAN: As far as I know, B.C. Hydro is a Crown corporation and is under the jurisdiction of the Minister of Energy, Transport and Communications. I would suggest that would be a better time.
MR. D'ARCY: Mr. Chairman, the question of raising debt, we have heard a great deal spoken in this House of interest payments, of the need for borrowing initiated by the Minister of Finance both last year and this year. And I'm talking about debt in Crown corporations. If we can't talk about debt in Crown corporations, what are we going to talk about? Most of the debt of this province is in Crown corporations. The B.C. Rail debt — we don't know how big that is; they won't tell us. We just know they ran up another deficit of $69 million. And we know there are more and more debts being built up all the time.
We do know that B.C. Hydro has increased its indebtedness by 35 per cent in the last year — from $3 billion to $4.15 billion. What is that costing the taxpayer of British Columbia, the businessman of British Columbia and the ratepayer of British Columbia? They have to pay the interest charges on that debt each and every month when they pay their B.C. Hydro bills.
MR. CHAIRMAN: Hon. member, I remind you the third time. I don't wish to debate the issue with you at all. I just must remind you that if we took the kind of reasoning that you have just suggested....
Interjections.
MR. CHAIRMAN: Order, please. If we took the line of reasoning that you are following now we could debate every minister's estimates under this minister's vote. Therefore I would suggest that, perhaps, the matters involving B.C. Hydro are better debated under the Minister of Energy, Transport and Communications.
MR. D'ARCY: Mr. Chairman, I will accept your ruling. You are the chairman. I wish to thank the
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minister for attempting — or appearing to attempt, at least — to answer the questions by the member for Oak Bay (Mr. Wallace) in a candid way. Perhaps, if he's answering some of my concerns, he could tell us if he went to New York along with Robert Bonner to arrange a bond floating sale of B.C. Hydro bonds recently. Perhaps the Chairman might be interested in hearing about that, too, because I was given some information that the minister, in fact, did do that. That was one of the reasons that I wanted to talk about borrowing. The Chairman has ruled me out of order, but perhaps the minister can enlighten us on this. When the minister goes to New York with the chairman of British Columbia Hydro to borrow a billion dollars or more, that apparently is not to be discussed with the minister in the House but only with the Minister of Transport and Communications. I would hope that the next time Mr. Bonner goes to New York he takes with him the Minister of Energy, Transport and Communications because it seems that he was taking a minister who did not have the authority to make any arrangements, at least according to my good friend in the chair.
MR. BARRETT: Carry on.
MR. D'ARCY: But there will be, as the Chairman says, other opportunities to discuss borrowings by B.C. Development Corporation, B.C. Buildings Corporation.... For all we know, by then we're going to have a B.C. Highways Corporation, a B.C. Education Corporation and a B.C. Health Corporation. In fact, it's quite possible that there will be absolutely no provincial capital development at all and very little operating development that can actually be debated in this House because they'll all be Crown corporations. We will just have to hope that perhaps the government may see fit to convene some of the committees that have never been convened yet in this Legislature — last year or this year — so we can question some of the people from these Crown corporations. Perhaps we could start with the public accounts committee, Mr. Chairman. That committee — of which I am not a member by the way, so I don't have a personal, direct, legislative interest in seeing it called — could question some of these people on some of these rather heavy borrowings which have indebted each and every British Columbian and taxpayer for years to come.
Mr. Chairman, with your indulgence, I hope, I am going to talk about assessment of land. I believe that comes under this minister's vote. I notice there are provisions for the Assessment Appeal Board, taxation administration and so on, so I hope you are going to rule that in order.
In my constituency of Rossland-Trail we have two major power projects. Unlike the ones I was mentioning, they don't belong to British Columbia Hydro. They belong to a private corporation. The private corporation pays all corporation taxes to Ottawa which are rebated to the provincial government and it is the desire of Ottawa that they be passed on to the consumer. Of course, the provincial government doesn't. They simply bury them in revenue. But in addition, those two project operations — one at Juanita on the Pend-d'Oreille and one at Brilliant on the Kootenay River — pay to the municipal councils and school districts in the area some $1.4 million each and every year in taxes. I ask, Mr. Chairman, why it is that public corporations such as British Columbia Hydro can avoid year after year paying what private companies have to pay and still manage to pay and even earn a profit for their owners. I would allege that it's because it could be construed as an embarrassment in terms of rates and that's why the people of Vernon are so upset about electric rates which are three times higher than those in Kelowna 35 miles away. The difference, of course, is that Kelowna is served by the private company, West Kootenay Power, and Vernon is served by B.C. Hydro, and the people locally know the difference in the rates because they're so close.
Now, Mr. Chairman, I have some questions relating to the estimates of revenue for 1977-1978, as stated in the budget. Perhaps the minister can enlighten both the House and the people of British Columbia on them. He has told the House that he has estimated logging tax revenue at $10 million. That's down from $25 million last year, a reduction of $15 million or 60 per cent less. According to the relative figures in the budget, we see that timber leases revenue is down from $200,000 to $150,000, a reduction of 25 per cent; timber revenues themselves are down $200,000, from $700,000 to $500,000, a 28 per cent reduction; timber royalties themselves are down from $8 million to $7 million, a 12 per cent reduction. Timber sales revenue of $80 million is down to $50 million, a $30 million reduction — 37 per cent less. The total, for the forest industry, our No. 1 industry in British Columbia, is down 41 per cent, from $114 million to $67 million.
Now, Mr. Chairman, I'm very concerned. Either we are going to see the worst depression or recession in the forest industry that this province has ever seen, or the industry is going to be on strike for 60 per cent of the year — which I certainly hope doesn't happen; I hope it's not on strike for one day — or, strangely enough, maybe there's going to be a massive reduction in the rates these companies are going to pay. If that is so — there's nothing in the budget to indicate that, there's been no legislation introduced to that effect — Mr. Chairman, I think the House and the people of B.C. and, perhaps most important, the industry, would really like to know. In my constituency I have one integrated major company, Canadian Cellulose, but I also have four
[ Page 1013 ]
small, nonintegrated operations. I'm sure those operators and their employees would dearly like to know what kind of a year they're about to face.
I talked to them recently. None of them had had any indication from the B.C. Forest Service or the Department of Finance that the revenues they would be expected to turn over to the government were going to be reduced by 50 or 60 per cent. I'm really sure they would like to know. It could have some effect on decisions that they made in 1977. Of course, this government never goes out of its way to reduce any level of uncertainty in British Columbia. They like to keep everybody continuously in a state of never knowing whether they're going to be pushed over the precipice or not.
Anyway, that's just in the forest industry, Mr. Chairman. We could go into the mining industry, which is our No. 2 resource industry in British Columbia. We see the same pattern evolving. Royalties on coal are down from $12.8 million to $5.3 million — 58 per cent. Does this mean that we're going to be producing considerably less coal or does it mean that the royalties are going to be reduced? Once again, the people of B.C. — and in particular the industry and their employees — would like to know that. Petroleum and natural gas is down from $275 million to $245 million — a reduction of 11 per cent.
MR. BARRETT: They're getting good advice but not taking it.
MR. D'ARCY: You know, you can reel these off, Mr. Chairman, and they don't sound like a lot of money after a while — $30 million, $7.5 million, $4 million, $6 million. They are a lot of money, though. They mean a great deal to British Columbia and they mean a great deal to people here. We know that each percentage on the sales tax brings in...well, we used to think $125 million. I think it's probably somewhat less than that now because nobody's spending any money in British Columbia. There's a consumer resistance on the sales tax, so we really don't know that each percentage brings in $125 million. It probably brings in more like $110 million. We know that each percentage on the corporation income tax brings in approximately $25 million. Of course we know who pays corporation income tax in British Columbia. It's not the multinational conglomerates that control our resources. It's British Columbia businessmen and Canadian businessmen and small businessmen. They're the people who pay that corporation income tax. Of course that was one of the taxes that the government increased last year, along with personal income tax.
Here we are talking about, just in the petroleum and natural gas royalty all by itself, the projected revenue being down enough that if it were retained in the revenue of the province we could set our corporation income tax and personal income taxes back to where they were a year ago which, in some people's opinion, was already too high.
The minister likes to talk about raising income tax a couple of points. A couple of points is actually four points. It's from 30.5 per cent to 34.5 per cent of the federal tax. That, Mr. Chairman, by anybody's calculation, is more like a 10 or 13 per cent increase in that tax. He likes to talk a couple of points on the corporation income tax — from 12 to 15 per cent or from 10 to 13 per cent, depending on the size of business we're talking about. In fact, a couple of points here is a 30 to 35 per cent increase in tax. That's 30 to 35 per cent, Mr. Chairman, which is not available for profits at the end of the year. That's 30 to 35 per cent that can't be passed on to the consumer in reduced prices to compete with retail businesses in Washington state and Alberta. That's 30 to 35 per cent that cannot go into new investment and new jobs for British Columbians.
Mr. Chairman, the mineral industry we see has a net reduction of $36.5 million, and yet we don't see any indication from any mining company in British Columbia that they intend to convert any of that money into jobs, any of that money into secondary industry, any of that money into refining. One of the reasons for that, Mr. Chairman, is that I don't think the industry knows for sure they're going to get that reduction. How can they plan? We need to let industry plan right now. We need to let the public of B.C. plan right now so that we have some idea of what kind of investment level we're going to see in British Columbia in 1977 and 1978.
Mr. Chairman, while investment in B.C. was up moderately last year, it did not increase at the rate it did when the New Democratic Party was in power. Unfortunately, I am told by many people in industry that most of their investment was repair estimate. It was repair, refurbishing and updating of equipment; it was not investment in new capital measures which would take greater advantage of our natural resources and which would provide more employment. It was just necessary maintenance and repair on operations which, in fact, were becoming increasingly less competitive internationally. I don't know of any major plans in 1977 in the mining industry, the smelting industry or the forest industry either, in that regard. There are very few, if any, new plans — just repair, modification and innovations which are absolutely necessary. That's the kind of investment we're getting in British Columbia, and it's not good enough, Mr. Chairman.
MR. BARRETT: Hear, hear!
MR. D'ARCY: We need new investment. We need new jobs, new resources, new refineries, new job-intensive industries.
[ Page 1014 ]
MR. CHAIRMAN: Hon. member, I must interrupt you again. I've been listening very patiently and mustering all the leniency that I can, but the debate that you are carrying on now essentially is the debate that was carried on under the budget debate. I have tried to give you as much time as I possibly can to bring your remarks more in keeping with vote 2, but I must now warn you that your debate is out of order.
MR. D'ARCY: Thank you, Mr. Chairman. I hope that these little words of wisdom that you're producing for my benefit are not cutting in to the time that the Hansard staff is keeping on my behalf. I will attempt to stay within the guidelines that you're laying down.
I would repeat, Mr. Chairman, that I am talking about revenue. If we cannot talk about revenue in British Columbia under the Finance minister's estimates, I'd be quite happy to bring it up under someone else's estimates, but I've always thought that that's the reason we have a Finance minister. Not to spend money....
MR. CHAIRMAN: Hon. member, I cannot take issue with you except that all the members of this House are good students of the rules of this House. There are provisions made for the kind of debate that you are talking about. The fact is that the kind of debate you are carrying on now should have been carried on under the budget debate regulations. It's not provided for under Committee of Supply.
MR. L. NICOLSON (Nelson-Creston): Come off it! You are getting ridiculous and tyrannical!
MR. CHAIRMAN: Order, please! The member for Nelson-Creston will....
Interjections.
MR. BARRETT: He's gone out to name the Chairman.
MR. CHAIRMAN: Please proceed.
MR. D'ARCY: Thank you, Mr. Chairman.
On page G3 of the estimates presented to this House, we notice that the projected gasoline revenue is down. I would like the minister to tell us in his remarks whether this means that he anticipates a lesser use of the highways of this province in 1977, or whether he is indicating to us that he intends to introduce a bill that's going to reduce the gasoline tax and the fuel tax. My constituents pay some of the highest costs in British Columbia for gasoline, and I think that they would like to know about that because many of them are asking questions about it.
Mr. Chairman, to carry on into an area that I was dealing with — corporation income tax — we see increases of $32 million. Again, I would like to see the minister bring in a bill to reduce the amount from corporation income tax because that is a tax which is automatically passed on to consumers which is essentially anti-growth and anti-investment.
I notice that the personal income tax is up substantially. Now that may be necessary, because in the dialogue that the minister was having with the member for Oak Bay (Mr. Wallace), he was telling us about the differences in the cost-sharing programmes that Ottawa is forcing on the provinces for programmes they themselves started. The fact remains that if we have a 36 per cent projected increase in revenue from personal income taxes, I think that the public in British Columbia should have some idea of how much is going to be reduced in the federal taxes. Because I don't think the taxpayer of British Columbia is as much concerned about federal-provincial spending as he is about what is deducted off his paycheque every two weeks or what he has to pay out of his business revenues.
Mr. Chairman, I don't see any major increases coming in the social services tax. You've said it's going to go up 4.2 per cent; we know that inflation is continuing at 6 per cent. Does that mean we're going to have a real decline in spending in our gross provincial product by some 2 per cent? That's not much of a projection to encourage the kind of involvement in the economy of B.C. which we need if we're going to reduce our unemployment rate, if we're going to provide business and job opportunities.
Mr. Chairman, I'm somewhat concerned also about the provision for raising extra taxes from necessary fees. Ambulance service fees are up substantially. We know that. They've virtually doubled, perhaps even trebled. Revenue is up at least 50 per cent in the estimates, and that is a direct tax on people who are ill and on people....
MR. CHAIRMAN: Hon. member, I must remind you again your debate is out of order and I must ask you to either discuss those matters under vote 2 or else cease from your present level of debate.
MR. D'ARCY: Thank you, Mr. Chairman. I will attempt to stay within your rulings, although I do find them somewhat inexplicable, but I have to accept that....
MR. BARRETT: Try the weather.
MR. D'ARCY: Try the weather?
MR. BARRETT: Yes, the weather. In Celsius. That'll keep 'em confused for a little while.
MR. D'ARCY: That may involve numbers and
[ Page 1015 ]
they may be out of order. Celsius, yeah.
Mr. Chairman, perhaps the minister — I hope this is going to be in order — will be able to tell the House how much the government is underwriting, since we are told that borrowings are a contingent liability. Perhaps this would be under the Premier's office, but how much is the government underwriting the various Crown corporations and how much are the borrowings and how much are the interests on those actual borrowings? I note in the interim expenditure statement — which is not the third quarterly report — for 1976-1977 from the comptroller-general, that last year there was an estimate for $40 million for interest on public debts and we see at this point, Mr. Chairman, that some $8.7 million has actually been paid out in interest. That's hardly enough to meet the payment on the money borrowed for the so-called ICBC debt. Perhaps the minister could give us some precise details on how much his department has had to pay out in interest, to whom, and how much the various Crown corporations and government agencies have acquired in terms of contingent and long-term liabilities over the past year. Again, Mr. Chairman, if that can't be brought up under this minister's estimates, I really don't know where it can be brought up. I think the people of B.C. really have a right to know how much money they owe through their various government agencies, how much money they have underwritten and what the annual interest charges are on those amounts.
I was quite pleased and would like to support the suggestion of the member for North Vancouver–Capilano when he said that various revenue schemes could be put on the computer. We have a new computer corporation — Orwellian, some people have said — that's going to handle all the data processing for the provincial government. I think it would be very nice to know exactly what would happen to investment in British Columbia if the sales tax were reduced. It would be very nice to know what would happen to revenue to the provincial government if corporation income tax and personal income taxes were reduced. Let's just se., whether, in fact, we would be losing any money. Gts; thing we do know: if taxes were reduced, it would be a tremendous incentive to both consumers and taxpayers and investors in British Columbia.
Mr. Chairman, there has been much discussion in this House — and I've been involved in it — on the need for jobs and the need for investment here. I would be very interested to know what the minister thinks he may be able to do in 1977 in relation to reductions of taxes and reductions of revenues, because, Mr. Chairman, that kind of investment is absolutely essential if we're to go anywhere in 1977. We've lost a steel mill. We've lost an oil refinery. We've lost at least one copper smelter in the past year and we have had a report which indicates we may see a reduction of jobs and hence a reduction in revenue to the Minister of Finance from the forest industry. I would like to know what that minister has in mind to resolve some of these problems before we get to an area of real crisis in British Columbia where, as I said earlier, we are not only losing out on our options for the future, but we lose a great deal of what we have today and on which we base our economy.
MR. BARRETT: There he is.
HON. MR. WOLFE: Thank you, Mr. Chairman. Here he is. And there you are. And isn't that nice. Isn't that a nice arrangement?
MR. BARRETT: I've read your list and you're totally correct.
HON. MR. WOLFE: Thank you. And I've had your return list, but I'm studying. And I don't like it.
MR. CHAIRMAN: Hon. Mr. Minister, before you proceed there is a matter which I must care for and perhaps you could just give me just a moment. I see the member for Nelson-Creston has returned to the chamber. I have an obligation to maintain the dignity of this House. An attack on the Chair of any sort is not an attack on a member who happens to be seated in the Chair but it is an attack on the institution of the House itself. Therefore I must ask him to withdraw the statements of attack that he made just before he left the chamber.
MR. NICOLSON: Mr. Chairman, I withdraw any attack on the Chair.
MR. CHAIRMAN: Thank you so much.
HON. MR. WOLFE: Mr. Chairman, I'd like to refer to certain questions asked by the member for Rossland-Trail (Mr. D'Arcy). He asked questions about the debt of Crown corporations, and I think he is indicating that he can't get this information on the debt of B.C. Rail and B.C. Hydro. I think this is information clearly laid out in the budget speech on page 31. For instance, the B.C. Rail debt, as of December 31, 1976, is $619 million after deducting sinking-term investments. It is very clearly laid out, Mr. Member. All of the provincial Crown corporations are clearly laid out there. You have further information on Crown corporation financing on page 21 of the budget speech. So perhaps you'd care to refer to that.
He was referring some while ago to the Assessment Authority and the practice of assessments for private utility companies as compared to B.C. Hydro, and so on. He seems to feel that Hydro does not pay in relationship to private utility companies in certain
[ Page 1016 ]
areas. I think that is possibly true. I am advised that Hydro did not pay on their dam structures, but they do pay assessments on anything else in terms of buildings and other facilities within the province. They do pay assessments on other facilities within the province in comparison to private utilities.
I will get you further information on that, Mr. Member; I'll be glad to.
MR. D'ARCY: In the Kootenays they don't have any other facilities.
HON. MR. WOLFE: You are just referring to a dam, in other words. Then the member spent some length in going into the comparison of next year's revenues of various descriptions — logging tax, timber sales, sales taxes — and how they bear on the budget of a year ago. I think he has been led to believe, and probably wants to infer, that we are estimating a considerable decrease in revenues from the lumber industry. I would just remind him that these estimates are based on the current year's performance, and do not in fact reflect decrease — with the exception, I think, of timber sales which are showing the effects of logging costs which are still going up. Many companies are paying strictly the minimum stumpage at this stage.
But you asked whether there wasn't a massive reduction in rates the companies would be paying on their forestry resources, and the answer is no. You were intrigued at the comparison in income tax revenues for the coming year — I believe it is $1.115 billion or something of that nature — and that it indicated not a transfer of two percentage points to 32.5 per cent, but in your view represented four percentage points.
Of course, this is completely ignoring the fact that, as you mentioned later on, this new figure reflects the transfer of tax points on the new federal-provincial scheme plus a real increase anticipated in the value of income tax, taking out the transfer of some 15 per cent. So we are not anticipating a 30-per-cent increase in income tax or something of that nature. It is just a transfer from the shared-cost programmes which appear in another section of your revenues, up to the top, under income tax.
I think you asked regarding the item of interest expense, interest on debt, of $8.7 million to December 31 in the comptroller-general's statement. Mr. Chairman, as the member well knows, that is the interest cost to that date on the direct borrowing of the government.
MR. BARRETT: Well, just to further confuse the confused answer of the minister, why do you say in the budget speech that things are going to be better in the forest industry and the mining industry next year, but then tell us that the markets are going to be bad?
HON. MR. WOLFE: Just logging tax.
MR. BARRETT: Just logging tax. Well, if there is going to be more logging.... Mr. Chairman, I want to point out to you, because the minister is confused and I want you to understand this....
Interjection.
MR. BARRETT: Confused? No. 3 on the list? I don't have a list. Send me a list. You're on my list too.
You say on page 10 of the budget: "Our forest products industry should show considerable improvement." What do you base that remark on?
MR. J.J. KEMPF (Omineca): You still think two and two makes five, don't you, Dave?
MR. BARRETT: Can you tell me what you base this statement on from your budget speech: "Our forest products industry should show continued improvement"? Can you tell me what you base that on, please?
Interjections.
MR. BARRETT: Do you have an answer now, Mr. Minister?
Interjection.
MR. BARRETT: Yes, I'd like an answer to that, because then I'd be able to carry on the questioning.
HON. MR. WOLFE: The statements in the budget refer to our estimates of the economy for the coming year in general, in terms of the timber industry and so on. Reflected in the revenues are the logging tax formulae, the minimum stumpage paid by many companies. It doesn't necessarily follow that revenue would increase to that degree.
MR. BARRETT: I thank you very much. What I interpret you as saying is that although our sales may go up, the stumpage rates to the industry may go down. Now don't shake your head.
AN HON. MEMBER: It's my head.
MR. BARRETT: Well, you're not in control of it, obviously. We know the identity. We just want to know who's pulling the strings.
Mr. Chairman, the minister says that we expect an upturn in the economy, but the logging tax revenue reflects what we collect off logging tax, which may go down, affecting stumpage rates. Are you announcing that stumpage rate charges are going to go down next
[ Page 1017 ]
year? Are you announcing that? Yes or no. We're in committee now; we can be a lot more frank in committee. Very few people are listening.
Interjection.
MR. BARRETT: No, no. I'm waiting for you to say yes or no. You're not telling us everything that you don't know.
HON. MR. WOLFE: Stick around and you'll find out.
MR. BARRETT: Well, now don't interrupt me; I've got the floor. If you want to answer my questions, I'll sit down. Keep the member in order, Mr. Chairman.
MR. CHAIRMAN: I'll try to do that if the member who has the floor will address the Chair and the minister would not interrupt the member who has the floor.
MR. BARRETT: Thank you very much. Mr. Chairman, I address the Chairman. Mr. Chairman, you and I are both confused now.
On page 10 he says: "Our forest products industry should show continued improvement." That means more sales. That is correct. If there are more sales, therefore the logging tax, if the formula remains the same, should bring in more revenue. Is that incorrect?
Interjection.
MR. BARRETT: That's correct. Therefore one must conclude that there will be a change in the logging tax formula. Is that correct?
Interjection.
MR. BARRETT: Oh, yes. Mr. Chips says that's correct. There's going to be a change.... Oh, there's not going to be a change. Well, we start all over again.
Interjections.
MR. BARRETT: On page 10 of the budget, it says: "Our forest products industry should show continued improvement." Logging tax in 1976-77 is $25 million. Considered improvement means $15 million less collected. That's considerable improvement for the forest industry. They're going to get a $15 million tax reduction on improved sales unless there is going to be a change in the formula for logging tax. Is that what you're anticipating? You're the Minister of Finance; you tell us why the logging tax will be reduced by 60 per cent in a year when you anticipate that there'll be increased sales. Could you tell us that, please?
HON. MR. WOLFE: I think I said earlier that when we talk about the economy and next year, we're also.... But you don't want to get confused, Mr. Member, on how this might bear on the logging tax.
MR. BARRETT: Right.
HON. MR. WOLFE: Are you saying "right" to the first statement or the second one?
MR. BARRETT: You say the forest products industry, not the whole economy. Your words exactly, sir, through you, Mr. Chairman, are: "Our forest products industry should show continued improvement." Those are your words....
MR. CHAIRMAN: Order, please, hon. members.
HON. MR. WOLFE: All right. Thank you for that explanation. I appreciate that.
MR. CHAIRMAN: Hon. members, please. We are giving the Hansard people fits here. Should we have the Minister of Finance recognized now, please?
HON. MR. WOLFE: I think it's a simple fact, Mr. Chairman, that lumber sales in our estimation will go up.
MR. BARRETT: Yes.
HON. MR. WOLFE: The cut will not increase.
MR. BARRETT: No.
HON. MR. WOLFE: These are your favourite two words.
MR. BARRETT: Yes, I've got 'em both.
HON. MR. WOLFE: The fact that we have the present high inventory, due to a high cut last year, means that because stumpage was paid when the logging was done and not when the lumber is sold, the revenue for the coming year is as it's shown.
MR. BARRETT: Thank you very much. I accept your explanation.
Between now and six o'clock, Mr. Speaker, we're going to take the minister out of the forests. This is the explanation we've been given. I want everybody to follow it slowly so we can see the convoluted trail we're on.
We now have an explanation that our forest products should show continued improvement. That
[ Page 1018 ]
means, under the minister's explanation for logging tax, that all the timber we cut last year and made into lumber was not sold. We're not going to cut any more logs — that's what he just said — than we cut a year ago, but we're going to sell more lumber than we sold a year ago. That's what you said. Sales will go up but the cut will go down. That means there'll be a selling of inventory.
AN HON. MEMBER: No logging next year.
MR. BARRETT: We made $25 million selling logs under the logging tax. The sales will go up, but we won't be cutting as many logs so we're going to cut 60 per cent logs because the revenue's going to go down by 60 per cent. No? All right.
Let's say that you hold the lumber. Then explain this to me: under the timber sales, which you say are going to go up because of the existing inventory — timber sales which are directly related to sales — the estimated revenue last year was $80 million. We're going to sell more timber, as the minister just told us, but the revenue is only going to be $50 million.
MR. COCKE: Come on!
MR. BARRETT: That's right!
MR. COCKE: Don't pull that on me!
MR. BARRETT: I'm telling you that I'm explaining to you how these books are cooked, Mr. Member. These books are cooked. He's been caught, and the embarrassing thing is that not one of those three sitting there, including the minister, is responsible for this. Somebody else said: "Scratch this out. Rub this in." I've been in the room where that's been suggested and I've said: "Nothing doing! Nothing doing!" (Laughter.) Oh, you know what it feels like when you've been hoisted, partner! You have been hoisted and you've been caught. You went to a Treasury Board meeting and were told: "Fix it up." It's been fixed up and he's been caught.
Listen to his words. The poor guy sounded like he was trying to sell a 1964 Edsel.
MR. N. LEVI (Vancouver-Burrard): A '57 Edsel!
MR. BARRETT: A '57 Edsel. With that kind of car everything would be sold on credit, even though you are against credit. I have not seen a big sign or a picket out in front of your place saying: "Don't buy here unless you've got cash!" Thank goodness that over in the east end of Vancouver they don't read your budget speech, because your business would be down the drain.
HON. MR. WOLFE: Be careful! You might come in some day.
MR. BARRETT: I know. I size up my used-car dealers. You're one of my favourites. Anybody could tell me that this is a blue car, but it's painted red with three tires; on the other hand it might have a steering wheel, but if you get inside the brakes don't work. You're doing the same thing in the budget. You're not selling a used car here, and there's no odometer to play around with.
AN HON. MEMBER: Order!
MR. BARRETT: Oh, order, order, order! It's almost 6 o'clock. You'll get your supper. It's only your stomach growling, not your mind. (Laughter.)
Mr. Chairman, we are not being told the truth in these estimated revenues. We're not being told the truth. You cannot come in here and tell us that the sales are going up on inventory but the cut will be down, therefore there'll be a 6 per cent reduction in the logging tax, and in the same speech — in the same budget — tell us that the timber sales revenue will be down by 37 per cent. Now you don't make sense, or dollars, for the people of this province.
What we are really being told, Mr. Chairman, in my opinion, is that there will either be a change in the stumpage formula to favour the large companies, or there will be tax write-offs given that have not been presented to this House. The last thing of all that I would suspect this minister to be a part of is a deliberate, obvious attempt to underestimate revenues so that when they show up he can be part of the group and sit in the corner, stick his thumb in the pie, come out with a plum, and say: "Oh, what a good boy am I."
MR. CHAIRMAN: Mr. Member, I'm enjoying the debate. (Laughter.)
MR. BARRETT: Well, you are the only one, Mr. Chairman.
MR. CHAIRMAN: However, I have an obligation to remind you that the line of reasoning you are following...
MR. BARRETT: ...is logical. It's too logical for this House!
MR. CHAIRMAN: It should have been carried on in the budget debate. I must ask you to come to vote 2.
SOME HON. MEMBERS: Oh, come on!
MR. BARRETT: Mr. Chairman, the Minister of Finance is responsible for the details in the public
[ Page 1019 ]
accounts of British Columbia. That's his name. They don't have his picture in here, but I can prove to you that it's him, even without his picture. He is responsible. He had just told us, and the Blues will prove it.... It won't be quoted by me, even though they are confused. I'll be slow so that the Blues will prove it was him that said: "Sales will go up, but the cut will go down." If the cut goes down and sales go up, timber sales should show an increase in revenue in terms of return to the government. Is that correct? It's correct, absolutely right. Even Digger's with me. Is that Digger?
AN HON. MEMBER: That's the other guy.
MR. BARRETT: Oh, is that him?
Interjections.
MR. BARRETT: That's right. When you pull out a tree, you can plant something in the hole. Think of the money you could save!
MR. R.L. LOEWEN (Burnaby-Edmonds): Keep trying, Dave.
MR. BARRETT: Timber sales revenue for 1977-78....
MR. LOEWEN: Cocke for leader!
MR. BARRETT: I'm coming to sales tax and you, Mr. Member.
You have not presented a truthful picture here, through you, Mr. Chairman. The budget is not a truthful statement.
AN HON. MEMBER: Oh, order!
MR. BARRETT: It is not a truthful statement. It cannot be. If you're trying to make the minister out to be a fool you couldn't have done any better if you had worked on it a couple more hours. You've done well enough in this statement alone. Timber revenues are down from $500,000 to $200,000; timber royalties are down to $7 million from $8 million.
Mr. Chairman, somebody has pulled something over the minister's eyes. I don't blame the minister because it's against the rules. Not only is it against the rules, but I don't think he'd do it. But let the people of this province know that we have not been given a truthful statement about the amount of money that we should be collecting from the forest industry, because the minister's statements are contradictory.
Now the next subject I wish to raise, unless the minister cares to tell me.... Please, Mr. Minister, would you tell me why the timber sales revenue is down from $80 million to $50 million? Would you tell me that? If the sales are going to go up on inventory, why is the revenue going to go down? Could you tell me that?
HON. MR. WOLFE: Mr. Chairman, I think that that question was canvassed and responded to earlier. It's a simple fact that the estimates for next year should not be compared to the original estimates of last year but to the current experience of the nine-month period. You're nodding your head, Mr. Member. That's good. Does that mean you understand?
MR. BARRETT: Yes.
HON. MR. WOLFE: Now if you'll allow me to just explain just a bit further....
MR. BARRETT: What is the current revenue for this year?
HON. MR. WOLFE: I believe I have the floor, Mr. Chairman. I think the House should realize who is asking these questions, in terms of accuracy of forecasting.
AN HON. MEMBER: Hear, hear!
HON. MR. WOLFE: The former Minister of Finance, Mr. Chairman, is asking these questions. He talks about being in meetings and rooms and carrying on all sorts of surreptitious activities.
MR. BARRETT: You tell us the answer.
HON. MR. WOLFE: I'd like this House to be reminded of what kind of a job he did in estimating during his tenure in office.
MR. BARRETT: Just answer the question.
HON. MR. WOLFE: In 1973-74 they underestimated revenues and expenditures by 23 per cent. No small matter! In 1974-75, they underestimated revenues and expenditures by 21.2 per cent.
SOME HON. MEMBERS: Shame!
HON. MR. WOLFE: So what about the last year, when we had the election? He's criticizing these estimates of ours, saying that we've cooked the books.
MR. BARRETT: That's right.
HON. MR. WOLFE: How's this for cooking? They overestimated their revenues by $250 million and
[ Page 1020 ]
absolutely inflated figures willy-nilly. They just threw a bunch of made-up figures in, overestimated their revenues by $250 million, underestimated the expenditures by $155 million, for a total deficit in one year of $405 million.
SOME HON. MEMBERS: Shame!
HON. MR. WOLFE: Mr. Chairman, I think that member shouldn't have the audacity to be questioning these forecasted figures. Not for one minute I don't think he should be. He's smiling, Mr. Chairman. He's smiling because he's ashamed. Forgive him, Mr. Chairman, he knows not what he's doing.
MR. BARRETT: Thank you very much for not answering the question. On page A5, the answer is no. On page A5, signed by that minister, of a budget he inherited, are $265 million of nonbudgetary expenditures that you authorized! You didn't tell the House that, did you? It's close to 6 and you thought you'd make it without telling them that. You authorized the $265 million in nonbudgetary items. There's your name there! Shame on you!
I'm not going to tell Clarkson Gordon on you; they already know.
HON. L.A. WILLIAMS (Minister of Labour): Trust us, Dave.
MR. BARRETT: Trust you! You're the last one of that group I'd trust. You're after the leadership every single day! Every single day you're working it over in the back bench. Don't even give the new young Premier a chance. You've got the shiv in him every day, the poor guy! Holy cow! That's no way to treat him!
Now that we're back to some amiability and now that we're back to some exchange, Mr. Minister, let us assume that your total revenues as you projected and scaled down, you guessed that your revenues for the timber sales for this year would be $80 million. Obviously you're not going to make that $80 million. Is that correct, Mr. Minister? Mr. Minister, through you, Mr. Chairman, you guessed that your revenues were going to be $80 million. You're not going to make that $80 million. Is that correct, through you, Mr. Chairman? That's what the minister said. That was an estimation. All right, Mr. Minister, through you, Mr. Chairman. Let us assume that your $80 million was wrong and you're only going to bring in $60 million, which I think is pretty close, since we haven't had an up-to-date report. The only thing we can go on is the six-month report. The six-month report indicates that your revenues from timber sales will probably be around $60 million to $65 million Is that right, Mr. Minister? Do you not anticipate making $60 million out of an estimated $80 million? Is that right? What have you made so far in timber sales? Could you tell us that?
Mr. Chairman, the minister is deliberately silent because these figures are being deliberately underestimated, in my opinion. Deliberately! That is my opinion, and Mr. Minister, through you, Mr. Chairman, you're not fooling anybody. If you really believe what you're saying, you stand up in this House and you tell us how much you've collected in timber sales so far this year. We know it's not going to be $80 million. We figure it will be around $60 million to $65 million. The doctors are looking for you, Mr. Badmouth.
SOME HON. MEMBERS: Order!
MR. BARRETT: Order is right! Mr. Chairman, we have not been told the full and accurate information by that minister. All his flim-flam has been exposed by the fact that he's the one who authorized $265 million of nonbudgetary items. He signed the orders for those expenditures and he can't kid anybody.
The member for Nelson, uh, Revelstoke, uh....
AN HON. MEMBER: Rossland-Trail.
MR. BARRETT: Rossland-Trail (Mr. D'Arcy). That whole area is NDP anyway.
MR. L.B. KAHL (Esquimalt): He's here so seldom you don't know where he comes from!
MR. BARRETT: I heard a voice from the helicopter back there! (Laughter.)
Well, Mr. Minister, I think you'd better have some supper, calm your stomach, and come out here and tell us who's causing you these ulcers, because you couldn't be doing a thing like that. You're too nice a guy.
The House resumed; Mr. Speaker in the chair.
The committee, having reported progress, was granted leave to sit again.
Hon. Mr. Williams moves adjournment of the House.
Motion approved.
The House adjourned at 5:59 p.m.