[ Page 4395 ]

CONTENTS

Routine Proceedings

Oral Questions

Northeast coal development. Mr. Leggatt –– 4395

Mr. Lauk –– 4396

Mr. Macdonald –– 4397

Natural gas pipeline to Vancouver Island. Mr. Lockstead –– 4397

Tabling Documents

Public accounts of British Columbia for the fiscal year ended March 31, 1980.

Hon. Mr. Curtis –– 4398

Report of the comptroller-general.

Hon. Mr. Curtis –– 4398

Budget Address

Hon. Mr. Curtis –– 4398

Tabling Documents

Return, refunds and remissions in accordance with the Revenue Act.

Hon. Mr. Curtis –– 4416

Returns, remissions and refunds in accordance with the Taxation (Rural Area) Act.

Hon. Mr. Curtis –– 4416

Provincial Capital Commission annual statement for the year ended March 31, 1980.

Hon. Mr. Curtis –– 4416

Purchasing Commission annual report, January 1, 1980, to December 31, 1980.

Hon. Mr. Curtis –– 4416

Unclaimed Money Act statement of unclaimed money deposits for the year ended

March 31, 1980.

Hon. Mr. Curtis –– 4416

Estate Administration Act annual return, 1980.

Hon. Mr. Curtis –– 4416

Financial administration act task force report.

Hon. Mr. Curtis –– 4416

Provincial Debt Repayment Act (Bill 14). Hon. Mr. Curtis.

Introduction and first reading –– 4416

Finance Statutes Amendment Act, 1981 (Bill 13). Hon. Mr. Curtis.

Introduction and first reading –– 4416

Social Service Tax Amendment Act, 1981 (Bill 12). Hon. Mr. Curtis.

Introduction and first reading –– 4416

Assessment Amendment Act, 1981 (Bill 11). Hon. Mr. Curtis.

Introduction and first reading –– 4416

Income Tax Amendment Act, 1981 (Bill 10). Hon. Mr. Curtis.

Introduction and first reading –– 4417

Tabling Documents

Labour Relations Board annual report, 1980.

Hon. Mr. Heinrich –– 4417

Human Rights Commission report, human rights branch.

Hon. Mr. Heinrich –– 4417

Ministry of Transport and Highways annual report, 1980.

Hon. Mr. Fraser –– 4417

Government air services logs for the year ending March 1980.

Hon. Mr. Fraser –– 4417

MONDAY, MARCH 9, 1981

The House met at 2 p.m.

Prayers.

HON. MR. CURTIS: I would seek your indulgence and that of the House while I introduce a number of guests. It's not possible nor appropriate to introduce every guest who is present today, but may I first start with my wife Sheila. One week from today will mark our 24 years of marriage. She has tolerated me for that long and I'm pleased that she is in the House for this afternoon's events.

Also, my mother Mrs. Helen Curtis is here, and the House will be relieved to know that she has not imposed a time limit on us this year in that she has no further appointments for the day. She has tolerated me longer than Sheila has.

In addition, I thought that because what we do in this assembly has an impact on young people — will have an impact for years to come — it would be appropriate to invite five students from various regions of British Columbia. Other members may care to speak to them. But we turn to the presidents or prime ministers of five student councils. Those five students are here and I'm honoured to be able to introduce them to this assembly: Miss Margo Listhaeghe, the president of Chetwynd Secondary School Student Council in Chetwynd; Mr. David Kershaw, prime minister of Mount Baker Secondary School Student Council, Cranbrook; Mr. Farley Stewart, president of Prince Rupert Secondary School Student Council in Port Edward; Mr. Troy Albo, president of Rossland High School Student Council, Rossland; and Mr. Kevin Blude, president of Columneetza Senior Secondary School Student Council, Williams Lake.

In addition to the financial and business community who would normally attend on a day such as this, we've also invited representatives of the Canadian management group, for any placement which might be made by the government of British Columbia, and the U.S. management group. I will not list their names. However, I would like to identify three individuals who have come from Europe representing a part of our European management group if, and as, we turn to that particular capital financing market. They are M. Jean-Phillipe Delacroix, vice-president of Banque de Paris et du Pays Bas; Dr. Siegfried Weber, spokesman of the board for Deutsche Bank AG; and Mr. Cristoph Kremp, representing, out of Toronto, Bayerische Landesbank Girozentrale. Perhaps the House would join me in welcoming them.

MR. HOWARD: Mr. Speaker, I would also like to welcome a couple of guests to the chamber and the precincts today. One, on probably his first and last visit, is Mr. Brian Westwood, leader of the Progressive Conservative Party of the province of British Columbia. While I have not been able to identify the other gentleman visually, I am told that Mr. Trudeau's personal representative, Mr. Jev Tothill, is also in the House.

MR. DAVIDSON: Mr. Speaker, in the gallery today are 24 students from the Lewis and Clark College in Portland, Oregon. The students are from the political science department and are accompanied by Professor Donald Balmer, who has for many years brought students here to observe our Legislature. I ask all members to give them a warm welcome.

MR. NICOLSON: Mr. Speaker, in the gallery today are His Worship Tex Mowatt and his wife Edith from Nelson. Also I note in the gallery a long-time Kootenay resident, well-known to both Nelson and Creston areas and the first principal I served under, Mr. Ben Crawford.

MR. LAUK: I don't know whether it's been officially done, but after a long sabbatical may the House welcome back the Deputy Clerk who has served the House for, I think, 378 years, Mr. George MacMinn.

I'd also like the House to extend their welcome and their congratulations to the former president of the UBC law students, now the Minister of Consumer and Corporate Affairs (Hon. Mr. Hyndman).

MS. BROWN: Mr. Speaker, the chairman of the Burnaby Tenants Association, Mr. Tom Lalonde, is in the gallery. I would like the House to bid him welcome.

Oral Questions

NORTHEAST COAL DEVELOPMENT

MR. LEGGATT: Mr. Speaker, my question is directed to the Minister of Finance. On February 10, 1981, the Hon. Bud Olson, Minister of State for Economic Development, announced on behalf of the federal government that all of the federal government investment in northeast coal would be recovered through the commercial freight and throughput charges. Is the minister prepared today to make the same commitment to the taxpayers of British Columbia that all B.C. government investments in northeast coal will be recovered on a commercial basis?

HON. MR. CURTIS: Mr. Speaker, to the hon. member, in the event that I have an opportunity to speak this afternoon, I believe that I will be able to deal with the question of northeast coal at some length. Therefore for this short period I would take the question as notice.

MR. LAUK: As part of the northeast coal deal — and the Minister of Finance is fiscal agent for the British Columbia Railway — Teck and Denison will pay transportation charges of $15.86 per tonne, plus a surcharge for the Anzac spur line — I think it is $4.88 to the BCR and the rest to the CNR. Can the minister confirm that there will be a $2 rebate on these charges in the first five years of coal shipments?

HON. MR. CURTIS: Mr. Speaker, to that hon. member, and without confirming or denying the points he has put in the question, I think, again, I will be discussing northeast coal in the course of the budget speech, which I hope I can deliver this afternoon.

MR. SPEAKER: Does the Chair understand the question is taken as notice?

HON. MR. CURTIS: Yes, it is.

MR. LAUK: Mr. Speaker, the minister did not take it as notice; he said he was going to deal with it in the budget speech. That's not notice.

Is the minister taking it as notice, and will he reply to these questions? Or is he saying, with respect to my question, that he will deal with it in the budget speech?

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MR. SPEAKER: Order, please. The intent of the question is that it be taken as notice, and the minister will answer the question at his discretion. A further question?

MR. LAUK: I put the same question to the Minister of Economic Development. As part of the northeast coal deal, Teck and Denison will pay transportation charges of $15.86 per tonne, plus a surcharge for the spurline. Can the minister confirm there will be a $2 rebate on these charges in the first five years of coal shipments?

MR. SPEAKER: The Minister of Economic Development.

HON. MR. PHILLIPS: Mr. Speaker, I'm not aware of any Minister of Economic Development.

Interjections.

MR. SPEAKER: The time of question period is limited, hon. members.

MR. LAUK: The minister full well realizes that the time is limited, Mr. Speaker, which is the reason for his last answer. No one else in this province is aware of a Minister of Economic Development.

MR. SPEAKER: The question, please.

MR. LAUK: The question is directed to the Minister of Industry and Small Business Development.

HON. MR. PHILLIPS: I'd hope that the member, who has been in this House for some time, would show respect for the House and address all members of cabinet by their proper title.

Mr. Speaker, in answer to the member's question, I am not aware that either the Canadian National Railway or the British Columbia Railway will be making any rebates to any coal companies.

MR. LAUK: The cost of the Hydro substation and transmission line to the Denison and Teck mines and the Tumbler Ridge townsite will be at least $50 million. How will this cost be divided between the provincial government and the mining companies?

HON. MR. PHILLIPS: Mr. Speaker, in answer to the member's question, B.C. Hydro is building a line to service two mines, originally — there is one townsite, but I say "two mines originally" because in that great northeast area, as the member full well knows, there will be other mines — and the coal companies will be paying those normal portions of the substations after the power is taken off the main line.

MR. LAUK: Mr. Speaker, can the minister assure the House that no portion of that cost will be borne by the provincial government or by B.C. Hydro?

HON. MR. PHILLIPS: Mr. Speaker, I think the intent of the question is to confuse the public. I have made the statement that the coal companies will be paying their portion of the facilities necessary to get the power to their area from the main line, and that's a standard procedure.

MR. LAUK: The full costs?

HON. MR. PHILLIPS: So far as I am concerned the standard procedure will be paid for... The normal procedure will take place where the coal companies will be paying for the transformers necessary to reduce the voltage to supply their mines.

MR. LAUK: I take it from the minister's answer that when he says the main line he means that Hydro will pay entirely for the transmission line up to a certain point which will arbitrarily be a cutoff point to the two separate mine locations.

HON. MR. PHILLIPS: Mr. Speaker, the member opposite seems a bit confused. I've stated that in the infrastructure we're providing for northeast coal there is some fifty-odd million dollars to provide a powerline from the W.A. C. Bennett to the Gordon Shrum power station to the town of Tumbler Ridge. That is in the original estimated cost of the infrastructure, which the government of British Columbia is putting in as their share of the $111 million for the infrastructure for northeast coal.

MR. LAUK: B.C. Hydro has stated that they will not pay for the line, and the negotiations are underway between the government and the companies. With that information, can the minister now report to the House the state which those negotiations have reached?

HON. MR. PHILLIPS: I'd be happy to get the exact date. As I've said, Hydro isn't paying for the line; the government is paying for the line. I've announced it as part of the infrastructure. Maybe, Mr. Speaker, I could inform the member again what the government has said we are providing by way of infrastructure to open up that great inland empire.

MR. LEGGATT: I have a question to the same minister. The minister has announced for some time that there is a differential in the surcharge, that there will be the sum of $2.50 chargeable to the Teck operation and $3 to the Denison operation. Why is there a differential in this particular case briefly, if you could.

HON. MR. PHILLIPS: Mr. Speaker, I'd be quite happy to answer the member's question briefly, and that is because, very simply, Teck have to truck their coal some 27 kilometres, and therefore the surcharge is less for Teck Corp.

MR. LEGGATT: In view of the fact that the minister has said that there could be additional contracts let, are we now to expect that those other companies, like BP, will also get a reduction in their surcharge because they have further to go to get to the rail line? Or maybe we'll have to pay BP to haul their coal over to the railroad. Because that's the principle the minister has just enunciated.

HON. MR. PHILLIPS: I'm very glad that the member recognizes what I have said all along — that indeed there will be several additional contracts for northeast coal. And as we've said in the past, we will sit down and assess each project. But there will be a surcharge, and I want to tell you I don't know of anywhere else in the world where we've had a surcharge on a railway for building a new railway to open up a new inland empire.

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MR. LEGGATT: On January 28 the Japanese industry paper called the Japan Echo confirmed that it would be most unlikely that there would be any further contracts. I want to know if the minister bothers reading any other news releases than his own.

MR. SPEAKER: Order, please. Hon. members, the purpose of question period is not to bring information to the House, but rather to seek information from members in the House.

HON. MR. PHILLIPS: Well, Mr. Speaker, that member has been wrong before, and I just want to tell the House and all the big province of British Columbia that he's wrong again.

MR. MACDONALD: Mr. Speaker, I have a question for the minister for business and small development — whatever. Prior to the signing ceremony, when the federal government representatives and the ministers from this government and the two companies Teck and Denison sat around with the cameras and the rest, had the federal government sent a Telex — from Senator Olson — outlining in detail the extent of their aid in terms of the port charges that would be made — the CNR, the rehabilitation of the rail lines and so forth? Had that all been set out in a Telex prior to the signing ceremony?

HON. MR. PHILLIPS: Mr. Speaker, I would suggest that the learned member for Vancouver East ask the recipients of the telegram whether they have received such a telegram or not.

MR. MACDONALD: Has the minister seen a copy of that telegram, or does he have a copy of a Telex of that nature? I'm asking you.

HON. MR. PHILLIPS: Mr. Speaker, in answer to the member's question, I'll have to advise him that I will have to check my records, because there were many telegrams and much correspondence going on at that particular time.

NATURAL GAS PIPELINE
TO VANCOUVER ISLAND

MR. LOCKSTEAD: Mr. Speaker, I have a question for the Minister of Energy, Mines and Petroleum Resources. Can the minister advise why public hearings were not held prior to the government's decision to reject the application of Westcoast Transmission to construct the natural gas pipeline to Vancouver Island?

HON. MR. McCLELLAND: Mr. Speaker, first of all, there have been no applications yet, unless there happens to be one on my desk today from B.C. Hydro. There were a number of proposals put forward to the government suggesting that applications would follow. The purpose of the public utilities commission will be achieved in holding public hearings for the pipeline crossing that B.C. Hydro will build to bring natural gas to Vancouver Island, a promise which was broken by the previous government and which is being kept by this one.

MR. LOCKSTEAD: Mr. Speaker, the minister does not answer my question, as he has indicated that no public hearings will be held into route selection for this pipeline. My question is: what assurances have B.C. Hydro or the government given to to users or potential users on theSun shine Coast, in Powell River and in Squamish that there will be a natural gas pipeline and that there will be a fertilizer plant in Powell River, as would have been possible if Westcoast had got that contract and had that proposal been successful? What does the minister intend to do about those potential economic development projects at this time?

HON. MR. McCLELLAND: I want the House to remember, first of all, what the promise of this government was originally. The first, of course, was to move us away as quickly as possible from our dependence on foreign oil by using a substitute which is more readily available to British Columbians, and that, of course, is natural gas. The largest area which is not served by natural gas is Vancouver Island, and the promise made by this government was to make gas available as quickly as possible to Vancouver Island. That's the promise which is being fulfilled.

The next promise, which I mentioned in the last session during my estimates, I think, to the member for Shuswap-Revelstoke (Mr. King), was that we would very quickly be establishing a rural gasification policy in this province which would attempt to reach out to many of the other areas of the province which are not yet served with natural gas. That policy will be established in due course, I hope as quickly as we possibly can; and we will in a very orderly manner make natural gas available to many other parts of our province.

On the final part of the question from the member, Mr. Speaker, with regard to the fertilizer plant, if there is not gas available at Powell River, then that plant will not be able to be located at Powell River. But in a meeting with the principals of the consortium which was proposing to build that plant in Cranbrook some three weeks ago or so I asked those proponents one simple question. That simple question was: can that plant be located somewhere else? They said yes. It's my understanding that given the opportunity to have gas, economic development will be able to go ahead, perhaps in some other locations.

I might also just say very briefly, Mr. Speaker, that that fertilizer plant, as well, was not a proposal as such. There were many, many terms which would have to be achieved, including the price of the gas which would be paid to supply that fertilizer plant. One of the other promises we have made to the people of this province through our energy policy and in other ways is that we won't give our natural gas away for any reason. All of those things will have to be achieved in terms of normal and good economic development.

MR. SPEAKER: Hon. members, in anticipation of the order paper and the ceremonial events of today there are a few preparations which need to take place. Television cameras will need to be placed in readiness and some lights will need to be elevated in intensity, so I am going to declare a short recess in the absence of any other business. I will ring the bells as soon as your attendance is required.

The House took recess at 2:31 p.m.

The House resumed at 2:38 p.m.

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Orders of the Day

Hon. Mr. Curtis tabled the public accounts of British Columbia for the fiscal year ended March 31, 1980.

HON. MR. CURTIS: Mr. Speaker, I move that the public accounts for the fiscal year 1979-80 be referred to the Select Standing Committee on Public Accounts and Economic Affairs.

Motion approved.

Hon. Mr. Curtis tabled the report of the comptroller general in accordance with section 25(4) of the Financial Control Act, chapter 129, Revised Statutes of British Columbia 1979.

ESTIMATES OF SUMS REQUIRED
FOR THE SERVICE OF THE PROVINCE

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Estimates of Sums Required for the Service of the Province for the fiscal year ending March 31, 1982, including Schedule A sums required by Her Majesty to make good certain sums expended for the period ended March 31, 1980, and to indemnify the several officers and persons for making such expenditure, recommending the same to the Legislative Assembly.

Hon. Mr. Curtis moved that the said message and the estimates accompanying the same be referred to Committee of Supply.

Motion approved.

HON. MR. CURTIS: Mr. Speaker, I move, seconded by the hon. Attorney-General (Hon. Mr. Williams), that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

BUDGET ADDRESS

HON. MR. CURTIS: In speaking to this motion I am honoured today to deliver my second budget speech and to present the sixth budget of this government. As its predecessors did, this document will emphasize the importance of sound financial management and fiscal integrity in government, two principles which have enhanced the quality of life in British Columbia in the past.

The budget is more than a mere accounting of fiscal trends and positions. It must not be regarded in isolation as a simple set of figures and policies by which a government intends to maintain itself over a fixed period. The budget is a total statement of the financial position of the province. It is an expression of past performance, present programs and projects, and future developments. It places recommendations and decisions in a more complete perspective, in a clear light. It explores and explains the economy and provides the best method of safeguarding our economic future. As such, it is a strong indicator, a digest of facts concerning where we have been, where we are now and where we shall be going.

The budget I am presenting today contains measures and directions for here and now, but it also contains strong statements about the long-term financial health of the province. There is, after all, much about which we can be proud and positive. Our actions have clearly demonstrated that a responsible approach in matters of money is fundamental to the cause and effect of providing superior standards of services to British Columbians.

Today our government reaffirms support for public services to British Columbians in all parts of our province. It will assure support for a level of services already superior to and wider-reaching than those of most other provinces in Canada.

It should be clear from the record of this government that our planned approach to fiscal policy has never caused us to shy away from difficult challenges, nor shall we do so today. It's our firm belief that we in the public sector must provide strength and leadership. In doing that we never wish to supplant the role of the individual and the private sector, but rather to strengthen and augment it.

In this budget we demonstrate once more this government's solid commitment to bold and imaginative projects that will dramatically transform parts of this province. These projects call for major investments which we can make because of our underlying financial strength, and projects that will call for the ongoing involvement and commitment of British Columbia's finest resource: British Columbians — people with pride.

May I talk about pride for just a moment? We — and I include all British Columbians in "we" — can and should take considerable pride in the excellent performance of the provincial economy. Mr. Speaker, western Canada has become the envy of the nation. We see it daily in the stream of new people coming to British Columbia. We see it daily in the rapid pace of investment, in the confidence expressed in our policies and in the opportunities we have created. All of it attests to the attractive economic, social and physical environment we have to offer. We welcome these developments, but are well aware that they also bring some problems. Increased economic activity puts pressure on labour and housing markets. The demand for public services grows with every newcomer. The need to further diversify our economy becomes ever more pressing.

We are fortunate that the people and resources of British Columbia are more than equal to these challenges. We are ready and willing to make adjustments, to see our economy .grow and to provide opportunities for ourselves and our fellow Canadians. As I have stated already, the government has made a commitment to providing support, services and economic direction to secure growth and opportunity in the 1980s.

In spite of the rapid pace of expansion, our economy, solidly based though it continues to be, is vulnerable to sudden changes in external conditions. British Columbia is still an open economy affected by trends and shifts over which we often have little control. As such, we are integrated with markets throughout the world. We are interdependent through capital and labour markets with other parts of our country. And we are also integrated with other governments in the total fiscal framework of Canadian federalism.

Our ties with other regions, governments, trends and spheres of influence are a source of strength. But they are also the basis of our vulnerability. Now more than ever these factors are having a profound impact.

This budget has been developed in the face of some difficult external circumstances. We have had to counter poor markets for our major export commodities. We are experiencing turbulent relations with the federal government. These are realities that have made my task this year very

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difficult. I shall elaborate more fully on these matters as I explain the budgetary measures to be taken this year.

However, before proceeding to 1981-82, I should like to briefly review a number of issues that have come up during this past year and describe our responses to them. I can best explain these actions in the context of certain guiding principles we've adhered to, particularly that I've adhered to since assuming the Finance portfolio.

First, fiscal responsibility. Early in the year it became clear that the government would be facing a problem of expenditure unavoidably higher than expected in last year's budget, coupled with a serious shortfall in certain resources. My response to this situation was direct. It could well have been the wait-and-see approach many people were counselling — people who for one reason or another did not see the situation as serious. This was advice I would not accept. Early last summer I imposed a freeze on hiring and on all new consulting contracts. Mr. Speaker, this prompt action enabled us to implement a more carefully designed program of cutbacks in consultation with individual ministries. As we approach this year end, the success of this early action is apparent. We now expect spending in 1980-81 to be close to the original budget estimate, despite major cost escalations in the area of health care.

The second guiding principle is improved communications and accountability, and accountability is a term we hear often. But what is it? What is the concept, the underlying idea? Let me suggest what it means: better access to more information, more clearly presented. It is a deliberate effort to communicate, to present programs, define objectives, state goals and explain costs.

To provide greater accountability, this government in 1976 initiated the practice of doing something private industry has been doing for decades: publishing quarterly financial reports. These documents have always provided a valuable source of information between budget presentations, but they were rather limited in scope.

This last year I have had much more information included in the quarterly reports and have placed a priority on making them more readable, more accessible to the people of British Columbia. The reports are no longer limited to information on the year to date. We have introduced revised forecasts of revenue and expenditure for the full fiscal year. And for the first time we have provided information on special purpose funds as well as the general fund of the province.

This year, Mr. Speaker, I will be taking further steps to improve accountability and provide more helpful information to the public.

The subject of government accounting has received increasing attention from the auditor-general and a variety of professionals and other observers over the past few years. Government, as we all know, has grown in size and complexity and earlier accounting practices have become outdated. Accordingly, a thorough review of this government's accounting policies has been undertaken. New methods will be phased in, beginning with the public accounts for the 1980-81 fiscal year and the estimates for the 1982-83 fiscal year. At the same time, the estimates will be amended to establish a new structure of votes and objects of expenditure which will be more useful and more informative for this House, for the people we serve, and for public service managers. A background paper, to be tabled with this budget, discusses the approach to be taken.

Now while these improvements in presentation have been valuable, the most significant way to improve accountability and control is to bring the total financial administration of the province into the twentieth century. When I took office, I was disturbed by the lack of precision and consistency in the legislation assigning responsibilities to the Minister of Finance. Members will know, Mr. Speaker, that the Financial Control Act and the Revenue Act — guiding statutes both — have been in effect for more than sixty years. They are clearly out of step with modern techniques of financial management and with the size and complexity of contemporary government.

Rather than proceed at once with new legislation, we published in August a discussion paper proposing a new financial administration act. My intention was to stimulate debate and to receive reaction. I was surprised at the massive response to the paper. To take full account of all these submissions, a task force was established with responsibility for providing advice on the final form the legislation could take. I shall table the report of the task force today, and I would like to say that the work of that task force, and the advice and responses I've received from people throughout the province, have been excellent. We still have work to do in this important area, but the act should be introduced in this session and will demonstrate by its quality the value of open public discussion.

To complete my brief review of the major accomplishments of the past year, I would like again to remind hon. members and all British Columbians that in 1980 the province was granted a triple-A credit rating. We can all be proud of this achievement. In practical terms it means that the province can borrow at significantly lower interest rates, and British Columbians will therefore save millions of dollars. The triple-A rating is the highest rating possible. It is, if you will, the seal of approval from the international financial community. We've received top marks for our economic and financial performance.

This financial stature has been hard won. We've balanced our budgets at a time when most governments are going deeper into debt. Difficult and unpopular decisions were necessary, but it is the responsibility of the government to lead. We accepted that responsibility. We will continue to accept that responsibility for safeguarding British Columbia's financial and economic future.

While most people are familiar with the government's role in securing borrowed funds at the most favourable rates possible for provincial entities, there's less awareness of our investment and cash-management role. The Minister of Finance in any government in this province is responsible for investment of the pension funds of various groups of public sector employees — provincial and municipal government employees, teachers and employees of some Crown corporations. The Minister of Finance also invests the sinking funds related to the debt of Crown corporations. In the past, almost all of these funds have been invested in long-term loans to Crown corporations.

Although loans have always been made at prevailing market rates, the current volatility of interest rates has created a number of new opportunities in different types of assets. While I expect that long-term Crown corporation bonds will continue to be part of the trusteed fund portfolio, we are now making significant investments in short-term assets in the open market. This policy of diversification, and other extensions of this policy now being considered, will improve the

[ Page 4400 ]

return on trusteed funds. In addition, investment of provincial cash balances will earn an estimated $97 million in 1981-82 and we intend to continually improve our cash management practices.

A policy of portfolio diversification can also provide significant social as well as economic benefits. Where, for example, housing cooperatives are unable to obtain capital financing from normal market sources, the government would consider making such money available for insured mortgages at competitive rates.

Mr. Speaker, I turn now to the economic and fiscal setting with the heading "The Economy." In last year's budget speech I emphasized that the 1980s would be a decade of opportunity for the people of British Columbia. One year later I am even more convinced, even firmer in my resolve, that we have in this province every ingredient necessary to secure a standard of living of unsurpassed quality. Very simply, my basic optimism about the future we share is rooted in the undeniable fact that the world wants what British Columbia has to offer.

We possess the resources, the accessibility to markets, the people, the drive, the desire to achieve a great future. The challenge to all British Columbians is to pull together towards common objectives; to maintain and expand export markets in a tough and highly competitive international economy; to develop a solid reputation as a reliable supplier; to create a safe and obliging home for new investment; to tell the world that here we have the materials, the people and the will to be competitive, dependable and quality-conscious. We can and we shall position ourselves strongly and directly as a world leader. We have all that is necessary, including a reputation in the world as a desirable trading partner — a blue-chip investment, a winner in every way.

I would ask all of you today: when the world sees us in these terms is it not time we in British Columbia took real pride in such an image?

There remains almost unlimited potential for further economic development in this province. But remarkable economic gains have already been achieved. Over the past three decades, the provincial economy has diversified into new resources and products, broadened into new foreign markets and extended further into processing, manufacturing and high-technology services. These are exciting areas in which to grow and these are the areas in which we can offer strength and leadership.

My reason for this optimism is that British Columbia has recorded more rapid economic growth than the rest of Canada in 23 of the last 30 years. British Columbia has become a highly productive industrial economy, supporting one of the highest levels of per capita income in the world.

Pride? Very much so. For all of us. In what we have done and what we shall continue to do.

The exceptional strength and resilience of our own economy has come to the foreground in the past few years. While the rest of North America has sputtered and stalled, the Canadian west has surged forward. After the energy crisis of the early 1970s, demand intensified for western energy, western coal, western metals, western initiative and participation. As a result, there has been a pronounced westward shift in Canadian economic activity. Walk through the streets of Vancouver or Kamloops, Prince George or Fort St. John— you will see firsthand how British Columbia has played a major part in causing the west to become the engine of economic growth and mobility in Canada. This government gladly gives the credit where credit is due. It is due to all British Columbians. We all share in that.

Here is some evidence of what I am describing this afternoon: over the past five years, British Columbia, which has approximately 11 percent of the Canadian population, has contributed over 17 percent to total growth in the Canadian economy. Since 1975, 195,000 new jobs have been created in this province. These account for more than 14 percent of all new jobs created in Canada. Over this same period, capital investment has grown at an average rate of 15.7 percent in British Columbia compared to only 11 percent for Canada as a whole. In 1980 real gross domestic product — or gross provincial product, if you will — is estimated to have increased by 3.6 percent, while for Canada as a whole and in the United States there was little or no growth at all. More than 62,000 new jobs were created last year and the rate of unemployment declined — for the fourth year in a row — to 6.8 percent, which is well below the Canadian average of 7.5 percent. Indeed, the rate for January 1981 was 5.8 percent, which is the lowest British Columbia rate on record.

Let us examine in greater detail why the British Columbia economy managed to do so well when all around us there were slumps and downturns. First, in 1980, British Columbia had the strongest investment growth of all the provinces. This reflects the solid confidence that the business community holds in the economic future of our province. The role we have played in building this confidence is one of the major accomplishments of this government. I might add that such confidence is easily lost and we in government must be ever vigilant in our relations with the business community. Not only must be, but will be.

Second, while export sales of lumber and natural gas to the United States weakened, much of the slack was taken up by increased sales of pulp and paper to West Germany and Italy, coal to Brazil and South Korea, and metals, coal and forest products to Japan. The diversification of the British Columbia economy paid dividends in 1980.

Third, in 1980, a near record level of almost 50,000 more people entered than left the province. These new British Columbians, together with overseas and North American tourists, buoyed consumer spending and led to a healthy 14 percent increase in retail sales — a much greater rate of increase than the nine percent estimated for all of Canada.

Finally, it's my firm conviction that the fiscal policy of this government provided significant support for the economy in 1980. In the last budget we returned to British Columbians a large part of the surplus resource revenues that had been accumulated in the years during which the economy was stronger than expected. I believe that our timing was near perfect: when the economy needed selective stimulus, an extra $353 million was appropriated for new or enhanced programs. Added to this stimulus, provided in my last budget, was the $200 million housing initiative program, a program which led to a level of new housing starts in the province that came very close to the all-time British Columbia record — this accomplished in a year in which other house-building markets in North America were extremely depressed.

All these factors contributed to a strong performance in 1980 in spite of that weak international economic environment. This accomplishment reflects the partnership that has been formed between business, labour and the provincial government. It's on the basis of this partnership that another

[ Page 4401 ]

steady advance is forecast for 1981. The detailed analysis presented in the background papers suggests that in 1981 we shall see another year of sluggish and hesitant growth in the North American economy. Although export performance may improve somewhat, particularly in sales of lumber, fish products, metals and coal, we shall rely once more upon the strength of our healthy domestic economy.

One of the most important reasons that the British Columbia economy has performed so well over the past five years has been the pronounced downward trend in worker days lost due to work stoppages. In 1980 there were almost 75 percent fewer days lost than in 1975. This has had immense benefits for British Columbians, and a tribute is in order to the responsible negotiations carried out between management and the trade union movement, and also, I believe, to the government which has introduced effective measures to help bring the parties together.

My concern is that in 1981 the pressures on labour management negotiations could undermine the very significant accomplishments of the past five years. Contracts covering more than 200,000 workers are due for renegotiation this year. I suggest, if I may, that it is crucial at this time for all parties in the collective bargaining process to exercise restraint. We cannot let the solid economic base of this province be eroded for the sake of short-term objectives. Exorbitant settlements fuel inflation and hamper our ability to sell export products in the highly competitive markets of the world. Our enviable but hard-won reputation as secure and reliable suppliers could hang in the balance.

The private sector must take the lead in restraint. Our responsibility in government is to see that public sector settlements follow this lead. We intend to exercise this responsibility. I shall be seeking the cooperation of all my cabinet colleagues to ensure that settlements reached in coming months with employees in provincial ministries, Crown corporations, agencies and societies follow, not lead, comparable private sector settlements.

If we manage to avoid costly work interruptions, the economy will record another strong year in 1981. Our forecast is for real growth in gross domestic product of approximately 3 1/2 percent in 1981. That is well above the projections in the 1 percent range which are presently being made for the Canadian economy.

Underlying this forecast is a major impact provided by the development of the northeast coal fields. This injection into the northern economy will be spent and respent on the goods and services of large and small businesses throughout the province. More than 2,100 new jobs from this single activity will be generated in 1981 alone. The overall result of this imaginative development will be to transform a moderate year in the economy into another solid year of expansion and development.

While the perils of long-term economic forecasting are recognized, we expect that even without coal development there would be a strong resurgence of economic growth in 1982 and beyond. The international economy, including that of the United States, should be entering a period of recovery, thereby generating new demands for British Columbia exports. A further economic boost is expected to come from the Pacific Rim countries and from our own dynamic western Canadian market. On top of these longer term projections, the northeast coal development will add almost 5,000 jobs during peak construction in 1983 and a permanent increase of approximately 3,500 new jobs for British Columbians.

The rate of real growth in 1982 could exceed 5 percent, and over the next five years should average at least 4 percent. The early 1980s could see British Columbia become one of the most dynamic economies in the world. It is our collective responsibility to make sure that this opportunity is explored, exploited and secured to the fullest extent.

Now to the financial position of the province. The strong performance of the economy in recent years has been reflected in revenues flowing to the provincial government. Between 1976-77 and 1979-80, for example, operating revenue grew at a compound annual growth rate of 16 percent and reached $5.5 billion. Over this period, natural resource revenue tripled. These were dramatic increases. With an excellent financial position, the government was able to sustain financing for existing services as well as to introduce a number of innovative programs. Could we review some of the more important initiatives: a revenue-sharing agreement with our municipalities to provide an assured and independent financial basis for local government decision-making; urban transit services that removed responsibility from the British Columbia Hydro and Power Authority and put it where it belongs, in the hands of local governments, but with the support of generous and dependable provincial financing; a long-term care system to provide improved service to our sick and elderly, while making better use of expensive acutecare facilities; and a dental care program that provides coverage for almost one million British Columbians.

These programs represent just a sample of the responsive and responsible action taken by this government to meet needs and improve services. These programs alone are expected to cost almost $600 million in the current fiscal year.

Although the provincial treasury benefited from the success of the economy, the government was cautious in using additional fiscal resources without adequate long-term planning and preparation. New programs and tax reductions were introduced gradually. The government was criticized by some for accumulating surpluses and for not returning them to the economy more rapidly. Our caution, I suggest, was prudent and well advised, as will be clear when I explain the financial situation we face this year.

Although the international recession only touched us in terms of the total provincial economy, it has hit us quite hard — as hard as it has hit other Canadians — in the area of provincial finances. There is a most important, fundamental difference here, a difference that is vital to fully understand. While there is no question that the overall economy is in excellent condition, there is also no question that the overall finances of the province have been seriously affected by a number of trends and developments.

A most unsettling event in 1980 has been the sharp decline in natural gas exports. Although a variety of factors contributed to this weak performance, the basic point is that the federal government's pricing policy has made British Columbia gas uncompetitive with alternative fuels. The large industrial users in our neighbouring states of the Pacific Northwest have turned to cheaper residual fuel oil. United States utilities have bought more domestic gas in preference to a higher-cost imported alternative. The process of deregulating natural gas sales in that country has also made interstate movement of gas much easier and more profitable, and our finances are suffering the effects of these moves.

The combination of higher export prices and lower export volumes has led to a serious decline in the value of export revenue to the British Columbia Petroleum Corporation.

[ Page 4402 ]

Petroleum and natural gas revenue is expected to be $447 million in 1980-81, down from $599 million in 1979-80.

We've been fortunate that strength in other areas of the economy produced more revenue than originally estimated for 1980-81. While forestry revenue declined as expected, log prices have held up better than anticipated. Timber sales revenue in 1980-81 is now forecast to be $341 million, $107 million above the original budget estimate. To put it in perspective, however, this is still almost $200 million below 1979-80 timber sales revenue.

Overall operating revenue for 1980-81 is now forecast to be $5.75 billion — $54 million below the budget estimate and only 4.6 percent above the 1979-80 level. By contrast, operating expenditure for the full fiscal year is expected to reach $5.66 billion; that's $112 million above budget. Higher than anticipated expenditure, particularly in the Ministry of Health, will be partially offset by savings as a result of the restraint measures instituted during the year.

The revised outlook for the operating account, therefore, indicates a balance of $84 million compared to an anticipated balance of $250 million. The decline of $166 million in expected operating surplus means that the province will now have to provide more funding from the contingency balance of unappropriated funds.

It's now expected that funds remaining in the revenue surplus account will decline to $53 million by the end of this fiscal year, and this, you will know, Mr. Speaker, is a very small contingency balance to carry forward into 1981-82.

Clearly the province will be working to some fine financial tolerances in 1981-82, leaving little margin for error. I cannot overstate how difficult this makes budget planning. Even small changes from revenue and expenditure estimates can lead to wide divergencies in net financial requirements. For the 1980-81 year, the variances in forecasting total revenue and expenditure have been extremely small — only 2 percent on expenditure and less than 1 percent on revenue — and yet this 3 percent spread has led to a 66 percent decline in the size of the anticipated operating balance. The financial position of the province will remain vulnerable to such small revenue and expenditure variations. In the coming year, however, there will not be an adequate balance of funds to provide for such contingencies. This must condition the government's attitude to budget-making. A cautious and responsible approach is more than ever called for.

Now for the prospects for 1981-82. Although the general performance of the economy is expected to remain strong, there exists considerable uncertainty about lumber and natural gas exports, the performance of which are crucial to the revenue position of the province.

It had been expected that lumber markets would rebound quite quickly in 1981, but high interest rates in the United States and a weakening in Japanese demand for lumber have dampened our optimism. These factors, together with normal lags in the appraisal system, will cause another decline in provincial revenue from timber sales in the coming year.

The prospect for natural gas sales also remains bleak. The export-pricing policies of the federal government underly this negative outlook. Whether British Columbia is able to recapture traditional markets depends on many factors: the price of competitive fuels, the availability of United States gas, and the energy policies of the Canadian federal government. At present, the Ministry of Energy, Mines and Petroleum Resources and the British Columbia Petroleum Corporation are pessimistic about the near-term outlook for these markets.

Fortunately for producers of natural gas, the British Columbia Petroleum Corporation accepts significant financial risks associated with the marketing of natural gas. As sales decline, the British Columbia Petroleum Corporation continues to pay producers for gas that is not taken to market. This is the take-or-pay principle. It provides a measure of security for producers, but it reduces the income of the British Columbia Petroleum Corporation accordingly. The combination of poor markets and take-or-pay payments of more than $100 million will lead to a further reduction in natural gas revenue in 1981-82. Recovery in market share and provincial revenue can only be expected to come gradually.

Once again, the revenue forecast is one of contrasts. Although forestry and natural gas revenue will be down in 1981-82, revenue from other sources is expected to increase by 12.5 percent before revenue measures. Total operating revenue of $6.01 billion is expected if no action is taken to build upon this revenue base. This would represent an increase of 4.6 percent over 1980-81. However, the cost of providing government services is increasing at over twice that rate. It is this imbalance between revenue and expenditure growth that produces a serious budgetary situation for 1981-82.

Our fiscal projections for the next few years indicate gradual improvement in resource revenue. However, not until the middle of the decade will it approach the level experienced in 1979-80. Therefore the budgetary imbalance projected for 1981-82 is not expected to disappear over the medium term. The government is facing a difficult gap between operating revenue and expenditure, and it is going to be very hard to balance the budget.

May I turn to the federal budget, Mr. Speaker?

MR. LAUK: You're delivering.

HON. MR. CURTIS: Paying both, my friend.

The problem of slow revenue growth would have been difficult enough, even without the measures announced in the October federal budget. Now the situation has become critical. The Canadian government has introduced new energy taxes that directly reduce provincial revenue. More significantly, the federal government has increased the tax burden on the petroleum industry and has reduced incentives to explore for and develop new oil and gas fields in British Columbia. At a time when energy shortages and cost escalations are a regular occurrence, can such actions be considered as responsible or positive for Canadians?

The impact of these measures on the industry and on provincial revenue is substantial. Over the period 1980-81 to 1983-84, federal taxes have the very real potential of reducing provincial revenue by over $1 billion. How can the people of British Columbia be expected to cope with such an intrusion?

In addition to new energy taxes, the federal budget contained other proposals to reduce provincial revenue. From careful reading of the fine print of that budget, it becomes clear that the federal government is embarking on a general cutback in shared-cost financing for social services. For our province this could mean reduced support for health care, reduced support for policing, and reduced support for post-secondary education. I am sure that it has not escaped the attention of the federal government that these are the areas where the cost of providing public services is also growing rapidly.

[ Page 4403 ]

Although the precise details of these federal measures are not yet known, the trend is distressingly clear. At the very end of last year, for example, the federal government decided to terminate the community services program. This pushes a larger burden of costs onto the municipalities for sewer and water facilities. Municipalities will in turn seek more assistance from the province.

The impact of federal action will not be temporary. On the contrary, we expect these measures to put an ever-increasing burden on the provincial treasury. To repeat: the federal government has turned a difficult situation into a basic budgetary problem, and there is little in the way of accumulated surplus to help alleviate the problem.

Now, Mr. Speaker, the priorities for 1981-1982, the balance of choices. This unusual combination of a strong economy and yet slow government revenue growth has forced difficult choices upon us. If the budget is to be balanced, additional revenue must be raised to meet expenditure needs, or government programs must be drastically cut.

The third possibility — that of running an operating deficit — was ruled out early in our planning. This government is not prepared to consider borrowing to pay operating expenses. Too many governments have adopted this short-sighted way out of their financial difficulties only to find that tough decisions become even tougher to make as the debt load accumulates. It is a problem which is painfully obvious at the federal level. Once a government becomes trapped in the mire of deficit spending it is almost impossible to correct the situation. I do not intend to leave that legacy to my successors in this portfolio.

For these reasons, we consider it responsible to face fiscal difficulties now, rather than put them off for future British Columbians to cope with. Once again, therefore, this government's budget will be balanced.

I stress that even with operating expenditure and revenue in balance, the government will still be providing considerable stimulus through major capital investments. The province acts as the fiscal agent for all guaranteed debt issued by Crown corporations. With the northeast coal project, urban redevelopment in Vancouver, an all-time record hospital building program and construction of new correctional facilities, the government will be providing considerable investment stimulus to the economy.

On the operating account, however, the hard choice remains: cut expenditures or increase revenue. In the short term, major expenditure reductions are neither possible nor desirable. Almost one-half of provincial government expenditure is accounted for by the ministries of Health and Education, and only 35 major programs account for 80 percent of provincial expenditure. We will not curtail these essential social programs.

The government is faced with many cost pressures similar to those of any private organization: inflation and higher wage demands. In addition, a number of expensive government services are open-ended and expanding rapidly in response to a growing and ageing population. Services must also be provided for an increasingly urbanized society within a more decentralized province.

An alternative to reduced spending on social programs is to restrain expenditure in the economic development ministries. Unfortunately, cutbacks in these areas could be counter-productive: they could weaken our industrial base and thereby erode the future strength of the economy and provincial revenue. In the 1980-81 budget, for example, there was an allocation of $388 million for the first stage of a $1.4 billion five-year program to enhance and sustain our forest resource base. Without this type of investment our most valuable renewable resource would be reduced to a depleted asset offering no future benefits. This type of public sector investment is essential to the economic health of the province.

[Mr. Davidson in the chair.]

Having explained some of the difficulties associated with curtailing government expenditures, I do not wish to leave the House with the impression that the government has no flexibility. In the short run, as I shall indicate later, some changes can be made.

Perhaps more important than short-term expenditure cuts are steps to ensure reduction of waste and expenditure control in the longer term. To ensure that such control is achieved, the government is continually updating its financial management and planning tools. Zero-based budgeting, for example, has been introduced in all but five ministries. In addition, the Treasury Board is introducing a procedure for review of capital expenditure. A method has been developed to allow careful planning and budgeting now for the expenditure to be made several years into the future when capital facilities such as schools. hospitals and courthouses are completed and require staffing, facilities and maintenance.

But financial controls are valuable only if they work. That's why I have stressed improvements in all aspects of financial accountability and why I shall continue to insist upon them in the year ahead.

Although controls must be in place to prevent waste in the public sector, the government is not prepared to dilute in any way the high standard of services delivered to the people of our province. This cannot be accepted. We shall not compromise improvements we have put in place. We shall not hold back on enrichments long overdue. We shall act responsibly, openly, cautiously, but with determination. This is a prosperous province, a dynamic province. Our people deserve public services of the highest standards, and it is our intention to see that they are provided. We shall continue to provide economic leadership to protect valuable resource strengths. And we shall explore and develop all opportunities so that our prosperity can continue.

In the spending plan for 1981-82 these commitments have been kept. The operating budget for 1981-82 is estimated to be $6.61 billion, an increase of 16.7 percent over the revised forecast of 1980-81 expenditure — in line with the expected growth of the economy in the coming year. The rapid growth rate reflects the cost escalation pressures I have already mentioned, plus a number of special factors.

In 1980-81 a number of programs were financed out of previous years' surpluses. In 141-82 these programs have been incorporated into the operating budget of the government and are presented as part of the estimates. Also, a number of new programs and program enrichments introduced in 1980-81 are having a full-year impact for the first time in 1981-82. If allowance is made for these differences, the growth of operating expenditures for 1981-82 is actually closer to 12 percent. Finally, the government will have to finance a further instalment on the debt resulting from the socialist administration between 1972 and 1975.

I have indicated already that our projections suggest that operating revenue at present tax rates will reach $6.01 billion

[ Page 4404 ]

in 1981-82. With total expenditure at $6.64 billion, the government must raise an additional $625 million in revenue — 10 percent on top of the revenue forecast — in order to balance the budget. This will not be a simple or easy matter. I shall turn to the details of my proposed revenue measures later in this speech. But be assured, Mr. Speaker, that it will be done, and it will be done responsibly and equitably, with a keen eye on the future and on the potential of British Columbia.

Now, expenditure priorities:

Social Programs. Every provincial budget must give a high priority to the funding of services for people. This includes funding provided directly by the province and that provided at the local level with provincial assistance. I have already outlined this government's excellent record of expanding and upgrading social programs. This budget provides sufficient funding to sustain all existing programs and allows for new initiatives in many areas.

The three primary ministries for the delivery of social programs are Health, Education and Human Resources. Together they account for $4 billion of estimated operating expenditure in 1981-82 or 60 percent of the total. This level of spending is $479 million more than in 1980-81, and almost $900 million more than in 1979-80. Even so, given the cost pressures on basic services and the difficult financial position faced by the government, additional funds have had to be limited to certain very high priority program areas. I am pleased that this budget is able to provide for expanded services for disabled persons, improved services for families in need and enhanced educational opportunities for people throughout the province.

Once again the Ministry of Health will place the greatest demands upon the government's operating budget. It's estimated that just under $2 billion dollars will be required from the province for health care delivery in 1981-82. That's a 15 percent increase over expected 1980-81 spending and a 27.4 percent increase over the estimate presented to this House last year.

Part of this large increase can be attributed to the contract settlements imposed through arbitration last year for hospital workers, nursing and professional staff. For the most part, these contracts are not negotiated directly by the government. Collective bargaining takes place between the hospital workers and the Health Labour Relations Association, although the government is required to pay the bill. What this means is that the government is exposed to financial risks without adequate means of influencing the outcome. This is a major impediment to efficient and responsible fiscal management.

The cost of the dental care program in 1981-82, its first full year of operation, will be $76 million. This valuable program will provide basic coverage for more than one million British Columbians. It's a generous program to be sure, but it is not in any way excessive. By focusing help on those least able to afford dental care and on the young, the program will achieve maximum effectiveness at minimum cost.

The medical care program continues to be one of the most costly and rapidly growing social services financed by the province. It is appropriate, therefore, that the cost be reflected in medical premiums so that users are reminded of the costs associated with a modern medical care system. Although full application of the user-pay principle is clearly not desirable, the government last year decided to set premiums at a level sufficient to finance 35 percent of medical care costs in the province. Therefore, as costs increase — as they are expected to do this year following a new contract settlement with physicians — 35 percent of the increase will be paid through premiums and 65 percent will be financed from general taxation. I emphasize, however, that low-income families and the elderly will continue to receive premium assistance so that all British Columbians will be able to afford the finest quality health care.

In the area of hospital programs, the focus this year is again on reducing the cost of institutional care. By providing lower cost extended-care and long-term care facilities and by allowing individuals to receive support in their own homes, a better and more efficient service can be provided. This government made the fundamental decision a few years ago to move patients away from costly acute-care facilities, if they could be successfully cared for in alternative settings.

It was well understood that such a fundamental shift would take time. Program changes have been introduced gradually, but the new emphasis is very clear, particularly in the hospital construction program. Of the almost 2,000 new beds expected to become available in 1981-82, over 80 percent will be for extended- and long-term care.

Although the Ministry of Health will be dedicated to the maintenance of the major hospital, medical and dental care programs, a number of smaller but important initiatives will also be funded by the ministry. A detoxification unit will be set up under the Alcohol and Drug Commission, and health services to rural communities will be enriched.

In short, this government intends to continue its support for quality and affordable health care in British Columbia. We restate that today. The British Columbia government provides the best and the most comprehensive medical services in Canada.

During 1981-82, the Ministry of Human Resources will continue to provide a broad range of social services and income-security programs. Despite the current financial situation, the government continues to take the position that these services provide necessary and valuable assistance in response to real social needs. Consequently, the decision has been made to allocate more than $836 million to this ministry for the 1981-82 year.

First, I wish to highlight the efforts being made by the Ministry of Human Resources to provide services to families and children. In light of the importance which we attach to these needs, this area of services will receive $104 million in 1981-82, an increase of 18.8 percent over 1980-81. Also included in this budget are funds to increase subsidies to help more than 10,000 parents in British Columbia meet the costs of daycare services. The increase reflects inflation and also provides a catch-up to current day-care centre rates. This assistance will offer valuable support to low- and fixed income families who rely on the subsidy to ensure suitable daytime supervision for their children.

Further, we've provided the necessary funds to develop five intensive child-care resource units for emotionally disturbed adolescents who cannot receive proper care under existing programs. This program is a cooperative endeavour by the Ministries of Human Resources, Health, Education and the Attorney-General. It's another example of the productive efforts of the Interministerial Children's Committee established in 1976.

Other important services to families and children which will be expanded this year include an increase in specialized services and community resources for children with emo-

[ Page 4405 ]

tional problems — this will enable them to return to their own families and communities while receiving care and attention; and increased staffing to deal with reported child abuse and neglect generated by the Helpline for Children. This program has proven to be of immense value in identifying family crisis situations so that assistance can be provided.

The Ministry of Human Resources will continue to provide assistance to families in need through income security programs. An additional $32 million will be directed to increased income assistance and handicapped benefits.

To ensure that the Ministry of Human Resources can effectively administer these services the field operations budget of the ministry has been increased by almost $3 million to provide additional staffing. New ministry offices will be established to meet the growing need in the Valemount-McBride area and in Stewart. An additional 85 social workers and support staff will be hired to provide services in areas where a need has been identified, such as the war against child abuse. These new positions will be placed in all regions of the province, including the northern and interior areas where the pace of economic and social change is rapid.

I would like to spend a few moments with respect to the International Year of Disabled Persons. While this government has spearheaded the provision of services to the handicapped, particular attention will be given to the needs of the disabled during 1981. The United Nations has declared this year to be the International Year of Disabled Persons. This is an excellent and most worthwhile focus for worldwide attention. In recognition the government of British Columbia will introduce a number of programs to complement those already provided.

It's estimated that between 5 and 9 percent of our population is affected to some extent by a disability. It is to these people that provincial programs will be directed. Financial people the assistance has been made available through GAIN, and in addition there are programs to provide educational and employment opportunities for the disabled.

The government has created a coordinating committee to organize government efforts during this special year. The committee has been allocated almost $3 million for new initiatives for the disabled in 1981. Grants will be considered for those organizations within the province whose projects meet the objectives for the international year as set out by the UN by providing assistance directly to handicapped persons as well as increasing access to existing programs; by expanding employment opportunities; by improving the quality of life through better housing, transportation, recreation and other social opportunities; by increasing public awareness and responsiveness to the needs of disabled persons; and by encouraging prevention of avoidable disability.

Complementing these grants are a number of provincial government activities and services. These will involve various ministries and will offer a broad range of initiatives. First, the homeowner grant of $630 will be extended to all handicapped persons in British Columbia. The maximum grant is currently available only to handicapped persons who are in receipt of GAIN or war veteran's disability allowance. Second, the Ministry of Education will enrich several special education programs to ensure that disabled persons are given equal access to educational opportunities as well as to provide special training for students with hearing and sight impairments. Third, programs administered by the Ministry of Human Resources will be enriched in the following way: the infant development program provides special training from birth to the age of three years for handicapped children who are delayed in their physical development. This program has been highly successful since it was introduced. Funding will be increased by 100 percent to expand existing services and to provide services where none currently exist.

Funding for specialized day-care programs for children with exceptional needs will be expanded. This will enable an anticipated 170 handicapped children to receive day-care services in facilities throughout the province.

The counselling and home training programs for deaf children introduced by the federal government will be continued. They will be continued by this Social Credit government — the provincial government — despite withdrawal of federal funds. Fifty families of deaf infant and preschool children will be given training in all forms of communication. It is our firm belief that early training by specialized staff can greatly support later education for children with hearing disabilities.

The number of achievement centres will be increased so that handicapped adults may receive more opportunities for training and social interaction. As well, the monthly transportation allowance for travel to achievement centres will be increased for 1,700 handicapped people receiving 'income assistance.

I am pleased to announce that additional funding is being provided through the Ministry of Health for the kidney dialysis program and for long-term care for the physically disabled.

An important objective identified by the UN is the expansion of employment opportunities for handicapped adults. With this specific objective in mind, the Ministry of Labour will expand the personal placement program as well as the employment opportunities program.

Finally, I should like to indicate two tax changes that will recognize the special transportation needs of disabled people: effective tonight, transportation aids for the handicapped will be exempt from social service tax and eligible handicapped persons will receive a full rebate of provincial fuel tax paid.

May I now turn to the allocation of funds to assist local government, Mr. Speaker. I am happy to have been involved in the financial arrangements this government has established with local authorities. Funding for municipalities is now predictable and generous. It is a model for all of Canada, The cost burden of providing local services and the upward pressure on property taxes have been reduced while maximum independence at the local level has been retained. Our overall commitment to local funding can be seen in the growth of the budget of the Ministry of Municipal Affairs. which has doubled since 1978-79. Funding in 1981-82 will be $380 million, an increase of 16.4 percent over 1980-81.

The most significant transfers to municipalities are those provided through the Revenue Sharing Fund. Payments into this fund will grow by 21.3 percent despite slow revenue growth last year and in the coming year. Although the revenue-sharing formula has been designed in such a way that municipalities share in both revenue strengths and weaknesses, the structure of payments includes adjustments for prior years. Therefore in 1981-82 municipalities will continue to share the unexpectedly strong revenue increase realized by the province in 1979-80. Of course, this lag in the system could lead to slower growth rates in the future if revenue growth remains weak.

The Urban Transit Authority was established in 1978 to provide central guidance and direction to the planning of

[ Page 4406 ]

improved urban transit in all regions of British Columbia. It is also through the UTA that the government channels its subsidy for transit services. With the metropolitan transit systems joining this program last year, all pieces are finally in place.

This budget provides $92.7 million for transit funding in 1981-82, an increase of 19.2 percent over the previous year. This increased contribution reflects the accelerated rate of investment in transit facilities across the province. In Vancouver, for example, orders have been placed for 200 new trolley buses to be delivered within the next two years, at a cost of $42 million.

Buses are becoming an alternative form of transportation to the private car for residents of more and more communities in the province. As of February 1, when the province's newest transit system went into operation in Fort St. John, 20 communities outside the lower mainland and Victoria have bus systems of their own. These range from the 14-vehicle system in Kamloops, which carries more than 1.5 million passengers a year, to that of Vernon, with one vehicle and an estimated annual ridership of 46,000.

The major development in public transit over the next few years will be an advanced light rapid transit system for Greater Vancouver. Last year's budget set aside $55 million for the capital financing of urban transit. The province will draw upon this for an initial contribution to the ALRT project. We expect that the federal government will contribute to costs associated with this important new proposal. The majority of the financing, however, will be done by the Urban Transit Authority under its existing mandate.

Through the Ministry of Municipal Affairs the province will continue to provide funding for grants to defray the capital costs of sewer and water systems. Municipalities, however, will no longer have federal support for such projects. At the end of last year the federal government announced the termination of the community services program, as I indicated a few moments ago. The term of the original agreement, Mr. Speaker, was limited to two years because both sides wanted to work toward a longer-term arrangement. Now the federal government has taken advantage of this renewal provision by withdrawing from the program. Unfortunately, this action is only one more example of Ottawa's present fiscal thinking: federally induced spending followed by reduction or withdrawal of federal funds as programs mature. I will discuss this disturbing aspect of fiscal federalism in greater detail later.

Through its substantial direct grants to municipalities the province reduces the property tax burden on local taxpayers. British Columbia also contributes in a number of other ways to help restrain the growth of property taxes. These include:

Provincial grants to school districts to cover operating and capital costs. In 1981-82 these will increase by 10 percent to $512 million, and the provisional mill rate for school purposes has been reduced from 41.25 to 41.20 mills. Including colleges and institutes, the province pays for two-thirds of all education costs. This figure is rarely referred to, but it represents the magnitude of provincial assistance for education.

The fifteenth largest program allocation of the province is its employer contribution to the Teachers Pension Fund. As a result of legislation introduced in the last session to improve the financial standing of the fund, the provincial contribution in 1981-82 is almost double that budgeted at this time last year. Furthermore, British Columbia has agreed to cover the employer cost of the Canada Pension Plan for teachers, rather than have it paid out of their pension fund.

A grant of at least $380 is available to homeowners for credit against property taxes. Where homeowners qualify by reason of age or disability, they may claim a yearly grant of $630 to be applied to property taxes.

Mr. Speaker, our financial situation precludes a further increase in the homeowner grant this year, but the government will continue to spend approximately $254 million on the program. For those persons whose property taxes are so low that application of the homeowner grant would reduce taxes payable to zero, current legislation requires that the minimum tax payable be $50. Mr. Speaker, I believe that homeowners should make a contribution to the provision of local services. Since this minimum has been in effect for some time, I intend to increase it to $75 — just over $2 per month. This will not cause undue hardship and it will reinforce the important "user-pay" principle at the local level. However, this minimum has not applied — and will not now apply — to the elderly or the handicapped. That amount remains at just one dollar per year.

Mr. Speaker, the shortage of housing in several parts of British Columbia is of concern to every member of this House. It has been brought about, in large measure, by the dramatic westward movement of many Canadians from other provinces. My colleague, the Minister of Lands, Parks and Housing (Hon. Mr. Chabot), will speak of this in greater detail during the session.

His ministry and the government have clearly identified the major cause of the problem: a shortage of land. Disposal of large blocks of Crown land for development purposes continues at record high levels. Of tremendous significance in the lower mainland are the thousands of lots to be developed in the northeastern sector of the Greater Vancouver Regional District. To assist in that development, an on-site office will be opened in Coquitlam during the year. In the Capital Regional District, this government in cooperation with the City of Victoria has recently announced that development of the Songhees land will proceed on a priority basis.

Interjections.

HON. MR. CURTIS: They're getting restless on the other side, Mr. Speaker. They don't like the news; they don't like the progress that's being recorded in British Columbia.

Similar initiatives in other parts of the province will see a gradual but steady improvement in the availability of developable housing land.

During the 1970s the province assumed almost total responsibility for social welfare, thereby relieving municipalities of a major expenditure item. Nevertheless, municipalities with population in excess of 2,500 have been expected to share in the cost of providing these services. A per capita levy has been used to return to the province 10 percent of shareable welfare costs. Last year this percentage was reduced to 7 percent and I am pleased to announce that it will remain at that level for the coming year.

In spite of these large provincial transfers to municipalities, a number of local taxpayers are concerned about the possibility of substantial increases in property taxes this year. In order to, forestall a dramatic increase in taxes, as a result of higher property assessments, I took action in the fall of last year to reduce the ratio of assessed value to actual residential

[ Page 4407 ]

property value from 14.5 percent to 11 percent in rural areas as well as in those municipalities which adopt that assessment option. Our aim was to ensure that increased services at the local level would be financed by increased rates of tax rather than taking the easier, less accountable route of higher assessments. The adjustment also ensures a proper balance between taxes on residential as compared to commercial and industrial property. We shall review this situation again this year if residential property values continue to escalate.

As well as providing assistance to local government, the province provides services directly to unincorporated areas. To help pay for these services the government levies property taxes on land outside organized districts. The tax rates on such properties have not been changed for many years. For example, the ten-mill rate on rural land has been in effect for almost 60 years. With a constant tax rate, the gap between revenue raised and the cost of providing services has grown. It is now estimated that revenue from this tax source yields less than half of the cost of local services provided to unincorporated areas. This is a matter of concern and one which must be addressed. In view of the other factors leading to an increase in property taxes in rural areas in 1981, it is not appropriate to recommend an increase in provincial property tax rates at this time. However, I shall be advancing the date for property tax payment, provincially that is, from July 31 to July 2. This will eliminate confusion which at present exists between payment dates in municipalities and rural areas. Owners of property which is classified as farmland will still have until the end of October to pay their property taxes.

Mr. Speaker, priorities for economic growth in the 1980s. Having outlined the social programs funded by the budget, I would like now to turn my attention to economic matters. The budget speech provides the opportunity to inform British Columbians of the government's priorities for economic development in the coming year. Our priorities flow from our economic philosophy, which is to encourage and coordinate growth in the private sector. Let me put it quite bluntly. We want to help without meddling. Government has the responsibility to provide leadership in economic development, to lay the foundation for stable expansion. But perhaps most important, government has the responsibility to ensure that all British Columbians receive their share of benefits from the development of our natural resource heritage.

This year's budget goes several steps further toward implementing an economic strategy. The priorities for government action during the next year include the following. Firstly, we must continue to assume the crucial, leading role in opening up all regions of the province to new development. The government should serve as the catalyst by bringing all parties together and assuming some of the risks. We must help transform imaginative ideas into productive realities. Secondly, we must upgrade manpower training programs so that more British Columbians can participate directly in the growth and development of the province. Third, we must make a continued commitment to manage, protect and enlarge British Columbia's natural resource base. Fourth, provincial energy policy must be implemented to ensure energy supply at stable prices while encouraging the conservation and development of alternative fuels. And fifth, government must continue to accept the important responsibility of helping the private sector pursue new market opportunities and create new and innovative products.

May I now describe in some detail how this year's budget helps to meet these priority objectives. On January 23 of this year the provincial government announced that a formal agreement had been reached to begin the development of British Columbia's massive northeast coal resources. A new phase of northern development has finally begun, decisively and irrevocably. The agreement calls for the sale of 7.7 million tonnes of coal per year for 15 years. This is a fraction of the vast coal deposits in British Columbia. It is a major undertaking for this region of our province, and it is a major step forward.

The project will demand vast amounts of work, services and systems to be put into place. That in turn means massive investment capital must be injected. It's easy to see how coal development will open this untapped region, but northeast coal must be viewed within a broader perspective. It should be seen as only one of the key components of the ongoing economic development of British Columbia. There are enormous immediate benefits. Including thousands of new jobs, a new town and a new vitality for Prince George, Prince Rupert and other established northern communities. This is growth and vitality that will in turn benefit every British Columbian.

The northeast coal development will further reduce our historic dependence on the forest sector and its cyclical markets. Coal development assures us of a more diverse base for a more stable economy.

We are opening a vast new inland empire which is rich not only in coal but also in forests, natural gas and other energy resources. Development of these will provide more balanced regional growth and add to greater prosperity for all regions of British Columbia. All of Canada will gain from our initiative and hard work. British Columbia will provide Canada with an annual injection of $500 million in much needed foreign exchange that will add strength and value to our dollar. In addition there will be new and profitable contracts for the Canadian National Railways and a boost to Canada's steel and manufacturing industries.

The northeast coal development provides a further means of improving the northern tier of Canada'a east-west transportation system. Now, more than ever, the continent will be linked with major west coast port facilities. This fulfils a long-standing dream — 70 years! — of Prince Rupert to be that major port, handling grain, potash and other commodities as well as coal. British Columbia's future as Canada's gateway to the Pacific Rim will be even more firmly entrenched.

The project is awe-inspiring in scope. It is by far the largest development in British Columbia's history, with combined public and private investment exceeding $2.5 billion. It includes the building of 130 kilometres of new railroad through difficult terrain. It means the upgrading of another 864 kilometres of the British Columbia Railway and the Canadian National Railways. It calls for the construction of a minimum of 92 kilometres of new roads. It requires the construction of 182 kilometres of new power lines, and it means the creation of a new townsite at Tumbler Ridge and a major new port at Ridley Island adjacent to Prince Rupert.

[Mr. Speaker in the chair.]

All of these projects are on a tight timetable and the work commences immediately. For this reason I've made sure that sufficient funds are in the 1981-82 budget to keep these investments on schedule; $48.2 million is to be appropriated for northeast coal development in 1981-82. This total, includes: $750,000 for environmental impact studies and ac-

[ Page 4408 ]

tion to ensure compliance with environmental protection legislation; $22.9 million to bring electrical power to the new town and mine sites; $22.6 million to build new roads and upgrade existing roads; and $1.9 million for development of community plans for the new townsite. The balance of the budgetary allocation will be for provision of social services in the areas affected by the project.

The construction of a rail spur to join the British Columbia Railway main line at Anzac is a major development, expected to cost $310 million in 1980 dollars. Financing for this line will take the form of provincially guaranteed debt, issued on behalf of the BCR. A surcharge on all rail shipments of coal will be used to repay the debt.

In mentioning the British Columbia Railway, I would also like to announce that a further $70 million is to be provided for interest costs and retirement of the historic debt of the railway. By removing this burden, the British Columbia Railway should be able to carry on more efficient financial planning and operate as a more dynamic and businesslike company. Following the recommendation of the auditor-general of the province, the government has written down its investment in the railway to the sum of one dollar.

Mr. Speaker, may I talk now about manpower programs. We are experiencing a major investment boom. While we welcome and encourage the confidence that the business community is showing in B.C., the rapid pace of development creates new demands upon government. Perhaps most pressing has been the need to deal with the critical shortages of skilled workers resulting from high levels of construction activity and the rapid growth of mining and forestry capacity.

The Ministry of Labour has been working to solve this problem. Last year the new Provincial Apprenticeship Board studied alternative proposals to revitalize apprenticeship programs and increase the supply of skilled labour. Over $40 million was allocated in last year's budget for apprenticeship training and employment opportunity programs. This year the programs will be continued and will be enriched.

During last spring and summer the government learned that a particularly severe shortage of skilled labour was emerging in the northern regions of the province. In October the Cabinet Committee on Economic Development, led by my colleague the hon. Minister of Energy, Mines and Petroleum Resources (Hon. Mr. McClelland), toured the north to identify more precisely the full scope of the situation. More recently the committee visited the southeastern area of the province. In both instances, the committee met with representatives from trade unions, from industries and from the public. It was concluded that the supply of skilled labour in several key trades was already inadequate to meet the needs of industry, and that the shortage is likely to grow in the years ahead.

Historically, British Columbia, as well as the rest of Canada, has relied upon new Canadians as a source of skilled labour. A recent study estimated that more than 70 percent of Canada's trades people had acquired their skill training outside the country. We see in this situation the opportunity to take a leadership position, to make British Columbia self-sufficient in skilled labour. Clearly the time has come for the province to look after its own needs. This is especially important in view of the co-existence in some regions of skilled-labour shortages and high levels of unemployment among our young people.

Youth is one of British Columbia's most valuable assets, and we must harness its energies more productively. Realizing the vital role that skilled trades have in the future of British Columbia, a new $14 million critical skills program was initiated in September last. It will attract additional apprentices in seven critical trades areas by providing grants to employers for the extra apprentices they employ. I can enthusiastically report that in the first three months of the program the training of more than 900 additional apprentices has been initiated.

A further action I am pleased to mention is the launching of a comprehensive manpower forecasting system. Its task is to define more accurately the current training needs necessary to supply the right amount of skilled labour for the future. On the cabinet committee tours I spoke of, this was specifically requested by various representatives. We shall meet this request immediately.

While greater emphasis must be given to on-the-job training, educational opportunities in our schools and post-secondary institutions should also reflect the demand for skilled workers. Enrolment in colleges and provincial institutes is growing very rapidly. In this year's budget provincial funding for these institutions has been increased by 20 percent — to $283.2 million. The government has also substantially increased the amount of money available for student aid. This will assist young people to gain the necessary skills to be productive and contributing members of our society.

This year we have focused the employment opportunities program directly upon job creation in the private sector. Greater emphasis is being placed on the creation of permanent jobs. It is, after all, in the private sector that each new job will have the greatest overall impact on the economy. Because of this emphasis on providing permanent employment, the decision has been made to terminate just one part of that — the Work in Government program, originally designed to provide students with seasonal jobs in government during periods of high unemployment. The economy is strong, and jobs should be more readily available in the private sector.

Mr. Speaker, I've already stated that British Columbia is a prosperous and fortunate province. The base for the prosperity of British Columbians is largely in our natural resources, not only the quantity of these resources but also their quality and their diversity. Consider that in 1979 the extraction and processing of natural resources directly employed more than 170,000 British Columbians. This is the core of employment on which the rest of the economy so heavily depends. These are jobs that must be protected through careful management of forest, mineral, water and land reserves. This government is committed to their protection.

In 1979, the overall condition of provincial forest and range resources was assessed and a number of difficult challenges to the government were identified. Simply, it appeared there would be difficulties in maintaining current levels of wood supply over the long term.

Last year's budget recognized the singular importance of forestry to the provincial economy by providing for a major initiative in the care and management of our forest resource. The new $146.6 million Forest and Range Resource Fund was directed towards silviculture — the cultivation and tending of our forests. It includes measures for protection against fire and pests, improved harvesting techniques, improved range management and other forest management responsibilities.

Now, in the second year of this five-year program, a total of $293.4 million will be devoted to the care and protection of the forests. This includes an allocation of $35.9 million from

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the Forest and Range Resource Fund as well as a hefty $9.3 million increase in direct ministry spending. Also included is $94.8 million for credits against stumpage revenue as compensation for certain projects related to forest management undertaken by private companies on behalf of the government.

A priority in the 1981 program is the completion of the reorganization of the Ministry of Forests. This will ensure that forest region and district operations are fully equipped, organized and supported. It will enable them to work effectively towards meeting forest and range resource management goals.

The government has recently approved revisions to the original five-year plan to accommodate an increased rate of reforestation. This should result in a doubling of the number of tree seedlings planted between 1980-81 and 1985-86.

Agriculture and food production is a mainstay industry in our provincial economy as well as being of great importance to all British Columbians concerned with secure supplies of high quality agricultural products. With growing pressures on the use of land for housing and industrial applications, it is vital that land allocated to agriculture be utilized with the utmost efficiency. To this end, the ministry continues to monitor agricultural land reserves to ensure the continued farming of all lands with capability for food production.

Under ALDA, the Agricultural Land Development Act, loans are provided to farmers to develop and improve agricultural lands. This worthwhile program will be enriched this year by introducing the revolving fund concept. As loans are repaid, the funds will be made available for new loans under ALDA. Under this system, almost $1 million more will be available in 1981-82 than in the preceding year to farmers who wish to take advantage of this loan program.

The Ministry of Environment has also undertaken major initiatives towards protecting the ecology of British Columbia. Programs that monitor and manage pollution, fish, waters, wildlife and pesticides will all be enhanced. An industrial waste transportation manifest will be established to manage and control hazardous wastes. British Columbians will now be given much greater access to environmental information and programs through the creation of seven new regional storefront offices across the province.

I am also pleased, Mr. Speaker, to announce that a perpetual fish and wildlife conservation fund will be created for habitat improvement on Crown lands. This initiative represents a cooperative undertaking between people and their government. To launch the project, the province will advance $750,000 to the fund. Subsequently, it will be maintained by a $3-per-licence impost fee for fishing, hunting and trapping. The Salmonid Enhancement Program — I love the fish but can't pronounce its name, M. Speaker — will also continue as a positive step towards restoring our Pacific salmon stocks. This year, $2 million has been budgeted to support this important initiative. And finally, a new program has been established to deal with waste management issues in the lower mainland. This program is long overdue and I am pleased to be able to confirm it for 1981-82.

May I now speak about energy and energy strength. One prominent feature of the British Columbia economy, one which makes it so attractive to investors from all parts of the world, is our overall energy position. We offer an abundant and secure supply of electricity and natural gas. Already, energy resources are being considered as feedstock for the development of a major petrochemical industry in this province. We intend to continue attracting new secondary industry to British Columbia. We also intend to seek expansion into further processing of our natural resources. To do this, we must be sure our energy supplies are sufficient to meet the demands. We must plan today for the expansion that will take place later in the 1980s.

I have already described how the development of natural gas in British Columbia has suffered major setbacks. Sales to traditional export customers have collapsed. The national energy program of the federal government has dramatically reduced the profitability of both exploration activity and production from existing wells. Over the longer term we must offset these unfortunate events by locating and developing new market opportunities. New possibilities are already emerging. More and more companies are presenting proposals to liquefy natural gas for sale to Japan. And while such projects present interesting new prospects for the provincial economy, I must stress that they can and they will be approved only if the province is assured that sufficient reserves are available to protect our domestic needs.

In order to demonstrate the existence of sufficient reserves, exploration activity must continue. By grabbing at energy revenues and in turn removing the incentive to explore, the federal government has jeopardized future western growth and weakened our energy future. The provincial government is prepared to review the incentives to producers in light of that federal taxation. We are now awaiting a report from the British Columbia Utilities Commission on the entire issue of wholesale and field prices.

And in reviewing the field pricing question, particular attention must be paid to recent developments south of the border. As I said earlier, with accelerated de-control of oil prices and the prospect of early de-control of natural gas prices, United States producers are facing a much improved domestic investment outlook. The contrast between the Canadian and American governments attitudes could not be more dramatic, This is yet another reason why the Canadian government should rethink its revenue-minded energy policies.

Although we are fortunate in our energy wealth, we cannot afford to be casual in the use of limited resources. We remain "energy rich, but oil poor." This is why the principal themes of the provincial energy strategy are energy conservation and reduced consumption of imported oil. The Ministry of Energy. Mines and Petroleum Resources will continue to implement the energy strategy. More work will be directed in 1981-82 at encouraging energy conservation: government buildings will be inspected to ensure that energy is used in the most efficient way; public information programs will continue; and a further $2.8 million will be provided for demonstration projects on renewable energy and energy conservation technologies.

The Energy Development Agency has been directed to continue its research and development programs for alternative energy supplies. Detailed studies of the possibilities for liquefaction of coal deposits at Hat Creek will continue. If this option can be shown to have merit, the province will consider inviting companies to make formal application for the development of coal liquefaction facilities. Attention is also being given to the possible use of compressed natural gas as an effective alternative to other fuels. Gas-for-oil substitution may be the way of the future and can be expected to gather momentum in the years to come.

[ Page 4410 ]

In last year's budget I introduced a number of taxation measures designed to encourage energy conservation generally, and in particular to encourage more efficient use of crude oil derivatives. Today I should like to complement the actions taken last March. Effective tonight the following changes will be made to the Social Service Tax Act. Fuel oil used in commercial establishments is to become taxable. Currently fuel oil is exempt, while electricity, natural gas and propane are taxable. I remind hon. members that last year the Fuel Oil Tax Act was repealed in order to assist homeowners with the increasing cost of heating their homes. Let me emphasize this afternoon that fuel oil for residential use will remain tax exempt. Kits for the conversion of motor vehicles from gasoline or diesel to compressed natural gas will become tax exempt. All weather-stripping and caulking materials designed to prevent loss of heat from a building will become tax exempt, and new cars will continue to be taxed at differential rates.

Last year in the budget I established three categories of fuel efficiency; today I intend to redefine two of these categories to provide an even greater incentive to purchase fuel efficient cars. At present, cars that require more than 13 litres of gasoline per 100 kilometres are regarded as the most fuel inefficient and are taxed at the highest rate. From tonight, cars that require more than 11. 3 litres per 100 kilometres will be in the upper category and will pay the highest rate.

While these changes, in conjunction with those introduced last year, will provide added impetus to the provincial energy strategy, their impact on the use of oil for transportation purposes will be relatively limited.

The most effective means of encouraging conservation of gasoline and motive fuel oil is to increase the prices of these products. I am sure that most Canadians and most British Columbians now accept the necessity and the wisdom of higher oil prices. The federal government has failed to face this unpleasant reality or to accept a leadership role. Therefore the province can and must use its system of fuel taxation to encourage greater conservation of energy.

Today I announce fuel taxation changes that encourage fuel efficiency. The essential features of the new system are as follows. The tax rate on gasoline will be increased tonight from 3.74 cents to 5.32 cents per litre, thereby increasing the average price of gasoline from 31 cents to 32.6 cents per litre. The new tax rate is 20 percent of the retail price of gasoline before provincial taxes. Starting October 1, 1981, the gasoline tax rate will be adjusted every three months to maintain the rate at 20 percent of the pre-tax pump price. Therefore, if the retail price of gasoline increases by 5 cents per litre, the gasoline tax rate will be increased by 1 cent per litre. Diesel fuel is currently taxed at a higher rate than gasoline and this practice will continue. Propane will continue to be taxed at a lower rate than gasoline.

The current fuel taxation system provides preferential rates for certain off-road uses of fuel, and these will be continued. For example, purchasers of purple or coloured gasoline will still pay a tax rate 2.64 cents per litre below the clear gasoline rate. The current system also provides a preferential rate to bona fide farmers and fishermen. These rate preferences will be continued at their present levels. For example, a farmer buying diesel fuel for his tractor will continue to pay a tax rate of 3.74 cents per litre less than the clear gasoline tax rate. Finally, fuel used in the propulsion of steam-driven ships will become taxable at the coloured gasoline tax rate.

These measures will increase the fuel tax rate on all uses of petroleum fuels and will keep the tax rates in step with increases in the price of fuel. At the same time all the rate differentials contained in the existing system will be retained at their present levels. As I announced earlier today, eligible handicapped people will receive a full rebate of tax paid.

Mr. Speaker, on the topic of industrial development, it has been a priority of this government to broaden the provincial economy and diversify its base. New markets and new products can be initiated only through aggressive pursuit of export opportunities and imaginative research and innovation. Where possible, industrial activities must be developed that utilize British Columbia's many other advantages. These obviously include our scientific capabilities, our accessible and attractive geography and our near-ideal Pacific Rim location.

Not only British Columbians but also visitors to British Columbia play a major role in our economy. Our visitor industry is the third most important industry in British Columbia, following only forestry and mining. In 1980, the visitor industry generated spending in the provincial economy at a record level of $1.85 billion.

Unlike the two leading sectors, the visitor industry can offer a relatively stable pattern of employment as well as considerable opportunities for our young people. As an industry it is not as sensitive to the same external fluctuations that affect our resource industry. With virtually unlimited natural potential for development and with worldwide interest in British Columbia, I am sure that tourism will be fundamental to our economic future.

During my working visit to Europe in October, I was surprised at how much was known about the varied attractions of this beautiful province. Many Europeans have already visited our region, while many more are looking forward to vacations on the west coast of North America with British Columbia high on the list of places to see.

This budget recognizes the importance of the visitor industry. The budget of the Ministry of Tourism will increase by 18 percent to almost $15 million in 1981-82. Additional funding will be available for the marketing and advertising strategy of that ministry, with new emphasis on extending the tourist season and also expanding British Columbia's traditional markets. In addition, this will include the establishment of a new visitor information centre in Prince Rupert.

My colleague the Minister of Tourism (Hon. Mrs. Jordan) has placed a high priority upon developing a feature film industry within the province. Drawn by the magnificence and diversity of British Columbia's scenery and the available pool of technical expertise, the feature film industry here is the fastest growing of any province in Canada. A special film production budget has been allocated to the Ministry of Tourism to further encourage this trend.

Under the direction of the Minister of Industry and Small Business Development (Hon. Mr. Phillips), the federal-provincial travel industry development subagreement will provide more than $11 million for the modernization of tourist facilities throughout the province. In spite of this year's mild winter, visitors and residents have enjoyed new ski industry developments which were assisted by this program.

The provincial park system is a vital part of outdoor recreation facilities for all British Columbians and a major contributor to tourism. Last year, provincial parks had a record level of attendance — over 2.4 million campers and

[ Page 4411 ]

14.6 million day visitors. I am pleased to announce another $3 million will be provided for continuation of the five-year parks facilities development program to expand and improve our parks system.

British Columbia's two major metropolitan centres, greater Vancouver and greater Victoria, are both ideal for large conventions. Their comfortable life styles, varied cultural attractions and convenient access to the outdoors make both cities ideal for this important activity. At the same time, both are thriving centres of commerce and industry. The provincial government has long recognized these advantages and has encouraged both cities to proceed with the construction of trade and conference centres. Plans for both are well underway, although final decisions have yet to be made on all aspects of design nor have funding details been finalized. The province stands ready to assume its share of responsibility if appropriate support from other levels of government and from the business community is forthcoming.

In 1980 approval was given by the International Bureau of Expositions in Paris for the staging of a transportation exposition on the site of British Columbia Place in 1986. This exposition, Transpo '86, will coincide with the anniversary of the arrival of the first transcontinental train in Vancouver. In the nineteenth century, the railroad was the symbol of transportation. In today's energy-conscious age, the transportation symbol is surely urban transit. It is appropriate, therefore, that Vancouver's new advanced light rapid transit system, incorporating the very latest in transit design, will be in place for the start of Transpo '86. Planning for this exposition has already begun. In the 1981-82 budget of the Ministry of the Provincial Secretary and Government Services, we have provided $2.5 million for the further advancement of this world-scale, exciting project.

The Ministry of Industry and Small Business Development will continue its active trade promotion program, putting particular emphasis on the growing Pacific Rim market. The ministry plans at least 24 trade missions this year. These are expected to increase sales of British Columbia products by as much as $90 million. In addition, the cooperative overseas market development program will be extended with a budget of $31.5 million. The program is jointly funded by the province, the Council of Forest Industries and the federal government. Its aim is the expansion of overseas markets for British Columbia wood products.

The province will continue its commitments under the industrial development subsidiary agreement, which has proved to be an immense success since its introduction in 1977. This year the province will contribute more than $18 million to the program, specifically for community industrial park projects in Kamloops, Cranbrook, Campbell River, Squamish, Elkford and Invermere. The success of the industrial park initiatives is already evident in Kamloops, where serviced lots in Southgate Park were sold out in 1980, far ahead of schedule.

Last year, British Columbia's low interest loan assistance program, LILA, provided $9 million in loans to small businesses outside the metropolitan areas of the province at one half the prime rate of chartered banks. The program has proven particularly valuable in offsetting the punishing impact of high interest rates which is felt keenly by the small business proprietor. Because interest rates remain high, we are again enriching the program to further assist the small business sector of this province. In 1981-82 the province will allow the chartered banks to provide the capital but through the LILA program will subsidize the interest payable on these small-business bank loans. In this way the province will make possible a flow of capital of $14 million to small businesses outside the metropolitan areas, and that is a $5 million increase over the amount provided through LILA in the preceding year.

Ours is an age of science and technology, of research and development. Over the past few years the Minister of Universities, Science and Communications (Mon. Mr. McGeer) has made remarkable advances in laying the foundation for development of high-technology industry in British Columbia. He has created an environment which demonstrates the province's high priority for applied technologies and which fosters innovation in industry.

The Science Council has encouraged and supported research over a wide range of scientific disciplines helping ideas to become innovations. new products, new jobs. This year we make long-term commitments in this area by providing an additional $5 million for the Science Council to continue its outstanding work. Also, construction is underway for industrial research parks adjacent to our post-secondary educational institutions as part of the Discovery Foundation program. These parks bring industry, technology and scientific capability together to attract high technology production to British Columbia. Construction has begun for development of a discovery park at the British Columbia Institute of Technology. Its first two tenants plan to be in operation by the end of next year. Discovery parks are becoming a reality through the foresight and careful planning of this government. To ensure that this useful work continues, funding of $1 million is provided for the foundation this year.

Mr. Speaker and hon. members, all of us in government, all of us in this House, took considerable pleasure in the announcement last week that the government's shares in the British Columbia Resources Investment Corporation, worth more than $20 million, are to be transferred to the Terry Fox Medical Research Foundation. That non-profit foundation will be dedicated to fighting cancer and other diseases of man through its support of medical and pharmaceutical research. The foundation will enter into an agreement with Pacific Isotopes and Pharmaceuticals Ltd., a provincial Crown subsidiary of the British Columbia Development Corporation, to finance the building of an interferon purification plant on the UBC campus.

Clinical studies on interferon may be started in Canada prior to the completion of the purification plant. Some of that interferon will be donated to the British Columbia Cancer Control Agency so that work can commence in our province in the very near future. Mr. Speaker, I cannot imagine a more worthwhile use of these assets.

Much has been said about British Columbia Place. I want to add a brief comment. A government with vision must be prepared to act as a catalyst for the exceptional large investment project that breaks new ground or requires the detailed coordination of many diverse interests. This year will see the beginning of two such major projects. One I've already discussed: northeast coal. The other is the redevelopment of the metropolitan heartland of the province through the creation of British Columbia Place.

This imaginative centre will change the face of downtown Vancouver. It will provide a setting for Transpo '86. But more important, it will provide a focal point for British Columbia cultural and sporting events for many years. The project,

[ Page 4412 ]

including the amphitheatre, will cost approximately S250 million over the next five years. In the previous two budgets, $65 million was allocated to the stadium and to British Columbia Place. During 1981 major construction will begin and another innovative idea will move toward reality for the benefit of all British Columbians.

Mr. Speaker, I turn now to the troublesome subject of federal-provincial fiscal relations.

Many British Columbians are perhaps not aware that 18 percent of provincial revenue comes in the form of cash transfers from the federal government. In 1981-82 total transfers spread over a large array of programs are expected to total $1.2 billion.

Let me stress at the outset that revenue from Ottawa does not represent an infusion of new money into the province. Rather it is a return of tax dollars already collected from British Columbians. These dollars are obtained by the national government in one of two ways. First, revenue is obtained from direct taxation of British Columbia citizens and businesses. Secondly, more and more federal revenue is being obtained from tax measures which infringe upon traditional sources of provincial government revenue. This must be seen for what it is. It is an attempt to place the ultimate burden of national fiscal restraint on provincial governments, particularly western provincial governments.

The government of Canada has a long tradition of fiscal mismanagement. In 1981-82 alone, each Canadian household will pay an average of $1,500 just to cover interest on the public debt. That is a $1,500 payment today for programs that either should have been paid for yesterday, or were not affordable and should not have been provided until they were. I think it provides a useful perspective to note that the contribution of British Columbians to servicing the national debt will be approximately $1.5 billion in 1981-82 — that is far in excess of total federal program transfers to the province expected next year.

The federal government's recent measures will secure more money for even more programs. Many of these, and I am thinking particularly of the national energy program, are proving to be a costly policy adventure — costly to Canadians, costly to our economy, and costly to our energy future. What is worse, most of the revenue for this adventure will come from western Canadian provinces.

The problems in our fiscal relationship with Ottawa do not end there, Mr. Speaker; in fact they only begin there. I have mentioned the array of federal-provincial programs upon which the provincial government has come to depend for a large amount of revenue. These are varied in their objectives. Each involves administration by both the federal and provincial government and often means too much administration, too much bureaucracy, and too much overhead.

Too often federal-provincial programs are pursued by governments because they appear to be cheap. They appear so because each order of government puts up only part of the cost of the programs, and these programs are then justified because they involve so-called "50-cent dollars." Governments tend to consider only the expenditure of their half — the 50 cents which they must raise themselves. They give inadequate attention to the other half — the full cost to the taxpayer.

The end result of this kind of thinking becomes quickly apparent. There is a weakening of government accountability to the people it serves. Taxpayers are unable to see clearly which government should be held responsible for what program. They cannot readily assess whether program dollars are being used efficiently. They cannot find out if there are excessive administrative costs. In fact, Mr. Speaker, taxpayers frequently are not in a position to assess whether the whole program is a desirable use of public money.

Federal-provincial funding arrangements also pose serious problems of planning and budgeting, as this government has learned only too well in recent months. Naturally provincial representatives don't wish to forego any opportunities to bring federal dollars back to the province. For that and other reasons, provincial expenditure priorities can be distorted in order to obtain federal funding. That in itself is serious enough, but perhaps even more serious are the problems posed by sudden unilateral withdrawals from various programs by the federal government.

Unilateralism — the federal government acting alone and without meaningful consultation with the provinces — is a trend that is becoming well established. For example, I've already mentioned the recent federal termination of the community services program. I have also expressed concern over federal moves to shift the cost of providing RCMP services onto the provinces. In addition, the national energy program, which bites deeply into the province's traditional revenue base, did not reflect a consultative or cooperative approach. These measures reflect a concerted effort by the federal government to strengthen its fiscal capacity, but at the expense of the taxpayers.

Mr. Speaker, there are now signs of other even more worrisome developments in federal-provincial fiscal relations. By this time next year, March 1982, the largest federal-provincial funding arrangement must be renegotiated. The Federal-Provincial Fiscal Arrangements and Established Programs Acts, which dates from 1977, is to be revised by March 1982. It is a program which alone provides more than $700 million per year in cash funding for medical care, hospital insurance and post-secondary education.

Ottawa has announced its intention in making major cuts in funding, but it has not provided any details. We have yet to see any proposals or any plans; we have yet to be given facts and figures to study. All we have been given is the word that there will be major cuts. I suggest today that that is not enough. Time is fast running out for any cooperative examination of the issues and alternatives by both levels of government. If Ottawa waits until the last moment — as now appears only too possible — and again imposes its will on provincial governments, the results could be financially disastrous for all of us. It would further erode our Canadian tradition of cooperative federalism.

These are just some of the difficulties we are facing in the area of federal-provincial relations. Effective long-range fiscal planning is difficult at the best of times, but the uncertain and threatening course now being charted in Ottawa makes the situation particularly difficult.

In spite of these ominous signs out of Ottawa, I intend to seek a cooperative approach to the legitimate issues before us.

Interjection.

HON. MR. CURTIS: This is not a start, Mr. Member. It's been going on for a long time, as you should know and know very, well.

If and when meaningful discussions take place, I shall advance strongly our view on federal-provincial programs.

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In particular, I shall stress the need for improved government accountability and for greater stability and predictability in all federal-provincial fiscal arrangements.

May I summarize some of the principles by which I shall be guided in the upcoming fiscal arrangements discussions.

Mr. Speaker, first, I believe that governments — like businesses or individuals — function most effectively when their areas of responsibility and accountability are clearly defined. At present, there is extensive cohabitation of numerous policy fields by both orders of government in health, welfare, education, housing and natural resources policy. Clear delineation of responsibilities among the various governments in Canada is vital. No one should be confused as to which level of government has the responsibility for the provision of what services.

Second, to the greatest extent possible governments should tax their own electorate to raise revenue for the services they are expected to provide under the constitution. They are, after all, being judged on these measures by their voting and taxpaying public. When extensive amounts of program money are received from other governments, this basic principle is violated and, in a very real way, the effectiveness of democratic government is weakened. To avoid the necessity for substantial transfers between governments, both levels of government must have an adequate and a secure fiscal base. Each level of government must have the fiscal capacity to raise sufficient revenues through taxation to carry out its responsibilities.

Third, in a federal system of government such as we have in Canada, the national and provincial governments must have sufficient freedom to govern within their own areas of jurisdiction. In particular, the central government should not use its obviously greater fiscal powers to coerce provincial governments into distorting their program priorities.

Finally, we must ensure an appropriate degree of balance in the fiscal base of provincial governments in Canada. All provinces must be able to provide a basic level of services without unduly burdensome levels of taxation. At present, some provinces are in a position to do this while others, particularly in the Atlantic region of Canada, are not.

These are some of the basic principles I shall take to the fiscal arrangements negotiations. A number of constructive policy proposals based on these principles will be put forward in the coming months.

One proposal we shall pursue energetically is the replacement of substantial amounts of existing cash transfers to the province by a transfer of tax room. Rather than providing cash transfers to an economically strong province such as British Columbia, the federal government should simply reduce its own share of taxes collected and allow the province to take an increased share. There would be no need for an increase in taxes on the citizen, and it would cost the federal government nothing. British Columbia is an economically healthy province, and there is no compelling reason why we should have to obtain back from the federal government tax dollars which were collected in this province in the first place. We find this situation even more difficult to accept when we see that British Columbia is forced to rely on transfers from Ottawa to provide basic programs such as health, education and social assistance, which are clearly provincial responsibilities.

In making proposals to improve federal-provincial fiscal arrangements, we will also advocate that special consideration be given to the provinces of Canada whose economic situation may be less fortunate than our own. It is imperative that so-called have-not provinces, whose tax base cannot be sufficiently improved by transfers of tax room, have the assurance of adequate fiscal resources to carry out their responsibilities. They must be able to do so without undue dependence on the federal government and without resort to burdensome levels of taxation. The poorer provinces, less fortunate provinces if you will, must be allowed full and self-respecting partnership in federalism.

In this regard, the national equalization program must be examined. We have to ensure a secure source of fiscal resources in less prosperous provinces; but equally we must avoid the absurd situation where a province as economically strong as Ontario has a possibility of qualifying for equalization payments.

I shall also advance proposals for restructuring the tax collection agreements between Ottawa and the provinces. These agreements are administrative arrangements whereby the federal government administers the collection of personal and corporation income taxes on behalf of the provinces.

In recent years, two problem areas have been encountered with these agreements. One has been the federal government's refusal to administer certain provincial tax initiatives on the grounds that they create barriers to the free movement of capital among the regions of Canada. British Columbia's proposals for small business venture capital corporations and a dividend tax credit for people investing in British Columbia-based companies were both refused on these grounds.

Federal arguments on this issue have been inconsistent. Provinces have sought to implement only a small number of minor programs, yet the federal government administers its own tax programs — regional investment and employment tax credits, for example, which when taken together create much larger barriers to the Canadian common market.

I believe it is desirable, in fact necessary, for all governments in Canada to refrain from measures which balkanize the economy of our country. In our discussions, I will advance this view and stress the need for standards — codes of conduct — which will apply equally to both federal and provincial governments.

The second problem with the present tax collection agreements concerns federal tax expenditures — tax measures which are designed to give monetary benefits to certain groups. Under the existing arrangements, the federal government has provided tax expenditures on a major scale and, because of the nature of the tax collection agreements, has been able to force provinces to provide a major share of the funding. The background papers to the budget today detail a number of federal tax expenditures and provide estimates of the revenue forgone by the government of British Columbia as a result of these measures.

Again, many of these programs have been implemented by the federal government without consultation with the provinces and without the provinces receiving recognition for their contribution.

It is because of these problems that I have notified the federal government of British Columbia's intention to withdraw from the tax collection agreement. If absolutely necessary, we shall administer our own tax system. I would like to stress that a provincial tax collection system, if we choose to adopt our own, would be an instrument of social policy as well as economic policy. We have long advocated the use of the tax system to deliver certain forms of social assistance. If

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British Columbia administered its own tax system it would provide an opportunity to develop and implement major social policy innovations.

It is my hope that all British Columbians have come to see and understand that we are in a turbulent period in our fiscal relations with the federal government. I have to say that the present government in Ottawa has lost the spirit of cooperation and has demonstrated a refusal to compromise. Cooperation, compromise, fairness — these have traditionally provided the basis for unity among Canadians. I sincerely hope the trend towards division and single-mindedness which is now so apparent in Ottawa can and will be turned around.

Mr. Speaker, on previous occasions and earlier today I have referred to the need for a balanced budget. The phrase has been repeated time and time again in this House, and I have to confess that years ago, before I became involved in elected service, my reaction to balancing the budget was one of general indifference. That attitude has changed with the years and also with the recognition that many provinces, states and nations have come to meekly accept the political need of the moment by going into debt on an annual basis. That legacy of debt erodes the economy. As I said earlier, it becomes more unmanageable over the years and finally produces a malaise which pervades every governmental action. Simply put, a province or nation slides into massive debt on a year by year basis.

A balanced budget is not just a commitment to tidy accounting practices or a case of subscribing to an economic philosophy purely for philosophy's sake. Deficits are not necessary nor are they acceptable to this government or to most British Columbians.

May I restate our problem. In 1981-82 operating revenue is forecast to be $6,011 million in the absence of any additional revenue measures. This compares with expenditure totalling $6,636 million, for a shortfall of $625 million. I announced earlier today that a new fuel taxation system will be introduced and changes will be made to the Social Service Tax Act to encourage energy conservation and assist the handicapped. The combined impact of these changes is a forecast revenue increase in 1981-82 of $159 million. Further revenue measures are required to raise an additional $466 million.

In selecting an appropriate set of revenue measures I have been guided by a number of considerations. First, the revenue to be generated is substantial and there is a limited number of measures that can produce sufficient dollars without dramatic and destructive rate increases. Second, I have attempted to spread the cost of revenue measures as widely and as fairly as possible. Third, I am personally committed to providing additional protection and benefits to those British Columbians least able to afford tax increases.

The revenue measures I have selected are as follows. Effective midnight tonight, the social service tax rate will be raised from 4 to 6 percent. However, the list of tax-exempt items will be further expanded.

Effective midnight tonight, the tax on cigarettes will be increased from 24 cents to 34 cents per package of 25. Starting September 1, 1981, this rate will be adjusted every six months to reflect increases in the price of cigarettes. There is a corresponding increase in the tax rate on tobacco.

The corporation income tax rate will be increased to 16 percent. I feel it is necessary for corporations to bear a fair share of tax increases. However, Canadian-controlled private corporations will continue to pay the lower small business tax rate where business taxable income is less than $150,000. The increase is effective for all taxable income earned after December 31, 1980.

The hotel room tax rate will be raised from 5 to 6 percent. The rate on rooms costing over $50 per night will be increased to 8 percent. I see no reason why the tax rate on accommodation should be lower than the social service tax rate, and for those who can afford luxury accommodation, the higher tax rate should not prove to be a burden, In order to protect our travelling youth and those on low incomes, accommodation costing $10 per night or less will be exempt.

Interjections.

HON. MR. CURTIS: Mr. Speaker, I was prepared for hoots and giggles from across the floor. This exemption may, at first glance, seem unimportant; it will, in fact, benefit a great many British Columbians.

Interjections.

MR. SPEAKER: Order, please, hon. members.

HON. MR. CURTIS: To repeat, Mr. Speaker, it will, in fact, assist a great many British Columbians, and these new tax rates take effect at midnight tonight.

Mr. Speaker, a 10 percent surtax will be imposed on all provincial personal income tax otherwise payable in excess of $3,500. For 97 percent of taxpayers this will mean no increase in income tax. Top income-earners in the province will be affected by this measure in the 1981 tax year. For example, a person with taxable income of $50,000 would pay an additional $234 in personal income tax, a 4 percent increase in provincial tax payable.

In addition to these measures which will yield $465 million in 1981-82, I have asked my colleague, the Minister of Consumer and Corporate Affairs (Hon. Mr. Hyndman) to increase liquor distribution markups to raise $28 million in the coming fiscal year.

Now, Mr. Speaker, although well balanced, the impact of these tax measures, particularly the sales tax increase, will be felt by lower-income families. Therefore I am announcing today a provincial personal income tax credit to offset the impact of these increases.

The new credit will be administered in a similar fashion to the existing renter's tax credit. For any taxpayer the credit will be equal to 3 percent of of total personal exemptions less 1.5 percent of taxable income. Consider a family of two adults and two children under 18 with a gross income of $10,000 per year. Personal exemptions in 1981 would amount to $7,130. Depending upon the other deductions available to such a family, the credit would amount to between $182 and $214. And although the credit received falls as taxable income increases, 40 percent of British Columbia families will receive some benefit from this measure.

I believe that this credit will effectively bring tax relief to those who need it most: the larger the family, the larger the credit; the smaller the income, the larger the credit. The elderly in particular will benefit from this measure, because it is expected that 75 percent of elderly tax-filers will receive the credit. This important measure will be implemented for the 1981 taxation year.

[ Page 4415 ]

Mr. Speaker, in consideration of fairness and equity to over 50,000 small businesses in British Columbia, I am also announcing a reduction in the income tax rate on small business from 10 percent to 8 percent. This is the second major reduction in two years and brings British Columbia's tax rate below all provinces except Alberta.

Finally, I would like to announce a number of other important tax changes.

Effective midnight tonight, all yard goods and patterns for clothing will be exempt from social service tax. Mr. Speaker, this ministry received many suggestions in 1980 requesting exemptions for material which would be used for children's clothing. I'm sure that some members will agree, however, that administratively that is not practical. However, thousands of British Columbians will benefit from a more general exemption, and I'm pleased to encourage those who prefer to undertake this activity for the benefit of themselves and their families.

Effective tonight, work-related safety apparel such as safety hats, safety boots, goggles, safety gloves and others will be exempt from the social service tax. This is an important consideration for those in the workforce who are required to have such apparel or who choose to wear it for their own protection. Items in this category, Mr. Speaker, have shown continuing cost increases, and the total exemption is a major response by this government.

In the further interest of safety, I announce that effective midnight tonight the purchase of smoke detectors designed for residential use will also be exempt from the social service tax.

Also effective tonight, the purchase of new bicycles will be exempt from the social service tax. This measure was suggested by a number of people last year, some in this assembly and some not in this assembly, and in preference to automobiles it's very attractive and I'm very pleased to announce this. It is consistent with a healthier, quieter and more energy-efficient society.

Finally, during the course of the last year it was brought to my attention that items returned to a dealer receive no rebate of social service tax unless a full refund is paid. Effective tonight a rebate of tax will be paid in proportion to any refund on merchandise returned within 90 days. This, I believe, is fair and equitable.

As part of my review of the tax structure, I've considered the size of commissions paid to vendors for the collection of provincial taxes. In a number of cases I believe that commissions paid exceed the administrative cost of collection, particularly because many vendors have installed automated cash registers. Accordingly, I intend to change the commission structure under the Social Service Tax Act and the Hotel Room Tax Act to provide increased commissions for over 25,000 small vendors and to substantially reduce commissions to large multi-branch organizations. Commissions under the Tobacco Tax Act will also be reduced. Full details are included in the supplementary information provided with the budget.

All the revenue measures I have announced in this budget are expected to generate additional revenue of $625 million, bringing expected operating revenue, to $6.64 billion, 15.5 percent above 1980-81.

Even these substantial tax increases would not have been sufficient had additional expenditure savings not been made. I stressed earlier in this speech that the quality of government services must not be diluted. Nevertheless, I believe that services have to be provided in an efficient and cost-effective manner. To some extent this is strictly a question of attitude. Public sector managers must be cost-conscious — small economies on small programs can add up to large savings across government. It is this attitude that I shall continue to emphasize as chairman of Treasury Board.

In preparing this year's estimates, two decisions were taken to ensure efficiency savings to control government expenditure growth. First, all ministries were asked to make savings in their building occupancy costs. I expect this will encourage ministries to pay greater attention to the cost effectiveness of the service provided to them by BCBC. Second, each ministry has been asked to reduce the growth of government spending to achieve total savings of $61 million. With these expenditure restraint measures in place, it has been possible to keep operating expenditure in 1981-82 down to $6.61 billion. Let me repeat, however, this will not result in a reduced level of service.

Mr. Speaker, with the tax measures I have announced and with expenditure restraint the budget will once again be balanced.

British Columbia is a rich and majestic province. We are particularly blessed with a natural resource heritage from which we are able to draw considerable wealth — wealth in form of jobs, industry, unsurpassed recreational opportunity, and in the form of revenues that enable us to enjoy some of the finest-quality public services in the world. This we are able to do without burdensome levels of taxation. We should never lose sight of British Columbia's impressive record of economic growth.

But our rich resource base brings with it problems and challenges. Resources cannot be squandered; they must be managed carefully. The development and renewal of our natural resource base has been a major theme of this budget. The investments — and investments are precisely what they are, Mr. Speaker— in our coal and forest resources are major commitments that are necessary now if we are to grow in a planned way to realize dividends in the future. We must press on with project implementation, and we must ensure that our greatest resource of all — British Columbians — is trained and ready to participate in these developments.

Our resource wealth brings with it another challenge. Natural resource prices and export sales fluctuate erratically and unpredictably in response to world markets. These are markets well beyond our control, and yet we must live with their effects. The past year has been difficult for this very reason.

Responsible budgeting requires that government expenditure stays within our ability to provide services without borrowing. But at the same time it is simply not possible or desirable to continually attempt to expand or reduce the services we provide in order to match highly volatile resource revenue.

As I look to the future I cannot help reflecting upon the past. I mentioned in last year's budget the need for a Resource Revenue Stabilization Fund. I indicated that we would be examining the concept and how it might be applied. That promise has been kept. You will find the concept discussed in the background papers.

While the revenue is simply not available to initiate the fund for this fiscal year, we shall move ahead and make it part of next year's budget. It's my belief that this stabilization fund will serve governments of British Columbia for many years to come. It will make it easier for all future governments to

[ Page 4416 ]

plan their revenue and expenditure without the necessity of major tax adjustments every time world markets for our resources weaken.

It's expected that 1981 will be another less than satisfactory year for resource revenue. In order to ensure a continuation of a high level of essential services to people, and in order to maintain investment in our economy and our future, I've made the difficult decision to raise taxes. While none of us enjoys paying taxes, I have taken the utmost care to select a package of revenue measures that will be supportive of a number of social objectives such as energy conservation. To ensure that tax increases are borne fairly and equitably, I have placed great emphasis on ability to pay — ability to pay among individuals and families, and ability to pay among business establishments. This I believe is a reasonable price to pay to maintain our health care system, to educate our children, to secure social justice, to provide for our economic future, to train our workforce and to provide local levels of government with the resources they need to maintain stable and effective communities.

Looking to the future I must also reflect upon the state of federal-provincial relations in Canada. The past year has not been a good one for Canadian federalism. In the coming months I shall participate in a major set of negotiations with the federal government and with all other provinces to determine the nature of the financial relationships between our respective governments for some years to come. I will participate in these discussions as a good Canadian, but we will not be exploited by Ottawa. British Columbia's resources and wealth belong to British Columbians. We will share this wealth, but we will do so because that is our choice, not because Ottawa says we must.

Objective British Columbians will recognize this as a realistic and responsible budget. At a time when a storm of economic turmoil is battering the world, we in British Columbia sail in relative calm. We have a standard of living, a level of government services, and resources which are the envy of the world. Having escaped this storm we enter a new year clearly able to maintain and expand a healthy, vigorous and forward-looking economy.

Earlier today I mentioned pride. That word is used in its correct sense, not boastfully or with arrogance, but quietly recognizing what we have, what we enjoy, and what the future promises all of us. Every British Columbian, if he or she thoughtfully looks around, takes stock, and recognizes what we have, will readily acknowledge our good fortune.

Societies are judged by history on the basis of social equity and justice. May we today move forward together with pride, ensuring that history will judge us well.

MR. STUPICH: Mr. Speaker, the hour is late. I understand the members opposite have a social engagement this evening, and in a spirit of cooperation lamentably lacking in the minister's remarks when he talked about dominion provincial relations, I move adjournment of this debate until the next sitting of the House.

Motion approved.

MR. SPEAKER: Hon. members, there are the accompanying documents which I am sure every member is interested in. I declare a short recess so that these can be distributed to each member's desk. I'm sure that all members would like to stand for just a few moments and stretch their legs.

The House took recess at 5:30 p.m.

The House resumed at 5:36 p.m.

HON. MR. CURTIS: Mr. Speaker, I have the honour to present several documents: a return submitted in accordance with section 46(2) of the Revenue Act, RSBC, 1979; refunds and remissions made under section 46(l) of the Revenue Act, RSBC, 1979, during the calendar year 1980; returns submitted in accordance with section 23(4) of the Taxation (Rural Area) Act; remissions and refunds made under authority of section 23(l), (2) and (3) of the Taxation (Rural Area) Act, RSBC, 1979, during the calendar year 1980; the annual statement of the Provincial Capital Commission for the year ended March 31, 1980; the annual report of the Purchasing Commission, January 1, 1980, to December 31, 1980; a statement of unclaimed money deposits under the authority of the Unclaimed Money Act, RSBC, 1979, for the fiscal year ended March 31, 1980; the annual return for the calendar year 1980 submitted in accordance with section 51 of the Estate Administration Act, RSBC, 1979; and the report of the task force on the Financial Administration Act — copies will be distributed to all members. I table those documents, sir.

Introduction of Bills

PROVINCIAL DEBT REPAYMENT ACT

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Provincial Debt Repayment Act.

Bill 14 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

FINANCE STATUTES AMENDMENT ACT, 1981

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Finance Statutes Amendment Act, 1981.

Bill 13 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

SOCIAL SERVICE TAX
AMENDMENT ACT, 1981

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Social Service Tax Amendment Act, 1981.

Bill 12 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

ASSESSMENT AMENDMENT ACT, 1981

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Assessment Amendment Act, 1981.

[ Page 4417 ]

Bill 11 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

INCOME TAX AMENDMENT ACT, 1981

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Income Tax Amendment Act, 1981.

Bill 10 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Hon. Mr. Heinrich tabled the annual report of the Labour Relations Board for 1980 and the report of the human rights branch of the Human Rights Commission.

Hon. Mr. Fraser tabled the annual report of the Ministry of Transportation and Highways for the fiscal year 1980 and the government air services logs for the year ending March 1980.

Hon. Mr. Gardom moved adjournment of the House.

Motion approved.

The House adjourned at 5:42 p.m.