[ Page 3331 ]

CONTENTS

Routine Proceedings

Oral Questions

Ministry of Forests scaling practices. Mr. Barrett –– 3331

Mr. Skelly

Mr. Macdonald

Tabling Documents –– 3333

Motion to refer public accounts. Hon. Mr. Curtis –– 3333

Mr. Skelly

Mrs. Wallace

Hon. Mr. Nielsen

Mr. Lea

Hon. Mr. Bennett

Mr. Barrett

Budget Address

Hon. Mr. Curtis –– 3338

Mr. Stupich –– 3347

Income Tax Health Care Maintenance Amendment Act, 1984 (Bill 2). Hon. Mr. Curtis

Introduction and first reading –– 3348

Hotel Room Tax Amendment Act, 1984 (Bill 3). Hon. Mr. Curtis

Introduction and first reading –– 3348

Home Owner Grant Amendment Act, 1984 (Bill 4). Hon. Mr. Curtis

Introduction and first reading –– 3348

University of Victoria Special Appropriation Act, 1984 (Bill 5). Hon. Mr. Curtis

Introduction and first reading –– 3348

Resource Revenue Stabilization Rind Act (Bill 6). Hon. Mr. Curtis

Introduction and first reading –– 3348

Assessment Amendment Act, 1984 (Bill 7). Hon. Mr. Curtis

Introduction and first reading –– 3348

The House met at 2:06 p.m.

Prayers.

HON. MR. CURTIS: Mr. Speaker, I would like to extend on behalf of yourself and all bon. members a welcome to a number of distinguished visitors who have accepted the invitation to be here today, some from Victoria, some from Saanich and the Islands, I might confess, and in addition some from considerable distances away.

MR. LEA: Sooke?

HON. MR. CUKTIS: Farther than Sooke, Mr. Member. I was thinking of New York and Toronto and Montreal.

It may be somewhat unorthodox, but I am sorry that not present today is the Deputy Minister of Finance, Larry Bell, who has fallen victim to the flu bug. I spoke to him this morning, and I'm sorry that the deputy who worked so hard with me leading up to today is not present.

HON. MR. SMITH: Mr. Speaker, I wish to make a very brief statement.

In view of the special report of the ombudsman investigating a complaint about the Ministry of Forests scaling procedures at Shoal Island, British Columbia, and to assist members in question period on this budget day, I would like to advise the House that I will make a full statement tomorrow in the Legislature on this matter and on the government's reaction.

Oral Questions

MINISTRY OF FORESTS SCALING PRACTICES

MR. BARRETT: Mr. Speaker, to the Minister of Finance: could the Minister of Finance inform the House when he first became aware of the ombudsman's report number 7 to the Legislative Assembly?

HON. MR. CURTIS: Mr. Speaker, I would have to take the question as notice, in order to be completely accurate in replying to the hon. member.

MR. BARRETT: Mr. Speaker, to be within a degree of accuracy, has the minister been aware of this for a month or six weeks?

HON. MR. CURTIS: Mr. Speaker, to the hon. Leader of the Opposition, I took the question as notice. I will note my diary with respect to when I first was aware of the report, and I will report back to the House.

MR. BARRETT: Mr. Speaker, we can assume that the minister made note of it or the fact that it was given to the cabinet and will come back to the House and give us the exact date.

Since that time, has the Minister of Finance initiated any action, through the Minister of Forests (Hon. Mr. Waterland), to recover the money in question owing to the people of British Columbia, or does he believe in the policy of free logs, as outlined in this report?

HON. MR. CURT IS: The question is in two parts. Quite clearly the allegations which have been made in connection with this particular matter are the subject of discussion with my colleague and colleagues.

MR. BARRETT: I am glad to hear the minister tell us it was a subject of discussion, but that is not my question. My question is: has the Minister of Finance, who is responsible for collecting the taxes due to all citizens of this province, taken any steps whatsoever to recover this money for the Crown so that we can provide services and schools and hospitals and roads in British Columbia?

HON. MR. CURTIS: Mr. Speaker, I understand the duties of government. The question is somewhat premature, and any answer would similarly be somewhat premature.

MR. BARRETT: On page 28 the ombudsman's report says — a supplementary, not to the former Attorney General: "In my view, a grave injustice has resulted from the Ministry of Forests scaling at Shoal Island — an injustice which adversely affects both the contractors and the revenues due the province." This is not an allegation but a statement of fact, Mr. Speaker, and I refer now to the statement of fact. Does the minister have any knowledge that the statement of fact given by the ombudsman is contrary to what the ombudsman says, and is that the excuse for not collecting the tax?

HON. MR. CURTIS: Mr. Speaker, the hon. member has made a number of conclusions which in time may prove not to be completely correct. I would caution him with respect to questions which he may ask in the safety of this chamber.

MR. BARRETT: A supplementary, Mr. Speaker. I will ask this question in any comer of British Columbia — in or out — and if it comes to the safety of this chamber, that is up to the minister to decide. I ask the minister clearly: do you intend to collect the money owing the people of British Columbia, as stated factually by the ombudsman to this Legislature? Have you initiated any steps to collect this money in the name of the Crown?

HON. MR. CURTIS: In this matter, as in all others, I trust that I will carry out the duties that go with the portfolio of Finance, and indeed, I'm somewhat offended that there would be a suggestion that I would do otherwise.

MR. BARRETT: Mr. Speaker, there are laws in this province that govern such circumstances. Under section 87 of the Forest....

HON. MR. CURTIS: What's your question?

MR. BARRETT: It's not a question of my questions: where are your answers?

Related to this matter of scaling, section 87 of the Forest Act has a clear-cut method of recovering funds due the Crown. Is the minister aware of section 87 of the Forest Act, dealing with recovery of such funds?

[ Page 3332 ]

[2:15]

HON. MR. CURTIS: I believe the member is asking a question with respect to a statute of British Columbia. The question is a matter of record and self-evident.

MR. BARRETT: Is the minister aware of that section of the act?

Interjection.

MR. BARRETT: No, you're not aware of it?

HON. MR. CURTIS: No, I'm not going to answer that question.

MR. BARRETT: You're not going to answer that question. Can the minister explain to this House why it is that some taxpayers get preferred treatment and others don't, and he isn't aware of this method of collecting taxes? Mr. Speaker, I ask the Minister of Finance why it is that these forest companies are getting preferred treatment in tax collection.

HON. MR. CURTIS: The member has been in this House a long time.

MR. REID: Too long.

HON. MR. CURTIS: Some would say too long, but I wouldn't say that. I would point out, as I attempted to do earlier, that the duties associated with the collection of taxes due the Crown are duties that all of us in this government take very seriously. I suggest that the member has jumped to some conclusions which may prove not to be completely correct in the course of the weeks to come.

MR. BARRETT: I have been here for some time, but I ask the minister to explain to me why in all the time I've been here these taxpayers are not being asked to pay up on the same basis that everybody else is asked to pay. Does the minister possess any information that indicates that the ombudsman's report is totally inaccurate in terms of the Crown not receiving the revenues due it? Do you have any information that leads you to believe that the ombudsman's statement is incorrect?

HON. MR. CURTIS: No, Mr. Speaker, I have no evidence that the ombudsman's report is "completely incorrect" — I believe that was the phrase used by the member, or very close to it.

SOME HON. MEMBERS: No.

HON. MR. CURTIS: I paraphrase it slightly. The member may care to check Hansard a little later.

I am not, sir, refuting every single statement made in the report of the ombudsman with respect to this matter. I am simply urging that member, as perhaps some other members of the NDP on other occasions might have done, to be a little more careful — and let no one think that's a threat. We had a case a couple of years ago where questions were asked back and forth in the chamber....

AN HON. MEMBER: The Sommers case?

HON. MR. CURTIS: Well, I was thinking of another one, Mr. Speaker: the former Deputy Attorney-General, where outrageous statements were made and later found to be incorrect. I simply cautioned the member on that point.

MR. BARRETT: Mr. Speaker, does the Minister of Finance believe that there has been a single outrageous statement in the ombudsman's report, related to the collection of taxes from the forest companies? Is there, to your knowledge, any factually incorrect material in this report related to the fact, as stated in this report, that the funds were not collected on scaling of these logs?

HON. MR. CURTIS: Mr. Speaker, we may, in fact, find that there are some inaccuracies. We may find those in due course.

MR. BARRETT: Mr. Speaker, is it not government policy to collect taxes due from every citizen in this province, and if there is any dispute on those taxes, there is an appeal process through the minister? Can the minister name any other instance where it has been brought to his attention as Minister of Finance that taxes are due and he decided not to collect them, as government policy?

HON. MR. CURTIS: Mr. Speaker, in his latest question the member has assumed that there is to be no further government action whatsoever with respect to this matter. The member, again, is jumping ahead some days, weeks or months with respect to possible government action in this regard.

MR. SKELLY: Mr. Speaker, a question to the Minister of Finance on the same issue. The ombudsman indicates that in the Shoal Island case the amount owing to the Crown, from the contractors' portion of the logs delivered to Shoal Island alone, is $1.3 million to $2 million, and that represents one third of the total timber delivered to Shoal Island, which would bring the amount of stumpage at that site owing to the Crown to around $6 million. The ombudsman also indicates there are five additional sites around the province, which could bring the amount owing to the Crown, and uncollected, to approximately $36 million to $40 million. Has the minister investigated other sites as well as the Shoal Island site to see how much uncollected revenue remains owning to the Crown as a result of the practices that took place?

HON. MR. CURTIS: Mr. Speaker, that is a matter that would be decided in due course.

MR. MACDONALD: A question to the Minister of Forests. On page 28 of the ombudsman's report it says: "Documents on the ministry's files indicate that in March 1983 the Minister of Forests asked one of my complainants to get the ombudsman out of the investigation." My question to the minister: is that a correct statement made by the ombudsman?

HON. MR. WATERLAND: Mr. Speaker, no.

MR. MACDONALD: A supplementary, Mr. Speaker. Then in what respect is the statement incorrect? Let me put it like this: was there any contact between the Minister of Forests and one of the complaining companies? This is a very

[ Page 3333 ]

serious allegation, and not one that the Premier should be smirking about.

MR. SPEAKER: Order, please.

MR. MACDONALD: Interfering with the ombudsman, which is found here in this report, is not a laughing matter, I ask the Minister of Forests: did he have contact with any of the complainants during the course of the ombudsman's investigation?

HON. MR. WATERLAND: Mr. Speaker, the question posed by the member has been answered. The ombudsman's statement is incorrect.

MR. MACDONALD: Supplementary. I ask the same question again: has the minister been in contact with any of the complainants to the ombudsman relating to this matter during the.course of the investigation? Have you been in contact with any of them, discussing the question that was under investigation? Have you or not?

HON. MR. WATERLAND: Mr. Speaker, to the best of my knowledge I have not discussed the subject of the ombudsman's investigation with any of the complainants since the ombudsman's investigation has been underway.

MR. MACDONALD: The ombudsman refers to documents in the ministry's file to the effect that I have just mentioned. Has the minister looked up those documents, or tried to ascertain what they are? Have you taken any interest in finding out just what those documents were?

HON. MR. WATERLAND: The answer to both questions is yes.

MR. MACDONALD: Then will the minister table those documents in this House? Is he prepared to undertake now to table those documents?

HON. MR. WATERLAND: Mr. Speaker, the comments made by the ombudsman were made by him. I would suggest that if any documents are to be tabled, you ask the ombudsman to table them.

MR. MACDONALD: Mr. Speaker, the ombudsman is referring to documents in the files of the Ministry of Forests. not in his own files — except perhaps a copy, at this point. I would ask the minister if he would be prepared, to clear up this very grave matter, to file all those documents with this House.

HON. MR. WATERLAND: Mr. Speaker, the ombudsman is the person who has claimed that there are documents in the Ministry of Forests' files which indicate that the Minister of Forests attempted to interfere with the investigation of the ombudsman. It is up to the ombudsman to identify which documents he is referring to. The ombudsman has complete access to the Ministry of Forests' files. I would I suggest that that member ask the ombudsman to identify which documents it is on which he makes such an allegation.

MR. SKELLY: The Minister of Forests said that the ombudsman had complete access to the files of the Ministry of Forests, yet when the ministry was requested to provide a document, made available to him by the Attorney-General, which said he had no power to assess stumpage from B.C. Forest Products under section 87 of the Forest Act, the minister refused to provide that document. Has the minister since provided that document or that legal interpretation of section 87 to the ombudsman? If not, is he willing to table it in this House?

HON. MR. WATERLAND: Mr. Speaker, the ombudsman has been advised of the content of that document. But it is not in the best interest of the Crown to give that document in its entirety to the ombudsman, because it does touch on matters other than strictly legal interpretation.

SOME HON. MEMBERS: Oh, oh!

MR. SPEAKER: Hon. members, just prior to calling the next order of business, could we just have a very brief recess to turn on the necessary lights.

Orders of the Day

Hon. Mr. Curtis tabled the Public Accounts of British Columbia for the fiscal year ended March 31, 1983.

HON. MR. CURTIS: Mr. Speaker, I move that the Public Accounts for the fiscal year 1982-83 be referred to the Select Standing Committee on Public Accounts and Economic Affairs.

[2:30]

On the motion.

MR. SKELLY: Mr. Speaker, I would like to move an amendment to the motion, seconded by D. Barrett, to delete the word "year" and substitute therefore the following: "...years 1981-82 and...."

MR. SPEAKER: The motion is that the motion be amended by the deleting the word "year" and substituting therefore the following: "...years 1981-82 and...."

On the amendment.

MR. SKELLY: Mr. Speaker, it is my understanding that the motion is debatable. The opposition would like to debate this motion, the reason being that the incidents described during question period took place between the years 1978 and 1981 and there will likely be material in the Public Accounts for the years 1981-82 that would be material and of some assistance in helping the members of the House and the public get to the bottom of what actually took place in the Shoal Island case and in the case of other dry land sorts around the province, where, through defective scaling techniques, which appear to have been approved by the ministry, millions upon millions of dollars of potential revenue was deprived the Crown. In fact, Mr. Speaker, if that amount was in the neighbourhood of $6 million at Shoal Island, it was likely somewhere between $36 million and $40 million total for the six sites where these scaling practices occurred around he province.

I cannot believe that this government that sits across the floor would tolerate for another minute the Minister of Forests sitting in this House in his current office while $36

[ Page 3334 ]

million of public funds have been diverted from the Treasury by defective scaling practices in his ministry, practices which were made known to him as early as 1981. It's of serious concern to the members of this House and to the people of this province. Mr. Speaker, you can imagine how much revenue would have been made available to provide the social services that are required by our citizens had those practices been corrected, and had those funds flowed property into the provincial treasury rather than being left in the hands of private companies for the use of those private companies over a period of three years. We need access to thePublic Accounts of 1981-82 in order to examine the revenue figures for that year and in order to get to the bottom of this case. We simply cannot rely on police reports which have been done by this government into other ministries, such as the Ministry of Tourism. Where are the results of the police investigation into activities within the Ministry of Tourism? What other police reports have been done into the activities of various ministries of this government? This question should be analyzed fully and openly. Full access should be had to this material by members of the Legislative Assembly and by the general public in this province. We should all have access to that material. This is only one small access that we have: the 1981-82Public Accounts of the province. So the Public Accounts committee of the province should have access to those documents in order to get some idea as to what took place in the case of Shoal Island and those other dryland sorts.

Every day we hear from organizations around the province who are being told that because of the lack of revenue available to this government and the lack of money in the provincial treasury, their useful services are being required to be curtailed or cut off completely — services such as legal aid, services such as those provided by the Vancouver Status of Women women's centres, services such as child care and group homes and transition homes. All of those things were told that because of inadequate revenues the government must cut back on those services or privatize those services. Yet here is an example where the government has, either through neglect or design, not collected revenues owing to the Crown that could have provided the moneys needed to keep those services going. We're told that one of the reasons boards and commissions around the province are being cut back is that the province doesn't have the money to fund those boards. We're told that Public Utilities Commission hearings will no longer fund interveners because it's too expensive — the Crown can't afford it. Yet here is a case where $36 million owing to the Crown has been left in the hands of private companies — revenue that was owing to the citizens of British Columbia from resources owned by the citizens of British Columbia and that the government, through negligence or design, has failed to collect.

The evidence in the ombudsman's report is damning to the ministry. It accuses the minister — the person responsible for that ministry — of violating his own act. It also says he can make no claim to be managing the forests of this province in the public interest. This is damning evidence from the ombudsman's report. Some opportunity should be given to the members of this Legislative Assembly either to clear the minister or else to confirm the evidence that's been given in the ombudsman's report and have the minister do the decent thing, which is to resign until this issue is cleared up.

Mr. Speaker, I think it is urgent that the members of the Legislative Assembly have the opportunity to examine the public accounts for the years 1981 and 1982 as well as for 1982-83, to give us a full opportunity to look into the activities of the minister during that year that some of the problems took place at Shoal Island so that we can make that information public, debate the activities of the ministry in public and make sure one way or the other that the minister has either been acting correctly in carrying out his mandate as Minister of Forests or else he has been negligent in not carrying out his mandate. It's important that we get access to that information.

MRS. WALLACE: Mr. Speaker, I rise to support the amendment. I want to speak on the same topic but from a slightly different angle. I want to speak on behalf of those six small contractors, many of whom operate in my own constituency. I want to speak on behalf of their economic need. We all agree that it has been a difficult period for the forest industry during the past few years, but how much more difficult for those small contractors who have found that their return is much reduced because the logs that they have supplied to B.C. Forest Products have not been scaled in the full amount. Do you know what that means to a small contractor, Mr. Speaker? It means that they may not be able to meet their payroll. That means that the people who are living and working in my own constituency find that they don't have money to pay their mortgage or to buy their groceries, and we in Cowichan are already hard hit by the forest downturn. Those are the kinds of things it means. It means that those small contractors can't meet their payments on their trucks and their logging equipment. That's what we're talking about here. We're talking about a government so callous and so careless that it has not bothered to ensure that those small operators have their rightful return. That's what we're talking about here. If there is any way that we, as legislators, can have access to the documentation for the period involved, then it is extremely critical that we have that access. That's what this amendment will provide, and that's why I support this amendment.

HON. MR. NIELSEN: Mr. Speaker, a few comments on the amendment. If for no other reason than the insatiable appetite of the opposition and certain members to muck about in the mud and to try to capture the headlines for whatever purpose, a statement has been made in the House today by the Attorney-General (Hon. Mr. Smith) that a complete statement will be forthcoming tomorrow. Other comments have been made by the Minister of Finance (Hon. Mr. Curtis) with respect to the actions of his ministry and the government. Repeatedly we have seen the opposition reach incredible conclusions based on a preliminary document; it is different this time in that it wasn't simply a news report somewhere from which they reached incredible conclusions.

The members opposite have received a report and have reached certain conclusions because of which they are calling for, among other things, the resignation of the Minister of Forests (Hon. Mr. Waterland). The member for Alberni (Mr. Skelly) said that the committee should look into it to determine if the Minister of Forests was responsible in any way, yet just immediately prior to that called for his resignation. May I remind the House that the same crew opposite, upon receiving a report some time back by way of the media, immediately called for the resignation of the then Deputy Attorney-General, immediately called for his office to be sealed, immediately called for a provincial judge to seize

[ Page 3335 ]

files, prior to any investigation whatever and prior to the conclusion of an RCMP investigation.

It has been made public that the RCMP are investigating the incident. The opposition has reached its conclusions for political expediency. They have redeployed the Star Chamber mentality. The situation with respect to the ombudsman's report is one of great severity, and everyone realizes and appreciates that. The members opposite, in their attempt to create headlines and draw attention to themselves, be it for their own personal future or as a party....

MR. MACDONALD: You're repeating yourself.

HON. MR. NIELSEN: It's worth repeating.

They have dropped back into their previous style of muck-raking, forgetting that for a brief period of time they had decided to take the high road until they decide who their new leader's going to be. I think the people of British Columbia should recognize that it was only a momentary lapse in their style which we've witnessed for so many years. For no other reason than their ineptitude, I would certainly vote against that amendment.

MR. LEA: I rise to support this amendment. This is a time, Mr. Speaker, when it shouldn't matter which side of the House you sit on. We're talking about process, and there are members in this House who are trying to cloud the issue of process by trying to bring in whether we're muckrakers or not, whether we're having a leadership race or not. It doesn't matter. The fact of the matter is that if we're going to gain respect as a legislature, not just this side of the House but that side and in fact every member in this House must act correctly. Can any member take his or her place in this House and say that the public should not know whether the ombudsman's report is correct? No one. So we're going to talk about a process.

I don't know whether there has been any criminal wrongdoing, and I'm sure not going to say there was. We on this side of the House have never said that. The public has a right, though, to know whether there has or hasn't been. The public also has a right to know whether the Crown is handling the people's money correctly, either in spending it or in collecting it. It's by no accident that it's called public accounts. It's called public accounts so that the public, not the members of this House, will know that the business of the people is being done correctly. That's why this amendment. We want the people of this province to see clearly whether or not their affairs have been handled appropriately — no more, no less. There are no charges being made by us. There have been charges made by the ombudsman's report. It's yet to be seen whether those charges are correct or incorrect — the Minister of Finance (Hon. Mr. Curtis) was absolutely correct.

[2:45]

For those reasons I would think that the Minister of Finance and the government would back this amendment, and for the first time in the history of this Legislature the government would refuse to put government members on the committee to represent the Social Credit Party onPublic Accounts . It should be the members of this Legislature who are not government members who sit on that committee to investigate this charge, because we, as back-benchers on this side of the House and on that side of the House, have a bigger duty than supporting or not supporting the government. We have a duty to carry out the people's business, For members of the government to sit onPublic Accounts to investigate the government seems a bit ludicrous to me, Mr. Speaker. It should be the independent back-benchers of this House, from both the Social Credit and the New Democratic sides. We have an obligation to make sure the people know. We have an obligation to invite witnesses, with no interference from government members. When I say government members I mean cabinet members: they are the only government members. To have government members sit onPublic Accounts, when it is the government itself that is under investigation, will not satisfy the people of this province, nor should it.

I call upon the Premier, not only as the leader of the Social Credit Party but as the leader of this province, to make sure that no cabinet ministers sit on thePublic Accounts committee during this next session. I call on the Premier to stand up and say: "My government will support this amendment, because we want the people to know."

The people sitting around this floor and watching today must be wondering why the government is not standing up and saying: "Never mind the opposition asking for this investigation in Public Accounts, we're going to ask for it. Never mind voting against this amendment, we should have initiated it." I would think that the Premier, more than any other person in this province, would want the public to know. I would think that more than any other person in this province the Premier would make sure that the people know. I would think that more than any other person in this province the Premier would say: "Yes, I vote for this amendment, because I wantPublic Accounts to investigate. I want Public Accounts to have witnesses. I want the small contractors to come forward to Public Accounts and put their case. I want the big corporations to come to Public Accounts and put their case. I want everyone involved to come to Public Accounts and let the story be told."

If this government votes against this amendment, we will not judge; the people will judge. If the Premier and his cabinet do not vote for this amendment, the people will judge, and the Premier and his cabinet will be found wanting, in everyone's opinion.

HON. MR. BENNETT: Mr. Speaker, it is evident that the member for Prince Rupert (Mr. Lea), embarrassed by his leader and his colleague who is seeking the leadership against him, tended to soften what we witnessed here earlier today.

What they are asking for here in this amendment is not justice or due process, but an opportunity for a political trial before all due process has taken place. Obviously the members of this Legislature know full well that there are protections now that were not there before. Are the members opposite denying the fact, or are they challenging the competency of the auditor-general to police, on behalf of all members of this Legislature, investigations, particularly in the formative stages? Or do they want a political trial before all of the investigation and all of the facts are assembled?

I know full well how that opposition uses Public Accounts for political trials. Long before I was a member of this House and long before I was an active politician, members of the NDP, in order to embarrass the government and the then Premier, made false accusations about me inPublic Accounts. The members then, and we can recall them well, because it was the subject of a libel case which I won....

That side hasn't changed since the days when Gordon Dowding, a leader within that party, both in its standards and its conduct, and Bob Williams made those incorrect statements

[ Page 3336 ]

in Public Accounts. Not only have those statements been denied and proven false, but they have shown what can happen when the NDP at their lowest can sink to the type of political muck-raking that can take place while investigations are going on; or be totally wrong and fabricate stories just to get a headline. I remember that very well.

In his judgment on that libel case, when I sued the Sun, Judge Anderson made a stinging indictment of the two NDP members who had used their position in Public Accounts to make untrue statements that would affect the life of an innocent party who was not a member of this House. In fact, they were only made to try to get some political gain. That's the history of the NDP inPublic Accounts.

I want to say to the member for Alberni (Mr. Skelly) that he may not trust law enforcement officers and the RCMP in this province, as he stated, but I do and the public does. In your eagerness to get some media attention as you scramble for the leadership, you may not care what havoc you create. But I've got to tell you that the people of this province trust the police, as does, I believe, every other member of this Legislature. Some trust the auditor-general to protect the legislative and the public interest. In due course the legislators and the members can have their say, but there is every good example from the due process side.... What happens when the search for the truth becomes embroiled in partisan political gains, far in advance of all the evidence being collected in the proper manner?

Mr. Speaker, I reject this amendment for what it is — a cheap, shoddy, political attempt to try to revisit the days of Dowding and Bob Williams inPublic Accounts in those years that many of us can remember. Every decent person would reject this motion for those reasons as well.

MR. BARRETT: Mr. Speaker, we have now embarked upon a wide-ranging debate on a very innocuous amendment. Nonetheless, we are in that debate, and I think it is an important debate. Perhaps to the inconvenience of a few people, the debate should be measured on the basis of the selective history that the Premier has brought forward. I call it selective history, because when I hear the Premier refer to this amendment, which is asking that the 1981-82 public accounts be reopened for public scrutiny.... When I hear the Premier reopen, through selective memory, some of the chapters that may not have been the happiest in the history of British Columbia, it is important to recount all of the chapters.

When the Premier talks about a political trial before due process, the only time I witnessed a political trial before due process in this chamber was when the member for North Vancouver–Seymour (Mr. Davis) was convicted in this House by the Premier and his office locked before he had his day in court. I never witnessed the demeaning of a cabinet minister without any due process in court, as that member was demeaned by the Premier in this chamber, convicted by the Premier in this chamber and relegated to a footnote in history by the Premier before there was even a court trial and that member could have his day in court. Who did that, Mr. Speaker? The Premier of the province. Since we're now dealing with memory, I ask this question: why was there selective treatment of Jack Davis but not of this minister'?

MR. SPEAKER: Order, please, hon. member. First, the member is well aware of the rules of this chamber. Second, we must contain our remarks somewhat within the motion and the amendment before us.

MR. BARRETT: Mr. Speaker, I appreciate the admonition. But I neglected to witness the same admonition to the Premier when he used selective history as to his experience in this chamber. Within the due frame of time, I think I am entitled to have the same leeway. I recall the Jack Davis incident.

MR. SPEAKER: Order, please, hon. member. The member has been a member here long enough to know about the rules regarding the naming of members in this chamber. And I'm sure that the member can contain his remarks in the....

MR. BARRETT: I apologize, Mr. Speaker. I refer to the member for North Vancouver–Seymour. He was a minister of the Crown and he was convicted in this chamber by the Premier before he had his day in court. That had never happened before.

Now we deal with the second case of RCMP investigation and no one questions the RCMP in this chamber. The government had the RCMP report on the Sommers case for two years, and the government refused to release it — not the RCMP, Mr. Speaker. If we're going to recount history, let us not be selective in judgmental history. It is worthwhile asking: why did the government sit on the Sommers case for 200 and some days? The Butler report was the RCMP document that that government deliberately withheld from the public. So I point out two cases — two to one, Mr. Speaker. If the Premier wants to go back in history, we certainly can.

Let us deal with the matter at hand. May I respond to the former Attorney-General? If there is no muck, there will be no raking. Are you afraid to find out whether or not there is anything in there?

Interjections.

MR. BARRETT: Mr. Speaker, my colleagues....

Interjections.

MR. SPEAKER: Order, please. Hon. members, one member at a time, please.

MR. BARRETT: Thank you, Mr. Speaker, and I thank my colleagues over there for listening so closely.

What is it that the House is attempting to address through this amendment? We're not rewriting history. We'll be long gone and long dead. History will be there for all of us. But it is our duty as Her Majesty's Loyal Opposition, no matter what personalities occupy these seats, to do our duty. One of the duties inPublic Accounts is to scrutinize the money that has been collected or spent. Here is a statement........

HON. MR. CHABOT: Why didn't you?

MR. COCKE: Because we had day and night sittings.

MR. BARRETT: Mr. Speaker, the minister calls over....

Interjections.

[ Page 3337 ]

MR. BARRETT: These asides should be dealt with in order. The minister asks: "Why didn't we?" Mr. Speaker, in the last three months the government deliberately thwarted the work of thePublic Accounts committee by not showing up for that committee. But, Mr. Speaker, I do not wish to embark....

[3:00]

Interjections.

MR. BARRETT: If there were no interruptions, I would not slip into history.

What we are dealing with here is the documented statement of the ombudsman of the province of British Columbia. Would any fair-minded citizen suggest that the ombudsman was not doing his duty in giving this report to the chamber? No one would. Would any fair-minded person suggest that we in this chamber not deal with this report? No one would.

What is this report, Mr. Speaker? In essence, it is in one paragraph, which I will read. This report from the ombudsman states: "But the Ministry of Forests has failed in its duties." That's not an allegation from the opposition; it is a statement by the ombudsman. Is the Premier intending to sue him for libel? Mr. Speaker, it's a libellous opinion if I've ever heard one. Are you going to sue the ombudsman for libel? Is that your line? Well, let's do it. Sue the ombudsman, but don't come into this chamber and intimate that because somebody makes a statement, it's libellous. The ombudsman has made a public statement saying that the Ministry of Forests has failed in its duties. It's clearly libellous. Are you going to sue the ombudsman? I don't think so, Mr. Speaker. Why would the ombudsman make such a statement?

He goes on: "In this report I draw to your attention a situation in which the ministry's failure has resulted not only in significant financial losses for a number of small contractors but also in millions of dollars of lost revenue owing to the province for the use of Crown timber." Is that muckraking, Mr. Speaker? Is the ombudsman indulging in muckraking when he says that the people of this province have not been collecting the money that is due them from a natural resource? Is that libel? Is that slander? Is that muckraking? It is a statement of the ombudsman. For every senior citizen in this province who does without a meal, for every handicapped person who does without a service, for every ill patient in a hospital who has to wait, there is an explanation due as to money that should have been there to provide that service. Is that libellous? Is that muckraking? These are honest statements of fact by the ombudsman, and the government immediately labels them.

I'll read further and I'll finish shortly, Mr. Speaker. "Briefly put, the ministry did not scale large amounts of Crown timber as required by the Forest Act — that is, it did not determine the volume of timber removed from the province's forests." Through you, Mr. Speaker, I ask the Premier: is the ombudsman lying? Is he slandering? Is he libelling? What are you trying to hide by using those kinds of words when we're dealing with a factual report from the ombudsman?

I conclude by reading this sentence, and then some comments. "Since the timber was not scaled, the company benefitting from the use of Crown timber has never been billed...." They've been giving them free logs, Mr. Speaker. Is it not the duty of Her Majesty's Loyal Opposition to get to the bottom of why free logs are being given to a big company, and to do so without the abuse of personal comments, political interpretation, vituperative analyses of the past? We're here to serve the citizens of this province with the truth. This amendment is an attempt to get at the truth of allegations and statements made by the ombudsman. Any government that has nothing to hide would vote for this amendment. Any government that votes against this amendment indicates fear of the truth and an unwillingness to let honesty shine through this province and facts come out publicly. It has been a record of Social Credit to have the only minister of the Crown in the history of parliamentary government be sentenced to jail because of similar allegations. You'd think they'd have learned once, Mr. Speaker. There is nothing to hide in getting at the facts, unless you've got something to hide. Pass this motion and let's have some truth in the province of British Columbia.

Amendment negatived on the following division:

YEAS — 18

NAYS — 32

Division ordered to be recorded in the Journals of the House.

MR. SPEAKER: Hon. members, the main motion is that the public accounts for the fiscal year 1982-83 be referred to the Select Standing Committee onPublic Accounts and Economic Affairs.

Motion approved.

Hon. Mr. Curtis tabled the comptroller-general's interim financial statement for the nine months ended December 31, 1983.

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, 1985.

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

[ Page 3338 ]

Motion approved.

HON. MR. CURTIS: I move that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

BUDGET ADDRESS

HON. MR. CURTIS: Mr. Speaker, hon. members, it is my pleasure to present today the provincial budget for the fiscal year ending March 31, 1985. This budget follows by only seven and a half months the presentation of that for the fiscal year 1983-84. Clearly the intervening period has been one of intense activity in carrying out last year's initiatives and preparing this year's goals and objectives.

During the preparation of the budget, I have held direct consultations with representatives from a wide range of organizations to obtain their views on a variety of economic and fiscal matters. I listened with interest to a great number of observations and suggestions. Obviously, the government could not accept all of the recommendations; but many of them have, I believe, helped to improve the budget. I want today to extend my thanks to all participants.

In framing this budget for the coming year, I have attempted to address three major objectives. First, the policy of reducing the size and scope of government will continue. This budget will complete the first and most difficult phase of the process and demonstrate the progress achieved in managing during an extremely difficult period. The measures proposed today will build a solid base for the elimination of the deficit and the retirement of the debt over the next several years. Secondly, the government's commitment to the preservation of essential social services remains absolute. Important measures toward this goal will be introduced. Thirdly, the government will take steps in the coming year to capitalize on the benefits of restraint to build a more stable and secure economic future for this province.

Difficult choices have been necessary in the preparation of the budget, as with others preceding it, but I believe the result fairly and responsibly serves the interests of British Columbians.

After a strong start, the 1980s have proven to be a difficult and sobering period for British Columbia. While most of North America entered a period of serious economic stagnation in 1980, British Columbia continued to exhibit strong growth until approximately mid-1981, as the effects of booming resource commodity markets continued to work their way through the provincial economy. Partly as a result of this previous strength, British Columbia suffered a much larger decline in economic activity and employment during the major downturn of 1982. Moreover, the recovery in the provincial economy, which began in early 1983, has been modest.

The past four years have represented, in many ways, a period of readjustment in the world economy and in the psychology of all its participants. Unrealistic expectations have been lowered, obsolete plants have been eliminated, inflation has been reduced and cost control has been tightened. As we move into a new era, we find that industrial structures and trading patterns have permanently changed and nations around the world are moving quickly to reorient their economies.

I'm fully aware — and the government is fully aware — of the difficulties this period of adjustment has caused for many British Columbians. In fact, the price exacted by the recession makes it doubly important that we learn well the lessons it has taught us.

We must recognize the limits of our ability to manage our economy independently. Our close interdependence with other nations means that our industries, and therefore our jobs and incomes, depend on export sales. As a result, we cannot significantly affect the health of our economy by spending or consuming more ourselves.

We must recognize the cyclical nature of British Columbia's economy. Long-term government spending commitments should not be based on short-term revenue trends.

[3:15]

We must recognize the importance of our ability to compete in world markets. Erosion of our competitiveness through increased costs, including the cost of government services, will lead inevitably to a loss of jobs and economic security for our citizens.

Finally, we must recognize the dynamic changes taking place in the world economy. Our industries and institutions must be made sufficiently flexible to adapt to, and take advantage of, the international environment.

Failure to heed these lessons will necessitate greater and more difficult adjustments in the future.

The new era in which we now find ourselves will be much tougher than the period of growth and prosperity enjoyed through much of the 1960s and 1970s. Economic growth, while somewhat more stable than in recent years, is likely to be slower than in the past. To be successful we shall require a higher degree of responsibility and cooperation from all segments of society: individuals, government, business and labour.

First, individuals must moderate their demands for government services. We have to accept that increases in living standards can no longer be automatic. Governments can and will continue to provide essential services and to protect those in need, but there are real limits to the range and volume of services which can be provided. As a society, we now must earn our way in the world. We can only consume goods and services to the extent that we are able to produce and sell our products.

All governments must reduce their demands on the economy, whether through taxation or regulation. Fiscal balance should be pursued wherever possible through limiting expenditure rather than increasing taxes, and closer attention should be paid to the real impact of government activity, which often differs from that initially intended.

Similarly, businesses must realize that government cannot protect them from shifts in market conditions. Reduced government intervention in the economy should be accompanied, I suggest, by greater self-reliance.

Employees must continue to be flexible, seeking wages and working conditions that reflect their shared interest in productive and competitive enterprises. Those who generate the wealth in our society should temper their expectations to suit the state of the economy. We can only maintain and increase our standard of living here in British Columbia if we keep pace with very aggressive international competitors.

I'm confident that British Columbia will rise to the challenges presented by this new economic reality, and I am proud of the leadership this government has provided in this vital endeavour.

Two years ago British Columbia was facing a major economic crisis caused by a shift in the world economic environment. No longer could we increase wage levels and

[ Page 3339 ]

public expenditure while expecting the world to simply go on buying our products. We had to recognize our place in a changing world economy, and adapt to circumstances beyond our control. The government took major action in February 1982 — two years ago — through the compensation stabilization program and the restraint-on-government program to deal with the factors within our control. In May 1983 the people of British Columbia were asked to decide whether they favoured continuing this approach. They responded at that time with a clear answer in the affirmative, and they continue to strongly support our restraint policies today. The program of reducing the size of government and restraining compensation will therefore continue as the government carries out the decisive mandate given to us by the voters.

The government's economic policy, particularly as refined over the past two years, is designed to meet the basic problems facing this province.

First, to deal with the sharp cyclical downturn which resulted from international economic fluctuations, the government has pursued a policy of selective stimulation to help sustain employment and accelerate recovery. Within the limits of the taxpayers' financial capacity, the impact of the recession was cushioned by social program expenditures and accelerated expenditure on capital construction projects. As the recovery gains momentum through 1984, these expenditures can be reduced and the government's financial position strengthened.

To redress the erosion in our competitive position, steps have been taken to reduce the burden of government on the economy and to restrain increases in wage and salary costs. A thorough review is now being undertaken to determine the impact of taxation on our business sector. Efforts to improve competitiveness will be continued to ensure that the gains of the past two years are not lost.

To increase the resilience and flexibility of our industries in the years ahead, government policy must now focus on breaking down rigidities in our economy. Government programs and regulations affecting all industrial sectors will be reviewed to identify those which present barriers to innovation and higher productivity. Some programs intended to assist industry actually promote inefficiency and penalize efficiency. Given the economic pressures now facing us, this situation is simply not tolerable.

As we continue to develop and refine our approach to economic policy in British Columbia, it is important that we distinguish clearly the problems related to the fluctuations of the business cycle from those related to the underlying structure of our economy and to longer-term trends in the world's economy. These difficulties often merge, with the result that policies appropriate to one type of problem are regularly recommended, and frequently adopted, to deal with other problems for which they are completely inappropriate. How many times, for example, is increased government spending proposed as a way to make the economy grow more rapidly? This approach can be effective for accelerating a cyclical recovery, and indeed it was a key element of my last budget. But any suggestion that more government spending can raise the long-term growth rate of the economy should be recognized as misguided. We should be cautious when reviewing any government expenditure which is justified only by the statement that it will stimulate the economy. This probably means that it cannot be justified on its own merits when recognized as a demand on the taxpayer.

To further elaborate on this point, I'd like to emphasize that in the long term raising public expenditure simply substitutes one type of activity for another. Yes, in some cases it may marginally increase total economic activity, but more often there will be a loss of efficiency resulting in a reduction in the size of the economy. We must now accept that there is no magic formula for making an economy grow faster. The solution is at once very difficult and very simple: respond to the demands of the world marketplace and become more and more productive at doing what we do best. The same advice applies to individuals, businesses, regions and nations. Probably because of its simplicity, it is often forgotten or ignored.

Today I want briefly to discuss the economic outlook for the coming year. The United States economy has now been recovering for about 15 months and has shown much more strength than was anticipated a year ago. There are recent signs that growth is abating from the high rates reported last summer, but the pace of expansion continues to indicate that this is a typical business cycle upturn. The early stage of the United States recovery has been led primarily by consumer spending and housing construction. In 1984, I suggest, the expansion is likely to broaden, with business investment becoming a key source of growth. With continued growth in output and employment and relatively low inflation, 1984 promises to be a good year for the United States, and as a result British Columbia can expect to reap some of the benefits. Nevertheless, I would be negligent this afternoon if I failed to point out three very serious threats facing the world economy in the years ahead: government deficits, trade imbalances and inflation.

First, government deficits at the federal level in both the United States and Canada are too large. The massive borrowing required to finance these deficits is conflicting with attempts to maintain a firm monetary policy in the continuing fight against inflation. The result is interest rates that are still too high. Federal fiscal policy in both countries should be brought into line, mainly through spending reductions, so that interest rates can be brought down even further. At current levels interest rates are limiting a recovery in capital investment. Moreover, by attracting foreign funds to North America, they've caused our currencies to be overvalued and our products to be less competitive in overseas markets.

[Mr. Strachan in the chair.]

Second, large trade imbalances could lead to disruptions in the development of world trade. The recovery from the 1981-82 international recession has so far been very slow in areas outside North America, and the resulting weakness in exports to those areas has caused a record trade deficit for the United States. While faster growth is forecast for 1984 in Japan and other market economies in Asia, continuing adjustment problems are expected to restrain growth rates in Western Europe. As a result, the United States trade deficit may increase further in 1984 and create pressure for corrective measures. If significant policies of protectionism are adopted in response to that temporary trade deficit, the future growth of world trade, on which British Columbia relies heavily, could be severely impaired.

Third, despite very positive progress against inflation in the past few years, the performance of prices remains of concern for the future, In the United States inflation fell from a peak of 13.5 percent in 1980 to 3.2 percent in 1983. An even more impressive reduction was accomplished in the

[ Page 3340 ]

United Kingdom, where inflation was lowered from 18.1 percent in 1980 to 4.6 percent in 1983. For Canada the rate peaked at 12.5 percent in 1981, before falling to 5.8 percent in 1983, while in British Columbia inflation was reduced from 14.3 percent in 1981 to 5.5 percent in 1983.

Despite these impressive gains, which demonstrate that we need not accept rapid inflation as inevitable, there is no room for complacency. A severe economic downturn, the worst in 50 years, was required to bring down inflation to a level which is still high by the standards of the 1950s and 1960s. Some upward pressure on prices may be unavoidable as the current expansion progresses, but clearly a significant resurgence in inflation would be disastrous. In the current international financial environment, characterized by large government deficits, heavy debt burdens and nervous investors, higher inflation could cause another rise in interest rates and lead to a premature weakening of investment and consumer spending. If this occurs, we may be forced to undergo another painful recession without having fully recovered from the last one. I sincerely hope, and the government of British Columbia hopes, that economic policymakers throughout the world will ensure that this does not happen. I know that we in British Columbia will do our part.

[3:30]

To repeat the earlier observation, 1983 was a difficult year for the British Columbia economy. As we emerged from the recession, the growth we experienced was uneven, both among sectors of the economy and over the course of the year. Consumers and businesses in the province remained cautious and concentrated on improving their financial position. Nevertheless, I believe the pattern of growth in British Columbia merely reflects a delay between the recovery of certain industries, notably lumber production, which responded quickly to the United States upturn, and other industries which take somewhat longer to respond. Provided that we avoid major labour-management disruptions, the next phase of the recovery should soon be underway.

Therefore, following the rapid growth of early 1983 and the moderate growth of late 1983, we can expect a more general expansion in 1984. Real growth in gross provincial product is estimated to have been 2 percent for 1983, and is forecast at 3 percent for 1984. Consistent with this outlook, increases are forecast for exports, retail sales and employment during this second year of recovery.

As mentioned earlier, in the past few months I undertook to seek out the views of a number of organizations in the province to assist me in the preparation of this budget. In this consultative process, I met with representatives of the following groups: the British Columbia Central Credit Union; the Employers' Council of British Columbia; the British Columbia branch of the Canadian Federation of Independent Business; the Council of Forest Industries of British Columbia; the British Columbia Real Estate Association; the British Columbia Federation of Labour; the Mining Association of British Columbia; the Institute of Chartered Accountants of British Columbia; the Tourism Industry Association of British Columbia; the British Columbia Federation of Agriculture; the United Elders' Association of British Columbia; the British Columbia council of the Housing and Urban Development Association of Canada; the Law Society of British Columbia; the British Columbia Road Builders' Association; the Union of British Columbia Municipalities; the Education Coalition; the British Columbia Chamber of Commerce; and the Association of British Columbia Professional Foresters. I also received written representations from two groups with whom meetings could not be arranged: the British Columbia Motels, Resorts and Trailer Parks Association and the Canadian Manufacturers' Association. I found this process to be very useful. I intend to commence a new round of consultations on other policy issues within the next six months.

The budget that I am presenting today should be viewed as part of a multi-year plan initiated by the budget of July 7, 1983. The measures to be introduced for 1984-85 will complete the first phase of the restraint program and begin the next phase, in which we shall reap additional benefits.

Important progress has already been achieved through restraint. Inflation has been brought down, and a solid base laid for our recovery, and more progress will be evident in the coming months and years. It should, nevertheless, be recognized that the province continues to face a severe fiscal imbalance — I would call that a deficit, Mr. Speaker — which will take several years to correct.

In discussing the deficit I think it is important that we make a clear distinction between two components. There are many who will readily understand that the cyclical part of the deficit is related to the impact of the recent recession on the government's revenue and expenditure. As the economy continues to recover, this part of the deficit will be eliminated gradually and an offsetting surplus will be created. The structural part of the deficit is that portion unrelated to the business cycle. It reflects a basic imbalance between the revenue base and the program structure of government, and it can only be corrected by permanent increasesin tax rates or reductions in program costs.

Last July I presented a budget which started the process of eliminating the structural component, partly through modest tax increases, but mainly through measures to reduce the size and scope of government activity. By eliminating less essential programs, transferring functions to the private sector and making government leaner and more efficient, we are avoiding the need for major tax increases which would threaten future economic development in B.C. The 1983 budget provided us with the tools needed for the very difficult task of defining the balance between the private and the public sectors. Today's budget represents the consolidation of those gains and sets the stage for a period of stable and sustained growth for our province.

Notwithstanding the policy measures introduced last year, the lingering effects of the recession continued to affect the government's revenue and expenditure. In July I forecast a deficit for the 1983-84 fiscal year of $1.603 billion. I am very happy to report to this House that revenue has grown somewhat more strongly than I had anticipated and that further savings have been made in expenditures. As a result, the deficit for 1983-84, the year just coming to a close, is now forecast at $1.307 billion.

Even with this improvement, however, the direct debt of the government, excluding that incurred on behalf of Crown corporations, will reach an estimated $1.9 billion by March 31, 1984, and will rise further in the next year. The Premier and my colleagues in government are determined that this debt will not be left as a burden to be borne by future generations of British Columbians. Accordingly, I shall introduce legislation to establish a mechanism for repaying the debt over the next few years.

Under this new system, to be phased in commencing in 1984-85, natural resource revenue will no longer be directly

[ Page 3341 ]

available to finance current expenditures. Since 1982-83, resource revenue has been credited to the Resource Revenue Stabilization Fund and then transferred to the general fund to meet operating expenditures. In future years the primary charge on the Resource Revenue Stabilization Fund will be for the repayment of debt. In this way revenue derived from our resource endowment will be used to build the financial strength of the provincial government in preparation for any future economic downturns.

The new fiscal year will be one of transition. Approximately 70 percent of natural resource revenue will be credited to the Resource Revenue Stabilization Fund, while the remainder will be credited to the general fund to help maintain social programs.

The first allocation from the Resource Revenue Stabilization Fund will provide for the retirement of the British Columbia Railway Company's historic debt. I want to take a few minutes today to recount the history of the British Columbia Railway and to describe the steps being taken to place the railway in a sound financial position.

It is well known that the railway incurred large losses during the 1970s and spent huge amounts on capital construction, principally on the Dease Lake extension. These problems, which left a large debt load, have obscured the accomplishments of the railway, both prior to the decade of the 1970s and from 1980 onwards.

From its inception in 1912 as the Pacific Great Eastern Railway, the British Columbia Railway has played a major role in the economic development of the province. Access to the forest and mineral resources of large parts of our interior would have been practically impossible without it. Although the railway required financial assistance from the government on more than one occasion, it was largely able to pay its way and did not receive the massive amount of federal government financial assistance which has been provided to the Canadian National and Canadian Pacific Railways. By the end of 1960, in fact, the British Columbia Railway showed less than $13 million outstanding in long-term debt and was successfully operating 1,200 kilometres of rail line.

The railway's financial difficulties began with the construction of the northern extensions in the 1960s and 1970s, which represented a continuation of the policy to provide access for the development of provincial resources. Unfortunately, rail construction in the north proved to be much more complex than expected, and rapid inflation caused construction costs to soar. By the end of 1971, the railway's long-term debt had risen to $211 million, and in the next five years it ballooned to $620 million. This debt was incurred to finance construction costs, mainly on the Dease Lake extension, which cost more than $200 million, and losses incurred in operating the railway and paying interest, In fact, in the six years ending in 1976 the railway's losses were $157 million. In the next three years losses were a further $153 million, mainly as a result of interest, expense.

The decade of the 1970s was certainly a very difficult period for the railway, as losses totalling $310 million were recorded. Long-term debt stood at $658 million at the end of 1979.

This government recognized the need to provide financial assistance to the railway and in 1980 commenced paying debt-servicing grants amounting to $70 million annually. The government has also recognized that the railway should be compensated for operating uneconomic branch lines where government policy requires them to be operated for overriding social or economic reasons. Annual grants for the operation of the Fort Nelson extension and for passenger services have been made under this government policy.

The government has also given the railway the freedom to operate commercially and appointed a board of directors who are experienced and knowledgeable in the railway industry. I am happy to note that these policies are meeting with success. In spite of the economic difficulties experienced in the last three years, the railway has been able to increase its operating profit from $3 million in 1981 to an expected $37 million in 1983.

To complete the task of rebuilding the finances of the railway, the government has decided to completely eliminate the burden of that historic debt. At the end of 1983 this debt amounted to $610 million, slightly less than the balance seven years earlier. A payment of $470 million will be made from the resource revenue stabilization fund, to be added to the sinking funds for the railway's historic debt. This will increase the sinking funds sufficiently to provide for all future interest and principal payments on the historic debt up to the year 2005, when the final payment is due. In the absence of this payment the government would have been required to continue the annual debt-servicing grants for the next two decades. Those grants will no longer be required.

The removal of this debt burden from the railway's accounts has been recommended by the Royal Commission on the British Columbia Railway and by the auditor-general, By this action, the government has completed the job of putting the railway on a sound financial footing and ensuring that it is run on a commercial basis.

I want to emphasize that this payment to the railway will be used exclusively for the retirement of the historic debt. It will not be available to meet normal operating expenses or any costs, operating or capital, of the Tumbler Ridge branch line. The railway is expected to carry the costs of the Tumbler Ridge branch line, which was constructed to move northeast coal, without any subsidy from the government. The construction costs have been met by the railway, largely through short-term borrowings which are to be replaced with longer-term financial arrangements in the near future. The railway will pay the annual costs of the long-term financing. In the 1984-85 fiscal year the railway will receive an estimated $16 million in freight surcharges on coal shipments to assist in paying for construction of that line. That is just the first payback on our investment. Any future extensions to the railway will similarly be undertaken only where provision is made for recovering the investment over a reasonable period.

[3:45]

On behalf of the government, I want to take this opportunity to commend the directors and the management of the British Columbia Railway for their success in improving the railway's operating position. Prior to 1978 the railway experienced a series of operating losses. It has now experienced six consecutive years of operating profits. With the completion of the financial restructuring, the railway will be able to proceed on a totally commercial basis and may soon begin paying dividends to its shareholders, the people of the province.

Let me briefly return to the subject of the resource revenue stabilization fund. Commencing in 1985-86, it is planned that all resource revenue will be allocated to the fund to provide for the repayment of direct public debt as well as that guaranteed debt which is not commercially supportable. By

[ Page 3342 ]

starting now to make provision for repayment of the debt, I intend to make certain that British Columbia does not fall into the pattern of perpetual deficits and borrowing, which has been the experience in so many other jurisdictions.

The expenditure budget for 1984-85 represents an important and an exciting step in our multi-year plan. For the first time in 31 years, the budget of the provincial government has been reduced from that of the previous year. Indeed, it has been almost 20 years since any government in Canada, federal or provincial, has actually reduced its budget from one year to the next. Growth in government spending, which many have considered irreversible, has been stopped and reversed in British Columbia. That difficult achievement is probably the clearest evidence to date of the success of our restraint program and associated policies.

In my pre-budget consultations, I was advised by some groups not to limit government spending but to raise taxes in order to finance more expenditure. To repeat, this government was re-elected last year on the basis of a pledge to reduce government spending, and that pledge is today being honoured.

[Mr. Speaker in the chair.]

Despite the policy of restraint, the government will continue to protect our core social programs. In particular, there is one major area of government for which expenditure will not be reduced. I am referring to health care, which remains the highest priority of the government and which will receive an increase of $51 million in the 1984-85 estimates presented today. Later in these remarks I will outline measures to be taken to obtain more funding for this essential service.

The total expenditure of the government, excluding the extraordinary payment from the resource revenue stabilization fund, is estimated for 1984-85 at $7.920 billion. This represents a reduction of 6.2 percent from the 1983-84 budget and 5.8 percent from the revised forecast for the current year.

I point out that the current phase of the business cycle is the best time for government expenditure reductions. Temporary cyclical pressures on government are now easing. At the same time, private sector activity is picking up and will absorb resources released by the reduction of public spending. Because of the delayed impact on the economy of fiscal policy changes, expenditure reductions will now alleviate upward pressure on wages and prices later in the current economic expansion.

The existing revenue base of the government is estimated to provide total revenue of $7.622 billion in 1984-85, 7.3 percent more than the revised forecast for 1983-84. Later I shall be announcing a limited number of revenue measures which will have the net effect of increasing total revenue by $97 million to $7.719 billion.

After the allocation of $470 million of natural resource revenue for guaranteed debt retirement, a net amount of $7.249 billion will be available to finance normal operating expenditure. The deficit for 1984-85 is therefore estimated at $671 million, compared with the $1.307 billion currently estimated for 1983-84.

Although I am pleased to be able to show this reduction in the deficit, I must caution all British Columbians against complacency. The most difficult steps have been taken. The direction has been reversed, but the road ahead will not be smooth. A deficit of $671 million still represents almost $650 per household in his province. The interest payments alone for 1984-85 are equal to the combined budgets of seven ministries. We shall carry on until the deficit is erased, until sufficient funds are provided to retire the debt incurred since 1982 and until the government is financially prepared to withstand future economic slowdowns. This objective will not be easily attained, but it is within our reach. Should we fail to achieve it, future British Columbians will pay a heavy price. Let me say again: the outstanding direct debt for government purposes is forecast to reach $1.9 billion at March 31, 1984, and $2.6 billion at March 31, 1985. We are determined not to leave this as a legacy for the future.

The operating expenditure plan for 1984-85 reflects a reduction of 6.2 percent in provincial government spending. With the exception of the Ministry of Health, budgets for 1984-85 provide less than in the previous year's estimates. While the specific percentage reductions vary among ministries, the principles do not. Staff reductions are continuing on schedule, office space is being reduced, motor vehicle fleets are shrinking and many programs are being scaled back or eliminated. Privatization is being achieved where appropriate, ministries are becoming leaner and more efficient, all activities are under review and more productive ways of doing the necessary jobs are being found.

An essential element in this budget, as in the two previous, is the compensation stabilization program. The revised guidelines and regulations proposed last summer were issued in final form in November, following discussions with those affected. It will be recalled by this House, Mr. Speaker, that the principles of ability to pay and productivity are now the primary determinants of compensation levels in the public sector. I emphasize that for the coming year, as for 1983-84 just ending, no compensation increases can be justified on the basis of ability to pay. This leaves increased productivity as the only way for employees to earn salary increases.

The recent settlements negotiated with the British Columbia Government Employees Union and with the Ferry and Marine Workers' Union exemplify the application of the compensation stabilization program. In accordance with the government's ability to pay, no increase was provided to BCGEU members for the first year of the new agreement. Increases are payable in the second year, but the cost will be offset by efficiency improvements and staff reductions being undertaken by the government within the terms of the agreement. As a result, the government's direct salary bill will be reduced by 8 percent in 1984-85. Similarly, the British Columbia Ferry Corporation is now able to offset future wage increases negotiated with its employees through significant productivity measures, including revised work schedules provided for in the new collective agreement.

In addition to seeking higher productivity within government, we have again been forced to re-evaluate services. I can tell the House that my colleagues and I derive no enjoyment from eliminating programs. Indeed, the primary objective of raising productivity is to prevent reductions in our most essential programs. Restraint would not be necessary if our resources were unlimited, but the reality of life in the 1980s is that financial resources are limited. Just as a family must make choices in spending its income, a government must decide among the almost infinite demands on the treasury, remembering always that public money comes from the hard-earned incomes of our citizens. In selecting the programs to be funded by the taxpayers, we shall always consider whether

[ Page 3343 ]

they represent services which British Columbians would wish to buy for themselves.

In preparing the expenditure plan for 1984-85 the government was determined to scrutinize every spending proposal to ascertain whether it represented an appropriate use of public money. Ministries have been pushed very hard to improve their productivity, an essential step if we are to do more with less. Administrative support groups and regional offices will continue to be scaled down, as we reduce the overhead costs of program delivery. New initiatives are underway to increase the effectiveness of central management functions for personnel, motor vehicles and government records. Regulatory processes are being streamlined and automated, both to reduce direct costs and to ease the burden of compliance on the private sector. I recognize that these efficiency initiatives require extra effort from our public employees, and I am pleased to see that they are responding. Attitudes are an important ingredient in restraint, and I believe that government employees, from deputy ministers through to junior staff, have accepted restraint and are to be commended for their efforts to make it work.

[4:00]

Another key element of the expenditure plan is the shifting of activities from the government to the private and nonprofit sectors. Some commentators have suggested that this process does not save money, but I can provide assurance that there are indeed savings. Functions performed by government ministries create both direct costs in the ministries and indirect, overhead costs elsewhere in government. In recognition of this, two major centrally provided services — employee benefits and telecommunications — will be charged back to ministries in 1984-85 to provide a better indication of the full costs of delivering each program. When these and other indirect costs are fully accounted, it becomes clear that savings can often be made by shifting activity to the private sector. So in these cases privatization should be and is being pursued.

Specific privatization initiatives for 1984-85 include transfer of real estate, insurance and securities licensing functions to self-regulating industry bodies; transfer of travel agency regulation to the travel industry; transfer of laundry facilities from the Ministry of Health to private or non-profit operation; transfer of some forest management functions to private sector licensees; and turnover of most governmentoperated child-care facilities to non-profit societies. In addition, a number of privatization initiatives started after the last budget will be completed in the coming year. Last July I called for privatization proposals to be brought to my attention by any interested parties. I've been most encouraged by the response, and I repeat that suggestion for this year.

Significant budget savings for this year will be realized through a broad range of measures affecting major expenditure programs. By directing the funding for these programs more effectively, we shall be able to achieve our fiscal objectives while retaining the essential benefits of the programs.

Several amendments will be made to the GAIN program to preserve benefits for those most in need. My colleague the Minister of Human Resources (Hon. Mrs. McCarthy) will shortly announce a series of revisions to the rates and eligibility criteria for basic income assistance. By limiting payments made to certain types of clients, the government will reduce the chances of creating a permanent group of unemployed persons and of attracting potential recipients from outside the province. At the same time, the core program of assistance to those most in need will be maintained.

Under the Pharmacare program steps will be taken to restrain costs by limiting dispensing fees paid to pharmacists. In addition, the annual deductible amount under the universal component of the program will be raised from $125 to $175. No change will be made in benefits for seniors, long-term-care residents or eligible GAIN recipients.

My colleague the Minister of Health (Hon. Mr. Nielsen) is now addressing ways in which payments under the Medical Services Plan may be limited. If we are to preserve our health care system in B.C., we must control the growth of this program. The open-ended nature of the Medical Services Plan has allowed an escalation in the number of practitioners and their incomes beyond the ability of the taxpayers to pay. The fee schedule for physicians in British Columbia is the highest in Canada and last year was more than 25 percent above the national average. In the past five years payments from the plan have more than doubled, and they are now $296 per capita, again the highest in Canada. Discussions are taking place now to develop revisions to the Medical Services Plan which will give the medical profession a positive role in preserving the provision of high-quality medical care within limited resources.

In the hospital programs area, funding will be increased to provide for cost and volume increases, but pressure is also going to be placed on hospitals to become more efficient in their service delivery.

I repeat, Mr. Speaker, that despite these cost-saving measures, health care has been given a high priority in the expenditure plan, and it is the only major program area in which funding has been increased for 1984-85. At the same time, the federal government has limited its contribution to health care and is attempting to impose more conditions on the provinces. I'll have more to say about that later.

Steps will be taken in the coming year by my colleague the Attorney General (Hon. Mr. Smith) to limit the expenditures of his ministry while protecting core services of the justice system.

The Criminal Injury Compensation Act will be amended to limit the government's financial exposure. Provision will, of course, be made to ensure that persons now receiving payments awarded under this act will not be affected,

Measures will be implemented to permit the Legal Services Society to set priorities for providing legal aid within a limited budget. Discussions with the society are underway, and a task force has been appointed to hold public hearings as well as to make recommendations.

The provincial government contribution for training of municipal police and firefighters will be reduced. Municipalities will be consulted to determine how best to accommodate this reduction.

Functions performed by sheriffs will be carefully reviewed to identify those which can be performed at less cost by others.

Finally, I observe that no provision is made in the budget for the implementation of the federal Young Offenders Act. The federal government has been approached to seek a delay in the proclamation of this act, and a review of cost-sharing arrangements. It is British Columbia's objective to provide for the orderly and effective implementation of this new legislation.

It has become evident throughout North America that more teachers and higher salaries do not in themselves raise

[ Page 3344 ]

educational standards. Accordingly, school funding reductions planned for the next three years are consistent with an increase in the pupil-teacher ratio to the level which prevailed in 1976. At the same time, my colleague the Minister of Education is taking important steps to improve the quality of education in our schools. In this connection, the $12.6 million saved in the school system during the teachers' strike last November will be applied to a variety of educational purposes in the coming fiscal year.

Post-secondary educational institutions will also be required to reconsider their priorities. In the universities, costs can be reduced through increased efficiency and rationalization of programs, and early retirement incentives can be used to reduce faculties. I point out that while the universities were asked to budget for a 6 percent reduction in operating grants for 1984-85, after reviewing the actions needed to meet this target the government has scaled the reduction back to 5 percent. Just as the government is avoiding major tax increases, I would expect the universities to use the extra funds to restrain the increases in tuition that have been announced.

For colleges, the government has decided to reduce operating grants by only 3.5 percent. These institutions are closely oriented toward preparing students for the job market and I expect that they will be able to absorb students affected by any limitation on university admissions.

My colleague the Minister of Education will shortly provide details concerning a restructuring of student financial aid in British Columbia. Effective April 1, 1984, student aid will be provided primarily in the form of loans, rather than grants as in the past. This matches the federal government's approach to student financial assistance and will improve the balance between government and individual financing of post-secondary education. In 1982-83 students paid 12.5 percent of the costs of university education and 10 percent of college costs in British Columbia. Ontario universities, by comparison, cover 18 percent of their costs through tuition fees. It is often argued that education provides public benefits and should therefore be publicly financed, but there are also significant benefits to the individual in the form of employment opportunities and resultant higher income. Surely a public subsidy of over 80 percent is more than fair. Provision of loans to needy students will ensure access to all qualified persons, while requiring that the assistance is repaid from their future earnings.

My colleagues the Minister of Education and the Minister of Universities, Science and Communications will announce shortly a new provincial government scholarship program, based on academic achievement, to be developed in consultation with interested groups. In addition, to assist young people in supporting themselves during their education, the Ministry of Labour will fund a student employment program and a new student venture capital program in 1984-85. The latter will give students an opportunity to create their own jobs using loans guaranteed by the government.

Provincial assistance to municipalities is provided through the revenue sharing formula, under which the amount available for grants is based on revenue from major provincial taxes and resource charges. The amount for each fiscal year is determined primarily by the estimated revenue for that year, plus or minus an adjustment for the difference between estimated and actual revenue two years earlier. Because of the large revenue shortfall in 1982-83, there is a substantial negative adjustment in 1984-85. As a result, the total allocation to the revenue-sharing fund for municipalities will decline from $210 million in 1983-84 to $175 million in 1984-85. Fortunately the fund has an unspent balance, which arose during 1982-83 due to reduced municipal participation in conditional grant programs. As a result, the total available for distribution in 1984-85 will be $202 million, only marginally less than in 1983-84.

Municipal officials have expressed concern about fluctuations in revenue-sharing because of the difficulties this presents for their own financial planning. From my own civic experience, I certainly understand and sympathize with these concerns. I point out, however, that these fluctuations reflect those in the revenue of the provincial government itself. When, as Minister of Municipal Affairs and Housing, I introduced the revenue-sharing program in 1977, I emphasized for the government that municipalities would share the same growth in revenue as the province. This meant sharing the bad as well as the good. Consistent with this principle, the recent recession has now affected municipalities as it has the provincial government.

Nevertheless, because of the concerns expressed, I am prepared to consider the development of a stabilization mechanism for revenue-sharing. Clearly the municipalities of the province will benefit from the stabilizing effect of the fund balance that I mentioned earlier, and perhaps a more formal approach could yield even greater benefits. And so the Ministry of Finance will be reviewing this suggestion during the next few months, in consultation with the Ministry of Municipal Affairs and the Union of British Columbia Municipalities, with a view to developing specific proposals for 1985-86.

Despite the overall reduction in government operating expenditure, provision has been made for a number of economic development and public investment initiatives. In comparison with the enormous expenditures on social programs, these allocations, Mr. Speaker, are very small. But the programs funded will provide important benefits to the people of the province through greater economic opportunity or environmental safety.

The Ministry of Universities, Science and Communications has been allocated $4.7 million for the discovery enterprise program, primarily to assist in raising equity for high technology ventures in the province. In addition, a portion of this funding may be made available to establish chairs at our universities for experts in high technology. Establishment of a core of expertise can be an important inducement for the location here of technology-related enterprises.

The accelerated diking program started last year will be continued with an allocation of $8.8 million for 1984-85. This program will yield increasing benefits through flood protection in future years. In this connection I have also identified a requirement for a new system of insurance for flood damage. Obviously there are difficulties in providing private insurance, but the taxpayer cannot be expected to assume all of the risk on behalf of those in flood-prone areas. So I invite the insurance industry today to bring to the government innovative proposals for meeting this need.

[4:15]

The Ministry of Lands, Parks and Housing will make available a total of $25 million for loans to municipalities under section 286 of the Municipal Act. This financing, which is used for servicing new residential land, should create construction activity and at the same time help to stabilize land prices.

[ Page 3345 ]

Finance will also be provided for road construction and reforestation in connection with small enterprise projects sponsored by the Ministry of Forests.

In speaking of economic development, I want to emphasize again today the importance to British Columbia of Expo 86, both for the direct activity it will create and for the favourable attention it will draw to our province. Planning and development are proceeding rapidly, and with the recently announced participation of the People's Republic of China, it is clear that British Columbia shall be hosting a major world-class exposition. During the construction and operation of Expo 86 over the next three years, an estimated 60,000 person-years of employment will be generated for British Columbians. In addition, to ensure that Vancouver's transportation system is ready both to meet the demand for visitors as well as to be a showcase for the fair, work is proceeding rapidly on both the ALRT system and the Annacis Island bridge toward completion dates in early 1986.

1 want to comment briefly today on some administrative reforms being made in connection with capital borrowing. Under legislation passed last year, the government now has the option of borrowing funds and relending them to Crown corporations. Previously, all Crown corporations borrowed directly under provincial guarantee. With the new flexibility we now have, the government can obtain better terms by undertaking a larger borrowing for several corporations, rather than requiring each to borrow separately. Savings will also be made on the temporary borrowings required by regional hospital districts, school districts, universities and colleges in anticipation of their financing. Under newly developed procedures, the provincial government will now be able to guarantee these loans in order to reduce the interest rate charged by financial institutions.

I spoke earlier today about the high priority this government has given to the provision of health care services. Of all the programs in government, health care has been treated most generously in this period of restraint because it is our most essential service.

Many British Columbians are fully aware that the federal government has been making a political issue of health care services. Ottawa's approach to this matter has been, to put it in the most favourable light, mischievous. The Canada Health Act has been introduced into parliament in an attempt to portray the federal government as the saviour of medicare and hospital care.

In order to provide some perspective on this issue, may I briefly review the history of health care funding in Canada. In 1949 British Columbia became the second province to implement a scheme of universal hospital insurance coverage. The federal government began a cost-sharing program in 1958 under the Hospital Insurance and Diagnostic Services Act, which provided roughly 50 percent federal reimbursement for provincial costs under programs conforming to certain standards. In 1968 a similar program was started under the Medical Care Act, to provide federal cost-sharing for provincially operated medicare programs. British Columbia and Saskatchewan were the first provinces to participate in this plan.

The programs proved to be very popular with Canadians. Services expanded greatly and, not surprisingly, costs increased rapidly. Having used taxpayers' money to induce the provinces to spend more on medical and hospital programs, the federal government later decided that it could not afford to pay its share of the costs. In 1975 the federal government unilaterally placed a ceiling on the annual increases in its medicare contributions and gave notice of its intention to withdraw from participation in hospital insurance funding. In taking these actions, the federal government blamed the provinces for spending too much on health care programs. The irony of this in today's context will be readily apparent to all hon. members.

A year of difficult negotiations produced a new system for the provision of federal contributions for health care under EPF, the established programs financing arrangements. Beginning in 1977, federal payments to provincial governments were determined under a complex formula based on population, gross national product and the value of a specified portion of the personal and corporation income tax fields. Since contributions were no longer related to actual provincial expenditures, federal exposure to escalating costs was eliminated. In exchange, provincial governments were to receive a stable and predictable source of funding and were permitted greater flexibility to improve the efficiency and cost-effectiveness of their health care systems. The incentive to structure programs to maximize federal cost-sharing was replaced by a new incentive to control costs and maximize the value received for the taxpayers' money. B.C. and other provinces subsequently took steps to rationalize health care delivery systems to achieve these goals.

Five years later, in 1982, when EPF came up for renegotiation, the federal government again decided that its contributions were too large. Ottawa unilaterally changed the EPF formula to reduce its transfer payments and to effectively shift part of its deficit to the provinces. To maintain health care services, therefore, provinces could either raise taxes or cut back other services.

Incredibly, the federal government decided, at the same time that it was reducing funding, to start a campaign to force provincial governments in this nation to spend more on health care. Extravagant claims have been and continue to be made about so-called erosion of services. The campaign recently culminated with the introduction of the Canada Health Act, which would empower the federal government to withhold a portion of EPF contributions from provinces which impose or allow fees for health services or which fail to meet certain other standards.

To further confuse the issues surrounding health funding, Ottawa claimed last fall that it was paying additional money to provinces for established programs financing. The fact of the matter is that federal payments were increased only due to revised estimates of the amounts already owing to the provinces under the existing formula. Part of the change is due to new estimates of gross national product, and the remainder is due to a decline in personal income tax revenues of the provinces. For the federal government to portray this as increased funding is at best misleading.

While I can understand the political motivation behind the Canada Health Act initiative, I have to say that it is extremely irresponsible of the federal government in this country to limit its own financial commitment to health care and at the same time pressure the provinces to spend more. Our analysis shows that since the introduction of EPF in 1977-78, the federal share of health costs in British Columbia has declined from 43 percent to 39 percent. An increase of $364 million is required to raise the federal contribution to a more appropriate level of 50 percent.

It's my belief that the current federal proposals will actually damage rather than secure the health care system in this

[ Page 3346 ]

country. Hospital co-insurance fees have been an integral part of British Columbia's health care funding for 30 years. Through these very minimal charges we obtain additional resources for hospitals, as well as give a necessary indication to the users that there is a real cost to hospital services. The fees are certainly not onerous and the government pays them on behalf of those in need. The result is that direct users of acute-care hospitals contribute only 3 percent of the total cost, while the general taxpayer contributes 97 percent.

For its own reasons, the government of Canada seems to have concluded that even these minor charges represent erosion of health care, and has decided to penalize British Columbians to enforce this view. Beginning in 1984-85, established programs financing payments to British Columbia could be reduced by an amount equivalent to the collections from charges for acute care, emergency care and day surgery. Based on current fee levels, this penalty would represent a loss of $40 million per year to this province.

British Columbians cannot afford this disruption to our health care financing system. Loss of this revenue, combined with the earlier reductions in federal funding, represent the real threat to health care in British Columbia. The ideal way to remove this threat would be for the federal government to drop its proposal and to raise its contributions for health care to an adequate level. Unfortunately the current federal administration has decided to manipulate Canada's health care system for its own political purposes, hoping — I think in vain — that Canadians will blame the provinces for the consequences. I note that both opposition parties in Parliament have taken positions in favour of higher federal contributions.

To ensure the continued stability of health care services in Canada, we need cooperation; we do not need confrontation. Accordingly, I today call for a federal-provincial conference of finance and health ministers to address the real issues and to abandon the rhetoric.

We believe that British Columbia's user charges neither impede access to health services nor place a burden on low-income groups. Our preference, frankly, would be to retain them. Nevertheless, to advance an agreement, and in a spirit of cooperation, British Columbia is prepared to replace all acute-care hospital user charges with a single charge based on family size, levied through the income tax system. The federal government would be expected to administer the charge under our existing tax collection agreement.

At the same time, we would hope to obtain a resolution of the funding issue. The EPF arrangements are admittedly complex, and opinions may differ as to the correct interpretation of the numbers. It is, however, clear that the provinces — and I say "provinces"; all provinces in this country — bear the full exposure to rising costs. In British Columbia particularly we must provide an ever-increasing range and level of services to a growing and an aging population. The costs of these services have clearly increased more rapidly than federal contributions. That is the essential issue today.

I sincerely hope that my suggestion for a conference will be accepted as an important step in protecting health services. A resolution of the user-charge question and an increase in federal funding are both necessary for future stability. I have written today to my federal counterpart — the federal Minister of Finance — to inform him of our proposals, and to request his cooperation.

[4:30]

In the interim we must have an alternative source of revenue to compensate for that federal underfunding. To make up part of the shortfall, I am announcing a new health care maintenance tax in the form of an 8 percent surcharge on provincial personal income tax. This tax will be phased in at 4 percent for the 1984 taxation year and will affect payroll deductions in July. It will raise an estimated $97 million in 1984-85 and $166 million in a full year. I repeat that this is a temporary measure which will remain in place while we await an appropriate increase in federal contributions.

During this year my colleague the Minister of Health and I — the government, in fact — will be pressing for a new health care funding arrangement which will serve the needs of Canadians in all regions. If we can achieve a satisfactory resolution, the new tax I have announced can be reversed. I recognize there presently appears to be little prospect of agreement from the current federal administration, but attitudes and circumstances can change quickly in public affairs. Most importantly in this whole issue, we have logic on our side.

The ultimate benefit of the government's restraint program will be a healthy and sustainable economic recovery. A smaller, leaner and more productive public sector will be more restrained in its demands on the taxpayer, leaving more room for a vibrant private sector. This government is firmly committed to limiting the tax burden on individuals and businesses as the financial position of the province improves. We also plan amendments to make the tax system fairer, more balanced and more efficient.

This, however, is not the time for major tax changes, and I have very few measures to announce. I have already described the temporary personal income surtax to be levied in connection with health care funding. In addition, I am announcing the following tax changes:

Effective March 1, 1984, the hotel room tax will be levied at a flat 7 percent rate. I have been persuaded that a single rate would be easier for the hospitality industry to administer than the existing split tax rate of 6 percent on accommodation priced at less than $50 per day and 8 percent on accommodation priced at $50 or more per day.

Effective midnight tonight, an additional comprehensive list of safety equipment including infant car seats, portable fire extinguishers and emergency locator transmitters will be exempted from the social service or sales tax. I wish to encourage use of these items both for individual safety and, frankly, as a cost-saving measure to the taxpayer through accident prevention.

The net effect of these two changes will be a reduction of $400,000 in provincial revenue for 1984-85. Including the new health care maintenance surtax, the increase in provincial revenue will be $96.6 million in 1984-85.

1 want to comment briefly on property taxes for 1984. Significant changes to the property assessment and taxation system have been introduced in the past two years to stabilize tax burdens and simplify tax calculations. The essential elements of market value assessments and local flexibility have been retained. I believe that we now have a much better system than before and, indeed, one of the best systems anywhere in North America.

In preparing this budget the government has recognized the impact of property taxes on individuals and businesses, and has avoided loading additional costs onto the local taxpayer. Accordingly, school budgets and grant levels have

[ Page 3347 ]

been set to ensure there will be no increase in non-residential school taxes for shareable costs. Any increase in residential school taxes will reflect only local discretionary spending increases. For most municipalities, budgets are expected to show no increase in 1984, and, with few exceptions, municipal property taxes will increase very little. There will be a slight rise in rural property taxes due to the increase from 12 to 13 mills for 1984, which I announced in this chamber last July. Nevertheless, property taxes remain below the cost of providing services in rural areas, and no change is proposed in the rural tax rate for 1985. In summary, I can say that property taxes for 1984 will, for the vast majority, increase only marginally, if at all, from 1983.

Before leaving this subject I shall announce one minor property tax measure: The minimum property tax payable for 1985, after application of the basic homeowner grant, will be raised from $150 to $175. The $1 minimum for recipients of the additional homeowner grant for seniors and the handicapped is not changed.

The main focus of revenue policy this year will be the analysis of our taxes on business. If we wish our economy to grow and develop in the future, providing employment and generating revenue for public services, we must ensure that we have a favourable environment. If we try to lower taxes for individuals by levying higher taxes on businesses, we will succeed only in making our industries uncompetitive and in discouraging new investment. The result of that will be lost jobs, lost income and lost opportunities. This would be the road to economic decline. Significant adjustments have been made in the last year to restrain charges on business. For 1984, property tax relief has been provided through a new $10,000 actual value exemption for business and industrial properties and an increase in the exemption for machinery and equipment from $1,500 of assessed value to $50,000 of actual value. These exemptions have eliminated taxes on machinery and equipment for almost 15,000 small business firms, and significantly reduced property taxes for many others. In addition, businesses have been assisted through the deferral of a scheduled increase in water rental charges and limitations on Workers' Compensation Board assessments.

Despite these measures, concerns have been expressed to me, both in my recent consultations and previously, that British Columbia's taxation of business is somewhat higher than in competing jurisdictions. To ascertain whether this is the case I have commissioned a study of the tax burden on a variety of types of business in several jurisdictions. The analysis is complex and difficult because of certain differences in tax systems. Nonetheless, I expect to use the results of the study as the basis for a consultative process to be undertaken this summer. In conjunction with these discussions, the government will conduct a thorough review of the impact of taxation on economic development. Consideration will be given to innovative tax measures for stimulating new investment by large and small businesses. The government hopes to develop a series of policy proposals for implementation beginning next year.

Mr. Speaker, this budget that I have presented today will strengthen the foundation for British Columbia's future. In the coming year this government will continue with the necessary task of reducing and rationalizing government in this province. This certainly does not mean that restraint will be over, because the highly competitive era now emerging will require us to remain vigilant in controlling our costs. But the first and the most difficult phase of our economic recovery program will be complete. The toughest decisions on government services will have been made, and the basis for a lean and efficient public sector will have been established.

The next fiscal year will also mark the beginning of the second phase of the economic program, which will sustain British Columbia and her people through the recovery. During this phase we shall strengthen both government finances and the economy in the province to prepare ourselves for whatever the future may bring. No one would wish to see another recession such as that which we recently experienced, but if one comes we're going to be ready. The current period of recovery must be used as an opportunity to restore fiscal balance and give ourselves the capacity to absorb any future shocks. We must also bolster our economy by identifying and building on successful industries. The best way to ensure that we continue to enjoy one of the highest standards of living in the world is to develop a strong and a vibrant business sector which can compete with the best. As our goal we accept no less.

The success achieved by this government since it received a new and a larger mandate just nine months ago is a fundamental element of today's budget. It is a success which the majority of British Columbians will acknowledge with satisfaction and from which they can take encouragement. To repeat, there are many circumstances, external as well as those within the province, which could interfere with our recovery, but it is appropriate today to pause for just a moment and to note the improvement that is already evident: less expensive government, surely unique on an international scale; limited and modest changes in taxation; a new and more realistic approach to employee relations in the public sector; emphasis on and maintenance of essential social services; a continued commitment to encouragement of individual initiative; and a mature recognition of our individual and collective responsibility for our future.

The course chosen by British Columbians last year has not been easy. Difficult choices have been required and sacrifices have been made. Nevertheless, our citizens continue to support these policies because they recognize that sacrifices must be made to generate future benefits. Neither I nor anyone else, in this chamber or outside, can guarantee that the time ahead will be smooth, but I can provide assurance that it will be better. Our economy is recovering, jobs are being created, confidence is improving and British Columbians are quickly adapting themselves to a new economic environment.

As we become accustomed to this change, we can find satisfaction in knowing that we have taken steps which others still have ahead of them. We have been the pioneers, and we can now watch others follow. Mr. Speaker, I believe that one day we shall look back on this time as a period of shared adversity in which we together forged a stronger future.

MR. STUPICH: Just a couple of words. The hour is late and perhaps members have other things to do; I know I will have this evening.

May I say first that there are some curious contradictions in the minister's speech. He tells us of continued dependence upon the private sector to take us out of our recession, that in the United States the earlier stages of recovery were led by increased consumer spending, and then proceeds to take out of the economy $1.6 billion more than he did last year — $1.6 billion that will not be in the hands of individuals to lead

[ Page 3348 ]

us on the way to recovery. Continued dependence upon the private sector, and yet all he has to offer is further subsidies to the private sector. Whatever he calls it, Mr. Speaker, the $470 million is nothing less than a subsidy to those who are exporting our coal to Japan. It will be described differently — and that will be argued over the next few days — but there is no question that this is where the $470 million is going.

[4:45]

You will recall, Mr. Speaker, our being assured in this House that not a dollar of taxpayers' money would go into that project. We are trying to attract that will-of-the-wisp high tech, when all around us in this province we have abundant resources that we are shipping out of the province in an unprocessed state. The proportion of round logs now being shipped out of B.C. is higher than ever before. And instead of working to do something more with the resources, skills and energy that we know we have in this province, we are running around the world — cabinet ministers chasing dreams.

I'll have a good deal more to say tomorrow. May I right now simply move adjournment of this debate until the next sitting.

Motion approved.

MR. SPEAKER: Hon. members, prior to the next point of business, possibly at this time it would be appropriate for a short recess while our guests make their way from the chamber.

The House took recess at 4:48 p.m.

The House resumed at 4:51 p.m.

Introduction of Bills

INCOME TAX HEALTH CARE
MAINTENANCE AMENDMENT ACT, 1984

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Income Tax Health Care Maintenance Amendment Act, 1984.

Bill 2 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.

HOTEL ROOM TAX AMENDMENT ACT, 1984

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Hotel Room Tax Amendment Act, 1984.

Bill 3 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.

HOME OWNER GRANT AMENDMENT ACT, 1984

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Home Owner Grant Amendment Act, 1984.

Bill 4 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.

UNIVERSITY OF VICTORIA SPECIAL APPROPRIATION ACT, 1984

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled University of Victoria Special Appropriation Act, 1984.

Bill 5 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.

RESOURCE REVENUE STABILIZATION FUND ACT

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Resource Revenue Stablization Rind Act.

Bill 6 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, 1984

Hon. Mr. Curtis presented a message from His Honour the Lieutenant-Governor: a bill intituled Assessment Amendment Act, 1984.

Bill 7 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. Gardom moved adjournment of the House.

Motion approved.

The House adjourned at 4:56 p.m.