[ Page 8401 ]

CONTENTS

Open Learning Authority Act (Bill 31). Hon. R. Fraser

Introduction and first reading — 8401

Small Business Venture Capital Amendment Act, 1986 (Bill 33). Hon. Mr. McClelland

Introduction and first reading — 8401

Committee of Supply: Ministry of Finance estimates. (Hon. Mr. Curtis)

On vote 28: minister's office — 8401

Mr. Williams

Ms. Sanford

Mr. Lockstead

Mr. Davis

Mr. Mitchell

Mr. Stupich

THURSDAY, MAY 29, 1986

The House met at 10:05 a.m.

Prayers.

Introduction of Bills

OPEN LEARNING AUTHORITY ACT

Hon. R. Fraser presented a message from His Honour the Lieutenant-Governor: a bill intituled Open Learning Authority Act.

HON. R. FRASER: Mr. Speaker, I would like to point out that British Columbia is a world leader in the provision of distance education to its people. The creation of the Open Learning Institute, the Knowledge Network and the Open University Consortium are all excellent examples of this government's work, and specifically that of Dr. McGeer, my predecessor, who had a vision of services for the people. This proposed legislation is the next logical step in bringing all these services together under one guiding structure.

In the summer of 1985, the boards of the Open Learning Institute and the Knowledge Network were given common memberships and assigned the task of making recommendations to government on the role and function of the Open Learning Authority board, the organization and administrative structure under which open learning will be carried out in the future and the legislation necessary to enable open learning to be carried out in an efficient manner throughout the province. The boards struck a subcommittee, and with the assistance of two staff members from the Ministries of Education and Universities, Science and Communications, it has worked over the past year developing responses to the task.

This proposed legislation addresses the concerns of government and the needs of the institutions. I will be developing guidelines and regulations as provided for in the legislation which will ensure that the colleges, institutes and universities play an important role in the academic offerings of both the Open Learning College and Open Learning University.

It is my intention to continue the consultation process with the subcommittee in developing these guidelines. I would like to thank the staff and board members of the Open Learning Authority and the Knowledge Network and the representatives of the colleges, universities and institutions who have worked so long and hard to provide the advice on which this legislation is based. I am confident that you will find the legislation provides increased opportunities for our citizens to participate in distance education in the future.

I move that the bill be introduced and read a first time now.

Bill 31 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.

SMALL BUSINESS VENTURE CAPITAL
AMENDMENT ACT, 1986

Hon. Mr. McClelland presented a message from His Honour the Lieutenant-Governor: a bill intituled Small Business Venture Capital Amendment Act, 1986.

HON. MR. McCLELLAND: Briefly, Mr. Speaker, I would just say that this bill contains a number of amendments which are primarily the result of discussion with the investment community, of recommendations from those involved in the offering of venture capital as well as those involved in the seeking of venture capital, and also of some of the things which were contained in the budget speech this year. It's all very technical, and I think it would be best addressed at committee stage in terms of debate.

Bill 33 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: Before proceeding to Committee of Supply, I'd ask leave for an introduction, Mr. Speaker.

Leave granted.

HON. MR. GARDOM: Mr. Speaker, we have a number of students from St. Margaret's School in Victoria present in the galleries today, and I know all members would like to bid them a special welcome.

Orders of the Day

The House in Committee of Supply; Mr. Strachan in the chair.

ESTIMATES: MINISTRY OF FINANCE

(continued)

HON. MR. GARDOM: Mr. Chairman, it is with great pleasure that I again call vote 28: resolved that a sum not exceeding $209,220 be granted to Her Majesty to defray the expenses of the best Minister of Finance we've ever had, the hon. Minister of Finance (Hon. Mr. Curtis).

On vote 28: minister's office, $209,220.

MR. WILLIAMS: Well, I appreciate the comments of the Minister of Intergovernmental Affairs — or whatever that sinecure is.

SOME HON. MEMBERS: Oh, oh!

MR. WILLIAMS: At any rate, it does seem to me that we should look at the question of where we get our revenues in British Columbia, and the question of where our income comes from in this resource-rich province. Specifically, I'd like to look at the question of resource revenue. I know we can get the standard speech back, and probably will, about commodity prices and all the rest of it, and that that's impinging on our resource revenues. I think there are enough academic studies around, however, to indicate that there is incredible leakage of resource rents and legitimate revenues for the Crown; in my view, far more legitimate revenues than any other, because the Crown is the owner of the resources in British Columbia. The Crown has 94 percent of the public land and is the owner of the minerals and gas and petroleum resources, the land resource, the agriculture resource and all of the related land-based resources.

MR. CHAIRMAN: Hon. member, one moment please. Members of the committee, it's rather noisy in here. The

[ Page 8402 ]

second member for Vancouver East has taken his place in debate and will be offered the courtesy of being allowed to speak to a reasonably quiet committee. Could we curtail the conversation, please.

MR. WILLIAMS: Thank you, Mr. Chairman. I appreciate the former Provincial Secretary's concern.

I think we should look at those revenues. Let's look first at forest revenues in this province. That's really nothing short of a scandal in terms of our income from the forest sector. Let's remember that we own all the trees in British Columbia. What is our income? Revenue from our forest sector is $140 million. What are our expenditures in the forest sector? That revenue sector is logging tax, timber sales, small business enterprise program, royalties, scaling and miscellaneous. But what are our expenditures? Our expenditures are forest management, fire, ERDA, small business and stand management — $344 million.

[10:15]

What that represents, then, is a net loss to the province in the ownership and management of this sector of some $204 million, in this one sector alone. If we considered all the land-based resources — rural, not urban — of petroleum and gas — and we're not looking at municipal either — minerals and other, water and wildlife, essentially our revenues are $541 million. We deduct the cost of running the department of environment and the department of mines, which is about $139 million, and we end up with a net of $402 million in those sectors. Then we deduct our forest losses and we end up with $198 million in net income from our resource-based sector. Just think about that. In this really blessed province, in terms of resource-based advantages that we have on this planet, we actually only come in with an income of less than $200 million. That's in terms of lands, forests, water, wildlife, petroleum, gas and minerals, Our net position is under $200 million. That's not very significant.

In a budget of about $9 billion, 2 percent of our net revenue comes from natural resources; 2 percent of our net revenue in this resource-rich province comes in fact from natural resources. That is nothing short of incredible. It's not a philosophical question in British Columbia. We, the people of British Columbia, own 94 percent of the lands. We have all of the mineral and other resource-based elements as well.

So let's compare that with what you do in the nuisance and sin taxes. Liquor, $420 million in revenue. Lotteries, $110 million in revenue. Permits and licences alone, $191 million. Tobacco, $206 million. That is $927 million in nuisance and sin taxes that we're getting — about $1 billion out of our total in that sector. That's almost five times what we get from natural resources in British Columbia, almost five times. Booze alone is two times what we get net out of the whole natural resource sector.

Isn't there clearly something desperately wrong in terms of how we get our income in this province, given those circumstances? It begs the question in terms of whether we benefit the overall economy; not even just looking at Crown revenue, but whether there are economic impacts on industry in terms of inefficiency and other problems. It begs the question, and I think there's no question that the end result is a less efficient industrial sector because we do not collect many of these rents that are legitimately ours. That is the problem of some of our basic industries in this province; they in fact have become very inefficient because of the non-collection of rent. It's a very serious problem indeed. It is at the roots of some of our unemployment problems. It is the root of our income problems. And it is the reason we are not able to deliver the social services that we should in British Columbia. It's a tremendous loss.

I know your ministry has addressed these questions. I know that your staff has looked at some of these questions and backed off. These are serious areas. With the kinds of studies that have been undertaken, there clearly should have been a new direction in terms of revenues for the province of British Columbia. But instead you have backed off in terms of these legitimate areas of revenue.

The pieces are popping up all over the place. They are popping up all over the place, in academic studies and through ministerial studies in various sectors. Let's just look at one: a recent one out at UBC, the FEPA group, under Dr. Peter Pearse. They looked at the simple question of export logs in British Columbia. That study came out in the last month and was reported in the Vancouver press. Just look at an example of the difference in price in international pricing of export logs versus our domestic market, which is how your revenue system is based — on an inadequate estimate of domestic market.

But if we look at the international market, i.e. the real market in that sector, where the UBC people compared raw log export from the northwestern United States with raw log export from British Columbia, the following differences in prices appear, depending upon quality of log, by species: balsam — 61 percent higher for low quality and 96 percent higher for high quality; Douglas fir — 39 percent higher for low quality and 72 percent higher for high quality; cedar — 46 percent higher for low quality and 88 percent higher for high quality; hemlock — the lower quality is 46 percent higher than our domestic market, and it's 58 percent higher in terms of high quality; spruce — 23 percent higher for low quality, 29 percent higher high quality; pine, 418 percent higher in the international market versus our domestic market. That tells us something about leakage of revenue.

Export logs do not get plugged into any formula for revenue-collection in British Columbia other than the modest amount we charge at the very end at the time of export.

It was the work of Michael Margolick and Russell Uhler at UBC that documented that information. Those were 1983 data figures; there's no reason to think that the data has changed significantly over time in terms of the relative position of those commodities. Those numbers don't get plugged in. That, then, is leakage in legitimate revenue for the Crown. It's what the economists would call rent, rent that could legitimately be collected by the province.

There are other examples around that give you some market indicators that are different than what you live with with respect to the rest of the system. The small business enterprise program in the forest sector is clearly an indication of that. You get $18 million of your forest revenue out of that, yet it's only about 4 percent of the volume. That, in turn, should tell us something about the potential rent in this sector.

Then there is the simple business of measuring and weighing the commodity in the forest sector; that's called scaling by the people in forestry. We have the Shoal Island case, which has now gone before the courts. There is now evidence out of the preliminaries of that case. The earlier studies by the ombudsman indicated a $10 million shortfall, probably, at this one location, and noted that there were six other similar locations on the coast. Clearly that was leakage in revenue as well.

[ Page 8403 ]

A senior government official appearing at examination for discovery in the last six months indicated that until the complaint to the ombudsman's office and the one private sector person who blew the whistle on this problem, the only time the provincial staff had monitored that facility — in fact they hadn't.... They had only been there at a cocktail party at the opening. That's evidence now going before the courts. Only then, at a cocktail party, did our senior person in appraisal and in charge of scaling at least appear at that operation. There was no monitoring through the six-year period. Imagine that.

You're responsible in the end for the proper collection of provincial revenue, and we now have evidence in examination for discovery that there was no monitoring for six years with respect to the measuring and weighing of Crown timber in a major facility on this coast. The ombudsman rightly blew the whistle on that whole operation.

There's other evidence popping up that you and other ministers have available to you. One is the Hopwood report that the Minister of Forests (Hon. Mr. Heinrich) has. What does that tell us? That, too, has now been made public in the Vancouver Sun a couple of weeks ago. That says that in fact there was a 25 percent difference with respect to phony costs charged against the exploitation of timber in the province, i.e. 25 percent higher. We were allowing them costs 25 percent above real cost. That was the case with trucking. That in turn represents leakage of rent due the Crown, even under our sloppy measurement formulae.

What did Mr. Hopwood, a professional forester, say? And he was looking at the coast alone, not all of British Columbia. He said it represented a difference of $63 million to $100 million, and he said he used conservative figures and took a conservative approach to the leakage there. Where is the Ministry of Finance in this whole exercise in terms of monitoring legitimate public revenue even under existing formulae, which are open to question?

That study by Mr. Hopwood looked at 32 cutting permits in eight tree farm licences and eight forest licences on the coast, and he found this kind of problem throughout the piece. And as I said, there was a 25 percent difference in the allowance for trucking alone. Again, what kind of monitoring took place by the Ministry of Finance with respect to this massive leakage question?

There's another example of the leakage of rent in terms of government income. Let's look at coal in a different sector. Let's look back at Kaiser Resources and Edgar Kaiser's game. I know this minister is not very happy with Mr. Kaiser and has taken his chances in dealing with Mr. Kaiser in terms of how he sees that entrepreneur's role in British Columbia.

Kaiser Resources: in their later years it was something like this. After cost of product, i.e. the cost of operating the coal fields and plant, and after return on capital, they had a surplus or rent of some $90 million in their later years in the operation of Kaiser Resources. A surplus of $90 million annually, of which we collected less than half in rent and royalties.

Most of Kaiser's cash flow was leaving the provincial economy. We were the generous players with respect to Mr. Kaiser and we've consistently been the generous player with respect to Mr. Kaiser, but most of that cash flow was leaving the provincial economy. As Eric Kierans, I think one of Canada's most noted economists and public policy people, has said, how can you rebuild provincial economies if they let the surpluses go abroad? If these rents leak out of provincial economies, then you're in a no-win situation. The rebuilding of the provincial economy and the retooling of the provincial economy has to be done with these surpluses.

MR. CHAIRMAN: Hon. member, do you wish to be designated as speaker? The opposition has not had that opportunity.

MR. WILLIAMS: No, I'm sorry, I didn't notice the light.

MR. CHAIRMAN: Okay, your time has expired then; thank you.

MR. STUPICH: Mr. Chairman, there are a number of us who have relatively short presentations to make, but at this time I think we would all gain from listening to the second member for Vancouver East, and I'd like to hear more of what he has to say.

MR. WILLIAMS: Thank you, Mr. Chairman and Mr. Member.

That's the situation with respect to Kaiser. The majority of the cash flow was simply leaving the provincial economy, to no benefit to the people of British Columbia or us, the owners of the resource.

[Mr. Ree in the chair.]

Kaiser's own total equity investment in that exercise was $73 million. That was their total investment in southeast coal, just $73 million. Yet they withdrew $550 million out of the provincial economy; $550 million was withdrawn from the provincial economy by Kaiser, a net loss to the province of some $470 million. The non-payment of rent was the key issue there.

What happened? The uncollected rent from that coal field went out of the provincial economy in terms of Mr. Kaiser's other activities in oil and with respect to his steel operations in California. But then he went one better: he capitalized the uncollected rent which the province did not take that was legitimately ours, and by capitalizing that rent, i.e. saying, "What is this value of uncollected rent over time if I sell it now, and if the province continues to be the foolish player it has consistently been to date, what can I get?" he had another even more naive player to deal with. The other naive player was your creature, B.C. Resources Investment Corporation, and they paid the capitalized value of the uncollected rent in the southeast coal fields.

[10:30]

So Edgar was able to pocket all that money — the capitalized rent — and go and rebuild his steel industry at Fontana in California, invest abroad and live in a grand manner. Well, who can blame him? If our players are that naive.... It's a little bit late if we sort of bug the Bank of B.C. about minor things. Those were major errors by the province in terms of the collection of rent that was legitimately ours, major errors in establishing BCRIC and having it pay the capitalized value of those rents for those southeast coalfields.

It is an extraordinary story. It represents massive incompetence at each stage of the game, and it makes the provincial economy more vulnerable than it has ever been. This leakage of rent that you have allowed to go on and on at this juncture

[ Page 8404 ]

makes the entire provincial economy more vulnerable than it has ever been in our history. So BCRIC was there, and the irony of BCRIC picking all that up is a tremendous lesson, and one hopes that it is a lesson that has been learned. But this budget doesn't indicate that the lesson has been learned, because our rent income is modest — it's minimal.

What are the key pieces in this provincial budget of ours anyway? Two billion dollars from the feds in various transfer payments, and another $2.3 billion from the feds in personal income tax — the province's share. How much in corporate? Only $400 million, and we're still reducing that. Compare that, as I said, with $400 million from liquor alone and the modest net of $200 million from resource rent collection. Think about it: this whole huge province of British Columbia, where we own 94 percent of the land, and we collect only $200 million net from that massive acreage of lands, forests, water, minerals, gas, oil, wildlife and so on. It is absolutely incredible that our income from this massive bounty, this incredible land resource that we all own in British Columbia, should be so modest. It has not gone unnoticed, and that's incredibly dangerous for us all.

So the bulk of our income, in this rich land of ours, comes from what is essentially a payroll tax paid by middle-income earners. We don't get it at the corporate level in terms of the end product of corporate enterprise activities. The numbers are there: it's $400 million. That's not much of a return. We don't get it at the input level, and we shouldn't really think of input level issues as taxes. They are essentially commodity prices for commodities that the province owns. We get only $200 million for all these commodities that we own. We try to balance our books essentially with a payroll tax and a sales tax, both of which are not very progressive and impinge more heavily on the lower-income sector of the population.

Your other taxes and charges — medicare premiums and the like — also all impinge more heavily on the lower-income group of the population. So clearly what we've got out of this budget, and consistently get out of your budgets, is a bottomed loading in terms of tax dollars. You load the bottom end and get your revenues out of those who generally can least afford it.

By leaving this leakage in the resource sector, you end up creating problems within the economy. They're there in inefficiencies, which are also documented in all too many reports, academic and otherwise, within the private sector. It is a loss to the province. We lose these surpluses for the purpose of province-building, which is what should be taking place. These are surpluses lost to our whole provincial economy. They either leak abroad to Japan, as has happened currently in coal because of our foolish exercise in the northeast sector, which has allowed coal prices to be depressed, which in turn has reduced the rent potential from that critical resource in the province.... And it is lost in the form of inefficiency.

It is little wonder, Mr. Chairman, that with those kinds of management policies we have problems of poverty in a land of plenty. British Columbia is a land of plenty. Because of your actions in recent years, you have tended to cloud the public's view of our problems by thinking that: "Oh, yes, we have to really tighten our belts because these incomes are not there." That's not so. We are essentially a mismanaged economy in British Columbia. If I had to put a figure on it, I would guess that your incompetence — and I mean collectively, not your own, because I think you have to carry the can for a lot of bad policies that other people initiate in this administration.... If I had to put some numbers to it, I'd say it was worth at least four points in terms of unemployment, in terms of the competence of this administration. I think that's the minimum in terms of impact on employment in this province alone.

HON. MR. CURTIS: I have listened with interest to the comments of the second member for Vancouver East. I did not want to interrupt him in his presentation, but it seems that many of his remarks would have been more appropriate in the budget debate, debating this year's budget or last year's budget or next year's budget, rather than, in some respects, in analyzing the spending estimates for the Ministry of Finance. The member may agree that he covered a wide spectrum and on the other hand he may not; but I feel he covered a wide spectrum of topics, a number of which would have been more appropriate either in budget debate or in questioning other ministers' estimates in Committee of Supply.

Let me speak generally about our revenue policies. The member advanced several theses which overlook a couple of international factors, I think, quite apart from how he would have functioned as a Minister of Finance or a minister of the New Democratic Party if it were in power. Prices, not only in British Columbia but elsewhere, are very low, have been very low, by historical standards. The industries — let's speak in the plural — as I think most would agree, have been under heavy financial stress. Indeed, I think without some of the policies which we have introduced, that stress would have been strengthened with its attendant difficulties in terms of employment and in terms of the health of a number of communities throughout British Columbia.

When he mentioned Eric Kierans, I realized then that I was hearing a familiar theme. I don't listen too often through the daytime, for obvious reasons, but I read of Mr. Kierans, I have met Mr. Kierans, I am aware of his views particularly with respect to natural resources — but not exclusively — and I hear him from time to time in bed on the radio — if that is possible, and I speak in an analogy — with a former Premier of this province, one David Barrett.

AN. HON. MEMBER: And Dalton Camp.

HON. MR. CURTIS: And Dalton Camp — well, Dalton Camp never misses an opportunity to speak anywhere about anything under any circumstance, so I'll leave Dalton Camp out of this for a moment. I don't often hear comments made by Mr. Kierans with which I agree. Now someone may say: "That's your view, and that's okay, but you're wrong.

If you're analyzing natural resource revenue, as I understand it and have tried to understand it over a good number of years, you speak of payroll tax or you speak of other taxes, Mr. Member. But it is important, I think, to lump together not only the direct revenues which are received from our natural resources, whatever they may be — and I'm not going to intrude into specific ministries — but we must also take into account, as the member touched on briefly, sales tax, property tax, personal income tax, corporate income tax and factor them all in. They're somewhat hidden — not deliberately, but they're hidden by the very nature of the specific taxes that have just been listed.

I don't know if the committee wants to hear again about the tax tour which I took, but it could have been called a revenue tour. That second member for Vancouver East appeared before one of the meetings, as did the member for Rossland-Trail (Mr. D'Arcy) and as did the Chairman (Mr.

[ Page 8405 ]

Ree), as it turns out, who participated at least in analyzing comments made at one of those meetings. I think it is important for the Minister of Finance of the day, or the Provincial Treasurer in some other provinces, to not only read the views of Eric Kierans or the second member for Vancouver East or others who hold completely differing points of view, but also to get out often to hear what is being felt and sensed in the community — perhaps in the view of the presenter in terms of taxation, but easily translatable into provincial revenues — and that's what I did. It seems a long time ago, in one respect, but in terms of how government functions it wasn't that long ago — the fall of '84. I hope I'm given the opportunity to do that again: to devote a significant amount of time, in an open forum, to hear from all comers, to hear from every participant, whether or not one agrees with what this government has been doing, and have them provide views in terms of taxation policy for British Columbia. That worked very well, in my view, and I see no reason why it would not work similarly well again.

Let me just say one thing. The comptroller-general is available, not to this committee but he is in attendance, and he has an opportunity to speak at Public Accounts committee when questions are directed to him. I think the record will show that I have encouraged the internal audit process, recognizing, quite apart from that, the activities undertaken by the auditor-general and her very competent staff.

I indicated at the start of these remarks that I felt the member was moving into some other ministerial estimates rather than mine. The member will know that the Ministry of Finance is not initially or directly responsible for forest revenues, as an example. Members of the committee may advance the view that perhaps the Ministry of Finance should be, but I gather that has been the case for some considerable time. But at the audit end of the entire process, the Ministry of Finance — the office of the comptroller-general — has certainly paid particular attention to forest revenue matters. As I say, the record would stand for itself in terms of that at the appropriate interval in the entire process the internal audit kicks in, and kicks in very well. I'm sure there's room for improvement, and I'm sure that improvement is on its way. There is nothing this government would undertake, or that any other party would undertake as government, which could not be improved.

[10:45]

Without speaking specifically about the Ministry of Forests in other than the audit process, certainly the office of the comptroller-general knows my views and is following those views in terms of very careful audit. Internal audit is occurring in other ministries as well; it's occurring on a regular basis. It has my full and enthusiastic support, and I see that as a key part of my duty.

MR. WILLIAMS: It's all very well to say we're auditing these things — and of course you are, and with direction — but how is it that something like the Hopwood report comes along...? A professional forester does just a limited amount of monitoring with respect to what has been allowed to be charged off against the Crown and comes up with these incredible numbers of $63 million to $100 million in leakage. The leakage depends, of course, on what the market is; but he says he's conservative, so in good markets the leakage exceeds $100 million annually.

What are your auditors doing? Are they counting paper clips? Are they making sure there's a piece of paper backing up another piece of paper for the cheque? Clearly that's what much of the exercise is. It is not a thoughtful overview with some significant intellectual input. It simply accepts these pieces of paper. It's a kind of paper-clip mentality. That's how this leakage happens. Either that, or its a conscious decision at the very top that says: "We won't touch this leakage at all."

I suggest to you, Mr. Minister, that to too great an extent that's what in fact happens with the major resource sectors; i.e. we're not going to go into it in depth. You've got studies that indicate this leakage is going on, studies that tell you it's inadequate, but the leakage is pervasive, and continues. How do you answer that?

HON. MR. CURTIS: Mr. Chairman, the member suggests that it's a counting-paper-clip exercise or, if not, then it's direction from the top. He's certainly wrong on both counts. In terms of this ministry's view of other ministries and the process of protecting the public's tax dollars, other than where government policy has been clearly enunciated — it is no subject for discussion in Committee of Supply, because it is the policy — I look to the professionals throughout the ministry, not only in the office of the comptroller-general but in other sections of the ministry as well, to perform their duties as set out for them: that is, in line with the enunciated policies of the government and in line with good tax-collection processes and in line with the correct accounting processes.

One can bring forward a variety of scholarly views with respect to leakages, as the member calls them, but I would refer again to the fact that we also have — quite independent of this ministry, the Minister of Finance and the executive council — the office of the auditor-general. The member knows that.

Since I am speaking of the office of the auditor-general, may I say again that I have the greatest comfort that we finally have in British Columbia an auditor-general, who no matter who the incumbent may be is accountable to this Legislature, not to the executive council nor to the Premier nor to any member of cabinet. When the auditor-general speaks, I can tell the member that this minister and other ministries and ministers in government listen. They must and they do.

MR. WILLIAMS: Mr. Chairman, we all have some of the benefits of the work of the auditor-general, but it's very clear that the incumbent does not carry out her activities in the same manner that the federal incumbent does. She's doing these sectoral overviews that are of some benefit in terms of.... What was it, the Lands ministry previously, a very difficult one to deal with — so I don't know why she dealt with it, to tell you the truth. There are certainly far better areas for her work, but that's what she did.

It's very clear that she has — and I don't mean this in a mean way — a very conservative view of the function and role. Some time back I requested an overview of northeast coal in terms of some analysis of this whole project. I think that's a good one. It's the biggest industrial project in the history of the province — $3 billion worth. The response was: "Well, there have been other auditors and they've checked, and all these numbers are real numbers."

MR. CHAIRMAN: Order, please. We are not on the estimates of the auditor-general.

[ Page 8406 ]

MR. WILLIAMS: Well, I'd rather pursue other things anyway. I think it would be more productive. I think we balance that off, so that's fair enough.

I just wonder what happens when you see something in the press like this with respect to the Hopwood report on the business page a couple of weeks ago. What does that trigger in you and your staff? If you weren't aware of the report previously, or if you weren't aware of government documents regarding those problems, then surely seeing something like this must ring a bell. Directives must go down to to the staff about cleaning this problem up. Does that happen?

HON. MR. CURTIS: Mr. Chairman, often it does. I can't assure the committee that it occurs every time there is a report. That would be inaccurate. But very often, if we are speaking of a particular report, that certainly triggers discussion within the ministry, often between the deputy minister and me, and then the relevant ministry, whatever that other ministry might happen to be. The newspaper report doesn't necessarily trigger very much, but certainly the production of a report. That, I trust, will continue.

MR. WILLIAMS: I'm sure the minister hasn't read.... There was a study done by Margolick and Uhler out of FEPA at UBC, again in the last month. That one is essentially looking at the advantages of log export, totally, for British Columbia, which is interesting in an academic sense in terms of our being the landowner and the question of maximizing return to the landowner. They suggest that the provincial economy would be $140 million better off if we didn't even try to process the stuff, which is a measure of problems in the private sector. They say that if we take into account the unemployment problems, nursing those, then the net return to the province would only be $40 million more than currently. So if we nursed all of the walking wounded as a result of that exercise and so on, we'd still be $40 million better off by not carrying out this industrial activity in the province. This is what these academics are suggesting.

We know that that's not acceptable public policy. But the interesting thing is to look at the underlying data that is the basis of that study. If you look at the underlying data, then it tells you what these numbers are, in terms of the difference in log export value versus domestic value. Again, there is a very significant difference that is not plugged into any formula whatsoever in the province in income collection other than a modest amount at the very end, at the time of export. It seems to me that your staff in analyzing data and information should perceive these kinds of things — that underlying those kinds of reports there is information that is telling you there is significant leakage in terms of revenue that should be dealt with. Have you looked at that question in terms of log exports and leakage of revenue with respect to that raw material that is not processed in the province?

HON. MR. CURTIS: Mr. Chairman, no, I have not reviewed the report to which the member refers. He indicates that it was produced a month ago, roughly. I do not know if officials in the Ministry of Finance have reviewed it, but I'm sure that in the course of time they would if it is brought to their attention or if they are aware of its publication or preparation presentation.

Look, the Ministry of Finance officials during my time, Mr. Chairman, are free — indeed they are encouraged — to review any view, whether presented orally or written, in terms of provincial revenue, provincial taxation policies, the provincial economy — the list can go on. They are perfectly free to do that. In addition, they know that they have easy and regular access to my office. This does not mean that I simply leave the door open for them to come to me; indeed, it works in reverse on many occasions. But that kind of dialogue — in my view, and I believe that it works well — between senior officials in a Ministry such as Finance and the minister of the day is vital, a two-way dialogue, perhaps occasionally expressing views which might not be very popular with the minister. I hope that no one has ever in the Ministry of Finance during my time there felt any impediment whatsoever to coming in and advance a view or a theory or a suggestion or a proposed policy in draft form. That is an essential linkage between the elected minister in whatever ministry it might be, whatever portfolio, and the officials who carry on after that incumbent has gone. So the officials can't speak for themselves — that's not my rule; that's the nature of this system — but as and when they retire or leave they're free to speak, and I have great comfort in believing that none of them would correct me on the point I've just made.

MR. WILLIAMS: I would like to take the opportunity to commend the minister with respect to that point of view, and I think it is to his credit. Despite what I've said today — which I think is just an incredibly serious problem for the province and one which should not be ignored any longer, because we are moving into a very desperate period — I want to commend the minister for the upgrading of the department and for the building up of the staff. Historically this has been a weak department in this province of ours. Under W.A.C. Bennett it was an incredibly weak department, with very limited competence, I'm sorry to say. It was not strengthened greatly in the subsequent period — modestly. It has been improved under this minister in terms of the quality of staff significantly. I don't think there's any question about that, and I would like to commend the minister for that. I think the province is better off as a result.

But the gaps are huge, and I think the biggest gap is the area that I've covered this morning in terms of leakage in natural resource revenues, because it's not just a Crown income question, which is significant and important enough; it's the question of the implications in the private sector in terms of what the leakage does to them and their activities and how they spend and invest and improve. We send the wrong signals to the private sector by allowing the leakage to go on, and I don't think most economists or administrators — some do — appreciate the negative impact on the private sector of that generosity. It's ironic, but most great truths are ironic.

[11:00]

So after saying that in terms of the upgrading that's gone on, how is it that something like Shoal Island happens, that in terms of your monitoring of incomes and revenues and so on a huge facility like that should go unchecked for six years? I think that is extraordinary that that should be the case, where, as we have said before, it's the equivalent of the person buying groceries in the supermarket and also handling the checkout at the end and the cashier's till. That's essentially what has been happening in these various operations in the province. How is it that at some point a bell doesn't ring?

But I would also like to point to another couple of reports of the Canada Council that look at leakages in these sectors. There is a recent report from the Canada Council on forest

[ Page 8407 ]

revenues in British Columbia, the implications of tariffs and all the rest of it. But they look at rental income with respect to this resource in the province, and they come in the middle of all the verbiage, with some very interesting numbers, numbers that should be very disturbing to all of us. That is now a public document, printed by the government of Canada, the work of Michael Percy at the University of Alberta. It's a public document on the shelves in every government bookstore. It's available.

He measures the leakage, and he comes up with a number. Are your staff familiar with that? It's a recent study. Michael Percy is looking at our forest sector, looking at the implications of various policy changes. Looking at that, it should have rung some bells. It should have suggested new policies. Have you got reports that are the result of that that suggest new policies on the part of the province?

HON. MR. CURTIS: Mr. Chairman, I will not respond with respect to Shoal Island. That is, as the member knows, before the courts.

You said "Canada Council"; it's the Economic Council. I would not have been surprised, in fact, if Canada Council had also produced a report in this general thematic area. They seem to do everything else, but that is another story.

Interjection.

HON. MR. CURTIS: Not really, Mr. Member. I'll tell you about that some time — in terms of the Canada Council.

The report is within the Ministry of Finance. The officials are reviewing it. I have not yet asked them for, nor have they suggested, that the study is complete.

MR. WILLIAMS: I presume too that your officials looked at an earlier report a year ago called "Blue Gold," dealing with rental questions with respect to water resources. At that time they suggested the leakage, the rental value of the resource, was about $800 million or $900 million, if my memory serves me right. Very significant, and I presume they took that into consideration in halting the water tax in the current fiscal budget.

[Mr. Strachan in the chair.]

HON. MR. CURTIS: Mr. Chairman, certainly the question of water rentals straddles two ministries, as the member and the committee would know. That is not pushing it off. That is the Ministry of Environment as well as the Ministry of Finance. But we moved a long way in terms of water rentals. One can say that it should have happened earlier. The fact is that it happened when I was able to do it, and for a variety of circumstances which have been discussed in debate in this House, those rentals are frozen for a stated period. I can't look beyond that stated period.

MR. WILLIAMS: I guess the numbers would have to be adjusted, because the Economic Council report was done comparing fossil-fuel energy base. And of course fossil fuels have declined in values. I am going to help you out in terms of your argument and suggest that the economics have changed. Maybe that's in the note you've just received.

HON. MR. CURTIS: No, this says: "Bring home a quart of milk."

MR. WILLIAMS: You'd think you'd remember. You keep getting the same note.

But at any rate, the "Blue Gold" report is really quite significant as well in terms of looking at this question of rental income from the water natural resource. Those numbers were very high in that report. We do have private sector operations in the province as well as our monster B.C. Hydro, and one of them is the aluminum Co. There is a case where it is an extraordinarily valuable resource tied to a very bad contract of some 25 years ago. The water tax certainly is legitimate in areas like that. It would seem to me that if we forgo these revenues, we should have some kind of industrial trade-off in the sector where we forgo the revenue. That might be a more reasonable public policy position in terms of expecting greater processing and greater value added within the province — more job creation, more capital investment as a trade-off. If we're going to let these great numbers be dissipated to some extent, then the reasonable trade-off, it would seem to me, in current western public policy, would be these kinds of ancillary agreements in which we require further value added. Certainly with respect to the aluminum industry in the province, we might well require that in an area that could use greater employment and where leakage is very great — where we have a relatively modest population but a lot of them unemployed. You agree?

HON. MR. CURTIS: I agree with the member's proposition that that sort of thing should be looked at. I think we've been quite innovative in a number of areas which previously might have been considered untouchable. So I was simply nodding, as I say, from my seat that I agree it's the kind of thing which we can and should look at.

MS. SANFORD: I just want to ask the minister about the surcharge that has been applied to wines in the province. Half of the bailout program, as I understand it, was paid for by the federal government. Does that mean that the money now collected on this surcharge is going to the federal government as well as to the provincial government? Or is it only the provincial share that we are collecting?

HON. MR. CURTIS: The member for Comox has asked about a program in another ministry. Nonetheless, as minister responsible for revenue I can say that the money is returned to the provincial government.

MS. SANFORD: Does that money then go back into the Ministry of Agriculture's budget, so that they will not suffer that loss? I know it was a special warrant charged to the Ministry of Agriculture. Do the recouped funds go back into the ministry?

HON. MR. CURTIS: In this instance, no, and indeed in most instances, no. There are exceptions. Generally speaking, where money is received back in a program such as this it should flow, in my view, into the general revenue fund, into what we've called for years consolidated revenue, as revenue. Then we expend — whether it's in the ministry's budget for the year or whether it's for something which occurs in the course of the year, particularly in ministries where there can be surprises, such as Environment, Agriculture and Food and so on — on the merits of that, and we allocate from the expenditure side. I don't, personally and as a matter of

[ Page 8408 ]

ministry policy, believe that you should have money flowing back into all sorts of sub accounts in various ministries.

MS. SANFORD: I asked the question because it's also not usual to put a surcharge on when you have a special warrant issued for some program. The drought relief, for instance, didn't result in any kind of surcharge. I was hoping that since the government had decided to put a surcharge on, the money would at least flow back into the Ministry of Agriculture's budget, because they certainly could use the money.

The other question that I have is whether or not the provincial government will recover the full cost of the provincial share of that program.

HON. MR. CURTIS: One of two things should happen in the committee at this point. Either I take that and offer to bring back an answer in a few minutes, or it is more appropriately directed to the Ministry of Agriculture and Food. I don't have the answer readily available.

MS. SANFORD: I have two conflicting statements on this, and this is why I am pursuing it. It's not the Minister of Agriculture and Food's (Hon. Mr. Waterland's) program. It's under Consumer and Corporate Affairs, and when I posed this question to the Minister of Consumer and Corporate Affairs (Hon. Mr. Veitch), he indicated that there was no cutoff date on the program and that they would collect all the revenues. Yet the Minister of Finance in an earlier statement said that there was a cutoff date, that it was a term program. I'm a little confused, and I would like to have that clarified in my own mind.

HON. MR. CURTIS: Mr. Chairman, the notes that I have from late in 1985 indicate a special warrant of $2.8 million, and we canvassed that the other day in committee, on Tuesday. The notes from that moment indicated that, based on current sales projections, the government's $2.8 million contribution would be fully recovered by December 31, 1986. This was a special warrant, as the member knows, for the Ministry of Agriculture and Food. Whether Consumer and Corporate Affairs has involvement, as we know, is really, I think, not before Committee of Supply debating my estimates. The special warrant went to Agriculture and Food.

MS. SANFORD: Mr. Chairman, I would like the minister to answer for me whether or not the program will finish on that date, even though the full amount of money has not been recovered. I would also like the assurance that the minute that money is recovered, that surcharge will be removed. So those two assurances.

HON. MR. CURTIS: Mr. Chairman, I know of no proposal to undertake another program of this kind, but that is as of today, May 29, 1986. Now I can't forecast. I'm not trying to hint that there's something else in the works, but indeed if I am presented with a special warrant request at some point in the balance of this fiscal year when the Legislature is not sitting, then I would have to deal with it at that time. Was that not the question? I thought it was the question. Well, it's a good answer.

MS. SANFORD: I am wondering whether the program to charge the surcharge will end on December 31 this year, or whether the minister is going to collect the full amount, even if it goes longer than December 31 this year. Secondly, can he give me the assurance that when that money has been recouped, if that's the plan of the government, that surcharge will be immediately removed?

HON. MR. CURTIS: Mr. Chairman, the answer to the first question is yes; insofar as I know at this point in time, that's the end of it. The member is discussing my estimates. I cannot — this is what I was trying to say earlier — give an assurance that indeed another ministry might not come to us in the balance of 1986. That really is what you're asking. I'm sorry, I'm giving you an even better answer. There is nothing that I know of to suggest that this program, in any form or any emanation, continues beyond the stated date of December 31, 1986.

[11:15]

Interjection.

HON. MR. CURTIS: Will I remove the surcharge in this program? The member from her seat asks: will we remove the surcharge? I would think that that would occur, but I cannot assure the committee. I would think that that will occur; but please underline the word "think." It's my belief that it will discontinue. I don't want to be later accused of misleading the committee. That is my expectation at this point in time.

MS. SANFORD: I'm assuming that the minister is saying the surcharge will be removed if no further requests come in for programs of this nature which would require the surcharge to be placed on wine. The only assurance that I want is that, once this program has been paid for — and the reason that the surcharge was put on was, very clearly, to pay for this program — if there are no further appeals from the Ministry of Agriculture and Food or the Ministry of Consumer and Corporate Affairs related to the grape industry or the wine industry, or whichever industry might call for a surcharge on wine, the surcharge will come off.

HON. MR. CURTIS: Mr. Chairman, this is another instance where we really straddle more than one ministry. With the caveat the member for Comox has given in her last comment, yes, it is my expectation that the surcharge will come off, given no further request from the Ministry of Agriculture and Food which led to this special warrant, or from the Ministry of Consumer and Corporate Affairs. With those caveats, I would think the answer is yes.

MR. LOCKSTEAD: Thank you, Mr. Chairman, and my thanks to the member for North Vancouver–Seymour (Mr. Davis). I have one very short question for the minister which has been brought to mind by the member for Comox's question to the minister. This is in regard to the tolls levied on the Coquihalla highway. My question to the minister is very straightforward: will the revenues from the tolls collected be channelled back into the Ministry of Highways or into general revenue? I think I know the answer but I'm not sure.

HON. MR. CURTIS: It is my understanding and desire that the toll revenues go to general revenue. No doubt the Minister of Highways (Hon. Mr. Fraser) will remind me of those moneys flowing, but that's my expectation.

[ Page 8409 ]

MR. DAVIS: Mr. Chairman, briefly a question and then a comment. The question has to do with the so-called value-added tax which the federal government is considering. Studies are being carried out. Hearings will be held across the country, with the possibility — indeed the likelihood, if Finance minister Wilson's budget statements are to be taken seriously — that at the federal level at least we'll have a value-added tax beginning in the next year or two.

The value-added tax at the federal level would replace the tax now levied by the federal government at the manufacturer's gate in Canada, but would cover a much wider range. It would conceivably cover all goods and services and would certainly cover imports as well as Canadian production. So assuming an equivalent revenue recovery, the value-added tax could be at a lower rate than the present 10 percent federal tax, I believe it is. But it does beg the question of provincial.... not consent so much as consistent application of taxation. Ideally, if there's a value-added tax at the federal level, the provinces will use the same data and apply their sales tax — call it a sales tax — as a value-added tax.

I'm not a proponent of the value-added tax, but it is a matter that's being studied seriously by the federal government. If there were to be a federal value-added tax and we continue with our provincial sales tax, we'll have two systems existing side by side; in a sense, two sets of books having to be kept by each commercial operation. This is not just manufacturing or processing. It would include the wholesale and retail establishments throughout the province. So it seems to me there is a likelihood of a lot more bookkeeping. I would think the province would be very concerned about this not only duplication, but even temptation to use the same data as the federal government and apply a provincial tax on a value-added basis.

I would like to know from the minister whether his officials are carrying out any studies in this area, whether there's going to be any representation, either to the committees from Parliament that are travelling across the country or directly to the Minister of Finance from his ministry in British Columbia.

HON. MR. CURTIS: The likelihood of a value-added tax appears to have diminished for any number of reasons, not the least of which might have been at the meeting of federal and provincial ministers of finance treasurers which followed the first time it had been seriously mentioned or suggested. I cannot assure the committee that Ottawa has abandoned it altogether. I don't have the full knowledge. Indeed, others may have differing views on it, but my assessment is that it has been abandoned.

I can tell the member for North Vancouver–Seymour that we made strenuous representations against it in meetings with the federal Minister of Finance. This Minister of Finance for Canada seems to want to meet as often as is reasonable with his provincial counterparts, and we have had a number of meetings. I indicated on Tuesday that another meeting is scheduled. It will occur in Victoria, I'm happy to say, in the latter part of June, with the date finally to be confirmed by all. We will again look for any signal whatsoever; not only my officials or the officials of the ministry, but I shall took for any signals at all that it is being touted or advanced by officials of the federal government.

The federal Minister of Finance, Michael Wilson, can have no doubts as to how the majority of his provincial counterparts feel about a value-added. They are looking now, we understand, at the possibility of a business transfer tax. This is very much at the development stage and the official stage, although I will also want to hear any updating when I meet with Mr. Wilson in a few weeks time. As it has been generally described to us, it doesn't seem to have the same impact on sales tax. There's a further indication that if whatever is being developed regarding a business transfer tax is indeed given the nod by the Minister of Finance for Canada, we would see a proposal publicly. I don't mean just within ministries, but that a proposal would be released sometime next month. It may be delayed a little.

That's the latest information that I have. I don't carry the same concern today about the threat of a value-added tax as I felt even a few months ago.

MR. MITCHELL: Mr. Chairman, I was wondering if the minister has that information that we were discussing the other day on charging land tax on mobile-home parks in Indian reserves, because I would like to debate the whole issue if he has that background.

HON. MR. CURTIS: Mr. Chairman, the member has been patient in this regard. As I recall the question, property taxes are levied on privately owned property and on exempt properties such as Indian reserves and Crown land that is leased or occupied by non-exempt persons. This ensures that property owners, renters who pay property taxes through their rent, and private users of exempt land are all taxed on the same basis to pay for services such as police protection, education and so on.

Until recently, Mr. Member for Esquimalt, this general rule has been interpreted to permit the taxation of mobile-home park owners on the value of the land, and mobile-home owners only on the value of their mobile home. A recent assessment appeal resulted in a supreme court decision that changed the way this policy was applied to trailer parks on native Indian reserves. The court ruled — it wasn't a government policy — that mobile-home owners should be taxed on the value of both the mobile home and the surrounding portion or portions of land of which they were the principal or primary user. This therefore is clearly a departure from the practice of taxing mobile-home owners on just the value of the mobile home. Mobile-home park operators who used to pay taxes on the value of the entire land component of the park will now be assessed only for the value of common areas and roads. This arrangement is similar, members of the committee will know, to that which is used for strata title developments, and should result generally in little change to property taxes, because in the case of most owners of the mobile homes, the minimum $200 property tax will continue to be payable after the change.

In rural areas only — and I think the member was speaking about a non-municipal area; he may not have identified it — where the taxpayer relocated to another trailer park for any reason, including eviction, double taxation could have conceivably arisen. This has been remedied by, as I indicated on Tuesday, Mr. Member, the recent legislation, which ensures that the value of recently occupied property, such as the taxpayer's pad in a new mobile-home park, is not taxable until the year after occupation begins. Payment of property taxes in these instances will not of course preclude park operators from evicting tenants for non-payment of rent.

[ Page 8410 ]

MR. MITCHELL: I was listening with great interest when the second member for Vancouver East (Mr. Williams) was talking. He was talking at that time about the leakage of vast amounts of money out of the provincial treasury. I would like to assure the second member for Vancouver East, through you, Mr. Chairman, that this government does stop the little leaks. It's not the massive ones.

As the minister clearly pointed out, it was non-municipal lands. It's all mobile-home parks on Indian reserves, and it could be a mobile-home park that is owned by the band itself, or it could be a mobile-home park that has a lease on a piece of property on the reserve owned by an exempt person, which is an Indian in these cases.

What I say is that we have a policy throughout North America to encourage the native Indians to build mobile-home parks on Indian reserves, or to do any industry that is going to bring in revenue to make the Indians more self-supporting. But when that policy was lived up to by the Indians, the government then created a whole new policy — plugged a leak that really wasn't a leak, if you take the overall policy of developing on the Indian reserves — creating these little 20 foot by 40 foot pieces of property, so that the tax people could go in, put a value on it and then charge it to the person who is renting a space in the mobile-home park.

[11:30]

Now I think we're opening up a whole new law, that if you can start charging the renter.... A person pays his rent for a pad. Granted, the improvements.... It's always been in the act: he pays the taxes on the improvements, which is his mobile home or any other structure he builds around it. That's the improvement. He's paying that. Also, as he's paying that, he's getting the homeowner grant, but to go around and create these little chunks of land that you're charging people.... You don't have any rights to that land, you can't sell it, you can't sit on it. Even if you paid your taxes, you can't sit on it without paying your rent.

They did create a law, a regulation that is abusive. It's not consistent with any other types of legislation. I don't know if you can appeal Judge Legg's decision on that case on mobile home parks. I guess you've read the decision, based on something going back to 1912 dealing with a mine or equipment on a mine. It's very complicated.

In mobile-home parks, these people are definitely renters, and I can't get the Minister of Consumer and Corporate Affairs to bring in a bill of rights that gives mobile-home people some security. But they can stop the leak, if you want to say, because the owner, the lessor, or the Indian band is not paying taxes. They found a way of getting around that to stop that leak, but I think they have missed the overall policy of allowing the Indians to develop on their land.

I know that there is a native Indian land problem in B.C., but I don't think the answer is chopping the reserves up in little pieces so they can collect a few extra dollars. It doesn't mean anything, but it's just a bureaucratic nightmare that you've created. It's going to cost more to a minister than it was worth.

[Mr. Ree in the chair.]

MR. MOWAT: I ask leave to make an introduction, Mr. Chairman.

Leave granted.

MR. MOWAT: Mr. Chairman, it's my pleasure to welcome to the parliament buildings and into the House this morning students and teachers from the Talmud Torah School in our constituency of Vancouver–Little Mountain. I had the pleasure of addressing them in our caucus room, and I ask the House to make them welcome.

HON. MR. CURTIS: Mr. Chairman, the member for Esquimalt–Port Renfrew has outlined again this year a problem that he feels strongly about. On the basis of past commitment, I will look at it. However, we should not be mistaken here. I think the essence of his criticism is with respect to the court decision. That wasn't a change we made; that was through the Assessment Appeal Board and then to the Supreme Court of Canada, and the court ruled, leading to this problem.

I will want to analyze this quite carefully, and if it is appropriate to make a change, then we shall look at that.

MR. WILLIAMS: I just wonder if there has been any analysis to date in terms of the beneficial or otherwise impact of your tax cuts with respect to this and the previous budget. It seems to me that....

MR. CHAIRMAN: Hon. member, we are discussing the spending estimates of the minister. We have completed the budget debate.

MR. WILLIAMS: I'm aware of that, Mr. Chairman. However, I presume there are ongoing analyses on the part of staff with respect to impact of previous decisions and current decisions, and that's what interests me.

When we cut these taxes, what happens is that that's forgone for British Columbia. If we were a totally closed economy, then it wouldn't be the same kind of problem, but we are essentially a branch-plant economy — i.e., branch plant vis-à-vis countries abroad and the United States; almost branch plant within the nation with respect to eastern Canada. So when we cut these corporate taxes, we end up providing those benefits for those corporations. Again, it seems to me that that represents a kind of leakage from the provincial economy, because only a part of those funds remain in British Columbia. They end up really dealing with other corporate 'interests.

If we deal, say, with Noranda: Noranda Corporation in Canada controls half of our mining activities in British Columbia in the corporate sector and 25 percent or so of our forest sector — that one company. Now they have other problems; they have serious internal problems of their own. If we give them these benefits in British Columbia, shouldn't we realistically have required that that benefit remain in British Columbia too, albeit in the private sector? I suggest that what's really happened is that by the blanket cutting of tax in these sectors — and I've already talked about the leakage in the input level, which is incredibly serious.... But the leakage at this level, in terms of the internal provincial economy, has to be pretty substantial as well. Do we get it in plant and equipment? Do we get it in new jobs, new capital applied to processing, new value-added products in British Columbia? It seems to me that one needs a more sophisticated fiscal arrangement with these corporations. Otherwise it's another kind of leakage — in terms of the branch-plant problem that we face in this nation of ours.

[ Page 8411 ]

HON. MR. CURTIS: Mr. Chairman, we canvassed some of this the other day. But if I might respond to the second member for Vancouver, I don't particularly like the idea of trying to — and this is putting it in fairly straightforward fashion — trade with business and industry in terms of tax cuts. It is important to go back.... This started in 1984 with the discussion paper, then the tax study, and then the measures introduced in 1985 and subsequent measures introduced in March of this year. A number of them, as the member will know, have only just kicked in, at the start of calendar 1986. So we're very early in that process which, with one or two exceptions, took effect last year. The bulk of them, it is correct to say, are only now — now being the fifth month of 1986 — starting to ripple through.

I watch a variety of economic indicators for the province — and I would happily add the member to my mailing-list if he would like that.... A good number of positive economic indicators are showing; they started showing last year.

Interjection.

HON. MR. CURTIS: I like my economic indicators better than I think I would what you might send me, because you're in opposition — your job is to oppose.

Interjection.

HON. MR. CURTIS: "Just the facts." I remember that from 1972 to 1975 that member had very strong views. His operational phrase was: "Mum's the word." Mr. Chairman, I digress.

Interjection.

HON. MR. CURTIS: I wasn't talking about his mother.

Mr. Chairman, we can argue again and again whether the members of the opposition would have introduced the tax cuts which I did. That is the straightforward answer. They are just now starting to kick in, in calendar 1986, and to a certain extent fiscal 1986.

MR. WILLIAMS: Well, it is the branch-plant economy problem, and it is a very serious one for Canada and for British Columbia. I don't think you can ignore it in terms of these exercises. I will be pleased to receive the data as it comes forth and compare it with my own other sources as well.

On another subject, I just wonder how much we ended up paying in severance pay out of this province of ours for the restraint program. I looked at the printouts, and the number for the last fiscal year alone is about $14 million in severance pay, some as high as $60,000 per individual. Can the minister advise us how much in fact?

I notice also that we spent about $35,000 on Omega gold watches, men's and ladies'. That is through another ministry. I don't know if that is part of the golden handshake or whether people get it after 25 years or some other disastrous length of service in the public mines. But $14 million struck me as very substantial for the last fiscal year, and I presume that there was a substantial amount before that as well. Could the minister advise?

HON. MR. CURTIS: Both items, even the gold watches presented to long-service members of the public service, would fall under Provincial Secretary. The severance.... That would be wrapped up in the budget of the Provincial Secretary responsible for the public service. I don't have the information nor would I feel that it is appropriate in debating my estimates, particularly in view of the fact that the estimates for the Provincial Secretary have yet to be presented to Committee of Supply.

MR. WILLIAMS: I suppose I was seeing it in the broader context of restraint, which has been certainly the "cornerstone" of provincial policy in recent years. Clearly this was a side cost of the restraint program, some $14 million last year alone in severance pay to civil servants that have since gone on to other things.

It does seem to me, though, that again a good economic analysis of restraint in the broadest kind of way might well have been done by your department as well: the whole kind of ripple effect on the economy, the whole impact on employment. Various academics have done that, as a matter of fact. I don't know if your own staff have; maybe they didn't need to. But I think the numbers are very significant. The suggestion is that the impact was something up around the 50,000 level that might have occurred in new jobs in the province had a stimulative program been in effect rather than a cutback program. That is a very significant impact on employment, and all of this of course internal to the provincial economy.

There is another area that intrigues me too. I've talked about leakage of resource revenues, but we're even worse than that in terms of fiscal policy. We actually subsidize most resource development projects in the province. Not only do we allow the kind of incredible leakage that I've covered earlier this morning, but we actually subsidize the leakage as well of direct payments and generous infrastructure allowances. We've done that throughout the piece in the resource sector.

Not only do we have the leakages, but we actually subsidize the development of this staple economy of ours and the opening up of new resource areas. One of the areas where that's been most substantial has been with respect to the northeast coal project. Any return on the railway, for example, in the northeast coal project, in terms of meeting those costs, is predicated on at least three times the coal volume being shipped on that line out of Tumbler Ridge.

If we're only shipping at the eight million level now rather than the 24 million which is required to pay the bills, then that represents a significant shortfall for the operating company. That in the end means that the operating company, B.C. Rail, comes to the province for a handout. What kind of analysis has been made of that shortfall? When I last questioned the minister on this question, he indicated that the surcharge was, indeed, being paid up to that date. Since then, the Japanese have made it clear that they will be moving to international market price; they will not be talking in terms of contract anymore.

[11:45]

The recent meetings in Nagoya in Japan appear to have been disastrous from the provincial economy point of view. What kind of analysis has been made, again, of the leakage there, in terms of necessary subsidies to pay for the cost of that rail line?

HON. MR. CURTIS: Mr. Chairman, while I enjoy the debate and the discussion — and it's been very much give and take today, in a constructive way as far as I'm concerned —

[ Page 8412 ]

this is where I feel, subject to the view of the Chair, that it's moving into other ministries. Yes, this ministry, as a central ministry, can analyze almost anything associated with the provincial economy, provincial revenues, provincial expenditures. It can do so through Treasury Board as well. But when one is discussing specific undertakings such as northeast coal, then the opportunities would exist with regard to the Ministry of Energy, Mines and Petroleum Resources, or to an extent when debating the estimates of the minister responsible for the British Columbia Railway — we went through that on Tuesday — or to a certain extent the Ministry of International Trade and Investment, whose estimates have not yet, I believe, been presented; I'm not certain.

So it's an understandable problem that the committee has when debating estimates of the Ministry of Finance. Almost any dollar in or any dollar out could be offered as subject for debate, but I don't believe that's the practice of our committee.

MR. CHAIRMAN: The Chair could not have said it any better, Mr. Minister.

MR. WILLIAMS: Mr. Chairman, I'll note those wise words, but in the end the buck stops in the Ministry of Finance, doesn't it? If these outfits are short, if they've got a problem, you have to pick up the tab. You're the final responsible agency for the Crown. If they've been loaded down with unrealistic, uneconomic projects and the operating agencies can no longer carry them, then you have to do as you've done before: provide significant capital input into those operations. So that's a problem. We went into this in a little more depth last year during your estimates, and I suggested that what we really have, in terms of the major commercial projects on the part of the Crown, are negative income projects. Essentially these are massive capital projects that do not have any rate of return. So in the end those problems rest with your ministry.

As I recall the debate last year, when we finished, the minister got up and said.... And I'd covered Revelstoke Dam as something that wasn't making any money, the power line to Vancouver Island that wasn't making any money, northeast coal, which wasn't making any money, Expo, which wasn't making any money, etc. — all essentially with negative rates of return, so that in fact that naturally impinges on provincial operations, provincial income and demands in terms of new revenues for those various outfits. So in the end all of these various operations end up impacting on your ministry. But I think the response that we got last year was that these things would be better raised in the Premier's estimates; in effect, that you're the workhorse that shoulders the burden in terms of managing these dollars and these negative income problems from the Premier's projects and that really it was the wrong place to bring these burdens to, you'd had enough of them and that I should deal with the guy that was really responsible. I wonder if the minister still feels that way. Or maybe he's ready to become the guy that's ultimately responsible. Maybe you've had too much of these negative-rate-of-return projects and you're ready to try to deliver some fiscal responsibility to an administration you've been overburdened with lo these many years. Maybe we'll have an announcement today.

HON. MR. CURTIS: Not likely, in Committee of Supply. If I had to choose a venue, with the greatest respect to this chamber and its members, this would not be at the top of my list.

MR. STUPICH: I'm just going to question the minister about something else: British Columbia housing and development bonds. The press release put out by the minister called them British Columbia development bonds, but they were issued in 1983. They matured March 31, 1986. The minister described it as a very successful way of channelling British Columbia savings into small business expansion and building programs. I'm not going to ask him how much of the money went into small business or into housing or into development programs in the province, because I don't think he can identify one dollar compared to another. But I'm wondering, if it was successful, whether the minister has given any consideration to a similar bond program?

HON. MR. CURTIS: Yes, Mr. Chairman, I have given consideration to development bond II or son of development bond, whatever, but it was a slightly different economic and interest-rate environment at that time. The program was successful. The member is correct: the bonds did mature as of March 31 of this year. I think virtually all of them have been redeemed, but we're doing the very best we can for the few where people have forgotten that they held them.

I haven't any imminent decision to make with respect to undertaking a similar issue, but I wouldn't rule it out, Mr. Member. I did consider it when we had what could have been a longer interest-rate cycle-rise just at the start of this calendar year; but then rates, as the committee will know, declined again.

MR. WILLIAMS: Mr. Chairman, a short question with respect to that Peter Brown benefiting statute that was passed last fall, or parties related to him — the $100 million gift arrangement for buying shares. I've noticed that there is an office on Fort Street that seems to house the huge bureaucracy necessary for that generosity, but it seems to be empty, which is very encouraging to me. I don't know if the phones are answered or not. I hope not. I was encouraged to see that pretty well empty space. The forgone rent in that particular case, which is a little bit of leakage, doesn't bother me at all relative to the other leakage that might happen if you go ahead with the program.

Maybe you can give us some encouraging words, not enough to send Mr. Brown into a snit and run for the leadership or anything like that, but just encouraging words that you're not planning on full staffing there for some time, or something equivalent.

HON. MR. CURTIS: Mr. Chairman, the local newspaper, the Times-Colonist, focused attention on an office with a sign on the door. I was satisfied then that the individuals who were in place in the revenue division of the ministry were engaged in a number of other things quite apart from awaiting passage of the regulations.

I do not anticipate significant staffing of that office in the immediate future.

MR. STUPICH: Mr. Chairman, I'm pleased that that subject came up. I intended to ask the minister. It just seemed that he was in such an all-fired hurry to get it through in the very late days in the fall sitting of last year. It came in, I think, on the second-to-the-last day we were here, and it had to be

[ Page 8413 ]

put through very quickly because we were leaving soon after. I'm as pleased as the second member for Vancouver East (Mr. Williams) that nothing has happened since. I take it from what the minister says that little is likely to happen in the near future.

I just had one more point, described here as development bonds. The press release reads to the effect that $7.4 million in bonds was distributed to the B.C. Government Employees' Union. I believe the bonds went to individual members of the union, but not to the union for distribution; that is my question.

HON. MR. CURTIS: The member for Nanaimo is correct: they went to members of the British Columbia Government Employees' Union. I'm sorry, it was a little while ago. I don't know if we utilized the offices of the BCGEU to carry out, to facilitate, the distribution. But the member's point is correct.

MR. STUPICH: I'm just looking at the questions I had that have been asked by other people. There's one that hasn't been asked of anyone yet, to the best of my knowledge. I believe that in last year's budget there was a reference to some $130 million of sales tax revenue that the minister felt could be attributed to sales that we would not have had but will have because of the Expo activity. This was going to be turned over to Expo to reduce, in part, the expected deficit. I don't see any provision in this year's budget. The minister drew to my attention yesterday something that I didn't see in the budget, and I might very well have missed this. But I wonder if there is any provision in this year's budget for $130 million that, as I understand it, was committed in last year's budget to go to Expo 86 Corporation.

HON. MR. CURTIS: Mr. Chairman, to the member for Nanaimo, it seems to me that in the 1985-86 budget it was a reference rather than an appropriation; it was not an appropriation. It was an estimate that this would be extra revenue, a portion of it onsite; but obviously the very large portion of it offsite. I have no reason to see any downward revision of that number. I don't have my 1985 budget material right in front of me. I've got lots of 1986 and even a bit of 1987, Mr. Member — just getting started early. But it was an estimate of money which might be available for Expo. No steps have been taken. It was presented in the March 1985 budget in that context.

MR. STUPICH: So from what the minister has said, as I understand it, there is no commitment in this year's budget to make that contribution. It is expected that revenue will increase, but contrary to what I thought was in there last year, there is no commitment to pay that to Expo 86 Corporation.

HON. MR. CURTIS: The member is correct, Mr. Chairman — no commitment.

MR. STUPICH: Mr. Chairman, it used to be the procedure to give a detailed listing of cash and temporary investments in Public Accounts with respect to the consolidated fund — or, prior to that, the general revenue fund — and also with respect to the pension funds, the trust funds. We have moved away from that, and I did raise the question earlier of the ministry. I think some three years ago there was a detailed listing of the various banks in which trust funds were invested as at the year's end. I am not sure how many years prior to that we abandoned the procedure of giving a similar listing for the consolidated revenue fund. Is this now available simply by asking someone in the ministry where the cash and temporary investments were sitting as at...March 31, 1985 in this instance? Or is it something felt to be no longer public information?

HON. MR. CURTIS: There is a summary, Mr. Chairman. Public Accounts is a constantly evolving document, as the member would know from his number of years in the House. But I would be happy to provide the member with a more detailed listing of funds as of March 31, 1985. That would present no problem to me. We have left it out, but the summary is there. We left it out not to withhold information, but rather to simplify the whole public accounts presentation.

[12:00]

MR. STUPICH: There is still this concern in my mind, and I discussed it briefly with the minister yesterday. I am not sure whether he would add anything to what he said. His most recent press release with respect to the budget said that the change in the corporation tax rate does away with the last anomaly, and the concern that I raised yesterday was that to a greater and greater degree B.C. Is moving toward getting a higher proportion of its income tax revenue from individuals rather than from corporations. Each year it seems to go more in that direction. The points I made yesterday were to the effect that the minister is taking more and more money away from people who can't afford it and giving more and more government assistance to those people who can afford it best. Does he feel he has gone far enough in that direction, when he tells us that the last anomaly has been removed, that he no longer intends to take from those who haven't and give to those who have? Can I take that assurance from that statement, or would the minister like to tell us a little more about the philosophy of this approach?

I won't take long after the lunch adjournment, but I would like to have some discussion about this. So, Mr. Chairman, I move the committee rise, report progress and ask leave to sit again.

The House resumed; Mr. Speaker in the chair.

The committee, having reported progress, was granted leave to sit again.

Hon. Mr. Gardom moved adjournment of the House.

Motion approved.

The House adjourned at 12:01 p.m.