[ Page 1189 ]

CONTENTS

Routine Proceedings

Private Members' Statements

Funding of university programs. Mr. Mercier –– 1189

Ms. Marzari

Hon. Mr. Strachan

West Kootenay Power and Light Co. Ltd. Mr. Clark –– 1191

Hon. Mr. Davis

Policing. Mr. Rabbitt –– 1192

Mr. Sihota

B.C. science and technology policy. Mr. Lovick –– 1194

Hon. Mr. Strachan

Tabling Documents –– 1196

Insurance (Captive Company) Act (Bill 21). Second reading

Hon. Mr. Couvelier –– 1196

Mr. Stupich –– 1196

Mr. Mercier –– 1197

Mr. Sihota –– 1198

Mr. Vant –– 1202

Mr. D'Arcy –– 1202

Mr. Clark –– 1203

Mr. Williams –– 1204

Mr. Blencoe –– 1206

Hon. Mr. Couvelier –– 1207

The House met at 10:05 a.m.

Prayers.

HON. MR. STRACHAN: Mr. Speaker, it gives me great pleasure this morning to introduce a close personal friend and his family. I'd like the House to welcome Henry Novak, his wife Mary Novak, and his mother Terezija Novak; and visiting with the Novak family from Yugoslavia are relatives Antoine Hrovat and Anna Hrovat. Would the Legislative Assembly please bid them a nice British Columbia welcome.

MR. VANT: Mr. Speaker, it gives me a great deal of pleasure to welcome, from Rick Hansen's home town, 32 students from Williams Lake Junior Secondary School. Accompanying them in the gallery behind me is their teacher, Mr. Redding. This group of students and chaperones are hosted by Shoreline Junior Secondary School here in Victoria and their teacher, Mr. Ham. I know the House will join me in welcoming them.

MR. BLENCOE: Mr. Speaker, every now and again if we happen to sit during the summer months — but I hope we won't have to sit too long — I try to welcome the many visitors to this city, and I know there are many people in the galleries today who are visiting our beautiful Victoria on this beautiful day. So I would like to ask all my colleagues — hopefully this is the only time I have to do it this summer — to join with me in welcoming our many visitors to the city of Victoria. Please join me.

Private Members' Statements

FUNDING OF UNIVERSITY PROGRAMS

MR. MERCIER: Mr. Speaker, I'd like to speak briefly on industry and commerce funding university programs, and to promote increased cooperation between post-secondary institutions and business corporations, mainly in the area of scientific research and development of high-technology products. Then I'd like to take a moment to mention a funding source for students: namely, a perpetual revolving scholarship fund.

Dealing with business funding, I would like to use Simon Fraser University as a focal point, although I would say that my comments would apply to virtually all provincial universities, colleges and other post-secondary institutions. I've followed the growth of SFU since its inception, through my terms as alderman and mayor of Burnaby. Like the cooperative efforts between SFU and the corporation of Burnaby, it has been a real pleasure to witness the tremendous growth in research programs conducted jointly by Simon Fraser University and its business partners.

I speak to endorse and promote the concept, because it is critical that the community at large, and the small business community in particular, be made aware that such cooperative research and development programs are available. We can all benefit greatly from expansion of those joint efforts.

There was a time not too long ago when such programs did not receive the support of all British Columbians. Without being overly critical of the NDP, it is noteworthy that there was a void, a lack of direction, in the university and business cooperation when they were government after 1972. To illustrate, in March 1974 the NDP Minister of Education stated a lengthy list — what amounted to a policy statement — of programs recommended for our students. The list made no mention of scientific research or technology, notwithstanding advances in those areas in other centres in the world.

Also, when I was mayor of Burnaby in 1980, the NDP led the resistance at a public hearing for the establishment of a discovery park facility at the SFU and Willingdon locations. It is interesting to note that Microtel Pacific Research Ltd., one of the largest research and development companies in western Canada, is now a tenant in the Simon Fraser University research park. We must continue our commitment and make an even greater commitment to research development and technical programs in universities, colleges and other post-secondary institutions.

It's appropriate in this context to mention the recent appointment of Mr. Samuel Belzberg, a prominent Vancouver businessman, as chairman of the Simon Fraser University Bridge to the Future fund-raising campaign for research and other programs. I would ask every member of this House to encourage persons and businesses in their communities to support this ambitious fund-raising campaign.

My purpose today is to emphasize our Social Credit government's resolve and commitment to the joint venture concept. Secondly, I encourage the business community to get itself involved by committing larger and larger sums to joint projects with Simon Fraser University and other post-secondary educational institutions in this province. The president of Simon Fraser University, William Saywell, is justifiably proud of the programs he has initiated or advanced at his university to meet the needs of business, industry and government for access to new knowledge — programs such as a research centre for all computer-based research, an energy research institute, a chemical ecology research group and more. The heads of other institutions of higher learning in B.C. are, I am sure, equally proud of their similar programs.

It has been evident in the past few years that many areas in North America are trying to duplicate the developments which have taken place in Massachusetts and in the Silicon Valley of California. The evidence is that research developments in these and similar areas benefited significantly from university-industry ties when accompanied by availability of venture capital and a capable workforce. President Saywell has rightly stated:

"Traditional industries operating in sheltered environments are yielding, they are yielding to a new wave of advanced manufacturing, information services and high-tech processes. We must compete in a rapidly changing market with rapidly changing technology and intense international competition."

It is the position of Simon Fraser University and many other such institutions that now, more than ever before, they must play a key role by commercialization of university research. Mr. Saywell has noted that many studies show a high standard of living correlates directly with a well-educated population. It is even more evident that the standard of living is even better where human resources are employed in technological research.

Another important facet of university and industry joint projects is job creation. The Social Credit government recognizes the importance of the achievements of innovative companies and the ideas of enterprising British Columbians. And to accelerate the economic diversification, we have

[ Page 1190 ]

many programs in place. Since the benefits to all concerned are becoming increasingly obvious, I urge businesses to take an even more active role. I urge them to contact their universities, colleges and other educational institutions, and back those institutions with ideas, participation and dollars.

[10:15]

MS. MARZARI: Mr. Speaker, no one could be more concerned about the cooperation between the private sector and post-secondary institutions than this side of the House. Our concern takes a number of turns here. We are very proud of what has happened up to this point in this province, in terms of our ability, through our post-secondary institutions, to pull in federal research dollars. And this is where most of those dollars come from: the national science and research council, the national medical council and some other national research bodies basically generate more than half of the money that comes into this province; national and provincial foundations also contribute.

In the last number of years, however, the national research and science council has basically stipulated that money will not be forthcoming to our post-secondary institutions unless it is cost-shared by corporations in the private sector. So, although we are very proud of how far we've come in this province, this cooperation has not happened, shall we say, organically. Rather, it has been mandated. This in itself can play some havoc for pure research priorities. Happily, in this province we don't have any pure research priorities, so that doesn't seem to bother us any.

Nonetheless, I think what should be said here is that although we are proud of our universities and their ability to pull in these dollars, we must start developing our own plans, our own systems of accountability and our own rationalizations for ensuring that these dollars are properly used.

UBC, for example, attracts more than half of these dollars. Of the $150 million that pours into this province every year, UBC attracts $65 million to $70 million, mostly in the medicine, science, engineering and research faculties. In fact, UBC proudly boasts 52 companies that have been spinoffs of this activity, where faculty, students and related individuals and professionals have set up their own companies and have generated in the 1985-86 economy $88 million in profits or in money brought into the province because of these spinoff businesses. They have created no less than 1,000 jobs at UBC alone.

What has to be said now, now that we have built this space, are a couple of things; one, we have been concentrating in an unplanned way on high-tech generation. This has led us, without planning and proper development, into areas such as CART at New Caledonia College. Because of lack of good contracts developed, there is a lot of confusion about who actually owns CART. Between interlocking directorships on CART, which stands for, by the way, Centre for Advanced Resource Technologies.... It is a subsidiary of North Western Technology Ltd., a private company.

CART, in its relationship with the College of New Caledonia, is basically running its own show. There does not seem to be any real responsibility or accountability back to the community or to the college. This is a problem of what we can run into when we throw ourselves into the high-tech business without proper planning.

I would go on to suggest that we would applaud on this side of the House, the new Premier's Science and Technology Advisory Council, which I gather is going to be reporting now to the Advanced Education department. It is through this mechanism that we hope the province does develop a sense of accountability and a sense of planning, so that we can do better with science and research dollars that are coming into this province.

HON. MR. STRACHAN: I'll be brief. CART hardware is owned by the province of British Columbia. The board of directors are a majority of local residents and they are seeking an active president at this point. Just put that on the record.

MR. MERCIER: Mr. Speaker, I didn't hear much that I could disagree with in the previous comments. It's nice that the opposition when in government didn't display the resolve and the support for the programs that I referred to, so I'm happy to see the change of direction indicated by the member from Vancouver-Point Grey.

I'd like to close by saying that the second part of what I wanted to talk about was to address briefly the student assistance programs. Over the years millions of dollars of grants and scholarships have been awarded by government to students at post-secondary institutes. I suggest that all students who have benefited from grants or scholarships over the years be encouraged, when they are in an income-earning position, to repay of their own free will those amounts as a perpetual scholarship fund. This would create a multimillion dollar pool of capital for future student grants and scholarships. With such a plan, those who have received the benefits of higher education could show gratitude to the other people of this province by supporting the perpetual scholarship fund.

Thank you, Mr. Speaker, for the opportunity of leaving these thoughts with the members today.

MR. HARCOURT: Mr. Speaker, I would like to ask leave to make an introduction.

Leave granted.

MR. HARCOURT: Mr. Speaker, in the gallery today is a young British Columbian, who is here observing this Legislature and the decorum of this very fine body, and his mother. I'm very proud to introduce my wife Becky and son Justin, who are just up there.

MR. BARNES: Mr. Speaker, I'd like to make an introduction, if I may.

Leave granted.

MR. BARNES: First, I'd like to associate myself with the first member for Vancouver Centre, who has just asked us to welcome his son Justin and wife Becky, soon to be first lady of the province of British Columbia.

As well, I would like the House to join me in welcoming Mr. James Kirk, who is in Victoria this week as a member who will be participating in the third Western Canada Youth Parliament out at the University of Victoria over the weekend. I am very pleased and honoured to have been invited to read the throne speech at this event.

[ Page 1191 ]

WEST KOOTENAY POWER AND LIGHT CO. LTD.

MR. CLARK: Mr. Speaker, I want to begin my remarks by stating very clearly that on the NDP side of the House we are unequivocally and unalterably opposed to the proposed sale of West Kootenay Power and Light to the American company, UtiliCorp United Ltd.

We believe that it is quite simply not in the public interest and is not in British Columbia's interest to allow the sale of a hydroelectric utility to a foreign company. We say this essentially for two reasons.

First, American control — foreign control — of this resource will mean higher rates to the consumers in the region. Dividends will flow out of British Columbia and out of Canada.

More importantly, complex intercompany transactions are exceedingly difficult for regulators to monitor. That means that the head office in the United States can pass on to subsidiaries in B.C. inflated costs for goods and services — and we have seen that historically in this country. How will the Utilities Commission determine precisely whether those costs are justified, when they're passed on to the subsidiary? The answer is that they can't. All of the academic literature shows the difficulty of regulating private utilities. Milton Friedman has written books about the difficulty of regulating private utilities. Those inflated costs will be recovered from people buying their electricity from the company.

That's very important in this particular case, because UtiliCorp has bid $20 million more than the company is worth. A $20 million dollar premium — higher than any other bidder. They've stated that they won't pass that $20 million on to the consumers. Does anybody here believe that this big American company is really giving a $20 million dollar gift to Cominco? Do they really believe that they're not going to get a return on their investment? UtiliCorp, like any other business, wants a return on their investment. They will — indeed they must, to succeed in business — find a way of recovering that investment from the people in the region. So power rates will go up at least 8 percent if UtiliCorp buys West Kootenay Power and Light. And who knows how much more in the future, with the erosion of effective regulatory control?

The second reason we oppose the sale is that energy is a strategic sector of the economy and should be controlled locally, preferably by some organization not solely committed to profit maximization. Electric power plays a vital role in economic development, and control of this sector automatically involves a degree of control over the structure and future direction of the regional economy as a whole.

How can we allow this monopoly resource to be controlled by foreign interests? Will a foreign company use their resources to subsidize or otherwise promote or pursue economic development in the region? Of course not. American companies come to Canada to make a buck. They come to make a return on their investment, not to advance the cause of the community.

Most importantly, that region, Mr. Speaker, has been devastated by the recession in British Columbia. The Kootenays, Boundary and the Okanagan have been devastated. To quote the remarks of Corky Evans, before the Utilities Commission: "In a couple of years, we've lost a sawmill in Brilliant, the sawmill in Creston, the sawmill in Kaslo; we've lost the plywood plant in Nelson, the sawmill in Nelson; we've lost the university. This community, this economy right here, is somewhat in shock in these times." And the list goes on: Alcan Manufacturing in Kelowna shut down; sawmill in Salmo shut down; centralization of B.C. Tel has reduced 90 jobs in Nelson alone. This region needs economic help. Will this do it? Of course not.

We believe that the sale of West Kootenay Power and Light could be an exciting opportunity, a dramatic and significant force for community economic development. If local people owned and controlled their hydroelectric power, they could use it to generate jobs; they could use it to generate economic development and employment in the region.

We subscribe, on this side of the House, to a view that Quebeckers call maitres chez nous, which means "masters in our own house." We don't rely on foreigners, foreign investment or foreign companies to develop British Columbia. We can do it with local people, with local talent and with local resources.

There are other qualified bidders for this, like the regional district and the operating engineers' union pension plan, which have put forward a bid recently.

The sale of West Kootenay Power and Light, Mr. Speaker, will not add a single job. This foreign investment is not going to put more people to work; it's simply buying a Canadian going concern. It's Mulroney-style, begging American investment. This government should be ashamed of itself for their silent approval of this sale. And those members in the region, like that member there.... He should be ashamed of himself. He's not going to get into cabinet, so speak out against this sale that's going to affect this region. And the member for Nelson-Creston (Mr. Dirks) — where has he been? Silent. Silent approval of the sale of that monopoly resource to a foreign owner, which doesn't benefit the region.

Mr. Speaker, I have moved a private member's bill on this question to outlaw foreign ownership of hydroelectric utilities. Many American states have similar statutes and don't allow their hydroelectric utilities to be owned by foreigners. We should do the same. Those members, particularly backbench members from the region who aren't going to get into cabinet anyway, should speak out on this sale. The NDP is unequivocally opposed to foreign ownership of hydroelectric utilities. We are opposed to the sale of West Kootenay Power and Light to an American company, and we will do everything — if that side won't — to stop this sale.

[10:30]

HON. MR. DAVIS: I must congratulate the hon. member on a good speech. Power is always an important topic, especially monopoly power. He said that private utilities are difficult to control, and I agree with that. There's only one entity that's more difficult to control, and it's a Crown corporation.

Over the years I've listened to many speeches delivered eloquently from the other side of the House, and none are more eloquent than those attacking B.C. Hydro, or the management of B.C. Hydro, or how it runs its affairs. Hydro looked at West Kootenay Power. Hydro, which might have been interested in taking over West Kootenay Power, had several problems, not the least of which was that its rates were twice as high as the private utility's rates. So there was a problem as to how to phase n B.C. Hydro's operations in a significant area of the province, doubling the rates over a period of time. So Hydro obviously is a higher-cost operation than West Kootenay has been.

[ Page 1192 ]

West Kootenay serves a market roughly one-third the size of Vancouver Island, just to give an idea of scale. West Kootenay Power has two very small power plants, 2 to 3 percent of the capacity of hydroelectric plants in this province; so it's small. Being a private utility, West Kootenay is controlled in several ways. One is that it cannot generate more power from its two small plants without the water controller of the province allocating more water. All of the water is allocated under two international treaties and under the rules and regulations of the water controller. So there's no ability of West Kootenay to expand its operations. It will expand by buying more expensive energy from B.C. Hydro.

There's the question of rates. The Utilities Commission rates are tied to historic cost; and only demonstrated historic cost, or demonstrated current or future cost, is a basis for increasing rates. It doesn't matter what the shares trade for. Share price or the cost of the takeover don't matter at all; it's the cost of building those plants, which happen to have been built many years ago. That's why the rates are relatively low. There is no way that West Kootenay Power, if it's taken over, will be able to raise rates without installing or updating or modernizing or expanding the system.

Foreign ownership is explicitly covered by federal legislation. Federal legislation covers communications and banking; it doesn't cover power utilities. Investment Canada, when it looked at this proposed takeover, agreed with it. We do not have provincial law that stipulates that foreign ownership is not permitted in any industry. We would have to legislate in order to prevent a takeover in any area, let alone in this area. So the hon. member is proposing legislation. Frankly, I think West Kootenay's takeover is only warranted if Utilicorp can market better than its predecessor, which means more new industry, more jobs. Whether they can do that or not remains to be seen. But the hon. member can't blame past problems on Utilicorp; he can only conjecture about future ones.

Finally, I think this is partly a matter of confidence. I'm sure Canadians can run operations like this, can develop industry as effectively as Americans. It doesn't bother me at all that Americans own shares; they won't be the management.

Interjections.

HON. MR. DAVIS: The members opposite have been fond of saying that the Columbia treaty was a sellout. They don't talk now about the Site C equivalent power about to be repatriated at no cost forever as a bonus to the treaty. We did well negotiating with the Americans. Be confident we can do a job, so let's not be worried about a few Americans owning some shares in a small utility in this province. It'll be regulated, regulated well, and if they don't do a job, we'll be on to it again.

MR. SPEAKER: The second member for Vancouver East. I'm sorry, to the first member for Boundary-Similkameen (Mr. Hewitt) ; the time is up for the response, and the second member for Vancouver East will wrap up the debate.

MR. CLARK: I want to thank the minister first for his serious response, but I want to make a couple of final remarks. First, B.C. Hydro is your responsibility. It's been created by Socred governments, and Socred governments have been responsible for its growth and its uncontrollability, not this side of the House. Our position clearly is local public ownership — local ownership first and then public ownership — and we believe that Hydro should be busted up, that there should be regional control of B.C. Hydro all across this province.

Secondly, I want to say that the rates will go up. The minister said that current costs influence rates. The fact is that this company needs $100 million in investment regardless of who buys it. That's the information before the Utilities Commission. There are going to be rate increases, and this company will have an opportunity to pass on the costs from their head office to the utility that are very, very difficult, I think impossible, to regulate. I think this company has to get a return on that $20 million, and they will get it, and it's very difficult to control.

Finally, on foreign ownership, it's a leap of faith that the minister asks us to take. He says: "I have confidence that the Americans will do a good job." Well, I don't, and I don't think we should take that kind of leap of faith. Foreign ownership of a provincial resource, of a monopoly provincial resource, is provincial responsibility at least as much as, and I think more so than, that of the federal government. We have every right and every power to intervene to disallow the sale of hydroelectric utilities to foreign companies, and we should do so; we shouldn't have blind faith in the kind of free market system that that government opposite talks about so much.

POLICING

MR. RABBITT: I welcome this opportunity today to address the topic of policing within our beautiful province. Presently B.C. is policed either by independent municipal police forces or the RCMP, either employed by the province or by municipalities. I wish to address the policing policies in B.C. and specifically what I consider to be unfair hiring practices by that agency in relation to our B.C. youth that are applying for jobs.

I would firstly like to preface my remarks by saying that I think the RCMP is a first-class police organization, and I don't want these remarks to be considered a negative response towards the organization in any way other than their hiring policy. Due to the time restraint, I will only speak to a very narrow section of that, and that is the policy of hiring recruits in B.C.

To look at a bit of the history, policing in our province has gone back to the early days prior to Confederation. We started off in the early days with the Northwest Mounted Police. We went through the era of a provincial police force. In 1950 we re-established a contract with the federal government with the RCMP, and we're presently now partway through a ten-year contract which will terminate in March 1991. The present training facilities for the RCMP are in Regina and there are no plans at the present to establish any of these facilities in B.C.

I'd like to take a moment to discuss some of the stats over the last few years. For example, going back to the year 1983-84, at that particular time recruits from B.C. represented 3.57 percent. It increased the following year to a little under 5 percent. Presently we are approximately 12.8 percent. When we look at those specific numbers going back to 1984, that represented six youths; the following year, 97; last year, 82. We are, in effect, employing over 3,700 at the present time; 3,700 employees of the RCMP, regular constables, are employed in the province of British Columbia,

[ Page 1193 ]

representing almost 30 percent of the national figure of that police force. When we consider that only slightly over 12 percent are being hired from this province, there's a serious imbalance which we have to address.

I've looked up the hiring policy which I mentioned earlier. It's based on four main factors. One is that they’re looking for a university degree; second, they're looking for females; third, they're looking for bilingualism; and fourth, they're looking for native applicants. I'm not suggesting for a moment that there's anything wrong with any of those four categories. What I am suggesting is this: let's hire graduates from B.C. universities. Let's hire female applicants from British Columbia. Let's hire native applicants from British Columbia. And if we have to teach them a second language in order to qualify as a member of this force, then let us teach them that as well.

I suggest very strongly that we carry this message to Ottawa, that we carry the message to the federal government that we want a better balance and we want to see a better opportunity for B.C. youth. We're talking right now about a budget in this province of approximately $250,000 in RCMP policing. I think that our youth should have an equal opportunity, and at the present time they're not getting that equal opportunity. There are many imbalances. One of the imbalances, for example, is in the unemployment figures: B.C. at 12.6 percent as compared to the Canadian average of 9.3 percent.

Interjection.

MR. RABBIT: Listen up, my friend. I'm going to ask the Premier and the Attorney-General (Hon. B.R. Smith) to make this a priority, to put it on the priority list for the first ministers' conference, and to see that this be addressed. I think if we work cooperatively with the federal government, we can create more opportunity for our youth in British Columbia and we can bring a better balance in the hiring practices of this first-class police force. I don't want to have to look at the alternatives. The alternatives are varied, and I don't think they are beneficial. So I would like to see that we have a fair and honest representation for B.C. youth on that force.

MR. SIHOTA: Well, it's always delightful to hear members on the opposite side talk a little bit about youth, because I wish to remind the member that it was this government, when it introduced its throne speech in the first week of March this year, that failed to mention the word "youth" in that throne speech; that failed to outline any type of youth employment programs in its throne speech; that has been totally negligent in terms of trying to deal with the 24 percent level of unemployment for young people in this province.

[10:45]

And now the proposal is that, well, the feds should do something about it with respect to the RCMP. We on this side have been looking for a comprehensive youth employment strategy from the other side, and it has been lacking. There's absolutely nothing flowing from the government with respect to dealing with the serious problem of youth employment. That's the first point.

The second point is simply this: we do have a real need within the RCMP for all sorts of additional services. We have a real need for greater representation not only from British Columbia but from various ethnic communities in this province within that police force. Mr. Speaker, the member opposite who spoke should know that nine out of ten native people in downtown Vancouver are arrested — nine out of ten. The member opposite should know that there are restrictions — technical, indirect restrictions — on people from my community being able to enter the RCMP. There is an under-representation of Chinese, Japanese, Oriental and Asian individuals in the RCMP, and that's something that should be addressed as well.

The third point is that there is indeed a need within the RCMP for additional recruits in additional areas, and I want to lay out some of those areas. First of all there's the commercial crime division. There's a total lack of enforcement in the commercial crime division. We have in this province a $400 million trade — if you want to call it that — in narcotics, and a limited amount of enforcement in the RCMP. We have in this province about a $100 million — on the conservative side — illegal trade in sports gambling in this province, and we have one person from the RCMP who's attached to investigate that. One person. We should be putting more resources in there — of course, unless this government is intent now on legalizing that type of gambling activity in B.C. If that's their intent, to secure some of the funds from it, I guess that's a different story.

We have in this province a lack of enforcement within the stock market, and of course I've been talking about that in the last week or so in terms of the commercial crime divisions, both provincially and federally. They're looking at the manipulations that are going on in the stock market. There's a total lack of RCMP coverage in those areas. There is a lack of RCMP coverage in unincorporated municipalities, the larger of which are in my riding. We have, for example, the inability of the RCMP in ridings like mine in uncorporated areas to do simple things like delivering documents; just serving people with documents requiring them to appear in court, subpoenas and the like. So there is a tremendous lack. But I have a large concern about where this government is headed. It always seems to point the finger at the federal government, to say it's a federal problem, to say that the feds should do something about this, that, or the other thing; the feds should rectify the problem about the RCMP; the feds should rectify the problems with youth unemployment; the feds should be putting money into this or that, and that there is an imbalance one way or the other.

This government, in my view, Mr. Speaker, cannot behave like an ostrich and pretend that it has no responsibility in matters of policing, in matters of youth employment and in matters of correcting those imbalances that we talked about earlier on. I would say to the member opposite that instead of simply trying to encourage the first ministers to make this an agenda item in their discussions, perhaps he should be lobbying his own government to make employment, to make policing, to make crime investigation an agenda item and a top-priority item within this provincial government.

MR. RABBITT: Thank you, Mr. Speaker, I take it you were telling me something. I appreciate the support I think I've got from the hon. member. I realize that we do have a very wide range within the topic I put on the agenda today that we could have addressed, but as I mentioned, with the limiting factor of time, I wanted to address one which I thought was very pertinent.

[ Page 1194 ]

Yes, I do have concerns about the ethnic minorities in their representation, but I think that in addressing the problem of youth, if we can establish getting criteria based on an equal representation to the amount of numbers that we have employed, then the next step is exactly as you say, to see that the people within our community are represented. I understand some of the problems that you've discussed today — and they are problems — which I don't think I'm trying to unload onto the federal government. I'm not standing here to bash the federal government. I'm saying yes, we do have a problem. But we have the power to sit down and negotiate this particular item with the federal government. I might be able to make some points on bashing the feds, but this isn't the reason of the discussion today. The discussion today is to address the problem of getting more young people jobs within this province which we are paying for. I'll rest my case.

B.C. SCIENCE AND TECHNOLOGY POLICY

MR. LOVICK: Mr. Speaker, on the order paper it says that I'm going to talk about a science and technology policy for British Columbia. More appropriately I think my remarks ought to be titled "In search of a science and technology policy for British Columbia," because certainly that's part of our problem.

Before I do that, Mr. Speaker, I'd like to respond to a couple of other comments that have been made today that directly connect with the area of science and technology. My colleague, the second member from Vancouver-Point Grey, made reference to CART, the Centre for Advanced Resource Technologies that is located in Prince George. If you'll pardon me an outrageous pun, Mr. Speaker, I would like to put the CART before this House. I want to do so for a very particular reason. I want to start my remarks by suggesting that when we talk about a science and technology policy in B.C., or for that matter in Canada, part of our problem is credibility. We don't have much. We don't have much simply because of a confusion surrounding what ought to be done in the name of science and technology

I was delighted to hear The hon. Minister of Environment, the Government House Leader, respond to the comments about CART and tell us that the provincial government does indeed own part of it, that there's a local community board and so forth. What I want to suggest, however, to the minister through you, Mr. Speaker, is that there is also considerable confusion in the community of Prince George regarding just what that thing called CART actually is and does, who the players are, the potential for conflict of interest, which has been referred to in the local papers in Prince George, and, moreover, the suggestion that in fact there was a considerable amount of money spent by the college, given to CART to keep it in operation — some $300,000.

All I want to suggest — and I'm not for a moment intimating any kind of impropriety, necessarily — is that those concerns are still alive and well and causing people some anguish in that community. I understand that there has been a report prepared for the Premier, the result of an independent investigation into CART. I would like to suggest to the minister that the appropriate thing to do, if we want a meaningful, coherent, accountable and credible science policy in this province, is to release that report. Make it public so we get some sense of exactly what the problem was there, so we can learn from that.

So much, then, for this CART before this House.

The second point I'd like to refer to, albeit briefly again, is in response to the member for Burnaby-Edmonds (Mr. Mercier) talking about science policy and the direct connection with industry. The member made reference to discovery parks. Unfortunately the member's comments seemed to suggest that the discovery park had been an unqualified success. Let me remind the hon. member that that is not the case. I don't think anybody who has examined the concept or studied the literature would come to that conclusion. Indeed, there are some serious questions and reservations about the discovery park as a method of encouraging the development of science policy. Some will argue that the discovery park, as we've seen the American model, and as we've seen it in Canada, is in fact incompatible with good community development. So I want to remind the member opposite that we should not for a moment assume that discovery parks have somehow come as a marvellous panacea or solution to our problem. That's not the case.

The third area, just to touch on it very briefly, raised by members opposite is the connection between industry and the universities — between business and the universities. To be sure, there is a place for that, but I want to remind the members opposite why a number of us were concerned in the early seventies about that too-close connection. We had that abomination and atrocity in South-East Asia still going on, thank you very much. We had a clear connection that had been demonstrated for 30 years about a military-industrial-academic complex. We knew that stuff, and we wanted to be very careful that the universities and the domain of research were not co-opted and corrupted by the wrong kind of research and connections. So let's have a little sense of history before we suggest that we on this side of the House are somehow anti-science. That's not the case at all.

Mr. Speaker, I suspect I've used rather more time than I had originally anticipated. I want to turn very briefly to the search for a meaningful science policy. Let me change my tack and approach by commending the government first. I want to commend the Premier for establishing what is called the Premier's council on science and research. It's overdue, but a marvellous step in the right direction.

Also, I want to commend the Premier on the throne speech in terms of the decision to establish what is called a strategic or common strategy for the players in the game: namely, the universities, the private sector and governments. The point, of course, is that that statement, understandably, indicates to us that we have not had that kind of coordination and coherence; Lord knows we need it. Our predicament has been that we have had a policy that, to put it not too uncharitably, has been uncoordinated and incoherent. There is, in fact, no obvious coordination between the players. There is no recognizable and coherent policy governing science in this province: namely, what are our plans and our objectives, what do we want to accomplish? Instead, all we have is rhetoric.

Finally, neither is there a strict accounting for how those dollars are spent. You can get into a heated argument on the University of B.C. campus, for example, by simply pointing at that whole area in the health sciences section of the campus, where most of the research dollars are going, and saying: "What's going on there?" Because you will find senior professors at the university who say: "I do not know." That's our predicament, Mr. Speaker.

[ Page 1195 ]

HON. MR. STRACHAN: Mr. Speaker, I wasn't planning on commenting today, but it seems that the members have put the CART before the House. As I indicated when I spoke to this earlier after other members' statements, I think it's appropriate, as the MLA for Prince George, for me to address the CART questions that have been placed before the House today.

I don't think there's any question that, with respect to CART, we could assume maybe a checkered past, in terms of its direction, in terms of its accomplishments, and in terms of the expectations from the science, business and development community of Prince George and the province of British Columbia. However, the province recognized those concerns, partially from concern from the members themselves, partially from the academic community, partially from the report that the member referred to, and we recognized that we would have to address the whole management situation in CART and put it on the right track.

[11:00]

With that in mind, in December 1986 we agreed that CART would receive continued provincial government spending, in conjunction with federal government spending, which was part of a federal government/provincial government agreement. Our conditions were that CART would have a majority of their board of directors from the Prince George area; that they would seek an active recruitment of a full-time president, to be not associated with the College of New Caledonia but with CART itself; and that we would ask the National Research Council, under the auspices of our Member of Parliament, the Hon. Frank Oberle, to assist us in this direction. All those conditions have been met; and on the basis of that, the government continued its funding, which is $2.8 million for CART.

I don't disagree, as I said earlier, that the situation of CART had to be addressed. But I want to impress upon all members that there's a remarkable computing capacity there; there's a lot of horsepower. It's one of the bigger computing facilities, or has the potential to be one of the biggest computing facilities and research facilities in the province of British Columbia. So we felt there was a need there and, of course, as the member I was pleased to have that money continue to flow into my riding and continue to benefit the government of British Columbia.

I understand that the recruitment drive is in place now for the full-time president of CART. The president will be given the mandate of listening and reacting to the business and development community — firstly, within the central interior region, or actually seeking and soliciting business from all parts of the province, or from outside of the province. I think that's healthy. Really, we are on the right track now. I will commend it to all members that I see CART as being a remarkable institution for the riding, for the benefit of British Columbia business and development. I would commend that to the members. It's going to be a good thing, and that's why the government of the province of British Columbia has continued....

AN HON. MEMBER: Will you release the report?

HON. MR. STRACHAN: No, I'm not prepared to release the report. That's old news. I don't think it would do any of us any good at this point. The board of directors and the president are aware of the new direction they have to take. I'm convinced that they can react to the concerns of the province as addressed to the board, and I'm sure they'll react in a responsible manner, and CART will continue to be of benefit to Prince George and all of British Columbia.

MR. LOVICK: I thank the minister for his response. I am sorry, however, that the minister apparently didn't hear my central thesis. My central thesis in my remarks is that we have a problem with credibility in the scientific enterprise. I was suggesting therefore that the best thing this government could do, if it wants to begin the work of repairing our lost credibility, is to release that report; otherwise, what we're being asked to do is to simply accept the fact that everything has been solved and it's old news, it doesn't really matter.

For heaven's sake, don't we recognize that what we've got to do is somehow put an end to the sniping and the quarrelling that's going on? All we have to do is use the truth to set ourselves free. Why is it that this government simply has to stonewall? Why won't you release the report? I don't, however, want to devote all my remarks to that part of the discussion, Mr. Speaker, but I do want to go on record as imploring, importuning this government to release that report. I suggest it would serve all of our interests well.

What I want instead to do is to touch briefly on what we might do with a coherent and credible science policy. Our predicament, as I hinted very briefly in my earlier remarks, Mr. Speaker, is that it is not coordinated. We have a whole bunch of different players, all competing for funds, all of whom apparently do not know what one another is doing — I think there's a grammatical error somewhere in there, Mr. Speaker, but I won't try to save that sentence. The people simply don't understand what other people in the field are doing. The University of B.C. points very proudly, for example, to a steady increase in funding from federal grants, and so forth, I think totalling some $63 million in the past year — exclusive of the TRIUMF facility and the kaon factory and all of that, by the way, which is another $420 million. The predicament is, however, that we have various departments at UBC all competing with one another for those dollars, because nobody knows who is doing what on the other side of the campus.

I'm suggesting that we have an opportunity here if we accept the premise — and it's a good one, I think — that science has a tremendous economic generation capacity. If we accept that premise, then surely it follows that we ought to set up a coherent and coordinated strategy so that all of the players who are applying for funds indeed know the rules governing the appropriation of funds. Now that's not a big request; I think it's a small one, and I hope it's one of the things the new science council that has been established in this province will do.

I'm a little worried, however, because on the basis of half a dozen or more phone calls yesterday afternoon, nobody in the appropriate ministries could tell me the terms of reference for the new council. I hope we get those terms of reference quickly. I don't think we can afford to wait much longer. Science provides us a marvellous opportunity to do wonderful things in this province; let's take the opportunity.

HON. MR. STRACHAN: At the outset, I'd like to ask leave for the Minister of Finance to table amendments to Bill 17 and Bill 11 prior to completion of second reading stage of these bills. This may be a diversion from standard parliamentary practice, but we believe that tabling these amendments

[ Page 1196 ]

now will clearly be in the interest of Her Majesty's opposition and clearly in the interests of the public in general.

Leave granted.

Hon. Mr. Couvelier tabled amendments to Bill 17, Property Purchase Tax Act, and Bill 11, Social Service Tax Amendment Act, 1987.

HON. MR. STRACHAN: Second reading of Bill 21.

INSURANCE (CAPTIVE COMPANY) ACT

HON. MR. COUVELIER: The principle of Bill 21 is very simple. Insurance companies now licensed to operate in British Columbia are subject to the regulatory provisions imposed by the Insurance Act. Many of these provisions are in place because of the government's responsibility to oversee the interests of consumers who deal with these companies. There is, however, another class of insurance company that does not deal with the general public. This is the so-called captive insurance company.

Captive insurance companies are insurance companies formed by corporate groups, industry associations or other groups of sophisticated companies to insure only their own risks. At present, activity resulting from the use of this valid and rational business management tool is being forced offshore by over-regulation in Canada. This bill will provide a balanced and reasonable regulatory framework which will make it feasible for captive insurance companies to be located within Canada. Captive insurance companies are useful to some companies for a number of reasons: improved cash flow; more control over policy wording and administration; potential direct access to reinsurance; the provision of otherwise unavailable insurance; and savings due to lower costs for some insurance. Although captive insurers will not be useful to all businesses, for some they will provide a way to improve efficiency.

[Mr. Pelton in the chair.]

The bill provides for three types of captive insurance companies. None of these will be permitted to deal with the general public — none of them. They will be permitted to insure only their owners, related companies and people operating on their behalf. The types of companies contemplated by the legislation are: first, pure captive insurance companies which will insure a single corporation or group of related corporations — the owners of these captives will generally be quite large businesses; secondly, association captive insurance companies which will insure the members of associations — usually trade or industry associations, but potentially also professional associations and others; and thirdly, a sophisticated captive insurance company designed to allow the banding together of moderate-sized companies which are not necessarily related. Each sophisticated insured will have to demonstrate sophistication in insurance matters to satisfy the superintendent that they know exactly what they are committing themselves to.

The regulatory environment established for captives by Bill 21 differs in a number of important ways from that imposed by the Insurance Act for regular insurance companies. Captive insurance companies may be smaller than regular insurance companies in terms of capital. However, their capital and reserves will have to be sufficient to support their insurance activities. Reporting requirements will be less onerous than the extensive forms required of regular insurers, but captive insurers will have to file annual audited financial statements and annual actuarial reports. There will be no direct control of investments or reinsurance for captive insurance companies, but they will be required to behave prudently. If their solvency is in question, the Minister of Finance and Corporate Relations will have the authority to revoke or suspend their registration.

There are no tax or other incentives or subsidies being offered to encourage the creation of captive insurance companies. These companies will be subject to the same income taxes and insurance premium taxes as any other insurance company.

Captives are often located in offshore tax havens to take advantage of both regulatory and tax benefits. Nevertheless, I believe there will be other factors which make B.C. an attractive location for captive insurance companies, as long as British Columbia offers a competitive regulatory climate. These factors include British Columbia's relative accessibility compared to offshore locations, the stability and physical attractiveness of this province, the existence of an extensive, well-trained professional community and our world-class communications and travel infrastructure. In addition, a federal excise tax imposes considerable costs on offshore captives, but not on companies located in Canada.

With this bill, British Columbia is providing a competitive and appropriate regulatory regime. Given the interest which has already been generated, I am sure that significant benefits will accrue to British Columbia as a result. Mr. Speaker, I commend Bill 21, the Insurance (Captive Company) Act to Members of the Legislative Assembly, and move that this bill be now read a second time.

MR. STUPICH: Mr. Speaker, the opposition will be opposing this legislation. For one thing, we feel that we don't know enough about it yet. For another thing, I'd like to know just who's asking for it and in whose interest they're asking. I would think it's pretty selfish interests on the part of large corporations; and if there's something in it for them, then it's costing us something. What the cost will be I can only speculate.

The government seems to be following in the tracks of Social Credit governments over the past 12 or 13 years. They've been trying to find some panacea for our economic ills, when the answers are in front of them and they refuse to see them, to hear them, to act on them. There have been many schemes. First, there was the one that was going to make every person in British Columbia a shareholder in a successful giant corporation. I don't think I have to name it as BCRIC. Everyone knows what happened to that. Assets that were worth.... When the share value went up to $9, that was still less than the book value of the assets. Today those shares are trading at something like $1.10 — once they were turned over to the private sector to operate. That was an opportunity. Those assets were owned by the government, and they were annually producing dividends that were being used to pay for services for the people of British Columbia. It was thrown away. It was supposed to be a way to progress, but it turned into exactly the opposite.

I remember the Minister of Finance standing up on one of his budgets in the late seventies and talking about the new solution to our economic woes in British Columbia, which

[ Page 1197 ]

would be to establish special enterprise zones all over British Columbia, or at least on the coast. We didn't hear much more about that for a while. In the next budget, I think it was, the emphasis was on a Pacific banking centre. We had forgotten about the special enterprise zones. In the meantime nothing had happened. Now we're going to have an international bank in Vancouver which is going to produce prosperity for the province of British Columbia. The next thing was that we changed the name of the special enterprise zones — as I recall, this was the order — and all of a sudden they were free enterprise zones. Once again, this was going to be the economic salvation for the province of British Columbia, and once again we heard very little about it after the initial announcements and publicity.

Then a brand-new scheme came up, which was so hot and had to be dealt with so promptly that in the dying days of one fall session the Minister of Finance got permission to rush this bill through because people were standing in line to take part in the program. Some members have been here long enough to recall the Equity Investment Plan. The Minister of Finance was actually going to give people who wanted to start playing around in the stock market as much as $2,500 if they would simply take advantage of this great opportunity. I haven't heard a thing about it since it was passed in the House. So nothing came of that.

Of course, there was another get-rich-quick scheme for the people of British Columbia — the ALRT-financing plan that cost us I'm not sure how many millions of dollars. We'll hear more about that later; there'll be opportunities to ask.... That was another plan that was going to be great for the people of British Columbia.

[11:15]

The latest whizzo scheme, if you like, is captive insurance companies. We're told it isn't really going to cost us anything — there are going to be no tax benefits. If it isn't going to cost us anything and if there are no benefits to the people wanting to set up these companies, why are they doing it? We're not going to have any control at all over the spending of these reserves. Listen to that word "reserves," Mr. Speaker. How are those reserves built up in the first place? They're built up by the companies paying large premiums, and it's proper that insurance companies have to build up reserves. But in so doing, the large companies paying those large premiums to the companies they own are lowering their income tax. That's costing the taxpayers of British Columbia something, because those companies are operating here, and they would be paying more income tax to B.C. If they weren't paying fantastically large premiums to companies they own themselves and companies that will be able to write off their income to a large extent by setting up reserves that they can show by calculations are proper reserves for the risks that they're running in those particular insurance endeavours.

It is going to cost us something, or nobody would be interested in doing it. Nobody would be interested in asking the minister to give them the legal authority to undertake this kind of activity. It's going to cost us, and what are going to be the benefits? Maybe, if the offer is good enough, some of the large corporations in B.C. will set up their captive insurance companies here in the province of B.C. Well, it was said at one time that the Pacific banking centre was going to provide employment for as many as three people, and I would think those three people in their spare time would be able to conduct all the work that's really necessary to keep these captive insurance companies going — all of them.

If I thought that this was one scheme of the many that have been tried by the party opposite over the past 12 years to do anything positive economically for the province of British Columbia, I'd be supporting it. But I think it's one more attempt to divert the attention of the people of the province from the kinds of things that we talked about in statement period today. Both sides of the House talked about the importance of education, about the potential for B.C. as a world centre for research and development. I think it was the government House Leader who said that we have the climate here to attract the kind of people who will do this kind of work. We have three universities. We have everything it takes for B.C. to be a real centre — a world centre. We have the geographical location: B.C., the gateway for Canada and for the United States to the Orient, to the developing nations in many parts of the world. There are just so many opportunities, if we'd look to the assets that we have and develop them rather than fooling around with these crazy ideas that come from somewhere else.

I can see nothing from this for the people of British Columbia other than another attempt, as I say, to divert our attention from our real problems and to suggest phony ways of answering them. I'm tempted to say — I haven't checked their biographies lately, but certainly in the previous parliament I would have said — why don't you go back to the business you know best? Most of you have done well in selling used cars; why not try that? I think it would be better than the schemes that have been announced by the government over the past 12 years for helping B.C. economically.

Mr. Speaker, the minister said nothing to convince me that this is going to help B.C. in any way. I'm satisfied from what he said and from my own knowledge of it that it's going to cost us something or nobody would be wanting to do it. On that basis I oppose the legislation.

MR. MERCIER: Well, I'm very surprised, Mr. Speaker, that the opposition member would oppose such a simple and straightforward proposition. I think that it's a case of the old adage of ignorance being bliss. The companies involved would simply be talking about the management of their own affairs. The reserve requirements aren't relevant, because they're talking about effectively being self-insured. And it's something that.... Before the opposition goes running off, they should consider what the municipalities may be asking as time comes.... They may be asking for the right to self-insure and set up their own central self-insurance corporation. Those are related issues; they aren't directly within what the bill is talking about.

I think the opposition has taken the position that anything corporate is bad. It brings to mind the view I used to have of that party when people were calling it the dinosaur party. If they hadn't heard of it, then they automatically assumed that whatever was being proposed was not good for the public. If this last speaker had been listening to the minister.... It's quite clear that the captive insurance companies will be permitted only to insure the owners of such companies, related companies and people operating on their behalf. In other words, it's very much a closed circuit. The class of insurance companies being talked about does not deal with the general public. This is an example of permissive legislation which allows a particular group in our business community to be facilitated to handle their own insurance needs.

The income tax, for example, payable by such a corporation would be payable under the terms of the federal Income

[ Page 1198 ]

Tax Act, and the provincial government would receive their share. If a captive insurance corporation operated at a profit through the fees they charge themselves, then they would be taxed on that profit.

One of the most important points made was that some of these companies have the ability to set up such corporations in other countries in the world. When they set up in other countries in the world, that means there may be five or ten or 15 employees working in those other countries on corporations that are dealing strictly with insurance that's placed in B.C.

I don't understand how there can be opposition to something that's permissive, that does not affect the general public one bit, that would be leading the way in a rather sophisticated field. So before the opposition goes off and opposes this bill, they should try to determine the significance of it. A number of major corporations are going to be insuring their own affairs. The losses they have to cover are losses they're suffering on their own.

MR. WILLIAMS: And if they're sued for damages?

MR. MERCIER: The insurance that they're carrying would have to have a reserve base the same as some of the insurance companies that are already operating. You have regulated insurance companies now that file their reserve statements, and they probably have less capital than most of these self-insured corporations will have.

Mr. Speaker, I really believe it's a typical case of opposing something for the sake of opposing it, of being obstinate about things that are not contrary to public interest and of not coming up with ideas of their own to facilitate this particular business need. It seems that the opposition thinks anything to do with business is bad. I thought your new leader was a little more sophisticated; that he understood a little more of the technicalities of these endeavours. I thought they would have absolutely stepped behind this legislation and supported it. I'm really disappointed that they haven't.

MR. SIHOTA: I want to respond to the comments made by the member opposite with respect to our position on this bill.

It's certainly not my view that our policy is simply to criticize anything that has a corporate label to it. Nor is our position on this matter simply one of saying: "Well, it's being presented by the government; hence we should oppose it." I think over the first few weeks and months of this session we have demonstrated clearly that we're quite prepared to support initiatives that we think will foster increased economic development in this province and result in the type of economic development that takes advantage of the particular talents of the people of British Columbia. We have some concerns about this legislation which get us to the position of opposing it. These are sophisticated concerns based upon the regulations, the statements and the specific terms of the legislation. I would invite the member who made those rather frivolous comments to spend a little bit of time reading the legislation and listening to what we've got to say about it to understand that there is in fact a lot of merit in what we say.

I want to start off on this point: I think part of what the government is saying when introducing this legislation is that jobs are going to be created in British Columbia as a function of this legislation, much as with the international banking centre. The first member for Nanaimo (Mr. Stupich) has already pointed out the rather lacklustre performance in that regard, and I can point out the rather lacklustre performance in other areas where the government tried to lure offshore enterprise to the province through various forms of tax havens, relaxed regulations, tax-free zones, enterprise zones, or whatever we've called them in the past. All of them have failed, and they failed for basically the same reason: the philosophy is flawed. The philosophy ought to be that we try to tap the entrepreneurial talents of the people who live in this province, not relax the rules to try to secure something from offshore which is questionable, first in terms of an enterprise, and secondly, which is unlikely to come here in any event.

Let's talk about the basic premise as to why the government thinks jobs are going to be created in this situation. The reason captives exist in places like the Caribbean, Bermuda and some of the other havens in that part of the world is because of the generous tax incentives that are offered. Nothing in this legislation really deals with that problem. There's nothing in this legislation that relaxes the taxation regulations, that in itself creates a relaxed tax haven equivalent to what's down there in the Caribbean. I appreciate that it does deal with the matter of fronting fees, with the matter of having to cycle the premiums through a regulated or accepted Canadian insurance company. That's one thing. And there's 7 percent to 12 percent in terms of fees paid in that regard. I understand that, having worked a little bit in this matter as a solicitor. But I must also say that the 7 to 12 percent break, if it indeed is that high, is not enough to encourage someone to come over here to British Columbia. In fact, there are other tax reasons as to why these companies want to remain in the Caribbean, and will. Therefore I think there is a serious question as to whether or not this legislation will create the type of jobs this government is forecasting. It's not going to happen, because we haven't dealt with the reason why they're down there. The reason is relaxed tax regulations, and rightfully, in my view, we haven't created a situation here that tends to make those tax regulations the equivalent of what they are in the Caribbean. Nor is there an income tax advantage.

Without going into any detail, I was reading recently an article in the Financial Post. It was interesting to read what one of the vice-presidents of Sedgewick Tomenson Inc. had to say. For those members of the House that are not familiar with that company, it is a large stock brokerage firm located in Toronto. They were looking at the proposed B.C. legislation in terms of captive insurance. For the reference of the members, the article appeared on May 4, 1987. The vice-president of that brokerage firm said: "There's clearly no income tax advantage, but it does allow anyone already planning a capture to save 10 percent federal excise tax on premiums paid to offshore insurance companies." But as the representative said, there is no clear income tax advantage to it to have these people come to British Columbia. Therefore it seems to me that the opening premise is flawed, in the sense that it is going to create jobs here in B.C. It is flawed because of the lack of the tax regulations, because we are not matching those and because we rightfully should not match those.

In my view, the sole purpose of this legislation, when you begin to look at it, is simply propaganda to get people to think that something is being done about the serious unemployment problems that we have in this province. If you reject that submission, which my good friend from Yale-Lillooet does right away, the next question to ask yourself is, okay, if I'm

[ Page 1199 ]

wrong in that regard, who is going to benefit from the jobs, if they are created under this legislation?

[11:30]

Well, the minister actually answered that question in his press release and the accompanying documents to the legislation. It is clear from those documents that the only people who are going to benefit, to use the minister's own words, are lawyers, accountants and actuaries. We have, in this province, clearly a significant problem when it comes to unemployment. However, the levels of unemployment among lawyers, actuaries and accountants is nowhere near the depth of the problems of unemployment in other sectors of our economy, like forestry and mining.

On this side of the House, we've laid out a strategy that's designed to create jobs in those areas. We don't necessarily have an unemployment problem in the specialized areas of insurance litigation, particularly from a solicitor's perspective. We don't have a major unemployment problem in this province in respect to actuaries and the issue of captive insurance companies, and we don't have an unemployment problem in relation to accountants specializing in captive insurance.

What I'm saying is that if, indeed, this legislation is intended to create jobs and to deal with the severe problems of unemployment that we all know we have in this province, it's targeted in the wrong way. It's targeted to try to create employment in areas where we don't have high levels of unemployment. Probably in areas with a level of specialization required, we don't really have people out looking for work in those areas. So the points are that, firstly, there is no evidence to suggest that it will create jobs; in fact, the evidence is to the contrary, simply because the same relaxed taxation regulations that are available in the Caribbean are not going to be available here in Canada. The saving of the 7 to 12 percent fronting fee that they're paying right now, if indeed they're paying it.... I must say that there is a way to get around the regulations to prevent having to pay that fee. That in itself, according to one of the largest brokerage firms in Canada, is not enough to encourage these people to come here. Thirdly, if there are going to be jobs, those jobs are going to be in areas that require a high level of specialization, in which I'm not convinced there is a high level of unemployment.

So (a) you're not going to make a significant impact in terms of unemployment; and (b) the government's assumption that there is going to be unemployment generated out of this is not well founded, if one begins to understand why it is that these companies are located in the Caribbean. We on this side of the House believe in fair taxation. We believe in taxation that attaches to the wealth of some of these corporations. We don't think that one ought to be introducing taxation legislation to encourage.... Well, I won't say "encourage," but relaxed to the point that it is in the Caribbean. I would like to think that members opposite don't agree with that either. So in terms of an employment generator, it's not going to make sense.

I want to turn now to another aspect of this legislation, Mr. Speaker, that also causes me a fair bit of concern. The minister has said that the system that is being proposed under this legislation is going to be well regulated, and that there are going to be some very stringent regulations in place here in British Columbia to ensure that the system works and that those who have to deal with captive insurance companies are going to be protected. Before I launch into my explanation on that point, I must say that I take great exception to the point made by the speaker who spoke before me on the matter of the general public not being affected, as if in some way the general public is immune and isolated from the provisions of this legislation. That's simply not true. The general public is going to be affected; let me explain how.

Let's take the example of a large corporation. In fact, most recently before I got elected, I was dealing with a civil litigation case that involved Canadian Pacific, which also self-insures, as do MacMillan Bloedel and several other large corporations in this province. We commenced legal action against Canadian Pacific, which we were successful in. But that aside, the point was that they had a captive insurance company and there was a claim made by my client, who was injured as a result of the negligence of that corporation. A simple matter: a corporate entity owned a truck; the truck collided with my client's vehicle, resulting in very serious injuries to my client at that time, injuries that required compensation in excess of $300,000 or $400,000.

In that case, this person — a member of the general public — obviously had to sue this corporation in order to recover damages, and that will be true again under the provisions of this captive insurance if indeed there are negligent acts of employees of these large corporations. The member of the general public will, of course, have the ability, the opportunity and the right to take legal action against the company, which is then protected by this captive insurance. So to say that the general public is immune to this legislation is misleading. The general public is involved directly with this insurance. It will not be immune, and it will have to take actions against companies that have secured insurance through captives.

I said at the outset that I wanted to talk a little bit about the regulations. I want to tie in the regulations, as I understand them. I agree that they haven't been passed by order-in council and so on, so I am just relying on the material that the minister provided in his notes and his press release on the issue. One that causes me a fair bit of concern is the regulation that says that when looking at capital requirements and reserves, a minimum being considered is $200,000 in capital and $100,000 in reserves. There are a lot of problems with that. Let's go back again now to the instance of the person whom I was representing against a large corporation that had secured insurance for a captive insurance company. That individual had a claim of $300,000 or $400,000.

Let's take, for example, a situation that's a little more extreme than that, that an individual, through the negligent actions of an employee of one of these companies — let's say through a motor vehicle accident — is rendered a quadriplegic. Under the law that we have in this country right now, the corporate entity would be required to cover this person's health expenses between now and the time he dies. We have seen in the past, Mr. Speaker, insurance settlements in this country in excess of $1 million for those types of instances.

If indeed the capital requirements of these captive insurance companies are to be $200,000 capital and $100,000 in reserves, and if indeed a judgment by the courts is handed down in the case of a quadriplegic of $1 million — or in the case of the type of client I was representing, where because of the negligent actions of another driver he could not work again in his chosen field and was going to suffer an income loss because he was unable to work for the rest of his life, and they were looking at $300,000 or $400,000 income loss, then

[ Page 1200 ]

I say that's underinsurance. Those regulations are clearly lax and ought to be expanded to allow for the same level of insurance coverage that we require now, and to take it up to the limit of $5 million, which now the Insurance Corporation of British Columbia is advising people, when they buy their automobile insurance, to acquire. Yet we have within the capital requirements and reserves for captives here a $200,000 capital and $100,000 reserve. Those regulations are weak.

Interjection.

MR. SIHOTA: The member says it's called "self-insurance." I agree it is called self-insurance, but what does that person do? Take the person who's rendered a quadriplegic, or the person who has suffered a loss of income and will not be able to work again, and suffers a loss of, let's say, $400,000. He takes judgment and receives a payment out from the captive of $300,000, and he's $100,000 minimum, on that example, out of pocket; or $700,000 in the case of a quadriplegic, which of course he would then have to recover against the principal company. I'm not denying that point, but I'm saying that if you want to talk about self-insurance, and if you want to ensure that there's an adequate level of insurance coverage under these regulations, then you should be doing what everybody else is required to do and what the Insurance Corporation of British Columbia is recommending now to most people, and that is getting a total of $5 million in coverage, not the $300,000 that's required in terms of these regulations.

Interjection.

MR. SIHOTA: The member says "recommend amendments." I'm not sure if this matter is dealt with in the bill, if it's part of the regulations. But the point is that it is underinsurance, that it ought to be increased, that it ought to be at a higher level. The point is, if the members opposite are going to argue during the course of this debate that the general public is not affected by these regulations or by this act, they're wrong — they're dead wrong. They're going to be affected by it. Certainly I don't think it's appropriate to make that argument, and I want to remind the member who spoke before me that he was off the track in making that suggestion.

I'm only reading what the minister put out. Of course, if he changed it, we'll deal with it later.

Interjection.

MR. SIHOTA: The member opposite.... Let's deal with that. I was going to make another point in terms of investments, but let me deal with that.

Interjection.

MR. SIHOTA: "Be negative," says the member opposite. We're not being negative.

I said at the outset that it's not our policy on this side of the House to criticize for the sake of criticism. I think I've made a constructive point. That constructive point is that the general public is going to be affected; you're wrong on that. Secondly, there's underinsurance. If that's not constructive.... That's not criticism for the sake of criticism; that's a constructive, valid point that deserves consideration and merit. I remind the members opposite that some of them a minute ago were saying,"Well, amend the legislation." And now, all of a sudden....

Interjection.

MR. SIHOTA: The member for Yale-Lillooet (Mr. Rabbitt), I believe, was saying "amend the legislation." If I'm wrong, Mr. Speaker, I apologize, but it was coming from that comer. I certainly heard someone say that it ought to be amended. If they saw the value in the argument to the point that they agreed that perhaps an amendment should be forthcoming, then clearly they should understand the value of the point that I'm making and should not be sort of harping away on the other side of the House, saying: "Well, it's just criticism for the sake of criticism." It's a bona fide point.

Another bona fide point that causes those of us on this side of the House a fair bit of concern again relates to the general sphere of the regulatory framework that encompasses or accompanies this legislation. Really, that sort of raises the whole issue of investment. The minister himself has talked about prudent behaviour in dealing with the matters of investment and reinsurance. I'm not satisfied with that. If indeed the strategy is to encourage expanded economic development and economic activity in this province, then it seems to me that you want to prevent leakages of funds from this province to other jurisdictions in the case of this legislation. Here is where it goes wrong, because what you're saying here is that the government does not want to put any restrictions on investment. Perhaps it should give some thought, if indeed its intentions are to generate economic activity in British Columbia.... It should begin, perhaps, to put on some restrictions to ensure that some of those premiums which are paid here in British Columbia remain here and are invested here, instead of allowing for leakages abroad.

[11:45]

The legislation talks about prudent behaviour. I don't know if that term captures the point that we're making or not, but the fact is that there is no restriction, no encumbrance and no overview, as far as I can see, other than these loose terms of prudent behaviour on the matter of investment of these funds here in this province. Certainly if the members opposite think they're going to be coming here, perhaps they should be talking a little bit in the legislation about the investment policies.

The third point I want to raise is one that also causes me some concern; that is, insolvency and bankruptcy. What do you do when one of these firms goes insolvent, or declares bankruptcy, or winds up, and you have an outstanding claim against both the parent and, hence, the insurance company? What I'm talking about here are large cases involving, say, product liability — large instances of negligent actions on the part of a captive insurance.... We've seen instances of disaster in the world caused by negligence on the part of corporations. We've heard of situations elsewhere in the world about chemicals, and the effect that chemicals have had in India or in the United States — I believe it was outside Buffalo, at Love Canal. We've heard of cases that have involved contraceptive products in the United States and part of Canada, where the products have proven to be defective, and we've seen large class-action suits launched in those instances against these corporate interests.

[Mrs. Gran in the chair.]

[ Page 1201 ]

My concern is that it will become easier under this legislation for corporations involved in product liability cases simply to underinsure, given the capital requirements under the legislation, and to wind up, to declare themselves insolvent and, hence, to allow those people who are holding judgments in their hands due to the negligence of these corporate entities and the negligence flowing from the products that they produce.... That would reduce, diminish and indeed prevent the opportunity for these people to collect on their judgments — to take appropriate actions against these self-insured captives for product liability negligence.

I think that's a serious problem, We've been fortunate in this province. We haven't seen any large product liability cases. Most of them have been in the United States and in Canada. But certainly that is a fear of legal litigation that I'm aware of, and we've seen more and more product liability cases coming on stream here in British Columbia.

What do you do in the case of a large class action involving a corporation that has captive coverage? In those instances it's going to be quite easy, particularly given the nominal reserves, for the corporation to wind up and declare itself bankrupt or insolvent, and for the captive to do the same. Then you have the general public standing out there exposed to the risk, affected by the risk, and not able to seek compensation for economic loss flowing from being exposed to that risk. That raises a serious question. I hate to sound lawyerish, but it's something that is of concern to those of us who practise in the personal injury field and for those of us who want to see some stringent regulations in this province dealing with captive insurance, if indeed it's the government's will to bring them here.

There are other regulations that cause me some concern. I'll highlight them very quickly, but I won't talk about them in any depth. There is, of course, the role of the superintendent in terms of being able to enforce. When we get into committee stage on this bill, I want to put the minister on notice that I'll certainly be asking several questions with respect to the ability of the superintendent to enforce the regulations and to ensure that captives abide by the regulations.

Mr. Speaker, I also want to point out that there are indeed some differences right at the outset that distinguish these captive insurance companies from normal insurance companies that are governed under the provisions of the Insurance Act. One of the things that causes me concern, of course, is the level of documentation and backup required by these companies before they start up here in British Columbia. The level of documentation required for them to set up is less than that required for reporting and startup purposes for companies governed under the provisions of the Insurance Act.

It is my understanding that, for normal insurance companies, appointments of receivers and liquidators, notification of insured persons, bankruptcy, winding up and so on are matters that have to be dealt with when dealing with the startup of these companies falling under the purview of the Insurance Act. Those matters are not covered under the captive act. That in itself raises a lot of questions. It seems to me that if you relax the regulations too much, in trying to encourage these people to come here and set up, and you reduce the level of reporting they have to do and the level of documentation that they have to provide to ensure that they are solvent, then you're making it easier for shell companies, relatively insolvent companies, to start up here in British Columbia.

I don't think anybody on either side of the House wants to see, at the end of the day, insolvent shell companies set up here to provide captive insurance. It seems to me that if it's indeed the intention of the government to maintain its lower capital reserves, it has to make sure that when these companies are making applications to set up here in British Columbia, on the front end we have substantial documentation that proves that the net worth of these companies is significant enough to withstand major claims. The way I read the regulations and the exemptions from the provisions of the Insurance Act, that is simply not going to happen.

In addition, there are some questions I would have — maybe it is better to refer this to committee stage, but I'll lay out the broad concern at this point — in terms of the breadth of the coverage, the type of coverage and the type of responsibilities that are going to be provided to those who are making claims under that insurance scheme. Once again, if we were to use the model of the Insurance Corporation of British Columbia, I think that what the corporation has done with respect to part 7 no-fault benefits provided under their scheme is commendable. In some areas they should be improved, and I think that the experiences in Manitoba and Saskatchewan on the equivalent part 7 benefits are areas that we should moving in with respect to ICBC.

The question still remains whether or not the breadth of coverage that these capitals will be providing will be to what I think has now become accepted practice both in the public and the private sector in British Columbia. That, of course, is kind of a technical debate, perhaps better left to committee stage. I think the government has a responsibility to ensure that regulation on the breadth of coverage is firm and clear.

I also notice that under the provisions of this legislation it is quite possible to provide for professionals to join with themselves and engage in professional liability insurance. In some ways that is a positive move, in light of the scandalous premiums that the private sector is requiring, and certainly an argument that we should be moving more towards public regulation and public interference with the operations of insurance companies.

I see I have a limited amount of time, but I will be raising the matters later on in terms of the breadth of coverage for professional organizations that pool their resources together: for example, in liability governing lawyers. Certainly all of us would like to see lower premiums, but there also must be an assurance of adequate coverage for members of the general public who are going to be making claims against negligent professionals.

To wrap up, Madam Speaker — because I see that my time is up — I want to first of all say that it is most unlikely that there will be additional employment generated out of this legislation. Secondly, if employment is to be generated by this legislation, it will be targeted towards a specified group of professionals — lawyers, accountants and actuaries — who aren't facing any real problems with unemployment. The legislation misses out, as a target, the areas of unemployment we have in this province in other sectors.

On top of that, as I said, the regulations are weak and the capital reserves are low. The general public will be affected by these regulations. There are questions about the level of coverage. It's for those reasons — constructive, positive criticism from this side — that we're standing up to speak against this legislation.

[ Page 1202 ]

MR. VANT: Madam Speaker, I'm very pleased to rise in support of second reading of Bill 21. I will speak to the principle and the spirit of this bill. I think the Insurance (Captive Company) Act adds to the ability of specialty risks in this province to get coverage that they currently cannot get under the Insurance Act. I don't believe there is any provision in any statute under the Insurance Act that I'm aware of that an insurance company has to insure any risk.

Let me give you an example of how this new captive insurance act can help specialty groups and indirectly be of great benefit to citizens of our province. Right now there are a number of Sikh temples in B.C. which, under the Insurance Act, are unable to get insurance as their insurance expires. There is a Sikh temple in Quesnel right now that has, under the Insurance Act, approached 11 insurance companies and for some reason or another has been turned down by all of them, so they cannot renew their insurance. So sophisticated companies or associates of groups with specialty needs under this captive insurance act would be able to get coverage.

Another example I can think of is in my own riding of Cariboo — and I'm not an expert on the Caribbean like the hon. member for Esquimalt-Port Renfrew (Mr. Sihota) — where a number of years ago the operator of the stagecoach in the Barkerville Historic Park was unable to get insurance. He tried all over the place, and he couldn't get any insurance. So a group of heritage-site operators could, under this proposed captive insurance act, under Bill 21, arrange suitable specialty coverage right within this province. So this certainly would be of benefit to groups of citizens with specialty coverages. Also, these groups would have the potential to always have the ability to reinsure themselves on a regular basis, because right now as I speak in this House there are a number of Sikh temples in this province that have absolutely no insurance.

These captive insurance companies will, of course, be able to insure their own owners. Of course, those who are providing a very specialized, sophisticated insurance — and this is one of the big positives in this bill....

Interjections.

MR. VANT: I realize it's Friday and it's not quite afternoon. There are a few here in the socialist comer of the House, and it's keeping the debate interesting.

Any specialized or sophisticated insurance company under Bill 21 would of course have to demonstrate its specialized needs in order to satisfy the superintendent of insurance, so that these companies would know exactly what they are committing themselves to in terms of details of the coverage, which would be tailor-made to meet these specialized needs. Of course, the premiums and so on could be in accordance with the risk taken.

[12:00]

MR. BLENCOE: Which section is that?

MR. VANT: I'm speaking to the principle of the bill. We're not into Committee of the Whole, hon. second member for Victoria.

It has been mentioned that there might be a flight of capital from the province in terms of the premiums paid. Well, if these are companies or associate groups within our province, I sincerely believe that 98 percent of the capital would stay in the province. The reserve funds would be invested in our province to create employment.

If solvency of these captive insurance companies is a question, the superintendent of insurance always monitors the level of their reserves and looks after the shareholders' equity. So if these shareholders are in British Columbia, I am sure that those funds would be used to benefit the citizens of our province — if not directly, at least indirectly. I don't want the people who would be interested in insuring themselves through a captive insurance company to have to go all the way to the Caribbean to seek insurance if under the present Insurance Act they are unable to get coverage.

As I said earlier, there are people out there who, for some reason or another, cannot get insurance under the Insurance Act, so this presents a very positive way of enabling people and groups and companies to get insurance which they don't currently have. In the liability sense, that can be of great benefit to citizens in our province. I'm certainly in favour of Bill 2l.

MR. D'ARCY: Madam Speaker, I'm delighted to be able to follow my colleagues from Nanaimo and Esquimalt-Port Renfrew in offering cogent and constructive discussion on this particular bill. I'm also pleased to see so many of my colleagues gathered around today, as compared to the tiny corporal's guard of government members who chose to come to work today.

I see Bill 21 as an attempt by the government, perhaps well intentioned, to improve British Columbia's not too favourable reputation as a secure depository and a secure place for individuals, both here and interprovincially and internationally, to do business and put their money. One of the most important things we need to do in British Columbia is remove any uncertainty as to rules and the moving of goalposts by the present government or any future government. Not too long ago the then Minister of Finance, the former member for Saanich and the Islands, introduced changes affecting insurance companies in British Columbia that provided a tax incentive for them to be in British Columbia, especially if they were of the smaller sort. At the same time, a tax break was also given to smaller regional banks to locate in British Columbia, in the sense that they were given a break in corporation capital tax — something that was not provided for the larger banks.

What has happened now.... By the way, I'd like to point out that I'm advised that it usually takes about ten years for companies in the financial field, whether trust or insurance companies, to make a head-office decision to move. That really is what the Minister of Finance is aiming for here. He wants companies presently headquartered somewhere else in Canada — probably in Toronto, perhaps in Montreal or Winnipeg — or somewhere else in the world to come to Vancouver presumably, or somewhere in British Columbia. I give him credit for aiming for that. But, Madam Speaker, are we talking ten years down the road, when the rules are being changed now, were changed in the budget, and were changed a few years ago under the Finance minister's predecessor? There must be some stability and there must be some assurance that things are not going to change depending on a sort of back-of-the-envelope ad hockery in terms of financial regulation.

It is not news to this House or anywhere else in Canada that there have been financial institutions in Canada which have got into trouble in recent years, and I include a couple of

[ Page 1203 ]

regional banks, some trust companies and some insurance companies. I don't believe any of them were from British Columbia, fortunately. We have even had the occasional credit union run into difficulty in recent years. We know what has happened in many of these things. In order to protect the credibility of our financial community at large, governments and the institutions themselves have in many cases moved through deposit insurance and sometimes, as we saw with the federal government, through special legislation to protect depositors who, in some cases perhaps, shouldn't have received that kind of protection. We have also seen a great many things which I will perhaps politely call shotgun marriages — called, I think, in the corporate vernacular of the press release, a rationalizing of assets or efficiency reorganizations — which are really hiding mergers based on the fact that the junior partner in the merger has gone belly-up — I'm sorry, bankrupt. But they don't use that term; they use these other nice terms.

Madam Speaker, we do not want an insurance-company crap-shoot reputation for British Columbia. That is our concern on this side of the House. I'm not one of those who suggests that the Vancouver Stock Exchange's reputation as a haven for some responsible companies but also some rather fast-operating, junior, under-the-counter companies is justly — or unjustly — deserved. The fact is that in many financial circles we in British Columbia have that reputation. I do not want to see that spread to insurance companies.

To give the minister his due, he has perhaps looked at legislation in another jurisdiction, Quebec, in recent years and noticed that there is somewhat similar legislation to this — not precisely similar, but something the same. And he may well have noticed that Montreal, because of it, has managed to pry some business away from Toronto. I really have no idea whether this is going to work for British Columbia. However, if on the one hand you change the tax rules — which were changed a few years ago anyway — and at the same time say you're going to eliminate regulation in order to appeal to some financial business that you hope is going to be footloose enough to locate here, I do not think it bodes well for establishing British Columbia as a place with a stable reputation to receive deposits and to channel investment through. That really is the bottom line for all of British Columbia, not just for this side of the House.

An enormous amount of investment that's generated in British Columbia doesn't end up here, whether it be through pension funds, insurance company assets.... The last time I looked, there was even a large amount of deposits and investment controlled by the provincial government which was not channelled through British Columbia investment houses; it was channelled through investment houses in other jurisdictions. If we're going to establish that reputation, we cannot have this kind of uncertainty or this kind of special atmosphere hanging over what I think is a very important part of the total financial community that we need to stabilize and give a credible reputation to in British Columbia. We not only need depositors from elsewhere; we need depositors from British Columbia to keep their business here.

With this absence of regulation that the minister proposes here, what assurance would either the insured or the shareholders have that the first time there was a major claim on an insurance company, whether it was captive or otherwise, the same thing wouldn't happen as has happened to several other insurance companies in Canada — and internationally — in recent years? The first time they had a major disaster or a major claim, they filed for chapter 11, to use an American term. How is that going to lead to the credibility of B.C. as a place to do business? That's a question which neither the minister nor either of the speakers on the government side has addressed.

What we need in British Columbia — and the kind of legislation that this side would seriously consider supporting — is legislation that makes it preferable for stable companies founded on a sound, actuarial basis to come and locate here, and that is predicated on a good and solid asset base. If the government was going to ensure that, you wouldn't need careful regulation. We know what has happened with some of our financial institutions in British Columbia, in western Canada. We know that deposit insurance and financial institution insurance is kind of a hodgepodge in B.C.

I hope you don't consider this outside the scope of the bill, Madam Speaker — you've allowed a fair degree of latitude on this bill — but I think we need a common set of rules and a common set of deposit insurance schemes to cover provincially chartered banks, trust companies, credit unions and insurance companies so that everybody, internationally and nationally, knows the rules in British Columbia and knows that everybody is going to be required to operate on sound, insurance company business principles. So since I do not see any of those provisions — or even any of those concerns — expressed in this bill or by the minister, I have to say that I will not be supporting it on second reading.

MR. CLARK: I want briefly to register my opposition to this legislation. I have some concerns about it. The minister's statement that we're overregulated in the insurance field in Canada really concerns me. The regulations are there for a reason, and in the drive for deregulation we sometimes forget why those regulations were put there in the first place. As the member before me indicated, the difference in the regulatory regimes between different insurance companies is I think cause for concern.

The minister stated that he wanted to make it a competitive regulatory environment to attract captive insurance industries. That means competitive, I assume, with Bermuda, Bahamas and the Cayman districts — areas known for their tough regulations and concern for those industries. I think there are some real concerns, particularly with respect to the weakening or the easing of regulations. Applications now, as I understand it, need only include a business plan, details on captive owners, managers, operating plans and financial projections, considerably less documentation than for property casualty insurers. The minimum capital requirement is very low: a few hundred thousand compared with $5 million for a regular company. Reporting requirements are limited to an annual audited statement and the actuarial report. There are no specific rules governing investments or reinsurance, as the minister said. There will be no direct control of investments or reinsurance by captive insurance companies, but they will be required to behave prudently.

[12:15]

The bill sets out in section 8 that shareholders' equity and reserves will be calculated in accordance with the regulations, or the direction. In normal insurance companies, the following topics are covered in the act, not by regulation: deposits, appointments of a receiver or liquidator, notifications of insured persons of bankruptcy, winding up, etc. So why are these matters left to be defined by regulation? I think that's a serious error, I guess for two reasons that I want to

[ Page 1204 ]

raise. First, I think there are some very serious tax implications to it, because if there's a problem with taxation or income tax, then a company would transfer, it seems to me.... Increase the capital assets of the captive insurance company as a way of avoiding income tax on earnings. I think that's a very real possibility. So even though the minister said that it's not going to impact on revenues, I think it may well have; that's in fact one of the ways in which large corporations now funnel money through the Caymans and other areas, in order to avoid those kinds of things.

Secondly, the potential for bankruptcy in corporations, and therefore for the insurance system itself not to work; in fact, to defeat the very purpose of insurance. As an example, Mentor Insurance in Bermuda went bankrupt in 1986 — and Bermuda is, I think, specifically referred to as an area that we're trying to emulate — so the liquidators had to sue the parent company for $50 million to cover the insolvency. With these kinds of very loose regulations which don't require significant capitalization, it means that the potential for bankruptcy is significantly higher. The potential for bankruptcy, and not to recover through the insurance mechanism, could really be quite significant because of all the relaxations of the regulations, and I think most importantly because of the relaxation with respect to capitalization.

So for all of these reasons, Madam Speaker, we have some very serious concerns about this legislation, and I wanted to register them here before you today. We will be voting against this, I think, flawed legislation.

MR. WILLIAMS: Well, Madam Speaker, the minister said that the principle with respect to this is to allow these captives to carry on outside the regulatory framework that exists for insurance companies. It begs the question, Madam Speaker, about those regulations. If there are problems with the regulations, deal with them. But they're there for a reason; there's a framework there for a reason. What you're doing is avoiding a reasonable regulatory framework by establishing this legislation.

The minister says it won't deal with the general public. That's not so. Certainly the people who want to pursue their situation in the court with respect to this captive insurance company are going to be impacted. They're part of the general public. The member for Esquimalt-Port Renfrew (Mr. Sihota) made that very clear. So to say that it doesn't involve the general public doesn't wash at all. It of course involves the general public, insofar as they're impacted when they want to go after claims against the captive insurance company.

With respect to investments, no control over investments; but he says "they must act prudently." What does that mean? And what is the history of this minister and this government in terms of prudent action, in terms of protecting the investments of various citizens in this province?

Interjection.

MR. WILLIAMS: You want to talk about the Vancouver Stock Exchange today? Do you want to talk about the credit unions today? Do you want to talk about the teachers' co-op today? Do you want to talk about any of the many scams you've let happen in this province, day in, day out? No, you don't want to talk about that. This is just one more to add to your little list, which is growing. It's not a little list; it's growing and rightly should be attacked.

HON. MR. COUVELIER: Don't get excited.

MR. WILLIAMS: No, no, not at all. I think the member for Nanaimo made a really significant point. You people on the other side, this minister included, and the Minister of Economic Development (Hon. Mrs. McCarthy) especially, chase every little glitzy item that comes down the pike — every little item that you say will create jobs. How many people in the Grand Caymans are walking around with briefcases, white shirts and old school ties? Not many that I'm aware of. How many in the Bahamas? Not many that I'm aware of. What are the unemployment rates in these castaway locations for tax barriers and the various fraudulent outfits that operate in those sunny climates? You end up chasing every glitzy item, and it's not very encouraging.

This is a province with great resources, and a tremendous human resource, much of it misapplied, improperly and inadequately, with heavy unemployment. If you addressed the real issues, instead of these little glitzy items that some corporate lawyer puts onto your desk, we'd all be better off.

The member for Burnaby-Edmonds (Mr. Mercier) said: "It won't affect anybody else. What is the opposition talking about? They're just being anticorporate." Well, that's not so, as the member for Esquimalt-Port Renfrew (Mr. Sihota) said.

AN HON. MEMBER: Jobs.

MR. WILLIAMS: What are the jobs? Give us an estimate of the jobs out of this legislation, Mr. Minister. Is it like they said about the other stuff, the Love Boat strategy, in terms of the new provincial economy? As somebody in Ottawa said, there might be two jobs and one French waiter out of the exercise — that's about the size of it.

The member for Esquimalt-Port Renfrew raised this whole question of product liability, which is a new insurance reality in the world. The IUD devices in the United States. Major issues, really. The whole question of Johns-Manville Corp. in the United States and asbestos poisoning across North America, the games that were played there with legitimate claims against asbestos poisoning, and all of the rest. Those are real concerns. You're moving out of the existing regulatory climate and opening up greater areas of vulnerability in terms of those major issues.

I really find it troublesome if you say the existing rules are a problem in terms of the investment climate. We went through a world depression in the thirties and built up a whole regulatory base that dealt with the kind of intercorporate games of the thirties that were part of the problems that led to the Depression. Now the new right — the conservative right — is doing the whole deregulatory game and setting the world up for the next big depression, in terms of allowing interrelationships between corporations, in terms of the banks getting involved in insurance and in stocks and bonds and a whole range of things. The rules were established for good reason, Mr. Minister, because of terrible, upsetting times in the past where the so-called unfettered marketplace had to be dealt with, monitored and regulated. All of these new things that are coming on stream out of the radical right and out of this government are setting us up for the next big fall. And make no bones about it.

Let's think about, say, one example in terms of the history of regulation by this government. Let's think about the teachers' co-op. This ministry was responsible for the teachers' coop. Oh, yes, it was.

[ Page 1205 ]

HON. MR. COUVELIER: Oh, come on!

MR. WILLIAMS: No "Oh, come on."

Interjection.

MR. WILLIAMS: Oh, that's the line we're going to get. When some corporation has an inadequate captive insurance company, you're going to say: "Well, our hands are clean. Why, it was the captive insurance company that was the problem." Of course. But you have regulators in all of these fields, and you have a terrible, miserable record in terms of your regulatory activities, even where we spell out the regulations more tightly than you are doing in this statute. How much has been lost by investors in British Columbia under the B.C. teachers' co-op scheme?

Interjections.

DEPUTY SPEAKER: Order, hon. members.

MR. WILLIAMS: Oh, well. The loss to date is $100 million. The member for Prince George, the Minister of Environment (Hon. Mr. Strachan), says,"Well, they had the right to go to CUDIC." Well, Mr. Minister....

Interjection.

MR. WILLIAMS: Oh, it's a little bit of quicksand, isn't it? It's a little bit of quicksand.

HON. MR. STRACHAN: Well, actually, it was a federal thing....

Interjections.

MR. WILLIAMS: It's a little bit of quicksand, isn't it? Let's talk about CUDIC. CUDIC, your regulatory agency, was responsible for monitoring Westcoast Savings. What were the losses, which have lately been tallied up, by your CEO, your Social Credit nominee? What are the losses in that operation? Eighteen million dollars in the last couple of years had to be picked up by the prudent credit unions of British Columbia. The prudent, careful credit unions of British Columbia had to pick up those bills that your friends in Westcoast created because of imprudent investments in parts of the province and elsewhere that they knew nothing or very little about.

Interjections.

MR. WILLIAMS: You know the problems. They're with your friends in outfits like Westcoast. The real challenge is that you were asleep at the switch again, just as you've been.... This ministry has been asleep with respect to the Vancouver Stock Exchange. There's scandalous nonsense going on there on Howe Street. You've been asleep at the switch with respect to the B.C. teachers' co-op — great losses for the citizens of British Columbia, some 32,000 of them that thought their money was protected, but it was not.

You've been asleep at the switch with respect to some of the credit unions in this province in terms of inadequate investment, inadequate policing, inadequate enforcement and all of the rest of it. The signals were out there in all of these cases at an earlier stage, and never did you respond. The bells were ringing. People in various industries and movements were aware of it. Your staff had to be aware of it but did nothing in all of these cases.

HON. MR. COUVELIER: Relevancy.

MR. WILLIAMS: Relevancy indeed. You're the one who is talking about an excessive regulatory climate in this province and elsewhere. There is absolutely every evidence that there is a totally inadequate regulatory process in this province under existing statutes and under your administration, and you're coming in with a statute that would make it far worse. So you're opening up the opportunity for all kinds of abuses.

What about the reserves? You're not going to monitor the investments carefully. Reserves could go up and down at corporate will, in terms of their own corporate situation, their own corporate tax problems. It's a neat way to deal with corporate tax problems, if that was the problem this year, and so on. So it's a neat kind of loophole game that the corporate group can go back and forth through. That's what this legislation represents.

You talk about being prudent — this administration has not been prudent so far with respect to so many of these other issues in this province. You're setting up a thing that allows less prudence by this statute. The second member for Cariboo (Mr. Vant) talked about insuring some of the people who aren't getting insured in this province now. But let's not forget that we had a general insurance company in this province owned by the people of British Columbia. ICBC General was set up to deal with the very problems that you cry about today: the little municipalities, the little villages of British Columbia that had to in the past pay through the nose for their insurance.

Once ICBC General was sold off — for pretzels, I might say — they got into trouble — monstrous insurance rates that were totally unreasonable, based on American experience, made no sense whatsoever. Some members on the opposition side nod. They know that's been the case. You sold it off for $9 million: a company that had been developed over a dozen years or more, with significant assets far in excess of $9 million and with reserves that were probably more than adequate.

The evidence is there. This government has not done the job of monitoring the existing financial institutions and the like in British Columbia. This opens the door to worse things happening in the future. It's most distressing that we've gone through the whole exercise of issues like the teachers' co-op, and the loss of $100 million. Currently they only have 50 cents on the dollar out of the teacher's co-op in this province.

You have credit unions in this province like Westcoast, with an $18 million loss because your regulatory people were asleep at the switch. You have First Pacific here and its predecessor with an $11 million loss because your people were asleep at the switch. You've got the Fort St. John credit unions and others that I will not name in trouble because your regulatory people were asleep at the switch. You've got the issues raised by the member for Esquimalt-Port Renfrew (Mr. Sihota) regarding that incredible casino called the stock exchange on Howe Street in Vancouver, because your regulators were asleep at the switch or were removed from the switch.

That's been the reality of the last few months under this minister. We are not encouraged by your record to date, Mr.

[ Page 1206 ]

Minister, and your proposals in this legislation are equally disturbing.

[12:30]

MR. BLENCOE: Madam Speaker, I want to reflect on a little bit of history in terms of the lack of regulations in the province of British Columbia, which the first member for Vancouver East (Mr. Williams) has mentioned in his debate this morning.

A little over a year ago, when I was critic of the consumer affairs section, the Teachers' Investment and Housing Co-op got itself into serious trouble, and the evidence is in on why that happened: because of the lack of monitoring, the lack of proper regulation, and the lack of competency in terms of this government and its ability to protect the 32,000 members who invested in that corporation in good faith.

Madam Speaker, we have legislation before us that continues to weaken and deregulate, rather than this government starting to deal with the issues of financial institutions that do business in the province, creating faith in those institutions. Instead of having proper regulations, liquidity requirements, reserve requirements and monitoring requirements, what do we have? We have further deregulation and lack of monitoring of those institutions.

Madam Speaker, 32,000 investors in the teachers' housing co-op lost in excess of $100 million because this government was at the time, and continues to be, asleep at the switch. Their lack of competency in financial matters is absolutely astounding — and the tradition continues. Those 32,000 teachers and their committee have consistently asked for proper regulations, and they have asked for a proper public inquiry into what happened with that institution. We do know that that board started to make investments that were doubtful, and that those who monitored that institution knew what was going on, but they refused to monitor. And what happened? Those teachers.... Much of that money, I might add, was pension money, and it was used by this government to invest in the highways and other projects in this province. Those teachers gave money, and this government used those funds. Where was this government when they needed protection? Where was this government when we needed monitoring? Where was this government when proper supervision was necessary? Where was this government when proper reserve requirements, proper liquidity requirements and a proper board of directors should have been in place? This government was asleep at the switch.

Madam Speaker, we have heard absolutely nothing from this government about ensuring that kind of failure never happens again in British Columbia. But what do we have? We have a piece of legislation that's going to entice.... Well, what is it going to entice? Captive insurance companies, further deregulation — the ultra-right-wing, extremist financial policies that we've seen fail over and over again in every other jurisdiction that has gone into them.

AN HON. MEMBER: Reagan.

MR. BLENCOE: No, this is not Reagan. This is further right than Ronald Reagan, Madam Speaker.

SOME HON. MEMBERS: Mulroney.

MR. BLENCOE: Well, I would like to be that nice, but it's further right than Rambo Mulroney, Madam Speaker.

When the people of British Columbia wish to invest in their own financial institutions, want to invest in the future.... We've seen failures, and my good colleague from Esquimalt-Port Renfrew has got the Minister of Finance on the run again over Tillex — clearly incompetency by this government in ensuring that the Vancouver Stock Exchange is monitored properly.

The people of the province who invest in these financial institutions, Madam Speaker, want to know that the government of the day is not asleep at the switch and that they are watching the affairs of the people of British Columbia.

AN HON. MEMBER: Big Brother.

MR. BLENCOE: No, not Big Brother; responsible government protecting the interests of the people of the province of British Columbia.

If there was ever a gigantic Socred blunder, it was the fact that you did not monitor and regulate and ensure that the 32,000 members who invested in the teachers' co-op.... Their life savings were not being protected by minimum monitoring. Madam Speaker, do you know that this government doesn't even require that those who invest in that kind of institution have to be told there's no insurance? You don't even ensure that. Those institutions don't have to tell the people that there's no insurance. Not one word is in regulation or in policy that tells the people of British Columbia, when they go to invest, that they're investing in an institution that has not one ounce of insurance.

If we want to have long-term investment in this province, Madam Speaker, and if we want to build the economy of this province inside and outside and attract investment inside and outside, the people of British Columbia have got to know that the government is awake at the financial switch, and that it is ensuring that when an investor comes to the province and puts his money in the institutions of this province, this government is ensuring proper supervision, proper monitoring, and that their money is safe. That's the issue.

They call that we want regulation. That's always the extreme right-wing's answer to doing the people's business properly. We want to do the people's business properly, but these ultra-right-wing extremists want to get rid of all the rules.

Interjections.

DEPUTY SPEAKER: Hon. members, please!

MR. BLENCOE: We know that this government is moving into the gambling issue. We're going to have no rules or regulations in that area, and all sorts of undesirables are going to move into it. And now, when the people of British Columbia and investors outside of the province are looking to see....

MR. SERWA: A point of order, Madam Speaker. I fail to see where the hon. member is addressing any aspect of Bill 21.

DEPUTY SPEAKER: Thank you, hon. member. Your point is well taken.

MR. BLENCOE: On a very serious note, the New Democratic Party of British Columbia believes that if we are to be

[ Page 1207 ]

perceived better beyond our boundaries, if we're to get correct investment and recovery in the province, we have to make sure that we've done our homework, and that when people invest in British Columbia they know they don't have a government that continues to be asleep at the switch. That's the issue — your competency is at issue. You lost $100 million for those people in the teachers' co-op. With your lack of monitoring of the Vancouver Stock Exchange, you've lost further millions for British Columbians who invested faithfully and loyally in the province. You don't monitor properly.

Now what do they want to do, Madam Speaker? They say the answer is to have no rules at all. Well, the people of British Columbia don't want that kind of province. They want a safe environment for investment. They don't want an atmosphere of no rules, no regulations and no monitoring — Socred-style. It's time that we rebuilt the future of our investment industry, and that people who want to invest in this province can have faith in this system.

MR. SIHOTA: If I may have leave, Madam Speaker, I'd to make a quick announcement in this House on some very, very good, positive news.

Leave granted.

MR. SIHOTA: I'm proud to report that just a few minutes ago the Esquimalt Secondary School junior stage band won the gold medal in Ottawa at the national jazz festival. They will be eligible later on in the day for the overall band competition, so it remains to be seen if they'll secure the gold in that. Just for the personal interest of all members of this House, I think everybody will be delighted to know that the person who was playing the piano solo in that band was a young lady by the name of Susan Skelly.

DEPUTY SPEAKER: Pursuant to standing order 42, the minister closes debate on Bill 21.

HON. MR. COUVELIER: Madam Speaker, I must say that as a new member in this House, I've had some difficulty getting accustomed to the conduct of business, and the style in which the serious affairs of governance of this province are handled by the members in this chamber. One of the most difficult problems I've had is learning to live with the gross distortions of fact, the misapplication of intent, and the almost untrammelled inclination of the members of Her Majesty's Loyal Opposition across the floor to play with matters brought before them in a frivolous way and in a way which tends to obfuscate the merits of the questions at hand.

[12:45]

The dragging in of the teacher's co-op question, and the Vancouver Stock Exchange — I couldn't remember the long litany of complaints that different members tried to pin different responsibilities on the government for — really amazes me. I don't imagine there's a rational person in the province who would expect it is the role of a free enterprise government, at least, to assume that it is the proprietor of all of the shareholders' interests, all of the customers' interests and all of the investors' interests for every business enterprise in the province. Yet, if you were to listen to the opposition, you would immediately conclude that that's their intent and that's really what they believe should be done. I suppose that's why they never get elected as government, Madam

Chairman. Clearly that's not going to create the free, open kind of competitive situation that the free enterprise parties, the Social Credit Party in particular, stand for.

In dealing with this bill, back to the subject at hand, the captive insurance company. The first speaker on the opposition side to deal with the question was afraid that the creation of large reserves would result in a tax-avoidance problem. We had one speaker complaining, or at least suggesting, that reserves would be too big; therefore we wouldn't be getting our fair share of corporate income tax. On the other hand, you listen to the vast majority of other speakers. They were claiming that they were going to be too low. Madam Speaker, the opposition must get their act together and decide what it is they're opposed to in this bill. Are the reserves going to be too high or are they going to be too low? Why don't you start speaking with one unified voice, rather than merely trying to kill the clock, so we can all go home for the weekend?

I think, Madam Speaker, at the very least the people of this province should expect of the opposition some kind of coordinated approach to the serious matters of legislation that the government brings forward for debate. But what we get is just time-wasting flannel-mouthing — keep your lips moving and watch the clock and hope it will be over soon.

Surely it's clear, when you examine the legislation, that there will be regulations to ensure that the interests of those affected will be protected. But more importantly, there will be an opportunity for a new little market niche for entrepreneurs and business people in Canada to come to B.C. with their expertise in the insurance business.

There has been great focus about the number of jobs this initiative will create. Clearly the opposition have not read the previous comments made in the throne speech or the budget speech, or the various public comments made by members of the government side.

Madam Speaker, if we are going to be successful in creating an infrastructure in our financial community of increasing world stature, it is clear that that will have to be an incremental process, one in which we carve out little market niches for ourselves so that we can acquire a level of expertise and knowledge which is unmatched elsewhere in the country.

The economic strategy plan that this government has been formulating and speaking to now for some weeks — and if you'd unplug your ears, you would have heard it — is clearly that we are not happy at all with the kind of concessions that have been offered by the federal government regarding our international financial centre ambitions. As a consequence of that, it is clear that we are going to have to, as I say, become very mentally disciplined and approach the opportunities before us seeking out little niches for ourselves.

The captive insurance legislation, Madam Speaker, is not being promoted as a job creator of any great significance. It is being promoted as another small increase in the financial community network that we expect to continue to grow in this province. It is clear that we're going to have great difficulty putting together the kind of financial network that is found elsewhere in Canada, and therefore what we're going to have to do is be more imaginative than the rest of the country, more aggressive than the rest of the country, in seeking out these little initiatives. And I tell you now, members of the opposition, we will continue to seek out those opportunities, we will be bringing them forward and we will be actioning them, because that is the only real way that we're going to be able to build our stature in the international financial community: by

[ Page 1208 ]

developing some expertise in some relatively sophisticated market areas. This is the purpose of this act.

[Mr. Speaker in the chair.]

There is at the moment a vacuum in this country regarding this captive insurance market, and this provides us the opportunity to fill that vacuum in a unique way. If you listened to the opposition, they would lead you to believe that the captive insurance corporations are all located in the Caribbean. We heard about white suits and open-necked shirts and gold chains. Did you mention the gold chains? I didn't hear the gold chains. Anyway, I got the picture. The truth of the matter is that a large part of the captive insurance corporations that are formed in North America are situated in different American states that have very similar legislation to this. The fact of the matter is that it's not some sort of tax avoidance scheme; it is not some kind of a cheap evasion scheme. It is a regular style of business, and one which anyone who's accustomed to the international marketplace knows full well has long been in place. So all we're doing now is entering a larger arena in a very narrow market area. So, Mr. Speaker, I move second reading.

Motion approved on division.

Bill 21, Insurance (Captive Company) Act, read a second time and referred to a Committee of the Whole House for consideration at the next sitting of the House after today.

HON. MR. STRACHAN: Mr. Speaker, it's Friday, and I'd like to once again hope that we all have a good and fruitful holiday weekend. Accordingly, I move adjournment of the House.

Motion approved.

The House adjourned at 12:52 p.m.