[ Page 2915 ]
Routine Proceedings
Open Learning Agency Act (Bill 58). Hon. S. Hagen
Introduction and first reading –– 2915
Tabling Documents –– 2915
Oral Questions
"Gag order" to senior personnel. Mr. Lovick –– 2915
Information on decentralization. Mr. Lovick –– 2916
Funding for ministers of state. Mr. Blencoe –– 2916
Miscellaneous Statutes Amendment Act (No. 4), 1987 (Bill 59). Committee stage.
(Hon. B.R. Smith) –– 2917
Mr. Sihota
Mr. Williams
Mr. Cashore
Pension (Public Service) Amendment Act, 1987 (Bill 62). Committee stage. (Hon. Mr. Veitch) –– 2925
Mr. Clark
Mr. Lovick
Mr. Miller
Mr. Williams
Softwood Lumber Products Export Charge Compensation Act (Bill 61). Second reading. (Hon. Mr. Couvelier)
Hon. Mr. Parker –– 2938
Mr. Miller –– 2939
Appendix –– 2940
The House met at 2:10 p.m.
Prayers.
HON. MR. STRACHAN: In the precincts today are the members of the Special Waste Advisory Committee. I'd like the House to give a sincere welcome to three dedicated servants of the public process in British Columbia: Dr. David Boyes, chairman; Mrs. Lael Hamilton; and Mr. Ted Jefferys.
On a second introduction, Mr. Speaker, Members of the Legislative Assembly will recall that last spring I introduced Father Greg Smith, who is in the gallery. Father Smith was a good friend of this Legislative Assembly, having served here as an intern and in other capacities. At that time I told the Legislative Assembly that Father Smith had promised me his ties when he entered his training; I'm pleased to report now that a tie has been delivered, and I thank you, Father Smith.
MR. HARCOURT: I have a combination of greetings and congratulations. I'm sure we're all aware that yesterday the United States and the Soviet Union signed what we all hope is a historic accord for nuclear arms reduction. As we watched the summit in Washington, we saw that Ronald Reagan and Mikhail Gorbachev have taken an important first step towards constructive negotiations between the two superpowers. I'm sure we all agree that our hopes for world security through nuclear disarmament hinge on the commitment of these two nations to move quickly towards a comprehensive nuclear arms treaty.
I would ask this House to join with me in adding our support for the intermediate weapons nuclear force agreement that was signed yesterday and for the continued discussions between the United States and the Soviet Union on an immediate and effective strategic arms reduction.
MR. SIHOTA: I was looking at the member for Cowichan-Malahat (Mr. Bruce), thinking that he was about to get up, because I have four introductions to make and I'm sure he's got more than I do. In any event, these are special introductions. My sister-in-law from Edmonton and her husband, Daljit and Al Chaytors, along with their daughter, Rajene, are in your gallery today, Mr. Speaker. They hail from that socialist haven of Edmonton, and they're coining here to visit us and spend a little time over Christmas with us. Joining them in the gallery today is my wife Jessie. Will the House please give them a warm welcome.
MR. BRUCE: Mr. Speaker, I'm back because of popular demand. You've all heard, of course, of that dynamic little community of Chemainus, the little town that did and continues to do. Today in the gallery is a group of students from the Chemainus high school with their teacher, Mr. David Towner, and I'd like you to bid them all a very warm welcome.
Mr. Speaker, my mother always wonders what I do in a day, and today she's come down to just check on what I'm doing. I would like the House to welcome my mother, Madge Bruce, and a very good friend of our family, Mrs. Annie Philpot.
MR. MICHAEL: I would ask the House to give a warm welcome to a gentleman visiting Victoria from my constituency of Shuswap-Revelstoke, a resident of the Blind Bay community. Please give a warm welcome to Bryan Riley.
[2:15]
Introduction of Bills
OPEN LEARNING AGENCY ACT
Hon. Mr. Strachan presented a message from His Honour the Lieutenant-Governor: a bill intituled Open Learning Agency Act.
HON. MR. STRACHAN: On behalf of the Minister of Advanced Education and Job Training (Hon. S. Hagen), I am pleased today to introduce Bill 58, the Open Learning Agency Act. This bill will establish the Open Learning Agency, which will merge the operations of the Open Learning Institute and the Knowledge Network of the West Communications Authority. The legislation will ensure the coordination and delivery of distance education to both urban and non-urban areas of the province, improving access to education for residents in all regions of British Columbia.
I move the bill be introduced and read a first time now.
Bill 58 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.
Hon. Mr. Richmond tabled the 1986-87 annual report of the Ministry of Social Services and Housing and the 1986 annual report of the British Columbia Housing Management Commission.
Oral Questions
"GAG ORDER" TO SENIOR PERSONNEL
MR. LOVICK: My question is to the Premier. Yesterday, before the Highways minister (Hon. Mr. Rogers) had an opportunity to discuss his department's gag order with the deputy minister, the Premier intervened and publicly endorsed the memorandum. He stated as follows: "It's a hell of a good one, and we should have more of these." Could the Premier please inform the House what other ministries he has decided to similarly gag?
HON. MR. VANDER ZALM: The member didn't really quote all of the things I said. I also mentioned that the question as presented would lead one to believe that it was something malicious, a gag order, much beyond what in effect the memorandum contained. Upon reading the memorandum, I realized that the question as phrased was misleading, I'm sure, for a lot of the people here or listening on the outside, because we're on radio. I said that as well and I say that again. Frankly, I found it very unfortunate that the question had been phrased as it was.
The memorandum in fact recognizes that when we're dealing with matters of major policy and legislative implication, not everyone in a ministry of 6,000 people can somehow be responding to the media on this. On questions of that nature, involving matters such as legislation or something as major as privatization within the ministry, the people who are asked questions should direct them to the public relations officer responsible for those matters. Six thousand people could not be providing all of the answers, because I suppose there could be 6,000 different answers, and that would
[ Page 2916 ]
provide the citizens of B.C. with the wrong impression of what the ministry is doing, and that's not fair to the people nor to the ministry.
So I certainly support the memorandum. In answer to question two, if we were faced with a similar situation in other ministries, I would support such a memorandum.
INFORMATION ON DECENTRALIZATION
MR. LOVICK: This is another question to the Premier. Interestingly, the Premier is apparently worried about the cause of truth and providing full information, and therefore perhaps he would be willing to explain to us another statement he made. He stated Sunday, for example — again I'm quoting — that he purposely "withheld details of decentralization to keep things cool." The question is this: can the Premier explain to us how his ministers and his senior staff can possibly communicate the correct information if he is going to purposely withhold information from them?
HON. MR. VANDER ZALM: Mr. Speaker, the truth mustn't only be in the answers; the truth must also be reflected in the questions. If a question is posed in an untruthful manner, that certainly is terribly misleading to the listener or to other people seeking to have answers to questions as well.
With respect to the statement made, or the quote given by the member regarding centralization, that was not the quote. I recall the question; I remember the answer. What I said is that decentralization is intended to provide people in the regions throughout the province — and we must look beyond Victoria and Vancouver — with a voice in the decision-making process, in that they can make their views known through a process, a procedure, such as we've not previously seen. But if we mean what we say about decentralization — and I do, and all members on this side do — then obviously if we want the involvement of the local community, we can't begin by spelling out a process and saying: "We want your involvement; we'd like you to be a part of it; but here is how you're going to be doing it." For that reason, Mr. Speaker, we left that flexibility available to the regions, because we're a government that not only professes and talks about democracy; we show democracy in action.
MR. LOVICK: Mr. Speaker, I wish we had more time in question period so that the Premier's answer could be longer, because the more he says the more he corroborates the points I've been making.
One more question for the Premier: once more unto the breech with yet another statement from the Premier. The Premier also stated Sunday: "Had I come out with all the details of my program, everybody would have been down on my head." Is the Premier telling us that the more he explains his program the more confusion and concern will result?
HON. MR. VANDER ZALM: I did say that, and I mean it. Frankly, if I had come out and laid out a total process for decentralization for involving the people and then laid out all as to how it ought to be done, I think then I would have deserved having things and people come down on my head. That is not, as I said earlier, the democratic process as we see it.
If we're talking about a democratic process involving the people, you can't lay out, as the socialists might have it, some documents saying that this is exactly how it is to be done. We want the people involved in the process. We want the people to be involved in making the process.
I might add to this that I've just come from Fort Nelson, one of those regions out there that wants to have a voice in that whole decision-making process. I had NDPers coming to me and saying: "We want to be with you, Mr. Premier."
MR. LOVICK: All of us in this House, I am sure, enjoyed the Premier's candour — discovering that too much truth is sometimes painful so we'll only give them a little of it.
The question, though, that I asked was whether he would agree that this absence of sufficient information is causing considerable confusion to the point that members in good standing of various Social Credit constituency associations and others are now saying: "Please tell us what's going on, Mr. Premier." Including your own riding.
HON. MR. VANDER ZALM: Mr. Speaker, you can't have decentralization such as the members are talking about, because they're talking about a very centralist approach, where everything is dictated in advance from Victoria — the very thing that we're saying decentralization will avoid.
I repeat: this process is for all the regions of this province. Our government doesn't concentrate only on Vancouver East nor guide all things in this province from what happens in Vancouver East. There are many regions of this province — the Cariboo, the Kootenays, the Peace River — where people want to have as much a say in the process as though they were living in Vancouver East. They certainly deserve a voice, and our system of government, a decentralized approach, will serve all the people of the province.
FUNDING FOR MINISTERS OF STATE
MR. BLENCOE: Mr. Speaker, the Premier admitted last week that the $8 million for the ministers of state was not needed right away, and that seems to be a reasonable assessment of the situation by the Premier. Would the Premier agree that all the funds were not immediately required the day that the special warrant was issued?
HON. MR. VANDER ZALM: I agree that if in fact we had given such a sum to an NDP minister — should there ever be such — he'd probably go out and buy some industry for government. That's not the case at all. This million dollars is to say to those regions: not only are we providing you a means of having a greater input into the decision-making process of government in Victoria, but we're backing it up with the necessary resources. But, member, this government would not be so irresponsible as to run off and spend the money the first day, as you're asking.
MR. BLENCOE: Given that the Premier has admitted that there wasn't immediate need — and he has admitted that — and given that we've had no guidelines for the spending of this $8 million, and given that not all the money has been expended yet, would the Premier agree that the money allocated by the special warrant was not urgently required? It may be needed in the future, but was the need urgent at the time the warrant was granted, Mr. Premier?
HON. MR. VANDER ZALM: To the industry that is looking to have a decision made very quickly in the Nanaimo region, because they want to see people employed very
[ Page 2917 ]
shortly; to the industry in the Okanagan that is before us seeking some participation by and support from government, because they're able to employ people presently unemployed in the Okanagan; to the industry in North Island; to the industry up the Sunshine Coast; to the industry in the Kootenays; to all of these people who are looking at jobs, at expansion, at creating economic activity, I would suggest it was urgent. To the member, who has a job and perhaps, after three terms, a pension from this House, it probably wasn't as urgent.
[2:30]
MR. BLENCOE: Mr. Premier, you talk about wanting to serve the industry in the economic regions of this province, but you have no legislation before this Legislature. How can you do that? That is a flagrant violation of the law of the province of British Columbia.
May I read to you section 21 of the Financial Administration Act? It states clearly that it must be urgent and immediate. Are you aware — do you realize — that this special warrant amounts to a flagrant violation of the law of the province and that it was recommended in 1981 that this kind of abuse stop in British Columbia?
HON. MR. VANDER ZALM: Mr. Speaker, the member is hard of hearing. Everyone on the floor here has a job, and there is a pension plan. I would suggest that to all the people out there seeking employment opportunities and employment security, what this government is doing is extremely important.
Orders of the Day
HON. MR. STRACHAN: I call committee on Bill 59.
MISCELLANEOUS STATUTES
AMENDMENT ACT (No. 4), 1987
(continued)
The House in committee on Bill 59; Mr. Pelton in the chair.
On section 11.
MR. SIHOTA: It is certainly difficult to get back into the cut and thrust of section 11 and the whole issue of repeal of the Investment Contract Act after that little sideshow we just had over question period, as we now begin to see the return of the leopard with respect to the Premier. All those analogies about the....
MR. CHAIRMAN: Hon. member, we're dealing with section 11 of Bill 59 –– I certainly can't find anything relevant in the comments that are coming forth at this moment. Maybe you'd direct your attention to section 11.
MR. SIHOTA: I was just waiting for things to settle down, Mr. Chairman.
The provision that's before us is the repeal of the Investment Contract Act, and that's section 11 of the legislation that's before the House today. Members of the House know....
Interjections.
MR. CHAIRMAN: Hon. members, we are in committee. The Chair would appreciate some quiet in the room so the member for Esquimalt-Port Renfrew can proceed with his questions on section 11. Please proceed, hon. member.
MR. SIHOTA: Thank you. Mr. Chairman. As I was saying, we're here in the House today to deal with section 11. I notice that the Attorney-General (Hon. B.R. Smith) is here to cover for the Minister of Finance (Hon. Mr. Couvelier). Because of the fact that yesterday the Minister of Finance and I exchanged a whole series of questions with respect to the Investment Contract Act, I'll provide the Attorney-General with some comfort right off the bat by telling him that I do not intend to ask a lot of questions. I view the comments that I'll be making now with respect to this legislation as closing comments on section 11, subject to maybe one or two short questions for the Attorney-General at the conclusion of my remarks.
The legislation before us is the Investment Contract Act. The government has chosen to repeal the Investment Contract Act. As I was pointing out yesterday in the Legislature, the Investment Contract Act was introduced in 1962 to provide protection to individuals who were caught up in a situation analogous to the Principal Trust situation. I think all members of the House are familiar with the problems that have been inherent and have flowed from the collapse of the Principal Group of companies.
The recommendation before the House right now with respect to repeal of that act flows entirely from the report of Mr. Robinson which was commissioned by the Minister of Finance with respect to the Trade Practice Act and the matter of the First Investors Corp., Associated Investors of Canada Ltd. and Principal Consultants and Principal Savings and Trust Co., and the other companies of the Principal Group. In recommendation 17.2 of his recommendations. Mr. Robinson indicated that he felt that it was about time that the government repealed the provisions of the Investment Contract Act.
It's my submission that to repeal that legislation at this stage in time after the collapse of the Principal Group of companies is an admission of failure on the part of the government. It's an admission and a recognition of the fact that the very legislation that had been created in this province to protect investors and designed to give investors some sort of comfort that there was a government agency out there that was looking after their interests with respect to the Principal type of situations — and there certainly have been others — simply was not working, did not work and could not work. Accordingly, the government has now chosen to repeal the provisions of the Investment Contract Act.
The problem with repealing at this stage of the game is that it provides little comfort, if I can use that word again, to the individuals who were burnt in the Principal fiasco. I'm going to use the example of Principal Trust because it is the most salient, relevant and up-to-date example that all of us in this House are familiar with. Please don't take my comments to be a diatribe on Principal Trust; it's really dealing with the Investment Contract Act. I want to use that experience as an indicator of what has transpired here, and why it is, in my submission, that repealing this act amounts to an admission of failure on the part of the government.
These people went to the offices of these companies. They were provided with standard form contracts on the bottom of which the provisions of the Investment Contract
[ Page 2918 ]
Act were reproduced. Upon witnessing that, the individuals clearly felt — and the evidence that Mr. Robinson collected during the course of his inquiry around the province was clear on this point — that there was a government watchdog agency monitoring their funds and monitoring the activities of Principal Trust. They were provided with further assurance by the fact that section 10 of the Investment Contract Act was reproduced in the investment contract that they signed. It was reproduced to tell investors who read it.... Unfortunately, some will argue now that you needed a law degree to be able to understand what it meant, but according to Mr. Robinson's report, the way in which it was translated to investors over and over again — because the stories are so similar and consistent in their patterns — led them to believe that the company was holding in hand assets equivalent to the amount of money taken in; that if someone came in with a $100,000 deposit, the company would go out and acquire assets of a market value equivalent to that $100,000.
In other words, there was an equilibrium, as I referred to it yesterday, a balance, as the Minister of Finance referred to it yesterday, between the money that was taken in and the assets that the company held. Section 10 was the cornerstone of the legislation, because section 10 mandated that that be done, and then it was reproduced in the contract. As a consequence of that reproduction, if I can put it that way, a sense of assurance was provided to the various investors. That section also referred to the powers of the superintendent of brokers. In all of the standard investment contracts that these people executed, it was indicated very clearly that if that equilibrium, that balance which I referred to was to be adjusted in any way up or down, it could only be done when it was deemed to be appropriate by the superintendent of brokers.
So not only were investors told that there would be a balance between the money taken in and the market value of assets that the company held, but on top of that they were told: "Look, if that balance is disturbed in any fashion whatsoever, then rest assured that the government — the superintendent of brokers, the province of British Columbia; only that person — can allow an imbalance to occur." That certainly provided additional security, if I can put it that way, to the individuals who executed these contracts.
Yesterday I asked a series of questions of the Minister of Finance with respect to the provisions of the Investment Contract Act, and I now want to turn to his answers and point out to the House some of the concerns we have with respect to what he said. The minister has indicated that upon a second reading of that legislation, it turns out there was first of all no requirement to approve application forms for investment — and I'm paraphrasing what the minister said yesterday. So there was no requirement in law that the superintendent of brokers' office review those investment contract forms that people relied on to make sure they comply with the provisions of the act; to make sure the word "guarantee" is not misrepresented in some fashion; to ensure that the usage of the companies being members of the deposit insurance corporation was not misused. That was one of the flaws, according to the minister yesterday.
The minister went on, during the course of the questions that I put to him yesterday, to indicate that there were inadequate powers to value the assets of the company. Let's step back and think about that for a moment. Here are people investing in a company, Principal Trust. That money is being used to acquire various stocks, bonds, real estate holdings and debentures. According to the minister, there is no power under the Investment Contract Act to determine whether or not $100,000 being taken in by the company is being used to buy $100,000 worth of property — no power to value the assets, to ensure that with that $100,000 the company hasn't gone out and bought $80,000 worth of stocks, options, bonds, real estate or whatever, as the case may be.
Inadequate power to value the assets is the guts of the problem with Principal Trust. This company had acquired assets.... In the case of real estate, I know we've had this debate in terms of the falling real estate market. But if one peruses the Principal Trust financial statements, as I have done, one sees that the guts of the problem started in 1983, when this legislation that the government now wishes to repeal was intact.
The government is saying that all along it never really had the power to go and check to make sure that these people were buying assets equivalent to the amount of money coming in. Why is it that that deficiency came to the attention of the government only now? Why would that flaw or incompleteness in the legislation, which was introduced in 1962, come to the attention of the government when Mr. Robinson prepared his report in 1987? What was going on in that 25-year period? Was no one looking at the provisions of the Investment Contract Act? Was the superintendent of brokers not sending signals to government saying: "Hey, look, this legislation is flawed"? Who was sleeping at the switch? That's a legitimate question that the investors are now beginning to ask.
[2:45]
I said yesterday, during the course of my presentation on this matter, that I didn't think the legislation should be repealed. I think that other things should be done. I will get into those other things in a matter of minutes. I want to go on now and take a look at what the minister had to say yesterday. He indicated, during the course of his response to the questions I asked, that there were limited powers to freeze the assets of the company, limited powers to investigate the affairs of the company, limited powers to appoint receivers over the affairs of the company in the event they were deemed inadequate. Again, who was sleeping at the switch? Where were all of the regulatory bodies that are supposed to be telling the government what's going on.
I think my time's up.
MR. WILLIAMS: It seems to me we're just getting into the meat of the outstanding presentation of my colleague from Esquimalt on this matter that the government handled very badly and which deserves this kind of thorough attention.
MR. SIHOTA: I'm delighted to learn that my good friend the first member for Vancouver East wants to hear more. I'm sure the Attorney-General over there does as well.
Who was sleeping at the switch? It seems to me that the basic question the Minister of Finance ought to be asking, before he proceeds with the repeal of this legislation, is: what was the superintendent of brokers doing to protect the interests of those small investors investing in these types of companies? I want to emphasize "small investors," because the evidence that has come out of the Code inquiry in Alberta — and I'll refer to that in a few minutes — is that four out of ten investors, 40 percent, earned something less than $25,000 annually. The majority of the investors with this
[ Page 2919 ]
company were seniors who worked hard to save up their money and were seduced — in a very deliberate and conscious way, according to this report from Mr. Robinson — into investing with this company.
Because of my own involvement as the critic for this party in this area, I know of people, couples, who have worked all their lives because they didn't have children, couldn't have children, and who saved up in excess of $150,000, and who lost it all. Another is a young couple who through an estate had received $200,000 and invested it, regrettably, a month before the collapse and lost their money. They don't want to know that the act is repealed. They want some hard answers from government as to what was going on inside the superintendent of brokers' office, what was going on within the Ministry of Finance, and why it was that nobody was protecting their interests.
It's not enough for the Minister of Finance to come before this House with a provision of this miscellaneous — and, as the Attorney-General called it, shortycoat — bill and say: "Well, we want a repeal." That's not adequate. The point is that the act did not provide the measure of security that it was held out to supposedly provide to these people, and as a consequence of it, they've been burnt.
So what did the government do? What did the provincial regime in this province do? I am delighted to see the Premier here, because I know that the Premier has heard from some of the people who had their financial security ripped out from underneath them as a consequence of the collapse of this company. I could go through my newspaper clippings, but I won't bother; suffice it to say that they were offended by the comments the Premier made when he said: "Well, you take a risk." These aren't people who play the stock market; these aren't people who get into penny stocks and hope and pray that they'll go up to dollars and hundreds of dollars. They aren't the speculators of the world. If the Premier would take one moment to read this report, he'd recognize immediately that it was a very conservative clientele that Principal Trust had targeted. Mr. Robinson reported on that.
I won't ask for it — because I don't think it's appropriate for me to ask for it — but the people who are offended by the comments the Premier made have asked for an apology. Mr. Premier, I don't think it's sufficient to smile. I think it's time to reflect on the comment you made at that time. I really mean that. Apart from all of the partisan flavour of the debate that goes on — and I know I'm one of the ones who plays that game a lot — I mean that in all seriousness. It's time for the Premier to reflect back on those comments.
So what did the government do? The government of this province appointed a commission of inquiry, and I made reference to Mr. Robinson's report. I want very quickly to quote from the terms of reference. Keeping in mind that the Investment Contract Act was the pivotal piece of legislation in this instance: "The terms of reference," and I'm quoting Mr. Robinson here, "for this inquiry do not explicitly provide for an examination of the application of the Investment Contract Act." The pivotal piece of legislation that was supposed to give comfort, assurance and security to the investors in this province was not part of the mandate of the commissioner of inquiry. Admittedly, he chose.... And the Attorney-General and I both know the gentleman quite well. He is actually, like the Attorney-General, a former professor of mine at the University of Victoria and after that a dean.
He chose, in any event, to stray a bit and take a look at the provisions of the Investment Contract Act, and out came his recommendation to repeal it. So he also admitted that the act doesn't work. That's an admission, as I said earlier, of failure on the part of the government in terms of its ability to pass consumer legislation and then to ensure that that type of legislation works in the interests of the investors it's supposed to protect.
It's not sufficient in my mind. Mr. Chairman, for the government to turn around and say: "Well, in response to the Principal Trust fiasco, as a result of the collapse and the regrettable effect that it had on the savings of people, the security that they had built up...." It's not sufficient, in my view, simply to repeal the legislation. Instead. It is my submission that a number of questions need to be answered — I'll outline those questions in a second — and that there needs to be a greater action on the part of the government, in light of its admission of failure with respect to the legislation. I'll talk about that in a second.
There are some specific questions that remain unanswered. Why, for example, did the superintendent of brokers not issue a licence to Principal Trust between April 1, 1986, and August 26, 1986? Was the superintendent of brokers aware of something, which has not been communicated to the public, that warranted his decision not to issue that licence? If that was the case, Mr. Chairman, then why was that information not made available to the public, so that that young couple that I talked about a few minutes ago that invested $200,000 from an estate that they had just inherited would have had the type of market knowledge that I referred to earlier when we talked with the Vancouver Stock Exchange?
I'm talking now about the type of market knowledge that they ought to have had. If the superintendent of brokers had some information that resulted in his hesitating to issue a licence over that period, then the public ought to have known that so that they could have made a decision, and decided on their own whether they should hesitate to make those investments. Why was there no notification? That's one of the hard questions that remain unanswered.
What about the role of the superintendent of brokers, pursuant to section 10 of the legislation? The so-called security section, as I call it, was reproduced at the bottom of these contracts. It's clear from the financial statement.... And you do not have to be a graduate of Harvard Business School to take a look at what those financial statements indicated. In the period between 1983, 1984 and 1985, those financial statements indicated that there were serious problems, particularly with respect to the mortgages held by Principal Trust. What was the role of the superintendent of brokers' office? And what did it do at that time, in 1983, 1984 and 1985, to take a look at these financial statements and communicate to the public that there appeared to be some relevant concerns about the financial status of these companies?
The investors want to know. Did the superintendent of brokers' office, given its powers as they were under the Investment Contract Act — and I've already talked about how the minister said that they were lacking — act diligently? Was it negligent in any way whatsoever? That's what the investors want to know. They want to know if there was due diligence and the absence of negligence. They don't want to know whether or not the legislation is being repealed now. What kind of response is that? I've said it already; it's an admission of failure. That's all it is. To turn around and repeal the legislation — what kind of response is that?
[ Page 2920 ]
Indeed, did the superintendent of brokers upset that balance, that equilibrium, that I referred to earlier? If so, on what basis? Because if indeed the equilibrium was upset, it seems to me that first of all the investors ought to have been informed, and I think there is reason to believe that that equilibrium ought to have been upset. Whether it was or not, pursuant to my comments yesterday, I don't know for sure. But the investors want to know that. If it was upset, they want to know why they weren't publicly apprised of that fact.
[3:00]
I'd say that it's not enough for this government to appoint a commissioner, Mr. Robinson, as good as he is — to investigate the Principal Trust situation. The government ought to expand the powers of that commissioner to investigate the role of the superintendent of brokers' office with respect to the Principal situation.
At this stage of the game we don't support repeal of the legislation, because we refuse to see how that acts in the interests of those investors who were burned.
MR. WILLIAMS: Mr. Chairman, we are clearly getting the best presentation we've had in this House with respect to the Principal Trust fiasco. There are many questions that have to be answered, and I look forward to the member's continuing.
MR. SIHOTA: I shan't be much longer in my comments.
It's not enough to appoint a commission of inquiry and then to repeal the legislation. That doesn't help out the investors. We want to know, and the investors want to know.... If the government had any sense of its obligation to the investors, it would certainly do this. There ought to be an extension of the powers of Mr. Robinson as a commissioner to investigate the role of government, to provide some answers to the questions that investors are asking. There must be some answers provided to the investors through the extension of the terms of reference of the commissioner to ask one very basic question: if the legislation introduced in 1962 was not adequate, then why was it that the government did not either introduce amendments or, more importantly from my reading of it, pass appropriate regulations pursuant to the act to allow for the type of deficiencies to be remedied that the Minister of Finance talked about yesterday? It's a simple matter of order-in-council regulations.
It's not sufficient for the government to simply admit that the legislation was inadequate. It's not sufficient for the government to admit that the legislation was a failure. The government has an obligation — if I can put it this way — to pay the price of that admission of failure. The least it can do is to expand the powers of the commissioner to delve into the role of government and ask the very basic question of why the government — and particularly the superintendent of brokers' office — let down the investors in this regard. It's not an unprecedented request, Mr. Chairman. I know that in Alberta the Code inquiry is doing essentially that job. If it's good enough for Alberta, it ought to be good enough for British Columbia.
I want to end by asking the Attorney-General — and I appreciate the fact that the Attorney-General does not have firsthand knowledge of these issues, which fall more within the purview of the Minister of Finance — whether the government is now willing to make a commitment to extend the terms of reference of the commissioner to allow him to investigate the role of the government and the superintendent of brokers' office with respect to the Principal Trust issue.
HON. B.R. SMITH: Mr. Chairman, we've had a very good debate on almost everything but this section.
The section repeals an act. A commissioner whose appointment the member for Esquimalt-Port Renfrew lauds, former dean Lyman Robinson, having spent considerable time and care on this matter, has recommended that the protections given under the old Investment Contracts Act, an act in place in this province since 1962, and in the years 1972-75 when there was a government of that party that could have changed it, just as a government of this party could have changed it.... He recommended that that act should be changed or replaced and that additional safeguards such as those available under the Securities Act should be available to the innocent holders of this kind of contract. The government has done that. Indeed, as soon as this report became available, the Finance minister, on October 19, made a number of promises with respect to the Alberta litigation that was underway. He promised to provide information to investors. He promised to make legislative repeal of the Investment Contract Act, the legislation here before us. He also promised to make changes to the term of guarantee in financial transactions in British Columbia and to consider placing a statutory limitation on the use of the word "deposit," and I understand that that will be the subject of further legislation in the spring.
He also undertook that the Canada Deposit Insurance Corporation would be asked to change its policies and procedures to clarify which investments are and are not insured, because there's no question from Professor Robinson's report that many of these innocent investors — very conservative investors, I agree with the member — believed that they were covered by deposit insurance. Indeed, the staff of Principal Trust, according to Dean Robinson's report, often blurred the distinction between safe and unsafe investments, and a lot of these people thought they were protected, and they weren't.
So the Minister of Finance agreed to ask the Canada Deposit Insurance Corporation to make changes in those policies and procedures, and I understand that he has done that and has pressed that. So all these commitments were made in a straight-up way when this report came in, and those commitments are being carried out. This side of the House regrets what happened to those innocent investors just as much as the other side does. There is no sense trying to take ownership of that regret on the other side. Every member of this House regrets that these innocent and often elderly conservative investors of limited means lost their money or their life savings. It's a terrible tragedy. It is regretted by all members of this House, so let's not try to take partisan ownership of it.
MR. WILLIAMS: Some have more responsibility than others.
HON. B.R. SMITH: Yes.
We believe that this is a legislative first step: to get rid of this legislation and bring about the better protections and the better disclosure under the Securities Act. We also believe that there has to be further legislation, such as the Finance minister indicated on October 19, and that will be proceeding.
[ Page 2921 ]
MR. SIHOTA: I will be short, but I want to respond to what the Attorney-General had to say.
First of all, the Attorney-General talked about the undertakings of the Minister of Finance when he responded on October 19, 1987 with respect to the conclusions and recommendations in the report. Quite frankly, those undertakings don't amount to a hill of beans. They really don't. You take a look at what's said here.... I know this is somewhat off the debate and has also been commented upon both by me and others. The government will take legal proceedings against Mr. Cormie. Big deal. The government will give legal advice to contract holders with respect to proceedings against the companies. There are companies that are delinquent, in some cases virtually bankrupt. So what? If you're going to give people legal advice....
The director will provide forms and information to investors in pressing claims. That's a great undertaking; there's a lot of substance to that. The minister will ask that the contract act be repealed. Well, that's what's happening here. Then he lists a couple of others with respect to the use of the words "deposit" and "guarantee." Those may be proactive changes, but they don't help the situation that these people find themselves in. They don't amount to much and, as you say, that has already been commented on. I commented on it back on October 19 in the press, and the minister and I had a go at each other. But let me put on the record that those undertakings do not amount to much.
If the government has regrets about what transpired — which the Attorney-General says it has — then I say to the Attorney-General: put some substance behind those regrets. Inject an element of responsibility into that regret and provide answers to these investors with respect to the role of the government. If you've got nothing to worry about, then the commissioner will report as such, and there's no risk to government to allow for the commissioner to investigate the role of the superintendent of brokers. If, on the other hand, due diligence was not exercised by the superintendent of brokers, then clearly there is a risk and exposure to government with respect to liability, and the investors have a right to know that. But if you have regrets, put some substance behind those regrets.
The third point I want to touch on very quickly in one sentence is for the information of the Attorney-General. In 1975 Mr. Macdonald actually did amend the Investment Contract Act. So it's not as if the NDP regime between 1972 and 1975 was oblivious to this piece of legislation.
I want to again put the proposition to the Attorney-General: will the government expand the terms of reference of Mr. Robinson to investigate the role of government, in particular the superintendent of brokers' office with respect to the Principal Trust fiasco?
HON. B.R. SMITH: I think we'll decline that invitation. You've already done the job anyway. You've examined it and investigated it and told us what we should do.
MR. WILLIAMS: I think we've had a fine case put here by the member for Esquimalt. It's abundantly clear after you look at the range of fiascos we've had in the financial sector in British Columbia, as in Alberta unfortunately, that there has been less than adequate performance on the part of the ministries involved — and that's being kind. Surely there's a need to go through that, like what they're now going through in Alberta, in terms of determining precisely where the weaknesses were, what the inadequacies were and what kind of toothless watchdogs we've had all too often.
So many of these problems are predictable; it becomes apparent. I think the member for Esquimalt has made the point, and it should be underlined. They're at last dealing with this side of the question in Alberta, and it should similarly be dealt with in British Columbia.
What does the minister have to hide? That's what you have to ask yourself. What do they have to hide? Incompetence? Bungling? Well. If that's the case, let's get to the bottom of it. Let's deal with the people who are responsible. We have ministries here that are.... The Minister of Finance is clearly stretched like elastic around 93 different administrative chores. It's impossible in some respects. But these bureaucrats in the superintendent's office clearly have roles to play. They have not been properly played. The public, the poor people that have been consciously bilked, need and deserve an answer in terms of non-performance under these provincial ministries.
[3:15]
Section 11 approved on division.
MR. CHAIRMAN: Hon. members, we have already dealt with sections 12 through 15, so the next section in Bill 59 to be dealt with is section 16.
On section 16.
MR. CASHORE: First of all. I would like to ask the Attorney-General if he would speak to this change and give the reason for this amendment.
HON. B.R. SMITH: Section 16, which is really part of section 18, is to enable the Lieutenant-Governor-in-Council to provide by regulation the fees of services that are rendered by the public trustee. Where the public trustee now looks after a patient or a person who used to be a patient, the public trustee is entitled to retain a sum of 5 percent of the gross value of the estate to meet the costs of administering the estate. That's the present state of the law. Such funds are payable to the Ministry of Finance for the consolidated revenue fund, and they can be waived also in the case of hardship if there's no estate, or a very limited estate.
This would be repealed consequential to section 18, which would provide a new authority in allowing the cabinet to make regulations prescribing fees to be paid for services rendered. So we're going to try to do a fee-for-service administration instead of a flat percentage fee administration. I can outline it further under 18 if you want, as well.
The present provision for a fee would include services such as approving infant settlements, for instance, under the Infants Act; those fees are prescribed by regulations. Executors and administrators of estates: those fees are set by statute under the act. The public trustee is disqualified from collecting certain fees previously collectable under the Estate Administration Act because the public trustee is not a lawyer. Administrative trust funds for children is another one. Approved payments out of court for children's trusts: no fees are presently collectable, although the work may be significant and take a lot of time. The audit of the accounts of mental patients is required every two years under the Patients Property Act, and no fees are collectable there. The work can be
[ Page 2922 ]
substantial, and often there is ready ability to pay without hardship. In all cases where there is hardship, no fees ixill be charged.
To put it very bluntly, we want to charge prescribed fees on the basis of work done throughout the administration of this office, instead of flat percentages.
MR. CHAIRMAN: Just before we proceed, hon. Members, it would seem to the Chair that this debate would be much facilitated if we could deal with sections 16 and 18 simultaneously. If the debaters have no objection, we can deal with it in that manner, although I should tell all hon. members that when it comes to seeking approval on the sections, they will be dealt with separately.
As there are no objections, we can proceed on that basis.
MR. CASHORE: Some of the points that the Attorney makes could in fact be reassuring in that it implies that in some cases where a flat 5 percent ceiling is charged, in future it may not be charged at all. So my next question is: under the present situation with the Patients Property Act, is it automatic that 5 percent is charged in a given year, or is it up to 5 percent that may be charged?
HON. B.R. SMITH: You're correct. It's only up to. It doesn't mean that we have to charge 5 percent. One of the weaknesses in the old system was that except by the statutory collection of up to 5 percent on the gross value of an estate, if you acted as an executor or administrator, the public trustee, having a lawyer doing that work, often couldn't charge for the work as a lawyer even though legal staff do the work. So we want to replace the percentage basis with a whole set of fees which would be made public under regulations and which would try to reflect the kind of work that this office does.
We've been trying to reorganize that office and cut down the time taken in processing. About three or four years ago I used to get a lot of complaints about delays through that office, and I think the office has made quite an effort in the last year or two to improve the efficiency of its operation. I think there should be some cost recovery from it. It's one area of government where we can cost-recover and pay for the operation of the office, always bearing in mind that where we have a hardship case or no estate, we're not going to be able to charge fees and wouldn't seek to do so.
MR. CASHORE: I would like to concentrate on section 16 in terms of the point that I want to pursue. That is, I could understand this if it was stating that it was not absolutely necessary to charge for certain services, but to take the lid off, to remove the statutory requirement that no more than 5 percent can be taken from the estate, seems to me a very inappropriate action on the part of this government. If 5 percent was set at some time, surely there was reason for that. Administrative costs do go up, but if it's on a percentage basis, it still is reflecting a fair reality there.
What really concerns me about this is that we're dealing here with defenceless people in our society: mental patients; mentally handicapped people; and certainly, if we include sections 16 and 18, infants and persons in our society who have come in some way under the care of various elements of government. It may be within the milieu of Social Services and Housing; it may be within the milieu of the Ministry of Health. But whatever it may be, what we're dealing with here is a matter of trust. It is the public trustee. To be moving in a direction that enables the government to remove funds from an estate over which it has trust — the funds belonging to a defenceless person — is really inappropriate.
I do not think, notwithstanding all the points the minister has made, that the case has been made to justify removing a lid in terms of what may be taken. I understand when the minister says that of course there are cases of hardship and there are cases where we would not do that, but I can tell you, having worked extensively with mental patients, that I have been aware of many patients whose estates are under the stewardship of the public trustee and where, over a period of time, the assets in those estates have diminished incredibly, even under the present circumstances.
I would like to remind the minister and the members of government that when we are talking about defenceless people, we're talking about people for whom self-esteem is often an incredibly important factor in terms of their sense of wellbeing and their ability to function to the best of their potential. If those persons do happen to have an estate there which might be able to help in some ways to provide for their comforts, to enable them to buy Christmas presents for their extended family and that sort of thing, that is a very worthwhile and wholesome thing. What this is going to do is hasten the day when the assets within such an account will be diminished, and when that will no longer be available to that person, and when that person will be in essence completely on the dole. I don't think that's socially responsible. I think it's absolutely unnecessary. I don't think a financial or an economic case has been built for doing this. It is simply wrong, and it should not happen.
This government has seen fit to remove estate taxes. Why would this government see fit to take the lid off its ability to tax the estate of a defenceless person? I would like to hear the minister's comments on some of the points that I've made.
HON. B. R. SMITH: I just must profoundly disagree with the proposition that estates of patients or infants or people who are under disability and are administered by the public trustee, or all the many other works that the public trustee does, such as administering the trust funds for children, proving payments for children's settlements, dealing with the assets of former patients.... I profoundly disagree that — save in cases of hardship where there should be minimal or no fee charged, and there isn't under the act — the estate shouldn't bear some reasonable cost of that. I don't see that that should be an element of social service. I understand that there is a philosophy over on the other side among some members who believe that everything should be paid for by the state. But I do believe that that is not the philosophy of the majority of people of this province. There is absolutely no suggestion here that we're going to destroy the estates of helpless people. That is just an absurd proposition.
What we are going to do is to try to modernize and have a fee schedule for the services that are rendered. The fees now are full of anomalies, because some of the fees are charged under specific statutes — not under percentage figures such as the patients' estate act, but under statutes that prescribe a fixed fee for service which the public trustee can charge, or enable them to he set by regulation. But in other cases, services are provided or even required to be provided without any provision for fee, even though the cost of providing the service may be considerable. In many of these cases, there is a clear ability to pay on the part of the owners of that estate.
[ Page 2923 ]
We're saying let's get a modern fee schedule, covering all these various contingencies, which has to be published in regulations, and everyone can see it. If there is something unfair in that and the member wants to address that, we'd be delighted to hear from him. There's nothing more sinister than that in the legislation.
MR. CASHORE: The Attorney-General has not heard me argue that the costs should be home by ministries such as the Ministry of Social Services. The Attorney-General has heard me argue that there is already a provision enacted for fees to be charged, and indeed, to be consistent with the point that is being made, there could be an amendment, there could be legislation enabling the trustee to charge for certain kinds of services rendered. I notice that in section 18 it provides for some contracted-out services.
I'll say more about that later, but I'm not opposing that per se. I'm saying: why not create the amendment to give you the opportunity to do that, but recognize that you already have the opportunity in the existing legislation to charge a fee? In the wisdom of some previous jurisdiction a limit was placed on it. Now, through the act you are seeking to enact at this time, you are taking that limitation off.
[3:30]
I submit that that is uncalled for. To have a limit on what might be spent from the estate of one of these people is not to say that some other branch of government should pay for these services. The way it's written now, it's already built in that it can be charged for — it always has been. The minister has not made the point. He has suggested that I am suggesting it be paid by some other branch of government. I'm not saying that. I'm suggesting that the minister continue to use the powers the act now provides, and if he wants to add something to the act to enable fees to be charged for certain types of services, as long as it stays under 5 percent, so be it. Why haven't you gone that route?
HON. B.R. SMITH: As I've said three or four times, we're going to a fee schedule for everything, and if the fee schedule should take work over and above 5 percent, well then, we'll charge that in a case that isn't hardship.
We've got to be able to do things fairly, and rationalize all these various demands and fees for services by the public trustee. That includes dealing with matters under the patient's estate act as well as under the Infants Act and various other statutes that deal with the fees — all in very different ways. The only way we can see to do it fairly is to have one set of regulations for fees that includes them all — patient's estate and the others.
MR. CASHORE: I don't think that we need to continue to belabour that debate. We've both had the opportunity to make our points.
I would like to ask the Attorney-General this: assuming that a patient who comes under the Patients Property Act, or somebody acting on behalf of that patient, felt that the fee being charged was unfair, what recourse would that patient or person acting on his behalf have? For instance, would it be to go to the ombudsman? What recourse is provided within the opportunities the Attorney-General is aware of?
HON. B.R. SMITH: It's certainly open to that person to go to the ombudsman. Any of us can go to the ombudsman if we don't like any act that a provincial official of any kind does, and the public trustee is such an official. So you would certainly have that right.
If you have a fee schedule and that fee schedule is charged, then I guess it would boil down to the question of the number of hours or the question of hardship, and that would be a matter that Von could go to the court on, I would think. Or you could certainly go back to the public trustee's office.
The safeguards that a patient's heirs have now are really no greater than I can see them being under the new legislation. You still have the right to go to court if you feel the charges are unfair. Or if it's a case for hardship and you can't persuade the public trustee of that, then you have the right to go to court. You certainly always have the right to go to the ombudsman, which is a swifter route in many cases than to go to court.
MR. CASHORE: I thank the Attorney-General for that. It would seem to me, however, that any of those recourses would be after the fact and that they would not have the effect of suspending the action of the public trustee in charging that allegedly exorbitant amount. I do not think that such a procedure would suspend the action of that charge against that estate. Again, I think that's taking people who often have the most difficult time in our society and putting them in a very awkward spot.
I'd like to move on now to section 18, which deals with the Lieutenant- Governor-in-Council being able to "make regulations prescribing fees or a scale of fees payable to the Public Trustee for the performance of a duty or for services rendered by or on behalf of the Public Trustee...." I have some mixed feelings as I come to this part of the act. I can understand that in some instances a person who is a mental patient perhaps may benefit, or an ex-mental patient whose funds are being handled by the public trustee may benefit, by being able to arrange to have a certain type of counselling that would be paid for out of that estate. I can see how it might free up some opportunities for that patient or for that ex-patient. I can also see how it might be quite frustrating for people to have their funds tied up, to feel there's something worthwhile that they'd like to be able to use those funds for and not to have that access. I think there's an effort in this to make that opportunity more available, and I find that commendable.
One of the things that really concerns me about the wording is that it seems to me that it's possible.... I would have to admit to a sense of being suspicious of this government. It seems to me that this wording opens up the door to the privatization of the public trustee. I'm very concerned about that. I have not seen the privatization of the public trustee announced in either phase 1 or 2. I have heard vague generalizations about everything being for sale. But I would have to object, on the strongest possible grounds, to anything, notwithstanding the worthwhile aspects that I recognize the drafters of this resolution are aiming at here.... I would have to oppose, on the strongest possible grounds, the fact that this wording could be used to justify the privatization of the public trustee.
It says: "...performance of a duty or for services rendered by or on behalf of the Public Trustee under this Act or any other enactment." If that is the intent, or even if it opens the door to that possibility, I think that it is a cause for a very important dialogue with regard to where we're going with this legislation. I'd like to hear the Attorney-General's comments on that.
[ Page 2924 ]
HON. B.R. SMITH: I don't see that it changes the ability of the public trustee to contract out some service over and above what he could do now. For instance, the public trustee may decide to hire a lawyer in private practice because of a very difficult problem that he has, and that he can't have someone on his staff do; then he will pay that lawyer his legal fees. Those funds can be paid now. Those funds can in some cases be chargeable to an estate, as a disbursement.
I don't see how this new regulatory provision encourages or abets or aids privatization. Privatization could be done now in the office without legislation, I suspect. You'll be pleased to know that I haven't been looking at it or had to consider it. Quite frankly, there have been offers in the past, going back years, from people who want to buy part of this operation. But I always noted that they wanted to buy the lucrative parts and not to buy all the non-lucrative but public service parts that a trustee performs for patients and for people who are under disability, which are not money-makers and are not attractive to the private sector.
I would rather doubt that anyone would, even if we put it out, come up with the comprehensive protection that we would want to give. If it ever was privatized, you couldn't privatize them all, I don't think, commercially. As a service, the government would have to do certain things to protect people under disability, to ensure that their estates are intact and that people don't take advantage of them.
The public trustee has never been in the position of gouging anyone on fees. He's the guy that prevents others from doing that. That's his whole modus operandi: to make sure that somebody else isn't ripping off a patient, that they're not getting overcharged. Those of us over the years in private practice that dealt with that office knew that it was very tough to get nickels and dimes out of that place. It was very hard to get access to any of those funds. So people were well-protected. I don't think these provisions cut one way or another on privatization.
I mean, privatization is not something that's on my drawing board for this, but I would never say it isn't going to happen. You never say "never," because you don't know — if there were some interest in taking the whole thing on. But I suspect that you couldn't take the whole thing on and perform that function in an economic way in the private sector; only the good parts of it. It's like the air carriers who want to move into a new route under deregulation. But all they want to do is cream off the good flights at the prime times. They don't want to provide all that service for the rest of us who have to get off an island or a small community.
So I think that it would be attractive privatized if it was creamed, but not the whole service. That's my off-the-cuff opinion on it. I can tell you people have expressed interest over the years in buying some of the nice attractive parts but never the whole.
MR. CASHORE: The concern that we have with privatization is precisely the creaming. We think that that process is implicit within the gradually revealed plans of the government.
On this section 18, I want to say to the minister that I have not been raising any issue with regard to a sense of trust of the public trustee. I agree with you that the public trustee office does a good job. I think there's genuine effort here; I just wish you would have let me help you draft the legislation. I think there's a genuine effort here to give a little more leeway on some of the kinds of services that might be made available.
I am a little bit reassured when the Attorney-General tells us that he hadn't anticipated that in this legislation. But I still wonder hypothetically if this legislation enables the privatization of the public trustee. Does it enable it?
HON. B.R. SMITH: No, I think you can do it with or without the legislation if you had a mind to do it. I don't think it would make any difference. I don't think the legislation is key to it all.
MR. CASHORE: I would just like to go one step further and say that my understanding of the comments the minister has made in this discussion is that he really does not favour the privatization of the public trustee. That's my understanding of what I heard the minister say, and I'm glad to know the minister is against the privatization of the public trustee.
Mr. Chairman, I notice that there are a number of sections in this miscellaneous statutes act that deal with bringing the public trustees together, and I have no problem with that. But I do say that I still — it's not a matter of us not trusting the public trustee — have some concerns regarding our trust of this government and its intent. I have very deep concerns about removing the 5 percent. I will end with this, but it leaves the opening for this government to reach into the pockets of the disadvantaged, the weak and the defenceless. It's absolutely unnecessary in terms of anything the minister has explained in this discussion.
Section 16 approved on division.
Section 18 approved on division.
Section 17 approved.
[3:45]
Section 19 approved on division.
Sections 20 to 25 inclusive approved.
On section 26.
HON. B.R. SMITH: I move the amendment standing in my name on the order paper. [See appendix.]
Amendment approved.
Section 26 as amended approved.
Title approved,
HON. B.R. SMITH: I move the committee rise and report the bill complete with amendments.
Motion approved.
The House resumed; Mr. Speaker in the chair.
Bill 59, Miscellaneous Statutes Amendment Act (No. 4), 1987, reported complete with amendment to be considered at the next sitting of the House after today.
HON. MR. STRACHAN: Committee on Bill 62, Mr. Speaker.
[ Page 2925 ]
PENSION (PUBLIC SERVICE)
AMENDMENT ACT, 1987
The House in committee on Bill 62; Mr. Pelton in the chair.
On section 1.
MR. CLARK: I want to make some introductory remarks to make it very clear that on this side of the House we strongly support the move towards early retirement. It's something that should be considered across the board in British Columbia. It's something many of us have argued for in the past.
We also think, however, that it's unfortunate that the government would choose the initiative of privatization to bring forth this kind of legislation, because it is no longer early retirement but really a kind of economic blackmail to get people out of the civil service.
I'd like to move on to ask some very specific technical questions, and I hope the minister has those answers for us, because I have a great deal of concern about the magnitude of these changes.
The first question would be: has the minister got any numbers in terms of the number of employees eligible in government to take advantage of this plan?
HON. MR. VEITCH: No, I don't have numbers yet as to the number of people who will participate in the plan. That information is forthcoming, and we would have to wait until we saw the number of people who apply for this plan.
MR. CLARK: This is not a very good beginning, Mr. Chairman. I hope now that some staff are here that maybe we can get some better answers, because the question I asked was not how many people will take advantage of this plan, but how many people are eligible to take advantage of it?
HON. MR. VEITCH: Mr. Chairman, 3,500.
MR. CLARK: Is that 3,500 in the civil service? Does that include management? Is that the total number of people who are eligible — in other words, are within the age bracket to take advantage of this plan and have the commensurate service required?
HON. MR. VEITCH: Yes, that's the public service, hon. member. It would exclude any Crown corporations that may or may not, through order-in-council, take part in this.
MR. CLARK: So that includes management employees as well as bargaining employees? The minister nods his head; that's fine.
Could the minister give us an indication — an estimate that they are surely using to work on — as to the percentage of employees who will likely take advantage of this plan? I say that because I think many members of the House will know that actuaries work on estimates to determine the costs, and therefore while I appreciate that the minister will not know precisely how many employees will take advantage of the plan, surely they have a range of estimates that he can inform the House of with respect to the number of employees.
HON. MR. VEITCH: No, I can't speculate nor will I speculate on the number of people who will avail themselves of this particular plan. I think that that would be improper to do at this point in time. I can tell you that there are 3,500 eligible. You can pick a number anywhere in between that, and one would be as correct as the other.
MR. CLARK: Can the minister inform the House what the estimated cost per capita is to the government of this plan?
HON. MR. VEITCH: Again, these are hard things to average out. It depends in which area the people avail themselves — whether it's at the management level or whether it's at some other level. But if you took a median right across the whole thing, it would be about $25,000 per capita.
MR. CLARK: If the Chair would just give me some latitude.... I'm trying to make some quick calculations here — I don't have a calculator with me. I'd like to know, first, if every single employee took advantage of the plan, and you multiplied that by $25,000, what the cost would be to government for this plan. Do you have that number handy?
HON. MR. VEITCH: That wouldn't even be relevant, because you have to add some numbers back and you have to say what the costs would be to government. You realize that the plan will be compensated over time for whatever the cost is. So I guess the figure that would be more relevant is the cost to government. You can't ascertain what that is, because obviously some of these people may or may not be replaced, and they may not be replaced in certain areas. So that is one that would be pure guesstimation if you ever attempted to put a number to it at this time.
MR. CLARK: Well. the minister has said that the cost to government on the median average is $25,000. I think it's fair to look at a range of possible costs to the government, based on the numbers the minister gave, because those are numbers which I've also been given by other people.
[Mrs. Gran in the chair.]
So let me just look at it. First of all, if 50 percent of the employees took advantage of the plan — and that, one might argue, is a low estimate; I would certainly argue it is a low estimate — then the cost to government is $43,750,000. That's the minimum; that's 50 percent. If 2,500 employees took advantage of this early retirement plan, then the cost to government is $62,500,000. Of course, if all 3,500 employees took advantage of it.... I don't have the number handy, but it must be close to $80 million or $90 million.
HON. MR. VEITCH: $80 million.
MR. CLARK: The minister says $80 million, if all the employees....
I'd like it clarified about Crown corporations. Could the minister tell us how many Crown corporations will participate in this initiative and how many have decided to participate in it by order-in-council?
HON. MR. VEITCH: If ifs and ands were pots and pans, the whole world would be tinkers, wouldn't it? You can put whatever number you want to it. You can go from zero to $80 million.
[ Page 2926 ]
At this point there is an indication, at least, that the Buildings Corporation and the Systems Corporation are interested in the plan. There's been no formal request for an order-in-council. There can't be, of course, until the act is passed. But there is an indication that they may be interested.
MR. PELTON: Madam Chairman, may I have leave to make an introduction, please?
Leave granted.
MR. PELTON: On behalf of our Speaker, I would like to introduce to the House Dorothy and Chris Hebb, who are from West Vancouver, and I would ask you all to make them very welcome here this afternoon.
MR. CLARK: Would the minister confirm that B.C. Hydro is also embarking upon a similar plan?
HON. MR. VEITCH: B.C. Hydro wouldn't apply under this plan. They have their own pension plan, as you're probably aware, so it wouldn't be covered under this program.
MR. CLARK: But the minister is aware that a similar plan has been adopted by B.C. Hydro, and it was exactly the same parameters in terms of the 5 percent penalty being waived and the severance pay being applicable.
HON. MR. VEITCH: Yes, but it has no relevance to this particular section of the bill we're discussing at this time.
MR. CLARK: I think it does have some relevance, and I'd like to probe a little bit with the minister regarding it. I have here in my hands a document dated November 16, 1987, which has been given to me. "Strictly confidential," it says on it, and I'm sure the minister's aware, as we know the Premier's aware, that we don't want this kind of documentation in the public domain, because we don't want to tell everybody what's going on, because the people will get upset.
But I have this document by William Mercer, actuarial consultant, regarding the B.C. Hydro scheme, which I submit is very similar to the scheme we're looking at here to be passed into law if the government agrees to it. It's a very interesting document, because it makes a number of assumptions. Unlike what the minister says and public statements by the Premier and others about the cost of the early retirement plan, we have estimated costs.... If only 50 percent of the eligible employees take advantage of it at B.C. Hydro, then the cost to government or to B.C. Hydro will be $15 million and the indirect costs will be $5.3 million, for a total cost of $20.3 million to B.C. Hydro.
If 70 percent of the eligible employees take advantage of this plan, then the cost to B.C. Hydro directly will be $21 million and indirectly will be $7.9 million. Therefore the cost to B.C. Hydro, if 70 percent of the employees take the plan, will be $28.9 million.
HON. MR. VEITCH: Madam Chairman, we are discussing section 1 of Bill 62, the Pension (Public Service) Amendment Act, 1987. I respectfully suggest that the rule of relevancy is being abrogated here, and we should move on to the discussion of this section.
[4:00]
MR. CLARK: Madam Chairman, I will discuss this section, and I think this is very relevant. I think the minister knows.... He said he doesn't know how many people will take advantage of it; he said he doesn't know what the cost is going to be. The only document we have that deals with the cost of the early retirement plan is one that comes out of B.C. Hydro, that's confidential, that was not released by the government, but which I happen to have. I want to go through with the minister the B.C. Hydroplan, and then we'll bring it back and make some comparisons to the provincial government plan.
The high cost estimate to B.C. Hydro of the early retirement plan: direct costs of $27.1 million and indirect costs of $10.5 million. So B.C. Hydro will have to swallow $37.6 million if 90 percent of the employees who are eligible take advantage of the plan. I just did some very rough estimates of what those numbers would mean if we extrapolate them to the entire public service. Those numbers are quite horrendous.
If we say that there are 34,077 full-time employees in British Columbia in the public service, not counting Hydro, and that 3,500 will take advantage of the plan or are eligible for the plan, if we use the same actuarial assessment that the actuaries did at B.C. Hydro and we work it out, then the cost to government of this plan that you are about to pass is between $80 million and $150 million. That's the cost of this early retirement plan. What's worse, Mr. Minister, is that the document I have with respect to B.C. Hydro is dated November 16, 1987, so the government has once again made an announcement about an early retirement plan which is very generous to the employees and is only now going to the actuaries and asking how much this is going to cost us.
We only now have it at B.C. Hydro, and the numbers are $30 million to B.C. Hydro, for which the taxpayer is going to pick up the tab. If we extrapolate and use those numbers in the public service, it's $80 million to $140 million. That's $80 million to $140 million that could have been used, rather than to pay people to retire, to deal with the kind of crisis we've seen in health care, in mental health and in other services in British Columbia.
Using the minister's numbers, he says the estimate could range up to $80 million, depending on how many people.... If we take the actuarial estimates used by the same actuarial firm used by B.C. Hydro, then it becomes, at 50 percent — which is the low estimate that he uses — $43 million of the taxpayers' money. If he uses the high estimate, it's about $75 million. It's not acceptable, Mr. Minister, to come to this House and ask us to pass a bill that's going to spend taxpayers' dollars — $80 million by his own estimate, or $150 million if we use the same assumptions as the B.C. Hydro actuary.
HON. MR. VEITCH: This has been quite an exercise in throwing numbers around. You know, what we're talking about here is apples and oranges, completely and absolutely. I don't know what the hon. member is reading from. I am sure he is reading from something that pertains to Hydro, and I'd like to have a copy of it. But if he is reading from something that pertains to Hydro and their employees that's specific to Hydro, the cost is based on demographics of that particular group, and they have no relevance whatsoever to the public service group we're speaking of here. So you can pick any number you want and bounce it around, hon. member, but you won't come up with anything correct. You've got
[ Page 2927 ]
to compare apples with apples or oranges with oranges, and you're not doing that, with the greatest respect to you.
MR. CLARK: Let me try to give a very conservative estimate of the cost to government of this kind of legislation. If we use your numbers, Mr. Minister — not the numbers from B.C. Hydro.... If we use the $25,000 cost to government of early retirement plans as an average, as a median, and we use the actuarial assumption — the conservative one or the median one of 70 percent — then the cost to government is about $62 million. If we add to that the B.C. Hydro plan, which is a cost to government, to B.C. Hydro, and we use their friedian costs, the cost to government is $29 million. So we're now up to $99 million as a cost to government. If the B.C. Systems Corporation takes advantage of this plan, if the B.C. Buildings Corporation takes advantage of this plan — which is what the minister said they have every intention of doing — we are in excess of $100 million of taxpayers' money to go to people to retire early, to get out of the civil service to make way for this crazy privatization scheme.
It doesn't make any sense. That $100 million could be used in so many different ways in British Columbia, as any heart patient will tell you, lined up for surgery: as hungry school children in Vancouver will tell you; as unemployed people will tell you — $100 million to give a golden handshake to civil servants all across British Columbia, using your numbers, Mr. Minister, not the B.C. Hydro estimate, but your numbers and the actuarial numbers. Can the minister defend the expenditure of $100 million?
HON. MR. VEITCH: No, I won't defend the expenditure of $100 million, because the hon. member is picking numbers out of the air. But I will tell you this: if you go through the bill further on and in other sections, you will find that the government intends to replenish the pension fund in the amount that it will cost.
Having said that, if all those people are not replaced, and we take an amortization period from five to ten years — whatever you want — to pay that back, you'll find that there is a saving in wages and that the cost to government probably will be nothing. In fact, there will be a saving to government. You have to go a little further than what you consider the obvious, hon. member, and extrapolate some other numbers and put them in place there so that you add all the factors. You're grabbing at a pumpkin, and it's something else. It's a different kind of fruit altogether. You've got to compare apples and apples, and you've got to compare those savings.
If we knew at this time how many people were going to take advantage of this particular plan, then we could take those numbers and work them out and tell you how much the government will save over time. I can assure you there will be a saving.
MR. CLARK: Maybe I should go through it just briefly once more, because the minister is attempting to put the best light on what is a very expensive proposition to the government. The numbers for B.C. Hydro are from a real report, an actuarialy sound report, commissioned by B.C. Hydro. The numbers I am giving you are net costs, after the benefits accrue to the plan. Because you're right: there are some benefits to pensioning off people earlier in terms of what it does to the plan.
The net cost to the government, to the Crown corporation, that they have to pay in are.... I will repeat them: if only 50 percent take advantage — and that is a low estimate, which is not going to be the case, from every indication — then it is going to cost the government $15 million in direct costs and $5.3 million in indirect costs, and is going to save the government $1.2 million.
That's what the actuaries say: that it costs the government about $20 million if only 50 percent take advantage. If 70 percent take advantage, which is a more realistic assumption, based on the actuarial study, then the cost to government is $29.9 million, and it saves the government $1.8 million. If it's 90 percent, which in all likelihood is goina to be closer to reality in this province the way civil servants want to get out of here — and with the kind of generosity that the government's giving them to get out — then we're looking at a $37.5 million cost to Hydro and a saving of $2.2 million. That's a net cost to government from B.C. Hydro of close to $30 million. The $25,000 figure you provided in this House is a net cost to government after the benefits.
HON. MR. VEITCH: No, no.
MR. CLARK: Yes, it is, Mr. Minister. That's what Superintendent Cook has said: that the cost to government that has to be topped up is $25,000. If we extrapolate based on those numbers, not the B.C. Hydro numbers.... For the minister's information, the numbers of B.C. Hydro are $35,000 cost per job. Your analysis here is $25,000; the B.C. Hydro actuarial result is $35,000, which one must assume means that the average wage of B.C. Hydro employees is $10,000 higher than the median wage of civil servants. So even if you use your estimate of $25,000, which is $10,000 per employee lower than the B.C. Hydro estimate, we're still looking at somewhere close to $60 to $70 million of government money being used to top up the plan, plus the $20 or $30 million in B.C. Hydro, plus BCBC, plus B.C. Systems Corporation. At least $100 million — conservative estimate — of government money has to go into the plan to cover this cost.
HON. MR. VEITCH: No, the $25,000 is a gross amount, hon. member.
You're talking about topping up the plan. Whatever the dollar amount that it costs to top up the plan, one would not top it up in that particular year. You don't need to do that. If there's a saving as a result of not employing so many people or employing them at a lower rate — people will be coming in at different rates or different levels perhaps, a different place on the grid — then one would amortize those savings over a period of time in order to offset what it cost to top up the plan and leave the plan whole. If you stretch that out beyond the amortization period, whatever that might be, then you'll find that in fact there is a substantial saving to government. That would be the case unless a socialist government is re-elected — goodness forbid — and you employ everyone in sight and double the size of the public service. But if that didn't happen, as I'm sure it won't, you'll find that in fact there is a saving over time.
Everything doesn't happen in a blinding flash of light in one year. It takes time to amortize these things. There's no reason to — as you say — top up or prop up the plan in the first year. You would do it over a period of time. And you would take your savings over a period of time, and one ought to offset the other.
[ Page 2928 ]
MR. CLARK: The answer given by the minister is simply not acceptable. I say this advisedly, but there is a danger that that answer is not correct, because the minister.... The minister had better be very careful, because it comes out in Hansard and we'll be following it up. This report is very clear. The kind of money that government has to pay into this plan is significant. We have employees who are eligible for the plan in all facets of government, not all of which are being privatized, employees who are eligible for $18,000 or more in severance pay — a lump sum payment by the government.
Maybe the minister would like to clarify his remarks in this respect, because what this actuarial report does is break down the cost in terms of the early retirement reduction waiver — the 5 percent waiver — and the lump sum benefit cost. The lump sum benefit cost in the various scenarios goes from $10 million to $16.9 million. That's not a cost that goes out over time; that's a cost due and payable to employees of a lump sum payment based on their years of service. So in the B.C. Hydro plan that the government has to pay, it's from $9 million to $17 million now when they take advantage of the plan. Could the minister inform the house what the lump sum payment will have to be to those employees, not counting the 5 percent reduction waiver? What is the lump sum payment only which is due and payable now to the employees?
[4:15]
HON. MR. VEITCH: That's not part of this legislation. What we're discussing here is the pension fund and how that will be administered; how the government, if you will.... We're actually going on further into the bill — it's in a different section — how it will be handled. The funding, of course, is to maintain the integrity of the fund so that it will have a neutral effect on the fund. I don't know what you're reading from there, obviously, and I don't know how Hydro will handle their particular situation; I simply don't know about that. But I can tell you that it's not necessary, under the situation we're describing here, to top the fund up.
Now I'm talking specifically to this particular section of this particular bill. It's not necessary to top the fund up immediately. As long as the commitment is made to the fund to top it up, to amortize it over a period of time, then I don't know how long it will take, because obviously I don't know how much money it will cost; I don't know how many employees will avail themselves of this particular plan. But given that, one can amortize one cost against the other, so that both effects are neutral, as far as what comes out of the government's pocket in the final analysis. In fact, there ought to be a saving to the government, over time, if you don't reemploy the total numbers of people.
MR. CLARK: With all due respect, that is a ridiculous answer. It is ridiculous to say that we're going to give employees an $18,000 severance payment, a lump-sum payment, and that it's a saving to the government. If that were the case, you'd have done it years ago. You can't say that because we don't have to pay it now, we don't have to pay it. You can't say that because it comes out of the fund, we don't have to pay it. It still has to be paid. They still get the cash; they get the money. And it still amounts to literally hundreds of millions of dollars for the taxpayers of British Columbia. You still have to pay the money out. The lump-sum payment, whether it comes out of the fund now and has to be paid in later or whether it comes out of the government's bank account now, still has to be paid.
HON. MR. VEITCH: The cash incentive does not come out of the fund. You're aware of that, aren't you, hon. member? What I'm saying — and this is a pretty simple bit of mathematics — is that if it costs you X number of dollars to do something, and you amortize that over a given period of time, and if you're not employing a portion of those people anymore, those savings then will accrue to government by way of savings. What we're talking about is total cost to government, because it will be government consolidated revenue that will be topping up this fund over a given amortized period of time. They don't have to do it the first day or the first week or the first year or the first number of years; it can be done over time. One saving can then offset the other. The savings will definitely not be immediate; no one has suggested that. But over time there will be savings. If people are not employed, not drawing wages from the government, then it stands to reason that there is a savings there. God forbid that every dime that goes to an employee...doesn't go into pensions. Surely you can see the propensity of the thing, when you just multiply it out a little bit and see that the savings can accrue over time.
I want to explain to you quite straightforwardly that the cash incentive part is not part of this particular plan. It doesn't come out of the fund. It's not part of the fund.
MR. CLARK: The minister has made a number of statements saying that there is no intention of filling all the positions that are to take layoff and that that's where the savings are going to come out. The minister is now saying that he's got no idea. The minister has answered question after question, saying that there are going to be savings to the government because we're getting rid of all these employees and we may not hire them back. Does he have any estimate as to how many employees will not be hired back after they're pensioned off?
HON. MR. VEITCH: I don't know how many employees will be leaving. If I knew that, I might be able to answer some of your questions. You don't know that and I don't know that. You can guess whatever you want. As I said before, hon. member, you can pick whatever you want and add a multiple to it and come up with all sorts of nonsense, which you appear to be doing today. You're reading also from something you purport to be an actuarial report from B.C. Hydro that has absolutely no relevance to this particular plan or this particular situation.
MR. CLARK: It is indicative of this government that they make announcements and make major plans like this early retirement plan, and then come into the House and say they can't tell us how many people are going to take advantage of it. They can't even give us an estimate as to how many people are going to take advantage of it. When we put forward actuarial propositions that other people have put forward, they still can't answer the questions.
You said the cash incentive does not come out of the fund; that's right. Can the minister give us an indication as to how much the cash incentive plan is going to cost?
Interjection.
MR. CLARK: Oh, it's not part of the bill, so the minister's not going to answer.
[ Page 2929 ]
Can the minister give us an undertaking that he will give us an estimate of how much the cash incentive plan is going to cost the government?
HON. MR. VEITCH: Madam Chairman, I'll give the hon. member an undertaking that I'll tell him how much will have to be expended over time, with relation to this plan, when we know how many people are going to avail themselves of it. I can't give you that number at this point.
What I'm trying to do is to be relevant and relate my remarks to this particular bill and this particular section of the bill. I'll give you an undertaking that when that information comes to us, it will be made known to you. I could give you estimates now, but I'm not going to do that, because I don't know the exact number of people that will be availing themselves of this plan. When we know that, and we know what it will cost, we will then know approximately how much the savings will be over time. But of course there will be some costs at the outset to the fund to be amortized over a given period of years.
MR. CLARK: The minister now says to the House that he does have estimates, but he's not going to share them with us. What kind of attitude is that on the part of the government? It's exactly along the lines that the Premier has said: "Don't tell anybody; they might get scared." They might come down on him, he said.
HON. MR. VEITCH: If there's one, it'll be $25,000.
MR. CLARK: So the minister's agreeing with me that the cost of the plan is from.... If it's 50 percent, it's a $43 million cost to the government; if it's 100 percent, it's an $80 million cost to the government.
HON. MR. VEITCH: Gross.
MR. CLARK: That's only the cost of the plan; that's not the cost of the cash incentive part of the plan.
Well then, if we use those numbers.... The B. C. Hydro report says that two-thirds of the cost of that $30 million is the lump sum benefit. So if the minister is saying that the $25,000 could cost, if only 50 percent of those eligible take advantage of it, the fund $43 million.... If the same ratio holds, then the cash incentive retirement plan will cost another $60 million or more. Could the minister confirm that logic: that the ratio of cost to the fund of the early retirement reduction waiver to the lump sum benefit is roughly two to one, and therefore we can simply make a rough estimate that it will cost the government $80 million with respect to their lump sum payment?
HON. MR. VEITCH: No, Madam Chairman, I can't confirm his logic, because he's dealing in apples and oranges. He's talking about two very different things, and he's trying to superimpose Hydro on the public service. With great respect to him, I don't think he can superimpose those numbers.
As I said before, I'll give the undertaking that when we know how many people are going to avail themselves of the plan, we can tell you what it will cost the fund up front, and we can also tell you how much time it will take to amortize that. So those effects will be made known in the fullness of time, hon. member.
MR. CLARK: Madam Chairman, this is indicative of the kind of answers we're getting from the government: "We're not going to tell you. We've got estimates, but we're not going to tell you. When the thing happens, we'll let you know." Surely, Mr. Minister, for the purposes of budgeting, the government has some estimates as to the cost of this program. Or is it just completely up in the air? "We're going to just make a plan and say that whoever wants to take it can take it," with no idea of the cost to government. Because the kind of numbers we're talking about here are.... Hundreds of millions of dollars of taxpayers' money could potentially be used up in this endeavour. Surely they can give us something more concrete than: "Wait and see. We'll tell you after we know how many people are going to take advantage of it."
Surely for the purposes of planning — if there's any planning at all done on that side of the House — we would have an idea of an actuarial estimate as to how much this is going to cost the fund, based on a number of scenarios, and how much it's going to cost the government in terms of the lump sum payment. Surely he could be straightforward in the House and tell us what those estimates are.
HON. MR. VEITCH: I've told the hon. member time and time again that the upfront draw from the fund, which will be topped up over a given period of time — amortized — would be $25,000 per person. That does not suggest that it would cost, over a given period of time, $25,000, because the government will accrue savings as a result of not employing all of those people, more than likely. So I can't tell you what the exact cost will be. If you knew, you could do the mathematics the same as I. Yes, it's up front from the fund, but the integrity of the fund will be maintained. It will be topped up over time, and the net cost to government over time will be amortized out as a result of savings.
MR. CLARK: Then the minister will confirm that the cash incentive bonus plan, which is not part of the fund, will be paid in a lump sum payment and therefore be payable and due at the time — will not be amortized over time, but will actually have to be paid out.
HON. MR. VEITCH: It's got nothing to do with this.
MR. CLARK: You don't answer that.
Maybe the minister could deal with a couple of other aspects of this plan. We're talking about roughly 3,000 employees taking advantage of this very generous offer on the part of the government that's going to cost the taxpayers close to $100 million at least. Maybe the minister could give us an indication of how, in terms of management — and this is part of this bill — if 3,000 people or so take advantage of this early retirement plan.... If, for example, in one unit there are ten employees and all ten of them decide to take advantage of the plan, what contingency labour adjustment strategy do they have to deal with the kinds of people that are going to move off? Because quite frankly, Mr. Minister, there are serious problems in terms of human capital, in terms of literally thousands of qualified employees who have given their life in service of the Crown, who are now 55 years of age and who are going to leave as a result of this plan. What happens when there are ten employees in a warehouse dealing with some sophisticated purchasing arrangement and all
[ Page 2930 ]
ten of them leave? Is there a course of action that the government has in mind to deal with that kind of adjustment?
HON. MR. VEITCH: Madam Chairman, in any organization or entity, if an employee leaves they have to find a way of replacing that employee. He or she may or may not be more valuable than someone you would bring in from the outside to take over that job. That's an ongoing management situation. If something happened to you tomorrow and you weren't here, we'd have to replace you. It might be very difficult, mind you, but I imagine it could be done, possibly. There must be one more socialist in Vancouver East, anyway. That could happen.
What you're talking about is an ongoing management situation. I'm not going to superimpose myself into the labour relations side, nor is it within my purview to decide what sort of contingency plans are in shape. I trust the management and the administration of the public service, and I'm sure they will look after that. You're saying, again, that if everybody leaves.... If ifs and ands were pots and pans, the whole world would be tinkers, my friend. I don't know how many are going to leave, but I doubt they're all going to leave, and I'm sure that there are other people around who, when they are hired, after a little training period will be just as good as some of the ones who have left. It happens even with MLAs.
[4:30]
MR. CLARK: Madam Chairman, this is not a normal management situation where a few employees leave and we have to hire someone. The minister has stated that 3,500 people are eligible for the plan. A conservative actuarial estimate is that 50 percent will take advantage of it; more likely, with this government, because they'll all want to leave, 70 or 90 percent. So we're looking at 2,000 to 3,000 employees leaving, not over time but now, right away. And we're talking about lump sum payments of $18,000 to $20,000 per employee. We're talking about $50 million or more paid to those employees, cash up front. We're talking about $50 million or $80 million paid in terms of the pension fund, up front. We're talking about the kinds of disruption to government services that we're liable to see with 2,000 to 3,000 senior civil servants in this province, who have spent their lives working for this province, leaving all at once, right now. And the minister stands up and says he has faith in the management to fill those positions.
Is there any analysis? Is there any understanding as to where those employees are that are going to be leaving? Is there any understanding that in certain segments of the public service — in Prince George, say, or in Vancouver and other areas — whole workforces are going to be leaving and taking advantage of this very lucrative plan? Has the government got any understanding of how they are going to deal with that tremendous adjustment problem? Or are we just going to go, as we are with the rest of this government, like a speeding train out of control with no brakes — just keep going for it and wait and see what happens? All of a sudden one day, 3,000 senior civil servants leave. Then the government is going to say: "Oh my, how are we going to deal with that? How much is this going to cost us? Oh, we didn't know that. Isn't that a shock!" Nothing you've said in this House has indicated that you're on top of this situation. The ramifications of this bill are quite significant, in both cost to the taxpayer and loss of human capital in terms of senior management people who are going to leave employment.
HON. MR. VEITCH: There are 35,000 employees, more or less, in the public service. We're not talking about 35,000 people. There are a lot of folks out there doing a lot of things, and there are a lot of other folks around who can do those same kinds of things, if it be necessary. The hon. member, with great respect, doesn't appear to have any faith in management. I do have tremendous faith in the management of our public service, and I would suggest that if you think that those people who are eligible to take advantage of this particular plan....
If you think it's wrong, then I suggest you vote against it. Call a division and call all your folks in here and vote against this particular piece of legislation. Somehow I don't think you're going to do that; I think you're going to support this. What you're doing right now is engaging in rhetoric, and I guess that's all right.
MR. CLARK: It's not rhetoric. These are factual questions that the minister is refusing to answer, or isn't capable of answering, which is probably more likely. The fact is that up to 10 percent of the workforce in this province could take advantage of this plan. What I'm asking is: do they have any understanding? It's not one out of every ten employees in every single division. There is a disproportionate impact on different divisions. Can the minister give us any understanding of whether it is 25 percent of the highways crew that is going to leave or 5 percent? It's not 10 percent across the board. It has varying consequences, depending on the age structure. Surely the minister or the government wouldn't bring in a bill without any understanding of where that impact is going to take place, so that they can plan for it. Does the minister have any understanding as to where this impact is likely to take place?
HON. MR. VEITCH: I can assure the hon. member that the highways will be plowed, the ditches will be dug, the work will be done, your paycheque will be ready on time and the services will be looked after, regardless.
MR. LOVICK: I had some words to offer in second reading debate on this particular bill. I said at the time that it was damage control and that, properly understood, what this bill was doing, in effect, was simply dealing with the casualties of war. I stand by that claim and, having listened to the minister for some time now, I get the distinct impression that there is no other real justification beyond coping with and accommodating a crisis created by this government that, I am afraid, is somewhat larger and wider and more frightening than has been recognized and admitted to thus far.
I listened quite carefully to the minister's early justifications for this, and I can't resist. I wasn't going to, but when I hear the minister say to my colleague the member for Vancouver East that we don't know what we are talking about, I want to suggest to the minister that his early explanations would lead one to precisely that conclusion, because the minister stated — and it's clearly on the record — that "the purpose of this particular measure is to ensure employees are treated in a meaningful way." I thought: what does "a meaningful way" mean? I think, if we look at it carefully, that we can fairly conclude that to treat people in a meaningful way
[ Page 2931 ]
can mean anything from treating them compassionately, graciously and kindly to treating them viciously, vindictively and cruelly. So I wonder precisely what the minister meant when he said we're going to treat people in a meaningful way. That's one question.
The other claim — and I'm starting with these questions to the minister because I simply would like to establish the ground rules.... I hasten to point out that it is not my intention to make a long speech on the subject. Rather, I simply want to remind people of what the issue is and why we have indeed posed the questions we have, and then deal with some rather specific, direct questions I will throw at the minister.
That preamble aside, the second general question I want to ask the minister is simply whether he would explain to me what he meant when he said that another purpose of this particular measure, this section of the bill, was "to rejuvenate the public sector," I thought, well, wait a minute. Unless language has radically changed in my reckoning, or unless something rather bizarre and strange has happened in the past week, it is not the case that when you reduce the size of the public sector by a very significant factor — which this bill is designed to accommodate — we can say we are rejuvenating the public sector. In short — to use a line from an 18th century writer — it seems to me that the minister is in danger of saying that which is not. I wonder if he would care to explain to me precisely what he means by "ensure that employees are treated in a meaningful way," and secondly, how this bill can possibly be construed as constituting a rejuvenation of the service.
HON. MR. VEITCH: I guess that the hon. member has asked me to explain what section 1 of this bill.... We are dealing with section 1, aren't we?
MR. LOVICK: Yes.
HON. MR. VEITCH: Good. The hon. member has asked me to explain in a meaningful way what section I is all about. So I'll do that in a very meaningful way, in as meaningful a way as I can. Section 1 sets out the eligibility requirements for the early retirement incentive plan. That is the waiving of the reduction of five percent for each year between five and ten years from a maximum retirement age in the pension benefit formula. That's very meaningful to someone who wants to retire early.
How will we rejuvenate? I know that when I first came into this place in 1976 — I think I mentioned it before — I came in campaigning on new blood. Now I'm campaigning on experience, of course. I do believe that bringing new people into the system is rejuvenating it. If a number of people take advantage of it, other people will be hired who are not hired at this time — how many I can't tell you — but that will certainly rejuvenate those areas. There's no question in my mind that this is meaningful to those people who will take advantage or avail themselves of this particular plan.
MR. LOVICK: Madam Chairman, I thank the minister for that semantic tour deforce. This is an intriguing kind of quibble which has gone on. But I think that I make my point, and that's why I ask the question.
Before I get to some direct questions, I want to state — albeit briefly — what it seems to me the member for Vancouver East elicited by his comments, and to give the minister an opportunity to respond. I think the point that my colleague is making — as I understand those comments; and I was listening carefully — is that it seems clear that this so-called window of opportunity is perhaps open too wide and open without sufficient concern and consideration about the impact in financial terms — in short, the cost of this program. I think my colleague effectively demonstrated that the ministry — the government — does not seem to have done that kind of preliminary and preparatory work that would in most circles constitute a reasonable preparation for making the announcement for this kind of initiative. We're suggesting that there were a number of very discrete and specific questions posed that, in a rational universe, ought to have been given very direct and discrete answers. But we didn't get those answers. I think that's what my colleague effectively elicited from the minister, and I wonder whether the minister would like to respond to my rendition of events. The minister's capacity to answer is obviously exceeded only by his capacity to listen. Perhaps I will repeat the question.
I'm suggesting to the minister that my colleague was attempting to demonstrate — and I think he succeeded — that this rather significant initiative, which could represent millions and millions of dollars, has not been effectively projected. We don't know what those figures are. We don't, in short, know what the cost would be if only, say, 50 percent of those employees eligible by section 1 of this bill were to take advantage of it. We have not done that kind of projection. Is that not the case?
HON. MR. VEITCH: With greatest respect, what your colleague the second member for Vancouver East was doing was reading mostly from what was purported to be — and I have no reason not to believe him; he''s an honourable member — an actuarial report to do with Hydro. My answer has been consistently that we must compare oranges with oranges and apples with apples. You can't compare Hydro with the public service or what that particular Crown corporation may or may not do by way of benefits to employees who may be leaving.
I have given you a number, and I've said that the per capita cost to the fund day one — remember it is to the fund — would be $25,000 as a medium. It's an approximate average across the board. If you take whatever number of employees who may avail themselves of the fund. and subtract from that over a given period of time some of those who may or may not be employed or coming into employment at a lower place on the salary grid, savings will accrue to the consolidated revenue fund. The consolidated revenue fund is a fund that will be topping up the pension fund, in this particular case, so it preserves the integrity of the fund at all times. Those savings amortized over time will offset, hopefully, the cost to the fund. The government does not need to pay on day one all the money it would cost to pay out those people, as far as the pension is concerned. It doesn't need to do that. But it needs to ensure that from a financial point of view some integrity is preserved, and that is specifically embodied in another section 1n this bill. If you wanted to — it's up to you — you could get onto that and talk about that at that point in time. It's covered specifically in another section of the bill.
MR. LOVICK: The minister's suggestion that somehow actuarial projections from B.C. Hydro are not relevant to this bill I frankly find mind-boggling.
[ Page 2932 ]
Interjection.
MR. LOVICK: No, it isn't. What my colleague has done — and it's a classic technique in any kind of economic analysis — is he has extrapolated from and projected. Given that the government has effectively told us that nothing is sacred, that everything is concievably for sale, that all the Crowns are part of this process of privatization, and given moreover that very clearly in section 1 there is a provision for employees other than Crown employees, we have no choice but to conclude that there is in fact another larger agenda out there.
[4:45]
I would suggest that given that relatively simple leap — certainly a much shorter leap than the leap of faith we were asked to accept some minutes ago from the minister — the conclusion my colleague derives is eminently reasonable and eminently fair. I don't think there is any question about that, but let the record show and let people read the questions and the answers and determine for themselves.
What I want to do now then, if I might, Madam Chairman, is just pose a couple of very quick questions. Firstly, will the minister please inform us why this particular short window of opportunity was chosen, namely the period October 20, 1987, to March 31, 1988? Why that particular period?
HON. MR. VEITCH: It's obviously an attempt to gain a result, and the result will be that certain numbers of employees will avail themselves of this particular plan. It is precisely that. It's not a great deal different from the teachers' plan, where there's a window of opportunity given to the teachers to have some of those people retire earlier than they would normally. The same thing is true here.
From October 20 to March 31 is quite a good period of time. As you pointed out yourself, getting back to what you said, it's a large window of opportunity.
It remains to be seen how many people will avail themselves of that particular plan. I've been straightforward with you. I tell you there are 3,500 who could. Obviously 3,500 won't. How many will? You put your number to it, and I'll put mine to it, but we'll just have to wait and see. We'll know a little better in the next short while.
MR. LOVICK: I wouldn't for a moment suggest that the minister is being less than straightforward with me — by his own best lights, I hasten to point out.
The minister is telling me, if I understand him aright, that the reason for this particular window — as he says, a large one — is "to gain a result." In other words, this is an incentive to downsize. Will the minister accept that statement of it?
HON. MR. VEITCH: It's an incentive for people to retire who wish to retire earlier than they would normally. In some instances it's also an opportunity, as I pointed out, for government to rejuvenate itself as far as the public service is concerned. It's certainly an opportunity for those individuals who want to retire early or want to move on to another career. It's a big world out there. They may even go to a college; you never know.
MR. LOVICK: Is it correct that we are talking about a means to reduce the size of government? The minister very carefully — adroitly, I am tempted to say — said that some people will take advantage of this, not everybody. He also said that some new people would come in. Now I would suggest that on the basis of what's been happening to the public service latterly, that is a tremendous leap of faith. It seems to me that there are many people seeking to exit the public sector, but there aren't too many rushing to get in. I would suggest that the morale in the public sector right now is at rock bottom, partly because of the manner in which the government has chosen to treat its employees. Indeed, Mr. Minister, I could present chapter and verse to substantiate that claim. Certainly it's the case in my constituency. I know of some Ministry of Highways employees who are taking early retirement but are not at all happy to be doing so. The morale is rather low, and I think that that's inexcusable. I do not think that the government has been a good or model employer in this exercise, with all due respect.
In asking the question about whether this is indeed about downsizing government, my point is really to ask the government to come clean with us, to be direct and not to pretend that this is going to rejuvenate and bring in new people because we're getting rid of some others. It's very clear that what we're talking about — to use the terminology from the right — is downsizing government. I for one am getting a little impatient with the rhetoric that argues the other case. If the government wants to take a position and say that it agrees with Madsen Pirie et al. that we should dismantle the state or we should reduce the size and the scope of the government — good old neoconservative agenda — fine; say so. Don't continue to give us these kinds of things and say that this amounts to rejuvenation, because by any stretch of logic, by any stretch of proper imagination, by any normal rendering or understanding of what language means, this bill is not rejuvenating the public service; it is downsizing the public service. It's sweetening the pot for those who have not otherwise been induced to leave the public service. That's the point, and I don't think that's debatable; it's very clear from what the bill does.
MR. MILLER: You know, there are a lot of things to consider in this pension bill. Firstly, you can throw somebody in the ocean, and then you can throw them a life-ring and they're somewhat grateful, but probably more grateful if you didn't throw them in in the first place. There are elements of this in this bill, as there are in terms of the side issue, which is privatization.
Again, you can make an analogy. I've seen services reduced to a level where they become so bad that people ultimately come to the conclusion that they might as well get rid of them because they're no good. That's a kind of backhanded way of achieving an end without really telling people that that's what you intend to achieve.
I've had some dealings with the question of early retirement in industry, and I would say in the main that most people, given the opportunity and a reasonable pension, would seriously consider availing themselves of the opportunity. We're not suggesting that that's not the case, but I'm also aware that there have been various efforts over the years by individuals who don't really want to stop working: "I see working as adding some value to my life. I'm good at what I'm doing. I like the work I'm doing."
Interjection.
[ Page 2933 ]
MR. MILLER: Actually, the next section deals with mandatory, because if you're going to sell the job, I guess you're going to sell the employee too.
I think the previous speaker was right in that this has caused considerable morale problems. People I have talked to who work for ministry operations are really feeling quite upset about what is happening. It seems to me the wrong way to go about dealing with the question of early retirement. In other words, why create the fear that the jobs are going to be done away with, with suggestions that we've just seen the tip of the iceberg in terms of privatization? You know there is more to come. You've created this uncertainty in the minds of a lot of employees who look at this bill as the kind of lifeline they should reach for after they've been tossed into the cold, cold sea.
I have a specific question with regard to a deadline. I may be corrected by the Chair in terms of the section. If the plans that are afoot or have been announced do not proceed because of some administrative problems, what protection is going to be afforded to those people who wish to retire but who may not, because of administrative difficulties, be able to meet the March 31 deadline included in the act through no fault of their own. Therefore, having created this kind of feeling in the public service that you're better off out and here we'll give you a little leg out — you can take some cash with you.... Having created that kind of atmosphere and feeling among civil servants and confined it to a pretty tight time-frame....
Interjection.
MR. MILLER: The minister shakes his head. It's not pretty tight, but I would think with his years of experience in government, he would be proceeding a little slower than some of the initiatives I see coming from across the floor.
What happens to this person? He ends up being, according to the info line that I read, simply unable to take advantage of the early retirement provisions. Could the minister address that question?
HON. MR. VEITCH: There are a couple of things here that one should address.
The hon. second member for Nanaimo (Mr. Lovick) seemed to infer that people didn't want to get into the public service. I can tell you that every time we do a posting in the public service, there are many, many people wanting to take advantage of that. There are a lot of people who are not now in the public service who would like to be working in the public service. It might surprise you, hon. member, that the conditions in the public service might be a lot better than in a lot of other places, and the wage scale might be a lot better. So there are a lot of people. It's just not factual to say that nobody wants to enter the public service in British Columbia. That's not true.
We make no pretence of saying that we're not attempting to do privatizing. There's a section in this bill that alludes specifically — and I don't want to go section to section because we're supposed to be addressing section 1 — to a privatized employee and how that person would be dealt with. I might say as well that it's optional. Anyone who doesn't want to stop work, as the hon. member for Prince Rupert said.... These people have great seniority and could stay on. They don't have to leave. They don't have to avail themselves of this plan. The plan is optional for them.
To answer you specifically, hon. member, the responsibility of an individual who wishes to avail himself between October 20, 1987, and March 31, 1988, is to get an application in. I happen to think that those people who wish to avail themselves in that relatively long period will get an application and send it in. If they qualify, then they would be able to avail themselves of this optional plan if they wish to do so.
[5:00]
MR. MILLER: It doesn't surprise me in the least that people apply for jobs. I don't know why you should try to single that out. The unemployment rate in this province is not too great; I'm sure people would be grateful for any job they can get. Somehow the minister is trying to single out public service jobs. I'm just wondering if between the lines here there's not a little more that the minister is trying to allude to: that the wage rates are so good that people are rushing forward to get these public service jobs, and we've got to do something about it; let's get them into the private sector and get the wage rates lowered and parcel out the employees that we've had for years, who have been doing a good job for the people of this province, and all our problems will be solved. I think the minister is ill-advised to make those great leaps of illogic, if I could put it that way.
If your job is being sold, given the uncertain atmosphere in this province today, I don't doubt that many people look at early retirement as a way of getting out of this screwed-up system.
Interjection.
MR. MILLER: If the member for Vancouver South wants to enter the debate, I'm sure we would be pleased to hear him question the minister about all aspects of this bill. He can do it after me if he likes.
This is my last question. It's clear that Hydro attempted to do some kind of analysis of the cost impact. I don't think any employer in the private sector would offer a program of this nature without doing a pretty thorough examination of the impact on their business establishment in terms of who would be likely to avail themselves of the provision, what that would mean in the operation of that business, what the cost would be. Has a cost-benefit analysis been done? We've heard the minister talk about the savings because of the lower wage scales amortized over a period of time. Has a department-by-department analysis been done on the potential impact in each ministry in terms of the operation of that ministry, with skilled employees possibly leaving, and on the amortization period that the minister referred to? How much is the saving? Well, it's not really a saving. The minister is saying there's not going to be as much of a loss in some ways. How long will it take, then, before the province realizes a benefit from the program that the minister is offering in the bill?
HON. MR. VEITCH: Again, I don't want to be repetitious, and I've said over and over again that the upfront cost....
Interjection.
HON. MR. VEITCH: Yes, I've said it over and over again, and I repeat that I don't want to be repetitious. The upfront cost per capita is $25,000. How long it will take to
[ Page 2934 ]
offset that depends on the number of people who avail themselves of the plan. When I know the exact number of people who will be availing themselves of the plan, I'll be able to give you more definitive numbers. But I can assure you that the services offered by government will carry on, that the roads will continue to be paved and graded, the administration of government will continue, the human resources cheques will continue to go out, children will still be taught in schools. All of the good things will happen, and quite a few new people will be entering the workforce in government. These people will bring with them new ideas, and other people can go on to other things. That happens, you know. Lots of people work in more than one career in their life. It happens to a lot of us. I don't see where that is any problem at all.
It depends on the number of people, hon. member, that avail themselves of the plan.
MR. MILLER: I wasn't going to continue, but given the non-answers, maybe it's about time the minister tried another career. I asked some specific questions about studies and time-frames, and what do we get?
I often hear this old refrain — believe me, it's an old one, too; I've been hearing it for a long time — about spending money. The Premier tried to do some rhetoric today. Because he didn't have a defence of his $8 million decentralization program, he tried to deflect it and say, "If we gave you guys a million dollars, you'd waste it," and it's a foolish argument. But, for God's sake, we're bringing in a bill that's going to cost the province of British Columbia money. Why won't the minister simply state, without the bafflegab, what it's going to cost? What are the implications in terms of the operation of the public service? How long is it going to be before this benefit he talks about is realized by the taxpayers? Surely these are very simple questions that deserve answers. Can the minister not answer?
MR. WILLIAMS: Mr. Minister — through you, Madam Chair — come on; I believe you've got all the documentation in the world there. I believe your staff has got all the material that most anyone would need. The member for Vancouver East (Mr. Clark) has provided documentation to the House of what the implications are for B.C. Hydro. We've had the full gamut. Why, there will be nothing left of B.C. Hydro but the wires, my friend. The wires are all that's going to be left if you guys have your way. And the new CEO. It will just be a conduit. It makes you wonder whether he left or was pushed, doesn't it?
At any rate, we think the minister should provide the information. We are talking about substantial amounts for the Crown in terms of a liability. The other member for Vancouver East has provided the House with information that indicates how significant these numbers are. It indicates a kind of ideological drive and push behind this administration which has not changed since the last one. Under the second Bennett, the cutting and slashing of the public service was scandalous. You destroyed full ministries; 35 percent decimated. You have no idea what human capital is about, in terms of the evolution of a group with ability and competence that is refined over the years — the kind of incremental growth in human capital that we're talking about.
This legislation is a kind of golden handshake. It's still taking the 2-by-4 to bash the public service, in a sense, and push them out the door. The talent around here has been absolutely decimated under this administration. You read what Graham Leslie says about what has happened around here. This former Rhodes scholar, this former Deputy Minister of Labour, says there has been a flight of talent out of Victoria, a flight of talent away from the ministries. And you are pushing them out the door again. We don't have any objections to proper treatment of the public service and a proper pension scheme and early retirement if that's what they really want. But you're pushing them out the door, and you have absolutely no concept of the talent you've got at your fingertips here and available to you as ministers.
Every day, day in and day out, we get the cruddy asides from you and your back-benchers about the lack of talent and about how when something is bungled or something's different, it had to be done by the public service. You guys are in such an ideological trap, you are prepared to just destroy this kind of human capital that we've got. You're an ideologically driven crew, especially that number over there from Skeena. Talk about an ideological captive! That's really what we've been getting, and that's what this legislation represents.
You have an obligation to tell us what the numbers are, Mr. Minister. What this chamber is about is public spending, to a very great degree, and you have an obligation to tell us what those numbers are and what you anticipate the Crown's liability to be as a result of this statute.
I have no doubt whatsoever that you have all of the information there. It's clear that you just don't want to deliver it. It's part of the grand scheme that the Premier talks about, where he says: "I don't want all the information out there or it's trouble on my head. They'd all want my head if they really knew what I was up to."
We want to know what you're up to, Mr. Minister. We want to know what the numbers are. We want to know what the costs are going to be.
HON. MR. VEITCH: We are debating, I thought, section 1 of Bill 62. However, the hon. first member for Vancouver East, a longtime member, talks about ability and confidence in people. I want to tell you: yes, we do have the best talent. We have a deputy minister in my own department who has been in the service as long as anyone. He's been in the service through four ministers — extremely talented. We have here with us probably the best superannuation commissioner in all of Canada; talents widely known; renowned not only throughout Canada but throughout North America. There isn't any question about the talent the public service has and will continue to have, despite what you say. I'm fully aware of the work that the public service does, and I'm fully aware of the competence within it, and I want to assure you that this government and I respect that competence.
We're not locked in. You talk about ideological lock-in. I suggest you're locked into the Industrial Revolution. You've never gotten out of it and I don't know if you ever will. Your thinking goes back to another time and another era, something that's completely and absolutely foreign to this day and age that we're living in right now in this province. You demonstrated it during the brief time you were in office, those horrendous 1,200 days that you occupied in office, and you'll never have the chance again.
I've been saying to every member here that the upfront cost per capita to the fund is $25,000 amortized over time. You tell me the number of people that will avail themselves, and I'll tell you the numbers. Now you can guess whatever you want; you can't get inside the craniums of those people
[ Page 2935 ]
any more than I can. I don't know whether they will retire or whether they will by their own option decide to stay in the service. But I can tell you that the public service will continue to be the best in Canada despite what you say. I have tremendous confidence in the management of the public service and all of the public servants themselves.
MR. CLARK: I note that the government had no confidence in the last three Deputy Ministers of Highways in this province.
I want to ask a few questions, back to my earlier remarks, and maybe I'll try and refine the questions so we can get some answers.
In the Hydro plan it says that there are going to be direct non-pension-plan costs because Hydro intends to pay the increase in pension, represented by the amount of the early retirement reduction waived, directly out of the Hydro plan, and to make a special lump sum payment to the Hydro plan equal to the actuarial value of such pension enhancements. So while the minister has said that the pension plan will pay $25,000 per employee — and that amounts to about a $70 million cost to the pension plan — are there any direct costs as a result of this bill before us that are not related to the pension plan, as we have seen at B.C. Hydro?
[5:15]
HON. MR. VEITCH: Again, I don't have the benefit of the information that you have there, but as far as Hydro is concerned, if they opt up front to put X number of dollars in, a total amount or whatever up front, I suppose it could be done.
What I'm saying here is that in this particular plan, in this section of this bill that we're debating here, in all likelihood that won't be the case; it will be amortized over a period of time, if we're talking about the cost to the consolidated revenue fund. Necessarily, for every employee who avails himself of the plan, the cost up front to the plan, which will be topped up by the consolidated revenue fund over time, will be $25,000. I wish I knew the number of people who would avail themselves of that particular plan; I'd tell the hon. member, and then perhaps we wouldn't have to debate this any further.
MR. CLARK: If 50 percent of the eligible people take advantage of the plan, that's 1,750 employees. How much out of consolidated revenue will have to go into the plan to top it up, to us the minister's vernacular?
HON. MR. VEITCH: Dealing in hypothesis, we wouldn't have to put anything into the plan in the first instance. Over a period of time you would have to top that plan up. Whether it was five years or ten years, or whatever it was, you would have to top it up, but hopefully savings would accrue to the consolidated revenue during that time that would offset that cost. We assume, and we are assured, that there will be. If you're dealing with $25,000, it would cost the plan $25,000 up front; that would be offset over time by the consolidated revenue fund. It is not important that it be offset the first month, the first day, the first year, or the first number of years.
MR. CLARK: So the minister is saying that the $25,000 will come out of the consolidated revenue fund and go into the pension plan over time. But it will come out of consolidated revenue, the $25,000?
HON. MR. VEITCH: That's right, but it will also be offset by savings over time.
Interjection.
HON. MR. VEITCH: I can't help your mindset, hon. member. If you can't get into that one, then I can't help your particular mindset. If you're spending less on that segment of the public service than you were before, then there has to be a saving, which will offset it over time. You'll have to work that one out for yourself, I'm afraid.
MR. CLARK: So the minister can give us no estimation of how many employees who are going to take it are not going to be replaced? The only savings that you've alluded to in this House are savings from the government not filling the positions that have become vacant because people take advantage of the plan. Can the minister give us any indication as to how many employees will not be replaced? That's a whole new dimension to the debate which we could get into today. If 50 percent take advantage, there'll be close to 2,000 people who will leave the public service. Can he tell us how many people will not be replaced out of that 2,000?
HON. MR. VEITCH: If one looks at the whole restructuring plan, you'll note that there is privatization; you'll notice that there is restructuring of government, and that there will be positions that will not be replaced in government. Those positions will not cost the government money. That money in consolidated revenue will, over time, offset whatever cost there is to consolidated revenue to top up the pension fund.
MR. WILLIAMS: This is intriguing. I looked through the Premier's press statements on "restructuring of government." It sounds like restraint again. Part of the bundle was on that Langford sign shop. I looked at the cost of the Langford sign shop. It's about a million and a half — or something like that, if my memory serves me right — in terms of employees, materials, the works. And I looked at the number of signs they produced. Mr. Minister, members of the House, did anybody here do the arithmetic to figure out the average cost per sign? Well, I did — and it blew me away. I was starting to believe some of this guff from you people over there about inefficiency, and how the public service just doesn't produce efficiently. I started thinking about all these signs that we see along the highways and freeways in British Columbia, those big green and white ones, those huge ones, and then there are the little stop signs; there's the whole gamut, the whole range. Do you know what they cost? I bet there's not one of you over there who knows. Put up your hands. Did any of you do the number work?
MR. CLARK: Let the record show there were no hands.
MR. WILLIAMS: There were no hands raised. You do the number work.
Interjections.
MR. WILLIAMS: Do you want to know? It was $24 a sign. Well, let's just think about that. Why, I bet, in your election campaign, Mr. Provincial Secretary, it almost cost that much — and they're disposable, I hope.
[ Page 2936 ]
Interjection.
MR. WILLIAMS: When it's in the family, you can reuse them, there's no question about that.
The Provincial Secretary is telling us today that there are going to be savings. Maybe there's an estimate out there about what signs will cost once you've privatized. Well, what will the estimate be? Does anybody think you can do it for less than $24 a sign? I for one, Mr. Provincial Secretary, don't think so. Twenty-four dollars a sign for the full range of highway signs in British Columbia stikes me as one heck of a bargain. I would bet you anything that once you've pursued this crazy, ideological drive of yours, and once the Langford sign shop is privatized, there will be no more $24-a-sign signs in British Columbia. I'll bet you any amount that the price will go up. And you're here talking about savings, Mr. Provincial Secretary. Let's just wait and see. I think not. We're getting an extraordinary bargain out of the Langford sign shop, and frequently we're getting an extraordinary bargain out of the public service in terms of this human capital I was talking about earlier. You tell me where the savings are going to be.
You've got the mindset. You said to the other member from Vancouver East: "Well, you know, I can hardly waste my time trying to explain it to you, young fellow. If you don't understand where the savings are because.... Off with their heads. That's a saving, obviously." Isn't that really the line we're getting? I think so. You may be able to peddle that in parts of Burnaby, but not for long, I think, in view of what happened in Burnaby in just the last couple of weeks. I hope you try to sell that line in Burnaby in the next provincial election. It should mean a couple more seats for this group.
Talk about the mindset. The mindset is over there. Not one of you folks looked at that release of the Premier's and did the arithmetic on the Langford sign shop. You just bought the ideological baggage of the throwback we listened to in question period today. We heard today the unravelling of a throwback — an old right-wing ideologue who muffed up Education, Human Resources and other ministries in this province, and now....
Interjection.
MR. WILLIAMS: No, you're all part of that package; you're all part of that throwback. You don't do the homework. You automatically salute the flag, whatever it is. I really wonder in terms of a democracy, in terms of the kind of talent we see, in terms of genuinely analyzing these things in some kind of careful way. It isn't happening. It's an ideological mindset. You're determined to drive us over the precipice. It's a runaway train we've got here. That's what this is part of. We're not getting the answers we should. You haven't done the homework.
The other member for Vancouver East is showing us that just in the last couple of weeks B.C. Hydro has started pulling the numbers together on what it's going to cost in just that one little area. The intriguing thing is that it assumes the possibility of the whole thing going. The Premier has talked in terms of stages 1, 2, 3 and 4 of privatization, and said that they won't all be reported on. I guess not. You have a plan in mind — and this is part of it — that is going to reduce economic engines like B.C. Hydro to simply the lines, the wires.
That's what this ideological drive is leading to. You've got the bureaucrats working on all those scenarios now. It's very clear. Only the pieces are beginning to tumble out. What you have in mind is the most radical restructuring of public policy in the modern history of British Columbia, and this is just part of it, Mr. Minister.
MR. CLARK: The minister talks about savings as a result of early retirement, but the only savings it gives us is the fact that the employees who retire are not going to be replaced. Yet he can't tell us how many aren't going to be replaced, because that would be too much. As the Premier said: we don't want to tell everybody or they'll all be upset, so we'd better keep it quiet.
Look at the costs. We know the cost of the plan is between $40 million and $70 million, which has to come out of consolidated revenue — over time, admittedly. We know the cost to B.C. Hydro is $20 million to $25 million, or more directly now, out of B.C. Hydro. We know that BCBC and B.C. Systems Corporation are going to enter into this plan and are going to be costs. We know there are indirect costs, and we know there is also a cash incentive plan — a cash bonus, money, six months' payment, cash up front — and the minister won't tell us how much it is going to cost, because he says it's not in this bill. But we know — if B.C. Hydro's numbers are any indication — that it's another $60 million or $70 million or $90 million in cash up front, so we're talking about hundreds of millions of dollars of taxpayers' money here.
The only thing he can say is: "We may not hire some of these people back." It's not much of an analysis, and there are certainly not many numbers to deal with it. Maybe on a very obscure, specific point the minister can give us a hand, because in the B.C. Hydro plan, again, it says that not only are there costs involved — direct costs, as I've alluded to — but there are all kinds of indirect costs. For example, because people retire now, for a long period of time after the early retirement incentive plan takes effect, no one will be retiring. Therefore there would be more early retirements than had been assumed in the actuarial evaluation of the plan. Therefore the cost to the plan will also go up.
[Mr. Pelton in the chair.]
They estimate in B.C. Hydro a cost to the plan of between $5 million and $10 million because of the change in the actuarial assumption with respect to people taking more early retirements than were anticipated. So maybe the minister can give us some indication of the service costs, the liability costs, that will accrue to the plan as a result of more early retirements taking place than would otherwise have taken place.
MR. WILLIAMS: We appreciate, Mr. Chairman, that the Provincial Secretary is getting detailed briefing in this area in terms of the actuarial assumptions at an earlier stage versus the impact this would have in that area. We appreciate that it's fairly complicated, and I don't envy the civil service's task at this time. However, if the minister has any thoughts, we would appreciate hearing them.
HON. MR. VEITCH: The long-term costs or rates, if you will, are based on certain demographic assumptions, and we don't know how many people are going to retire in the future.
[ Page 2937 ]
We don't see — I'm talking with the commissioner here — any significant costs to the plan over and above the amount, and the plan will be topped up by the consolidated revenue fund over time.
[5:30]
MR. WILLIAMS: Why would that be necessary?
AN HON. MEMBER: How much?
HON. MR. VEITCH: I've told you, hon. member. It will be $25,000 per capita up front.
Interjection.
HON. MR. VEITCH: It will cost the fund that, but it will be replenished over time.
MR. WILLIAMS: You know, the average folks out there, when you say, "But it will be topped up from the consolidated revenue fund over time," have a little trouble following that kind of meandering road. What you really say is that the money ain't there, and it means we're going to have to tax or borrow to put the money in the pot. The average citizen might understand that a little more readily, and I think that's what you're saying. But it's hard to believe that there isn't a number there in terms of your expectations, Mr. Minister.
HON. MR. VEITCH: The cost up front to the plan is $25,000 per capita. I don't see that the other part is an issue at this time; I'm sorry. The cost is $25,000 up front to the plan, and it will be replenished by the consolidated revenue fund over time. I don't want to be repetitious; I don't want to repeat that again. The member can put whatever number he wants to that. If I knew the number of people who would be retiring and availing themselves of this particular plan, I'd be able to give you an actual set of costs. I tell you, I will do that for you when that's complete.
MR. CLARK: So the minister is saying that $25,000 per person who takes advantage of this plan is a total, all-inclusive, one-time cost that will be paid by the consolidated revenue fund, and that that is, on the basis of an actuarial analysis that says that because the demographics change because all of these people leave all of a sudden.... That takes care of all the demographic changes. Is the minister saying that he has actuarial evidence — documents — that that is the total amount the fund will have to be replenished by in order to accomplish the retirement plan that they have put forward here?
HON. MR. VEITCH: As I said before, hon. member, it's expected that there will be no changes in the long-term costs as a result of this particular program. I can't tell the future any more than you can. If you're a soothsayer and can tell me about the future, then fine, I'd like to know about the future. Maybe I wouldn't, but it's expected that there will be no changes in the long-term costs as a result of this particular program. The plan will, if you want, be topped up, made whole; the plan will not suffer as a result of this, and a lot of people will benefit.
You're suggesting all sorts of numbers, hon. member. All I can suggest to you is that if you don't think this is a good idea, if you don't think that we should be doing this, then I would vote against it. That's what I would do if I had that mindset.
MR. CLARK: Can the minister tell the House on what basis he arrived at the $25,000 cost for the plan?
HON. MR. VEITCH: Yes. the statute itself is fairly straightforward on that. It points out that the actual cost is to be determined by the superannuation commissioner. The superannuation commissioner tells me that that is the cost. The superannuation commissioner is expert in these areas, his staff is expert in these areas. In fact, they're the best in Canada. I trust the superannuation commissioner, I trust his staff, I trust the public service that has compiled these numbers. I have to accept them as being correct.
MR. CLARK: The minister tabled the documents from the superannuation commissioner which detail the nature of the $25,000. I know the minister only has a little note there, but what I'm asking for.... It seems to me that the number of people who take advantage of the plan is going to impact on the cost of the plan. Maybe I'm wrong. If 50 percent of the eligible people take advantage of it, it's going to cost the plan a certain amount of money. If 90 percent take advantage of it, it may cost more. Yet the minister is saying that it's $25,000 on a linear basis.
HON. MR. VEITCH: Certainly, in actual dollars it will cost more, but the average, the median cost, still applies. If ten people took advantage of the plan it would cost more than if one did, or if 200 people did it would cost more than if one did. But the average still applies across the board.
Section 1 approved.
On section 2.
MR. CLARK: I note that section 2 deals specifically with privatized employees, if that's a word. It deals with some changes. I think the ten-year requirement for all employees is no longer the case. Could the minister tell us how many employees would be eligible under this section of the bill?
HON. MR. VEITCH: I can't give you that number. We don't really know, because it depends on how many people are actually privatized. We've told you that 3,500 people are eligible in aggregate within the public service, but I can't tell you how many of those people will be privatized. I just don't have that number.
MR. CLARK: That's not correct, because the 3,500 employees who are eligible are based on the eligibility requirements in the first section. So maybe the minister could tell us how many more.... Thirty-five hundred are eligible with ten years' service. In phase 1 of privatization, how many more employees will be eligible if that comes to fruition'.'
HON. MR. VEITCH: I'm sorry; you're quite correct that it's the other provisions for the 3,500. But I can't tell you how many employees will be privatized. I don't know how many will be privatized within the group, but I do know that the employees that are privatized are being dealt with very fairly under the provisions of this particular section of this act.
[ Page 2938 ]
There are several options for them here, and they can avail themselves of any of them, so they'll be looked after and treated very fairly. Some of them will continue to work if they're privatized, they'll continue to draw paycheques if they're privatized, and I'm sure that they'll continue to draw the benefits of a pension when it comes due.
MR. CLARK: What you're asking us to do, Mr. Minister, is.... You're saying that we should vote for this, and you can't even give us a ballpark figure as to how much it's going to cost the taxpayer. You're saying that you're making this very generous offer to employees who are privatized, and you can't tell us, even close, how many people would be eligible under this section. You can't give us any indication of how much it's going to cost. So all of the numbers we've gone over to date, which are very expensive for the taxpayers of British Columbia.... All of that stands with section 1. Now with section 2 we're adding more cost to the taxpayers. We can't even say that it's $1 million or $10 million or $20 million. We have no idea how much more money this is going to cost if we pass this section of the bill.
Maybe the minister could give us an indication of, say, the B.C. Hydro gas division, which is likely to be privatized. Maybe the superannuation commissioner can tell us how many more employees would be eligible under this section of the bill that wouldn't have been eligible under the first section, so that maybe we can get some sense of the number of employee who might become eligible if we pass this section of the bill.
HON. MR. VEITCH: You remember the first press release that was issued, which included B.C. Hydro, B.C. Systems Corporation and Riverview as well — Riverview being turned over to a society. The aggregate amount, I believe, was 7,200 persons, but you must extrapolate from that Hydro and Riverview and the Systems Corporation as and when they become privatized. We could work those numbers out for you. I'm afraid I don't have those numbers here in front of me. I don't know how many are in the Hydro gas division, and I don't know how many are in Riverview. I could find out very quickly how many are in the Systems Corporation.
MR. CLARK: Can the minister give us a guess? Can he give us any indication how many employees would likely be eligible under this section of the bill? If there are 35,000 employees in British Columbia, how many of them.... We did this earlier with the first section. There are 3,500 people in the whole public service who are eligible now to take early retirement. If we take the whole public service, and we add this clause which says that you no longer have to work ten years to be eligible, how many employees would fall within that parameter?
HON. MR. VEITCH: As I pointed out before, there's a whole host of options here for these privatized employees, and you can't determine the cost because it's dependent upon the selection by the individual, the person who may become part of the privatization. The options are not equal at all. In some of these options, the plan improves its funding, and in some other areas it costs. So if you could tell me what options the employees will take, I can tell you what the costs will be to the plan. But the options are not equal. There's a host of options. They can transfer it over into the new employer; they can do a lot of things. It just depends on which options the employee decides to take up at that point.
Sections 2 to 4 inclusive approved.
Title approved.
HON. MR. VEITCH: I move that the committee rise and report the bill complete without amendment.
Motion approved.
The House resumed; Mr. Speaker in the chair.
Bill 62, Pension (Public Service) Amendment Act, 1987, reported complete without amendment, read a third time and passed.
HON. MR. STRACHAN: I call second reading of Bill 61.
SOFTWOOD LUMBER PRODUCTS
EXPORT CHARGE COMPENSATION ACT
HON. MR. STRACHAN: I will advise the Legislative Assembly that although this is an act introduced by the Minister of Finance (Hon. Mr. Couvelier), leading the government in second reading debate today will be the Minister of Forests and Lands (Hon. Mr. Parker), who of course is intimately familiar with the legislation.
[5:45]
HON. MR. PARKER: The objective of Bill 61 is to provide the legislative framework for a program to compensate the forest industry in situations where British Columbia softwood lumber is subject to both higher stumpage and a federal export charge. This program is required primarily because of the provisions contained in the memorandum of understanding signed by Canada and the United States to resolve the lumber countervail dispute.
This government introduced, on October 1, 1987, a package of measures affecting stumpage and royalty charges and silviculture costs which were intended to meet the requirement of full replacement of the federal export charge. However, under the terms of the memorandum of understanding, the charge cannot be eliminated without negotiating agreement with the United States. These negotiations are underway, but until they are successfully completed, the provincial government recognizes that the higher stumpage and the export charge will apply to softwood lumber shipped to the United States. To redress this problem, the proposed legislation provides for a program with the following elements.
Compensation will be paid in cases where softwood lumber has been subject to the higher stumpage and the export charge. To ensure that funds are available to pay the necessary compensation, transfers of export charge revenue from the federal government to British Columbia on or after January 15, 1988, will be placed in the newly created special fund and will earn interest in the fund. Because of delays in the federal billing and payment system, these transfers will reflect the charge paid on exports of British Columbia lumber during November and subsequent months.
[ Page 2939 ]
Persons applying for compensation will have to satisfy the government that they meet the legislative and regulatory requirements of the program. In the majority of cases, compensation will be paid to the exporter or to a person who paid the charge on behalf of the exporter. Applicants will be required to provide authority for the government to confirm their claim through audits or other examinations.
An appeal mechanism is available in situations where there is a disagreement between the government's program administrator and the person applying for compensation. The appeal mechanism draws on the well-established procedures in the Social Service Tax Act.
Any money remaining in the special fund after compensation has been paid to all qualified applicants will be returned to the general fund of the province.
The intent of the program is to refund the export tax paid on lumber exported on or after November 1, 1987. A definition of softwood lumber shipments entitled to compensation under the program will be included in the regulations. This will allow some modifications to be made to the program, if required, by the outcome of the current discussions with the United States regarding replacement of the export charge.
This bill provides authority for a program which is the best alternative for providing fair compensation to British Columbia's forest industry while remaining within the spirit of the memorandum of understanding.
I commend Bill 61, the Softwood Lumber Products Export Charge Compensation Act, to members of the Legislative Assembly, and I move that the bill be now read a second time.
MR. MILLER: I think there are a number of points to be made on second reading of the bill, and of course at the outset I should state that we will be supporting the bill, because we realize and it has become even more apparent in past weeks that some industries are indeed feeling the pinch when it comes to a double taxation, and we would not want to impede any measures that the government proposes for alleviating that pinch. Nonetheless, we do have some concerns, and I think the bill does open up to some extent the implications of the arrangement with the United States, and raises a number of questions about what is happening now.
The minister indicated that discussions are ongoing, and it is somewhat unfortunate that British Columbia, before they can enact a new stumpage system, must go to the American lumber lobby and get their approval for whatever we do. Without rehashing all the debates that have taken place in this province over the last couple of years around that point, I think it's still important to point out that in some sense we are at the mercy of the United States when it comes to establishing policies that we think are good for British Columbia. I guess we'll be getting into a debate in this country about whether or not the free trade agreement that has been reached is in fact good for Canada and British Columbia and our industries.
In the main, the message I hear from industry is that they support it. But I have some concerns. We had a brief discussion, and perhaps we will have more discussion, relative to the whole area of subsidy, which I would remind members really brought on the countervail in the first instance — the claim by the American producers that British Columbia softwood products were unfairly subsidized. Yet we see that the Minister of Economic Development (Hon. Mrs. McCarthy) announced in the House yesterday that there was going to be some major investment from the Japanese in a paper mill and pulp improvements, subject to the province providing energy discounts. One wonders if that program, which has been applied to other industries in British Columbia as well, will be subject to some action by the U.S. as a result of the free trade agreement.
In reading over some documentation from not only the industry but also other sources, I frequently read, throughout the documentation — bearing in mind that the industry generally seems to support the concept of free trade — these little warnings that keep popping up: no security really gained in the agreement for lumber, pulp and paper; B.C. industries still subject to countervail — which again impacts on the bill.
We're putting a bill before the House to deal with one situation, and we really don't know if we will have to deal with other situations in the very near future. There's a big trade bill before the U.S. Congress that could impact on British Columbia as an exporter of softwood lumber, and I don't know what's going to happen on that. The 15 percent the industry was looking for to be taken out as a result of the free trade agreement is enshrined in the free trade agreement. We have the lifting of ceilings in terms of foreign takeovers in British Columbia.
A specific question I'll get into in committee stage is a concern that I have, if you like, relating to a situation that may still exist in British Columbia with respect to branch plant operations of U.S. companies. Special arrangements can be put in place by those companies. I know what happened with respect to the old Canadian Cellulose mill. In fact, I think it was discovered — my colleague for Vancouver East may be able to corroborate this — that the product being sold to the American head company was in fact being sold at a lower rate than it should have been. So does this bill prevent those kinds of arrangements from taking place? I have certainly no proof that that exists at the present time in British Columbia, but it could be that someone could be using a resource that's quite valuable to us and, because of an arrangement with the parent company in the U.S., taking advantage of our stumping system.
MR. WILLIAMS: Shifting the profits.
MR. MILLER: That's right.
Although the bill is required to solve the immediate problem that some producers have, I don't know if it really deals with other areas that I think are of just as much concern to B.C. producers, or to the B.C. government and the B.C. taxpayers, as the problem we're now facing.
Again, I'm referring to the statement by COFI, a very influential group in the forest industry. Their words certainly are important when we deal with arrangements covering softwood lumber producers. They talk about the free trade arrangement. Despite their support, all they really say is that we stand to gain a chance. There are no guarantees that we won't be faced with further countervail actions from the United States, and that we won't be faced with having to bring into this House another bill dealing with that so we can satisfy the U.S. producers. So there are really some serious questions about whether or not we'll be facing that again.
The pulp and paper side has some caution too. I've talked to some people in the industry who on the face of it say: "Yes, we're in agreement with the deal, but really we don't know if there is any protection for our industries." Certainly if you look at the expansion that's taking place in a related forest
[ Page 2940 ]
industry — pulp and paper — there is a considerable amount of money now going into modernization and upgrading and increasing production in that field. Could that lead to the same thing that happened with softwood lumber, where we escalated our share of the market fairly rapidly and caused the Americans to react the way they did?
Of course, we have no guarantees that the American economy is going to go along at the same rate that it has been going along at. There is some evidence — Black Monday is one — to indicate that all is not well in the United States economy. A downturn in that economy, I think, would bring on the kind of protectionist mood that is still simmering in the United States.
Again, referring to one other document from the Business Council of British Columbia, Mr. Matkin was quoted in the newsletter of October, in reference to the free trade agreement.... He said he felt, however, that "'it's too bad' the tribunal is to get involved after countervails are imposed rather than before." There's the whole question of whether the tribunals can really protect Canada's interests against, or in the face of, a strong protectionist move in the United States.
Again referring to Mr. Matkin, he said: "The 'status quo' message contained in the summary is 'not the message we were anticipating.' We were anticpating less reliance on existing protectionist measures and more reliance on a special regulatory approach." I don't think all is well in the forest industry, in its relation to the major customer that we have, the United States.
In addition to that, I have a number of questions about specific sections of the bill, which we of course we will deal with in committee. At this point, Mr. Speaker, it may be advisable to simply adjourn debate.
HON. MR. STRACHAN: Are you guys finished speaking?
MR. MILLER: Just to advise the House Leader, it may be that a short time might be required tomorrow to finish off second reading. If that's appropriate, a motion to adjourn debate....
HON. MR. STRACHAN: I see no problem, but we'll address that tomorrow.
On behalf of the member for Prince Rupert, I move adjournment of this debate — because he still has some time — until the next sitting of the House.
Motion approved.
Hon. Mr. Strachan moved adjournment of the House.
Motion approved.
The House adjourned at 5:59 p.m.
Appendix
AMENDMENTS TO BILLS
59 The Hon. B. R. D. Smith to move, in Committee of the Whole on Bill (No. 59) intituled Miscellaneous Statutes Amendment Act (No. 4), 1987 to amend as follows:
SECTION 26, in section 26 (1) by deleting "22 and 24" and substituting "22, 24 and 25".