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CONTENTS

Routine Proceedings

Tabling Documents –– 5765

Estimates of Sums Required for the Service of the Province.

Hon. Mr. Couvelier –– 5765

Budget Address. Hon. Mr. Couvelier –– 5765

Mr. Clark

Introduction and first reading of bills. Hon. Mr. Couvelier –– 5775

Budget Measures Implementation Act, 1989 (Bill 5)

Home Owner Grant Increase Act, 1989 (Bill 6)

Income Tax Amendment Act, 1989 (Bill 7)

Land Tax Deferment Amendment Act, 1989 (Bill 8)

Motor Fuel Tax Amendment Act, 1989 (Bill 9)

Property Purchase Tax Amendment Act, 1989 (Bill 10)

Public Trustee Amendment Act, 1989 (Bill 11)

Social Service Tax Amendment Act, 1989 (Bill 12)

Tobacco Tax Amendment Act, 1989 (Bill 13)

The House met at 2:06 p.m.

Prayers.

MR. SPEAKER: We would normally have introductions, but on behalf of all the members, I'd like to welcome all our guests today.

Orders of the Day

HON. MR. COUVELIER: Mr. Speaker, I move that the House at its next sitting do resolve itself for this session into a committee to consider supply to be granted to Her Majesty.

Motion approved.

Hon. Mr. Couvelier tabled the comptroller-general's report of interim financial statements for the 10-month period ending January 31, 1989.

ESTIMATES OF SUMS REQUIRED
FOR THE SERVICE OF THE PROVINCE

Hon. Mr. Couvelier presented a message from His Honour the Lieutenant-Governor: Estimates of Sums Required for the Service of the Province for the fiscal year ending March 31, 1990, and a supplement to the estimates for the fiscal year ending March 31, 1990, recommending the same to the Legislative Assembly.

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

Motion approved.

HON. MR. COUVELIER: Mr. Speaker, I move, seconded by the hon. Minister of Social Services and Housing (Hon. Mr. Richmond), that Mr. Speaker do now leave the chair for the House to go into Committee of Supply.

Budget Address

HON. MR. COUVELIER: Mr. Speaker, members of this House, I am honoured to present to the people of British Columbia the third budget of this administration. This is a budget that represents a commitment both to the broad spectrum of economic and social programs that our citizens desire and to the sound government management that makes it possible. This is a fair budget. Mr. Speaker, this is a balanced budget.

You will see today that we not only continue to enhance social programs, but we also focus on environmental protection and housing. Mr. Speaker, the budget is balanced; it is balanced with sensitivity. We will also be strengthening the economic fabric of the province by providing more resources for the development of our transportation network.

Let me first review the economic progress made during 1988 that allows for this year's exceptional budget. You will recall the great uncertainty in the world economy early last year. We wondered whether the large stock market decline of October '87 would have a lasting effect on economic activity. I cautiously forecast the B.C. economy would grow 2.7 percent. I now report the economy grew by 4 percent in 1988.

In 1988 employment was 4 percent higher than in 1987. Hon. members, that is 52,000 more jobs for British Columbians.

Other indicators suggest that growth was broadly based. Retail sales were up 8.6 percent. Over 30,000 housing units were started. Exports increased by 11 percent. Personal incomes rose by 7.6 percent. Manufacturing shipments increased by 5.9 percent. The value of mineral production rose by 9.7 percent. Foreign visitors to the province increased by 2.4 percent. Pulp and paper production increased by 2.6 percent. New capital investment increased by 18.3 percent. More important, over the last two years capital spending has spread to all regions of the province.

For example, in Delta, an environmentally better paper production plant; in Coquitlam, an electronic machine shop; in Grand Forks, an improved insulation production facility and also an expanded particle board plant; in Armstrong, an expanded food product plant; in Hazelton, a new high technology sawmill; in Mission, a value-added wood products plant and a movie production facility; in Prince George, an environmentally better chemical plant; and in Oliver, two new beverage plants aimed at the export market that the Premier has previously described.

Projects such as the newsprint mills in Gold River and Mackenzie, the pulp mills in Quesnel and Taylor, the redevelopment of the Highland Valley Copper complex and the Songhees development here in Victoria have provided good jobs for our construction workers and will provide long-term employment growth throughout the entire province.

[2:15]

Many were predicting a disastrous bargaining year in 1988. That did not happen. Today I congratulate labour and business in the province for their willingness to renew collective agreements last year without excessive wage or concession demands.

Mr. Speaker, it is in the nature of things that the government should be reminded from time to time of its shortcomings. We trust, however, that even the most cynical of critics will concede that we are managing the economy effectively.

January 1 of this year marked the beginning of the historic Canada-United States free trade agreement. We believe that the free trade agreement is a key to British Columbia's business competitiveness in the international marketplace. By providing access to the huge United States market, we can refine the export capability of our home-grown industry.

To take advantage of this agreement, this government has entered into a Pacific Northwest economic partnership agreement with the state of Washington,

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and our Premier recently opened a new office in southern California to promote our trade, investment and tourism interests with that state.

Reflecting our international commitment, British Columbia was well represented at a number of important world forums during the past year. My colleague, the Minister of International Business and Immigration (Hon. J. Jansen), and I had the pleasure of accompanying the Premier to Davos, Switzerland, in January. British Columbia was one of only five jurisdictions invited to make a presentation. Accompanying us to this prestigious event were 18 provincial business people who were instrumental in raising B.C.'s profile among the many world business leaders who attended.

In September 1988 I had the honour of being part of the delegation which traveled to Seoul, South Korea, to represent greater Victoria when the bid was won for the 1994 Commonwealth Games. Being part of the winning delegation on foreign soil was a proud experience for me as a Canadian and as a British Columbian.

In October 1988 we hosted the renowned Williamsburg Conference. That conference, which was held in Saanich, brought together some of the best and brightest economic and foreign policy experts from Canada, the United States, the Soviet Union and South-East Asia to discuss issues affecting the Pacific basin. The selection of our province as the site of this event is a recognition that we are considered an important part of the Pacific Rim community.

Further strengthening our relationship with Pacific Rim countries, a new British Columbia trade development office was opened in Singapore last year, complementing the eight existing trade offices.

The legislative and administrative framework to establish Vancouver as an international banking centre is now substantially in place. To date, nine firms have been registered as international financial businesses under this legislation. Three more are in process. Several others have expressed strong interest in making application.

The House should know that our captive insurance initiative has already registered nine firms. There continues to be strong interest in the world insurance industry. This increased level of expertise moving to Vancouver further enhances our financial sector.

I am also pleased to tell this House that preliminary discussions are underway between the Vancouver and Hong Kong stock exchanges concerning the prospects of trading linkages. Such a development could see a segment of each market eventually being traded on a number of exchanges around the Pacific Rim.

Our efforts to strengthen current ties with the Pacific Rim have paid handsome dividends. During 1988, the value of our exports to those countries was 45 percent higher than during 1986.

Young people must learn more about our important trading partners. These future leaders are benefiting from our Pacific Rim education initiatives. About 1,000 students will be studying Japanese or Mandarin in British Columbia schools this year. All students will benefit from the Pacific Rim focus being added to the entire education curriculum.

These are important initiatives, but government can only be a catalyst for change. We can promote the province and provide responsible fiscal management. But the private sector must take the lead, be competitive and aggressively use our advantages if we are to maximize our potential in the world marketplace.

It is satisfying to note the efforts of this government, and the entrepreneurship of our residents are now being recognized throughout Canada and the world. In its most recent report on British Columbia, the Investment Dealers' Association of Canada said: "Positive structural developments introduced by business and government in the past few years will sustain economic growth in British Columbia and avoid repetition of the boom-bust cycles that have characterized the B.C. economy in the past."

In addition, the recent increase in the province's credit rating by Dominion Bond Rating Service further illustrates how others see us.

It is this type of recognized leadership that has allowed all British Columbians to benefit from this budget. The budget is balanced — by acknowledged good management.

I would now like to outline the economic forecast that underlies our fiscal plan for 1989-90. I expect the B.C. economy will grow 3 percent in 1989. This decline from 4 percent growth in '88 partly reflects a widely expected moderation of growth in the Canadian, American and Japanese economies this year. As well, I expect the rate of increase in capital spending to moderate slightly from its rapid growth of the last two years. Retail sales growth, however, should remain strong, underpinned by growth in personal income.

I expect that employment will increase 2.5 percent, representing 34,000 jobs. Although large numbers of people are migrating to British Columbia because of our strong economy, I anticipate that the unemployment rate will still decline to 9.7 percent. That would be the lowest unemployment rate since 1981.

Our economic prospects, even in a cooling world economy, are bright. Our recovery, however, requires prudence and caution in government actions and those of labour and management. Recent wage settlements in the public school sector are of concern to our government. Those settlements must not of themselves become the floor for future negotiations. At the same time, we are cognizant of the importance of amicably completing the important contract negotiations with the health care sector in the immediate months ahead. Our government pledges to treat those in this most vital of service areas fairly and honourably.

Interest rate increases, inflationary pressures and currency fluctuations are also a source of concern and uncertainty for the economic outlook. Some governments in Canada are adding to inflationary pressures through unwise deficit spending, particularly where the economy is strong and unemployment rates are low. If this deficit spending was curtailed, inflation-

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ary pressures would diminish and the Bank of Canada could lower interest rates.

Hon. members, we in this province are not contributing to this problem. We were all encouraged to hear the Prime Minister reaffirm that deficit reduction is a primary goal of his government. It is, however, the problem of both the federal government and the provincial governments. We all have to contribute to the solution. The provincial governments must do their share, but not by accepting funding obligations historically performed by the federal government. Our government will strongly resist any attempt to merely shift the federal deficit to provincial governments through cuts in transfer payments. Our taxpayers have paid their fair share.

Mr. Speaker, we are responsible Canadians. Our budget is balanced in the national interest.

I would now like to review the government's fiscal performance for '88-89 and our fiscal plan for '89-90. Because of unexpectedly strong economic growth, total '88-89 revenue is now forecast at $12.102 billion, some $538 million more than originally estimated. This revenue windfall will be transferred to the budget stabilization fund. In addition, we have received $302 million from privatization and asset sales during '88-89. This entire amount will be placed in the privatization benefits fund. Final expenditures for '88-89 are now expected to be slightly under the original budget estimate. After the transfer of excess revenue to the budget stabilization fund, the government will have an '88-89 general fund deficit of $375 million, $20 million less than originally anticipated.

Mr. Speaker, in setting the '89-90 expenditure plan, I received the generous assistance of a caucus committee consisting of Members of the Legislative Assembly from all parts of the province. The committee met 17 times to review budget proposals. I sincerely appreciate the dedication, hard work and valuable contribution of each of those members. Using this committee's useful advice on how to focus our expenditure plan, '89-90 general fund expenditures have been budgeted at $13.487 billion.

It is our government's view that essential social service expenditures must be increased significantly in the coming year. Therefore we are transferring $500 million from the budget stabilization fund to the general fund. Even with this transfer, over $1 billion will remain in the budget stabilization fund at the end of next year, an ample reserve that will enable us to maintain social and other programs should an economic downturn occur.

Including the transfer from the budget stabilization fund, I expect '89-90 general fund revenue to reach $13.487 billion.

Hon. members, this budget meets our commitment to taxpayers that budgets be balanced over the business cycle. Deficits initially have a seductive appeal, but soon the debt begins to grow and interest payments squeeze out expenditures for important services. When this administration took office in 1986-87, the provincial government's annual deficit was almost $1.2 billion. At that time, I emphasized prudent fiscal management and our government's objectives of eliminating the deficit and reducing the debt.

In '87-88 we reduced the deficit to under $800 million. In '88-89 we will reduce it to $375 million. In '89-90 the budget is balanced as we promised two and one-half years ago. We have achieved our first objective: eliminating the deficit. We are making progress on the second objective: reducing the debt. During '88-89, we managed to reduce government purpose debt by $96 million and will reduce it by a further $250 million during the upcoming year.

This progress has resulted in tangible benefits. This year's estimates provide for a $69 million reduction in government interest payments. This significant saving can be used to increase funding for important social services. Mr. Speaker, the budget is balanced, and the people of British Columbia benefit.

Our government not only believes in prudent fiscal management but also in enhancing the social and economic well-being of all of our residents, as you will see.

It is folly to send young people into the future ill-prepared to meet the challenges they will face. We must have an education system that enables our children to realize their individual potential and win the competitive marathon of the future. This isn't simply a matter of writing a cheque and hoping to produce favourable results. Numerous studies have proven that the level of government spending devoted to education is not the sole determinant of student performance. A strong education system also reflects the efforts of parents, teachers and, of course, the students themselves.

[2:30]

Two years ago, this government established a Royal Commission on Education to determine the appropriate direction for education and to make recommendations on ways to improve quality and accountability in the system. My colleague the Minister of Education (Hon. Mr. Brummet) recently outlined the details of the government's important initiatives in this critical area. For '89-90, we shall be providing $44 million in new funding and redirecting $20 million in existing program funding to start implementing the commission's recommendations.

This budget includes a $149 million increase for a total of $1.6 billion in provincial contributions to school districts' operating budgets and debt service costs.

Grants to independent schools will rise by over 17 percent to $57 million. Independent schools meeting specific criteria will receive per-pupil grants equal to 50 percent of public schools' per-pupil operating costs. Funding for special education in independent schools will also increase.

Contributions to teachers' pension funds will rise by 11 percent to $135 million as a result of increases in the number of teachers and the rising salaries.

The Pacific Rim initiatives program will also receive additional funding. Designed to help establish closer cultural, educational and economic links, this program will receive $5.3 million in '89-90.

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Overall, the budget for the Ministry of Education will rise by $253 million in the next fiscal year to over $2.2 billion, a 12.8 percent increase. The government has also approved a $250 million capital plan for '89-90 for schools to meet new space requirements and to provide for upgrading and renovations.

Continuing our commitment to post-secondary education, the '89-90 budget of the Ministry of Advanced Education and Job Training will increase by 13.9 percent, or $121 million. Provincial contributions to colleges' and institutes' operating budgets will increase by $26 million to $318 million.

University operating grants will increase by $30 million to $371 million. In addition, $20 million will be provided in 1989-90 for the universities matching program which encourages private sector donations.

I believe our student financial assistance programs have given all British Columbians a better opportunity to obtain higher education. In 1989-90, $51 million will assist 33,000 students in obtaining post-secondary education.

Mr. Speaker, this program has been a great success in bringing the students to our universities. Now it is time to bring the universities closer to the students.

As my colleague the Minister of Advanced Education and Job Training (Hon. S. Hagen) recently announced, over $35 million will be provided in the coming year to implement the provincial "Access for All" strategy for post-secondary education. Included will be $8 million for the establishment of full university degree programs at Kelowna, Kamloops and Nanaimo. The degree programs will be offered by new partnerships between the colleges and provincial universities.

Other important access funding includes $19 million for enrolment growth at universities, colleges, institutes and distance education, and $5 million to help increase adult literacy rates, expansion of English-as-a-second-language training and expanded job preparation training for adult native people. We will also be spending over $3 million to improve regional program access as well as expanding programs for remote communities.

Implementing the access strategy will also require capital expenditures. The $99 million post-secondary education capital budget includes $29 million for this purpose.

Mr. Speaker, we have balanced the budget and provided new opportunities for our young people.

Hon. members, spending on health care will total $4.3 billion during 1989-90: an increase of $388 million.

Over $178 million of the increase will go to hospital programs, which will receive almost $2.1 billion next year. The Medical Services Commission, which funds services provided by physicians and other health practitioners, will receive an increase of $79 million to nearly $1.2 billion in the next fiscal year. An additional $18 million will be provided for Pharmacare. Community and family health services will receive over $28 million more next year, and continuing care services will receive an additional $74 million.

In addition to the increases in operating funding, $155 million in capital funding has been provided to add almost 700 acute-, intermediate- and extended-care beds to our extensive health care system.

This year we are expanding Medical Services Plan premium assistance coverage for low income groups at an additional cost of $16 million. In total, premium assistance is expected to help 540,000 British Columbians next year.

All should note that the budget for the Ministry of Health is one-third of total provincial government expenditure, and the increase in funds provided for health in 1989-90 exceeds the total budget of 16 of the 21 government ministries.

Mr. Speaker, I want to assure the House that this government is committed to preserving and improving our excellent health care system. Adequate funding is not the issue. Rather we must refocus on sickness prevention techniques. We are becoming too reliant on a health care system designed to treat sickness rather than staying well.

We are starting to prove that we can contain costs and improve effectiveness. The Victoria Health Project, which will have its first year of operation in 1989-90, is a good example of the innovation that will reduce cost pressures by integrating and improving the coordination of services to seniors and, at the same time, enhance services through innovations such as senior care centres.

An important ongoing initiative is the three-year $137 million alcohol and drug program. It is designed to reduce the immense health and other social costs created by substance abuse through prevention, education, treatment and research.

Another example is the special support teams of health care professionals. These allow elderly patients to be treated and spend their recovery periods in the comfort and familiar surroundings of their homes, thereby freeing acute care facilities for other patients.

Another important new initiative in the coming year is the hospital innovation incentive program. This provides $4 million in seed funding which allows hospitals to make investments that will reduce operating costs. Hospitals will pay back the funds by sharing future cost savings with the province.

We have balanced the budget, and we are increasing health care spending by over $1 million per day.

During 1989-90 funding for the entire range of government programs directly targeted to seniors will increase by $97 million. We recognize that senior citizens have unique needs. Therefore next year two new initiatives will be introduced to improve the sensitivity of government programs to those needs.

A task force will be appointed which will assist communities across the province to discuss issues raised in a soon to-be-released discussion paper entitled "Towards a Better Age: Strategies for Improving the Lives of Senior British Columbians."

A seniors' advisory council will be appointed to provide advice to the Minister Responsible for Seniors (Hon. Mr. Dueck) on matters of importance to

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seniors. This council will be supported by an office for seniors in the Ministry of Health.

More importantly, this government can assure seniors of stability in government taxation and expenditure policies that allow them to plan financial and family affairs.

Thanks to the province's strong economy, I am pleased to report that the income assistance caseload declined during 1988-89 for the third year in a row. I expect a further decline next year. Nevertheless, the budget of the Ministry of Social Services and Housing will be increased by $165 million, or more than 11 percent, to over $1.6 billion next year. Shelter and support allowances paid to income assistance recipients will be increased on July 1 at a cost of $33 million. As announced by my colleague the Minister of Social Services and Housing (Hon. Mr. Richmond), we will also provide a $37-per-month increase in social assistance payments to 13,000 single handicapped recipients, effective April 1.

The budget for services to families and children has been increased by 12.6 percent to $140 million to provide for an increase in foster care rates and the intervention, assessment and treatment of children with severe behavioural and emotional problems. This funding increase includes increased day care subsidies for low-income workers. An additional $20 million will be made available for the care of the physically and mentally handicapped and to continue the phasing-out of institutional care.

I turn now to a problem that troubles me deeply. Despite strong economic growth, our province still has an unacceptably high unemployment rate. Experts suggest that the current unemployment rate has a structural component which is not shrinking as the economy expands. This structural unemployment seems to be caused by significant mismatches between the types of skills offered by job-seekers and the types of skills required by employers. It seems clear that at least part of the solution to this problem involves retraining these unemployed individuals and better matching their skills to available jobs.

While there are programs already in place which deal with unemployment and job training, we need to develop a more comprehensive and coordinated attack on structural unemployment. What is required is a cooperative strategy to deal with the problem. As announced in the Speech from the Throne, developing such a strategy will be the priority of a task force of members of the Legislative Assembly, businessmen and labour.

It is essential that British Columbians have a justice system they can count on, understand and access. We are addressing the recommendations of the justice Reform Committee. Measures to be implemented include a new small claims act, streamlined trial procedures and drafting of legislation and forms in plain language.

An important part of the system is access to legal services. In 1989-90 funds for legal aid services will increase by more than 20 percent. We will be providing additional funds for Crown counsel offices to ensure that the needs of victims and witnesses are met during the justice process. The Attorney-General (Hon. S.D. Smith) will also ensure that the victims of crime are compensated for costs by perpetrators of the illegal acts.

This budget provides S4 million for full implementation of the family maintenance enforcement program. This program helps those with maintenance orders obtain the support to which they are legally entitled.

During 1989-90 the Ministry of Attorney-General's capital budget includes $16 million for upgrading, expansion and replacement of court facilities throughout the province. Approximately $80 million will be spent by the Ministry of Solicitor-General on three new correctional facilities. This will complete the government's commitment to close the Oakalla prison by the end of next year.

I have already mentioned some of the international activities undertaken by the Premier and members of cabinet over the past year. Our economic development efforts in the coming year will continue to focus on trade development and the attraction of international investors.

Legislative authority will be sought to establish the B.C. Trade Development Corporation. This new corporation will help increase goods and service exports from the province. An integral part of the Trade Development Corporation's activities will be to help firms obtain export financing and to help small and medium-sized business enter foreign markets for the first time.

Funding will also be provided to expand the province's trade offices in Ottawa and San Francisco. These offices will provide advice to British Columbia business seeking federal government contracts, help our local high technology companies doing business in the Silicon Valley and assist firms exploring free trade opportunities south of the border.

[2:45]

Mr. Speaker, the Canada-U.S. free trade agreement and recent rulings against Canadian provincial liquor board practices, under the General Agreement on Tariffs and Trade, will necessitate substantial adjustments by producers in some of B.C.'s industries. The government is complying with the provisions of the free trade agreement and the GATT which require that we reduce markup differentials between B.C. products and those from other countries.

I am pleased to see steps being taken by our wine industry to enhance the quality of our local wines through adoption of appellation and quality standards. However, I recognize that some growers will still need help in adjusting to the new rules. Accordingly, this budget provides $12 million in funding to complete the first phase of a $28 million federal-provincial grape and wine sector adjustment assistance program.

Mr. Speaker, a number of other important economic development initiatives by various ministries will receive new or enhanced funding in '89-90. This funding is designed to assist economic development in all regions of the province.

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The Ministry of Agriculture and Fisheries will receive $6.7 million for a major expansion of agrifood industry development programs cost-shared with the federal government.

Together with the Ministry of Energy, Mines and Petroleum Resources, the Ministry of Regional Development will establish a $5 million loan program for the building of roads to access mineral resources. The Ministry of Forests will continue to expand opportunities for small business firms to establish themselves in the industry by increasing the volume of wood available through competitive timber sales under the small business forest enterprise program. This program encourages the production of higher-valued solid wood products.

The Ministry of Regional Development will receive $3.9 million in new funding for expansion of community-based initiatives, such as the Community Organizations for Economic Development program, which assists in local economic development.

The Ministry of Regional Development will also be expanding its regional seed capital program. Up to $48 million in loan guarantees will be provided next year, compared to the previous year's authorization of $16 million.

Mr. Speaker, there is a need for business, labour and government to cooperate in all aspects of economic development, including the search for new markets and new ways of producing products. Often the spur to cooperative innovation is common economic interest. Therefore I am pleased to announce that over $1.5 million will be authorized for a new employee equity program, which will provide incentives for employees to invest in their firms or in worker-sponsored venture capital funds. My colleague the Minister of Regional Development (Hon. Mr. Veitch) will be announcing the details of this program shortly.

Mr. Speaker, we have balanced the budget and we are further diversifying our economy. Privatization has been a major success. Not only has it generated over $300 million for the benefits fund but it has also provided opportunities for expansion. A good example is the sale of the assets of the B.C. Steamship Company, a Crown corporation which has provided the government with a legacy of losses in its years of operating the Princess Marguerite and, more recently, the Vancouver Island Princess. Upon the sale of these vessels to the private sector, the purchaser announced an expansion of service between Victoria, Seattle and Vancouver and the introduction of a new vessel into service. The new owner will also be undertaking significant refit work in Victoria.

Other successful privatization examples that will result in new jobs include the sale of the mainland and Victoria gas distribution networks which, with the new pipeline, opens up all of the Sunshine Coast and southern Vancouver Island to a new, clean source of energy.

Over the next year we will continue to examine other facets of the government's activities to identify functions more appropriately located in the private sector.

Mr. Speaker, British Columbians want a strong economy and employment opportunities, but not at the expense of their environment. That is why we set up the Task Force on the Environment and the Economy in January 1989. We believe that sustainable development is possible, and we look forward to receiving the report of the task force at the end of May.

We must think globally and act locally. There is a growing recognition that developing solutions to environmental problems will require cooperation among all jurisdictions. The importance of cooperation and coordination was illustrated by the response to the oil spill off Washington State which soiled our coastline. This incident made clear that environmental efforts of various jurisdictions need to be better coordinated. To this end, a task force on oil spills, co-chaired by B.C. and Washington State, has been established.

Cooperation among jurisdictions to deal with environmental disasters is one thing, but we believe that environmental protection is everyone's responsibility. Environmental protection requires a dedicated, cooperative approach by all levels of government, industry, business and individuals. This budget applies that principle. This budget provides an almost 90 percent increase, to nearly $200 million, for environment programs. Included is new funding of $28 million from the lottery fund.

The Vancouver Island pipeline will provide a clean and efficient source of energy for homes and businesses on Vancouver Island, Howe Sound, the Sechelt Peninsula and Powell River. The several pulp mills along the pipeline's route will be provided with an alternative to heavy fuel oil. Substitution of natural gas for fuel oil will reduce acid rain and cut oil barge traffic, reducing the risk of oil spills in Georgia Strait. I expect the economic impact of this project to be significant. My colleague the Minister of Energy, Mines and Petroleum Resources (Hon. Mr. Davis) estimates that the construction of the pipeline will provide 700 person-years of employment.

One of the tools we have to protect the environment is government regulation and monitoring of industry. The government has recently taken a number of important steps in this regard. My colleague the Minister of Environment (Hon. Mr. Strachan) has announced that we will be restricting the use of chlorofluorocarbons, which are depleting the earth's ozone layer, and that industry's use of high-sulphur-content fuel, a major contributor to acid rain, will no longer be allowed. My colleague will also be providing an additional $7.4 million for monitoring of special wastes and toxic chemicals and enforcement of existing environmental legislation. The Ministry of Energy, Mines and Petroleum Resources will be strengthening its mines inspection function to ensure that mines in B.C. are developed and operated in a manner that is sensitive to environmental concerns.

Our balanced and cooperative approach to the environment requires incentives for industry, local governments and individuals to work together. This budget includes funding for the following initiatives.

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The Ministry of Energy, Mines and Petroleum Resources will be spending $3.1 million this year on a new program to produce energy from waste products, including municipal garbage, wood waste and possibly coal waste. The province will be seeking matching federal funds for this initiative.

The province has already announced major financial support under the Go B.C. program for recycling initiatives in Nanaimo and Surrey. We will also be assisting other municipalities and regional districts wishing to establish recycling programs.

The government will increase funding available to municipalities for water and sewer infrastructure under the revenue-sharing fund and dedicate money from the Lottery Fund to address other local waste management priorities.

Establishment of centres of excellence in environmental research and engineering in cooperation with the federal government will be funded with grants from the Lottery Fund.

The government will expand and upgrade toxic waste storage facilities and work towards establishment of a provincial toxic waste disposal plant.

The initiatives I have announced so far are targeted at environmental cleanup. The government is also committed to preserving our environment. The government will create one of the largest urban parks in the world from the University Endowment Lands on Point Grey, a legacy for all future generations to enjoy. There will also be a major increase in spending to acquire and enhance fish and wildlife habitat and funding made available to establish a new provincial fish hatchery.

Another important initiative is the new environmental youth services program which will be administered by the Minister of Environment. This program will employ young people to perform non-hazardous work, such as enhancing fish and wildlife habitats and improving facilities and outdoor recreational opportunities in provincial parks.

Mr. Speaker, polluters should pay for the damage they cause. This government intends to significantly raise the fines it levies for polluting the environment.

Forestry continues to be important for the environment and economy of the province, and it is essential that we renew this precious resource. Since 1981, one billion seedlings have been planted, more than in the previous 50 years. The government and the forest industry expect to accelerate plantings, and over one billion seedlings will be planted over the next several years. Reflecting our commitment to the renewal of the forest resource, Ministry of Forests expenditures on silviculture will increase to over $250 million next year.

Mr. Speaker, the budget is balanced — as we progress towards totally sustainable development.

An important government role in the economic development of our province has been the building of a transportation network. In a province as geographically and climatically diverse as ours, that has been an expensive but vital task. As members will recall, the government recently announced a unique transportation planning process, which we have called "Freedom to Move." Flowing from this announcement, local committees are at work in each of the eight development regions collecting ideas from the public and community organizations and developing regional plans for improving the transportation system over the next decade.

In the meantime, there is a great deal of work that can begin. As the Premier announced in January, we are accelerating the completion date of the Okanagan connector to the fall of 1990. Originally it was planned to be completed a year later.

The Vancouver Island Highway is not forgotten. This project will provide better transportation linkages among Vancouver Island communities for both tourism and economic development. Over $30 million will be spent next year on this project.

Other projects will be announced shortly by my colleague the Minister of Transportation and Highways (Hon. Mr. Vant). Overall, highways construction capital funding in 1989-90 will be more than twice the '88-89 level.

Although new construction is required in some areas, it is important and cost effective to maintain and enhance our existing highways. Accordingly, this year we will be funding a 50 percent increase in the Ministry of Transportation and Highways budget for highway rehabilitation.

The activities I have just outlined and a number of smaller highway projects will not only provide a better transportation system but they will also stimulate employment opportunities and give a boost to local economies in all regions of the province.

[3:00]

The significance of these commitments to areas throughout British Columbia can be seen in the fact that we are providing over $1 billion for the Ministry of Transportation and Highways in this budget.

My colleague has also examined the B.C. ferry fleet to ensure that it is responsive to the growing needs of local service and tourism. Therefore the government has approved a ten-year, $550 million capital maintenance and expansion program for the B.C. Ferry Corporation. This program includes construction of two super ferries and two smaller ferries by 1994 at an estimated cost of $372 million, improvements of all major terminal facilities and reorganization of the Gulf Islands ferry service.

In order to finance this program, our government will continue to provide the annual operating subsidy while allowing the B.C. Ferry Corporation to raise its fares in line with inflation.

The B.C. Ferry Corporation estimates that the five-year shipbuilding phase of the program alone will generate almost 3,900 person-years of employment and many more benefits from purchases of materials and equipment.

As a former mayor of Saanich, I am well aware of the importance of local governments in this province. Therefore I am very proud that our government is able to share its buoyant tax revenues with municipal governments in all regions of the province. This year we will be transferring $286 million to municipalities under the municipal revenue-sharing program. For

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the first time, the municipal revenue-sharing program will also transfer funds to assist with the cost of policing and community health services in those municipalities which until now have covered the cost of these services themselves.

In addition to the lottery funding for environmental projects, which I announced earlier, the municipal revenue-sharing transfer includes $35 million in conditional grants for water and sewer projects, a $20 million increase.

At the Union of B.C. Municipalities' annual meeting in Whistler, the Premier introduced the three-year, $162 million Go B.C. program. Funding comes from provincial lottery revenues and will provide up to one-third of the cost of worthwhile community "growth and opportunity" capital projects, up to a project maximum of $1 million.

During '89-90, $50 million will be set aside for Go B.C. projects ranging from a child development centre in the Comox Valley, to a heritage museum in Burnaby, to a swimming pool in Castlegar, to instructional space at the Art Gallery of Greater Victoria. The Royal British Columbia Museum here in Victoria will receive $1 million in '89-90 to upgrade its physical plant and begin computerizing its catalogue system.

Mr. Speaker, we have balanced the budget, and we have done so without tax increases. We are managing the public's money with care.

The strong growth of the provincial economy, combined with access to low-cost power over the next decade and revenues from export sales, will result in substantial increases in the earnings of the B.C. Hydro and Power Authority. As a result, the corporation will return to its shareholder, the provincial government, an estimated $102 million of surplus net income next year. B.C. Hydro will continue to pay a dividend to the province in future years, related to its surplus net income. Further, B.C. Hydro is expected to limit rate increases to less than inflation.

Mr. Speaker, I am pleased that extensive consultation between the financial services industry and the government will result in the tabling of a major piece of legislation in this legislative session concerning the regulation of financial institutions. The Financial Institutions Act will provide an up-to-date regulatory framework for credit unions, trust companies and insurance companies operating in British Columbia.

Another significant piece of legislation I intend to introduce this session is the Personal Property Security Act. This legislation will provide for the establishment of a consolidated personal property security registry in our province. This is an important initiative which will provide a comprehensive and modern regulatory structure for secured loan and credit transactions in the province. It will remove some existing impediments to investment and, in a general way, enhance the environment for business activity in British Columbia. It will also allow us to provide better and faster service to the public at a lower average cost to the taxpayer.

I am now pleased to provide details of a set of major initiatives combined in a provincial housing action plan, a plan which addresses the issues of the affordability of housing, property taxes and the supply of rental accommodation.

Our buoyant and growing economy has resulted in significant in-migration to the province, with the lower mainland and Victoria areas being the primary destinations. This has resulted in low vacancy rates for rental accommodation, rising rents and generally higher property values. The free market's neighbourhood preferences have resulted in considerable tax shifts within jurisdictions, which are also of concern. Major government intervention to reverse market-determined trends has been shown to be harmful whenever it has been attempted in the past. There are some actions, however, that government can take: we can relieve the hardship caused by rapid changes in the housing market; we can assist those unable to afford market-priced housing; and, most important, we can help increase the supply of housing. We will do all three.

This government will be spending almost $900 million on housing-related and mobile home programs in the coming fiscal year. In order to facilitate the implementation of the provincial housing action plan, we propose to present legislation authorizing the formation of a new Crown corporation, the B.C. Housing Corporation. The objective of this corporation will be to increase private sector and government cooperation in the housing market and to assume the functions of the B.C. Housing Management Commission and the Provincial Rental Housing Corporation.

Most homeowners are facing school property tax increases this year that are larger than usual, partly as a result of higher-than-anticipated wage increases. To reduce the impact of these increases, we are increasing the basic homeowner grant for the 1989 taxation year from $380 to $430. For seniors, the handicapped and others entitled to the supplementary grant, the homeowner grant for the 1989 taxation year will rise from $630 to $700. Over 640,000 homeowners are expected to receive this increased grant, which should ensure that, on a provincial average, property taxes will rise by less than the rate of inflation. Indeed, many homeowners will experience a decline in their net property taxes.

Of particular benefit to seniors is an expansion of our land tax deferment program. The eligible age for participation in this program will be lowered from 65 to 60 years, effective January 1. Those 60 years and older and the handicapped can have their annual property taxes paid by the provincial government if they so choose. The deferred taxes and interest, at a lower-than-market rate, are registered as a charge against the property, to be recovered when the property is eventually sold or transferred.

We will also provide start-up grants for non-profit societies undertaking to construct rental housing for seniors. Experience has shown that a small amount of assistance to those societies in the initial phase can be extremely useful.

Our provincial housing action plan provides assistance to home-buyers. Today I am announcing

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property purchase tax relief which will apply to buyers of modestly priced housing for whom a registered mortgage or other financing exceeds 75 percent of the purchase price of the home. Relief will be on a sliding scale to allow for greater tax reductions for those with low down payments. For example, a one-year resident buying a $100,000 home with a 10 percent down payment will receive property purchase tax relief of $600, equal to 60 percent of the tax otherwise payable. Relief will be limited to property purchases not exceeding $150,000. This relief measure will be effective for property transfers registered after today, and can be claimed for a period of one year following registration of the transfer. This measure is expected to reduce property purchase tax revenue by almost $13 million next year and will benefit an estimated 25,000 home-buyers, not just the first-time buyer.

Increased assistance will also be provided homebuyers by changes to the British Columbia second mortgage program. The eligible house price limit will be raised from $85,000 to $100,000, and the maximum assistance available will increase from $10,000 to $12,000. To facilitate delivery of the program by the private sector, second mortgages will be replaced by loan guarantees. The guarantees will be attached to first mortgages that are traditionally issued by financial institutions.

Our provincial housing action plan considers renters. The Ministry of Social Services and Housing will add over 1,800 units to the over 50,000 social housing units in the province. These units will be cost-shared with the federal government. My colleague the Minister of Social Services and Housing (Hon. Mr. Richmond) will also request of his federal counterpart an increase in the number of housing units to be cost-shared.

As I announced earlier, those on income assistance will benefit from an increase in the shelter allowance this year. Eligible rent levels under the Shelter Aid for Elderly Renters program will also be increased, which will provide assistance to an additional 5,700 seniors and increase support to those already in the program. This improvement is expected to more than double the cost of SAFER to almost $15 million.

To assist other low-income British Columbians who rent accommodation, the government will introduce a renter's tax reduction this year that will be available to all renters who pay provincial income tax. The tax reduction will amount to $200 for every person in a family and will be phased out as income rises. For a family of four with an income of $20,000, the tax reduction will normally amount to $500. When the federal government agrees to administer this measure, British Columbia residents will be able to claim the tax reduction when they file their '89 tax returns early next year. Because this measure is intended to reduce hardship during this period of rising rents, it will be phased out over the subsequent four years.

The supply of rental housing, especially in greater Victoria and greater Vancouver, is a matter for concern. The essential ingredient to increasing rental housing supply is cooperation among the players involved. Municipal governments have a major role to play through the regulation of new developments; developers must play a role by building affordable housing; and the provincial government can play a role by providing land suitable for development and some financial assistance.

Municipalities and the federal government are also major landowners in greater Vancouver and Victoria. We shall ask them to participate by providing land for rental housing. Accordingly, the provincial government is appointing a task force for this purpose, with a wide mandate to pursue cooperation among all the potential participants.

[3:15]

For our part, we have already identified provincial government and Crown-owned land in greater Victoria and greater Vancouver sufficient to provide many new units of rental housing over the next two or three years, and I challenge the municipal governments and developers to work with us in ensuring those units are built. Our target is an additional 4,000 units of rental housing to be started over the next 18 months.

Our proposal is to sell or lease this Crown land, when zoned, on an open-ender basis to developers who agree to build rental housing. I also propose to exclude the sale of this land from the property purchase tax. Those municipalities which participate in this program by providing the appropriate density requirements that facilitate an early start on this initiative will share in up to one-third of the proceeds from the sale or lease of those Crown lands and any other provincial government land used for these developments.

We are also introducing a municipal incentive grants program to encourage municipalities to approve rental housing developments. The amount of the grant, which will be available to all municipalities, will vary with the extent of rezoning required, but is expected to be up to $2,500 per unit. My colleagues the Minister of Social Services and Housing (Hon. Mr. Richmond), the Minister of Municipal Affairs, Recreation and Culture (Hon. Mrs. Johnston) and the Minister Responsible for Crown Lands (Hon. Mr. Dirks) have the major responsibilities for this initiative and will be announcing details in the near future.

Rising interest rates have also caused developers' costs to increase. To reduce this added burden, the government will provide interest subsidies to developers who are willing to make investments in affordable rental housing with suitable commitments on the level of rents. The proposed Crown corporation will examine the feasibility of establishing a rental housing development fund for this purpose.

The corporation will also work with my colleague the Minister of International Business and Immigration (Hon. J. Jansen) to explore the possibility of attracting investments by new Canadians in rental housing.

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We have balanced the budget and brought forward the most sweeping and innovative housing program ever presented to this House.

Mr. Speaker, I have had the privilege of presenting three budgets to this Legislative Assembly, and I believe that each has served as a building-block on the other. In these three budgets this government has delivered substantially more funding for a range of services required by our citizens.

Over the three years we have increased Ministry of Health funding by almost $1 billion. Over three years we have increased primary, secondary and post-secondary education funding by over $700 million. We have increased Ministry of Social Services and Housing funding by over $250 million, even though the number of people in need on income assistance has declined.

In the last three years we have delivered economic development policies which have generated significant economic growth for the province. That growth has, in turn, helped fund our social programs. Natural resource levies paid by business have increased from approximately $650 million in 1986-87 to over $1.2 billion in 1989-90. Corporation income tax payments have risen from less than $300 million to almost $750 million during the same period, despite the fact that we reduced the rate.

In this budget we have addressed the continuing need for environmental protection and housing. In this budget we are providing more resources to equip our children with education and skills for tomorrow. In this budget we have significantly increased our funding for highways and our contributions to municipalities. In this budget we have provided more support than ever for our health care system.

Our taxes remain fair compared to other provinces, with our personal income tax rates and social service tax rates being the second-lowest in the country.

Starting from a deficit of $1.2 billion in 1986-87, we have delivered the first balanced budget in a decade.

Mr. Speaker, our economy is strong, our budget is balanced and we have the fiscal resources to weather any squalls. I trust every British Columbian is as proud as I am this day.

MR. CLARK: At the outset I would like to thank the Minister of Finance and Corporate Relations for providing us with an advance copy of the budget. As is the custom, I will be adjourning shortly. My major remarks will be made tomorrow. I would like to make some very brief remarks.

This budget — as the minister himself said just a minute ago — must be viewed in the context of the last few years of Social Credit administration. In the last two years we have seen tax increases of $500 million on middle-income people. We have seen deep cuts in virtually every government program over the last few years of Social Credit. Over 10 percent of the civil service left through early retirement last year alone as a result of the policies of this government, and they have not been replaced.

Over the past few years we have seen a reduction in Environment staff of 20 percent. We have seen a dismal record of enforcement. We have seen a Premier visit Alaska but not visit the west coast of Vancouver Island. Now the government expects British Columbians to believe that the environment is a priority for this administration.

In education there have been per capita funding cuts in the last five years of 6 percent in real terms. Now the government expects British Columbians to believe that education is its number one priority. In universities we have seen 8,000 to 10,000 students turned away last year due to the lack of space. We need 15,000 to 20,000 post-secondary spaces to bring us up to the national average. We have seen the elimination of a university in the interior — in Nelson — in recent years. Today the government expects us to believe that post-secondary education is a priority.

In housing we have seen neglect, poor planning and underfunding by successive Social Credit administrations, which has created in many respects the crisis we now have in the lower mainland. Now the government expects us to believe that housing is a priority.

We have a government without a plan and without a vision. It is erratic and unstable. There have been wild policy swings from one year to the next, from cuts one year to promises of spending increases now. What we really have with Social Credit is a kind of yo-yo economics.

It is clearly a desperate attempt to buy back favour with the electorate. The problem is that they have no credibility. That is why this budget will fail to be the salvation that they think it might.

Tomorrow I will deal in more detail with substantive criticisms and concerns I have about the erratic policy swings that we have seen with this administration. As well, I will deal with what can only be described as fictional and exaggerated revenue projections contained in this budget.

I move adjournment of the debate until the next sitting of the House.

Motion approved.

MR. ROSE: Mr. Speaker, I rise on a point of order concerning the accuracy of a document tabled by the Minister of Finance earlier today. When our researcher phoned and asked for copies of the financial statements of revenue and expenditures, he was told that they were withdrawn because of an error in printing and wouldn't be available until next week. I would like to ask the Minister of Finance whether this is the copy with the misprint or the accurate one.

HON. MR. COUVELIER: To the best of my knowledge, it's the accurate one. The misprint, as I understand it, was a one-figure typo which was caught after printing. But I must commend the staff: when you look at the thousands and thousands of

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figures that are reproduced in the document, a typo of one figure strikes me as an outstanding record.

Introduction of Bills

Hon. Mr. Couvelier presented a message from His Honour the Lieutenant-Governor: bills intituled: Budget Measures Implementation Act, 1989; Home Owner Grant Increase Act, 1989; Income Tax Amendment Act, 1989; Land Tax Deferment Amendment Act, 1989; Motor Fuel Tax Amendment Act, 1989; Property Purchase Tax Amendment Act, 1989; Public Trustee Amendment Act, 1989; Social Service Tax Amendment Act, 1989; Tobacco Tax Amendment Act, 1989.

HON. MR. COUVELIER: Mr. Speaker, these nine bills implement the budget measures that I announced earlier today. In moving first reading of each of these bills, I will state their primary purpose.

Bill 5, Budget Measures Implementation Act, 1989, establishes a social housing special account. It provides for a special payment from the budget stabilization fund to the general fund, converts several special funds to special accounts under the general fund and clarifies several administrative measures.

Bill 6, Home Owner Grant Increase Act, 1989, increases homeowner grants for 1989.

Bill 7, Income Tax Amendment Act, 1989, introduces a renter's tax reduction for low-income renters.

Bill 8, Land Tax Deferment Amendment Act, 1989, lowers the age at which homeowners can defer property taxes to 60 from 65.

Bill 9, Motor Fuel Tax Amendment Act, 1989, extends the use of coloured fuel in the mining industry and makes a series of administrative changes.

Bill 10, Property Purchase Tax Amendment Act, 1989, introduces property purchase tax relief for purchasers requiring high-ratio financing and enacts a series of administrative changes.

Bill 11, Public Trustee Amendment Act, 1989, establishes a special account for the office of the public trustee.

Bill 12, Social Service Tax Amendment Act, 1989, provides for the exemption from tax of magnetite used in the coal industry and makes a series of administrative changes.

Bill 13, Tobacco Tax Amendment Act, 1989, increases the tax rate on loose tobacco and makes a number of administrative changes.

I now move first reading.

Motion approved.

HON. MR. COUVELIER: Mr. Speaker, I move that the said bills be placed on orders of the day for second reading at the next sitting of the House after today.

Motion approved.

HON. MR. RICHMOND: I rise to thank the minister for his budget and to remind the House that we will sit at the regular time tomorrow, 10 a.m., when we will continue with the address in reply with the second member for Vancouver East (Mr. Clark). I'm sure we're all awaiting that with bated breath.

By prior arrangement with my counterpart in the opposition, there will be no private members' statements tomorrow.

Hon. Mr. Richmond moved adjournment of the House.

Motion approved.

The House adjourned at 3:30 p.m.