[ Page 7131 ]

CONTENTS

Routine Proceedings

Home Mortgage Assistance Program Act (Bill 22). Committee stage.

(Hon. Mr. Couvelier) –– 7131

Mr. Clark

Third reading

Home Owner Grant Increase Act, 1989 (Bill 6). Committee stage.

(Hon. Mr. Couvelier) –– 7136

Mr. Clark

Mr. Rose

Mrs. Gran

Mr. Loenen

Ms. A. Hagen

Third reading

Income Tax Amendment Act, 1989 (Bill 7). Committee stage.

(Hon. Mr. Couvelier) –– 7140

Mr. Clark

Ms. A. Hagen

Third reading

Land Tax Deferment Amendment Act, 1989 (Bill 8). Committee stage.

(Hon. Mr. Couvelier) –– 7143

Mr. Clark

Third reading

Motor Fuel Tax Amendment Act, 1989 (Bill 9). Committee stage.

(Hon. Mr. Couvelier) –– 7145

Mr. Clark

Third reading

The House met at 10:06 a.m.

Prayers.

Orders of the Day

HON. S. HAGEN: I call committee on Bill 22, Mr. Speaker.

HOME MORTGAGE ASSISTANCE PROGRAM ACT

The House in committee on Bill 22; Mr. Pelton in the chair.

Section 1 approved.

On section 2.

MR. CLARK: Mr. Chairman, I don't want this thing to move with unseemly haste while we're preparing in the morning for a long day ahead. I wonder if the minister could begin by explaining this section in particular and whether this differs from the second mortgage program that existed before. What exactly is new here?

HON. MR. COUVELIER: I'd like to point out to the members of the House that there's nothing wrong with unseemly haste if the initiative is well researched, documented and justifiable.

Section 2 would enable the Lieutenant-Governor in-Council to prescribe regulations to establish the program. We will be issuing, under this bill, secured loan guarantees to eligible applicants. The new program improves and replaces the B.C. second mortgage program and will be delivered by private sector financial institutions. Individuals will be able to apply for both their financing and the loan guarantee at the same time.

One of the major benefits of the program is that it offers 95 percent financing. The most significant structural change, of course, is that by merging both the first and second mortgage under the one instrument, we will be able to shorten the time-frame between the time of the application for the second mortgage under historical practices and its final approval. As the hon. member is aware, in the past practice there was a hiatus period in which bridge financing frequently had to be arranged by people who desired one of the old second mortgage applications. This should speed up and simplify the process and have the effect of reducing legal costs in completing a real estate transaction that's applicable under this act.

MR. CLARK: There are some efficiency gains in transaction-costs reduction, presumably. In terms of the private sector loan guarantee as opposed to the money coming directly from the government, in the past in the second mortgage program was the money physically lent by the provincial government, or was it a form of guarantee for the private sector institution?

HON. MR. COUVELIER: It was actually lent. So we funded, on approval.

MR. CLARK: In this new program, there will be no money lent. It is simply a guarantee, and the money comes from the private institution. I wonder whether there is any increased risk associated with that, given that in the past presumably the money would be lent by the province and the risk associated with that would be adjudicated by the province. Now the private sector institution will be adjudicating the risk, but they don't have any risk. We're the ones who pay and take the risk; they're the ones who decide on whether we take the risk or not.

What's the vetting process whereby the province, as the guarantor of the loan, is assured that there's some fiduciary responsibility or assurance that the private sector is not simply giving the second mortgage or the guarantee because they don't have any risk associated with it? Is there not a chance that they'll be more lax in terms of scrutiny of the loan because the province is guaranteeing it? If the province was lending the money, presumably they would be more cognizant of the risk associated with it.

HON. MR. COUVELIER: No.

MR. CLARK: It's nice to hear the minister give brief answers, but that seems to be slightly briefer than what might be required. I don't want to belabour it, because I think it's not a huge issue, but I want same assurance that there is a process by which we're protected in the private sector decisions that the province is guaranteeing. It always concerns me that we allow the private sector to make a decision where the public has to pick up the tab.

Perhaps the minister could give me some assurance that that won't result in lax scrutiny on the part of the Crown. In the past we approved them all anyway, under certain guidelines, so that we didn't adjudicate them in a tough banker-like manner, because it was really just a routine matter. We approved them all anyway, so the private sector approving them all anyway won't result in any difference. Is that really the case?

HON. MR. COUVELIER: Yes, Mr. Chairman.

MR. CLARK: So is the minister saying that under the second mortgage program, we never turned down anybody for the second mortgage, provided they qualified? We never did a credit check or any of those normal banking things?

HON. MR. COUVELIER: No, Mr. Chairman.

MR. CLARK: I want to get this answer right. No, we didn't do any credit checks, or yes, we didn't do any credit checks?

[ Page 7132 ]

HON. MR. COUVELIER: No, Mr. Chairman, we didn't consistently rubber-stamp every application; some were rejected. The member said that it wasn't a big issue, so I was trying to facilitate the issue with short answers. I've often been criticized for long answers, Mr. Chairman, and I'm trying to oblige the House here.

It's the government's belief that the private sector can do the job of monitoring and adjudicating applications much more effectively than government can. We on this side of the House happen to think that while we can manage public affairs fairly well, when it comes to bringing discipline into the normal business practices as it relates to support programs, government frequently isn't the most effective provider of that kind of discipline. Therefore the private sector has a unique role to play. We're very proud of this program, because it does wire the private sector into that specific requirement.

[10:15]

In other words, we believe that by merging the two loans into one single document, we capture the opportunity for the private sector to administer it more effectively than we do — and more equitably, in the sense that it's arm's length from government. Therefore any suggestion of manipulation is absolutely absent, and the normal disciplines of the marketplace would prevail. Given that we have that philosophical belief and the conviction that historically this approach has worked best, then it seems propitious for us to take this opportunity to merge both those interests and desires.

We believe that by virtue of being part of one document the administration will be simpler. It will have a degree of consistency that would be supportable, and it clearly would be in the interests of the applicants to have the assurance that these applications will be dealt with expeditiously and in a totally arm's-length relationship with government.

As to risk or exposure, we have the belief that the private sector, by virtue of having one document and one loan, in effect, to administer, will be applying the same discipline to our portion of the guarantee as they would be applying to their own. At the same time, In order to give comfort as to just how the collection of bad debts might be handled, we felt that when a loan gets to the point that it is seriously in default, the government would once again step in and assume its obligations of recapturing outstanding balances. That also, in our judgment, seems a sensitive thing to do.

If the House just thinks back to the volatility in the real estate market that has historically prevailed, it's not inconceivable that there might be a universal downslide in real estate values, in which case it might be incumbent upon all levels of government to impose some sort of safety net, some sort of comfort to homeowners, that would prevent the loss of their homes. It seemed prudent to us; in those circumstances the government has a proper role.

This is a government which describes itself as sensitive not only to the needs of the marketplace but also to the human side of this equation. Homeowners must have some comfort that government is available to react to situations in the marketplace if they justify government intervention. On the other hand, in good times government intervention should not be necessary in the marketplace, and its rules and guidelines should be the norm of the day.

All in all, Mr. Chairman, we're very pleased with this initiative' and think that it's an imaginative step forward and at the same time still provides us with the capacity to deal with any universal downslide of the economy that might justify government intervention to protect the interests and property rights of homeowners.

MR. CLARK: I'd never want to accuse any member of the House of being philosophically consistent, but it seems to me you can't argue that the normal discipline of the marketplace will prevail when the government is guaranteeing home mortgage assistance; in other words, the public is taking the risk. The problem I have just generally with the notion is that private sector monitoring is fine — the minister says how much better the private sector is in terms of monitoring this risk — but the public is taking the risk. Private sector monitoring, public risk. That trend concerns me somewhat.

I don't have any problem dealing with the marketplace. I think the marketplace works very well. I think the banks represent their interests as prime lenders very well. The problem is: who represents the Crown's interest when we are guaranteeing the loan? You're saying the banks are going to represent the Crown's interest in guaranteeing the loan. I think that's a big assumption. It concerns me that they will view this as free money from the government, and the banks will then apply that to the loan routinely. There's no market test. The Crown is guaranteeing a debt. You've therefore entered the marketplace, and you're skewing the marketplace. We may want to do that for good public policy decisions; but if we do, it seems to me that the Crown has an obligation to monitor the debt and not have the private sector do it.

As I say, I think by and large we've rubberstamped them in the past; we haven't monitored them in a tough manner. So it may well be that the private sector will in fact be no real change, because they'll rubber-stamp it. We used to rubber-stamp it. But the principle of it concerns me somewhat.

Could the minister tell me roughly what the default rate was under the old second mortgage program so that down the road we can see whether the default rate is higher with private sector monitoring than it would have been with public sector monitoring?

HON. MR. COUVELIER: We don't have that exact figure here, but going by memory, we believe it's less than 5 percent.

Section 2 approved.

On section 3.

[ Page 7133 ]

MR. CLARK: Just for the record, this allows the government to make regulations. I understand that we don't want to cast into legislation specific dollar values, because obviously those change over time. Perhaps he could tell us specifically what the regulations will be at this time — for the record — recognizing that the Lieutenant-Governor-in-Council may make changes to those regulations.

HON. MR. COUVELIER: We announced in the budget that homes purchased for $100,000 or less would qualify for the new program. Under the second mortgage program, the old limit was $85,000. The regulations will set eligibility criteria. In other words, to qualify for the program, an applicant will have to be 19 years of age or older and be classified as a B.C. resident. Additionally, the applicant cannot have received previous assistance under this program or its predecessor programs.

Sections 3 to 5 inclusive approved.

On section 6.

MR. CLARK: Maybe I could ask the minister first to explain the purpose of section 6, which is, I guess, distinct from the sale of the second mortgage program. Maybe he could tell me why we didn't need legislation to sell the loan portfolio — the second mortgage program — but apparently we do to sell the loans given under these four.... Am I incorrect on that?

HON. MR. COUVELIER: As the bill states, by virtue of small portions of the old second mortgage program being wrapped in different bills or acts, it was necessary for us to make this amendment in order to legalize the total capturing of the old second mortgage program in all its aspects.

As the member knows, this enables us to complete the sale to the Bank of Montreal of the assets held by the Ministry of Social Services and Housing as they relate to the second mortgage program. We made that sale of approximately $275 million and made the announcement some months ago after a competitive tendering process. The completion date for that transaction is June 22 of this year.

MR. CLARK: I got that wrong. This is, in fact, legalizing what the government has already announced; it doesn't do anything beyond that. The minister is nodding his head, so that's correct.

Maybe we could just ask a few questions about that then. The $275 million, what are the liabilities associated with that? Is there any net gain, any profit?

HON. MR. COUVELIER: No, Mr. Chairman. This government is very proud of the fact that it's able to sell a dollar and get a dollar in exchange.

MR. CLARK: So there's not a penny in profit? It seems to me that the value of loans You can sell loans, and the minister and the government have done that with BCEC. Usually there's a profit associated with that. Why would there be no profit in this regard?

First of all, before we get into profit, maybe we can just make sure there are no liabilities. What was the actual value of the money lent? Not the book value, the actual value. What was it that you sold for $275 million?

HON. MR. COUVELIER: I'm a little bit confused by the question. It's a dynamic process; it changes as we open the mail every morning. Payments are made on old mortgages and new mortgage applications come in, so the figure is constantly moving. The value of the loans at the date we advertised and tendered them was $275 million. They pay interest, so there is obviously no interest in anybody overbidding for the value of the loans, given the fact that the interest rate, etc., are all set. That's a strict arithmetic figure.

In a similar sense, of course we weren't prepared to sell the loans if we had to discount them; there would be no public advantage to that. So it was a straight transaction. The effect of it is to increase the cash available to government, which we've acquired, and to put it to good use, as in our daily cash management program.

MR. CLARK: So this doesn't add anything to the public coffers, but it reduces our debt. The asset and the liability come off. It's much like the BS fund actually; it comes off both ends, in a way.

Interjection.

MR. CLARK: The minister is asking what the BS fund is. I would have thought that he would be quite familiar with that by now.

I understand the $275 million value of the loan, presumably that's the value the government assigned to the loan after writing down defaults. What I'm trying to get at is: how much did you write it down in order to get the current value of the loans? What was the total loan package at the time you lent? How much did you write it down to get the value? I'm not accusing anything nefarious. You said 5 percent were defaulting, so those loans aren't worth anything. This is where I would like some guidance. Perhaps if it's 5 percent in a broad sense, then the actual money lent out would be roughly 5 percent more than that $275 million. Is this logic correct, or can the minister clear it up for me?

HON. MR COUVELIER: I will do my very best to clear it up. It's important that all members understand this bill.

The sale was for active loans currently not in arrears, and therefore that value is quantifiable and the bank assumed the management of them. The portions of the portfolio that were in arrears we retained, we did not transfer. While we don't have that exact figure here, it is our estimate that what was

[ Page 7134 ]

retained might be in the range of $10 million to $20 million.

To expand on that, the ministry is going to assume the management and collection responsibilities for a variety of these different loans that are outstanding throughout all levels of government. That's a housekeeping decision which we will be implementing in the months ahead and which won't require legislative change; it's merely a question of transference of the function. The objective would be to get in one ministry the expertise required to monitor collection of accounts receivable to government.

MR. CLARK: So you sold the good loans, but under such restrictions that they weren't worth anything over and above the book value, essentially, and you kept the bad loans. In the future, with this bill, new loan guarantees will be issued by the private sector. At what point do the bad loans — the 5 percent, 10 percent that presumably will be bad; I suspect it might be slightly higher, given that this private sector is allowed to grant government guarantees — become a government liability, like this $10 million or $20 million? When does it move from the Bank of Montreal to the province of British Columbia?

[10:30]

HON. MR. COUVELIER: The new loans are the responsibility of the lender to administer, follow through and pursue the collection of. In the failure of that, they can come to us for our portion of the guarantee, which then would result in that particular loan coming under the administration of the group that will be contained in the Ministry of Finance to pursue these collection efforts. So the prime lender assumes, by virtue of it all being in one document, the total responsibility to administer, collect and pursue until the point at which they are going to have to take foreclosure action. With that eventuality, unpaid balances to a maximum of what we offered as a guarantee would revert to ourselves for collection.

MR. CLARK: Let me get this right. There is a loan. The bank loans $90,000 and there is a $10,000 second mortgage or whatever, essentially a guarantee, by the province to bring it up to $100,000, say. The loans falls in arrears and the bank proceeds with foreclosure. The bank forecloses on the home, the property reverts to the bank, the bank puts it up for sale and sells it at a loss of, say, $5,000. At what point are the interests of the province...? How much of that do they get? In other words, if there is a 5 percent loss, is that 5 percent shared –– 5 percent on the principal lent by the bank and 5 percent of the second mortgage held by the province — or does the bank get all of it and the province pick up the tab?

HON. MR. COUVELIER: Excellent question, except that in the example given there is a 5 percent down payment required. So in the example there would be no loss, no forfeiture, no default, and therefore peace and harmony reigns in the world.

MR. CLARK: Okay. Let's assume that there is a 10 percent down payment and the value of the property falls by 20 percent, so there is a 10 percent loss that has to be absorbed by the lenders. Does the province lose 10 percent of their money and the lender 10 percent, or is there some disproportionate sharing?

HON. MR. COUVELIER: This is a second position after the first position, so the bank obviously would exercise their guarantee; the point being that that defaulted application then would come back to us for further pursuit.

Interjection.

HON. MR. COUVELIER: Well, the member must bear in mind that the document is in the name of an individual who, presumably, is still active in our society, so the normal business practices would flow in that event.

MR. CHAIRMAN: The second member for Central Fraser Valley would like to make an introduction.

Leave granted.

MR. DE JONG: It's a great pleasure for me to introduce to the House this morning 44 grade 10 students from Abbotsford Christian School, who are accompanied by their teacher, Martin Gelderman. I ask the House to give them a cordial welcome.

MR. CHAIRMAN: On section 6 of Bill 22, the second member for Vancouver East.

MR. CLARK: This gets to the heart of the questions I've been raising. I understand the role of government guarantees. My colleague reminds me that student loans are similar in some respects; we're guaranteeing them. The bank always gets its money. They're the prime lender, and we're in second place. The member's nodding; the banks always get their money. It rings true for used car dealers as well, I'm sure.

The problem I have, though, is that the government is saying that the province is in a secondary position, and therefore that's when our guarantee would apply and the bad debt would go to the province. But the decisions on when to lend the money go to the bank. We're no longer in the decision-making capacity; it's the bank that makes the decision. Surely what you've done, then, is invite the bank to be more lax in their lending requirements. To encourage home ownership may well be a laudable goal, but what's happened is that the banks now can assume that Let's say it's a $100,000 home, roughly $10,000 of which can now come from the government to this program. That's 10 percent. The banks now can lend money to an individual and not worry about the property falling in value by 10 percent or the down payment, which presumably can be absorbed by the individual. A small down payment of 10 percent and 10 percent by the Crown

[ Page 7135 ]

means that the bank is insulated from a 20 percent fall in the market value of the home. But it's the province that's on the hook for that fall.

As I understand it, the rule of government guarantees is to enable more people to purchase homes. But by privatizing the loans, and allowing the bank to make a decision, it seems to me that there's a built-in conflict of interest with respect to the bank's position of being the only people to decide on the role of government guarantees. Certainly in principle, I think that the previous system, where the province was not only the supplier of the money but the adjudicator of the second mortgage program, was a much sounder position. I understand the administrative efficiencies, but it seems to me that the principle of allowing the bank to apply a government guarantee insulates the bank from more risk and puts the province in a more exposed position. Whereas in the past our defaults or liability with respect to those $275 million worth of loans or above was in the neighbourhood of $20 million, I would be very surprised if our liability in the future, particularly in the light of a potentially volatile market for real estate, won't expose us even further under this program, given the private sector administration of the program. I wonder if the minister could allay any of my concerns in this regard.

HON. MR. COUVELIER: Very easily, Mr. Chairman. In the interests of improving his understanding of the bill, the hon. member has overlooked a key element of the bill. The bill very cleverly levers a larger percentage mortgage coverage — 95 percent Clearly there is a higher risk to government in initiating this venture; clearly it will have the effect of broadening the availability of the program to the lower-income segment of the population. Implied in that movement is a greater risk to government, but we willing assume it. That's the point. The point is that government is saying with this program that it has the responsibility, given the instability of the real estate market — the highs, the lows, the wide swings — to meet the needs of those people in the community who need this bit of extra help, if only on a temporary basis. The very philosophical thrust of the bill quite clearly addresses the point the member appears to be criticizing. We willingly assume this obligation, given the instability in the market. We think it's our obligation to provide extra help for those British Columbians who wish to acquire their first home or a home that is presently just beyond the reach of their incomes levels.

This is a higher risk feature — no question. But it does lever out of the private sector a 95 percent mortgage coverage. We think that it's a positive thing. When we introduced the bill, I noticed, the member suggested he was going to endorse it. We'll wait and see. The assumption is that even the opposition agrees that this was an intelligent, sensitive way to put an extra arrow in the quiver of government's arsenal to deal with the housing needs of the people of this province.

MR. CLARK: I just want the minister to be clear that my concern is not so much for the intervention in the marketplace, as the minister knows; it's not so much for the government taking a greater risk; it's with allowing the private banks to adjudicate the risk and removing government's role in terms of accountability, which previously existed under the second mortgage program. It allows the banks to give government guarantees for a percentage of the program. That's my concern. It's not levering more money; it's not giving improved assistance to people to purchase a home; it's the relinquishing of the responsibility of government and allowing the private sector to make the loan guarantee on behalf of the government that puts the risk higher than it might be if we were just interested in enhancing the ability of individuals to purchase a home.

HON. MR. COUVELIER: The member should bear in mind that the traditional experts in this field — CMHC, banks, credit unions — are still part of the exercise, and therefore their discipline is available to us. As I say, we believe that this is the best way to approach the problem, in the interests of simplifying the paperwork, reducing the costs of transfer, and ensuring that government continues to spend public money responsibly, in the sense that we are not interested in creating bureaucracies and creating separate little entities which become self-serving empires. We are interested in making sure the needs of the public are met sensitively and effectively with a minimum of public cost. This clearly meets all of those objectives. It's something that I can't imagine not being endorsed by those of us who are attempting to manage public policy in a way that recognizes the needs of the people we serve.

MR. CLARK: I wonder if the minister could tell us how many people will be laid off — people who used to administer the second mortgage program — as a result of this transference of this responsibility to the private sector.

HON. MR. COUVELIER: It is our intention, once the total program is in place and any surplus staff are identified, to assimilate them throughout the government service. As the hon. member knows, we have been pretty effective managers of staffing levels. As a consequence, we have the flexibility in the existing organization to accommodate minor adjustments that may be required. There's no risk that by this initiative existing public servants will be denied future employment.

MR. CLARK: Can the minister tell the House how many people work in the branch of his ministry that deals with the second mortgage program who are likely to be reassigned as a result of this initiative? The minister has gone to great lengths to say what the efficiency gains will be. Clearly there are some administrative efficiencies with respect to purchasers. But presumably there are bureaucrats at the moment who are rubber-stamping, if not adjudicat-

[ Page 7136 ]

ing, the second mortgage program. I wonder how many of those people exist and will be reallocated to other functions.

HON. MR. COUVELIER: We calculate that after all of the necessary accommodations are found in terms of transferring responsibilities and fixing them, out of a total of maybe 55 employees there may be something in the order of ten who might be reallocated to positions in other ministries.

Sections 6 to 9 inclusive approved.

Title approved.

HON. MR. COUVELIER: Mr. Chairman, I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 22, Home Mortgage Assistance Program Act, reported complete without amendment, read a third time and passed.

HON. S. HAGEN: I call committee on Bill 6.

HOME OWNER GRANT INCREASE ACT, 1989

The House in committee on Bill 6; Mr. Pelton in the chair.

On section 1.

MR CLARK: I wonder if the minister could tell me how the government arrived at $50.

[10:45]

HON. MR. COUVELIER: Mr. Chairman, the sum was intended to address the issue of rising property taxes around the province. The bill attempted to recognize that settlements — particularly in the education sector of property taxation — had risen over the years. As a consequence, in deference to our longstanding philosophical position that home-ownership is a cornerstone of government policy and an ambition that all British Columbians might have — access to that privilege of life — we thought that we should do all in our power to minimize the tax imposition on property owners.

The increases cover the majority portion of the average property tax increase as a consequence of the school settlements. It was our best effort to remain sensitive to the needs of the majority of British Columbians and minimize the cost to them of some of these settlements that were negatively impacting their property tax levels.

MR. CLARK: When was the last time the homeowner grant was increased?

HON. MR. COUVELIER: The last increase was in 1979 for the basic homeowner grant of $380 and in 1980 for the homeowner grant for seniors, the war veterans' allowance and the handicapped.

MR. CLARK: I'm just scribbling some numbers. If we had kept up with inflation, in the nine years the increase in the homeowner grant would have been about $200. As a rough estimate, about $200 would have kept pace with inflation. So the minister will agree that this is a good move to try to address some problems of property taxes, but it hasn't come close to dealing with.... Homeowners are not even close to getting the level of homeowner grant that they got nine years ago under a previous administration. In fact, the grant would have to be increased by roughly $200, or another $150, in order to bring us back to the 1980 level, even though property taxes have risen dramatically in the last few years.

HON. MR. COUVELIER: Well, Mr. Chairman, now we get to the basic issue of whether a government really believes that local decision-making is better than centralized decision-making. It has been a longstanding principle of this side of the House that to the extent we can get local decisions made, certainly as it relates to property ownership, we should endorse it and pursue it and nurture it with every fibre of our being. As a consequence, we have consistently attempted to make sure that local decisions do impact local citizens. The anomaly in the last couple of years is that this kind of expected discipline has not been exhibited in terms of tax increases. But were the central government to always provide the safety net for decisions made by locally elected officials, it would insulate them from the consequences of their spending decisions.

Quite clearly, we on this side think there is an obligation to ensure that local decision-making does have a relevance to its local citizens and is sensitive to the needs of those citizens. It therefore follows from that philosophical position that we not — and should not, as a matter of practice — consistently insulate them from those spending decisions. It's important for locally elected officials to maintain their sensitivity to the local citizens' ability to pay. Were we always to provide that safety net, then of course there would be no discipline in the system whatsoever. We on this side of the House don't undertake to prevent local spending decisions to insulate local citizens from tax increases.

Our ambition is to get more responsible decisionmaking at the local level, so our past practice in terms of administering this homeowner grant program clearly was intended to do that. Up until the last year or two, in the education sector I think it has done that, and we're quite proud of it. Nevertheless, given the length of time since the last increase, and given the particularly large increases in the education sector, we felt it incumbent upon us this year to address this need, balancing both of those ambitions.

[ Page 7137 ]

MR. CLARK: The minister and I could get into a very interesting discussion of local autonomy and the role of accountability. It is a vexing question, for example, in terms of giving school boards autonomy to make decisions and the province having to pick up part of that tab. I don't think the government has gone about it at all correctly.

I would also point out again the minister's lack of consistency, although I wouldn't want to accuse him of being the only one in the House to be inconsistent in his answers. The government, of course, has centralized the industrial-commercial tax base and removed it from the ability of school boards and councils to deal with. It has heaped more and more of the burden onto local school boards, so the school boards have been responsible for acquiring certain programs by the provincial government and therefore having to pick up increased costs, like the institutionalization and others, and passing it on to local school boards.

You can't have it both ways. You can't say on the one hand, "Let's make local school boards autonomous and then accountable for the tax increases," and say on the other hand: "We're going to take away some of their taxing powers and at the same time give them more obligations to fulfil on the part of the mandate given to them by the provincial government." The government has been inconsistent. It has played a political game, which has put school boards and municipalities between themselves and the people — quite cleverly, I think — so the public can attempt to voice their opposition to governmental concerns on school revenue to the school board rather than to the provincial government. I think it has been a clever political strategy. To the extent that the government is still sitting there, it has worked, but it's not sound public policy. This homeowner grant increase does not go nearly far enough in addressing the inequalities that have built up as a result of this administration.

While the minister can make a speech about autonomy and accountability, in reality it's been a clever political ploy to try and put the school boards in the bite, so to speak, and let the province off the hook. I think the public, by and large, have seen through it, and we'll see in the coming months whether they continue to see through it.

This is a $50 increase, and we certainly have no problem supporting it, but it doesn't go even close to what it would be if we had kept pace with inflation and alleviated that property tax and school tax burden that homeowners are faced with. In my view, homeowners will rightly blame the provincial government and not school boards and municipalities for those increased taxes.

HON. MR. COUVELIER: I must offer some short explanation and expansion on the comments of the hon. member opposite.

The homeowner grant was never intended — as pointed out earlier, at length — to cover the increased costs of home-ownership. If it were intended to do that, there would be no discipline on locally elected officials to temper their spending decisions with any sense of discipline.

The argument was made about some sort of cleverness on government's part as it related to education costs and the role of school boards vis-à-vis the provincial government. I have to make the point that the provincial purse, general revenue, pays between 75 and 80 percent of the cost of education in this province, not the taxpayer. The property tax payer is only covering 20 to 25 percent of the cost of education. Even though we have an outraged property owner who's getting his tax notices this year, he should bear in mind that out of general revenue of the province comes a minimum of three-quarters of the cost of education. So to allege that there is some sort of gamesmanship by the provincial government in transferring education costs onto the shoulders of the taxpayer — nothing could be further from the truth. The fact of the matter is, three-quarters of it comes out of general revenue. All we're saying is that the local taxpayer must be aware of what the local school board decisions are doing vis-à-vis their property taxes.

I suspect the opposition will endorse this bill, despite the puffery we've been hearing in the last few minutes.

MR. ROSE: Speaking of puffery, I haven't heard so much self-righteous claptrap for a long time.

I don't know what my hon. friend had to say about the homeowner grant. I realize it's a difficult problem, because it operates in different ways regionally. The fact is that the lower Island and lower mainland school districts are severely disadvantaged by the fact that the homeowner grant does not deliver the amount, in terms of school taxes, that it does in areas of lesser house prices. The fact is that Vancouver, Victoria, Coquitlam and others are about $250 to $300 short in terms of financing schools, and they have to make it up out of property taxes, whereas little districts such as Armstrong, Enderby and Princeton actually credit the municipal taxes by about $150 from the homeowner grant.

The facts are clear. There has been no increase in the homeowner grant until now.

A former leader of this party, one time when I was pontificating on a subject, said: "Never give a guy hell for doing what you wanted him to do in the first place." We don't intend to do that, because we wanted you to do it in the first place. We think this is important. I realize, though, that if you keep on doing it, it's going to be skewed even more, and there will be a greater benefit to the rural areas, which I think is a good thing as far as this government is concerned, since it has a very strong base in the boonies; we understand that over here.

Something has to be done, I think, to make certain that there is equity here. If the homeowner grant falls short in a number of lower mainland areas of high house prices by $250 or more per year and it creates a credit in some other areas, it certainly doesn't treat British Columbians equally A lot of people have had their houses for years, they're not in the speculative

[ Page 7138 ]

market, but their assessments have gone up and their tax delivery falls far short. But to suggest that this is somehow going to help discipline the taxpayer or the school boards is an interesting bit of logic that escapes me completely.

HON. MR. COUVELIER: I'll do my best to explain. As the hon. member noted, he didn't hear all the comments of his colleague. I'll excuse him for that.

Nevertheless, the fact of the matter is that had we been as devious as the hon. member wishes to suggest in terms of how we might deal with homeowner grants and their application, the simplest political solution would have been for us to have systematically reduced our contribution towards education and systematically increased the homeowner grant. If it's crass politics we're talking about — which, of course, this side of the House have never exhibited; we've always managed these issues very sensibly and responsibly — then that's how we would have done it. We would have annually increased homeowner grants, made heroes out of ourselves and obviously won the support of the taxpayer, and on the other side just reduced the percentage of school costs we traditionally pay. But we've maintained that percentage; as a matter of fact, we have increased it.

Clearly we're not playing politics, Mr. Chairman. We are genuinely attempting to maintain a balance between local responsibility for spending decisions and the province providing some comfort to those people who can no longer endure some of those local property tax and expenditure decisions. The homeowner grant increase this year — the hon. member would have missed this — approximates on average the increased cost of the education component of the property tax bill.

MRS. GRAN: I just can't miss this opportunity without asking if the opposition House Leader is calling communities like Langley and further out "the boonies." Where do the boonies start? Do they start at Langley or beyond the mountains? I'm really quite shocked to hear a member of the opposition talk about communities in this province in that particular manner. The people who live on the lower mainland enjoy a lot of benefits that people who live in "the boonies," as he calls it, don't enjoy. I just want to remind that member that the homeowner grant that gives them a little less to pay in taxation perhaps makes up for a lot of things they don't have that we on the lower mainland take for granted.

[11:00]

Interjection.

MR. ROSE: I'm not going to be distracted by these lurid personal attacks. I'm not going to rise to that red-baiting over there. I'm far above that sort of behaviour. As a former resident of Langley, I can report that it was a wonderful place to live.

Interjection.

MR. ROSE: I realize that the hon. member feels that a horse is a girl's best friend. She said it in the House a number of times, but she's not going to saddle me with that remark.

I'd just like to suggest to the Minister of Finance that our concern about it — as far as the lower mainland areas and the more urban non-boonie areas — is that there hasn't been any raise in the homeowner grant. This is the first one in six years. It hasn't even kept up to inflation.

At the same time, commercial and industrial property has dropped in terms of its assessment and taxation load, and the reason that you're giving 70 percent to 80 percent provincially is because you confiscated the machinery and industrial taxes from the local areas. We all know that. I know these were done for good and sufficient reasons, because you wanted to take all of the machinery and industrial benefits and spread them equally across the province. There are all kinds of euphemisms that can be used for this. The fact is you haven't touched the homeowner grant until this year for some six years, and I realize your problem. Your problem is that you distort it even more — in terms of its delivery — if you had done it each year. But that doesn't help the homeowners who are my constituents and my neighbours. There is a load on those taxpayers, frequently disproportionate to their ability to pay, because many of them feel that it wasn't their fault that the neighbourhoods around them resulted in higher house prices. It's a very serious problem to them.

We compliment the minister for doing what he's done. We even urge him Godspeed to do more. But please don't tell us you've done something for our own good, when we know that there might be — not crass political reasons — other justifications for what he's doing.

HON. MR. COUVELIER: Mr. Chairman, I won't be distracted with sugar-coated pills here. It's very important that our tax structure be competitive with other competing jurisdictions who are attempting to attract industry. We were the only jurisdiction still taxing machinery and equipment, and our predecessor government made a determination, in the interests of ensuring that we had a continued heavy injection of investment in the province, that we must have our tax system competitive.

In this respect, I must point out that sales tax is still applied on machinery and equipment, and it's not done in other jurisdictions. We're still not completely competitive, but to the extent that we could manage the issue, we did — over something like four years — work on that machinery and equipment exemption, but as we should have. If we hadn't done that, I'm quite confident that the economic recovery that we've enjoyed since we've taken office would not have been at the level it is. It clearly was the proper thing to do.

We have covered off the loss of machinery and equipment to local taxing authorities by increasing

[ Page 7139 ]

provincial contribution. That's why we're up to 75 percent to 80 percent of the budget now; 75 percent to 80 percent of the cost of education is paid out of general revenue. We have covered off that loss of revenue to local government by exempting machinery and equipment. Contrary to the member's view, we have addressed the very issue that he's speaking to.

[Mr. Rogers in the chair.]

MR. LOENEN: Mr. Chairman, I'd just like to get into the debate. We heard from the members opposite that we're at least $200 shy of what we ought to be doing in homeowner grants. I just want to say on behalf of my constituents that the people in Richmond are immensely grateful for the $50 increase. I've stood in this place and said many times that because of the increased values and assessments there has been an undue shift to the lower mainland. We are aware of that, and we are addressing that. I'm glad that the Minister of Education (Hon. Mr. Brummet) has seen fit to address some of these concerns and listen to them.

Through you, Mr. Chairman, I want to ask the minister not to heed the advice of the members of the opposition. They failed to point out that we as a province still continue to fund at least 80 percent of the total education costs. A lot of the additional costs we have seen are a result of the freedom that this province gave to the various local boards. If they wanted to exceed the allotments that were deemed to be necessary for a good education by the Ministry of Education, they have the freedom to go to the local taxpayers for additional funding.

MR. CHAIRMAN: Order, please. Committee reading on a bill is a pretty narrow scope. I must ask the member to address his remarks to section 1 of this bill. Broad, general discussions about other levels of funding really aren't in order during this section Perhaps that was in order during second reading but not now, so please just address your remarks to this section.

MR. LOENEN: Thank you, Mr. Chairman. I was responding to a discussion that took place before you occupied the chair. I shall not be long, but I do want to point out that the Ministry of Education increased the basic level of participation from 55 to 57 percent What that means for my community is that whereas they would have been faced with a very, very substantial increase in the taxes on homes, on residential properties, that go towards education, this year the increase is very minimal, and the homeowner grant has a lot to do with that. That, in addition to the shift from 55 to 57 percent, means that in my community the increase that would have gone to the homeowner has been kept to an absolute minimum. I think the members opposite ought to recognize that. I know the minister knows that, but I do want to say that for the public record.

MS. A. HAGEN: Mr. Chairman, this is known as the repent bill, and the members on the opposite side of the House have been repenting this morning. The second member for Richmond just repented on behalf of his constituents. Although this grant is surely welcome, the cost that his constituents in Richmond are bearing is considerably increased, and I'm not sure whether that $50 will be enough to relieve their pain.

One of the things I want to ask the minister about is the duration of this increase. It's my understanding that there is an announcement to the schedule of the homeowner grant statute each year, and that schedule has not been altered since 1979-80. So this is the first increase in eight years. But there is some concern abroad, because of the way in which this act has been promoted, that we're looking at an increase for one year only. I would like to ask the minister to clarify, in fact, the status of the schedule and the duration of this increase. Is this a one-year repent schedule or will we be looking at this or better in the next session of the Legislature?

MR. CHAIRMAN: That's actually future government policy and therefore out of order, but the minister may wish to speak to it.

MS. A. HAGEN: Mr. Chairman, I certainly am asking for clarification of the message that went out with this bill. It was for one year only. The message implicit in that to the beleaguered taxpayers of the province is: "This is a repent bill; this is something that's in place for one year; don't look for any protection for longer than that time." I think that's a fair question in committee stage of this bill for the minister to respond to.

HON. MR. COUVELIER: I was interested in the member's comment or introduction that there is great concern abroad. I hope offshore people don't get too excited about such issues.

Interjection.

HON. MR. COUVELIER: Nevertheless, the fact of the matter is that we want to ensure that this issue is visited annually. We therefore designed the bill in this way so that it does have annual attention.

Sections 1 and 2 approved.

Title approved.

HON. MR. COUVELIER: Mr. Chairman, I move that the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair,

[ Page 7140 ]

Bill 6, Home Owner Grant Increase Act, 1989, reported complete without amendment, read a third time and passed.

HON. S. HAGEN: Committee on Bill 7, Mr. Speaker.

INCOME TAX AMENDMENT ACT, 1989

On section 1.

HON. MR. COUVELIER: Mr. Chairman, I'd like to move an amendment to section 1 standing in my name on the order paper.

On the amendment.

[Section 1., in the proposed section 4.2 (5) (b) by adding "the spouse and" before "each dependant".]

MR. CLARK: Sorry, Mr. Chairman, I am just getting my material together.

I wonder if the minister could explain the purpose of the amendment.

HON. MR. COUVELIER: This amendment is to add the category of spouse to the act. As I understand it, that category was omitted from the original bill.

Amendment approved.

On section 1 as amended.

MR. CLARK: This is a one-section bill. It strikes me as a little bit interesting that it's all in one section, but perhaps it makes it easier in committee.

I want to ask a few questions about this very modest initiative, to see if I have this correctly. I am just doing some calculations here. On page 2 of the bill — the minister can maybe follow through with me — I am trying to see, at the margin, who benefits by the renter's tax credit, as the government, of course, is spending probably more money on advertising than it is going to cost them to actually deliver on this promise.

If I read this correctly — and I'd like to go through this with the minister — it's a rather simple formula. It starts with subsection (5) of section 4.2 of the Income Tax Act, and it is basically this: 10 percent of the rent paid by the taxpayer, or $200 plus $200 for dependents. Let's forget about 10 percent of the rent paid, because I can't think of a case where 10 percent of the rent paid would be less than $200, so let's just assume that it is $200 plus $200.

[11:15]

Let's take the lower mainland. It seems to me that rent there is going to be $500 a month or thereabouts, no matter what category you are in, virtually. Even if it's $300 a month, 10 percent of that is over $300, so $200 would be the lesser in many cases, unless one had lots of spouses. Let's say it's $200. You go to section 6, and it says that that amount is reduced by 3 percent of the amount by which the principal taxpayer's net income exceeds $10,000. That's quite simple. If one looks at the current tax system, the net income is no longer any different in many respects from the gross income. It's not like before, when you could deduct a $6,000 personal exemption. It's essentially the same. The minister can clarify any of that if he wants.

For the first time this year, under the new tax regime we have, the net income is virtually the same as the gross income — that's before taxes — unless one has RRSP contributions or a few other things which are deducted. Then you reduce that amount by 20 percent. It's $200 for every dependent minus 3 percent of your income that exceeds $10,000. Then you reduce that by 20 percent. A very simple formula.

Who gets to take advantage of it? Let's take a look. Let's say an individual was making $18,000 a year; for example, a single woman in Vancouver. Let's work on the formula. No dependents, so it's $200. Let's say her rental is about $500 a month. She gets $200 off the top. That's then reduced by 3 percent in excess of $10,000. In excess of $10,000 is $8,000; 3 percent of that is $240. So $200 minus $240. Oops, she doesn't qualify for any money. Sorry, that's too high. If you're making $18,000 a year in British Columbia and you're a renter, you don't get any renter's tax credit. You are not eligible for a penny.

Let's get it lower. Let's say you're making $16,000 a year. Let's be honest here, $16,000 is a pretty poor person. So you're making $16,000 a year and you're a single woman. That's probably a dishwasher.

MRS. GRAN: A single mother.

MR. CLARK: A single mother we'll get to in a minute, because you get $200 for a dependent. Let's say you get $16,000 and you're a single woman, which would be maybe a secretary or lower — yes, about that, a secretary. You get $200 minus 3 percent of everything above $10,000; that's $6,000, so 3 percent of $6,000 is $180. She gets to deduct $20 from her taxes minus 20 percent. As a result of this tax deduction, if she makes $16,000 a year, she gets $16 from the government. That's the renter's tax credit. That's about the margin. If you make $16,500 a year, you get nothing. If you make less than that, you get $10 or $16.

It doesn't benefit anybody but the very poorest citizens. We're not talking about working poor, because I classify that individual as working poor.

Let's see what happens if you're a single mother. How much do you have to earn as a single mother to get no money? I'm just doing this now, so you'll have to bear with me. If you're a single mother making $24,000 a year in Vancouver, that means you get $200 for yourself and $200 for your child, so it's $400 minus 3 percent of everything above $10,000. That's $14,000. By my calculations, 3 percent of that is $420. Oh, sorry, it's $400 minus $420; you don't get anything.

We have to go down. Let's say you made $22,000 a year, and you're a single mother. Then it's $10,000 from $22,000, which is $12,000; 1 percent is $120, so

[ Page 7141 ]

it's $360. Oh, $400 minus $360 is $40, and you take 20 percent off that because you can't declare that. This is only in the first year. You get $30. If you're a single mother with a $22,000 annual income, you get to save $30 on your taxes this year.

I won't belittle $30. For someone making $22,000, it's better than nothing, but it's a very modest initiative. I would suspect that the government's probably spending more money on advertising on this proposal than they are going to pay out to the individuals. It's 20 percent of the amount in this year, and you reduce it by 20 percent; next year, by 40 percent; the following year, by 60 percent; and the following year, by 80 percent. Where a single mother gets $30 this year, next year she gets to deduct $20, the third year $10 and the next year, virtually nothing.

Maybe I could ask the minister if these numbers are correct and what the margin is where you don't get a penny. If you're a single person — woman or man — you have to make less than $16,000 a year to be eligible; if you have one dependent, you have to make less than about $20,000 a year; and if you've got two dependents, you have to make about $28,000 a year — maybe it's $22,000. So if you're anywhere above that number — $16,000 as a single, $28,000 if you've got two kids — you don't get a penny. Maybe the minister has at his fingertips the precise marginal rate where you don't receive a penny from the government.

HON. MR. COUVELIER: Mr. Chairman, the hon member made some assumptions there that I think I should clarify. First of all, there's no reduction in the first year. The hon. member seemed to be deducting 20 percent in year one, and that's not the case; it's 100 percent in year one, with no deductions.

Secondly, he seemed to imply that we were going to be spending more money on advertising than we were on the program — and that's a slur on the integrity of the members opposite. I've got to clear the record, if you'll permit me, Mr. Chairman. The fact of the matter is that we estimate the cost of the program to be $15 million in year one, and we expect that the take-up rate, as knowledge permeates through the community, will be larger in succeeding years. To allege that we're going to spend more on advertising is a shameful allegation, and I have to straighten the record out.

Furthermore, to the suggestion that it won't be widely used, I'd have to point out to the hon member that we estimate that 80,000 British Columbians will be eligible for this program. If the member suggests that it's not enough, I guess I could agree that we would all be delighted if we could make it 100 percent. But let's pause for a minute and think about the consequences of continued government intervention in the natural forces of the marketplace. Given the fact that there is no limit to the deep pockets of government in the minds of some, there is a need, I think, for all citizens to appreciate what a balanced budget means, in terms of flexibility as a government and towards spending programs. Were government to continue to expend sums with this deep-pocket philosophy exhibited by some members opposite, the flexibility available to us to increase spending in the area of education or other social services or health care....

MR. CHAIRMAN: Order, please.

HON. MR- COUVELIER: ...would clearly be at risk.

MR. CHAIRMAN: Order! We're getting off the subject. This is committee stage of the bill. The member opposite stayed within the realm of a specific section of the bill, and the minister is straying a long way from this. This is strictly the details of this section, not second reading. All of these other matters could be dealt with at another time, but not during this period.

HON. MR. COUVELIER: I trust rules for one side of the House will apply to the other.

MR. CHAIRMAN: Absolutely.

HON. MR. COUVELIER: I'm comforted by that assurance; therefore I will take my seat.

MR. CLARK: The specific question, of course, wasn't answered. Can you tell me who's at the margin? As a single person, how much do you have to earn not to get any renter's tax credit, and how much with one dependent, and how much with two dependents? We have to make some assumptions. Let's assume the latter — $200 plus $200 for each dependent — and not 10 percent of the rent paid, because virtually no one is going to qualify for 10 percent of the rent paid. If we assume $200 for an individual plus $200 for each dependent of the taxpayer — and of course, all the rest applies — what is the income level at which you do not get any benefit from this bill?

HON. MR. COUVELIER: For a single taxpayer, the income figure at which no assistance is provided would be something in the area of $16, 500 a year. For a senior couple, the income level of the couple would be something in between $22,000 and $23,000 per year. For a single parent with two children, the income level at which no assistance is provided is about $26,000 a year. Those are ballpark figures. For a family of four, this year the income level at which no assistance would be provided triggers at something above $32,000 income a year.

MR. CLARK: What the minister is saying is that there are 80,000 renters who fall below those threshold numbers, which doesn't surprise me in British Columbia. There are probably many in my constituency. Is the minister saying that there are 80,000 people who have less income, given those dependents?

[ Page 7142 ]

HON. MR. COUVELIER: That's right. Bear in my mind we're talking about a mix of family situations ranging all the way from singles at $16,500 to a family of four with an income exceeding $30,000 a year.

MS. A. HAGEN: This particular clause deals with people who have a taxable income, whether they're working or not. At one time a renter's tax credit was available in this province to every renter — again with some qualifications — regardless of where he or she got the money for food on the table, shelter and the other necessities of life. As I recall, it was something in the order of $150 per person. There was a ceiling and a schedule that reduced the $150 on a percentage basis.

Given that we have within the renting community many people who have sources of income from government in the form of GAIN, and given that many of these people have rentals well in excess of the accepted 30 percent of income up to that poverty line level which is deemed to be an appropriate portion of income to be spent on shelter, why has the minister, in bringing in some rental assistance at this time, chosen to exclude a large number of people whose rents are well in excess of a standard that is accepted as good social policy or good planning for their needs? Why has he chosen to exempt those people from the coverage under this bill?

MR. CHAIRMAN: I must remind the members, I guess for the third time today, what the committee's scope of discussion is. We really can only discuss what is in this section and not what might have been or could have been included at another time, or what previous legislation took place. Those things are unfortunately required either in second reading or in other periods of debate. The minister may wish to respond to some portions of what you've had to say.

[11:30]

HON. MR. COUVELIER: Mr. Chairman, in an abundance of fairness you earlier ruled my response, exactly to that point, out of order. We were talking about the same subject.

MR. CLARK: We can certainly cover this in estimates if it's the minister's or the Chair's wish, but it seems to me appropriate that in dealing with the rent tax reduction, there are two ways of doing it: this way and a credit. It may be straining committee stage, but it's a strain that we have endured many times in the House, notwithstanding the current Chair. If it's the wish of the House we can certainly deal with it in committee stage.

Let me just make a few points, Mr. Chairman. This is a very modest proposal which benefits only those who earn less than $16,500 a year if you are single; $22,000 if you have one dependent; $26,000 if you have two dependents. It's a tiny, miserly renter's tax reduction, and as the previous speaker said, it does not deal with those who do not have a taxable income; in other words, senior citizens or those on fixed incomes who do not file and do not pay tax. The poorest citizens do not benefit by this, and anybody making more than $16,500 as a single individual does not benefit by it. It's a very narrow range of people that benefit by this bill, and then they benefit by a very tiny amount.

I submit that this bill is part of a package of bills designed to enhance the government's image with respect to dealing with a serious housing crisis in Vancouver. This particular bill does virtually nothing to deal with the serious problem that renters face in Vancouver, a problem which is going to get more serious as the latest housing-price rises find their way into the rental market. It's a crisis in Vancouver. This bill does virtually nothing. It's a tiny little tax break for a relatively few people. I think it's unfortunate that the minister and the ministry have chosen to promote this as a serious attempt to help renters, because it does nothing of the kind.

HON. MR. COUVELIER: I am shocked that the hon. member opposite would ascribe some cynical motive to this initiative. We pay them to be critics, Mr. Chairman; that's their job, not to ascribe motives. As matter of fact, we had a debate about that point just yesterday, as to speaking about motives of speakers here in this Legislature.

The fact is that this is a program that will benefit 80,000 British Columbians. What would the hon. member wish: 85,000, 90,000, 100 percent? Clearly, a program brought forward to improve the lot of 80,000 British Columbians is not to be sneered at, despite the temptation to do so by the hon. members opposite.

To the suggestion that it should be enshrined and permanent — one of the earlier speakers referred to the time-frame — I have to point out that anyone who studies housing-crisis cycles appreciates that there's a very close relationship between the economy's vitality and the need for housing assistance. It seems to ebb and flow. Therefore this program is being phased out, in recognition that this crisis will disappear, as all previous crises have disappeared as the economics of the province change. Therefore the phasing-out of the program over a period of time is justifiable, because the urgent need that the government perceives today need not exist tomorrow.

Section 1 approved.

Title approved.

HON. MR. COUVELIER: Mr. Chairman, I move the committee rise and report the bill complete with amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 7, Income Tax Amendment Tax, 1989, reported complete with amendment.

[ Page 7143 ]

MR. SPEAKER: When shall the bill be read a third time?

HON. S. HAGEN: With leave now, Mr. Speaker.

Leave granted.

Bill 7, Income Tax Amendment Act, 1989, read a third time and passed.

HON. S. HAGEN: I call committee on Bill 8, Mr. Speaker.

LAND TAX DEFERMENT
AMENDMENT ACT, 1989

The House in committee on Bill 8; Mr. Rogers in the chair.

On section 1.

MR. CLARK: I had some fun with this in second reading because of the hypocrisy of the government's opposing the original of this legislation in 1974. I quoted at length previous members — Mr. Bennett ' Mr. Phillips, Mr. McClelland and Mr. Smith — who all said it was a plot to confiscate private property; and now the government is moving to reduce the deferment from 65 to 60. I won't rehash that, because I know we're in committee stage and the Chairman is being rather strict with the rules here.

Perhaps the minister could tell the House how many more people will be eligible — roughly, because I understand it could be a floating average of people turning 60 to 65 — under this amendment? In other words, how many people who fell between 60 and 65 previously, who would have been eligible, are now eligible? What could the costs associated with this amendment be? I assume there are some carrying costs associated with the fact that it's a deferral over time, that they can defer their taxes for five years. How many people would likely be eligible — roughly? I appreciate the difficulty of that. And what would any associated costs be with respect to this amendment?

HON. MR. COUVELIER: We calculate that there should be roughly 250,000 British Columbians who can benefit from this imaginative, forward-thinking assistance device.

MR. CLARK: I don't want to stray with the Chairman, but maybe, just for the sake of magnitude, he could tell me how many people are eligible who are over 65. What is the addition in terms of rough percentages? Do you have those numbers?

HON. MR. COUVELIER: No, we don't have those figures. It would take some staff work in order to provide them.

MR. CLARK: There are 250,000 people eligible, the minister has said. We don't know how many are eligible who are over 65, and this is just the extra between 60 and 65. Is that correct? The 250,000 are between 60 and 65, not in the full program as amended. Is that correct?

[Mr. Rabbitt in the chair.]

HON. MR. COUVELIER: My memory is — and I'm sure staff will correct me by note if my memory is incorrect — that 250,000 is the number of citizens 60 and over who would qualify.

MR. CLARK: Does the minister know by memory — I appreciate the difficulty of that — what it was before and what it will be now? How many more people are eligible under this initiative than were eligible when it was just for those over 65? Do we know that? The minister says no. It strikes me as a pretty reasonable question from the opposition. I'm not trying to be ticklish. We want to know what the impact of this amendment will be, and how many more people are eligible than were eligible before. It seems to me that's not an onerous request.

HON. MR. COUVELIER: The member first asked how many of those over 65 were eligible, and we told him we didn't have that figure. We told him there were 250,000 in total who were 60 and up. Then he came back with another question, which really was a repeat of the first, if I understood it properly. That information can be provided with no difficulty. The problem we have is that, as the hon. member knows, when you do demographic analysis.... As a population ages, its numbers reduce. So I wouldn't want to mislead the House in that respect. I'd be happy to provide it later, and I'm sure my staff are beavering away now punching figures into computers, attempting to oblige.

MR. CLARK: I'm just trying to get a handle on the magnitude of the change, and I don't want to have the staff do detailed demographic analysis which — you're right — is required.

I'll try it a different way. How many people are estimated to take up this deferment option?

HON. MR. COUVELIER: It would be our ambition that all of them would choose to take it up.

The difficulty I have in responding to your earlier question is that there's a line in my notes which says it should double the number of beneficiaries. But I have trouble with that statement. It seems to me that's not logical, and it would almost need a demographic analysis in order to determine it. It seems to me illogical to think that there are 125,000 British Columbians of 65 and over who would qualify and only 125,000 under 65.

As I suggest, I have people running around now attempting to clarify this question, and the minute it is available, I will transmit it to you.

MR. CLARK: Let me try a different way, because I may be.... I've been told, and I understand intu-

[ Page 7144 ]

itively, that very few people take advantage of this program. People over 65 do not like to defer their taxes until the time they die. Apparently that's the case. So while there are maybe 150,000 people eligible, a very tiny percentage of those will take advantage of that. I would like to know, from your staff or otherwise, how many people.... It's not so much how many are eligible as how many take advantage of it now, and how many more are likely to take advantage of it with this change.

It may well be in your notes that people 60 to 65 will be more likely to take advantage of it than people 65 and over. That may be the estimate from your staff. That may result in a doubling of the take-up even though it's not a doubling of the number of people eligible. I am grasping at straws. I would like some understanding of how many people it is estimated will take up this option. Is that possible?

HON. MR. COUVELIER: Once again, I cannot predict how many people will take up the option. Under the old guidelines, 2,600 British Columbians took advantage of the program.

MR. CLARK: So it was 2,600 people who took advantage of it who were over 65, and your notes say — if I can just read between the lines — that another 2,600 people may take advantage of it. That's not what they say? I understand the minister disagrees with his notes, but it struck me that he was saying that it looks like there are another 2,600 people who may take advantage of it when it moves to 60 to 65. Is that incorrect?

HON. MR. COUVELIER: Head nods don't count, I guess. No, Mr. Chairman.

The interest in the program, surely, is a function not only of age by requirement, but also a function of interest rate charged. This initiative currently charges an interest rate of only 9.75 percent. That's at least 3 points — more like 4 to 5 points — less than the market.

MR. CHAIRMAN: We are starting to stray from this part of the bill, Mr. Minister, are we not?

HON. MR. COUVELIER: No, Mr. Chairman. The questioner was trying to get me to identify the number which would be applicable. I am explaining why I can't quantify that. It is also a function of the interest rate charged. I was just making the point that this is a very generous program in terms of offering a discount over market of anywhere from 4 to 5 percent.

It's my ambition, expectation and hope that we would have many more apply under this program than did when our interest rate policy wasn't so generous as it is now.

[11:45]

MR. CLARK: I understand the logic. It's a very generous program. I agree with you; I agree with the program; I agree with this amendment. The problem is that very few people take advantage of it, and it's more of a concern of many elderly people that they don't want to have a debt, it seems to me. But if it's roughly a doubling of the take-up.... I'm not sure whether the minister agrees with me on that, but it seems to me the staff is estimating that there will be a doubling of the take-up. I assume the difference between the interest rate charged and the market rate is absorbed by the provincial government. That's a real cost then. Can we have an estimate of the real cost implications of this amendment, assuming a certain take-out?

HON. MR. COUVELIER: At the old program level, we were applying a credit, or at least a deferment, to a total of about $20 million in property taxes, including $4.8 million in accumulated interest. That doesn't answer your question specifically. I think we'll have to provide that to you, hon. member, because we don't have that figure here on our notes — unless we can resurrect it from another source. If I understand the question, you want to know what the dollar cost absorbed or assimilated by government is under the old program and a projection for the future. That figure isn't available to us here, but I'm sure it will be coming up in short order.

MR. CLARK: Because we on this side of the House are very supportive of the bill, I won't delay the bill. If the minister would give me an assurance — and he has, I assume — that that information will be forthcoming, then if there are any further questions, I can raise them under ministerial estimates.

For the minister's sake, we're certainly prepared to pass the bill, because we support it. If the minister will give me an assurance that that financial information will be forthcoming in estimates — and if there are any questions arising from that, I'll raise them in estimates — we'd be happy to proceed with the bill.

AN HON. MEMBER: What a delightful compromise.

HON. MR. COUVELIER: Yes, that's delightful. We'd be pleased to oblige.

Sections 1 and 2 approved.

Title approved.

HON. MR. COUVELIER: Mr. Chairman, I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 8, Land Tax Deferment Amendment Act, 1989, reported complete without amendment, read a third time and passed.

[ Page 7145 ]

HON. MR. PARKER: Mr. Speaker, I call committee on Bill 9.

MOTOR FUEL TAX
AMENDMENT ACT, 1989

The House in committee on Bill 9; Mr. Rabbitt in the chair.

Section 1 approved.

On section 2.

MR. CLARK: The notes to section 2 say this will reduce large fluctuations in the tax rate. Could the minister explain this, given that it appears to change from the most recent one-month period to the most recent three-month period? Just by definition, it would seem that the longer the time-lapse between adjustments, the greater the fluctuation in price. Is this not correct?

HON. MR. COUVELIER: This is one of those classic illustrations where the optics are contrary to the truth. The fact is that gas and fuel prices are subject to price wars of relatively short duration When a war occurs, consumers, of course, reap great benefits; but given the economics of the industry, they don't last long. Giving us a longer time-frame to make the judgments will therefore remove some of the big swings currently possible under this old method.

Section 2 approved.

On Section 3.

MR. CLARK: I wonder if the minister could just explain this. This has to do with coloured gas, I gather. Does it — the tax break for certain vehicles? It seems to extend that tax break to certain vehicles used off-highway by the mining and logging industries. I wonder why the government chose to extend that tax break to these industries.

HON. MR. COUVELIER: The issue, it seemed to us, was one of equity as it relates to the two basic industries of the province. It did seem to us that vehicles used for safety or fire prevention or that kind of essential public use should be treated equally. It seemed appropriate that we should extend that same benefit to another very important element of our economy.

MR. CLARK: Well, of course, there are two ways of dealing with that inequity. One would have been to eliminate the use of coloured gas by the mining industry, rather than extending that tax break to the logging industry. I know it's kind of nitpicking. It's, I'm sure, a tiny tax break, but I frankly don't understand the rationale for giving coloured gas to the mining and logging industries. I understand it for farmers. There is a long tradition of subsidizing the farm community for a public purpose. I understand the logic of the use of coloured gas for off-road vehicles in farming. But the logic escapes me in the mining and logging industries. I don't understand why, given the choice of clarifying an inequity, you would choose to extend that tax break to the logging industry while the mining industry had it. Maybe a specific question would be what the tax loss associated with the extension is likely to be.

HON. MR. COUVELIER: I'm surprised that the hon. member, having as he does, sitting next to him, a representative of a community that has a critical interest in mining, should be suggesting that we should not consider treating mining in the same way we treat forestry, with this tax concession. The estimated cost on an annual basis is assumed to be something on the order of $100,000 a year.

Sections 3 through 6 inclusive approved.

Title approved.

HON. MR. COUVELIER: I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; Mr. Speaker in the chair.

Bill 9, Motor Fuel Tax Amendment Act, 1989, reported complete without amendment, read a third time and passed.

Hon. Mr. Parker moved adjournment of the House.

Motion approved.

The House adjourned at 11:55 a.m.