[ Page 9879 ]

CONTENTS

Routine Proceedings

Committee of Supply: Ministry of Finance and Corporate Relations estimates.

(Hon. Mr. Couvelier)

On vote 28: minister's office –– 9879

Hon. Mr. Couvelier

Mr. Clark

Mr. Blencoe

Mr. Lovick

Hon. Mr. Michael

TUESDAY, MAY 29, 1990

The House met at 10:03 a.m.

Prayers.

HON. MR. RICHMOND: This morning we have a group of people visiting us from the constituency of Kamloops–North Thompson. They are from Raft River Elementary School in Clearwater. They are a group of teachers, chaperones and students: Mr. M. Moore, Bill Keast, Art Marcyniuk, John Downey, Clif Feddersen, Janet Cooke, Rosalie Veillette and Mrs. L. McKenzie. They are accompanying a group of grade 7 students from Raft River Elementary School, including the nephew of the Attorney-General (Hon. Mr. Smith), the second member for Kamloops. I would like the House to make them very welcome.

Orders of the Day

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

ESTIMATES: MINISTRY OF FINANCE
AND CORPORATE RELATIONS

On vote 28: minister's office, $329,702.

HON. MR. COUVELIER: Mr. Chairman, I'd like to make a few introductory remarks, which is traditional, so that the hon. members opposite might more properly focus their comments on specific issues.

The estimates for the ministry comprise two votes: vote 28, for the operation of the office of the Minister of Finance and Corporate Relations; and vote 29, for the operations of the various divisions of the ministry. I'm also responsible for vote 69, management of the public funds and debt, and vote 70, contingencies and new programs, which are shown at the back of the estimates under "other appropriations."

The total expenditure requested for ministry operations in votes 28 and 29 amounts to $74.53 million, representing an increase of 5.3 percent, as measured against the comparable 1989-90 estimates. The majority of this increase, $2.77 million, is for negotiated salary adjustments, with the remaining amount going to strengthening revenue systems, the homeowner grant program and other ministry financial systems.

In keeping with my ministry's goal of increasing productivity and providing better services to the public, a number of initiatives, which are funded in my budget, will be undertaken during 1990-91. Some of these are as follows.

To modernize the corporate governance and consolidate the regulations of provincially regulated insurance companies, trust companies and credit unions. This is targeted for July 1990.

To establish a consolidated personal property registry and modernize the regulation of secured loan and credit transactions in B.C. This is targeted for September 1990.

To continue the process begun in 1987 of strengthening the regulation of securities trading in British Columbia.

To introduce new legislation to replace the Commodity Contract Act, to bring our regulatory system for commodity contract trading into line with that for securities, in order to provide protection to investors in B.C. and to encourage the development of market activity.

To provide a master insurance program for local government-funded agencies and contractors delivering a variety of social programs on behalf of ministries, to ensure that adequate insurance coverage is available to these groups for programs they deliver.

Lastly, to continue the process of investment diversification so that over time managed funds will enjoy increased investment returns and reduced levels of risk, and to strengthen the loan administration process in government by continuing to consolidate the collection process of major loan portfolios in government.

As well as funding in votes 28 and 29, the ministry operates self-sufficient programs through the following six special accounts:

1. The B.C. Securities Commission has a $10 subvote in the ministry's appropriation for '89-90. This special account provides for the operation of the commission and costs of administering the Securities Act and Commodity Contract Act. Operating within the special account will allow the commission to better plan its expenditures, as fee revenue obtained through the industry will be credited to the special account and any surpluses will be carried forward for future fiscal years' use.

2. The Insurance and risk management account provides insurance and risk management services to government. Revenues to this special account represent amounts paid by participants, and expenditures are cost-related to agreements, self-insurance service to hospitals, schools, colleges, etc., settlement of claims, risk management services and purchase of insurance.

3. The low-interest loan assistance revolving fund was established to provide low-interest loans to firms in various business sectors. Most of the loan portfolio was privatized during 1988-89; however, those which were non-saleable are being managed by the ministry's loans administration branch. No new loans are being authorized.

4. The provincial home acquisition account is for the purpose of paying grants to B.C. residents obtaining a home and to make loans secured by second mortgages. In June, 1989, most of the second mortgage portfolio was sold to private sector lenders. However, the province must repurchase mortgages which become more than 90 days in arrears.

5. Provincial treasury operations was a $10 subvote in the ministry's appropriation for 1989-90. This special account provides for the operation of provincial treasury including investment debt management, banking, cash management and loan administration services to its clients. As previously mentioned, for Securities Commission special account, this new for-

[ Page 9880 ]

mat will provide provincial treasury with increased flexibility in planning its expenditures, as fee revenues obtained from clients will be credited to the account, with any surplus being carried forward for future years' use.

6. The provincial treasury revenue account provides for revenue generated from various financial hedging operations managed by the ministry. This is a new program for the ministry, and the net income from the activities will be credited to the account.

Mr. Chairman, that concludes a brief overview of my ministry's estimates. I would be pleased to respond to any questions.

MR. CLARK: I thought I'd start with Meech Lake Mr. Chairman. I just want to read for the record this clipping from this morning's newspaper. Oh, I can't do that, can I? It's not a newspaper; is that what you were going to say?

MR. CHAIRMAN: Its relevancy would persuade me that Meech Lake does not really form a part of the Minister of Finance and Corporation Relations' estimates.

MR. CLARK: Absolutely. I was going to make the comment that the Premier was on television last night. He spent about half his time on Meech Lake and half his time on other financial issues that he purported to be connected, so I think they clearly are

The minister apparently said yesterday that the Meech Lake constitutional accord is "irrelevant.... It's such a minor emotional issue, I just can't take it seriously." He went on to say: "I think Confederation and unity are more seriously impacted by the fiscal problems than this emotional issue of the accord."

This appears to be at variance with the Premier's position. I know that as politicians, from time to time we say things we later wish we hadn't, especially in the heat of the moment, maybe on a hotline show, where we're being pressured and attacked. So I thought maybe I'd start today by asking whether the minister would like to clarify, retract or otherwise qualify what appear to be intemperate remarks with respect to the Meech Lake accord.

HON. MR. COUVELIER: As you properly pointed out, Mr. Chairman, the issues before the House today are my estimates. I would be very pleased to send the member a tape of that program. He takes comments out of context and tries to make much out of nothing I'll be happy to send that to him if he so desires.

MR. CLARK: Does the minister agree with this comment: the Meech Lake accord is "such a minor emotional issue, I just can't take it seriously"? It may be particularly relevant, this last statement: "I think Confederation and unity are more seriously impacted by the fiscal problems than this emotional issue of the accord." Does he agree with that?

HON. MR. COUVELIER: Only, Mr. Chairman, in the context in which the discussion was focused. As say, in order to appreciate that, you would have to have access to the entire program so that you could follow the flow of the discussion and the range of topics being considered. I'd be happy to supply the hon. member with the tape, so he can expand his knowledge and come to a better appreciation of all of the serious problems that are facing this country, and our province's unique opportunity to provide some imaginative solutions to these serious issues.

[Mr. De Jong in the chair.]

MR. CLARK: Is it your view that the fiscal problems of Canada are more important than the constitutional questions addressed in Meech Lake?

HON. MR. COUVELIER: Mr. Chairman, once again I must take your advice. I suspect that the question is inappropriate in the context of discussing ministerial estimates. But notwithstanding that comment, I think it is appropriate to point out to the hon. member, if he wasn't already aware, that Canada is in a very senous fiscal plight and that those of us who are involved in managing public money from day to day have a unique appreciation of how serious that plight is.

If there is to be some solution to the dilemma that we face — that is to say, a growing national cost of debt which Is burdening and limiting seriously the federal government's ability to manage our monetary policies and their fiscal policies As I say, a unique opportunity is provided all the provinces of Canada to assist the federal government in addressing those issues.

In order to appreciate the dimensions of the problem and the wide-ranging discussion on the radio interview show that the member refers to, he really would have to listen to the whole tape. I would be pleased to provide it to him if he so wishes.

[10:15]

MR. CHAIRMAN: I would just like to remind the House that this morning we are dealing with vote 28, which is the office of the Minister of Finance and Corporate Relations, and I think relevancy to that specific aspect is very important in our debate.

MR. CLARK: Mr. Chairman, I think you appreciate the latitude that's afforded in this House with respect to policy questions that deal with this minister.

I wonder if it would help the minister if we just forgot about the radio program that took place yesterday and dealt with the issue discussed in the newspaper clippings with respect to that. In other words, we don't have to talk about what you said or didn't say yesterday; you can clarify those remarks yourself for the press. But I am interested in the minister's comments on this important topic.

[Mr. Pelton in the chair.]

I know that in Saanich there is a very large Reform Party vote, and the minister has a fight coming up in Saanich, so there appears to be some urgency with

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respect to this minister's comments on Confederation. This comment that I read out at the beginning of my remarks is only the last in a series of comments that the minister has made with respect to our relationship with the federal government, including debate on whether British Columbia contributes more or less to Confederation, whether we get our fair share of revenue from the federal government, and whether we should disentangle ourselves financially from the federal government. All of these have been mused about by the minister over the last couple of weeks. This is only the last in a series of comments over the last three or four weeks which struck me as at variance, to say the least, with the comments from the Premier.

In that respect, I would like the minister to comment. Does the minister think that those kinds of comments with respect to British Columbia's place in Confederation are helpful at this time in our history, in light of the fact that we're in a constitutional crisis in Canada around the Meech Lake accord? Does he think that these comments about our fiscal position our position within Confederation, whether we get our fair share and those kinds of things are calculated to help the process to resolve this constitutional impasse?

HON. MR. COUVELIER: I'm delighted to hear the hon. member concede the Premier's point last night in his outstanding television presentation, that we do indeed face a constitutional crisis around the Meech Lake accord. That is a significant step forward. I'll transmit the hon. member's opinion to the Premier at the first opportunity. That's comforting.

MR. CLARK: I wonder if the minister thinks that the comments with respect to our fiscal position in Canada are helpful to the process of solving the Meech Lake accord. Does he think his comments have been deliberately crafted, seeing that there has been about ten or so comments by the minister over the last three weeks? Have they been deliberately crafted?

MR. SERWA: On a point of order, Mr. Chairman, I believe we were to be discussing the estimates of the Minister of Finance this morning, and the second member for Vancouver East is going on and on about federal matters. I wonder if we could proceed, unless the second member for Vancouver East feels that the estimates of the Minister of Finance are to be approved. It seems that we're just wasting time here.

MR. CHAIRMAN: The Chair is well aware of the requirements for relevancy. I have right on the desk here all of the relevancy rules that are applicable, because I could see from the outset that there might be a problem. Latterly, I must give the second member for Vancouver East (Mr. Clark) credit. He is bringing the financial situation into his comments. By and large, I would suggest that he is being relevant not completely, but by and large. If the line of questioning continues, I'll probably have something more to say as we go down the road.

MR. BLENCOE: Mr. Chairman, I commend you for your comments, because I think the points that my good colleague from Vancouver East is making are valid. In particular, in greater Victoria, which the minister resides in, I have to say that there is some concern about the minister's pontification and the views he has been expressing over the last few weeks.

I know that my constituents would like to know what the minister's views are on the various issues my colleague is raising — and, indeed, on the overall fiscal policy of the federal government vis-à-vis the provincial government. From the concerns that have been expressed to me, I think the minister owes his constituents and this area a full disclosure of where he's really coming from. Tell us, is it the official position of the government that fiscal issues of the day, which may or may not be, you were announcing, valid to some degree...? But during a constitutional crisis, are those fiscal problems paramount when the country faces some major problems in terms of the constitution and keeping this great country together?

The Finance minister is a key member of the cabinet, and views expressed by him are listened to, written about and read. The minister certainly owes some clarification to the constituents in greater Victoria, who wonder where he's really coming from. On behalf of those constituents, I would ask for some clarification. My constituents think Canada is in a crisis and that the Finance minister's continual dwelling upon the fiscal problems — which, of course, we don't disagree with; this country has fiscal problems— muddies the waters when this country is trying desperately to stay together. It's not helping the case. I know that the capital region and the constituents I serve and the minister serves would like some clarification. Obfuscation of the issue by the minister this morning is not helping. Maybe the minister will be a little clearer in his intentions.

HON. MR. COUVELIER: I would be delighted to have the hon. member invite me to speak to any assembly in his riding. If he manages to scrape together 30 or 40 people, it would be a great pleasure for me to carry the message. I look forward to such an invitation.

MR. BLENCOE: Is the minister saying that if the good constituents of Victoria or the capital region, a number of people who care enough about this country, proud Canadians, are prepared to hold a major meeting for the minister to come and tell them exactly what he means and clear the air, he would agree to attend and say to that meeting that the fiscal issues are paramount and the Meech Lake debate and constitutional issues are secondary? Would the minister be prepared to address my constituents and his in the capital of British Columbia and say those very things? If he's prepared to do that, I'm sure we could

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get a gathering together for the minister to clarify that position.

HON. MR. COUVELIER: Yes, I would certainly look forward to the opportunity to address an audience. I'm accustomed, in our party, to gatherings of 200 or more, so I assume that the member could scrape together a similar number. If the audience is of sufficient import and dimension, then obviously I would be delighted. Of course, if there are only smaller groups available at any one time, we'll have to fit them into the schedule. I have a keen interest in carrying the message.

MR. BLENCOE: I will pass on to my colleague and whoever else on my side, but I want to put on record that those I have talked to in greater Victoria over the last few weeks have been most concerned about the minister's position. As usual, I explain that this minister was awarded the— what was the award he got last year for?

AN HON. MEMBER: Obfuscation.

MR. BLENCOE: Obfuscation, I think — the North American award for obfuscation. I think he's in the running for the second year in a row. I think his comments are being heard across the country, and I want it known that from my vantage point of representing one of the important ridings in greater Victoria, my constituents don't appreciate the minister playing politics, playing with the future of this country and not dwelling upon the seriousness of the constitutional problems that face this great country. I would like to hear the minister say today, at least once, that we do have some problems, that he is prepared to work for unification of this country and that he will quietly— as we will — work on the fiscal problems facing this country.

At this point, the issue is that this country is desperately trying to grapple with Confederation 2, if you will. Those issues are paramount, in my estimation. Maybe the minister would at least make some statement that he recognizes the difficulty that this great country is going through today.

MR. LOVICK: I simply wanted to pursue the same point that my colleagues have, because I think we do indeed have an obligation to find out precisely what the chief administrative officer of this province has to say about this very important issue. We know that the Premier has gone on television ostensibly to tell us about the urgency of the debate. Many of his comments, however, were devoted to matters financial rather than the issue of Meech Lake itself. Clearly, whatever statements are made by the Minister of Finance will have an impact on this province's economy and our relations with other provinces. I think the minister has— perhaps unwittingly called into question precisely what the position of this government is vis-à-vis that very important question.

We know that the minister is habitually garrulous; he loves to speak. Indeed, he loves to speak at great length. We are offering him here today an opportunity to tersely, succinctly and concisely explain what he meant. I'm amazed that he hasn't accepted with alacrity the generous offer on our part. I would therefore reiterate the point my colleagues have been making— will the minister please explain to us what he intended by his statements as reported from yesterday.

HON. MR. COUVELIER: I'm flattered to see the degree of interest all of a sudden exhibited by the hon. members opposite. My memory is that a serious discussion of Confederation hasn't attracted much of the time of the House.

So it's comforting to see, all of a sudden, this focus of energy on what is truly a national problem. It's appropriate, and I appreciate the focus, because I do agree that it's a serious issue that the federal government must find resolution to. It's one where I think the provinces can play a significant role in helping to make Canada stronger and more relevant to the rapidly changing times that we find ourselves in.

But in view of the interest of — now three — members opposite, it sounds to me like I had better make copies of the full tape. Members might appreciate that the subject was evidently interesting, because the program went on for something like an hour. So it's a lengthy tape, broken by commercials. I can edit the commercials out, if the members' time is valuable.

But in any event, I get the feeling that maybe I should make spare copies for more than the second member for Vancouver East so that all opposition members might have their knowledge level elevated. Goodness knows, that's an important consideration for intelligent debate at any time.

[10:30]

MR. LOVICK: Mr. Chairman, far be it from me to prick the balloon that has just floated across the way. But surely the minister must recognize the difficulty we on this side are having. We have not been able to find out whether there was indeed anything of substance in that program that went on for more than an hour, or whether what we were talking about was some kind of fatuous twaddle but happened to involve the rather silly, perhaps unguarded, comment about Meech Lake.

Surely the minister would agree with us that what is important is that this issue — precisely because it has been picked up, precisely because it seems to have been the only part of the broadcast that had any moment and any significance— cries out for explanation. Surely if the minister believes that Canada is anything more than merely a collection of convenience based on bottom-line calculus, he has some obligation to clarify that in this chamber. We're not making light of what the minister had to say. Rather we want to know whether he has taken a clear, conscientious and deliberated position regarding the Meech Lake accord that concludes that it's really

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irrelevant, because what we're talking about is wheeling-and-dealing and who can get the best deal for whom. Surely the minister would like to clarify that for us.

HON. MR. COUVELIER: To use the hon. member's phrase, Mr. Chairman, I guess I can only repeat again. Surely, if the hon. members are genuinely interested, then the entire discussion, from which they're extracting comments that suit their purpose, would be something that they should have, because it is a very serious question that the country faces.

I happen to believe that the provinces can provide solutions in the national interest. So it's appropriate that the members opposite, now that they have an interest in the subject, should have the opportunity to learn a little bit more about it.

That's a positive thing, and I take delight in telling the hon. members that if their interest is genuine, then I'd be happy to send them the tape so that they can follow the entire, wide-ranging discussion and understand then that the reference they're making today deals with an out-of-context reference.

The dimensions of the national dilemma are such that it's absolutely critical that the ignorance levels of the members opposite be improved so that they can properly make a contribution to this important national dialogue. You really have to start with a base of knowledge, and I will undertake to provide some of that base level of knowledge to the hon. members.

As I say, I apologize for the commercials that will interrupt the conversation, but it's all in the interest of supporting the B.C. economy. So with generosity of heart, the hon. members might be able to understand that even a radio station in this free enterprise world is forced to make a profit once in a while and sell their air time to advertisers. However, that's just one of the facts of economic life, and the members might pontificate on that while they're listening to this program.

Interjection.

HON. MR. COUVELIER: I'm delighted; I now understand there are two copies that I should make, and I'll undertake to do that.

MR. LOVICK: What a pity it is, Mr. Chairman, that we on this side give the Minister of Finance an opportunity to be a statesperson, and instead what we see is a crass politician who has to engage in ad hominem arguments suggesting that all we are doing is making silly political utterances.

There is an issue here. Let me just remind the minister of a small fact that he ought to know. He suggested that we on this side speak from relative ignorance. When the minister says, "The only way you can appreciate what I, the minister, have to tell you is by dealing with the entire broadcast," it reminds me of a true story I once encountered when was a graduate student at university.

I remember a colleague of mine getting back a detailed essay that she had written, getting comments on only the first page of the paper and receiving a failing grade. In righteous indignation she went to the learned professor and said: "What's going on, professor? You have only marked the first page of my 40-page paper, yet you have the gall to give me a failing grade. How dare you do that?" The professor's answer, Mr. Chairman, was very succinct and clear. He said: "Madam, do I have to eat the whole cheese to know it is rotten?" I would offer the same observation to this minister. I don't think we need to hear the whole broadcast, and I do not find comfort in the minister's telling us that he was quoted out of context.

Once again, I would ask as gently and as gentlemanly as I am able: would the minister explain to us what his intention was in making that statement— which, on the face of it, certainly appeared to be simply silly and rather vacuous? Would he at least tell us that he didn't mean to say it or that there was some other purpose behind his utterance?

HON. MR. COUVELIER: Mr. Chairman, I am extremely disappointed to hear that, as usual, the members of the opposition are only interested in twisting and turning in the wind as their political noses sense the potential of an issue on which they can seize. It's disappointing to be told just now, as I have been by the first member for Nanaimo, that he's not interested in hearing the whole story; he is only interested in hearing that part that he thinks has some relevance. That's too bad. The citizens of this province are not well served, in my judgment, by the refusal of duly elected representatives to try to get their minds around all aspects of a major national dilemma.

MR. CLARK: It's disappointing that the minister won't take the opportunity to clarify his remarks, because, as I said a minute ago, this is only the last in a series of remarks on the constitutional question and how fiscal matters relate to it. I want to talk about one of the other comments he made.

Over a year ago the minister stood in this House and said that we were going to embark on a study of a separate provincial personal income tax and corporate income tax. I asked a series of questions on that in the House last year in estimates. Then, of course, in the last few weeks, while the temperature is rising on the constitutional question in Canada and while we are in the middle of a constitutional crisis, the Minister of Finance made the comment that something had to be done. He said: "I am going to commission a study on a British Columbia personal income tax collection system and a British Columbia corporate income tax collection system." In other words, he assured the House last year that the study was underway; in fact, I think he said that it was completed last year— I'll have to check Hansard.

Now he's taken the opportunity to raise again something which presumably he did last year. The only conclusion I can come to is that he's attempting to enter the Meech Lake debate in a way that I don't

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think is constructive at all in light of the current constitutional crisis.

Perhaps the minister could explain why he chose in the last couple of weeks to give interviews and make comments that we should disentangle ourselves from the federal government fiscally and that he was going to study a British Columbia go-it-alone personal income tax system and a British Columbia corporate income tax system, especially In light of the comments he made last year. Was he correct last year in saying that the study was done, or is this a new study? Or is he just using the opportunity of the current constitutional crisis to get his name in the press on this question?

HON. MR. COUVELIER: Once again the member opposite has his facts wrong. That's not unusual, but it's tiresome. If there was a serious desire to understand these issues, the members opposite might take the trouble to lift up the telephone or put pen to paper so that they could be provided with background information.

The member is incorrect when he ascribes to the announcement made not a few weeks ago but in this year's budget document that we would embark on an examination of all tax initiatives— not necessarily only, as he seems to have leapt to the conclusion, income tax; rather, all tax structures in the province, including property tax— so that we might re-examine the fiscal relationship between our province and the federal government.

I'll save the member referring to Hansard — because his time is valuable, and obviously because he doesn't feel compelled to try to understand the total issue around the discussion we just had. He must be short of time. I'll save him the trouble of checking Hansard. The review that we announced two years ago was concluded. It was limited purely and simply to income tax. The proposal that we announced in the budget, many weeks ago now, refers to the entire tax structure.

MR. CLARK: The minister clearly said in the last couple of weeks, not in the budget, that he was.... Part of this disentangling — his words — of British Columbia from the federal government was to conduct a study on setting up our own personal and corporate income tax. Can the minister tell the House whether that's a new study or whether it's the same study that he announced had been taking place last year, and what the results of both the personal income tax study and the corporate income tax study have been?

HON. MR. COUVELIER: It will be a total new study embracing an examination of all taxation relationships in British Columbia, with a particular focus on those intergovernmental relationships between us and the federal government. It's a new study and a much broader one than originally discussed.

MR. CLARK: Was there a study done last year on the possibility of British Columbia's setting up its own personal income tax system, like Quebec?

HON. MR. COUVELIER: That's a possibility, Mr. Chairman.

MR. CLARK: I wonder whether the minister could be slightly clearer on that. We discussed this last year. He announced last year that the study was undertaken. Was the study on the British Columbia personal income tax system completed last year?

HON. MR. COUVELIER: I'm just checking our memory with Mr. Powell, the director of financial services, who's with me this morning. It's my memory that we did the study about two years ago, and it was discussed in the House a year ago when my estimates were up.

[10:45]

MR. BLENCOE: I want to continue on this theme. I draw to the minister's attention the document that he knows well. On page 18 of his speech he says: "We will also examine, Mr. Speaker, whether British Columbia's social and economic vision can be achieved within the current national tax structure."

Some reading that may wonder what the direction of the Minister of Finance is. Is he saying that there's even a consideration or an option that we would not participate in the national tax structure? That British Columbia may be preparing for the option of withdrawing from the national tax structure? That British Columbia may indeed be considering or the minister may think it's advisable to put out there that we may go it alone? I'm wondering what the minister's intentions were in these statements. He clearly says: "We will examine whether British Columbia's social and economic vision can be achieved within"— the operative word being "within, " and that's within Canada — "the current national tax structure."

In light of the comments made by the Minister of Finance in the last few weeks, his comments about the irrelevance of the national debate on the constitution and Meech, and his other statements about financial matters being more important than the current crisis we're in, and the state of this great country.... When we read this statement about whether our social and economic vision can be achieved within Canada, in the current national tax structure, the implications are quite serious. I'd like the minister to clarify his intentions.

HON. MR. COUVELIER: As the salesman said to the farmer, father of the daughter, my intentions are honourable, sir.

MR. CLARK: I think it's a very dangerous course, frankly. Given the current constitutional crisis that exists in Canada, comments by the minister over the last three or four weeks have been deliberately inflammatory. I think it's prudent for any government to review fiscal relationships with senior and

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junior levels, and to review taxing regimes. That's prudent all the time. The minister last year, or two years ago if he wants, conducted a study on whether British Columbia should go it alone on our own personal income tax and conducted a study on corporate income tax. I don't have any problem with those studies being done. But I do have a problem with a deliberately inflammatory message given by the Minister of Finance over the last three or four weeks, starting with the budget, where he talks about whether or not we can accommodate British Columbia's social and economic vision within the current national tax structure in Canada.

It seems to me that that in the budget was the beginning of a series of inflammatory comments with respect to British Columbia's fiscal position within Canada, and I don't think it's helpful in the current climate. Again, I don't have any problem with doing that kind of analysis on a range of things. In fact, last year I repeated my view that a separate corporate income tax system might be desirable in British Columbia, and that a separate personal income tax system would be cumbersome and not necessarily in our interests, but something that any prudent government could review.

But given that those have been reviewed and touched on in the budget — and in inflammatory language for the last few weeks — I think that announcing in Ottawa that we're going to disentangle from the federal administration and the federal tax regime is not helpful to the current constitutional debate. I wonder if the minister is going to pursue this angle on this debate over the next few weeks and deliberately attempt to talk about British Columbia's position within Confederation.

Finally, we know — or at least we're led to believe — that two years ago the government conducted several analyses with respect to British Columbia's position within Confederation. I believe there's even a draft act— the Confederation Equity Act or something — that came out of the minds of David Poole and the Premier. It seems to me that that is always under the surface of the remarks we hear from this particular minister.

I think it's a very dangerous course that this minister has set about to discuss, and I wonder where he's taking us, and where he sees it going over the next few weeks. Is he going to continue on this course of dismissing the constitutional question and talking only about the financial question but in the context of British Columbia's position within Confederation? Could he give us some guidance as to the course of this analysis?

He has talked about a tour or something. Does he see touring British Columbia with respect to our fiscal taxation systems? Does he see public meetings around the province, with respect to B.C.'s position within Confederation or within the federal tax regime? I wonder if he could give us some guidance as to where he's taking this inflammatory and dangerous course.

HON. MR. COUVELIER: The member's opinion, of course, is always listened to closely, and it helps provide clarification of the traditional philosophical difference between the socialist approach to managing public affairs and one that is more democratic and believes in people's individual worth.

However, aside from that comment, at this point I can't predict what our proposed study will produce, so at this juncture I have no idea what would flow from the study, or even what it would find. Obviously the reason we're calling for the study is because we want to get the issue examined in an impartial way. So it certainly would not be appropriate— nor am I able — at this point to give the member any sense of direction as to where the study would go after it's completed.

I do see the study as being, at least initially, a technical matter that would have to be examined by competent individuals. I would hope, in order to ensure the integrity of the document and to provide comfort to any critics, that government aren't manipulating the data. I believe that the qualified private sector participants would be involved. That isn't yet settled, in terms of selection and criteria, but I expect that would be the approach we would take. And then, depending on the outcome of the findings and the recommendations, it might well be appropriate to have a tour, so that the issue can be addressed and considered by all citizens.

So I don't rule that out; certainly it has attractions. I have learned from experience that any taxing authority that changes the tax base and moves the goal posts creates a new set of losers and new set of winners, in a financial sense. Because of that, any changes of significance have to be approached very cautiously to ensure that there aren't shock waves sent throughout the economy.

So we are sensitive to all of those things. The study will proceed at a technical level, at least originally.

MR. BLENCOE: I have to wonder and go back to the comments of the Finance minister during the budget speech and the appropriateness of even.... As my colleague has said, there may be a time and a place to obviously take a look at the national tax system as it applies to British Columbia within the national scheme. But I wonder at the timing of talking about that. In the last few weeks some of the comments you've made, given the — I happen to think — paramount issue of national unity and the future of this country....

I think that this statement in the budget and other statements this minister has made have been inflammatory. Quite frankly, I have to wonder— given the nature of the riding the minister has chosen to run in and the preponderance of those who support the Reform Party and their views of this country— if the minister's personal success and future in terms of political success is what's dictating his comments, rather than the national question of unity— of Canada remaining together.

[ Page 9886 ]

When I take a look at his comments in the budget, it says he is going to "examine whether British Columbia's social and economic vision can be achieved within the current national tax structure." It means within Canada. I have to wonder at the sensitivity of a major and key member in government— the Finance minister — who would make those kinds of comments at this difficult time within this country. I think it questions at least the judgment of that minister.

I would suggest that it probably has more to do with the nature of the minister's personal political success than his concern for this country, national unity and the constitutional problems we currently face today. But it's quite clear in this statement in the budget debate that he is going to review and is reviewing British Columbia's position — its vision within the current national tax structure.

It doesn't take much to read what that really means. I have to ask: does the Minister of Finance believe that British Columbia can go alone? What does he think? Is that his intention?

HON. MR. COUVELIER: The hon. member talks about timing and alludes a crass political motive to the budget announcement that we would embark on this study. I'm appalled at the political stagecraft that we see unfolding in front of us this morning. The opposition members seem to have conveniently forgotten what drove the delay of the opening of the House. The federal government arbitrarily, without any advance notice and contrary to tradition, blindsided the provincial governments of Canada by unilaterally cutting EPF payments relating to the funding of health care and advanced education.

In the case of British Columbia, they cut $120 million without notice, weeks before we were preparing to open this Legislature. That unfortunate event forced the government, my staff and me to rework the budget in order to accommodate that new reality. The consequences of that cut made it crystal-clear to us and to every other provincial government in Canada, I might add, that the federal government saw the only resolution of their own desperate financial plight as being a continuing cut of federal contributions and violations of contracts with the federal government on a variety of fronts to the provinces.

The consequence of that was that we had to delay the opening of the House, and we had to totally rework our budget. We had to significantly alter our proposed presentation for this year to the citizens of the province, because we started with the basic premise that we wanted to balance the budget.

Of course, if a political party had no such desire to balance a budget, the dilemma we faced at that time would not be one that they would have worried about. They would merely either deficit budget or raise taxes, as the hon. second member for Vancouver East (Mr. Clark) has said repeatedly he would do if ever he got his hands on the public purse. But the hon. members must remember the series of events that preceded the opening of this Legislature and the presentation of our own provincial budget.

[11:00]

I suppose I should point out also that as a consequence of that unilateral federal action of reducing their contractual commitments to the provinces, we will be having an interprovincial meeting of Finance ministers and chairmen of treasury boards— which British Columbia has been arguing for now for three years — for the purpose of examining the difficult question of expenditure reduction.

I don't believe that there is any greater problem facing the country today than the need for us to cut our financial cloth to fit our ability to pay. If there is any doubt among the members of the opposition across the floor on that issue, I would happily direct them to my correspondence files. The taxpayers of Canada have had enough and are looking for responsible leadership in terms of managing their country's financial affairs. So to suggest that there's some political motivation behind our budget statement, that we wanted to revisit all of those fiscal relationships, is irresponsible and a distortion of the historical facts. It's somewhat depressing that in the game of playing politics in this hall, these kinds of debates can go on incessantly for no obvious purpose or objective other than scoring political points.

The issues we face are severe. They will require the combined intelligence of all of us in this country to help address them. We're not going to be able to easily find resolutions if the members opposite see it as a purely political exercise. The problem demands a greater dedication of effort and a higher motivation. I would invite the members opposite to participate in that kind of exercise in a constructive way, because that's the only way we're going to be able to deal with the globalization of economies that is occurring all around the world.

MR. BLENCOE: I don't disagree with the minister that as Minister of Finance within your purview you have every option to take a look at the financial arrangements provincially and federally, the linkages and the correlations. But to accuse this side of the House of politics— what we're trying to do is deal with the minister. Over the last few weeks, if anybody in this Legislature has played crass politics with the future of this country, it has been that minister of the Crown. Indeed, it has taken some weeks perhaps for this debate to reach here, because in many respects I think there's a concern that discussing this item may draw further problems. But all we're trying to do is ask the Minister of Finance— a key player in the provincial cabinet — what his full intentions are.

As I've said, if anyone has been making statements that reflect poor judgment in terms of the political scene of the day, in reflecting on opposition and Confederation and reflecting on the national tax structure, in saying that the Meech issue and the future of this country may be irrelevant to the fiscal problems.... No one disagrees with the fiscal problems of this country. But timing is the issue in nation debates, in nationhood, in the next step. In the last

[ Page 9887 ]

few weeks, I think this minister has shown very poor timing, and we have a job to state that, not only as legislators but as Canadians and British Columbians. Quite frankly, I don't think the minister adds to the debate by saying we're just playing politics. As I say, if anyone has played politics with this issue, it has been the Minister of Finance in the last few weeks. To play politics at a time when this country is really in a serious position.... I sincerely feel, as many Canadians do, that we are at a watershed.

As I reflect on the budget and the statements of the last few weeks, I only have to conclude that this minister may have another agenda. I would like to know if he would share with us: is he preparing for British Columbia to go on its own?

MR. CHAIRMAN: The member for North Island seeks leave to make an introduction.

Leave granted.

MR. GABELMANN: I'll give the minister a chance to collect his thoughts and prepare a reply to that question.

I want to take a moment just to introduce a group of students, who are in the gallery behind our side this morning, from a small elementary school in the most northern part of Vancouver Island, San Josef School. I wonder if the House would welcome these students and the adults who are accompanying them.

MR. CHAIRMAN: Just before we continue, hon. members, I would like to make a comment. In full respect by the Chair of the importance of the issue that members have been discussing this morning and the seriousness of it in their minds, I feel compelled to just mention to hon. members that we do have rules with respect to repetition. The debate has gone on now for an hour and five minutes. I would certainly not wish to deny anybody the right to say whatever he wished in this respect, but I just bring it to your attention, because we do have rules about repetition, particularly when it becomes tedious.

MR. CLARK: Mr. Chairman, I will just sum up, and then I have some more specific questions which I'm sure we haven't covered yet.

The minister talked about the series of events leading up to the position that the government is taking, and he also talked about responsible leadership. I think those two things are important, because the series of events are this.

We have a Premier with a demonstrated animosity towards Quebec and bilingualism and the like — the public knows that. We have a throne speech from a couple of years ago with deliberately inflammatory language towards the federal government. We know the government has prepared something called the Confederation Equity Act which deals with British Columbia's position in Confederation. We have last year's comments by the minister that we're going to look at a separate personal income tax system and separate corporate income tax system for British Columbia. We have this year's budget that talks about reviewing our economic vision within the Canadian national tax structure. And we have a series of comments from the Minister of Finance about disentangling British Columbia from the federal fiscal regime, the federal tax structure. We now have a major study being undertaken by this government to look at British Columbia's position in Confederation. Last week or two weeks ago, we have the minister giving a bean-counter's approach to Confederation, talking about how much money we get and how much we give in Confederation.

That's the context in which we find this minister now saying that the Meech Lake accord is irrelevant, that other issues are more important and that it is an emotional issue. That's the context with this administration.

It's one thing to stand up to federal government and take a strong provincial position against a clearly unpopular federal government and to attack many of things that the federal government has done; it's another thing to go the next step and discuss what appears to be laying the groundwork for a potentially separate British Columbia.

I want to ask the Minister of Finance whether his work in the Ministry of Finance is connected in any way to the Confederation Equity Act drafted by the provincial government. I want to know if he can tell the House whether his work with respect to disentangling— or this thing referred to in the budget, which is whether we can achieve British Columbia's social and economic vision within the current national tax structure— is connected to the Confederation Equity Act or index being contemplated by the government two years ago.

While that act has not been introduced in the House, is it the intention of this government to review questions regarding Confederation in light of this equity index, which was derived two years ago? Did these studies by the Ministry of Finance fit into the work done two years ago by the Premier's office?

HON. MR. COUVELIER: Mr. Chairman, one of the most difficult lessons I've had to learn in the three and a half years that I've been a member of this Legislature has been that there's no obligation for the members on the floor to speak the truth. I find that very difficult to accept and work with. I must confess that from time to time it has presented me with problems in responding to queries of the members of the opposition, when queries don't have to be based on any substance or truth whatsoever. It's difficult to deal with questions based on myth.

I have no knowledge of any proposed legislation that the member has referred to at least twice this morning, so I can't comment. For all I know, it doesn't exist, never did exist and is entirely a fabrication of the member's imagination. But the rules of the House are such that he's entitled to make these kinds of statements and face no consequence, even though there may be no substance to them. So I can't respond to the question, because I have no knowledge of the issue to which he is referring.

[ Page 9888 ]

MR. CLARK: Does the minister have any knowledge of the Confederation equity index drawn up by the Premier's office, by Mr. Poole? It's a matter of public record and has not been refuted by anybody on the government side, including the Premier, Mr. Poole or otherwise. There is information that an act was drawn up by the Premier's office with respect to implementing a variation of this equity index.

The comments by the minister over the last few weeks and his comments in the budget and over the last year clearly indicate that he's of the same mind as the Premier with respect to British Columbia's stake in Confederation. Clearly the things the minister has contemplated and the studies he has done over the last couple of years fit exactly with the kind of thing that we saw coming out of the Premier's office — or that we understand was generated in the Premier's office— with respect to British Columbia's place in Confederation.

That's the kind of question regarding responsible leadership that I'd like to talk about with the minister. The minister has said that we need responsible leadership. Clearly the leadership shown by this administration has gone one step beyond standing up for British Columbia to playing with the future of the country, particularly in light of the constitutional crisis that we are now faced with. The kinds of comments by the minister have not been helpful, to say the least. The kinds of comments that we've seen over the last three years have not been constructive in terms of getting a better deal for British Columbia in federation. I think they're deliberately inflammatory, designed presumably to curry votes in Saanich by the minister with the Reform Party, designed presumably to curry favour with that rump group that the Premier has long had support from. The Premier's position is very clear to anybody who's followed British Columbia politics for ten years. He has nothing but contempt for Quebec, nothing but contempt for bilingualism....

Interjection.

MR. CLARK: We've heard that before.

MR. CHAIRMAN: I was just going to mention relevancy, as we seem to have lost complete track of relevancy in this debate. Perhaps the hon. member could remark with respect to vote 28.

MR. CLARK: Can the minister enlighten the House at all with respect to the Confederation equity index and whether any of the remarks.... Forget about the act for a minute. The index that was generated by the Premier's office— did the Ministry of Finance have any role in determining that? We're led to believe that the index deals with British Columbia's share in Confederation. The minister generated some numbers— highly suspect numbers I might say — which seemed to document British Columbia's less than full share in Confederation.

I just assumed — it's pretty safe for anybody to assume — that these were a two-track proposal. Can the minister enlighten us with respect to the Confederation equity index and whether his ministry or he personally has had any discussions with the Premier or the Premier's office with respect to how that was arrived at?

[11:15]

HON. MR. COUVELIER: I thought I answered that question just a few moments ago. I suspect that this whole issue is a figment of the hon. member's imagination. In the interests of trying to make some false point, he builds a house of cards that is based purely and simply on flights of fancy. I've no knowledge, as I've indicated earlier, of such an index as he describes. Furthermore, I find offensive the member's reference to the Premier and his attitude to other provincial governments in Canada. I think the hon. member does a grave disservice to the position of British Columbia vis-à-vis its relations with those other provinces when he ascribes false perceptions and restates them in this House. I don't know if the hon. member is aware that other provincial jurisdictions in this country are very sensitive these days to how they're perceived by their peer groups in Canada. And for the hon. member to stand and repeat twice now his assessment of how the Premier might view one of those provinces, I find offensive and objectionable in the extreme. It's true, Mr. Chairman, the members opposite are elected to represent a philosophical point of view, and I respect that they are elected and therefore totally entitled to come here and represent those views. But I really do take exception to the crass political commentary I've just heard, which serves no useful national purpose and indeed ascribes a false motivation to the Premier of this province.

MR. CLARK: We have canvassed that, and I may canvass it again some other day. But I'd like to turn to the auditor-general's report, which is probably several days' worth of discussion in the House. But let me start out by asking the minister whether he would concede that his remarks with respect to.... The minister apologized in the House to Mr. Morfitt, the auditor-general. But he did it in a way which I don't think was particularly gracious. He said that the auditor-general was guilty of the same gratuitous comments or remarks that he had exhibited. So I'd like the minister's comments on what he sees as the auditor-general's role and where he thinks the auditor-general has exceeded his mandate. Through all of the discussion regarding the minister's intemperate remarks, they did tend to focus on particular names that the minister called the auditor-general. What I'd really be interested in is the minister's view of the role of the auditor-general and where he thinks he's exceeded his mandate, and what gratuitous comments the auditor-general has made, because that clearly was the tone of the minister's apology to Mr. Morfitt at the time.

Would the minister please inform the House where he sees the auditor-general has exceeded his mandate with respect to the 1990 report?

[ Page 9889 ]

HON. MR. COUVELIER: I'm not quite sure what the hon. member is referring to. It is a fact that I did make aspersions on the auditor-general's report that were of a personal nature. Those aspersions were inappropriate and I apologized for them. I think it's unnecessary to replay that record, although if the hon. member wishes to fill his boots.... I don't know what more I can add to that.

[Mr. De Jong in the chair.]

MR. CLARK: I have no wish to make the minister apologize again or any such thing. The press played up a couple of remarks the minister made, and of course the minister ultimately apologized. Lost in the press coverage at the time was the minister's comment that essentially it was his view that the auditor-general exceeded his mandate with respect to this particular report. I wonder whether the minister could tell me what he sees as the role of the auditor-general, and where he sees that the mandate has been exceeded. In other words, I'm not interested in replaying the intemperate remarks or apology or any of that unfortunate incident. I'm interested in the minister's substantive critique of the role of the auditor-general, and where he sees....

MR. PETERSON: Mr. Chairman, a point of order. I might be on dicey ground here, but it appears to me that the auditor-general's report has been received and accepted by the Public Accounts Committee, a committee duly constituted by this House. I wonder if reference to the auditor-general's report in terms of the estimates of the Minister of Finance is indeed in order, when that actual report is being addressed right now by the Public Accounts Committee.

MR. CHAIRMAN: I'm not sure whether it's totally wrong to refer to the auditor's report and its content. However, on a broad basis, if the member is trying to get to a specific issue, then it's allowable.

MR. CLARK: I will get into specific questions on the auditor-general's report, Mr. Chairman.

The auditor-general, as you know, reports through the Minister of Finance. I'm interested in the Minister of Finance's view of the role of the auditor-general, insofar as he made the comment that the auditor-general exceeded his mandate in 1990. If the minister feels he exceeded his mandate, where does he feel that the mandate has been exceeded? That's a specific question with respect to this auditor-general's report

I don't want to belabour the unfortunate things that happened last year. I really just want to ask the minister's view of where he sees the auditor-general exceeding his mandate in this report, and then, or instead of that, he could perhaps simply say what he views as the auditor-general's role, and where he is at variance with his own view of what the auditor-general should be doing.

HON. MR. COUVELIER: The auditor-general performs a valuable function for the House. Insofar as he is a servant of the House, he reports to the House. While the reports flow through my ministry, he nevertheless is a servant of the House. I applaud that initiative and support it entirely. As a matter of fact, it was this government that brought the auditor-general into being. There should be no doubt in anybody's mind about this government's support for the function of an auditor-general.

HON. MR. MICHAEL: I wonder if sometime during his estimates the Minister of Finance would be kind enough to provide the House with the state of affairs in British Columbia in relation to other provinces in Canada. We have heard many statistics from a variety of people, but I would like to have the minister table for the House the percentage of British Columbia taxpayers' dollars that goes towards service charges for debt.

Along with that, I would like the minister to provide us comparisons with other provinces. We have often heard that the province of Alberta is in a better financial position than British Columbia. I was most interested to read a letter addressed to the hon. Leader of the Opposition by someone from, I believe, Thorne Riddell, an accounting firm, about the ratio of debt in Alberta compared to British Columbia. He pointed out that the debt-servicing charge in Alberta is eight cents out of every dollar, and in British Columbia it is four cents.

I wonder if the minister could confirm those figures, because it was a shock to me to see British Columbia that far ahead of Alberta. I knew we were in good shape, but I didn't realize that there was such a wide difference, wherein Alberta would pay twice as much in debt charges as British Columbia. Perhaps the minister would be kind enough to provide us with the number of cents out of every taxpayer's dollar that go toward interest charges in the ten provinces and also with what those charges would be for the federal government.

The other thing the minister could make note of is this. We know in the most recent document tabled by the minister the amount currently in the privatization benefits fund. Perhaps sometime during the estimates he would be kind enough to just let us know what he expects that will be by the end of the current fiscal year, 1990-91. 1 would be interested in knowing the additional income that might be derived and that is expected to go into the privatization benefits fund.

With your indulgence, Mr. Chairman, I have those two questions for the Minister of Finance. I am sure that his office has that information readily available, and I am sure that members on both sides of the House would be most interested in seeing just how well off British Columbia is. We hear lots of talk, lots of chatter, but I think that we should have the information tabled officially so that we set the record straight for all.

HON. MR. COUVELIER: That is certainly something that deserves the focus of attention. The hon. member's information is correct. B.C.'s debt costs represent about four cents on the dollar of our

[ Page 9890 ]

expenditures, as opposed to, let's say, the federal government, which is something between 35 cents and 40 cents on the dollar. I do believe the member's information is correct as it relates to Alberta, but we will verify that and provide it for the House. That's an excellent suggestion. In a similar sense, we will provide to the House the debt costs of all the provincial governments across the country.

There is no question that British Columbia is one of the leaders in the country in terms of fiscal responsibility and is perceived as such by those in the financial community. I have only to point to the comments of the Investment Dealers' Association of Canada, where they speak about the fiscal performance of our government, and also the fact that the four international credit rating agencies have all upgraded the credit rating of the province during this administration's term of office. So clearly it's something that we should all be proud of and certainly cognizant of.

Mr. Chairman, the second question relates to the privatization benefits fund. We opened the year with $422 million, and we would estimate that by the end of the year, we will close with something in the order of $450 million to $475 million. That will depend, of course, on proceeds of further privatization initiatives— land sales and that kind of thing — which might occur. It would also increase by virtue of the income earned by this fund, because as the House knows, this fund is invested for the benefit of all British Columbians and does make a contribution towards the annual operating statements of the government as those earnings are transmitted through to government.

[11:30]

HON. MR. MICHAEL: Mr. Chairman, I appreciate the response from the minister. I would like to put another question to the minister. Perhaps it may be argued that the question could better be put under a bill, but I think it could be answered by the minister now. It has to do with the new rules regarding the homeowner grant. The legislation has been passed, and the tax notices are being received by taxpayers. But the notices themselves seem to be very vague on information regarding the new legislation. I understand— as I'm sure most members of the House understand — that if your school taxes exceed $430 if you are under 65, and/or $700 if you are 65 and over, the current legislation provides that 25 percent of that sum over those amounts would be provided by the provincial government to reduce the tax load to the homeowner.

I have a question for the minister, if he has the answer readily available. Is there a cap on that? Can a person living in a $5 million, $8 million or a $20 million mansion receive that 25 percent, or is there some type of a cap figure placed on the amount that the 25 percent can account for?

Another complaint to the minister is that the tax notices seem to be very void on information. We know in this House that the figure is going to be increased from 25 percent to 50 percent in the next fiscal year. I see nothing in the tax notices to indicate that. There is very little information to the taxpayer and very little information in the current tax notices being received by homeowners as to what this supplementary provincial homeowner grant is. I think that's the way it's identified. Could the minister advise me if there is a cap on the amount a homeowner can receive on a mansion?

HON. MR. COUVELIER: Yes, I can advise the member there is a cap on the amount of supplementary grant that can be provided. The issue is one that elicited much public discussion during our property tax tour conducted by the Minister of Municipal Affairs and myself last fall. It became clear it was necessary to provide some property tax relief to citizens of the province. I'm delighted we were able to provide the supplementary homeowner grant, which has the effect of recognizing the anomalies that have arisen throughout the province by virtue of property values rising at an unusual rate— at varying rates — within jurisdictions, within municipal boundaries or school district boundaries. So there is a cap. We will provide that information to the hon. member.

The purpose of the cap, of course, is to ensure that to the extent we are able, we provide relief to all citizens, but proportionately more relief to those citizens who are most disadvantaged and find it a greater financial hardship.

MR. CLARK: Mr. Chairman, I'll pursue this either later in estimates or when the bill actually comes up in the House for debate, because there are some interesting questions around that.

I'd like to talk a little about the BS fund. Maybe that's not a surprise to the minister. It's appropriate that the Minister of Tourism (Hon. Mr. Michael) mentioned a letter from Peat Marwick Thorne, because Peat Marwick Thorne did a review of the provincial budget, and their analysis of the BS fund was among the clearest that I've read. I thought I'd just read it for the record.

"If the proliferation of funds to be created by this budget is any indication, the B.C. government must be pleased with the general confusion created by its budget stabilization fund, the so-called BS fund. In reality, this is not a fund at all, at least not a fund in the sense that there is any money in an account identifiable with this fund.

"In fact, a review of the balance sheet of the general fund, budget stabilization fund and privatization benefits fund discloses that liabilities are projected to exceed assets by $2,667 million at March 31, 1990. In other words, the accounts are in deficit by $2,667 million.

"On an artificial and arbitrary basis, this deficit has been divided up as a $4,693 million deficit in the general fund, and surpluses of $1,603 million in the budget stabilization fund and $423 million in the privatization benefits fund.

"Each year, in an arbitrary fashion, the way the deficit will be divided up into deficits and surpluses is changed, with a consequential supposed effect on the budget surplus or deficit. Of course, the funds

[ Page 9891 ]

given attention by the government are those in which a surplus has been manufactured."

This is actually quite nice. I have to explain this to people, as well as to the minister. I have several ways of explaining it, which I'll get to in a minute. But I kind of like this one by Peat Marwick Thorne: "The whole exercise is akin to being indebted to the bank for $50 but pretending that is the same as $200 of assets and $250 of debt, and then telling the world about your supposed $200 of assets while ignoring your supposed debts." That's quite a nice, simple way of explaining the fund. Then they go on to say: "Clearly the government is not assisting with the understanding of its accounts by describing each such different arrangement as a fund." Peat Marwick Thorne deserves a lot credit for being nice and simple in how it describes the BS fund— nice and tight.

Ron Pickerill, president of the Certified General Accountants' Association, was simple as well. He simply said that it was all smoke and mirrors; that a public accountant doing that sort of thing in a private business wouldn't get away with it. His critique was kind of general; he said it was really just smoke and mirrors. But at least I credit him with saying that the budget is in deficit and that there is no surplus.

I still think Peat Marwick Thorne's is the best, but the auditor-general's is close. The auditor-general said, with reference to the budget stabilization fund:

"When the government said that it was making transfers between that fund and the general fund, many people assumed that separate bank or investment accounts were established to serve as depositories for the money, in the same way individuals might set up their own savings or investment accounts. This is not what happened, however. Moneys transferred by the government into the budget stabilization fund to March 31, 1989, were, in effect, simultaneously loaned back to the general fund, which then credited interest at going market rates back to the budget stabilization fund in return for use of its money. Thus the only asset of this special fund was an account receivable from the general fund. There were no bank or investment accounts that could be specifically identified with the budget stabilization fund."

His is slightly more sort of accountantese; Peat Marwick Thorne's was easier to understand. What the auditor-general said is closer to what I've been saying, which is that it's sort of like writing an IOU to yourself and then saying.... Say you wrote an IOU to yourself— "I owe myself a hundred dollars" — and went around saying — "I've got a hundred dollars that I can spend that someone owes me." Writing an IOU to yourself is kind of close to what the auditor-general said: the money is simultaneously transferred back. It's taken out and then simultaneously loaned back to the general fund, so it's close. It's much like an IOU, so that's a good one.

The Peat Marwick Thorne characterization of claiming $200 in assets and $250 in debt, and not talking about the debt, is nice and tight. The auditor-general's approach really deals with the IOU, which is what I've been using for a couple of years; it is a good one.

But I like this last one that I've been using lately, because I think people understand it. It's like having a credit card — everybody has credit cards now and a credit card limit. Mine says, for example, that I have a $5,000 credit limit with MasterCard, and I don't owe any money on MasterCard. So I could go to people and say: "I've got $5,000 to spend." Sure, I can spend it on my credit card because I have that credit limit. It's like declaring that credit limit as an asset that I can spend, which of course is not true at all. It is true that I do have access to $5,000. So the BS fund could be viewed that way— that's the third option.

We talked about being on talk shows — Rafe Mair — and the minister was on yesterday and said some things. When I'm on this talk show, I usually run through these three definitions because I think it gets a little simpler, and I think those are generally.... There are other explanations, and maybe less kind descriptions of the BS fund than I've tried. But I think those three, to date, are the simplest.

I wonder if the minister would agree with the credit card analogy, or whether he likes the IOU analogy or the Peat Marwick Thorne view— or whether he could try to describe it himself.

HON. MR. COUVELIER: The hon. member, as he did last year, obviously wants to spend some more time on this issue of the budget stabilization fund. As we might expect, he takes selective comments and repeats them for the record.

I didn't come prepared this morning to give rebuttal quotations, but the hon. member and the House know that there is an opinion from Price Waterhouse, another internationally recognized accounting firm, which endorses the concept of putting something aside for a rainy day. There is also, as I mentioned earlier this morning, the comments of the Investment Dealers' Association and the endorsement of the chartered accountants' association of British Columbia, which also spoke glowingly of the manner in which these accounts were presented.

I suspect — as appears to be the case — that what we have here are political ideologues ascribing themselves to certain points of view, for whatever motivation I won't comment on. But for every one you can mount we can mount two, and if we wish to consume the public record with that issue I'm happy to oblige— although I don't have that particular information at hand, not having known that the member was going to raise it this morning.

However, it might be appropriate to read into the record issues that were discussed at Public Accounts on May 15. To questions put to him, Mr. Morfitt, the auditor-general, said: "Our jurisdiction, I think, is relatively close to the forefront in taking the recommendations of the committee into account in the presentation of its financial information. No jurisdiction has as yet approved or taken in hand all the recommendations of the CICA. It's a process which takes place over time...." Then Mr. Marson, the comptroller-general, also reporting to the Public Accounts Committee on the same day, said: "I think it's fair to say that through working together over almost

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a decade we have not only put B.C. in the forefront of accounting statements but are actually blazing the trail in a number of areas - for example, the consolidated statement Issue."

Furthermore, to questions put to him by the hon. member for Cowichan-Malahat (Mr. Bruce), Mr. Morfitt made this comment: "I would like to reiterate what I've said on other occasions. The financial statements of the province are, in most people's view, the best in the country. If they aren't, they're awfully close to it. Many other jurisdictions have not seen fit to consolidate their accounts whatsoever, so I think it's important to keep things in perspective." A little later on he also says: "The statements are in good condition, and I'm pleased that I'm able to present an auditor's opinion without any reservations. This is not true in other jurisdictions."

[11:45]

To further questions from the member for Cowichan-Malahat, the auditor-general said: "The interpretation of the financial statements is the subject of debate. The form and content we are quite satisfied with." To further questioning from, once again, that persistent member for Cowichan-Malahat, the auditor-general had this to say: "There are a number of jurisdictions in Canada that do not produce consolidated financial statements. The government of Canada does not produce consolidated financial statements. This province does, and has for many years." The third set of financial statements "is, I believe, as good and inclusive and informative as any other set of consolidated financial statements in the country."

The middle set of financial statements in Public Accounts is entitled "Combined Financial Statements". This relates to consolidated revenue, which is the fund governing central government, excluding Crown corporations and agencies. "That set of financial statements has been in existence in this province for many, many years. It also is very well developed, well presented and as good as or better than any" elsewhere in the country.

I'm indebted to the member for Cowichan-Malahat and other members of the Public Accounts Committee for assisting the auditor-general in clarifying the obfuscation efforts that have been put into this issue by members of the opposition.

The fact of the matter is — and there can be absolutely no denial by members opposite — this government, during its term of administration, has reduced public debt. The fact of the matter is that since this administration has been in office, we have reduced unemployment, we have so significantly improved our fiscal situation that the four international credit-rating agencies have improved our credit rating, and capital investment has never been as strong in this province. That's a fact. The reason why that occurs is that international investors want the comfort of knowing they have competent managers of public events. They want to know they have a government that deals with them responsibly and understands that government doesn't create jobs. Industry creates jobs, and if government is truly interested in creating jobs as opposed to creating monoliths of little centralist power-grabbers, they'll do all they can to ensure that private investment continues to flow into a healthy free enterprise economy.

For all the rhetoric surrounding the budget stabilization fund, and for all the attempts to confuse the issue, and for all the political posturing that we've seen evidenced over the last month and a half in this Legislature, there is no denying the basic truth that the economy of this province has prospered under this administration and is seen as prospering by all commentators in the financial community around the globe.

The House might be interested to know that last evening the Premier and I and some of our colleagues had the opportunity to discuss economic issues with one of the major international bankers in the world. Once again those commentators told us what we've heard repeatedly from these people who are so knowledgeable in looking at what's happening elsewhere in the world, outside the boundaries of this province or the country. They say unequivocally, Mr. Chairman, that this administration is one of the most sensitive they've experienced, and one of the most appreciative of the basic economic truths that are driving this globalized society. They look forward with confidence, as do we on this side of the House, to debating those basic philosophical issues at any opportunity provided.

MS. PULLINGER: Mr. Chairman, I'd like to make an introduction.

Leave granted.

MS. PULLINGER: With us in the members' gallery today are 20 hard-working, industrious and successful students from the Chemainus Native College in Ladysmith. I'd like the House to join me in making them very welcome.

MR. CLARK: There's no money in the fund, Mr. Chairman. I wonder if the minister could strip it all away and just tell the House that there actually is no money in the BS fund.

HON. MR. COUVELIER: The concept of a rainy day fund is now in place in 29 U.S. states. Twenty nine American jurisdictions see the merit of attempting to level out the budgeting process. This is particularly relevant, Mr. Chairman, in economies such as British Columbia's, which are subject to such volatile swings on the revenue side of a budget.

As I said a year ago when we debated this — and will say again for the edification of the members opposite, because they evidently have short memories: when you're subject to wild swings on the revenue side of a budget, by virtue of world commodity prices or a variety of other events beyond our ability to control, then you need a levelling device to ensure that there's some stability to the revenue side of a budget.

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We all know today that it's a historic fact that the expenditure side of the budget will always have upward pressures. There is always the new, emerging need that the government of the day must try to respond to. There is always the need to treat our staffs fairly and give them wage increases. Of course, there is an inflationary impact around the world, and we're no exception. So it's inevitable that there are heavy pressures on the expenditure side of any budget.

I think that we in British Columbia have been outstanding in our sensitivity to dealing with expenditure-side dollar allocations. As a matter of fact, it's ironic to me that the federal government and some critics have been critical of this government's expenditure growth patterns and have said that we're increasing our expenditures too rapidly and that this indicates a sense of fiscal irresponsibility. Of course, they conveniently forget that our debt costs are only four cents on the dollar— the lowest in the country. The fact remains that expenditure growth will be a constant concern.

If you take the issue of managing public money seriously, the question then becomes: how are we going to provide for inevitable revenue swings, ups and downs, cycles? How are we going to try to flatten out and give some consistency to the revenue side?

We could have, as I suspect a socialist government might have done, taken the windfalls that occurred in the '87-88 fiscal period and spent them. I suspect the members opposite, in their mad rush to spend more public money, would have done so had they had the opportunity.

What we did on this side of the House was say to ourselves: "Those are windfalls. We cannot anticipate they will continue ad infinitum, and we can safely assume that revenues in the province will continue to go through cycles and swings. What we need is a cushion or a rainy-day account, one that will enable the province to avoid cutting expenditures in essential social services in a downturn." It's a basic truth that in an economic downturn there is a greater need for social service expenditures than in healthier times. When that eventuality occurs, it will be necessary for us to have some rainy-day account by which we can draw the dollars across the account into the operating statement so that in that particular year we will be able to avoid a reported deficit budget.

Of course there's no cash in the account. The very fact of the matter is that this government takes the cash it receives on a daily basis, and it uses that cash to reduce our debt, to reduce the cost of borrowing and to ensure we get effective cash management on a daily basis.

If the member opposite didn't know, we have a small group of six or seven very bright young people who go in in the morning on a business day at about 5:30 and take off the bank balances in about 2,200 bank accounts— not only in B.C. but around the world. They take that cash as reported in those bank accounts, and they manage that money throughout the next 24 hours. It is by that device that we can ensure the financial interests of the citizens of this province are served to the maximum, and that every opportunity to reduce debt and to increase interest income is sought out by this group of public servants that I'm very proud to represent.

The job they do is recognized across the country. I can't travel anywhere in the financial community of eastern Canada, the United States, the U.K., Japan or elsewhere where I am not told about the exemplary performance of our treasury branch and the way they manage public money. Their dedicated efforts are something that we should all applaud. Due to the fact that we take that cash on a daily basis and manage it, we don't need to have a funded, dedicated cash balance in the budget stabilization fund. It is sufficient to have a book account from which we can draw those dollars across and avoid a deficit in an economic downturn.

That is effective financial planning. The initiative has been embraced by 29 U.S. states. Other provinces in Canada are looking at it. It is now recognized as being innovative, at the leading edge and a responsible way for an economy like British Columbia's to deal with this difficult issue of public money management.

So I am very proud to defend the budget stabilization fund, Mr. Chairman. I know all members of this House share my pleasure in noting the outstanding economic performance of this government in the past 12 months.

MR. CLARK: Buried among all of that very lengthy answer was the quote: "Of course, there's no cash in the account." I appreciate that the minister actually said that in the House, and people will see what the fund really is.

Mr. Chairman, I move that the committee rise, report progress and ask leave to sit again.

The House resumed; Mr. Speaker in the chair.

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

Hon. Mr. Richmond moved adjournment of the House.

Motion approved.

The House adjourned at 11:58 a.m.