Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

FRIDAY, MARCH 27, 1992

Volume 1, Number 11

[ Page 197 ]

The House met at 10:05 a.m.

Prayers.

Hon. L. Boone: It gives me great pleasure to introduce four distinguished visitors seated in the members' gallery this morning. They are the Brazilian Ambassador and his wife, His Excellency and Mrs. Paulo Pires do Rio. The visitors are accompanied by Mr. Marques-Porto and Mrs. Escosel de Moraes, consul general and vice-consul of Brazil in Vancouver. Would the members of the House please join me in welcoming these visitors.

G. Janssen: It gives me pleasure today to introduce Marlene Dietrich, my constituency assistant and a longtime worker in the Alberni riding.

Hon. L. Boone: As required by the System Act, I am tabling the 1990-91 annual report of the B.C. Systems Corporation. As this report is to be tabled in the Legislature within 15 days after its receipt from the corporation, I am happy to present it now.

Hon. G. Clark: I'm delighted today to table documents which I gave commitments to the opposition I would. First is a listing of the ranking of accounting firms, showing that Peat Marwick is the largest accounting firm in the country and that Deloitte and Touche is the second-largest accounting firm in the country, by both employees and revenue.

Second is the curriculum vitae of all the accountants who worked on the Peat Marwick report. There were 38 of them. I apologize to the members, because I said there were 42. Here are the curricula vitae and the 18 reports from Peat Marwick Thorne, which are in the public domain and which were given to the opposition. However, they've asked for them to be tabled, so I'd like to table all the reports of the independent financial review. 

Private Members' Statements

THE IMPORTANCE OF SMALL BUSINESS
TO THE ECONOMY OF BRITISH COLUMBIA

L. Stephens: When I was asked by our caucus to make a private member's statement on the importance of small business to the B.C. economy, it was my intention to make a highly personal statement. As a small business owner myself in my constituency of Langley, I could tell the hon. members of this House something of the personal struggles that our small business owners go through. I felt I could provide a unique perspective of the importance of government policy in fostering small business development. That was before yesterday's speech. I speak to you today not simply as an hon. member of this House but also as a person with a personal perspective on the destructive measures in this budget document.

Like many thousands of British Columbians, I actually hoped this government appreciated and understood the crucial role small business has in job creation. I believed they understood the impact that small business loans and investment have in propelling our economy. When the Premier of this province went to the bond-raters of New York and Europe, he said: "British Columbia is open for business." I thought he meant it. Unfortunately, that message to the international business community has proven as empty as the promises this government made during the election campaign.

This budget raises the minimum rate of corporate income tax even on small corporations. It slashes the budget of the Ministry of Economic Development, which has a vital role to play in assisting new business in this province. It raises the cost of doing business on everything from fax paper to the legal services that every small business must use from time to time.

I am sure my colleague the hon. member for Delta South, who will be speaking to this House in a few minutes, will have much more to say about the destructive impact of this budget. I certainly defer to his expertise on matters of finance. However, it seems an opportune time for me to rise and to remind this government of the plight of small business and of how, at this time, they need the help and understanding of this government, not the knee-jerk response they have received.

Let's consider some of the facts. Small and medium businesses account for over 90 percent of all businesses in British Columbia. Fact: firms with fewer than 50 employees accounted for 290,000 new jobs for working men and women in this province in the last decade. Fact: 76 percent of exports in technology in this province are provided by small business, high-technology operators. This province enjoys $5 billion from tourism revenue, mostly generated by small business operators, from one end of the province to the other.

Hon. Speaker, these figures demonstrate that small business is the lifeblood that pumps through the economy of this province. Small business is attracting an increasing number of entrepreneurial women and diversifying the economy. Our small businesses are mostly owned by British Columbians. The profits stay here. The owners and employees live here, reinvest here and pay taxes here -- more taxes today than yesterday.

This NDP government says that the small business community is uppermost in their concerns. This NDP government solicited small business support in the last election and claims they represent their best interests. I do not think this government has a clue what small business is all about. I don't think they know what the words "profit", "meet a payroll", or "financial statement" mean. This government is not listening. This government does not understand that you have to create wealth before you spend it. This government does not understand that there is a limit to the amount the small business people of this province can pay. There is a limit, and the small business people are fast approaching it.

Let me just point the attention of the hon. members opposite to the future of small business in British 

[ Page 198 ]

Columbia after yesterday's budget. Simply put, this government is driving small business in two directions: into the ground or south of the border. It used to be that our competition was the neighbour down the street or in the next community. Now our competition, as a result of this government's ill-conceived tax policies, is in Washington, Oregon and California. Small business is a vital part of the economy. When is this government going to start treating it with the respect it deserves?

D. Schreck: Hon. Speaker, on this side of the House we recognize that small is beautiful. It's one of the reasons the members on this side of the House are dedicated to keeping the size of the opposition benches as small as possible for years to come. I note that my friend the hon. member for Langley has taken the liberty of using private members' statements today for going on at some length and really responding to my colleague the Minister of Finance in the budget statement.

On this side of the House we recognize the importance of small business on more than just budget day. We recognize that small businesses become the engine of growth in the B.C. economy. We respect the entrepreneurial ability of men and women throughout British Columbia, and we recognize that our government has done more in this budget to further entrepreneurial ability and small business than any government in the history of this province.

[10:15]

I know that when I speak to the men and women in North Vancouver-Lonsdale, they are encouraged by the steps my government has taken to reduce the deficit by $1 billion relative to the record run up by the members of the third party. I know that the small business men and women in my riding running restaurants are delighted that this government did not reinstitute the restaurant tax that members of the third party inflicted on restaurants once upon a time in this province.

I know that the business men and women in British Columbia are delighted to have a government which is not the laughingstock of North America. Men and women throughout British Columbia are proud of the fair and balanced approach our government has taken with respect to very difficult financial circumstances.

This term "small business" is thrown around by the hon. member for Langley. But we never really get down to discussing what's "small." The small business entrepreneur can be running a business from home, such as a software consulting firm, a garden service or a housecleaning service. Those are the true individual entrepreneurs whose own personal signature on the loan is all they have to go with. Or it could be a business as small as 50 employees. If you're running a business from home and you look at the business employing 50 employees, which is small in comparison to many of the multinationals, you think that a 50-employee firm is a virtual giant. We have to understand, when we throw around this catch-all term of "small business," that we're really talking about a considerable range. And when we want in this House to show empathy towards small business men and women, we have to understand their individual problems. The problems for the small business working from home are considerably different than those for the small business in my constituency that may have 25, 40 or 50 employees. The small business working from home or the small business with two, three or four employees cannot take advantage of many fringe benefits for their people. They can't take advantage of dental and pension plans, because they are so small that many of the rules of our society do not apply to them. Our government is committed to extending equity and fairness to look after all British Columbians and to understanding these differences -- not lumping them into one catch-all term.

The commitment by my government in this budget to not go ahead and increase the sales tax is a commitment to all British Columbians, and it helps businesses small and large. I've mentioned that we have no sales tax on restaurants. We have no increase in the sales tax. We have stopped the laughing throughout North America at the government of British Columbia that we suffered under the hands of that third party. We've put British Columbia back on track. We understand that small business is more than one catch-all term. We understand that there is a face on small business, a face on home-based businesses, a face on corner grocery stores and a face on small practices up and down the main streets and side streets of this province from corner to corner. We do not categorize people in one big bucket. We understand each and every one of the problems of people in British Columbia.

We look forward over the weeks ahead to debating with the members opposite and finding where they truly stand.

L. Stephens: For the information of the hon. member for North Vancouver-Lonsdale, small business is defined as businesses employing less than 20 employees.

This government insists on spending money before they've earned it. If the government's priorities are to support health, education and social services, then it shouldn't pull the props out from under the economy and small business.

This government is sapping incentive, overtaxing and eroding consumer confidence. This government should at least give small business an even break with its competition south of the border. Small business people in British Columbia can compete. Small business has an impressive record of growth, job creation and employment in this province. Will this government learn that before you spend, you earn, and before you earn, you invest? Until this NDP government learns these basic lessons, leave business to look after its business.

THE COMMUNITY OF CASSIAR

J. Pement: I rise to speak about the community of Cassiar today. As you, hon. Speaker, and all of us are well aware, our new government is in a tough fiscal situation, with little room to move when it comes to initiatives. It is under these circumstances that our 

[ Page 199 ]

government has made some difficult decisions regarding the financial problems of Cassiar Mining Corp.

The previous administration provided a $20 million loan to Cassiar in 1988, and a $5 million guarantee in May 1991. Even with this assistance, the company faced serious difficulty.

After an extensive examination of the company's proposal, the job protection commissioner recommended that the province not ask taxpayers to take risks that company shareholders were not willing to take. This came about from a financial organization plan requesting a $13 million loan and other debt conversions from the government. The shareholders were not willing to invest their money in the mine at this time.

Our government has made a commitment to be fiscally responsible and could not in good conscience ask B.C. taxpayers to make the requested investment. Unfortunately, there was also no guarantee that provincial support would secure the survival of the mine. The government tried to work out a soft-landing plan that would have kept the mine open until July, while a new investor was sought. This offered families the advantage of a summertime move if no new investment was found and would allow children to finish their school year in Cassiar. The soft-landing plan was not without risk. It would have required continued physical upkeep of the mine itself; the cooperation of the company, banks and creditors; and the maintenance of good labour relations.

However, events forced the provincial government to ask the courts to appoint a receiver, and this happened during negotiations on the soft-landing plan. The company demanded an immediate cash infusion, without any agreement to protect the taxpayers' interests. The company wanted funds without signing on the dotted line. It was unacceptable to the government for funds to be advanced to the company without protection for the taxpayer. The legacy of bad loans by the previous administration, totalling over $300 million -- revealed by the independent financial review -- shows that this practice is just irresponsible, and it will not be tolerated under a New Democratic government.

Cassiar is a community which is geographically isolated from the rest of British Columbia. It is some 700 kilometres from the nearest B.C. population centre of 5,000-plus, and that's Terrace; and the next one is Smithers, not too far away as well. It is 150 kilometres from the nearest year-round airport, at Watson Lake in the Yukon. Cassiar is located in one of our most sparsely populated areas. This unincorporated community comprises nearly 50 percent of the population in the only administrative district in the region, the Stikine local health area.

The residents of Cassiar have virtually no alternative employment opportunities. Cassiar provided more than one-third of the total employment in a 137,000-square-kilometre district and over 70 percent of the primary industry in that area for jobs. Aside from Cassiar Mining Corp., with its 324 employees, there are simply no employers of significant size within a 350-kilometre radius of Cassiar itself.

The townsite of Cassiar has historically been owned and operated by the mine, and in the absence of a municipal infrastucture, residents have been totally reliant on the mine operator for basic and essential services. In recognition of this unique situation, our government has made a commitment to ensure that the people of Cassiar are treated fairly and equitably and with dignity. While we could not put taxpayers' money at risk in Cassiar Mining Corp., we believe all British Columbians are willing to invest in the people of Cassiar and their future. We have taken responsibility for the townsite, formerly dependent on the mine, and now operate local services, such as heat, power, water, road maintenance, etc. Along with officials of the federal government we helped establish an industrial adjustment committee to look into the needs of the community and find ways to provide the necessary services. Job search initiatives are underway: computer-aided search methods help Cassiar workers identify jobs and careers, and the Northern Lights College is assisting with retraining. A number of different courses are being offered to the workers in order to acquire gainful employment elsewhere, and the college is offering specific courses for older workers on the special problems that they face when they become unemployed.

The Minister of Forests has written to the federal Minister of Finance asking for exemption from the federal income tax on adjustment packages received by the Cassiar residents for pay in lieu of notice, relocation and equity repurchase. We believe the provincial support offered by British Columbia should stay in the pockets of those who need it most, and expect that a federal order on tax remission will be forthcoming.

As the government continues to support the Cassiar residents we also continue to look for a buyer for the mine. Four investors have expressed a strong interest and have paid a $100,000 deposit to inspect the mine and the balance sheets. While we hope that some of the arrangements can be made to find an investor, it would be unfair to the residents -- and frankly immoral -- for the government to overstate the possibility that a new investor will be attracted. That is why we continue to provide the means for residents to get on with their lives.

As the member for Bulkley Valley-Stikine I know full well that the fiscal decisions that were made were tough. The government has made those decisions and based them on prudent use of the taxpayers' money. At the same time, the government has a well-developed program to invest in the future of the people of that community. These are difficult times in Cassiar, but the people of Cassiar know that their government has not abandoned them. In fact, we continue to work together for the new opportunities that lie ahead.

D. Jarvis: It's obvious that my friend across the floor marches to a melody alien to the majority of people in B.C., I'll tell you that.

Cassiar: we're glad you brought that up. We are also concerned with Cassiar Mining Corp., and the people in Cassiar, the workers and their families, and the people up and down Highway 37. We do not feel this 

[ Page 200 ]

government has treated them very nicely. Let me put it this way: there are a lot of questions that remain unanswered. You have been orchestrated by Mr. Bob Williams, and you're reading notes printed out by Peat Marwick.

[10:30]

Interjections. 

D. Jarvis: Let's point out a few things about it, then, if you want to know it. The previous government, I'll tell you.... 

Interjections. 

The Speaker: Order! Could I remind the member to address his comments to the Chair. 

D. Jarvis: Yes, I shall. I'm new at this job, Madam Speaker.

The previous government made every effort possible to help the people in Cassiar -- the families -- and rightly so. That was because the fibre was there; the world markets were there; the contracts were signed; the manpower was there; the expertise was there. 

An Hon. Member: People power. 

D. Jarvis: Definitely. However, when this government was asked for help, this government panicked. When they were faced with an economic decision that would normally be handled very well by someone familiar with the free enterprise system of this country, they panicked. They had a clear case of myopia. Entrepreneurs built this province, not socialist governments.

The company, prior to asking for the $13 million, approached the government and said: "We have a way to handle this problem." Under a previous agreement under a previous government, their assets were tied up in previous loans. Providing this company was able to produce the right figures and numbers, the government had agreed to release all their assets held in security. They had arranged with the federal government to sell them their wharves in North Vancouver. However, this government here panicked again. They refused to release all the securities.

Cassiar Mining could have financed their way out of this problem without any cost to this government. 

Hon. R. Blencoe: Prove it. You can't prove that. 

D. Jarvis: It's there. The records are in there. However, there's also another problem. This government was afraid to make a decision. They were afraid they were going to look soft. They were trying to give the impression that they were saving the taxpayers money. There were no savings to be made by this -- just heartbreak for thousands of people up in the northwest corner of B.C. While this government vacillated, a town died. They would not make a decision. Appropriation by procrastination is what it was, my friend.

These softies were going to arrange for a soft landing. The soft landing of which the member speaks was more like a crater -- and that's not an open-pit variety. Anyway, they are now looking for another buyer. One of the last B.C.-owned companies they're going to sell off to either Japan or the United States or to eastern Canada.

One more thing before I sit down. She talks about looking after the people in Cassiar. I was talking to the people in Cassiar. They are not happy up there. It costs $6,000 to $9,000 to move down to Vancouver. This government is prepared to give each family $2,000. They write them a cheque for $2,000; they charge them 30 percent tax right off the top of it. Some government! Some soft landing! 

The Speaker: I regret, hon. member, your time has expired. 

J. Pement: Hon. Speaker, obviously this critic has no idea what Cassiar is about at all. Cassiar is an isolated community. Go up Highway 37, fly into Cassiar in a small plane and land on the strip and talk to the people. Get in there and talk to them. They are satisfied with the package the government has given them.

Interjections.

J. Pement: You haven't gone in and talked to the people. Go in and talk to them.

Nevertheless, it is a unique situation. I think that the residents and the workers themselves recognize that the company could not pull it together -- that the shareholder was not willing to put money on the table. When they took the money off, that showed non-support for the people in Cassiar from that company.

This government did not vacillate. This government worked hard in order to put together a restructuring plan. They worked very hard with the job protection commissioner to put together a good plan. And what happened? The company pulled the plan right off the table. They left the people of Cassiar holding the bag, and that's not right.

The government has corrected that situation. The government has given them relocation and has helped in terms of the equity in their houses and with their pay packages and severance. This is a good situation for the people of Cassiar out of a bad situation that the company developed itself.

I would suggest that hon. members on the opposition side go up to the community of Cassiar and find out what it's really like to work in an underground mine with the cutback situation that they had to work in. Go into that mine, slug through that water, and find out what it was like to try to work in a mine that was not working and for a company that was cutting back on the money. This government has done a good job in terms of dealing with the people of Cassiar, and I would suggest that anybody who has a complaint should go up Highway 37 and find out what it's like.

[ Page 201 ]

PRIVATE ENTERPRISE IN B.C.

L. Hanson: I would like to address the House this morning on the issue of free enterprise. It's important to note that for the first time in this century, every party represented in this Legislature supports the free enterprise system. My party, as you all know, has always believed in the concept of free enterprise. The Liberal Party, although it has moved sharply to the left since the last time there was a Liberal caucus in Victoria, still professes to reject the socialist model. Hon. Speaker, the Premier stood before the Victoria Chamber of Commerce and said: "I am not a socialist." He took the pledge again in front of a Vancouver business luncheon. He said: "I believe in the market system. No one can seriously question its effectiveness in creating wealth and prosperity." Even though my party lost the last election, I'm sure all members can appreciate how gratified we were to learn that we had won the war, and the idea of free markets had not only penetrated eastern Europe but had sunk in with the NDP here in British Columbia.

The people of British Columbia were happy to see this transformation, too. They have always been free-enterprisers, and they were happy to be reassured by the NDP leader that his government would not be a repeat of the Dave Barrett disaster. The people of British Columbia were assured time and time again over the last few years that an NDP government would allow a market system to operate in this province. They trusted the NDP, and heaven help them if they breach this trust.

Hon. Speaker, I am sorry to report that they have already breached this trust. The first NDP throne speech and the first NDP budget speech breached this trust, but nothing shows the NDP's commitment to socialism and deception more clearly than the so-called fair wage policy. This policy is a fixed wage policy -- a policy designed to subvert the workings of the market in order to realize a political goal of the New Democratic Party. It intervenes in the marketplace in order to advance a group of NDP supporters at the expense of all other British Columbians. Non-union construction workers will lose their jobs, women will lose more ground as the wage gap widens, municipalities and school boards will face increased costs, and taxpayers at all levels will have to cough up more money. That is not what the people of British Columbia bargained for when they elected an NDP government, and that is what is most disturbing about the fixed wage policy.

The NDP assured British Columbians time and time again over the past two years that it was a convert to free enterprise. There was no mention about anything remotely like a fixed wage policy in the NDP's 48-point election platform. The fair wage policy is one of the biggest broken promises in this government yet. Not only does it break the promises of open and honest government, of no special favours for government supporters and of pay equity, but it breaks the promise of moderation and free enterprise, which was the central promise of the entire NDP election effort. How can a government which claims to be open and honest even consider introducing such a major policy change only five months after the election and without notice, without consultation and without explanation?

The Premier told the media that he would be consulting people. I ask you, hon. Speaker, who has he consulted? Has he consulted anyone beyond the construction-trade unions who paid for his election campaign? Is this another case, as in the last election, where the Premier claimed to have consulted with Kenneth Dye only to find that Kenneth Dye had never met with him? So much for openness and honesty.

British Columbians might be prepared to accept some government intervention in the market if it were openly and honestly brought forward by honourable means. Pay equity, for example, which is something that was promised in the election campaign, might be acceptable as a reasonable imposition on the market system, but to ask the taxpayers to shell out $200 million to raise construction wages from $21 to $30 an hour is unacceptable. People making 30 percent more than the average hourly wage in British Columbia and four times the minimum wage do not require the government to intervene in the marketplace on their behalf. British Columbians are not prepared to intervene on their behalf, and before the election the NDP gave all of us the impression that they weren't going to intervene either.

J. Beattie: I'm glad to respond to the remarks of the member for Okanagan-Vernon. Ostensibly he rose to speak about free enterprise. I think he got waylaid on a number of specifics that didn't seem to address the issue of free enterprise.

[10:45]

Interjections.

J. Beattie: I thought he was.

I want to remind the opposition benches that we did present a vision in our throne speech. I'd like to remind the House that this is the first time in 33 years that there was not a registered vote on our throne speech. I accept that as being an acknowledgment of what a brilliant vision this is for the province.

I want to talk to the hon. member about the changing world. Certainly we recognize that the Soviet Union has collapsed into a pile, and we also recognize that Reaganism and Thatcherism have fallen into the dust. This government represents a moderate approach to the business of taking responsibility in the province and governing it the way it should be. Intervention is something that the Socreds know all about. We know about the free enterprise friends and insiders who received loans that were never repaid. That's the type of free enterprise Social Credit represents.

The people of this province want a government that protects the environment. The people of this province want a government that maintains the level on health care. The people of this province want to see a province that's searching for greater markets in the world. The fact of the matter is that the deficit left by the previous government has put the people of British Columbia into a real hole when it comes to spending ability.

There are a number of ways of supporting the free enterprise system. One of the ways is to give to the 

[ Page 202 ]

corporations -- cut the corporation tax and put the taxes on the individual. Or there's another approach: pay your fair share. At the same time, no increase in sales tax, no restaurant tax, an increase in the homeowner's grant, no increase in....

Interjections.

J. Beattie: I hear the hon. members complaining about the fact that they've lost the supplemental grant. The average British Columbian who owns a low-cost house is able to take advantage of a higher homeowner's grant.

The money that's available to the people of British Columbia to spend on enterprises in their communities is what will make this economy grow. I called an owner of a furniture store in my community of Penticton. He said: "Jim, what was the budget?" I told him what it was. He said: "Was there an increase in the sales tax?" I said: "No, there is no increase in the sales tax." He said: "That's great, because that's what destroys the economy of the province." We've taken a moderate, rational approach to advancing the aims not only of business but also of individuals in this province. I'm proud to stand up today and defend free enterprise, a free market, and the support of the people of this province.

L. Hanson: Obviously the government is not going to listen to my counsel today, but I ask them to at least listen to the people of British Columbia. I have received hundreds of letters from people across the province on this issue, and no doubt the minister responsible will be receiving that same correspondence. One letter voiced the valid concern that this policy will affect the competitiveness of our private sector. I quote: "The legislated wage will affect not only the government's ability to build capital projects by making them more expensive, it will also raise rates in the private sector." You can't tell your employees they make $25 an hour working on a government office building and $21 working on a private office building."

Another warns that this will spread to other government employees. Although this initiative flows from the building trades, to give it life only guarantees a me-too response from other sectors. Why does this policy affect only public construction contracts? Why not other government contractors, such as architects or advertising agencies? Are the building trades chosen because they have donated more money to the NDP campaign than other unions? Or will other friends of the government be next?

Another letter says: "Governments must stay out of our business and let the marketplace dictate. Wage controls only serve to strangle private industry and destroy the free enterprise market. Less industry means less employment, and who gains from that?" That one sounds like the Premier did just six months ago. "What happened to 'No deals for friends and insiders,' 'Open and honest government,' and 'Open for business'?" writes another constituent. I could go on and on with these letters if I had the time, but I think I have made my point. The government has deceived British Columbians. It has sprung a new policy into the throne speech without ever mentioning it during the election campaign. It has betrayed the trust of British Columbians, and the people of this province will not forget it.

THE E&N RAILWAY

J. Pullinger: I'm pleased to have a Friday statement that's not controversial, that doesn't deal with anything we deal with in the House, just as Friday statements are supposed to be.

Over the past few years, I think all members of this House have become very aware of the E&N Railway on Vancouver Island. It's been the subject of much attention, and that attention became very sharply focused in 1988-89, when the federal government decided it wanted to break its commitment made in the constitutional process and discontinue the E&N Railway. That attention became very focused, and what happened was that from Vancouver Island, the whole length of the railroad and beyond, there was instantly a large and heavy and angry response from the people and probably the largest petition I have ever seen.

My colleagues and I, who were in opposition at the time, were vehemently opposed to what happened. We instantly responded with a press conference. My colleague from Nanaimo -- I was from Nanaimo at the time -- put forward some proposals about how the E&N might be better run, what the difficulties with it were and, in fact, what the lost potential was. So there was a loud, clear voice of protest from the New Democrats when that happened.

Of course, finally, the government of the day sued the federal government, and happily they won. In 1989 the B.C. Supreme Court ruled that the federal government has a constitutional and contractual obligation to operate the Victoria-to-Nanaimo part of the route in perpetuity, as was the deal. Thus, the federal government could not discontinue or cut passenger rail service on the Island. Shortly after that judgment, the B.C. Supreme Court also ruled that the northern part of the line to Comox must continue to run in perpetuity.

That's as it should be, hon. Speaker. As anybody who has looked at the history of Vancouver Island and the E&N Railway knows, British Columbians have paid very well for that railway, and for the federal government to simply walk away from its contractual and constitutional obligations I don't believe is acceptable to anybody in this House.

Let's not forget that the original line was built by Robert Dunsmuir at the end of the nineteenth century. Robert Dunsmuir, if you remember, was the big coal baron of Vancouver Island. He was also a Conservative politician and was Premier of this province, as was his son James. Isn't it interesting that the basis of that family fortune was one-quarter of Vancouver Island, with all the mineral rights and rights to cutting the trees; plus a little gift at the time of $10,000 or $20,000; plus ten years tax-free? The Dunsmuir family, who just happened to be in government, ended up with all that in exchange for 66 miles of track, which I believe the first summer's logging paid for. The people of British Columbia have done very well indeed.

[ Page 203 ]

An Hon. Member: A coincidence.

J. Pullinger: That was just a coincidence, of course.

That was one of the original sweetheart deals by Conservative governments in this country. That paid very well. The Dunsmuir family's fortune was based on that, and I would argue -- and I think there is lots of evidence to support it -- that there have been many fortunes built on that same land since. To ask people to simply let the federal government walk away from its obligations is not going to fly with the people of B.C. We're not going to accept that.

The federal government continues to try, however, and at this very moment there is an appeal pending before the courts. That, of course, limits our options at this time. As the federal government is continuing to try to discontinue this line, it is obviously not likely to plug much more money into it. What we have is a minimal system that just barely meets their contractual obligations and that is not very effective. Quite frankly, I think we can do an awful lot better.

Perhaps once the federal government has exhausted their legal options -- and hopefully they will lose -- they will be more interested in making it work. We on this side of the House believe that there is a tremendous amount of lost potential in that railway.

My colleague Dave Stupich, the federal MP for Nanaimo-Cowichan, Patrick Hind, a local citizen who has pushed for the railway for a long time, and I met with officials of Via Rail just recently and were very pleased to see that there is, in fact, some room to move under the status quo and that they are willing to look at any option we can come up with in terms of scheduling, ticketing or special use of the trains. I will be exploring that option with my colleagues.

C. Tanner: I stood up today, for a change, to offer support from this side of the House for something that was going to happen on that side of the House, but it didn't happen. What was the member for Cowichan-Ladysmith talking about? Was it a history lesson?

She said that in 1988-89 there was a court case between the provincial government and the federal government and that we won. We did win; we won the case, and we lost the war. She said that's how it should be. Well, that's not how it should be. The case right now on this Island is that if you want to go from here to Nanaimo on that railway, you phone Winnipeg. That's how it should be?

If you want to find out something about that railway in this country, you've got to find advertising. You've got to tell the world about it. This company, CP Rail.... Via Rail doesn't ever advertise or promote. We've got a peculiar circumstance on this railway, which I've never heard of before, where one company owns the rails and another company owns the rolling stock. If you want to get a decision, they always pass the buck. If you say to the rail company that you want to go on it, they say: "We can't keep the rails in any sort of shape."

It would please this side of the House particularly if the member, when she closes the statement in the last three minutes, would explain the purpose of her talk.

In the meantime, I have a few suggestions. Has she thought about promoting the railway for ski tours? Has she thought that perhaps a three-day trip might promote a ski tour? Has she thought about reversing the system now, so that people who live up there can use it as a commuter train? If it started from the right end in the morning, perhaps they could commute here. That party over there is very keen on telling us that they want to help improve the environment. This is a way they could do it.

[11:00]

Have they given any consideration to perhaps utilizing that railway in the same way that the previous government used the Royal Hudson? Have they given any thought to the historical significance of having a steam train on those tracks? When they cut down their tourist budget, are they really interested in investing some money in an industry which potentially could give people jobs? They keep telling us they're trying to promote this.

Have they given any thought or consideration to perhaps taking over this railway or having B.C. Rail taking over this railway? Unfortunately, to do so you have to invest. You have to be prepared to take a chance like any good businessman does. You have to be prepared to take a chance that you might lose, that you might not succeed. But you have to take the chance to invest. It's called free enterprise.

Can we look forward to the day when this government will have the intestinal fortitude to take a risk on something, put their dollars in first, earn some money and then start spending? Can we look forward to the circumstances when the people in this town of Victoria don't have to phone Winnipeg to get a ride on their own train?

J. Pullinger: First of all, that was a wonderful start on some patronizing twaddle, but obviously the member doesn't understand the purpose of Friday statements. I would suggest he go back to the handbook on the Legislature and legislative proceedings and discover the purpose of Friday statements -- because you are off track, if you'll pardon the pun.

I also found it very interesting to listen to the member talk about government takeovers and free enterprise in the same breath, and try to argue both. That was interesting and wonderful stuff. I'd like to correct the member -- you don't phone Winnipeg. It is, in fact, New Brunswick that you have to phone, which is worse.

I would like to offer to table for the members opposite the report that this side of the House -- my colleague the critic for transportation, myself as tourism at the time and all the members from Vancouver Island -- drafted and put forward. We put forward a proposal that talked about ski trains, about extending the line and about pocket cruises back to Victoria. We put forward proposals that talked about a tourism train which would stop at places like Duncan, the city of totems; Chemainus, where they've done a tremendous job with tourism; and Ladysmith, Nanaimo and all the small communities up and down the Island -- to take 

[ Page 204 ]

tourists out of Victoria, move them up-Island and get some tourism into the regions.

We also talked, not about a commuter train as such -- because it's unrealistic with the setup that we've got right there, quite frankly, if you speak to the people from Via Rail -- but some sort of interurban with a schedule that would work so that people from up-Island could come to Victoria for the day. We've talked about all of those things, and I offer, with the best of intentions to the member, to happily table those reports. We will send you a copy if you like. It's all done; it's all in writing. It's been sitting there for three and a half or four years now. We'd be happy to let you have that.

I would just simply like to caution the member, though: he doesn't seem to understand that this railway is still subject to litigation. There is a court case pending. You might want to be a little bit careful about the statements you make and how you deal with this so you don't jeopardize British Columbia's case against the federal government. Let's not forget that this is a federal responsibility. It's constitutional. It's contractual, and it has been held up in the courts of British Columbia. I hope, hon. Speaker, that it will also be held up in the Supreme Court of Canada, because we've paid for that train, and we should have it on Vancouver Island and have it working well.

Hon. M. Harcourt: I beg leave to present the report of the outcome of the discussions of the first ministers' conference on the economy.

Leave granted.

Hon. M. Harcourt: I was asked by members of the House if I would be able to table the outcome, and I am pleased to be able to do so. This has come out of the two days of meetings that took place in Toronto between the first ministers. Members can see that in five weeks preparation for this, we did indeed have some excellent work done by people like George Ford, my deputy, and the other deputies and first ministers on areas that are important to restructuring the Canadian economy.

Without getting into the details of this, though, I would like all members of the House to have access to the summaries of very extensive policy papers with specific actions attached to them that are now going to be followed up by first ministers, trade, transportation, social services, health and other ministers over the next few months, leading to the Premiers' conference in Prince Edward Island in August. I hope the members appreciate that we have just been able to get this information. I'm pleased to be able to make it available to members of the Legislature.

G. Wilson: I thank the Premier for tabling this document and his offer to table subsequent documents that will allow us an opportunity to review, in some detail, what the first ministers are doing.

The Speaker: Hon. member, is this a point of order?

G. Wilson: This is a response to the tabling. By leave?

The Speaker: I don't believe there is a response required to the tabling.

G. Wilson: I request leave.

Leave granted.

G. Wilson: I noted in the documents that were tabled that it was interesting that there has been a commitment to significant infrastructure investment. It was recognized how that was, in fact, going to be important for the economy of Canada. It is regrettable, however, that in this budget we have substantially cut our investment in this province.

I also noticed with some interest that there is a long time lag with respect to the removal of interprovincial trade barriers, and it will be with some interest that we review how that time lag is going to affect us given that we're losing $7 billion a year in this country as a result of the trade barriers that are here.

However, the offer from the Premier is a generous one, and we intend to review the documents with great interest.

Hon. G. Clark: I know members will forgive me for taking this opportunity, but Mr. Gerry Lindner, who people know has been the chamber supervisor in this House for the last two sessions, is retiring today. I want to take this opportunity to thank him for his service to members of the House. He has worked here from April 1988 to March 27, 1992 -- for four years. Gerry's worked in various positions with the Sergeant-at-Arms staff: he worked in the gallery as a mailman and was chamber supervisor for the last two sessions. As I understand it, he will be working in Parksville to pursue business opportunities with his family. I know that all of us wish him all the luck in the private sector. We also want to pay tribute to him today, because this work is necessary for the functioning of democracy. He has done just an outstanding job, and we'd like to collectively thank him for that.

Orders of the Day

Budget Debate

(continued)

F. Gingell: Hon. Speaker, it has taken five months and ten days from the election of October 17, 1991, to reach this point. For me it has been an unusual experience. Although I have spent 20 years in the practice of chartered accountancy and 20 years in business, I've never had such a frustrating and difficult five months and ten days. It has taken us this long to get on with the job that we've all been elected to do. We've been delayed and put off. We've been in the dark.

There has been secret government spending by special warrant. Talk of open government was just a blind. The government during the election campaign had made certain commitments. Some they decided 

[ Page 205 ]

could be ignored, but some had to be kept. So one of the first things that happened was that the Premier went off to the far east to assure the world that things in British Columbia, this time under a New Democrat administration, would be different.

Interjection.

F. Gingell: Absolutely. I show you an extract from the Vancouver Sun: "No more tax hikes, Harcourt promises. The only two tax increases he says his government will introduce in the spring budget will be a 7.5 percent tax on corporate profits and an income tax surcharge on high-income earners."

Again he was quoted in the Times-Colonist on November 23. He said the province is open for business and promised there would be no surprises. Asia's big money players get some political reassurance. The people of Hong Kong were reassured by the Premier. Two areas of concern kept coming up in his talks with businessmen and journalists. Will a New Democratic Party government increase taxes and tilt labour laws in favour of labour? The answers Premier Harcourt kept giving for the past eight days were simple: "No. No. No."

The promises they made that fair wages in British Columbia would be union wages, that the people of British Columbia would not be assured of getting the very best value for their dollar, made them realize that they had to start a program of softening them up to increase taxes. Trial balloons have been floated like you wouldn't believe. It's a wonder that the ozone depletion problem hasn't been solved by the fact that there have been so many balloons up there keeping all the unhealthy rays out.

They had a tale of gloom and doom. They fired up the jet, and they went off to Prince George, Vancouver -- anywhere there was an audience to listen to this tale. At one time I thought their plan to kick-start the economy was by increasing the demand for newsprint. But all the time there was a plan. It was to wreak revenge on Social Credit for the damaging Clarkson Gordon and Co. report that criticized the NDP administration of the early 1970s, and it set the stage for the March 26 tax grab -- the three-quarters of a billion dollar tax grab.

[11:15]

In the past three months Peat Marwick have been front and centre. When you listen to all that is going on, I sometimes wonder whether they have been more important in planning the economy of British Columbia than you have, Mr. Minister. They should pay you a million dollars, Mr. Minister, rather than your paying them. The free advertising you have given them has been phenomenal. You have made them a household word. Now other NDP governments may well use them to write their budgets, just as you have: the Peat Marwick rent-a-budget program.

The Peat Marwick report reminds me of an old cartoon. I promise not to take up much of your time, but I'm going to try and tell it. See if I can make it work. In a Punch magazine of the 1890s is a cartoon that over the years has been printed and reprinted many times. It's called the curate's egg. The curate is sitting at lunch with the bishop, who is a big, fine man, in his gaiters. The curate has broken his egg, and there's a smell coming out of it. The bishop says: "What's the matter, my dear man? Isn't that egg all right?" The poor little parson says: "Oh yes, my lord. I assure you that parts of it are fine." Well, parts of this Peat Marwick report are fine. That I will concede, hon. Speaker. But some parts of it, just like the egg, stink.

What parts of the report are bad? The report has been worked on and developed to produce the rationale that there is tax room in British Columbia. Does the tax regime we have here compare to the tax regime in a province 5,000 kilometres away? No, it doesn't. Does it matter how the tax regime in British Columbia compares to a province that's only 3,000 kilometres away? No, it doesn't. What does matter is what is in our own back yard; that's what matters -- the tax regime just over the 49th parallel. Yesterday it became apparent to us that the whole Peat Marwick exercise was just to set us up for this tax grab.

The Peat Marwick report, I believe, is bad. I believe that it's fallacious, because it is based on irrelevant comparisons, and those irrelevant comparisons are now being used as a rationale to do this province damage and to justify a three-quarters of a billion dollar tax grab that British Columbia cannot afford.

[E. Barnes in the chair.]

We have listened to a budget address that refers continually to the past and the ongoing saga of the financial mess they inherited. Well, the truth is that this government didn't inherit a $2.34 billion deficit. The quarterly financial reports for the period September 30 and the period December 31, issued by your minister in 1991 -- it's got his smiling face in them -- allow us to easily and clearly calculate in what portions of the year this deficit has been incurred.

According to these reports from the Minister of Finance, 39 percent of that deficit was incurred in the first half of this year and 61 percent in the second half, when the NDP had control for all but 17 days. If you think that is an unfair comparison, we all know that they've had their hands on the controls from January 1. From January 1 to March 31 this province has incurred a deficit of $773 million -- one-third of the deficit that we will suffer in this year in only one-quarter of the year.

When they came into office, did they tell ministers to cut back? No. Did they tell ministers to defer expenditures? No. Did they tell them to delay? No. They kept on spending by special warrant. They hired their friends as ministerial assistants and bureaucrats at salaries that are in excess of scale.

Mr. Speaker, I should like to lay to rest one of the rapidly growing myths of this budget. That myth is that the government has held the line on spending. Spending is not cut; it has increased by 4.7 percent -- much greater than the rate of inflation. Some ministries, mainly the larger ones, have spending increases of 9 percent, 18 percent and 19 percent. Some spending increases in some smaller ministries are even at 47 

[ Page 206 ]

percent and 73 percent. While the programs may be laudable, this is not a time for such increases.

More importantly, this increased spending comes on the heels of last year's spending increases of 14.7 percent. Those spending increases were characterized by the members of the present government as "government out of control." They said the government had mismanaged the province's finances. They said that such spending was wasteful. So what has been the response? Spending is up again. Over a two-year period, spending in this province has increased by almost 20 percent. This is far too much.

In the meantime, programs such as the fair wage policy will ensure that we get less value for our money. The main spending cuts are in ministries whose efforts are required to enhance our economy and provide a strong base for the province.

What does the future hold for British Columbians? What are our long-term prospects? Peat Marwick dealt at length on the need for a long-term, integrated financial plan for the province and, in the long term, a balanced budget. This budget ignores Peat Marwick's recommendations. There is no long-term plan here. There is no vision for the province -- only a short-term tax grab.

The budget should form the basis of an economic plan for this province -- a central pillar in our reconstruction and prosperity. This budget isn't that. There is no recognition that there needs to be prosperity to fund social programs, and that without economic prosperity we won't be able to afford social programs. The budget should help create that prosperity. There are virtually no measures designed to stimulate the economy and increase our economic base. To the NDP the economy is simply a cow; they milk it, but they don't know that it has to be fed.

The real test of government spending is the percentage of the gross provincial product that is spent. In 1980, 12 years ago, this province spent 15 percent of GPP in provincial government. By 1989 this had risen to 17.5 percent. This budget, Mr. Speaker, right here, increases it to 21 percent. More than one dollar in every five of the value of goods and services in this province are to be spent by government. With all the talk that we can't spend what we don't have, I suggest they set their sights a little lower.

So let's turn to the questions of, as it's often called, revenue enhancement. But first I would like to clear up a question from yesterday. This budget, on page 4 if you happen to have your copy handy, shows that tobacco tax revenues are anticipated to increase from $430 million to $510 million -- an increase of $80 million, or almost 20 percent -- in a world where fewer people are smoking. I was questioned about that. How will this happen? Will we restrict in-migration to this province only to smokers? I know that the minister didn't mention any direct increase in tobacco taxes, so I am mystified.

This budget is based on a forecasted economic growth of 3 percent. This may well be optimistic. I don't think that this budget will encourage capital investment. But, Mr. Minister, I certainly hope that you are correct. It is important for this province to have economic growth. But your tax policy is this: we're going to take another $1.125 billion from the taxpayers of this province now, and we'll take another $1.79 billion from them later -- plus interest, of course. Deficits are no more than deferred taxes. It's not a happy day for me to announce to the members of this House that tax freedom day in British Columbia has been delayed by five days since the NDP took office.

The most insidious of the new taxes is the new corporation capital tax. Corporation capital taxes are not a new concept; they are known and reviled in many provinces. The problem is that by this minister's own criteria, they are not fair. They are not based on an ability to pay. Corporations losing money have to pay; corporations deep in debt have to pay; and corporations that in our troubled economic times are barely hanging on have to pay. The only companies that won't have to pay are the ones not yet established in British Columbia. They won't pay because they will choose to locate in Washington or Oregon, where there aren't any such taxes.

[11:30]

Among the hardest hit by this tax will be the capital-intensive forestry and mining companies, which are in their worst operating period on record. It will have the effect of reducing our competitive ability in these key industries. Since even the smallest company has capital in excess of $1 million, the timing simply couldn't have been worse. It should be made clear that this tax is not only a tax on equity, but also a tax on debt. If a company borrows $1 million from the bank, it has to pay not only interest, but also $3,000 per year in corporate capital tax year after year.

This government and the minister have consistently criticized Ottawa for its high interest rate policy, which has hurt British Columbia's economy so badly. Now they have added more than 0.25 percent to the cost of funds. This tax is exactly equivalent to an increase in the prime lending rate of 0.3 percent, except that it's worse. It's worse because it's not deductible for tax purposes. So it's really 0.5 percent. According to announced federal government policy, this tax will be non-deductible for federal tax purposes. This will effectively double the burden. Who will pay this tax? Renters will be among the hardest hit. Rental property owners, faced with a tax on their own funds and on their mortgage money, will not absorb these new costs. They will pass them on to their tenants. The result: renters will face rent increases. This tax is unfair. This tax is not the minimum tax on so-called profitable companies which pay little tax, as promised by the NDP -- because money-losing companies pay. This tax creates a major compliance burden for B.C. companies and will be subject to major attempts at avoidance or non-compliance. This tax is the first and foremost signal to business across the country and on the Pacific Rim that British Columbia is not open for business.

This budget is also notable for what it doesn't do, things that the hon. minister seems to have overlooked. Among them is the $470 million pension fund shortfall that was so front and centre in the Peat Marwick report. In spite of the recommendation of Peat Marwick for its inclusion in the province's accounts, it was not men-

[ Page 207 ]

tioned anywhere in the budget speech. Purely and simply, an additional debt of $478 million -- and growing every day -- is omitted from this budget. So much for proper accounting principles and full disclosure.

Importantly, the issue of what is to be done to make up this growing shortfall is not addressed. Tens of thousands of British Columbians will depend on their pensions for their retirement. This government has done nothing to reassure them, nothing to ensure that British Columbians will receive the pensions which they have earned.

Another issue that is not addressed in this budget is cross-border shopping. No other phenomenon speaks so clearly of the flight of economic activity out of British Columbia. For the benefit of government members, I should like to make the point that it is not across-the-border shopping with Alberta that I am referring to. The government seems to be under the misapprehension that our retailers and manufacturers are in competition mainly with other Canadian jurisdictions. They must have read the Peat Marwick report. They may be surprised to learn that B.C. lumber and minerals are sold to the Pacific Rim and the United States, not Alberta and Saskatchewan.

Carload after carload of Canadian retail dollars head south each day, not east through Rogers Pass. I'm surprised they are not aware of this. That is because our retailers compete mainly with companies in Washington, and our manufacturers compete with companies to the south and in the Pacific Rim. That is why our tax structure should be competitive with Washington and Oregon. So why not compare our tax burden in British Columbia with the tax burden in those states? The comparison the minister has made with other Canadian provinces is outdated and irrelevant.

Let's make the comparison: (1) while Washington State doesn't have personal income taxes, ours are going up. Through the use of "S" corporations, small Washington business corporations can properly and legally avoid paying state corporate income taxes; ours are going up. Washington doesn't have a corporation capital tax; now British Columbia does.

Increased school taxes, increased property taxes from diminished grants to municipalities -- how will these affect the competitiveness of Canadian retailers along the border? The answer is obvious: Canadians will continue to be drawn across the border for lower-priced gasoline, dairy products, poultry, tobacco and alcohol, all higher priced in Canada because of higher taxes. Manufacturers and other businesses will also choose to locate south of the border in friendlier tax jurisdictions. Furthermore, professionals, consultants, doctors, athletes, all will find it friendlier in the south.

So what is the message to B.C. business manufacturers and retailers? No help, more problems. What message has the Finance minister sent to international business? Three-quarters of a billion dollars in additional taxes, largely out of the pockets of businesses and their owners. What is the message to the investment community? Unfair taxes, new and difficult programs. That is the message: British Columbia is not open for business.

I have it on very good authority that major tax planning firms -- perhaps like some we've mentioned before -- have already created four or five methods of moving income that should be taxed in British Columbia out of the province, eroding our taxation base. We may be increasing our tax rate, but through the erosion of the tax base we may well lose more than we gain.

Will investment come to our province now that we know that three-quarters of a billion dollars in new taxes are imposed? This government has indicated through this budget and other measures, such as the union wage policy, that it does not understand business and how business works. It is another in a series of continuing signs that the bad old times are back again.

J. Weisgerber: Mr. Speaker, provincial budgets are more than just words and numbers. They are more than the sum of expert advice and cold, hard calculations. They are indeed the product of our political system. In a sense, they are as much spin as they are spun. Politicians set the priorities that are reflected in the budget. Politicians make the decisions about how to generate sufficient revenue and how to keep expenditures within the taxpayers' ability to pay. Politicians are the ones who are responsible for communicating the contents of the budget to the people, and therefore it is only fitting that they should also be the ones who are held accountable. Let me say from the outset that every MLA in this assembly should be questioning the cabinet on this budget.

Further, let's be clear about one thing. The politicians in the previous government -- myself included -- have already been held to account by the auditor general and Peat Marwick for yesterday's finances. Some of the criticisms were valid, others perhaps less so. Yet all of them were worthwhile, because no amount of scrutiny is too great where the taxpayers' money is concerned. I commend the government for commissioning the most intensive review of public finances ever undertaken in British Columbia. Such an intensive study would indeed be in the taxpayers' interest each and every year, provided of course it's done through a competitive bid process. But I won't hold my breath for that eventuality. After all, I understand just how tight money can be for a government in power, particularly if it's for discretionary projects of this nature. In the meantime it's my pleasure, as finance critic, to share my observations and concerns about this budget.

This document makes a mockery of the Premier's 48 election promises. It's a sad excuse for a sorry budget. "Sorry," says the Premier for increasing taxes. "Sorry," he says for breaking his opinions. "It was the Socreds who done it. It was the Tories who done it." Not him. It wasn't his fault. He can run away to Europe and Japan. He can hide out in Hawaii or New York, but he can't escape his shadow. I'll tell you, that shadow is growing longer and darker every day. Indeed, the NDP springtime is rapidly passing. For them, winter's on the way.

In fact, this government started running from its commitment on the day it was elected. The Premier knew he could not afford to keep his promises, so he immediately began preparing the groundwork to break them.

[ Page 208 ]

First he hired a corporate gunslinger to shoot holes in the government's books. Without ever going to tender, they forked out $1 million to Peat Marwick to do a hatchet job on the former government. I've got to hand it to them, they did their job well. They spilled a lot of blood on this side. But then that's politics. I suppose the measure of a party is whether it can recover from its wounds and learn from its mistakes.

After five months of throwing stones at us, it's the NDP who is now on trial. With this budget their illusions have all been shattered. Now they find themselves walking on shattered glass, for this government can no longer blame the Socreds for its decisions. When all is said and done, it is only this government that controls the purse-strings. It is only this government that is betraying the people who elected it. In common language, the people gave the Premier their trust, and he's given them the shaft.

This budget savages property tax payers and ravages small business. Homeowners will now pay 50 percent higher school property taxes as a result of this government's callous decision to scrap the supplementary homeowner grant. Four hundred and sixty-five thousand homeowners will lose their grant. Small businesses will pay higher income taxes and a new capital tax will send investors fleeing.

[11:45]

This budget singles out farmers for a special tax hit. They face a double whammy -- a 6 percent non-residential school tax hike and another 6 percent increase in rural property taxes. So much for coming down to Victoria last week to look for help. They got help all right. Farmers will be forced to cope with 12 percent higher property taxes in addition to higher fuel taxes. They won't be able to look to this government for relief because the Agriculture and Fisheries budget has been slashed by 16 percent. To fully appreciate the extent of this government's commitment to the farming community, you just have to look at its spending priorities. Financial assistance programs for farmers have been cut by $1 million while a $0.5 million increase has been allocated to hire more civil servants in the ministry.

In fact, the message that this budget sends small business is pretty bleak. All the economic portfolios have been drastically pared down. Transportation and Highways, for instance, has been cut by 15 percent. Forests and silviculture have been frozen at last year's level. Finance and Corporate Relations has been chopped by 23 percent. Tourism has been cut by 11 percent, and Energy, Mines and Petroleum Resources has been cut by 41 percent. Yet the budget for contingencies and new programs has been increased by 121 percent, a vote that gives the NDP carte blanche to fritter away money in any way it pleases with a minimum of accountability. The Social Services budget is up by 19 percent, an increase of $400 million in higher welfare pay-outs. If this government was as intent on keeping people employed as it seems to be at keeping them on welfare, it could have moderated its cuts in economic development programs to keep people off welfare altogether.

This budget speaks of fairness but unfairly targets rural residents for a 5 percent hike in rural property taxes and a 6 percent school tax increase.

The one source of funding that local communities depend upon for worthwhile community-based projects has been axed. I'm speaking of lottery funds, the GO B.C. program and the breakopen program in particular. Who can forget how our current Deputy Premier pleaded for increased lottery funding just a few short years ago in this House? On May 19, 1988, your Deputy Premier said: "...it should be the intent of this minister to significantly increase the grants that are going to community groups this year." Clearly an increase in assistance of this sort was the last thing this government intended to provide. After all, once the NDP get through with taxing profitable companies and middle-income-earners, we will all live in one big non-profit society.

In addition, the income surtax in this budget will be placed on 48,000 wage-earners who were previously exempt. The rate has been doubled, and in some cases tripled, for at least 120,000 taxpayers earning $60,000 a year or more. The NDP promised that the wealth surtax would apply only to incomes over $80,000 a year. Well, Mr. Speaker, they lied again. This budget represents the biggest tax grab since the GST, a vicious assault that will steal hundreds of dollars this year from every family in British Columbia. Anyone with an acre of farmland is somehow seen as a land baron by this government, and for that they must be taxed. Anyone who likes a bottle of beer or a glass of wine is a standing tax target. This budget will nickle-and-dime us to death with $100 million in tax increases for beer, wine and spirits, and various fees and licences.

This government says it's fair. I don't think it's fair to see this budget tax legal services 6 percent. That represents the thin edge of the wedge -- a tax on service, not just goods. There has never been one in British Columbia before. It's exactly like the GST, which the NDP has been so critical of. Think of it: senior citizens who get a lawyer to prepare their will will now be taxed by the NDP, while criminals will be subsidized through legal aid paid for by their higher taxes. That in itself is criminal.

I wish this government had the vision to maintain the economic growth that resulted during the years of the Social Credit government. During those years we created half of all the jobs in Canada. I fear this budget will drive our economy straight into the dirt as it drives investors and consumers south of the border. That's unfortunate, because I know how hard the Finance minister worked on the very real fiscal dilemma that confronted him. Watching him yesterday, I just know that he worked like a dog on his delivery, so it's a shame to see him caught flatfooted by the response this budget has already received.

That minister has been very effective in his capacity over the last five months. As the master of spin, his job was to make us all dizzy with the numbers. A year ago he said: "This year's record deficit of $1.2 billion is stated as only $395 million." During the election campaign he released a five-year, balanced-budget plan that showed a $1.4 billion deficit for 1991-92. This 

[ Page 209 ]

accounted for the $200 million in reduced Canada Assistance Plan transfer payments, which had not been shown in our original budget.

During the post-election transition period, the NDP Finance critic was informed that the revised deficit would be $1.7 billion. A protocol agreement with the government-elect ensured the Social Credit administration would not be allowed to issue a press release to that effect despite our request to do so. Nevertheless, the Finance minister's quarterly report for the period ending December 31, 1991, reported a projected deficit of $1.7 billion, or $300 million more than the NDP had budgeted during the election campaign.

As confirmed by Peat Marwick, Informetrica and even the new Finance minister, about $1.1 billion of the 1991 deficit can be attributed to cutbacks in federal transfer payments. Be that as it may, the NDP assured us during the campaign that its projected $1.4 billion deficit had anticipated the federal cutbacks. They knew it was going to happen. They worked it into their plan.

If the NDP had only contained spending by $300 million during the first five months it was in office, it would have brought the deficit back down to the level it had planned for during the election. Instead of putting the brakes on public spending, what did the government do? It put its foot to the floor and coasted for five months, tossing great wads of cash out the window at every turn. While it talked the language of restraint, it was bending over backwards to pay off its election debts to special interest groups through the use of special warrants. For five months the government twisted people's minds in an attempt to gain public acceptance of higher taxes.

The minister had a problem. He knew this budget would have the largest deficit in the history of British Columbia. He knew darn well there would be no five-year, balanced-budget plan, regardless of the fact that this was the NDP's central election promise. No problem, thought the minister. The NDP had a game plan. These people learned from the bad advice they gave Bob Rae, so they set about to ensure that the 1991 deficit would exceed this year's budget deficit to make the latter appear reasonable by comparison. That's where Peat Marwick came in so handy. It identified about $700 million in bad debts accumulated over the past decade, which the NDP happily added to the 1991 deficit as though they had incurred these debts in 1991.

For nearly half the entire fiscal year, the NDP has been at the helm, yet they accept absolutely no responsibility for their refusal to cut back expenditures over that period of time. We reduced expenditures by $330 million when confronted with a similar situation last year. But not this year -- not this government. Instead we find ourselves with an inflated deficit that is held out as the central reason for this budget's tax attack.

It's tough to evaluate the assumptions that underpin the deficit figures contained in this year's budget, because the government is afraid to allow us access to details of the loans it has written off. Peat Marwick never even studied them. All they did was estimate a bad loan percentage and then apply the rate to the total value of the loans. If this government was really committed to freedom of information, it would release the paperwork on all the loans that have been written off. It would release the so-called entity papers that I called on the Minister of Finance to release last week, in the course of my throne speech response. We're still waiting for an answer.

At any rate, the taxpayers of this province are not easily persuaded by simple statistics. People remember the Premier's promise of no tax increases. They remember his promise of a balanced budget. As the NDP leader said of his five-year fiscal plan during the election: "Voters and taxpayers are rightly fed up with the traditional approach to election campaigns: promise anything before the vote; renege afterwards." We didn't really understand what he meant by that, but it's surely clear now.

The reason people are so furious with the NDP over this budget is not so much that taxes are going up but that they were lied to by those self-described paragons of virtue across the floor. To be sure, the minister has taken every opportunity over the past several months to malign his predecessor and to gloat about the so-called fiscal mess that was left behind. He conveniently forgets that he was repeatedly warned by the former minister that the well was dry, that there was no money left in the kitty.

Who could forget what the Minister of Finance said during the BCTV debate on finances near the end of the campaign? For the benefit of the minister -- who unfortunately has left -- I will read a short snippet of that debate. John Jansen didn't mince words. He said: "The promises the NDP have made are simply foolish promises that can't stand the light of day in terms of fiscal responsibility.... We recognize that there isn't any money available, and we're committed to maintaining social...programs. Therefore, we don't promise any new expenses." I repeat: "There isn't any money available" -- that's what John Jansen said. Yet the current Finance minister stuck to his guns. "We're saying...working people have paid and paid and paid. They are taxed to the limit. They can't be taxed any further.... We're saying no taxes on working people...." So much for that promise.

[12:00]

Hon. Speaker, the NDP broke that promise even before they brought down this budget. Tuesday's Vancouver Sun detailed the grab-bag of hidden taxes and fees that have been increased by this government since its very first day in office. Passenger vehicle fees, commercial vehicle fees, water rentals, Hydro rates, ICBC rates, ferry rates, hunting licences, camping fees and pesticide user permits have all gone up -- every last one of them.

Hardest hit are senior citizens who saw their special rates and fares slashed before the ink was even dry on this budget. These are people who mostly live on fixed incomes, as opposed to the fixed wages we will soon see in the public construction sector. About the only people who will really benefit from this budget are the Premier's union pals on the NDP provincial council.

The fixed wage policy, for example, will give a $200-million-a-year annual bonus to unionized construction workers. That's equivalent to the amount that the government hopes to raise through the new capital 

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tax on business. The unfortunate irony of that punitive tax is that it will likely lower wages for people who are already in lower-paying jobs. It will certainly mean fewer jobs, less capital investment and more people on welfare.

The government should have bitten the bullet and held the line on public sector wage increases. Go ahead, change the name of the Compensation Fairness Act if you don't like it. But for heaven's sake, don't place a greater tax burden on the backs of our economy. The Peat Marwick report stressed that public sector wages represent by far the biggest cost to government and must be held to the rate of inflation. That's Peat Marwick that the members across the way love to quote day in and day out.

Every 1 percent in wage increases costs taxpayers $89 million. If this government had the taxpayers' interests at heart, it would have announced a two-year wage freeze on all public sector salaries, except for a pay equity adjustment for women. Had it done this, it could have frozen personal income taxes at the 1991 level, frozen small business income taxes instead of increasing them to the highest rate in Canada, and maintained the supplementary homeowner's grant that reduced school property taxes by 50 percent net.

Instead, this budget increases the size of the civil service by 1,500 bureaucrats. It provides $1 billion in salary and benefit increases over the previous year's estimates. Clearly, the BCGEU and all other public sector unions must be drooling at the prospect of higher wages under the NDP government. Public sector wage settlements negotiated before the Compensation Fairness Act was brought in were averaging 13.7 percent over two years. The total cost of those settlements across the board was about $1.2 billion. Yet instead of taking concrete measures to control public sector wage hikes, what was the first act of this new government? It announced the end of the compensation fairness program that held public sector wage increases in line with those in the private sector.

The Premier gave 7 percent retroactive wage hikes to the teachers -- a transparent gesture to pay back the BCTF bosses for their support in the campaign. He sent a signal to every unionized worker in this province. He raised expectations that have already led to increased labour turmoil. If the Premier is prepared to hand out 7 percent to one sector of public employees, it should be no surprise that every other sector is standing in line for similar treatment. Wonder of wonders! What do we discover when we review public sector wage increases over the last four months? The Business Council of B.C. reports that in this government's first four months in office public sector wage increases have been running at double the average in the private sector. Peat Marwick stresses that expenditures on public sector salaries are already so large that even a relatively small annual increase contributes disproportionately to further budgetary pressures.

The report says: "Public sector salary increases must be limited to near the rate of inflation during the next...two years." Yet under this government we see public sector salaries growing at twice the rate of inflation and twice the average of the private sector. We see taxes being raised for homeowners, farmers, rural residents, consumers and small businesses -- all to pay for 1,500 more bureaucrats and public sector pay hikes that are double what most taxpayers will receive. That's not at all fair. We say the government should abandon its tax assault and focus on controlling public sector wages.

Now I'd like to take a few moments to address the fiscal context in which this government's decisions have been made. British Columbians should know that not everything in the Peat Marwick report was bad. In fact, it gave grudging praise to the Social Credit government in a number of places. That's not to say that the report didn't make many excellent suggestions and legitimate criticisms. But taxpayers might be surprised to learn that it was Peat Marwick who reported: "The province of British Columbia has a reputation for good fiscal controls." Who do you suppose is responsible for that reputation? Certainly not the NDP. What else did Peat Marwick say about Social Credit's track record on budgeting? The report said: "The ability to forecast revenue within a small band of error and to control expenditures relative to budgeted estimates is an indication that the process of forecasting revenue and expenditure control is working relatively well." Interesting. Certainly the budgeting and reporting system could have been improved, and we commend the government for wanting to do so. But let's also remember Peat Marwick's comment that the province of British Columbia has for many years been at the forefront of reporting, as compared to other governments across Canada. They were not alone in their verdict. The auditor general reported in 1990 that the financial statements of the province were, in most people's view, the best in the country. It's important to keep these things in perspective. That's how Mr. Morfitt qualified his assessment to the Public Accounts Committee.

To gain a reasonable perspective of this year's budget, it is appropriate to view the economic and fiscal performance of the past government through the eyes of a truly neutral observer. Only last month the Investment Dealers' Association surveyed our economic landscape. This should interest every government member, so I hope they pay attention, because it's a fairly lengthy quote.

The February 1992 Investment Dealers' Association report summarized the situation as follows:

"Despite the deficit overrun...the fiscal position of British Columbia is in far better shape than the finances of any other province in the country. Net public debt totals $9.8 billion, or 12 percent of the GDP, the lowest debt burden in proportionate terms of any province in the country except P.E.I.

"The government managed its finances in a responsible manner through the second half of the 1980s and kept the debt burden to a minimum.... Spending restraint enabled significant deficit reduction in this period.... Government was able to reduce the deficit and pay down debt."

The member for Victoria asks who said that. For his information, it was the Investment Dealers' Association in their February 1992 report.

What other measures of a province's fiscal performance are there that can give us a more complete 

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understanding of the province's finances? Again I refer to Peat Marwick: "The rating given to a province by the major bond-rating firms is perhaps the most reliable indication of its fiscal position. The ability to effectively budget and monitor spending has culminated in British Columbia achieving the highest credit rating of all Canadian provinces." Exactly how long that ranking will hold true is anyone's guess.

But perhaps an even more important measurement of a government's financial success is its ability to generate higher revenues while holding the line on taxes. Until this budget, British Columbia had the second-lowest taxes in Canada. We had the second-lowest corporate income taxes, the second-lowest personal income taxes and the second-lowest sales taxes. It's important to note that our taxes were both highly competitive and extremely fair.

The NDP used to like to charge that large corporations were not paying their fair share of taxes. But consider this. Until yesterday, small businesses paid far less under Social Credit than they did under the previous NDP administration. The small business income tax rate was actually 1 percent lower under Social Credit than it was when the NDP left office in 1975. Conversely, the rate for large companies was 1 percent higher under our government than it was under Dave Barrett's NDP government.

Hon. Speaker, I'd like to know whatever happened to the Finance minister's promise to lower taxes. On April 20, 1990, he stood in opposition to our budget and said: "Again, that is our commitment. tax relief for middle-and lower-income British Columbians in our first budget...." In fact, he repeated that promise four times in the same speech.

The Premier was promising just last November that his government would "not bring in any major new tax initiatives." Well, he did, and I would be willing to bet right now that we've only just seen the tip of the iceberg as far as this government's tax agenda is concerned.

The NDP claim to be responsible fiscal managers. And that is quite a refreshing change of attitude, I must say. How different the NDP Finance critic sounded in 1989 when he told B.C. Politics and Policy that reducing the debt was: "...not a priority at this point. I think the priority is...money being spent creatively and targeted to specific programs and not to pay off debt." It was in that same interview that he said: "There is no magic to balancing a budget in British Columbia. In fact, it's extremely easy." And: "I think it's simple to balance the budget in British Columbia. Absolutely one of the easiest things I could imagine doing." I suspect the minister is having some second thoughts about that one.

Before winding up I'd like to address the issue of economic stability and confidence. Allow me to again read from the investment dealers' independent review of our track record. I apologize for the length of this excerpt, but I think it says everything I would hope to -- albeit without an ounce of partisan bias.

[12:15]

"The relative strength of the British Columbia economy stands in sharp contrast to the comparatively poor performance in the previous recession in 1982. At that time, British Columbia experienced a searing downturn, far worse than any other province in the country. Yet even though prices for B.C.-produced resource commodities are lower in real terms than in 1982, the economy has performed better, both in absolute and relative terms, than in the last recessionary period.

"The marked difference in economic performance can be explained by several factors. In sum, these developments, when taken together, describe the progress made in improving international competitiveness and diversifying the economic base of the province.

"The province can not only withstand weak economic conditions much better than before, but is well positioned to take advantage of developing opportunities as the recovery unfolds. Further, the relative strength of the B.C. economy through these difficult times has kept consumer and business confidence much higher than in the rest of the country. In sum, British Columbia is no longer the tail at the end of the economic dog, whipsawed by cyclical movements in international commodity prices and downturns in central Canada.

"...government finances will deteriorate this year, as has been the case for most provinces. However, unlike other provinces in the country, the fiscal position of British Columbia is in far better shape, reflecting conservative fiscal management through the boom of the 1980s."

There is no doubt that British Columbia is not only better off today than it was a decade ago, but it is also better off compared to any other province. Not long ago, the Conference Board of Canada predicted that British Columbia would have the highest economic growth rate in Canada this year. Yet the government wants to risk our economic recovery with punitive tax increases on businesses and consumers alike.

Last year at this time, the NDP Finance critic was arguing that there was nothing more crucial to economic growth than stability. Does the minister forget what he said? I'll repeat it for him: "When you have significant policy shifts in finances and taxes, then clearly it introduces an element of instability to business, in terms of investment, and increased instability and economic insecurity in the public at large."

In light of yesterday's budget, it's hard to fathom how it could be the product of the same individual who championed laissez-faire politics last June 11. The Finance minister at that time said: "When [corporations] are not making much money in an economic slowdown, we see increased taxes. It's no way to run a province. It's certainly no way to run a government." How much things change in a year!

The minister said: "British Columbians are looking for a government whose economic policies and financial management create confidence and stability." What do we see today? I refer to an article in the March 20 Province, which reveals how little confidence investors have in this NDP government. The article reported as follows: "The province's fuzzy policy on exporting electricity has cost two B.C. firms a chance at $100 million in power projects, the Independent Power Association of B.C. charged yesterday." It goes on to note that the province's fledgling independent power-producing industry "was encouraged under the Social Credit government."

[ Page 212 ]

Yet according to the spokesman for Puget Power, confidence and stability are not what comes to mind when thinking about this NDP government. He said: "We have considered the uncertainty of the new B.C. government's attitude toward exports as a risk...so we've decided that it may be better to hold off for a while from buying long-term power from B.C." There is no stability and precious little confidence precisely because of the government's misguided approach to free enterprise.

Hon. Speaker, you simply cannot engender confidence and stability when you say one thing and do the opposite. That's what this budget does over and over again. It breaks every positive commitment about taxes the NDP made over the last five years. The Finance minister gave us fair warning when, as opposition Finance critic, he said in an interview on CHEK TV: "It's my view that politicians can play around with taxes. That's what we're elected to do." I think he misunderstands what his job is.

This budget is every bit as much a political document as any that has ever gone before it. That's being kind. If the NDP....

An Hon. Member: Give us the full quote -- a longer quote.

[The Speaker in the chair.]

J. Weisgerber: You wouldn't want to hear a longer quote, my friend.

If the NDP was really interested in bringing about stability and confidence, it would have listened to the president of the Business Council two years ago. On April 20 he warned the man responsible for this budget not to raise taxes: "...increasing taxes at a time when the economy is starting to slide is a good formula for driving out investment and increasing unemployment. It could very well be ensuring that we have a recession." The managing director of the Vancouver Board of Trade echoed that sentiment on March 14, 1990: "If the first thing an NDP government did was to raise taxes...I think you'd see a flight of capital out of here. That would be seen as the opening salvo and create fear among the business community...." On January 31 of this year the Canadian Federation of Independent Business wrote to the Finance minister to offer its advice as well. The CFIB wrote: "The addition of an increased tax burden [on small business] would have a disastrous impact."

Hon. Speaker, we were warned. The NDP had an ideological agenda then, and they do now. That's what's in this budget. It's in the whispers, and it's in the words. And speaking of whispering, the member from Alberni has been strangely quiet, but I do have a quote of his from last year. On April 6, 1989, in this very chamber, the lonely voice in the NDP wilderness, one of few with an ounce of common sense, said this: "I want tax cuts so that consumers can purchase more goods and services, so that business can grow in this province. When is that going to happen?" Indeed, my friends: when?

Now I will gladly take my place and listen with as much intent as you have kindly shown me.

J. Weisgerber moved adjournment of the debate.

Motion approved.

Hon. G. Clark: Hon. Speaker, by leave I move that the auditor general's special report to the Legislature of British Columbia on the 1990-1991 public accounts tabled in this House on Tuesday, March 24, 1992, be referred to the Select Standing Committee on Public Accounts.

Motion approved.

Hon. G. Clark: I was just going to wish everybody a good weekend and welcome back on Monday, and with that I move the House to now adjourn.

Motion approved.

The House adjourned at 12:24 p.m.

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