1992 Legislative Session: 1st Session, 35th Parliament
HANSARD
(Hansard)
WEDNESDAY, APRIL 29, 1992
Afternoon Sitting
Volume 2, Number 15
[ Page 1095 ]
The House met at 2:03 p.m.
[E. Barnes in the chair.]
Prayers.
Hon. M. Harcourt: On behalf of all members on the government side I would like everybody to give a very warm welcome to the constituency assistants of the government members, who are here and who, as all members of the Legislature know, play an absolutely invaluable role of being the ombudspeople who work with individual citizens who feel aggrieved or need some service, who are the information source and the grass-roots representatives, and who play a very important role of making sure that we're in touch with our constituents. I would like the members of the Legislature to bring a very warm welcome to the constituency assistants who are in the galleries around us.
M. Lord: It gives me a great deal of pleasure to welcome to the precincts today two of my constituents: Dennis and Colin Blake. Dennis Blake has had a long and successful career as an educator, and both have been long-time supporters of New Democrats. Would the House please help me make them welcome.
Hon. G. Clark: On behalf of the Minister of Labour, who is away at a constitutional conference in Edmonton today, it's my privilege to introduce to the House the following guests visiting from Australia: Ms. Domica Whelan, senior industrial officer with the Australian Council of Trade Unions; Mr. Chris Christodoulou, research officer with the Federated Miscellaneous Workers' Union; Ms. Gene Reardon, manager of rehabilitation comcare; and Mr. Blake Williams, director of workers' advisers in Vancouver. Would the House please make them welcome.
J. Pement: I too would like to introduce the Australian visitors. I would particularly like to point out that these visitors came as delegates to Independence '92. Their interests are particularly in the area of disabled workers, and we welcome as well the information that they brought to our province.
Hon. E. Cull: I would like to introduce to the House today a visitor from T'ai-chung, Taiwan -- Ms. Yang Jen Sang -- who is visiting Victoria with Allison Bond, a Victoria resident.
M. Farnworth: It gives me great pleasure to introduce today 80 students from Hastings Junior Secondary School in my riding, and their teacher Mr. Wright. They are grade 10 students. Would the House please make them welcome.
C. Evans: Would the House please honour one of the most pre-eminent artists, the great potter Sandy Korman.
E. Conroy: I'd like the House to recognize one of my constituents and best supporters, Joanne Partridge.
P. Ramsey: I'd like the House to help me welcome my constituency assistant, who is visiting us from Prince George today. Would the House please welcome Pauline Carrol.
GOVERNMENT APPOINTMENTS
G. Wilson: My question today is to the Premier, and it has to do with patronage. In honour of that I wear this tie, conscious of the fact that it should not be seen as a reflection of members opposite. I'm aware that we are on camera today.
The question to the Premier is: could the Premier tell us when and where the advertisement was placed for the adviser for the B.C. Trade and Development Corporation, the number of candidates, who they were and what the selection process was with respect to the criteria that were used in the eventual choice of candidate?
Hon. M. Harcourt: I'm puzzled by the question, because if he's speaking about Johanna den Hertog, I've already been asked that question -- the Leader of the Opposition should know -- by a member of his own caucus, and I took it on notice. I don't know what communication is going on in his caucus, but there's not very good communication happening in that caucus, Mr. Speaker.
Deputy Speaker: The question is taken on notice. Would the hon. opposition leader proceed to another question.
G. Wilson: I will then ask a new question.
In light of the ultimate of the patronage appointments -- a patronage appointment to oversee further patronage appointments -- could the Premier tell us if the reason that we need to have a patronage appointment to look after further patronage appointments is because the lineup of failed candidates and retreaded NDPers is so long at the trough that he's having difficulty selecting who gets the jobs?
Hon. M. Harcourt: Sitting here with a caucus of 51 MLAs, I don't see too many failed candidates.
And one of the other opposition parties, which used to have about 47 MLAs in the previous Legislature, has gone from seven to six and is shrinking rapidly. I think the Leader of the Opposition should take note of that trend in the opposition.
G. Wilson: A supplementary to the Premier. I've got a list -- a long, long list -- of failed and retreaded NDP candidates who are in line for patronage appointments. I'd be happy to share it with him. Some have already got them.
Hon. Speaker, my question to the Premier: the Premier told the people of British Columbia there
[ Page 1096 ]
would be no more friends and insiders. The people on October 17 wanted change. It would appear that perhaps they only cleaned half the House.
My question to the Premier is this: given that you promised there would be no more friends and insiders, that you would not embark on a long patronage appointment process, how can the Premier explain the 54 names we've released and the many, many more patronage appointments that they have put in place to the people of British Columbia? The people of British Columbia are outraged by these absolutely blatant patronage appointments.
Hon. M. Harcourt: Thank you for that question. There's a great deal of difference between the previous government's contracts, special deals and monopoly contracts to Social Credit friends and insiders and appointing good British Columbians who volunteer to go on boards and commissions.
I think the people of British Columbia know very well that they have given us a clear, open mandate to carry out our election priorities and directions and that, of course, we're going to appoint people who are going to help us carry out that mandate and directions; just as the Legislature has made $1 million available to the opposition to hire staff, and they have hired two failed Liberal candidates -- one a campaign manager -- and a number of Liberals from outside of British Columbia to help them carry out their mandate, which we don't begrudge. We think that's their choice, and they're able to do that.
The difference between the way boards and commissions and agency appointments were done before under the previous Social Credit government is that they were done before in an ad hoc way. We are now setting up a process where we are making sure that the geographic regions of this province are represented; where there is gender parity; where the minority communities in this province -- the aboriginal community -- the visible multicultural communities, and people with disabilities are represented on the boards and commissions. It took us a number of months to be able to find that information that used to be done on an ad hoc process.
I would like to say....
[2:15]
Interjections.
Deputy Speaker: Order, please.
Hon. M. Harcourt: It took us three or four months to tabulate this, because the previous government didn't make it available. All of the appointments by the previous government have been compiled in one open document, which we're prepared to file with the people of British Columbia. Over 4,000 appointments will now be done not because they are friends of the government. Ad hoc decisions will be done because they represent the regions of British Columbia, represent gender parity between men and women, and our visible communities will be represented.
Mr. Speaker, I am prepared to table this document after question period.
ENERGY COUNCIL
D. Jarvis: Mr. Speaker, my question is for the Minister of Energy, Mines and Petroleum Resources. It pertains to the creation of the Energy Council Act and the appointment of Mr. Dick Gathercole as chairman. Since the annual price tag for this council will be $2 million, what will it do that her ministry can't already do?
Hon. A. Edwards: It's my pleasure to say again what I've been saying for nearly three years now: one of the functions that is needed in this province is to involve the public in some of the decisions on energy policy. That is an issue, and there are a number of policy issues in energy that need public participation. This Energy Council will allow that to happen. It will also allow us to take a very comprehensive view of policy, which we hope to do anyway; I agree. But it will give us assistance in that, and the public process will be brand new.
D. Jarvis: With due respect to the minister, the mandate of her ministry is to prepare with public involvement an energy plan for British Columbia, to consult with the public on energy issues and to report to the minister on the results of these consultations.
So my question is: with a staff of over 400 fully competent people in the ministry, what is left for the new layer of government to do?
Hon. A. Edwards: First of all, I'd like to clarify that we have 389 employees in my ministry, and the largest number of them are involved in the minerals part of the ministry.
With the difficult situation we face this year, we need to find a way to consult with the public. We can do that with a well-accepted model, which is a policy council. We have chosen a policy council that will allow the public to be involved and to do what you've said we should do, which is to let the people have a say in the policy of the province.
Deputy Speaker: I recognize the leader of the third party.
Interjections.
Deputy Speaker: Hon. members, the problem that the Chair has is that we do have an additional party in this Parliament. Although the supplementaries.... Hon. member, I'll get back to you if I can.
The leader of the third party.
STEWART-FIRESTONE CASE
J. Weisgerber: My question is to the Attorney General. Yesterday the Attorney General indicated that he didn't know who had initiated the Firestone settlement. Surely the Attorney General would be aware if the person who initiated the Firestone settlement was the lawyer for Bill Stewart. Will the Attorney General
[ Page 1097 ]
confirm that it was indeed Mr. Berardino who initiated the settlement on behalf of his client?
Hon. C. Gabelmann: I can't confirm that.
J. Weisgerber: On a supplementary. Isn't it also a fact that after having initiated the settlement, Mr. Berardino negotiated the settlement on behalf of all three parties? Will the Attorney General confirm that it was Mr. Stewart's lawyer, Bill Berardino, who negotiated separately with counsel for each of the parties to arrive at a settlement that would satisfy Mr. Firestone?
Hon. C. Gabelmann: Unlike the member, I have not talked to any of the parties involved in the matter. It was not a concern that I felt was appropriate for me to pursue. I have not asked any questions about who may have initiated the settlement or about what the settlement might have been. The member has done that. If he wants to answer the questions, I'm sure he will be able to. I cannot.
Deputy Speaker: The leader of the third party, on a final supplementary.
J. Weisgerber: Surely the Attorney General would recognize that he is accountable for the actions of his ministry. It was his ministry that agreed, on behalf of taxpayers, to pay $12,500 in settlement costs for the Assistant Deputy Attorney General. Is the Attorney General saying to us today that he agreed to that settlement without any knowledge of who else was contributing to the settlement, who initiated the settlement and what the details of the settlement were? Is the Attorney General saying that without any knowledge at all, without having questioned his staff or his cabinet, he agreed to an expenditure of taxpayers' money?
Hon. C. Gabelmann: Unlike the previous administration, as Attorney General I do not get involved in matters before the courts, or in and around the courts, respecting political matters. I can say further that the Deputy Attorney General advised me of the costs incurred by the Crown in respect of the settlement. I was satisfied, as I am sure all members would be, with the integrity and competence of the Deputy Attorney General. That should end the matter.
ENERGY COUNCIL
D. Jarvis: My second supplemental, finally, to the Minister of Energy, Mines and Petroleum Resources. What reason does the minister have for announcing the appointment of Mr. Gathercole and the creation of this commission before this legislation has even been debated or passed in the House?
Hon. A. Edwards: The legislation has been introduced in the House. Therefore, since it has only been introduced.... I have been talking about it for quite some time, and everyone knows it is coming. We have been encouraged by the independent power producers to get on with discussions, so I have named Mr. Gathercole simply as the chair-designate right now. That means that we are planning in our heads. We are ready to give an answer to the independent power producers as soon as we can.
GOVERNMENT APPOINTMENTS
K. Jones: A question to the Premier. What do John Pollard, Dick Gathercole, and Johanna den Hertog, Charan Gill, Shane Simpson, Randy Garrison, Ron Johnson and Gene Errington all have in common?
Hon. M. Harcourt: Mr. Speaker, as you can see, there are many British Columbians, there's a balance between genders and there are some representatives of the multicultural community. It's too bad that the member left out some of the aboriginal leaders who have been appointed to the PNE board and the B.C. Ferry Corporation. It's too bad that he left out the other competent British Columbians like the ones he just named, one of whom, Wendy Holm, is a Liberal who has been appointed to the Tree Fruit Authority.
As I said earlier, this government wants to see competent British Columbians appointed to the 1,100 boards and commissions -- over 4,000 positions -- in British Columbia. Competent British Columbians is what is common to all those names.
Deputy Speaker: I will permit the member to have one final supplementary. The bell has gone.
K. Jones: The Premier forgot to mention that all those individuals have backgrounds as NDP organizers or as failed NDP candidates and are now on the government dole. Does the Premier have a response to this question? Oink, oink.
Deputy Speaker: Hon. members, that's a difficult question even for the Speaker to decipher. However, the Premier is adept at difficult questions, and perhaps he would like to respond.
Hon. M. Harcourt: I wasn't intending to respond except to note the startled look on the Leader of the Opposition's face as an ex-pig farmer. I'm sure he would agree that was a pretty poor imitation of a pig by his member.
During question period I said I would be seeking leave of the House to table a list of the 1,100 boards, commissions and agencies and the over 4,000 appointments that had been made to those agencies so that members of the Legislature can peruse this at their leisure and pleasure.
Leave granted.
Hon. C. Gabelmann: I ask leave to file a document. A question was asked of me yesterday in question period about a letter that I was alleged to have received in November. I did receive it; we found it in my office. I'd like the House's leave to table the letter.
Leave granted.
[ Page 1098 ]
J. Weisgerber: On a point of order. I have been concerned in question period for the last few days about the length of answers that are being given by the ministers, particularly by the Premier. As the Speaker will know, on Wednesday two answers by the Premier exceeded two minutes in length. They were extremely argumentative and offend all of the rules of question period.
The Chair has seen fit to bring members to order on this side of the House with regard to questions that are asked and whether or not they are in order. I would respectfully suggest that it's time the members on the government side of the House started to obey the rules of question period.
Hon. G. Clark: On the same point of order, I'm a bit surprised that the leader of the third party would raise this consideration, because the responses are in keeping with the questions we have been receiving, which have been, in a sense, argumentative and lengthy. In fact, we had questions today from a member for North Vancouver referring to the Energy Council, which is a subject of legislation before the House that we fully canvassed with ample opportunities and that does not meet the test of question period, which is urgent or pressing necessity. So the questions have generally been out of order and argumentative. I think that when we receive questions on this side of the House and some latitude is given, it's in response to questions from members of the opposition.
Deputy Speaker: The Leader of the Opposition on the same point of order.
G. Wilson: No.
Deputy Speaker: Not on this point of order.
On the point of order, hon. members, I will take the comments of the parties under advisement. We do have standing orders that are quite explicit. I would refer members to standing order 47A, which outlines the conditions under which questions should be constructed.
On both sides of the House, I think we've had some latitude beyond those parameters. However, the points are all well taken, and the Chair will endeavour to stick closer to the guidelines that we are all bound by.
[2:30]
G. Wilson: In light of the tabling of this wealthy document by the Premier, I would like to request leave of the House -- in response to today's appointments -- to table my tie.
Deputy Speaker: Hon. member, I think that speaks for itself.
Interjections.
Deputy Speaker: Order, please.
ADVANCED MANUFACTURING IN B.C.
Hon. D. Zirnhelt: Hon. Speaker, I rise today to make a ministerial statement. I endeavoured to provide it in a timely fashion -- half an hour before the House sat -- to the opposition, and I trust that they have it.
I want to inform the House of a report entitled "Competitive Advantage in Advanced Manufacturing: Comparing British Columbia to Washington, Oregon and California."
Advanced secondary manufacturing has emerged over the past decades as the fastest-growing sector of our province's economy. Growing at an estimated annual rate of 16 percent to 20 percent from 1980 to 1990, this sector is now the fifth-largest goods-producing contributor to our gross provincial product.
Electronics, one of British Columbia's new strategic industries, already employs over 10,000 people. This report compares the economic climate provided by British Columbia and our American neighbours to so-called footloose industries. It answers the question put by prospective investors: why should we establish in British Columbia rather than Seattle, Portland or the Silicon Valley? The answer is very straightforward: British Columbia is very cost-competitive with its U.S. neighbours in advanced manufacturing. Our tax environment is potentially more favourable. This means higher potential profits for investors and more jobs for British Columbians.
The Premier briefly mentioned several of the report's conclusions in a recent speech to the Business Council of B.C., and I would like to reiterate those conclusions for the House today.
The report took the case of an electronics manufacturer in the four jurisdictions. To examine applicable tax liabilities, both revenues and costs were assumed to be consistent, even though the report also shows significant business costs to be lower in British Columbia. The example showed that a B.C.-based firm in this sector would enjoy a lower tax burden than its counterparts in Washington, Oregon and California.
Our study also compared taxes not related to profitability, such as payroll taxes, property tax and sales tax. These taxes, which are essentially fixed costs, represent 46 percent of tax liability in Washington State, 41 percent in Oregon and 40 percent in California. The proportion in British Columbia of taxes not related to profits is 32 percent. The corporate tax calculations were verified by Price Waterhouse after our government's March 26 budget. Clearly British Columbia offers advanced manufacturers not only a competitive tax regime, but a system that has greater sensitivity to profits than those of our U.S. competitors.
While this report makes clear the competitive advantage that British Columbia enjoys in an important emerging sector, it also shows that our province offers benefits that enhance the competitiveness of all B.C.-based industries. To cite two examples: energy costs were found to be up to 30 percent lower in British Columbia than in the three U.S. states, and medical insurance costs in the west coast states were found to be
[ Page 1099 ]
from four to six times higher than in British Columbia -- a significant additional cost to doing business across the line.
Some critics have recently suggested, rather simplistically, that labour rates in British Columbia's forest products sector prevent us from being competitive. Labour costs are only one factor of many and do not alone determine competitiveness. The rate of technological innovation by industry, the level of capital investment for workers, the commitment to developing workforce skills and the attention paid to quality improvement are all more meaningful in assessing productivity and growth levels and thus competitiveness.
This is the first of a series of reports that I have asked my ministry to produce, which will look at a number of sectors and industries in B.C. so that we can accurately identify advantages that will allow for successful development of value-added products and long-term diversification in our economy. No province or country can expect to have a competitive advantage in all sectors. I look forward to receiving the comments and suggestions from the members opposite, once they've had the opportunity to review the report. I hope that all members can be out there helping to sell B.C. as a good place to invest, and not be trying to drive industry across the line.
F. Gingell: I have been asking for a copy of this report almost daily, and I'm really pleased that it has come out. I'm very unhappy, though, that I didn't have some time to see it and study it prior to the minister making his speech. It simply isn't possible, whatever your background or training, to absorb all of the words as they come across the floor. It sounds as though what they have produced is a comparison of Vancouver to Seattle to Portland. I'm sure that is very valuable, and we will look at that with interest.
What we are hearing, of course, is that businesses are making their decisions to locate in Whatcom County just across the border -- particularly British Columbia businesses -- where they can manage their Whatcom county businesses from beautiful British Columbia. So thank you very much. We look forward to receiving it.
I'm sorry that we're not being given the opportunity to respond to this statement in a more knowledgeable fashion, but I assure you that we will take every opportunity to deal with this as various subjects come up through the estimate debates and various bills.
R. Neufeld: It's my pleasure to reply to the report from the minister on competitive advantage. I'd like to commend the minister on this initiative. If you go back and think about the NDP's position on free trade, we wonder if singling out the electronics industry may have something to do with free trade, and that that's why it makes it so viable with taxation in British Columbia.
I think we should take some other industries into consideration -- equipment manufacturing and value-added products in the forest industry -- and see how competitive they are. I think the proof is in the pudding. There are some industries moving south of the border, and the reasons would be interesting for the government to find out and make known in this House. Also, the Peat Marwick report spoke about room to move, and compared us to eastern Canada -- Ontario -- and Alberta specifically, I believe. If I remember correctly -- although there were 16 volumes, and I obviously didn't get a chance to read all of them -- they stated that we were really not at a competitive advantage with the U.S. So we wonder how this flies in the face of the Peat Marwick report that was commissioned by this party.
In a competitive advantage, the report states that labour costs, payroll tax, land and building costs, corporate tax, capital tax and medical services costs are all relatively lower in British Columbia. I'm really pleased about that, and if that's the case, I think that's really good for British Columbia. I'm glad that we compare favourably with the states of Washington, Oregon and California, because it proves what most British Columbians know: that British Columbia was run very judiciously for the last 20 years. It was fiscally run properly, and the results of that are showing up now for this minister to take advantage of. I'm really proud to be part of a party that initiated that over the last 20 years.
We have the lowest corporate rate -- or we used to; lowest personal income tax -- used to; among the lowest gasoline tax; lowest cost per capital debt reduction, and of this I am proud. Even with the famous Peat Marwick mark, we still were head and shoulders above all other jurisdictions. In fact, the Minister of Finance confirmed this just recently, when he came back with B.C. retaining the best credit rating of any province in Canada. Of that I am particularly proud, because that is also a heritage of successful Social Credit governments.
I notice that the report was completed on March 26, 1992. Mr. Speaker, we hope that this same type of report, with these same figures and percentages, can be presented to this House on March 26, 1993. Motions on Notice
REAPPOINTMENT OF ACTING OMBUDSMAN
Hon. G. Clark: I call Motion 56 on the order paper.
Hon. C. Gabelmann: Motion 56 reads: "Be it resolved that this assembly recommends to the Lieutenant-Governor that Mr. Brent D. Parfitt be reappointed acting ombudsman pursuant to the Ombudsman Act on termination of his present appointment as acting ombudsman."
As members know, Mr. Parfitt was appointed acting ombudsman on February 10, following the appointment of Stephen Owen to the Commission on Resources and Environment. Under the legislation, Mr. Parfitt's appointment must be approved by the Legislative Assembly within 30 sitting days of the commencement of the current session of the Legislature. Mr. Parfitt's current appointment, therefore, expires May 1, 1992. It is required that this motion be passed prior to that date to confirm Mr. Parfitt as the acting ombudsman.
[ Page 1100 ]
D. Symons: As a member of the committee that's working to choose the new ombudsman, I would say that this committee is working very hard to produce a good replacement for the ombudsman to oversee that organization. I would say that the work done by Mr. Parfitt, who is currently in that position temporarily, has been done very well. I encourage members on both sides of the House to endorse this motion.
L. Hanson: Certainly we, as the third party in the House, would support that. As the member just said, the committee is working very hard. It's very interesting to see the number of applicants who have come forward already for the permanent job. We certainly endorse and support the motion.
[2:45]
Hon. C. Gabelmann: In closing the debate, I move the motion that stands in my name, Motion 56.
Motion approved.
Hon. G. Clark: I call committee on Bill 4, hon. Speaker.
BUDGET MEASURES
IMPLEMENTATION ACT, 1992
The House in committee on Bill 4; E. Barnes in the chair.
On section 1.
F. Gingell: Mr. Chairman, I was under the impression that this commenced with the minister explaining to us exactly what the purpose of this is. So if that is not the case, my first question is: please would you tell us, Mr. Minister, exactly what this means?
Hon. G. Clark: That -- I say to my friend across the way -- is in fact the case. If you would like me to explain it, certainly you can ask, and I would be delighted to explain it. But in the absence of that, I thought maybe this was self-explanatory and that we could proceed.
Let me also begin by introducing Murray Crowthers, one of my staff who's here to assist with any technical questions you may have on these bills, and to assist the House and the minister on some of the technical nuances of the bill.
This section discontinues eight special accounts which currently exist in the general fund of the consolidated revenue fund. The legislation which created these special accounts is repealed in subsequent sections of this bill.
Subsection (1) identifies those discontinued special accounts. Subsection (2) reaffirms that any expenditures that occurred in 1991-92 may be accrued at March 31, 1992, where the payments are not made until after that date. The Lottery Fund is the only case that I can think of here, but I can ask directly. In the Lottery Fund, there are commitments made in '91-92, and sometimes they're not paid out until '93-94 or even '94-95. But they generally, for good accounting practices, accrue to the year in which the commitment is made and the money allocated. This is consistent with the government's stated policy of accrual accounting.
The balance -- other than the Lottery Fund, which is obviously significant -- is, in large measure, accounts which don't really exist anymore, such as the northeast coal development special account. These are basically defunct. It's part of the beginning of a process that was identified by the Peat Marwick report as a whole series of special accounts for which the purposes have been superseded by events.
Essentially this is trying to clean up the books of the House more appropriately, and it is only a beginning. We are reviewing all special accounts to see whether in fact we can minimize them further. Obviously the one that's of most significance here, it's fair to say, is the elimination of the Lottery Fund special account.
F. Gingell: Mr. Minister, 1(a) is the closing of the special account on the crop insurance stabilization account, which was provided for the very proper purpose of creating some stabilization and an available crop insurance fund for British Columbia producers. Can you tell us what government programs will be in place to ensure that this very important role is carried on?
Hon. G. Clark: I want to assure all members of the House that this has absolutely no impact on the crop insurance program. It simply moves what was a financing transaction within the special account to a financing transaction outside the special accounts. Special accounts do two things. In part, they allow statutory expenditures. That means that if you have a special account like the Lottery Fund, you can exceed the amount appropriated by the House without coming back to the House, because there is an account on the books which allows you to expend money up to that amount. There is a notional balance on the special account. That is what I find to be not good public policy. That's where the previous administration could, if they would have liked, spend more money on lottery grants in spite of the fact that they had exceeded their budget allocations, because there's a notional surplus in the account. I think that really distorted the books in some cases.
What's positive about special accounts, and what I'd like to be able to retain in some way -- I think it was the original purpose of them, and I think any members of the previous government would agree -- is that a special account does two things. It can politically identify an important area so it's on the books as a designated fund, so to speak, for a designated purpose. Secondly, these special accounts have a way of allowing funding to continue on a multi-year basis. Again, what happens in these special accounts is that you might want to carry a surplus from one year to the next, and the way we do budgeting is annually and it sometimes becomes cumbersome. In areas like the treasury branch of government, we've retained the special account, because it allows business to carry beyond a single year
[ Page 1101 ]
of appropriation where there's a surplus in the account. It allows a little more flexibility to deal with commitments over a period of time.
There are some positive things with special accounts in a public policy sense, but there are some negatives. What we're doing now is going through the special accounts and saying: which ones don't really make sense and have artificial surpluses that really escape the scrutiny of the House -- and that's not good public policy -- and which ones make sense? Or we ask if there are other ways of accomplishing those goals. The one that comes to mind is the treasury branch of my ministry, which is a major operation of borrowing and investing money and has a very large surplus in its account, even though any money that is spent out of that surplus affects our deficit on the bottom line. There's some real merit in a business sense to having a separate business unit that can be judged on its performance inside government. We want to essentially reward or know how treasury is managing our funds.
By the way, I might say -- to give them a plug -- that they are doing extremely well and they have generated a lot of income for the government, and that shows up in their special account. They can't spend it without approval of Treasury Board or without hurting our expenditure numbers. Everybody now knows how treasury is managing their money, and they're doing extremely well. There are some benefits to special accounts; we've kept it for treasury. There may be other ways which might make more sense, but at the moment we've kept it and we're reviewing them all.
I want to make it very clear here that 1(a) has absolutely no impact on any of them -- even on the Lottery Fund. All the Lottery Fund programs are now in ministries. Any impact on the Lottery Fund as a result of budget decisions, you can quite appropriately criticize -- I don't have any problem with that -- or laud if you like. But if we made a decision about whether or not to have less money in the GO B.C. program, we're held accountable in the House. This limits the ability of government to spend more money than the House has approved, by way of a special account. I would think that the members opposite should strongly support this initiative.
J. Weisgerber: Along that line of thought, I'm particularly interested in the Lottery Fund, because the act goes on to indicate that lottery funds will now be put into general revenue. We all know that a couple of hundred million dollars -- which has been quite significant in its impact on certain community groups, in being used to develop community facilities -- is significant. In a budget of $17 billion or $18 billion, $200 million has a bad habit of disappearing and being very hard to find again. So I have a concern that way.
My greater concern is for those groups that have used lottery funds through GO B.C. or other funding mechanisms over the years. There has been a one-window opportunity to apply for funds. If you had a project that you believed qualified in general terms for lottery funding through GO B.C. or others, you made an application to the Ministry of Government Services, the minister responsible for lottery funds, and your request was dealt with.
I have the sense that what has happened is that these lottery funds have been spread throughout ministries. I assume then that they are going to fall under the management of the deputy minister and may not necessarily reappear as funds available to community groups or for the kinds of purposes that they were previously allocated for. I can see situations where ministries may decide that lottery funds will be better used to supplement the budget of the ministry.
If that's the case, it will be unfortunate. At the end of the day, the government will simply spend another $200 million, and a very worthwhile project and opportunity will have been lost to community groups or charity groups -- groups that have, in almost every case, raised $2 for every lottery dollar expended by the government. Every time a $1 allocation was made from lotteries, a $3 activity was generated in the community.
I'm curious about how the government will respond to that. On behalf of my constituents and others, I would be curious to know how community groups will identify where to go now with their lottery applications.
[M. Lord in the chair.]
Hon. G. Clark: I want to be very clear about this. I don't want the leader of the third party to be mischievous, because I know he understands this. Last year, under the previous administration, the government raised roughly $200 million in profit from the Lottery Corporation. That went into the Lottery Fund special account. But roughly $120 million was authorized to be spent by the previous government. So the $80 million surplus in the Lottery Fund special account went into general revenue.
The member is nodding; I know he agrees with that. There's nothing wrong with that. Any expense authorized beyond $120 million, which was the budgeted amount, you could notionally take out without approval of the Legislature, because there was a surplus in there. But in fact it impacted on our bottom line. I think that kind of bookkeeping is unacceptable.
Here's the second thing I want to make a point about before I proceed: that $120 million, which was actually authorized to be spent out of the lottery funds, in fact, over time -- and I don't necessarily blame the government for this -- stopped becoming a discretionary expenditure of lottery funds on community programs, as the member might suggest. The majority of that $120 million was actually spent on ongoing program commitments; for example, $1 million of the multicultural program. Not discretionary funding for capital projects, as the original intent of the Lottery Fund was, but actual program spending dollars on ongoing programs.
Of that $120 million, there was a discretionary fund for capital projects, and the discretionary component of that ended up being, I think, about $20 million; that is the one that people applied for under the GO B.C. program. We have taken all of that $120 million, and how it was spent last year.... If you look at schedule A of the estimates, you'll see that $120 million. The $1
[ Page 1102 ]
million for the multicultural program is still there; we have now moved it into the Minister Responsible for Multiculturalism. The Cultural Fund, which was ongoing program funding for cultural groups administered by the Minister Responsible for Culture, but notionally applied in the books under the Lottery Fund, has now been allocated to the minister responsible, where it was before. But on the books it's more true, it's more honest. That is in fact where it is spent.
We have taken the GO B.C. fund and maintained it, but we have reduced it, because the discretionary component of the lottery fund was solely in the GO B.C. fund. It still exists. It has been reduced, and you can, of course, if you like, criticize us for not spending enough money in that area. In fact, I might agree with you. Unfortunately, we have a difficult fiscal situation, and we had to cut back on our discretionary spending. So the GO B.C. fund still exists. People can still apply for it. People will still apply for it. It's a smaller amount, and it's now in a ministry. Most importantly -- and the reason why all members should support this bill and this section -- it is no longer acceptable for government artificially to approve applications for GO B.C. without approval of the Legislature. The flexibility of the special account afforded government the notional surplus in that account, which governments could draw on without approval. That is eliminated by this.
[3:00]
We have maintained all the program spending; schedule A of the estimates shows you that. We have reduced some of the program spending. You are quite correct: the ministers who allocated them before still allocate them. But on the books they are appropriately shown where they belong. That, I think, gets us away from some of the problems that existed -- not with the members opposite, but some other cabinet ministers who got into problems, or governments who wanted to appease certain groups. They always had the Lottery Fund and this fictional surplus, this book surplus, to draw on to appease political considerations. We have given up that discretionary right. We have said: "Here's the fund; here's how much can be spent."
Obviously governments can still spend money through the contingency fund or others. I'm not saying we don't have any discretion. The government still has some discretion to move money around. In reality, the major source of abuse by certain ministers in the past is eliminated by this bill and by what I think is a good public policy initiative.
J. Weisgerber: The minister quotes figures of about $20 million used to fund community groups. I sat on a committee of three cabinet ministers for about a year and a half that approved lottery grant applications in excess of $100,000. I recognize that that was put in place to take away from a single minister the discretionary power that rested with the minister. It was my impression that we were spending considerably more money than that, and it was being spent in a fair way. If you look at the distribution of money around British Columbia, it wasn't a partisan distribution of money. In fact, it was done on the basis of the merit of the application that was being made. So I recognize the concerns.
I would suggest to the minister that the process the previous government put in place in the last 18 months or so provided more safeguards to British Columbians than the situation that exists today. If I understand the minister correctly, he said he allocated money into the GO B.C. account. He hasn't said how much, but I suspect it's considerably less than the $20 million he says we spent and considerably less than what I believe we were really spending, which was probably several times that amount.
I would suggest that, before I hear his response, what you've done is put yourself back in exactly the same position we were in before the committee was established: you've given a minister X millions of dollars, and you're saying that because it's a vote of the Legislature, there's a control in place. If that's not the case, if you have a committee that administers within the ministry, then I'd be interested in that. Again, it seems to me that you're moving things around simply to move them around and not to deal with a problem that didn't exist.
Hon. G. Clark: I have the numbers here, just so you know. There was $33 million last year, $30 million this year.
It's important for members to know also -- this was a surprise to me when I came into office -- that it doesn't mean you actually have $30 million in discretion or $33 million last year. Last year $26 million out of the $33 million was committed in previous years. Because the GO B.C. fund is multi-year funding for major capital projects, if you make a commitment to fund $1 million for a community centre, it may take a couple of years to actually pay that out because of the building contractors, etc. The discretionary amount under the previous year -- last year -- was about $7 million. That's in the GO B.C. fund -- I have the numbers; they're right here. In this year the discretionary amount is.... To be honest, you would be better asking the minister responsible, and I know she'd be delighted to answer. From my understanding, we've maintained the existing commitments; we haven't cancelled any commitments made by the previous government. We have continued funding the GO B.C. fund, and that's close to $26 million, and the discretionary amount is smaller than $7 million, but I'm not sure exactly.
Just to clarify, the cabinet committee that reviewed major requests still exists in this administration. Again, if you ask the minister responsible, I'm sure she would inform you how that works. I'm not on that committee, and I have no desire to be on. Major capital allocations, which are difficult to do because the budget is smaller, including '91-92 when we continued on the function from the previous administration, did go to a cabinet committee.
I strongly disagree that by putting it in a real fund -- in a real appropriation -- without this special account fictional surplus, we have dramatically limited the ability of government to use discretion in a political way. We have maintained the checks and balances that
[ Page 1103 ]
existed as a result of the Bill Reid affair that the previous government initiated in terms of making sure that more than one minister is responsible.
Again, I don't mind answering these questions, but I'm sure that you'll have lots of questions for the Minister of Government Services, who is responsible for administering the GO B.C. fund. I want to make the point that this is essentially a bookkeeping change. We think it's good, sound public policy. All of the programs, including the community archive assistance, continue to exist. The Maritime Bicentennial funding exists; the Premier's Advisory Council for Persons with Disabilities exists. But instead of being funded out of the lottery fund special account, they are now funded in the appropriate ministry, from where they have always been administered. On the books they showed up in the Lottery Fund, but they now show up in the appropriate ministry.
J. Weisgerber: I'm reassured by some of the answers that I hear, but I would like to clarify that while there was always a lag in the actual drawdown of funds from the fund for the reasons that the minister explains -- you approve today $1 million toward a $3 million arena in Vancouver East, but it may be a couple of years until they draw that down -- staff is able to project, so that on an ongoing basis, if you're spending $30 million a year on the project, it's reasonable for you to approve $30 million a year in new projects. So your discretionary spending is not the $7 million, but on an annualized basis, roughly the amount that you're willing to fund the projects for. Otherwise, at some point you're going to grind to a stop. Because only $26 million of the $32 million was already committed, knowing it wasn't all going to be drawn down, it would be imprudent of you to say you're only going to approve $7 million or $4 million worth of projects this year. It just doesn't work that way.
I am pleased to hear that there is a committee of ministers overseeing it. Whatever the temptation is to get on the committee, don't accept it. You'll be lobbied by everyone from your colleagues to anyone who's making an application. So forgo that temptation. For anyone else who has the temptation to sit on it, it's not something that you should succumb to.
There has to be -- and I hope that there is -- the intention to continue funding community projects at a significant level. We heard a lot of talk during the election about half of the money going into health care. I don't know whether that's happened. I understand now it's all going into general revenue.
Hon. G. Clark: As a matter of fact, there is another bill called the lottery funds special account. We have created a special account to deal with our political commitment to 50 cents on every dollar going into health care. That is there, and it is accountable. It's up to 50 percent, which means $110 million, and I'll be delighted to debate that. So we have kept that commitment. We're eliminating the special accounts; we've created another special account to deal with the health care....
Interjection.
Hon. G. Clark: No, precisely in order to give that political commitment -- the positive things I mentioned about special accounts, which are retained. We have made our commitment, and I'm delighted that I can look forward to that debate.
I want to also clarify -- so you know -- that this government is committed to the funding question for community groups. Given this tough fiscal environment which we inherited -- I won't make that speech again -- obviously we don't have as much money as we'd like. The demand is there, and I'm sure that if you put a lot of money in there, you'd still have a lot of demand. That's really difficult. We would like to be able to approve more. We are going to be approving some; we are going to be talking about it. You could probably canvass the minister's views on it, but my sense is that the fund should be refocused so that we're funding genuine small community groups rather than the huge funding that the lottery funding has been used for in the past -- sometimes $5 million, $10 million, $20 million dollar funds.
I would prefer, given that we have a tough fiscal environment, that we try to fund small things. This is my personal view, and I'm not reflecting the government view. It's just that we have cut that budget somewhat, and because of its discretionary nature and the ability to do that.... I know the minister is working hard at making sure that fund still provides services. One of the very good services, which I commend the previous government for, was this travel grant program for students to be able to travel, particularly for those outside the lower mainland. It's fair to say that -- again, you should canvass the minister -- we want to make sure that that program continues. It's a good program; it should be funded by the Lottery Fund. It still is; it's in the budget.
It's a matter of sharpening our pencils, trying to refocus the fund as best we can given a tough fiscal environment. We still have a very strong commitment to community facilities.
J. Weisgerber: I'll wrap this up quickly. The minister already made the point that I was going to make, and that is that we're cancelling a bunch of special accounts, but creating another special account in which to transfer half of the lottery funds. I guess it depends who creates them and who eliminates them, how well they meet the objectives of the current government. I don't have an argument with that one.
I know that my colleague the Finance critic for the official opposition would like us to move through these issues one by one, and I leapt ahead to lottery funds, so I'll sit down and let him continue with the line of questioning that I interrupted.
C. Tanner: I have two questions for the minister. One is that he mentioned the special lottery fund: could he clearly tell the House that only the $110 million for medical funds will be going into that special fund? In effect, will he be creating another special fund for the other $110 million?
[3:15]
[ Page 1104 ]
Hon. G. Clark: That's correct. About $110 million or whatever 50 percent of Lottery Fund revenue is, $104 million this year.... It's flattened out -- our proceeds from lotteries -- which may be good in a public policy sense, but from a financial sense concerns me, obviously. That money will go into the health care special account. I'm sure the minister will be delighted to tell you what we're doing with that $104 million. The other $104 million now goes into general revenue -- the consolidated revenue fund -- and we are, in turn, funding all of those programs that used to exist in the Lottery Fund's special accounts. We're eliminating the Lottery Fund special account by this bill, and that money -- the remainder of the 50 percent of Lottery Fund revenue -- will go into general revenue, which we are held accountable on how we spend. We have chosen to continue all of that program spending that used to exist in the special account in the appropriate ministries.
Obviously, some budget decisions were made. I gather some are up a little bit; many of them are down a little bit. Those decisions quite appropriately are the place for debate. I would say quite candidly that the place to debate some of the nuances are in the appropriate ministries, not with me; I simply don't know the answers to how they're managing.
I'll take an example that the member might be interested in: cultural funding. It used to be in the Lottery Fund special account. We've now moved it to the Ministry of Tourism and Culture. It was a little smaller this year. How that minister is handling that, how she's disbursing the cultural fund, is quite appropriately asked of her. I might say, if I can, when I was in opposition it was a great source of frustration, because the minister responsible for the Lottery Fund would never answer questions on cultural funding or any of these things. They always referred it to the minister responsible, and the minister responsible said: "Oh no, talk to the minister responsible for the Lottery Fund." From your perspective it's much cleaner: we've abolished the Lottery Fund special account. The Minister Responsible for Culture is now responsible for that funding, and that's where the questions should go.
C. Tanner: I asked the question because I have an interest in lottery funds; unfortunately I generate some of them, or at least my wife does now, thanks to conflict-of-interest regulations. Maybe I should make that statement in the House: that my wife has a lottery machine.
My interest is that I think the way lottery funds are being dispensed in this province is absolutely shocking. The government had an opportunity to improve it. I would rather they had used the Manitoba scheme, where an independent committee is set up and administers all the funds under certain conditions set up by the Legislature. What the minister has done now is pass the buck to these various ministries, and they're going to be under the gun the same as the member of the third party who just spoke.
After all that introduction, my question is this. If we want to discuss that.... In a couple of instances so far in the estimates, we've been whipsawed between your department and a couple of other departments. I want to get it clearly from you that if we want to discuss the dispensation of lottery funds, we should do that with the minister responsible, not with you.
Hon. G. Clark: That's quite correct. But be careful, now. It's the programs that were previously funded by the Lottery Fund that you should ask of the appropriate minister. For example, if it's multiculturalism, there was a small fund that has now been allocated to the minister responsible. That's who you should ask concerning questions on multiculturalism, not me. If it's culture, and funding has now gone from the Lottery Fund to the Minister Responsible for Culture, then you should ask that minister. Quite correct.
C. Tanner: I have a number of applications from my constituency that are on the way through. I have endorsed them. I've asked the previous dispenser of those funds what the situation is and where they are now, and I'm not getting any answers. I'm being told that I'm not getting any answers for the simple reason that they're within departments now, and the departments haven't determined how they're going to dispense them. Can the Minister of Finance advise me on those?
Hon. G. Clark: No, I can't, to be honest. I know that you're quite correct; I'm in the same position. I'm a member, and I have worthy groups in my constituency that ask for my support. Not always, but generally I give that support, and I write a letter recommending it. There are, as you can appreciate, hundreds of those. It goes to a GO B.C. fund, which is quite small, even though it looks large because of previous commitments. Those are adjudicated. Frankly, I won't know the status of mine until a decision is made, just as you won't. It's just simply not possible to tell you exactly where they are in the system.
Again, you have to ask the minister responsible for GO B.C., the Minister of Government Services. If it's an application for a cultural grant -- I think there is such a thing -- then it's the Minister Responsible for Culture. That's the appropriate place.
K. Jones: Could you just clarify, in the allocation of lottery funds in this bill, if the allocation is just going to general revenue, or is this bill actually allocating these funds excluded from Bill 10, which is where the health-oriented funds are going? Is it being allocated through this bill to these different ministries, or are you taking it into general revenues?
Hon. G. Clark: I'm trying to answer all of these questions even though they are beyond my purview. This bill abolishes the Lottery Fund special account, so all that money goes into general revenue, except the health care special account, which receives 50 percent of it. You're quite correct; it is allocated by the budget process, by the estimates process. You can see it in the book, and you can question the ministers. Technically speaking, it goes in the consolidated revenue fund, and then it is reallocated to the various programs.
[ Page 1105 ]
I say that it's bad public policy generally to earmark specific funds for specific purposes, which is what the previous government did, largely for political purposes. It's fiction. People are held accountable in the budgets that I introduced in the House and in the estimates that every minister has. To say that this percentage of this fund comes from forestry revenue, and that this percentage comes from lottery revenue.... I could say that to you. The reality is that government receives all funds from all sources, and then it decides, quite appropriately, how it's allocated. We're held accountable by you, across the way.
However, in some circumstances we do have earmarked funds for political, public-policy purposes. We've decided that 50 cents of every dollar generated by lotteries will go into health care. That's a government decision; it's earmarked, and I can't change that. Once the bill is passed, it's beyond my budgetary purview. It goes in there. Similarly, the natural resource community fund is an earmarked fund, and it's there. Once that bill is passed, I can't touch it without changing the act.
So there are some reasons for it, but on balance the Lottery Fund has been distorted quite dramatically, and we're trying to fix that and make us more accountable to it. It's correct that this bill abolishes the special account, and that means lottery revenue comes to general revenue.
K. Jones: You were stating earlier that you have allocated $30 million this year to the GO B.C. program. I would like to bring to your attention that at the Community Advocates for Charitable Gaming information forum on April 27 -- last Monday -- the Deputy Minister of Government Services responded to a question of how much there was and where it was being allocated. He stated that there was $40 million in that program, and that $30 million was previously committed to GO B.C., that breakopen pay-outs were $6 million and that the remainder -- less than $5 million -- was available for community applications.
Which person in this government knows the truth? Do you? Are you stating the real amount that's available -- the $30 million? Therefore with $30 million in previous commitments, there's zero for the community. Or does the deputy minister have the true facts on this?
Hon. G. Clark: You can ask the minister responsible for the details of how the money is allocated. Last year there was about $100 million; I'm giving you broad numbers to help you understand the process we're going through.
For example, there's something called the Expo legacy grant program, which last year spent $1.7 million out of the Lottery Fund. We've maintained it at a reduced rate for next year. So it depends on if you want to add in all the grant programs....
The provincial carillon program -- you know the chimes out here? -- is funded out of the Lottery Fund, and we've maintained it -- at a reduced rate, I see here. There was funding for the Year of Music last year, which obviously we've not continued, but it's there.
What I'm getting at is that, by this bill, we've sorted out the special account question and have made government more accountable. But for the details of the funding that the budget has provided, you have to ask the detailed questions to the minister responsible.
If he said $40 million in a general number, he may have added -- as I just suggested -- some of the other grant programs that were allocated by the Lottery Fund. Essentially we have maintained all of the existing programs and put them in the different ministries.
The reason I wanted to talk about the discretionary question is not to mislead you, and I say this in all honesty. I didn't understand this until we formed the government. It looks like a big number there, but because of previous commitments of big projects that carry over several years -- obviously commitments we want to uphold, because agreements were made and people entered into contracts -- the actual discretionary component was remarkably small. We've tried to maintain discretionary amounts so that we can continue to fund the travel programs and some community grants, but there's very little discretion. In this huge Lottery Fund -- on the books a couple of hundred million dollars, and a $100 million approved -- when you stripped it all away it ended up that there was very little discretion for community programs. We've maintained that; we've put it directly in the ministry.
Again, if you want to get into details of dollar numbers, you have to ask the minister responsible. I know that she would be delighted to answer, and that's the appropriate place to ask the question.
The Chair: May the Chair just remind members that the minister has made it very clear as to where this information may be gathered. I think that continuing to canvass the minister for information that he has said clearly is available from other ministers is only delaying the debate.
K. Jones: It is just that I wanted to clarify a statement by the minister, who appeared to be giving misleading information to this House when deputy ministers were giving very different information about the very specific areas that both were talking about. It was very clear that both were talking about the same area of funding, yet there was a $10 million difference in the statements made. I wanted to make sure it was clear that the minister is now deferring to the deputy minister that there was $40 million available in that fund, rather than the $30 million you quoted. Is that correct?
Okay. Let it be put into Hansard that the answer from the minister was affirmative.
Hon. G. Clark: I don't want to confirm some newspaper report you have. What I'm prepared to confirm is that I completely defer to the minister responsible and the decisions they've made within the budget allocation. I was trying to be helpful in giving you a sense of the magnitude in the shifts we've made. It's very likely -- in fact, I guarantee you -- that the deputy minister and the minister responsible know far more about the details of these programs than I do.
[ Page 1106 ]
F. Gingell: I guess we'll just carry on with the lottery question, though I hadn't gone down to number (e).
There are two things. When we were in the estimates debate for the Minister of Social Services, I specifically brought with me the book of the lottery grants and found a number of them -- and it's recorded in Hansard -- that clearly came within the purview of the Minister of Social Services. There was a completely negative answer. They didn't know what was involved when I asked how much lottery funds they had or how much money was being allocated that's not definitively assigned to a program for them to make grants, contributions and assistance to various worthwhile projects that clearly come under the jurisdiction of Social Services. The answer I got was zero.
Hon. G. Clark: Just to be clear here, the minister is responsible where the stuff is allocated. There's Government Services; Municipal Affairs, Recreation and Housing; Tourism and Culture; Economic Development, Small Business and Trade; Aboriginal Affairs; Health, of course, separately; and Education. That's how the existing programs in the Lottery Fund were allocated -- essentially on the basis of how they were administered in the past, although there was some overlap between Lottery Fund administration and these programs.
[3:30]
According to my information here, there are no Lottery Fund programs that impinge upon Social Services. As you know, in this complex world many things impinge upon programs like Social Services. Some things might more appropriately be in Social Services, but they aren't. One that comes to mind is where Advanced Education has the training component, and yet Social Services has wage subsidy programs for things like retraining. That's a problem in government that is very hard to sort out, but in this case of lottery funds, there's nothing that was administered by Social Services and there's nothing now that's administered by Social Services.
F. Gingell: I understand that it is quite acceptable in this committee stage to make a statement more than ask a question. I'm going to make a statement, if I may. I must admit that I have never approved of lotteries. I think that it is voluntary taxation of the poor. I must admit that on occasions when the prizes get very high, I get the same greed everybody else gets and think that with my $1 purchase I can beat the odds, which I understand from being in California once when the prize got to over $50 million -- and they are required in the state of California to print the odds on the back of the ticket, which means you won't buy very many -- are something like 64 million to 1.
I think that a lot of people supported the Lottery Fund because they could clearly see a support for programs. They were being told that good things happening in their community were funded and assisted by lottery grants. I was very impressed, shortly after I was elected, when I attended the opening of a new facility for the testing and evaluation of autistic children in Ladner, which was built by joint grants and assistance from both the Variety Club and from lottery funds. People will support lotteries on the basis that they recognize that despite these terrible odds that you give us, all the profits in the past have gone to worthwhile projects.
But now they're all going to go to general funds, as I understand, and then half of them are transferred out again to this new special account called the health special account. With people being unsure of the way it is going to be handled, I think that this is going to be perceived for what this really is: the government of British Columbia has finally got into the numbers racket and is operating in a fashion similar to that of people we expect to be outside the law. If these programs are going to continue, it is really important for you to get the message out and to make the manner in which people can apply clearly understood. There are many important community projects for which people are willing to go through this voluntary taxation to pay for.
The advantage of the way it worked in the previous accounts, being handled as a special account, was that you were able to carry things forward from year to year. How is that going to be handled in the future, Mr. Minister?
Hon. C. Clark: I'm sorry. Can you just....
F. Gingell: Under the previous arrangements with the lottery funds being in a special account, you were able to make commitments in 1992 that you knew would carry over to 1993 and maybe even 1994. Because budget estimates are approved on an annual basis and you won't have the approval made for something that you intend to spend in a following year, how will that be handled now?
Hon. G. Clark: It will just be handled in the normal budgetary process. That means that my discretion and Treasury Board's discretion, as a board, will be limited by decisions made. I understand your point. It means that if we agree to funding which will take place over two or three years -- in instalments over two years, or even start to be paid out in two years -- and we make the political commitment to it and people enter into contracts for concrete and the like, then we're obligated to pay it. It doesn't really matter that we don't have a fund where they can keep notional surplus over time, in this case. It means that we have got to fund those programs somehow. The political and the budgetary commitments are made. To be candid, in a difficult fiscal environment it means that you have removed some discretionary ability of the government to, say, cut that program, because we're going to maintain the funding.
This does the same thing. We're continuing to fund programs that we were committed to in the past. In the future we will continue to fund programs for which commitments are made today, albeit we're trying to limit those, again because of our difficult fiscal environment.
[ Page 1107 ]
F. Gingell: Where in the budget document can I find the GO B.C. fund? I've had quite a search for it, but I haven't come up with it.
Hon. G. Clark: That's of course beyond the purview of the bill. I can't answer right now, but I'll have my staff review that question for you. It may not be discretely displayed. I don't know.
L. Fox: I have several concerns with respect to this change in the accounting process and procedures regarding how we're going to manage the lottery dollars. Prior to stating that concern, I'd ask the minister if he would explain the percentages of the fund. I understand that 50 percent is going into Health. Can you tell me in a percentage or in dollars what's going in? I believe you mentioned four other ministries: Aboriginal Affairs, Government Services, Education and Tourism and Culture.
Hon. G. Clark: I'm sorry, I can't do that. It's beyond the scope of this debate, frankly.
I don't want to mislead you about where it's going. The money is going into general revenue. Fifty percent of the Lottery Fund goes into the consolidated revenue fund. The other 50 percent -- just to correct my critic across the way -- doesn't go into the consolidated revenue fund at all; it goes directly into the health care special account. So 50 cents on every dollar that we make on lottery funds goes into the health care special account; the other 50 cents goes into general revenue.
We're now accountable for those decisions in all the individual estimates. How they're divided up is something for which we can be held accountable. But 50 cents on every dollar of profit that we make in lotteries is going into the consolidated revenue fund. To give you a bit more of an answer, I'll just say that we have continued all of those programs, essentially, that were funded before. The ratio is almost exactly the same as it was under the previous administration; although there are some differences because the Year of Music is over, and because it's not being funded, that's where you can see how we've cut down the amount in order to achieve our budget deficit target. We have made cuts. The previous government spent $7.5 million last year on the Year of Music. There is no Year of Music; we've funded nothing in its place. That $7.5 million is one way we reduced our expenditure. I can't give you a definitive answer.
L. Fox: I'm a bit concerned, because earlier, if I understood you correctly, I was under the impression that applications could move forward only under the respective ministries that they fall under. Given the fact that Aboriginal Affairs' and the Ministry of Education's estimates have been completed and during both of those estimates there was no opportunity to debate the amount of money that was going to be allotted through lotteries and how that was going to impact on their respective budgets, I would think that it would be in the interests of the public that they would know, at least in percentage forms, how these lottery funds were going to be distributed. I'm convinced and confused at the same time that there is going to be a larger bureaucracy handling the distribution of these funds rather than a simpler one than there was previously. If you can't give me the amounts -- and I certainly hope you can -- can you at least tell me how the mechanism will work if it falls under three ministries with respect to that initiative? It could quite easily fall under Government Services, Education and Culture at the same time; an application could fall under all three ministries with respect to the intent of their complex. How is that mechanism going to work? Is the process not going to be even lengthier than it was previously?
Hon. G. Clark: There is absolutely no difference. The first citizens' heritage language fund, which was theoretically in the Lottery Fund special account, is now administered by Aboriginal Affairs, and it used to be administered by Aboriginal Affairs. This kind of phony bookkeeping that your party engaged in is one of the reasons they were defeated. We're doing the opposite: we're telling the truth. We're saying the first citizens' heritage language program is now operated under Aboriginal Affairs. And what difference does it make if it's 1 percent or 10 percent or 0.5 percent or 0.25 percent of the Lottery Fund revenue? It's all going into general revenue, and we're disbursing it to the ministries. That's where they're held accountable. Those are the questions you should ask. It should make no difference to you when the Aboriginal Affairs estimates were up -- either last year when we had a Lottery Fund or this year when we don't. That's the minister that administers that program; that's who you should ask. If you didn't, I'm sorry, but I can't answer the questions.
L. Fox: I guess I have to respond a bit with respect to telling the truth. If you're convinced you're on the right track and you're going to be more accountable with respect to the handling of the lottery funds, I don't have a problem with that. However, you should be able to tell us specifically, in dollar form -- at least in the estimates -- what's going into each of these ministries so that we know what's available with respect to those initiatives in the province. I have two initiatives right now that have been cancelled because of the cancellation of the GO B.C. program. They do not know where to apply, how to apply. They cannot get the answers out of the ministry; I cannot get the answers out of the ministry. I cannot even get the answers out of the ministry as to how many applications were rejected and sent back to the respective areas. Sooner or later you've got to stop the gobbledegook and give us some information that we can serve our constituents with.
Hon. G. Clark: All of the GO B.C. grants, as I understand it, have been rejected and sent back, and the people responsible have been advised that we're reviewing this program. There's a consultative program about how we can deal with community grants.
I've just been advised where that $40 million comes from. There's a number in the estimates of the Ministry of Government Services that says $40 million for community grants, and that's all the programs for community grants.
[ Page 1108 ]
What I was talking about was what would have been in existence in the GO B.C. grant. What we've done is say that you deal with the minister responsible, who's going through a consultative process on how to deal with community grants. There is a period.... I understand that. In some respects, it's difficult for us as well. We're all members; we all have demands from our constituents. We are now trying to refocus it. The minister is going through a consultative process to come up with a better way of allocating funds so that all the rules are clear and all the people can access the fund.
We're trying to review all those things. We simply can't fund the hundreds of millions of dollars for hundreds and hundreds of grants; and it would be wrong for us to keep taking those applications, sitting on them and reviewing them when we don't have the ability to fund them without increasing the deficit significantly.
[3:45]
L. Fox: One final observation with respect to the change in the distribution of the funds: it's well known that under the initial program, as handled in the previous administration, individuals were able to track the fund quite easily. They were able to see, as you have identified several times, that there were some misuses with respect to those. I strongly believe that the ability to do that will be severely hampered by the way you're distributing these funds. It will be almost impossible, because it will be hidden within the respective ministries; and the opportunity to misuse these funds within those ministries may very well be enhanced, because they'll have more control over them than what was previously over them by the other administering body. I'd just like to have your comments on that.
Hon. G. Clark: I would say it's exactly the opposite, because those funds are now subject to debate in this House; it's now clear how much money is going for this purpose.... They're subject to the normal rules. They're not subject to a sort of off-book lottery slush fund that people can access with very few rules attached. When it comes to the community grants program and how that's administered, the appropriate place to ask those questions is the minister responsible, to ensure that she and the government are held accountable for the distribution of those funds. I'm sure that she'd be delighted to answer that question and to give you that comfort, because we have learned from the previous administration, and we will ensure that there's full accountability for those programs. Again, ask the minister responsible.
C. Tanner: I'm starting to sympathize with you, and I didn't think that would happen with your having to answer these questions. I understand it's for another ministry.
My question is about lotteries, but a different section. Could I direct your attention to section 9?
The Chair: Hon. member, we are discussing Bill 4, section 1 only, at the moment.
K. Jones: I wanted to continue further on section 1 with regard to the discontinuance of these special accounts. This question of lottery funds distribution is a question of creating a true slush fund. It's a matter of taking half the funds that are presently allocated to the lottery program -- the entire lottery funds that have been available to all types of services; almost $200 million.... That is now being split in half, with only a portion being allocated in this bill to Bill 10 -- that being the Health budget -- and the remainder just literally going into the general revenue slush fund. It's really nothing else.
There's no designation of those funds. It's up to the discretion of the Minister of Finance as to whether he takes money to go to one ministry or to another ministry. It's totally in the hands of the Minister of Finance to play with this money, to dole it out through the ministries to whatever source could benefit the government party interests -- to whomever. They complained about the previous government doing this, yet today they're doing it without any accountability at all. You say it comes up for debate, but there is no opportunity to debate, because you haven't even identified where it's going.
An Hon. Member: Yes, he did.
K. Jones: You've indicated that it may show up in these ministries, but there's no commitment to those ministries until they are approved. If more money comes into the Lottery Fund, you can distribute it to wherever you want. The Lottery Fund is not a fixed fund. It can grow as the use of it -- the different programs.... Maybe we're into electronic video lottery facilities that draw a lot of money.
You're really using it as a means of cutting down the taxation. There was $100 million in there allocated to community use, yet only now is $40 million being allocated. What about the remainder? That's going to pay down the debt so that the government looks as though it isn't spending as much money. That's what's really happening, let's face it; let's be out in the open about it.
F. Gingell: Back to crop insurance stabilization, which is where we started. Do I take it, Mr. Minister, that the function of the crop insurance stabilization fund is all taken care of now under the farm income assurance fund?
Hon. G. Clark: If you look at page 69 of the estimates, you'll see the crop insurance stabilization program still exists. Instead of being in a special account, the financing transaction is now part of the general books of the province. It has absolutely no impact.
Interjection.
Hon. G. Clark: Yes. The difference is that instead of having a special account, we put it in the general financing transactions.
[ Page 1109 ]
F. Gingell: I will move on to the cancellation of the special account for Freedom to Move. Having Freedom to Move in the special account form gave members of the Legislature and the province a clear understanding of where the government was going with Freedom to to Move; what projects they had planned; how much they anticipated spending on them in the current financial year; what the total anticipated cost was; and how long some of the projects would take -- what kind of time-frame was involved. Once they were budgeted, we knew it was on the planning board. Can the minister tell us how this function is going to be carried on in the future, letting us know about long-term commitments?
Hon. G. Clark: With respect, the Freedom to Move account did not do that. What it did was politically inflate how much money was going to be spent by the government on transportation. It would be like me setting up a health special account and saying the government of British Columbia is going to spend $30 billion on health care over the next ten years. In fact, we're spending $5 billion or $6 billion a year on health care. But if you want to make a big political statement, you create a special account, add up the annual amounts you're spending anyway on a program, wrap it up in a bow and pretend you've made a huge commitment. That's what the Freedom to Move account really did. It was a political exercise to try to demonstrate, going into an election, that the government had this huge, multibillion-dollar, ongoing commitment to highways.
We, on this side of the House, are spending, I think -- in the budget -- $800 million on highway construction. It's mostly rehabilitation and a lot of small projects. It's a lot of money, in any event; and obviously, if I made that $800 million $1 billion and added it up over the next five years, I could make a similar announcement. Really, it was a political game that had no practical impact except to demonstrate a political commitment to highway construction. We share that political commitment. We also share certain fiscal and political realities when we're trying to make these budget decisions.
The reality is that this was a very political statement Premier Vander Zalm made to try to demonstrate this huge commitment. But it was largely a matter of ten years out, add up some future budgets of Highways -- which they said they had a commitment to.... Frankly, whether or not they had.... No government can say. I cannot say that three years from now we're going to spend $2 billion on highways, or ten years from now we're going to spend $2 billion on highways -- I don't know.
Interjection.
Hon. G. Clark: That's right; I may not be there to do it. But even if I were....
You can try to make some general statements of future intent. I don't disagree with that, and I'm sure we'll do the same thing.
This special account was really designed for a specific purpose, and it has really outlived its usefulness. I want to make it clear to members of the House.... I'm a bit disturbed by all these questions only in this respect. I could have maintained the Freedom to Move special account. It has no practical implication. We could have a huge fund in there, and I could say there is a huge special account in there; I could have just maintained it. But we're trying to be honest with people. We're trying to liquidate some of these ridiculous accounts which don't have any practical purpose, and that's what we're doing.
C. Tanner: I refer to item (h) in section 1, the tourism incentives program. Section 4 of the 1985 Industrial Development Incentive Act provided up to $25 million for assistance for construction expansion of tourist attractions. While I appreciate that the minister is looking for places to save money, and I commend him for that, I suspect this is one area he shouldn't have saved money in. If he's confined highways to $800 million, he might well have taken $25 million and left it there, or at least substituted another program for it. Could the minister give us some direction on that?
Hon. G. Clark: I want to make it clear that we have not saved any money by abolishing this. We have not saved a penny. This was a federal-provincial program which has been completed; it is defunct. This is cleaning up the books of the province. It has no impact whatsoever on our commitment to tourism or lack of commitment. We are not capable of maintaining this program, and we're simply eliminating a special account, which is prudent in terms of trying to clean up the books of the province. It has no impact at all.
C. Tanner: I appreciate that I misunderstood what was happening. In that case, could the minister tell us if he has committed any money, and if he has another agreement with the feds to cost-share a similar program?
Hon. G. Clark: That's beyond the purview of this bill, and you should ask the Minister of Tourism. I am sure she would be delighted if we could work out a federal-provincial agreement on tourism.
F. Gingell: The next item is the industrial development subsidiary agreement loan repayment revolving fund. Do you have any comment on that?
Hon. G. Clark: I could simplify this: (c), (d), (f) and (g) -- the ones that are left, as I understand it -- are all defunct programs which no longer exist. This is simply cleaning up the books.
There is an ability sometimes with the LILA program, which was a good program, I understand, that existed some time ago.... There are some loans outstanding that we're still trying to collect on. But we don't need the fund; the fund doesn't exist. It can't lend any money out; it has no money in it. None of these are programs which exist.
We have discussed the ones you quite appropriately focused on -- the Lottery Fund and the crop insurance stabilization program -- where there still is a program
[ Page 1110 ]
that we just moved around. All the other ones have no impact. The land title survey is finished; the LILA program is over; northeast coal is obviously over. These are defunct special accounts that we're cleaning up.
J. Weisgerber: The question with regard to the IDSA program -- and I'm not certain whether this.... I'm sure the minister is feeling rather besieged trying to get through section 1, and you can probably understand now why very few accounts ever get eliminated. It takes too long to explain it, so you just leave them there.
In any event, there will be repayments as a result of these activities, and I'm wondering how you handle the repayment once the fund is rolled down.
[4:00]
Hon. G. Clark: You're quite correct. In that particular program, as I understand it, they are loans to municipalities. As they repay them, we repay the federal government through the Minister of Finance, actually.
Other loan programs, like the LILA program, are now administered by the loans administration branch in my ministry, so this has no impact on them. Now we're just flowing them through the Ministry of Finance in terms of the revolving fund.
The Chair: Hon. members, we have listened with some interest to the extensive debate. I think the questions have been clearly answered by the minister, and the Chair is now going to call for a vote on section1.
Section 1 approved.
On section 2.
J. Weisgerber: I understand that the government would like to move along with these bills, but I clearly find it very frustrating to find the Chair calling a vote in the midst of a section that has eight or nine sections, and we've touched on three or four of them. It's a most peculiar kind of decision that I'm not very happy about.
The Chair: The Chair would be pleased to permit further discussion on section 1 if the questioners are prepared to raise new matters to the minister.
J. Weisgerber: Certainly. I'd only asked one question on this particular section, so I can almost guarantee you that I'll raise a new matter. My question can be short, and the answer can be short, but I want to be clear. Sometime in the near future I hope to approach the minister to discuss an outstanding loan with regard to a heritage park that's funded through this particular activity. All I would like to have from him is an assurance that the elimination of the account won't in any way affect the discretionary powers of the government -- whatever they may be -- to adjust the terms of these loans.
Hon. G. Clark: We obviously have the ability to discuss that with you. It's in the registry branch. Bill Bell is essentially assistant deputy minister; he's called an executive director and is administering the remnants of this extinguished program. I'm not sure about this particular program, to be honest, but we do try to negotiate terms on outstanding loans. As you know, we provide evaluation adjustments for ones we don't think will be paid off. This will have no impact, and obviously the Ministry of Finance is administering this, as is appropriate. I'd be more than happy to discuss with you any concerns you might have.
D. Symons: I would like to backtrack a little bit to the Transportation Capital Funding Act or Freedom to Move. One concern I have with the removal of this act is that before, it allowed a little bit of carry-over: if something was left from a project, it could be carried over into the next year. It certainly seems that if it's removed -- and I'm going back into Transportation -- we would have to vote each year on these, because that carry-over factor would not be there. This is an advantage, as I mentioned earlier, on long-term planning. That's the other aspect of it that truly concerns me.
There was a certain amount of flexibility within the Freedom to Move; moneys could be moved from one project to another. I know this gave your side concern when you were in opposition that it could be fiddled around a great deal when the House didn't really vote the appropriations that way. But there were some good features that allowed the money to be used in innovative ways, and in ways where it could be used effectively to get best value for your dollar. It seems that it's removing that possibility. As my colleague here asked earlier: what is going to replace it, to put some of this into the Transportation funding so that some of those positive aspects of the Freedom to Move would be there?
Hon. G. Clark: I tried to explain at the outset that we are reviewing special accounts. There are some positive aspects to it. We have created a new one with health special account. But on balance they became political tools used by government to pretend that there was this notional surplus in some of these special accounts. While I agree with you that there are some positive things, we think on balance they were not positive on these ones. They're either completely extinguished, or in the case of Freedom to Move, were largely political exercises that have passed us by.
But I agree with you. We want to maintain multi-year funding and some certainty in some of these areas. It would be nice to be able to do that without limiting the discretion the government has over time to deal with the fiscal realities of the day.
F. Gingell: Are we at present dealing with section 1(1) or all of section 1? Or is it section 1 (1) only, and we deal with section 1(2) afterwards?
Interjection.
F. Gingell: Okay. I see that section 1(2), deals with the ability to pay off the liabilities. Would you please advise us if any of the funds listed under 1 from (a) to
[ Page 1111 ]
(h) -- which I believe is where they go to -- have any assets in them: cash, accounts receivable, loans, mortgages, whatever?
Hon. G. Clark: I'm just trying to clarify. I guess it's fair to say there are some assets, but the question is whether they are legally held by the special account or by the general fund in any event. Special accounts are essentially, when we strip it all away -- and I'm not an accountant like my colleague across the way -- a bookkeeping technique.
F. Gingell: They're a little more than that.
Hon. G. Clark: Well, a little more than that, I suppose, but that's how I always describe them. So yes, there are some transitional things, and these LILA loans have some outstanding that we're trying to collect. The program is extinct, and there's no reason for this special account. But if we still collect them, some assets could be tangible. But I think they're essentially, in a legal sense, already captured by the consolidated revenue fund, so this has no impact on it.
F. Gingell: If I was in your shoes, Mr. Minister, I'm not sure I would be content with that situation. Perhaps it would be important for us to be assured that nothing will slip through the cracks or be extinguished. One can appreciate that Freedom To Move obviously doesn't have any money in it; probably all it has is the debts.
The lottery fund, of course, may have funds; they probably sit in the corporation and go straight over. But it would be helpful if, before the end of Bill 4 is closed up, we could receive advice on what assets might sit within those funds.
Hon. G. Clark: No, the advice of my staff here -- and I agree -- is that the only assets of these funds are with the LILA loans or the IDSA loans. There would be no other assets associated with them. They would either be financing transactions or liabilities associated with expenditures.
Remember, the special accounts are within the general fund, and the general fund is within the consolidated revenue fund. In fact, it should have no impact at all on the bottom line or anything else. So those are the only assets we have to deal with winding down: these loan assets that we still have to try to collect.
Section 1 approved.
On section 2.
J. Weisgerber: I'll try to stick within committee debate on these sections, and I think the only real question I have with regard to this section is the decision to allow the transit authority to run a deficit. We're led to believe there will be an amendment that will start its ability to run a deficit back to April 1 retroactively. Is there any time-frame on when the provision for this extinguishes? Or is this until it has amended an open-ended opportunity for the transit authority to run a deficit?
Hon. G. Clark: No, absolutely not. In fact, the bill does not contemplate allowing a deficit; it contemplates partial-year funding. Essentially there is a deficit of the Vancouver Regional Transit Commission that we have to work to resolve. It's a $28 million deficit -- or $35 million, but we've renegotiated the capital debt, so it's a little less than that. We weren't in a position to work through and negotiate or discuss with the communities affected how we might best resolve it.
The Vancouver Regional Transit Commission wanted us to impose a gas tax, which I and the government felt would be problematic for cross-border shopping. They wanted us to do a whole variety of things such as increase the Hydro levy.
So in this bill we said: "Yes, we have to resolve this. It may result at the end of the day with some of those things happening anyway, but we want to sit down and talk to you about it. They say: "Well, there isn't time." So we have said: "Let's allow the existing funding sources to continue for a partial year, because the deficit does not become due and payable until about February. At that point we have to resolve it."
This does not let us off the hook. This does not allow the government of the day to let them run a deficit and carry it over. It's not my desire to do that; it's simply my desire to work in a rational way with the communities to try to resolve this funding shortfall. This was a way of trying to give them some flexibility to deal with that without running a deficit. They chose not to do that -- with this first section, actually -- so we've allowed the existing funding formula to continue.
There is no deficit, and there will be no deficit until about February of next year. Certainly before that time we have to come to grips with this problem.
A. Cowie: Mr. Minister, that's certainly innovative financing. I recognize that it does give you an opportunity to resolve the problem, and probably that's the best way to go. Essentially what the transit authority wants, though, is for you to pay the $30 million deficit. That's very clear, and everybody knows that. That will undoubtedly be resolved. I have to give you credit for coming up with some compromise that allows for that.
My question has to do with the amendment to the bill and specifically why amendment (3.1) was brought forward. Was there a particular legal reason, or whatever, that that had to come forward at this time? I've got: "(3.1) A...."
Hon. G. Clark: That's section 22 of the bill.
A. Cowie: It has to do with the transit, though.
An Hon. Member: We'll deal with it when we get to section 22.
Hon. G. Clark: You understand. You're right, it's the same issue.
[ Page 1112 ]
F. Gingell: Does this mean that the requirements to fund the Vancouver Regional Transit Commission in accordance with the working arrangements and agreements have not been fully provided for in the budget that has been presented to the government, and subsequent actions that will cause them to be fully funded, as you've indicated they will be, will be handled by way of a special warrant?
[4:15]
Hon. G. Clark: That's a good question. That's not my desire, to be honest with you. But you're quite right. There is no provision right at the moment to deal with this deficit in the budget. If we could cut spending by $28 million, then we won't go over the deficit to solve it. It still may require a special warrant to do that, however, because of the rules on the way the place works -- quite appropriately, I think. You can't simply move money out of Health and into transit, etc. I don't want to mislead you. That is an option which is available to the government if we fail to resolve it and if other things happen. It's not my desire.
But you're quite correct. Some action on the part of the government, hopefully working with the Vancouver Regional Transit Commission and the Victoria transit commission, will have to be contemplated. For example, if we decide to raise the gas tax, as is requested -- and that's certainly not my option, believe me -- we would have to do that somehow, either by way of legislation or, if we can, by an order-in-council. I'm not sure of the technicalities. But we would have to take some action to solve that problem.
At this point the budget does not contemplate the revenue source to provide the funding for that. So this is not a solution; this is an attempt to give us some time to work out a solution. In a way I guess I'm putting you on notice that it would be very nice if over the next couple of months, before the House rises, we could deal with it in a legislative way to solve the problem. That may in fact happen. We're just beginning to look at a whole range of options now. It's a very messy and difficult problem connected with governance, and we have simply provided the mechanism here to allow us to keep talking -- not in a crisis atmosphere.
F. Gingell: For my own information, the various revenue sources that one contemplates as being funding for transit subsidies in the form of gas tax, property taxes, etc.... Can those kinds of changes -- like increasing the gas tax, putting on an additional property tax or having an additional tax on the use of energy -- be done by order-in-council? Or do they require legislative change?
Hon. G. Clark: I'm not absolutely sure, to be honest, on all the details of that answer. I don't think I could give you an answer.
First of all, let me make it clear that it is beyond the scope of this. This gives us a way of dealing with it, but I don't want to try to hide from it. This does give us some flexibility to deal with that, but there are clearly other acts which we can't -- nor do we intend to -- supersede to deal with the transit problem.
But in all fairness, if we decided on something that required legislative action and if we don't require it until February, it may be possible to fund it subject to legislative approval down the road, depending on whether we can work out some agreement.
Section 2 approved.
On section 3.
F. Gingell: Can the minister tell us what these amendments to sections 4 and 6(2)(b) of the Industrial Development Incentive Act are intended to accomplish?
Hon. G. Clark: This section repeals the following sections of the Industrial Development Incentive Act, which established the tourism incentives program special account. The tourism incentives program special account, which we described as (h) of section 1, is contained in the Industrial Development Incentive Act. So this section 3 we are now looking at simply deletes the portion of the act that pertains to the tourism incentive program, which no longer exists.
Section 3 approved.
On section 4.
F. Gingell: I take it then that section 4 accomplishes exactly the same thing with respect to the crop insurance stabilization fund?
Hon. G. Clark: You're absolutely correct. These are consequential amendments to the discussion we had earlier.
F. Gingell: The Insurance for Crops Act, as I understand it, deals with the handling of funds that are on a cost-sharing arrangement entered into by the province and the government of Canada. Can you advise us if there are any agreements?
Hon. G. Clark: Maybe this will clarify it. I'll read you my full note here:
"This section repeals section 5 of the Insurance for Crops Act, which established the crop insurance stabilization special fund and provided funding for the program.
"The program was designed to cover deficits in the crop insurance trust account that might arise due to payments of indemnity claims in excess of premiums and other revenues in the trust account. Advances have been in the form of financing transactions from within the special account and are fully recoverable in subsequent years from the crop insurance premium revenue. In recent years recoveries have exceeded expenditures. Outstanding advances amount to $14.5 million. In '91-92 this program was administered by the Ministry of Agriculture, Fisheries and Food. For '92-93 the program will continue to be funded by a voted financing transaction but no longer from within the special account. The $10.5 million residual spending authority of the special account is cancelled."
Did you follow that?
[ Page 1113 ]
F. Gingell: Do I take it that this Insurance for Crops Act funding has made a profit of $10.5 million in previous years which was being held to ensure that the bad years could be looked after by the good?
Hon. G. Clark: I don't think that's fair. This residual spending authority of $10.5 million remember.... Many members get confused on this: there isn't actually $10.5 million in the bank; it just gives statutory spending authority. It has never been used; in fact, recoveries are exceeding expenditures. Obviously if they don't, then we'd have to fund them out of some other mechanism. The Insurance for Crops Act remains; the existing programs remain; all we're doing is a consequential amendment to section 5 saying that funding is not made out of the special account but out of the consolidated revenue fund.
Section 4 approved.
On section 5.
J. Weisgerber: My understanding of this section is that it eliminates the advantage that British Columbia registered insurers enjoyed. There were special provisions made to give a beneficial tax advantage to insurers whose headquarters were in British Columbia. It's my understanding that this was brought in in an attempt to attract insurers to British Columbia whose headquarters would be here. It is our analysis that it would increase their tax rate and be a discouragement to them.
Hon. G. Clark: That's certainly not the intent. This section amends the Insurance Premium Tax Act to increase the rate of tax applicable to premiums paid to unregistered insurers from 5 percent to 7 percent of the premium. The higher rate returns the differential with tax rates applicable to premiums paid to registered insurers to traditional levels and is intended to encourage insurers to register to do insurance business in the province. Registration, while it does not require a physical presence of an insurer in the province, requires that certain financial information is available to provincial regulators.
We had built in an anomaly that gave an advantage to people not to register. This is the opposite: this removes the incentive not to register and encourages people to register in British Columbia. The added advantage to registering in British Columbia is that the Financial Institutions Commission then gets all the information that's required to regulate the insurance business. It does the opposite; that's certainly our intent, anyway. It removes the disincentive to register in British Columbia and tries to encourage people financially to register in British Columbia.
J. Weisgerber: Is it my understanding that following the implementation of this act, a company that decided to headquarter in British Columbia would find it no less advantageous than they did prior to the introduction of the act? It would be equally advantageous to headquarter an insurance company in British Columbia following the implementation of this act as it was previously?
Hon. G. Clark: My understanding is that it's better now, because you encourage people to register in British Columbia and then hopefully to locate in British Columbia. Before there was essentially a penalty to register in British Columbia, because if you were unregistered, you had a lower tax rate. We've raised the tax on unregistered insurers, so there's no disincentive to register now. There's an incentive to register.
F. Gingell: My understanding, not of the provisions of this act but of the practical applications, is that the policies that primarily come under this section are usually very special liability insurance policies -- things that are not available in the normal course of events. Brokers have to go out and find a special market somewhere in the world for them. I certainly hope that this change doesn't remove from British Columbia businesses the availability of this insurance coverage. Will the result be that it'll just push the premiums up?
Hon. G. Clark: No, that's not our intent. It's also not our intent to push the premiums up. We don't anticipate receiving any extra revenue out of this. We're simply trying to remove the disincentive to register. This shouldn't have an impact. It's not a tax grab or a tax increase; it's trying to remove the disincentive for registering.
Section 5 approved.
On section 6.
F. Gingell: As I understand it.... Actually, Mr. Minister, perhaps the best way of handling this is to ask you to read from your briefing notes.
Hon. G. Clark: Rather than read from my briefing notes, let me tell you that this is a tiny program, and it is inactive. The residual spending authority in '92-93 was $9,000, and that's what this cancels. This was a program that has been inactive for several years. It used to exist in the Ministry of the Attorney General. Of all of the special accounts that we're eliminating, this one is of the least consequence, elieve me.
F. Gingell: But it was a requirement of the act that moneys coming in under certain conditions be placed into a fund, wasn't it?
[4:30]
Hon. G. Clark: I don't think so. The program made payments to property owners for survey work to restore or re-establish insufficient or missing survey evidence.
Section 6 approved.
On section 7.
[ Page 1114 ]
F. Gingell: Mr. Minister, perhaps you could advise me, first of all -- this is going to sound like a foolish question -- whether this act has in fact ever been proclaimed.
Hon. G. Clark: It may be a trick question. I honestly don't know the answer; I assume it has. Let me, while I'm on my feet, make it clear that this amends the Lottery Act by consequential amendments to the full discussion we had earlier. They are very minor amendments to the act to eliminate the reference to special accounts.
Sections 7 to 11 inclusive approved.
On section 12.
F. Gingell: I understand that the sustainable environment fund itself is not being cancelled. Could you give us a good understanding of what section 12 does?
Hon. G. Clark: If it's okay with members, section 12, 13, 14 and 15 are the same issue. If we could canvass them collectively, hon. Chair, I think that might be helpful.
These sections provide for the removal of the activities of the Ministry of Forests from the Sustainable Environment Fund Act. Since 1990-91, forest renewal activities have been funded through the sustainable environment fund special account and managed by the Ministry of Forests. So it's another one of those notional allocations where, in order to inflate.... I think it's fair to say, and I don't mean this in any pejorative way, that in order to make it look like the sustainable environment fund is doing more, they put all the replanting and silviculture activities notionally in that account, because then it looks like there's a huge fund there. But in fact, it's the exact same programs always administered by the Ministry of Forests, which continue to be administered, but which were notionally put into that account.
In the future, forest renewal activities will be funded directly through the voted appropriations of the Ministry of Forests as they were prior to 1991. The sustainable environment fund will continue, because we think, to be honest, that there is some merit in having some dedicated funds flowing into a sustainable environment fund. We wanted to remove the forestry renewal activities from it.
In addition, we are amending, in sections 13 and 15, sections which allow the Lieutenant-Governor-in-Council to prescribe additional revenue to the sustainable environment fund. If, for example, we put a new environmental tax on something, we could have it also flow directly into the environment fund. This change allows us to have a broader range of revenues moving into the fund.
F. Gingell: Having set up the ability to create more and new taxes, are you contemplating using this section? Otherwise, why have you provided for it?
Hon. G. Clark: No, not at this time. I guess there is a limited range of new environmental taxes on -- as far as I recall -- tires and batteries. That funding was flowing into the sustainable environment fund; we've continued that. But we are reviewing environmental legislation and environmental taxes, fees and the like. We wanted to enable ourselves to earmark any funds, environmental taxes or fees into that fund should we choose to do so.
There's a good principle. We've discussed this earlier, and this is one of the advantages of special accounts, frankly -- one of the very positive things -- the ability to earmark money. If you're going to put a tax on batteries, I think it has some real merit to then have that flow into a fund specifically for environmental purposes. I think you have to be careful with extending that too far, or you wouldn't have any general tax revenue to fund general programs. But I think, on the environmental side, there's a really high saliency.
The previous government did it. We've scaled down the funds so it's more of an environmental fund. We took out the forestry renewal. By the way, we're also taking out the funding for the Hazardous Waste Management Corporation, which we are abolishing. In addition, the fund is a little leaner, a little meaner or a little tighter on environmental stuff to be spent on environmental activities. We want the ability to prescribe. If we do decide on any environmental taxes or fees any time in the future, then the ability is there for the Lieutenant-Governor-in-Council simply to put it into that fund rather than into general revenue, should we decide to do so.
F. Gingell: When one thinks about the matters that are discussed in relation to the environment, and proposals that are made by world environmental bodies, and you start thinking about carbon taxes, such taxes could be huge. It would certainly seem to fit within a description of the sustainable environment fund. By us passing this regulation, are we giving the Minister of Finance, upon his recommendation to the Lieutenant-Governor-in-Council, the right and the ability to create such new taxes without them coming through to the Legislature?
Hon. G. Clark: Absolutely not. With any tax or new tax imposed by this Legislature, this allows us, by order-in-council, to designate the revenue to go into the sustainable environment fund. You're quite right, we receive a lot of money right now from gasoline tax, which one could argue is an environmental tax. I suppose this gives me the power to redirect funding into the sustainable environment fund from that source. We could argue that case.
Again, I think it's important not to overstate the significance of this in the sense that it doesn't allow us to impose new taxes; it doesn't allow us to spend the taxes any way we want. It simply allows us to redirect or direct environmental taxes to the environmental fund to again establish that principle that revenue raised from environmental taxes or fees are therefore required to be spent on environmental purposes. I think that is good public policy.
[ Page 1115 ]
L. Hanson: I don't want to get into an argument with the Minister of Finance -- my learned friend across the way -- but section 15(2) seems to give the cabinet or the Lieutenant-Governor the ability to create taxes or revenue. It doesn't seem to, as the minister says, simply give the cabinet or order-in-council the ability to direct taxes that are already part of revenue into the environment fund.
Hon. G. Clark: I understand the point you're making now, actually, and it's a new point to me. It says, "any other prescribed revenue," so the question is: does that mean I can prescribe a new tax? Let me assure you, first of all, that is not the intent. Secondly, that is certainly not what we are contemplating, and that is not the instruction we gave to the legislative counsel when this was drafted.
I understand the point you're making, but I think, frankly speaking, technically you're wrong. This does not give me the ability to simply prescribe new revenue sources to put it in. This simply gives me the ability to direct existing tax revenue to the fund or, if we generate new revenue by way of legislation at any time in the future, I can prescribe the revenue that is being generated by those legitimate sources and is approved by the Legislature into the fund. I essentially give you my assurance that that's certainly what we're contemplating.
F. Gingell: I've been sitting here during the course of this discussion with the question that I had designed first, and the additional question on it, and wondered, Mr. Minister, whether there are one or two words that we could add to section 6(2) to give us the assurance that this would be the case.
Hon. G. Clark: If it will help, my staff is here and they assure me that it is simply not possible for me to use this section to create a new tax source. In fairness, I think you'd have to accept that. This has gone to legislative counsel. You have my sense here in the House. My assistant here has assured me that I simply can't do it. It might have been a neat trick if I could have. But clearly we're not trying to do that. Unless you have some legal opinion which tells me that in fact this gives me that power.... If you did, I could give you my assurance that I would amend the act. But it's certainly not our legal interpretation.... I haven't heard any legal interpretation. I understand the plain reading of it, and it's simply not correct. We have no intention of doing that -- we won't do it.
C. Serwa: The minister was relating to such things as tires and batteries, and the environment charges levied against them going into the sustainable environment account. Will there be separate acknowledgment of the account, of the amount realized from the levy on tires and batteries? Originally those were intended to finance research and development for new products. Will we have an accounting, or will it be buried again in the overall look of the fund?
Hon. G. Clark: To be honest, all of the revenue from those sources is going into the fund. That's what's contemplated. If you're asking me to break out how much is raised by each source, I'm sure I could do that for you. I'm sure that we have that revenue. It's not disclosed in the act. We're not contemplating changing the act to make that a prescription.
I really don't object to it, you know, if you want to get a sense of the revenue sources. We have drivers' licence fees, and we don't disclose in the estimates how much we raised from drivers' licence fees. If you asked me, I'd be delighted to tell you. Similarly, on any environmental charges I'd be delighted to give you the answer. Just for the sake of simplicity, in the estimate book we don't break them out in that fine of a disaggregated form. So I don't mind giving you the answer, but to be honest we have not contemplated it in the legislation. I will take it under advisement.
C. Serwa: The reason for the question, of course, is that it is imperative that we strive to utilize as much of the funds realized from those specific levies so that we develop the research and new products and market those particular products. That's what we're striving to do. The concern here is that they might be buried globally, and those funds might be used for environmental purposes other than those originally intended. I would just express my concern to the minister in the hope that there is an accounting and that we know it is going into R and D work with those specific products that generate the revenue.
Sections 12 to 15 inclusive approved.
On section 16.
F. Gingell: Madam Chair, I'd be quite happy to deal with sections 16, 17 and 18 at the same time.
During the course of the budget debate I made reference to increased tobacco taxes, to which the Minister of Finance indicated by expression that there weren't any changes. The question that was in my mind at the time was purely and simply that the revenue for the year 1991-92 in the revised forecast in the budget document showed an anticipated collection for this year of $430 million, based on actual results to a particular date, and an anticipated increase to $510 million in this budget year. Knowing that smokers are a dying breed, I was wondering why the minister was saying that there is no change in the tax rates.
[4:45]
The copy of the Tobacco Tax Act that I was given, dated 1979, creates a tax of of 1 cent on every cigarette purchased by him, and I notice that section 17 creates the tax at 10 cents. That gives you some idea of what has happened to tobacco taxes between 1979, when I presume the act was rewritten, and the current date.
Hon. G. Clark: Let me be clear that it was, and is still, a source of irritation that the members opposite accused me of a tax increase. God knows there were tax increases which you could quite properly attack me for,
[ Page 1116 ]
but this is not one of them. You are correct in saying that what I meant was the formula -- the automatic indexing of cigarettes, the march with the CPI as it was going up. What we did was replace it with a revenue-neutral flat tax. In that respect it is an increased tax, but it was about the same as we would have generated had the indexing taken place over the course of the year.
Our intent was not to cut taxes on cigarettes. We simply had to cap the rate of increase, because the automatic indexing was putting us above everybody else in the country. In fact, we still are. While there are some good public policy reasons for having high taxes on cigarettes, the problem is really a smuggling problem, particularly with our Alberta neighbour.
We replaced indexing with a flat tax, but this year we raised the flat tax so that it would raise almost the same revenue as the indexing would. But we've stopped it at that rate, because if we continued to let it escalate over time, it's pretty clear that revenue would go down. The reason we know that -- aside from our very serious and growing smuggling problem with Alberta and the United States, and some other problems we have with smuggling, which I hope to address at some point.... New Brunswick is the only jurisdiction which is higher than us now in cigarette taxes. The last time they raised taxes, their revenue went down by $20 million. It's pretty clear that we're now really at the margin. If we raise the cigarette tax further, we will lose revenue because of smuggling. You -- or whoever made that point -- are correct: we raised the flat tax, but the reality is that it was simply a revenue-neutral change. That's why I resent being attacked for raising taxes when in fact an indexing formula which existed would have resulted in at least as much revenue, and certainly more over the long run. From my perspective, this was not a change. In fact, if anything, it's a change which caps the rate of increase and makes us accountable to the House to come back every time in every budget. That means we can be more sensitive to what's going on with smuggling and what's going on in other provinces.
D. Symons: I'm just delighted to hear your response, because that's precisely the position we put to you when we were discussing the effect of the jet fuel tax and possibly reducing it. You've just turned it around and used it as a reason for justifying this. I'm curious -- and you might respond -- why in one case it works one way, but in the other case it works the opposite way.
Hon. G. Clark: That's completely out of order, but let me deal with it. In fact, it's our information and our advice from my staff that it will not happen. I said during that whole debate that if in fact that did happen -- and you are correct in ascribing those problems -- then clearly we'll review it. But you are not correct. My staff and my review of their materials shows you are not correct that we anticipate $16 million more in revenue as a result of the jet fuel tax. But it's completely out of order, and we fully canvassed it.
Sections 16 to 19 inclusive approved.
On section 20.
F. Gingell: Perhaps the minister would care to give us a description of this. It was a subject that you mentioned briefly during the budget debate. We'd be most interested in hearing more.
Hon. G. Clark: To be honest, I don't want to get into this debate in full, because there is a bill before the House which we can debate.
This section repeals the Privatization Benefits Fund Act which established the privatization benefits fund. The purpose of the fund was to hold in perpetuity proceeds of asset sales. The assets and liabilities of the privatization benefits fund had a net value of $523.6 million upon the termination of the fund, and those assets are now fully in the British Columbia endowment fund. If it's acceptable.... I appreciate that you have an entrée into this debate, but I want to give you notice that I do not intend to debate the merits of that question. I'd like to do that when the bill comes before the House.
F. Gingell: At the moment Bill 4 passes, I would presume that the provisions of section 20 of this bill come into effect. There isn't any problem of timing?
Hon. G. Clark: No, there isn't. Obviously these are technical questions, and we'll make sure that there isn't.
D. Symons: Is this simply a means of changing the name of something that was set up by the previous government so it will be something different from theirs but basically the same thing with a new name? Where will the new B.C. Endowment Fund get funding, other than from here? It seems to be more a name change to dissociate yourself from the previous administration.
Hon. G. Clark: In terms of the assets and liabilities of the fund, it is a name change. In terms of the actions of that fund, that's the subject of another bill.
Sections 20 and 21 approved.
On section 22.
Hon. G. Clark: Because notice was not given and is not required to be given, it's important for me to read into the record the amendment, if I could.
I move that section 22 be amended by adding the following subsection (3.1): "A regulation of the Lieutenant-Governor-in-Council under section 11.1(2.2) of the British Columbia Transit Act shall be deemed to have come into force on April 1, 1992, and is retroactive to the extent necessary to give it effect on and after that date."
On the amendment.
Hon. G. Clark: The reason for that is pretty obvious. Again, we made some amendments. that will
[ Page 1117 ]
get us almost precisely to the point you made a minute ago -- of striking something out or adding something and coming into effect before it's possible. If you look at the commencement -- just to elaborate on that previous point -- of the various sections, this section 22 tells you that things like the amendment to the Privatization Benefits Fund Act are to come into force at the time deemed necessary and "are retroactive to the extent necessary to give them effect...." So that deals with your previous point, and this is a similar one. Unfortunately, it was overlooked at the time, to be honest. We didn't put that retroactive provision in here, and so we're just rectifying it at this time.
The Chair: I understand members of the opposition were given copies of the amendment.
Amendment approved.
Section 22 as amended approved.
Title approved.
Hon. G. Clark: I move that the committee rise and report the bill complete with amendment.
Motion approved.
The House resumed; E. Barnes in the chair.
Bill 4, Budget Measures Implementation Act, 1992, reported complete with amendment.
Deputy Speaker: When shall the bill be read a third time?
Hon. G. Clark: With leave now, Mr. Speaker.
Leave granted.
Bill 4, Budget Measures Implementation Act, 1992, read a third time and passed on division.
TAXPAYER PROTECTION REPEAL ACT
The House in committee on Bill 3; M. Lord in the chair.
On section 1.
F. Gingell: During the course of second reading of this bill, we tried to impress upon the minister the concern that we have. However cynically they may view the original Taxpayer Protection Act.... When one goes back in Hansard and reads some of the things that were said at that particular time about this bill, I can appreciate that he would perhaps have that concern.
The taxpayers and the businesses of British Columbia really do want the financial affairs of this province to be carried on in the most businesslike and responsible manner that they can be. The bill that we are now being asked to repeal called for us to have a proper plan for long-term or five-year budget plans and specifically required the government to give thought to a debt reduction plan and to put those thoughts into writing and place them before this House in a manner that could be debated.
[5:00]
What we have seen in the budget that the hon. minister has recently laid before this House isn't a debt reduction plan but a debt increment plan. We all know that deficits, as in this present budget, are purely and simply deferred taxation, taxation that we and our children will be required to pay, with compound interest, in the future.
When members of this government were in opposition and during the course of the election campaign which culminated on October 17 -- and I appreciate that they did only receive 40 percent of the votes of the people of British Columbia, but through some quirk of electoral practices managed to form the government -- they promised faithfully that their government would present a balanced-budget plan. It was a major platform of their campaign. It was, I am sure, one of the things that caused the 40 percent of the population who voted for their party consistently over the years to continue. They only lost about 1.4 percent of their vote.
It really is important that the government not only spend their time talking about what they plan on doing in this current year but allow us and the people to see that they do have some plan and are not just moving from a crisis with the hospital workers to a crisis with education funding to the next crisis -- that there is some definitive plan for us to get the finances of the province balanced and start working towards the reduction of our deficit.
I can appreciate and understand that perhaps Bill 3 needs to be repealed, but it should have been replaced immediately with a new bill that sets out the promises that this government has made to the people of British Columbia, represented in this House by all of us. It's a disappointment that their own government members aren't putting pressure on the cabinet to bring forward a plan.
As we know, when the Taxpayer Protection Act was brought into this House and passed during the last parliament, every single member of the New Democratic Party voted for it -- every single one. And now, even though their party made a firm commitment during the course of the election campaign that they would have a plan and balance the budget over a five-year cycle, I anticipate that when we call for the vote on Bill 3, I'm afraid they will all have forgotten what they did then, and they'll all turn around and vote for the repeal of this act. Madam Chairman, I wish to assure you and my friend the minister that I will vote against it.
Hon. G. Clark: A good speech always deserves a speech in response. It's interesting that the member opposite would like us to bring in a balanced-budget plan and is concerned about the deficit, but every time a member of the Liberal Party stands up in the House, they ask for more money. They want more money for this, more money for that, more money for health care, more money for education. Everybody on that side is
[ Page 1118 ]
asking for more money. Yet at the same time, every time they stand up and talk about taxes, they say we should be cutting taxes. So I say to my friend that if he wants to accuse members on this side of the House of not being consistent, he should look at his own caucus. It's pretty clear that the Liberal Party does not have a consistent view on anything, let alone the finances of the province, particularly when it comes to this question. Let me deal with it specifically though. You should know, and maybe the member opposite does know, that Moody's in New York has just reconfirmed our credit rating as the highest in Canada. We are now the benchmark credit in Canada. In some sense, that is a result of our low debt per capita that we have, which in some respects I don't take credit for; we've only been in office six months. In many respects, it's the strength of our economy, which again is a result of a variety of decisions arrived at mostly in the private sector.
It is also a result of the budget and the management that we're showing in terms of dealing with our deficit. I want to tell the members opposite -- and I know the members made this point -- that there needs to be a commitment on the part of the government to deficit reduction, and we have made that commitment. There is an appendix to the budget called the "Deficit Reduction Strategy." If you talk to the rating agencies in New York, as I just did, they know. We have discussed our deficit reduction strategy with them, and they have seen the budget. They have now confirmed our credit rating -- in part, as a result of that. I can assure you that there is a commitment by the government, directed by the Premier of the province, to move towards a balanced budget. It's a commitment that we have gone some distance to keep in the current budget, but we have more work to do. I fully acknowledge that.
To put some numbers to that over time, as was contemplated by this bill, would not have been honest. It is pretty clear to say that five years from now we would have a $2 billion surplus, as was contemplated by the previous government -- whatever the number is to balance it, $12 billion.... I could do that; it would be easier for me to do that. The member is not asking me for something difficult, that's what the federal government does. They have a balanced-budget plan they publish, and every year it moves one year along. They never get there, but they publish a balanced-budget plan. We rejected that fiction, and instead, made a real commitment to move in that direction, which the budget contemplates in a commitment in an appendix to a deficit reduction strategy. It's a commitment the Premier and all members of the government have made, and a commitment I've made as Minister of Finance. It's a commitment that you can quite properly debate with us every year.
You're Right: the bill should be repealed. You made that point. It should be replaced with something. What it should be replaced with is a real commitment -- not a phony commitment, not a legislative commitment -- to the deficit reduction strategy, and that's what we have made. I suggest, by your own logic, that you should support the repeal of this legislation.
F. Gingell: That was quite a shock for me to hear that the Minister of Finance believes that a balanced-budget business plan over a business cycle is a fiction. We should all understand that that's what he says it is. If you take the quite large NDP platform that had its 48 promises, one of them was that there was a plan in there, and you actually listed it out. You had year one, year two, year three, year four, year five, and this was how you were going to balance it over a business cycle, and now you're telling me it's a fiction.
Interjection.
F. Gingell: Someone is stealing my lines. As my hon. friend said: "That perhaps tells us that the whole of that election campaign platform -- those 48 promises, the promises not to have friends and insiders and to balance the budget -- was a fiction.
I must admit that I am really pleased with the results of your meetings in New York. The credit rating of this province is critically important to us. It is terribly important as to the future costs of funding our debt and our ability to raise debt in the future for good purposes. I'm happy that our present debt rating has been confirmed. That's very good. I just hope it wasn't because they didn't understand that you were planning to get on the plane in New York and come back to Victoria, and the first thing you were going to do was repeal Bill 3. When I went back and read Hansard and listened to the Premier -- not the last one, but the one before that -- and saw how he had described this particular bill as the most wonderful thing that had ever been done in all the world at any time by any government.... I hope you realize what you've just taken an axe to.
With that, I close debate.
Sections 1 and 2 approved.
Title approved.
Hon. G. Clark: I move that the committee rise and report the bill complete without amendment.
Motion approved.
The House resumed; E. Barnes in the chair.
[5:15]
Bill 3, Taxpayer Protection Repeal Act, reported complete without amendment, read a third time and passed on the following division:
| YEAS -- 43 | ||
|
Petter |
Marzari |
Boone |
|
Priddy |
Edwards |
Cashore |
|
Barlee |
Charbonneau |
Jackson |
|
Pement |
Beattie |
Schreck |
|
Lortie |
MacPhail |
Lali |
|
Giesbrecht |
Miller |
Smallwood |
|
Hagen |
Harcourt |
Gabelmann |
|
Clark |
Zirnhelt |
Blencoe |
[ Page 1119 ]
|
Pullinger |
B. Jones |
Lovick |
|
Ramsey |
Hammell |
Farnworth |
|
Evans |
O'Neill |
Doyle |
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Hartley |
Streifel |
Lord |
|
Krog |
Randall |
Garden |
|
Kasper |
Simpson |
Brewin |
|
Janssen |
||
| NAYS -- 19 |
||
|
Farrell-Collins |
Tyabji |
Wilson |
|
Mitchell |
Cowie |
Gingell |
|
Warnke |
Hanson |
Serwa |
|
De Jong |
Fox |
Dalton |
|
Anderson |
Symons |
K. Jones |
|
Chisholm |
Jarvis |
Hurd |
|
Tanner |
||
Hon. G. Clark: I call second reading of Bill 5.
INCOME TAX AMENDMENT ACT, 1992
Hon. G. Clark: I move that the bill be now read a second time.
Bill 5 introduces a number of amendments to the Income Tax Act in order to implement personal and corporate income tax measures which were announced in the 1992 provincial budget. In addition, some of the amendments make technical changes.
The bill makes the following personal income tax changes. First, the basic British Columbia income tax rate calculated as a percentage of basic federal tax is increased by 1 percentage point to 52.5 percent, effective July 1, 1992. This will provide a rate of 52 percent for the 1992 taxation year. For members opposite, the July 1 effective date is to coincide precisely with the 1 percent reduction in the federal surtax, so British Columbians will see no net change in their tax burden for next year.
In addition, I might say that I believe this gives us the second-lowest personal income tax rate in Canada, so it retains us as a very favourable jurisdiction in terms of income tax.
A surtax of 20 percent on British Columbia income tax in excess of $5,300 is introduced, effective July 1, 1992. This will provide a surtax rate of 10 percent of tax in excess of $5,300 for 1992. The existing surtax of 10 percent of British Columbia income tax in excess of $9,000 will be continued. As you know, this is the two-tiered surtax that we are imposing on higher-income earners.
In addition, the phase-out provision of the British Columbia renter's tax reduction will be delayed by one year. Renters will receive full benefits for 1992, while the program is reviewed. I might say to members that we -- particularly the Minister of Municipal Affairs -- are reviewing the whole question of renters and housing. But while we are reviewing it, we decided to retain the renter's tax reduction, which is a modest tax reduction for low-income renters.
Hon. Speaker, these changes to personal income tax will help the government with the additional revenue required to maintain important public services like health, education, and social services. The increases reflect the government's intent to raise additional revenue fairly and equitably and from those most able to pay. Low-and middle-income taxpayers will not pay more, because the basic British Columbia tax rate is offset again, as I said, by the federal surtax cut.
The changes in British Columbia surtax will result in an additional tax for 8 percent of taxpayers. The new surtax will result in increased taxes for high-income earners of only 3 cents on each dollar of earnings over the threshold; in other words, 3 cents on every dollar earned above $80,000. Even with the increases, British Columbia's income tax rates remain competitive with those of other provinces.
In keeping with the government's commitment to tax fairness, part of the necessary tax increases will fall on profitable corporations. Effective January 1, 1992, the corporation income tax rate was increased 1 percentage point; the general rate will be 16 percent. The small business rate increases to 10 percent. Again, that simply returns us to the rate prior to 1985. In fact, the small business rate increase to 10 percent is lower than it was in 1987 and, I think, in 1988. The previous government reduced corporate taxes while shifting the burden to individuals. These changes will reverse that policy, while leaving British Columbia with corporate income tax rates that are certainly competitive with other provinces.
Bill 5 also repeals several unused and expired sections of the Income Tax Act and makes an amendment to reflect a change in the federal Income Tax Act.
F. Gingell: Mr. Speaker, Bill 5 does nothing except increase the tax burden on British Columbians by $254 million. This increase in the personal basic tax rate is from 51.5 percent to 52.5 percent and will bring the government an additional $86 million from taxpayers.
In the recent budget introduced by the Alberta government, the basic tax rate was dropped to 45.5 percent, effective January 1, 1993. In his words about this bill, we've just heard the Minister of Finance suggest that personal tax rates in British Columbia are competitive with other provinces. They may be competitive compared to Newfoundland, Quebec and Ontario, but they certainly aren't competitive with the province that we compete with, if you're looking at the Canadian market. At the time the federal government gave encouragement to entrepreneurs and business people by dropping the federal personal income tax rate, the British Columbia government was the very first province in Canada to grab it back. Within weeks -- February 24 to March 26 -- they took it back.
If you compare personal income tax rates in British Columbia with Washington State -- friends and neighbours across the 49th parallel -- you will find that they don't pay any state income tax at all -- absolutely none.
[5:30]
An Hon. Member: Shame!
F. Gingell: That's a fascinating response. I guess the members of the government caucus would like to see the state of Washington put on a tax of 53.5 percent
[ Page 1120 ]
-- whatever that is effectively; that's a rate on a tax rate -- so that you could boast that our income tax in British Columbia was lower than that of Washington State. I can assure you, Mr. Speaker and Mr. Minister, that simply is not going to happen. The state of Washington raises their funds by different methods -- not that I would necessarily give it a blanket endorsement.
We hear a great deal of talk from this government that our tax rates, our tax jurisdiction and our tax situation in British Columbia are competitive, and the word "competitive" means that it has to be competitive with someone. So you think about who our competitors are. They're certainly not living in Newfoundland or in New Brunswick. I am fairly sure in my own mind that they are living in the province of Alberta, the state of Washington and the state of Oregon. So if we ever talk about competitive rates, we should have a rule that we only make comparisons with our competitors. As I say, the rate in the province of Alberta is 45.5 percent. On their new budget they've recognized what needs to be done: that the economy needs to get a jolt; that we need to put more money into the hands of consumers. We need to do all the things that we can to encourage the growth of the economy in the province of British Columbia. That's what they've done in Alberta: they've reduced their personal tax rate to 45.5 percent in their very recent budget. And, as I've previously said, in the state of Washington they don't pay any personal state income taxes at all.
What is the situation, Mr. Speaker? Well, the situation is that unemployment in British Columbia is at 10.3 percent by the latest statistics; 172,000 people in the province of British Columbia are looking for work. There are 172,000 people looking to this government to do those things that need to be done to create economic growth, to create new jobs and to do what is right for the people of B.C. What did the government do? What do the 172,000 people who are unemployed in this province see happening? They see our government raising personal income taxes, which they know and understand may help the provincial government raise more funds to help pay for the services that are necessary; but it won't create economic growth.
The only way that we in this province can solve our economic problems is by having economic growth, the growth of our gross provincial product, at a rate that is greater than inflation -- i.e., in constant dollars -- and at a rate that is greater than our growth in population. The real key, Mr. Speaker, to economic health in this province is the rate of gross provincial product per capita -- and that's what this government should be concentrating on. If they focus their attempts and their efforts and do the right things to make that economic growth take place, they won't need to raise income taxes. They will be in a position where they will be able to reduce them, because not only will greater revenues come in from currently existing rates, but in addition, of course, there will be more people working and becoming taxpayers; there will be fewer people looking for social services and assistance, and I'm sure there will also be reduction in our health costs. I'm really concerned that this government and this Minister of Finance have their priorities in the wrong places. We don't need to increase taxes; we need to create jobs. We need to create economic growth.
Not only have they increased personal taxes, but they have increased corporate taxes, even for small business, by 11 percent. Somebody who paid a $1,000 in taxes last year will have to pay $1,110 this year -- an increase of 11 percent. It's not an increase of 1 percent, as they have on personal rates. I'd have to work it out, because it's a rate on a rate, but it's a rate increase of maybe 0.5 percent. They've increased it by 11 percent on corporations. Small business is one of the key ingredients, one of the foundation stones, of building economic growth, creating jobs and putting British Columbians back to work.
I continually hear from the other side of the House that they recognize, as we do, that in the last few years in British Columbia and in Canada, the growth in jobs has come from small business. It has come from unincorporated businesses. Individuals are starting up one-and two-person businesses. Husbands and wives are getting started in some small business in their garage or in their study, working out of their home and finding that they've got a secret that works. They are producing a product for which there is a demand. Finally they are able, as their business grows, to take on their first employee. Then they manage to take on their second. At this point they're probably an unincorporated business. The majority of small businesses are not incorporated.
The tax treatment of an unincorporated business is that they are taxed just as an individual. The income earned by the business is considered to be the income of the proprietor, or of the partners if there is more than one. It is taxed in their hands. They have to eat and live in a home and buy shoes and clothes. After they've looked after their living expenses, it is the profits on their small businesses that are the capital for expansion. It's these after-tax profits, after they've looked after their living costs, that are the source of capital for them to buy new equipment, move into a larger building and take on more employees to make their business go. Small unincorporated businesses that earn in excess of $60,000 a year are one of the levels that the Minister of Finance and the government believe are capable of absorbing a larger tax bill. It is those funds that are available in those small businesses for expansion.
What has this government done? They have reduced those funds. They've reduced the funds available from small, successful, unincorporated businesses to grow and prosper, to hire more people, to make more products and to start to make a dent in the ever-growing number of unemployed in this province.
As the government has said on so many occasions, it is the small businesses and the unincorporated businesses.... They've not only selected out the unincorporated businesses, the proprietors and partners, on whom to place a heavier burden of the tax; they have also increased the small business corporate rate. They've increased that, as I said earlier, by 11 percent. On large corporations, where they've increased the rate from 15 to 16 percent, there's only an increase of 6.5 percent. So the government has said: "Aha! We know that small corporations have been a major factor in
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creating new jobs, and for large corporations the employment history in the past few years has been pretty dismal; they've been in the downsizing business; they've been laying people off." We read in the papers day after day, occasion after occasion, about large corporations laying people off. They have, with some strange thought process, arrived at the decision that they should increase taxes on small business by 11 percent but on large business by only 6.5 percent. It simply isn't logical. I don't understand it.
Moving along, we all have to recognize that when taxes are imposed on business, the tax will normally move in two directions. Who is going to pay it? Where is it going to come from? The first direction is usually towards the customer. We well know that businesses in British Columbia have in many instances been suffering these last two or three years, particularly those in the forest product industries -- the pulp mills, the lumber reman plants, the sawmills. They've been having a tough time. Although they may have small profits -- those that are taxable -- they aren't in a position to absorb those taxes themselves. As they sell into a world market where they cannot determine what their prices are -- they have to accept the price of the market -- I guess they're going to have to find the additional tax funds that will be required by laying off more people. There isn't any magic black box. The Minister of Finance cannot wave a magic wand and say: "Magic black box, find me more tax money. Pay it to me." It simply doesn't work. Corporations have to find places for that money to come from.
[5:45]
So what happens? Businesses that cannot pass those increased taxes on in the price of their product because they sell into a world market have to find somewhere from within their organization. They've already been cutting back and cutting everything to the bone. Really, in the end, they have very few alternatives. One hears about these things time after time: the unhappiness and the misery that is caused to your neighbours and mine when they get their pink slip.
For those businesses that believe that cost increases can be passed on, and they try and include it in the price of their goods, what happens there? Well, if they're in the retail market and they live close to the 49th parallel, we all know what has happened there. Retailers close to the 49th parallel -- in Surrey and Langley and Delta -- aren't going out and hiring a lot of employees. They aren't dealing -- or able to help in dealing -- with the 172,000 people in this province who are unemployed.
Seeing that my friend across the way has some interest in this subject, I would like to quote to him from Hansard of May 27, 1991. The words are these:
"Now times are tough, and profits are down. And what do they do? They introduce an increase in the corporate tax. Times are tough, so we're going to give you a little boost by giving you an extra tax. Smart move, Mr. Speaker! Lord save us from the rationale of a government as economically blind as this one."
A. Warnke: Oh, and who was that?
F. Gingell: Well, who was that, Mr. Speaker? I am surprised that the members didn't immediately prick up their ears and be concerned whether or not they....
A. Warnke: She's talking. She's forgotten.
Some Hon. Members: Who was that?
F. Gingell: Well, it was the member for Prince George-Mount Robson, the Minister of Government Services. I am surprised that the hon. member for Prince George-Mount Robson didn't immediately take note of what I was saying and make a note. If I had done it in the wrong way, she could perhaps start an action against me for plagiarism or for infringing upon her copyright. It wasn't me that said: "Now times are tough, and profits are down. And what do they do? They introduce an increase in the corporate tax. Times are tough, so we're going to give you a little boost by giving you an extra tax. Smart move, Mr. Speaker! Lord save us from the rationale of a government as economically blind as this one." What have they done? They have just increased corporate tax rates.
As the debate on Bill 5 proceeds, I presume we shall be hearing again from the member for Prince George-Mount Robson. So that she doesn't have to look too far, I will give her a hint: it's in Hansard at page 12226. So there it is. You will be in good shape.
May 1991 was a very interesting time. The hon. Minister of Agriculture criticized the government at that time for raising taxes by $208 million in a severe recession. Well, the recession hasn't changed. That's still with us. I hope and pray sincerely, as I know all government members do, that things will be getting better. Perhaps the rather good economic news for the first quarter of 1992 from the United States is a sign of better things to come for British Columbia.
But the recession is still here, the time has not yet come, and the Minister of Agriculture was incensed -- the only word that clearly describes his reaction to the then government raising corporate income taxes in this province to raise an additional $208 million in the time of a recession. He was pretty incensed when it was $208 million. I wonder how incensed he will be now that it's $254 million.
On May 22, 1991, an important month, the member for Alberni, now our government Whip, said that it's 20 percent cheaper, on average, to do business in the United States than it is in Canada. I guess he hadn't read the Price Waterhouse report. We always used to talk about the Peat Marwick report. We've now been given what is being referred to as the Price Waterhouse report, but I don't see their name on it anywhere. I have looked for their name from beginning to end. That's a little bit of an exaggeration, but I have looked, and I can't find Price Waterhouse's Good Housekeeping seal of approval. I guess he hadn't read it, although it was prepared by the Ministry of Economic Development in an earlier year. At this point they've just updated it. He hadn't read it, I guess, because he was saying that it's 20 percent cheaper, on average, to do business in the United States than it is in Canada. That's not because of wages; it's because of tax costs to business people. In the
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last few days we've heard statements by the Premier and by the Minister of Economic Development, Small Business and Trade that it isn't true. It isn't cheaper to do business in the United States; it's cheaper in Canada.
As I said earlier, we haven't had a chance to read this.
My friend on my right has found the name Price Waterhouse on it. I understand that it is a disclaimer; it's headed up as a disclaimer. We shall deal with this later.
Interjection.
F. Gingell: We'll read it first.
Times change, and the attitude of the members across the Legislature from us change too. At one point they were completely against increasing taxes. It was going to be death and destruction for the province of British Columbia, and they said it loudly and very clearly. This government has increased taxes.
If I may, I will conclude this portion of the debate by just stressing one more thing: it really disturbs me that the tax increases have been focused on small business and the entrepreneurs -- an increase of 11 percent on small corporations compared to an increase of only 6.5 percent on large corporations.
With those remarks, Mr. Speaker, seeing the time of day, I move adjournment of the debate until the next sitting of the House.
Motion approved.
Hon. G. Clark moved adjournment of the House.
Motion approved.
The House adjourned at 5:56 p.m.
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