[ Page 1471 ]

The House resumed at 6:43 p.m.

[The Speaker in the chair.]

Hon. J. MacPhail: In Committee A, I call Committee of Supply. For the information of the House, we will be debating the estimates of the Ministry of Employment and Investment; Municipal Affairs and Housing; and Small Business, Tourism and Culture. In this House, I call Committee of Supply, and for the information of the members, we will be debating the estimates of the Ministry of Education, Skills and Training, and then Labour.

The House in Committee of Supply B; G. Brewin in the chair.

On vote 20: minister's office, $460,000 (continued).

[6:45]

W. Hurd: I have a brief series of questions for the minister this evening on funding issues in the Ministry of Education. I want to ask the minister if he can provide the committee with an update of the program that was announced by the previous minister on reviewing the administration expenses of school districts in British Columbia. It's my understanding that an offer went out to school districts in British Columbia to have the ministry review their administration expenses. I wonder if the minister could tell us how many districts availed themselves of that opportunity, and what that review might have determined.

Hon. M. Sihota: It's my understanding that very few districts took advantage of that offer.

W. Hurd: I wonder if the minister could elaborate as to why he thinks that might be the case. Does that mean that the committee is to conclude that the administration expenses are in line? Did the ministry follow it up in any way, or was the offer just one that was on the table for a brief duration and then removed? I wonder if the minister could advise the committee of the ministry's position with respect to administration expenses in the 75 school districts at that time -- I guess it's now 57.

Hon. M. Sihota: I expect that it was a statement of independence on the part of boards.

W. Hurd: I wonder if the minister can advise us, then, whether the ministry takes any active interest in the administration costs of boards or whether the policy was experimental. I'd certainly welcome some sort of explanation from the minister -- or from the staff -- who obviously, at one time, thought the program had some merit. It even included a suggestion to boards that they avail themselves of some sort of ministry audit or initiative.

I just wonder whether, besides the autonomy of the boards -- which he has identified as maybe the reason why they didn't take advantage of the opportunity -- the ministry is concerned about administration costs of boards; whether they intend to pursue, in any way, a review of those costs; whether in the view of this minister and ministry, the costs are now totally within the purview of the boards; or in some cases, if the costs were to soar to unrealistic heights, whether that would be an issue the ministry would necessarily focus any attention on.

Hon. M. Sihota: Yes, we do take an interest in it. What we've done now is cap the administrative costs so they only get a set amount for administrative purposes. That seems to me a relatively effective way to deal with one of the issues. Of course, the amalgamation process is another example of our efforts to reduce administrative costs.

W. Hurd: I wonder if the minister could elaborate on the status of Bill 21, which I think had a three-month duration ending in late July, in terms of a settlement in the Surrey school district. I think it also affected a CUPE settlement in Coquitlam.

I assume that the provisions of that bill are now over. I just wonder if I could ask the minister whether the settlements that were imposed under that bill, or the mediator's recommendations that were imposed under that bill in Surrey -- and I guess obliquely in Coquitlam -- represent, in the ministry's view, a guide for future CUPE settlements in other districts in the province or whether that was just an isolated settlement that was imposed by the government, obviously through the provisions of that bill in those two districts. I wonder if the minister could tell us how many districts were affected by the provisions of that bill and how many settlements resulted from it.

Hon. M. Sihota: The hon. member has been around this House long enough to know that any agreement which is the result of a process -- with or without intervention -- becomes the benchmark from which other agreements will work, both up and down.

W. Hurd: As the minister knows, the situation in Surrey was an imposed settlement based on the mediator's recommendations. I wonder if the minister can advise the committee of what research the ministry might have done with respect to that particular agreement, since he has indicated that it could form a benchmark for other CUPE settlements in the province. Did the ministry at any time analyze the impacts of that settlement on this particular district? Is it prepared to review the impact of the settlement on other districts -- given the fact that we may be dealing with what amounts to a benchmark settlement for other districts in the province?

Hon. M. Sihota: No, we haven't. We don't typically do a systemwide analysis of every agreement to see what impact it would have, because you'd be doing that 120 times -- supposedly because every one could be a benchmark. Generally, I think the system acknowledges the cost of an agreement and how that may impact upon them in a subsequent agreement.

W. Hurd: The minister will recall that the settlement in Surrey was actually imposed by the government mere days after the passage of the legislation in this House. I wonder, again, if the minister could tell us whether it's the practice of the ministry -- since the minister does hold the Labour portfolio -- to impose a mediator's recommendation with serious cost implications for a school district, without doing the kind of analysis that might be required on the part of the employer.

[ Page 1472 ]

Or is it going to be the practice of the ministry not to bother about analyzing costs of the mediator's recommendation on the district? I'm just trying to clarify in my own mind whether it's the decision of the ministry to simply impose a settlement without referencing in a cost way the mediator's recommendations, given the implication for other districts, or whether, based on the experience of Bill 21 and based on the fact that that settlement may in fact prove to be a benchmark, as the minister has predicted, we can expect the ministry to embark on a policy of attempting to assess some of the costs of that agreement across the system.

Hon. M. Sihota: It seems to me that if the mediator's recommendations fall within the range of other negotiated agreements, those agreements have as much influence on the agreement as anything else. As a matter of general policy, we always look at the implications, and so does the mediator. I guess if it falls within the range of what settlements are coming in on, that's one thing; if it's outside the range, it's another. My understanding of this agreement is that it fell within the range.

W. Hurd: Just to refresh my memory, is the ministry aware of how many other districts in the province have settled based on the imposed settlement in Surrey? It's my understanding that Coquitlam did arrive at a settlement -- not necessarily an imposed one, but based on the settlement that was reached in the Surrey school district. Is that what I am to assume, or are we dealing with other settlements -- with the Canadian Union of Public Employees in other districts -- that have been guided by that imposed model in Surrey?

Hon. M. Sihota: There have been subsequent agreements settled, but not necessarily based on Surrey.

W. Hurd: Since the ministry and the government did impose a settlement on the district of Surrey, is any attempt going to be made on the part of the ministry to follow up, with the district, the cost implications of the agreement? I'm sure the minister will be aware of the concern expressed by the trustees about the impact of the settlement on that particular district, which is growing so rapidly -- and certainly other districts that may use it as a model, such as Coquitlam, parts of Vancouver, I guess, perhaps even Vancouver Island, certainly Richmond. I'm just trying to determine, since we did embark down the road of imposing a settlement, whether the minister feels any obligation on the part of his ministry to attempt to track the cost of those agreements across the system.

Hon. M. Sihota: On tracking, I think I've answered that question already. We track to some degree, and, as the evidence points out, there have been a number of agreements, as I've said, that haven't followed every "i" and "t" in the Surrey agreement -- so I've answered that portion of the question.

With regard to the question, as I understood it, of any new money to Surrey in light of the fact that the government, in the member's words, "imposed agreement," there will be no new money given to Surrey to deal with the cost implications of this agreement.

W. Hurd: A couple of additional questions on funding and the funding formula. Can the minister tell us how many districts in the province exceed their allotted funding for special needs education?

Hon. M. Sihota: We don't have the exact number, but a large number of the districts do.

W. Hurd: Isolating some real challenges with the existing funding formula, I'm sure the minister agrees that where there is a block fund available for special needs education and the district is required by need to go beyond that, the money has to be taken out of ongoing program funding within the district. If the minister doesn't have the numbers of districts that do have to go beyond their budget allocation, could he perhaps apprise the committee before this set of estimates is over whether that information is available? If it is, are there any plans on the part of the ministry to deal with that particular issue, particularly in districts that are growing rapidly and where I'm aware they're spending many millions of dollars more than their allocated ceiling amount? I understand the legislation provides for the districts to spend a mandatory amount of money, but most go well over that. Could the minister elaborate, first, whether the ministry intends to identify the number of districts that are over their allotment, and then, what steps we might expect to deal with that critical problem, particularly in fast-growth districts?

Hon. M. Sihota: I will provide to the member in writing a list of the districts that have surpassed the targeted amount, and remind him that they do that by a decision they make at the local level.

W. Hurd: I guess the other question I have would relate to the ESL block funding. I'm sure the minister will correct me if I'm wrong, but I believe there is a provision made within the legislation to provide a target level of funding for that as well. I wonder if the minister....

Interjection.

W. Hurd: Not so? Does the funding for English-as-a-second-language programs come from within the district, then? I wonder if the minister could explain how the provincial funding formula deals with the fact that some districts in British Columbia, as the minister knows, face considerable costs in dealing with that particular problem.

Hon. M. Sihota: I recognize that there are districts, like the Surrey district, where there are exceptional needs for ESL programs. We have a budget allocation of $60 million that makes provision for that.

[7:00]

W. Hurd: I wonder if the minister can tell us, then, in terms of the number of districts that face ESL challenges, what.... Is that $60 million allocated across the system? Is that the...??

Interjection.

W. Hurd: I see the minister's official is nodding his head: it's an allocation across the system. Can the minister explain to the committee how the $60 million is allocated, how the ministry identifies which districts receive the funding and how you increase the funding? That seems like a fairly modest amount of money for some of the districts in the lower mainland that experience dramatic growths in enrolment and in the need for English-as-a-second-language instruction.

Hon. M. Sihota: It's calculated out at the rate of about $1,000 per student, based on the estimates that we receive from districts. Approximately eight to ten districts, mostly in the lower mainland, take up the bulk of that -- it's $64 million.

[ Page 1473 ]

W. Hurd: I have just one other question with respect to ESL programs. Is there an allotment from the federal government for ESL programs? Do they provide funding support?

Hon. M. Sihota: Not for children in the K-to-12 system.

G. Wilson: I appreciate the opportunity to be able to get into this debate. I have five primary areas of concern. I'm going to try to get through them as quickly as I can and be as specific as I can in my comments to the minister.

Taking up from where the member for Surrey-White Rock left off on formula funding, as the minister knows, it has been certainly the position of this member and the party that I lead that formula funding doesn't work. It's inequitable in the sense that there are, for some reason, inequities built into the system based on enrolment that seem to be varied by a whole series of different factors.

I draw the minister's attention to some statistics which are generated from 1996 data -- May 14 of this year. I just want to demonstrate the kind of inequity I'm talking about. For example, Central Okanagan, with an enrolment of 21,221 students, has a per pupil allocation of $5,404. Right next door to it, Penticton-Summerland, with an enrolment of 7,102, has a per pupil allotment of $5,797 -- some $300 more. Vernon has 9,968, which is a per pupil allotment of $5,800. Kamloops-North Thompson, with a student enrolment of 17,000, has $6,000 per pupil. I can go all the way up until I get to the provincial average, which is $5,849. By looking at the provincial average, we find Central Okanagan left well behind.

When you look at the history of that particular school district -- school district 23 -- it's hard to fathom why the ministry would continue to underfund that particular district. If you look at the 1996-97 budget year for school district 23, with a $5,404 per pupil funding, you will see that in fact there is a $36 reduction per pupil compared to the '95-96 funding level. I think this district now is ranked 71 out of 75 districts in terms of its pupil funding, yet it's one of the faster-growing school districts, certainly in the interior of the province, if you exclude the faster districts in the lower mainland.

Clearly, formula funding is a problem. I use Central Okanagan as my first example. I'd be happy to get into more detail, as we've done a fair bit of work on this, if the minister would like. We'd like to hear from the minister whether or not there is going to be a commitment to review those dollars, and in particular to review Central Okanagan, which seems to very definitely be suffering at the hands of a formula that appears to be driving dollars away from classroom delivery and leaves them with an unacceptable level of funding for students who need that service. Perhaps we could hear from the minister.

Hon. M. Sihota: For the record, I have already indicated in estimates that the funding formula is under review.

G. Wilson: That's useful to have restated. I wonder if that means that formula funding is going to be reviewed in terms of the formula. Or are we going to get rid of formula funding -- which would be of great benefit to us -- and move toward a four-year-based financing system that would allow multiple-year financing so that school districts could carry dollars from year one to two to three to four and do long-range, more equitable planning? If you look at the $3 million shortfall that Central Okanagan is facing now, unless some swift action is taken to rectify that problem, in the '96-97 and '97-98 years those shortfalls are going to compound themselves into some very significant and very real problems in terms of educational delivery for students. Perhaps the minister might clarify: is it just the formula that's being adjusted or are we going to actually get rid of formula funding and move to a more progressive way of financing our schools?

Hon. M. Sihota: I understand the hon. member's points with regard to continuity of funding and some sense of where the world is going. That's an issue that I also struggle with, but for the time being all I will commit to is a review of the funding formula -- in other words, the formula. That's not to say that I haven't been thinking over the past few weeks about greater stability.

G. Wilson: Perhaps I could seek some advice from the minister. Where would, for example, a board such as the one representing the central Okanagan...?? How would they best be able to communicate to the minister what clearly is a serious and urgent need for review of that formula? As the minister reviews this formula, is there an opportunity for meetings with ministry officials? If so, when and how, and what are the dates?

Hon. M. Sihota: We met with them a month ago.

G. Wilson: It will come as no surprise to the minister to learn that I know that. There is not a great deal of confidence yet, because even though the minister knows as well as I do -- because I'm certain he has these figures -- that even though there was a meeting and the issue has been articulated to the ministry, prior to allocation of dollars through the next school year we have to have some clear indication that this issue is going to be rectified. As a result of those meetings, I'm wondering if there are going to be some subsequent opportunities to be able to make sure that in the allocation of dollars in the next round, not only are those dollars going to be brought up to par but the $3 million shortfall is going to be addressed.

Hon. M. Sihota: They should work in conjunction with the finance and facilities advisory committee, which I referred to earlier in my estimates.

G. Wilson: I for one am enthusiastic about the opportunity. I hope the minister is enthusiastic; he certainly appeared enthusiastic in his response. I'm hoping that he is enthusiastic about the opportunity to review this iniquitous situation and make sure these issues are dealt with, and that would be good.

If I might, I would like to add to the list that was prepared for the minister by the member for Okanagan-Vernon. I was watching this in my office. I had a meeting, but I was trying to jot them down, and I'm not sure that Glenmore Valley Elementary or George Elliot Secondary were on the list provided to the minister -- if they're not, they should be -- with respect to capital funding freezes in the central Okanagan. If the minister would like, I could get into a list of a few in Powell River that we are expecting to have released as the freeze on capital programs is dealt with.

I would like to move to a second issue, if I might. I think it is a issue of growing concern, and it deals more with the philosophy of education than with funding details. It has to do with the need for the establishment of national standards. There are growing concerns over the degree to which provinces are entering into educational curriculum development. There is also concern over the lack of a concerted national plan for dealing with those issues. There appears to 

[ Page 1474 ]

be a lack of commitment to establishing national standards on education that would allow for equity in terms of the delivery of programs for young people who move from another province and wish to enter a school in this province. Some have had their first five to eight years of education elsewhere. I'm wondering if the minister might want to enlighten us about what the plans are for the upcoming....

Interjection.

G. Wilson: Hon. Chair, I'm absolutely delighted that I'm getting such an enormous response from the Minister of Agriculture, Fisheries and Food. He's clearly as anxious as we are to set national standards.

But perhaps the Minister of Education, Skills and Training might want to enlighten us as to what is being done. I know that some meetings are being planned for the national stage, but I don't know the degree to which British Columbia has participated in the development of their agendas. I hope that it has participated, and more than by simply being a participant. We could lead the way in terms of setting these national standards.

Hon. M. Sihota: The hon. member knows me well enough to know that I never go to national meetings if I don't have an agenda -- and usually that agenda is well known. I can assure him that I will go to those meetings with a clear agenda. One of the issues that we will deal with there is the issue of national standards. I'm pleased to advise the hon. member that just recently -- I think it was about two weeks ago -- we signed an agreement for standards with the four western provinces.

G. Wilson: I do know this minister well -- well enough to know that he always has an agenda at work in some capacity or other. Notwithstanding that, I am surprised that I haven't heard what the national agenda might be for the upcoming meetings. I'm delighted to hear about the protocol that was established by the western Premiers; I think that is a step in the right direction. But the biggest concern that we have -- and it's a serious one that I would flag for the minister as an issue that we need to discuss -- concerns Ontario and Quebec. It does not necessarily spawn out of a concern in the western provinces. The difficulty that I have is that Ontario standards, which are often centralist, are applied as the norm in Canada. There are some serious difficulties in respect to students who transfer from Ontario schools to B.C. schools. I don't want to get into a long list of them, because I know that the minister was apprised of some of them as they occurred. I'm delighted that we have a protocol with the western Premiers, but perhaps the minister might be more forthcoming in respect to the initiatives we're going to take on the national stage -- particularly on the K-to-12 issues and the Ontario curriculum, which is now being drastically altered, as the minister knows, in a direction that I'm not sure is really in our best interest.

Hon. M. Sihota: First of all, let me say that I understand this problem very well. As the member knows, I represent Esquimalt -- and by the way, I welcome him to my constituency; I understand that he lives there. As I told him the other day, that's another house with another sign location for the NDP in the next election campaign. The member is going to take a sign of mine next time.

The other point I want to make -- and the reason that I know about this acute problem -- has to do with representing a military constituency. About a third....

Interjection.

Hon. M. Sihota: I'm sure that all hon. members would be interested in hearing this debate.

In Esquimalt, we have a lot of military families that move in from all parts of Canada -- let alone the world -- and particularly from Ontario and the maritime provinces. On a firsthand basis, I've seen the difficulties involved in being able to adapt to these standards. So I understand that issue, and I'll make it an issue. I don't know to what extent the federal government is interested in it, and I'll ascertain that when I am there.

With regard to other issues, I want the hon. member to know, because he asked me about the agenda, I will be making a significant issue nationally out of the amount of violence that is on television. I'll let him know, so that he has some sense of perspective, that that will be a more dominant issue than this issue of standards.

[7:15]

G. Wilson: I'd love to enter into that philosophical debate; however, I won't yield to the temptation to do that now. I think that is a very big issue, a huge issue, and it does speak to some of the broader questions that we have with respect to the philosophy and general direction that education should be taking.

One of the issues that I want to raise, because it is now being raised with great seriousness in Ontario.... I think the member for Okanagan-Vernon alluded to it earlier on. Unfortunately, I was in a meeting and I had one ear to the meeting -- I shouldn't say that, because the person I was meeting with would be quite upset -- but I did have one ear to the monitors as well. I do believe that the member for Okanagan-Vernon at least alluded to, if not introduced, the concept of private partnership in education. This is something that is being very seriously considered now in Ontario and it is something that is being seen right across the United States. It may not necessarily be all negative, but it could be quite problematic. To the degree that private partnership, in terms of capital construction, is concerned, certainly there may be some opportunity with respect to the construction of schools or other facilities which then could be leased back, and there could be opportunities of cost being reduced to the public sector with respect to the provision of physical plant space.

Having said that, I would be seriously concerned if we moved to the degree that this grade 10 chemistry class is brought to you by IBM, or is brought to you by Hooker Chemicals, or somebody else. I would certainly not want to see corporate sponsorship of classroom delivery service as we are starting to see now -- the only one I've been exposed to is in Chicago. In Chicago now, you've got whole grades that are brought to you by GM and Ford. This school's grade 11 and 12 are brought to you by General Motors, and out of that class comes all of these little people who are now being trained and prepared to go to work for General Motors. I have some serious concerns about that level of corporate partnership.

What I've painted for the minister is really a picture of two extremes. On the one hand, when I am talking about corporate sponsorship of capital plant -- that is, construction of buildings, whether it is under the fair wage or whatever they call that program.... I don't want to get back into that debate, because I think we've had it. However it is done, it seems to me that there may be a role for private partnership in terms of capital construction. But I would not want to cross the line and say that there is a place for private partnership 

[ Page 1475 ]

with respect to curriculum development. Yet in Ontario now that seems to be a matter of very serious consideration. That's why I raised this matter of national standards. It's something I really don't want to see spill over out of the boundaries of Ontario, if they actually adopt it, and contaminate the rest of Canada.

Hon. M. Sihota: I don't share the right-wing, neoconservative approach of the Ontario government, and that's well known. I think people in this chamber know me well enough to know that I have strong opinions with regards to that issue and that government, and who it is that this government is to represent.

Second, I should let the hon. member know that I don't want schools to look like the Atlanta Olympic Games sites with inflated Coke bottles hanging outside every school -- that won't happen.

Third, I remember -- I was thinking about this -- being in class, and I think the maps of Canada that we used to have had a little Jersey Milk bar insignia. I remember -- but it had no influence on me -- that even back in the sixties there was a little corporate stuff that had sneaked in.

Generally, these are things that I am not particularly fond of. We are looking at public partnership on the capital side and a leaseback. We're doing a pilot project in Burnaby, and there might be lessons for everybody to learn from that. I don't think every time you go to the gym you should be told that it's brought to you by Reebok. We'll look at these issues, but I think you've got a flavour of my biases.

G. Wilson: I'm absolutely stunned and amazed that this minister doesn't adhere to whatever that philosophy was in Ontario that he said there was. I'm just joking. I know full well that there is a right and a left on the spectrum and I know when I've hit the left, and that's when I'm debating this minister.

Having said that, I think private partnership is something.... Certainly we can see enough corporate advertising on the general outfits of most of the kids who are attending school. I always found it rather strange that people would pay more to run around in sweatshirts advertising some product -- Nike or whatever it would be. All that kind of corporate advertising is already well advanced in the clothes that are the general fare of most young people today.

I do think the pilot project in Burnaby that the minister alludes to is an excellent opportunity to study what might be a very real advantage with respect to private partnership in capital construction. I know that we've taken some fairly bold steps with respect to infrastructure plans. We're now talking about private partnership on bridge construction, private partnership with respect to rapid transit -- now being considered seriously with respect to rolling stock being picked up by private enterprise and allowing the government to hold rail rights-of-way -- and so on. It seems to me that there is an opportunity for us to seriously look at some very significant cost savings on that kind of private partnership. So I'm delighted to hear that the pilot project is underway, and we look forward to hearing from the minister what kind of information comes out of that particular project.

I would like to move now to two other very brief issues with respect to K-to-12 education. This is a rather serious matter. It is a matter that is somewhat delicate and I want to approach it with a caveat that suggests to the minister that my inquiry is really one of procedure, not anything else at this point.

It is difficult for people and constituents to contemplate, to understand, how there can be a more accessible and open public audit of school district accounts. I raise this matter because I think it is a serious question that the people need to have some serious answers to and it needs the contemplation of this minister. Clearly, there are staffing issues and personnel issues that should rightly belong in the protected category. There are also situations where public moneys -- especially moneys that have been provided through grant applications through B.C. 21, for example -- have gone to community-based organizations that have then been administered through school districts, through the board or through the agents of the board, such as the superintendent, and where the community societies wish to have an accounting of those moneys and can't get it. They find, in fact, that these dollars have been advanced and that projects have been completed, presumably on or under budget. Where there is surplus in those accounts, they can't get access to them for application to whatever other parts of the project they may want. Yet they find it almost impossible to get a full accounting from the board as to how those moneys are applied.

My question -- and it is a somewhat sensitive one, because I don't want to make any allegations other than those I've already alluded to -- is that it seems to me there is an opportunity for this minister to look at, in a more broadly based way, a manner by which the public can get a more full accounting of the operations of the board, including the amount of money they're spending on litigation and legal fees. One of the areas that rarely ever shows up on a budget is the amount of dollars that school boards are actually putting into that kind of litigation and legal fees. When you have a tight budget and you have special needs kids being cut out or you have other programs that are not being delivered and yet have several thousands of dollars being directed to legal bills, I think the public has a right to know why. If the minister has some thoughts on that, I'd like to hear them.

Hon. M. Sihota: We do audits. Each school district appoints an external auditor to audit the accounts, the transactions of a board. That is forwarded to the ministry, and then the ministry makes that information public. If the hon. member is saying that the scope of those audits isn't as deep as it should be, then I'd like to have him so advise me, in writing, and to give me his suggestions. I'd be happy to look into it. I don't have any difficulty with that. If the hon. member points out that dollars aren't being spent as well or as carefully as they should, then we need to know about that. It's not beyond me, never has been beyond me, to take action when it's required, even though it may touch some sensitivities of independence. So if you are aware of cases, I would encourage you to meet with my staff and we'll look into it.

G. Wilson: I'll take the minister up on that offer. I won't protract this particular part of the debate any more than to say that I do believe there needs to be a better auditing system because, effectively, all that happens is that the auditor looks to make sure that the books, as presented, are as they say they are. The audit doesn't look beyond that.

One of the things that I learned in my term and time here on Public Accounts, and listening to the auditor's reports, and looking at how we are now changing the manner by which we are looking at the auditing of public accounts generally, is that there has to be a much deeper look at value for dollars. There also has to be a much better look at how these dollars are being applied and whether or not they're being applied within the lines that they are supposedly being directed at. So 

[ Page 1476 ]

I won't protract that debate, except to say that, having served notice to this minister and being offered the opportunity to meet with staff, I'd like to do that soon.

My last set of questions, then...? I think the issue of the capital freeze has been well-enough addressed, and I don't want to go back on that, except to say that in Powell River we're anxiously awaiting the release of dollars for a couple of projects that are currently approved but frozen. We're anticipating that the.... I'm not sure if it was the minister or the Premier, or maybe both, who said that whatever was approved before the freeze is likely to be given a green light when the freeze is lifted if the project was underway.

Interjection.

G. Wilson: I'm hearing now from the Minister of Agriculture, Fisheries and Food, who wishes to get into this debate, that the answer to that is no. If the answer is no, then maybe we need to go back and talk about this a little bit. It seems to me that dollars were announced, they were announced through project funding for.... The member should get into trouble from his back bench for protracting this debate. It's interesting, hon. Chair, if that, in fact, is not true. Because we have, for example, child care facilities that were approved, given grants and ready for construction, and we had anticipated them being open in September in Powell River. Perhaps the minister can tell us, then, what is the status of that, and whether or not we are going to see that come forward after the freeze or not.

Hon. M. Sihota: I want to make this absolutely clear: any hon. member who heckles another hon. member automatically loses any capital funding for projects in their constituency. So that's fair warning to the minister who has now left, for good reason.

I have already committed to two things. First, with regard to minor capital, within seven days of the passage of these estimates, I will make public a list of those projects which are approved. I don't know if that will mean the Powell River projects will get funded or not. We'll go through a process, and I'll do that. So within seven days of the passage of these estimates, I'll make that commitment publicly.

Second, any member on either side of this House who wishes to see a capital project go in their riding, will have to write me a letter saying that they want the debt increased in this province in order to fund that project. And that has to be explicitly stated. So I will be requiring that of all hon. members.

[7:30]

G. Wilson: Always the consummate politician, ready to have us commit in writing to increasing the debt -- something that the minister can then hold up and say: "See! This member is trying to increase the debt, to be ingratiated with the people who elected him or her to office." But there are other options. For example, we could cancel an $800 million capital project for the B.C. Ferry Corporation, to save ten minutes of sailing, which could put $800 million into educational funding. There's an option; that's a really good option. I'll tell you, there are several others we could get into if the minister would like.

Perhaps what we should do is that each of the opposition members should make a list of the wasteful projects this government has embarked upon. And we should match that wasteful list with the more appropriate expenditure of dollars on educational facilities that we would like to see. We can put that match together to prove to this government that a more conscientious and more fiscally sound capital plan would provide the educational facilities that we need without increasing the debt. Wouldn't that be a novel thing for this province: to actually have a capital plan that effectively does provide for the people without increasing the debt? I'm sure that every opposition member would be happy to assist this minister in the administration of his duties by providing such a list of projects. I know I certainly would be.

However, it's a wonderful seven days for the passage of this budget, which could be -- who knows? -- one week, two, three, four.... The summer goes on. I see the estimates are moving along, and I don't want to protract them unnecessarily here tonight. Let me offer an invitation to this minister on the eighth day, his having, I assume, announced on the seventh day where he will rest. I'm assuming, judging by the responses we're getting from this minister, that upon the eighth day he may come and cut the ribbon on the new facility in Powell River, which he will, of course, have provided funding for. Because we're that confident that this minister sees the wisdom of those dollars going to that project.

My last comment or question has to do with school district amalgamation. I know, once again, that that's an issue that has already received some attention. I just want a commitment from this minister that we're not now going to see a revisiting of that issue in light of the Health and Social Services boundaries being once again looked at.

Clearly, we've just heard today that this government wants to introduce 81 seats into.... I mean, look around us, hon. Chair. We can't even adequately finance 75 constituency associations right now. This government is dragging its feet on giving us a little bit more money so we can adequately finance our constituency associations. They want to go for 81.

I want to make sure that this minister is not going to entertain a revisiting of the boundary amalgamation issue, in which the people of Powell River-Sunshine Coast fought so hard to introduce wisdom into the process, so that the ministry recognized that the proposed amalgamation was absolutely ludicrous. I understand that there is some rediscussion of Health and Social Services boundaries, which is causing a lot of concern. I want to make sure that this minister commits tonight that Education boundaries will not be part of that review.

The Chair: Hon. member, I think you've been here long enough to know that future policy is future policy. I'm sure your comments are well appreciated, and the minister will take that....

Interjections.

The Chair: All right. I recognize the hon. minister.

Hon. M. Sihota: I know that the hon. member has as much respect for the rules of this chamber as I do. Therefore I'm assuming he wasn't asking me about future policy but about whether or not the amalgamation process that was already announced by government is going to proceed. That's the way I understood his question. The answer to that question is: it is proceeding. Letters have gone out to school districts telling them that the amalgamation of, I believe, 59 districts is proceeding, and I don't think that impacts on Powell River, if I remember.

[ Page 1477 ]

The other point I was going to make is that I have no difficulty with members writing a letter to me saying which capital projects they would consider to be wasteful, as long as they include in that letter projects in their own constituencies which they consider to be wasteful.

G. Wilson: That's challenging. I must say, that's.... Boy, I'm not sure I can think of one in Powell River-Sunshine Coast that's wasteful. You know, hon. Chair, what's interesting is that the minister says that I have the same respect for the rules as he does. I have more, I think, having watched him over the years -- I think maybe I have a little bit more.

I just want to close my questions to the minister by asking this rather direct question. I don't think that this is a future-policy question. I know that a constituent of this minister has requested him to provide some example of how one introduces reading material into the school curriculum. I wonder if the minister might tell us how one goes about taking reading material of a B.C. historical nature, which should be on the school curriculum, and having that material advance, so that it can be considered and reviewed. This is a question that comes from, I believe, a constituent of this minister.

Hon. M. Sihota: I appreciate the constituent's interest. The hon. member points out that it is a constituent of mine. That constituent should just walk a little bit further into my constituency, onto Viewfield Road in Esquimalt. There sits the learning resources branch. At the learning resources branch, that constituent can then make their submission, and we will make a determination as to the appropriateness of the inclusion of that material in the curriculum. I know the issue of which the hon. member speaks, so I am sure that it will get attention.

G. Wilson: This is my last comment, and I just want -- because I know that that these Hansards are so widely read by the people of British Columbia and are distributed so freely around the province.... The minister alluded to the fact that I now live in his riding. This issue as to where my domicile was came up in the last election. I just want to clarify that this is true. It is true that while attending to business in Victoria I do have a residency in this minister's riding. But this minister is really, really dreaming in technicolor if he ever thinks there is a lawn sign opportunity at that area, and that should be on the record in perpetuity.

D. Symons: I have just a few questions to the Minister of Education. One of them alludes to the question that the member for Powell River-Sunshine Coast raised about what we'll call innovative funding for schools. The Richmond school district, which I represent, certainly has often been in the forefront in this province in looking for various innovative and interesting ways -- and in going along with the minister or the Education ministry -- of attacking the problems of giving quality education to the students. Our area has gone into effective scheduling, if necessary, in order to look after overcrowding. They also looked into the issue of using stock plans for elementary schools before it was more or less mandated by the ministry.

They've done a lot of these things in order to look at ways of funding the schools that we so desperately need in Richmond. They've also been one of the first districts, I believe, to get involved in the school sites acquisition legislation that was passed last year. So our district -- I'm just trying to point out to the minister -- has been at the forefront of many of these particular innovative and, I think, necessary methods of dealing with funding of education. But for a length of time now our board has also been asking the ministry to look at something else that they've been bringing forth. I'll just read from a letter that was sent to the Minister of Employment and Investment, and you'll see the relevance to Education in just a moment. This is from our school board:

"The board is pursuing a concept that generates income by leasing the space to businesses that are complementary to the school's programs and, combined with other fundraising initiatives, will contribute significantly to the funding required for a new school. The board has written to successive Ministers of Education seeking support and direction for our initiatives. The only response has been the assurance that Ministry of Education staff would discuss with your ministry the policy of providing matching grants where private sector funding is obtained, as is the case in post-secondary capital projects.

"We understand that the provincial government is studying a number of ways of using public-private partnerships in order to reduce the capital funding demands on the taxpayer. The board is most willing to work with the government to share the experience we have gained to date in order to be able to proceed with any of our proposed school expansions.

"We would appreciate knowing the current status of the P3 initiatives, particulary in regard to the possibility of our district being involved, as we have a number of elementary and secondary schools in the planning stages that are urgently required in order to meet the needs of increased enrolment."

My question to the minister, then, would be: have those discussions taken place with the Employment and Investment ministry, and what was the outcome of those discussions?

Hon. M. Sihota: The hon. member is not new to this chamber. It is not for me to answer questions that relate to the Ministry of Employment and Investment; let's make that clear. The question was: do I know if the Ministry of Employment and Investment engaged in that dialogue? Ask the Minister of Employment and Investment. In the case of the Ministry of Education, I can tell the member that we have told Richmond to proceed and that we will continue to engage in a dialogue with them on this concept. We have made it very clear that they should move along in terms of their work on this. That doesn't mean we have bought into the concept in its entirety. I have some concerns, but basically -- conceptually -- it's okay. We should proceed.

D. Symons: I think the minister misinterpreted what was said in the letter, because the letter says: "The only response has been assurances that Ministry of Education staff would discuss this with the Ministry of Employment and Investment." I'm asking whether your ministry discussed those issues with the Employment and Investment ministry and what the outcome of those discussions was.

Hon. M. Sihota: Our officials have conveyed, through Education, that they should proceed. That's the operative point here, I think.

D. Symons: Just a few more questions, then. As is the case in many other districts around the province, I gather that we have some very serious overcrowding problems which have certainly been caught by the project freeze. I note that one of them is in my portion of Richmond -- the J. N. Burnett Junior Secondary School. The part that's legally going ahead, and which is legally committed, is supposed to increase capacity from 450 to 1,000 students. The school now has over 1,000 students, but one of the freezes under review is at the same school, and phase 2 of the plan is supposed to increase capacity from that 1,000 up to 1,200 students.

[ Page 1478 ]

Burnett is sort of unique in the sense that it has serious seismic problems. In the process of upgrading the school and adding capacity, the project also included increasing its capacity to withstand earthquakes. It would seem only logical, I think -- both from doing that and from an economic viewpoint -- that after completing phase 1, you should continue on into phase 2 rather than have a stall between the phases. A stall would result in the problem of bringing crews back in and would cause more disruption to the school. I wonder if the minister can give me some idea as to the advisability of putting that particular portion of this project under review. It's common sense, I think, that that particular project should be continued in order to finish off the construction at J. N. Burnett.

Hon. M. Sihota: I'm sure that the hon. member doesn't want to break any promises he made to his constituents when he asked for their support, and I'm sure that during the course of the last election campaign he went out of his way to say to them that we needed to deal with the debt in this province. If the hon. member tables a letter to me asking me to increase the debt in order to deal with that project -- and also, perhaps, an election pamphlet in which he made a commitment to increase the debt for that purpose -- I'm sure it would have an impact on my thinking.

D. Symons: I think that the minister, in his nonsensical answer, is basically missing the point here: it was his government that made the promises to carry through with these particular projects. It was his government that was saying this, and it was his government that was making many promises around the province during the election campaign. It was also his government that was breaking those promises as soon as they were elected; that's the issue. We're simply asking you to carry forward the promises that you had made before the election. Obviously, a government of integrity would do so and would not go around and say: "I'll just try to turn this stone over and blame the other side for what's going on here." That's not the issue here.

[7:45]

If you want to save money, you've wasted $500,000 on firing a very good man who was head of B.C. Transit. Would the minister explain the nonsense of doing that? You had a man in there; you brought him in. You had him go through a series of interviews and chose this particular person to bring some common sense into operating the B.C. Transit system, and within seven months you fired him. You were sued for wrongful dismissal, and that misadventure cost the taxpayers of British Columbia, or the transit users, $500,000. Those are areas where you can save money; those are areas where money can go into the schools.

I won't go into all the other areas where this government is wastefully using money. If you want to build schools, let's use proper sense and proper perspective in the use of the money you have -- the taxpayers' money. Don't try to blame the opposition by saying that we have to raise taxes to carry the projects that you should be doing, while at the same time you're carrying forward your favourite insider deals that you've got going with many of the organizations you're working with. That's not the issue. I assume the minister doesn't want to discuss these things in a rational way. He's simply going to throw out these threats and idle challenges instead of discussing things properly.

The Richmond school board asked on July 10 to have a meeting with the minister to discuss their urgent needs within the district of Richmond. I gather that you probably have had similar requests from many other school districts. If these projects in the list of the government's freeze on things are under review, it would seem only prudent that the minister concerned would meet with the people involved in the projects, in order that they could discover which of the projects should indeed go forward. I wonder why the minister was not able to meet with them. The answer they basically got was that he's too busy. Somewhere between the time that the six months are going to run out and the beginning of that freeze, the minister must meet with all the boards of all the projects that are caught in the freeze and discuss with them their concerns for the projects in their districts. Will the minister be doing that?

Hon. M. Sihota: I cannot physically meet with every group that has capital allocations within this portfolio. When I look at universities, colleges and all the schools in the province, I cannot, practically, from a purely physical point of view, meet with every project that's out there. I'll make choices.

With regard to the hon. member's earlier comments, if he thinks that we are wasting money on debt in his riding, he should give me the list of projects that he thinks we're wasting money on in his riding and the ones that he would like to see go ahead in his riding. That would be very instructive for me, and I would hope that he would do that.

D. Symons: I enjoy the minister's challenge. But, of course, being on the opposition side, we haven't had the same largesse shown in our ridings as maybe some of the NDP ridings have. We haven't got commuter rail running through Richmond right now; we won't have the fast ferries running in Richmond. There are a great number of areas around the province that haven't had that largesse given to them. In my riding there is very little I can point to that this government has done, good or bad, in wasting money or spending money.

I can point to some of the other parts of the province and some of the areas where NDP members happen to sit where you might be able to save some money. Commuter rail might be one of them, to begin with. We certainly have the fast-ferry project, which I think is very questionable. We seem to have the Victoria-Seattle ferry, which the government is now willing to off-load, because they discovered they made a mistake in initiating that. If you want some examples of wasted money, there you are, but they don't happen to be in Richmond. Richmond needs a little more of the government's largesse, I suppose.

I have one other question. We're certainly off the topic of what I really intended to discuss with the minister, because he's not giving sensible or even responsible answers, I don't think. I'm reading from the May 23 to May 26, 1995, issue of Victoria This Week, from the B.C. government communications office:

"A new $100 million five-year school technology plan aims to increase B.C. students' access to technology. The plan calls for all B.C. school districts to develop three-year technology plans and sets goals of having one computer for every three secondary students and one for every six elementary students within the next five years."

This was a commitment by the previous Premier, Mr. Harcourt. I wonder if the minister might tell me if plans are made in each of the districts. Is the ministry monitoring this program? Can he give us a progress report?

[ Page 1479 ]

Hon. M. Sihota: With regard to the member's opening comments, I have noted that some Liberal ridings have done very well on capital, and others haven't done as well. Perhaps that's more a reflection of the effectiveness of the MLA than of anything else.

With regard to the plan, this year's budget makes an allocation of $10 million, and districts are submitting their plans for technological assistance from the capital side. As they come in, we are making the funding determinations. Again, if the hon. member has specific requests for his constituency, he should notify me.

A. Sanders: This is a hard act to follow, hon. Chair. I'd like to get back to the basics, and certainly to advise the minister that his ergonomic position in the chair there is not going to suit him well by 10 o'clock tonight.

Nevertheless, with a new Education minister in this portfolio, I'm interested in what the 1995-96 goals of the Ministry of Education are and how their outcomes will be measured.

Hon. M. Sihota: I don't smoke and I don't eat high-cholesterol foods; I just sit kind of weirdly in chairs. But I'll take any medical advice I can get any time I get it, especially when it's free. I could go on, but I won't.

I think it's easier for me to talk about my goals for the ministry versus the ministry's goals for itself, which sometimes are at variance until the minister gets a better grip on what's happening in a particular portfolio.

On the K-to-12 side, I want to be in a position where, two years from now, people are saying.... And that's how I'll measure it; I won't measure it on anything other than that. I have to take it to the point where, two years from now, there's a general acceptance in society and a deeply held belief that the education young people are getting in their schools is relevant, in the sense that it's relevant to the marketplace as it's evolving, so there's a sense of confidence among parents and the consumers of our services, students, that what they're being taught indeed prepares them for opportunities in the marketplace. I'm not sure in my own mind, and certainly from what I hear, that the sense of confidence around that issue is as high as it should be, so it's very important to deal with what I call the relevance gap and the skills gap. That will mean that there will be some changes, I guess, perhaps even to the curriculum, but certainly in terms of structure and approach.

What I'm going to do, and what I have been doing, is drop in unannounced at schools -- I don't want it to be announced, because then people are prepared -- and talk to kids first, just talk to them about their sense of what they're learning, particularly grade 11 and grade 12 students, and get them to reflect on their experience and also to talk about their expectations after grade 12. That helps shape the policy determinations that I will be making, and I will continue to operate on that basis. It's the same with regard to dropping in to staff lunchrooms. I'll continue to do that fairly regularly, again unannounced, to measure their sense.... Inasmuch as there is a relevance gap and a skills gap that students can speak to, as well as parents, when I drop in unannounced to parent advisory meetings across the province.... I'm going to gauge to see whether or not those comments are there two years from now -- they'd better not be.

Teachers also have some strong feelings about the ministry and the degree to which the ministry supports the work that they do, interacts with them, attends to their concerns, has a sense of what's required in the field by way of academic versus.... I shouldn't say academic, but artificial determinations as opposed to practical determinations. I will not consider it a success if I'm still hearing those complaints two years from now. So that's important, in my mind.

There are obviously some structural issues as well. Collective bargaining matters have to be resolved. That has been a matter of debate here. They'd better not be sitting here two years from now. That's an important issue, in my mind.

I've taken a look at issues like CAPP, because we got too many comments about the CAPP program. The report cards, as we said prior to the break, in terms of the in-progress side of report cards -- that's very important to me. The way in which we deal with special needs children and with the pressures in the classroom as a result of special needs children; how we take this policy that was introduced in 1989 and deal with the pressures that have been created by it, both fiscal and emotional, and from an education point of view -- that is going to be yet another goal that we're going to take a look at. So special needs will be a factor.

Also, in terms of outcomes, I don't mean just the raw numbers of where students go after they leave grade 12. I think I have to be able to convey to students a sense that they have a chance, as I said right at the outset, going right back to my opening comments, of getting a post-secondary education. It troubles me enormously to see so many students rule that out as an option at such a young age. So we're going to do something along those lines. In fact, I'm in the process of talking to a number of role models for young people that can assist me in conveying a message in that regard. So that's another goal that we hope to set for ourselves.

I want to also deal with, of course, some administrative issues and administrative cost-related pressures. So that will be on the plate. Those are the goals, randomly, that I've laid out, and we'll assess them.

Finally, I found in previous portfolios that it is better to set those subjective measurements as opposed to necessarily objective measurements. There are always objective indicators of the degree to which you've been able to achieve these goals that you've set for yourself, but at the end of the day -- and I know the hon. member used the word "feelings" -- I think that subjective variables are very important. So that's the approach.

A. Sanders: I appreciate the minister's comments. I, specifically as a consumer within the educational system, would like to see that this minister conveys to the ministry and its staff some objective criteria for evaluating areas such as intellectual development, for implementing in a very sound way examination results and assessments in provincial learning programs. I'd like to see human and social development made into some objective criteria, with achievement in physical education and fine arts, and attitudinal and behavioral outcomes, in student surveys. I'd like to see a career development arm of Education that is objectively defined, as we seem to be moving in that way. I have some concern about subjective analysis of these areas, in that my subjective analysis and the minister's subjective analysis of what is right for our children and society in general may be different. I would be very encouraged to hear that we do have objective parameters in which to measure these results.

[8:00]

Looking specifically at the quality of education in British Columbia, I am interested in the science and mathematics exams written in British Columbia over two years ago. I do not have any results later than the international math and 

[ Page 1480 ]

science achievement tests in '91, which showed British Columbia eighth or ninth in the ranking for 13-year-old children. My understanding is that the science and mathematics exams written two years ago by British Columbia students are still not available, and I wonder if that is in fact the case.

Hon. M. Sihota: Let me make a couple of points. First of all, I appreciate the hon. member's comments, and I don't want her to leave with the impression that there won't be objective indicators. There have to be objective indicators. Let me give a simple example. I think that all members of this House, regardless of their partisan background, will agree that this government did a good job in terms of environmental protection. That's the subjective sense that people have. But obviously you don't get that subjective sense without any objective indices that give you that sense. Using the Environment again, I'll give another simple example: 161 new parks is the objective measurement that leads to that subjective sense.

I have to have objective parameters to make sure that we're moving in the right direction, and I will begin to delineate the subjective parameters: some that the ministry has, and I might want to put a different focus or emphasis on those; some that I have that aren't part of the mix. But I want to emphasize that what parents and students say to me when I travel around the province is critical. They will have more impact on my thinking than any other stakeholder interest in the system. I have always made it a practice to be out there doing that, and I'll do that. So that's that.

With regard to science and math, I have no explanation as to why the information isn't out. During the course of your question, I asked staff to make sure that it is out with dispatch. So we'll get that information out.

[T. Stevenson in the chair.]

A. Sanders: The minister has very kindly provided information on a number of areas for me today, which is forthcoming. I would hope that would be expedited and could be received tomorrow, so that we can make closure on those areas that are not finished at this time and on which additional information is required.

I do have interest in the B.C. science and mathematics exams, in that a number of people have suggested to me that we have done very poorly and that our ministry is covering up poor performance by our students by not releasing these examinations. There is an addendum question that's important to me in terms of understanding the plasticity of education and how we change, in reference to finding out information from the studies we do. If it takes so long for us to provide the information to the public about how our students are doing, how does that provide a quick response, in that upon receipt of the information it would take somewhere between two and five years to implement some kind of final analysis or change in direction? Does the minister have any comments on that lag time and perhaps on how to change that?

Hon. M. Sihota: We also do other measurements within the province. I mean, the international math and science exam is not the only measurement. We do other measurements in the province to see how we're progressing; so we do have far better data. In my view, it is a valid point that we need to get this information out in a more sensible time frame, and I accept that point. It's a very valid point.

A. Sanders: The importance of that point which the minister has raised.... We are in a global economy, and these young people who do train in British Columbia do not compete in British Columbia; they in fact compete in the world.

In a 1994 study from a Michigan university, for example, the average time of math study for a Canadian student was 2.5 hours a week; whereas in China it was 6.7 hours, and in Korea and Taiwan, 5.1 hours. Whether that's right or wrong is irrelevant. What I'm more interested in is in having some kind of expedited results of the math test to see where we stand, based on what we're putting into our program.

What I was interested in, in reference to these kinds of quality-education issues, was: what kind of mechanisms do we have for fast-tracking changes that are necessary in the system? As many of us who taught in the seventies have seen, there have been very large amounts of change. We've gone from one set of curriculum and projects in education to a second. We've moved from Education 2000 to something new. What kind of stability will there be over the next two years, in terms of education plans and correction of deficiencies?

Hon. M. Sihota: So that the hon. member understands, we have brought forward a substantial change in the curriculum over the last two years, to the point where, quite frankly, we're being criticized for the pace with which we brought about change to the curriculum to respond to the changes in our global economy. Everywhere I go in the province I'm told by trustees, teachers and even parents that the pace of change in the curriculum to try to achieve this relevance that I think we're both speaking of is happening too quickly. So I'm going to slow it down in terms of stability. There will be far more stability in that context in the system; there are no two ways about that.

I wouldn't want to leave anybody with the impression that the system has not tried to reconfigure itself to deal with the economy as it's evolving. As I said earlier, this is the best investment we can make in people, and we have to make sure that the system is relevant. That's a driving variable.

A. Sanders: I'd like to, instead of this broad focus on the quality of education in B.C., look specifically at reading and writing achievement. If we look at the last period, '93 to '94, I believe the statistics show that 20 percent of British Columbia students did not meet basic reading and writing expectations. These are the expectations of comprehension, sentence structure and grammatical correctness -- I hope that's grammatically correct. What is the ministry doing to rectify what many consider a serious problem?

Hon. M. Sihota: Interestingly enough, those numbers are very consistent with the pattern right across the country. I say that just to put them into some perspective. It's not as if British Columbia is in any way materially worse in the delivery of these programs than any other province in the country. It seems to me that obviously all of us would intellectually take the view that that number should be zero, not 20 or 30 percent. And obviously, to the degree to which we can bring that down, we should. At this point I don't have a solution that I can offer except that I can tell the hon. member that those kinds of statistics trouble me, as well, and that they should trouble us as a nation.

Now, one of the things we are also trying to do is to make sure that these people get the kind of training they require at some point in their lives. That's why we've moved to the system that we have now in terms of lifelong learning. Youth Works is in part designed to deal with some of these deficiencies, if I can put it that way, as well as with our ability to offer 

[ Page 1481 ]

some of the programming required to offset these concerns to people after they've left school, after hours, or through our colleges or other institutes.

A. Sanders: Looking at the annual report of '93-94 -- again mentioning that I don't have a '94-95 report and certainly not a '95-96; looking at the last available report -- students were taking longer to graduate.

The hon. minister is short of oxygen. I see him yawning as I am talking here.

What I am interested in specifically is: do we have any idea why people are taking longer to graduate in British Columbia?

Hon. M. Sihota: I think it may be because some people who have left the system are coming back into the system, and that may be picked up in the numbers that you are looking at. That would be my guess.

A. Sanders: I would be interested in the actual objective criteria there. In '93-94, of those who came into grade 12 at the beginning of the year, 72 percent graduated. They actually finished grade 12, whereas earlier it was a lower percentage.

The other area that's concerning me -- and I wonder especially if the staff have some enlightenment in this area -- is computer science 11. It has steadily declined since 1989-90, to a low of 16 percent enrolment in '93-94. To me, this is an integral part of education for youth who are graduating from our school system at this time. What does this figure mean from an objective point of view?

Hon. M. Sihota: What that means is that we have tried to integrate technology into other programs and throughout the entirety of the system. That may cause students to be less interested in the specific class, because those technological skills and that knowledge base are something that students can capture in other courses.

A. Sanders: Do we actually have any way of quantifying that? For example, there are potentially other scenarios. It could be that young people are taking computer courses elsewhere in the system. It could be that we are educating so many of our senior students in portables that they don't have the access to computer skills and thereby do not actually get to participate in the computer technology.

The concern is the statistic that 62 percent of students felt schools didn't teach computer skills well. What I am looking for is: what objective findings do we have to say that those young people are getting computer skills in courses other than computer science 11 -- which may well be the case? What other ways are we able to quantify that so that we know that those people are in fact leaving the system trained, as opposed to presupposing that they have gotten the skills in another course?

Hon. M. Sihota: Well, we can get you the information that shows the number of hours a student will spend in front of this kind of technology, learning those technological skills outside of the computer science 11 program.

For example, my son, who is going to school, really, for the first time now -- he did kindergarten last year and he's doing grade 1 -- and my daughter, who is in grade 4.... I am actually impressed with the amount of time they've spent in front of computers -- in his case, in the first year, and in her case, in the first four years of their program. This is not a school that's particularly endowed with computers. It offers the programs.... I'm amazed, and very impressed as a parent, as to the degree that that's available. Now, you can't take a specific situation and generalize it; I know that. But I'm just trying to give you another indication. When you see it as a parent, in the kindergarten and grades 1, 2, 3 and 4 levels, you know that they're not waiting until computer science 11 to begin to pick up these skills -- and that's good.

[8:15]

A. Sanders: Again, some hard data in that area would be very encouraging.

Hon. M. Sihota: We'll get you that.

A. Sanders: Another area that to me is very important and that I feel is going by the wayside is the physical education requirement after grade 10. My understanding now, and this has changed again since my original involvement in the school system, is that after grade 10, physical education is no longer required. Is this in fact the case in B.C. schools?

Hon. M. Sihota: That is my understanding, as well.

A. Sanders: My second understanding is that statistically, physical education can be achieved in grades 11 and 12 through elective courses, but students aren't doing those, either. In fact, it's declined 30 percent from the year previous to when the '93-94 report was written. Do we have an explanation for that significant decline?

Hon. M. Sihota: My sense of it is that students -- certainly the ones I've talked to as I make my way around the province -- are far more concerned about the relevance of their training, as the member pointed out earlier on, with regard to academic, vocational and technical learning. I think they're more obsessed than when I was at school about getting a job. So some of the options fall by the wayside.

Also, I think it's fair to say that students do a lot of that stuff on an extracurricular basis -- I think more than was the case a couple decades ago -- and that's encouraging. To let the hon. member know, if I may, one of the things I've asked staff to do is to report back to me on the thing that actually bothers me more than physical education: their awareness around health and nutrition. It's amazing. You know, I'll often go to a school and I'll ask kids: "Tell me what your gall bladder is." You might find one kid who could tell you in a year of asking that question. So just in terms of nutrition and.... The Minister of Transportation is wondering....

Interjection.

Hon. M. Sihota: She lost hers a long time ago, so she knows exactly where it is.

I've asked staff to give me some ideas on what more we can do in terms of health and nutritional information. In my view, there's an unsatisfactory lack of knowledge around those areas. There are areas where I think we could all agree that you'd like to see them do more.

But students do want to make some choices. My observation has been that, given their concern about what may happen to them from a vocational point of view when they leave school, they're very much inclined now to reject options like physical education and take options like computer science.

[ Page 1482 ]

A. Sanders: I think the importance of this issue cannot be underrated. As a health practitioner and former teacher, I can tell you that one of the primary conditions I see in elementary children now -- and most definitely in adolescents, specifically in adolescent females -- quite often is disorders related to obesity and, through the spectrum, to eating disorders. The concomitant health risks that come with those disorders start with smoking to keep weight down, for example; concomitant diabetes; poor self-esteem; and other lifelong health risks such as heart disease and stroke that come from the use of substances to control weight or the onset of obesity. They could all be controlled to a larger extent by some institution of daily physical education, as opposed to where, once you get to grade 10, when your body stops growing, you also stop playing or competing or doing physical activity of whatever kind.

I think that career choices are important for many young people, but we need to avoid nailing them into little boxes so tightly that they don't have any room to move. In fact, from my daily observations in the medical office, for kids in high school, most of their issues relate to self-esteem: how they see themselves, how they're presented, how much they weigh, what they look like and how they look to their peers. I think that not only from a health point of view, and to keep our health care system in order and have reasonable funding for it, but also in terms of avoiding cigarette-smoking and other things, we would be well advised to revisit that old issue of looking at PE for all of our children and keeping them active.

For example, in the school where my children go, kids have PE once a week; that is the amount of gym time these children are able to have. They make up for that by going cross-country skiing and doing other sporadic activities that depend on the season, but those kids are sitting in a desk from kindergarten to grade 7, five days a week, with one hour of PE per week. I don't think that's appropriate for learning. If I wanted my children to learn the best way, I'd have them active every day. That's my soapbox.

I'm interested in school completion rates. Completion rates were declining, with student enrolment in grade 12; on September 30, they were dropping. We talked about the different ways that these trends could show increased part-time students and an increase in older returning students. In terms of the curriculum for this kind of change in how we're seeing student enrolment in senior grades, are there curriculum reforms that have been designed to meet the needs of part-time students and older returning students, or are we giving them the same curriculum that we give children who go from K to 12?

Hon. M. Sihota: The curriculum and education outcomes are the same, and to some degree you need that for transferability into colleges and universities. However, the focus has -- correctly, in my view -- been on being far more flexible in terms of access. So there's far greater opportunity to access the system at just about any point of entry, in order to get that knowledge base.

I'm not going to let the comments about physical education pass without getting onto that same soapbox. I agree and disagree with the comments the hon. member made. Look, I don't have a problem -- in fact, I'm an advocate of.... I'd like to see more physical education, but I also understand why kids make the choices they make in terms of wanting the academic courses that are there. I want to make a number of points. I think that physical education clearly does assist in self-esteem, and there's a lot of leadership and team skills that people can pick up by being involved in that kind of activity. I know that my own experience has been such that that's the case.

Where I disagree is that I don't think they would stop showing up at doctors' offices if they just did more physical education. I think kids lack basic nutritional and health knowledge. I'm just amazed at how naïve we are, by the time we leave grade 12, about how our bodies function. That concerns me. I'm not a physician, so maybe I look at it from a different point of view, but I have to say that it concerns me more than the amount of time or opportunities available for physical education.

The other point I want to make -- and it's a different soapbox, but I think it's an important point to make -- is that I believe that there are some real responsibilities here for parents. Sometimes we put too much onto the school system. We all have responsibilities as parents. I think teachers spend five, maybe six, hours a day with kids, which leaves a lot of other time for parents to pick up some responsibilities. I think parents have an obligation to see that their children are physically active and involved in opportunities that allow them to get a physical education in a different context. I think that's very important. I just don't think that that happens to the degree that it should. Sometimes we can't lay these deficiencies exclusively at the feet of the school system.

Now, I don't think the hon. member is being that black-and-white, but I just wanted to have a chance to comment on the soapbox. The answer to your question is that we do measure learning outcomes, and we do provide for flexible access to the system.

A. Sanders: I do appreciate the minister's comments on these points. My rebuttal would be that although children do require nutrition and health advice, we are talking about children who are at an age where they don't want their parents giving them organized activity. They're 14, 15 or 16. They're not going to be going out and doing aerobics with their mother. They are going to require something within the integrated context of school, or it's not going to happen. I think most of us who have teenagers at home will concur.

I'm interested in touching a bit on the CAPP program, which the minister has alluded to. My understanding is the career program requires 100 hours of work experience, and that it is available in British Columbia schools. First of all, is that the correct information? And second, how many schools are participating in the CAPP program?

Hon. M. Sihota: The information is wrong. It's 30 hours, not 100, and they're all participating.

A. Sanders: I had trouble hearing that. Did the minister say that all schools are participating -- so 100 percent of senior secondary schools are participating in '94-95?

Hon. M. Sihota: It's not 100 percent, only in the sense that there hasn't yet been full implementation.

A. Sanders: What is the cost of the CAPP program in the '95-96 estimates? Where do I find it, first of all? Secondly, what is the incremental change for the '96-97 year?

Hon. M. Sihota: It's not broken out. It's part of the block grants, so we can't break it out that way for you.

[ Page 1483 ]

A. Sanders: So this would occur, hon. minister, under the $5,000, or whatever it is, per student.

I have some questions specifically with respect to the ministry. In the Ministry of Education there have been some substantive changes. Whereas in the past we were talking about elementary and post-secondary education, now we have skills development under the umbrella that is Education. I have some questions about this particular change in the structure. How many of the full-time-equivalents that have been added to the ministry as per the estimates are specifically allocated for Youth Works, how many are allocated for Welfare to Work, and so on?

Hon. M. Sihota: We'll have to get that information. That's more of a technical question.

A. Sanders: Again with the ministry, looking at the number of FTEs.... From the breakdown of the ministerial area, how many assistant deputy minister positions are here?

[8:30]

Hon. M. Sihota: Five.

A. Sanders: And how many deputy ministers?

Hon. M. Sihota: One in Education.

A. Sanders: How many deputy ministers have been in the Ministry of Education in the year 1996?

Hon. M. Sihota: Three.

A. Sanders: That's almost more than the number of months, hon. Chair. Could the minister give me some indication as to why there is such a large turnover in the deputy minister position?

Hon. M. Sihota: Well, sometimes people want to move on to other functions within government; sometimes they're reassigned to other responsibilities.

[G. Brewin in the chair.]

A. Sanders: Again, for the interest of the critic, in general, are the deputy ministers who come into the Ministry of Education individuals with skills in administration, or do they concurrently have skills in education?

Hon. M. Sihota: I think generally what we look for is people who have good skills in policy development and administration. Typically what one looks for is someone who has a good handle on understanding policy and can make sure the ministry is administered in an efficient way. It's not an easy job, but that's basically what we often look at.

A. Sanders: Do we produce these people in British Columbia? Do they come from our school system? Do we have the opportunity to have them here?

Hon. M. Sihota: Yes, there are people from our school system who work their way up the system and bring good field experience to the ministry.

A. Sanders: Is our deputy minister today from British Columbia?

Hon. M. Sihota: I don't know what you mean by that. He is a resident of British Columbia now. He has had a career in the civil service. If you want his CV, we can send you a copy of it.

A. Sanders: Specifically, what I am fishing for is this: there is some concern that many of our deputy ministers come from other NDP provinces, and not specifically from British Columbia. I was interested in the minister's opinion of whether that statement was correct or whether most of our Deputy Ministers of Education were products of the B.C. system.

Hon. M. Sihota: My current deputy worked in Saskatchewan for the Devine government.

A. Sanders: I would like to see, in the next tenure of this ministry, some stability within the Ministry of Education. I think that's how we get things done. Three deputy ministers within a period of less than half a year is excessive, and it provides a lack of continuity. People from Saskatchewan, such as myself, I will raise no further points about.

Other things that I am interested in have to do with examination-marking. This has been a very large problem this year, in that we've changed the way things have been done. Every time you change or alter the way things are done, it creates a certain amount of consternation. What is this minister's feeling about the philosophy of testing? Is this a minister who believes we should be testing more than we are now? Should we be testing less? What is the minister's mandate in this area?

Hon. M. Sihota: My own view is that testing is a necessary and essential part of the school system. I think it teaches students many skills. Just knowing how to deal with pressure, and how to prepare, and the focus and discipline that comes from writing tests is very important. We do live in a competitive world, and there's some sense of competition that comes from testing, which, again, is relevant.

I am reasonably satisfied with the level of testing within the system now. I would not want to reduce the amount of testing within the system.

A. Sanders: The corollary to that question would be: will this minister be increasing the amount of testing, or will it be staying the same?

Hon. M. Sihota: The jury is out on that matter.

A. Sanders: Do you place value on professionals teaching a subject and in addition marking grade 12 provincial exams? In other words, should those who teach the course mark the exams?

Hon. M. Sihota: You would like to see many people who are involved in classroom instruction do the marking of the exams. This year we have had some problems, in light of determinations that were made as a result of issues raised in this House.

[ Page 1484 ]

A. Sanders: We did discuss this area somewhat toward the beginning of the session. For those who are not aware, there were a number of individuals -- graduate students and professors -- marking examinations, because we were lacking the actual professional staff who taught the course to do that. There were many individuals who were involved in the provincial exam-marking process who were very concerned about the results of examinations and about whether examination-marking by people other than those who taught the classroom group would produce realistic examination marks on which to base grade 12 performance, especially if it was a provincial or scholarship exam. My question to the minister, relating to the just-previously-passed period of time, is: how many graduate students or professors were used in the marking of provincial exams in English in Victoria?

Hon. M. Sihota: Let's deal with this issue in some sequence. Some time ago, the opposition and others were critical of the fact that this government was bringing people down to Victoria to mark exams. The opposition at the time took the view with Minister Charbonneau that there had to be a more efficient way of doing it. As a result of those demands, the government made some changes and went to the structure that we went to this year to see if it was more efficient, cheaper and, from a quality point of view, the same. That's why this year it's what it is.

This year in biology, 40 people were required to mark. Not one of the individuals that did the marking was not teaching the subject. In chemistry, 41 of the 41 markers that were required were individuals who were teaching the subject. In communications, 33 out of 33 were people who were teaching the subject. In French language, there was one individual out of 13 that was not teaching the subject. In French, 36 out of 36 were people who were teaching the subject; in geography, 39 out of 39; in geology, eight out of eight; in German, five out of five. In history, there was one person. We needed 48 markers; one of the individuals who did the marking did not teach the subject. In Japanese, ten out of ten were people who actually taught the subject. In Latin, there was one person who did not teach the subject but did marking. In literature, 39 out of 39 were people who taught the subject. In mathematics, six people out of the 55 that were required were people who did not teach the subject. In physics, 39 out of 39 were people who taught the subject. In Spanish, eight out of eight were people who taught the subject. The major deviations were in Mandarin, where ten of the 17 were individuals who did not teach the subject; and in English, 20 out of 129 were people who did not teach the subject.

A. Sanders: Do those numbers reflect the four designated regional marking areas -- Kelowna, Vancouver, Victoria and Prince George -- or just the Victoria area?

Hon. M. Sihota: It is the total. Therefore, of the cumulative total that we required originally.... We required 562 markers, of which we had 543; only 39 were people who did not teach in that subject.

A. Sanders: That information is of great help. What has happened, in the change over this year in the marking circumstance, is that this government did not issue T4 slips for teachers who were marking exams over the past two years. Revenue Canada subsequently issued slips to say that they required taxation for income earned and that this made the remuneration less suitable to the teachers, in terms of their hourly rate or what they anticipated based on their daily contract in their own district. If this was the case and we were looking to decrease the amount of money spent on marking....

One of the very experienced markers, who has written to you as well as to the Times Colonist, a Mr. Derek Peach, suggested that if anyone whose university application required a certain score was displeased with their mark -- if they found that this mark had been the product of a novice marker recording their test result -- they would have reason to request a re-mark, or to request some grievance. What does the minister think about this kind of statement from one of our experienced markers?

Hon. M. Sihota: I think I should caution you that just one letter to the editor does not a situation or a practice make; people write letters to the editor all the time. I don't think the opposition should simply rely on one letter to the editor. The fact of the matter is, as I've laid it out, that as a result of these changes, we've saved about $159,000.

A. Sanders: I was looking more specifically from a theoretical point of view rather than from one of a practical, single case. I don't disagree that one case does not make an example. However, should we have difficulty.... I think this is the turning point where we're going to have more difficulty finding provincial markers. I think teachers are recognizing that this is a good learning experience for them in terms of professional development -- coming to Victoria. If we have the same or more degree of difficulty next year finding markers because we're paying a $100 honorarium that now has a T4 slip attached to it, what are we going to do this time next year? It's not that far away. Specifically, we're going to be having exams halfway through the year.

Hon. M. Sihota: This is perplexing, because the opposition creamed this government -- or tried to cream the government -- for the way in which things were done, without making the very points the member is making. It's ironic, because at the time I think the minister made many of the arguments the hon. member is making -- and I realize that elections happen, and people don't have a corporate memory of what previous critics might have said. Having said that, the facts are that this year we did quite well. But I am also aware of this concern, and I will.... It's under review, but at this point I'm not about to make any determinations, except to say that it's under review. I may not change it.

There are many questions I want to ask about the effectiveness this year versus the effectiveness last year. We've just come out of a system this year, and if I'm going to go back to the old system, then I'm going to have to be confident that there are compelling policy reasons for doing it. At this point, we've just gone through this exercise this year, so now we'll go and compare apples to apples. I'll look at those apples and make some decisions.

A. Sanders: As alluded to by the minister, those who do not know history are condemned to repeat it. Many of us who went into this school system in one set of organized ways are now finding that that's back. First it's whole language; now it's phonics; now grammar is back. I think that's part of the perpetuity of education and part of the frustration of being in government -- you will see old ideas recycled and coming back.

I'd like to touch a little bit on special programs. These relate more to the social issues affecting schools. Specifically, in terms of special programs, could the minister give me the figure for the total budget in the estimates for 1996-97?

[ Page 1485 ]

[8:45]

Hon. M. Sihota: I assume that the hon. member is talking about school meals and inner-city programs, not special needs. The school meals program is $14.8 million; for inner-city schools, it's $5.5 million.

A. Sanders: In terms of the $5.5 million for the school meals program, my question to the minister would be: from an objective point of view, how are we evaluating how that is working in terms of its outcome?

Hon. M. Sihota: We do evaluations of those programs. We've done two of them. I'm quite happy to have staff make them available to the hon. member if she's interested. She can see the objective indices that we apply and the evaluations that occur, and can respond back to me on that. If she wishes, we'll make that information available.

A. Sanders: I'd appreciate getting that information, and forthcoming from that, if there are any questions, I will pose them as the session comes to closure.

Again, excluding those special programs and looking at English as a second language, in 1993-94 we had 13.9 percent of British Columbia students with English as a second language. What is the figure for 1996-97 as a comparative percentile?

Hon. M. Sihota: It is 12 percent.

A. Sanders: Subsequent to that question, if it's gone from 13.9 percent in 1993-94 to 12 percent in 1996-97, what percentage of the total student population in British Columbia is enrolled in ESL? My understanding is that it was an increase of 6.6 percent from '91 to '94. Where has that percentile gone, in terms of the total population?

Hon. M. Sihota: The 12 percent was the total population.

A. Sanders: What is the 1996-97 funding total for ESL? It is not broken down in the votes. My understanding was that it was $58.2 million for 1993-94. What is it for this estimate?

Hon. M. Sihota: It is $68.9 million.

A. Sanders: The minister loves those short, snappy answers.

Following on ESL, what is the student-teacher ratio in ESL classes?

Hon. M. Sihota: Actually, we don't set those ratios; the school districts do. I don't have any numbers that would speak to what those ratios are.

A. Sanders: I'd appreciate getting those ratios, but in a generalized way. Are they anticipated to be the same as the regular classroom, or are they substantially different?

Hon. M. Sihota: Well, that all depends on the level of the ESL student as they enter. If the student is virtually incapable of speaking in English, let's say, and requires heavy involvement, it will be in a smaller class. That's as opposed to someone who has good aptitude but just needs some fine-tuning, which would be done in a larger class.

A. Sanders: I would appreciate any information I can have from staff.

I would like to talk a bit about special education -- education for the gifted or the disabled, as opposed to special projects. What percentage of the enrolment in public schools requires special education?

Hon. M. Sihota: It's approximately 11 percent.

A. Sanders: Again, for my understanding, is the Jericho school under this ministry's mandate?

Hon. M. Sihota: Only the educational component is.

A. Sanders: My understanding is that under special education in the Ministry of Education, we have gender equity programs. Could the minister tell me how many staff, how many FTEs, are employed in gender equity programs?

Hon. M. Sihota: It's about half an FTE.

A. Sanders: In 1992-93, 36 equity grants were awarded to 18 schools and 13 educational organizations. Could the minister give me an example of what such a program would be?

Hon. M. Sihota: School districts would put forward proposals to increase participation of young women in non-traditional courses, for example.

A. Sanders: What would be the typical cost for such a program to be instituted?

Hon. M. Sihota: The grants are pretty small; they're in the neighbourhood of $5,000 or $10,000 each.

A. Sanders: I'm quite interested in these programs. How would these programs delineate identifiable change, so that when all is said and done and the dust has settled, you would know that they had made any difference? What would be the quantifiable aspects of such a program?

Hon. M. Sihota: I don't think it's easy to quantify. There are just so many influences on the human being; these programs can influence the thought process, perhaps, for some time, and the participation rate. But whether they ultimately have a long-lasting effect, I don't know. I think it would be hard to quantify that from a sociological point of view. We don't track a young woman all the way through the system to make sure that she makes certain career choices. You don't know where to do it: do you take it to grade 12, or to what post-secondary institution program they take, or to employment, or to success in employment, or to equal pay for the kind of work -- engineering, let's say? I don't know where you'd stop doing it. We are trying to change behaviour and influence thinking.

A. Sanders: I think this is an important point, in that if we're looking at 36 equity grants at $10,000 each -- $360,000 -- and we cannot identify any changes and we can't measure the outcome, I think we need to have something concrete that would provide a little bit more accountability to the taxpayer. Again, I would be interested if staff could provide me with one such equity program so that I could perhaps have some idea about what we're talking about here. It's very unclear.

Interestingly enough, in the report by this ministry, when they surveyed grade 12 females, they achieved better grades 

[ Page 1486 ]

than males in most subjects. I was wondering where the gender equity initiatives were and whether they were for the wrong gender, in order to bring our grade 12 boys up to equity with the young women.

Something along the lines, again, of special education: how many students in B.C. are involved in distance education in 1996-97?

Hon. M. Sihota: There are 5,900.

A. Sanders: Along the same lines, I find from my own constituency and from the parents I see in my medical practice that more and more children who do not live in rural environments are being home-schooled. How many students are being educated in a home schooling program in British Columbia in '96-97?

Hon. M. Sihota: Less than 5,000.

A. Sanders: From the annual report, the enrolment had increased 3 percent between '93 and '91. This number of children seems to be increasing yearly. In the opinion of the minister, what would be motivating parents to provide home schooling for children when public schools are accessible, within walking distance?

Hon. M. Sihota: From the parents that I've talked to, it varies. It's a lifestyle choice. It always goes down to lifestyle and social influences, and these are individual parenting decisions. I don't take it as a comment on confidence or the lack thereof in our system -- more a reflection of lifestyle issues, changes and desires that parents have.

A. Sanders: I have some very straightforward questions so I can peruse the numbers in the estimates a little more clearly. How many students are enrolled in British Columbia's schools in '95-96?

Hon. M. Sihota: It was 591,000.

A. Sanders: What is the change from the '95-96 figure to the anticipated estimates for '96-97?

Hon. M. Sihota: Approximately 10,000.

A. Sanders: What percentage of student enrolment is in the actual, regular, public school?

Hon. M. Sihota: Put it another way. I don't know what you mean by regular, but they include home schooling. Are you taking that out, or are you just talking about private, or are you just asking how many kids are in the independent schools?

A. Sanders: The percentage.

Hon. M. Sihota: In the neighbourhood of 88 to 89 percent.

A. Sanders: Of that 88 percent that are in the regular public schools, not educated elsewhere or home-schooled, etc.... What percentage of those 591,000 children, with a 10,000 increase for this year, are in the elementary category, and what percentage are in the secondary category?

[9:00]

Hon. M. Sihota: Sixty percent are in elementary.

A. Sanders: What percentage of our students now, in the '96-97 projections, are being educated in independent schools?

Hon. M. Sihota: Eight percent.

A. Sanders: In terms of teachers, what is the number of full-time-equivalent teachers in British Columbia in the '96-97 year?

Hon. M. Sihota: Thirty-four thousand.

A. Sanders: What is the average age of educators in the '96-97 year?

Hon. M. Sihota: Forty-three years.

A. Sanders: It seems that the average age of our educators is increasing quite significantly. I can certainly remember a time when the average age in a school or a constituency was a good ten years less. Does this present any concern for the Ministry of Education?

Hon. M. Sihota: Yes. Some districts have an older population, even, than the average, so it does present a concern. We're looking at programs like early retirement to deal with some aspects of the problem -- to allow younger people to come into the system, for example.

A. Sanders: It would be of interest to me what percentile of areas.... I know that in my own area, 43 does reflect very accurately the average age of the educator. Is this something that predominates in certain districts, or is it pretty well spread across the board in terms of age?

Hon. M. Sihota: It's spread out across the system, but there are some districts -- for example, like Victoria -- where you have a higher number. That needs to be dealt with.

A. Sanders: Specifically, looking at teachers, we talked a bit before about whether there was an interim agreement or whether there was provincial bargaining, and so on. Touching back on that a little bit in terms of teachers, do they have a code of ethics? If so, how does that work? And if not, why not?

Hon. M. Sihota: They have a code of ethics, and it's administered by the College of Teachers.

A. Sanders: What is the dismissal rate for teachers within our education system?

Hon. M. Sihota: That information is individualized in different districts; we don't have that information. If you're saying dismissal because of conduct by the College of Teachers, that's one thing; if you're talking about.... We'll get that information for you.

A. Sanders: Again, just for my education, in terms of an individual brought before their own college for correction of a behaviour considered unethical, what is the course of action that occurs within...?? Is it something that occurs at the district level? Is it within the ministry? How does that work?

[ Page 1487 ]

Hon. M. Sihota: The college is an independent, self-regulating professional agency, so it wouldn't be done at the district level. They'll do it at the provincial level, as a college.

A. Sanders: In terms of funding schools, what percentage of the Education budget is primarily salaries and benefits?

Hon. M. Sihota: In the school districts, it's 89 percent.

A. Sanders: I'm interested, in that the report on 1995-96 funding to schools.... The percentage quoted in one of the ministry's documents was 93 percent. I'm just wondering if that is a misinterpretation on my part.

Interjections.

Hon. M. Sihota: I just want hon. members to know, because there are new members in the House who haven't been here before, that earlier on I said that if anyone heckled, they would lose all capital funding for their constituency. I'm going to extend that to any unnecessary and particularly provocative speeches.

The hon. member may be referring to the ministry, as opposed to school districts. That may be the reason for the discrepancy.

A. Sanders: I will not be heckling, I can see.

I'm interested in the funding to technology, specifically with regard to the principle of equity. I'm interested in knowing what this minister feels could be a guiding principle to bring equitable technology to all districts in British Columbia.

Hon. M. Sihota: Those comments about heckling weren't directed towards you, hon. member. They were directed towards the two gentlemen who just left.

We're trying to do it through the $10 million technological agreement.

K. Whittred: I really only have one question, and then I'll pass this on to a colleague. Earlier in the evening there was some discussion surrounding corporate partnerships and that sort of thing. It occurred to me at the time that one thing that is even more insidious, I think, is that with the advent of various technologies in curriculum application and the effect they have on the culture -- I'm thinking particularly of CD-ROMs, videos, the Internet and the amount of money that goes out of Canada to American television stations, for example, to pay for taping rights for KCTS-9, the Knowledge Network.... It's not the Knowledge Network; it's the other one. It has escaped me for the moment; it's channel 17 at home.

An Hon. Member: PBS?

K. Whittred: It's not PBS.

Anyway, taping rights -- schools tape all the time.

An Hon. Member: It's Arts and Entertainment.

K. Whittred: Arts and Entertainment, that's right.

My question is: the ministry has obviously given some thought to the nature of problems surrounding private partnerships in education. I'm wondering, though, what the ministry has thought of in this area. My experience as a classroom teacher is such that I don't think anybody has thought of it at all.

Hon. M. Sihota: I want to make sure that I understand the question. You're talking about the commercial application of knowledge-based education and us taking it, as a province, and utilizing it in the classroom, or someone else taking our information and putting it on air through, let's say, Arts and Entertainment?

K. Whittred: I'm speaking of the use of these applications in instruction. The Internet is one. There are all manner of CD-ROMs. Many of them commercially produced; many of them are in fact produced by foreign countries. Similarly, this relates to videos. There are many, many videos which are taped off-air. I am not for a moment presupposing that we're going to have any massive kind of control over this; I am simply asking whether the ministry has given any thought, or very much thought, to the direction of this kind of instruction.

Hon. M. Sihota: I can't say that we have.

R. Masi: I'd like to get back to the average age of educators, for obvious reasons. In my experience, I've noticed a startling decline -- and this is generalizing -- in the effectiveness of many teachers as they hit their fifties. My feeling is that the ministry could be looking at some incentive programs in order to alleviate or perhaps make more flexible the position of teachers who have been in the field 20 to 25 years. Is there any initiative coming up in regard to this?

Hon. M. Sihota: Yes. We are looking at a number of options. I can't tell you exactly what option we'll select, but we are doing that. Of course, in the collective agreement that was executed, there is about $10 million for this purpose, as well.

R. Masi: I'm certainly glad to hear that, because I think it is a serious situation. It would certainly do away with some of the insurance situations where people who are off on stress leave aren't really that stressed but perhaps need some help.

I wonder if the ministry has considered more flexible scheduling in schools that would allow more positioning in terms of free time for teachers during the day and during the week. It's very much like the Legislature: when the bell rings, you jump. I'm not sure this is an appropriate way to live or to take part in a profession.

I notice you commented on year-round schooling, and you've commented on extended days. Is the ministry seriously looking at this and at putting some motivational teeth into it? I realize that these things are not new. They've been put forward over the last ten to 15 years, but without some motivational approach to it by the ministry, districts or schools don't bite.

Hon. M. Sihota: Some of us jump to bells a lot quicker than others do in this place.

Yes, we are looking at some of those issues. For example, on the allocation of capital we will give a higher priority to funding for something like a year-round school or a school that makes some provision for greater flexibility. We use capital as a variable. One of the reasons we're doing that is that 

[ Page 1488 ]

districts themselves have been somewhat more reluctant than the ministry. We've been more proactive in moving on these types of issues. By tying some of these things, let's say, to year-round schooling or better utilization of school facilities, in order to provide some flexibility models, they'll get a higher priority.

[9:15]

R. Masi: Further, on the same theme, it's my understanding that some of the difficulties that come up relative to even a simple schedule like the semester can be more or less inhibited by the teachers' contracts. This, of course, gets into the whole realm of contracting, and working and learning conditions, which I alluded to before in terms of making progress in developing these changes. I guess what I'm asking here is: how are you going to deal with the difficulties faced in terms of union contracts?

Hon. M. Sihota: Through the collective bargaining process, if properly driven, I am confident that one can achieve some creative outcomes. That's been my experience, but it needs to be driven.

A. Sanders: I'd like to talk about amalgamation, which is something I think many of the constituencies will want to address -- specifically, the interests in their own area. But I would like to look it over in a broader context, in terms of the correspondence I've received with respect to this issue.

My understanding was that there was a bulletin that was to be put out to keep boards abreast of circumstances as they evolved in the amalgamation process. This was originally, I understand, to be a joint publication between the ministry and the B.C. School Trustees Association. One opinion has been that the ministry did not make a timely effort to get their part of the job done, and it was taken over by the B.C. School Trustees Association for want of communication on the issue of amalgamation. What are the minister's comments with respect to this? Was this something that the areas were not kept abreast of, or is this something that has been misinterpreted?

Hon. M. Sihota: I think the member's information is stale-dated. I have sent out a letter to districts, my deputy has sent a letter to districts, and a meeting has been arranged for trustees this month.

A. Sanders: Does the ministry appreciate having a sensitivity to the amalgamation process?

Hon. M. Sihota: Yes.

A. Sanders: Could the minister elaborate on how he perceives that sensitivity and how he feels the response to the sensitivity would best be deployed?

Hon. M. Sihota: Well, the sensitivities, of course, centre around people's desire to keep the system as it was. That is no longer the case. It will now be changed, and we will proceed with amalgamation. I know people have strong feelings about this issue, but we've made our decision. We have facilitators that are working with the ministry who will involve themselves both with districts that are amalgamated and those that are non-amalgamated, to achieve the efficiencies that we expect to achieve with the changes that we've made.

A. Sanders: Again, for the historical aspect, for my own edification.... The amalgamations of Chilliwack, Campbell River and Vancouver Island West were cancelled. Could the minister explain to this member why that was the case?

Hon. M. Sihota: Those decisions were made before I became minister, so I'm not too sure what thoughts rattled through the head of my predecessor. As I understand it, representations were made, and they made some determinations. But I didn't go back and ask my predecessor why. I just took the file as I found it.

A. Sanders: This is a point of interest to me, in that many districts, when bringing forth their case as to why they should or should not be amalgamated, will use as reference points those from the past who somehow managed to scoot under the bar and avoid the process of joining ranks with another geographical area. Would that information be available to me during the course of these estimates, so that I could procure it and try to make some sense of it?

Hon. M. Sihota: There are a number of issues: the representations from the committee that went across the province, as I recollect it, and concerns around aboriginal funding, which impacts on some of the districts that the hon. member referred to.

To be candid about it, I felt it was a decision that should have been made -- to amalgamate. Therefore, when I took over the portfolio, I didn't really want to revisit many of the decisions that were made. They were made, the verdict was in, and those districts all had an opportunity to have their say. The adjudicator at the time, who was my predecessor, made the determinations. I didn't want to revisit that issue. I just wanted to implement the decision that was made, given the time lines that were there, given the impending election in November. I just went ahead, so I can't help the hon. member too much there.

A. Sanders: Was there any political intent in ridings where amalgamation was curtailed, as opposed to those where it continued or proceeded forward?

Hon. M. Sihota: Not that I'm aware of.

A. Sanders: Is it possible that there was but the minister is not aware of it?

Hon. M. Sihota: I'd be surprised if those were the considerations.

A. Sanders: A number of districts have asked if there will be an appeal process for amalgamation. Does this minister have any intention of setting up such a process?

Hon. M. Sihota: None whatsoever. The decision is made and we're proceeding.

A. Sanders: My only concern, again trying to look at the big picture, is the finality of it. A number of districts have written letters. They are not my constituencies at all: Golden; Windermere; Kimberley -- an NDP riding, I understand; the area of school district 55, Burns Lake; school district 56, Nechako; the school district of Kitimat; and school district 21, Armstrong-Spallumcheen, amalgamating with Salmon Arm. Many of the districts that have written have presented quite extensive briefs on why it is not appropriate for their district to be amalgamated, discussing in many ways that in fact 

[ Page 1489 ]

amalgamation will cost them revenue due to melding contracts from different districts, the loss of federal revenue from enlarging the area, the moneys they get for aboriginal students, and severance packages -- not even including the additional $50 million that would go into the two-year agreement with the B.C. Teachers Federation.

My concern here, as someone looking from the outside, is that we are missing something. None of these areas said they would not restructure. In many of the reports they've suggested ways or mechanisms of how they would restructure, in order to integrate their focus with other things in their community, such as their hospitals, and so on. For them, that restructuring process would make much more sense than having a school district that was three hours in breadth, driving from one end to the other.

My concern in looking at the process of amalgamation is that I don't want to see us, in education, have another New Directions, where we started something in 1991 because, "This is what we're going to do, and we're going to put it through, and that's all there is to it," without some kind of mechanism to look at what the glitches in the system might be. This government is now changing gears with New Directions and looking at what is going wrong. There is something going wrong, and I have a feeling, using my retrospectoscope, that perhaps we'll look back on this in three or four years and say: "Maybe we should have read some of those reports. Maybe we should have looked at what some of those districts gave as options to the direct amalgamation of their area with another area." I'm looking for some feedback on the relevancy of perhaps opening up the circumstance a little bit, so that we might all learn something -- if there is something to be learned.

Hon. M. Sihota: When I get into a portfolio, everything is open for review, and when I got into this portfolio, this issue, in many ways, was open for review. It was open for review in terms of the status quo of 75. It was open for review in terms of bringing that number down to the 30-whatever-it-was that someone had originally suggested.

I asked staff about many of these issues. I flipped through many of these same letters -- read them. I wouldn't be standing here if I wasn't satisfied that the decision that was made was an appropriate decision. I'm satisfied that it is. I heard many arguments at the time as to why the sky was going to fall. Looking at it retrospectively, things tend to work out much better than people would have forecast -- normally. I anticipate that to be the case here.

There are no more appeals; there is no more re-examination. The decision is made; the letters are out; the boundaries are redrawn; the orders-in-council are filed. It's done, and it's time that people started now to do what the public wants -- namely, to find the efficiencies that are either accrued through amalgamation or that are in those that weren't amalgamated -- where people made the argument retrospectively that they could get the financial savings in another way. The job now is for them is to get those savings. We're determined to get those savings, because as I said earlier on, we're under fiscal pressure.

A. Sanders: Again, I need to expand, to expound. I need to do something more with this issue, because it is one that I think needs more dialogue. A typical letter that the hon. minister received -- July 26 -- which has been sent to myself as well as to Don Wright, Deputy Minister of Education, states.... I will paraphrase it, but again, I think it's important that it be included in the record:

"Dear Sir,
"We recently received a copy of the budget speech...?it was with amazement, though, that we read page 3: 'Listening to the People of B.C.... It states: 'Our commitment, clearly, is to listen to the people of B.C. We have promised to act on their priorities, to be guided by their concerns, to respond to their needs.' "

The writer then goes on to say that the ministry has listened to no less than 1,600 submissions from concerned parents, teachers, students, staff, communities and school board members regarding amalgamation of school districts.

"Your own restructuring team advised you not to amalgamate any school districts, as it was 'not in the best interest of students and would not achieve significant financial savings....' Our communities are opposed to the amalgamation, the loss of our local district...." They do not feel that you have listened to them or acted on their priorities. "Recently we, like you, have become aware of the exorbitant costs of joining existing local contracts -- in our case, well over a million dollars, and at an estimated cost of $11 million for the entire province. If you postpone these provisions until a provincial agreement is reached, you merely postpone the associated costs.

"New committees, task forces, forums and the Legislature are all adding to an expensive process, which could have been avoided. There are no savings in this process, yet you appear to push ahead regardless of what school districts want.

"You are not listening to the people of British Columbia. If you had, you would have called off the amalgamation process and announced a restructuring process that would truly save dollars while leaving local boundaries in place. You have, so far, only been guided by political concerns, not by a genuine caring for what happens in our schools, to our educational system or to our children."

This is signed by the chairperson of school district 21.

[9:30]

I have received a number of these letters. They all are pretty significant in terms of the concerns. Good arguments have been outlined. I feel that somewhere, some kind of hearing process for these people would go a long way toward making peace and would provide no conduit in the future for them to say "I told you so" to the government. That being as it may, I will let other people speak to those who are involved in those specific areas, as they will have much more interest in it, particularly, than me at this point.

I do have a question following from amalgamation going ahead, as this minister has said that it will. Is it legal -- from the sense of legality -- to have some trustees elected at large and others by ward?

Hon. M. Sihota: With regard to that letter and to comments that other members have, let me just put this on the record so they can refer to it in Hansard. The decision is made, and I'm not going to be swayed by any argument that's made in this chamber. People making the case again for districts who are unhappy will absolutely have no effect on me whatsoever, because the decision of this government has been made. We've gone past the decision stage into the implementation stage. I will be remarkably curt in dealing with any issues that any individual MLAs may want to canvass with regard to their situations in their own ridings.

I will also remind people -- so I'll put this on the record -- that both the opposition political party and our political party took the view that there ought to be amalgamation of school districts. I don't want to fuzzify that by saying that we all agreed on the boundaries as they are; I understand that there are distinctions. But in principle, there was an agreement in this House in terms of amalgamation, and I don't need to remind hon. members of that again -- and I won't, except to refer to this point in Hansard if people want to get into individual issues. It will have absolutely no impact on me whatsoever, whereas other comments made in this House with r

[ Page 1490 ]

egard to policy, policy changes and some of those things I have heard tonight clearly do have an impact on my thinking, because we're in a state of looking at policy options. But this one will have no impact whatsoever, because we have made the decision with regard to amalgamation.

I'm sorry, I forgot what the question was.

A. Sanders: I was specifically asking about trustees being elected at large versus by the ward system.

Hon. M. Sihota: The answer to that is: yes, we have that capacity, and we've prepared orders-in-council to allow for that to happen.

A. Sanders: Could the minister take a few minutes just to explain how he will make that legal, so that I understand it?

Hon. M. Sihota: Through an order-in-council passed by cabinet.

A. Sanders: I'm interested in whether the minister has read the PERC report.

Hon. M. Sihota: A summary.

A. Sanders: Briefly, what would be the minister's opinion of the findings of the PERC report?

Hon. M. Sihota: I thought they made some thoughtful suggestions, particularly as to how we can accrue some savings both through amalgamation and through the non-amalgamation process. As a consequence, I've directed districts -- for example, Saanich, Victoria and Sooke, which were not amalgamated -- to take up the recommendations of that report and to find savings, even though they weren't amalgamated, given some of the views that were articulated during that process.

A. Sanders: I believe the minister has answered my question. I was going to ask: if districts could demonstrate that amalgamation was not cost-effective, would the minister still force that through? And my understanding is: "Yes, that is the case." Is that the case?

Hon. M. Sihota: We're proceeding with amalgamation. We've heard the arguments as to why it can't be done and why it can be done. There are some who still want to continue that debate, and the time for the debate is over.

A. Sanders: My understanding of amalgamation is that two districts will combine -- I don't think there's anywhere that there are three districts -- and will get one base funding. Is this a correct interpretation?

Hon. M. Sihota: Yes.

A. Sanders: From the PERC report, the original savings that were to be realized by the amalgamation process were somewhere in the neighbourhood of $30 million. Is that, in fact, the correct figure?

Hon. M. Sihota: I just want to make sure that I understood the question on the base funding. They will get both. If there are two districts, they'll get both base fundings.

As to the amount of savings, I'm not going to be held to any figures, but I believe that we can come close to the targets we set for ourselves.

A. Sanders: Again, the PERC report had estimated that $30 million in savings would be accrued from the amalgamation of districts in B.C. Is that figure still the amount that this ministry hopes to realize from amalgamation?

Hon. M. Sihota: I think we can achieve those numbers, particularly if those districts that were not amalgamated pick up on the suggestions that were made as to how they can realize the savings. Remember, the objective of this exercise is to get more money into the classroom.

A. Sanders: My colleague from Okanagan-Boundary had alluded to what has been a very large concern for many districts: that under amalgamation, special education services would be incrementally weaned. In other words, they would, instead of two aliquots of special education funding, they would eventually lose one. The minister has made some comments about that, at least for the next year, not being the case. Just for the record, I do acknowledge that that has been the comment of the minister. Hopefully, that will remain the way it is over more than one year.

I would like to again direct the minister's attention to the amalgamation in the Ashcroft, Lytton and Lillooet area. Some of the correspondence I've received from members of that community, as well as from those involved in the boards of one or the other of the locations, have mentioned to me that, for the resultant board of nine, a request was made by one of the areas for the allocation of a board space solely for first nations. I wonder if the minister has comments on that.

Hon. M. Sihota: I don't think we're entitled to do that under the provisions of the act. We can't pass a regulation with regard to a specific group, like native people; we can only do it with regard to geographical areas.

A. Sanders: Going on with the theme of amalgamation, I'm interested in looking at districts that are forced to amalgamate and that have contracts that vary significantly between those two areas with respect to class-size language. Usually, when contracts are merged, the resultant contract will favour the better contract. In other words, if one contract has some aspects that are more favourable, those tend to be adopted, through a mediation process.

With one of the suggested amalgamations, the Salmon Arm-Armstrong merger, my understanding is that if the class-size language was deployed to the entire district, it would require 15 new teachers, one area of the amalgamation having quite different class-size language than the other area. The estimated cost of that additional number of teachers is over a million dollars. Kimberley, Golden and Windermere had done similar estimates for their mergers and had come up with $1.6 million. I would appreciate the minister's comments on the synthesis of this information from the school districts.

Hon. M. Sihota: This explains in part why I've proceeded with the decision, because those letters were written without the benefit of my letter. In my letter I pointed out that if an employee is covered by contract A in a merged district, and another one by contract B, then they are governed by the provisions within those contracts. You don't shift to one contract as opposed to another, depending on where your preferences lie. I've had discussions with the BCTF, and they concur

[ Page 1491 ]

 with allowing this process to unfold over the course of this year and resolving collective bargaining issues generally as we have discussed earlier. They are quite content to live with that situation.

The letters that you have received were not aware of that. That's why the hon. member gets the sense that there is a cost implication. I'm not persuaded that there is, in light of the discussions that I've had with BCTF and in light of the letters that I have now written out to the districts.

A. Sanders: My understanding, from the minister's comments, would be that the original contracts of the amalgamated districts will be left in place. Is that the case for this year? If so, what happens next year or the year after? Are we not just shifting the responsibility of settling what appear to be non-negotiable situations between BCTF and BCSTA two years down the road for someone else to worry about? What kinds of things will be in place to ameliorate what looks like a standoff?

Hon. M. Sihota: I think, as the member for Delta North acknowledged earlier, outcomes can be driven. The ministry and/or myself will play a role in making sure that these wrinkles in the system are ironed out during the course of this year.

A. Sanders: We'll be revisiting this issue in the estimates in a year or less hence, and we can refer back to the discourse at this point to see where we are at.

Again, with respect to the amalgamation of governance in amalgamating districts, there will be severance packages that will be necessary for those individuals who have contracts of three years that have just started. My understanding is that in some districts there may be even four- or five-year contracts, although that is much more rare. Do we have a projected figure for the cost of severance packages for those individuals?

Hon. M. Sihota: Again, this explains why the hon. member has the concerns that she outlined earlier. Again, boards are not aware of the position that I have taken and which changes the dynamic of the correspondence.

[9:45]

I have told districts very clearly -- very, very clearly -- that I expect them to mitigate and reduce those costs. For example, if there is a superintendent leaving from district A as a result of amalgamation, and there is a vacancy in district B elsewhere, then district B has to work with the newly amalgamated district A to take that position that is out of the system and to mitigate the loss or to reduce the potential for severance by picking up that individual in district B. We expect the districts to work together to solve this problem. I believe there are 16 districts that are affected, and I believe that we've got the capacity within the system not to have a situation where someone gets a severance pay-out today and is working in another district tomorrow. Corporately, districts have been advised by myself very clearly that I expect them to mitigate this potential exposure to the taxpayer. If they're watching, they've just heard the message, and they've read it, I know, in the correspondence they have received.

A. Sanders: Notwithstanding that that is a possibility, do we have the number of positions that could be filled by displaced staff who are involved in governance?

Hon. M. Sihota: We're collecting an inventory right now. This is an issue on which I believe if we work together, we can reduce the exposure to taxpayers. It is just not acceptable for me to see someone get a severance pay-out today and then be hired at another district tomorrow.

A. Sanders: For those boards who may be in the circumstance -- having been read the riot act by the hon. minister, and assuming that they don't have a position to send superintendent A to at location B.... Have these boards received a summary of the laws of dismissal or guidelines for severance should that be necessary?

Hon. M. Sihota: They have been sent that, but I just don't believe that we can't find space in this $3.7 billion system for 16 people.

A. Sanders: Maybe that's the extra 16 I couldn't account for in the ministry's operations.

Interjection.

A. Sanders: They're in Youth Works; maybe that's where.

The minister has specifically gone over assisting displaced staff, finding new positions and early retirement. Just a little bit more on early retirement, so it's clear in my mind. What are the details? Do we actually have a package for early retirement? Is there an incentive plan? If so, what does that look like?

Hon. M. Sihota: I'm not sure if I understood the question, although my staff think they did. Were you talking about teachers, or are you talking about administrative staff?

Interjection.

Hon. M. Sihota: Administrative staff. We attend to that on an individual basis with the Superannuation Commission.

A. Sanders: One of the suggestions that was made to me by amalgamating districts was that, if amalgamation was to proceed -- and the minister now tells me that amalgamation will proceed -- all districts share in the funding reductions and pursue restructuring initiatives over the next four years. Does the minister have any comments with respect to that way of looking at the data?

Hon. M. Sihota: They're expected to share. This is a corporate exercise, and we expect them to achieve these objectives on the part of government.

A. Sanders: Does the minister feel that the instruction or services to children will be improved as a result of amalgamation?

Hon. M. Sihota: Yes, because it should provide more money to the classroom, which is what parents and students want.

A. Sanders: I again would like to ask about amalgamation and whether the minister has read a report sent to him by the Burns Lake school district chairperson, Barbara Skillen.

Hon. M. Sihota: If I recollect it, they wanted the boundaries kept intact because of geographical, transportation and administrative issues, and they didn't want to relocate the administrative office from one community to another because of distance-related issues.

[ Page 1492 ]

A. Sanders: The letter I draw to the minister's attention was written on July 11, 1996. Again, the common thread through much of the correspondence has been that to date only one letter from this board has been acknowledged by the Ministry of Education. Very commonly, it appears that there's been a communication problem between the Ministry of Education and the individual school districts. I would certainly urge the minister and his staff to implement some kind of system to improve communication, education being a field of communication, and communication itself very, very important to school districts.

In her letter, Barbara Skillen specifically goes through, as I mentioned before, the melding of contracts, the loss of federal revenue to aboriginal children, severance packages and the anticipatory amount there -- which the minister has addressed -- and other hidden costs that were not outlined in those areas, such as legal services, land registration, printing of revised forms, reprinting of reports, painting buses, and so on. Do we have any estimated costs to amalgamating districts for those kinds of ancillary costs to the taxpayers?

Hon. M. Sihota: We do have some cost numbers. We do an indication and acknowledge that there might be some costs. That's why we've allowed them to keep the money they are getting from the savings -- to defer those expenses.

R. Masi: The B.C. Liberal Party was very clearly in favour of amalgamation, and I am glad you brought that point forward. It establishes a certain tone here that I think we should keep. My personal opinion is that amalgamation is a good thing. But why did it stop where it stopped? It seemed to me that the first indication was that there would be further amalgamation of a number of smaller districts, and the line was drawn. Could you comment on that?

Hon. M. Sihota: As I said earlier on, those are determinations that I inherited, not ones that I made. I have to tell you that it was a question I asked, in terms of why. The status quo of 75 was.... I think it's something I asked staff when I got the portfolio -- and on going to a lower number, also. But based on the representations that were made to us at the time, the minister made that determination, and I didn't think it best at this point to offset that. I just felt that at this point it would be better to proceed with the determination that I inherited. I will proceed with it and analyze it, and we'll see where life takes us from there.

R. Masi: If this is an appropriate way to go, it would seem to me that a district like New Westminster has no more stand-alone qualities than the district of White Rock, which is, of course, part of Surrey. When we look at some of the organizational aspects.... For example, Nelson and Creston seem to be a very strange grouping geographically, whereas Nelson, Castlegar and the Slocan would make an ideal triad, to be more effective.

My question to the minister is.... I understand that you are studying it. But have we stopped because of political pressures, or are we prepared to go ahead because of sound administration?

Hon. M. Sihota: I'm never reluctant to make decisions that are administratively sound, and I'm not reluctant to make decisions from time to time which may be politically controversial.

R. Masi: Perhaps the difference between the B.C. Liberal position on amalgamation and the NDP's position on amalgamation is one of philosophy. Perhaps the government's approach to it was essentially financial, in terms of cost savings and efficient operation. Is there a further rationale at all?

Hon. M. Sihota: I don't know what the hon. member is probing for, but I would say that financial and administrative efficiencies and getting more dollars into the classroom are the driving variables.

R. Masi: As an educator, I guess I approach this from the perspective of teaching and learning. I wonder if there's anything to indicate whether there's an increase in effective learning because of amalgamation. Has anything been put forward at all?

Hon. M. Sihota: Yes. This may allow us to offer a wider array of programs to students within the larger districts, something that was not previously available to them. From that point of view it does offer an educational opportunity that was unavailable.

R. Masi: I guess I would like to approach it from the perspective of governance. It would seem to me that a large.... One of the effects of largeness, of course, is an increase in the bureaucracy. I wonder if the ministry has considered a different approach to the delivery of governance, in terms of these larger districts. I may suggest school-based management, which would fit in with the terminology of the loose-tight variables, which would not necessarily bring about an increase in administration at the upper level but could be an effective delivery vehicle in terms of large districts that would perhaps benefit from the concept.

[10:00]

Hon. M. Sihota: Those are all interesting points. As I said earlier on, I'm never hesitant to evaluate a range of options. At this point I wouldn't want to make any decisions or announcements on the part of government, except to say that the beauty of taking over a portfolio is that you can look at everything. Everything is being looked at these days.

G. Bowbrick: I rise because I'm rather concerned. I heard the member for Delta North a few moments ago, I believe, suggest that New Westminster is a district that should be amalgamated. That causes me, as the member for New Westminster, a great deal of distress. I suggest that it would cause a great deal of distress for the people of New Westminster, who view themselves very much as a tight community that deserves full well to have its own school district.

I am rather surprised. Prior to the election my Liberal opponent certainly didn't say anything about favouring amalgamation of New Westminster with any other school district. It would appear now.... I don't know if he was speaking for himself -- or perhaps for the entire Liberal Party, and it is the official opposition's position that New Westminster should be amalgamated. But I would suggest that that is absolutely outrageous. If the official opposition felt that that was a proper position to take, I am surprised they didn't raise that prior to the election campaign, because certainly this was a very, very big issue in New Westminster. Many people worked very hard to make sure that New Westminster remained a single school district, and they would be very distressed to hear about this now -- and, I think, very interested. It smacks of the most cynical form of politics. I just want to make that point.

[ Page 1493 ]

Now, I note that the minister has stepped out for a moment, but as soon as he comes back I'd like to ask him for his reaffirmation that New Westminster will remain as a single school district. I'd like to point out to the hon. member for Delta North that the guidelines under which the various school districts were either amalgamated or not were set up very clearly. The school district in New Westminster met those criteria and deserves to be its own school district.

Having said that, I'd like to ask the hon. minister if he would reaffirm that New Westminster will remain as an independent school district and not be amalgamated with any other.

Hon. M. Sihota: I'd be happy to reaffirm that and to commit that the district will remain a stand-alone district.

R. Masi: I guess, in answer to the hon. member for New Westminster, it's not exactly a driving issue in Delta. New Westminster tends to consider itself as a beacon of whatever -- industry, light, whatever -- in its own mind. But enough of that.

I'm interested that the minister could give an assurance that, despite the philosophic drive of the government party towards amalgamation, they could consider small districts as being untouchable.

Hon. M. Sihota: We made that determination; the determination has been made. There is not much more to say than that. We made that determination around New Westminster, the previous minister made those decisions, and I've just confirmed them.

Hon. Chair, we've made good progress this evening, and with that....

Interjection.

Hon. M. Sihota: I was trying to tell the House Leader that we were finished, but I didn't think she was going to believe me if I said that. So instead I'll say that I move the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported progress, was granted leave to sit again.

Committee of Supply A, having reported progress, was granted leave to sit again.

Hon. J. MacPhail moved adjournment of the House.

Motion approved.

The House adjourned at 10:04 p.m.

The House in Committee of Supply A; W. Hartley in the chair.

The committee met at 6:55 p.m.

On vote 22: minister's office, $374,615 (continued).

The Chair: Just before we get started, I'll read the motion that was passed in the House just before 6 p.m. and moved by the Hon. Moe Sihota:

[that the sessional order of July 10, 1996, authorizing the Committee of Supply to sit in two sections designated A and B be varied to permit the Minister of Employment and Investment and Minister of Municipal Affairs and Housing to defer to the chairman of B.C. Hydro for the purpose of replying to questions put to the minister.]

G. Farrell-Collins: That was passed?

The Chair: Yes, that was passed in the House; it was before six.

G. Campbell: Is the chair aware of a letter that was sent by Mr. Ridley either to Mr. Sheehan or to Mr. Sheehan's counsel shortly after the appointment of the chair to his position?

Hon. D. Miller: Mr. Smith is unable to.... Perhaps the member has something that could allow us to zero in on this.

G. Campbell: I understand there was a letter sent by legal counsel McClellan Rubenstein and Parolin on March 1, requesting Mr. Sheehan to resign from a number of companies. Does either the minister or the chair of B.C. Hydro recall those letters?

Hon. D. Miller: Mr. Smith will respond to the question.

B. Smith: Our counsel has produced a letter that went from McClellan Rubenstein to Edwards Kenny and Bray concerning John Sheehan; that's right.

G. Campbell: Can the minister or the chair inform us of who in fact directed McClellan Rubenstein and Parolin to send that letter out?

Hon. D. Miller: I'll ask Mr. Smith to respond.

B. Smith: This letter to Edwards Kenny and Bray was.... Excuse me just a minute.

I'm informed that the reason the letter was sent by McClellan Rubenstein is that they had the corporate records and were responding by setting out the various corporate positions John Sheehan had. In response to that, they set out the various directorships and officers' positions that he held, and the correspondence was to give them that information.

G. Campbell: Can you tell me who "them" is in this case? Is it McClellan Rubenstein? Is it someone on the B.C. Hydro board? Is it the chair of B.C. Hydro? Is it the minister? Is it the Premier? Who is it that is trying to discover this?

[ Page 1494 ]

[7:00]

B. Smith: It was initiated by Mr. Sheehan's counsel, Edwards Kenny and Bray. It's in response to Sheehan's counsel's request that they gave all the directorships John Sheehan held.

The Chair: The member could direct this question to the minister, please.

G. Campbell: To the minister: could you let the committee know all the directorships Mr. Sheehan did have, according to the letter that is being referred to now?

Hon. D. Miller: The letter lists five companies: BCHIL Southern, IPC Transpower, B.C. Hydro International Transpower, SEP Holdings Corp. and B.C. Hydro International Power Development Corp.

G. Campbell: Can the minister confirm for me that Mr. Sheehan resigned from all of those positions as of March 4, 1996?

Hon. D. Miller: The question is: had he resigned from all of those companies prior to March 4? Is that correct?

Hon. D. Miller: The answer is yes.

G. Campbell: In resigning, were the minister and the chair of B.C. Hydro and the B.C. Hydro board made aware of these resignations?

Hon. D. Miller: Management of B.C. Hydro would have been aware.

G. Campbell: Was what's called the review team aware of the resignations of Mr. Sheehan from these positions?

Hon. D. Miller: Mr. Smith will respond.

B. Smith: It wasn't the role of the review team to deal with matters that happened after the last week of February, when we commenced. For the purposes of the interim report, we weren't dealing with ongoing relationships in those companies. I think the answer to that would probably be no.

G. Campbell: If the chair of the review team, who happened to be the chair of B.C. Hydro, was not aware of it, who does the minister mean was aware of it when he refers to the management team of B.C. Hydro?

Hon. D. Miller: I'm advised that the secretary, the chair and the CEO were aware.

G. Campbell: The chair was aware?

Hon. D. Miller: The chairman indicates that he thinks he was aware.

G. Campbell: I am perplexed by this, because the chair was the chair of the review team, was he not? Was the chair of B.C. Hydro not the individual responsible for the review team? I'm not sure how a person who was sitting on the review team could know, but the review team could not know. I am not sure why that wouldn't inform part of his report, and I'd like the minister to explain that.

Hon. D. Miller: Mr. Chairman, I'm not sure where we are going here, but Mr. Smith will respond.

B. Smith: The management of B.C. Hydro wasn't something that was discussed with the review team. The review team was reviewing events that had occurred up to this time, and they were not part of decision-making in B.C. Hydro. When I was doing review team matters, I was not reviewing ongoing managerial events at B.C. Hydro.

G. Campbell: Again, I'm not trying to be difficult here; I'm trying to understand both the report and the context of the report. There are a number of issues in the review team's report that refer to things that took place after March 1996. Clearly one of the goals of the review team was to establish ways that would ensure that we would not fall into the same problems we have, and there are a number of references to activities that took place after February 22, 1996, and to positions which were held after February 22 or February 23, which was when the chair was appointed, I believe. If it's part of the review team report, is it not appropriate or correct -- at least for myself, as an outside reader of the report -- to believe that the review team has actually been made aware of that information?

Hon. D. Miller: I'm having difficulty following where the Leader of the Opposition is trying to go. I don't know where he is trying to get. If it's perhaps made clearer, we could try to respond. But I'm a bit mystified in terms of what he's trying to do here.

G. Campbell: What I'm trying to get to is the validity of the report as a document that we can take and have some confidence in. If the information in the report is not the same information we're getting prior to its issuance, subsequent to its issuance or even subsequent to our discussions here in estimates, it's a bit difficult for us to know where we're going to go.

On page 147 of the report, there are observations made in the appendix by the review team about Mr. Sheehan's position in a number of entities which the minister has identified this evening. The report is very clear -- in six instances at least, that I can tell -- that Mr. Sheehan is still involved in companies which we've been informed tonight he resigned from on March 4, 1996. I'd like to try to get to the heart of that discrepancy. Why does it exist?

Hon. D. Miller: Are we conducting an analysis of the IPC review, the interim report?

The Chair: I think the Chair's advice would be that we are dealing with the minister's estimates, and if the member is pursuing a line of questioning that is leading to a point, perhaps he could move to that point. Otherwise, I think all members can probably agree that there's a fair amount of repetition. I guess the question is: are we getting anywhere?

G. Campbell: Well, hon. Chair, I would agree with your characterization that we may not be getting anywhere, but one of the reasons is that we are not getting any straight answers in these estimates. It's very difficult for us to carry out estimates if we don't get the facts and the public doesn't get the facts. As I've pointed out before, we're glad to have the facts, and then we can, as the minister has pointed out on a number of occasions, have a difference of opinion as to how we should act with that fact base available.

[ Page 1495 ]

We're getting two separate fact bases here, and I think it's legitimate for not just members of the opposition but all of us to understand how they come together or whether there's consistency there. If there's not consistency, it's very difficult for us to deal with the situation at B.C. Hydro that existed through 1995-96, which is one of the things that we're talking about right now.

Hon. D. Miller: If the Leader of the Opposition was casting any doubt or aspersions with respect to our attempting to give answers to questions that are asked, then.... Well, I guess it's a waste of time asking him to withdraw. We've been trying to give answers here. I don't know what problems the leader has with respect to understanding them. Mr. Sheehan is not connected.... I answered in the affirmative on the March 4 issue, and I don't know how much clearer I can be than that.

G. Campbell: Through you, Mr. Chair, to the minister -- and maybe to the chair, who wrote the report -- why is there a difference between the information we received from the minister tonight, that Mr. Sheehan resigned effective March 4 from a number of companies, and what the report says on page 147, that he did not resign, that he was still involved well after March 4?

Hon. D. Miller: Notwithstanding any of that, there is a record between legal counsel for Mr. Sheehan and B.C. Hydro International, and there are resignation letters. As I said, the answer I gave with respect to March 4 is absolutely correct. It's there; it's a matter of record. I'm looking at page 147, and I'm looking at these. I can't quite sort it out, but notwithstanding any of that, the fact is that he is not. There are letters between his legal counsel and B.C. Hydro International attesting to that fact.

The Chair: I'd just further caution the committee that the questions being asked are being answered. I can attest to that, as the Chair. If some members are not happy with the answers, or if some answerers are not happy with the questions -- it applies to both sides -- we are nonetheless dealing with a lot of repetition, and we on this committee have to move on.

G. Campbell: Can I just confirm, then, that the minister agrees, at least in terms of page 147 of the report, that the information with regard to Mr. Sheehan is wrong?

Hon. D. Miller: I've said that I've looked at it as well. I've given a definitive answer to the leader's question. There may be an explanation as to why this.... I can't, quite frankly, follow how it's laid out on paper, but the fact is that Mr. Sheehan, as of March 4, is no longer in any position in any of those companies.

G. Campbell: The problem I have, hon. Chair, is if that part of the report is wrong, then are there other parts of the report, particularly with regard to appendix 2, that are wrong as well? My question to the minister is: is he aware of other parts of this report that are wrong, particularly with regard to appendix 2 and specifically with regard to Mr. Laxton?

[7:15]

Hon. D. Miller: The same answer applies as to the last inquiry, with respect to Mr. Sheehan. The only corporation Mr. Laxton remained on -- and that's been the subject of three days of discussions -- was the SEPCOL board, and I've indicated that we have a resignation in hand.

G. Campbell: If I can get a specific answer from the minister on a date, I'll be satisfied with this. I understand from the appendix that Mr. Laxton's appointment as chair of B.C. Hydro was rescinded by order-in-council 195 on February 23, 1996. I'll assume that's correct, and I hope the minister will inform us if it is not. Can the minister tell us the specific date on which Mr. Laxton resigned from BCHI Power?

Hon. D. Miller: April 12, 1996.

G. Campbell: Can the minister inform us why it took from February 23 to April 12 to secure Mr. Laxton's resignation from BCHI Power?

Hon. D. Miller: Going back to the fundamental issue with respect to IPC and our lack of control of IPC, there was a lot of discussion initially, and that's simply how long it took to achieve that result.

G. Campbell: Again, with regard to the board of BCHIL, I understand that Mr. Laxton's resignation was received at least, or executed, by March 1, 1996. If that is not correct, I would appreciate it if the minister would let us know.

With regard to the IPC board, can the minister tell us the specific date on which Mr. Laxton's resignation was either executed or accepted?

Hon. D. Miller: The question was on IPC International Power Corp. The date Mr. Laxton ceased to be a director was May 31, 1996.

G. Campbell: Can the minister confirm why it took until May 31 to secure that resignation?

Hon. D. Miller: I'm advised that it was probably their shareholders' meeting, but we had no input, and in fact, we had to call their counsel to find out when it was. So I think it was their shareholders' meeting.

G. Campbell: Moving off of appendix 2 for a minute, can the minister inform the committee when the idea of moving into Pakistan for International Power Corporation development and activity was conceived? Who conceived it, and what was the initial thrust? Why did Mr. Laxton go to Pakistan to begin with?

Hon. D. Miller: I believe the issue was canvassed fairly fully in the interim report with respect to the broad outline. I don't know if there are specific pages. There was a decision some time ago to make an approach into this field. It's all outlined.

G. Campbell: I understand from the report that there was a specific decision to try to proceed in an ethically and socially responsible manner, and for British Columbians -- for B.C. Hydro -- to look for international development opportunities where we could market our expertise and perhaps invest in the future. The report does not, in fact, explain how Mr. Laxton picked Pakistan as one of the initial thrusts for our international development activities.

[ Page 1496 ]

My question to the minister is: what was it about Pakistan, the Raiwind project, that prompted Mr. Laxton to go there as an initial foray for International Power Corporation?

Hon. D. Miller: Again turning to the report, the Leader of the Opposition might look at page 23, which outlines, really, two things coming together. At the same time the government had discussed with Hydro the opportunities in the international power business, the government of Pakistan began to seek private sector investors. I talked earlier about how the IMF, the International Monetary Fund, had allocated a sum of money for Pakistan, and the World Bank subsequently became involved with respect to the development of power projects. They seemed to be attractive investments -- although, Mr. Chairman, after three days in this game, I'm not sure I'd want to bless that statement. Nonetheless, events came together and the decision was made to proceed.

G. Campbell: If the minister thinks the last three days have been tough, he should try and get a prospectus through the province of British Columbia someday, to see what is really difficult in terms of questions.

The issue with regard to Pakistan is -- and I'm sure the minister is aware of this because of our international interests in British Columbia, and B.C. Hydro.... There are a number of Third World countries which would look, perhaps, to British Columbia Hydro for their knowledge and expertise, for their engineering ability and for their reputation, not just Pakistan. The World Bank and the International Monetary Fund look to support a number of activities around the globe, particularly in what used to be called the Third World.

The issue for me, hon. Chair, is to try and discover what it was that first prompted Mr. Laxton to go from British Columbia to Pakistan. Was he introduced to the potential of an agreement that was as specific as this, the Raiwind project? Was it someone from Vancouver who suggested he might go there for the opportunity that existed, the singular opportunity that existed? We know from B.C. Hydro that there was no long-term B.C. Hydro development plan, except that it seemed like a good idea. There was no specific ... there was no strategy; there was virtually no discussion at the board level; there was evidently virtually no discussion at the cabinet level. So there must have been a reason that Mr. Laxton personally decided that he was going to Pakistan. The issue for me is: why did he personally decide to go? How was he personally introduced to the economic opportunities that were present in Pakistan? And why did he personally decide to put so much of his time and effort into that project?

Hon. D. Miller: As so often is the case, I think looking for one simple substantive answer may not be possible.

Interjection.

Hon. D. Miller: Mr. Chairman, I don't know why I get chuckles when I respond to questions. Does it display some cynicism? I don't know. Are they treating it seriously? Who knows?

Let's try to read into the record parts of the report. Obviously the Liberal opposition hasn't had time to read it. Those parts that they have had time to read and that they disagree with, they simply ignore, which is evidenced over the last three days of these estimates. Let me read what the report details with respect to Pakistan:

"...the elimination of import restrictions, taxes and customs duties on all items required for design, construction, completion, operation and maintenance of the power plant; an indexed power tariff to accommodate movements in the exchange rate between the domestic currency, the rupee and the U.S. dollar; authorization for the company, its contractors and foreign investors to open and maintain local and foreign currency bank accounts within and outside Pakistan; a guarantee of government assistance in securing visas, work permits, approvals and other permits and licences required for the project; a bonus payment should the project be completed ahead of schedule; and a guarantee against future expropriation and internationalization."

Gee, I wish they could get that kind of guarantee from the Liberals here in B.C. with respect to IPC shares.

In addition to that, BCHIL has operated in Pakistan for five years through the installation of monitoring systems to predict reservoir inflows for the Tarbella and Mangla hydroelectric projects and through the provision of training programs to WAPDA. It's a fact that many of the state monopolies -- the Hydro operations in Canada and, I presume, around the world -- have looked at this issue of getting into international projects. I don't know the details, but I know that Ontario Hydro and Hydro-Québec, in conjunction with Noranda, I believe, were looking at the same field. It's a new field, and these state monopolies have some expertise. We've been marketing our expertise around the world for about 12 years. For all those reasons, I suppose, not being party to the discussions at the time, Pakistan appeared to be a project that was favourable.

G. Campbell: I appreciate the recitation from the prospectus, which we've just received, and I want to thank the minister for giving us the prospectus so we can read it. However, it doesn't quite answer the question: why did Mr. Laxton pick that particular project to begin with? Let me ask the minister the question in a different way. Is the minister aware of Mr. Laxton having any connections with anyone in British Columbia or in the lower mainland who had a specific understanding of the Pakistan situation and was ready to push that forward as a potential project for B.C. Hydro?

Hon. D. Miller: Hydro was looking, I am advised, at a number of possibilities -- or at least two possibilities. Argentina was another one that was under consideration, but the decision was to go with Pakistan.

G. Campbell: Do I take from that answer that the minister is not aware of Mr. Laxton having any particular business or professional association with anyone in British Columbia who had specific interests in Pakistan? Can the minister confirm that for me?

Hon. D. Miller: I don't know Mr. Laxton, and I'm unaware of any of his other dealings. There may be some listed in various places, but I have no familiarity with them.

G. Campbell: The reason I asked the question is that when you look at this agreement and the interim report, and listen to the answers we get, it is a very complicated structure that has been established. It's one that neither the minister nor the previous minister seems to have a handle on. In fact, we get different answers on different days. I take your point from earlier on that we do get answers, but sometimes they are a bit different.

[ Page 1497 ]

I want to go back to the question that was raised by the member for Vancouver-Little Mountain earlier today, and that gets back to the issue of Mr. Mahmood and Pathfinder Enterprises Inc. Is the minister aware of whether Pathfinder Enterprises Inc. was in existence prior to B.C. Hydro or a representative or Mr. Laxton becoming involved, or at least interested in the potential for a power development project in Pakistan?

Hon. D. Miller: I don't know. I'm just looking at some more information, and I am advised that prior to Mr. Laxton being appointed to B.C. Hydro, they had been looking at various opportunities around the world, including Pakistan.

G. Campbell: So that the minister understands, I understand that B.C. Hydro was looking at opportunities around the world. When there are so many opportunities around the world for B.C. Hydro to market its expertise and its knowledge, the issue that I am trying to get at is: why did B.C. Hydro pick Pakistan as our first foray?

[7:30]

The issue, hon. Chair, as I am sure you are aware -- and as I am sure the minister is aware from reading the report -- is that, really, this initiative was pushed, prompted, promoted and bullied through the system by Mr. Laxton. The question, surely, for all of us, this committee, the minister responsible and the chair of B.C. Hydro, is: why did Mr. Laxton assume such a personal mission to push this particular project through? That's what the issue is here, and it's an important issue, I would suggest, both in terms of the committee and in terms of the minister, who I know wants to make B.C. Hydro as accountable as possible.

So let me go back to the issue with regard to Mr. Mahmood. It is true, as I understand it, that someone in B.C. Hydro decided that Mr. Mahmood should receive 300,000 shares in IPC and in Pathfinder Enterprises Inc. because of some imaginary work that was done prior to this project being assumed by B.C. Hydro.

Hon. D. Miller: We have dealt with this extensively. Page 99 of the report, I think, does deal with that. Again, I'd invite the member to read it.

G. Campbell: The member has read it, hon. Chair, and the thing that concerns me is that once again we find that there is no real work done, or no real identification of the so-called work or services for which $300,000 (U.S.) has been passed on to Pathfinder Enterprises Inc. So maybe the minister, since he's now read this report, can explain what specifically those services were and how the remuneration of $300,000 (U.S.) was decided upon by the decision-makers with regard to this.

Hon. D. Miller: Mr. Chairman, I'd ask Mr. Smith to respond.

B. Smith: The first report touches on this, and the final report will deal with it as well, because one of the things that the review team is still looking at is the contribution that came from Pakistan, and the various people that were involved from that standpoint. We have been interviewing some witnesses, and we have more to interview. So I can say that if the member or any other member has any information or any questions that they think are important or relevant, quite beyond this forum here, they can communicate those to our counsel and we will certainly take them into account.

G. Campbell: I understand that Pathfinder is owned wholly by Mr. Ali Mahmood. Is that correct?

Hon. D. Miller: As far as we know, Mr. Chairman.

G. Campbell: As far as we know, has work been done in Pakistan or somewhere whereby we have discovered who it is, in fact, that B.C. Hydro is a partner with? Pathfinder Enterprises Inc. is, at least, an important investor here. It's an important partner of B.C. Hydro. Have we, in fact, gone and searched Pathfinder Enterprises Inc. to see who the shareholders of Pathfinder Enterprises Inc. are?

Hon. D. Miller: I'll ask Mr. Smith to respond.

B. Smith: Our review team due diligence on Pakistan companies is not complete. It's mostly complete on all the shareholding companies that you saw listed previously. I think there may be one or two that we were not able to completely identify, but the identification of all the shareholdings in Pakistan has not been concluded. So far as Pathfinder is concerned, we have no reason to believe that it is other than controlled or substantially owned by Mr. Mahmood. But in terms of other shareholdings -- for instance, shareholding by people who may not be Pakistan residents -- I would think those are legitimate matters for the final review.

G. Campbell: It seems to me that every time we run into the name Ali Mahmood or his business dealings, we run into, effectively, some form of wall in terms of information. It certainly isn't an open book in terms of Mr. Mahmood. Pathfinder Enterprises is one example, SEL (Marshall Islands) is another example, where we do not know who Mr. Mahmood represents, who holds the shares in those companies, or who may be the beneficiaries of the activities of either of those two companies that I know of off the top of my head, again from the interim report. The concern I have is that when we don't know, and we have someone who is clearly calling the shots with regard to those enterprises, pushing them, is it not possible that we should ask ourselves questions about the advice we're getting from that individual, particularly when you look at this litany of confused mandates and missions which came out of B.C. Hydro as well as BCHIL, certainly driven by Mr. Laxton? Why do we assume that there is nothing wrong there when there is more evidence that there could be something wrong than that everything is straightforward?

My question to the minister is: why, once again, would we take the advice of someone like Ali Mahmood, who has not cooperated with the government and who clearly has been one of the major beneficiaries of this project? Why would we take his advice instead of taking the advice and, indeed, the direction of the Premier of the province to sever all ties with Mr. Laxton? What is it that Ali Mahmood brings to this project that says that you can operate under the cloak of secrecy while everyone else is supposedly opening this up so that we can deal with it in the future?

Hon. D. Miller: Again, I don't know. If the Leader of the Opposition has allegations or whatever, he should make them. In dealing with this rather difficult issue, I think I've tried to outline that this project is a partnership, and to that extent the World Bank is also a partner. We have seen what appear to be conflicting statements from the World Bank, at least on the surface, but we do know that the World Bank is a partner and will flow funds in the project.

[ Page 1498 ]

Really, it's part of a larger IMF initiative in terms of Pakistan. We do know that the government of Pakistan is desirous of increasing its ability to generate power for modernization and industrialization, and we know that the Prime Minister of Pakistan, Ms. Bhutto, is also very much supportive and, in fact, did something at one point that I think was referred to in Mr. Laxton's letter. It may be that in a country like Pakistan you never would be able to get every answer to every question. I've never been there. I don't know much about it, but I'm sure that's probably true.

On the face of it, you have to look at the project you're involved with and make a decision as to whether or not that's something on which you can get the kind of return you think is reasonable and makes sense internationally. In this case it did, and it does. There are shareholders out there who continue to claim that there is a guaranteed 24 percent rate of return. It is not a guarantee, but they refuse to sell their shares, so they clearly must believe that they've invested in something worthwhile. We have an ongoing relationship in terms of the contracts through an arm of B.C. Hydro for the kind of technical expertise that B.C. Hydro possesses to ensure that the project is successful over a long period of time.

So, again, we've danced around these questions for a long time, but it's pretty straightforward on the face of it, and I think we've tried to respond to all the questions. I don't hear any new ones coming up.

G. Campbell: I think it is a legitimate question, and it is a new question in view of the information we have received today. Today is the first time we were told that Mr. Mahmood was the Pakistani investor who said that Mr. Laxton should not be removed from the company, because of stability. We have a letter from Mr. Laxton that says: "You know, fortunately there are no problems with what's taking place in British Columbia with Pakistan." We have a letter from Mr. Smith back to Mr. Laxton saying: "Gee, I'm glad there are no problems with what's taking place in British Columbia with regard to Pakistan." This is not an allegation; this is simply the facts. The fact is that Mr. Mahmood has done nothing to try to resolve these issues. Mr. Mahmood has not been forthcoming in terms of what his involvement was -- why is Pathfinder receiving a fee? -- or in coming and testifying to the review team, explaining what the situation is and why it is and what it is that he feels Mr. Laxton brings to the table.

In British Columbia, there is nothing he brings to the table. Let's be clear: there is nothing that Mr. Laxton brought to the table except for a confusing and complicated corporate enterprise which was structured in the Cayman Islands and in the Marshall Islands. It is a situation where people were bullied into pursuing a project which may or may not have worked, a situation that the Premier says today he believes we should get out of altogether in spite of what the minister said last week, which was that we should carry on with the project. There are a number of questions that have not been asked. The critical question, it seems to me, is why we would take advice from one person -- i.e., Ali Mahmood -- who has done nothing to cooperate with the committee, nothing to cooperate with the government of British Columbia, nothing to cooperate with the chair of B.C. Hydro, nothing to cooperate with the review team and nothing to help us solve the problem that we clearly face in British Columbia. Whether our standards are higher than those in Pakistan is, frankly, irrelevant.

If B.C. Hydro and the chair and the review team and the minister came and said: "You know, I was so worried about this that I wanted to find out who each and every one of our partners was; I wanted to find out who each and every partner was who could benefit from B.C. Hydro's expertise...." Let's be clear: the beneficiaries here are people that are benefiting from B.C. Hydro's expertise.

The only question I'm asking the minister seems to be a legitimate question that there may be no answer for. I will grant him that. It's one thing if the minister says: "Look, there's no answer. I don't know why we listened to Ali Mahmood. We probably shouldn't have. I wouldn't have, but someone did." The fact of the matter is that we did. The most important Crown corporation in the province took the word of someone who has virtually no reputation in British Columbia, that we can tell, except that of trying to stonewall and cover up and keep away from the public eye what took place in Pakistan with regard to Mr. Laxton, the Raiwind project, BCHIL, SEPCOL and the works.

Again, the question to the minister is simply this: why would we take the advice of someone like that when the effort that we in British Columbia were making, that he was making and that the Premier was making was to sever all relationships? I would suggest that there is no evidence whatsoever that the dismissal of Mr. Laxton from all of the boards and from all connections would have had any detrimental effect at all on the project, B.C. Hydro or the people of British Columbia.

Hon. D. Miller: I won't try to outline this in general terms again, because I've done that ad nauseam. Just to counter a couple of comments made by the Leader of the Opposition, B.C. Hydro was faced with a decision. In the face of an issue that had blown up politically and was front-page news -- I'm not happy, and I said that, I think, at some point in these estimates -- they were still faced with the management decision about how to conduct themselves relative to a deal they had signed onto. They were partners. Let nobody make the mistake of thinking that people had the luxury of simply turning their backs on it or ignoring it; they had to deal with it.

In dealing with that, they received advice from Pakistan, where the share offering was to take place -- not in British Columbia, in Pakistan -- and the advice was to let Mr. Laxton's name stay on the board on paper only as Mr. Smith has described in the press. The reason for that was the share offering. So they made a business decision to do what was right for B.C. Hydro, to do what was right for the shareholders of IPC and to do what was right for the other partners in this project. They made that decision on the advice of people in Pakistan, but they made it only on the basis of the share offering on the Karachi exchange. You have a copy of that prospectus there. That's why they made that decision.

The correspondence trail indicates that we were soon to have Mr. Laxton leave all of the associated companies. The facts are that we did not have the absolute authority in terms of our percentage of ownership in SEPCOL. So Hydro management made that decision in order that this project -- and this share offering was a necessary part of this project -- could proceed, the project could get built and we could fulfil our business obligations. B.C. Hydro has business obligations. Whether or not it's through a subsidiary, it's B.C. Hydro. It's B.C.'s name out there. We're project managers through subsidiaries. We have ongoing maintenance -- technical, contract -- with this project in Pakistan.

[7:45]

Sure, in hindsight we could say: "Our morals simply don't allow us to do that. We're not going to deal," But we didn't do that. B.C. Hydro made a business decision to live up 

[ Page 1499 ]

to their obligation as an operating company to protect our reputation, which is tarnished. It's tarnished all the time, every time we get up and talk this way. I'm not suggesting that we don't talk about it, but I'm suggesting that it has an impact.

We made that fundamental business decision, and it's a very important one. If we're going to start to extricate ourselves -- as the Premier talks about -- then surely extrication doesn't come by turning your back, risking a project failing, and having your reputation completely tarnished and damaged internationally. Is that how one would approach this difficult, complex issue? I suggest not. Surely there is some understanding on the part of British Columbians, including members of the opposition, of what was at stake with respect to Hydro's business relationship as a partner in this project, its international reputation as a partner in this project.

It comes down to, I suppose, some debate about, "Did you really have to leave him on?" or: "You only took one person's word for it." It's really, really easy to go through all of this in hindsight, and it's difficult sometimes to answer questions in hindsight. But the fundamentals are there; they're not complicated.

This is a complicated deal. Look at the chart. It's a very complicated deal. I don't come from that background. If you ask me or, I dare say, any member of this House to stand up and walk through this chart, how many do you think could do it? There may be some who have the business experience. I suspect that most don't. Do you think you can explain this easily to the public of British Columbia? No, you can't.

Yet, with respect to this issue that we have been pursuing for the past three days, there's an entirely logical and plausible explanation as to why what happened happened. I've said it over and over and over for the last three days. I've tried to lay that out as one central explanation: that we were involved in an international power project, that we had an ongoing contractual obligation in that project over time -- over ten years, I believe -- and that that's not something you turn your back on and walk away from.

I said the other day that others would support that. I read a letter today from.... I can't remember the fellow's name now.

An Hon. Member: Written today.

Hon. D. Miller: Does it matter when it was written? Does anybody over there suggest that the gentleman in question could be somehow bought, could be asked to provide a letter on demand?

Interjection.

Hon. D. Miller: Well, laugh. Is anybody suggesting that? I hear the opposition complaining about the timing. Is the letter less worthy because it was received today instead of a week ago or two weeks from now? Does anybody in the Liberal caucus want to suggest that the author of the letter is not capable of offering that kind of advice? I hear silence, nothing.

We go through this endlessly for three days, over and over and over again, when the simple facts are there: we were part of this deal; events happened in British Columbia that cast a terrible, terrible colour on how Hydro was run; we're trying to deal with that, but at the same time we're trying to deal with the business obligations that we're a part of. We made that fundamental decision, and, as I say....

I'm sorry, it was Mr. Cullen. I apologize for not recalling his name. He's a person of some repute in the province, giving advice in a business sense -- not morals, a business sense -- about what we did.

I suspect, with all the explaining in the world, that the complexity of this business deal, the activities of certain parties and the pall that I think has been cast on Hydro because of the activities of Mr. Laxton and Mr. Sheehan make it virtually impossible to try to put forward a straightforward explanation. In that kind of atmosphere, it's very, very difficult. I understand that. I'm not complaining; I'm just saying that that's a fact. But three days.... It's absolutely irrefutable. There were simple reasons why Hydro did what they did; they were sound reasons. It was important.

Mr. Chair, I keep saying that I think we've canvassed this, but perhaps we haven't.

G. Campbell: I just want to say that I would concur with much of what the minister says; I agree with it. It is a very complicated deal. We know that this deal was put together by someone who was clearly in a conflict of interest, who was clearly in breach of public trust, who went out to people who clearly didn't know what they were doing and whose only expertise was their connection with Mr. Laxton -- which was personal or having to do with real estate deals.

British Columbia Hydro does not belong to the government of British Columbia, to the NDP, to the government side of the House; it belongs to every single British Columbian. And every British Columbian has a responsibility to try to maintain and restore its reputation. I can tell you that what we've gone through for the last three days has not done that.

What we've got -- and this is something I know this minister and this government understand -- is a conflict of interest. This has a true potential for conflict of interest; it's not one of the phony ones that gets thrown out. Mr. Mahmood has a potential financial interest. His information may be tempered by what he says. The issue for the minister and, for that matter, for the chair of B.C. Hydro and for B.C. Hydro, is: did they go to anyone who does not have a conflict of interest with regard to this project to get advice -- whether it was international advice, advice in Pakistan, or advice in British Columbia?

I know that subsequent to February 21 -- subsequent to this coming forward and being public -- because we asked questions which I know were uncomfortable, there has been some effort to get outside expertise, hopefully non-partisan, non-conflicting, no-gain-for-anyone expertise in British Columbia. The question is: have we done that in Pakistan? The answer so far is no. No one has cared to do that. We have not heard one word from this minister, one word from this chair or one word in the corridors of the House to suggest that anyone thought about the conflict of interest Mr. Mahmood might be in. Pathfinder Enterprises Inc. is potentially in a conflict of interest in terms of their advice. So is SEPCOL. So is SEL (Marshall Islands). With all of those activities, there is a potential conflict of interest because we don't know who the shareholders are of Pathfinder Enterprises Inc. We don't know who the shareholders are for SEL (Marshall Islands). We don't know all of the people who are involved in all of the companies that are involved in SEPCOL. What we're saying to those people is: "Well, if you're in a conflict of interest in Pakistan, it's okay. If you're in British Columbia, we don't like it." British Columbians don't expect us to be getting advice from people who may be in a conflict of interest. Clearly Ali Mahmood is.

[ Page 1500 ]

Secondly, I would suggest that for us to say flippantly, "Well, we've got Laxton involved but he's just on paper," and then submit that as an official document is, frankly, to mislead the people who are subscribing -- to suggest that Mr. Laxton was involved. We knew when that document was filed that Laxton was out of here. He was not going to be involved. Again, if we didn't know, there is a huge breakdown between B.C. Hydro, its management and the government, and between what the NDP government, the Premier and the minister have been telling the people of British Columbia. We have been told that Mr. Laxton was not involved in B.C. Hydro and was not involved in this deal. And yet he was.

We've been told that this was going to be a report that laid out all the facts; we haven't got them. Maybe we're going to get them in the final report. There's a lot of factual information here that is not correct. Just tonight we've identified some of it. There are other places in the report, as we know from the discussions over the last three and a half days, that are not correct. There is still a huge problem with accountability at B.C. Hydro. It's the same problem that we were supposedly going to solve. So when I ask the minister questions, or when anyone from this side of the House asks the minister questions, it's because we want to restore and revitalize B.C. Hydro. We want the professionals at B.C. Hydro to be put back in the driver's seat. We don't want the politicians driving B.C. Hydro, as they have over the last two years -- in fact, over the last five years -- to one problem after another. This is just one example of that.

My question to the minister is simply this: is the minister aware of B.C. Hydro asking anyone in Pakistan who was not in a direct conflict of interest for advice on how we should proceed with this project?

Hon. D. Miller: I'm genuinely confused. I have listened carefully to the Leader of the Opposition talk about people who were in conflict of interest. The leader suggested -- the way I interpret it -- that people who were shareholders in this enterprise are in a conflict of interest, that Mr. Mahmood....

G. Campbell: You got advice....

Hon. D. Miller: Mr. Mahmood is president and CEO of SEPCOL, which is the company that is building the project. The Leader of the Opposition says that we ought not to listen to the advice of the president and CEO of the company that is building the power project, because he is in a conflict-of-interest situation. That's what I heard, and I don't quite understand it. Are we in a conflict of interest as participants in the project?

G. Campbell: No, because you're not going to make anything out of it.

Hon. D. Miller: Yes, we are.

G. Campbell: You are, personally?

Hon. D. Miller: B.C. Hydro will make money out of this; shareholders will make money out of this. The reason we went into this, Mr. Chairman, was to bring dividends back to the....

Interjection.

Hon. D. Miller: SEPCOL is a company with many partners. Mr. Mahmood is the president and CEO of SEPCOL.

An Hon. Member: He's a shareholder.

Hon. D. Miller: He is a shareholder.

D. Jarvis: He has a vested interest.

Hon. D. Miller: I know that it's a practice in the private sector for people on boards to be encouraged to be shareholders. That has become a bit of a problem; it certainly arose during this problem with B.C. Hydro. But is it a fact that if you're the president of a company building a power project which you've bought shares in -- presumably; Mr. Smith dealt with that in his response -- then you're in a conflict of interest if you give advice and that advice is taken? I don't quite understand. Is it because you'll make money on your shares? Is that the conflict? I'm a bit baffled here. I haven't bought shares; I'm not out there operating in the private sector like that. But I don't quite follow where the conflict is, and I think that's important, because....

D. Jarvis: If you don't understand it, it is important.

Hon. D. Miller: The member for North Vancouver-Seymour is telling me, from his seat, that I don't understand it and that it is important. I'm looking forward to seeing him stand on his feet and explain it. But I think the central point....

Interjection.

Hon. D. Miller: It's easy enough to use the word "conflict," and the Leader of the Opposition even acknowledged that it's used without merit. I think he said that this is a real conflict as opposed to some of those phony ones. I was going to complete the sentence for him and say: "...some of those phony ones that his party has raised."

G. Campbell: There was one that you were involved in that we thought was phony.

Hon. D. Miller: Well, there you go.

I'm responding to a broad statement made by the Leader of the Opposition -- to wit, that principals of SEPCOL, who presumably bought shares, were in a conflict. I don't quite follow what the conflict was, but perhaps the Leader of the Opposition has some further advice.

[8:00]

G. Campbell: Once again, I'd like to suggest that Mr. Mahmood -- as we understand it so far, but we don't know yet -- and perhaps others are in a position to benefit from this. Maybe Mr. Laxton is; we don't know that. Maybe some of Mr. Laxton's family are; we don't know that. There is a big difference between investing public money, taking risks with public money and taking risks with your own money. If the minister wants to go out and risk all of his salary and assets, that's his business. It's different when we're talking about the public's assets. There is an obligation, just to hear from people who are directly involved, but also to hear from people who are independent of the entire project, so that they can give us some advice. This whole report is about someone who didn't bother to go out.... I can't find one word from one staff member of B.C. Hydro who thought for one minute about the public trust with regard to this project. From the review team itself, there is comment after comment after comment that 

[ Page 1501 ]

someone forgot, that someone didn't have the integrity, the courage or the strength to stand up to Mr. Laxton, who clearly had a personal interest in spite of what he was saying and in spite of what the act said.

The same thing may be true in Pakistan, so we have an obligation. I would suggest that B.C. Hydro has an obligation to get independent public information -- independent information and advice -- on how this works. They didn't do that; they didn't go out for independent advice. Within a week, Mr. Sheehan was out of contention in terms of any of those boards; Mr. Laxton was still hanging around until July. My question to the minister is: was independent advice sought from someone in Pakistan who might know what the business climate and investment practices are there? Was any independent advice sought from such a person on how prospectuses work there or how agreements are put together there? Was there any independent advice from someone who was not directly involved and who was not explicitly able to make private and individual gain from this activity? Was there any independent advice sought whatsoever? That's all I want to know. Yes or no. And if yes, I'd like to know who they were.

Hon. D. Miller: I know that the opposition asks me questions, and I occasionally pose one that I think is a reasonable question. I'm disappointed that the Leader of the Opposition did not deal with the issue of conflict. It's easy enough to stand up and use the word "conflict." In fact, it's very, very easy. It's easy enough to stand up and say, "Well, this might be wrong; we don't know," but to somehow leave the suggestion that perhaps it is and say....

G. Campbell: You don't know?

Hon. D. Miller: Well, I don't know, but....

G. Campbell: Find out. You've had five months to find out.

Hon. D. Miller: Mr. Smith is going to deal with that in a moment, but it seems to me....

I'll go back to my central point: the Leader of the Opposition has stood and said, almost definitively, that there was a conflict because Mr. Mahmood presumably -- we're checking this -- owns shares in a project in which he is the president and chief executive officer of the company charged with building the project. I don't quite get where the conflict is. I understand that when you're dealing with a public board, there are certain rules that are unacceptable. In fact, that's what gave rise to the issue in terms of the terminations of Mr. Laxton and Mr. Sheehan. But I also understand that in the private sector, it is commonplace and indeed almost required that chief executives or people in those kinds of positions show their confidence in projects by purchasing shares.

We're dealing with a question of principle here, and I just don't think it's good enough to suggest that there's conflict without at least some.... I mean, if there is some, I'd like to know about it. I'm not saying it's not there; I'm just saying.... To simply say that there's conflict because of that circumstance seems to me to not be a very able argument. The leader declined to respond to my very simple question, trying to define that a little better for people so we could perhaps understand. These are important questions, and we hope to get clear thinking on these.

G. Plant: I understand. Do you understand?

Hon. D. Miller: I hear members opposite muttering that they understand, but perhaps it's in the articulation. I'll ask Mr. Smith to add some more comments with respect to advice.

B. Smith: SEPCOL's involvement in this was as the project development company. BHCIL and B.C. Hydro have absolutely no option but to deal with SEPCOL. That was the development company. Their responsibility was to handle all relations with the Pakistan government, all local approvals, and to negotiate the power purchase agreement, the fuel supply agreement and all the other agreements. Mr. Mahmood, being the president and CEO of that company, had to be dealt with.

On the question as to independent and neutral advice and taking Mr. Mahmood's advice, I can assure the Leader of the Opposition that B.C. Hydro, after the end of February, put together a financial and legal team to review this whole thing and look at our options. That is, did we stay in, or did we try and get out? What would be the costs, legally and financially, of getting out? What would be the cost to Hydro's reputation? What were we exposed to?

We already had over $8 million of public money invested in this project. We were already on contracts and at risk of being sued for a fair amount of money -- not including damages but just actual loss. So we had considerable exposure, upwards of a further $10 million. But we didn't just get legal advice; we used two legal firms. We used Blake -- and we used a number of lawyers at Blake, not just the one who had given Hydro the initial advice -- and then we used Farris. We used two very senior counsel, their most senior corporate solicitor, and we put together a financial team to advise us, consisting of RBC Dominion.... That letter from Mark Cullen really reflects the fact that he was involved in looking at this project over a period of about four or five months, sort of holding our hand and telling us what we should and shouldn't do, and what we should and shouldn't accept. They also had strategic partners who had people in the field in Pakistan as well, who advised us. So that we didn't make any missteps, we had a fairly broadly based, neutral and responsible team, legal and financial. We didn't just act on what our legal partner told us from Pakistan; we did as much due diligence as we could on our own of a neutral, legal, financial kind.

G. Farrell-Collins: I have a slightly different line of questioning. It arises from the prospectus that the minister was kind enough to give me a copy of just after we reconvened this evening. I note on the prospectus.... It's a lovely document, fairly large. I'm going to lay it out here so that I can see it and make sure I'm referring to the proper sections for the members opposite. It looks like there are comics on the back there. It looks like it came out of a newspaper; perhaps that's why the size.

If one goes to subsection 5.2 on page 18 of the prospectus, top left -- it's in the third column over, halfway down, for those staff members who are looking for it -- it lists the shareholders of SEPCOL, something we've been trying to find out for a long period of time. There are a couple of issues that arise, and I'll take them one at a time. The first one is that under various shareholders, there are sponsors and there are.... There's a listing of shareholders called "sponsors, directors and associates," which lists some 7,346,986 shares. I assume those are about $1 (U.S.) because their equivalent value is about ten rupees, which is about ten to one in my understanding. So about $7 million worth of shares are owned by sponsors, directors and associates. The directors of SEP-

[ Page 1502 ]

COL include Mr. Laxton, Mr. Ali Mahmood and Stan Ridley, who I assume doesn't have any shares but is there representing BCHI Power. We have a banker -- I can't pronounce his name. Shareholder No. 5 is Mr. Hadi -- and I'll come back to him -- who is with First Leasing Corp. We have Mr. Mohammad Kahn, Mrs. Sughra Mahmood and Mr. Sultan Kurji from Vancouver. Do we have any idea which of those directors themselves -- not just the companies they represent, but the individual directors -- own those 7,346,986 shares?

Hon. D. Miller: The answer is no.

G. Farrell-Collins: So we don't know who the directors, sponsors or associates who own those shares are. Can I ask if B.C. Hydro or Mr. Ridley as our representative on the SEPCOL board -- as of now, our active representative -- has asked the other directors of SEPCOL which of them owns those shares, if any of them?

Hon. D. Miller: I'm not aware of that.

G. Farrell-Collins: The question was whether anybody had asked. Is the minister telling us we don't know if they've asked? Perhaps I can ask if anybody at B.C. Hydro -- i.e., the chair or the review committee -- has asked who the director shareholders are in SEPCOL.

Hon. D. Miller: I'll ask Mr. Smith to respond.

B. Smith: The answer is yes, and the answer to the question has not satisfactorily been forthcoming to date.

G. Farrell-Collins: Perhaps I can ask the minister or, through him, the chair to expand on that last answer. In what form has the answer not been satisfactory? Is it because we haven't received any information or just partial information? Or has there been some sense of obstruction at the other end with regard to receiving that answer?

Hon. D. Miller: I said that I'm not aware of any.... But I also want to come back, because I'm not completely satisfied with the interpretation of that section. I've got staff looking at it with respect to director shareholders. I want to get some clarification on that.

The Chair: Mr. Smith.

B. Smith: The review team has been concerned with that very question, and that question has been posed. I've not had an answer. I can't say I'm not going to get an answer, but I haven't got an answer.

G. Farrell-Collins: So the review team has asked the question -- the answer being: "We've asked the question; we haven't received an answer." Perhaps I can ask: of whom was that question asked? Was it asked of each individual director? Was it asked of our representative, Mr. Ridley? Was it asked of Mr. Laxton? Who did we forward that question to? Was it to the board of SEPCOL as a whole?

[8:15]

Hon. D. Miller: Mr. Smith will respond.

B. Smith: To Mr. Mahmood.

G. Farrell-Collins: I suppose that's in Mr. Mahmood's capacity as the CEO of SEPCOL. Have we had other difficulties getting information from SEPCOL in the past? Has it been a problem? I know there are references in the first report by the review team to the difficulty of getting any information from SEPCOL. Has any information been forthcoming from SEPCOL, other than what is contained in the prospectus? Has it been like pulling teeth to try and get anything? Or has it been coming forth fairly easily?

Hon. D. Miller: Mr. Smith will respond.

B. Smith: I guess I should put it in a little clearer perspective. There are detailed sources of capital breakdown, which is the last document of the interim report. When we say that we don't know who the shareholders are, we really mean we don't know who the SEL (Marshall Islands) shareholders are or who bought the shares in the public offerings in Pakistan or who maybe got some options there. Those are the things we don't know, and we are trying to find out. A lot of the other shareholdings are identified in that document, so that's what we're talking about.

Has it been difficult to get information? Well, it's difficult to get information because of geographic and cultural reasons sometimes, and it's not always intended. The review team has been trying to do a source of funds in and out of SEPCOL, and I think we're getting there, but it's been a slow process. There haven't been obstructionist responses; it has just been hard to get the information. You don't want to spend a lot of money and hire somebody down there to do it for you. You want somebody here, who knows exactly what you want, to go and get it. We have had problems getting information, but I don't think there's anything sinister about that. It's just taking us longer than we thought. I think we will get the information; I hope we will.

G. Farrell-Collins: I would hope that we'll get that information, and I'm certainly encouraged to hear from the chair of Hydro that it's not seen to be as the result of obstruction that we don't have that information, but rather that it is perhaps time-consuming and difficult to correspond. They are on the other side of the world, and I know that when we're sleeping, they're working, and when we're working, they're sleeping. I'm sure there's a bit of difficulty there.

I would have thought that with Mr. Ridley, at least, as a director of this company, that information would flow to him on a regular basis, being one of eight -- now seven -- directors on SEPCOL. That would be a reporting structure in which that type of information would come to him fairly easily. As a director, does it not seem that he should be able to get that information without even asking or that when he asks, the information should be forthcoming? Perhaps the minister can respond to that -- or perhaps the chair, if the minister decides.

I do have a specific question. Has Mr. Laxton been asked by anybody at B.C. Hydro or anybody at the political level whether or not he owns shares in SEPCOL, other than those he owns through IPC?

Hon. D. Miller: Mr. Smith will respond.

B. Smith: I think the final report will give the answer to that. I don't think I should give the answer today.

To come back to the point about Mr. Ridley, Mr. Ridley has been an enormous help, and he's really the only link we have. He's the only person we've had to keep this project going, and he has done so under an enormous amount of 

[ Page 1503 ]

duress. He is personally extremely traumatized by this whole thing. The easy thing for him to have done would probably be to have walked away from it, because it brought a great deal of embarrassment. He had a feeling of shame, and it's to his credit that he stayed with this project and soldiered on. He's done a remarkable job.

There have been no meetings of the SEPCOL board. The project has gone forward, and it is agreed that without Mr. Ridley, we would have great difficulty getting information. What we do get, I think, we get almost solely and largely as a result of him.

G. Farrell-Collins: I'm glad to hear that. I hope that Mr. Ridley.... Now that this deal is out in public and now that the work goes on to try to ensure that this type of setup doesn't happen again -- but perhaps also learning from this, with the opportunity to involve ourselves with other projects down the road.... Maybe we've learned something from this. Certainly the corporate memory contained in Mr. Ridley's bones as a result of his participation in this over the long period will be invaluable to B.C. Hydro, should the government decide to further partake of international equity investments. So I hope he continues to offer his advice and wisdom as time goes by.

I'm glad we are getting some information from that source -- at least, apparently, through him. I would also hope that he is being fairly aggressive with the other members of the SEPCOL board in ensuring that we are in the loop as far as this goes and that we are getting all the information. I suspect there has been the odd time when we haven't been. The fact that Mr. Laxton went to meet with Mr. Mahmood without Mr. Ridley being aware of it until -- the minister told us it was last week -- he physically saw him there.... I don't think he said he spoke to him, but he saw him in Pakistan. I'm sure it was a bit of a shock to Mr. Ridley -- probably more than it was to the chair of Hydro when he was informed that Mr. Laxton had been there. I suspect that Mr. Mahmood is not being as open as one would expect him to be with members of the board, who oversee his activities, if that type of information isn't being passed on to Mr. Ridley on an ongoing basis.

One would expect that Mr. Mahmood would know very quickly who the shareholders were after the closing of the offering. I hope that information is as forthcoming to us as to a shareholder in SEPCOL, which in some capacity would allow us to define who our shareholders are in Pakistan, although the others remain unanswered.

The question I ask is whether Mr. Laxton was asked if he owned any of the shares. If it's the opinion of the chair of Hydro that whether or not he actually owns shares is best left to the findings of the report, I will obviously accept that opinion. I want to make sure that the chair of Hydro was declining to answer the question I asked, which was: has he been asked? It's not the question that you probably thought I was going to ask after that, which is: does he or doesn't he? Has he been asked? If that's a question he is able to answer, I would appreciate that. If the question he declines to answer is whether the answer is yes or no, I'll accept that.

Hon. D. Miller: Mr. Smith will respond.

B. Smith: I don't think I should answer either -- not because I don't wish to, but because the review isn't concluded. The special prosecutor has asked us not to release what we normally would have released, so it's for those reasons.

G. Farrell-Collins: I accept that explanation. I suppose somewhere down the line we'll ultimately find out the answer to that.

I did have another set of questions with regard to the prospectus. It was something that didn't jump out at me; it jumped out at the member for Vancouver-Quilchena, who pointed it out to me. I found it interesting. If one looks at the shareholders, one of them is a Mr. Khurshid Hadi from First Leasing Corp. Ltd., and if one looks at -- this is subsection 6.1, the top right corner of page 18 -- the list of directors, the fifth is Mr. Hadi. If you look at the other directorships which he holds, one is First Leasing Corp., which has appeared in the report in the past as being one of the investors. Also, subsection (ii) is THK Financial Services. Maybe this is just an amazing coincidence, and I hope it is, but perhaps the minister can explain that amazing coincidence. If one goes across the page, one will see section 7.4, which lists the auditors as Taseer, Hadi and Khalid and Co., chartered accountants -- THK. And if one looks at the subsection again, it's THK Financial Services, and THK and Co., chartered accountants. If one goes down there from where it lists the auditors and notices that 7.7 lists consultants, one finds Taseer, Hadi and Khalid and Co., chartered accountants -- again, THK and Co. Indeed, if one looks back to the auditor's certificate, on the sponsors of share capital -- which is 5.2, just down to the left from where the list of directors is -- and one goes down to the bottom, one finds that Taseer, Hadi and Khalid and Co. again are the chartered accountants. THK and Co. are the chartered accountants who are auditing the financial documents. More importantly, if one looks at the signatories to the prospectus -- which is 8.17, which is on the second page, in the second column, near the bottom -- we have Mr. Hadi again as one of the signatories to the prospectus. Maybe it is just a coincidence, but appears to me that our auditors, our consultants and our board directors are one and the same person. Is that correct?

Hon. D. Miller: We simply don't have the answer to the question. We'll certainly see if it's possible to find out. I assume there might be some comfort in terms of the securities regulations in Pakistan, but we'll see if we can't find out.

G. Farrell-Collins: I don't even want to go into the line of questioning as to what the securities regulations may be in Pakistan. But I must say that from the point of view of how this might be done, certainly in British Columbia anyway, I think that would be questionable, if that were the case.

F. Gingell: Illegal is the word.

[8:30]

G. Farrell-Collins: "Illegal is the word," the member for Delta South tells me. So I hope to find that answer, because it does raise a whole series of questions in my mind. It raises a question as to who looked through this prospectus before it was offered. Mr. Ridley obviously played a role. And if it's the case that this person, Mr. Hadi, is one and the same -- the consultant, the auditor, the shareholder, the signatory to the prospectus, all of those things -- then I guess we've got a whole other line of questioning that we want to get into.

Perhaps the minister can tell me who it was who perused this prospectus on our behalf to find out what it was we were getting our investment involved in, in SEPCOL in Pakistan.

Interjections.

Hon. D. Miller: Mr. Chairman, I understand it was reviewed by BCHIL and its counsel. But I definitely heard the

[ Page 1504 ]

member from North Vancouver say it was somebody with a brother in Surrey. Perhaps I misinterpreted what he said; I'm sure I heard him say that, Mr. Chairman. Perhaps he'd like to correct the record.

G. Farrell-Collins: I asked the member a question on a different matter, of no bearing to the minister. The members opposite are talking all the time; some of it I can hear and some of it I can't. I don't infer anything until the minister speaks, so I don't know where he's getting off here.

Hon. D. Miller: Mr. Chairman, I've had three days of people who've been inferring things, and I'm just saying that I distinctly heard the member from North Vancouver talk about one of these people who had a brother in Surrey. I was just trying to inquire if he had some knowledge about the issue.

G. Farrell-Collins: I'll answer the question, then, for the minister. No, he doesn't have any information on the issue, and it was a different question that had nothing to do with this prospectus.

Let me take a slightly different line of questioning.

Interjection.

G. Farrell-Collins: The member for North Vancouver-Seymour reminds me of my question. It was: who was it, on our behalf, who analyzed this prospectus with regard to whether or not it was something that we were comfortable with as partners in SEPCOL?

Hon. D. Miller: I'm advised it was BCHIL and Mr. Ridley.

G. Farrell-Collins: Is the minister telling me that BCHIL went through this prospectus, along with Mr. Ridley, and decided it was something we didn't have any problem with? Is that correct?

Hon. D. Miller: Yes, Mr. Ridley's name is on the prospectus.

G. Farrell-Collins: Can the minister tell me if Mr. Ridley ever asked the question I asked earlier about Mr. Hadi and his involvement in so many facets of this prospectus?

Hon. D. Miller: I don't know the answer to that question.

G. Farrell-Collins: Is there anyone from BCHIL who might have asked the question about Mr. Hadi's involvement in so many aspects of this prospectus?

Hon. D. Miller: I think I've indicated generally that I'm unaware of any requests for information along those lines.

G. Farrell-Collins: That's discouraging, because one of the recommendations.... I don't know if it was a specific recommendation, but certainly the overall tone of the interim Smith report on this issue was that the proper outside advice wasn't considered, that people were flying on their own, that there wasn't proper supervision and communication back and forth. Now we're led to believe that, as it stands, neither the chair, nor the minister, nor the legal counsel for B.C. Hydro is aware of the questions that were asked or the approval process that went into place.

Did this prospectus have to be approved in any way, shape or form by the shareholders or directors involved at that point? Did Mr. Ridley have a yea or a nay about whether or not this prospectus was in a form we were comfortable with? Was there any sort of approval process that went through the board or chair at B.C. Hydro, or the board or staff of BCHIL? Was it their responsibility? And are we to assume tonight that they actually performed a study of this prospectus and that it went through some sort of approval process? Or was there, in fact, an approval process that took place?

Hon. D. Miller: I understand Mr. Ridley did sign off and had the assistance of outside counsel. I can't detail that here.

G. Farrell-Collins: Was the sign-off something that was required for it to go ahead, or was it simply: "Okay, thanks for letting me know"? Was it something where Mr. Ridley could have said: "Sorry, I don't like this. I'm putting a halt to it right now, and I want to change X, Y or Z portion of the prospectus"? Which outside counsel did he use to peruse this prospectus, to make sure that it was all in order?

Hon. D. Miller: First of all, with respect to the overall approval of the prospectus, it was not an issue for BCHIL. Mr. Ridley's name was on the prospectus, and therefore he had to give personal approval. In doing so, he obtained advice from outside counsel.

G. Farrell-Collins: Was that outside counsel somebody who specialized in offerings in Pakistan, or was that somebody here locally who normally deals with British Columbia securities law? I'm wondering if, in his seeking outside advice, it was somebody from Pakistan who is familiar with this or somebody local who offered that advice.

Hon. D. Miller: It was domestic counsel. Specifically, with the issue as I have outlined it, it wasn't a question of our okaying the entire prospectus; rather, Mr. Ridley, because his name appeared on it.... In other words, we didn't have someone interpreting Pakistani law, but Mr. Ridley did seek counsel. I did say I was unaware of and don't have the details about who that might be.

G. Farrell-Collins: I'm a little bit curious about the prospectus. If I can ask another couple of questions on it.... The listing of the board of directors intrigues me, because that obviously is.... We still haven't determined yet whether or not this law exists in Pakistan that says that once the thing is underway, you can't change directors. Here you just attach a statement of material change, and you move on; it's not a big deal. In Pakistan they may have different laws. We're still trying to determine that. I don't know if the minister has managed to get that information over the intervening period as to whether or not that law does exist.

Hon. D. Miller: Sorry -- which one?

G. Farrell-Collins: The law that says that while an offering is on the go, you can't change any of the directors; they're on there for good. That reference was made by the government in some capacity over the last week or so.

Hon. D. Miller: No, it wasn't.

G. Farrell-Collins: I think it has been; the minister says it hasn't. We'll leave it at that until we can determine it one way 

[ Page 1505 ]

or the other. That issue came forward, anyway, and I asked earlier whether or not we've been able to confirm that law. The World Bank has confirmed it, but the minister said he wanted to confirm it for himself. If he hasn't done that in the interim, that's fine.

The reason I'm asking this is that Mr. Laxton's name appears right at the front of this prospectus as the chairman. He's listed as serving on IPC International Power Corp. and is the nominee of BCHIL Southern, that being the joint company between IPC and BCHIL. It would seem to me that putting Mr. Laxton's name on this prospectus with no reference at all to what has taken place here in British Columbia may have given the people in Pakistan some sense of comfort that there was this person who was there as a representative, essentially, without their having to go through the hoops and find out what the percentage shareholders were for BCHIL Southern. It appears, by writing underneath his name, that he is the nominee of BCHIL Southern, as is Mr. Ridley. That would give Mr. Laxton at least the same, if not more, credibility as Mr. Ridley in representing British Columbia on the board of SEPCOL, in that they both are nominees of BCHIL Southern. Mr. Laxton has been appointed the chairman, and Mr. Ridley has only been appointed a director.

Is there not some obligation on behalf of us, the people who are putting the nomination forward for these people to sit as members of the board, to inform the people in this prospectus? There are pages.... Let's go to the end of this. I don't know how many 8-1/2-by-11 sheets of paper this would be if one were to do it that way, but there are obviously pages and pages and pages of information here with disclosures. There's a very clear disclosure in sections 6 to 6.10, with benefits to promoters and officers, interests of directors in property acquired by the company, qualifications of directors, etc. There's also a mini-bio of the chief executive officer, Ali Mahmood, and the company's secretary, Syed Akbar Kazim, talking about who they are, what they do, what their background is. There is no mention here at all, anywhere in the prospectus, that Mr. Laxton is in the middle of a little bit of trouble here in British Columbia, in that there's an RCMP investigation going on into the way the BCHIL Southern deal was set up.

Does the minister not think that it would have been appropriate to include somewhere in this prospectus -- in all these pages of disclaimers and facts -- something that would have disclosed to people that there was an RCMP investigation ongoing? Certainly there are claims throughout by all the companies saying whether they have loans that are overdue -- whether any financial considerations are outstanding. It goes into extreme detail on the fuel supply deals, the standing and the assets of the various companies. Would it not have been appropriate somewhere in this prospectus to have outlined the fact that the chair of the corporation was subject to a criminal investigation in British Columbia?

Hon. D. Miller: I assume that prospectuses in various countries are subject to the laws of those countries, and I assume this one passed that test.

G. Farrell-Collins: I agree with the minister that obviously this has to pass the test of the laws in Pakistan.

If the minister remembers correctly, the framework for foreign investments that was approved by cabinet also indicated that there was a requirement for us to operate in the international field with a high standard of ethics and moral conduct. Does the minister not feel that it was incumbent upon the government and upon the chair and board of B.C. Hydro to ensure that in keeping in line.... This is post-February 22 now; this is a new chair, some new board members, a new minister. This is after this issue.

In order to finally comply with the framework direction given by cabinet to the Crowns for these types of projects, does the minister not think it would be important for us to comply with the ethical component of that, and that it was therefore by putting that clause in that framework...?? Does it not demand a slightly higher standard of B.C. Hydro's participants, over and above what is required in the laws of those countries? Isn't the very reason that clause was put into that framework direction given to the Crown corporations to ensure that we didn't just go to those countries and operate our business the way it's done there? We felt that a British Columbia standard of ethics and conduct was required; we wanted to ensure that we were engaged in, for ethical and environmental concerns.... There are a whole bunch of them listed there. Doesn't the minister think that that demands a slightly higher standard of measure than just the answer I got previously, which is the laws that exist in whatever country we happen to be doing business with?

[8:45]

Hon. D. Miller: I would remind members for the umpteenth time that at the request of the Pakistani partners we took a passive position with respect to Mr. Laxton. It was initially our desire to have him removed from all associations and all companies. Based on advice and considered thinking of the people responsible, they acceded to that request from Pakistan, because it was considered to be important. Perhaps we shouldn't assume too much, but I assume that in Pakistan they do have regulations. There is no reason not to believe that these affairs are regulated as well as we regulate our own.

Finally, with respect to an obligation that I think is important -- that is, not to turn our back on a project that obviously was of some significance to the people of Pakistan and was one that, had we walked away from it and acted precipitously, would have damaged our reputation and our ability to pursue these in other locations.... I have no reason to think that the standards in Pakistan aren't adequate to protect people who purchase shares on the exchange. If you look at the extensive information contained there, I assume that investors in Pakistan are capable of making these kinds of decisions and that there was clearly no deception, if that's what the member might imply -- that somehow we should have insisted that beside Mr. Laxton's name, perhaps in bold type, we could have put: "Subject to some investigation." We let him stay there on paper only.

The real support for this project is the fact that B.C. Hydro is behind it. Mr. Laxton is only an appointed individual. The entity that's behind this project in B.C. is ultimately B.C. Hydro, and that's a pretty solid level of support for this kind of project. Now, it's not listed here -- we don't say B.C. Hydro. But the fact is that unless Hydro had decided to pursue these projects, we wouldn't be in this game, operating through subsidiary companies of B.C. Hydro.

G. Farrell-Collins: Well, that's the nub of the whole matter, I guess, and it takes us back to where we first started. The only reason that Mr. Laxton and Mr. Ridley are there is.... It's because of B.C. Hydro. There's nothing that Mr. Laxton particularly had to offer.

It's interesting, because the minister says that the people in Pakistan can make these decisions on their own. They're investors, and they can look through the prospectus and find 

[ Page 1506 ]

out. Well, the very reason there is a prospectus is that it's supposed to be a full and frank disclosure of what's going on. That's why there are requirements to put various bits of information in a prospectus. Rather than put a big black mark beside Mr. Laxton's name which said "Subject to criminal investigation in British Columbia," perhaps the prospectus, at the direction of Mr. Ridley or somebody at B.C. Hydro, could have included under section 7.8, "Material Documents and Contracts," or something like that.... Or somewhere in section 7, it could have listed some facts about an ongoing criminal investigation in British Columbia with regard to this. Because it certainly does go out of the way to mention, in section 7.8(e), an offering memorandum with B.C. Hydro International Power Development Corp. for the.... Oh, sorry -- this is the operation and maintenance contract.

It lists the operation and maintenance contract of B.C. Hydro International Power Development Corp. to continue to operate the project. There are all sorts of subscription agreements, agreements for management of construction, an underwriting agreement, a bank facility agreement, a first amendment, restated fuel supply, power purchase and implementation. Then it goes on in section 7.9 to say: "Copies of the agreements referred to in this prospectus may be inspected during the usual business hours on any working day at the registered office of the company, from the date of publication of the prospectus till the closing of subscription." Why couldn't there have been documents available at the office that explained that to people if they came to look?

There is a series of avenues to make sure that we were playing to a certain level of ethical conduct for the people in Pakistan who may well have ended up being investors, who bought into this deal. I didn't set the direction; the government did. I'm trying to remember the name of the document. I think it was the Policy Framework for Crown Entrepreneurial Activities or something to that effect. The minister was probably in the cabinet meetings when that was approved and discussed; I wasn't. In that, quite clearly, there was a clause that put forward maintaining certain standards of environmental and ethical -- there are a couple of others -- conduct. I assume that those are measures one would want to live up to.

The minister said that as long as we're obeying the laws in Pakistan, everything's fine. I would say that's not fine; I would say that B.C. Hydro has, as a result of a clear directive given by the cabinet in British Columbia, the requirement to measure itself by a slightly different stick, that being the requirement for proper ethical conduct. I would suggest to the minister that B.C. Hydro fell short of that when, in the prospectus, it did not disclose the activities that are going on here in British Columbia, the concern there is around the way the IPC deal was structured and who controls it. The fact is that the controlling interest of BCHIL Power may or may not be changing and that there may or may not be a buyback that's ongoing.

Obviously, the outstanding loans of the companies and any overdue loans, those types of things, are things that we feel need to be listed on the prospectus for consideration by the people who are going to go there and possibly buy shares in SEPCOL. Certainly all the changes, or at least some of the changes, on at least a warning, a flag or a footnote on the changes that are taking place here in British Columbia with regard to the ownership and control of BCHI Power, and the activities surrounding the investigation that is ongoing, are things that should be of concern to the government of British Columbia and, through them, B.C. Hydro.

I would think that B.C. Hydro, if it were living up to the measure that was contained in the framework directive that was given by the government, would have wanted to include something like that in the prospectus. It doesn't have to be vague; it doesn't have to be bold; it doesn't have to be flashy; it doesn't have to be highlighted; it doesn't have to have a little box around it. It could just be here, like all these other risks that are listed. All these other concerns are listed in a full and frank disclosure. It would be there.

It's interesting to note, if one looks at section 8.16, on page 19 of the prospectus, that.... This is for people who are applying to purchase shares. If I am an investor in Pakistan, and I'm applying to buy some of these shares and say, "Hey, this looks like a good deal; no criminal investigations in this one; I'm going to buy some shares," I have to comply with section 8.16. It says: "Making of any false statements in the application or wilfully embodying incorrect information therein will make the applicant or the bank liable to legal action." So, as a person purchasing shares, I can get my butt sued off if I put something in that is not full and frank and clear. But B.C. Hydro, in its role in signing off on this prospectus, doesn't have to be full and frank. It doesn't have to disclose; it doesn't have to put all the factual information out there. They can get off scot-free. But if I, little old me, with my very small amount in RRSPs, decide to invest in SEPCOL -- heaven forbid! -- then I could get nailed if I put something in there that's not true.

Why wouldn't the same standard apply to the companies that are putting the prospectus forward? It would seem to me that if that's the ethical standard, if that's the standard we are going to put to the shareholders -- the people that may buy the shares -- then why wouldn't we put that same standard to ourselves, as people offering those shares for sale?

Hon. D. Miller: Mr. Chairman, I really tried to answer in my last question that the issue is not material to the share offering; it's not my view that the issue is material to the offering in this regard. The offering was for shareholders in Pakistan to purchase shares in the project that's listed. There are a number of partners in that project. B.C. Hydro, through subsidiaries, is one of them. The fact that Mr. Laxton was the subject of an announced investigation is not material to the share offering, nor, in fact, do I think -- and there may be people on the other side who are more familiar with this than I -- that a share offering being put forward in Canada would require that kind of information. It may be that here in Canada.... I keep looking over there for people more familiar with the stock market than over here; I can't look in a mirror. But I do not believe that the issues that we have been discussing are material to the offering; nor would it be material, for example, using the same logic, to have insisted that language go into the offering that indicated that there was a very close political race here in British Columbia and that the Liberal Party, if successful, would expropriate the private shares. Would that, using the same logic, be something that should have been included in that prospectus? I see the circumstances as being exactly similar. I don't think it should have, but perhaps, having made the argument, the member opposite may now disagree with me.

G. Farrell-Collins: I don't know -- maybe that's a good question the minister has. I think there is a big difference between the ownership of those shares, necessarily.... I think the minister makes a point. Whether or not the chair of the company -- not just any old person, but the chair of the company -- that you are about to buy into, this man of great repute from B.C. Hydro, Mr. John Noel Laxton, is subject to a criminal investigation for the very deal that you're about to buy into.... That, I think, is something you might want to know.

[ Page 1507 ]

As I said, even if I were to give the minister the benefit of the doubt and say: "Look, the appropriate place for it wasn't in the document...." Let's just say that for a minute. Let's say that you shouldn't even have put it in the document. But in compliance with section 7.9, that information could have been available, maybe even with some newspaper clippings attached to the files at the head office of the company, so that if somebody happened to wander in to actually look at the documents -- which does happen from time to time when purchasing shares -- they would have been able to see what was going on here on this side of the water.

If the government is going to give those kinds of directives to B.C. Hydro and to the Crown corporations and say that there's more than just a requirement to live up to the laws of the country they operate in; that we have some principles here in British Columbia which may be higher or lower, of a tougher standard or an easier standard to reach, than in the various countries we're dealing with; that we have some standards here in British Columbia below which we will not go.... In dealing with Pakistan, we may find that there are far more stringent requirements in a certain area -- I don't know that. But in British Columbia.... My understanding of the directive that was given by cabinet, not just to B.C. Hydro but to all the Crowns, is that there's a level, a list of items, an overall sense that this is what is acceptable in British Columbia, that this is what we expect for ethical conduct, environmental conduct and business arrangements in British Columbia, and that we expect the Crown corporations to at least meet those standards when they're in other countries. If they have higher standards, great -- we obviously have to live with those. But we at least want them to live up to those standards.

It would appear to me that, in living up to those directives from the government, it would be incumbent upon the government and, more importantly, upon the Crown corporation, to have some form of disclosure. It might be: "Oh, by the way, the guy John Laxton who is on the prospectus here is not really sticking around. Right now, he's under investigation for criminal activity. This director, Mr. Ali Mahmood, the CEO, wants you to keep him on here because he doesn't want to tell you all about it. He wants to keep him on here, but as soon as this deal is over, he's leaving, and the whole thing is going to change." You would think that that would be something one would want to disclose to people who were buying these shares in Pakistan.

[9:00]

The Chair: Hon. members, we've reached a point where we really are listening to ourselves over and over again. I should remind members that this is a large ministry. We are dealing with one Crown corporation, and we have many more to go, so just keep that in mind.

G. Farrell-Collins: Thank you, Mr. Chair. I've been here not a long time but long enough to know what's in the Ministry of Employment and Investment. I'm well aware of the estimates that still need to be perused. The Chair may be eager for us to wrap up, but we'll move through this at the speed with which we continue to get good answers from....

The Chair: Hon. member, could you take your seat, please. We'll move through it according to the rules of the House. I've given at least four cautions now on repetition. So as long as we keep that in mind, we will move through this, but only in that way.

G. Farrell-Collins: Given that the minister is not here, and given that I know we have such a desire to move so speedily through here, I move that we recess until the minister gets back.

Interjections.

G. Farrell-Collins: Section 6.7 of the prospectus says: "Save as provided by section 187 of the Companies Ordinance, 1984, no person shall be appointed as a director unless he is a member of the company." I assume that means "a shareholder of the company." Is that correct?

Hon. D. Miller: I don't have the answer to that question.

G. Farrell-Collins: I hope we can get the answer somewhere along the way. While we are seeing if we can find the answer to that, I'd like to just move off the prospectus for a bit. There are a couple of other questions, too, which I had asked and which we were trying to find answers to.

In reading the report, one comes across the name of Bruce Duncan, who is the director of energy, insurance and communications with the Crown corporations secretariat. It's my understanding that he was sort of the front man or point man for CCS in reviewing this deal. It appears that there was a fair bit of conflict between Mr. Duncan and Mr. Shaw, I believe. I'll have to refresh my memory, but certainly this occurred between Mr. Duncan and the people at B.C. Hydro International. It seems that there was a difficult exchange of information. Mr. Duncan's name comes forward quite often in this arrangement. On page 142 of the interim report, it says that from 1994 to 1996 Mr. Duncan was the CCS director of energy, insurance and communications Crowns. Does he continue in that capacity?

Hon. D. Miller: He has the same position. There was a minor word change: the word "communications" was deleted.

G. Farrell-Collins: He continues to do exactly the same job that he did before -- is that correct?

Hon. D. Miller: Yes.

G. Farrell-Collins: In the report there is some talk about a particularly confrontational meeting between Mr. Duncan and BCHIL. Can the minister tell me what that was about? It appears that that is where communications first broke down between CCS and BCHIL. At that point, there seems to be a real lack of information going back and forth. From there on, it seems like CCS really had to pull information out of BCHIL on an ongoing basis in order to make any sort of sense of what was going on. It seems that the information, when it was forthcoming from BCHIL to CCS, was less than complete and needed to be requested time after time. There are numerous references in the report to information being sought by CCS on an ongoing basis, only to find that they received it after asking for it three or four times, that they didn't quite get it all or that they didn't get anything at all. Perhaps the minister can explain why that occurred.

Hon. D. Miller: I believe there was some conflict in respect to a desire on the part of some directors of Hydro to have the act changed so that they could in fact be shareholders. Mr. Duncan provided advice and also, if you look at page 112 of the report, communicated cabinet's decision -- I 

[ Page 1508 ]

think the section refers to cabinet's decision -- that section 7 of the act would not be changed to allow directors to be shareholders.

G. Farrell-Collins: So the only reason there was a conflict between Mr. Duncan and BCHIL was with regard to the amendment of section 7 of the B.C. Hydro act, which would allow B.C. Hydro directors and officers to purchase shares. That's where that conflict arose. Was that the only reason for that?

Hon. D. Miller: Hon. Chair, in the course of operations with respect to any of the Crowns, there may be issues that arise. The CCS is there to provide government with advice, and that advice may conflict with advice received from the Crown. That assists us in trying to reach the best decisions.

G. Farrell-Collins: It appears to me -- certainly just from reading the report, so it must appear that way to the chair of B.C. Hydro -- that there were major breakdowns in communication between the various parties that were participating here. To what extent that was deliberate and was perhaps a function of Mr. Laxton's personality, in that he knew what he wanted to do and was just darn well going to do it whether anybody objected or not.... Quite frankly, one director of B.C. Hydro in particular, I think, really did push fairly hard to seek outside legal advice with regard to conflict of interest. There certainly was, even internally, some pressure with regard to the potential for conflict of interest in board members, directors, officers and senior people within B.C. Hydro purchasing shares. I think quite a few people raised the issue time and again, and perhaps at the end of the day should have raised it just that one more time or just that much louder, or somehow should have gotten the information to somebody who may have listened to them and gone around Laxton. But certainly that issue was raised.

Throughout the document, there's a real sense that these people just weren't talking to each other. They weren't listening to each other; they weren't talking to each other; they weren't exchanging information. That's if one is to assume that the testimony given by all these parties is factual and correct. Has that tenor, that tone, within B.C. Hydro and B.C. Hydro International changed? Has there been an improvement in that? Has there been some leadership provided to ensure that this type of communications gridlock doesn't happen again?

Hon. D. Miller: Hopefully, there have been a lot of lessons learned about this event. I would say that the issues I'm faced with as the minister, and that senior management and the board at Hydro are faced with, are -- I spoke to this at length last week -- first of all, trying to deal with this project -- and I've reiterated that over and over again, that sense of direction we have in terms of trying to deal with it -- and with the obvious impact that this has had on morale within B.C. Hydro.

In my short time as minister.... I think we've got some enormous challenges ahead of us for B.C. Hydro, and it's important to try to bring stability throughout the organization, but with the management group and the board. Anytime you take a large corporation and examine its function and essentially challenge the status quo, you have to have an effective management team. We will be, and I will be, making some suggestions to my colleagues with respect to structure and reporting and the like. But I don't think there's any question that this has had a negative impact on the management people -- indeed, throughout the ranks of B.C. Hydro -- and that it's important that we try to bring as much stability as we can to the organization and then look at those challenges that I think the organization faces.

G. Farrell-Collins: Certainly there are communication problems within the Crown that need improving and, obviously, morale problems that need improving. I would suggest that so far.... I'm obviously not privy to everything that goes on in B.C. Hydro -- or, for that matter, a great deal of what goes on in B.C. Hydro -- but certainly the way this issue has come about and has been made public, and the difficulty in extracting answers to questions up until today, haven't given me a great deal of confidence that we've gone far down that path yet, although it is early. It's only five months or so since the initial issue became public, but I certainly hope that some of those changes are coming.

I want to go through a bit of chapter 8 of this report, because it's probably -- in the short term, anyway -- one of the most crucial. It deals with the financial controls and accounting controls, particularly in section 8.7. I have a series of questions there. A few concerns were raised to me in reading this that I have a problem with and would like to ask some questions about, particularly on page 100, section 8.7, "Accounting records and documentation". There's a paragraph there that says:

"BCHIL did not establish proper books, records and accounts for the companies in the B.C. Hydro group at the outset, and the transactions were not recorded until well after the fact. In some cases, there was a lack of supporting documentation with respect to cash transactions which occurred without proper legal documents."

Perhaps the minister, through the Chair, could expand upon what's been done, first of all, to address the items in the first sentence; and second, could explain in more detail the problems with the cash transactions in the second sentence.

Hon. D. Miller: I'm advised that since the report -- probably prior to the report being published -- Hydro is working with both external and internal auditors to try to come to grips with the issues outlined on page 100.

[9:15]

G. Farrell-Collins: I assume that's the first part of that paragraph -- i.e., that there will now be a proper set of books, records and accounts, and that transfers and transactions will be recorded as they happen or with whatever accounting method is being used. I find that finding of this report to be a huge concern, quite frankly -- that a company of B.C. Hydro's size, when spinning off these subsidiaries, would not ensure that there was, along with that spinoff, some sort of D and A with regard to what the accounting procedures should be. That's a big concern to me, and I'm glad to hear that that's being acted upon.

Do we know how far down the line that is? Is this a huge project or is it something that can be done pretty quickly? Are the templates there within B.C. Hydro to put this into place fairly quickly? Is it almost done? Are we just starting on it? What's the time frame for getting that accounting structure in place?

Hon. D. Miller: It's been ongoing for some time, and again, just following through on page 101, it lists some reasons why the control problems were experienced and the kind of time pressure on raising the finances for the project. It talks about Hydro operating in a typically Canadian environment and the Pakistani partners not being familiar with accounting 

[ Page 1509 ]

and control procedures. I think these issues can be properly put in the context of our experience with respect to international projects, and Hydro is working both internally and externally to straighten that out.

G. Farrell-Collins: The second half of my first question referred to the second half of that same paragraph: accounting records and documentation. The sentence says: "In some cases, there was a lack of supporting documentation with respect to cash transactions which occurred without proper legal documents." Perhaps the minister or the chair could expand upon what types of problems we had there: what types of cash transactions were there, what sort of dollar figure are we dealing with here, and how big a concern is that?

Hon. D. Miller: I'd advise we're not talking about cash here. We're really talking about paper. I know that the language says "with respect to cash transactions," but we're talking about paper and the lack of proper documentation surrounding certain processes of transactions.

G. Farrell-Collins: Hon. Chair, that's a little more clear. If one moves to the bottom of the page, on non-cash transactions, the last paragraph in the last sentence says: "In the opinion of the review team, it would have been in the B.C. Hydro group's interest to require an external review or audit of Southern group costs transferred to SEPCOL." Has that external review or audit been completed yet?

Hon. D. Miller: It's underway with the review team in KPMG.

G. Farrell-Collins: I'm glad to hear that. If we move over to the next page, section 8.8.... It's a bit of a follow-up to what was asked earlier, and I don't know if the chair of Hydro, through the minister, would like to comment further on it. But the last sentence of the last paragraph on page 101, in referring to accounting information and financial controls at SEPCOL, says: "This remains a weakness as it relates to the quality of financial information available directly from SEPCOL and the Southern group." What sort of financial information are we getting from SEPCOL? What sort of financial information are we still not getting? And has that improved in the intervening period since April 23?

Hon. D. Miller: I'll ask Mr. Smith to respond.

B. Smith: I asked the member of my review team who is working on that along with KPMG to give us a report on that. I'm sorry I don't have that, but I know that's something that he's addressed. He worked on it during July. I can't give you an up-to-date on it.

G. Farrell-Collins: I appreciate the answer. It was probably more detailed that what I was looking for. I'm wondering if we are now getting the information we need, or whether that what KPMG.... Is it KPMG that's saying to us: "Here is the type of information you should be getting. These are the questions you need answered. Here's the type of financial or management reporting that you require in order to play a responsible role as a significant shareholder in this corporation. We're drawing up for you a list of what it is you need to get, and then you can compare it with what you're actually getting, and then perhaps we can help you negotiate to get the rest of the information that you're not currently receiving"? Is that the sort of structure of this review that has been assigned to the review team and to KPMG? I'm just trying to get a sense of what it is they're doing for us.

Hon. D. Miller: Mr. Smith will respond.

B. Smith: There are two things, hon. member. The review team is trying to find out exactly what has happened and what is going on, and then KPMG are trying to design a proper structure, so that these weaknesses won't be there in the future. The review team will be reporting out in its final report on this, for which KPMG is supposed to be assisting in the designing.

G. Farrell-Collins: So the review team is doing our version of the public accounts work on this by looking backwards and trying to find out what went where, and why and how, and by getting a sense of where we are as of today -- or as of when the report comes out. And KPMG is looking forward, saying: "Here is what we need to know; here is the structure in place." Are they going to be able to impose that structure on SEPCOL and say, "Here is an accounting structure that we would like to see," or are we going to say to SEPCOL, as a shareholder: "This is the kind of information we'd like to get. Would you please give it to us"? What sort of process will be in place in order to ensure that that does, in fact, improve?

Hon. D. Miller: We will do our best with respect to that issue, which was identified in the report. Again, looking at the report, reading section 8.8 from the beginning, the second paragraph deals with some failure to report. On the good-news side, I suppose, is that irrespective of these weaknesses, there is no evidence of financial irregularities with the funds invested in the project by the B.C. Hydro group's participants. So Mr. Smith has indicated that there is ongoing work, with external assistance, to rectify these problems. As to the question of its applicability, obviously that's something we desire, and we will just have to see as the work progresses.

G. Farrell-Collins: I hope it improves. As one of my colleagues said, I suppose if it had been people's personal money when they were putting this deal together, they would have been a little more forceful in ensuring that the reporting structure was better. But I am glad to see that we are working actively to close those loopholes and to make sure that there is a responsible accounting structure in place. Does KPMG have people in Pakistan that are doing that for us, or is this being done out of their office here in British Columbia?

Hon. D. Miller: It's both in Pakistan and here.

G. Farrell-Collins: The member for Delta South has just informed me that Mr. Duncan is in the room. I do not know if that is correct. There he is, waving, so he still is alive and well, and he does still work for E&I, or for CCS. I am glad to hear that.

I want to refer to the flow of funds, section 8.4 of the report, on page 98. This raises the question that is contained a little bit in a note in the financial statement in this year's annual report of B.C. Hydro. I think it is note 7. In this report it is contained in the second paragraph, at the end. It deals with the potential liabilities in the event that this thing doesn't come off exactly as we all hope it will. It talks about the debts back and forth, etc., and it says that a review team has not 

[ Page 1510 ]

reviewed the form of investment in SEL in the Marshall Islands or in SEL in Pakistan, collectively the Southern group, in terms of whether those companies are capitalized with debt or equity.

This is relevant, in that the project sponsors, which include BCHIL and the Southern group, "are jointly and severally liable for certain project cost overruns." Now, that is significant, because what that means is that obviously B.C. Hydro has a pretty deep pocket, probably, relative to some of these smaller companies. Although we do not know how big they are, I suspect that they are not of the size of B.C. Hydro. I guess, ultimately, B.C. Hydro's pockets are as deep as the collective pockets of the taxpayers in British Columbia, and beyond that, they're as deep as those of the government of Canada. Those are pretty deep pockets.

I know what happens when things go wrong. The people with the deepest pockets are the ones they go after first. Given that we are jointly and severally liable for project cost overruns with the Southern group, both of the two SEL companies, have we yet been able to determine whether or not those companies, in the event of a failure in this project, or cost overruns in particular, can absorb their portion of the liabilities? As far as BCHIL Southern goes, with us putting up 60 percent of the asset -- "us" being B.C. Hydro -- and IPC putting up 40, and the controls being reversed in a 60-40 relationship, certainly IPC's pockets aren't nearly as deep as B.C. Hydro's.

My concern is that if the cost overruns occur, the two SEL companies could bail on us. IPC is obviously not going to be able to provide the funds if we get up into the tens of millions of dollars. In fact, the default on all of those liabilities that are held jointly will end up being held severally by B.C. Hydro, and we'll end up holding the bag for this on that occasion. Have we been able to determine yet the extent of the deepness of the pockets of the two SEL firms contained in the Southern group?

Hon. D. Miller: I'm not certain of that last question. With respect to the issue identified in the third paragraph, I understand that the cap on that is $8 million. I think that has been identified.

G. Farrell-Collins: Perhaps that is something in the report that I missed -- or in the prospectus, which I haven't had a chance to look at in detail. Where is it that the liability for cost overruns is capped at $8 million? I've been unable to find that, and if the minister could steer me in the right direction, I'd be most grateful.

Hon. D. Miller: They are looking for the reference. The obligation is BCHI Power's, and the cap is $8 million. But hopefully we'll find it.

[9:30]

G. Farrell-Collins: I don't know if I heard the minister's explanation completely or accurately. I think he said that BCHI Power -- so, the joint IPC-B.C. Hydro company -- is liable to a cap of $8 million in the event of project cost overruns. What if the cost overruns are higher than that? What if they are on the order of $50 million? I mean, that is huge in a project of $120 million. But what if they are significantly larger than $8 million? Who picks up the extra in the cost overruns? Does that default to the Pakistani government? Where does that money come from? Is that something that the World Bank kicks in? In the event that cost overruns go beyond that amount, where does that come from?

Hon. D. Miller: I would assume SEPCOL, but I don't know if it's germane or not. I mean, we've been trying to buy those shares back, and people are fiercely clinging to them, so obviously the potential downside risk....

Interjection.

Hon. D. Miller: No, there is not, Mr. Chairman, in response to the member for Delta South. I have a body of experts behind me who say there is no guarantee. I suspect it has become myth, and therefore, for some people, it is fact. But there is not. Those shareholders, some of whom are absolutely convinced that it's probably even sweeter than that, don't want to sell. The private sector is clearly not alarmed at all.

G. Farrell-Collins: I stand corrected. It's not a guaranteed 24 percent. I think "an expected or anticipated 24 percent" is the wording that is actually used there. We'll wait and see what the return is, I suppose; we'll see what the final return might be. If the minister is saying that the opposition, in turning an expected return into a myth of a guaranteed return, has caused the confidence in this project to increase dramatically, then I guess all the negative things he's been saying about us and about our lack of interest in this project aren't quite true. Anyway, we will determine that.

The other item on page 98, just below that paragraph that we've been talking about, states: "The equity of distribution between BCHI Transpower and the Southern group does not account for currency fluctuations between the Pak rupee and the U.S. dollar in the future, nor for how cost overruns for which the sponsors are responsible might be contributed." Can the minister or the chair tell us why that wasn't part of the way the deal was structured? It would seem to me to be a realistic way of approaching it.

Hon. D. Miller: I'll let Mr. Costello give the response to that.

M. Costello: Hon. Chair, the shares that were listed on the Karachi Stock Exchange are denominated in the local currency, and therefore they can fluctuate. The share values can fluctuate. But the foreign currency hedge that's contained in the agreements with SEPCOL is fully hedged in U.S. dollars. The amount that the Pakistan government will actually pay for the power is fully hedged in U.S. dollars, so there's no foreign currency risk as far as the economics of the project goes. But shareholders who hold shares denominated in rupees are then subject to the changing value of the rupee on international currency markets.

The Chair: The Chair is going to assume that Mr. Costello is the deputy minister for the purpose of this debate.

G. Farrell-Collins: He is, actually. Good assumption.

That answers the first concern. The second concern is that it also states: "...nor for how cost overruns for which the sponsors are responsible might be contributed." Can we get a similarly adroit explanation into how that has been handled?

M. Costello: The risks associated with funding cost overruns are denominated in U.S. dollars. That is the foreign currency risk that is attached to any calls that might be made on BCHI Power by SEPCOL for cost overruns. It would be in U.S. dollars.

[ Page 1511 ]

G. Farrell-Collins: So that, in effect, means that those people who purchased shares in rupees have got a bit of a risk. If the rupee takes a dive, they could still be held for those cost overruns -- the payment of those in U.S. funds if there were cost overruns. Is that correct?

M. Costello: The member referred to shareholders. It's BCHI Power, as one of the shareholders, that has the U.S. currency risk associated with cost overruns. It's BCHI Power we're referring to, not other sponsors or shareholders.

G. Farrell-Collins: Maybe I misunderstood or maybe I didn't ask the right question, but the question was with regard to the last sentence of that paragraph, where it says.... The whole thing says: "The equity distribution between BCHI Transpower and the Southern group does not account for currency fluctuations between the Pak rupee and the U.S. dollar in the future, nor for how cost overruns for which the sponsors are responsible might be contributed." Do the sponsors in this case mean BCHI Power or the Pakistani shareholders? It doesn't explain how they would have to deal with it, thereby meaning that our Pakistani partners, who purchased their shares in rupees, are not covered for any currency fluctuations with regard to cost overruns in the portion they would have to pay.

M. Costello: The liability for cost overruns is fixed at the equivalent of $8 million (Canadian). Because of the joint and several obligation, should the other partners' sponsors not be able to put up their share, we would ultimately have to put, for the first three years, up to the equivalent of $8 million into SEPCOL.

G. Farrell-Collins: I just want to be clear on this. For the first three years, the maximum liability possible, due to cost overruns, that could be charged against BCHI Power, would be $8 million (U.S.), regardless of whether or not the other partners in the project were able to live up to their end of the deal. Let's say cost overruns amounted to $12 million (U.S.) and the Southern group could not kick in the $4 million, or their proportion -- whatever it is percentage-wise -- of the cost overruns that they would be required to kick in. Then that would default to BCHI Power as a result of the agreement, and they at no time would be required to pay more than $8 million for the first three years. If that's correct, then what happens at the end of the three years?

M. Costello: For the first three years, the cap is the equivalent of $8 million (Canadian), which is jointly and severally held, and if the other sponsors aren't able to put up their share, then it would come back through BCHI Power, conceivably back right up to BCHIL. After the three years, that $5.95 million (U.S.) drops, I believe, roughly in half. I don't have the figure right in front of me. But after three years, the cap drops to roughly one-half of that value.

F. Gingell: If the overruns are in excess of this $5.9 million (U.S.) or $8 million (Canadian), which I understand is the equivalent, who is going to advance the additional funds to pay the costs of the project?

M. Costello: As I understand it, in that event, SEPCOL would then have to raise new equity or take out new loans in order to keep the project going, should something be required in excess of the cap.

F. Gingell: Have firm price contracts been entered into that effectively guarantee costs in the future of the total project?

M. Costello: The project at this time appears to be on budget and on time, and so we are not foreseeing that there would be any call on the cost overrun cap. In terms of price guarantees, there is a price guarantee that becomes revenue to SEPCOL for the sale of the power. Those agreements have been in place for a number of months to assure the revenue to SEPCOL.

F. Gingell: What B.C. Hydro owns, through all these various corporations and IPC, is shares in SEPCOL, the company that's going to build this project. If B.C. Hydro or BCHIL were required to advance more in the accounts of SEPCOL, would they issue additional shares? Would they be some form of preferential share or loans? If they were loans, would those loans be secured?

M. Costello: As I understand it, the call on the $5.9 million (U.S.) would be in the form of a loan, and we were discussing whether it would be converted into equity. We're not sure of the provisions, but initially, it would be as a loan to SEPCOL.

F. Gingell: One would presume that the way this would be structured in such an event would have been negotiated with the banking group. Can the minister advise us how those additional funds would sit vis-�-vis the financing that comes from the banking group?

[9:45]

Hon. D. Miller: Mr. Chairman, I'm advised that it would be subordinated debt to the other lenders.

G. Farrell-Collins: I realize this is sort of a hypothetical line of questioning, given the assurance from the deputy minister that the project is on time and on budget, but I think it's worth pursuing a little bit. I guess the liability is capped at $8 million (Canadian) for the first three years and then $2.9 million (U.S.) after that. I think that's the figure that was given. If they required more funds after the three years, they would have to go out and raise them. I suspect that it's SEPCOL that then has to raise them, and it's us, through our position in SEPCOL, who would have to repay some of that, if it's in the form of a loan. However you want to put it, we're liable for whatever the costs may be. To cap them at $8 million (Canadian) for three years is a good way of putting it, but it seems to me that, after that, unless I missed the last discussion, what happens is that we just account for them a different way and call it a different thing. It becomes a loan of SEPCOL's and a liability of SEPCOL's to repay. That essentially means we're going out and borrowing money, and we're going to have to repay it, hopefully from the operations. In the event that they don't materialize and that one has to wind up the project, then I would assume that those loans would then kick back to the shareholders of SEPCOL down the line.

If I can move off that for a minute.... One thing that did jump out at me when I first read this report -- it's something that wasn't a big flashy part, so the media didn't grab hold of it, but it's something that stuck in the back of my mind at that time -- was the way the deal was structured regarding the guarantee of the price that we're going to receive for selling 

[ Page 1512 ]

the power to Pakistan: 6.5 cents per kilowatt-hour, with a potential 25 cent per kilowatt-hour bonus in the event that the project is on line at the end of December 1997, or whatever it is.... Yes, December 31, 1997.

But if you look at it, the price of our supply.... We're bringing in oil -- I think it's diesel, if I understand correctly. We're bringing in diesel at one end, and we're pumping out electricity at the other end, and the price that we're going to receive for the power going out the one end is fixed. The price for the diesel that's coming in the other end may fluctuate, in fact. If I read this correctly, it says that:

"Fuel and diesel oil for the plant will be supplied by the Pakistan State Oil Company Ltd., PSO, for an initial period of 22 years pursuant to a fuel supply agreement that was signed on November 30, 1994, and amended on October 24, 1995. SEPCOL is to build a railway siding....

"PSO is to enter into an agreement with Pakistan Railways for the delivery of the fuel. The price to be paid for the fuel and diesel oil will be the price established by the GOP" -- the government of Pakistan -- "from time to time."

I sort of think: "Well, that's interesting." We have a fixed amount we can sell our product for, but the price of the supply coming in the other end fluctuates depending on what the government of Pakistan decides. I mean, we only have one supplier. We've entered into a 22-year agreement to have the diesel fuel supplied to us by the government of Pakistan through their state-owned oil company, and the price of the diesel fuel will be set by the government of Pakistan. We're a captive purchaser, yet we have a fixed price that we can receive for our product out the other end. That concerns me a little bit. Perhaps the minister, or, through him, either the chair or the deputy minister, could explain how that works, whether I'm incorrect in my analysis, and whether my concern that -- with a different government and without violating any agreements -- this project could become a money-loser very quickly, with no ability to get out of it for 22 years....

Hon. D. Miller: I'm advised there's a flow-through on any price increases.

G. Farrell-Collins: I'm reassured by that. It means that if the price of fuel rises, then the price we receive for our power also rises in proportion. What happens in the event that the price drops? Does our price for power also drop?

Hon. D. Miller: We're not in a position to give an explicit answer on that. Just sort of reaffirming, I understand there is a flow-through arrangement with respect to price increases on diesel, on the upside. But I can't confirm the downside.

G. Farrell-Collins: I guess if it were to be a flow-through up or down, I would ask the question just from sheer logic: why is it that in the agreement the figures of 6.5 cents per kilowatt-hour and the 25 percent bonus would be specifically listed, but not the price of fuel also? It seems to me that the two would be linked and that the flow-through structure would be there. Perhaps that's in the actual agreements to purchase the power from us or from the plant and in the agreement to purchase the diesel fuel from the government of Pakistan.

It's interesting to note that if one looks at the way the price of the power coming out the other end is determined, it says: "The agreement establishes a tariff for the electricity in U.S. currency of 6.5 cents per Kwh and specifies a formula for adjusting the tariff in response to variations in fuel prices...?" -- which is what we talked about. I perhaps missed that the first time we went through this, and I apologize for that. Devaluation of the Pakistan rupee and changes in the U.S. consumer price index.... If SEPCOL achieves commercial operation, they get the premium.

Then it says there is a 6.5-cent-per-kilowatt-hour starting point. What is the starting point for the fuel? Has that been determined yet? Or is that still up in the air? Are we still negotiating that? The formula with regard to fuel costs, it seems to me, would be determined upon that.

Hon. D. Miller: The price is pegged to the time in March '94 when the Pakistani government issued their policy with respect to these matters. Drawing the member's attention to page 25, the second paragraph, under "Power Purchase Agreement," says: "The agreement establishes a tariff for the electricity in U.S. currency of 6.5 cents per Kwh and specifies a formula for adjusting the tariff in response to variations in fuel prices, devaluation of the Pak rupee and changes in the U.S. consumer price index." That's just to confirm that the fuel price risk is a flow-through item under the power purchase agreement.

G. Farrell-Collins: Sorry, I have another round here. I'm just trying to figure out which chapter it was in; hopefully, we can move on.

I want to get some clarification on chapter 5 of the review report. It deals with the big question about choosing the Cayman Islands. Why choose the Cayman Islands? When I first read this chapter, I had some concerns about it. I've read through the legal tax decision at the back, and quite frankly, it's over my head as far as my background in international tax law and finance goes -- which doesn't take much, but it's way over there. I do have a concern, because we too, in making sure we have done our homework with regard to this issue, talked to a couple of fairly well placed international tax lawyers and accountants who deal with these types of structures: why people go to the Cayman Islands and what the benefit of going there is. I haven't been able to find anybody who's given me any answer other than the only reason you go to the Cayman Islands is one of two things: either you want to have a different tax regime or you don't want anybody to know who you are. To this day I've been unable to find anybody who's given me an indication otherwise.

But the findings of this report seem to indicate that that's not the case and that in fact there's been no benefit accrued -- or potential benefit; let me put it that way. The minister and I have gone around this bush once before. But now that I've got the author of the report here, I'd like to ask the questions again and perhaps get a slightly different response if there's different information available.

The concern that we had was that these companies.... Let me put it this way. B.C. Hydro, in going through the Cayman Islands as a Crown corporation, may not have benefited from any sort of tax implications, because they don't pay federal tax anyway. Actually, they don't even pay provincial tax. They don't even pay property tax, and that's a bone of contention sometimes. But that's a policy issue. There may not have been any benefit for B.C. Hydro in doing that, but the question then arises: why go there?

It seems to me that regardless.... Maybe the tax structure is too baffling for me and too baffling for the tax experts that we consulted, and I got it wrong and they got it wrong, and the review team got it right -- that's entirely possible. But I do want to explore this a little. It would seem to me that the reasons for going to the Cayman Islands are those two which 

[ Page 1513 ]

I've mentioned before. Despite the fact that B.C. Hydro goes through there, the IPC shares going through the Cayman Islands would allow any capital gains or income that accrued to those shareholders in the Cayman Islands to remain there and then to be moved elsewhere across the globe if there were ever to be other projects of any kind -- which certainly was the intention, according to Mr. Laxton. Or if you just wanted to build yourself a nice chalet in France somewhere, you could move the money in that direction. It seems to me that there was lots of opportunity there for having those funds accrue the capital gains or the earnings in a tax-free way by holding them in the Cayman Islands.

If IPC -- and let's leave B.C. Hydro aside for a minute -- were to have invested directly in Pakistan and not have gone through the Cayman Islands.... Let's just take IPC as a separate company from B.C. Hydro. If the shareholders from IPC had invested directly in Pakistan, in buying their share of SEPCOL there, would they not...?? When the capital gains, in the event of sale, or the earnings accrued to those shareholders in Pakistan, there would obviously have been some tax implications in Pakistan. I don't recall, but at the time I raised this issue, I think I had this all pretty clear. There is a withholding tax in Pakistan, I believe, and there is a special deal for this type of project by the Pakistani government. But there would still, then, have been a tax which would have been payable here in British Columbia when that money was earned in Pakistan, or certainly when that money was returned to Canada from Pakistan. Is that not correct?

[10:00]

Hon. D. Miller: Mr. Chairman, I think you could line up an army of tax experts -- some on this side and some on that side -- and they could probably debate these matters until the cows came home.

Our obligation, legitimately, was to investigate the issue from this point of view. There had been an allegation, essentially, that this whole structure was deliberately designed to avoid the payment of taxes. That was offensive and remains offensive. I'm certainly not here defending using the Cayman Islands. Mr. Smith in his report, "Appendix 5," goes on.... For those who delight in this kind of reading.... I see some bleary eyes opposite. I don't know if they need any help getting to sleep tonight, but if they do, I highly recommend "Appendix 5." I don't think they'll be on page 2 before they'll be in dreamland. Hopefully, they won't dream about B.C. Hydro but about things more pleasant.

Chapter 5 of the report deals with the whole issue of why the Caymans. Mr. Chairman, not to put too fine a point on it, but I think we've devoted a considerable period of estimates time already to this question, during which time I read a portion of a letter from Mr. Richard J. Bennett, from Lang Michener Lawrence and Shaw, in which he states:

"In our opinion, BCHI Power's liability under part 1 of the Tax Act, for Canadian income tax in respect of dividends paid out of profits derived by SEPCOL's operation of the Raiwind power project, would be the same whether BCHI Power held its equity investment in SEPCOL directly rather than indirectly through BCHI Southern, a corporation resident in the Cayman Islands, an acknowledged tax-haven jurisdiction. In other words, in our opinion, the insertion of a tax-haven holding company between BCHI Power and SEPCOL in no way affects BCHI Power's liability for Canadian income tax in respect to the subject dividends."

That's why I made a slight grimace as I've been getting a variety of advice with respect to the question. I think it's clear on the face of it that the simple notion that somehow this was done to avoid tax is not correct. I think it's fair to say it could have been structured differently. Fair enough -- that's what the review is looking at, and hopefully we'll have some clarity with respect to that.

I also know that others, notably Ontario Hydro and Hydro-Québec, in structuring for offshore deals, used another so-called tax haven -- Barbados, if I'm not mistaken. I really think we've canvassed the issue. Getting back to the substantive question in terms of my estimates and the arcane points of tax law, I don't know whether or not it's reasonable that we will ever reach a conclusion on some of those questions here. I don't know that there are any tax experts in the room.

G. Farrell-Collins: Hon. Chair, obviously his tax lawyers have said one thing and ours have said another thing. As the minister said, we could probably line them up on either side and let them go at it. I don't know how interesting it would be, but I'll stand by ours and you can stand by yours. There's obviously a disagreement.

I don't want to go around the bush again, but Mr. Laxton said right there and then that the reason they went to the Cayman Islands was that they didn't want to send the greedy feds their portion of income taxes. That was certainly his intention, and perhaps we can chalk that up to Mr. Laxton just not knowing what the heck was going on. Wouldn't that be surprising -- that Mr. Laxton didn't know what he was doing?

With that, hon. Chair, and due to the lateness of the hour, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 10:04 p.m.

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