[ Page 2101 ]

The House met at 2:07 p.m.

G. Janssen: We have with us in the gallery today Richard and Janis Marz. Richard is the Progressive Conservative MLA for Olds-Didsbury-Three Hills in the beautiful and bountiful province of Alberta. I ask the House to please make him welcome.

G. Wilson: I'm delighted to have as a guest in the chamber today the former Minister of Transportation and Highways, a former member for Bulkley Valley-Stikine and now a member of the PDA, Jackie Pement. With Ms. Pement is the former member for Okanagan East, my wife Judi Tyabji. Would the House please make them welcome.

L. Reid: There are two gentlemen in the gallery today that I'd like this House to make most welcome. One is Mr. Patrick Wong, and one is Mr. Floyd Sully. I would ask the House to please welcome them today.

V. Anderson: Today we have in the House a member of my riding, Ken Steinberg, who is a very active person with youth in our province, his mother Ida Steinberg -- also from my riding -- and his sister Lynn Sokoloss from Toronto. I ask the House to welcome all three.

Hon. G. Clark: It's my privilege to introduce to the House seven young people who are the 1997 legislative interns. Assigned to the government caucus are Clayton Jones, Jane Ramsbotham and Elizabeth van der Kamp. Assigned to the opposition caucus are Anne-Lise Loomer, Amanjit Pandher, Lisa Pape and Lori Ziebart. Actually, there are four to the opposition caucus and three to the government caucus. I just thought I'd note that, hon. Speaker.

The Speaker: Happily, nobody's raising a point of order, Mr. Premier.

Hon. G. Clark: The legislative interns are an important tradition in this chamber. Having been in opposition and in government for 11 years, working with the young people who come here, I know there's tremendous value added. It is a learning experience for them, but it's increasingly important for those of us in this chamber. I'd like to ask all members to welcome those seven young people. I know they'll do an excellent job.

G. Abbott: On behalf of the opposition side of the House, I would also like to welcome the legislative interns. I had the pleasure of being a member of the first legislative internship program 21 years ago, and I was a mere stripling youth at the time. The hon. member for Victoria-Beacon Hill was of one of the younger generations that followed my own. It's been a great success, and I'm sure the program will be a great success this year as well.

Hon. D. Miller: In the gallery I noticed Mr. Howard Lloyd, who used to be an MLA in this House representing the Prince George constituency. I first met Howard as an opposition member and Forests critic, and actually he taught me quite a bit about forestry in the central interior. I ask the House to make him welcome.

Hon. C. McGregor: Hon. Speaker, it's my pleasure today to welcome a very good friend and colleague, Paula McRae, from my Kamloops constituency. She's been a longtime Kamloops activist, and she is now employed as my administrative assistant. I'd like the House to please make her welcome.

P. Reitsma: In the gallery today is a good friend of mine, the member of our local executive in the Parksville-Qualicum area, the chairman of a dynamic policy committee, and a retired chartered accountant. Will the House please make welcome Ron Speller.

Hon. P. Priddy: Best for last, undoubtedly. There are two people I'd like to introduce today. One of the reasons we're here is because of the friends and supporters and people who work with us. So one of the people I'd like to introduce to the gallery is K.C. Gilroy, who is from my riding of Surrey-Newton. She is a friend and someone who works with me, and I'd like the House to make her welcome. Secondly, as a former school trustee, I see in the gallery someone I want to make sure that we acknowledge: Carole James, the president of the B.C. School Trustees Association.

R. Neufeld: I guess this is what happens when you don't get on your feet right away. The Minister of Employment and Investment beat me to introducing my guest, Mr. Howard Lloyd. But thank you very much, Mr. Minister. I hope you're that perceptive through the rest of the session.

I have a number of other guests that obviously he hasn't beaten me to: Duane Mather from sunny Alberta, the president of the Canadian Association of Oilwell Drilling Contractors, and also the president of Nabors Drilling; John Jacobsen, the vice-president of CAODC and the vice-president and general manager of Kenting Hi-Tower Drilling; and the managing director of CAODC, Don M. Herring. They are here to talk a little bit with government and opposition members about how we treat the oil and gas industry. Would the House please make them all welcome.

Hon. G. Clark: It's my pleasure to introduce some relatives of the Minister of Finance, Lisl and Gordon Petter. Would all members please make them welcome.

G. Robertson: I am very pleased that we have with us today from IWA-Canada the national president, Mr. Dave Haggard, and also Harvey Arcand, the fourth vice-president. I'd like to ask the members to please join me in welcoming them to this House.

R. Masi: It's my pleasure today to introduce the president of the British Columbia Liberal Party, Sonja Sanguinetti. Would the House make her welcome.

[2:15]

F. Gingell: I see in the gallery today a gentleman who grills me hard and regularly on Delta Cable "Live" -- you can watch it on Thursday nights -- the host Mr. Vic Eaton.

P. Calendino: It's with pleasure today that I rise to introduce a longtime resident of Burnaby North and a member of my constituency. He is a retired electrical inspector for the city of Vancouver and a former IBEW member. He is a gentleman who dedicates a lot of his spare time to community organizations, and he tells me that he even has Italian ancestry in his blood. Would the House please welcome Mr. Lloyd Fedewa.

Hon. L. Boone: We've started a tradition here. Normally, one doesn't introduce guests during the budget, but I would

[ Page 2102 ]

hate for my guests to feel left out. Therefore would you please welcome to this House Mr. Fred Carroll from Prince George, the president of the IWA.

I. Chong: I am pleased to introduce today my special guest, a longtime friend, a supporter and a constituent, Mr. James Estock. Would the House please make him welcome.

S. Orcherton: It's indeed a pleasure today to advise the House that a good friend of mine and an extremely good friend of working people is with us today, the secretary-treasurer of CUPE Local 50 -- Victoria Outside Workers -- and the vice-president of the Victoria Labour Council, John Colin Graham. I'd ask the House to make him welcome.

P. Nettleton: I'd like to introduce, if I may, the former mayor of Ladysmith here on Vancouver Island, Kay Grouhel, who was also known at one time as "Concrete Kay," the first woman president of the UBCM.

J. Kwan: I am delighted to introduce to the members of the House today Roberta McCann, my riding association president, a longtime resident of Vancouver-Mount Pleasant, the president of the Union Workers Union and, of course, an executive member of many non-profit organizations in Vancouver-Mount Pleasant, including the Portland Hotel Society, a housing project financed by this government. Would the House please welcome Roberta McCann.

J. Weisbeck: In the gallery I have a very special friend and a good Liberal, Mr. Kjell Sundin. Would the House please make him welcome.

G. Janssen: With us today is the longtime mayor of Port Alberni, Ms. Gillian Trumper, also president of the UBCM. I ask the House to make her welcome.

Hon. D. Zirnhelt: I'd like the House to welcome a constituent of mine who is a student at the University of Victoria, Am Johal.

F. Randall: In the gallery this afternoon is Bill Rempel, who is the past president of the chamber of commerce in Burnaby, and in his regular job he's the general manager of ManuLife Insurance in Burnaby Metrotown. And here as a guest of the MLA for Burnaby-Willingdon is Dwayne Coben, who is the vice-president of the chamber of commerce in Burnaby. Also, I just want to mention that I notice a friend up there, Brian Stanhope, who is with the Insurance Bureau of Canada. Would the House please make them welcome.

J. Wilson: It gives me pleasure today to have with us my constituency assistant for Cariboo North, Marina Guest. I ask that the House give her a hearty welcome.

G. Campbell: My question is to the Premier. On April 17, 1996, Treasury Board estimated the total provincial revenue would be $19.97 billion. Thirteen short days later, the Minister of Finance stood in the House and presented a budget which stated that total revenue would be a miraculous $163 million above that amount. Can the Premier tell the House who authorized the manipulation of the provincial revenue forecast only days before its presentation to the public?

Hon. G. Clark: After months and months of preparing, that's the best, I guess, that we can do.

Hon. Speaker, the member knows full well that the Minister of Finance put forward projections and forecasts in the budget documents. The Minister of Finance is responsible for putting those forecasts in the budget documents. The forecasts that were put in the budget documents were tabled by the Minister of Finance at that time and were debated in the House. The members have ample opportunity to debate the budget in the chamber, and they will, of course, as well, with the budget about to be presented. At that time, I don't recall a huge debate around the revenue forecasts. In fact, after an election was called, the members opposite used the same economic growth forecast that we did, the same forecast that the Bank of Montreal and all the banks in Canada used. They're consistent; they're a matter of public debate; they're in the House. And that's a matter of public record.

G. Campbell: After months of preparing to answer that question, I'm surprised the Premier did such a bad job. You know, I think that today, particularly, the Premier should understand that when all of these people come to this House and listen to the budget, they have a right to expect they are going to be told the truth by the government. This Premier and this government presented a phony surplus of $16 million for '95-96, based exclusively on a false presentation of their revenues, on a distortion of the facts. We now know that the revenue picture was pure fiction. I would like the Premier to tell this House, tell these people in the gallery today tell the people of British Columbia who specifically authorized a $163 million miraculous revenue grab so that you could look like you had balanced the budget?

Hon. G. Clark: The revenue forecast last year. . . . The difference between the actual revenue and the revenue forecast was no different, in terms of variance, than it has been virtually every year for the last ten years. In fact, the average difference between the forecast and the actual was about bang-on this year, as it was last year, as it was the year before that. The member is desperately trying to construct a case. The case doesn't exist. The forecast was there. The forecast is exactly the same as it is every single, solitary year.

G. Campbell: I would like the Premier to understand what we are desperately trying to do here. We are desperately trying to get this government to tell the truth to the people of British Columbia. The Treasury Board -- the professional public servants in British Columbia -- told this Premier and his cabinet they were not going to have a balanced budget, told this Premier and this cabinet they were going to have revenues of $19.97 billion. This Premier and this cabinet -- someone -- decided to fix those figures so they reflected an additional $163 million, so they could generate a phony surplus. Will the Premier not tell the truth once in this House so that we can get it straight with the public of British Columbia?

Hon. G. Clark: I ask the member to withdraw the previous remarks.

The Speaker: Members, it is not our practice in this chamber, of course, to have points of order during question period. But I would suggest that perhaps, for the smooth

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functioning of this assembly for the next however many months, we would all do well to remember certain niceties of parliament, one of which, at least, is that we do not use language that is offensive to other members in the House and that is likely to generate disorder in the chamber. In that spirit, I am going to ask the Leader of the Opposition if he might withdraw.

G. Campbell: No, hon. Speaker, I will not withdraw. I don't think it's too much to ask that the Premier tell the truth in the House. [Applause.]

The Speaker: Members, I am charged with maintaining and upholding your rules in this chamber. That's my responsibility. One of the longest-standing conventions and traditions in the House is that we do not use certain kinds of language. It seems to me the evidence is very clear that that rule has been transgressed. I therefore, with the greatest civility and understanding I'm capable of, am asking the Leader of the Opposition if he would please reconsider. He has made his point. Would he withdraw for the sake of this assembly? I am asking him again to do that, please.

G. Campbell: Hon. Speaker, I do not think it is untoward to ask that we have the Premier express the truth to us in this House.

The Speaker: Member, I'm sorry. I don't want a debate.

G. Campbell: And I'm afraid that if it is not appropriate in this House to ask for the Premier to express the truth, then I would gladly withdraw.

The Speaker: I'm sorry. I have no choice in the matter, then. I must. . . .

Interjection.

The Speaker: I'm sorry; excuse me, hon. member for Delta South. Did I indeed hear. . .?

G. Campbell: I am willing to withdraw from the House, hon. Speaker.

The Speaker: That's what I understood. I would ask the member to please do so, and I'm sorry that happened.

G. Campbell left the chamber.

F. Gingell: Mr. Speaker, since the election. . . .

Interjections.

The Speaker: Order, members, please. Excuse me, members, please -- all members. We cannot function in this place unless one can indeed hear what a given member is saying at a given time. Please, then, extend that courtesy to whoever may be speaking.

F. Gingell: Since the election, this government has repeatedly stated that the budget was not balanced because of errors made in forecasting revenues. Agreed. According to the ministry's accounting policies, revenue from corporation income tax is only recorded when it is received. However, the Public Accounts for '95-96 show that the corporation income tax revenue was $91 million less than the amount stated in the revised forecast, tabled just before the election. Can the Premier tell the House who authorized this contravention of the ministry's own accounting policies?

Hon. G. Clark: That's a detailed question which would probably be better put to the Minister of Finance. There have been no instructions, of course, to alter anything, as the member appears to imply. But if it would be helpful, I'll take the question on notice for the Minister of Finance.

F. Gingell: The Ministry of Finance has no option when it comes to counting revenue from the corporation income tax. It's only counted as revenue when it's received. So there's an obvious conclusion, and that is that $91 million in revenue has not been accounted for. The $91 million was either fabricated, or it disappeared. Can the Premier please advise this House if a police investigation has been launched to discover its whereabouts?

Hon. G. Clark: Not that I know of.

[2:30]

C. Clark: On March 12 of last year the Ministry of Finance issued a press release stating that for the first nine months of 1995-96, the province had officially achieved a $16 million surplus. But just six weeks earlier, Treasury Board had produced an official report which stated that for the first nine months of 1995-96, which is exactly the same period referred to in the press release by the Ministry of Finance, instead of a surplus we had a $26 million deficit. Can the Premier, in the absence of the Minister of Finance, tell us who in his government decided that they should tell the public that the government actually had a surplus on its books, when the officials of the ministry were telling him that they indeed had a deficit?

Hon. G. Clark: I think these are appropriate questions for the Ministry of Finance's estimates. It seems to me very unusual to take up question period with these kinds of questions from about a year or so ago. Or was it two years ago? I'm not sure. But I'll be happy to ask the Minister of Finance to bring forward the information. This chamber is for this public debate. There will be scrutiny of all the spending estimates in the House and many weeks of debate, and I'm sure we can deal with all these questions. It's a very unusual question for question period.

C. Clark: And an unusual answer, given the fact that one would think the Premier would have asked the Minister of Finance, in the intervening seven or eight months, what might have happened that would turn a surplus into a deficit so suddenly.

I'll refer instead, then, to a press release which was issued by the ministry, in which the Premier made the bold-faced statement that we are on track for a balanced budget for the 1995-96 fiscal year. The documents from Treasury Board prove that B.C. was instead facing a $207 million deficit. Can the Premier tell us whether it was he or the Minister of Finance who decided that the Treasury Board analysis should be kept secret from the public during the election period?

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Hon. G. Clark: It's odd, hon. Speaker. There are no secrets. The members have all this information. We have the best freedom-of-information legislation in the country. All of the information is public. All of it is for public debate. And we can have this debate in the chamber at this time, or we can have it. . . . The more appropriate time is when Finance estimates take place.

M. de Jong: In May of last year, the Ministry of Finance prepared some transitional documentation for the incoming Minister of Finance. One has to presume that this material represented the ministry's best-guess, non-partisan collective wisdom on the budgetary state for British Columbia. This government had that material and had a chance to review it. And it was this government that chose to ignore the warning that instead of realizing a budget surplus, there was going to be a billion-dollar deficit.

My question to the Premier is: if he and his government had so little confidence in the abilities of senior ministerial officials as to disregard a billion dollars' worth of advice, how many of those officials are part of the 14 government employees that have lost their jobs in this government's huge cost-saving exercise?

Hon. G. Clark: First of all, I am very proud that we have managed to achieve significant downsizing without layoffs -- without layoffs. That might be a difference between our side and that side. But when we make tough decisions, we will always look to take care of and protect people who work for this government. In a few minutes he will see the deficit for this year, and it's not anywhere near the billion dollars the member referred to.

The Speaker: The bell terminates question period.

Hon. A. Petter: Hon. Speaker, I move that the House at its next sitting do resolve itself for this session into a committee to consider supply to be granted to Her Majesty.

Motion approved.

Hon. A. Petter tabled the comptroller general's report of interim financial statements for the ten-month period ending January 31, 1997.

Hon. A. Petter presented a message from His Honour the Lieutenant-Governor: Estimates of Sums Required for the Service of the Province for the fiscal year ending March 31, 1998, and a supplement to the estimates for the fiscal year ending March 31, 1998, recommending the same to the Legislative Assembly.

Hon. A. Petter moved that the said message and the estimates accompanying the same be referred to Committee of Supply.

Motion approved.

Hon. A. Petter: Hon. Speaker, I move, seconded by the hon. Minister of Health, that the hon. Speaker do now leave the chair for the House to go into Committee of Supply.

Hon. A. Petter: Hon. Speaker, I'm pleased to present the 1997-98 budget to the Legislature and to the people of British Columbia. This is a budget that has been developed in challenging circumstances, and it has required us to make difficult choices as a government. But it is a budget of which I am proud. It is a budget that shows real progress in placing the province's finances on a sound, sustainable path. It's a budget that is based upon prudent economic assumptions, and a budget that is consistent with the priorities of British Columbians.

This government has made a clear commitment to the priorities of British Columbians to build on an already strong job creation record, to protect health care and education, to ease the burden on middle- and lower-income British Columbians, and to achieve these goals in a fiscally responsible manner. Hon. Speaker, we're delivering on these priorities, and that's what this budget is all about. We do so in the face of an economy which has not grown as strongly as expected in 1996. Government revenues are below projections for the fiscal year just ending, and because of the delayed effect on corporate income tax collections, they will remain low in the coming fiscal year.

To meet these challenges, we have significantly reduced government expenditures over the past six months: first, by cutting the size and cost of government itself, including cuts to management and administration, eliminating positions, and tough restrictions on government travel and contracts; second, by reducing subsidies to business and other levels of government; and third, by eliminating funding for other activities while protecting core priorities such as health care, education and job creation. These actions set the stage for the budget that I am presenting today.

Hon. Speaker, the highlights of the 1997-1998 budget are as follows. For the first time in almost 40 years, overall government spending is down -- by more than $100 million. That means that this year's projected deficit will be the smallest of any year this decade. While overall spending is down, spending for health care and education is up. There's $300 million in additional resources for health services, $63 million in new resources for kindergarten to grade 12, and 2,900 new spaces will be provided at colleges and universities. The budget provides support for the creation of 40,000 new jobs throughout the province, building on the best job creation record in Canada.

Additional tax cuts for middle-income and lower-income families are a feature of the budget. A further 2 percent income tax cut will build on last year's cut. And 200,000 low-income and modest-income families will get further help through the B.C. family bonus program, which is providing $235 million this year to help with the cost of raising children. Combined with continued freezes on hydro rates, ICBC premiums and college and tuition fees, this means that $700 in savings this year will be realized for the average family.

So what this budget comes down to for ordinary British Columbians is this: spending on health care and education is up, while total spending is down. Support for middle-income and lower-income British Columbians is up, while taxes for average families are down. Jobs for British Columbians are up, while the B.C. deficit is down.

[ Page 2105 ]

Let me now turn to the details. First, let me review our province's economic performance last year and the prospects for the coming year. Our economy is becoming more diversified, but it's still significantly affected by developments in the volatile natural resource sector. While the price of lumber strengthened through 1996, pulp and paper prices weakened significantly during the year, taking the forest sector as a whole from a strong profit position in 1995 to a loss position in 1996. This resulted in lower employment and investment levels in that sector, affecting other areas of the economy and reducing consumer and business confidence. Current estimates are that real economic growth in 1996 will be 0.5 percent, far below what was predicted by every major forecaster at this point last year.

Despite the problems in the forest sector, job growth remained strong in 1996. In fact, 44,000 jobs were created in the province, an increase of 2.5 percent over 1995. That's almost one quarter of all the new jobs in Canada, created in a province with only 12 percent of the population. This indicates the underlying strength of our economy, our diversified economic base and the resourcefulness of British Columbians, all of which provide reason for long-term optimism.

As part of my consultations for developing this year's budget, I met with independent experts to get their views on our economic prospects. Their forecasts for economic growth in 1997 ranged from 0.5 percent to 3.75 percent. The average forecast was 2.4 percent, reflecting a consensus that 1997 will be a better year than 1996. Consistent with these forecasts, the Ministry of Finance's forecast for 1997 is for economic growth of 2.2 percent. We see a further strengthening in 1998, with projected growth in that year of 2.5 percent.

The factors contributing to this anticipated improvement include an increase in housing starts and consumer spending, resulting from lower Canadian interest rates and lower provincial income taxes; an increase in capital investment, as indicated by the Statistics Canada survey that showed a 5.1 percent increase in planned investment in British Columbia in the coming year; a stabilization and then strengthening in the prices of pulp and newsprint; and a continued diversification of the B.C. economy, with growth in sectors such as tourism, film and knowledge-based industries.

[2:45]

All commentators agree that 1996 was a disappointing year for the economy. This has resulted in lower-than-forecast revenues. We are now estimating that total revenue to the consolidated revenue fund will be $20.2 billion, $465 million below budget estimate. On the spending side, the need for higher-than-forecast spending for public safety, reducing hospital wait-lists and spending for lower-income British Columbians was offset by spending reductions in other areas. This means that total spending is now estimated at $20.6 billion, $28 million over budget estimates. The resulting deficit for 1996-97 is now forecast at $395 million.

Let me put that into perspective. In 1991, when our party took office, we inherited a record $2.5 billion deficit. Spending had increased 12 to 14 percent in each of the three final years of the previous Social Credit government. We've worked hard to reverse that trend, and we've made steady progress. This year, with careful management, we will reduce total spending on a year-over-year basis for the first time since the years of W.A.C. Bennett's government. And we will do this while dealing with the challenge of the fastest-growing population in Canada -- almost 100,000 new British Columbians in 1996, a number equal to the population of the city of Kelowna.

Hon. Speaker, this government remains committed to the goals of eliminating the deficit and reducing taxpayer-supported debt as a percentage of the provincial economy. But we do not believe eliminating the deficit is an end in itself. Rather, it is a means to an end. What makes balancing the budget and controlling the province's debt important is that these goals provide the fiscal foundation for building a strong economy from which all of our citizens can benefit.

With sound fiscal management, we can be sure that valuable taxpayers' dollars are not targeted towards paying interest on the debt but are paying for schools, for hospitals and for the infrastructure necessary to encourage investment, jobs and economic growth. For these reasons we are determined to provide the fiscal management necessary to keep our province's finances on a sustainable path and to ensure that British Columbia's debt burden remains amongst the lowest in the country.

Hon. Speaker, government is a large and complex enterprise. There is no one simple benchmark for fiscal performance. I want to outline the four principles of fiscal sustainability which will guide us and against which we will measure our progress.

First, balancing the consolidated revenue fund. The CRF still represents the best record of each year's operating expenditures. Like a household budget, the CRF represents the groceries, the heating bills and the day-to-day spending. While some items such as education might be viewed more properly as an investment, the lessons of the household budget apply here. That means that in managing the provincial accounts, we must continue to reduce the deficit and move towards surplus.

Second, debt financing of capital assets must be sustainable. In particular, we must stabilize and then reduce taxpayer-supported debt as a percentage of provincial GDP. To continue the household analogy, it's all right to finance the family home with a mortgage, but the carrying costs must remain within the family's capacity to pay.

Third, budget forecasts must be built on prudent economic assumptions. These assumptions must be prudent for estimates of both expenditures and revenues. And they must be combined with strong management that monitors performance against the budget and takes corrective action when variances appear.

Fourth, economic growth and job creation must be a central component of any complete fiscal plan. Managing expenditures is only one half of what is necessary to balance a budget. A strong revenue base is also key, and that requires an active economic growth and job creation strategy.

These principles underlie this budget and our financial management plan now and for the years to come.

Hon. Speaker, as I said earlier, the budget I'm presenting today cuts overall government spending for the first time since 1958, while increasing funding for health care and education. The projected deficit is the smallest this decade at an estimated $185 million. Some may argue. . .

Interjections.

Hon. A. Petter: In fact, I hear some of them now, hon. Speaker.

. . .that we should have cut deeper to ensure a balanced budget this year. We decided not to do so for two reasons. First, unlike some other provincial governments, we are not

[ Page 2106 ]

prepared to sacrifice our commitment to protect health care and education. Second, we are determined to maintain an environment for future investment and job growth. Our economy is recovering from a difficult year. We must be careful that government does not withdraw too much purchasing power from the economy and undermine the return of business and consumer confidence. For this very reason, the Business Council of B.C. and others have cautioned us not to go too far too fast in reducing the deficit.

This budget cuts the deficit by more than half of what it was last year. As outlined in the financial management plan I'm releasing today, this places us in a position to put the budget in balance next year and to achieve a significant surplus in the year that follows. As we move to balance the government's operating budget, taxpayer-supported debt will only be used to invest in the capital assets necessary to maintain our social and economic fabric, such as schools, hospitals and highways.

The combination of the deficit left by the previous Social Credit government and the need to make up for their failure to fund necessary capital investments resulted in taxpayer-supported debt, as a proportion of the GDP, rising from 1991 through 1993. Since then it has stabilized, although the ratio was pushed up again last year by lower than projected economic growth.

Hon. Speaker, I recently reconvened the private sector group that advised the government on its debt management plan. The financial plan that I've released today shows the result of that consultation. It's a plan to cut taxpayer-supported debt as a proportion of GDP to 20 percent within three years and to reduce it to 15 percent by the year 2015. The capital spending review is an important element in achieving this goal. It shows us how to do more with less by identifying over $200 million in savings, so we can get the schools and hospitals we need and do it more efficiently and effectively.

This budget is based upon prudent economic assumptions. On the spending side, we have worked hard to ensure that each vote in the estimates reflects underlying spending pressures. That includes anticipating pressures and meeting the needs for additional services that come from our continuing population growth. On the revenue side, while my ministry forecasts a growth rate of 2.2 percent, I have chosen to base the budget's revenue forecast on a prudent economic assumption of 1.6 percent growth. We are determined to meet the spending and deficit estimates presented in this budget. In addition to using a prudent economic assumption for revenue forecasting, we will monitor performance against the budget and take corrective actions as they are required.

I want to turn now to the government's key priorities for the coming fiscal year: job creation, health care and education, as well as support for middle-income and working families. We recognize that the only way to get to a sustainable fiscal path is through strong economic growth, and we also recognize that new jobs and economic opportunities are a central priority for British Columbians. Over the past five years, British Columbia's job performance has far surpassed that of the rest of Canada -- more than 220,000 new jobs. This is an impressive record, to be sure. . . .

Interjections.

Hon. A. Petter: The support for jobs even from the other side of the House is encouraging, hon. Speaker.

This is an impressive record, but we are determined to do even better. Accordingly, the government's job strategy is designed to maximize the employment capacity of B.C.'s economy. There is no one easy way to create enough well-paying, family-supporting jobs. An effective job strategy has to explore all avenues to achieve this goal and must reflect the contributions of people from all parts of society. The five major elements of our job creation strategy are as follows: a sustainable fiscal foundation, better skills and training for young people, investment in infrastructure, partnership with the private sector, and initiatives targeted at key sectors of the economy. Let me review each of these elements.

First, a sustainable fiscal foundation. To create the jobs and economic climate that will bring opportunities for new businesses and for communities, we must start with a sustainable fiscal foundation. Providing this level of certainty is necessary for businesses to make their investment plans and be confident about the future. The plan for fiscal sustainability, which I have already outlined, is therefore a critical part of our strategy for higher growth and job creation.

Second, better skills and training for young people. This government is committed to helping secure the job opportunities young people seek and providing them with the tools to prosper. We are protecting funding to ensure high-quality education and greater access to our colleges, universities and institutes. We're investing $23 million in the Guarantee for Youth program, to create 12,000 new jobs. We are making sure that work is a better deal than welfare. Our $20 million Youth Works initiative replaces welfare with training and work experience. It will help more than 40,000 young people this year, making sure the social safety net doesn't become a web in which they become entrapped but serves as a trampoline to lift them up into the workforce.

Third, investment in infrastructure. This government will be investing more than $1 billion annually in schools, hospitals and transportation infrastructure over the next few years. Not only does this investment provide the vital services that our people need, it will directly create more than 13,000 jobs throughout the province each year. New schools in Williams Lake, Richmond, Surrey and Langley and in many other communities, replacement of the Hudson's Hope hospital, the Vancouver Island cancer clinic and our commitment to light rapid transit in the lower mainland are just some of the investments that the government will be making. We will also be signing a renewed infrastructure agreement with the federal government that will lead to cost-shared programs and additional jobs for British Columbians.

Fourth, partnerships for the private sector. The interests of business and government are not always identical, but both share a common interest in fostering a strong economy and a healthy business climate. In preparing this budget, I have benefited from the consultation and advice offered by business and labour leaders on provincewide issues such as fiscal management and capital spending.

Today, I am announcing that the government will establish a forum for business, labour and government to work together to discuss issues of mutual concern, develop economic strategies and identify measures that generate employment, increase investment and protect competitiveness. In addition, my colleague the Minister of Employment and Investment will be undertaking a wide-ranging review of business regulations, with a goal of cutting red tape and making government less burdensome.

We are also committed to pursuing more public-private partnerships that allow cost-effective solutions to developing and financing new facilities. For example, a partnership to build a new Vancouver trade and convention centre can provide investment of over $200 million and create 2,750 direct and indirect jobs. The partnership to add a new large-format theatre to the Royal British Columbia Museum in Victoria will create jobs and add to the city's tourism appeal as well.

[ Page 2107 ]

Fifth, sectoral initiatives. As part of government's job strategy, certain sectors are being targeted for special attention. Let me touch on a few of the initiatives underway to protect and create jobs in forestry, small business, tourism, the airline industry, film and fisheries. This government is working on a framework agreement for a jobs and timber accord with the forest industry. Its aim is to increase the economic return and the number of jobs from every tree harvested, while maintaining our world-class environmental standards. Overall, the goal is to create 21,000 new jobs in the forest sector by the year 2001.

Small business is the fastest-growing sector in our economy and the biggest generator of new jobs. Last year we cut the small business income tax rate by 10 percent and introduced an income tax holiday for eligible new companies. These incentives will now be available through the entire fiscal year of 1997-98 and will reduce costs for small business by about $29 million. We are determined to do more to assist the small business sector in the years ahead.

[3:00]

Tourism continues to be a source of economic strength in every region of our province, employing many thousands of British Columbians. We will further assist the industry to reach its full potential. In partnership with the tourism industry, this government will establish a new agency with a dedicated revenue source to promote tourism in British Columbia.

Through the leadership of the Premier, this government played a key role in the restructuring of Canadian Airlines International, helping to protect some 12,000 direct and indirect jobs in British Columbia. Building on that achievement, and to keep B.C. competitive and attract new carriers, we will reduce the international jet fuel tax rate for all carriers over the next three years. The current rate of 4 cents per litre will be reduced to 3 cents per litre on April 1, 1998, and to 2 cents per litre on April 1, 1999.

B.C.'s film industry outpaced Ontario's last year and recorded the highest film production of any province. More than 8,000 British Columbians were directly employed in productions. To ensure continued development, we will work with the industry to expand opportunities and, in particular, to find ways to encourage Canadian productions. We want to see maximum opportunities for B.C. workers in this dynamic field.

The future of our fisheries is critical to the future of our province. This government is working with communities, industry, owner-operators and workers to develop a made-in-B.C. vision for the future. Our priority in this area is conservation of the resource and protection of those workers and communities that depend upon it. Success here means the jobs will follow. In the near future, we intend to create Fisheries Renewal B.C. to invest profits back into the sector and to protect fish and jobs. Creating jobs for British Columbians is a central objective of this government and this budget. Our job strategy ensures that we will continue to lead the way in creating new jobs for the people of this province.

Let me turn now to another priority: health care. Canada has the finest health care system in the world, and British Columbia has one of the best health care systems in Canada. This budget ensures that it's going to stay that way. We are protecting the health care services of British Columbians, providing funding for health care that will increase by more than $300 million in 1997-98. This year's funding level is particularly important, as it is a year of transition. Management of major elements of the system will become the responsibility of regional health boards and community health councils. In making this change, the government will be making a good system better.

British Columbia faces a number of health care funding challenges: a growing and aging population, increasing health care costs and large reductions in federal transfer payments. Other provinces have chosen to meet these challenges with funding cuts and reductions to services. That is not our choice. Since 1990-91, the rate of spending growth on health care in British Columbia has been two and a half times the national average, and the highest in Canada. Our health care spending per person leads the country.

This year, we are increasing funding for hospitals across B.C. by more than $800 million, including a $28 million increase for new equipment. Funding for physician services, ambulance services, mental health and continuing care are all up significantly from last year's levels, and a particular priority will be further reductions to wait-lists for heart surgery, cancer treatment and kidney dialysis. At the same time, to sustain our standards and systems affordability, we must find savings in the system and reallocate them to priority and front-line services so that new pressures can be accommodated and all our needs met in a fiscally prudent way.

A third priority of this government, hon. Speaker, is education. Education is an investment in our children's future. This government's track record in support of education is exemplary. From 1990-91 to 1995-96, spending on kindergarten-to-grade-12 has risen 5.5 percent annually, more than in any other province. In this budget, funding for the K-to-12 system will rise by $63 million. As a result, our investment in each student in B.C. remains well above the national average. In addition, reforms introduced last year have cut the number of school districts and are reducing administration costs, both through amalgamation and increased cooperation among districts.

A similar level of government support is being provided to post-secondary institutions. Since 1991, in a time when Canada's overall investment in post-secondary education declined by an average of 1.5 percent, British Columbia's overall investment in post-secondary education increased an average of 4 percent, the largest increase in the country. This government is also increasing access for young people to post-secondary institutions. Tuition fees remain frozen for 1997-98.

This is a marked contrast to other provinces such as Ontario, where last year, college students saw a tuition increase of 15 percent and university students 20 percent. In addition, we have added thousands of new spaces for post-secondary students. Today, there is a place for all qualified students in B.C.'s colleges and universities, with almost 10,000 new spaces opening last year and this year combined -- an impressive record, hon. Speaker.

These major investments in jobs, in health care and in education demonstrate this government's resolve to work for the people of this province, responding to their priorities and meeting their needs. That is why we have also cut income taxes for B.C. families by a further 2 percent. That cut, combined with last year's cut, lowers income taxes by $142 million per year.

We have supported this income tax reduction with a freeze on other taxes for individuals and families until the year 2000. We have frozen B.C. Hydro rates for three years. We have frozen ICBC premiums and college and university tuition fees for two years. And we are investing $235 million to provide more than 200,000 families with a monthly B.C. family bonus cheque. This is a groundbreaking program. It's a program that is making work a better deal than welfare, while it becomes a model in fighting child poverty across Canada. Taken together, these measures will save the average B.C. family up to $700 per year.

[ Page 2108 ]

We are protecting health care, protecting education, protecting job creation and providing support for working families. This achievement is remarkable because, at the same time, we are reducing total spending compared to last year. For the first time since 1958, there will be a year-over-year decline in budget expenditures. Spending from the consolidated revenue fund will go down more than $100 million, to $20.47 billion.

This has required some difficult choices, given an expected increase in population of over 2 percent and inflation exceeding 1 percent. We have cut the size of government, cut costs in administration and overhead, and eliminated programs, grants and subsidies. The budget for government salaries alone has been cut by more than $100 million. As a result, government positions have been cut, and they have been cut significantly. Much of this reduction has been achieved through measures such as voluntary severance and early retirement, not through forced layoffs. That this was done in an orderly and humane manner is to be welcomed, not derided.

In the process of making cuts, it has been necessary to reduce or eliminate some services and grants to many worthy groups and individuals. Now, let me just say to those affected that these decisions have not been taken lightly. But governing is about setting priorities, and this government has made its priorities clear: to create jobs, to protect health care and education, and to provide support for working families. Those are our priorities, and those are the priorities reflected in this budget.

Our total revenues will increase less than one-half of 1 percent this year to $20.29 billion. That is just $80 million over the revised forecast for 1996-97. This is not only because we have used prudent economic growth assumptions in developing our estimates. Federal government cuts to transfer payments for health care and education mean a loss to British Columbia of another $200 million this year, on top of the $400 million that was cut last year. Provincial corporate income tax payments are expected to be down this year by more than $300 million, due to the lag effect from the falling corporate profits during 1996. In addition, maintaining our tax cuts and the B.C. family bonus program will further reduce our available revenues by $400 million -- $400 million that thankfully is finding its way into the pockets of ordinary working British Columbians.

In the face of these pressures, we have had to seek other ways to protect our revenue base. A program to review asset disposition has begun looking at the hundreds of millions of dollars of assets owned by the government, to see if they still serve a useful purpose. This year we expect to receive $170 million by disposing of certain assets that are no longer required. For example, we have recently negotiated to have the private sector take over operation of the Royal Victoria ferry service to Seattle. We have asked our Crown corporations to increase efficiencies in income and dispose of any unneeded assets in order to increase returns to government. Including $50 million from the gaming expansion already announced, these initiatives are expected to generate an additional $150 million in the coming year.

We have undertaken a review of fees for government services to ensure that their costs are recovered, where fair and appropriate, from those who benefit rather than from the general taxpayer. In addition, we have taken steps to improve tax enforcement and to ensure that all tobacco products are taxed on the same basis. These new revenues will help offset other revenue losses and contribute to protecting health care, protecting education and protecting jobs while reducing the provincial deficit.

Hon. Speaker, as I said at the outset, we have had some difficult choices to make. We face major pressures: reduced revenues, a growing population, increased demands for services. But we've accepted our responsibility to meet the needs of British Columbians in a fiscally responsible way. We have reduced spending on a year-by-year basis for the first time in 40 years and have cut the deficit to its lowest level this decade. At the same time, we are protecting health care, education and job creation. With an anticipated improvement in the economy this year and with the federal government committing not to further reduce federal transfer payments, we are establishing a solid foundation for the future.

With this budget, we are meeting the challenge on behalf of the people of British Columbia. For our children, there is assurance of a good education and access to colleges and universities. For those who are ill, there is treatment available when they need it. For middle- and lower-income families, there is money in their pockets and help to assist them in raising their children. And for all British Columbians and their children, there is the prospect of good jobs for the future.

Hon. Speaker, we are confident that the road we've chosen -- to protect these services while reducing the deficit in a careful and prudent way -- is the right road for British Columbia. [Applause.]

[3:15]

The Speaker: In response, I recognize the member for Delta South.

F. Gingell: I hope, Mr. Speaker, that the Minister of Finance will forgive me for not joining in that great round of applause he received. But I must admit that I see these things perhaps from a different angle, with a more jaundiced eye.

At the commencement of a new legislative session, the government presents its throne speech -- its vision for the province. Then it tables its budget. A budget should chart the course. It should be the road map that identifies the actions and the commitment of resources that are required to turn the vision into a reality.

The budget sends a signal. It tells the people of the province and the markets that lend us money our plans for the year. You can appreciate that this is an important task. You can appreciate the importance of the stakeholders, as citizens and creditors, having faith that the plan presented is on the up and up -- that it is doable, is not a fraud and is worth the paper it is written on.

So what is the record of this government in recent years? In 1995 all members of this House will remember that they included in the budget $250 million of revenue that was supposed to come from the Columbia River downstream benefits transaction. My argument about that was not whether or not the deal was done; that was irrelevant. Proper accounting

[ Page 2109 ]

practices clearly said it was not income for that year. In fact, they went to the comptroller general, and they got an opinion. He said: "No, it isn't income for the year." So they went to the auditor general, and he said the same thing: "No, it isn't income for this year." So then they looked around and bought a made-to-measure opinion and included it. In 1996, I think "revenue optimism" was the term used by Treasury Board -- revenue optimism in large doses.

From a review of the appropriate clippings, I'm sure, Mr. Speaker, you'll find that there are many questions in the minds of the public regarding the credibility or the clarity of the financial statements, projections and budgets issued by this government. At this moment, I was going to give you some examples, but I find I will get into trouble if I do that. I've been in trouble with you once today, and I wouldn't like there to be a second time.

I did manage to find one, Mr. Speaker, that didn't contain words that are forbidden: "The deliberateness of the deception cannot be doubted. There were clear warnings from the bureaucracy as long ago as last November that revenues were faltering." That was written in the Vancouver Sun on September 12, 1996. The one clipping that really made me feel sad was in a magazine that Ministers of Finance have always read and allow me to borrow, the Economist. The Economist, a world-renowned magazine that goes all over the world, said on November 16: "Six months ago, they voted. Today British Columbians face a new choice -- is the provincial government they elected a pack of incompetents. . .?" I can't mention what the alternative was. But that was November 16, Mr. Speaker.

A poll taken shortly after the release of the information that came out through FOI in September indicated that 75 percent of the people in this province believed that the government had intentionally issued inaccurate financial statements that were the foundation of their election platform. Now, 75 is an interesting number, because there are 75 members in this House. Today, I think, we're all here. Well, we're all here in body; we might not be all here or all there, you know. But I think all 75 members in this House know in their hearts that there was a conspiracy to keep quiet.

If a company listed on the Vancouver Stock Exchange were to issue financial statements, reports, projections and news releases that were as incorrect and misleading as this government has done, they would be delisted, fined, and their directors would be barred from holding office for life. Now, there's an idea. I was going to say, "All joking aside," Mr. Speaker, but it isn't funny, and it isn't a joke. It's serious. It's deadly serious and could disadvantage the citizens of this province -- doubly disadvantage them. They are disadvantaged by having an incompetent government that can't differentiate between facts and fancy. And our citizens may well be further disadvantaged by having the cost of servicing our substantial debt increased dramatically.

Current interest rates won't stay down forever, and we all know what that does. It takes resources away from students, from patients and from the most vulnerable in our society, who rely on income support programs. And it pays these moneys instead to our creditors, not for extending additional capital but just for servicing our present debt.

We all know about the warnings of credit alert from Standard and Poor's, Moody's and the Canadian Bond Rating Service, which recently changed the outlook from long-term stable to negative. But even without the bond-rating agencies, the market has spoken. Late last month or very early this month, the minister received a briefing document prepared by the Ministry of Finance, entitled "Deterioration of Province of British Columbia Bond-issuing Spread Levels," which made a very interesting analysis of the rates of interest at which provinces borrow and which shows how these spreads have changed. For the Minister of Finance, I've updated this to this morning -- we now have the very latest numbers -- and I'll be pleased to make it available to the minister.

What does it say? It says our performance compared to the other provinces has worsened. Now, that's all the other provinces, every single one. Alberta and Manitoba can now borrow cheaper than British Columbia, and Ontario and New Brunswick at the same rate as us. The market price of province of Quebec securities has improved seven times the amount of improvement in British Columbia bonds in the last 14 months.

It's a message, Mr. Premier, a real message. This is a government that has continually boasted that British Columbia's debt-to-GDP ratio is the lowest of any province. Stop boasting. Say it no more -- no longer true. Let's have action instead of rhetoric. Alberta's percentage is 17.9. I'd written ours down as 19.4, but fortunately I managed to get a copy of this. It's not 19.4; it's 20.3. It's up. And it's expected to go, at the end of this year, up to 20.9 percent. This government two years ago came in with a debt management plan in which they said: "We will bring the ratio of government-supported debt to GDP down. Every single year we will do it."

Now, we all know that the crisis that has been heaped upon us has been caused by the ignorance of these ministers across the chamber who don't understand the basic tenets of good management: the need to watch the trends, the need to react to changes, the need not to hide away from bad news, the need to think about the consequences before you act. Then there's the ignorance they deliberately laid on the citizens by not telling people the truth for more than a year when the trends first started to happen. They went into what I call the three-brass-monkeys syndrome: see no evil, hear no evil and certainly speak no evil.

Do you think the initiatives that this government has floated -- about expanded gambling, about no-fault insurance, about opening liquor stores on Sundays and allowing us to buy liquor on our credit cards and pay on the never-never -- have anything to do with good social policy, with the setting of goals to make this province a better place for our children and our grandchildren? Not at all. They're simply the panic reactions of a government scrambling for cash, who don't know what they're doing, and who are incompetent -- a triple-A government: arrogant, amateurish and abusive of the democratic rights of their citizens.

The minister's speech today reiterated and regurgitated many earlier promises and statements that this government has made. I will take the opportunity between now and when this debate resumes to give it my careful consideration and respond in greater depth at that time. I now move that this debate be adjourned.

F. Gingell moved adjournment of the debate.

Motion approved.

Hon. A. Petter presented a message from His Honour the Lieutenant-Governor: bills intituled Budget Measures Implementation Act, 1997; Corporation Capital Tax Amendment Act, 1997; Correction Amendment Act, 1997.

Hon. A. Petter: Hon. Speaker, these three bills implement a variety of budget measures. In moving first reading, I will state the primary purpose of each bill.

[ Page 2110 ]

Bill 2, the Budget Measures Implementation Act, 1997, amends 21 provincial statutes to implement a variety of budget measures. Several statutes are amended to support changes to the structure of the estimates, for example, by eliminating some special accounts that are no longer necessary.

The Local Government Grants Act is amended to carry out the restructuring of grant programs announced in November 1996.

The Industrial Development Incentive Act is amended to increase the funding cap on the industrial incentive fund from $400 million to $450 million.

Hon. Speaker, amendments are made to several tax statutes to improve tax administration and compliance, for example, by extending appeal periods from 60 to 90 days. The bill also includes amendments to clarify the application of tax in certain situations and to introduce several tax policy changes.

The Fire Services Act is amended to clarify that the 1 percent imposed on policies insuring against fire apply to the full amount of the premiums under these policies.

The Motor Fuel Tax Act is amended to provide a refund of tax to bona fide farmers equal to the difference between the clear and coloured fuel tax rates for clear fuel used in the United States. The act is also amended to clarify the application of tax to natural gas used in stationary engines and to implement the government's announcement to extend the exemption for natural gas and alcohol-based fuels used in motor vehicles.

Three acts -- the Municipal Act, the Vancouver Charter and the Taxation (Rural Area) Act -- are amended to vary provisions governing property tax exemptions for land and improvements used to reduce pollution.

The Property Transfer Tax Act is amended to expand the exemption for transfers of family farms to or from family farm corporations.

Finally, hon. Speaker, the Tobacco Tax Act is amended to increase the tax rate on loose tobacco from 8.4 cents per gram to 11 cents per gram, a rate comparable to that imposed on manufactured cigarettes on a per gram basis.

Hon. Speaker, Bill 3, the Corporation Capital Tax Amendment Act, 1997, tightens the investment allowance provisions by denying a deduction to corporations for certain investments in foreign bank accounts, insurance companies and exempt Crown corporations. In addition, various technical amendments are being made to harmonize the corporation capital tax legislation with new provisions in terminology under generally accepted accounting principles, to clarify that non-resident corporations owning real property in the province are subject to the tax, to permit an investment allowance deduction for a corporation's loans and advances to partnerships, and to extend the appeal period to 90 days from 60 days.

Hon. Speaker, Bill 4, the Correction Amendment Act, 1997, allows the transfer of community probation and custodial programs and services for youth to the Ministry for Children and Families.

Hon. Speaker, I now move first reading of Bills 2 through 4.

[3:30]

Bills 2 through 4 introduced, read a first time and ordered to be placed on orders of the day for second reading at the next sitting of the House after today.

Hon. J. MacPhail moved adjournment of the House.

Motion approved.

The House adjourned at 3:31 p.m.

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