DEBATES OF THE LEGISLATIVE ASSEMBLY (Hansard)
TUESDAY, APRIL 21, 1998
Morning
Volume 8, Number 21
[ Page 7013 ]
The House met at 10:05 a.m.
Prayers.
Hon. D. Miller: In the galleries today we have a number of representatives from the mining industry in British Columbia. It is Mining Day today, and we do have some events. I'd like to acknowledge Gary Livingstone, the president of the Mining Association of B.C., and Bruce McKnight from the B.C. and Yukon Chamber of Mines. As well, there are three individuals from a small community in my constituency, the community of Stewart: Mayor Andy Burton, Frank Armitage and Garry Hubbard. I would ask the House to please make them welcome.
G. Campbell: I'd like to join in welcoming here to Victoria today all the representatives of the mining industry in the province. Last year's Mining Day was very successful, and hopefully they will help to raise the government's awareness of the issues that confront them so that we can build a strong and united mining industry as we move forward. On behalf of this side of the House, I'd like the House to welcome them.
E. Walsh: I would ask the House to welcome three constituents of mine from Kootenay. This is the first time since the election that I have actually been able to stand up just about every day for the last three days and introduce somebody from my riding. I would ask the House to welcome Bill Foster, Pat Koski and Cindy Brunel. They are all here on Mining Day from the Elk Valley, representing Fording Coal and the Fording River operations -- coal country in the Kootenays. I would ask that the House welcome them.
D. Symons: I too would like to welcome some of the mining industry people here today. Garry Hubbard from Stewart has already been mentioned. We also have Russell Gerard from Kamloops, and from that great city of Richmond, we have Dan Jeannotte. Please welcome these people. They are here, as our leader said, to deal with the issues of mining in the province. I remember that when I was a high school student, mining was one of the three most important industries in this province. We want to bring it back up there.
J. Doyle: I'd like to welcome a couple of people from my constituency this morning, one being Don Boyle, the manager of Cominco-Sullivan operations in Kimberley, and also Jim Ogilvie, the long-serving mayor of Kimberly and the chair of the East Kootenay regional district. Please welcome these people.
R. Neufeld: I was quite surprised that the Minister of Energy and Mines and Northern Development didn't introduce the councillor from Fort St. John, Peter Vandergugten. He introduced the mayor the other day before I got a chance to get up. I guess he was a bit remiss. I would like to have everyone welcome a councillor from the city of Fort St. John, Peter Vandergugten.
G. Robertson: With us today in the House, hon. Speaker, we have His Worship Gerry Furney, the mayor of Port McNeill. It's one of the greatest and most beautiful towns in British Columbia. We're really pleased to have Gerry here. Also we have Dennis Gregoire, the mine manager from Boliden, the Myra Falls operations. I would ask members of the House to please make them very welcome.
L. Stephens: This morning in the House visiting from Langley is Lawrence Thiessen, a constituent of mine who has a mining company. He is world-famous. Please make him welcome.
The Speaker: Seeing no further introductions by members, I welcome all of you.
Interjection.
The Speaker: I beg your pardon. I call on the member for Bulkley Valley-Stikine.
B. Goodacre: I'm hard to notice.
From the constituency of Bulkley Valley-Stikine, we have with the mining contingent representatives from Booker Gold, Paul Stevenson and Gordon Weary; a representative from Huckleberry mine, Emile Brokx; from the Snip mine, Bruce Bried; and from Eskay, Garry Biles. Would the House please make them welcome.
The Speaker: Are we sure there are no further introductions? I don't want to miss anyone.
Hon. D. Miller: I'll treasure that moment.
MINING RIGHTS AMENDMENT ACT, 1998
Hon. D. Miller presented a message from His Honour the Lieutenant-Governor: a bill intituled Mining Rights Amendment Act, 1998.Hon. D. Miller: I move that the bill be introduced and read a first time now.
Madam Speaker, Bill 12 is really one of the key instruments developed by this administration in support of attracting investment and creating jobs in the mining sector. I don't need to remind members -- occasionally perhaps I do -- that the mining sector is a very, very important industry in this province. It creates about 40,000 -- or 58,000, if you count all the smelters -- very good, family-supporting jobs. They have very high wages. They leave, quite frankly, a very soft footprint on the landscape. This bill is an attempt to deal with the sector and to try to address some of the issues that they have identified and that we have identified, so that we can move forward to hopefully increase opportunity for investment. Passage of the bill is needed to recognize the right to mine in British Columbia and to ensure access to mineral tenures the right to compensation when tenures are expropriated for parks, and timely permitting.
As I said, these issues have been in the consultation process with industry and labour and stakeholders for the past couple of years. While there has been strong growth in many sectors, we all know that mining is facing significant challenges, not the least of which is the international marketplace with respect to some of the ore that we mine. Notwithstanding that it is a dynamic industry, this industry has put together a plan called Mining 2000, for creating a future of sustainability. This government will work with industry to
[ Page 7014 ]
help them meet their goal of creating 22,000 new mining-related jobs over the next ten years. I think this bill supports that goal. With that, Madam Speaker, I move second reading.
The Speaker: Sorry, the motion is that
Interjections.
Hon. D. Miller: Actually, why don't we just get it over with? I know the opposition will fully support this bill. However, I rush.
The Speaker: You do.
Bill 12 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.
[10:15]
BRITISH COLUMBIA HYDRO AND POWER
AUTHORITY RATE FREEZE AND
PROFIT SHARING ACT, 1998
(second reading)
The British Columbia Hydro and Power Authority Rate Freeze and Profit Sharing Act enables the government to extend the B.C. Hydro rate freeze to March 31, 2000. This will ensure electricity rate stability for commercial, industrial and residential customers. By 2000, businesses and residents in British Columbia will have benefited from no B.C. Hydro rate increases for seven consecutive years. This will improve business cost-competitiveness and create jobs across the province.
Last year was an exceptionally good year for B.C. Hydro, as very high precipitation and reservoir levels resulted in significantly higher revenues. As such, the government believes that Hydro customers should share in these good fortunes. The act enables the government to share extraordinary B.C. Hydro profits with Hydro's customers.
G. Farrell-Collins: Well, that's the song and dance around the Hydro rate freeze. Let's get to what the reality is.
Hon. Speaker, B.C. Hydro is a monopoly. Worst of all, it's a government-controlled monopoly. There are provisions within legislation to try and ensure that this monopoly doesn't abuse its power, that the government doesn't abuse its power in the marketplace. It is really, for all intents and purposes, the only major supplier of hydroelectricity for the vast majority of British Columbians. You don't have a choice to go somewhere else. If B.C. Hydro's rates are too high, you're out of luck. If B.C. Hydro isn't responsive to your needs, you're out of luck. If B.C. Hydro increases its rates, you're out of luck.
In order to compensate for that type of scenario, there is legislation in place to ensure that the consumers are protected. That's the British Columbia Utilities Commission Act. It is an independent body that's designed to evaluate whether or not the rates that B.C. Hydro intends to charge consumers are fair. It's designed to be an independent body for the very reason we're seeing here today in this legislation.
The fact of the matter is that B.C. Hydro, over the last number of years, has done relatively well financially. In fact, it's done quite well financially for a whole bunch of reasons. Particularly, as the government said, in the last year or so the water levels in the dams have increased dramatically; that's part of it. The government has had to do a couple of other things in order to deal with other issues that are out there -- or B.C. Hydro's had to do other things. So Hydro has done fairly well financially.
In 1996, before the election, along with the Premier's announcement-a-day of tuition freezes and ICBC rate freezes that we're going to pay for later, he also announced a Hydro rate freeze. That was probably the most hypocritical freeze that the government announced, for two reasons. Hydro was unlikely to be applying for an increase -- in fact, wasn't going to apply for an increase in the foreseeable future -- because they knew it was highly unlikely they would need a rate increase. When the B.C. Utilities Commission looks at whether or not Hydro needs to have a rate increase, it evaluates its ability to provide the service efficiently, effectively, at the minimal cost, and to still pay its bills. Hydro was more than able to do that. So the chances that B.C. Hydro would have been asking for a rate freeze were zero. It wasn't going to happen.
So this cap that the minister
The problem with that is this: not only was Hydro not expecting a rate increase, but it was very likely that Hydro's rates were going to have to decrease. We've all known that changes were coming in the hydro market. We knew that Hydro's profits were getting larger. We knew that what was very likely to happen with the deregulation of the industry around North America was that rates were going to be pushed down competitively -- that Hydro, because of its profits, was probably going to have to lower its rates as a result of the direction from the B.C. Utilities Commission.
What's happened? At a time when the cap is a false cap, because there's no pressure upward on Hydro rates, there is in fact a downward pressure on Hydro rates. With this bill the government has added a floor to the cap. They've said that Hydro rates have to stay at this level for the foreseeable future -- for the next number of years. British Columbians were likely to get a rate decrease in the nature of about 7 percent -- ballpark, we don't know what the B.C. Utilities Commission would have ultimately decided. The government has stepped in, removed the right of the B.C. Utilities Commission to set rates independently, up or down, and decided that the cabinet is going to do it itself, and then the government puts that in the guise of protecting consumers.
The only people who have asked for a rate freeze in the last five, six or seven years are this government and B.C. Hydro. In 1992-93, at the direction of this government under their special directives, B.C. Hydro had to return huge dividends to the government for general revenue. In order to pay for those dividends, B.C. Hydro had to either go into debt or
[ Page 7015 ]
increase their rates. At that time it was the minister, who is now the Premier, who was responsible for B.C. Hydro. I remember the debate taking place in this House in 1994 when we talked about that very issue at the beginning of the session. B.C. Hydro was turned down by the B.C. Utilities Commission.It wasn't the Premier who was protecting the ratepayers in the province; he was the one looking for a rate increase. It was the B.C. Utilities Commission that protected the consumers in British Columbia by saying no to that rate increase. So now we have the height of hypocrisy, where this government is bringing in a floor. In fact, they're stopping B.C. Hydro's rates from dropping, which is what would likely have happened under the B.C. Utilities Commission, and putting in a floor and saying: "You can't lower the rates either. Not only can't you increase the rates, you can't lower the rates." As a result, British Columbians are going to continue to pay inflated Hydro rates because of the direction of the government. If the government had kept their nose out of it, if they hadn't brought in Bill 6, which we're dealing with today, the B.C. Utilities Commission would have been giving the people of British Columbia a rate reduction. So for the government to tell us that they're doing the consumers of British Columbia a favour by bringing in this rate freeze is ridiculous. They're not doing them a favour at all. In fact, they're charging them more.
Let's look at what that the B.C. Utilities Commission has to do, or what it used to have to do, when it was setting its rates -- whether up or down. If you look at section 60 of the Utilities Commission Act as it stands in the statutes today, it states: "In setting a rate under this Act or the regulations (a) the commission must consider all matters that it considers proper and relevant affecting the rate, (b) the Commission must have due regard, among other things, to the setting of a rate that is not unjust or unreasonable
If the B.C. Utilities Commission had to make its rate determination based on what was just and what was reasonable, what is the government basing its rates on? Why did the government see a need to go in and change that? They did it because they want the cash. They want to go into B.C. Hydro and use it as a cash cow like they've used it every year in the past little while. In essence, when the government talks about a rate freeze for B.C. Hydro and a tax freeze for British Columbians, what they don't tell them is that if the government had not done anything, they would have got about a 7 percent rate cut from B.C. Hydro. This is a form of taxation. They're keeping rates artificially high at B.C. Hydro and putting that money into general revenue, so British Columbians are paying more than they should be paying for hydro in this province. It's a form of taxation; it's a way for the government to raise tax revenue without saying they're raising tax revenues. On top of that, they have the gall to go out there and tell consumers that they're doing them a favour by freezing rates. That's what this bill is about.
This bill isn't about doing a service for the consumers of British Columbia; this bill isn't about giving them a special deal. This bill isn't even about a small rebate to the Hydro customers of the 2 percent they're talking about. This bill is about the government wanting to get cash any way it can and keeping B.C. Hydro rates artificially high, bypassing the normal independent process for setting rates and refusing to give British Columbians the rate break they deserve from the Crown corporation that they own, and using that cash to generate tax revenue for the government. I think that that type of charade -- that type of error or misrepresentation -- to the broad public of British Columbia about what this is all about is abhorrent. It's disgraceful.
If you're going to do that, tell the truth. Tell the public what you're doing. Say: "We need the cash because we can't control our spending, and therefore we're going to keep B.C. Hydro rates artificially high. We're going to bypass the independent process, and you're going to pay more for hydro than you deserve, because this government needs the money." I can't wait to see a television ad like that. Instead, we see television and print ads, we hear radio ads -- the same thing we heard on the other tax measures this year -- telling the people of British Columbia what a wonderful job the government is doing for them and what a great deal this is.
If the government would just tell the public the truth for once about what their plans are and explain to them exactly what it is, I think the people of British Columbia would have a far different view. The members opposite would get a lot different response from their constituents than they do when they tell them they've frozen the rates.
This isn't a government that's bent on doing the right thing by the consumers; this isn't a government that has the best interests of the consumers at heart. This is a government that has its own political hide at heart. This is a government that is more concerned about having the photo op for the Premier and the press conference for the Premier and the announcement for the Premier and the TV ads for the Premier, trying to boost their sagging image; trying to get themselves up from 18 or 20 percent in the polls, where they've been languishing for the last two years; trying to restore the damage that was done with the budget lie and all the other things this government has done wrong in the last two years. That's what they're more concerned about. They're more concerned about the image of the government and the Premier, and not concerned about the rates that are paid by the people of British Columbia.
[10:30]
The minister said in her speech that this rate freeze will help encourage job creation. What a load of hogwash! If this government wanted to do the right thing to create jobs in this economy, if they wanted to do the right thing by the mining sector -- which is here today, on Mining Day -- they would have allowed the B.C. Utilities Commission to do its job, to do an independent evaluation of the rates at B.C. Hydro and lower the rates not just for residential consumers but for industrial consumers as well. If the minister were honest and upfront about what the government really wanted to do, she would have told people that. If the government really wanted to create jobs, it would have allowed the B.C. Utilities Commission to do what it does -- what it's supposed to do: set the rates. The rates would have gone down; the mining and forest sectors would have had a significant break. They would have been paying rates that are more competitive with the other jurisdictions that they compete with.Interjection.
G. Farrell-Collins: I hear the member for Mission-Kent complaining about us raising this issue. The member for Mission-Kent doesn't seem too encouraged about this. The member for Mission-Kent should go back and tell his constituents the truth about the Hydro rate freeze. The member for Mission-Kent should go back and tell his constituents that, in fact, what the government is doing is overcharging them for hydro because it can't get its act together. The member for
[ Page 7016 ]
Mission-Kent should go back and tell the unemployed people in his constituency that the government refuses to let Hydro rates drop to a reasonable and competitive level so that those unemployed people can get jobs in the forest and mining sectors and in the economy. He may think it's funny, and he may laugh at this whole issue. But if he were upfront enough to go back to Mission and tell his constituents the truth about this issue, we'd see a different story.Interjection.
G. Farrell-Collins: He goes on again. Well, that's fine. We know what'll happen in the next election. This rate freeze is not a rate freeze. All this bill is about is overcharging for hydro. The people in Mission-Kent are being overcharged for their hydro. And the member opposite
People need to know what this bill is about. It's about artificially high Hydro rates. It's about a government that doesn't care about job creation. It's about a government who won't tell them the truth about what they're actually doing with Hydro and with the revenues. And it's about a government that just doesn't get it. If the government were going to do the right thing, they'd get out of the way, let the B.C. Utilities Commission do its job, and let the monopoly be regulated by an independent body instead of by a cash-hungry, cash-strapped NDP government. They'd allow it to do its job and give the people of British Columbia the rate reduction that it deserves.
T. Nebbeling: I'd like to add a little to the debate. This issue has been an issue of grave concern in my riding and in other areas where commercial users are operating. Going back to 1992, when special direction was given by government to B.C. Hydro to work on a financial strategy where the return on equity to B.C. Hydro had to be equal to the returns that their strongest competitors achieved
The role of the Utilities Commission is extremely important when it comes to how much B.C. Hydro can take from the export consumers, because it's only the Utilities Commission that has the power and the ability to do a review of reasonableness whenever a rate increase or rate decrease is demanded. Especially with a monopoly such as B.C. Hydro, I think it is extremely important that that ability be there, that there be an independent body to go over the request and say "Yes, this is reasonable" or "No, this is not reasonable." So the process up to now has been that when the Utilities Commission was asked to look at increases -- and traditionally it did look at increases -- there would be an interim rate set by the Utilities Commission reflecting the request for the increase. Then there would be a review where various parties would be asked to comment on the review. The Utilities Commission itself would look into the fairness of the increase, and then at the end of the process, a recommendation would be made to accommodate the request either from B.C. Hydro or, if it was a reduction, from the users.
Now, it is also fair to say that in general the reviews have always been dictated or driven by rate increases, and it's funny that the government at no time felt the need, when these increases were requested by B.C. Hydro, to interfere in the manner that they are now. What they have done here
The argument made in this particular case by the Minister of Employment and Investment, who introduced Bill 6 and the so-called freeze on the rates
The first point is that this overcharge was in '96-97, and '97-98 sees just as much excess billing and charging by B.C. Hydro. So it is not a one-year occurrence; it becomes a bit of a trend. By overcharging, of course, B.C. Hydro is violating one of the Utilities Commission Act's rules, and that is that it cannot have profits higher than have been established under section 8 with the special direction. Clearly, not only is cabinet overruling B.C. Hydro's mode of operation, how much they can charge, and how much they can make in profit, but furthermore, the argument that this is done because it's a one-time occurrence and will not happen in the future has already been shown to be wrong by presentations made by lawyers on behalf of B.C. Hydro when this rate was actually debated in the courts.
I'm obviously opposed to Bill 6. Like my colleague from Vancouver-Little Mountain says, this is a bill that pretends to do the customers a favour by freezing the rate, but what it is really doing is setting and maintaining an artificially very high level of charges for B.C. Hydro. During committee I will speak on the three sections in more detail and with more information to justify this government's withdrawal of this bill. This is not, as has been portrayed by the minister, a favour to the consumers but is really another way of taking more money
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out of people's pockets than this government is legally entitled to. Morally, they should never have been involved in it.D. Jarvis: My associates have pretty well outlined the things that are basically wrong with Bill 6, Madam Speaker, but I thought I might add a few comments to the record that show that this government is perhaps a very hypocritical one -- to say the least. In their press release on this bill back on March 27, they suggested that the government share Hydro profits and that they were going to freeze the rates. That in itself is probably the most hypocritical thing that this government has said so far: that they plan to share the profits with the people of British Columbia. In fact, where they have now frozen the rates of B.C. Hydro, they have, in effect, actually frozen the rates up, not down. This bill does not give a true benefit to citizens and industries and businesses in British Columbia.
Now, I can see different members on the government side shaking their heads, wondering what I meant by "freezing up." Basically, as has been said before, they froze those rates up only because they wanted to make sure that they were able to make a cash grab out of B.C. Hydro. Everywhere in North America, rates for hydro are plummeting. The cost of producing hydro is dropping. Yet this government holds it up to the point where, as I say, they've frozen it so that the benefit is not being returned to British Columbians.
They continue to tax businesses and industries throughout this province, rather than use the resources to benefit our individual householders or our small businesses or our large industrial companies. These are the companies that employ our workforce. They say that they're going to share the profits with them, but it's a sham. Here's another tax grab by this government -- a government that is really very, very desperate.
With this Bill 6 they now say that they are going to freeze the rates up for another seven years instead of dropping the rates down. All over North America, as I said, the prices are dropping, but not in British Columbia. I'll give you some good examples, as I go on further, to show how hypocritical this government is on that aspect.
Now we are virtually at the start of or well into a recession due, granted, to the world markets. But the taxes, fees and regulations of this government, which have been invasive to our industrial businesses, have added to the problem we are having with our economy in British Columbia. Our industrial users need some tax breaks or help in some way or another -- but not with this government. When a cut is needed and it's beneficial to them to compete, this government turns around and gives them just a one-year dividend, which is another tax grab in disguise.
B.C. Hydro had an exceptional year this year, as it has in the past few years. But a 1 percent cut for our residential users and a 2 percent cut for our industrial users are really not sufficient. Industry asked BCUC for a larger cut in the rate -- for approximately 7.5 percent -- not a one-time dividend. A dividend in this instance is just inadequate. There's no benefit, really, when you see a company like Hydro
[10:45]
They say that they are going to give a 2 percent benefit to our industries. You turn around and you see industries -- for example, large ones like forestry, the chemical industry, the mining industryWhen the major industrial users in this province went to BCUC -- the British Columbia Utilities Commission -- they went there because BCUC has a mandate to regulate all energy and utilities in British Columbia, which includes B.C. Hydro. They went to BCUC to ensure that they could get a reasonable break in their electricity costs. Although BCUC doesn't have the direct power, it's a safeguard for British Columbia citizens to make sure that utilities do not go overboard and charge the citizens too much. As I said, it has no power to regulate government freezes, but it can recommend a rate cut.
Even the commissioner for energy that this government put forward back in '92-93, Dick Gathercole, said that a rate cut should be necessary. They turned him down. As a matter of fact, there's an article here from the Vancouver Sun of March 28 in which Dick Gathercole, representing British Columbia public interest groups in an advocacy centre that he runs, sent letters asking for a rate decrease on behalf of residential clients. But Hydro and the government rejected them. He said that a 2 percent rate -- which is about $12 to an average household -- is insufficient when you consider what is happening with the rest of the electricity markets in North America.
We now know that this government is selling electricity cheaper to the Americans south of the border than it is to the industrial users in British Columbia. In itself, that is such a hypocritical thing in the sense that this is where the benefits should come to. But no, they are putting it into B.C. Hydro, to sell power cheaper to get cash to bring back into British Columbia so that they can go out and take it and put it into their general coffers. As I said, the rate freeze sounds good, but in reality it's just a giant revenue grab.
We look back at some of the old documents since this government came into power, which show that they use the Crowns not as a benefit for the people of British Columbia but solely for the benefit of their government. They have mismanaged the economy so badly that they are in desperate need of cash. They transferred out of B.C. Hydro in the last few years
[ Page 7018 ]
this next year. Now, that's going to be pretty insignificant when you think of the money that this government is taking out and spending on situations that make everyone very, very nervous in this province.
We are in desperate shape. Mines and industrial users are in tough, tough condition. They put forward another bill today to help
Madam Speaker, I'm not going to go on forever, fortunately, because I don't want to say something that I probably shouldn't say. This is a bill that shows the hypocrisy of this government. It's a bill that is bent for their own political means, driven by their desperate need for cash. I would refuse to support a hypocritical bill that overcharges our citizens and the industrial users in this province for their use of electricity -- when they export cheaper rates and electricity costs across the borders. It will not create jobs, and I will not support it.
G. Plant: I'm pleased to have the opportunity to rise to speak for a minute or two about Bill 6. I am going to pick up on a theme which the previous speaker -- my colleague -- alluded to, and that is the theme of hypocrisy. I'm going to do that in a slightly different context, however, and that is the context of the extent to which this bill sends a message, a principle, around the issue of consumer protection and what I see as some of the hypocrisy of the government's actions and statements on that subject.
I have to begin by saying that I'm always struck by the particularly malevolent genius of a government that can take what is ultimately, in every way but name, an increase in hydro rates -- compared to what economic circumstances should be -- and call it a decrease, and that special form of intelligence that takes a Crown corporation, which holds its assets and revenue in trust for all British Columbians
I must pick up on some of the comments which my colleague the Opposition House Leader made about the context in which we as a society, we as a province, have over the course of time regulated and controlled the setting of rates by B.C. Hydro, both for the protection of consumers and citizens, on the one hand, and obviously, on the other hand, for the benefit of the Hydro and Power Authority -- so that they could do their business in a way that ensures that they will be a viable organization. The mechanism through which that has been achieved over the course of time
Now, the history goes something like this. Prior to 1960-61, we had the B.C. Electric Co., which was a privately owned electricity company. It was, if my history is right, regulated under what was then the Public Utilities Commission or whatever it was called. In the early sixties, after the provincial government nationalized the electricity company, the government of the day decided that it was not in the public interest to subject the newly formed Hydro Authority to the regulation of the Utilities Commission. So for a period of some years -- in fact, perhaps as long as two decades -- B.C. Hydro was essentially outside the scheme of utilities regulation that applied to all of the privately owned utilities in the province. I think it was then recognized that that was not the right way to ensure that a powerful monopoly like B.C. Hydro would operate in a way that protected the interests of the public and consumers and protected B.C. Hydro's interests as well. So approximately 20 years ago or thereabouts, Hydro was brought under the umbrella of the B.C. Utilities Commission. I think that was a fairly good public policy decision, because I think that most people are of the view that over the course of time the Utilities Commission, in all of the things that it has done, has served the public interests of British Columbia relatively well.
What this bill does is take away from the Utilities Commission the authority to have any power or ability to have any meaningful say over the rates of B.C. Hydro. In other words, it stabs a knife into the heart of the consumer protection principles -- the public interest protection principles -- which have been an important part of the public policy of British Columbia for the last couple of decades. I don't think that's good public policy; I think that's bad public policy. But what is always amazing to me is to discover that there are other people within the government who have my view of consumer protection issues but who apparently don't have any influence over the Minister of Finance or, in this case, on the public policy around B.C. Hydro.
Of course, in this government there is a minister who has responsibility for consumer relations. We no longer have a cabinet minister who is called the Minister of Consumer and Corporate Relations, but we do have the Attorney General. The Attorney General has many responsibilities, and among those responsibilities is consumer affairs. The Attorney General is responsible for the Motor Dealer Act. I think he is also responsible for the Cemetery and Funeral Services Act and other statutes that are enacted in the name of protecting consumers. More than any other minister, the Attorney General is probably the one who has the most responsibility to protect the interests of the consumers of British Columbia from whatever evil is currently besetting them, whether that be travel companies or motor dealers that aren't operating properly -- whatever the issue is.
On September 14, 1997, I was very interested to read an article in the newspaper about an important step which the Attorney General, as the consumer affairs minister, was taking to try to enhance the protection of consumers in British Columbia. I'll just read the first sentence of the newspaper article: " 'Canada needs laws to make it easier for consumers to join together to counter the big profitable banks,' B.C.'s consumer minister told a meeting of his provincial counterparts." The article goes on to talk about the Attorney General's ideas for how you could enhance consumer protection in the area of the banking industry, where people always have a concern about whether or not consumers are being adequately protected. Interestingly enough, the Attorney General's idea was to institute and to encourage the creation of models like citizens' utility boards, which have been very successful in the United States. These organizations, which operate in the United States, have an official role to play in -- guess what -- the setting of electricity rates. In fact, they have an important role to play all across North America in ensuring that rates for electricity and other utilities are set in a way that protects the public interest as well as the interests of consumers.
[11:00]
I'm confused today because, on the one hand, we have an Attorney General who as recently as last September was speaking out as an advocate for consumer interests and trying to come up with creative ways to ensure that consumers were protected. Yet today we have before us a bill which I think will[ Page 7019 ]
achieve exactly the opposite. What will happen as a result of this bill -- if this bill passes -- is that the government will take onto itself directly the power, essentially, to set utility rates. The Utilities Commission will no longer be the place where B.C. Hydro's rates are set. The cabinetUntil today, until this bill, we had in place in British Columbia a mechanism that did a reasonable job of protecting the interests of consumers and citizens by ensuring that there was some public accountability, some transparency around the issue of the rates that people pay for B.C. hydro power. We will lose that when this bill becomes law. I think that is a step backward; I think that's a shame. It is also, frankly, once again an exercise in or illustration of the kind of mysterious hypocrisy which exists in this government, when on the one hand we have an Attorney General who says, "I'd like to do things to protect the interests of consumers," and who comes up with some interesting ideas about how to protect consumers, yet in fact when we come to debate legislation, the bill that is before us is an attack on the interests of consumers.
While I think about what the Attorney General said about banks and how it would be a good idea to protect the interests of banks, and then I look at what the government is doing here -- the government is the owner of a huge hydroelectric monopoly -- I guess I have to be thankful that the government doesn't own any banks. If the government owned too many banks, we'd get a few more Bill 6's. I think the interests of consumers would be even more at risk than they are today.
I know it's hard for a government in a big province to have the right hand and the left hand talking to each other. But this bill, coupled with the interesting statements which the Attorney General made recently on the subject of consumer protection, has me wondering whether or not the right hand and the left hand of this government are even attached to the same body. I don't see how I can support a bill which, in my view, far from enhancing the public interests of British Columbia, will take away from it. So I'm going to be opposing this bill.
F. Gingell: Madam Speaker, in 1991, when this government came into office, B.C. Hydro paid to the province $199 million in water rentals. In 1997 they paid $296 million in water rentals, an increase of $100 million or 50 percent. In 1991 this government received a dividend of $114 million on the earnings of B.C. Hydro. And in 1997 they extracted a total of $279 million.
During the intervening years, through special directives Nos. 2 and 8, they have ensured that B.C. Hydro's main function besides the selling and the production, transmission, delivery and sale of electricity to British Columbia's citizens and residents
When we look at 1997 and think about what the accounts may be like in 1998, we recognize that the largest single cost to B.C. Hydro is interest costs -- the costs of servicing the debt that they've incurred for developing the infrastructure. Those costs in 1995-96 amounted to 35 percent of total costs and in 1996-97 have dropped to 30 percent. They've dropped to 30 percent, with a reduction of some $100 million, because there was $1.75 billion in long-term debt that they were able to refinance in this past year at substantially lower interest costs than the debt that was retired.
It is anticipated that in this coming year -- the year just ended, for which the government will have a good idea of the financial results, but we don't yet
This rebate that this bill provides for -- or profit shares, as they call it -- amounts to roughly $31 million, I believe, but the excess earnings -- the earnings that B.C. Hydro has realized in the past year in excess of normal rates that would have been established by the Utilities Commission and would have been taken into account by the commission in dealing with the setting of future rates -- amount to $170 million. This profit-sharing dividend to consumers is less than 20 percent, less than one-fifth, of the total excess profits that had been earned.
This government brings forward this bill and rings the bell and has another photo opportunity and puts out a press release that they're doing everybody a favour. It bothers me -- the hypocrisy in not stating the truth. Why can't this government put out a press release that says to the people of British Columbia: "B.C. Hydro rates are too high, and instead of reducing B.C. Hydro rates, we're going to keep those additional funds, because this government has an insatiable appetite for spending public money"?
I think that it's time they brought a little more frankness, a little more openness and a little more honesty to their government and dealt with people and told them the truth instead of hiding it behind a façade that is purely that. The numbers, the dollars, that flow through B.C. Hydro tell a very telling story. B.C. Hydro rates in this province are too high. Bring down Hydro rates, and we will have the opportunity to improve the economic environment of this province, to make this a better place to invest, to bring capital investment to British Columbia that will create good, family-supporting jobs. That is far more important than the silly games that this government plays with respect to profit-sharing and the operation of B.C. Hydro.
Hon. J. MacPhail: I move second reading of Bill 6.
Motion approved on division.
Bill 6, British Columbia Hydro and Power Authority Rate Freeze and Profit Sharing Act, 1998, read a second 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: I call committee on Bill 2, hon. Speaker.
BUDGET MEASURES
IMPLEMENTATION ACT, 1998
The Chair: Just before we begin, as this is the first occasion for Committee of Supply, I would like to remind members that Committee of Supply is a committee of the whole House, and that under standing order 61 two main principles
[ Page 7020 ]
apply. First, the standing orders of the House, except for limits on the number of times that a member may speak, apply. Secondly, the rule of relevancy requires that speeches be "strictly relevant to the item or clause under consideration." In keeping with the practices of this House, general discussion of a ministry's policy and administration will be permitted under the office vote of the minister. Accordingly, debate under subsidiary votes will have to be strictly relevant to the vote under consideration. Under standing order 43 the Chair may intervene where it perceives that a member is persisting in tedious repetition. In all other respects the normal rules of debate will apply. These comments apply equally to committee on bills and to Committee of Supply.
[11:15]
On section 1.G. Farrell-Collins: Section 1 of Bill 2 is the changes to the corporate capital tax for the lower threshold of businesses. Can the minister explain what rationale was used in determining these new thresholds, as opposed to the ones that existed before?
Hon. J. MacPhail: In consultation with various aspects of the business community, it was determined that a clear signal had to be given that the corporate capital tax was to be
G. Farrell-Collins: Members of the opposition would love to see a sustainable three-year plan from the government too. Every time we have a plan that comes forward, it seems to change the following year, because the government misses every single one of the targets that it puts in place.
That aside, I assume that the discussions with the business community, if the minister is correct in what she's saying, were probably around
Hon. J. MacPhail: I'll ask the Premier whether he had those discussions.
G. Farrell-Collins: This is the minister's bill. I would assume that she has the answers to those questions, but I guess she didn't have a lot of impact on setting this legislation or writing the budget. I assumed when she brought it in that she would have had those determinations, would understand the rationale for the various provisions that exist in the legislation that she is tabling and would be able to discuss them. Can the minister tell us, then, what study the government did to determine whether or not these figures and changes in threshold would make that clear signal across not just British Columbia but other jurisdictions as well -- that the government was listening to business and would in fact be willing to encourage job investment and reduce taxes, as opposed to what just appears here to be a very minor change in a tax that generates hundreds of millions of dollars for the government?
Hon. J. MacPhail: In the discussions I've had with the business community subsequent to the budget, they have welcomed these changes.
G. Farrell-Collins: My question to the minister was this -- maybe I'll put it in a more contained fashion: can the minister tell us what economic impact studies were done to determine how big an impact this very small change was going to have on the small business community? The government is always going to make some announcement, whether it's an Alcan deal or some other deal or a jobs and timber accord or some advertising campaign for youth jobs. It is always able and willing to tell us, even if it's an IBM deal involving as few as 200 jobs, how many jobs will result because of the changes the government has made or the deal the government has made. Can the minister tell me what studies the government did with regard to these changes, as to how many jobs they are likely to create?
Hon. J. MacPhail: The provision increases the exemption threshold, so an additional 10,200 small and medium-sized businesses will be exempted from the tax when the provision is fully implemented. It will reduce our revenues and put revenues in the hands of small businesses to the tune of $46 million annually. The economy will benefit from that.
G. Farrell-Collins: The minister says $246 million annually. You would think that the government would
Interjection.
G. Farrell-Collins: Oh, $46 million.
The Chair: Through the Chair, please, members.
G. Farrell-Collins: Thank you, hon. Chair. I thought the figure was a little larger than what I'd read -- $46 million.
Yesterday in this House -- I believe it was in debate on Bill 5 -- we had a discussion about the $15 million that was going into the northwest sector of the province with regard to the Alcan deal. We were privy to a very loud and vociferous and enthusiastic speech by the minister from the north coast about the jobs and the opportunities this was going to create for the northwest sector, and that was $15 million. So can the minister tell us what projection the government has done to determine the kick-start this is going to give the economy and the number of jobs it's likely to create?
Hon. J. MacPhail: Because I fear that the member opposite will pursue this with vigour in every section, let me make clear to him the nature of the discussions that did occur between the business community and the Premier, the former Minister of Finance and, after my appointment, me. This was a top priority for the business community, as a signal to be sent that this government is open for doing business in a different way.
The discussions were of a nature that
G. Farrell-Collins: I'm just looking at "Budget '98 Reports," page 72. Maybe the minister can correct me if I'm wrong, but the corporate capital tax for the farm sector looks like it's about $3 million. Is that correct for the farm sector?
[ Page 7021 ]
Hon. J. MacPhail: This particular listing is irrelevant to the clause that we're debating.G. Farrell-Collins: We'll come back to it at a later date, then -- perhaps in the estimates.
The minister says that there was a full and frank discussion, an in-depth discussion, with the various businesses that were involved. My understanding of the discussions that took place between the Premier on four occasions, I think
To my knowledge, only on one occasion was there even a representative of small business present, so I'm wondering how the government and the Premier and the former Minister of Finance and the current Minister of Finance managed to get such a comprehensive understanding of the economic impact that this very small change in the corporate capital tax for this year was likely to have on small businesses. Can she give us some sense of the nature
Hon. J. MacPhail: Consultations took place among the small business community at several tables. The Minister of Finance had an investment advisory committee where there was substantial representation from the small business community. I also met with that group after my appointment. The Taiwanese community, the Taiwanese-Chinese business community, the Hong Kong-based business community, the Chinese community are representative of the small business community. There was a separate consultation among a table specifically of small business operators. Then, of course, the Premier also met with business leaders, many of whom, in their association, also represent small business.
G. Farrell-Collins: It's clear to me that, on an annual basis, representatives of the small and medium-sized businesses -- and indeed, probably individual members, individual owners of small and medium-sized businesses -- send to the minister, in advance of his or her introduction of a budget, recommendations for changes to the taxation levels, for the types of taxation, for the various things they'd like to see in a budget. Can the minister confirm that that was done this year as well, as it's been done virtually every other year, certainly since she and I have been in this House?
Hon. J. MacPhail: Yes.
G. Farrell-Collins: Then can the minister tell me why, after only six or seven years of getting those representations year after year after year from the small and medium-sized business community, this is the only year that the government has chosen in any way, shape or form to heed those concerns? And the minister listed them: the Hong Kong business association, the Taiwanese business association, the Canadian Federation of Independent Business, the Coalition of B.C. Businesses, not to mention probably hundreds of individual small and medium-sized business owners who would have written to the minister, and certainly to her predecessors over the years, to ask for the elimination of the corporate capital tax on their businesses. Why is it that this year is the only time that the government has done anything, however remarkably small it is? Quite frankly, it's for next year, not this year. Why is this the only year that they've done anything about it?
Hon. J. MacPhail: Actually, the member's wrong; we have made changes to the corporate capital tax in the past.
G. Farrell-Collins: The minister is correct: they've made marginal increases in the threshold over the years. I'm glad she raises it, because it highlights my point. The impact of the changes that the government made were certainly not enough to sustain the economy for small and medium-sized businesses. In fact, they did next to nothing. They did give a small break to those businesses, but not enough to encourage the small and medium-sized businesses to grow and to continue to create jobs at the rate that they used to.
In fact, they're experiencing a downturn. At a time when that crisis for small and medium-sized businesses is getting even more intense, one would think that the government would be making more significant changes to the corporate capital tax to really make sure that they aren't in a situation where they are paying taxes on their capital before they even have a chance to make a buck or before they even have a chance to earn anything. Before they even unlock the front door of the business, they're paying this tax.
If the minister has had those inputs all along and has actually responded to them for many years as we went along -- this threshold has increased incrementally each year -- why hasn't the minister responded when she's still getting calls from those businesses to eliminate the corporate capital tax on them? Why is it that you haven't responded? All that the government has done is raise the threshold marginally and incrementally again. In this case, it doesn't even take place until next year.
It would seem to me that if the government were really getting the message and really cared about the job creation ability of those small and medium-sized businesses, it would have done something this year that is different from what it has done every other year in order to make an impact and in order to send a signal that they're getting it, that they want investment here and that they want small and medium-sized businesses to thrive. The government has done nothing other than what it's done in other years. It's made no significant signal; it's made no change. It's made no significant change that's going to say to those people -- here in British Columbia and elsewhere in Canada, in Washington State and in Oregon, and also, importantly, in Taiwan and Hong Kong -- that they should bring their money here to British Columbia, they should invest it here, they can do well here, they can create jobs for the people who live here, and they can make our economy more vibrant and create opportunities for our young people.
There is nothing in this bill that does anything different than what the government has done incrementally over the past number of years. The minister makes my case for me. On one hand, she says that the government is trying to signal out there that this is a new way of doing business, that the doors are open in British Columbia, that they want to make a change, that it's time to change things around and that they're hearing about the pain that's out there from small and medium-sized businesses and from the people who work for them that are losing their jobs. But the government has done nothing different in this bill from what they've done in the last
[ Page 7022 ]
two or three years. Again, it's another marginal incrementation of the threshold -- no real impact. The minister makes my case for me. The fact of the matter is that the minister argues on one hand that the corporate capital tax penalizes small businesses and that it stops them from creating jobs. She says that increasing the threshold is going to encourage them to create jobs, and it's going to encourage people to invest here. And on the other hand, she says that they want to go out and send a clear signal to business that they're changed. If she wanted to do that, she would have made a substantial, significant change to the corporate capital tax, not one more small, incremental adjustment to the threshold.
[11:30]
There is no logic behind the corporate capital tax. It is a job-killing tax for these small and medium-sized businesses. It continues to drive them out of the economy, it continues to drive them out of business, and it continues to ensure that small and medium-sized businesses can't create the new jobs or the jobs in the high-tech sector that this province needs. This government has sent no signal of the sort that the minister says it has. What they have sent as a signal to small and medium-sized businesses is that this government is doing business as usual. They want your money. They don't care if you invest here. They don't care if you create jobs, because they need the cash.Hon. J. MacPhail: Hon. Chair, it's clear that this member is going to get up and talk at me, because he can't talk to the business community. I appreciate the fact that he's going to be ranting and raving at me. He has no other way to get his message across, because they simply have no communication with the business community. I am quite prepared to hear this rant over and over again from the member opposite. Let me just make one response to the continuous rant by an ill-informed MLA who is clearly out of the loop of the business community.
When we met with the business community, they had several issues which they asked us to address and which we asked them to address. I know it is difficult for the member opposite to understand the consultation process, where one is actually working in partnership and where one actually has to be responsible for the overall picture of protecting health care and education, for ensuring that we stimulate the economy, for ensuring that there are safe environmental and employment standards in this province and for ensuring that we move toward a balanced budget. I know that is a difficult concept for the member opposite to understand. In fact, I guess it is the role of the opposition to be ill-informed so that they can nitpick in an ill-informed way and never have to answer to any of the constituents who actually have real input into the economy of this province, such as the business community.
We met with the business community, and the business community had a series of issues which they wanted us to address. In fact, the business community didn't have consensus on any of these issues. They admitted that there was no consensus; they admitted there was no consensus before we started our consultations. They admitted during their submission that there was no consensus; they admitted it during the consultation. They continued to admit it after the budget was announced, as the Premier and I and my colleagues continued to meet with the business community.
The tax stimulation package that we have put forward will cost the province $415 million annually by the year 2001. It is a package that is precise in targeting specific aspects of the range of concerns that the business community had. It is a package that also allows us to protect health care and education, which the members opposite don't give a whit about on budget day -- but subsequent to budget day, they do ask, each and every time they stand up, for us to spend more. So we have managed to balance that. We have a $95 million deficit that we will be moving toward balancing, and then a surplus.
The business community, unlike the members opposite, understands the complexities of the economy and of the various sectors of the economy as well. This budget -- particularly this section -- addresses a concern of the business community, and I must say that in my subsequent discussions with the business community, this particular change was welcomed.
G. Farrell-Collins: Of course it was welcomed. If I was strung out on the rack and the torture master came along and released it a notch, I'd thank him too. I'm trying to deal with the issue here; I'm trying to deal with the impact on small and medium-sized businesses, and the minister gets up and launches a personal attack for which I'm not going to retaliate. But I am going to say a couple of things.
First of all, the deficit isn't $95 million. The auditor general says it's $949 million, and no matter how many times the minister repeats it, it's not going to change that fact. So she can try once again, like this government does every year, to tell people some funny business about the budget that isn't reality. But it's not going to wash, because the people are onto the game and the people understand the way this government balances its budgets fictitiously. They are not going to fall for that trick twice, so the minister can repeat it over and over again. The fact of the matter is, and the auditor general confirms it, that the deficit for this year, according to the budget documents -- and it's written in the budget documents -- will be $949 million.
Second, the minister states that somehow this government, after having three dinner meetings with the Premier, has now heard all there is to hear from businesses. Somehow they've co-opted the business community. They're the party of business; they are the party of big business. Well, we know they're the party of big banks -- we'll get to the tax break they gave to the banks in a few minutes -- but they certainly don't have the slightest clue about what it takes to run a business. They certainly don't have the slightest clue about what it takes to create a job that doesn't come with a cheque from the government of British Columbia. They certainly don't have a clue about how this economy works: how the small and medium-sized businesses of this province drive the economy, drive job creation and have been doing for so long. Now they are suffering under an onerous burden of regulation, red tape and too much tax. That's the truth.
If the minister had a clue about what small business really thinks, above and beyond the four dinner meetings the Premier had with the big business community, she would have an understanding of that. So I'm not going to get into that, because the argument the minister makes just isn't credible. The public isn't going to buy it; they're not going to understand it. The reality is that the people of British Columbia and the small business people of British Columbia -- despite being pleased that the noose around their neck has been loosened a little bit, despite being relieved that the rack has been released a notch and thanking the minister wonderfully for it -- could do a heck of lot better creating jobs and turning this economy around and getting our 18 percent youth unemployment rate down to a reasonable level, one that's even comparable with our neighbouring jurisdictions.
[ Page 7023 ]
That one is key. I remember during the election campaign that the minister in particular talked about youth over and over again, and in the last two years the youth unemployment rate has gone up 5 percentage points, to 18 percent. So the government hasn't done a darn thing for young people in this province as far as creating jobs and opportunities for them, and this change in this bill is not going to make one bit of difference. It may be a tiny, small amount, but it's not going to make the kind of difference that is necessary to turn the economy around and get those young people the jobs that they need.Section 1 approved on division.
On section 2.
G. Farrell-Collins: Section 2 is a fun one. Section 2 should probably be called the NDP government hypocrisy section. During the election campaign this government ran television ads mercilessly, for three months before and then another month during the election campaign, misrepresenting the platform of the official opposition by saying
The fact of the matter is that the members opposite and this government ran those campaigns stating that the opposition -- and I'll repeat their misrepresentation -- was going to give a billion-dollar tax break to the big banks. And they were merciless. I'm sure the people around the province remember those ads and remember that misrepresentation. That wasn't what was in the platform. That wasn't what was in the economic plan of the opposition. We had no corporate tax break for the banks. We had a complete elimination of the corporate capital tax for the small and medium-sized businesses in this province, the non-financial institutions. That was a fact; that was in the economic plan. That government went out and mercilessly misrepresented that to the public over and over again. And the member for Mission-Kent laughs that he went out and misrepresented the facts to his constituents. He laughs about it; he's giddy about it.
Let's look at what happens in this bill. Who would ever have thought that a government that went out and did that during an election campaign would, in their second budget, give a multimillion-dollar tax break on corporate capital tax to a bank? Who would ever have thought that? I wonder how many people in Mission-Kent -- who are outraged by the assertions made by the member for Mission-Kent -- would have thought that if they voted for that member, he would be standing up in this House less than two years later, voting in favour of a multimillion-dollar corporate tax break for a bank? Who would have thought that? But that's what he's going to do. In probably ten minutes -- maybe five, maybe two; who knows? -- he's going to stand up in this House, and he's going to vote in favour of a multimillion-dollar tax break on the corporate capital tax for a bank. Isn't that amazing, hon. Chair, that they would do that, that they would have the gall to do that? I've seen some funny things in this House; I've seen some amazing things. But I never thought -- as much as I think about the government -- that I'd be seeing this less than two years after those ads ran. I never imagined it in my life.
The reality is that businesses right across the spectrum in British Columbia need a break, because they're suffering. Our economy is going down; our forest sector is going down; our mining sector is going down -- our industries are having a heck of a time. They've had a heck of a time for the last couple of years. We went from number one in economic growth in Canada to number ten -- behind every other province and the federal government.
Things are going the right way, so I'm glad to see the government making some changes. I'm glad to see the government making some changes in the taxation system, however small and incremental they are. But we know that this change in section 2 will save at least one financial institution, one bank in British Columbia, $8 million. In the preceding section, every small business in the province -- if you gather all the small businesses in British Columbia that fit into this category -- will get a $5 million tax break next year. This one institution that's affected by section 2 -- or there's at least one institution that's affected by section 2; there are probably others -- receives $8 million, and it doesn't have to share with anybody. And it got it last week -- two weeks ago, three weeks ago. It has already got the break. It shows you where the government's priorities are, it shows you the hypocrisy of the government, and it shows you that they'll say one thing one day and turn around and do exactly the opposite the next day. Nobody in this province should ever again believe the government of British Columbia when it tells them anything about the finances of this province. Nobody can believe a word the NDP says about the finances of the province. They just can't be trusted.
[11:45]
Section 2 raises the threshold for the financial institutions that have to pay the larger 3 percent rate from $750 million to $1 billion. Now, I don't need to know the names of the companies. I don't need to know who they are. I don't need to know where their offices are. All we're asking for the Minister of Finance to do is to come clean and tell us how many institutions will pay the lower rate this year, instead of the 3 percent rate, because of this change in section 2.Hon. J. MacPhail: Just a couple of comments, because it's been very, I would say, almost therapeutic for the member opposite to be able to relive the last election. It would probably be preferable if he did take therapy rather than waste our time in here, because if the member opposite had properly fought the last election, he actually would have been able to point to a time when our government had previously changed this threshold. He would have been able to point to 1994, when our government raised the threshold for which this tax would apply from $500 million to $750 million. He probably, if his party had done the research at the time, could have pointed to that in the last election, and he wouldn't have had to go through this massive therapy to deal with his bitterness now. That would have been more helpful.
However, as they did miss the opportunity to actually post a budget for post-secondary education the last time, they also missed the opportunity to point out that the threshold had been raised. We could have had a debate on that, around the facts, in the 1996 election as well. But because he personally missed that opportunity in the 1996 election -- to point out the good work that we're doing for homegrown financial institutions -- he needs to vent, have a cathartic reaction today to this. He could have also pointed out the debate that occurred in 1992, when the restructuring of this tax took place in this very Legislature, about the purpose of two-tax structure. He could have pointed out at that time that this government was bringing in a tax structure to encourage local homegrown institutions and small and medium-sized financial institutions. That was exactly the purpose of the tax structure.
[ Page 7024 ]
That was exactly the purpose of raising the threshold from $500 million to $750 million in 1994. It is exactly the purpose of the change in this particular budget.Hon. Chair, I think members on this side take pride in homegrown financial institutions that create and retain jobs in British Columbia. Now, I would also say to the member opposite that, in pursuing the number of institutions in the financial world that exist here, there are rules of confidentiality that exist. If the member opposite is saying that even in the context of those rules of confidentiality he wishes to have a number named, I will have to seek advice about whether that is allowed under the terms of the confidentiality of the act. I will be more than happy to get back to him with that information.
G. Farrell-Collins: With regard to the answer to my question, which the minister gave at the end of her speech, I will await that. I'd love to see the rules of confidentiality myself so that I can have a chance
Interjection.
G. Farrell-Collins: Well, hon. Chair, I don't believe disclosing the number of institutions is going to make any negative determination on any particular corporation. But I'll wait for the minister; I'll hold her to it. I thank her for offering that. I will look into it myself. Obviously she'll have her staff look into it and find that answer.
While she's doing that, it would be helpful to know the answer to the previous question I asked -- I don't know if I asked it, but I probably should ask it now -- which is: how much tax has been forgone as a result of this change this year? I know the way it's represented in the budget documents, and I understand the argument that the ministry staff make with regard to that. Let me put the question clearly. Had this change not been implemented, what additional tax would have been paid this year? Can the minister tell us that? Or, for that matter, next year or the year after, because some of these vestings don't come into place until later. So if the minister can assure us that she will investigate those questions and give us those answers without having to disclose the names of the firms that are associated, it would be much appreciated, and I will hold her to that.
I want to come back to one of the comments the minister made, because I thought it was really illustrative of the way the government works
Interjection.
G. Farrell-Collins: Whatever -- however the member wants to pronounce it. He's welcome to get up and correct me if he likes.
The fact is that in 1995 the government did raise it from $500 million to $750 million. The minister stands up in the House and says that if we had done our job, we could have raised that issue and pointed it out to the public and had that debate at the time. Well, you would think a government that was going to go out and run the kind of ads they've had and that was going to take the position it had during the election campaign would have been honest with the people of British Columbia. They wouldn't have tried to hide it from the people of British Columbia. They would have disclosed to British Columbia just what a bunch of hypocrites they really were. So the minister can point over here, somehow saying: "Ha-ha, you didn't catch us." But I didn't think that's the way governments operated. I thought the minister took an oath. I thought members took an oath here to be honest and forthright and upfront. If the minister is telling us that she has to get caught in the act
The Chair: Order, member. Could you take your seat, please. The Chair has to intervene at this point, as much as he doesn't like to. We are varying from the section of the act by quite a degree. I would ask members to please make their comments relevant to the section.
G. Farrell-Collins: Thank you, hon. Chair. If I had been allowed to finish, I would have made it all relevant. The fact of the matter is that if this government believes that the way it portrays itself, the way it deports itself, is that they're only going to stop doing something, they're only going to change their ways, once they get caught, I guess that explains a lot of things.
Hon. J. MacPhail: Point of order.
The Chair: The minister, on a point of order.
Hon. J. MacPhail: Actually, hon. Chair, not only is it irrelevant but he's misrepresenting the remarks I made. I said that the record was there for them to address and that we had actually done it in a very public way. So he is imputing false motives to my comments, and he's actually misinterpreting my comments as well.
The Chair: Members, points of order are very clear. While the comment is appreciated, I would ask members to please go back to section 2.
G. Farrell-Collins: The fact of the matter with this section is that the government
Interjection.
G. Farrell-Collins: The minister says she did. Where are the TV ads out there saying: "We've raised the threshold and given a bank an $8 million break"? Where was it in the budget speech? The other stuff was in the budget speech, but the $8 million break to a bank wasn't. The change was in the budget speech but certainly not the implication, certainly not the fact that the government was about to give at least an $8 million break to at least one financial institution -- who knows how many others? That wasn't in the budget speech; that had to be found out later. That had to be ferreted out by the media and the opposition and raised as an issue. Even then it was like pulling teeth to find out how many others were involved.
So for the minister to say that she's open and lily-white on this thing and that somehow she's been upfront is ridiculous.
Interjection.
G. Farrell-Collins: I'm which?
Hon. J. MacPhail: Stupid.
[ Page 7025 ]
G. Farrell-Collins: Oh, hon. ChairThe Chair: Members, through the Chair, please.
G. Farrell-Collins: Thank you, hon. Chair. The Minister of Finance is calling me stupid. Well, I remember in grade 3
Interjection.
G. Farrell-Collins: Now the member for Mission-Kent, too. In grade 3, when you're in the school yard and you don't have an answer for something, you call the other person stupid. I've never heard such a low level of debate in this House.
The Chair: On the section, please, member.
G. Farrell-Collins: I will get back to the section.
I mean, it's just insane to have that type of debate from a minister of the Crown. It's ridiculous. I won't go any further with it. It just shows the type of person
All I want to say is that I'll await the added information from the Minister of Finance, and I'm looking forward to seeing it. I will then finally, hopefully, get the truth about this section and find out how much money is affected and how many institutions are involved. Then we'll know the true extent of the hypocrisy of this government.
Section 2 approved on division.
Sections 3 to 9 inclusive approved.
On section 10.
Hon. J. MacPhail: I move the amendment to section 10 that is in possession of the Clerk.
[SECTION 10 by deleting the section and substituting the following:If the members opposite haven't had a chance to see it, I'll wait. This amendment doesn't change the intent of the original draft legislation; it only ensures that the definition of taxable insurer is not repealed in the Fire Insurance Act.10 Section 1 of the Fire Services Act, 1996, subsection 144, is amended by repealing the definition of "taxable insurer" and "taxpayer" and substituting the following: "taxable insurer" has the same meaning as in the Insurance Premium Tax Act."]
Amendment approved.
Section 10 as amended approved.
Section 11 approved.
On section 12.
G. Farrell-Collins: Section 12 eliminates the British Columbia Systems Corporation from the schedule of corporations, agencies, bodies, etc., which come under the Freedom of Information Act. The entity formerly known as the B.C. Systems Corporation obviously has documents, records, data, etc., that would be available under the Freedom of Information Act. Can the minister assure the House that by eliminating this item from the schedule, it will not affect access to the records of the B.C. Systems Corporation that existed previously or access to those same documents as they now are incorporated in other agencies and bodies within government?
Hon. J. MacPhail: Yes.
Section 12 approved.
G. Farrell-Collins: Noting the time, I move the committee rise, report progress and ask leave to sit again.
Motion approved.
The House resumed; the Speaker in the chair.
The committee, having reported progress, was granted leave to sit again.
Committee of Supply A, having reported resolution, was granted leave to sit again.
Hon. J. MacPhail moved adjournment of the House.
Motion approved.
The House adjourned at 11:58 a.m.
The committee met at 10:19 a.m.
ESTIMATES: MINISTRY OF AGRICULTURE AND FOOD
(continued)
On vote 16: ministry operations, $54,751,000.
B. Barisoff: The information provided by the minister in this blue book states that establishing performance and indicator measures for its corporate goals, which include industry development, job creation and resource management
Hon. C. Evans: Over the last couple of years, as we have decreased expenditures and staffing levels and offices, we have stressed the system quite considerably to deliver, in a
[ Page 7026 ]
cost-effective manner, pretty much the same objectives with fewer people. The ministry will have to undergo, in future, an analysis of our ability to do this. But it's my impression, hon. member, that both ministry staff and the client group, if you will, have done incredible work in the last few years to deliver the same output -- increasing production in terms of farm-gate gross income with fewer workers. So I would argue that there's great credit due all around in terms of our ability to deliver, as they say, value for money.B. Barisoff: What in fact are the minister's goals for this ministry at this time?
Hon. C. Evans: That's a wonderful question from the hon. member. Firstly, it would be to see the continued expansion of agriculture and food as a proportion of the provincial GDP. I would qualify that by saying that we are not making decisions that other jurisdictions in this country and other countries are making to drive that GDP by increasing corporate concentration in the sector. Quite to the contrary, my goals include finding ways, in spite of the post-GATT global economy, to maintain the family-driven, small business nature of the industry, to maintain the diversity of the industry and to use agriculture as a community development tool to maintain the health of the rural economy. That's quite a difficult charge on the civil service in the ministry, but it fits, happily, within the bias of the folks who have come to work here over the years. It challenges the ministry to buck the continental trend towards concentration and to aim at both business commodity and geographic decentralization and diversity rather than at concentration of control in exchange for output.
B. Barisoff: I think you've partially answered it, and maybe you have more to do. I was just going to ask: what challenges does the minister see for this ministry during the coming year? You were kind of getting into it, and maybe you want to expand a little bit more on the challenges for the coming year.
Hon. C. Evans: The ministry, I hope, is finished with the catastrophe of El Niño and the difficulties of budget reductions. We are now challenged by a much more optimistic task than, essentially, damage control. We are attempting to develop by Christmas an agrifood policy which was originally started by my predecessor, the former minister, in the '95-96 time frame, I believe, and which was then put on hold during the years of difficult weather and budget downsizing. Last weekend we started that process in Richmond with about 50 people from around the province -- mayors, restaurateurs, retail folks, union people, primary producers, processors in all areas of the food business.
We suggested to them and to staff that it is time to articulate what the post-GATT food policy for the province really is, something that we can aim for as we approach the millennium, something to give the industry a sense of hope and some achievable targets for expansion that we can reach -- targets that are actually suited to our different geographical working environments. We don't have the sort of monolithic opportunities for grain that they have in Saskatchewan or Manitoba or the huge ranches they have in Alberta. We don't have the thousand-acre apple orchards they have to the south of us. We don't have the cheap raspberry production that they have in Chile, which the hon. member alluded to yesterday.
We have quite the opposite. We have more commodities than the rest of the country put together. We have terrific diversity in the marketplace. We have an expanding market, but we are constrained by our geography in the same way that we are blessed by our geography. We have more flora and fauna in our natural ecosystem than in all the other provinces and states on this continent put together, because we move from deserts to rain forests almost within a few hundred miles. That means that our agrifood industry works in microclimates that make almost anything from ginseng to flowers possible. But it's difficult for them to attain the economies of scale in any single sector to compete with the other nations that may be concentrating on a single factor.
Meanwhile, we have to swallow, at this time, the ending of the Crow rate. The Crow rate subsidy essentially allowed British Columbia in this century to develop industries based on affordable grain, which the federal government has stressed seriously by ending the subsidy even after the industries are built. So we have unique opportunities based on diversity but unique constraints based on the difficulty of maintaining economies of scale that other jurisdictions have. Our challenge is to find a policy that all the ministries of government -- from Finance, which sets our budget; to Environment, which sets the regulatory regime; to Agriculture, whose job it is to carry it out; to Transportation, which defines our ability to move goods around; and on and on. We need a policy that gives government, in a corporate fashion, a target or a series of targets aimed toward a defined business climate that will work. That's the challenge of this year.
[10:30]
B. Barisoff: I'm just going along on these operational things. What are the minister's long-term goals for crop insurance, farm practices and Buy B.C.?Hon. C. Evans: I promised myself short answers today. In terms of crop insurance, the short answer is to make it work. Hon. member, we've been operating a bit of a lie -- I guess the more parliamentary term is a façade -- in recent years. We have a crop insurance program, but the crop insurance program did not reflect the nature of the business. In order to make money, farms increasingly have to diversify from a single crop to a group of products. But our crop insurance program put people in stovepipes, and you could only insure your primary production. Over this decade, the takeup of crop insurance continued to decline.
My goal is twofold. One is to make whole farm insurance work, so that you can hedge against loss -- weather loss, for example -- by growing more than one commodity and then insure your whole farm income instead of single crops. Secondly, by doing that and by making it work, we must convince the farm community to buy the insurance. Crop insurance is not like ICBC; you don't have to buy it. It has to work for you; there has to be an entrepreneurial advantage in risk management in order for you to shell out the money to buy it. In terms of the accountability of my job, you can measure whether or not we're making it work by the amount of takeup in the farm community. We started -- I think we talked about it yesterday -- at 23 percent a couple of years ago. I suppose that 100 percent would be a ridiculous target to aim for, but we have already achieved 50 percent in some sectors. I consider that an excellent change, and I hope that we would aim for 60 percent takeup of the program.
The hon. member asked about Buy B.C. and one other factor. What was the second one?
B. Barisoff: The farm practices code.
Hon. C. Evans: The farm practices code -- it was my great pleasure last year, and somewhat my great difficulty, to
[ Page 7027 ]
be the first minister who actually had to use the law. As the hon. member knows, we had a situation in Langley and in surrounding communities where the urban interface with the farm community came to quite an argument over the subject of whether mushroom production or mushroom manure compost production was actually a farm crop.The farm practices code was written in such a way that it was not intended to be a big club, where I bash people over the head on behalf of farmers. It was intended to be a negotiating device. What we said to Langley was: "The law gives me, as minister, a great deal of power -- enough power to overrule municipal bylaws, actually, in defence of the farming community." But using that power may actually exacerbate the differences between country people and urban people. I would rather not make the problem more pronounced or difficult. I would rather create bylaws that allow us to produce farm goods even within sight of condominiums and the like.
So we initiated a process of reviewing Langley's bylaws to stop them from coming forward with what we felt was a fairly punitive or harsh law. We moved to a situation where an ADM in my employ and a member of the opposition party are co-chairing a committee to try to resolve that issue, so as to remove politics and bring expertise to the fore. I am hoping that within this year and certainly within the next 18 months we will see resolution of the Money's Mushrooms issue in particular and see victory on the first use of the farm practices code legislation. People will see that by solving problems in a cooperative fashion, we can make these things work.
On the subject of Buy B.C., hon. Chair, Buy B.C. month, September, is my favourite part of the year. I find the sort of cynical
Then I get to travel around and talk about the quarter-million jobs dependent on this industry. I get to talk about the 400 commodities we grow, the little entrepreneurs that make jam, the VQA wine producers, the people who dry fruit and the people with emu meat. Everybody comes out of the woodwork and shows their products and the diversity of the province. We go into fancy restaurants, and seven-course meals are prepared with food that's all produced within 20 miles. Everybody participates.
Hon. member, I don't think the fact that in seven or eight years we've turned this thing into a great victory is enough. If the GATT is going to say that tariffication, the rules that people like you and I used for centuries to defend jobs in our territory
The challenge I face -- or that I think we face collectively in Buy B.C. -- is how to make that step. We started last year with the food bank part of it. I hope this year we'll move to government procurement as part of it. But we still have to go the further step of actual consumer loyalty -- on this Island especially. We have 700,000 consumers living in a place where it is more expensive to produce food. We might have to go to a place of regional loyalty. We might have to go to a place of identifying in stores not just the Buy B.C. logo but where it comes from.
Then we have to start talking about food quality. We have to say to the world that pesticide use in British Columbia is one-third of what it is in the United States, and in the U.S. it is one-third of what it is in Central and South America. Of course it increases the cost of production, but it is an advantage in the marketplace. It produces higher-quality food, and on and on. We have tell the story of the SIR program; we have to tell the story of pesticide-free tomatoes being produced in Delta. We have to use food quality to drive a market advantage.
We've been leery of doing that in previous years. I wouldn't be talking about this on the record in previous years, because there was basically a belief in the producer community and the retail community that to talk about additives to food was to risk the consumer shying away from fruits and vegetables and the like. Don't admit that there are different ways of growing food. All that is beginning to fade away. Now we're actually going use Buy B.C. and our natural advantage to say: "Our food is healthier for you than the food you might buy from elsewhere." These are many steps. I don't know if they are all achievable in one term of government, but they are my objectives for the Buy-B.C. program.
B. Barisoff: I think some of those would be commendable goals to set, and I hope, for the farmers' sake, that some of them are set.
I just want to move into crop insurance. Given the recent changes in the crop insurance program unveiled last year under the new look and the basic plus, would the minister please share the statistics on participation in the new program? What was enrolment in the basic as compared to the '96 levels?
Hon. C. Evans: I don't have figures for '98 computed, but in 1996 we had 28 percent of producers participating in the program. In '97 we had 55 percent, and I am advised that when the '98 figures are computed, they will show another rise, although I'm not sure how high.
B. Barisoff: Could you get the enrolment figures for the plus program also? How many people are in the plus coverage?
[10:45]
Hon. C. Evans: I can't answer the question in terms of a grand total of all commodities, because we haven't broken out the figures that way. If the hon. member would agree, I'll just give you some examples of different commodities.B. Barisoff: Okay.
Hon. C. Evans: In blueberries, 64 producers last year purchased basic insurance, and six purchased tier 2. In cranberries, 26 bought basic insurance, and one bought tier 2. In raspberries, 60 bought basic insurance, and three bought tier 2. In forage crops, 267 bought basic insurance, and 13 bought tier 2. In wheat, 85 bought basic insurance. The total is 102, so
[ Page 7028 ]
the difference of 17 bought tier 2. In wine, 67 bought basic insurance. Eighty-four is the total, so the difference of 17 bought tier 2.B. Barisoff: As B.C. tree fruits traditionally represents 65 percent of program participation, could you give me the levels of participation right now for the grain, vegetable and berry growers?
Hon. C. Evans: Grain had a 64 percent uptake in 1997, tree fruits had 79 percent uptake for 1997 and vegetable had 23 percent uptake.
B. Barisoff: One of the big holdups in presenting the basic plus coverage program was the hail-rain endorsement clause negotiated by the tree fruit industry. What feedback has the minister had, in terms of numbers, regarding this option being selected by growers?
Hon. C. Evans: I don't have the amount of hail endorsements for the hon. member, although my anecdotal comment would be that I think there is a good deal of satisfaction that we've addressed the issue to the best of our ability. I do have the tier 2 figures. The basic insurance in apples is 918, and approximately 730 people above that bought tier 2.
B. Barisoff: There was a tremendous amount of anger being demonstrated by growers and farmers last year. Of course, in part it was due to the unfortunate weather conditions -- in some cases, for two years running. Also, it was due in part to betrayal felt by the farmer seeing further ministry cutbacks resulting in the closure of offices and the elimination of services and field personnel. It wasn't a particularly good time to launch a new-look insurance program. There was a high degree of suspicion on the part of growers that basically this was another name, and you were giving less coverage for a higher cost. Would the minister give assurances to the farmers that the new look isn't going to be more of the old look?
Hon. C. Evans: Actually, I think it's a great time to launch a new program. The old one was broken, and it seemed to me about time that somebody said so.
The hon. member is correct about a good deal of despair and a feeling of alienation and anger. It seemed to me that if the program was generating that kind of response, then government's job was to rebuild the program. So I can't imagine a better time to put the wheels back on and fix them than when they're all flat.
We have two things going for us. One is that because of El Niño, we managed to get commodity groups to work together and talk to us about rebuilding crop insurance in a way that was without precedent. Historically we tend to have each commodity group coming to government and saying: "Fix the situation for my commodity." Last year we had grain and tree fruits and vegetables and berries in a room working with us to rebuild the program. It was the first time that they actually got to hear about the other person's problems.
Because crop insurance is an envelope of money which is spread around many commodities, it's kind of a waterbed issue, where you push on one corner and you make it wonderful for somebody, and it goes up somewhere else and has an impact on somebody else. I at least think that the time of crisis was the best possible time to work on it, because the people could see that the other person needed their issues addressed as much as they did.
The second thing is that I don't assume that it's fixed. Just because we've gone almost double the takeup rate doesn't mean that something which historically didn't work very well is now running as well as it can. So we have issued a contract to an independent, non-government person to do a review of crop insurance and give us a critique of our own changes -- what has worked and what hasn't worked and what we should do in future. The report is not internal to me to hide somewhere. We've committed to share it with the industry and then to work on it to make further changes. We expect that report by June, and I'll share it with the hon. member so he'll know what we think we ought to do.
B. Barisoff: Continuing along with crop insurance, bearing in mind that crop insurance basic coverage is in no way an income subsidy. In fact, it is disaster insurance only. By that I mean that you really do have to experience a disaster before claiming, and then you may find that you're underinsured to cover your financial costs unless you have subscribed to the plus options. What steps has the ministry taken to ensure that growers are aware of the perils associated with subscribing to only the basic coverage?
Hon. C. Evans: It's a good question, in part because I think that historically there was kind of a feeling that crop insurance was there if you wanted it. You ought to come into our office, and you ought to understand the language and buy it on our terms, or not, and we really didn't care. We're trying to move it to a more entrepreneurial sort of a thing, where we're asking our staff to go out and explain it to people, and, where the uptake is not what we think it should be, to actually try to sell the program, to make the information available earlier.
There was a lot of criticism last year that it was simply too complicated. We're trying to get
One other thing, hon. member. Staff have now found the information that you wanted a minute ago. The number of hail endorsements purchased last year by the fruit growers was 322 in apples, 16 in apricots, 18 in peaches, 27 in pears and 4 on sweet cherries.
B. Barisoff: Could the minister indicate to me what the revenues in the program were for last year?
Hon. C. Evans: The premiums paid in last year were forecast to be $7.6 million. The premiums paid in last year were $8.9 million in '95-96. The target for this year is $9.7 million.
B. Barisoff: What were the total figures for claims under the basic and the plus then?
Hon. C. Evans: They were $16.5 million.
[ Page 7029 ]
B. Barisoff: Would the minister -- he doesn't have to do it right at this moment -- provide me with financial statements for the crop insurance program, including data for each of the commodities?Hon. C. Evans: I sure will.
B. Barisoff: I'd also like to compare figures over the past two years in order to make a fair comparison, considering the transition association with the new program. Can I get that too?
Hon. C. Evans: Yes.
B. Barisoff: What is the cost-sharing financing breakdown for basic plus compared to the old program of 50 percent for the grower, 25 percent for the feds and 25 percent for the province?
Hon. C. Evans: In tier 1 the producer pays a $175 flat rate, and then above that costs are divided equally between B.C. and the federal government. In tier 2 the costs are provided by the producer.
B. Barisoff: In view of the fact that the previous crop insurance was considered inadequate and not serving the needs of farmers, as demonstrated in the decreasing enrolment since 1988, and in view of the fact that the participation by vegetable and berry farmers is markedly reduced -- almost non-existent -- why does the minister feel that the new look is going to solve the old problems?
Hon. C. Evans: I think that the data contradicts the question. In 1996 the total participation in berries -- strawberries, blueberries and the like -- was 21 percent, and in '97, under the new program, it was 60 percent. Now, I would acknowledge that 60 percent is not high enough, but it's a tremendous improvement over 21 percent. We haven't done as well in vegetables in terms of the goal reached, but we have done even better in terms of the increase, which is a fivefold increase. In vegetables, under the old system in '96, we had a 4 percent takeup, and by '97 we had 23 percent. I don't have figures for this year's crop year.
[11:00]
B. Barisoff: I'm just wondering what has specifically changed in the new program, in favour of the farmer, that you feel is a positive strength that would get the farmer to get up higher than the figures you just indicated.
Hon. C. Evans: There are two steps to this. Between '96 and '97 we changed the way that you pay your premiums so that you could cover a crop for $175, and second, third and fourth crops were $75 for each additional crop. I think the hon. member would acknowledge that that's a very reasonable amount of money for crop insurance, and it bears no relationship to the size of the crop or the pay-out. That was attractive to producers because they could cover more than one crop on their farm for a very nominal fee. However, that's all tier 1, and the tier 1 pay-out is not very high. We attempted, then, to design tier 2 in such a way that you could buy insurance in tier 2 suited to your farm. Suppose you are growing apples and the risk isn't very high, and you're growing cherries and the risk of rain in the last week is tremendous. In tier 2 you could buy an insurance program aimed at your cherry crop. So that
Interjection.
Hon. C. Evans: Preferably before it starts raining. Actually, the way it works is that you have to buy it before the season starts. The hon. member's question is a good question, though, because I think there are other jurisdictions in Canada that allow you to buy it afterwards, which has tended to kind of skew the system and make people think it's a subsidy.
In future, because of the whole farm program that we brought in this year, we will change the insurance scheme from a by-crop scheme to a whole farm income scheme. That wasn't my idea. That was a response to what we heard was the experience of producers through the last two years of El Niño. So I hope that since it was designed by the producer community, the uptake will continue to rise, especially as we work the bugs out.
B. Barisoff: He speaks of buying insurance for rain after the fact. I understand that some people were allowed to buy hail insurance after it hailed, but the minister can maybe check that out.
Moving on, I would just like to ask the minister to justify the rationale for the pay-out of 80 percent of the market price, instead of the 100 percent that it used to be.
Hon. C. Evans: Hon. Chair, I'm going to only answer the second half of the question, because this is all for the record. If there was ever any insinuation that anyone was allowed to buy any insurance after the fact
On the substance of the question, I believe the answer is that the 80 percent figure the hon. member is referring to is the tier 1 figure. By moving to a tier 2 producer-paid and producer-designed insurance scheme, we are trying to allow the producer to buy up to 100 percent if they choose, and yet have tier 1 so inexpensive that new producers coming into the market, or folks who didn't used to buy it, will be encouraged. It's "the first one is free" kind of a marketing principle. Budget limitations drive situations such that if we're going to have a low-cost system for tier 1, then it won't pay out as high as you might wish. We will encourage you to buy tier 2 designed for your real needs -- once we convince you that crop insurance itself is a good idea.
B. Barisoff: I probably know the answer, but it begs the question: would the minister reconsider the policy to increase the value of the crop to 100 percent and include this in the basic coverage?
Hon. C. Evans: A minister would be wise to reconsider anything. If the crop insurance review or the producers themselves were to suggest that we had it wrong, I'd be pleased to reconsider. I don't think I have the data at present to prove that reconsideration is in order, since the review won't be in for a couple of months and our present information suggests a fourfold or fivefold increase in participation, which was our objective.
B. Barisoff: Some of the concerns expressed to me by some of the growers have been about the inflexibility regarding the payment of premiums, especially last year. It is my understanding that the Ministry of Agriculture has eliminated their costs associated with accounts receivable operations. What recourse has the farmer who has experienced a bad year
[ Page 7030 ]
and may have a local packinghouse that won't accept an assignment of crop order or finance the upfront premium costs?Hon. C. Evans: It's a really good question, yet I'm not sure I'm overly sympathetic to solving the problem. I think what the hon. member is referring to is a system that used to be in place where if a person did not have the money for the upfront cost of crop insurance, we would allow it to be paid later. There were various ways to do that. The one the hon. member points out is where a packing facility or a grain distribution facility might loan a producer the money to buy crop insurance. That still goes on where they are willing to do so. Unfortunately, some of that trade credit is at 20 and 30 percent interest. Then there was an accounts receivable situation where we would allow people to make payments on crop insurance.
Before my time as minister I became involved as an MLA in a case in Creston with one of my constituents where there was a bit of a dispute about a producer who arranged to make payments on time in two successive crop years. In one crop year there was no weather failure, and the gentleman decided not to make the payments at the end of the crop year. In the second crop year he again made the arrangements to delay payments, and this time there was a failure and the crop insurance folks asked him to make payments for both years. The person felt quite strongly that he should only have to pay for the year in which he had a failure. The other part was simply an unreceivable account.
That kind of situation leads to subjective application of the rules. While it may have been a good idea at a time when crop insurance was quite expensive, once we lowered the cost for the first crop to $175 and the second crop to $75, I guess I would argue that there are very few crops you can grow where your input costs -- your costs of seeding, your fertilization costs, even just your fuel costs -- don't make $175. What we're trying to move to is a place where the producer sees risk management as the primary input cost of a given producing year. So in the absence of being told to by the review, I don't think I would want to go back to a situation where you don't actually have to pay for the insurance prior to the current year.
B. Barisoff: After meeting with some of the farmers from the Peace country, who came down that time when they had two years of bad returns, even the $175 became burdensome to some of them. But it's something I'm sure we can look at.
The issue you brought up yesterday with the SIR program and multiculturalism -- and that is definitely predominant in the Okanagan and the Fraser Valley, and probably all over B.C
Hon. C. Evans: I think that we have been somewhat derelict, or that we have somewhat failed to address the question you ask. I could give you the answer on what we have done, but I would rather say that it constitutes an issue that we have yet to resolve. I'm not sure of this, but the oral information I heard in Kelowna a few months ago was that 50 percent of the fruit is either owned, managed or picked by Punjabi-speaking peoples. I was told -- and I have no information if it's true -- that we had no one on staff actually able to speak to the folks picking or owning half the fruit.
I have no information that the forms have been translated into languages like Punjabi or Portuguese, and I think we will have to address these issues increasingly in future. There's an increasing participation by Vietnamese people in the mushroom industry, and on and on. In fact, I would suggest that this ministry doesn't physically or in language skills look like or sound like the people of British Columbia to the extent that we ought.
B. Barisoff: I just want to get into some loan guarantees here. While farmers may be in the business of losing money, clearly banks are not. I think that goes with the adage that if you talk to a farmer, if he won the lottery, he'd continue farming until it was all gone and then hope for something else to come along. In regard to the distress operating loan guarantee, in light of the disaster last year for the grain growers and some of the tree fruit growers, how many third-party financial reviews were conducted on behalf of farmers and paid for by the government?
Hon. C. Evans: At the end of March, 23 applications had been made to the farm debt review.
B. Barisoff: Was there a cap established for the loan guarantee program? How does that stack up against the demand for the loans?
[11:15]
Hon. C. Evans: The individual cap on loans is $100,000, unless an individual applies to exceed the cap. Globally, it would be $10 million.B. Barisoff: What rate of interest is on loans given over that five- to seven-year period?
Hon. C. Evans: It's negotiable with the financial institution providing the funds, but it cannot exceed prime plus 2 and can go down as low as the institution desires.
B. Barisoff: Is the ministry doing anything in a meaningful way to help the farmers negotiate a reduced rate of interest for that period of time?
Hon. C. Evans: The minister met -- actually, it was the first time in my life; it was quite an experience -- with representatives of all the major banks and credit unions in the province and discussed this issue. We came to the conclusion that the terms were quite reasonable, because, as the hon. member would recognize, if the province was to set a number and say that the interest rate is 7.59 percent, that would be assuming that every producer in the province had the same debt-to-equity level or cash flow situation. But by setting an upward cap, we were basically saying to the financial institutions: "We will not allow you to go above this, but within that envelope, you can go as low as the producer can negotiate."
One other thing is that in the main, it was never my belief that these loans would constitute the main risk-management tool available to the folks that applied but that they would be used as a way to pay down trade credit, if you like, that they already had, at an interest rate that was usurious. In that respect, prime plus 2 against an interest rate of 15, 20 or 25 percent is actually pretty good. Whether it was 7 percent or 3 percent is almost immaterial if you're using it to try to pay down money you owe at 25 percent.
[ Page 7031 ]
B. Barisoff: Could the minister supply me with the financial report on how many farmers have utilized the loan guarantee program and include the commodity breakdown in geographical areas?Hon. C. Evans: Yes, I will.
B. Barisoff: I'm just looking at the net income stabilization account program, which is sort of an RRSP for farmers. It does encourage farmers who are quality producers to plan for the future. It is designed to help producers invest some of their income in good years, drawing down upon the bad years. Considering the policy regarding withdrawal of funds in light of the crop disasters, what is the record for the past year for withdrawal?
Hon. C. Evans: I can't supply that information just at present. I will say to the hon. member that the way NISA works, there tends to be, almost universally, a difference of opinion about what the funds are intended for. Government thinks that they are intended to even out the income level of the farmer. If you will, crop insurance is intended to take some of the risk out of weather predictability, and NISA is intended to take some of the risk out of the marketplace. So if grain or apples is in a trough, a person can withdraw some of the funds placed there by government and by themselves in earlier years when the price of their commodity was in an upswing, so that the income of the farm would remain stable.
Now, the producers don't see it that way. They see it the way the hon. member just described it -- as RRSPs for farmers. Thus during the difficult times of the last two years, I tended not to raise the issue of drawing down on the NISA account as a way to get through the times, because not everybody who has a NISA account believes that that's what they should do with it. It was not a debate that I wished to enter into. I have to say though, hon. member, that farmers can buy RRSPs just like you and I. I hope NISA, with a very heavy government contribution, would be used as a way to create market stabilization against commodity swings, rather than as a retirement plan -- or at least rather than solely as a retirement plan.
B. Barisoff: I guess we'll go along to the next question. I'd like to know, then, how much money was actually put in over the last couple of years when the farmers were in this disaster -- if they've been able to replenish it. How long is it going to take them to replenish their
Hon. C. Evans: The NISA program is actually federally managed, and I don't have figures on a year-over-year basis of what the drawdown is. I do have a global figure for the hon. member. There is $45 million in NISA accounts held by B.C. producers. Part of the reason I can't answer your question specifically to the Peace is that I basically ask staff not to compile the answers. If you do, what it does is say to the producer: "We're going to keep track. Draw down your NISA account before you apply for crop insurance, before you apply for this loan program, before government assists you with this situation." If the hon. member desires more specific information for a region or a commodity, we will endeavour to get it for him over time.
B. Barisoff: I'd appreciate that information.
There was some concern expressed that the minister is going to turn this program over to the feds. Is the province committed to continuing administering this program?
Hon. C. Evans: I'm not sure what to say. We don't administer the program. In discussions with the federal government about how to fund whole farm insurance, we are decreasing our involvement in NISA, in order to make up for what they don't want to do in terms of whole farm insurance. But the net result to the producer should be a saw-off, and NISA should have a similar amount of funding in the future as it has in the past. It might interest you to know that other provinces, like Alberta, participate not at all in the NISA program and that there is an upcoming round of negotiations between the provinces and the federal government on the safety net system in general. I do not know what Canada will decide to do in future. Personally
I'll tell you what, instead of a personal comment
B. Barisoff: I agree with you. I couldn't say it any better. That's probably perfect in the way it has been described. I know that you've mentioned that the crop insurance and the effectiveness of the new crop insurance is being reviewed. I just couldn't remember when you said that a copy of that report would be done. Could I get a copy as soon as it's done?
Hon. C. Evans: June -- and yes.
The Chair: The member -- and I'll remind you to speak through the Chair.
B. Barisoff: Thank you, hon. Chair. It wasn't me that wasn't speaking through the Chair.
The Chair: Just prior to that.
B. Barisoff: You've got to reprimand both sides.
On the WFIP program and crop insurance
My concern, I guess, is that a ten-acre fruit farmer in the Okanagan -- and there are a lot of them -- would, when they take their revenues and expenses, fall below the 70 percent reference margin for the three previous years before the claim could trigger. In 1995 in Alberta, based on 60,000 farmers, $65 million was paid out. In 1996 it was $52 million. This is a two-year pilot program. What happens if the claims exceed the $10 million?
[ Page 7032 ]
Hon. C. Evans: The answer to the question is that if we have to, we will prorate the pay-out so that if the ceiling is met, applicants will receive a percentage of the pay-out according to their part of the ceiling.B. Barisoff: I'm just looking at some of the agriculture safety net programs. Could the minister provide me with the financial summary and ministry costs associated with the farm assistance program?
Hon. C. Evans: I'm sorry, staff are confused as to what it is that the hon. member is requesting. Can the member describe the program in another way?
B. Barisoff: It would probably be easier if I did it by coming over there afterwards. It's just part of that Holm report and part of the agriculture safety net program.
We're running out of time here. I've just got another question. Of course, some of the other people want to ask some questions. Jack, would you like to go ahead?
J. Weisgerber: Yeah, I'd like to pick up on some of the discussion that's already gone on. I think I'd like to start in the area of crop insurance and the deferment of crop insurance premiums. To the best of my knowledge, 1996 was the first year that the ministry required crop insurance to be paid on June 21, rather than having a registration date and a fall payment date.
[11:30]
I know that the minister talked a little bit about the fact that basic insurance is down to $100 or $175, and he related that to the costs of fuel or fertilizer or other things. First of all, I think it's important to understand that on the average Peace River grain farm, where we're talking about anywhere from 500 to 10,000 acres, the fuel bill will be several thousands of dollars -- perhaps tens of thousands of dollars. The fertilizer bill will be equally high. The suppliers of those commodities have well recognized that it's unrealistic to ask a farmer to pay up front, even though the fuel is gone, the fertilizer is in the ground, and there's no way to recoup it. The reason that farmers have these high debts is because of their fuel and fertilizer bills. So what I'm trying to say to you is that it's not the $175; it's the extended coverage that farmers find burdensome to pay for at planting time, as opposed to harvest time.I think that although the minister has indicated an unwillingness to go back and re-examine this issue, the historical process has been to register for crop insurance, to require payment, at a time that's anticipated to be harvest time. The ministry has always had ways to deal with that. There have been problems; there have been disputes. But the reality is that 95 percent to 99 percent of farmers, if they wanted to enrol again for crop insurance, had to pay up. So there have been safeguards, just as the supplier of fuel or of fertilizer has safeguards to ensure that, even though credit is advanced, there is a mechanism to recoup payment.
So perhaps we could start this discussion by clarifying the minister's position. Is he adamant indeed, regardless of the cost of crop insurance, that he is unwilling to consider returning to the historical practices with respect to payment of crop insurance?
Hon. C. Evans: No. I didn't mean -- and if I did, I misspoke myself -- to suggest any adamance at all. If the review suggests that there are a significant number of folks who are not participating because of the change of paying up front or paying later, then I think it would be a very important issue to reconsider.
Hon. member, part of my thinking is that these changes are being made at a time when
So yes, I will certainly look at that issue as the review comes in. It was never my intention to say that I think it's a great system the way it is. It's only my feeling that if it's to change, it should change at a time when government eats the difference, rather than the people who need the money.
J. Weisgerber: One of us is confused here, and it's probably me. My sense is that the whole farm insurance has a cap but no premium. There's a registration date. But whole farm insurance is not anticipated to have a premium, whereas the basic coverage plus has a premium but no cap. So, I mean, the minister's comments left me entirely confused. He talked about premiums and caps all in the same breath. I had the clear sense -- up until now, at least -- that these were two entirely separate programs and that it would be inappropriate to combine or tie premiums with caps. But that's probably my confusion, as opposed to the minister's.
The other thing is that the idea of suggesting that the time to move back to delayed payments on crop insurance, the basic coverage plus
The idea, though, that the deferment on premiums would be done at a time when government has the money seems to be entirely backward. I mean, here we're facing a situation in the Peace with two successive crop disasters -- which the minister has recognized, and I think appropriately so. But surely it's the ability of the farmer to pay, as opposed to the convenience of government to finance, that should be the driving factor here. If ever there were a time when farmers were going to be pressed for money, it's going to be this spring -- after two successive crop failures and the need to deal with financing and paying for input costs such as seed, fertilizer and fuel and, for only the second time in history, having to upfront the cost of crop insurance.
Perhaps the minister could advise me on two things. Am I confused with respect to the basic coverage plus and the whole farm insurance? Is there a connection between premiums and caps? Secondly, would the minister respond on the notion that it should be the insurance buyer's ability to pay rather than the convenience of government with respect to interim financing that decides when those premiums are in fact due and payable?
Hon. C. Evans: No, the member is not confused. I didn't mean to suggest that the programs could be run by taking
[ Page 7033 ]
money out of one and putting it into another. I meant to suggest that this ministry's budget that we are debating here encompasses the works. All of government's contribution to tier 1, tier 2 and whole farm insurance has to come out of our annual budget and, to the extent of crop insurance, the reinsurer community. I meant that this ministry's budget might, at some future date when we're not in a disaster, have some room to accommodate changes that didn't come out of the producers' share of crop insurance, tier 2 or whole farm.
As for the hon. member's comments that this year would be an excellent year to reconsider allowing people to pay their crop insurance at harvest time rather than in the spring, I think the logic of that in the farm community is obvious. The idea is laudable. If it was at all possible to do, I would agree with the member, and I take his
J. Weisgerber: I appreciate the commitment. I think it's an important issue.
With respect to whole farm insurance, I had an opportunity to go out to one of the farm communities and sit in for the day. The whole farm insurance program was explained to the farm community. I'll say, as I did in the newspaper article that I wrote, that I was disappointed with the number of farmers who came out. I think it's a program that deserves consideration and examination by farmers, although they obviously know their business far better than I do.
Can the minister confirm that for this year, to perhaps make a later claim for whole farm insurance, the requirement is simply to be enrolled in the basic crop insurance program, not the crop insurance plus program?
Hon. C. Evans: I will confirm that, just because I'm not sure what the hon. member means by this year. Last year you didn't have to have tier 1. This year you have to have tier 1 but not tier 2.
J. Weisgerber: I don't think we need to pursue that issue anymore. I'm very much encouraging farmers, first of all, to look at the 1997 crop year or calendar year and to perhaps spend the money necessary to get their accountant to have a look at it and give them a quick analysis. I'm fearful that a lot of Peace country farmers are going to forgo the opportunity to claim on whole farm insurance simply because they think it's a waste of time or they think that because they've had an income, there's going to be nothing in it for them. I'm going to do my best to continue to encourage people, but I think they're running out of time with respect to the 1997 crop year. I would encourage the minister to do whatever he can in terms of using media, etc., to urge farmers to take a careful look at that whole farm insurance program. I would feel badly if many farmers who are eligible missed that opportunity.
I don't think that requires any particular answer, so what I'd like to do is go on and ask: with respect to the loan guarantee program, could the minister tell me how much has been committed provincewide? How many dollars' worth of loans have actually been taken under the program?
Hon. C. Evans: Twenty-three producers have applied. If in fact each applied for and were granted the cap, that would be 23 times $100,000. However, I cannot tell you what specific numbers the 23 have asked for, and I don't think I can tell you if any of them have asked to exceed the cap by appeal.
J. Weisgerber: Given the extent of the disaster in the Peace country, and given the serious nature of crop failures in the Fraser Valley, Vancouver Island and the Okanagan, I expect that if I were the Minister of Agriculture and I brought out a program and on April 21 or 22 only 23 farmers had examined the possibility of getting a loan, I'd be deeply worried about the program. I would be alarmed. As a matter of fact, I must tell the minister that I am flabbergasted that there is a program out there with a lot of money supposedly available and only 23 people have applied.
I think it reinforces more dramatically and more eloquently than I ever could the criticisms of this program when it was introduced. I mean, farmers said: "So what. I can go to the bank if my liabilities are only 70 percent of my assets. I can go to the bank and sit down myself to negotiate a loan with an interest rate probably better than 2 percent over prime. Why in the world would I ever bother with a program like that?" Any farmer who has any kind of an arrangement with his bank and assets in the neighbourhood of what is required by the program
[11:45]
My goodness, the fact that only 23 farmers have taken this upHon. C. Evans: Hon. Chair, the answer is complicated. The hon. member knows that at the time of the disasters in the last two years, there were lots of people who said that there ought to be a loan program and other people, like most of my staff, who said that it actually wouldn't solve much of the problem, because the takeup historically -- whenever government has made a loan program available -- has been very low.
I actually decided to force the issue of the loan program after visits to the Peace, when I discovered or began to understand how the trade credit system worked and that there were people who would be unable to pay down interest of 23 percent and 30 percent except by acquiring money at a lesser interest rate.
We had a discussion with MLAs affected by the farm crisis last year, including the hon. member asking these questions. He advised me that his greatest fear actually was not related to last fall's predicament but to this spring and the possibility that the spring would come with a reasonable market for grain and reasonable weather and the ability to get on the land, but that producers would no longer have the wherewithal -- the money, the borrowing ability -- to actually seed a crop.
I acknowledge that there was always a risk that the takeup of the program would be very low because of histor-
[ Page 7034 ]
ical precedents, because of people's abhorrence of debt and, I think, also because of a cultural belief that the less you have to do with government, the better off you are. So I kind of bucked the advice of staff and said there ought to be a program, because it ought to be available for folks in a trade credit jam, or to the people that the hon. member was referring to, who would need access to cash this spring to get a crop in the ground.The hon. member suggests that the takeup of 23 producers represents a failure of a program. I'm not sure that's true. The advice, the prediction, of many people -- including the opposition members and lots of producers and about 100 percent of the people in the ministry -- was that the takeup would be low. It was my feeling that if 23 people who wouldn't farm otherwise farmed because it was available, it would be worth whatever embarrassment I'd have to face with these kinds of questions about delivering a program to make it possible for 23 people to take it up.
If the implication is that the program ought to be delivered to people with less equity on the land, I have a lot of sympathy for that argument. However, I received considerable advice -- and you should know that some of it was from the farm community -- that there is not a belief that government is doing people -- human beings, farmers -- a favour to create an abstract working environment where they are encouraged to take on more debt than they can actually afford.
The very first person who applied for this program is actually a friend of mine. He told me that the review process that he went through at his kitchen table -- and for free -- was believed by all of the hon. member's neighbours to be expensive. They thought that you had to pay for it, and they thought that it would be intrusive. They thought that the information that was collected during the review would somehow be transmitted to me. That's the cultural belief out there. The gentleman I'm referring to who went through this review said it was the healthiest exercise he'd ever undertaken with financial agents because it happened in his home. His wife, son and daughter-in-law were able to participate, and when they went through the figures -- much to my chagrin, since he is my friend -- he didn't get any money. I have had to resolve, as a personal question inside myself over the last few months, whether or not I should use this case to try to order the system to advance money to people who have been advised not to take it because of their debt-to-equity levels.
I don't think there's any easy answer. There are all kinds of morality issues involved, and I don't wish to suggest that a person like myself can make these decisions. But I think it's pretty clear that if hundreds -- as the hon. member says, even thousands -- of people decide not to even go through the review process, that represents a decision on those people's part and necessarily a failure of the program. If the review process, which is free and in your home -- and the information is not transmitted to government -- advises folks against actually applying, I think it's a good thing that we make that service available to help people make decisions in their kitchens rather than in some banker's office.
Having said all of that, if the hon. member knows of ways that the program has failed, that the program is functionally inaccessible or that my advertising of its availability has failed, then I need to make corrections, and would be pleased to do so.
I move that the committee rise, report resolution and ask leave to sit again. Why does it say that?
Motion approved.
The committee rose at 11:55 a.m.
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