[ Page 9209 ]

The House met at 10:04 a.m.

Prayers.

Orders of the Day

INCOME TAX AMENDMENT ACT (No. 2), 1998
(second reading)

The Speaker: Seeing no debaters on the matter. . . . Or, yes -- generally the motion is made, and then the remarks begin. So proceed.

Hon. J. Pullinger: The motion is made; the remarks will begin. Thank you, hon. Speaker.

Two years ago, the province of British Columbia brought in the B.C. family bonus. In June 1996 we made a broad range of changes, what has been called a quiet revolution in social policy in British Columbia. That took place in June 1996. There was a lot of controversy. What wasn't commonly known at that time was that the changes also included the introduction of the B.C. family bonus, which provides low-income working families with up to $103 per child per month. It also introduced a number of other programs, such as the B.C. Healthy Kids, which provides for dental and optical care, plus increased child care and so on. But the centrepiece was the B.C. family bonus.

At that time, just for a little history, in British Columbia between 1990 and 1996, through reductions to the CAP program from the federal government, we'd lost $1.8 billion in transfer payments. So we were already losing a significant amount of ground from the federal government. However, despite the fact that the transfer payments to British Columbia were dramatically reduced and there had been an announcement of further reductions, which have taken place since 1996 -- to the tune of about roughly another billion dollars -- we moved forward and introduced the changes that I've spoken of, in the B.C. family bonus.

I'm very pleased that we in British Columbia did that at a time when many other -- in fact, most other -- provinces were not only passing the cuts through to low-income families and people on welfare but were also adding cuts of their own. So at a time when most other provinces were dramatically cutting the incomes available for poor people, British Columbia went in the opposite direction.

We did that because child poverty in the 1980s started to rise to a level that was entirely unacceptable. That figure has not moved until very recently across this country. Since 1996, however, the depth of child poverty in British Columbia has been reduced as a result of the B.C. family bonus, by 19 percent for low-income working families and by over 25 percent for single-parent families. That is a dramatic reduction. Quite frankly, it exceeded our expectations in British Columbia.

The other effect which exceeded our expectations was that single parents and families with children who are on income assistance and whose children have. . . . While the B.C. family bonus didn't increase the amount they had, it did put their children on an entitlement, rather than welfare. That entitlement then moved with them when they moved into the workforce, along with child care and B.C. Healthy Kids. That program alone, with very little else, resulted in a 21 percent reduction in the caseload. The some 30,000-plus children of families that had been on assistance and are now working are significantly better off than they were two years ago. That, too, is a very positive effect for low-income families, and it has served to reduce child poverty in this province.

While there is clearly still a tremendous amount to do, the steps that we've taken in this province in the last two years have been very positive, and they have certainly been in the right direction. They're also, I might say, almost counterculture. We in British Columbia sometimes feel like the little kid with a finger in the dike -- that we're trying to hold back the flow.

Because of the astounding success of the B.C. family bonus, in February of 1997 our Premier went to the first ministers' meeting and encouraged the other provinces and the federal government to participate in such a program. While what has happened does not, to any degree, match the extent of what we've done in British Columbia -- we've continued to do three times what the federal government is doing -- nevertheless, the introduction of the national child benefit is clearly a step in the right direction, if for nothing else than the recognition that there must be a public, political response to the issue of child poverty. Poverty is both created and solved in the legislatures across this country. We did go forward; our Premier took it forward. The federal government and the provinces entered into negotiations, the result of which is the national child benefit, which formally comes into effect on July 1 this year.

In British Columbia and across the country, the national child benefit will mean that children are better off. However, it also means that the working-income supplement, which the federal government introduced a short time ago, will end. In British Columbia we are going to backfill that cut to the tune of $60 million a year, roughly, but we need a change in the legislation in order to do that. The new B.C. earned-income benefit, which will replace the former working-income supplement from the federal government, will start next month.

The amendments in Bill 33 simply allow for the introduction of the new B.C. earned-income benefit to further our government's objective of making work an attractive alternative to welfare. This new monthly benefit will be available to families with earned income, as the working-income supplement was, and will be provided in addition to their monthly B.C. family bonus payment. As I say, this works as an incentive for people to move from welfare to work. I do want to underscore that it is simply a replacement of the federal program, not an additional one. The amendments will also allow the province to adjust the basic B.C. family bonus amount by regulation, in response to changes to the Canada child tax benefit, which is a component of the federal contribution to the national child benefit system.

[10:15]

[ Page 9210 ]

This amendment in Bill 33 gives the province the ability to react to changes in federal benefits to ensure that the combined benefit provides an appropriate level of overall benefits to British Columbians and that there is in fact no change for most people in British Columbia who already receive the benefit. British Columbians should take pride in the fact that the national child benefit started here in British Columbia, that we created this program here, and that it's now moving, in a modified form, across the country.

With that, hon. Speaker, I move second reading.

G. Hogg: I am encouraged that the provinces, territories and federal government were able to get together and come to some type of agreement with respect to almost anything, but in this case to the national child benefit. In particular, we will see a program which will assist and benefit low-income families. While we don't often say very positive or kindly things across this House, I think that in this example the government -- by providing the template, through the B.C. family bonus, for the development of the national child benefit plan -- is to be congratulated.

I believe there are at least two primary goals that we should look at when we're developing social policy. One of those is to promote certain important values, and another is to appropriately redistribute income consistent with those values. The fact that this is an important value -- children -- I don't think is contentious at all. The federal Finance minister stated last year: "I believe child poverty is the greatest social policy challenge of this generation." The fact that it is in existence and that children live in poverty is not in contention in this province.

Some of the numbers, I think, are of greater contention or issue. The minister made reference to some figures, and certainly the latest figures I have out of Campaign 2000 are somewhat inconsistent with those numbers but, at the same time, still reflect the great need that we have in this area. Using Statistics Canada's low-income cutoff line, which identifies those who are substantially worse off than the average, in 1995 British Columbia had 181,000 poor children, which was a growth of some 85 percent since 1989. That growth rate was the second-highest of any province in Canada.

Nationally, since 1989 -- again based on Campaign 2000's report card and some of the information that was used to develop this nationally -- it's been a pretty dismal performance. Since 1989 the number of poor children in Canada is worse by 58 percent. Children in families experiencing long-term unemployment is worse by 47 percent; children in working-poor families, worse by 43 percent; children in families needing social assistance, worse by 68 percent; children living in unaffordable rental housing, worse by 48 percent; poor children in two-parent families, worse by 57 percent; poor children in lone-parent families, worse by 64 percent; children living in families with incomes of less than $20,000, worse by 45 percent. By any measure, the needs in this country and indeed in this province are great.

I welcome a response to those; I welcome the response that the federal and provincial governments have been able to put together with respect to this. The federal government will administer the program and provide some $85 million to this province. The new B.C. earned-income benefit is to ensure that all low-income families will receive from the national child benefit at least what they are receiving under the B.C. family bonus.

Plus, the intent is to promote employment as a better option than welfare. I hope that the government will consider employing further options and providing further incentives to move people off B.C. Benefits and that they will look at the influx of dollars to offset further incentives and options. I also encourage the government to look at methods to monitor and evaluate the impact that these changes in social policy have.

We are aware that there have been some reductions on the base of people receiving B.C. Benefits. We are aware that those have doubled -- that the number receiving those doubled since 1991. We've seen some reductions in past years, yet we haven't been able to follow up on those, because there hasn't been any study or evaluation of that taking place. I would encourage the government to do some evaluation of the social policies, so that we're able to look at, evaluate and understand what impact it truly has. This brings new federal dollars to B.C., and it is a response not only to those receiving B.C. Benefits but also to the working poor. I am pleased that we are looking at methods by which we can expand the difference between those, so that we can ensure that to those persons who are receiving B.C. Benefits, the new national child benefit and the new initiatives that are coming forward, we will again emphasize that work is a positive option. When we're able to have the economy change, there will be some options available for persons within this environment and within this province.

G. Wilson: In rising to talk on the principle of Bill 33, I'm going to try to keep my remarks brief and to the point. I don't think anybody in this chamber is likely to oppose Bill 33, because it makes amendments to the Income Tax Act, specifically with respect to definitions for the B.C. family bonus, as well as B.C. family bonus regulations. It does provide, I think, an opportunity that would otherwise not be there for young people living in poverty in British Columbia.

Having said that, though, I think there is a point at which people are obliged as legislators, as people who are in this chamber, to point out that these amendments and this tinkering with acts that are grossly inefficient in their intent. . . . They need to be more that just amended; they need to be revised, to be changed. In the years that I have been in this chamber, I have heard about child poverty, rising child poverty and how terrible it is, and about how we need to deal with the issue of poverty. I have heard it from federal politicians; I have heard it from provincial politicians. In the six years I have been in this chamber, I have seen nothing substantive done to reduce the numbers. We've just heard from the member from White Rock that the numbers in British Columbia have not diminished at all -- in fact, they've increased dramatically. The minister herself said a few minutes ago that they have now risen beyond an acceptable level. I don't know what an acceptable level of child poverty is. My guess is that there shouldn't be child poverty.

It seems to me that there comes a point, if British Columbia really wants to be the leader -- as we're told that we're going to be by members opposite -- where we need to start to moving toward a guaranteed annual income. We need to start to amend the system for the delivery of income support and to put in place a guaranteed annual income with a base income level that allows families in British Columbia the opportunity to not only meet their primary needs but also, through training, education and skills development, take advantage of whatever changes we may be able to bring about in our economy and in our communities.

Currently there are so many ways in which people who are living in poverty are penalized for being poor. Poverty is

[ Page 9211 ]

Societal and systemic poverty is a huge issue. While this bill seeks to find redress for young people and for children, it does not speak to the root cause itself. It does not find solutions to rising poverty in British Columbia. So while we may vote for this -- and I certainly support it and hope to see its speedy passage through this Legislative Assembly -- let us not believe that this is anything more than an aspirin for a headache. It might relieve the pain briefly, but it doesn't cure the problem. I don't think any of us must be under that illusion. While I'm prepared to support Bill 33, I'm hoping that we will see initiatives come from this government that will move swiftly to the implementation of a guaranteed annual income, so we can start to take seriously the division of wealth in this country between those who have tremendous wealth and the growing majority who are now living either in poverty or in a working-poor situation.

With that, I would like to see speedy passage of this bill and will give it my support. I do look forward to initiatives from this government that will do more than simply give us an aspirin, but will seek ways to solve the root cause of poverty in British Columbia.

V. Anderson: I also have to say that I appreciate that the government has recognized, to some extent at least, that poverty does exist in B.C. and that the ravages of poverty particularly affect our children. Prior to this particular announcement, they had moved to deal with some aspects of that, particularly dealing with those working families who have low incomes. They have moved to supplement that income in order to enable those families to continue to work or even to go out and work in the first place without their children being penalized because of that.

It's a beginning, and as indicated by the previous speaker, it's a very small step in that direction -- a very significant step, I want to say, but a very small step. One of the negative aspects of that step is the people who have been left behind. The circumstances of the people who have been left behind have been made more difficult because the circumstances of other people have been improved. That's not to take away the value of improvement to one segment of society -- improvement that it is important that they receive. But other segments of society, in particular children in those segments, should not be punished even more than they were before because of this. The children who are left behind are the children of non-working families who are on social services, social welfare -- it has many names -- and have actually had reductions in services and payments in order that B.C. child benefits could be provided. They actually had a reduction in income over time. Also, more pressure has been put upon them, and there is more indication that there is something wrong with them if, for one reason or another, they're not able to move into the employment category.

People in poverty have always had a kind of stigma placed upon them. Even the words "poor children" is a term that we should not use. There are children who live in poverty, but they are not "poor children"; they are children who live in poverty. That's a distinction that we need to make more and more. There are not poor families; there are families who have poverty as one of the facts in their lives. They are rich in varying other ways. They are capable, willing families, families that are able to cope with circumstances that many other people would never had been able to cope with: sickness, disability, family breakups, whatever. They have coped very well, given the circumstances. Society has recognized it should give these persons some support in their times of difficulty. But over the years, we have developed a stigma on that support, a stigma in society generally that should not be there. This does nothing for those people, except put more pressure upon them and suggest that since they are getting very little, if any, more help while they have to stay in that situation, then they have been disadvantaged.

[10:30]

One other comment that I would make is that it has highlighted the need for dealing with our children as complete persons and that dollars are not the only concern they have. Just because they get $103 a month more does not mean that they're going to be better off in the total picture of things. They need health services, education services, recreation services and integrated programs that deal with the whole of their life. They need all of these things put together in a package.

In the Child, Family and Community Service Act I'm pleased to say that we've acknowledged that and are moving somewhat in that direction again. But we've only acknowledged it and begun to move very little. Children from the time of conception until five years old still do not have priority in our overall thinking, and that's where their life formation is made. That's where the pattern is made for their future existence. We're still caught up in the later years of their life and have not given a priority to the early years.

I stress this, because I think it is fundamentally important that when we rejoice in one aspect, we should highlight the other tasks that are before us, those that we have to undertake. I highlight particularly those two sections. Those who, for whatever reason, cannot move into employment need assistance and support during their time of greatest difficulty. They need not only help to move out to employment, but they need help for the years of preparation and maintenance that will get them to the stage where they are able to. If they're never able to move out into employment, for whatever reason -- (1) because employment's not there, (2) because they haven't the skills, or (3) because of physical or mental difficulties -- we need to take that into account.

The other aspect that we need to take into account is the priority of children from birth to five, wherever they may be,

[ Page 9212 ]

With those comments, I commend where we're moving, but it's only a very, very small step in priorities or in undertaking.

The Speaker: I recognize, to close debate, the Minister of Human Resources.

Hon. J. Pullinger: First, let me thank the members opposite for their thoughtful and supportive comments. I very much appreciate that, particularly on this issue. I do want, however, in a very non-confrontational way, to respond to some of the points made. I would be willing -- and am, in fact, delighted -- to continue the dialogue outside this House.

All of the points made are valid; however, there's some information that may be old or missing. I just simply want to point that out for the record. The member for Surrey-White Rock quite correctly pointed to numbers and growth in poverty and to Campaign 2000. I did meet with those folks. I will put out to this Legislature, as I did to the campaign, that the numbers that they are using are the most recent ones available. They're the ones that Dr. John Millar used in his recent and valuable report on health, which demonstrates the very clear relationship between health and socioeconomic status -- particularly the gap between the haves and have-nots, to use that phrase.

The problem with the argument used in this context, however, is that those are old numbers; they are pre-B.C. Benefits and pre-B.C. family bonus. They are 1995 and 1996 numbers that the campaign is using. Since then in British Columbia we have closed the gap by over 25 percent for low-income, working single parents and by 20 percent for single families. Roughly 45 percent of all B.C. families receive this, and therefore, as the member for Powell River-Sunshine Coast. . . . It really is a step toward that negative income tax or guaranteed annual income. It does, in effect, move in that direction. So we do have old numbers, and in fact the ground that we're standing on has changed very significantly in the two years since those numbers came out.

The growth in poverty happened in the 1980s, as Dr. John Millar pointed out; the numbers had been static for the better part of 20 years. It came about, as we all know. . . . Everybody has alluded to the fact that it is changes that we have made in the legislatures across this country -- really, sometimes in response to circumstances outside. . . . It is choices that we make that create child poverty. It's about where we set the bar for minimum wages and employment standards, whether or not people can join a trade union to improve their own lot and what we do about tax cuts at the top, which in most provinces have resulted in service cuts at the bottom -- in other words, in reallocating wealth the wrong way. All of those things make a huge difference in poverty, and I would suggest that the agenda we've been following at the national level since the early 1980s has indeed resulted in a totally unacceptable level -- if there is an acceptable level -- of child poverty. I want to say, too, that although the member for Powell River-Sunshine Coast didn't hear my comments about the growth and level of poverty quite correctly, I do agree with him that any level of child poverty is completely unacceptable.

We have taken a very significant step ahead. This does not harm people who are on income assistance -- not at all. It changes nothing for them. In fact, this particular piece of legislation backfills what would have been a cut for those on income assistance who were benefiting from the working income supplement. So we are ensuring, through this legislation, that they are not hurt by the federal cut of the working income supplement. There is no such thing as punishment in this. There is no intention, there is no indication and there is no language -- there is nothing -- that would suggest anything like that. We have been extremely careful in this province, and in others, to make sure that there were no negative impacts.

What it does in British Columbia is that we have a net of $25 million which is going to things like early intervention programs, which I know the member for Vancouver-Langara will applaud. That's added to things like intercity programs, school meal programs and the most comprehensive child care program in the country. Alberta is now putting $21 million into child care; we spend ten times that every year. We're the only province -- or one of two, I think -- building social housing, and single parents have got first priority because that's where the greatest need is. We have the broadest training in education. This is the only province where post-secondary education is on the increase rather than a decrease. In British Columbia, 45 percent of families get dental, optical and medical for their kids, as well as $103 per month and the range of services. So really we have recognized the problem in British Columbia in a very real way.

I do want to underscore that this does not hurt or punish anyone, as the member suggested; I'd be happy to speak to him afterwards. This very much protects people on assistance. In British Columbia, we have the highest rate in Canada of single parents on income assistance. We are also the only province where a single parent on income assistance gets an additional $100, if in fact their spouse is providing spousal support, to encourage that to happen. Therefore we. . . . Well, it's still very difficult to live on assistance. In B.C., single parents, particularly, on assistance and families are better off than just about anywhere else in the country because of the supports we've provided and the relative ease with which they can move into training in a job. That isn't available in other provinces.

I simply want to close by saying thank you again to the members who spoke. I do appreciate their sensitive and thoughtful comments, and I look forward to continuing the debate. With that, I move that the bill be referred to a Committee of the Whole forthwith.

The Speaker: Member, we have to vote on second reading first.

Hon. J. Pullinger: Oh, I'm sorry. I move second reading.

Motion approved.

Bill 33, Income Tax Amendment Act (No. 2), 1998, read a second time and referred to a Committee of the Whole House for consideration forthwith.

INCOME TAX AMENDMENTACT (No. 2), 1998

[ Page 9213 ]

On section 1.

G. Hogg: Maybe I should take this opportunity to remind your deputy minister of the volumes of literature on various and sundry subject matters which I've requested from her, which I hope to receive sometime in the near future. I see her waving in concurrence. Thank you.

Could I ask if there have been any groups who have expressed concern with respect to any items in this bill or concern that perhaps the bill should have gone in any other particular direction or taken further steps in any area -- whether any interest groups have expressed. . .or come forward?

Hon. J. Pullinger: I have had no one even mention this bill to me.

[10:45]

Hon. J. Pullinger: No.

G. Hogg: Will the appeal process under these changes be exactly the same as the appeal process currently in existence under the B.C. family bonus program? What will the appeal process be in this matter? Or is that part of what. . . ? The bill doesn't reflect anything on that, so I just wonder about the context of that.

Hon. J. Pullinger: This is the Income Tax Act, so there is an appeal process for income tax, but there's nothing under the B.C. Benefits side. I think that's what the member is asking.

G. Hogg: I'm assuming I can wander all over this act and not have to be limited to the section which you highlighted.

The Chair: Excuse me, member. The Chair should suggest to members that we perhaps deal with the sections in order -- deal with section 9 first and then section 10 as we go along.

G. Hogg: While I appreciate the suggestion, it conflicts with my time frame. If I could ask just two more questions. . . . Unfortunately, I have another engagement I must move to quickly. I would like to ask just one question with respect to section 1, section 10(4), which reads: "The Lieutenant Governor in Council may make regulations prescribing the amounts, or the calculation of the amounts, of the BC basic family bonus and the BC earned income benefit, as referred to in subsection (3)." This allows for regulation and change. Has there been any consideration of any types of changes in that? Or is this section just included as something that might be a provision which could be utilized or looked at, should there be some further policy changes contemplated at a later date?

Hon. J. Pullinger: This in fact is the essence of this bill, because up until July 1 the entire B.C. family bonus was paid by British Columbia. As of July 1, we will have a new benefit, the B.C. earned-income benefit. Of course, all of the numbers will shift around because of the participation of the federal government and the resultant additional funds that we have in B.C. for other programs. This allows us to adjust the amounts in a way that people get the same amount -- but it comes from different sources, that's all. That's the essence of this whole change.

G. Hogg: Does the minister foresee any other development coming out of the federal-provincial discussions and the intent that came out of those? This is the first positive agreement that was able to be generated out of the issues on development of social policy. Are there any other items that may be on the table, which may be reflected in further bills or at any other points in time, that we might look forward to or know they're under discussion?

Hon. J. Pullinger: I was delighted when we were able to achieve this agreement that resulted in the national child benefit. My very clear agenda now -- which I've stated on a number of occasions in this House and outside -- is to press the federal government to increase their amount to the child benefit by 300 percent, to a minimum of $2.4 billion a year. When you look at the numbers, you see that in British Columbia we spend $400 million a year on the family bonus. Across the country we are now seeing the federal government come in to the tune of $850 million, just barely twice as much for the entire country -- provinces and territories. You can see that there needs to be a significant increase at the federal level.

I look forward to the support of the members opposite in helping me push the federal government to increase to a minimum of $2.4 billion, so that we can really have an effect on child poverty across the country, and so that children in other provinces can enjoy at least a similar level of support to what the children in British Columbia are receiving. That is clearly next on my agenda -- to try to drive that number up by three times.

V. Anderson: On the adjusted earned income, could the minister explain briefly for us the definition in this section of adjusted earned income? I may have a couple of questions after the explanation.

Hon. J. Pullinger: Adjusted, in a sense, means the sum of the parents' income. For instance, they may have employment income, Canada Pension Plan or disability benefits, training allowances and self-employment income. So adjusted simply means the aggregate amount of the parents' income.

V. Anderson: You mentioned pensions. Are there any items of income that a family receives which are exempt from that total adjusted income level?

Hon. J. Pullinger: The entire list of what is included in earned income is employment income, Canada Pension or Quebec Pension, disability benefits, training allowances or self-employment income.

V. Anderson: Are lottery proceeds part of income? Are veterans' pensions, which parents may get, part of income? Are insurance payments from accidents part of income? I'm just trying to get an idea of what income covers.

Hon. J. Pullinger: The list I read is all that's included. But let me state the definition of employment income. I think this

[ Page 9214 ]

G. Hogg: Let me with semantic dexterity try and slide my more general question into your definition section of this.

An Hon. Member: What's semantic dexterity?

G. Hogg: I'll help you with that later, hon. member, if you'd like to come to.. . .

The Chair: Through the Chair, please, members.

G. Hogg: The tutorials will be running a little later with my colleague the Minister of Labour. I'd be happy to assist you with that.

Are there any changes, either financial or administrative, which will have any negative impact on those currently receiving B.C. family bonuses? I'm referring to the administrative side of things. We may be looking at the federal government carrying out the administrative side of things. I'm wondering, firstly, what the impact of that may be, whether or not we have control of when and if the cheques will be arriving, how people will be able to identify those as cheques related to B.C.; and secondly, whether or not there will be any financial impact with respect to that.

Hon. J. Pullinger: This program has been very carefully designed so that while the B.C. family bonus cheque that people currently get now will look different, the bottom line will remain precisely the same -- except in the case where their own circumstances change the cheque, as it would have anyway. So there is absolutely no change in this at all, other than that change by an individual or a family circumstance.

I would just like to point out for the member's comfort that in the design of the B.C. Benefits program we did opt to deliver the B.C. family bonus cheque through the federal system, because it was significantly cheaper to do it through an existing system rather than build our own. The only cost there was a political cost, because too many people think the federal government did it for the last two years, when in fact they were cutting and we were adding the B.C. family bonus. But we have used the federal system. What's happening is that it's precisely the same system as has happened for the last two years. It's simply that the calculation of the pieces going into that same bottom line changes. But it has absolutely no effect on individuals receiving it.

G. Hogg: I would like to extend my thanks to the minister and her staff for assisting in these. . . . I have some other commitments I must get to. At this point I'll be happy to turn my questions over to the deputy critic. Thank you for your support and indulgence to both the Chair and the minister with respect to the questions.

V. Anderson: If I understand the minister, then, when you fill out your income tax return, all of the income that's on your tax form is taken into account. That's what it's based on. Just to clarify, my understanding is that what you receive on July 1, 1998, will be based on the 1997 income tax return which completed. If by chance you haven't completed a 1997 income tax return, then you would not receive that until it's completed. Am I right there?

Hon. J. Pullinger: Yes, that's correct. That's why I wanted to make the differentiation. It's necessary or probably a good idea to have this new program come in across the country at this appropriate time, when income tax from last year is being reported.

However, the minor complication for us in British Columbia, because we've been doing this for two years, is that people need to understand that two things are happening. One is that standard annual change -- if there is any -- in individual circumstances resulting from the income tax form they just filed. So whether it was still the B.C. family bonus or not, the July cheque would reflect any changes in the circumstances of the family. That's one thing that happens, and it happens every year.

The other thing that is happening is a new cheque. But any changes in the numbers on the cheque will result from a change in the personal circumstances. That would have happened anyway. So the member is absolutely correct: one has to file their income tax return. That is, in effect, the way one applies for this income supplement. I would refer again to the comment of the member for Powell River-Sunshine Coast about negative income or guaranteed income. It effectively works that way. If your income tax suggests that you qualify -- you fall below the level and you qualify for this -- then the cheque automatically comes.

That is the only application and the only adjustment annually: your income tax. That's why we ran some ads twice this year, to make sure that people are aware and do file their income tax return. Even if they're not in a category where they'll pay a lot, they really need to file so that they can get this cheque.

V. Anderson: To clarify, if your circumstances change anytime in the current year, 1998, that does not affect your payments -- to increase it or to decrease it. Or are there opportunities to change if you've earned a great deal more income, and therefore you should receive less? Or if you've lost a lot of income and received more. . .what's the situation there?

Hon. J. Pullinger: It is once a year; the system is fairly crude that way. I would hope that in future we'll be able to refine it. But that will take some technology, clearly, and a lot of work.

Right now there are only provisions for the following changes. One is marital. For instance, if a family breaks up and one parent has custody of the children -- typically that's the woman, and typically she has a significant reduction of income -- that can be taken into account during the year. Secondly, if a family has a child during the year, that child can then be added in. It's similar to the old family bonus; you could say, "I've got another one," and get that added on to the rolls. Someone who is not receiving the B.C. family bonus can become a new recipient during the year, on application. But those are the only three changes that are provided for during the year, at this point. Other changes simply come at income tax time.

[11:00]

[ Page 9215 ]

V. Anderson: In the briefing it was mentioned that, at the current time, families with children in care receive a $25 supplement per child for their personal needs. That's as I understand it. Is that correct -- that it's for their personal needs for a child; it's not for the caregivers, it's for the child's use?

That's being upped to $50 per child, if I understand it. Is that income that will have to be claimed on behalf of the child or the caregiver? What happens to that particular income?

Hon. J. Pullinger: With respect, I would suggest that that entire topic is related to, but separate from, this issue, which is just the change in the Income Tax Act to allow for the blending of the federal and provincial programs to equal the $103. I would be happy to chat with the member afterwards, but there is no connection between that and what's happening here.

V. Anderson: I'll be happy to talk to the minister after, because it raised the income of foster parents, and what payments they receive are income to them and what are not, that foster parents have to declare when they're applying for income tax. . .on behalf of children. If she wants to comment briefly on how foster parents work out and what effect. . . . Presumably, at this point, children in foster care, or their care families, will be receiving $103. Or will they? Does it have any effect upon them or not? There's the $103 that affects foster care children, plus the extra supplement.

Hon. J. Pullinger: In the fostering situation there is support provided through the foster children program to the foster parents, so they would not be eligible for this. That's an entirely different situation. It's a care situation rather than a family situation per se. Where there's some legal guardianship, then they would be treated as any other family -- as a child in the family.

V. Anderson: That leads to another question. If a child who is in a family that has been receiving $103 a month has, for one reason or another, been put into temporary care, either willingly by the family or by apprehension by the ministry, for a month or six months -- indefinite; whatever the time may be -- will that money continue to come to the family? Is that what happens automatically? Do they lose those funds? What happens in that situation? The time that the children will be out of that family will be indefinite; it could be a month to six months. What happens during that period of time?

Hon. J. Pullinger: I'd be delighted to answer the question, but I would suggest that we're getting beyond the bill. Maybe we should have some of these conversations in the hall afterwards. I'd be delighted to do that.

In effect, what happens is that if a child is apprehended -- when it is determined that that child will in fact be in care and not before -- then the social worker who has apprehended the child will make the proper notification, and the cheque to the parents will stop because the child is no longer living there. When the child is returned to the family, then the cheque will recommence. So the cheque is not paid to the family when the child is not in the family, but it's not stopped until it's certain. . . . If there's a very brief interruption. . . . Not until there is a determination that the child will in fact be moved for a length of time -- that's when the cheque will be stopped.

V. Anderson: I will meet you, because I would like to discuss this further, but this isn't the place to do that. Let me take the other scenario where there is joint custody of children and a child spends one week in one home and the other week in the other home. How is it worked out in that kind of adjustment? Or if it's a month or weekends, how does that work out?

Hon. J. Pullinger: There are a number of criteria -- such as the amount of time that a child might spend with one parent or the other, where the child goes to school, etc. -- that the federal government uses to determine which is the primary parent, and that parent will get the cheque. I am advised that in most cases it's fairly straightforward; it's exceedingly rare that it's exactly equal. It's usually fairly clear, and the federal government makes that determination quite readily in most cases.

V. Anderson: So if I understand correctly, if the child has two parents living separately and the child is shared back and forth between them, then both parents would need to make their income tax claims. The income tax claims, along with the court orders, if you like, would be taken into account, and the payments would be adjusted accordingly to both parents, depending upon their care of the children.

Hon. J. Pullinger: Only the parent who receives the benefit needs to file. . . . Only their income tax. . . . I mean, everybody needs to file an income tax return. Only their income tax return is considered in the calculation of the family bonus. Let me put it this way. The determination of who gets it -- which parent gets it -- is made by the federal government through their system of figuring that out, which I understand is very effective. Only one parent gets it. Once that's determined, then the amount is calculated, based on that parent's income alone.

V. Anderson: We may have to follow that up in discussion. I have parents who have joint custody, but they don't live together; the child spends half the time with one and half with the other. It seems to me that both those parents have the responsibility on their income, and if they're both low-income parents, then they would both qualify. So we'll follow that up. Or if the minister wants to comment later. . . .

But at the same time let me ask the question: are we using a B.C. definition of spouse or a federal definition of spouse in this definition? At the moment we have a different definition in B.C., I understand, than the federal definition. Which definition are we using in this circumstance?

Hon. J. Pullinger: Eligibility is determined under the federal rules; therefore it's the federal definition. Just to clarify on the other point, again, it is the federal government that has the black box which feeds the information through to determine who gets the payment. Put simply, the determination of which parent is made by Revenue Canada -- the federal income tax folks, anyway. They make the determination about who is the primary parent; that parent gets the payment. But that is a federal determination. Therefore, while we may be able to shed a little light on it, it might be better for the member to direct his questions, in terms of exactly how that determination is made, to the federal government. It might be a better way to get the exact details of how they do that, because it is a federal determination.

V. Anderson: My follow-up question to that is: are there persons who have been receiving the benefit at this point under the B.C. definition of spouse? Same-sex families, for

[ Page 9216 ]

T. Stevenson: Hon. Chair, I ask leave to make an introduction.

Leave granted.

T. Stevenson: I just noticed in the gallery a friend of mine, a supporter and a hard-working NDPer: Tim Agg. I wish to welcome him to the House, and I hope the House joins me in welcoming him.

Hon. J. Pullinger: The member is quite correct: the federal government is not as enlightened as the provincial government and therefore has not accepted the reality of our society. However, if anything, that works to the benefit of those same-sex families. But I would suggest that in most cases it's still a very clear process of the federal government determining who should get the bonus. I would certainly encourage the federal government to change its definitions of "family," in the same way British Columbia has. It would certainly make like simpler for a whole lot of people.

V. Anderson: I appreciate the minister's reply. If I understand correctly -- just to be clear -- theoretically, at least, it is possible that some who are currently receiving the B.C. family bonus may have an obstacle in getting the federal family bonus. That's all I want to clarify.

Hon. J. Pullinger: The answer is an unequivocal no; there will be no change whatsoever. I just want to clarify. . . . Let me bring this back to it's very simplest. What we're doing here is providing that we can make changes to the composition of the cheque, effectively, by order-in-council. That is simply to accommodate the fact that the federal government is coming in and joining with us. To the person on the end of the cheque, the only difference, really, is that the cheque will look different. The amount won't change unless their income has changed. Nothing else at all changes. This merely allows the province to alter the amounts and where they come from, because of the positive disruption, if you like, in the system caused by the federal government coming into B.C. with a net of $25 million, which then allows us to do other things. They're putting in an additional $25 million, but also the $60 million that used to go into the working-income supplement federally is now paid by the province. So that changes the delivery of it. There are all those kinds of internal changes to the cheque to accommodate the federal government coming in, but the person who receives the cheque has no difference in application. All you do is file your income tax return, and the cheque is automatic if you qualify. There's no difference in the date of the cheque or the bottom line of the cheque, unless it's your own circumstances that change that. There's absolutely no difference. The only visible difference to the recipient will be that the cheque will look different.

V. Anderson: Taking sub-subsections 9(a) and 9(b) together, I want to clarify. . . . I'm assuming that it's the total income of the family, of the two spouses together, that's taken into account. I'll ask two questions at once. It's not the individual income of the husband or the wife, it's the total income of the family that's taken into account? That's one part of the question. At what level does the $103 per child get cut off when you move out of the low-income category? Is it $103 all the way through that category, or is there a variation?

[11:15]

V. Anderson: That's helpful, because I think public relations so far have indicated that every family with an income under $40,000, if I heard the minister right, would be receiving $103 per child. From the publicity that's been out there, I haven't seen anything that said there is a sliding scale. Is the minister able to provide us with the formula and a sliding scale, so that we might have that and get some indication of how it works?

Hon. J. Pullinger: At the introduction of this program, we provided every MLA -- all 75 -- with a poster. And on the front of the poster it has the grid; it has the formula. It was a brown-and-white poster. So we did in fact provide it right up front to every member of this assembly and to the public, in our literature when it was announced as well as in the poster and all of the little handouts. They all have the grid.

I would simply like to correct the record. I know the member is stating his perception, so I don't mean to be confrontational, but in every single piece of literature I have ever put out or anything I have ever said about this, I have said: "Up to $103 per month." When I have the opportunity I explain how it works: in fact, most of the money goes to the lower end -- as I'm sure the member would agree it ought to -- and then it tapers off.

Section 1, section 9 approved.

On section 1, section 10.

V. Anderson: This section has to do with overpayment -- all the way through the section, if I'm correct. It has to do with overpayment in a variety of categories. There's a variety of overpayments that are listed in each of the sections. If the minister might comment about overpayment and the intention of this section.

Hon. J. Pullinger: This is one of those marvellous things that one does in government. I should say that it's tax policy, just to make sure that I pick on the Ministry of Finance and not my own here. In order to make this work, the rules are made under this section to say that if you don't meet the bar of where we say your income should be. . . . In other words, what we say is: "Okay, your tax payment should be a certain amount, which is calculated minus the $103." All it does is create some room so we can give you a cheque for $103 and say you overpaid by that much. So it's just, quite frankly, a

[ Page 9217 ]

V. Anderson: Just to clarify. As I read it through, there are a number of scenarios listed here: if you are a resident of Canada for only part of the year, or if you go bankrupt during the year, and other items here. The inferences I get from this -- and I want to see if that's correct -- is that if there were these changes in circumstances, and these weren't originally reflected in your income tax, there could be an overpayment to the family, and the family may be required to pay that back. Is that what we're saying? It's just to understand what overpayment means here.

Hon. J. Pullinger: My understanding of this part of the act is that. . . . First of all, let me underscore that it's not an overpayment per se; it's simply a legislative mechanism to allow us to pay a cheque. There is no reason to pay back any money, and that doesn't happen. The provisions in here are about eligibility, and they also account for the fact that in some circumstances, people file their income tax return quarterly or in other ways. There are different circumstances that happen. This simply allows us to override that, so you're simply calculated on that one annual income tax filing at the end of April. So this is simply a mechanism that lays out the ground rules for qualification. It essentially levels the playing field between those who file early and often and those who just file once. That's what this is, and then it provides that mechanism to actually pay out the cheque, but there's no payback.

V. Anderson: Section 4 was one that was commented on briefly: "The Lieutenant Governor in Council may make regulations prescribing the amounts, or the calculation of the amounts, of the BC basic family bonus and the BC earned income benefit, as referred to in subsection (3)." If I understood the minister's comment, that was simply to make the adjustment from the present program to the incoming program. Is that what's she's referring to? It's not referring to anything else except the adjustments from the present program to the incoming program -- from the B.C. bonus to the national bonus. Is that correct?

Hon. J. Pullinger: The regulation power is simply for this benefit. This is very specific. The section that the member is speaking to, subsection (4), is in fact the heart of this legislation. It allows us by regulation to adjust all these amounts, so that we can take into consideration the federal amount.

Hon. Chair, I would ask leave to make an introduction.

Leave granted.

Hon. J. Pullinger: It seems the least I can do is introduce the two people in the gallery with whom I was supposed to meet at 11 a.m. So I would ask everyone in the House to please acknowledge and make welcome Tim Beachy and Tim Agg. I hope to meet with you very briefly. Would members help make them welcome.

Section 1, section 10 approved.

On section 1, section 11.

V. Anderson: I would also add my greetings to Tim, and tell him that I owe him a cup of coffee some time in the future. I've had the opportunity to work with him in the past. I appreciate his waiting while. . . .

On section 11, I would like to ask particularly about section 42(2) -- the things that are being repealed -- and have some explanation on that. It's the last section just above the commencement part: section 42(2)(a)(iii) and (iii.1) on page 4 of the bill. If there could be an explanation of what those mean -- what's happening by repealing these and reworking them.

Hon. J. Pullinger: This allows for an appeal through the Income Tax Act, not through B.C. Benefits. I want to be quite clear about that; it's quite different. I am advised that the general rule is that anything that is defined by the federal government is appealed there. Similarly, anything that's defined by the province is appealable under provincial rules through the Income Tax Act. That's the case here.

V. Anderson: Just for a little clarification, as I read the explanation, that's what confused me. The right-to-appeal determinations are no longer required by the federal act, but are still needed for the B.C. family bonus program. But the B.C. program is being incorporated into the federal act. So we can still appeal in the B.C. program, but we can't appeal in the federal program. It's the same $103 we're talking about. I'm trying to figure out. . . . There are two programs. We can appeal provincially but not federally. That's what I'm trying to understand.

Hon. J. Pullinger: The section the member alludes to is in recognition of the fact that as the federal government is bringing in the child benefit, they're also cutting the working-income supplement. Therefore some of those definitions will now move to the province under the new B.C. earned-income benefit, which is simply the working-income supplement delivered provincially. That change means that some of the appeals that would have gone through the federal income tax appeal process will now go through the British Columbia income tax appeal process, and that's what this section reflects.

V. Anderson: I'm still not clear, but I'll ask the minister for clarification at a later date, rather than take the time now. I would like to thank the minister for her cooperation. I look forward to meeting with her and her staff, so that we can do it in more detail.

Sections 1 to 3 inclusive approved.

Title approved.

Hon. J. Pullinger: I move the committee rise and report the bill complete without amendment.

Motion approved.

The House resumed; the Speaker in the chair.

Bill 33, Income Tax Amendment Act (No. 2), 1998, reported complete without amendment, read a third time and passed.

Hon. J. Pullinger: I call second reading of Bill 26.

[ Page 9218 ]

LABOUR RELATIONS CODE
AMENDMENT ACT, 1998
(second reading continued)

Six Mile Ranch, of course, hasn't been built at all. Indeed, it only finally received approval from the provincial government to go forward. It seemed to me that that was another example of the unfortunate tendency that the Premier has modelled for government members: to claim credit for things which have been announced or approved, regardless of whether or not a spade is in the ground.

An Hon. Member: Premature expectation.

K. Krueger: Absolutely -- announcing extremely prematurely that things have happened, when indeed they are sometimes only a gleam in somebody's eye. The Six Mile project is a lot more than that. People in Kamloops and indeed in my constituency are thankful that it has finally be approved and is going to go ahead.

Madam Speaker, there's hardly anybody in the House on the government side, and I move that the House do now adjourn.

The Speaker: The motion is in order. I'll put the question.

Motion approved.

The House adjourned at 11:32 a.m.

PROCEEDINGS IN THE DOUGLAS FIR ROOM

The committee met at 10:11 a.m.

ESTIMATES: MINISTRY OF FINANCE AND
CORPORATE RELATIONS
(continued)

G. Farrell-Collins: Over the last number of months, I've been contacted by a number of different suppliers to government regarding some changes that have taken place at the Purchasing Commission over the last period of time. There are a couple of issues which we need to discuss. One of them is the requirement for suppliers to track and report all of their sales to the provincial government, so that the Purchasing Commission has all that information. It appears to the suppliers that they are being asked to do the paperwork for the Purchasing Commission, as part of their job. I have a letter that was sent to my colleague from North Vancouver-Seymour -- one of a number of letters we've had. This was also cc'd to the member for Burnaby North. I'm going to read it to the minister; it's only about a page and a half. I'd just like to read it into the record so she can see the type of correspondence that we are getting. It was actually written to the minister, so she's probably got it. It was cc'd to the member for North Vancouver-Seymour and the member for Burnaby North. It says:

"I am writing to raise some concerns regarding the B.C. government master standing offer for the purchase of office furniture and the paperwork now required. I will provide some background. Recently, the Purchasing Commission changed their policy on reporting purchases made against the MSO. They have advised that they are too busy to continue to process the paperwork involved. We have been instructed that we, the manufacturer (wholesaler), are now responsible for receiving and compiling the required reports and forwarding them on a quarterly basis to the Purchasing Commission. Failure to comply will result in exclusion from the list of authorized suppliers to the provincial government. Even nil reports are required.

"It is unreasonable for the commission to set up cumbersome reporting requirements, then off-load onto vendors. If government purchases are made using government purchase orders, why are vendors also required to raise paperwork associated with each purchase? Is this not an internal reporting responsibility? In fact, the instructions for reporting issued by the Purchasing Commission state that the vendor reports will be checked against Purchasing Commission copies of the POSOs and purchasing card reports to verify their accuracy.

"There you have it. We are duplicating an internal reporting procedure. Why? Is this government employing staff to check their own reports against external reports for accuracy? Does the term 'streamline' have any meaning here?

"I would also like to comment on the manner of the staff at the Purchasing Commission. We recently received notification that several of our dealers have been dropped from the list of authorized dealers for failure to report. When advised that some of these reports had been filed, the response was: 'I don't have any record so there was no report filed.' There was no offer to look into the situation, no acknowledgement of the possibility of lost or misfiled reports at the commission -- no effort to assist at all. They told me not to be too hard on my dealers. The reason given was that due to the spending freeze, there were few drawdowns in the past year; hence nothing to report. This was hard to take, given that I had just been handed increased reporting requirements due to their alleged workload.

"As a final insult, the MSO includes the following statement: 'A master standing-offer administration fee of 1 percent is being considered and may be implemented during the term of this agreement.' Not only are we required to do the work for the commission, but we also may be charged for the privilege.

"In summary, we are a small family-owned business based in B.C. that wholesales Canadian-made office furniture. We have been in business for 25 years. During this time, we provided product to the provincial government using the tender formula and found that process fair to all. As a wholesaler, we operate on very tight margins; consequently we need to be as lean as possible. What we don't need is to have our workload unduly increased by unnecessarily bureaucratic procedures dreamed up at the Purchasing Commission."

[10:15]

Hon. J. MacPhail: I appreciate the member bringing this to my attention. We are actually dealing with this as we speak. Perhaps I could just commit to providing you with a copy of the letter that I am in the process of sending.

What we're attempting to do here, through a master standing offer -- which we talked about last night in the

[ Page 9219 ]

I acknowledge the contents of the letters. My understanding is that Purchasing Commission staff are in the process of writing to the company with several options for how to proceed to resolve this matter. I don't know whether. . . . I'd like to make that available to the member. We'll work out the issues about where, in the company. . . .

G. Farrell-Collins: If the minister can't, then I can ask. Seeing as they distribute it fairly widely, I'm sure they wouldn't mind doing that also.

I appreciate the background information that I was given by the commission. You raised it in our briefing, and a couple of individuals did speak to me to try and clarify it. I think I got the facts, but I think we perhaps now have a difference of policy. This is the better place to have the policy discussion, rather than there.

I think there are two issues. The first one is the idea of a master standing offer, which I think makes sense for everybody. It makes sense for the commission, for the ministries and for the supplier. The other two issues are whether or not all the benefit from that should accrue to the government and, really, all the costs of administering that accrue to the supplier. There's a power relationship here with the supplier and a very large purchaser. Yes, there is a duty of the government to try and get the best deal they can; I would agree with that. But there's also a principle here that we need to talk about.

The first one, and probably the easier one to discuss, is the administering of it as far as the paperwork goes. I fail to understand why the businesses that are supplying government are being required to basically do the recordkeeping for the Purchasing Commission of who it is they're selling to. One would think that internal to government, there would be some knowledge and tracking of who is making purchases and the amounts of those purchases, and that that would be collected by the Purchasing Commission. If the Purchasing Commission is trying to centralize those purchases, it would seem to me that that is their duty.

If they're doing that, then it appears to me there's no need for the suppliers to be duplicating that effort. If the Purchasing Commission has stopped doing it or has never done it, then I would say that there is a control issue at hand there. If we're relying upon our suppliers to manage the control and tracking of our purchases, for them to do it all for us. . . . I would say that we have lost control of tracking and controlling our purchases. So I would ask the minister to clarify for me which it is: is the Purchasing Commission doing that? If they've stopped doing that, why have they stopped? If we are indeed relying solely upon our suppliers to provide that information to us, why?

Hon. J. MacPhail: I actually appreciate having this discussion, and I thank the member for bringing it up. My understanding is that in the olden days, we used to make ministries or government agencies put out what was virtually a solicitation document -- like a mini-tender -- for all purchases. If they wanted four or five chairs, they had to go and solicit the equivalent of what would, I guess, be bids, and several companies would make bids and would either get the business or not.

In order to streamline -- and I agree that this should be mutually beneficial. . . . The basis for master standing orders is that they be mutually beneficial. So instead of doing that, now we reach agreement with companies on master standing orders. That means that there are substantial cost savings to companies for not having to go through that solicitation response. Also, companies have a form of guarantee of government business as well.

By the same token, the central agency, the Purchasing Commission, has a more streamlined way of doing business on behalf of government. What the Purchasing Commission asks is that we be informed of what the sales are, of the inventory nature of the sales. We have the ability to track and account for the price -- the dollar value of the sales -- but not the inventory aspect of the sales. We do audits to check. I mean, we are constantly doing audits. In terms of the overall inventory contents. . . . That's what we ask the companies to provide us with.

It has worked relatively successfully. This is not new. In some areas of government procurement, it's been around for eight years, and in other areas for five years. I do understand that, particularly in the area of IT companies, there has to be a renewal of understanding, and we will do that.

G. Farrell-Collins: I seem to recall that a while ago -- I'm not on the Public Accounts Committee, but my colleague is, and maybe she will recall -- the auditor general did a report into inventory control in government -- if I remember correctly. I don't need to go into that, other than to say that I expect that there has been some comment on that in the past.

Is this the government's attempt to solve that problem -- by having the suppliers track the inventory for us? Or are ministries still required or now required to track their own inventories and keep records of what it is they actually own?

Hon. J. MacPhail: No, this doesn't deal with the issue of inventory control or asset management. That's done through the ministries themselves, with guidelines. This is to get a sense of the business that we're doing under that particular master standing order, what the use is under that master standing order -- not only look at it for perhaps renewal purposes or continuation purposes. That's why we ask. It is truly meant to be mutually beneficial between the company and government. Inventory control is a separate issue done at the line level.

G. Farrell-Collins: Not being privy to the intricate workings of government, it would seem to me that you're duplicating the effort. If you have ministries that are required to maintain inventories of their own -- if they're also required to track their own purchases -- it would seem to me that each ministry would be maintaining some control and some information database on that themselves. If they're doing that internally already. . . . It would seem to me that they have to do that -- that the only way you can control that information is if you do it yourself, have it done internally. Otherwise you internally lose control over it by having your supplier, your customer or whoever in business is doing all your inventory control or tracking or reporting of all your purchases for you. . . . I would argue that the larger the organization in business and the larger the organization in government, the more you have the requirement to do that internally, because you can lose control of it so easily.

Let me just ask the question again. If ministries are doing their inventory control themselves, if they are required to maintain and track their inventory and to also be able to account for their purchases, is not all that information currently held within the ministries?

[ Page 9220 ]

[10:30]

What we ask of the master standing order is to work with us to identify the nature of those purchases, the volume of those purchases under the context of the master standing order. It's not done ministry by ministry. These businesses actually get business from across ministries. What we're asking them to work with us on is to ask: what kind of government business are you getting. What's the nature of the business? How many chairs of this nature are being bought and how frequently across government? We are working toward a technological solution that will eliminate the need for reporting from the vendors' level. We have what is called a purchasing card, which the member may be familiar with, and we're moving toward implementing that across ministry systems. When that is fully implemented, the manual system of paper reporting will also be eliminated.

G. Farrell-Collins: So my understanding is that it's been. . . . We're coming at it from two aspects, for two different reasons, if I can try and clarify what I've heard and see if I'm reflecting what the minister is trying to say. Inventory control -- the ministries try and do that themselves; they're responsible for keeping track of what they own and what they're purchasing, etc. But what the Purchasing Commission is trying to do here is step to the other side and look back at the government from the side of the supplier and say that within this master standing offer there are sales going on with various parts of government, agencies, etc., and that the only organization that knows the nature of that over the longer term is the supplier. The government doesn't know all that information. I understand what they're trying to say: all that information is already located, probably in one place, in the suppliers' database or records, etc.

What the Purchasing Commission is saying is: "It's easier for us to get the information from you the supplier than it is for us to go out and contact the various ministries, agencies and departments within government, collect all that information from them and centralize it in our database or our records." I would argue that that's accurate.

But the policy question becomes: why should your supplier have to do that for you? If you can't do it efficiently and you're asking your supplier to provide you with the information that they collected, that they paid to collect, that they pay people to track, that they pay people to input into their database, that they pay people to monitor, that they have comptrollers who monitor and check and audit. . . . That's information that they've spent money collecting for their own business purposes, and you as a customer are going to them and saying: "We need that information too. This is something that we want from you. It's your information; we want it." It would seem to me that the obligation there is from you to them; it's from the Purchasing Commission to them.

The Purchasing Commission is now becoming a consumer of information that someone else has paid to collect. In fact, the obligation there is yours. You are once again the customer; you are purchasing information now -- not just goods -- from a supplier so that the Purchasing Commission doesn't have to secure that information and go to the expense of securing that information internally. So the government and the Purchasing Commission have an option: do we do all of that internally and expend this much money, or do we do that externally and source that information somewhere else and spend this much money? I would say the advantage here accrues only to the Purchasing Commission.

More and more, businesses and, I would say, government are understanding the monetary value of information -- the value of that. Certainly in our business of politics, mailing lists have a huge value. If one wants to purchase a mailing list, they cost money. If you're in business and you want to purchase information -- databases, etc., -- from another organization, it costs you money. No one would ever think to go to a company and demand access to their database as a right of doing business with them; that's simply not done. I would say that if one looks at this from a logical, policy point of view, what government is doing here is. . . . Because of the size of its purchases and the size of its position in the market, it's in a near-monopoly situation.

As far as some suppliers are concerned, it's using that power and that leverage in a heavy-handed way to extract a valuable asset from a supplier, which they previously had no obligation to supply. I would say that that's improper. I don't think that's the right way to go. If the Purchasing Commission wants that information, it should purchase it. What I'm saying is that the government is asking those people to collect all that information -- all that data -- process it, audit it, have a comptroller control it and manage it. Then they're asking to get that information for free as a privilege of selling to them. I think that's wrong, quite frankly. I think it should be the other way around.

This gets even more interesting when one finds out that in fact the Purchasing Commission is charging that supplier 1 percent on top of it for the right of providing that information to the government. To me that's totally backwards. If anything, it should be the other way around. The Purchasing Commission should be saying: "Tack on 1 percent, and do all this paperwork for us; otherwise we've got to do it internally, and it's too onerous for us to do it. So we'll give you an extra 1 percent if you can do all that management for us and send us the information." It seems to me that this relationship is backwards and that the only reason it's backwards is because of the size of the purchases government makes. It is in a semi-monopolistic position in this power structure with a bunch of small suppliers, and it's using that power to extract information and cost from the supplier.

In fact, it's been characterized to me by people, particularly in the high-tech sector -- and I know the minister talked about that -- as a kickback. If they want to sell the product to this person, they've got to tack on a bit of money and send that through for the right of doing business. I think that's inappropriate. I don't think it should work that way. I'd be interested to see if the minister has a different analysis and explanation of how that power relationship works and why it's being structured that way.

Hon. J. MacPhail: I guess the proof would be in us reverting to the old system and seeing how all heck would break loose in the business sector. The power relationship is one of government, through the Purchasing Commission, trying to restructure our business relationship with suppliers so that we ease the burden on them, save taxpayers' dollars and reduce government administration costs at the same time. So let me try to give you a different vision of it.

As I said earlier, it used to be that suppliers would have to put in a bid -- it's not called a bid, but it's the equivalent of a bid -- or tender on the smallest of inventory items. And they

[ Page 9221 ]

It's not that we have a monopoly; we don't have a monopoly. In fact, government ministries could have previously purchased wherever they wanted in a way that would not be cost-effective at all. We have, in a very businesslike way, negotiated MSOs that are beneficial to the supplier and that save taxpayers' money. What we ask and what is agreed upon. . . . It's not like these are terms that have been imposed after the MSO. We have said: "Please, could you keep track of what it is you're selling under your MSO?" That's actually good business practice as well, because we need to know whether the MSO is working, whether it should be renewed and whether it should be expanded. Frankly, businesses that are not subject to an MSO would require that of us as well, to ensure that we are actually getting value for the dollar and not in any way engaging in anything other than best value for the dollar. We are also moving another step forward in this purchasing-card method, using technology to eliminate paperwork through the use of electronic transmission.

The 1 percent fee, if I might just address that, is a fee we charge to the ministries. It is collected at source, where the ministry actually makes the purchase, and it flows through. It is in no way a cost to the individual businesses at all. I don't know how else. . . . You see, it's a mutually beneficial relationship. Ministries can purchase directly through these MSOs with this supplier, and we want to make sure that. . . . I mean, we charge the ministries an administration fee for having negotiated this MSO, etc., so it's only the supplier that can collect that, but it's a flowthrough fee.

G. Farrell-Collins: I'll deal with the fee a little later, perhaps at the end of this question.

I'm not arguing with the new structure. I think it is a good structure, and I said that in my opening comments. It makes sense. Instead of making ten million little purchases, we now make 10,000 or whatever the figure is. I have no idea. You're still buying the same quantity of product, but the purchases are being done in a larger quantity, which makes more sense for everybody. It makes more sense for the ministries and for the supplier. That's just smart. And yes, there are benefits that accrue from that. Definite benefits accrue to government, and definite benefits accrue to the supplier. That's true.

Where we differ is on how to allocate those benefits and whether or not it's being done in a proper manner. I would argue that it's not, that the government is indeed in a. . . . The supplier is pretty much a price-taker when you're dealing with an entity as large as the government of British Columbia, particularly if they're 80 or 90 percent of your business, which will happen with many small suppliers. The government becomes a price-setter, and the suppliers become price-takers. That economic relationship is a powerful one for the government. Those suppliers are put in a position where. . . . Do you really want to upset the customer who is 90 percent of your business, by not agreeing to do just about whatever they ask? Price-takers are notoriously accommodating. They have to be, because if they're not, the purchaser or customer can go elsewhere. That's certainly the case here, so one has to be mindful of that relationship.

The benefits that accrue to government are substantial. I know that the assistant sitting behind the desk doesn't have to go through this process to buy three more chairs. There are real savings in time and efficiency for government of a fairly significant magnitude. The supplier is in the same position. There are marketing and administrative savings -- all those savings the minister highlighted. I don't argue with those at all.

What I do argue about is: why doesn't the ministry absorb its savings and its benefits, and the supplier absorb its savings and its benefits? In turn -- and this is just an economic principle -- if the supplier is able to do business more efficiently, then they will be able to reduce their bid in further standing offers to the government. In fact, that efficiency will be gained by the taxpayer in a market way through the bidding process. That's the way to do it. But what the government has done is impose additional costs, over and above the bid cost, on those suppliers -- i.e., collect information for us and remit that information to us. I don't think that is something the government should be demanding as a cost of doing business with the government without being willing to pay for it.

[10:45]

We could have a big discussion about whether that's the appropriate process, but let's say we agree that that's a reasonable way to do it. The Ministry of Health tacks on 1 percent onto the invoice, and the supplier turns around and pays that 1 percent directly to the Purchasing Commission. Again, they've managed a transaction for the government, which they shouldn't have to do. They've managed an internal government transaction for government, but essentially it's a flowthrough. It's an on-top charge and it's a flowthrough. But what is happening out there -- what I'm hearing from suppliers and what I heard from the commission. . . . I've heard two different things from the commission. I was told that it was an on-top charge and that it flowed through. I was also told that no, it was included in the cost and that suppliers were encouraged to include the 1 percent in their bids so that it became part of the structure. Then they were to remit whatever it was at the end.

The reason I think the latter is inappropriate is because it encourages suppliers, who may or may not have very small margins in addition to all the little fractions of percentages that they're trying to deal with, to squeeze that 1 percent down to maybe 0.75 percent, 0.5 percent or 0.25 percent, or to

[ Page 9222 ]

So I want to know which it is. I've heard from different sources. I've heard from the Purchasing Commission that in principle it's a flowthrough. I've also heard from the commission that in practice, that's not what is being done -- that the suppliers are being encouraged to fold that in with their costs, their bid. I've heard from suppliers it is the latter case -- that they are being encouraged to deal with that cost as part of the bid, that many of them are having to absorb it, and that it's eating into their margins substantially.

Hon. J. MacPhail: Just to start, I would note a couple of points for the member's information. When we enter into negotiations to establish an MSO, the rules are clear. The rules about inventory, filing and the 1 percent are clear. Companies bid on the basis of the rules being clear. They make a bid, it's all voluntary, and the arrangement is made. I've heard others say that as long as the rules are clear, as long as companies bid on the basis of them being able to make a profit, it's as any other contractual relationship should be. In fact, MSOs do qualify for meeting all of those tests.

Let me make it clear for you that the 1 percent is actually included in the bid; it is part of it. If the member is suggesting that one option could be to accept the bid but to let everyone know that after the bidding there will be a 1 percent administration fee tacked on as a flowthrough, I think that's a legitimate consideration from the member's point of view and mine. It's one that we should test with the suppliers. The staff of the Purchasing Commission is meeting with the suppliers in mid-July to address exactly this issue. I expect that that could be discussed then.

G. Farrell-Collins: I would argue that it's not clear, because it wasn't clear within the commission as to what the scenario was. If the commission wasn't clear, then I don't know how the suppliers could have been clear. In the letter I read earlier to the minister. . . . I'll go back and quote this one paragraph: "The MSO says: 'A master standing offer administration fee of 1 percent is being considered and may be implemented during the term of this agreement.' " If it is being included as part of the bid, and they're putting in a bid and saying, "I don't know if I'm going to have to pay that 1 percent or not," that makes a big difference. When you are dealing with very small margins, 1 percent is a big, big difference.

What is being said to the suppliers is this: "Give us a bid and give us your best offer. We may or may not tack on another 1 percent that you will have to absorb after the fact, because it will be included in your cost." Plus or minus 1 percent when you are dealing with a significant contract is a significant amount of money. When you are trying to bid -- I know what it's like when you're trying to bid on a project -- you look for any way that you can whittle down your costs, any way that you can undercut the next guy by $20. To be faced with an agreement that says: "Give us your absolutely most slim margin, but we might add another 1 percent onto that. We don't know for sure. We don't know whether it will come after the first month of the contract or after six months or in the eleventh month. We don't know that. It may not come at all, but you should be aware that somewhere along the line, we may add another 1 percent to this. We expect you to voluntarily agree to that, and we expect you to accept that as part of the contractual arrangement, because we're the customer. . . ."

I would argue that a supplier in a similar relationship with a much smaller purchaser would say: "What is it? Do you want 1 percent or don't you? Let me know, and if you let me know, then I can give you the best deal. If not, forget it. I don't even want to bother selling to you. I'll go and deal with someone else, because I can't deal with that uncertainty if it's the difference between making a profit and making a loss."

I think it's an unreasonable thing to write into an MSO and expect a supplier to have to deal with. Get your act together. Either charge it or don't charge it, but let them know. Let them understand how it's going to be done. To have this uncertainty written into a contract would cause most suppliers to abandon smaller contracts. Because of the size of government and its position in the marketplace, government can demand this kind of thing, and those people out there, those small businesses and suppliers, are price-takers. They just have to live with it. They have to deal with it, or they don't do business. I think that is an unreasonable abuse of power by a large consumer to its suppliers and the business people around British Columbia who like to supply to government. I would argue that those kinds of clauses. . . .

I would like to receive from the minister today, if I can, a commitment that none of the people who have those clauses in their agreements are going to be surprised in the next fiscal year with that 1 percent being charged on them until such time as they've agreed to a clear statement of exactly what is being charged over and above or not, and until this meeting in July with the high-tech sector and with other suppliers takes place. I don't think it's a fair thing for government to do to small businesses in British Columbia -- to demand of them to absorb and take the risk of that uncertainty in order to do business with the government to whom they pay the taxes.

Hon. J. MacPhail: It's interesting to note that the member argues on behalf of the suppliers in a way that the suppliers aren't arguing on behalf of themselves. That's standard. . . .

Interjection.

Hon. J. MacPhail: Actually, if the supplier is rethinking the MSO, then we'll be more than happy to hear that. That's fine. This is a mutually beneficial MSO, and if the supplier isn't. . . . I don't get that sense from the letter at all, but if that's the issue. . . . We're not in the business of forcing agreements upon people that they subsequently think that they can't abide by. That's fine. This is mutually beneficial. The issue of the 1 percent is standard language in the contract and was there from the beginning of the signing of the contract. There is no intention of imposing 1 percent at this stage on furniture suppliers. It now exists on IT only.

G. Farrell-Collins: That's the most arrogant statement I've heard. In fact, that epitomizes exactly what I'm saying. That says: "Hey, if you don't want to do business with us, if you don't like the way we've set the contract, go find someone else to sell to." The government isn't IBM; the government isn't General Motors. The government is owned by the people of British Columbia, and there are certain principles that should be lived up to. For the minister, when these issues are raised, to say, "Hey, that's in the agreement; if you don't like it, don't sell to us; if you're rethinking the MSO and you don't

[ Page 9223 ]

For the minister to say that this is standard language and nobody's complaining about it. . . . They are complaining about it. They complained to you about it. They put it in a letter that they haven't heard back on yet. They complained to me about it. A lot of them would probably love to complain about it but are terrified because they're going to get the same arrogant response they just got now and be told to bugger off: "Fine, we won't buy from you, then." That is arrogance in the extreme.

The job of the minister isn't just to take a government-can-do-whatever-it-wants attitude. These are the small businesses that this minister is sitting around a table with, trying to deal with red tape. Here's one; here's one right here. Here's red tape. Here's a structure that's unfair to small businesses. Here's a process that puts them at an economic disadvantage with government, that makes it difficult for them to know what their margins are going to be as they're bidding, and the minister says: "Fine. Go somewhere else." That's ridiculous.

The minister says that it's standard language in the agreement and that they knew that when they signed it. Well, they don't have anywhere else to go. They're trying to make a living. They're trying to make a profit. They're trying to employ people. They're trying to supply the government that they pay for -- they're taxpayers, too, like you and me. Why can't they ask the Purchasing Commission to get its act together and just tell them what the deal is and make it clear to them? "Is there or is there not 1 percent? Is there or is there not a flowthrough on that 1 percent? Let me know and we can all bid on it. Then we'll all be competing fairly, the market will adjust, and the efficiencies that are gained by the suppliers can be transferred through in the bid process."

If they're able to do business more cost-effectively, you can bet that they're going to be whittling down those margins even more, to try and get that contract. The benefit will accrue to the taxpayers because of the competition. But to go out there in some heavy-handed way and say: "Be warned. We might give you 1 percent, and you've got to agree to this uncertainty, this risk, whether you make a profit or not, whether people are going to be laid off or not, because of how well you're doing. You've got to agree to it, because that's standard; everybody has to do that. We treat everybody badly. Everybody's treated badly the same, and you just have to absorb it and deal with it. . . ."

If you're a supplier and your margins are one-quarter or half a percentage point, and the government's telling you that there may be 1 percent charged on top of that. . . . I mean, how do you deal with that? I would think: "Well, I can bid on this, and I'm either going to make half a percent or I'm going to lose half a percentage point. I'm either going to make money or I'm going to lose just as much money on the contract. I don't know, because I don't know if one month later they're going to change the rules on me. I don't know if 11 months later they're going to change the rules on me. I don't know what my cost is going to be. Somehow I'm supposed to bid on this, so what I do is throw some salt over my shoulder and hope for the best, because if I don't do business with the government, I'm not doing business with anybody. They're my biggest customer."

[11:00]

A Voice: We'd have an inquiry.

G. Farrell-Collins: Yes, there would be an inquiry. There would be a public inquiry, like there is on gas charges -- gas fees and taxes we pay on gasoline. The Premier would stand up and talk about the big banks and how they're abusing people. The Minister for Small Business would have an inquiry into this and go around the province to hear from people in all parts to find out what was going on. But when the government does it, the minister stands up and says: "Hey, if you don't like it, go somewhere else. You're rethinking your MSO? Fine, we'll find someone else." I just think that's wrong.

When you're dealing with it. . . . I mean, I'm not a big fan of the banks either. They haven't been particularly nice to me over the years that I've dealt with them. Trying to get through is impossible. Yet we have here. . . . I can tell you, if I was a customer dealing with my bank, and I phoned and they told me, "We bounced all of these cheques because your paycheque didn't come in," and I said, "Well, yes it did; it says so right here; I know I made the deposit; I've got the deposit slip," and they said, "We can't find it, so too bad; we don't have any record of it; see you later. . . ." What kind of an attitude is that?

That's exactly what happens here. This guy's dealers get a call from the Purchasing Commission that they've been dropped from the list -- they can't supply anymore. They're basically being shut down. Their largest customer is telling them to get lost because they haven't filed their papers. They phone up and say: "We have filed our papers." The government or the Purchasing Commission says: "We don't have them, so too bad. Get lost. We don't have them. That's your problem." There's no effort made to go and find out. There's no: "We'll look into that and see if we can find them" -- nothing. It's: "Sorry, we're too busy. We can't do it. See you later. We'll go and find somebody else to buy from."

Come on! If a business behaved that way, the government would be all over them, and rightly so. So why can the Purchasing Commission behave that way? Let me ask the minister that: why?

Hon. J. MacPhail: We're actually responding to the letter from Global. I made that clear to the member at the beginning. I also made it clear that we would, with the permission of the company, give that information to the member. Or he can get it himself.

Government is a customer in the marketplace. We are also responsible for assuring efficiencies for taxpayers, and that's why we enter into contractual arrangements and agreements that are mutually beneficial and mutually agreed upon. There's nothing more to be said. To respond to the member's accusations would be folly, because they're not relevant to the topic. We are working with the suppliers to ensure that the contracts, the MSOs, continue to be mutually beneficial. Where there are problems, we'll meet and solve them.

[ Page 9224 ]

In my discussions on this, I was told that the reason the 1 percent had been applied to the high-tech sector was that, while their margins are small, they make a lot of money. It's a high-profit area, and they can afford to pay it. That's what I was told by government. Is that a fee or is that a tax? It would seem to me that if you're selectively applying a fee to one sector that's not being applied to the other sectors, and the rationale is that they can afford to pay it, that's a tax. That's not a cost of administration. That's: "Let's go out and whack these guys because they have deep pockets." Where does that come from? Why is one sector doing this and no other sector? Maybe the minister can tell me why the high-tech sector is paying the 1 percent and no one else is.

Hon. J. MacPhail: The administrative fee associated with the high-tech MSO is not a tax. It's not paid by the supplier. It's a user fee, and its cost is borne by the ministries and other public agencies. These are high-maintenance MSOs. We want to make sure that ministries are doing what is adequate in this area, not what is luxurious. The administration fee is borne by the ministry, never by the supplier.

G. Farrell-Collins: Well, that's not what I was told. I was told that on one hand, it was a 1 percent. . . .

Hon. J. MacPhail: Don't ask me, then. Don't ask me if you're not going to listen.

The Chair: Order, members!

G. Farrell-Collins: That's not what I was told, and that's not what the minister said earlier today; it's in Hansard. The minister said that it's 1 percent, that it's charged on the invoice and that it's part of the bid. They've got to put it in as part of their bid; it's all in there. As I discussed earlier, as suppliers try and shave down their margins, you can bet they're trying to shave down that 1 percent; and in some cases, they're going to be forced to eat the whole 1 percent. That's the issue. For the minister to stand up and assert that it's a flowthrough, when she just told me it's not a flowthrough but that it's something that she may want to look into. . . . I mean, which is it? This is now the fourth answer I've received. I've received two different answers from the minister and two different answers from the ministry: it's a flowthrough, or it's not a flowthrough; it's part of the bid, or it's not part of the bid -- it's added on top. I've heard that from the minister two different times -- both options; and I've heard that from the ministry -- both options. So if the ministry doesn't know and the minister doesn't know, how is the supplier supposed to know? How do they know? They don't.

The minister says it's a high-maintenance MSO. Well, it's not a high-maintenance MSO from the supplier's point of view; it's a high-maintenance MSO from the government's point of view. And the government is saying: "It's harder for us, because the product we're purchasing from you requires us to be more diligent in ensuring that we're getting the right product at the right price, and the right quality and quantity of product; we're not going over the top here. So we as the government have to manage that more tightly to make sure that we're getting the right stuff. It's a high-maintenance product purchase for us." Why does the supplier have to pay for the fact that's hard for the government to manage it? Why do they have to pay for it? It makes no sense. There's no logic behind that.

I would argue -- and I come right back to my point at the beginning -- that what you've got here is a price-setter and a price-taker, and the price-taker is getting it in the ear. They're being forced to absorb the administrative costs of the price-setter. That's wrong and it should change. If your government has problems administering stuff, don't pass on that cost to your suppliers. If it costs government more to service something, yes, find efficiencies, but pay for those efficiencies within government. And if it's a cost of government, it's a cost that should be borne by all the people of British Columbia, not by somebody who is at a huge economic disadvantage and is trying to supply their government in a fair manner and is trying to make a living -- trying to hire employees and pay them properly and do good business in British Columbia.

This is exactly the kind of attitude from government that makes British Columbia a place that is hostile to small and medium-sized business. This is exactly the kind of thing that says to people that this is a hard place to do business. The minister may not agree with me, but I can tell you that if she thought long and hard about it, and certainly if she were on the other side trying to supply to government, she would look at this with a slightly different attitude. It's not fair, it's not right, and it should be changed. If there are efficiencies that are going to accrue to both sides out of this, those will flow to the taxpayer in the form of more competitive bids, because the supplier can compete and can operate more efficiently. If the government needs help with it's administration, then go out and purchase that information from a better source than from internally within government. You'll get a better deal, government will save money, and the supplier will be treated fairly. That's the way this economic relationship should be working. It's another example of how government is insensitive to the small and medium-sized businesses that have to deal with them.

I know that there have been improvements made in the last number of years with invoicing and with timely payments. We had a big problem about four years ago that, I believe, was corrected. I know that everybody is trying to improve the system; everybody is trying to make it better for everybody. But I can tell you that what we've got here is a power relationship that's not working properly; those small people are being taken advantage of by big government, and it's time that it got turned around. So if you're trying to improve this -- great. I'm glad to see it; I'm sure the suppliers are glad to see it. But you're off on the wrong track doing it this way. It's not fair, it's not equitable, it's not right, and it shouldn't be done this way. When those discussions happen on an ongoing basis, I hope people will look at that and that you'll go out and solicit from those people what their feelings are and not expect them to come and complain to the opposition or to the minister. You go out there and say: "This is what we're thinking of doing. This is what we're planning on doing. How do you feel about it? No risk here."

Maybe you want to hire somebody to go out and do a focus group, or maybe you want to hire an independent body to go out and get this information from the people, if they're afraid to speak directly to the purchasing commissioner or to the government. As I said, it's their livelihood. They don't want to offend their major customer. Go out there and ask these people in a way in which they can feel comfortable giving their true feelings on this, and I think you're going to get a response that's quite different from what you expect right now and what you think is going on out there.

[ Page 9225 ]

I think if the government's going to deal fairly with those small and medium-sized businesses that supply the government, it should go out of its way to find out how they feel about this. Find out what their true feelings are in a way they can feel safe and secure that they're not going to be punished after the fact. I expect it's an unwarranted worry, but it's something they have. You should solicit that information, and you'll get a very different impression, I think, of how they view this relationship than government has right now.

I would just encourage the government to do that. I think it would be a smart thing to do. You'll establish a better relationship with your customers, and quite frankly, at the end of the day, you're going to have a more efficient structure. You're going to have less red tape back and forth, less duplication of services. As a result, those cost-benefits and efficiencies will accrue to the customer through the competitive process of bidding, and we'll all be better off because of it. We'll have more efficient businesses that can then go out and try and supply in Alberta, in Washington State and elsewhere.

This gentleman who manufactures office furniture, a British Columbia manufacturer, will be in a more efficient position, a more competitive position not just within British Columbia but elsewhere, and will be better positioned on the international market to grow the company and supply elsewhere. Who knows? If it turns out to be a good structure and a good system here in British Columbia, maybe other jurisdictions will pick up on it too. I think we're off on the wrong track on this one, and I really encourage the government to take a second look at this, to talk to those businesses. Hopefully, we'll have a better system in place after the fact.

If the minister doesn't want to respond, I notice the comptroller general walked in.

[11:15]

G. Farrell-Collins: Oh, he just walked out again. Okay. Perhaps we can wait for a minute or two for him to come in, and we can move on to a couple of other areas.

The Chair: The committee will please take a five-minute recess.

The committee recessed from 11:15 a.m. to 11:18 a.m.

[E. Walsh in the chair.]

G. Farrell-Collins: I want to discuss an issue which the former Finance critic, our deputy leader, wrote to the comptroller general about on January 19, 1998. That was the booking of the Skeena money -- the cost of doing the Skeena bailout. At the time, the member for Delta South asked what appropriation the money was coming out of, and he was informed that we in fact hadn't actually paid cash for Skeena Cellulose. We got a loan from our partner in the deal, the Toronto-Dominion Bank. In fact, it's not like we had the money to pay for it, but we went out and put it on the credit card. That in itself was, I think, interesting and revealing. But the thing I was surprised to see in the budget documents this year was that it had been booked as self-supporting debt. Can the minister tell me how well it's doing in supporting itself to date?

Hon. J. MacPhail: There are accounting tests for determining commercial viability, and I think this was discussed with the member for Delta South. Its viability is not considered in one year but over a long term. Arthur Andersen looked at this, the OCG looked at it, and the auditor general will look at it. The business plan is determined by the parties to be viable; it's booked that way, but it will be reviewed by the auditor general.

G. Farrell-Collins: Well, I've looked at the business plan. I've also examined the Arthur Andersen review of it. There were pretty significant disclaimers in it, as far as measuring performance, if I can recall. I can't recall verbatim. . . . There was a fairly large disclaimer in the report towards the end, where it says: "The only information we have is information told to us by the government and by Skeena Cellulose, and we have not audited that information; we have no idea whether it's valid. We're only working on assumptions; we have no idea whether the assumptions that are being made are valid. But based on the data and the assumptions given to us, we believe that this is not an unreasonable assessment." I don't know if the minister has that right there in her binder, but maybe she can read it us so that we can see it, if it's the same one that I recall reading.

Hon. J. MacPhail: It says:

"Based on SCI's revised financial projections, SCI demonstrates commercial viability in the long term, as indicated by its ability to generate surplus cash flow by the year 2000 after completion of its pulp mill capital improvement program. If the trend list price of pulp persists in the future, then SCI shall be valuable over the long term. However, SCI must preserve this viability by ensuring that it has sufficient financing available to survive pulp price fluctuations."

Hon. J. MacPhail: The auditor general reviews commercial status annually, and he will continue to do that.

G. Farrell-Collins: I know we'll end up having this discussion at a later date in Public Accounts, when they come

[ Page 9226 ]

I hope that there's some monitoring being done of this within the Ministry of Finance, considering that it's this ministry that's going to have to pick up the leftovers if this thing doesn't work. How often. . . ? What role is the Ministry of Finance or the comptroller general playing in monitoring that? I don't know how this works with these ventures. If you've got a high-risk one with a lot of money invested, doesn't the Ministry of Finance play a role in monitoring the progress of that project to see how we're doing? It would seem to me that if, all of a sudden, they defaulted on that loan, it adds a significant chunk of money to our debt that we then have to start to service. It starts to throw your estimates out of whack. How closely do we monitor a project of this size and this risk?

Hon. J. MacPhail: For the record, the exposure of the government on Skeena -- the taxpayers' exposure -- is $64.48 million. The Ministry of Employment and Investment is responsible for this acquisition, and they are responsible for its viability and reporting to cabinet on that.

G. Farrell-Collins: Essentially, the minister is telling me that the Ministry of Finance doesn't monitor that type of investment, that size of risk: we'll just await word from the Ministry of Employment and Investment as to how it's going. That's fine. I don't think that's necessarily wise; but if that's the way it works, that's fine.

The minister said that our exposure on this was roughly $64 million. What happened to the rest of the $329 million? Have we already written that off, or are we booking that as an asset? How is that working? Maybe the minister can explain it to me.

Hon. J. MacPhail: The $64.48 million is the commitments that have been given by government as of March 31, 1998. That's what we've delivered on, to date. The rest is in the form of a guarantee that at that point had not been utilized.

G. Farrell-Collins: Okay. I'm just trying to. . . . I'm not an accountant, so I'm trying to figure this out in my small head. There's $329 million that appears in the budget reports and in the estimates as a self-supporting debt, if I remember correctly -- in those financial statements. But the minister is telling me that only $64.48 million of that has actually been exercised. Does that mean that there's another guarantee out there, as it were, of $265 million that we're not on the hook for yet? Does that mean we don't have that as a liability? Is it sort of a guarantee that they can draw upon at some point in the future?

[11:30]

G. Farrell-Collins: Has the government granted any additional funds to Skeena Cellulose in the last three months?

Hon. J. MacPhail: Sorry -- I think that question is appropriate for the Minister of Employment and Investment. But I would undertake to get that on his behalf.

G. Farrell-Collins: Thank you. I will look to receive that.

The next item I want to ask about is. . . . I know that the member for Delta South, in his capacity as the Chair of the Public Accounts Committee, had a meeting, which I attended, with regard to the audits and the audit reports -- those which he was intending to review. Unfortunately, I haven't been able to communicate with the member for Delta South this week, and I just ask. . . . I know that last week he had not yet received the audit reports, and I wonder if they have been forwarded to him in the interim. Maybe I misinterpreted it; my understanding at that meeting was that those audit reports would be forthcoming to him fairly quickly. It's now some time later, and I wonder what the status of that is.

Hon. J. MacPhail: We're just reviewing the audit reports now for the confidentiality element, and we'll be releasing them starting next week.

G. Farrell-Collins: Well, maybe I can leave that question for later. I am just curious whether Public Accounts receives them in in their entirety, or whether they're severed when Public Accounts gets them. I would assume that the Public Accounts Committee is seen as an arm of the Legislature and would be able to view those in their entirety and respect the confidentiality contained therein. Or is it that this gleaning for confidentiality is only happening so that they can be released to the member for Delta South, as opposed to the Public Accounts Committee?

Hon. J. MacPhail: We're advised that Public Accounts is a public document, so the rules of FOI apply. We're not doing the confidentiality severing for. . . . I don't even know whether there will be severing, but the confidentiality search is not being done for the benefit of the member for Delta South. It's because the documents will go to Public Accounts and are then deemed to be public.

G. Farrell-Collins: I'll move on, then, and I'll wait to see those. I expect that it will be an interesting Public Accounts meeting when they finally come forward.

I want to ask a question about the support services in this department of the ministry. My understanding is that this is the department, the area, the office, that goes out and secures second opinions: independent auditing opinions, accounting opinions, etc. Who is it that the government uses? My understanding is that it's support services. Maybe I misunderstood, but what I got from my briefing was that when the government needed to get an opinion from outside government about how something should be done -- when they needed an independent audit, an independent assessment of how something should be booked, or an independent review of a particular project -- this was the department that went out and sourced those independent opinions. Can the minister tell me if my understanding of that is correct, or if I'm misinformed?

Hon. J. MacPhail: We apologize if there was some misunderstanding. That is not the role of support services. But let me answer the question that the hon. member asks. If there are outside accounting opinions sought, it's usually by the comptroller general himself. Or certain program areas can request that and receive the support of the comptroller general to do so.

[ Page 9227 ]

Hon. J. MacPhail: Outside accounting opinions are rarely sought, and then it's after a proposal has been submitted to the OCG. Such opinions are only sought when an issue is controversial material and/or precedent-setting, and there is significant room for interpretation. The work is not centrally handled, and no firm is on retainer for this type of work.

I. Chong: In follow-up to that, then, when you do request proposals, is that done at the beginning of a fiscal year? Even though you say no one is on retainer, it would be awfully difficult, I suppose, to go out each and every time throughout the year. Is that request for proposal done at the beginning of the fiscal year, so that you would at least use one particular person or firm for the entire fiscal. . . ?

Hon. J. MacPhail: We don't do it at one particular time of year. This time is more frequent if there is a necessity for it. If the OCG is soliciting an outside opinion, the work is distributed among accounting firms, based on whether or not that particular firm was involved in the project under review, the firm's expertise in the area and the necessity of avoiding conflicts of interest. As I say, they're rare.

I. Chong: Then, could the minister advise: is there at the end of the fiscal year, whether it's '97-98 or '95-96, a summary prepared as to the various firms that were used for that particular fiscal year and the amounts of the contracts that were let? If they're very minor, it probably wouldn't be too difficult to summarize it -- but just to look at a comparative from '95-96, '96-97, '97-98, you know, to determine if we are perhaps choosing one firm more frequently than the others. Is the specialty becoming so specialized in Victoria that it's more difficult to seek outside? I mean, when you want to get outside opinions, you do want to look to get the most vast experience.

If you were in Victoria, I have to admit, the specialties are getting much more restricted, because a lot of larger firms have left here and gone to Vancouver. So if the OCG is usually contracting and getting accounting opinions here in Victoria, I would imagine it would be fairly restricted. But I'd be curious just to see the frequency of some of the contracts that are let and also the various firms that do have the ability to provide this service to the government.

Hon. J. MacPhail: I'll actually list the outside audits. For 1995, KPMG did one, Arthur Andersen did one, KPMG did another, Doane Raymond did one, Ernst and Young did one, and Coopers and Lybrand did one. I'm sorry I didn't make it clear; that's from '95 to '98.

I. Chong: That's helpful, because as I say, I know that in Victoria or throughout the country, the accounting firms were amalgamating, and the Big Seven became the Big Five, became the Big Four, became the Big Three. So I'm curious to see who is out there, actually, and able to provide the kind of services that we need.

I'll leave that area for a moment, because I think that covers some of the questions my colleague was interested in. He may follow up very quickly, in case I missed something that he wanted to know about.

The other area I'd like to move into briefly -- I think it will be brief -- is the area of unclaimed and tangible property. To be fair, I did speak to the comptroller general. It just came up in our briefing that there might be a topic here that we could pursue. I am satisfied, having received some information. What I'm looking for from the minister is whether she has given any thought to this particular subject area -- as to whether there has been, in her mind, a movement towards looking at new legislation or whether we're going to be amending the Unclaimed Money Act. I know it's future legislation, but surely there must be some indication of which way she would like to be moving in this area.

Hon. J. MacPhail: This is a very interesting area. Let me just say that there won't be legislation this year. I'd appreciate the member's views on this, actually. It's always interesting, when one takes over a new portfolio, to learn of the issues of great concern. This is one of them, both from the side of the people who benefit from receiving the unclaimed moneys and also from the point of view of business, in ensuring that we are not making the regulations onerous on business. I must say that it's an area the Ministry of Finance has done excellent work in. We are at this point trying to balance those interests, making sure that as much money as possible flows back in an efficient way to those who have claims on it and that we also do it in a way that doesn't impose unnecessary costs on business. Perhaps you've expressed your views directly to the OCG, and I'll discuss that with him. This is something we're discussing with both business and consumers. I would appreciate discussing it directly.

I. Chong: I do appreciate the minister's comments in that regard. I did get satisfactory information from the OCG. I suppose where I'm heading with that is. . . . If legislation isn't able to be introduced this year and we are still looking at it, then what should we be doing in the interim? Holding everything in abeyance can create a bit of anxiety, I guess, amongst people out there. I note that this was raised in the 1993-94 auditor general's report. It's now some five years later. If we let it go another year before we look at it in greater detail and then look at legislation, we could be looking at the year 2000.There is a fairly substantial time frame from when all this was initiated. If there isn't going to be legislation forthcoming, then I suppose I'm wondering what the people out there are supposed to be doing in the immediate future -- in the next year to two years. Is there some policy they can be informed of that says: "Look, you are going to have to start segregating this. The time limits will not run out on this. We are looking at this"? I don't know if enough people out there are aware of it.

Speaking personally, as someone who has represented clients who could have been involved in dealing with unclaimed moneys, I know that they certainly don't want to deal with the burden of the extra paperwork, so I know that this will solicit more information.

Hon. Chair, noting the hour, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 11:45 a.m.

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